Elements of marketing book

ELEMENTS OF MARKETING


BABASAB PATIL


SYLLABUS

Modern Marketing Concept – approaches to the study of marketing Features of
Industrial, Consumer and Services Marketing

Consumer Behaviour – Meaning – Consumer Behaviour models – their relevance
to marketing – Market Segmentation Strategies – Marketing Mix.

Product Planned and Development – Test Marketing – Product positioning –
Product life cycle – Brand policies and practices

Pricing policies and Methods – New Product Choice and management

Promotional Mix : Personal and Impersonal selling Salesmanship –
Compensation plans – Evaluation of performance salesforce – Advertisement
practices – Measurement of effectiveness advertisement – publicity – Sales
promotion : Methods and their uses.

Contents

SL. No. Lessons
1. Marketing – Meaning and Importance
2. Marketing Concept
3. Approaches to the study of marketing
4. Features of industrial, consumer and service marketing
5. Marketing Mix
6. Market Segmentation
7. Consumer Behaviour
8. Product Planning an Development and PLC

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9. Branding and Packaging
10. Pricing policies and method
11. Physical distribution
12. Personal Selling
13. Sales Management
14. Advertising
15. Sales Promotion

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BABASAB PATIL


LESSON – 1
MARKETING – MEANING AND IMPORTANCE

Marketing has been defined by different authors differently. A popular
definition is that “marketing is the performance of business activities that direct
the flow of goods and services from producer to consumer or user”. Another
notable definition is that “marketing is getting the right goods and services to
the right people at the right place at the right time at the right price with the
right communication and promotion”. Yet another definition is that “marketing
is a social process by which individuals and groups obtain what they need and
want through creating and exchanging products and values with other.” This
definition of marketing rests on the following concepts.

i) needs, wants and demands.
ii) Products,
iii) Value and satisfaction,
iv) Exchange and transactions, and
v) Markets

Needs, wants and demands:
A human need is a state of felt deprivation of some basic satisfaction.
People require food, clothing, shelter, safety, belonging, esteem etc. These
needs exist in the very nature of human beings.

Human wants are desires for specific satisfiers of these needs. For
example, cloth is a need but Raymonds suiting may be want. While people’s
needs are few, their wants are many.

Demands are wants for specific products that are backed up by an ability
and willingness to buy them. Wants become demands when backed up by
purchasing power.

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Products:
Products are defined as anything that can be offered to some one to
satisfy a need or want.

Value and satisfaction:
Consumers choose among the products, a particular product(s) that give
them maximum value and satisfaction.

Value is the consumer’s estimate of the product’s capacity to satisfy a set
of his goals.

Exchange and transactions:
Exchange is the act of obtaining a desired product from someone by
offering something in return. A transaction involves atleast two things of value,
conditions of agreement.

Markets:
A market consists of all the potential customers sharing a particular need
or want who might be willing and able to engage in exchange to satisfy that
need or want.

Importance of Marketing
1. Marketing process brings goods and services to satisfy the needs and
wants of the people.
2. It helps to bring new varieties and quality goods to consumers.
3. By making goods available at all places, it brings balanced distribution.
4. Marketing converts latent demand into effective distribution.
5. It gives wide employment opportunities.

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6. It creates time, place and possession utilities to the products.
7. Efficient marketing results in lower cost of marketing and ultimately
lower prices to consumers.
8. It is vital link between production and consumption and primarily
responsible to keep the wheels of production and consumption
constantly moving.
9. It creates and raises standard of living of the society.

Marketing Vs Selling
The marketing and selling are frequently confused. Theodore Levitt in his
sensational article ‘Marketing Myopia’ draws the following contract between
marketing and selling.
Selling focuses on the needs of the seller, marketing on the needs of the
buyer. Selling is preoccupied with the seller’s need to convert his product into
cash, marketing with the idea of satisfying the needs of the customer by means
of the product and the whole cluster of things associated with creating,
delivering and finally consuming it.

Selling Marketing
1. It is a part of the marketing 1. It is a comprehensive term or
process total system.
2. The emphasis is on product 2. The emphasis is on customer
3. It aims at seller’s needs 3. It aims at buyer’s needs
4. Its aim is sales volume 4. Its aim is buyer’s satisfaction

Marketing Management:
Marketing Management takes place when atleast one party to a potential
exchange gives thought to objectives and means of achieving desired responds
from other parties.

Marketing Management is defined as “the analysis, planning,
implementation and control of programmes designed to create, build and

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maintain beneficial exchanges and relationships with target markets for the
purpose of achieving organizational objectives.”

Marketing managers have to carry marketing research, marketing
planning, marketing implementation and marketing control. Within marketing
planning, marketers must make decision on target markets, market positioning,
product development, pricing, channels of distribution, physical distribution,
communication and promotion. Thus, the marketing managers must acquire
several skills to be effective in market place.

REVIEW QUESTIONS:

1. Bring out the importance of marketing
2. Distinguish marketing and selling
3. What do you understand by marketing management?
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BABASAB PATIL


LESSON – 2
MARKETING CONCEPTS

There are five competing concepts under which business organisation
can conduct their marketing activity.

1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
5. Societal marketing concept

Production concept:
The production concept holds that consumers will favour those products
that are widely available and low in cost.

Product concept:
The product concept holds that consumers will favour those products
that offer the best quality, performance and features.

Selling Concept:
The selling concept holds that consumers will ordinarily not buy the
organization’s products on their own unless that organisation undertakes and
aggressive selling and promotion effort.

The selling concept is undertaken most aggressively with ‘unsought
goods’, those goods that buyers normally do not think of buying such as
insurance. The selling concept is also practiced in the areas like politics where
the political parties sell their candidates to the votes.

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Marketing Concept:
In a modern industrial economics, productive capacity has been built up
to a point where most markets are buyers markets (i.e. the buyers are dominant)
and sellers have scramble hard for consumers and ultimately consumers began
to occupy a place of unique importance. The business firms recognize that
“there is only one valid definition of business purpose to create a customer”. In
other words, the recognition of the importance of marketing leads to the
acceptance of marketing concept.

The marketing concept holds that the key to achieving organizational
goals consists in determining the needs and wants of the target markets and
delivering the desired satisfactions effectively and efficiently:

On other words, marketing concept is a customer’s needs and wants
orientation backed by integrated marketing effort aimed at generating
customer satisfaction as the key to satisfying organizational goals.

The salient features of the marketing concept are:

1. Consumer orientation
2. Integrated marketing
3. Consumer satisfaction
4. Realization of organizational goals.

1. Consumer orientation:

The most distinguishing feature of the marketing concept is the
importance assigned to the consumer. The determination of what is to be
produced should not be in the hands of the firms but in the hands of the
consumers. The firms should produce what consumers want. All activities of the
marketer such as identifying needs and wants, developing appropriate products
and pricing, distributing and promoting them should be consumer – oriented. If
these things are done effectively, products will be automatically bought by the
consumers.

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2. Integrated marketing:

The second feature of the marketing concept is integrated marketing i.e.
integrated management action. Marketing can never be an isolated
management action. Marketing can never be in isolated management function.
Every activity on the marketing side will have some bearing on the other
functional areas of management such as production, personnel or finance.
Similarly any action in a particular area of operation in production or finance
will certainly have an impact on marketing and ultimately on consumer. In a
business firm that accepts the marketing concept as the corner stone of its
business philosophy, no management area can work in isolation. Therefore in
an integrated marketing setup, the various functional areas of management get
integrated with the marketing function. Integrated marketing presupposes a
proper communication among the different management areas with marketing
influencing the corporate decision making process. Thus, when the firms
objective is to make profit – by providing consumer satisfaction, naturally it
follows that the different departments of the company are fairly integrated with
each other and their efforts are channelized through the principal marketing
department towards the objective of consumer satisfaction.

3. Consumer satisfaction:

The third feature of the marketing concept is consumer satisfaction. The
objective of the company adopting marketing concept is to satisfy the
customers’ needs so perfectly that they will become regular or permanent
satisfied customer. For example, when a consumer buys a tin of coffee, he
expects a purpose to be served, a need to be satisfied. If the coffee does not
provide him the expected flavour, the taste and the refreshments his purchase
has not served the purpose. Or more precisely, the marketer who sold the
coffee has failed to satisfy his consumer. Thus, ‘satisfaction’ is the proper
foundation on which alone any business can build its future.

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4. Realization of organizational goals including profits:

Though the organizational goals may differ from firm to firm, though key
areas such as innovation, market standings, profits and social responsibility are
common to all firms. According to the marketing concept, the right way to
achieve these organizational goals is through ensuring consumer satisfaction.

A distinguishing feature of the marketing concept is that it considers the
creation of profits as an essential requirement for any business concern. The
marketing concept is against profiteering but not against profits. Reasonable
returns or surplus are essential for the survival and growth of an business.

Benefits of Marketing Concept :

i) Benefits to firms:

A firm that believes in the marketing concept always feels the pulse of
the market through continuous marketing audit and marketing research. It is
fast in responding to the changes in buyer behaviour. It rectifies any drawback
in its product and this proves beneficial to the firm. The firm gives more
importance to planning, research and innovation and its decisions are no longer
based on hunches but on reliable scientific data and the proper interpretation
of such data. The profits for the firm become more certain.

ii) Benefits to consumers:

The concept on the part of various competing firms to satisfy the
consumer puts the later in an enviable position. Reasonable prices, better
quality and easy availability at convenient places are some of the benefits that
accrue to the consumer as a direct result of marketing concept.

iii) Benefits to society:

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The practice of marketing concept contributes to better life style, better
standard of living and also results in the development of entrepreneurial talents.
All these sets the pace for social and economic development.

Thus the marketing concept benefits the organisation, the consumer and
society at large. A proper understanding of this concept is fundamental to the
study of modern marketing.

Societal Marketing Concept:

Now the question is whether the marketing concept is an appropriate
oranisational goal in an age of environmental deterioration, resource shortages,
explosive population growth etc., whether the firm is necessarily acting in the
best long run interests of consumers and society. For example, many modern
disposable packing materials create problem of environmental degradation.
Situations like this, call for a new concept, which is called ‘Societal Marketing
Concept’.

The societal marketing concept holds that the organization’s task is to
determine the needs, wants and interests of target markets and to deliver the
desired satisfaction more effectively and efficiently than competitors in a way
that preserves or enhances the consumer’s and the society’s well being.

The societal marketing concept calls upon marketers to balance thre
consideration in setting their marketing policies namely firm’s profits,
consumer wants satisfaction and society interests.

REVIEW QUESTIONS:
1. Briefly discuss the various concepts of marketing.
2. Discuss in detail the modern marketing concept.
3. Write a note on societal marketing concept.

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BABASAB PATIL


LESSON – 3
APPROACHES TO THE STUDY OF MARKETING

Marketing may be studied by different approaches. To facilitate the study these
approaches may be broadly classified as follows:

i) Commodity approach,
ii) Functional approach,
iii) Institutional approach, and
iv) Management approach.
v) System approach

i) Commodity approach:

The first approach is the commodity approach under which a specific
commodity is selected and then its marketing methods and environments are
studied in the course of its movement from producer to consumer. In this
approach, the subject matter of discussion centres around the specific
commodity selected for the study and includes the sources and conditions of
supply, nature and extent of demand, the distribution channels used,
promotional methods adopted etc.

ii) Functional approach

The second approach is the functional approach under which the study
concentrates on the specialized functions or services performed by the
marketers and the problems faced by them in performing those functions. Such
marketing functions include buying, selling, storage, standardizing, transport,
finance, risk-bearing, market information etc. This approach certainly enables
one to gain detailed knowledge on various functions of marketing.

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iii) Institutional approach:

The third approach is the institutional approach under which the main
interest centres around the institutions or agencies that perform marketing
functions. Such agencies include wholesalers, retailers, merchantile agents and
facilitating institutions like transport undertakings, banks, insurance companies
etc. This approach helps one to find out the operating methods adopted by
these institutions and the various problems faced because institutions and to
know how whey work together in fulfilling their objectives.

iv) Management approach:

In the management approach, the focus of marketing study is on the
decision-making process involved in the performance of marketing function at
the level of a firm. The study encompasses discussion of the different
underlying concepts, decision influencing factors, alternative strategies – their
relative importance, strengths and weaknesses and techniques and methods of
problem-solving. This approach entails the study of marketing at the
micro-level of a business firm – of the managerial functions of analysis,
planning, implementation, co-ordination and control in relation to the
marketing functions of creating, stimulating, facilitating and valuing
transactions.

v) System approach:

Modern marketing is complex, vast and sophisticated and it influences
the entire economy and standard of living of people. Hence marketing experts
have developed one more approach namely ‘System approach’. Under this
approach, marketing itself is considered as a sub-system of economic, legal
and competitive marketing system. The marketing system operates in an
environment of both controllable and uncontrollable forces of the organisation.
The controllable forces include all aspects of products, price, physical
distribution and promotion. The uncontrollable forces include economic,

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socio-logical, psychological and political forces. The organisation has to
develop a suitable marketing programme by taking into consideration both
these controllable and uncontrollable forces to meet the changing demands of
the society. The system approach, in fact, examines this aspect and also
integrates commodity, functional, institutional and managerial approaches.
Further, this approach emphasizes the importance of the use of ‘market
information’ is marketing programmes.

Thus from the foregoing discussion, one could easily understand that the
marketing could be studied in any of the above approaches and the systems
approach is considered to be the best approach as it provides a strong base for
logical and orderly analysis and planning of marketing activities.

REVIEW QUESTIONS:
1. Discuss the various approaches to the study of marketing.
2. Explain ‘Systems Approach’ to the study of marketing.

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BABASAB PATIL


LESSON – 4

FEATURES OF INDUSTRIAL, CONSUMER AND SERVICES
MARKETING

Product may be classified broadly into two major categories namely consumer
goods and industrial goods.

Consumer goods
Consumer goods are those goods meant for use by the ultimate household
consumer and in such form that they can be used by him without further
commercial processing.

Consumer goods are generally divided into three sub-categories according to
the method in which they are purchased namely convenience goods, shopping
goods are specialty goods.

i) Convenience goods: There are goods which the consumer usually
purchases frequently and with the minimum efforts. Usually they have
easy substitutes and the unit value will be low. The consumer may not
have much of a preference for a particular brand. E.g. Match Box.
ii) Shopping goods: These are goods which the consumer purchase less
frequently and the unit value will be higher. The consumer will look
for their suitability, quality, price and style. Consumer will exercise
considerable effort in choosing the product. Many consumer durables
come under this category. Example: Textiles, foot wear.
iii) Specialty goods: These are consumer goods which the consumer buys
rarely and the unit value will be very high. Hence buyers expect certain
special characteristics and for which they make a special purchasing
effort. E.g. car, jewellaries.

Industrial goods:

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Industrial goods are those goods which a reused in producing other
goods or rendering services. They cannot be used without further processing.
Industrial goods fall into three main categories.

1. Raw materials: These are industrial goods which in part or in whole
become a part of the physical product and which have undergone only a
minor change before becoming ready for a final consumption. Stainless
steel which are used for making steel utensils is an example.
2. Equipments: These goods are exhausted only after repeated use such as
installation, equipment, accessories etc.
3. Fabricated materials: These are industrial goods which have undergone
processing Metals, plastics, cement come under this category.

the marketing practices for industrials and consumer goods differ due to their
characteristics.

Features of Industrials
The marketing of industrial goods generally possesses the following
features.

1. Industrial goods are those which are produced by and sold to industries.
They are mostly meant for producing consumer gods.
2. The demand for industrial goods is a derived demand. For example, the
demand for paper manufacturing machinery will increase when the
demand for paper increases.
3. Industrial marketing is normally backed by technical details and usually
done by people with technical knowledge. In many cases, there may not
be substitutes.
4. Industrials buying is comparatively a rational process. Precise
specifications and quality of products are the main criteria.
5. Number of buyers are limited.
6. Advertising are made in technical and trade journals backed by direct
mailing and personal selling.

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7. In many cases, it is short channel, involving either direct selling or with a
limited number of middlemen.
8. Each sale would generally be high value.
9. Supplier’s reliability and reputation is important criterion in the industrial
market.
10. The demand is normally inelastic.

Features of manufactured consumer goods:

1. The consumer goods are those goods which are bought by ultimate
consumer for their consumption.
2. The consumer goods are manufactured on mass scale.
3. The number of buyers are also large and widespread.
4. Majority of consumer goods are non-durable.
5. Demand is primary in nature.
6. Other than essential products, most of the durable consumer goods have
elasticity in demand.
7. The unit cost of consumer goods is normally not very high.
8. The unit of purchase is normally low. But the frequency of purchase is
greater.
9. The consumer goods are very often bought by emotional impulse.
10. The goods are subject to serve competition. They may be price
competition, quality competition and competition from substitute
products.
11. Branding and packaging also add some strength to the products.
12. The goods are under constant threat from fashion/design changes.
13. The channel of distribution is normally long as the buyers are
widespread.
14. Mass advertisement is a must. The marketer has to give equal
importance to personal as well as impersonal methods of sales promotion.
15. The products are not usually technical complex.

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Services marketing:
A service may be defined as an activity which has some element of
intangibility associated with it, which involves some interaction with customers
or with property in their possession and does not result in a transfer of
ownership. The American Marketing Association defines services as “activities,
benefits or satisfactions which are offered for sale or are provided in connection
with the sale of goods.”

Scope of services marketing:

Services marketing extend to the activities listed below:
- Insurance, banking, financial services, investment counselling, credit and
loan services.
- Business and professional services such as legal, accounting, consultancy
and computer services.
- Transportation and communication.
- Housing and accommodation and hotels, apartments, holiday resorts,
motels etc.
- Recreation and entertainment.
- Medial and health care.
- Personal care services, E.g., beauty parlours, barber shop etc.

Features of services marketing:
1. Services are to a large extent abstract and intangible.
2. Services are non-standard and highly variable in dispensation.
3. Services are produced and consumer simultaneously and hence cannot be
separated from the person who sells them.
4. Services are perishable and cannot be stored.
5. The demands for services are not stable.

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The analysis of the target market, planning and developing the services, pricing
the channels of distribution and promotion of the services should be covered in
a programme for marketing of services.

Review Questions:
1. Explain different kinds of consumer and industrial goods.
2. What are the characteristics of manufactured industrial goods?
3. What are the features of services marketing?
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LESSON – 5
MARKETING MIX

Marketing mix is one of the major concepts in modern marketing. It is the
combination of various elements which constitutes the company’s marketing
system. It is the set of controllable marketing variables that the firm blends to
produce the response it wants in the target market. Though there are many
basic marketing variables, it is Mc Carthy, who popularized a four-factor
classification called the four Ps: Product, Price, Place and Promotion. Each P
consists of a list of particular marketing variables.

The first P – Product consists of
i) Product Planning and development;
ii) Product mix policies and strategies; and
iii) Branding and packaging strategies.

The second P – Price consists of
i) Pricing policies and objectives, and
ii) Methods of setting prices.

The third P – Place consists of

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i) Different types of marketing channel,
ii) Retailing the wholesaling institutions, and
iii) Management of physical distribution system.

The fourth P – Promotion consists of
i) Advertising;
ii) Sales promotion; and
iii) Personal selling.

A detailed discussion on each of the above four P’s follows now:
PRODUCT:

Product stands for various activities of the company such as planning and
developing the right product and/or services, changing the existing products,
adding new ones and taking other actions that affect the assortment of
products. Decisions are also required in the areas such as quality, features,
styles, brand name and packaging.

A product is something that must be capable of satisfying a need or want, it
includes physical objects, personalities, places, organizations and ideas. Thus,
a transport serviced, as it satisfies, human need in a product. Similarly, places
like Kashmir and Kodaikanal, as they satisfy need to enjoy cool climate are also
products.

The second aspect of product is product planning and development. Product
planning embraces all activities that determine a company’s line of products. It
includes:
i) Planning and developing a new product,
ii) Modification of existing product lines, and
iii) Elimination of unprofitable items.

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Product development encompasses the technical activities of product research,
engineering and decision.

The third aspect of product is, product mix policies and strategies.

Product mix refers to the composite of products offered for sale by a company.
For example Godrej company offers cosmetics, steel furnitures, office
equipments, locks etc. with many items in each category.

The product mix is four dimensional. It has breadth, length, depth and
consistency.

The breadth of the product mix refers to how many different product lines are
manufactured by a company. The product line is the group of products that are
closely related either because they satisfy a class of need, are used together,
are sold to the same customer groups, are marketed through same types of
outlets, or fall within given price ranges. Thus, the Godrej company
manufactures several product lines such as – Cosmetics, steel furnitures, office
equipments and locks.

The depth of the product mix refers to how many items are found in each
product line. Thus, the Godrej produces, for example.

- Five product items is steel furniture such as almirah and table.
- Three product items in office equipments such as typewriters, filing
cabinets and racks.
- Four product items in locks, such as five levers, six levers, seven levers
etc.

The consistency of the product mix refers to how closely related the various
product line are in end use, production requirements, distribution channels or
in some other way.

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Major product mix strategies are expansion of product mix, contraction of
product mix and modification of existing product.

a) Expansion of product mix means increasing the number of lines and/or
the items.

Contraction of product mix – means either eliminating an entire line or a few
items within a line. Alteration of product-means modifying the existing product
to suit the changing consumer requirements.

All products, like human beings, have certain length of life cycles during which
they pass through different identification stages. Broadly, the stages are
introduction, growth, maturity and decline. It is the responsibility of the
company to identify the stage through which its product passes, so that it could
evolve an appropriate marketing strategy to capitalize the opportunities and to
overcome the problems.

The second major component of product is branding. A brand, brand name and
brand mark are used synonymously. A brand is a name, term, sign symbol or
design or a combination of them which is intended to identify the products or
services. Thus ‘Liril’ ‘Colgate’ are examples for brand name and ‘Maharaja’ or
Air India and ‘Butterfly’ of Co-optex are examples for brand mark.
When a brand is registered with the Registrar of Brand Names, it becomes a
trade mark. The significance of registration is that no other producer could use
the same name or mark for his products.

Brands help identify the product and differentiate the product from those of
competitors. It is an indicator of product quality. For example, any product of
TVS – either Sri Chakra Tyres or TVS Washing Machine creates a feeling that it
must be a good quality product. Further, brands increase the success the
success of advertising and personal selling. Once the manufactures succeeds in
creating brand loyalty for his products, then it would be easier for him to
introduce new product it the market.

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Yet another integral part of product is packaging. Packaging not only protects
the contents, but also helps to identify the product, offers convenience in
handling and promoters sales by inducing the customers to buy the product. It
is common experience that consumers, sometimes, buy the product attracted
merely by the containers.

PRICE
The second element of the marketing mix is Price. Price stands for the
monetary value that customers pay to obtain the product. In pricing, the
company must determine the right price for its products and then decide on
strategies concerning retail and wholesale prices, discounts, allowances and
credit terms.

Before fixing prices for the product, the company should be clear about its
pricing objectives and strategies. The objectives may be to set low initial price
and raising it gradually or to set high initial price and reducing it gradually or
fixing a target rate of return or setting prices to meet the competition etc. But
the actual price setting is based on three factors namely cost of production,
level of demand and competition.

Regarding retail pricing, the company may adopt two policies. One policy is that
he may allow the retailers to fix any price without interfering in his right.
Another policy is that he may want to exercise control over the products.
Discounts and allowance result in a deduction from the base price.

PRICE

The third element of marketing mix is place or physical distribution. Place
stands for the various activities undertaken by the company to make the
product accessible and available to target consumers. There are four different
level channels of distribution. The first is-zero-level channel which means
manufacturer directly selling the goods to the consumers.

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The second is-one-level channel which means supplying the goods to the
consumer through the retailer. The third is-two-level channel which means
supplying the goods to the consumer through wholesaler and retailer. The
fourth is-three-level channel which means supplying goods to the consumer
through wholesaler-jobber-retailer and consumer.

It is the responsibility of the company to select the right channel through which
the products will reach the right market at right time. The factors affecting the
choice of channel are the nature of the product, supply, middlemen, customer,
environment, the distribution policy of the company and the cost of the channel.

There are large-scale retail institutions such as departmental stores, chain
stores, mail order business, super-market etc. and small-scale retail
institutions such as small retail shop, automatic vending, franchising etc. The
company must choose to distribute their products through any of the above
retailing institutions depending upon the nature of the product, area of the
market, volume of scale and cost involved.

The actual operation of physical distribution system requires company’s
attention and decision-making in the areas of inventory, location of
warehousing, materials handling, order processing and transportation.

PROMOTION:
The fourth element of the marketing mix is promotion. Promotion stands for
the various activities undertaken by the company to communicate the merits of
its products and to persuade target customers to buy them. Advertising, sales
promotion and personal selling are the major promotional activities. A perfect
co-ordination among these three activities can secure maximum effectiveness
of promotional strategy.

Advertising to marketing is that steam to machinery. It is impersonal
presentation and promotion of ideas, goods or services. It has a strong
persuasion power. It is a common technique for mass selling.

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The advertisement copy must be able to attract the attention of the audience,
arouse interest, create desire and stimulate action. The advertisement media
chosen should be able to reach maximum number of people at minimum cost.

The second element of promotional mix is the sales promotion. It includes all
those marketing activities that stimulate consumer purchasing and dealer
stocking the goods. Such activities include issue of free samples, coupons,
gift-offer, conducting contest, demonstrations in exhibition etc. The distinct
feature of sales promotional activities is that they are purely temporary in
nature and are meant for short duration only.

The third element of promotional mix is personal selling. Personal selling
involves oral presentation in a conversation with prospective purchases for the
purpose or making sales. The purpose is to bring the right products into
contract with the right customers and to make certain that sales takes place.

The salesman should have right aptitude and qualities to be successful. Hence
great care has to be taken in selection, training and compensating the sales
people.

For successful marketing, the marketing manager has to develop a best
marketing mix for his product.

REVIEW QUESTION:
1.Define Marketing Mix. Briefly explain elements of marketing mix.

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BABASAB PATIL


LESSON – 6
MARKET SEGMENTATION

Market in heterogeneous both in the supply side and in the demand side. On
supply side, many factors like differences in production equipments, processing
techniques, nature of resources or inputs available to different manufacturers,
unequal capacity among the competitors in terms of design and improvement
and deliberate efforts to remain different from others account for the
heterogeneity. Similarly, the demand side, which constitute consumers- is also
different due to differences in physical and psychological traits. As a result,
imperfect markets are common. This problem is to be solved by the strategy of
product differentiation and market segmentation.

According to William Stanton, “Market segmentation is the process of dividing
the total heterogeneous market for a product into several sub-markets or
segments each of which tend to be homogeneous in all significant aspects.

Market segmentation is a strategy of ‘divide and rule’. The strategy involves the
development of two or more different marketing programmes for a given
product or service, with each marketing programmes aimed at a different group
of individuals whose expected reactions to the seller’s marketing efforts will be
similar during a specified time period. A strategy of market segmentation
required that the marketer first clearly define the number and nature of the
customer groupings to which he intends to offer his product or service. This is
a necessary condition for optimizing efficiency of marketing effort.

Bases for market segmentation:

There are a number of bases on which a firm may segment its market.

1. Geographic basis
a. Nations
b. States

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c. Regions
d. Cities
2. Demographic basis
a. Age
b. Sex
c. Material status
d. Family size
e. Education
f. Occupation
3. Socio-economic
a. Income
b. Nationality
c. Religion
d. Culture
4. Psychographic
a. Social class
b. Life style
c. Personalities
d. Loyalty status
e. Benefits sought – price or quality or durability
f. Usage rate (volume segmentation)
g. Buyer readiness stage (unaware, aware, informed, interested,
desired, intend to buy)
h. Attitude stage (Enthusiastic, positive, indifferent, negative, hostile)

Bases for segmenting industrial markets:

1. Geographical
2. Behaviouristic

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a. Benefits sought
b. User status
c. Loyalty status
d. Readiness stage

Requirements for Effective Segmentation:

1. Measurability – the degree to which the size and purchasing power of the
segments can be measured.
2. Accessibility – the degree to which the segments can be effectively
reached and served.
3. Substantiality – the degree to which the segments are large and /or
profitable enough
4. Actionability – the degree to which effective programmes can be
formulated for attracting and serving the segments.

Possible market coverage strategies:

The firm can adopt one of three market coverage strategies known as
undifferentiated marketing, differentiated marketing and concentrated
marketing.

Undifferentiated marketing: The firm might decide to ignore market segment
differences and go after the whole market with one market offer.

Differentiated marketing: Here the firm decide to operate in several segments
of the market and designs separate marketing programmes to each. Thus,
“Maruti Udyog” produces cars for every ‘purse, purpose and personality’.
Similarly Bajaj two-wheelers.

Concentrated marketing: Under this strategy, the firm goes after a large share
in one or a few sub-markets.

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Benefits of market segmentation:
Market segmentation gives a better understanding of consumer needs,
behaviour and expectations to the marketers. The information gathered will be
precise and definite. It helps for formulating effective marketing mix capable of
attaining objectives. The marketer need not waste his marketing effort over the
entire area. The product development is compatible with consumer needs,
pricing matches consumer expectations and promotional programmes are in
tune consumer willingness to receive, assimilate and possibility react to
communications.

In short, the strength of market segmentation lies in matching products to
consumer needs that augment consumer satisfaction and firm’s profit position.
However, the major limitation of market segmentation is the inability of a firm
to take care of all the segmentation bases and their numerous variables. still,
the strengths of market segmentation outweigh its limits and offers
considerable opportunities for market exploitation.

REVIEW QUESTIONS
1. What is market segmentation? What are its bases?
2. What are the benefits of market segmentation?

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LESSON – 7
CONSUMER BEHAVIOUR

Under the modern marketing ‘Consumer’ is the fulcrum, he is lifeblood, he is
very purpose of the business and hence the business firms have to listen
consumer voices.... understand his concerns. His needs have to be focused and
his respect has to be earned. He has to be closely followed – what he wants .......
when, where and hos. The new business philosophy is that the economic and
social justification of a firm’s existence lies in satisfaction of consumer wants.
Charles G. Mortimer has rightly pointed out that, ‘instead of trying what is
easiest for us to make, we must find out much more about what the consumer
is willing to buy..... we must apply our creativeness more intelligently to people
and their wants and needs rather than to products.’ To achieve consumer
satisfaction, the marketer should know, understand consumer behaviour – their
characteristics, needs attitudes and so on But, the study of consumer behaviour
is not an easy task as it involves complex system of interaction of various
factors namely sociological, cultural, economical and psychological.

BUYER BEHAVIOUR MODELS
The influence of these social on buyer behaviour has promoted marketing
experts to propound certain models for explaining buyer behaviour. Broadly,
they include the economic model, the learning model, the psychoanalytical
model and the sociological model.

The Economic Model

According to the economic model of buyer behaviour, the buyer is a rational
man an his buying decisions are totally governed by the concept of utility. If he
has a certain amount of purchasing power, a set of need to be met and a set of
products to choose from, he will allocate amount over the set of products in a
very rational manner with the intention of maximizing the utility or benefits.

The Learning Model

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According to the learning model which takes its cue from the Pavlovian stimulus
response theory, buyer behaviour can be influenced by manipulating the drives,
stimuli and response of the buyer. The model rests on man’s ability at learning,
forgetting and discriminating.

The Psychoanalytical Model

The psychoanalytical model draws from Freudian psychology. According to this
model, the individual consumer has a complex set of deep-seated motives
which drive him towards certain buying decisions. The buyer has a private world
with all his hidden fears, suppressed desires and totally subjective longings. His
buying action can be influenced by appealing to these desire and longings.

The Sociological Model

According to the sociological model, the individual buyer is influenced by
society – by intimate groups as well as social classes. His buying decisions are
not totally governed by utility, he has a desire to emulate, follow and fit in with
his immediate environment. And several of his buying decisions may be
governed by societal compulsions.

The Nicosia Model

In recent years, some efforts have been made by marking scholars to build
buyer behaviour models totally form the marketing man’s standpoint. The
Nicosia model and the Howard and Sheth model are two important models in
this category. Both of them belong to the category called the systems model,
where the human being is analyzed as a system with stimuli as the input to the
system and behaviour as the output of the system.

Francesco Nicosia, an expert in consumer motivation and behaviour put forward
his model of buyer behaviour in 1966. The model tries to establish the linkages
between a firm and its consumer towards the product. Depending on the
situation, be develops a certain attitude towards the product. If these steps

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have a positive impact on him, it may result in a decision to buy. this is the sum
and substance of the ‘activity explanations’ in the Nicosia model. The Nicosia
model groups these activities into four basic fields.

Field One has two sub-fields- the firm’s attributes and the consumer’s
attributes. An advertising message from the firm reaches the consumer’s
attributes. Depending on the way the message is received by the consumer, a
certain attribute may develop, and this becomes the input for Field Two. Field
Two is the area of search and evaluation of the advertised product and other
alternatives. If this process results in a motivation to buy, it becomes the input
for Field Three. Field Three consists of the act of purchase. And Field Four
consists and the use of the purchased item. There is an output from Field Four
– feedback of sales results to the firm.

The Howard – Sheth Model

John Howard and Jagadish Sheth put forward the Howard and Sheth model in
1969, in their publication entitled. ‘The Theory of buyer Behaviour’. The logic of
the model runs like this. there are inputs in the form of Stimuli. There are
outputs beginning with attention to a given stimulus and ending with purchase.
In between the inputs and the outputs there are variables affecting perception
and learning. These variables are termed ‘hypothetical’ since they cannot be
directly measured at the time of occurrence.

Over the years, several other models have also been put forward, with the
intention of explaining buyer behaviour. All these models have certain merits as
well as limitations. They do not fully explain the complex subject of buyer
behaviour. Nor do they establish a straight input-output equation on buyer
behavior.

And, none of them provides a precise answer to the why’s or how’s of buyer
behaviour. They merely explain the undercurrents of human behaviour from
different angles and premises. But these models will certainly be helpful in
gaining at least a partial insight into buyer behaviour.

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Factors influences consumer behaviour:

Consumer are stimulated by two types of stimuli - internal and environmental.
The internal influence comprise of motivation, perception, learning and
attitudes – all concepts drawn from the field of psychology. The environmental
influences include cultural, social and economical. Experts in these areas
attempt to explain why people behave as they do as buyers. All these influences
interact in a highly complex ways, affecting the individual’s total pattern of
behaviour as well as his buying behavour.

Cultural Factors:

Culture is the most fundamental determinant of a person’s wants and
behaviour. It encompass customs, traditions and any other capabilities and
habits required by an individual as a member of a society. Each culture contains
smaller groups of sub-cultures such as national culture, religious culture and
caste culture that provides more specific identification and socialization for its
members. Thus, the Japanese culture provides for certain manners of dressing
while the Indian culture provides for different patterns. Similarly, religious
groups such as Hindus, Christians and Muslims possess distinct cultural
preferences and taboos. Each culture evolves unique pattern of social conduct.
The prudent marketer has to analyze these pattern to understand their
behaviour to evolve a suitable marketing programme.

Sociological Factors:
The sociological factors are another group of factors that affect the behaviour
of the buyers. These include reference groups, family and the role and status of
the buyers. The reference groups are those groups that have a direct or indirect
influence on the person’s attitudes, options and values. These groups include
peer group, friends, and opinion leaders. The marketers, therefore, aim their
marketing efforts to reach reference groups and through them reach the
potential buyers. A more direct influence on buying behaviour is one’s family
members namely, spouse and children. The person will have certain position in
his family, that is called a status and has a duty assigned - that is role and this
status and role also determine buying behaviour. The marketer needs to

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determine which member normally has the greater influence on the purchase of
a particular product and should try to reach him to market his product.

Personal Characteristics:

An individual’s buying behaviour is also influenced by his personal
characteristics such as his age and life cycle stage, occupation, income, and
personality.

For example, if the target market is kids, their food and other reqirements will
certainly be different from aged people. Similarly, behavour and need differs
depending on the nature of occupation, of the buyers. For example, factory
workers and other defence people require footwear of mainly durable type that
could withstand severe strain whereas people with white collar jobs require
footwear of light and fashionable type. Hence, marketers should try to identify
the occupational groups that have interest in their products and services. An
organisation can even specialize in manufacturing products needed by a
particular occupational group.

Basically it is the level of income, its distribution and the consequent
purchasing power that determine one’s buying behaviour. Out of the one’s total
income, a part may be saved and the remaining part is available for spending.
Again out of this, a sizable part has to be reserved for meeting essential
expenses and it is only the balance – the individual has the discretion to spend.
An intelligent marketer has to watch the income – serving trend of his
consumer and basing on that evolve a marketing programme.

Each person has a distinct personality that will influence his buying behaviour.
A person’s personality is usually described in terms of such traits as
self-confidence, dominance, autonomy, and adaptability. Personality can be a
useful variable in analyzing consumer behaviour.

Psychological Factors:

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Psychological characteristics play the largest and most enduring role in
influencing the buyers behaviour. A person’s buying choices are influenced by
four major psychological processes – motivation, perception, learning and
attitudes.

Motivation is one which leads the individual to behave in a particular way. It
may be conscious or subconscious – a force that underlies a behaviour. It is the
complex network of psychological and physiological mechanism. Motives can
be instinctive or learned, conscious or unconscious, rational or irrational. The
most popular human motivation theories are profounded by Maslow’s, Freud’s
and Herzberg. For example, Maslow has classified human needs into five types
in the order of importance – basic, safety, social, esteem and self actualization
needs. The most urgent motive is acted upon first. If this is fulfilled, the
individual proceeds to fulfill them next higher need. It is important for the
marketer to understand the motives that lead consumers to make purchases
and he must be able to explain the prospective buyers how best his product can
satisfy a particular need. But he must be sure that the target consumers have
already fulfilled the previous need.

Freud’s Theory deals with sub-conscious factors. He asserts that people are not
likely to be conscious of the real motives guiding their behaviour because these
motives are often repressed from their own consciousness. Only through
special methods of probing such as in depth interviews, projective techniques
their motives can really be discovered and understood. The marketer should be
aware of the role of visual and tactile elements in triggering deeper emotions
that can stimulate or inhibit purchase.

Frederick Herzberg develop a two factor theory of motivation which
distinguishes between dissatisfiers and satisfiers. The implication of this theory
is that the marketers should do their best to prevent dissatisfiers from affecting
the buyers and then he should carefully identify the major satisfiers or
motivators of purchase.

Perception means how one views or thinks about a particular situation. The
marketer while issuing advertisement message should be sure that a given
message is properly perceived by the consumers. If the message is susceptible
to different types of perceptions, it would defeat the purpose.

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Learning is the changes that occur in an individual’s behaviours arising from
experience. Learning is produced through the interplay of drives, stimuli, cues,
responses and reinforcement. A drive is a strong internal stimulus impelling
action and it becomes a motive when it is directed toward a particular
drive-reducing stimulus object. Cues are minor stimuli that determine when,
where and how the person responds. These cues can influence response to buy
a product and if its experience is rewarding, he will continue to buy the same
product which means his response is reinforced. The principal importance of
learning theory for marketing is that they can build up demand for a product by
associating it with strong drives, using motivating cues and providing positive
reinforcement.

A belief is a descriptive thought that a person holds about something. These
beliefs may be based on knowledge, opinion or faith. Marketers are very much
interested in the beliefs of people about their products and service because
they influence their buying behaviour. If some of the beliefs are wrong and
inhibit purchase, the marketer should launch a campaign to correct these
beliefs.

An attitude describes a person’s enduring favourable or unfavourable cognitive
evaluations, emotional feelings and action tendencies toward some object or
idea. Attitudes put them into a frame of mind of liking and disliking an object,
moving toward or away from it. This leads people to behave in a fairly
consistent way towards similar objects. Hence, the marketer should try to fit his
product into existing attitudes rather than to try to change people’s attitudes.

From the above discussions, it becomes obvious that consumer behaviour is
influenced by economic, sociological and psychological factors. But it is wrong
to assume that consumer behaviour is influenced by any ‘one’ of these factors.
The fact is that at a point of time and in a giver set of situation, it is influenced
by a sum total of these diverse yet interrelated factors. When a consumer is in
the process of taking a purchase decision, all these factors are prove to work
simultaneously and influence his choice. But it is possible that the relative
importance of these factors vary in a given situation. It is the intelligence of the
marketer to find out the nature and intensity of the influence exerted by these
factors and to formulate appropriate marketing programme.

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REVIEW QUESTIONS:

1. Bring out the importance of studying consumer behaviour.
2. Discuss the influence of socio-cultural factors in determining consumer
behaviour.
3. Explain how the psychological determine buyer behaviour.

*****************

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LESSON – 8
PRODUCT : PLANNING AND DEVELOPMENT

In common parlance, any tangible items such as textiles, books, tooth paste
and many other items are called as ‘products’. But an individual’s decision to
buy an item is based not only on its tangible attributes but also on a variety of
associated non-tangible and psychological attributes such as services, brand,
package, warranty, image etc. Hence, it is essential to understand the term
‘product’.

According to Alderson, “Product is a bundle of utilities consisting of various
product features and accompanying services”. The bundle of utilite is composed
of those physical and psychological attributes that the buyer receives when he
buys the products.

A product is anything that can be offered to a market for attention, acquisition,
use or consumption might satisfy a want or need. It includes physical objects
services, persons, places, organisation and ideas.

In order to further facilitate understanding it would be appropriate to know the
meaning of some other also which often recur in any discussion on product.
Some of these terms are discussed below.

Product item: A distinct unit that is distinguishable by size, appearance or
some other attribute.

Product line: A product line is a group of products that are closely related, are
able to satisfy a class of need are used together, are sold to the same customer
groups, are marketed through the same type of outlets or fall within given price
ranges. Example: cosmetics, office furniture.

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Product mix: A product mix is the set of all product lines and items that a
particular seller offers for sale to buyers. It is also called Product assortment.

A product mix can have certain width, length, depth and consistency.

The width of product mix refers to how many different product lines the
company carries.

The length of product mix refers to the total number of items in its product mix.

The depth of product mix refers to how many variants are offered of each
product item in the line.

The consistency of the product mix refers to how closely related the various
product lines are in end use, production requirements, distribution channels or
some other way.

Above four dimensions of the product mix defines the firm’s product strategy.

Product Planning:
Product planning is the process of determining that line of products which can
secure maximum net realization from the intended markets. It is an “act of
marking out and supervising the search, screening, development and
commercialization of new products, the modification of the existing lines and
the discontinuance of marginal or unprofitable items”.

Thus, product planning encompasses the following aspects:
1. Planning and developing new products.
2. Modification of existing products,
3. Elimination of marginal or unprofitable product items.

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New Product Development Process:
New product development process consists of the following eight steps.
1. Idea generation
2. Screening of ideas
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization of new product.

Idea generation

The new product development process starts with the search for ideas. A
product idea is an idea for a possible that the firm can see itself offering to the
market.

The new product ideas can be derived from the following sources.

Customers: Customers’ needs and wants are the logical place to start in the
search for new product ideas. Firms can identify consumer needs and wants
through direct consumer surveys, projective tests, focused group discussions
and suggestion and complaint letters from customers.

Scientists: The Company’s scientists will also be able to supply new product
ideas.

Competitors: Companies can find new ideas by monitoring their competitor’s
products. The company should assess who is buying competitor’s new products
and why. Many companies buy competitors products, take them apart and build
better ones.

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Sales representatives and dealers: Since sales representative and dealers have
first hand exposure to customer’s needs and complaints, they are good source
of new product ideas.

Top management is another major source of new product ideas because its vast
experience in the particular field.

Besides the above, new product ideas can come from a variety of sources such
as University and commercial laboratories, industrial consultant, advertising
agencies, marketing research firms and industrial publications.

Really good ideas come out of inspiration and creativity. The following
techniques may help generate better ideas.

1. Attribute listing: The major attributes of an existing product are listed
and then each attribute is modified in the search for an improved product.
2. Problem analysis: Consumers may be asked for the problem they
encounter in using a particular product.
3. Brain-storming: Groups can be stimulated to greater creativity through
the technique called brain-storming.

Screening of ideas:

Under this stage, the ideas are pruned and the purpose of screening is to spot
and drop poor ideas as early as possible.

In the screening stage the company must avoid two types of errors. A
drop-error’ occurs when the company dismisses a good idea. A ‘go-error’
occurs when the company permits a poor idea to move into development and
commercialization.

The purpose of screening is to spot and drop poor ideas as early as possible.
The ideas are screened considering the target market, market size, competition

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price, development time and costs, manufacturing costs and rate of return. The
ideas are also screened in terms of company’s objectives, strategies and
resources. Ideas that do not satisfy these are dropped. The remaining ideas can
be rated using the weighted index method – considering the factors required
for the successful launching of the product and weights assigned by the
management to these factors to reflect their relative importance.

Concept development and testing:
The selected ideas, then be developed into product concepts. A product
concept is an elaborated version of the idea expressed in meaningful consumer
terms.

Concept testing implies testing these concepts with an appropriate group of
target consumers. The concept may be presented symbolically or physically. At
this stage a picture description is also sufficient. The consumers’ responses will
help the firm determine which concept has the strongest appeal. Concept
development and testing methodology applies to any product or service.

Marketing strategy development:

The preliminary marketing strategy consists of three aspects. The first aspect
describes the size, structure and behaviour of the target market, the sales, the
market share and profit goals planned in the first few years.

The second aspect outlines the product’s planned price, distribution and
promotional strategies for the first year and the third part describes the
planned long-run sales and profit goals and marketing – mix strategy over time.

Business analysis:
Once management develops the product concept and marketing strategy, it can
evaluate the business alternativeness of proposal by reviewing the sales, cost
and profit projections to determines whether they satisfy the company’s
objectives.

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Management needs to estimate whether sales will be high enough to return a
satisfactory profit to the firm. It has to estimate first – time sales of the new
product, replacement sales and repeat sales.

After preparing the sales forecast, management can estimate the expected
costs – Research and development, manufacturing, marketing and finance
departments and profits of this venture.

Product development:

Under this stage, the product concept is converted into a real physical product.
This stage will answer whether the product idea can be translated into a
technically and commercially feasible product. Whenever possible, a prototype
could be produced, otherwise products should be produced only in limited
quantities. When the prototypes are ready, they must be put through rigorous
functional and consumer tests. The functional tests are conducted under
laboratory and field conditions to make sure that the product performs safely
and effectively. Consumer testing can take a variety of forms such as giving
samples to use in their homes.

Market testing:

After management is satisfied with the product’s functional performance, the
product should be given a brand name, packaging and a preliminary marketing
programme to test it in real market. The purpose of market testing is to learn
how consumers and dealers react to handling, using and repurchasing the
actual product and to know the size of the market, marketing programme
effectiveness and other matters. The amount of market testing is influenced by
the investment, cost and risk, time pressure and research cost.

Commercialization:

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In this stage, management makes a final decision about whether to launch the
new product. In launching a new product, the management must make four
decisions a) the right time to introduce the new product b) The geographical
area – single locality, a region, the national market – or the international market
to introduce the product c) The target market prospects and d) action plan to
introduce the new product in the market. It must allocate the marketing budget
among the marketing-mix elements and sequence the various activities.

The Consumer – Adoption Process:

The consumer – adoption process begins where the firm’s innovation process
ends. It describes how potential consumers learn about new product, try them
and adopt or reject them. Management must understand this process in order
to build in effective strategy for early market penetration.

Innovation - Diffusion and Adoption:

An innovation refers to any good, service or idea that is ‘perceived’ by someone
as new.

The diffusion is defined as “the spread of a new idea from its source of
invention or creation to its ultimate users or adopters.

Adoption is the decision of an individual to become a regular user of a product.

Adoption process:

The adoption process focuses on the ‘mental process through which an
individual passes from first hearing about an innovation to final adoption.

The adoption process consists of five stages:

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a) Awareness: The consumer becomes aware of the innovation but lacks
information about it.
b) Interest: The consumer is stimulated to seek information about the
innovation.
c) Evaluation : The consumer evaluates whether it would be beneficial to try
the innovation.
d) Trial: The consumers tries the new product on a small scale to find out
his estimate of its value.
e) Adoption: If the consumers is satisfied, he decides to make full and
regular use of the new product.

Product Diversification:

Product diversification means adding a new product to the existing product line
or mix. It does not mean that the new product should be complementary or an
allied product to the existing one. It may be a product which may be entirely
distinct and different from the existing products. For example, Bata entering
into readymade garments, Raymonds entering into footwear business etc.

Reasons for diversification:

1. To offset declining market for the existing products.
2. To compensate for technological obsolescence.
3. To utilize the existing spare capacities more profitability.
4. To take advantage of the reputation of the company’s image.
5. To maintain employment of labour force.

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Product Modification:

Product modification is any deliberate alternation in the product’s
characteristics in a way that will attract new users and/or more usage from
current users. It may be quality improvement aiming at increasing functional
performance of the product its durability, reliability, speed, taste etc. and/or
feature improvement aiming at adding new features such as size, weight,
materials etc that expand the product’s versatility, safety or convenience. It
would also be style appearance improvement. E.g. new car models.

Product Elimination:

Product elimination is the process of withdrawing or dropping a product in the
existing product line if they are unprofitable.

Such product tend to consumer a disproportionate amount of management’s
time, the advertising and sales force effectiveness will go waste, requires
frequent price, adjustments and affects the company’s image.

Product life cycle:

Like human beings, every product has a life span. When a new product is
launched in the market, its life starts and the product passes through various
distinct stages and after the expiration of its span dies – dies in terms of its
capacity to generate saels and profits. This is called Product Life Cycle (PLC)

The Product Life Cycle is an attempt to recognize ‘distinct stages’ in the ‘sales
history’ of the product. In each stage, there are distinct opportunities and
problems with respect to marketing strategy and profit potential. Hence,
products require different marketing, financing manufacturing, purchasing and
personal strategies in the different stages of their life cycle. The PLC concept
provides a useful framework for developing effective marketing strategies in
different stages of the Product Life Cycle. There are four stages in the Product
Life Cycle which are known as Introduction, growth, maturity and decline.

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Introduction Stage:

When a new product is launched, the company has to stimulate awareness,
interest, trial and purchase. This takes time. In introductory stage only a few
persons will buy the product. Further, it takes time to fill the dealer pipeline
and to make available the product in several markets. Hence, sales will be low
and profit will be negative or low. The distribution and promotion expenses are
very high. There are only a few competitors. Regarding pricing, the
management can pursue either skimming strategy i.e., fixing a high price or
penetration strategy i.e., fixing a low price.

Growth Stage:

The growth stage is marked by rapid increase in sales and profits. New
competitors enter the market, attracted by the opportunities for high profits.

Prices remain the same. Companies maintain their promotional expenditure at
the same level to meet competition and continue educating the market. Sales
rise much faster.

During this stage, the company uses the following marketing strategies.

- The company improves product quality and adds-product features and
models.
- It enters new market segments.
- It enters new distribution channel
- It changes the price.

Maturity Stage:

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This stage normally lasts longer than the previous stages. At this stage, sales
will slow down. This stage can be divided into three phases – growth maturity,
stable maturity and decaying maturity.

In the growth phase, the sales start to decline because of distribution saturation.

In the stable phase, sales become static because of market saturation.

In decaying maturity phase, the absolute level of sales now starts to decline and
customers start moving toward other products and substitutes. Competition
becomes acute.

Marketing strategies in the maturity stage:

- Market Modification: The company should seek to expand the market.
- Product modification: The company should modify the product’s
characteristics such as quality improvement, feature improvement, style
improvement to attract new users and/or usage from current users.
- Marketing – mix modification: The company should also try to stimulate
sales through modifying one or more marketing-mix elements such as
price cut, step up sales promotion, change advertisement copy,
extending credit etc.

A major problem with marketing-mix modification is that they are highly
imitable by competitors. The firm may not gain as much as expected and in fact
all firms may experience profit erosion as they compete each other.

Decline stage:

In this stage, sales decline due to number of reasons including technological
advances, consumer changes in tastes and acute competition. As sales and
profit decline, some firms withdraw from the market. Those remaining may
reduce the number of product offerings.

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They may drop smaller market segments and marginal trade channels. They
may reduce the promotion budget and prices further.

Marketing strategies during the decline stage:

- Identify the weak products by appointing a product-review committee
with representatives from marketing, manufacturing and finance.
- The firms may adopt the following strategies.
i) Continuation strategy by increasing the firm’s investment to
reap the profits.
ii) Concentration strategy by continuing sales only in
selected pockets.
iii) Harvesting strategy by selling to get profit whatever is
possible in the market.
When a company decides to drop a product, the firm can sell or transfer the
product to someone else or drop it completely. It must decide to drop the
product quickly or slowly. It must decide on how much parts in inventory and
service required to maintain service to past customers.

Use of PLC Concept:

PLC concept’s real usefulness varies in different decision-making situations. As
a ‘planning tool’, the PLC concept characteristics the main marketing challenges
in each stage and suggests major alternative marketing strategies the firm
might pursue. As a ‘control tool’, it allows the company to compare product
performance against similar products in the past.

Criticism of PLC concept:
1. PLC stages do not have predictable durations. It may vary from product of
product.
2. The marketer cannot tell at what stage the product is in, as there is no
definite line of demarcation between one stage to another stage.

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3. Not all products pass through all the stages. It is possible that the product
may travel to the first and second stage and then die out.
4. A product may not be in an identical stage in all the market segments, it
may be in the second stage in one segment whereas in the third stage in
another segment at a point of time.

Product Positioning:

Each competitive product occupies a given place in the market segment. What is
important is the consumer perception of the place each product occupies in the
market. Product positioning is the act of designing the company’s product and
marketing mix to fit a given place in the consumer’s mind in relation to
competitor’s product.

Every product offered to a market needs positioning strategy so that its place in
the total market can be communicated to the target market. The following six
alternatives are identified for a product-positioning strategy.
- Positioning on specific product features.
- Positioning on benefits or needs
- Positioning for specific usage occasions.
- Positioning for user category
- Positioning against competitor’s product
- Positioning for another product class. E.g. Positioning a recreational
theme park not as recreation but as an educational institution.

The company’s product positioning decision further defines its customers and
competitors. At this point the company can start planning the details of its
marketing mix.

REVIEW QUESTIONS:
1. Discuss the new product development process.
2. Explain PLC concept. What are its uses?

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3. Write a not on product diversification and product modification.
4. What are the steps involved in the adoption process.
5. Write a note on product positioning.

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BABASAB PATIL


LESSON – 9
BRANDING AND PACKAGING

Branding and packaging are the integral part of the product. The word ‘brand’
is a comprehensive term. A brand is a name, term, sign, symbol or design or a
combination of them, which is intended to identify the goods or services of one
seller or group of sellers and to differentiated them from those of competitors.

Brand name: It consists of words, letters and/or numbers which can be
vocalized or pronounced. E.g. ‘Crompton’, ‘Kelvinator, No/: 1 Premier.

Brand mark: It is that part of a brand which can be recognized such as a
symbol, design or distinctive colouring or lettering. E.g ‘Maharaja’ of Air India.
Red inverted triangle of Family Welfare Dept.

Trade Name/Trade Mark: When a brand name or brand mark is registered and
given legal protection, it becomes trade name/trade mark respectively. A trade
mark protects the seller’s exclusive rights to use the brand name and/or brand
mark.

Reasons for branding:
1. It helps in product identification
2. It helps indicate the product quality and other characteristics
3. It helps create brand image and brand loyalty to products.
4. It helps increase the success of advertisement and personal selling.
5. It helps increase sales
6. It ensures legal right on the products.
7. It helps product and price differentiation.
8. It helps introduce new product easily.

Characteristics of a good brand name:

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1. It should be short, simple, easy to pronounce, spell and remember.
2. It should suggest something about product’s benefits, quality and action.
E.g. ‘Stopache cream balm. ‘Ruchi pickles’.
3. It should be distinctive
4. It should be versatile

Types of brands:

Individual brand name: When each product has a unique brand name, it is
called individual brand name. E.g. TVS XL, TVS Champ, TVS Scooty.

Family brand name: When a same brand name is given to all the products of a
single manufacturer, it is called family brand name. E.g. Godrej, Tata.

Packaging:

Packaging may be defined as the activities of designing and producing the
container or wrapper for a product. The container or wrapper is called the
package.

In recent times, packaging has become a potent marketing tool.

The package must perform many of the sales tasks. It must attract attention,
describe the products’ features, give the consumer confidence and make a
favourable impression.

Packaging protects the products and provides convenience, appearance,
dependability and prestige for the products.

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Packaging helps create brand and corporate image for the products.

Innovative packaging can bring benefits to consumers and profits to products.

Packaging decisions:

Developing an effective packaging for a new requires a number of decisions.
The first task is to establish the packaging concept i.e., what the package
should basically be or do for a particular product – protection, convenience or
image building.

Decisions must be made on further elements of package design – size, shape,
materials and colour. The packaging elements must also be harmonized with
decions on pricing, advertising and other marketing elements.

After the packaging is designed, it must be put through a number of tests.
Engineering tests are conducted to ensure that the package stands up under
normal conditions, visual tests are conducted to ensure that the letters and
colours are legible, dealer tests to ensure that dealer find the packages
attractive and easy to handle, and consumer test to ensure favourable
consumer response.

Labelling:
Label is a small ship placed on or near the product to denote its nature,
contents ownership etc.

Labels perform several functions:

- The label helps identify the product or brand
- The label might describe several things about the product, who made it,
where it was made, when it was made, its contents, how it is to be used
and how to use it safely etc.

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- It might promote the product through its attractive design.

Kinds of labels:

1. Brand labels: These labels are exclusively means for popularizing the
brand name of the product. E.g. Soaps, Cigarettes.
2. Grade labels: These labels give emphasis to standards or grades. E.g.
Dust tea, Cloth etc.
3. Descriptive Labels: The label which are descriptive in nature are called
descriptive labels. They describe product features, contents, method of
using it etc. E.g. Milk – food products and medicines.
4. Promotional Labels: These labels aim at attracting the attention,
arousing desire and creating interest among the consumers to buy the
product.

The marketers should make sure that their labels contain all the required
information before launching the product.

REVIEW QUESTIONS:

1. Define brand. What are the reasons for branding the product?
2. Define packaging. What are the functions of packaging?
3. What is labeling? What are the usual contents of labeling.

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BABASAB PATIL


LESSON – 10
PRICING POLICIES AND METHODS

Among the different components of the marketing –mix, price plays an
important role to bring about product-market integration. Price is the only
element in the marketing-mix that produces revenue.

Price may be defined as the value of product attributes expressed in monetary
terms which a consumer pays or is expected to pay in exchange and anticipated
of the expected or offered utility. It helps to establish mutually advantageous
economic relationship and facilitates the transfer of ownership of goods and
services from the company to buyers. The managerial tasks involved in product
pricing include establishing the pricing objectives, identifying the price
governing factors, ascertaining their relevance and relative importance,
determining product value in monetary terms and formulation of price policies
and strategies. Thus, pricing plays a far greater role in the marketing-mix of a
company and significantly contributes to the effectiveness and success of the
marketing strategy and success of the firm.

Factors influencing pricing:

Price is influenced by both internal and external factors. In each of these
categories some may be economic factors and some psychological factors,
again, some factors may be quantitative and yet others qualitative.

Internal factors influencing pricing:
- Corporate and marketing objectives of the firm
- The image sought by the firm through pricing
- The characteristics of the product
- Price elasticity of demand of the product
- The stage of the product on the product life cycle
- Turn around rate of the product

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- Costs of manufacturing and marketing
- Product differentiation practiced by the firm
- Other elements of marketing mix of the firm and their interaction with
pricing.
- Composition of the product line of the firm.

External factors influencing pricing:

- Market characteristics
- Buyers behaviour in respect of the given product.
- Bargaining power of the major customers
- Bargaining power of the major suppliers
- Competitors’ pricing policy
- Government controls/regulations on pricing
- Other relevant legal aspects
- Social considerations
- Understanding, if any, reached with price cartels.

Pricing Objectives:

A business firm will have a number of pricing objectives. Some of the them are
primary, some of them are secondary, some of them are long-term while others
are short-term. However, all pricing objectives emanate from the corporate and
marketing objectives of the firm.

Some of the pricing objectives are discussed below:

1. Pricing for a target return
2. Pricing for market penetration
3. Pricing for market skimming.

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4. Discriminatory pricing
5. Stablishing pricing
6. Competitor – oriented pricing
7. Achieving market share
8. Profit maximization pricing.

1. Pricing for a target return:
This is a common objective found with most of the established business firms.
Here, the objective is to earn a certain rate of return on investment (ROI) and
the actual price policy is worked out to earn that rate of return. The target is in
terms of ‘return of investment’. There are companies which set the target at, for
example, 20 percent return on investment after taxes. They target may be for a
short-term or a long-term. A firm also may have different targets for its
different products but such targets are related to a single overall rate of return
target.

2. Pricing for market penetration:

When companies set a relatively ‘low price’ on their new product in initial stages
hoping to attract a large number of buyers and win a large market-share it is
called penetration pricing policy. They are more concerned about growth in
sales than in profits. Their main aim is capturing and to gain a strong foothold
in the market. This object can work in a highly price sensitive market. Is it also
done with the presumption that unit cost will decrease when the level of sales
reach a certain target. Besides, the lower price may make competitors to stay
out. When market share increases considerably, the firm may gradually increase
the price.

3. Pricing for market skimming:

Many companies that launch a new product set ‘high prices’ initially to skim the
market. They set the highest price they can charge given the comparative
benefits of their product and the available substitutes. After the initial sales

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slow down. They lower the price to attract the next price-sensitive lover of
customers.

4. Discriminatory Pricing:

Some companies may follow a differential or a discriminatory pricing
policy-charging different prices for different customers or allowing different
discounts to different buyers.

Discrimination may be practices on the basis of product or place or time for
example, doctors may charge different fees for different patients, railways
charge different fares for usual passengers and season ticket holders.
Manufacturers may offer quantity discounts or quote different list prices to
bulk-buyers, institutional buyers and small buyers.

5. Stabilising pricing:

The objective of this pricing policy is to prevent frequent fluctuations in pricing
and to fix uniform or stable price for a reasonable period. When price is revised,
the new price will be allowed to be remain for sufficiently a long period. This
pricing policy is adopted, for example, by newspapers and magazines.

6. Competitor – oriented pricing:

Under this method, pricing is fixed on par with competitor’s pricing policy. If
the competitors reduces the prices, the firm will also correspondingly reduce
the price. If the competitors increases the price, the firm will also increase the
price or keep the price as it is thereby prevent competition.

7. Achieving market share:

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A firm may aim to secure a target market share by employing price as an input.
Target market share means that share of the industry sale which a firm aspires
to attain. It is usually expressed as percentage.

8. Profit maximization pricing:

Profit maximization is the most common pricing objective. It means in a given
set of market conditions, firm attempts to maximize profit through the
instrument of price.
Besides the above, fast turn around and early cash recover, Profit optimization
in the long term and target sales volume could also be other pricing objectives.

Pricing Methods:

The pricing method must be appropriate for achieving the desired pricing
objectives. There are several methods of pricing. Each of them is appropriate
for achieving a particular pricing objective or combination of pricing objectives.

The different methods of pricing can be grouped under the following broad
categories.

1. Cost-based Pricing

Under this category, there are several approaches:
i) Make-up pricing
ii) Rate of return pricing
iii) Marginal cost pricing

2. Demand-based pricing method:
Under this category, there are different approaches.
i) Skimming pricing

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ii) Penetration pricing

3. Competition – Oriented Pricing Method:

Three alternatives are available under this method.
i) Premium – pricing
ii) Discount pricing
iii) Parity pricing

4. Product-line Pricing Method:

Under this method, the firm fixes the price of each product is such a manner
that the entire product line is prices optimally resulting in optimal sales of all
the products in the line put together and optimal total profits from the line.

5. Affordability-based Pricing Method:

The affordability-based pricing method is relevant in respect of essential
commodities which meet the basic needs of all sections of people. Under this,
often, an element of state subsidy is involved and the product items are often
distributed by the Public distribution system.

New Product Pricing:

Firms launching a new product can choose between market-skimming pricing
and market penetration pricing.

i) Market skimming Pricing:

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Firms launching a new product may set high prices initially to skim the market.
After the initial sales slow down, they lower the price to draw in the next-price
sensitive layer of customers.

ii) Market penetration pricing:

Firms may set a relatively low price on their innovative product, hoping to
attract a large number of buyers and win a large market share.

Government Control on pricing:

Price controls refer to the Governmental regulations in respect of price fixation.
Usually statutory price control entails imposition of price ceiling so that it does
not exceed consumer capacity to pay. Currently for example, the price of petrol
is under statutory price controls. The firms manufacturing these products are
assured retention prices which are based on costs, and ensure fair return on
investment.

In case of sugar, a dual pricing system has been introduced. Under this system,
a manufacturer is required to compulsory sell a part of its production to the
Government at substantially low prices, called levy price.

The rest of production may be sold in the open market at a price the firm
deems fit. The statutory price control also envisages the announcement of
‘support price’ for certain agricultural products like cotton, food grains etc. so
as to protect cultivators from price fluctuation.

Voluntary price control envisages formulation of price control measures by the
respective industry association under the direction of and according to the
guidelines provided by the Government.

REVIEW QUESTIONS:
1. What is pricing? What are the factors influence pricing?

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2. Discuss various pricing objectives.
3. State the pricing methods.
4. Write a note on ‘Government control on pricing’.

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LESSON – 11
PHYSICAL DISTRIBUTION

Distribution management consists of two major tasks - physical distribution
and management of distribution channels.

Physical distribution is the process of taking the product to the consumers. It
encompasses all the activities involved in the physical flow of products from
producers to consumers.

Importance of Physical distribution:

Physical distribution provides places utility and time utility to a product. In
other words, it is physical distribution that makes the product available at the
right place and at the right time.

Physical distribution largely determines the customer service level and serves as
an effective tool for building up a market.

It is a very important area of cost savings. A systematic planning of inventory
levels, warehousing operations, transport schedules and materials handling
would lead to considerable savings in cost.

An efficient management of physical distribution may accrue to a firm’s larger
market share. It is possible to achieve a larger market share by decentralizing
warehousing operations and by using economic and efficient modes of
transportation to reach those market segments which have hitherto bee
untapped.

An effective management of physical distribution can also stabilize prices of
products by a judicious use of transport and warehousing facilitate.

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