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Product Planned and Development Test Marketing Product positioning Product life
cycle Brand policies and practices
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Contents
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LESSON 1
MARKETING MEANING AND IMPORTANCE
Human wants are desires for specific satisfiers of these needs. For example,
cloth is a need but Raymonds suiting may be want. While peoples needs are few, their
wants are many.
Demands are wants for specific products that are backed up by an ability and
willingness to buy them. Wants become demands when backed up by purchasing
power.
Products:
Products are defined as anything that can be offered to some one to satisfy a
need or want.
Value is the consumers estimate of the products capacity to satisfy a set of his
goals.
Markets:
A market consists of all the potential customers sharing a particular need or want
who might be willing and able to engage in exchange to satisfy that need or want.
Importance of Marketing
1. Marketing process brings goods and services to satisfy the needs and wants of
the people.
2. It helps to bring new varieties and quality goods to consumers.
3. By making goods available at all places, it brings balanced distribution.
4. Marketing converts latent demand into effective distribution.
5. It gives wide employment opportunities.
6. It creates time, place and possession utilities to the products.
7. Efficient marketing results in lower cost of marketing and ultimately lower prices
to consumers.
8. It is vital link between production and consumption and primarily responsible to
keep the wheels of production and consumption constantly moving.
9. It creates and raises standard of living of the society.
Marketing Vs Selling
The marketing and selling are frequently confused. Theodore Levitt in his
sensational article Marketing Myopia draws the following contract between marketing
and selling.
Selling focuses on the needs of the seller, marketing on the needs of the buyer.
Selling is preoccupied with the sellers need to convert his product into cash, marketing
with the idea of satisfying the needs of the customer by means of the product and the
whole cluster of things associated with creating, delivering and finally consuming it.
Selling Marketing
1. It is a part of the marketing process 1. It is a comprehensive term or total
system.
2. The emphasis is on product 2. The emphasis is on customer
3. It aims at sellers needs 3. It aims at buyers needs
4. Its aim is sales volume 4. Its aim is buyers satisfaction
Marketing Management:
Marketing Management takes place when atleast one party to a potential
exchange gives thought to objectives and means of achieving desired responds from
other parties.
REVIEW QUESTIONS:
There are five competing concepts under which business organisation can
conduct their marketing activity.
1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
5. Societal marketing concept
Production concept:
The production concept holds that consumers will favour those products that are
widely available and low in cost.
Product concept:
The product concept holds that consumers will favour those products that offer
the best quality, performance and features.
Selling Concept:
The selling concept holds that consumers will ordinarily not buy the
organizations products on their own unless that organisation undertakes and
aggressive selling and promotion effort.
The marketing concept holds that the key to achieving organizational goals
consists in determining the needs and wants of the target markets and delivering the
desired satisfactions effectively and efficiently:
1. Consumer orientation
2. Integrated marketing
3. Consumer satisfaction
4. Realization of organizational goals.
1. Consumer orientation:
3. Consumer satisfaction:
Though the organizational goals may differ from firm to firm, though key areas
such as innovation, market standings, profits and social responsibility are common to all
firms. According to the marketing concept, the right way to achieve these organizational
goals is through ensuring consumer satisfaction.
i) Benefits to firms:
A firm that believes in the marketing concept always feels the pulse of the market
through continuous marketing audit and marketing research. It is fast in responding to
the changes in buyer behaviour. It rectifies any drawback in its product and this proves
beneficial to the firm. The firm gives more importance to planning, research and
innovation and its decisions are no longer based on hunches but on reliable scientific
data and the proper interpretation of such data. The profits for the firm become more
certain.
The concept on the part of various competing firms to satisfy the consumer puts
the later in an enviable position. Reasonable prices, better quality and easy availability
at convenient places are some of the benefits that accrue to the consumer as a direct
result of marketing concept.
The practice of marketing concept contributes to better life style, better standard
of living and also results in the development of entrepreneurial talents. All these sets the
pace for social and economic development.
Thus the marketing concept benefits the organisation, the consumer and society
at large. A proper understanding of this concept is fundamental to the study of modern
marketing.
The societal marketing concept holds that the organizations task is to determine
the needs, wants and interests of target markets and to deliver the desired satisfaction
more effectively and efficiently than competitors in a way that preserves or enhances
the consumers and the societys well being.
REVIEW QUESTIONS:
1. Briefly discuss the various concepts of marketing.
2. Discuss in detail the modern marketing concept.
3. Write a note on societal marketing concept.
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LESSON 3
APPROACHES TO THE STUDY OF MARKETING
i) Commodity approach,
ii) Functional approach,
iii) Institutional approach, and
iv) Management approach.
v) System approach
i) Commodity approach:
The first approach is the commodity approach under which a specific commodity
is selected and then its marketing methods and environments are studied in the course
of its movement from producer to consumer. In this approach, the subject matter of
discussion centres around the specific commodity selected for the study and includes
the sources and conditions of supply, nature and extent of demand, the distribution
channels used, promotional methods adopted etc.
The second approach is the functional approach under which the study
concentrates on the specialized functions or services performed by the marketers and
the problems faced by them in performing those functions. Such marketing functions
include buying, selling, storage, standardizing, transport, finance, risk-bearing, market
information etc. This approach certainly enables one to gain detailed knowledge on
various functions of marketing.
iii) Institutional approach:
The third approach is the institutional approach under which the main interest
centres around the institutions or agencies that perform marketing functions. Such
agencies include wholesalers, retailers, merchantile agents and facilitating institutions
like transport undertakings, banks, insurance companies etc. This approach helps one
to find out the operating methods adopted by these institutions and the various
problems faced because institutions and to know how whey work together in fulfilling
their objectives.
v) System approach:
Modern marketing is complex, vast and sophisticated and it influences the entire
economy and standard of living of people. Hence marketing experts have developed
one more approach namely System approach. Under this approach, marketing itself is
considered as a sub-system of economic, legal and competitive marketing system. The
marketing system operates in an environment of both controllable and uncontrollable
forces of the organisation. The controllable forces include all aspects of products, price,
physical distribution and promotion. The uncontrollable forces include economic, socio-
logical, psychological and political forces. The organisation has to develop a suitable
marketing programme by taking into consideration both these controllable and
uncontrollable forces to meet the changing demands of the society. The system
approach, in fact, examines this aspect and also integrates commodity, functional,
institutional and managerial approaches. Further, this approach emphasizes the
importance of the use of market information is marketing programmes.
Thus from the foregoing discussion, one could easily understand that the
marketing could be studied in any of the above approaches and the systems approach
is considered to be the best approach as it provides a strong base for logical and
orderly analysis and planning of marketing activities.
REVIEW QUESTIONS:
1. Discuss the various approaches to the study of marketing.
2. Explain Systems Approach to the study of marketing.
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LESSON 4
Product may be classified broadly into two major categories namely consumer goods
and industrial goods.
Consumer goods
Consumer goods are those goods meant for use by the ultimate household consumer
and in such form that they can be used by him without further commercial processing.
Consumer goods are generally divided into three sub-categories according to the
method in which they are purchased namely convenience goods, shopping goods are
specialty goods.
Industrial goods:
Industrial goods are those goods which a reused in producing other goods or
rendering services. They cannot be used without further processing. Industrial goods fall
into three main categories.
1. Raw materials: These are industrial goods which in part or in whole become a
part of the physical product and which have undergone only a minor change
before becoming ready for a final consumption. Stainless steel which are used
for making steel utensils is an example.
2. Equipments: These goods are exhausted only after repeated use such as
installation, equipment, accessories etc.
3. Fabricated materials: These are industrial goods which have undergone
processing Metals, plastics, cement come under this category.
the marketing practices for industrials and consumer goods differ due to their
characteristics.
Features of Industrials
The marketing of industrial goods generally possesses the following features.
1. Industrial goods are those which are produced by and sold to industries. They
are mostly meant for producing consumer gods.
2. The demand for industrial goods is a derived demand. For example, the demand
for paper manufacturing machinery will increase when the demand for paper
increases.
3. Industrial marketing is normally backed by technical details and usually done by
people with technical knowledge. In many cases, there may not be substitutes.
4. Industrials buying is comparatively a rational process. Precise specifications and
quality of products are the main criteria.
5. Number of buyers are limited.
6. Advertising are made in technical and trade journals backed by direct mailing and
personal selling.
7. In many cases, it is short channel, involving either direct selling or with a limited
number of middlemen.
8. Each sale would generally be high value.
9. Suppliers reliability and reputation is important criterion in the industrial market.
10. The demand is normally inelastic.
1. The consumer goods are those goods which are bought by ultimate consumer for
their consumption.
2. The consumer goods are manufactured on mass scale.
3. The number of buyers are also large and widespread.
4. Majority of consumer goods are non-durable.
5. Demand is primary in nature.
6. Other than essential products, most of the durable consumer goods have
elasticity in demand.
7. The unit cost of consumer goods is normally not very high.
8. The unit of purchase is normally low. But the frequency of purchase is greater.
9. The consumer goods are very often bought by emotional impulse.
10. The goods are subject to serve competition. They may be price competition,
quality competition and competition from substitute products.
11. Branding and packaging also add some strength to the products.
12. The goods are under constant threat from fashion/design changes.
13. The channel of distribution is normally long as the buyers are widespread.
14. Mass advertisement is a must. The marketer has to give equal importance to
personal as well as impersonal methods of sales promotion.
15. The products are not usually technical complex.
Services marketing:
A service may be defined as an activity which has some element of intangibility
associated with it, which involves some interaction with customers or with property in
their possession and does not result in a transfer of ownership. The American Marketing
Association defines services as activities, benefits or satisfactions which are offered for
sale or are provided in connection with the sale of goods.
Scope of services marketing:
The analysis of the target market, planning and developing the services, pricing the
channels of distribution and promotion of the services should be covered in a
programme for marketing of services.
Review Questions:
1. Explain different kinds of consumer and industrial goods.
2. What are the characteristics of manufactured industrial goods?
3. What are the features of services marketing?
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LESSON 5
MARKETING MIX
Marketing mix is one of the major concepts in modern marketing. It is the combination of
various elements which constitutes the companys marketing system. It is the set of
controllable marketing variables that the firm blends to produce the response it wants in
the target market. Though there are many basic marketing variables, it is Mc Carthy,
who popularized a four-factor classification called the four Ps: Product, Price, Place and
Promotion. Each P consists of a list of particular marketing variables.
Product stands for various activities of the company such as planning and developing
the right product and/or services, changing the existing products, adding new ones and
taking other actions that affect the assortment of products. Decisions are also required
in the areas such as quality, features, styles, brand name and packaging.
The second aspect of product is product planning and development. Product planning
embraces all activities that determine a companys line of products. It includes:
i) Planning and developing a new product,
ii) Modification of existing product lines, and
iii) Elimination of unprofitable items.
The third aspect of product is, product mix policies and strategies.
Product mix refers to the composite of products offered for sale by a company. For
example Godrej company offers cosmetics, steel furnitures, office equipments, locks
etc. with many items in each category.
The product mix is four dimensional. It has breadth, length, depth and consistency.
The breadth of the product mix refers to how many different product lines are
manufactured by a company. The product line is the group of products that are closely
related either because they satisfy a class of need, are used together, are sold to the
same customer groups, are marketed through same types of outlets, or fall within given
price ranges. Thus, the Godrej company manufactures several product lines such as
Cosmetics, steel furnitures, office equipments and locks.
The depth of the product mix refers to how many items are found in each product line.
Thus, the Godrej produces, for example.
The consistency of the product mix refers to how closely related the various product line
are in end use, production requirements, distribution channels or in some other way.
Major product mix strategies are expansion of product mix, contraction of product mix
and modification of existing product.
a) Expansion of product mix means increasing the number of lines and/or the items.
Contraction of product mix means either eliminating an entire line or a few items within
a line. Alteration of product-means modifying the existing product to suit the changing
consumer requirements.
All products, like human beings, have certain length of life cycles during which they
pass through different identification stages. Broadly, the stages are introduction, growth,
maturity and decline. It is the responsibility of the company to identify the stage through
which its product passes, so that it could evolve an appropriate marketing strategy to
capitalize the opportunities and to overcome the problems.
The second major component of product is branding. A brand, brand name and brand
mark are used synonymously. A brand is a name, term, sign symbol or design or a
combination of them which is intended to identify the products or services. Thus Liril
Colgate are examples for brand name and Maharaja or Air India and Butterfly of Co-
optex are examples for brand mark.
When a brand is registered with the Registrar of Brand Names, it becomes a trade
mark. The significance of registration is that no other producer could use the same
name or mark for his products.
Brands help identify the product and differentiate the product from those of competitors.
It is an indicator of product quality. For example, any product of TVS either Sri Chakra
Tyres or TVS Washing Machine creates a feeling that it must be a good quality product.
Further, brands increase the success the success of advertising and personal selling.
Once the manufactures succeeds in creating brand loyalty for his products, then it
would be easier for him to introduce new product it the market.
Yet another integral part of product is packaging. Packaging not only protects the
contents, but also helps to identify the product, offers convenience in handling and
promoters sales by inducing the customers to buy the product. It is common experience
that consumers, sometimes, buy the product attracted merely by the containers.
PRICE
The second element of the marketing mix is Price. Price stands for the monetary value
that customers pay to obtain the product. In pricing, the company must determine the
right price for its products and then decide on strategies concerning retail and wholesale
prices, discounts, allowances and credit terms.
Before fixing prices for the product, the company should be clear about its pricing
objectives and strategies. The objectives may be to set low initial price and raising it
gradually or to set high initial price and reducing it gradually or fixing a target rate of
return or setting prices to meet the competition etc. But the actual price setting is based
on three factors namely cost of production, level of demand and competition.
Regarding retail pricing, the company may adopt two policies. One policy is that he may
allow the retailers to fix any price without interfering in his right. Another policy is that he
may want to exercise control over the products. Discounts and allowance result in a
deduction from the base price.
PRICE
The third element of marketing mix is place or physical distribution. Place stands for the
various activities undertaken by the company to make the product accessible and
available to target consumers. There are four different level channels of distribution. The
first is-zero-level channel which means manufacturer directly selling the goods to the
consumers.
The second is-one-level channel which means supplying the goods to the consumer
through the retailer. The third is-two-level channel which means supplying the goods to
the consumer through wholesaler and retailer. The fourth is-three-level channel which
means supplying goods to the consumer through wholesaler-jobber-retailer and
consumer.
It is the responsibility of the company to select the right channel through which the
products will reach the right market at right time. The factors affecting the choice of
channel are the nature of the product, supply, middlemen, customer, environment, the
distribution policy of the company and the cost of the channel.
There are large-scale retail institutions such as departmental stores, chain stores, mail
order business, super-market etc. and small-scale retail institutions such as small retail
shop, automatic vending, franchising etc. The company must choose to distribute their
products through any of the above retailing institutions depending upon the nature of the
product, area of the market, volume of scale and cost involved.
The actual operation of physical distribution system requires companys attention and
decision-making in the areas of inventory, location of warehousing, materials handling,
order processing and transportation.
PROMOTION:
The fourth element of the marketing mix is promotion. Promotion stands for the various
activities undertaken by the company to communicate the merits of its products and to
persuade target customers to buy them. Advertising, sales promotion and personal
selling are the major promotional activities. A perfect co-ordination among these three
activities can secure maximum effectiveness of promotional strategy.
Advertising to marketing is that steam to machinery. It is impersonal presentation and
promotion of ideas, goods or services. It has a strong persuasion power. It is a common
technique for mass selling.
The advertisement copy must be able to attract the attention of the audience, arouse
interest, create desire and stimulate action. The advertisement media chosen should be
able to reach maximum number of people at minimum cost.
The second element of promotional mix is the sales promotion. It includes all those
marketing activities that stimulate consumer purchasing and dealer stocking the goods.
Such activities include issue of free samples, coupons, gift-offer, conducting contest,
demonstrations in exhibition etc. The distinct feature of sales promotional activities is
that they are purely temporary in nature and are meant for short duration only.
The third element of promotional mix is personal selling. Personal selling involves oral
presentation in a conversation with prospective purchases for the purpose or making
sales. The purpose is to bring the right products into contract with the right customers
and to make certain that sales takes place.
The salesman should have right aptitude and qualities to be successful. Hence great
care has to be taken in selection, training and compensating the sales people.
For successful marketing, the marketing manager has to develop a best marketing mix
for his product.
REVIEW QUESTION:
1.Define Marketing Mix. Briefly explain elements of marketing mix.
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LESSON 6
MARKET SEGMENTATION
Market in heterogeneous both in the supply side and in the demand side. On supply
side, many factors like differences in production equipments, processing techniques,
nature of resources or inputs available to different manufacturers, unequal capacity
among the competitors in terms of design and improvement and deliberate efforts to
remain different from others account for the heterogeneity. Similarly, the demand side,
which constitute consumers- is also different due to differences in physical and
psychological traits. As a result, imperfect markets are common. This problem is to be
solved by the strategy of product differentiation and market segmentation.
According to William Stanton, Market segmentation is the process of dividing the total
heterogeneous market for a product into several sub-markets or segments each of
which tend to be homogeneous in all significant aspects.
Market segmentation is a strategy of divide and rule. The strategy involves the
development of two or more different marketing programmes for a given product or
service, with each marketing programmes aimed at a different group of individuals
whose expected reactions to the sellers marketing efforts will be similar during a
specified time period. A strategy of market segmentation required that the marketer first
clearly define the number and nature of the customer groupings to which he intends to
offer his product or service. This is a necessary condition for optimizing efficiency of
marketing effort.
There are a number of bases on which a firm may segment its market.
1. Geographic basis
a. Nations
b. States
c. Regions
d. Cities
2. Demographic basis
a. Age
b. Sex
c. Material status
d. Family size
e. Education
f. Occupation
3. Socio-economic
a. Income
b. Nationality
c. Religion
d. Culture
4. Psychographic
a. Social class
b. Life style
c. Personalities
d. Loyalty status
e. Benefits sought price or quality or durability
f. Usage rate (volume segmentation)
g. Buyer readiness stage (unaware, aware, informed, interested, desired,
intend to buy)
h. Attitude stage (Enthusiastic, positive, indifferent, negative, hostile)
1. Geographical
2. Behaviouristic
a. Benefits sought
b. User status
c. Loyalty status
d. Readiness stage
1. Measurability the degree to which the size and purchasing power of the
segments can be measured.
2. Accessibility the degree to which the segments can be effectively reached and
served.
3. Substantiality the degree to which the segments are large and /or profitable
enough
4. Actionability the degree to which effective programmes can be formulated for
attracting and serving the segments.
The firm can adopt one of three market coverage strategies known as undifferentiated
marketing, differentiated marketing and concentrated marketing.
Differentiated marketing: Here the firm decide to operate in several segments of the
market and designs separate marketing programmes to each. Thus, Maruti Udyog
produces cars for every purse, purpose and personality. Similarly Bajaj two-wheelers.
Concentrated marketing: Under this strategy, the firm goes after a large share in one
or a few sub-markets.
REVIEW QUESTIONS
1. What is market segmentation? What are its bases?
2. What are the benefits of market segmentation?
LESSON 7
CONSUMER BEHAVIOUR
According to the economic model of buyer behaviour, the buyer is a rational man an his
buying decisions are totally governed by the concept of utility. If he has a certain amount
of purchasing power, a set of need to be met and a set of products to choose from, he
will allocate amount over the set of products in a very rational manner with the intention
of maximizing the utility or benefits.
The psychoanalytical model draws from Freudian psychology. According to this model,
the individual consumer has a complex set of deep-seated motives which drive him
towards certain buying decisions. The buyer has a private world with all his hidden
fears, suppressed desires and totally subjective longings. His buying action can be
influenced by appealing to these desire and longings.
In recent years, some efforts have been made by marking scholars to build buyer
behaviour models totally form the marketing mans standpoint. The Nicosia model and
the Howard and Sheth model are two important models in this category. Both of them
belong to the category called the systems model, where the human being is analyzed
as a system with stimuli as the input to the system and behaviour as the output of the
system.
Francesco Nicosia, an expert in consumer motivation and behaviour put forward his
model of buyer behaviour in 1966. The model tries to establish the linkages between a
firm and its consumer towards the product. Depending on the situation, be develops a
certain attitude towards the product. If these steps have a positive impact on him, it may
result in a decision to buy. this is the sum and substance of the activity explanations in
the Nicosia model. The Nicosia model groups these activities into four basic fields.
Field One has two sub-fields- the firms attributes and the consumers attributes. An
advertising message from the firm reaches the consumers attributes. Depending on the
way the message is received by the consumer, a certain attribute may develop, and this
becomes the input for Field Two. Field Two is the area of search and evaluation of the
advertised product and other alternatives. If this process results in a motivation to buy, it
becomes the input for Field Three. Field Three consists of the act of purchase. And
Field Four consists and the use of the purchased item. There is an output from Field
Four feedback of sales results to the firm.
John Howard and Jagadish Sheth put forward the Howard and Sheth model in 1969, in
their publication entitled. The Theory of buyer Behaviour. The logic of the model runs
like this. there are inputs in the form of Stimuli. There are outputs beginning with
attention to a given stimulus and ending with purchase. In between the inputs and the
outputs there are variables affecting perception and learning. These variables are
termed hypothetical since they cannot be directly measured at the time of occurrence.
Over the years, several other models have also been put forward, with the intention of
explaining buyer behaviour. All these models have certain merits as well as limitations.
They do not fully explain the complex subject of buyer behaviour. Nor do they establish
a straight input-output equation on buyer behavior.
And, none of them provides a precise answer to the whys or hows of buyer behaviour.
They merely explain the undercurrents of human behaviour from different angles and
premises. But these models will certainly be helpful in gaining at least a partial insight
into buyer behaviour.
Consumer are stimulated by two types of stimuli - internal and environmental. The
internal influence comprise of motivation, perception, learning and attitudes all
concepts drawn from the field of psychology. The environmental influences include
cultural, social and economical. Experts in these areas attempt to explain why people
behave as they do as buyers. All these influences interact in a highly complex ways,
affecting the individuals total pattern of behaviour as well as his buying behavour.
Cultural Factors:
Sociological Factors:
The sociological factors are another group of factors that affect the behaviour of the
buyers. These include reference groups, family and the role and status of the buyers.
The reference groups are those groups that have a direct or indirect influence on the
persons attitudes, options and values. These groups include peer group, friends, and
opinion leaders. The marketers, therefore, aim their marketing efforts to reach reference
groups and through them reach the potential buyers. A more direct influence on buying
behaviour is ones family members namely, spouse and children. The person will have
certain position in his family, that is called a status and has a duty assigned - that is role
and this status and role also determine buying behaviour. The marketer needs to
determine which member normally has the greater influence on the purchase of a
particular product and should try to reach him to market his product.
Personal Characteristics:
For example, if the target market is kids, their food and other reqirements will certainly
be different from aged people. Similarly, behavour and need differs depending on the
nature of occupation, of the buyers. For example, factory workers and other defence
people require footwear of mainly durable type that could withstand severe strain
whereas people with white collar jobs require footwear of light and fashionable type.
Hence, marketers should try to identify the occupational groups that have interest in
their products and services. An organisation can even specialize in manufacturing
products needed by a particular occupational group.
Basically it is the level of income, its distribution and the consequent purchasing power
that determine ones buying behaviour. Out of the ones total income, a part may be
saved and the remaining part is available for spending. Again out of this, a sizable part
has to be reserved for meeting essential expenses and it is only the balance the
individual has the discretion to spend. An intelligent marketer has to watch the income
serving trend of his consumer and basing on that evolve a marketing programme.
Each person has a distinct personality that will influence his buying behaviour. A
persons personality is usually described in terms of such traits as self-confidence,
dominance, autonomy, and adaptability. Personality can be a useful variable in
analyzing consumer behaviour.
Psychological Factors:
Psychological characteristics play the largest and most enduring role in influencing the
buyers behaviour. A persons buying choices are influenced by four major psychological
processes motivation, perception, learning and attitudes.
Motivation is one which leads the individual to behave in a particular way. It may be
conscious or subconscious a force that underlies a behaviour. It is the complex
network of psychological and physiological mechanism. Motives can be instinctive or
learned, conscious or unconscious, rational or irrational. The most popular human
motivation theories are profounded by Maslows, Freuds and Herzberg. For example,
Maslow has classified human needs into five types in the order of importance basic,
safety, social, esteem and self actualization needs. The most urgent motive is acted
upon first. If this is fulfilled, the individual proceeds to fulfill them next higher need. It is
important for the marketer to understand the motives that lead consumers to make
purchases and he must be able to explain the prospective buyers how best his product
can satisfy a particular need. But he must be sure that the target consumers have
already fulfilled the previous need.
Freuds Theory deals with sub-conscious factors. He asserts that people are not likely to
be conscious of the real motives guiding their behaviour because these motives are
often repressed from their own consciousness. Only through special methods of probing
such as in depth interviews, projective techniques their motives can really be discovered
and understood. The marketer should be aware of the role of visual and tactile elements
in triggering deeper emotions that can stimulate or inhibit purchase.
Perception means how one views or thinks about a particular situation. The marketer
while issuing advertisement message should be sure that a given message is properly
perceived by the consumers. If the message is susceptible to different types of
perceptions, it would defeat the purpose.
A belief is a descriptive thought that a person holds about something. These beliefs may
be based on knowledge, opinion or faith. Marketers are very much interested in the
beliefs of people about their products and service because they influence their buying
behaviour. If some of the beliefs are wrong and inhibit purchase, the marketer should
launch a campaign to correct these beliefs.
An attitude describes a persons enduring favourable or unfavourable cognitive
evaluations, emotional feelings and action tendencies toward some object or idea.
Attitudes put them into a frame of mind of liking and disliking an object, moving toward
or away from it. This leads people to behave in a fairly consistent way towards similar
objects. Hence, the marketer should try to fit his product into existing attitudes rather
than to try to change peoples attitudes.
From the above discussions, it becomes obvious that consumer behaviour is influenced
by economic, sociological and psychological factors. But it is wrong to assume that
consumer behaviour is influenced by any one of these factors. The fact is that at a
point of time and in a giver set of situation, it is influenced by a sum total of these
diverse yet interrelated factors. When a consumer is in the process of taking a purchase
decision, all these factors are prove to work simultaneously and influence his choice.
But it is possible that the relative importance of these factors vary in a given situation. It
is the intelligence of the marketer to find out the nature and intensity of the influence
exerted by these factors and to formulate appropriate marketing programme.
REVIEW QUESTIONS:
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LESSON 8
PRODUCT : PLANNING AND DEVELOPMENT
In common parlance, any tangible items such as textiles, books, tooth paste and many
other items are called as products. But an individuals decision to buy an item is based
not only on its tangible attributes but also on a variety of associated non-tangible and
psychological attributes such as services, brand, package, warranty, image etc. Hence,
it is essential to understand the term product.
A product is anything that can be offered to a market for attention, acquisition, use or
consumption might satisfy a want or need. It includes physical objects services,
persons, places, organisation and ideas.
Product item: A distinct unit that is distinguishable by size, appearance or some other
attribute.
Product line: A product line is a group of products that are closely related, are able to
satisfy a class of need are used together, are sold to the same customer groups, are
marketed through the same type of outlets or fall within given price ranges. Example:
cosmetics, office furniture.
Product mix: A product mix is the set of all product lines and items that a particular
seller offers for sale to buyers. It is also called Product assortment.
A product mix can have certain width, length, depth and consistency.
The width of product mix refers to how many different product lines the company
carries.
The length of product mix refers to the total number of items in its product mix.
The depth of product mix refers to how many variants are offered of each product item
in the line.
The consistency of the product mix refers to how closely related the various product
lines are in end use, production requirements, distribution channels or some other way.
Above four dimensions of the product mix defines the firms product strategy.
Product Planning:
Product planning is the process of determining that line of products which can secure
maximum net realization from the intended markets. It is an act of marking out and
supervising the search, screening, development and commercialization of new
products, the modification of the existing lines and the discontinuance of marginal or
unprofitable items.
Idea generation
The new product development process starts with the search for ideas. A product idea is
an idea for a possible that the firm can see itself offering to the market.
The new product ideas can be derived from the following sources.
Customers: Customers needs and wants are the logical place to start in the search for
new product ideas. Firms can identify consumer needs and wants through direct
consumer surveys, projective tests, focused group discussions and suggestion and
complaint letters from customers.
Scientists: The Companys scientists will also be able to supply new product ideas.
Competitors: Companies can find new ideas by monitoring their competitors products.
The company should assess who is buying competitors new products and why. Many
companies buy competitors products, take them apart and build better ones.
Sales representatives and dealers: Since sales representative and dealers have first
hand exposure to customers needs and complaints, they are good source of new
product ideas.
Top management is another major source of new product ideas because its vast
experience in the particular field.
Besides the above, new product ideas can come from a variety of sources such as
University and commercial laboratories, industrial consultant, advertising agencies,
marketing research firms and industrial publications.
Really good ideas come out of inspiration and creativity. The following techniques may
help generate better ideas.
1. Attribute listing: The major attributes of an existing product are listed and then
each attribute is modified in the search for an improved product.
2. Problem analysis: Consumers may be asked for the problem they encounter in
using a particular product.
3. Brain-storming: Groups can be stimulated to greater creativity through the
technique called brain-storming.
Screening of ideas:
Under this stage, the ideas are pruned and the purpose of screening is to spot and drop
poor ideas as early as possible.
In the screening stage the company must avoid two types of errors. A drop-error occurs
when the company dismisses a good idea. A go-error occurs when the company
permits a poor idea to move into development and commercialization.
The purpose of screening is to spot and drop poor ideas as early as possible. The ideas
are screened considering the target market, market size, competition price,
development time and costs, manufacturing costs and rate of return. The ideas are also
screened in terms of companys objectives, strategies and resources. Ideas that do not
satisfy these are dropped. The remaining ideas can be rated using the weighted index
method considering the factors required for the successful launching of the product
and weights assigned by the management to these factors to reflect their relative
importance.
Concept development and testing:
The selected ideas, then be developed into product concepts. A product concept is an
elaborated version of the idea expressed in meaningful consumer terms.
Concept testing implies testing these concepts with an appropriate group of target
consumers. The concept may be presented symbolically or physically. At this stage a
picture description is also sufficient. The consumers responses will help the firm
determine which concept has the strongest appeal. Concept development and testing
methodology applies to any product or service.
The preliminary marketing strategy consists of three aspects. The first aspect describes
the size, structure and behaviour of the target market, the sales, the market share and
profit goals planned in the first few years.
The second aspect outlines the products planned price, distribution and promotional
strategies for the first year and the third part describes the planned long-run sales and
profit goals and marketing mix strategy over time.
Business analysis:
Once management develops the product concept and marketing strategy, it can
evaluate the business alternativeness of proposal by reviewing the sales, cost and profit
projections to determines whether they satisfy the companys objectives.
After preparing the sales forecast, management can estimate the expected costs
Research and development, manufacturing, marketing and finance departments and
profits of this venture.
Product development:
Under this stage, the product concept is converted into a real physical product. This
stage will answer whether the product idea can be translated into a technically and
commercially feasible product. Whenever possible, a prototype could be produced,
otherwise products should be produced only in limited quantities. When the prototypes
are ready, they must be put through rigorous functional and consumer tests. The
functional tests are conducted under laboratory and field conditions to make sure that
the product performs safely and effectively. Consumer testing can take a variety of
forms such as giving samples to use in their homes.
Market testing:
After management is satisfied with the products functional performance, the product
should be given a brand name, packaging and a preliminary marketing programme to
test it in real market. The purpose of market testing is to learn how consumers and
dealers react to handling, using and repurchasing the actual product and to know the
size of the market, marketing programme effectiveness and other matters. The amount
of market testing is influenced by the investment, cost and risk, time pressure and
research cost.
Commercialization:
In this stage, management makes a final decision about whether to launch the new
product. In launching a new product, the management must make four decisions a) the
right time to introduce the new product b) The geographical area single locality, a
region, the national market or the international market to introduce the product c) The
target market prospects and d) action plan to introduce the new product in the market. It
must allocate the marketing budget among the marketing-mix elements and sequence
the various activities.
The consumer adoption process begins where the firms innovation process ends. It
describes how potential consumers learn about new product, try them and adopt or
reject them. Management must understand this process in order to build in effective
strategy for early market penetration.
An innovation refers to any good, service or idea that is perceived by someone as new.
The diffusion is defined as the spread of a new idea from its source of invention or
creation to its ultimate users or adopters.
Adoption process:
The adoption process focuses on the mental process through which an individual
passes from first hearing about an innovation to final adoption.
Product diversification means adding a new product to the existing product line or mix. It
does not mean that the new product should be complementary or an allied product to
the existing one. It may be a product which may be entirely distinct and different from
the existing products. For example, Bata entering into readymade garments, Raymonds
entering into footwear business etc.
Product Modification:
Product Elimination:
Like human beings, every product has a life span. When a new product is launched in
the market, its life starts and the product passes through various distinct stages and
after the expiration of its span dies dies in terms of its capacity to generate saels and
profits. This is called Product Life Cycle (PLC)
The Product Life Cycle is an attempt to recognize distinct stages in the sales history of
the product. In each stage, there are distinct opportunities and problems with respect to
marketing strategy and profit potential. Hence, products require different marketing,
financing manufacturing, purchasing and personal strategies in the different stages of
their life cycle. The PLC concept provides a useful framework for developing effective
marketing strategies in different stages of the Product Life Cycle. There are four stages
in the Product Life Cycle which are known as Introduction, growth, maturity and decline.
Introduction Stage:
When a new product is launched, the company has to stimulate awareness, interest,
trial and purchase. This takes time. In introductory stage only a few persons will buy the
product. Further, it takes time to fill the dealer pipeline and to make available the
product in several markets. Hence, sales will be low and profit will be negative or low.
The distribution and promotion expenses are very high. There are only a few
competitors. Regarding pricing, the management can pursue either skimming strategy
i.e., fixing a high price or penetration strategy i.e., fixing a low price.
Growth Stage:
The growth stage is marked by rapid increase in sales and profits. New competitors
enter the market, attracted by the opportunities for high profits.
Prices remain the same. Companies maintain their promotional expenditure at the same
level to meet competition and continue educating the market. Sales rise much faster.
During this stage, the company uses the following marketing strategies.
- The company improves product quality and adds-product features and models.
- It enters new market segments.
- It enters new distribution channel
- It changes the price.
Maturity Stage:
This stage normally lasts longer than the previous stages. At this stage, sales will slow
down. This stage can be divided into three phases growth maturity, stable maturity
and decaying maturity.
In the growth phase, the sales start to decline because of distribution saturation.
In decaying maturity phase, the absolute level of sales now starts to decline and
customers start moving toward other products and substitutes. Competition becomes
acute.
A major problem with marketing-mix modification is that they are highly imitable by
competitors. The firm may not gain as much as expected and in fact all firms may
experience profit erosion as they compete each other.
Decline stage:
In this stage, sales decline due to number of reasons including technological advances,
consumer changes in tastes and acute competition. As sales and profit decline, some
firms withdraw from the market. Those remaining may reduce the number of product
offerings.
They may drop smaller market segments and marginal trade channels. They may
reduce the promotion budget and prices further.
Product Positioning:
Each competitive product occupies a given place in the market segment. What is
important is the consumer perception of the place each product occupies in the market.
Product positioning is the act of designing the companys product and marketing mix to
fit a given place in the consumers mind in relation to competitors product.
Every product offered to a market needs positioning strategy so that its place in the total
market can be communicated to the target market. The following six alternatives are
identified for a product-positioning strategy.
- Positioning on specific product features.
- Positioning on benefits or needs
- Positioning for specific usage occasions.
- Positioning for user category
- Positioning against competitors product
- Positioning for another product class. E.g. Positioning a recreational theme park
not as recreation but as an educational institution.
The companys product positioning decision further defines its customers and
competitors. At this point the company can start planning the details of its marketing
mix.
REVIEW QUESTIONS:
1. Discuss the new product development process.
2. Explain PLC concept. What are its uses?
3. Write a not on product diversification and product modification.
4. What are the steps involved in the adoption process.
5. Write a note on product positioning.
******************
LESSON 9
BRANDING AND PACKAGING
Branding and packaging are the integral part of the product. The word brand is a
comprehensive term. A brand is a name, term, sign, symbol or design or a combination
of them, which is intended to identify the goods or services of one seller or group of
sellers and to differentiated them from those of competitors.
Brand name: It consists of words, letters and/or numbers which can be vocalized or
pronounced. E.g. Crompton, Kelvinator, No/: 1 Premier.
Brand mark: It is that part of a brand which can be recognized such as a symbol,
design or distinctive colouring or lettering. E.g Maharaja of Air India. Red inverted
triangle of Family Welfare Dept.
Trade Name/Trade Mark: When a brand name or brand mark is registered and given
legal protection, it becomes trade name/trade mark respectively. A trade mark protects
the sellers exclusive rights to use the brand name and/or brand mark.
Types of brands:
Individual brand name: When each product has a unique brand name, it is called
individual brand name. E.g. TVS XL, TVS Champ, TVS Scooty.
Family brand name: When a same brand name is given to all the products of a single
manufacturer, it is called family brand name. E.g. Godrej, Tata.
Packaging:
Packaging may be defined as the activities of designing and producing the container or
wrapper for a product. The container or wrapper is called the package.
The package must perform many of the sales tasks. It must attract attention, describe
the products features, give the consumer confidence and make a favourable
impression.
Packaging helps create brand and corporate image for the products.
Innovative packaging can bring benefits to consumers and profits to products.
Packaging decisions:
Developing an effective packaging for a new requires a number of decisions. The first
task is to establish the packaging concept i.e., what the package should basically be or
do for a particular product protection, convenience or image building.
After the packaging is designed, it must be put through a number of tests. Engineering
tests are conducted to ensure that the package stands up under normal conditions,
visual tests are conducted to ensure that the letters and colours are legible, dealer tests
to ensure that dealer find the packages attractive and easy to handle, and consumer
test to ensure favourable consumer response.
Labelling:
Label is a small ship placed on or near the product to denote its nature, contents
ownership etc.
Kinds of labels:
1. Brand labels: These labels are exclusively means for popularizing the brand
name of the product. E.g. Soaps, Cigarettes.
2. Grade labels: These labels give emphasis to standards or grades. E.g. Dust tea,
Cloth etc.
3. Descriptive Labels: The label which are descriptive in nature are called
descriptive labels. They describe product features, contents, method of using it
etc. E.g. Milk food products and medicines.
4. Promotional Labels: These labels aim at attracting the attention, arousing
desire and creating interest among the consumers to buy the product.
The marketers should make sure that their labels contain all the required
information before launching the product.
REVIEW QUESTIONS:
1. Define brand. What are the reasons for branding the product?
2. Define packaging. What are the functions of packaging?
3. What is labeling? What are the usual contents of labeling.
**********************
LESSON 10
PRICING POLICIES AND METHODS
Among the different components of the marketing mix, price plays an important role to
bring about product-market integration. Price is the only element in the marketing-mix
that produces revenue.
Price may be defined as the value of product attributes expressed in monetary terms
which a consumer pays or is expected to pay in exchange and anticipated of the
expected or offered utility. It helps to establish mutually advantageous economic
relationship and facilitates the transfer of ownership of goods and services from the
company to buyers. The managerial tasks involved in product pricing include
establishing the pricing objectives, identifying the price governing factors, ascertaining
their relevance and relative importance, determining product value in monetary terms
and formulation of price policies and strategies. Thus, pricing plays a far greater role in
the marketing-mix of a company and significantly contributes to the effectiveness and
success of the marketing strategy and success of the firm.
Price is influenced by both internal and external factors. In each of these categories
some may be economic factors and some psychological factors, again, some factors
may be quantitative and yet others qualitative.
- Market characteristics
- Buyers behaviour in respect of the given product.
- Bargaining power of the major customers
- Bargaining power of the major suppliers
- Competitors pricing policy
- Government controls/regulations on pricing
- Other relevant legal aspects
- Social considerations
- Understanding, if any, reached with price cartels.
Pricing Objectives:
A business firm will have a number of pricing objectives. Some of the them are primary,
some of them are secondary, some of them are long-term while others are short-term.
However, all pricing objectives emanate from the corporate and marketing objectives of
the firm.
When companies set a relatively low price on their new product in initial stages hoping
to attract a large number of buyers and win a large market-share it is called penetration
pricing policy. They are more concerned about growth in sales than in profits. Their main
aim is capturing and to gain a strong foothold in the market. This object can work in a
highly price sensitive market. Is it also done with the presumption that unit cost will
decrease when the level of sales reach a certain target. Besides, the lower price may
make competitors to stay out. When market share increases considerably, the firm may
gradually increase the price.
Many companies that launch a new product set high prices initially to skim the market.
They set the highest price they can charge given the comparative benefits of their
product and the available substitutes. After the initial sales slow down. They lower the
price to attract the next price-sensitive lover of customers.
4. Discriminatory Pricing:
Some companies may follow a differential or a discriminatory pricing policy-charging
different prices for different customers or allowing different discounts to different buyers.
Discrimination may be practices on the basis of product or place or time for example,
doctors may charge different fees for different patients, railways charge different fares
for usual passengers and season ticket holders. Manufacturers may offer quantity
discounts or quote different list prices to bulk-buyers, institutional buyers and small
buyers.
5. Stabilising pricing:
The objective of this pricing policy is to prevent frequent fluctuations in pricing and to fix
uniform or stable price for a reasonable period. When price is revised, the new price will
be allowed to be remain for sufficiently a long period. This pricing policy is adopted, for
example, by newspapers and magazines.
Under this method, pricing is fixed on par with competitors pricing policy. If the
competitors reduces the prices, the firm will also correspondingly reduce the price. If the
competitors increases the price, the firm will also increase the price or keep the price as
it is thereby prevent competition.
A firm may aim to secure a target market share by employing price as an input. Target
market share means that share of the industry sale which a firm aspires to attain. It is
usually expressed as percentage.
Profit maximization is the most common pricing objective. It means in a given set of
market conditions, firm attempts to maximize profit through the instrument of price.
Besides the above, fast turn around and early cash recover, Profit optimization in the
long term and target sales volume could also be other pricing objectives.
Pricing Methods:
The pricing method must be appropriate for achieving the desired pricing objectives.
There are several methods of pricing. Each of them is appropriate for achieving a
particular pricing objective or combination of pricing objectives.
The different methods of pricing can be grouped under the following broad categories.
1. Cost-based Pricing
Under this method, the firm fixes the price of each product is such a manner that the
entire product line is prices optimally resulting in optimal sales of all the products in the
line put together and optimal total profits from the line.
Firms launching a new product can choose between market-skimming pricing and
market penetration pricing.
Firms launching a new product may set high prices initially to skim the market. After the
initial sales slow down, they lower the price to draw in the next-price sensitive layer of
customers.
Firms may set a relatively low price on their innovative product, hoping to attract a large
number of buyers and win a large market share.
In case of sugar, a dual pricing system has been introduced. Under this system, a
manufacturer is required to compulsory sell a part of its production to the Government at
substantially low prices, called levy price.
The rest of production may be sold in the open market at a price the firm deems fit. The
statutory price control also envisages the announcement of support price for certain
agricultural products like cotton, food grains etc. so as to protect cultivators from price
fluctuation.
REVIEW QUESTIONS:
1. What is pricing? What are the factors influence pricing?
2. Discuss various pricing objectives.
3. State the pricing methods.
4. Write a note on Government control on pricing.
LESSON 11
PHYSICAL DISTRIBUTION
Physical distribution provides places utility and time utility to a product. In other words, it
is physical distribution that makes the product available at the right place and at the
right time.
Physical distribution largely determines the customer service level and serves as an
effective tool for building up a market.
Middlemen bring together the producer and consumer in an efficient and economic
manner.
Middlemen combine the products of different firms and offer them in the form of
assortments that are convenient to final users. They help to sell new products in the
market. The dealers promote the product through their task. They provide market
intelligence and feed back to their principles. Since they maintain constant and direct
contract with customers and know the pulse of the market.
Middlemen help create awareness and interest about the product among the consumers
by attractive display of the new product.
Middlemen help implement the price mechanism in the market, they assist in arriving at
the price level that is acceptable to the producer and the user.
They also look after a good part of the physical distribution function like transportation,
warehousing and inventory management. In addition, they look after financing of the
goods, credit transactions, negotiations with buyers etc.
Middlemen also act as change agents among the buyers and generate demand for
new products.
The best channel is one that works best in the marketing strategy selected by the
company. The channel chosen should achieve ideal market exposure and should meet
target customers needs and preferences.
Distribution Policy
Product characteristics:
The product characteristics such as the use of the product, its frequency of purchase,
Perishability, value, the service required etc decide the channel.
For example, perishable products require more direct marketing, convenience goods
such as soaps, match box which are frequently purchased and low unit value require
long channel. Shopping goods such as refrigerator require selective channel.
Supply characteristics:
Customer characteristics
Middlemen characteristics:
The choice of channel is also depends on the strengths and weaknesses of various
types of middlemen performing various marketing functions. Their behavioral
differences, product lines, the number and locations affect the choice of the channel.
Company characteristics:
Environmental characteristics:
Environmental characteristics such as economic conditions and law also influence the
channel selection. For example, when economic conditions are depressed the
producers prefer shorter channels to reduce cost.
Cost of channel:
As each channel will be doing some of the marketing functions, the cost of performing
such marketing functions at each distribution level and the total cost of performing the
entire marketing task has an influence in the choice of the channel. Those channels
which ensure efficient distribution at least expense and which secure the desired
volume of sales should be chosen.
Functions of Middlemen
The middlemen mainly, comprised of wholesalers and retailers. The word wholesaler
means to market goods in relatively larger quantities and who usually does not sell the
ultimate consumers.
Retailers:
Retailer is the last link in the channel of distribution. He sells the commodities to the
ultimate consumer. As an intermediary between the manufacturer/wholesaler and the
consumer he is performing the following services.
Elimination of Middlemen:
Middlemen are used by the manufacturers because they can perform the marketing
functions more economically and more effectively than the manufacturer at a given cost.
Further the manufacturer does not have the ability to perform those, functions and / or
because he does not possess adequate financial resources to perform them effectively.
Even those producers who have required financial resources to sell directly to final
consumers often can earn a greater return by increasing their investment in other
aspects of business. The element of risk also arises here. Direct selling involves owning
warehouses, delivery equipments and sales personnel. These involve fixed costs and
increases the risk. But if middlemen are used, these risks are borne by the middlemen.
These middlemen by virtue of their specialization and experience may do the job better
than the producer.
It is wrong notion to believe that goods are marketed cheaply when middlemen are not
used. The elimination of middlemen does not mean the elimination of the marketing
functions. The functions are to be performed and the issue is who should perform it is
largely one of relative efficiency and effectiveness. Therefore, one of the reasons the
producer does not choose to perform a number of specific marketing functions is that
the middlemen through their specialization may perform it at less cost. Hence it is not
possible to eliminate the middlemen from the channel and it is wrong to blame them as
parasites on the society by pointing to the difference between the final price and the
producers price. It is only when the middlemen take advantage of shortage and
consumer ignorance and exploit them, they can be termed as parasites.
Relating Establishments:
Mail order marketing also known as Mail Order Business is one the popular method.
Under this method, the prospective consumers become aware of the product through
information furnished by the produces through the print media or through broadcast or
through direct mail. Interested consumers respond by placing order through mail to the
suppliers. the products are supplied to the consumer by mail and payment made either
by VPP or by cheque.
Vending Machines:
Vending machines enable the producers to supply the products to the consumers
through machine without employing salesmen. Usually products which belong to the
buy on impulse category like soft drinks, ice creams, cigarette etc are marketed
through this method.
Independent stores:
Independent stores are retail shops marketing the products to the consumers. They
have the following advantages:
- Personal relationship with customers
- Location at convenient places to the customers
- Greater flexibility in working
- Catering for more individualistic need
- Personal supervision
- Prompt and quick decisions
- Better services
Department Stores:
Advantages:
1. Centralized location
2. Availability of a wide range of goods in one location
3. Convenience of shopping for consumers
4. Being a large organisation it can get economics of large-scale procurement
5. It can afford to have effective advertisement and can derive economics of large
scale advertisement.
6. It can offer better sales services.
Drawbacks:
A chain store system consists of a number of retail stores which sell similar products,
are centrally owned and are operated under one management. The various stores may
be located in the various localities of a city or may be spread over a number of cities in
the country.
Advantages to customers:
1. Easy accessibility
2. Elimination of middlemens profits
3. Assured quality
4. Uninterrupted supply
5. Direct contact
Disadvantages:
Super Market:
A supermarket is defined as a large retailing business unit with wide variety and
assortments, self-service and heavy emphasis on merchandise appeal
Advantages:
Limitations:
1. It can operate in the area of concentration of buyers
2. It has to face the problem of personnel and supervision
REVIEW QUESTIONS
The art of selling is called salesmanship. Salesmanship is one of the skills used in
personal selling Salesmanship is defined as seller-initiated effort that provides
prospective buyers with information, and motivates or persuades them to make
favourable buying decisions concerning the sellers product or services.
The selling done by the salesforce is called personal selling while selling achieved
through advertising and other sales promotional methods are called impersonal selling.
Personal Selling is present in all the three phases of buying namely pre-transactional,
transactional and post-transactional.
It is two way communication and thereby it proves to be effective. It is one human mind
influencing another human mind.
It is more flexible and adaptable to the varying purchase situations. It is possible for a
salesman to adapt himself to the needs, motivates, impulses and other behavioural
traits of the prospective customers.
The salesman acts as a market researcher. He gathers and promptly transmits relevant
market information to the company in making timely strategic and tactical decisions.
Personal selling is relatively more economical and effective in the following conditions.
Good salesmanship is not a matter of some rare, persuasive, inherited skill, which,
when turned on, magically gets the order. On the contrary, good salesmanship is the
result of careful analysis of the buyers problem combined with some articulateness in
explaining to the buyer how the seller can solve his problem. The size-up of
salesmanship may well emphasize the personal qualities required of good salesmen.
Most companies desire that certain essential personally traits, qualities, characteristics,
aptitudes, attitudes and abilities should be possessed by the people whom they want to
recruit to the sales force. However there is no standardized formula for listing the
essential qualities such thing as the ideal sales personality. There are many kinds of
selling jobs requiring different types of salesmen. So the characteristics of salesmen
usually varies also from one sales position to another and also from company to
company. This means, each company should make its own study of its selling job and
decide the characteristics of its own sales force.
However, a number of lists of essential characteristics are available. Mayer and Herbert
conclude, it is enough if a good salesman has two basic qualities - empathy and ego
drive. Empathy is the ability to feel as the customer does. Ego drive refers to a strong
personal need to make the sale for its own sake and not merely for the money to be
gained. But these are rarely enough. The majority of scholars feel that the following
should be the essential characteristics of successful salesman.
1. Ambition
2. Enthusiasm
3. Cheerfulness
4. Sympathy
5. Patience and persistence
6. Tact
7. Hardwork
8. Determination
9. Dependability
10. Integrity
11. Ability to ask questions
12. Ability to make quick and accurate spot judgements
13. Ability to provoke answer
14. Modest and confident answers to questions
15. Alertness
16. Sense of humour
17. Story telling ability
18. Ability of smile
19. Optimism
20. Right facial expression
21. Ability to mix easily with other people
22. Memory
23. Leadership
24. Power of observation
25. Acceptance of criticism
26. Habit of asking for the order
27. Knowledge of the company
28. Knowledge of the product
29. Knowledge of the prospect
30. Personal appearance.
As pointed out already, the above are the common qualities required of a good
salesman. In practice, it is difficult to find from a single individual all the above qualities.
But still, the individual could develop the above qualities to become a better salesman.
Consumer goods are those meant for use by the ultimate household consumer and in
such form that they can be used by him without further commercial processing.
Consumer goods are generally divided into three sub-categories according to the
method in which they are purchased viz, convenience goods, shopping goods and
specially goods.
Industrial goods are those which are used in producing other goods or rendering
service. Industrial goods are divided into three main categories viz., raw materials,
equipments and fabricated materials.
1. Scale of Production:
2. Nature of demand:
The demand for consumer goods are generally primary in nature whereas demand for
industrial goods is derived demand.
3. Number of buyers:
In consumer market the buyers are large in numbers but in the case of industrial goods,
the buyers are limited in number.
4. Location of buyers:
The consumer market is widespread and the consumers are scattered whereas
industrial users are generally concentrated geographically.
5. Unit of purchases:
The unit of consumer goods is invariably low and unit of purchase is also low. But the
frequency of purchase is greater. In the case of industrial goods, the scale of purchase
is high and the unit cost is also high.
6. Nature of products:
The consumer goods are not complex when compared to industrial goods which are of
more technical and complex in nature.
7. Buying Process:
8. Buying Motive:
Consumer goods are bought by emotional impulse whereas industrial goods are bought
on rational motive.
9. Competition:
When compared to consumer goods suppliers reputation plays a major role in industrial
goods.
The length of the channel for consumer goods is long and indirect when compared to
industrial goods where the channel of distribution is short and direct.
The consumer goods market has a constant threat from changes in fashion than
industrial goods.
Industrial selling is normally backed by technical details and usually done by people with
some technical background.
Mass advertising essential for consumer goods whereas it is not needed for industrial
goods. Advertisement in trade and technical journals backed by direct mailing and
personal selling will serve the purpose for selling industrial goods.
Government control is comparatively more for consumer goods than for industrial
goods.
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LESSON 13
SALES MANAGEMENT
The major areas where personal selling objectives have to be set are:
- Sales volume
- Market volume
- Profits
- Selling expense level
- Appointment of new dealers
- Pre sale and after sale service
- Assistance in sales promotional measures
- Gathering and reporting market intelligence
The sales force is usually structured on a territory basis or on a product basis. This
structuring is the task of sales management.
The size of the salesforce ahs to be fixed at the optimum level. The size of the
salesforce depends on the following considerations.
1. Level of sales expected and the number of salesmen needed for generating this
sale.
2. Minimum number of salesmen needed from the servicing angle, irrespective of
level of sales.
3. Costs involved in maintaining the sales force.
The firms integrate exercise of determining the number of territories and the number of
salesmen and arrive at the optimum.
1. Application blanks:
The firm may ask the prospective candidates to apply by issuing application blanks. The
application blank contains questions relating to personal history, educational
background, experience, expectations etc.
2. Conducting Tests:
In order to develop an indepth understanding of the candidates, the firm may conduct
psychological and other tests such as tests of ability, tests of habitual characteristic and
tests of achievement. Besides, a firm may also administer physical /medial tests to
ascertain the physical fitness of the candidate for a hard and strenuous selling job.
Interviews:
Interviews involves personal interaction with the candidates and is aimed at discovering
the salesmanship in the candidate.
After having screened the application blanks, administrated the various tests and
interviews, the results of these different components of the process are compiled and
the final score is arrived at to prepare a panel of candidates acceptable for employment.
Training of Salesman:
Training Method:
A variety of training methods are available to train the salesmen. These methods may
include the following:
1. Self-study Method:
The individual salesmen may be supplied with booklets, journals, reports to study by
himself to acquire sufficient knowledge.
2. Lecture Method:
Under this method, the lecturer delivers lecturers on the course content to trainees.
Audio-visual aids are also used. It is a teacher-dominent method which inhibits trainees
active participation in the learning process.
3. Discussion:
Under this method, the trainee activity participates in the learning process by discussing
buying selling situations/problems and this their analytical facilities and help them
think logically.
4. Royal Playing:
This method requires trainee to act out roles in contrived problem situation wherein the
trainee assumes the role of customer, salesman and other characters. Having played
the roles, each trainee evaluates his own performance its strengths and weaknesses.
Feed back is provided by groups members and audio visual means.
5. Case studies:
Case studies are particularly appropriate for developing analytical skills. Trainees are
asked to analyze situations, identify problems and opportunities and make
recommendations for dealing with them.
6. Sensitivity Training:
In this method, the trainee is imparted instructions by placing him on the job of selling.
In the beginning the trainee will accompany the trainer, observe his performance and he
will be asked to do job under the trainees supervision. The trainees performance will be
reviewed and if necessary suggestions made to improve his performance.
The salesmen may also be deputed to conference and seminars conducted by outside
organisatoins to enable them to get new knowledge and experience.
Evaluation of Training:
The effectiveness of training programme may be done at the end of the programme by
getting their views and analyzing them. The overall impact may be evaluated by
comparing salesmens performance in terms of sales volume, sales profitability,
expenses etc between pre and post training periods. For new recruits the judgement
may be formed on the basis of absolute total performance.
Compensation of salesforce
Methods of Compensation:
Straight Salary:
Under this method, fixed salary for a specific period, usually, a month is paid to
salesmen. It is fixed and guaranteed and does not vary with quantum of sales.
This system ensures regular income to the salesmen and thereby provides security. It is
simple to understand and easy to calculate.
It does not provide any incentive to salesmen for additional performance. It may not
attract/retain high-performing sales people.
This method, however, has certain drawbacks. The sales personnel may pursue short-
term goals to the detriment of activities which have the effect in the longer term. Their
focus is only on selling, non-selling tasks such as preparation of report, market
intelligence are usually ignored. The system provides little security to the sales people.
This system is used where there are a large number of potential customers, the buying
process is relatively short and technical assistance and services is not required. E.g.
Insurance selling.
Under this method, usually a mix of salary (fixed component) and commission (variable
component) is developed in such a way that salesmen are assured of a secured steady
income and also adequate incentive to work harder. The commission may be paid on
total sales/profit or on a certain quota of sales predetermined.
The main output measures relate to sales and profit performance. Specific output
measures for individual salesmen include:
- Sales skills
- Customer relationship
- Product knowledge
- Co-operation and attitudes
For an evaluation, to work efficiently, it is important for the sales team to understand its
purpose. It should be used and perceived as a means of assisting salespeople in
improving their performance.
REVIEW QUESTIONS:
1. Discuss the steps involved in the selection process of salesmen
2. Discuss the various methods of training of salesmen
3. Explain the major methods of compensating sales force
4. What are the methods of evaluating the performance of salesforce?
LESSON 14
ADVERTISING
The term advertising originates from the Latin work adverto, which means to turn
around. Advertising, thus, denotes the means employed to draw attention towards any
object or purpose. In the marketing context, advertising has been defined as, an paid
form of non-personal presentation and promotion of ideas, goods or services by an
identified sponsor. It is component of firms promotional mix. It is a common technique
of mass selling. Publicity is different from advertising. Publicity is not normally paid for
and sponsor could not be identified. It is not easily controlled by the firm. Advertising
can have both long-term and short-term objectives. Some common objective are:
1. The basic objective of the advertising is to inform and influence the buyers to
buy the product and thereby increase the sales
2. Advertising may be used to introduce a new product to potential customers.
3. It is used to induce the middlemen to store and handle the product.
4. It helps build up brand image and brand loyalty to the products.
5. Advertising may be necessary to publicise the changes made in prices, channels
of distribution, any improvement made in the quality, size, weight and packing of
the product.
6. It may be issued, sometimes, to compete with or neutralize competitors
advertising.
7. It helps build up corporate image.
8. In the case of mail order business, advertising does the selling job by itself.
9. By supplementing personnel selling, advertising makes the job of salesforce
easier.
10. It helps increase the effectiveness of sales promotion campaign.
11. Finally, it encourages the creative arts and the artists.
Advertising objectives are essential because it helps the marketer know in advance
what they want to achieve and helps ensure effective development of advertising
programmes and guides and controls decision-making in each area and at each stage.
Deciding how much money to the spent on advertising is not an easy task. The type of
products involved, the competitive structure of the industry, legal constraints,
environmental conditions etc. influence advertising expenditure. The decision cannot be
taken by applying a standard formula. The answer varies from industry to industry and
from company to company within the same industry. The same companys
advertisement expenditure may differ from time to time.
1. Affordable method
2. Competitive parity method
3. Percentage of sales method
4. Objective and task method
Affordable Method:
This method as the name indicates, rests on the principle that a firm will allocate for
whatever it can afford. Usually small firms follow this method. Even the limited funds
provides for advertising may get reallocated for other items depending upon the
emergent requirements.
Under this method, the firms make their advertising budget comparable to that of their
competitors. They simply do what others are doing.
Under this method, the advertising budget is set in terms of a specified percentage of
sales. The fact that different product/brands at different stages of their life cycle will
require varying levels of advertising support which is not taken into account by this
method.
Another limitation is that the level of sales determines the level of advertising budget but
the actual functional relationship would seem to be the reverse. Hence it is advisable
that at percentage of projected sales be allocated rather than a percentage of previous
years sales.
In actual practice, marketers usually blend some of the well accepted methods and
arrive at compromise budget which is logical. In other words, the budget decision is
closely linked up with the advertising objectives, the media decisions and copy
decisions. These four decision areas in advertising interact among themselves and
influence each other. The decision-making is an integrated process, which takes into
account the total task of advertising to be performed.
The term copy includes every single feature that appears in the body of advertisement
such as the written matter, picture, logo, label and designs.
Developing the copy is, of course, a creative process. It is an area where no rigid rules
can be applied. Some essential qualities that must be present in a good advertisement
are that it must be able to i) attract the attention of audience ii) arouse interest iii) create
desire and iv) stimulate the action of buying. This is known as AIDA (Attention, Interest,
Desire and Action).
Message Content:
The advertising has to decide What to say to the target audience to produce the
desired response. The basis is advertising objectives. Depending on the nature of the
product nature of target market the message can have rational value, emotional value,
moral value, educational value, suggestive value, attention value, humour value etc.
Message Structure:
The structure deals with the organisation and arrangement of the various elements of a
message. This includes decision on the headline, message size, colour drawings etc.
Message Source:
The source of the message has great deal of persuasive influence on the buyers. The
persuasive influence of the source depends mainly on two specific characteristic of the
source.
Likability of the source is the second major characteristic. If the source is identical to the
audience is personality, political affiliations, the audience tends to like the source. The
audience would emulate the source and identity themselves with the sources.
Deciding on media:
Media consists of channels for carrying the intended advertising message to the
selected audience. There is difference between media and media vehicle. For example,
newspapers are media, The Times of India, The Hindu are media vehicle. Media that
are commonly used in advertising are:
Print Media:
- Newspapers
- Magazines
- Trade journals
- Direct mail such as catalogues
Audio-Visual Media:
- Radio
- Television
- Cinema
- Outdoor media such as posters/banners/hoardings
Selecting the appropriate media and media vehicle and arriving at a sound media mix is
a very crucial function in advertising. Now, advertising agencies provide help in media
selection as an integral part of their service to their customers.
1. Target Audience:
It is essential for the media planner to find out the firms existing image in the market,
characteristics of its major customer segments, their habits, life styles, reading habits
etc.
The media planner also has to seek information regarding the age, income occupation,
education, religion, social class etc of the firms customers. These demographic and
psychographic variables of the existing and potential customers will give the medial
planner the required background information.
Communication objectives:
The marketing objectives, particularly, advertising objectives help the media planner
decide what media or what combinations of media or media mix can help attaining the
objectives. Hence, the must know the objectives clearly.
Another factor that has to be seriously taken into account by the media planner is the
total budget available to run the advertising campaign.
The main consideration in selecting the media is how many exposures can be
purchased for the budgeted amount, the cost of exposure in different media and media
vehicles, and the reach of media. The exposure available through a media is a product
of its reach and frequency.
Mathematical Models:
The innumerable qualitative dimensions enter the media selection call for a fine tuning
which only a conscious human judgement can provide.
Copy tests are conducted during development process, at the end of actual production
process and (pre-test) and after the campaign is launched (post-testing) to find out the
effectiveness. Tests may be conducted in laboratory, in the simulated environment or
real/natural environment.
The labouratory methods normally use physiological measuring techniques with the
help of aids like eye-camera, polygraphs, etc. The market tests include folio test in the
print media, in-home projector test for T.V. commercials etc. one of the widely used
methods for testing T.V. commercials is the Day-After-Recall techniques, commonly
called DAR. Those who had the opportunity to see the test commercial are interviewed
to find out their ability to recall the commercial. A majority of the tests are centering on
attention, recognition and recall factors. This means the tests are mostly concerned
with communication effectiveness of the copy.
REVIEW QUESTIONS
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LESSON -15
SALES PROMOTION
Sales promotion is essentially a direct and immediate inducement that adds an extra
value to the product, so that it induces the dealers and ultimate consumers to buy the
product. It is defined as those sales activities that supplement both personal selling and
advertising and co-ordinate them and help to make them effective, such as displays,
shows and expositions, demonstrations and offer non-recurrent selling efforts not in the
ordinary routine.
Salespromotion measures are not that durable and lasting like the results obtained
through advertising and personal selling. It is practised as a catalyst and as supporting
facility to advertising and personal selling.
The sales promotion effort may be aimed at Consumers, traders/dealers and salesmen.
Tools and Techniques of Sales promotion:
The sales promotional methods aim at consumers include:
1. Free samples
2. Coupons
3. Premiums
4. Contests, or sweepstakes
5. Point of purchase displays
6. Discounts
7. Gifts
8. Demonstrations
9. Trade fairs and exhibitions
Free samples are offered to persuade the consumers, to try the product. By this method
the firm tries to gain entry into that market. Soaps, soft drinks are examples.
Coupons are certificates which offer price reductions to consumers during the
subsequent purchase of same items. Coupons are distributed through newspapers and
magazines advertisements or even by direct mail. These are useful for introducing new
product and to increase the sale of existing product.
Contests or Sweepstakes:
A game comprises finding out a missing letter or completing a slogan. Contests take
variety of forms such as quiz contest, beauty contest, car rallies, lucky draws etc.
This is nothing but innovating, attractive displays of products in the shelf space to
induce the consumers to buy the product. Various kinds of display materials like
posters, stickers, mobile wobblers are used at the retail shop to induce the purchase.
Discounts/Price off:
It is giving discount on certain products to induce buying of products. One could see
grand discount sales during festival seasons on textiles to stimulate sales.
Gifts:
Companies also distribute gifts to customers such as pen, calenders, diaries, table
decorations etc which will carry companies name and logo.
Demonstration:
Firms resort to product demonstrations when they introduce new products Vaccum
cleaners, washing machines are best examples. Demonstration may be done at retail
stores, schools, homes and in trade fairs and exhibitions.
Trade fairs and exhibitions:
Firms can introduce their products by displaying them in trade fairs and exhibitions to
induce the buyers to buy the product. Especially in international marketing, international
trade fairs play a pivotal role.
Buying allowance:
Promotion allowance:
This is given to compensate the dealers for promotion expenses incurred by them.
These include advertising allowance, displays allowance etc.
The manufacturers may also issue advertisement of other publicity materials like
calenders, key chains which carry the names of retailers who stock the product.
Sales contest:
It is a contest among the dealers in selling the product. The winners will the given prizes
by the manufacturers. This is done to stimulate the distrigutiosn/dealers.
Salesforce promotions:
The tools of sales promotion include
a. Bonus
b. Salesforce contest
c. Sale meetings
Bonus:
A quota is set for salesforce for a specific period. Bonus is offered to salesforce on sales
in excess of the quota.
Salesforce contest:
The contests are conducted among the sales force to stimulate selling and prizes are
awarded to the top performance.
Sales meetings:
Sales meetings, conventions and conferences are conducted for the purpose of
educating, inspiring and rewarding the salesmen. New products and new selling
techniques are also described and discussed.
For success, it is essential that salesmen are briefed on the context and content of the
promotion programme, informed their roles and given detailed information / guides
regarding what they to do during different stages of the campaign.
Since major part of the activity has to take place around the dealer, it is essential to
enlist their support and motivate them.
The programme has to be perfectly launched and tempo should be maintained till end
with proper follow-up.
REVIEW QUESTIONS:
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MODEL QUESTION PAPER
B.COM DEGREE EXAMINATION
(SECOND YEAR)
SECTION A ( 5 X 8 = 40)
Answer any FIVE questions
SECTION B (4 X 15 = 60)
Answer any FOUR Questions
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