I YEAR I - SEMESTER

For Telangana University

MARKETING
MANAGEMENT

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 MARKETING MANAGEMENT SYLLABUS

Unit-I: Marketing Basics (Only Concepts)

An Overview of Marketing - Production concept - Product concept - Marketing myopia -

Selling concept – Marketing Concept - Societal dimension of marketing - Importance and
scope of marketing. The Role of Marketing in Economic Development - Rural Marketing,
Rural Markets VS Urban Markets – Marketing Management tasks - Types of demand -
Marketing mix - marketing Objectives – Marketing Planning and Strategy - Mega
Marketing (Power and Public relations) - Service Marketing

Unit-II: Target Marketing and Market Segmentation and Consumer Behaviour

Concept of Target market-Market segmentation: Concept - Types - Patterns - Benefits -
Requirements for effective segmentation - Basis for market segmentation - Market
segmentation analysis for given products – Product positioning. Concept of consumer
behaviour - Nature - Scope - Importance - Major factors influencing consumer behaviour:
Cultural - Social - Economic - Psychological & Personal- Consumer decision process - Post
purchase feelings - Brand loyalty - Cognitive Dissonance -Industrial buyer behaviour -
Marketing Research – Steps.

Unit-III: Product & Price Management

Concept of product - Classification of products - levels of product classification - Product

mix and product line decisions - New Product Development Process - Product Life Cycle
Stages and implication for marketers - Branding - Packaging and Labelling strategies. Role
of price in marketing mix- Pricing concept - Objectives of pricing - Factors influence price
determination - New product pricing - Market Skimming pricing – Market penetration
pricing - Pricing of products and services - Pricing Methods.

Unit-IV: Channel Management

Nature of Marketing Channels - Channel Structure and Participants - Types of marketing

intermediaries – Importance of Channel management - Channel Design Decisions - Channel
conflict and resolutions – Contemporary marketing channels in India - A global perspective.

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Unit-V: Promotion Management

Role of promotion in marketing - Promotion mix - A view of the Communication Process -

Advertising - Need - Objectives - Types of advertising - Major decisions in advertising -
Objectives - Budget - Strategy - Evaluation - Advertising and Social Marketing - Sales
Promotion - Objectives & Tools - Personal Selling - Nature, Role of Sales force - Publicity -
Public Relations.

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 UNIT-1

INTRODUCTION TO MARKETING

Market - Meaning

‘Market’, the term originates from Latin word ‘mercatus’ meaning “trade, marketplace,”
which is derived from ‘mercari’ meaning “to trade”. ‘Mercari’ is derived from merc-
meaning “merchandise”.

In simple terms, Market refers to a particular place where goods are purchased and sold. In
management and economics “Market is any region in which buyers and sellers are brought
into contact with one another and facilitate price fixation”.

A market is an actual / nominal place where forces of demand and supply operate, and
where buyers and sellers interact (directly or through intermediaries) to trade goods,
services, or contracts or instruments, for money or barter. The market for a particular item is
made up of existing and potential customers who need it and have the ability and
willingness to pay for it.

DEFINITIONS:

The term market refers not to place, but to a commodity or commodities and buyers and
sellers who are in direct competition with one another. - Chapman

A market is an aggregate demand of the potential buyers for a product/service. American

Marketing Association.

PRODUCTION CONCEPT

The production concept is one of the oldest concepts in business. The production concept
holds that consumers will prefer products that are widely available and inexpensive.
Managers of production-oriented businesses concentrate on achieving high production
efficiency, low costs, and mass distribution. They assume that consumers are primarily
interested in product availability and low prices. This orientation makes sense in
developing countries, where consumers are more interested in obtaining the product than in
its features. It is also used when a company wants to expand the market. Some service
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organizations also operate on the production concept. Many medical and dental practices
are organized on assembly-line principles, as are some government agencies (such as
unemployment offices and licence bureaus). Although this management orientation can
handle many cases per hour, it is open to charges of impersonal and poor-quality service.

PRODUCT CONCEPT

Other businesses are guided by the product concept. The product concept holds that
consumers will favour those products that offer the most quality, performance, or innovative
features. Managers in these organizations focus on making superior products and improving
them over time. They assume that buyers admire well-made products and can appraise
quality and performance. However, these managers are sometimes caught up in a love
affair with their product and do not realize what the market needs. Management might
commit the “better-mousetrap” fallacy, believing that a better mouse-trap will lead people to
beat a path to its door. Product-oriented companies often design their products with little or
no customer input. They trust that their engineers can design exceptional products. Very
often they will not even examine competitors’ products. A General Motors executive said
years ago: “How can the public know what kind of car they want until they see what is
available?” GM’s designers and engineers would design the new car. Then manufacturing
would make it. The finance department would price it. Finally, marketing and sales would
try to sell it. No wonder the car required such a hard sell ! GM today asks customers what
they value in a car and includes marketing people in the very beginning stages of design.
The product concept can lead to marketing myopia. Railroad management through that
travellers wanted trains rather than transportation and overlooked the growing competition
from airlines, buses, trucks and automobiles. That happened in America and is likely to
happen in India where middle class families are opting for their own vehicle. Slide-rule
manufacturers thought that engineers wanted slide rules and overlooked the challenge of
pocket calculators. Colleges, departmental stores, and the post office will assume that they
are offering the public the right product and wonder why their sales slip. These
organizations too often are looking into a mirror when they should be looking out of the
window.

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MARKETING MYOPIA

It has been introduced by Theodore Levitt. One of the main reasons for the failure of large
business enterprises is that they do not actually know what kind of business they are doing.
This narrow minded view of Marketing is called Marketing Myopia. Marketers suffer from
marketing myopia when they view their business as providing goods and services rather
than as meeting consumers needs and wants.

SELLING CONCEPT

The selling concept is another common business orientation. The selling concept holds that
consumers and businesses, if left alone, will ordinarily not buy enough of the organization’s
products. The organization must, therefore, undertake an aggressive selling and promotion
effort. This concept assumes that consumers typically show buying inertia or resistance and
must be coaxed into buying. It also assumes that the company has a whole battery of
effective selling and promotion tools to stimulate more buying. The selling concept is
practised most aggressively with unsought goods, goods that buyers normally do not think
of buying, such as insurance etc. These industries have perfected various sales techniques
to locate prospects and hard-sell them on their product’s benefits. The selling concept is also
practised in the non-profit area by fund-raisers, college admissions offices, and political
parties. A political party vigorously “sells” its candidate to voters. The candidate moves
through voting precincts from early morning to late evening, shaking hands, kissing babies,
meeting donors, and making speeches. Countless money is spent on radio and television
advertising, posters, and mailings. The candidate’s flaws are concealed from the public
because the aim is to make the sale, not worry about post purchase satisfaction. After the
election, the new official continues to take a sales-oriented view. There is little research
into what the public wants and a lot of selling to get the public to accept the politician the
party wants. Most firms practise the selling concept when they have overcapacity. Their
aim is to sell what they make rather than make what the market wants. In modern industrial
economies, productive capacity has been built up to a point where most markets are buyer
markets (the buyers are dominant) and sellers have to scramble for customers. Prospects are
bombarded with TV commercials, newspaper ads, direct mail, and sales calls. At every

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turn, someone is trying to sell something. As a result, the public often identifies marketing
with hard selling and advertising. But marketing based on hard selling carries high risks.

MARKETING CONCEPT

The marketing concept is a business philosophy that challenges the three business
orientations we just discussed. Its central tenets crystallized in the mid-1950s. l The
marketing concept holds that the key to achieving its organizational goals consists of the
company being more effective than competitors in creating, delivering, and communicating
customer value to its chosen target markets. The marketing concept has been expressed in
many colourful ways : “Meeting needs profitably.” “Find wants and fill them.” “Love the
customer, not the product.” “Have it your way.” (Burger King) “You’re the boss.” (United
Airlines)

The marketing concept rests on four pillars: target market, customer needs, integrated
marketing, and profitability. where they are contrasted with a selling orientation. The
selling concept takes an inside-out perspective. It starts with the factory, focuses on existing
products, and calls for heavy selling and promoting to produce profitable sales. The
marketing concept takes an outside-in perspective. It starts with a well-defined market,
focuses on customer needs, coordinates all the activities that will affect customers, and
produces profits by satisfying customers.

SOCIAL RESPONSIBILITY MARKETING / SOCIETAL MARKETING Assuming

the responsibility of enhancing or preserving the society’s long term wellbeing, by ensuring
that the organization is adhering to the legal, ethical, environmental and social norms.
Concerns about Public welfare, better living environment, better quality of life etc. make
organisations adopt socially responsible marketing policies. For eg. An automobile is not
only fuel efficient but less polluting. It requires the organisation to balance three
considerations:

I. Company profits
II. Consumer Needs
III. Public Interest/ Social Welfare

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SCOPE OF MARKETING

Marketing is typically seen as the task of creating, promoting and delivering goods and
services to consumers and businesses. In fact, marketing people are involved in marketing
10 types of entities:

Goods—Good is defined as something tangible that can be offered to market to satisfy a

need or want. Physical goods constitute the bulk of most countries production and
marketing effort. In a developing country like India fast moving consumer goods
(shampoo, bread, ketchup, cigarettes, newspapers etc.) and consumer durables (television,
gas appliances, fans etc.) are produced and consumed in large quantities every year.

Services—as economies advance, the share of service in gross domestic product increases.
For example, in USA, service jobs account for 79% of all jobs and 74% of GDP. A service
can be defined as any performance that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may or may not
be tied to a physical product. Services include the work of hotels, airlines, banks, insurance
companies,

Experiences—by mixing several services and goods, one can create stage and market
experiences. For example water parks, zoos, museums etc. provide the experiences which
are not the part of routine life. There is a market for different experiences such as climbing
Mount Everest, travelling in Palace on Wheels, river rafting, a trip to Moon, travelling in
Trans Siberian Railways across five time zones etc.

Events—Marketers promote time–based, theme-based or special events such as Olympics,

company anniversaries, sports events (Samsung Cup—India Pakistan Cricket Series),
There is a whole profession of event planners who work out the details of an event and stage
it. In India event management companies are growing and in case of organising Miss World
at Bangalore and World Cricket Cup (Hero Cup) they won the acclaim from all over the
world.

Persons—Celebrity marketing has become a major business. Years ago, someone seeking
fame would hire a press agent to plant stories in newspapers and magazines. Today most of

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cricket players like Sachin Tendulkar, Saurav Ganguly, Rahul Dravid etc. are drawing help
from celebrity marketers to get the maximum benefit..

Places—Places–cities, states, regions and whole nations—compete actively to attract

tourists, factories, company headquarters and new residents. India and China are competing
actively to attract foreign companies to make their production hub. Cities like Bangalore,
Hyderabad and Gurgaon are promoted as centre for development of software. Bangalore is
regarded as software capital of India and Hyderabad is emerging as the hub of
biotechnology industry. Gurgaon and Noida are competing for call centres to open their
offices.

Properties—Properties are intangible rights of ownership of either real property (real

estate) or financial property (share and debt. instruments). Properties are bought and sold,
and this requires marketing effort. Property dealers in India work for property owners or
seekers to sell or buy plots, residential or commercial real estate. In India some builders
like Ansal, Sahara Group, both build and market their residential and commercial real
estates. Brokers and sub-brokers buy and sell securities on behalf of individual and
institutional buyers.

Organizations—Organizations actively work to build a strong, favourable image in the

mind of their publics. We see ads of Reliance Infocomm which is trying to provide
communication at lower rates, Dhirubhai Ambani Entrepreneur programme to promote
entrepreneurship among the Indians. Companies can gain immensely by associating
themselves with the social causes. Universities and colleges are trying to boost their image
to compete successfully for attracting the students by mentioning their NAAC grades in the
advertisements and information brochures.

Information—Information can be produced and marketed as a product. This is essentially

what schools, colleges and universities produce and distribute at a price to parents, students
and communities. Encyclopaedias and most non-fiction books market information.
Magazines such as Fitness and Muscle provide information about staying healthy, Business
India, Business Today and Business World provide information about business activities
that are taking place in various organizations

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Ideas—Film makers, marketing executives and advertising continuously look for a creative
spark or an idea that can immortalise them and their work. Idea here means the social cause
or an issue that can change the life of many. Narmada Bachao Andolan was triggered to
bring the plight of displaced people and to get them justice.

IMPORTANCE OF MARKETING

(A) To the Society

1. It is instrumental in improving the living standards. Marketing continuously identifies

the needs and wants satisfying products or services which can propel the people to do an
extra to earn money which can be exchanged for the desired products or services. The
people are likely to spend the additional income over and above the disposable income on
the products or services which helps in minimizing the physical efforts. Thus marketing by
indirectly increasing the earning ability will help in improving the standard of living of the
customers.

2. Marketing generates gainful employment opportunities both directly and indirectly.

Directly, marketing provides employment to the people in various areas like in advertising
agency, in the company sales force, in the distributor’s sales force, in public relation firms
etc. Indirectly, marketing is responsible for selling the offerings of the organisation. If the
organisation’s products or services are able to satisfy the customers, then customers will
demand organisation’s products or services again and again, thereby sustaining the
production activities.

3. Marketing helps in stabilising economic condition in the sense that marketing helps in
selling the products or services, which keeps the various organizations functioning and
gainful employment is available to the people. With the earnings from the employment, the
people will purchase the products and/or services, thus sustaining the demand. This will
happen in all the industries, then gainful employment will be available throughout the time
period and economy will remain stable, healthy and vibrant.

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(B) To the firms/companies

1. Marketing sustains the company by bringing in profits. Marketing is the only activity
that brings revenue to the firm, whereas other activities incur expenditure. If the company’s
products or services satisfy the customer’s requirements, then the satisfied customers will
keep the company in business by repeat orders and recommending other profitable
customers. Thus marketing is the driving force behind a successful company.

2. Marketing is the source of new ideas. New product or service ideas usually come from
the research laboratories, employees or from marketplace. It’s the marketing people who are
in continuous touch with the consumers and marketing intermediaries. Interaction with them
helps in identifying strong and weak points of company’s product or services as well as
competitor’s products or services.

3. Marketing provides direction for the future course. The marketing oriented company
continuously brings out new product and service ideas which provide the direction for
corporate strategic planning for longer time horizon.

(C) To the Consumers

1. Meeting the unmet needs or wants. Marketing identifies those needs or wants which
were not satisfied and helps in developing the product or service which can satisfy those
unmet needs or wants of the people. For example a number of drugs were invented to treat
various physical problems of the people. Again the low cost formulations were developed
to treat the people who are unable to afford the expensive drugs.

2. Reducing the price of products or services. Marketing helps in popularising the product
or service which attracts the customers as well as competitors towards that product or
service categories. Due to increase in demand, the manufacturing capacity increase which
brings down per unit fixed costs of the product or service. Furthermore increase in
competition led to decrease in the prices charged by the firm.

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MEANING OF RURAL MARKETING

Rural marketing simply means marketing in the rural areas. Often, rural marketing is
confused with agricultural marketing - the latter denotes marketing of produce of the rural
areas to the urban consumers or industrial consumers, whereas rural marketing involves
delivering manufactured or processed inputs or services to rural producers or consumers.

Rural marketing broadly involves reaching rural customers, estimating their needs and
wants and then supplying goods and services to meet these requirements. This could mean
carrying out after sales service that leads to customer satisfaction and repeat sales.

There are different types of rural markets. They are Regular periodic markets, seasonal
markets and daily markets. In Regular periodic markets, the rural people gather once or
twice a week on a fixed day to exchange or sell their produce or buy necessities. The
seasonal markets are those markets which specialize in few crops like onion, bananas etc.

The daily markets are permanent with continuous trading activity.

Unique features of rural marketing

When compared to urban marketing in India, rural marketing has certain unique features.
These are summarized as follows.

Consumer: The people living in rural areas are traditional and innocent by nature. Their
needs are simple. The literacy rate is around 36 percent of the population. Women are
mostly illiterate.

Cultural diversity: Indian villages are truly diverse with respect to languages, religion,
culture, tradition and social customs.

Income levels: Majority of rural people are living below the poverty line. The higher
income group have a tendency to migrate to urban areas. It is therefore, obvious that rural
market consists of cheaper and low quality necessaries of life. However, after the advent of
television, radio and press and improvement in literacy, the life style of rural people is
changing. There is growing preference for new products and luxuries. Toilet soaps, tooth
pastes, ready-made garments, radio, TV etc. have been appearing in rural areas. Bicycles,

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motor cycles, tractors have been replacing old bullock carts. As a result of this a closed rural
market is slowly opening up. Due to agricultural revolution, increased education the average
income level of Indian rural mass is rising and their purchasing power has also increased
considerably

Seasonal demand: Farmers receive the income during harvest. Most of the purchases are
made during this season. There is heavy rush for shopping on the eve of Diwali, Onam, Ed-
ul-fittar, Durga puja, Holi etc. For meeting the heavy demand, marketing centres and shops
need to be ready with stocks.

Market structure: Rural market consists of private sole traders, co-operatives, fair price
shops, and itinerant traders like hawkers, peddlers, cheap jacks etc. and weekly markets.
These marketing organisations are small with less stock and financially not so well.

Infrastructural facilities: Even after more than 60 years of independence the transport and
communication systems have not developed in rural areas. Most roads are dusty and useless
during rainy seasons. There is lack of storage facilities in most of the villages.

Traditional Life: Life in rural areas is still governed by old customs and superstitions.
People do not easily adapt to new practices and products. For example, even the rich
farmers do not wear jeans or branded shoes.

Buying decisions: Rural consumers are cautious in buying anything. Decisions are made
slowly and often delayed for months together. Often, they move from shop to shop inquiring
about the prices of products. Moreover men are the main decision makers even in the case
of purchase of ladies garments.

ROLE OF MARKETING IN ECONOMIC DEVELOPMENT

Marketing is central to economic development. Marketing can be defined as a means by

which an economy can be integrated. In general, this integration is between buyers and
sellers, as well as different regions and sectors of the economy. Many authors, including the
well-known African economist Joseph F. Aiyeku, hold that integration is the chief aim of
marketing, especially in less-developed states.

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Building capital

Marketing spurs demand. This is an important function. In spurring demand, it creates wants
that the manufacturing interests of the country can then satisfy. In this way, marketing can
create capital through the use of consumption currency for future projects. This, in a way, is
a means of development and modernization. The simple act of linking producers and
consumers through information can permit consumers to realize what is available, creating
demand where none existed. Markets can be created and with it, new channels of
consumption and cash flow.

Fair prices of agriculture

Most undeveloped societies are primarily agricultural. Agricultural societies are often
dominated by the local, including local power structures and oligarchies. Marketing can
then link these agricultural units to the broader society, including the global society. Local
oligarchies can be broken when marketing links consumers in other part of the country or
region, meaning that local farmers can have a broader market and even higher prices for
their produce.

Developing standards

Merchants, producers and bankers are all directly involved in marketing throughout a target
economy. They want to promote a product that will produce profits and a large, permanent
share of the market. This cannot be done unless the products being promoted are of high
quality and reasonable price. Shoddy goods generally do not promote market loyalty.
Therefore, serious marketing in the developing world must promote standards of quality,
price, reliability and service. Marketing in this context is building a web of relationships for
the long term, not a quick sale that does not build loyalty.

Society and economy

The integration of the social and the economic is a main part of marketing, says African
economist Joseph F. Aiyeku. This means that products and services being promoted become
a part of the social and cultural life of the people. The role of merchants and entrepreneurs is

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central here, since this strata is largely responsible for developing a real local and national
market. This integration strengthens the role of entrepreneurs who create capital and
opportunity, while providing needed services and products for society.

DIFFERENCE BETWEEN RURAL & URBAN MARKETING

Thinking ,purchasing patent ,perception ,attitude , behaviour ,environment ,strategy ,

positioning loyalty , segmentation process & CLV all are different in rural markets .so
totally new marketing techniques can be used in rural marketing . Before entering rural
market any marketer must analysis the basic difference between rural &urban marketing.

Urban marketing Rural marketing

Crate relationship by offering integrated Crate relationship by inclusive growth of
innovation in product or service. product or service.
Buyer looks for style, quality &novelty. Buyer looks for quality products that offer
value for money.
Internet, TV channels, mobile, are used for Interactive approaches, observation, rating
research. scale are used for research.
Psycho graphic, usage based segmentation Demographic & geographic segmentation
is the main base of divide the market. can be the base of divide the market.
Marketing goal is capture market share, Create a brand name then capture the
image, and profitability. market with enough profitability.
Sophisticated technology can be used to Primarily appropriate technologies can be
create product. used for rural innovation.
Consumers take purchasing decision Consumers are too much emotional to take
emotionally &rationally purchasing decision.

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DEMAND SITUATIONS AND RELATIVE MARKETING MANAGEMENT TASKS

Demand-related tasks are contingent upon different demand situations. Philip Kotler has
identified some types of demand situations and relative marketing management tasks. There
may be more demand situations, too.

Negative Demand:
Negative demand exists because of negative attitudes of the buyers for the product. Major
segments of potential market dislike the product. They want to remain away from the
product. They have a strong prejudice toward the product. The market holds a strong
objection against production, distribution, and use of the product.

Here, whether the product is beneficial or harmful is not the question, but for any reason,
customers want to avoid the product. Even, they are ready pay price to avoid the product.
This type of situation is labeled as negative demand.

No Demand:
Some products have no demand. No demand simply means customers are not buying the
product. They are not buying because they do not know about the product, its availability,
and benefits it offers, or they lack interest in the product; they are indifferent toward the
product. Thus, they do not buy either because they are not aware of or because they are not
interested in the product. This situation is called as no demand. Product may be useful, but
customers do not perceive its benefits or usefulness.

Latent Demand:
Latent demand means hidden or invisible demand. Demand exists but cannot be seen. There
exists a strong needs for the product that can satisfy certain expectations of the market. But,
such product is not available. Exiting products lack desirable attributes, uses, qualities, and
performance. They are not capable to meet these expectations. So, people expect superior
product to satisfy their expectations.

This situation can be called as latent demand. Examples of the products include harmless
cigarettes, highly fuel-efficient and pollution-free vehicles, exam-free education, tension-
free job/work, sugarless sweets (for diabetic patients), speedy and safe journey with

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minimum fare, free membership of the prestigious club, painless injections, tasty pills, etc.
All people want such products that can serve maximum welfare and satisfaction.

Declining or Falling Demand:

Declining or falling demand is also known as faltering demand. When demand for goods
and services, compared to the past sales volume and the current supply level, is less, and is
falling continuously, is known as declining demand or falling demand.

Full Demand:
Full demand is the demand situation in which demand is adequate or at desired level.
Company is satisfied with volume of sales or the level of demand and its position in market.
In real practice, this situation hardly prevails. It is an ideal demand state. Full demand has
two indications – one is, demand is equal to its production capacity or supply, and the
second is, the company can fulfill its marketing goals.

Demand is at satisfactory level doesn’t mean that manager has to do nothing. If suitable
actions are not taken, such level will not continue for a longer period. The task of marketing
management is known as Maintenance Marketing. Maintenance marketing calls for
monitoring or maintaining demand.

Irregular Demand:
Irregular demand is the state of demand in which demand for the product experiences
variations (ups and downs) continuously. For any reason, demand is fluctuating. There are
many products, which have irregular demand. For examples, seasonal products like fan,
heater, refrigerator, air conditioners, cold drinks and ice creams, and so on.

Even, railways and airways reservation and demand of hotels in different seasons have
irregular demand. Firecrackers, flowers, and other products used during marriage seasons
have also irregular demand. Irregular demand is not advisable as the company has access
capacity in slack seasons, and it cannot cope with demand during peak seasons.

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Overfull Demand:
Overfull demand is the demand situation in which level of demand is more than firm’s
capacity to cope or handle. It is not possible for the company to meet demand of the product
either because of short supply, or because of difficulty in distribution. In short, demand for
the product is much higher than the supply.

MARKETING MIX

Marketing Mix is the combination of product offerings used to reach the target markets for
the organisation. It is optimum combinations of all marketing ingredients that help company
realize its goals and objectives. It is a mix of internal controllable marketing variables –
Product, Price, Place and Promotion, which best meet the needs of targeted customers.
These four elements of Marketing Mix are closely interrelated; decision in one area affects
action in others. Marketing mix is dynamic in nature. It Changes according to changing
marketing conditions such as: customer demand, competition & other environmental
factors. The Elements of Marketing Mix.

1. Product Mix: Product is the thing possessing utility. It is the sum total of physical and
psychological satisfaction it provides to the buyer. The product mix is the composite of
products offered for sale by the firm and includes product range, brand, package etc.

2. Price Mix: Price is the value of a product expressed in terms of money. It is the
valuation placed upon the product by the offered and takes into account consumer
expectations discounts, allowances, terms of credit.

3. Place Mix: Also known as distribution mix. Place mix stands for the smooth flow of
goods from the producers to the consumers. It includes channel of distribution and physical
supply (distribution).

4. Promotion Mix: Promotion is the persuasive communication about the product by the
offered to the prospect. It comprises two forms of communication- Personal
Communication: Personal / Direct Selling Impersonal Communication: Advertising, Sales
promotion, Public relations

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OBJECTIVES OF MARKETING:

 Creation of utility - Place utility: Movement of goods from the centres of production to
the centres of consumption creates place utility. - Time utility: By making goods and
services available to the customers at the time of their need, marketing creates time utility -
Possession utility: By facilitating the transfer of ownership from producers to consumers,
marketing creates possession utility

 Cost reduction

 Price stability

 Maximize consumption

 Maximize consumer satisfaction

 Maximize choice for

 Maximize life quality

MARKETING PLANNING:

Executive summary and table of content:

The marketing plan should open with a brief summary of the plan's main goals and
recommendations. The executive summary permits senior management to grasp the plan's
major thrust. A table of contents should follow the executive summary.

Current marketing situation:

This section presents relevant background data on sales, costs, profits, the market,
competitors, distribution, and the macro environment. The data are drawn from a product
fact book maintained by the product manager.

Opportunity and issue analysis:

After summarizing the current marketing situation, the product manger proceeds to identify
the major opportunities/threats, strengths/weaknesses, and issues facing the product line.

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Objectives:

Once the product manager has summarized the issues, he or she must decide on the plan's
financial and marketing objectives.

MARKETING STRATEGY:

The product manager now outlines the broad marketing strategy or “game plan” to
accomplish the plan's objectives. In developing the strategy, the product manager talks with
the purchasing and manufacturing people to confirm that they are able to buy enough
material and produce enough units to meet the target sales volume levels. The product
manager also needs to talk to the sales manager to obtain sufficient sales force support and
to the financial officer to obtain sufficient funds for advertising and promotion.

l Action programs:

The marketing plan must specify the broad marketing programs for achieving the business
objectives. Each marketing strategy element must be elaborated to answer these questions:
What will be done? When will it be done? Who will do it? How much will it cost?

2. Projected profit-and-loss statement:

Action plans allow the product manager to build a supporting budget. On the revenue side,
this budget shows the forecast sales volume in units and the average price. On the expense
side, it shows the cost of production, physical distribution, and marketing, broken down into
finer categories. The difference between revenues and sales is projected profit. Once
approved, the budget is the basis for developing plans and schedules for material
procurement, production scheduling, employee recruitment, and marketing operations.

3. Controls:

The last section of the marketing plan outlines the controls for monitoring the plan.
Typically the goals and budget are spelled out for each month or quarter. Senior
management can review the results each period. Some control sections include contingency
plans. A contingency plan outlines the steps management would take in response to specific
adverse developments, such as price wars or strikes.

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MEGA MARKETING

The term Mega marketing was termed by Philip Kotler. Mega marketing refers to the
marketing activities needed to manage the elements of the firm’s external environment and
try to control those factors. The external environment factors may include political, legal
and technological factors. Other factors may include media, social groups and pressure
groups as well. The company undertakes various mega marketing strategies widely to
market its products globally to generate profit and perform better than the competitors.
Philip Kotler suggested that two more P’s are essential in a market mix.

Public relations –The businesses needs to be acquainted to the external environment

before actually entering the market. This is how the businesses maintain the goodwill with
other organizations. These may include education, charitable causes etc. PR is done mostly
prior to entering a market. A company that wants to familiarize itself with the new market
environment as well as make itself noticed conducts PR events and partakes in PR activities.
PR activities are generally spread with the help of local media to make the company more
visible to the local residents.

Power- According to Philip Kotler, power refers to the ability to make things happen or
prevent any action. The power talked about here is the power of persuasion, to influence the
other parties that may be directly or indirectly involved in your business. This talks about
the relationship with third parties like government, and the power of persuasion with them.
For example, for a new entrant, it would be of benefit to be well connected with important
people from the government to be able to make its way through the entry barriers posed in
the new market.

THE SEVEN STEPS OF MEGA MARKETING ARE:

• Research the market by analysing the external and the internal environment

• Set a marketing plan

• Have a marketing goal

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• Competitor analysis and determining which model works well

• Understanding the demands of the customers and accordingly set the plan

• Set the target customers

• Focus on the people who can buy the product

DEFINITION OF SERVICE MARKETING:

Service marketing is marketing based on relationship and value. It may be used to market a
service or a product. With the increasing prominence of services in the global economy,
service marketing has become a subject that needs to be studied separately. Marketing
services is different from marketing goods because of the unique characteristics of services
namely, intangibility, and heterogeneity, perish ability and inseparability.

In most countries, services add more economic value than agriculture, raw materials and
manufacturing combined. In developed economies, employment is dominated by service
jobs and most new job growth comes from services.

Jobs range from high-paid professionals and technicians to minimum-wage positions.

Service organizations can be of any size from huge global corporations to local small
businesses. Most activities by the government agencies and non-profit organizations involve
services.

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 UNIT -II

TARGET MARKETING

Target marketing is the process of assessing the relative worth of different market segments
and selecting one or more segments in which to compete. These become the target
segments. Titan is using the target marketing strategy very effectively. German car
manufacturer Mercedes target high status consumers with experience and prestigious motor
cars.

According to David Cravens and others “Target market is a group of existing or potential
customers within a particular product market towards which an organisation directs its
marketing efforts”.

CONCEPT OF TARGET MARKETING

Total market approach:

A company develops a single marketing mix and directs it at the entire market for a
particular product. This approach is used when an organisation defines the total market for a
particular product as its target market.

Concentration approach:

An organisation directs its marketing efforts toward a single market segment through a
single marketing mix. The total market may consist of several segments, but the
organisation selects only one of the segments as its target market.

Multi-segment approach:

An organisation directs its marketing efforts at two or more segments by developing a

marketing mix for each segment.

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MARKET SEGMENTATION

Definition: Market Segmentation is the process of dividing a market into distinct groups of
customers on the basis of some criteria like demographics, needs, behaviour etc. such that
those within a group are relatively homogeneous with respect to their response to marketing
inputs

PATTERNS OF SEGMENTATION

Undifferentiated Marketing:

Under this strategy, the producer or marketer does not differentiate between different types
of customers. One marketing mix is used for the whole market. Eg. Pepsi.

Differentiated Marketing:

A number of market segments are identified and different marketing mix is developed for
each of the segments. Eg; consumer products.

Concentrated Marketing:

It is concerned with the concentration of all marketing efforts on one selected segment
within the total market. Eg; Kid’s wear.

Customised or Personalised Marketing:

In this case firms view each customer as a separate segment and customised marketing
programmes to that individuals specific requirements. Eg; civil engineers designing flats,
villas, bridges etc.

BENEFITS OF SEGMENTATION

1. Market can be defined more precisely in terms of customer needs

2. Can formulate and implement marketing programmes according to demands in market

3. Identify strengths and weaknesses, accordingly serve the markets

4. More effective utilization of resources

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5. Helps explore and exploit business opportunities, in line with market requirements

ESSENTIALS OF EFFECTIVE MARKET SEGMENTATION

Measurability-Segment should be measurable and possible to quantify

Definable-Segment should show the degree of homogeneity

Viable-Method should be cost effective and profitable for the marketer

Reachable-It should include physical distribution and communication aspects to reach the
customers

Intensity in competition-The more intense the inter-firm rivalry, the more unattractive a
segment will be for a marketer.

BASES FOR SEGMENTATION:

1. People Oriented Approach

2. Product Oriented Approach

People Oriented Approach is based on Customer Personal Characteristics such as:

Demographic Characteristics

Based on the observable aspects of the population and is a dynamic, complex variable. It
includes segmentation on basis of:

Age- people of different age groups require and prefer different types of products

Ex: Watches, Footwear and soon

Socio-Economic Characteristics

Are predominantly as given below

Income levels- based on income of people

Occupation – the type of jobs held by the population, be it salaried (private/ public sector)
or self employed

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 Education – Literacy levels, Vocational or Professional courses

Social class- upper class, middle class and lower class

Religion, Race, Nationality –it will explain the diversities and irregularities in the market

Geographic location and mobility

Where people live is one of the best clues to what they want to buy, their likes and
preferences. The characteristics include:

Region of the country

Urban, Semi-Urban, Rural

Size of town/city

Climate and weather conditions

Psycho-graphic

Values and Lifestyle (VALS): Classifies individuals on basis of AIO

Activities: Work, Hobbies, Shopping style

Interests: In Food, Fashion, Recreation

Opinions: About themselves/Others, Social Issues

Personality

On basis of the prominent personality traits observed in the population mix. Ex: Analytical,
Expressiveness, Friendliness, Dominance etc.

Product Oriented Approach

Focuses on bases of Customer Response Behaviour towards product. This is also known as
behavioural segmentation.

In this approach the customers are divided based on the way they respond to, use or know of
a product:

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Use Pattern

On basis of the product usage frequency customers may be categorised as light, medium and
heavy users.

Product Usage Occasions

Segmentation is done on basis of the occasions of use. Whether customers are using a
product on regular, everyday occasions or special / festive occasions etc.

Loyalty

Segmentation is based on the loyalty of customers to the product / brand or store. The
customers may be classified as Hard core loyalists, Soft core loyalists, fence-sitters,
experimenters and rejecters.

Benefits Pattern

This form of segmentation focuses on the core benefits and desires of customers, to satisfy
which they may buy products. It is inclusive of such factors as economy, performance,
durability, product appearance and status

PRODUCT POSITIONING

The act of creating an image about a product or brand in the consumers mind is known as
positioning.

In the words of Kotler, “Positioning is the act of designing the company’s offer and image
so that it occupies a distinct and valued place in the target consumers minds.” In short, the
process of creating an image for a product in the minds of targeted customers is known as
product positioning. Close-up tooth paste is looked upon by the consumers more as a mouth
wash than a teeth cleaner, while ‘pepsodent’ has created an impression of germ killer in the
consumers’ minds.

STEPS IN PRODUCT POSITIONING

1) Identifying potential competitive advantages: Consumers generally choose products and

services which give them greatest value. The key to winning and keeping customers is to

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understand their needs and buying processes far better than the competitors do and deliver
more values.

2) Identifying the competitor’s position: When the firm understands how its customers
view its brand relative to competitors, it must study how those same competitors position
themselves.

3) Choosing the right competitive advantages: It refers to an advantage over competitors

gained by offering consumers greater value either through lower price or by providing more
benefits.

4) Communicating the competitive advantage: The company should take specific steps to
advertise the competitive advantage it has chosen so that it can impress upon the minds of
consumers about the superiority claimed in respect of the product over its competing brands.

5) Monitoring the positioning strategy: Markets are not stagnant. They keep on changing.
Consumer tastes shift and competitors react to those shifts. After a desired position is
developed, the marketer should continue to monitor its position through brand tracking and
monitoring.

ELEMENTS OF POSITIONING

It is concerned with the following four elements.

1) The Product: Design, special feature, attributes, quality, package etc. of product create its
own image in the minds of the consumers. Material ingredient of a product is also important
in the process of product positioning.

2) The Company: The goodwill of a company lends an aura to its brand. For example, Tata,
Godrej, Bajaj etc have very good reputation in the market

3) The Competitors: Product image is build in consumers mind in relation to the competing
product. Thus a careful study of competition is required.

4) The Consumer: Ultimate aim of positioning policy is to create a place for the product in
consumers’ minds. Therefore, it becomes necessary to study the consumer behaviour
towards the product.
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CONSUMER BEHAVIOUR:

Consumer / Buyer behaviour is defined as ― “All psychological, social and physical

behaviour of potential customers as they become aware of, evaluate, purchase, consume and
tell others about products and services.” It is the decision making process involved in
acquiring evaluating, using and disposing of goods and services by a consumer.

SCOPE OF BUYER BEHAVIOUR:

1. Buyer Behaviour involve both individual and group influences

2. Social environment plays an important role

3. Is reflected from awareness through post purchase evaluation indicating satisfaction or

dissatisfaction

4. Includes purchase, consumption and communication

5. Includes both consumer and business buyer behaviour

IMPORTANCE OF STUDY OF CONSUMER BEHAVIOUR

The modern marketing management tries to solve the basic problems of consumers in the
area of consumption. To survive in the market, a firm has to be constantly innovating and
understand the latest consumer needs and tastes. It will be extremely useful in exploiting
marketing opportunities and in meeting the challenges that the Indian market offers. It is
important for the marketers to understand the buyer behaviour due to the following reasons.

1. The study of consumer behaviour for any product is of vital importance to marketers in
shaping the fortunes of their organisations.

2. It is significant for regulating consumption of goods and thereby maintaining economic

stability. It is useful in developing ways for the more efficient utilisation of resources of
marketing. It also helps in solving marketing management problems in more effective
manner.

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3. Today consumers give more importance on environment friendly products. They are
concerned about health, hygiene and fitness. They prefer natural products. Hence detailed
study on upcoming groups of consumers is essential for any firm.

4. The growth of consumer protection movement has created an urgent need to understand
how consumers make their consumption and buying decision.

5. Consumers tastes and preferences are ever changing. Study of consumer behaviour gives
information regarding colour, design, size etc. which consumers want. In short, consumer
behaviour helps in formulating of production policy.

6. For effective market segmentation and target marketing, it is essential to have an

understanding of consumers and their behaviour.

FACTORS INFLUENCING CONSUMER BEHAVIOUR/ BUYING DECISIONS

All factors which determine the buying or consumer behaviour are broadly classified into
six. Psychological factors, Social factors, Cultural factors, Personal factors, Economic
factors and Environmental factors.

PSYCHOLOGICAL FACTORS

The following are the important psychological factors:

Consumer Needs and Motivation

All buying decisions start with need recognition. People always seek to satisfy their needs.
When need is not satisfied it drives people to satisfy that need. Then the need becomes a
motive. Thus motive arises from needs and wants. The force that converts needs into
motives is called motivation.

Perception

It is the process of selecting, organizing and interpreting information in order to give

meaning to the world or environment we live in. the way the consumers display selective
attention, distortion or retention motivates marketers to design the product, package,

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promotional themes etc. The marketers should understand the consumer perception and
convert perception into a buying response.

Learning

Learning is the process of acquiring knowledge. Generally, learning results in four ways
Listening, Reading, Observing and experiencing. The importance of learning theory for
marketers is that they can create demand for a product by associating it with strong drives,
using motivating cues and providing positive reinforcement.

Belief and Attitude

A belief is a descriptive thought that a person holds about something. Such thoughts are
based on learning, opinion or faith. For example, A consumer believes that Maruti cars are
less costly and fuel efficient. Attitude means a person’s feelings towards a particular object
or situation.

SOCIAL FACTORS

The major social factors are as follows

Reference Group

Consumer behaviour is influenced by various groups within society known as reference

groups. We have several reference groups with whom an individual associate such as
friends, relatives, classmates, club memberships etc. In each groups there is an opinion
leader whose style is adopted by others. Marketers often identify such opinion leaders and
develop advertisement featuring them as endorsers.

Role and Status

A person takes up many roles in different situations in his /her life. He can be son, father,
husband, employee etc. Each role has a status. A person’s role and status influence his
general as well as buying behaviour.

Family

Family is one of the important factors influencing buying behaviour.

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CULTURAL FACTORS

Culture determines and regulates our general behaviour. The major cultural factors are as
follows:

Culture

Culture simply refers to values and beliefs in which one is born and brought up. It is a set
of Ideas, Customs, Values, Art and Belief that are produced or shaped by a society and
passed on from generation to generation. Culture influence what we eat and wear, how we
relax and where we live etc.

Sub-Culture

It is based on religion, language, geographic region, nationality, age etc. It is a segment

within a large culture that shares a set of beliefs, values or activities that differ in certain
respects from those of the main or overall culture. The food habits are different in different
parts of India.

Social Class

A social class is a group of people with similar values, interest and behaviour within a
society. Consumers buying behaviour is determined by the social class to which they belong
rather than by their income alone. The social class is based on income, education,
occupation, family history, wealth, lifestyle, area of residence etc.

PERSONAL FACTORS

Personal factors are unique to a particular person. These factors include demographic factors
and are as follows.

Age

Need and wants are determined by age. So buying changes with age, Taste for food,
clothing and recreation etc. changes with age.

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Stages in the Life Cycle

People buy different goods during different life cycle stages. Life cycle of an individual
refers to the different phases of his or her life.

Occupation and Economic Status

Occupation influences product choice, brands beliefs etc. It determines income, buying
power and status.

Life Style

It indicates how people live, how they spend their time, how and what they choose and
where they shop. It is the way people eat, drink, spend leisure time, work and so on.

Personality

Personality refers to the unique psychological characteristics of an individual. Personality

of consumers influences brand preference and choice of products.

Self-Image

Self image implies what one thinks of himself/herself .It is the way one sees himself/herself
or wishes to see himself/herself or wants to be seen by others. Self-concept is an important
factor to marketers in planning advertising campaign.

ECONOMIC FACTORS

The various economic factors which determine consumer behaviour are as follows:

Personal Income

Gross income of a person is composed of disposable and discretionary income. When

disposable income rises, the expenditure on various items will increase and vice versa.

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Family Income

It is the aggregate income of all members of a family. The family income remaining after
the expenditure on the basic needs of the family is made available for buying goods,
durables and luxuries

Income Expectations

If a person expects any increase in his income he will buy durables on hire purchase etc, if
his future income is likely to decline he will restrict his expenditure to bare necessities.

Savings

When a person decides to save more, he will spend less on comfort and luxuries.

Liquidity Position

If an individual has more liquid assets, he goes in for buying comfort and luxuries.

Consumer Credit

If Consumer Credit is available on liberal terms, expenditure on comfort and luxuries will
increase.

ENVIRONMENTAL FACTORS

The various environmental factors which determine consumer behaviour are as follows:

Political Situation

In state monopolies, consumers have to be satisfied with a limited range of products, but in
market oriented economy like that of USA, consumers have wider choice.

Legal Forces

Consumers make purchases within the legal framework. All purchase dealings are carried
on within legal limits.

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Technological Advancements

Technological advancements bring wide range of changes in products/ services and makes
consumers go in for latest products.

CONSUMER BUYING PROCESS (CONSUMER DECISION MAKING PROCESS)

RECOGNITION OF AN UNSATISFIED NEED:

All buying decisions start with need recognition. When a need is not satisfied it creates
tension. This tension drives people to satisfy that need. Then need becomes motive. Thus
motives arise from needs and wants. The force that converts needs into motives is called
motivation.

Identification of alternatives:

After recognizing a need or want consumers search for information about the various
alternatives available to satisfy it. If the need is usual, such as hunger, thirst etc. the
consumer may rely on past experience of what satisfies this need. If needs are unusual or
unfamiliar, consumer may seek additional information from friends, family, media, sales
people etc. it is only through this information search that we can identify the means of
satisfying our need.

Evaluation of alternatives:

By collecting information during the second stage, an individual comes to know about the
brands and their features. Now he compares the alternative products or brands in terms of
their attributes such as price, quality, durability etc. during the evaluation stage he may
consider the opinion of others such as wife, relatives and friends. Then he selects the brand
that will give him the maximum utility (or that he thinks the best).

Purchase decision:

Finally the consumer arrives at a purchase decision. Purchase decision can be one of the
three, namely no buying, buying later and buying now. If he has decided to buy now, he will
decide the shop (dealer) to buy it from, when to buy it, how much money to spend etc. After
deciding these, he will go to the shop chosen and buy the product of the brand chosen.
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POST PURCHASE BEHAVIOUR:

It refers to the behaviour of a consumer after purchasing a product. After the consumer has
actually purchased the product/brand he will be satisfied or dissatisfied with it. If he is
satisfied with the product he would regularly buy the brand and develop a loyalty. He
recommends the brand to his friends and relatives.

BRAND LOYALTY

It simply means loyalty of a buyer towards a particular brand. Wilkie defined loyalty as, “
A favourable attitude and consistent purchase of a particular brand.” For example, if a
customer has a brand loyalty towards ‘Pears’, he will buy and use only that soap. There are
three levels of Brand Loyalty.

Brand Recognition

This means that people are familiar with the product and they are likely to buy it.

Brand Preference

At this level people adopt the product- that is, they habitually buy it if it is available.

Brand Insistence

It is the stage at which people will not accept any substitute.

INDUSTRIAL BUYER BEHAVIOUR:

Consumers goes through complex buying behaviour when they are highly involved in a
purchase and aware of significant differences among brands. Consumers are highly involved
when the product is expensive, bought infrequently, risky and self-expensive. Here
consumers go through a rational/logical thinking process to collect as much information as
possible about the available brands. Behaviour exhibited while purchasing a car is an
example of complex buying behaviour.

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COGNITIVE DISSONANCE:

is the inner tension that a consumer experiences after recognizing an inconsistency between
behaviour (purchase decision) and values or opinions (buyer‘s beliefs). Did I make a good
decision? Did I buy the right product? Did I get a good value?

Marketing can minimize Cognitive Dissonance through:

1. Effective Communication
2. Follow-up
3. Guarantees & Warranties

STEPS INVOLVED IN MARKETING RESEARCH

Identification and Defining the Problem:

The market research process begins with the identification “of a problem faced by the
company. The clear-cut statement of problem may not be possible at the very outset of
research process because often only the symptoms of the problems are apparent at that
stage. Then, after some explanatory research, clear definition of the problem is of crucial
importance in marketing research because such research is a costly process involving time,
energy and money.

Statement of Research Objectives:

After identifying and defining the problem with or without explanatory research, the
researcher must take a formal statement of research objectives. Such objectives may be
stated in qualitative or quantitative terms and expressed as research questions, statement or
hypothesis. For example, the research objective, “To find out the extent to which sales
promotion schemes affected the sales volume” is a research objective expressed as a
statement.

Planning the Research Design or Designing the Research Study:

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After defining the research problem and deciding the objectives, the research design must be
developed. A research design is a master plan specifying the procedure for collecting and
analyzing the needed information. It represents a framework for the research plan of action.

Planning the Sample:

Sampling involves procedures that use a small number of items or parts of the ‘population’
(total items) to make conclusion regarding the ‘population’. Important questions in this
regard are— who is to be sampled as a rightly representative lot? Which is the target
‘population’? What should be the sample size—how large or how small? How to select the
various units to make up the sample?

Data Collection:

The collection of data relates to the gathering of facts to be used in solving the problem.
Hence, methods of market research are essentially methods of data collection. Data can be
secondary, i.e., collected from concerned reports, magazines and other periodicals,
especially written articles, government publications, company publications, books, etc.

Data Processing and Analysis:

Once data have been collected, these have to be converted into a format that will suggest
answers to the initially identified and defined problem. Data processing begins with the
editing of data and its coding. Editing involves inspecting the data-collection forms for
omission, legibility, and consistency in classification. Before tabulation, responses need to
be classified into meaningful categories.

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 UNIT-III

PRODUCT DEFINITION

A product can be defined as a collection of physical, service and symbolic attributes which
yield satisfaction or benefits to a user or buyer. A product is a combination of physical
attributes say, size and shape; and subjective attributes say image or "quality". A customer
purchases on both dimensions According to Jobber(2004), “ A product is anything that has
the ability to satisfy a consumer need.” In the words of Dibb et al ,” A product is anything,
favourable and unfavourable that is received in exchange.”

CLASSIFICATION OF PRODUCTS

A product's physical properties are characterized the same the world over. They can be
convenience or shopping goods or durables and nondurables; however, one can also classify
products according to their degree of potential for global marketing:

i) Local Products - seen as only suitable in one single market.

ii) International Products - seen as having extension potential into other markets.

iii)Multinational Products - products adapted to the perceived unique characteristics of

national markets.

iv) Global Products - products designed to meet global segments.- Products and services fall
into two broad classes based on the types of consumers that use them

A - Consumer Product

B - Industrial Product

CONSUMER PRODUCT:-

“Product bought by final consumer for personal consumption”. Consumer products divided
into four classes.

1. Convenience product

2. Shopping Product

39
3. Specially Products

4. Unsought Product

Convenience Product

Consumer product that the customer usually buys frequently, immediately, and with a
minimum of comparison and buying effort consumer products can be divided further into
staples, impulse products, and emergency products.

Staples Products are those product that consumers buy on a regular basis, such as ketchup,
tooth path etc., Impulse products are those product that purchased with little planning or
search effort, such as Candy bar, and magazine, Emergency product is those when consumer
need is urgent, e.g. umbrellas during a rainstorm etc.

Shopping Product

Consumer good that the consumer, in the process of selection and purchase,
characteristically compares as such bases as suitability, quality, price, and style. Example:
Furniture, clothing, used cars, major appliances and hotel and motel services.

Specialty Products

Consumer product with unique characteristics or brand identification for which a significant
group of buyers is willing to make a special purchase effort. e.g. Specific brands and types
of cars, high-priced photographic equipment, designer clothes etc.

Unsought Products

Unsought products are consumer products that the consumer either does not knows about or
knows about but does not normally think of buying. Most major new inventions are
unsought until the consumer become aware of them through advertising. E.g. Life Insurance
and blood donations to the Red Cross.

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 INDUSTRIAL GOODS

It is meant for use in the production of other goods or for some business or institutional
purposes. Industrial goods are classified into four- production facilities and equipments,
production materials, production supplies and management materials.

Levels of Product Classification

Core Product:

This is the basic product and the focus is on the purpose for which the product is intended.
The fundamental need or want that consumers satisfy by consuming the product or service.
For example, in a hotel industry- Rest and sleep.

Generic /Basic Product:

This represents all the qualities of the product, a version of the product containing only
those attributes or characteristics absolutely necessary for it to function. Eg- room with
basic facilities

Expected Product:

This is about all aspects the consumers expect to get when they purchase a product. The set
of attributes or characteristics that buyers normally expect and agree to, when they purchase
a product. Eg-room service, neatness of room

Augmented Product:

This refers to all additional factors which sets the product apart from that of the competition.
And this particularly involves brand identity and image. Inclusion of additional features,
benefits, attributes or related services that serve to differentiate the product from its
competitors. Eg- Complimentary breakfast / dinner, free access to pool, gymnasium etc.

Potential Product :

This is about augmentations and transformations that the product may undergo in the future.
all the augmentations and transformations a product might undergo in the future. Eg: free
pick up / drop from and to airport, Free Wi-Fi facility in room

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PRODUCT MIX

The number of different product lines sold by a company is referred to as width of product
mix. The total number of products sold in all lines is referred to as length of product mix.

FACTORS INFLUENCING PRODUCT MIX

1. Change in demand.

2. Marketing influences.

3. Production efficiencies.

4. Financial influence.

5. Use of waste.

6. Competitor’s strategy.

7. Profitability.

PRODUCT LINE

Product lining is the marketing strategy of offering for sale several related products. Unlike
product bundling, where several products are combined into one, lining involves offering
several related products individually. A line can comprise related products of various sizes,
types, colours, qualities, or prices. Line depth refers to the number of product variants in a
line. Line consistency refers to how closely related the products that make up the line are.
Line vulnerability refers to the percentage of sales or profits that are derived from only a
few products in the line. If a line of products is sold with the same brand name, this is
referred to as family branding.

PRODUCT LINE MODIFICATION

When you add a new product to a line, it is referred to as a line extension. When you add a
line extension that is of better quality than the other products in the line, this is referred to as
trading up or brand leveraging. When you add a line extension that is of lower quality than
the other products of the line, this is referred to as trading down. When you trade down, you

42
will likely reduce your brand equity. You are gaining short-term sales at the expense of long
term sales.

 Product Line Contraction

 Product Line Expansion

 Changing Models or Styles of the Existing Products

PRODUCT SIMPLIFCATION

Product Simplification means limiting the number of products a dealer deals. Sometimes it
becomes necessary for a company to stop the production of unprofitable products.

PRODUCT DIVERSIFICATION

Product diversification means adding a new product or products to the existing product. It is
a strategy for growth and survival in the highly complex marketing environment.

PRODUCT DIFFERENTIATION

Product differentiation involves developing and promoting an awareness in the minds of

customers that the company’s products differ from the products of competitors. This is
made by using trade mark, brand name, packaging, labelling etc.

NEW PRODUCT DEVELOLOPMENT

New product development tends to happen in stages. Although firms often go back and
forth between these idealized stages, the following sequence is illustrative of the
development of a new product:

1. New Product Strategy Development. Different firms will have different strategies on how
to approach new products. Some firms have stockholders who want to minimize risk and
avoid investing in too many new innovations. Some firms can only survive if they innovate
frequently and have stockholders who are willing to take this risk. For example, Hewlett-
Packard has to constantly invent new products since competitors learn to work around its
patents and will be able to manufacture the products at a lower cost.

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2. Idea Generation. Firms solicit ideas as to new products it can make. Ideas might come
from customers, employees, consultants, or engineers. Many firms receive a large number
of ideas each year and can only invest in some of them.

3. Screening and Evaluation: Some products that after some analysis are clearly not feasible
or are not consistent with the core competencies of the firm are eliminated.

4. Business Analysis. Ideas are now exposed to more rigorous analysis. Profit projections,
risks, market size, and competitive response are considered. If promising, market research
may be done.

5. Development: The product is designed and manufacturing facilities are planned.

6. Market Testing: Frequently, firms will try to “test” a product in one region to see if it will
sell in reality before it is released nationally and internationally. There is a lesser risk if the
firm only commits money to advertising and other marketing efforts in one region. Retailers
will also be more receptive in other parts of the country and world if it has been
demonstrated that the product sold well in one region. The firm may also experiment with
different prices for the product.

7. Commercialization: Facilities to manufacture the product on a larger scale are now put
into operation and the firm starts a national marketing campaign and distribution effort.

THE PRODUCT LIFE CYCLE

Products often go through a life cycle. Initially, a product is introduced.

Since the product is not well known and is usually expensive (e.g., as microwave ovens
were in the late 1970s), sales are usually limited. Eventually, however, many products reach
a growth phase— sales increase dramatically. More firms enter with their models of the
product. Frequently, unfortunately, the product will reach a maturity stage where little
growth will be seen. For example, in the United States, almost every household has at least
one colour TV set. Some products may also reach a decline stage, usually because the
product category is being replaced by something better. For example, typewriters
experienced declining sales as more consumers switched to computers or other word

44
processing equipment. The product life cycle is tied to the phenomenon of diffusion of
innovation. When a new product comes out, it is likely to first be adopted by consumers
who are more innovative than others— they are willing to pay a premium price for the new
product and take a risk on unproven technology. It is important to be on the good side of
innovators since many other later adopters will tend to rely for advice on the innovators who
are thought to be more knowledgeable about new products for advice. At later phases of the
PLC, the firm may need to modify its market strategy. For example, facing a saturated
market for baking soda in its traditional use, Arm & Hammer launched a major campaign to
get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used
before vacuuming were also created.

PRODUCT INTRODUCTION/ DEVELOPMENT STAGE

This is the first stage in product life cycle. Before a new product is introduced in the market
place, it should be created first. The processes involve in this stage include generation of
idea, designing of the new product, engineering of its details, and the whole manufacturing
process. This is also the phase where

the product is named and given a complete brand identity that will differentiate it from the
others, particularly the competitors. Once all the tasks necessary to develop the product is
complete, market promotion will follow and the product will be introduced to the
consumers. Product development is a continuous process that is essential in maintaining the
product’s quality and value to consumers. This means that companies need to continuously
develop or innovate their products to our ride new and existing competitors.

Product Growth Stage This is a period where rapid sales and revenue growth is realised.
However, growth can only be achieved when more and more consumers will recognize the
value and benefits of a certain product. In most cases, growth takes several years to happen,
and in some instances, the product just eventually died without achieving any rise in
demand at all. Hence, it is important that while the product is still in the development and
introduction stages, a sound marketing plan should be put in place and a market and primary
demand should be established.

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Product Maturity and Saturation Stage

In the maturity stage, the product reaches its full market potential and business becomes
more profitable. During the early part of this stage, one of the most likely market scenarios
that every business should prepare for is fierce competition. As business move to snatch
competitor’s customers, marketing pressures will become relatively high. This will be
characterised by extensive promotions and competitive advertising, which are aimed at
persuading customer to switch and encouraging distributors to continue sell the product.

In the middle and late phases of the maturity stage, the rate of growth will start to slow
down and new competitors will attempt to take control of the market. In most cases, many
businesses falls and lose money in these stages as they focus more on increasing advertising
spending in hope of maintaining their grip of the market.

Product Decline Stage

The decline stage is the final course of the product life cycle. This unwanted phase will take
place if companies have failed to revitalize and extend the life cycle of their products during
the maturity stage’s early part. Once already in this phase, it is very likely that the product
may never again recover or experience any growth, eventually dying down and be forgotten.

BRANDING

Branding means giving a name to the product by which it could become known and familiar
among the public. When a brand name is registered and legalised, it becomes a Trade mark.
All trademarks are brands but all brands are not trademarks. Brand , brand name, brand
mark, trade mark, copy right are collectively known as the language of branding.

TYPE OF BRANDS

In many markets, brands of different strength compete against each other. At the top level
are national or international brands. A large investment has usually been put into extensive
brand building— including advertising, distribution and, if needed, infrastructure support.
Although some national brands are better regarded than others—e.g., Dell has a better
reputation than e-Machines—the national brands usually sell at higher prices than to

46
regional and store brands. Regional brands, as the name suggests, are typically sold only in
one area. In some cases, regional distribution is all that firms can initially accomplish with
the investment capital and other resources that they have. This means that advertising is
usually done at the regional level. Store, or private label brands are, as the name suggests,
brands that are owned by retail store chains or consortia thereof. (For example, Vons and
Safeway have the same corporate parent and both carry the “Select” brand). Typically, store
brands sell at lower prices than do national brands.

In order for a business organisation to successfully create an effective brand that is capable
of enhancing a product’s value, it needs to understand how the delivery of value differs
across different types of brands. This means that a company has to know the kind of brand
suitable for its offering. So what are the different kinds of brand? They are the following:

Manufacturer Brands:

These are developed and owned by the producers, who are usually involved with
distribution, promotion and pricing decisions for the brands. For example, Apple computers.

Dealer Brands:

These are brands initiated and owned by wholesalers or retailers.

Generic Brands:

It indicates only the product category and do not includes the company name or other
identifying terms

Family Brands:

A single brand name for the whole line closely related items. For example, Amul for milk
products.

Individual Brands:

Each product has a special brand name such as surf etc.

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Co-Brands:

It uses two individual brands on a single product.

Licensed Brands:

It involves licensing of trade marks. For example, P&G licensed its Camay brand of soap in
India to Godrej for a few years.

PACKAGING AND LABELLING

Packaging and Labelling are among the most important areas in product management.
Packing means putting article into small packets, boxes or bottles for sale to ultimate
consumers or for transport. Labelling is defined as a slip or tag attached with the product or
with its package which provides necessary information about the product and its producer.

Contrary to common perception that these two processes are all about creating an image and
decent presentation of a product, packaging and labelling have more relevant purpose and
objectives. These include physical protection of product from destructive things that may
spoil or ruin it, e.g. temperature, shock, vibration, etc. Other purposes include containment
convenience, marketing, security, and dissemination of information about the use,
transportation, storage or disposal of the product.

Designing the labels and packages of products require careful planning. Moreover, there are
consumer safety regulations that every businesses should follow. It is the responsibility of
every product manufacturer to respects these rules. Thus, before you start designing product
labels and packaging, it makes good business sense to know what laws will affect you and
what kind of materials will best suit your product.

PRICING

It is the Method adopted by a firm to set its selling price. It usually depends on the firm's
average costs, and on the customer's perceived value of the product in comparison to his or
her perceived value of the competing products. Price is the only revenue generating element
amongst the four Ps, the rest being cost centres. Price is the exchange value of a product /
service expressed in terms of money.

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Price translates into quantitative terms (rupees), the perceived value of the product to the
customer at a point of time. Price = Bundle of expectations OR Total product offering which
are: Product benefits, brand name, package, after sales service, delivery, credit etc.

OBJECTIVES OF PRICING

1. Maximize Profits

2. Survival: Only by covering Variable Costs and some Fixed Costs, company can stay in
business

3. Competitive Situation: Growth in Sales, Meet or follow competition

4. Capturing the Market: Increase Market Share/ Market penetration

5. Market Skimming: Setting high prices to skim the market – get the cream- make it
worthwhile for some segments to adopt the new product

6. Predetermined profit level: achieve a target return

7. Control Cash-flow: Return cash on fund invested within a given period

FACTORS INFLUENCING PRICING POLICIES

The factors that businesses must consider in determining pricing policy can be summarized
in four categories:

1. Costs

In order to make a profit, a business should ensure that its products are priced above their
total average cost. In the short-term, it may be acceptable to price below total cost if this
price exceeds the marginal cost of production – so that the sale still produces a positive
contribution to fixed costs.

2. Competitors

If the business is a monopolist, then it can set any price. At the other extreme, if a firm
operates under conditions of perfect competition, it has no choice and must accept the

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market price. The reality is usually somewhere in between. In such cases the chosen price
needs to be very carefully considered relative to those of close competitors.

3. Customers

Consideration of customer expectations about price must be addressed. Ideally, a business

should attempt to quantify its demand curve to estimate what volume of sales will be
achieved at given prices

4. Business Objectives Possible pricing objectives include:

• To maximize profits

• To achieve a target return on investment

• To achieve a target sales figure

• To achieve a target market share

• To match the competition, rather than lead the market

NEW PRODUCT PRICING STRATEGY.

Entrants often rely on pricing strategies that allow them to capture market share quickly.
When there are several competitors in a market, entrants usually use lower pricing to change
consumer spending habits and acquire market share. To appeal to customers effectively,
entrants generally implement a simple or transparent pricing structure, which enables
customers to compare prices easily and understand that the entrants have lower prices than
established incumbent companies.

Complex pricing arrangements, however, prevent lower pricing from being a successful
strategy in that customers cannot readily compare prices with hidden and contingent costs.
The long-distance telephone market illustrates this point; large corporations have lengthy
telephone bills that include numerous contingent costs, which depend on location, use, and
service features. Consequently, competitors in the corporate long-distance telephone service
market do not use lower pricing as the primary pricing strategy, as they do in the consumer
and small-business markets, where telephone billing is much simpler.

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SKIMMING PRICING:

This is done with the basic idea of gaining a premium from those buyers who always ready
to pay a much higher price than others. It refers to the high initial price charged when a new
product is introduced in the market. For example, mobile phones which when introduced
were highly priced.

PENETRATION PRICING:

The price charged for products and services is set artificially low in order to gain market
share. Once this is achieved, the price is increased. This approach was used by France
Telecom and Sky TV. Competitive pricing: The producer of a new product may decide to
fix the price at competitive level. This is used when market is highly competitive and the
product is not differentiated significantly from the competitive products.

METHODS OF PRICING:

Cost Oriented Pricing

1. Mark-up/ Cost plus Pricing

Marketer estimates the total cost of producing the product and add a mark-up / margin that
the firm desires. The marketer expects a certain rate of return on sales. Mark-up price = a/
(1-r); a= unit cost (fc+vc); r = return on sales

2. Full Cost/ Absorption Pricing

Works out the full cost involved in manufacturing, selling and administering the product.
By adding the required margin towards profit to the total costs from the three operations, the
selling price is determined.

3. Marginal/ Incremental Pricing

Here, the company determines price that recovers its marginal/ incremental cost and get a
contribution towards its overheads.

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4. Break even pricing/ No profit No loss pricing

Break-even point is the volume of sales at which total revenue is equal to total cost. Total
cost is divided into two parts: FC and VC. BEP(price) is determined as follows: Break-even
price = (Total Sales X Fixed Costs) / (Total Sales- TVC)

5.Rate of Return/ Target pricing

A rate of return desired by the enterprise on the amount of capital invested by it is

determined. This amount of profit is added to the total cost of production and the price per
unit is determined.

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 UNIT –IV

MARKETING CHANNEL

Marketing terminology, a channel refers to a way of making a product available to distribute

to the end consumers. A marketing channel helps by getting the right products to the right
consumer in time for purchase. This channel terminology falls under the P of physical
distribution in the four P's of the marketing mix.

There are three ways that marketing channels can accomplish this task. One of Farmer
Joseph's tasks is to make sure his pies are delivered to his customers when they need them.
He has to be concerned with providing specialization and division of labour, overcoming
discrepancies, and providing contact efficiency.

CHANNEL FLOW AND STRUCTURE

The channel flow is a flow which relates different agencies involved in the distribution of
goods and products.

The channel structure is referred to as the combination of different channel members in

achieving organization’s marketing mix strategy.

CHANNEL PARTICIPANTS

The marketing channel consists of various players like manufacturers, producers,

wholesalers and retailers. Manufacturers and producers develop their own marketing
channel to reach the end user. However, not all manufacturers have the expertise in
managing channel participants. Therefore, they need wholesalers and retailers for
distribution of goods.

There are three types of wholesalers; merchant wholesalers, agents and producer’s branch
offices. Merchant wholesalers usually have good capacity of storing and managing goods.
In contrast, agent works as middlemen for producers and end users. Retailers are responsible
for selling goods and products to end users.

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IMPORTANCE OF CHANNEL PARTICIPANTS

The major role of channel participants is to make the distribution and selling of goods and
products efficient. Intermediaries provide manufactures opportunities which for them
financially would not be feasible. Intermediaries provide greater market exposure, market
intelligence, economies of scale and operational knowledge.

Managing channel conflict

Conflict among channel partners adversely affects the distribution of goods and products. It
is important for the channel managers to understand the nature of conflict and come with
solution, which strengthens the distribution network.

However, all issues in the channel cannot be considered as a conflict. The channel manager
needs to assess the frequency of disagreement, level of disagreement and importance of
issue.

Multi Channel Marketing System

Multi channel marketing system has become a prominent way through which goods and
products are delivered to end users. The multi channel system enables the companies to
deliver goods and products to end users as per their preference. The delivery of goods can
be through store, website, mail order, etc.

Franchise

Another innovation in the marketing channel system is the franchise. Franchise enables
brand recognition, standardization of operation structure, access to learning curve and less
financial investment.

MARKETING INTERMEDIARIES

Middlemen or distribution intermediaries are an important part of the product distribution

channel. Intermediaries are individuals or businesses that make it possible for the product to

54
make it from the manufacturer to the end user, essentially facilitating the sales process. The
four basic types of marketing intermediaries are agents, wholesalers, distributors and
retailers.

Agents:

The agent as a marketing intermediary is an independent individual or company whose

main function is to act as the primary selling arm of the producer and represent the producer
to users. Agents take possession of products but do not actually own them. Agents usually
make profits from commissions or fees paid for the services they provide to the producer
and users.

Distributors:

Distributors are similar to wholesalers, but with one key difference. Wholesalers will carry
a variety of competing products, for instance Pepsi and Coke products, whereas distributors
only carry complementary product lines, either Pepsi or Coke products. Distributors usually
maintain close relationships with their suppliers and customers. Distributors will take title to
products and store them until they are sold.

Wholesalers:

Wholesalers are independently owned firms that take title to the merchandise they handle.
In other words, the wholesalers own the products they sell. Wholesalers purchase product in
bulk and store it until they can resell it. Wholesalers generally sell the products they have
purchased to other intermediaries, usually retailers, for a profit.

Retailers

A retailer takes title to, or purchases, products from other market intermediaries. Retailers
can be independently owned and operated, like small provision stores, or they can be part of
a large chain, like Big Bazaar. The retailer will sell the products it has purchased directly to
the end user for a profit.

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IMPORTANT OF CHANNEL MANAGEMENT

Information Provider:

Middlemen have a role in providing information about the market to the manufacturer.
Developments like changes in customer demography, psychographic, media habits and the
entry of a new competitor or a new brand and changes in customer preferences are some of
the information that all manufacturers want. Since these middlemen are present in the
market place and close to the customer they can provide this information at no additional
cost.

Price Stability:

Maintaining price stability in the market is another function a middleman performs. Many a
time the middlemen absorb an increase in the price of the products and continue to charge
the customer the same old price. This is because of the intra-middlemen competition. The
middleman also maintains price stability by keeping his overheads low.

Promotion:

Promoting the product/s in his territory is another function that middlemen perform. Many
of them design their own sales incentive programmers, aimed at building customers traffic
at the other outlets.

Financing:

Middlemen finance manufacturers’ operation by providing the necessary working capital in

the form of advance payments for goods and services. The payment is in advance even
though the manufacturer may extend credit, because it has to be made even before the
products are bought, consumed and paid for by the ultimate consumer.

Title:

Most middlemen take the title to the goods, services and trade in their own name. This helps
in diffusing the risks between the manufacturer and middlemen. This also enables

56
middlemen to be in physical possession of the goods, which in turn enables them to meet
customer demand at very moment it arises.

Help in Production Function:

The producer can concentrate on the production function leaving the marketing problem to
middlemen who specialize in the profession. Their services can best utilized for selling the
product. The finance, required for organizing marketing can profitably be used in
production where the rate of return would be greater.

Matching Demand and Supply:

The chief function of intermediaries is to assemble the goods from many producers in such a
manner that a customer can affect purchases with ease. The goal of marketing is the
matching of segments of supply and demand.

Pricing:

In pricing a product, the producer should invite the suggestions from the middlemen who
are very close to the ultimate users and know what they can pay for the product. Pricing
may be different for different markets or products depending upon the channel of
distribution.

Standardizing Transactions:

Standardizing transactions is another function of marketing channels. Taking the example of

the milk delivery system, the distribution is standardized throughout the marketing channel
so that consumers do not need to negotiate with the sellers on any aspect, whether it is price,
quantity, method of payment or location of the product.

By standardizing transactions, marketing channels automate most of the stages in the flow
of products from the manufacturer to the customers.

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Matching Buyers and Sellers:

The most crucial activity of the marketing channel members is to match the needs of buyers
and sellers. Normally, most sellers do not know where they can reach potential buyers and
similarly, buyers do not know where they can reach potential sellers. From this perspective,
the role of the marketing channel to match the buyers’ and sellers’ needs becomes very
vital.

CHANNEL DESIGN DECISION

Factors Affecting Channel Choice Channel decisions influence other marketing decisions –
Price and Promotion. Is a Key External Resource Influencing Factors in Channel Choice
are:

1. Product factors

• Perishable / Fragile Product – Shorter Channel

• Durable Goods – Longer & Diversified channel

• Custom Made Product- Direct distribution to consumer or industrial user

• Technical product – Direct/ Shortest channel as it requires specialized selling

• High Unit Value Product – Direct channels are preferable

2. Market factors

• Consumer Market-Retailer is essential; Business Market – Retailer not needed

3. Middlemen related factors

• Channel generating largest sales volume at lower unit cost is given top priority

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• Those Middlemen are selected who give o Required Marketing Services o Extend
maximum co-operation , particularly in promotion o Accept marketing policies and
programmers of the manufacturer and implement them

4. Company factors

• Size of the Company

• Product Mix of the company

• Financial resources with the company – if the company is financially weak, it need to rely
on middlemen to get financial and warehousing relief

• Age of the company - New Company needs to rely on middlemen due to lack of
experience and ability

• Quantity and Quality of marketing services provided by the company influence the
channel choice

5. Marketing Environment Business environment –

• Recession: Shorter and cheaper channel

• Prosperity: Expanded distribution network Technological Inventions

• Cold storage facilities have expanded the role of intermediaries in case of perishable
goods

6. Competitors

• Similar channel as adopted by competitors

• Avoid customary channels and adopt different channel strategy - By-pass retail channel
and adopt direct selling or network marketing (Amway)

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CHANNEL CONFLICT AND RESOLUTIONS

Distribution channels are more than simple collections of the company tied together by
various flows. They are quite complex behavioural systems in which people and companies
interact with each other in order to accomplish company, individual, and channel goals.
Some channel systems have only informal interactions among loosely organized companies.
Others consist of formal interactions that are guided by strong organizational structures.
A marketing channel consists of organizations that have partnered for their common goal.
Each and every channel member depends on the other channel members. For example, a
Ford dealer depends on Ford for the design of cars that meet consumer needs. Ford depends
on the dealer to attract buyers, persuade them to buy Ford cars, and service the cars after the
sale. It also gets depended upon the other dealers to provide good sales and service that will
enhance the reputation of the brand. The success of individual Ford dealers depends on how
better the whole Ford marketing channel competes with the other auto manufacturer’s
channel.
Every channel member plays a significant role in the channel. For example, the main role of
consumer electronics maker Samsung is to produce electronics products which will be liked
by the consumers and create demand through national advertising. The best Buy’s role is to
show these Samsung products in convenient locations, answer customers’ questions, and
complete sales. The channel is the most effective when each member assumes that the tasks
it can do best. All channel firms should work together smoothly because the success of
individual channel members depends on overall channel success. They must understand and
accept their roles and responsibilities, coordinate their activities, and cooperate for attaining
overall channel goals.
Individual channel members rarely take such a broad view. Cooperating for achieving
overall channel goals sometimes means giving up individual company goals. Channel
members depend on one another but they often act alone in their own short run best benefits.
They usually disagree on who should do what and for what rewards. These disagreements
over goals, roles, and rewards create
Channel conflict. Horizontal conflict
appears among company at the same level of the channel. For instance, some Ford dealers
at Chicago may complain that other dealers in the city steal sales from them by advertising
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outside their assigned boundaries or pricing too low . Or Holiday Inn franchisees may
complain about other Holiday Inn operators overcharging guests or providing poor service,
harming the overall Holiday In image.

Vertical conflict

refers to the conflicts between different levels of the same channel. In recent years, for
example, Burger King had a steady stream of conflicts with its franchised dealers over
everything from increased ad spending and offensive ads to the charges for cheeseburgers.

CONTEMPORARY MARKETING CHANNELS IN INDIA

Conventional Wholesale Retail Trade Continues to Dominate the Scene: In total contrast
with the Western countries, where formats supermarkets/retail chains dominate the
distribution system. Conventional wholesale retail trade dominates the scene in India.
Again, unlike, the West where a handful of apex distribution chains service the millions of
retail shops, in India stand alone wholesalers/retailers dominate the scene. Some experts
believe that before long we will see the massive growth of distributing companies/retail
chains. Many others, however, feel that in India, large distribution outfits will not replace
traditional distributors in the future.

Image of the Trade is changing: Till recently, the image of a stockiest /distributor in India
was one of a cash rich trader interested in quick profits. Such an image was related to the

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prevailing marketing environment. Many products enjoyed a premium. Often in black, in
view of the all round shortages and the system of price controls. The distributive trade was
making merry at the cost of the consumers. The situation has changed considerably in recent
years. With the increased availability of products, removal of price controls, increased
competition and increased choices to consumers, the environment in which the distributive
trade was operating has changed significantly. The distributor of today has to put in harder
effort to sell the products and has to service the customer properly. Naturally his image has
undergone a change. Companies too are now keen to present to the public/consumers a
cleaner image of their distributors. Conventional wholesale retail trade continues to
dominate the scene, though formats like supermarkets, retail chains and shopping malls are
making a mark.

* Image of channels/distributive are undergoing a change;

* Profiles of distributors to undergo a change;

* Trade margins escalate as costs of distribution keep growing;

* Expectations of distributors in the matter of profits also change;

*The power equation among the distribution triumvirate – principals, distributors and
retailers – shifts in favor of the lower levels;

* Distributors are becoming choosy;

It greatly influences the way marketing channels operate.

GLOBAL PERSPECTIVE

A global perspective is when someone can think about a situation as it relates to the rest of
the world. It may seem silly to some that every business should be concerned with what
goes on in another country, but today we're all connected in a lot of ways. With the use of
the Internet as a means of reaching customers, every mom-and-pop store on the corner can
now compete on a global scale, when you think about it.

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 UNIT-V

PROMOTION

Meaning and Definition.

Promotion is a term taken from Latin word promovere . It means ‘move towards’. In
marketing, promotion means all those tools that a marketer uses to take his product from the
factory to the customer and hence it involves advertising, sales promotion, personal
selling, and public relation. It is necessary to flow the information about the product from
the producer to the consumer either along with the product or well in advance of the
introduction of the product. This role is played by promotion. In the words of Masson and
Ruth, ”Promotion consists of those activities that are designed to bring a company’s goods
or services to the favourable attention of customers”.

ROLE OF PROMOTIONIN MARKETING:

It may be studied in the following heads:

Importance to Business:

Now a days, it is very necessary to communicate information regarding quality, features,

price uses etc. of the product to the present and potential customers. Then only the
consumers will select the product from a wide range of competing products. Most modern
institutions cannot survive in the long run without performing promotion function
effectively.

Economic importance:

In economic sense, it helps to generate employment opportunities to thousands of people.

As a result of promotion sales will increase and it brings economies in the production
process and it reduces the per unit cost of product.

Social importance:

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Promotion has become an important factor in the campaign to achieve some socially
oriented objectives. For eg. Ad against smoking, drinking etc. It also helpful to provide
informative and educational service to the society

Importance to non business organizations:

The non business organizations like govt. agencies, religious institutions, educational
institutions etc also realized the importance of promotion and they are using the various
elements of promotion mix vary widely.

PROMOTION MIX

Firms select a mix of promotional tools to effectively communicate with their target
customer group. The different elements of this group are:

1. Advertising

2. Personal selling

3. Sales Promotion

4. Public relations and

5. Direct Marketing

COMMUNICATION PROCESS

The steps involved in developing an effective promotion program are as follows:

1.Identify the Target Audience:

.Potential Buyer/ Current Users; Decision Maker/ Influencer/User; Profile of Target Group

Determine the Communication Objective:

Design the Message:

Need to develop an effective message through AIDAS Model A-I-D-A-S Model A–

Attention: It is seen by/ captures the attention of the desired prospects I –Interest: It is read
by them with interest and It is properly understood by them as the advertiser wants. D-

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Desire: It is believed by them and wins their confidence and trust, resulting in the desire to
purchase the product A- Action: The prospect acts by reaching to the point of sale. S-
Satisfaction - Reinforce the decision of the purchase, ensure satisfaction

Selecting the message source:

Refers to the actor in the advertisement, company, brand name, salesperson, etc.

Choosing the media:

Between the two broad communication channels:

 Personal Communication: face-2-face, telephone, post, email

 Non-Personal Communication: Radio, TV, Newspaper, Billboards etc.

Collecting Feedback:

Effectiveness of message on the Target Group is measured:

• Whether they remember the message,

• What they remember Likes/ Dislikes

• Intention to buy etc.

ADVERTISING

Advertising It is a paid form of non-personal presentation and promotion of ideas, goods or

services by an identified sponsor. Advertisement is the presentation to a group an oral
and/or visual message regarding a product/ service

OBJECTIVES OF ADVERTISING

It is non personal form of communication paid by a sponsor and is a process of influencing

customers’

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TYPES OF ADVERTISING MEDIA

PRINT MEDIA:

1. Newspapers- wide reach, each household has at least one newspaper but life span is only
one day and literate can only read.

2. Magazines- helps to target a specific group, life span is at least one week but reach is
less compared to newspaper, Illiteracy is limiting factor

3. Trade Journals-services sectors uses this method, helps to target specific group but reach
is very less.

BROADCAST AND ELECTRONIC MEDIA

1. Radio Advertisements:

• Has targeting capabilities

• Inexpensive compared to other traditional broadcast media

• Builds frequency quickly (commercials are replayed throughout the day/evening)

• Branded promotions offer advertisers appealing community involvement opportunities

• No seasonal listener erosion

2. Television Advertising:

Websites/internet & blogs • Need to be computer literate, but otherwise lots of potential for
participation through blogging, list-serves, e- networking, specific websites. Caters to the
Literate public and specific list serves and networks can be set-up for particular
audiences/clients, such as the media directly. Global info can be obtained, not only local or
regional and the youth becoming computer savvy is an added advantage.

Mobile phones and text • Tremendous potential for two-way communication and one- on-
one communication among public directly. Also provides timely information for specific

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publics, teenagers in particular. It has a growing reach, especially in rural areas. Low cost
for text messages makes it highly popular. Text messages must be short and are best if
linked or tied to other communication efforts

Film Advertising: overcome illiteracy and language barriers; AV technique for maximum
impact but only seen by people who come to watch the film

NON BROADCAST MEDIA :

Cinema theatres / multiplexes – cater to a captive audience and ensure the impact is higher
because the focus of the public is undivided and the communication is better received.

Cable TV – Local TV channels and cable TV provide smaller companies the advantage of
being able to advertise to local and regional audiences at more reasonable prices as
compared to advertising on national level TV channels.

OUTDOOR ADVERTISING:

Murals Can be highly educational and participatory, high visibility if done in a high traffic
zone for intended audiences, general public, especially attractive for young people and
children. Murals make good use of space that is otherwise wasted. However, requires
permission and partnership with local owners of the property

Posters No potential for feedback, unless widely tested or if produced together with
communities through participatory processes to the general and specific publics, can deliver
simple messages and slogans. Not necessarily expensive and can often be produced in-
house. Requires visual and written literacy. Generally better for simple messages and
slogans

Billboards Not participatory at all, suitable for General public and specific audiences. Best
means for advertising one main message or slogan. Fairly permanent depending on duration
posted. Highly visible but very expensive. However, people forget to notice after a while

TRANSIT ADVERTISING:

On buses, Subways, Railways, Outside displays on the front, sides, back of buses or other
public transport and at transportation terminals.
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Advantages

• Exposure to one ad can be long if the ad is inside a transit vehicle.

• Frequency, the number of times a viewer is exposed to an advertisement, may be high if

the viewer uses the same method of transportation repeatedly.

• Seen by large and diverse audiences.

• The ad message can be timely because often the person riding mass transit is on the way to
shop, eat or visit an entertainment outlet.

• Ads can be geographically targeted

• Ads can be lifestyle targeted in some instances.

DIRECT MAIL:

Advertising by mail including sales letters, pamphlets, catalogues etc. Most personal and
selective media. Direct mail is a marketing technique in which the seller sends marketing
messages directly to the buyer.

MAJOR DECISIONS IN ADVERTISING

1. Stimulates demand, production, employment and income, leading to rising purchasing

power and better living standards.

2. Facilitates mass production and mass distribution

3. Promote acceptance of new innovations

4. Informative advertising give consumers relevant and adequate information about all
products and exercise their right to choose in an intelligent manner.

5. Builds up brand preference and brand loyalty and therefore greater emphasis is on brand
quality

6. Educative Value as it teaches new ways of life.

7. Increase in sales volume

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8. Facilitates large scale of production

9. Protection from competitors

10. Minimization of seasonal variation in business

11. Stabilization of price

12. Securing dealers

13. Less expensive than salesmanship

14. Provide information and visualization of product

15. It creates employment opportunities for society

SALES PROMOTION

Sales promotion is another major component of promotion mix. The phrase sales promotion
has a distinct meaning. It stands for all those activities that supplement, co-ordinate and
make more effective the efforts of personal selling and advertising. It collectively
comprises of the tools used to promote sales in a given territory and time. It consists of
short term incentives designed to achieve a specific marketing goal in the immediate future.

According to American Marketing Association,” those marketing activities other than

personal selling, advertising and publicity that stimulate consumer purchasing and dealer
effectiveness such as display, shows and exhibitions, demonstrations and various non-
recurrent selling effort in the ordinary routine.”

OBJECTIVES OF SALES PROMOTION

• Introduce New Product

• Attract New Customers

• Provide New Incentives to the Users

• Reduce Seasonal Fluctuation

• Counter-attack the competitors

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• Simplify the task of selling

• Induce Middlemen Sales Promotion Tools: Consumers 1. Samples: Free samples to

induce trial of new.

SALES PROMOTION TOOLS

The sales promotion tools can be seen from the angle of dealers, consumers and sales force.

Dealer promotion/Trade promotion:

Trade promotion objectives are to motivate market intermediaries to invest in the brand and
aggressively push sales. It includes

(a) Price deals: Under this method, special discounts are offered over and above the regular
discounts.

(b) Free goods: Here, the manufactures give attractive and useful articles as presents to the
dealers when they buy a certain quantity.

(c) Ad Materials: In this case, the manufacturer distributes some ad materials for display
purpose.

(d) Trade allowance: It includes buying allowance, promotional allowance and slotting
allowance.

(e) Dealer contests: It is a competition organized among dealers or salesmen.

(f) Trade shows: Trade shows are used to familiarize a new product to the customers.

Consumer Promotion:

The broad objective of consumer promotion is to create pull for the brand and it includes

(a) Rebates: Simply it is a price reduction after the purchase and not at the retail shop.

(b) Money refund offer: Here, if the customer is satisfied with the product, a part or whole
of the money will be refunded.

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(c) Samples: While introducing a new product, giving samples to the customers at their
doorstep.

(d) Price packs: In this method the customer is offered a reduction from the printed price of
product.

(e) Premium offer: Here goods are offered at a lower price or free as an incentive to
purchase a special product.

(f) Consumer contests: Various competitions are organized among the customers. The
winners are given prizes.

(g) Free trials: In this case, inviting the buyers to try the product without cost.

Sales force promotion:

It includes

(a) Sales force contests: Sales contests are declared to stimulate the sales force increase
their selling interest.

(b) Bonus to sales force: Bonus is the extra incentive payment made for those who cross the
sales quota set for a specific period.

(c) Sales meeting conventions and conferences: Sales meeting and conferences are
conducted with a view to educate, train and inspire the salesmen.

PERSONAL SELLING:

Is face to Face interaction with one or more prospective customers for the purpose of
making sales. It is the use of a salesperson to communicate the marketing message of a
company to the customer.

Advantages of personal selling:

1. Is interactive and allows for more persuasion.

2. More suitable when the products in question are technical in nature or have a high cost
per unit.

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3. Helps foster better relationships with the customers.

Disadvantages of personal selling:

1. Widely misunderstood

2. Is labour intensive and involves high pressure

3. Has a limited reach and caters to a limited audience

PUBLIC RELATIONS

Public Relations (PR) is another tool of promotional mix designed to improve, maintain or
project a company or product image. PR is a two way communication between the
organisation and the target group (publics) to establish understanding based on truth,
knowledge and complete information. The Publics of PR include: Customers, Shareholders,
Employees, Trade, Media etc.PR involves number of activities like Press Relations,
Publicity, Corporate Communication, Lobbying, liaising with influential groups etc. It is not
paid for by the organisation. It is the process of building goodwill about the company and
securing favourable public image. Publicity comes from news-reporters, columnists and
journalists. Major Tools of marketing PR are:

1. Company Publications: Magazines, Annual reports, Newsletters etc.

2. News and Press Releases

3. Events: organized by company such as sports tournaments, music, cultural programme,

contests

4. Social Service Activity

5. Messages involving PR communicated through advertising.

Direct Marketing

is an interactive system of marketing used by firms to communicate directly with customers

on one-on-one basis to generate a response and/ or a transaction at any location. The three
elements of DM:

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1. Interactive System

2. Measurability of response

3. Transaction at any location Channels for Direct Marketing are:

Telemarketing:

Tele marketing is defined as the use of telephone as an interactive medium for promotion,
sales and customer service. It utilizes sophisticated telecommunication and information
systems combined with personal selling and servicing skills for following purposes:

• To help companies keep in close contact with present and potential customers

• To increase sales

• To enhance business productivity

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