UNIT - I

The term Marketing is derived from the word ‘Market’. Here, Market refers to the
place or geographical area where buyers and sellers gather and enter into transactions
involving transfer of ownership of goods and services.

Definition of Marketing
 Traditional Concept: The term ‘traditional marketing’ can be expressed as the
business activity through which goods and services directly move from
producers to consumers or users.
 Modern Concept: The term ‘modern marketing’ can be expressed as the
achievement of corporate goals through meeting and exceeding customer needs
better than the competition.

According to Philip Kotler, the term ‘marketing’ is a social and managerial process by
which individual groups obtain what they need and want through creating, offering
and freely exchanging product and services of value with others.

Nature of Marketing
The Nature of Marketing (or Modern marketing) may be studied under the following
points:

1. Human activity: Originally, the term marketing is a human activity under which
human needs are satisfied by human efforts. It’s a human action for human
satisfaction.
2. Consumer-oriented: A business exist to satisfy human needs, hence business
must find out what the desire of customer (or consumer) and thereby produce
goods & services as per the needs of the customer. Thus, only those goods
should be produce that satisfy consumer needs and at a reasonable profit to the
manufacturer (or producer).
3. Art as well as science: In the technological arena, marketing is the art and
science of choosing target markets and satisfying customers through creating,
delivering, and communicating superior customer value. It is a technique of
making the goods available at right time, right place, into right hands, right
quality, in the right form and at right price.
4. Exchange Process: All marketing activities revolve around commercial
exchange process. The exchange process implies transactions between buyer

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 and seller. It also involves exchange of technology, exchange of information
and exchange of ideas.
5. Starts and ends with customers: Marketing is consumer oriented and it is
crucial to know what the actual demand of consumer is. This is possible only
when required information related to the goods and services is collected from
the customer. Thus, it is the starting of marketing and the marketing end as
soon as those goods and services reach into the safe hands of the customer.
6. Creation of Utilities: Marketing creates four components of utilities viz. time,
place, possession and form. The form utility refers to the product or service a
company offers to their customers. The place utility refers to the availability of
a product or service in a location i.e. Easier for customers. By time utility, a
company can ensure that products and services are available when customers
need them. The possession utility gives customers ownership of a product or
service and enables them to derive benefits in their own business.
7. Goal oriented: Marketing seeks to achieve benefits for both buyers and sellers
by satisfying human needs. The ultimate goal of marketing is to generate
profits through the satisfaction of the customer.
8. Guiding element of business: Modern Marketing is the heart of industrial
activity that tells what, when, how to produce. It is capable of guiding and
controlling business.
9. System of Interacting Business Activities: Marketing is the system through
which a business enterprise, institution or organization interacts with the
customers with the objective to earn profit, satisfy customers and manage
relationship. It is the performance of business activities that direct the flow of
goods and services from producer to consumer or user.
10. Marketing is a dynamic processe. series of interrelated functions: Marketing is
a complex, continuous and interrelated process. It involves continuous
planning, implementation and control.

Functions/Scope of Marketing
The term scope of marketing can be understood in terms of the functions of the
marketing manager. The major purpose of marketing manager is to generate revenue
for the business by selling goods and services to the consumers. It lies in insuring the
customer needs and converting them into product or services and moving the product
and services to the final user or customer, to satisfy the wants and needs of specific
segment of customers with emphasis on profitability and ensuring the optimum use of
resources available with the organization. The marketing manager has to perform the
research functions and exchange functions. They are discussed below:

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Marketing is the process that comprises of all the activities involved
from the concept of the product all the way till it reaches the final
consumer. So there are a lot of activities in this process, which we call
the functions of marketing. Let us take a look.

1] Identify Consumer Needs

One of the first steps the company needs to take is to identify the needs
and wants of the consumers in the market. To do so they must gather
information and analyse this information. Once you understand your
customer thoroughly you can base your product design on this
information.

2] Planning
The next logical step would be to make a marketing plan. Firstly you
must be very clear about the objectives of the company and what it
wishes to achieve. Then you figure out a timeline to achieve these
objectives. And finally, you plan the marketing strategy of your
company accordingly.

3] Product Development
As per your consumer research, we then develop the product that suits
the needs of the consumer. The design of the product is also an
important factor in many products. Like for example when buying a car,
the design will play a huge factor. There are other factors to be
considered like cost, durability etc

4] Standardisation and Grading

Standardisation means ensuring uniformity in the product. All
customers must get the same product of the same design and quality.
And these standards need to be maintained throughout.

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Grading is the process of classification of products according to similar
characteristics and/or quality. If the product does not have any
predetermined quality or other specifications like
say agricultural products. Grading will ensure the consumer knows your
goods are of the highest quality.

5] Packing and Labeling

The package and the label are the first impressions your product makes
on the consumer so they are of essential importance. They are not only
to protect and identify the goods but are great marketing tools. There is
proof that an attractive package and label can go a long way in making a
product a success.

6] Branding
One important decision the company has to make is whether they want
the product to have an individual identity in the market or they want it
to be recognized by the brand name.

Certain brands enjoy incredible goodwill in the market and it can

benefit the product. But you may also want the product to have a
separate identity so it can flourish on its own attributes.

7] Setting up Customer Support Services

Depending on your product there may be a variety of customer services
that the company has to set up. Pre-sales service, consumer helpline,
maintenance services, technical support are just some of the services
that your product may require. These are important functions of
marketing.

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8] Pricing
This may be one of the most important functions of marketing. The
price of a product will largely determine its success or failure. Factors
like demand, market conditions, competition prices etc will be
considered to come up with the correct pricing strategy.

One other thing the company must remember that prices of the products
should not be changed too frequently. This leads to confusion in the
market.

9] Promotion
This is where you inform the customers of your product and persuade
them to buy it. There are four major promotion methods – advertising,
personal selling, sales promotion and publicity. The company must
decide on its best promotion mix, a combination involving all or some
of these four methods.

10] Distribution
Here the company must ensure the correct distribution channel for its
product. It will depend on a variety of factors such as the concentration
of the market, shelf life of the product, company’s capital requirements
etc. Inventory management is another important factor the company
must look into.

11] Transportation
The physical movement of the goods from its place of production to its
place of consumption is transportation. It is a very important function of
marketing. The company must analyse the geographical boundaries of
its market. This will help them choose the correct modes of
transportation.

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And in the global economy where we live in, there are almost
no barriers to international trade. So if a company wishes to go global
transportation will be a key factor in their marketing mix.

12] Warehousing
As we have seen there is always a lag time between the production and
the consumption of most goods. Sometimes the products are seasonal or
the supply is irregular or there are production difficulties. But
companies like to maintain a smooth flow of goods. So storage and
warehousing of goods are necessary.

Needs Wants and Demands: Marketing Concept

To begin with, needs, wants and demands are tied. We, humans, have infinite wants
and demands.

When the feeling of deprivation emerges and our mind requires something, we call it
needs. Now, let’s have an in-depth discussion about all three of them.

Needs

The easiest explanation of the concept “needs” is the basic human requirements like
shelter, clothe, food, water, etc.

These are essential for human beings to survive.

If we take the topic further, other needs are education, healthcare, insurance, pension,
etc.

Basically, things that we can associate with “needs” don’t require a boost because
these are the products and services people always buy (for example, people who are
into home security, always purchase Arlo or Arlo Pro Security Cameras).

Though, don’t feel relieved if you’re planning to promote a product or a service that
falls under the “needs” category.

In the 21st century, thousands of brands are promoting the same products and services
from the needs category.

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In other words, there are thousands of competitors trying to sell the same things you
are.

In addition, needs aren’t only physical. Needs can be a social thing, for
example, social class, belonging to a certain society and need of self-expression.

Wants

This is quite different from needs.

Wants aren’t permanent and it regularly changes.

As time passes, people and location change, wants change accordingly.

Wants aren’t essential for humans to survive, but it’s associated with needs.

For example, if we always manage to satisfy our wants, it transforms into a need.

Demands

Let’s discard the boring explanation process and start with an example.

There are two options, you either buy a Samsung’s or Apple’s product.

Though, the prices are really different. The Samsung’s phone costs $150 and the
Apple’s iPhone $780.

We’d prefer to purchase the Apple product, but the question is, can we?

If we, financially, are strong enough and can allow ourselves to buy a $780 iPhone, it
means that we’ve transformed our want/need into a demand.

So, the key difference between wants and demand is desire. Consequently, for people,
who can afford a desirable product are transforming their wants into demands.

In other words, if a customer is willing and able to buy a need or a want, it means that
they have a demand for that need or a want.

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Marketing Management Philosophies
There are five marketing concepts. A company should choose the right one
according to their and their customers’ needs.

1. Production Concept
2. Product Concept
3. Selling Concept
4. Marketing Concept
5. Social Marketing Concept

Production Concept
This concept works on an assumption that consumers prefer a product which is
inexpensive and widely available. This viewpoint was encapsulated in Says Law
which states ‘Supply creates its own demand’. Hence companies focus on
producing more of the product and making sure that it is available to the
customer everywhere easily.

Increase in the production of the product makes the companies get the
advantage of economies of scale. This decreased production cost makes the
product inexpensive and more attractive to the customer.

A low price may attract new customers, but the focus is just on production and
not on product quality. This may result in a decrease in sales if the product is not
up to the standards.

This philosophy only works when the demand is more than the supply. Moreover,
a customer not always prefers an inexpensive product over others. There are
many other factors which influence his purchase decision.

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Examples of Production Concept of Marketing Management
Philosophies:-
 Companies whose product market is spread all over the world may use this
approach.
 Companies having an advantage of monopoly.
 Any other company whose product’s demand is more than its supply.

Product Concept
This concept works on the assumption that customers prefer products of ‘greater
quality’ and ‘price and availability’ doesn’t influence their purchase decision.
Hence the company devotes most of its time in developing a product of greater
quality which usually turns out to be expensive.

Since the main focus of the marketers is the product quality, they often lose or
fail to appeal to customers whose demands are driven by other factors like price,
availability, usability, etc.

Examples of Product Concept of Marketing Management Philosophies:-

 Companies in the technology industry.
 Companies having an advantage of monopoly.

Selling Concept
Production and product concept both focus on production but selling concept
focuses on making an actual sale of the product. Selling Concept focuses on
making every possible sale of the product, regardless of the quality of the product
or the need of the customer. The main focus is to make money. This philosophy
doesn’t include building relations with customers. Hence repeated sales are very
less. Companies following this concept may even try to deceive the customers to
make them buy their product.

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Companies which follow this philosophy have a short-sighted approach as they
‘try to sell what they make rather than what market wants’.

Examples of Selling Concept of Marketing Management Philosophies:-

 Companies with short-sighted profit goals. This often leads to marketing
myopia.
 Fraudulent companies.

Marketing Concept
Selling Concept cannot let a company last long in the market. It’s a consumers
market after all. To succeed in the 21 century, one has to produce a product to
st

fulfil the needs of their customers. Hence, emerged the marketing concept. This
concept works on an assumption that consumers buy products which fulfil their
needs. Businesses following the marketing concept conduct researches to know
about customers’ needs and wants and come out with products to fulfil the same
better than the competitors. By doing so, the business establishes a relationship
with the customer and generate profits in the long run.
However, this isn’t the only philosophy that should be followed by all the
businesses. Many businesses still follow other concepts and make profits. It
totally depends on the demand and supply and the needs of the parties involved.

Examples of Marketing Concept of Marketing Management Philosophies:-

 Companies in perfect competition.
 Companies who want to stay in the market for a long time.

Societal Marketing Concept

Adding to the marketing concept, this philosophy focuses on society’s well-being
as well. The business focuses on how to fulfil the needs of the customer without
affecting the environment, natural resources and focusing on society’s well-
being. This philosophy believes that the business is a part of the society and

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hence should take part in social services like the elimination of poverty, illiteracy,
and controlling explosive population growth etc.

Micro and Macro Environment

Every business organization is a part of the business environment, within

which it operates. No entity can function in isolation because there are
many factors that closely or distantly surrounds the business, which is known
as a business environment. It is broadly classified into two categories,
i.e. micro environment, and macro environment. The former affects the
working of a particular business only, to which they relate to, while the latter
affects the functioning of all the business entities, operating in the economy.

While microenvironment has a direct impact on the business activities, the

macro environment is a general business environment, which influences all
business groups at large. It is important to learn the business environment, so
as to understand the effect of various forces on business. Take a read of the
given article to know the difference between micro environment and macro
environment.

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 BASIS FOR
MICRO ENVIRONMENT MACRO ENVIRONMENT
COMPARISON

Meaning Micro environment is defined as the Macro environment refers to the general
nearby environment, under which environment, that can affect the working
the firm operates. of all business enterprises.

Elements COSMIC, i.e. Competitors, PESTLE, i.e. Population & Demographic,

Organization itself, Suppliers, Economic, Socio-Cultural, Technological,
Market, Intermediaries and Legal & Political and Environmental.
Customers.

Nature of Specific General

elements

Are these factors Yes No

controllable?

Influence Directly and Regularly Indirectly and Distantly

Definition of Micro Environment

Microenvironment refers to the environment which is in direct contact with
the business organization and can affect the routine activities of
business straight away. It is associated with a small area in which the firm
functions.

Microenvironment is a collection of all the forces that are close to the firm.
These forces are very particular for the said business only. They can influence
the performance and day to day operations of the company, but for a short
term only. Its elements include suppliers, competitors, marketing
intermediaries, customers and the firm itself.

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 Micro Environment

 Suppliers are the ones who provide inputs to the business like raw
material, equipment and so on.
 Competitors are the rivals, which compete with the firm in the market
and resources as well.
 Marketing intermediaries may include wholesalers, distributors, and
retailers that make a link between the firm and the customers.
 Customers / Consumers are the ones who purchase the goods for their
own consumption. They are considered as the king of business.
 The firm itself is an aggregate of a number of elements like owners like
shareholders or investors, employees and the board of directors.

Definition of Macro Environment

The general environment within the economy that influences the working,
performance, decision making and strategy of all business groups at the
same time is known as Macro Environment. It is dynamic in nature. Therefore
it keeps on changing.

It constitutes those outside forces that are not under the control of the firm
but have a powerful impact on the firm’s functioning. It consists of
individuals, groups, organizations, agencies and others with which the firm
deals during the course of its business.

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 Macro Environment

The study of Macro Environment is known as PESTLE Analysis. PESTLE

stands for the variables that exist in the environment, i.e. Population &
Demographic, Economic, Socio-Cultural, Technological, Legal & Political and
Environmental. These variables, consider both economic and non-economic
factors like social concerns, government policies, family structure, population
size, inflation, GDP aspects, income distribution, ethnic mix, political stability,
taxes, and duties, etc.

Key Differences Between Micro Environment and Macro Environment

The following are the major difference between micro and macro
environment:

1. Microenvironment is the environment which is in immediate contact

with the firm. The environment which is not specific to a particular firm
but can influence the working of all the business groups is known as
Macro Environment.
2. The factors of the microenvironment affect the particular business only,
but the macro environmental factors affect all the business entities.
3. The microenvironmental factors are controllable by the business.
However, the macroeconomic variables are uncontrollable.

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 4. The elements of the microenvironment affect directly and regularly to
the firm which is just opposite in the case of the macro environment.
5. The study of the microenvironment is described as COSMIC analysis.
Conversely, PESTLE Analysis is a study of the macro environment.
Conclusion

Microenvironment and macro environment, both cover the overall

environment of business. So, they are more complementary rather than
contradictory. The study of these environments will help to know the strength,
weakness, opportunity and threat of business.

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 UNIT - II

Market Segmentation

Today, companies have recognized that they cannot appeal to all

buyers in the marketplace, as they are too widely scattered and too
varied in their needs and buying practices. Most of the companies
have moved from mass marketing towards market segmentation and
targeting. Instead of scattering their marketing efforts, firms are
focusing on buyers who have greater interest in the values they create
best. At its most basic level, the term ‘market segmentation’ refers to
subdividing a market along some commonality and similarity. That is,
the members of a market segment share something in common.

Concept:
The process of dividing the total heterogeneous market for a product
or service into sub-markets or segments, each of them being
homogeneous in all significant aspects, is known as market
segmentation. According to William Station, market segmentation is,
“the process of taking the total heterogeneous market for a product or
service and dividing it into several markets or segments, each of which
tends to be homogeneous in all significant respects.” For example, the
total market for ready-made garments may be divided into segments
like kids, teenagers, ladies and gents.

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Market segmentation is based on the fact that a market is composed of
different buyers who respond differently to the same marketing
programme. Therefore, all the potential customers are grouped into
sub-groups so that each sub-group is different from others but all
customers in a particular sub-group have by and large similar
characteristics.

Market segmentation is customer-oriented philosophy. It is a

technique of recognising effectively the differences among customers.
It is well-tested system for guiding marketing strategy. It enables a
bank (or any other organisation) to offer specialised services and
need-based (user- oriented) schemes for optimum deployment of
funds.

The basic aim of market segmentation is to identify the varying and

specific needs of different types of customers so that appropriate mix
of products/services may be designed and offered to satisfy different
types of customers. In this age of intense competition for the mass
market, individual sellers can prosper by serving specific market
segments in a creative manner.

The process of market segmentation involves the following

steps:
ADVERTISEMENTS:

(i) Identify the total market (those who buy or may be induced to buy
the product or service under consideration).

(ii)Divide the total market into its major sub-markets or segments.

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(iii) Estimate the sales potential and profit potential for each sub-
market.

(iv) Determine the unique characteristics and requirements of each

sub-market.

Need for Market Segmentation (Why Market Segmentation?)

Not all individuals have similar needs. A male and a female would have varied interests and liking
towards different products. A kid would not require something which an adult needs. A school kid would
have a different requirement than an office goer. Market Segmentation helps the marketers to bring
together individuals with similar choices and interests on a common platform.

 Market Segmentation helps the marketers to devise appropriate marketing strategies and
promotional schemes according to the tastes of the individuals of a particular market segment.
A male model would look out of place in an advertisement promoting female products. The
marketers must be able to relate their products to the target segments.
 Market segmentation helps the marketers to understand the needs of the target audience and
adopt specific marketing plans accordingly. Organizations can adopt a more focussed approach
as a result of market segmentation.
 Market segmentation also gives the customers a clear view of what to buy and what not to buy.
A Rado or Omega watch would have no takers amongst the lower income group as they cater to
the premium segment. College students seldom go to a Zodiac or Van Heusen store as the
merchandise offered by these stores are meant mostly for the professionals. Individuals from
the lower income group never use a Blackberry. In simpler words, the segmentation process
goes a long way in influencing the buying decision of the consumers.

An individual with low income would obviously prefer a Nano or Alto instead of
Mercedes or BMW.

 Market segmentation helps the organizations to target the right product to the right customers
at the right time. Geographical segmentation classifies consumers according to their locations. A
grocery store in colder states of the country would stock coffee all through the year as
compared to places which have defined winter and summer seasons.
 Segmentation helps the organizations to know and understand their customers better.
Organizations can now reach a wider audience and promote their products more effectively. It
helps the organizations to concentrate their hard work on the target audience and get suitable
results

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Components of Market Segmentation

Market segmentation is the division of an entire market group based on consumers

with similar market needs. The marketing of a men's clothing line may be based on
advertising during football games. But when manufacturers discover that a large
percentage of the product is actually purchased by a wife, girlfriend or mother, a new
segment requiring its own separate marketing is identified.
Measurable

Measurability is an important element of market segmentation. Though a new segment

is identified, without knowing just how many potential consumers it encompasses, it
may not be worth the risk. Commercial advertising, changes in product placement and
jumbling price points all come with a price tag to the marketer. If the amount of
consumers, and the potential purchasing power of those consumers, cannot be
measured, the marketer cannot accurately create a marketing budget to target the
segment.
Accessible

For a market segment to be valid, it must be accessible as a marketing target. In other words, if
a manufacturer identifies a potential new market segment, it must determine a means to
advertise to that market. If the segment cannot be targeted successfully through commercials,
direct mail, radio ads, newspapers or the other means typically used by the marketer, creating
a new advertising campaign for this segment is not a financially sound adventure. But if the
segment can be reached by creating new advertising and selling the product in a different
location, it becomes a worthwhile prospect.
Different

A market segment is defined as having a different response to the marketing mix elements, also
known as the four P's. A target market group will be identified based on reactions to the
product itself, the price point given, the promotion or advertising methods for the product and
where it is sold, or its placement. When a group of consumers inside that market expresses

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different demands for the product, it morphs into its own segment. There is a huge demand for
cell phones, but teenagers and adults have different demands for the product. These two
segments will react differently to a commercial for a cell phone, the price of the phone and how
it is sold. The manufacturer of the phone will devise separate marketing strategies to reach
each of the segments.
Profitability

Defining and targeting a new market segment is the first step toward creating a potential niche
market. But before expending time, energy and money into attempting to capture this new
segment, run some test questions. How durable is this market segment and is it large enough to
garner a profit? Back-to-school products may have a short advertising life span, but the amount
of consumers that can be captured in that time make it a potentially profitable venture.

Nature of Market Segmentation:

1. Systematic process:
Segmentation of market demands a systematic process.

The process consists of the following steps:

a. Defining the market.

b. Data collection to analyse the characteristics of the potential

customers.

c. Identifying the bases of segmentation.

d. Defining the market segments.

e. Evaluating the market segments.

f. Selecting the appropriate market segments.

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2. Serves many benefits:
Market segmentation brings many benefits to the marketer for
selecting target market and using an appropriate combination of the
four P’s.

3. Subject to certain limitations:

Market segmentation is subject to limitations such as:
(a) Difficulties in data collection,

(b) It is a time-consuming process, and

(c) It is expensive.

4. Facilitates customer satisfaction:

Through market segmentation the customers get goods and services of
their choice, which helps in satisfying their needs and wants.

5. Operates as promising marketing strategy:

Market segmentation is better than market aggregation, as the current
marketing trend is shifting from mass marketing strategy to target
marketing strategy.

Bases of Market Segmentation

Everything you need to know about the bases of market

segmentation. Market segmentation is based on the assumption that
all the potential customers are not identical and that the firm should
address their needs with appropriate product Land other marketing
strategies or else should concentrate on only one single segment and
tailor the strategy accordingly. Marketers establish the basis to
segment the market.

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There are several basis available for segmenting the market where
marketers may use any one or a combination of more than one basis
to segment the market.
In this article we will discuss about the bases of market segmentation.
Learn about:-

1. Demographic Segmentation 2. Geographic Segmentation 3.

Geodemographic Segmentation 4. Psychographic Segmentation 5.
Behavioural Segmentation.

Base # 1. Demographic Segmentation:

Demographics are the statistical description of population
characteristics in terms of age, gender, income, education, family size
and so on. People differ for their demographic characteristics and
marketers’ use of these variables as segmentation basis is based on the
premise that people with different characteristics have different needs
and in the case of a product these differences may lead to behavioural
differences as well.
Marketers need to focus more on some specific demographic groups
and not all, as mentioned already the group should be distinct for its
behaviours. Companies develop products and services to meet the
needs of individual demographic segments and also tailor their
messages to those specific groups.
Market segmentation based on differences in population age
recognizes that people in different age groups seek different features
or benefits of the product, choose different brands and also process
the information differently. Due to differences in their information
processing behaviour, marketers decide for using different
promotional and advertising approaches in terms of both message and
media techniques.
Coco- Cola India (CCI) in an attempt to enter, understand and
influence the daily lives of its young consumers launched its brand-led
mall hangout space – Coke Red lounge- in Pune. The lounge offers
music, movies, surfing on internet, console gaming and videos piped
in via a plasma-screen and the entire decor is in brand red colour. The

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purpose is to get engaged with young consumers in India and offer
them the safe hangout zone.
For a product, marketers may target children, young adults, adults,
middle age grownups and senior citizens, and each one of them
belongs to certain chronological age group. Though senior citizens
belong to 60+ age group marketers, however, recognize sub-groups
within the senior citizen group and evolve more specific strategies
particularly advertising strategies to approach specific sub-group.
Marketers also keep track of the likely growth of population size of
various age groups as a major pointer to future growth patterns and
the market size. It is, however, observed that ‘cognitive age’ rather
than the ‘chronological age’ of a person is a better predictor both of his
purchase and communication behaviour. For example, despite
belonging to different age groups, the middle aged adult may appear
similar to a young adult for his brand and media choices.
Gender-wise market segmentation is relevant when for a product
category men and women differ for their purchase and purchase
related behaviours.
First, there are certain gender specific products and their messages for
these products are targeted only for a particular gender, e.g. ads for
after-shave lotion. The tone of the message appeal may also differ for
men and women.
Secondly, same products purchased for different reasons by men and
women require different advertising appeals to attract their attention.
Thirdly, in the same product category, men and women may seek
different features, e.g. deodorants, and these differences are taken care
at the time of developing message content and its execution.
Fourthly, men and women may differ for their influences on decision
making for a product purchase. Where men often are the prime
purchasers in the case of automobiles, women influence the decision
making for the choice of colour and design. Therefore, advertisers in
their ad executions for a product prefer to include both men and
women making joint decisions.
Lastly, information processing differs between men and women. As
compared to men, women tend to go for more detailed information

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processing. Unlike women, men have more dislike for celebrity
endorsements.
Income level decides one’s affordability for various goods categorized
as necessities, sundries or luxuries, and also one’s sensitivity to price
vis-a-vis the quality of the product. The hypothesis is that income and
consumer’s price sensitivity is negatively correlated and as income
tends to increase consumer looks forward to more quality purchases
as against cost saving purchases.
Marketers, therefore, decide about targeting different income groups
and accordingly vary the message content of ads, with less or more
emphasis on savings in the product price. Media and programme
preferences also vary for different income groups. While targeting
specific income groups marketers also consider changing patterns of
saving and expenditure in the light of growth of dual income
households.
Base # 2. Geographic Segmentation:
Depending on their area of location, consumers are often found to
have differences in their consumption behaviour. Marketers divide the
markets into different geographical units at national, regional. State,
local or neighbourhood level. These locations differ for their spread as
well as for the extent and types of differences and the level of
complexity.
The message and media strategies, therefore, differ for each of the
location. Small firms targeting a local area employ local media as
against national marketers who develop specific advertising and
marketing programmes for specific regions of the country. The
multinational firm operating in different nations requires greater
adaptations to suit the differences in culture and language.
Base # 3. Psychographic/Lifestyle Segmentation:
Information about consumers’ psychographics or lifestyle factors adds
richness to the demographic information because it attempts to
explain that why demographically alike people buy different products
or require different message appeals to approach them. Psychographic
profiles are prepared on the basis of patterns of responses that emerge
from people’s activities, interests and opinions called as AIO
inventory.
24
With the help of various market analysis techniques marketers identify
such groups which exhibit unique lifestyle patterns and thus generate
market segments based on differences in their lifestyle. Lifestyle as a
segmentation variable is found useful mainly for product categories
where user’s self/image is important. When the differences in lifestyle
are correlated with the consumers’ product, brand and/or media
usage, it allows for a fine-tuning of marketing strategies, particularly
media and message strategies.
Base # 4. Segmentation Based on Product Usage:
The frequency of product use, i.e. the usage rate, could be heavy,
medium or light and the markets may be segmented to align the
product with the given usage rate for the product. Market research
provides that out of the total customers, light and medium users are
70 to 80 per cent and constitute only 20 to 30 per cent of the product
demand.
Whereas heavy users are only 20 to 30 per cent of the population, but
for their usage rate they take 70 to 80 per cent of the product demand.
This is known as 80- 20 rule for product demand and marketers often
use it to build demand for their product through appropriate
marketing and communication programmes targeted at different user
groups.
There may be different usage occasions for the product and consumers
seek different benefits in different usage occasions. Ad campaigns
promote the different use occasions for the product to make the
consumer learn about new uses for the product. This is done to push
forward the product usage rate.
Base # 5. Segmentation Based on Brand Loyalty:
Market for the product may differ on the basis of user’s status also.
There are always some users and some non-users of the product
category. The users of the product are of .various types-category users
(NCU), brand loyal users (BL), frequent brand switchers (FBS), other
brand switchers (OBS), or other brand loyal (OBL). The potential
brand purchaser belongs to any of these five groups which are
mutually exclusive and also define the potential customers of the
product.

25
New category users (NCU) do not always provide good sales potential
for the product as it all depends upon the level of awareness about the
product in the market. Among the category users those who buy the
brand on a regular basis are referred to as brand loyal. Frequent brand
switchers of the product hold moderately favorable attitude towards
the brand.
Together these two types represent the brand sale in the market. The
non-loyal group of consumers, FBS and OBS, often seek the least
expensive or the most convenient brand selection. They can be made
to increase their proportion of product purchase by creating ads that
tend to reinforce the loyalty of such purchasers.
However, marketers do not keep much faith in other brand loyal
(OBL) category of buyers as they are likely to hold a negative or
neutral attitude towards the advertiser’s brand. The group of other
loyal buyers tends to avoid advertising for other brands; they do not
seek information and need solid reasons to get convinced about the
brand. This makes the entire exercise of attracting them to a trial
purchase costly and difficult. However, for their tendency to be loyal, if
once attracted, there is a greater chance of their becoming loyal buyers
of the brand.
Base # 6. Segmentation Based on Benefits:
Markets are also segmented for the benefits that the customer seeks in
product use. The rationale for a benefit based market segmentation
lies in the fact that products are actually the bundle of benefits and
various products available in the market serve not all but some
benefits to the customers. Different customers seek different benefits
from the product; marketers choose some specific products and
communicate those benefits using specific promotional programmes.
Advertising programmes differ for the use of different media and copy
elements. Russell Haley carried out a benefit based segmentation of
the toothpaste market and identified four market segments, viz.
sensory segment, sociable, decay prevention and independent
segment. Each segment had its preferred brands of toothpaste serving
the required benefits. Details on various benefit based segments in the
toothpaste market.
Base # 7. Segmentation Based on Attitudes:
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There are different attitude groups in the market. There may be some
who feel enthusiastic about the product, while others may just hold a
positive attitude but less excitement about the product. There are
some who seem to be neutral, some as indifferent and some with a
negative attitude for the product.
At times marketers decide about targeting specific attitude groups and
carry out required ad campaigns to sustain the declining product sale
or to give a further boost to it. Honda, the manufactures of motor
bikes in Japan, once initiated aggressive ad campaigns to change
potential customers’ negative attitude that motorbikes are used by bad
people. Through an appropriate ad campaign saying ‘one meets good
people while riding on motorbikes’, people were made to feel positive
towards motorbikes.
The rest is the success story of Honda’s motorbikes. Marketer,
however, needs to know that for a given product it is the positive
attitude of the people which forms the basis to the product sale and
not simply the familiarity and knowledge about the brand. There are
certainly many purchase situations where attitude formation does not
really take place before the actual purchase like in the case of low
involving products.
To select a particular segmentation basis, it can be noted that the
geographic specifications of the market is simple and easy to apply,
but it confines the target selection process to geographical boundaries
only. Most commonly, markets are segmented logically on
demographic and/or psychographic basis to expect differences in
behaviour.
However, the knowledge about potential customers’ membership to a
buyer group, viz. NCU, BL, FBS, OBS or OBL brings more clarity to the
target audience selection. The overlapped area between the two
circles, representing different market specifications in, constitutes a
clear representation of the target audience for the product. Otherwise,
also if not looking for the overlapped area, the understanding of the
buyer status of targeted audiences may help in sharpening of the
strategies.

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Market Segmentation Strategies and Importance
The concept of market segmentation defines three strategic options of marketing:
These are as follows: Undifferentiated marketing strategy, Differentiated
marketing strategy and Concentrated Marketing strategy.

Contents

 Undifferentiated marketing strategy

 Differentiated marketing strategy
 Concentrated Marketing
 Importance of Market Segmentation

Undifferentiated marketing strategy

Under this marketing strategy, the marketing management focuses on the common
needs of the people and designs its goods and services to satisfy the maximum
number of customers. It is neither grouping of customers nor market segmentation.
It relies on mass production, mass advertising and mass distribution. This strategy
does not make any difference among the customers of the product of the enterprise.
The principle of same brand, same price, same product, same packaging, same
media, same marketing programme and same advertising is followed for all the
customers and whole market. This strategy is also known as market aggregation
strategy. Usually, the product-oriented firms adopt this strategy.

Differentiated marketing strategy

Under this marketing strategy, the grouping of customers is done on the basis of
their common needs and desires viz. region, income, age, education, personality,
profession, religion, etc. The whole market is divided into various segments. Here,
different products are manufactured for different market segments. Such marketing
strategy increases sales and profits of the firm, attracts large number of customers
from all corners of the society and offers higher customer satisfaction by producing
goods and services according to the needs and desires of the consumers. Thus, this
type of consumer-oriented strategy is also known as market segmentation or
market segregation strategy.

Concentrated Marketing

Under this marketing strategy, the marketing manager concentrates on one

particular segment instead of various segments (or whole market). It follows one

28
product and one segment principle and creates brand monopoly. According to
Philip Kotler, “Instead of going after a small share of a large market, the firm
goes after a large of one or a few sub-markets. But another way instead of
spreading itself thin in many parts of the market, it concentrates its forces to gain a
good market position in a few areas.” This strategy is best suitable in case when
new products are introduced in the market. As all marketing efforts are
concentrated on one market segment, it provides best possible satisfaction to the
consumers.

Importance of Market Segmentation

The Market Segmentation strategy is a consumer-oriented philosophy. It benefits

both the marketers and the consumers. The following points explain the
importance of market segmentation:

Helpful in Competition

Market segmentation provides an opportunity of making deep study of the

products, policies and strategies of competitors in all the segments. With this, the
business enterprise can adopt different strategies for different markets taking into
account the rival strategies.
Provides opportunities to expand market

By segmenting the market, a marketer is able to create new markets for their
products.

To discover marketing opportunity

Market segmentation helps in making intensive marketing research in all the

segments. The habits, tastes, hobbies and nature of consumers of all the segments
can be understood deeply. Such research helps in discovering marketing
opportunities in these segments.

Knowledge of customer needs

By the help of market segmentation, the marketing manager can easily get to know
why customer do or do not buy certain products or services. All marketing
activities are directed towards the customer satisfaction. With the help of
segmentation, it becomes easy to measure the level of segmentation of each
segment and also to make improvements in the segmentation level.

29
Adjustment in products

Under market segmentation, marketing manager can easily make adjustments in

their products and market communication according to the change in taste, need,
nature and income of the consumers.

Increase in Sales Volume

By segmentation, the marketing manager can increase the sales volume of the
enterprise. Each market segment has different demand pattern and when the
marketing manager satisfies the demands of different segments by changing the
products, the total sales volume of an enterprise increases.

Adopt sound and effective marketing programme

When customer needs are fully understood by the marketing manager Market
segmentation divides the whole market into several segments and Individual
marketing programmes are prepared for every segment. These programmes are
better and more effective than a single programme for the whole market.

Effective advertising appeal

The advertising appeals are designed in a way so as to create a positive image of

the individuals who use certain products. The message conveyed through
advertising appeals influences the purchasing decisions of different buyers groups
which are recognized with the help of market segmentation. Thus, different
advertising appeals can be formulated for different segments. Hence, segmentation
helps to make the advertising appeals more effective.

Increases marketing efficiency

The market segmentation increases marketing efficiency by offering specific

pricing, sales promotion and distribution channels as per the requirements of
different segments. The unique market strategies can be framed regarding product,
pricing, advertising, sales promotion, distribution channel, etc. according to the
changing needs of the segments. This increases the marketing efficiency of the
business enterprise.

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Mass Marketing VS Target
Marketing/Segmentation:

Mass marketing has been a life long marketing approach using traditional means of
marketing. With the latest technological advancement in digital marketing which
has made target marketing even better.

This is because it is cheaper and effective ways of reaching your target market.

When it comes to running a business the type of marketing strategy you adopt is
very important. Over the years many companies have moved from mass marketing
to targeted marketing. Depending on your product and business model you may
adopt any of the two.

However, as a startup, it will be more effective to focus on target marketing. Some

of the top best companies in the world now use the targeted marketing approach
which is cheaper and more effectively.

Demography Segmentation for Niche Market

Segmentation is one of the most important processes in target marketing as it allows

easy breaking down the target audience. This includes-

1. Age
2. Gender
3. Educational qualification
4. Marital Status
5. Income Level
6. Religion
7. Location
8. Economic Class
9. Occupation
10. Ethnic Background
11. Lifestyle
12. Interest, etc.

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Some Niche Market Companies

Mercedes is one of the most popular car manufacturing firms in the world, unlike other
car markers they only produce cars for a segmented market, those who want luxury,
comfort, security, and poise.

Mercedes have adopted the target marketing in their approach which can be seen in their
adverts, marketing strategies and products. Some of their cars are limited edition which
clearly states that it's strictly a segmented market. This marketing strategy has made it
one of the biggest car manufacturing companies in the world.

Why Target Marketing?

Every startup usually faces a problem of getting their products or services to the right
audience and one of the major challenges is lack of funds to reach a wide range of
audiences.The best marketing model would be target marketing, It allows you to
segment your audience into demography and focus only on those that that will be
interested in your products or services either by age, sex, location, educational
qualification, income, etc.

As a startup, it is always better to narrow your focus this will not only help you save
money it will also help you build a stronger business reputation and help you plan
an effective strategy in reaching your target market. This will make your business more
effective, more profitable, build a loyal customer base and also build a lasting business.

Mass Marketing and Target Marketing

Mass marketing is a form of marketing that tries to reach as many people as possible. In
mass marketing, the focus is on the numbers while Target marketing tries to reach a
segmented or specific audience. Mass marketing employs several approaches to get the
messages out to the largest possible audience.

Mass Marketing at a Glance

The easiest way to explain mass marketing is like casting a wide net into the ocean with
the aim of catching so many fishes. This means you will require a bigger net, a bigger

32
boat and also many hands to help out. Since this kind of marketing is open to all you will
catch all forms of fishes, big small and species of different fishes.

Mass marketing focuses on low price and high volume which usually make the profit
margin little.

The marketing channels in mass marketing are usually the traditional marketing channel
like radio, Television, magazines, and newspapers. This strategy focuses on low price to
drive high sales. It focuses on volumes and numbers. Mass marketing examples include
telecommunication companies, detergents, drinks, consumer goods, etc.

Target Marketing

Target marketing is also known as niche marketing, is highly specialized. Unlike the
mass market where you just throw out an advert to a wide range of audience the niche
market offers a more streamlined platform. However, this gives you a smaller market
share compared to those in the niche market.

On the other hand, target marketing focuses on a few well-defined customer base and
strategies to reach those who are only interested in your products or services. In Niche
marketing you are focusing on a refined and segmented target audience.

Niche market product examples are organic beauty products for people worried about
using non-organic products for their skin. In target marketing, the market is broken into
segments or demographics
Mass market means you want to service or sell to a large group or audience while target
market means you are selling to a small group of audience who are interested in your
products or services.

Difference between Target marketing and Mass Marketing

 Mass marketing is more expensive than Target marketing

 It targets everyone even those that may not need the products while niche
marketing is only targeted at those that may need it

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 Mass marketing produces fast results compared to niche marketing
 Target marketing requires time to develop which includes a custom strategy for the
target market segment
 It is easier to measure the success of target marketing compared to the mass
marketing

Advantages of Mass Marketing

It reaches a wide range of audiences

Maximum product/services exposure
It reaches a wide range of audience

Disadvantages of Mass marketing

It is not cost effective, It is expensive to run as you will need to reach a wide range of
audiences
It is hard to measure its effectiveness
Profit margin is usually low
It requires a lot of manpower

Advantages of Target marketing

Target marketing is cheaper and more affordable

It offers a great profit margin
It offers a better chance for leads

It's easy to build loyal and returning customers because this marketing is custom made
for them

Disadvantages of Target Marketing

It often takes time to see the result

it requires lots of planning and strategy to determine the target market
Mass marketing VS Target marketing

Every brand is looking for the most cost-effective ways to reach a wide range of
audiences. As a startup, the best approach you may want to consider is target marketing

34
as this gives you the flexibility to reach people who may be interested in your products or
services. The target marketing gets the message out only to those who may be interested
compared to the niche.

Unlike the mass market which relies majorly on the traditional means on marketing like
the TV, radio, print media, etc. the target market uses the power of technology and social
media to reach a wide range of the specified target audiences.

Targetted marketing helps save time and money on all your marketing campaigns,
however, it requires a lot of research and strategy to be able to determine the
demography, where and how to reach your potential audience, what they want versus
what they need.

Why You Should Adopt Target Marketing?

High conversion rate: One of the reasons why you should adopt target marketing over
niche marketing is it has a high conversion rate compared to mass marketing.

Can be measured: Target marketing can easily be measured in terms of result, metric,
etc.

High quality Leads: Due to the fact that you are targeting those who may be interested
in your products, Target marketing only offers your products/services to only those who
may be interested in your offers thereby offering high-quality leads.

Promotes Customer Loyalty: Niche marketing allows you to offers custom messages to
your client and because the client and the company have the same goals and vision. there
is a connection between the company and the customers which help build customer
loyalty.

Helps improve the quality of products and services: Since the products and services
are customized to suit the target audience need. This usually ensures the company
improves the quality of their products and services.

Examples of Target Marketing Platforms

35
Social Media

Social media is one of the best things to happen to the world of advertisement, it allows
you to reach a wide range of audiences through different demography which can either be
age, sex, location, educational background, interest, etc Some examples of social media
sites for niche marketing
include, Facebook, Twitter, Instagram, Linkedin, YouTube, Pinterest, etc.

Content Marketing

Since content is king in every marketing endeavor, It's therefore important to adopt
content marketing for your target marketing needs. This is one of the best ways to reach
your target audience because you are creating content that only appeals to them. For
example, instead of creating generic blog posts, you can create posts that are tailored for
your audience that way you can communicate effectively and meet their specific needs.

Email Marketing

Another way to reach your target audience is through email marketing, You can send
emails to people within a specific niche, eg if you sell basketball equipment and you have
an email list of basketball professionals, you can easily send them a custom message
about your products or services.

Search Engine Optimization (SEO)

Search engine Optimisation has to do with the practice of increasing the searchability of
your website using the search engines. This can be done by creating contents based on
keywords that are related to the specific fields. Using SEO helps you identify words,
phrases, and keywords that your target audience uses when doing a search, you can then
develop contents based on their frequently searched words.

Paid Search

Another great way to reach your target audience is to also do a targeted keyword paid
search. So that when people search for some related keywords your products or services
comes on the top pages on search engines.

36
Banner Ads

You can also place banners ads on related niche sites. You can do that either through
direct placements or through Google ads.

Paid Post

Another easy way to reach your target audience is target marketing through paid post
which can come in the form of guest blogging, paid blog post, etc If you have a niche site
that focuses on a category that is related to your product or services, that means many of
your potential customers are already on the site. That way you can easily reach them
through a sponsored post on the blog.

Final Words on Mass VS Target Marketing

It has shown that Mass marketing can be effective in getting your products to the right
audience but it is not the best approach for startups due to the fact that it requires lots of
resources, manpower and funding. On the other hand, niche marketing provides a more
efficient way to reach your segmented audience in an efficient, reliable and effective
way.

The Niche market also provides a level ground for small startups to compete with big
corporations without necessarily having a huge budget.

Marketing Mix Definition:

The marketing mix definition is simple. It is about putting the right product or a
combination thereof in the place, at the right time, and at the right price. The
difficult part is doing this well, as you need to know every aspect of your business
plan.

As we noted before, the marketing mix is predominately associated with the 4P’s
of marketing, the 7P’s of service marketing, and the 4 Cs theories developed in
the 1990s.

37
Here are the principles used in the application of the right marketing mix:

Marketing Mix 4P's

A marketing expert named E. Jerome McCarthy created the Marketing 4Ps in the
1960s. This classification has been used throughout the world. Business schools
teach this concept in basic marketing classes.

The marketing 4Ps are also the foundation of the idea of marketing mix.

#1 Marketing Mix – Product

A product is an item that is built or produced to satisfy the needs of a certain

group of people. The product can be intangible or tangible as it can be in the
form of services or goods.

You must ensure to have the right type of product that is in demand for your
market. So during the product development phase, the marketer must do an
extensive research on the life cycle of the product that they are creating.

38
A product has a certain life cycle that includes the growth phase, the maturity
phase, and the sales decline phase. It is important for marketers to reinvent their
products to stimulate more demand once it reaches the sales decline phase.

Marketers must also create the right product mix. It may be wise to expand your
current product mix by diversifying and increasing the depth of your product line.

All in all, marketers must ask themselves the question “what can I do to offer a
better product to this group of people than my competitors”.

In developing the right product, you have to answer the following questions:

 What does the client want from the service or product?

 How will the customer use it?
 Where will the client use it?
 What features must the product have to meet the client’s needs?
 Are there any necessary features that you missed out?
 Are you creating features that are not needed by the client?
 What’s the name of the product?
 Does it have a catchy name?
 What are the sizes or colors available?
 How is the product different from the products of your competitors?
 What does the product look like?
#2 Marketing Mix – Price

The price of the product is basically the amount that a customer pays for to enjoy
it. Price is a very important component of the marketing mix definition.

It is also a very important component of a marketing plan as it determines your

firm’s profit and survival. Adjusting the price of the product has a big impact on
the entire marketing strategy as well as greatly affecting the sales and demand of
the product.

This is inherently a touchy area though. If a company is new to the market and
has not made a name for themselves yet, it is unlikely that your target market will
be willing to pay a high price.

Although they may be willing in the future to hand over large sums of money, it is
inevitably harder to get them to do so during the birth of a business.

39
Pricing always help shape the perception of your product in consumers eyes.
Always remember that a low price usually means an inferior good in the
consumers eyes as they compare your good to a competitor.

Consequently, prices too high will make the costs outweigh the benefits in
customers eyes, and they will therefore value their money over your product. Be
sure to examine competitors pricing and price accordingly.

When setting the product price, marketers should consider the perceived value
that the product offers. There are three major pricing strategies, and these are:

 Market penetration pricing

 Market skimming pricing
 Neutral pricing
Here are some of the important questions that you should ask yourself when you
are setting the product price:

 How much did it cost you to produce the product?

 What is the customers’ perceived product value?
 Do you think that the slight price decrease could significantly increase your
market share?
 Can the current price of the product keep up with the price of the product’s
competitors?
#3 Marketing Mix – Place

Placement or distribution is a very important part of the product mix definition.

You have to position and distribute the product in a place that is accessible to
potential buyers.

This comes with a deep understanding of your target market. Understand them
inside out and you will discover the most efficient positioning and distribution
channels that directly speak with your market.

There are many distribution strategies, including:

 Intensive distribution
 Exclusive distribution
 Selective distribution
 Franchising

40
Here are some of the questions that you should answer in developing your
distribution strategy:

 Where do your clients look for your service or product?

 What kind of stores do potential clients go to? Do they shop in a mall, in a
regular brick and mortar store, in the supermarket, or online?
 How do you access the different distribution channels?
 How is your distribution strategy different from your competitors?
 Do you need a strong sales force?
 Do you need to attend trade fairs?
 Do you need to sell in an online store?
#4 Marketing Mix – Promotion

Promotion is a very important component of marketing as it can boost brand

recognition and sales. Promotion is comprised of various elements like:

 Sales Organization
 Public Relations
 Advertising
 Sales Promotion
Advertising typically covers communication methods that are paid for like
television advertisements, radio commercials, print media, and internet
advertisements. In contemporary times, there seems to be a shift in focus offline
to the online world.

Public relations, on the other hand, are communications that are typically not
paid for. This includes press releases, exhibitions, sponsorship deals, seminars,
conferences, and events.

Word of mouth is also a type of product promotion. Word of mouth is an informal

communication about the benefits of the product by satisfied customers and
ordinary individuals. The sales staff plays a very important role in public relations
and word of mouth.

It is important to not take this literally. Word of mouth can also circulate on the
internet. Harnessed effectively and it has the potential to be one of the most
valuable assets you have in boosting your profits online. An extremely good
example of this is online social media and managing a firm's online social media
presence.

41
In creating an effective product promotion strategy, you need to answer the
following questions:

 How can you send marketing messages to your potential buyers?

 When is the best time to promote your product?
 Will you reach your potential audience and buyers through television ads?
 Is it best to use the social media in promoting the product?
 What is the promotion strategy of your competitors?
Your combination of promotional strategies and how you go about promotion will
depend on your budget, the message you want to communicate, and the target
market you have defined already in previous steps.

Marketing Mix 7P's

The 7Ps model is a marketing model that modifies the 4Ps model. The 7Ps is
generally used in the service industries.

Here is the expansions from the 4Ps to the 7Ps marketing model:

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#5 Marketing Mix – People

Of both target market and people directly related to the business.

Thorough research is important to discover whether there are enough people in

your target market that is in demand for certain types of products and services.

The company’s employees are important in marketing because they are the ones
who deliver the service. It is important to hire and train the right people to deliver
superior service to the clients, whether they run a support desk, customer
service, copywriters, programmers…etc.

When a business finds people who genuinely believe in the products or services
that the particular business creates, it's is highly likely that the employees will
perform the best they can.

Additionally, they'll be more open to honest feedback about the business and
input their own thoughts and passions which can scale and grow the business.

This is a secret, “internal” competitive advantage a business can have over other
competitors which can inherently affect a business's position in the marketplace.

#6 Marketing Mix – Process

The systems and processes of the organization affect the execution of the
service.

So, you have to make sure that you have a well-tailored process in place to
minimize costs.

It could be your entire sales funnel, a pay system, distribution system and other
systematic procedures and steps to ensure a working business that is running
effectively.

Tweaking and enhancements can come later to “tighten up” a business to

minimize costs and maximise profits.

#7 Marketing Mix – Physical Evidence

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In the service industries, there should be physical evidence that the service was
delivered. Additionally, physical evidence pertains also to how a business and it's
products are perceived in the marketplace.

It is the physical evidence of a business' presence and establishment. A concept

of this is branding. For example, when you think of “fast food”, you think of
McDonalds.

When you think of sports, the names Nike and Adidas come to mind.

You immediately know exactly what their presence is in the marketplace, as they
are generally market leaders and have established a physical evidence as well
as psychological evidence in their marketing.

They have manipulated their consumer perception so well to the point where
their brands appear first in line when an individual is asked to broadly “name a
brand” in their niche or industry.

Factors that Affecting Market Segmentation

1. Nature of demand

A commodity having wide demand the extent and size of the market will be large and
contrary to it the size and extent of the market will be Limited.

For example, Silver, Gold, sugar, and food-grains have a wide market while the
demand for bangles, Gandhian cap, and Nehru jacket are limited to India only.
2. Durability

Perishable goods like vegetables, eggs, milk, bread, and butter have a limited market
while durable goods namely T.V., radio, vehicles, gold, silver have a wide market.

3. Banking and Financial System

In a country where there is well developed organized money credit, banking and
financial system are in existence the market is widened because payments are quickly
finalized.

On the other hand, if the banking and financial system is not well developed an
organized the markets Limited.

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4. Portability

The goods having heavyweight and prices are low the market is limited while those
goods which are easily portable and prices are high have the large size and extent of
the market.

Thus, Bricks, cement other building materials have a small size and extend
market while silver and gold have a large size and extend the market.

5. Piece of and security of life and property

If there is peace in the country and life and property are protected by the government
the business activities will increase in the market is widened. If there is no internal
peace and security in the market is limited.

6. Cognizability

A commodity is easily known on the basis of its quality by the consumers it will be
demanded more and the size of the market is widened while in the absence of
cognizability of a product buyers will not demand more and market will be Limited.

15 Factors that Affecting Market Segmentation

Engine mark mustard oil, postman, dalda etc. Are well-known and the market will be
large.

7. Sampling and grading of goods

Those goods which are bought and sold on the basis of the samples and grading the
market will be wide while the goods not sold on the basis of samples and grading have
a limited market. Woollen clothes, food-grains, raw cotton etc. have a Wide market.

8. Adequate supply

The goods and services having a flexible supply market will be widened and the goods
having inadequate supply will have a limited market.
9. Efficient and honest Businessman and Traders

The presence of efficient and honest Business and trading community encourage the
business and trade to flourish and the market is widened.

Thus, While inefficient and dishonest Businessman and traders will adversely affect the
business activities and the market is limited.

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10. Substitutes

A commodity having substitutes in the market will have a limited market while no
substitute commodity will be widely used and the size and extent of the market are
widened.

11. Government policy

Domestic and foreign trade is affected by government policy relating to exports and
imports, license, protection, taxes, etc.

If these policies are restricting the trade then the market will be Limited and when there
are liberal policies the market is widened.

12. Availability of means of communication and transport

In a country where there are cheap, quick, and adequate means of communication and
transport available the goods are transferred from one part of the country to another and
the market is widened.
Contrary to it the market is limited because goods cannot be transferred from one place
to another.

13. Division of Labour and Specialisation

The size and extent of the market are affected by the division of labour and
specialization. When the division of labour and specialization have used the production
of goods is carried on the low cost of production and the cheapest will have large size
market.

Thus, Contrary to it the market for dearer goods will be small.

14. Multi Uses

A commodity is used for various purposes the market of such commodity will be large
and the commodity used for single use only will have a limited market.

15. Market Dynamics

Does market lend itself to a highly concentrated market or a more fragmented market?
How does this affect the expected market share a company could be expected to win in
the short and long run.

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Thus, All these factors play an important role in the market size and are factors to be
aware of when thinking about sizing a market, As they can help guide you on the best
approach to take for a given market.

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 UNIT – III
Product :-
A product is what a seller has to sell and what a buyer has to buy it
satisfies the needs of customers. Customers purchase products
because they are capable of realizing some benefits to the purchaser. A
marketer can satisfy the needs and wants of his customers by ‘offering
something’ in exchange for money. And this ‘offering’ is basically a
product. The product is one of the important elements of the 4Ps of
the marketing mix. It consists of a bundle of tangible and intangible
attributes that satisfies consumers.

Product is an important component in marketing-mix. Other elements

of marketing-mix i.e. price, promotion and place are complementary
to it. A product is central to the marketing operations in an
organization. Most of the time product fails not because of poor
quality but because they fail to meet the expectations of the customers.
It is not just a bundle of physical attributes, but a bundle of perceived
benefits which satisfy consumer’s needs. Hence, utmost care should be
taken to handle product decisions. A bad product not only generates
bad name for the firm but also affects negatively the price set for the
product, dissuades the channel members and reduces the believability
of the promotional measures.
In a narrow sense, “A product is a set of tangible physical attributes in
an identifiable form” (W.J. Stanton). But in marketing, product is used
in a broader form.
According to W. Alderson “A product is a bundle of utilities consisting
of various product features and accompanying services”.
According to Philip Kotler “A product is anything tangible or
intangible that can be offered to a market for attention, acquisition use
or consumption that might satisfy a need or want”.
According to Cravens, Hills and Woodruff “Product is anything that is
potentially valued by a target market for the benefits or satisfactions it

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provides, including objects, services, organizations, places people and
ideas”.
From the above definitions, it is clear that product has the want
satisfying attributes which drive a customer to purchase the product.
It is nothing but a package of problem solving devices and is
something more than a physical product. This is because a product
encompasses a number of social and psychological attributes and
other intangible factors which provide satisfaction to the consumer.
ADVERTISEMENTS:

Products can be anything. It can be physical product (e.g. fan, cycle

etc.), service (e.g. haircuts, property deals etc.), place (e.g. Agra, Delhi
etc.), person (e.g. Late M.F. Hussain etc.), Organization (e.g. Helpage
India, Rajiv Gandhi foundation etc.) and idea (e.g. Family Planning,
safe driving etc.).
Alderson defines, “A product is a bundle of utilities consisting of
various product features and accompanying services”.

Stanton defines, “A product is a set of tangible and intangible

attributes, including packaging, colour, price, manufacturer’s and
retailer’s services, which the buyer may accept as offering satisfaction
or wants or needs”.

According to Philip Kotler, “A product is anything that can be offered

to a market for attention, acquisition, use or consumption that might
satisfy a want or need. It includes physical objects, services, persons,
places, organization and ideas”.

Features of a Product

i. Tangibility:
ADVERTISEMENTS:

Products are tangible in nature, customers can touch, seen or feel a

products. For example, car, book, computer etc.

ii. Intangible Attributes:

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Service products are intangible in nature, services like, consultancy,
banking, insurance etc. The product may be combination of both
tangible and intangible attributes like restaurants, transportation, in
case of a computer it is a tangible product, but when we will talk of its
free service provided by dealer, then the product is not only a tangible
item but also an intangible one.

iii. Associated Attributes:

The attributes associated with product may be, brand, packaging,
warranty, guarantee, after sales services etc.

iv. Exchange Value:

Irrespective of the fact that whether the product is tangible or
intangible, it should be capable of being exchanged between buyer and
seller for a mutually agreed price.

v. Customer Satisfaction:
ADVERTISEMENTS:

A product satisfies the customer needs and wants of customers, value

of products is also determined by the level of satisfaction given by a
product after purchase.

Characteristics of Product
1. It can be a single commodity or a service; a group of commodities or
a group of services; a product service combination, or even a
combination of several products and services.
2. Its meaning is determined by the needs and desires of the
consumer. The purpose of a product is to satisfy some need of the
consumers. The buyers purchase problem-solving and time for
creativity when they purchase a computer system.
3. It may be durable such as those that are expected to deliver a stream
of satisfaction over a period of time,
4. Products may be luxuries which might be needed as a symbol of
prestige and status such as car, a well- furnished bungalow in a posh
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colony or necessities which are needed to keep the body and soul
together, such as bread, milk, sugar, etc.
5. It may be an agricultural, mineral, forest or semi-manufactured or
manufactured product.

Product Decision

Decisions regarding the product, price, promotion and distribution

channels are decisions on the elements of the “marketing mix”. It can
be argued that product decisions are probably the most crucial as the
product is the very epitome of marketing planning. Errors in product
decisions are legion.
These can include the imposition of a global standardised product
where it is inapplicable, for example large horsepower tractors may be
totally unsuitable for areas where small scale farming exists and where
incomes are low; devolving decisions to affiliated countries which may
let quality slip; and the attempt to sell products into a country without
cognisance of cultural adaptation needs.
The decision whether to sell globally standardised or adapted products
is too simplistic for today’s market place. Many product decisions lie
between these two extremes. Cognisance has also to be taken of the
stage in the international life cycle, the organization’s own product
portfolio, its strengths and weaknesses and its global objectives.
Unfortunately, most developing, countries are in no position to
compete on the world stage with many manufactured value-added
products. Quality, or lack of it, is often the major letdown. Most
developing countries are likely to be exporting raw materials or basic
and high value agricultural produce for some time to come.

Elements of Production Decisions

In decisions on producing or providing products and services in the

international market it is essential that the production of the product

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or service is well planned and coordinated, both within and with other
functional area of the firm, particularly marketing.
For example, in horticulture, it is essential that any supplier or any of
his “out grower” (sub-contractor) can supply what he says he can. This
is especially vital when contracts for supply are finalised, as failure to
supply could incur large penalties. The main elements to consider are
the production process itself, specifications, culture, the physical
product, packaging, labelling, branding, warranty and service.

Production Process:
The key question is, can we ensure continuity of supply? In
manufactured products this may include decisions on the type of
manufacturing process – artisanal, job, batch, flow line or group
technology. However in many agricultural commodities factors like
seasonality, perishability and supply and demand have to be taken
into consideration.
Quantity and quality of horticultural crops are affected by a number of
things. These include input supplies (or lack of them), finance and
credit availability, variety (choice), sowing dates, product range and
investment advice. Many of these items will be catered for in the
contract of supply.

Specification:
Specification is very important in agricultural products. Some markets
will not take produce unless it is within their specification.
Specifications are often set by the customer, but agents, standard
authorities (like the EU or ITC Geneva) and trade associations can be
useful sources.
Quality requirements often vary considerably. In the Middle East, red
apples are preferred over green apples. In one example French red
apples, well boxed, are sold at 55 dinars per box, whilst not so
attractive Iranian greens are sold for 28 dinars per box. In export the
quality standards are set by the importer. In Africa, Maritim (1991),
found, generally, that there are no consistent standards for product
quality and grading, making it difficult to do international trade
regionally.
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Culture:
Product packaging, labeling, physical characteristics and marketing
have to adapt to the cultural requirements when necessary. Religion,
values, aesthetics, language and material culture all affect production
decisions.

Physical Product:
The physical product is made up of a variety of elements. These
elements include the physical product and the subjective image of the
product. Consumers are looking for benefits and these must be
conveyed in the total product package.
Physical characteristics include range, shape, size, color, quality,
quantity and compatibility. Subjective attributes are determined by
advertising, self-image, labelling and packaging. In manufacturing or
selling produce, cognisance has to be taken of cost and country legal
requirements.
Again a number of these characteristics is governed by the customer or
agent. For example, in beef products sold to the EU there are very
strict quality requirements to be observed. In fish products, the
Japanese demand more “exotic” types than, say, would be sold in the
UK.
None of the dried fish products produced by the Zambians on Lake
Kariba, and sold into the Lusaka market, would ever pass the hygiene
laws if sold internationally. In sophisticated markets like seeds, the
variety and range is so large that constant watch has to be kept on the
new strains and varieties in order to be competitive.

Packaging:
Packaging serves many purposes. It protects the product from damage
which could be incurred in handling and transportation and also has a
promotional aspect. It can be very expensive. Size, unit type, weight
and volume are very important in packaging. For aircraft cargo the
package needs to be light but strong, for sea cargo containers are often
the best form.
The customer may also decide the best form of packaging. In
horticultural produce, the developed countries often demand blister
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packs for mangetouts, beans, strawberries and so on, whilst for
products like pineapples a sea container may suffice. Costs of
packaging have always to be weighed against the advantage gained by
it.
Increasingly, environmental aspects are coming into play. Packaging
which is non-degradable plastic, for example is less in demanded. Bio-
degradable, recyclable, reusable packaging is now the order of the day.
This can be both expensive and demanding for many developing
countries.

Labelling:
Labelling not only serves to express the contents of the product, but
may be promotional (symbols for example Cashel Valley Zimbabwe;
HJ Heinz, Africafe, Tanzania). The EU is now putting very stringent
regulations in force on labelling, even to the degree that the pesticides
and insecticides used on horticultural produce have to be listed.
This could be very demanding for producers, especially small scale,
ones where production techniques may not be standardised.
Government labelling regulations vary from country to country. Bar
codes are not widespread in Africa, but do assist in stock control.
Labels may have to be multilingual, especially if the product is a world
brand. Translation could be a problem with many words being
translated with difficulty. Again labelling is expensive, and in
promotion terms nonstandard labels are more expensive than
standard ones. Requirements for crate labelling, etc. for international
transportation will be dealt with later under documentation.

New Product Development Process:-

In order to stay successful in the face of maturing products, companies have to obtain new ones by
a carefully executed new product development process. But they face a problem: although they must
develop new products, the odds weigh heavily against success. Of thousands of products entering
the process, only a handful reach the market. Therefore, it is of crucial importance to understand
consumers, markets, and competitors in order to develop products that deliver superior value to
customers. In other words, there is no way around a systematic, customer-driven new product
development process for finding and growing new products. We will go into the eight major steps in
the new product development process.

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 The 8 steps in the New Product Development Process
1. Idea generation – The New Product Development Process
The new product development process starts with idea generation. Idea generation refers to the
systematic search for new-product ideas. Typically, a company generates hundreds of ideas, maybe
even thousands, to find a handful of good ones in the end. Two sources of new ideas can be
identified:

 Internal idea sources: the company finds new ideas internally. That means R&D, but also
contributions from employees.
 External idea sources: the company finds new ideas externally. This refers to all kinds of external
sources, e.g. distributors and suppliers, but also competitors. The most important external source
are customers, because the new product development process should focus on creating customer
value.
2. Idea screening – The New Product Development Process
The next step in the new product development process is idea screening. Idea screening means
nothing else than filtering the ideas to pick out good ones. In other words, all ideas generated are
screened to spot good ones and drop poor ones as soon as possible. While the purpose of idea
generation was to create a large number of ideas, the purpose of the succeeding stages is to reduce
that number. The reason is that product development costs rise greatly in later stages. Therefore,
the company would like to go ahead only with those product ideas that will turn into profitable
products. Dropping the poor ideas as soon as possible is, consequently, of crucial importance.

3. Concept development and Testing – The New Product

Development Process
To go on in the new product development process, attractive ideas must be developed into a product
concept. A product concept is a detailed version of the new-product idea stated in meaningful
consumer terms. You should distinguish

 A product idea à an idea for a possible product

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 A product concept à a detailed version of the idea stated in meaningful consumer terms
 A product image à the way consumers perceive an actual or potential product.
Let’s investigate the two parts of this stage in more detail.

Concept development
Imagine a car manufacturer that has developed an all-electric car. The idea has passed the idea
screening and must now be developed into a concept. The marketer’s task is to develop this new
product into alternative product concepts. Then, the company can find out how attractive each
concept is to customers and choose the best one. Possible product concepts for this electric car
could be:

 Concept 1: an affordably priced mid-size car designed as a second family car to be used around
town for visiting friends and doing shopping.
 Concept 2: a mid-priced sporty compact car appealing to young singles and couples.
 Concept 3: a high-end midsize utility vehicle appealing to those who like the space SUVs provide but
also want an economical car.
As you can see, these concepts need to be quite precise in order to be meaningful. In the next sub-
stage, each concept is tested.

Concept testing
New product concepts, such as those given above, need to be tested with groups of target
consumers. The concepts can be presented to consumers either symbolically or physically. The
question is always: does the particular concept have strong consumer appeal? For some concept
tests, a word or picture description might be sufficient. However, to increase the reliability of the test,
a more concrete and physical presentation of the product concept may be needed. After exposing
the concept to the group of target consumers, they will be asked to answer questions in order to find
out the consumer appeal and customer value of each concept.

4. Marketing strategy development – The New Product

Development Process
The next step in the new product development process is the marketing strategy development.
When a promising concept has been developed and tested, it is time to design an initial marketing
strategy for the new product based on the product concept for introducing this new product to the
market.

The marketing strategy statement consists of three parts and should be formulated carefully:

 A description of the target market, the planned value proposition, and the sales, market share and
profit goals for the first few years
 An outline of the product’s planned price, distribution and marketing budget for the first year
 The planned long-term sales, profit goals and the marketing mix strategy.
5. Business analysis – The New Product Development Process
Once decided upon a product concept and marketing strategy, management can evaluate the
business attractiveness of the proposed new product. The fifth step in the new product development
process involves a review of the sales, costs and profit projections for the new product to find out
whether these factors satisfy the company’s objectives. If they do, the product can be moved on to
the product development stage.

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 In order to estimate sales, the company could look at the sales history of similar products and
conduct market surveys. Then, it should be able to estimate minimum and maximum sales to assess
the range of risk. When the sales forecast is prepared, the firm can estimate the expected costs and
profits for a product, including marketing, R&D, operations etc. All the sales and costs figures
together can eventually be used to analyse the new product’s financial attractiveness.

6. Product development – The New Product Development Process

The new product development process goes on with the actual product development. Up to this
point, for many new product concepts, there may exist only a word description, a drawing or perhaps
a rough prototype. But if the product concept passes the business test, it must be developed into a
physical product to ensure that the product idea can be turned into a workable market offering. The
problem is, though, that at this stage, R&D and engineering costs cause a huge jump in investment.

The R&D department will develop and test one or more physical versions of the product concept.
Developing a successful prototype, however, can take days, weeks, months or even years,
depending on the product and prototype methods.

Also, products often undergo tests to make sure they perform safely and effectively. This can be
done by the firm itself or outsourced.

In many cases, marketers involve actual customers in product testing. Consumers can evaluate
prototypes and work with pre-release products. Their experiences may be very useful in the product
development stage.

7. Test marketing – The New Product Development Process

The last stage before commercialisation in the new product development process is test marketing.
In this stage of the new product development process, the product and its proposed marketing
programme are tested in realistic market settings. Therefore, test marketing gives the marketer
experience with marketing the product before going to the great expense of full introduction. In fact,
it allows the company to test the product and its entire marketing programme, including targeting and
positioning strategy, advertising, distributions, packaging etc. before the full investment is made.

The amount of test marketing necessary varies with each new product. Especially when introducing
a new product requiring a large investment, when the risks are high, or when the firm is not sure of
the product or its marketing programme, a lot of test marketing may be carried out.

8. Commercialisation
Test marketing has given management the information needed to make the final decision: launch or
do not launch the new product. The final stage in the new product development process is
commercialisation. Commercialisation means nothing else than introducing a new product into the
market. At this point, the highest costs are incurred: the company may need to build or rent a
manufacturing facility. Large amounts may be spent on advertising, sales promotion and other
marketing efforts in the first year.

Some factors should be considered before the product is commercialized:

 Introduction timing. For instance, if the economy is down, it might be wise to wait until the following
year to launch the product. However, if competitors are ready to introduce their own products, the
company should push to introduce the new product sooner.
 Introduction place. Where to launch the new product? Should it be launched in a single location, a
region, the national market, or the international market? Normally, companies don’t have the

57
confidence, capital and capacity to launch new products into full national or international distribution
from the start. Instead, they usually develop a planned market rollout over time.
In all of these steps of the new product development process, the most important focus is on
creating superior customer value. Only then, the product can become a success in the market. Only
very few products actually get the chance to become a success. The risks and costs are simply too
high to allow every product to pass every stage of the new product development process.

Product Life Cycle:-

Product life cycle is the timeline of demand for the product from its initial stage of
introduction.

Let us now discuss the various stages of a product, starting from its innovation to its
decline stage.

Stages of Product Cycle

Product life cycle can be defined as the life cycle of the product. It means the various
stages a product sees in its complete life span.
Product life cycle comprises of the following four stages −
 Introduction or innovation
 Growth
 Maturity
 Decline
Let us start by describing the first stage we have in the product life cycle, that is, the
introduction stage.

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Introduction Stage
The product is introduced in the market in this stage; it is the initial stage of the product.
 Sales of the product are low in this stage because there may not be a need of the product in
the market.
 The product may undergo brand trouble.
 In this stage, there is very little or no profit.
 The demand for the product is created and developed in this stage.
After this initial stage, the next stage of the product is the growth stage.
Growth Stage
In this stage, the demands and market share increases as well as competition emerges
in the market.
 Generally, the price remains constant in this stage.
 Marketing and promotional expenses increase.
 There is rapid increase in sales.
 The manufacturing cost decreases so there is increase in profit margin.
 It penetrates other market segment.
In the growth stage, there is a boom in the demand of the product and the profit increases
substantially.
Maturity Stage
The price of the product is comparatively low, but the advertisement and promotion cost
increases in this stage.
 This stage remains for a comparatively longer duration.
 In this stage, there is high competition.
 Profit is decreased.
 Sales growth can be divided into the following three categories in the maturity stage −
o Growth
o Stability
o Decay

In growth, there is an increase in the demand of the product. In stability, the demand of
the product remains constant. In decay, there is a slight decrease in the demand.
Decline Stage
There is a decrease in sales in this stage. Demand of product also decreases.
 There is decrease in the price of the product.
 Margins are lowered.

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  There is introduction of new product in market.
 New strategies are implemented.
This is the final stage of the product. There is a decrease in demand and sales of the
product.

Importance of Product Life Cycle

Product life cycle is an important tool for market forecasting, planning and control.
Product life cycle is important in various ways. The situation of the product can be
analyzed properly and changes can be made in order to increase profit. Some other
important features are −
 Helpful in formulating a proper product policy, production and pricing.
 Helpful in modifying the marketing policy.
 Helpful to the marketer regarding competition.
 Cautions the management about the decline stage of the product.

Market Positioning:-
Market Positioning means selecting a marketing mix that is most suitable for a target
market segment. The following illustration shows a product positioning map.


 The position of a product is the sum of those attributes normally recognized by the
consumers − its position, quality, quantity, the type of people, strengths,

60
 weaknesses, threats, etc. "A product's position is how potential consumers see
the product", and it is expressed proportional to the position of the competitors.
 Positioning is a podium for the brand. It facilitates the brand to get through the
mind of the target consumer groups. The position of a brand has to be diligently
guarded, maintained, and managed.
 Example − Watches like “Guess” are positioned as luxury brands, thus they are quite
expensive and treated as a status symbol. If Guess reduces its prices, it loses its real image
and potential customers.

Branding

Branding is a process which involves creating a specific name, logo,

and an image of a particular product, service or company. This is done
to attract customers. It is usually done through advertising with a
consistent theme.

Branding aims to establish a significant and differentiated presence in

the market that attracts and retains loyal customers. A brand is a name,
term, symbol, or other feature that distinguishes an organization or
product from its rivals in the eyes of the customer. Brands are used
in business, marketing, and advertising.

Features of Branding

Targetability
Branding should be planned according to the targeted audience. No
business firm can target the entire population. Business owners should
identify the type of people who are buying their products and services.
Research should be done on the basis of age, gender, income, the
lifestyle of their customers, etc.

Awareness
The percentage of people who are aware of a brand is known as brand
awareness. Well established companies have the benefit of a high level
of brand awareness. Brand awareness can be increased with the help of

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advertisement on TV, radio, newspaper or social media marketing and
advertising. Logos also help companies build brand awareness, as
people often recognize brands by these symbols or diagrams.

Loyalty
Brand loyalty is the highest achievement or apex of any company. A
customer who buys the product of a particular company extensively is
known as a brand loyalist. Many consumers prefer using certain brands
of clothing, deodorants or tubes of toothpaste, for example. They like
how these brands benefit them. Brand loyalty can be build by staying in
touch with the customers, asking them for their reviews.

Consistency
Consistency is necessary for a brand. A brand must remain
consistent. Small businesses make numerous promises in commercials
and ads about their brands, and consumers expect companies to
continue living up to these promises. Their products should also be
effective

Packing And Labelling Decisions

Most marketers treat packing as an element of product strategy. Packing can be define as

"the activities of designing and producing the container or wrapper for a product."... "Labelling is
part of packing and consists of printed information that describes the product, appearing on or
with the package" (Philip Kotler and Ronald E. Turner).

Physical products require packing decisions to create such benefits as protection, economy,
convenience, and promotion. Physical products also require labelling for identification and
possible grading, description, and promotion of the product. Also laws require sellers to present
certain minimum information on the label to inform and protect consumers.

Innovative Packing Decisions

The fact is, the number of consumers willing to pay a premium for products that save time and
are more convenient will continue to grow in the next decade. Therefore, effective execution of
packing will be the key to tapping the potential of this market.

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Sue Bassin distinguishes four strategies that can boost sale and profits through innovative
package design:

Convert to a different technical package for an existing product.

One of the quickest approaches to developing an innovative successful package is to put an

existing product in a different package. For example, by putting soup in a package shape like a
brick, Campbell Soup Company can offer a product that is lighter in weight and more portable
that cans. These packages increase convenience and lead to lower costs.

Develop a new package for an existing product that better solves key marketing problems.

An existing product in an innovative new package can bring new sales to the company.
Moreover, repacking an existing product can solve problems with existing product delivery
systems. By creating a more convenient portable product, a product manager can obtain better
margins.

Choose the best package for a new product, looking outside your category industry.

A third strategy to get new products to market is to take a new formula or new product and select
an existing package that can be adopted to the product. However, to introduce a new product in
an existing package successfully, one must understand how the product will be used and what
will be most convenient from the consumers' perspective. Moreover, packing design should be
used to help communicate the innovation.

Develop the new product and new package together.

This approach helps to optimize the overall performance to optimize the overall performance of
the product because it is in a package designed to deliver exactly what is required by the task.

These four approaches to new packaging enable a company to stimulate the market, establish a
position, and gain a reputation for leadership.

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 Moreover, innovative new packages and products can even offer an opportunity to create whole
new businesses, and therefore new sources of sales and profits.

Product labeling decisions

Product labels refers to the information attached to the packaging that helps describe the product in a little bit more detail.
It is important to note that labeling is more information focused, as opposed to packaging itself (please refer to the separate
article) which is more marketing communications related.
Depending upon the product and the legal requirements of the country or industry self-regulation requireents, there are
certain requirements for the information that must be placed on a label for a product. Food and medicine products in
particular have fairly prescriptive labeling requirements.

Some of the key approaches to product labeling that need to be

considered are:
 A clear identification of what the product is – this is important when there is an unusual brand name and/or the
packaging is not transparent.
 Some form of quantity measure – such as weight, volume, or number of items in the pack
 Sometimes ingredients – particularly for food, there is a legal requirement to list ingredients
 Health and safety warnings – often included for foods, medicines, and even toys
 Usage date – often for food products, brands are required to list the expected shelf life of the product
 Brand ownership – the company that has produced the product
 Brand contact information – how to contact the company, usually by a website, or perhaps a phone number or postal
address
 Brand/firm identification numbers – some countries will have codes for companies, which should be included if legally
required
 Country of origin – in some jurisdictions, the geographic source of the product needs to be identified

Pricing
Pricing means the process of selecting the pricing objectives, determining the possible range of
prices, developing price strategies, setting the final price, and implementing and controlling
pricing decision. The determination of price is very important and crucial decision. It affects all
parties involved in the production, distribution, and consumption of goods. Price affects the
volume of production and the amount of profit. It is a source of income to distributors.

According to M.J. Jones and S.W. Jetty, “Pricing begins with an understanding of the
corporate mission, target markets, and the marketing objectives; then pricing objectives are
developed; next management estimates as to extent of flexibility in establishing prices by
studying costs and profits internally and demand and competition externally; prices are, then set
between these two extreme ends by deciding price strategies in the light of objectives so set;
specific methods are used to set prices; final aspects in implementation and control that includes
effective monitoring to get feedback on consumer response and competitive reaction.”

According to W.J.Stanon, “Pricing is the functions of determining the products value in

monetary terms.”

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Objectives of Pricing
The pricing objectives reflect overall goal of the organization. It describes the what an
organization wants to achieve through pricing. All the pricing policies and strategies are
determined by the parameter of pricing objectives. So, pricing objective provides the guideline-
setting the pricing policies and strategies. Moreover, the pricing objectives determine the overall
objectives of the organization. The pricing objectives are as follows:

1. Profit Oriented Objectives

Profit oriented objectives focus on profit. This objective can be profit maximization and achieve
target return.

 To maximize profit:

One of the objectives of pricing is to maximize the profit. It is very important to maximize the
profit to run the organization.Some company set price to their products or services with a view of
maximizing profit. It is very important to focus on profit maximization.

 Achieving target return:

Another objective of pricing is to achieve target return.Some company may determine the price
of their goods or services to achieve a certain return on investment or on sales. This is the desired
profit. It is necessary to have target return in the pricing process.

 Achieving target return on sales:

It is necessary to achieve target return on sales in pricing.Mostly resellers manage their pricing to
achieve a target return on sales. For example, 10% of sales. If there is not more competition this
objectives can be used.

 Achieving target return on investment:

Pricing should focus on achieving target return on investment too.Manufacturing company

manages pricing in order to achieve specified return on investment in manifesting, research and
development, establishment and commercialization. For example, 5% on investment.

2. Sales Oriented Objectives

Sales oriented pricing objectives focus on sales volume rather than on profit. The profit can be to
gain sales volume and market share.

 Sales volume increase:

One of the pricing objectives may be determined in terms of increasing sales volumes over the
certain period of time. For example, 10% increase annually. This does not mean that profit

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should be avoided. Organization believes that higher sales volume will lead to lower unit costs
and higher long run profit. It is necessary to focus in the increment in sales volume of the
company.

 Maintain market share:

Pricing should have the basic objectives in maintaining market share.Market share is really a
meaningful measure of the success of a firm's marketing strategy. A market share price objective
can be either to maintain the market share, to increase it or sometimes to decrease it. The
company uses the price as an input to enjoy a target market share. This market share is normally
expressed as a percentage of the total industry sales.

3. Status Oriented Objectives

Status oriented pricing focus on maintaining the current position. This objective can be described
as “Don’t Rock the Boat” objective. The large companies in order to minimize the risk of loss
and maintain their status adopt this objective. Organization does not take any initiative in the
price change. These objectives are as follows:

 Stabilization of price:

Pricing should have the objectives in stabilizing the price of a product.Some organization may
set their pricing objective in order to maintain or stabilize price and prevent from market
uncertainty. These objectives are adopted for minimizing the risk of loss. Small organizations in
market adopt these objectives. These objectives build up their status and goodwill.

 Meet competition:

The objective of pricing is to meet the competition in the market. Now there is big competition in
the market.In highly competitive market some organization may set the meet competition. Under
this objective organization set the prevailing market price. It is important to meet the competition
in the market. Without it, market cannot achieve its objectives.

Importance of Pricing
The importance of pricing has been increasing substantially in the recent years. The role of the
price is crucial not only in the national economy but also in the marketing sector, especially to
the marketing organization or executives. Pricing is important to the economy, to the
organization and to the customers.Some of the importances of the pricing in the business can be :

 Profit Margin
 Sales Volume
 Position
 Market share

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Product Pricing Strategies

In product pricing, you have to decide what kind of a pricing strategy you’re
going for. Your strategy of choice depends on your product and your
competitors.

1. Expensive pricing

People generally have a pretty good idea of what’s cheap and what’s expensive.
If you’re going for expensive pricing, your product has to feel expensive. Your
role is to increase its perceived value.

Do this exercise: Think of a few luxury brands and a few discount brands.
Write down the characteristics of each. What makes the difference? What do
the expensive brands have that the cheap ones don’t?

Things that drive up the perceived value of a product:

Packaging and design

Every high-priced item you buy comes in a fancy box. Your product has to
“look” expensive. You can also do this with digital products.

Just spend time on some high-end products’ websites and take note of what
makes that website look expensive. Start by making your website look
expensive, then make your product look fancy, too.

If you’re going to sell five-figure watches, you website better look the part.

When it comes to information products, PDFs and ebooks will always seem
cheap. Everybody knows how to create a PDF and that it doesn’t take much
effort or money. We recommend against it.

Online courses, elearning environments, and information products shipped on

physical media will always seem more valuable.

Format

Product differentiation! Don’t be like most products in your category.

Repackage it into a different format, one that no one else is using.

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For instance, if everyone else is selling ebooks on your topic, do your product
in video. Video products always look classier than text-only
products.

Uniqueness

Expensive products have to be one of a kind—the only one that does what it
does. If your product has no differentiating characteristics in a crowded
market, you really cannot charge more than the market average (unless you
manufacture that differentiation with something like a brand-owned term).

Availability

You can charge a higher price if you have a very limited quantity (e.g. a
coaching program that accepts only 25 people).

If you meet all four points above, choosing an expensive pricing strategy can
be very profitable. Things to remember about expensive products:

 It is one of three pricing strategies to increase profits. (The other two are
to sell more products or to sell to more customers.)

 Charging more money for a product instantly makes people think it’s
better. Example: I bought two cars last month. One of them cost
$10,000 and the other one $85,000. Which car is better? You don’t
need to know anything else to answer the question.

 Different + expensive = desire.

 Once you’ve established your product as expensive, your income will go

up significantly every time you have a sale. (But don’t do it too often, or
you’ll end up pissing off the customers that paid the higher price.)

2. Cheap pricing

Remember: If your product is not unique, you’re always going to compete on

price. If there are no significant differences between your product and
competing products, people will choose based on price. That can work to your
advantage.

The most proven pricing strategy in a competitive market is to be

cheaper. (That’s what Warren Buffett suggests is the economic moat at

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Geico.) People like to get stuff cheap. This is the best strategy if your product is
very similar to others in the market.

Cheap product pricing doesn’t necessarily mean that you have to

be the cheapest. Testing a higher-than-average price for your product is a good
thing to do. If you test a higher price and it brings in the same number of
responses as the lower price, you immediately increase your profits.

Generally, a higher price will reduce the number of sales. The theory of market
elasticity says that the number of sales will go down when the price goes up,
and vice versa.

A product with
elastic demand will sell fewer units as the price increases. (Image source)

The question is by how much? If it’s a modest decrease, you’ll do better at a

higher price because you’ll generate more profit (and possibly bring in higher-
quality clients that will spend more money later).

If you make the price too high, your sales will drop precipitously to a point
where you’re bringing in too few new customers to maintain cash flow. This is
usually easy to notice and fix.

When you enter an existing market with a product that is not significantly
better than competing products, you usually succeed by selling the product at
a discount.

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When there is an established price for the same type of product, it’s easier for
the customer to figure out the average price. If you can sell at a significantly
cheaper price, you may enjoy a strong response.

The question you need to answer is whether you can afford to run your
business that way.

3. Niche product pricing

So how does being a “nobody” relate to pricing? Well, one would assume that
if you don’t have a big name, then you can’t charge a high price.

The truth is that you can sell your product for a nice price, even if your site
visitors don’t know who you are. You can also do well regardless of the size of
your product (e.g. a single video vs. a video series).

Here’s the process to execute a niche product pricing strategy:

 Write down the prices of as many comparable products within

your niche. By “comparable” I mean products that target the same
topic and audience.

 List the top three products. These are the products that you think
are the most likely competitors for your potential customer.

 Ask yourself these questions: Is your product something brand

new that nobody else is offering? If it’s a product geared toward
consumers, charge 20–50% more than the highest priced alternative (if
there is one). If it’s geared towards business people, charge 30–100%
more than the highest priced product. Does your product provide an
existing benefit differently than your competitors? Charge a median
price—the price midway between the lowest and highest priced
products. Are you selling the same product in a different format (e.g.
video instead of print)? Choose a price between the lowest- and
average-priced product.

Online buyers come from all walks of life. Some people perceive “free” as being
poor or of inferior quality. Maybe they’ve been misled by free product
offerings, so they’re leery of them. Likewise, if you price a product too low,
some buyers get suspicious. Quality = high price in many peoples’ minds.

The rationale I hear quite often—from infoproduct creators, at least—is that if

you price low, you make it up in volume. Not always. Most people

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overestimate the number of people they think are going to buy their product.
You might guesstimate 1,000 but end up with 500. That’s a big difference in
the bottom line if you’ve decided to sell for $9.95 instead of $22.95.

4. Optimum pricing strategy

Before you set your price, you have to gain some insight into how
much room you have to maneuver. A good way to start is to get a clear
overview of your costs. Costs can be divided into variable and fixed costs.

Variable costs are the costs you incur that are directly linked to the product
you sell. For example, if you sell a instructional video course “How to grow
healthy houseplants” on Blu-ray, your variable cost-per-item would include
the cost of the Blu-ray discs, the rights that you might have to pay per video
sold, and the shipping costs.

For customer acquisition, if you pay $0.20 per click to Google and convert
every 50th visitor into a customer, you’d have to add $10 to your variable cost-
per-product.

Fixed costs are the costs you incur to keep your business running. These
include employee wages, the rent for your office, Internet costs, utilities, and
so on.

Let’s say that in the case above, your fixed costs amount to $1,000 a month.
Your variable product costs come to $25 per Blu-ray. You’re expecting to sell
500 videos a month.

Fixed costs = $1,000

Variable cost per video = $25

You’re expecting to sell 500 videos, so your total cost will be:

Quantity Sold x Variable Costs + Fixed Costs = Total Cost

500 x 25 + 1,000 = $13,500

To break even, you have to charge $27 per video (13,500 / 500 = 27). At this
price, you’re not making or losing any money. This is your lower limit. The
highest price you can ask for is the market’s ceiling price. Look at your major
competitors to estimate what this price could be.

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Choosing a pricing strategy for your product

The price you charge for your product has a major impact on sales. Choosing
the price, like choosing the media or the product, is fairly easy to do.

Start by finding out what the competition is doing. If your competitors are
selling their widgets for $195, you should consider selling yours for $195, too.
You can safely assume that any product that has been selling well at $195 has
been tested at other prices—higher and lower—and that $195 is where the
money is.

To be successful, you’ll need to find this optimal selling price: a price at which
the selling campaign will yield the greatest profits. This optimal price can
change during the lifecycle of the product—being higher when the product is
hot, for example—but it is always important to know. If you deviate from it
significantly, you’ll reduce profits or even create losses where profits should
have been.

Once you’ve taken stock of your costs, your product’s value, and your
competitive positioning, it’s time to select a price. Here are some guidelines to
keep in mind:

 Better to charge more than less. A higher price increases the

perceived quality of your product. If your price starts on the low side,
you’ll meet more resistance from your customers as you try to increase
your price compared to when your product starts a little overpriced.

 If you’re a small business, don’t compete solely on price. For a

smaller ecommerce business, it’s normally a better idea to compete on
added value than on price. In a price fight, larger competitors with
deeper pockets and lower operational costs wipe you off the field.

 When marketing to the global market, think about the U.S.

market and in U.S. dollars. Undoubtedly, the U.S. dollar is the
currency of the Internet. Most Internet transactions occur in U.S.
dollars.

 Price points matter. Never charge $100. Charge $99.95 instead! If

you want to charge over $100, then don’t go up to $101. Go to the next
natural bracket, such as $109.95.

 When possible, and if your product is expensive, offer

installments or financing. Many people are short on cash, so

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offering them a special deal can work wonders to motivate sales. Why do
you think there are so many retailers that offer “Zero money down!”?
Giving customers the option to pay in installments or to receive
financing can increase sales.

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 UNIT – IV
Promotions:-

Definition: Promotions refer to the entire set of activities, which communicate the product, brand
or service to the user. The idea is to make people aware, attract and induce to buy the product,
in preference over others.

Description: There are several types of promotions. Above the line promotions include
advertising, press releases, consumer promotions (schemes, discounts, contests), while below
the line include trade discounts, freebies, incentive trips, awards and so on. Sales promotion is a
part of the overall promotion effort.

Thereare also:
1. Personal selling: one of the most effective ways of customer relationship. Such selling works
best when a good working relationship has been built up over a period of time.
This can also be expensive and time consuming, but is best for high value or premium products.

2. Sales promotions: this includes freebies, contests, discounts, free services, passes, tickets and
so on, as distinct from advertising, publicity and public relations.

3. Public relations: PR is the deliberate, planned and sustained effort to establish and maintain
mutual understanding between the company and the public.

Promotion Mix:-
Definition: The Promotion Mix refers to the blend of several promotional tools used by the
business to create, maintain and increase the demand for goods and services.

The fourth element of the 4 P’s of Marketing Mix is the promotion; that focuses on creating the
awareness and persuading the customers to initiate the purchase. The several tools that facilitate
the promotion objective of a firm are collectively known as the Promotion Mix.

The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion, Public
Relations and Direct Marketing. The marketers need to view the following questions in order to
have a balanced blend of these promotional tools.

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  What is the most effective way to inform the customers?
 Which marketing methods to be used?
 To whom the promotion efforts be directed?
 What is the marketing budget? How is it to be allocated to the promotional tools?

Elements of Promotion Mix

1. Advertising: The advertising is any paid form of non-personal presentation and promotion of goods and
services by the identified sponsor in the exchange of a fee. Through advertising, the marketer tries to
build a pull strategy; wherein the customer is instigated to try the product at least once.The complete
information along with the attractive graphics of the product or service can be shown to the customers
that grab their attention and influences the purchase decision.
2. Personal Selling: This is one of the traditional forms of promotional tool wherein the salesman interacts
with the customer directly by visiting them. It is a face to face interaction between the company
representative and the customer with the objective to influence the customer to purchase the product
or services.
3. Sales Promotion: The sales promotion is the short term incentives given to the customers to have an
increased sale for a given period.Generally, the sales promotion schemes are floated in the market at
the time of festivals or the end of the season. Discounts, Coupons, Payback offers, Freebies, etc. are
some of the sales promotion schemes.With the sales promotion, the company focuses on the increased
short-term profits, by attracting both the existing and the new customers.
4. Public Relations: The marketers try to build a favourable image in the market by creating relations with
the general public. The companies carry out several public relations campaigns with the objective to
have a support of all the people associated with it either directly or indirectly.The public comprises of
the customers, employees, suppliers, distributors, shareholders, government and the society as a whole.
The publicity is one of the form of public relations that the company may use with the intention to bring
newsworthy information to the public.

E.g. Large Corporates such as Dabur, L&T, Tata Consultancy, Bharti Enterprises,
Services, Unitech and PSU’s such as Indian Oil, GAIL, and NTPC have joined hands with
Government to clean up their surroundings, build toilets and support the swachh Bharat Mission.

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5. Direct Marketing: With the intent of technology, companies reach customers directly without any
intermediaries or any paid medium.The e-mails, text messages, Fax, are some of the tools of direct
marketing. The companies can send emails and messages to the customers if they need to be informed
about the new offerings or the sales promotion schemes.

E.g. The Shopperstop send SMS to its members informing about the season end sales and extra
benefits to the golden card holders.

Thus, the companies can use any tool of the promotion mix depending on the nature of a product
as well as the overall objective of the firm.

Importance of Promotion Mix

The importance of promotion mix can be briefly shown below:

 Sales of the goods in imperfect market:

Promotion helps in the sales of the goods in imperfect market. In the imperfect market
conditions, the product cannot be sold easily only on the basis of price differentiation. It is the
promotional activity that provides information about the differences, characteristics and the
multi-use of the products of various competition in the market. The customer is attracted to
purchase the goods on the basis of such information successfully.

 Filling the gap between producers and consumers:

Promotion helps in filling the gap between producers and consumers. Due to the tough market
condition, mass selling is quite impossible without promotional activities. The distance between
producers and consumers has so widened in present days to get them touched with the product
that promotional activities are necessary.

 Facing intense competition:

Promotion helps in facing intense competition in the market.When a manufacturer increases his
promotional spending and adopts an aggressive strategy in creating a brand image, others are
also forced to follow the suit. This leads to ‘promotional war. Without promoting the goods, the
competition is not possible in the market. So, it is necessary to face the competition in the market
with the help of promotional activities.

 Large scales selling:

Promotion helps in the large selling of goods and services. Sales promotion is the result of large-
scale production. It can be achieved only by appropriate methods of large scale selling. Large
scale selling is possible with the help of promotional activity. Due to the large selling of goods,
there will be more chance of promotion of goods. So, it is necessary to sell lot of goods in the
market for promotional activities.

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  Higher standard of living:

Promotion helps in the rising standard of the people.The promotional activities increase the
standard of living by providing the better goods at a lower rate due to large scale production and
selling. It help to increase the standard of living in a good way. People can raise their standard of
living with the help of promotional activity. As the promotional activities increases, the standard
of living of people also increases. So, the promotional activity has a great role in the increment
of a standard of people so that they can live a good and happy life.

 More employment:

Promotion helps to create more employment opportunities. People can gain employment
opportunity with the help of promotional activities. With the help of promotional activity, many
workers get motivated towards the work. Promotional activity helps to increase more
employment opportunities to the people who are unemployed, as the promotional activities
cannot be performed without the help of an effective sales force and the specialists in various
fields.

 Increased trade pressure:

Promotion helps to increase trade pressure in the market.The growth of large scales retailer, such
as supermarkets, chain stores, etc. has brought greater pressure on manufacturers for support and
allowance. Promotional activities help to decrease the trade pressure. There is need for
promotional activities to decrease the trade pressure.

 Effective sales support:

Promotion helps in the sales support of the product.Sales promotion policies are under the
supplement to the efforts and impersonal salesmanship. Good sales promotion materials make
the salesman’s effort more productive.Promotion helps in the sales of theproduct. It provides
good support in selling the different types of goods. Sales of different types of goods in the
market are very necessary to increase the market economy.

 Increased speed of product acceptance:

Promotion helps to increase the speed of the products acceptance.Most of the sales promotion
devices such as contests, premium coupons, etc. can be used faster than other promotion methods
such as advertising. The increase in rapid speed of product acceptance has occurred with the help
of promotional activities. As the promotional activities are done, there will be direct effect in the
increment of a speed of the product. Increase in the speed of product acceptance is very
important in the competitive market. So, it is necessary to increase the speed of product

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 Factors Affecting Promotion Mix
Definition: The Promotion Mix is the blend of several promotional activities (Advertising,
personal selling, sales promotion, public relations, direct marketing) used by business to create,
maintain and increase the demand for a product.

The management must consider the following factors in determining the promotion mix, these
are:

1. Nature of Product: The different type of product requires different promotional tools. Such as, for the
industrial products Viz. Machinery, equipment or land personal selling is more appropriate as a great
deal of pre-sale and after-sale services is required to sell and install such products. On the other hand,
advertising and publicity are more suitable for the consumer goods, especially the convenience goods.
2. Nature of Market: The number and location of customers greatly influence the promotion mix. In case
the group of potential customers is small and are concentrated in a particular locality, then personal
selling is more likely to be effective. Whereas, if the customer base is large and widespread, then the
blend of advertising, personal selling, and the sales promotion is required to sell the product.

Also, the type of customers influences the managerial decisions of the promotion mix. The type
of promotion for the urban, educated and institutional customers would be different as compared
to the rural, illiterate and household customers.

3. Stage of Product’s Life: The promotion mix changes as the product moves along its life cycle. During
the introduction stage, the principal objective of the promotion is to create the primary demand by
emphasizing the product’s features, utility, etc. therefore, the blend of advertising and publicity is

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 required. As the product reaches its maturity stage the advertising and personal selling is required to
maintain the demand of the customers.

And finally, during the decline stage the expenses on other promotional activities are cut, and
more emphasis is laid on sales promotion with the intent to push up the declining sales.

4. Availability of Funds: The marketing budget also decides the promotion mix. If the funds available for
the promotion are large, then the blend of promotional tools can be used, whereas in the case the funds
are limited then the management must choose the promotional tool wisely.
5. Nature of Technique: Each element of the promotional mix has unique features that significantly
influences the purpose of promotion. Such as, the advertising is an impersonal mode of communication
that reaches a large group of customers. Its expression can be amplified with the use of colors and
sound that helps in developing the long lasting brand image in the minds of the customer.

The Personal selling involves face to face interaction that helps in developing cordial and
personal relations with the customers. Likewise, the sales promotion is short-term incentives
given to the customers with the intent to boost sales for a shorter period of time.

6. Promotional Strategy: The promotion mix largely depends on the company’s promotional strategy, i.e.
whether it accepts the Push Strategy or a Pull Strategy. In a Push strategy, the manufacturer forces the
dealers to carry the product and promote it to the customer, i.e. convince the potential buyers to buy it.
Here, personal selling and trade promotion are likely to be more effective.

In the case of a Pull Strategy, the consumers ask the dealers to carry the product, i.e. customers
themselves purchase the product. Here, advertising and consumer promotion are more
appropriate.

7. Readiness of Buyer: Different promotional tools are required at different stages of buyer
readiness. Such as, at the comprehension stage, the blend of advertising and personal selling plays a
vital role. Whereas at the conviction stage, personal selling is more effective. At the time of sales
closure, the blend of sales promotion and personal selling is likely to be more effective.

Hence, the advertising and publicity are more effective at the early stages of buying decision
process while the sales promotion and personal selling are more effective during the later stages.

Advantages and Disadvantages of the Promotional Mix

Advantages and Disadvantages of Each Element of the Promotional Mix
Mix Element Advantages Disadvantages
Advertising Good for building awareness Impersonal - cannot answer all a
Effective at reaching a wide audience customer's questions

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 Repetition of main brand and product Not good at getting customers to
positioning helps build customer trust make a final purchasing decision

Personal Highly interactive - lots of Costly - employing a sales force

Selling communication between the buyer
and seller
Excellent for communicating complex
/ detailed product information and
features
Relationships can be built up -
important if closing the sale make
take a long time
Sales Can stimulate quick increases in sales
Promotion by targeting promotional incentives
on particular products
Good short term tactical tool
Public Often seen as more "credible" - since
Relations the message seems to be coming from
a third party (e.g. magazine,
newspaper)
Cheap way of reaching many
customers - if the publicity is
achieved through the right media
has many hidden costs in addition
to wages
Not suitable if there are thousands
of important buyers
If used over the long-term,
customers may get used to the
effect
Too much promotion may damage
the brand image
Risk of losing control - cannot
always control what other people
write or say about your product

Distribution Channel
A distribution channel is a chain of businesses or intermediaries through which a
good or service passes until it reaches the final buyer or the end consumer.
Distribution channels can include wholesalers, retailers, distributors, and even
the Internet.

Types of Distribution Channels in Marketing

There are four major types of distribution channels, which are as below. You need to be
aware of them all.

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  Direct Channel.
 Indirect Channel.
 Selective Distributive Channel.
 Intensive Distributive Channel.

1. Direct Channel

When the manufacturer or the producer supplies goods directly to the consumers is
called direct channel. The manufacturer in this stage of distribution
channels performs all the marketing functions himself. No middleman is involved. In
the direct channels of distribution, the manufacturer attempts to reach the consumers
through his

 Own retail stores,

 House to house selling,
 By mail and
 By sales from the factory door.

The manufacturer to consumer link no doubt appears to be simple and low cost method
of distribution channels, but it is not practicable for marketing of the large amount of
consumer goods. Imagine for a moment, the difficulties which a producer of soap,
hairpins, toothpaste, shoe polish, cigarettes, beverages etc will face in selling the goods
directly to the consumers.

2. Indirect Channel

Indirect channel are also called exclusive distribution channels. It can be defined as
marketing of goods first to retailer who in turn sell it to consumers is known as Indirect
Channel of distribution. It is a most effective method of products distributions, and
effectively used for promoting clothes, machines, automobiles, furniture’s etc. The
reasons for selecting indirect channels of distribution are:

 Better control on the supply of goods.

 Speedy disposal of products.
 Lesser expenses on selling.
 Better training of sales people and
 Rapid feedback.

3. Selective Distributive Channel

The marketing through Wholesaler is one of the widely used ways of distribution in all
over the world. These distribution Channels enables the manufacturer to sell goods in
lot to a few selected wholesalers, who sell it to retailers, who further in turn to sell
products to the consumers. The wholesaler acting as middleman, take little to the
goods, assume risks, appoint dependable retailers, provide goods on cash as well as a

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credit and thus spreads sale on a wide market. These types of distribution channels are
effective for the promotion of drugs, hardware, tobacco, toys, food products etc.

4. Intensive Distributive Channel

In intensive distribution channels, the producer uses many wholesalers and retail
middlemen for the promotion of the product. The producer uses this route of marketing
for saturating the market with the product.

Distribution Channels for Industrial Goods

The distribution channels through which the industrial goods travel from the place of
the production to the final consumers is known as industrial distribution channels. In
the distribution of industrial goods, there are fewer middlemen and shorter channel of
distribution, which should be in your mind:-

1. Technical Information

The industrial goods are mostly purchased by the industrial users in large quantities.
They are therefore, purchases directly from the manufacturer of the source of supply.

2. Purchase in bulk

The industrial user buys products mostly of technical nature. The technical information
regarding the performance, standard of the product, the installation of machinery, the
maintenance services etc cannot be reliably furnished through the middlemen. The
industrial user thus wants direct dealing with the manufacturer to get full technical
information of products. The middleman is thus eliminated from the distribution
channels.

3. Direct Contact

Another reason for short channel of distribution for industrial goods is that most of the
industrial markets are generally concentrated in a small geographical area. The
purchasers of industrial goods directly contact the sellers and thus there does not arise
the need of the agent.

4. Contact on Telephone & Fax

The industrial users generally purchase good in bulk. The cost of direct correspondence
is probably through contacts on telephones, mobile number, Fax, or in person etc. The
buyers therefore, eliminate middleman and contact the manufacturer directly for the
purchase of industrial goods.

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FACTORS AFFECTING DISTRIBUTION DECISIONS

The distribution patterns, channel objectives and constraints are influenced by a

host of variables. These are explained in the following write up.

Market Characteristics

The market, characteristics play an influencing role on distribution decisions. For

example, if the customer wants a high level of service, the manufacturers will
have to ensure that its channel members are able to provide it or else the firm
will have to provide it. The latter alternative may be costly but may ensure a
high level of customer confidence. In an automobile dealership, for example, the
automobile manufacturer insists on investment in tools, equipments and
manpower training that will ensure high precision and level of servicing. The
manufacturer trains dealers’ employees in servicing the automobiles. For a
firm like Sumeet, a leader in mixer and grinder market has a mobile service
concept to serve its customer. It regularly announces the date, time and place
where its service van will be parked for the benefit of the housewives and retail
outlets. Many other firms have adopted this pattern to service their target
markets.

Customer characteristics also involve attitude towards waiting time, expectations

with regard to special convenience and preference for buying in a comfortable
and more relaxed environment.

Company Characteristics

The next variable is the company characteristics and objectives. The channel
design is influenced by the company’s long term objectives, financial
resources manufacturing capacity, marketing mix and even its philosophy. For
example, if the firm’s manufacturing capacity can meet only 25% of the total
market demand it may be well advised to follow selective distribution, i.e.
distribute only through selected outlets in few markets or adopt an intensive
distribution, i.e. cater to all outlets in a given geographical market or exclusively
distribute it all over the country.

Product Characteristics

The next important variable influencing distribution decision is the product

characteristics. Here, the key issues for analysis are product value and perceived
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risk, and the nature of the product. If the product value and perceived risk is
high, as in case of capital equipment, precious stones and gems, shorter
channels or rather direct marketing is the most preferred alternative. Here the
firm sells the product through its own sales force.. If the product is perishable
like example milk, bread, and eggs they require direct distribution. In the case of
milk dairy the milk is distributed to the wholesalers and distributors who in short
give it to customers through delivery boys (Shorter Channels)

In the case of non-perishable goods like textiles, footwear, toiletries etc., are
distributed through the longer channels. The next product related factor to be
considered is whether it is standardized or non- standardized. The latter
demands direct distribution. For example, a suit tailored to fit a specific
customer’s size and fashion preference will demand direct marketing by the
tailoring firm. But when the same makes shirts in different collar sizes, colors and
fashion so as to appeal to different customer groups it can now adopt a longer
channel of distribution because it has now a standardized product.

The product volume will also determine the length of the channel. Bulky products
like construction materials, chemicals or soft drinks require shorter channels to
economically reach the customer. Lastly the desired brand image sought by the
firm will determine the distribution structure.

Designing and Managing Marketing Channels

Marketing channels are set of mutually dependent organizations involved in the process of making
product or service available for utilization. It is established in academic studies that Marketing
channels are the means by which goods and services are made available for use by the customers.
All goods go through channels of distribution, and marketing will depend on the way goods are
distributed. The direction that the product takes on its way from production to the consumer is
imperative because a marketer must choose which channel is best for his particular product. It can
be said that channel is the link between manufactures and purchasers. Decisions about the
marketing channel system are decisive for management.

The marketing channels chosen by marketers influence all other marketing decisions. The firm’s
sales force and advertising decisions depend on how much training and inspiration dealers need.
Further, channel decisions involve comparatively long-term commitments to other firms. Holistic
marketers guarantee that marketing decisions in all these different areas are made to jointly
maximize value.

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Marketing Channel:-

In current competitive climate, big companies are using hybrid channels in any one area. The firm
must choose how much effort is needed to assign to push versus pull marketing. A push
strategy uses the manufacturer’s sales force and trade promotion to encourage intermediaries to
carry, promote, and sell the product to customers. This is suitable where there is low brand loyalty
in a category, brand choice is made in the store, the product is desired item, and product benefits
are well understood. In a pull strategy, the manufacturer uses advertising and promotion to
influence customers to ask intermediaries for the product, thus inducing the intermediaries to order
it. This is suitable when there is high brand loyalty and high involvement in the category, people
perceive differences between brands, and people choose the brand before they shop. A marketing
channel executes the work of moving products from producers to consumers, beat the time, place,
and possession gaps that separate goods and services from those who need or want them.
Channel level: The producer and the final customer are part of every channel. There are
numerous channels by which goods and services are distributed. It is divided into direct and
indirect channel. In direct channel also known as zero-level channel, manufacturer and customer
deal directly with each other. There is no middleman in this channel. It consists of a producer
selling directly to final customers through door-to-door sales, Internet selling, mail order,
telemarketing, home parties, TV selling, manufacturer-owned stores, and other methods.
In indirect channel, companies manufacture products in huge scale and sell these products to
middle man for example whole seller and retailers. This channel can be very expensive.
Manufacturer to Customer: Manufacturer produces the goods and sells them to the customer
directly with no mediator, such as a wholesaler, agent or retailer. Goods come from the
manufacturer to the user without an intermediary.
Manufacturer to Retailer to Consumer: Purchases are made by the seller from the manufacturer
and then the retailer sells the products to the consumer. This channel is used by manufacturers that
specialize in producing shopping goods.
Manufacturer to Wholesaler to Customer: Consumers can buy directly from the wholesaler. The
wholesaler breaks down bulk packages for resale to the consumer. The wholesaler reduces some
of the cost to the consumer such as service cost or sales force cost, which makes the purchase price
cheaper for the consumer.

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Manufacturer to Agent to Wholesaler to Retailer to Customer: This type of distribution involves
more than one intermediary involves an agent called in to be the middleman and help with the sale
of the goods. An agent receives a commission from the producer. Agents are useful when products
or services need to move rapidly into the market soon after the order is placed.
Market channels by which goods and services are distributed

Characteristics of Marketing Channels

Link between Producer and Consumer.
Flow of Goods
Remuneration.
Classification-Direct and Indirect.
Activities- Financing, Credit Facility
It is important to consider some factors when choosing appropriate marketing channel such as
product, market, company. It is observed that middle man plays vital role in distribution of product
in market channel. The core responsibility of intermediaries is to deliver products to customers in
their desired location. To accomplish this objective, they purchase goods and store these and then
ship to customers.

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marketing channel function performed by middleman.

Designing a Marketing Channel System

Designing a marketing channel system entails factors such as analysing customer needs,
establishing channel objectives, identifying major channel alternatives, and evaluating major
channel alternatives.
Analysing Customers’ Desired Service Output Levels: The marketer must recognize the service
output levels which its target customers want. Channels produce five service outputs:

1. Lot size: The number of units the channel allows a particular customer to buy at one time.
2. Waiting and delivery time: The average time consumers of that channel wait for receipt of the
goods. Customers generally prefer fast delivery channels.
3. Spatial convenience: The extent to which the marketing channel facilitate for customers to
obtain the product.
4. Product variety: The variety provided by the channel. Usually, consumers prefer a greater
collection, which enhances the chance of finding what they need.
5. Service backup: The add-on services such as credit, delivery, installation, repairs provided by
the channel.

Providing greater service outputs denotes increased channel costs and higher prices for consumers.
The triumph of discount resellers (online and offline) designates that many consumers will accept
lower outputs if they can save money.

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Establishing Objectives and Constraints
Another factor in designing a marketing channel system is that marketers must declare their
channel objectives in terms of targeted service output levels. In competitive conditions, channel
institutions should coordinate their functional tasks to reduce total channel costs and still offer
desired levels of service outputs. Generally, planners can recognize several market segments that
want different service levels. Successful planning needs to determine which market segments to
serve and the best channels for each. Channel objectives differ with product characteristics.
Channel design is also affected by numerous environmental factors as competitors’ channels,
monetary conditions, and legal regulations and limitations.
Identify Major Channel Alternatives
Other decisive factor in developing market channel is to recognize alternatives. Companies may
select array of channels to approach customers, each of which has distinctive strengths as well as
limitations. Each channel alternative is explained by (i) the types of available intermediaries (ii)
the number of intermediaries needed; and (iii) the terms and responsibilities of each channel
member. Types of Intermediaries entails a firm needs to discover the types of intermediaries
available to run its channel work. Some intermediary merchants such as wholesalers and retailers
buy, take title to, and resell the products. Agents such as brokers, manufacturers’ representatives,
and sales agents chase customers and may bargain on the producer’s behalf but do not take title to
the merchandise. Facilitators, including transportation companies, independent warehouses,
banks, and advertising agencies, help in the distribution process but neither take title to goods nor
negotiate purchases or sales.
Companies should recognize pioneering marketing channels. Number of Intermediaries indicates
that to choose intermediaries to use, companies can adopt one of three strategies: exclusive,
selective, or intensive distribution. Exclusive distribution means severely limiting the number of
intermediaries. Selective distribution depends on more than a few but less than all of the
intermediaries willing to carry a particular product. In intensive distribution, the producer places
the goods or services in as many outlets as possible. This strategy is usually used for items such as
snack foods, newspapers, and gum. Terms and Responsibilities of Channel Members signify that
each channel member must be treated courteously and given the opportunity to be lucrative. The
main constituents in the “trade-relations mix” are price policy, conditions of sale, territorial rights,
and specific services to be performed by each party. Price policy assists the producer to ascertain
a price list and schedule of discounts and allowances that intermediaries see as equitable and
sufficient.
Evaluating the Major Alternatives
The Company must assess each alternative against suitable economic, control, and adaptive
criteria. The firm should verify whether its own sales force or a sales agency will create more sales
and it estimates the costs of selling different quantities through each channel.
Managing Marketing Channel
In order to maximize profit, companies must manage their marketing channel effectively.
Management of marketing channel refers to the process of analysing, planning, organizing and
controlling its marketing channel. In marketing channel two different activities occur. One is the
establishment of physical distribution system and other is management of marketing objectives.
Management of marketing channel involves all functions of marketing mix which include product,

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price, physical distribution, program and people. The physical distribution system and channel
structure is established through which products flow in the marketing channel.
Marketing Mix Activities In Marketing Channel Management: (McCalley, 1996)

To Mange marketing channel, firms must adopt motivational strategies such as paying higher
slotting allowances, offering higher trade discount, providing strong promotional and advertising
support, training channel member sales people, giving high level logistic support. Management
professional stated that after a firm has selected a channel system, it must select, train, motivate,
and evaluate individual intermediaries for each channel. It must also modify channel design and
arrangements over time.
Selecting Channel Members: For successful management, Companies must have to choose
talented channel members cautiously because for customers, the channels are the company.
Producers should decide what features distinguish the better intermediaries and scrutinize the
number of years in business, other lines carried, growth and profit record, financial strength,
cooperativeness, and service reputation of potential channel members. If the intermediaries are
sales agents, producers should assess the number and character of other lines carried and the size
and quality of the sales force. If the intermediaries want exclusive distribution, the manufacturer
should assess locations, future growth potential, and type of customers.
Training and Motivating Channel Members: It is a major responsibility of a company to
examine its intermediaries in the same way it views its customers. It needs to establish
intermediaries’ needs and build a channel positioning such that its channel offering is tailored to
provide superior value to these intermediaries. To enhance intermediaries’ performance, the
company should offer training, market research, and other capability-building programs. The
company must also continually strengthen that its intermediaries are to jointly gratify the needs of
end users. Producers differ greatly in channel power, the ability to change channel members’
behaviour therefore the members take corrective actions. Often, gaining intermediaries’
collaboration is a major challenge. Sometimes, Producers try to forge a long-term affiliation with
channel members. The manufacturer must talk clearly what it expects from its distributors in the
way of market coverage and other channel issues and may ascertain a compensation plan for
adhering to these policies. Motivating channel members takes numerous forms in order to gratify
the requirements at each level in channel. Profitability is major Motivational force for whole seller
for product selection. When profit motivation is satisfied, whole seller will look for marketing
programs offered by producers to sell products to retailers. Whole seller checks the credit option
and terms of payment when assessing the profit option for business when dealing with particular
supplier. Retailers are mainly concerned with maintenance of product supply and availability. It is

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observed in market that when customers cannot get product in one retail shop, they immediately
search for it in another retailers. But retailers do not want to lose customers. Another interest of
retailers is profitability of the product.
Motivational consideration for channel members: (McCalley, 1996)

Evaluate Channel Members: To successfully manage market channel, producers must assess
intermediaries’ performance at regular intervals against such standards as sales-quota attainment,
average inventory levels, customer delivery time, treatment of damaged and lost goods, and
cooperation in promotional and training programs. A producer will occasionally determine that it
is paying particular intermediaries too much for what they are actually doing. Producers should
establish functional discounts in which they pay specific amounts for the intermediary’s
performance of each agreed-upon service. People who are not performing must be given extra
training or counselling.
Modifying Channel Arrangements: Channel arrangements must be reassessed regularly and
altered when distribution does not work as planned, consumer buying patterns change, the market
develops, new competition occurs, inventive distribution channels appear, and the product moves
into later stages in the product life cycle. No marketing channel remains successful over the entire
product life cycle. Early purchaser might be willing to pay for high-cost value-added channels, but
later buyers will change to lower-cost channels. In highly competitive markets with low entry
barriers, the best channel structure will transform over time. The company may add or drop
individual channel members, add or drop particular market channels, or develop a new way to sell
merchandise. The process of adding or dropping an individual channel member needs an
incremental analysis to decide profitability of company. Additionally, marketers adopt data mining
to analyse customer shopping data as input for channel decisions. The most complicated decision
is whether to modify the overall channel scheme. Channels can become old-fashioned when gap
occurs between the existing distribution system and the ideal system to gratify customer’s needs
and wants.
The most challenging face of channel management is the maintenance of control over all parts of
distribution flow and marketing activities. Marketers have to undergo legal issues in controlling
marketing channels therefore they need to develop successful channel programs that will stimulate
the action planned without creating conflict among competitive channel members.
To summarize, market channel is medium through product from raw material move to costumer.
In designing market channel it is important to comprehend customer’s need. The task of managing
marketing channel falls to marketing and sales managers. These people directly involve with
channel members and company’s competitors. They know how to find valuable information for
good management decisions. To organize marketing channel, it is imperative to gather relevant

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information. It assists in writing accurate and detail market profile statement. Most marketing
channels are created with one or more intermediaries between the manufacturer and consumer.

Retailing:-
Retailing includes all the activities involved in selling goods or services directly to
final customers for their personal, nonbusiness use. A retailer is any business
enterprise whose sales volume comes primarily from retailing.

Types of Retailing
Store Retailing: 8 categories

1. Specialty Stores: Carry a narrow product line with a deep assortment within
the line. Ex: Athlete’s Foot, Tall Men, The Limited.
2. Department Stores: Carry several product lines. Ex: Sears, J.C. Penney,
Bloomingdale’s.
3. Supermarkets: Relatively large, low-cost, low-margin, high-volume, self-
service operations designed to serve the consumer’s total needs for food,
laundry, & household maintenance products. Ex: Kroger, Safeway, Food
Lion.
4. Convenience Stores: Relatively small stores located near residential areas,
opened long hours seven days a week. Ex: 7-eleven
5. Discount Stores: Sell standard merchandise at lower prices by accepting
lower margins & selling higher volumes. Ex: Wal-Mart, H.E.B., Kmart.
6. Off-Price Retailers: Buy at less than regular wholesale prices & charge
consumers less than retail.
o Factory outlets: Owned & operated by manufacturers & normally
carry the manufacturer’s surplus, discontinued or irregular goods. Ex:
Ralph Lauren, Liz Claiborne.
o Independent off-price retailers: Owned & run either by
entrepreneurs or by division of larger retail corporations. Ex: TJX Cos.
o Warehouse clubs: Sell a limited number of brand-name grocery
items, appliances, clothing, etc. at deep discounts. Operate in huge,
low-overhead, warehouse-like facilities. No credit cards. No deliveries.
Ex: Sam’s Club.
7. Superstores: 35,000 square feet selling space. Meets consumer’s total
needs. Ex: Petsmart, Home Depot, Staples.

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 8. Catalog Showrooms: Sell a broad selection of high-markup, fast-moving,
brand-name goods at discount. Ex: Service Merchandise.

Retail life cycle: emerges, grows, matures, declines.

Wheel-of-retailing hypothesis:
New store types emerge to challenge old store types.

New store types emerge to meet widely different consumer preferences for service
levels & specific services. Retailers can position themselves as offering one of four
levels of service:

1. Self-service.
2. Self-selection. Customers can ask for assistance. Higher operating expenses
than the previous one.
3. Limited-service. More sales assistance because customers need more info.
4. Full-service. Provides salespeople who are ready to assist in every phase of
the locate-compare-select process.

Nonstore Retailing: 4 major categories

1. Direct Selling: Oldest one. 3 types:

o One-to-one selling: A salesperson visits & tries to sell products to a
single potential user. Ex: Avon, Electrolux.
o One-to-many: A salesperson goes to the house of a host who has some
people in the house. Ex: Tupperware.
o Multilevel: A variant of direct selling in which companies recruit
independent businesspeople who act as distributors for their
products. These distributors in turn recruit & sell to sub-distributors,
who eventually recruit others to sell their products, usually in
customer homes. Ex: Amway, NuSkin.
2. Direct Marketing: Includes telemarketing, TV direct response marketing &
electronic shopping. Ex: 1-800-FLOWERS, Home Shopping Network.
3. Automatic Vending: Vending machines offer 24 hour selling, self-service &
unhandled merchandise. Ex: COKE, Pepsi.
4. Buying Service: A storeless retailer serving specific clienteles- usually the
employees of large organizations, such as schools, hospitals, unions, &
government agencies. Ex: United Buying Service

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Retail Organizations
Achieve many economies of scale, such as greater purchasing power, wider brand
recognition, & better trained employees. The major types of retail organizations
are:

1. Corporate Chain Stores: Two or more outlets that are commonly owned &
controlled, employ central buying & merchandising, & sell similar lines of
merchandise. Their size allows them to buy in large quantities. Ex: Tower
Records, Pottery Barn.
2. Voluntary Chain: Wholesaler-sponsored group of independent retailers
engaged in bulk buying & common merchandising. Ex: Independent Grocers
Alliance.
3. Retailer Cooperative: Independent retailers who set up a central buying
organization & conduct joint promotion efforts. Ex: Associated Grocers, ACE.
4. Consumer Cooperative: A retail firm owned by its customers. Started by
community residents. Ex: local consumer cooperatives.
5. Franchise Organization: Contractual association between a franchiser &
franchisees. Normally based on some unique product, service or method of
doing business. Prominent in fast foods, video stores, health/fitness centers,
auto rentals. Ex: McDonald’s, Pizza Hut, Taco Bell, Burger King.
6. Merchandising Conglomerate: A free-form corporation that combines
several diversified retailing lines & forms under central ownership , along
with some integration of their distribution-&-management function Ex: F.W.
Woolworth, Kids Mart.

Retailer Marketing Decisions

1. Target-market decision: A retailer’s most important decision. Until the

target is not defined, the retailer cannot make consistent decisions. Retailers
should conduct periodic marketing research to ensure that they are reaching
& satisfying their target customers.
2. Product Assortment-&-procurement decision: Must match the target
market’s shopping expectations. The retailer has to decide on product-
assortment breadth & depth. Another product assortment dimension is the
quality of the goods. The real challenge is to develop a product
differentiation strategy:
o Feature some exclusive brands not available at competing retailers.
o Feature mostly private branded merchandise.

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 o Feature blockbuster distinctive merchandise events.
o Feature surprise or ever-changing merchandise
o Feature the latest or newest merchandise first.
o Offer merchandise customizing services.
o Offer a highly targeted assortment

Once the retailer decides on the product-assortment strategy, the retailer

must decide on procurement sources, policies, & practices. Retailers are
rapidly improving their procurement skills. Stores are learning to measure
direct product profitability, which enables them to measure a product’s
handling costs from the time it reaches their warehouse until a customer
buys it & takes it out.

3. Services-&- store- atmosphere decision: The services mix is one of the key
tools for differentiating one store from another. The store’s atmosphere is
another element. Ex: Banana Republic stores work on the concept of retail
theater.
4. Price Decision: Key positioning factor & must be decided in relation to the
target market, the product-&-service-assortment & competition. Retailers
must pay attention to pricing tactics. They will plan markdowns on slower-
moving merchandise. A growing number of retailers have abandoned “sales
pricing” in favor of everyday low pricing (EDLP). This could lead to lower
advertising costs, greater pricing stability, a stronger store image of fairness
& liability, & higher retail profits.
5. Promotion Decision: Use promotion tools that reinforce image position.
6. Place Decision: Retailers have a choice of locating their stores in:
o Central business districts (downtown). Rents are high.
o Regional shopping centers. Large suburban malls containing 40-200
stores. Malls are attractive because of generous parking, one-stop
shopping, restaurants, & recreational facilities.
o Community shopping centers. Smaller malls. Between 20-40 smaller
stores.
o Strip malls. Contain a cluster of stores, usually housed in one long
building.
o A location within a larger store. Certain well known retailers-
McDonald’s, Dunkin Donuts- are locating units in airports, schools,
Wal-Marts.

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Retailers can assess a particular store’s sales effectiveness by looking at four
indicators:

1. Number of people passing by on an average day.

2. % who enter the store.
3. % of those entering who buy.
4. Average amount spent per sale.

Trends in Retailing
Main developments that retailers need to take into account as they plan their
competitive advantage:

 New Retail Forms constantly emerge to threaten established retail forms.

 Shortening Retail Life Cycles. Retail forms are rapidly copied.
 Nonstore Retailing due to electronic age.
 Increasing Intertype Competition. Competition between store & nonstore
retailers is common.
 Polarity of Retailing.
 Giant Retailers are emerging.
 Changing Definition of One-Stop Shopping. Now specialty stores within
malls are becoming increasingly competitive with large department stores in
offering one-stop shopping.
 Growth of Vertical Marketing Systems.
 Portfolio Approach. Retail organizations are increasingly designing &
launching new store formats targeted to different lifestyle groups.
 Growing Importance of Retail Technology.
 Global Expansion of Major Retailers due to mature & saturated markets at
home. Ex: The Gap, Burger King, Tony Romas.
 Retail Stores as Community Centers or Hangouts. Establishments that
provide a place for people to congregate (cafes, tea shops, book-shops, etc.).

Physical Distribution:

In this article we will discuss about:- 1. Definition of Physical

Distribution 2. Objectives of Physical Distribution 3. Importance
4. Components.
Definition of Physical Distribution:

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Physical distribution is concerned with the physical movement of the
goods from the producer to the consumer. It is an important part of
marketing activity and a major component of marketing mix. It
includes all those activities which help in efficient movement of goods
from producer to consumer, such as transportation, warehousing,
material handling, inventory control, order processing, market
forecasting, packaging, plant and warehouse location and customer
service.
Philip Kotler has defined physical distribution as, “Physical
distribution involves planning, implementing and controlling the
physical flow of materials and final goods from the point of origin of
use to meet consumer needs at a profit.”
According to William J. Stanton, “Physical distribution involves the
management of physical flow of products and establishment and
operation of flow systems.”
Physical distribution is thus, management of the physical flow of
products and management and operation of the flow system. It is a
process of managing the movement of the goods.
Objectives of Physical Distribution:
Physical distribution has two broad objectives viz. consumer
satisfaction and profit maximisation. Apart from these, there are other
objectives too. A satisfied consumer is the biggest asset that a
company has. A firm can provide satisfaction to consumers by making
available right quantity of right goods at right place and time, at lowest
costs. Prompt and dependable distribution enhances consumer
satisfaction.
At the same time, by offering better service at lower price of the
product, the firm can attract additional consumers and make more
profits. This can be done by improving the efficiency and effectiveness
of physical distribution activities, firm can bring in economy which
will have an effect on profit margin i.e. by lowering the physical
distribution costs, profit position can be improved
Apart from these two broad objectives, physical distribution
has other objectives as follows:
i. To make available the right goods in right quantity at right time and
right place at least cost.
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ii. To achieve minimum inventory level and speedier transportation.
iii. To establish price of products by effective management of physical
distribution activities
iv. To gain competitive advantage over rivals by performing customer
service more effectively.
Importance of Physical Distribution System:
Physical distribution activities have an important role to play in
success of business.
Its importance can be judged from following points:
1. Creating Time and Place Utility:
Physical distribution activities help in creating time and place utility.
This is done through transportation and warehousing. Transportation
system creates place utility as it makes available the goods at the right
place where they are required. Warehousing creates time utility by
storing the goods and releasing them when they are required.
2. Helps in Reducing Distribution Cost:
Physical distribution cost account for a major part of the price of the
product. If these costs are handled systematically, decrease in costs of
product can be there. Proper and systematic planning of
transportation schedules and routes, warehousing location and
operation, material handling, order processing, etc. can easily bring in
cost economies.
3. Helps in Stabilisation of Price
Physical distribution helps in maintaining stable prices. Even
customers expect price stability over a period of time. Proper use of
transportation and warehousing facilities can help in matching
demand with supply and thus ensure stabilisation of price.
4. Improved Consumer Services:
Consumer service in physical distribution means making products in
right quantity available at right time and right place i.e. place where
customer needs.

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Components of Physical Distribution:

(1) Order Processing:

Order processing is the starting point of any distribution activity.
Order processing includes activities like receiving the order, handling
the order, granting credit, invoicing, dispatching, collecting bills, etc.
Each customer expects that the order placed by him is implemented
without delay, and as per the specifications of the order.
Thus, order processing becomes very important. Marketer should
make effort to maintain the order cycle time i.e. the time period
between the time of placement of an order by the customer to the time
of arrival of goods at his destination. Standard procedure should be
laid down for processing of order.
(2) Storage and Warehousing:
Storage means making proper arrangements for retaining the goods in
proper condition till they are demanded by customers. There are many
products which are seasonally produced but are used throughout the
year, they can be stored and later released.
ADVERTISEMENTS:

Similarly, there are products which are produced throughout the year
but are seasonally used like umbrella, fans, heaters, etc. Here also
storing plays an important role. Storage reduces the need for instant
transportation which is difficult and costly.
Warehousing provides the storage function. Places where the goods
are stored are known as warehouse. Goods are stored in warehouses to
be released in time of demand. Apart from storing function,
warehouses also perform other functions like, marketing and
assembling the goods.
Two types of warehouses are there- Storage Warehouses and
Distribution Warehouses. Storage warehouse helps in storing the good
for long and medium period of time to ensure matching of supply and
demand. Distribution warehouses facilitate assembling the product
and redistributing it within a short period of time. They can also be
centralised (when located near factory) or decentralised (when located
near market).
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(3) Inventory Control:
Inventory control refers to efficient control of goods stored in
warehouses. Maintaining adequate level of inventory is very essential
for smooth flow of business. Inventory acts as a bridge between the
orders of customers and production. They are the reservoir of the
goods held in anticipation of sales. Therefore, it needs to be properly
managed and controlled. Neither to small nor too large inventory
should be maintained.
Former would result in stock out, resulting in lost sales and latter
involves heavy investments. Thus, a balance has to be maintained. As
Prof. W. J. Stanton states, “the goal of inventory control is to minimise
both the investment and the fluctuation in inventories, while at the
same time filling customer order properly and accurately.”
Correct anticipation of the product demand is necessary for
maintaining the correct level of inventory. Properly estimated demand
helps the business firms in terms of cost of inventory, supplying to
customer in time and maintaining the production schedule.
(4) Material Handling:
Material handling includes all those activities which are associated in
moving products when it leaves the manufacturing plant but before it
is loaded on the transport. This activity has been in existence since
very long period of time, and now it has developed as a system.
It involves moving the goods from plant to warehouses and from
warehouses to place of loading in transport modes. Proper
management of material handling helps in avoiding unnecessary
movement of goods, avoiding damage to the goods, facilitate order
processing and efficient movement of goods.
Material handling is the sub part of the total physical distribution
system and helps in reduction in cost and better service to consumers.
Effective management of material handling system leads to
effectiveness of total physical distribution system and thereby makes it
economical.
(5) Transportation:
Transportation as a component of physical distribution is concerned
with the movement of goods from the warehouse to customer
destination. It includes loading and unloading of goods and their
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movement from one place to another. In doing so it provides time and
place utility. Transport accounts for a major portion of the distribution
cost and of the total price of the product.
Being a major cost element, marketers must take keen interest in
transportation decision as it will help in reducing cost and increasing
customer satisfaction. Correct form of transportation mode is very
essential as it directly affect the price of the product. Proper choice
facilitates smooth movement of goods on time and in good condition.
The transportation mode therefore needs to be adequate, regular and
dependable.
Different modes of transportation are there like Road transport,
railways, Airways, Water transport and pipeline from which a choice
has to be made. Each has its own share of merits and demerits.
Normally a combination of different mode is chosen and integrated in
a sequential order to move the product economically and faster.
Choice of a particular mode of transportation depends upon various
factors like cost of the transport, availability of the mode of transport,
speed, reliability, frequency, safety and suitability of the mode to move
the product.
i. Road Transport:
This is an ancient form of transport and plays an important role in
marketing. Road transport may be through different means like
transport by animals (like bullock, camel), transport by human beings
(like coolies or porters), transport by automobiles (like scooters, auto
rickshaws, cars, truck buses etc.). Road transport is flexible and
economical. However, it is unsuitable for long distances.
ii. Railways:
It is suitable for transporting bulk goods over long distances. It is an
economical mode because large volume of traffic is handled over large
network of railways. However, it is inflexible as it is unfit to transport
goods to rural areas. Further, it involves huge maintenance
expenditure.
iii. Water Transport:
Water way is an important mode of transport for heavy and bulky
goods in large quantities. It consists of inland water transport and
ocean transport. Inland water transport is used for transporting goods
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within county and ocean transport is used to transport goods to other
countries. Water transport is a cheapest form of transport, having
great carrying capacity and is highly suitable for heavy and bulky
goods, but it has low speed and higher degree of risk due to seasonal
difficulties.
iv. Air Transport:
Of late air transport has assumed significant importance as a mode of
transport. Although it accounts for a small percentage of
transportation, it is useful for perishable items, overnight packages,
emergency supplies etc. The main disadvantage of air transport is that
it has high freight charges, low carrying capacity and too much
dependence on climatic conditions.
v. Pipelines:
These are specialized carriers design to transport the crude and
refined petroleum and natural gas from wells to refineries and further
to distribution centre. It is an economical mode as it involves less
handling and labour cost, but it is the slowest mode of transportation
and very limited in number.

What is digital marketing?

Digital marketing encompasses all marketing efforts that use an electronic device
or the internet. Businesses leverage digital channels such as search engines,
social media, email, and other websites to connect with current and prospective
customers.

A seasoned inbound marketer might say inbound marketing and digital

marketing are virtually the same thing, but there are some minor differences.
And conversations with marketers and business owners in the U.S., U.K.,
Asia, Australia, and New Zealand, I've learned a lot about how those small
differences are being observed across the world.

Why digital marketing?

While traditional marketing might exist in print ads, phone communication, or

phsycial marketing, digital marketing can occur electronically and online. This
means that there are a number of endless possibilities for brands including
email, video, social media, or website-based marketing opportunities.

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 Because digital marketing has so many options and strategies associated with
it, you can get creative and experiment with a variety of marketing tactics on a
budget. With digital marketing, you can also use tools like analytics
dashboards to monitor the success and ROI of your campaigns more than you
could with a traditional promotional content -- such as a billboard or print ad.
How does a business define digital marketing?
Digital marketing is defined by the use of numerous digital tactics and
channels to connect with customers where they spend much of their time:
online. From the website itself to a business's online branding assets -- digital
advertising, email marketing, online brochures, and beyond -- there's a
spectrum of tactics that fall under the umbrella of "digital marketing."

The best digital marketers have a clear picture of how each digital marketing
campaign supports their overarching goals. And depending on the goals of
their marketing strategy, marketers can support a larger campaign through the
free and paid channels at their disposal.

A content marketer, for example, can create a series of blog posts that serve
to generate leads from a new ebook the business recently created. The
company's social media marketer might then help promote these blog posts
through paid and organic posts on the business's social media accounts.
Perhaps the email marketer creates an email campaign to send those who
download the ebook more information on the company. We'll talk more about
these specific digital marketers in a minute.

Digital Marketing Examples

1. Search Engine Optimization (SEO)
2. Content Marketing
3. Social Media Marketing
4. Pay Per Click (PPC)
5. Affiliate Marketing
6. Native Advertising
7. Marketing Automation
8. Email Marketing
9. Online PR

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10. Inbound Marketing

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