Retail Management, UNIT 4

RETAIL MANAGEMENT
UNIT 4

4.1 Communicating with the Retail Customer

Figure 4.1: Marketing Communication Process

Need for Communication

When a company develops a new product, changes an old one, or simply wants to increase sales of
an existing product, it must transmit its selling message to potential customers. The process of
communication is generally divided into Explicit and Implicit communications.

The marketing communications mix (also called the promotion mix)

Consists of five major tools:
• Advertising: Any paid form of non personal presentation and promotion of ideas, goods, or
services by an identified sponsor.
• Direct Marketing: Use of mail, telephone and other non personal contact tools to
communicate with or solicit a response from specific customers and prospects.
• Sales Promotion: Short-term incentives to encourage trial or purchase of a product or service.
• Public Relations and Publicity: A variety of programs designed to promote and / or protect a
company's image or its individual products.
• Personal Selling: Face-to-face interaction with one or more prospective purchasers for the
purpose of making sales. The whole marketing mix, not just the promotional mix, must be
orchestrated for
The Communication Process:

Figure 4.2: Elements in the communication process

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Steps in Developing Effective Communication:

1. Identifying the Target Audience: A marketing communicator must start with a clear target audience
in mind. The' audience could be individuals, groups, particular publics, or the general public. The target
audience will critically influence the communicator's decisions on what to say, how to say it, when to
say it, where to say it, and to whom to say it.
2. Determining the Communication Objectives: Once the target market and its characteristics are
identified, the marketing communicator must decide on the desired audience response. The ultimate
response, of course, is purchase and satisfaction. But purchase behaviour is the end result of a long
process of consumer decision making. The marketing communicator needs to know how to move the
target audience to higher states of readiness to buy. The marketer can be seeking a cognitive,
affective, or behavioural response from the target audience.
3. Designing the Message: Having defined the desired audience response, the communicator moves
to developing an effective message. Ideally, the message should gain attention, hold interest, arouse
desire, and elicit action (AIDA model). In practice, few messages take the consumer all the way from
awareness through purchase, but the AIDA model suggests the desirable qualities. Formulating the
message will require solving four problems: what to say (message content), how to say it logically
(message structure), how to say it symbolically (message format), and who should say it (message
source).
4. Selecting the Communication Channels: The communicator must select efficient channels of
communication to carry the message. Communication channels are of two broad types, personal &
non personal. Within each are found many sub channels (a)Personal Communication Channels
Personal communication channels involve two or more persons communicating directly with each
other. They might communicate face to face, person to audience, over the telephone, or through the
mail. Personal communication channels derive their effectiveness through the opportunities for
individualizing the persuasion and feedback. (b) Non Personal Communication Channels: Non personal
communication channels carry messages without personal contact or interaction. They include media,
atmospheres, and events. Media consist of print media (newspapers, magazines, direct mail),
broadcast media (radio, television), electronic media (audiotape, videotape, videodisc), and display
media (billboards, signs, posters). Most non personal messages come through paid media.
5. Establishing the total promotion Budget: One of the most difficult marketing decisions facing
companies is how much to spend on promotion. This it is not surprising that industries and companies
very considerably in how much they spend on promotion. Promotional expenditures might amount to
30to50% of sales in the cosmetics industry and only 10 to 20% in the industrial equipment industry.
Within a given industry, low-and high-spending companies can be found. How do companies decide
on their promotion budget? We will describe four common methods used to set a promotion budget.
6. Promotion mix: Demand of goods is to be created to sell the goods produced in the market be
created. Without demand creation, no sale can be affected. It is a continuous process throughout the
product life cycle. At introduction level utmost efforts are made to make a product recognized by the
customers. The demand once created, would have to be maintained and increased. Efforts for demand
creation continue even in the declining stage. For this purpose, promotional activities are undertaken.
7. Measuring Promotion results: After implementing the promotional plan, the communicator must
measure its impact on the target audience. This involves asking the target audience whether they
recognize or recall the message, how many times they saw it, what points they recall, how they felt
about the message, and their previous and current attitudes towards the product and company. The
communicator would also want to collect behavioural measures of audience response, such as how
many people bought the product, liked it, and talked to others about it.

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8. Total Marketing Communication: Management combines the four controllable into marketing
strategy market, distribution promotion and price strategies. It involves establishing and maintaining
communications with target markets and interview middlemen, through various marketing
communications media-advertising, personal selling, point of purchase materials, packing and other
media like samples and coupons.

4.1.1 Promotion Strategy

1. ADVERTISEMENT
The word advertisement originated from the Lat in term =advertise meaning to turn to. Advertising is
paid form of publicity. It is non-personal. It is directed at a mass audience and not directly at the
individual as in the case of personal selling. It is identifiable with its sponsor or originator which is not
always the case with publicity or propaganda.
Evolution of Advertising
The Beginning: - Romans practiced advertising. The potentiality of advertising multiplied when the
hand press was invented at the end of the 15 century. By Shakespeares time the posters had made
their appearance. Thus gradually advertising assumed the function of fostering demand for excising
products.
Mass Advertising: - It was in the latter half of the 19th century that mass advertising came into being.
As mass production became a reality channels of distribution had to be developed to cope with the
physical movement of goods creating a need for mass communication to inform customers of the
choice available to them. This development was accelerated by increasing literacy.
Advertising in India: - In India advertising was accepted as a potent recognized means of sales
promotion only two decades ago. This delay is attributable to late industrialization in India. But as
India has become an industrial country, advertisements appear regularly in local as well as national
papers.

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Definition
American Marketing Association defines; Advertising is any paid form of non- personal presentation
and promotion of ideas, goods or services by an identified sponsor. It involves the use of such media
as magazine, newspaper, space, radio, motion pictures, outdoor media, cards, catalogues, direct mail,
directories and references, store signs, programmers and menus, novelties and circulars.
„« Advertising is any form of paid non-personal presentation of ideas, goods or services for the
purpose of inducing people to buy. By Wheeler
„« Advertising is a paid form of non-personal presentation of ideas, goods or services by an identified
sponsor¡ü. By Richard Buskirk
„« Advertising consists of all the activities involved in presenting to a group, a non-personal, oral or
visual, openly-sponsored message regarding a product, services or idea, this message is called an
advertisement, is disseminated through one or more media and is paid for by an identified sponsor.
By William J. Standon
The above definitions clearly reveal the nature of advertisement. This is another powerful element of
the promotion mix. Essentially, advertising means spreading of information.

Elements of Advertising
On the basis of the definitions, the essential elements of advertising can be listed as follows:
1. Non-Personal communication: Advertising is a mass non-personal communication reaching a large
group of buyers. It is neither delivered by actual persons not addressed to an individual or small
audience of individuals. The communication is speedy permitting the advertiser to speak hundreds or
thousands of people within a shorter period.
2. Matter of record: It is a matter of record furnishing information for the benefit of the buyers. It
guides them to make a satisfactory purchase. The contents of the advertisement are what the
advertisers want.
3. Paid from of publicity: Advertising is a paid form of presentation. The sponsor must pay for it to
other person whose media is employed. Hence, it is commercial transaction. Only this feature
differentiates advertising from publicity.
4. Persuasion of the buyers: The advertisement must be capable persuading the buyers to purchase
the goods advertised. It is an art of influencing the human action; the awakening of the desire to
possess and possess ones product.
5. Identifiable with the sponsor: Advertisements are identifiable with their sponsor or originator. The
producer or the dealer sponsors the advertisement campaign by employing a suitable media. He also
bears the expenses connected with it.

Objectives of Advertising
1. To Create Demand: - Advertisement is used for introducing a new product in the market. New
product needs introduction as potential customers have never used such product earlier. The
advertisement prepares a ground for the new product. Most of the advertisement in cinema-halls or
at radio and television serve this purpose.

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2. To Prepare Ground for New Product: - The main objective of the advertisement is to create a
favourable climate for maintaining or improving sales. Customers are reminded about the product and
the brand. Advertisement may induce new customers to buy the product by informing them about its
qualities since it is possible that some of the customers may change their brands. Thus advertisement
may bring new areas and customers to the company’s product thereby increasing the company’s share
in the total market.
3. To Face the Competition: - In modern days advertising is undertaken not only to inform the people
about a product, but also to maintain and increase the demand of the product by weaning people
away from rival products in the market. Under competitive conditions, advertisement helps to build
up brand image and brand loyalty. When customers have developed brand loyalty, it becomes difficult
for the middlemen to change.
4. To Inform the Changes to the Customers: - Large scale advertising is often undertaken with the
objective of creating or enhancing the goodwill of the advertising company. This increase the market
receptiveness of the company’s product. It helps the salesman to win customers easily.
5. To create or Enhance Goodwill: - The advertisement is made with the purpose of informing about
the change to the consuming public. Whenever changes are made in the prices, channels of
distribution or in the product by way of any improvement in quality, size, weight, brand, packing, etc.,
these must be informed to the public by the producer through advertisement. Such advertisements
may also be used to maintain or improve sales.
6. To Neutralise Competitor Advertising: - Advertising is also used to compete with or neutralise
competitors advertising. When competitors are adopting intensive advertising as their promotional
strategy, it is reasonable to follow similar practices to neutralise their effects. It is essential for the
manufacturer to create a different image of his product. Advertising helps to create product
differentiation by the particular message it sends and the image it creates.
7. To Bar New Entrants: - Through long advertising a strongly built image helps to keep new entrants
away. The advertisement builds up a certain monopoly for the product. The entrants find it difficult to
enter. Whenever a new entrant plans for an investment in that field, he considers the existing market
conditions. If he knows that the existing market is dominated by a few producers due to long standing
advertisement effects, he may hesitate to make his investment.
8. Link between Producer and Consumer: - To conclude, advertising aims at benefiting the producer,
educating the consumer and supplementing the salesman. Above all it is a link between the products
and the consumer.

Functions of Advertising
(A) Primary Functions:
1. Increase in Sales: - Advertisement increases sales of the product by securing greater consumption,
attracting new buyers or introducing new uses for a commodity.
2. Boost stocking: - Persuasion of dealers to stock the goods is one of the functions of advertisement.
3. Help in Sales: - Advertisement helps the dealers (wholesalers and retailers) to sell the advertised
product.
4. More Per Capita use: - Advertising is effectively used to increase the per capita use of the
commodity by its constant repetition.

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5. Respectability: - By advertisement the receptiveness of a new product or new model increases if

producer has earned a name as a producer of good quality products.
6. Insurance: - Advertisement creates insurance for the manufacturers business.
7. Buyers Dependability: - The buyers dependability y on well-advertised go is increased because he
knows its quality.
8. Diminishing Fluctuations: - Advertisement helps to eliminate or les seasonal fluctuations.
9. Brand Image and Brand Loyalty: - Advertisement creates brand image brand loyalty.
10. Raising Standard of Living: - Advertisement raises the standard of living the public by instigating
the desire to purchase better and qualitative things.
(B) Secondary Functions
1. Encouraging Salesman: - Advertisement encourages the salesman and lends them moral support in
facing a difficult customer.
2. Information: - Necessary information’s are furnished to salesman, dealers and customers about the
product. The printed word is manufacturers guarantee.
3. Public Response: - Advertisement creates a feeling among executives and administrative staff that
they are working in a company having public response.
4. Sense of Security: - The workers of a company of well-advertised goods feel themselves secure. It
means steady work and consequent prosperity. Their jobs are permanent and are likely to be
promoted.
5. Better Employees: - Advertisement helps the company to secure better employees-executives,
salesmen and workers.
6. Help to all: - The above functions of advertisement help the producer, salesman, dealer and
consumer.

Benefit of Advertising:
The following are some of the benefits of advertising available to the retailers.
1. Increase the turnover: Advertising quickness the turnover of the retailer. Quick turnover, in its turn
reduces the risk of dead stock and brings down the proportionate expenses in overhead charges.
2. Publicity: Advertising not only offers publicity to the product but also to the retailers. In fact, the
retailer himself is known to public only through the manufactures advertising. In many cases, the
names of the retailers are also advertised by the producers.
3. Minimum efforts: Since advertising creates new wants, the retailer need not take many efforts to
push up the sales of the product. Generally, retailers employ no salesman who goes outside the shops
to procure orders. But advertising goes out on his behalf and attract more customers towards his shop.
4. Risk of price wars: Advertising enables the producer to control both wholesale and retail prices.
Therefore, the retailers need not afraid of unfair competition and price wars. This avoids losses to the
retailer through the fluctuations in prices.
5. Sales forecasting: The retailer can also forecast the sales for the current year and also plan his stock
accordingly. Proper sales forecasting brings more profits to him.

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6. Strengthening of goodwill: The reputation created to the product is also shared by the retailer who
deals in it. Well-advertised product adds prestige to the retailers and he incurs no additional
expenditure for this.

Advantages to the Consumers:

Modern advertising brings a number of benefits to the consumers also. The following are the chief
benefits of advertising to the consumers.
1. Quality of the product: Generally, well-advertised goods are better in quality. If the goods are not
up to the quality the consumers shall switch over to some other product. Therefore, the manufacturer
is compelled to maintain the quality of the product advertised. The consumers are ultimately
benefited by the quality of the product.
2. Selection of Products: The existence of different varieties of products, their prices, and their
peculiar qualities are made known to the consumers only through advertising. The consumer can
select the product best suited to his tastes, requirements and his purse.
3. Information service: Advertising also acts as an information service and helps him in intelligent
buying. The consumer can exactly know where the product is available and at what price. The
consumer, therefore, can make an intelligent buying without taking any extra efforts. Intelligent
buying leads to the satisfaction of wants more effectively and economically.
4. Fair prices: Modern advertising stabilises the price of the products. In majority of the cases, the
retail prices are also advertised so as to make the buyer aware of the prices. Thus, exploitation of
consumers by the retailers is considerably avoided.
5. Mail order business: Advertising also makes it possible to sell direct to the consumers by mail order
business. Therefore, the consumers in the rural areas and interior parts of the country can also enjoy
the comforts and luxuries available only in cities. This makes the life of the village consumers easier,
comfortable and pleasant. Besides purchasing directly from the producer is economical to the
consumers.
Advantages to the Society:
The following are the benefits of advertising to the community in general.
1. Educative value: Advertising has educative value. It educates the public and enables them to make
an intelligent buying. It also makes it possible for enjoyment of new amenities and comfort goods.
2. Stimulation of investment: Mass advertising always leads to mass scale production and
distribution. Consequently, business firms tend to grow. In the modern days, most of the undertakings
are organised in the form of joint stock companies so as to mobilise the savings of the public and
thereby carry-on large-scale production. Even private firms and private companies are converted into
public companies. This stimulates the investment habit of the community.
3. Employment opportunities: It is already stated that advertising creates mass demand and leads to
large scale production. Large scale production, in its turn creates more employment opportunities. It
also assures employment opportunities for professional artists.
Advertising Values: The success of advertisement depends very much upon the copy of
advertisement. The main aim of the advertisement is to attract the customer and create an urge to
possess that product. If the advertisement does not fulfil this objective, the expensive advertisements
are useless. Hence, the advertisement copy should be drafted very carefully. The person who drafts
the advertisement copy must be thoroughly acquainted with the mental process. He should be
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imaginative enough to think of words and patterns which would produce the desired effect on the
prospective customer. An effective copy of advertisement should posses the following characteristics,
qualities or values:
1. Attention Value- an Advertisement copy must attract the attention of the potential consumers. If
it fails in this mission, the money and efforts go waste, for everything else follows this. The copy should
be drafted, planned and displayed so ingeniously that it may compel even the most casual reader to
notice it and read it with interest. It should be designed in such an attractive manner that it catches
the eye. Following devices can be used to make the copy attractive. (i) Use of pictures, photographs
or sketches to reveal a great deal about the product. (ii) Use of display types, i.e,. appropriate heading
in attracting types; (iii) Attractive borders etc., can also be used to separate an advertisement copy
from the rest of the setting and to compel the reader to focus his attention on it: (i) Price quotation
being advertised is quite low; the display should be at an appropriate place in the copy. (ii) Reply
coupons may be inserted in an advertisement to attract the attention of the readers.
2. Suggestive Value- The next quality of an advertisement should be to offer suggestion about the use
and the utility of the product. This can be done if crisp and pointed but simple slogans and suggestions
are devised to bring home to the reader the utility of the product in everyday situation. The repeated
use of suggestion, a command or slogan can do the trick.
3. Memorising Value - The copy of advertisement should be so drafted and laid out that the product
sticks to the memory of the individual reader. Repetition of advertisement is an effective method of
creating memorising value for the copy. Use of trade mark or brand name should be repeated very
often. Lux, Dalda, Asprin, Ponds, Vim, Surf, etc. have become household words through repeated
advertisements of memorising value.
4. Conviction Value- An advertisement copy a proven effective when the suggestion contained in it is
backed by convincing arguments. In it the advertiser must avoid the two extremes: it should neither
be plain notice nor should it use high flower language. By emphasising the outstanding feature of the
product an ideal copy should make an appeal to reason so that the consumer acting on the
advertisements may go in for it with confidence and firm belief in its utility and superiority over
competitive products. Examples of copies emphasizing conviction value may be found in
advertisement of Colgate dental cream saying ¢wStop bad breath with Colgate while you fight tooth
decay all day.
5. Sentimental Value- Sentiments reflecting the personal feelings and attitudes of individuals towards
various things indicate reactions of a person infamous or against a particular product. The advertiser
should make a sincere attempt to make an appeal to the sentiments of as many buyers as possible. It
is more important where advertisements are directed towards the educated and cultured sections of
the community.
6. Educational Value - A Good copy of advertisements educates the general public about the uses of
the new products or the new uses of the same product. It increases the demand of the product. It
creates new habits among people by offering new tempting products to them. It helps creating new
markets. Thus a good copy of advertisement possesses educative value.
7. Instinctive Appeal Value- Instincts are the main springs of human thoughts and actions. Instincts
are the underlying forces which compel the men to act in certain ways. A good copy of advertisement
must induce, persuade and motivate the people to think well of a product and to take to its use.
Generally speaking, the following are the basic instincts of the consumers.
(i) Self-preservation Instinct - The sale of product like medicine, clothes, etc., may be promoted by
appeal to our anxiety to preserve our person, our wealth, our family and our belongings for example,
insurance are advertised by appeal to this instinct.

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(ii) Hoarding Instinct Banking institutions, insurance companies or the Government Savings
Organisation make an appeal to the hoarding instinct Slogans like = Up and Up Go your Savings are
used for this purpose.
(iii) Parental Instinct The parental instinct takes the form of love and affection for the children. Those
who deal in children’s requirement like toys, baby goods, etc., lay upon the motherly feelings of
women or the parental sentiment of men through their advertisement copies. (i) Instinct for Self-
display- An advertisement copy drafted for dresses, readymade clothing, etc., must be directed
towards the aesthetic sense of the people by showing happy and likeable people in dresses that are
being advertised. (ii) Something for nothing Instinct Everybody has an instinct to get something
without paying for it. An advertisement copy that contains the offer of a prize or a gift is likely to tempt
many of the customers. For example, this instinct is widely used by lottery ticket sellers. The above
qualities should be incorporated in an advertisement copy to make it an ideal advertisement.

2. Public relations
Public relation is a communication method used by businesses to convey a positive image to a target
audience and the general public. Public relations methods can include press releases, community
involvement and speaking at public forums on issues important to a target audience. Small companies
with small advertising budgets can use public relations as an inexpensive medium to establish the
company name and communicate a brand image. Successful public relations programs highlight
company accomplishments and positive contributions to community.
Public relations are an organization communication that seek to build good relationships with an
organization public, including consumers, stockholders, and legislators. It includes obtaining
favourable publicity, building up a good corporate image, and handling or heading off unfavourable
rumours, stories, and events. Publicity is unpaid communication about an organization that appears
in the mass media. Public relations may consist of writing press releases, holding special events,
conducting and publishing consumer surveys about a product or the company, and efforts to put a
positive spin on negative company news. Unlike sales promotions, public relations activities do not
usually seek a short-term increase in sales. Instead, they try to craft a long-term positive image for the
product or the organization. Compared with personal selling, advertising, and sales promotions,
expenditures for public relations are usually low in most organizations. Since companies do not pay
for publicity, they have less control over the publication of good or bad company news. But this often
means that consumers find this type of news source more believable than if the information were
disseminated directly by the company.

Marketing and Non-marketing Public Relations:

The basic rule of public relations is to do something good and then talk about it. Public relations is
crucial to an organization ability to establish and maintain a favourable image.
Non-marketing public relations refers to a company messages about general management issues.
When a company makes a decision that affects any of its publics, input from public relations specialists
can help to smooth its dealings with those publics. A company, for example, that decides to close a
plant would need advice on how to deal with the local community. Other examples include a company
attempts to gain favourable public opinion during a long strike or an open letter to Congress published
in a newspaper during congressional debates on a bill that would affect a particular industry.
Marketing public relations refers to narrowly focused public relations activities that directly support
marketing goals. Marketing public relations involves an organization relationship with consumers or

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other groups about marketing concerns and can be either proactive or reactive. With proactive
marketing public relations, the marketer takes the initiative and seeks out opportunities for promoting
the firm products, often including distribution of press releases and feature articles. It is a powerful
marketing tool since it adds news coverage that reinforces direct promotion activities. Although some
publicity happens naturally, more typically a buzz needs to be created by a firm publicist. Reactive
marketing public relations responds to an external situation that has potential negative consequences
for the organization. The goal in this case is to manage the flow of information to address concerns so
that consumers don’t panic and distributors don’t abandon the product.
The Internet has expanded the capabilities of the traditional public relations function. Corporate
websites post testimonials from customers, make new product announcements, and respond quickly
to important events. News releases posted on the company website may double as sales vehicles. The
Internet can also be very effective in handling company crises. With a host of Internet news sites,
companies can respond to a crisis online in far less time than other forms of communication such as
press releases or conferences.

Public Relations Objectives:

Public relations specialists need to operate at many levels to ensure that various publics of a company
receive coordinated, positive messages about the firm. These groups include customers, suppliers,
employees, the media, stockholders, and government regulators.
Companies that practice integrated marketing communication strategies know that public relations
strategies are best used in concert with advertising, sales promotion, and personal selling in order to
send a consistent message to customers and other stakeholders. As part of the total IMC plan, public
relations departments may perform any or all of the following functions to achieve communications
objectives:
1. Public Affairs - Building and maintaining national or local community relations.
2. Lobbying - Building and maintaining relations with legislators and government officials to influence
legislation and regulation.
3. Investor Relations - Maintaining relationships with shareholders and others in the financial
community.
4. Development - Public relations with donors or members of non-profit organizations to gain financial
or volunteer support.
5. Location - PR Enhancing the image of a city, region, or country.
6. Press Relations - Creating and placing newsworthy information in the news media to attract
attention to a person or product.
7. Product Publicity - Publicizing specific products to consumers as well as other organizations.

Public Relations Tools:

Public relations professionals use several tools. They use:
1. News,
2. Speeches,
3. Special Events,
4. Mobile Marketing,
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5. Written Materials,
6. Audio-visual Materials,
7. Corporate Identity Materials, and Public Service Activities.

One of the major tools is news. PR professionals find or create favourable news about the organization
and its products or people. Speeches can also create product and company publicity. Increasingly,
company executives must field questions from the media or give talks at trade associations or sales
meetings. Another common PR tool is special events, ranging from news conferences, press tours,
grand openings, and fireworks displays to laser shows, hot air balloon releases, multimedia
presentations and star-studded spectaculars, and educational programs designed to reach and
interest target publics. Recently, mobile marketing traveling promotional tours that bring the brand
to consumers has emerged as an effective way to build one-to-one relationships with targeted
consumers. Public relations people also prepare written materials to reach and influence their target
markets. These materials include annual reports, brochures, articles, and company newsletters and
magazines. Audio-visual materials, such as films, slide-and-sound programs, and video- and
audiocassettes, are being used increasingly as communication tools. Corporate identity materials can
also help create a corporate identity that the public immediately recognizes. Logos, stationery,
brochures, signs, business forms, business cards, buildings, uniforms, and company cars and trucks all
become marketing tools when they are attractive, distinctive, and memorable. Finally, companies can
improve public goodwill by contributing money and time to public service activities.

Planning a Public Relations Campaign:

A public relations campaign is a coordinated effort to communicate with one or more of the
organization publics. This is a three-step process of:
1. Developing Objectives,
2. Executing, and
3. Evaluating.
The organization must first develop clear objectives for the PR program that define the message it
wants people to hear. The PR specialists must develop a campaign strategy that includes:
1. A statement of objectives;
2. A situation analysis;
3. Specification of target publics, messages to be communicated, and specific program elements to be
used;
4. A timetable and budget; and
5. A discussion of how the program will be evaluated.
Execution of the campaign means deciding precisely how the message should be communicated to
the targeted publics and implementing the decisions. An organization can use a variety of public
relations tools: news conferences, special events, written materials, etc.
One of the barriers to greater reliance on public relations campaigns is the difficulty encountered
when trying to gauge their effectiveness. It is possible to tell if a PR campaign is getting media
exposure, though it more difficult to gauge bottom-line impact. In-house assessments, awareness and
preference research studies, and the measurement of print and broadcast coverage generated by PR
activities as well as impression counts can be used in the PR campaign evaluation.
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3. Personal Selling
Personal selling is promotional presentation by the firm sales force conducted on a person-to-person
basis with the buyer for the purpose of making sales and building customer relationships. Personal
selling is the oldest form of promotion. This direct form of promotion may be conducted face-to-face,
over the telephone, through videoconferencing, or through interactive computer links between the
buyer and the seller. This direct contact with the customer gives the salesperson the opportunity to
be flexible and modify the sales message to coincide with the customer needs. The salesperson can
get immediate feedback from the customer. This form of promotion has a high cost per contact with
the customer. The average sales call costs about $300. It is difficult to ensure consistency of message
when it is delivered by many different company representatives. The credibility of salespeople often
depends on the quality of their company image, which has been created by other promotion
strategies. About 14 million people in the U.S. are employed in personal selling.
Today, most salespeople are well-educated, well-trained professionals who work to build and
maintain long-term customer relationships by listening to their customers, assessing customer needs,
and organizing the company efforts to solve customer problems. The term salesperson covers a wide
range of positions. At one extreme, a salesperson might be largely an order taker, such as a
department store salesperson standing behind a counter. At the other extreme are order getters,
whose positions demand the creative selling of products ranging from appliances, industrial
equipment, and airplanes to insurance, advertising, and information technology services.

The Role of Personal Selling:

Generally, a personal sales effort is more important when a firm engages in a push strategy, in which
the goal is to push the product through the distribution channel so that it is available to consumers.
Personal selling also is likely to be crucial in B2B contexts when direct interaction with upper-level
management is required to secure an important sale and often when intense price negotiations occur
before the sale is made. In addition, inexperienced buyers may need the hands-on assistance that a
professional salesperson can provide. Firms selling products that consumers buy infrequently, such as
computers, lawn mowers, and college educations, often rely heavily on personal selling, as do firms
selling complex or very expensive products that need a salesperson to explain, justify, and sell them.
Personal selling, however, has some disadvantages that limit the role played by personal selling in the
promotion mix. First, when the dollar amount of individual purchases is low, it isnt economically
feasible to use personal selling. The cost per contact with a customer is high compared to other forms
of communication, such as advertising. Salespeople can also only make a limited number of sales calls
a day. Reliance on personal selling is effective only when the success ratio is at its highest. Because
the cost of utilizing salespeople is high, telemarketing is growing in popularity.
The types of salespeople and their functions vary considerably. The person who processes a computer
purchase over the phone is an order taker, a salesperson whose primary function is to facilitate
transactions that the customer initiates. Order takers include both inside and outside salespeople.
Most retail salespeople are inside order takers, but often wholesalers, dealers, and distributors
employ salespeople to wait on customers. In contrast, a computer technician is a technical specialist,
a sales support person with a high level of technical expertise who assists in product demonstrations,
recommendations for complex equipment, and setup of machinery. The technical specialistjob is to
provide sales support rather than actually closing the sale. The technical specialist promotes the firm
and tries to stimulate demand for a product to make it easier for colleagues to actually make the sale.
Sometimes a person whose job is to lay the groundwork is known as a missionary salesperson. This is
a salesperson who promotes the firm and tries to stimulate demand for a product, but does not
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actually complete a sale. Many firms find that the selling function is best handled by team selling,
using teams of people from sales, marketing, engineering, finance, technical support, and even upper
management to service large, complex accounts. Finally, the person who actually convinces the
customer to buy is an order getter, a salesperson who works creatively to develop relationships with
customers or to generate new sales.
Approaches to Personal Selling:
Personal selling is one of the oldest forms of promotion, but its image has been tarnished by smooth-
talking pitchmen who have sometimes said anything to make a sale. In more recent years, personal
selling has begun to redeem itself as a profession and has moved from a transactional, hard-sell
technique to a relationship marketing approach.
1. Transactional Marketing: The hard sell is a high-pressure process. Hard-sell tactics are a form of
transactional selling, a form of personal selling that focuses on making an immediate sale with little or
no attempt to develop a relationship with the customer. As customers, the hard sell makes us feel
manipulated and resentful. This technique also contributes to the negative image many of us have of
obnoxious salespeople.
2. Relationship Marketing: Today professional salesperson is more likely to practice relationship
selling, a form of personal selling in which the salesperson seeks to develop a mutually satisfying
relationship with the consumer. Relationship selling involves winning, keeping, and developing
customers. Winning a customer means converting an interested prospect into someone who is
convinced that the product holds value for him or her. Keeping a customer means ensuring that the
customer gets what he or she paid for. Developing a customer means satisfying the customer so that
he or she will be counted on to provide future business. The professional salesperson who genuinely
adheres to the principles of relationship marketing is a relationship builder and a customer problem
solver.
The Creative Selling Process:
Selling is seldom boring. Every customer, every sales call, and every salesperson are unique. Some
salespeople are successful primarily because they know so much about what they sell. Others are
successful because they have built strong relationships with customers who look forward to their
visits. Most salespeople understand and engage in a series of activities necessary to bring about a
transaction. Complex or expensive sales require careful planning, and successful selling in these cases
is more likely if the salesperson undergoes a systematic series of steps known as the creative selling
process. These steps require the salesperson to seek out customers, analyze their needs, determine
how product attributes provide benefits, and then decide how best to communicate this to the
prospects. The steps in the process include prospecting, qualifying, pre-approach, approach, sales
presentation, demonstration, handling objections, closing, and follow-up.
1. Prospecting: Prospecting is the step of the selling process that includes identifying and developing
a list of potential or prospective customers. Prospects or sales leads can come from existing customer
lists, telephone directories, or commercially available databases. Sometimes companies generate
sales leads through their advertising or sales promotions by letting customers request more
information. One way to generate leads is through cold calling, when the salesperson contacts
prospects without prior introduction or arrangement. Salespeople also rely on referrals. Current
clients who are satisfied with their purchase often give referrals.
2. Qualifying: Salespeople next need to qualify their prospects, the step of the selling process that
determines how likely prospects are to become customers. Prospects can be qualified by looking at
their financial ability, volume of business, special needs, location, and possibilities for growth.

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3. Pre-approach: The pre-approach is the step in the selling process in which the salesperson learns
as much as possible about a prospective customer before making a sales call. Salespeople try to learn
as much as possible about qualified prospects early on. They may probe prior purchase history, current
needs, or information about their interests. The salesperson can consult industry and online sources,
acquaintances, etc. to learn about the prospect. Another task is to decide on the best approach, which
might be a personal visit, a phone call, or a letter. The best timing should be considered carefully
because many prospects are busiest at certain times. Finally, the salesperson should give thought to
an overall sales strategy for the account.
4. Approach: The approach is the step in the selling process in which the salesperson usually meets
the customer for the first time. He or she should start building the relationship during the approach.
The salesperson should know how to meet and greet the prospect and get the relationship off to a
good start. This step involves the salesperson appearance, opening lines, and the follow-up remarks.
The opening lines should be positive to build goodwill from the beginning of the relationship. If the
salesperson made contact with the prospect through a referral, the salesperson should probably say
so up-front. This opening might be followed by some key questions to learn more about the customer
needs or by showing a display or sample to attract the prospect attention and curiosity. As in all stages
of the selling process, listening to the customer is crucial.
5. Sales Presentation: The sales presentation is the step in the selling process in which the salesperson
seeks to persuasively communicate the product features and the benefits it will provide after the sale.
Proof statements, such as data on past sales, testimonials, guarantees, or research results, help to
make the salesperson presentation credible. Some sales presentations are canned, meaning a script
has been written in advance, and the same message is delivered to many prospects. This technique
often provides a series of verbal prompts to which there are expected customer responses. A similar
approach called a formulated approach identifies a prospect needs and then provides a scripted sales
pitch keyed to that kind of prospect. These standardized approaches work fine in some cases, but the
most effective sales presentations are those that are tailored to the specific customer. Increasingly,
sales presentations are going high-tech. Computer-based multimedia presentations are considered
the next wave in sales-force automation. With a multimedia-ready notebook computer or LCD
projection computer, salespeople can bring color, animation, video, audio, and interactivity as well as
the latest product and pricing information to their presentations.
6. Demonstration: One important advantage of personal selling over most advertising is the ability of
salespeople to provide a demonstration of the product to the potential buyer. Many firms use new
technologies to make their demonstrations more effective. Multimedia interactive demonstrations
are now common. The key to a good demonstration one that gains the customer attention, keeps his
or her interest, is convincing, and stays in the customer memory is planning. The salesperson should
check and recheck all aspects of the demonstration prior to its delivery.
7. Handling Objections: Handling objections is the step in the selling process in which the salesperson
seeks out, clarifies, and overcomes customer objections to buying. Customers almost always have
objections during the presentation or when asked to place an order. The problem can be either logical
or psychological, and objections are oftentimes unspoken. The salesperson should handle objections
using a positive approach, by seeking out hidden objections, asking the prospect to clarify any
objections, and taking objections as opportunities to provide more information turning the objections
into reasons for buying. Every salesperson needs training in the skills of handling objections.
8. Closing: Closing is the step in the selling process in which the salesperson asks the customer for an
order. Some salespeople do not get around to closing or do not handle it well. They may lack
confidence, feel guilty about asking for the order, or fail to recognize the right moment to close the
sale. Salespeople should know how to recognize closing signals from the buyer, including body
language, comments, and questions. Salespeople can use several closing techniques. They can ask for

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the order, review points of agreement, offer to help write up the order, ask whether they buyer wants
this model or that one, or note that the buyer will lose out if the order is not placed now. The
salesperson may also offer the buyer special reasons to close, such as a lower price or an extra quantity
at no charge.
9. Follow-Up: Follow-up is the last step in the selling process, in which the salesperson follows up after
the sale to ensure customer satisfaction and repeat business. Right after closing, the salesperson
should complete any details on delivery time, purchase terms, and other matters. The salesperson
then should schedule a follow-up call when the initial order is received, to make sure there is proper
installation, instruction, and/or servicing. This visit should reveal any problems, assure the buyer of
the salesperson interest, and reduce any buyer concerns that might have arisen since the sale. Follow-
up also allows the salesperson to bridge to the next purchase. Once a relationship develops, the selling
process is only the beginning. Even as one cycle of purchasing draws to a close, a good salesperson is
already laying the foundation for the next one.

4. Sales Promotion
Sales Promotion is the use of short-term incentives to encourage the purchase or sale of a product.
Sales promotions are programs such as contests, coupons, displays, trade shows, samples, premiums,
product demonstrations, or other incentives that marketers design to build interest in or encourage
purchase of a product during a specified time period. Sales promotions are intended to stimulate
immediate action, often in the form of a purchase, rather than to build long-term loyalty. Whereas
advertising and personal selling offer reasons to buy a product, sales promotion offers reasons to buy
now.
Sales promotion geared to marketing intermediaries is called trade promotion. Companies actually
spend about as much on trade promotion as on advertising and consumer-oriented sales promotion
combined. Trade promotion strategies include offering free merchandise, buyback allowances, and
merchandise allowances along with sponsorship of sales contests to encourage wholesalers and
retailers to sell more of certain products or product lines.
Sales promotion tools are used by most organizations, including manufacturers, distributors, retailers,
trade associations, and not-for-profit institutions. They are targeted toward final buyers, retailers and
wholesalers, business customers, and members of the sales force. Several factors have contributed to
the rapid growth of sales promotion, particularly in consumer markets. First, inside the company,
product managers face greater pressures to increase their current sales; and sales promotion is viewed
as an effective short-run sales tool. Second, externally, the company faces more competition; and
competing brands are less differentiated. Increasingly, competitors are using sales promotion to help
differentiate their offers. Third, advertising efficiency has declined because of rising costs, media
clutter, and legal constraints. Finally, consumers have become more deal oriented, and ever-larger
retailers are demanding more deals from manufacturers. The growing use of sales promotion has
resulted in promotion clutter, similar to advertising clutter, however. Consumers are increasingly
tuning out sales promotions, weakening their ability to trigger immediate purchase. Manufacturers
are now searching for ways to rise above the clutter, such as offering larger coupon values or creating
more dramatic point-of purchase displays.

Sales Promotion Objectives: Sales promotion objectives differ widely

1. Increase Short-Term Sales (consumer promotion)
2. Build Long-Term Market Share (consumer promotion)

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3. Encourage Retailers to Carry New Items and Additional Inventory (trade promotion)
4. Encourage Retailers to Advertise and Provide More Shelf Space (trade promotion)
5. Encourage Retailers to Buy Ahead (trade promotion)
6. Increase Sales Force Support (sales force promotion)
7. Increase Number of New Accounts (sales force promotion)
Sellers may use consumer promotions to increase short-term sales or to help build long-term market
share. Objectives for trade promotions include getting retailers to carry new items and more
inventory, getting them to advertise the product and give it more shelf space, and getting them to buy
ahead. Sales force promotion objectives include getting more sales force support for current or new
products or getting salespeople to sign up new accounts.
Sales promotions are usually used together with advertising, personal selling, or other promotion mix
tools. Consumer promotions must usually be advertised and can add excitement and pulling power to
ads. Trade and sales force promotions support the firm personal selling process.
In general, rather than creating only short-term sales or temporary brand switching, sales promotions
should help to reinforce the product position and build long-term customer relationships. Increasingly,
marketers are avoiding quick fix, price-only promotions in favour of promotions designed to build
brand equity.
Sales Promotion Tools:
Consumer-Oriented Sales Promotion: The main consumer promotion tools include samples, coupons,
cash refunds, price packs, premiums, advertising specialties, patronage rewards, point-of-purchase
displays and demonstrations, and contests, sweepstakes, and games. Consumer-oriented sales
promotions can be classified as either price-based or attention-getting consumer promotion.
Price-Based Consumer Promotion: Price-based consumer promotions emphasize short-term price
reductions or refunds, encouraging consumers to choose a brand while the deal is on. If used too
frequently, however, consumers become conditioned to purchase the product only at the lower
promotional price.
1. Coupons: A coupon is a certificate that gives buyers a saving when they purchase a specified
product. Coupons can stimulate sales of a mature brand or promote early trial of a new brand.
Redemption rates have been declining in recent years, however, as a result of coupon clutter. Most
major consumer goods companies are issuing fewer coupons and targeting them more carefully. They
are also cultivating new outlets for distributing coupons, such as supermarket shelf dispensers,
electronic point-of-sale coupon printers, or paperless coupon systems.¨
2. Cash Rebate Offers: A cash rebate is an offer to refund part of the purchase price of a product to
consumers who send a proof of purchase¨ to the manufacturer.
3. Price Packs: A price pack is a reduced price that is marked by the producer directly on the label or
package. Price packs can be single packages sold at a reduced price, or two related products banded
together. Price packs are very effective even more so than coupons in stimulating short-term sales.
4. Patronage Rewards: A patronage reward is cash or other award for the regular use of a certain
company products.
5. Special Packs: A special pack is a package that gives the shopper more product instead of lowering
its price. A special pack also can be a separate product given away along with another product.

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6. Attention-Getting Consumer Promotion: Attention-getting consumer promotions stimulate

interest in and publicity for a company product.
7. Samples: A sample is a small amount of a product offered to consumers for trial. Sampling is the
most effective but most expensive way to introduce a new product. About 84 percent of consumer
packaged-goods marketers use sampling as a part of their promotion strategy. Some samples are free;
for others, companies charge a small amount to offset its cost. The sample might be delivered door-
to-door, sent by mail, handed out in a store, attached to another product, or featured in an ad.
Samples can also come with the morning newspaper, in a sample pack, or via the Internet.
8. Premiums: A premium is a good offered either free or at low cost as an incentive to buy a product.
A premium is not the product being promoted. It is used as an incentive to encourage purchase of the
featured product. A premium may come inside or outside the package, or through the mail.
9. Advertising Specialties: An advertising specialty is a useful article imprinted with an advertiser¡
name, given as a gift to consumers. Typical items include pens, calendars, key rings, matches, shopping
bags, T-shirts, caps, nail files, and coffee mugs. In a recent study, 63 percent of all consumers surveyed
were either carrying or wearing an ad specialty item. More than three-quarters of those who had an
item could recall the advertiser¡ name or message before showing the item to the interviewer.
10. Point-of-Purchase (POP) Promotions: A point-of-purchase promotion is a display or
demonstration that takes place at the point of purchase or sale. Unfortunately, many retailers do not
like to handle the hundreds of displays, signs, and posters they receive from manufacturers each year.
Manufacturers have responded by offering better POP materials, tying them in with television or print
messages, and offering to set them up.
11. Contests, Sweepstakes, and Games: Contests, sweepstakes, and games are promotional events
that give consumers the chance to win something such as cash, trips, or goods by luck or through extra
effort. A contest calls for consumers to submit an entry jingle, guess, or suggestion to be judged by a
panel that will select the best entries. A sweepstakes calls for consumers to submit their names for a
drawing. A game presents consumers with something bingo numbers, missing letters every time they
buy, which may or may not help them win a prize.
12. Trade-Oriented Promotion: Manufacturers direct more sales promotion dollars toward retailers
and wholesalers (78 percent) than to consumers (22 percent). Trade promotion can persuade resellers
to carry a brand, give it shelf space, promote it in advertising, and push it to consumers. Shelf space is
so scarce these days that manufacturers often have to offer discounts, allowances, buy-back
guarantees, or free goods to retailers and wholesalers to get products on the shelf and, once there, to
stay on it. Manufacturers use several trade promotions tools. Many of the tools used for consumer
promotions contests, premiums, displays can also be used as trade promotions.
13. Discounts: A discount is a straight reduction in price on purchases during a stated period of time.
This is also called price-off, off-invoice, or off-list. The discount could be based on the volume of the
product ordered.
14. Allowances: An allowance is promotional money paid by manufacturers to retailers in return for
an agreement to feature the manufacturer¡ products in some way. An advertising allowance
compensates retailers for advertising the product. A display allowance compensates them for using
special displays.
15. Conventions and Trade Shows: Many companies and trade associations organize conventions and
trade shows to promote their products. Firms selling to the industry show their products at the trade
show. A trade show is an event at which many companies set up elaborate exhibits to show their
products, give away samples, distribute product literature, and troll for new business contacts. Trade
shows are major vehicles for manufacturers to show off their product lines to wholesalers and
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retailers. More than 4,300 trade shows take place every year, drawing as many as 85 million people.
Vendors receive many benefits, such as opportunities to find new sales leads, contact customers,
introduce new products, meet new customers, sell more to present customers, and educate
customers with publications and audio-visual materials. Trade shows also help companies reach many
prospects not reached through their sales forces. About 90 percent of a trade show¡ visitors see a
company¡ salespeople for the first time at the show. Business marketers may spend as much as 35
percent of their annual promotion budgets on trade shows.
16. Other Programs: Manufacturers may offer free goods, which are extra cases of merchandise, to
resellers who buy a certain quantity or who feature a certain flavour or size. They may offer push
money cash or gifts to dealers or their sales forces to push the manufacturer goods. Most retailers
also charge manufacturers slotting fees payments demanded by retailers before they will accept new
products and find slots for them on the shelves. Manufacturers may also give retailers free specialty
advertising items that carry the company name, such as pens, pencils, calendars, paperweights,
matchbooks, memo pads, and yardsticks. For more expensive and highly complex products,
manufacturers often provide specialized training for retail salespeople. This background helps
salespeople explain features, competitive advantages, and other information to consumers. Training
can be provided in several ways: A manufacturer sales representative can conduct training sessions
during regular sales calls, or the firm can distribute sales literature and videocassettes.
17. Sales Force Promotion: Sales force promotion is directed at the company own sales force
(oftentimes the manufacturer sales force) rather than a business customer sales force which is in the
distribution channel, such as a retailer sales force. Contests, for example, could be used to urge the
sales force to increase their efforts, with prizes going to the top performers. A sales contest is a contest
for salespeople to motivate them to increase their sales performance over a given period. Sales
contests motivate and recognize good company performers, who may receive trips, cash prizes, or
other gifts. Sales contests work best when they are tied to measurable and achievable sales objectives.
Other incentives could also be provided to encourage the sales force to increase new accounts in
addition to boosting sales.

4.2 Developing Retail Pricing Strategy

Price is an integral part of the retail marketing mix. It is the factor, which is the source of revenue for
the retailer. The price of the merchandise also communicates the image of the retail store to the
customers. Various factors like the target market; store policies, competition and the economic
conditions need to be taken into consideration while arriving at the price of a product.

➢ The first factor to be taken into consideration is the demand for the product and the target
market. Who is this product meant for and what is the value proposition for the consumer?
In some cases, the price of the product is linked to the quality. This is generally in the case of
products like electronics, where a high-priced product is perceived to be of good quality. On
the other hand, for products like designer clothing, a certain section of the population may be
willing to pay a premium price. Hence, it is very essential that the buyer is clear about the
target market for the producer and the value proposition that they would look for.
➢ The stores policies and the images to be created also influence the pricing of a product.
Retailers who want create a prestige image may opt for a higher pricing policy, while the
retailer who wants to penetrate the market, may decide to offer a value for money
proposition.
➢ Competition for the product and the competitors price for similar product in the market also
need to be taken into consideration. In case the product is unique and does not have any
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competition, it can command a premium price on the other hand, in case there after a fair
number of similar products in the market, the prices of such product need to be taken into
consideration before fixing the price.
➢ The economic conditions prevalent at the times play a major role in the pricing Policy. For
example, during an economic slowdown, prices are generally lowered to generate more sales.
The demand and supply situation in the market also affects Prices. If the demand is more than
the supply, prices can be premium, however, when supply is more than the demand, prices
had to be economical.
The various factors affecting retail pricing are illustrated in the fig. shown below:

FIG 4.3: Factors Affecting Retail Price

The pricing objectives should be in agreement with the mission statement and merchandising policies
of the retail organization.

Elements of Retail Price:

In order to arrive at the retail price, one needs to first consider the elements that go into the
calculation of the price. The first element to be considered is the Cost of Goods, which is the cost of
the merchandise and various other expenses that are involved in the movement of the goods from
the manufacturer to the actual store. These expenses may be fixed or Variable. Fixed Expenses are
those, which do not vary with the quantity of the sale or business done. Sop rents and head office
costs fall into this category. The level of sales directly affects the variable expenses. Merchandise
margins and the product mix, however, are variable, and their management can either enhance or
destroy.
1. Profitability: The profit to be earned from the merchandises must be planned before fixing the
retail price. The profit figure arrived at, can be expressed as a percentage of the retail price or as a
percentage of the cost price.
Thus, the following formulae would apply:
Make Up Per cent (Based on Retail Price) = Mark Up in Rupees / Retail Price and,

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Mark Up Per cent (Based on Cost) = Mark up in Rupees / Cost.

Let us under strand this concept with the help of the following illustration. Assume that the cost of
the merchandise of an item I s Rs 200 and the mark up is Rs 150.
The mark up percentage based one the retail price would work out to 37.5%.
The retail price has been calculated as 200+150 = 350.
Mark Up percentage on retail = 150 / 350 = 42.86%
Based on the cost price, the mark up percentage can be calculated as under:
Mark Up percentage on cost = 150 / 200 = 75 %.
The mark up thus fixed, is termed as the Initial Make Up. Rarely are all products sold completely at the
fixed price. Reductions in price are often made and could be due to markdowns, employee discounts,
customer discounts and / or shrinkage. Markdowns are reductions in the original retail price.
Markdowns are discussed in detail later in this chapter, in the section on adjustments to retail prices.
Discounts offered to customers and employees who buy the products, also reduce the mark up
percentage. Shrinkage includes loss of merchandise due to thefts, or damaged / soiled goods. All these
costs reduce the profit margin and hence must be accounted for.
2. Strategy
The pricing strategy adopted by a retailer can be cost-oriented, demand-oriented or competition-
oriented. In Cost-oriented pricing, a basic mark up is added to the cost of the merchandise, to arrive
at the price. Here, retail price is considered to be function of the cost and the mark up.
Cost Oriented Pricing
Thus, Retail Price = Cost + mark up
If this formula is rearranged, we get
Cost = Retail Price Mark up and,
Mark up = Retail Price Cost.
The difference between the selling price and the cost is considered to be the mark-up and should
cover for the operating expenses and the transportation, etc. Mark up percentages may be calculated
on the retail price or on the cost. They are calculated as under.
Mark up % (at retail) = (Retail Selling Price Merchandise Cost) / Retail Selling Price
Mark up % (at cost) = (Retail Selling Price Merchandise Cost) / merchandise Cost When the buyer is
aware of the mark-up percentages required and of the selling price, he can also work out the price at
which he actually needs to procure the product.
Since it may not be possible to adopt a policy of maintaining a single mark up for a product category,
the concept of a variable mark-up policy can be followed. This allows the buyer to procures goods at
varying price, but at the same time, maintain the margin that need to be earned, as some products
may earn a higher margin as compared to other.
Demand-oriented pricing focuses on the quantities that the customers would buy at various prices. It
largely depends on the perceived value attached to the product by the customer. Sometimes, a high-
priced product is perceived to be of a high quality and a low-priced product is perceived to be of a low
quality. An understanding of the target market and the value proposition that they would look for is
the key to demand-oriented pricing.
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Competition Oriented: When the prices adopted by the competitors play a key role in determining
the price of the product, then competition-oriented pricing is said to follow. Here, the retailer may
price the product on par with the competition, above the competitors price or below that price.
APPROACHES TO A PRICING STRATEGY
Price lining do retailers use a term when they sell their merchandise only at the given prices. A price
zone or price range is a range of prices for a particular merchandise line. A price point is a specific
price in that price range. The pricing strategies that can be followed include:
1. Market skimming: The strategy here is to charge high prices initially and then to reduce them
gradually, if at all. A skimming price policy is a form of price discrimination over time and for it to be
effective, several conditions must be met.
2. Market Penetration: This strategy is the opposite of market skimming and aims at capturing a large
market share by charging low prices. The low prices charged stimulate purchases sand can discourage
competitors from entering the market, as the profit margins per time are low. To be effective, it needs
economies of scale, either in manufacturing, retail or both. It also depends upon potential customers
being price sensitive about particular item and perhaps, not perceiving much difference between
brands.
3. Leader pricing: Here, the retailer bundles a few products together and offers them at a deep
discount so as to increase traffic and sales on complementary items. The key to successful leader
pricing strategy is that the product must appeal to a Large number of people and should appear as a
bargain. Items best suited for this type of pricing are those frequently purchased by shoppers, e.g.,
bread, eggs, milk, etc.
4. Price Bundling: Here, the retailer bundles a few products together and offers them at a particular
price. For example, a company may sell a PC at a fixed price and the package may include a printer
and a web camera. Another example is that of the Value Meal offered by McDonalds. Price bundling
may increase the sales of related items.
5. Multi-unit Pricing: In multi-unit pricing, the retails offer discounts to customers who buy in large
quantities or who buy a product bundle. This involves value pricing for more than one of the same
items. For example, a retailer may offer one T-shirt for Rs 255.99 and two T- shirts for Rs 355.99. Multi-
unit pricing usually helps move products that are slow moving.
6. Discount pricing: It is used as a strategy by outlet stores who offer merchandise at the lowest
market prices.
7. Every Day Low Pricing: Every Day Low Pricing or EDLP as it is popularly known, is a strategy adopted
by retailers who continually price their products lower than the other retailers in the area. Two famous
examples of EDLP are Wal- Mart and Toys ¢wRUs, who regularly follow this strategy.
8. Odd Pricing: Retail prices are set in such a manner that the prices end in odd numbers, such as Rs
99.99 or Rs 199, Rs 299,etc. The buyer may adopt either the cost-oriented or a demand-oriented
approach for setting prices. In the Cost-oriented method, a fixed percentage is added to the cost price.
This is determined by what mark up the retailer works on. Alternately, t he demand-oriented method
bases prices on what price the customer expects to pay for the product. The price fixed here is based
on the perceived value of the product. Ultimately, it is the planned gross margin, which needs to be
achieved, and which is a major consideration while fixing the retail price.

ADJUSTMENTS TO RETAIL PRICE

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Many a times, retail prices need to be adjusted to meet the conditions prevailing in the market.
Adjustments to retail prices can be done by way of markdowns or by way of promotions. Markdowns
are a permanent reduction in the price and this step may be taken as a result of slow selling of the
product or as a part of a systematic strategy. Markdowns are usually done after a determined number
of weeks in order to maintain a desired rate of sales. Timely markdowns help improve the profitability,
increase the turnover and increase the profit. Markdowns may be necessitated due to wrong
forecasting, overbuying, faulty selling practices or simply because the product is shop soiled or the
odds and ends of a range are left at the end of a season. The mark down percentage is calculated as
follows:
Total mark down / total sales X 100
Promotions on the other hand, are a temporary reduction in the price, used to generate additional
sales during peak selling periods. Prices may be reduced by a percentage (25 percent off) or to a lower
sale price (Rs. 99). High volume items, with a substantial initial mark-up, are usually selected for
promotions. Promotions may also include coupons, which may reduce the retail price by an amount
or a percentage. With retail coupons, the retailer absorbs the reductions in the price.
A Comparison of Mark ups and Markdowns
A mark-up is where profit is expressed as a percentage of the costs, as shown below:
(price-Cost)/CostX100
Thus, a selling price of Rs 30, with a cost of Rs 20, gives a mark-up of 50 percent.
A markdown is where profit is expressed as a percentage of the sale price and is shown below:
(price-Cost)/PriceX100
thus, a selling price of Rs 60, with a cost of Rs 24, gives a markdown of 60 percent.
% Markdown on selling price = %Mark Up on cost X 100
= 100% = Mark Up on cost
% Mark Up on cost = % Markdown on selling price X 100
= 100 % - % Markdown on selling price

4.3 Retail Brand and its Significance

Brand is the products essence, its meaning and its direction. It defines it identify in time and space.
The American Marketing Association defines a brand as a name, term, sign, symbol, or design, or a
combination of them, intended to identify the goods or services of one seller or group of sellers and
to differentiate them from those of competitors. ¨
Successful Retail Branding Starts with
1. A clear definition of what the retailer stands for
2. An identification of what the customers associate it with
3. When customer think the brand is a reflection of them
4. When the retailer is in the minds of the customer when he thinks of the brand

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Branding Efforts
• Communication that inspires emotional reaction
• Customer service
• How salespersons greet customers
• How fast product is shipped and delivered
• Involves every single contact occurring between any product and a human representative of
the company

Successful Retail Branding Ensures

1. Stable long-term demands
2. Differentiation by way of creating long term association
3. Adds value to the product
4. Trust of fulfilment of service expectations
5. Protection from growing completion
6. Image as a company attractive enough to work for
7. Negotiation with suppliers from a position of improved strength

Brand or store loyalty will ensure

• Positive disposal to the brand on brand loyalty
• Brand preference: Frequent utilization of the store over other stores
• Brand allegiance: Continuous utilization

Benefits of Brand for the consumer

1. It helps to identify the source of manufacturer of the product and simultaneously assigns a
responsibility towards an organization for the branded product.
2. Experience of customers with products of same brand help them to quickly decide whether they
will want to go with their purchase decision or not making their decision easier.
3. Brands bring with them a certain level of quality assurance.

Benefits of Brand for the firm

For a firm, the brand provides legal protection towards unique features or aspects of the product.
1. Brand loyalty helps organization to retain their existing customers when diversifying from one
line of products to other. It provides security of demand and creates barrier for other
manufactures to easily tap existing customers.
2. Firms can charge a premium for owning a brand boosting profit on every sale.
3. Product can be copied, but brand cannot. Once a brand is established, it’s the invaluable asset
for an organization.

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4. A well-established brand adds towards the overall value of the firm while calculating its net
worth.

Scope of Branding
A brand is a perceptual entity that is rooted in reality but reflects the perceptions and perhaps even
the idiosyncrasies of consumers. Ultimately a brand is something that resides in the minds of
consumers.
To successfully brand a product it is necessary to teach consumers:
Who the product is.
What the product does.
Why consumers should choose that particular brand.
A branding strategy shall be considered successful only when the consumers have an answer to the
above three questions which is strong enough to make them believe that there are significant
differences in the products or services provided by a brand than others.

The concept of branding can be applied to:

1. Physical Goods e.g. Parle-G biscuits, Tata Tea, Maruti SX4 etc-
2. Services e.g. Indigo Airlines, ICICI Bank etc-
3. Stores e.g. Future Retail, Central, 99 Store, Amazon etc-
4. Person e.g. Sachin Tendulkar, Amitabh Bacchhan etc-
5. Place e.g. Gujrat Tourism, Incredible India etc-
6. Organization e.g. The Rolling Stones
7. Idea e.g abortion rights, free trade, or freedom of speech

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