Marketing Management MBA -10 1 - 24



PAPER – 2.2

LESSONS: 1 - 24


Marketing Management

LESSON 1 - 14 Written by

Professor and Head Dept. of Bank management Alagappa University Karaikudi

LESSON 15 - 24 Written by

Professor and Head Dept. of Business Administration Utkal University Bhubaneswar


Marketing Management

Lesson No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Lesson Name Marketing : Definition and Importance Concepts of Marketing Marketing Management Tasks Marketing Environment Marketing Strategies Market segmentation, Market Targeting and Product Positioning Buyer (Consumer Behaviour) Sales Forecasting Marketing Mix Product Product Planning and Development New Product Development Product Related Strategies : Branding Product Related Strategies : Packing and Labelling Pricing Promotion Advertising Sales Management Distribution Channels Physical Distribution Marketing Distribution Consumerism Government and Marketing The Indian Marketing Environment Page No. 4 10 17 23 34 42 55 67 77 82 90 98 106 115 127 139 151 165 187 203 213 226 236 241


Marketing Management

OBJECTIVES After studying this lesson you are familiar with

To know the Distinction between Market & Marketing Importance of marketing
STRUCTURE 1.1 Introduction

1.2 Definitions of Marketing 1.3 Distinction between market and marketing 1.4 Marketing, Selling and Merchandising 1.5 Importance of Marketing 1.5.1 Importance of Marketing to the Society 1.5.2 Importance of Marketing to Individual Business Firms 1.6 Summary 1.7 Revision points 1.8 Keywords 1.9 Review questions 1.10 Terminal exercise 1.11 Assignment questions
1.1 INTRODUCTION The term “market” in its common usage is used to refer the place where actual buying and selling take place. But, for a student of marketing, the term “market” does not mean any particular market place in which things are bought and sold, but the whole of any region in which buyers and sellers are in free interaction with one another that the prices of the same goods tend to be equalized easily and quickly. In its general interpretation it means “any body of persons who are in intimate business relations and carry on extensive transaction in any commodity”. Thus the market is the some total of the situation of environment which the resources, activities and attitudes of buyers and sellers affect the demand of products in a given area. It should be clearly understood that the term market is used to mean not any particular geographical meeting place of the buyers and sellers by as the getting together of buyers and sellers in person, by mail, telephone, telegraph, cable or any other means of communication.

“Marketing” makes goods useful to the society by getting them where they are wanted, when they are wanted and by transferring them to those people who want them. It is in this sense that marketing has been defined as “all the activities involved in the creation of place, time and possession utilities”. Marketing is thus concerned with “handling and transportation of goods from the point of production 4

Much of marketing is concerned with the problem of profitably disposing of what is produced. To facilitate proper discussion on the subject. 8.. we shall consider a few definitions of marketing. it means that they must be stored and protected against fire. Marketing is a total system of interacting business activities designed to plan. 11. Marketing is the function that adjusts the organisation’s offering to the changing needs of market place. Finally. In this journey of goods from the manufacturer’s warehouse of producer’s granary or miner’s yard to the ultimate consumers. 5. To emphasize all these aspects of marketing. several difficulties has to be removed. secondly. thieves etc. goods are to be made available at a time when they are needed. This is creation of place utility. Marketing activities are concerned with the demand-stimulating and demand –fulfilling efforts of the enterprise. 7. 3. Clark and Clark wrote that “marketing consists of those efforts which effect transfer in ownership of goods and care for their physical distribution”. from the point of view of the customer. till that time. at the right place and at an acceptable price. Marketing is designed to bring about desired exchanges with target audiences for the purpose of mutual gain. Marketing is the economic process by means of which good and services are exchanged between the maker and the user their values determined in them of money prices. the ownership and ultimately the possession of these goods are to be transferred from the producer or the manufacturer to the ultimate consumer. pests. rain. i. A cursory glance through them would reveal that there are varying perception sand view-points on the meaning are content of marketing. 6. 5 . promote and distribute need-satisfying products and services to existing and potential consumers.. Firstly good are to be removed from the place of their origin to the place or places where their need is felt. Marketing is so basic that it cannot be considered a separate function.2 DEFINITIONS OF MARKETING 1. The consumer if found both at the beginning and the end of the marketing process. 10. Marketing is the performance of business activities that direct the flow of goods and services from the producer to the consumer.Marketing Management to the point consumption”.e. Marketing is a phenomenon brought about by the pressures of mass production and increased spending power. This is creation of time utility. 2. 1. Marketing starts with the identification of a specific need on the part of the consumer and ends with the satisfaction of that need. This has been referred to as the creation of possession-utility. 9. Marketing originates with the recognition of a need on the part of a consumer and terminates with the satisfaction of that need by the delivery of a usable products at the right time. 4. It is really the whole business seen from the point of view of the final result.

‘Selling’ and ‘Merchandising’ are used interchangeably.” and promotion is only a part of the total marketing programme. Physical movement of goods is the point of consumption. Marketing is a viewpoint which looks at the entire business process as a highly integrated effort to discover. vii. while the others are only one part of the marketing system. Providing guiding policies regarding marketing procedures and their implimentations. arouse and satisfy consumer needs. Supplying the factual background and analytical judgement necessary for dealing with marketing problems. Merchandising may be defined as “product planning”.4 MARKETING. SELLING AND MERCHANDISING Sometimes the terms ‘Marketing’. Indicating the sources from which further information can be obtained concerning marketing problems or situations. Developing an intelligent appreciation of modern marking practices and the influences in marketing situations. Intensifying one’s felling of participation in marketing.Marketing Management 12. 1. Developing a broader framework for thinking about marketing. In the market the forces of demand and supply operate directly or by means of communication and fix prices. Any organisation that fulfills itself through marketing a product or a service is a business. Creating an open-minded. the journey is to start from sellers to buyers. 1. Marketing is a comprehensive term. iv. It includes the “internal planning need to get the right product or service to the market at the right time. But that is not correct. viii.3 DISTINCTION BETWEEN MARKET AND MARKETING Market is an arrangement to provide an opportunity to exchange goods. and sizes”. once the price fixation is done. create.5 IMPORTANCE OF MARKETING The importance of marketing has been so beautifully expressed by Peter Drucker : “Marketing is the distinguishing. 13. That is. and in proper colours. hopeful attitude towards the efforts of those scholars in marketing who are trying to develop it into a science. A business is set apart from all other human organizations by the fact that it markets a product or a service. Helping oneself to decide whether his career shall be marketing. Neither Church. Some difference exists in their meaning. Physical movement of goods is the hallmark of marketing. at the right place. the unique function of business. nor Army. 1. Marketing is the delivery of a standard of living. ii. vi. Selling is “one method of promotion. quantities. Any organisation in which marketing is either absent or incidental is not 6 . The studying of marketing aims at: i. iii. Whereas marketing is the sum-total of all those activities that are related to the free flow of goods from the point of production to the point of consumption. v. nor State does that.

cost of production will be low and hence price of the article will be low. Just as every industry provides employment opportunities to thousands of skilled and unskilled labour in various capacities. Under mass production. This raises the standard of living. Marketing increases employment opportunities : Marketing process increases employment opportunities. The importance of marketing in business planning and decision making can be understood from a following quotation: “In this existing age of change. Malcolm Nair improved Mazur’s statement and has said that “Marketing is the creation and delivery of standard of living to the society”. marketing. warehousing. Hence Paul Mazur states that marketing is the delivery of standard of living. There for everything and anything. The modern concept of marketing recognizes its role as a direct contributor to profits.Marketing Management a business and should never be run as if it where one”. a company must first determine what it can sell. marketing also provides employment to millions of people. and can be expressed as follows: 1. the purchasing agent cannot purchase. Marketing helps to achieve. 2. maintain and raise the standard of living of the society : Despite the differences in the level of living.5. the hair oil and toothpastes that you apply. the chief financial officer cannot budget. marketing is the beating heart of many operations”. the medicines you consume. how much it can sell and what approaches must be used to entice the wary customer. Since price is low people can buy more goods for their money. the drinks cold or hot you drink –all are made available by marketing. everybody has to depend completely on this gigantic system i. Better marketing gives room for mass production. Thus the shirts and pants you wear. The president cannot plan.1 Importance of Marketing to the Society 1. as well as sales volume. “No longer can a company just figure out how many gadgets it can produce and then go ahead and turn them out. the food you eat. Prof. the cars and scooters that you drive. risk bearing. This will result in a higher standard of living. Marketing is a complex mechanism involving number of functions and sub-functions which call for different specialized persons for employment. to make his living decent and gracious. and the engineer and designer cannot design until the basic market determinations have been made”. transport. Marketing is the means through which production and purchasing power are converted into consumption. The major marketing functions are buying and selling. financing. Marketing has even greater importance and significance for the society as a whole than for any of the individual beneficiaries of the marketing process. the face powder and now that you use in makeup. It must be considered a principal reason for corporate existence. To endure in this highly competitive change infested market. market 7 . every member of the society requires certain commodities and services to enjoy.e. the production manager cannot produce. the cycle you ride on. Marketing process brings new variety of useful and quality goods to consumers.

Transport creates place utility. these problems are solved by the marketing departments. When markets are widened sales increases and thus profit to the firm increases.Marketing Management information and standardization. place. the problem of the procedure become very acute and complicated. Now a days. In such a situation. Marketing helps to increase national income: The narion’s income is composed of goods and services which money can buy. The marketing department collects all information regarding what. Therefore. Promotional activities create information utility. Change is the essence of life and change means progress. Hence. There is nothing permanent except change. Efficient system of marketing reduces the cost to the minimum. in order to run a business successfully a business man should adapt himself to the changing preferences. Marketing is connecting link between the consumer and the producer: Marketing process brings new and new to retail shops from where the consumer can have them. the producer was in direct contact with consumers. If production is more than demand. but fluctuating or changing. We are living in a dynamic world. Marketing alone generates revenue or income to an enterprise. The top management uses all these informations for decision making. how. 5. this in turn lowers the prices and the cons numer’s purchasing power increases this will increases the national income. Marketing generates revenue to firms: Profit is the core on which the whole super structure of business is built.5. prices shoot up resulting in inflation. In the past. different activities are to be performed by a large number of individuals or institutions. Exchange creates ownership and possession utilities. Economic stability is maintained only when there is a balance of supply and demand. However. through better transport facilities. Similarly. marketing maintains the economic stability by balancing production and consumption. 3. to-day the producer does not have any direct contact with a consumers. time. To-day the minds of the consumers are not firm. how when. In each such function. 6. the excess goods cannot be sold at acceptable prices. Marketing removes the imbalances of supply by transferring the surplus to deficit areas. 4. 8 .2 Importance of Marketing to Individual Business Firms 1. 3. Functions of marketing development and widen the markets. how much and for whom to produce. how much and the whom to produce and these informations are passed on to the top management. and information utilities. It is said that roughly 30 to 40% of the population depend directly or indirectly on marketing. Marketing helps in creation of utilities: Marketing as an economic activity creates possession. 2. Then the stocks of goods would be piled up and there would be glut in the market. Marketing as a basis for making decisions: The problems of the entrepreneur are what. Marketing helps to maintain economic stability and development: Economic stability is the sign of any efficient and dynamic economy. when. 7. Hence the problems were tackled very easily. 1. Marketing helps the top management to manage innovations and changes: Marketing and innovation are the two basic functions of any business. resulting in fall in price. if production is less than demand. Storage creates time utility.

new markets. new product. The firm is in the line of manufacturing quartz watches. Merchandising 1. 2. 1. modern marketing has enabled a smooth system of mass distribution. and the right price at which it is to be made available. whether a firm is really consumer-oriented or not? 9 . Market research also acts as a source of marketing information on consumer behaviour and market trends. Do you agree to this statement? If so give reasons 3. in turn.9 ASSIGNMENT QUESTIONS 1. Marketing secures a closer balance between output and consumption.9 REVIEW QUESTIONS 1. Marketing is. 1.10 TERMINAL EXERCISE Your company has decided to introduce the modern marketing concept into its business activities. developer of economy. “Marketing orientation goes beyond selling”. Salesmen of a market oriented concern are its ears and eyes for information feedback. thus. Selling 3. Merchandising 1. Marketing. through which it is to be brought to the notice of the consumers. Marketing 2. Marketing helps to adopt change and innovate. Examine this statement. communicate to manufacturers about market demand. Market 2. Hence.Marketing Management changing styles. Wholesalers. wholesalers and manufacturers. In this age of mass production. How would you judge. Give a write up as to how you could make the company really “Consumer-oriented”? 1. 1. closure of factories and retrenchment of workers. “All organizations need marketing”. stimulator of consumption and higher standard of living and guardian of price system. changing fashions etc. Describe the various importance of marketing. in sum. prompter of entrepreneurial talent. marketing plays an review role in the economic stability of country. tries to find out the right type of production that the firm should manufacture. Retailers communicate to the wholesalers about consumers demand.7 REVISION POINTS 1. and the right channel. new methods and procedures. the right place where it is to be made available for use.8 KEYWORDS 1. and innovate new customers.6 SUMMARY If the functions of marketing are not performed properly the economic system may get out of balance resulting in piling of goods with retailers. the father of innovation and product development.

2 Marketing Concept 2. holds that the exchange of a product between the seller and the buyer is the central idea of marketing. While exchange does form a significant part of marketing to view marketing as a mere exchange process would amount to a gross undermining of the essence of marketing.5 Marketing Concept 2.1 Exchange Concept 2.8 2.7 2. A proper scrutiny of the marketing process would readily reveal that 10 .1 Exchange Concept The Exchange Concept of marketing. It is found that at lest five distinct concepts of marketing have guided and are still guiding business firms.10 Assignment questions 2.2 Production Concept 2.2.3 2.4 2.2.9 Features of the Marketing Concept Benefits of Marketing Concept Summary Revision points Keywords Review Questions Terminal exercise 2.2.3 Product Concept 2.1 INTRODUCTION Studies reveal that different organisations have different perceptions of marketing.6 2.2 MARKETING CONCEPTS the exchange concept the production concept the product concept the sales concept and the marketing concept We shall now discuss each of the five distinct concepts of marketing.2.2.Marketing Management LESSON – 2 CONCEPTS OF MARKETING OBJECTIVES After studying this lesson you are famililar with To study different concepts of marketing To study features and importance of marketing concept STRUCTURE 2.4 Sales Concept 2. 2. as the very name indicates.1 Introduction 2.5 2.2. And these differing perceptions have led to the formation of different concepts of marketing. 2.

Organisations that subscribe to the Product Concept of marketing believe that the consumers would automatically vote for products of high quality.Marketing Management marketing is very much broader than exchange. new products and ideally designed and engineered products.2 Production Concept According to the Production Concept. large-scale sales promotion. Whereas the Production Concept seeks to win markets and profits via high volume of production and low unit costs of production. It also places emphasis on quality assurance. They believe that marketing can be managed by managing production. it tries to take care of the marketing task through the product attributes. get. The sales concept maintains that a company cannot expect its products to get picked up automatically by the customers. They concentrate on achieving product excellence. are motivated by a variety of considerations in their purchases. such as concern for the customer. And the production concept thus fails to serve as the right marketing philosophy for the enterprise. They get totally engrossed with the product and almost forget the consumer for whom the product is actually meant. 2. Easy availability and low cost are not the only parameters governing the customer’s buying action. 11 . they often do not get customers as they expected.2.2. Organisations voting for this concept are influenced by a drive to produce all that they can.4 Sales Concept The Sales Concept become the dominant idea guiding marketing as more and more markets became buyers markets and as the entrepreneurial problem became one of solving the shortage of customers rather than the shortage of goods. They do not bother to study the market and the consumer in depth. The other review aspects of marketing.2. the generation of value satisfactions. The concept holds that consumers would. the Product Concept seeks to achieve the same results via production excellence. these organisations fail in the market. In general. Heavy advertising high-power personal selling. and in quite a few cases they also do well with the distribution takes and make the products widely available. support those products that are produced in great volume at a low unit cost. at best. 2. Exchange. in many cases. marketing is a mere appendage to production. Yet. heavy price discounts and strong publicity and public relations are the normal tools used by the orgnaisation that rely on this concept. 2. as a rule.3 Product Concept The product Concept is somewhat different from the Production Concept. research and development and bring in a variety of new products. improved products. Production and technology dominate the thinking process of the key people in the business. they fail to find out what the consumers actually need and they would gladly accept. the creative selling and integrated action for serving the customer get completely overshadowed in the Exchange Concept of marketing. covers the distribution aspect and the price mechanism involved in marketing. In addition. after all. The company has to consciously promote and push its products. They do achieve high production efficiency and a substantial reduction in the unity cost of production. Customers.

Selling starts with the existing products of the corporation and views business as a task of somehow promoting these products. the other hand. But only a few marketing executives realise this problem. the Sales Concept too generates marketing myopia just as the Exchange Concept. And that explains the evolution of the Marketing Concept as a totally distinct idea from the Sales Concept. Selling seeks profits by pushing the products on the buyers. In a company operating on this concept all departments will 12 . not the corporation. marketing revolves around the needs interests of the buyer. 2. The concept puts the consumer at both the beginning and end of the business. anticipating. one has to delve a little deeper for obtaining a full understanding of the marketing concept as such. Marketing is much wider than selling. It proclaims that “the entire business has to be seen from the point of view of the customer”. It dose not unwisely limit its role to persuading the customers to accept what the corporation already has or what it can offer readily.5 Marketing Concept While the foregoing discussion on the difference between selling and marketing make it clear that marketing is a more fully evolved idea compared with selling.2. The Marketing Concept was born out of the awareness that marketing starts with the determination of consumer wants and ends with the satisfaction of those wants. It leads to a wrong or inadequate understanding of the market and consequently a total failure in the market-place. Selling revolves around the needs and interests of the seller. The concept rests on the realization that a business cannot success by supplying to the customer products and services that are not properly designed to serve their needs. It may be relevant and useful to analyse the difference between ‘Marketing’ and ‘Selling’ before we discuss the Marketing Concept. there is a great deal of difference between selling and marketing. The majority fee that the Sales Concept is a flawless idea. starts with the customers of the corporation-present and potential-and views business as a task of meeting the needs of the customers by producing and supplying those products and services that would exactly meet the needs of the customers. marketing calls upon the corporation to choose products. and the Product Concept do. The general public too perceive marketing from the standpoint of the Sales Concept as the majority of business firms practice only selling. the Production Concept. stimulating and meeting customers requirements. But in reality. Overwhelming attention to the production or product aspects or the selling aspects at the cost of the customer and his actual needs creates this myopia. The customer. They think selling is synonymous with marketing. has to be the centre of the business universe. the much more dynamic. Marketing seeks profits not through the aggressive pushing of the products but by meeting the needs of the customers and by creating value satisfactions for them.Marketing Management Evidently. There is a fundamental between the two in approach as well as in the very philosophy on which the two processes rest. Marketing. It stipulates that the company should be organized totally around the marketing function. In other words. prices and methods of distribution and promotion that would meet the needs of customers.

13 . the Exchange Concept. It is obvious that only the Marketing Concept is capable of keeping the organisations free from ‘Marketing Myopia’. This is essential for the success of the business because every activity in every function of management has a vital bearing on marketing consumer. The marketing concept is a customer orientation backed by integrated marketing aimed at generating customer satisfaction as the key to satisfying organisational goals. And it meant a revolution. the business was seen and defined from the point of view of the producers of those who owned the business. the Production Concept. Consumer satisfaction: Integrated management action explained above. All these activities should lead to a favourable impact on the consumer. namely. the Product Concept and the Sales Concept give rise to marketing myopia of one from or the other. Integrated management action simply means that all the different management functions in the business must be tightly integrated with one another. And this leads us to the third major distinguishing features of the Marketing Concept. The change is: From production orientation – From product orientation From supply orientation From volume orientation From sales orientation From internal orientation – – – – – to marketing orientation. is again only a means..3 FEATURES OF THE MARKETING CONCEPT 1. 2. to external orientation. keeping marketing as the pivot. It believes that not firm can afford to ignore the its dose so at its peril. keeping consumer satisfaction as the foundation of it growth. It is the means for fulfilling the needs of the consumer. And for this to happen all functional areas of the business has to be properly aligned with marketing. by its emphasis on consumer satisfaction. as till then. The concept believes that it is not enough if a firm markets its products successfully in the short run. The Marketing Concept believes that it is not enough if a firm has consumer orientation. it must keep growing. Integrated management action: The second major distinguishing feature of the Marketing Concept is integrated management action. All other ideas guiding marketing. not an end in itself. to customer orientation. consumer satisfaction.Marketing Management recognize that their actions have a profound impact on the company’s ability to create a retain a customer. The concept effectively counteracts the temptations of short-sighted management attitudes. to satisfaction orientation. Marketing concept represents essentially a change in orientation on the part of managements towards business. Consumer orientation: An overwhelming emphasis on the consumer and his need is the first distinguishing feature of the Marketing Concept. viz. to demand orientation. The concept enabled the industrial and business firms to understand the nature and the mission of their business from the point of view of the consumer. 3. 2. It is essential that such orientation leads to consumer satisfaction. to profit orientation.

Hence. has offered competitive price and prompt services and has succeeded in creating a good product and company image. 8. economies of scale) apart from giving customers 14 . which is a major theme of the Marketing Concept. 2. 2. Marketing system based on the marketing concept assures integrated view of business operations and indicates interdependence of different departments of a business organisation. The concept is against profiteering. It appreciates that reasonable returns or surpluses are essential for the survival and as a natural corollary of the business sequence consumer orientation and integrated management action leading to consumer satisfaction. more emphasis is given to research and innovation. Thus Marketing Concept brings benefits to the organisation that practices the concept. will a product with all the attendant features organisational goals including profits is unreview to the firm. It enables the firm to move more quickly to capitalise on market opportunities.Marketing Management 4. It is quite obvious that for achieving these results. is again not an end in itself. They argue that there are other valid considerations hat companies must take into account when making decisions (for instance. Long –term success is assured to an enterprise only if it recognize that the needs of the market are paramount. 5. 4. Demand side of the equation of exchange is honoured more and supply is adjusted to changing demand. Marketing risks can be reduced only by knowing and understanding the market. but ask why after decades of trying has the concept not been fully implemented. 6. 3. it treats consumer satisfaction as the pathway to all the goals of the organisation. 7. MARKETING AS AN IDEOLOGY Critics recognize the importance of customer orientation. Interests of the enterprise and society can be harmonised as profit through service emphasized. Customer needs. Greater attention is given to the product planing and development so that merchandising can become more effective. Realising organizational goals including profits: Consumer satisfaction. optimize productivity and maintain a good organisational supporting one another. Hence a clear understanding of this concept is fundamental to the study of marketing. the consumer and the society. the firm would have tried its maximum to control costs and simultaneously ensure quality. but not against profits. The concept does not preach that a firm must generate consumer satisfaction and forget all the other goals of the organisation. Instead. Marketing research is now an integral part of the marketing process and it is a managerial tool in decision –making in the field of marketing. The underlying approach is: if a firm that the firm has given a quality product. wants and desires receive top consideration in all business activities.4 BENEFITS OF MARKETING CONCEPT A business enterprise adopting the marketing concept can enjoy the following advantages: 1. and the latter leading in turn to organisational profits.

Explain clearly the modern concepts of marketing 2. Successful innovations are mostly based on good understanding of user needs and technologies available to meet those needs. Providing customer satisfaction may simply be a means to achieving a company’s profit objectives and does not guarantee protection of customer welfare. Benefits of marketing concepts. Write short notes on a. MARKETING AND SOCIETY The marketing concept focuses on individual market transactions. the production. the marketing gets importance study of marketing. Consumer orientation b. This suggests that the ideas gained from marketing research will be modest compared to those coming from the scientific discoveries of R & D laboratories. which do not adequately correspond to societal welfare. Integrated management action c. innovation 2. But this criticism is not actually directed towards the marketing concept itself but towards an over dependence on customers as a source of new product ideas. Technological innovation is the process that realizes market demands which were previously unknown.7 KEY WORDS Consumer orientation. 2. MARKETING AS A CONSTRAINT TO INNOVATION Marketing research discourages major innovations. Companies must not rely solely on the customer for new product ideas.6 REVISION POINTS Marketing concepts. Consumer satisfaction 15 . the sales. adoption of marketing concept will result in production of goods. 2. the product.5 SUMMARY All the fine concepts of marketing the exchange. Relying on customers to guide development f new products has severe limitations. the role of product development ought to be far more proactive. Since individuals heavily weigh their personal benefits while discounting the societal impact of their purchases. This is because customers have difficulty articulating needs beyond the realm of their own experiences. Effective utilization and exploitation of technology in developing new products is at least as important as market need analysis.Marketing Management exactly what they want. Particularly for discontinuous innovations. New product development should be based on sound interface between perceived customer needs and technological research. Marketing oriemation docs not guarantee welfare of the customer but it does ensure profits for the firm. There has to be a conl.promisc betweer: the satisfaction of customers and achievement of other company requirements.8 REVIEW QUESTIONS 1. Integrated management action 2.

2.Marketing Management d.10 ASSIGNMENT QUESTIONS “All organisations need marketing” – Do you agree to this statement? If so give reasons in support of your answer. Evaluate the reactions from the consumers. Realising organisational goals including profit 2. 16 .9 TERMINAL EXERCISE Identify an Indian company which sailed through the different concepts of marketing.

It has to build up appropriate marketing plan or marketing mix to fulfill the set goals of the business. Formulation of marketing strategies. It looks after the marketing system of the enterprise. Marketing management involves planning. 3. implementation and control of programmes to achieve predetermined objects. It has to plan and develop the production on the basis of known consumer demand. 5. It has to formulate sound marketing policies and programmes. 2. Determination of marketing goals Sales forecasting and marketing budget. Marketing management represents an review functional area of business management efforts for the flow of goods and services from the producers to the consumers. It looks after their implementation and control. It may be defined as the process of management of marketing programmes for accomplishing organisational goals and objectives.Marketing Management LESSON – 3 MARKETING MANAGEMENT TASKS OBJECTIVES After studying this lesson you are familiar with Responsibilities of marketing management Marketing management tasks STRUCTURE Introduction Responsibilities of marketing management Marketing management tasks Summary Revision points Keywords Review questions Terminal exercise Assignment question 3. implementation and control of marketing programmes. 17 . policies and procedures. Sales and market analysis.1 INTRODUCTION Marketing management represents marketing concept in action.2 RESPONSIBLITIES OF MARKETING MANAGEMENT Marketing management has to fulfill the particular: following responsibilities in 1. Evolving an appropriate marketing – mix or programme. Marketing management performs all managerial functions in the field of marketing. 3. The process of management is the set of managerial functions known as planning. 4.

The marketing task and the formal name of each task is shown next to each demand state. the actual demand level may be below. Management of distribution channels and physical distribution. Marketing activities may be organized product-wise. People have a negative demand for vaccinations. timing. or above the desired demand level.1. vasectomies. 10. Post-sales servicing during the warranty period. Negative demand is a state in which all or most of the review segments of the potential market dislike the product or service and in fact might conceivably pay a price to avoid it. to execute marketing campaign. Simply put. Marketing management is a task of regulating the level. dental work. Table 3. finance. 3. and gall bladder 18 . 9.. far from being a rare condition. Active participation in the product planning and development to establish best correlation between the product attributes and customer demands. such as marketing personnel. marketing management is demand management. VII Overfull demand VIII Unwholesome demand CONVERSIONAL MARKETING Conversional marketing grows out of the state of negative demand.Marketing Management Organizing all marketing activities and instruments included in the marketing-mix. This leads to the eight distinguishable demand states listed in Table 3. this is too limited a view of the range of marketing tasks carried out by marketing managers.1 The basic marketing tasks Demand State I II III IV V VI Negative demand No demand Latent demand Faltering demand Irregular demand Full demand Marketing Task Disabuse demand Create demand Develop demand Revitalize demand Synchronize demand Maintain demand Reduce demand Destroy demand Formal Name Conversional marketing Stimulational marketing Developmental marketing Remarketing Synchromarketing Maintenance marketing Demarketing Countermarketing 6.3 MARKETING –MANAGEMENT TASKS The popular image of the marketing manager is that of someone whose task is primarily to stimulate demand for the company’s products. Effective communication. proper control and co-ordination of all marketing functions. The organisation forms an idea of a desired level of transactions with a market. 7. Vegetarians feel negative demand for meats of the kinds. Negative demand. and characters of demand in a way that will help the organisation achieve its objectives. and physical facilities etc. However. equal to. 11. 8. areawise or customers-wise according to specific requirements. Assembling of necessary resources. At any point in time. applies to many products and services.

The third is not distribute information or the object itself in more places in the hope that people’s lack of demand is really only a lack of exposure. and even work are in negative demand by certain groups. there are those unfamiliar objects that are innovated and face a situation of no demand because the relevant market has no knowledge of the object. No demand is a state in which all or review segments of a potential market are uninterested in or indifferent to a particular offering. Third. A state of latent demand exists when a substantial number of people share a strong need for something that dose not exist in the form of an actual product or service. Examples would include boats in areas not near any water.Marketing Management operations. Places such as the North Pole and the desert wastelands are in negative demand by tourists. Thus antique dealers can attempt to stimulate interest in old barbed wire on the part of those who have a general need to collect things. is to develop a plan that will cause demand to rise from negative to positive and eventually equal the positive supply level. they are indifferent or uninterested. The latent demand represents an opportunity for the marketing innovator to develop the product or service that people has been wanting. Atheism. and burglar alarms in areas where there is not crime. The first is to try to connect the product or service with some existing need in the marketplace. old barbed wire. Examples would be urban junk such as disposable coke bottles. He can proceed in three ways. snowmobile in areas where it never snows. Instead of people having negative or positive feeling toward the offering. DEVELOPMENTAL MARKETING Developmental marketing is associated with a state known as latent demand. Three different categories of offering are characterized by no demand. Thus sellers of motorboats can attempt to stimulate interest in boast in a lakeless community by building an artificial lake. First. exconvicts. STIMULATIONAL MARKETING There is a whole range of products and services for which there is no demand. The task of converting no demand into positive demand is called stimulational marketing. there are those familiar objects that are perceived as having no value. The challenge of negative demand to marketing management especially in the face of a positive supply. Many travelers has a negative demand for air travel. Second. We call this marketing task conversional marketing. Examples would include trinkers of all kinds that people might buy if exposed to but would not normally think about or desire. there are those familiar objects that are recognized to have value but not in the particular market. military service. and political buttons right after an election. Stimulational marketing is a tough task because the marketer does not even start with a semblance of latent demand for the offering. Many cigarette smokers would like a good-tasting cigarette that dose not yield nicotine and tars 19 . The second is to alter the environment so that the offering becomes valued in that environment. Examples of products and services in latent demand abound. others have a negative demand for rail travel.

Many popular entertainers and political candidates lose their following and badly need remarketing. SYNCHROMARKETING Very often an orgnization might be satisfied with the average level of demand but quite dissatisfied with its temporal pattern. Many people would like a car that promised substantially more safety and substantially less pollution than existing cars. Faltering demand is a state in which the demand for a product or service is less than its former level and where further decline is expected in the absences of remedial efforts to revise the target market. Hotels in Miami Beach are insufficiently booked during the summer and overbooked in the winter. services. The marketing task of trying to resolve irregular demand is called synchromarketing because the effort is to bring the movements of demand and 20 . The marketer must be an expert in identifying those prospectus who have the strongest latent demand and in coordinating all the marketing functions to develop the market in an orderly way. and it is badly in need of imaginative remarketing. just as the first filter-tip ciragette won a sizable share of the market. organisations. The process of effectively converting latent demand is that of development marketing. Irregular demand is defined as a state in which the current timing pattern of demand is marked by seasonal or volatile fluctuations that depart from the timing pattern of supply. uncrowded national parks. For example. In mass transit. unpolluted major cities. a good television programmes. Such a product break-through would be an instant success. efficient trains. offering and /or marketing effort. much of the equipment is idle during the off-hours and in insufficient supply during the peak hours.Marketing Management damaging to health. Many churches have seen their membership thin our in the face of competition from secular recreations and activities. Remarketing is based on the premise that is possible in many cases to start a new life cycle for a declining product or service. places. and the marketing task involved is remarketing. There is a strong latent demand for fast city roads. REMARKETING All kinds of products. Remarketing is the search for new marketing propositions for relating the offering to its potential market. Hospital operating facilities are overbooked at the beginning of the week and underutilized toward the end of the week to meet physician preferences. The downtown areas of many. and other seasons are marked by a wasteful underutilization of the organisation’s supply capacity. railway travel has been a service in steady decline for a number of years. and ideas eventually experience declining or faltering demand. Many examples of irregular demand can be cited. safe streets. large cities are in need of remarketing. The challenge of faltering demand is revitalization. Some seasons are marked by demand surging far beyond the supply capacity of the organisation.

as when producers suddenly find themselves facing an unexpected surge in demand or unexpected interruptions of supply. competitors quickly move in a attempt to attract away some of the demand. in other case the reshaping may be achieved only after years of patient effort to alter habits and desires. education. For example. MAINTENANCE MARKETING The most desirable situation that a seller daces is that of full demand. One force is changing needs and taste in the market place. and keeping tight control over costs. For example.Marketing Management supply into better synchronization. 21 . the state of Oregon felt that too many people were moving to Oregon and spoiling its natural environment. The demand for barber services as well as the demand for mass magazines and college. a museum that is undervisited on weekdays and over visited on weekends could (a) shift most of the optional events to weekdays instead of weekends (b) advertise only its weekday programmes (c) change a higher admission price during the week ends. Maintenance marketing calls for maintaining efficiency in the carrying out of dayto-day marketing activities and eternal vigilance in spotting new process that threaten to erode demand. keeping the sales force and dealers motivated. In some cases a pattern of demand can be readily reshaped through simple switches in incentives or promotion. The task of the marketer facing full demand is maintenance marketing. The demarketer must have a thick skin because he is not going to be popular with certain groups. Full demand is a state in which the current level an timing of demand is equal to the desired level and timing of demand. The other force is active competition. The maintenance marketer is primarily concerned with tactical issues such as keeping the price right. it calls for the art of discouraging convenience may be reduced. When a product is doing well. and the city of San Francisco felt that too many motorists were using the Golden Gate bridge and weakening its structure. Demarketing deals with attempts to discourages customers in general or a certain class of customers in particular on either a temporary or a permanent basis. The task of reducing overfull demand is called demarketing. DEMARKETING Sometimes the demand for a product or service may outpace the supply. Many marketing steps can be taken to alter the pattern of demand. However. Various products and services achieve this state from time to time. it is not a time for resting on one’s laurels and doing perfunctory marketing market demand is subject to two erosive forces. Or the problem may be due to chronic overpopularity. it is defined as a state in which demand exceeds the level at which the marketer feels above to motivated to supply it. The problem may be due to temporary shortages. Instead of encouraging customers. had undergone and unexpected decline because of changing market preferences. Known as overfull demand. Demarketing largely calls of marketing in reverse.

faltering demand.9 ASSIGNMENT QUESTIONS “Marketing orientation goes beyond selling”. alcohol.6 KEY WORDS Negative demand. 3.5 REVISION POINTS Conversional marketing. unwholesome demand. 3. 3. 3. the public’s welfare. Examine this statement and highlight the major differences between marketing orientation and selling orientation. a competitor’s product. or unselling. many petroleum companies have sought to reduce their customers using oil. Remarketing. cigarettes. Unwholesome demand is a state in which any demand is felt to be excessive because of undesirable qualities associated with the offering. Elucidate the various tasks of marketing with examples. irregular demand. Whereas demarketing tries to reduce the demand without impugning the product itself. 2. The offering may be the organisation’s own product which it wishes to phase out.4 SUMMARY The task of trying to destory the demand for something is called countermarketing. Explain ‘Marketing management’ and its responsibilities. synchro marketing. or the supplier’s welfare. Latent demand. Classic examples of unselling efforts have revolved around the so-called products.7 REVIEW QUESTIONS 1.8 TERMINAL EXERCISE In the face of fuel shortage. Stimulational marketing. and hard drugs. counter marketing. 22 . Demarketing. 3. or a third party’s product which is regarded as socially undesirable. Propose a demarketing plan that will bring down the level of demand for oil. countermarketing is an attempt to designate the product as intrinsically unwholesome.Marketing Management COUNTERMARKETING There are many products or services for which the demand may be judged unwholesome from the viewpoint of the consumer’s welfare. 3.

marketing management is directly interested in demography.5 Revision points 4.9 Assignment question INTRODUCTION Most of successful companies have now realized that marketing presents a never ending series of opportunities and threats. The marketing managers major task is that of trend trackers and opportunity seekers modern marketers realize that environmental scanning would provide a continuous link between them and their customers. Demographic analysis deals with quantitative elements such as age.1.2 UNCONTROLLABLE EXTERNAL FORCES 4. 23 .2. Growing population indicates growing market particularly for baby products.3 Social & Cultural environment 4.Marketing Management LESSON – 4 MARKETING ENVIRONMENT OBJECTIVES After studying this lesson you are familiar with Key environmental forces that have an implementation on marketing decisions The techniques available for environmental scanning STRUCTURE 4. education. 4. occupation..2.6 Keywords 4. many companies specializing in baby products will have to adjust their marketing programme accordingly. Hence. sex.2. But when we have reduction in the birth rate and the lower rate of growth of population.2 Economic environment 4.2.8 Terminal exercise 4. Marketing Environment comprises of external factors over which the organisation and management has little control.1 Introduction 4.7 Review questions 4. A marketers has to design his marketing strategies based on the current marketing environment.e. scientific study of human population and its distribution structure. i. Population forecasts during the next decade can be arrived at with considerable accuracy and on the basis of such forecasts marketing management can adjust marketing plans and policies to establish favourable relationship with demographic changes.2 Uncontrollable external forces 4. Marketing environment comprises of external factors over which the organization and management.1 Demography 4.4 Summary 4. income. Demography Market means people with money and with a will to spend their money to satisfy their wants.3 Importance & Benefits of environmental analysis 4.

High economic growth assures higher level of employment and income. Marketing plans and programmes are also influenced by many other economic items such as interest rates. money suppy. Economic Environment People constitute only one element of a market. (mid-1998 estimate). Zoroastrians. etc. census of population. The average density of population in the country is 260 per sq. the density also varies widely between the urban and rural areas of the country. attitudes. motivation. Similarly. are several factors such as population rate of growth. The lanuages specified in the Consitution as national languages and hundreds of dialects spoken by substantial segments. are provided by behavioural analysis. occupation. Hence. 4. Nearly a quarter of the total population of the country lives in urban areas and the remaining three quarters in semi-rural and rural in Arunachal Pradesh. etc. Buddhists and Jains – form part of Indian society. India is the second largest market in the world. life cycle analysis of in Sikkim and 8 per sq. and this leads to marketing boom in many India’s population likely to reach the 100 crore mark. attitudes. are provided by behavioural analysis. The level of 24 . price level. Quantitative aspects of consumer demand are provided by in Kerala to 45 per sq.2. etc. Then only we have effective demand. Thus. As many as seven different religious groups – Hindus. change in political and legal set-up influence international marketing.3 million sq. There are 4000 towns and more than five lakh inhabited villages in the country. The people of India profess diverse religions and speck different languages. urban and rural population. Muslims. The density. The life expectancy of the people in the country has gone upto 56 year by 1984. Both demographic and behavioural analysis enable marketing executives to understand the basis of market segmentation and to determine marketing reaction to a new product or consumer reaction to an advertising campaign. whereas qualitative aspects of consumer demand such as personality. Christians. motivation... e. demography (study of population) offers consumer profile which is very necessary in market segmentation and determination of target markets.g. Good demographic analysis combines economic power. however. By the turn of the century. Sikhs. perception. education and geographic segmentation. currency devaluation. varies widely from state to state from 655 per sq. Good demographic analysis combines several factors such as personality. consumer credit.Marketing Management geographic concentration and dispersion. The people of India are widely scattered over the length and breadth of the vast country which covers an area of 3. motivation.. About 40 percent of the total population is below 14 years of age. perception. The second essential element of a market is purchasing power and willingness to spend. Higher interest rates adversely influence real estate market and markets of consumer durables sold on instalment basis. etc. etc. economic conditions play a significant role in the marketing system. Exchange fluctuations.

and promotion policies of a business enterprise.e. In 1951. In addition to the marked downtrend in the share of food in final consumption. The country’s stockmarkets have grown enormously in the last two decades. transport and communication went up from 4.532 with a paid-up capital of just Rs. there was a marked spurt in the share of protective foods-fats.3 percent. Fortunately in recent years. And this spurt from the historical rate of 3. Since 1974.7 percent to 9. Of these.5 percent has review implications for future standards of living. Inflationary conditions affect adversely the market for consumer durables. provided the technological aspects of the nation’s economy is appropriately stepped up. India was among the slow growth countries in the developing world and her unspectacular average annual growth of 3 to 3. Higher petrol prices created a tread in favour of small cars and public transport. the share of durables increased substantially. 929crore.5 percent or more in GDP is achievable on a stable basis by the turn of the country. vegetable. after the energy (oil) crisis all over the world. continuous to be appallingly low.144 joint stock companies in India. India’s economic growth has averaged five percent per annum.Marketing Management take –home pay determines disposable personal income and it influences marketing programmes directly. Economic forces can have positive or negative effects upon the promotion efforts of business units. Many purchases may be postponded or even eliminated.6 percent to 4. pulses. 21. in the eighties. The corporate sector which was till then depending 25 . India’s per capita income. During the last two decades 96. The growth in the eighties has been particularly striking.264 companies which were limited by shares has a paid up capital of Rs. eggs and fish. The growth of the corporate sector is adequately reflected in the growth of the stock markets. sugar. Marketing mix must be formulated on the basis of review economic indices. 94. ‘within the food group. we have inflationary trends and general level of prices in continuously rising. If fact. an environment for faster economic growth and higher per capita income is sought to be created through a new set of economic and industrial policies. government and non-government put together. Inflation coupled with scarcity conditions can radically change consumer buying habits. Similarly. i. the food component came down to 24 percent from 28 percent. the number of joint stock companies was only 28. State of trade and business booms and slumps constitute the economic aspects of marketing environment.5 percent was dubbed the ‘Hindu rate of growth’.9 percent.775crore. meat. price fixing. Economic conditions leading to recession can influence product planning.. Between 1960-61 and 1983-84. household equipment went up from 2. While throughout the seventies. The growth of the corporate sector is an review indicator of the sophistication and growth of an economy. fruits. the Private Final Consumption has also shifted in a welcome manner from ‘food and other basic items’ to ‘products and services with high marketing significance’. Over the years. with the non-food consumer goods. it is now accepted that a growth rate of 7. There are indications that India is emerging as a growth economy.

The growth has been particularly striking in sectors like petroleum products. internationally comparable costeffectiveness and levels of productivity.. Consumerism is becoming increasingly review to marketing decision process. Major social problems. changing role of women. means agricultural prosperity. communications etc. environment free from pollution. emphasis of quality of goods instead of quantity of goods. concern for pollution of our environment. coffee. Social and Cultural Environment Changes in our life-style and social values. state-of-the-art technology.2. jute.Marketing Management more on external borrowings and dependence during the decade and started mobilizing larger funds for investment through the capital market.. chemicals and chemical products. etc. There has also been some fundamental structural changes for the better. 4. Indian industry has in recent years also undergone a qualitative change in addition to the quantitative expansion. greater preference to recreational activities. Agriculture is a prominent sector of the economy of India. Nearly three-fourths of the total population of the country depend directly or indirectly on agriculture for their livelihood and more than forty percent of the national income is contributed by agriculture.3. e. rubber. electronics. demanding not only consumer welfare but also citizen welfare is very much emphasized. A substantial portion of the country’s exports in also provided by the agricultural sector-mostly by agricultural commodities like tea. e. in effect. it is needless to say that the future growth of several consumer goods industries in the country will increasingly depend on rural prosperity. It means that agricultural growth would be a main indicator of the level of buoyancy of the nation’s markets. India’s engineering industry can today supply the entire requirements of the country in respect of power generation equipments. a good beginning has already been made and it augurs well for the future.g. jute. In fact it has been the backbone of the national economy all these years.g. tobacco. need for safety in occupations and products etc. etc. electrical machinery. Marketer’s are now called upon not only to deliver life i. metal products. transport equipment and power generation. A survey of the industrial scene of India would reveal that industrial production increased at an average compound rate of six percent per annum. The output of basic and capital goods industries now have a share of 55 percent in the index of industrial production whereas it had only a share of 20 percent in1950. 2. socially responsible marketing policies. Societal marketing concept. equipments for railways. The industrial sector now contributes nearly 30 percent of India’s GNP. In this backdrop. road transport. Industries in cotton.e. To the marketing man. which. depend totally on agricultural commodities. as well as the food processing industry. 1. Though it has still a long way to go in this respect.. sugar. It has embraced the concepts of optimum scales of production. spices and marine products. 26 . this has a special significance. The industrial output today is nearly six times of what it was in 1950.

Many economists now place India’s middle class at over 100 million. and the upper strata within this group has become the consumption community of the country. gas stoves and other household appliances have also become items of demand for this class. ready made garments. All these groups constitute the ‘middle class’ of the country. More and more women taking to employment is the third factor. TVs. In addition to the economic factors. the land reforms and the new farming technology. pursuing varied vocations. furniture. Soft drinks. For example. The continuous expansion of the government machinery at the Centre and the states swelled up the strength of government servants of different categories. on a conservative basis. The growth of urbanisation is the first among these factors. but a sizable new agricultural group emerged. around 25 million people are at present employed in the government and organized sector. The class has often spent more than what it has earned at any given point in time to cope with its new social image. This class has not only swelled continuously in numbers. This group reaped the benefits of the green revolution. If on an average we have four members in each household. doctors and other supporting staff emerged. The trader class also expanded considerably. have brought about a new lifestyle among the middle class. stereo systems. its disposable and discretionary income has gone up. in the rural areas too. The middle class households in all these categories together could. fans. Around 18 million are estimated to be employed in the unorganized sector. electric mixers and grinders pressure cookers. Its expenditure on non-food items has increased.Marketing Management From the marketing point of view. there is a sizable middle class today. It has actually two segments-the well-to-do among the farming class and the relatively better off among the nonfarmers. a sizable population of school and college teachers. its aspirations have been constantly changing. private and public. the total size of the middle class in the country can be reckoned at 100 million at the minimum. the increased income coming from 27 . These and other similar factors acting the concert. employed of self-employed. The breaking down of the joint family system and the parallel rise of the nuclear family is the next. synthetic fabrics. the emergency of a large middle class is perhaps the most significant of all developments that have taken place in India since independence. In the social services sector. They now require several time-saving conveniences. In India. but has also grown in prosperity. managers and supervisors. transistors. As this class is also relatively better educated and better exposed to the life styles of the rich. be reckoned as 25 million. While these developments were taking place largely in the urban areas. The industrial development over the years gave birth to a well-to-do working class and a sizable chunk of engineers. It could safely be reckoned that one half of this falls under the middle class. cosmetics. These two groups add up to 43 million people. In addition. Occupation statistics form the basis for such estimates. The landed gentry become a vanishing tribe. rural India was also undergoing some change. socio-structural and life style factor have also contributed to the rise of the middle class.

the new policy measure have resulted in two significant developments: (i) a high degree of encouragement has become available to consumer goods industries and (ii) a perceptible change has occurred in the competitive character of India’s markets. As cumulative effect of the quantitative expansion of the class. The markets of India have become enormously more competitive as a sequel to the new policies and measures. Marketing systems are affected by government’s monetary and fiscal policies. Consumer legislation tries to protect consumer interests. division of markets. Fiscal policies.g. both these approaches have undergone a change. all these steps have been aimed at a restructuring of the instruments of controlremoving some. Now. revamping others-with the ultimate objective of accelerating the pace of industrial development in the country. On the procedural side too there has been simplification of rationalisation. as a fall-out effect. The provision of a free atmosphere to the industrial and business enterprise and the consequent entry of a number of new enterprises into different businesses with relative ease have been mainly responsible for the change in the competitive structure of a wide variety of businesses in the country. it was also unduly concerned with mopping up savings and curbing consumption. Marketing management cannot ignore the legislation regulating competition and pretecting consumers. industrial licensing policies. the increase in its income levels and the change in its lifestyle. While the new policies and measures were primarly aimed at accelerating the country’s economic development. 4. e. anti-pollution laws also influence marketing plans and policies.. In the earlier years. the market potential of this segment of India can be placed almost on par with the total potential of major European countries like U.Marketing Management both husband and employed wife has made it possible for the family to buy a variety of such conveniences. The new policies touch practically each and every aspect of economic affairs. These approaches dampened India’s marketing climate considerably. Basically. The economic and industrial environment of India has undergone a significant change as a result of the new economic policies and liberalization measures introduced by the government in recent years. Consumer goods have been accorded their due importance and consumption is encouraged along with savings. customs duties. France or West Germany. the competitive profile of the nation’s markets has changed in a significant manner. deceptive sales promotion devices. Legislation controlling physical environment. exclusion of new competitors and such other unfair trade practices. import-export policies. trade policies and policies relating to technology have all been changed.K. the government laid greater emphasis on basic and heavy industries. Business enterprises may not be allowed to resort to price discrimination. false and misleading advertising exclusive distributorships and trying agreements. the consumption potential of the class has gone up considerably in recent years. Political and Legal Forces: Political and legal forces are gaining considerable importance in marketing activities of business enterprises. 28 . From the marketing point of view. Today.

The marketing manager has little or no control over the actions of competitors. Many businesses are earning handsome profits from products which did not exist 35 years ago. and communication and information technologies. Computers and airplanes are entirely new industries. It has the responsibility of relating changing life-style patterns. No marketing decision of major importance can be made without assessing competition in a free market economy. 6. We have witnessed in one generation radical change in our life-styles. the methods. in our consumption pattern as well as in our economic welfare. 5. Seventy percent of food products now available to a housewife in highly industrialized countries were simply non-existent thirty years ago. Artificial fibre cloth has almost killed the pure cotton textile industries in many countries. the government has been bringing in a number of legislative measures with a view to regulating the marketing and distribution of several products in India. micro electronics. Marketing management with the help of technology can create and deliver standards and style of life in many counties. There is an all-round accent on securing high – technology on par with the developed nations and on becoming technologically competitive on the international scene. Aspects like the final consumer price. materials and techniques used to achieve commercial and industrial objectives. India is making rapid and significant advances in field like energy. Electronic industry is the best example of exploiting new marketing opportunities. Better incentives have been built into the basic policies and systems so that technologically advanced nations find it attractive to collaborate with India in different sectors of industry and transfer the latest technologies in the respective fields. New technologies offer a main source of economic growth. Over the years. Competition: Although price competition is still present particularly in the retail market. Digital watches are killing the marketing prospects of traditional watches. product quality. India is no exception to this reality. In particular. Technology is the way things are done. A new package of policies relating to technology has also been introduced. The nation is now attaching a great degree of importance to technological upgradation of practically all segments of industry. electronics. channel arrangements and stipulations and resale prices are the ones that have been frequently touched by one law or the other. He can merely anticipate competitive actions and be prepared to deal with them. non-price competition is of paramount importance for the manufacturer. Television has adversely affected radio and cinema industries.Marketing Management The legal framework prevailing in a country has a direct impact on the marketing environment of the country. Science and Technology: Unprecedented development of science and technology since 1940 has created a phenomenal impact on our lives. Competitors considerably influence the company’s choise of marketing strategies particularly in relation to selection of 29 . values and changing technology to market opportunities for profitable sales to particular market segments. the physical movement of the product.

making advertising in the country an interesting and professionally rewarding field of activity. and his profitability had improved despite the hike in various cost elements. the situation has vastly changed. his margins are more respectable now than before. range and quality. the parasitic middlemen of yore are disappearing from the Indian distribution scene. as the channel is getting shorter. The are now developing their own channels. Advertising in India has grown in a spectacular manner throughout the last two decades and has scaled new peaks during the last five years in terms in size. Over the years. Creative ads have multiplied. Finally. In the first place. in quite a few sectors. And to present. The advertising Scenario: According to marketing experts.Marketing Management target markets. The Distribution Environment: The distribution environment is an review part of the marketing environment. the pace of change is getting further accelerated. the emergence of a large public distribution system is another major development in India’s distribution scenario. There was a time when Indian ads were mere imitations of British and American ads. Increasing consumer awareness and the spread of consumerism has also had its share of influence on the distribution environment. suppliers. The government has taken several measures by which the distribution environment has been affected in a significant way. All the major media-the press. 8. depots and showrooms. as a rule. Many factors have been responsible for these changes in the distribution environment. TV and cinema have expanded sizably and are being used extensively by advertisers for reaching their target customers. the retail dealer in the distributive trade is getting a better deal. Another significant development is that the manufacturers in many industries have departed from the traditional method and channels of distribution. The distribution trade has also been growing in size recent years more and more people are being employed in the distribution business. But now. The ad-men of India have succeed in giving a distinctiveness to Indian advertising. the distribution channels have been getting shorter. marketing channels as well as in relation to its product mix. New approaches and new styles to suit the Indian audience have emerged. Qualitatively too. the nature of its country. retailing has grown into a prestigious activity. 30 . the number of advertising agencies in the country has also increased rapidly. radio. he is able to give better service to the consumers. substance and volume of advertising in a country is a pointer to the status of the economy of the country. Over the years there has also been a substantial expansion in the media. The gap between the producer and the consumer is becoming narrower. Increased competition and inflation and rising costs of marketing and distribution are the most significant among these factors. the nature. Thirdly. price mix and promotion mix. 7. Secondly. Redundant market intermediaries have been withdrawn by manufacturers for containing the escalating costs of marketing and distribution. the ad business of India has grown considerably. The distribution environment in India has been undergoing significant changes in the past few years. In fact.

there are two sides to India’s rural markets. It is said that pollution is an inevitable by-product of high-consumption economic systems prevalent in the advanced countries. ecological environment has assumed a unique importance. and temp and style of marketing which proved a success in the urbon marketing context. The marketing system of an enterprise has now to satisfy not only the buyers of its products (consumers/users) but also societal wants which may be adversely affected by its activities and then only it is entitled to achieve its profit objective. The Rural Marketing scenario: The marketing environment governing the rural markets too has been undergoing vast changes in the last two decades. In future. involving a new customer and a new marketing situation. Plastic products and stainless steel goods have become common consumer items. India is the world’s second largest producer of bicycles with an output of six million unites per annum and a major part of this is absorbed by rural India. Today. technology and consultancy services. For example. The directional pattern of the foreign trade of India has also changed for the better. knitted apparels. Preferences have shifted to blended fabrics. 11. chemicals. The rural market happens to be a totally new market. marine products. The country has also made notable progress in the export of projects. leather and leather manufatures. The exports scene: India’s exports too have been growing over the years. their has been a sea change. Two-wheelers have also become a common sight in the villages.000 different items are exported by the country today. Environmental experts are vigorously advocating the preservation and survival of our entire ecological systems. engineering goods and iron ore. tape recorders or ‘two-in-ones’ have become a common sight in the rural areas. as compared to hardly 60 items at the time of independence. gems and jewellery. both equally powerful while the market provides immense opportunities it also displays intimidating challenges. Prevention of all types of pollution and efficient use of our scarce resources can restore to balance in 31 . and readymade garments. Ecology: In the wider concept of marketing. Above all. Indian exports are now reaching a large number of countries all over the globe. More than 4. they must show active interest in the welfare of community life. They are expected to take measures to conserve and allocate our scarce resources properly. Evidently. textiles and ready-made garments.Marketing Management 9. Earthenware pots have yielded place to a variety of new kitchenever. There has also been a welcome change in the pattern and range of India’s exports. It does not lend itself to an automatic transfer of the tools and techniques. The spread of bicycles had been almost in the nature of a revolution. In clothing. 10. marketing executives will have to pay due attention to the quality of our life and our environment. The sectors in which significant gains have been made in the export effort in recent years include farm products. Manufactured products and products of a highly technical nature now find a prominent place in the items exported by India.

h the challenges of environment. Explain the impact of social and cultural environment on the marketing management of a firm. In short. the marketing environment of the country provides a great opportunity for the marketing man to work on.4 SUMMARY The detailed analysis presented in the foregoing page in this lesson reveals that the marketing environment of India has undergone a major change in the last three decades.7 REVIEW QUESTIONS 1.3 IMPORTANCE OF ENVIRONMENT ANALYSIS The marketing manager needs to be dynamic to effectively deal wit. It provides a. It is changing with fast speed. It provides a base of 'objective qualitative information about the business environment that can subsequently be of value in designing the strategies. 4. and the strategists in particular. environment.5 REVISION POINTS Demographic environment. It helps firms to identify and capitalize upon opportunities rather than losing out to competitors. The environment of business is not. experts scene. Economic environment. The following benefits of environment scanning have been suggested by various authorities: • • It creates an increased general awareness of environmental changes on the part of management. It guides with greater effectiveness in matters relating to Government. 2. continuing broad-based education for executives in general. Economic use of energy and natural resource are the essential ingredients of marketing strategies. Social and cultural 4. static. New markets for several consumer –products have been created in the country-in-urban as well as rural areas. distribution environment.6 KEYWORDS Legal forces. It suggests improvements in diversification and resource allocations. 4. advertising scenario. All these developments has made a profound impact on the size and structure of India’s markets the traditional marketing scene has been significantly altered by these developments. The change has been particularly significant in the past few years. Ecology 4.Marketing Management our ecological environment. Mention the uncontrollable variables influencing the marketing strategies and policies of a firm in a competitive market. It helps in marketing analysis. It is resonable to expect that in the coming years. the change already witnessed in the social scenario too is like to get accelerated further in the coming years. • • • • • 4. 32 . Competition has become an integral part of the marketing environment of the country.

8 TERMINAL EXERCISE ‘A marketer has to be more aware of changes in the external environment than any other department in the organization’ – Do you agree. adaptive system living in its own environment and strives to accomplish within objective through integration and coordination’ – Explain.9 ASSIGNMENT QUESTIONS 1. 4.Marketing Management 4. 33 . ‘A firm is an open.

6 Kinds of marketing strategy 5.2 ANALYSING OPPORTUNITIES There is an unresolved debate in the management literature as to whether the first step in the strategic marketing process is to identify opportunities or to set objectives.9 Key words 5. promotion and pricing. distribution. But they do recognize good opportunities. It is difficult for them to state what they really want.7 Summary 5. It is a policy to maintain the firms competitive edge in the market. 34 .3 Setting company objectives 5.10 Review question 5. Many organisations do not have well-stated objectives. policies and rules that guide over time a firms marketing efforts. Thus the March of Dimes was set up to raise money to conquer the dreaded disease of polio. The development of the Salk vaccine in the early 1950s left the organisation without a cause. 5.8 Revision points 5.12 Assignment question 5. Management give it a shape with strategies for each controllable of product. Many organisations get their start because they recognize an review opportunity. They echo Sir Edmund Hillary’s reason for climbing Mount Everest: “Because it is there”.Marketing Management LESSON – 5 MARKETING STRATEGIES OBJECTIVES After studying this lesson you can able to know Analysing opportunities Kinds of marketing strategies STRUCTURE 5. Those who argue in favour of looking at opportunities offer the following reasons: 1.11 Terminal exercise 5.1 INTRODUCTION Marketing strategy as a set of objectives.5 Formulating marketing strategy 5. 3.2 Analysing opportunities 5.4 Developing marketing strategy 5. It looked for new opportunities and recommitted its resources to the problem of birth defects. Many organisations change their objectives as their opportunities change. 2.1 Introduction 5.

day-care centers and biochemical instruments. we call these intensive growth opportunities. Currently there are great opportunities to develop new sources of energy. But none of these necessarily represent opportunities for any specific company. The world is too full of opportunities. There are opportunities in refuse disposal. such as to make high profits. 2. prefab housing. 2. or horizontal within the industry. Market development: Market development consists of the company’s seeking increased sales by taking its present products into new markets. 3. water purification. The first level of analysis discerns those opportunities present in the current product-market activity of the company. 1. The three major types of intensive growth opportunities are described below: Market Penetration: Market penetration consists of the company’s seeking increased sales for its present products in its present markets through more aggressive marketing effort. new forms of leisure. 3. we call these diversification growth opportunities. Integrative Growth: Integrative growth makes sense for a company if (a) the basic industry has a strong growth future and /or (b) the company can increase it profitability. 35 .Marketing Management On the other hand. Intensive growth: Intensive growth makes sense for a company if it has not fully exploited the opportunities latent in its present products and markets. and both must be considered simultaneously. there are those who argue that objectives should precede opportunity analysis: Many organisations start with an overriding objective. Many organisations make conscious change in their objectives. 1. the new objectives lead them to search for a different set of opportunities. We have to conclude that both sides have merit. We might even add that the company’s resources often provide still a third starting point. or control by moving backward. There are countless environmental opportunities available in any economy as long as there are unsatisfied needs. The second level discerns those opportunities present in other parts of the core marketing system. lower – cost legal services. forward. Product development: Product development consists of the company’s seeking increased sales by developing improved products for its present markets. Alternative growth opportunities can be generated for a company by mapping its core marketing system and then moving to three levels of analysis. new food products. containerization. improved forms of transportation. efficiency. and when they do. The arguments show that there is a dynamic tension between them. It is possible to start the strategic marketing process by looking either at opportunities or at objectives. improved agricultural methods. A company cannot simply look for opportunities without a set of objectives. and improved teaching technology. and look for the opportunities that will achieve the objective.

Marketing Management
The three integrative growth possibilities are discussed below: Backward integration: Backward integration consists of a company’s seeking ownership or increased control of its supply systems. 2. Forward integration: Forward integration of a company’s seeking ownership or increased control of its distribution systems. 3. Horizontal integration: Horizontal integration consists of a company’s seeking ownership or increased control of some of its competitors. Diversification Growth: Diversification growth makes sense for a company (a) if the core marketing system does not show much additional opportunity for growth or profit, or (b) if the opportunities outside of the present core marketing system are superior. Diversification does not mean that the company will take up any opportunity however unrelated to its present distinctive competences or needs. On the contrary, the company would attempt to identify fields that make use of its distinctive competencies or help it overcome a particular problem. There are three broad types of diversification moves: Concentric diversification: Concentric diversification consists of the company’s seeking to add new products that have technological and/or marketing synergies with the existing product like; these products will normally appeal to new classes of customers. 2. Horizontal diversification: Horizontal diversification consists of the company’s seeking to add new products that could appeal to its present customers though technologically unrelated to its present product line. 3. Conglomerate diversification: Conglomerate diversification consists of the company’s seeking to add new perfects for new classes of customers because this (a) promises of offset some deficiency or(b) represents a great environment opportunity; in either case, these products have no relationship to the company’s current technology, products, or markets. 5.3 SETTING COMPANY OBJECTIVES A company cannot go after all of its opportunities first, because some of them are inconsistent with each other; second, because it never has enough resources to pursue all of its opportunities; and third, because all the opportunities are not equally attractive. We can imagine the company eliminating those opportunities for which it lacks sufficient resources or synergistic possibilities. Once a company arrives at a strong sense of corporate mission, it finds it easier to scan the environment for opportunities and easier to evaluate the contribution of different opportunities to corporate purpose. At the same time, corporate purpose itself is subject to revision as new opportunities arise and old solutions no longer work. The company’s basic purpose and mission must be translated into specific objectives to guide the organisation to what it should try to accomplish with various activities in the external environment. Company objectives must have certain qualities if they are to serve the purposes. If particular, they should be hierarchical, quantitative, realistic, and consistent. 1. 1.


Marketing Management
A company may pursue a large number of objectives, not all equally important. When possible, major objectives should be arranged in a hierarchical fashion showing which are the most important, which are derived, and how they are derived. To the extent possible, objectives should be stated in quantitative or operational terms. The objective “increase the return on investment” is not very satisfactory. The objective “increase the return on investment to 7.5 percent” is an improved statement. The objective “increase the return to investment to 7.5 percent by the end of the second year” is a still better statement. The more specifically the objective is stated in terms of magnitudes, time and place, the more useful it I for developing plans and implementing controls. The company is likely to pursue at any time a number of review objectives rather than one. For example, a company states that it seeks to provide a quality product that will maximize customer satisfaction, provide an adequate return, and increase the company’s total market share. These are admirable objectives but raise the question of whether they are all consistent. Sometimes the objectives are clearly inconsistent as when management says that it wants “to maximize sales and profits”, or wants “to achieve the greatest sales at the least cost”, or wants “to design the best possible products in the shortest possible time”. It must be recognised that these objectives are in a trade-off relationship. It is not possible to maximize simultaneously sales and profits. One can increase sales by lowering price, improving product quality, and increasing marketing effort, although these steps, beyond and point, are likely to reduce profit. A statement involving two basic objectives in a trade – or relationship is of no help as a management guide without further specification.
5.4 DEVELOPING MARKETING STRATEGY Objectives are a statement of where a company wants to go; strategy is a grand design for getting there. Strategy is a battle plan fused out of marketing, financial, and manufacturing elements.

Marketing strategy of a firm is the complete and unbeatable plan or instrument designed specifically for attaining the marketing objectives of the firm. The marketing objectives will toll us where the firm wants to go; the marketing strategy will provide the design for getting there. According to Michael E. Porter, “Marketing strategy has mainly one air-to cope with competition. There are five major and vital forces that decide the nature and intensity of competition – the treat of new entrants, bargaining power of customers, bargaining power of suppliers, threat of substitute products and the jockeying among the existing contestants. The collect strength of these forces determines the ultimate profit potential of an industry. And the strategist’s goal is to find a position in the industry where his company can best defend itself against these forces or can influence them in his company’s favour. Strategy can be viewed as building defenses against the competitive forces”.
5.5 FORMULATING THE MARKETING STRATEGY Formulation of marketing strategy consists of five main steps.


Marketing Management
1. Market segmentation: Market segmentation is the basic recognition the every market is made up of distinguishable segments consisting of buyers with different needs, buying styles, and responses of offer variations. No one approach to the market will satisfy all buyers. Each segment of the market represents somewhat different parts of the market before taking a position. There is no unique way to segment a market. The fortunate firm is often the one that has found a creative new way to segment the market. 2. Market positioning: The second principal of marketing strategy is to select a specific pattern of market concentration that will afford the maximum opportunity to the company to achieve its leadership objective. The company cannot to everywhere. It must go after viable positions. It mush follow the principle of target marketing. Market segmentation throws up not one but several market segments with varying degrees of potential, profitability and risks. The firm may not be interested in all these segments. There may be segments assuring immediate profits; there may be segments demanding heavy investment by way of market development; some other segment may show very great potential but may display tough barriers to entry. As such, the question which segment/segments the firm should select as its target market, assumes crucial importance. The firm may analyse the risks,. Analyse the profitability and size and the competition in the different segments. Still, it may not be possible for it to readily pick up the target segments. Quantitative techniques may take the firm thus far, but not to be concluding point. Judgment along can take the firm to the concluding point or final decision on the decision on the target market. This decision is essentially a decision in the realm of strategy. It is not just a number game. What makes any part of the market an attractive one for a particular company to go after? A maximally attractive market segment would have four characteristics: The market segment is of sufficient size. The market segment has the potential for further growth. The market segment is not “owned” or over occupied by existing competition. 4. The market segment has some relative unsatisfied needs that the particular company can serve well. 1. Market entry strategy: The third element of marketing strategy is to determine how to enter a target market segment. The company can proceed through acquisition, internal development, or collaboration with other companies. Acquisition of an existing product or company is the easiest and quickest way to enter a new market. Acquisition obviates the costly and time-consuming process of attempting to build up internally the knowledge, resources, and reputation necessary to become an effective participant in that part of the market. Some companies prefer to achieve most of their growth through internal development. The may feel that true leadership is only achieved by running their own research and development laboratories. They many feel that the companies 1. 2. 3.


Marketing Management
around to acquire are not very good or are asking for too much. Or there may be no companies around to acquire. Entry into a new market or market segment may also be accomplished by collaboration with others to jointly exploit the new opportunity. A major advantage is that the risk is shared, and therefore, reduced, for each of the participating companies. Another advantage may be that each company brings specific skills or resources, the lack of which makes it impossible for either company to venture by it. In the best jointventuring combinations, there is not only complementarily by synergy. 4. Marketing –mix strategy: The next element in marketing strategy is for the company to determine how it will profits its offering to the particular market segment. The key concept here is marketing mix. Marketing mix is the set of controllable variables that the firm can use to influence the buyers responses. Many variables quality as marketing – mix variables. McCarthy popularized a four-factor classification which he called the “four P’s” product, place, promotion and price. This classification implied that buyers are influenced by variables related to the product, the place, promotion, and price. Assembling the marketing mix simply means assembling the “Four Ps” of marketing in the right combination. Involved in this process are the choice of the appropriate marketing activities and the allocation of the appropriate marketing effort to each one of them. Product strategy is a part of this process. Matching the products with market needs and consumer aspirations is the purpose of product strategy. Distribution strategy is another part of this exercise. Taking the product where the consumer wants it and delivering the product to him in a manner that is most convenient to him is the essence of the distribution strategy. When other elements like pricing, advertising and promotion are superimposed appropriately on this framework, the marketing mix gets assembled. 5. Timing strategy: The final element of strategy is that of timing. Just because a company has spotted a good opportunity, set an objective, and developed a marketing strategy does not mean it should immediately move in. It may lost by moving in too soon or too late. The proper sequencing and timing of its moves are a key component of strategy.
5.6 KINDS OF MARKETING STRATEGY In actual practice, it can be often seen that different firms take different strategy stances. This is but natural. As long as their situational designs and consequently their specific requirements of strategy differ from each other, they will evidently follow different strategy stances. One firm may find it appropriate to have a direct confrontation with the market leader; another may find it appropriate to keep aloof for some time from the heat of competition; the third may find it relevant to chalk out a strategy of sheer survival. It is essential to understand that three is no universally valid strategy stance. It is so because the various firms do not share the same situational design. Depending on the unique situational requirement faced by each firm, the strategy stances adopted by them can fell into any of the following broad categories.


Reliance Textiles adopted a confrontation strategy. It cultivates a small market segment for itself with unique products/services. 5. Types of diversification 5. it assumes a defensive stance in the market. it ‘demarkets’ the product through a conscious manipulation and suppression of demand. conglomerate 5. Philip Kotler classifies these approaches into Frontal attach. 40 . supported by a unique marketing mix. And to confront. Horizontal diversification. 5. Normally. makers of ‘Promise’ toothpaste. Defensive Strategy Here the firm wants to avoid any possible direct conformation with leading competitions. Taking the cue from military strategies. too adopted a confrontation strategy. Niche Strategy In this case. Remarketing Strategy Through this strategy. Explain the different kinds of marketing strategies. Its concern is: how best can I defend my present position? ‘VIP’ in the moulded luggage market adopted a defensive strategy when big competition landed it in rough weather. Balsaras. the firm neither confronts nor defends. Bypass attach and Guerrilla warefare. These segments are too small to attract big competitors. How would you formulate a marketing strategy? 2.7 SUMMARY Organisational marketing strategies differs and choose the strategy according to their requirement. Flanking attach. a product with losing demand is brought back of like and remarketed in the same name and style or in a changed name and style. 5.10 REVIEW QUESTIONS 1. a firm may adopt several kinds of tactics /approaches.9 KEY WORDS Concentric diversification diversification. The firm may canalize the demand towards some other products which it would like to popularise. Encirclement attack. A repositioning of the product and /or a modification in the marketing mix often constitutes the broad components of a remarketing strategy.11 TERMINAL EXERCISE Comment on the competitive marketing strategies to convert the competition from multinationals in India.Marketing Management Confrontation Strategy It is a strategy of aggression /offence. Demarketing Strategy When for certain reasons. smaller firms with distinctive capabilities adopt niche strategy. The firm is ready for a direct frontal attach on the existing competition. a firm wants to withdraw a product that is enjoying good demand. Strategies help the firms to maintain or increase market share. For its own reasons.8 REVISION POINTS Diversification growth opportunities.

12 ASSIGNMENT QUESTION Give a brief write-up on the “Current marketing situation” and how to face the challenge of dynamism. Leading cigarette manufactures in India have launched cheaper varieties to have an eye on beedi segment concentrating in rural parts of the country.Ramaswamy and S. Propose a demarketing plan that will bring down the level of demand for oil. (Refer Lesson 3) 2. CASES (UNIT 1) 1. many petroleum companies have sought to reduce their customers’ use of oil.S. Do you think that the Indian marketing environment is a boon to their strategy? (Refer Lesson 4 and 5) REFERENCE BOOKS (UNIT 1) MARKETING MANAGEMENT MARKETING MANAGEMENT FUNDAMENTALS OF MARKETING STRATEGIC MARKETING BASIC MARKETING – – – – – Philip kotler V.Marketing Management 5. Stanton A. Namakumari William J. In the face of fuel shortage. Robertson Mc Carthy 41 .

Thus.Marketing Management LESSON – 6 MARKET SEGMENTATION.4 Requirements for effective segmentation 6.7 Criteria for market segmentation 6.14 Keywords 6. market segmentation is the strategy of ‘divide and conquer’. Segmentation is a consumer oriented marketing strategy.5 Bases for segmenting industrial markets 6. purchasing power.10 Selecting a market targeting strategy 6.1 Introduction 6.9 Target market strategies 6. MARKET TARGETING AND PRODUCT POSITIONING OBJECTIVES After studying this lesson you can able to know Rationale for market segmentation Requirements for “effective segmentation” Target market strategies Product positioning techniques STRUCTURE 6. geographical locations. This is made possible by recognizing the difference in the response characteristics of various parts of the market. Market segmentation is a method for achieving maximum market response from limited marketing resources. segmentation helps in grouping those consumers having similar wants or desires. buying attitudes and buying practices. A market segment is a meaningful buyer group having similar wants. In a sense. Though wants and desires of consumers are diverse.12 Product positioning techniques 6. and buyers differ in one or more respects.8 Market targeting of product positioning 6.2 Rationale for market segmentation 6.1 INTRODUCTION Market consists of buyers.15 Assignment questions 6. segmentation answers the following question: “To whom should the products be sold and what should be sold to them?” Market segmentation enables the marketers to select the target market and offer appropriate marketing mix.13 Summary 6. This varied and complex buyer behaviour is the root cause of market segmentation.11 Product positioning 6.6 Steps involved in segmentation process 6.3 Benefits of segmentation 6. The essence of segmentation is to identify 42 . They may differ in their wants. Each segment can be a group of people with similar or homogeneous demand and this will enable the enterprise to have tailor-made marketing mix to each market segment.

product requirements. and prices. We call this undifferentiated marketing. Markets vary in their degree of heterogeneity. Distribution and promotion. Market segmentation is the process of identifying groups of buyer with different buying desires or requirements. He can go after one particular market segment and develop the ideal product for them.2 RATIONALE FOR MARKET SEGMENTATION Every organisation must decide not only of what needs to serve but also whose needs. and responses to marketing influences. Such a market is heterogeneous. colours.Marketing Management consumer demand. suppose all buyers of salt want to buy the same amount per month and want the simplest packaging and the lowest price. This is the problem of selecting target markets. sizes. there are markets made up of buyers who are very similar in their wants. He can introduce several product versions. In a heterogeneous market. “Market segmentation is the sub-dividing of a market into homogeneous subsets of customers where any subset may conceivably be selected as a market target to be reached with a distinct marketing mix. Thus market segments and the determination of market targets are separate questions. 43 . The power of this concept is that in an age of intense competition for the mass market. 5. furniture buyers are looking for different styles. 4. and selling to it would be fairly straight forward. With the rising cost of production. We call this concentrated marketing. Market targeting is the firm’s decision regarding which market segments to serve. materials. individual sellers may prosper through creatively serving specific market segments whose needs are imperfectly satisfied by the mass-market offerings”. At one extreme. 6. precise market segmentation has assumed considerable importance in marketing management. Such a market would be homogeneous. It is made up of customer groups with different buying needs and interests. each appealing to a different group. Definition “Market segmentation consists of taking the total. For example. each of which tends to be homogeneous in all significant aspects”. We call this differentiated marketing. At the other extreme are markets made up of buyers seeking substantially different product qualities and/or quantities. Most markets are too large for an organisation to provide all the products and services needed by all the buyers in that market. heterogeneous market for a product and dividing it into several sub-markets or segments. For example. These groups are called market segments. The market offers of competitors would probably be very similar. Some delimitation of the market is necessary for the sake of efficiently and because of limited resources. 6. the marketer has three targeting options: He can introduce only one product. hoping to get as many people to want and buy it as possible.

It helps in determining the kinds of promotional devices that are effective and also their results 5. the organisation could allocate and appropriate its efforts in a most useful manner. 4. 6. such as nations. or neighbourhoods. cities. or social class. the product line could be diversifies or even discontinued. Segmental marketing is expensive. occupation. 44 . As such as soon as the product becomes obsolete. It determines those geographical markets that it could serve best.. as we shall shortly see. the degree to which the segments are large and /or profitable enough to be worth considering for separate marketing cultivation. The second condition is accessibility. the degree to which information exists or is obtainable on the particular buyer characteristic.Marketing Management 6. could be easily determined. the market is divided into different locations. advertising. family size. This is not possible with all segmentation variables. Appropriate timing for the introduction of new products. family life cycle. or even earlier. Unfortunately. One reason is that consumer wants or usage rates are often highly associated with demographic variables: another is that demographic variables are easier to measure than most other types of variables. Thus it is hard to measure the respective number of automobile buyers who are motivated primarily by considerations of economy versus status quality. A segment should be the smallest unit for which it is practical to tailor a separate marketing programme. for example. The result obtained form market segmentation is an indicator to adjust the production.3 BENEFITS OF SEGMENTATION 1. 3. He is able to judge product acceptance or to assess the resistance to his product. states. It would be nice if advertising could be directed mainly to opinion leaders. The organisation recognizes that market potentials and costs vary with market location. Demographic variables have long been the most popular bases for distinguishing significant groupings in the market place. religion. Geographic Segmentation: (Bases for Segmentating Consumer Markets) in geographic segmentation. nationality. using men. sex. In other words. Changes required may be studied and implemented without losing markets. Demographic Segmentation: In demographic segmentation. income. 2. It would not pay.4 REQUIREMENTS FOR EFFECTIVE SEGMENTATION The first condition is measurability. the degree to which the firm can effectively focus its marketing efforts on chosen segments. for an automobile manufacturer to develop special cars for midgets. the market is subdivided into different parts on the basis of demographic variables such as age. The manufacturer is in a better position to find out and compare the marketing potentialities of his products. many suggestive characteristics are not susceptible to easy measurement. but their media habits are not always distinct from those of opinion followers The third condition is substantiality. materials and other resources in a most profitable manner. etc. education.

some are desirous. and low price as independents. The particular distribution of people over stages of readiness makes a big difference in designing the marketing programme. whereas a small film competitor will concentrate on trying to attract regular users to its brand: Potential users and regular users require different kinds of communication and marketing efforts. some are interested. For example. Psychographic variables tend to refer to the individual and such aspects as his life-style. This information can help the company in allocating its marketing 45 . 50 percent of the beer drinkers account for 88 percent of beer consumption. bright teeth. and service. Such terms as hippies.Marketing Management Psychographic Segmentation: The third category of segmentation variables is the psychographic. Heavy users may constitute only a small percentage of the numerical size of the market but a major percentage of the unit volume consumed. Marketing factors: Markets can often be segmented into groups responsive to different marketing factors such as price and price deals. there is a distribution of people in various stages of readiness toward buying the product. Life-style: Life-style refers to the distinctive mode of orientation an individual or a group has toward consumption. High-market-share companies such as Kodak (in the film market) are particularly interested in going after potential users. Haley has characterised those seeking decay prevention as worriers. The amount of loyalty can range from zero to absolute. An attempt is made to determine the demographic or psychographic characteristics associated with each benefit segment. or low price. They try to endow their products with brand personalities (brand image. potential users. personality. straights. We find buyers who are absolutely loyal to a brand to an organisation. medium and heavyuser groups of the product called volume segmentation. Marketers are increasingly being drawn to life-style segmentation. and some intend to buy. Loyalty status: Loyalty status describes the amount of loyalty that users have to a particular object. and product knowledge and use. Stage of Readiness: At any point of time. first-time users. In the case of toothpaste. self-concepts). and play. good taste as sensories. brand concept) designed to appeal to corresponding consumer personalities (self-images. and regular users of a product. People within the same demographic group can exhibit vastly different traits. product quality. and jet-setters are all descriptive of different life-styles. good taste. Benefits sought: Buyers are drawn to products with different buying motives. buying motives. some are informed. Personality: Marketers have used personality variable to segment the market. Some members of the potential market are unaware of the product: some are aware. Usage rate: Many markets can be segmented into light. Companies try to identify the characteristics of their hard-core loyal so that they can target their market effort to similar people in the population. User status: Many markets can be segmented into nonusers. swingers. bright teeth as sociable. work. ex-users. there are customers who seek decay prevention. to a place and so on.

say. 6. The industries might be loyal to a particular supplier. For example. quality. Demographic variables are the most important basis for market segmentation. Some industrial customers may be enterprising and risk-taking where as some may be conservative and cautious. Separate marketing programmes can be formulated for dealing with large and small customers. a company can further by segmented by customer size. the company can segment on the basis of purchase criteria. Identification is the starting point. the size of the companies and geographical areas shall be the demographic factors to which attention should be paid...g. They apply multi attribute segmentation. The criteria for purchasing. 6. They are followed by operating variables and personal characteristics. The purchasing policies of the company. Personal characteristics: the industrial customer may have the similar or different values than the marketer. The following factors should be borne in mind to segment industrial market. picture tubes.Marketing Management resources. The size of orders may also vary according to requirements. A company that specializes in a certain marketing factor will build up hard-core loyal seeking that factor or benefit. financial soundness. aircraft manufacturers. industrial companies do not focus on one segmentation variable.5 BASES FOR SEGMENTING INDUSTRIAL MARKETS Industrial markets can be segmented using many of the variable employed in consumer market segmentation.6 STEPS INVOLVED IN SEGMENTATION PROCESS The process of market segmentation is not complete merely by identifying the differences between one customer group and another. Demographic Factors: The type of industries to which the goods sold. Within a chosen target industry. e. The product sometimes may serve only a single purpose. technological soundness have an impact the market segmentation. price etc. Within the chosen customer size. Situational Factors: Some industries may require sudden be immediate delivery of the product. Government industries may require products at a lower price where as private industrial units may give importance to reliability. service. The marketing variables are usually proxies for particular benefits sought by buyers. There are many other steps in completing the process. Purchasing Approach Factors: Companies some times have a centralised purchase function or a totally decentralised purchase function. the power structure viz. All these personal characteristics are noteworthy for segmentation of industrial markets. a rubber tyre company’s buyers may be car manufacturers. Thus. The main steps are as follows 46 . heavy vehicle manufacturers etc. and the company’s relationship with market do need attention while segmenting these markets.

The chosen segments should also be clearly ‘measurable’. it should be possible for the firm to capture the segments. some basis for classifying an individual as being or not being a member of the segment. they should not remain a dreamland. they must be ‘profitable’ to the firm there is no use in locating sizable markets that are unprofitable. ii) Finding out the factors or characteristics on the basis of which consumers can be appointed to a specific segment. the extent of influence of a specific marketing mix over the segment should also be measurable. market inputs. v) Finding out the segment which will be benefited by the products of the firm. disaggregating the customers into suitable segments. the practical requirements have to be kept in view. Identity: The marketing manager must have some means of identifying members of the segment i. etc.7 CRITERIA FOR MARKET SEGMENTATION CUSTOMER DEMAND AND MAKET SEGMENTATION EASTERN PART OF COUNTRY HIGH INCOME GROUP FAMILIES i) TOTAL MARKET TARGET MARKET 1. i. There must be clear differences 47 . The segments must be ‘accessible’ or ‘available’ to the firm. iv) Analysing and establishing whether it is possible to formulate separate marketing programmes and marketing mixes for the different segments.. especially the significant and relevant ones.. Such a segment can be considered as the target segment of the firm.e. 6. vi) Estimating the likely levels of purchase by each segment. by normal standards. This may be in terms of needs. vii) Finally. i. likely response.Marketing Management Assessing the difference between one customer group and the other. As mentioned earlier while carrying out the segmentation. iii) Based on the above steps.e. the sales potential and profit potential of the segments must be measurable.e. Again. The segments arrived at must be relevant to the marketing requirements of the firm. they must also be ‘sizable’.. A very small segment may not serve the purpose of commercial exploitation. selecting those segments which offer higher potential and which would be amenable to the offerings of the firm.

Segments must be accessible in two senses. Firms must be able. safety. The evaluation of the different segments has to be actually based on these criteria and only on the basis of such an evaluation should the target segments be selected. Members of such segments can be readily identified by common characteristics. It depends upon the number of people in it and their purchasing power. Measurablility: The purpose of segmentation Is to measure the changing behaviour pattern of consumers. For example. 4. He must look at each segment as a distinct marketing opportunity. comforts. organisation must be able to focus its marketing efforts on the chosen segment. Essentially. The marketing man must assess the sales potential and profit potential of each segment. 6. it should react negatively to price rises. whether it is accessible and whether it is attractive and profitable. 2.8 MARKET TARGETING AND PRODUCT POSITIONING Introduction: Market segmentation is actually the prelude to target market selection. In other words. Accessibility: It must be possible to reach the different segments in regard to both promotion and distribution. Segmentation Is required only If there are marked differentiation in terms of demand. The marketing man normally carries out several steps in addition to segmentation before selecting the target market. makers of luxury goods may appeal to small but wealthy target markets whereas makers of cheap consumption goods may sell co a large number of persons who are relatively poor. he carries out a thorough evaluation of the various segments and selects those segments that are most appropriate. 48 . He can look for segments which are relatively less satisfied by the current offers of competing brands.Marketing Management between segments. He must evaluate his company’s resources and try to match the resources and the market segments. he must evaluate the worth of each segment from his firm’s viewpoint. 3. the segment of a market for a bike are determined number of considerations. resale value etc. Nature of Demand: It refers to the different quantities demanded by various segments. how many and which one.whether the segment is relevant to his firm. The idea is that enough potential buyers must exist to cover the costs of production and marketing required in that segment. 6. He must also take at the product characteristics and try to match the product characteristics and market segments. He must examine alternative possibilities whether the whole market has to be chosen for tapping or only a few segments have to be chosen ad if so. status. to make teem aware of products or services. 5. such as economy. quality. whether it is sizable. Size: The segment must be reasonably large enough to be a profitable target. if a particular segment is defined as being cost-conscious. For example. For example. Responsiveness: A clearly defined segment must react to changes in any of the elements of the marketing mix.

The market realities of the segment under consideration will now enter the picture. business firms seek out the high growth segments. It tries to design a product and a marketing programme 49 . may look at each zone in the country as a separate market segment and analyse whether distinctive marketing strategies and distinctive marketing mixes could be applied over the different zones. the firm can easily size up that the premium segment is the more profitable segment in the soap business.9 TARGET MARKET STRATEGIES There are three target market strategies viz. Given the position of the firm in these respects. In the example under consideration. The firm. profitable and accessible. between Rs. in the popular or regular segment. 6. On the contrary.. focusing on what is common in the needs of people rather than on what is different. for example. a strong marketing organisation and the required resources can successfully fight for a share of the premium segment. objectives. The firm has to now consider whether the segment is accessible to it. Usually. for some firms. the popular segment may be natural and for others. In the soap business. The premium segment is a highly competitive segment. the firm chooses not to recognize the different market segments making up the market. The profit potential in the premium segment is quite high and a relatively lower volume would provide adequate returns to the firm. Only a firm endowed with an aggressive marketing culture. ambition and distinctive capabilities. growth oriented. Concentrated marketing 1. though it is a high growth segment. the premium segment may be the ideal choice.Marketing Management The future position of the segment would be the next consideration in the evaluation process. Having satisfied itself that the premium segment is sizable. will have to be seen. profitable and accessible. a much larger sales volume would be necessary for the business to be viable since prices and profit margins in the segment are low. Next in line will be the consideration of profitability. In addition to the segmentation on the basis of premium vs. Un differentiated marketing 7. the firm can also attempt a geographical segmentation of the soap market before finally selecting the segments to be served. etc. attractive. market analysis would readily indicate that the premium segment happen to be the high-growth segment of the business. It treats the market as an aggregate. an analysis of whether the segment considered is sizable. the firm has to analyse and find out if the segment would match the firm’s resources. The price in this segment is usually high. Undifferentiated Marketing: In undifferentiated marketing. Here again. all new brands that enter the segment do not make a success.6 per cake in respect of the popular segment. Differentiated marketing 8. This may need further analysis. The firm has to assess whether its marketing capabilities are compatible with the segment under consideration. 6. several new brands in the segment are seen falling by the wayside. popular groups.

it also tends to be true that differentiated marketing increases the costs of doing business. its only realistic choice is concentrated marketing. However. instead of spreading itself thin in many parts of the market. Instead of going after a small share of a large market. the product. This is reflected in trends toward multiple product offerings and multiple trade channels and media. such as cameras and automobiles.10 SELECTING A MARKET TARGETING STRATEGY Particular characteristics of the seller. The fact that the product line is kept narrow minimizes production. For these reasons. whether or not this is based on any real difference. inventory. undifferentiated marketing results in keeping down several costs of doing business. or the market serve to constrain and narrow the actual choice of a market targeting strategy. Undifferentiated marketing is primarily defended on the grounds of cost economies. Products that are capable of great variation. it concentrates its forces to gain a good market position in a few areas. It aims to endow the product with a superior image in people's minds. 2. 3. On the whole. many firms see a third possibility. one that is especially appealing when the company’s resources are limited. The absence of segmental marketing research and planning lowers the costs of marketing research and product management. The second factor is product homogeneity. many companies prefer to diversify in several market segments. are more naturally suited to differentiation or concentration. and transportation costs.Marketing Management that appeal to the broadest number of buyers. the firm goes after a large share of one or a few sub markets. Undifferentiated marketing is more suited for homogeneous products such as grape fruit or steel. and universal themes. Put another way. The first factor is company resources. However. a firm decides to operate in two or more segments of the market but designs separate product and / or marketing programmes for each. The undifferentiated advertising programme enables the firm to enjoy media discounts through large usage. The net effect of differentiated marketing is to create more total sales than undifferentiated marketing. 6. 50 . Differentiated Marketing: Under differentiated marketing. In recent years an increasing number of firms have moved toward a strategy of differentiated marketing. Where the firm's resources are too limited to permit complete coverage of the market. mass advertising media. Concentrated Marketing: Both differentiated marketing and undifferentiated marketing imply that the firm goes after the whole market. At the same time. It relies on mass channels. The particular market segment can suddenly turn sour or a competitor may decide to enter the same segment. concentrated marketing involves higher than normal risks.

Identifying these features imaginatively and using it as the ‘Plank’ on which to pedestal the product is the essence of positioning. is positioned as a health drink. Positioning comes out to the marketing man's awareness that a product cannot be 'everything to everyone'. the newly introduced soyamilk. The firm's interest is to develop primary demand. When a firm introduces a new product into the market place it usually finds it practical to introduce one or. The detergent powder. So. Complan is positioned as a health-builder. firms tend to pursue a strategy of differentiated marketing. wherever there is a dominant brand or competitor. In the mature stage of the product life cycle. Some unique features of the product. Rasna is positioned on the plank of economy and convenience. throughout the world. on account of the distinction that the brand or company has already attained. When competitors are practicing active segmentation. 6. If buyers have the same tastes. the product can be positioned against a competing brand. The fifth factor is competitive marketing strategies. IBM holds a dominant position. the other brands have to reckon the leader's position. Nirma is positioned on the plank of economy. and react in the same way to marketing stimuli. Limca is positioned as a thirst-quenching soft drink. So. at the most. Great Shake. when competitors are practicing undifferentiated marketing. It can only be something to someone. a strategy of undifferentiated marketing is appropriate.12 PRODUCT POSITIONING TECHNIQUE There are certain brands and companies which occupy a dominant position in the consumer's mind. and positioned against milk. a few product versions.11 PRODUCT POSITIONING The significance of product positioning can be easily understood from David Ogilvy's assertion. "The results of your campaign depend less on how we write your advertising than on how your product is positioned". some unique features of the market or some unique features of the competition is normally isolated and around that feature the product is placed in the market. No other brand can enter the market without somehow relating itself to IBM's position. and it is positioned for a price-conscious segment of the detergent users. For example. it can be positioned for an exclusive well-to- 51 . a firm can gain by practicing active segmentation if some of the other factors favour it. Positioning is the outcome of a conscious strategy of marketing. or it might concentrate on a particular segment. among the customers of computers. it is hard for a firm to compete through undifferentiated marketing. Let us understand product positioning through certain examples. The fourth factor is market homogeneity.Marketing Management The third factor is product stage in the life cycle. Conversely. and positioned against milk. 6. buy the same amounts per periods. listing out the additional nutritive agents it possessed over milk. and undifferentiated marketing seems the suitable strategy.

the marketing man is committing the product to the particular decision and situation. uniqueness. While repositioning a successful product later in the life-cycle may be easy. and then next year it changes its positioning to superior product performance. They feel that defining value propositions will narrowly restrict their market. Confusion will arise if changes in positioning planks occur frequently. The marketing man has to formulate his positioning theme right from the product idea stage.Marketing Management do segment of the market. The target market should be clearly demarcated and identifiable in terms of demographic or geographic parameters. He cannot suddenly invent a positioning theme when he is ready to enter the market with his product. In India. it can be positioned for men. By positioning a product in a particular way. Positioning is essentially a battle or capturing a place in the mind of the prospect. the consumer would not know what to expect from the offering of the company. The target market should be clearly defined in terms of being served by a distinct value proposition. it can be positioned on a claim of luxury. products undergo ‘repositioning’ as they go along their life-cycle. Most companies do not clearly communicate the corresponding value proposition because they also want their offerings to be' acceptable to customers other than those in their target market. Positioning is a technique which the marketing mean has to employ with a lot of care and pre-planning. it is not at all easy to retrieve and reposition a wrongly positioned product. CRETERIA FOR SUCCESSFUL POSITIONING CLARITY The positioning idea must be clear in terms of both target market and differential advantage. or a combination of both. it can be positioned for the fun-loving youth. For instance. Each target market of the company should be different from the other. they repositioned them as an affordable convenience for the common man of the semi-urban and even the rural markets. This is done to increase the sale of the products by appealing to a wider market. The value proposition should be clearly communicated. New 52 . novelty. the product suffers heavy damages. it can be positioned for children. Quite often. Later. if a company positions on quality of service in one year. manufacturers of transistor radios positioned them for the urban and educated customers. Customers who were attracted to the previous positioning of the company now desert it. a claim of distinctiveness. He should have already decided what his ‘cash on’ point should be. a claim of convenience. where he should introduce his product and for whom. The product may be provided with new features for the same old product may be associated with new uses and may be offered to existing and new markets. It may take a long time and enormous effort to retrieve a wrongly positioned product. or usage. If the positioning decision is faulty. and on what distinctive claim he should go around and promote his product. in the past. it can be positioned for a health-conscious market.

The company should be able to develop or acquire distinct set of resources and processes. But positioning is just an external manifestation of what the company really is. since they lack the set of resources and processes used to create it. why should customers buy it? It is extremely important to state that one compelling reason why the company's product is the best for the target customers. It is important for firms to understand and implement a few fundamental do's and don'ts to attain successful positioning. The target audience should be determined. Credibility built through personal use of the product and word of mouth are stronger than credibility built through advertising and public relations. A company has to stick to a positioning plank for a reasonable length of time so that the new image sinks in customers. Positioning is a promise made to the customer. A company which changes its positioning planks frequently will leave customers confused about its real identity. If the product or service being offered by the Company is not better than or different from that of competition. So if a company changes its positioning plank it has to transform itself to become true to its new positioning. A company feels that all that a new positioning requires is an ad campaign posturing the new status.Marketing Management customers do not find the new positioning of the company credible. Credibility means believability and trustworthiness. Therefore the key to be able to provide differential value to customers is to possess a distinctive set of resources and processes which competition does not possess. Through advertisement and its public relation efforts the company should be able to demonstrate its capability to deliver the promised utility. companies should be precise and concise. • • 53 . • The positioning of a corporate or a brand should be clear and precise. This unique set of resources and processes are used to deliver a distinctive value which no other company can possibly deliver. and is capable of delivering the promise. No company can transform itself completely so frequently The differential advantage must be credible to customers. The unique proposition made to the customer should be brief and catchy. The differential advantage should offer something of value to the customer which the competition is failing to supply. Instead of overloading customers with a maze of complicated information. Positioning is not an abstract art. and the positioning appeal and message should be tailored to it. A company cannot hope to reach out to the entire market with one positioning appeal. Customers will not know what the company stands for. Through word of mouth the company develops a reputation for delivering its promised value. as their image of the company being something other than what it is claiming to become persists. The product or service should be set apart from what competitors are offering. The customer must believe that the company will deliver what is promises. Every time a customer buys the company's product he should have got what the company promised in its positioning strategy.

and what it is about. One unique value proposition that customers desire the most must be present in the product.13 SUMMARY Market segmentation enables the marketers to select the target market and offer appropriate marketing mix. Repositioning 6. how would you select the target segment? 6. Customers should be told as to how the company's product will fulfill these needs. What is product positioning? Distinguish between product positioning and product repositioning? 8. These needs should be specific.15 ASSIGNMENT QUESTIONS 1.14 KEY WORDS Segmentation. intent and offering should be clear from the positioning statement. 5. Its values. Positioning. What are the benefits of market segmentation? Identify the requirements of effective segmentation.Marketing Management • The positioning statement should clearly reflect what the organization stands for. Such benefits should be stressed in the positioning statement. 54 . measurable and something that customers really want. Positioning appeals should be specific. a company should say that it has 2S different models. Explain the target market strategies with illustrations. Distinguish between the base for segmenting consumer market and industrial markets? 4. Positioning should address the felt needs of the customer. and five colours in each model. • • • 6. 6. The company should also be able to deliver what it promises to the customer as its success depends on its credibility. What is market segmentation? What is the rationale behind the market segmentation? 2. 7. What is market targeting? As a two-wheeler marketer. Explain the features of the product positioning technique. Instead of being vague that the company offers a lot of variety or selection. 3. Explain the steps involved in market segmentation process.

In other words. He is not a simple entity. And his role as a buyer is not distinct from his role as a human being. he postpones them.5 Factors influencing buyer behavour 7. His needs vary from security needs to self-actualisation needs.2 BUYER BEHAVIOUR Buyer behaviour is defined as "all psychological. 3. his friends.6 Buying process 7. He satisfies his needs by his means. His purchases and consumption are carried out within the larger context of his living. He does not take all the information. Every component of his social environment leaves some imprint on him and influences him in his day-to-day life. Buyer is a riddle.2 Buyer Behaviour 7. buyer behaviour includes the acts of individuals directly involved in obtaining and using economic goods. there is no rigid rule to bind him. what. the buyer is exposed to a great deal of information. evaluate. When the buyer takes a buying decision. where. The Buyer 1. after all. when. consume. his colleagues.8 Summary 7. These decisions are influenced by various factors. his job. These acts are the result of a sequence of decisions made by the buyer. 2. And. Hence buyer behaviour is the process by which individuals decide whether. 7.1 Introduction 7. is a specific aspect of general human behaviour.3 Theories of buyer behaviour 7. social and physical behaviour of potential customers as they become aware of.7 Influences on buying decisions 7. influenced by the social environment in which he lives-his family. his society. When his needs are costlier. or the made after a thorough analysis. 55 .9 Keywords 7. it is only natural that it is as complex as general human behaviour. With the revolution in the field of communication. purchase. how and from whom to purchase goods and services.10 Assignment questions 7. but selects those which suit him. his neighbour.4 Buying motives 7.1 INTRODUCTION The buyer is a complex person.Marketing Management LESSON – 7 BUYER (CONSUMER) BEHAVIOUR OBJECTIVES To know the meaning of consumer behaviour To study the theories of buyer behaviour Discuss about buyer behaviour process STRUCTURE 7. Buyer behaviour. His decision may either be spontaneous on the spot. and tell others about products and services".

cues. He may not be able to fulfill all his needs because his purchasing power is the limiting factor. Buyer behaviour is reflected by post-purchase evaluation which indicates satisfaction or non-satisfaction 3. Higher is the purchasing power. Hence. higher will be the sales- Economic model assumes that markets are homogeneous. Buying process is not always rational and price is not the only factor of motivation. thirst. stimuli. i) ii) iii) iv) Lower the price of the product. and acquisitiveness). Psychologists distinguish between primary drives (such as hunger. They follow the law of marginal utility. Buyer behaviour involves both individual (psychological) processes and group (social) processes. and reinforcement. he allocates his expenditure over different products at given prices so as to maximize utility.Marketing Management The above definition gives the following information about buyer behaviour: 1. Lower the price of a substitute product. responses. Hence the economic man is a myth. A person may 56 . Economic Theory: According to economic theory. Thus. 7. A drive becomes a motive 'when it is directed toward a particular drive.reducing object. It is obvious that the economic model is insufficient to explain the intricacies of buyer behaviour. 2. Buying is not always at the lowest price. The purchasing decision is based on economic calculations and reason. Buyer behaviour is shaped by social environment. 4. 5. 2. Buyer behaviour includes both consumer and industrial buyer behaviour. Higher the promotional communication effect. lesser the quantity that will be bought of the original product-substitution effect. They have got a certain amount of purchasing power. the law of equi-marginal utility enables him to secure maximum utility from limited purchasing power. The latter are learned through experience in trying to satisfy primary drives. higher will be the quantity boughtincome effect. expenditure. larger will be the quantity bought-price effect. Consumers evaluate the alternatives available and they chose that alternative which would provide him with highest utility and lowest cost. Every organism has innate physiological drives connected with survival. sex. Buyer behaviour includes communication. But now markets are assumed to be heterogeneous. A drive is a strong internal stimulus impelling action. Learning Theory: Classical psychologists interpret man's needs are coming about through the interplay of drives. the buyers are assumed to be rational in their decision-making. purchasing and consumption behaviour.3 THEORIES OF BUYER BEHAVIOUR 1. The following presumptions are made about buyer behaviour. Economic model of consumer behaviour is un-dimensional. The consumers have a set of needs and tastes.

sales promotion also act as guides persuading buyer to purchase the product. The tendency of all people is to "fit in" a society in spite of their personal likes and dislikes. Most of the luxury goods are bought primarily because one's neighbour or 57 . For example. Discrimination increases the specificity of the cue. Almost everything one does or thinks is learned. If a response is not rewarding. This. the shopper's favorite brand may be out of stock or he may see another brand on sale. the probability of a similar response is diminished.Marketing Management reach for a soft drink to satisfy his thirst or a hotel to satisfy his hunger. He will shift to similar stimuli because learned responses are generalised. package etc. Marketing communications such as advertising. service. In essence. the learning theory has the following predictions. brand. 3. the consequence of an act rather than rushing blindly into the activity. It is an equilibrating device that leads to socially acceptable behaviour and imposes rationality on the id. 1. Product features such as price. This has led to motivation research and has proved to be useful in analysing buyers behaviour. Psycho-analytic Theory : This theory is developed from the thoughts of Sigmund Freud. the probability of a similar response next time to the same cue configuration is reinforced.response connection. The particular response of a person to a stimulus is influenced by the configuration of cues. It is highly rational and tries to keep the activities morally right. Learning refers to change in behaviour brought about by practice or experience. In satisfying a thirst. The ego weighs. Super ego is a person's conscience. Cues are minor stimuli that determine when. He postulated that the personality has three basic dimensions: id refers to the free mechanism that leads to strong drives. 4. If the response is rewarding. When a person tries two similar brands and finds one more rewarding. These objects are stimuli in that they are capable of arousing and satisfying his drives. Thus. his ability to discriminate between similar cue configurations improves. in turn. a person is cued by the time of day. 2. while generalisation decreases the specificity. acts as cues or hints influencing consumer response.. the cost and availability of different beverages. where and how the person responds. Response is decision to purchase. 3. the id urges and enjoyable act: the super ego presents the moral issues involved and the ego acts as the arbitrator n determining whether to proceed or not. A countertendency to generalisation is discrimination. 4. quality. Ego refers to the act of weighing consequences and tries to reconcile with reality. has contributed some useful insights in the advertising and packaging fields. and so on. Cue configurations are constantly changing. Such drives (motives) are not influenced by morality or ethics. The response is the organism's reaction to the configuration of stimuli and cues. Socio-cultural Theory: Man is primarily a social animal and his wants and behaviour are largely influenced by the group of which he is a member.

This becomes obvious when one steps into another culture. Products. Groups that interact and influence the attitudes and behaviour of an individual are called reference groups. Social classes are relatively homogeneous and enduring divisions in a society which are ordered with respect to each other and whose members share similar values. Religious groups. More frequently. close friends. such as sports clubs and movie clubs. and the higher the individual esteems it. Reference group influences consumption behaviour most strongly in those product and brand categories that are visible and even conspicuous. He is also influenced by groups of which he is not a member. The more cohesive the reference group. professional associations). Major marketers. life-styles. and reference groups leave in indelible imprint on his needs and wants. leisure activity. Sub-cultures: Each culture contains smaller groups or subcultures. although their markets are broad. interests. social class. and feels. The norms and value systems in his culture. Nationality groups. require sensitivity to variations in the needs and preferences of different subcultures. a person's basic motivations are heavily influenced by social learning. the more influential it will be in shaping his product and brand choices. and Geographical areas are the four types of subcultures identified. He suddenly becomes aware of his cultural biases. subculture. These social forces deserve the most careful study by marketers trying to interpret the objectives that might motivate consumer interest in their products and brands. advertising appeals.Marketing Management friend of the same status bought it. International marketers in particular must study cultural differences as a prelude to planning their products and marketing programmes in different countries. and each of these provides more specific identification and socialization for its members. services. family are the different factor groups that influence buyer behaviour. The Person: From what has been said. automobiles. Social classes show distinct differences in their tastes in clothing. social classes. and atmospheres can be designed to appeal to specific social classes. and so on. Racial groups. and behaviour. reference groups. neighbours and fellow workers) and others secondary groups (fraternal organisations. Social class: Virtually all human societies exhibit social stratification. Culture has a great deal to do with how an individual sees. There is evidence that social classes differ in their purchase decision processes as well Reference groups: An individual is influenced by the many small groups with which he interacts. Culture: Culture is the most fundamental determinant of a person's wants. Culture. subculture. stratification takes the form of social classes. home furnishings. the more effective its communication process. Marketers have found social class a useful variable for segmenting markets. The individual learns the values of his culture through a process called socialization. Some are primary groups (family. 58 . Stratification may take the form of a caste system where the members of different castes are reared for certain roles and cannot change their caste membership. thinks.

Field Three consists of the act of purchase. Depending on the situation. This is the sum and substance of the 'activity explanations' in the Nicosia model. with the intention of explaining buyer behaviour. none of them provides a precise answer to the why's or how's of buyer behaviour. If these steps have a positive impact on him. Both of them belong to the group called the systems model. And. And Field four consists of the use of the purchased item. he develops a certain attitude towards the product. in their publication entitled 'The Theory of Buyer Behaviour'. Field One has two sub-fields-the firm's attributes. In other words. instinct. Over the years. are goalseekers who gratify their needs by purchases and consumption. The Nicosia model and the Howard and Sheth model are two important models in this category. Consumers. Depending on the way the message is received by the consumer. where the human being is analysed as a system with stimuli as the input to the system and behaviour as the output of the system. These variable are termed 'hypothetical' since they cannot be directly measured at the time of occurrence. All these models have certain merits and certain limitations. every human activity is motivated and is not spontaneous. If this results in a motivation to buy. and this becomes the input for Field two. Motive is a strong feeling. a certain attribute may develop. 59 . The messages from the firm first influence the predisposition of the consumer towards the product. For that matter. But these models will certainly be helpful in gaining at least a partial insight into buyer behaviour. some efforts have been made by marketing scholars to build behaviour models totally from the marketing man's standpoint. for example. The Howard-Sheth Model: John Howard and Jagdish Sheth put forward the Howard and Sheth model in 1969. It may lead to a search for the product or an evaluation of the product. The Nicosia Model: In recent years. 7. 6. They do not fully explain the complex subject of buyer behaviour.Marketing Management 5. In between the inputs and the outputs there are variables affecting perception and learning. it may result in a decision to buy. desire or emotion that makes the buyer to react in the form of a decision to buy. An advertising message from the firm reaches the consumer's attributes. Nor do they establish a straight input-output equation on buyer behaviour. They merely explain the undercurrents of human behaviour from different angles and premises.4 BUYING MOTIVES A consumer buys a particular product because he is influenced by certain motives. Field Two is the area of search and evaluation of the advertised product and other alternatives. several other models have also been put forward. The logic of the model runs like this: There are inputs in the form of stimuli. it becomes the input for Field Three. The Nicosia model groups these activities into four basic fields. The model tries to establish the links between a firm and its consumer-how the activities of the firm influence the consumer and result in his decision to buy. There is an output from Field Four – feedback of sales results to the firm. urge. There are outputs beginning with attention to a given stimulus and ending with purchase.

For example. He makes a buying to satisfy: (i) pride. Only when need becomes specific and is consciously felt. It seems that distinction between needs and wants is necessary here. in a pyramid form known as 'Hierarchy of Needs'. Emotional Patronage Motives are those that persuade a customer to buy from specific shops. (iii) urge to imitate others. social. Socio-psychological product motive may be defined as the desire to buy the product which shall arise as a result of psychological or social significance that a buyer attaches to the product. (iv) his desire to be distinctive Rational product motives are defined as those impulses which arise on the basis of logical analysis and proper evaluation. Needs are general in nature and common to all people. He may be subjective for shopping in his favourite 60 . Marlow. The buyer does not try to reason our or logically analyse the need for purchase. These are termed as buying motives buying motives are defined as "those influences or consideration which provide the impulse to buy. safety. When one need is satisfied. without any logical reason behind this action. induce action or determine choice in the purchase of goods or services. cost benefit. Satisfaction proceeds through each of the five stages viz.. alternatives available. a) Emotional Product Motives and b) Rational Product Motives Emotional product motives are those impulses which persuade the consumer on the basis of his emotion. need for safety is common. and such other valid reasons. But all needs may not become demand.Marketing Management needs are the motivational element behind purchase. The buyer makes a rational decision after cheap evaluation of the purpose. Patronage Motives: Patronage Motives may be defined as consideration or impulses which persuade the buyer to patronise specific shops. patronage can be grouped as emotional and rational. self esteem and self realisation. (ii) sense of ego. Product motives may still be classified on the basis of nature of satisfaction as. Just like product motives. These needs were classified by Abraham H. psychological. desires and considerations which make the buyer to purchase a product. Product motives may also be classified in the following ways: i) ii) Operational product motive Socio-psychological product motives Operational product motive may be defined as an impulse arising out of the ability or function that a product is likely to provide. it conditioned by certain motives. These buying motives may be classified into two: i) ii) Product Motives Patronage Motives Product Motives: Product Motives may be defined as those impulses. the customer will seek higher goals and thus proceeds up the hierarchy.

who have a common social background and who normally belong to the same age group. The constitution of a social class is decided by the occupation. He belongs to a family. he is a member of some religion or caste.5 FACTORS INFLUENCING BUYER BEHAVIOUR 1. place of residence etc.. Marketers stand to gain considerably 61 . Which influences him in his day-to-day life and consequently. These sources inform him about new products and services. Group Influence on Buyer Behaviour: Actually group influence on buyer behaviour is of two types since there are two types of groups exercising an influence on buyers: i) the intimate group and ii) the broad social classes influence of intimate group on buyer behaviour: Examples or intimate groups are family. The Socio-Cultural Environment: Affecting Buyer Behaviour: The buyer whom we are studying is living in a society. Influence of Social Classes on Buyer Behaviour: Buying behaviour of individuals is also influenced by the social class to which they belong. There is constant interaction between the individual and the organisations to which he belongs. 7. Among these groups. 4. close colleagues. He is a unit of several groups. He is a member of several organisations – formal and informal. he belongs to a certain language group. closely-knit organisations. And all these interactions leave some imprint on him. his buying behaviour. The common information sources that persuade people to try a product are: advertising samples and trials display in shops salesmen's suggestions 2. of the individual members. Impact of Information on Buyer Behaviour: The buyer today is exposed to a veritbale flood of information. Rational Patronage Motives are those which arise when selecting a place depending on the buyers satisfaction that i) ii) iii) it offers a wide selection it has latest models it offers good after-sales services etc. Each class develops its own standard of life style and behaviour patterns. or a cultural body. the most influential and primary groups are the family and peer groups. new uses for existing products and so on. There is a deluge of information unleashed on him from different sources. And the members of the class normally select a product or a brand which caters to their group norms. He may be a member of a professional forum. and small. These groups exercise a strong influence on the life styles and the buying patterns of the members. friends. the social class is a larger group than the intimate groups. influenced by it and in turn influencing its course of development.Marketing Management place. 3. improved versions of existing products. The peer groups are close-knit groups composed of individuals. he may belong to a particular political group. Structurally. The members of a social group will enjoy more or less the same community status and prestige.

5. are not purchased so frequently.Marketing Management form a proper study of group influence on individual buying behaviour. education or marriage in almost all matters of individual life. etc. Influence of Religion. The buyer is willing to make one or more shopping trips to buy these items. Status is announced through various symbols like dress. The customer would certainly like to compare the prices. are to show that you are one. They are termed shopping goods. The desire to the somebody. Shopping Goods: Items like furniture.. cigarettes. There is a recurring need of these items and the consumer would desire to get it at an easily accessible place. Unlike the purchase of convenience goods. etc. Products like toothpaste.. It is not necessarily purchased at the easily accessible store. Language. Buying Habits: Marketers should also know the buying habits of customershow. there may be several set and sub-sects. control significantly the individual's life style and buying behaviour. patterns etc. Manufacturers marketing such products know that the products have to be made available within the customer's easy reach. So they make these products available in as many outlets as possible ensuring maximum exposure. ornaments. Such items are purchased frequently and their unit price is low. Convenience Goods: There are certain product which the consumers would like to purchase with the least possible effort. is a compelling one in modern society.. Status Influencing Buyer Behaviour: People are becoming more and more concerned about their image or their status in society. these purchases involve considerable expenditure. the consumer is not prepared to make a special shopping trip for buying the products. The values attached to these status-symbols may change over time. religion and culture exercise an influence on the individual directly or indirectly. One such classification divides them into convenience goods. Culture. etc. It is for the marketing man to know and capture the marketing opportunity behind these changing symbols-symbols of status. In dress and food habits. 'to feel that you are somebody. come under this category. Such products are normally not standardized items. There is an element of planning behind the purchase. classifications of consumer goods have been made on the basis of buying habits. Buying habits can be best studied in relation to the types of products purchased. and he may readily switch over to any substitute product or brand available at the immediate vicinity. In fact. on Buyer Behaviour: Every culture. in a number of stores before finalizing the purchase. when and where they buy. This concern is a direct outcome of the material property of the society. shopping goods and specialty goods. The do’s and don’ts listed out by religion and culture. there may be orthodox groups and cosmopolitan groups. soap. There is not much of planning behind the purchase. quality. 62 . Within each religion. There is an element of fashion in them. and general lifestyle. possessions. dress materials. If the products are not available easily. It will help them to develop proper marketing strategies for different customer segments. electrical appliances. These are convenience goods. 6. every religion and every language group dictate its own unique patterns of social conduct.

making process in the purchase of specialty goods. a 63 . There are several important elements in the process of evaluation: 1. sales promotion and window-displaying. Whereas manufacturers of convenience goods make their products available through innumerable sales points. normally entrusting the job to selected retailers. watches. They have a selective distribution. This may relate to the brand. In certain cases. the manufacturers of specialty goods operate their own retail outlets. highpriced dresses and ornaments. 3. the utility angle. For example. Since the buyers of shopping goods are in the habit of comparing the items in one shop with those of another. The need may be activated by internal or external factors. opinion leaders and acquaintances. the alternatives available. etc. 2. packaging. like family. A product is viewed as a bundle of attributes. Normally the entire family take part in the decision. But when it is not clear what type or brand of the product can offer best satisfaction. 7. normally there will be a smaller number of selling points. Marketers are expected to provide reliable. Evaluation of Alternative: This is the critical stage in the process of buying. advertisements. Purchases of specialty goods involve substantial investment and the periodicity of purchase is less frequent than that of shopping goods. Marketing management should offer appropriate cues to promote the sale of the product. neighbours. friends. location and the manner of obtaining the product. up-to-date and adequate information regarding their products and services. The intensity of the want will indicate the speed with which a person will move to fulfill the want. Need Recognition: Buying process begins when a person begins to feel that a certain need or desire has arisen.Marketing Management In accordance with these buying habits. radio and television provide information. in the case of shopping goods. Mass-media like newspapers. These attributes or features are used for evaluating alternative brands. Since the buyers of such products are prepared to make special purchase efforts. the experience of others who have purchased the product are analysed before deciding on the purchase. dealers. the manufacturers need not have a wide distribution. And the manufacturers normally sell directly to the retailers without routing the supplies through a wholesale tier. Marketers also provide relevant information through salesman. the prestige angle. stores dealing in such goods are seen clustered in market centres. the person will have to search for information. Specialty Goods: Specialty goods are high-priced goods-care. Consumers can use many sources. They normally deal through a small number of outlets in potential markets. Specially goods are not purchased out of instant decisions. The various aspect of the purchase-the cost angle.6 BUYING PROCESS The buying process includes the following five steps: 1. The buyer will postpone the less important motives. This is the pressing demand of consumerism. Information Search: Aroused needs can be satisfied promptly when the desired product is not only known but also easily available. marketing methods of these goods have been modified.

In order to reduce the number of alternatives. negative feelings will occur and this will create anxiety and doubts. the fiscal policy of the government has a direct influence on the organizational customer's decision to buy a product. situational factors like dealers terms. Marketer may try to create dissonance by attracting users of other brands to his brand. But if the purchased brand does not yield desired satisfaction. may use an evaluation process permitting trade off among different alternatives. Post-purchase Experience and Behaviour: The brand purchase and the product use provides feedback of information regarding attitudes. 3. brand images and brand concepts can help in the evaluation of alternatives. falling prices etc. If the derived satisfaction is as per the expected satisfaction.. 7. 4.Marketing Management product like it has certain common attributes such as taste. industrial buying will change. Advertising and sales promotion can help marketer in this job of brand switching. Marketers should grasp thoroughly the process and utility functions for designing and promoting the product. colour. Occasionally. distinctiveness. In addition to all other factors. cement. aroma. he will develop some likes and dislikes about the alternative brands. Perceived risk may also influence the decision to purchase. This attitude towards the brand influence the intention to buy. Information cues or hints about a set of characteristics of the product in brand such as quality. sent all companies either shopping for collaborations. Purchase Decision: While the consumer is evaluating the alternatives. 4. 5.7 INFLUENCES ON BUYING DECISIONS Most organizational purchase decisions are influenced by the firm's external and internal variables. In either situation. or diversifying or expanding their existing capacity. flavour. paddy are going to increase in the future. Further. depending on whether the economy is going through a boom or a recessionary phase. Consumers may not have confidence in foreign products involving higher cost and they would prefer national brands to reduce risks and problems of service after sale. some consumers may consider more critical attributes and mention the level of for those attributes. 5. also are considered. High priced products involve higher risk. strength. demand for basic commodities like steel. There are four major variables influencing buyer decisions: (a) environmental 64 . This phenomenon is called cognitive dissonance. Sophisticated products involve performance risk. For example. 2. The recent announcement of the government of India's policy to reduce excise duty on consumer goods and the emergence of a strong middle class market' in the country. consumers. it will create brand preference influencing future purchase. There will be lack of harmony between the buyer's beliefs and his purchase decision. Thus the prospective buyer heads towards final selection. price. number of cups per packet and price. with major brands in the world market. availability etc.

most Indian family owned firms have a centralized structure where purchase decisions often require the family’s consent. rate of technological change and the value of money. Likewise.7. This can delay purchases and sometimes even affect the firm's capability 65 . Influence on buying decisions These influences are shown in Figure 7. if the buyer perceivcs that the government is likely to increase taxation. Environmental Variables : A very important determinant in organizational purchases is the environmental factor. factors like competitive developments in the industry. For example.1.Marketing Management (b) organizational (c) interpersonal (d) individual Environmental Factors (a) Level of demand (b) Economic outlook (c) Rate of interest (d) Technological change (e) Political and regulatory development (f) Competition Individual (a) Age (b) Education (c) Income (d) Attitude towards risktaking (e) Personality (f) Job position Organizational Buyer Interpersonal (a) Authority (b) Status (c) Empathy (d) Persuasiveness Organizational Variables (a) Objectives and goals (b) Organizational policies (c) Procedures (d) Organizational structures (e) Systems Fig. if the buyer anticipates new competition with a better technology. Organizational Variables : Internal variables like culture and environment of an enterprise affect buying decisions. This includes. the buyer may resort to buying more material and holding its stock.3. which will in turn increase the price of a crucial input. For example. he may not rcpeat his entire purchase order with the existing suppliers.

a decentralized structure allows for quicker decisions. Patronage motives 7. Buying process. 3. and so forth are likely to affect individual perception. at the end. income. Let us take the example of a case where a young (20-25 years) salesperson had to deal with an elderly (55-60 years) customer. Explain the factors influencing Buyer Behaviour. Since the buying organization was an important client. Narrate the Buying process. The customer found it difficult to accept that a young boy had the knowledge and authority to explain technical details of computers and networks. who then called on the buyer along wwith his director (50-55 years) and the salesperson. 7. They got the order because the buyer could relate himself better to the “old and seasoned gentleman” than the young. organizational factors and environmental variables affecting buyers decisions. job position. Hence Buyer Behaviour is still a riddle. As opposed to this. Individual Variables : Even though there are several individuals. Because. The marketer needs to know who exerts the maximum authority and able to persuade others to agree with his viewpoint.9 KEY WORDS Reference group. 2. Interpersonal Variables : The buying centre usually involves several individuals with different formal authority status and persuasiveness. 66 .Marketing Management to compete in the market. It is important that the marketer has complete personal details of all individuals who arc involved in the decision making process. smart “brat. personal factors like age. motivation and preference. An understanding of group dynamics helps the marketer to evolve his strategy on selling to the buying centre. many persons tried to study the buyers mind and are successful to some extent only. it is a human decision involving the individual that matters.” 7. The director asked the young salesperson to do the presentation and thereafter negotiated the deal with the buye.8 SUMMARY Buyer mind is a black box. What do you mean by Buyer Behaviour? Discuss the different themes of Buyer Behaviour. Buying motives. this young salesperson reported his problems to the marketing manager. education.10 ASSIGNMENT QUESTIONS 1.

1 INTRODUCTION A sales forecast is an estimate of the amount or unit sales for a specified future period under a proposed marketing plan or programme.12 Summary 8. Financial planning or working capital requirements.4 Sales Forecasting is a Difficult Task 8. and determining the rate of production output. and other need is based on anticipated sales. Once the sales forecast is prepared. The forecast is the basis of sound budgeting.5 Criteria in sales forecasting 8.11 Role of forecasting in planning and budgeting 8. such as the weather.7 Section of appropriate forecasting method 8. in dollars or physical units for a specified future period under a proposed marketing plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made" The making of a proper sales forecast requires assessment of two sets of factors: i) ii) The outside uncontrollable forces likely to influence the company's sale.2 Uses of Sales Forecast 8.1 Introduction 8. advertising. distributing and service. depends upon sales forecast. Scheduling of all production as setting man power needs purchasing raw material requirement. The internal marketing methods or practices of the firm that are likely to affect its sales. price. government activity and competitive behaviour. The sales forecast may be for a specified product or for the entire product line or it can be for market as a whole or any portion of it.8 Sales forecasting procedure 8.10 Limitations of sales forecast 8.9 Marketing information system(MIS) and sales forecasts 8.3 Period of Sales Forecast 8. it becomes the key controlling factor in all operational planning throughout the company. plant expansion.Marketing Management LESSON – 8 SALES FORECASTING OBJECTIVES To know the meaning of sales forecasting and its uses To study various techniques of sales forecasting To study the sales forecasting procedure and its limitations STRUCTURE 8. such as product.6 Techniques of sales forecasting 8.13 Keywords 8. 67 . The American Marketing Association has defined sales forecast as "an estimate of sales.14 Assignment questions 8. quality.

It is useful for measuring the efficiency of sales department. warehousing and transportations facilities are concerned. 68 . The specific contributions of forecasting to the field of marketing management may be summed as follows: To decide whether to enter a new market or not. To prepare standards against which to measure performance. (6) scheme of distribution. "The act of forecasting is of great benefit to all who take part in the process. The collaboration of all concerned leads to a unified front. we can have (1) the required number of the salesmen to achieve our sales objective.Marketing Management 8. As far as sudden and temporary pressures are concerned. On the basis of the reliable sale forecast. To determine how much production capacity to be built up. (11) budgeting and controlling expenses. It mitigates the twin evils of under-stocking and over-stocking 6. (10) estimating standard cost. 4. Sales forecasting may be said to occupy a forefront seat in management. 2. Perhaps the most dramatic advantage of forecasting in the personal field is the opportunity it gives management to avoid frantic discharging and hiring policies. (5) advertising and sales promotion programme. To help in the product mix decisions (to eliminate or to add a new product). an understanding of the reasons for decisions. and (12) planning cash requirements. According to Henry Fayol. 5.2 USES OF SALES FORECAST Sales forecasting serves the following purposes: 1. (8) production plan. It acts as a tonic for financial departments which may make use of sales forecast. (9) regulating inventories and purchasing. (2) allocation of sales quota for each salesman. and is the best means of ensuring adaptability to changing circumstances. It acts as a friend. To prepare annual budgets based on estimated sales revenue. Sales forecast is the cost or keystone of marketing management. 3. It also eliminates slack periods in which workers have nothing to do. (3) determination of sales compensation plan. (4) determination of sales territories. (7) fixing of sales price. 9. philosopher and guide in so far as plant layout. Seasonal or timely fluctuations may be easily met with by averaging out production and employment over the year. Maximum regularisation of production which forecasting makes possible serves to eliminate completely or reduce substantially the need for overtime work at premium rates. It aids in reallocation of sales territories. Reliable sales forecasting is a first rate aid to proper pricing whether in terms of costs or in terms of what the market will bear. To assess the effects of a proposed marketing programme. and a broadened outlook". 8. 7. forecasting helps the organisation to avoid them. It enables the company concerned to meet the growing needs by balancing supply and demand.

promotion and physical distribution revolves round the sales forecasts. basically. Such forecasts are normally used for the purpose of perspective planning. say ten years will be essential for investment decisions. Such forecast are usually made for a period of one year and reviewed monthly. The short-range forecasts are used for planning the various sales/marketing programmes like personal selling. There are two vital reasons for this.Marketing Management In fact entire marketing mix. forecasting means 69 . one comes across a still longer-term forecast. its operating programmes. Thus a comprehensive and integrated business planning (strategic as well as short term) is based on the foundation of sales planning. price. there are three types of sales forecasts: The short range forecasts The long range forecasts Perspective planning forecasts The short range forecasts help in short range business planning. Since industrial investment is often irrevocable and the pay-off period extends over a long term. say for 15 or 25 years. Sales forecasting is a device by means of which management may integrate its objectives. demand forecasting for a longer-term. The master plan or budget of the company as the functional or departmental plan and budgets are ultimately based on sales forecasts. and its targets with potential market opportunity. 8. This is done by translating the sales forecast into specific profit and sales volume goals to be realised in the given period. purchasing plans. advertising. product. The margin of error may be high in such long-term forecasts. financial. sales forecasting invariably turns out to be a difficult exercise. viz.4 SALES FORECASTING IS A DIFFICULT TASK In any business. personnel needs. Revisions are made in the light of experience and changing conditions. quarterly or half yearly. finance and materials. The sale forecast thus becomes a basis for marketing programmes. The long range forecast at the time of starting facilitate investment decisions at the time of starting a new industry or while attempting and expansion or diversification. Perspective planning of this kind serves as a guide to the planning and implementation process over a really long ranging period. they would be sufficiently reliable for planning purposes. warehousing arrangements and so on. production schedules. In the first place.. They also used for short-term planning of the activities in the functional areas that are outside marketing like production.3 PERIOD OF SALES FORECASTS As far as time frame is concerned. Yet. Sales forecasting acts as the basis not only of production planning and marketing planning but also of financial planning and personal planning. Sometimes. Economies subscribing to planned economic development often generate perspective planning targets in the different sectors of the national economy. budgets. expansion programme and many other aspects of management programming. plant and equipment needs. 8.

refer to those portions of 'Market potential' and 'Company potential' that are achievable under existing conditions. what an individual firm can sell at the maximum in a given market. ii) It will be different from what it is now. It can be easily seen that 'Company potential' is just a part of 'Market potential'. nor can all factors that establish a sales forecast be obtained form one source.e. we can be certain of only three things about the future. sales forecast is just a part of 'Market forecast'.. These techniques range from uninformed guesses of the executives to highly sophisticated statistical methods.5 CRITERIA IN SALES FORECASTING The following are the criteria frequently used: Market potential (or industry potential) Company potential (or sales potential) Market demand (or industry demand) Company demand (or sales possibilities) Market forecast (or industry forecast) Company forecast (or sales forecast) 'Market potential' is nothing but a quantitative estimate of the total possible sales by all the firms selling the product in a given market. Then each total product forecast is sub-divided in as much detail as possible i. And as Peter F. iii) It will be different from what we expect Secondly. and 'Company forecast'. each business has certain peculiarities. 8.e. i. The terms 'Market demand' and 'Company demand'. 'Company demand' is just a part of 'Market demand'. group or other meaningful sales unit. 'Company potential' refers to a part of the market potential.6 TECHNIQUES OF SALES FORECASTING No one method of sales forecasting can be applied to all enterprises. Such forecast may then be used in planning for sales quota or allocating the advertising expenditure. 8. i) it cannot be known with certainty. Some of the most common techniques used for sales forecasting are discussed below: 70 . 'Market forecast' and 'Company forecast' are still narrower they refer to what the industry and the firm respectively are likely to sell in actual practice during the period of the forecast. again under ideal conditions and on the assumption that the ideal marketing effort is made. It gives an indication of the maximum demand or the ultimate potential for that product assuming that the ideal marketing effort is made. Usually separate estimates are prepared for each article or product line.Marketing Management predicting the future. Drucker said. As such forecasting of demand and sales in any business bristles with certain peculiar complexities. One has to master these complexities in any attempt at sales forecasting. a forecast should be made in rupees and/or units for each territory.. customer.

3. permits combining and averaging the specialised opinion of different executives. By a detailed marketing audit. experts in the concerned field inside or outside the organisation are approached for their estimates. even though the actual orders are not in hand. Such method provides forecasts easily and quickly. market share and strengths and weaknesses as compared with the competitors in the industry. the simplest is the one that uses the ‘rule of the thumb’ by which current year’s forecast is arrived 71 . this method cannot be adopted in consumer goods marketing as the customer are large in number. Only then. it would help assess the industry position as well as the individual firm’s market shares. does not require any elaborate statistics. Clearly. production. and the aggregate of all these forecasts is taken as the corporate forecast. customer expectations cannot be predicted accurately. In survey of expert opinion method. Simple Projection Method: Among the projection methods. They work out the industry forecast apply their market share factor and deduce the company's sales forecast. its competitor’s plans. Sales Force Composite Method: As per the sales force composite method. 5. 2. As pointed out. the firm must correctly appraise its market standing. This is somewhat different form the jury method and the sales force composite method. the sales forecasting is done by the sales force. Such conversion of industry forecast into company sales forecast enquires considerable expertise. 4. it will have a good basis upon which to develop a sales forecast. Users' Expectation Method: This method is adopted for industrial marketing. 6. It must also correctly assess through reliable marketing intelligence. Jury Method/Executive Opinion Method: Under this method. company’s competitive position. brand image. brand preference etc. This method may be relatively more useful when total industry forecast is developed than in company level sales forecast. and it also disperses responsibility for accurate forecasting. The market share factor is developed based on past trend. the forecast arrived at by this method will have a good degree of reliability.Marketing Management 1. The advantage here is that the customers comprise only a small group. the market share method. Secondly. finance and other departments) regarding future sales volume is obtained. if a company can obtain an adequate and reliable information sample of what customers will buy. Market Share Method: Some firms use a simple method of sales forecast in which the desired/planned market share of the firm is the key factor. opinions of the top executives (form marketing. the territory-wise forecasts are consolidated at branch/region area level. policies and activities. In those two methods. Survey of Export Opinion Method: This is yet another judgment-based method of sales forecasting. All salesmen develop the forecast for their respective territories. Retail audit would also be of considerable help in employing. But such method lacks scientific validity and may turn out to be absolutely wrong and deceptive. opinions of the executives and sales force are used to develop the forecast.

10. It represents the weighted sum of all past numbers in a time series with the heaviest weight placed on the most recent data. competitive factors or price. a minimum of two years sales history is needed for applying this method. Boom followed by Slump and so on). In other words. and (4) irregular or unexplained variations. Extrapolation basically assumes that the variables will follow the previously established pattern. 11. 9. Some other firms go by the growth rates adopted by industry leaders. If seasonal effects are present in the demand pattern of the product. This technique tries to functionally relate sales to those variables that influence sales. an analyst can estimate with accuracy the probable level of sales for a coming period. Revival. 72 .Marketing Management a by simply adding a certain percentage to last year’s sales. Extrapolation is also a projection/trend method. They may be economic factors. Of course. By isolating and analysing these four types of variations in sales. It is not necessary to keep a long history of past data. Accordingly. (2) movements related to changes in the business cycles (Depression. The mechanical extrapolation will give the sales forecast for the coming years. Each point of a moving average of time series is the arithmetical or weighted average of a number of preceding consecutive points of the series. Extrapolation Method: Some firms rely on the extrapolation method. the assumption is that the future will mirror the past. The method can have a stable response to changes and responses can be adjusted as required. 7. This method is particularly useful when forecasts of a large number of items are made. It is similar to moving averages and is used fairly extensively. Time-series Analysis: It is a common device of mathematical projections of future sales. This is an objective method of sales forecast. Regression Analysis: Regression analysis is another analytical technique of sales forecasting. It involves the plotting of the sales figures for the past several years and stretching of the line or the curve as the case may be. Some firms use the formula shown below: Next year' s sales = (This year' s Sales )2 Last year' s sales This formula will provide a reasonably reliable estimate only if the sales are stable and show an increasing trend. Prosperity. it is assumed that the past trend will continue in the future under such extrapolation. (3) the long-term trends of sales. Exponential smoothing: Exponential smoothing is yet another projection method of sales forecasting. In certain cases the rate of growth of the industry as a whole is adopted or the projection. 8. Moving Averages Method: This method enables us to eliminate the effects of seasonality and other irregular trends in sales. To predict future sales we analyse four kinds of historical sales variations (1) seasonal variations. this method will be effective where the pattern of past movement has been relatively steady and abrupt disruptions are unlikely in the future. It involves the projection of past sales trends into the future.

But they predict the turning points more accurately. where ‘replacement demand’ is a significant factor to be projected. and/or retailers to elicit information on their attitudes. likely purchases and purchase habits. Basically. Econometric Models: Econometric models constitute yet another analytical method of sales forecasting. Market Survey Method: When a company wants to introduce a new product or an improved product. Econometrics basically attempts to express economic theories in mathematical terms so that they can be verified by statistical methods and used to measure the impact of one economic variable upon another for predicting future event. The econometric models are quite complex and expensive to develop. An equation is fitted to explain the fluctuations in sales in terms of explanatory or causal variables. the method chosen must match the requirements of his product and his organisation. 12. Computers are used for regression analysis involving complex calculations. the firm conducts a survey among a sample of consumers and gauges their attitudes. The econometric forecasting models vividly portray the real world situations and the multiple variables involved in the sales situation. The firm does not have any data of past sales or past demand patterns to fall back upon. Where sales are influenced by two or more causal variables acting together. It has to gather the information from the market and take decisions. This is quite natural. 13.7 SELECTION OF APPROPRIATE FORECASTING METHOD The forecaster must carefully choose his method of forecasting from among the wide variety of methods. Since all the methods have their associated merits and demerits and there is nothing like an ideal forecasting method that could be applied to advantage in all situations. likely purchases. we can get the sales estimates for the future years. in general. Usually. the sales forecast of the company) and the explanatory or causal variables is determined and measured. Sometimes. etc. At the same time. The association between the dependent the dependent variable (i. any new company entering the market for the first time. 8. it resorts to a market survey to assess the likely demand for the product. Likewise. a survey is conducted among the channel members-wholesalers. in regression analysis involving a number of causal variables. resorts to the market survey method for forecasting its demand/sales. the error of forecasting will multiply along with the error in determining and measuring the relationship or influence of each of these variables. the forecaster must assess the suitability of the specific method to his specific situation before 73 . The econometric models are used more in forecasting the demand of durable industrial as well as consumer durables.e. The regression method. After establishing the relationship based on past data and with the estimated values for the factors for future years. will give more accurate forecasts than the trend method since regression takes into account causal factors. multiple regression analysis is applied.Marketing Management The variable which is to be forecasted is the dependent variable and the factors which cause changes in the dependent variable are explanatory or casual variables.

Past sale of the company. Strengths and weaknesses of the firm in the market. The limitations are offered by factors such as fashion. Determining the objectives for which the sales forecasts are to be used. In the absence of past a sales history the sales forecasts may be based on mere guess work. 7. otherwise the sales may be very small. Dividing Company’s products into homogeneous groups. 7. Determining the relative importance of the factors which affect sales of each such group.Marketing Management commissioning the forecasting exercise. 1. changes in competition and changes in the programmes of the firm influence the sales of a firm. which hamper the accuracy of sales forecasting. Since a large number of factors. Production data-industry and company. 8. product-wise territory-wise. Converting the conclusions into specific forecasts relating to the products and territories involved. Applying these forecasts to company’s operations. such as changes in economic and business conditions. If the fashion becomes popular. 3. and 8.9 MARKETING INFORMATION SYSTEM (MIS) AND SALES FORECASTS Marketing information is central to sales forecasting. sales forecasting requires a data base relating to all these factors. Fashion or style affects the sales. It is difficult to say how for the market will adopt the new fashion and for how long. Market share of each firm in the industry with break-up of sales by markets/territories/channel types. absence of sales history. Industry sales for the past few years. 6. 4. 4. Absence of sales history also creates difficulty in accurate forecasting in case of those firms which base their forecasts on the past sales trends. 8. Selecting the appropriate sales forecasting method. the forecaster can improve his forecast by choosing a combination of more than one method. Economic. customers class-wise. 6. Quite often. month-wise and dealer-wise. The following are the essential data requirements for effective sales forecasting. 2. 5. 5. Periodically reviewing and revising the forecasts. 74 . Collecting and analysing the sales and drawing conclusions there from. large sales may result. technological and environmental date relevant for the product’s consumption. 2. growth elements and psychological behavioural variables of the market. 8. 3. 8. Sales of substitute products.8 SALES FORECASTING PROCEDURE The usual steps involved in sales forecasting are: 1. changes in market potential.10 LIMITATIONS OF SALES FORECAST It is subject to certain limitations. Use pattern of the product.

8. Psychological behavioural variables prevailing in the market are difficult to measure for any change in the consumer attitude may upset the entire sales forecast. Define Sales Forecasting. due consideration should be given to these limitations by the marketing executives.Marketing Management Anticipated growth rate for the product can be calculated precisely. as the diagram on the next page shows. Plans can never be realistic if they i1re based on solid forecasts. because the rate of growth never remains uniform.13 KEY WORDS Sales Forecasting. State the importance of Sales Forecasting. 2. Budgeting is also closely related to planning. where the funds will come from. and determining how these goals are to be reached. the same rate may rather continue. establishing goals based on the forecasts. Management prepares for change through planning which.12 SUMMARY Sales forecasting is an estimate or projection of sales likely in the future. a budget is a blueprint of the financial aspects intended for that future. An organisation cannot have effective plans or budgets without their being built on well-conceived sales plans or sales forecasts. 75 . A plan is what management intends to do about it. Though a plan depicts what management intends to do in the future. It is helpful for a marketing man in several ways in planning. 8. Explain the techniques of Sales Forecasting. budgets serve as control mechanisms to measure the progress toward accomplishing plans. 8. But forecasting probably is more closely linked to planning and budgeting than to any other key business function. Notice in the diagram how sales forecasts drive the entire budgeting process. Collectively. decline or remain stationary. Therefore. in effect. A forecast is an estimate of what is expected to happen at or by some future period. Forecasts are different from plans. There are various techniques used for sales forecasting.11 ROLE OF FORECASTING IN PLANNING AND BUDGETING Forecasting plays an important role in every major functional area of business management. In turn. in turn. Market Potential 8. The entire budgeting process is also built on the sales forecasting process. while preparing sales forecasting. an organisation’s budgets spell out how much is to be spent on various activities in the future and. An organisation should choose an appropriate method of Sales Forecasting. requires making forecasts.14 ASSIGNMENT QUESTIONS 1.

The company has market potential throughout India.Marketing Management 3. Nirmala Prasad 76 . cattle feed. Namakumari Dr.S.B.A. The extent of their influence and the appropriate approach of marketers have also to be highlighted. C. Joshi S. How would you manipulate your marketing mix to face the market situations? (Refer Lesson 9) REFERENCE BOOKS (UNIT II) Fundamentals of marketing – William J Stanton Marketing Management Marketing Management Principles and Practice of Marketing in India Principles of Marketing – – – Philip Kotler V. How would you segment the market for Suma Ltd? (Refer Lesson 6) 2. Ramaswamy S. drugs. CASES/PROBLEMS (UNIT II) 1. Sherlekar S. (Refer Lesson 8) 4. State the factors influencing the TV buyers.L. Salvadore Victor Dr. Suma Limited has a product range of steel furniture. You are making and marketing mosquito nets. K. (Refer Lesson 7) 3. cosmetics. refrigerators and typewriters. Bata shoes are gradually losing their position in the market. Mamoria R. Suggest a strategy to reposition them.J. Now the market is flooded with mosquito repellents.

Place (distribution). “The marketing man is a decider and an artist-an mixer of ingredients. who described the variables of marketing mix in terms of the four Ps.13 Assignment questions 9. Promotion. Product.4 Price variable 9. sometimes invents some new ingredients.5 Promotion variables 9.7 Competition variables 9. The distribution mix. sometimes adapts a recipe to the ingredients immediately available.11 Summary 9. who coined the expression Marketing Mix and described the marketing manager as a ‘mixer of ingredients’.2 Product variable 9. the well-known American Professor of marketing. each beginning with the alphabet ‘P’. the American marketing expert.9 Environmental variables 9.10 Management of Marketing Mix 9. Pricing. who sometime follows a recipe prepared by others: sometimes prepares his own recipe as he goes along.1 Introduction 9.12 Keywords 9. The pricing strategy. and sometimes experiments with ingredients as no one else has tried before”. The complete set of marketing mix elements and sub.8 Trade variables 9. classifying the variables under four heads.3 Place variables 9. The communication mix. In each of the marketing mix elements there are several sub-elements.Marketing Management LESSON – 9 MARKETING MIX OBJECTIVES After reading this lesson you will understand The concept of Marketing mix Variables of Marketing mix STRUCTURE 9.elements are presented below: 77 . These for components of the marketing mix are also alternatively described as: The product mix.1 INTRODUCTION It was James Culliton. To quote him. It was Jerome McCarthy.6 Customer variables 9.

Marketing Management 9.5 PROMOTION VARIABLES Personal selling. 78 . levels. Nature and intensity of competition. Competition variables. Buying behaviour. Advertising. Publicity and public relations. viz. warehousing. contests. media mix. 9.2 PRODUCT VARIABLES Product line and range. Customer variables. budgets. types of intermediaries. levels of prices. Branding and trade mark. appearance. appearance and label. quality of sales force.. Service. type. Purchasing power of the customers. and dealer-principal relations.3 PLACE VARIABLES Channels of distribution. Resale price maintenance. In addition to the marketing mix variables described above.4 PRICE VARIABLES Pricing policies. models. materials. transportation. As the same indicates.6 CUSTOMER VARIABLES Number of customers. Personality traits and attitudes. Physical distribution. pre-sale and after-sale. Behavioural/ Environmental variables. cost level. these variables are constituted by the behavioural or environmental forces that are external to the enterprise. 9. style. channel policy and design. 9. size and warranty of product. objectives.7 COMPETITION VARIABLES Structure of the industry. They are presented below: 9. New products. Location of the customer. Sales promotional efforts. Design. location of outlets. level of motivation. This set of variables too can be classified under four heads. payment terms. trade promotions. level of effort. Habit of purchase. size. Trade variables. discounts and rebates. Terms of delivery. display. Lifestyles and needs 9. channel remuneration. levels of margins. allocations and programmes. Environmental variables. the marketing manager of any firm handles another set of variables. Packaging. There are several sub-variables under each of the Behavioural/Environmental variables. order processing etc. inventory. credit terms and instalment facilities. features. quality.

The ‘environmental variables’ are termed as ‘non-controllable variables’ as they are external to the firm and the marketing manager cannot choose them or control them at his will.9 ENVIRONMENTAL VARIABLES Level of technology. channel and promotion. or which individual product should be the price structure? What are the channel options available and which one has to be selected? What is the right promotion strategy for the product in the chosen market? How should the total marketing effort and resource of the firm be apportioned among each of the four Ps? These and many other similar questions have to be raised and answered.Marketing Management Products and services offered by the competitors. It involves many crucial decisions relating to each of the elements-product. Competition from substitute products. The impact of the mix would be best when the different elements of the mix are chosen correctly and are integrated very well with one another. Economic conditions in the country. Competitors’ sales levels in each market segment/product. Culture and traditions. Extent of sophistication of the trade. Attitudes of the public and the press. 9. Number of competitors. Geography and climate. Government regulations on products. Competitors’ strengths and weaknesses. The ‘marketing mix variables’ are often termed as ‘controllable variables’ of marketing. alter and control these variable as he likes. Trade practices. Controls on trade practices. Service provided by the trade. their number and strength. Types of intermediaries. The marketing process is nothing but the interaction of the marketing mix variables with the environmental variables. their size. etc. distribution. Law and politics. prices.8 TRADE VARIABLES Structure of the trade. as they emanate from within the enterprise and the marketing manager is free to choose. 9. Motives and attitudes of the intermediaries. capacity and territory of operation.10 MANAGEMENT OF MARKETING MIX Assembling the marketing mix elements into a winning marketing programme is by no means an easy task. Decisions are also required on the interrelationships of the elements. price. What is the ideal combination of the four Ps in a given situation? Which line of products. 9. 79 . As the environmental variables are noncontrollable any marketing programme in effect turns out to be a conscious adjustment of the marketing mix variables to suit the environment variables.

place (i.product. price. place and service. Price. Publicity. take competition. rather than its validity. 80 . price. Packaging. it is very important to emphasize here that this mode1 is not of universal validity. Just as the changes taking place in the external environment necessitate modifications in the marketing mix. The only route open to him for achieving this is the manipulation of his marketing mix. The marketing man of the firm has to meet all these manoeuvres and take care of the competitive position of his firm and his brands in the market. which underline the Company's strategy.e. The basic theory behind this model and concept is that if one manages to achieve the right product at the right price. which is a major environmental variable. In short. just in time). selling (i.e. Personalselling. Let us. And this is precisely why assembling and operating the marketing mix remains a continuous task in marketing management. Without keeping the marketing mix open and dynamic. here we give a few typical examples of Marketing-Mixes of various Companies. The marketing man has to carefully monitor the mix and adjust the elements as required by the changing conditions. or changes in the product lines of the firm lead to changes in the marketing mix as well. (2) Domestic appliances . So. They may introduce a new product or initiate an aggressive promotion campaign or announce a price reduction. promotion. Physical distribution and Advertising). No marketing man can assume that the marketing job is over once the elements of the marketing mix are assembled in the right way. We have to identify the significant sub-components. for instance. the elements of the marketing mix have to be ingeniously altered to accommodate the changes taking place within the firm and in the relevant external environment. (1) Cosmetics . Promotion. The marketing man has to keep the marketing mix open. it is not sufficient to think in terms of 4 P’s model only.Marketing Management Blending the marketing mix elements into a winning combination is a continuous task and not a one shot assignment.. quality. changes taking place within the firm too necessitate modifications in the marketing mix. LIMITATIONS OF 4 P’S MODEL The 4 P’s model of “Marketing-Mix” has perhaps gained acceptance more because of its elegance. In other words. To help you. changes in the resource level of the firm. no mention of promotion and/or advertising). (3) Automobile components – product. changes in the corporate strategy of the firm. the market-programme will be taken to be effective and successful. in all situations. The competitor in a given industry may be making many tactical manoeuvres in the market all the time..7 P’s and 1 A (Product. For example. with appropriate promotion and at the right place. the marketing man will not be in a position to respond properly to the changes that are taking place constantly in the environmental variable. The mix may require constant changes.

Explain the different variables of Marketing Mix. it should be very clear now.12 KEY WORDS Four Ps. and the environmental factors. According to Philip Kotler “it represents the setting of a Firm’s “marketing decisions”. every situation calls for a careful analysis or the key-points. 81 .13 ASSIGNMENT QUESTIONS 1. The marketing mix acts as the integrated marketing strategy and the four elements together constitute the marketing strategy. The situation gets all the more complicated. with a large number of consumers in it. at a particular point of time. advertising may be quite relevant.Marketing Management Thus. The Marketing-Mix should represent these key-points. Blending the Marketing mix 9. that what is right for a cosmetic company. 9. Narrate Management of Marketing Mix. It is a dynamic process. to decide where marketingresources must be allocated. whereas in the latter case. 3. or for the replacement market. The decisions on the elements of marketing mix must be properly co-ordinate and balanced in order to achieve an optimum marketing mix. Brief the Behavioural/ Environmental variables. that the Marketing-Mix also has to keep on changing and cannot remain static. Individually the four elements are important but their significance lies in the proper mix or blend indicating the unique way they are combined as a careful plan. in as much as the automobile components company may have different mixes. inter-dependent and essential. It is because of the constant changes in the needs of the customers. there is little point in spending resources on promotion and/or advertising. So. is to satisfy the “needs” and “wants” of the customers. in the most effective and economical way. For one market segment we have a typical marketing mix. Remember that the very purpose of determining a Marketing-Mix. to meet competition in a dynamic marketing environment. Marketing mix. or strategy. In the former case. Variables. depending on whether it sells its products to original ell1lipment manufacturing (OEM) companies. 2. 9. is not appropriate for an automobile-components company.11 SUMMARY The four elements of marketing mix are co-equal. because one is seeking to reach a market.

It has a personality.Marketing Management LESSON – 10 PRODUCT OBJECTIVES To know the meaning of the term product and its importance To know the classification of products To study the product policy and factors influencing product mix STRUCTURE 10. The major components are: (i) (ii) (iii) The core or the basic constituent The associated features The brand name 82 . a Close-up tooth paste. for easy identity. not just a physical object but what consumers perceive it to be. will have a descriptive name also (brand name). a Onida TV set – they are all products.” From a strictly technical or manufacturing point of view. Products carry certain meaning with them and project certain distinctive image. From the economic point of view. The products. a tin of Complan..e.6 Factors influencing product mix 10.10 Assignment questions 10. A product is something more than a mere physical commodity.7 Objective of product management 10. These meanings and images arise out of the many components that make up the total product personality.8 Summary 10. physical and chemical attributes assembled in an easily identifiable form. Almost everything that we come across in our daily life is a product this course material on Marketing Management is a product. Reynolds ball point pen is a product. These utilities are created by a set of tangible. the product) serves a useful purpose of consumption. So.1 INTRODUCTION In a most simple way a product could be defined as “everything the purchaser gets in exchange for his money. a bottle of Kissan’s Orange squash. Thus. a product consists of a number of raw materials put together that the end result (i. a consumer is buying what is expressed economically as “want satisfaction”. all of them cater to and satisfy some needs of some people. Financial Express news paper is a product. in simple terms. we can define a product as a ‘need satisfying entity’.4 Product concept 10. a product consists of a bundle of utilities involving various product features and accompanying services. a packet of Surf. A product is. All of them have some utility behind them. therefore.5 Product policy 10.2 Importance of the product 10.3 Product classification 10.1 Introduction 10. a Margo soap.9 Key words 10.

Any firm is floated to manufacture and sell a product.Marketing Management (iv) (v) The package and The label 10.2 IMPORTANCE OF THE PRODUCT A firm is not selling a product. So product decisions are the most important decisions. 10. In essence. It may not demand extra-ordinary sales promotion gimmicks.3 PRODUCT CLASSIFICATION It is evident that ‘product’ has been undergoing a constant change and the marketing man has been constantly engaged in enriching his product offer. It claims a distinction and difference over other brands of packaged soups-it is ready in two minutes. flour or cloth. if it satisfies reseller’s needs and consumer preferences and is carefully fitted to the needs and desires of the customers. Spencers bread and Modern bread are branded products. He had to take the ‘product’ to higher and higher levels of evolution such as: The generic product The branded product The differentiated product The customized product The augmented product The potential product THE GENERIC PRODUCT AND THE BRANDED PRODUCT The generic product is an unbranded and undifferentiated commodity like rice. A right product is bound to reduce considerably the problems pricing. The marketing implications of ‘the Brand’ have already been dealt with earlier in detail. it involves absolutely no cooking. brought about through subtle sales appeals. The marketing planning begins with the product and also ends with the product. All season’s Hi-tech Tomato soup is an example of a differentiated product. The differentiation is essentially on the plank of convenience to the user. the right product is a great stimulus to sales. In his attempt to score over competition. If the product is sound and easily acceptable to the market. sales success is assured. Product is the most important variable in the marketing mix of a firm. 83 . promotion and distribution. The branded product gets an identity through a ‘name’. or it may be ‘psychological’. with a real distinction on quality or utility or service. the product is to be just poured into boiled water and consumed. The differentiation claimed may be ‘real’. he has been bringing out refinements upon refinements on his basic product offer but managing the product was becoming more and more difficult. bread. THE DIFFERENTIATED PRODUCT The differentiated product enjoys a further distinction form other similar products/brands in the market. It sells only the “Product benefit”. It need not have aggressive advertising and high pressure salesmanship. Hence ‘product’ is the centre of all marketing policies and decisions.

When an engineering and fabrication firm like Larsen and Toubro undertakes to supply oil rigs to the Oil and Natural Gas Commission. Cycle etc. 84 . 10. brand. It is not supplying an off-the-shelf or standard product. as they fulfill the expectations of social welfare and social interests. This is a frequent practice in industrial products marketing. A computer which can understand human language. post-purchase experience. the customer’s specific requirements are taken into account while developing the product. it was a case of product augmentation. and to what extent it satisfies their social and psychological needs. marketers can have repeat orders. These improvements are neither suggested by the customers nor even expected by them. Buyers are not interested in the composition of a product. THE AUGMENTED PRODUCT The augmented product is the result of voluntary improvements brought about by the manufacturers in order to enhance the value of the product. The wheel was an extra facility the manufacturer thought of and added to the luggage.. where the manufacturer and the user are in direct contact and the product gets customized to the requirements of the customer. 2. THE POTENTIAL PRODUCT The potential product is tomorrow’s product carrying with it all the improvement and finess possible under the given economic and competitive conditions. Once a product is bought by a consumer and his evaluation. The marketer. it is offering a customized product to the specifications of ONGC.e. on his own. Tonic and desirable product (TV. by adding an extra facility or an extra feature to the product.g. When manufacturers of Aristocrat mouled luggage introduced luggage cases with wheels. product life-cycle and product planning and development. package. 3.. it is offering just a branded product. Managerial Dimension: It covers physical attributes. Societal Dimensions: To the society salutary products (having good effect in the body & mind) e. There are no limits to the ‘potential product’. i. Consumer Dimensions: To the consumer. related services.Marketing Management THE CUSTOMISED PRODUCT In the customized product. Managerial Dimension Consumer Dimensions and Societal Dimension 1.4 PRODUCT CONCEPT The product concept has three dimensions viz. When the same firm supplies its cement to ONGC. is favourable. the users could now pull it along the ground on its wheels.. Instead of lifting and carrying the suitcase. not a customized product.) are always welcome. The limit is set only by the technological and economic resources of the firm. a product actually represents a bundle of expectations. and respond directly to human voice and oral instructions is an example of a potential product. augments the product. They are concerned only with what the product does.

packaging and pricing of many products. Today the success of the company is measured not only by its current profits but also by its long-term growth. These aims could be achieved only by adopting a proper product policy. As far as a product is concerned. nature and direction of changes in demand for existing products. In other words: (1) Even if there is a better product. 10. concern for better environment Fulfillment of government regulations relating to composition. A policy sets the objectives to be achieved and also the limits within which the management has to operate. Product policy could provide only guidelines for efficient planning and action. a company must strike a delicate balance between optimizing current operations and making necessary provisions for the future. Product elimination and new product development decisions. and Product policy of the competitors. The important aspects analysed under product policy are: Consideration of the product mix. This makes it necessary on the part of the producers to adopt certain “policies” to bring the product to the notice of the prospective buyers. (a) (b) (c) (d) Safety to users Long-run satisfaction to consumers Quality of life. but may not have immediate appeal.5 PRODUCT POLICY The modern marketing concept is that it is not sufficient merely to produce a better product. Such policies taken in regard to the development of a new product or for retaining an existing product in the market is known as product policy. It is to be understood that product policies do not provide ready made answers to the above problems. Marketers have to fulfill the following social responsibilities while offering the products to consumer. it will not be bought unless its existence is brought to the notice of the consumers (2) A bad or useless product may be bought when its uses are highlighted to the consumers.Marketing Management Salutary products yield long run advantages. For the proper carrying out of business functions. The main function of product policy is to guide the activities of the firm towards common goals. it is also necessary to bring it to the attention of the prospective customers. each function must have a policy. Desirable products offer both immediate satisfaction and long run consumer welfare. In other words. 85 . such a policy is essential to make the product live up to the expectations of the consumers. The term ‘policy’ can notes a principle of operation adopted by the management to guide those who carry out action. the rate.

Stated more specifically. Godrej Company produces various products (items). Product policies are applicable for both existing and new products. Simply speaking it refers to a particular product. If any one of the conditions is fulfilled to a group of products manufactured by a concern. 86 . (d) they are marketed through the same type of outlets (e) they fall within given price ranges. (a) Breadth/Width: Breadth or width of the product mix refers to the number of product groups or product lines found within the company. The product mix is three dimensional: it has breadth/ width. family brands and / or multiple brands? Can a product be left to the middleman’s branding? Answers to these questions will constitute the product policy of a firm. What products should a company make? Where exactly are these products to be offered? To which market. Product mix is one of the elements of product policy. typewriters. 2.Marketing Management Product policies are company rules to guide those engaged in product planning development. the product policy involves: Appraisal of the product line and the individual products. then it is a product line. etc. 1. etc. Product Line: Product line refers to a group of products that are closely related because: (a) they satisfy a class of need (b) they are used together (c) they are sold to the same customer groups. such policies are concerned with defining the type. For example. a. like locks. DECIDING THE PRODUCT POLICY Deciding the product policy is the main task in product management. it is sometimes suggested that the product policy is applicable only in cases where new products are introduced. For example. depth and consistency. Product Mix: Product Mix is defined as the composite of products offered for sale by a firm or a business. Broadly. mixies. refrigerators. Rather product mix is a collection of all products offered for sale by a company. Bajaj Electricals produce varieties of electrical appliances such as fans. volume and timing of the products that are offered by a company for sale. Decisions on product differentiation Product positioning Brand decisions Decisions of packaging New product development Product policy has three elements viz. or market segment? What should be the relationship among the various members of a product line? What should be the breadth and depth of the product mix? How many different product lines can a company accommodate? How should the products be positioned in the market? What should be the brand policy? Should there be individual brands. Product Item: Product item refers to the specific product manufactured by a company. Here each product is a product item. lamps. (1) Product item (2) Product line and (3) Product Mix. 3. production or marketing.

For example Kodak Company manufactures different varieties of cameras. Bajaj Electricals produces various lines of products. (c) 10. changes. But these goods are not united by a common factor. In India. It will lower down their advertising and distribution costs also. This also adds to the stream of demand qualitatively and quantitatively. Advertising and Distribution Factors: A firm using a wide network of advertising and distribution channels can think of adding new products. (b) changes in the level of income of buyers. For example. Thus the cost considerations may be tempting motive behind such diversifications. In other words the products manufactured by a company are united by one factor. It will certainly bring down the cost of production of existing products. there is an ever increasing rate in the growth of population. This naturally adds to the number of buyers leading to a quantitative change in the volume of production. external or internal. Use of Waste: Sometimes due to use of waste and residual material also there can be an increase in product line. They are influenced by many factors – controllable.Marketing Management (b) Depth: Depth refers to the number of product items within each product line. Complementary/Demand Factor: A firm can add the product to its product line which has a complementary demand to its products. (2) Controllable Factors: (a) Cost Considerations: A firm may think of adding the new product to its product line which can be produced easily with the same machinery and production facilities. a pen manufacturing company can start the production of nibs and link also. in product mix are inevitable. Consistency: Consistency of product mix refers to the close relationship of the various product lines. The exact number of products to be manufactured and marketed by a firm cannot be exactly determined. (b) (c) (d) 87 . The development programme of the Government ensures increase in income enabling the consumers to spend more. The consumer behaviour is the source of reasons that invite changes in product planning. (c) changes in consumer behaviour. For example. to its product line as they can be distributed with the help of the same network.6 FACTORS INFLUENCING PRODUCT MIX As long as profit motive is there in any business. non-controllable. The product can be manufactured as by-product and it may bring down the cost of main product. (1) Non-controllable Factors: The non-controllable factors may be (a) population increase / decrease.

Thus the overall success of the organisation is dependent upon the planning land development of products. To do portfolio analysis. AN AL CU NIN YS ST G IS O M . to maximum sales or to enter into new markets.7 OBJECTIVES OF PRODUCT MANAGEMENT Products are the bed-rock of any organisation. Product management thus tries to achieve the following objectives: PR AN O D DU D CT EV P EL LA O N PM NI EN NG T D EL I VA VER LU Y E OF E Y AG IT IM AL D ON A N RS BR PE D AN D NT AN ME BR GE NA MA D AN Y BR UIT EQ C O RE F VA AT LU ION R E D G AN NIN BR TIO SI PO PRODUCT MANAGEMENT 1. 6. 10.1 Scope Of Product Management To design product strategies with respect to customer. industry and competition analysis. 3. ER PRODUCT LIFE CYCLE AN D 88 .Marketing Management (e) Company Objective: The company objective may be to stabilize or increase the profits. To plan strategies for each stage of product life cycle. Sales are realised through sales of the products. 4. ' C M OR C AR P O IN OM KE R D P T AT U E IN E ST TI G A R TIO P ND Y L AN N. To identify the brand extensions and line extensions. 10. 2. and develop them further. To improve and modify existing products. To seek growth through new product development. This may motivate the company to add new product to its product line. To spot marketing opportunities and to see whether they are exploitable. Fig. To consolidate existing product profile. To generate new product ideas. The elimination of obsolete products and unsuccessful product also bring changes in product line and product mix of the companies. 5.

position a brand. Augmented product. Customised product. to develop brand equity and measure it.8 SUMMARY Product is the import variable in the market. build a brand image. What is a Product? How would you classify it? 2. Product lone. 7. 10.9 KEY WORDS Generic product. Explain product policy. build a brand. If the product is satisfied to the buyer. Product differentiation. then all other tasks to the organ is simple. 10. 89 . 10.10 ASSIGNMENT QUESTIONS 1.Marketing Management To identify the brand identity.

and commercialization of new products. Which product should the firm make and which should it buy? Should the company expand or simplify its line? How each new item could be more useful? Is the quality right for the intended use and market? What brand. It requires the collective participation of production.2 Product Planning 11. and The discontinuance or elimination of unprofitable or marginal products.8 Assignment questions 11.3 PRODUCT DEVELOPMENT Product development embraces the technical activities of product research. Product planning has been defined as “the act of marketing out the supervising the research. 1. the modification of existing lines and the discontinuance of marginal or unprofitable items”. 11. package and label should be used for each product? 90 . 4. and research departments.planning and product development activities covers the decision making and programming in the following areas. In other words. 5. engineering.5 Uses and Limitations of Product Life Cycle 11. 3. product planning involves three important considerations: (a) (b) (c) The development and introduction of new products The modification of existing lines to suit the changing consumer needs and preferences. 2.3 Product Development 11.2 PRODUCT PLANNING It is the starting point for entire marketing programme in a firm.Marketing Management LESSON – 11 PRODUCT PLANNING AND DEVELOPMENT OBJECTIVES To understand the concepts Product Planning & Product development To study the stages in Product Life Cycle To know the strategies used in different product life cycle. development. is called as Product development like human being the product is having a definite life cycle.7 Keywords 11.1 Introduction 11. screening. STRUCTURE 11.6 Summary 11. It embraces all activities. The scope of product. Various strategies are formulated depend upon the stages of the cycle.1 INTRODUCTION The Marketing programme starts with product planning and the technical activities involved in it. marketing. which enable producers and middlemen to determine what should constitute a company’s line of products.4 Product Life Cycle 11. engineering and design. 11.

The examples may be of a fashionable dress or an electrical appliance. and other market risks. It is worth noting that the duration of each stage is different among products go through all stages some fail in the initial stages. Attractiveness of the investment necessary to make a product. Yet others may assemble pre-manufactured parts. The decision to “make or buy” a product depends upon the management’s analysis of several issues. a product goes through the various phases of its development. Availability of production capacity. during its development. Willingness to accept seasonal. Managerial time and talents required – the amount of production supervision needed. It life begins with its market introduction. large production and distribution costs. 3. the life cycle may be as short as a month. others may decide to make some parts and buy others and then assemble to give an end product. Risk of depending upon outside resource-will they raise the price cut off relationship? 9. have a certain length of life.4 PRODUCT LIFE CYCLE Products. Some firms may assemble a series of pre-manufactured parts. How should the product be priced? Of the above areas one of the most important is the taking of decision to make or buy a product. or otherwise finish the end product. and what inventory control should be established? 8. and upto the time it is launched in the market. it reaches marketing maturity after which is a market decline and finally the product dies. “In virtually all cases decline and possible abandonment are inevitable because (1) the need for the product disappears. 1. Secrecy of design. Extent of reciprocity present –Is the supplier of item also a customer of the firm’s other products? 11. and production resources are needed. next it goes through a period during which its market grows rapidly. during which they pass through different stages. such as the following. Relative cost of making or buying Extent to which specialized machinery techniques. and what materials should it produce? 7. like people. From the time the product idea is born. 5.Marketing Management How should the product be styled and designed. For some. or (3) a competitor does a superior marketing job”. Profit may not be there as there is low sales volume. and the paint. Introduction In the early stage when the product is introduced in a market sales revenue begins to grow but the rate of growth is very slow. In what quantities should each item be produced. 7. others may reach the maturity stages after a long time. polish. 8. cyclical. Ultimately. while for others it may last for quite a sufficiently long period. 6. style and materials – the extent to which the company wants its processing methods kept secret. 4. It may require heavy 6. 2. 1. (2) a better or less expensive product is developed to fill the same need. and in what sizes and colours. 91 .

(2) the market is relatively aware of the product (3) most buyers are pricesensitive. Weaknesses may be revealed and they must be promotion. The low price will encourage the market’s rapid acceptance of the product. and (5) the company’s unit manufacturing costs fall with the scale of production and accumulated manufacturing experience. (2) most of the market is aware of the product. The high promotion serves to accelerate the rate of market penetration. Products are brought cautiously on a trial basis. This strategy makes sense if (1) the market is large. In this stage. A selective penetration strategy consists of launching the new product with a high price and low promotion. (4) there is strong potential competition. Cost of market development may be considerable. A high-price a high promotion level. This strategy makes sense under the following assumptions: (1) a large part of the potential market is not aware of the product.Marketing Management advertising and sales promotion. (3) the firm faces potential competition and wants to build up brand preference. and (4) there is some potential competition. The purpose of the high price is to recover as much gross profit per unit as possible and the purpose of the low promotion is to keep marketing expenses down. 92 . and (4) there is little threat of potential competition. marketing management can set a high or a low level for each marketing variable such as price. This strategy makes sense under the following. The firm charges a high price in order to recover as much gross profit per unit as possible. distribution. A pre-emptive penetration strategy consists of launching the product with a low price and heavy promotion. (2) those that become aware of the product are eager to have it and play the asking price. Products are brought cautiously on a trial basis. This strategy makes sense under the following assumptions (1) the market is relatively limited in size. it spends a lot on promotion to convince the market of the product’s merits even at the high-price level. (3) those who want the product are prepared to pay a high price. Marketing Strategies in the Introduction Stage In launching a new product. Weaknesses may be revealed and they must be promptly removed. This combination is expected to skim a lot of profit from the market. Assumptions: (1) the market is large in size. (2) the market is highly ware of the product (3) the market is price-sensitive. and product quality. At the same time. ‘product development and design are considered critical. at the same time. promotion. the company keeps its promotion costs down in order to realize more net profit. The company firmly believes that market demand is highly price-elastic but minimally promotion – elastic. This strategy promises to bring about the fastest rate of market penetration and the larger market share for the company. A low-profile strategy consists of launching the new product with a low price and low level of promotion.

3. the manager looks always to stimulate increased usage among present customers. Market modification: The product manager first looks for opportunities to find new buyers for the product. A common practice of food manufacturers.. Market strategies in the mature stage The product manager whose product has settled into a stage of sales maturity is not content to simply defend its current position. Third. These basic strategies are available in this stage. For example. Marketing Strategies in the Growth Stage During this stage. First the manager looks for new markets and market segments that have not yet tried the product. a manufacturer of a chocolate drink mix may find that its heavy users are mostly order people. It shifts some advertising from building product awareness to trying to bring about product conviction and purchase. Growth or market Acceptance stage In this stage. Competitors enter in the market in large number if the profit outlook appears to be very attractive. 93 . the firm tries to sustain rapid market growth as long as possible. 3. 1. which is experiencing faster growth. the manager may want to consider repositioning his brand to achieve larger brand sales. He recognizes that good offense will provide the best defense of his product. the product is produced in sufficient quantity and put in the market without delay. It vigorously searches out new market segments to enter. It keeps its eyes open to new distribution channels to gain additional product exposure. Sellers shift to “But-my-brand’ rather tan “Try – my-product” promotional strategy. 4. There are several possibilities. This is accomplished though such actions as: The firm undertakes to improve products quality and add new-product features and models. and marketing –mixmodification. The trade term for this is product relaunch. market modifications product modification. They sales and profit curves rise often at a rapid rate. 5. and it can take several forms. Product modification: Managers also try to break out of a stagnant sales picture by initiating calculated changes in the product’s characteristics that will attract new users and /or more usage from current users. The number of distribution outlets increase. although this will be not affect total industry sales. is to list several recipes on their packages to broaden the consumers’ uses of the product. economies of scales are introduced and prices may come down slightly. This firm should give serious consideration to reposition the drink in the youth market.Marketing Management 2. It decides when the time is right to lower prices to attract the next layer of price – sensitive buyers into the market. 2. The demand generally continuous to outpace the supply. Second. for example.

Some firms at this stage may try to link up the sale of these products with some other premium products they have developed and this try to strength out the life of the product. market-share trends. and contests. 3. Prices and margins get depressed. 2. the sales begin to fall. Market decline Stage At the decline stage. 94 . the product manger considers the possibility of stimulating sales through altering one or more elements or the marketing mix. Successful firms quite often keep new products ready in a queue to fill the vacuum created by the decline of existing products. The controller’s office fills.Marketing Management A strategy of quality improvement aims at adding new features that expand the product’s versatility. But most firms perceive properly the impending total decline and prepare for the gradual phasing out of the product. or convenience. The periodic introduction of new car models amounts to style competition rather than quality of feature competition. A more direct way to attract other brand users is through aggressive and attractive promotions – trade deals. gross profit margin. manufacturing and the controller’s office. 4. and return on investment. 4. The demand for the product shrinks probably due to new and functionally advanced products become available in the market or the market becoming apathetic to the product. Another is to search for a new a brilliant advertising appeal that wins the consumers’ attention and favour. cents-off. out data for each product showing industry sales. and other information over the last several years. The company can also offer more services to the buyer as a patronage building step. safety. The criteria include the number of years of sales decline. Marketing-mix: Modification: As a final source of mature product strategy. company sales. For example. the total sales and the profits diminish. This information is run against a computer programme that identifies the most dubious products. gifts. prices. the introduction of power to hand lawn movers increased the speed and ease of cutting grass. One strong possibility is to cut prices as a way of drawing new segments into the market as well as attracting other brand users. In any case. The committee meets and develops a set of objectives and procedures for reviewing weak products. The committee includes representatives from marketing. A strategy of style improvement aims at increasing the aesthetic appeal of the product in contrast to its functional appeal. Identifying the weak product: the first task is to set up on information system that will spot those products in the line that are truly in a declining stage. A product review committee is appointed with the responsibility for developing a system for periodically reviewing weak products in the company’s mix. Marketing Strategies in the Decline Stage A company faces a number of tasks and decisions to ensure the effective handling of its aging products. unit costs. An overall view of such a system is 1.

A company with all its products in the mature stage may be generating profit today hut as the products enter decline stage. It will usually prefer the farmer because this will bring in some cash and will minimize the hardship to customer and employees. a number of them in the growth stage. In some situations the hard-core loyalty may remain strong enough to allow marketing the product at a greatly reduced level of promotion.Marketing Management Products put on the dubious list are then reported to those managers responsible for them.5 USES AND LIMITATIONS OF PRODUCT LIFE CYCLE PLC emphasizes the need for product planning. Management will also want to provide a stock of replacement parts and service to stretch over the expected life of the most recently sold units. First. 11. same market segments. Determining marketing strategies: In the face of declining sales. both of which mean good profits. There is a need to analyze the balance of products. in which case it concentrates its resources only in the strongest markets and channels while phasing out its efforts elsewhere. The product simply continuous to decline until at last it is dropped from the line. A nicely balanced product array would see the company marketing some products in mature stage. There is need to replace to old products with new ones. It could be dropped quickly and decisively so there would be no chance for resistance to build up a reverse the decision. Finally. If it decides to stay in the market. it has the option of selling or transferring the product to someone else or dropping it completely. The firms that remain enjoy a temporary increase in sales as they pick up the customers of the withdrawing firms. For example. Procter & Gamble decided to remain in the declining liquid – soap business until the end and made good profits as the others withdrew. The drop decision: When a product have been singled out for elimination. knowing this will accelerate the rate of sales decline and ultimate demise of the product. the firm faces further strategic choices. it could follow a milking strategy. some firms will abandon the market earlier than others. and that the old or even a higher price. Thus any particular firm faces the issues of the whether it should be the one to stay in the market until the end. The product review committee examines the product rating form for each dubious product and makes a recommendation (a) to leave it along (b) to modify its marketing strategy. Or it could be discontinued gradually with a time table to allow resources to transfer out in an orderly way and to allow customers to make other arrangements. 6. the firm faces some further decisions. in which case it continuous its past marketing strategy. profits may fall. the organization has to decide when the product should be terminated. pricing. in which case it sharply reduces its marketing expenses to increase its current profits. and so on. Each manger fills out a diagnostic and prognostic rating forms showing where he thinks sales and profits on dubious products will go with no change in the current marketing programme and with his recommended changes in the current programme. and there should be reasonable prospect of new 5. or (c) to drop it. promotion. channels. Second. Or the firm could follow a concentration strategy. 95 . The firm could adopt a continuation strategy.

LIMITATIONS OF PLC Not all products follow the classic S-shapcd PLC curve. pioneer to charge high prices. Strict adherence to PLC can lead a company to misleading objectives and strategy prescriptions. putting them on the growth trajectory time and again. They feel that the company has charged them a high price when they could afford not to. Other products (and brands) do not enter the decline stage for a very long time. in maturity stage to build (when a differential advantage can be developed) and in the decline stage to build (where there is opportunity to dominate). insufficient product redesign or lack or promotional support. It is simply a pattern of sales that reflects marketing activity. Some brands have shown reluctance to follow the traditional PLC. and will take that into account when they shape their early strategies of market entry.Marketing Management product launches in the near future. Genuinely interested competitors will still enter the market but they will be there for the long haul and their strategies and moves will be more predictable and manageable. It may charge a very high price during the. they can keep off competitors. A company that introduces a new to the world product may be in very powerful position early in the PLC. The sale of some products rise like a rocket and their fall like a stick (fad). Without this sequence a company may find itself with a group of products all in decline stage of the PLC. Customers get angry when they find the pioneer reducing their high prices due to competitive pressures. at least those which pursue markets purely for profits and do not have strategy and preference for entering new markets. smart pioneers will price the products at a low price so the potential competitors do not consider the market attractive enough to enter it. It is not possible to predict when maturity or decline will begin. 96 . period of monopoly supply. If pioneers decide to be content with low margins. The duration of PLC stages is unpredictable. But unless the product is patented competition will enter during growth phase and make it difficult for the. Using the PLC may lead to inappropriate action (dropping the product) when correct response would be increased marketing support. Companies have to face the fact that products need to be terminated and new products developed to replace them. In fact. There can be circumstances where appropriate marketing objective in the growth phase is harvest (in like of intense competition). Some products have been in the maturity stage for a very long time and the decline stage seems nowhere in sight. Sales of a product may flatten because it has not received enough marketing attention. A company which understands concept of PLC will realize and estimate the eventual entry of competitors. Products should be viewed as interrelated set of profit bearing assets that need to be managed as a group. PLC is the result of marketing activities and is not the cause of variability in sales. Marketers have continually reinvented them.

so as to shape the life cycle of the product to suit his objectives and requirements. 97 . all of a sudden. pricing strategy and promotion strategy. 11. find their way into decline before entering the growth stage. A marketer can also try to foresee at the very outset the pattern of life of the proposed product and plan the product strategy.Marketing Management 11. This does not man that every single product necessarily passes through all these stages. Pre-Emptive Penetration 11.7 KEYWORDS Product Planning. Product Life Cycle.8 ASSGINMENT QUESTIONS 1. However. Product Development. The knowledge that the product will pass through such a cycle of life is helpful in evolving proper product policies and promotion and pricing strategies. What is Product Planning? How will you differentiates it from product development? 2.6 SUMMARY This is a description of the typical product life cycle. Several new products. most successful products can be seen to pass through the typical life cycle. Explain the different stages in Product Life Cycle.

6 Product elimination 12. In the age of scientific and technological advancements. change in expectation and requirements. This is especially true in marketing. and more value for the money they part with.7 Factors contributing new product development 12. 12. A progressive firm must always consider new product development as a cardinal element of its product policy. products are positioned effectively and brand decisions are taken wisely.9 Keywords 12. change in comforts and conveniences of life. Any business has to be vigilant to these changes taking place in its environment. and these responses take the shape of new products and new services.4 New product adoption process 12. change is a natural outcome of change in food habits. the firm reaps a good deal of benefits.8 Summary 12.1 INTRODUCTION New product development is one of the most important components of product policy and product management. New products become part and parcel of the growth requirements of the firm and in many cases.2 Significance of new product development 12. A business firm has to respond to these dynamic requirements of its clientele.1 Introduction 12. It thus becomes essential for business firms to bring in new products to replace old and declining ones and products incurring losses. The need for responding to changes and the need for new profits are not the only factors that persuade business firms to go in for new products.2 SIGNIFICANCE OF NEW PRODUCT DEVELOPMENT New Products Become Necessary for Meeting the Changes in Demands Innovation is the essence of all growth. Products that are already established often have their limitations in enhancing the profit level of the firm. NEW PRODUCTS BECOME NECESSARY FOR MAKING NEW PROFITS New products become necessary from growth and profit angles too. more fashion. new profits come to the firm on through new products. People always seek better and better product more convenience to products.10 Assignment questions 12.3 Stages in new product development 12.Marketing Management LESSON – 12 NEW PRODUCT DEVELOPMENT OBJECTIVES To study the concept of New Product Development To know the stages in NPD STRUCTURE 12.5 How to solve the problems of new product failure 12. There is amore 98 . Through such as response. It is not enough if the existing product lines and products are appraised properly. change in social customs and habits.

research staff and salesman are also source of product ideas. Thus management finds itself in a dilemma. although the company may maintain its position longer. and toys. 12. Experienced workforce. The risk also gets spread over several products. customers are generating product ideas. Keen competition is leading to increasing fragmented markets. This is equally true of both industrial products and consumer products. so that the firm does not face the threat of sudden extinction. Some technologist think there is shortage of fundamentally new technologies on the order of the automobile. xerography. The answer still must lie in new product development. Hence this stage is also termed as ‘Idea Generation’. Several companies follow user-stimulus strategies by announcing attractive rewards for good new product ideas. automobiles. the need for effective organizational arrangements and the need for improved techniques at each stage of the new product development process. but conducted in a way that reduces the risk of failure. And innovation –bound companies are cashing in on them. Successful new-product development is becoming increasingly hard to achieve. From shampoos to computers. They must be designed with consideration given to consumer safety and ecological compatibility. yet the odds weigh heavily against their success. there are several reasons for this. These threats make some of their current products highly vulnerable. it must develop new products. A company typically has to develop a great number of new. There are companies well known for silently encouraging 99 . television. dealers. A new product is aimed at capturing a large share of a small market segment rather than the mass market. Two needs stand out.3 STAGES IN NEW PRODUCT DEVELOPMENT New product development goes through several important stages as given below: Exploration: The first stage of the new product’s evolution begins with an idea for the product. Although there are many minor products emerging the nation needs major innovations to avoid economic stagnation. small appliances.product ideas in order to finish with a few good ones. The new product ideas may come from customers.Marketing Management compelling reason-the threats arising from the environment. And to reduce the vulnerability of their business as a whole. This means smaller sales and profits. and wonder drugs. Government requirements have slowed down the rate of innovation in the drug industry and have considerably complicated product design and advertising decisions in such industries as cosmetics. Consumers’ problems are the most fertile ground for the generation of new product ideas. computers. New products offer new avenues of growth and thus secure to overall viability of the firm. they seek our new products. existing ones and new products. in-company sources or from research organisation. New products have to increasingly satisfy public criteria in addition to promising reasonable profits.

CONCEPT DEVELOPMENT During this stage the ‘idea-on-the paper’ is turned into a ‘product-on-hand’. Evaluation and decision now enter the picture. The final decision whether a product should be developed on a commercial scale or not is decided at this stage because the time-lag required to attain this stage is a long one and it is possible that some adverse developments might have taken place during this period. They seek answers to basic questions. will reveal market gaps by comparing the existing supply of products with the ideal product conceptions of consumers. The company is not likely to have the resources or the inclination to develop all of the new-product ideas. from idea to final physical form. the various product ideas are put to rigorous screening by expert product evaluation committees. And they will not all be equally good.Marketing Management ‘skunkworks’ where small ‘unauthorized’ teams of executives/workers spend company’s time and money to work to crazy product ideas of their own. The main purpose of all the succeeding stages is to reduce the number of ideas. The group is encouraged to think in all possible dimensions. products. The promising ideas will be chosen for framing new product concepts. But all market gaps are not commercially viable. and their ideas would get refined. In the idea screening stage. take place. Research studies on the consumers. like: Is there a felt need for the new product? Is it an improvement over an existing product? Is it close to out current line of business? Does it take us to a totally new line of business? Can the existing marketing organisation handle the product? Or does it need extra expertise on the production and marketing front? The more attractive looking ideas pass on to the next stage. Establishing development projects for each product. 100 . Creatively techniques like brainstorming and synectics are also used for generation of product ideas. In other words. SCREENING The main purpose of the first stage in the new-product development process is to increases the number of good ideas. In synectics. It is during this period that all development of the product. This stage is also termed as ‘Technical Development’. New product ideas can also come from market research studies. the following activities are undertaken: 9. In brainstorming. a small group of people are encouraged to come up with their ideas on a specified problem. the idea is converted into a product that is producible and demonstrable. even if they were all good. The first idea-pruning stage is screening. Once the management decides to go forward with the product idea. and slowly the problem would be made clearer to them. etc. the real problem is kept away initially from the group and only a broader framework of the problem is given to them. competition.

Second. What is tested at this stage is the ‘product concept’ itself-whether the prospective consumers understand and product idea. Because. it provides an answer as to whether the product idea can be translated into a technically and commercially feasible product. Building the product with the changed specifications. if necessary.Marketing Management 10. Much time and money go into trying to develop a technically feasible product. Upto now. whether they actually need such a product and whether they would try out such a product if its is made available of getting the market response to the product idea. CONCEPT TESTING This is different from test marketing of the product which takes place at a later stage. in the absence of any real product to be shown to the respondents at this stage. its attributes and benefits. Investment analysis and profitability analysis of the project under different assumptions are made at this stage. The marketing experts by now should have undertaken detailed exercises on the marketability of the product. BUSINESS ANALYSIS This stage is crucial in the total process of new product development because several vital decisions regarding the project are taken based on the analysis done at this stage. or perhaps as a drawing. the project is worth proceeding with. and rate of return for the proposed new product. or a very crude mock-up. If not. And finally. 101 . PRODUCT DEVELOPMENT Product ideas appearing sound from a business point of view can now be turned over to the research and development department. the company’s investment up to now is lost except for any by-product information gained in the process. profits. It marks the first attempt to develop the product in a “concrete” form. If they do. The purpose of this stage is to project the future sales. whether they are receptive towards the idea. This stage will decide whether from the financial and marketing point of view. and 11. This is an important step in at least three ways. the company will develop the new product. the company has to make very elaborate and definite statements about the product. it has existed only as idea. Much of the vagueness associated with a new product idea may get thrashed out at the concept testing stage. Three steps are involved in the product-development stage: prototype development and consumer testing. The financial estimates would be reliable only if they are based on a fairly accurate demand forecast and related market factors. this exercise helps bring the company’s own version of the product concept into clearer focus. it represents a very large investment. Business analysis is done not only at this stage but throughout the development process as new information is accumulated about the product and the market. which is likely to dwarf the idea-evaluation costs incurred in the earlier stages. branding and packaging. and to determine whether these meet the company’s objectives. Completing laboratory evaluation and releasing the product for testing. The project’s overall impact on the corporation’s financial position with and without the new product are estimated and compared.

and the testing organization exercises the normal controls to avoid biased results. It should be easy to pronounce. TEST MARKETING Test marketing is a form of risk control and ensures avoidance of costly business errors. The firm can save the investment by dropping the new product idea. such as paired comparisons. Consumer testing goes hand in hand with prototype development. Test marketing of a product may indicate that the sales prospectus for the product are bound to be poor. In many cases. 4. The two traditional packaging concerns of manufactures are product protection and economy. it is possible for them to manipulate the test process and thereby make the test results unreliable. It should suggest product qualities such as action colour. the firm may go ahead with the commercial producton and marketing of the new product. This means such things as size options and packages that are easy to open. it may so happen that the product was not the right one for the chosen market. It should suggest something about the product’s benefits. multiple choices. Test marketing is an experiment that has to be carefully conducted. 3. In the Indian context. and ranking procedures. is convenience. It may be too costly a mistake for the firm. only giant corporations like Hindustan Lever 102 . A third packaging objective. if the results received from the test marketing are positive and encouraging. 2. test marketing is also a time-consuming process. to decide the soundness and feasibility of full-fledged marketing of the product. It is a controlled marketing experiment with minimum possible cost and risk. particularly those in the consumer’s goods field. recognize and remember. This is the promotional function. or whatever. And if competitors get information regarding the test. The brand name should not be casual after thought but an integral part or reinforcer of the product concept. Over the years a fourth packaging objective has received increasing recognition from manufacturers. Care is required in selecting the test markets and control markets. it has to be carried out for long duration in order to obtain reliable and meaningful indications. Consumers are normally asked to sample the alternative products in a laboratory or home setting. Among the desirable qualities for a brand name are: 1. in monitoring the test and in analysing and interpreting the test results. Various methods have been proposed for the testing of consumer preferences among a set of prototype alternatives.Marketing Management The first task is for the research and development department to build a physical prototype that realizes the attributes specified in the product concept and its trouble – free and economical to manufacture. The company examines the results and decides on the prototype model that seems not promising on the overall criteria. It should be distinctive. which comes closer to considering the consumer. text marketing as a marketing technique is becoming popular in recent times. If totally new products are introduced into the market on a commercial scale without resorting to test marketing. On the contrary. In the past.

Now more and more firms with the help of their advertising agencies are going in for test marketing before a new product is commercially launched. According to him. these stages are: (a) (b) (c) (d) (e) (f) (g) Awareness stage. and thus commences its life-cycle.Marketing Management and Tatas used to go in for test marketing. it should be checked whether advertising and personal selling have been done effectively and whether proper outlets have been arranged for the distribution. The following are the usual reasons for the failure of new products. Checking results at regular intervals. in which the individual decides whether or not to use the innovation on a full scale basis. Commercialisation is also the phase where marketing is most active in connection with the new product. In other words. Why new products fail? Despite careful attention to product planning and development. service. as many as 50% of the new products actually entering the markets have a very short life span and market failures occur. This stage is considered to be a critical one for any product and should therefore be handled carefully. 3. in which the prospect mentally measures the relative merits and demerits of the innovation. in which the prospects actually adopted the innovation on a limited basis. Adoption stage. 103 . Post-adoption stage. 12. Completing final plans for production and marketing 2. unforeseen events can impair commercialisation seriously. It should be remembered that new products should be launched in the market only stage by stage. Interest information stage. in which the prospect continues to seek assurance that he made the right decision. Evaluation stage. where the prospect becomes interested to ask for and know specific information about it. COMMERCIALISATION In this stage the product is submitted to the market. For instance. Initiating coordinated production and selling programmes. Trial stage. The following activities are usually undertaken during this stage: 1. This is to avoid short supply of the product due to initial gaps in production and distribution. It is not prudent to extent a product nationally and then not be able to meet demand or to come across some unexpected deficiency.4 NEW PRODUCT ADOPTION PROCESS When a new product is launched. where the individual is exposed to innovation-product. Despite the care with which the previous development stages have been planned. it can be highly successful if the management identifies the nature and extent of adoption process of that product. idea-but knows very little about it. Stanton visualises six mental stages which a prospective user goes through while deciding whether or not to adopt new product. introduction may be restricted to a few regions in the first instance.

Poor/Bad timing of introduction: The basic principle to be followed in product planning is to find out the exact time within which the product is to be introduced into the market. Failure to estimate the strength of competition: this is also an important factor that leads products to struggle hard in the market. etc. Insufficient and ineffective marketing effort: It is wrong to assume that a manufacturer’s job ends at the moment a product is ready for sale. Inadequate sales force: Selling is done by personal or impersonal methods. This is a basic reason for product failure. 12. etc. 9. 8. Whatever it is. improper. 6. Inadequacies in products. may be adopted. are more intimate and more efficient.5 HOW TO SOLVE THE PROBLEMS OF NEW PRODUCT FAILURE? All these problems could be solved by timely action of the marketing management. biased or not extensive enough. A close analysis of market conditions and the consumer behaviour and attitudes is essential to find out an answer to the two problems. He should try very much to market his product by proper promotional activities. discounts. Higher costs than estimated costs: This is another reason for product failure. Customers cannot be cheated by price cuts. 7.Marketing Management 1.. 3. a manufacturer often finds it difficult to answer. By analysing and ensuring that there is adequate demand existing for the product. Impersonal methods constitute the advertisement and similar promotional activities. 11. Too many new products entering the market and Many products are not new as perceived by consumers. 4. Usually when and how are the two questions. Inadequate market analysis: if the market analysis is inadequate. The following methods are suggested to prevent a new product failure: 1. Failure of product to fill consumer needs due to ignorance about consumers attitudes and about new products. 104 . The cost estimate often also go wrong when the products are finally introduced into the market. In other words one should identify and ensure a potential market for his products. Product problems and defects: It arises out of technical mistakes in the process of production. improvement in the quality alone will withstand competition. the analysis will yield only wrong idea. are got rid of by proper product testing. 2. Price cuts on the marked price and various kinds of discounts. Personal methods on the other hand. Acting on such data leads to product failure. Failure to recognise rapidly changing market environment. 5. Promotional activity should be backed by adequate sales force to introduce the product in the market. 10. There are various methods to overcome severe market. to a large extent.

2. 12. Why New Product Fail? Suggest measures to overcome this problem. Indira Gandhi’s government had not decided to expand the television network to cover 70 percent of the Indian population. Product improvement search will be a continuous affair to introduce necessary improvements. Here. leading towards a change in the customers preferences and expectations. By selecting a product that should reflect the company’s image already created in all respects.6 PRODUCT ELIMINATION There are some products which cannot be improved or modified to suit the market. it is extremely doubtful if many of today’s products would have seen the light of the day in the Indian market. Application of chips technology to the watch making industry gave us a quartz watch-some thing that Titan watches have successfully marketed the product in India. Changing Customer preferences : The driving force in new product development is changing customer life styles. Concept testing. 105 . By using continuous and efficient demand creation methods and 4. increase in education and income levels. 12. Explain the different stages in New Product Development. Screening. While most are related to external environmental variables. modifications.7 FACTORS CONTRIBUTING TO NEW PRODUCT DEVELOPMENT Several factors contribute to new product development. launched its own Satellite INSAT 1B and started colour telecast in 1982.. 12. in the existing product on the basis of changing consumer preferences as well as on account of development of science and technology. 3. 12. innovations etc.9 KEY WORDS Product Elimination. growth in the nuclear and stand alone families. the most important internal factor in new product development is the surplus capacity that a firm may have at any given time. The changing role of women. 3. the profitable alternative would be withdrawn the product.8 SUMMARY Marketing management will have to undertake constant checking of a new product throughout its life cycle. 2.Marketing Management By making a product that would exactly fit into the existing market structure of a company. 12. Commercialisation. the fact is that many do. Test Marketing. Although firms should not pick up products to fill their surplus capacities. For example. Explain the significance of New Product Development. especially with regard to quality and price. The process of withdrawal is technically known as “product elimination”.10 ASSIGNMENT QUESTIONS 1. and a manifold increase in the electronic media also contributes towards changing customers expectations and preferences Technological changes : Another factor is the technological change in the industry and the market. Your product must be uptodate and then only it can prolong its life cycle against keen competitions. if Mrs.

2 Branding 13.13 Summary 13. brand name is part of a brand consisting of a word or group of words comprising a name which is intended to identify the foods or services of a seller to differentiate them from those of competitors. (3) Product Warranty and (4) Services. For example.4 Importance of branding 13. design.12 Branding decisions 13. Brand Mark: A brand mark is that part of the brand whichappears in the form of a symbol.5 Functions of branding 13. the picture of “Gopuram” of the Tamil Nadu Tourism and Development Corporation.14 Keywords 13.15 Assignment questions 13.Marketing Management LESSON – 13 PRODUCT RELATED STRATEGIES: BRANDING OBJECTIVES To know the concept of Branding and its importance STRUCTURE 13. Usha fans. These four elements are the vital marketing tools in any marketing programme to secure the desired market share in a competitive market. It is a single word or words used to identify a product and to differentiate it from other products.7 Types of brands 13.10 Advantages of branding or trade mark 13.9 Essentials of a good brand 13. Trade Mark is defined 106 .g.11 Disadvantages of branding 13. It cannot stand alone before the potential buyer.2 BRANDING Brand is a wider term and it includes brand name and brand mark.6 Methods of branding 13. Godrej etc.1 Introduction 13. Brand Name: According to American Marketing Association. 13. a brand name consists of words which may be pronounced e. In that sense all trade marks are brands but not all brands are trade marks. In other words. These are (1) Branding. or distinctive colouring or lettering. Thus registered brands are Trade Marks. There are four elements that surround the product to give us a complete product concept.3 Concepts of branding 13.8 Conditions favourable to branding 13. but not pronounceable. It is recognised by sight. Allwyn Refrigerators. (2) Packaging and Labelling.1 INTRODUCTION The physical product is only a part of the product image. It is designed for easy identification of the product. Trade Mark: When a brand name or brand mark is registered and legalised it becomes a trade mark.

Patents: Patents are public documents conferring certain rights privileges. Brand Architecture It is a branding approach that explains the relationship of corporate brand and individual products. LG 2. from making commercial use of a clearly identified. These differences may be rational and tangible-related to product performance of the brand or more symbolic. Skoda 107 . symbol. Ex: Dettol. A trade name may also be a brand name.3 CONCEPT OF BRANDING Brand A brand is a name. a new machine. and Pond’s Brands versus Products A brand is a product with additional dimensions to differentiate it in some way from other products designed to satisfy the same need. Fiat. titles of offices. Thus the trade mark is essentially a legal term protecting the manufacturer’s right to use the brand name and /or brand mark. term. 13. or design or a combination of them intended to identify the goods and services of a seller to differentiate them from those of competition. The types of architecture are: 1. Fixed Endorsed Structure: Powerful brand name with individual product name Ex: Tata Indica. It is a sole right to reproduce literary. TATAS is solely a trade name of the marker of various brands of cosmetics. sign. but in such a case it serves two the product. a patent confers the right to secure the enforcement power of the State in excluding unauthorized persons. preferably the name of the organisation itself. musical or artistic work. A trade name is the name of business. A patent confers the right to the use of a technical invention. Trade Name: This term is frequently and erroneously used as synonym for either ‘brand name’ or ‘trade mark’. It is applicable in the case of new inventions such as a new process. When a new invention is made it is registered so that an exclusive right is obtained by the inventor to use it. for a specific number of years. but in such a case in serves two separate purposes. dramatic. Copyright is available for the whole of the author’s lifetime and fifty years after his death. Copyright: This is applicable in the case of books and is used in the same meaning as that of patents. It brings name. emotional and intangible related to non-product performance of the brand. Defined more precisely. new and useful technological invention.Marketing Management as “a brand or part of a brand that is given legal protection because it is capable to exclusive appropriation”. Monolithic Structure: The corporate brand name appears on all products Ex: Nirma. GODREJ is both a trade name and a brand name for most of their products.

Ex: Bajaj Chetak. . Ex: HLL’s Surf. a company name is linked .Branding or Dual Branding Two or more well-known brands are combined in marketing offer.Marketing Management 3. Discrete Structure: -Individual brand name alone dominates-with identity and status Ex: Power detergent cake Brand Platform Inter-brand model that explains brand characteristics are mentioned below Brand Vision: Insight of brand in its world Brand Mission: Brands contribution to society Brand Value: The core value on which brand stands Brand Personality: Characteristics of-brand Brand Tone: The way brand communicates with its target customers Double Branding or sub-Branding It is a hybrid form of product branding and umbrella branding where.with product name. Flexible Endorsed Structure: Corporate name appears but individual brand name dominates. Ex: Bru-Cadbury – McDonald’s – Coca-Cola Multi Branding Having more than one brand in the same product category. Burnol. Ex: P & G has 12 brands of detergents Brand Elimination Process of gradually taking the brand out of the market. when all efforts fail to strengthen brand. 108 .Vitalisation Process of strengthening the brand when its share and value starts declining in the market. Brand Re. Tata Indigo Co . Wheel Re-Branding Changing the name of the brand and relaunching with new name. 'Raymonds Double Barrel’ is renamed as Park Avenue Brand Portfolio \ Set of all brands and brand lines that a particular firm offers for sale in a particular category. Ex : GlaxoSmithKline withdrew it’s Aquafresh tooth paste brand. Ex: Cadbury's Perk 4. Ex: Raymonds ready to wear trouser brand. Ex: Ambassador.

It helps in product identification gives ‘distinctiveness’ to a product. It ensures legal right on the product. What is purchased by us is not tea as such but a particular brand of tea. branding is invariably used as a method of modern mass selling. Factors which have made branding necessary. intimacy. The increasing importance of advertising Significance of packing as an important function of marketing. For example. Brands differentiate the product and facilities advertisement to be more effective and successful. etc. brands provide the base for selling efforts. Brand Audit It is a detailed examination of a brand involving activities to assess the health of the brand. 7. The primary object of branding is to introduce “product differentiation” in the market.4 IMPORTANCE OF BRANDING Branding is an essential part of marketing sub-function of selling. It eliminates imitation products 4. 2. 13. The growing habit among consumers to buy goods of particular brands. A branded product indirectly denotes the quality or standard of a product. shape. Thus they are of uniform quality.5 FUNCTIONS OF BRANDING 1. The seller is selling “Brook Bond” or “Lipton” tea. to single out a product from its rivals. We may take the example of tea which satisfies a number of our needs like hospitality. 5. Thus. Following factors have made the need of branding felt effectively: (a) (b) (c) (d) The growth of competition. 109 . uncover its source or equity. it is not a car which is sold. Also. He does this by using a brand or trade mark to symbolize his product. and do not require grading. 13. a manufacturer or a seller wants to establish certain definite image in the mind of the public about the quality. sociability. It helps to create brand loyalty to particular products. But every manufacturer or seller feels the need of identifying his goods with some definite symbol.Marketing Management Brand Positioning Positioning refers to placing the brand distinctively in the consumers mind against competitors. leisure and relaxation. durability. 6. mark or slogan so that his goods catch the attention of the consumers. size. Brands help or facilitate consumer’s shopping. Manufacturers and sellers know that branded products can be sold more easily and at highest prices than competitive unbranded products. Manufactured goods are standardized in the process of production. Consequently sales of this brand exceed those of the competing brands which have not created such distinct image. but a ‘Maruti’ or an ‘Ambassador’. fashion and colour of his product. that is. This is so because there is an image in the mind or the buyer that a particular brand satisfies his need. and suggest ways to improve and leverage that equity. Therefore. 3.

3. Therefore. 2. Remington. it is known as family brand. 5. Under this method. Special symbol or mark: Special symbol or mark may be designed for use as trade-mark or brand to describe a particular product and to identify and distinguish it from other products some class Examples-Scissors cigarettes. BRAND IMAGE AND PRODUCT IMAGE Every brand image is partially derived from a product image. A good brand signifies prestige. Individual Brand: A firm very decides upon a policy of adopting distinctive brands for each of its products.7 TYPES OF BRAND 1. cosmetics and so on. Under this device each product of the company has an individual brand name but it also has the name of the company brand to indicate the business house producing the product e.6 METHODS OF BRANDING Products are branded in one of the following ways: 8. we have the image of the organisation also. 10. sports goods etc. soft drinks. Refrigerator etc. 110 . Furniture. The manufacturer merely produces goods as per the specifications and requirements of distributors and he need not worry about marketing. 13. such brand name is known as umbrella brand or company brand. Family brand: When a firm is making many lines of products and each line of product is given a particular brand name it is called family brand. because two similar items with two different brands may not be compared. Special names: The products may be given special name without may be coined especially to be used as the brand name Example-Sunlight. has only one brand name “Godrej”. A company may produce different lines Milk food. The product image relates to the fundamental aims and satisfactions which the consumers find in a particular product. Repeated sales are facilitated with minimum effort through brands.. gives different brand names for its products.g. In India this practice is popular in the woolen. Many companies use this device profitably. If each line is given a separate brand name. Camel ink. it is not wrong to say that the brand image relates to the specific versions of the product image. Combination Device: Tata house is using a combination device. All the products of Godrej Company – Soap. For example ITC Ltd. Tata’s Tea. Umbrella Brand / Company Brand: When all the products of a company have the name of the company as a brand name. 9. Lifebuoy. Private of Middleman’s Brand: Under this arrangement manufacturer introduces his products under the distributors’ brand name. ii) iii) 13. hosiery. side by side with the product image. i) Based on the name of the manufacturer: The name of the manufacture may be used in the abbreviated form to name the product Example-Bata. Typewriter.Marketing Management Branding reduces the price comparison. 4.

13. 4.9 ESSENTIALS OF A GOOD BRAND A brand to be an effective weapon in the hand of manufacturer or seller for the creation of consumers preference or “:product differentiation” must posses the following essential qualities: Firstly it should simple short and easy to memorise : Secondly.. Fifthly. Once the brand has been made popular retailers are forced to keep the product in their stock because of its popularity. The individuality of a product is established. retailers and consumers alike. 5.Marketing Management Middlemen enjoy more freedom in pricing products sold under their own brands. it should be effectively illustrative. Thirdly. In such a case manufacturer reduces the expenses in distribution of goods. 6. 5. it should not be based on prevailing styles and fashions. involving additional promotion cost. 3. Fourthly. 2. 3. it should be distinctive and attractive to the eyes and pleasing to ears. Sixthly. 1. The quality of the product should be the best and it should be easily maintained. it should be easy economical to reproduce. it is possible for the manufacturer to dispense with the services of the wholesaler. There must be a consistent and widespread supply of the product. if satisfied. More important of these advantages are discussed here: (a) Advantages to manufacturers 1. 111 . Finally. 2. The brand must vary through to the ultimate consumer. will lead to successful branding: The demand for the general product class should be large and strong enough to support a profitable marketing plan. 4. 13. it should be easy to recognize and recall. Thus a fixed demand and preference for the branded product are created.8 CONDITIONS FAVOURABLE TO BRANDING The following conditions. whole – salers. The product should be easily identifiable by a brand and lend itself easily to conspicuous marketing. Wholesalers and retailers have preference for branded products because they can be hold easily. Distribution of the product in a wider market with the help of effective advertising is made possible. After some time. its owner should be able to protect the brand or trade mark in the low court.10 ADVANTAGES OF BRANDING OR TRADE MARK The practice of selling goods under a brand name or trade mark brings advantages to manufacturers. Advertising costs are reduced. This helps the manufacturer to distinguish his product from those of his competitors. There must be economies of large scale production whenever additional production is undertaken as a result of expanding sales volume. They have more control distribution. 13.

(b) Advantages to wholesalers and retailers 1. Consumers are assured of good quality: Manufacturers have to maintain the quality of products. Prices of branded products are fixed by the manufacturers and they are well advertised. Prices of well-known brands tend to fluctuate less than those of non-branded products or of unknown brands. It reduces price comparisons and helps stabilize prices. 8. 2. Branding aids the manufacture to maintain contact with the consumers. 7. It facilities introduction of a new item. Also. products of 6. 3. 9. Therefore. It help in increasing control and share of market. In case of products with manufacturer’s brands less time is required to sell them. a wholesaler cannot be sure that a retailer will not substitute a product of another make. Unless the product can be identified by a brand. This many help in the turnover of sales in retail shops. 4. Consumers often know and accept many branded products. Therefore. Less risk involves in the case of a branded product of a manufacturer for the retailer.fluctuations. Branding insures steadier demand which leads to economics of planned and continuous production. it is not possible for the retailers to charge higher prices of branded products. 7. manufacturer is required to pay lower rate of commission to wholesalers (or retailers). No efforts of promoting a sale are necessary. A product sold on self-service basis has to rely heavily on brand appeal so that in can be immediately recognized and selected by the customer out of the mass of products displayed on shelves and counters. It helps in advertising and display programmes. their reputation is to be retained. quick method of attracting the consumer’s attention and creating an impression which will “motives his into buying action”. Thus the consumers know what the price is. 6. Retailer is assured of a more or less stabilized demand for the branded products which have been brought to the notice of the consumers. Branded products are often handled on smaller margins. Therefore. 5. Brand name or brand mark gives a seller a short. Breading aids in the standardization of quality and saves the retailer much trouble in choosing and buying his stock.Marketing Management Manufacturer can directly control the price of his product because in case of the branded product retail selling price is fixed by manufacturer. 9. Branding also helps the owner of the brand to encourage “repeat sales” and to protect himself against “product substitution”. 112 . A brand differentiates a product and enables the brand owner to establish a price for his product which cannot be easily compared with prices of competing goods. 2. Consumers cannot be charged higher prices by the retailers. By putting his own brand on the product a manufacturer or a middleman can be sure of some control over the market. consumers themselves come to the retailer for the purchase of such products. c) Advantages to consumers 1. 8. branding reduces price. Manufacturer has not to depend upon the wholesalers and retailers for the creation of demand for his product. A firm selling one or more lines of branded much more easily than a firm selling unbranded goods.

What is branding? Differentiate brand name from brand mark. Brand Mark. Manufacturers sometimes place inferior goods in the market under a glamorous brand name. they are protected from the effect of heat. supply of quality product is ensured to consumers. 2. 13. Quality of branded goods is protected: Branded goods are usually sold in sealed packages.13 SUMMARY The purpose of branding is to create a distinct offering that is superior to those offered by competitors.15 ASSIGNMENT QUESTIONS 1. Therefore. The brand monopoly created by gradually creating a brand loyally to the products in the minds of the customers. 3. 5. Trade Mark. The serve criticism leveled against branding is that it leads to some kind of monopoly known as “Brand monopoly”.Marketing Management inferior quality cannot be sold. Brand names do not always assure good quality. Brand Loyalty. Some of the practical hints have been discussed above. Therefore consumers can get such goods easily whenever they want. Non – recognition of a Brand recognition availability Brand preference habit a Brand insistence any Brand loyalty – Consumers are unware of the availability particular brand – Making the consumers to realise the of a particular brand – Making the consumers buying out of particular brand – In this stage consumers will not accept substitute product Last stage in the Branding process – when consumers make repeat purchases of the same brand. 4. Thus. moisture and dust. The product that is offered must be meant for a well defined set of customers. 4. Quality goods are easily available: Retailers have to keep ready in stock goods of all popular brands. and must provide them with a compelling reason to buy. 5.11 DISADVANTAGES OF BRANDING 1. 2. 3. Copy Right. Stability in price: Generally the retail price of branded products is maintained steady because manufacturers do not find it advisable to change the prices as frequently as those of unbranded products. 13. These steps may be as follows: 1. – 13.12 BRANDING DECISIONS Branding has become a management technique as it involves considerations of alternatives and choosing the best alternative. 3. Patents. 13.14 KEY WORDS Brand Name. 13. Adulteration by middlemen is also made impossible in case of branded goods. 113 . Brand managers have in develop a logical order of action in developing brand awareness and ultimately leading to brand loyalty. It is difficult to establish a brand and the expense of advertising in the initial stage is very high which raises the cost.

10. 5. wholesalers / retailers.Marketing Management 2. What are the limitations to branding? How would you make a branding decision? 3. and consumers. 11. Write notes on: (a) Trade Mark (b) Trade Name (c) Patents (d) Copyright State the importance of branding Explain the functions of branding What are the essentials of a good brand? Explain the different methods of branding. 114 . 6. Narrate the features of different types of brands State the conditions favouring branding Discuss the advantages of branding to manufacturers. 8. 7. 9. 4.

15 Advantages of labeling 14. bags. It means placing of goods in small packages – boxes. 2.20 Assignment questions 14.. Bulky foods such as cotton and jute are compressed into bales. barrels etc. spirit etc.9 Social view of packaging 14. 14.12 Labelling 14.14 Kinds of labels 14. If they are not properly packed they will evaporate. Packaging has been defined as the general group of activities which involve designing and producing the container or wrapper for a product.19 Keywords 14. Goods must be placed in boxes or bags for delivery to dealers.7 Advantages of packing and packaging 14.11 Packaging scene in India 14.4 Requisites of good packaging 14.8 Consumer problems with packaging 14. 115 .2 Need of packing and packaging 14. Protection from damage: Goods are likely to get damaged in transit or while in store.1 INTRODUCTION Packing means the wrapping and creating of goods before they are transported or stored.3 Packaging decision 14.2 NEED OF PACKING AND PACKAGING 1. for sale to the ultimate consumers. Prevention of Evaporation: Products like gas.13 Functions 14. Packages are the sub-division of the packing function of marketing.1 Introduction 14.6 Packaging materials 14. Fragile goods are often packed in special containers. Liquids must be placed in barrels.10 Gauging the reaction of consumers 14. bottles or cans. are volatile in nature.. Therefore they must be kept in suitable containers.17 Product warranty 14.5 Kinds of packaging 14.18 Summary 14. STRUCTURE 14. Many goods must be packed in order to be preserved or delivered to the buyers.16 Disadvantages of labeling 14.Marketing Management LESSON – 14 PRODUCT RELATED STRATEGIES: PACKAGING AND LABELLING OBJECTIVES To know the importance of Packaging and labelling. bottles or cans. It is concerned with putting goods in the market in the size convenient to the buyers. Retailers often wrap goods or place them in bags or boxes for delivery to the ultimate consumer.

Well packed products are fresh. Christmas marriage and such other selling seasons. Moreover. sugar. (b) Consumer difference: Prestige of a product is maintained with the help of proper packaging. Which of the numerous materials available for packaging will serve the purpose of enhancing the appearance of the product best? 2. ants. What colours. designs. Economy: Package should provide various economies both to the producers and to the consumers. 8. Product identification: Packages differentiate similar products and thereby they have an advertisement value. Promotion Role: Packaging also has a promotional role which has become more important. (c) 14. Can a package be so designed that it can be used by the consumer even after the product it contains has been consumed? 5. sugar. Convenience of consumers: Goods are packaged in convenient sizes and units which are easy of handle by the consumers. 5. Should special gifts and such other packages be designed for Diwali. Hence they must be kept properly and tightly packed in suitable containers. Protection against leakage: To prevent liquid articles like oil flow away while in storage or in transit.4 REQUISITES OF GOOD PACKAGING 116 . Above all many people buy the products for the sake of containers. air or other atmospheric effects. The various promotional functions are : (a) Self. When people think that a good package.Marketing Management 3. It must attract attention.3 PACKAGING DECISION Packaging as a marketing activity confronts the seller with following questions: 1. clean and it tack. 9. It has received increasing recognition from the manufacturers in recent years. Protection against pilferage: To product goods from getting stolen also packing becomes essential. 14. these must be kept in barrels or containers.. give the consumer confidence and make a favourable over all impression. honey and such other products attract flies. describe the producers’ features. etc. Therefore monetary loss is prevented. Good packaging is capable of projecting various qualities of the product as well as of the manufacturers. Protection of the quality of goods: Packing is also necessary to prevent deterioration in the quality of goods because of the effect of light. containers should be so designed that they may be useful for further usedomestic or re-use. Protection Against spoilage: Products like gur. 4. How to design a package which will be convenient for the consumers to handle? 4. are likely to get spoiled in transit or in store if they are not protected against dust and other articles. contains bigger products. not shorter. shapes and sizes of packages should be preferred? 3. 6. 7. Also gur. taller in size. etc.Service: The package must be capable of performing many of the sales tasks. tea. whenever possible.

(iii) Consumer’s convenience. Thirdly. pilferage etc. spoilage. But while using colour certain caution is necessary. 14. there is tendency towards smaller packages. Whenever possible containers should be so designed that they may be useful for domestic and other purposes even after the contents have been used. Secondly. they should be further packed in good cardboard packing. Bright colours should be used for packaging articles meant for children but use of such colours should be avoided if the article is meant for grown – up persons. such matter should be informative and should occupy minimum of the space. Firstly. Also it must have been printed clearly. iv) Economy: Another essential requisite of good packaging is it must be as inexpensive as possible. a picture. Usually. (ii) Protective strength. is used on the package to make it attractive. Sometimes packages are so designed that they may be returned for refilling. ii) Protective strength: Basically packaging is concerned with the protection of goods. Pictures having no relation with the product should be avoided. In case of goods packaged in glass bottles or containers.Marketing Management To perform its function effectively in the process of marketing. Generally. for example edible oil bottles. colour to be used should be pleasing to eye. iii) Consumer’s convenience: Goods are packaged in the size which suits the requirements of the consumers. blue stands for coolness. For example tooth 117 . while using colours it must be borne in mind that different colours are associated with different human feeling and emotions. i) Attractiveness: The package must be attractive enough to tempt the on looker to try it. baskets. packaging must possess the following essential qualities: (i) Attractiveness. wooden etc. Therefore. white colour is the symbol of purity and cleanliness. different colours should be used for packages containing goods for customers from different age-groups. glass cans. colours are used to make to packages look attractive. green symbolizes freshness and red indicates warmth. Printed matter on the package also adds to its attractiveness. Consumer Packaging: A consumer package is a kind of package which holds the required volume of products for the household consumption.5 KINDS OF PACKAGING The following are the various kinds of packaging: 1. attractively and in prominent letters.. care should be taken to see that the picture suggests the nature of the product. But to be effective. For example. For example. Usually consumers prefer to purchase their requirements in small quantities rather than in bulk. and (iv) Economy. For this purpose special efforts should be made to reduce the cost of packaging. Therefore it should be strong enough to protect the goods from breakage or leakage. Goods subject to determination in quality due to atmospheric effects should be packed in glass containers or in tight-capped metal tins. have many uses. In such a case.

etc. Different materials at used for the purpose of packaging. materials used for packaging. Similar in the sense. The other examples are V. Parker pen set. of packaging will be similar for all his products. shoe polish. will be one end the same for all the products of a manufacturer.. freshness and such other characteristics of the product.. Firstly.D. the shape of tins and appearance will be same. etc. They are strong and can stand rough handling through long distance involved in the transportation of such goods. 4. have packed is small volume. 2. strong and right to product fragile goods. gas etc.. Thirdly. For example oil. Secondly. its surface can be used for marking and design or written material. For solid product. particularly in the case of packing small articles. Cardboard containers have become popular and in many cases have replaced wooden boxes. the appearance etc. etc. Wooden boxes are used as the outermost packing because they are strong enough to protect goods even if roughly handled in the process of transportation. This is because cardborad containers have certain advantages over wooden boxes.Marketing Management paste. Bata shoe company’s products are packed in similar type of boxes. Chin jars are becoming popular and replacing the old earthenware containers. Family packaging: The products of a particular manufacturer when packed in an identical manner is known as family packaging. The shape. Packages that could be used for some other purposes after the packed goods have been consumed is known as re-use packing. size. cement. nail polish. face powder. wooden containers are used to protect then from breakage. cardboard is cheap. shaving cream. kumkum. Their defect is that they are fragile. Oil packing.6 PACKAGING MATERIALS Packaging differs from goods to goods. biscuit tins and so on. Asian Paints Company packs all its products in a similar type of packing. Johnson’s Baby care set. It depends upon the nature of the goods to be packed. Re-use Packaging: Re-use packaging is also known as dual package. Sometimes the same article may be packed in larger volume for office or factory purposes. They can protect a product against right and corrosive action of acid. it can be manufactured in varying thickness and different colours. Earthenware is porous and helps in retaining the freshness of the products kept in it. ink. Sweet tins. For example. 14. are packed in larger volumes also. 3. For example. colour. In such a case packaging methods.V. oil.. Gunny bags are popular for packing goods like grains. packing is necessary and helpful in retaining the moisture. liquor bottles. Multi Packaging: The practice of placing several units in one container is known as multiple packaging. For liquid products container made of materials which can prevent its disperson is used. gas cylinder etc. though sufficiently. For fragile articles like bangles. are example of multiple packaging. blade. Paper bags are popular as package for products 118 . sugar. the glass jar of Nescafe Instant Coffee and many other products are packed in such a way that the package can be put into many uses. ink.

Paper bags are commendable because they can be given very attractive appearance and they have an advertisement value as it can be printed upon. etc. the Transport Corporation of India (TCI). Several manufactures of fruit juices and fruit drinks are now using tetrapacks. (v) light weight. Tin and plastic containers have gained extreme degree of popularity because they are light in weight and they can be made attractive by giving any shape or colour to them. food grains. but in the bulk transportation of commodities also. fertilizers cement. Lipton’s Tree Top. have recently introduced flexible containers for bulk movement of liquids. But they suffer from certain limitations. Flexible Containers: The trend generally is towards flexible packaging whenever the products lend themselves to such package. the freshness of the product cannot be preserved. These packing processes necessitated the addition of preservatives to the products. The special feature in this case is that the package as well as the contents are sterilized and human handling is dispensed with. The package consists of several thin layers of polyethylene foil and paper. Secondly. alcohol. in case of plastic. liquid detergents. For example. Plastics as a group are now dominating the packaging field in India. They are now used in a variety of packaging applications from simple grocery bags to sophisticated stretch blown bottle. Not only in consumer goods packaging. They also lend themselves to attractive printing/ branding on them. They are durable rubber containers-tanks and drums – made from high tenacity polymide fabric matrix and coated with compatible polymers. (vii) attractiveness and transparency. one of the leading transportation agencies in the country. It is the new development in food packaging. flexible containers have made their entry. Consumer products like Paloma Tea. 119 . In the past. Nescafe. caution to keep them away from fire is always necessary. fruit juices were made available in cans and fruit drinks in bottles. Tetrapacks have an edge over cans since their contents have as shelf life of three months without the addition of preservatives. (iii) greater resistance to sun exposure (iv) thermal stability. (ii) capacity to provide effective barrier to vapour.Marketing Management solid in form. Firstly. production against damage is not possible. But. Voltas’ Volfruit and Noble Soya’s Great Shake are some of the drinks now being marketed in aseptic tetrapack bricks. chemicals. Tetrapacks: One of the latest among these innovations is the tetrapack bricks or aseptic packaging. Sponta Wafers. The new family of synthetic packaging materials have several merits such as: (I) waterproof and moister proof property. Dalda. (vi) alkali and acid proof property. Amul Milk Chocolates and agricultural inputs like chemical fertilizers have all gone in for plastic packaging materials. granules and powders. Parle’s Frooti and Appy. The flexible containers are useful in large volume transportation of several products like oil. They are rigid and non-porous too.

There is no way to check the weight and volume of the contents unless the buyer opens the packages to ascertain the weight. One among them it that it adds to cost. the buyer cannot judge the contents by appearance. are more convenient.8 CONSUMER PROBLEMS WITH PACKAGING In spite of its various advantages. But the benefits received are sufficient to compensate the increase in cost. leakage or pilferage. Thus. the package serves as a ‘silent salesmen’ encouraging impulse buying. Chief advantages of packing and packaging are listed below: 1. It is useful in getting display in retail stores which usually suffer from the shortage of space. 4. It helps to identify a product and thus may prevent substitution of competitive goods. package is also used as a “Powerful selling tool”. A company with several products gets the advantage of the goodwill or one product to push the sale of other products by using similar package with the “same colour scheme and name”. packaged goods. Apart from this criticism the other disadvantages are listed below: 1. Most of the products are packed for their protection. If information about the quality on the package label is absent. 120 . spilling and spoilage. spoilage. packaging is important not only for the purpose of protection and convenience but also for product-differentiation and stimulation of demand. Compared with products sold in bulk. To some extent this complaint holds good. usually. 8. 2. It products the quality of the products. the buyer has to buy almost blindly. he may not have that amount when goods are sold in packages. 7. 2. This is particularly so in the marketing of consumer’s goods. packaging has been subjected to many criticisms. While in the possession of the customer. Apart from this protective packaging”. 6. Unless the package is transparent. 14. 11. It ensures the supply of goods of right quality in desired quantity of consumers. An increase ease of handling or a reduction in losses due to damage may cut marketing costs.Marketing Management 14. cleaner and less susceptible to losses from evaporation. 3. Package sizes inflate the contents. 12. 10. it induces the customer to reorder the same brand and thus stimulates ‘repeat sale’. an individuality which are not possessed by goods sold in the loose form by retailers.7 ADVANTAGES OF PACKING AND PACKAGING Packing is very useful in the marketing of goods. 3. It helps the seller to increase his sales and obtain higher prices than he could get for similar goods handled in the bulk. It facilitates branding and advertising of products. If the consumer wants a specific quantity. At the selling point. Packaging gives the product a prestige. It protects goods on its route from the manufacturer to the consumer or industrial user against breaking. 9. 5. Printed literature containing information about the method of using the product can be easily passed on to the consumers by putting it in the package.

The consumer’s perception of the change is the most important factor. India being an agricultural economy. Some precious natural resources are being wasted on non-returnable (disposable) containers e. must be handled deftly and carefully. coffee. Cold storage facilities are required more and more. Broken bottles. 121 . Fruits and vegetables are perishable and do require protective packa9ing like Modified Atmospheric Packaging (MAP) and Controlled Atmospheric Packaging (CAP). During the period of rising prices less contents are packed in the same package and apparently same prices are charged. Such type of packages cannot be tolerated now. even when it means an improvement in every respect. Still the scale is not very large by world standards. Still. packaging will playa greater role in food related sector. Packages stored in god owns are susceptible to infection. the industry is. Certain plastic food packaging has been shown to cause cancer. and under varying climatic conditions is a big challenge to the packaging industry. Transportation of milk. Ever since the liberalisation. Later on these disposal packages create litter and pollution problems. Resources scarcity: Resources scarcity is another problem. (b) package shape and (c) package material. This has created the solid waste problems in those countries. The middle class is the main consumer for packaging products. Consumers may have their own preferences covering (a) package size. edible oil over large distances. Pollution control: Pollution control is a burning issue in packaging particularly in western countries. however. changing rapidly. 14. Per capita consumption of paper is around 5 KG where as it is almost 50 KG all over the world I The packaging industry In India is mostly in the small scale sector. 2. 5. crushed cartons and bent cans litter the streets and choke municipal dumps. contribute over 60 per cent of the value of the packaging materials produced.Marketing Management 4.9 SOCIAL VIEW OF PACKAGING 1. food grains and commodities like tea.g.11 PACKAGING SCENE IN INDIA The progress made by Indian packaging industry recently is commendable. Marketing men must grasp through systematic research. this 10 thousand plus crore industry has to go a long way when compared to its counterparts in other countries. They should also remember that any change in packaging. Medium and large units. 14. Packaging may create health hazards for consumers. soft drink bottles.10 GAUGING THE REACTION OF CONSUMERS TO PACKAGING It is essential to gauge periodically the reaction of the consumers to packaging and adapt the packaging to their requirements. Processed food sector will be a main buyer of packaging materials. consumer preferences on the one hand and the cost and availability aspects on the other and provide the consumers with the best possible packaging. The average consumption of plastics in India per person is one KG whereas in the Western countries it is 14 KG. 14. Hence all packaging programmes must consider the environmental and ecological issues. These units convert the basic materials into finished and semi-finished packaging forms.

cloth. price is recorded registered and maintained.. It stresses the standard and other special features of the product which are advertised. Grade. undue price variations caused by the intermediaries are avoided. Most of the milk – food products and other similar household products invariably have descriptive a labels. etc. By mentioning prices. It is a medium through which the manufacturer gives necessary information to the user or consumer. This is used as an indirect method of product identification. in popularising the brand manes for their products. iii) Descriptive labels: the labels which are descriptive in nature are typified as descriptive labels. Packaging can provide support to Indian exporters. iv) Informative labels: The main object of these labels is to provide maximum possible information. i) Brand labels: These labels are exclusively meant for popularising the brand name of the product. Consumer durables with high value products also require a scientific packaging approach. Stanton classifies the labels into four: Brand. They are interested. its weight. Descriptive and Informative labels. destination. contents.12 LABELLING Label is a small slip placed on or near anything (product) to denote its nature.Marketing Management Pharmaceutical Packaging is a very promising area. date of manufacturer. 4.14 KINDS OF LABELS William J. In other words. makes it obligatory on the part of manufacturers to show details about the identity of the commodity. It is defined as a part of a product which carries verbal information about the product of the seller. It encourages to produce only standardized and quality products. leaf. E. It provides a method for the manufacturer by which a contact with the customer is established. Cosmetics manufacturers prefer to use this kind. A label plays an important role in making the packaging and branding functions meaningful. 14. 14. Hence these three functions are closely related. 5. It enables the manufacturer to give clear instructions to the consumer about the proper use of his product. etc. ownership. The provision of this enactment is carried out with the help of labelling. dust tea. 3. The recently passed Packaged Commodities (Regulation) Order 1975. 6.g. They are most illustrative in nature. It gives definiteness to the product and therefore the identification of a product is easy. ii) Grade labels: These give emphasis to standards or grades. Packaging should be a value added function.13 FUNCTIONS 1. 2. Packages afford a place where the labels could be affixed. above all. Even a small dent on a durable may result in its rejection Industrial products also require packaging. These may contain the product characteristics and in addition 122 . tea. The function of standardization is made perfect and known to the users through labels. 14. In addition to the product feature they explain the various uses of the product.

television. It aims at mainly popularizing the product rather than giving information to the consumers. It helps the customers to assess the superiority of the product. It gives all needed information to the buyers and avoids confusion. 5.15 ADVANTAGES OF LABELLING 1. since labelling involves expenditure on the part of the manufacturer. It is a written guarantee of the intrinsic value of a product. 4. Label is the medium to popularise the product. 5.. 6. service and maintenance in the case of consumer durables. 3.. In many countries the law takes into consideration the handicaps and disabilities encountered by average buyers while purchasing such highly mechanized or automated products. This ultimately ends in discarding of one product in favour of the other. False claims are prevented by using labels. A warranty is an assurance of the quality. The producer should use the word warranty instead of the word guarantee.16 DISADVANTAGES OF LABELLING 1. Hence it raise the prestige of the product and of the manufacturer. If it is broken. service and performance. Producers developed warranties to create buyers confidence and to provide redress 123 . unambiguous and meaningful. The law has now started to alter the famous maxim “Let the Buyer Beware” and give due recognition to its substitute “Let the Seller Beware”. such as radio. 4. 2. 14. the buyer can claim for damages but has no right to reject the contract.17 PRODUCT WARRANTY In modern life we have numerous products with complicated. Condition is a stipulation essential to the main purpose of the contract. It enables to customers to weigh and compare the advantages of products before they are used.e. “let the buyer beware”. It increases the cost of the product. 14. who very often do not know anything about the product’s characteristic features. An average consumer is incompetent to know the ins and outs of such sophisticated products. victimized party. electrical appliances. It is guarantee for the standard of the product. motor car. 2. For an illiterate this is of no use. i. In the case of medicine detailed labels are attached which even specify the side effect in using them. It points out the responsibility of the maker for repairs. 3. The product warranty must be clear. Informative labelling and informative advertisement will also educate consumers in making wise selection while purchasing the products.Marketing Management the method of using it properly. intricate and elaborate mechanism. etc. The warranty is the outcome of the rule of law viz. 14. The Sale of Goods Act has given legal protection in the form of implied conditions and warranties. It helps advertising activity of the organisation. Labelling is a social service to customers. It avoids price variations by publishing the price on the label. Labelling is effective only where standardization is compulsory.

It is also necessary in the sale of machine and equipment. electrical appliances etc. If the four guidelines are followed by the manufacturers. For example. There are millions of appliances being used by consumers all over the world. for the smooth maintenance and repairs at low charges as well as quick access to spare parts and accessories at reasonable prices. performance. the consumer has little resource. (2) Education of consumer in the use of the product. SERVICE FACILITIES After – sales service is an important aspect of a marketing transaction. However. and will last a reasonable period of time. Customer satisfaction with product in use provides the clue as to the effectiveness of the warranty programme. tape recorders. Manufacturer should not give fraudulent warranties and victimize innocent consumers. and (4) Service on demand. appliances and equipment in all branches of our economy has created a continuous demand for after-sales service. i.Marketing Management to aggrieved customers. courts have started awarding damages for an injury simply if the product is shown to be defective or unfit for its intended use. all kinds of office appliances and machines refrigerators. TV sets. This is true because in practice and it law. (3) Product quality control. 124 . motor cars. condition or other feature. Express warranties are specific promises in writing made by the manufacturer or trader relating to quality. radios. a manufacturer may warrant that his produce is 100% wool or that the colour of the cloth will not fade. refrigerators. particularly in the case of costly durable goods such as television. There are four guidelines as instruments for meeting social responsibilities of marketing as well as for assuring a continuous customer interest 1) Warranty integrity. warranty acting as seller aid.. Implied warranties are promise of the maker that the product is of average saleable quality. fans.e. When one accepts an express warranty. Every increase in the use of machinery.. The value of warrantee to consumers depends upon the reliability of the warrantor and the person who has specific responsibility of making good on the warranty. Buyers could rely on the statement made by the seller. washing machines. Such a warranty may be supported by money-back guarantee. one may have to give up the implied warranty as a condition of acceptance. Manufacturer is expected no go give deceptive advertisement of warranties or guarantees as they will defect the very purpose viz. They are complicated and need honest warranties from the manufacturers. duplicators. will do what the product is normally expected to do. repeat sales can be stimulated and Government may not be compelled to enact additional consumer legislation. Market research emphasizes the importance of after sales service in the marketing campaign of costly and durable goods such as typewriters. domestic appliances and such other status-symbol goods. False warranty is an unfair trade practice. Consumer satisfaction is the key to successful warranty programme.

Labelling. 4. we have to consider the design and the make-up of the package and the labeling of the package. Packaging and labeling are distinctly specialized activities.18 SUMMARY Once the decision is taken on the brand. Product Warranty MODEL QUESTIONS (UNIT III) 1. 5. Explain the requisites of good packaging. 14. 3. 10. State William J.19 KEYWORDS Packaging. Highlight the importance of after sales service in marketing the durable goods. Mass distribution of costly consumer durables is possible only through after-sales service and consumer credit. Packing. ‘Product warranty is a seller aid’ – Elucidate. Evaluate both the ideas and select one for commericalisation. personal selling and channels. 8. In reality it is not the product which is displayed and sold but it is the brand together with the package and the label which are sold or which enable to sell the product. What are the different kinds of packaging? 5. What are packaging materials? 6. Discuss the advantages of packaging? 7. What are the advantages and disadvantage of labelling. 12. After Sales Service. Branding. State the problems of consumers associated with packaging. Stanton’s classification of labelling. 11. What is packaging? What is the need for packaging? 2. (Refer Lesson: 12) 1.Marketing Management BENEFITS OF AFTER –SALES SERVICE 1. (b) Ball point pen with eraser technology. How would you make a good packaging decision? 3. Develop a long range plan for marketing a new line of electric gas lighter indicating for each stage in the product’s life cycle the major objective and the likely policy on price. 2. 4. It can build up and maintain seller’s goodwill. What is labelling? What are its functions? 9. Free service during the guarantee period is the best selling point in the sale of machinery and appliances. CASES / PROBLEMS (UNIT III) 1. Justify your selection 125 . Following two ideas are generated by your subordinates : (a) Fountain pen with eraser mechanism. Sales campaign will achieve remarkable success if after-sales service is included in sales promotion. Customer satisfaction is the master-key to further sales and growth. advertising. 14. demanding the services of advertising experts. quality. Complaints and grievances regarding servicing and maintenance will be promptly and efficiently dealt with by the seller.

Narrate the different stages in the product life cycle. 18. Joshi QUESTIONS TO RESPONSE SHEET 1 (UNITS 1 TO III) INSTRUCTIONS TO LEARNER: Answer all questions. Sinha Philip Kotler Dr. writing materials. Stanton J.Marketing Management (Refer Lesson: 13) 2. R. The whole of India is your market. Discuss the bases meant for segmenting consumer and industrial markets. Principles and Practice of Marketing in India - William J. Explain the factors influencing the buyer behaviour. C. How would you react to this demand? (Refer Lesson: 15) 4. Assess the Indian marketing environment. Critically examine the different kinds of marketing strategies.C. You are marketing seedless dates in packages. 16. Consumer activists protest against you to replace polythene bags by jute. cosmetic items. Explain the process of new product development. and biscuits. 19. 15. Your have to channelise your products through dealers. Answer for a question should not exceed five pages Do not copy from course materials Stretch your imagination as a student of marketing 13. 17. Your have a product mix of multiple items like edible oil. You are using polythene bags as packing material on a massive scale. Marketing Management 14. Principles of Marketing and Salesmanship 13. Fundamentals of Marketing 12. Do you recommend umbrella brand or combination device while branding? Assign reasons for your answer. State the information to be incorporated while labelling such packages? REFERENCE BOOKS (UNIT III) 12.B. Memoria.L. drugs. (Refer Lesson: 14) 3. 126 .

These may inter alia include after sale service. rent for use of living quarters or a piece of equipment for a period of time: fare for a taxi ride or airline flight.1 Introduction 15.4 Pricing methods 15. Inc Illinois 1988. Carvens. (Marketing Management.1 INTRODUCTION Pricing decisions have strategic importance to all organizations profit as well as non-profit organizations. you will understand The concept of price and pricing The objectives and role of pricing The pricing policy and various pricing strategies. In this lesson.5 Summary 15. Pricing is the process of setting objectives. Pricing plays a far greater role in the marketing mix of a company and contributes significantly to 127 .7 Revision points 15.e.3 Pricing polices and strategies 15. and engaging in implementation and control. Price exists all around us. toll for travel as some highways. developing strategies.10 References 15. the price he pays for a product or service represents a sacrifice of purchasing power. setting prices. etc. we are concerned with the role of pricing at the micro-level i. It is the only objective criteria (might be an imperfect measuring rod) for the consumer for comparing alternative items and making the final choice.Marketing Management LESSON – 15 PRICING OBJECTIVES After reading the lesson. Hills and Robert B Woodruff.2 PRICING – MEANING AND OBJECTIVES Price is the device for translating (into quantitative terms i. Gerald E. the other elements produce costs.9 Assignment questions 15. You pay interest for use of money. a student pays tuition fees for education. To the ultimate consumer. Irwin. The different methods of pricing STRUCTURE 15. and so on.8 Model questions 15. 15. P. credit. David W.e rupees and paise) the perceived value of the product to the customer at a point of time. Price is the only element in the marketing mix that produces revenue. Pricing as a marketing function has an important role to play both at the macro and micro-levels.2 Pricing –meaning and Objectives 15. Richard D. determining the available flexibility. The buyer is interested in the price of whole package consisting of the physical plus a bundle of expectations or satisfactions.455). replacement parts: technical guidance.6 Key words 15. dues for membership in an union for a club. a firm’s level.

to cover anticipated operating experts and provide a desired profit for the period. We may discuss the following pricing objectives: PROFIT-ORIENTED OBJECTIVES 14. high prices. To maximize profit To Achieve a Target Return An adequate rate of return on the investment involved is the principal objective of any pricing policy. Pricing objectives are specific quantitative and qualitative operating targets that reflect the basis role of pricing in the marketing plan. Stanton and others further observe that a profit maximization goal is likely to be far more beneficial to a company if it is pursued over the long term. a firm entering a new geographic territory or introducing a new product thinks best by initially setting low prices to build a customer base. For example.Marketing Management the effectiveness and success of the marketing strategy. management attempts to maximize profits through the instrument of price. The idea here is to secure a sufficient return on investment from specific products or divisions so that the sales revenue will ultimately yield a pre-determined average return for the whole company. Price is said to be the demand regulator. a probability determinant. To maintain or increase market share 128 . To increase sales volume 2. and marketing objectives.” (Fundamentals of Marketing. They add an amount to the cost of the product called mark up. To do this hoverer. For example. It may be pointed out here that profit maximization should not be equated with profiteering. These should be so stated as to enable those charged with pricing responsibility to compare performance with them. To Maximize Profits Stanton.301). It is an important decision input in a variety of marketing decisions. the price that the product would fetch relative to the cost provides an important decision base to approve or discard a product idea. McGraw-Hill. a competitive weapon. concise and understood by all involved in making pricing decisions. etc. Pricing begins with an understanding of the corporate mission. when product planning or modification programmes are undertaken. Many retailers and wholesalers use a target return on sales as a pricing objectives. “The pricing objective of making as much money as possible is probably followed more than any other goal. The pricing objectives should be clear. target markets. P. 1994. SALES-ORIENTED OBJECTIVES 1. To achieve a target return 15. first may be have to accept modest profits or even losses over the short term. Etzel and Walker have rightly observed. Repeat purchases from this large group of customers may allow the firm to maximize its profits over the long term. and monopoly. The rate of return may be a specified percentage return on its sales or on its investment. The objective of profit maximization implies in a given set of market conditions.

the other pricing objectives may be to expedite cash collection. The National small industries corporation (NSIC) assists small firms to grow by availing of its nominally priced services. In hotel industry reduction to prices in tariff for accommodation is seen during off-season to increase sales volume. Electrical appliances Dealers run end of season sales. Expediting cash collection may be resorted to as a pricing objective to accelerate cash inflow for developmental projects for debt-servicing or repayment. The object to meet competition is appropriate when a company is not a price leader and does not want to initiate price changes. Sometimes companies are prepared to incur a loss in the short run to expand sales volume. To stabilize prices 2. 129 . Cloth Merchants. In such a situation it only aims to neutralize the impact of competitive manoeuvres by appropriate pricing moves. A firm set pricing objective so as to promote developmental activity in those sectors or areas of the economy which are weaker. to promote developmental activity etc. Besides these. This objective is adopted to achieve either a rapid growth or to discourage potential competitors from entering a market. To Maintain or Increase Market Share Another important pricing objective is to maintain or enlarge market share. Garments Dealers. In such circumstances government subsidy is usually available to prevent losses. The market share as a pricing objective is especially relevant for companies in developing countries like India. To meet competition To Stabilise Prices This is a long-range objective which aims at preventing frequent and violent fluctuations in prices. In times of credit squeeze this pricing object is so special relevance. Many public sector companies aim at achieving this objective so as to impart a sort of stability to economic conditions.Marketing Management To Increase Sales Volume This is one of the sales oriented objectives. where market expansion is a phenomenon of economic development. Management may seek higher sales volume by discounting or by some other aggressive pricing strategy. The increase in sales is usually stated as a percentage increase in sales volume over a certain period say. 1 year or 3 years or 5 years. It also aims at preventing price wars amongst competitors. to mobilize resource. besides. it may expedite realization of bills receivables. The price may be so designed as may favour the weakest and be affordable by the weaker. The price structure may be so designed that it encourages cash sales and discourages credit sales. Price stabilization often is the goal in industries where the product is highly standardized such as steel or bulk chemicals. STATUS-QUO ORIENTED 1. To Meet Competition To meet or prevent competition may be another pricing objective of no less importance. A firm may aim to secure a target market share by employing price as an input.

We find transportation expenses on the distribution of goods to different regions or zones. it is likely.o. On the basis of geographical condition.b. Policies Involving Prices Variations Under these we can discuss (a) One price-policy and (b) Variable price policy. viz. destination. a seller charges all similar types of buyers exactly the same price and there shall be no discrimination or difference among the buyers of the same commodity. Geographical pricing Geographical pricing involves the company in deciding how to price its products to customers in different locations. 2. The variable price policy is relevant in small businesses and where products are not standardized. such pricing polices often produces friction and dissatisfaction among consumers who feel unfairly discriminated against when charged higher prices relative to others. However. Uniform return on each sale and a certain profit is assured. bargaining or haggling. 15. It can be adopted where the individual sale transactions involve large sums and bargaining power of individual buyers varies with the size of the transaction. It provides guidelines to the marketing manager to evolve appropriate pricing decisions. It can be used to match price with individual consumer needs and demand elasticities. the pricing policies may be any one of the following: (a) (b) Uniform delivery pricing policy. It is fair and builds goodwill among buyers owing to its non discriminatory character. factory or f. In the absence of a strong brand. However. It is easy to administer and saves the salesman’s time. Flexible character in use as a promotional weapon is its strength. In the f. The merits of one price or single-price policy may be enumerated as follows: 1. f. this pricing policy does not allow company to match price to buyer needs. Under one-price policy.3 PRICING POLICIES AND STRATEGIES A pricing policy is the standing answer for a company to recurring problem of pricing.b.b destination.Marketing Management Resource mobilization as a pricing objective may be adopted by companies through higher resale prices which have a strong demand in the market so that the adequate resources are made available either for their own expansion or for the developmental investment elsewhere in the country.o. Variable price policy may be defined as one in which a company charges different prices for sale of its similar goods at a given time to similar buyer purchasing in comparable quantities under similar conditions of sale. the transport cost from sellers dock is met by the buyers.o. that a company may lose bulk buyers. 3. There is no chance for negotiations. Hence the firms adopt two policies. Terms of sale are the same for similar quantities of the product. Zone pricing 130 . It particularly does not appeal to large buyers who want variable price on account of bulk transactions. In the former. the cost of transportation is borne by the sellers.

It is used to create an illusion of bargain. Special – Event pricing. Buyers are classified in to different and equal prices are charged for the consumers coming under the particular zone. This pricing policy is found suitable only for such firms whose fixed cost or production is high but the marginal cost is low.o. The price is known as factory price or f. Promotional pricing Under certain situations. companies price their products below the list price. factory price. But factory B agrees to pay excess freight on 100 Km. Freight absorption pricing policy is generally adopted when market for a product expands. It is the practice of setting the prices at odd points e. 190. Prices of consumer durables such a care. A basing point is a geographical location from which all sellers of a given commodity compute transportation charges to a given destination. etc. In the Basing point pricing policy. Bata Shoe company adopts psychological pricing. Psychological pricing Psychological pricing is based on customer price perceptions so has to have special appeal in certain target markets. The firms adopting the pricing policy make delivery of the goods at the gate of the factory or the warehouses. 99. Such pricing policy is known as Promotional pricing. Rs. Under Zone pricing policy different prices are charged to the different zones. Let us take an distance of say 250 Km from customer C and B at the distance say the cost of freight is likely to be low. This pricing policy is seen in industries producing the standardized industrial products. This may also be followed by firms offering the same quality product at the same price being located at differing distance. Rs. This pricing is also called postage stamp pricing policy. (d) Production point pricing policy. For example manufacturer has been 131 . In uniform delivery pricing policy the sellers charge equal prices form all consumers. the consumer belonging to the different regions or zones pay similar prices. refrigerators. It is suitable to the products covering the least transportation charges. It may also be adopted to protect the interest of the producers from the nearest rival competitors. etc. Production-point policy is adopted by majority of firms. the sellers are the producers charge prices to a given destination. the customer in question would not have any objection to make purchase.g. of course. Hence the name freight absorption policy. In this policy. In the other words. (e) Freight absorption policy. Rs. viz.b. Loss – leader pricing. Loss-leader pricing policy helps in raising the sales volume or make possible the generation of profits at an increased scale. the sellers or producers bear a portion of freight. 199. special – Event pricing Low-interest Financing. The transportation cost there from is borne by the buyer.95 etc.Marketing Management (c) Basing point pricing. are usually fixed in odd amounts. The basing point for a given transaction may be location of the mill nearest to the buyer or it may be some arbitrary location. The ultimate aim of this pricing policy is to allow all competitors to quote identical transportation charges to any one buyer. for a temporary period and sometimes even below the cost. In such pricing policy the sellers price includes cost of goods and the transportation charges. It takes various forms.

the consumers realize that the producers have been showing their good gesture by minimizing the price. penetration pricing strategy is characterised by low initial price product when product is introduced in the market. He then brings down the prices of a particular product and takes help of advertising. Penetration pricing is desirable in the following situations. he may attempt at encashing the goodwill or reputation. During its introduction stage. During exhibitions also. This is a strategy of recovering rapidly the investment made in the product.Marketing Management able to create a positive image for its product(s). e. Secondly. The principal object underlying this pricing strategy is to attain a large volume and reduce cost by stimulating rapid and widespread market acceptance. the initial high price generates more profits which can be used subsequently for further market development and expansion. Telco and Premier Automobiles. Two common price strategy options are available to a manufacturer during the introduction stage of new products.g. Bombay Dying or any other retail outlet. e. the stalls price their products at lower than the market price. Ultimately. the price can be lowered.g. Supermarkets and department stores at times drop the price on well-known brands to stimulate additional store traffic. Titan show Room. Low-Interest Financing as a form of promotional pricing is being followed by some of the automobile manufacturers. Existence of a high short-run price elasticity of demand Substantial economics of large-scale production are possible. An important advantage of keeping the price high in the initial stage is that if the market does not respond satisfactorily. the companies offer customers low-interest financing. The principal object underlying this pricing strategy is to fully exploit the product distinctiveness by offering the product to consumers in the higher income level group so as to skim the milk of the market. As opposed to skimming pricing strategy. This policy is followed where it is felt that there will be rapid competitive in roads and the company wants to take the cream before this happens. Pricing strategies for new products The introduction stage of the product life cycle (PLC) is characteristised by product distinctiveness. the product is offered to customers at a basic price which may be set on the basis of cost or demand or both. It is characterised by high initial price of the product when it is introduced in the market resulting in enormous profits in the product’s initial on the market period and then allows the price to fall as competitors enter the field. instead of lowering the price. 132 . The notable examples of Special-event pricing are pricing followed when a new show room is opened. they are: (a) (b) Skimming pricing Penetration pricing Skimming pricing is also known as skim-the-cream pricing. This distinctiveness gradually perishes during the product’s travel through the subsequent stages.

1990. storing and record keeping. or beyond a specific flow volume (incremental purchases) or absolute volume.A Managerial Introduction. such discounts are allowed by a number of companies in order to stimulate their sales (J.2000 x = 400) Rs.00 as the price of a product and offer 20 per cent and 5 per cent trade discount from the channel end to retailers and wholesalers respectively. 1. Such discount is best used when money market is tight and company needs to augement liquidity. It is possible to force full line on buyers by so structuring the discount schedule that slow moving items attract more discount Despite these. wholesalers. 1969. P. It amounts to a reduction from the invoice price. Policies involving price differentials Price differential may be defined as the difference between the quoted price and the net price charged to the buyer. It stimulates larger orders especially in case of slow moving items.Marketing Management Possibility of rapid competitive imitation Market generation pricing strategy may also be adopted to capture a share of a market form a competing product which the new product is likely to replace. 2.C. Quality discount: A quantity discount is a price reduction to buyers who buy large quantity of a product(s). Trade Discount: It is also known as functional discount and is offered by the manufacturer to channel members such as distributers. In india. encouraging early payments. According to the judgement given in the case of Carona Sahu Company Limited “the practice of 133 . 2000/. Price differentials are designed to accommodate various situations such as meeting competitive pressures. 244). a company may quote Rs. New Delhi. Some of the important differentials involving reduction in quoted price include discounts and rebates. TMH. selling. Functional discount is allowed as a certain percentage of the quoted price and its rate varies among different classes of middlemen. Thus the wholesaler is given 25 per cent keeps 5 per cent and possess 15 per cent to the retailers. Quantity discounts is being allowed because of some benefits that accrue from it. It may be allowed on the aggregate of all or specific class of product purchases measured in rupee value or physical units. retailers for performing certain functions viz. providing incentives to buy in bulk. Cash discount: A cash discount is a price reduction to buyers who promptly pay their bills. compensating buyers for the loss of some value satisfaction. It serves not only the purpose of improving the seller’s liquidity but also helps in reducing credit collection costs and bad debts.Rs. It also discourages competitors from entering the market in view of the fact that the lowprice policy allows a small margin.600/100 (Rs. For example.. 400/-). This is in addition to trade discount.000. It implies 20 retailers buying from a wholesaler would pay (Rs. one major difficulty that arises in structuring the discount shedule which is not discriminatory and anticompetitive so that it does not attract provisions of MRTP Act. Gandhi. in terms of purchases at a time or over a period of time (cumulative). Marketing. A brief mention may be made on each class of discount.

The important pricing methods falling under this broad head are: Cost-plus pricing method Marginal or Incremental cost Break-even Pricing Method Cost-plus pricing method It is simple method of price setting. Pricing methods Cost plays an important role in making the pricing decisions. 2(c) of the MRTP Act and therefore.4 PRICING METHODS A number of methods are available for setting prices. refrigerators. 15. It is for this reason that this method is also called cost-plus or Target pricing method. The rate of rebate or its quantum is seldom fixed. P. making of defective or delayed deliveries of goods and deterioration in the quality of products on shelf or in transit. Promotional allowances are payments or price reductions to reward dealers for participating in advertising and sales-support programmes. Allowances: These are also a type of reductions from the list price. It is designed to accommodate different claims of buyers arising out of loss of some value satisfiaction. The mark-up when based on cost is arrived at as follows: Mark – up % based on cost = Markup in Rs. The cost based method of price determinations is one in which the cost of manufacturing a product serves as the base for price fixation. Trade-in allowances are price reductions granted for turning in an old item when buying a new one. (Restrictive Trade Practices in India. Rebate: It is deduction from the quoted price. management usually adds to this cost some amount referred to as mark-up. The purpose of this pricing policy is to enable the manufacturer to level his production throughout the year.e. This policy is generally found in the consumer durables of seasonal uses. Vol. 1978. during the slack/off-season. restrictive trade”.g. Seasonal Discounts: A seasonal discount is a price reduction to buyers who buy merchandise or services out of season i.Marketing Management allowing discriminatory or differential incentive bonuses based on larger turnover is a trade practice within the meaning of Sec. In this method. E. It is also called flow price since it provides the flow below which any sale would loss to the company. etc. This mark-up may be a certain per cent of the cost. These are found in durable – goods markets. The price setting may be either on the basis of cost or on the basis of market conditions. 288). the cost of manufacturing a product serves as the base for price fixation. e. electric fans. coolers. However in order to cover an anticipated profit on the product being sold. I.g. x 100 Cost price When the mark-up is based on selling price the formula adopted is : 134 . etc. It varies from situation to situtation depending on the loss of value satisfaction.

the interest. Any marketing plan is based on the sales budget and the sales budget is itself based on the sales forecasts. expected profit margin mark-up. When the sales revenue exceeds total costs. Cost-plus pricing is generally preffered by the middlemen. the result or difference is profit and when sales revenue is less than total costs. A middleman includes in it acquistion cost. the result or difference is loss. The concept of contribution is important in breakeven analysis. the method cannot be followed for long. Break –even pricing method This is the most sophisticated pricing method which takes into account both fixed costs and variable costs.e. the selling expenses. Unit contribution to fixed costs is foundout by subtracting variable costs per unit from the selling price per unit. we know that there are broadly two categories of cost viz. Mathematically: Unit Contribution to Fixed Costs = [Selling price per unit] – [Variable Costs per unit] Break-even points is the point at which the firm has neither gains nor losses. Thus. Fixed costs and variable costs. (Price per unit multiplied by quantity sold). As regards costs. the price is fixed on the basis of the additional variable cost associated with an additional unit of output. the cost of the last unit. i. It is also useful for keeping labour employed during slack seasons and to prevent a shut-down. break even point is that point at which sales revenue is just equal to total costs. is taken as the price of the final article. Despite all. Breakeven analysis is a managerial tool that emphasizes the relationship among decision variables such as price. estimated sales volume. particularly while introducing a new product.Marketing Management Markup in Rs. The cost of producing and selling one more unit. x 100 Selling price Markup % based on sale price = It is a simple method of price selling since the calculation stands like: Selling Price = Unit Total cost+Derived Unit Profit This method is a weak and unrealistic one since it completely ignores the influences of competition and market demand. we do not find the relevance of fixed cost in this method. i. It is suitable only to such producers who maintain the minimum possible cost of production. costs and volume of sales.e. Variable costs vary with the output or number of units produced. The firm just manages to cover its total costs. This method of setting prices is found useful. Sales volume is a function of prices charged and the amount of products sold. Fixed costs remain constant for a given range of operations. The equation for arriving at BEP is: BEP = Where FC SP − VC or FC C FC = Fixed Cost 135 . Because. Marginal or incremental cost pricing method In this method. deprecation.

The stage of competition determines the market condition. Usually three method exist which are based on market condition or demand viz. Pricing above competition In this method of price setting. In Fig. But the fixed cost remains static. Here.Marketing Management SP = Selling Price VC = Variable Cost C = Contribution A diagrammatic representation of the breakeven point has been depicted in Fig. this method would not be suitable. particularly to give some share to the middlemen. Pricing to meet competition Pricing above competition Pricing below competition Pricing to meet the competition This is the simplest method of price setting. Competitive price is the basis of this method of price setting. Again. the buyers have details of the prices adopted by the competitors. this point is B. The main object is to give an impression that his product(s) is superior to that of the competitors. The standardized products prefer to adopt this pricing method. At times. that producers set more than average prices.1. 1. In such a market. Especially in a firm where we find fluctuation in costs. it is doubted whether this method of pricing is perfect. the seller may set higher than average prices for the product. This pricing method is also found suitable for products having inelastic demand. It is found applicable in the perfect market situation. The assumption that fixed costs remain static is not true in the long run. the market condition is also a reliable basis of the setting of pricing. The point where the total cost is equal to the revenue is the break-even point. Pricing method based on market conditions Besides costs. OX axis indicates the quality of production and OY the cost revenue in rupees. Above competition pricing 136 . each company or firm prices its products the same as rival competitors. With a rise in production. Y 800 TOTAL COST & REVENUE (Rs. Hence. we find a rise in the variable cost.) 700 600 BREAK-EVEN POINT TOTAL REVENUE IT OF PR 500 400 300 200 100 0 SS LO B TOTAL VARIABLE COST TOTAL FIXED COST X 0 1 2 3 4 5 6 7 8 9 10 11 12 QUANTITY Figure 1 Break even Analysis In Figure –1. the demand estimate would also vary.

Breakeven pricing is said to be the most sophisticated pricing method which takes into account both fixed costs and variable costs. For new products two products two principal pricing strategies are (a) skimming pricing and (b) penetration pricing. and meeting competition are the principal ones.Marketing Management is suitable to the producers who have established fair image among the consumers at large. etc. Despite the above. Pricing policy may either be one-price policy or variable price policy. Cash discount. basing point pricing. Quantity discount. Seasonal discounts are the most popular forms of discounts allowed by the marketers. profit – oriented objectives. It is a like that binds consumers and the company. Cost-plus pricing is generally preferred by the middlemen. Pricing below competition In this method the firms price their product(s) below the prevailing competitive price it is observed. particularly new and interested in penetrating the new market. In the process it is alleged that the ultimate consumers suffer. viz. 15. Geographical pricing policy may be one of uniform delivery pricing policy. Of the objectives. easy to administer etc. zone pricing. One –price policy is fair and builds goodwill. Discount is an element in the price-mix. Some firms also follow psychological pricing or odd pricing policy. 137 . Pricing management begins which an understanding of the corporate mission. Price exists all around us. the price of a product is usually low when the quality of product is low. Pricing objectives can be grouped under three broad categories. The products having elastic demand may go through this method of pricing. The pricing methods inter alia include Cost-plus pricing method. the method is criticized on the ground that the producer charge high prices not only to make high profits but also to give a chance to middlemen to get handsome pay offs. production point pricing and freight absorption pricing policy. Hindustan Lever Ltd (HLL) follows this method of pricing. Trade discount. rebate and allowances are also given. target markets and marketing objectives. Marginal or Incremental cost pricing method and Breakeven Pricing method. sales –oriented objectives and status –quo oriented objectives. Besides. increasing market share. Low-Interest Financing. This method of pricing is found suitable to the firms. Special –Event Pricing. The former is characterized by high initial price of the product and the later is characterized by low initial price. achieving a target return. The firms following this method of price setting must either have very low costs or be willing to accept a very low profit pen unity in the hope of radically increasing sales volume.5 SUMMARY Price is an important element in the marketing-mix. Promotional pricing takes that form of Loss-Leader Pricing. Break-even analysis is a managerial tool. Every company follows a particular pricing policy or a combination of two. In case of marginal cost pricing the cost of the last unit is taken as the price of the final article.

Irwin. David et al. Richard D.A.6 KEY WORDS Mark-up. PHI. 3. Inc. Describe the major pricing objectives which a company may set out to achieve. Irwin. Illionis. Kotler.10 REFERENCES 1. 4. Distinguish between (a) Skimming Pricing and Penetration Pricing (b) (c) Trade Discount and Quantity Discount Break-even Pricing and Incremental Cost Pricing. New Delhi. Marketing Management. 4. Pricing methods 15. b) Zone Pricing. New Delhi. J. Promotional Pricing. Illinois. 1992. What is the rationale of following policies involving price-differentials? Describe the kinds of differentials usually allowed by the marketers. 2. c) Loss-Leader Pricing d) Promotional e) Pricing 5. Describe the cost-based methods of pricing and outline its strengths the limitations. Planning Implementation and Control). 1998. Gandhi. P. Lynn.C. price policies and strategies are guidelines and frameworks within which management of a company administers prices so as to match them with the market needs. 15. 1977. 138 . 5. Contribution 15. Richard D. “The break-even pricing method overcomes the weaknesses of both the costbased and demand-based pricing methods”. 3.8 MODEL QUESTIONS 1. 15. Trade – in Allowances.7 REVISION POINT Pricing policies & strategies. Rebate. R. Marketing – A Managerial Introduction. W. 2. 1967. Dean Joel. 15. managerial Economics. 1990.Discuss.Marketing Management Thus. Crevans. Price Policies and Marketing Management. TMH.9 ASSIGNMENT QUESTIONS 1. New Delhi. Write short notes on: a) Variable Pricing. Inc. PHI. Marketing Management (Analysis.

10 Review questions 16.9 Revision points 16. or the acceptance of ideas or points of view”. New York.2 PROMOTION – MEANING AND SCOPE Meaning Basically.6 Marketing communication process 16. They must know that the right product is available at the right place and at the right price. Marketing Management. 16. More specifically.A. and remind the market of a product and/or the organisation selling it.1 INTRODUCTION In an exchange activity such as marketing. It is an important element in the marketing-mix. Himalaya.Marketing Management LESSON – 16 PROMOTION OBJECTIVES After reading this lesson. But it is a fact that people will never buy the product unless they have heard of it.12 Assignment Questions 16. A manufacturer may have the best product.13 Terminal exercise 16. P. 1) involved in it. New Delhi.4 Sales promotion 16. the concept of promotion-mix the aims/purposes of promotion the scope of sales promotion the promotion strategy STRUCTURE 16. et al. promotion is the element in organisation’s marketing –mix that serves to inform. p.11 References 16. communication is vital. Mc Graw Hill. reasonable price. [Quoted in S. It has also been defined as ”the coordinated self-initiated efforts to establish channels of information and persuasion to facilitate or foster the sale of goods or services. Since the promotion-mix is also known as the marketing communication-mix.2 Promotion-Meaning. 456]. 1993. 139 . you will understand.5 Promotion Strategy 16. Fundamentals of marketing.3 Need for Purpose of promotion 16.8 Key words 16. This is the job of promotion. let us at this stage have an idea about the communication process and the various elements (Fig. [Stanton.1 Introduction 16. Persuade. 264]. an efficient distribution system. Sherlekar. promotion is an attempt to influence. Nature and Scope 16.7 Summary 16. 1994.

PHI. Marketing Management. a marketing company. public Relations. viz.Marketing Management Sender Encoding Message Media Decoding Receiver Noise Feedback Response Fig. Media: The communication channels through which the message moves from sender to receiver. telephone. These can be the elements of the promotion-mix. newspaper. (may be a salesman. Personal Selling: It is the direct presentation of a product to a prospective customer by a representative of the selling organisation. postcard..) Decoding: The process by which the receiver assigns meaning to the symbols transmitted by the sender. 1: Elements in the Communication Process Source: Philip Kotler. Personal selling takes 140 . Sales Promotion. (the target customers. and Publicity. 568. purchase influencer. Receiver: The party receiving the message sent by another party. Encoding: The process of putting through into symbolic form Message: The set of symbols that the sender transmits. Feedback: That part of the receiver’s response that the receiver communicates back to the sender. 1992. Packaging. Personal Selling. Noise: Unplanned static or distortion during the communication process. etc) Response: The set of reactions that the receiver has after being exposed to the message. In other words. Advertising. A glance at the figure indicates nine elements which may be explained as follows: Sender: It is the source or communicator. an ad. (may be sales the copy theme) story. etc. Nature and Scope The nature and scope of promotion-mix can be studied under five heads. he is the party sending the message to another party. New Delhi P.

Some Common Promotional Tools A mention made this at this stage about the suitability of promotion elements. Advertising: Any paid form of non-personal personal presentation and promotion of ideas. The polypacking is an example. or services by an identified sponsor.g. Some common promotional tools have been presented in figure-2. courier too have begun to use packaging as a promotion. Display signs 2.) service industry e. maintain or product a company or product image. Free samples 2. or stage that is not paid for by the sponsor. television. Sales promotion: It embraces those marketing activities other than advertising. But advertising is most important in the marketing of consumer goods. Marketers have designed their communication message around new and innovative packaging (Dalda Refined Oil. catering. and it may be directed to an intermediary in the distribution channel or a final consumer. Premium and gifts Fig. With the introduction of new packaging technology. POP display 3. service or a business unit by place commercially significant news about it in a publication or obtaining favourable presentation of it upon radio. etc. the value of packaging especially in consumer products has assumed a fascinating communication channel.fig. (The American Marketing Association) The key words are “non-personal” and “paid by an identified sponsor”. Pan Masala. Rebates 3. goods. Sales promotion aims at complementing other means of publication. Advertising Personal selling In person sales Presentation Sales Meeting Tele Marketing Print and Broadcast ads Bill Boards 1. Public Relations: A variety of programmer designed to improve. Direct Mails Print. Motion Pictures 5. New Stories Broadcast media New Stories 1. Advertising is the efficient tool in obtaining customer awareness of new products and services whereas customer comprehension is influenced about equally by advertising and personal selling. 141 . Media. Cosmetic.2. Speeches Contents Publicity Sales Promotion Couponing 1. publicity and person selling that induce consumer purchasing and dealer effectiveness. Annual Reports 2. Packaging: Packaging has become increasingly important as a promotional tool.Marketing Management place face to face or over the phone. Catalogues 4.3 shows personal selling is considered the most important of the promotion tools in the marketing of industrial goods. Publicity: It is non-personal stimulation of demand for a product.

persuasive communication. “Nothing happens until somebody promotes something”. Sales do not take place automatically without promotion. even though the product is superb. The main purpose of promotion is to influence buyer behaviour and alter the location and shape of the consumer demand curve in favour of the products. to persuade and convince them that those products have want satisfying capabilities. It can create and stimulating demand. Characteristic and Relative Importance of Four Elements of Promotion 16. capture demand from rivals and maintain demand for one’s products even against keen competition.3. Promotion is persuasive communication to inform potential customer of the existence of products. Promotion is responsible for awakening and stimulating consumer demand for a product.3 NEED FOR/PURPOSES OF PROMOTION Someone has rightly said. The promotion message has two basic purposes viz. Promotion is said to be the spark plug in the marketing-mix. 142 . Figure-4 demonstrates the effect of promotion on the demand curve. and tool of competition.Marketing Management Personal Advertising Sales Promotion selling Form of communication Contact with prospect Message flexibility Prospect feedback Cost per contact Relative importance for consumer marketing Relative importance for industrial marketing Personal Non-personal Non-personal Direct Flexible Direct High 3 1 Indirect Inflexible Indirect Low 1 3 Indirect Inflexible Indirect Publicity Nonpersonal Indirect Inflexible Indirect Moderate to high None 2 2 4 4 Fig.

through creating brand loyalty and patronage by intensive advertising and sales promotion. 2. Either through shifting the demand to the right or marketing the demand more inelastic. advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display. Same quantity OQ1 sold a the higher price OP2 X SALES VOLUME Fig. In brief. Large quantity OQ2 sold at the same price OP1 2. Thus promotion tries to alter demand curve to the right (from D1 to D2). New Delhi.4 SALES PROMOTION Sales promotion is an integral part or promotion-mix. Himalaya. actual users. the object of higher sales revenue can be accomplished with the help of persuasive marketing communication. Promotion can also raise the price but retain the sales level by marketing the demand relatively inelastic e. 1993. shows and exhibitions. P. Sherlekar. 4: Influence of Promotion on Demand Source: S.g. demonstrations and various non-recurrent selling effort not in the ordinary routine. The potential buyers or the actual users are motivated by paying 143 . 16. Sales promotion activities are also undertaken with a view to attract new customers. The primary objective of sales promotion is to introduce new product. Sale promotion also means “any steps that are taken or the purpose of obtaining or increasing sales”. A. re-sellers or middlemen.Marketing Management PRICE Y HIGHER PRICE FOR SAME SALES D2 P2 D1 P1 DE MA N PR D G OM OA OT L W IO N IT H PR PA ESE T T NT ER N RESULT OF PROMOTION D2 D1 Y Q1 Q2 MORE SALES AT SAME PRICE 1. all forms of promotion can act as the best means of non-price competition. Marketing Management. It is employed to retain the price and secure increasing sales at the price.270. It is referred to those marketing activities other than personal selling. The basic purpose is to expand market for the new product by influencing or motivating the potential buyers. Objectives of Sales Promotion 1.

Sales Promotion vs. This is common. To maintain their normal demand. particularly in the winter season. 3. The chief objective of price-off or money-off is to boost sales. Advertising Sales promotion is the temporary offer of a material reward to the customer. Free samples are prevalent in consumer non-durables market. Consumer Promotion. Advertising is impersonal communication or we can say it is a media of information transmission. The sales promotion activities also aim at influencing or inducing the middlemen. Hence dealers’ promotion is as important as consumer promotion. but the sales promotion can be dispensed with. the reduction in price and the second.Marketing Management to them different incentives. Consumer Promotion Consumer Promotion activities are those incentives which are intended to educate or inform the consumers and at the same time stimulate the product/service usage at the consumer level. premium. A few consumer promotional tools may be mentioned here. air cooler. the rival competitors are forced to adopt the same. 5. we find the provision of off-season discount/concession/gifts. more than one item is packed and made available at a reduced price. refrigerator or so is reduced. More specifically the points of distinction between the two are as follows: (a) (b) (c) Advertising is a day-to-day matter of the business. To counter-attack the competitors in some cases is also the objective of sales promotion actives. Classification of Sales Promotion Activities Sales promotions are targeted at consumers. They are induced by free samples. 4. Hence we can classify the sales promotion activities into three broad groups viz. Free samples are given to consumers with the object of introducing a new product in the market as well as to enlarge the market for the product. Dealer promotion and Sales-force Promotion. dealers and sales force of the organisation. The demand for electric fan. 144 . Price-off label is printed on the package. But sales promotion is an occasional tool. It is available in two forms. As and when a competing firm provides promotional benefits. The sales promotion is a persuasive communication. gifts. first. Price-off is a consumer-oriented sales promotion device which provides an opportunity to the buyers to get the product at a reduced price. etc. To reduce seasonal fluctuations in sales is another important objective of sales promotion. Advertising is a necessity for any marketer/manufacturer. Where as advertising is the communication of information. The free samples accelerate sale by motivating the consumers as they get an opportunity of using the product before making the buyer decisions.

In the selfliquidating premium. All the coupons received from the consumers are kept in a place. brand name/slogan/essay writing contest. The dealer promotions thus are introduced to induce the dealer to keep a larger stock of the manufacturer’s product. reason why. etc. the purchasers get the premiums after a certificate producing a certificate regarding the purchase of goods. Key chains. In the container premium. cookery contest. the forms of promotion which attract them may include (1) offered of cash discount on various bases i. In this device. distributors. quantity bought / ordered. Consumer contests are competitions where in individuals are invited to compete on the basis of create skills. But the manufacturers can also use it for the existing goods. Consumer contests are indirect manner of introducing a new product or attracting new users. toilet soaps. The premium is of four types. Attractive jars costing separately Rs. The premiums are sent to the concerned purchasers free of cost by mail. Retail demonstrators are supplied by manufacturers for preparing and distributing the product as a retail sample. the purchasers get the goods at the reduced prices. Quantity discounts and higher rate cash discount/trade discount induce the dealers to stock larger quantities.5. etc.Marketing Management Premium is the product which is given free of cost to the purchaser. Recently Brooke Bond Tea gave sugar in a separate pack weighting 50grams for each pack of 250grams of tea. This device is used for the new products intended to be penetrated in the market. artificial flowers. sentence completion. viz. One finds its descriptions on the package of goods. special skills..4. retailers. Nescafe Instant Coffee and 145 . knitting. etc.00 only. (3) prizes and gift. Being capable of meeting diverse objectives the popular types of contest include. The contest should be easy and fun in order to attract greater participation. each capable of delivering the purpose with which a contest is organized. In the mail premium. Sweepstakes are some sort of lottery. The middlemen are interested in profits. For example. selfliquidating premium and re-usable container premium.00 or Rs. These are also known as buyer allowance.00 or so may be given at an extra change of Rs. (2) advertising or display allowances. ball pens. sewing. percentage. In the in-pack premium. lots are drawn and names of winners are declared. Hence. were given as in pack premiums. blades. combs. etc. This is introduced to attract new customers or actual users or to improve off-season sales or to introduce a new product or to discourage price competition. free in the mail premium. and aim at motivating them to back up the sponsored brand by giving more than their usual push. The contests remain open for a period of five weeks of more and among others aim at generating greater degree of awareness and enthusiasm in the sponsor and/or his brand. the purchasers get a container of domestic use.8.e. a consumer who buys the product is given a coupon containing a serial number. Trades or Dealer Promotion Trade promotions are incentives which are offered to wholesalers. in-pack or non-pack premium. the goods are packed with premium.

Hence the sponsors of trade/dealer promotion schemes should perform these tasks for them instead of expecting them to carry them out. In case of gifts are offered as incentives to trade members. While organizing trade/dealer promotional activities some of the following points should be borne in mind. to revive old product. Free goods are an important sales promotion device meant for the middlemen.Marketing Management Rasna use this device by trying the sample with visitors to the retail outlets on the spot. A sales contest is a competition among members of the sales force of a firm. sales aids. In this method. The payment of display allowance is for displaying the goods and the merchandise allowance combines both. to promote dealer activity. Trade promotion schemes should match with the capability of the different members of the trade. The wholesalers might be put at primary demand creation of the product and the retailers in administration of complete schemes.these include broadly incentive programmes and sales contest. the middle men get few goods free of cost. Awards are tied to unit sales on the annual basis. especially after crossing the minimum limit. meetings. viz. Awards are given to those who perform best in relation to their Individual quota. Even Surf at times shows on the spot demonstration regarding the method of using the product. A merchandise allowance may be defined as a short-term contractual agreement through advertising or in store display of his product. esteem and selfactualization. The advertising allowance is paid to them for making advertisements. and to evaluate the 146 . etc. The sales incentive awards may be for the sales-force by following any one of the four methods. to obtain new customers. all these lead to increase sales productivity. these article should be reputed brand and of household or personal use. Awards are given to those who achieve more than a specific percentage of their sales quota performance. trainings materials. Displays and advertising allowances otherwise known as merchandising allowances are also offered to the dealers. to launch and introduce new products. Sales force promotions Sales promotion schemes can be aimed at a company’s own sales force . To boost recession period sales. Contests are employed to increase sales on an entire product line. It aims at fulfilling the needs of the sales person for achievement. Dealer and distributor training for salesmen which may be provided to give them a better knowledge of a product and how to use it. etc. to increase average sales per account. Regular availability of product supplies and gifts must be ensured during the period of the promotion schemes. Besides sales contest the other promotional tools used for motivating sales force are bonus. Awards are given on account of specials achievements as notified by the organisation from time to time.

(b) pull strategy. dissolve social barriers. During the introduction stage. Promotions strategies may also be studied under (a) push strategy. Sales meeting/convention/conferences are the devices of group motivation. the middlemen must be convinced to carry it. and (c) push and pull strategy. In such a situation both advertising (to consumers) and personal selling (to middlemen) are critical in a product’s introductory stage. Figure-6 gives an idea about both the promotion. They may also lead to overstocking or under servicing of customers. Later. A promotion programme aimed primarily at middlemen is called a push strategy and promotion programme directed primarily at end users is called a pull strategy. more emphasis is placed on persuasive advertising. the prospective buyers must be informed about the product’s existence and its benefits. However. inspire and raise salesmen’s morale. The sales promotion activities now can be summarized and put in Figure 5. if a product succeeds in the markets competition is seen which gradually intensifies. Hence. They may lead to jealousy among salesmen. If contests are wisely used.5 : Sales Promotion Activities 16. Tools of Consumers Promotion Banners Samples Calendars Point-of-purchase materials Contests Coupons Trade Fairs Tools of Dealer Promotion • • • • • • Price deals Sales contests Gifts Trade shows Meetings Merchandising • • • • • Tools of Sales Force Promotion Contests Bonuses Meetings Sales aids Training Materials • • • • • • • Fig.5 PROMOTION STRATEGY Promotion strategies are influenced by the life cycle stages of a product. they can remove many disadvantages. They promote team work. 147 . Contest awards must be cash prizes or merchandise prizes or a combination of both.Marketing Management real capacity of salesmen. sales contests suffer from limitations.

PHI. Advertising plays a minor role.6 : Push Versus Pull Strategy Source: Philip Kotler. A push strategy usually involves a lot of personal selling and sales promotion. It presents a set of messages to a target market through numerous media or cues.Marketing Management Manufactuer Demand Intermediaries Demand End User Push Strategy Marketig activities Demand Demand Manufactuer Intermediaries End User Pull Strategy Marketing activities Fig. 16. including contests for sales people and displays at trade shows. the retailers promotes to consumer. The producer promotes heavily to wholesales. The product is pushed through the channel. 148 . P. The product is literally pulled through the marketing channel by consumer.6 MARKETING COMMUNICATION PROCESS 1. 588 Push strategy It is also called a pressure strategy. Pull strategy A pull strategy involves marketing activities primarily advertising and consumer promotion directed at end user to them to ask intermediaries for the product and thus induce the intermediaries to order the product from the manufacturer. New Delhi. This promotion strategy is appropriate for many manufactures of business products and for various consumer goods. High priced product. A channel member directs its promotion primarily at the middlemen that are the next link forward in the distribution channel. The conditions favouring push strategy are: Quality product with unique product features and talking points of salesmen. 1992. This strategy is also known as suction strategy. Marketing Management. In turn. Higher profit margins to resellers. which then also use a push strategy to retailers.

In the present day competitive business world promotion in general and sales promotion in particular plays a key role. an advertisement. The messages try to create a favourable response from the market (with the help of unique sales propositions) towards the company's total product offering.7 SUMMARY Promotion is one of the important elements in the marketing-mix. print and label etc. purchase influencer. advertising copy. to attract new customer. 16. (6) noise or obstacles reducing the effectiveness of communication process. It is a persuasive communication. radio. advertising. The feedback is essential to modify. (3) channel or media. public relations and sales promotion constitute the promotion-mix. Sales promotion activities are necessary while introducing a new product. Push Strategy and Pull Strategy. and improve the plan.. sales literature. publicity.8 KEY WORDS Encoding Decoding Identified Contests Buyer allowance Push strategy 149 . to counter-attack the competitors. customer. a sales person. (5) feedback in the form of a response. sales story. The principal objective of promotion is to influence the behaviour of the buyer and increase demand. 6. counter-proposal. package. These elements vary in their relative importance depending on whether the product is a consumer one or industrial one. (4) receiver a prospect. press etc. As a sender of messages. The company tries to get back adequate feedback from the consumers which points out their response. 5. reaction. reaction and their reinterpretation of the message 4. Personal selling. Broadly two promotional strategies exists viz. phone television. The communicator must be a good listener. 7. the vehicle carrying the message. the company communicates with the market not only through promotional tools but also through product. Elements of Marketing communication: (1) Sender of the message also called the communicator. programme or message.. Sales promotional activities can be broadly divided into (a) consumer promotion (b) dealer promotion (c) sales force promotion. 16. reseller. promotion strategy. (2) message in the form of commercial ides. or the returned communication called feedback from the receiver to the sender. alter. The company is not only the source or sender of market messages but also a receiver of market responses. the audience 0r destination. 3. to reduce seasonal fluctuation. price and place or point of sale (the retail store) as well. The feedback enables the company to improve and modify its total pruduct offering. Feedback improves the effectiveness of communication.Marketing Management 2.

Anderson. 16. (b) Premium. How does sales promotion differ from advertising? State the importance of sales promotional activities 4. Advertising and sales promotion. 2. Push strategy. Water purifier 4.13 TERMINAL EXERCISE 1. (d) Pop materials 5. Kotler Philip. Rolph E. 3. Distinguish between: i. Buyer allowance. Cellular phones 150 . New York. Pull strategy 16. 1992. iii. New Delhi. Premium and sweepstakes.11 REFRENCES 1. Apply the 4 major elements of promotion mix to market CRY-child relief and you or family planning programme in the country. New York. al. et.9 REVISION POINTS Contests. Give illustration. International edition. al. et al. 6. Professional sales management. McGraw Hill. Four wheeler 3. 16. Push strategy and pull strategy ii.10 REVIEW QUESTIONS 1.12 ASSIGNMENT QUESTIONS 1. 2. 3. Marketing Management. J. New Delhi. Explain in brief the process of communication in marketing. Aaker. Advertising Management PHI. Define promotion and give its classification. Mutual funds 2. Mc Graw Hill. What is the need for motivating the sales force? Explain the various tools that are used for sales force promotion. 1994. What types of consumer response should the markets aim at in the communication strategies for the following: 1. William.Marketing Management Premium Sweepstakes Pull strategy 16. International. 1988. 16. Write notes on: (a) Sales contests. et. 1992. 4. Stanton. Prentice Hall of India. (c) Push strategy. Fundamentals of marketing. Also describe the purposes of promotion.

identifiable information and persuasion by means of mass communication media”. According to W. STRUCTURE 17. sponsor-identified. Ad.3 Role/Functions of Advertising 17. Stanton and others advertising consists of all activities involved in presenting to an audience a nonpersonal. 502) One of the most representative and widely accepted definitions is that of the American Marketing Association. According to it. goods. This definition indicates that advertising is a paid.2 ADVERTISING-MEANING & NATURE Several authors have defined advertising in various ways. winter and Zeigler say “advertising is controlled. Evaluation of advertising effectiveness.13 Terminal Exercise 17.2 Advertising-Meaning and Nature 17. (Fundamentals of Marketing.4 Classification of Advertising 17. 17. 10) It is considered controlled information because it has to use the 151 . Budgeting/appropriation for advertising.7 Public relation advertising 17.Marketing Management LESSON – 17 ADVERTISING OBJECTIVES After studying this lesson you will be in a position to learn the following: The meaning and nature of advertising – an important element.11 Assignment Questions 17.10 Model Question 17. in the promotion. New York.8 Summary 17. P. New Delhi.9 Key Words 17.6 Evaluation of Ad. advertising is. non-personal communication. Effectiveness 17. TMH.J. 1982. the theme has more or less remained the same.5 Advertising Budget 17. Importance is also attached to the sponsor.1 Introduction 17. It lays emphasis on presentation and promotion. “any paid of non-personal presentation and promotion of ideas. Mc Graw Hill. In this lesson an attempt is made to explain advertising and its various important aspects as another important element in the promotion-mix. or services by an identified sponsor”.12 Reference 17. The presentation of the sales message may be visual as well as oral. 1994. Wright. However. (Advertising.1 INTRODUCTION In the preceding lesson promotion in general and sales promotion in particular were discussed. paid-for message about a product or organisation. Kinds of advertising. P.

messages and information. The distinction made between advertising and sales promotion in the preceding chapter helps us in further understanding the nature of advertising.. Personal selling.. Mass communication is the basic purpose of advertising.Marketing Management time. television. planning. qualities and prices of the product.3 ROLE/FUNCTIONS OF ADVERTISING Advertising is a communication which informs. Advertising activity is undertaken by some advertising agencies which charge the price of advertising. Publicity may or may not be openly sponsored or initiated by any party 17. newspaper. It is controlled again because. 3. Introduces New Product Advertising introduces a new product to potential customers. It performs a number of functions. sales promotion and publicity are the other elements.1). The field of advertising management is made up of a system of interacting organisations and institutions. the advertiser (David A. entertains and ultimately persuades a group or society to purchase the advertised products. Advertising may here be differentiated from publicity. Advertising informs. Advertising management is heavily focused on the analysis. 2. The knowledge so gained about the advertised product in two ways. The prospective buyers are given information on the attributes. it reinforces and 152 . control. Aaker et. are sold by advertising agencies 4.e. First. etc. Advertising Management. Publicity may or may not be for. persuades and reminds. disclosing ideas. bill boards and magazines. time. language. P. al. Stimulates Demand Advertising as a communication medium informs consumers about the presence of a product in the market. Space. The role of advertising can be traced from the functions it performs. whereas advertising is always paid for. etc. The mass communication media such as radio. At the core of this system are advertisers. and decision-making activities of this core institution i. 2. An advertisement is sponsored by some identified advertiser. the organisations that provide the financial that support advertising. 1992. all of which play a role in the advertising process. 1. The nature or characteristics of advertising may be enumerated as follows: 1. Such advertising gives an edge to the new product over the existing products. it aroused latent needs and secondly. 5. It informs not one person but a group of persons who are the prospective buyers of the product. it is directed at a particular group. space and content of the message effectively and economically. PHI. It has been said that success in business depends on persuasion. are used for advertising purpose. It is an essential element in the promotion-mix. The advertising message is persuasive & informative enough to motivate potential customers.. New products are advertised first before production commences. New Delhi.

When sales go up on account of advertising. Once a brand preference is developed. Develops Brand Preference Consistent advertising.4 CLASSIFICATION OF ADVERTISING MEDIA In advertising. magazines or calender. Distribution is accelerated by extensive advertising by the manufactures which acts as the dealer support. brand preference and cost reduction is better price realisation on the product sold. The major contribution of advertising is in maximizing profits under a given set of constraints. Marketing – A Managerial Introduction. qualities. 17. Besides. and creating a brand preference.. It also tries to create and retain brand preference and brand loyalty. supplementing other selling efforts. A classification of advertising media is presented below: 153 . may give information on the names of shops and retailers where the advertised products would be available at a lower cost. P. Increases Sales Volume By stimulating demand. coupled with newspaper advertisement. They are informed about the prices. or may be heard in a ratio or shown on a screen in a cinema hall or displayed on posters or in neonsign. advertising goes on to reduce the post-purchase consumer dissonance and the influence of competitive advertising so as to sustain consumer’s brand preference. 1985. Delhi. Miscellaneous Role Advertising helps in cutting costs both production and selling. advertising influences in a positive way a company’s sales volume. The message may appear in newspapers. Its contribution is particularly relevant in a country like India where demand for goods has to be regulated so as to check the adverse effects of the demand –supply disequilibrium (J. Promotional activity had definite impact on aggregate consumption.C. Reinforces Middlemen’s Promotional Efforts Advertising helps middlemen to achieve better performance. The collective and cumulative effect of demand stimulation. media refer to those through which the message of an advertisement is presented. 298). so that they may pass on the information to customers. there is a greater spread of over head production cost as a result of which unit cost also goes down (when variable cost remains constant). News letters. Makes De-marketing Possible Advertising is the prime instrument of a company’s demarketing strategy. When unit cost of a product goes down there are both internal and external environmental pressures which compel companies to lower their prices to the advantage of consumers. coupled with other selling efforts. TMH.Marketing Management strengthens the aroused needs. the product differentiation created by advertising enables a company to maximize its profits on sales of those who value product distinctiveness. It ultimately increases the share of market. Gandhi. etc. makes consumers to buy company’s product.

Different magazines have different classes of readers. Magazines / periodicals are published monthly. Magazines enjoy longer life than newspapers. Evening Newspapers. Trade journals or industrial magazines are also published. trade and commerce. even fortnightly / and weekly. Now – a – days magazines are published practically on every discipline viz. There are magazines for men and women. A Newspaper is suitable for any type of advertisement. Morning Newspapers. quarterly. 154 . 1. children and so on. Sunday Newspapers. Agriculture. banking. Effectiveness of the advertisement has a very extensive coverage. the appeal in such advertisement has a very extensive coverage. the cost of newspaper advertising is cheaper. There are mainly three types of news papers viz.Indoor Advertising Press Media: Press Media are broadly divided into News paper and Magazines. Production can be illustrated through advertisements in magazines. Circulation: News papers and magazines having more circulation in a particular area or all over the country is a major consideration. A suitable magazine may be selected to make an appeal to a particular class or section of the society. Newspapers have wide circulation. Outdoor advertising * Mural (Posters * Advertising Board * Vehicular * Sky advertising III. Direct Advertising * Sales Letters * Circular Letters * Folders IV. Indoor Advertising * Press media *News Papers *Magazines * Radio * TV * Film II. astrology. Advertisements in magazines look more attractive compared to newspapers because of the quality of paper. Compared to the cost in other media like radio or film. Promotional Advertising * Window Display * Showrooms * Interior Display * Exhibitions * Booklets & Catalogues * Package Inserts * Stores Publications * Hand Bills * Painted Displays * Electric Displays * Sandwichman 4. Selecting Press Media: The following are the important considerations which must be taken into account while selecting the press media.Marketing Management I.

Marketing Management
2. Frequency: If the demand for the product to be advertised is seasonal, advertisement must appear in a number of newspapers, magazines during and before that season. 3. Appeal: If appeal is to be made through illustrations, magazines are to be selected in preference to newspapers. But if only general appeal is to be made over a wide area, newspapers shall be better than those of magazines. If appeal is to be made to a specific group of persons specific magazines are to be selected. 4. Cost: The amount which can be spent towards advertisement is another consideration. The higher the circulation of newspaper or magazine, the higher while be the cost of advertisement. The space and position of advertisement also decide its cost. Radio Advertising: Radio advertising is advertising by sound and voice and not by illustration. Broadcasting stations in several parts of the country are selling time for the purposes of commercial advertisements. Commercial broadcasting is a good source of income to broadcasting stations. Radio advertising comprises to methods, viz; Spot Announcements and Sponsored Programmes. The former are made by the broadcasting stations where they charge on the basis of words contained in the announcement. On the other hand, sponsored programmes are relayed by purchasing the time. Usually longer time is purchased for making the programmes interesting.
Film advertising: Cinema or film advertising is an indoor medium of advertising where customers are approached indirectly. Cinema advertising is of two types viz; feature films for products and slides for products. Feature films contain advertisement of products. Many advertisers take the help of advertising agency for the purpose on payment. These films are exhibited in cinema halls or outside. Sildes are the simplest form of cinema advertising. Here, a slide is made for the product to be advertised. The final design is handled over to a photo-engraver who transfers the design to a small squares glass plates. These slides are shown in the cinema usually before the commencement of the main film or during the interval.

Film advertising has goods demonstrative value. People can see as well as hear the salient features of products. Hence, the attention of audiences is not diverted, Both educated and uneducated sections of people can understand the message of advertisement through films. The films or slides can be prepared in the regional language of the area where they are to be exhibited. This ensures easy understanding of products by people.
Television: Television uses both video (vision) and audio (sound) signals. Television has all the advantages or radio, namely, sound and explanation, plus the additional advantage of sight. Advertising though television is a powerful medium. Television reaches the audience almost like personal face-to-face contact. T.V. combines all of the elements of communication viz. Illustration, music, spoken word, written words. We can have short commercials as well as sponsored programmes confining entertainment with advertisement. In fact, it represents typical combination of salesmanship and advertising.


Marketing Management
Outdoor or Rural Advertising The outdoor or mural advertising is suitable for the outdoor readers. Outdoor advertisements are displayed on the walls. The outdoor advertising includes the following forms:

The Posters are placards displayed in public places like street corners, junction areas, railway station, etc. The message conveyed in posters is very brief. It contains in brief the attractive feature of articles, name of manufactures, etc. Posters are less expensive than many media of advertising.

The Advertising Board is generally displayed at the focal points of big cities where the potential buyers are expected. Such advertisements are displayed on the big boards.
Electric and Neon-signs: These are glass tubes or signs with electric wiring made in the form of letters or designs to represent the advertisement message. Like the advertising board, this form of advertising is also reminds the consumers. They are lighted with attractive coloured lights after sunset and therefore, are very effective in attracting the attention of the people. Sandwitch Board Advertising: These are two advertisement boards connected at the top having space in the middle. A man with fancy dress carries or pushes these boards and attracts the attention of people sitting or walking on both the sides and roads. He goes on repeating some slogans. Vehicular advertising also constitutes an important place, specially among the outdoor advertisements. The advertisements are displayed on the bus, tram and trains where general passengers view the advertisement. One can see the display of posters on the different modes of transportation either inside or outside. Some manufactures possess their own vans and they display posters, sign boards, etc. inside the vehicles. Such vans use of colourful smokes designing the map or shape of products to be advertised. No doubt, it is a costly advertising media which is suitable for the big business houses. Sky advertising is generally found in the advanced countries where aero planes are used for advertisements. We find use of colourful smokes designing the map or shape of products to be advertised. No doubt, it is a costly advertising media which is suitable for the big business houses. Sticker advertising is also a suitable form of outdoor advertising. In the Indian context, such type of advertising is found at the very nascent stage. Of late a good number of big business houses has started sticker advertising.
Direct Mail Advertising Direct mail advertising includes circular letters, business replay, envelopes/ cards, price list, catalogue, leaflets and folders, booklets, novelty gifts, etc. Direct mail is considered the most personal and selective media. It reaches only the desired prospects. It has maximum possible personal features even without personal contact. It provides detailed information about the product or service,


Marketing Management
creating lasting impression. The results of direct mail advertising can be checked by means of an offer incorporated in the mailing. Some of the strengths of direct advertising are: The impact of direct advertising can be tested Catalogues, booklets, etc. have educative value. Explanations of product become more elaborate and illustrations more distinct and pleasant through these media. There exists a more personal touch in direct advertising.
Promotional Advertising Promotional advertising consists of window display, interior display, show rooms, exhibitions, etc.

Window Display: It is otherwise called ‘Window Dressing’. It is the art of dressing windows by an attractive display of articles inside shop windows. The object of the window display is to bring the store to the notice of the likely customers and induce them to enter into it by creating a favourable impression and interest in the goods displayed by an appeal through the eye to some emotion or instinct.

Attractive window display is an important factor in effecting sales. Just as the face is the index of mind, so also the window display is the indicator of shop contents. Window displays with a good combination of light and colour can have an impelling effect on the prospective buyers.
Interior Display: Display made in the interior portion of a shop is known as interior display. It includes within itself display of articles on counters in front of the selling personnel, displays on the floor, on walls, in show-cases and showboxes. Effective interior display holds on the attention of the customers who have been attracted into the shop by outside display. It make easy the selection of the goods by the customers. With proper use of light and colour, it makes the store’s atmosphere congenial,. Cheerful, etc. Showrooms and Show Cases: Show rooms are specially designed rooms in which products of a concern are displayed and where people can go near the products and see them from a close quarter. Show cases are glass boxes, or cupboards containing the displayed articles depicting the wide range of products of a particular firm. The purpose is to exhibit a sample of an article for show purpose. Show-cases from an important part of interior display. The leading textiles mills like DCM, VIMAL, BOMBAY DYEING and TITAN & HMT watch have their show-rooms in urban areas.

Show rooms and show cases have more than one use. Show rooms act as places to get orders from the prospective customers who visit them. They provide an opportunity to the customers to examine the displayed commodities for their satisfaction. Recently show rooms have offered the ‘after – sale’ services particularly in case of T.V., Automobiles, Watches, etc.


Marketing Management
Exhibitions: An exhibition is a huge fair, where many manufacturers get together to display their products to the dealers and the general public. The importance of exhibitions is increasing in modern days. The principal object of advertising at exhibitions is to keep the product before the public and to demonstrate its uses and merits. Exhibitions are also a good means of introducing new products and educating the public about their uses. Besides displaying their products, the manufacturers who organize the exhibitions, distributes sales literature to the visitors and at times samples to the dealers and stockists.
17.5 ADVERTISING BUDGET The most important aspect of the management of advertising is budgeting. Advertising budgeting is also known as advertising appropriation. Budget is a detailed plan of the amount to be spent within a specified time. The advertising budget sets the limit of amount to be spent on various promotional measures. 5.Factors to be considered in setting advertising budget (Schultz. Martin & Brown, Strategic Advertising Compaigns, Crain Books, Chicago, 1984, p. 192 – 97)

The following specific factors are taken into account while setting the advertising budget. 1. STAGE IN THE PLC: New products typically receive large advertising budgets to build awareness and to gain consumer trial. Established brands usually are supported with lower budgets as a ratio to sales. 2. MARKET SHARE & CONSUMER BASE: Higher –market-share brands usually require less advertising expenditures as a percentage of sales to maintain their. To build share by increasing market size or market share requires larger advertising expenditures. 3. COMPETITION: In a market with a large number of competitors and high advertising spending, a brand must advertise more heavily to be heard above the noise in the market. 4. ADVERTISING FREQUENCY: The number of repetitions needed to put across the brand’s message to consumers also determines the advertising budget. 5. PRODUCT SUBSTITUTABILITY: Brands in a commodity class e.g. cigarettes, beer, soft drinks require heavy advertising to establish a differential image. Advertising is also important when a brand can offer unique physical benefits of features.
5.Methods of ad. Budgeting The following are the principal methods for determining the advertising budget.

Percentage on Sales Method: In this case a pre-determined percentage of sales value is earmarked for advertising purposes. The previous year’s (years’) sales are taken as the yardstick for the allocation of the Budget. At times the estimated sale of the coming year is also taken as the basis for budget allocation. This method may be explained as follows:


Finally.6 EVALUATION OF ADVERTISING EFFECTIVENESS Advertising effectiveness is measured by pre-testing and post-testing. selling price and profit. pupil dilation. There are firms which spend 10 percent or more of their sales on advertising while there are many others who spend possibly less than 1 per cent. the objectives are determined and there after the media and frequency are determined. some of the critics feel that this method lacks a correlation between the cost and objectives of advertising. the fundamental drawback of this method relates to the fixation of the percentage itself. attitude test and depth interviewing. the cost on advertisement is computed. On the contrary. Further. there is no reason to assume of that what the competitors are spending is optional and therefore should be followed. It compels management to think in terms of advertising objectives and awakens it to the need for their achievement. story board tests. The procedure is to estimate a accurately as possible what the other competitors in the industry are spending and to fix own appropriation at the same level. Of course. For example. this method provides ample opportunity to the management to maintain optimum relation between the advertising cost. Since a company seldom spends more than it can afford there is an element of financial discipline. it is extremely difficult to estimate very accurately what other competitors are spending advertising.Marketing Management Advertising Appropriation = Rupee Sales x % The main advantage of this method is its simplicity. However. 17. Finally. pychogalvanometer. it is very difficult to estimate what a firm is spending on direct mail or out-door advertising. Secondly. Despite the fact that this method is more market oriented than any other method. while the amount spent on print media or TV can be easily found out. 159 . This method is explicitly out-ward looking. before spending the budget and adopting advertising actions. The budget varies with what the firm can afford on the basis of its sales. Competitive Parity Method: This method envisages determination of advertising appropriation in such a way that a company maintain parity with its competitors advertising outlays. Pre-testing may involve a consumer jury. Pre-Testing Techniques Pre-testing is preferred because it enables one to know how effective an advertising is likely to be. At the outset. tachistoscope. eye camera. laboratory tests. It is flexible and may be adopted to changing company needs. This method is more realistic. advertising expenses are deemed to be unaffordable. Affordable Method: This method is based on the capacity of a firm in a given business situation. competitors in general would not have identical product line and to that extent direct comparability would not be justified. Objective and Task Method: This method is based on the relationship between the objective and task.

filming techniques. However. The main objective of advertising is to attract attention to the product which is reflected by the galvanic skin response. The copy. slogans. Similarly. Consumers can provide true and correct information on reaction to and adaptability of products following an advertising campaign. The psychogalvanometer measures a respondent’s reactions to new records and slogans. Story-board Tests: The story-board prepared for television advertising is tested before it is used. Electrodes are attached to his palms to detect changes in electrical resistance arising from perspiration. retention. The change in perspiration rate in a respondent is supposedly indicative of a change in emotional reaction. The consumer jury technique is adopted for print media. interesting words. The respondents are placed in laboratory situations. etc. There are known as psychological techniques. Vision and sound are synchronized and shown to an audience for evaluation. Psychogalvanometer: It is a mechanical device that measures the amount of perspiration. The semaetic differential is a rating scale which has been used extensively to measure advertising effectiveness. The message of the print media’s should be evaluated before its publication. desire. it should not be concluded that greater tension reflects the treater success of the advertisement. illustrations. Respondents are asked the questions to be answered on a seven-point bipolar scale about their feelings about a particular advertisement. Laboratory conditions offer a controlled environment that is used to measure awareness. the other media’s messages should be evaluated before their presentation.. If the machine registers lower electrical resistance. it is stated that a tension exists as a result of advertisement. It is slowed down to a level where the message can be perceived easily.Marketing Management Consumer Jury: The consumer-jury test involves persons most likely to be exposed to the advertisement. The story board pictures are transferred to a film strip and the audio section on to a tape. The respondents should understand and appreciate the message. broadcast media and direct mail. Consumer reactions have greater validity than the reactions of non-consumers. etc. They can be easily segregated from the less interesting message. can be properly evaluated by the consumers concerned with the product. layout. The attitude is closely related to 160 . The respondents’ responses are recorded and special laboratory tests are conducted to examine the effect of the advertisements. Laboratory Tests: Laboratory tests have been an important method of pretesting advertisements. attention. This process can separate the messages which are more effective from those which are less effective. Important means are developed to measure the stimuli. The costs involved can be cut by reducing the unnecessary part of the story board. The psychological technique is characterized by a prediposition or state of readiness to act or react in a particular way to some stimuli. Attitude Test: A number of techniques for measuring the attitudes of respondents are available. This test uncovers the unnecessary part for deletion. The important part of advertising is accepted for telecasting. Tachistoscope: Tachistoscope is a projector that can project objects into a screen at rates so fast that the viewer cannot detect the message. etc. headlines.

A recognition test is based on the assumption that there is a high correlation between the reading of the advertising and the purchase of the product. Consumer behaviour towards an advertisement can be measured on the attitude scale. Under the unaided recall. The impact may be probed to find out the attitude. This test in relation to print media information regarding the percentage of readers who have seen the advertisement and remember it. This measurement is applied before the use of the advertising media. The advantage of the recognition test is that it measures something which has been realised under normal conditions. who recall seeing or reading any part of it. or the impression made by an advertisement on the reader’s mind. This test has a high degree of objectivity which arises from the respondents attempting to perform at the maximum level of recall without subjectively screening out the response. The techniques are used to find our how far advertising has been successful. varying from favourable at one end and to unfavourable at the other end with the neutral point in the middle. 161 . The name of the product is not given to the audience. enquiry tests. etc. If they do remember. and who reported reading at least one half of the advertisement. Respondents are asked whether the advertisements included a particular picture or message. his interest. Recognition Tests: Recognition test is also known as readership test. Recall tests have been divided into aided recall and unaided recall. This scale measures the position of the consumer’s attitudes on a continuum. of the audience to the product. message and campaign to find out how far they would influence consumer attitudes.Marketing Management advertising effectiveness. the advertisement is considered effective. The aided method is used to measure the reading memory of magazine advertising impressions. etc. The aided test is used mainly to measure television advertising. Post-testing techniques Post-testing techniques are applied after the advertisement has ended. recall tests. identifying the product and brand. The most important ones may be elaborated on this stage. the post-testing techniques are in the nature of recognition tests. desire and develop his attitude to the product. It is a simple test does not require any specialized knowledge. This test is applied to measure the penetration of. it is established that there was some impact of the advertisement. Recognition tests have been helpful in determining the actual percentage of persons who ‘recognised’ the advertising. They has to recall it themselves. Hence.. attitude change. little or no aid is given because the purpose is to measure the penetration of the advertisement. If the attitudes of potential customers are changed towards the products. Recall Tests: A recall test depends on the memory on the memory of the respondents. The immediate objective of advertising is to arouse consumer awareness. The degrees of variation on the left side and the right side of the neutral point indicate the favourable and unfavourable attitudes respectively. sales tests. The recognition tests show the importance of each type of advertisement on the basis of the readership test.

involves the following elements: 1. However. thus. An illustration of semantic differential is given in Fig. The Likert Scale is used to measure audience attitude to advertisements. Strongly agree Agree Uncertain Disagree Strongly disagree 2. preference. Examples 16.Illustration of Semantic differential This technique may be used to determine how far the advertising of a particular brand has been effective.. its resources and information constraints. media communication by an identified sponsor to accomplish objectives that are not related directly to products or commercial services. etc. BPL advertising has applied to people who have accepted it. It measures the extent to which favourable opinions have been created about the product. the ranking techniques and the projective techniques. usually a mix of these methods is developed to evaluate the effectiveness of advertising. Semantic Differential Known Informative Realistic Persuasive Useful Effective Unknown Uninformative Unrealistic Not persuasive Useless Ineffective Fig. involves the use of nonpersonal. the selection of appropriate technique depends on the needs of a company. are measured with this technique.7 PUBLIC RELATIONS ADVERTISING Public relations involves the many practices used to build good rapport with various sectors of the public. therefore. It uses a bi-polar (opposite) adjective statement about the subject of evaluation. 17. A series of statements are described to measure the attributes of the advertisement. acceptance. advertising is one of several tools available to accomplish such goals Public relatiol1s advertising. viz. Only relevant statements are used for the purpose. semantic differential. image and company. There are several techniques for the measurement of attitude change after the advertising campaign has ended. Radio advertising has been heard by a majority of the population. Public relations. Strongly agree Agree Uncertain Disagree Strongly disagree A review of the various methods reveals that no one method is perfect and. A planned effort or management function 162 . Loyalty. intent.1.Marketing Management Attitude Test: Such tests measures advertising effectiveness. The semantic differential technique is used to measure attitude in the field of marketing and advertising research. the Likert scale.

Recall Test (aided and unaided). Various methods of advertising appropriation or budgeting such as percentage of sales. procedures. Attitude Change Tests are the various devices available for pretesting. While selecting press media. develops brand preference. Mural Advertising. are available. affordable method. goods. It is any paid form of non-personal presentation and promotion of ideas. understanding. The relationship between an organization and its publics 3. Techistoscope.8 SUMMARY Advertising is an important element in promotion – mix. Sponsor. Consumer Jury Frequency. direct or promotional. reinforce the middllemen’s promotional efforts. sticker advertising. Consumer Jury. electric and neon signs. Execution of an action and/or communication program 7. Development of rapport. hoardings. Advertising helps in introducing new products. Steps taken to ensure that said policies. stimulates demand. Laboratory Tests. frequency. Post-testing techniques comprise Recognition Test. Film and TV advertising especially the sponsored programmes have gradually assumed increasing importance. Of the outdoor advertising the prominent ones are posters. competitive parity method etc. appeal and cost factors are taken account. window display. goodwill..9 KEY WORDS Non-personal Presentation.Marketing Management 2. Pre-testing and post-testing of advertising are undertaken to ascertain the impact of advertising on consumer. and acceptance as the chief end result sought by public relations activities 17. Projective Techniques. A variety of toolls are available under each category. Advertising may be indoor. and actions as they relate to s lid organization’s publics 5. Evaluation of public attitudes an. increases sales volume. participation in exhibitions and fairs have also become popular as promotional tools. procedures. opinions 4. Promotional Advertising. outdoor. and so on. Interior display. Story Board Tests. 163 . 17. circulation. It is important to measure the effectiveness of advertising from time to time. Each of these have its own strengths and weaknesses. vehicular advertising. or services by an identified sponsor. An organization’s policies. and actions are in the public interest and socially responsible 6.

Do you agree? Substantiate your arguments with appropriate examples. Planning. et al. 1992. Write short notes on (a) Outdoor advertising (b) (c) (d) Exhibitions Recall Tests Direct Mail Advertising 4. Mc Graw Hill. 1994. Wright. Kotler P. 17. 5. 2. J. Implementation and Control). 1992. Refrigerators. Marketing Management (Analysis. David et al. A. Fundamentals of marketing. 17. TMH.10 MODEL QUESTIONS 1. What media choices would you suggest in the following cases? (a) Family planning. New Delhi. Advertising. Circular letters. Describe the importance of advertising in the marketing strategy of a firm 2. Folders. 6. Aaker. TMH. (b) (c) (d) Garments.. Marketing – A Managerial Introduction. et al. a) What factors are taken into account in setting and advertising budget? b) Explain in brief the various methods of appropriating for advertising. Expand the following statements: (a) ‘Advertising stimulates demand’ (b) ‘Advertising reinforces the middlemen’s promotional efforts’ 3. C. Sandwichman. (b) (c) (d) (e) (f) Sticker Advertising. 17. 3. 4. Give you reasons. LPG.Marketing Management 17. Stantion. Advertising Management PHI. 164 . 1985. PHI. H. Why should effectiveness of advertising be evaluated? Describe the various methods/ tools available for the purpose. New Delhi. New Delhi. Vehicular advertising.12 ASSIGNMENT QUESTIONS 1. W. 1984. New Delhi.13 TERMINAL EXERCISE 1. It is said that advertising is a waste of scarce resources in a developing country like India. Ghandi. Examine the suitability of the following media in relation to some product(s) or service (a) TV.11 REFRENCES 1. New York.

Sales management may be defined as the management of a firm’s personal selling function. NATURE AND SCOPE Sales management has assured the position of a challenging profession. Salesmanship qualities. In fact.6 Effective Selling 18.8 Summary 18. Nature and Scope 18. sales executives must assure the delivery of products with satisfying experiences. The importance of the sales function various across organisations depending upon its nature and variety of products. It is the sales management that translates the marketing plan into action. Under the socially responsible marketing policy. In the present lesson an attempt is made to examine some important aspects of sales management and personal selling. motivation and control are applied to sales management for securing better sales performance. Ramaswamy and S. The stages of selling process The effective selling. Namakumari.9 Key Words 18. STRUCTURE 18.S. target market. wholesale or retail trade.3 Qualities of a Salesmanship 18.12 References 18. It is responsible for obtaining sales volume.2 MEANING. Sales management is sometimes described as the muscle behind marketing management. sales management means the management of the sales effort in toto.4 Selling Process 18. 18. especially in a commercial concern i.10 Revision Points 18.1 Introduction 18. organising.7 Problems of sales management 18.11 Assignment questions 18.Marketing Management LESSON – 18 SALES MANAGEMENT OBJECTIVES After studying this lesson the reader will be in a position to understand the following: The concept of sales management. (V. Marketing 165 .5 AIDCA Process of Selling 18. The sales function of a business is a basic function.2 Meaning. In a modern organisation.e. its scope and importance.1 INTRODUCTION Sales management is an integral part of marketing management. and for ensuring continuous growth. direction. consumer density and dispersion and the competitive practices. handling the sales operations so as to make contributions to profits. it does much more than provide muscle. All the principles of general management such as planning.

a well as supervisors and salesmen .Supervise handling of sales correspondence . The nature and scope of a sales management functions can be clearly understood from the check list given below. 362).Supervise hiring and training of salesmen . layout. district and branch managers.Co-ordinate area sales activities with headquarters 166 .Lay down clear channels for operating procedures . Mcmillan.Analyse salesmen’s reports and expense accounts . The following mega-trends affect the growing importance of sales management Intense foreign competition Rising customer expectations Increasing buyer expertise Revolutionary developments in communications There is a increased integration of marketing and sales functions. district and branch offices as well as distribution agencies. Checklist-Sales Management Functions I. II. Implementation and Control.Organize sales department at headquarters and at branches .Keep in touch with board of directors’ decisions . Coordination . Planning.Co-ordinate activities of regional.Establish sales policies and programmes .Delegate duties to subordinate and assign necessary authority to operate effectively .Arrange for office space.Marketing Management Management. appliances and staff .Explain policies and programmes to the staff . 1990. Administration .Co-operate with top management executives .Supervise regional.Sell sales programmes to top management .Keep customer control-records .Contact important customers and distributors .Supervise allocation of sales territories . P.Supervise budgets and quotes .Participate in activities of trade association .Stress professional salesmanship .Plan current and long-range sales operations .Plan communication channel . New Delhi.

Textbooks .Plan sales offices.Arrange interviews and rating blanks . packing and transportation.Decide who should interview . Sales Planning .Determine methods of interviewing .Prepare checking of reference blanks .g.Sales manuals .Plan for efficient administration at headquarters and in the field . distributors.Co-ordinate export selling with headquarters’ operations . IV.Determine types of sales organization suitable for various branches . locations.Co-ordinate dealer activities with company operations.Decide when and where interviews should be held .Build job specification . .Arrange for medical reports V.Co-ordinate all promotional materials and campaigns .Emphasize professional.Cross –check on interviews . district and branch managers as well as supervisors and salesmen . Selecting the Sales Force .Arrange refresher courses for existing salesmen .Sales-training bulletins 167 . salesmanship .Prepare application blanks .Ascertain types of promotion and advertising provided. .Plan sales strategy . e.Arrange training for regional. branch office delivering. dealers and retailers. transportation from warehouses: and time schedules for such transportation.Determine suitable sources for recruitment . district and branch offices . Training the Sales Force . such as: .Select distribution channels such as wholesalers.Establish regional. III. .Plan packaging.Determine how and where sales can be effected . etc.Plan warehousing facilities throughout the field .Develop and use sales-training tools.Marketing Management .Develop training plans for new salesmen . personnel.

Plan commission incentives .Use sales forecasting as an aid to quota setting .Arrange vacation plans .Arrange interesting sales meetings and conventions . Remunerating the Sales Personnel . Motivation – Human Relations .Slide films . employees.Provide adequate pubic relations .Draft enthusiastic letters and bulletins . VII.Modern catalogues .Special product presentations .Fix pension and retirement plans.Determine how training is to be done .Determine what motivates salesman . distribution channel and consumers .Provide emphasis on the dignity of man VIII.Instruction manuals .Correspondence courses .Headquarters’ schools .Provide reasonable satisfaction of the security need .Arrange contests and award of prizes .Analyse what motivates distribution channels .Be fair to all.Fix base salary scales .Arrange exciting sales contests . i.Marketing Management .Motion pictures .Plan advancements and promotions .Fix rules for submission of expense accounts .Determine methods of arriving at quotas 168 .e.Field supervisory training .Sales meetings . Quota Setting .Find out what motivates consumers .Fix how bonus is to be paid .Branch office training .Conduct continuing motivation research .Build employee pride .Follow –up on training programmes VI.

Break down overall quota into quotas for territories.Incentive plans . X.Review territories allocations periodically for improvements. Controlling the Sales Personnel .Visit large and important customers . monthly reports .Economic condition .Quotas and special assignments . weekly.Increase in number of households .Prospect density .Bring distributors and dealers into home office occasionally .Special income groups .Fix overall quota .Letters and bulletins .Population increases .Arrange marketing research trips to old and possible 169 . .Commission and bonuses .Marketing Management .Visit regional.Analyse orders from distributors and dealers . district and branch offices . etc.Analyse territory potentials .Pay periodic visits to salesmen in the field .Determines special quotas for large users .Daily.Visit important distributors and dealers .Sell quotas to salesmen IX.Control salesmen through .Develop routing lists for territories . conferences and conventions .Expense meetings .Tap information from trade association contacts . Territory Allocation .Industrial centres .Rearrange territories for more effective effort .Find and develop new distributors and dealers .Allocate territories on basis of geographical areas .Check complaints and adjustments .Supervisors and branch managers .Personal contacts .Arrange and attend meetings.

he serves as a 170 . Planning: Selling objectives of the firm’s sales effort and pointing out strategies and facts for achieving them. Direction: Staffing and supervision of the day-to-day implementation of sales policies. Whitehead defines salesmanship as. Control: Performance comparison of actual and planned sales results.. Organisation: Setting up structure and procedures for smooth and effective execution of sales programmes and plans.3 QUALITIES OF A SALESMAN Under this let us examine first what is personal selling or salesmanship. 2.Marketing Management The various decision areas of sales management may be exhibited as a cycle in Fig. The work of a salesman is service because he helps the customer to get the most for the money he spends. 18. examination of the reasons for observed divergences and evaluation of the need for plan revision. programmes and plans. 2. He performs two important tasks viz. Analysis Control Organisation Planning Direction Fig. Meaning of salesmanship The American Marketing Association has defined personal selling as an “Oral presentation in a conversation with one or more prospective purchasers for the purpose of making sales”. A good salesman looks upon the work of selling as a process of making the customer buy. “The art of so presenting an offering that a mutually satisfactory sale follows…” The ability to handle people is also salesmanship. In terms of psychology salesmanship is persuasion which motivates feelings to action or evidence which convinces reason and judgment. Sales Management Cycle Analysis: Review of the firm’s internal sales records and sales person’s reports. It is affected only if the prospect is convinced in his own mind that it will be beneficial for him to make the purchase.

The personality of a salesman will be pleasing only when he has a good health. Since the success of sales is primarily influenced by the personality of the salesman.Marketing Management link between the producer and the distributor to their mutual advantage and secondly. Qualities of good salesmen The personality of the salesman plays a very important role in the field of sales. The qualities may broadly by divided into (a) physical. Classification of salesmen Sales can be classified on the basis of (a) organisations they represent. (b) the goods they sell. A good health is usually associated with a good breath. Physically he must be fit. When one compares two salesmen. Staple salesmen 20. Sound health is of first necessity. he enables to customer to satisfy his wants better. The following Figure gives an idea about the classification of salesmen on the basis of organisations they serve. The quality and the tone of voice have also its influence on the listeners. SALESMAN Manufactuer' s Sales Wholesaler' s Salesmen Retailer' s Salesmen Pioneer Salesmen Dealer Servicing Salesmen Merchandising Salesmen Counter or Indoor Salesmen Travelling or Outdoor Salesmen Fig.1 Classification of Salesmen   On the basis of the types of goods they sell. the salesman may be classified into 17. (b) mental. firms become careful in selecting the right type of salesman whose personality is impressive. Missionary salesmen. Service salesmen and Exporter’s salesmen. Sales personality includes all the qualities of a good salesman. one having a good personality and the other not having it there will be remarkable difference in the sales by them. Speciality salesmen On the basis of services of field or field of operation the salesmen may be classified into House-to-House salesmen. Offensive breath repels the customers. Since the salesman has to meet and talk with many customers. A good appearance is another important physical quality which goes a long way to create a good 171 . (c) social and (d) character traits Physical Qualities The sales man is the ambassador of the company. oral hygiene is of utmost importance. and (c) the services they render.

Appearance includes many things viz. healthy looking and well proportioned young man with a good poise makes an excellent impression on the prospects. It is said. A healthy and happy facial expression is a sure indication of the confidence with which a salesman works. A good salesman understands the attitude and feeling of the customers and answers all questions fully. cheerfulness. imagination. clean and neat dress. A tall. courtesy. initiative. goods he sells and the customers. tact. inspiring confidence. It is the ability to invent new angles of approach to sales problem that characterizes the imaginative salesman. A salesman who can understand the psychology of the customer better shall ultimately be a resourceful salesman. etc. He should have the ability to meet strangers. Social Traits Some of the qualities under this category are ability of the salesman to meet the public. A well-dressed salesman can work with ease and confidence and uphold the prestige of the firm he represents. Conversation is an art and can be developed by proper thought and practice. It implies doing the right thing at the right moment. Tact is the skillful way of doing things. Imagination is needed to enable devise means for solving them. resourcefulness. etc. It also means keen power of observation and common sense to take correct decisions quickly. While meeting the inquiries of the customers he has to convince them by stating the facts and advantages of the products. Selfconfidence comes to him through study. calmly and tactfully. 172 . he will inspire confidence in the customers and this result in more sales. and so on. fair. Courtesy is an indication of refinement and culture. If the salesman will be alert. This can be developed through experience and mixing with people easily. A resourceful salesman is one who can analyse the situation by alertness and use of common sense. which every salesman should possess and cultivate. Weep and you keep your goods”. self-confidence. By making accurate statements he is able to establish confidence of the customers in himself. A salesman has to initiate talks and should feel happy in meeting the public and enjoy their presence. He must have the ability to speak very effectively to impress the customers. Resourcefulness is a mental ability to think and find out alternatives. “Apparel often counts a man”. Self-confidence is another important quality. By showing polite behaviour he exercises courtesy. alertness.Marketing Management impression. manners and mannerism. “Smile and the world smiles with you. experience and knowledge of himself. A salesman should be accurate in his speech or statements. He should be an extrovert. This quality can be cultivated through study products and psychology of customers. Alertness relates to the presence of mind. Mental qualities The important mental traits or qualities which must be developed by a salesman to be successful are accuracy. good facial expression of the salesman. general cleanliness. The salesman should always be polite and courteous. open up new territories and create friendship. It is aptly remarked. Imagination is also another important mental quality.

Salesmen are not necessarily born as qualified salesmen. 2). through out the life of a salesman. He has to work in harmony with the authority given to him. attempt to overcome the objections. moral soundness and good behaviour. fulfills them and loses no friend. Secretly making any profit. There is no substitute for this quality. In the process. and keeping one’s promise make salesman successful. listening attentively and maintaining a cool temperament are some of the important courtesy rules. An honest salesman appeals to the customer’s desire for safety and protection. he commands the confidence of the customers. integrity. keeping hands swinging back and forth in the chair etc. fulfillment of promises and strength of character. collect valuable information about their testes and habits (pre-approach) initial contact (meeting) with the potential buyers (approach). Manners of a salesman either make him prosper or mar his career. Industriousness is another quality which means the ability to work hard. A salesman should be reliable or trustworthy. (Fig. The success of an organisation greatly depends on good manners and politeness of the salesmen. Sales managers impart necessary training to their salesmen to develop their personality. industriousness etc. the salesman goes through to sell a product are more or less than the same.. receptionists and secretaries. reliability. and then close the sale. Integrity implies uprightness of character. He should be loyal to (1) the organisation in which he works and its products (2) his customers. 18.Marketing Management Being punctual appointments. It implies persistent work to achieve a desired goal. A salesman has to show good manners to customer. Honesty in dealings and statements. loyalty. the significance of honesty in selling. stealing or misusing any property of the firm are some of the acts of disloyalty. A salesman should avoid biting nails. Loyalty is another character attribute which a salesman should posses and develop. They can be made qualified or ideal salesmen by developing their personality through constant and sincere efforts. 173 . swinging back and forth in the chair. honesty. Though an honest salesman might take time to win customers will frequently come to his shop. Hence. A reliable salesman takes his work seriously and is honest in his dealings. show the product and its use (Presentation and demonstration). The personality of a salesman can be improved. integrity and loyalty. The actual process. Willingness to work is a great thing in salesmanship also. and (3) his fellow-workers. All salesmen attempt to locate the prospect buyers (prospecting). Reliability is the outcome of honesty.4 SELLING PROCESS Personal selling is an oral representation in conversation. clasping and unclasping hands. Self-examination and self-improvement may turn out to prove amazingly rewarding. becoming polite to customers. It may be pointed out here that a salesman may not possess all the qualities that are present in the best salesmen. are some of the important character traits which a salesman must possess and develop. Character attributes Honesty. Such a salesman gives value to his promises.

Many persons may have the need to buy but they may not have the ability to pay for them. Accessibility means whether a prospect is approachable by the salesman or not. The salesman should ascertain the authority of the executive or officer before approaching to persuade him. etc. Physical accessibility approaches a prospect. Membership Registers of club. 3. Prospecting This is the first step in the personal selling process. 174 . Fundamentals of Marketing. 2. Stanton et al. 1994. income and environment. The prospect or potential customers have an unsatisfied need. but with very high expenses it is said that such prospect does not have accessibility.Marketing Management POST SALE SERVICE PROSPECTING PREAPPROACH PRESENTATION Identifying Profiles Leads Records Qualifying Capability Willingness Information Habits Preferences AIDA Attention Interest Desire Action Reduce Dissonance Build goodw ill Fig. Such. Accessibility is another criterion to know whether person/organisation could be a potential buyer. Endless chain method Centre of influence method Cold canvass method Direct mail and Telephone method. all executive officers do not have the authority to buy. the ability to purchase and a willingness to buy the product. A salesman can locate potential buyer by analysing the telephone directory. yellow pages. Before approaching a prospect the salesman should ascertain whether the prospect has a need to buy the product. New York. 4. This can be assessed from his profession.2 The Personal Selling Process Source: William J. In case of institutions. p 487. The salesman should ensure that the prospect has the necessary financial capacity and also the desire to spend in that product. McGraw Hill. The important prospecting methods are: 1. big organisations of Government concerns. names with addressed are of no use if he does not quality each person according to the requirements of a prospect. The prospect that the salesman contacts may be quite convinced about the product but he may not have the authority to buy the same. Prospecting implies locating of prospects or locating the potential customers. The task of prospecting beings with obtained names and addresses of people who might be needier.

by obtaining introduction from a customer and by handing his business card. and mutual approach. To give the salesman more confidence To gain insights into how best to approach the prospect. The reference approach involves reference of the product by the friends of the prospects. authority. etc. the salesman obtains some other detailed information like the ability need. Pre-approach This is the second step in the sales process and starts soon after the salesman obtains the names and addresses of the prospectus. On the other hand. etc. martial status. sample approach. The mutual approach considers the prospect supreme. In the pre-approach stage. The objectives of the pre-approach are: To obtain additional qualifying information To obtain information around which the presentation can be better planned. Approach The initial few minutes of the sales talk are known as the “approach” to the prospect. the salesman will confine his investigations to the prospect as a person. During this stage the salesman would be required to go through the age. occupation. hobbies. The sample approach involves giving the sample to prospect. Before the talk. religion. He has to meet many subordinates like receptionists. The persons visiting various exhibitions and fairs are likely to become prospects. Some of the popular techniques for this purpose are reference approach. In the first contact. approaching the prospects. he should attract the attention of the customers and get them interested in the talk. Hereafter the salesman prepares for the next step i. accessibility. Whatever methods of approach the salesman adopts. The purpose of the talk is to arouse and sustain the customer’s attention.. the salesman may take advantage of other methods under suitable circumstances. secretary and others who may 175 . children. of the prospects. education. The salesman should put him in the place of the prospect when planning his approach in person and asks himself.Marketing Management In additional to these methods of prospecting. “Will this interest me and cause me to like the salesman?” Approach by travelling salesmen differs from approach by retail salesman faces many difficulties in approaching people who are completely strangers to him. The information gathered in the pre-approach will differ with the selling problem facing the salesman. if the prospect is buying for a business the pre-approach should be broad and it includes many facts about that business also. If he is selling to an individual for his own use. income. the salesman should introduce himself by using the telephone. The benefit approach indicates the benefits of the product.e. he must make it a point to include something of interest to the prospect. benefit approach.

about their uses and working. he usually conveys willingness or indication to serve them. it is like making a sale. Demonstration in personal selling is the task of proving the statements by a salesman about quality. It also affords an opportunity to the salesman to prove the truth of what he has stated about the products.. Sales presentation involves the presentation of the product and a demonstration of its features and benefits to the prospect. model. service. Clarity in presentation in essential and the salesman should always try to complete it for the satisfaction of prospects. If the salesman will be prompt in presenting the articles to the prospects. Such prospects are aware of the products and one attracted to the store by means of advertising.e. This class of salesman does not move from place to place for prospecting. etc. and test the articles for their satisfaction. Collecting details of the prospects is also required in retail selling. The salesman should give due respect and recognition to the subordinates. operation. Gaining an interview with the right man is the biggest problem. Demonstration gives rise to following advantages: It enables the salesman to present all the salient features of products in a more concrete way. of a product with the help of experiments. The prospect should be allowed to fondle. The details of articles. It attempts to increase the desire for the product and arouses the willingness of the prospect to purchase the product and arouses the willingness of the prospect to purchase the product. The salesman is to sell an idea to the subordinate i. displays.Marketing Management not allow them to go in unless they have some real value to offer to the executives proposed to be met by him. 176 . praise them to get their favour and thank them for their co-operation. and shows how the product meets the customers’ needs. Personal call without introduction Personal call with introduction Sending business card Writing for an interview Appointment over telephone Use of sales letters The approach followed by the retail salesman/indoor salesman is different. or to the prospect who has the power to grant or refuse the interview to the prospect proper. Presentation and Demonstration “Presentation” means the presentation of the product to the customer or prospect. Prompt action creates a favourable mood in the minds of the prospects. secretary or receptionist who prevents him from meeting the boss. texture.. and is closely related to the buying process. etc. A traveling salesman may follow any one of the following ways of approach for gaining an interview with the prospect. have to be explained to the prospect. etc. handle. and test or by any other satisfactory evidence. utility. It is rightly observed gaining the interview is in fact a selling process.

It enables the salesman to reduce his sales talk to some extent and sometimes to a substantial extent. (a) Demonstration is use and (b) Demonstration of a specific feature of the article. Self confidence and positive attitudes help the salesman to secure favourable buying decisions. A customer may be reluctant to give up the product and adopt the new product. The most effective form of demonstration would be to show how the article will appear when actually used by the customer. The best time for meeting objections is the moment they are raised. ‘unbreakable’.. Direct Denial Method. Superior point/Compensation Method. while selling a TV or audio-set one may ask the customer to which on and switch off the see the picture clarity (TV) or stereo effect (Audio-set). Psychological resistance relates to interference. The main forms of demonstration are. The follow-up 177 . It removes the idea from the mind of the prospect inoffensively and courteously. mostly due to ignorance of prospects. It is said a poor closer is always a poor salesman. The salesman should be expert enough to close the sales talk at the right moment and ask for the order. payment systems of the company. The objections or resistance may be either psychological or logical. Meeting objections Sometimes. the nature of the product and the type of objections. including physical actions. Closing and follow-up The main object of the salesman is to sell and hence closing the sale. The sale is said to complete when the buyer is satisfied. He prices to remove any post-purchase problems. The mere act of listening to the prospect is likely to feed his ego. product. A salesman has to answer these objections and overcome the customer’s resistance.Marketing Management It appeals to the senses of the customers. The way and the time of answering questions or meeting objections depend upon the attitude of the prospects. but method. help the customer to select a particular product and offer special inducements to close the sale. transport. Indirect Denial Methods/Yes. can also be demonstrated. He should break down the customer’s objections. Listening attentively is the fundamental principle of over coming objections. It is true that sale is made not in the mind of the buyer. Follow – up action begins when the prospect signs the order and asks for delivery. Direct denial method may be applied when the objection raised is a false one. Various methods are available to overcome objections viz. preference for established products or habits and traditions. The ultimate goal of salesman is to get the order. customers raise some objections to the product. etc. etc. Indirect denial method is invariably used in meeting most of the important objections. Experience and training would enable him to deal with the objections satisfactorily. Boomerang Method. The specific features like ‘leak proof’. For example. He should know the closing signal. He can ask for the order. After sales service is a good example of follow-up action. Logical resistance or objections may pertain to price. statements or comments.

Interest can be converted into desire for the product mainly by three means viz. and by explaining once more the important selling points of 178 . The culmination of the first three stages should be in the actual purchase of the product. Attention (A): It is the starting point in the sales process. smelling. Until the customer’s attentions secured by the salesman. the sale process does not develop. distributing samples etc. Conviction (C): After a desire for the product has been created in the mind of the prospect. the want what the product is able to satisfy and the buying motive to which the product appeals. Emphasizing the selling points of the article/product Making suggestions Making demonstration. In this way the prospect’s attention is attracted towards the product. the salesman informs the customer about his needs. This act of persuasion needs proper planning of the strategy and tactics. One should keep in mind that the close of one is the beginning of another. he must be made to feel that the product to be sold is worth buying. supplying sure information. The attention of the customer must be attracted to the product. and must feel curious to know more about the product. display. The first thing which is involved here is to make the prospect feel that the article is necessary for them. These stages are summarized by what is known as the AIDCA formula. Action (A): It means gaining an order. At stage. One can arouse interest by offering something useful. The customer must be made to realize how the product will benefit him. From the stage of interest or curiosity must develop the desire to buy the product. The customer must be taken through various stages of the mid. Once he is convinced of this fact he would be ready to buy. Awakening interest means getting a person interested in an article or proposition. He has to convince him about the soundness of his proposition. Desires (D): A salesman must ignite the desire of the prospect after securing his attention and after arousing his interest in the products. etc.5 AIDCA PROCESS In order to effect a sale. testing. Interest (I): The salesman must awaken an interest in the mind of the customer. The salesman can arouse interest and held his attention by specifying to him interesting features of his product. Some doubts may remain to be removed. touching. He also informs him about the existence of products or services to satisfy his needs. In order to convince him all objections must be met adequately. The salesman induces the customer to think about the goods. its features. 18. The attention of the prospects may be attracted in many ways such as advertisements.Marketing Management action also provides feedback to the salesman because if graces him a chance to evaluate his actions and persuasions. etc. and its merits. the salesman must persuade the customer to buy his product. After the desire is created in the mind of the prospect. Action can be stimulated by permitting the prospect to feel sensually gratified by seeing. hearing.

firm and the salesman. (a) materials from which it is made. purchasing. A salesman should have details of the customers’ wants. Sales 179 . desires and habits. The whole responsibility before a salesman is to convert the potential customer into the actual users and this would not be possible. after sale-servicing. He should constantly study the products offered by his competitors and determine their strengths and weaknesses in comparison to his own products. the potential customers make buying decisions in the background of brand. Unless. In a good number of cases.e. Knowledge of the company It is essential that the salesman has an in-depth knowledge of the company in which he has been working.Marketing Management the products. Knowledge of customers To make the personal selling effective. 18. especially while studying the buyers’ behaviour. he is expected to know everything about the company. It is the responsibility of the salesman to answer all the questions asked by the potential buyers and albeit to satisfy them. Hence.e. Then again knowledge gives salesmen confidence in themselves. discounts. the salesman should essentially be companyoriented. it leads the prospect to the ultimate decision or action. it is also essential that the salesman must have adequate knowledge about the customers. If the prospect is convinced or his confidence is reported in the product. know your product. The changing trends in fashion should also be studied by a salesman. he would not be successful in answering the questions asked by the potential customers. know the process of selling and know your self. The buying motives of the customers would help the salesman. if necessary. Knowledge of competition It is essential that the salesman constantly studies the emerging trends in competition. (d) selling points of the product in relation to its rival. As the representative of the company. guarantees and so on. i. The perception. this would help his particularly while convince the potential customers. to compare his product with that of the rival on those points in which the buyer seems most interested. particularly while studying the customers. know your customers. (b) how it is used and how it is maintained. know your competitors and their products. the salesman has an in-depth knowledge of the corporate multi-faceted development programmes. (c) product features. The principal responsibility before a salesman is to establish a fair match between the goods desired and goods offered. Awareness of competition enables a salesman. motivation and learning processes would help the salesman. Buyers have faith in well-informed salesman.6 EFFECTIVE SELLING There are six pre-requisites of effective selling i. name or fame earned by a particular corporation. etc. know your company. The potential buyers may raise different queries regarding the policies. If the salesmen lacks details about the products. Knowledge of product A salesman should know all about his product.

180 . Self-evaluation of preference is the best criterion to diagnose the loopholes. Know-Yourself Last but not the least essential requisite for successful selling is knowledge of self. Knowledge of selling process The various stages of personal selling process have already been discussed in this lesson. the sales force requires delegation of authority with respect to following: (a) Changing or fixing prices. It is the ability or perfectibility of the salesman that counts more in the process. The post-sale activities like writing of order. But it must not be forgotten that the mere possession of selling techniques does little to ensure success. 2. Sales force authority 3. leading to intractable problem~ in a sales organisation. Designing and managing sales force 2. (b) Credit facilities to old and existing customers. The details regarding the selling processes would help a salesman. they will not able to deal with the customers. The AIDCA formula also helps the salesman. pro-active or sensitive.Marketing Management presentation cannot be effective unless a salesman knows socio-psychological factors influencing buyer behaviour. Actual supervision of and guidance to individual salesmen is also a sine qua non of a sound sales manager. it is essential that a salesman evaluates his own performance. in making the processes effective.7 PROBLEMS OF SALESMANAGEMENT 1. sometimes be beyond control. So the sales manager must maintain a vigilant check on the various activities of the sales force. Designing and Managing Sales Force: The sales manager’s control over the various activities of the sales force a must. This evaluation should be made not only in terms of the salesmen but also in respect of the quality of goods and services offered and the prices charged. These activities may. There-fore. To make the selling process effective. Sales Force Authority: If authority is not delegate to the sales force. who in turn do not like to deal with persons who have authority. particularly while sales presentation. all the aforesaid prerequisites would help the salesman in raising the volume of sales. Target-setting 4. (d) Payment terms and settlement of claims. execution preferences facilitating grant of credit should also be known to the salesman. 18. The salesman should know the details of prospecting. etc. approach. pre-approach. Sales forecasting 1. Thus. (c) Assurance regarding quality and after-sale service.

Accuracy depends on meticulous planning and dynamic strategies 18. Sales forecast must change as conditions change. Explain the AIDCA process of selling 6. After sale service. Describe the various qualities of a successful salesman. Personal selling is an element in the promotion – mix of any marketing strategy. In a competitive environment. An effective and successful salesman should have the knowledge of self. Define personal selling. Sales targets are fixed on the basis of past experience. (b) (c) (d) Direct denial method of overcoming objections.Marketing Management 3. 5. training and evaluation of sales personnel also come within the purview of sales management.attracting attention. Prospecting 18. directing. Tact. 4. He must possess a certain qualities in order to become successful. targets can be based on the different aspects of sales strategies. pre-approach. time period and brand positioning in the market.11 ASSIGNMENT QUESTIONS 1. the knowledge of the company and its product and that of the competitors too. organizing. 18. Canons of a successful close. 4. conviction an ultimately action process is also followed by the salesmen. 2. creating desire.9 KEY WORDS Sales Management Cycle. coordinating. He has to develop his sales personality. 3. State and explain in brief the various stages which are followed by salesmen. 18. Target-Setting: Target-setting is necessary for achieving organisational goals. Sales Forecasting: It is difficult to say how long consumers will continue to accept wasting goods in a changing environment. motivating and controlling of sales-force. It involves primarily prospecting. Various methods of principles exist for successful personal selling at each stage. Define sales management. Qualities of salesman. awakening interest. new fashion articles. which is changing fast with new competitors. It embraces within itself the planning. presentation and demonstration and meeting objections of prospective buyers. Recruitment selection.8 SUMMARY Sales management is an important aspect of overall marketing management.10 REVISION POINTS Selling process. AIDCA. new technologies. new advertising strategies being regularly introduced. approach. Write notes on (a) Prospecting. Give an overview of its scope and functions. What is effective personal selling? How can this be developed? 181 .

P. PHI.M. & Sahoo S. New Delhi.C. 2. A. 3. 1988. Jha. New York. Sales Management: Decisions. Professional Sales Management. and Singh L. Nayak. Salesmanship. S. 1976. 182 . et al.P.Marketing Management 18. New Delhi. Cuttack. Books and Books.12 REFERENCE 1. Himalaya. Sales Management and Advertising. Marketing Management in Indian Perspective. et al.R. Anderson Rolph E. 1994. McGraw-Hill. Policies and Cases. 4. Still R. 1988.

No dealer was appointed in Bombay where the competition way very tough. & D and State tenders.S. help Helix in selling its daily production of 2.000 gloves in the market. To push the sale of its gloves it also advertised its products in medical journals and put up stalls in medical and surgical conference. soil testing sheets etc. mask equipment. to Re. entered into the business of manufacturing surgical and post mortem hand gloves in December 1968. saline and blood transfusion tubing.25 initially fixed price.1 per pair. One of the its partners. 1/. Helix sold their brand of gloves. Calcutta and three in Delhi. decided to experiment and identify the effect of price reduction on the sale of this product. surgical trade. finding that its product was not moving notwithstanding the fact that Helix’s marketing mix compared favourably with its competitors. They had an open channel policy.25 per pair. (Tensile Strength) and E. a partnership concern which was in the business of Surgical and Medical equipments. through wholesalers and dealers and were able to keep to delivery schedules. Which they called super tax.. In promoting the sale of gloves Helix put up sign boards in important surgical and medical equipments markets. Swastik Rubber which was the biggest company of the lot was marketing about 30. As a result of this decision the price of its brand of product super tax was reduced from Rs.B. which was lower than its three main competitor’s 183 . D. In term of quality its products was superior to two of its competitors but occupied a second place when compared to Dial Rubber Works of Bombay.1.L. who had his training in the area of marketing in one of the best business schools of U. Helix appointed one dealer each in Madras. and Swastik Rubber of Poona. The market for gloves consisted of hospitals. These concerns were selling gloves on an approximate rate of Rs. When Helix first started manufacturing gloves is tried to sell its products at the rate of Rs. Being a surgical item the product however has to satisfy the minimum specifications in respect of T. B. Phoenix of Bhavnagar.000 pairs per day.1.G. It invested Rs. individual doctors and pockets of medicines. The reduced price also did not make any difference in the sale of super tax. however. The above marketing mix did not.S.000 pairs of hand gloves everyday.Marketing Management CASE STUDY – 1 HELIX LATEX INDUSTRIES Helix Latex Industries. It again reduced the price to 87 paise per pair. Helix Latex faced competition mainly from dial rubber works of Bombay.000 pairs per day.A.5 lakhs in plant and equipment to manufacture this item and started manufacturing 2. There were about 30 other manufacturers in this field nearly all of them coming under the classification of small scale industries. manufacturing between 25 and 30 items like feeding nipples.S.B. On finding that the reduced price of 87 paise. The first two companies were selling about 60. (Elongation and Break) laid down by the Government which required testing of the product in the Government laboratories before permission to market them was granted.

000pairs it could produce every day. The firm was really at a loss to understand what mix and strategy it could adopt to achieve success in its sales efforts? QUESTIONS (a) What are the basic problems being faced by the Company in marketing its products? (b) (c) What are the strength and weaknesses of the company? What marketing mix and strategy would you recommended to the company? 184 . again failed to tick.per pair.1/. On reviewing other elements of the marketing mix.Marketing Management prices in the neighbourhood of Rs. however. No tangible difference was. Unfortunately all these changes did not help Helix in marketing all the 2. Helix in order to improve upon its competitor’s strategy decided to grant 3 months credit facilities. made to sales of super tax by third downward exercise in price reduction. it was found that the Bombay concern was selling for cash and was not giving any credit facilities while its two other competitors were allowing 30 days credit. a decision was ten to further reduce the price to 75 paise per pair.

as this mechanized unit will have a proven advantage over his nearest competitors ‘M/s Hindustan Bread’ in ensuring better supply and quality consistency.. generally give supply contract after calling for tenders. Chief 185 . Ram Murty. Their manufacturing process is not mechanized. Rao entrusted the job of developing suitable marketing strategy to TG again. a reputed consultancy firm in the city for a feasibility study of the proposed venture. Having gone through MIG’s finding and recommendations. There is no prominent branding. and also some units sell bread without packing. he intends to purchase the required machinery from “Britannia Industries Limited” of Germany. These institutions. They are also reluctant to get these items form hotels on the grounds of health of hygiene. He is also interested in starting a chain of bakeries in the city. It is worth nothing here that. Regarding breakfast habits of most of the people. In addition. a majority of employees have to travel on an average of 12kms. Some of the industrial units and some big hospitals are large scale customers of bread in the city. Rao. it time consuming. Bread –making and marketing in the city is unorganized.Marketing Management CASE STUDY – 2 PROMOTIONAL STRATEGY FOR BREAD MARKETING Mr. Rao approached ‘Thick Group’ (TG). Mr. working women account for 0. Rao’s venture. it has been observed that they are in the habit of taking idly. which is marketing bread. Other bakery products will be added to the product line at a later date. dosai. this segment of customers is not happy with the regularity of supply and inconsistent quality of bread supplied by ‘M/s Hindustan Bread’. and packaging activity in other units. labeling. Coimbatore is developing fast industrially with a population of 6 lakhs. dosai etc. According TG conducted an exhaustive market survey. a successful businessman in Coimbatore. cost. Out of the total population.. Mr. For this purpose. Most of these working women expressed that the preparation of conventional break – fast items like idly. Rao is interested in introducing two varieties of bread viz. There are about 30 small bread making units. everyday and reach work-place before 8’0 clock in the morning. Out of lakh working population. etc. Mr. ‘milk bread’ and ‘fruit bread’.000 loaves per day. At present ‘M/s Hindustan Bread’ is the only large scale. Rao can also have economies of scale with this mechanized unit. Mr. TG has a strong felling that there is a good market potential for bread in Coimbatore. As most of the industries are located in the outskirts of the city. The proposed unit’s installed capacity is 30. TG has made a positive case for Mr. whose markets are limited to the places where they are located. semi mechanized bread-making unit. Most of the units simply wrap the bread in a white paper. under the brand name ‘Hindustan Bread’. The following are the finding of the study.20lakh. which is the sole supplier of bread to this segment. puri. plans to launch a mechanized bread-making unit on a large scale. Mr. where a change in the breakfast habits in favour of bread can be brought about by an aggressive promotional campaign. and lack of good hotels in their localities.

If you are in the place of Mr. Do you think that TG’s recommendation for aggressive promotional programme is a suitable marketing strategy to brig about this desired change in the breakfast henbits of the working people? 3. What are the important points that emerge from this case? 2. Krishna Reddy. Krishna Reddy. one of the TG’s senior executives. QUESTIONS FOR DISCUSSION 1. how would you work out suitable promotional programme for Mr. Rao.Marketing Management Executive of TG entrusted this job to Mr. 186 .

Irwin. “A channel is the pipeline through which a product flows on its way to the ultimate consumer. Richard D. The American Marketing Association defines marketing or distribution channel on “the structure of intra-company organisation units or extra-company agents and 187 .11 Model questions 19.1 Introduction 19. 19.1 INTRODUCTION Placement or distribution of goods is an important element in the marketingmix since the product/service must reach the consumer in right quantity and at right time. There are a number of middlemen with varied roles and functions between the manufacturer or producer and the consumer or user. the manufacturer markets his product to the ultimate user”. The manufacturer puts his product into the pipeline or marketing channel and various people move it along to the consumer at the other end of the channel. 19.6 Channels of Distribution for Consumer and Industrial Goods. Clewett states.4 Role and Function of Retailers 19.Marketing Management LESSON – 19 DISTRIBUTION CHANNELS OBJECTIVES After reading this you will be able to understand.7 Factors influencing distribution decisions 19. Richard M.10 Revision points 19.5 Selection of Channels of Distribution 19. (Marketing channels fore manufacturer products.8 Summary 19. They constitute the marketing channel involving them on the process of making a product or service available for use or consumption by consumers or industrial users.2 Meaning and Importance of distribution Channels 19. 1954) Somebody has said. STRUCTURE 19.9 Key words 19.2 MEANING & IMPORTANCE OF DISTRIBUTION CHENNALS Large.12 Assignment questions 19. The role and functions of wholesales and retailers. The considerations/factors involved in alternative method of distribution. Meaning and importance of distribution in marketing.3 Role and Function of Wholesalers 19.scale production of to day has necessitated the use of different channels of distribution or marketing channel. Major channels of distribution for both industrial and consumer products. Illinois. “Marketing Channels are the combination of agencies through which the seller who is often through not necessarily.13 Terminal exercise 19.

product or service is marketed”. 1. Good received in car loads are sold in case lots. 2. (b) Accumulation: It involves bringing similar stocks from a number of sources together into a larger homogeneous supply (wholesalers accumulating various goods for retailers and in turn. Since the location of supply and demand points are at widely different locations. Channel intermediaries arise to adjust the discrepancy of assortment and through the performance of sorting processes. This is the discrepancy of quantity and assortment in the exchange process. (c) (d) While sorting out the accumulation predominate in the agricultural marketing. retailers for consumers). separating the potatoes from the supply of vegetables to a restaurant. This difference in line of production and consumption are referred to as temporal discrepancy which requires for risk inventory stocking. 188 . For example. there is the need for physical movement of products. This discrepancy arises out of the fact that manufacturers typically produce a large quantity of limited variety of goods whereas consumers usually desire only a limited quantity of wide variety of goods. Allocation: It involves breaking a homogeneous supply down into smaller and smaller lots. The sorting function performed by intermediates includes the following activities. Intermediaries arise in the process of exchange because they can improve the efficiency of the process. Importance of Distribution Channel The importance of distribution channels can be examined with reference to the need for their emergence and functions they perform. The producers produce large quantities of an item while the individual consumer purchases a limited quantity of wide variety if items at a given point of time.Marketing Management dealers. The demands of consumers at different geographical locations are intermittent and smaller in quantity. whole and retail. This is referred to as spatial in advance to cater to the demand. So to facilitate exchange specific quantities and unique assortments must be built up from the product range. (a) Sorting out: It involves breaking down a heterogeneous supply into separate stocks that are relatively homogeneous. The Sorting function is necessary to bridge the discrepancy between the assortment of goods and services generated by the producer and demand by consumer. prohibiting individual customer specific transportation. This does not guarantee and exchange. Assorting: It involves building up the assortment of products for resale in association with each other. There is a variation in quantities and assortment demanded. The other factor is the buyers’ intention to buy on believes that right products are available at right quantities and at desired assortments. through which a commodity. allocation and assorting are marked in finished goods.

Since Exchange relationships between buyer and seller are standardised resulting to routinization of lot size. grocery. Wholesale and retail institutions are organized by separate lines to trade such as hardware. amount and timing of payment. Intermediaries make possible the flow of products from producers to buyers by performing three basic functions. Channels also look-after physical distribution and financing function. Marketing agencies group together in channel arrangements to provide for the routinization of transactions. frequency of delivery and payment. 1) must be performed in a marketing channel even though each channel member may not participate in all three. Every transaction involves ordering of.Marketing Management 3. (a) Intermediaries perform a transactional function that involves buying. valuation of and payment for goods and services. they promote transfer of technology and act as change agents. a sequence of marketing intermediaries can group together in a channel structure. Intermediaries perform a logistical function evident in the gathering. chain shops. 189 . etc. The process facilitates the development of exchange system. Channels facilitate the searching process: There is a double search for each other by both buyers and sellers in market place. This process involves the risk of uncertainty because producers are not certain of consumer needs and consumers are not certain about their products they are looking for. Marketing channels facilitate the process of searching when. for example. The members often negotiate about which specific function they will perform which results in reducing the channel conflict. storing and dispersing of products. The cost of distribution can be minimized if the transactions are routinised. which assist producers in making goods and services more attractive to buyers. They also provide a vital input for salesmanship. The channels provide distributional efficiency to the manufacturers. 4. sugar are available through various types of outlets like general stores. super markets etc. The seller and buyer must agree to the mode. medicine. The channel’s role is to specialize in exchange efficiency and value assortment to provide customer satisfaction at the right time with right product at correct price. Distribution channels play a decisive role in the successful marketing of many products because they aid in mass consumption. (b) (c) All three groups of functions (Fig. Thousands of automotive parts are supplied to the spare part retailers by the local wholesalers within few hours or requisition. Routinisation leads to standardisation of performance of goods and services and encouraged high valued items production. Channels help in merchandising and implementing price mechanism. Mass consumption products like chocolates. selling and risk taking because they stock merchandise in anticipation of sales. bread. Intermediaries perform facilitating functions.

162-63. financing of the proceeding level takes place. John Willey & Sons. Physical possession. New York. Broad Functions of intermediaries Source: Reproduced from Fredrick E. testing or judging products and assigning them quality grades : Providing information to customers and suppliers including competitive conditions and trends. Sorting Transporting c) Facilitating functions Financing Grading Marketing information & Research Fig. The negotiation finance and risk flows move in both directions. when inventories along with its title are held by a channel member. ownership and promotion are typically forward flows from producer to consumer. possession and payment for goods or services. Ordering payment are backward flows. 1979. pp. Each of there moves ‘down’ the distribution channels.Marketing Management Type of function a) Transaction functions Buying Selling Risk taking b) Logistical functions Assorting Sorting Description : Purchasing products for resale or as an agent for supply : Contacting potential customers promoting products and soliciting orders : Assuming business risks in the ownership of inventory that can become obsolete or deteriorate. A channel symbolizes the path for movement. At any point of time. Webster Jr. Industrial Marketing Strategy. 190 . : Purchasing in large quantities and breaking into smaller amounts desired by customers : Physically moving a product to customers : Extending credit to customers : Inspecting. Eight flow functions take place through channel. This movement may be title.1. : Creating product assortments from several sources to serve customers : Assembling and protecting products at a convenient location to offer better customer service.

The wholesaler’s role is for value addition for suppliers and customers as illustrated below: 191 . commercial and institutional users or to other wholesalers. agency & Media Manufacturer Dealers Buyers Fig. 2 Marketing Flow s in Channels 19. industrial. Wholesaler is commonly defined as an intermediary who sells to other intermediaries usually to retailers. The wholesaler’s role in the modern business is shaped by the vast economic task of coordinating periods and places in which goods are produced and consumers.Marketing Management a) Product flows Suppliers Shippers Manufacturer Dealers Buyers b) Title flows Suppliers Shippers Manufacturer Dealers Buyers c) Payment flows Suppliers Banks Manufacturer Banks Dealers Banks Buyers d) Information flows Suppliers Shippers Manufacturer Distributors Buyers e) Promotion flows Ad. This sort preceding the essence of their economic viability that helps in reducing the discrepancy of assortment. Wholesalers are defined as all establishments or places of business engaged in selling merchandise to retailers.3 ROLE AND FUNCTION OF WHOLESALER Wholesaler is one of the important members among the primary participants in a channel system.

A merchant wholesaler’s compensation is the profit made on the sale of goods. 3: Types of wholesaling intermediaries Merchant wholesalers are independently owned firms that take title to the merchandise they handle. Merchant wholesalers are classified as either fill service or limited service wholesaler. depending upon the number of functions performed.Marketing Management Marketing functions performed for Manufacturer Marketing functions performed for Customer * * * * * * Market coverage Inventory holding Customer support Market information Order processing Sales contract Wholesalers perform all these functions * * * * * * Product availability Assortment convenience Bulk Breaking Customer service Credit & Finance Advice & Technical Support RESULT Value added (Reflected in Margins earned by w holesalers) Fig. 2 Value Addition by Wholesaler through the performance of Marketing Function CLASSIFICATION OF WHOLESALERS Full Service Wholesaler Merchant w holesaler General merchandise Specialty merchandise Limited Service Wholesaler Rack jobbers Cash and Carry Drop Shippers Truck Jobbers Agents Agents and Brokers Manufacturer' s Agent Selling Agent Brokers Branch Offices Manufacturers Branches and Offices Sales Offices Fig. 192 .

house wares. Familiar products such as history. Four major types of limited service wholesalers exist. They are used extensively automotive industry. determine distribution policies and make recommendations on product strategy. office supplies. Manufacturer’s Agents work for several producers and carry non-competitive. perform all channel functions and sell on consignment to retailers which means that they retain the title to the products displayed and bill retailers only for the merchandise sold. agents and brokers do not take title to merchandise and typically provide fewer channel functions. They design promotional plans set prices. Specialty merchandise (limited time) wholesalers offer relatively narrow range of product but have an extensive assortment within the product line carried. They usually handle limited assortments for fast moving or perishable items. complementary merchandise in the exclusive territory. lumber and chemicals. They act as a producer’s sale arm in a territory and are principally responsible for the transactional channels functions. They are found in health drinks. Cash and carry wholesalers take title to merchandise but sell only to buyers who call on them. automotive parts and seafood industries. footwear and fabricated steel industries. This wholesaler is common in electric.Marketing Management Two major types of full service wholesalers exist. Truck jobbers are small wholesalers who have a small warehouse from which they stock their trucks for distribution to retailers. 193 . They carry limited product information. These wholesalers do not maintain much depth of assortment within specific product lines. Drop shippers are used for bulky products like coal. toys. Selling agents represent a single producer and are responsible for the entire marketing function of that producer. hardware products and groceries. Agents and brokers: Unlike merchant wholesalers. Brokers are independent firms or individuals whose principal function is to bring buyers and seller and together to make sale. Rack jobbers furnish the racks or shelves that display merchandise in retail stores. General Merchandise (full time) wholesalers carry a board assortment of merchandise and perform all channel functions. pay cash for merchandise and furnish their own transportation for merchandise. health and beauty aids are sold by rack jobbers. Manufacturer’s agent and selling agent are the two major types of agents used by producers. They make their profit from commissions or fees paid for their services where as merchant wholesalers make their profit from the merchandise sold. stock or deliver if the simply solicit orders from retailers and other wholesaler and have the merchandise shipped directly from a product to a buyer. They design promotional marketing function of the producer. They usually do not have continuous relationship with the buyers or seller but negotiate a contract between two parties and then move on to another task. Drop Shippers or desk jobbers are wholesalers who one the merchandise they sell but do not physically handle.

Inventory holding function: Wholesalers take title to and usually stock the products of the manufactures. A Manufacturer’s Sales Office does not carry inventory typically performs only a sales function and serves as an alternative to agents and brokers. IV. There is also the wholesalers’ ability to bring together from a variety of manufacturers an assortment of product that can greatly simplify their customer’s ordering tasks. assembly and set up of products. To have good market coverage so that their products are readily available to customers when needed. I. Sales Contact Functions: The cost to cover the spread over market by sales force will be prohibitive. manufacturer’s branches and offices are wholly owned extensions of the producer that perform wholesaling activities. Many manufacturers find it uneconomical to sell it to small customers by performing bulk – breaking functions. agents and brokers. Functions of wholesalers The following are the marketing functions performed by the wholesalers. So they are in a good position to learn about customers’ product and service requirement. manufacturers can call on wholesalers to secure the necessary market coverage at reasonable cost. VI. Second. Producers will assume wholesaling functions when there are no intermediaries to perform these activities. Customers also do not need large quantities. manufacturers are able to reduce significantly the costs of outside sales contacts. Market Coverage Function: Markets for the product of most manufacturers consists of many customers spread over large geographical areas. after sales service information. By doing so. V. customers are few in number and geographically concentrated or orders are large or require significant attention. Credit and Finance Function: Wholesaler provide their customer with financial assistance by extending open account credit on products sold. their customers have time to use products in their business before having to pay for them. Market Information Function: Wholesalers are quite close to the customers geographically and in many cases have continual contact through frequent sales calls on their customers. they can reduce the manufacture’s financial burden and reduce the risk with holding large inventories and also help in planning better production schedule. number and type of customer orders and supports required by customers from the company in the form of ineffective merchandise return. By using wholesalers to cover a substantial portion of the market.Marketing Management Manufacture’s Branches and Offices: Unlike merchant wholesalers. II. A Manufacturer’s Branch Office carries a producer’s inventory. which they represent. 194 . performs the functions of a full service wholesaler and is an alternative to merchant wholesaler. They also provide advice and technical support in the cast of high-tech industrial goods. by stocking and providing ready availability for many of the items needed by their customers would bear if they had to stock all of the products themselves. Product Availability Function: Probably the most basic marketing function offered by wholesalers to their customers is providing for the ready availability of products which sometimes cover the fabricating operation. III.

Many retailers often are able to influence marketing policies and practices of their suppliers. Retailers have many sources of power to draw upon in their attempt to develop market leadership. III.Marketing Management 19. renting and providing services to ultimate customers for personal. Time. I. possession and form utilities are offered by most retailers in varying degrees. They are distinguished from wholesalers by the fact that they sell primarily to ultimate users. The utilities provides by intermediaries are of major value to retailers. The example include retailer sponsored co-operative. dry cleaner. centralisation in decision making and purchasing is common. The customer gets a personalised service in these kinds of stores. The capabilities of a retailer to develop a large customer franchise and being trusted by consumers have included private label merchandise within their product assortments. The amount of space or shelf area is restricted providing a local monopoly to the retailer. II.g. 195 . Method of operation : : : : Who owns the outlet The degree of service provided to customer How many different types of products a store carries and in what assortment The manner in which services are provided – how and where the customer purchase products. Level of service III. the manufacturer’s alternatives are limited. Customer Franchise: Related to local monopoly is the concept of retail customer franchise. Form of ownership a) Independent retailer: This is the retail outlet common to every day life which is owned by an individual e. fluorist etc. b) Corporate chain: It involves multiple outlets under common ownership. So within a specific market area. These powers emerged because of their: I. Form of ownership II. preference desires and needs to the firms which supply them directly the desired market knowledge. Forms of retail outlets There is a wide variety of retail outlets but broadly they can be classified into I. wholesaler sponsored voluntary chains and franchising. Chain stores have advantage in dealing with manufacturers particularly as the size of the chain grows. non-business use. Local Monopoly: Retailing is highly distributed and spread over activity. Any time a retailer is able to obtain a price concession advertising support or faster delivery from a manufacturer influence has been exerted over that manufacturers policies. place. Close Proximity to the Customers: They collect market information and consumers raise their complaints. c) Contractual system: It involves independently owned stores that band together to act like chain. Retailing includes all activities involved in selling.4 ROLE AND FUNCTION OF RETAILERS Retail trade is defined by the Bureau of Census as “all establishment engaged in selling merchandise for personal or household consumption and rending services incident to the sale of such goods”. In a chain operation. Merchandise line IV.

Financing and Risk Bearing The retailer negotiates with the wholesaler and manufacturer is quality. 5. III. Provide inventory facility 6. computer and tele-shopping. the retailers order the merchandise through the wholesaler to manufacturer. They also help in financing consumer by extending credit facility for regular or bulk buying. Make the required assortment in variety and quantity 7. Merchandise line a) Depth of Line: These kinds of stores carry a considerable assortment (depth) of a related line of items. payment and information flow Anticipating or reacting to the needs of customer. Take possession of merchandise from wholesaler. Stores that carry tremendous depth in one primary line of merchandise are single line stores. Level of service a) Self Service: It is at the extreme end of the level of service continuum because the customer performs many functions and little is provided by the outlet. IV.Marketing Management II. d) Order.g. vending machines. Method of operation a) Store Retailing: Traditionally. b) Non-store Retailing: It occur outside a retail outlet such as through direct marketing e. c) Full Service: These retailers provide a complete list of services to cater to its customers. merchandise return and telephone ordering. Functions of retailer The retailer is the ultimate connecting point to the consumer in distribution channel. retailing meant the consumer went to the store and purchased a product which is store retailing e. departmental stores and limited and single the specialty stores. These are referred to as general merchandise stores. There are limited line stores. but not unusual size. store display and act as final dispenser of sales promotion schemes to the consumer. Also negotiates with consumers. Department stores are considered as limited service outlets. corporate chains. a large department store carries a wide range of different types of products. Change the title of the merchandise to customers. mail order. b) Limited Service: These outlets provide some services which as credit. Specialty stores are among the few stores in this category. As risk accompanies ownership. e.g. Home building supply outlets.g. The retailers perform various functions such as: a) Physical flow 18. Accepting payment from the 196 . b) Promotion Retailer takes an active part in producers promotion programme by facilitating POP display. the retailers assume all the risk inherent in ownership of goods. b) Breadth of Line: These stores carry a board product line with limited depth. price stocked quantity and terms of sale. c) Negotiation. discount stores and catalogue showroom are often self service.

the greater the work provided by the channel. They include: Lot Size: It is the number of units that the channel permits an individual customer to buy on one situation. The number of middlemen in any local is ought to be limited i. Perishable products require more direct marketing. backward in the channel. Retailers form a vital link in the two way flow of information about customer response. The greater the service back up. There are five service outputs produced by channels. after deducting their margin. repairs provided by the channel.e. The smaller the lot size the greater the service output level that the channel must provide. Step I Step II : : Analysing service output levels desired by customers Establishing channel objectives Identifying the major channel alternatives Evaluating channels. it branches out to new markets and operates with existing intermediaries. 197 . fabrication and maintenance are sold by company itself. delivery. installation. Service back up: Services back up represents the addition on services like credit. Since it has limited capital. product assortments. The following steps are involved while selecting and designing a distribution channel. Products which require installation. a few manufacturer’s selling agents. several established retailers. Establishing channel objectives These objectives should be stated in terms of targeted service output levels. Non standardised products are sold directly by company sales representatives. 19.5 SELECTION OF CHANNEL OF DISTRIBUTION A new firm typically starts as a local operation selling in a limited market. Waiting time: It is the average time that customers wait for receiving the goods. Convenience: This expresses the degree to which the marketing channel makes it easy for customers to purchase the product. Step III : Step IV : Analysing service output levels desired by customer There is diversity in the customer’s buying needs. Product variety: It represents the breadth of assortment provided by the marketing channel customers like greater assortment breadth because the chance of exactly meeting their need. few wholesalers. merchandise choice and frequency of buying. Deciding upon the best channels is a challenging task if the new firm is successful. Bulking products such as building and machinery material require channels minimizing transportation and shipping distance and the number of handling in the movement form producer to customer. Faster service requires a greater service output level. product and promotional information. Customers normally prefer fast delivery channels. it uses existing middlemen.Marketing Management customer is consideration for the transfer of ownership retailer pass on the payment. Channel objectives vary with product characteristics.

b) Adaptive Criteria: The order to develop a channel.Marketing Management Similarly high unit value products are often sold through a company sales-force. The balance of the dynamics of marketing control between intermediaries and manufacturer should be considered. Selective distribution involves the use of more than a few but less than all of the intermediaries who are willing to carry a particular product. The policies involved are price policies conditions of sale. (b) Adaptive criteria. The intermediaries can be of the manufacture’s agents or independent units or manufacture’s sales-force. there should be the identification of channel alternatives. c) The manufacturer must determine the conditions and responsibilities of the participating channel members. An exclusive distribution involves severely limiting the number of intermediaries handling the company’s merchandise. As in the ultimate flow of products. 198 . This type of distribution is used by established as all as new organisations. An intensive distribution involves planning the goods or services in as many outlets as possible. In this case the producer exercises a great deal of control. it is required to offer greater intensity of distribution. a) Economic Criteria : Each channel member produce a different level of sales and cost. So in rapidly changing volatile or uncertain product markets. (c) Control criteria. To get the locational convenience. A channel alternative is characterized by: (a) (b) (c) Types of business intermediaries The number of intermediaries The responsibility and duty of each channel participant. Identifying the major channel alternatives After defining the target market and the variability of customer needs. the producer needs the channel structure and policies to maximize control over the members. territorial rights and mutual services to be performed by each party. the members must make some degree of commitment to each other for a specified period of time. b) The number of intermediaries decides the type of distribution the organisation prefers. price and communication these channel members perform a varying degree of function. Evaluating channels The various channels so selected needs to be evaluated against (a) Economic criteria. c) Control Criteria: The area of channel evaluation should be broadened to include the control criteria. a) There are various kinds of intermediaries and each them differ in their role and function. Whether the company salesforce or the intermediaries will be generating more sales and the cost involved in maintaining each of these alternatives are to be analysed. Channel design decision maker should do the strength and weakness analysis of each member and the decision should be adaptable to a larger environment.

Channels for Consumer Goods A Producer B Producer C Producer D Producer Agent Whole saler Whole saler Retailer Retailer Retailer Consumer Consumer Consumer Consumer Fig. 4 Common Marketing Channels for Consumer Goods and Services Channel A represents a direct channel. increases the channel is viewed as increasing in length. Channel B. is manufacturers and many small retailers and an agent is used to help coordinate a large supply of the product. 199 . with a retailer added is most common when a retailer is large and can buy in large quantities from a producer. 5 Common Marketing Channels for Industrial Gods and Services In contrast with channels for consumer products. The remaining three channels B. Many products and services are distributed this way. individual channels typically are shorter and rely on one intermediary or none at all because industrial users are fewer in number and tend to be concentrated geographically and buy in larger quantities. chocolates and magazines. because a producer deals directly with each consumer.6 CHANNELS OF DISTRIBUTION FOR CONSUMER AND INDUSTRIAL GOODS The channels for consumer goods and industrial goods differ widely because of customer demands. are indirect channels. Adding a wholesaler in channel C is most common for low cost.C. As the intermediaries between a producer and buyer. because intermediaries are inserted between the producer and consumers and perform numerous channel functions. B.Marketing Management 19.D. Channels for Industrial Goods and Services A Producer B Producer C Producer D Producer Agent Agent Industrial Distributor Industrial Distributor Industrial User Industrial User Industrial User Industrial User Fig. A. low unit value items that are frequently purchased by consumers such as sweets. Channels D.

The channel design is influenced by the company's long-term objectives. Many other firms have adopted this pattern to service their target markets. Market characteristics play an influencing more on distribution decisions. an agent. Channel structures for consumer and industrial products assume various forms based on the number and type of intermediaries. who serve primarily as the independent selling arms of producers are represent and producer to industrial users. In channel B an industrial distributor performs a variety of marketing channel functions. For example. Other channels are indirect channels. Channel D is the longest channel and includes both agents and distributors. For example. In an automobile dealership. It regularly announces the date. financial resources manufacturing capacity. The latter alternative may be costly but may ensure a high level of customer confidence. These are explained in the following section. 200 . the manufacturer trains the dealer’s employees in servicing the automobiles. A firm like sumeet. 19. distribute only through selected outlets in few markets or adopt an intensive distribution. if the customer wants a high level of service. the automobile manufacturer insists on investment in tools. Knowledge of the roles played by these intermediaries is important for understanding the channel operation. This channel arrangement is employed when buyers are large and well defined. Channel C. for example. has a mobile service concept to serve its customers. a leader in the mixer and grinder market. equipments and manpower training ensuring a high level of precision in servicing. the sales effort requires extensive negotiations and the products are of high unit value and require hands on expertise in terms of installation or use. marketing mix and even its philosophy. manufacturer will have to ensure that its channel members are able to provide it or else the firm will have to provide it. eater to all outlets in a given geographical market or distribute it exclusively all over the country. if the firm’s manufacturing capacity can only meet 25 percent of the total market demand it may be well advised to either fellow selective distribution. Company characteristics The next variable is company characteristics and objectives.Marketing Management Channel A is a direct channel and firms using this channel maintain their own sales-force and are responsible for all channel functions. Therefore.7 FACTORS INFLUENCING DISTRIBUTION DECISION The distribution patterns. introduces a second intermediary. time and place where its service van will be parked for the benefit of housewives and retail outlets. channel objectives and constraints are influenced by a host of variables.

A number of intermediaries/middlemen are engaged in the distribution of goods and service. a shorter channel or direct marketing is the most preferred alternative. For example. He takes possession of merchandise from the wholesaler. these firms aim at getting the highest share from such outlets. The channel members also facilitate the searching process. accumulation. Here the firm sells the product through its own solcs force. The wholesalers and retailers perform a number of functions such a sorting out. hence the longer channel. Intensity of Competition The nature and intensity of competition in the industry will determine the distribution pattern adopted by a firm. milk. If the product value and hence perceived risk is high. 19. Likewise. Hence. promotion and handing negotiations. as in the case of capital equipment or precious stones and gems. fruits and flowers require direct or short channels to reach the customer. eggs. Channel design reflects the strength and weakness of different intermediaries.Marketing Management Product Characteristics The next important variable influencing the distribution decision is product characteristics. allocation and assorting are marked in finished goods. The latter demands direct distribution. Other firms may have the policy of exclusive distribution-insisting that the intermediary deals in no other brand. toiletries. The wholesaler more specifically performs the functions which can be broadly grouped under market coverage function. Middleman Characteristics This refers to middlemen’s aptitude for service. allocation and assorting. store display and act as final dispenser of sales promotion schemes to the consumer. storage. The motto of any marketer is to see that the right production in right quantity at price is made available at the right place. contract and credit. if the product is perishable in nature. and so on. inventory holding function. The methods of distribution may broadly be divided into direct and indirect methods. Here. The retailer is the ultimate connecting like between the wholesaler and the consumer / user.8 SUMMARY Distribution is also an important element in the marketing – mix. market information function. He also takes active part in producer’s promotion programmes by facilitating POP display. 201 . sales contact function. footwear. The next product related factor to be considered is whether it's standardised or non standardised. While sorting out and accumulation predominate in the agricultural marketing. a dairy supplies milk in bulk to wholesalers or distribution points who then redistribute it directly to the customer either for n their outlets or through their own delivery boys. provides inventory facility. etc. the key issues for analysis are product value perceived risk and the nature of' the product. But this is not so in the case of non-perishable goods like textiles. Some firms may adopt an intensive distribution strategy and be indifferent to multiple brand outlets. Here. credit and finance function. bread. direct distribution or a shorter channel is advisable.

Irwin. 1988. Breadth of merchandise line. Houghton Mifflin Co. (ed. Marketing Management. 1954. Suppose 15 firms in an industry wished to reach 15.) Distribution Channels: Behavioural Dimensions. Richard D. 4. Customer franchise. Lowis W. Store retailing 19. establishing channel objectives. P. analysing service output levels desired by customers. Suppose the President of Libra Carpets has asked you to look into the possibility of by passing the firm’s wholesales (who sell to carpet department and furniture stores) and selling directly to these stores. Depth of merchandise line. Marketing Management. et al. Title flows. Product flows. Illinois . 202 . PHI.M.10 REVISION POINTS Local monopoly. What caution would you voice on this matter and what type of information would you gather before making this decision? 19. 19.Marketing Management Four major steps are involved in selecting the designing the distribution channel viz. Assorting. Irwin.9 KEY WORDS Sorting out. Kotler. Clewett. and evaluating channels. R.) Marketing Channels for Manufactured Products. Analysis.. Stren. Planning and Control.000 potential customers are selling to them directly. 1992. What are the various types of retailers and their functions? 5.. 2. Illinois. Logistical function. 19.12 ERMINAL EXCERCISE 2. Discuss the type and role of wholesalers in a channel? 3. REFERENCES 1. New Delhi. identifying the major channel alternatives. Richard D.11 ODEL QUESTIONS 1. Answer the following: a) What is meant by marketing channel? b) What are the basic functions performed by intermediaries? c) What utilities are created by intermediaries? 2. What are the functions of wholesalers and retailers? 4. David W. Transactional function. Cravens. Information flows 19. 3.12 ASSIGNMENT QUESTION 1. (ed. How many sales contacts would be required in this industry if each firm if each firm called on each customer? How many sales contacts would be required if an intermediary were placed between firms and potential customers. “The only distinction among merchant wholesalers and agents and pokers in that merchant wholesaler take title to the products they sell. Comment on the statement.

Thus. P.11 Terminal exercise 20. market forecasting.1 INTRODUCTION Physical distribution activities and decisions are important for many kinds of manufacturers.8 Model questions 20.6 Key words 20. Mc Carthy states that physical distribution is the actual handling and moving of goods within individual firms and along channel systems. P. USA status that physical distribution is a term employed in manufacturing and commerce to describe the broad range of activities concerned with efficient movement of finished products from the end of the production line to the consumer. The National Council of Physical Distribution Management. plant and warehousing site location. warehousing. materials handling. 554). 20. inventory control.2 Meaning. In some cases the physical distribution also includes the movement of raw materials from the source of supply to the beginning of the production line.7 Revision points 20. and customer service. implementing. PHI. New Delhi.5 Summary 20. protective packaging. Marketing Management.2 MEANING. Chicago. The management of physical distribution provides and exciting opportunity for improving customer services and reducing costs.4 Managing Physical Distribution 20. Objectives and Importance 20.10 Assignment questions 20. and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer needs at a profit (Kotler. these activities include freight transportation. affecting both customer satisfaction and bottom – line profit performance. wholesalers.3 Components of PDS 20. OBJECTIVES AND IMPORTANCE Meaning Physical distribution involves planning. and retailers. Managing the physical distribution function is considered in this lesson.1 Introduction 20. 1992.9 References 20.Marketing Management LESSON – 20 PHYSICAL DISTRIBUTION OBJECTIVES After studying this lesson you will be able to understand the following: The importance of physical distribution in marketing The various important elements in physical distribution STRUCTURE 20. it could be observed from the above definitions that physical distribution is a marketing term which refers to the broad range of activities connected with 203 . order processing.

The importance of physical distribution system will be better understood from the following: 1. Customer satisfaction is the end of all marketing activities.. physical distribution ensures better customer services. inventories. too strikes to achieve two broad marketing objectives. Physical distribution system helps to attain the objective of utmost customer satisfaction. 2.. A well-devised Physical Distribution system helps to minimize cost of marketing. In the process it adds to the value satisfactions of consumers. thus. By delivering products to target consumers at the places and time required. have registered a sharp increase primarily due to inflationary conditions all the world over. The specific objectives of physical distribution are: Minimizing inventory level Speeder transportation Minimum handling Minimum transhipment Of course. A sizable chunk of marketing cost cold very well is curtailed by evolving an appropriate PDS. An efficient service increases the probability of repeat sales. Consumer satisfaction and profit maximization. largely depend on what the company aims to achieve within given cost revenue constraints. etc. This is achieved through devising a constant delivery schedule. Even the best distribution channels are not likely to yield derived results without adequate support a provided by the system of physical distribution. A satisfactory physical distribution system ensures best possible warehousing. a higher customer retention rate and the addition of new customers. An efficient physical distribution facilitates lowering the level of stock and to avoid out of stock situations. order processing. all the major components of marketing cost. They physical distribution strategy will. 204 . materials handling. physical distribution. Importance Physical distribution system is the most powerful support to distribution channel.Marketing Management efficient movement of goods from the place of production to the place of consumption. All these help ultimately in profit maximization. A significant reduction in cost is also brought about by determining the optimum number and location of warehouses. increasing stock turnover and so on. Devising a constant delivery schedule results into lower inventory carrying costs and a reduction in the amount of capital tied-up in inventory. Recently. viz. Objectives Like other components of the marketing – mix. It is against this that physical distribution management assumes particular significance. improving the handling of materials. these objectives may very from company to company and even from situation to situation in a company. viz. transportation cost.

etc. in turn. In marketing. protective packaging. It plays an important role in the economic development of nation. Thus. and starting from station to customer 205 . large scale production would have been impossible. represents a major portion of national income.Marketing Management inventory control. loading and unloading. management chooses that mode which involves the minimum cost. 3. handling. physical handling. Hence PDS becomes important from the point of view of the national economy as well. transport discharges an important function. other things being equal. Speed refers to the pace of movement and it usually indicated in kilometers per hour. transportation refers to the movement of products from the warehouse (s) to the consumer destination (s). 1. etc. Better transport opens up new markets. the process of physical distribution is of utmost importance not only from the view point of the enterprise in question but also from the broader national angle. availability and safety. While calculating speed. stoppages. The distance criterion influences the ratio between the fixed and variable components of the total movement cost. aircraft. Land/Road Transport (Road & Rail way) Water Transport Air Transport Some of the factors determining the choice of selecting transport medium may be pointed out here. the time involved in transhipment. reliability. transport. ships docks. Without the development of transport. PDS creates time and place utilities: Physical distribution creates utilities of time and place of making available a product at the time it is needed and at the place where it is needed. Performance Criteria: Performance characteristics of each mode of transport considerably influence the choice of management. 4. Anyway. which gives the customer the service they expect. highways. since the entire work of assembling and dispersing of goods is done with the help of some form of transport. Cost: Cost of transport is indicated by the freight rate and total freight bill that a company is required to pay on the goods / Cargo. which. There are several models of transport such as. Transportation is the crux of the problem of physical distribution. increases the volume of production requiring the support of wider and larger transport facilities. order processing. trucks. road. 2.3 COMPONENTS OF PDS PDS comprises the following broad areas: Transportation As a component of the physical distribution system of an organisation. frequency. The important performance criteria are speed. 20. The distance to be traveled and the volume of products to be moved go to determine the cost. PDS form a major part of national wealth: PDS in the form of rail.

Similarly. The principal aim of inventory management is to ensure enough supply of all the materials and supplies of the quality essential to the business with the least of the inventory investment and inventory carrying cost. Perishable products and products having a high replacement rate and time value are best moved by the roadways whereas bulky goods like coal. Inventory control means holding balanced stock of materials and / or finished goods. Product suitability: Not all media are suitable for the movement of all types of products.Marketing Management destination are taken into account. etc. Reliability: It implies the dependability of the transport medium.e. dislocation owing to inclement weather. Dependability in indicated by the number of in-transit interruptions. The chromic wagon shortage makes railways a purely available mode. jewellery. Hence the choice of the transport medium is also determined by its suitability from the view point of product character. Safety is indicated by the possibilities of product loss and damage. are best moved by air owing to the low ratio of the transport cost to the product price. inprocess goods and finished goods available with a firm. supplies. 206 . Frequency: It refers to repetitive movement of the mode of transport from one place to the other. It’s the total time taken from warehouse to customer destination that is relevant. It is because of this reason that inventory management of physical distribution. Inventory management means the laying down of the policy to be followed regarding the holdings of stocks or raw materials and finished products and the implementation of this policy in the business. accident proveness. etc. electronic equipment. etc. never pay high prices and incur high freight and lose quantity discount because of buying in small quantities. component parts. There are daily rail and road cargo services from practically all trading centre in the country. products with a high unit value. A firm cannot succeed in maximizing customer satisfaction without effective management of inventories. oil. is best moved by railways and water ways. It aims at there objectives: Never run of anything (out of stock) Never build up a very large inventory i. road transport emerges successfully in this test. Availability: It implies flexibility and accessibility of the transport medium. Inventory Management Inventory refers to all kinds of materials. Safety: Safe and secure movement of products is important. having much of anything on hand (unwanted stock) Never send out too many small orders for more i.e. such as diamond. Both railways and roadways in these terms rank before airways and waterways.

primarily related to market. dispatch of smaller consignments to retailers. Under such assured delivery time. It is a full service warehouse. providing market intelligence and many other merchandising services of manufacturers. 2. there is only one dispatch point.g. Thus. As regards the location of warehouse. A distribution center provides services with the help of a computer and modern materials handling equipment. 3. In decentralized warehousing. The Minimum: It is the lower limit of inventory. The word storage means holding the stock of goods for a relatively longer period. Warehouse. It is the level of inventory necessary to protect against exhaustion of the stock during the time gap between the order date and date of receipt of stock. The standard order: It is the quantity of inventory to be requisitioned for purchase at any one time. handling and transport. The standard order. usually two options are available. to centralize warehouse facilities at one geographical location or to decentralize them at more than one location. When the level of inventory or the balance of stocks on hand reaches this ordering point. Products are shifted from the 207 . the ordering point can be easily determined. plan a strategy and accept risk and most favourable terms. It is the largest quantity to be kept in the interest of the economy. 4. We can only assess risk. sufficient margin must be provided for contingent delay or transport bottlenecks. involves more than storage. viz. Warehousing. Of course. storage is a function that helps in preserving the goods at one place until they are needed at another place. the products are first moved in bulk from the plant to different warehouse called distribution centers where these are assorted. regrouped. storage.Marketing Management It should be noted that the efficient inventory management can not eliminate business risk but it can certainly reduce it. Storage and warehousing Storage and warehousing is one of the important physical distribution functions of marketing. The standard order is the quantity for replenishment of stocks. It can reduce cost of inventory. breaking bulk. Thus. It must be always on hand. say 10 days from the date of receipt of an order. The supplier can help his customer by assuring delivery within a certain period. A reorder or repeat order for a commodity is always the same quantity until conditions change. It acts as a safety value. on the other hand. The Maximum: It indicates the upper limit of inventory or stock. perform many of the usual functions of wholesalers’ e. In centralized warehouse products are moved to the warehouse from the plant from where these are distributed to different markets irrespective of the distance. on the other hand. The ordering point: It indicates when to order or reorder. The centralized warehouse is built around the manufacturing plant while the decentralized warehouse is built at or in the vicinity of market. it is an indication that a new order or reorder must be placed at once. It is also called safety or reserve stock. necessitating a revision of the standard order. Standards in inventory control: There are four important standards in inventory control 1. and repackaged in customer acceptable sizes and delivered.

The former are owned and operated by the company itself and are often exclusively used by it. The ideal solution to the problem of PDS design is to develop minimum cost systems for a range of acceptable levels of customer service is a complex collection of demand-related factors under the control of the firm. Prentice Hall. As regards the ownership of warehouses. broadly two options are available viz. private warehouse(s) or/and public warehouse(s). including raw materials management.J. Many companies are shifting steadily from storage warehouses. 1973)). communication. but whose importance in determining supplier patronage is ultimately evaluated by the customer receiving the service. Englewood (Iiffs.Marketing Management factory to the distribution center directly and not to a storage warehouse. Business Logistics Management. 1. The distribution center is a new idea developed recently in India. (Ronald H. Identify and select design alternatives. Ballow. Measure customer service Several possible measure of customer services are shown in fig. The latter are those which are owned and operated by public institutions or other persons and are open for use by anybody at a charge who can confirm to certain rules and regulations. The customer services levels that may be provided range from very good to very poor. and warehouse and plant location. Five major factors affect customer service. It is a measure of how all the customer service function is being accomplished. N.4 MANAGING PHYSICAL DISTRIBUTION The design and management of physical distribution systems involve a number of business functions in addition to marketing. Customer service as it relates to the physical distribution function consists of providing products at the time and location corresponding to the customer’s needs. inventory control. The principal objective was to provide better customer service.. availability and convenience. The major steps in designing the PDS are: Establish PDS objective Measure customer service Examine cost trade – offs. Time dependability. Establish PDS objectives We have already pointed out earlier the objectives of effectives PDS. transportation. to distribution centers in their plans of physical distribution. manufacturing. 20. 208 .

III: Richard D. The post-transaction elements measure customer service based and sellers is an important factor in customer service.offs Trade-off analysis in PDS design is the evaluation of the costs of each system component with the objective of determining the combination of components that provides a minimum total cost system for specified customer service level. The arrows indicate the trade –offs between activities the must be evaluated in: Estimating customer service levels. 1982). 1 Possible Measures of Customer Service Performance Douglas M. Lambert and James R. 75 The choice of an appropriate measure or measures is situation specific and is based on the service factors(s) most closely linked to customer satisfaction. Developing purchasing policies Selecting transportation policies Making warehousing decisions Setting inventory levels 209 . The pre-transaction elements use measure that designate service capability before it is provided. Examine cost trade . Irwin. The inter–relationships of various PDS components are shown fig.Marketing Management Pretransaction elements Inventory availabilty Target delivery dates Customer service Transaction elements Order status Order tracing Backorder status Shipment shortages Shipment delays Product substitutions Routing change Postransaction elements Actual delivery dates Returns adjustments Source: Fig. A target delivery date indicates the planned time or delivery. Strategic Distribution Management (Homewood. p.2. Stock. The transactions elements gauge service performance for various components of buyer – seller transactions.

stock-outs etc. In many cases. Management judgment and experience will often dictate a range of customer satisfaction levels that are acceptable to the firm.Marketing Management Product Price Promotion Marketing Plac-customer service levels (cost of lost sales) Physical distribution Inventory carrying costs Transportation costs Production lot quality costs Order processing and infomation costs Warehousing costs (throughput costs not storage) Fig. Approaches for organizing physical distribution include: 210 . They are: Estimate sales response to customer service Minimize total PDS costs Like product management. Identify and select design alternatives A key issue in designing the PDS is how to incorporate the customer service objective into the design process. 1976) p. Since certain elements of the distribution function are often more important than others in a given firm. distribution involves areas of the firm that have traditionally been separated. but rather in terms of lot orders. trade-off analysis should be directed to those elements that comprise the major portion of distribution costs. delays.2 Cost Trade-offs in a Physical Distribution System Source: Douglas M.7. The Development of an Inventory Methodology: A study of the costs Associates with Holding Inventory (Chicago: National council of Physical Distribution Management. Lambert. Two possible approaches may be considered as alternative ways of handling the customer service objective. these levels may be expressed not as percentage.

The integration of physical distribution activities may evolve time. Various criteria are followed in selecting the mode of transport. (a)State how the PDS can contribute to the creation of time. The establishment of a separate organisational until for distribution management and coordination. PDS helps to minimize marketing cost. What do you mean by physical distribution? Describe its importance in marketing of goods and service. coordinate and when necessary. inventory decisions are concerned with balancing the costs of carrying inventory. It may range from a small staff organisation that is primarily responsible for analysis.5 SUMMARY Physical distribution is an important aspect of overall distribution in marketing.8 MODEL QUESTIONS 1. Such companies have succeeded in reducing appreciably the number of storage warehouses. and coordination to a line operation with responsibility for such distribution activities as warehousing. State the objectives of an effective PDS. measuring customer service. Cost trade-offs. inventory management and control. and controlling other inventory costs to achieve a desired level of customer satisfaction. The unit should be headed by a professional physical distribution executive. 211 . What are its major components? Discuss in brief. To ensure better customer service. It is also termed as the other half of marketing. 20. reliability etc. ordering products from suppliers. Transportation.7 REVISION POINTS Components of PDS 20. cultivates demand and has a direct bearing on the standard of living of the people at large. and order processing. The assignment of management responsibility to an existing functional area in which several distribution activities are already being performed. place and possession utilities.. safety. 20. examining cost trade – offs. and identifying and selecting design alternatives. transportation. modify distribution activities and interrelationships. The PDS planning and designing process involve establishing PDS objectives. beginning with a task force approach and ultimately developing into a separate organizational until. to reduce cost and ultimately to provide best service to customers are the important objectives of any efficient PDS. planning. (b)How does physical distribution contribute to the firm’s marketing programme? 3. creates time and place utilities.6 KEY WORDS Customer service level. to lower the level of stock.Marketing Management The use of a task force to monitor. It is observed that many companies are shifting steadily from storage warehouse to distribution centers in their plans of physical distribution. such as speed. Distribution centers 20. storage and warehousing are the major components of any PDS. 2.

New York.M. Irwin. Cravens. evolve a market driven distribution system for the Indian market. As marketing director of kellogg’s. Stock. Snykay. Lambert and James R. 212 . 1961. Physical Distribution management. 4.Marketing Management 20. 1982. 1990.10 ASSIGNMENT QUESTION 1. Inc. Macmillan Co.. Douglas M. Illinois. Homewood.9 REFERENCES 1. Richard D. 1982.C. Strategic distribution management. Homewood. Richard D. New Delhi. David W. E. 20. 3. et al. “Managing physical distribution involved balancing distribution costs against acceptable level of customer services and satisfaction”. introduction. Irwin. TMH. Explain :20. Gandhi J.11 TERMINAL EXERCISE 1. Illinois. 2. Marketing management. marketing – A management.

This in turn. Illusions. acquiring.8 Revision points 21. is a complex problem.4 Marketing research process 21.6 Summary 21.12 Terminal exercise 21.1 INTRODUCTION Decisions – making in various areas marketing management.7 Key words 21. and interpreting information relevant to a marketing decision – making situation (Cravens. etc.9 Model questions 21. STRUCTURE 21.11 Assignment question 21.1 Introduction 21. This job of collecting. you should understand the following: The meaning. recording and analysing of data about problems relating to the marketing of goods and services. such as pricing. 631). promotion and distribution. of marketing research. Marketing research is a step – by – step process of planning for.5 Types of marketing research 21. product development. scope and objects.2 Marketing research – meaning. 1988. It is a search for data which are relevant to marketing problems – distribution. Richard D. objective and exhaustive search for and study of the facts relating to any problem in the field of marketing. Importance and scope 21. It is essential for every marketer to develop a dependable marketing data and information base for rational decision – making. The marketing research process. analysing. Hills and Woodruff. Marketing management. P.3 Objects of marketing research 21. recording and analysing relevant data for marketing decisions is known as marketing research. promotion. An analysis of the definition reveals the following salient features of marketing research: 1. Irwin.Marketing Management LESSON – 21 MARKETING RESEARCH OBJECTIVES After studying this lesson. depends on collection. recording and analysing relevant data.10 References 21. The American marketing Association has defined marketing research as the systematic gathering. (Richard Crisp). 21. It is the systematic. pricing.2 MARKETING RESEARCH MEANING IMPORTANCE AND SCOPE Meaning and importance Marketing research has been variously defined. 213 . It is both a problem and a challenge.

Scope A wide range of research activities are carried on by marketing researchers of this century. Marketing research can significantly help each and every function of marketing. sales forecasting. It involves a process or gathering.Marketing Management 2. the market researcher gives a true picture of the business position. “Marketing Research is the radiology and pathology of marketing operations of a business. product line decision. the results of which are useful in enhancing the ability to make marketing decisions in the ever changing world. study of customer dissatisfaction. It also required obtaining information on consumer’s satisfaction and dissatisfaction for bringing requisite change in company’s marketing programme. studying competitive pricing analysing salesman’s effectiveness and establishing sales quota. It diagnoses the business ailments when there is a trouble. 3. and analysis of data. As the pathologist gives test reports to the medical practitioner. As regards the importance. Like the radiologist who provides an X-ray. They can be broadly categorized into 7 groups. Estimation of demand for new products. evaluation present and proposed sales methods. Test marketing of proposed product. comparative study of competitive products. selection of advertising media. packaging labeling and design decision. a) Product / Service research which covers the research on customer acceptance of the proposed new product. the marketing research furnishes reports that can guide the business executives”. It is a carried out in a systematic manner as opposed to a hazard or hit-and -miss manner. and determination of new uses of existing products. so that the customer remains loyal to the enterprise and its product. It is rightly observed. motivational study establishment of sales territory. it became necessary to get information on the needs. marketing research is described as an activity. assessment of market potential and development of sales forecasts. c) Promotion research which covers advertising campaign evaluation. analysis of advertising and selling practices. recording. it can be said that marketing research plays a key role in the entire marketing process. Thus. it is also means regular checks. b) Market research which covers analysis of market potentials for existing products. 214 . With the emphasis shifting from the product to the consumer and his needs and with the consumer becoming more involved and the market turning into a buyers market. It helps the firm in market measurement. preference and evaluations of the consumer. One of the important tasks is to deliver the right product to the right person at the place at right time. analysis of sales potential and study of trends in markets. characteristics of product markets.

1 The Information Flow and Marketing Informatin System 215 . This cover research on diversification satisfaction and motivation of sales personnel. Corporate Responsibility research which covers research on ecological impact of business. g) The scope of modern marketing research is two fold i. evaluate and distribute needed. process. In order to carryout their analysis planning implementation and control responsibilities. Marketing information system – Vs marketing Research A marketing information system is an on going future – oriented structure designed to generate. The role of the MIS is to assess the manager’s information needs. cost analysis and margin analysis. store and later retrieve information to aid decisionmaking in an organization’s marketing programme. routine problem analysis and non-routine problem analysis. handling and packing of merchandise. Dealer supply and storage requirements. e) f) Pricing Research which covers demand elasticities. cost analysis of transportation methods. equipment and procedures to gather. INFORMATION PROCESSING INFORMATION OUT PERIODICAL REPORTS MACRO MICRO MARKETING INFORMATION SYSTEM INTERNAL SPECIAL REPORTS Fig.Marketing Management d) Distribution research which covers location and design of distribution centers. sort. governmental actions and attitudes towards corporate sector. the marketing managers need information about developments in the marketing environment. protection of customer’s rights. international marketing research. The above categorization helps in giving a broader look to the scope of marketing research. timely and accurate information to marketing decision makers. studies on legal restraints and regulations. perceived prices.e. analyse. analysis and presentation of information in making marketing decisions. develop the needed information and distribute the information in time to marketing managers. studies on social values and policies. It consists of people. It is a set of procedures and methods for the regular and planned collection. Miscellaneous Research activities cover various research activities which are not conducted regularly but has some marketing implication.

Marketing Management There is an increasing need for marketing information system because a) c) e) There is a growing consumer discontent. To discover what major and underlying factors are dominating the situation and how these factors can be influenced or controlled. 6. MR aims at providing the following information to the marketing manager: 1. cheaply and profitably without sacrificing consumer interest.3 OBJECTS OF MARKETING RESERCH The first and foremost objective of marketing research is to enable manufactures to make product acceptable and saleable and to see that they reach the market easily. Concerned with prevention and solution of marketing problems. then marketing research is a part of this broader information system. operates in a fragmented & interment basis Tends to concentrate on past information Need not be a computerised process Is one of the sources of input for an effective marketing information system 21. Concerned with solution of problems 3. Some opinions that if a company has a formal MIS. Depends largely on the handling of external data 2. CONTRAST BETWEEN MARKETING INFORMATION SYSTEM AND MARKETING RESEARCH Marketing Information System 1. 21. There is the emergence of complex marketing environment There is shortening of time span for decision making b) There is a shortage in scarce resources. 216 . 6. 3. quickly. 3. 5. 4. To set up a plan for keeping in touch with the behaviour to these dominating factors and for measuring the results of any efforts made to influence or control them. computer based extension of marketing research. 2.4 MARKETING RESEARCH PROCESS The marketing research begins with the recognition of a marketing related problem. Some view marketing intelligence system as simply a logical. This is followed by a formulation of the objectives of the study and the methodology to be used to achieve these objectives. Identifying and stating the right problems is like winning half of the marketing war. The detailed steps involved in the marketing research process are explained in the following flow chart. Others view them distinctly different. Handles both internal and external data. 4. 5. d) There is a knowledge explosion There is a varying degree of contradiction among theorists regarding the relationship between the MIS and MR. To define his present market situation together with the long range trends which have led up to it? 2. operates continuously as a system Tends to be futuristic Mostly a computerized / process Includes other subsystems besides marketing research Marketing Research 1.

1 Definition of Problem Step .5 Selecting the sampling scheme & sample size Step . 2 Stages of Marketing Research Process Step – 1 Definition of Problem: This is the first step in marketing research process.2 Statment of research objectives Step . values. The problem may be of different types depending on the marketing situation e. market gossip etc. the subjective probabilities associated with each outcome and the pay-offs associated with each outcome.3 List of needed informations Step . sales decrease.8 Findings and Conclusions Fig. beliefs. intention and socioeconomic status of prospects.6 Organising field w ork Step .7 Analysing the data Step . is required depending on the gravity of the problem. knowledge. product failure. List of Needed Information’s: Information is required about attitudes. The problems then are formulated into statements known as hypotheses can be translated into research objectives which give an indication on information to be collected and variables to be studied.4 Design of data Collection Project Step . The information so obtained while formulating the problems pass through a subjective exercise to assess the possible outcomes. the problem may be solved internally or external assistance from a marketing research agency.g.Marketing Management Step . The hypothesis and objectives are formulated having the idea about the possible set of outcomes. Statement of Research Objectives: The hypotheses are translated into research objectives. The main source of information Step – 2 Step – 3 217 .

preference. Primary data can be collected in various ways such as: a) Survey Method: A survey consists of gathering data by interviewing a limited number of people selected from a larger group. University research organizations and foundation. The sources of secondary data are libraries. telephone and mail. The depth and extent of data required the costs and benefits of the research. private business firms. It is helpful in establishing in studying the competing explanations of phenomenon: conclusive research is an elaborate and systematic collection of the information needed. the type of research design and the methods to collect information for the project. government. This is required to obtain a proper definition of the problem and helps in providing insight to the problem. The observation can be personal and mechanical but this method suffers from recording covert behavior. The interviewing in a survey method can be done by the researcher by person. people and incident. for the specific research purpose. The second aspect of the design of data collection project is the selection of methods for gathering data. The secondary data have already been gathered for some other purpose. In addition to high cost and time consuming. opinion. behaviour etc. Telephone surveys can be conducted more rapidly and at least cost but it is time specific and it leaves the scope of reaching non-telephone holders. Advertising media. personal interviews also face the possible limitation of inviting respondent’s bias. It is the observation of some occurrence. All marketing research projects start with exploratory research.Marketing Management may be the prospects themselves. The data may be primary or secondary in character. Step – 4 Design of data Collection Project: This covers two broad concepts viz. It provides the blueprint for research work. Observational Method: In this method data are collected by observing some action of the respondent. The primary data are original data gathered specifically for the project at hand. trade. the urgency of the work and the tone available for the work also affects the research design. Personal interviews are more flexible because they are able to probe more deeply is the answer is not satisfactory. b) c) 218 . It has the advantage of getting original information.. professional and business associations. The primary sources of data are obtained from respondents on their attitude. The development of research design largely depends upon the purpose for which the research is conducted. Interviewing by mail involves mailing a questionnaire to potential respondents and having them returned the completed form by mail. its analysis and findings as per the research findings.

the field workers may be unable to establish rapport with respondents. 219 . The actual collection of data in the field by interviewing. Tabulation process involves manual as well as mechanical tabulation by using punched card. After data processing various statistical and non-statistical tools are used to analyze the data quickly and inexpensively which invariably leads to finding solutions to the marketing problem and conclusions. Some common probabilistic sampling methods are simple random sampling and quota sampling. Step – 5 Step – 6 Step – 7 & 8 Marketing research process to be effective should be always regulated with a follow up action. non-response and response from non-competent respondents. In other steps. observation is the weakest link in the entire research process.Marketing Management d) Experimental Method: This method of gathering primary data involves the establishment of a controlled experiment that stimulates the real market situation as much as possible. Then these data are categorized by tabulation. This process of selecting small number of items out of a larger number of items is called sampling. there is an unequal chance of few members being selected and rest others of being not selected out of the whole population. This helps the decision makers in finding out the effectiveness of the research. Finding and conclusion: The data so obtained from field survey are subjected to editing. A probabilistic or random sample is one that is selected in such a way that every unit in the predetermined universe has a known and equal chance of being selected. These findings and conclusions are presented in the form of a report. The small scale experiment will provide valuable information for designing a large scale marketing programme. marketing prudent are involved to ensure the accuracy of the result. Organizing the Field Work: This step involves the real research work on the field. Analysis the Data. Editing is a process of reviewing the data to avoid and check the error arising out of illegibility. So organizing the field work is an uphill task for the researcher. Their process of sampling can be probabilistic as well a non-probabilistic or judgmental. computers etc. Selecting the Sampling Scheme & Sample Size: A complete enumeration or census involves in decisive data gathering and the cost involved is prohibitive in character. the whole labour will be lost. In non-probabilistic. so if the field workers are inadequately trained and supervised. so it is prudent in marketing to select a small group (sample) out of the population (universe). There is the chance of bias because people in the sample may not feel at home and refuse to answer.

measures of brand loyalty and switching can be determined. which channel is being watched and by means of a hand console. space is bought on a questionnaire for face to face or telephone interviews. The demographic profile of a person who buys a particular brand can also be found.Marketing Management 21. By using the same households and tracking the same variables over a period of tine. it is possible to track changes within the same set of audience over a period of time. Continuous Research Interview In this method the same respondents are interviewed repeatedly. Potential problems related to distribution. of sales achieved by the store and competitive activity is provided. a company wants to find the impact of its latest advertising campaign on its sales. introduced. but accurate assessments. Respondents are enrolled by the research agency. The research design is based on the research brief given. in-store promotions or layout can also be assessed by using retail audits. Retail Audits Sales of brands can be measured by means (If laser scans of barcodes on packaging which are read at the checkout. It is an activity. This is the currency by which television advertising is bought and judged.5 TYPES OF MARKETING RESEARCH An ad-hoe research focuses on a specific marketing problem and collects data at one point in time from one sample of respondents. Brand loyalty and switching cannot be measured. Consumer Panels Consumer panels are formed by recruiting a large number of households which provide information about their purchases over time. The questionnaire is designed specifically for finding a solution to the client’s problem. For omnibus survey. who is watching. 21. Custom designed studies are based on specific needs of the client. who benefit from cost sharing. The interview may cover many topics as the questionnaire space is bought by a number of client. Thus. Commercial breaks can be allocated rating points according to the proportion of the target audience watching the program. People meters record whether the set is on or off.6 SUMMARY Marketing research has become vital weapon in the armory of a modern marketer. it is possible to track even small behavioural changes in response to changes in marketing variables. Ad-hoc surveys are either custom designed or omnibus studies.. such audits can be particularly useful. For example. Sales potential and sales forecasts can also be planned with such data. Television Viewership Panel The audience size of a program is measured minute by minute. Changes in market share can also be examined over time. the results of which are useful in enhancing the ability of the marketer to make marketing decisions in the ever changing world. For identifying geographic areas or type of outlets where new products may be. Information is gathered from these respondents on a periodic basis. Thus. He has to gather information 220 .

Boyd Jr. The future of marketing research in India is bringing on account of the growing business awareness about its usefulness and the steady growth of data base. G. Evaluate the merits of personal.. 21.9 MODEL QUESTIONS 1.10 REFERENCES 1. Tull.11 ASSIGNMENT QUESTION 1. 21. telephone and mail survey method on the basis of accuracy. Why does a company need a marketing information system? 2. et al. Specialised research skill and data processing facilities are also improving. 1973. Describe the types of goods/services which would definitely need exploratory/research 4. 21. 1967. In depth interviews are similar to individual case studies – Comments. Marketing Research. New York. 1994. Conclusive research. 4. PHI New Delhi. Exploratory research 21.7 KEY WORDS Marketing information system. advertising research. The scope of marketing research is widening. How does a marketing information system differ from marketing research? 3. & D.8 REVISION POINT Marketing research process 21. MR involves a number of steps starting with definition of problem and ending with finds and conclusions. et al. Beri. Marketing Research: Text and Cases. 21. Richard D. TMH. Green P.S. speed.C. It has embraced with itself consumer research. cost case of implementation. 2. Irwin. Illinois.12 TERMINAL EXERCISE 1. Research for Marketing Decisions. Fundamental of Marketing. flexibility and amount of information obtained.Marketing Management and process them for taking a decision on any marketing aspect. and product and price research. Corporate responsibility research. MrGraw Hill.E. Stanton. 3. 221 . Develop a suitable marketing research procedure for a departmental store for the following problems: Inability to copeup with large turnover of customers Lake of proper stock status Stock accounting Cash collection and reconciliation Excessive reliance on the owner in day to day operations of the store made him unable to devote sufficient time for developing business. New Delhi. 1964.

218. The hypotheses will concern the differences in attitude of the two groups towards advertising. rich and poor.. For this purpose. Part II will examine some hypotheses and conclude whether they are accepted or rejected. Which scale would be most appropriate and why? 8. P. 222 . whether favourable or unfavourable. How would you develop a suitable scale for the proposed study? 7. young and old. in the medium – sized city where you live. QUESTIONS 19. The proposed study has to be carried out in two parts.C. New Delhi.. What would be the limitations of such a study? Source: Beri G. Marketing Research 2nd Edn. you may think of groups in terms of male and female. 1994.Marketing Management CASE Attitude towards Advertising You have been asked to ascertain the attitude of people towards advertising. Tata Mc Graw-Hill Publishing Co. What type of study is this? 6. educated and uneducated. The study should indicate whether heterogeneous groups differ significantly or otherwise in their attitudes towards advertising. Part – I will involve the construction of a suitable scale for measuring attitudes of people. Ltd.

Marketing Management

‘Business World’, a fortnightly magazine, is published from Bombay. It brought out by management of Anand Bazar Patrika Limited, Calcutta. In accordance with the decision taken in the annual editorial workshop of Business World held in early May 1986, a questionnaire was printed in some issues of Business World to know what readers thought of this magazine. By undertaking a survey of this type, the management hoped to ascertain the strengths and weaknesses of the magazine. This would enable it “to tailor Business World of readers” requirements”.
QUESTIONNAIRE Name :____________________________________________________

Profession:___________________________ Designation _____________________ Income____________________ Age __________________ City _________________ 20. Which of these business papers/magazines do you read? (Please tick) Regularly Occasionally Infrequently Economic Times Financial Express Business Standard World Business India Fortune India Update Others (Specify) 9. My areas of interest are (please tick one or more) Corporate and business affairs ( ) Economic policy / Development ( Political affairs People and lifestyles Art/Literature Investments ( ( ( ( ) ) ) ) )

10. Rank the following magazines on a 1 to 5 scale (5 for very good, 1 for poor) for the following attributes Business Business Update Fortune world India India 1 Timeliness of information 2 Depth of information 3 Range of information 4 Depth of analysis 5 Language and style of presentation 6 Quality of printing and visuals 11. How much time do you spend in reading an issue of Business World? ________ hours 12. How much of Business World do you read? (Please tick one)


Marketing Management
1. The entire magazine 2. More than half the magazine 3. More than a quarter of the magazine 4. Less than a quarter of the magazine ( ( ( ( ) ) ) )

13. Which of these features in Business World do you usually find interesting and read? (Please tick one or more) (1) Cover feature () (7) Editorial () (2) Spotlight () (8) Company News and Events ( ) (3) Business News () (9) International Briefs () (4) In the News () (10) Entrepreneurs () (5) International News ( ) (11) Leisure () (6) Off Stage () 14. Which of these specialist pages in Business World do you read and find interesting? (Please look at the shoulder heads inside the magazine pages if you are not sure). a. Political comment g. Careers & Professionals b. Banking and finance h. Media trends c. Economic comment I. Book serial d. Taxation j. Business Information e. Management k. Marketing F. Computers l. Investment 15. In order to suit my requirements better, Business World should have Fewer main feature stories ( ) The same number of main feature stories ( ) At least one more than feature story ( ) 16. The lead feature (cover and spotlight) should be Shorter ( ) Same length ( ) Longer ( ) 17. Business World’s coverage of the following items (Please tick one column for each entry) Is Needs to be Needs to be adequate expanded reduced Technology Marketing Management Corporate finance Investment/ Stockmarkets Book reviews Economic policy Policy analysis Corporate performance Corporate studies Behaviour 18. (a) Do you buy your copy of Business World from the News – stands or are you a subscriber? (A) News-stands, (B) Subscriber 224

Marketing Management
(b) If A, do you find it difficult to get a copy of Business World on the newsstands? Yes ________________ No________________ 19. How soon after the magazine is published each fortnight do you receive you copy of Business World? 1 – 3 days ______________ 3 – 6 days ______________ 6 – 12 days ______________ Longer than 12 days ______________
QUESTIONS 21. Evaluate this questionnaire in the light of the object stated. 20. Can you suggest a few more items that can be included in the questionnaire?

Source: Beri G.C. Marketing Research, 2nd Edn., Tata Mc Graw – Hill Publishing Co. Ltd., New Delhi, 1994, P. 218.


Marketing Management

OBJECTIVES After studying this lesson, you will understand:

The meaning and need for consumerism, The problems of consumer protection and related legislations. STRUCTURE 22.1 Introduction 22.2 Consumerism – Definition and Scope 22.3 Need for Consumer Protection 22.4 Consumer Movement – Abroad and in India 22.5 The Problems of Consumer Protection 22.6 Consumer Protection – The Legal Framework 22.7 New avenues of consumer oriented marketing 22.8 Summary 22.9 Key words 22.10 Assignment questions 22.11 Reference 22.1 INTRODUCTION Consumer is the centre of all economic activities. In our Indian culture, Philosophers and Thinkers have thought consumer as a God. He is a kingpin of any democracy. But unfortunately the Indian consumer has always been neglected in our economy because of many reasons.
22.2 CONSUMERISM – DEFINITION & SCOPE Consumerism was thought of as a consumer movement first in mid 1960s. It was considered as another ism like socialism and communism threatening capitalism. In simple words, consumerism is a protest of consumers against unfair business practices and business injustices. It is in fact a social force designed to protect consumer interests in the market place by organizing consumer pressure on business. Peter Drucker defines consumerism as follows:

“Consumerism means that the consumer looks upon the manufacturer as somebody who is interested but who really does not know what the consumers’ realities are. He regards the manufacturer as somebody who has not made the effort to find out, who does not understand the world which the consumer likes, and who expects the consumer to be able to make distinctions which the consumer is neither willing nor able to make”. (“Consumerism in Marketing” – a Speech to the National Association of Manufacturers, New York, April, 1969). According to Buskirk and Rothe, consumerism means the organized efforts of consumers seeking redress, restitution and remedy for the dissatisfaction they have accumulated in the acquisition of their standard of living. Kotler defines consumerism as an organized movement of citizens and government to strengthen the rights and power of the buyers in relation to sellers. G.S. Kamat says,


Marketing Management
consumerism is a process through which consumers seek redress for their dissatisfaction and frustration on the basis of organized efforts and activities. Consumerism according to former Senator Charles Percy is “a broad public reaction against bureaucratic neglect and corporate disregard of the public”. Some others have defined consumerism as policies and activities designed to protect consumer rights as they are involved in an exchange relationship with any type of organisation. Consumerism now-a-days includes many things within its compass. The term has come to mean many things to different people. The most common understanding of consumerism is in reference to protection of consumers privileges against clear-cut abuses by the seller. This includes cheating and other malpractices at the market place as well dangers to health and safety of life form various types of products. What is interesting is that consumerism is also considered to include protection of consumers against consumers. For example, smoking is prohibited in auditorium, trains and public buses to avoid nuisance to other persons from smokers. Now-a-days consumerism has become wide enough to include protection against environmental pollution and declining quality of physical environment. The people are greatly concerned maintenance of ecological balance and conservation of national resources.
22.3 NEED FOR CONSUMER PROTECTION In a country like India, there is a very great need for consumer protection for a variety of reasons. Some of the important ones may be highlighted here.

a) A majority of the population is illiterate, ignorant and ill informed. In a vast country like India, it is very difficult to organize the consumer. The people are not only backward but also have linguistic, cultural and religious difference which makes the problem still more intricate. b) The consumer is economically weak if compared with the producer or the seller. The producer is able to manipulate the price quality, size, weight, etc. of the product. He has to depend upon the trade practice of the seller. If the seller indulges in unfair trade practice, then the consumer needs protection against such malpractices. c) The advance of science and technology enables the manufacturers to produce myriad types of goods. There are varieties of same type of goods produced by different manufacturers. Though they provide a choice of selection to the buyer still they have made the goods more complex and complicated making selection difficult. In such a situation the consume needs guidance which can be provided by consumer organizations. d) Advertising is a potent device for sales promotion. But advertising to-day is highly deceptive. A consumer does not know the real qualities of the advertised goods. For example, he would not know how one processed butter is better than another processed butter. He feels confused and hence needs to be guided and protected.


in the case is largely owing to rising prices. we need a forceful. Civil Rights Movements. according to Mrs. etc. Thus increasing education and sophistication led to rising public standards of business conduct and social responsibility through consumer unrest. can be cured or reduced to the minimum. Independence Movement. Knauer. The objectives of consumerism under these circumstances were to seek more information about the merits of competing products and services and to represent the collective views of consumers in order to influence the producers. In USA greater education and affluence of the buyers. hoarding. to be informed. dealers and the Government. adulteration. Congressional investigations of certain industries proved embarrassing and finally. mailorder frauds. poor product. In course of time. misleading advertisement. Vance Packard and Rachel Carson accused big business of wasteful and manipulative prices. reached a level of affluence which is the characteristic of what may be called the postindustrial society.e. In the past. The Watchword for this new militant mood among the American consumers. 22.Marketing Management Thus to prevent ruthless exploitation. 228 . Virginia H. etc. Ralph Nader appeared on the scene to crystallize many of the issues. John Kennedy’s Presidential Message of 1962 declared that consumers had the right to safety. was simply “Let the seller beware. well-organised consumerism of consumer movement coupled with Government support and patronage in the form of special legislation. such as. were the results of social conflicts. etc. all movements. the failure of business to implement the marketing concept resulted in consumerism raising its head in the 1960’s. in comparison with the age-old caveat emptor” i.4 CONSUMER MOVEMENT – ABROAD AND IN INDIA Consumerism or consumer movement is a social movement. consumerism has emerged after the countries concerned. There was adequate production and distribution of essential as well as luxury products. short measures and weights. The social conflict. So also consumer movement which is likely to be with us till the conflict facing the consumer is resolved. The influential writings by John Kenneth Galbraith. legislation can protect consumers only when consumers themselves assert their rights and exert necessary pressure on the producers. shortage. better communication. many private consumer organizations have emerged and several pieces of consumer legislation have been passed In the West. black-marketing. special Assistant to the President for Consumer Affairs. mass marketing and above all. Only then the prevailing malpractices like profiteering. faulty packaging. Let the buyer beware. to choose and to be heard. Of course. This was augmented in 1966 by rising prices. deceptive advertising. Government’s desire to protect the consumers and help them to arrive at rational decisions in their selection resulted in excessive control and insistence on adequate communication to the consumer such as the advertising pack the statement indicating that smoking may cause cancer.

i. Kottayam and Trichur. There are three agencies for ensuring consumer protection Self-help. It has also got underway in India. Indian Federation of Consumer Organisations (IFCO) and the Society for Civic Rights are the most notable ones. Germany and Japan.1 229 . The language of advertising making exaggerated claims about the products creates an expectation of better products. especially higher education and rising incomes have tended to intensify consumer movement.5 THE PROBLEMS OF CONSUMER PROTECTION The idea that the consumer is the king in the market place has in reality been largely discarded and in its place the idea that he is a pawn in the hands of the business man is a major driving force of consumer movement. As regards the origin of the movement in India. France. rather the heart of enlightened marketing mix. Business. In the third place. The consumer movement in India is in its infancy and is largely confined to metropolitan cities like Bombay. with much strength in Scandinavia. that nine housewives and social workers got together and formed the Consumer Guidance Society of India (CGSI) to protect the consumer’s interest. To-day the CGSI has over 2. Among other such organisation Voluntary Organisation in Interest of Consumer Education (VOICE). it was in April 1966. This naturally makes the consumer to expect a perfect product. Some of the problems of consumerism are. The shortages of essential consumer products and the inflation of early 1973-74 gave a fillip to the consumer movement.. by self-regulation and by giving a fair deal to the resellers ad consumers. There is also the Consumer Education and Research Centre(CERC) at Ahmedabad. consumer organisation itself. The problem of consumer protection in the market can be seen from Fig. It is gratifying to note that over the years. 22. the spread of education. The business and consumerism both aim at the protection of consumer business through self-regulation and consumer through self-help. Dandeli. Government. having special Acts and implementing those laws strictly.Marketing Management The movement by now has acquired an international character. CGSI has excelled itself in publicizing of tests conducted by it on various products edible and electric. Further. rising prices of goods have created in customers an attitude to expect better quality and if it is not forthcoming creates dissatisfaction among them. Ahmedabad.e. etc. The consumer interest in the market place is the focus. Hyderabad. Secondly. Pune. inflation in recent times has made purchasing more difficult. First. there is a large variety of products with increasing element of complexity because of new and changing technology. Consumerism invokes Government assistance when business misbehaves and fails to fulfill social responsibilities.500 members and five branches at Hyderabad.

boarding.e. 1940 Drugs and Cosmetic Act.6 CONSUMER PROTECTION THE LEGAL FRAME WORK In order to protect the consumer interest Government in the recent past have enacted several statutory legislations (Exhibit–1). 1950 230 . unfair trade practices. Consumer Protection Act. the Government passed a comprehensive legislation i. 1. 1946. The 4. In fact. 22. 1986. 1937 Drugs Act. profiteering. Enduring and positive improvements in business practices can be brought about by the businessmen themselves and these changes should be based on the inner will or desire rather than from external force or discipline. The 2. Drugs Control Act. The 3. packaging and branding.Marketing Management Statutory Regulation Consumer Legislation Consumer Protection in the Market Place Business Consumerism Self-Regulation Self-help Fig. etc. The The Exhibit – 1 Sale of Goods Acts. programmes to implement or carry out these objectives and measures to evaluate the programmes. More and more companies are now creating a consumer affairs department in charge of consumer adviser directly responsible to the head of the organisation. 1930 Agricultural Produce (Grading and Marking) Act. It can also publish instructional booklets on the use and care of the company products. The business community must take appropriate steps to regulate its conduct and cultivate selfdiscipline and self-regulation in the larger national interests. These legislations are related to standardization. 1: Problem of Consumer Protection in the Market It is rightly said that self-policing is far more effective and superior or advantageous than State-policing in the field of distribution. food adulteration. grading. it can provide consumer education. false advertisement. Further. The department deals with the consumer problems. weight and measure. It also contributes to the development of corporate social objectives. to cover-u the consumers problems.

storing. or distributed of adulterated and misbranded food article is considered to be in injurious to public health. The Standard Weights and Measures Act. The Essential Commodities Act. 1955: It is one of the major consumer-oriented legislations of the country whose object is to control in the interest of the general public. 1954 8. The Environment (Protection) Act. 1986 17. Supply and Distribution) Act. 1970 13. 1954 6. The Packaged Commodities Order. 1963 11. 1987 Salient Features of Major Legislations The Prevention of Food Adulteration Act.Marketing Management 5. Its package contains false or misleading information about its contents. 1956 10. It contains an injurious substance. The Drugs Control Act. According to this Act manufacturing to sell. The Drugs and Magic Remedies (Objectionable Advertisement) Act. Whenever a company markets these commodities. The Act provides elaborate rules about the quality of different food articles and imposes both civil and criminal liabilities for violation of its provisions. The Essential Commodities Act. The Standards of Weights and Measures Act. The Monopolies and Restrictive Trade Practices (Recognition of Consumer Association) Rules. 1984 16. and pricing decisions. The Cigarette (Regulation of Production. 1954: This is a consumer-oriented legislation designed to protect the health of the public by prohibiting adulteration of food. 231 . supply and distribution of trade and commerce in certain commodities declared essential. 1975 14. 1986 18. It makes false claims. It is falsely stated to be a product of another place or country. An adulterated food article is one is injurious to public health. selling. The Patent Act. It is deemed injurious when The product quality is not as demanded or claimed. 1955 9. The Prevention of Food Adulteration Act. distribution. 1975 15. In the area of marketing the provisions of this Act influence the product and advertising decision of companies manufacturing food products. The Monopolies and Restrictive Trade Practices Act. the production. The Display of Prices Order. the provisions of this Act apply to it and influence its product. 1969 12. The Consumer Protection Act. 1954 7. 1976. A food product is misbranded when It is a deceptive imitation of or resembles an existing product. Its quality or purity falls below the prescribed standards. The Act defines essential commodities and lists a large number of products included under it. The MRTP (Amendment) Act.

fits. which is certainly an improvement over other consumer protection legislations. As other consumer-oriented legislations. This is a welcome legislation and redefines the legal relations between consumers of goods and services and their manufacturers or sellers. 1986: This Act is the latest development in safeguarding the economic rights of citizens as consumers. doordarshan.Marketing Management In 1974. The Act prohibits advertisements making false claims for the drug. 232 . electricity. the Central Consumer Protection Council and the State Consumer Protection Councils comprising official and non-official members to provide a platform for discussing consumer problems and to advise the concerned Central or State Government on policies and programmes to safeguard consumers’ interest. this Act also imposes both civil and criminal liabilities for the contravention of its provisions. It is made compulsory to display the prices of essential commodities. telegram. sexual importance. The Drugs and Magic Remedies (Objectionable Advertisement) Act. The Trade and Merchandise Markets Act. It aims to prevent advertisement tending to cause and ignorant and unwary consumer to resort to self-medication with harmful drugs and appliances. a citizen must help himself to protect his rights as a consumer. the Act applies to all types of goods and services and it extends to Government services like railway. insurance.e. and others given in the schedule. 1958: It is also an important commercial legislation which influences company’s products and advertising decision particularly with regard to the use of trade and merchandise marks registered under this Act. are that it is applicable even to public sector enterprise. The Act establishes two councils viz. Secondly. 1954: It is an equally important piece of consumer-oriented legislation the provisions of which influence the advertising decisions of companies marketing drugs for certain ailments specified in it. the Act was amended with provision against hoarders. postal. banks. epilepsy. The registration of trade-mark under this Act endows on its owner the right to its exclusive use and provides legal protection against infringement of his right on the person(s) infringing the rights of trademark the owner invites prosecution. etc. The Consumer Protection Act. blackmarketers and profiteers. Thus the scope of this piece of legislation is much broader compared to the earlier ones. It is based on the principle of self-help i. telephone. The most important features of the Act. etc. According to this Act advertisements are prohibited in respect of certain drugs marketed for the treatment of certain diseases and disorders like prevention of conception. financial institutions and co-operative societies. The Act imposes both civil and criminal liability on the person for the contravention of the orders made under it. radio. The month of December 1986 can legitimately be considered as the Parliament’s session for consumer protection when marathon race of legislative activity was undertaken to protect the interests of consumers. They have an advisory role to promote and protect the rights of consumers which interalia consists of (a) the right to be informed about the quality.

. it is expected to ensure consumerism in the country. potency. Again. The orders of the district forum and state and national commissions are enforceable by them in the same manner as a decree or order of a court. Efforts should be made to harmonise the functioning of all these courts and authorities so that one does not hinder the functioning of the other so as to harm the consume instead of protecting them The Act acknowledges only six rights of the consumers as pointed out a little earlier.the basic philosophy for all future consumer relations. (d) right to seek redressal against unfair trade practices. some significant aspects could not be covered. the right of healthy environment must be included for better environment. As said earlier it is a welcome legislation. It is time for business to discard the traditional massmarketing concept of consumer and adopt in its place the new concept of consumer 233 . standard and price of goods. At the bottom. Delhi. 22. the Act seems to have been enacted in a great hurry. Perhaps because of this. refund of the price. and (e) right to consumer education. in case of their failure to enforce the order.P. 1986 has been set in Bihar. with the support of the Government and the consumer’s organisations. of course.7 NEW ANENUES OF CONSUMER ORIENTED MARKETING Since a majority of the consumer problems (packaging. marketing is the one management area in which the question will often be raised “Is it good for the consumer?” . Pondicherry. there is the consumer disputes redressal forum (district forum) in each district to be established by the state government with prior approval of the Central Government. (b) right to be assured access to a variety of goods at competitive prices.. distribution policies and so on) directly involve marketing policies and practices. Rajasthan. The Redressal Forum may give orders for removal of defects from goods.Marketing Management quantity. For example. etc. state and national. is appealable to the Supreme Court within 30 days of its passing. a large number of administrative and quasi-judicial bodies have been established under a large number of consumer protection legislation s to exercise powers in many areas which would also fall within the purview of he present Act. purity. The redressal machinery under the Consumer Protection Act. A. promotion and advertising policies. Whatever may be the lacunae in the Act. (c) right to be heard at appropriate forums. It completely ignores the right of consumes to a healthy environment. The Act provides for the establishment of adjudicator bodies at three different levels – district. replacement of the goods. This is very important in case of pollution control: hence. in exercise of its original jurisdiction. U. The whole objective of the Consumer Protection Act is to speedily redress the grievances of the consumer and not through long drawn legal practices. the same may be sent to the court of competent jurisdiction for enforcement. An order of the national commission. there is no provision for giving interim relief or issuing interim injunction which may be necessary in some cases. product testing and pricing. However.P. An marketing decisions must now centre round the question – “How will they affect the consumer?” Marketing deserves special study because of its very objective of reaching and selling the consumer. award of compensation for injury suffered. Orissa.

Two-way communications are necessary for better flow of understanding between the corporation and the consumers. The movement in India is in its infancy. public relations. carrying consumer (public) attitudes and opinions back to the corporation. management policies and decisions must see that consumer interests are duly protected. Short-run sales and profits should be given secondary importance in such a consumer relations concept of the public. Instead of viewing the consumer solely as sales prospect. shareholder research. more wider look at the consumer to assess the full range of his genuine diverse needs and desires. What is needed at present is a forceful. the Indian consumer suffers from various dishonest practices of the traders and marketers. illiteracy and lack of awareness necessitate for his protection. Unfortunately. There are three agencies for ensuring consumer protection viz. brand promotion. consumer. 22. Fair Trade Practices Associations.interest committees. selection of distribution channel. it Is now necessary for business to take a broader. The future will call for far more effort in creating a reverse communications flow. well-organised consumer movement coupled with Government support and patronage in the form of special legislation. such companywide groups would consist of representatives of the operating sections (advertising. Women's by consumer organisations themselves. Consumer research. media planning. advertising appeals. Management decision must be based on consumer viewpoint which is possible if we have two-way allow of communications in a balanced form. built-in consumer audience which could supply many answers about consumer wants and needs the company's shareholders. Has the business ever gone directly to the consumer in such a manner? Individual companies might work with consumer-interest organisations such as Consumer unions.. Shareholder Research: Every public company has a ready-made. Consumer Research: It will provide grass-root report on consumer problems and complaints. consumer relations (for services) sections are some of the new avenues to consumer-oriented marketing management. sales. legal. Self. This is the demand of consumer movement today. etc. At such meetings each specialist would contribute his particular knowledge and talents in order to market a product which substantially meets current consumer needs and demands.Marketing Management relations. Poverty. self-regulation by business and the 234 . In such are)s as market research.8 SUMMARY Consumer is said to be the king in the market place. The nature and objectives of marketing management will have become vastly more consumeroriented and much less product and / or corporation-oriented for the maximum long-range benefits of the corporation itself. How many companies have taken advantage of this audience? Consumer-Interest Committees: Organised along product lines. and so on) whose work and responsibi1ities most closely affect consumer interest areas.

1986 is to speedily redress the grievances of the consumer. Define Consumerism. 1986. Sherlekar. 5. insurance. S. The principal feature of the Act is that it is an improvement over the earlier consumer legislations. the Act extends to Government services like railways. S. Emerging Trends in Indian Marketing in the 1990s. It is applicable even to public sector enterprises. 1991 (Chapter – 4). New Delhi.K. 2.A. etc.P. TMH. redressal. 22. telegram. telephone. 3. Academic Foundation.1986. Sinha (Eds).P. financial institutions and co-operative societies.9 KEY WORDS Consumerism. Central Consumer Protection council. Write notes on: a) The Essential Commodities Act. packaging and branding. New Delhi. the Government has enacted a number of legislations. 1990. J. etc. In 1986 the Government has passed a comprehensive legislation viz. radio. Gandhi. Act.11 REFERENCE 1. b) Point out the salient features of C. grading. The Act establishes two council’s viz. All these legislations govern standardisation. (Chapter – 15). and to regulate food adulteration. Marketing Management Himalaya. Describe the problems that you face ion the market place as a consumer and suggest how can you protect your interest? 22. Do you feel a need for consumer protection in India? Why? 3. The whole objective of the C. Secondly. Sahoo. b) The Prevention of Food Adulteration Act.10 ASSIGNMENT QUESTIONS 1.C. & P. What do you mean by ‘Consumerism’? Examine its scope. 2. The Central Consumer Protection Council and the State Consumer Protection Councils comprising official and non-official members to provide a plat-form for discussing consumer problems and to advise the concerned Central or State Government on policies and programmes to safeguard consumer’s interest.. weights and measures. New Delhi. Consumer Protection Act. unfair trade practices.C. . SCPC. 235 . In order to protect the consumer interest. a) Point out the rights guaranted under the Consumer Protection Act. This is the latest Act meant to safeguard the economic rights of citizens as consumers. Marketing – A Managerial Introduction. Act. 1993 (Chapter 10 & 11). Consumer 22.Marketing Management Government. postal. electricity. 4.

5 Keywords 23. Commitment to national economic priorities and development strategy. viz. Important aspects of ISI and AGMARK. The broad reasons for the influence of state on the marketing decisions of companies may be put under three categories. development of public sector and regulation of manufacturing operations through a licensing mechanism. This section attempts to study the role played by the state and law in relation to marketing in India. Absence of collective unity among consumers.1 Introduction 23.4 Summary 23.2 NEED FOR GOVERNMENT INTERVENTION Marketing decisions are influenced and shaped by a variety of organisational and environmental factors.8 Assignment questions 23. The Government has to play its role to protect their interest in the market place. STRUCTURE 23. and The need for regulation of commercial relations amongst citizens of our country. 23. adulteration. They are mostly poor and illiterate. The planned development of Indian economy envisaged lying down of economic priorities in the successive five-year plans.3 Public distribution system 23.2 Need for Government Intervention in Marketing. Concern for and sympathy with emerging consumerism.1 INTRODUCTION India lives in villages and more than 75% of their population lives in villages. government to determine what is to be 236 . It describes the nature and causes of State’s intervention in marketing operation of companies and brings out the relevant features of major legislations currently in vogue and having an influence in the marketing decisions. 23.7 References 23. which warrant intervention of Government. inadequate storage facilities and so on are the major reasons. The whole idea of this section is to highlight the roleplayed by law as a marketing decision input and to examine to what extent it can promote consumer movement by protecting the interest of the consumers. Priorities as laid down in these plans entailed development of heavy industry and manufacture of capital goods. They lack bargaining power.6 Review questions 23. The need for government intervention in marketing. Salient features of public distribution of essential commodities. In order to pursue this development strategy. excessive presence of middleman.Marketing Management LESSON – 23 GOVERNMENT AND MARKETING OBJECTIVES After studying this lesson you will be able to understand.

Industrials units producing goods conforming to the standards specified by the institution are licensed to use ISI mark of quality. 5. Government being the representative of this citizen entrusted with thus task of governing the affairs of the country by legislation and enforcing relevant laws has enacted certain laws to protect the well being of the consumer and to safeguard them. A few are dealt with here. are incapable of forging enforceable commercial relationships unless there are laws to help them out. Lastly. bogus and sub-standard products. namely. 3. In fact. the need for enacting consumer legislations would not have arisen. Standards Formulation: BIS is entrusted with the task of formulation and promotion of standards in all sectors of economy. Protection from the explosion and deception. how much is to be manufactured and who will manufacture. Free replacement of ISI marked products in case they are found to be sub-standard quality. The ISI mark certification scheme operated since 1947 by the Indian standards institution (ISI) established by the government of India aims to protect the consumers against impure. the national standards body is looking after the consumer’s interest through its two major activities. 1986 which is another Act of considerable significance to the consumer movement . 2. The product standards prescribes 237 . ISI certification mark scheme confers certain benefits to consumers: 1. standards formulation and certification marketing. Individuals. Main Activities of BIS: The bureau of Indian standards. the power of these options is wide enough to shape business decisions. BIS is the creature of parliament under bureau of Indian standards Act. ISI certification The common has no means to determine the quality of products but to depend upon the assurances of manufactures. The influence of government of the marketing decisions may also be attributed to its concern for and sympathy with the emerging consumerism in India which has been discussed in the preceding section. Assurance of safety against hazards to life and property.Marketing Management manufactured. If the businessman earlier shown as the necessary foresight on their own account had taken with effective and organised steps to build up through voluntary regulation fair trade norms and practices into the everyday process of industry and trade and into the exchange relationship between traders and consumers. In order to protect the consumers against exploitation by trade and industry the government has taken a number of measures. ISI mark helps the consumers to choose a standard product. 4. though powerful. commodities and processes. But what’s the real picture? Just of the major objectives of this Act was to make BIS another instrument of state to protect and promote consumer interest. Increasing technical complexities of consumer goods makes it difficult for the consumers to know the detail of such goods. ISI-marked goods are subject to quality control.

cooker. process. rubber products. refrigerator. A reprint of ‘Consumer News’ is being distributed to about 400 consumer organisations all over the country so as to achieve as large a readership among the consumer as possible. To create awareness among consumers. Since its inception the institute has given 6000 licenses covering 1000 products such as dairy products. a monthly journal of BIS. BIS is carrying out publicity advertisement in newspaper. Ghee. radio. National Institute for Reliability. steel products. and is basically a voluntary scheme wherein manufacturer are permitted to use the standard mark (ISI) on their product after ascertaining there conformity to the relevant Indian standards under a well defined scheme of testing and inspection. fans. mixer. refined ground nut oil. Certification Marketing: the BIS certification marks schemes. spices etc. Agmark “Agmark” has been derived from the words Agricultural Marketing. regarding Indian Standards and the certification marks scheme. The presence of standard mark on product provides a third party guaranty to the common consumer about its quality .to provide greater trust to consumer protection and ensure better consumer satisfaction . This feature is also carried in BIS. safety and performance of relevant products and methods of their practical evaluation. glassware. etc. etc. motor. code of practices etc. mustard oil. safety matches. Atta. television. cables. The BIS has prepared over 13. 1986. test methods.Marketing Management optimum levels of quality.. BIS is also publishing a special feature entitled ‘Consumer News’ in the ‘Standard India’. The feature contains write-ups on the contents or International standard of interest to the consumer and reports the activities of conferences.000 standards relating to products. associations and organisations like Directorate of Marketing and Inspection professional bodies like Institute of standards Engineer (SEI). BIS participates in seminars. seminars and workshops of consumer importance. Popularization of certification Marks Scheme with the help of BIS licenses is also being carried out. plywood. Hindi journal ‘manakdoot’.the government of India has made BIS certification mandatory for term of mass consumption and those affecting the health and safety of consumers. vests and briefs. BIS has established a full-fledged consumer affairs Department to ensure intensive interaction with and provide service to common consumers and their organisations. etc. According to the Agricultural produce (Grading and Marketing) Act. exhibitions and the other programs organised by consumer. in variety of fields of fields ranging from agriculture and food products to electronics and communication. to the extent possible. operated under the provision of the BIS Act 1986. 1937 the equality standards of agricultural-based and animal based produce are determined. have been given 238 . These two major activities of BIS. food products. honey. gas stove. biscuits.standardization and certification encompass all the elements essential for promoting the rights of the common consumer as enshrined in the consumer protection act. cement.

3 PUBLIC DISTRIBUTION SYSTEM PDS is concerned with marketing of food grains. Because of increasing use of AGMARK the exports of agricultural product are increasing year after year. The Consumer Card Holders of different categories get their commodities like wheat. because paddy accounts for nearly 60% of the cereal production in the country (Economic Times. 19 May. Inspectors and Supervisors operates. If any complaint is received about substandard product. However. The Commission on Agricultural Costs and Prices (CACP) has repeatedly reported the failures of support operations. as a mark of purity and standard quality. Essential commodities are being distributed through open market as well as controlled retail outlets. packing. Other agencies concerned with PDS are Food Corporation of India and Cooperative Sector. 23. Prior to the conferment of AGMARK Certification the Directorate of Sales and Inspection enquires about the history and status of the organisation. For effective distribution. etc. Government of India has set up 21 scientific Laboratories and 50 sub-centres all over the country. 1993). This mark implies that the produce/product is free from adulteration. a Department of Civil Supplies exists in addition to a State Civil Supplies Corporation. We should remember that Cy or Bx is prefixed to the number of AGMARK on a product. It is observed except in certain pockets of the country. because most of the rice is procured by the government from rice milling and not from farmers. They look-after the processing. reduction in the cost of food grains distribution and effective interventionary powers in the hands of the 239 . so long as paddy is required to be converted into rice only by licensed rice mills. And if the consumer has any complaint about the product bearing AGMARK he can lodge the same with the nearest Government office or with the directorate of Sale and Inspection. Many traders and manufactures now-a-days used to obtain AGMARK for their saleable produce. Again.C. But a number of problems are witnessed in effective functioning of the PDS. 19 May.e. more than half of the cereal production remains shackled. The cheap food grain policy has resulted in increasingly adverse term of trade for farmers. not because consumers and the taxpayers (in the form of subsidy) are paying less. The Central Agmark Laboratory is located at Nagpur. through these retail outlets. The genuinely poor deserve sympathy and help. detail inquiry is taken into hand immediately. In the process. i. sugar. the public distribution of food grains has failed to have any impact on rural hunger (Economic Times. In each State. The Directorate of Sales and Inspection. Distribution. They collect samples and study their physical and chemical properties. popularity and experience. Therefore. sugar etc. District Civil Supplies Office at the district level manned with Civil Supplies Officer. the benefit of support prices.Marketing Management AGMARK. accrues to the rice millers and not to farmers. 1993).I. kerosene. There are better alternatives to our public distribution system of food grains. has been continually increasing. The subsidy paid to F. While issuing AGMARK label the Directorate or the officials of State Government remain present. essential commodities. the need for effective intervention by the state in times of scarcity cannot be minimized. but because nearly half of what they are paying is being expropriated by middlemen official as well as no-official. sharp decline in capital formation in the farm sector and reduced growth rate of food grain production. The producer in India is suffering. in case of paddy. if any. etc.

Sahoo. 3. 2. 1991. & P. What is the importance of Public Distribution System? What major problems exist in the present system? What measures do you suggest for better implementation of the PDs? 240 .C. BIS is concerned with standards formulation. 2. are the two essential features. 1. About 70-75% of its population lives on agriculture. All sorts of controls should be withdrawn. For better distribution of food grains of the following steps may be taken. and a host of other activities. PDS 23. Emerging Trends in Indian Marketing in the 90s. Agmark. 2. New Delhi.7 REFERENCES 1. The public distribution system for essential commodities has failed to deliver the results. 3. Marketing Management Mcmillan. 23. To protect the interest of the people in a welfare state like it is vital for the Government to intervene in marketing especially in public distribution of essential commodities. to do so only in specified godowns under the control of the Central Warehousing Corporation (CWC). Per capita income is very low. It should be obligatory on the part of all stockiest who which to stock more than 15 tones of food grains. ISI mark and AGMARK (for agricultural produce) testify quality.S. 1991. For quality control the Government has passed the Bureau of Indian Standards Act.C. THM. is accruing to the rice millers and not to farmers. A chain of rural godowns with Warehousing facilities be established and at least one godown be located in a cluster of 10 to 12 villages. Reduction in the cost of food grains distribution and effective interventionary powers in the hands of the Government in times of need shall go a long way to help and aid the poor. What is ISI Certification mark? Who confers it and why? 3. Ramaswamy.8 ASSIGNMENT QUESTION 1. if any. 1990. New Delhi. Academic Foundation. Sinha.5 KEYWORDS ISI. 23. S. A chain of rural godowns with warehousing facilities be established for effective distribution. Marketing Management – A Managerial Introduction. V.6 REVIEW QUESTIONS 1.4 SUMMARY India is a poor country.K. Gandhi J. New Delhi. Write short notes on a) AGMARK b) Activities of the BIS. 23. certification marking. In case of paddy. 23. the benefit of support prices. State the need for Government intervention in marketing in India. 1986 under which ISI Certification is conferred on quality products. and Namakumari.Marketing Management government in times of need.

e. internal and external.10 Terminal exercise 24.9 Assignment questions 24. Multi-income households are increasing. such as customer. better informed and quality conscious. 24.1 INTRODUCTION Environment comprises two aspects viz. demography. demand. About 75% of the population lives in villages. They account for only 35% of the total spending..2 Marketing Environment 24. This is the segment marketers are vying for. this bracket has a maximum discretionary income and hence the target of all produces creation in nuclear family is changing the spending habits and its adding to the spending. employees and the government with this background let us examine the marketing environment prevailing in India and also the changes that are likely to take place in the next few years. They are no more as inclined to buy land 241 . The population is looking upward and is better educated. A customeroriented organization has twin objectives .5 Keywords 24. satisfaction of all interested parties. legal.8 References 24.4 Summary 24.3 Ethics in Marketing 24. economic. The mobility toward urban area has been trend. technological. profitability and social performance i. citizen.2 MARKETING ENVIRONMENT Demographics India is the World’s second largest customer base and adding to the population. The Nagars are becoming Mahanagars (like Colus becoming Mahacolos).e. political.7 Review questions 24.. viz. A middle class with an enhanced purchasing power might be through different easy purchase schemes and support from the banks is growing in its size.Marketing Management LESSO N – 24 THE INDIAN MARKETING ENVIRONMENT OBJECTIVES After studying this lesson you would be able to understand the following The salient features of the marketing environment and Ethics in marketing STRUCTURE 24.1 Introduction 24. and competitive scenario. Traditionally. India is a rural-based country. External environment is influenced by uncontrollable forces. majority of them are in the age bracket of 25-50. the spending years.economic performance i.6 Revision Points 24. The change in media scene has changed their spending and producers are looking form ward them their ideal consumption basket is changing.

e. in the process. Indian products are in on way less those available outside.Marketing Management and gold as they two-wheelers. The technological advancement has given the customers better quality products. The middle class is a typical phenomenon. The child is tending to be the influencer. if not the decider. An upsurge is seen in the consumer products markets i. New Delhi.31). the products have become complex in nature requiring expert knowledge to maintain and repair. In fact. as seen in ready made garments being offered as casual or formal wear. On the organisational front. Every individual is being treated as a segment. and perhaps a major sector. The household is now made of electronic gadgets that were once dreams in Indian homes. Even the villages are affected by the process of change. The increasing literacy rate and exposure to the World around have given the population a multi-culture orientation. etc. Electronic gadgets have become a part of our life. One of the main reasons for the change in the life style of the Indian population is the proliferation of products generated by the technology inflow. Psychographics The change to nuclear family has led to democratic purchase decisions with housewife exerting greater influence. A major shift in the product policies has been the emergence of services as a separate. The number of two wheelers and car owners will also increase. which have takers. The importance of working women is leading to a more prosperous and hedonist like style (Sahoo and Sinha. p. Hero Honda and ONIDA have become household names. Its life style has been changed by the convenient payment alternative and increased discretionary income that help realize its dreams. Emerging Trends in Indian Marketing in the 90’s Academic Foundation. but. but a private transport is a necessity. the office automation drive will be faster and surer. 1991. Products The liberalization of the Indian economy with regard to technology transfer gave an impetus to the World’s best technology flowing into the country. Cycle will still be the maximum selling vehicle. durables and consumables/non-durables. The benefit segmentation will give way to occasion segmentation. With better facilities through Green and White Revolutions and now with the new economic policy of the Government to channelise 50% investment into rural areas the number of developing and urban analogous villages will rises rapidly and there is going to be an insurage of their purchasing power. The market that was characterised by a handful of brands and one main brand is a scene of the post. The children want ice creams and chocolates and that too only Kwality and Cadbury’s. The population is no more homogenous. Such discretion was never seen before. the outflow of such products is increasing day by day. 242 . Dependence on public transport will increase due to the distance between work place and home. The fact that even the entrepreneurs are young and dynamic has changed the industry scene and the market is proliferated with product. Personal transport is a necessity.

The brand image is gaining primacy. 243 .the salesmen are becoming professional. on the other hand. The nineties now see the crystallization of many of these changes and the beginnings of new trends. How ever. The dealer motivation will take a turn towards non-monetary incentive. Where there is a lot of impulse buying . The trend shows an increase in the retailer’s advertisements of the product than it was a decade ago.customers are more likely to go for conveniently available brands . pick and choose.Marketing Management The strategy is moving from Product Posting to Brand Positioning. PCs marketers are cutting prices like anything and if the response to the price cut by electronic corporation is any indication of the things come. What is seen is that the manufacturer has started to make the middlemen a partner in its marketing efforts. credit cards. The marketing principles. Comparatively the new products are expected to be offered at much less price than to-day. co-operative advertising will form more important parts of motivation. viz. They are dynamic.the companies which look to price as a cost-related determination well have to change to the non-related factors.. They will be selling at a premium. This will be on the rise. The retail marketing scenario is changing it is no more a dull exercise .the shops are no having good get ups . Commission will stay as important as it is. The consumer durables have good image when priced higher. comparative advertising. which are restricted to the corporate such a situation. Family brand is not likely to be popular but each brand will have a shelter of a Corporate Image. the growing importance of shelf space at retail outlets. Distribution Distribution calls for making available the product in every corner of the market this is especially true with low involvement products (lips). The younger generation is taking over the business at the retail/wholesale outlets. Promotion The 1980s have been regarded by many as a watershed decade . Role of price The Indian market is experiencing a peculiar phenomenon now-a-days. contests. political advertising.They saw the beginning of the positioning Era. The personal service shops will make way for the departmental stores where consumers will find it convenient and feel more free to look. PCs are going to be still cheaper. In short. asserted services etc. These are clear indication that price is no longer a cost-related decision . professional and highly forward looking. Distribution plays a vital role. but services like shop displays. the importance of rural markets and the beginning of Direct Marketing. retail outlet will be another profit centre of the company and the concept of vertical marketing system (VSM) will catch on. will also come down to retailers. home deliveries. customized and specialty product only one can observe a whole lot of addition to the service rendered at the retail outlets. awards. Due to the fast spread of technology the distinctiveness of the product will be short-lived. the products which are meant for prestige only will be on the rise as the market for the riches is growing. as in the case of TVs.

go for regular booking. Companies like HLL P & G. hoardings and wall paintings will continue to be the leading media. whereas a few Godrej.3 ETHICS IN MARKETUNG Modern business is regarded as an integral component of society. In the rural areas. Modi Xerox. Thus dealer display contests. Hero Honda. use the space only in the case of a launch or when there has been an unforeseen change in sales. That was an isolated case then. and BPL Vs. Nirma Vs. Nestle. Asquiring shelf space for the company’s products. One of the most important objectives of any Marketing Manager during the recent years was the procurement of a spot on the retailer’s shelf so that the consumer can see if easily and getting the retailer to push it just in case the consumer dose not spot it. Ethics in marketing means an objective concern for the consumers or users of products and services i. In addition to economic performance. This is going to be more basic in the year to come. Nirma Vs. It is observed that roughly 40% of the consumers buy on impulse. the cases of HCL copiers Vs. POP promotion consists of three major tasks viz. It demands what is quality of life management. Today. Co-Cool. Surf. Retailer motivation through citation. The Hindustani Advertisements (Vernaculars written in English) is now-a-days proving effective (Binnines. etc. It has become a recent phenomenon in India.Marketing Management Comparative advertising is the natural manifestation of a highly competitive environment. like tangles. The ratesof the display depend on the location of the shop.etc. these have already become a common scene in urban areas particularly for industrial and household goods. The first real comparative advertising in india was released more than a decade ago by Nutramul when it compared prices of competing brands. This phenomenon can be strategically exploied through point-of-purchase (POP) displays. aggressive merchandising and efficient retailing have become the fulcrum around which marketing plans revolve. etc. Budget outlays in various media and sales promotion in particular have shown increases. etc. The advertisers no longer blindly pump in major protions of their advertising budget into television. Rin. Preparing the display materials. TVS Suzuki Vs. incentives and margins for retailers and dealers become an important variable to be tackled. TV exhibitions and fairs are acquiring more popularity in rural areas. Videocon are clear indications that comparative advertising is here to stay. cash incentives. stickers. modern business must demonstrate social awareness or sensitivity and social performance. the place of display in the shop and the size of the display. Thus. etc. Today society is expecting much more from business than in the past. Of course. Industrial advertising is becoming more corporate Image Building through social and ecological concerns shown by the companies. for the welfare of society that prevent or limits individuals and corporate behavior from 244 .) 24.e. danglers. Vicks.

In the third place marketing is also considered the process the prices charged for both the rival brands would have to be higher than necessary. These polices should cover distributor relations. Most consumer wants are acquired or imposed. Under this principle. Following the principle of societal marketing. TVs. 642). powerful labour. and society long-run interest. Fraudulent and deceptive means to promotion exploit innocent consumers and always create after-sale doubts and frustration. a few road and such other socially desirable goods and services can be noting but a serious misallocation. hence modern business to demonstrate not only economic efficiency but also consumer Sensitivity and social awareness. customer service. But the question is what principle should guide companies and marketing managers on issue of ethics and social responsibility? One philosophy is that such issues are decided by the free market and legal system. These are in general in relation to inefficiencies or unethical marketing practices. As a result the consumer purchasing power is diverted from more worthwhile expenditure. Principles of Public policy towards marketing Marketing executives of the 1990s and beyond 2000 AD will face many challenges. companies and their managers are not responsible for 245 . For example. The production of lakhs of cars. exacting shareholders. an enlightened company makes marketing decisions by considering consumers’ wants the company’s requirements consumer’s long-run interest. advertising standards. It is alleged that marketing misallocates scarce economic resources. Criticism against marketing Many types of criticism have been leveled against marketing. marketing is said to create too much materialistic and artificial values. if HLL spends lakhs of rupees in promoting its soaps and detergents TATA spends more than HLL’S investment in promotion to promoting its brands . such as unfair trade practices. pricing. challenging customers. product development and general ethical standards. it is felt that there are too many middlemen especially in retail trade. Again. Each company has to develop corporate marketing ethics policies – broad guidelines that every one in the organization must follow. Companies that are able to create new values and practice socially responsible marketing will have a world to conquer (Kotlet. refrigerators music system and only hundreds of new class rooms. Secondly. restrictive trade practices.Marketing Management unethical practices. Advertising and sales promotion encourages consumers to place too much emphasis on the satisfaction of material wants and to substitute material values for moral values. a few public hospital. In an economy of scarcity like that of ours. marketing also involves too much competitive promotion. two-wheelers. P. this assumes special significance. Alert companies view societal problems as opportunities modern management is faced by critical public. pollution of environment and so on.

decisions should be made by consumers and producers under freedom. those for sales people cover such topics as expense accounts and supplier relations. Nearly all employees have attended workshops. Companies and marketing managers should apply high standards of ethics and morality when making corporate decisions. Armstrong Principle of Marketing . The important ones may be enumerated in brief. all information provided relating to products and services should be clear and concise. it will not pursue that business further. The program came about after charged that the company had deliberately over billed the government on defense contracts. And little wonder it was put together as general from the Pentagon looked on. The Principle of Consumer and Procedure Freedom As far as practicable marketing. Freedom for producers and consumers is the foundation of a dynamic marketing programme. To prevent hidden interpretations or understandings. Hence. A number of principles that might guide the formulation of public policy toward marketing may be adopted. This leads to greater fulfillment through a closer matching of products to desires. The General Dynamics ethics program is considered the most comprehensive in the industry. Now at General Dynamics. 1. Source: Exhibit–1: The General Dynamics Ethics Program Kotler. entertainment. Under no circumstances may an employee offer or give anything to customers or their representatives in an effort to influence them. The Principle of Meeting Basic Needs Marketing should serve both affluent as well as disadvantaged ones. The company also has a 20 page code of ethics that tells employees in detail how to conduct themselves. a committee of board members reviews its ethics policies. In countries where common practices. This means that a company should have a ‘social conscience’. 246 . Receiving or soliciting gifts.Marketing Management making moral judgments. Marketing freedom is essential to enable the marketing system to deliver a high standard of living.643. sales people will follow the company’s standards. PHI. and a corporate ethics director and steering group execute the program. New Delhi. Here are some examples of rules for sales people: If it becomes clear that the company must engage in unethical or illegal activity to win a contract. 2. Each company must workout a philosophy of socially responsible and ethical behaviour. A second philosophy puts responsibility not on the system but in the hands of individual companies and managers. A model is portrayed below in Exhibit-1. p. Companies can in good conscience do whatever the system allows. Certain people may lack purchasing power and may to without needed goods and services. 1992. which ultimately cause harm to their physical and psychological well-being. It should adopt its own code of ethics. and G. or anything else of value is prohibited. Philip. The company has set up hot lines that let any employee get instant advice on job-related ethical issues and has given each employee a wallet card listing a toll-free number to report suspected wrongdoing. indicate acceptance of conduct lower than that to which General Dynamics aspires.

247 . A whole lot of addition to the services at the retail outlets such as Credit Cards. misleading and untruthful. 24.7 REVIEW QUESTIONS 1.5 KEY WORDS Impact of price. It is alleged that marketing misallocates resources.Marketing Management it should endeavour to meet the basic needs of all people and all people should share to some extent in the standard of living it creates. better informed and quality conscious. 4. etc. The principle of Economic Efficiency Marketing must strive to supply goods and services efficiently and at low prices. 24. What is ethics in Marketing? What criticisms are leveled against it? 5. cooperative advertisements etc. a) What changes do you witness in the Indian Market so far as products are concerned? b)Write a note on the promotional scenario in the Indian Market. Exhibitions and fairs are common in urban areas for promoting the products. They will have greater purchasing power. Examine the recent changes in the Indian Marketing environment. State the important principles of public policy in relation to marketing. Psychographics 24. The customerpopulation is becoming educated. has become common. The other principles of public policy which go to shape marketing ethics are (a) the principle of innovation. It is high time that the companies and marketers must follow a code of ethics guided by certain principles of public policy. The Indian market witnesses the proliferation of products service sector is emerging as a major sector. are forming an important part of dealer promotion.4 SUMMARY Over 3/4th of the country’s population are in their spending years and the emergence of nuclear family has changed the spending habits. Promotional efforts often are offensive. The marketers at times forget their social responsibilities. Home Deliveries. Marketing is expected to become more consumer-based with an added social concern. hoardings and wall paintings are becoming a leading media. contests. It involves too much of competitive promotion. Brand positioning is coming up. POP displays and personalized marketing are being emphasized. (b) the principle of consumer education and information and the principle of consumer protection. 2. a) What changes do you observe in the demographics and psychographics of the India Consumers? b) Distinguish between Product Positioning and Brand Positioning. 3. In rural areas. Shop displays. Product positioning is taking a backseat.6 REVISION POINTS Marketing environment 24. 3.

Kotler. Himalaya. 1994. New Delhi. 1993. Principles of Marketing. Himalaya.Marketing Management 24. P & Gary Armstrong.N. What information on competition will you collect and how will you go about searching for this information? 248 . PHI. Marketing Management. Sales Promotion and Advertising Management. 1992.8 REFERENCES 1. New Delhi. 2. Mishra M.A. 24.9 ASSIGNMENT QUESTIONS What factors would influence the willingness and ability of consumers to buy each of the following products a) Mobile phone b) DVD player c) Air cooler 24. New Delhi. Sharlekar S.10 TERMINAL EXERCISE If you were the marketer for a new brand of cooldrink to be introduced in India. 3.

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