Contemporary Marketing 3 Modules

CONTEMPORARY MARKETING
Semester – III
B.com
Student Workbook
Edition: 2023
#44/4, District Fund Road, Behind Big Bazaar, Jayanagar 9th Block, Bengaluru, Karnataka,
560069
pg. 1 For Private Circulation Only

Course: B.Com Semester: III
No. of Hours: 45 Hours Credits: 3
Subject: CONTEMPORARY MARKETING
Course Objectives: Enhance the marketing understanding with relevant to contemporary
practices. Aquitaine students with global knowledge in the domain of marketing. Leverage
skills and information about current marketing trends
Module 1: Marketing Concepts & Environment 10 Hours
Marketing – Meaning and Definition, Nature of Marketing, Goals of Marketing, Company’s

Orientation Towards Market Place; Functions of Marketing; Types of environments – Micro
& Macro Environment; Market Segmentation – Meaning and Definition, Basis of Market
Segmentation; Consumer Behaviour – Factors influencing Consumer Behaviour
Module 2: Marketing Mix – Product & Pricing 08 Hours
Marketing Mix – Meaning & Elements; Product – Meaning, Product Mix, Product Line,
Product Life Cycle, Product Planning, New Product Development; Pricing – Meaning,
Factors affecting pricing, Methods of Pricing (Only Meaning), Pricing Policy
Module 3: Marketing Mix – Place & Promotion 08 Hours
Physical Distribution – Meaning, Factors affecting Channels of Distribution, Types of

Marketing Channels; Promotion – Meaning, Significance of Promotion; Personal Selling &
Advertising, Branding, Packing, Packaging
Module 4: Service Marketing 07 Hours
Meaning of Services, Characteristics of Services, Challenges of Services Marketing,

Marketing Mix in Service Industry, Growth of Services Sector in India
Module 5: Trends in Marketing 12 Hours
Digital Marketing – Introduction, Features, Process, Advantages and Disadvantages; E-

Marketing & Mobile Marketing; Marketing Disruption caused by Digital Marketing,
Challenges and Suitability of Digital Marketing in India
Trends in Marketing – Green Marketing, Grey Marketing, Retailing, Relationship
Marketing, Customer Relationship Marketing & Social Marketing
Reference Books:
1. Marketing Management - Kotler, Keller, Koshy and Jha
2. Essentials of Marketing Management -P N Reddy & Appanniah.
3. Marketing management- Sharma and Shashi.K. Gupta
4. Marketing management – Sontaki
5. Marketing management – SA Sherlakar
CO COURSE OUTCOME
Recognize the knowledge marketing and Categorizing and summarizing the
1
market segmentation and consumer behavior
2 Illustrate the new product development through marketing mix
3 Illustrate the marketing mix elements of place and promotion
4 Demonstrate the knowledge of marketing and service sector
Appraise E-Marketing strategies for a new product and recent trends
5
of contemporary marketing

Module 1
Marketing Concepts & Environment
Structure
1.1 Marketing – Meaning and Definition, Core Concepts (Needs, Wants, Demand, Customer
Value & Customer Satisfaction)
1.2 Nature of Marketing
1.3 Goals of Marketing
1.4 Company’s Orientation Towards Market Place (Production, Product, Selling, Marketing,
Holistic Marketing Concept)
1.5 Functions of Marketing
1.6 Types of environments – Micro & Macro Environment
1.7 Market Segmentation – Meaning and Definition, Basis of Market Segmentation
1.8 Consumer Behaviour – Factors influencing Consumer Behaviour

Module 1
1.1 MARKETING
Meaning
Marketing is the process of converting prospective buyers into actual customers by

communicating complete information of the product or services to the customer. The key
elements which are the secret to a successful marketing practice are thorough market survey
and research, framing a competitive strategy, designing a realistic marketing plan and
implementing different tactics to execute the plan.
Marketing is an ongoing practice to capture customer’s attention towards a product or

service. It is the core of all the business practices, without which any business will prove to
be a colossal failure.
Definition
According to Philip Kotler, “Marketing is a social and managerial process by which
individuals and groups obtain what they need and want through creating and exchanging
products and value with others.”
According to the American Marketing Association (1988), “Marketing is the process of

planning and executing the conception, pricing, promotion, and distribution of ideas, goods,
and services to create exchanges that satisfy individual (customer) and organizational
objectives.”
Peter Drucker defines, “Marketing is not only much broader than selling; it is not a
specialized activity at all. It encompasses the entire business. It is the whole business seen from
the point of view of the final result, that is, from the customer’s point of view. Concern and
responsibility for marketing must therefore permeate all areas of the enterprise.”
Philip Kotler and Kevin Lane, “Marketing management is the art and science of choosing
target markets and getting, keeping and growing customers through creating, delivering and
communicating superior customer values of management.”

According to Kotler and Armstrong, (1996), “Marketing is the business function that
identifies customers’ needs and wants, determines which target markets the organization can
serve best, and designs appropriate products, services, and programs to serve these markets.”
CORE CONCEPTS OF MARKETING
Needs:
Needs are the basic requirements which human beings require for existence. These mainly
consist of air, water, food, clothing and shelter. Along with these needs, some other needs
which are required to be satisfied are education, medical care, entertainment, and recreation. It
is a difficult task for a marketer to identify the needs of the customers since costumers may not
be conscious of their needs, and even if they are, then they might be unable to put forth their
needs clearly.
The notion that marketer creates needs is wrong. The need actually pre-exists in the market;
the marketer just has to identify these needs, make the customers aware of these needs, and
make the customers believe that only their company can satisfy these needs.
Wants:
The wants are a step ahead of needs and are largely dependent on the human needs. A need
becomes a want when a need is directed to a specified object. Wants are designed according to
the taste and preferences of the society.
Needs already exists in the market; however, wants may be created by the marketers. It can
also be said that Need and Want are relative terms because a product may be considered to be
a need by someone but it may also be perceived as a want by others. E.g. To have a food is a
basic need of human beings but to have biscuits for food is a want created by the marketers.
Demand:
A demand is generated when a customer is willing to buy a particular product and has an ability
to pay for it. A company should study not only how many people want their product but also
how many would actually afford to buy the product. E.g. Many people would be desirous to

buy Ferrari car; however, there is only a small segment which can afford to buy it which reflects
the demand for Ferrari car in the market.
Demand = Willingness to pay + Ability to pay
Customer Value:
Value reflects the sum of the perceived tangible and intangible benefits and costs to customers.
Here the costs include both economic and non-economic costs whereas benefits include both
tangible as well as intangible ones. A product or services is successful when it delivers value
and satisfaction to the buyers. Value is usually a combination of quality, service, and price.
Value increases with quality and service and decreased with price. A value is a relative term as
perceived benefit for one person may not be a benefit for others. Value changes based on time,
place, and people in relation to changing environmental factors. It is a creative energy exchange
between people and organizations in our marketplace.
Companies try to figure out the list of add-on benefits that they can provide based on the taste
and preferences of the customers. A high value product not only helps the company to generate
new customers but also helps to retain the older ones. Eg. Online parcel tracking facility
provided by the courier companies without any additional cost can be one of the best examples
of customer value. The same goes for free delivery of products purchased through online
shopping portals.
Customer Satisfaction:
Satisfaction reflects a person’s judgment of product’s perceived performance in relationship to

expectations. Customer satisfaction with a purchase depends on how well the product’s
performance lives up to the customer’s expectations.
(i) If the performance falls short of expectations, the customer is dissatisfied.
(ii) If it matches expectations, then the customer is satisfied.
(iii) If it exceeds the expectations, then the customer is delighted.
In short:
Performance < Expectation → Dissatisfied Customer
Performance = Expectations → Satisfied Customer
Performance > Expectations → Delighted Customer
Satisfied customers will buy the product repeatedly and recommend the same to others;
however, dissatisfied customers may switch to the competitors and discourage others to buy
the product. Marketers should be careful while setting the expectations. If they set expectations
too low, they may satisfy those who buy but fail to attract enough customers. If they raise
expectations too high, customer might be disappointed.
1.2 NATURE OF MARKETING
Marketing is a complex function and does not sum up to sales alone.
To develop a better understanding of the marketing practices, let us know about its
nature:
 Managerial Function: Marketing is all about successfully managing the product,

place, price and promotion of business to generate revenue.
 Human Activity: It satisfies the never-ending needs and desires of human beings.

 Economic Function: The crucial second marketing objective is to earn a profit.
 Both Art and Science: Creating demand for the product among consumers is an
art and understanding human behaviour, and psychology is a science.
 Customer-Centric: Marketing strategies are framed with the motive of customer
acquisition.
 Consumer-Oriented: It practices market research and surveys to know about
consumer’s taste and expectations.
 Goal-Oriented: It aims at accomplishing the seller’s profitability goals and buyer’s
purchasing goals.
 Interactive Activity: Marketing is all about exchanging ideas and information
among buyers and sellers.
 Dynamic Process: Marketing practice keeps on changing from time to time to
improve its effectiveness.
 Creates Utility: It establishes utility to the consumer through four different means;
form (kind of product or service), time (whenever needed), place (availability) and
possession (ownership).
1.3 GOALS OF MARKETING
Three (3) big goals of marketing which include:
1. Acquiring customers: Top of mind for most businesses, acquiring new customers
means new revenue for growth. This goal is the most complex out of the three goals
because you have to get new customers all the way through your sales funnel.
First, customers need to become aware of you through ads, colleagues, social media or
other means. Then they have to be interested enough in your brand, your quality
content, or you’re offering to consider your services. Then, they engage with you
through things like signing up for your newsletter, following you on social media, or
reading a blog. Lastly, the engagement has to be valuable enough for them to want to
learn more about your product or service and eventually buy it.

IMPORTANT DIAGRAM
When your marketing efforts are engaging enough to bring a customer through the sales
funnel, it means you are doing something right. It means you have marketing strategies
and activities focused on each part of the sales funnel: awareness, consideration, and
purchase. It also means you’ve taken the time to understand your customer and are
patient enough to see them come through each part of the sales funnel.
Consistency is key!
2. Retaining customers: Somehow people forget about this goal! And what an amazing
goal it is. Retaining customers is a lot more cost-effective than acquiring new ones
since they already know you and have used your services.
Marketing strategies that don’t focus on retaining customers are missing out! Strategies
can include things like rewards programs, discounts for repeat customers, and, last but
not least, providing a great service with amazing customer service.
Customers won’t come back if your service doesn’t meet their needs. That means
you should be talking to your customers and learning how to improve your products
and services continually. It means making your buying process easy and user-friendly.
And it means you have great employees that give good customer service. Gathering this
feedback is important and can be done in the form of surveys or customer interviews.
Since retaining customers is a main goal of marketing, your marketing team should be
involved in the development and updates of your products and services as well as your
buying process and customer service.

3. Turning customers into brand ambassadors: Customers fall in love with good
brands -- with what they stand for and the story they tell. Having an emotive brand
story is important in both acquiring customers and retaining customers. And when a
good brand story can turn customers into brand ambassadors, you’ve hit a home run.
Brand ambassadors will go to bat for you, not just because of the service you
provide, but because they are deeply connected with your brand’s higher purpose.
If we think about the sales funnel, people who hear about your company from brand
ambassadors will automatically go into the consideration part of the sales funnel. This
means you don’t have to spend as much time or money in marketing activities focused
on awareness. These people also are more likely to consider a purchase because of the
increased trust from hearing about you from someone else.
Word of mouth, hands-down, has THE highest conversion rate of any type of
marketing activity. Therefore, any way that you can increase the number of people
committed to your brand, the more successful you will be.
Building brand ambassadors should be a key focus of any marketing team. This would
include strategies like developing a compelling and emotive brand story that resonates
with your audience. It also includes things like referral programs and creating free high-
quality content that educates or entertains (with no sales ask).
Having brand ambassadors should be the ultimate outcome of any business!
1.4 COMPANY’S ORIENTATION TOWARDS MARKET PLACE
Marketing needs to follow a philosophy where there is no conflict of interest between the
organization, the customers and the society. Marketing activities should be carried under a well-
thought out philosophy of efficient, effective, and socially responsible marketing. There are
few concepts under which organizations conduct marketing activities.
Traditionally the following concepts were followed:
1. The Production Concept: The production concept is the oldest concept in business.
According to this concept consumers will prefer products that are widely available
and inexpensive. The concept believes that product should be available and affordable.
This concept works well in developing countries where consumers are more interested
in obtaining the product than its features. Managers of production- oriented business
concentrate on achieving high production efficiency, low costs and mass distribution.
They assume that consumers are primarily interested in product availability and low
prices. This orientation makes sense in developing countries such as China, where the
largest PC manufacturer, Lenovo, and domestic appliances giant Haier take advantage
of the country’s huge and inexpensive labour pool to dominate the market. Marketers
also use this concept when they need to expand the market. But this concept does not
concentrate on the type of product and does not give importance to customization or
customer satisfaction.
2. The Product Concept: The product concept holds that consumers will favour those
products that offer the most quality, performance, or innovative features. Managers in
these organizations focus on making superior products and improving them over time.
They assume that buyers admire well-made products and can appraise quality and
performance. However, Product oriented companies often design their products with
little or no customer input. The customer needs are ignored. They overlook competition
and this also leads to marketing myopia.
3. The Selling Concept: The selling concept holds that consumers will not be interested
in buying on their own; they need to be coaxed into buying. This concept believes
that a company needs effective selling and promotional tools to stimulate morebuying.
Salesmen are hired to make people aware about the availability of the product and also
to the 12 increase the sales. The selling concept is practiced most aggressively with
unsought goods, goods that buyers normally do not think of buying, such as insurance
and encyclopaedias. Most firms also practice the selling concept when they have over
capacity. Their aim is to sell what they make, rather than make what the market wants.
The selling concept is also practised in the non-profit area by fund-raisers, college
admission offices and political parties. When the product is new, this method is
beneficial and people become aware of the product; but, at the same time, it carries high
risks also. They sell what they make rather than make what the market wants.
The modern concepts of Marketing are:
1. The Marketing Concept: According to this concept, achieving organizational goals

depends on knowing the needs and wants of target markets and delivering the desired
satisfaction better than the competitors. It is based on premise like customer orientation,
marketing information system, systems approach and dual objectives. Therefore, under
this concept, customer focus and value are the paths to sales and profits. Instead of
“make and sell” philosophy, here we focus on “sense and respond” tactics. Therefore
this is a customer-centredconcept. The job is not to find the right customers for your
product but to find the right product for your customers. The Selling concept is an
inside-out perspective where the focus is the company’s existing products. But the
Marketing concept is an outside-in perspective where the focus is the customer needs.
The modern marketing concept believes that the philosophy of marketing is to deliver
goods more efficiently and effectively than the competitors with a view of overall
customer satisfaction. This concept insists on a good marketing information system
with a view of maintaining such information and data which will help in satisfying the
customer. Each and every department is well co-ordinated and inter related with one
another in bringing about customer satisfaction. This concept concentrates on dual
objectives of profit maximization and customer satisfaction. Several scholars have
found that companies that apply the marketing concept achieve superior performance.
2. The Holistic Marketing Concept: The holistic marketing concept is based on the
development, design and implementation of marketing programs, processes and
activities their breadth and interdependencies. Holistic marketing recognizes that
“everything matters” in marketing and that a broadand integrated perspective is often
necessary. Holistic marketing is thus an approach that attempts to recognize and
reconcile the scope and complexities of marketing activities. There are four broad
components characterizing holistic marketing:
 Relationship marketing: It aims at building mutually satisfying long term relationships

with key constituents in order to earn and retain their business.
 Integrated Marketing: Integrated marketing is a process of coordinating various

marketing activities to maximize their joint efforts.
 Internal Marketing: Internal marketing is the task of hiring, training, and motivating
able employees who want to serve customers well. It’s a process of ensuring that

everyone in the organization embraces appropriate marketing principles.
 Performance Marketing: It is a process of understanding the returns to the business

frommarketing activities and programs, as well as addressing broader concerns and their
legal, ethical, social and environmental effects.
1.5 FUNCTIONS OF MARKETING
Marketing is not just selling off goods and services to the customers; it means a lot more
thanthat. It starts with the study of the potential market, to product development, to market
sharecapturing, to maintain cordial relations with the customers.
Following multiple operations of marketing helps the business to accomplish long-term

goals:
 Market Research: A complete research on competitors, consumer expectations

and demand is done before launching a product into the market.
 Market Planning: A proper plan is designed based on the target customers,

market share to be captured and the level of production possible.

 Product Design and Development: Based on the research data, the product or
service design is created.
 Buying and Assembling: Buying of raw material and assembling of parts is done to
create a product or service.
 Product Standardisation: The product is graded as per its quality and the quality of
its raw materials.
 Packaging and Labelling: To make the product more attractive and self-
informative, it is packed and labelled listing out the ingredients used, product use,
manufacturing details, expiry date, etc.
 Branding: A fascinating brand name is given to the product to differentiate it

from the other similar products in the market.
 Pricing of the Product: The product is priced moderately keeping in mind the value
it creates for the customer and cost of production.
 Promotion of the Product: Next step is to make people aware of the product or
service through advertisements.
 Warehousing and Storage: The goods are generally produced in bulks andtherefore
needs to be stored in warehouses before being sold in the market insmall
quantities.
 Selling and Distribution: To reach out to the consumers spread over a vast
geographical area, selling and distribution channels are to be selected wisely.
 Transportation: Transportation means are decided for transfer of the goods from
the manufacturing units to the wholesalers, retailers and consumers.
 Customer Support Service: The marketing team remain in contact with the

customers even after selling the product or service to know the customer’s
experience, and the satisfaction derived.
1.6 TYPES OF ENVIRONMENTS
Introduction
Meaning of Marketing Environment
A marketing environment is a combination of internal and external environmental forces

and factors that influences the business operation of a business and its ability to serve its
customers. It is essential to know both internal as well as external environmental factors.
The internal marketing environment consists of factors like materials, machines, workers,
money, etc. All of these components are necessary to run a business successfully. For
example, ifthe raw material is not available on time and in sufficient quantity, then the work
of production will become slow, and the company will not be able to fulfill the demand
for the product inthe market.
On the other hand, the external marketing environment can be divided into two categories,
such as the macro external marketing environment and the micro external marketing
environment. The microenvironment is closely related to the business and constitutes all
external business activities such as the distribution and promotion of products in the
company. The macro- environmental components affect all the companies serving in a single
industry similarly.

Marketing
Environment
Internal External
Environment Environment
Money
Men
Markets Micro Macro
Materials
Machinery
Technological
Demographic
Socio-Cultural
Controllable Semi-Controllable Economic
Political
Physical
Suppliers
Product Market-Intermediaries
Place The Company
Price Customers
Public
Promotion Competitors
1. Internal Marketing environment

The internal environment is formed of all the internal factors and forces of an organization.
The internal environment of an organization is within the control of the marketer, and he
can change or modify the environment as per the demand in the market and the requirements
of the business.
 Money
 Men
 Markets
 Materials
 Machinery
However, the internal environment factors are changed according to the change in the external
marketing components. For example, an organization is required to upgrade its technology
if new technology in the market is introduced.
2. External Marketing environment

The external marketing environment consists of all the external marketing factors that exist
outside the organization, and the marketer has little or no control over the external marketing
environment factors.
a. Micro Environment
The microenvironment of a business consists of all the factors and forces that are directly
associated with the company. The micro components of the external environment are also
knownas task environments.
 Suppliers
 Market Intermediaries
 The Company
 Customers
 Public
 Competitors
i. Suppliers:
Suppliers provide raw materials, services or goods to a company. The prices, service
availability and product quality that a supplier offers can affect the cost and condition
of products that customers purchase.
Companies often consider their suppliers to be their partners and may expect suppliers
to commit to delivering quality goods to customers. Researching a variety of suppliers
can help the company determine which one may provide the product quality and prices
your customers are seeking.
ii. Marketing Intermediaries:
Intermediaries helps the company to promote, sell and distribute its products to
final buyers. Marketing intermediaries includes resellers, physical distribution
firms, marketing services agencies and other intermediaries including financial
intermediaries.
Reseller includes distribution channel firms that help the company to find
customers or make sales to them.
In India it is a growing trend that in near future manufacturers will now be facing
competition of large and powerful intermediaries. Some resale organizations in

India have emerged and troubled the manufacturers. For example Big Bazaar,
Shoppers Stop. Pantaloons retail. Like suppliers, intermediaries form an important
component of the company’s overall marketing strategic management.
For optimizing customer satisfaction company must become partner with these
intermediaries to balance the performance of whole system.
iii. The Company:
The company is a hierarchical entity consists of different departments like

purchasing, production, top management, research and development, finance etc.
All these interrelated groups forms the internal environment of organization.
Top management is responsible for companies’ mission, objectives, and broad

strategies, policies. Marketing management make decisions within the actions and
decisions of top management. Other departments also have impact on marketing
department. Harmony must be established with all the departments.
iv. Customers:
Customers exercise a major influence on a company's marketing environment.

Companies may collect information about customer behaviors and opinions to help
inform future business decisions.
To manage this aspect of its marketing environment, a company may monitor the
changes in customer preference and behavior and adjust its offerings as needed.
For example, if a company receives negative feedback about a product, it might
alter its product development practices.
v. The public:
The public includes any person who might engage with the company. The public
can also include potential investors and people who refer new customers to the
business. Understanding the public as a group of potential customers can help you
target new markets to increase brand awareness.

vi. Competitors:
A company's competitors are part of its microenvironment because they directly affect
daily business operations. A company can determine its position in the market to decide
on strategies that can help it outperform its competition. Competing businesses often
share customers, so it's helpful to monitor how the competitors are succeeding to
understand ways that the company you work for might improve.
b. Macro Environment
Macro components of a marketing environment consist of all external forces and factors that
impact the whole industry rather than just changing an organization directly. Therefore, the
macro marketing environment is also referred to as a large environment.
 Technological environment
 Demographic environment
 Socio-Cultural environment
 Economic environment
 Political environment
 Physical environment
1. Demographic Environment:
Demographic word is a combination of the words “Demo” which means “The People” and
“Graphy” which means “Measurement”. It means the ‘measurement of people’.
A demographic environment is a set of demographic factors such as gender or ethnicity.

Companies use demographic environments to identify target markets for specific products
or services. The demographic environment is a term used by marketers to describe the
characteristics of a population that can be used to influence the success of a business or
commercial venture. The most important demographic factors for businesses include age,
sex, income, education level, and occupation.

2. Economic Environment:
The economic environment consists of economic factors which affect the buying habitsof
consumers and the commercial behavior of companies. For example, if an organization
increases the price of a particular product, then people will start buying less from the
organization and similarly when the demand of a particular product decreases the company
reduces the production of the product.
Microeconomic environment factors are those factors which affect and

individual organization and do not affect the whole industry. The examples of
microeconomic factors are demand, competitors, market size, distribution chain, suppliers,
supply, etc.
Macroeconomic environment factors are those which impacts at a larger level and does not
only impacts one company but impact the whole economy. The examples of microeconomic
factors are inflation, unemployment, interest rates, taxes, tariff, the trust of customers, etc.
Factors affecting the economic environment –
i. Demand - Increased demand for product results in more profits whereas a decrease
in demand for your product cause loss. Therefore, companies use various strategy
to increase the demand for their product in the market.
ii. Market Size - The profit margin of the organization will be low if it has a small
market size. Meaning of market size is the total number of potential buyers in a
market. For example, a company which produces asthma inhalers has a small market
size as it can sellinhalers to people who suffer from asthma.
iii. Supplier - The production of a company will halt if its suppliers suddenly stop to
providesupplies of raw material to produce a product. Similarly, the production cost

will also increase with the increase in the price of supplies by the supplier.
iv. Income - Income is the total earning of an individual or an entire family. Income
affects the buying habits of the consumers and thus impacts the commercial
businesses. There isa direct relationship between the buying habits of an individual
and his income. For example, people with low income tend to buy only goods and
services which are necessary for living and don’t spend much money on
entertainment and luxurious items. On the other hand, people with high income have
a tendency to spend more money on entertainment and luxurious services and goods.
They tend to spend low money on necessary goods for a living.
v. Inflation rate - The inflation rate can be defined as the rate at which the process of
goodsand services increases. With increased prices, the buying ability of people
gets affected. People start buying less, and they spend their money on the necessary
goods and services only. Inflation rate put bad impact on services businesses.
vi. Interest rates - Increasing interest rates also impact the businesses, especially those
businesses where people require to take a loan to buy goods. For example, people
mostly buy houses and cars on loans. Therefore, the sales of such goods decrease
with the increased rate of the interest rate.
vii. Taxes – High taxes in the country impacts the economic environment badly. People
will have low disposable income. Taxes not only affect the consumers, but it also
affects businesses as high taxes results in the high cost of production.
viii. Unemployment Level - Another factor which impacts the economic environment is
the unemployment level. The countries with high unemployment level have a weaker
economic environment.

If most of the population will not earn, then they will not have sufficient money to spend on
buying goods and services. This creates a bad economic cycle in the county.
3. Natural Environment:
Natural environment involves the natural resources that are needed as inputs by marketers
or they are affected by marketing activities. So marketers should be aware of several trends
in the natural environment. There are three natural environment trends that marketer should
be aware of:
i. Shortages of raw materials: if your company makes products that require scarce
resources such as nonrenewable resources (oil, coal, various minerals), you could
face large cost increases making a marketing strategy difficult.
ii. Increased pollution: Disposal of chemical and nuclear wastes, mercury levels in the
oceans, chemical pollutants in the soil and food supplies, littering - industry damages
the quality of the natural environment. This is a hard hill to climb to promote
products to consumers thus your marketing strategy is very difficult.
iii. Increased government intervention: Different countries have different levels of
involvement with respect to natural resource management. Some vigorously pursue
environmental quality while others do little about pollution. There is hope, however,
that companies will become more socially responsible and that pollution will be
reduced. These factors create marketing strategies that bode well to the consumer.

4. Political Environment:
The political environment is one of the external environmental factors which affect the
business. It can impact positively or negatively depending on the situation, business, and
many other factors. Companies must address the risk of political factors by making decisions
that will reduce the external impact on the environment of business.
The political factors of any country can impact the business. The political factor can also
introduce a risk factor in the industry, which can suffer losses, or it can reduce
profitability. There could be many reasons due to which the political environment may
change, and it depends on country to country.
Factors affecting the political environment:
i. Stability: This is one of the most important factors. The stability of the political
environment is very conducive to the economy and business in general. If a country is
not stable and the government keeps changing frequently, the country can never be
economically stable as well. The GDP, and stock exchange index all would go down
leading to a vicious circle.
ii. Taxation: The taxation regime is very important when it comes to the political
environment. If a government is balanced in terms of tax and budget, the companies are
motivated to produce more and grow.
iii. Foreign Policies: Political Environment should also balance the foreign investments
and growth in a particular country. If there is no foreign investment, growth and
technicalknowledge can be issued but if there is too much foreign investment inflow
then it can lead to loss of domestic players.
iv. Foreign Trade Regulations: Every business expects to expand its own company to
another country. The political background of that country could impact this. The
government controls almost everything right from tax policies to prices of the products.
Itis up to the government to expand particular business operations in their area or not.
Implementing complicated tax policies can affect business expansion for many
industries.
v. Employment Laws: Employment laws are made and implemented by the government
so that the rights of employees are protected. It includes every aspect of employer and
employee business relations. And employment law is considered to be very
complicated, which has many Pitfalls.

5. Legal Environment:
Legal environments are the legally bound protocols surrounding every activity done on a
premise. This also ensures certain allowances, obligations, and restrictions that people must
follow. This helps in protecting consumer rights, employee rights, and writing contracts to
create relationships.
The legal environment is helping managers to analyze the legal boundary of the operational
works. And these are the only ways to help you deal with all government- related legal issues.
Examples of legal environment – Consumer Protection Laws, Employment Law, Labour
Act etc.
6. Socio-Cultural Environment:
The socio-Cultural environment in marketing is actually the trends, developments, values,
attitudes, and behaviors prevailing in society. The reason it affects businessdecision-making is
its close relation to the tastes, customs, traditions, lifestyles, and preferences of customers.
Impact of Socio-Cultural environment:
The Socio-Cultural Environment includes culture, age composition, geography, ethnicity,
language, values, family structures, employment, social developmental statistics, etc. All these
factors impact decision-making, business operations as well as long-term planning.
Socio-Cultural environment elements fluctuate rapidly every day, every month, and every
year. Hence, marketers or decision-makers need to stay updated very minutely to frame
profitable expansionary strategies.
Example: McDonald’s had to consider the culture, values, and food habits while opening
outlets in India. That’s why it did not include any Beef recipes in any Indian Outlets.
Example: Cultural belief, Age composition, ethnicity
1.7 MARKET SEGMENTATION
Meaning- Market segmentation is the process of dividing a market of potential customers

into groups or segments based on a different characteristics. Market segmentation is the
process of dividing a broad population into subgroups according to certain shared factors.
These groups may have common demographics (age, gender, etc.), geographic location,
attitudes, behaviors, or a combination of similar characteristics.
A consumer may belong to multiple market segments. For instance, a female may be a

Millennial (gender and age demographic), living in a rural area (geographic location), who
likes to buy her food locally (purchasing habit) from companies with a solid humanitarian
ethic (attitude).
Businesses perform market research to create market segments that include multiple
variables. Their challenge is to find potential customers, known as their target market, that
combine shared factors, making them the group that is most likely to buy their products and
services.
Marketers use different segmentation strategies depending on their goals. The goal of market
segmentation is to identify a target market or group of people. Market segmentation will
have a greater emphasis on the geographic market segments (e.g. metro areas, DMAs, states,
regions, and countries). Consumer segmentation is used to find out the behaviors and
attitudes of those groups. Customer segmentation divides the existing customer base into
separate groups. While the methods for study design, data collection, and analysis are
similar, they focus on different aspects of segmentation.
Definition of Market Segmentation:
According to Philip Kotler, market segmentation means “dividing a market into distinct
groups of buyers who might require separate products or marketing mixes.”
According to William J. Stanton, “Market segmentation is the process of dividing the total
heterogeneous market for a good or service into several segments. Each of which tends to be
homogeneous in all significant aspects.”
According to Ronald W. Hasty and W. R. Ted, “Segmenting markets simply divides the
heterogeneous mass market into groups, each of which has one or more homogeneous
characteristics.”
Basis of Market Segmentation

Market segmentation is depending on the assumption that all the potential customers do not
behave identically, and therefore, the industry should address their requirements by making
appropriate marketing strategies and adapting them subsequently. The marketers bifurcate
orsplit the market on certain bases. These are–
 Demographic Segmentation
 Geographical Segmentation
 Psychographic Segmentation
 Behavioral Segmentation
 Product-Volume Segmentation
1. Demographic Segmentation:
In this segmentation, the marketers divide the consumers on the basis of several factors such
as gender, age group, marital status, income, profession and so forth. This kind of traditional
method of segmentation is seen almost in all kinds of industries, including automobile,
beauty products, mobile phones, apparels, etc.
2. Geographic Segmentation:
This simplest method of market segmentation depends on the geographical location of

customers. It means that the purchasing habit of one location differs from another location
or country. For instance, lifestyle products or branded apparels have high demand in metro
cities rather than small towns. Even the banking requirements of rural areas also differ from
urban areas. Different kinds of banking products, and schemes are designed to keep in mind
the requirements and preferences of each customer group of various regions. The
requirement of clothes, foods, home appliances of hilly people would not be similar to the
demand of the inhabitants of desert regions or dry places.
3. Psychographic Segmentation:
In this premise, the consumers are classified on the basis of their psychological traits such
as attitude, personality, lifestyle, and habit. It is assumed that an individual’s buying decision
depends on personality and lifestyle. According to an individual’s personal traits, the
market divides the consumers as innovators, adapters, ambitious, laggards. Personality and
lifestyle influence purchasing habit and decisions to a great extent. A person who is living a
luxurious lifestyle feels the need for an air conditioner and television in every room, whereas
a person who prefers to live a conservative lifestyle considers it a luxury.
4. Behavioral Segmentation:
In this segmentation process, the marketers consider an individual’s knowledge and

attitude about the usages of a product or service. Several variables are considered for
behavioral segmentation. These are:
i. User Status: Before launching any new product or the new version of the old
products, the marketers target this consumer group. Here potential buyers are
classified as regular users, occasional users, and non-users.
ii. Benefit Counting: Most of the consumers always want high quality, low price
products, and those consumers are measured as benefit seeking customers.
iii. Purchasing Occasionally: Some buyers decide to buy products or services on
various occasions. The consumers book a hotel or air ticket either for holiday or
business purposes. So the service industry or aviation can target the customers in two
different ways.
iv. Product Volume Segmentation: In this segmentation, the consumers are divided
as light, medium, and heavy product users. Sometimes 20 percent of customers
consume 80 percent of the product of a particular brand. But the marketers need to
concentrate on all groups of users because they provide different opportunities.
1.8 CONSUMER BEHAVIOUR
Consumer behavior refers to the study which analyzes how consumers make decisions about
their wants, needs, buying, or acting with respect to a product, service, or organization. It is
very critical to understand the behavior of consumers to analyze the behavior of potential
consumers towards a new product or service.
An example in aspect of consumer behavior is the change in eating habits which drastically
increased the demand for gluten-free products. Businesses that have identified this market gap
have produced gluten-free products and have tapped this market aspect as well.
Definition:
According to Walters and Paul, Consumer behavior is “the process whereby individuals decide
what, when, where, how and from whom to purchase goods and services”.
American Marketing Association (AMA) defines Consumer behaviour as “The dynamic

interaction of cognition, behaviour and environmental events by which human beings conduct
the exchange aspect of their lives.

According to Peter D. Bennett, Consumer behaviour refers to “the actions and decision
processes of people who purchase goods and services for personal consumption”.
According to James F. Engel, Roger D. Blackwell and Paul W. Miniard, Consumer behaviour
refers to “the mental and emotional processes and the observable behaviour of consumers
during searching for, purchasing and post consumption of a product or service.
Factors Affecting Consumer Behaviour:
Consumer Behaviour is influenced by many different factors. The four major factors that
influence consumer behaviour are as follows:
1. Psychological Factors:
Human psychology plays a major role in understanding consumer behaviour. Difficult to

measure, but psychological factors are powerful enough to influence a buying decision.
Some of the important psychological factors are as follows:
i. Motivation: Motivation to do something often influences the buying behaviour of the

person. Individuals have different needs such as social needs, basic needs, security
needs, esteem needs, and self-actualization needs. Out of all these, the basic needs and
security needs take a position above all other needs, and these motivate a consumer to
buy products and services.
ii. Perception: Our perception is shaped when we gather information regarding a product
and examine it to generate a relevant image regarding a certain product. Whenever we
see an advertisement, review, feedback, or promotion regarding a product, we form an
image of that item. As a result, our perception plays an integral role in shaping our
purchasing decisions.
iii. Attitudes and Beliefs: Consumers’ attitudes and beliefs also influence the buying
decision. Based on this attitude, the consumer behaves in a particular way towards a
product. This attitude plays a significant role in defining the brand image of a product.
Hence, marketers try hard to understand the attitude of a consumer to design their
marketing campaigns.
2. Social Factors:
Humans are social beings, and the society or the people they live around influence their buying
behavior. Human beings try to imitate other humans and nurture a desire to be socially

accepted. Hence, their buying behavior is influenced by other people around them. These
factors are considered social factors.
Some of the social factors are as follows:
i. Family: Family plays a significant role in shaping the buying behavior of a person. A
person builds his/her preferences from his childhood by watching their family buy
certain products and continues to buy the same products even when they grow up.
ii. Reference Groups: A reference group is a group of people with whom a person
associates himself. Generally, all the people in the reference group have common
buying behavior and influence each other.
iii. Roles and status: A person is influenced by the role that he holds in society. If a person
is in a high position, his buying behavior will be influenced largely by his status. A
person who is a Chief Executive Officer in a company will buy according to his status
while staff or an employee of the same company will have different buying patterns.
3. Personal Factors:
Factors that are personal to the consumers influence their buying behavior. These personal
factors vary from person to person, thereby producing different perceptions and consumer
behaviour.
Some of the personal factors include:
i. Age: The buying choices of individuals depend on which age group they belong to.
Elderly people will have totally different buying behaviours as compared to teenagers.
ii. Income: Income influences the buying behavior of a person. Higher-income gives
higher purchasing power to consumers. When a consumer has higher disposable
income, it gives more opportunities for the consumer to spend on luxurious products.
Whereas low-income or middle-income group consumers spend most of their income
on basic needs such as groceries and clothes.
iii. Occupation: The occupation of consumers influences buying behavior. A person tends
to buy things that are appropriate to this/her profession. For example, a senior corporate
professional would tend to buy formal clothing whereas a creative designer would tend
to spend on casual wear.

iv. Lifestyle: Lifestyle is an attitude and a way in which an individual stay in society.
Buying behavior is highly influenced by the lifestyle of a consumer. Someone who
leads a healthy lifestyle would spend more or healthy food alternatives.
4. Economic Factors:
Consumer buying habits greatly depend on the economic situation of a country or a market.
When a nation’s economy is strong, it leads to a greater money supply in the market and higher
purchasing power for consumers. Whereas a weak economy reflects a struggling market that
is impacted by unemployment and lower purchasing power.
Some of the important economic factors are as follows:
i. Personal Income: When a person has a higher disposable income, the purchasing
power increases simultaneously. Disposable income refers to the money that is left after
spending towards the basic needs of a person. When there is an increase in disposable
income, it leads to higher expenditure on various items. But when the disposable
income reduces, parallel the spending on multiple items also reduced.
ii. Family Income: Family income is the total income from all the members of a family.
When more people are earning in the family, there is more income available for
shopping basic needs and luxuries. Higher family income influences the people in the
family to buy more.
iii. Consumer Credit: When a consumer is offered easy credit to purchase goods, it
promotes higher spending. Sellers are making it easy for consumers to avail of credit in
the form of credit cards, easy instalments, bank loans, hire purchases, and many such
other credit options. When there is higher credit available to consumers, the purchase
of comfort and luxury items increases.
iv. Liquid Assets: Consumers who have liquid assets tend to spend more on comfort and
luxuries. Liquid assets are those assets, which can be converted into cash very easily.
Cash in hand, bank savings, and securities are some examples of liquid assets. When a
consumer has higher liquid assets, it gives him more confidence to buy luxury goods.
v. Savings: A consumer is highly influenced by the amount of savings he/she wishes to
set aside from his income. If a consumer decided to save more, then his expenditure on
buying reduces. Whereas, if a consumer is interested in saving more, then most of his
income will go towards buying products.

TERMINAL QUESTIONS
5 marks questions
1. Define marketing and list its functions.

2. List the nature of marketing?
3. Define Market Segmentation and list the basis.
4. List the specific goals of Marketing?
5. Define Consumer Behaviour and list the factors influencing Consumer Behaviour.
9 marks questions
1. Explain the concepts of marketing.

2. Explain the Basis of market Segmentation.
3. Explain the elements of Micro environment.
4. Discuss marketing concepts.
12 marks questions
1. Elaborate Macro environment in detail.

2. Explain the factors influencing Consumer Behaviour.
Module 2
Marketing Mix – Product & Pricing
Structure
2.1 Marketing Mix – Meaning & Element

2.2 Product – Meaning
2.3 Product Mix
2.4 Product Line
2.5 Product Life Cycle
2.6 Product Planning - New Product Development
2.7 Pricing – Meaning, Factors affecting pricing
2.8 Methods of Pricing (Only Meaning)
2.9 Pricing Policy
2.1 MARKETING MIX
Meaning
The process of marketing or distribution of goods requires particular attention of management
because production has no relevance unless products are sold. Marketing mix is the process of
designing and integrating various elements of marketing in such a way to ensure the achieve-
ment of enterprise objectives.

The elements of marketing mix have been classified under four heads—product, price, place
and promotion. That is why marketing mix is said to be a combination of four P’s. Decisions
relating to the product includes product designing, packaging and labelling, and varieties of the
product. Decision on price is very important because sales depend to a large extent on product
pricing.
Marketing mix involves decisions regarding products to the made available, the price to be
charged for the same, and the incentive to be provided to the consumers in the markets where
products would be made available for sale. These decisions are taken keeping in view the
influence of marketing forces outside the organization (e.g., consumer behaviour,
competitors’ strategy and government policy).
Definition
According to Philip Kotler, “marketing mix is the mixture of controllable marketing variable
that the firm uses to pursue the sought level of sales in the target market”.
Stanton defines Marketing Mix as, “Marketing mix is the term used to describe the
combination of the four inputs which constitute the core of a company’s marketing system
— the product, the price structure, the promotional activities and the distribution system”.
Borden stated that, “The marketing mix refers to the appointment of efforts, the
combination, the designing and the integration of the elements of marketing into a
programme or mix which, on the basis of an appraisal of the market forces will best achieve
an enterprise at a given time”.
Elements
1. Product: Goods manufactured by organizations for the end-users are called products.
Products can be of two types - Tangible Product and Intangible Product (Services).

An individual can see, touch and feel tangible products as compared to intangible
products.
A product in a market place is something which a seller sells to the buyers in exchange
of money.
2. Price
The money which a buyer pays for a product is called as price of the product. The price
of a product is indirectly proportional to its availability in the market. Lesser its
availability, more would be its price and vice a versa.
Retail stores which stock unique products (not available at any other store) quote a
higher price from the buyers.
3. Place
Place refers to the location where the products are available and can be sold or
purchased. Buyers can purchase products either from physical markets or from virtual
markets. In a physical market, buyers and sellers can physically meet and interact with
each other whereas in a virtual market buyers and sellers meet through internet.
4. Promotion
Promotion refers to the various strategies and ideas implemented by the marketers to
make the end - users aware of their brand. Promotion includes various techniques
employed to promote and make a brand popular amongst the masses.
Promotion can be through any of the following ways:
i. Advertising: Print media, Television, radio are effective ways to entice

customers and make them aware of the brand’s existence.
Billboards, hoardings, banners installed intelligently at strategic locations like
heavy traffic areas, crossings, railway stations, bus stands attract the passing
individuals towards a particular brand.
Taglines also increase the recall value of the brand amongst the customers.

ii. Word of mouth: One satisfied customer brings ten more customers along with
him whereas one dis-satisfied customer takes away ten more customers. That’s
the importance of word of mouth. Positive word of mouth goes a long way in
promoting brands amongst the customers.
Lately three more P’s have been added to the marketing mix. They are as follows:
 People - The individuals involved in the sale and purchase of products or

services come under people.
 Process - Process includes the various mechanisms and procedures which help
the product to finally reach its target market
 Physical Evidence - With the help of physical evidence, a marketer tries to
communicate the USP’s and benefits of a product to the end users.
2.2 PRODUCT
Introduction
A business house offers a product or a service to its customers at a pre-determined value or

price, defined in specific currency. The price is the monetary value at which the manufacturer
or the producer is willing to part his offering to his prospective customer. In other words, it
is the exchange value of a product or service.
The price to travel in a bus is the fare we pay for the ticket. Similarly, the price of travelling
on a highway, will be the toll paid; while, premium is the price of insuring life and objects.
Price attains various forms depending on the product or service offered. Thus, by the time the
product is available at the super market counter, it will be at a specified price.
Definition:
According to Philip Kotler, “A product is anything that can be offered to satisfy a need or
want” Business Dictionary defines product: A good, idea, method, information, object or
servicecreated as a result of a process and serves a need or satisfies a want. It has a
combination oftangible and intangible attributes (benefits, features, functions, uses) that
a seller offers a buyer for purchase.
For example a seller of a toothbrush not only offers the physical product but also the idea
that theconsumer will be improving health of their teeth.
According to W. Alderson “A product is a bundle of utilities consisting of various
features and accompanying services”.
According to Rustam S. Davar “A product may be regarded from the marketing

viewpoint as a bundle of benefits which are being offered to consumer”.
According to William J. Stanton “A product is a complex of tangible and intangible

attributes, including packaging, colour, price, manufacturer’s and retailer’s services,
which the buyer may accept as offering satisfaction of wants or needs”.
2.3 PRODUCT MIX
A company can have more than one product in its total offering. The entire range of
products of a company offered for sale can be referred to as product mix or product
assortment of acompany.
Product mix is a combination of products manufactured or traded by the same business house
to reinforce their presence in the market, increase market share and thereby, increase the
turnover for higher profitability. Normally, the product mix is within the synergy of other
products for a medium size organization. However, large groups of industries may have
diversified products within core competency. The product mix of Hindustan Machine Tools
includes a diverse range of products such as watches, machine tools, tractors, printing
machinery and electric lamps. Larsen & Toubro Ltd, Godrej, Reliance in India are some of
the examples.
Likewise, Bajaj Electricals, a household name in India, has almost ninety products in its
portfolio ranging from low value items like bulbs to high priced consumer durables like
mixers, luminaries and lighting products.
The number of products carried by a firm at a given point of time is called its product mix.
This product mix contains product lines and product items. In other words, it is a composite
of products offered for sale by a firm.
One of the realities of business is that most firms deal with multi-products. This helps a firm
diffuse its risk across different product groups. Also, it enables the firm to appeal to a much
larger group of customers or to different needs of the same customer group. So, when
Videocon chose to diversify into other consumer durables like music systems, washing
machines and refrigerators, it sought to satisfy the needs of the middle and upper middle
income groups of consumers.
Often, firms take decisions to change their product mix. These decisions are dictated
by theabove factors and also by the changes occurring in the market place. The changing
life-styles of Indian consumers, led BPL-Sanyo to launch an entire range of white goods,
like, refrigerators, washing machines, and microwave ovens. It also motivated the firm to
launch other entertainment electronics.
Rahejas, a well-known builders firm in Bombay, took a major decision to convert one of its
theatre buildings in the western suburbs of Bombay into a large garments and accessories
store for men, women and children; perhaps, the first of its kind in India, to have almost all
products required by these customer groups.
Competition from low priced washing powders (mainly Nirma) forced Hindustan Levers to
launch different brands of detergent powder at different price levels positioned at different
market segments.
Customer preferences for herbs, mainly Shikakai motivated Lever to launch black Sunsilk
Shampoo, which has shikakai. Also, low purchasing power and cultural bias against
shampoo market made Hindustan Lever consider smaller packaging mainly sachets, for
single use. So, it is the changes or anticipated changes in the market place that motivates a
firm to consider changes in its product mix.
The structure of product mix has dimensions of both ‘width’ and ‘depth’.
Width of product mix refers to the different product lines found within the company. In
other words, breadth is measured by the number of product lines carried. For example, Bajaj
Electricals produces bulbs, fluorescent lights, mixies and grinders, toasters, pressure cookers
and a host of other electrical appliances.
Depth of the product mix refers to the average number of items offered by the company
within each product line. In other words, the depth is measured by the assortment of sizes,
colours, models, prices and quality offered within each product line.
The consistency of the product mix refers to how closely the various product lines are
related in terms of consumer behavior, production requirements and distribution channels or
in some other way.

Kotler observes, “All three dimensions of product mix have a market rationale. Through
increasing the width of the product mix, the company hopes to capitalize on its good
reputation and skills in present market. Through increasing the product depth of its
product mix, the company hopes to entice the patronage of buyers of widely differing in
tastes and needs.Through increasing the consistency of its product mix, the company hopes
to acquire an unparalleled reputation in a particular area of endeavour.”
2.4 PRODUCT LINE
A product line refers to a number of products that are related and developed by the same
manufacturer. Items within a product line generally share the same basic theme, and with the
help of a successful marketing strategy, these products can be effective.
Frequently, a product line includes different products that are offered to the public at varying
price points. This way, a manufacturer or company can ensure that all products within a line
will be purchased by all kinds of people. In offering a product line, companies normally
develop a basic platform and modules that can be added to meet different customer
requirements.
For Example, the product line of Pepsi Co. includes Pepsi, Kinley and many others which fall
within the group of soft drinks.
Product line extension refers to any additional products that may be added to an existing
product line. Product extensions are introduced to the public in order to ward off
competitors. Bycreating products that match other competitive products, manufacturers are
able to keep customers interested in a product that they are familiar with. Since most people
purchase brands that they know, these same consumers are more likely to purchase a new
product from a brand that they are comfortable with rather than purchase a product from an
unknown brand.
Marketers create target markets based upon age groups, geographical locations and
ethnicity. Target markets refer to a group or groups of people that are likely to purchase one
product. Thus, even though products might be related, some products may look different,
smell different, and even appear unrelated in order to appeal to different types of people.
For example, many air freshener manufacturers offer a variety of products ranging from
flameless candles targeted at parents with young children; to simple aerosol air fresheners,
targeted at consumers who don't want to spend a lot of money on an air freshener. While these
products are related, they are vastly different.
Thus, a great deal of strategy goes into marketing various products. Marketers must be aware
of competition at all times in order to advise manufacturers on new products that should be
added to an existing product line. In addition, a marketing agency should be aware of those
products that sell and those that remain unpopular.
Through the collection of statistical data, marketers can effectively determine what products
should be kept within a product line and what products should be phased out. Pricing is used
to create a large barrier between different products, and higher-priced products are usually
justified based upon certain ingredients, emphasizing quality and longer life of the products.
A company may decide to discontinue a particular product for various reasons. This results in
product deletion. For example: The first Apple product to be discontinued was the Apple I in
1977, superseded by the Apple II. The most recently discontinued products have been several
iPod models including the iPod Mini, replaced by the iPod Nano. HP [Hewlett Packard] has
also discontinued a host of scanners in its offering. The working formula for software and
electronic products is usually to introduce a superior version and then remove the old one.
However, this is not true in other industries. LML, who had to stop production due to fund
crunch and labour problems back in 2006, went back in domestic market in April 2007. Since
then the LML is not very much in news. After all, 18 months of closure had a serious impact
on company's reputation and working. After April 2007, they have made their second launch,
i.e., new NV 4 stroke 150 cc scooter. LML hoped for a better market response as the demand
of scooters increased in domestic market by 9% in the year 2009.
The Bajaj Chetak was a popular Indian-made motor scooter produced by the Bajaj Auto
Company. The Chetak is named after Chetak, the legendary horse of Indian warrior
RanaPratap Singh. In the face of rising competition from Bikes and Cars, the Chetak lost
ground in India, and production was discontinued in 2005.
Discontinuing a product has to be a well thought out decision; as, once a product is out of sight,
it will be out of consumer’s mind. Unexpected market changes, faulty demand analysis,
financial crunch, business cycle changes, etc. contribute to discontinuing products and services.
Few products manage to make an appreciable comeback. Discontinuing a product could be the
natural result of the product falling out in its life cycle. A decade ago radio was revived, which
was once a discontinued product. This happened due to its fading popularity taken away by
television which substantially grew in the 1990s.
2.5 PRODUCT LIFE CYCLE
It is based upon the concept of biological life cycle. For example, when the life cycle of a
plant is studied, the following may be understood. A seed is planted (the first stage of
introduction) it begins to sprout (second stage – growth) it shoots out leaves, puts down roots
as it becomes an adult (maturity) and after a long period as an adult, the plant begins to
shrink and die out (decline).
In theory, the same can be applied for a product. Although a product is developed with a
commercial motive, it is still affected by the concept of product life cycle. After a period of
development, it is introduced or launched into the market gains more and more customers
as it grows. Eventually, the market stabilizes and the product attains the stage of maturity.
After a period of time, the product is overtaken by development and introduction of superior
products, substitutes by competitors, sales drop, it goes into decline and is eventually
withdrawn. However, many products fail in the introduction phase.
Different stages in a Product Life Cycle

1. Introduction [Pioneering or development stage]:
When a product is introduced in the market, sales grow at a slow to very slow rate. At this
stage, the product is promoted to create awareness. This stage is also characterized by heavy
advertising and sales promotion. The pressure for immediate profit does not exist.
If the product has no or few competitors, a skimming price strategy is employed. This refers to
a strategy in pricing for new products where the manufacturer aims to build the image of high
quality and prestige and, therefore, offers the product at a high price. At this stage, if the product
is accepted by the consumers, the manufacturer will be able to earn large revenue within a short
period of time. A successful product attracts competition sooner than later. So, before the
product faces competition and the market share is split between more than one player skimming
price helps a manufacturer to earn higher profits in shorter period of time.
If the product has no or few competitors, a skimming price strategy is employed. This refers to
a strategy in pricing for new products where the manufacturer aims to build the image of high
quality and prestige and, therefore, offers the product at a high price. At this stage, if the product
is accepted by the consumers, the manufacturer will be able to earn large revenue within a short
period of time. A successful product attracts competition sooner than later. So, before the
product faces competition and the market share is split between more than one player skimming
price helps a manufacturer to earn higher profits in shorter period of time.
2. Growth or market acceptance stage:
Only if a product successfully cross the hurdles encountered in the introduction stage, a product
reaches the growth stage. Increasing sales indicate the acceptance by the consumers. Therefore,
competitors are attracted into the market with very similar offerings. Products become more
profitable as growth in sales is rapid. In this stage, advertising and effective distribution are
considered as vital factors. Advertising generates awareness and in turn demand is stimulated
in the market. Hence market is created. This demand should be complimented by adequate
distribution in all desired locations. Otherwise, the product can miserably lose its share to
competition. Companies form alliances, joint ventures and take each other over. Advertising
expense is high and focuses upon building brand. The market share tends to stabilize.

During the growth stage, a firm uses several strategies to sustain rapid market growth:
i. It improves product quality, adds new product features and improved styling.
ii. It adds new models and flanker products (products of different sizes, flavors and so
forth that protect the main product).
iii. It enters new market segments
iv. It increases its distribution coverage and enters new distribution channels
v. It shifts from product-awareness advertising to product-preference advertising
vi. It lowers prices to attract the next layer of price sensitive buyers
A firm in the growth stage faces a trade-off between high market share and high current
profit. By spending money on product improvement, promotion and distribution, it can
capture a dominant position. It foregoes maximum current profit in the hope of making even
greater profits in the next stage.
3. Maturity:
Those products that survive the earlier stages tend to spend the longest time in this phase. Sales
grow at a decreasing rate and then stabilise. While the sales curve is leveling off, the profits of
both producers and retailers start declining because of rising expenditure and lowering of
prices. At this stage, therefore, marginal producers are compelled to drop out of the market.
Producers attempt to differentiate products and brands. Price wars and intense competition
occur. At this point, the market reaches a point of saturation. Producers begin to leave the
market due to poor margins. Promotion becomes more widespread and uses a greater variety
of media as supply exceeds demand and demand stimulation becomes essential.
During the maturity stage, a firm uses several strategies to sustain its position in the
market:
Since the maturity stage divides into three phases of growth stable and decaying maturity, the
strategies also modify accordingly:
i. Companies abandon weaker products to concentrate on more-profitable products

ii. Market modification: Includes market expansion by influencing usage rate and the
number of users

iii. Product modification: Includes quality (new, better, stronger, bigger) improvement,
feature (enhance size, weight, materials, additives, accessories, etc. ) or style (increase
the product’s aesthetic appeal) improvement
iv. Marketing Program Modification:
v. Playing with the options of pricing – lower or increase it;
vi. Distribution channels – penetrate more or use new channels;
vii. Advertising – increase expenditure, change message or ad copy, media mix, frequency
of ads, etc.
4. Decline or death stage:
At this point there is a downturn in the market. The stage is characterized by either the product’s
gradual replacement by some new innovation or by an evolving change in the consumer buying
behaviour. The buyers do not buy as much as they did before. For example, paper napkins
[innovative products] are introduced to replace linen napkins for being more convenient
[consumer tastes have changed]. There is intense price-cutting and many more products are
withdrawn from the market. Emphasis is placed on efficient and low cost distribution strategies.
Thus, it becomes concentrated in few large mass distributors. Profits can be improved by
reducing marketing expense and cost cutting. Most managements shift their focus to other
products, gradually phasing out the declining product as its future grows increasingly dark.
Examples of products that declined and were written off in the market: Floppy disks, pagers,
audio players, cassettes, VCRs, Desktop computers, etc. in electronics. Moti soap, Cuticura
face powder etc. in hygiene care segment; etc.
In certain cases, such as Apple, the company knows to re-emerge from every product that
moves towards decline. The moment one version of the iPod becomes obsolete, or even
before (allowing Apple to control when a product enters its own decline phase), a new
version appears on the market. However, this is applicable only in the electronics industry
where the life of the product in general is visibly short-lived and innovation is the norm of
the day for such a volatile industry.
To resist declining sales, the management has the following strategies/alternatives:
i. It may improve the product or revitalize it in some way.

ii. It may review the marketing and production programs to be sure that they are efficient.
iii. It may streamline the product assortment by removing the unprofitable sizes, styles,

colours and models.
iv. It will cut all possible costs to the bare minimum level that will optimize profitability
over the limited remaining life of the product; or
v. The appropriate strategy also depends on the industry’s relative attractiveness and
thecompany’s competitive strength in that industry.
vi. In handling aging products, a company faces many tasks and decisions. The
important ones are identifying weak products, recommending revamp strategies and
deciding on its retention or withdrawal.
vii. Abandon the product if continuing it only yields losses to the company.
2.6 PRODUCT PLANNING - New Product Development
Improving and updating product lines is crucial for the success of any organisation. Failure
foran organisation to change could result in a decline in sales and with competitors racing
ahead. The process of NPD is crucial within an organisation. Products go through the stages
of their lifecycle and will eventually have to be replaced. There are eight stages of new
product development. These stages will be discussed briefly below:
Stage 1: Idea generation:
New product ideas can come from many sources. Some sources include:
 Within the company, i.e., employees, sales force, top management

 Competitors, rivals
 Customers
 Distributors, dealers, Supplies and others
Sometimes, new ideas emerge out of unintended mistakes or accidents. The classic example
includes the discovery of salt and sweet biscuits which happened accidentally when the bar
separating salt and sugar in a manufacturing concern was not placed by mistake.
The potato chip, which is the most famous snack all over the world, was discovered when a
cook accidentally dropped a piece of raw, sliced, potato into boiling oil.
New product ideas can many times emerge out of the shortcomings of the existing products. In
the West, having a separate washing machine and drying machine is the norm, due to extreme
climatic conditions. But, in countries like India, which have abundant sunlight, drying
machines don’t have the same popularity. Therefore, a semi drying feature is built along with
the washing machine itself. This ensures that the clothes are spinning enough to remove all the
water from washing only; yet, they are not completely dry. The concept of 100% dryers in
India is viewed upon as waste of electricity and money.
Stage 2: Idea Screening:
This process involves sifting through the ideas generated above and selecting ones which are
feasible and workable to develop. Pursuing non-feasible ideas can clearly be costly for the
company. While screening ideas, many aspects have to be considered. Some of them may not
be culturally acceptable, while, some may not have commercial viability. Hence, all the desired
factors must be listed in their order of preference and then screened accordingly.
In some situations, product ideas not workable in certain markets may have potential in other
markets. In certain other cases, the same idea may need modification without harming the basic
concept to make it workable.
Stage 3: Concept Development and Testing:
The organisation may have come across what they believe to be a feasible idea; however, the
idea needs to be taken to the target audience. This will be done only if the idea survives the
screening process. Concept testing aims at verifying the result obtained in the screening process
and at strengthening it further to develop a mature product. The following questions must be
answered from the target audience point of view:
What do they think about the idea?
Will it be practical and feasible?
Will it offer the benefit that the organisation hopes it will?
Have they overlooked certain issues?
Note the idea and concept is taken to the target audience to research upon it further. It is not a
working prototype at this stage. At this stage, all ideas that have passed screening will be
subjected to concept development and testing.

Steps in ‘New Product Development Process’
Stage 4: Business Analysis:
The company has a great idea, but will the product be financially worthwhile in the long run?
The business analysis stage looks deeply into the cash flows the product could generate, what
the cost will be, how much market share the product may achieve and the expected life of the
product. To ascertain all this, at this stage, marketing research is necessary, allowing the
company to define benefit analysis and cost and profit analysis. In the process many forecasts
need to be made. For example, demand analysis. This is useful to project future sales, estimate
subsequent developments in the fields related to the proposed product, to know when
competitors would enter, etc. Similarly, cost analysis includes in- detail cost ascertainment by
describing the different types of costs that will be involved in pursuing the proposed product.
This is a difficult task and only estimates can be provided.
Profitability analysis has to be done in terms of break-even analysis, rate of return analysis,
discounted cash flow analysis, etc.
If these questions are answered favourably, the company can proceed with in-detail product
development.
Stage 5: Product Development and marketing strategy:
This is a crucial step as the paper idea attains a physical form at this stage. Finally a prototype
is produced. The prototype will run through all the desired tests. Many visual images are

created and the one of them is finalized for consumer testing and packaging requirements.
Consumer testing helps in the final selection of the best model for mass production.
How will the product/service idea be launched within the market? A proposed marketing
strategy will be written laying out the marketing mix strategy of the product, the segmentation,
targeting and positioning strategy, sales and profits that are expected. This is essential to have
the complete concept developed as only product development is considered incomplete without
a complimenting marketing strategy.
Stage 6: Test Marketing:
Test marketing means testing the new product within a specific geographical area. The product
will be launched within a particular region so that the marketing mix strategy can be monitored
and, if needed, be modified before national launch. This is an important step and there are
products that are rejected at this stage if the market acceptance is not achieved. This is
determined by surveying about the product by collecting responses from consumers who try
the product for the first time. Many times, this helps to clearly discovering finer aspects that
have been overlooked till now by the company. The price decided should be perceived as value
for money by the prospective consumer. Otherwise, it can lead to costly failures.
Stage 7: Commercialization:
If the test marketing stage has been successful, then the product will go for actual market
launch. This involves huge expenditure, amounting to 60-75% of the sales revenue. There are
certain factors that need to be taken into consideration before a product is launched. These are
timing how the product will be launched, where the product will be launched, will there be a
national roll out or will it be region by region? Some companies choose to introduce the product
in selected markets and later go in for national launch.
Business Dictionary defines price: “A value that will purchase a finite quantity, weight or other
measure of goods or services”
2.7 PRICING
Meaning:

To the consumer, price defines the worth of the product. It explains the relative value of the
product when compared to competitors’ products and other substitutes. Price is a complex
term evolved out of many calculations to satisfy the objectives of the producer, as well as,
the consumer. In its totality, price includes a brand name, a bunch of benefits expected by
the consumer, the profit element for the producer, credit terms, after sale services, packing,
membership etc.
Pricing refers to the act of arriving at the right monetary value at which the product or
service can be offered, for sale in the market, to the consumers. It has to take into account
the various factors that influence pricing for a particular product at a given period of time.
Factors Influencing Pricing Policy:
Pricing decisions are influenced by numerous factors. Pricing policies should be consistent
with pricing objectives.
Internal factors are those which arise within the organisation and are, therefore,
controllable. The important internal factors are discussed below:
i. Product Cost: Cost of the product is the basic determinant of its price. Only after
ascertainingcost, pricing can be achieved in a financially healthy manner. Resources
have to be utilized to their best point in order to achieve cost efficiency and enhance
profitability. Cost will help ascertain the amount of profit to be added in order to
arrive at profit and thereby the selling price. When cost is the basic determinant, price
can change according to the quantity offered, thereby passing on the benefit of
economies of scale to the ultimate consumer.
ii. Pricing Objectives: Pricing objectives of a company play a crucial role in determining
the price. Therefore, price can be based on the objectives alone. A well-established
company can afford to offer a very low price for its product, if the objective is to capture
market and wipe out competition. Here, in the initial stages, profitability is not given
importance. Once the competitors are wiped out, they can shoot up the price and work
on profitability.

However, if a new or an existing company wants to offer a product as a high end
one, they may adopt premium pricing. It can be justified because of high quality
offered, better range of benefits to the consumer and superior ingredients used in the
manufacturing process.
iii. Product differentiation: The concept of product differentiation aims to distinguish
one brand from the other on various dimensions. The manufacturer makes use of
aspects like color, size, packaging, name, ingredients, smell, advertising theme, logo
etc to achieve the same. Especially, in consumer goods, this concept is put to practice
to the maximum extent. Whether it is biscuits, soaps, shampoos, detergents or
chocolates or even cell phone service providers – all make use of product
differentiation. One more such dimension is the price element itself. This strategy
was well demonstrated by TATA DOCOMO, which revolutionized its name using
price as the distinguishing factor.
iv. Product life cycle: The price of a product is influenced by the stage in its life cycle.
In the introduction stage, the price should allow market penetration. Therefore, price
is kept low. This helps the product to build goodwill. In the growth stage, prices can
be raised depending upon consumer acceptance. The price rise continues until the
product reaches maturity and stabilizes. Once it enters the decline stage, the price is
actually cut down to encourage sales. Thus, the stage of the product in its life cycle
is a deciding factor for pricing.
v. Marketing mix: Price, itself, is a component of marketing mix for a product.
However, it is not an independent factor. Since all the components of the marketing
mix are inter dependent, a change in one factor will cause changes in others.
Therefore, pricing decisions should be conducive to the working of the other
elements in the marketing mix. Infact, price is considered to be the greatest weapon
in the hand of the marketing manager.
The external factors are those which control the firm as they exist in the external
uncontrollable environment. The firm usually does not have any control over them. The
important external factors are discussed below:
i. Product Demand: Demand refers to the desire to purchase a product backed by

purchasing power. This is an important factor in determining the price of the product.
Demand is, in turn, affected by many factors like number of competitors, pricing
policy of competitors, buyers’ preference, their capacity and willingness to pay, etc.
All these factors should be studied while fixing the price.
ii. Competition: Competition refers to other players in the market, within the industry,
offering products which satisfy the same needs of the customers, as offered by the
company under consideration. These products exhibit similar features with same
benefits and, therefore, the consumer can choose among them.
iii. Economic conditions: This refers to the play of business cycles. Accordingly,
during good economic conditions, demand is high and therefore, sales are also high.
Competition increases during boom to take advantage of the high demand scenario.
This leads to higher competition. Even established players reposition their products
in a high inflationary period by revising the price to a higher level. The manufacturer
recovers such cost rise by adding it to the price and the ultimate consumer has to
bear it. Similarly, once the boom period phases out and makes way to depression,
which is also part of the business cycle, price are considerably affected as it is a
period characterized by low income, falling sales and decreasing demand. Many
producers provide price saving offers to survive and also offer value for money to
customers who are experiencing lower incomes.
iv. Different kinds of buyers: Buyers can be either business buyers/industrial buyers
or individual customers/final users. The composition of these two categories of
buyers and their behavior clubbed together impact pricing decisions. Generally, if
the number of buyers are large in number and at the same time small in strength,
lesser will be the impact on pricing decisions as they are too small to influence unless
well organized. However, if the number of buyers is small in number but high in
strength, they will be an important influencing factor. Apart from this, the firm has
to distinguish its pricing policy among the industrial users and final users.

v. Government regulations: The laws of the land govern every aspect of business and
pricing is also covered among them. Legislations like MRTP [Monopolies and
Restrictive Trade Practices Act], Consumer Protection Act, etc., effectively
discourage companies from engaging in anti- consumer practices.
vi. Competitive Structure: Much depends on the number of buyers and sellers
operating in a market and the extent of entry and exit barriers. These factors affect a
company’s level of flexibility in setting prices.
A non-regulated monopoly can set prices at any level it determines to be appropriate. However,
in case of regulated monopoly there is less pricing flexibility and the company can set prices
that generate a reasonable profit. In case of oligopoly, there are few sellers and market entry
barriers are high, such as auto industry, computer processor industry, mainframe-computer,
and steel industry etc. If an industry member company increases the price, it hopes others will
do the same. A similar response is likely to result when a company reduces its price in an
attempt to increase its market share, other companies follow suit and the initiator company
gains no appreciable advantage.
Monopolistic market structure consists of numerous sellers with differentiated offerings in

terms of tangible and intangible attributes and brand image. This allows a company to set
different price than its competitors. In most successful cases, the nature of competition is
likely to be based on non-price factors. Under perfect competition there are very large
number of sellers and buyers perceiving all products in a category as the same. All sellers
set their prices at going market price as buyers are unwilling to pay more than the going
market price. Sellers have no flexibility in price setting.
2.8 METHODS OF PRICING (Only Meaning)

Every company incorporates the vital factors such as costs, competition and demand factors
in arriving at an ideal price for its offering in the market. Due to the existence of various
influencing factors, many methods exist to determine price. The important ones are
discussed here.

A. Cost-Based Pricing Methods:
Costs define the minimum amount to be recovered from sales. Popularly, there are two
commonly used cost oriented pricing methods. They are:
i. Cost Plus Pricing Method: This method suggests that adding a percentage of cost
(acting as profit) to the total cost to arrive at the selling price. It is also known as markup
pricing. However, there is a difference. In cost plus pricing, profit is calculated as a
percentage of cost. In mark-up pricing, profit is calculated as a percentage of sales value.
ii. Target return Pricing: Here, a rate of return is set, for example, 15% of invested capital
or 18% of sales revenue. This concept is based on break even analysis. Prices are set at
a desired percentage return over and above the breakeven point. Therefore, the costs of
producing and selling goods are determined and a target percentage return is added to
these costs at a standard level of output. In this concept, price may need repeated
revisions to keep the rate of return constant, as and when demand level undergoes
changes.
iii. Marginal or Incremental Cost Pricing: This method aims at recovering only the
marginal costs or the variable costs and not the total costs. Thus, fixed cost is ignored.
However, this cannot happen for long as every cost incurred must be recovered.
Ignoring fixed costs brings the price down. The market will witness price variations
making some customers pay lower price while others may pay higher prices.
B. Competition Based Pricing Methods:
Competition-based pricing policies focus attention on competition without neglecting cost and
demand factors. Many companies pricing policy is influenced by competitors’ policies as they
want to fit into the existing pricing bracket for the product in the consumer’s mind.

Competition-based pricing pushes the costs and revenues as secondary considerations and the
main focus is on what are the competitors’ prices. This pricing acquires more importance when
different competing brands are almost homogeneous and price is the major variable in
marketing strategy, such as cement or steel.
Depending on the level of product differentiation a company can keep the price higher, lower,
or the same as the nearest competitors. This approach may make it necessary to adjust prices
frequently. However, this approach can help keep prices stable in the industry.
There are two commonly used competition based pricing methods:
i. Going rate pricing: Here, the firm will take the competitor’s price as a benchmark and
keep it at par or slightly below it or even slightly above it. This method works well in
an oligopoly market such as steel, fertilizers, paper, aluminum, copper etc.
To adopt this method good many factors such as pricing objectives of the firm,
customers’ perception, costs of production and industry spare capacity to accept new
players influence. In industries where costs are difficult to measure and competition
response is uncertain, going rate pricing is the popular choice of pricing method.
ii. Sealed bid pricing: This method is popular to win contracts form the government when
there is more than one company trying to win the project. Among various
considerations, keeping the price as low as possible is the most important one. This
means, if a firm wants to win the contract, it has to keep it low. ‘Low’ here means
keeping it less than that of competitors.
However, it must ensure such a low price also recovers cost. At the same time, it cannot
keep it high as it reduces the chance of winning the contract. So, there should be balance
between recovering cost and have a safe margin of profit and yet keep the price low
enough to gain the project.
Managers adopt competition based pricing when:
a) The existing competitors have a strong hold on the market and are able to select
appropriate prices.
b) The product offered is not subject to wide price changes at the retail level and any
change in the retail price can impact sales strongly.
c) Important factors such as cost, profit and sales volume are taken care off to adopt the
standard price prevailing in the market.
C. Demand Based Pricing Methods:
Demand for a product or a service plays an important role in setting its price. Apart from
competition and cost, demand will be one more factor to form a basis in determining price.
Since demand determines the life curve of a product in the market, its importance cannot be
understated.
Demand-based pricing is any pricing method that uses consumer demand - based on
perceived value - as the central element. These include: price skimming, price discrimination
and yield management, price points, psychological pricing, bundle pricing, penetration
pricing, price lining, value-based pricing, geo and premium pricing. Pricing factors include
manufacturingcost, market place, competition, market condition and quality of product.
2.9 PRICING POLICY
Policies exist for all matters in a business. Pricing also needs policies to monitor the process of
determination and then it’s functioning. Pricing policies are guidelines that define within what
range a price should be. A policy frame work is designed for various aspects of a business
house to keep its overall working in line with the objectives and the existing competition and
market structure.
Following are some of the pricing policies in practice:
A. Price Variation Policies: This is a policy adopted to vary prices according to changing
market needs. The three price variation policies are as follows:
i. Variable Price Policy: As the name suggests, according to this policy, company
charges different prices for the same product at a given point of time to similar buyers
purchasing in comparable quantities under similar conditions of sale. Variable policy
works well in businesses where products are not standardized. This policy offers the
advantage of flexibility as a promotional tool. At the same time it is time-consuming
and creates dissatisfaction and friction among consumers who feel discriminated.
ii. Non-variable Price Policy: Non-variable refers to having no variations. Here, only
‘one price’ is maintained. The company charges similar price for sale of like goods at
a given time to a class of buyers purchasing in comparable quantities under similar
conditions of sale. Variations here exist from class to class of customers and not from
customer to customer. Firms making use of indirect marketing arrangements make use

of this pricing policy. This policy does not allow price bargaining and the greatest
advantage is the absence of dissatisfaction among the consumers.
iii. Single Price Policy: This is the policy wherein all the buyers irrespective of their class,
size or the conditions of purchases are charged similar purchase price under similar
conditions of sale. Companies make use of this policy to build goodwill as there is no
discrimination whatsoever. However, this policy does not favour quantity buyers who
feel they deserve to pay lower prices on higher quantities. Thus, such buyers may be
lost to competitors.
B. Geographic Price Policies: These policies emerge due to the difficulties of reaching
consumers spread across different geographical segments. Transportation costs have an
important role to play as production centres are concentrated and consumers are not.
Thus, geographical price policies are based on transportation costs involved in reaching
out to consumers across a wide geographical spectrum. The major ones are discussed
below.
1. Point of Origin Price Policy: This is a type of geographic price policy where a firm
quotes ex-factory price makes no allowance for the transportation costs incurred to send
the goods to their final destination. Such a policy can have two variations – ex-factory
and free on rail (F.O.R).
Under ex-factory price, the consumer assumes the responsibility of transportation costs as
the company does not take up this task. This includes both freight and cartage from the
factory point. Hence, the name ex-factory is given.
On the other hand, under F.O.R price policy, the company bears cartage or carriage till the
transport agency or the railway station as suggested in the name of the policy itself.
Therefore, the buyers have to meet freight from the transport agency or the railway station
to the point of destination.
Point of origin policy helps a firm establish monopoly due to the advantages gained by
distance factor. The increased transportation costs for the other firms separate them from
those firms located in the vicinity. Wherever products enjoy inelastic demand, price
realization is better in the local markets. However, these advantages are limited to the
product’s functioning in local markets and cannot be easily extended to national markets.

2. Freight Absorption Policy: Freight Absorption Policy absorbs transportation costs
partly or fully. There are three variations in such a policy which are briefly discussed
below.
i. Uniform delivered price policy: This policy is also known as ‘postage stamp’ price or
‘F.O.R destination’ price. Here, the firm takes responsibility of absorbing full
transportation costs and delivers the goods to all the buyers at their place at a uniform
price irrespective of location and distance. To adopt this policy practically, firms
average out the total freight prices incurred to different locations for all customers and
then arrive at the selling price. This becomes a non- competitive measure to expand the
market.
ii. Zonal price policy: A firm following zonal price policy divides its markets into zones
and quotes uniform prices to all the buyers located in a particular zone. Thus price
differs from zone to zone although it remains the same within a zone.
iii. Base point price policy: This policy absorbs transportation costs partially. Here, the
price is quoted by adding transport costs calculated up to the buyers’ location by
reference to a geographical point called the base point. This base point is not necessarily
the factory location. Thus, buyers pay ex-factory price plus freight computed from the
nearest base point regardless of the actual freight paid by the company. In this policy,
sometimes, the actual freight paid can differ from the one that is charged. In cases where
actual freight is less than the amount recovered the excess amount is called as ‘phantom
freight’.
Base point price policy can be single base-point price policy or multiple-base point price policy.
C. Price Differential Price Policies:

i. Discounts: Discount is the ‘price differential’ [a factor that differentiates the price
from that ofcompetitors] that reduces the quoted price. Thus the buyer pays a lesser
price than the MRP. Discounts imply increase in the value received by the consumer
as the quantity remains unchanged.
Discounts can be of two types – Quantity discounts and Cash Discounts.
Quantity Discounts are allowed based on the quantity bought by the buyer. It is calculated
on the total quantity of goods purchased under the same class or brand. It can be measured
in rupee value or physical units or in terms of purchases at a time or even over a period of
time.

Quantity discounts encourage bulk sales thus increasing the overall sales volume. Slow
moving items [goods or brands which are not bought enthusiastically by customers due to
lack of popularity or the like] find market and sales are accelerated.
Although quantity discounts push sales, it is practically impossible to keep them anti-
competitiveor even anti-discriminatory. Discrimination refers to not being able to please
those buyers who lose out on the discount due to marginal gap in the quantities purchased.
Cash discounts are allowed on the invoice price granted to those buyers who clear their bills
by a specified date/deadline. The rate at which the discount is provided is based on the existing
market rates. Cash discounts act as a benefit or reward for making prompt payments, thus
encouraging quick cash inflows for the business.
For example, if a buyer has bought goods worth Rs. 5,000 [acc. to the MRP]; and the cash
discount rate is 5%, he/she is liable to pay only Rs. 4,750; assuming that they qualify for cash
discount.
Cash discounts are offered not only to encourage prompt payment by the customers but this
also regulates the liquidity requirements of a company. The probability of having bad and
doubtful debts is also reduced which can block the working capital for the organisation.
ii. Rebates: Rebate is a reduction of amount from the quoted price. Such a deduction is
offered in cases where buyers suffer loss of value satisfaction caused due to external
factors such as defective goods delivered, loss due to delay in delivery, goods damaged
in transit, deterioration of quality in goods etc. since these are genuine claims,
concessions are given in the form of rebate.
Eg. Factory seconds in case of clothes, suitcases, soaps etc. The amount of rebate varies form
case to case.
Rebates help tremendously in providing satisfaction for value compromised by the customers.
This is also an effective method to clear defective stock, thus avoiding huge losses resulting
out of blocking of capital in unsold stock.

D. Leader Price Policy: Over a period of time, every industry will witness emergence of
leader firms. This happens due to standardization of the product itself and having a
market share so large, it compels the firm to be known as the ‘leader’. The price charged
by such a firm will be competitive and it will be arrived at after careful considerations
regarding costs, demand forecasts, supply conditions, profit aspects etc. Popular
examples of such products include cigarettes, sugar, cement, fertilizer, steel, tea, soaps,
paints etc. The price adopted by the leader firm is so effective that everyone in the
industry follow the same. If changes are initiated in price by the leader firm, the rest of
the firms will follow suit. Firms that follow the changes are known as ‘price followers’
and the leader firm’s price is known as ‘leader price’.
This policy works as other firms perceive it to be wise to follow the existing giants than go
otherwise. The price leader’s reputation is usually so strong that they can exercise several
options of just maintaining the price, increase it, reduce it, increase the relative quality or launch
low price strategy etc.
E. New Product Pricing Policies:

i. Skimming Pricing: Skimming pricing sets a very high price when the product is
introduced in the market. This works favorably when there are no competitors in the
market and demand is good. This is a situation of price inelasticity favoring the
producer to take advantage of his new product and earn large amounts of profits at the
earliest. Prices will be lowered once competitors enter the market, which takes some
time. Suitable examples for this will be the high prices set for latest mobile phones,
telecommunication devices and other software packages. Prices tend to be lowered only
when competition sets in. This usually dilutes the market for the original producer and
product development costs can be recovered at the initial stage of high price only.
ii. Penetration Pricing: This is opposite to skimming pricing. Here, prices are set very
low to allow the product to seep into the various segments of the society. The objective
of such pricing is to make the product affordable and strike market share quickly even
in the presence of competitors. Competitors’ customers may be willing to try a new
brand at a much lesser price, benefits remaining the same. FMCGs [Fact Moving
Consumer Goods] including necessities are good examples for penetration pricing.
Niche products do not qualify for this method.

TERMINAL QUESTION
5 Marks Questions
1. Explain Product Mix with examples.
2. Explain Durable goods with examples.
3. Report the methods of demand based pricing.
4. Explain Geographic Price Policies.
9 Marks Questions
1. Design the methods involved in Pricing.
2. Discuss in detail about elements of product mix.
3. Articulate the factors influencing Pricing Policy.
4. Examine the classifications of Consumer durable goods.
5. Define Pricing and state its objectives.
12 Marks question
1. Illustrate Product Life Cycle.
2. Construct the process involved in New Product Development.
3. Briefly explain the pricing methods and pricing policy.

Module 3
Marketing Mix – Place & Promotion
Structure
3.1 Physical Distribution

3.2 Factors affecting Channels of Distribution
3.3 Types of Marketing Channels
3.4 Promotion
3.5 Significance of Promotion
3.6 Personal Selling & Advertising
3.7 Branding, Packing, Packaging

3.1 PHYSICAL DISTRIBUTION
Introduction
Mass production is the order of the day. Goods are manufactured in one or few places and
finished goods are distributed to all the regions where demand exists. This means that the
manufacturer can produce goods for a large community in one place itself. Distribution takes
care of catering the products to their desired destinations. In other words, distribution is the
link between the producer and the final user.
A channel of distribution is an organized network or system of institutions or agencies, which,

in combination, perform all the activities required to link the producers and final users.
Meaning
The American Marketing Association defines a market channel as “the structure of the intra-
company organisation units and extra company agents and dealers, wholesale and retail,
through which a commodity, product or service is marketed”.
Philip Kotler defines marketing channel as “a set of independent organisations involved in the
process of making a product or service available for use or consumption”.
Thus, a channel of distribution is a pathway for the flow of goods and services from one point
to another. This requires the services of intermediaries. Distribution can happen through many
channels.
The importance of channels of distribution can be understood in Peter Drucker’s words –

“Channels are primary and products are secondary” and “deserve much more attention and
study than they usually receive”.
This description is justified, as, value addition happens due to distribution channels. The
distribution system creates time and place utilities, while, value utility is created by
manufacturing.
Objectives of Channel of distribution
i. To ensure availability of products at the point of sale.

ii. To build channel members’ loyalty
iii. To stimulate channel members to put greater
iv. To develop managers’ efficiency in channel organization
v. To identify your organization at a particular level
vi. To have an efficient & effective distribution system, to make your products & services
available
3.2 FACTORS AFFECTING CHANNELS OF DISTRIBUTION
Every producer has to find a way to distribute his products to their final users. To distribute,
various channels are available in today’s economy. How does a producer select one or more
channels of distribution to ensure smooth functioning and minimized cost? This is
understood bystudying the factors that influence the choice of distribution channels which
are discussed below.
A. Product Factors/Considerations:
The first and most important factor that influences on the choice of the channel of
distribution is the nature of goods. Perishable goods like cakes and breads that are needed to
be sold quickly aresold directly by the manufacturers to the consumers through retail outlets.
Goods that last longer can be handled by more intermediaries to insure a larger market.
i. Physical and Technical Nature:

Products of low unit value and of common use are generally sold through middle
men; whereas, expensive consumer goods and industrial products are sold directly
by the producer himself.
Perishable products, i.e., products subjected to frequent changes in fashion or style,
as well as, heavy and bulky products, follow relatively shorter routes and, are
generally distributed directly to minimize costs.
Industrial products requiring demonstration, installation and after sale services are
often sold directly to the consumers; while, the consumer products of technical
nature are generally sold through retailers.
Certain technical or complex products need installation and advice of product use
including demonstration, service visits, etc. For this, having exclusive trained
personnel isessential. Some companies prefer exclusive dealership in such cases.
An entrepreneur producing a wide range of products may find it economical to set
up his own retail outlets and sell directly to the consumers. On the other hand, firms
producing a narrow range of products may distribute their products through
wholesalers and retailers.
A new product needs greater promotional effort in the initial stages and, hence, few
middlemen or intermediaries may be required.
ii. The market position: Here, the focus is on the reputation of the manufacturer. A
product promoted by an established and reputed manufacturer has a higher degree of
market acceptance and, therefore, can be sold through various channels with little
effort. A new product, thus, has quick sales based on the producer’s reputation. This
may, however, have long term risks.
B. Market Factors/Considerations:
i. The existing market structure and size: Producers may have to study the existing
market structure. It can be geographically concentrated or wide spread. For example,
industrial markets are usually concentrated in a few large cities involving only large
customers. Producers or channel commanders can have difficulty in changing that.
However, consumer goods market has a different structure, as it is directly related to
the masses. Consumer preferences dictate channel selection. For example, baby food
manufacturers changed their channel of distribution to supermarkets, as, research
revealed that mothers preferred super markets over drug stores.
ii. Consumer behavior and nature of the purchase deliberation: Purchase decisions
are made differently for different products. Consumers spend more time and effort
on durables such as washing machine and mobile phone than on a pack of biscuits
or toothpaste. The frequency of purchase influences purchase deliberations. Products
which are purchased frequently by consumers have more buyer-seller contacts and
middlemen are suggested.
iii. Availability of the channel: Availability of a channel refers to the willingness of

channel members to accept a brand. For this, the channel commander or the producer
has the task of winning over the cooperation of the channel members. The producer
may adopt push or pull strategy. In push strategy, the producer resorts to regular
activities of convincing the existing channel members to accept the product and
passes it through various points to reach the retailer and then the final consumer. In
the pull strategy, the producer resorts to aggressive promotional activities on the
final consumer, relying on the fact that strong consumer demand will force
middlemen to accept the product in order to cater to the consumer satisfaction.
iv. Competitor’s channels: A new firm always studies the existing distribution pattern
and this, necessarily, includes identifying the distribution channels employed by
competitors. Every business has certain established norms and practices and this
may, even, apply to channels of distribution. If the existing pattern has given
success to the competitors, a new firm may adoptthe same channel as long as it is
suitable and logical. As a matter of fact, finding new avenues may prove to be costlier
and cumbersome.
C. Institutional Factors/ Considerations:

The channel members also influence the choice of the channel to be selected. They
may be briefly discussed as follows:
i. Financial ability of channel members: In the process of sending the goods through
the channels of distribution, it is found that manufacturers need to aid the retail
dealers financially, either through, interest free loans, or other credit terms. Credit
terms being competitive the willingness to extend credit is a determinant in channel
acceptance. Retailers also sometimes finance their suppliers either directly or by
investing in the company. Usually, government agencies are restricted from making
advance payments.
ii. The promotional strengths of channel members: Every producer, i.e., the channel
commander, wants his product to be promoted. For national brands, producers
themselves take up the responsibility. However, for others, distributors promote
jointly with the producer. In case of certain private brands, the job is taken up by
wholesalers or retailers who establish the brand name.
iii. The Post-sale service ability: Many products carry a warranty and this is used by
the consumer post purchase. The responsibility of serving the warranty has to be well
established. It can be the manufacturer himself or a channel member. Since the
retailer-distributor is the closest in touch with the consumer, the consumer may
expect this service from them itself. In certain cases, the product may be returned o
the manufacturer for servicing or services may be performed by an independent
service outlet established for this purpose.
D. Unit or Firm specific Factors/ Considerations:
Every firm has its own strengths and weaknesses which influence channel decisions.
Amongthem, important ones are discussed below:
i. The company’s financial position: Very big firms, which have the financial, and
human resources normally not only produce the goods, but, also setup their own
retail outlets. Smaller sized producers may prefer to concentrate on the technical
aspects of the production and leave the marketing of goods to others.
ii. The extent of market control desired: Market control refers to the ability of a firm
to influence the behavior of channel members according to the will of the
management. The entire distribution network will be served by factors such as resale
price maintenance, territorial restrictions, quotas and the like. The channel
commander, i.e., the producer or the manufacturer, may desire to exercise such
command from time to time. The extent to which they want the control is the question
to be answered, as, higher the control, higher will be the channel directness.
iii. The company’s reputation: Popular companies, known for their products or
services, have little or no problem in settling with a particular channel. This is
because reputed companies don’t go in search of intermediaries. Instead, the
intermediaries come in search of them. Reputation is reflected through higher sales,
timely and quick replenishment of stocks, low levels of inventory, easy settlement of
claims, competitive margins granted etc. The selected channel turns out to be cheaper
and dependable due to the willingness and cooperation extended by channel
members.
iv. The company’s marketing policies: A company’s marketing strategy lays down
the method of distribution. Important factors such as advertising, sales promotion,
pricing, delivery and after sale services influence the channel selection the most. For
instance, a company that invests heavily in advertising and sales promotion makes
the selected channel direct, as, little effort is required to push the product through the
chosen line. Alternatively, a company adopting a price penetration policy, [comes

with a low margin], chooses a longer channel.
E. Environmental Factors/ Considerations:
i. Economic and Legal factors: Due to the economic disparity prevalent in the
economy, the government promotes public distribution system through fair price
shops to reach out to the economically weak sector. This constitutes the public
distribution system which primarily focuses on the distribution of necessities. The
private distribution system also needs a certain amount of regulation. Much
legislation has been passed from time to time to regulate thefunctioning of the
various channels of distribution. One such important legislation is the M R T P Act
of 1969. The provisions of this Act aim at preventing exclusive dealership, regulating
territorial restrictions, reselling price maintenance, full line forcing, etc. The
Companies Act, 1956, forbids sole selling agency arrangements in industries like
paper, cement, Vanaspati, etc. Such provisions keep away cut throat competition;
prevent creation of monopoly and the like which are objectionable to the very public
interests.
ii. Fiscal factors: Sales tax rates vary from state to state as it is a state fiscal matter.
Although such sales tax is part of the retail price set for a product, it is actually borne
by the final consumer; it has its role to play in channel arrangements.
For example, let us say, sales tax rate in Karnataka is higher when compared to
Kerala, a producer may, therefore, take advantage of this benefit, prefer to open his
office in Kerala and pass on the reduced tax benefit in the form of reduced price.
This can also become a competitive advantage to the product.
3.3 TYPES OF MARKETING CHANNELS
Trade channels are classified as conventional and non-conventional with further divisions.
The following chart explains the classification.

A. Conventional Channels
i. Direct channels
Manufacturers’ Customers: This is the shortest and simplest choice as goods move
directly from the source of manufacture to the ultimate user. For example, vacuum cleaner,
water cooler, etc. The sales are affected through the company sales force.
Direct channels of distribution can take the following forms:
a. Direct selling or salesmanship example: - Eureka Forbes, zenith computers.

b. Vending machines example: - Pepsi and coke
c. Manufacturers retail shop. Example: - Bata, Titan, Reebok.
d. Factory outlets – small outlet just outside their factory – export factory out let.
e. Direct mail order business. Example: - teleshopping network, Proactive
f. acne kit, etc.
ii. Indirect channels

Manufacturers – Retailers – Customers: This option consists of only one intermediary. It
is short and simple. This is a popular in case of consumer durables such as textiles, readymade
garments, etc. Example: - Bata, Corona etc.
Manufacturers – Wholesalers – Retailers – Consumers: Here, two intermediaries exist.

This isthe most popular choice and is used by both small and big companies alike. This is
ideal for consumer non-durables. Example: - Biscuits and chocolates, soaps, shampoos, parle-
g—15 to 20 wholesales.

Manufacturers – Agent – Wholesaler – Retailer – Consumer: This is the longest indirect
channel available to a firm. The agent middlemen may be commission agents, export
merchants who manage trade on behalf of the manufacturer. Companies with multiple product
portfolio and producing consumer non-durables with national and international market resort
to this channel.
Manufacturers – Wholesaler – Consumer: Here, retailers do not exist. This works well for
institutional consumers such as colleges, hospitals, schools clubs, government agencies,
business houses, religious institutions etc. this can be adopted in case of consumer durables
and consumer non-durables.
F. Integrated Channels or Non-Conventional
1. Vertical Channels
These channels comprises the producer, wholesaler(s) and retailer(s) as a unified system.
These are professionally managed and centrally programmed networks that are established to
achieve operating economies and maximum market impact. Hence, they are bound to be
capital intensive; they are designed to achieve technical, managerial and promotional
economies through integration, coordination and synchronization of marketing flows from
the point of production to the point of final consumption.
i. Administered channel: This channel coordinates successive stages of production and
distribution through the size and power of one of the members. Manufacturers of a
dominant brand are able to secure strong trade cooperation and support from resellers.
This is developed in such a manner that the co-ordination of marketing activities is
achieved by using the programs of one or few firms. Companies like Procter and
Gamble are able to command high levels of cooperation from their resellers in
connection with displays, shelf space, promotions etc
ii. Contractual channel: Here, independent firms at different levels of production and
distribution, integrate their programs on a contractual basis to attain economies of
scale and maximize the market impact than they could achieve alone. They are three
types of Contractual Channels:
 Wholesaler sponsored Voluntary Chains: Wholesalers organize voluntary chains of
independent retailers to help them standardize their selling practices and achieve
buying economies in order to compete with large chain organizations.
 Retailer cooperatives: Retailers take initiative and organize a new business entity to
carry on wholesaling and possibly some production. Members concentrate their
purchases through the retailer co-op and plan their advertising jointly. Profits pass
back to members in proportion to their purchases.
 Franchise Organizations: A channel member called Franchiser might link several
successive stages in the production distribution process.
iii. Corporate channel: It combines successive stages of production and distribution
under single ownership. All the channel components are owned and operated by the
same organisation. Although it provides full control, this comes with a huge
investment. For example: Sears obtains over 50% of the goods it sells from companies
that it partly or wholly owns. Sherwin-Williams notonly makes paint but also owns
and operates 3000 retail outlets.
2. Horizontal channels:
Here, two or more companies join hands to exploit a marketing opportunity. This may be
achievedby themselves or by creating an independent unit, for example, Sugar Syndicate of
India, Associated Cement Company, etc. The factors motivating horizontal integration are
rapidly changing markets, racing competition, swift pace of technology, excess capacity,
seasonal and cyclical changes in consumer demand and the risks involved in accepting
financial risks single- handedly.
3.4 PROMOTION
Introduction
After product research, development and creation, promotion (specifically advertising) is

generally the largest line item in a global company’s marketing budget. At this stage of a
company’s development, integrated marketing is the goal. The global corporation seeks to
reduce costs, minimize redundancies in personnel and work, maximize speed of
implementation, and to speak with one voice. If the goal of a global company is to send the
same message worldwide, then delivering that message in a relevant, engaging, and cost-
effective way is the challenge.
Effective global advertising techniques do exist. The key is testing advertising ideas using a
marketing research system proven to provide results that can be compared across countries.
The ability to identify which elements or moments of an ad are contributing to that success is

how economies of scale are maximized. Market research measures such as Flow of Attention,
Flow of Emotion and branding moments provide insights into what is working in an ad in any
country because the measures are based on visual, not verbal, elements of the advertisement.
Marketers rarely face a situation in which simple and plain communication of information is
enough to make promotion effective. In the era of the production concept, when many
organization faced a seller’s market, this may have been the case. But today’s world is full of
messages and distractions of all sorts. Consumers are often faced with many competing options.
People find themselves increasingly rushed and harried. With less time for comparative
shopping, consumers turn to advertising for product information. However “pure information”
is not all these is to be found in marketing communications. Marketing managers exist in a
competitive environment, and as competitors they want consumer to buy their brands. Thus,
persuasion that encourages purchases or attitude change is a primary goal of promotion. It is
Benetton’s management’s hope that the information that the store is having a big sale will
persuade consumers to visit Benetton’s and see for themselves. In fact, a traditional definition
of promotion is “persuasive communication.”
Meaning
Edwin B. Flippo, “A promotion involves a change from one job to another that is better in
terms of status and responsibilities.”
Scott & Spriegal, “A promotion is the transfer of an employee to a job that pays more
money or that enjoys some better status.”
3.5 SIGNIFICANCE OF PROMOTION
i. Sales of the goods in imperfect market: Promotion helps in the sales of the goods in
imperfect market. In the imperfect market conditions, the product cannot be sold easily
only on the basis of price differentiation. It is the promotional activity that provides
information about the differences, characteristics and the multi-use of the products of
various competition in the market. The customer is attracted to purchase the goods on
the basis of such information successfully.

ii. Filling the gap between producers and consumers: Promotion helps in filling the
gap between producers and consumers. Due to the tough market condition, mass
selling is quite impossible without promotional activities. The distance between
producers and consumers has so widened in present days to get them touched with
the product that promotional activities are necessary.
iii. Facing intense competition: Promotion helps in facing intense competition in the
market. When a manufacturer increases his promotional spending and adopts an
aggressive strategy in creating a brand image, others arealso forced to follow the
suit. This leads to ‘promotional war. Without promoting the goods, the competition
is not possible in the market. So, it is necessary to face the competition in the market
with the help of promotional activities.
iv. Large scales selling: Promotion helps in the large selling of goods and services.
Sales promotion is the result of large- scale production. It can be achieved only by
appropriate methods of large scale selling. Large scale selling is possible with the
help of promotional activity. Due to the large selling of goods, there will be more
chance of promotion of goods. So, it is necessary to sell lot of goods in the market
for promotional activities.
v. Higher standard of living: Promotion helps in the rising standard of the people. The
promotional activities increase the standard of living by providing the better goods
at a lower rate due to large scale production and selling. It helps to increase the
standard of living in a good way. People can raise their standardof living with the
help of promotional activity. As the promotional activities increases, the standard of
living of people also increases. So, the promotional activity has a great role in the
increment of a standard of people so that they can live a good and happy life.
vi. More employment: Promotion helps to create more employment opportunities.

People can gain employment opportunity with the help of promotional activities.
With the help of promotional activity, many workers get motivated towards the
work. Promotional activity helps to increase more employment opportunities to the
people who are unemployed, as the promotional activities cannot be performed

without the help of an effective sales force and the specialists in various fields.
vii. Increased trade pressure: Promotion helps to increase trade pressure in the
market. The growth of large scales retailer, such as supermarkets, chain stores, etc.
has brought greater pressure on manufacturers for support and allowance.
Promotional activities help to decrease the trade pressure. There is need for
promotional activities to decrease the trade pressure.
viii. Effective sales support: Promotion helps in the sales support of the product. Sales
promotion policies are under the supplement to the efforts and impersonal
salesmanship. Good sales promotion materials makethe salesman’s effort more
productive. Promotion helps in the sales of the product. It provides good support in
selling the different types of goods. Sales of different types of goods in the market
are very necessary to increase the market economy.
ix. Increased speed of product acceptance: Promotion helps to increase the speed of
the products acceptance. Most of the sales promotion devices such as contests,
premium coupons, etc. can be used faster than other promotion methods such as
advertising. The increase in rapid speed of product acceptance has occurred with the
helpof promotional activities. As the promotional activities are done, there will be
direct effect in the increment of a speed of the product. Increase in the speed of
product acceptance is very important in the competitive market. So, it is necessary
to increase the speed of product.
3.6 PERSONAL SELLING & ADVERTISING
Personal Selling
Personal Selling is an effective way to manage personal customer relationships. The sales
personacts on behalf of the organization. They tend to be well trained in the approaches and
techniques of personal selling. However, sales people are very expensive and should only
be used where there is a genuine return on investment. For example, salesmen are often
used to sell cars or home improvements where the margin is high.

Advertising
Advertising is a 'paid for' communication. It is used to develop attitudes, create awareness,
and transmit information in order to gain response from the target market. There are many
advertising 'media' such as newspapers (local, national, free, trade), magazines and journals,
television (local, national, terrestrial, satellite) cinema and outdoor advertising (such as
posters, bus sides).
3.7 BRANDING, PACKING, PACKAGING
Branding
Introduction
There are millions of products and services all over the world, each claims to be the best
among their category. But, every product is not equally popular. Consumer doesn't
remember every product, only few products are remembered by their name, logo, or slogan.
Such products generate desired emotions in the mind of consumer. It is branding that makes
product popular and known in the market.
Branding gives personality to a product; packaging and labelling put a face on the product.
Effective packaging and labelling work as selling tools that help marketer sell the product.
The most unique skill of professional marketers is their ability to create, maintain, enhance
and protect brands. Starbucks, Sony, Nike, brands command a price premium and elicit
deeper customer loyalty
Meaning
The American Marketing Association defines a Brand as, “A name, sign, symbol, or design,
or acombination of them, intended to identify the goods or services of one seller to group of
sellers and to differentiate them from those of competitors”
According to Philip Kotler - “Brand is a name, term, sign, symbol, design, or a combination
of them, intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors”
A brand is thus a product or service whose dimensions differentiate it in some way from

other products or services designed to satisfy the same need. These differences may be
functional, rational, or tangible, symbolic, or emotional- related to what the brand represents.
Role of Brands
 The ability of a brand to simplify decision making and reduce risk is invaluable
 Brands also perform valuable functions for firms
 Simplify product handling or tracing
 Help to organize inventory and accounting records
 Offers the firm legal protection for unique features or aspects of the product
 Intellectual property
 Brands can signal a certain level of quality so that satisfied buyers can easily choose
theproduct again
 Brand loyalty provides predictability and security of demand
 Loyalty also can translate into a willingness to pay a higher price—often 20 to 25
percent more
 Competitive advantage
 Sustained future revenues to their owner
Concepts of Branding
Brand Awareness:
Brand awareness is the probability that consumers are familiar about the life and availability
of the product. It is the degree to which consumers precisely associate the brand with the
specific product.
Brand awareness includes both brand recognition as well as brand recall. Brand recognition
is the ability of consumer to recognize prior knowledge of brand when they are asked
questions about that brand or when they are shown that specific brand, i.e., the consumers
can clearly differentiate the brand as having being earlier noticed or heard.
While brand recall is the potential of customer to recover a brand from his memory when
given the product class/category, needs satisfied by that category or buying scenario as a
signal.
Brand Name:

Brand name is one of the brand elements which helps the customers to identify and
differentiate one product from another. It should be chosen very carefully as it captures the
key theme of a product in an efficient and economical manner.
It can easily be noticed and its meaning can be stored and triggered in the memory instantly.
Choice of a brand name requires a lot of research. Brand names are not necessarily
associated with the product.
For instance, brand names can be based on places (Air India, British Airways), animals or
birds (Dove soap, Puma), people (Louise Phillips, Allen Solly). In some instances, the
company name is used for all products (General Electric, LG).
Brand Loyalty:
Brand loyalty is the extent to which a consumer constantly buys the same brand within a
product category. The consumers remain loyal to a specific brand as long as it is available.
They do not buy from other suppliers within the product category.
Brand loyalty exists when the consumer feels that the brand consists of right product
characteristics and quality at right price. Even if the other brands are available at cheaper
price or superior quality, the brand loyal consumer will stick to his brand.
Brand Equity:
Brand Equity is the value and strength of the Brand that decides its worth. It can also be
defined as the differential impact of brand knowledge on consumers’ response to the Brand
Marketing. Brand Equity exists as a function of consumer choice in the market place. The
concept of Brand Equity comes into existence when consumer makes a choice of a product
or a service. It occurs when the consumer is familiar with the brand and holds some
favourable positive strong and distinctive brand associations in the memory.
PACKING AND PACKAGING
One cannot transport eggs from a poultry farm to the retailer without packing them in an egg
trayas they might crack even before reaching the final consumer. Similarly, a white shirt
might get stains if transported and sold without packaging, and a retailer might not be able
to sell perishable milk products after a day if there were no Tetra Pak.
The paper, corrugated boxes, plastic films, polybags, and roll bags, etc., that enclose a
product have a lot more value than a customer can imagine.
Packaging is the act of enclosing or protecting the product using a container to aid its
distribution, identification, storage, promotion, and usage.
Packaging may be defined as the process of wrapping, creating, bottling, compression

and containerization of a product for the purpose of protection, promotion, information or
any other allied benefit.
According to Kotler –
Packing constitutes all the activities of designing and producing the container for a product.
In simple terms, packaging refers to designing and developing the wrapping material or
container around a product that helps to:
 Identify and differentiate the product in the market
 Transport and distribute the product
 Store the product
 Promote the product
 Use the product properly

TERMINAL QUESTION
5 Marks Questions
1. Briefly discuss the channels of distribution.

2. Explain the environmental factors that influence the channel of distribution?
3. Briefly discuss any five elements of the promotion mix
4. Explain the institutional factors that influence the channel of distribution?
5. Briefly discuss the firm specific factors that influence the channel of distribution
6. Explain the vertical channel of distribution? Discuss the different types in it.
9 Marks Questions
1. Define channels of distribution? Explain in detail the various factors that affect
channels of distribution.
2. Define promotion? Briefly discuss the various elements of the promotion mix in today’s
world of cut-throat competition.
3. Write a detailed note on branding.
12 Marks question
1. Enumerate the different factors which influence the promotional mix.

2. Explain in detail the elements of promotional mix.
3. Give a detailed report on different types of marketing channels.

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CONTEMPORARY MARKETING

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Marketing – Meaning and Definition, Nature of Marketing, Goals of Marketing, Company’s

Module 2: Marketing Mix – Product & Pricing 08 Hours

Module 3: Marketing Mix – Place & Promotion 08 Hours

Physical Distribution – Meaning, Factors affecting Channels of Distribution, Types of

Module 4: Service Marketing 07 Hours

Meaning of Services, Characteristics of Services, Challenges of Services Marketing,

Module 5: Trends in Marketing 12 Hours

Digital Marketing – Introduction, Features, Process, Advantages and Disadvantages; E-

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Marketing Concepts & Environment

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Marketing is the process of converting prospective buyers into actual customers by

Marketing is an ongoing practice to capture customer’s attention towards a product or

According to the American Marketing Association (1988), “Marketing is the process of

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CORE CONCEPTS OF MARKETING

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Demand = Willingness to pay + Ability to pay

Satisfaction reflects a person’s judgment of product’s perceived performance in relationship to

(i) If the performance falls short of expectations, the customer is dissatisfied.

(ii) If it matches expectations, then the customer is satisfied.

(iii) If it exceeds the expectations, then the customer is delighted.

Performance = Expectations → Satisfied Customer

Performance > Expectations → Delighted Customer

1.2 NATURE OF MARKETING

Marketing is a complex function and does not sum up to sales alone.

 Managerial Function: Marketing is all about successfully managing the product,

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1.3 GOALS OF MARKETING

Three (3) big goals of marketing which include:

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1.4 COMPANY’S ORIENTATION TOWARDS MARKET PLACE

Traditionally the following concepts were followed:

The modern concepts of Marketing are:

1. The Marketing Concept: According to this concept, achieving organizational goals

 Relationship marketing: It aims at building mutually satisfying long term relationships

 Integrated Marketing: Integrated marketing is a process of coordinating various

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 Performance Marketing: It is a process of understanding the returns to the business

1.5 FUNCTIONS OF MARKETING

Following multiple operations of marketing helps the business to accomplish long-term

 Market Research: A complete research on competitors, consumer expectations

 Market Planning: A proper plan is designed based on the target customers,

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 Branding: A fascinating brand name is given to the product to differentiate it

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1.6 TYPES OF ENVIRONMENTS

Meaning of Marketing Environment

A marketing environment is a combination of internal and external environmental forces

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1. Internal Marketing environment

2. External Marketing environment

ii. Marketing Intermediaries:

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iii. The Company:

The company is a hierarchical entity consists of different departments like

Top management is responsible for companies’ mission, objectives, and broad

Customers exercise a major influence on a company's marketing environment.

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