PRODUCT PLANNING Product planning may be defined as “the act of marking out and supervising the search, screening

, development and commercialization of new products; the modification of existing lines; and the discontinuance of marginal or unprofitable lines”. Importance of PLC (a) (b) (c) (d) (e) PLC concept is a useful tool for market forecasting, planning and control. The knowledge that a product will pass through such a cycle of life is helpful in evolving proper product policies and promotion and pricing strategies. PLC is a reliable aid in modifying the marketing strategies. PLC helps the marketer to plan a strategy to meet the competition. PLC cautions management about the declining stage of the product. However, PLC is not free from criticisms. In an article, “Forget the

product life cycle”, Dhalla and Yuspeh, argued that the PLC concept is essentially descriptive and if the management use it as perceptive tool, it would be making a grievous mistake. Some of the blunders committed due to dependences on PLC are firms put to much of emphasis on new product development instead of continuing the revitalization process of existing brands (a study shows that more than 95% of new products fail); sometimes firms get misguided by PLC concept that stagnation in sales or negative growth rates in sales create illusion of decline stage leading to phase out of products or brands. Still it is believed that PLC is an important strategic tool in marketing. Levitt believes that PLC is a planning tool and not just a descriptive tool. Thus, firms renewed to use it.

LOCATING PRODUCTS IN PLC Since PLC is a useful concept to deal with product, pricing and promotional strategies of a firm, it should be effectively manipulated by the firm to locate its product or brand in it. The approach to locating a product or brand in the PLC

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of a firm involves environmental scanning and trend analysis. following steps. 1. 2. (a) (b) products. (c) (d) Analysis of shifts in distribution channels, if any

The involves the

Analysis of historical sales and growth trends in the brand and industry. Analysis of recent trends in the market place. This involves. Analysis of recent trend regarding the number and strengths of competitors. Analysis of the quality, performance and perceived benefits of competitor

Analysis of the relative advantage the brand product enjoys over competitors in

the market place. 3. 4. 5. 6. 7. Analysis of development of short term tactics of competitors. Analysis of historical information regarding life cycles of similar and related products. Projecting brand or product sales on the basis of above analysis. Estimation of the probable years remaining for the brand of product. Fixation of the brand or product’s position in the life cycle.

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STEPS IN NEW PRODUCT DEVELOPMENT PROCESS Eight stages are involved in the new product development process : • • • • • • • • Idea generation Screening, Concept development and testing, Marketing-strategy development, Business analysis, Product development, Market testing & Commercialization

The purpose of each stage is to determine whether the idea should be dropped or moved to the next stage. The companies develop new products to achieve strong sales and healthy profits. Thus, every company should have an explicit strategy with respect to developing new products. This strategy is called New-Product Strategy. A new product strategy is a statement identifying the role a new product is expected to playing achieving corporate and marketing goals. For example, a new product might be designed to protect market share of the company. If it is so, then the new product strategy may be to introduce an additional to an existing product line or revise an existing product. Let us now consider the various stages a firm has to pass through for launching a new product in the market. • Idea generation: The New Product Development (NPD) process starts with the search for ideas. New product ideas can come from interacting with various groups and from using creativity generating techniques. Ideas for new products can come from customer, scientists, competitors, employees and top management. Customer needs and wants are also the sources to search for ideas. • Screening: An organization or company should motivate its employees through reward. So that they can submit their idea Manager or Idea Committee. The company then divide the ideas into 3 groups such as – i) Promising ideas, ii) marginal ideas, iii) rejects. 3

Each promising ideas is researched by a committee member. And the surviving ideas then move into full-scale screening process. Also the screened idea helps in evaluating the potential of new product ideas. • Concept development and testing: A concept is an elaborated version of a According to Levitt, product idea expressed in meaningful consumer terms.

customers buy concepts and not just the tangible product. For example, a leading soft drink company wanted to strength its product line by adding a new range of fruit juice. This is the idea from which following product concepts may be developed. Concept-1: Fresh fruit juice for children and adolescents as a health supplement at breakfast. Concept-2: Fresh bottled mango juice for the young and the grownups as a fun thirst quenching and refreshing beverage to be had at any time. Concept-3: Fresh bottled mango juice for adults as a health supplement. Assume that the second concept looks to be attractive and promising. Then the next task is to decide how the new product will differ from existing soft drinks. The company may consider two product attributes-taste and packaging. The company can also position the brand against competing ones on several features like use situation, price, calories, and convenience. The moment it does so, the product concept, now becomes a brand concept. After the product and brand concepts have been developed, the stage is now set for testing them. • Marketing-strategy development: After having a successful concept resting, the new product manager develops a preliminary marketing-strategy plan for producing the new product into the market. The plan generally consists of three arts : à The first part describes the target market’s size, structure and behavior, the planned product positioning; and the sales market share, and profit goals sought in the first few years. à The second part outlines the planned price, distribution strategy, and marketing budget for the first year. à The third part describes the long-run sales and profit goals and marketing – mix strategy over time.

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Commercialization: It is the actual introduction of the product into the market place. Market testing: This stage thoroughly evaluates the acceptance of potential market through the use of market research. cost and profit projections to determine whether they satisfy company objectives. BRANDING STRATEGY 5 .• Business analysis: It’s an in-depth study of the estimated economic feasibility of new product ideas. packaging ad distribution cost estimates. with all the related decision and resource commitments. In this stage the company needs to prepare sales. • • • Product development: It involves developing the product itself and further development of marketing.

and oil filters. From the view point of the manufacturer. A) Producer’s Strategies Producer’s must decide whether to brand their products and whether to sell any or all of their output under middlemen’s brands. three cases arise which are as follows : Case-I – (Marketing entire output under producer’s own Brands) The large. 6 . Case-II – (Branding of Fabricating Materials and parts) Some producers use a strategy of branding manufactured goods that become part of another product following subsequent manufacturing. EXIDE batteries. stimulating. a brand can be defined as a device designed to assist in the processes of creating. But it is particularly difficult for a new firm to produce only for its own brands. an integral part of an automobile. well financed and well managed companies like IBM. or a combination of them which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitions”. it becomes an integral part of the product. symbol or design. strengthening or maintaining demand for his products. (b)The item is a key part of the finished product. Once a brand is used. etc. sign. middle man. who is considering employing a brand.A brand is defined by the American marketing Association as “a name. For example. Thus. term. market their entire output under their own brands. This strategy is most likely to be effective when the particular type of fabricating parts or materials has two characteristics : (a) The product is also a consumer good that is bought for replacement purposes. batteries. strategy. This strategy is used in marketing many automotive parts such as spark plugs. For instance. With this strategy. or retailer. the seller seeks to develop a market preference for its branded parts or materials.

The risks in this strategy are : i) ii) iii) brand.Case-III – (Marketing under Middlemen’s brands) A strategy among manufacturers is to sell part or all of their output to middlemen for branding by these customers. because it increases their control over their target markets. Also this strategy helps the manufacturer to achieve additional sales. adequate financial resources to build a brand and the competition in the industry is high. because it increases their control over their target markets. premium may go to the middlemen Distributor may not extend the desired marketing support to the (distributor) but not to the producer. and so forth. B) Middlemen’s Strategies An alternative to manufacturer’s own brand policy is the middlemen’s or distributor’s brand policy. C) Strategies Common to Producers and Middlemen Loss of control over the product’s marketing. If customers prefer a given retailer’s brand sometimes called a store brand they can get it only from that retailer. 7 . This is useful when the firm does not have strength in marketing. Voltas. Middlemen may find it advantageous to market their own brands. Middlemen may find it advantageous to market their own brands. it is not uncommon to see readymade garments and other accessories being marketed under the store name or stores created brand name. If the product succeeds. in place of or in addition to producer’s brands. Several small producers market their products under well-known brand names like Bajaj. In fact. in place of or in addition to producer’s brands. This strategy helps a manufacturer fully utilize its plant capacity.

or dual branding. POSITIONING A BRAND The concept of positioning wall first advocated by AI Ries and Jack Trout. a detergent promoted as being gentler than Tide. Positioning is the act of communicating company’s offer so that it occupies a distinct and valued place in the mind of customers. To reach other segments of the market. aimed either at the same target market or at distinct target markets. The company name combined with a product name. This arrangement is called cobranding. Case-II – (Branding for Market Saturation) With increasing frequency. Two &G detergents. (a) (b) (c) A separate name for each product. and joint branding activity with another company. Case-I – (Branding within a Product-Mid) Three possible strategies are used by firms that sell more than one product. for example. that a company has built one type of sales appeal around a given brand. There are different ways of positioning the brand. The company name alone. firms are employing a multiplebrand to increase their total sales in a market. They have more than one brand of essentially the same product. the company may use other appeals with other brands. These are as follows : 8 . Case-III – (Co Branding) Sometimes two separate firms or two segments within the same firm/company agree to place both of their respective brands on a particular product or enterprise.Producers and middlemen (distributors) alike must choose strategies with respect to branding their product mixes branding for market saturation. Tide and Dreft. For these people P&G has Drefts. Suppose. Some people feel that if Tide is strong enough o clean soiled work clothes. illustrate this point. it should not be used on fine clothings.

Benefits offered :. such as business crisis or a shift in consumer tastes. etc. BRAND EQUITY Brand equity can help a product survive changes in the operating environment. Linking to Uses :. Use Situations : The marketer can identify use situations for his brand or product and analyze customer perception of existing competitor brands in different use situations.positioning of brand may be done on the basis of tangible benefits that the company offers to customers. Head-on Competitive Positioning : This is the strategy of placing ONIDA colour TV was a firm’s brand next to the leader in the market and trying to uproot it on a specific tangible variable. At one extreme are brands that are not known by most buyers. Beyond this are brands with a high degree of brand acceptability. For example Colgate offers benefits of preventing cavity and fresh breath. Then there are brands for which buyers have a fairly high degree of brand awareness. 4. especially by intending a product line. positioning of a brand is done by identifying the possible uses which the firm’s brand can be put to. Many of today’s new kitchen appliances like the microwave oven.In this way of positioning the brand. launched and positioned against the giants in the CTV industry with the message that all others were clones and only ONIDA was the leader. Life Style Positioning :.1.A brand may be positioned as a life style component. Brand equity is often used to expand a product-mix. are positioned accordingly. 5. Based on this analysis the firm can position its brand. Brand vary in the amount of power and value they have in the market place. Nirma offers the benefit of low price. 2.In this case. Emphasizing Tangible Benefits : The . These are in the form of specific features and sometimes through its price and distribution. 6. 3. Then there are brands that enjoy a high degree 9 . the benefits that customers get in using the product are highlighted.

1. 2. the Lexus brand commands $ 10. consists of all the activities of designing and producing the container or wrapper for a product. It protects the product after it is purchased. Functions of a Package : The following are some of the functions. Importance of Packaging : Packaging a product is very important for the following purposes : i) ii) iii) It protects the product on its way to the consumer. especially for price reason. No reason to change the brand. Customer is satisfied and would incur costs by changing brand.000 more than the Camry brand. iv) v) It can assist in getting a product noticed by consumers. 4. Customer is devoted to the brand Customers will pay more for a strong brand. and 40% would pay upto a 30% premium. Customer values the brand and sees it as a friend. 50% said they would pay a 25% premium. 5. 3. thus. No brand Customer is satisfied. It makes the product distinct from that of the competitors. loyalty. For example. Finally there are brands that command a high David Aaker distinguished five levels of a degree of brand loyalty.of brand preference. from lowest to highest. It helps to meet the needs of wholesaling and retailing middlemen. Tide users. a 100% premium and Volvo users a 40% premium and although the Lexus and the Toyota Camry share the same exact engine. Coke Lovers are willing to pay a 50% premium over the closest competitors. Customer will change brands. a package’s size and shape must be suitable for displaying ad stacking the product is the store. a good package is expected to perform : 10 . customer attitude towards a brand. One study found that 72% of customers stated they would pay a 20% premium for their brand of choice relative to their closest competitive brand. Packaging strategies : Packaging.

To supply a consumer need. full customer ‘satisfaction’.. inventory Packaging serves a convenience function in that it provides both processing. Packaging strategies : In managing the packaging of a product. executives must make the following strategic decisions. greater reduction of waste and lower distribution 11 . differentiation. develop and sustain ‘interest’ about or. i) ii) iii) iv) costs v) To improve profits by improving the product image. purchase of the product. packages can be designed to educate the customers and distribution channels on the benefits of the product. Objectives of Packing : The following five basic objectives are generally highlighted. less expensive materials. To increase total consumer demand. shelf-life and in the customer’s home.i) ii) A package protects a product during transportation. giving him. Packaging helps the selling function particularly in the shops and in advertising i.e. thereby. iii) iv) v) Packaging can be used to achieve common identification of the Packaging helps to achieve a greater degree of product various products in a company’s line of products. opening and storage of the products. better and concerned firm. The “A-I-D-A-S” Formula : In designing a package this formula can be used as is done by salesman whilst swelling and the advertiser whilst drafting advertisements. the middlemen and the customer’s greater economy and convenience in the handling. To redistribute existing consumer demand more in favour of the To reduce costs through efficient handling methods. better still. A well designed package will immediately attract ‘Attention’.

2. Family Packaging uses either highly similar packages for all products or packages with a common and clearly noticeable feature. PRODUCT-MIX STRATEGIES A product-mix is the set of all products offered for sale by a company. A grade label identifies the product’s judged quality with a letter. product mix refers to the collection of For example. Kodak’s products offered for sale by a business unit. A brand label is simply the brand alone applied to the product or package. A package change may become necessary through i) ii) iii) iv) v) Introduction of a new product. In other words. LABELLING Labeling means putting identification marks on the package. Packaging the Product Line :. care. Changing the Package :Management must constantly evaluate the effectiveness of the present packaging and be alert to introduce the necessary change. number or word. Example : ‘A’ grade product. as it increases total sales of a product.A company must decide whether the develop a family packaging when packaging related products. construction. Multiple Packaging :. descriptive label and grate label. Customer request or sales request Engineering request Altered conditions As part of a regular programme. 12 . and/or. A label is the part of a product that carries information about the product and the seller.It is a practice of placing several units of the same product in one container. 3. other pertinent features. performance. A descriptive label gives objective information about the product’s use.1. There are three primary kinds of labels : brand label.

The word width refers to the extent of different product lines in the product mix offered by an organization. Expanding the line : It may be a valid decision if it is in an area in which consumers traditionally enjoy a wide variety of brands to choose from and are accustomed to switching from one to another. In this sense.cameras. constitutes a product line. 1. or used together. or sold to the same customer groups. Expansion is done by increasing the number of lines and/or the depth within a line. A company may have following product line decision 13 . width and consistency. or marketed through the same types of outlets. Plastics land Fibers are its product mix. The American marketing Association defines product mix as “the composite of products offered for sale by a firm or a business unit”. Chemicals. physical characteristics. A broad group of products. This strategy is limited by the considerations of adequate finance. product mix is the full list of all products offered for sale by a company. strategies. or if the competitors black a comparable product or if competitors have already expanded into this area themselves. Photographic suppliers. intended for essentially similar uses and having similar PRODUCT LINE DECISIONS The American Marketing Association defines product line as “a group of product that are closely related either because they satisfy a class of need. The word consistency describes the relatedness of the various product lines. The nature of the product mix is at times described by expressions such as depth. time and equipment. or fall within given price ranges”. The word depth applies to the number of product items offered by the organization within a particular product line.

Technological Obsolescence : This is a strategy of making an For existing product obsolete due to significant technical improvements. Products subject to style or fashion or psychological obsolescence include clothing. Thus. automobiles. this strategy is to satisfy their thirst for newness though fashion. or added benefits are offered. Trading up refers to the adding of a higher priced prestige product to the existing lines with the intention of increasing sales of the existing low-priced product. and cell phones etc. CDs and DVDs rendered cassettes virtually obsolete. PRICING DECISION Pricing is the matter of vital importance to the seller as well as to the buyer in the market place.2. increase the market for replacement products. 3. 2. OBJECTIVES OF PRICING 14 . Contracting or Dropping the Product : Contraction may be done by dropping a product or products in the line so that fewer styles. The concept of planned obsolescence refers to either of two strategies : 1. Price refers to the exchange value of goods and services expressed in terms of money. Trading down refers to the adding of the low priced items to the line of prestige product. new styles. furniture. Trading up and Trading Downs : It involves an expansion of the product lines as well as the promotional strategies. PLANNED OBSOLESCENCE The intent of this strategy is to make an existing product out of date and thus. sizes. new colours and so forth. with the expectation that the people who cannot buy the original product may buy these new ones because these carry some of the status of the higher priced products. Style Obsolescence : It is a strategy in which superficial characteristics f a product are altered so that the new model is easily differentiated from the previous and now declared obsolete model. example.

Fast turn around and early cash recovery. 6. Providing commodities at prices affordable by weaker sections. FACTORS INFLUENCING PRICING Two categories of factors – internal factors and external factors – influence the pricing decisions of any enterprise. Thus. Thus. 14. and in an individual firm. 13. Providing commodities/services at prices that will stimulate economic development. 10. or keeping it under check. Entering new markets. A minimum return (or target return) on investment. Pricing objectives are overall goals that describe the role of price in an organization’s long-range plans. 2. Stabilising prices and margins in the market. 15. some factors may be quantitative and yet other qualitative. 11. A fairly 15 . it is important to have a look on pricing objectives. In each categories some may be economic factors and some psychological factors. 12. in the consumers mind. Keeping competition out. Deeper penetration of the market. all pricing objectives emanate form the corporate and marketing objectives of the firm. Profit – Maximization in the short-run. 7. again. Profit-optimization in the long-run. 8. Target profit on the entire product line irrespective of profit level in individual products. 5.Price is very significant in our economy. A minimum return on sales turnover. Target sales volume. 9. 4. Pricing objectives aid planners in formulating price policies planning pricing strategies and setting actual prices. 3. Keeping parity with compensation. The various objectives sought to be realized through pricing are listed below : 1. Target market share.

or monopoly. Understanding. The choice of a pricing strategy is dependent 16 . 7. 8. The stage of the product on the product life cycle. Market characteristics. if any. The characteristics of the product. perfect competition. 8. 1. 4. The image sought by the firm through pricing. Bargaining power of major suppliers. Corporate and marketing objectives of the firm. (B) External Factors PRICING STRATEGIES After deciding on pricing goals and setting the base price. 4. and other relevant legal aspects. 2. Price elasticity of demand of the product. 7. 3. 9. reached with price cartels. 5. 10. Buyer behaviour in respect of the given product.exhaustive list of internal and external factors which exercise an influence on pricing is given below : (A) Internal Factors : 1. Other elements of the marketing mix of the firm and their interaction with pricing. 5. or monopolistic or oligopolistic market. 6. market. national or overseas 2. 6. Societal (or social) considerations. 3. Costs of manufacturing and marketing. Government controls/regulations on pricing. Extent of distinctiveness of the product and extent of product differentiation practiced by the firm. There are a number of pricing strategies available to a marketer. Bargaining power of major customers. Composition of the product line of the firm. Use pattern and turn around rate of the product. marketers must establish pricing strategies that are compatible with the rest of the marketing mix. Competitor’s pricing policy.open or closed market.

1) The quantity of the product that can be sold is less affected by pricing in the early stages especially when the product has novelty. strategies must be In this section a thorough discussion will be made regarding pricing strategies. Similarly. it must choose a market-skimming or a market penetration pricing strategy. 17 . the product is tapping profitably those segments of the market which do not bother much about price. As the word skimming indicates. The skimming pricing strategy can prove ideal for really new and distinctive products on account of the following factors. the new product is priced high and the cream of the market is skimmed by concentrating on those segments of the market that are not price sensitive. the price is set at the highest possible level that the most interested consumers will pay for the new product. devised for discounts and allowances. this strategy literally skims the market in the first instance through high price and subsequently settles down for a lower price.on corporate goals and objective. Market Entry Strategies : (A) Skimming Pricing : In skimming pricing. 2) Through skimming. Ordinarily. 3) By skimming the ream of the market through a high price the product is fetching big funds which could be used for market development in the initial stage. In other words. When a firm is launching a new product. skimming pricing aims at high price and high profits in the early stage of marketing the product. Such tapping will not be possible at a later stage in the life cycle. customer characteristic intensity of inter-firm rivalry and phase of the product life cycle.

3) 4) When demand for the new product is fairly inelastic. 1) Since it is expected to provide healthy profit margins. through the low price strategy. And by strategy at a higher price it is always possible to come down on price. this strategy intended primarily to recover and R&D costs as quickly as possible. There are certain objectives of this skimming pricing strategy. The income is generated by large sales spread over large markets. when the situation warrants.4) The Skimming pricing can be a way to feel and figure out the demand for the product. The intention of this pricing The large strategy is to penetrate a brand market through low prices. When the new product is protected from competition through one or more entry barriers such as a patient. This strategy advocates for starting with a low price as it is intended to discourage other firms from introducing competing products. volume of sales facilitates substantial economics in unit cost of production and marketing and the cycle can continue in establishing the product in the market. a relatively low initial price is established for a new product. 2) When the product has distinctive features strongly desired by consumers. The penetration pricing is most suitable under the following conditions : 18 . The price is low in relation to the target market’s range of expected prices. (B) Penetration Pricing In this pricing strategy.

Discounts and allowances are deductions from the base price or list price. The product is likely to encounter heavy competition. when the product market characteristics are as follows : 1) The quantity of product that can be sold is highly price sensitive. 2) 3) 4) There is no elite market for the product. When it is possible to achieve economics of scale (substantial reductions in unit costs) through large-scale operations. 4) When a fierce competition already exists in the market for this product or is expected soon after the product is launched. Management has the option of offering quantity discounts. Large volume of sales is required to ensure economy in production and distribution. viz. There are two types of quantity discounts.1) 2) 3) When a large market exists for the product. Discounts and Allowances : It is necessary that the strategies must be devised for discounts and allowances which are very common in business dealings. trade discounts cash discounts. The penetration pricing becomes the choice for the new product. cumulative discount and non-cumulative discount. When demand is highly elastic. offering the deduction. even in the early stages of introduction. and/or other types of deductions. 19 . (A) Quantity Discounts These are deductions from a seller’s list price intended to encourage customers to buy in larger amounts or to buy most of what they need from the seller.

2) Frequent orders. This type of discount is advantageous to a seller because it ties customers closely to that firm.000 – 30% This type of discount is intended to encourage large manufacturer Rs. The discount is computed on the net 20 . motivated by a non-cumulative discount can result in lower production and transportation costs. In this regard two points are noteworthy.300 (Rs. promoting and selling the product. Quantity discounts can help a producer achieve true economies in production as well as in selling. from a single customer.10.7.6. a manufacturer may quote a retail price of Rs.10. The marketing functions are storing. can enable the producer to make efficient and effective use of production capacity. 2.1. For example. motivated by a noncumulative discount.10. (B) Trade Discounts These discounts are also called functional discounts.000 of Rs. A non-cumulative discount is based on the size of an individual order of one or more products. A cumulative discount is based on the total volume purchased over a specified period. (C) Cash Discounts A cash discount is a deduction granted to buyers for paying their bills within a specified time.7.000) and the wholesaler pays the (Rs. It means the retailer pays the wholesaler Rs.000). These are reductions from the list price offered to buyers in payment for marketing functions the buyers will perform.7. orders. Quantity discounts are given in terms of rupees or in physical units.000 – 10% of Rs.000 with trade discounts of 30% & 10%. 1) Large orders.

Geographic Pricing Strategies : Geographical pricing involves the company in deciding how to rice its products to different customers in different locations and countries. penetration 21 . etc. in which the buyer fill out a short form. consider granting a seasonal discount on purchases made in a season. 3. should the company charge higher prices to distant customers to cover the higher shipping costs or a lower price to win additional business? It may happen that in geographic pricing strategy. encloses proof of the purchases. (c) e-coupon : A company places an e-coupon on its website or sends a coupon to a customer via e-mail. (a) Coupon : A coupon is a small printed certificate that the buyer presents when purchasing the product in order to obtain a discount equal to the value shown on the certificate. and sends the paper work to specified address. greetings cards. Rebate : Some sellers offer rebates to prospective customers so as to stimulate sales. (b) Mail-in Rebate : A mail-in rebate. If all goes well. A rebate is a discount on a product that a customer obtains by submitting a form or certificate provided by the seller. There are three types of rebates.amount due after first deducting trade and quantity discounts from the base price. 2. a firm may charge a premium in one market. For example. Promotional Allowance : It is a price reduction granted by a seller as payment for promotional services performed by buyers. A seller can redeem this kind of coupon in cyber space and/or at a physical store that sells the firm’s products depending on the conditions attached to the offer. a rebate cheque arrives in the mail a short while later. Seasonal Discount : The manufacturers of seasonal goods like air conditioners. (D) Other Discounts & Allowances : 1.

This pricing strategy is due to the seller’s willingness to pay a part of the 22 . 2) Uniform Delivered Pricing Strategy : In this pricing. A firm should not attempt to fix prices among competitors for same region. iv) The elasticity of demand for the product should differ with respect to markets or localities or regions or countries. The most important requirement of this strategy is that the markets should be separated by transportation costs. basing point or zone pricing. and a discounted price in the third.price in another market. These are : 1) Uniform Delivered Pricing Strategy : In this pricing the seller quotes the selling price at the point of production and the buyer selects the mode of transportation and pays all freight costs. The freight cost built into the delivered price is an average of the charges to all points within a zone. the same delivered price is quoted to all buyers regardless of their locations. 4) Freight-Absorption pricing strategy : Under this strategy a manufacturer quotes to the customer a delivered price equal to its factory price plus the shipping costs that would be charged by a competitive seller located near that customer. Besides there are certain conditions on which this strategy is based : i) ii) iii) A firm should not discriminate between competing buyers in the A firm’s strategy should not kill other firms operating in a market. 3) Zone-Delivered Pricing Strategy : This pricing strategy divides a seller’s market into a limited number of broad geographic zones and then sets a uniform delivered price for each zone. There are different pricing strategies coming under geographic pricing. This pricing strategy is used where freight costs are a small part of the seller’s total costs.

under which a buyer pays a stipulated single price and then can consume as little or as much of the product as desired. Under this pricing strategy.Airways use this flexible-price strategy when charging lower-price tickets requiring advance purchase. The rational for odd pricing is that it suggests lower prices and as a result. and a thing group at Rs. 3) Flat-Rate Pricing Strategy : It is a variation of the one price strategy. under which not only all customers are charged the same price. similar customers are charged different prices when buying identified quantities of a product. for instance. primarily retailers.1999 a pair. Bata. 7) Leader Pricing : Many firms. a seller charges the same price to all similar customers who buy identical quantities of a product.1999.99. 5) Price Lining : It is a strategy which involves selecting a limited number of prices at which a business will sell related products. & iii) Low variable costs per unit of product Special Pricing Strategies : 1) One Price Strategy : Under this pricing strategy. 2) Flexible-price Strategy : This is also called variable price strategy. This strategy is called 23 . The Athletic store. ii) high fixed costs. For example :. temporarily cut prices on a few items to attract customers. rather than at even amounts. sets prices for shoes in this manner. 4) Single-price Strategy : It is an extreme variation of the one-price strategy.freight cost so s to penetrate distant markets. 6) Odd Pricing : Odd pricing sets prices at uneven (or odd) amounts such as Rs. sells several styles of shoes at Rs. This strategy is especially useful to a firm that has : i) Excess capacity.1499. but all items sold by the seller carry a single price. another group at Rs.95. to passengers who would not fly at higher prices. for example. yield greater sales than even pricing.

one can use the following formula Mark up price = alpha/(1-r) Where alpha = Unit Cost (Fixed cost +Variable cost) r = Expected return on sales expressed as a percent For Example. To arrive at the mark up price. Thus.30.000 shirts is Rs. 9) Every low Pricing : It involves consistently low prices and few if any temporary price reductions. now the firm expects 30 percent return on sales. This is indeed the most elementary pricing method and many services and products are priced accordingly. this is termed as resale price maintenance.000 and the variable cost per shirt is Rs. then cost per shirt is Rs. if the fixed cost for 10. that want to engage in price competition rely on high-low pricing. especially super-markets and department stores. Keeping this figure in mind. Pricing Methods 1. on which prices are cut. leaders.leader pricing. 10) Resale Price maintenance : Some manufacturers want to control the prices at which distributors and retailers resell their products. are termed This strategy entails alternating between High-low pricing : regular (high) and ‘sale’ (low) prices on the most visible products offered by a retail firm. the mark up price will be Mark up price = 45/(1-0.50. the marketer estimates the total cost of producing or manufacturing a product and then adds a mark up or the margin that the firm wants.45.3) 24 . resale price maintenance means controlling the prices at which middlemen resell products. 8) The items. Many retailers.1. This strategy is featured by some large discounters. Full Cost or Mark up pricing: In this method. Manufacturers seek to do this to protect the brand’s image.

64. ensures that all costs are recovered and the firm makes a profit. But the key to this method is to correctly understand customer’s perception of product value and not to overestimate the firm’s product value. Indeed it satisfies the finance oriented executives. This methods assume that there will be no price war within the industry. Some firms use this as a launch strategy . 2. Auction-Type pricing :Auction type pricing is growing more popular. This is a method commonly used in an oligopolistic market that sell a commodity such as steel. This method helps the firm in reducing the threat of price wars. In this method. This. The small firm “follows the leader. Going Rate or ‘ Follow the crowd’: This is a method which is competition oriented. but this method ignores the fact that it is not necessary that the firm is able to sell its entire merchandise at this price. approach.7 =Rs. if everyone in the industry adopts it. especially with the growth of the internet.=45/0. 4.28. paper or fertilizer. firms normally charges the same price. It can help the firm in reducing the threat of price wars. 3. where costs are difficult to measure and competitive response is uncertain.but this could prove fatal if competition already exists within the industry. Going-rate price is is quite popular . Here positioning strategy is important. One major use of auctions 25 .” changing their prices when the market leader’s prices change rather than when their own demand or costs change is the key limitation. It may be a useful method. the firm prices its products at the same level as that of Their major competitor. Customer oriented or perceived value pricing: An increasing number of companies base their price on the customer’s perceived value.

iii)Sealed bid auction: The U. the buyer announces something that he wants to buy and the potential sellers compete to get the sale by offering the lowest price. Image pricing is especially effective with ego- 26 . Ex: General Electric uses this method when it wants to buy some of its product. Here would-be suppliers can submit only one bid and cannot know the other bids. This method is used when a firm wants to make a fair return on their investment. Here a supplier will not bid below its cost but can’t bid too high for fear of losing the order. government often uses this method to procure supplies. which prices its automobiles to achieve a 15 to 20 percent ROI. i)English auctions (ascending bids): one seller and many buyers. In the other. Target return pricing: In target return pricing.is to dispose of excess inventories or used goods. Companies needs to aware of the three major types of auctions and their separate pricing procedure. or one buyer and many seller. Target pricing is used by General Motors.S. 6 .english auctions are being used today for selling antiques. the firm determines the price that would yield its target rate of return on investment (ROI). ii)Dutch auctions(descending bids):one seller and many buyers. The seller puts up an item and bidders raise the offer price until the top price is reached. In the first kind. real estateand used equipment and vehicles.return price can be calculated by using the following formula Target-return price = unit cost + desired return * invested capital / unit sales. The Target. 5. Each seller sees what the last bid is and decide whether to go lower. an auctioneer announces a high price for a product and then slowly decreases the price until a bidder accepts the price.Psychological pricing: Many consumers use price as an indicator of quality.

but if a company wants a high price image instead of a low price image. they are all communicating a message to the customer-buy me. Higher –priced cars are perceived to possess high quality. and the target markets or the middlemen about the product.900 range rather than Rs. Usually a marketing communication process is a seven stage process. publicity and merchandising. When this information is not available.1000 range. sales promotion. it should avoid the odd ending tactic. For instance. When alternative information about true quality is available.1000 as a price in the Rs. This idea should be properly formulated in the form of a message. information. the marketing executive may have ideas.. There must be a promotional idea in marketer’s mind. price becomes a less significant indicator of quality as a signal of quality.. Many customer see a shoe priced at Rs. instructions. involves advertising. PROMOTION Promotion means all those tools that a marketer uses to take his product from the factory to the customer and hence. etc. Another explanation is that odd endings convey the notion of a discount or bargain. important that marketers understand the communications process.sensitive products such as expensive watches. Higher quality cars are likewise perceived to be higher priced than they actually are. It is therefore. price acts as a signal of quality. Stage-I (Source) : The information source originates the communication. personal selling. sales force.999 instead of Rs. Many sellers believe that prices should end in an odd number. public relations. to communicate to his sub-ordinates. All these tools have one dimension in common. Transmitting the message select the media Encoding the message / create an ad display or sales presentation Decoding the message 27 . cars etc.

In marketing.e. the symbols must be decoded.. Stage-IV (Decoding) : Once the message has been transmitted through some communication channel. interpreted in 28 . or pictures. the electricity that carries invoices through a telephone connection. the postal service and the like. by the receiver. this means transforming an idea into words. i. gestures and facial expression and images. or a combination of the two. These rooms. words. The message is decoded. some signs and symbols. Stage-III (Transmission) : The encoded message carrying the idea must be transmitted from the marketer to the receiver either by print media.Message as intended Noise Competing message and Other distractions Messages as received Response Feed back Stage-II (Encoding) : The information that the sender (Marketer) wants to share must first be encoded into a transmittable form. or given meaning.

to make it known to the consumer that the product is available in the market. or behavioural. telling the sender whether the message was received and how it was perceived by the recipient. Whether the message is recognized or not depends upon the individual’s threshold of awareness. All stages of the process can be affected by noise. it is cleared that marketing depends heavily on an effective communication flow between the company and the consumer. there is some change in the receiver’s knowledge beliefs. Then a new message can be formulated and the process begun again. the receiver will fortunate a response. feedback gives an idea whether and to what extent the message has been received or learnt by the receiver. verbal. The response could be non-verbal. this response This 29 . Through feedback the sender can learn what a communication accomplished. Stage-VI (Response) : If the sender’s message has reached the receiver in its intended form. which can be accomplished through an effective. Communication is significant. In other words. It is essential to propagate the distinctive features of the product. noise include competing messages from competitors and other distractions. Stage-V (Receipt) : If the message has been decoded successfully. or feelings. Noise is any external factor that interferes with successful communication. Stage-VII (Feedback) : The response serves as feedback. shows that the message has been received effectively. In marketing. continuous and two-way flow of information between the firm and the consumer. could range from single awareness to purchase. Therefore. In other words.the light of the experience of the receiver or frames of reference. Communication is more important than producing a product and making it available in the market.

These are as follows : 1. and sponsorships. premiums. 4. etc. and action. packaging. telephone. 3. or services by an identified sponsor. particularly in building up 30 . buyer preference. banners. mass media (TV. Advertising can be used to build up a long-term image for a product or trigger quick sales. Sales promotion tools are coupons. Public Relations and Publicity : It refers to a variety of programs designed to promote or protect a company’s image or its individual products. and procuring orders. Sales Promotion : It refers to a variety of short-term incentives to encourage trial or purchase of a product or service. goods. Companies use sales promotion tools to draw a stronger and quicker buyer response.PROMOTION-MIX The term promotion-mix refers to a combination of different types of promotional tools used by a company/firm to advertise and sell its products. newspaper). print-or purchase displays. billboards. contests. speeches. Advertising can efficiently reach geographically dispersed buyers. radio. answering questions. ADVERTISING MANAGEMENT American Marketing Association has defined advertising as “any paid form of non-personal presentation and promotion of ideas. viz. Direct Marketing : It refers to the use of mail. 2. or internet to communicate directly with or solicit response or dialogue from specific customers and prospects. conviction. There are different media for advertising. 5. Advertising : It refers to any paid form of non-personal presentation and promotion of ideas. effective tool at later stages of the buying process. email. and the like. magazines. sponsorships. annual reports. Personal Selling : It refers to face-to-face interactions with one or Personal selling is the most more prospective purchasers for the purpose of making presentations. This tool includes press conferences. fax. events publications.

To introduce a new product. it is essential to understand the distinction between the most important step in developing an advertising campaign is the selection of the advertising media in which to place the change. 31 .. To remind users to buy the product. Media refers to daily newspapers. service or idea either now or later. peon sign and so forth (called outdoor media) and Cinema and television. magazines. technical journals (called the print media). broadcast. Thus. The medium used are print.g. To combat or neutralize competitor’s advertising. as the very meaning implies. and direct”. video. or an improvement in the product) prospects acquainted with the new uses of the product. hoardings. Typical advertising objectives are : i) ii) iii) iv) v) vi) vii) viii) ix) x) To support personal selling To improve dealer relations. media. billboards. Selecting the appropriate media and the media vehicle and arriving at a sound media mix is a very crucial function in advertising. To publicize some change in marketing strategy (e. Objectives of Advertising : The purpose of advertising is to seal a good. To counteract substitution To build brand preference.goods or services by an identified sponsor. To expand the use of a product. This goal is reached by setting specific objectives that are reflected in individual ads incorporated into an advertising campaign. cable TV and radio (called the electronic media). a price To extend the product’s life cycle by making buyers and The Media and Media Selection : The ad. consists of channels for carrying the intended advertising message to a selected audience. In this context. a new model.

The times of India. Suppose an 0 Awareness A* 32 advertiser is trying to obtain a specified T* Title Trail Which type(s) of media will be used-Newspaper. is a media vehicle. Furthermore. frequency and impact. Media cost. The Hindu is another media vehicle within the Newspaper media. choosing among major media types. Audience coverage. Therefore. then which news paper – The Times of India or The Indian Express. Time and location of the buying decision. deciding on media timing. iii) Which specific media vehicles will be used? If the selected medium is Newspaper. and deciding on geographical media allocation. Frequency and Impact : Media selection is nothing but the finding the cost-effective media to deliver the desired number and type of exposures to the target audience. Step-I – Deciding on Reach. Which category of the selected medium will be used? If internet is or magazine? the selected medium. and within each major media. there are certain major media. the selection of media gets influenced by the following factors : (a) (b) (c) (d) (e) Objectives of the ad. radio. The Media Selection Process involves five steps : deciding on reach. Thus. then which category to select-portals or individual . advertisers need to make following decisions : i) ii) websites. there are several medial vehicles. television. Requirements of the message. selecting specific media vehicles.two commonly used terms-media and media vehicle. Newspapers form a media. Under this media there are so many media vehicles.

Television. The rate of product trial will depend on level of brand awareness. more modern and elegant looking women’s dress advertisement in Famine will have a higher impact then in woman’s Era. Impact (I) : This is the qualitative value of an exposure through a given medium. These are : 1. The Diagram shows the relationship between product trail and awareness. or E* will help achieve this level of awareness. direct mail. frequency. an average person or household is exposed to the message. is now the key problem which is resolved by an understanding of the three important terms and the inter-relationship among them. For example. How many exposures. 3. iii) Message characteristics. Frequency(F) : It is the number of times within a specific time frame. Step-II Choosing among Major Media Types : The Media planner has to know the capacity of the major media types to deliver reach.advertising objective and response from the target audience – for example. Newsletters. and Internet. ii) Product characteristics. Yellow pages. Media planners make their choice among media categories by considering the following variables : i) Target-Audience media habitates. 2. Radio. and impact.available to choose from are Newspapers. etc. an average person or household is exposed to the message. The media types which are . he needs to have a brand awareness at level A*. Iv) Cost of media type. Reach(R) : It is the number of times within a specific time frame. 33 . Outdoor Media. Magazines. Assume that the rate of product trial increases at a diminishing rate with the level of audience awareness. a target level of product trial. If the advertizes seeks a trial rate of T*.

the more continuous the advertising should be. audience size. The timing pattern should consider following three factors : 1. Purchase Frequency : It is the number of times during the period that the average buyer buys the product.Step-III : Selecting specific Media Vehicles : The media planner must search for the most cost-effective vehicles within each chosen media type. Step-IV : Deciding on Media Timing : This is nothing but the macro-scheduling and micro-=scheduling problems. The company makes “national buys” when it places ads on national TV networks or in nationally circulated magazines. the planner has to rely on measurement services that provide estimates of scheduling problem calls for allocating advertising expenditures within brand. a short-period to obtain maximum impact. Step-V – Deciding on Geographical Allocation A company has to decide how to allocate its advertising budget over space as well as over time. The macro-scheduling problem involves scheduling the The microadvertising in relation to seasons an the business cycle. the more continuous the advertising should be 2. The higher the purchase frequency. the more continuous the advertising should be. Buyer turnover : It is the rate at which new buyers enter the market. The company makes “Spot buys” when it buys TV time in just a few markets or in regional editions of magazines. Forgetting Rate : It is the rate at which the buyer forgets the In making choices. and media cost. 3. The higher the rate of forgetting. The higher this rate. 34 . composition.

demonstrations and other non-recurrent selling efforts not in the ordinary routine. iii) Supplementing advertising and facilitating personal selling. i) ii) people. It does not matter how the goods or services are sold or where they are sold. Retailing based on the extent of product lines handled. Improving the marketing performance of middlemen and sales 35 . Any organization selling to final Consumers – whether it is a manufacturer. to attract new customers. to create goodwill among the present as well as prospective customers. Types of Retailers Generally retailers are classified into four categories : A) B) Retailing based on ownership. OBJECTIVES OF SALES PROMOTION Sales promotion measures are used to introduce new products in the market through educating people. and to create good public image of the product and the firm. non-business use. or retailer is doing retailing. Stimulating business uses or household demand for a product. to increase sales.…………………… SALES PROMOTION Sales promotion includes those sales activities that supplement both personal selling and advertising an co-ordinate them and help to make them effective. RETAILING Retailing includes all the activities involved in selling goods or services directly to final consumers for personal. wholesaler. such as displays shows and expositions. There are three broad objectives of sales promotion. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.

it has leased out space to Big Shoppy. and when owned by three different individuals. goods retail strategy mix. Big Bazaar. all the three functions of business – manufacturing. it leases out space to other retailers. Purchasing decisions and activities are carried out centrally for these various Food World and Pantaloons are examples of chain retailers. and retailing – may be owned by a single person. Non-store based retailing. the market share of individual retailers is significantly low compared to 36 . wholesaling. These retailers own several retail outlets. it comprises a partially integrated system. another form of retailing based on ownership. Other types of ownership-based Similarly. At its Hyderabad outlet. In India. In vertical marketing unit. A) Ownership : Retailing based on ownership primarily includes independent retailers. When the three functions are owned by two persons. Individual retail units can be set up with minimum licensing requirements. In return for the leased or rented space. where a retailer owns only a single retail unit. a retailer takes a portion of a major store or outlet on lease or rent and is responsible for decorating his section of the store. Consumer cooperatives are retail outlets that are owned and operated by a group Franchising is another form of retailing based on ownership. other forms of retail ownership. However. outlets. marketing units and consumer cooperatives. leases out space to other retailers. a major retailer in India.C) D) Retailing based on the services vs. A vertical marketing unit comprises all the levels of independently owned business along a channel of distribution. we have lakhs of retailers owning single retail units. and comprise a fully integrated system. the retailer pays an amount equal to a percentage of his sales to the store owner. Another form of retailing based on ownership is chain retailership. they are called independent systems. In leased department. another small retailer who deals in electrical and electronic appliances. for other retailers are vertical categories of products.

of consumers. The representatives of these consumers look after the day to day operations of the retail outlet. examples of successful milk cooperatives. example of a consumer cooperative. B) The Extent of Product Lines Handled : Based on the extent of product lines handled, retailers can be called as general merchandise retailers. This category of retailing includes specialty stores, departmental stores, discount stores, supermarkets, and hypermarkets. Some times, there can be an overlap in these categories. For example, a retailer can be classified as a supermarket as well as a discount store. Hence, these categories are not mutually exclusive. (a) Specialty Stores :Specialty stores offer a wide selection of specially chosen goods pertaining to a single product line. Thus these stores provide a narrow product line but a wide assortment of choice within this product line. These stores normally target selective and small segments of the market for sales. The stores are manned by personnel who are knowledgeable about the product Line. An example of specialty stores in India are the Health & Glow stores that have been up in recent times by the Goenka Group and offer solutions for better health in the form of Ayurvedic products. (b) Department Stores :- Department stores are the general merchandise retailers with considerably large retail space with separate sections allocated for toiletries, food stuff, body care products and; also on. Thus they offer a wide selection of products to consumers. Generally the quality of goods sold in department stores ranges from average to very good quality. Pantaloons, Shoppers’ Stop and Lifestyle are Westside, of example In India, Anand Milk Mumbai-based Anand Producers’ Union Limited (AMUL) and Delhi-based Mother Dairy are Bazaar, which has outlets in several other cities of India, is another

department stores in India. They have branches in the major cities.

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(c)

Discount Stores :- Discount stores are similar to the department stores, except that these stores offer products at less than the retail price. The purpose of doing so is to obtain profits on large volume sales. Discount stores are normally targeted at middle and lower-middle class customers, who are price conscious. Big Bazaar and Giant Hypermarket are examples of discount stores.

(d)

Supermarkets :- Supermarkets are retail outlets that are based on the concept of self-service. The customers can pick up products on their own from a wide variety of brands displayed on the shelves. Food World and Trinetra are examples of supermarkets in India.

(e)

Hypermarkets :- Hypermarkets are a recent phenomenon in India. These are very large supermarkets with the shop floor area ranging between two lakhs to three lakh square feet. These stores also offer a wide variety of products ranging from needles to household equipment. Giant Hypermarket set up by the RPG Group in Hyderabad was the first of its kind in India with two more to come up in Mumbai and Kolkata in the

(C) Retailing based on the Service vs. Goods Retail Strategy Mix : Retailing business can also be classified into goods and services. In goods retailing physical products are sold such as groceries. In services retailing, the consumer does not get ownership of a product. However he has access to a service such as travel agents. There are other retailers who offer a combination of both goods and services. For example, a video parlor rents video CDs as well as sells them. Strategies for services retailing differ from those for retailing of goods. The service sector is growing faster than the goods and manufacturing sector globally. Most economies including India are dependent on the service sector for their growth. Service retailing can again be subdivided into rented goods services, owned goods services and nongoods services. Hertz car rental is an example of rented goods services. In this case, the consumer pays a fee for the time he uses the car but does not own it.

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In owned goods service retailing, the service provider does not own the goods he services. Annual maintenance contracts for PCs and printers are examples of this category. A company or an individual who provides maintenance services does not own the equipment (PCs and printers). In non-goods service retailing, personal services are provided. No physical goods are involved; only the time and expertise of the person who is going to provide the service is bought for a fee. Stockbrokers, tutors, personal trainers, real-estate brokers, etc. examples of this category. In services retailing the following factors have to be taken into consideration. The buyers are called clients not customers; services are perishable and therefore, cannot be stocked; massproduction of services is not possible; and the experience of each service client is different from that of the other. D) Non-Store based Retailing Non-store retailing involves selling products in ways other than via conventional retail stores. Non-store retailing can be in the form of direct selling, direct marketing, and automatic vending. (a) Direct Selling is a process of selling the products directly to the Products sold using this method include vacuum cleaners, customers by meeting them personally in their homes, offices or other nonstore locations. water purifiers, milk, newspapers and magazines etc. Eureka Forbes Amway, Medicare and Tupperware are well known companies involved in the direct selling. (b) Direct marketing is a process of exposing the consumer to the product or service, through mailers, telephone, calls, cable, satellite television, or radio and subsequently soliciting a response from the consumer by asking him/her to contact the company through telephone, email, or post. For example the United Tele Shopping & Marketing Company, popularly known as the Tele Shopping. Network (TSN) promoted new products to customers by exhibiting them on television channels and invited direct response from the customers. are

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SUPPLY CHAIN MANAGEMENT (SCM) SCM is larger in scope than both physical distribution and marketing logistics. well. It encompasses materials management task as Supply chain actually refers to the whole business chain,

encompassing procurement of inputs, in-bound logistics, conversion of inputs into products, physical distribution / marketing logistics and channel functions, which finally take the end product to the ultimate consumers. Essentially, SCM can be viewed as the combination of materials management and end product distribution, which constitute the two vital components of the business process and form the key tasks at the front and back ends of the process, respectively. Merits of Supply Chain Management 1) 2) 3) 4) It can improve on-time delivery by about 20%. Reduce necessary inventory levels by about 50% Boost the firm’s profit by an amount equal to 3% to 6% of sales. It facilitates the integrated handling of the functions of the business,

especially the procurement function and the logistics function at the front and back end of the business. Demerits of Supply Chain Management 1) It gives prominence to materials management and treat the customers requirements of logistics as an appendix to the business cycle. 2) The requirement from the side of the customer or market get diluted PERSONAL SELLING Personal Selling in an important method of selling. It is the process of assisting an persuading a prospective buyer to buy a product in a face-to-face situation. respective buyer. Definition : Personal Selling could be defined as face-to-face interaction with one or more prospective buyers for the purpose of making sales. Thus, personal selling involves direct and personal contact between the seller or hi representative with the

on such an approach.

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2) Personal selling involves winning buyer’s confidence. 41 .e. 7) Personal selling is an activity of one human mind influencing another human mind. To secure and maintain customer’s cooperation in stocking and promoting the product line. Objectives of Personal Selling 1) 2) 3) 4) To do the entire selling job. 6) To assist customers in selling the product line. To search at and obtain new customers. their broad features. 6) Personal selling is an ability to change human needs into human wants. To ‘service’ existing account. 4) Personal selling involves mutual benefit to sellers and the buyers. i.Features of Personal Selling : 1) Personal selling involves pursuation of customers/buyers. 3) Personal selling involves providing information about products availability. 5) Personal selling is a way to the establishment of sound and casting relations between the salesman and his customers. with present customers. 5) To keep customers informed on changes in the product line and other aspects of marketing strategy. uses and their utility to customers.

To provide advice and assistance to middlemen or various management problems. 12) To secure and retain a specified share of the market.7) 8) 9) To provide technical assistance and advice to customers. eg. • It provides the marketer with more information about customer preferences and also serves as a means of obtaining feedback about the company and its products. To assist with or handle the training of middleman. • Personal selling facilities a two way flow of information and improves interaction between the customer and the company. 10) To collect and report market information of interest and use to company management. Importance of personal Selling Personal selling is important for the sales and revenue growth of an organization. 11) To obtain sales volume in ways that contribute to profit objectives. by selling the proper mix of products. • Unlike advertising. 42 . it allows the marketers to target their promotional message with utmost precision at the most promising leads. It can be described as a handy took in the hands of markets for the following reasons : • Personal Selling gives markets the freedom to make adjustments in the promotional message to satisfy the information needs of customers. publicity and sales promotion.

sales people contact customers by telephone or in person. • It is a powerful and effective took in convincing the customer about the product. • Personal selling helps marketers obtain necessary feedback to improve their new product development and customize the product to suit the requirements of individual customers. Inside selling primarily involves retail sales. there are two types of personal selling. 43 . In this group. • Effective sales force also helps a company build and improve relationship with customers. Representatives of retail organizations who go to consumer’s homes to demonstrate a product. we include the sales people in stores and the sales people at catalog retailers. who take telephone orders. In this group we include : 1) 2) Producers whose representatives sell directly to household consumers. or provide an estimate etc. In the other kind of personal selling sales people to the customers. one is where the customers come tote sales people.• The interaction between sales persons and customers helps the It company identify the strengths and weaknesses of their new products. helps the company take necessary corrective action. The former is called inside selling and the latter is called outside selling. give advice. • Through personal selling the time lag between introducing a product through the media and actually selling it is reduced. Types of Personal Selling : In business situations. In outside selling.

be it an individual customer or a corporate customer. Prospecting and Evaluation Pre-approach Approach Presentation Follow up Closing Handling Objectives Personal Selling Process 44 . This process is diagrammatically represented in Figure below. However. v) handling the objections raised by the prospect. ii) preparing before approaching the potential customer. whereas in some selling situations. vi) closing the sale and vii) following up after the sale. the previous sales history provides the necessary data regarding the customer. The selling process differs from one salesperson to another and also varies with the selling situation. a long-term relationship between a salesperson and a customer allows the former to skip the prospecting and evaluating stages. For example. a salesperson who sells the same product to the same customer every time.PERSONAL SELLING PROCESS : The objective of the personal selling process is to enhance customer satisfaction and build a long-term relationship with the customer. a typical selling process usually consists of (i) prospecting for and evaluating the potential customer. a few of these steps can be avoided. Some selling situations warrant that the salesperson follows all the seven steps. Likewise. (iv) making presentations to the prospect. In such cases. can avoid the prospecting and pre-approach stages. iii) approaching the prospect.

ability and authority. Step-III – Approach Approach is the stage in the personal selling process in which the salesperson makes an initial contact with the potential customer and tries to find out his needs. An effective salesperson will utilize the approach stage to lay the foundation for a successful presentation later by attracting the prospect’s attention. The amount of time and effort put in by the salesperson in prospecting depends on the nature of the product and the marketing goals of the company. and preparing for the presentation. At this stage. To buy the product. Prospecting involves – A) Generating sales leads. The pre-approach stage of personal selling process involves further sub-stages such as creation of the prospect’s profile.Step-I : Prospecting and Evaluating : Prospecting is the process of finding and evaluating potential customers. At this stage. establishing the objectives of the sales call. The salesperson must also identify if the potential customer has the willingness. deciding on the approach. For qualifying a person as a potential customer (prospect). Step-II – Pre-Approach After having identified the hot leads. the salesperson plans and prepares for making a sales call on them. the salesperson does not generally come into contact with the customer. creating a favourable impression on the buyer is more important to the sales person than pushing the product. Step-IV – Presentation 45 . building a rapport with him and generating an interest in him for the product. the salesperson must identify whether the customer (individual or organization) has an immediate or a distant need to be satisfied. B) identifying prospects and C) qualifying prospects.

further information regarding certain aspects of the sale or product. An efficient sales person considers the objection as an opportunity to satisfy the customer attitude in abstaining him from switching to a competitor. Step-VI – Closing The stage in which the salesperson asks the potential customer to make the purchase is known as closing. desire and Action) concept according to which. In fact. Sales presentations are based on the AIDA (Attention. formulated sales approach and need satisfaction approach to make the presentation. stimulate his interest and stir a desire for the product. Interest. which directs the potential customer to take action to fulfill the desire.The sales presentation is the most important step in the sales process. In the closing stage too. For example. The salesperson can create interest about the product by allowing the prospect to touch. it. marketers first attract the attention of the potential customer create interest and stimulate a desire for the product or service. An objection brings out the latent concerns c prospective It should be viewed as a reques buyer and needs to be addressed. hold and examine it. customers may raise objections due to various reasons. Sales persons can use a number of approaches like the canned sales approach. the financial position of the customer may not be good or the customer may not be mentally prepared to purchase the product. the conspicuous absence of objections can be an indication that the customer is not interested in buying the product. The salesperson should refrain from duping the customer into buying the Therefore. the sales persons needs to probe into the objection to understand the true nature of the problem and try to solve 46 . Step-V – Handling Objections Sales persons need to clarify any doubts or objectives that the customer may have. while he delivers the sales talk or the presentation. The aim of a sales presentation is to attract the prospect’s attention. so that he takes appropriate action.

the preferred mode of delivery. The follow up stage is the last stage in the personal selling process wherein the salesperson aims to develop a long-term relationship with the customer. etc. in worldwide markets to achieve marketing objectives. To achieve sales and promotion stability. This stage plays an important role in showing that the company and the salesperson are genuinely interested in nurturing a long-term relationship with the customer. To pay for imports. 47 .product. etc. rather than just making a sale. Follow up after closing the sale also helps reduce cognitive GLOBAL MARKETING Global marketing means using a standardized marketing strategy and uniform marketing programmes of product development production. dissonance. In global marketing. the focus of the place thus diffusing the firm/company is the world as a market Objectives The goal of global marketing is to maximise efficiency and returns on investment in the world market and the strategy is dictated by local country market conditions like customer preferences. advertising and distribution. This can be achieved by enhancing customer satisfaction. Step-VII – Follow up The objective of every salesperson is to ensure repeat sales. difference between the domestic or foreign markets. The response of the customer to such questions will help the salesperson known how close the customer is to placing an order. Besides. but should try earnestly to clear the objections and then attempt to close the sale. laws and competition. there are certain important objectives of global marketing. Salespersons can attempt to make a trial close at several points during the presentation by enquiring about the financial terms and conditions suitable to the customer. These are: i) ii) iii) To sell out the domestic surplus.

Selecting the market(s).e. deciding on the marketing programme. * Factors drawing companies into the international arena : (a) Global firms offering better products at lower prices can attack the company’s domestic market. To improve company mage. To achieve technological improvement. To achieve growth and development. economic and social conditions and environments. Designing the marketing program. To reduce business risks. the unique features. deciding whether to go abroad. The reason is that each country has its unique characteristics which are reflected in its cultural. i. deciding how to enter. Formulating market strategies i.e deciding which market(s)to enter. legal. (b)The company discovers that some foreign markets present higher profit opportunities than the domestic market. marketing opportunities available therein.iv) v) vi) vii) viii) ix) To contribute to national goals. and market attractiveness of targeted countries. political. Deciding on the marketing organization.e.e. i. SCANNING GLOBAL MARKETING ENVIRONMENT While deciding whether to go abroad. The process of designing and developing of marketing strategy for international marketing is similar to that for domestic marketing and involves the following steps : 1) 2) 3) 4) 5) Scanning and analyzing the global marketing environment. 48 . it is very essential to examine and analyse carefully. To lower the cost of business. i.

i. It is essential that the risks involved in each market should be assessed and evaluated. competitive advantage.(c) The company needs a larger customer base to achieve economies of scale. global marketing. (d)The company wants to reduce its dependence on any one market. ii) When [product and communication adaptation costs are high.. distinctive capabilities and constraints of the firm or company. trade restrictions. In general. transportation costs. iii) When population and income size and growth are high in the initial countries choosen. while selecting a market or markers to enter foreign countries the market screening criteria followed may be : market potential. psychic proximity and geographic proximity. The opportunities available in various overseas markets must be carefully observed and evaluated keeping in view the resources. a country.e. market attractiveness. (e) The company’s customers are going abroad and need reserving. available infrastructure. MARKET SELECTION Proper market section is an integral part of the strategies for international business. political stability. a firm should enter fewer countries for marketing: i) When market entry and market control cost are high. expected profits. iv) When dominant foreign firms can establish high barriers to entry. Then the company/firm should decide whether to market in few countries or many countries or only in 49 . expected return on investment. According to Agal and Zif.

trademark. E) The Internationalization Process Domestic-based export department or division. or item of value for a fee or royalty.ENTRY STRATEGIES After deciding the market(s) to enter. C) Joint Ventures Foreign investor may join with local investor to create a join venture company in which they share ownership & control. D) Direct Investment Here the scope of direct ownership of foreign based assembly or manufacturing facilities. Overseas sales branch or subsidiary Travelling export sales representatives Foreign based distributors or agents. 50 . it is important to formulate entry strategies to make the entry successful and profitable. This is all about mode of entry. market. The foreign company can buy part or full invest in a local company or build its own facilities. These are : A) Indirect and Direct export Occasional exporting Active exporting Indirect exporting Domestic-based export merchants Domestic-based export agents Cooperative organizations Export-management companies There are five basic routes to enter foreign Companies can carry on direct exporting in several ways • • • • B) Licensing The Licensor licenses a foreign company to use a manufacturing process. trade secret. patent.

The third strategy. process in known as internalization process. and place) to local introducing the product which is available in the domestic market. product adaptation. Many countries sponsor aggressive export And all the promotion programs to get their companies export. the firm can run the same advertising and promotion campaigns used in the domestic market or change them for each local markets. strategy. These countries try to encourage their domestic companies to grow domestically and grow globally. requires making changes in the product so as to meet the needs and wants to customers in the foreign market. in its original form without making any change in it.At the price level the firm may encounter problems Price escalation takes place due to like price escalation and gray markets. requires the company invent a brand new product specifically for the new market in the foreign country according to the target market requirements. Besides. the company engages in dual adaptation. it may be required to deal with transfer prices. product invention. and dumping.Most country forces or inhabits their companies participate in foreign trade.e. This involves decentralizing decision making at the local market level in foreign countries. currency fluctuation. (A) of straight Product: At the product level the firm may pursue a strategy extension. promotion. The second strategy. various factors like transportation. price. (B) Promotion :. (C) Price :.e. Here a company must decide how much to adapt its marketing conditions. product invention.At the promotion level. 51 . i. This keeps the country from earning foreign exchange to pay for needed imports. The first strategy involves mix (product. i. communication cost. the firm may choose In the former communication adaptation or dual adaptation strategy. DESIGNING THE GLOBAL MARKETING PROGRAMME The more acceptable strategy is localized marketing mix. But if it adapts both the product and the communication.

The organizations operating in these regard in India and outside are : In India India trade promotion organization (ITPO) State trading Organisation (STC) Confederation of India Industry CII) Federation of Indian Export & Import Organisation (FIEO) Commodity Boards (CB) Export Development Authorities (EDA) Indian Institution of Packaging (IIP) International Trade centre (genera) Offices of Indian Embassies. dumping occurs when a company either charges less than its cost or less than it charges in its home market to win a market. and (c) by creating a global organization. Channel Exporter or Producer GLOBALImporter MARKETING nations between Channel within foreign Final customers or Users ORGANIZATION Wholeseller or Retailer Based on the level of involvement in the international area the firm has to manage its global marketing activities in three broad always – (a) by creating export department (b) by creating international division. The typical distribution arrangement for global marketing is shown below.At the place (distribution channels) level. World trade Organiation (TWO) Outside India : 52 .tariff etc. (D) Place (Distribution) :.. Gray market problem arises when the same product sells at different prices geographically. which differ from country to country. Last. Concerned Departments Organiation of foreign Govt. The problem of transfer price rise when a company changes a price to another unit of company located in another country. the firm needs to take a whole channel view of the challenge of distribution products to the final users.

some organizations can introduce new technologies to decrease the direct interactions. The services are highly people intensive. service creates a problem to the marketer.The services can’t be seen. The effect varies depends on when and where the service is 53 . expansion. 3. Accordingly. delivery and consumption of a service takes place simultaneously in the buyer – seller interactions. It is always not possible to have the same service from the same seller for the second time. The inseparability of the service from the provider. the production. However. The process of a company making a service tangible should include location and The location at which the service outlets are established should be accessible to the target consumers. it is difficult for the consumer to judge the service before the purchasing. Also the services are performed. particularly in the case of market Whenever the service provider intends to offer services. 2.Services are highly variable. because : (a) (b) (c) provided. In This characteristic of a fact.The products are produced. the consumer can’t sample the services in advance. he should have a service production unit that offers the same service quality standards. Inseparability :. That’s why it creates the feeling of uncertainty about the outcome of a service. Again no two customers can have exactly similar service even though they experience it simultaneously.Services can’t be separated from its provider. 4. physical setting. The services are always variable. Characteristics of Services 1. Variability / Heterogeneity :. Service as a performance :. but Intangible :. touched or smelt.SERVICE MARKETING Service Marketing is the marketing of any activity or benefit that is essentially intangible and does not lead to the ownership of anything.

The Services Marketing Mix Unlike the marketing mix for the marketing of any products. 6. 7. 6. Customer Participations :. 7. Thus. As it is produced and consumed simultaneously. There is no ownership transfer of services. It is a problem to the service perishable as well. Services are little bit difficult to be patented. Production and consumption of services are often inseparable. and Process. but products are not so perishable like organization.Since the services are perishable and intangible. Customer is often involved in the distribution system of services. As the role of the customers can’t be overemphasized. Physical Services are intangible but products are tangible. 2.Services can’t be stored for a longer time. there is no question of ownership. 11. rather it involves three additional P’s evidence. Price. Service consumers only have experiences not the ownerships.The production quality of the service greatly depends upon the ability and performance of the customers. People. Middlemen role are different. 4. But service organizations face many problems when demand 54 . Perishability :. Precise standardization of services is often not possible. 5. There are no inventories of the services. Promotion. The quality of services is highly variable. 12. When the demand is stable. 8.5. 9. Factors Distinguishing Services from Products : 1. Services are inseparable from the provider of services. the seven P’s of services marketing mix are : Product. Services are highly people intensive. Services are perishable. No ownership :. the services market mix does not involve the conventional four P’s only. 3. 10. services. perishability can’t be fluctuates.

as a marketer one would have to analyse at the following levels. Most services can’t be offered without the support of tangibles. mood or physical presentation of the environment. examine them and try to form an opinion on the service provider.Service concept which is concerned with what general benefits with the shopping of the service offer. To find this match. they can definitely see the tangibles associated.Service offer which is concerned a with greater detailed service forms and service Level-4 :. Level-3 :.Service Delivery system which is a creation and delivery of service using guidelines built into the service offer and is concerned with facilities. 55 . etc. As such.A) Product Decision Product is one of the key element of marketing mix service is an intangible product. B) Physical Evidence : It is the ambience. It consists of a bundle of features and benefits that have relevance to a specific target market. Though customers can’t see the service. Level-1 : Consumer Benefit concept which is concerned with what benefits do customers seek. The marketing of services can be a success only if there is a match between the service product from the customer’s view point and the supplier’s view point. Level-2 :. there is a high level of flexibility and opportunity to be innovative in designing a product. levels. service concept decision on service elements. All physical tangible and controllable aspects of a service organization constitute the physical evidence of the service.

The two methods which a service organization/firm/industry/company may use to determine prices are cost-based pricing and market-oriented pricing. C) Pricing Decision The pricing decision is a critical in services too. don’t depend The quality of service only upon the service provider but also on the performance of the service consumer. a passenger transport organisation’s promise of a safe. personal selling. (D) Promotion Decision Consumers are the service business. (E) Place Distribution Decision 56 . Though the basic methods of pricing are the same as in goods. It is the responsibility of the providers to make the consumers educate and if necessary train them to make them prepared to use the services available. Consumer sensitivity to price would be higher in services than in goods. These methods are used in the same way as in the promotion of products. A well designed promotional programme is of immence help to organization to inform. publicity and sales promotion. the pricing strategies for services basically depends upon value perceptions of various groups of people that are targeted by the organization. The four methods used for promoting services are advertising.Thus. comfortable and timely journey from one place to another will be examined by the transport vehicle’s condition seating facilities and other physical facilities. persuade and remind customers to better their experiences. as this component of the marketing mix alone determines the revenue of the firm.

F) People People constitute an important dimension in the management of services in their role both as performers of services and as customers. Therefore. undertakes full-time or part time marketing activity. However services have an advantage to use direct selling approach. The way the physical setting are designed technically and how the functions are scheduled and routed provide promised services to the customers speaks the efficiency of the services. The two characteristics do not allow a service firm to follow the same channel options available for goods marketing. franchises and electronic channel that are used for the distribution of services. it is cleared that for marketing of services. the seven P’s of marketing mix should be used in a specific combination to arrive at the appropriate and suitable marketing strategy. This doesn’t mean that the direct selling is the only method for services. brokers. CUSTOMER RELATIONSHIP MANAGEMENT Companies have realised that the competitive strength of their business is very much dependent on their relationship with their 57 . employee of the service organization is a marketing person.Services are intangible as well as inseparable. Employees of a service organization constitute the major competency in undertaking business operations. Service organizations are people oriented and people Every Service based organizations. G) Process : The process is the functional activity that ensures the service availability and quality. There are other channel members such as agents. through which the services can be offered to the customers at a lowest cost. who employees are to be better trained and equipped so that they can better serve the customers. Also the customers who are the opinion leaders can be trained accordingly to capture the other market fruitfully.

target customers. This is nothing but loyalty which is assessed through measurement tools like customer satisfaction surveys and the development of satisfaction index. customer retention and strategic customer care.. which is a process of enhancing customers loyalty. Thus. and strategic customer care. which is turn attract high performing employees and promote investor confidence. The primary importance is on the measurement of the total number of customer acquisition over a period of time. In the third phase. Loyal customers ensure growth and continued profits. Loyalty is an outcome of the customer’s trust in the company’s offer. The customer believes and continues to buy the product of a company for the reason that he sees it reflecting his values. CUSTOMER RELATIONSHIP MANAGEMENT PROCESS 58 . In other words.target audiences i. the focus is on the measurement of the total number of customers continuing as the user of the product mix sold to them by the company. Customer loyalty is nothing but the strong interdependence between the customer and the company. the focus of the company is generally on transactions and the product-mix sold to each customer. This necessitates for customer relationship management. In the acquisition stage. attention is given to customer needs. the effort is made to build strong interdependence between the company and retained customers. This is helpful for long term growth of the firm. viz. in the process of customer loyalty development. In the customer retention stage. Thus. CUSTOMER LOYALTY DEVELOPMENT The strategies for developing customer loyalty are : customer acquisition. customer retention. customer loyalty is a good business objectives to pursue. aspirations and expectations by adopting customer care strategies like new product development product up gradation or modification and changes in distributions.e. there are three stages.

These days customer relationship management has been accorded with a significant role in creating strong customer bondage. organizational alignment to the environment and the raw strategic patterns CUSTOMER SERVICES : In marketing management delivering quality service to the customer is an important strategy. Thus. Customer relationship management is a process the objective of which is to enhance customer loyalty. Investment in technology for data mining and also for responding to the customer in real time. This process has four stages. essential to understand the role and significance of customer service in corporate strategy. a company’s profits and long-term growth depends on the strategy of providing competitive excellent service to the customer. 4) Development of a group of personnel who have the necessary perspective and understanding of their function. products. therefore. 59 . Thus. organization and a desire to be customer responsive. getting popularity in these days to differentiate a company’s offer from that of the competitors’. the major issue in determining the competitive IN other edges of words. customer service and delivering quality service have become companies/firms. customers relationship management is an organizational process which includes people infrastructure. It is. These are : 1) Creation and management of data mines and data warehouses. performance measure and controls. 2) 3) Development of appropriate organizational structures.

empathy is the carrying and individualized attention that the firm provides to its customers. Lastly. Thus. customer will be satisfied. we have to begin with the customer satisfaction. Expectations also shape a customer’s perception of the product/firm’s performance. Tangibles. Customer perceptions of the firm and its product are shaped by the word of mouth publicity like recommendations from friends. needs improvement. If the performance of the product and the concerning firm lie up to customer’s expectations. etc. personnel and communication material. But delivering quality service is not cheap and easy. the ultimate goal of marketing. in other words. Responsiveness refers to the willingness to help customers and provide prompt service. service. quality service is judged if a customer recommends the product of a firm/company to his friends and peers for ours. quality service. By tangibles we mean the appearance of physical facilities. reliability is the ability to perform the desired service dependably and accurately. courtesy extended to customer. the firm’s credibility and the extent to which the customer feels secure. Customer satisfaction is assumed to be a function of customer expectation from the firm and the actual performance by the firm/company. firms need to invest resources in upgrading technology.QUALITY OF SERVICE : In defining quality of service. The quality of service is nothing but the transformed form of customer satisfaction. reliability. relatives and neighbours. assurance and empathy. being himself satisfied. equipment. Any positive difference is definitely a And a negative difference is the indicator of poor In order to deliver quality customers quality of service and thus. service 60 . Assurance is measured by the competence of the firm in delivering the promised service. Service quality can be accessed by customers on five dimensions viz. responsiveness. service quality is the difference between the quality of service delivered by a company and quality of service expected by the customer.

a service quality model that highlights the main requirements for delivering high service quality. Jeithmalini and Berry formulated. Word of Mouth Communication Personal Needs Past Experience EXPECTED SERVICE GAP-5 GAP-1 PERCEIVED SERVICE SERVICE DELIVERY (INCLUDING PRE AND POST CONTACTS) EXTERNAL COMMUNICATION TO THE CONSUMERS GAP-4 GAP-3 TRANSLATION OF PERCEPTIONS INTO SERVICE QUALITY SPECIFICATIONS GAP-2 MANAGEMENT PERCEPTIONS OF CONSUMER EXPECTATIONS GAP-1 : GAP BETWEEN THE CUSTOMERS EXPECTATION AND MANAGEMENT PERCEPTION : 61 . human resources and “genuine” marketing. MANAGING SERVICE QUALITY Parasuram.delivery systems. rather than sales and promotion alone.

62 . the customer may perceive it wrongly. Hotel Management may think that customers are mostly interested for room services. GAP-3 : GAP BETWEEN THE SERVICE QUALITY SPECIFICATIONS AND THE SERVICE DELIVERY : The personnel for cleaning may be poorly trained for incapable of or unwilling to meet the standard or they may be held to conflicting standards. but customers may be more concerned with the surrendering and environments. Hotel Management may notice the sweepers to make clean the Hotel premises without specifying how many times it should be per day. GAP-4 : GAP BETWEEN THE SERVICE DELIVERY AND EXTERNAL COMMUNICATION : Consumer expectations are affected by statements given by company representatives or by advertisements. When the room service boy visits the room more than the usual times as instructed by the management for better customer care.Management doesn’t always correctly perceive what customers want. GAP-5 : GAP BETWEEN THE PERCEIVED SERVICE DELIVERY AND EXPECTED SERVICE : This gap occurs when the consumer misperceives the service quality. GAP-2 : GAP BETWEEN THE MANAGEMENT PERCEPTION AND SERVICE QUALITY SPECIFICATIONS : Management might correctly perceive customers’ want but not set a performance standard. such as taking time to listen to customers and servicing them fast. If the hotel information given prior to the customers visiting are not found by them after reaching then the customers’ expectations are distorted.

whereas rural marketing involves delivering manufactured or processed inputs or services to rural producers or consumers. In recent years. Responsiven : ess Assurance : The willingness to help customers and provide prompt services. individualized attention to customers. On account of green revolution. IMPORTANCE OF RURAL MARKETING It is said that “the future lies with those companies who see the poor as their customers”. In this context. Empathy : The provision of caring. such as : Reliability : The ability to perform the promised service dependably and accurately. sell to the poor”.And basing upon the service model. as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural masses. Pradeep Kashyap rightly said that “to get rich. It is very essential to distinguish between rural marketing and agricultural marketing as these two terms often confuse the human mind. The knowledge and assurance of employees and their ability to convey trust and confidence. the rural masses are consuming a large quantity of industrial and urban manufactured products. a special marketing strategy has emerged call rural marketing. rural markets have acquired significance. The important reasons for hopeful emerging of rural marketing are : 63 . Another reason may be green revolution. Agricultural marketing is the marketing of produce of the rural areas to the urban consumers or industrial consumers. the above researchers have made following five important determinants of service quality.

In this aspect. visually identifiable. The lucrative size of the rural market offers an opportunity that all marketers now want to grab. Further. of the rural consumers should be analyzed at the product planning stage so that they match the needs of the rural people. 3. sachet packaging is the best alternative. The better strategy is to offer a smaller unit size at a lower price. In this respect. even getting saturated. communicated in an interesting style and available at the customer’s doorsteps. Products for rural markets have to the simpler. the product should be more affordable. perhaps. Infrastructural development and improvement in communication facilities have been contributing in recent years to rural marketing. Pricing Decision The rural consumers are very much price sensitive because of their lower income levels. Urban markets are increasingly becoming competitive and in many products. the product should be dispensable in single units. rural markets offer new opportunities for marketing these products. Product packaging should be done carefully looking into the fact that rural consumer buys each time smaller units of the product.1. The most interesting fact is that the rural Indian market is growing at an amazing rate of 25% per annum. affordable. For example a typical rural buyer buys one unit of match box unlike an urban buyer who may buy a full pack of ten or twelve match boxes. 2. the marketer should work 64 . easy to use. The significance of rural marketing has been increasing due to higher aspiration levels and changing life styles in rural areas. The economic growth of rural sector is another reason for increasing trend of rural marketing. But so far as consumer durables are concerned. MARKETING MIX FOR RURAL MARKETS 1. Product Decision The unique consumption patterns. Thus. 5. 4. 2.

puppet shows. Promotion Decision Firms must be very careful in choosing the vehicle to be used for communication. can be used for high impact product campaigns. DIRECT MARKETING Direct Marketing attempts to acquire and retain customers by contacting them without the use of an intermediary. with which the rural consumers are familiar and comfortable. Annual “melas” organized are quite popular and provide a very good platform for distribution because people visit them to make several purchases. So. etc. 4. It is here that the firm has to deploy a mobile distribution strategy. traditional media forms like folk dances. Distribution (Place) Decision The fourth ‘p’ of marketing mix is place decision or distribution is the key to penetrating rural markets. However. The rich. Only 16% of the rural population has access to a vernacular newspaper. only the bigwigs can adopt this channel. Meaning of Direct Marketing 65 . 3.through rural banks and offer consumer loans and hire-purchase terms to the customers. One of the ways could be using company delivery vans which are serve two purposes – it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between noncompetitive marketers can be established to facilitate distribution. the audio visuals must be planned to convey a right message to the rural folk.

are marketing their goods and services available directly to customers. It covers a wide array of methods. is. . an exhibition) Participation in some form of action (e.Direct Marketing attempts to acquire and retain customers by contacting them without the use of an intermediary. Text messaging etc. Executive Director. According to Tim Searcy. Direct response advertising (coupon response or ‘pone now’). This 66 American Teleservices Association. to reach customers. HDFC Bank. Companies traditionally relied on advertisements. This approach in marketing is learned as direct marketing. which allow response to be measured. because of competitive pressures. Big Bazaar. interactive cable TV). telemarketing) both inbound and outbound). more and more companies are now adopting direct marketing to provide their products and services directly to customers. rediff. Direct marketing. Electronic media (internet. Americans spent $654 billion in the year 2003 to purchase goods and services over the telephone. Door-to-door leafleting. reduce the costs in reaching customers. information and promotional benefits to target consumers through interactive communication in a way. At the same time. and maximize their reach. they can also learn more about their customers and their needs and wants. companies began to realize the need to compress or eliminate the intermediary channels. etc.g. pass on the savings or benefits to their customers. personal selling. inserts (leaflets in magazines). Therefore. A request for a catalogue or sales literature An agreement to visit a location/event (e. However. A request for a sales person’s visit.g. Importance of Direct Marketing : Now various companies. including the following Direct mail. Catalogue marketing. The objective is to achieve a direct response which may take one of the following forms : • • • • • • A purchase over the telephone or by post. the distribution of products. sales promotion. then. joining a political party) A request for a demonstration of a product.

the firm and every one of the customers. 67 . Catalogue Marketing : Catalogue marketing is the process in which companies send their catalogs containing details of products and services to customers and expect them to respond by placing orders by telephone or by mail. Conventional marketing is a oneway activity. However catalogue marketing is suitable only for a limited range of products. Difference between DM and Conventional Marketing • • • Conventional marketing is mass marketing.shows how big the market is for direct marketing an the potential is even greater. DM is demassified DM deals customers directly. 2. Conventional marketing relies heaving on it. Direct Mail Marketing Direct mail marketing is similar to the catalogue marketing or mail order marketing. • DM does not involve marketing channels/stores. Otto Burlington in India sells its products exclusively through catalogue marketing. Retailers too have an advantage in catalog marketing as they can operate from remote locations with minimum store operating expenses and need not spend heavy amounts on store decor. them indirectly. with two-way communication between marketing. 1. Direct mail is material sent by post to a home or business address with the purpose of promoting a product and/or maintaining an ongoing relationship. conventional mass marketing deals DM is interactive marketing. Catalogue marketing is a convenient way for customers to purchase products. it deals with customers one to one. An important factor in the effectiveness of a direct mail campaign is the quality of the mailing list.

This is beneficial for both parties. There are several organizations that offer telemarketing services for their clients. Unlike telesales. Almost every day. Telemarketing Since lists Telemarketing is the process of communicating with customers through the telephone. become out of date quickly it is usually preferable to rent. Telemarketing is usually aimed at people who are prospective customers and require the services offered by a marketer. normally with a payment-on-delivery option. Most companies give their toll-free numbers for customers to respond. telemarketing is a concentrated effort aimed at developing a long-term relationship with customers rather than making immediate sales Telemarketing saves customer time. to promote products or services. An attempt is made to persuade the viewers to lace orders for these products on the phone or by writing to the company. It also identifies prospective customers for its clients and fixes up appointments with them. as it paves the way for increased response from customers. For example. a services. Indian consumers are exposed to these kinds of programs on television 68 . these products arte delivered to the customers within two to three weeks. Sixth Element systems.List houses supply lists on a rental or purchase basis. while the customer has access to the firm at a time of his/her convenience. 4. and Hyderabad-based company. Once the orders are placed. Teleshopping / Home Shopping : Home shopping or television home shopping is generally done through television Programs in which various products are displayed and their uses are demonstrated to viewers. A telemarketing executive can contact customers at a time that is convenient to them. Telemarketing needs highly trained marketing staff who is given specific objectives. offer telemarketing additionally offers its clients information on sales leads and sales opportunities. 3.

6. purchase value and responsiveness to promotional offers may be held in the database. So middle class consumer like it due to their busy schedule time. a special offer on garden tools from a mail order company can be targeted at those people who have purchased gardening products in the past. Information such as type of purchase. addresses and transactional behaviour. Database Marketing : Much direct marketing activity requires accurate information on customers so that they can be targeted through direct mail or telemarketing campaigns. Another example would be a car dealer. frequency of purchase.1) Less time is required for teleshopping. as they bypass the channels. which provide information to customers regarding products 69 . For example. Kiosk Marketing Kiosk marketing involves the use of kiosks or electronic touch screens. This information is stored on a marketing database which comprises on electronic filing cabinet containing a list of names.through the Telebrands programs. They also save the margins. This allows future campaigns to be targeted at those people who are most likely to respond. which by holding a database of customer names and addresses and dates of car purchases could direct mail to promote service offers and new model launches. 5. 2) It proves them a direct link to the consumer. which usually present fitness and health-related products. 2) Consumers can shop for these products at their convenience from their homes. b) Benefits to Manufacturers :1) Teleshopping promotes the manufacturer’s sales and reduces their cost. Benefits of Teleshopping a) Benefits to consumers :. 3) It reduces the necessity of more advertisements cost to highlight the product. The length of these programs varies between ten minutes to half-an-hour depending upon the extent of demonstration required for the products.

selecting. etc. They can be set up in even a very small area. Training. and control of the personal selling activities of a business unit. These kiosks are targeted at commuters who at present have to stand in long queues for information and railway passes. and enable them to obtain relevant information about the company without visiting the company. These can be operated twenty-four hours a day.and services of a company. The use of kiosks is beneficial for customers because they can be set up at places convenient for them. MANAGING THE SALES FORCE Meaning : The American Marketing Association has defined sales management as the planning. Indian are Railways is planning to install multi-lingual kiosks at railway stations” initially at major metropolitan cities to distribute monthly seasoned tickets. especially groceries. etc. Kiosks are highly beneficial for retail outlets. direction. paying and motivating as these tasks apply to the personal sales force. On an average. assigning. Then. The first step in sales force management involves setting the sales goals and planning the objectives of different sales activities of the sale executives.. There are certain kiosks that can be used” for transactions like distributing tickets coupons. they are delivered to him either immediately (in an ATM) or at his address. arises the need for designing the sales force to 70 . seven days a week. equipping. without any supervision. banks (ATM). Management of Sales Force Management of personal selling requires planning implementation and evaluation of sales force strategies. Once a customer fills in the details regarding the products he needs. each kiosk requires around four square feet of space. rating. supervising. including recruiting. These kiosks can be operated with a touch screen and will provide comprehensive information about train and city related queries. where the payment for the goods is made.

the average number of calls in the specified time and the ratio of orders generated in that time. are stated in terms of his unit sales volume. the channels of distribution.achieve the predetermined goals. Objective The most important objective of a sales person is a create an interest in the customer. the market share and overall profit to the organization. Fixing the Sales Quotas After establishing the sales objectives. sales objectives are statements of what the sales team expects to achieve in a specified period of time. whereas sales objectives for an individual salesperson. also known as sales quotas. his average order size. Sales quotas are quantifiable objectives set for measuring and appraising the effectiveness of sales personnel. They also act as a standard for evaluating the performance of the sales persons and the sales team. the target market and the nature of competition in the market. convince him about the product ad convert his interest into a sale by persuading him. Personal selling objectives differ from one firm to another. Establishing Sales Objectives Similar to other promotional objectives. Sales objectives can be set either for the individual salesperson or for the sales team as a whole They provide the direction and purpose for the functioning of a sales team. the sales manager evaluates the performance of the individual salespersons as well as the sales team as a whole. Sales objectives for the entire sale team are usually stated in terms of the sales volume. the nature of its product. They depend on the overall objectives of the firm. each salesperson is assigned a sales quota on the basis of the number of potential customers in that territory. The final stage. Quotas are the targets that specify the desired performance required from each salesperson or sales region to achieve the organizational 71 .

The most common bases for organizing sales personnel are geographical territory. On the other hand. the workload on each salesperson would increase. The two common methods employed by the sales manager to determine the size of the sales force are equalized workload method and incremental productivity method. a manager needs to determine the number of people needed in each sales team. The HR department maintains a pool or database of all the applicants to an organization. Recruitment can be either internal recruitment or external requirement. sales force is organized differently in different companies. customers. Designing the Sales Force Every company is different in terms of the product line. Therefore an optimum number of sales people should be hired to carry out the selling activities of the firm. making it difficult for them to meet the decline in sales volumes. for their future requirements. Internal recruits 72 . When the sales quotas are determined and communicated. Determining the sales Force Size After formulating the objectives and the structure of the sales force. whose profile matches the company’s requirements.sales target. if less sales people are hired. Recruiting and Selecting Salespeople The first step to develop an effective sales team is to recruit the right kind of people. Thus. the profit volume of the company would come down. This is a crucial decision because if the manager hires more people to cover the market adequately the costs would go up and consequently. It is almost impossible for a sales manager to determine the exact number of sales personnel he would require. the nature of the customer base and the type of sales personnel required. they act as a motivational factor for the sales personnel to achieve the desired goals. Recruitment is an ongoing process of selecting job applicants. product or a combination of these.

as sales personnel learn varied skills over a period of time. on training. The company recruits from external sources through references from its customers.can be the company’s own sales people (for higher job positions). Training Sales Personnel Sales training aims as helping the sales personnel (both old and new) to perform their job satisfactorily. It supplements experience. Selection procedure can vary from a simple informal interview to a structured process consisting of a written test and an interview. placement consultancies. in-campus student recruitment. 73 . spends over $300 million a year on training its employees. Therefore. Training also helps in bringing down the cost of recruitment. of their payroll cost per annum. employee referrals. Every organization has its own compensation plan. if the manager knows what qualities he is looking for in a salesperson. sales persons who are trained reach higher Xerox levels of job performance faster. selection and the rate of attrition. Likewise Motorola.. Selecting the sales team is a simple task. etc. ability to work under stress. FedEx and Singapore Airlines spend a minimum of 3%. Compensation Compensation is the reimbursement for the efforts put in by a salesperson. it is possible for sales people to learn the required skills. employees from other departments. Sales training improves the overall efficiency of the salespersons. followed by a physical examination. etc. problem solving skills etc. etc. this comes from personal experiences and requires a longer time. Professional associates or through job fairs. advertisements. Personal interviews evaluate the applicants’ desire to work their level of maturity. Even in the absence of training. However. Compensation encourages the sales personnel to put in the required efforts to meet the firm’s objectives. Written and oral tests evaluate the applicants’ abilities like aptitude intelligence. suppliers. language skills.

74 . • Functions of Distribution Channel :-i) Facilitate selling by being physically close to customer.CHANNELS OF DISTRIBUTION Producer Users / Consumers Middlemen The intermediaries are such as – • • Merchants :– Wholesaler & Retailer who buy and resell the Agents :-. banks. ii) Provide distributional efficiency by bridging the manufacturer with the user. Manufacturer’s representatives. who assist the distribution process but neither take title of the goods nor negotiate purchases or sales. • Facilitators :-. sales agents. efficiently and economically.Transportation companies. • Definition of Distribution Channel :-“A channel is the pipeline/path/route through which a product flows on its way to the consumer”. independent warehouses. search for customers and may negotiate on behalf of the producers but don’t take the title of the goods.Brokers. advertising agencies. who merchandise.

vii) viii) Gather information about potential and current customers. ii) Ownership :-. like transporters. Financial flow is 75 .iii) Assist in Sales Promotion. competitors and forces of the environment. to make your products and services available readily.The flows of goods physically from the producer to the final consumer takes place with the help of intermediaries. iii) To stimulate channel members to put greater selling effort. In the process. The possession of goods thus. iv) To identify the level of the organization. IN order to close the gaps that arise between producers and customers. v) To have an efficient and effective distribution system. iv) Assist in introducing new products.The Primary task of marketing channels is to move the goods from the producer to the end user. of functions such as – i) Possession :. • Objectives of Distribution Channel :-i) To ensure availability of products at the point of scale. Maintain Records. vi) Assist in developing sales forecast. space quantity and variety. iii) Financial Flow :-The financial flow involves the payment process wherein the customers pays for the goods on service they have received from the channel members. • Channel Flow :-. get transferred from the producers to the final customer.The flow of ownership or transfer of the title of the goods takes place on physical receipt of the goods from one channel member to another. the channel help close the gaps such as those at time. ii) To build channel member’s loyalty. v) Assist in implementing the price mechanization. regularly and in a fresh form. those representing marketing flows perform a No.

iv) Information flow :-. price fluctuations.It is the process of reaching an agreement on the price and other conditions and other conditions for facilitating easier transfer of ownership and possession of goods. Evaluating competitor’s channel design. 76 retailer. Analysing the product and linking the channel design to the product characteristics. risks generated by faulty products. Identifying the functions to be performed by the channel. wholesalers and retailers. The various intermediary levels to designate the length of a channel. and so on. Evaluating the distribution environment.Channel contains one selling intermediary. LEVELS OF CHANNELS OF DISTRIBUTION The producer and the final customer are part of every channel. vi) Negotiation :-.Risk may flow from one channel member to another in the form of product perishability. . fluctuating demand patterns.The flow of information from the channel to the customer is essential in order to create awareness among them about the availability of the products. • • • • A Zero-Level Channel :(Also called a direct marketing Channel) Consists of a manufacturer selling directly to the final customers. including legal aspects. Steps involved in designing and channel System :i) ii) iii) iv) v) vi) Formulating the channel objectives. It may also flow in the form of customer complaints from the customers to producers.usually in the opposite direction of the ownership and physical flow of goods. such as Similarly a Three Level—channel contains three intermediaries. A One-Level :. such as a A Two-Level – Channel contains two selling intermediaries. v) Risk Flow :-. Evaluating company resources and matching the channel design to the resources.

evaluating them and selecting the one that suits the firm best. iv) v) Producer à Agent à Retailer à Consumer – Instead of Producer à Agent à Wholesaler à Retailer à Consumer Distribution of services :-. wholesaler. Agents are included in this channel. Producer à Industrial Distributor àuser. FACTORS AFFECTING CHANNEL SELECTION The various factors that affect channel selection are – A) Market consideration : • Nature of Market :.Whether consumer or Industrial Market. iii) Producer à Wholesaler à Retailer àConsumer It is the traditional and regular channel for consumer goods.vii) Generating alternative designs. Distribution of Consumer Goods : 5 channels are widely used. producer may sell from door to door or by mail. i) Producer à Consumer This is the shortest and simplest distribution channel. Producer à against à user. i) ii) Producer à Consumer Producer à Agent à Consumer 5 common channels for business goods. ii) Producer à Retailer à consumer Many large retailers buy directly from producers and sell to consumers. i) ii) iii) iv) v) Producer à user. Producer à Agent à Industrial Distributor à user.2 channels are basically used. The Distribution of business goods : 77 . Producer à Industrial Distributor à Reseller àUser.

• Size of Order :If the sales volume is large direct selling is convenient and economical.A large potential market is likely to put weight in favour of the use of intermediaries / middlemen. Reputation and goodwill of the company. Standard product. Ability of Management. Financial resources/financial position. (B) Product Consideration • • • • • Unit sale value of the product. (C) Company Consideration • • • • • Whether small/large company. • Buying habits of the Customers :- When the buying habit of customers are frequent and small. • The Number of potential customers :. 78 . But when the buying habits are deliberate direct channel is preferred.Whether to concentrate in one region by direct marketing or go for the intermediaries / middleman.• Geographical consideration :. impulsive indirect channel is required. Bulk and weight of the product. (D) Middlemen Consideration • • • • • Availability of desired middlemen. Financial ability. Product line. Market control / share. Attitude & Behaviour Sales potential Competition and legal constraints. Perishability of the product.

79 wholesale transactions are usually larger than retail transactions and wholesalers usually cover a larger trade area than . More than 80% of the wholesalers and they account for almost 50% of the wholesales. Frequency of purchase by the customers.(E) Consumer Consideration • • • • • Number of customers. They posses the title of the goods. Merchant Wholesalers These are the wholesalers who buy the products from other intermediaries. Quantities purchase by the customers. offer credit. (1) Wholesaler merchants sell primarily to retailers and provide a full range of services. maintain a sales force. Purchased. WHOLESALING & PHYSICAL DISTRIBUTION Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use. and provide management assistance. Second retailer. The merchant wholesaler are further divided into -i) ii) Full Service Merchant wholesaler Limited Service Merchant wholesaler i) Full Service Merchant Wholesaler : Carry stock. There are two types of full service wholesalers. atmosphere and location because they are dealing with business customer rather than final consumers. wholesaler pays less attention to promotion. make deliveries. Location of potential customer. or directly from the firm and resell them. First. Wholesaler differ from retailers in a number of ways. TYPE OF WHOLESALING / CLASSIFICATION OF WHOLESALERS : 1.

who ships the merchandise directly to the customer on the agreed upon terms and time of delivery. 80 . Main function is to facilitate buying and selling. 3. WHOLESALER’S MARKETING DECISIONS The different market decisions that are to be taken in the wholesaling process pertain to the target market.(2) Industrial distributors sell to manufacturers rather than to retailers and provide several services – carrying stock. Tuck wholesalers primarily sell and deliver a limited line of semi-perishable merchandise to super markets. ii) Limited Service Merchant Wholesaler Offer fewer services to suppliers and customers. for which they earn a commission of 2 to 7 percent of the selling price. promotion and place decisions. Upon receiving an order. Brokers & Agents Do not take title of goods. Cash and carry wholesalers have a limited line of fast moving goods and sell to small retailers for cash. 2. offering credit and providing delivery. price. Manufacturer’s sales Branches & Offices The manufacturer’s sales are the manufacturer-owned They generate a intermediaries. The drop shipper assumes title and risk from the time the order is accepted to its delivery to the customer. similar to merchant wholesalers. and perform only a few functions. such as coal and heavy equipment. restaurants and hotels. The branches are situated at a different place from the production plant of the manufacturers and do not carry any inventory. significant percentage of wholesale sale. they select a manufacturer. small grocery stores. Drop Shippers operate in bulk industries. The branches sell goods to the buyers and offer support to the manufacturer’s sales people.

hotels. They fell that they should be involved in taking credit decisions such as reviewing the credit policies. a days wholesalers have stopped acting only as a distribution point. industrial chemicals. C) Promotion Normally. Wholesalers have started identifying and targeting. building materials. manufacturers assist wholesalers through trade displays. Wholesalers have started directing their sales efforts towards emerging institutional markets. paper and paper products. (D) Place Wholesalers distribute several types of products ranging from food.A) Target Market Now. advertisements. direct mails. and so on. Certain wholesalers prefer to design their own promotional activities rather than depend on their manufactures. hospitals and so on. wholesalers should make sure 81 . This type of strategy is followed by those wholesalers who want to stand out in the market and prove to their customers that they are different from the ordinary wholesalers. The selection of type of products is based on the demand for the products by the market. tobacco. drugs. hardware. schools restaurants. the most profitable market segments. decreasing the credit periodic and so on. pricing is a major concern for them. industrial tools. when composed to satisfying the new requirements of existing markets. Wholesalers also analyze the cost involved in entering new markets. Some wholesalers have changed their focus from traditional buyers to new ones. B) Price Though wholesalers do not have any control over the price of the products. They always want products to be priced I such a way that they can earn adequate returns or profits and can sell their products in large volumes. Due to the wide variety of products they provide. for promotional activities. and so on. including airlines. in addition to their existing market. dealer shows. catalogues.

Without this flow marketing cannot take place. Where production location and marketers are distance. physical distribution becomes all the more crucial. should then provide the product with a minimum cost. To set objectives a firm has to do the following jobs – 1) 2) 3) 4) Survey the target customers. Importance of physical Distribution : • Ensures the physical flow of the product from the producer to the consumer. • A promising area forcost reduction. Helps build clientele.e. the firm the main factor. the components of it should be considered with equal weightage. And to calculate the minimum cost in physical distribution. PHYSICAL DISTRIBUTION : Physical Distribution involves planning implementing and controlling the physical flows of materials and final goods from point of origin to the point of use to meet customer requirements at a profit. Decide whether price is the main factor or complete service is If it is level of service.that they are easily accessible to their customers and leverage location as a competitive advantage. Determine the level of service required by them. • • • Confers place and time utility on products. Objective of Physical Distribution To minimize the total distribution cost through efficiency along with providing predetermined level of customer service. PDC = T = W =S 82 . which is much more important. i.

PDC = Physical Distribution Cost. T = Total Transportation cost. The logistical task is to coordinate the activities of suppliers. Basically the three major functions of physical distributions are : (i) Transportation. TRANSPORTATION MANAGEMENT Transportation is the physical means whereby goods are transferred from places of production to the places where they are to be consumed/used. W = Total Warehouse cost. The transportation can effect on – 1) 2) 3) 4) 5) 6) Selling Price. advances. iii) Inventory Management. S = Total cost of the Sales lost due to non-availability of the product at the right time. Major gains in logistical efficiency have come from S is an intangible factor. Regional Specialization Consumption pattern. Price stabilization. which is very important for the reduction of the cost and also to satisfy the 83 . purchasing agents. FUNCTION OF PHYSICAL DISTRIBUTIONS Producers of physical products and services must decide on market logistics – the best way to store and move their goods and services to market destinations. The ultimate goal of market logistics is to meet customers’ requirements in an efficient and profitable way. customer. ii) Warehousing. channel members and customers. marketers. Transportation reduces the gap between the manufacturer and the customers. National boundaries (become irrelevant) Land value (increase). Although the cost of the market logistics can be high. a well planned market – logistics programme can be potential tool in competitive marketing. manufacturers.

Specialization and division of labour. warehousing vets the products with ‘form utility’ as well. warehousing too vests the product with time utility and place utility. • scale. Aid in stabilizing the price. Storage reduces the need for instant transportation. Transportation of the economy. • In the case of some commodities.The economic functions of Transportation are – 1) 2) 3) 4) 5) 6) 7) Widening the market. 84 . storage is needed on a larger difficult and costly. moisture and rats. • It is common knowledge that a certain level of storage is inescapable in marketing of most products. etc. Modern warehouses are equipped with latest equipments and facilities for the safety of goods from theft. Time and place utility. sun. Scale of production. Increase the mobility of labour and capital. • • In some cases. which is often For products with high seasonality. ROLE & IMPORTANCE OF WAREHOUSING • Like transportation. sub-distribution realities necessitate extra storage. WAREHOUSE MANAGEMENT A warehouse is a place where surplus goods can be kept for future use.

It safeguards the stocks of merchants and saves from the urgency of making sales for want of supply of stored goods. blending etc. packaging.It facilitates smooth supply of goods in the market and removes violent fluctuation of supply. It is not necessary that the timings of production and consumption of goods coincide with each other.• Storage is also a competitive advantage. and in stabilizing prices. FUNCTIONS OF MODERN WAREHOUSING A warehousing performs the following functions :(a) Time utility :. • Storage also helps in balancing demand and supply. of the goods for the urgency of paying the customs duty. (d) Facilities further processing :purpose of sale. An importer can postpone the payment of customs duty until the draws goods from the bonded warehouse. 85 . better servicing of the channel and consumer is possible. • In the case of some products. (e) Helps arranging Finance :A bonded warehouse removes the It provides the facilities of processing. (b) No urgencies of Sales :. Goods that are not immediately required can be stored in the warehouses. (c) Smoother supply :. as with better storage.It removes the hindrances of time. storage by itself facts as a stimulant of demand.

In the 86 . Food grains. owned or privately owned. He is required to take as much as care of goods.This is set up run by cooperative societies. (d) Bonded Warehouse :These are licensed to accept imported goods for storage before payment of customs duty. Anybody can keep his goods in the public warehouses by paying The owner of the public warehouse stands as an the necessary charges. regulations in respects of method of operation. The bonded warehouses may be either Govt.It delivers the goods according the instructions of the owners. The public warehouse provide safety transportation facilities to traders of different goods. (c) Co-operative :. The Govt. (b) c) Public :.(f) Delivery :. such as – (a) Private :Owned by the manufacturers (traders) to store the goods manufactured or brought by them until they resold out. manufacturers and agriculturists in return for a storage charge. fruits and vegetables are generally stored in such warehouses. (g) Collateral Security :.are organized to provide storage facilities to the traders.It helps in financing the trade. TYPES OF WAREHOUSE There are 4 different types of warehouses. gives encouragement to start public warehouses in the cooperative sector. Public warehouses are licensed by the Government and are subjects to Govt. The farmers or traders can register a cooperative society to set up a cooperative warehouse. Warehouse receipt can be used as collateral security to borrow from the financial institutions. agent of the owner of the goods.

they work under the strict control and supervision of the customs authority.Operational stocks kept at the point of sale/retail outlets for meeting ready demand is the first element. stocks in transit at any given point of time the second. Administrative overheads. in different locations and at different rates. Firstly : It acts as a landlord who provides storage facilities on rent. It will be obvious that without effective management of finished product inventory. there will buffer stocks for meeting emerging sales requirements. 87 . A Bonded warehouse acts in two capacities. and Secondly : It acts as the bailey of goods the warehouse must act with reasonable care to handle and store the goods and it has lie on the goods under its care for the charges of its services. ELEMENT OF INVENTORY COSTS : • • • • • • • • Interest on capital tied up in the inventory. it is impossible to run any business efficiently and profitably. Carrying inventories is inescapable in most business. and finally. INVENTORY MANAGEMENT : Inventory management is the third major component of physical distribution task. Warehouse rent. Stationery Postage and communication charges. Inventories are made up of several elements :.later case. then there will be stocks awaiting shipment. This is because the producing and consuming activities take pace at different times. Staff salaries Insurance Rates and taxes.

unloading and stacking. Loss due to damage and deterioration while on storage. 88 . Cost of order processing / record keeping / according.• • • Costs of handling.

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