LEARNING OBJECTIVES

After studying this chapter, youshould be able to:

explain the meaning of‘marketing’;

distinguish between ‘marketing’and ‘selling’;

list out important functions ofmarketing;

examine the role of marketing inthe development of an economyin a firm, to the society and toconsumers;

explain the elements ofmarketing mix;

classify products into differentcategories;

analyse the factors affectingprice determination;

list out the types of channels ofdistribution; and

explain the tools of promotionmix viz., advertising, personalselling, sales promotion andpublicity.

CHAPTER

11MARKETING

WHERE DO COMPANIES DO THEIR

BUSINESSES?

In the Markets or in the Society?

It is an undisputed fact that a company’ssurvival does not depend upon itsconsumers alone, but a diverse set ofstakeholders like the government,religious leaders, social activists, NGOs,media, etc. Hence, earning thesatisfaction of these segments is also asimperative as they add to the power ofthe brand by word of mouth.

The social concern adds to thestrength of the brand. Corporates thatembraced the deepest social values,have been successful in buildingpowerful brand, and, eventually, robustcustomer relationship. The area ofcorporate social justice fall under twobroad categories. The issues such as thenutrition of children, child care, old-agehomes, amelioration of hunger, offeringaid to those affected by naturalcalamities, etc. needing instant attentionwith humanitarian perspective, comesunder the first category.

The issues that contribute tomaking society a pleasant place to livein the long run, may be grouped underthe second category. Issues whichcomes under this category are healthawareness and aid, education,environmental protection, women’semployment and empowerment,preventing unjust discriminations (onthe basis of caste, community, religion,ethnicity, race, and sex), eradication ofpoverty through employment,preservation of culture, values, andethics, contribution to research, etc.

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Let us consider a typical day in our life.Right from the time we get up in themorning to the time we go to bed, weuse number of products to satisfy ourdifferent needs. Beginning with thebreakfast, we take such items as bread,butter, milk, and rice, to satisfy ourhunger; use the services of a bus or anauto or a cycle to reach to our schoolor place of work; read books, magazinesand newspapers, to keep ourselvesinformed and acquire knowledge; usecomputers, cell phone, television andother gadgets for communication/entertainment; and purchase manyother products like gifts, shoes,clothing, furniture, etc., from marketto satisfy our different needs.

Who makes these products andwhy? These products are manufacturedand marketed by different firms. Forexample, Lifebouy soap, Closeuptoothpaste, Surf detergent powder aremanufactured by Hindustan Lever;Ariel detergent powder by Procter andGamble, Dairy Milk Chocolate by

Nestle, Atlas Cycles by Atlas cyclecompany, Kwality Ice-creams byKwality Walls, LG Televisions by LGElectronics and so on. These firms arecalled marketers. These firmsundertake various activities tostimulate the demand for theirproducts and earn profit by satisfyingcustomer’s needs and wants. Peoplepurchase products because thesesatisfy some of their needs.

Number of activities are performedby the marketers to facilitate exchangeof goods and services betweenproducers and the users of suchproducts. These activities are referredto as marketing activities.

For a proper understanding ofmarketing, number of questions needto be answered. These include: Whatdo we mean by a market? What can bemarketed? Is it products or services orsomething more? Who is a marketer?What is marketing management?These points have been taken up fordiscussion in the following sections.

Infosys Technologies, the leading software consulting service provider, has beencertified ISO 14001, compliant by Det Norske Veritas for its development centers inPune, Chennai, Bangalore, Bhubaneshwar, Hyderabad, Mangalore, Mohali, andMysore, for its ‘Ozone Initiative’. Through this initiative, Infosys has committed forcontinual improvement.

Procter and Gamble’s (P&G) philosophy is that it should lead the industry inimplementing a global environmental programme. P&G is one of the first companiesin the world to actively study the influence of consumer products on the environmentand introduce concentrated products, recycled plastic bottles, and refill packagesto the industry. The overall packaging per case has been reduced by an average of27% and a reduction of 37% in air, waste, and water emissions has been achievedconsistently since 1990. P&G contributes to sustainable development and addressesenvironmental and social issues connected with its products and services.

Source: Adopted from ‘Effective Executive’, Feb. 2006

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WHAT IS A MARKET

In the traditional sense, the term‘market’ refers to the place wherebuyers and sellers gather to enter intotransactions involving the exchange ofgoods and services. It is in this sensethat this term is being used in day today language, even today. The otherways in which this term is being usedis in the context of a product market(cotton market, gold or share market),geographic market (national andinternational market), type of buyers(consumer market and industrialmarket) and the quantity of goodstransacted (retail market andwholesale market).

But in modern marketing sense,the term market has a broadermeaning. It refers to a set of actual andpotential buyers of a product or service.For example, when a fashion designerdesigns a new dress and offers it forexchange, all the people who are willingto buy and offer some value for it canbe stated to be the market for thatdress. Similarly, market for fans orbicycles or electric bulbs or shampoosrefers to all the actual and potentialbuyers for these products.

WHAT IS MARKETING

The term marketing has been describedby different people in different ways.Some people believe that marketing issame thing as ‘shopping’. Wheneverthey go out for shopping of certainproducts or services, they describe itas marketing. There are some otherpeople who confuse marketing with‘selling’ and feel that marketing activitystarts after a product or service hasbeen produced. Some people describeit to mean ‘merchandising’ or designinga product. All these descriptions maybe partly correct but marketing is amuch broader concept, which isdiscussed as follows:

Traditionally marketing has beendescribed in terms of its functions oractivities. In this respect, marketinghas been referred to as performanceof business activities that direct theflow of goods and services fromproducers to consumers.

We know that mostly manufac-turing firms do not produce goods fortheir own consumption but for theconsumption or use by others.Therefore, to move the goods andservices from producers to consumers,

“Business is not financial science, it’s about trading, buying and selling. It’sabout creating a product or service so good that people will pay for it.”

— Anta Roddick

“Marketing takes a day to learn. Unfortunately it takes time to master.”

— Philip Kotler

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number of activities such as productdesigning or merchandising, packaging,warehousing, transportation, branding,selling, advertising and pricing arerequired. All these activities arereferred to as marketing activities.

Thus, ‘merchandising’, ‘selling’ and‘shopping’ are all part of a large numberof activities undertaken by a firm,which are collectively called marketing.

It may be noted here that marketingis not merely a post-production activity.It includes many activities that areperformed even before goods areactually produced and continue evenafter the goods have been sold. Forexample, activities such asidentification of customer needs,collection of information for developingthe product, designing suitable productpackage and giving it a brand nameare performed before commencementof the actual production. Similarly,many follow up activities are requiredfor maintaining good customerrelations for procuring repeat sale.

In modern times, emphasis isplaced on describing marketing as asocial process. It is a process wherebypeople exchange goods and services formoney or for something of value tothem. Taking the social perspective,Phillip Kolter has defined marketing as,“a social process by which individualgroups obtain what they need and wantthrough creating offerings and freelyexchanging products and services ofvalue with others”.

Thus, marketing is a social processwhere in people interact with others,in order to persuade them to act in a

particular way, say to purchase aproduct or a service, rather than forcingthem to do so. A careful analysis of thedefinition shows the followingimportant features of marketing:

1. Need and Want: The process ofmarketing helps individuals andgroups in obtaining what they need andwant. Thus, the primary reason ormotivation for people to engage in theprocess of marketing is to satisfy someof their needs or wants. In other words,the focus of the marketing process ison satisfaction of the needs and wantsof individuals and organisations.

A need is a state of felt deprivationor feeling of being deprived ofsomething. If unsatisfied, it leaves aperson unhappy and uncomfortable.For example, on getting hungry, webecome uncomfortable and startlooking for objects that are capable ofsatisfying our hunger.

Needs are basic to human beingsand do not pertain to a particularproduct. Wants, on the other hand,are culturally defined objects that arepotential satisfiers of needs. In otherwords, human needs shaped by suchfactors as culture, personality andreligion are called wants. A basic needfor food, for example, may takevarious forms such as want for dosaand rice for a South Indian andchapatti and vegetables for a NorthIndian person.

A marketer’s job in an organisationis to identify needs of the targetcustomers and develop products andservices that satisfy such needs.

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2. Creating a Market Offering: On thepart of the marketers, the effortinvolves creation of a ‘market offering.Market offering refers to a completeoffer for a product or service, havinggiven features like size, quality, taste,etc; at a certain price; available at agiven outlet or location and so on. Letus say the offer is for a cell phone,available in four different versions, onthe basis of certain features such assize of memory, television viewing,internet, camera, etc., for a given price,say between Rs. 5,000 and Rs. 20,000(depending on the model selected),available for sale at say firm’s exclusiveshops in and around all metropolitancities in the country. A good ‘marketoffer’ is the one which is developed afteranalysing the needs and preferencesof the potential buyers.

3. Customer Value: The process ofmarketing facilitates exchange ofproducts and services between thebuyers and the sellers. The buyers,however, make buying decisions ontheir perceptions of the value of theproduct or service in satisfying theirneed, in relation to its cost. A productwill be purchased only if it is perceivedto be giving greatest benefit or valuefor the money. The job of a marketer,therefore, is to add to the value of theproduct so that the customers preferit in relation to the competing productsand decide to purchase it.

4. Exchange Mechanism: Theprocess of marketing works throughthe exchange mechanism. Theindividuals (buyers and sellers) obtain

what they need and want through theprocess of exchange. In other words,the process of marketing involvesexchange of products and services formoney or something consideredvaluable by the people.

Exchange refers to the processthrough which two or more partiescome together to obtain the desiredproduct or service from someone,offering the same by giving somethingin return. For example, a personfeeling hungry may get food by offeringto give money or some other productor service in return to someone whois willing to accept the same for food.

In the modern world, goods areproduced at different places and aredistributed over a wide geographicalarea through various middlemen,involving exchanges at different levelsof distribution. Exchange is, therefore,referred to as the essence ofmarketing. For any exchange to takeplace, it is important that the followingconditions are satisfied:

(i) involvement of at least two partiesviz., the buyer and the seller.

(ii) each party should be capable ofoffering something of value to theother. For example, the seller offersa product and the buyer, money.

(iii) each party should have the abilityto communicate and deliver theproduct or service. No exchangecan take place if the buyers andsellers are not able tocommunicate with each other or ifthey can not deliver something ofvalue to the other.

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(iv) each party should have freedom toaccept or reject other party’s offer.

(v) the parties should be willing toenter into transaction with eachother. Thus, the acceptance orrejection of the offer takes place onvoluntary basis rather than on thebases of any compulsion.

The points listed above are thenecessary conditions for an exchange

to take place. Whether the exchangeactually takes place or not dependson the suitability of the act of exchangeto both the parties, whether it makesthe parties better off or at least notworse off.

Another important point to benoted is that Marketing is not merely abusiness phenomena or confined onlyto business organisations. Marketingactivities are equally relevant to non-

What can be Marketed

Physical Products : DVD player, Motor cycle, ipods, Cell phone, Footwear,Television, Refrigerator.

Services : Insurance, Health Care, Business Process Outsourcing,Security, Easy Bill service, Financial Services(Investment),Computer Education, Online Trading.

Ideas : Polio Vaccination, Helpage, Family Planning, Donation ofBlood (Red cross), Donation of money on Flag Day (NationalFoundation for Communal Harmony).

Persons : For Election of Candidates for Certain Posts.

Place : ‘Visit Agra – ‘City of Love’, ‘Udaipur – ‘The City of Lakes’,‘Mysore – The City of Gardens’, ‘When Orisa celebrates,Eleven the God Join In’.

Experience : Customised Experiences as Dinner with a cricketer (sayDhoni); Lunch with a celebrity (say Bill Gates or AishwaryaRoy) or experience of Baloon Riding, mountaineering, etc.

Properties : Intangible rights of ownership of real estate in financialproperty (Shares, Debentures).

Events : Sports events (say Olympics, Cricket series), diwali mela,fashion show, music concert, film festival, elephant race(Kerala Tourism).

Information : Production packaging and distribution of information byorganisations such as by universities, research organisation,providing information as market information (marketingresearch agencies), technology information.

Organisations : For boosting their public image organisations such asHindustan Lever, Ranbaxy, Dabur, Proctor and Gamble,communicate with people. Example, Phillips says, Let’s makeThings Better’.

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profit organisations such as hospitals,schools, sports clubs and social andreligious organisations. It helps theseorganisations in achieving their goalssuch as spreading the message offamily planning, improving the literacystandards of people and providingmedication to the sick.

WHAT CAN BE MARKETED

The question commonly coming to themind is what can be marketed. Is it aproduct or service or something else. Letus first understand what is a product?

A product is a ‘bundle of utilities’or ‘source of satisfaction’, that can beused to satisfy human needs andwants. It is not confined to physicalobjects, such as motor cycle, biscuit,bulb and pencil but also refers to otherthings of value such as services, ideas,places, etc., that can be offered to thepotential buyers for their use. In themarketing literature, anything that canbe of value to the buyer can be termedas a ‘product’. It can be tangible, i.e.,which can be felt, seen and touchedphysically such as a pencil, a cycle oran intangible such as services renderedby a doctor, hairdresser or a lawyer.

Apart from the product, what canbe marketed is a service or a person(say political parties persuading tovote for a particular candidate) or an

idea (say Red Cross persuading todonate blood) or a place (say KeralaTourism persuading people to visitKerala for health tourism). Thus,anything that is of value to the othercan be marketed. It can be a productor a service or a person or a place oran idea or an event or an organisationor experience or properties. (see box)

Who is a marketer? : Marketer refersto any person who takes more activepart in the process of exchange.Normally it is the seller who is moreactive in the exchange process as he/she analyses the needs of the potentialbuyers, develops a market offering andpersuades the buyers to buy theproduct. However, there may becertain situations where the buyermay be taking more active role in theexchange process. Let us say insituations of rare supply, the buyermay be taking extra efforts inpersuading the seller to sell theproduct to him/her. This may behappening in defence deals or take asituation where a country havinginstalled a nuclear plant needs thesupply of nuclear fuel or ‘Heavy Water’.It may need to convince the supplierof the products to supply the same toit, by promising that it will be usedfor peaceful purposes only. In thiscase, the buyer will be treated as themarketer. Thus, any body, who takes

Do it yourself

Collect five advertisements each for the marketing of (a) ideas and (b) places from anewspaper or a magazine. Write in your notebook, the messages conveyed throughthese and discuss in the class indicating which of these messages are more appealingto you. Give reasons in support of your answer.

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more active role in the exchangeprocess will be taken as the marketer.

MARKETING MANAGEMENT

Marketing management meansmanagement of the marketingfunction. In other words, marketingmanagement refers to planning,organising, directing and control of theactivities which facilitate exchange ofgoods and services between producersand consumers or users of productsand services. Thus the focus ofmarketing management is on achievingdesired exchange outcomes with thetarget markets. Taking a managementperspective, the term marketing hasbeen defined as “the process ofplanning and executing the conception,pricing, promotion and distribution ofideas, goods and services to createexchanges that satisfy individual andorganisational goals” by AmericanManagement Association, similarlyPhilip Kotler has defined Marketingmanagement as the art and science ofchoosing target markets and getting,keeping and growing customersthrough creating, delivering andcommunicating superior customervalues of management.

A careful analysis of the definitionreveals that the process ofmanagement of marketing involves:

(i) Choosing a target market, say amanufacturer may choose to makereadymade garments for childrenup to the age of 5 years;

(ii) In respect of the target marketchosen, the focus of the process of

management is on getting, keepingas well as growing the customers.That means the marketer has tocreate demand for his products sothat the target customerspurchase the product, keep themsatisfied with the firm’s productsand also attract more customersto the firm’s products so that thefirm can grow; and

(iii) The mechanism for achieving theobjective is through creating,developing and communicatingsuperior values for the customers.That means, the primary job of amarketing manager is to createsuperior values so that thecustomers are attracted to theproducts and services andcommunicate these values to theprospective buyers and persuadethem to buy these products.

Marketing management involvesperformance of various functions suchas analysing and planning themarketing activities, implementingmarketing plans and setting controlmechanism. These functions are to beper formed in such a way thatorganisation’s objectives are achievedat the minimum cost.

Marketing management generallyis related to creation of demand.However, in certain situations, themanager has to restrict the demand.For example, if there is a situation of‘overfull demand’, i.e., the demandbeing more than what the companycan or want to handle, (like what thesituation in our country was before theadoption of policies of liberalisation

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and globalisation, in early 90’s, inmost consumer products be itautomobiles or electronics goods orother durable products. The job ofmarketing mangers, in thesesituations would be to find ways toreduce the demand temporarily by sayreducing the expenditure onpromotion or increasing the prices.Similarly, if the demand is ‘irregular’,such as in case of seasonal products,(say fans, woollen clothes) themarketer’s job is to change the timepattern of demand through suchmethods as providing short-termincentives, to the buyers. Thus, themarketing management in not onlyconcerned with creating demand butwith managing the demand effectively,as per the situation in the market.

MARKETING AND SELLING

Many people confuse ‘selling’ for‘marketing’. They consider these twoterms as one and the same. Marketingrefers to a large set of activities of whichselling is just one part. For example, amarketer of televisions, before makingthe sale, does a lot of other activitiessuch as planning the type and modelof televisions to be produced, the priceat which it would be sold and selectingthe distribution outlets at which thesame would be available, etc. In short,marketing involves whole range ofactivities relating to planning, pricing,promoting and distributing theproducts that satisfy customer’s needs.

The function of selling, on theother hand, is restricted to promotion

of goods and services throughsalesmanship, advertising, publicityand short-term incentives so that titleof the product is transferred fromseller to buyer or in other wordsproduct is converted into cash.

The major differences betweenselling and marketing are listed asbelow:

(i) Part of the Process vs Wider Term:Selling is only a part of the processof marketing and is concerned withpromoting and transferringpossession and ownership of goodsfrom the seller to the buyer.Marketing is a much wider termconsisting of number of activitiessuch as identification of thecustomer’s needs, developing theproducts to satisfy these needs,fixing prices and persuading thepotential buyers to buy the same.Thus, selling is merely a part ofmarketing.

(ii) Transfer of T itle vs SatisfyingCustomer Needs: The main focusof selling is on affecting transferof title and possession of goodsfrom sellers to consumers or users.In contrast, marketing activitiesput greater thrust on achievingmaximum satisfaction of thecustomer’s needs and wants.

(iii) Profit through Maximising Sales vsCustomer Satisfaction: All sellingactivities are directed at maximisingsales and, thereby, the profits of thefirm. In other words, the emphasisis on profit maximisation throughmaximisation of sales. Marketing,

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on the other hand, is concerned withcustomer satisfaction and therebyincreasing profit in the long run. Amarketing organisation, thus,attaches highest importance tocustomer satisfaction as a route toprofit maximisation.

(iv) Start and End of the Activities:Selling activities start after theproduct has been developed whilemarketing activities start muchbefore the product is produced andcontinue even after the producthas been sold.

(v) Difference in the Emphasis: Inselling, the emphasis is on bendingthe customer according to theproduct while in marketing, theattempt is to develop the productand other strategies as per thecustomer needs.

vi. Difference in the Strategies: Sellinginvolves efforts like promotion andpersuasion while marketing usesintegrated marketing ef fortsinvolving strategies in respect ofproduct, promotion, pricing andphysical distribution.

MARKETING MANAGEMENT PHILOSOPHIES

In order to achieve desired exchangeoutcomes with target markets, it isimportant to decide what philosophyor thinking should guide the marketingef forts of an organisation. Anunderstanding of the philosophy or theconcept to be adopted is important asit determines the emphasis or theweightage to be put on different factors,in achieving the organisational

objectives. For example, whether themarketing efforts of an organisationwill focus on the product—saydesigning its features etc or on sellingtechniques or on customer’s needs orthe social concerns.

The concept or philosophy ofmarketing has evolved over a periodof time, and is discussed as follows.

Production Concept

During the earlier days of industrialrevolution, the demand for industrialgoods started picking up but thenumber of producers were limited. Asa result, the demand exceeded thesupply. Selling was no problem.Anybody who could produce the goodswas able to sell. The focus of businessactivities was, therefore, on productionof goods. It was believed that profitscould be maximised by producing atlarge scale, thereby reducing theaverage cost of production. It was alsoassumed that consumers wouldfavour those products which werewidely available at an affordable price.Thus, availability and affordability ofthe product were considered to be thekey to the success of a firm. Therefore,greater emphasis was placed onimproving the production anddistribution efficiency of the firms.

Product Concept

As a result of emphasis on productioncapacity during the earlier days, theposition of supply increased over periodof time. Mere availability and low priceof the product could not ensure

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increased sale and as such the survivaland growth of the firm. Thus, with theincrease in the supply of the products,customers started looking for productswhich were superior in quality,performance and features. Therefore,the emphasis of the firms shifted fromquantity of production to quality ofproducts. The focus of business activitychanged to bringing continuousimprovement in the quality,incorporating new features etc. Thus,product improvement became the keyto profit maximisation of a firm, underthe concept of product orientation.

Selling Concept

With the passage of time, themarketing environment underwentfurther change. The increase in thescale of business further improved theposition with respect to supply ofgoods, resulting in increasedcompetition among sellers. Theproduct quality and availability did notensure the survival and growth offirms because of the large number ofsellers selling quality products. Thisled to greater importance to attractingand persuading customers to buy theproduct. The business philosophychanged. It was assumed that thecustomers would not buy, or not buyenough, unless they are adequatelyconvinced and motivated to do so.Therefore, firms must undertakeaggressive selling and promotionalefforts to make customers buy theirproducts. The use of promotionaltechniques such as advertising,personal selling and sales promotion

were considered essential for sellingof products. Thus, the focus ofbusiness firms shifted to pushing thesale of products through aggressiveselling techniques with a view topersuade, lure or coax the buyers tobuy the products. Making salethrough any means becameimportant. It was assumed that buyerscan be manipulated but what wasforgotten was that in the long run whatmatters most is the customersatisfaction, rather than anything else.

Marketing Concept

Marketing orientation implies thatfocus on satisfaction of customer’sneeds is the key to the success of anyorganisation in the market. It assumesthat in the long run an organisationcan achieve its objective ofmaximisation of profit by identifyingthe needs of its present andprospective buyers and satisfyingthem in an effective way. All thedecisions in a firm are taken from thepoint of view of the customers. In otherwords, customer’s satisfaction becomethe focal point of all decision makingin the organisation. For example, whatproduct will be produced, with whatfeatures and at what price shall it besold, or where shall it be madeavailable for sale will depend on whatdo the customers want. If thecustomers want features like doubledoor in a refrigerator or a separateprovision for water cooler in it, theorganisation would produce arefrigerator with these features, wouldprice it at a level which the customers

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bought not merely because of theirquality, packing or brand name, butbecause they satisfy a specific need ofa customer. A pre-requisite for thesuccess of any organisation, therefore,is to understand and respond tocustomer needs.

are willing to pay and so on. If allmarketing decisions are taken withthis prospective, selling will not be anyproblem. It will automatically follow.The basic role of a firm then is to‘identify a need and fill it’. The conceptimplies that products ad-services are

Differences in the Marketing Management Philosophies

Philosophies/ Production Product Selling Marketing Societal Bases Concept Concept Concept Concept Concept

1. Starting Factory Factory Factory Market Market,Point Society

2. Main Quantity of Quality, Existing Customer CustomerFocus product performance, product needs needs and

features of society’sproduct well being

3. Means Availability Product Selling Integrated Integratedand improve- and marketing marketing

affordability ments promotingof product

4. Ends Profit through Profit through Profit Profit Profitvolume of product through through through

production quality sales customer customervolume satisfaction satisfaction

and socialwelfare

Test Your Understanding I

State whether the following statements are true or false:(i) focus of marketing activities is on facilitating exchange of goods from producers

to consumers or users;(ii) in modern marketing, the term market refers to the place where buyers and

sellers meet for the exchange of goods and services;(iii) marketing is same thing as shopping for goods and services;(iv) marketing is a post production activity only;(v) marketing is equally relevant to non-profit organisations;(vi) The terms ‘need’ and ‘want’ are used interchangeably in the marketing literature;(vii) marketing management means management of the marketing function; and(viii) Product designing does not come under the purview of marketing activities.

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To sum up, the marketing conceptis based on the following pillars:

(i) Identification of market orcustomer who are chosen as thetarget of marketing effort.

(ii) Understanding needs and wantsof customers in the target market.

(iii) Development of products orservices for satisfying needs of thetarget market.

(iv) Satisfying needs of target marketbetter than the competitors.

(v) Doing all this at a profit.

Thus, the focus of the marketingconcept is on customer needs and thecustomer satisfaction becomes themeans to achieving the firms’ objectiveof maximising profit. The purpose ofmarketing is to generate customervalue at a profit.

The Societal Marketing Concept

The marketing concept, as describedin the preceeding section cannot beconsidered as adequate if we look atthe challenges posed by socialproblems like environmentalpollution, deforestation, shortage ofresources, population explosion andinflation. It is so because any activitywhich satisfies human needs but isdetrimental to the interests of thesociety at large cannot be justified. Thebusiness orientation should,therefore, not be short-sighted to serveonly consumers’ needs. It should alsoconsider large issues of long-termsocial welfare, as illustrated above.

The societal marketing conceptholds that the task of any organisationis to identify the needs and wants ofthe target market and deliver thedesired satisfaction in an effective andefficient manner so that the long-termwell-being of the consumers and thesociety is taken care of. Thus, thesocietal marketing concept is theextension of the marketing concept assupplemented by the concern for thelong-term welfare of the society. Apartfrom the customer satisfaction, it paysattention to the social, ethical andecological aspects of marketing. Thereare large number of such issues thatneed to be attended.

FUNCTIONS OF MARKETING

Marketing is concerned with exchangeof goods and services from producersto consumers or users in such a waythat maximises the satisfaction ofcustomers’ needs. From the view pointof management function, number ofactivities are involved, which havebeen described as below:

1. Gathering and Analysing MarketInformation: One of the importantfunctions of a marketer is to gatherand analyse market information. Thisis necessary to identify the needs ofthe customers and take variousdecisions for the successful marketingof the products and services. This isimportant for making an analysis ofthe available opportunities and threatsas well as strengths and weaknessesof the organisation and help in

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deciding what opportunities can bestbe pursued by it. For example, rapidgrowth is predicted in several areasin the Indian economy, say in the useof internet, market for Cell phones andseveral other areas. Which of theseareas a particular organisation shouldenter or in which area should itexpand requires a careful scanning ofthe strengths and, weaknesses of theorganisation, which is done with thehelp of careful market analysis.

With the growth of computers, anew trend has emerged in thecollection of market information. Moreand more companies are usinginteractive sites on the internet, togather customer views and opinions,before taking important businessdecisions. (see the box on GlobalBrands) One of the popular TV NewsChannel (in Hindi) seeks viewerschoice (through SMS) on which of thegiven four or five main news stories of

The Future of Global Brands

Role of Digital connection and consumer cooperation

In China and India, booming middle classes and fast-rising disposable incomeshave created a still-under-tapped consumer culture. Let’s not forget the lessonsbeing learned about the brand-building, power of digital connections and consumerco-creation. Since the advent of the internet, sites that offer social interaction andconnectivity have been at the forefront of our digital revolution, reshaping the wayconsumers expect to interact with each other and, ultimately, with brands.

Online tag-sale site e-Bay, for example was one of the first sites to teach us thatyou can trust people online as well as you might trust a friendly neighbour. Thatsocial interaction paved the way for Friendster and MySpace and You Tube, a socialnetworking tool that, in the past year, has empowered consumers to create theirown content and post it to a global audience. Anyone who doubts the real marketpotential of such a platform only needs to check out October’s biggest businessheadlines: Google purchased the site for $ 1.65 billion.

HSBC effort attempted a similar goal, to give consumers a forum for conversation.At your pointofview.com, consumers in 76 countries can weigh in and give theiropinions on subjects including cloning, fashion, wind farms and video games.

Teenagers in Chinese cities surf the web for 5.1 hours a week, and the onlinead-market is booming—by more than 75% annually for the past three years,according to Business Week, Mobile phones are among the most coveted pieces oftechnology. And 17.5 million bloggers (and their 75 million readers), many of whomfall within the coveted 18–25 age groups, are shaping consumer opinions in Chinawith more intensity than they do in the US.

The internet age has put advertisers and branding experts face-to-face with anempowered consumer. And those consumers are happy to listen to our messages,as long as we are willing to listen to them.

Source: Adopted from Brand Equity, Nov. 1, 2006

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the day would be broadcasted asdetailed story at the prime time, toensure that the viewers get to listento the story of their own choice.

2. Marketing Planning: Anotherimportant activity or area of work of amarketer is to develop appropriatemarketing plans so that the marketingobjectives of the organisation can beachieved. For example a marketer ofcolour TVs, having 10 per cent of thecurrent market share in the countryaims at enhancing his market share to20 per cent, in the next three years. Hewill have to develop a completemarketing plan covering variousimportant aspects including the plan forincreasing the level of production,promotion of the products, etc. andspecify the action programmes toachieve these objectives.

3. Product Designing andDevelopment: Another importantmarketing activity or decision arearelates to product designing anddevelopment. The design of theproduct contributes to making theproduct attractive to the targetcustomers. A good design can improveperformance of a product and also giveit a competitive advantage in themarket. For example, when we planto buy any product say a motorbike,we not only see its features like cost,mileage, etc. but also the designaspects like its shape, style, etc.

4. Standardisation and Grading:Standardisation refers to producinggoods of predetermined specifications,which helps in achieving uniformity and

consistency in the output. Standardisationensures the buyers that goods conformto the predetermined standards ofquality, price and packaging and reducesthe need for inspection, testing andevaluation of the products.

Grading is the process ofclassification of products into differentgroups, on the basis of some of itsimportant characteristics such asquality, size, etc. Grading is particularlynecessary for products which are notproduced according to predeterminedspecifications, such as in the case ofagricultural products, say wheat,oranges, etc. Grading ensures thatgoods belong to a particular quality andhelps in realising higher prices for highquality output.

5. Packaging and Labelling:Packaging refers to designing thepackage for the products. Labellingrefers to designing the label to be puton the package. Label may vary froma simple tag to complex graphics.

Packaging and labelling havebecome so important in modern daymarketing that these are consideredas the pillars of marketing. Packagingis important not only for protection ofthe products but also serves as apromotional tool. Sometimes, thequality of the product is assessed bythe buyers form packaging. We haveseen that in the success of many ofthe consumer brands in recent timessuch as Lays or Uncle Chips potatowafers Clinic Plus shampoos, andColgate Toothpaste, etc., packaginghas played an important role.

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6. Branding: A very important decisionarea for marketing of most consumerproducts is whether to sell the productin its generic name (name of thecategory of the product, say Fan, Pen,etc.) or to sell them in a brand name(such as Pollar Fan or Rottomac Pen).Brand name helps in creating productdifferentiations, i.e., providing basis fordistinguishing the product of a firmwith that of the competitor, which inturn, helps in building customer’sloyality and in promoting its sale. Theimportant decision areas in respect ofbranding include deciding the brandingstrategy, say whether each product willbe given a separate brand name or thesame brand name will be extended toall products of the company, sayPhillips Bulbs, Tubes and Television orVideocon Washing Machine, Television,and Refrigerator. Selection of the brandname plays important role in thesuccess of a product.

7. Customer Support Services: A veryimportant function of the marketingmanagement relates to developingcustomer support services such as aftersales services, handling customercomplaints and adjustments,procuring credit services, maintenanceservices, technical services andconsumer information. All theseservices aim at providing maximumsatisfaction to the customers, which isthe key to marketing success inmodern days. Customer supportservices prove very effective in bringingrepeat sales from the customers anddeveloping brand loyality for a product.

8. Pricing of Products: Price of productrefers to the amount of moneycustomers have to pay to obtain aproduct. Price is an important factoraffecting the success or failure of aproduct in the market. The demand fora product or service is related to itsprice. Generally lower the price, higherwould be the demand for the productand vice-versa. The marketers haveto properly analyse the factorsdetermining the price of a product andtake several crucial decisions in thisrespect, including setting the pricingobjectives, determining the pricingstrategies, determining the price andchanging the prices.

9. Promotion: Promotion of productsand services involves informing thecustomers about the firm’s product,its features, etc. and persuading themto purchase these products. The fourimportant methods of promotioninclude advertising, Personal Selling,Publicity and Sales Promotion. Amarketer has to take several crucial,decisions in respect of promotion ofthe products and services such asdeciding the promotion budget, thepromotion mix, i.e., the combinationof the promotional tools that will beuse, the promotion budget, etc.

10. Physical Distribution: Managingphysical distribution is another veryimportant function in the marketingof goods and services. The two majordecision areas under this functioninclude (a) decision regardingchannels of distribution or themarketing intermediaries (like whole

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salers, retailers) to be used and (b)physical movement of the productfrom where it is produced to a placewhere it is required by the customersfor their consumption or use. Theimportant decision areas underphysical distribution includemanaging inventory (levels of stock ofgoods), storage and warehousing andtransportation of goods from one placeto the other.11. Transportation: Transportationinvolves physical movement of goodsfrom one place to the other. Asgenerally the users of products,particularly consumer products arewide spread and geographicallyseparated from the place these areproduced, it is necessary to move themto the place where it is needed forconsumption or use, For example, teaproduced in Assam has to betransported not only within the statebut to other far off places like TamilNadu, Punjab, Jammu and Kashmirand Haryana, Rajasthan, where it isconsumed.

A marketing firm has to analyseits transportation needs after takinginto consideration various factorssuch as nature of the product, costand location of target market and takedecisions in respect of mode oftransportation to be chosen and otherrelated aspects.

12. Storage or Warehousing: Usuallythere is a time gap between theproduction or procurement of goodsand their sale or use. It may bebecause of irregular demand for the

products such as in the case of woollengarments or Raincoats or there maybe irregular supply because ofseasonal production such as in thecase of agricultural products(sugarcane, rice, wheat, cotton, etc.).In order to maintain smooth flow ofproducts in the market, there is a needfor proper storage of the products.Further, there is a need for storage ofadequate stock of goods to protectagainst unavoidable delays in deliveryor to meet out contingencies in thedemand. In the process of marketing,the function of storage is performedby dif ferent agencies such asmanufacturers, wholesalers andretailers.

ROLE OF MARKETING

All marketing organisations operateeither to earn profit or pursue someother goals such as communityservice, improvement of quality of lifeor promotion of a cause, say UNICEFworking for the welfare of children or‘Helpage’ working for the cause ofsenior citizens. Whether it is aprofit organisation or a non-profitorganisation, marketing playsan important role in achieving itsobjectives. It helps the individualconsumers in raising their standardof living by making available theproducts and services that satisfy theirneeds and wants. It also plays asignificant role in the economicdevelopment of a nation. The role ofmarketing in different situations maybe described in brief as follows.

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Role in a Firm

The modern concept of marketingplays a significant role in achieving theobjectives of a firm. It emphasises thatcustomer satisfaction is the key to thesurvival and growth of an organisationin the contemporary competitivemarketing environment. By adoptingmarketing orientation, an organisationwhether profit making or non-profitmaking, can achieve its goals in themost effective manner. It helps infocusing the activities of anorganisation on the needs and wantsof the customers. For example, whatproducts or services will be marketedby a firm will depend upon what doits customers need. Thus, an analysisof the needs of the customers shall beundertaken in order to decide what toproduce and sell. The product willthen be designed according to theneeds of the potential buyers and bemade available through the outletsconvenient to customers and be pricedat a level which the target customerscan afford. In other words, marketingas a business philosophy helps inserving the customers by satisfyingtheir needs. It is a well known fact thata satisfied customer is the mostvaluable asset of any firm. Thus,marketing plays a crucial role in thesurvival and growth of a firm.

Role in the Economy

Marketing plays a significant role in thedevelopment of an economy. It acts asa catalyst in the economic development

of a country and helps in raising thestandards of living of the people.

Development of a nation can bejudged by the level of standard of livingof its people. Another importantcriteria, which is related to the firstone, is the per capita income of anaverage citizen of a country. On thisbasis, an underdeveloped country maybe stated to be one which ischaracterised by factors like poverty,scarcity of goods and services,predominance of agriculture, etc.

Marketing can play a significantrole in the economic development of anation. It can inspire people toundertake new activities and to set upenterprises for producing goods thatare needed by the customers.Marketing can help in overcomingobstacles posed by high prices due toimbalances in the levels of productionand consumption. It can also ensuresmooth flow of goods through efficientphysical distribution arrangements.

In other words, marketing can helpin finding out right type of productsand services that a firm shouldmanufacture, the places where itshould make such products availablefor sale, the price at which theproducts should be sold and thechannels that should be used formoving the products to the ultimateplace of consumption or use. Thislinkage between the business andconsumption centres, accelerates theeconomic activity leading to higherincomes, more consumption andincreased savings and investment.

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MARKETING MIX

As stated in an earlier section, theprocess of marketing involves creatinga market offering, to satisfy the needsand wants of the present and potentialbuyers. The real question is how tocreate a market offering. Let us say aprofitable business opportunity isseen by some firm in the field ofproducing soft drinks. To develop andmarket a new brand of soft drinks, anumber of important decisions willhave to be taken for example whetherto go for any collaboration with aforeign manufacturer of soft drinks,whether to produce for the localmarket or for a wider market, what willbe the features of the new product,and so on.

There are large number of factorsaffecting marketing decisions. Thesecan broadly be divided into twocategories: (i) controllable factors, and(ii) non-controllable factors. Controllablefactors are those factors which can beinfluenced at the level of the firm. Inthe previous illustration, for example,whether the drink will be packed inglass bottles or plastic cans; what willbe the name (brand name) of the drink;

at what price it will be sold, (at parwith the price at which othercompetitive brands are sold or belowit or above it); what distributionnetwork will be used to make theproduct available (e.g., hotels,restaurants, groceries shops, kiosksselling cigarette, paan, etc.) to thebuyers whether the new soft drink willbe promoted by putting upadvertisements in newspaper ormagazine or on radio or television; orsay if newspaper, whether in a localnewspaper or a national daily; whetherin a paper of regional language or anEnglish daily, etc. is decided at thelevel of marketing manager of the firm.

However, there are certain otherfactors which affect the decision butare not controllable at the firm’s level.These are called environmentalvariables. For example, the politicalfactors such as the government policyon whether to allow any technical orfinancial collaboration in the area ofsoft drinks, production or economicfactors such as rate of inflationprevailing in a given period or a creditpolicy of the central bank affecting thetotal availability of money in the

Test your Understanding II

State whether the following statements are true or false:

(i) packaging serves as a promotional tool;

(ii) storage adds time value to the product;

(iii) financing is important for marketing only high value products;

(iv) marketing play important role from the point of view of individual consumersonly; and

(v) marketing acts as a catalyst in the economic development of a country.

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market, all of which affect the sale ofa particular product but can not becontrolled or influenced by thedecisions at the level of a firm. To besuccessful, the decisions regarding‘controllable factors’ are to be takenkeeping the environmental variablesinto consideration.

The controllable variables becomemarketing tools, which are constantlyshaped and reshaped by marketingmanagers, to achieve marketingsuccess. For example a firm canreshape a market offering by bringingin a change in any of the variable underits own control say introducing achange in the price or promotion offeror product features or channel used tomake the product available to buyers.Thus, from a number of alternativesavailable a firm chooses a particularcombination to develop a marketoffering. The combination of variables

chosen by a firm to prepare its marketoffering is also called marketing mix.Thus, marketing mix is described asthe set of marketing tools that a firmuses to pursue its marketing objectivesin a target market.

ELEMENTS OF MARKETING MIX

The marketing mix consists of variousvariables, which have broadly beenclassified into four categories,popularly known as four Ps ofmarketing. These are: (i) Product, (ii)Price, (iii) Place, and (iv) Promotion,and are discussed as follows:

1. Product: Product means goods orservices or ‘anything of value’, whichis offered to the market for exchange.For example, Hindustan Levercompany offers number of consumerproducts like toiletries (Close-UpToothpaste, Lifebuoy Soap, etc.),

Marketing Mix: Elements

Product PriceProduct Mix Price LevelProduct Quality MarginsNew Product Pricing PolicyDesign and Development Pricing StrategiesPackaging Price Change

LabellingBranding

Place PromotionChannel Strategy Promotion MixChannel Selection AdvertisingChannel Conflict Personal SellingChannel Cooperation Sales PromotionPhysical Distribution Publicity

Public Relations

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detergent powder (Surf, Wheel), foodproducts (Refined Vegetable Oil); Tataoffers Tata Steel, Trucks, Salt and alarge number of other products; LGElectronics Offers Televisions,Refrigerators, Colour Monitors forComputers, etc; Amul offers numberof food products (Amul Milk, Ghee,Butter, Cheese, Chocolates, etc.).

The concept of product relates tonot only the physical product asmentioned in the above examples butalso the benefits offered by it fromcustomer’s view point (for exampletoothpaste is bought for whiteningteeth, strengthening gums, etc.). Theconcept of product also include theextended product or what is offeredto the customers by way of after salesservices, handling complaints,availability of spare parts etc.These aspects are very important,particularly in the marketing ofconsumer durable products (likeAutomobiles, Refrigerators, etc.). Theimportant product decisions includedeciding about the features, quality,packaging, labelling and branding ofthe products.

2. Price: Price is the amount of moneycustomers have to pay to obtain theproduct. In case of most of theproducts, level of price affects the levelof their demand. The marketers havenot only to decide about the objectivesof price setting but to analyse thefactors determining the price and fixa price for the firm’s products.Decisions have also to be taken inrespect of discounts to customers,traders and credit terms, etc. so that

customers perceive the price to be inline with the value of the product.

3. Place: Place or PhysicalDistribution include activities thatmake firm’s products available to thetarget customers. Important decisionareas in this respect include selectionof dealers or intermediaries to reachthe customers, providing support tothe intermediaries (by way ofdiscounts, promotional campaigns,etc.). The intermediaries in turn keepinventory of the firm’s products,demonstrate them to potential buyers,negotiate price with buyers, close salesand also service the products after thesale. The other decision areas relateto managing inventory, storage andwarehousing and transportation ofgoods from the place it is produced tothe place it is required by the buyers.

4. Promotion: Promotion of productsand services include activities thatcommunicate availability, features,merits, etc. of the products to thetarget customers and persuadethem to buy it. Most marketingorganisations, undertake variouspromotional activities and spendsubstantial amount of money on thepromotion of their goods throughusing number of tools such asadvertising, personal selling and salespromotion techniques (like pricediscounts, free samples, etc.). A largenumber of decisions are to be takenin each of the area specified above. Forexample, in the respect of advertisingit is important to decide about themessage, the media to be used(example print-media–newspaper,

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magazines, etc. the objections ofcustomers, etc.).

The success of a market offer willdepend on how well these ingredientsare mixed to create superior value forthe customers and simultaneouslyachieve their sale and profit objectives.Let us say a firm would like to achievenecessary volume of sale at a cost thatwill permit a desired level of profit. Butso many alternative mixes can beadopted by a firm to achieve thisobjectives. The issue before a firm thenis to decide what would be the mosteffective combination of elements toachieve the given objectives.

PRODUCT

In common parlance, the word‘product’, is used to refer only to thephysical or tangible attributes of aproduct. For example, we say we have

bought a car or a pen or a Cell phoneor a tractor.

Our decision to buy a product isnot only af fected by its physicalqualities, but also by certain non-tangible and psychological factors,e.g., brand name, reputation,guaranty, packaging etc. Let us say,when a person buys a car, he/she isnot just buying a few nuts and bolts,an engine, four wheels and so on.Rather he/she is buying a means oftransport, a status symbol, guaranteesand warranties accompanying theproduct, image of the company andmany other such attributes. Thus, inmarketing, product is a mixture oftangible and intangible attributes,which are capable of being exchangedfor a value, with ability to satisfycustomer needs. Besides physicalobjects, we also include services,ideas, persons, and places in the

PepsiCo. Eyes New Products, Acquisitions

Aims at Adding Production Capacity for Gatorade and other Non-carbonated DrinksPepsiCo on Monday said it will launch new healthier products next year and

focus on growth in emerging markets, a continuation of the strategy that helped theworld’s No. 2 beverage company stay profitable ever as sales growth of its flagshipsoft drinks has slowed.

PepsiCo’s new CEO Indra Nooyi, who took the reins on October 1, also said thecompany was on track to meet its annual target of volume and revenue growth inthe mid-single digits and earnings per share growth in the low double digits.

PepsiCo. evolved from being known mostly for selling soda and salty snacksinto a $33-billion food company that has embraced the push into healthier optionslike Tropicana juice, Aquafina water and whole grain Quaker Oats Cereals.

The company said that moving forward, its capital expenditure as a percentageof sales would increase, and that most of the increased spending will go to expansionin developing and emerging markets and adding manufacturing capacity for Gatoradeand other non-carbonated drinks.

Source: Adopted from Economic Times, Oct. 25, 2006

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concept of product. Thus, product maybe defined as anything that can beoffered to a market to satisfy a wantor need. It is offered for attention,acquisition, use or consumption.

From the customer’s point of view,a product is a bundle of utilities, whichis purchased because of its capabilityto provide satisfaction of certain need.A buyer buys a product or service forwhat it does for her or the benefit itprovides to her. There can be threetypes of benefits a customer may seekto satisfy from the purchase of aproduct, viz., (i) functional benefits, (ii)psychological benefits, and (iii) socialbenefits. For example, the purchase ofa motorcycle provides functional utilityof transportation, but at the same timesatisfies the need for prestige andesteem and provides social benefit bythe way of acceptance from a group,

by riding a motorbike. Thus, all theseaspects should be considered whileplanning for a product.

It is customer for companies toreview the progress of their presentproducts and constantly look foropportunities of diversifying into neverareas. (see box on PepsiCo.)

LET US DO IT

Enlist the functional, psychologicaland social benefits that canbe achieved by the purchase of(i) Personal computer, (ii) Colourtelevision, (iii) Wrist watch.

CLASSIFICATION OF PRODUCT

Products may broadly be classifiedinto two categories — (i) consumers’products, and (ii) industrial products.The consumer products may further

Product

Consumer Product Industrial Product

Durability Basis Shopping Efforts Involved

Non- Durable Services Conven- Shopping SpecialityDurable ience Products Products

Products

Classification of Product

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be classified into different groups, asdetailed below:

CONSUMER PRODUCTS

Products, which are purchased by theultimate consumers or users forsatisfying their personal needs anddesires are referred to as consumerproducts. For example, soap, edible oil,eatables, textiles, toothpaste, fans, etc.which we use for our personal and non-business use are consumer goods.

The consumer products have beenclassified on the basis of two importantfactors: (A) the extent of shoppingefforts involved, and (B) durability ofthe product. These have beenexplained as below:

A. Shopping Efforts Involved

On the basis of the time and effortbuyers are willing to spend in thepurchase of a product, we can classifythe consumer product into the followingthree categories as here under:

1. Convenience Products: Thoseconsumer products, which arepurchased frequently, immediately andwith least time and efforts are referredto as convenience goods. Examples ofsuch products are cigarettes, icecreams, medicines, newspaper,stationery items toothpaste. etc. Theseproducts have low unit-value and arebought in small qualities. Some of theimportant characteristics of suchproducts are:

Convenience Products

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(a) These products are purchased atconvenient locations, with leastefforts and time;

(b) Convenience products have aregular and continuous demand,as these generally come under thecategory of essential products;

(c) These products have small unit ofpurchase and low prices. Forexample the eggs are sold at Rs.28 per dozen and the customers

(f) Sales promotion schemes or short-term incentives such as salescontests, discount offers, etc playan important role in the marketingof such products.

2. Shopping Products: Shoppingproducts are those consumer goods,in the purchase of which buyersdevote considerable time, to comparethe quality, price, style, suitability,etc., at several stores, before making

Shopping Products

purchase them in small numbers;(d) Convenience products have

standardised price as most of theseproducts are branded products;

(e) The competition in these productsis high as the supply is greaterthan the demand. The marketershave, therefore, to heavily advertisefor these products; and

final purchase. Some of the examplesof shopping products are clothes,shoes, jewellery, furniture, radio,television, etc. The importantcharacteristics of shopping productsare as below:

(a) The shopping products aregenerally of durable nature, i.e.,they normally survive many uses;

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(b) The unit price as well as profitmargin of shopping products isgenerally high;

(c) As these products have high unitprice, customers compare theproducts of different companiesbefore making selection;

(d) Purchases of shopping productsare generally pre-planned andthere is little degree of impulsebuying in these products; and

(e) Retailers generally play animportant role in the sale ofshopping products as lot ofpersuasive effort is needed toconvince the buyers to purchasethem.

3. Speciality Products: Specialityproducts are those consumer goodswhich have certain special featuresbecause of which people make specialef forts in their purchase. Theseproducts are such, which havereached a brand loyalty of the highest

order, with a significant number ofbuyers. The buyers are willing tospend a lot of time and efforts on thepurchase of such products. Forexample, if there is a rare collection ofartwork or of antiques, some peoplemay be willing to spend a lot ofshopping ef fort and travel longdistance to buy such products. In ourday-to-day life, we see people going toa particular hair-cutting saloon orrestaurant, or a tailor. The demand forthese goods is relatively inelastic, i.e.,even if the price is increased, thedemand does not come down. Someof the important characteristics of thespeciality products may be summedup as follows:

(a) The demand for speciality productsis limited as relatively smallnumber of people buy theseproducts;

(b) These products are generally costlyand their unit price is very high;

Speciality Products

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(c) These products are available forsale at few places as the numberof customers is small and arewilling to take extra efforts in thepurchase of these products;

(d) An aggressive promotion is requiredfor the sale of speciality products,in order to inform people abouttheir availability, features, etc.; and

(e) After sales services are veryimportant for many of thespeciality products.

B. Durability of Products

On the basis of their durability, theconsumer products have beenclassified into three categories—Durable, Non-durable and Services.

1. Non-durable Products: Theconsumer products which are

normally consumed in one or few usesare called non-durable products. Forexample, we purchase products liketoothpaste, detergents, bathing soapand stationary products etc. From themarketing point of view, theseproducts generally command a smallmargin, should be made available inmany locations and need to be heavilyadvertised.

2. Durable Products: Thosetangible consumer products whichnormally survive many uses, forexample, refrigerator, radio, bicycle,sewing machine and kitchen gadgetsare referred to as durable products.These goods are generally used for alonger period, command a higher perunit margin, require greaterpersonal-selling efforts, guarantees

Marketing of ServicesIndia Post Has 28% Market Share Against Blue Dart’s 20%

Speed Post Leads the Race in Express MailSpeed Post has emerged as a market leader in the express mail category with a27.55% volume share, a study commissioned by the Department of Post (DOP) andgovernment of India shows.

According to the study, almost 46.67% crore articles were sent by express mailin 05-06. The study values the express mail industry alone (excluding logistics andcargo which account for almost 35-40% of private firm’s turnover) at around Rs1,500 crore. In value terms, while Speed Post is the leader, Blue Dart is a closesecond with a 20% market share, followed by DTDC with a 11.91% share and FirstFlight with a 10.89% share.

“This has been possible because of our competitive pricing. We are offering thesame services as other private couriers do, with the same efficiency but at half therates”, added Mr. Samuel. In fact, Speed Post claims that its volumes have increasedby almost 30-40% after the introduction of the One India One Rate scheme.

Express companies are hopeful that the market is going to grow further withthe setting up of SEZs and greater economic activity in the country fuelled by theincreasing throughput from the manufacturing sector.

Source: Adopted from Economic Times, Oct. 20, 2006

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and after sales services, on the partof the seller.

3. Services: The durable and non-durable goods are tangible in thesense that these have a physicalexistence and can be seen andtouched. Services are intangible inform. By services we mean thoseactivities, benefits or satisfactions,which are offered for sale, e.g., drycleaning, watch repairs, hair cutting,postal services, services offered by adoctor, an architect and a lawyer. Someof the distinguishing characteristics ofservices are as follows:

(a) By their very nature, services areintangible, i.e., we can not see, feelor touch them;

(b) A service is inseparable from itssource. That means we cannotseparate the service from theperson providing the service;

(c) The services cannot be stored.They are highly perishable. Forexample, if a tailor does not workfor one week, the services he wouldhave provided during such periodgo waste; and

(d) Services are highly variable as theirtype and quality depends on theperson providing them. That iswhy, there is a difference in theextent of satisfaction we get fromthe services provided by differentpeople.

INDUSTRIAL PRODUCTS

Industrial products are thoseproducts, which are used as inputs

in producing other products. Theexamples of such products are rawmaterials, engines, lubricants,machines, tools, etc. In other words,industrial products are meant for non-personal and business use forproducing other products.

The market for industrial productsconsists of manufacturers, transportagencies, banks and insurancecompanies, mining companies andpublic utilities. The importantcharacteristics of industrial productsare given below:

1. Number of Buyers: As comparedto the consumer products, thenumbers of buyers of industrialproducts are limited. For example,sugarcane is purchased by fewproducers of sugar, but sugar, whichis a consumer product, is purchasedby crores of people in our country.

2. Channel Levels: Because of limitednumber of buyers, the sale ofindustrial products is generally madewith the help of shorter channels ofdistribution, i.e., direct selling or onelevel channel.

3. Geographic Concentration:Because of location of industries atcertain points or regions, industrialmarkets are highly concentrated,geographically. For instance, thedemand for power loom comes fromBombay, Sholapur, Bangalore, etc.where the textile industry isconcentrated in our country.

4. Derived Demand: The demand forindustrial products is derived from thedemand for consumer products. For

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example, the demand for leather willbe derived from demand for shoes andother leather products in the market.

5. Role of Technical Considerations:Technical considerations assumegreater significance in the purchaseof industrial products because theseproducts are complex products,bought for use in business operations.

6. Reciprocal Buying: Some bigcompanies from basic industries likeoil, steel, rubber, and medicines resortto the practice of reciprocal buying. Forexample, Ashok Leyland may buy tyresand tubes from MRF, which in turnmay buy trucks from Leyland,whenever it feels the need for the same.

7. Leasing Out: A growing trend inindustrial product market is to leaseout rather than to purchase theproducts on outright basis because ofthe heavy price of these products.

Classification

The industrial goods are classified intothe following major categories:

(i) Materials and Parts: Theseinclude goods that enter themanufacture’s productscompletely. Such goods are oftwo types: (a) Raw material:including farm products likecotton, sugar cane, oil seed andnatural products such asminerals (say crude petroleum,iron ore), fish and lumber; and(b) manufactured material andparts. These are again of twotypes – component materialslike glass, iron, plastic andcomponent parts such as tyre,electric bulb, steering, andbattery.

(ii) Capital Items: These are suchgoods that are used in the

Industrial Goods

Materials and Capital Items Supplies andParts Business Services

Raw Manufactured Installations Equipments Maintanence OperatingMaterial Material and Parts and Repair Supplies

items

Farm Natural Component ComponentProducts Products Material Parts

Classification of Industrial Goods

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production of finished goods.These include: (a) installationslike elevators, mainframeComputers, and (b)equipments like Hand Tools,Personal Computer, FaxMachines, etc.

products have dif ferent buyingmotives and have different attitudesand use different approaches in thepurchase of the products. Forexample, an industrial buyer isexpected to be more rational who willstudy the cost of different available

Test Your Understanding III

Please check whether the following statements are true or false:

(i) Products purchased by ultimate consumers for satisfying their personal needsare referred to as industrial products.

(ii) Speciality products are generally costly and their unit price is high.

(iii) Purchase of convenience products in generally pre-planned.

(iv) Shopping products are purchased frequently, immediately and with leastefforts.

(v) Sales promotional schemes play important role in the sale of industrialproducts.

(vi) Product is anything that can be offered to a market to satisfy a want or need.

(vii) Durable products are normally consumed in one or few uses.

(viii) Services can not be stored.

(ix) Furniture is an example of consumer non-durable product.

(x) Toothpaste is an example of consumer product.

(iii) Supplies and BusinessServices: These are shortlasting goods and services thatfacilitate developing ormanaging the finished product.These include: (a) maintenanceand repair items like Paint,Nails, etc., and (b) operatingsupplies like Lubricant,Computer Stationary, WritingPaper, etc.

The difference in the nature ofconsumer products and industrialproducts is important because of thefact that the buyers of the two sets of

brands, their technical specificationsand the goodwill of the supplier.Whereas, the buyer of a consumerproduct may be more impulsive andemotional who is susceptible toadvertising and various salespromotion schemes.

BRANDING

One of the most important decisionsthat a marketer has to take in the areaof ‘product’ is in respect of branding.He has to decide whether the firm’sproducts will be marketed under abrand name or a generic name.

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Generic name refers to the name ofthe whole class of the product. Forexample, a book, a wristwatch, tyre,camera, toilet soap, etc. We know thata camera is a lens surrounded byplastic or steel from all sides andhaving certain other features such asa flash gun and so on. Similarly bookis a bunch of papers, which are in abound form, on which some usefulinformation about a subject is printed.Thus, all products having thesecharacteristics would be called by thegeneric name such as camera or book.

If products were sold by genericnames, it would be very difficult for themarketers to distinguish their productsfrom that of their competitors. Thus,

most marketers give a name to theirproduct, which helps in identifying anddistinguishing their products from thecompetitors’ products. This process ofgiving a name or a sign or a symboletc., to a product is called branding.The various terms relating to brandingare as follows:

1. Brand: A brand is a name, term,sign, symbol, design or somecombination of them, used to identifythe products—goods or services of oneseller or group of sellers and todifferentiate them from those of thecompetitors. For example, some of thecommon brands are Bata, Lifebuoy,Dunlop, Hot Shot, and Parker. Brandis a comprehensive term, which has

Brands and BrandingBranding is creating a corporate brand identity for consumer, and getting thatbrand identity imprinted on the minds of consumer, and this requires brandpositioning and brand management.A brand today is an entity (product. service, company, person, technology, etc.),that offers a set of value exchange measures between what the owner/marketseeks and the price he is willing to pay for.It has always seemed to me that your brand is formed primarily, not by whatyour company says about itself, but what the company does.

— Jeff BezosA product is something made in a factory; a brand is something that is bought bythe customer. A product can be copied by a competitor; a brand is unique. Aproduct can be quickly outdated; a successful brand is timeless.

— Stephen KingYour brand’s power lies in dominance. It is better to have 50% of one market,instead of 10% of five markets.

— Al RiesYour brand image is primarily an emotional construct. Emotion is probably alwaysmore powerful in swaying people than reason. but people like to be able torationalise their choices.

— Drayton Bird

Source: Adopted from Effective Executive, 2006

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two components—brand name andbrand mark. For example, Asian Paintshas the symbol of Gattu on its pack,which is its brand mark.

2. Brand Name: That part of a brand,which can be spoken, is called a brandname. In other words, brand name isthe verbal component of a brand. Forexample, Asian Paints, Safola, Maggie,Lifebuoy, Dunlop, and Uncle Chips arethe brand names.

3. Brand Mark: That part of a brandwhich can be recognised but which isnot utter able is called brand mark. Itappears in the form of a symbol,design, distinct colour scheme orlettering. For example, the Gattu ofAsian Paints or Devil of Onida orsymbol of Yogkshma of LIC, or fourfingers and a palm of Anacin are allbrand marks.

4. Trade Mark: A brand or part of abrand that is given legal protection iscalled trademark. The protection isgiven against its use by other firms.Thus the firm, which got its brandregistered, gets the exclusive right forits use. In that case, no other firm canuse such name or mark in the country.

Though branding adds to the coste.g., to the cost of packaging, labelling,legal protection, and promotion, itprovides several advantages to thesellers as well as the consumers.

Advantages to the Marketers

(i) Enables Marking ProductDifferentiation: Branding helps a

firm in distinguishing its productfrom that of its competitors. Thisenables the firm to secure andcontrol the market for its products.

(ii) Helps in Advertising and DisplayProgrammes: A brand aids a firmin its advertising and displayprogrammes. Without a brandname, the advertiser can onlycreate awareness for the genericproduct and can never be sure ofthe sale for his product.

(iii) Differential Pricing: Brandingenables a firm to charge differentprice for its products than thatcharged by its competitors. This ispossible because if customers likea brand and become habitual ofit, they do not mind paying a littlehigher for it.

(iv) Ease in Introduction of NewProduct: If a new product isintroduced under a known brand,it enjoys the reflected glory of thebrand and is likely to get off to anexcellent start. Thus, manycompanies with established brandnames decide to introduce newproducts in the same name. Forexample, Food Specialties Ltd. hada successful brand Maggie(Noodles), it extended this name tomany of its new productsintroduced such as TomatoKetchup, Soups, etc. SimilarlySamsung extended the brandname of its Television to WashingMachines and other durableproducts, like Microwave oven.

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Advantages to Customers

(i) Helps in Product Identification:Branding helps the customers inidentifying the products. Forexample, if a person is satisfiedwith a particular brand of aproduct, say tea leaves or detergentsoap, he need not make a closeinspection every time, he has tobuy that product. Thus, brandinggreatly facilitates repeat purchaseof the products.

(ii) Ensures Quality: Branding ensuresa particular level of quality of theproduct. Thus, whenever there isany deviation in the quality, thecustomers can have recourse to themanufacturer or the marketer. Thisbuilds up confidence of thecustomers and helps in increasinghis level of satisfaction.

(iii) Status Symbol: Some brandsbecome status symbols because oftheir quality. The consumers ofthose brands of products feel proudof using them and adds to the levelof satisfaction of the customers.

Characteristics of Good BrandName

Choosing the right brand name is notan easy decision. What makes this

decision important is the fact that oncea brand name is chosen and the productis launched in the market, changing thebrand name is very difficult. So, gettingit right the first time is very essential.Following are some of theconsiderations, which should be keptin mind while choosing a brand name.(i) The brand name should be short,

easy to pronounce, spell,recognise and remember e.g.,Ponds, VIP, Rin, Vim, etc.

(ii) A brand should suggest theproduct’s benefits and qualities.It should be appropriate to theproduct’s function. e.g., Rasika,Genteel, Promise, My Fair Ladyand Boost.

(iii) A brand name should bedistinctive e.g., Liril, Sprit, Safari,Zodiac.

(iv) The brand name should beadaptable to packing or labellingrequirements, to dif ferentadvertising media and to differentlanguages.

(v) The brand name should besufficiently versatile toaccommodate new products,which are added to the productline e.g., Maggie, Colgate.

(vi) It should be capable of beingregistered and protected legally.

Do it Yourself

Visit a retail store in your locality and prepare a list of the (i) number of brandsavailable, (ii) the price of each brand, and (iii) most selling brand in respect of anythree consumer non-durable products such as Toilet Soap, Detergent Powder,Cooking, Oil, Toothpaste, Tea, etc. used in your family. Which brand of each ofthe product selected is used in your family? Give reasons.

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(vii) Chosen name should havestaying power i.e., it should notget out of date.

PACKAGING

One of the most importantdevelopments affecting the businessworld in recent years has been in thearea of packaging. Many products,which we thought could never lendthemselves to packing because of theirnature, have been successfully packede.g., Pulses, Ghee, Milk, Salt, ColdDrinks, etc. Packaging refers to the actof designing and producing thecontainer or wrapper of a product.Packaging plays a very important rolein the marketing success or failure ofmany products, particularly the

consumer non-durable products. Infact if one makes an analysis of thereasons for the success of some of thesuccessful products in the recent past,it can be noted that packaging hasplayed its due role. For example, it wasone of the important factors in thesuccess of products like Maggie’sNoodles, Uncle Chips or Crax wafers.

Levels of Packaging

There can be three different levels ofpackaging. These are as below:

1. Primary Package: It refers to theproduct’s immediate container. Insome cases, the primary package iskept till the consumer is ready to usethe product (e.g., plastic packet forsocks); whereas in other cases, it is

Levels of Packaging

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kept throughout the entire life of theproduct (e.g., a toothpaste tube, amatch box, etc.).

2. Secondary Packaging: It refers toadditional layers of protection that arekept till the product is ready for use,e.g., a tube of shaving cream usuallycomes in a card board box. Whenconsumers start using the shavingcream, they will dispose off the boxbut retain the primary tube.

3. Transportation Packaging: It refersto further packaging componentsnecessary for storage, identification ortransportation. For example atoothpaste manufacturer may send thegoods to retailers in corrugated boxescontaining 10, 20, or 100 units.

Importance of Packaging

Packaging has acquired greatsignificance in the marketing of goodsand services, because of followingreasons:

(i) Rising Standards of Health andSanitation: Because of theincreasing standards of living inthe country, more and more peoplehave started purchasing packedgoods as the chances ofadulteration in such goods areminimised.

(ii) Self Service Outlets: The self-serviceretail outlets are becoming verypopular, particularly in major citiesand towns. Because of this, someof the traditional role assigned topersonal selling in respect ofpromotion has gone to packaging.

(iii) Innovational Opportunity: Some ofthe recent developments in thearea of packaging have completelychanged the marketing scene inthe country. For example, milk cannow be stored for 4-5 days withoutrefrigeration in the recentlydeveloped packing materials.Similarly, in the area ofpharmaceuticals, soft drinks, etc.,lots of new innovations have comein respect of packaging. As aresult, the scope for the marketingof such products has increased.

(iv) Product Differentiation: Packaging isone of the very important means ofcreating product differentiation.The colour, size, material etc., ofpackage makes real difference inthe perception of customers aboutthe quality of the product. Forexample, by looking at thepackage of a product say Paint orHair Oil, one can make someguess about quality of the productcontained in it.

Functions of Packaging

As stated above, packaging performsa number of functions in themarketing of goods. Some of theimportant functions are as follows:

(i) Product Identification: Packaginggreatly helps in identification of theproducts. For example, Colgate inred colour, or Ponds cream jar canbe easily identified by its package.

(ii) Product Protection: Packagingprotects the contents of a product

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from spoilage, breakage, leakage,pilferage, damage, climatic effect,etc. This kind of protection isrequired during storing, distributionand transportation of the product.

(iii) Facilitating Use of the Product: Thesize and shape of the packageshould be such that it should beconvenient to open, handle and usefor the consumers. Cosmetics,medicines and tubes of toothpastesare good examples of this.

(iv) Product Promotion: Packaging isalso used for promotion purposes.A startling colour scheme,photograph or typeface may beused to attract attention of thepeople at the point of purchase.Sometimes it may work even betterthan advertising. In self-servicestores, this role of packagingbecomes all the more important.

Labelling

A simple looking but important taskin the marketing of goods relates todesigning the label to be put on thepackage. The label may vary from asimple tag attached to the product(such as in case of local unbrandedproducts like sugar, wheat, pulses,etc.) indicating some information

about the quality or price, to complexgraphics that are part of the package,like the ones on branded products (saythe graphic of Boat and Patwar on thepackage of a popular brand of AfterShave Lotion or of a lady offering apen to solicit the views of the users,on the label of a detergent powder).Lables are useful in providing detailedinformation about the product, itscontents, method of use, etc. Thevarious functions performed by a labelare as follows:

1. Describe the Product and Specifyits Contents: Let us look at some ofthe labels of the products used by usin our day to day life. The label on thepackage of a local tea companydescribes the company as ‘ Mohini TeaCompany, an ISO 9001:200C CertifiedCompany’; a popular brand of PricklyHeat Powder, describes how theproduct provides relief from pricklyheat and controls bacterial growth andinfection, giving caution forbidding itsapplication on cuts and wounds.Package of fast food products likeready to eat Dosa, Idli or Noodles,describe the procedure of cookingthese products; the Package of atoothpaste brand lists the ‘Ten Teethand Gum Problems’, which theproduct claims to fight with its

Do it Yourself

Visit a local Grocery Shop and find out any two products which are sold both inpackaged form and in loose (unpackaged) form and find out i) The product forwhich the sale in packaged form is greater ii) The product for which sale in looseform is greater. iii) the benefit, to the retailer in selling goods on i) packaged formand ii) unpackaged form.

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‘Complete Germicheck Formula’; thePackage of a brand of Coconut Oildescribes the product as pure coconutoil with Heena, Amla, Lemon andspecifies how these are good for Hair.Thus, one of the most importantfunctions of labels is to describe theproduct, its usage, cautions in use,etc. and specify its contents.

2. Identification of the Product orBrand: The other importantfunction performed by labels is tohelp in identifying the product orbrand. For example, the brand nameof and product, say Biscuits orPotato Chips imprinted on i tspackage helps us to identify, fromnumber of packages, which one isour favourite brand. Other commonidentification information providedby the labels include name andaddress of the manufacturer, netweight when packed, manufacturingdate, maximum retail price andBatch number.

3. Grading of Products: Anotherimportant function performed by labelsis to help grading the products intodifferent categories. Sometimesmarketers assign different grades toindicate different features or quality ofthe product. For example, a popular

brand of Hair Conditioners comes indifferent categories for different hair, sayfor ‘normal hair’ and for othercategories. Different type of tea is soldby some brands under Yellow, Red andGreen Label categories.

4. Help in Promotion of Products: Animportant function of label is to aid inpromotion of the products. A carefullydesigned label can attract attention andgive reason to purchase. We see manyproduct labels providing promotionalmessages for example, the pack of apopular Amla Hair Oil states, ‘Baalonmein Dum, Life mein Fun’. The labelon the package of a brand of DetergentPowder says, ‘Keep cloth look good andyour machine in top condition’. Labelsplay important role in salespromotional schemes launched bycompanies. For example the label onthe package of a Shaving Creammentions, ‘40% Extra Free’ or packageof a toothpaste mentioning, ‘FreeToothbrush Inside’, or ‘Save Rs15’.

5. Providing In formation Requiredby Law: Another important functionof labeling is to provide informationrequired by law. For example, thestatutory warning on the package ofCigarette or Pan Masala, ‘Smoking isInjurious to Health’ or ‘Chewing

Do it Yourself

1. Examine the label on the package of any three branded products recentlypurchased for use in your family and list out the type of information containedon these.

2. Find out the promotional messages given on the package of any three consumerproducts of your choice and comment how can these help in the sale of theseproducts.

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Tobacco is Injurious to Health’. Suchinformation is required on processedfoods, drugs and tobacco products. Incase of hazardous or poisonousmaterial, appropriate safety-warningneed to be put on the label.

Thus, labels perform number ofimportant functions relating tocommunicating with the potentialbuyers and promoting the sale of theproducts.

PRICING

When a product is bought, some moneyis paid for it. This money represent thesum of values that consumersexchange for the benefit of having orusing the prdocut and is referred to asthe price of the product. Similarly,money paid for the services such as farefor the transport service, premium foran insurance policy, and fee to a doctorfor his medical advise represent theprice of these services. Price maytherefore be defined as the amount ofmoney paid by a buyer (or received bya seller) in consideration of thepurchase of a product or a service.

Pricing occupies an importantplace in the marketing of goods andservices by a firm. No product can belaunched without a price tag or at leastsome guidelines for pricing. Pricing isoften used as a regulator of thedemand of a product. Generally, if theprice of a product is increased, itsdemand comes down, and vice-versa.

Pricing is considered to be aneffective competitive weapon. In theconditions of perfect competition,

most of the firms compete with eachother on the basis of this factor. It isalso the single most important factoraffecting the revenue and profits of afirm. Thus, most marketing firms givehigh importance to the fixation of pricefor their products and services.

Factors Affecting PriceDetermination

There are number of factors whichaffect the fixation of the price of aproduct. Some of the important factorsin this regard are discussed as below:

1. Product Cost: One of the mostimportant factor affecting price of aproduct or service is its cost. Thisincludes the cost of producing,distributing and selling the product.The cost sets the minimum level or thefloor price at which the product maybe sold. Generally all marketing firmsstrive to cover all their costs, at leastin the long run. In addition, they aimat earning a margin of profit over andabove the costs. In certain circumstance,for example, at the time of introducinga new product or while entering a newmarket, the products may be sold ata price, which does not cover all thecosts. But in the long run, a firmcannot survive unless at least all itscosts are covered.

There are broadly three types ofcosts: viz., Fixed Costs, Variable Costsand Semi Variable Costs. Fixed costsare those costs, which do not vary withthe level of activity of a firm say withthe volume of production or sale. Forexample, rent of a building or salary

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of a sales manager remains the samewhether 1000 units or 10 units areproduced in a week.

Those costs which vary in directproportion with the level of activity arecalled variable costs. For example, thecosts of raw material, labour and powerare directly related with the quantityof goods produced. Let us say, if thecost of wood for manufacturing onechair comes to Rs.100 the cost of woodfor 10 chairs would be Rs. 1000.Obviously, there will be no cost of woodif no chair is produced.

Semi variable costs are those costswhich vary with the level of activitybut not in direct proportion with it.For example, compensation of a salesperson may include a fixed salary ofsay Rs. 10,000 plus a commission of5 per cent on sales. With an increasein the volume of sales, the totalcompensation will increase but not indirect proportion with the change inthe volume of sale.

Total Costs are the sum total of thefixed, variable and semi-variable costsfor the specific level of activity, sayvolume of sales or quantity produced.

2. The Utility and Demand: While theproduct costs set the lower limits ofthe price, the utility provided by theproduct and the intensity of demandof the buyer sets the upper limit ofprice, which a buyer would beprepared to pay. In fact the price mustreflect the interest of both the partiesto the transaction—the buyer and theseller. The buyer may be ready to payup to the point where the utility fromthe product is at least equal to the

sacrifice made in terms of the pricepaid. The seller would, however, try toat least cover the costs. According tothe law of demand, consumers usuallypurchase more units at a low pricethan at a high price.

The price of a product is affectedby the elasticity of demand of theproduct. The demand is said to beelastic if a relatively small change inprice results in large change in thequantity demanded. Here numerically,the price elasticity is greater than one.In the case of inelastic demand, thetotal revenue increases when the priceis increased and goes down when theprice is reduced. If the demand of aproduct is inelastic, the firm is in abetter position to fix higher prices.

3. Extent of Competition in theMarket: Between the lower limit andthe upper limit where would the pricesettle down? This is affected by thenature and the degree of competition.The price will tend to reach the upperlimit in case there is lesser degree ofcompetition while under conditions offree competition, the price will tend tobe set at the lowest level.

Competitors’ prices and theiranticipated reactions must beconsidered before fixing the price of aproduct. Not only the price but thequality and the features of thecompetitive products must be examinedcarefully, before fixing the price.

4. Government and Legal Regulations:In order to protect the interest ofpublic against unfair practices in thefield of price fixing, Government canintervene and regulate the price of

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commodities. Government can declarea product as essential product andregulate its price. For example, thecost of a drug manufactured by acompany having monopoly in theproduction of the same come to Rs 20per strip of ten and the buyer isprepared to pay any amount for it, sayRs 200. In the absence of anycompetitor, the seller may be temptedto extort the maximum amount ofRs 200 for the drug and intervene toregulate the price. Usually in such acase, the Government does not allowthe firms to charge such a high priceand intervene to regulate the price ofthe drug. This can be done by theGovernment by declaring the drug asessential commodity and regulating itsprice. (see box)

5. Pricing Objectives: Pricingobjectives are another important factoraffecting the fixation of the price of aproduct or a service. Generally theobjective is stated to be maximise the

profits. But there is a difference inmaximising profit in the short run andin the long run. If the firm decides tomaximise profits in the short run, itwould tend to charge maximum pricefor its products. But if it is to maximiseits total profit in the long run, it wouldopt for a lower per unit price so that itcan capture larger share of the marketand earn greater profits throughincreased sales.

Apart from profit maximisation, thepricing objectives of a firm may include:

(a) Obtaining Market Share Leadership:If a firms objective is to obtain largershare of the market; it will keep theprice of its products at lower levelsso that greater number of people areattracted to purchase the products;

(b) Surviving in a Competitive Market:If a firm is facing difficulties insurviving in the market because ofintense competition or introductionof a more efficient substitute bya competitor, it may resort to

NPPA Sets 20% annual Cap for drug Price Rise

Drug price watchdog National Pharmaceutical Pricing Authority (NPPA) has decidedto invoke the ‘public interest’ clause in the drugs law more often to pressurecompanies to reduce prices of medicines that go up more than 20% in a year.

The pricing body has also decided to limit its communication with companies tojust one reminder asking them to respond to the show-cause notice on why thedrug should not be recommended for price control, sources told ET.

NPPA has now started scrutinising the fluctuations in the price-to-retailer of48,600 formulation packs every month. Every month, two to three formulations arelikely to get caught on an average.

So far, NPPA has recommended 45 cases of alleged abnormal price increase tothe Chemicals Ministry for appropriate action, on which the ministry has sent noticesto 11 companies asking them to reduce prices or face price control.

Source: Adopted from The Economic Times, Nov. 3, 2006

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discounting its products or runninga promotion campaign to liquidateits stock; and

(c) Attaining Product QualityLeadership: In this case, normallyhigher prices are charged to coverhigh quality and high cost ofResearch and Development.

Thus, the price of a firm’s productsand services is affected by the pricingobjective of the firm.

6. Marketing Methods Used: Pricefixation process is also affected byother elements of marketing such asdistribution system, quality ofsalesmen employed, quality andamount of advertising, salespromotion ef forts, the type ofpackaging, product differentiation,credit facility and customer servicesprovided. For example, if a companyprovides free home delivery, it hassome of flexibility in fixing prices.Similarly, uniqueness of any of theelements mentioned above gives thecompany a competitive freedom infixing prices of its products.

PHYSICAL DISTRIBUTION

The fourth important element ofmarketing mix is the physicaldistribution of products and services.It is concerned with making the goodsand services available at the rightplace, so that people can purchase thesame. There are two importantdecisions relating to this aspect—oneregarding physical movement of goodsfrom producers to consumers or usersand two, regarding the channels or

using intermediaries in thedistribution process. These aredescribed as follows:

Channels of Distribution

In case of large number of consumerproducts, the potential buyers arescattered over a wide geographical area.In order to contact these peopleefficiently and effectively, it is importantto take the help of number ofintermediaries as contacting themdirectly may not be cost effective andmay be difficult even otherwise. Forexample, a manufacturer of detergentpowder in Gujarat would find it verydifficult to directly approach customers,say in Delhi, Thiruvananthapuram,Bhuvaneshwar, Hyderabad Srinagarand other far off places. Therefore, he/she would supply a large quantity ofhis/her product to a big merchant, sayin Hyderabad. This big merchant wouldthen supply detergent powder torelatively small sellers in various townsof Hyderabad. These sellers would, inturn, resell the goods to customers. Inthis manner, goods are distributed fromthe place of production to the place ofconsumption. These people, institutions,merchants, and functionaries, who takepart in the distribution function, arecalled ‘Channels of Distribution’.(see figure on channels)

Channels of Distribution are set offirms and individuals that take title,or assist in transferring title, toparticular goods or services as itmoves from the producers to theconsumers. In other words, channelrefers to a team of merchants, agents,

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and business institutions thatcombine physical movement and titlemovement of products to reachspecific destinations.

Mostly goods and services aredistributed through a network ofmarketing channels. For example webuy merchandise of our need such assalt, bulb, tea, sugar, soap, paper,books, flour, etc., from retail sellers.

The channels bring economy ofeffort. This can be better understoodwith the help of an example. Let ussay you have to buy four things, viz.,Sugar, Bulb, Coffee and Ink. Mostprobably you would walk into aGeneral Merchant’s Shop and buy allthe articles form one place. Imaginewhat would happen if there were nomiddlemen or general merchantsavailable. In that case you would haveto buy directly from the manufacturersof these products. You will have tomake four contacts, each with theproducer of Sugar, Bulb, Coffee andInk. Compared to this, there was onlyone contact when all the things were

bought from the same generalmerchant. Now let us assume thatthere are four customers needing thesame four articles. In all sixteencontacts would have to be made. Incase middleman are used, as shownin the part II of the figure, only eightcontacts could be needed. Thus, useof middlemen brings economy of effort.This situation is illustrated in thepreceeding figure.

Apart from the economy of effort,middlemen help to cover largegeographical area and bring efficiencyin distribution, including transportation,storage and negotiation. They bringconvenience to customers as theymake various items available at onestore and also serve as authenticsource of market information as theyare in direct contact with the customer.

Functions of DistributionChannelsChannels of distribution smoothen theflow of goods by creating possession,place and time utilities. They facilitate

Channels of Distribution used for a Consumer Product

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movement of goods by overcomingvarious time, place and possessionbarriers that exist between themanufacturers and consumers. Theimportant functions performed bymiddlemen are as follows:

1. Sorting: Middlemen procuresupplies of goods from a variety ofsources, which is often not of the samequality, nature, and size. For example,a wholesaler of cashew nuts mayprocure a large quantity from differentcashew nut producing areas, whichwould contain nuts of varied qualityand sizes. He/She then sorts the nutsinto homogenous groups on the basisof the size or quality.

2. Accumulation: This functioninvolves accumulation of goods intolarger homogeneous stocks, whichhelp in maintaining continuous flowof supply.

3. Allocation: Allocation involvesbreaking homogenous stock intosmaller, marketable lots. For example,

once cashew nuts are graded and largequantities are built, these are dividedinto convenient packs of say 1 kg, 500gms and 250 gms, to sell them todifferent types of buyers.

4. Assorting: Middlemen buildassortment of products for resale.There is usually a difference betweenthe product lines made bymanufacturers and the assortment orcombinations desired by the users. Forexample, a cricket player may need abat, a ball, wickets, gloves, helmet, aT-shirt, and a pair of shoes. Perhapsno one manufacturer produces theseproducts in desired combination.Middlemen procure variety of goodsfrom different sources and deliver themin combinations desired by customers.

5. Product Promotion: Mostlyadvertising and other sales promotionactivities are organised bymanufacturers. Middlemen alsoparticipate in certain activities such asdemonstrations, special displays,

Economy of Efforts with the use of Channels

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contests, etc., to increase the sale ofproducts.

6. Negotiation: Channels operatewith manufacturers on the one handand customers one, the other. Arrivingat deals that satisfy both the partiesis another important function of themiddlemen. They negotiate the price,quality, guarantee and other relatedmatters with customers so thattransfer of ownership is properlyaffected.

7. Risk Taking: In the process ofdistribution of goods the merchantmiddlemen take title of the goods andthereby assume risks on account ofprice and demand fluctuations,spoilage, destruction, etc.

Types of ChannelsA manufacturer may choose fromdirect distribution to indirectdistribution and from a short channelconsisting of few intermediaries to along channel of distribution consistingof large number of middlemen. Eachform of channel network differs innumber and type of middlemeninvolved. The major types of channelsare as follows:

Direct Channel (Zero Level)

The most simple and the shortestmode of distribution is directdistribution, where in the goods aremade directly available by themanufacturers to customers, without

(i) Direct Channel (zero level)

Manufacturer Customer

Indirect Channel

(ii) One level Channel

Manufacturer Retailer Customer

(iii) Two level Channel

Manufacturer Wholesaler Retailer Customer

(iv) Three level Channel

Manufacturer Agent Wholesaler Retailer Customer

Types of Channels

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involving any intermediary. This isalso called zero level channel. Astraight and direct relationship isestablished between the manufacturerand the customer. For example, whena manufacturer sells his goodsthrough his own retail outlets (e.g., McDonald, Bata); it is referred to as directchannel. Similarly, mail order selling,internet selling and selling throughown sales force, (e.g., Eureka Forbes)are example of direct selling or zerolevel channel.

Indirect Channels

When a manufacturer employs one ormore intermediary to move goods fromthe point of production to the point ofconsumption, the distributionnetwork is called indirect. This maytake any of the following forms:

1. Manufacturer-Retailer Consumer(One Level Channel): In this form ofarrangement one intermediary i.e.,retailers is used between themanufacturers and the customers.That is, goods pass from themanufacture to the retailers who, inturn, sell them to the final users. Forexample, Maruti Udyog sells its carsand vans through company approvedretailers. This type of distributionnetwork enables the manufacturers tocover wide area of market whileretaining control over the Channels.

2. Manufacturer-Wholesaler-Retailer-Consumer (Two Level Channel): Thisis the most commonly adopteddistribution network for most

consumer goods like soaps, oils,clothes, rice, sugar and pulses. Herethe wholesaler and retailer function asconnecting links between themanufacturer and consumer. Use oftwo middlemen in the channelnetwork enables the manufacturer tocover a larger market area.

3. Manufacturer-Agent-Wholesaler-Retailer-Consumer (Three LevelChannel): In this case, manufactures usetheir own selling agents or brokers whoconnect them with wholesalers andthen the retailers. Thus, one more levelis added to the levels discussed in theproceeding arrangement. It is doneparticularly when the manufacturercarries a limited product line and hasto cover a wide market. An agent ineach major area is appointed, who inturn contact the wholesalers.

Factors Determining Choice ofChannels

Choice of appropriate channel ofdistribution is a very importantmarketing decision, which affects theperformance of an organisation.Whether an organisation will adoptdirect marketing channels or longchannels involving number ofintermediaries is a strategic decision.The choice of channels depends onvarious factors, which are discussedas follows:

1. Product Related Factors: Theimportant product relatedconsiderations in deciding thechannels include whether the product

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is an industrial or a consumerproduct, whether it is a perishable ora non-perishable product, what is theunit value of the product and thedegree of complexity of the product.

Industrial products are usuallytechnical, made to order andexpensive products purchased by fewbuyers. These products require shortchannels i.e., direct channel orinvolving few middlemen.

Consumer products, on the otherhand, are usually standardised, lessexpensive, less bulky, non-technicaland frequently bought products.These can be better distributed by longnetwork of channels, involving manymiddlemen. Perishable products likefruits, vegetables, and dairy productsare best sold through short channels,while non-perishable products liketoiletry products (e.g., soap,toothpaste, hair oil etc.), groceries

(vegetable oil, tea leaf etc.), fabricsrequire longer channels to reach widespread consumers.

If the unit value of a product is lowas in case of most convenienceproducts, long channels are preferredwhile in case of high value products,shorter channels may be used.Similarly, in case of complex productsrequiring technical details as in caseof most industrial or engineeringproducts, short channels are preferredbut if the product is a non-complexone, it is sold through long channels,involving number of intermediaries.

2. Company Characteristics: Theimportant company characteristicsaffecting the choice of channels ofdistribution include the financialstrength of the company and the degreeof control it wants to hold on otherchannel members. Direct sellinginvolves lot of funds to be invested in

India to have Variants of $ Store

It’s the cheap and cheerful concept that has worked all over the world. Now, itscoming to your friendly neighbourhood mall but retail marketers are offering it witha weak or two.

Though the concept, relatively new to the Indian market, retailers are trying toaggressively foray region’s low-cost daily-use retail segment. Idea is to enable acustomer buy a range of products its for or less than Rs 99. This being the template,retailers have introduced nations to suit there business models. The store range oflargely food, healthcare and products.

Home stores has gone a step further to introduce some interesting modificationsto the basic idea of a dollar-and-dime store. “We believe that pricing all products ata flat Rs 99 will be a rigid approach. We have introduced four different price slabs tomake it more attractive and reach a broader customer profile.

Homemaker’s group has modified the idea even further by introducing bargainpricing on its products with the help of a two-digit price band. So customers visitingthe Homemakers shops will not only get products between Rs 10 and Rs 99, theywill also have more price positioning options.

Source: Adopted from The Economic Times, Dec. 16, 2005

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fixed assets say for starting own retailoutlets or engaging large number ofsales force. Indirect selling throughintermediary does not involvedeployment of huge funds on theseaspects. Thus, if the firm has plenty offunds it may go for direct distribution.If spare funds are not available, it maygo for indirect channels.

Similarly if the management wantto have greater control on the channelmembers, short channels are used butif the management do not want morecontrol over the middlemen, it can goin for longer channel or large numberof intermediaries.3. Competitive Factors: The choiceof channel is also affected by thechannel selected by competitors in thesame industry. If the competitor’s haveselected a particular channel sayChemist shops for the sale of toiletryproducts like hair oil, the other firmmay also like to select the similarchannel. In some cases producers maywant to avoid the channels used bycompetitors. For example if othercosmetic producers have chosen bigretail stores for the sale of theirproducts, a particular firm may like toadopt door to door selling. Thus, it willdepend upon the policy of the firm –whether it wants to go with thecompetitors or be different from them.The changing global marketingenvironment has lead to adoption ofnewer channels. (see box)4. Market Factors: Important marketfactors affecting the choice of channelof distribution include size of market,geographical concentration of

potential buyers and quantitypurchased. In case the number ofbuyers is small, like for mostindustrial products, short channelsare used. But if the number of buyersis large, as in case of most convenienceproducts like soft drink, toothpasteetc., longer channels involving largenumber of intermediaries are used.

If the buyers are concentrated in asmall place, short channels may beused but if the buyers are widelydispersed over a large geographicalarea, longer channels may be used.Similarly if the size of order is small,as in case of most consumer products,large number of intermediaries maybe used. But if the size of order is large,direct channels may be used.

5. Environmental Factors: Otherimportant factors affecting the choiceof channels of distribution includeenvironmental factor such as economiccondition and legal constraints. In adepressed economy marketers useshorter channels to distribute theirgoods in an economical way.

PHYSICAL DISTRIBUTION

Once goods are manufactured,packaged, branded, priced, andpromoted, these must be madeavailable to customers at the rightplace, in right quantity and at the righttime. For example, a person convincedabout the quality etc. of a product, say,a detergent bar, wants to purchase thesame. He/She goes to a retail outletand asks for the product. If thatproduct is not available in that shop,

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he/she may purchase some of thealternative brand available. This waya sure sale is lost because goods werenot available at the place where thecustomer wanted to purchase. Thus,it is an important responsibility of themarketers to make the productphysically available at a place wherethe customers would like them to buy.The physical handling and movementof goods from place of production tothe place of distribution is referred toas physical distribution, which is a veryimportant element of marketing mix.

Physical distribution covers all theactivities required to physically movegoods from manufacturers to thecustomers. Important activities involvedin the physical distribution includetransportation, warehousing, materialhandling, and inventory control. Theseactivities constitute major componentsof physical distribution.

Components of PhysicalDistribution

The main components of physicaldistribution are explained as follows:

1. Order Processing: In a typicalbuyer -seller relationship orderplacement is the first step. Productsflow from manufacturers to customersvia channel members while orders flowin the reverse direction, fromcustomers to the manufacturers. Agood physical distribution systemshould provide for an accurate andspeedy processing of orders, in theabsence of which goods would reachthe customers late or in wrong quantity

or specifications. This would result incustomer dissatisfaction, with thedanger of loss of business and goodwill.

2. Transportation: Transportation isthe means of carrying goods and rawmaterials from the point of productionto the point of sale. It is one of themajor elements in the physicaldistribution of goods. It is importantbecause unless the goods arephysically made available, the salecannot be completed.

3. Warehousing: Warehousing refersto the act of storing and assortingproducts in order to create time utilityin them. The basic purpose ofwarehousing activities is to arrangeplacement of goods and providefacilities to store them. The need forwarehousing arises because there maybe difference between the time aproduct is produced and the time it isrequired for consumption. Generallythe efficiency of a firm in serving itscustomers will depend on where thesewarehouses are located and where arethese to be delivered.

Generally larger the number ofwarehouses a firm has, lesser wouldbe the time taken in serving customersat different locations but greater wouldbe the cost of warehousing and vice-versa. Thus the firm has to strike abalance between the cost ofwarehousing and the level of customerservice.

For products requiring long-termstorage (such as agricultural products)the warehouses are located nearproduction sites. This helps in

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minimising the charges ontransportation of the goods. On the otherhand, the products which are bulky andhard to ship (machinery, automobiles)as well as perishable products (bakery,meat, vegetables) are kept at differentlocations near the market.4. Inventory Control: Linked towarehousing decisions are the inventory

decisions which hold key to success formany manufacturers, especially thosewhere the perunit cost is high. A veryimportant decision in respect ofinventory is deciding about the level ofinventory. Higher the level of inventory,higher will be the level of service tocustomers but the cost of carrying theinventory will also be high because lot

Nothing Beats Word of Mouth in India

Nothing sways an Indian buyer’s choice more than a word of reassurance from thepeople he knows. Now even high octane media blitz. A global online survey conductedby ACNielsen puts word of mouth communication and referencing as the biggestinfluence than conventional advertising on consumers in their buying decisions. Inbig ticket purchases like cars, mobile phones and home loans, the study says thatalmost 50% of consumers in India rely on the references from their friends andrelatives while making their decisions.

The story is different in developed economies. Take the case of automobiles. Inmarkets like the US, Canada and Japan more people are influenced by conventionaladvertising by automobile companies, in developing markets like India, Malaysiaand Thailand it’s the neighbour or the colleague who tips the scales one way or theother. “In case of luxury goods, the psyche of Indians has always been different.Buying a car is a family decision, so it is only natural that all the members of thefamily will talk to all the other users of a similar products, who they know”, GeneralMotors India director P Balendran said:

“No wonder, large automakers in India spend as much on customer satisfactionas advertising, and recognitions like the JD Power Customer Satisfaction awardstaken so seriously.”

When the whole world is going crazy with Inter not and mobile marketing, it isinteresting that for Indians it’s still conventional advertising and word of mouthcampaigns that sways their choices. Unlike in the West, Indians come from a veryclosely-knit society where people get influenced by their peers, relatives and localcelebrities. People are more than willing to accept a brand if it’s endorsed by theirfavourite superstar or is recommended by their close associates,” AC Nielsen (southAsia) ED Sarang Panchal says:

“However, in markets like the US, previous experience with the products is thestrongest influencer overall and particularly when it came to buying cars (49%),choosing a banks (46%), mobile phone (39%) and loans (35%). World of mouth is apriority while buying weight loss products and mobile phones.”

Source: Adopted from Economic Times, Oct. 24, 2006

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of capital would be tied up in the stock.Thus, a balance is to be maintained inrespect of the cost and customersatisfaction. With advancements incomputers and information technologythe need for keeping higher inventoryis reducing and the new concept of Just-in-Time-Inventory decision is becomingpopular in an increasing number ofcompanies.

The decision regarding level ofinventory involves prediction aboutthe demand for the product. A correctestimate of the demand helps to holdinventory and cost level down to aminimum. This not only helps the firmin terms of the cash flows but also interms of its ability to maintainproduction at a consistent level.

The major factors determininginventory levels include:

(a) firm’s policy regarding the level ofcustomer service to be offered.Higher the level of service greaterwill be the need to keep moreinventories;

(b) degree of accuracy of the salesforecasts. In case more accurateestimates are available, the need

for keeping very high level ofinventory can be minimised;

(c) responsiveness of the distributionsystem i.e., ability of the systemto transmit inventory needs backto the factory and get products inthe market. In case the timerequired to respond to theadditional demand for theproducts is high there is a need tomaintain higher inventory. But ifthe additional demand can be metin less time, the need for inventorywill also be low; and

(d) cost of inventory, which includesholding cost such as cost ofwarehousing, tied up capital, etcand the manufacturing cost.

PROMOTION

A company may produce a good qualityproduct, price it appropriately and makeit available at the selling points, whichare convenient to customers. But inspite of all this, the product may notsell well in the market. There is a needfor developing proper communicationwith the market. In the absence ofcommunication, the customers would

M CA UR SK TE OT ME ER R

ADVERTISING PERSONAL SELLING

PUBLICITY SALES PROMOTION

Promotion Mix

Marketing Communications

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not be able to know about the productand how it can satisfy their needs andwants or may not be convinced aboutits utility and benefits.

Promotion refers to the use ofcommunication with the twin objectiveof informing potential customersabout a product and persuading themto buy it. In other words, promotionis an important element of marketingmix by which marketers makes use ofvarious tools of communication toencourage exchange of goods andservices in the market.

PROMOTION MIX

Promotion mix refers to combinationof promotional tools used by anorganisation to achieve itscommunication objectives. Varioustools of communication are used bythe marketers to inform and persuadecustomers about their firm’s products.These include: (i) Advertising, (ii)Personal Selling, (iii) Sales Promotion,and (iv) Publicity. These tools are alsocalled elements of promotion mix andcan be used in different combinations,to achieve the goals of promotion. Forexample consumer goods firms mayuse more of advertising through mass

media while the industrial goods firmsmay be using more of personal selling.What combination of these elementsis used by a firm will depend uponvarious factors such as nature ofmarket, nature product, thepromotions budget, objectives ofpromotion, etc. Let us first know aboutthese elements in some details.

ADVERTISING

We generally come across hundredsof advertising messages everyday,which tell us about various productssuch as toilet soaps, detergent powder,soft drinks and services such ashotels, insurance policies, etc.

Advertising is perhaps the mostcommonly used tool of promotion.It is an impersonal form ofcommunication, which is paid for bythe marketers (sponsors) to promotesome goods or service. The mostcommon modes of advertising are‘newspapers’, ‘magazines’, ‘television’,and ‘radio’.

The important distinguishingfeatures of advertising are as follows:

(i) Paid Form: Advertising is a paidform of communication. That is, thesponsor has to bear the cost of

Advertising

“If you’re trying to persuade people to do something, or buy something, it seemsto me you should use their language, the language in which they think.”

—David Ogilvy

“We find that advertising works the way the grass grows. You can never see it,but every week you have to move the lawn.”

—Andy Travis

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communicating with the prospects.

(ii) Impersonality: There is no directface-to-face contact between theprospect and the advertiser. It istherefore, referred to as impersonalmethod of promotion. Advertisingcreates a monologue and not adialogue.

(iii) Identified Sponsor: Advertising isundertaken by some identifiedindividual or company, who makesthe advertising efforts and alsobears the cost of it.

Merits of Advertising

Advertising, as a medium ofcommunication, has the followingmerits:

(i) Mass Reach: Advertising is amedium through which a largenumber of people can be reachedover a vast geographical area. Forexample, an advertisementmessage placed in a national dailyreaches lakhs of its subscribers.

(ii) Enhancing Customer Satisfactionand Confidence: Advertisingcreates confidence amongstprospective buyers as they feelmore comfortable and assuredabout the product quality andhence feel more satisfied.

(iii) Expressiveness: With thedevelopments in art, computerdesigns, and graphics, advertisinghas developed into one of the mostforceful medium of communication.With the special effects that canbe created, even simple products

and messages can look veryattractive.

(iv) Economy: Advertising is a veryeconomical mode of communicationif large number of people are to bereached. Because of its wide reach,the overall cost of advertisinggets spread over numerouscommunication links established.As a result the per-unit cost ofreach comes low.

Limitations of Advertising

The following are the major limitationsof advertising as a tool of promotion:

(i) Less Forceful: Advertising is animpersonal form of communication.It is less forceful than the personalselling as there is no compulsionon the prospects to pay attentionto the message.

(ii) Lack of Feedback: The evaluationof the effectiveness of advertisingmessage is very difficult as thereis no immediate and accuratefeedback mechanism of themessage that is delivered.

(iii) Inflexibility: Advertising is lessflexible as the message isstandardised and is not tailormade to the requirements of thedifferent customer groups.

(iv) Low Effectiveness: As the volumeof advertising is getting more andmore expanded it is becomingdif ficult to make advertisingmessages heard by the targetprospects. This is affecting theeffectiveness of advertising.

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OBJECTIONS TO ADVERTISING

In the proceeding sections, you havenoted the merits and limitations ofadvertising. Though advertising is oneof the most frequently used mediumof promotion of goods and services,it attracts lot of criticism. Theopponents of advertising say that theexpenditure on advertising is a socialwaste as it adds to the cost, multipliesthe needs of people and underminessocial values. The proponents,however, argue that advertising is

very useful as it increases the reach,brings the pay unit cost of productiondown and adds to the growth of theeconomy. It is therefore, important toexamine the major criticisms againstadvertising and see the extent towhich these are true. This is takenup as follows:

1. Adds to Cost: The opponents ofadvertising argue that advertisingunnecessarily adds to the cost ofproduct, which is ultimately passedon to the buyers in the form of high

Value AD

Government Shining

It’s not the heavy weight in the FMCG sector which are ruling the roost as topadvertisers on the tube, but surprisingly it’s the government departments andpublic sector units. Apart from Procter & Gamble, Bajaj Consumer Care, Joycoand Eicher Motors, the list of top advertisers across television and print isdominated by Sarkari outfits flaunting their new found passion for mass-medialed public communication.

Top Five Advertisers on Television

Ad Time(in ‘000 seconds)

Procter & Gamble Home Products 799Central Excise Department 375West Bengal Information and Culture 275Joyco India Ltd. 227Bajaj Consumer Care Ltd. 165

PrintAd Volume(Col.com in’000)

Sikkim/Royal Govt. Of Bhutan 416Ratan Ayurvedic Sansthan 388Government Of Mizoram 251Ministry Of Petroleum and Natural Gas 209Eicher Motors Ltd. 157

Source: Adopted from The Economic Times

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prices. An advertisement on TV, for afew seconds, for example, costs themarketers several lakhs of rupees.Similarly an advertisement in printmedia say in a newspaper or amagazine costs the marketers a largeamount of money. The money spentadds to the cost, which in animportant factor in fixation of the priceof a product.

True, advertisement of a productcosts lot of money but it helps toincrease the demand for the productas large number of potential buyerscome to know about the availabilityof the products, its features etc. andare persuaded to buy it. The increaseddemand leads to higher production,which brings with it the economies ofscale. As a result, the per unit cost ofproduction comes down as the totalcost is divided by larger number ofunits. Thus, the expenditure onadvertisement adds to the total costbut the per unit cost comes downwhich in fact lessens the burden ofconsumers rather than adding to it.

2. Undermines Social Values: Anotherimportant criticism of advertising isthat it undermines social values andpromotes materialism. It breedsdiscontent among people as they cometo know about new products and feeldissatisfied with their present state ofaffairs. Some advertisements show newlife styles, which don’t find socialapproval.

This criticism is not entirely true.Advertisement in fact helps buyers byinforming them about the newproducts, which may be improvement

over the existing products. If thebuyers are not informed about theseproducts, they may be using inefficientproducts. Further, the job of anadvertisement is to inform. The finalchoice to buy or not to buy anywayrests with the buyers. They will buy ifthe advertised product satisfies someof their needs. They may be motivatedto work harder to be able to purchasethese products.

3. Confuses the Buyers: Anothercriticism against advertisement is thatso many products are being advertisedwhich makes similar claims that thebuyer gets confused as to which oneis true and which one should be reliedupon. For example, we may notesimilar claims of whiteness or stainremoving abilities in competingbrands of detergent powder or claimsof whiteness of tooth or ‘feelings offreshness’ in competing brands oftoothpaste that it is sometimesconfusing to us as to which one to buy.

The supporters of advertisement,however, argue that we are all rationalhuman beings who make our decisionsfor purchase of products on factorssuch as price, style, size, etc. Thus thebuyers can clear their confusion byanalysing the information provided onthe advertisements and other sourcesbefore taking a decision to purchase aproduct. However, this criticism cannotbe completely overruled.

4. Encourages Sale of InferiorProducts: Advertising does notdistinguish between superior andinferior products and persuade peopleto purchase even the inferior products.

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In fact superiority and inferioritydepends on the quality, which is arelative concept. The desired level ofquality will depend on the economicstatus and preferences of the targetcustomers. Advertisements sellproducts of a given quality and thebuyers will buy if it suits theirrequirements. No advertisementshould however, make false claimabout the quality of a product. If a firmmakes a false claims it can beprosecuted for the same.

5. Some Advertisements are in BadTaste: Another criticism againstadvertising is that some advertise-mentsare in bad taste. These show somethingwhich in not approved by some peoplesay advertisements showing womendancing when not required or runningafter a man because he is wearing aparticular suit or using a particularperfume are certainly not good. Someadvertisements distort the relationshiplike employer employee and are quiteoffensive.

Celebrities’ Influence on Brands’ Performance

Example of ad campaigns featuring celebrities, which resulted in brand buildingand growth in volumes.

Cadbury’s and Amitabh Bachchan: The commercial, a testimonial by Bachchanon a factory visit, was launched to rebuild the trust in the brand. Twelve weeksafter the campaign was launched, the sales reached 90 per cent of volumes prior tothe worm crisis. Big B’s presence helped the company to get media coverage thatadded to the campaign’s impact.

Santro and Shah Rukh Khan: Shah Rukh was roped in Santro ad to strike animmediate bond with the consumers. Shah Rukh Khan is an unconventionalsuperhero with a quirky acting style that matched the image of Santro.

Titan and Aamir Khan: Both are considered to be Indian icons and have made amark internationally; the obsession with detail is common to both, as also a senseof style. The Mangal Pandey look, which was unconventional, made the advertisementstand out, along with the fact that Aamir is less exposed than the other celebrities.

Munch and Rani Mukherjee: The campaign for Munch was aired on TV roped RaniMukherjee to give “a big brand feel”. The company got incredibly good result inrecall and the ad was a big hit with kids. Rani was used as a consumer and not asa filmstar.

Sachin Tendulkar and Boost: Research indicated that the brand’s associationwith Sachin has consistently been successful in strengthening the brand’s corevalues and building brand stature. Kids look up to Sachin as a true hero, want toemulate everything that he does and can’t seem to get enough of him.

Source: Adopted from Indian Journal of Marketing, Oct. 5, 2006

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Personal Selling

‘Most people think ‘selling’ is the same as ‘talking’. But the most effectivesalespeople know that listening is the most important part of their job.’

—Roy Bartell

‘You don’t close a sale, you open a relationship if you want to build a long-term,successful enterprise.’

—Patricia Fripp

We have seen the views of theopponents and the proponents ofadvertising. There may be somechances of misuse of advertising as atool, which can be properlysafeguarded by the law or bydeveloping a code of conduct by theadvertisers, for their self regulation.However, most of the criticism againstadvertising are not entirely true. In thechanged economic environment ofglobalisation, advertising isconsidered as an important tool ofmarketing. It helps a firm in effectivelycommunicating with its target market,increasing the sale and there byreducing the per unit cost ofproduction. It is not a social waste,rather it adds value to the social causeby giving a boost to production andgenerating employment.

PERSONAL SELLING

Personal selling involves oralpresentation of message in the form ofconversation with one or moreprospective customers for the purposeof making sales. It is a personal form ofcommunication. Companies appointsalespersons to contact prospective

buyers and create awareness aboutthe product and develop productpreferences with the aim of making sale.

Features of Personal Selling

(i) Personal Form: In personal sellinga direct face-to-face dialogue takesplace that involves an interactiverelationship between the seller andthe buyer.

(ii) Development of Relationship:Personal selling allows asalesperson to develop personalrelationships with the prospectivecustomers, which may becomeimportant in making sale.

Merits of Personal Selling

(i) Flexibility: There is lot of flexibilityin personal selling. The salespresentation can be adjusted to fitthe specific needs of the individualcustomers.

(ii) Direct Feedback: As there is directface-to-face communication inpersonal selling, it is possible totake a direct feed back from thecustomer and to adapt thepresentation according to theneeds of the prospects.

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(iii) Minimum Wastage: The wastage ofefforts in personal selling can beminimised as company can decidethe target customers beforemaking any contact with them.

ROLE OF PERSONAL SELLING

Personal selling plays a veryimportant role in the marketing ofgoods and services. The importanceof personal selling to businessmen,customers and society may bedescribed as below.

Importance to Businessmen

Personal selling is a powerful tool forcreating demand for a firm’s productsand increasing their sale. Theimportance of personal selling to abusiness organisation may bedescribed as follows:

(i) Effective Promotional Tool:Personal selling is very effectivepromotional tool, which helps ininfluencing the prospects aboutthe merits of a product andthereby increasing its sale.

(ii) Flexible Tool: Personal selling ismore flexible than other tools ofpromotion such as advertisingand sales promotion. It helpsbusiness persons in adoptingtheir offer in varying purchasesituations.

(iii) Minimises Wastage of Efforts:Compared with other tools ofpromotion, the possibility ofwastage of efforts in personal

selling is minimum. This helpsthe business persons in bringingeconomy in their efforts.

(iv) Consumer Attention: There is anopportunity to detect the loss ofconsumer attention and interestin a personal selling situation.This helps a business person insuccessfully completing the sale.

(v) Lasting Relationship: Personalselling helps to develop lastingrelationship between the salespersons and the customers, whichis very important for achieving theobjectives of business.

(vi) Personal Rapport: Development ofpersonal rapport with customersincreases the competitive strengthof a business organisation.

(vii) Role in Introduction Stage:Personal selling plays veryimportant role in the introductionstage of a new product as it helpsin persuading customers aboutthe merits of the product.

(viii) Link with Customers: Sales peopleplay three different roles, namelypersuasive role, service role andinformative role, and thereby linka business firm to its customers.

Importance to Customers

This role of personal selling becomesmore important for the illiterate andrural customers, who do not havemany other means of getting productinformation.

The customers are benefited bypersonal selling in the following ways:

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(i) Help in Identifying Needs:Personal selling helps thecustomers in identifying theirneeds and wants and in knowinghow these can best be satisfied.

(ii) Latest Market Information:Customers get latest marketinformation regarding pricechanges, product availability andshortages and new productintroduction, which help them intaking the purchase decisions ina better way.

(iii) Expert Advice: Customers getexpert advice and guidance inpurchasing various goods andservices, which help them inmaking better purchase.

(iv) Induces Customers: Personalselling induces customers topurchase new products thatsatisfy their needs in a better wayand thereby helps in improvingtheir standards of living.

Importance to Society

Personal selling plays a veryproductive role in the economicprogress of a society. The more specificbenefits of personal selling to a societyare as follows:

(i) Converts Latest Demand:Personal selling converts latestdemand into effective demand. Itis through this cycle that theeconomic activity in the societyis fostered, leading to more jobs,more incomes and more productsand services. That is how

economic growth is influenced bypersonal selling.

(ii) Employment Opportunities: Personalselling offers greater income andemployment opportunities to theunemployed youth.

(iii) Career Opportunities: Personalselling provides attractive careerwith greater opportunities foradvancement and job satisfactionas well as security, respect,variety, interest and independenceto young men and women.

(iv) Mobility of Sales People: There isa greater degree of mobility insales people, which promotetravel and tourism in the country.

(v) Product Standardisation: Personalselling increases productstandardisation and uniformityin consumption pattern in adiverse society.

SALES PROMOTION

Sales promotion refers to short-termincentives, which are designed toencourage the buyers to makeimmediate purchase of a product orservice. These include all promotionalef forts other than advertising,personal selling and publicity, used bya company to boost its sales. Salespromotion activities include offeringcash discounts, sales contests, free giftoffers, and free sample distribution.Sales promotion is usually undertakento supplement other promotionalef forts such as advertising andpersonal selling.

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Companies use sales promotiontools specifically designed to promoteto customers (e.g., free samples,discounts, and contests), tradesmenor middlemen (e.g., cooperativeadvertising, dealer discounts anddealer incentives and contests) andto sales person (e.g., bonus, salesmencontests, special of fers). Salespromotions include only thoseactivities that are used to provideshort term incentives to boost thesales of a firm.

Merits of Sales Promotion

(i) Attention Value: Sales promotionactivities attract attention of thepeople because of the use ofincentives.

(ii) Useful in New Product Launch:Sales promotion tools can be veryeffective at the time of introductionof a new product in the market. Itinduces people to break away fromtheir regular buying behaviour andtry the new product.

(iii) Synergy in Total PromotionalEfforts: Sales promotion activitiesare designed to supplement thepersonal selling and advertisingefforts used by a firm and add tothe over all effectiveness of thepromotional efforts of a firm.

Limitation of Sales Promotion

(i) Reflects Crisis: If a firm frequentlyrely on sales promotion, it may givethe impression that it is unable tomanage its sales or that there areno takers of its product.

(ii) Spoils Product Image: Use of salespromotion tools may affect theimage of a product. The buyers maystart feeling that the product is notof good quality or is notappropriately priced.

Commonly used Sales PromotionActivities

1. Rebate: Offering products at specialprices, to clear off excess inventory.Example, a car manufacturer’s offer tosell a particular brand of car at adiscount of Rs 10,000, for a limitedperiod.

2. Discount: Offering products at lessthan list price. Example, a shoecompany’s offer of ‘Discount Up to50%’ or a shirt marketer’s offer of‘50+40% Discount’.

3. Refunds: Refunding a part of pricepaid by customer on some proof ofpurchase, say on return of emptyfoils or wrapper. This is commonlyused by food product companies, toboost their sales.

4. Product Combinations: Offeringanother product as gift along with thepurchase of a product, say offer of apack of ½ kg of rice with the purchaseof a bag of Aatta (wheat flour), or ‘Get128 KB Memory Card Free with aDigicam’ or Buy a TV of 25+ and Get aVacuum Cleaner Free’ or ‘100 Gm Bottleof Sauce Free With 1 kg Detergent.’

5. Quantity Gift: Offering extraquantity of the product commonlyused by marketer of toiletry products.For example, a shaving cream’s offerof ‘40% Extra’ or A Hotel’s offer of

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“Take a 2 Night 3 Days Package At theHotel and Get an Extra Night Stay AtJust Rs 500” or ‘Buy 2 Get 1 Free’ offerof a marketer of shirts.

6. Instant Draws and Assigned Gift:For example, ‘Scratch a Card’ or ‘Bursta Cracker’ and instantly win a

Refrigerator, Car, T-shirt, Computer,with the purchase of a TV.

7. Lucky Draw: For example, the offerof a bathing soap to win a gold coinon lucky draw coupon for free petrolon purchase of certain quantity ofpetrol from given petrol pump or lucky

Sales Promotion

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draw coupon on purchase of easyundergarment and win a car offer.

8. Usable Benefit: ‘Purchase goodsworth Rs 3000 and get a holiday packageworth Rs 3000 free’ or ‘Get a DiscountVoucher for Accessories on ApparelPurchase of Rs 1000 and above.’

9. Full finance @ 0%: Manymarketers of consumer durables suchas Electronic goods, automobiles etcoffer easy financing schemes such as‘24 easy instalments, Eight Up Frontand 16 To Be Paid as Post DatedCheques’. However, one should becareful about the file charges, whichsometimes is nothing but interestrecovered in advance.

10. Sampling: Offer of free sample ofa product, say a detergent powder ortooth paste to potential customers atthe time of launch of a new brand.

11. Contests: Competitive eventsinvolving application of skills or luck,say salving a quiz or answering somequestions.

PUBLICITY

Publicity is similar to advertising, inthe sense that it is a non-personal formof communication. However, as againstadvertising it is a non-paid form ofcommunication. Publicity generallytakes place when favourable news ispresented in the mass media about aproduct or service. For example, if amanufacturer achieves a breakthroughby developing a car engine, which runs

on water instead of petrol, and thisnews is covered by television or radioor newspapers in the form of a newsitem. It would be termed as publicitybecause the engine manufacturerwould benefit from such disseminationof information about its achievementby the media but would not bear anycost for the same. Thus, the twoimportant features of publicity are that:

(i) Publicity is an unpaid form ofcommunication. It does not involveany direct expenditure by themarketing firm; and

(ii) There is no identified sponsor forthe communication as the messagegoes as a news item.

In publicity, as the information isdisseminated by an independentsource, e.g., the press in the form ofnews stories and features, themessage has more credibility than ifthat comes as a sponsored messagein advertising.

Also, as the message goes in theform of a news rather than direct salescommunication, it can reach even tothose persons who otherwise may notpay attention to paid communication.

However, an important limitationof publicity is that as a medium ofpromotion, it is not within the controlof a marketing firm. The media wouldcover only those pieces of information,which are news worthy and whichsymbolise some achievement in thefield. Thus, a firm can’t use publicityto actively promote its products.

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Difference between Advertising and Personal Selling

S. Advertising Personal SellingNo.

Personal selling is a personal form ofcommunication.

In personal selling, the sales talk isadjusted keeping view customer’sbackground and needs.

Personal selling is highly flexible. asthe message can be adjusted.

Only a limited number of people canbe contacted because of time and costconsiderations.

The cost per person is quite high inthe case of personal selling.

Personal selling efforts take a lot oftime to cover the entire market.

Personal selling makes use of salesstaff, which has limited reach.

Personal selling provides direct andimmediate feed back. Sales personscome to know about the customers’reactions immediately.

Personal selling plays important roleat the awareness stage of decisionmaking.

Personal selling is more helpful inselling products to the industrialbuyers or to intermediaries such asdealers and retailers who are relativelyfew in numbers.

1. Advertising is an impersonal form ofcommunication.

2. Advertising involves transmission ofstandardised messages, i.e., samemessage is sent to all the customersin a market segment.

3. Advertising is inflexible as themessage can’ t be adjusted to theneeds of the buyer.

4. It reaches masses, i.e., a large numberof people can be approached.

5. In advertising the cost per personreached is very low.

6. Advertising can cover the market in ashort time.

7. Advertising makes use of mass mediasuch television, radio, newspaper, andmagazines.

8. Advertising lacks direct feedback.Marketing research efforts are neededto judge customers’ reactions toadvertising.

9. Advertising is more useful in creatingand building interest of theconsumers in the firms products.

10. Advertising is more useful inmarketing to the ultimate consumer’swho are large in numbers

The major differences between advertising and personal selling are as follows:

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SUMMARY

In the traditional sense, the term ‘market’ refers to the place where buyersand sellers gather to enter into transactions involving the exchange of goodsand services. But in modern marketing sense, it refers to a set of actual andpotential buyers of a product or service.

What is Marketing: The term marketing has been described as performanceof business activities that direct the flow of goods and services from producersto consumers. Marketing is not merely a post-production activity. It includesmany activities that are performed even before goods are actually producedand continue even after the goods have been sold.

In Modern Times: Marketing is described as a social process by whichindividual groups obtain what they need and want through creating offeringsand freely exchanging products and services of value with others. Marketingis not merely a business phenomena or confined only to business organisations.Marketing activities are equally relevant to non-profit organisations

What can be Marketed: Anything that is of value to the other can be marketed.It can be a product or a service or a person or a place or an idea. It can also bean experience, properties, events, information or organisation.

Marketing management means management of the marketing function. It refersto ‘The art and science of choosing target markets and getting, keeping andgrowing customers through creating, delivering and communicating superiorcustomer value of management.’

Marketing and Selling: Many people confuse ‘selling’ for ‘marketing’. However,selling is only a part of the process of marketing. The main focus of selling ison affecting transfer of title and possession of goods from sellers to users.Marketing activities put greater thrust on maximising customer’s satisfaction.

KEY TERMS

Marketing Brand Mark Market Packaging

Marketing Management Labelling Marketing MixChannels of Distribution Marketing Offering Physical Distribution

Consumer Product Promotion Industrial ProductPromotion Mix Convenience Product Advertising

Shopping Product Personal Selling Speciality ProductPublicity Generic Name Sales Promotion

Brand Brand Name Trade Mark

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Marketing Management Philosophies: The different business philosophiesor concepts guiding the marketing efforts are: (i) Production Concept whichassumes that availability and affordability of the product are the key to thesuccess of a firm and puts greater emphasis on improving the production anddistribution efficiency of the firms. (ii) Product Concept assumes that productimprovement is, the key to profit maximisation of a firm; (iii) Sales Conceptassumes that the customers would not buy, or not buy enough, unless theyare adequately convinced and motivated to do so, It is believed that aggressiveselling and promotional efforts are important to make customers buy theirproducts. (iv) Marketing Concept implies that focus on satisfaction of customer’sneeds is the key to the success of any organisation in the market. (v) TheSocietal Marketing Concept is the extension of the marketing concept assupplemented by the concern for the long-term welfare of the society.

Functions of Marketing: The important functions of marketing includeGathering and Analysing Market Information, Marketing Planning, ProductDesigning and Development, Standardisation and Grading, Packaging andLabelling, Branding, Customer Support Services, Pricing of Products,Promotion, Physical distribution, Transportation, Storage or Warehousing.

Role of Marketing: By adopting marketing orientation, an organisationwhether profit making or non-profit making, can achieve its goals in the mosteffective manner. Also marketing acts as a catalyst in the economic developmentof a country and helps in raising the standards of living of people.

Marketing Mix is a set of marketing tools that the firm uses to pursue itsmarketing objectives in a target market. The variables or elements of marketingmix have been classified in to four categories, popularly known as four Ps ofmarketing viz., Product, Price, Place and Promotion. These elements arecombined to create an offer.

Product: In common parlance, the word ‘product’, is used to refer only to thephysical or tangible attributes of a product. In marketing, product is a mixtureof tangible and intangible attributes, which are capable of being exchangedfor a value, with ability to satisfy customer needs. It is anything that can beoffered to a market to satisfy a want or need. Products may broadly be classifiedinto two categories—industrial products and consumers’ products. Products,which are purchased, by the ultimate consumers or users for satisfying theirpersonal needs and desires are referred to as consumer products. On thebasis of shopping efforts involved, the products are classified as ConvenienceProduct, Shopping Products and Speciality Products. On the basis of theirdurability, consumer products have been classified into categories—Durable,Non-durable and Services.

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Those activities, benefits or satisfactions, which are offered for sale, e.g., drycleaning, watch repairs, hair cutting, are called services.

Industrial products are those products, which are used as inputs in producingother products. These are broadly classified in to (i) Materials and Parts, (ii)Capital Items, and (iii) Supplies and Business Services.

Generic name refers to the name of the whole class of the product. For example,a book, a wristwatch, and tyre. A brand is a name, term, sign, symbol, designor some combination of them, used to identify the products—goods or servicesof one seller or group of sellers and to differentiate them from those of thecompetitors. That part of a brand, which can be spoken, is called a brandname.

That part of a brand which can be recognized but which is not utter able iscalled brand mark. Brand mark appears in the form of a symbol, design,distinct colour scheme or lettering. Brand or part of a brand that is given legalprotection is called trademark.

A good brand name should be short, easy to pronounce, spell, recognize andremember; Should suggest the product’s benefits and qualities; be distinctive;be adaptable to packing or labelling requirements; be sufficiently versatile toaccommodate new products; be capable of being registered and protected legallyand have staying power i.e. it should not get out of date.

Packaging: The act of designing and producing the container or wrapper of aproduct is referred as packaging. There can be three different levels ofpackaging. viz Primary package, Secondary packaged, Transport package.Packaging performs a number of functions in the marketing of goods. Some ofthe important functions, include Product identification; Product protection;Facilitating the use of the product and Promotion of goods and services.

Labelling: A simple looking but important task in the marketing of goodsrelates to designing the label to be put on the package. The label may varyfrom a simple tag attached to the product to complex graphics that are part ofthe package. The most important functions of labels include i) describing theproduct ii) help in identifying the product or brand; iii) help in grading theproducts into different categories; and aids in promotion of the products.

Pricing: Price may be defined as the amount of money paid by a buyer orreceived by a seller in consideration of the purchase of a product or service.Generally, if the price of a product is increased, its demand comes down,and vice-versa. Pricing is considered to be an effective competitive weapon.It is also the single most important factor affecting the revenue and profitsof a firm.

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The factors affecting price determination are (i) Product Cost (ii) The Utilityand Demand (iii) Competition (iv) Government and Legal Regulations and v)Marketing Methods Used.

Physical Distribution: There are two important decisions relating to this aspect-one regarding physical movement of goods and two, regarding the channels.

Channels of Distribution are set of firms and individuals that take title, orassist in transferring title, to particular goods or services as it moves from theproducers to the consumers. Channels of distribution smoothen the flow ofgoods by creating possession, place and time utilities. The important functionsperformed by middlemen are: (i) Sorting; (ii) accumulation; (iii) allocation; (iv)assorting; (v) product promotion; (vi) negotiation; and (vii) risk taking:

Types of Channels: (I) Direct distribution channels are those where in thegoods are made directly available by the manufacturers to customers, withoutinvolving any intermediary; include (II) Indirect Distribution Channels includei. Manufacturer - Retailer – Consumer (One Level Channel) ii. Manufacturer -Wholesaler - Retailer- Consumer (Two Level Channel) iii. Manufacturer - Agent- Retailer- Consumer (Three Level Channel) Factors Determining Choice ofChannels include i. Product Related Factors; ii. Company Characteristics iii.Competitive Factor iv. Market Factor; and v. Environmental Factor.

Physical Distribution Covers all the activities required to physically movegoods from manufacturers to the customers. The main component of physicaldistribution are. i. Order Processing; ii. Transportation; iii. Warehousing; andiv. Inventory Control: Just-in-Time-Inventory.

Promotion: Promotion refers to the use of communication with the twinobjective of informing potential customers about a product and persuadingthem to buy it. There are four major tools, or elements of promotion mix,which are. (i) Advertising, (ii) Personal Selling, (iii) Sales Promotion, and (iv)Publicity. These tools are used in different combinations to achieve the goalsof promotion.

Advertising is the most commonly used tool of promotion. It is an impersonalform of communication, which is paid for by the marketers (Sponsors) topromote some goods or service. The merits of advertising, as a medium ofcommunication, include i. Mass reach ; ii. Enhancing customer satisfactionand confidence iii. Expressiveness; and iv. Economy

The limitations of advertising are that it is (i) less forceful (ii) lacks Feedback(iii) inflexibility (iv) low effectiveness The most common Objections to Advertisingare that it i. adds to cost; ii. undermines social Values; iii. confuses the buyers;and iv. encourages sale of Inferior Products:

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Most of the criticisms against advertising are not fully true. Advertising istherefore considered an essential function of marketing.

Personal Selling involves oral presentation of message in the form ofconversation with one or more prospective customers for the purpose of makingsales. Personal Selling plays important role for the business persons as wellas for the society

Sales Promotion refers to short-term incentives, which are designed toencourage the buyers to make immediate purchase of a product service. Theseinclude promotional efforts other than advertising, personal selling andpublicity, used by a company to boost its sales. Commonly used Sales PromotionActivities include Rebate, Discount, Refunds, Product Combinations, QuantityGift, Instant Draws and Assigned Gift, Lucky Draw, Usable Benefit, Full Finance@ 0%, sampling, and contests

Publicity is similar to advertising, in the sense that it is a non-personal form ofcommunication. However, as against advertising it is a non-paid form ofcommunication. In publicity, as the information is disseminated by anindependent source. However, an important limitation of publicity is that as amedium of promotion, it is not within the control of a marketing firm.

EXERCISES

Very short answer questions

(i) Explain the advantages of branding to marketers of goods and services.

(ii) List the characteristics of a good brand name.

(iii) What is the societal concept of marketing?

(iv) List the characteristics of convenience products.

(v) Enlist the advantages of packaging of a consumer products.

(vi) What are the limitations of a advertising as a promotional tool? Enlist

(vii) List five shopping products purchased by you or your family duringthe last few months.

Short answer question

(i) What is marketing ? What functions does if play with process ofexchange of goods and services? Explain.

(ii) Distinguish between the product concept and production concept ofmarketing.

(iii) Product is a bundle of utilities? Do you agree? comment.

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(iv) What are industrial products? How are they different from consumerproducts? Explain.

(v) Distinguish between convenience product and shopping product.

(vi) ‘Products is a mixture of tangible and intangible attributes’. Discuss

(vii) Describe the functions of labeling in the marketing of products

(viii) Discuss the role of intermediaries in the distribution of consumer nondurable products.

(ix) Explain the factors determining choice of channels of distribution.

(x) Explain briefly the components of physical distribution.

(xi) Define advertising. What are its main features? Explain.

(xii) Discuss the role of ‘sales promotion’ as an element of promotion mix.

Long answer type questions

(i) Define Marketing. How is it different from selling? Discuss

(ii) What is the Marketing concept? How does it help in the effectivemarketing of goods and services.

(iii) What is marketing mix? What are it main elements? Explain.

(iv) How does branding help in Creating product differentiation? Does ithelp in marketing of goods and services? Discuss

(v) What are the factors affecting determination of the price of a productor service? Explain

(vi) What do you mean by ‘channels of distribution’ ? What functions dothey play in the distribution of goods and service? Explain

(vii) Explain the major activities involved in the physical distribution ofproducts.

(viii) ‘Expenditure on advertising is a social waste’ Do you agree? Discuss

(ix) Distinguish between advertising and personal selling.

Projects/Assignment

(i) Visit in a team of four-five students to different marketing organisationsin your locality (retailers, wholesalers, distributors etc). Find whatmarketing activities are undertaken by them. Do you find any differencein the activities in the organisations visited by you? What commonactivities are found in these organisations? Write a report.

(ii) Collect ten advertisements appearing in newspapers, magazines etcabout recent sales promotional schemes about some consumers durable

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or non durable products of your choice. Also collect some promotionalmaterial about these products written on the package of these products(cartons/wrappers/bottles etc.) and write important features of thescheme in your notebook. Make a presentation in your class about thesales promotional schemes.

Application based questions

(i) As marketing manager of a big hotel located at an important touristdestination, what societal concerns would be faced by you and whatsteps would you plan to take care of these concerns? Discuss.

(ii) Suppose you are the marketing vice president of an insurance company,planning to design a new mediclaim policy for senior citizens. Whatinformation would you like to collect to perform this task and how willyou collect such information? Discuss.

(iii) What shopping products have been purchased by you/your family inthe last six months. Make a list and specify what factors influenced thepurchase of each of these products.

(iv) What information is generally placed on the package of a food product.Design a label for one of the ford product of your choice.

(v) For buyers of consumer durable products, what ‘customer care services’would you plan as a manager of a firm marketing new brand ofmotorcycle, Discuss.

Case Problems

Nokia takes four-lane road to consumers.

NEW DELHI: After having grabbed a king-size 79% share of the Rs 15,000-crore mobile handset market in India, Nokia India has found a new way ofconnecting people.

The mobile handset manufacturer has embarked upon a brand new retailstrategy that is based on a classification of its consumers into four majorgroups that separates people in terms of usage, income level and lifestyle.

The classification is based on an extensive survey – the Nokia SegmentationStudy —that was carried over two years involving 42,000 consumers from 16countries. It studied the impact lifestyle choices and attitudes have on themobile devices consumers buy and how they use them.

The strategy, which was announced globally in June last year, is beingunfolded in India now. While the nitty-gritty of the new strategy is still being

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worked out, it is likely that the company would follow separate marketingstrategies for the four different segments. The advertising campaigns could bedifferent for the segments.

Nokia’s entire product portfolio has now been re-aligned towards thesefour groups to address the specific needs of each. The first of these segmentsLive, aimed a first time users whose basic need is to stay in touch with voiceas the main driver, would have basic handsets low on features and price.

“These may be functional phones but the target group for these phonesrange from SEC C (low socio-economic class) to SEC A1+ (very high socio-economic class) markets,” says Nokia India marketing head Devinder Kishore.The second segment Connect looks at more evolved users who look for morefunctionality and features and connectivity. Accordingly, phones in thissegment would have GPRS, camera and music capabilities.

The next two categories, Achieve and Explore, are aimed at high-end usersand have Nokia’s top-end handsets. For example, Achieve segment looks atenterprise users who need to have business functionalities in their phones.Nokia’s new E-series has been put under this segment with handsets havingQWERTY keyboards and full Internet capabilities.

Aimed at high-end lifestyle users, Explore would be the most prominentsegment for the company in the coming years. Says Nokia India multimediabusiness director Vineet Taneja, “This segment would see the most vibrantgrowth in the coming year. It will look at five different areas – applications,imaging, mobile TV, music and gaming. We are fast developing the ecosystemto support these areas.”

Nokia acquired music solution and content provider LoudEye and GPSsolution provider Gate5. It is all slated to launch its most high-profile handset,which boasts of having a 5 mega pixel camera and GPS capabilities apartfrom iPod quality music, in February.

Says Taneja, “There is increasing demand for convergence and multiplefunctionalities in high-end handsets. The N-series will try to address that.”Nokia feels that the new platform strategy wherein different handsets arelaunched under a platform, like the N-Series, will become a status and stylestatement and drive numbers.

Source: www.economictimes.indiatimes.com

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Question

1. Identify the four market segments that Nokia plans to address as per thenews report above.

2. What is the basis of classification of the market used by the company?

3. What do you mean by realignment of product portfolio? Illustrate thisfrom the case above.

4. Identify the points that can be highlighted in marketing campaigns foreach segment.

5. What are the different considerations in the mind of consumers of eachsegment while purchasing mobile phones as given in the above case?