Marketing Management - Final
Marketing Management - Final
Marketing Management - Final
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PREFACE
Marketing is rightly said as performance of business activities that directs the flow of goods and services from producer to consumer. Marketing is no longer a company department charged with a limited number of tasks-it is a company-wide undertaking. It drives the company vision, mission, and strategic planning. Marketing includes decisions like who the company wants as its customers; which needs to satisfy; what products and service to offer; what prices to set; what communications to send and receive; what channels of distribution to use; and what partnerships to develop. Marketing succeeds only when all departments work together to achieve goals: when engineering designs the right products, fianc furnishes the required funds, purchasing buys quality materials, production makes quality products on time, and accounting measures the profitability of different customers, products and areas. My objective of writing this book is to introduce the basic concept of marketing in the simplest possible language to the readers. I have attempted to explain the basic concepts with the help of examples. All the efforts have been done to make the text free of errors. Still, I dont rule out the possibility of some omission. I will be obliged if such omission can be pointed out and intimated so that necessary modifications can be done in the subsequent editions.
PRIYA JHAMB
FUNDAMENTALS OF MARKETING MANAGEMENT Course Objective: To help students to understand the concept of marketing and its applications, also to expose the Students to the latest trends in marketing. Course Contents: Module I Introduction, Nature and scope of marketing, Functions of marketing, Importance of marketing. Marketing concepts Production concept, Product concept, Marketing concept, Societal Marketing concept.. Selling V/S Marketing, Marketing mix. Module II Marketing Environment - Demographic, Economic, Legal, Socio-cultural, technological. Module III Marketing of services-Nature of services, Characteristics of services, Implications on marketing Module IV Market segmentation and targeting-Levels of market segmentation Basis for segmenting consumer markets, Differentiation and positioning of the market offer. Module V Product decisions -Concept of PLC, PLC marketing strategies, Product classification, new product Development, Brand decisions, Packaging & labelling, Module VI Pricing strategies, Objectives, Determinants of price, pricing methods Module VII Promotion Mix- Factors determining promotion mix, Promotional tools Basics of advertisement, sales promotion, public relations & personal selling, Publicity. Module VIII Place (Marketing channels), Channel structure, Channel design strategies. Module IX Consumer behaviour Nature, scope & significance of consumer behaviour - Factors affecting consumer behaviour.
INDEX
S.I.Nos Chapter No. Subject Page No.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
MARKETING: MEANING AND CONCEPTS MARKETING ENVIRONMENT MARKET SEGMENTATION MARKETING OF SERVICES PRODUCT PLANNING PRICING DECISIONS PROMOTION MIX CHANNELS OF DISTRIBUTION MARKETING RESEARCH AND CONSUMER BEHAVIOUR BIBLOGRAPHY KEY TO END CHAPTER QUIZZES 146
1.1 Marketing is a process which carries goods from producer to ultimate consumer. Marketing bridges the gap between consumer and producer. Marketing is an important activity of all business enterprises. The definition of marketing has been changing from time to time with the changes in the market place and perspective of the marketing men. Marketing has two kinds of definitions traditional & modern. Traditionally, marketing has been defined as the performance of business activities that direct the flow of goods and services from producer to consumers. In this case, marketing begins after the goods are produced and ends with their sale. It emphasizes only one way traffic i.e., transfer of goods from producer to consumers. According to Professer Cundiff and Still Marketing is the business process by which products are matched with market & through which transfer of ownership are effected. According to American Marketing Association, Marketing is performance of business activities that direct the flow of goods and services from producer to consumer. Modern concept of marketing is more than physical process or a set of activities i.e., distribution of goods & services. It is now used in a wider sense, i.e., the creation of customers. It is focusing attention on the consumer and the satisfaction of his needs and is therefore, consumer oriented. Marketing today produces that which consumer needs, in the quantity that the consumer requires, at a price that the consumer can pay for the satisfaction offered to him in the form of goods & services through the various channels of distributions that suit the consumer convenience. According to William Stanton, Marketing is a total system of business activities designed to plan, price, promote, and distribute want satisfying products to target market to achieve organizational objectives. This definition has two significant implications; firstly, the entire system of business activities should be customer oriented. Customer wants must be recognized and satisfied. Secondly, marketing should start with an idea about a want satisfying product and should not end until the customers wants are completely satisfied, which may be some time after the exchange is made. According to Phillip Kotler, Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others. According to this definition marketing starts with human needs and wants. People satisfy their needs and wants with products. The importance of the physical products lie in the service they provide as solution to needs. The consumer considers the different products value and price before making a choice among them. The will choose the product that produces the most value per unit of money. 6
Target Market
Consumer needs
Integrated marketing
Marketing 1. Focuses on Customers needs 2. Begins before production 3. Continues after sale 4. A comprehensive Term in terms of Meaning 5. Philosophy of Business 6. Profits through customer satisfaction 7. Let the seller be aware 8. Integrated Approach 9. Long-term Perspective 10. Customer first then Product.
Selling 1. Focuses on Sellers needs. 2. Begins after production 3. Comes to an end with Sale. 4. A narrow Term in terms of Meaning 5. Routine day to day Physical Process 6. Profits through sales volume 7. Let the Buyer be aware 8. Fragmented Approach 9. Short-term Perspective 10. Product first then Customer
Various Approaches
- The Distribution of goods and services Approach - The delivery of a Standard of living concept - Marketing as a social system. - The creation of utility concept. - The Generation of Revenue concept. - Institutional Approach - Art and Science Approach - Modern Concept of Customers satisfaction
Function of Marketing
A. Managerial Function Planning Organising Staffing Directing Control B. Functional Function Marketing Research Product planning Purchase Assembling of goods Grading & Standard System Branding Storage Transportat ion Packing Selling Advertising Finance Risk Servicing
Stanton also stated: Just as marketing does not begin at the end of the production line, it does not end with the final sale.
NATURE OF MARKETING
Nature can be studied under two parts: (A) Activities performed (B) Various Approaches
(A)Activities Performed
The following activities describe the nature of marketing:1. Consumer Research Consumer is the king of the market. Every product should be according to his tastes and habits. To know the preferences of the consumer, consumer research should take place. By doing this, the producers will also be able to achieve their targets and profits. 2. Determination of Product and Price Policies The effective manufacturing of a product depends upon product policies and effective sale is the result of proper price policy. These policies include color, design, size, brand name, trademark, label and price of a product. 3. Determination of Distribution Channel After manufacturing the product, the marketing has to decide the channel through which the product will flow from factory to potential consumers. They include the decisions related with retailers, wholesalers, recruitment of salesman etc. 4. Promotion Decisions The purpose of these decisions is to inform, to remind and to persuade, these decisions decide about the promotion mix which include advertising, personal selling publicity and sales promotion. 5. After Sale Services These services are provided to satisfy the consumers. These services are given to listen the complaints and doubts of the consumer. These services link up the producer and consumer. Sometimes markets get some valuable suggestions from consumer during this period. These include guarantee, warrantee services etc. (B) Various Approaches :Nature of marketing should be studied through various approaches. By approach here is meant a way of gaining an understanding of subject matter. The important approaches are as follows:1. The distributions of goods & services Approach This approach focus on the flow of goods & Services from producer to consumer. Also, it analyses the 9
means of distribution and lays emphasis on the activities such as buying and selling, branding, packaging etc. It is an old and product oriented approach. 2. The Delivery of Standard of Living Approach This concept has been propounded by Paul Mazur. According to Paul Mazur, Marketing in the delivery of standard of living. Marketing uplifts the standard of living of society. Standard of living can be improved by quality and quality of the products used by consumers. 3. Marketing as a Social System These approach to the study of marketing focuses on the contributions made by the various marketing activities and institutions tot eh overall standard of living of the society. Also, it analyses from the social point of view, the costs, more particularly the social costs art which several marketing functions are performed and cost of the contributions made by each marketing institutions. This approach is based on the social services, history and social philosophy. There are these sub types of social approach (1) The people oriented approach of the psychologists (2) the social system approach of the sociologists and (3) the historical approach of the marketing historians. 4. Functional Approach -The functional approach of the study attempts at the physiological treatment to the subject. It views marketing from the standpoint of group of inter-related activities. The overall marketing process is broken down into economic functions or services, such as buying, selling, transportation storage etc. Each function is then analyzed with a view to determine its nature, need and importance in relation to both marketing institutions and commodities or classes of commodities. 5. Institutional Approach - The institutional approach is analytical in character. It attempts to analyze and describe each segment of the marketing system. It undertakes to describe and analyze the various types of wholesalers, retailers and other institutions which together make up the marketing system. For instance, the retailing system is first divided into its component parts. The each type of retail institution is analyzed in terms of its importance, marketing functions performed by it, cost of its operations, competitive conditions, trends, economic positions etc. 6. Art and Science Approach Sometimes question is asked whether marketing is a science or an art. Form the discussion given below, whether it is science or art or both will be clear. (a) Marketing as a Science Marketing is certainly a social science, as much as marketing is concerned with an organized body of knowledge systematically used. In more and more studies of the subject the scientific method is employed the result of which are reflected in the rapidly developing literature of the field.
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(b) Marketing as an Art The performances of marketing function is also an art. It is in the sense that it is a skill that can be acquired by experience, skill or observation. For example, within a business organization marketing managers have to go about a lot of decision making without the benefit of all the relevant facts which they would like to have. 7. The Generation of Revenue Concept According to the concept, marketing is an economic process whose objective is to generate revenue for the business. Marketing provides the reasonable product to the consumers. It helps in cost reduction also. The marketers get profits with the help of proper marketing strategies and marketing programme. 8. The Creation of Utilities Concepts There are four kinds of utilities (a) Time utility (b) Form Utility (c) Place utility (d) Possession and Ownership Utility. Marketing creates these utilities in a product:(a) Time Utility Wholesalers and retailers provide products to consumers timely. When consumers demand the product, such products are provided to them with the help of marketing. Marketing includes storage, distribution facility which increases the utility of the product with the passage of time. (b) Place Utility Different products have different importance at different places. For example woolen products are in more demand at hill stations. Marketing helps in the flow of goods from producer to consumers at different places. (c) Form Utility We can increase the value of products by changing their forms such as ready made garments are more valuable than unstitched cloth or cotton. Marketing with the help of planning, manufacturing create from utility among products. (d) Possession Utility Change of possession also increases the value of a product. For example furniture is more useful in houses than at the showrooms. Stethoscope is more useful in hands of doctors that than at the shops.
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Scope of Marketing
The applicability area determines the scope of marketing. Philip Kotler includes 10 types of entities in the scope of marketing which are as under: Marketing is used to produce the goods according to consumers needs. The products should satisfy the consumer. Services also come under the scope of marketing. Professionals who provide their services to people also use marketing. For example Accountants, doctors etc. There is a market for experiences also such as weekend spots etc. Marketing is also used to promote events such as cricket matches etc. Now celebrity marketing has also become popular. The marketing of persons is also done. Different places, cities, state are also required marketing. For example State Tourism promotes different places. The area of marketing is property. It is used in selling real and financial property. Organisations, information, ideas are the other area which marketing covers. (B) Functions: These can be classified as under:I. Managerial II. Functional I. Managerial Functions: 1.
Planning function The marketer has to prepare a plan before producing any product
which can include the following :(i) Determination of Price, size, content, design of a product (ii) Determination of markets (iii) To decide intermediaries (iv) To determine distribution channel (v) To decide promotion mix 2. Organisation Functions Organisation means division of work according to the capability of persons. Marketing planning determines what is to be done while 12
organization explains the levels to be maintained. Organisation function should be divided according to the size of a company. 3. Staffing function Under this function, the recruitment, selection, training, and remuneration are decided. 4. Direction function Marketing manager gives directions to his sub-ordinates to achieve the objective. Encouragements, Motivation are the two basic pillars of this function. 5. Control function Marketing is a continuous process. It should be checked regularly. All the hurdles in the way of production should be controlled properly. II. Functional Functions: 1. Market Research Market research helps to know about the tastes, preferences of consumers. It provides the information regarding price, quality of competitive products in the market. 2. Buying Buying represents demand side and goods are bought for the purpose of reselling, production or for consumption. Manufactures and middleman assemble the material through buying process. 3. Selling Selling represents supply side. Marketing aims at selling goods and services at a profit. The selling function involves :(i) Product Planning and development (ii) Prospecting (iii) Pre Approach (iv) Approach (v) Demonstration (vi) Sale (vii) Feedback 4. Standardization and Grading Standardization refers to establishing of norms for features, quality and functions of a product and grading means sorting out the product into different classes on the basis of common features and preestablished standards. The standardization precedes grading process. 5. Branding Branding means naming a product for its identification and distinction. Brands have communication value. They improve product image Lox, Pepsi, Dove are the examples of brand. It is a creative matter to conceive and decide appropriate brand name for a product.
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6. Transportation Transportation is a process of carrying goods from production point to consumption point. It overcomes the hurdle of distance in the flow of goods and creates place utility. Transport has made mass production and wide distribution possible. 7. Storage and Warehousing Storage is a process of preserving goods in good condition till they are consumed and used. It bridges time lag between production and consumption and creates time utility. Storage and warehousing enable marketing to have equalization of supply of commodity to its demand. It is necessary for assembling and distribution of goods. 8. Packaging Packaging has immense convenience and promotional value for marketers. Package means a wrapper or container covering a product and packaging is the activity of designing and producing a container or wrapper for a product. Packaging protects the product and it performs promotion function also. 9. Pricing Pricing is the process of determining price of a product. Price is determined by the manufacturer. Sale can not be performed without price. It is an important P of marketing mix. 10. Advertising Advertising is a paid form of non personal communication of ideas, goods and services by an identified sponsor. It can be audio, visual or both. It is a mass communication medium and a creative work. It can be of various types such as local, regional, national, institutional etc. Marketing performs the advertising function effectively. 11. Financing Financing means providing money and credit to carry on marketing transactions. Producers, wholesalers, retailers, agents and even customers require funds for their activities. Banks, financial institutions and money lenders provide funds. 12. Risk Taking There exists risk of loss in every marketing activity. These losses are of three kinds :(i) Physical loss accident, fire, flood etc. (ii) Credit loss Bad debts etc. (iii) Economic less Fluctuations in demand or supply 13. Marketing information Marketing information refers to the facts and figures pertaining to environmental changes affecting performance of business. Sound marketing decisions and strategies can be formulated only when adequate, relevant and accurate information relating to market conditions, changes in industries and economy, shifts in consumer preference, government, life style of people etc. are made available. 14
14. Servicing Marketing provide different type off after sale services to customers such as guarantee, warrantee etc. These services are important to satisfy the consumers. These services improve the goodwill of the firm.
A. Importance of Marketing to the Firm / Manufacturer According to Peter F. Druker, Marketing is a distinguishing and unique function of the business. The importance of marketing to the business firm may be summarized as under:
B. Importance of the marketing to consumers 1.Increase in consumer satisfaction: Goods are produced according to the
needs and tastes of the consumers, which increases the customer satisfaction.
C. Importance of Marketing to the Society 1.Provides employment: Marketing is an important source of providing
employment. A large number of people are engaged in different marketing activities like storage, transportation, packaging, advertising, sales promotion activities, marketing research etc.
D.Importance of Marketing as a Business Function 1.Bases for business functions: Marketing is the beating heart of the business
organization. The chief executive of a business cant plan, the production manager cant produce, the purchase officer cant purchase inputs and the financial controller cant budget until the basic marketing decisions have been taken. 16
E.Role of marketing in the Economic Development: 1.Importance of marketing in the Economic Development :
Philip Kotler has summarized the importance of marketing in the economic development in four stages: i. Pre-industrial stage: In this stage most of the people are engaged in hunting, herding, farming and handicrafts. Most of the human efforts are devoted to meeting the basic needs for good, clothing and shelter. ii. Early industrial stage: During this stage producers attempt to increase their productivity by increasing the amount of physical capital available and by improving work processes through product standardization. Importance of marketing increases because marketing includes branding storage, transportation, standardization and grading etc. iii. Industrial stage: During this stage producers have achieved a high level of output. The main problem in this stage is to generate sufficient demand, employment and income. The role of marketing increase during this stage of economic development. Some new marketing function such as: product planning, product design, product packaging, promotion, customer service, sales analysis and marketing research, etch has been given much importance. iv. Post-industrial stage: in this economic development, the living pattern of the society took a rapid change. With the increase in percapita income the purchasing power of general public increases. Now people are less interested in quality of their goods and more interested in the quality of their lives. Marketing in this stage not only concerned with consumer satisfaction, but also concerned with consumer welfare. 17
2.Importance of marketing in Developed Economy :In developed economics the volume of production in generally more than the demand. It is because of latest technology and developed infrastructure of production. Many developed of the world like USA, Japan, France, Australia, England, Germany, etc. are developed because marketing is in developed form there. 3.Importance of Marketing in Underdeveloped Economy: Marketing has a special significance in underdeveloped economies. A rapid development of the economy is possible only by adopting the modern methods of marketing. Infect, marketing in underdeveloped economics is still line its infancy. Industrialisation and organisation go hand in hand with application of modern refinements in the field of marketing. Marketing is the most important multiplier and an effective engine of development. It mobilizes latest economic energy and thus, is the creator of business activities. 4. Importance of marketing in a developing country: The importance of marketing in developing countries has been well indicated by Prof. Peter. F. Drucker, according to him marketing plays a critical role in respect of development of developing countries, in the following manners:(i) (ii) (iii) (iv) Development of marketing leads to the integration of various economic sectors of the nations such as agriculture and industry. It makes possible the fullest utilization of existing assets and production capacities. It mobilizes unknown and untapped economic energy. It contributes to the development of entrepreneur and managerial class of people.
STANDARD DEFINITIONS
According to Prof. Philip Kotler, Marketing concept is a customer orientation backed by integrated marketing aimed at generating customer satisfaction, as the key to satisfying organizational goals. 18
2. Production Orientation Concept: Till 1930, there prevailed a strong feeling that whenever a firm has a good product, it results in automatic consumer response and that needed little or no promotional efforts. That is, if the product is really good and the price is reasonable, there is no need for special marketing efforts. The assumptions of this concept are (i) any thing that can be produced can am sold. (ii) The most important task of management is to keep the cost of production town. (iii) A firm should produce only certain basic products. This concept can be illustrated as under :Under this concept, production is the starting point. The product acceptability occurs after the product is produced. 3. Sales Orientation Philosophy: The failures of the production orientation philosophy of 1930s paved the way for change in the outlook that was possible during 1940s. This reshaped philosophy was sales orientation that holds good to a certain extent even today. It states tat mere making available the best product is not enough; it is futile unless the firm resorts to aggressive salesmanship. Effective sales-promotion, advertising and public-relations are of top importance. High pressure salesmanship and heavy doses of advertising are a must to move the products of the firm. The essence of sales-orientation philosophy is Goods are not bought but sold. The maker of product must say that his product is best and he fails if he keeps mum. The assumptions of this philosophy are (i) Producing the best possible product. (ii) Finding the buyer for the product. (ii) Finding the buyer for the product (iii) the managements main task is to convince the buyer through high pressure tactics, if necessary. It can be illustrated as under : The philosophy has been prevailing since 1940. It is more prevalent in selling all kinds of insurance policies, consumer non-durables and consumer durable products, particularly the status symbols. 4. Customer orientation Philosophy : This philosophy was brought into play during 1950s and points out the fundamental task of business undertaking is to study and understand the needs, wants, desires and values of potential consumers and produce the goods in the light of customer rather than the product. The enterprise is to commence with the consumer and end with requisite product. It emphasizes the role of marketing research well before the product is made available in the market place. The assumptions are: 1. The firm should produce only that first product as desired by the consumer. 2. The management is to integrate all its activities in order to develop programmes to satisfy the consumer wants. 3. The Management is to be guided by long range profit goals rather than quick sales. It can be illustrated as under :19
This means a radical change in the philosophy. The meanest two basics changes namely (i) move from production to market orientation. (ii) Graudal shift from age old Cavest emptor to Caveat vendor. Since 1950, this philosophy is in vogue and will continue so long as consumer is the kind of the market. 5. Social Orientation Philosophy: There has been a further refinement in the marketing concept particularly during 1970s and 1980s. Accordingly the new concept goes beyond understanding the consumer needs and matching the products accordingly. This philosophy cares for not only consumer satisfaction but for consumer welfare or social welfare. Such social welfare speaks of pollution-free environment and quality of human life. Thus, a firm manufacturing a pack of cigarettes for consumer must not only produce the best cigarettes but pollution free cigarettes ; an automobile not only fuel efficient but less pollutant one. In the other words, the firm to discharge its social responsibilities. Thus, social welfare becomes the added dimensions. The assumptions of social orientation philosophy are: (i) The firm is to produce only those products as are wanted by consumers (ii) The firm is to be guided by long-term profile goals rather than quick sales. (iii) The firm should discharge its social responsibilities. (iv) The management is to integrate the firms resource and activities do develop programme to meet these individual consumer and social needs. The concept can be illustrated as under. This social oriented philosophy is the latest and is considered as an integrated concept. This philosophy, as it covers earlier long standing concepts, is bounded to rule the marketing world for pretty long time. However, we are to wait and see as to what changes are likely in the coming years and decades that will shape the new marketing concept.
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Product is the sum total of physical and psychological satisfaction it provides to the buyer. A product is sum total of its parts like materials used in its construction and its ability to perform, its packaging, its brand and intangibles associated with it- all speaks about its personality or image. The product mix is the composite of products offered for sale by firm, over period of time. It includes various variables as:-
1.Product line and Product range:- Product line is a group of closely related
products which are able to satisfy a class of needs, to be used together, to be sold at the same consumer groups, to be modified through the same distribution channels or fall within given price range. It speaks of the width of the product. Product range, on the other hand, speaks of the depth of specialisation in terms of varities based on consumer pockets and functional requirements. 2 .Product Design:- The marketing decision starts with designing the product in such a way which is required by the target consumers. Product design is an important factor in the sale of many products. In this the manufacturer decides about the form, the colour and the line of all the products being planned. 3.Product package:- Package is the container or wrapper used to house the product. Packaging is the general group of activities in designing the container or wrapper of the product. A good package protects the product, provides convenience to the consumer, increases economy and communicates. Attractive packages have a communication value. 4. Product Quality:- Establishment and control of quality standard is a basic step in merchandising. Generally, specific grades or standards of quality are established for the products either by the agreement among producer and by law. Product quality depends on proper design, engineering, choice of materials, manufacturing processes and packaging. 5. Product Labelling:- A product label may be either descriptive, informative, grade designating or a combination of these. Labels are fixed to products to identify them and to describe their ingredients, quantity, quality and other characteristics. In very country, labeling is mandatory in case of food, drug and cosmetics products so that manufacturer is to give details of his name, place and date of manufacturing, expiry date, composition and so on. 6. Product Branding:- A brand is a symbol, a mark, a name, a communication which brings identity of a given product. A brand is a particular image, a quality, a value and personality. A good brand name is one which is easy to remember, pronounce, describe the product. 7. After Sale Services:- With the increase in the use of machinery, appliances and equipments, there is need for after sale services. After sale services as the name suggests, are the services provided by the producer after sale of the product in order to provide maximum satisfaction to the consumers.
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THE PRICE MIX: Price is the value of product expressed in terms of money. It is the price of the product that ensures a decent return on investment, guarantees stable economic structure, creates, maintains and extend market and market share. The various price mix variables are:1.The pricing policies and strategies:- These are the guidelines and the frames within which management administers prices so as to match them to the market needs. These policies can be broadly identified as policies involving price variations, leadership variations, psyche of the consumer. 2.The Terms of Credit:- Without the ability of offer some form of deferred payment or installment buying, many of the producers sold by the business houses would never activise the size of the market needed to get production economies of scale. Credit, by expanding the market, can make new firms of production economical worthwhile. The modern business is built upon the credit. 3.Terms of delivery:- Delivery of goods to the dealers, middlemen and customer is of vital importance. Clear cut policies are to be spelled out regarding the terms of delivery as to the quantity, time and place of delivery and the conditions of valid delivery. 4.Margin:- It is the difference between final price paid by the consumer and the cost incurred in making the product available to the consumers. This includes margin of wholesaler, retailer and producer. It has been observed that articles particularly, consumers durables and non durables need lower margin because of low consumption. On the other hand, the industrial products requiring after sale services and maintenance will need high margin. 5. Resale Price Maintenance:- It is the practice whereby the manufacturers or distributors or importers recommended the price or profit margin at which product will be sold. It is a policy of estabilishing a minimum resale price below which a wholesaler or retailer may not sell the products of the manufacturer.
THE PROMOTION MIX Promotion mix is the communication mix which deals with the personal and impersonal persuasive communication about the product or service of the manufacturer. Though companies communicate with their present and potential customer in a variety of ways, the two most common categories namely, personal and impersonal. It includes:-
3.Sales Promotion:- It implies special offers. It deals with offering of short term
incentives such as coupons, premium, contest for consumers, buying allowance etc. sales promotion is the achievement of short term marketing objectives by schematic means.
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END CHAPTER QUIZZES: 1.Marketing aims at:a) Earning profits. b) Customer satisfaction. 24
2.Marketing starts:a) b) c) d) Before production of goods. At time of production. After production of goods. At selling of goods.
3.Production oriented philosophy emphasis on:a) b) c) d) Production of goods. Product only. Providing services. Customer.
4.Marketing ends at:a) b) c) d) Providing after sale services. Making sales. Delivery of goods to customers. Marketing research.
7.Social orientation philosophy aims at:a) b) c) d) Consumer satisfaction. Consumer welfare. Earning profits at any cost. None of above.
9.Marketing is the performance of business activities that direct the flow of goods and services from ----------------------- to ------------------------------.
a) b) c) d) Producer, Consumer. Consumer, Producer. Producer, Wholesaler. Wholesaler, Retailer.
CHAPTER-II
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MARKETING ENVIRONMENT
Contents:
2.1 2.2 2.3 2.4 Marketing Environment Factors affecting marketing environment Micro factors Macro factors
2.1 In a rapidly changing works, successful companies cannot afford to remain inward looking only. A periodic assessment of the outside inside view of their business is necessary is adapt their businesses to their business is necessary to adapt their business to either best opportunities.
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According to Kotler. A companys marketing environment consists of external actors and forces that affect the companys ability to develop and maintain successful transitions and relationships with its target customers. It may be appreciated that marketing environment is comprised of uncontrollable factors and forces that have an impact on the companys marketing effort.
2.2 Various factors and forces of marketing environment can be distinguished into two parts:a) Micro- Environment: Consisting of actors in a companys immediate environment that can affect its ability to serve its markets. These actors are the company, its suppliers, its marketing intermediaries, customers, competitors and public. b) Macro Environment: Consisting of large social forces that affect all the actors in the companys micro-environment. These forces are demography, economic, physical, technological, political/legal and socio-cultural in nature. 2.3 THE FACTORS OF MICRO-ENVIRONMENT In order to carry out its business, a company comes in contract with various agencies/actors which affect its functioning. Although the list may be large, on the whole six major types of actors which come in direct contact with an enterprise have been identified. a) b) c) d) e) f) Company Suppliers Marketing intermediaries Customers Competitors Public
a) Company :
The first actor of micro-environment is the company itself. The nature of business of a company will greatly affect its functioning. The mission and objectives of a company, and the top managements business philosophy will have a direct bearing on the marketing strategies of company e.g. if a company is into manufacturing industry, its marketing activities will be different from a company in the services sector. b) Suppliers :28
The suppliers provide input to run a business. They can affect the company in various ways. The marketers must keep a watch on availability and price patterns of raw material and article components to run an enterprise. The marketing strategies may have to be modified at a very short notice, e.g. if the price of raw material is rising the marketers have to raise their prices. If there is less availability of it the marketers should avoid booking very big order. c) Marketing Intermediaries :These are the facts which keep a company promoting, selling and physically distributing goods and services from company to their final customer/consumers or buyers. But they may create bottlenecks in physical distribution. They may resort to handling, undercutting and unhealthy competition which can damage the interests of the marketers. They may not pass on the promotional schemes of a company and thus may disrupt even the most meticulously designed marketing plans. d) Customers :They are the eons for whom the entire marketing is done. Their role can hardly be underplayed because it the marketing strategies of a company are not suited to their needs, they can be rejected out rightly. The customers may comprise of consumers, industries, resellers, government and non-profit organizations and international customers. The strategies will differ for each type of customers. So, these marketing mix and promotion schemes must be suited to the needs of customers. e) Competitors : In the era of globalization of business, competitors emerging as a major actor of a companys micro-environment. The level of competition has intensified manifold and this diverts the companies of several strengths like product differentiation and brand images. The products are becoming homogeneous and their life cycles are becoming shorter and shorter. This calls for rapidly changing the strategies of companies. It may be appreciated that by increased product proliferation, the competitions has set in at various levels such as desire competition, generic competition, form competition and brand competition. f) Publics :A public is any group that has actual or potential interest in or impact on a companys ability to achieve its objectives. It can facilitate or impede a companys ability its goals. So, a successful relations with the public has to be manage to ensure success of the marketing activities. 2.4 FORCES IN MACRO ENVIRONMENT
There are six types of forces, viz:a) Demographic Environment b) Economic Environment c) Technological Environment 29
d) Political / Legal Environment e) Socio/Cultural Environment a) Demographic Environment :The size of the population, its geographical distribution, density, mobility, trends age, distribution, birth marriage and death rates, racial, ethnic and religious structure etc. have implications on marketing planning. For example the size and distribution of population limits the size and distribution of markets. The returns will be higher in densely populated areas such as metropolitan cities as compared to population distributed over a wide area like deserts. b) Economic Environment :More number of people does not constitute a market. They must have purchasing power as well. The purchasing power is dependent on factors such as current income, prices, savings and credit availability. The marketers have to be in a position to understand the effects of each of these and should also be able to recognize future trends and their repercussions in marketing planning. For example, in light of South East Asian crises, several companies postponed their expansion plans in the area. The focus shifted from luxury items to const efficient products. c) Physical Environment :The physical environment can be source of both opportunities as well as threats to the business. This can be creating scarcities as well as availability of resources which can affect business. For example in India, a good monsoon means good agricultural produce. This means higher income of large section of society and hence better opportunity for marketers to induce customers to purchase.
d) Technological Environment :The present age is an ear of the technological revolution. The world is changing at a very fast pace. The companies have to keep pace with this change. For example, the change is evident in electronics industry where the models become obsolete very soon. This calls for a lot of investment in R&D. The marketers have to price their products accordingly.
e) Political Environment :The political environment and legal development have a tremendous impact on marketing decisions. The political and legal environment is comprised of laws affecting business, government agencies and pressure group that influence and constrain various organizations and individuals in society. A wide range of laws affects business of and marketing activity and marketers have to comply with them. The product, price, etc, have to be in compliance with prevailing laws, conventions and practices. For example, the NGOs working on environment protection have a persuaded several state 30
governments to impose a ban on use of polythene bags as packaging material. The marketers will have to resort to alternatives means of packing their products. f) Socio/Cultural Environment :The socio cultural forces affect marketing decisions in several ways. The beliefs of people, their values and norms have to be always considered. The core cultural values must be identified and also their modifications at the level of subcultures must be studied. These get affected by secondary cultural values and also change over a period of time. The marketers can design their products and promotion campaigns keeping these in mind.
a) b) c) d)
3.Macro marketing environment analyses ------------------------marketing factors:a) b) c) d) Internal. External. Both of above. None of above.
4.Study of economic environment includes study of market on the basis of :a) b) c) d) Age. Economic conditions. Sex. None of above.
5.Demographic forces includes:a) b) c) d) Income of the consumer. Competition in the market. Technology. None of above.
6.Legal forces includes restrictions imposed by:a) b) c) d) Law of the country. People. Company. None of above.
7.Macro forces includes:a) b) c) d) Demographic factors. Economic factors. Political factors. All of above.
8.Micro environment doesnot include:a) b) c) d) Suppliers Economic environment. Market intermediaries. Customers.
9.Competition includes:32
a) b) c) d)
10.Environment means:a) b) c) d) Factors effecting the organization. Factors not effecting at all. Study of only those factors which has positive impact. Study of the factors having negative effect.
Objectives of marketing segmentation Requirement for effective segmentation Basis of Market Segmentation Marketing strategies Product Differentiation and Marketing Segmentation
People have different needs and values, therefore, a marketer cant serve all customers in a broad market such as automobiles or soft drinks. This all happens because consumer is unique in one respect that he is not like others in some respects. The customers are too numerous and diverse in their buying requirements. The marketers needs to identify the market segments that is can serve more effectively. A marketer must define his target market. According to Philip Kotler target marketing requires marketers to take three major steps: (i) Identify and profile distinct groups of buyers. (ii) Select one or more market segments. 34
(iii)
3.1 MEANING
Market Segment is a meaningful buyer group similar wants. It is the portion of the market designed on the basis of same features of people it covers. Thus, market segment includes buyer group with similar wants, purchasing power, geographic location or buying habits. Market Segmentation is the process of dividing a potential market into distinct sub-markets of buyers with homogeneous needs and characteristics. It is the process of dividing the market in order to conquer them. It is identify the groups of buyers on the basis of difference in their desires and requirements. The strategy of market segmentation involves the development of two or more different marketing programmes for a given product or a service with each marketing programme aimed at a different grouping of individuals.
DEFINITIONS
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2. Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several submarkets or segments, each of which tends to be homogeneous in all significant aspects. William J. Stanton Analysis : Thus market segmentation is a process of dividing marketing into some parts on certain basis. Market segmentation is based on the nation that markets are heterogeneous and not homogeneous in themselves. Inspite of heterogeneity, the buyers of products can be divided into homogeneous groups. 3.2 OBJECTIVES OF MARKET SEGMENATION
The objectives of market segmentation are as under :1. 2. 3. 4. 5. 6. To formulate marketing programme for each consumer group according to their nature. To know the needs, buying habits, necessities and priorities of buyers. To achieve market targets. To make the marketing policies and strategies customer oriented. To expand market and satisfy the consumers. To develop news products according to consumers needs.
REASONS FOR THE DEVELOPMENT OF MARKET SEGMENTATION 1. Technological Process : With a rapid change in technology, the manufacturing units are producing products at the lower costs. Technology has made possible, the production of goods as per the requirement of different market segments. 2. Adoption of Cost reducing Techniques : Nowadays, the marketers are adopting cost reducing techniques. These techniques help the marketer to produce more. This will help in matching the demand with supply in the market segment. 3. Implementation of Marketing Programme : The marketers design marketing programme and marketing mix to achieve success in the market. By market segmentation these policies can be formulated according to the needs of consumers. 4. New Product Development :
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Every marketer wants to introduce new products. He takes the help to market research. Market research provides the information regarding needs, desire, choice of consumers. By market segmentation correct information can be collected because consumers come to close with marketers. Product innovations are also possible. 5. Increase in Competition : There is cut-throat competition in the market. Every manufacturer wants to attract more number of buyers. The marketers are adopting modern concept of marketing that is consumer oriented, therefore it is needed to lister consumers. Market segmentation helps in this process because it provides a definite consumer group and a definite product.
3.3 REQUIREMENTS/CRITERIA FOR EFFECTIVE SEGMENTATION To be effective, segmentation of market must exhibit some characteristics that are as follows :1. Identifiable : The consumers of the market segment should be identified. It helps to make marketing programmes effective. This difference can be found on the basis of some characteristics. Consumers of the same group are homogeneous. 2. Measurable : The size, profile of the segment must be measurable. There are various basis for segmenting the market such as Demographic, psychographic. Demographic factors are measurable and psychographic factors are non-measurable. 3. Obtainable : Every market segment should be obtainable in terms of data. Information is required for effective market segmentation. The information obtained should be in the nature of convenient measuring the constitution of market segments.
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1. Mass Marketing :
Mass marketing means providing the same product and applying the same marketing mix to all consumers assuming that there is no difference among consumers in terms of their needs. A marketer affect standardized products to all. Features :(i) (ii) (iii) (iv) (v) The whole market is considers as one segment. Same product for all customers. Common marketing programme to appeal all buyers. Undifferentiated marketing strategy. Large scale production.
2. Product-Variety Marketing :
Under this marketing, a marketer provides different designs, colour, shapes in his product accoroding to the needs and wants of consumers of different segments. Different strategies are adopted to satisfy the consumers.
Features :(i) (ii) (iii) (iv) (v) Mass marketing with product varieties. Adoption of product differentiation approach. No proper segmentation. Products are modified according to the need of customers. Maruti 800, Zen, Suzuki, etc. are the different models produced by Maruti Udyog Ltd. To satisfy various needs of customers.
3. Target Marketing :
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Under this marketing, different segments are to be formulated. Target market means a group of potential buyers of a product, service or idea. Modern Marketing concept is based on target marketing. Features :(i) Total market is divided into different segments. (ii) Different products for different segments. (iii) Product positioning is also under the scope to target marketing.
4. Micro Marketing :
Under this marketing target market is further bifurcated and customers needs are satisfied on a local bases. This marketing is adopted to satisfy the needs of customers at a specified place.
I.
Geographic Segmentation :
Geographic segmentation means dividing the market into different geographical units. That is the customers are classified on the basis of geographical areas where they reside. National market, State market, local market and urban-rural market, denote territorial coverage of market. Market sepgmentation can also be made on the criteria of climatic conditions of customers areas e.g. Hot, Cold, rainy regions. Marketers may choose to restrict their operations to a secific area, say a city, a district or state. The following are the basis of geographical segmentation. Region City Size Density of area : Climate II. : North, East, West, South, Central. : Metropolitans, Small cities, towns Urban, Semi-urban, Rural : Hot, Cold, Humid, Rainy.
Demographic Segmentation :
Market segments are defined according to demographic such as age, sex, income, family life cycle, occupation, religion etc. Demographic factors are most popular factors to segment the market. These variables are easy to measure. The following are the basis of demographic segmentation : Age : 0-5, 6-12,13-19,20-34, 35-49, 50-64, 65 above 39
Sex Marital Status Income Family size Family life cycle Education : Religion Nationality
: Male, Female : Married/unmarried : High income, Middle income, Lower income : One, Two or three, four, five and above : Professional, business, clerical Primary, Secondary, Senior Secondary, College, University : Hindu, Muslim, Christian, Sikh : Indians, Chinese, Americans
III. Psychographic Segmentation : Psychographic considerations for market segmentations are based on social class, lifestyle, and personality of customers. Following are the basis of psychographic segmentation :Life Style : Conservative, Liberal, Adventuresome Culture : Hindu, Muslim, Chinese, Continental Social class : Lower-lower, Middle-middle, Lower-upper, Middle-lower, Middle-middle, Middle-upper,Upper-lower,Upper-middle,Upper-upper. Personality : Extroverts, Introverts, aggressive IV. Behavioural Segmentation : Behavioural pattern of customers can also be the basis for market segmentation. The consumers are segmented on the basis of their behaviour. This segmentation is based on the consumer response. Following are the examples of this segmentation :Needs-Motivation : Safety, Security, Affection Perception : Low Risk, Moderate Risk, High Risk Attitude : Positive, Negative Occasions : Regular, Special Readiness stage : Unaware, aware, informed Benefits : Cost, quality, repairs, durability Awareness : Ignorant, aware, informed, interested Usage rate : Habituated, Strong loyalty, Moderately attached V.
Multiple Segmentation :
The target market segment can be defined on more than one of the basis stated above. Normally customers are classified in terms of their age, sex, income and education. For example, a fashion garment manufacturer may target at young, college going, upper middle class, male or female population for his fashionable dresses.
Operating (i) Technology (ii) User or non-user status Situational (i) Urgency (ii) Size of order Personal characteristics (i) Loyalty (ii) Attitude towards risk. Thus many basis are used for segmenting the industrial market. Some basis are as under :(i) Kind of business :- A separate segment is being formulated for each type of business. For example, clothe industry can be segmented as weaving, printing, dying, finishing, embroidery. (ii) Size of users :- The market can be divided as large, medium, small buyers. A marketer always try to influence large buyers by offering them less price and discounts. (iii) Purchasing Procedure :- Industrial buyers purchase in centralise or decentralize manner. They consider lot of factors while purchasing, for example low price. Better quality, convenience, less wastage and Spoilage, easy availability. (iv) Geographical location Basis :- Industrial market can be segmented on geographical basis. 3.5 MARKET SEGEMNTATION AND ADOPTED MARKETING STRATEGIES OR ALTERNATIVE MARKETING STRATEGIES TOWARDS MARKET SEGMENTS Every market can be segmented as the buyers are never all alike. Therefore a firm has to shape its policies according to these differences. To a marketer, alternative market strategies are available. He can adopt anyone according to the requirement. Let us study the alternative strategies. 1. Undifferentiated Marketing Strategy : This strategy lays emphasis on one product and formulates only one marketing programme. It focuses on what is common in the needs of people. It tries to attract large number of buyers with its product and marketing programme. Firm does not segment its market under this strategy. The company focuses on the centre of the target market to get maximum advantage. This strategy is helpful in reducing cost. It relies heavily on product differentiation to protect itself from competition, mass advertising etc. The best example can be of cigarettes, wrapped in a white paper and Coca-Cola company sells coke, Limca, Thums up and does not distinguish the target audience.
Preference to common needs of customers. One marketing mix for the target market. One marketing programme to attract large number of buyers. A narrow product line. Large scale production. Cost economies. Maximum Profits. Common advertising Programme. Reduced Market research expenses. Increase in goodwill of the firm. Ignores various needs of consumers. Profits in the short run only. Product oriented strategy.
Merits :(i) (ii) (iii) (iv) (v) (vi) (i) (ii) (iii)
Demerits :-
2. Differentiated Marketing Strategy :Under this strategy, a firm operates in different segments of the market. A marketer designs separate products and marketing programmes for each. Market research is conducted to know the consumers needs. Different products are offered to increase the sale. This strategy is also helpful in expanding the market.
Differentiated Marketing Strategy different consumers different segments It provides product variety to consumers.
Features :(i) (ii) (iii) (iv) (v) Various market segments. Different marketing programmes. A different marketing mix for each segment. Large product line Variety of products. Customer oriented. Increased Sale. Products according to the needs of the segment. More suitable for common usage products. Difficult to implement due to restricted firms resources. Increased product cost, Advertising cost, and administrative cost. Increased Research and development expenditure.
Demerits :-
Under this strategy the marketer focuses on certain areas of market. It follows one product-one segment strategy. This strategy the small companies to establish in the market. According to Philip Kotler, Instead of going after a small share of a large market, the firm goes after a large of one or a few sub-markets. But another way instead of spreading itself this in many parts of the market, it concentrates its forces to gain a good market position in a few areas. This stragey is useful when firms resources are limited. It focuses to gain good market position. For example Philip Kotler has specialized in Marketing.
Features :(i) (ii) (iii) (iv) (i) (ii) (iii) (iv) (v) (vi) (vii) Customer oriented. One product one segment. Attract large number of buyers. One marketing mix for one segment. specialized organizations to satisfy the needs of segments. Strong market position of a firm. Increase in goodwill. Deep knowledge of the segments needs. Decreased costs. More suitable in different needs satisfying products. Optimum use of resources.
Advantages :-
Demerits :(i) (ii) (iii) (iv) Risky strategy. Restricts the growth opportunities. Increase in Competition. It neglects other segments that are otherwise profitable.
1.
Company resources :
A company selects the strategy according to its financial resources. Firms with limited financial resources will go for concentrated marketing. On the other hand strong financial position permits the firms to adopt either differentiated or undifferentiated marketing.
2.
Product Homogeneity :
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Some products are homogeneous. All consumers have same perception of these products. For example salt, fruits etc. A marketer can adopt undifferentiated marketing strategy for such products. On the other hand, some products are heterogeneous. For example automobiles, TV, cameras etc. a marketer can adopt differentiated marketing strategy for such products.
3.
Product Life Cycle generally has four stages. Introduction, growth, maturity and decline. When a product is in introduction stage, the firm wants to create primary demand, therefore undifferentiated strategy is more suitable strategy. As the product moves towards the other stages, the firm tries to increase sale, at the stage of maturity, the firm should adopt differentiated marketing strategy.
4.
Market Homogeneity :
Market homogeneity means the degree to which the consumers are alike in their preferences, tastes, desires etc. in such case, undifferentiated marketing is suitable. On the other hand, differentiated or concentrated marketing is more suitable in heterogeneous markets.
5.
A marketer should consider competitors marketing strategy while adopting strategy for his segments. When competitors are active, differentiated marketing is more suitable. On the other hand, when the competitors are adopting undifferentiated marketing strategies, a firm can gain by adopting undifferentiated marketing.
6.
Government Policy :
Government Policy has the impact on the selection of marketing strategy. Government frame the policies to protect the interests of the masses. A marketer has to follows the guidelines given by the Government. Finally, it is clear that no particular strategy is superior to others. The selection of ideal strategy totally depends upon some factors. In a changed environment. The marketing strategy has be changed.
Market segmentation means to adjust supply to the demand conditions. It adjusts product according to he needs of consumer. It is the process of identifying the customers according to certain base. Here, the total market is divided into sub-parts. According to A. Robert, Market segmentation is the strategy of dividing markets in order to conquer them .
END CHAPTER QUIZZES 1.Process of dividing heterogeneous market into homogeneous is called:a) b) c) d) Market positioning. Mass marketing. Market segmentation. Target marketing.
2.The requirements for effective segmentation should have all the following except:45
a) b) c) d)
3.The variables used to segment the market are:a) b) c) d) Purchasing power. Geographical location. Buying attitude. All of above.
4.Market ---------------------- are large identifiable groups within the market:a) b) c) d) Sub groups. Segments. Portions. Off shouts
5.Cost of market segmentation includes:a) b) c) d) Product cost. Production cost. Promotion cost. All of above.
6.When one product is produced to satisfy the whole market needs, it is called:a) b) c) d) Undifferentiated marketing. Differentiated marketing. Concentrated marketing. None of above.
7.Concentrated marketing means:a) b) c) d) Selecting a specific area and leaving the rest. Selecting whole market. Leaving the whole market. None of above.
8.Demographic segmentation is done on the basis of:a) b) c) d) Age. Area. Life styles. Benefits.
10.Market segmentation means:a) b) c) d) Bend supply to the will of demand. Bend demand to the will of supply. No demand is considered. No supply is considered.
4.1 Services are usually offered along with physical goods. The services component can be minor or major part of the product. However, in case of services marketing, although supporting goods are required, yet services are the major object of a transaction. Customers buy the services provided by physical product that satisfy certain wants and not physical product itself. According to W.J.Stanton, Services are identifiable, intangible activities that are the main object of a transaction designed to provide want satisfaction to customers. To produce a service may or may not require the use of tangible goods. According to Philip Kotler, a service is any act or performance that one partly can offer to another that is essential intangible and doesnot result in ownership of anything. Its production may or may not be tied to a physical product. 48
So, the salient features of services are: Services are intangible. Services are series of activities. Services have a customer orientation.
Intangibility:- Services cannot be seen or tasted like the physical products before they
are purchased. This can cause lack of confidence and uncertainty on the part of consumer. to overcome this, consumers tend to look for evidence of quality and other attributes in the people, place, communication, equipment, material etc. in providing the service. For example, consumers tend to look for evidence of quality in the dcor and surroundings of the beauty saloon or from the qualifications and professional standing of the consultant.
Inseparability:- In contrast to physical goods which are sold away from the place of
manufacturing after sometime , service cannot be separated from the creator or the seller of the service. This means that service provider become an integral part of service itself. A doctor has to be available personally to provide service to its patient.
Perishability:- Services are perishable; they cannot be stored. For example, due to any
reason a few seats remain empty on a train, or a theatre cancels a particular live show that particular service opportunity is lost forever. The Perishability of services is not a problem when demand is steady because it is easy to staff the service in advance.
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A. CONSUMER SERVICES:- Some important consumer services are: Catering and entertainment services:- Restaurants, cafeterias and hotels offer food services to numerous individuals and families who face difficulties in preparing themselves. The most common and organised forms of entertainment service are movies, golf, music, circuses, cricket, video games, dramas and dancing. Hotels, motels, flotels and rotels:- Millions of people are to go in for boarding and lodging facilities sheer out of necessity, pleasure tour or a business trip. For each class of society, these hotels do care and are known for excellent service and consumer care and delight. Personal care service:- Ever refinement in standard of living paved the way for personal care service. It includes beauty parlours, hair dressers, laundaries, plumber etc. Medical and surgical services:- It includes pathologists, dentists, children specialists, dermatologists etc., providing service to a large number of people in the society. Educational service:- It consists of extra teaching, coaching, cosultancy and guiding. It includes sports club, swimming pools,martial art scholls etc. Transportation services: It includes road transport, rail transport and air transport providing services to a large number of people to transfer material from one place to another. Insurance services:- It provides protection to society from theft, fire, earthquakes, floods, retirement, life etc. so as to give a feeling of security and freedom. Financial services:- It aims at providing finance for home, business, marriage, car or anything needed by the person.
B. INDUSTRIAL SERVICES:- The most common industrial services are: Financial services:- It involves providing finance to various industrial concerns who are in need of it so that they can run their business smoothly. It includes providing long term as well as short term finance.
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Transport services:- The most industrial units needs the services of transport providers to make their goods and services available to the ultimate consumers. It includes providing services like providing of trucks, carts, ships and airlines etc. Warehousing services:- Warehouses are essential to hold inputs and output from the time they are made available for conversion and consumption till they are finally consumed by their ultimate consumers. There are specialised warehousing units who provide services to various units for a reasonable amount of charge. Advertising services:- Advertising is paid form of non personal communication of ideas, goods and services by an identified sponsor. It is the advertising agencies that plan and place the advertising at least cost with professional touch. These help in preparing and implementing the promotion and communication mix. Manpower selection and training:- There are many agencies that perform crucial task of selecting and training the manpower required by various companies so that each individual company need not perform this work. Middlemen services:- Middlemen are agents or mediators between producer and consumers. These persons provide services to each individual firm so as to make their goods and services available to their consumers within time.
The augmented service:- Making the service better in some way is the means by which service providers differentiate their offering in an attempt to influence customer choice. Extra features, over and above the expected service,can be added to make the service more attractive to prospective consumers.
PRICE:- Pricing decisions for services are particularly important given the intangible nature of the product. Pricing decisions are significant in determining the value for the customer and play a role in the building of an image for the service. Price always gives a perception of quality of the service that is likely to be provided. Many factors influence the price which is ultimately charged for the service. The type of organisation, the structure of the market, prices charged by the competitors, cost of producing the service etc may have an impact on pricing decisions.
PROMOTION:- Promotion aims at communicating information about service to the target market. Promotion plays an important role in informing, educating, persuading and reminding customers about the intangible services which have no physical product and packaging to attract potential customers attention. Effective communication aims at informing customers about their role in service delivery process. It includes: Advertising Personal selling Publicity Sales promotion DISTRIBUTION:- Perishability and inseparability characteristics greatly influence the distribution of services. Usually, services have short and simple channel. Most services are distributed through direct sales. at best one agent, or middlemen can be added to it, like in the case of insurance, travel agent, courier service etc. the main purpose of these middlemen is to bring together the producer of service and the user. Thus, the service can be provided to customer at the lower cost as compared to tangible goods. PEOPLE:- In prevailing market environment, consumers are becoming increasingly sophisticated in terms of their expectations. Quality of service is judged by its standards. The inseparability means that human element forms an intrinsic part of the service package and it greatly influence its quality. Level of customer satisfaction or dissatisfaction can be governed by the way in which personnel deal with the specific needs and request of the customers. The importance of people within marketing of services has led to great interest in internal marketing in order to ensure high quality of external marketing. Internal 52
marketing aims to ensure that people work together in a way that is aligned with the organisations state mission, strategy and goals. PROCESS:- A service is performed rather than handed over. Processes involve the procedures, tasks, schedules, mechanisms, activities and routines by which a service is delivered to the customer. It involves policy decisions about customer involvement and employee discretion. This element is all the more important in service businesses where inventories cannot be stored. If the service operations run efficiently, the service providers will have a clear advantage over less efficient competitors. The choice of process can be a source of competitive advantage for services company. PHYSICAL EVIDENCE:- In the absence of actual physical products about which the consumer can make judgements relating to quality and value, the consumer will look for other ways of evaluating the service. e.g cleanliness in a hospital, library facility, decoration in a restaurant etc. all contribute towards the image of service organisation as perceived by the customer.
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Internal marketing:- It implies that the service enterprise should train effectively and
motivate its employees and all the supporting service personnel to work as a team to provide customer satisfaction in the first place and consumer delight in its broader perspective. In this sense a service organisation employees are essentially the contact personal with the customers. Therefore, it is not the one man show but an exercise of every employee to support and strengthen the programme of service selling. It was Christian Gronross who said, internal marketing should be broader than traditional marketing and should be viewed as a managerial philosophy.
END CHAPTER QUIZZES 1. The activities, benefits or satisfaction which are offered for sale are called:a) b) c) d) Mass marketing Marketing of services Marketing of products Target marketing
c) Three d) Ten 3. The important reason why marketers need to classify service is to:a) Standardize advertising programme b) Allocate personal duties c) Determine prices d) Identify similarities in marketing needs
4. Inseparability necessarily implies:a) b) c) d) A high level of consumer-producer interaction. Intangibility of service offering A high level of tangibility in the service offering. Variable output
5. Inseparability can be most effectively reduced by:a) Reducing tangible element of service offer. b) Increasing the labour content of service input. c) Using electronic means of service delivery. d) De-skilling of employee task 6. Intangibility implies a lack of a) Quality control b) Physical ownership c) Product specification d) Consistency 7. Services with high level of variability tend to be:a) People based b) Service provided on one to one basis c) Customized service d) All of above
8. The extended marketing mix for services has been developed on the basis of:a) b) c) d) Scientific analysis of actual decision made by services marketing managers. Need for realistic framework for analysis Intuition Need to incorporate service quality as a core element of marketing mix.
9. In the service sector, critical incidents:a) Occur each time an organization interacts with bits customers b) Necessarily involve front line employees c) Can only be defined by managers 55
10.Compared with high contact services, customers of low contact services are most likely to judge service quality on the basis of:a) b) c) d) Outcomes Processes Quality of personal Waiting time
Contents:
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 Features of Product Planning Objectives of Product Planning Scope of Product Planning and Development Product Development Branding Labelling Packaging Product classification Product Life Cycle Stages in new product development
Product Planning includes two words product and planning. Product means the utilities provided to consumers according to their needs which satisfy them. Planning answers the basic questions as what? how much? when? where? why? and so on. Product planning, therefore, means a technique applied to he creation, development and marketing of new products on a planned basis to maximize profitability. It is that plan which matches the products of the company to the requirements of consumers. In a nutshell, produt planning is the systematic determination of the manufacturers product line. Adjustment of products to meet the needs of market is product planning. Product planning embraces all activities which enables producers and middlemen to determine what should constitute a companys line of products. -William J. Stanton
1.
Product Innovation :
An innovation is the adoption of a new idea, product or process which is prospectively useful. An innovation provides a new product to consumers. A new product is one which consumes perceive as new. Broadly speaking innovations include the following :(a) Product improvements (b) Technology innovations (c) Marketing innovation
2.
Product Diversification :
Product diversification means stretching breadth and length of product mix by adding new items or product lines. It is the management policy to earn business and profits from a number of sources. These additional sources or product lines may have link with the companys existing products or may be totally unrelated. For example HMT, originally a Machine Tool manufacturing unit, had gone into new lines like wrist watches, bulbs and tubes, electric lamp components. Diversification is a strategy for growth and survival in his highly complex marketing environment. There is immense truth in the saying diversify or Die.
3.
Product Standardisation :
Goods are sold different way by inspection, by sample, or by description. If goods are standardized, it is possible to sell them by sample or description. This simplifies purchase and sale of goods. Standardisation reduces cost of marketing. It helps consumers to select good quality products because consumer will select from limited variety.
4.
Product elimination :
Product elimination becomes necessity because of its reduced effectiveness, it has a strong substitute, it has declining sales trends, it has decreasing price trend and profit. Product elimination helps in saving the firm from purchasing of costly raw materials, taking full advantage of marketing opportunities. The decision of product elimination is taken under product planning.
Consumer is supposed to be the king of market. Product planning includes research and identifies consumers tastes, preferences, likes and dislikes. A marketer produces products according to the market with the help of Product Planning.
5.3 IMPORTANT AREAS OF PRODUCT PLANNING OR SCOPE OF PRODUCT PLANNING AND DEVELOPMENT
Product planning and development has wide scope. All decisions related to product are included in it. It includes the following aspects :-
Product variety:
First of all the manufacturer has to decide whether he should produce to satisfy demands for all variety of products existing in the market or he should attempt to meet demands of a limited variety of products only. 59
Product quality:
Many manufacturers prefer to restrict their offer to a single quality. This may be high quality meant for high income groups or of average quality or market quality designed to sell at a standard market price. The quality of a product depends upon market conditions, objectives and resources of the manufacturer.
Product colour :
Colour of the product should be chosen carefully. Nowadays, consumers are influenced by colours. They choose that colour of the product which is matched with their personality and lifestyle. Every colour has its own significance. They are related with health, faith, religion. For example white is considered colour of peace while pink indicates love. Therefore consumers are very selective in choosing products.
Product size :
Due to change in society pattern, the consumers prefer those products which are available in different sizes that is small, medium or large. The consumers purchase products according to their convenience. The size of a product depends on the nature of product, resources, competitive products size, transport facility, packaging etc. Therefore, size decision should be taken after considering the above factors.
Product diversification :
Diversification of product lives refers to the practice followed by a seller to add new product to the line of products presently handled by him. Diversification is important to minimize the risk arising out the changes in fashions and consumers tastes. New technological development also brings into existence new products. Diversification is also to expand the activities of the firm.
Product simplification :
Simplification of product lines is just opposite the practice of diversification. It refers to the practice of limiting the number of products a seller deals in. Simplification is important because less capital is tied up in inventories. Personnel have better opportunity for specialization in simplification. Moreover manufacturing and marketing activities can be more effectively directed.
Product positioning :
Product positioning means a conscious attempt on the part of marketers to impart a distinct identity to his own brand to make it stand apart among the competitors. It is a strategy of establishing a distinct place for a brand in the mental perception of its consumers. For example Raymonds fabrics are positional as Executive Class Collection.
Product branding :
A brand is defined as a name, term, symbol, or a design or a combination of them. A manufacturer uses brand due to growth of competition, increasing importance of advertising, etc. A manufacturer should be very careful while selecting a brand because a 60
brand is an effective weapon in the hands of manufacturer. A brand should be simple, short and easy to memorise etc.
Product grading :
By grading we mean the act of separating or sorting out the goods according to the established standards to determine their grade. Established standards may be based on weight, size, strength, soundness, taste, colour or appearance and such other characteristics of goods.
Product Label :
The label is an important feature of a product. It is that part of a product which contains information about the producer of the product. A label may be a tag attached directly to the product. It is use to communicate brand, grade and other information about the product.
Product Package :
Packaging is the sub-division of the packing function of marketing. It means placing of goods in small packages-boxes, bottles or cans, bags etc. for sale to the ultimate consumers. It is concerned with putting goods in the market in the size convenient to the buyers. Packaging is important because it protects the product.
Product uses :
A marketer must explore new uses of a product. It helps in increasing the demand of the product. For example Dabur Honey can be used in various ways.
After-Sales Service :
Once the product has crossed the seller, it is the buyer who uses the physical product. It is possible that the physical product does not perform as expected because of some mechanical, technical or other defect. So a marketer should provide after-sale service to his buyers. For example Guarantee, Warrantee etc.
DEFINITIONS
1. Product development encompasses the technicalities of product research, engineering and design. W. J. Stanton 2. Product development involves the adding, dropping and modification of item specifications in the product line for a given period or time, usually one year. -Lipson & Darling
ELEMENTS OF PRODUCT DEVELOPMENT Product development has three elements which are summarized as under :1. 2. Product innovation :- An innovation is the adoption of new idea, product or
process.
3.
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1. 2.
3.
Extends the Product Life cycle : Every product has it own product life cycle.
Product life cycle has four stages-introduction, growth, maturity and decline. In maturity stage, the sales of the firm are maximum. To extend the period of his stage, a producer takes the help of product development. Product requires modifications in this stage.
4.
5. 6.
PRODUCT IDENTIFICATION
Product identification includes the marketing activities which helps in identification of products. Products are presented to consumers never in the natural form. Rather they are packed. Labeling and branding are the important marketing activities which differentiate the products of one manufacturer from the other. These activities make product identification easy. The consumers like those products which comes in package with brand name. They prefer guaranteed products. Labeled products are also their choice because label gives its contents, uses and instructions. Thus, a marketer adopts these techniques to make identity of his product. There are mainly three techniques of Product Identification which are summarize as under :Product Identification
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A Branding
B Packaging
C Labeling
A brand is a symbol, a market, a name, a design or a combination of them which is used for the identification of a product. The second technique to identify the product is packaging. The products available in a shop on shelves must be distinguishable for easy identification.
DEFINITIONS
1. All trademarks are brands and thus include the words, letters or numbers which may be pronounced ; they may also include a pictorial design. -William J Stanton A brand name is a name, term, symbol or design, or a combination of them which is intended to intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. -American Marketing Association
2.
BRAND NAME
It is a part of brand which can be vocalized i.e. utterable e.g. Cinthol, Moti, LG, Sony etc. It can be a combination of letters, words or numbers. For example Hamam, Bisleri, Nirma etc .
BRAND MARK
It is a part of brand which can not be uttered, but can be recognized such as symbol, design, colouring or lettering for example logo of Philips, eye on Bajaj electrical, Anchor on electric switches etc.
TRADE MARK
It is brand name or mark registered under law for protection against its copying or imitation. It enjoys legal protection against misuse by competitors. 64
According to the American Marketing Association, A trademark is a brand or part of a brand that is given legal protection. It protects the sellers exclusive rights to use the brand name or brand mark.
FEATURES OF A GOOD BRAND NAME:1. 2. 3. 4. 5. 6. It must be easy to pronounce and remember. It should be short and sweet. It should point out producer. It should be legally protectable. It should be original. It should reflect product dimensions.
MERITS OF BRANDING:1. Merits to Manufacturers: Product get individuality:- For any product, there are many competitiors, though ours is the first company to introduce the product. The product, if branded will has its own personality standing out rest of all competitors.
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2. MERITS TO CONSUMERS :
Brand stands for quality:- When consumers are buying the products,
they are selective as certain brands as it symbolizes lises the quality standards. Unbranded products to have quality but no assurance as greedy producers may say something and pass on spurious stuff to consumers.
Labeling is another significant means of product identification like branding and packaging. Labeling is the act of attaching or tagging labels. A label is anything- a piece of paper, printed statement, imprinted metal etc. which is either a part of package or attached to it, indicating value of- contents of price of product name and place of producers. It carries a verbal information about the product, producer or such useful information to be beneficial to the user. Thus a label is an information tag, rapper or seal attached to the product or product package. A label may be descriptive, informative or grade designating or a combination of these. A descriptive label describes the contents of package or ingredients of the product. A descriptive label on a cane of pineapple describes the contents by size, weight, syrups etc. an informative label includes detailed description with the emphasis on how the product is made? How to use it? how to care for it? in order to drive maximum satisfaction. A grade label designates customary regulated standards.
and designing of different means of packaging the products. what are cloth to human being , so are the packages for the products.
Standard definitions:
In the words of Professer Williams Stanton, packaging is the general group of activates in designing of container or wrapper for the product. Package design is the unique combination of colors, graphics and symbols to distinguishing the product. According to Professor Philip Kotler, Packaging is an activity which is concerned with the Protection, economy, convenience and promotional considerations.
OBJECTIVES OF PACKAGING:
Product Protection Product Identification Product Convenience Product Promotion Product Profit Generation
ESSENTIALS OF GOOD PACKAGING: 1. It should protect the contents:- by very nature, every packaging is designed to
protect the contents of it against the natural and artificial factors of damage such as dust, dirt, watering, evaporation etc. The intrinsic values or qualities of the product are to be maintained intact.
ROLE/FUNCTIONS OF PACKAGING:1. 2. 3. 4. 5. 6. 7. It protects the contents. It provides product density. It acts as promotional tool. It provides user convenience. It facilitates product identification. It allows easy product mix. It extends product life cycle.
PACKING STRATEGIES:
Reuse packing stategy:- It is the strategy wherein the manufacturers offer their
products in such packing which can be reused after consumption of the contents of 69
the same. Maltova food drink was offered in a glass jar which can be used as a tumbler. Amul butter is presented in a jar which can be reused.
A. Traditional Product classification: The traditional classification has three alternative as:
1.Consumer and industrial products. 2.Durable and non-durable products. 3.Convenience,shopping and speciality goods.
1. Consumer and industrial products: Consumer products are those which are
meant for the consumption or final use of consumer or households. These are the products which are used without further commercial processing. In the other words, consumer goods are meant for personal and non business use. On the other hand, industrial goods are those which are used by business buyer as input for further commercial processing. Thus, shampoo, biscuits, watches are consumer goods while raw material, spare-parts, supplies and equipments or machinery are industrial products.
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1. The continuum: This classification spots all the products along the continuum
with two basic characteristics at each end of the continuum. Accordingly any product falling between these two ends some combinations of these two basic types.
gross margin, adjustment, time of consumption and search time. Yellow goods are those which enjoy low replacement rate, high gross margin, adjustment, time of consumption and search time. In the middle we have orange goods that enjoy these five characteristics neither high nor low but medium.
MEANING OF PLC
The product life-cycle is a conceptual representation. The concept of product life cycle highlights that sooner or later all products die and that if management wishes to sustain its revenues, it must replace the declining products with the new ones. Product life cycle indicates that products move through the cycle of (i) introduction (ii) Growth (iii) Maturity (iv) Decline. Sales and profit rise till the growth stage. However in maturity stage sales rise but profits fall. The product Lift cycle model is one of the most encountered concepts in marketing management. Prof. Levitt popularized the concept and Prof. C.R. wassen, B. Carty, M. Chevalier, D.J. Luck, D.T. Kollat, J. F. Robson-furthered the original concept.
DEFINITIONS
1. The Product Life Cycle is an attempt to recognize distinct stages in the sales history of the product the sales histories pass through four stages, known as introduction, growth, maturity and decline. -Philip Kotler, Marketing Management Life Cycle of marketing offerings stages of marketing acceptance through which a market offering passes form introduction to its market death. The stages in a market offerings life cycle are market introduction, market growth, market saturation, market decline and market death. -Lipson and Darling 72
2.
3.
Life cycle of a product is a kin to human life cycle form several angles. Like a man the product also takes birth, rapid growth, attains the maturity and then enters the declining stage. -Arch Palton The Product Life Cycle concept is the explanation of the product from its birth to death as a product exists in different stages and in different competitive environments. -William J Stanton
4.
FEATURES OF PRODUCT LIFE CYCLE The important features of product life cycle are as under :(1) Product life cycle is compared with human life cycle. It has four stages : introduction, growth, maturity, decline as human life cycle has : childhood, adolescence, youth and old age. (2) Product move through the cycle. It starts with introduction and ends with decline. (3) Sales volume and units profits rise correspondingly till the growth stage. In maturity stage, sales rise but profits fall. (4) It is not necessary that all products in the market follow through four stages. It is possible that a product might cross only the first stage. (5) There is no definite line of demarcation between one and the subsequent stage. (6) The length of each stage varies from product to product depending on the nature of product, competition, changes in technology etc. (7) A marketer adopts different marketing strategies in different stages. For example more advertising is done in introduction stage and Product modification is done in maturity stage. (8) The marketing mix also changes form stage to stage.
6. 7. 8. 9. 10.
Existing consumers may be hesitant to try new product. A marketer introduces limited products that is narrow product line in introduction stage. Market is not aware of the availability of new product. Initial low demand keeps production below break even point. Difficulties and delays in adjusting production schedules.
Growth stage :
This is the second stage of product life cycle. As the product grows in popularity, it moves into the second stage i.e. growth stage. In this stage competitors enter the market and the company may have to resort to product improvement and innovation. It may enter new market segment and try new distribution channels. The prices may remain static or fall slightly for meeting competition. Advertising is geared to create brand image. The following are the main features of this stage : 1. The sale grows at faster rate because of streamlined production facilities. The sales are increased at an increasing rate. 2. The advertising expenditures are high as it moves towards brand identification. 3. Profits rise sharply because of high sale and prices. Consumers are aware about the product. 4. There is greater incentive for the new companies to enter the market. Competitors have the advantage of entering the market because research and development have already been completed. 5. Wide distribution network is adopted by a marketer because there is a demand from the every corner of market. 6. Product modifications, improvements are made because every marketer wants to win competition and reduce price. 7. Price of product is stable or slightly reduced due to large scale economies, product modification and competition. 74
Maturity stage :
This is the third stage of product life cycle. As the competition becomes keen and market gets saturated with product brands, the maturity stage sets in. in this phase of PLC, the sales increase at a decreasing rate. The firm has to combat competition by cutting prices, increasing promotional efforts and modifying products, markets and marketing mix. Consequently profit will fall. Product differentiation, identification of new segments and
product improvement are emphasized during this stage. The important features of this stage are as under :1. The sales grow at falling rates because there is little growth in the market. 2. Prices tend to fall and selling efforts becomes aggressive. 3. Profits are squeezed because customer are attracted towards substitutes and competitive products. 4. Promotional Exps. are made in normal ratio to sales. Advertising Exps. are made to differentiate manufacturers product form others. 5. Weak competitors leave the market because large and strong competitors adopt various strategies to be remained in the market. 6. Prices charged by the producers are quite lower and uniform. The strength and vitality of higher prices fade. 7. Profit margins are decrease because sales are also decreased.
Marketing Strategies :
The following marketing strategies are adopted under maturity stage : 1. Develop new market : The company may search for new market segment or consumers. For instance, Sunsilk shampoo was made available in small packets for a price of Rs. 2 only so that low income group consumers may be attracted. 2. Emphasis on new uses of the same product : For example, nylon originally used for making parachute and ropes was later developed as a fabric and now used in typres. 75
3. Increase in frequency or volume of product use : This may be done by offering quantity discounts, premiums, trade deals, discount coupons, contests and other sales promotional tools. 4. Quality improvement : R & D efforts are made to increase product performance, durability, reliability, speed etc. new models of colour television sets are brought up with multichannels. Crown TV has come up with TV model with built-in satellite receiver. 5. Product feature modification : The features of the product may be altered to increase its safety, convenience and usefulness. For example, the design of cars or scooters are modified often. Dry cell torch is filled with automatic chargers. Kinetic Honda has auto starter. Khaitan fan claims to have double ball bearings. 6. Product-style innovation : Product may be presented in new colour flavours, ingredients and packages. Rasna was made in varied flavours. Refrigerators are brought out in different attractive colours. Surf was sold in reusable containers. Modification in style makes the product more attractive. 7. Price slashing : If market is price-sensitive, a reduction in price may help to improve sales-tempo. Publishers bring out cheaper paperback editions to push up sales. Festival or Off-season low pricing is resorted to by retail organizations or dealers for augmenting sales. 8. Customer service : The firm offers special customer services like consumer finance, credit facilities, delivery and transportation, prior and after sales services, maintenance, and warranty to consumers. To boost sales, Kelvinator offered 7 year warranty and gained in volumes of sales.
Decline stage :
In this final stage of PLC sales will drop down heavily and product or brand will go out of market. The price will fall, profits will decline. Eventually the product line incurs loss. Decline may occur due to technological changes, shifts in consumers tastes, introduction of new sophisticated products, sever competition etc. Weak products affect company reputation in market which may harm other products also. It may create imbalanced product-mix. The important features of this stage are as under : 1. There is rapid fall in sales because new products are available in market. People are interested in buying new things. 2. There is fall in prices because of reduced sales. Every manufacturer wants to clear the stock at the earliest. 3. No promotional expenses are made because consumers are not interested in buying the product and they are aware of other better products. 4. Distribution network is reduced to the minimum with thorough rationalization. This is an advantage as product is known for good many years.
Marketing Strategies :
The following marketing strategies adopted under decline stage. 1. A marketer may think of keeping the weak product, if there is possibility of repositioning. 76
2. Marketer may reduce expenditure on promotion, advertising, R & D of weak products. 3. No extra expenditure of efforts are made to revitalize a declining product. 4. Weak product may be discontinued and spare capacity of the firm may be used for some other profitable product. 5. No additional feature may be added to the product. 6. Economy packs may be introduced to revive the market. 7. Moreover re-usable packages may be introduced. Attractive packaging should be made. 8. Change in marketing mix and marketing programme. 9. Reduce the price to attact consumers. Different schemes should be offered. 10. Credit facility, easy instalment facility may be offered.
According to Philip Kotler a product has a life cycle is to assert four things :
1. Products have limited life. 2. Products sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller. 3. Profits rise and fall at different stages of the product life cycle. 4. Products require different marketing, financial, manufacturing, purchasing and human resource strategies in each stage of their life cycle. Most product life cycle curves are portrayed as bell shaped as drawn above. Not all products exhibit a bell-shaped PLC.
PRODUCT DIFFERENTIATION
Product differentiation is a positioning that some firms rise to distinguish their products from those of competitors. Distinction can be either real or perceived~ the main product differentiators are features, performance, style, conformance, durability, reliability, reparability design, etc.
1.
Features :
Most products can be offered with verifying features. Features are characteristics that supplement the product's basic function. The company can create extra/ additional versions by adding extra features, e.g. Maruti 800 is having three different versions with different/extra features.
2.
3.
Conformance Quality: It is degree to which all the produced units are identical
and, meet the promised target specification. One of the major reasons for the high quality, reputation enjoyed by Japanese manufacturers is that their products have high conformance quality.
7. 8.
Testing Commercialisation
1.
2.
Idea Generation
New product ideas come from many sources. The most important are: (a) Customers: The market concepts suggest the customer wants& needs are the logical place to start the search for new-product idea through Surveys, projective tests, focused groups discussion, suggestion & complaints letters from customers. (b) Employees: Marketing personnel - advertising and marketing research employees as well as sales people- often create, new ideas because they analyze and are involve In the market place; Firms should encourage their employees to submit new product ideas and reward them if their ideas are adopted. (c) Distributors:-A well-trained sales force routinely asks distributors about needs that are not being met. Because they are closer to end Users. Distributors are often more aware of customer needs than manufacturers are. (d) Competitors:- Company Can also find good ideas by examining their competitors, products and services. They can find out what customers like and dislike in their competitors new product. They can buy their competitor's products, take them apart and build better ones. (e) R&D:-It is carried out in distinct ways as basic research - aimed at discovering new technologies, applied research- finding useful applications of new technology; product development converting applications into marketable products; product modification-making functional changes in existing products. (f) Consultants:- To examine a business and recommend product ideas, consultants are available. They determine whether a company has a balanced portfolio of products and if not, what new product ideas are needed to offset the imbalance.
TECHNIQUES FOR GENERATING NEW PRODUCT IDEAS Creativity is the well spring of product ideas. A variety of approaches and techniques have been developed to stimulate creative thinking.
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(1) (2)
(3)
(4)
value of taste.
Concept :1. 2. 3. An instant breakfast drink for adults A tasty snack drinks for children. A healthy supplement for older people.
Concept Testing - concept testing calls for testing products concepts with an appropriate group of target consumer, then getting those consumers reactions. A word and / or picture description can suffice. It is considered fairly good predictor to early trail and repeat purchases for the line extension. There have also been relatively precise predictors of success of new product.
(5)
categories that are sensitive to business cycle fluctuation. Commonly asked questions in this connection are: What is the likely demand for the product? Would current customers benefit from the product? Would it enhance the image of our overall products? How might competitors respond? .
6.
7.
Testing
After products and marketing programmes have been development. They are usually tested in the market place. Test-marketing is the limited introduction of a product and marketing program to determine line the reactions of potential customers in a market situation. Test marketing allows management to evaluate alternative strategies and to assess how well the various aspects of the marketing mix fit together. Cities chosen as test sites should reflect market conditions in me new product's projected market area. Researcher should find locations where the demographics and purchasing habits mirror the overall market. But test marketing is relatively too expensive. . . Stimulated Marketing Test : Alternatives to test markets and it is even cheaper also Simulated market test is presentation of advertising and other promotional materials for several products, including a test product, to members of the product's target market. These people are then taken to shop at a mock or real store where their purchases are recorded. Shopper behaviour - including repeat purchasing, is monitored to assess the product's likely ... performance under the market ,conditions.
9. Commercialisation
The final stage in the new product development process it commercialization. ln this stage full scale product and marketing programmes are planned and, finally, implemented. Upto this point in development, management has virtually complete control over the product. Once the product is born and enters its life cycle, however the external competitive environment becomes a major determinant of its destiny.
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END CHAPTER QUIZZES: 1.The geographical presentation of sales history of a product is called:a) b) c) d) Product life cycle. Product positioning. Product planning. Product development.
2.Various stages of product life cycle are:a) b) c) d) Introduction. Growth. Maturity. All of above.
3.The first step in new product development is:a) b) c) d) Idea generation. Test marketing. Commercialization. Product development.
5.The experiment done in a limited part of the market place is called:a) b) c) d) Test marketing. Commercialization. Selling. Marketing.
6.The process of giving name, symbol or mark to the product is called:a) b) c) d) Branding. Packing. Labeling. None of above.
7.Ecological packing policy aims at:a) b) c) d) Control the pollution. Help in reuse of the product. Provide all related goods closely. None of above.
8.Labeling means:a) b) c) d) Giving name to the product. Making product attractive. Piece of paper attached to give information about the product. All of above.
9.The services provided by producer after the sale of the product is called:a) b) c) d) After sale services. Commercialization. Product support services. Product credit services.
10.Aim of packaging is:a) b) c) d) Product protection. Product identification. Product convenience. All of above.
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Contents:
6.1 6.2 6.3 6.4 6.5 Meaning and features Factors affecting Pricing decisions Pricing Objectives Pricing Methods Pricing Policies and Strategies
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Importance of Price in Marketing Mix 1. Means of allocating resources: In any economy system, price is the
mechanism for allocating resources. Price generates revenues which are made available for the expansion and development of the firm. A firm employ various factors of products including land, labor and capital. The extent to which these factors will be used depends on the relative prices they receive. Price allocates the resources for the optimum output and distribution.
2.
for the product. Price is the greatest and strongest P out of the four P of the mix.
3.
4.
5.
6.
Other advantages :
a. Price is a powerful force in attracting the attention of buyers and increasing sales. b. Promotion and advertisement of a product depends on its price. c. Products are differentiated with one another on the basis of price.
Internal Factors: Internal factors are those which are well within the control of the company.
1.
regarding fixation of price for a particular product. Firms may have a variety of objectives such as: price stability, product maximization, sales maximization, target return on investment, meeting the competition, survival etc. Pricing decision should be made only after proper consideration of pricing objectives.
2.
as the base for price fixation. Majority of the firms uses cost plus or target pricing method for price fixation. Actually it is not only the cost but the plus factors which determine the prices. Whatever may be cost of production, the price is one at which the seller is prepared to sell buyer is prepared to buy.
3.
Marketing Mix: Price is one of the important elements of the marketing mix and therefore, must be coordinated with the other
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elements :production, promotion and distribution. Any change in price will have an immediate effect on other three elements.
4.
Product Differentiation: In order to attract the customers, different characteristics are added to the product, such as quality, size, colour, change, attractive package, alternatives uses etc. Generally customers pay more prices for the product which is of the new style, fashion, better package etc. 5. Organisational Consideration: Pricing decisions occur at two levels in the organisation. It is the top management which generally has full authority over pricing. The top management sets the guidelines with in which the price is to be administered and determine the price range while the actual price is dealt at lower level. 6. Product life Cycle: Pricing decisions are affected by stages of product life cycle. As the product follows a number of stages i.e. introduction, growth, maturity, saturation and decline. External factors
External factors are those which are generally beyond the control of the company. These factors also play an important role in deciding the price of a product.
1.
2.
3.
4.
deflationary conditions affect the pricing. In recession period, the prices are reduced to a sizable extent to maintain the level of turnover.
5.
6.
Consumer Behaviour: The behaviour of the consumers and users for the
purchase of the particular product, do affect pricing, particularly if their number is large. In other words, the composition and behaviour of consumers have great impact on pricing decisions.
7.
8.
Suppliers: If the suppliers raise the price, it will lead the manufacturer to
increase the price of the product, which will ultimately affect the consumer.
9.
10.
6.3 THE PRICING OBJECTIVES 1. Survival: Survival is the most fundamental objective in most cases. Survival price
objective is a short-run or a temporary goal and is insisted only when the firm faces a survival crises. Once, it turn the corner, it shifts to other price objectives.
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2. Target return on investment: Pricing for profit is the most logical price
objective. Pricing to attain predetermined profit involves the establishment of specific profit goals either as a percentage of sales or a R. O. I. Or R. O. A. M. (return of assets managed). Price decisions based on investment return are becoming very common both in private and public sector undertakings, these days.
3. Market share: A market share price objective can be either to maintain the
market share to increase it or sometimes to decrease it. The company uses the price as an input to enjoy a target market share. Target market share means that portion of the industry sale which is company aspire to attain. This market share is normally expressed as a percentage of a total industry share. Price is typically one of the most important variable in improving or maintaining market share.
5. Price and profit stabilisation: Stabilising prices and profit can be a long term
objective of a firm. Fluctuating prices having fluctuating profits bringing into play unwanted forces affecting the firms economic health and status in market place. Stabilisation of prices and margins is more in critical industries where oligopoly prevails.
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9. Maintaining the image: Every company has a identity from the moment it
opens its doors. It is an identity representing what it has done to convey the public. It is the sum total of the impression that the people have about the firm. It is about its product packages-trademarks-brand names-employees-graphics the marketing programme and the like. This images is deeply influenced by how the company handles the delicate and sharp weapon of pricing.
A. Cost based pricing methods: cost establish the floor for the possible price
range and there are two commonly used cost oriented pricing methods to set the product prices. These are(1) cost plus pricing and(2) target return pricing.
1. Going rate pricing: Going rate pricing is the method of setting the prices
in relation to the prices of the competitors. The firm bases its price largely on the competitors prices with less attention paid to its own cost or demand. Therefore the firm may charge the same, more or less than the major competitor or competitors. Generally in industries where oligopoly prevails such as steel , paper, fertilisers, aluminium, copper and the like, the firm charge the same prices as the competitors. It is natural that the firm charges the prices when the competitor or competitors change not bothering about their cost and demand changes. Some firms may charge not higher or lower prices than their competitors.
2. Sealed bid pricing: In all those business lines where the firms bid for
jobs, competition based pricing is followed rather than its costs and demand. The firm fixes its prices on how the competitors price their products. It means that if the firm is to win a contract or a job, it should quote less than the competitors. With all this, the firm cannot set its price below a certain level. This is, it cannot price below the cost. One the other hand , higher prices above its costs reduces the chances of winning the job. The net effect of the two opposite pulls can be well described in terms of expected profit of a particular bid.
2. Perceived value pricing: Of late, good many firms are setting their
product prices on the basis of perceived value of a product. It is buyers perception of value and not the sellers cost which is the key to the product pricing. The prices setter use non-price variables in marketing mix to build up perceived value in the buyers minds and prices is set to capture the perceived value. This approach fits well within the thinking of product positioning.
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Zonal Price Policy:- It is under which the firm divides its markets into
zones and quotes uniform prices to all buyers located in the identified zone. The price quoted will differ from zone to zone rather than a single price all over the country. The price arrived at is the addition of average transportation costs to the basic price. 93
3. Price Differential Price Policy:- The price policies that involve price
differentials are those the pricing firm accepts the gap between the price quoted to the consumers or dealers and the actual price charged. Thus, price differential represents the differences between the price quoted and the price charged to the buyer. it means that the final price will be less than the quoted price. but there may be price hike too. The forms of price differentials are:Discounts Rebates Premium
1.Discounts:- Discount is the price differential that reduces the quoted price so that the buyer pays much less than the quoted price. Discount is an allowance made to the buyers in consideration on marketing service rendered. Discount can be of three types namely, a) Trade discount b) Quantity discount c) Cash discount Trade discount is the deduction allowed of the quoted price with reference to specific position enjoyed by the buyers in the channel of distribution. The aim is to compensate the intermediaries of the distribution channel for their valuable service rendered. It is a percentage deduction of the quoted price. Quantity discount is the deduction allowed off the quoted price to the buyers on the basis of quantity bought. It is generally allowed on the aggregate of all or specific classes of product purchases measured in rupee value or physical units or in terms of purchase at time or purchase over a period of time or beyond a specific floor volume. Cash discount is the deduction from the invoice price granted to all those who clear their bills within the desired dead-line. It is a reward to the buyer for timely or prompt payment of the amount due. The cash discount rates are based on the prevailing rates in the market at a given point of time.
2.Premiums:- All the earlier four point were those that reduced the net price payable
by the buyer. However, at times, opposite is also true. There are occasions where the actual price paid will be higher than the quoted price. Thus, consumer durable manufacturing units can add premium to the price quoted for one reason or the other. It does not mean that discounts are not given. Even after enjoying discounts, the prices paid might be higher. It is not that all companies resort to this premium adding. Thus a 94
Tractor or Fridge are likely to ass extra say warrantees, special after sale services, extra durability and so on.
3.Rebates:- Rebate is a deduction of the quoted price. Many a times, the buyers suffer loss of value satisfaction caused by certain factors. The causes of such dissatisfaction may be defective goods delivered, delays caused in delivery, goods damaged in transit, possible deterioration in quality on the shelves. In order to accommodate these genuine claims, concessions are given in the form of rebates.
4. Leader Price Policy:- Leader pricing is one where the firm in the industry initiates
the price charged and these price changes are so effective that other firms follow suit. It is the one of price approximation by the followers to that of initiator in the industry. In market jargon the former is called as price followers and the later as price leader. It is based on the principle that there is some truth and wisdom in following the established and giant units.
6.New Product Pricing Policy:- In case of new products, there can be two possible
price policies: Skimming Price Policy Penetrating Price Policy
Skimming Price Policy:- It sets the high initial price to first profit from price inelastic
consumers, and then successively lowering the prices, often used under competitive conditions, to the level that more price sensitive customers are willing to pay. It sets introductory prices at high levels relative to costs to skim the cream off the market. As there is no immediate competition and there are price elastic customers, the firm finds it easier and safer to set initial new product price as high as possible relative to costs and to lower the prices gradually as the market conditions dictate.
Penetrating price Policy:- It is an attempt to set new product prices low relative to
costs. It involves setting how initial price to establish market share, pre-empt the competitors and/ or to capitalize production economies. By setting low initial prices, the competitors are kept away and this makes possible for the firm to enlarge its share by generating larger sales volume.
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3.------------------ is price policy wherein all the buyers are charged similar purchase price under similar conditions of sale:
a) Variable price policy b) Non variable price policy c) Single price policy d) Uniform delivered price policy
5. ------------------- is method of setting the prices in relation to the prices of the competitors:
a) Sealed bid pricing b) Target return pricing c) Demand based break even analysis d) Going rate pricing
7. The deduction given to persons who clear their bills within deadline is called:
a) Trade discount b) Premium c) Cash discount d) Rebate
CHAPTER VII
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PROMOTION MIX
Contents:
7.1 7.2 7.3 7.4 Personal Selling Sales Promotion Advertising Public Relations
Promotion mix or communication mix is the particular combination of promotional tools used by a firm to communicate with the audiences. These are the means by which firms attempt to inform, persuade and remind its target market, using both direct and indirect means, about the brands they sell as well as about the company as a whole. Although 99
communications directed to the target markets are the mainstay of the communication program, firms need to communicate with all its stakeholders i.e. suppliers, customers, shareholders, customers, employees and government agencies. Firm develop specific communication plans directed to the stakeholders. Communication mix stands for three special kinds of promotional activities namely, personal selling, advertising, sales promotion. Some authors include the fourth element namely, public relation.
DEFINITIONS:
According to American Marketing Association, Personal selling is the oral presentation in conversation with one or more prospective purchasers for the purpose of making sales. According to Blake, Salesmanship consists of winning the buyers confidence for the sellers house and goods thereby the regular and permanent customer.
2. Product conditions:- These includes: Where the companys product is in the introductory stage of product life cycle. Where the product requires personal demonstration. Where the product requires personal attention to satisfy the needs of customers. Where the product is of high unit value. Where the product requires after sale services.
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3. Consumer conditions:- The special customer conditions that require personal selling are: Where the consumer needs immediate answers to his queries. Where the consumer requires persuasion and follow up. Where the purchases are valuable and irregular.
4. Company conditions:- There are certain company conditions that motivate for personal selling. These are: Where the company is not able to identify and use non personal methods of selling. Where the company thinks that it does well with personal selling as compared to any other alternative.
METHODS OF PERSONAL SELLING:1. Selling across the table:- This is the selling method under which the companys
salesman negotiates the sales across the table by inviting the prospective buyer either in companys premises or at any other specified place especially hotels. This method is generally used in long term, high value transactiouns that establish relatively long term buyer-supplier relationship. The best example of this type is the supply of industrial products.
2. Selling at the doorstep:- Under this method sales is done by the companys
salesman by personally visiting the houses of the prospective customers and explore the possibilities of making sales of their product.
4. Tender selling:- It is the method of sales under which the company invites the
tenders from the prospective buyers through an advertisement requesting them to submit their offer of purchase in respect of particular product or service. The company sells the product to that person who gives the most profitable price and meets the companys conditions regarding sales.
5. Selling at the counter:- Under this method, the salesman of the company does
not go to the prospective customer, but it is the buyer who visit the salesman at the 101
shop to purchase a product or service. The salesman available at the counter attends the customer, give the demonstration of the product, helps the customer in making up his mind to purchase the product. This is the most common method of making sales.
THE PROCESS OF PERSONAL SELLING:Selling process is the sequence of steps involved in the conversion of human desires into demand for a product or service. These steps are:1. 2. 3. 4. 5. Prospecting Pre-approach Approach Presentation and demonstration Overcoming objections
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6. Closing:- the success in the earlier stages will lead to the last stage of closing the
sale. Closing sale is to persuade the prospects to act right now than postponing the sale. It is in this stage that prospects is turned into customer, desire into demand.
STANDARD DEFINITIONS: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. Mr. Christian Peterson, Sales-Promotion is the achievement of short term marketing objectives by schematic means. Mr. L.K. Johnson, Sales-Promotion consists of all those activities whose purpose is to supplement, co-ordinate and make more effective efforts of the sales-force, of the advertising department, and of the distribution and to increase sales otherwise stimulate consumers to make greater initiative in buying.
free gifts-Mail in coupons for information, Catalog offer-exhibits demonstration. Coupons-rupees off specials free samples , contests-premiums. On pack coupons Mail in coupons for Rebate Continuity premiums. Special sales- Weekly specials Enterta Ined events-retailer coupons premiums. Multi-packs-special price on twos-merc Handise allowance-return allowamce. Reusable display cases-Sales contests for distributor sales people promotional allowance co-operative promotions.
SALES PROMOTION TOOLS:A. DEALER PROMOTIONS:The term dealer is used here to include the retailers, wholesalers and distributors. The dealer promotions are of three types- namely, dealer loaders, dealer coupons and point of purchase promotion.
1. Dealer loaders:Dealer loader is the premium offered to dealers tied with the quantity of purchases. Dealer-loader offers, perhaps among the best sales promotion tactics designed to sell in order to get the traders to stock greater quantities at specific times. The dealers cooperation is sought to load them with stocks.There can be three basic loader schemes:-
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Price deals: under price deals for dealers, special discounts are offered over and
above the regular discounts agreed upon between the dealers and the company. For example, if the regular discount is Rs. 5.00 per case, dealers may be given Rs. 6.00 per case that is rupee 1.00 extra per case.
Gift-novelties: Many a times the marketing prefers to give away attractive and
useful articles as presents to the dealers against the orders placed. These Giftnovelties can be transistors, radio sets, clocks, watches, cupboards, chairs, tables, cash-boxes, lamps, steel utensil, lemon and lunch sets dress material and the like.
2. Dealer coupons:
A coupon is simply a document that entitles the holder certain stated concessions. The function is to serve as inducement to the dealers to stock the said item or items. That way it is very simple. A marketing company places coupons in bulk pack or packs and exchanges them for gift merchandise listed in a catalogue.
3. Point of purchase promotion: 1. Dealer stock display contests: In real sense, a display contest amongst
dealers is more an advertising medium than an incentive offer. Here, the best display arranged gets the prize. The objectives of stock display contents are: 1. to provide the very necessary product exposure at the point of purchase, and 2. to generate enthusiasm among dealers through the bait of attractive prices.
B. CONSUMER PROMOTIONS:Consumer promotions are the customer incentive plans to induce them to buy more. A customer premium plan can be best described as an article of merchandise offered to the consumer as an incentive to buy more and more regularly over a short span . 1.
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a) Off the pack premiums: The marketer distributes the gift articles meant for the wholesalers and retailers and then announces the premium offer through attractive advertising media to bring the fact to the notice of consumers. The premium article is neither banded with nor inserted inside the product package, but is distributed separately along the product. b) Banded premium offer: A banded premium offer can be defined as the offer of the two product sold together, often in one combined pack, at something less then their normal combined price when sold separately. In case of banded premium offers the article of the premium is firmly banded with the regular product package with a tape or other suitable material. c) In pack offers: Here the premium is packed inside the product package and it is followed by a message to that effect to the consumer, on the package. It is most popular in India as the consumer receives the premium immediately on the purchase of the product. d) Price deals: it is a temporary price reduction used to attract the consumer to a product. Price deals have been effective with low priced, frequently purchased nondurable products. e) Quantity deals: it offers the consumer more quantity of the same product as premium at no extra cost or with a nominal increase in the price of the deal package.
2.
a) Coupon Premium Plan: under this plan, the consumers are to save coupons usually issued as a part of product package. Premium is given a way in exchange of the coupons. b) Self- liquidating offer: it is an offer where, upon the proof of the purchase having been made, are given an option to obtain the premium offer article at a price far less than it would cost in the shop. c) Consumer contests: it is the contest or competition based on skill among the consumers in which prizes are offered. Usually, participants are required to purchase the product and send the proof of that and fulfill other conditions. 106
C. SALES-FORCE PROMOTION:
a) Bonus to sales force: bonus is the extra payment made for those who cross the sales quota set for a specified period. This help both the company and sales force as they both benefit by increased sales. Sales contest: sales contests are declared to stimulate the sales force to double or multiply their sales over a stipulate period of time with the prizes going to top performers.
7.3 ADVERTISING Advertising is the business of people, for the people and by the people. Advertising is important and can help make firms and brands leaders in the market provided they have just the products and services that the market requires. Advertising has become so integral part of our life and society that we cant imagine any event, newspaper, magazine, TV serial, Cinema etc. without advertising. Advertising is a vital marketing tool as well as powerful communication medium. The basic objective of any advertisement is to stimulate sales, direct or indirect by trying to make tall claims about product performance. The term advertising is derived from the original Latin word advertere which means to turn the attention. The dictionary meaning of the advertising is to announce publicly or to give public notice. Advertising is used for communicating business information to the present and prospective customers. It provides information about the advertising firm, features of its products, qualities, place of availability of its product, different schemes offered, benefits of using its product etc. Advertising is important for both buyers and sellers. Advertising influences consumer attitudes and buying behaviour. Advertisement helps in increasing product-awareness, preferences, share of market and profitability. According to American Marketing Association, advertising is any paid form of nonpersonal presentation of ideas, goods or services by an identified sponsor.
Advertising Media
Media is the vehicle that carries the advertisers message to target audience. Media includes all such means through which advertising message is communicated to the target audience. For achieving advertising objectives, selection of right kind of media is important. It should reach the right people, at the right time, at the right place and convey the right message. The media choices have multiplied with the advent of colour television, commercialization of Indian TV, cable TV, and the launch of STAR, Zee and other regional language channels. There are various types of advertising media. These various types of media can be grouped under the following categories.
Print Media:
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Print Media is also known as press advertising. It is one of the media of communication along with broadcast media and outdoor advertising media. It mainly includes advertising through newspaper and magazines.
a) Newspapers:
It is really hard to imagine life without newspapers. It is essential as a good cup of tea in the morning or even more important than tea to start a day. Newspaper is one that gives news-views-ideas-interpretation-opinions-comments and explanation regarding the social, economic, political, educational, moral, cultural, ecological, meteriological developments and the like. Of all the media, newspaper is considered as the backbone of the advertising programmes as it has continued to remain the most powerful message carrier. Of the total space, 45% goes to advertisements in form or the other and the rest for textual matter. The rates vary from one newspaper to other newspaper depending upon their circulation and popularity. The newspapers are classified on the bases of coverage, frequency, and languages. A good number of newspapers are also published in different regional languages.
b) Magazines:
Like newspapers, magazines are one of the oldest media of advertising. Magazines are the periodicals which come out regularly but not on a daily basis. These may be published on a weekly, fortnightly, monthly, bimonthly, quarterly or even yearly basis. These magazines may be classified into two broad categories as special and general. The examples of special magazines are Film-fare, Star and Style, Femina, Eves Weekly, Health Care, Architect, Dentist, Executive, Banker, Industrial Times, Business India, Promotion which cater to the needs of a selected group. On the other hand, general type of magazines do not concentrate on a particular subject but cover in general all the aspects. The examples of this kind are; Readers Digest, Front-line, India-Today, Imprints, Mirror, Illustrated Weekly, Times, Life, Span, Business India, Business World, Fortune, National 108
Geographic, Advertising and Marketing, Advertising Age and so on. All these periodicals have a large number of readers and thus, advertisements published in them reach a number of people.
Broadcast Media:
It includes advertisements in radio, television, cable etc. This media has both audio and visual effect. Broadcast media carrying advertisers message to the target-audience., Television has grown faster than any other advertising media and offers combination of sight, sound and movement in presenting advertisements. Broadcast media is mainly of two types:
a) Radio:
Radio advertising can be aptly called as word of mouth advertising on a whole sale scale which was welcomed in 1920. The advertising message is conveyed through spoken words in case of radio-advertising. Over the years, radio has remained popular and effective means of advertising.
b) Television:
With rapid growth of information technology and electronic media, television has topped the list among the media of advertising. TV has the most effective impact as it appeals to both eye and the ear. Products can be shown, their uses can be demonstrated and their utilities can be told over television. With catchy slogans, songs and dance sequences, famous personalities exhibiting products TV advertising has a lasting impact. Sponsorship means sponsoring a particular programme by advertiser. In this case advertiser makes payment to TV channel for sponsoring programme. In case of participation, advertisers pay to TV channels for 10,20,30 seconds of commercial time during prescribed TV programme i.e. advertisers make direct payment to TV channels for telecasting his advertisement. Rates of advertisement differ from one channel to other channel.
a) Neon-sign Boards:
These are big hoardings which are placed on busy-places. These display brand name of advertiser. Because of big size, these attract attention easily. With the advance in printing technology, big printed plastic-sheets with attractive colours, visual-effects are pasted on big boards, which are permanently fixed on both sides of the busy roads. Now-adays, electric-neon-signboards are becoming common. In the big cities, these boards use the flashing lights by which advertisers message moves on the board electronically. These type of neon-signboards are called electronic flashing signboards which dont use 109
flashing/moving lights. These neon-signboards are depicted at the top of showrooms, shops of retailers and at other busy places/roads.
b) Posters:
Posters are made of big size paper sheets. These are pasted on the walls, hoardings and advertising boards. This is the cheapest and oldest form of the outdoor advertising. These are displayed on bus-stops, near railway-station, cinema halls, near schools, colleges, road-sides, near road-crossings etc. Generally, advertisers paste their posters at a particular place again and again.. Advertising for movie is usually done through posters. Posters are also pasted on walls of houses, shops.
c) Vehicle Advertising:
It is also called transit advertising. It is advertising on the public transport system such as bus transport, railways. On the Indian-railway alone, millions of commuters move every day. In case of bus transport, advertising is common on its back side and side- roofpanels inside the bus. Inside-transit-advertising is observed by persons traveling in the vehicle. For passing their time, passengers look on these posters and read whole of message. In India , because of more dependence of people on public-transport-system, this method is more use for advertisers.
d) Sandwichmen:
They are hired-persons and are dressed like circus-jokers. They walk in busy places with boards, posters in their hands and stickers pasted on their back, depicting the message of advertiser. Sometimes a man is made tall by attaching long supports to his legs. He walks through the busy places with message of advertisers in his hands. When sandwichmen move through busy places, they catch attention of passers by.
internet on cable TV and mobile phones, its area is expanding day by day. It is another form of electronic media. It is also known as media of new millennium. With the increase in internet services, e-business and e-commerce are expanding and now shoppers do eshopping and retailers do e-retailing. On internet, advertisements are designed by webdesigners.
1. The type of target group:- Promotion activities are directed towards four target
groups namely consumers, retailers, wholesalers and industrial buyers. The type of promotion needed is governed by the size and individual needs of each type.
2. The size of promotion budget:- Small firms with meagre budget allocation
cannot think of enjoying economies in promotion deals. They cannot employ large scale personal selling, and in case of advertising, the national coverage. They have to go in for local news papers, outdoor ads, direct mail.
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It is a form of promotion to create, develop and maintain a bright public image of an organization in the community so that the reputation of the seller sets as a goods selling point to promote sale of goods under competition. Public relation means good relatios with everyone be it consumers, employees, government, shareholders and the community at large. According to Edward Bareney, Public Relations is an attempt by information persuation and adjustment to engineer public support for an activity, cause, movement or institution.
OBJECTS:The main object of public relations is to secure the goodwill of the public towards the product or services by having in a manner as to please those with whom the company comes into contact. It is also an image building exercise of the company in the minds of the consumers and at public at large.
SCOPE:The scope of public relations is very large as experts have identified five significant targets for public relation efforts i.e. consumers, dealers, employees, shareholders and community. This scope of targets may be enlarged by including any other target group with which the company might wish to communicate.
FUNCTIONS OF PUBLIC RELATIONS DEPARTMENT:1. Communicating with consumers:- A favourable image must be created both
about the product of the company as well as the company in the minds of the consumers. It can be easily done by public relation department by providing proper information regarding companys profile i.e. history, background, policies, objectives and nature as well as above all its quality of products.
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6. Miscellaneous Functions:
a) b) c) d) Press relations Product Publicity Corporate Communication Dramatisation
MARKETING PUBLIC RELATIONS:The market public relations goes beyond publicity and plays an important role in the following task:1. 2. 3. 4. 5. Assisting in the launch of new product. Assisting in repositioning a mature product. Influencing various specific target groups. Building interest in a product category. Building the corporate image in a way that reflects favourably on its product.
END CHAPTER QUIZZES 1.Any paid form of non personal presentation of ideas is called:
a) Advertising b) Sales promotion c) Public relations d) Personal selling
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6.Ad repetition creates -------------------- rather than ---------------------------a) Brand familiarity, brand loyalty b) Brand loyalty, brand convection c) Brand convection, brand familiarity d) Brand familiarity, brand convection
7.Mass media usually has the greatest impact at the ----------stage of new task buying:
a) Awareness b) Interest c) Trial d) Adoption
greatest
impact
at
the
9.Companies need to know all of the following about their competitors except:
a) What are their objectives? b) What are their strategies? 114
c) Who are their legal advisors? d) What are their strengths and weaknesses?
Contents:
8.1 8.2 8.3 Meaning Channel structure Channel Design strategies
8.1 The word Channel has its origin to the French word used for Canal Distribution is concerned with various activities such as movement of goods, storage, promotional and financial activities involved in the transfer of goods from producer to consumer. The term Distribution Channel thus connotes a route or path way taken by products as they follow from the point of product to the point of ultimate consumption. According to William J. Stanton, A distribution channel consists of the set of people and firms involved in the transfer of title to a product a as the product moves from producer to ultimate consumer or business user.
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Hence, It can be said that the cannel of distribution involves those activities through which goods passes away from producer to consumers. Every producers reaches to the consumer with the help of intermediaries and it makes possible the movement of goods and services. IT means the participants in the channels of distribution are:-
Producer
Intermediari es
Consumers
In general sense , channel members add value to a companys products by making the merchandise available at the right time , place and in the right quantity and right condition to the end customer. To do so , a number of activities need to be performed . we can broadly classify these activities into forward flows , backward flows and point of sale.
Gathering and sharing information with companies about buying patterns of current customers, potential customers, competitors and other factors that impact the business.
The functions are not performed by any one individual or distribution entity. A number of different channel partners perform these tasks.
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3. Multiple channels
Rarely does a company use just one type of channel structure for its distribution system. it usually employs several different or alternative channels which include multiple channels, non traditional channels and strategic channel alliances. When a company selects two or more different channel structures to distribute the products to its target markets, this arrangement is known as multiple or dual distribution. Usage of multiple channels increases the market coverage and reach for the company and provide greater convenience and better service levels to its customers.
4. Non-traditional channels
Often non-traditional channel arrangements help differentiate a firms product form competition. For example, a company may choose to use mail-order channels or internet to sell products instead of going through traditional retailer channels.
6. The internet
The internet allows consumers to directly access manufacturers and vice versa. As a result channel structures are undergoing a rapid change and in many industries the role of channel intermediaries is rapidly undergoing a change. In the travel industry, as more airlines offer e-ticketing, the role traditionally performed by the travel agent is rapidly diminishing. Travel agents are now positioning themselves as travel consultants for holidays, as their role as ticketing agents may soon become redundant. The market potential for the internet is only bounded by the penetration of the internet and the number of consumers who are able to shop online.
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Shopping goods are those goods that consumers buy infrequently. These are usually preplanned purchases and consumers make some comparison on features, styling, prices and quality. Clothing , footwear, cosmetics, personal accessories like watches and home appliances like televisions, refrigerators and washing machines and automobiles (4-wheelers or 2-wheelers) are examples of shopping goods. Distribution channels for such products are selective with wide market coverage. Retailers add value to the products through products demonstrations , assistance to customers in decision making, installation and even after sale service. Hence companies have to support the retail intermediaries through training of sale force; other factors like inventory control and service levels to retail outlets are also important. Transportation conditions are a critical element of the distribution strategy, to ensure the safe transportation of products from factory to end customer.
2. Channel conflict
Inequitable channel relationships often lead to channel conflicts, which is a clash of goals and methods among the members of the distribution channel. Conflicts can arise becouse a channel member refuses to adapt with the times and therefore becomes inefficient. Often conflict arise due to channel pursuing different goals. A multi brand home appliances retailer would want to sell as many products as possible, regardless of brand, to improve his overall sales and profitability. On the other hand, a particular company would want him to push their products more, as they desire a certain sales volume and market share. Conflicts can occur at any level within the distribution chain. A conflict among channel members at the same level, such as two retailers or stockists, is known as horizontal conflict. This type of conflict is common where companies practice dual or multiple distribution strategies. Horizontal conflict can also occur when channel members on the same level feel they are being unfairly treated by the manufacturer. Most managers regard, horizontal conflict as healthy competition, and may allow such a conflict to play out to their advantage. A more serious conflict is vertical conflict, which occurs between two different levels in the distribution chain, such as between a 122
manufacturer and wholesaler or between a manufacturer and retailer. Manufacturer versus wholesaler conflict typically arise when a manufacturer bypasses a wholesaler to deal directly with the customer, as in institutional sales. Managing channel conflict Conflict is not necessarily a bad thing hence the challenge is not to eliminate conflict, but to manage it better. There are several mechanisms for effective conflict management . one is the adoption of a superordinate goal. Channel members come to arrangement on the fundamental goal they are jointly seeking, whether it is market share, quality or customer satisfaction . they usually do this when the channel faces an external threat, such as the advent of a new and more efficient channel, or a change in legislation or changing customer tastes. Co-optation is an effort by one organization to win the support of the leaders of another organization by including them on advisory councils and the like. So long as the leader is taken seriously , co-optation can reduce conflict, as each begins to appreciate the others point of view.
3. Channel partnering
Channel partnering or channel co-operation is the joint effort of all channel members to create a supply chain that serves the customers and creates a competitive advantage. By co-operating retailers, wholesalers and manufacturers can speed up inventory replenishment, improve customer service and reduce the total costs of the marketing channel. Supply chain management emphasises channel alliances and partnerships as it helps supply chain managers to create parallel flows of material and information. The rapid growth in channel partnering is due to information technology as well as a common need to lower costs and improve operational efficiency. Forced to become more efficient, many companies are now turning towards channel partnering as a win-win situation.
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2. One who sells to retailer is:a) b) c) d) a) b) c) d) Factor. Agent. Wholesaler. Retailer. merchants. Agent. Facilitator. All of above.
4. direct selling goods to consumer is called:a) b) c) d) Direct channel. Indirect channel. Vertical channel. Horizontal channel.
5. using more than one channel is called:a) direct channel. b) Muliple channel. c) Indirect channel. 124
d) Horizontal channel.
6. When there is maximum market coverage, it is called:a) b) c) d) Intensive distribution. Selective distribution. Exclusive distribution. None of above.
7. pull strategy involves:a) b) c) d) pulling customer into stores. Pushing the customer. Selling product by direct selling. Not supplying the goods.
8. the joint effort of all the channel members to create a supply chain that serves the customer is called:a) b) c) d) Channel conflict. Channel partnering. Channel control. Channel leadership.
9. when one member affects another members behaviour, it is called:a) b) c) d) Channel power. Channel control. Channel leader. Channel conflict.
10.Company related factors of distribution includes:a) b) c) d) Push strategy. Pull strategy. Both of above None of above.
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CHAPTER IX
Contents:
9.1 9.2 9.3 9.4 9.5 9.6 Meaning of marketing research Stages in marketing research process Scope of marketing research Meaning of consumer behaviour Factors affecting consumer behaviour Application of Consumer behaviour in Marketing
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The principal task of marketing management is to fulfill the aspirations of the consumers. It is thus imperative to understand what the consumers want; how they make the various choice decisions; or what are their sources of information and influence process etc. As such, marketing research is the function which provides the necessary information about the consumer to the marketer. In the process, an organisation can identify new opportunities in the market; evaluate and monitor marketing actions; and in general, evolve better marketing progamme to serve the interests of the consumer. Thus marketing research acts as the link between the consumer and the marketer.
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Marketing research is the function that likes the consumer with the organisation through information. It involves systematic and objective search for and analysis of information that can be used for evolving some marketing decisions. Any research study must clearly state the issues being investigated. It must apply systematic and formal procedure in collection and analysis of information. It must communicate the study findings in a manner which could help in arriving at some marketing decisions. A research study 'will fail to serve its purpose if marketing researcher merely collates some statistical facts or is pre-occupied with techniques or uses data of questionable validity or communicates the findings in too much vague or technical language. Likewise, a research study will suffer if the marketing manager does not offer full perspective of the research problem; or allows inadequate time; or uses research as a firefighting device or does not really appreciate the value of research. Problem must be clearly defined and reasons for undertaking the research from the point of view of marketing decision making should be explicitly justified. In order to carry out effective research programme:
the researcher to set the proper research objectives which in turn facilitate relevant and economic data collection. Problem definition in specific terms must precede the determination of the purpose of the research. In order to define the problem more precisely, some sort of exploratory research may also be undertaken. The methods popularly in use are survey of secondary data, experience survey or pilot studies.
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Data Collection
The data collection process follows the formulation of research design including the sampling plan. Data which can be secondary or primary, can be collected using variety of tools. These tools are classified into two broad categories, the observation methods and the communication methods, all of which have their inherent advantages and disadvantages.
I) Title page II) Table of contents III) Introduction IV) Statement of objectives V) Methodology A) Research design B) Data collection methods C) Sampling D) Field work E) Analysis and interpretation VI) Limitations VII) Findings VIII) Conclusion and recommendations IX) Appendix A) Copies of forms used B) Tables not included in finding C) Bibliography, if relevant
1) Sales Analysis
Much research is done in the following areas which are broadly referred as sales analysis, measurement of market potential/demand projection, determination of market characteristics, market share estimation, studies of business trends. In fact, some of the more detailed studies to be carried out under the broad ambit of sales analysis could be as follows, The types of consumers that constitute the potential market The size and location of the market; The growth and. concentration of the market over certain period of time, The competitive picture for the product; The major strategies of leading competitors with respect to price, offerings distribution etc. 132
The purchase habits of key market segments; What is the pattern of pre-purchase deliberations made by the consumers'? Who are involved in the decision making? What are the roles of different members in the decision making? How does the product fit into the consumer's life styles? (Operation if it is an industrial product); Do consumers prefer to buy some particular brands'? (i.e. Assess the degree of brand loyalty). The above list is not exhaustive. Here research is basically done with a view to know consumers' motivation, attitude, cognition and perceptions etc. Thus information wilI be collected in a manner so that they have some implications for various marketing decisions.
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Moreover, some marketing research have evaluated the relative effectiveness of different media in specific product fields, and in context of achieving specific tasks such as creating brand awareness or a particular product benefit. Copy research: Advertising agencies have been regularly engaged in this activity where they test out alternative copy designs by obtaining the feedback from to consumers. Studies of advertisement effectiveness - Advertising agencies regularly make use of marketing research studies to assess and monitor effectiveness of different advertising campaigns.
V) Corporate Research
Large scale corporate image studies among different target publics - They involve an assessment of knowledge about company activities, association of company with sponsored activities and company perceptions on specific dimensions. These types of corporate image studies are done periodically to monitor any change in image over time among different publics. Social values research: Knowledge, attitude and practices on family planning, anti-dowry, smoking, drinking etc. Political studies: In recent times marketing studies have been conducted to ascertain the public opinion about the election results. Customer service studies: Many banks and large industrial houses have resorted to marketing research to know the consumers' changing need for service and possible grievances about existing operations.
MEANING
Consumer behaviour is the pattern of response of buyers to marketing offer of a firm. It refers to the process as to how, consumers make their purchase decisions. It is concerned with what, why, how, much, when and from whom buyers make their purchases of goods and services. It is defined as all the psychological, social and physical behaviour of 134
potential customers as they become aware of, evaluate, purchase, consume and tell others about the products or services. Thus consumer behaviour is concerned with (1) forces influcing consumers actions and reactions and (2) his purchase decisions process.
CONSUMER BEHAVIOUR:
Consumer behaviour is the study of (i) what consumer buy? (ii) who buys? (iii) when consumer buy? (iv) how consumer buy? (v) where consumer buy? It is the behavior that consumer adopt in searching for purchasing, using, evaluating and disposing of products, services and ideas. The concept of consumer behaviour can be presented in terms of marketing stimuli, process and behaviour response as under :Stimuli Response (Problem Solving) outcome) (Behavioural Process
1. Four Ps of Marketing 2. Physchological forces 3. Social Factors 4. Cultural Factors 5. Economic Factor 6. Enviornmental forces
1. 2. 3. 4.
Feedback The consumer behaviour is a process of a buyers actions and reaction towards marketing stimuli offered by a firm.
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2.
3.
4.
5.
6.
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7.
8.
9.
10.
11.
Change in human behaviour and preferences :Consumer preferences are chaning. They dont act or react as the theory would suggest. Todays consumer wants quality, value for money, less price but good quality. It is possible through the knowledge of consumer beahviour.
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Attitudes
Attitudes are our learned predispositions towards objects, people and events. Attitudes guide our orientation towards these. It is our attitudes which influence how we respond to different products and services. Attitudes are not inborn or innate in us. Rather they are learnt from people around us. Till a few years ago most housewives had a negative attitude towards frozen, dehydrated or instant food. But today, with more women joining the work force, such products are viewed as a convenience and instant, quick to cook meals are looked upon favourably. Similarly, our attitude towards saving is undergoing radical changes. Instead of saving and leading a simple, frugal life, people prefer to have a better lifestyle today rather than save for tomorrow. Our attitudes influence our purchase decisions and consumer behaviour. An attitude which is averse to risk taking will never make for a consumer investing his money in shares and stocks, such a consumer would always prefer `safe' investments even if though rate of return may be comparatively lower.
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Information Processing
This refers to the process and activities which consumers engage in while gathering, assimilating and evaluating information. As discussed in' the previous paragraphs, we only attend to selective information. The manner in which we assimilate and evaluate this selective information is determined by our motives, attitudes and personality and selfconcept. Thus the same information maybe evaluated in a different manner by two different individuals and the ensuing response may also be very different. A half-filled glass elicits the response "a half-empty glass from, one consumer while another reacts by saying it is " half-full".
EXTERNAL ENVIRONMENT
.
Cultural Influences
The first of the influences is that of cultural variables. Culture is defined as the complex, sum total of knowledge, belief, traditions, customs, art, morals, law and any other habits acquired by people as members of a society. Culture of one society differs from that of another. Many of our actions, and behaviour as consumers stem from our cultural background for instance, the emphasis on saving schemes oriented towards saving for a daughter's marriage or the preferred attitude towards gold as a form of saving are the result of our unique cultural influence.
Sub-cultural Influences
Within a given culture, there are many groups or segments of people with distinct customs, tradition and behaviour, which set them apart from other people. All Indians share one common cultural heritage, but the Hindu Brahmins of Tamil Nadu are very different from the Hindu Bengalis of Calcutta in the same way as Kashmiri Hindus are different from the Hindus of Gujarat. Each of these people, within one cultural mainstream, have uniquely distinct sub-cultures. They have their style of dress, food habits, religious traditions and rites all of which have implication for the marketer. Sumeet Mixer and Grinder developed special heavy duty motor to withstand continuous running required for grinding rice for dosa, vada, idli-staple food items of the South Indian cuisine. Similarly, marketers of spices need to modulate taste and formulation according to the consumers taste, which varies from state to state.
A social group is a collection of individuals who share some common attitudes and a sense of relationship as a result of interaction with each other. Social groups may be primary where face-to-face interaction take place frequently, such as families, work groups and study groups. Secondary groups are those where the relationship is a more formalized and less personal in nature. Examples of primary groups are associations of professionals members of a political party, and social groups such as Rotory, Lions, Jaycees etc. The behaviour of individuals as consumer is greatly influenced by other members of the group. If executives of an office normally wear a safari suit to work, it is most likely that a newcomer to the office would tend to conform to this pattern of dressing, even though he may have been dressing very differently in his earlier work situation. The change over to kurta-pajama once an individual joins politics is another example of how social group influences consumer behaviour.
Family Influences
Family is a social group which can be defined as a primary group. It needs to be studied in great detail as it is one of the strongest sources of influences on consumer behaviour. The first and strongest influence on a child is that of his family and he imbibes many behavioural patterns from other family members subconsciously and these tend to stay with him even after attaining adulthood. Further, within a family many decisions are made jointly with various members exerting different degree of influence. The changing structure of families as the joint family system gradually gives way to single nucleus families also influence the consumer behaviour.
Personal Influences
Each individual is influenced by the family, social class, sub-cultural and cultural group to which he belongs, and yet has his own distinct personality which influences his decisions and behaviour as a consumer. The probability of trying a new product or a new brand will depend on the type of personality of the consumer. The process of evaluation of different products and different brands will vary from person to person. For one, price may be the most important parameter in making the decision to buy a water geyser, for another it is convenience, and for yet another it may be the status symbol value.
Other Influences
All other influences not covered in any of the other specific influence headings are covered here. National or regional level events, situational factors or any other external influences are included here. Cricket test matches always lead consumers to buy TV sets and transistor radios. The hosting of Asiad '82 in New Delhi brought in its wake tremendous awareness and interest in sports. All such-events have both temporary and permanent influences on consumer behaviour. During the period of the event, there is increased emphasis on buying goods and services related to the event. After the event is over, as in case of Asiad, because the infrastructure for sports has been created, an interest amongst the people been kindled; sporting events are now held regularly with more people participating. All this leads to greater consumption of sports goods. Situational variables such as product display, price reduction offers, free gift offers, also influence consumer behaviour. Seeing an attractive offer, a free mug with a new brand of coffee, a regular user of a rival brand may be tempted to try the new brand, 141
9.6APPLICATIONS MARKETING
OF
CONSUMER
BEHAVIOUR
IN
Marketing is defined as "human activity directed at satisfying needs and wants through exchange processes". Thus the beginning of marketing lies in identifying unsatisfied human needs and wants and understanding the ensuing activity which people engage in to fulfil these. And that, as we have described, is the realm of consumer behaviour. Consumer behaviour and marketing go hand-in-hand. Trying to do the latter without an understanding of the former in akin to firing a shot in the dark. Consumer behaviour has a number of applications in the area of marketing as described in the following paragraphs.
1. Analyzing Market Opportunity: Study of consumer behaviour helps in identifying needs and wants which are unfulfilled. This is done by examining trends in income, consumers lifestyles and emerging influences. The trend towards increasing number of working wives. and greater emphasis on leisure and convenience have signalled the emerging needs for household gadgets such as vacuum cleaner, washing machine and mixer grinder. Tortoise Mosquito repellant coils and Good Knight electrical repellants were marketed in response to a genuinely felt need of the people. Its rapidly rising sales graph is an indication of how well the product has satisfied the consumer's need. 2. Selecting the Target Market: The study of the consumer trends would reveal distinct groups of consumers with very distinct needs and wants. Knowing who these groups are, how they behave, how they decide to buy enables the marketer to market products/services especially suited to their needs. All this is made possible only by studying in depth the consumer and his purchase behaviour. A study of potential consumers for shampoo revealed that there was a class of consumers who would like to use shampoo only on special occasions and who otherwise use soap to wash their hair. Further, this consumer class would not afford to spend more than three or four rupees on shampoo. Having identified this target market, companies with leading brands launched their shampoos in small sachets containing enough quantity for one wash and priced just at two or three rupees. 3. Determining the Product Mix: Having identified the unfulfilled need slot and having modified the product to suit differing consumer tastes, the marketer now has to get down to the brass tacks of marketing. He has to determine the right mix of product, price promotion and advertising. Again consumer behaviour is extremely useful as it helps find answers to many perplexing questions. Product: The marketer has the product that will satisfy hitherto unfulfilled consumer need, but he must decide the size, shape and attributes of the product. He must figure out whether it is better to have one single product or a number of models to choose from. Does the product require any special kind of packaging? Does it need any guarantee or after sales service? What associated products and services can be offered alongside? Maggi Noodles were first launched in the most common flavours such as masala and capsicum. Having succeeded with these, other flavours such as garlic and sambhar were
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launched with the objective of appealing to specific regional tastes. However, these flavours did not succeed. Recently, exotic flavour such as prawns has been launched. All these are attempts to modify the product by adding special features, attributes which might enhance the product appeal to the consumers. The study of consumer behaviour also guides the marketer in making decisions regarding packaging. Pan Parag was first introduced in tins. But study of consumer behaviour revealed that people wanted smaller packing which they could conveniently carry on their person and in response to this the individual pouches were introduced. Further study of consumers revealed a problem with, these pouches. Once opened and kept in the purse or pocket, the pan masala would spill out of the pouch into the purse or pocket. To overcome this problem, Pan Parag has now launched a pouch with a zip. You eat as much as you want, zip up the packet and put it in your pocket without fear of spillage and wastage. The study of consumer needs revealed the need for a water storage facility. in the kitchen and bathroom but which didn't occupy floor space. In response to this need, Sintex added the overhead indoor loft tank to their existing range of outdoor. roof top water storage tanks. Price: What price should the marketer Charge for the product? Should it be the same as that of the competing product or lower or higher? Should the price be marked on the product or left to the discretion of the retailer to charge what he can from the customer? Should any price discounts be offered? What is the customer perception of a lower or higher price? Would a lower price stimulate sales? Or is a lower price associated with poor quality? These are the kinds of questions facing a marketer when taking a decision regarding pricing. The marketer has to determine the price level which makes the image of the product and which also maximises the sales revenue. For doing so he must understand the way his product is perceived by consumers, the criticality of the price as a purchase decision variable and how an increase or decrease in price would affect the sales. It is only through continuous study of consumer behaviour in actual buying situations that the marketer can hope to find answers to these issues. Distribution: Having determined the product size, shape, packaging and price, the next decision the marketer has to make is regarding the distribution channel. What . type of retail outlets should sell the products? Should it be sold through all the retail outlets or only through a selected few? Should it be sold through existing outlets which also sell competing brands or should new outlets selling exclusively your brand of product be created? How critical is the location of the retail outlets from the consumers' viewpoint? Does the consumer look for the nearest convenient location or is he willing to travel some distance for buying the product? The answers to all these questions can only be found when the marketer has a good understanding of the consumers' needs which are being fulfilled by his product and the manner in which consumers arrive at the dicision to buy. A few years ago, Eureka Forbes introduced a vacuum cleaner in the Indian market. It was not only launch of a new brand, but rather a launch of a new product concept. No retail outlets were selling vacuum cleaners very few consumers knew much about the product and fewer still were willing to buy it. Under these circumstances, the company decided to sell the product only through personal selling with the salesman calling on the consumer at his home. Here the salesman had enough time to explain, demonstrate and convince the'prospective customer about the 143
utility of the vacuum cleaner. In a retail outlet situation, all this would just not have been possible. The retailer has neither the time nor the detailed knowledge required to sell such a new product concept. This distribution strategy of Eureka Forbes, based on a very fine understanding of the consumer behaviour, has yielded good sales results. The product concept is well accepted in the urban markets and today the vacuum cleaner, in addition to personal selling is also sold through some selected retail outlets. Promotion: The marketer here is concerned with finding the most effective methods of promotion which will make the product stand out amongst the clutter of so many other brands: and products, which will help increase the sales objective and yet be within the budget. This is possible only when the marketer knows who his target consumers are, where are they located, what media do they have access to, what is their preferred media and what role does advertising play in influencing the purchase decision? Today, TV is the most powerful advertising medium in the country. And many brands spend the greater part of their promotion and advertising budget on TV. Brands regularly advertised on TV soon become well recognized names. But as a marketer you have to question the suitability of any specific medium in case of your specific product and budget. Suppose your product is sold in only a few geographical markets you may decide to avoid TV altogether and concentrate on point of purchase promotion and local advertising through local newspaper, hoardings and wall paintings. In so many cases of industrial product media advertising is very negligible, instead, brochures or leaflets containing detailed product specification and information are directly mailed to the actual consumer, and sometimes followed up by a salesman making a call to clinch the deal. This is primarily because buyer behaviour and informational needs of industrial buyers are very different from that of consumer buying. You will study organisational buying behaviour in detail in Unit 3 of this block. But you can make these decisions only when you know your consumer and understand his behaviour.
4. Use in Non-profit and Social Marketing: The knowledge of consumer behaviour is also useful in the marketing of non-profit or social or governmental services of institution such as hospitals, voluntary agencies, law enforcement and tax collection agencies. The income tax authorities have always been perceived in negative manner by the common man who fears them and views them in a suspicious light. To overcome this poor image, advertisements on TV and in newspapers and magazines are regularly released, wherein a friendly, helpful image is sought to be projected. Moreover, there is greater dissemination of information regarding the rights and responsibilities of the taxpayer. Similarly, Delhi Police is trying to overcome the problem of poor image by projecting itself as always alert and available for help through regular newspaper advertisements.
a) b) c) d)
2. Various Sources of Data Collection are:a) b) c) d) Primary data Secondary data both a & b Neither a or b
3. Sales analysis includes:a) b) c) d) Analyzing sales of the organization. Analyzing purchases of the organization. Studying production facilities of organization. None of above
4. Scope of marketing research includes:a) b) c) d) Sales analysis. Product management Advertising research All of above
5. Advertising research includes:a) b) c) d) Media research Copy research Name of above Both a & b
6. Individual determinates affecting consumer behaviors includes:a) Motivation b) Attitudes c) Personality d) all of above
7. External environment includes:a) b) c) d) Cultural influences Sub- cultural influences Social class influences All of above 145
8. Consume behavior help in:a) b) c) d) Studying behavior of consumer. Studying behavior of supplier. Studying shareholders behavior. Studying behavior of creditors.
9. Personality means:a) b) c) d) Studying individual characteristics. Learning from past experience. Studying attitude. Motivating individual.
BIBLOGRAPHY
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1. Kotler, Philip, Marketing Management, Prentice Hall, 2000 2. Sontakki, C.N., Marketing Management, Kalyani publishers. 3. Saxena, Rajan, Marketing Management, Tata Mcgraw hill 4. Ramaswamy and Namakumatri, Marketing Management, Macmillan India Limited. 5. Marchannd & B. Vardharajan, An introduction to Marketing, Vikas Publishing House. 6. Maurice & Mondell & larry Rosenberg Marketing, Prentice Hall of India Ltd. 7. Mohammad Amanatuallh: Principles of Modern Marketing. Kalyani Publications
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KEY TO END CHAPTER QUIZZES. CHAPTER I 1(b); 2(a); 3(a); 4(a); 5(d); 6(d);7(b); 8(d); 9(a);10(d) CHAPTER II 1(c); 2(d); 3(b); 4(b); 5(d); 6(a);7(d); 8(b); 9(d);10(a) CHAPTER III 1(c); 2(d); 3(d); 4(b); 5(d); 6(a);7(a); 8(a); 9(d);10(a) CHAPTER IV 1(b); 2(b); 3(d); 4(a); 5(c); 6(b);7(d); 8(b); 9(d);10(a) CHAPTER V 1(a); 2(d); 3(a); 4(c); 5(a); 6(a);7(a); 8(d); 9(a);10(d) CHAPTER VI 1(a); 2(a); 3(c); 4(b); 5(d); 6(b);7(c); 8(b); 9(d);10(a) CHAPTER VII 1(a); 2(a); 3(d); 4(d); 5(d); 6(d);7(a); 8(b); 9(c);10(d) CHAPTER VIII 1(a); 2(c); 3(d); 4(a); 5(b); 6(a);7(a); 8(b); 9(b);10(c) CHAPTER IX 1(d); 2(c); 3(a); 4(d); 5(c); 6(d);7(d); 8(a); 9(a);10(a)
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ASSIGNMENT A
. 1. The length of the product life cycle is governed by the rate of technological change, the rate of market acceptance and the case of competitive entry Discuss. 2. The marketing concept is a customer orientation backed by integrated marketing aimed at generating customer satisfaction as the key to satisfying organisational goals. Comment. 3. What are major reasons for market segmentation and what are its advantages? 4. Briefly explain the steps involved in new product development.
ASSIGNMENT B
1. Explain any two pricing policies with their relative advantages and disadvantages. 2. As Marketing Director of Kelloggs evolve a market driven distribution system for the market. 3. Which type of sales promotion vehicles will you use to promote the sale of a premium brand of toilet soap?
CASE STUDY
M.K.B. products was an industrial company, undertaking the manufacture of chewing tobacco products. For the packing of these products, tin containers were required in huge quantities. The company was buying these containers from Shaz Metals, who were supplying the empty containers to M.K.B. products @ Rs. 1.60 per tin container. This arrangement carries on for more than ten years. M.K.B. products was later joined by a young M.B.A., who advised the owner of M.K.B products, to go in for backward integration (To make the tin containers themselves, instead of buying them from Shaz Metal Works. The matter was put under deliberation and it was decided to join for partial backward integration, i.e. to start the manufacture of their own tin containers, as well as, keep buying from the supplier(Shaz Metal) in a lesser quantity, till such time that the company M.K.B. products could become self sufficient. In the pursuit of backward integration, another semiautomatic tin container manufacturing plant was set up by the company, and it started its production and initially faced a lot of teething troubles. They however, overcame them and started functioning smoothly. A number of suppliers were interested in supplying tin sheets for M.K.B. products. After buying randomly from a number of suppliers, the company came to the terms with one Mr. Wali, who undertook all the raw material supplies of the tin sheets to the company at 149
reason able rates. He would make deliveries as and when necessary, and developed a good relationship with the company. This arrangement lasted for a decade. Later, Mr. Wali, the tin supplier told the company that they would be charging an additional two percent on the prices quoted by them and delivery time would have to be rescheduled and the company would have to pick up, or order for the entire material consumed by the quarterly, instead of monthly arrangements. This sets the company thinking whether to agree to Mr. Wali terms or to look for another supplier. After a little research, they came across a supplier in tin industries, who was happy to supply the goods at same terms and conditions. When the deal was about to finalised with the scrap tin industries, Mr. Wali sent a telegram that the increase in rated was cancelled, and they were willing to renew their contract, or continue with the suppliers at the earlier rate for the next 12 months. This again set the company thinking, because they had good relations with Mr.Wali for a long period of time and also the fact that in industrial buying, market price plays a secondary role but the quality, timely and regular suppliers are the dominant factors. QUESTIONS: 1. What should the company do in this situation and why? 2. Should the company try scrap industries who are an unlisted supplier and what precautions should the company take for the future?
ASSIGNMENT C
MULTIPLE CHOICE QUESTIONS
1. All of the following would be ways to segment within the category of psychographic segmentation EXCEPT: a. social class. b. occupation. c. lifestyle. d. personality. 2. The orange juice manufacturers know that orange juice is most often consumed in the mornings. However, they would like to change this and make the drink acceptable during other time periods during the day. Which form of segmentation would they need to work with and establish strategy reflective of their desires? a. gender segmentation b. benefit segmentation c. occasion segmentation d. age and life-cycle segmentation 150
3. Using a successful brand name to introduce additional items in a given product category under the same brand name (such as new flavors, forms, colors, added ingredients, or package sizes) is called a(n): a. line extension. b. brand extension. c. multibranding. d. new brands. 4. If a company's objective were to reach masses of buyers that were geographically dispersed at a low cost per exposure, the company would likely choose which of the following promotion forms? a. Advertising b. Personal selling c. Public relations d. Sales promotion 5. Successful service companies focus their attention on both their customers and their employees. They understand ___________________, which links service firm profits with employee and customer satisfaction. a. internal marketing b. service-profit chains c. interactive marketing d. service differentiation 6. Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need is called a(n): a. idea. b. demand. c. product. d. service. 7. ______________ is the general term for a buying and selling process that is supported by electronic means. a. Internet commerce b. Web commerce c. Computer commerce d. Electronic commerce 8. ________________ consists of dividing a market into distinct groups of buyers on the basis of needs, characteristics, or behaviour who might require separate products or marketing mixes. a. Product differentiation b. Market segmentation c. Market targeting d. Market positioning
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9. __________________ is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. a. Mass marketing b. Market segmentation c. Market targeting d. Market positioning 10. The fact that services are sold, produced, and consumed at the same time refers to which of the following service characteristics? a. Intangibility b. Inseparability c. Variability d. Perishability 11. _______________ factors are the most popular bases for segmenting customer groups. a. Geographic b. Demographic c. Psychographic d. Behavioral 12. The stage is the product life cycle that focuses on expanding market and creating product awareness and trial is the: a. decline stage. b. introduction stage. c. growth stage. d. maturity stage. 13. A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user is called a(n): a. retailer. b. wholesaler. c. distribution channel. d. logistics. 14. In evaluating messages for advertising, telling how the product is better than the competing brands aims at making the ad: a. meaningful. b. distinctive. c. believable. d. remembered. 15.___________________ is the practice of adopting policies and developing strategies that both sustain the environment and produce profits for the company. a. Environmentalism b. Environmental sustainability c. Consumerism 152
d. Consumer accountability 16. Consumer goods with unique characteristics or brand identification often requiring a special purchase effort are called: a. custom products. b. specialty products. c. convenience products. d. shopping products. 17. A price reduction to buyers who buy in large volumes is called a(n): a. quantity discount. b. cash discount. c. seasonal discount. d. trade discount. 18. R&D and engineering first produce the product concept into a physical product during which of the following stages of the new product development process? a. Concept development and testing b. Marketing strategy c. Business analysis d. Product development 19. The primary reason that many companies work to become the "low-cost producers" in their industry is because: a. they can generate more advertising. b. they can please top management. c. they can gain tax advantages. d. they can set lower prices that result in greater sales and profits. 20. Conflicts between different levels of the same channel of distribution are referred to as: a. horizontal conflicts. b. vertical conflicts. c. layer-based conflicts. d. parallel conflicts. 21. ________________ is a philosophy holding that a company's marketing should support the best long-run performance of the marketing system. a. Enlightened marketing b. Myopic marketing c. Fundamental marketing d. Conceptual marketing 22. A company is practicing ________________ if it focuses on subsegments with distinctive traits that may seek a special combination of benefits. a. micromarketing b. niche marketing 153
c. mass marketing d. segment marketing 23. When a company reviews sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives, they are in which of the following new process development stages? a. Concept development and testing. b. Commercialization. c. Business analysis. d. Marketing strategy development. 24. _______________ is a strategy of using a successful brand name to launch a new or modified product in a new category. a. Duobranding b. Line extension c. Brand extension d. Multibranding 25. The fact that service cannot be stored for later use or sale is evidence of their: a. intangibility. b. inseparability. c. variability. d. perishability. 26._________________ is the concept under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about the organization and its products. a. The promotion mix b. Integrated international affairs c. Integrated marketing communications d. Integrated demand characteristics 27. The course of a product's sales and profits over its lifetime is called: a. the sales chart. b. the dynamic growth curve. c. the adoption cycle. d. the product life cycle. 28. The type of trade-promotion discount in which manufacturers agree to reduce the price to the retailer in exchange for the retailer's agreement to feature the manufacturer's products in some way is called a(n): a. discount. b. allowance. c. premium. d. rebate.
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29. When producers, wholesalers, and retailers act as a unified system, they comprise a: a. conventional marketing system. b. power-based marketing system. c. horizontal marketing system. d. vertical marketing system. 30. ______________ is a person's distinguishing psychological characteristics that lead to relatively consistent and lasting responses to his or her own environment. a. Psychographics b. Personality c. Demographics d. Lifestyle 31. ________________ has the advantage of being high in selectivity; low cost; immediacy; and interactive capabilities. a. Direct Mail b. Outdoor c. Online d. Radio 32. If an advertiser wants flexibility, timeliness, good local market coverage, broad acceptability, and high believability, the advertiser will probably choose which of the following mass media types? a. Newspapers b. Television c. Direct Mail d. Radio 33. A(n) _______________ is a name, term, sign, symbol, or design, or a combination of these that identifies the maker or seller of a product or service. a. product feature b. sponsorship c. brand d. logo 34. All of the following factors can affect the attractiveness of a market segment EXCEPT: a. the presence of many strong and aggressive competitors. b. the likelihood of government monitoring. c. actual or potential substitute products. d. the power of buyers in the segment. 35. A _______________ is any activity or benefit offered for sale that is essentially intangible and does not result in the ownership of anything. a. demand b. basic staple c. product 155
d. service 36. The _______________ holds that consumers will favor products that are available and highly affordable (therefore, work on improving production and distribution efficiency). a. product concept b. production concept c. production cost expansion concept d. marketing concept 37. A company is in the ______________ stage of the new product development process when the company develops the product concept into a physical product in order to assure that the product idea can be turned into a workable product. a. product development b. commercialization c. marketing strategy d. business analysis 38. The practice of going after a large share of a smaller market or subsets of a few markets is called: a. undifferentiated marketing. b. differentiated marketing. c. concentrated marketing. d. turbo marketing. 39. ________________ is screening new-product ideas in order to spot good ideas and drop poor ones as soon as possible. a. Idea generation b. Concept development and testing c. Idea screening d. Brainstorming 40. Technological advances, shifts in consumer tastes, and increased competition, all of which reduce demand for a product are typical of which stage in the PLC? a. decline stage b. introduction stage c. growth stage d. maturity stage
11(b); 12(b); 13(c); 14(b); 15(b); 16(b);17(a); 18(c); 19(c);20(b) 21(a); 22(b); 23(a); 24(c); 25(d); 26(c);27(d); 28(b); 29(d);30(b) 31(c); 32(a); 33(c); 34(b); 35(d); 36(b);37(a); 38(c); 39(c);40(a)
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