Professional Documents
Culture Documents
Product Mix
Product is a powerful tool of an organization’s success. The products must
be acceptable to rural consumers in all significant aspects. The firm must
produce products according to the needs and future demands of rural
buyers. The product features like size, shape, color, weight, qualities,
brand name, packaging, labelling, services, and other relevant aspect
must be fit with needs, demands and capacity of buyers.
Price Mix
Price is the central element of marketing mix, particularly, for rural
markets. Rural consumers are most price sensitive and price plays more
decisive role in buying decisions.
Pricing policies and its strategies must be formulated with care and
caution. Price level, discounts and rebates, then credit and installment
faculties are important considerations while setting prices for rural specific
products.
Normally, the low-priced products always attract the rural buyers, but
rarely some rural customers are quality and status conscious.
Promotion Mix
Rural markets are delicately powerful to cater to the rural masses. The
promotion strategies and distribution strategies and Ad makers have
learned to leverage the benefits of improved infrastructure and media
reach.
Village fairs and festivals are ideal venues for projecting these programs.
In certain cases, public meetings with Sarpanch and Mukhiya too are used
for rural promotion. Music cassettes are another effective medium for
rural communication and a comparatively less expensive medium.
Different language groups can be a low budget technique and they can be
played in cinema houses or in places where rural people assemble. It is
also important that in all type of rural communication, the rural peoples
must also be in the loop. The theme, the message, the copy, the
language and the communication delivery must match the rural context.
Place Mix
Rural market faces critical issues of distribution. A marketer has to
strengthen the distribution strategies. Distributing small and medium
sized packets through poor roads, over long distances, into the remote
areas of rural market and getting the stockiest to do it accordingly.
1. Growth
2. Market-share
3. Cash flow
4. Profitability
What is a Product?
Anything of value that fulfils the requirement of the end-user is known
as a Product. It can be goods or services, tangible or intangible, physical
or psychological. The customers and competitors largely depend upon
the products offered by the company.
1. Core or Generic Product
It is the raw product that satisfies the customer’s primary
need. The core product is at its raw form, not bearing any
brand name and remains undifferentiated.
For example: – Wheat is a grain that one can consume.
2. Basic Product
The core products differentiated from the rest become the
basic product. It adds some necessary features to the
products like Brand Name, Packaging and Label, etc.
For example: – Fortune Chakki Fresh Atta (wheat flour).
3. Expected Product
These products include the key features that customers look
forward to. It also contains standard features that a product
should have.
For example: – Chapati is prepared from wheat flour.
4. Augmented Product
To differentiate products from competitors, companies
add distinctive features to them. These additions depend on
the market survey conducted for the product. They try to
create a Unique Selling Proposition (USP) for their products.
For example -Brown Bread and Cookies.
5. Potential Product
It refers to all the possible features that a product can have
in the future. These features depend on the market
conditions and economic changes.
1. Original Product
2. Improved Product
3. Modified Product
4. Development of Product
5. Launching Products, etc.
Product Mix
It refers to the aggregate range of products that a company owns. In
other words, the total number of products that a company offers for
sale is the product mix of the company.
There are various decisions the marketers have to take regarding the
product mix. It may include:-
Product line
1. Line Stretching
2. Line Filling
Design
Changing the product’s design may be effective but can be risky too.
The customer may or may not like the design and face problems while
using the product.
Branding
1. Band Name
2. Trade Marks
3. Logo
4. Brand Marks, etc.
Packaging
Packaging is the outermost covering of the product. It enables product
protection, conveys information and creates sale appeal. And is not
restricted to just the safety of the product.
1. Size
2. Design
3. Innovation
4. Aesthetics
5. Convenience
6. Material
7. Environmental factors
Labelling
The label is a part of the packaging. It contains all the essential
details about the product in written form. Also, it conveys information
regarding performance, features, quality and price, etc.
The marketers must perform an in-depth analysis at the time of
Labelling. It is a medium of communicating with customers. Vital
decisions based on labelling are:
1. Brand Label
2. Descriptive Label
3. Grade Label
4. Informative Labels
Positioning
Positioning builds a unique image of the product in the target
audience’s mind. Also, it differentiates products from others using
benefits and attributes in the customer’s mental space.
1. Segmentation 2. Differentiation
2. Aggregation
Support
Pricing Decisions:
Pricing decisions refer to the process by which a company decides on the most
appropriate pricing for its products or services based on various factors such as
demand, production cost, and competition.
It is a process used to figure out what manufacturers or service providers should get
in return for their products or services. Estimating the right prices relies upon
different variables like raw material costs, manufacturing costs, labor costs, profits
margins, etc. net revenue, and so on.
It involves careful analysis and consideration to arrive at the most effective pricing
strategy. It is common for companies to periodically assess their prices to stay in line
with market trends and competitors. Deciding on prices can be either simple or
complex.
Simple pricing is a strategy that involves charging the same price as competitors for
similar goods and services. Retailers and wholesalers selling commodities typically
use this strategy. In making simple pricing decisions, companies may offer purchase
discounts, volume discounts, and purchase allowances to increase sales in
a competitive market.
Complex pricing is the type of pricing that varies based on the uniqueness of
a product or service, as well as customers’ willingness to pay for it. It is typically
established through discussions with the customer and is often utilized for
customized furniture, art pieces, and consulting services.
When making pricing decisions, cost should be one of your top priorities. If costs
exceed sales, a business won’t be able to sustain itself. To determine the price, a
basic pricing method is to add a set percentage to costs, which is called a “cost plus”
approach. When setting prices, fixed costs and variable costs need to be considered.
2) Perceived Value
Customers determine the worth of a product based on their perception, and the cost
of production is not their concern. Therefore, if the price is higher than they perceive
its value to be, they will not make the purchase. On the other hand, if the perceived
value is much higher than the production cost, they will not mind paying a higher
price, which will result in a significantly higher profit margin for you.
3) Competition
When it comes to pricing, competitive pricing plays a vital role. In markets that are
open and free, prices can fluctuate depending on demand. Monopolies, on the other
hand, can set prices without many limitations.
4) Spoilage Risk
To make informed decisions, you should take into account both real and effective
spoilage risks. Real spoilage risk refers to items that have an expiry date, such as
milk or calendars, and may no longer be useful. Effective spoilage risk refers to
seasonal items.
5) Loss Leaders
It’s not necessary to make a profit on every item. You can offer some items at a
lower price to attract buyers to your store, with the expectation that they will
purchase other items with higher profit margins, making up for the initial loss on the
lower-priced item.
6) Economies of Scale
When companies increase their production and lower their costs, they can achieve
economies of scale, which are cost advantages gained through increased efficiency.
7) Bundling
One way to boost the average sale price is by offering bundled items at a discounted
rate. This can give price-sensitive customers more value than buying each item
separately and lead to higher customer satisfaction. Cable, internet, and phone
companies have been using bundling as a popular strategy for a long time.
8) Psychological Pricing
Psychological pricing involves pricing an item in a way that makes it seem more
valuable to customers. This could mean using price tags that appear lower, for
example, using numbers like 9 instead of 10.
9) Goal
When making pricing decisions, it’s important to balance revenue and customer
satisfaction. By keeping this goal in mind, you’ll be able to make better decisions
regarding the right price points for your product or service.
• 2) Penetration Pricing
• It lets products get launched in the market with low initial prices to optimize
the target purchasers.
• 5) Premium Pricing
• It is best for brands that make top-notch items and market them to rich
people. It is used for items that are of the best quality and that buyers will view
as high worth.
• 6) Bundle Pricing
• It is used when brands pair a few items together and sell them for lower prices
than each would be offered separately. It is a decent method for moving a ton
of stock rapidly.
• 7) Economic Pricing
• It focuses on those target customers who need to save as much cash as
could reasonably be possible while purchasing a good or service. It relies
upon your overhead costs and the general worth of your item.
• 8) Value-based pricing.
• It is like premium pricing and in this model, brands decide their prices with
respect to how much the customers think the item is worth.
• 9) Dynamic Pricing
• It enables brands to change the price of their products or services in view of
the market demand.
Ultimately, it’s up to you to decide how to price your products or services. You must
consider market demand, competition, and other factors, as well as the cost of goods
or services and desired profit margins before making any pricing decisions.
Promotion Decisions:
Promotion Decisions for Products is crucial element in Marketing & Selling of
Products & Services.
Promotion Decisions
Promotion helps marketers to communicate information to potential customers. This
information could be about the product awareness value and benefits offered by the
product. Promotion is done to achieve different objectives like to remind customers
to modify their behaviour or to inform them.
What is Promotion?
Promotion refers to the entire set of activities which communicate the product brand
or service to the user. The idea is to make people aware attracted and induced to
buy the product in preference over others
Promotion refers to the use of communication with the Twin objectives of informing
potential customers about the product and persuading them to buy it.
According to Philip Kotler promotion includes all activities the company undertakes to
communicate or promote its product to the target market
Promotion Decision:
Meaning:
Objectives of Promotion:
Promotion is an important marketing strategy. Promotion aims at communicating
marketing information to consumers and sellers. It persuades and convinces the buyer
to influence his behaviour and prompt him to take the desired action. The key
objectives of promotion can be summarized as to inform, persuade and remind:
01.To inform :
Company makes use of promotional tools to inform target market about:
(a) New product, brand, new pack size or new feature of product
(b) Reduction in price, new offer like buy one get one or more quantity at same
price
(c) Opening of new outlet in the region like Reliance, Big Bazar
(d) Working of product though demonstration
(e) New packaging of the product
(f) New or multiple uses of the product
(g) Introduction of new technologies in the market
(h) Genuineness of product or company when some wrong or negative perceptions
have emerged as happened in case of Maggi Noodles
(i) Competitive advantage of the product or service
02.To persuade:
Promotional strategies aim at influencing buyer’s behaviour to take a desired action.
It focuses on :
(a) Insisting consumers to buy now as happens in case of limited stock offers
(b) Initiating brand switching in the favour of company i.e. capturing customers of
rival firms
(c) Stimulating demand and creating brand preference
(d) Insisting consumer to stay loyal to brand i.e. creating brand loyalty
03.To remind :
There is stiff competition in consumer goods market and companies have to
consistently remind the customer about brand, product and its competitive advantage.
The companies aim to:
Promotion Mix
Promotion mix consists of a group of communication tools which marketing
executives use to communicate with their target audience. The marketer tries to create
a most favourable blend of all promotion elements to influence buyer’s behaviour and
his process of decision making. Sales can be promoted through an effective promotion
mix.
Public Relations:
It includes certain activities like event sponsorship, cause related marketing
programmes and consumer training programmes.
Communication process starts from sender. Sender means the person who intends
to convey his ideas and thoughts. In marketing, sender is the firm who tries to inform,
persuade and remind the target market about firm, its product offerings and services.
Ideas are encoded by the sender to create message. In marketing, message can be
encoded by marketer or advertising agency. Encoding means conversion of ideas into
a message by using words, symbols, or sounds. Marketer should encode the message
in a way that can appeal five senses. Message is transmitted through some channel
such as T.V., Radio, store displays, phone, press, product demonstration and so
on. Marketer must select the channel which is most suitable to the
message. Message is always directed to someone. In marketing communication, it is
meant for the target group to whom marketers want to influence. The receiver/
customer is supposed to have received message when it enters his frame of
reference. The channel distortions, also known as media noise, can interfere with the
reception of message. Message may get distorted due to light, climate, physical
surrounding or competitive advertisement. There can be ineffective reception of
message due to customer’s state of mind or physical discomfort. The target market
decodes the message as per its knowledge and understanding. Decoding
is interpretation of the language, tone and symbols of the message. Interpretation
of message is affected by age, gender, culture, attitude and belief of the consumer.
Each consumer finds his own meaning to the message.
It must be remembered that these models do not explain how promotion affects all
types of purchase situations. But still these models are popular and are used to
measure effectiveness of promotional efforts. These are also useful to evaluate
effectiveness of each component of promotion-mix and media-mix in terms of their
ability to create demand or influence buyers’ behaviour.
Nature of Product:
Target Market :
Sex, age and background of target market will determine the use of promotion tool.
Toys or cosmetics can be promoted through television. Press media is not suitable to
sell products which are meant for children. A convenience product targeted
at rural market would call for the use of customer education. In such markets,
advertising supported by personal selling will help in boosting the sales. It will serve
as communication tool and also support the distribution channels. Niche market
products are meant for loyal, educated and concentrated group of customers. The
promotion strategy in this case will focus on building long term relationship. Selective
and informative advertising will work for such product.
Promotional strategy will be influenced by product’s stage in life cycle. During the
introductory stage, there is need to create awareness and knowledge about product.
Promotion strategy should be such as to trigger a need and establish product utility.
Product displays and publicity supported by advertising can be relied upon to promote
such product.
The purpose of promotion will be different when product reaches growth stage. As
the product is known to the consumers, therefore, the focus will be to build brand
preference through advertising. In this case, there will be shift from creating awareness
to increasing customer base. Public relations and sales promotion can be used to
support advertising.
Product at maturity stage faces tough competition and declining sale. To retain
customers for matured product, firms can focus on consumer sales promotion and
trade promotion. Huge expenditure on advertising will prove a sheer waste at this
stage.
Availability of Funds :
The new entrants may lack funds to use advertising, personal selling, or sales
promotion tools. They can go for publicity to create awareness among customers. If
established firms do not face any financial crunch they can adopt any promotion tool.
Push strategy aims at assisting dealers in increasing sales whereas the purpose of
pull strategy is to encourage customers or end users. A company that wants to use
pull strategy should use advertising or sales promotion. But a company which is opting
push strategy must go for personal selling. However, a company can use a
combination of different promotion tools when push and pull strategy is followed by it.
Promotion strategy
Strategy lays down the broad principles and programmes by which company tries
to secure an advantage over competitors. Promotion strategy chalks out the
communication programme to be followed for achieving marketing objectives.
Promotion strategy aims at stimulating demand, creating brand awareness and
developing brand loyalty. A company can use a pull or push promotion strategy or it
can use a combination of both.
Most consumer goods manufacturers generally use a push-pull (mix) strategy to sell
their products. The proportion of pull and push may differ according to the
requirements of market situation. Salesmen are used to push the product through the
marketing channel, while advertising and sales promotion pull the customers and
support personal selling to accelerate sales. Thus, all tools of promotion work together.
Designing effective promotion strategy
The marketing executive should decide the target audience (in terms of usage and
loyalty). Typical purchase behaviour of target audience should be assessed.
Marketers may find loyal users, brand switchers, infrequent users of product or
service. Different promotion strategy should be used for different categories of buyers.
It is essential to lay down the objective of promotion strategy. The purpose may be to
create need, build awareness, provide knowledge, develop liking, build customer
preference, develop conviction (confidence) or secure purchase. The most effective
strategy can achieve multiple objectives.
The company must estimate the likely expenditure on promotional activities. Industries
or companies vary considerably on their expenditures. It may be high for consumer
goods whereas low for industrial goods. Different methods are available to
determine promotion budget. The company should use an appropriate method.
Among other things, it is equally important to take feedback and measure the
effectiveness of promotion strategy so as to make necessary changes in
communication programme and product offerings or services. Effectiveness of
promotion can be measured in terms of increase in demand, brand awareness, or
purchase intention.
Affordable :
In this method, a company sets promotion budget on the basis of funds available. This
method completely overlooks the role of promotion in increasing sales. Moreover, due
to different annual promotional budgets, long term planning becomes difficult.
This method envisages determination of promotion expenses in such a way that parity
with competitor’s promotion expenses can be maintained. For this purpose, relevant
data can be collected from industry publications, inter-firm comparisons published by
industrial association and research studies. This method is not scientific as
objectives, scale of operation and resources vary significantly among companies.
In this method, promotion objectives are determined first and then tasks required to
be performed to achieve those objectives are determined. Finally, cost of performing
these tasks is estimated. This method is flexible and scientific. It treats promotion
expenditure as investment which is necessary to achieve objectives. It forces
managers to prepare budget for each promotion campaign.
Distribution Channels:
The following points highlight the top eleven models of rural distribution. The models
are:-
1. Public Distribution System
2. Distribution through Wholesalers
3. Distribution through Sub-Dealers
4. Distribution through Local Dealers
5. Sales through Rural Sales Force
6. Company Outreach Programmes
7. Village Entrepreneurs
8. Local Influencers
9. Rural Retail Chain
10. NGOs and Other Networks
11. Rural Value Chains.
The PDS was started in India before independence with the objective of providing
food security to the poor. Under the system, food-grains were sold from fair price
shops at lower prices than the market rate. It was the first structured public
distribution of cereals in India through the rationing of rice or wheat to ration card
holder families. This was followed by successive governments over the years. In
1997, it was changed to Targeted Public Distribution System (TPDS) so that cheap
rations could be delivered to BPL people, identified through a BPL survey.
In 2013, the National Food Security Act (NFSA) came into force, under which a
rights-based approach was adopted instead of the earlier welfare approach. Under
this Act, eligible beneficiaries—identified through Socio-Economic Caste Census
(SECC) 2011 data—are entitled to receive 5 kg of food grain at subsidized prices.
Some states have already adopted the NFSA while the rest of India still follows the
TPDS system.
TPDS operates through a system in which the Central government procures food-
grains from farmers at a minimum support price (MSP), allocates grains to each
state, and transports them to the central depots in each state. State governments
identify eligible households to which the grains are to be delivered from these depots
to each ration shop. The ration shop is the last point of the distribution channel from
where grains are sold to consumers.
Though the system is supposed to help poor and marginal populations, studies have
revealed that is has not been very effective in its objective. For example, FAO’s ‘The
State of Food Insecurity in the World, 2015’ report points out that 194.6 million
people are undernourished in India, that is, India is home to a quarter of the
undernourished population in the world (FAO 2015). It also says that 51 percent of
women between 15 to 59 years of age are anaemic and 44 percent of children under
5 are underweight. The Global Hunger Index 2014 ranks India at 55 out of 76
countries, pointing to the weaknesses of government distribution system.
An NCAER study (NCAER 2015) found that there was inappropriate identification of
BPL families and that the inefficiencies in the supply chain contribute to the high cost
of delivery in most states. The study also found that the supply chain of the PDS is
riddled with malpractices at distribution and administrative levels. It was found that in
some states, people had paid Rs. 14-118 for getting a new ration card even though
the government charges a token fee of just Rs. 1.
The PDS, thus, is in need of an overhaul. A case has been made for direct cash
transfers through Jan Dhan Yojana and the UID generated by the Aadhaar scheme
instead of providing subsidized food-grains, which is easily diverted. PDS is also not
cost effective as its operations are too costly and the ratio between procurement and
transportation is too high. Storage losses are also very high.
Saini and Kozicka (2014) write that there is a case for reducing the role of the
government in food management systems of the country since the country no longer
faces acute food scarcity of the 1960s. Today, the country is self-dependent and it
exports a number of agricultural products. This is the right time, they write, to move
from controlling price through high subsidies to income policy support that includes
cash transfers to the poor. If India can make this switch, it can reap huge economic
gains. Cash transfers would help in better targeting and reduce the huge costs
associated with government intervention in the grain market.
Clearly, the PDS is not enough to serve the growing population of India. Private
individuals and companies step in and build distribution channels to reach markets
across India. They do this in various ways, working through their dealers or creating
new models.
The village dealers add a mark-up and cost of transportation to their cost of
purchase to arrive at the selling price. There are some disadvantages in the model.
First, all villages cannot be covered through this method. Second, goods become
quite expensive by the time they reach the customer. Village retailers thus have to
charge more than the printed MRP to cover their costs and customers are not very
happy about this. A third disadvantage is that sales are dependent on the
wholesaler.
In this case, the company bypasses the town wholesaler and directly appoints local
dealers or partners who are served through company depots in a nearby town. This
resembles the hub-and-spoke model, where the company depot serves as a hub
serving surrounding villages.
Either the company builds its own logistics to supply goods or it requires the dealers
to collect goods from the depot. This model is more expensive than working through
wholesalers as the company has to maintain many depots in towns. However, the
company gains full control of its rural marketing and distribution and is not dependent
on dealers.
Some companies appoint rural sales force to visit dealers and retailers in villages.
Goods are then supplied through the company depot in the town. Small companies
follow this route and are able to achieve deep penetration in their areas of operation.
Wholesaler commissions are avoided but the company bears the cost of distribution.
This is an expensive option since the company has to add a large number of sales
people on its payroll. The advantage is that the company can serve the areas it
wants to cover and is not dependent on the wholesaler or the sub-dealer. The
company is also able to establish direct relationship with the rural customers.
6. Company Outreach Programmes:
Outreach programmes are an effective way to reach villages, especially when demos
or consumer education are required. The company uses BTL techniques to involve
communities in their brands. Excitement is built by multimedia devices and direct
customer experience. Consumers can experience products directly through this
method, and brand loyalty can be achieved.
This approach is called ‘feet on the ground’ approach, in which the company trains
and develops entrepreneurs in villages who act as distributors and brand
ambassadors. Case studies of Essilor and Project Shakti, are examples of this
approach. The advantage of this model is that the company can reach the remotest
of the villages. The village entrepreneur creates customers for the company and
works for mutual benefit.
8. Local Influencers:
In this case, the company works through people who can influence others. Well-
known or respected people in the village arrange community meetings and product
demos to influence consumers and inculcate brand loyalty.
Companies can work with retail chains established to serve rural areas. Chains such
as Hariyali, Aadhaar and Choupal, or tying up with petrol pumps, are easy ways to
reach villages. However, many of these initiatives have failed.
Supply chains are created not only to provide goods to villages but farmers can sell
their produce through the same channel. Such chains help solve farmers’ problems
and help them increase their income, which, in turn, is used to buy products from the
supply chain. The approach, however, calls for huge investments to cover villages.
ITC’s e-choupal and Jain Irrigation show that rural distribution is facilitated by helping
deliver value to farmers, while at the same time solving a problem for village folk.
The aforementioned ten models of distribution serve rural markets in different ways
but, in each case, they have to overcome severe difficulties that arise because rural
areas have traditionally been neglected in public policy. Though the government has
many rural development schemes, its approach has been to throw money at villages.
But, it is estimated that only 10% of government spending reaches the beneficiaries.
The development route followed in India since Independence has been city-centric.
Relationship Management:
Relationship management is, as the name suggests, managing relations in your life.
Traditionally, relationship management means to maintain good and positive
relationships between an organization and its clients. But it goes way further — it
means managing and maintaining positive relationships with everyone in your life,
may it be your spouse, your family, your siblings or your work colleagues or
employees.
• Enhancing Our Creativity. Good relationships with people at work help in creating
a joyful environment to work in and give us an opportunity to be creative and
showcase our skills.
Now let us discuss the main components of relationship management and how to
build long-lasting relationships with customers:
Be Clear
For an organization to become a brand, your customers need to know exactly what
you are selling, why you are selling and who you are selling to. So in order to build
better relationships with your customers, make sure that the message being
delivered to them is crystal clear.
Similarly, to build better relationships with your team or employees, you have to
make sure that the message is clearly conveyed to them.
Be Consistent
Communicate Well
Relationships cannot just be built and then forgotten. Like a plant, which needs water
to grow, relationships need communication to sustain and grow, too. For a
relationship to grow, it is important that you give your time, energy and effort to
maintain it, and this is the key to all relationships, whether work or personal. Similar
is the case with a company and its customers.
It is essential that your company representatives are available for your customers at
all times. If you communicate with your customers through online chats or emails or
phone calls, then make sure a customer representative is always available to cater
to the needs of your customers by responding to them.
Similarly, if you want your team to perform a task, you have to make sure that you
communicate to them well and are available to cater to their confusions. Apart from
that, if you believe you have a problem with an employee for any reason, it is
important you communicate that to them so that they can improve and learn from it.
Communication is the key to having better relationships.
Be Positive
Who wants to spend time with a toxic and negative person? It is important to stay
positive with yourself and others, no matter how hard the situation is. Positivity is
very attractive, and it will help you in building friendships and maintaining
relationships throughout your life.
If you believe you do not have good interpersonal skills and that is the reason you
cannot maintain your relationships, well, there is nothing to worry about.
Interpersonal skills can be learned. It is important to develop these skills because it
will help you in communicating well with others and you will be able to influence
them, too.
In order to live a happy and wholesome life, it is important to build strong, good and
happy relationships in every aspect of your life. It is important to have good
relationships with your friends, family, neighbors and relatives, and similarly, it is
important to have good relationships with your work colleagues, employees and
bosses. Having sore or bad relationships with any of them can take a toll on your
mind and body and get you all stressed out. Our relationships can have a huge
impact on both our personal and professional lives. Good relationships at home will
make our lives easier and happier, and similarly, good relationships at work can
make us happy and satisfied.
With the popularization of the Internet and smartphones, consumers can now easily
find information on products or services on their own. As a result, the number of
consumers who wait for information to be given to them by sellers, which was
common in the past, has decreased, and consumers who take active steps to gather
information on their own have become the mainstream. This change is a major
reason why relationship marketing has become so important.
Because of these changes, the market is now centered around the consumer. This
situation has created the need for relationship marketing, which considers the
customer's perspective first and foremost.
Now that consumers have easy access to info online, the traditional approach of
treating all customers the same way and providing them all with the same
information is considered to be less effective. It has become necessary to provide
personalized information based on data.
You now need to break your list of prospects and existing clients down into
segments, and send content that is tailored to their interests and needs. One of the
principle ideas in relationship marketing is to treat each customer as an individual,
and personalized content is just one way of achieving this.
Benefits of Relationship Marketing
Life-time value (LTV) refers to the predicted net profit of an ongoing relationship
between a customer and a business. A maximized LTV is considered a huge benefit
of relationship marketing. This is achieved as there will be more repeat purchases
from existing clients, and you will have to invest less costs into new customer
acquisition.
If you can gain the trust of your customers, they will be less likely to waver and
switch to a competitor's products, and will repeatedly purchase from you. If you can
develop products and a customer experience that keeps everyone satisfied, you can
avoid customer churn as well.
These days, when everyone is on social media and look to their peers or influencers
to learn what’s trending, word of mouth advocacy is very powerful. If you can turn
your customers into loyal customers - or better yet, fans - they will act as free
advertisement to promote your products and services in their circles, helping you to
attract new customers.
Database marketing
Since your target is narrowed down to a select few groups, you need only focus on
their data, making it easier to keep track of which prospects are active and engaging
with your brand online.
One-to-one marketing
Since content is not sent out to your entire list at once, you need to spend time
planning different messages for each target, which can be time-consuming, but also
highly effective.
Physical Distribution:
Physical distribution involves the handling and moving of raw materials and
finished products from producer to consumer often via an intermediary. It is
sometimes used synonymously with logistics (the branch of military science
concerned with procuring, maintaining and transporting equipment and facilities
etc.).
Physical distribution creates ‘time’ and ‘place’ utility, which maximises the value
of products “by delivering them to the right customer at the right time and right
place.”
There are two dimensions to physical distribution process, the flow of information
from the individual customer or organizer to the producer and the flow of
materials from the producer to the consumer or the user.
Physical distribution is all about moving and storing the products and finally
making them available to the consumers. Distribution is the process of making
the products/services available to the consumer. It involves movement of the
products/services from the manufacturers to the end user.
(ii) Physical distribution is the main mid-look between manufactural and creation
of demand.
A minimum cost physical distribution system is the system with the lowest cost
that can provide a specified level of customer service. As customer approaches
100% sales level off and distribution costs sliding upward. The curves in the
exhibit probably resemble those that exist in as wide variety of firms.
The physical distribution design task is clear. Within the range of customer
service lends that considers necessary to achieve the firm’s marketing
objectives, (90 to 100%), the service level and system design that yield the
highest contribution of sales minus physical distribution costs must be identified.
The principle problem in doing this is the difficulty of measuring customer service
and estimating and sales response service level.
A key issue in designing the PPS is how to incorporate the customer service
objective into the design process. Management judgement and experience will
often dictate a range of customer satisfaction levels that are acceptable to the
firm.
In many cases, these levels may be expressed not as percentage, but rather in
terms of lost orders, delays, stock outs, and other proxy measures.
The system designs must determine a minimum cost design for each customer
service level analysed. In the six alternatives considered, the service level (e.g.
the sales increase that would be obtained by moving from alternative 3 to
alternative 4) and then select the alternative that offers the greatest contribution
over costs.
With the second PDS design approach, management must estimate the total cost
of customer service. This approach requires estimating costs of lost sales
instead of sales response to customer service. Management might specify a 95%
service level that would mean 5% customer dissatisfaction. The cost of lost sales
is estimated and included with other distribution costs.
The third approach to the design task involves analyzing the tradeoffs between
PDS components with the objective of improving physical distribution over the
present level. This may mean increasing the customer service level at no
additional costs or reducing total distribution costs with no loss of customer
service.
This approach is often the most feasible of the three, due to the inherent difficulty
of estimating the relationships of sales response or cost to level of service.
Although not an optional solution, it represents a potential starting point for most
firms.
1. 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 required to be sold quickly, are sold 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.
Products which are of low unit value and have common use amongst consumers
are generally sold through middle men; whereas, the sale of expensive and elite
consumer goods and industrial products is conducted directly by the producer
himself.
Products that are perishable, i.e., products which are subjected to frequent
changes in fashion or style or trend, as well as those products which are heavy
and bulky, go through relatively shorter routes and, are often distributed directly
in order to minimize costs and damage.
Industrial products that need demonstration, installation and after sale -services
are often sold directly to the consumers; while, retailers generally sell consumer
products which are of technical nature.
A new product needs greater promotional effort in the initial stages and, hence,
few middlemen or intermediaries may be required.
2. Market Factors/Considerations:
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.
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 adopt the 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.
3. Institutional Factors/Considerations:
The channel members also influence the choice of the channel to be selected.
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.
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 to the manufacturer for servicing or services may be performed
by an independent service outlet established for this purpose.
Every firm has its own strengths and weaknesses, which influence channel
decisions.
Huge companies, which have the financial and human resource capability may
not only produce the goods but also may have the ability to set up their own retail
outlets thereby creating a lot of visibility for themselves. On the other hand,
smaller companies which do not have either the financial capability or manpower
resources might just concentrate on production and leave the marketing of goods
to others.
Market control refers to the ability of a firm to influence the behaviour of channel
members according to the will of the management.
Here, the entire distribution network is 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.
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.
5. Environmental Factors/Considerations:
The private distribution system also needs a certain amount of regulation. Much
legislation has been passed from time to time to regulate the functioning of the
various channels of distribution. One such important legislation is the MRTP Act
of 1969.
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.
1. Order processing,
2. Inventory Control,
3. Warehousing,
5. Transport.
1. Order Processing:
We should have standard procedure for handling and execution of orders. Order
processing time must be reasonable. Any delay in order execution creates ill-will
and may lead to loss of business. Customer demands assured delivery within a
fixed period always. The speed in order execution reflects the degree of
customer service. Even a slight increase in customer service can increase your
business to the extent of 20 per cent. Order serving time can act as a selling
point in our marketing programme.
2. Inventory Control:
In fact the entire physical distribution management, size, location, handling and
transporting of inventories assume unique role in physical distribution.
Inventories are reservoirs of goods held in anticipation of sales. The inventory
inter-connects production activity (purchase activity) and the customers’ orders
(sales activity). Inventory cost increases at an accelerated rate as the customer
service level approaches 100 per cent. We must reconcile and balance the
inventory cost and the customer service level.
3. Warehousing:
Storage is the process of holding and preserving goods. It can equalise supply
time-wise. The selection and proper location of warehouses is of special
importance in the process of marketing. The distribution centres are now located
around the markets rather than around transport facilities.
We can also have a few warehouses and normal inventory stock. The new
system of distribution reduces delivery time and also storage time. Emphasis is
given on selling and not on storing. Many companies are shifting from storage
warehouses to distribution centres. One distribution centre is set up in one region
around the market and not around transport facilities merely.
Distribution centres use the latest equipment for data processing, material handl -
ing and inventory control. The range of services a distribution centre offers can
be matched with those offered by a wholesaler. However, a wholesaler is the
merchant middleman, whereas a distribution centre is an agent middleman.
Standard size containers to pack and transport goods can be stored on pallets or
small platforms which can then be moved by mechanical transport. Modern
mechanised handling of goods and protective packaging have improved
customer service, lowered distribution cost, and have also speeded up order
execution.
5. Transport:
Let us now describe the various means of transport, their relative advantages
and disadvantages and the criteria for choice of mode of transport.
Physical Distribution – Key Functions
Physical distribution is part of a larger process called “distribution,” which
includes wholesale and retail marketing, as well the physical movement of
products. The physical distribution functions include transportation and storage
of goods. Until the goods have been sold out they should be kept safe and after
selling they should be transported from one place to another.
The key functions of the physical distribution system can be categorized into
following two areas namely the primary functions and other functions –
If the warehouses are too far away from the consumer, it might mean a slower
time to deliver the product to the customer. On the other hand, if it is close to the
customer location, the cost of the warehouse might increase the total cost of
distribution.
a. Storage
b. Transportation
There is a trade-off between having too much inventory on hand, with its incurred
additional costs, and not having enough inventories on hand to satisfy shifting
customer demand. Another objective for physical distribution is to put in suitable
inventory policies so as to bring down the total cost of the physical distribution
function.
Goods should be kept collected in stock to supply them at right time and place to
the customers when demanded. This task is called inventory management. Both
short stock and large stock are dangerous for any company. So, considering
both aspects, goods should be kept in balance.
The following methods should be studied and analyzed for inventory
management:
a. Economic order quantity (EOQ) – Giving order for supply of goods in the
quantity that minimizes total expense is called economic order quantity.
e. Just in time [JIT] – Receiving just in time method of inventory control has
become very popular. According to this concept, very small amounts of goods
are purchased. They reach at the right time of production or right time of sale. In
some countries, inventory manager can give such direction to high level
management.
One factor that influences the decision is the cost of transportation. The
company has to make decisions relating to what mode of transportation to use
for its physical distribution. For instance, it could truck the products, ship them,
send them by train, or fly them. Sending a product by air is faster for international
delivery, but it is also likely to be more expensive. Other decisions related to
transportation include how often to transport goods, or the frequency of
transportation, and the transportation route.
The physical distribution manager should take decision on the following matters
in order to systematize the transportation –
a. Types of carrier
b. Mode of transportation
c. Cost
d. Speed
e. Consistency
f. Safety
g. Availability
In processing the order of the customer, the company might have to move it
through a number of channels. It could go from the manufacturer to the
wholesaler to the retailer, and finally reach the consumer. Some companies have
found ways to cut down on the multiple middlemen involved in this classic
distribution system.
It is designed to take the customer orders and execute the specifics the customer
has purchased. The business is concerned with this function because it directly
relates to how the customer is serviced and attaining the customer service goals.
If the order processing system is efficient, then the business can avoid other
costs in other functions, such as transportation or inventory control.
a. Billing
b. Granting credit
c. Invoicing
d. Dues collection
After the order has been received from customers; the order should be kept
recorded and sent to store and account sections. This task is called order
handling. If the quantity of goods is not sufficient in the store to meet the
demand, information is given to factory for production. If the goods as demanded
are stock in store, they should be packed properly and then only they should be
dispatched to the customer.
For handling the materials in such way, appropriate equipment also should be
selected. Efficient and proper equipment cuts down material handling cost and
save from breaks and damages. Nature of goods, package size, and packing
method etc., also determine the sorts of handling equipment.
a. Proper equipment
b. Maintenance
c. Minimising breakage
Distribution channels offer a variety of services that ease and enhance selling
and buying goods. They offer credit to customers and accept returned
merchandise. They also advertise and promote products through special
displays, sales prices etc. Depending on the product, distribution channels
service the products they sell. This includes maintenance and repair services,
and they often are trained and supported by the manufacturer. Distribution
channels may even add value to products before distributing the customers.
ii. Selling
iii. Financing
iv. Promoting
v. Negotiating
vii. Servicing
x. Customer relationships
ii. Selling – In case of sale through intermediaries, the selling function is effected
by the physical distribution system only.
iii. Financing – Many dealers design and offer variety of financing services to the
buyer for products which are expensive. Either finance is organized for the
consumers or the dealer lets the consumer pay in instalments.
iv. Promoting – For increasing sale in the outlets the dealers come up with
several promotional schemes that boost the sales.
vi. Marketing intelligence – The distribution system effectively gauges the pulse
of the market and helps the company in taking timely decisions.
ix. Consolidation and distribution – Consumers often prefer to buy a wide variety
of consumer goods at one time and place. Retail stores enable consumers to do
just that because they stock and display a great number of different products. Up
the distribution channel chain, wholesalers can accumulate large amounts of
many different products from different manufacturers and efficiently deliver many
products to many retailers. This lowers carrying and transportation costs.
Order processing varies by industry, but often consists of four major activities – a
credit check; recording of the sale, such as – crediting a sales representative’s
commission account; making the appropriate accounting entries; and locating the
item, shipping, and adjusting inventory records.
It is the storing of products while they wait to be sold. This storage function is
necessary because production and consumption cycles rarely match.
Organizations use either storage warehouses or distribution centers to process
their products. A distribution center is a large, highly automated warehouse
designed to receive goods from various plants and suppliers.
The Web has erased many of the distribution barriers between producers and
their potential customers. Many electric commerce sites do not have warehouses
because they do not carry inventory. E-commerce distributors dispense with
warehouses whenever possible.
It involves knowing both when to order and how much to order. During the past
decade, many companies have greatly reduced their inventories and related
costs through just-in-time logistics systems. For example, FedEx offers order
processing and fulfillment services, streamlined distribution by guaranteeing 48-
hour delivery globally, and just-in-time delivery for manufacturers.
It’s a suite of services that forms the backbone for Web-based companies like
Dell. “Inventory velocity has become a passion for us,” writes Chairman and
Chief Executive Officer Michael Dell in his new book “Direct from Dell” (Harper
Business).
“In 1993, we had $2.9 billion in sales and $220 million in inventory. Four years
later, we posted $12.3 billion in sales and had inventory of $233 million. We’re
now down to less than eight days of inventory [on hand] and we’re starting to
measure it in hours instead of days.”
v. Transportation Subsystem:
Trucking offers a fast way to ship and consistent service for both large and small
shippers. Trucks are dependent on highway infrastructures, which may not be
available in some countries. Trucking is very flexible because trucks can haul
goods wherever there are roads.
Air carriers are the fastest way to move shipments but air transport is more
expensive than other transportation modes. Water transportation, although slow,
is one of the least expensive modes of transportation. It lends itself mainly to
hauling bulk commodities that are easily containerized.
For example, FedEx handles 59 million pounds of airfreight a month and has 624
airplanes, 42,500 vehicles, 145,000 employees and millions of square feet in its
sorting centers. It sends 58 million electronic transmissions every day. The
company relies on its information network as much as its air force and its ground
troops.
Organizations can contract all of their logistics functions to third party logistics
providers such as – UPS Worldwide Logistics and Emory Global Logistics. These
specialized companies are able to offer smaller companies significant economies
of scale as they invest the capital needed to build advanced distribution systems
for all their customers.
A committee for organising the functions of physical distribution is set up. The
sales manager inventory control manager, transportation / traffic manager etc.
are included as member to the committee. Any chief/top executive is appointed /
nominated chairman to such committee. This committee discharges the
responsibility to increase in efficiency reduction in distribution costs and
establishing a co-ordination in the functions discharged by all these executives.
A number of institutions have now started a separate dept. with them in order to
establish a co-ordination among all functions of physical distribution. All physical
distribution functions under this dept. are carried on by a chairman. This
department is fully independent from other department.
A problem arises under this system is that for what executive the physical
distribution officer should be made responsible. Gradually, the executive of
physical distribution dept. is being made responsible for the chairman or
marketing manager.
3. Marketing Director:
ix. Demand Supply Coordination in case of seasonal goods like sugar / wheat
to ensure round the year supply
x. Price Stabilization –
Salesforce Management:
Sales Force Management (SFM) is a sub-system of marketing
management. It is Sales Management that translates the
marketing plan into marketing performance.
Actually sales force management does much more than serving as
the muscle behind marketing management.
Sales force management systems are information systems that
help automate some sales and sales force management functions.
They are often found to be combined with a marketing information
system.
Sales force management systems are information systems that help automate some
sales and sales force management functions. They are often found to be combined
with a marketing information system. Sales force automation includes sales lead
tracking system that lists potential customers through paid phone lists or customers
of related products. Some of the other elements of sales force automation include
Some of the identifiable processes involved with sales force management are:
iii. Control processes are achieved within a given time frame and given markets
It is not just about the control systems involved with sales force management
Some of the metrics that are implemented in the sales force management
processes are:
i. Time management- measures the tasks and time required for each task
There are certain distinct advantages and disadvantages of the sales force
and threats
xi. Developing marketing strategies for each of one’s products using the marketing
xii. Coordinating the sales function with other parts of the promotional mix, such
xv. Providing input into feedback systems to help monitor and adjust the
process.
The disadvantages are:
i. Difficulty in adopting the system
ii. Too much of time spent on Data Entry
This includes deciding the type of persons required, type of products added in
(ii) Structure:
A particular territory in which each sales person is assigned to sell company’s full
line. Sales area is small so selling can be done more effectively. The sales man can
understand the needs of the area and can design his strategy accordingly. This
It is used when the products are numerous, unrelated and complex. In this, sales
force sells along the product line. Kodak films and industrial goods are sold by
separate sales force, i.e. for industrial films technical sales force is there and a
(iv) Compensation:
(a) Straight salary plan – Sales men are paid a fixed salary.
(b) Straight commission plan – Where only selling commission is paid on every unit
sold.
(c) Salary plus commission plan – Where a fixed minimum salary is ensured and
(e) Salary plus group commission plan – As the name suggests, this method
advocates payment of a fixed amount as salary. In addition the entire group is paid
3. Training Activities:
The senior management must supervise the sales force on a regular basis. The
importance of control cannot be undermined or given less emphasis than any other
function. Supervision helps the management in knowing what is going on. Also it
Another important objective of supervision is control. The management can show its
concern for its people, and thereby motivate them by regular and routine supervision.
But such a system must be used in moderation, lest the employees start feeling
are good or who are bad. Those who are good and efficient must be awarded for
their task. Bad ones must be motivated and trained to improve and if after all efforts
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