M.M.S.

SEMESTER - II (CBCS)

MARKETING MANAGEMENT

SUBJECT CODE : UMMSII.1

 © UNIVERSITY OF MUMBAI
Prof. Suhas Pednekar
Vice Chancellor
University of Mumbai, Mumbai.
Prof. Ravindra D. Kulkarni Prof. Prakash Mahanwar
Pro Vice-Chancellor, Director
University of Mumbai. IDOL, University of Mumbai.

Programe Co-ordinator : Ms. Rajashree Pandit

Assistant Professor (Economics),
Head Faculty of Commerce & Management,
IDOL, University of Mumbai, Mumbai.

Course Co-ordinator : Mitali Nimkar

Assistant Professor (Management Studies),
IDOL, University of Mumbai, Mumbai.

Course Writers : Mr. Krishnakant Lasune

Assistant Professor,
Sheila Raheja School of Business Management & Research,
24, Rd Number 2, Kherwadi, Bandra East,
Mumbai, Maharashtra 400051.

: Mr. Kaustubha Kishorkumar Sawant

Assistant Professor,
R. C. Patel ET’s Institute of Management Research and
Development, Shirpur, Maharashtra.

: Mr. Sumit Shivaji Sagale

Assistant Professor,
R. C. Patel ET’s Institute of Management Research and
Development, Shirpur, Maharashtra.

: Mr. Vijay Ramesh Garge

Assistant Professor,
R. C. Patel ET’s Institute of Management and Research and
Development, Shirpur Dist. Dhule, Maharashtra.

August 2022, Print I

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 CONTENTS
Unit No. Title Page No

1. Introduction to Marketing Concept 1

2. Understanding the Basics 13

3. Marketing Environment 21

4. Market Research 32

5. Consumer Buying Process & Organizational Buying Behavior 44

6. Pillars of Marketing 60

7. Marketing Mix and Product Decision 70

8. New Product Development Process 83

9. Pricing Decisions 94

10. Distribution Decisions - Logistics and Channel Decisions

(Retail, E-Commerce Etc.) 109

11. Promotion Decisions 123

12. Personal Selling and Sales Management 136

13. Overview of Marketing Strategies 146

14. Case Study and Presentation 164

*****
 1
INTRODUCTION TO MARKETING
CONCEPT
Unit Structure
1.0 Objectives
1.1 Introduction to Marketing Concepts
1.2 The Traditional Concept of Marketing.
1.3 The Modern Concept of Marketing
1.4 Objectives of Marketing
1.5 Evolution Of Marketing
1.6 Importance of Marketing
1.7 Functions of Marketing
1.8 Summary
1.9 Test Your Knowledge
1.10 Questions
1.11 References

1.0 OBJECTIVES
 To understand basis terminology in marketing.
 To understand traditional and modern concept of marketing.
 To understand objectives of marketing.
 To understand evolution of marketing.
 To understand importance of marketing.
 To understand the functions of Marketing

1.1 INTRODUCTION TO MARKETING CONCEPTS

Meaning of Market:
A market is a place which allows the purchaser and the seller to invent and
gather information and lets them carry out exchange of various products
and services. In other words the Meaning of Market refers to a place
where the trading of goods takes place. The place can be a market place or
a street market.

Definition of Marketing:
According to Philip Kotler – ―The science and art of exploring, creating
and delivering value to satisfy the needs of a target market at a profit.
Marketing identifies unfulfilled needs and desires. It defines measures and
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Marketing Management quantifies the size of the identified market and the profit potential. It
pinpoints which segments the company is capable of serving best and it
designs and promotes the appropriate products and services.‖
According to American Marketing Association – ―Marketing is the
activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large.‖

Selling:
Selling is a transaction where a good or service is being exchanged for
money. It also refers to the process of persuading a person or organization
to buy something.

Product:
Product as something that is created through a process and provides
benefits to market.
A product is tangible (visible). It has physical existence. By acquiring a
product a person may acquire an asset, e.g., a television, refrigerator, table,
chair etc. A product may be capable of being reused for a certain time.
Examples are soap, toothbrush, etc.

Service:
A service is the action of doing something for someone or something. It is
largely intangible. A service tends to be an experience that is consumed at
that point where it is purchased, and cannot be owned since it is quickly
perishable. Example — Transport, medical, legal, etc.
Philip Kotler defines marketing management as
―Marketing Management is the analysis, planning, implementation and
control of programmes designed to bring about the desired exchanges with
target audiences for the purpose of personal and mutual gain. It relies
heavily on adoption and coordination of the product, price, promotion and
place for achieving response‖:

1.2 THE TRADITIONAL CONCEPT OF MARKETING.

1. Exchange Concept: Under this exchange concept, products are
exchanged between buyer and seller.
2. Production Orientation Concept: In nearly 1930 the producer feel
that if a company produced a good quality product & the price of the
product is reasonably cheap or affordable, the product would sell in
the market with less effort.
3. Product Concept: Under this concept, idea is that consumer will
prefer only those products which are high or good in quality,
performance and are innovative. Here manufacturer focused on
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 manufacturing superior product and improving the quality of the Introduction to Marketing
products. Concept

4. Sales Orientation Concept: After 1930 people are diverted from

agriculture to industry, due to this mass production is possible. This
resulted in an increase in production. Supply of product in the market
increases comparatively the demand of products in the market is less
& the market turned into a buyer’s market. Every producer focused on
how to increase sales and how their product will compete with
competitor’s product.

1.3 THE MODERN CONCEPT OF MARKETING.

1. Consumer Orientation Concept:
This concept came into existence around the 1950’s when manufacturer
realized that it would not be possible to sell everything which is
manufactured. Then manufacturer have to think about requirement of the
consumers and it is understood with the help of the research which is
important function of marketing. This concept is based on the following
assumptions.
a. The firm should produce only those products which are desired or
demanded by customer.
b. Manufacturer should think about long term profit rather than quick
sales.

2. Socially-oriented Marketing Concept:

The concept of Social Marketing was accepted by all manufacturers in
1960’s & 70’s by all over the world. This concept mainly focused on
customer’s satisfaction & social welfare. In this regard, the manufacturer
focused on fulfilling requirement of consumers along with social benefits
of it. For example manufacturer of automobile must manufacture not only
a good vehicle but one which releases least pollution.

1.4 OBJECTIVE OF MARKETING

The objectives of Marketing have following objectives viz. Consumer
Objective and Company Objective:

1. Consumer Objective:
a. To understand the needs of present customers & potential customers.
b. To make available right products, at right time, at right place, at right
quantity to satisfy wants of the consumers.
c. To create satisfied customers.

2. Company Objectives:
a. To carry out right kind of research to find out consumer needs. 3
Marketing Management b. To manufacture goods which really needed by customer.
c. To make available right kind of goods in right time, at right place, in
required quantities & at the right price.
d. To create satisfied customers to make them permanent customer of
the company.

1.5 EVOLUTION OF MARKETING:

1. The Exchange Concept:
When a product is sold or service is offered for a certain value, exchange
takes place. Exchange can be in the form of barter or for money. This
concept revolves around the exchange process only. It is a narrow concept
of marketing. The motive is profit maximization only. The sellers do not
consider the requirements of the consumers. They believe that as long as
there are commodities in the market, the consumer will buy them. This is a
traditional concept. It is in practice only in certain third world countries.

2. The Production Concept:

The production concept revolves around the production process. It is
based on the concept that buyers will buy the product if it is available at a
cheaper price. This concept works on the idea that if the production is
efficiently increased then per unit cost of production will reduce. The
motive is profit maximization only. This concept is applicable only in a
sellers’ market as it ignores quality of product, consumer needs, customer
relations, market research, competition etc. It can be applicable for
products whose features are not an important deciding factor for purchase.

3. The Product Concept:

The product concept was more advanced as compared to the initial
concepts of marketing. This concept is product centric. The idea is to
improve the product quality to increase the demand. Although the quality
is improved, it does not consider the requirements of the consumers. The
motive is profit maximization.

4. The Selling Concept:

The selling concept initiated the focus on the selling aspect of marketing.
Under this concept, more aggressive promotional techniques were used by
sellers. This would be helpful in pushing the product in the market and
attract consumers. Publicity, sales promotion and other selling techniques
were used. However this concept revolves around the seller and not the
consumer. The motive here is profit maximization only.

5. The Marketing Concept:

In this concept, the attention finally shifted to consumers. This concept is
revolved around consumer. The purpose is to identify needs and wants of
consumers and satisfying them as efficiently as possible. The organization
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understood the importance of customer loyalty in order to survive in the Introduction to Marketing
market for a long term. Although profit maximization is a motive, other Concept
aspects are also taken into consideration. These include customer
satisfaction, market research, consumer relationship, target market etc.
According to this concept, consumer welfare and satisfaction is the key to
success.

6. The Societal Concept:

This concept was developed when the organizations realized the
importance of social welfare. Along with profit motive and consumer
welfare it is equally important to consider the aspect of societal welfare.
This concept encouraged the use of eco-friendly methods of production.
Also, it gave birth to various research and development projects in order to
make goods which are environment-friendly along with being consumer
friendly.

7. The Relationship Marketing Concept:

A healthy and long lasting relationship with all the stakeholders is the
main idea of this relationship marketing concept. These stakeholders are
employees, dealers, suppliers, distributors, financers, shareholders, society
and also consumers. The stakeholders of an organization are the main
strength of the organization. Without support of the stakeholders, the
organization will collapse. For the success and prosperity of an
organization it is necessary to build strong relations with all the
stakeholders.

8. The Holistic Concept:

The Holistic Concept is a wider concept of marketing. Holistic means all
encompassing. It comprises of four main factors:

1. Integrated Marketing:
Integrated marketing means inter-linked marketing. Marketing function is
inter-linked with other functions which are performed in an organization
like planning, staffing, financing, production etc. For example, in order to
launch a new product in the market, it is necessary to conduct market
research, identify understand the consumer’s requirement and the
competitors. Depending on the results of the research, product with certain
requirement, quantity of products to be produced needs to be decided. This
will affect function of production department. In order to produce
particular quantity, raw material will have to be purchased. This will result
in additional cash outflow and hence will affect function of finance
department. Similarly manpower is required to produce product, this result
in staffing of manpower so will affect function of HR department.

2. Relationship Marketing:
Stakeholders include consumers, employees, dealers, suppliers,
distributors, financers, shareholders, etc. They are the essence of an
organization. Without support of the stakeholders, the organization will 5
Marketing Management collapse. For the success and prosperity of an organization it is necessary
to build strong relations with all the stakeholders. E.g. If the consumers
are unhappy, they may not purchased product. If the employees are
unhappy, they may not be able to work with same efficiency and
productivity. If the financers are not satisfied, they will not invest.

3. Internal Marketing:
Employees are the most important pillars of any organization. If the
employees are satisfied, they will give excellent results. It is important to
have a well-trained and self-motivated workforce to increase Optimum
utilization of human resource is possible only if the employees understand
the objectives of their organization

4. Performance Marketing:
Performance Marketing focuses on improving the performance of an
organization. Performance of an organization can be achieved by reducing
costs, increasing sales, improving brand loyalty, quality of product,
enhancing customer satisfaction etc.

1.6 IMPORTANCE OF MARKETING

Marketing is important for not only firm but also society. There are some
benefits of marketing for firm and society as follows.

Benefits to Firm:
1. It helps in earning & increasing profit: Main aim of every firm is to
earn profit. Marketing helps the firm to increase in profit through
advertising & sales promotional activities & reducing cost through
conducting market research.
2. Marketing helps in Planning & decision making: Every business
organization has to take important decisions like what to produce,
how to produce, where to produce, when to produce & how these
goods & services are made available to the customers. To get answer
to all these questions planning and decision are need to be taken by
marketing department. So Marketing helps in planning & decision
making.
3. Marketing provides goods to ultimate consumer: The marketing
process bridges the gap between producer & consumer. It is the duty
of marketing people to deliver the product from manufacturer to the
final consumers through various channels of distribution such as
direct channel or indirect channel of distribution.
4. Marketing is a source of new ideas: Marketing gives the detail idea
of current business environment i.e. demands of customers, tastes &
preferences of customers, prices of competitions through market
research. An organization also get source of information from their
dealers, suppliers etc.
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Benefits to Society: Introduction to Marketing
Concept
1. Marketing improves the Standard of living of the society: The
main objective of the marketing is to satisfy human wants. Marketing
creates demand & increases demand for new products & services,
which ultimately improves the standard of living of the people.
2. It provides employment: In India large number of population is
engaged in marketing activities directly or indirectly. Large numbers
of peoples are engaged in Market research, wholesale trade, retail
trade, transportation (distribution), warehousing, advertisement,
Publicity & promotion etc. Thus marketing provides employment
opportunities to society.
3. It stabilizes the economic conditions: When supply exceeds demand
and demand exceeds supply means more production with less demand
& less production with more demand both situations are harmful to
society. A efficient marketing makes balance in between demand and
supply (production), through creating demand & by distributing goods
to consumer, thus it solves the problem of imbalance economic
conditions.
4. Marketing increases National Income: Marketing creates demand for
new & existing products. If demand of goods increase production also
increases. If production goods & services increase the National
Income of a country also increases.

1.7 FUNCTIONS OF MARKETING

The marketing process performs certain activities as the goods or services
move from manufacturer to consumer. Every firm does not perform all
these activities or jobs. However, any company that wants to operate its
marketing system successfully must carry them out. The following
marketing tasks have been recognized for a long time.

1. Buying and Assembling:

Buying is first step in the process of marketing. It involves what to buy,
what quality, how much, from whom, when and at, what price. People in
business buy to increase sales or to decrease costs. Purchasing agents are
much influenced by quality, service and price. The products that the
retailers buy for resale are determined by the need and preferences of their
customers. After buying all the materials purchased it should be collected
at a central place, it is called assembling. Assembling is required for all
kinds of products whether they are agriculture product, consumer product
of Industrial product.

2. Selling:
It is concerned with the persuasion of potential buyers to actually
complete the purchase of an product or service. Selling is important part in

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Marketing Management final aim of earning profit. Selling is enhanced by means of personal
selling, advertising, publicity and sales promotion.

3. Transportation:
Transport is the physical means, whereby goods are moved from the place
of production to the place of consumption. It creates place utility.
Transportation is essential from the procurement of raw materials & for
the delivery of finished products to the customers’ places. Marketing relies
mainly on road transport, rail transport, waterways, pipelines and air
transport etc. The type of transportation is chosen on several
considerations such as suitability, speed and cost.

4. Storage:
It involves the holding of goods in proper condition after they are
produced until they are needed & demanded by consumers in case of
finished products or by the production department in case of raw materials
and stores. Storing protects the goods from deterioration and helps in
carrying over surplus for future consumption or use in production. Goods
may be stored in various warehouses situated at different places. Storing
assumes greater importance when production is seasonal or consumption
may be seasonal. Retail firms are called ―stores‖. Stores create time utility.

5. Branding, Packaging and Labeling:

“A brand is a name, symbol, term, design of any combination of these
which is used for popularizing the product & to identify the product of
particular seller “Packaging is the group of activities which involves,
designing or producing the container or wrapper for a product.‖ “Labeling
is affixing a small slip on the product, which gives information regarding
Name & address of the manufacturer, contents, price, batch number,
manufacturing and expiry date etc.‖ For E.g. Kinderjoy has established
itself as a brand for children. It’s packaging and labeling is attractive for
kids especially because of the unique egg shaped package and the free toys
inside.

6. Risk Taking:
Risk means lose due to some unforeseen circumstances in future. Risk-
bearing in marketing refers to the financial risk inherent in the ownership
of goods held for an anticipated demand, including the possible losses due
to a fall in price and the losses from spoilage, depreciation, obsolescence,
fire and floods or any other loss that may occur with the passage of time.
From production of goods to its selling stage, many risks are involved due
to changes in market conditions, natural causes and human factors.
Changes in fashions or interventions also cause risks. Legislative measures
of the government may also cause risks.

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7. Advertising: Introduction to Marketing
Concept
American Marketing Association has defined, ―Advertising is any form of
non-personal presentation and promotion of ideas, goods and services by
an identified sponsor.‖
1. Any form: The advertising is any form of communication. It may be
a symbol, sign or message in newspaper, magazines, on television,
radio advertisement, outdoor, advertising or direct mail; or new media
such as websites and text messages.
2. Paid Form: It means advertising is a paid transaction.
3. Non-Personal Presentation: Advertising is not a personal selling &
person to person presentation but it is a non personal presentation i.e.
advertising is addressed to a mass audience.
4. Identified Sponsor: Sponsor is agency through which advertising is
made.
Examples: Print ads, radio, television, billboard, brochures and catalogs,
signs, in-store displays, posters, motion pictures, Web pages, banner ads,
etc.
For eg. Fevikwik launched its advertisement with a tag-line of ―Todo
nahin, jodo‖ during world cup match. The advertisement presented a
humorous way of presenting the message of human bonding.

8. Market Research:
According to American Marketing Association, ―Marketing Research is
the function that links the consumer, customer and public to the marketer
through information-information used to identify and define marketing
opportunities and problems, generate, refine and evaluate marketing
actions; monitor marketing performance; and improve understanding of
marketing as a process.‖ Market research is the collection and analysis of
information about consumers, competitors and the effectiveness of
marketing programs. In other words, market research allows businesses to
make decisions that make them more responsive to customers' needs and
increase profits. While market research is crucial for business start up, it's
also essential for established businesses. It's accurate information about
customers and competitors that allows the development of a successful
marketing plan.

9. Marketing Management:
Marketing management is ―the art and science of choosing target markets
and building profitable relationships with them.‖ Creating, delivering and
communicating superior customer value is key. Marketing management is
the conscious effort to achieve desired exchange outcomes with target
markets. The marketer’s basic skill lies in influencing the level, timing,
and composition of demand for a product, service, organization, place,
person, idea, or some form of information. Marketing Management is
9
Marketing Management defined as the analysis, planning, implementation, and control of programs
designed to create, build, and maintain beneficial exchanges with target
buyers for the purpose of achieving organizational objectives.

1.8 SUMMARY
Success of a business largely depends on the success of marketing because
marketing is a field in business that makes the whole organization ready to
serve the customers. There are various definitions to marketing. We can
generalize the definition, through the definition of the famous marketing
author, Phillip Kotler who defines marketing as the science and art of
exploring, creating and delivering value to satisfy the needs of a target
market at a profit.
It is a process of identifying consumer needs, developing products and
services to satisfy consumer needs, making these products and services
available to the consumer through an efficient distribution network and
promoting these products and services to obtain greater competitive
advantage in the market place. According to American Marketing
Association- ―Marketing is the activity, set of institutions, and processes
for creating, communicating, delivering, and exchanging offerings that
have value for customers, clients, partners, and society at large.‖
The exchange, production, product and sales concept are traditional
concepts of marketing. The consumer and socially oriented concept are
modern concept of marketing. They are production concept, product
concept, selling concept, marketing concept and societal concept.

1.9 TEST YOUR KNOWLEDGE

1. Marketing is defined by the American Marketing Association as the
activity, set of institutions, and processes for ______, ________,
________, and __________ offerings that have value for customers,
clients, partners, and society at large.
(a) Making, Arranging, Maintaining and Selling
(b) Creating, Communicating, Delivering, and Exchanging
(c) Creating, Advertising, Selling, and Transferring
(d) Performing, Displaying, Offering, and Exchanging
2. Aggressive selling is a characteristic of which of the following
concept of marketing?
(a) Production concept
(b) Marketing concept
(c) Selling concept
(d) Product concept
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3. Adding new features to a product is advocated by which of the Introduction to Marketing
approaches? Concept

(a) Product Approach

(b) Production Approach
(c) Marketing Approach
(d) Selling Approach
4. A place where goods are bought and sold against the price
consideration between the buyers and the sellers is called ______
(a) Exchange
(b) Market
(c) E-commerce
(d) Transaction
5. Which of the following is a name, term, sign, symbol, design, or a
combination of these, that identifies that maker or seller of a product
or service?
(a) Label
(b) Co-brand
(c) Brand
(d) Product

1.9 QUESTIONS
Q.1 What is Marketing? Explain traditional and modern concept of
Marketing.
Q.2 Explain Evolution of Marketing.
Q.3 Explain the importance of Marketing.
Q.4 Explain the functions of Marketing.
Q.5 What are objectives and benefits of marketing.

1.10 REFERENCES
 Kotler, P., Keller, K. L., Ang, S. H., Tan, C. T., & Leong, S. M.
(2018). Marketing management: an Asian perspective. Harlow:
Pearson.

 Saxena, R. (2005). Marketing management. Tata McGraw-Hill

Education.
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Marketing Management  Karunakaran, K. (2008). Marketing management. Himalaya
Publishing House.

 Kotler, Philip, ―Marketing Management - Analysis, Planning,

Implementation, and Control‖, PHI, New Delhi.

 Namakumari S, and Ramaswamy, V.S., ―Marketing Management‖,

MacMillan Publishers, New Delhi.

 Skinner, J., S. Steven, ―Marketing‖, Houghton Miami Company,

Boston.

 Dawn Iacobucci, ―Marketing Management‖, Cengage Learning.

*****

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 2
UNDERSTANDING THE BASICS
Unit Structure
2.0 Objectives
2.1 Introduction
2.2 Core Marketing Concepts
2.3 Company orientation towards the marketplace
2.4 Summary
2.5 Questions
2.6 References

2.0 OBJECTIVES
1. To understand the core marketing concepts
2. To understand the company orientation towards the marketplace

2.1 INTRODUCTION
In the business world „marketing‟ is all pervasive. It involves marketing of
products and services. The study of marketing is remarkably interesting in
the perception that everybody of us have performed marketing activities in
one form or other. The main objective of marketing is to satisfy the
customer. It is essential for the entrepreneurs to identify the customers,
establish a rapport with them, identify their needs and deliver the goods
and services that would meet their requirements. Customers are ready to
pay to an organization in return for the delivery of goods and services.
Customers can named in many terms, such as subscriber, students, client,
patient etc The terminology can imply something about the relationship
between a firm and its customers, so the term „patient‟ implies a caring
relationship „passenger‟ implies an ongoing responsibility for the safety of
the customer, and „client‟ implies that the relationship is governed by a
code of ethics (formal or informal).

2.2 CORE MARKETING CONCEPTS

1) Concept of Need, Want and Demand:
Marketing process deals with understanding consumer „needs and wants‟.
The customer is understood to be the person who makes the decision to
purchase a product, and/or who pays for it. In fact, products are often
bought by one person(customer), consumed by another(consumer),
therefore the customer and consumer need not be the same person. For
example, Educational Institute must market themselves not only to
prospective students, but also to their parents, careers counsellors, local
employers, and government funding agencies. In these circumstances it
13
Marketing Management can be difficult to identify on whom an organizations marketing effort
should be focused.

Needs:
Human needs are vital to their survival. According to Need Hierarchy
Theory of Maslow (1943). Needs can be categorized as:
a) Psychological and Security Need: It includes food, water, shelter,
cloth and security, protection
b) Social and Esteemed Need: Sense of belonging to a society and
affection (includes need for education, entertainment, health care,
insurance, banking etc.
Esteemed Need includes self-esteem, status, recognition.
c) Self-Actualization: Self-development and realization
Consumers are influenced by their desire to satisfy their complex needs,
and these should be the pinpoint for all marketing activity. We no longer
live in a society in which the main motivation of individuals to satisfy the
above consumer needs. The needs specified above are critical to the
human life and as such must be satisfied. It can be said that whatever is
needed by humans do not need aggressive advertising because consumer
will always buy it.
Human beings will try to satisfy their most important needs first. When a
person succeeds in satisfying an important need, he or she will then try to
satisfy the next -most-important need. „Need‟ refers to something that is
deep-rooted in an individual‟s personality. How individuals go about
satisfying that need will be conditioned by the cultural values of the
society to which they belong. In some cultures the need for self-fulfilment
may be satisfied by a religious penance, while other societies may seek it
through a development of their creative talents.

Wants:
Wants is human desire which can either be fulfilled (if consumer can
afford it) or not ( if the consumer cannot afford it). These desires are likely
to change as our desires are known to change with time, when we get to a
new place or society, or as we grow up over the years. Also, the culture we
belong to and our individual personalities also mold our desires. Wants are
not critical but they complement needs. ( Kotler & Armstrong, 2012)

Demand:
I have a desire and I can afford to pay the price tag attached to it, then I
have created a demand for that want. Demand occurs when one is able to
financially afford a product as this automatically opens up a market where
we can avail ourselves of goods and or services that can satisfy our wants
(Kotler & Armstrong, 2012)

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 Understanding the Basics

Source: Walter, 2016

For Ex:- Mobile
Mobile before the generation it is treated as luxury. But as a technological
advancement, now has become an product that is crucial for survival in
this information age.
Need: Mobile if for communication such as dialing/ receiving calls,
sending/receiving messages
Wants: Use of smartphone is desire as I would like to do such as dialing/
receiving calls, sending/receiving messages additionally we wants more
features such as Larger/Notch Display, memory, HD Camera, touch screen
etc
Once customers can afford to pay for an Apple, Samsung, MI, One Plus
etc then firms create a demand for that mobile which firm has to meet.

2) Target Markets, Positioning, and Segmentation:

Marketers therefore identify distinct segments of buyers by identifying
demographic, psychographic, and behavioral differences between them.
They then decide which segment(s) present the greatest opportunities. For
each of these target markets, the firm develops a market offering that it
positions in target buyers‟ minds as delivering some key benefit(s).
(Kotler and Keller , 2016)

15
Marketing Management Examples:

 Volvo develops its cars for the buyer to whom safety is a major
concern, positioning them as the safest a customer can buy.

3) Offerings and Brands:

Companies address customer needs by putting forth a value proposition, a
set of benefits that satisfy those needs. The intangible value proposition is
made physical by an offering, which can be a combination of products,
services, information, and experiences.
A brand is an offering from a known source. A brand name such as Apple
carries many different kinds of associations in people‟s minds that make
up its image: creative, innovative, easy-to-use, fun, cool, iPod, iPhone, and
iPad to name just a few. All companies strive to build a brand image with
as many strong, favorable, and unique brand associations as possible.
(Kotler and Keller , 2016)

4) Marketing Channel:
The marketer uses three kinds of marketing channels for reach to a target
market, such as:

 Communication channels: It involves to deliver and receive

messages from target buyers. Communication channel includes
newspapers, magazines, radio, television, mail, telephone, smart
phone, billboards, posters, fliers, CDs, audiotapes, and the Internet.
Beyond these, firms communicate through the look of their retail
stores and Web sites and other media, adding dialogue channels such
as e-mail, blogs, text messages, and URLs to familiar monologue
channels such as ads.

 Distribution channels: It helps to display, sell, or deliver the physical

product or service(s) to the buyer or user. These channels may be
direct via the Internet, mail, or mobile phone or telephone or indirect
with distributors, wholesalers, retailers, and agents as intermediaries.

 Service channels: It includes warehouses, transportation companies,

banks, and insurance companies. Marketers clearly face a design
challenge in choosing the best mix of communication, distribution,
and service channels for their offerings. (Kotler and Keller , 2016)

5) Value and Satisfaction:

The buyer chooses the offerings he or she perceives to deliver the most
value, the sum of the tangible and intangible benefits and costs. Value, a
central marketing concept, is primarily a combination of quality, service,
and price), called the customer value triad. Value perceptions increase
with quality and service but decrease with price. We can think of
marketing as the identification, creation, communication, delivery, and
monitoring of customer value. Satisfaction reflects a person‟s judgment of
a product‟s perceived performance in relationship to expectations. If
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16
performance falls short of expectations, the customer is disappointed. If it Understanding the Basics
matches expectations, the customer is satisfied. If it exceeds them, the
customer is delighted. (Kotler and Keller, 2016)

6) Marketing Environment:
The marketing environment consists of the Internal environment and the
External environment. The Internal environment includes Human
Resources & Internal Relationship, Company Image, Management
Structure, Physical Assets, Financial Resources, Marketing Resources etc
The External environment consists Micro and Macro Environment. Micro
Environment consist of Consumers, suppliers, Competitors, Middlemen,
Public
Macro Environment consist of components: demographic environment,
economic environment, social-cultural environment, natural environment,
technological environment, and political-legal environment.

2.3 COMPANY ORIENTATION TOWARDS THE

MARKETPLACE
The marketing concept and philosophy is one of the simplest ideas in
marketing, and at the same time, it is also one of the most important
marketing philosophies. At its very core are the customer and his or her
satisfaction. The marketing concept and philosophy states that the
organization should strive to satisfy its customers' wants and needs while
meeting the organization's goals. In simple terms, "the customer is king".
Given these new marketing realities, following are the marketing
philosophy that guides a company‟s marketing efforts

Marketing Philosophies 17
Marketing Management 1) Production Concept:
The production concept is one of the oldest concepts in business. It holds
that consumers prefer products that are widely available and inexpensive.
Managers of production-oriented businesses concentrate on achieving high
production efficiency, low costs, and mass distribution. This orientation
has made sense in developing countries such as China, where the largest
PC manufacturer, Legend (principal owner of Lenovo Group), and
domestic appliances giant Haier have taken advantage of the country‟s
huge and inexpensive labour pool to dominate the market. Marketers also
use the production concept when they want to expand the market.

For example:

 Coke is widely available throughout the world

 A company manufactures sugar because it knows that in the end

consumers will surely buy sugar.

2) Product Concept:
The product concept assumes that consumers will buy the product that
offers them the highest quality, the best performance, and the most
features. A product orientation leads a company to try constantly to
improve the quality of its product. Organizations that are devoted to the
product concept of marketing, believe that consumers would automatically
favour for products of high quality. The managers of these organizations
spend considerable time money and energy on R & D to introduce quality
and variations in products.
Two companies which stand apart from the crowd when we talk about the
product concept are Apple and Google. Both of these companies have
strived hard on their products and deliver us feature rich, innovative and
diverse application products and people just love these brands.
The marketers can add any kind of attribute to their products but if the
consumers are not aware of regarding the availability, how can they go for
purchasing that particular product. This phenomenon gave birth to another
concept i.e. selling concept.

3) Selling Concept:
The Selling Concept intends that customers, individuals or organizations
will not buy enough of the organization„s products unless they are
persuaded to do so through selling effort. Organizations should undertake
selling and promotion of their products for marketing success. The
consumers typically are inert and they need to be forced for buying by
converting their inert need in to a buying motive through persuasion and
selling action. The main aim is to sell what they make rather than make
what the markets wants. Such marketing carries high risks. It focuses on
creating sales transactions rather than on building long term, profitable
relationships with customers. This approach is applicable in the cases of
18
18
unsought goods like life insurance, vacuum cleaner, firefighting Understanding the Basics
equipment‟s including fire extinguishers.

4) Marketing Concept:
The marketing concept is a customer-centered, sense and respond
philosophy. The job is to find not the right customers for your products,
but the right products for your customers. Dell doesn‟t prepare a PC or
laptop for its target market. Rather, it provides product platforms on which
each person customizes the features he or she desires in the machine. The
marketing concept holds that the key to achieving organizational goals is
being more effective than competitors in creating, delivering, and
communicating superior customer value to your target markets.

For example:
Pepsi and Coke – Both of these companies have similar products. Both the
companies have different value proposition. These companies thrive on
the marketing concept. Where Pepsi focuses on youngsters, Coke delivers
on a holistic approach. Also the value proposition by Coke has been better
over ages as compared to Pepsi which shows that coke especially thrives
on the marketing concept, i.e. it delivers a better value proposition as
compared to its competitor.

5) Societal Marketing Concept:

This concept says that firm is to determine the needs, wants, and interests
of target markets and to deliver the desired satisfactions more effectively
and efficiently than competitors (this is the original Marketing Concept).
Additionally, it focuses on enhancing and preserving the consumer‟s and
society‟s wellbeing. The organization believes in giving back to the
society by producing better products targeted towards society welfare. It is
an opportunity for organisation to enhance their image, reputation, raise
brand awareness, increase customer loyalty, build sales, and increase press
coverage. According to Societal Marketing Concept, products should be
Less Toxic, More Durability with Reusable or Recyclable Material

2.4 SUMMARY
In this unit you have learnt about the various market orientations, core
concepts and market philosophies. You have seen that in the changing
market environment with changing customer behaviour and seeking
business opportunities, companies face marketing challenges on a daily
basis. The core concepts talk about the customers wherein the marketers
need to differentiate between the needs, want and demands of a customer.
Once this is identified it becomes easier to target the market. It is essential
for the organizations to realize the importance of marketing philosophies
and which philosophy would suit their business needs. Without studying
the environment in which you operate you cannot follow any marketing
philosophy.

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Marketing Management
2.5 QUESTIONS
1. What are the various core concepts of marketing?
2. Describe in detail the various philosophies of marketing.
3. Define marketing management? Also discuss the various levels of
demand and the task of a marketing manager thereto.
4. Do all companies need to practice the marketing concept? Could you
cite companies that do not need this orientation?
5. Give an example of a good, service, and idea that you have recently
purchased.

2.6 REFERENCE
1. Stanton, Etzel and Walker- Fundamentals of marketing (TMH)
2. Philip Kotler- Marketing Management (PHI)
3. Philip Kotler and Armstrong- Principles of marketing (PHI)
4. Ramaswamy and Namakumari- Marketing management (Macmillan)
5. Namakumari S, and Ramaswamy, V.S., “Marketing Management”,
MacMillan Publishers, New Delhi.
6. Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,
Boston.
7. Dawn Iacobucci, “Marketing Management”, Cengage Learning
8. Kotler and Keller , 2016- Marketing Management, Pearson
Publication

*****

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 3
MARKETING ENVIRONMENT
Unit Structure
3.0 Objectives
3.1 Introduction
3.2 Definition and Meaning of Marketing Environment
3.3 Constituents of Marketing Environment
3.4 Environmental Scanning Techniques in Marketing Management
3.4 Opportunities in Rural
3.5 Summary
3.6 Questions
3.7 References

3.0 OBJECTIVES
1) To Understand of the Marketing environment
2) To know the factors of Marketing Environment
3) To acquaint knowledge about the Environmental Scanning
Techniques in Marketing Management
4) To compare various opportunities available in various sectors.

3.1 INTRODUCTION
Managers are facing difficulty and exciting challenges today due to a
dynamic environment. The challenges for today‟s and tomorrow‟s
managers is to be aware of specific changes in business environment,
along with the factors affecting such changes and their likely impact on
the businesses. Coverage of product and service quality has been
significantly increased. Diversity among consumers has also increased
rapidly where managers are challenged to manage this diversity by
keeping themselves abreast of the latest happenings. Managers who know
more than just management are required today. Those who can value
people, communicate well, solve problems, see the big picture and work
hard are the precious human resource that is the requirement by the
organisations. A manager, who can visualize these changes and
understand the dynamic character of marketing environment can survive
in the market.

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Marketing Management 3.2 DEFINITION AND MEANING OF MARKETING
ENVIRONMENT
1) “A company‟s marketing environment consists of the internal factors
& external forces, which affect the company‟s ability to develop &
maintain successful transactions & relationships with the company‟s
target customers.”- According to Philip Kotler

2) “Environment consists of factors that are largely if not totally,

external and beyond the control of individual industrial enterprise and
their managements. These are essentially the „givers‟ within which
firms and their management must operate in a specific country and
they vary, often greatly, from country to country”. - According to
Barry M. Richman and Melvgn Copen

3) “as the process by which strategists monitor the economic,

governmental, market, supplier, technological, geographic, and social
settings to determine opportunities and threats to their firms”.
According to William F. Glucck

4) “Marketing environment consists of all the forces outside an

organization that directly or indirectly influence its marketing
activities, includes competition, regulation, politics, society, economic
conditions, and technology”. - According to Skinner

From the above definitions we can extract that marketing environment

consists of factors that are internal and external environment which may
create threats to a business organization, or it provides opportunity for
exploitation. In business all operations are conducted to satisfy the needs
of the consumers. It poses a huge challenge for today and especially
tomorrow‟s businessmen/ businesswomen and managers to be aware of
specific changes to keep themselves abreast of the latest happenings in the
field of business to ensure their survival and sustainability in the market.
Therefore, the study of marketing environment is of utmost importance for
the managers and practitioners.

3.3 CONSTITUENTS OF MARKETING ENVIRONMENT

Every business firm consists of a set of internal factors, and it also
confronts with a set of external factors. An assortment of environmental
forces affects a company‟s marketing arrangement. A few of them are
manageable while others are unmanageable. It is the task of the marketing
manager to modify the firm‟s policies together with the changing
environment. Micro and macro environment consist of the structure of the
marketing environment. The following figure gives a clearer and more
comprehensive picture about the different factors.

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 Marketing Environment

3.3.1 Internal Environment:

There are number of factors which influence various strategies and
decisions within the firm‟s boundary. These factors are known as internal
factors and are given below:

(a) Human Resources:

The expression „human resource‟ refers to People. It is most critical
resource in an organisation. It is the process of employing people, training
them, compensating them, developing policies relating to them, and
developing strategies to retain them that is necessary for organisational
success. It focuses that people are valuable resources requiring careful
attention and nurturing. The organisation‟s strengths and weaknesses are
also determined by the skill, quality, morale, commitment, and attitudes of
the employees.

(b) Company/ Corporate Image:

A corporate image of a company can be defined as an image
that people hold in their mind about the company, its products, and its
services. The corporate image of a company is referred to as the reputation
of the company in the market place or how others view it outside the
company. The opinion of your customers about your company is highly
influenced by the corporate image of your company in the market. The
image of the company also matters in certain other decisions as well like
forming joint ventures, entering contracts with the other company or
launching new products etc. Therefore, building company image should
also be a major consideration for the managers.

(c) Management Structure:

A management structure describes how a company organizes its
management hierarchy. In almost all organizations, a hierarchy exists.
This hierarchy determines the lines of authority, communications, rights,
and duties of that organization. It also determines how the roles, power
and responsibilities are assigned, controlled, and coordinated, and how
information flows between the various levels of management. Within an
organization, the structure differs, depending on Board, Middle and Lower 23
Marketing Management management. Therefore, the composition of board of directors and
nominees of different financial institutions could be very decisive in
several critical decisions. The extent of professionalisation is also a crucial
factor while taking business decisions.

(d) Physical Assets:

Enjoy economies of scale, smooth supply of produced materials, and
efficient production capacity are some of the key factors of business which
in turn depends upon the physical assets of an organisation. These factors
should always be kept in mind by the managers because these play a vital
role in determining the competitive status of a firm or an organisation.

(e) R & D and Technological Capabilities:

The organisations which are using appropriate technologies enjoy a
competitive advantage over their competitors. The organisations which do
not possess strong Research and Development departments always lag in
innovations which are a prerequisite for success in today‟s business.
Therefore, R & D, and technological capabilities of an organisation
determine a firm‟s ability to innovate and compete.

(f) Marketing Resources:

The organisations which possess a strong base of marketing resources like
talented marketing men/women, strong brand image, smart salespersons,
identifiable products & service, wider and smooth distribution network
and high quality of product support and marketing support services make
effortless inroads in the target market. The companies which are strong on
above-mentioned counts can also enjoy the benefits of brand extension,
form extension and new product introduction etc. in the market.

(g) Financial Factors:

The performance of the organisation is mainly depending on certain
financial factors like capital structure, financial position etc. Organisation
develops strategies and takes major decision based on the financial factor.
The survival of the organisation (private or public sector) mainly based on
the financial position of the organisation.

3.3.2 External Environment:

Organisation operates in the external environment as well that forces and
shape opportunities as well as threats. These forces represent
“uncontrollable” in nature which the organisation must monitor and
respond to. SWOT (Strengths, weaknesses, opportunities and threats)
analysis is very much essential for the business policy formulation which
one could do only after examination of external environment. The external
business environment consists of macro environment and micro
environment.

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(A) Micro Environment: Marketing Environment

It is the organisation‟s immediate environment where routine activities are

affected by the certain factors. Consumers, Suppliers, Competitors and the
Public consist in Micro environment. It is not necessary that the micro
factors affect all the firms. Some of the factors may affect a particular firm
and do not disturb the other ones. So, it depends on what type of industry a
firm belongs to. Now let‟s discuss in brief some of the micro
environmental factors.

(a) Suppliers:
Suppliers are another important component of the micro environment.
Organizations depend on many suppliers for equipment, raw material, etc.
to maintain their production. Suppliers can influence the cost structure of
the industry and are hence a major force. The relationship between
suppliers and the firm characterizes a power equation between them. This
equation is based on the industry conditions and the extent to which each
of them is dependent on the other. For the smooth functioning of business,
reliable source of supply is a prerequisite.

(b) Customers:
According to Peter F. Drucker “the motive of the business is to create
customers” because a business survives only due to its customers.
Successful companies recognise and respond to the unmet needs of the
consumers profitably and in continuous manner. Because unmet needs
always exist, companies could make a fortune if they meet those needs. A
firm should also target the different segments based on their tastes and
preferences because depending upon a single customer is often risky. So,
monitoring the customer sensitivity is a pre-condition for the success of
business.

(c) Competitors:
Every business has competition. Competitors are other organizations that
compete with each other for both resources and markets. Hence, it is
important that an organization is aware of its competitors and in a position
to analyse threats from its competition. A business must be aware of its
competitors, their strengths and weaknesses, and the most aggressive and
powerful competitors always. Further, an organization can have direct or
indirect competitors. When organizations are involved in the same
business activity, they compete for both resources and markets. This is
Direct Competition.
For ex., Pantene and Sunsilk shampoo companies are direct competitors.
On the other hand, a five-star holiday resort and a luxury car company are
Indirect competitors since they offer different products but vie for the
same market.

25
Marketing Management (d) Marketing Intermediaries:
Marketing intermediaries provide a vital link between the organisation and
the consumers. These people include middlemen such as agents, brokers,
marketing agents, wholesalers and resellers, distributors, retailers, who
help the firm to reach out to its customers. Physical distribution entities
such as stockists or warehouse providers or transporters ensure the smooth
supply of the goods from their manufacturer to the consumer.

(e) Publics:
According to Cherrunilam “A public is any group that has an actual or
potential interest in or impact on an organisation‟s ability to achieve its
interests”. The public includes local publics, media and action groups etc.
The organisations are affected by certain acts of these publics depending
upon the circumstances.
For example if a business unit is establishment in a particular locality then
it has to provide employment to the localites at least to the unskilled
labour otherwise local group may harm that very business or they may
interrupt the functioning of the business.

(B) Macro Environment:

With the rapidly changing scenario, the firm must monitor the major
forces like demographic, economic, technological, political/legal and
social/cultural forces. The business must pay attention to their casual
interactions since these factors set the stage for certain opportunities as
well as threats. These macro factors are, generally, more uncontrollable
than the micro factors. A brief discussion on the important macro
environmental factors is given below:

(a) Demographic Environment:

The demographic factors like gender or ethnicity of the market are useful
to segment the target population for impactful marketing. The focus lies
mostly on the people who are most likely to buy the product. This ensures
that the company does not waste money in people who have no interest in
buying the product. Demographic approach provides very specific
information about different populations. Based on the data, the company
can develop well defined strategies helpful to reach more population.
Other easily identified demographic qualities of customers include their
age, household, composition

(b) Economic Environment:

Every day, marketing managers face a barrage of economic news. They
must digest it, assess its impact, and alter marketing plans accordingly.
Markets require purchasing power and that depends upon current income,
savings, prices, debt and credit facilities etc. The economic environment
affects the demand structure of any industry or product. The following

26
26
factors should always be kept in mind by the business people to determine Marketing Environment
the success of the business.
(i) Per capita income
(ii) Gross Domestic Product
(iii) Fiscal and monitory policies
(iv) Credit Policy
(v) Industry life cycle and current phase
(vi) Trends of inflation, deflation or stagflation etc.
Each of the above factors can pose an opportunity as well as threat to a
firm. For example, in an under-developed economy, the low demand for
the product is due to the low-income level of the people. In such a
situation a firm or company cannot generate the purchasing power of the
people so as to generate the demand of the products. But it can develop a
low-priced product to suit the low income market otherwise it will be
slipped out from the market. ( Ex. Srilanka Economic Crisis)

(c) Technological Environment:

Technological factors refer to the creation of new technologies and how
they shape products, product development, and access to new market
opportunities. A perfect example of a strong technological force today is
wireless communication. Mobile technology is also shaping the
development of new technological devices and replacing ones that have
become outdated. A company needs to continually use the most up-to-date
technology in order to operate at its highest capacity and be aware of how
technological applications can better serve customers. For Ex- In Covid 19
Pandemic, major business uses payment technologies such as Phone pay,
Google pay.

(d) Political/Legal Environment:

This environment consists of laws, regulations and policies that influence
and limit various organisations. Sometimes these laws create opportunities
for the business but these may also pose certain threats. Business
legislations ensure specific purposes to protect business itself as well as
the society from unfair competitions; to protect consumers from unfair
business practices and to protect the interest of the society from unbridled
business behaviour. In India business is regulated through certain laws like
Companies Act,2013, Partnership Act 1932, Consumer Protection Act,
1986 (CPA), Factories Act,1948, Income Tax, Goods and Service Tax.

(e) Social-cultural Environment:

Socio-cultural factors relate to demographics in a sense but are more
related to populations and how they behave based on preference and
values. Different societies and cultural groups are characterized by unique
needs, which are often based on different core values and preferences. 27
Marketing Management Cultures often develop a group mentality, which passes along core values
and general beliefs. It shapes how the individuals in such cultures shop
and what they choose to spend their money on. A business needs to pay
attention to socio-cultural variances, especially when moving into new
markets.
Within a society such as India, there are the different tastes and
preferences of the different strata. Like a Punjabi has altogether different
preferences then that of a South Indian in the name of certain products like
food and clothing, and the shrewd marketers have always capitalised on
this kind of opportunities. Hence, a thorough understanding of social-
cultural environment is imperative in order to be successful.

3.4 ENVIRONMENTAL SCANNING TECHNIQUES IN

MARKETING MANAGEMENT
The marketing environment is dynamic- it is always changing.
Environmental scanning is the process of collecting information through
observation, review of business, trade, government publications and
marketing research efforts. Then such collected information is reconciled
and assessed to interpret the findings. By evaluating available information,
a marketing manager should be able to determine threats and opportunities
associated with environmental fluctuations. Following are few techniques
which are mainly used in marketing environmental scanning such as -

1) SWOT:
A SWOT analysis is a common method of environmental scanning.
SWOT stands for strengths, weaknesses, opportunities, and threats. When
performing a SWOT analysis, the marketing department of an
organization must look internally at the company's strengths and
opportunities and externally at its weaknesses and threats.

2) PEST Analysis:
It provides insights into external macro-environmental factors, making it a
useful technique for environmental scanning. The acronym stands for
political, economic, social and technological. When performing a PEST
analysis, marketing professionals will look for potential government shifts
and other political factors as well as economic shifts that may impact the
business. Social factors include how people are discussing the product and
industry, while technological factors include any upcoming or shifting
technology that could play a role in shaping the company's future.

 PEST: Political, Economic, Social and Technological

 PESTLE: Political, Economic, Social, Technological, Legal and

Environmental

 STEEPLE: Social, Technological, Economic, Environmental,

Political, Legal and Ethical
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3) Research: Marketing Environment

It is one of the most used techniques in environmental scanning. Many

organizations across various industries rely on their own research to learn
more about the political climate, legislative shifts, technological
advancements, and other potential changes that can impact the industry in
which they operate. Research has become such a vital tool in the
marketing and development processes that organizations often have their
own research and development teams or departments that conduct internal
research.
By these marketing efforts, marketing strategies could be developed for
the coming time.

3.5 OPPORTUNITIES IN RURAL MARKET

Physical Distribution and transportation:
Regarding the problems of physical distribution, the marketers may have
stockiest/ clearing-cum-forwarding (C&F) agents at strategic location
for facilitate the physical distribution for its products in the rural market.
The important advantage of this scheme is that the costs of physical
distribution can be shared between the companies and stockiest.
The different modes of transportation based on availability of tracks
should also be beneficial to the companies. Even to this day, bullock-cart
plays a very vital role in physical distribution where the roads are not
available. Some of the leading MNCs use delivery vans in rural areas.
These delivery vans take the products to the retail shops in every corner of
the rural market and enable the companies to establish direct sales contact
with majority of the rural consumers. This in turn helps in sales
promotion.

Rural Market and Retail Sales Outlets:

The rural market consists of a number of retail sales outlets along with low
price shops under the public distribution system. The government should
take initiatives to encourage private shopkeepers and cooperative stores to
come forward and establish their business in rural areas.
Fertilizer companies should open their outlets for proper distribution of
fertilizer to the farmers. In addition, the companies dealing in consumer
goods can also apply this model and appoint a number of retailers in rural
market and attach them to the stockiest who distributes the goods to the
retailers as per the potential demand of the market. This approach will
help the companies penetrate into the interior areas of the rural markets.

Sales Force Management:

To solve the problems of sales force management, the company takes due
care in the recruitment and selection of sales people because the traits they
require are different from that of the urban sales persons. These sales
29
Marketing Management people must be fluent in the local/regional language and also have
patience to deal with rural consumers.
Controlling and operating of such a large and scattered sales force,
supervising them in sales calls, guiding and attending to their official and
personal problems, and motivating them for getting better results should
be an exciting and challenging task for the sales manager. Thus, the people
operating in rural areas should have an inherent zeal to serve the rural
peoples and to connect with them.

Marketing Communication:
For marketing communication in rural areas, the companies should use
organized forms of media like TV, Radio, cinema and POP (point of
purchase) advertising. In recent times, television is gaining popularity in
rural areas but due to lack of supply of electricity, radio is performing
quite better.
The rural people need demonstration, short-feature films and direct
advertisement films that combine knowledge and perform as better rural
marketing communication. The companies now also use audio visual
publicity vans that sell the products with promotion campaign directly.
Companies can also organize village fairs, drama shows, and group
meetings to convince the rural consumers about the products and services.
For the rural markets, those sales people are preferred for selection who
are willing to work in rural areas like Sarpanch, Pradhan‟s and other
elderly persons. Marketers can also approach them to propagate their
messages, because these persons could be effective communicators within
the rural peoples.

Demand Base and Size:

Indian rural market has a vast demand base and size. Rural marketing
involves the process of developing, promoting, distributing rural area
specific products and service exchange between rural and urban market
which satisfies customer demand and also achieves organizational goals.
As a part of development program economic development is concern,
government is making continuous efforts towards rural development.

3.6 SUMMARY
Marketing environment refers to all factors that have a direct or indirect
bearing on the functioning of the business. Every business firm encounters
a set of internal and external factors. The internal environment consists of
the factors which influence the various strategies and decisions which
happen within an organisation‟s boundaries. These factors include human
resources, company image, management structure, physical assets,
technological capabilities, marketing resources, and financial factors. The
external environment comprises of micro and macro environmental
factors. Micro environment is immediate environment of the firm which
include suppliers, consumers, competitors, intermediaries and publics.
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30
These factors are generally regarded as controllable factors because the Marketing Environment
marketing department commands a fair amount of control over these
factors and can modify or alter as per the requirements of the organisation.
The businessmen must scan the marketing environment techniques which
include demographic, economic, political/legal, technological and
social/cultural factors (PESTEL/STEEPEL/PEST/ SWOT).

3.7 QUESTIONS
1. What is marketing environment? Write down its main ingredients.
2. Define marketing environment? Discuss in brief the factors that
constitute marketing environment.
3. “Firms which systematically analyse and diagnose the environment
are more effective than those which don‟t”. Elucidate.
4. Discuss the demographic and technological trends that can affect the
future of the business.
5. Explain the Marketing Opportunities in Rural Market

3.8 REFERENCES
1. K. Ashwathappa, Business Environment for Strategic Management,
Himalaya Publishing House, Mumbai.
2. Francis Cherrunilam, Business Environment, Himalaya Publishing
House, New Delhi.
3. S.K. Misra and V.K. Puri, Indian Economy, Himalaya Publishing
House, New Delhi.
4. B.B. Tandon and K.K. Tandon, Indian Economy, Tata McGraw Hill,
New Delhi.
5. Kotler, Philip, “Marketing Management - Analysis, Planning,
Implementation, and Control”, PHI, New Delhi.
6. Namakumari S, and Ramaswamy, V.S., “Marketing Management”,
MacMillan Publishers, New Delhi.
7. Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,
Boston.
8. Dawn Iacobucci, “Marketing Management”, Cengage Learning.

*****

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 4
MARKET RESEARCH
Unit Structure
4.0 Objectives
4.1 Market Research
4.2 Marketing Information System
4.3 Demand Forecasting
4.4 Market Potential Analysis
4.5 References
4.5 Summary
4.6 Questions
4.7 References

4.0 OBJECTIVES
 To understand the meaning of market research.

 To study the process of conducting market research.

 Understanding components of Marketing Information System.

 To study estimation of future customer demand with demand

forecasting.

 To understand the method of market potential analysis.

4.1 INTRODUCTION
Market research is the gathering and evaluation of data on customers,
rivals, and the performance of marketing campaigns. It connects the
customer, consumer and public to the marketer through information. This
information assists in a better understanding of the marketing process by
identifying market issues and opportunities. Market research include
identifying problem areas, collecting data, analysing data, drawing
conclusions, and considering practical ramifications. It is the systematic
collection, documenting, and analysis of qualitative and quantitative data
on marketing products and services challenges.

Definitions of marketing research:

1. According to Philip Kotler, “Marketing research is a systematic
problem analysis, model building and fact finding for the purpose of
improved decision- making and control in the marketing of goods and
services.”

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2. According to American Marketing Association (AMA), “Marketing Market Research
Research is the systematic gathering, recording and analyzing of data
about problems relating to the marketing of goods and services.”
3. According to Paul Green and Donald Tull, “Marketing research is the
systematic and objective search for, and analysis of, information
relevant to the identification and solution of any problem in the field
of marketing.”
4. According to David Luck, Donald Taylor and Hugh Wales,
“Marketing Research is the application of scientific methods in the
solution of marketing problems.”

Types of Data in Market Research:

Primary Data: This type of data is acquired directly from the target
population using methods such as interviews, surveys, questionnaires etc.
Secondary Data: This type of data has previously been gathered and
categorised. Examples of secondary data are government statistics, trade
publications, market research reports etc.

Advantages of Marketing Research:

 Market research discovers and reveals possible problems.

 Market research assists the firm in planning ahead of time.

 Market research may assist the firm in identifying trends.

 Market research directs the organization's interactions with present

and prospective consumers.

 Market research aids in the identification of market opportunities.

 Market research aids in risk reduction.

 Market research assesses the organization's market reputation.

The Marketing Research Process:

1. Defining the Problem and Objectives:

The first and most important stage in market research is identifying the
problem. The majority of the time, the study begins with an issue that the 33
Marketing Management organization's management is confronting. It's important to comprehend
this problem so that a suitable solution can be found. Market research
describes this problem by discussing it with the organization's decision
makers. The rest of the study is carried out once the problem has been
properly defined.
After the initial phase of problem definition is complete, it is important to
determine the objectives of the study. Research objectives simply
summarise what the research is attempting to accomplish. Research
objectives include specific statements that gives direction to the study.

2. Research Design:
Research methodology is established after defining objectives and
reviewing literature related to the study. It describes the precise steps
needed to identify, select, analyze, and assess information related to the
study. This methodology acts as a guideline for the research process and
includes the following essential steps:

 Overview of Required Information

 Research Design

 Data collection procedures and methods

 Data analysis procedures and methods

 Participants and research settings

 Ethical Concerns
Different approaches, such as deductive or inductive, might be utilized to
answer the research question. The approach used for the study should be
specified, along with a discussion of why it is appropriate for the study.

3.Data Collection:
Primary data collection may involve desk work and field work for the
purpose of gathering all essential information. The field work comprises
conducting face-to-face interviews with individuals by visiting them in
their residences or places of business or setting up group gatherings in any
location of their preference. Desk work involves communicating with
people over the phone, through emails, and online meetings. For
secondary data collection relevant literature sources are referred.

4. Data analysis:
Immediately following data collection, the raw data is filtered, coded, and
analyzed. The most crucial step in conducting a study is data analysis
since the findings enable researchers to find information that may help the
organization to make wise business decisions. The complete procedure is
carefully recorded in accordance with organizational standards so that it
may be used as a reference in the future to make decisions. Trends,
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34
correlations, and variations can be discovered by analyzing the data Market Research
utilizing a variety of data analysis tools and methodologies. Database
patterns are revealed at this stage, and data visualization software assists in
transforming data into a comprehensible graphical representation.

5. Prepare a market research report and present the findings:

The final study report is written at this point. This report contain all the
data, including an accurate account of the study method, the findings,
interpretations, and suggested next steps. The report provides the decision-
maker with all the information they need to understand the problem and
apply the recommended course of action. It must be written in simple,
understandable language. The report can be submitted to the marketing
executives for recommendations and implementation.

6. Follow up:
Lastly, follow up is the final step in the marketing research process. At
this step, the marketing executive makes modifications to the product,
pricing, marketing policies, and so on in accordance with the report's
suggestions. Here, the researcher should identify whether or not his
recommendations were adequately adopted. He should also determine
whether or not the marketing problem has been resolved.

4.2 MARKETING INFORMATION SYSTEM

Elements of A Marketing Information System:
Businesses are researching the data needs of their leaders and developing
marketing information systems (MIS) to structure the information flow to
meet these requirements.

Definition of marketing information system:

A marketing information system (MIS) comprises of equipment,
personnel, and processes to collect, categorise, analyse, and transmit
precise information to marketing decision-makers in a timely manner.
Assessing the data needs of the supervisor, generating the required data,
and promptly providing it to the marketing managers are the
responsibilities of the MIS. The marketing managers require knowledge of
changes in the marketing environment in order to successfully complete
their analysis, planning, execution, and control tasks. The required data is
created by examination of marketing decision support data, marketing
research, marketing intelligence, and internal corporate records.

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Marketing Management

System of Internal records:

The foundation of an information system consists of reports on bookings,
sales, pricing, levels of inventory, debts, current liabilities, and other data.
Marketing managers can identify significant opportunities and issues by
evaluating this data.
Internal record systems place a lot of importance on the order-to-
remittance cycle. Invoices are created by the order department, and copies
are sent to other departments. Items that aren't in stock are back ordered.
Shipping and billing papers are delivered to several departments.
Current sales reports are necessary for marketing managers. These tasks
need to be completed by today's businesses efficiently and precisely.
Customers prefer businesses who are able to deliver their items on time.
Sometimes orders from sales agents must be sent right away. These orders
must be immediately processed by the order fulfilment department.
The merchandise has to leave the warehouse as quickly as feasible and
invoices should be sent out immediately. Companies are increasingly
implementing overall programmes to speed up and enhance the accuracy
of departmental procedures, and many report significant increases in
productivity.

Marketing Research System:

An advanced method used to investigate the suspected marketing issue is a
marketing research system. In order to reach significant findings, primary
or secondary data are gathered, tabulated, and presented. Sometimes data
is gathered with the intention of solving a specific problem. The focus of
the other type of marketing research is an ongoing effort to track the
36
36 marketing environment rather than a particular marketing issue.
Marketing Intelligence System: Market Research

The organisation is kept on track on daily updates by the marketing

intelligence system, which gathers and analyses data. A marketing
manager can make use of a marketing intelligence system, which is a
collection of procedures and sources of information, to collect data from
the external environment for use in decision-making. These data include
the external marketing environment, current trends, advancements,
changing client demands, technology, rivals' strategies, and market
circumstances. This leads to planning for future emerging opportunities
and preparing for potential obstacles.

Marketing Decision Support System:

A marketing decision support system is a synchronised collection of data,
systems, techniques, and methods, as well as supporting hardware and
software through which an organisation receives and analyses important
information from the environment and business and converts it into a
founding for marketing action. Various mathematical and economic
methods are used in marketing decision support systems to process,
evaluate, and transform raw data into meaningful marketing information to
assist decision-making.

4.3 DEMAND FORECASTING

Demand forecasting is the practice of predicting future market
requirement using empirical data. Demand forecasting is the method of
estimating future consumer demand over a certain time period utilizing
historical data and other information. Businesses may use demand
forecasting to learn vital information about their potential in both current
and future markets, enabling managers to make well-informed decisions
regarding pricing, corporate expansion plans, and market potential.

Significance of demand forecasting:

Consider the following three examples.
Vikram, a senior management of Company A, prioritized producing more
goods regardless of consumer demand. Products manufactured will be
distributed to the market, but a portion of them will go unsold and retailer
demand for the products will decrease, slowing down the dispatch. This
situation will result in a buildup of finished goods inventory blocking
warehouses and a halt to production; however, because he produced more
products than his competitors, his financial investment in resource
acquisition will be higher than theirs. Since Company A invests more
money while selling a comparable quantity of product, production
eventually stops, making it impossible to even fulfil working capital
requirements. Here, Company A's return on investment and management
control both decrease, and the upper management of Company A is
unhappy with Vikram since he caused overproduction.
Nikhil is a senior management at company B. He learns from this
37
Marketing Management experience and approaches operations defensively. He uses less resources
and produces fewer units regardless of market demand. He is overjoyed
that the market has a need and that warehouses are not clogged. His goods
instantly sells out on the market, forcing shops to place further orders. He
can't deliver on time since he doesn't have enough goods on hand to meet
demand. Retailers in this circumstance turn to business C's rival brand,
which guarantees steady supply. Management gains knowledge about
these issues. Given how tough it is to gain clients, they are furious with
Nikhil since he has already lost some. In addition to this, Nikhil kept many
limited resources either idle or underutilised, which led to
underproduction.
In Company C, Rohit is a clever manager. He predicts demand and plans
production to meet it. He manufactures as many goods as are needed in the
market. Manpower is stronger as a result of his tight control over
inventory, working capital, production planning, logistics, and the supply
chain, and demand and supply are more stable with fewer fluctuations.
Retailers are pleased with company C because they receive the goods in
the proper quantity and at the right time, and they develop deeper
relationships with company C. Similar to this, management is pleased with
Rohit since he produced strong results while using less funding.
From the three scenarios above, it is obvious that company C, with smart
manager Rohit, performs better than companies A and B, with Nikhil and
Vikram. Rohit anticipated demand and planned the production
accordingly. He received compensation, and his business outperformed
rivals in terms of profits and operational control.

Demand Forecasting Methods:

a. Survey of Buyers Intention:
It is also known as a survey of customer expectations or opinions. The
most frequent strategy for predicting demand in the near future is to ask
consumers what they intend to buy in the next year. It is a standard
strategy for sales forecasting that involves direct consumer interviews. A
sale is the consequence of a consumer's desire to purchase a goods. Many
businesses perform frequent surveys of customer purchasing habits to
determine when and how much they will purchase. This strategy is used
more in industrial marketing than in consumer marketing because
industrial buyers are clearer about their purchasing intentions. It can be
done as a sample survey or as a census survey.

b. Collective opinion Method:

This strategy may be used by companies with a large distribution and sales
associate’s network. This strategy collects salesperson opinions on future
product requirements for the company. It is also known as the composite
of sales force opinion. The company can ask all or part of its salespeople
to predict demand for a specific time period. Each sales person makes an
estimation about how much each existing and potential client will spend
for the company's product. In this case, the company's sales force opinions
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38
are used to estimate future demand. Salespeople may produce more Market Research
reliable estimates since they have direct and intimate interaction with
customers, suppliers, dealers, and the general market environment.
Personal biases of the sales force are eliminated after data collecting. The
impact of numerous macroeconomic developments may not be recognised
to all salespeople until forecasting data is collected.

c. Expert Opinion Method:

Professional market experts have in-depth understanding of numerous

demand factors. Their experience, skills, and access to information all
contribute to determining industry demand for future dates. Interviews and
questionnaires are effective strategies for gathering unbiased information
from these sources. Experts might also be consulted by the company to
acquire forecasts. Dealers, suppliers, distributors, consultants, and trade
groups are among the specialists. These experts provide their estimates
either individually or collectively in the form of a pooled individual
estimate. Along with the estimations, they also highlight key assumptions.
The corporation contacts them on a regular basis to gather their input on
the future level of company sales. Some businesses purchase economic
and industry forecasts from well-known forecasting services.

For example, if there are a few experts with in-depth knowledge of the
energy industry, firms that rely on them might seek their opinion about
future demand. This is relevant even to jewellery companies in order to
foresee future price fluctuations in gold and demand connected with each
price band. It is significantly faster than a few other approaches. In this
approach personal biases may exist and impact the forecast.

d. Controlled Experiments:

It is commonly referred to as test marketing. It is an experimental

technique. Opinions are neglected, but the actual experiment is carried out.
This is the most reliable approach. It is based on a thorough examination
of the market condition. In this strategy, neither buyers nor experts are
called to provide their view on future sales, but instead a direct market test
is undertaken. In the event of a new product and current goods, as well as
existing products in a new channel or region, a direct market test is
preferable. The approach is used to assess customers' and dealers'
reactions to product handling, use, and repurchase. Information such as
trial, first-time purchase, repeat purchase, and so on can help in more
accurate estimation of sales for a given time period. However, the major
disadvantage of this method is that it is conducted in a controlled setting
due to which the real position cannot be measured; and if it is conducted in
a natural setting i.e. field experiment, the impact of extraneous factors
cannot be estimated.

e. Barometric method:

With the barometer approach, demand is forecast based on the latest

happenings or significant current events. Numerous economic indices,
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Marketing Management such as savings, investments, and income, are predicted using this
strategy. This method aids in identifying the broad direction of business
activity. Consider the scenario where the government grants the XYZ
society land to be used for construction of buildings. This suggests that
steel, cement, and bricks will all be in high demand. This method's key
benefit is that it works even in the absence of historical data. However,
new products cannot be evaluated using this approach. When there is no
lag between the economic indicator and demand, it also loses its
significance.

4.4 MARKET POTENTIAL ANALYSIS

Companies may develop concepts for new products that they intend to
offer in the future. However, before proceeding with the concept, it is
essential to ascertain whether there is a market for it; otherwise, it would
be a waste of time and money. Before progressing on to secondary
research, short-term primary market research must be conducted. It is
necessary to concentrate on current marketing conditions and how they
will impact the business. The best way to do this is to do a market
potential analysis.

Market potential analysis is an important approach for determining the

feasibility of a concept and the level of market demand. The research is
carried out through a series of distinct analyses. The viability of the
corporate strategy is then assessed utilising the results.

Preliminary competitor analysis:

Conducting market research on competitors is essential. The benefits,

drawbacks, and strategies of competitors must be examined. By studying
the strategies of competitors, a firm may refine its own strategy, build ties
with collaborators who have previously worked with them, and uncover
market gaps that their product might fill.

Trend analysis:

Trend analysis is a statistical approach that uses previous patterns to

predict future behaviour of a variable. Trend analysis is the most important
component of market potential analysis. It helps determine if a product
will endure in the long or short term, aids in market adaption, and provides
evidence for better informed strategic decisions. The past data is utilised to
forecast the trend's direction. The goal of this approach is to forecast the
upward or downward trend of a product so that strategic decisions can be
taken. The performance during one time period in comparison to another
may be examined using trend analysis.

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SWOT Analysis: Market Research

SWOT is an abbreviation for strengths, weaknesses, opportunities, and

threats. SWOT analysis is a brainstorming method used to uncover
internal and external elements that have an impact on the company. A
SWOT analysis is meant to enable a fact-based examination of an
organization's advantages, disadvantages, opportunities, and threats. It
assists in highlighting the product's unique selling proposition (USP), as
well as potential opportunities and long-term challenges specific to the
market, sector and product.
For eg, the SWOT analysis sample below explains both internal and
external aspects and their importance to the operations of the organization.

Strengths:
1. Good-quality products.
2. Strong Research department.
3. Strong network of sales.

Weakness:
1. Slow to adapt to market developments.
2. High production costs.
3. Customer inquiries are not promptly answered.

Opportunities:
1. Market expansion.

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Marketing Management 2. Requirement of research project.
3. Market demands customized goods.

Threats:
1. Competitors have more innovative ideas.
2. Rising competition in the market.
3. Products are becoming outdated advance technologies.

4.5 SUMMARY
All marketing efforts are made to deliver goods and services to consumers
at the appropriate time and location, taking into account their preferences,
budget, trend, and so on. Marketing research is a method for achieving this
goal. Marketing research is the gathering, compilation, and analysis of
data on goods and services in order to understand customer behavior and
provide maximum satisfaction to them.
The Marketing Information System refers to the systematic gathering,
analysis, evaluation, storing, and presentation of market information to
marketers on a regular, ongoing basis from both internal and external
sources.
Market potential analysis is a strategy used by organizations to research
new markets and asses their viability in light of the goods they have to
offer. As a result, companies who want to launch a new good or service on
the market may use it. This type of research can help businesses locate the
most promising markets and allocate their resources more effectively.
Utilizing predictive analysis of historical data, demand forecasting is a
strategy for evaluating and predicting future customer demand for a
commodity or service. Demand forecasting helps the business make better
supply decisions by projecting future sales and profitability.

4.6 QUESTIONS
1. Explain the process of Marketing Research.
2. Define Marketing Information System.
3. What is the significance of demand forecasting?
4. What are the benefits of market analysis?
5. What are the methods of conducting demand forecasting?
6. Explain trend analysis.

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4.7 REFERENCES Market Research

 Marketing Management (A South Asian Perspective) by Philip

Kotler, Kevin Lane Keller, Abraham Koshy & Mithileshwar Jha,
Pearson Education.
 Marketing Management by R. Varshney, S. Chand.
 Marketing Management by Rajan Saxsena, Tata McGraw Hill.
 Basic Marketing by Jr., William Perreault, Joseph Cannon and E.
Jerome McCarthy.
 Marketing Management – Planning, Implementation and Control by
V.S. Ramswamy and S. Namakumari, McMillian.
 Business Marketing Management by M. Hutt, Cengage Learning.
 Marketing Management by Dr.Pavan Mishra.

*****

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 5
CONSUMER BUYING PROCESS &
ORGANIZATIONAL BUYING BEHAVIOR
Unit Structure
5.0 Objectives
5.1 Introduction
5.2 Factors Influencing Consumer Behavior
5.3 5 Stages of Consumer Buying Behavior
5.4 Organizational Buying Behavior
5.5 Steps in Organizational Buying Process
5.6 Factors Influencing Organizational Buying Behavior
5.7 Test Your Knowledge
5.8 Summary
5.9 Questions
5.10 References

5.0 OBJECTIVES
 To understand the meaning of consumer behavior
 To understand factors affecting consumer behavior and consumer
buying process
 To learn about organizational buying behavior
 To learn about steps in organizational buying process
 To study factors affecting organizational buying process

5.1 INTRODUCTION
Any individual who purchases goods and services from the market for
his/her end-use is called a consumer. In simpler words a consumer is one
who consumes goods and services available in the market. Example- A
person who pays a hairdresser to cut and style their hair. A company that
buys a printer for company use. The customer is the company who
purchased the printer, and the consumers are the employees using the
printer.
All of us are consumers and we purchase and consume variety of products
on day to day basis. These products are purchased and consumed
according to our needs, tastes, preference and purchasing power etc. These
products may be such as household groceries, fruits, vegetables, clothes,
consumable products, durable products, shopping products luxurious
products etc.

44
While buying these products, marketer needs to understand what products Consumer Buying Process &
are purchased, when it is purchased, where it is purchased and in how Organizational Buying
much quantity products are purchased and consumed. Buying of an Behavior
individual consumer depends on the internal and external factors like
perception, attitude, beliefs, values, motivation, personality, culture, age,
income, family cycle and social class etc. The marketers therefore try to
understand the needs of different consumers and having understood his
different behavior which require an in-depth study of their internal and
external environment as they have to formulate their plans for marketing.
Consumer behavior is the study of how individual customers, groups or
organizations select, buy, use, and dispose ideas, goods, and services to
satisfy their needs and wants. It refers to the actions of the consumers in
the marketplace and the underlying motives for those actions. In other
words, consumer behavior can be defined as the decision-making process
and physical activity involved in acquiring, evaluating, using and
disposing of goods and services.

5.2 FACTORS INFLUENCING CONSUMER BEHAVIOR

Consumer behavior is influenced by many different factors. A marketer
should try to understand the factors that influence consumer
behavior. Here are 5 major factors that influence consumer behavior:

1. Psychological Factors:
Human psychology is a major determinant of consumer behavior. These
factors are difficult to measure but are powerful enough to influence a
buying decision.

Some of the important psychological factors are:

i. Motivation:
When a person gets motivation, it influences the buying behavior of the
person. According to Maslow‟s Hierarchy, a person has many needs such
as the basic needs, social needs, security needs, esteem needs, and self-
actualization needs. Out of all these needs, the basic needs and security
45
Marketing Management needs take a position above all other needs. Hence, basic needs and
security needs have the power to motivate a consumer to buy products and
services.

ii. Perception:
A major factor that influences consumer buying behavior is consumer
perception. Consumer perception is a process where a customer gathers
information about a product and interprets the information to make a
meaningful image about a particular product.
When a customer looks at advertisements, promotions, customer reviews
social media feedback, etc. relating to a product, they develop an
impression about the product. Hence consumer perception becomes a great
influence on the buying decision of consumers.

iii. Learning:
When a person buys a product, he/she gets to learn something more about
the product. Learning comes over a period of time through experience. A
consumer‟s learning depends on skills and knowledge. While skill can be
gained through practice, knowledge can be acquired only through
experience.
Learning can be either conditional or cognitive. In conditional learning the
consumer is exposed to a situation repeatedly, thereby making a consumer
to develop a response towards it.
Whereas in cognitive learning, the consumer will apply his knowledge and
skills to find satisfaction and a solution from the product that he buys.

iv. Attitudes and Beliefs:

Consumers have certain attitudes and beliefs which influence the buying
behavior of a consumer. Based on this attitude, the consumer behaves in a
particular way towards a product. This attitude plays an important role in
defining the brand image of a product. Hence, the marketers try hard to
understand the attitude of a consumer to design their marketing
campaigns.

2. Social Factors:
Humans are social beings and they live around many people who
influence their buying behavior. Human try to imitate other humans and
also wish to be socially accepted in the society. Hence their buying
behavior is influenced by other people around them. These factors are
considered as social factors. Some of the social factors are:

i. Family:
Family plays a significant role in shaping the buying behavior of a person.
A person develops preferences from his childhood by watching his family
members who buy products and continues to buy the same products even
46
46 when they grow up.
ii. Reference Groups: Consumer Buying Process &
Organizational Buying
Reference group is a group of people with whom a person associates Behavior
himself. Generally, all the people in the reference group have common
buying behavior and influence each other.

iii. Roles and status:

A person is influenced by the role that he holds in the society. If a person
is in a high position, his buying behavior will be influenced largely by his
status. A person who is a Chief Executive Officer in a company will buy
according to his status while a staff or an employee of the same company
will have different buying pattern.

3. Cultural factors:
A group of people are associated with a set of values and ideologies that
belong to a particular community. When a person comes from a particular
community, his/her behavior is highly influenced by the culture relating to
that particular community. Some of the cultural factors are:

i. Culture:
Cultural Factors have strong influence on consumer buyer behavior.
Cultural Factors include the basic values, needs, wants, preferences,
perceptions, and behaviors that are observed and learned by a consumer
from their near family members and other important people around them.

ii. Subculture:
Within a cultural group, there exists many subcultures. These subculture
groups share the same set of beliefs and values. Subcultures can consist of
people from different religion, caste, geographies and nationalities. These
subcultures by itself form a customer segment.

iii. Social Class:

Each and every society across the globe has form of social class. The
social class is not just determined by the income, but also other factors
such as the occupation, family background, education and residence
location. Social class is important to predict the consumer behavior.

4. Personal Factors:
Factors that are personal to the consumers influence their buying behavior.
These personal factors differ from person to person, thereby producing
different perceptions and consumer behavior.

Some of the personal factors are:

i. Age:
Age is a major factor that influences buying behavior. The buying choices
of youth differ from that of middle-aged people. Elderly people have a
47
Marketing Management totally different buying behavior. For example, teenagers will be more
interested in buying colorful clothes and beauty products. Middle-aged are
focused on house, property and vehicle for the family.

ii. Income:
Income has the ability to influence the buying behavior of a person.
Higher income gives higher purchasing power to consumers. When a
consumer has higher disposable income, it gives more opportunity for the
consumer to spend on luxurious products. Whereas low-income or middle-
income group consumers spend most of their income on basic needs such
as groceries and clothe etc..

iii. Occupation:
Occupation of a consumer influences the buying behavior. A person tends
to buy things that are appropriate to his/her profession. For example, a
doctor would buy clothes according to his profession while a professor
will have different buying pattern.

iv. Lifestyle:
Lifestyle is an attitude, and a way in which an individual stay in the
society. The buying behavior is highly influenced by the lifestyle of a
consumer. For example when a consumer leads a healthy lifestyle, then
the products he buys will relate to healthy alternatives to junk food.

5. Economic Factors:
The consumer buying habits and decisions greatly depend on the
economic situation of a country or a market. When a nation is prosperous,
the economy is strong, which leads to the greater money supply in the
market and higher purchasing power for consumers. When consumers
experience a positive economic environment, they are more confident to
spend on buying products. Whereas, a weak economy reflects a struggling
market that is impacted by unemployment and lower purchasing power.
Economic factors bear a significant influence on the buying decision
of a consumer. Some of the important economic factors are:
i. Personal Income:
When a person has a higher disposable income, the purchasing power
increases simultaneously. Disposable income refers to the money that is
left after spending taxes.
When there is an increase in disposable income, it leads to higher
expenditure on various items. But when the disposable income reduces,
the spending on multiple items also reduced.

ii. Family Income:

Family income is the total income from all the members of a family. When
more people are earning in the family, there is more income available for
48
48
shopping basic needs and luxuries. Higher family income influences the Consumer Buying Process &
people in the family to buy more. When there is a surplus income Organizational Buying
available for the family, the tendency is to buy more luxury items which Behavior
otherwise a person might not have been able to buy.

iii. Consumer Credit:

When a consumer is offered easy credit to purchase goods, it promotes
higher spending. Sellers are making it easy for the consumers to avail
credit in the form of credit cards, easy installments, bank loans, hire
purchase, and many such other credit options. When there is higher credit
available to consumers, the purchase of comfort and luxury items
increases.

iv. Liquid Assets:

Consumers who have liquid assets tend to spend more on comfort and
luxuries. Liquid assets are those assets, which can be converted into cash
very easily. Cash in hand, bank savings and securities are some examples
of liquid assets. When a consumer has higher liquid assets, it gives him
more confidence to buy luxury goods.

v. Savings:
A consumer is highly influenced by the amount of savings he/she wishes
to set aside from his income. If a consumer decided to save more, then his
expenditure on buying reduces.

5.3 5 STAGES OF CONSUMER BUYING BEHAVIOR

Consumers go through a series of sequential steps while buying a
product. A buying process is the sequence of steps that a consumer takes
while making a purchasing decision. A normal consumer purchase
includes the recognition of needs and wants. Next comes the information
search, followed by an evaluation of all the choices. Finally the purchase
happens, and post-purchase evaluation follows a purchase.

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Marketing Management

1. Identify the Problem/ Need Recognition:

Need recognition is the first stage of the buying process. A consumer will
not initiate a purchase without the recognition of the needs or wants.
When a consumer feels that there is need to buy a particular product, he
will decide to purchase a product. There is an unmet need or there is a
problem which can be solved by buying a particular product.
Needs arise as there is a problem. For example, you broke your furniture
like table or chair that you were regularly using for your office. And due
to this problem, you now have to buy a new table or chair .
Wants arise either because you have needed a product or just because you
are influenced by external factors. For example, you see your cousins or
friends using a laptop for their project work. You might also have seen
advertisements about how a laptop can help you in your project work. Due
to this influence, you feel you want to upgrade to a laptop though you may
already have a desktop.
In this stage, the marketer should identify the needs of the consumers and
offer the products based on the desire.

2. Information search:
At this stage, the consumer is already aware of his need or want. He also
knows that he wants to buy a product that can solve his problem.
Therefore, he wants to know more details about the product that can solve
of his problem. This leads to the information search stage.
The consumer will try to find out the options available and the best
solution for his problem. The buyer will look for information in internal
and external business environments. A consumer may look into
advertisements, print, videos, online and even might ask his friends and
family.
When consumers want to buy a laptop, they look for a laptop, its
specifications, features, price, discounts, warranty, after sales service,
insurance, and a lot of other important features.
Here, a marketer must offer a lot of information about the product in the
form of informative videos, demos, blog, and celebrity interviews.

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3. Evaluation of Alternatives: Consumer Buying Process &
Organizational Buying
The consumer has done enough research about the kind of product that can Behavior
solve his problem. The next step is to evaluate alternative products that
can solve his problem. Various information gathered from different
sources are used in evaluating alternatives.

Generally, consumers evaluate the alternatives based on a number of

attributes of the product. Consumer Considers factors like looks,
durability, quality, price, service, popularity, brand, social media reviews.
The market offers many products that can solve the problem of a
consumer. Hence the consumer has to make a choice after evaluating the
various alternatives available in the market.

At the end of this stage, the consumer will rank his choices and pick a
product that best matches his needs and wants.

4. Purchase Decision/Purchase:

At this point, customers have already explored multiple options. They are
aware of the pricing and payment options available. Here, consumers are
deciding whether to buy that product or not. Even at this stage they can
still drop the purchase and walk away.

Philip Kotler (2009) says, the final purchase decision may be „interrupted‟
by two factors. Customer may get a negative feedback from friends or
other customers who bought it. For example, a customer shortlisted a
laptop, but his friend gave a negative feedback. This will make him to
change his decision. Furthermore, the decision might also change. Sudden
change in business plans, financial crunch, unexpected higher prices, etc.
might lead the consumer to drop the idea of buying the laptop.

The Consumer chooses the product that he wants to buy, but many times,
he may not actually buy it for various reasons. At this stage, a marketer
should find out the various reasons due to which the consumer is
hesitating to buy. The reasons could be price, value, and change in the
needs of the consumer.

Marketer needs to start by reminding the customers of the reason behind

their decision to buy the product. Furthermore give as much information
regarding your brand repeating that you are the best provider of the
product that can fulfill his needs. Retargeting by simple email reminders
can enforce the purchase decision.

5. Post-Purchase Evaluation:

This is the last stage and most often ignored by marketers.

After buying the product, customers compare products with their

expectations. There can be two outcomes: Either satisfied or
dissatisfied. Consumers will be happy after buying the product if it has
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Marketing Management satisfied their needs. But in case the product was not up to his
expectations, the consumer will be dissatisfied. A consumer can be lost
even at this stage.

A dissatisfied customer might feel as though he took an incorrect decision.

This will result in returns! Offering an exchange will be a straightforward
action. However, even when a customer is satisfied, there is no guarantee
that the customer might be a repeat customer.

Customers, either satisfied or dissatisfied, can take actions to express their

experience in the form of customer reviews. This may be done through
reviews on customer forums, website, social media conversations or word
of mouth.

A marketer has to make sure that the consumer will be satisfied with the
product so that his experience will lead to repeat customers. Brands need
to careful to create positive post-purchase experience.

5.4 ORGANIZATIONAL BUYING BEHAVIOR

Organizational buying process refers to the process through which
industrial buyers make a purchase decision. Every organization has to
purchase and services for running its business operations and therefore it
has to go through a complex problem solving and decision making
process. The behavior that the industrial buyer‟s exhibit while making a
purchase decision, is known as Organizational Buying Behavior and
sequential steps taken by buyers to make a purchase decision is known as
organizational buying process.

5.5 STEPS IN ORGANIZATIONAL BUYING PROCESS

A buying center consisting of members of the organization participate in
the purchase process and take relevant decisions according to different
buying situations. Buyers go through the following 8 stages in
organizational buying process:

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 Consumer Buying Process &
Organizational Buying
Behavior

(1) Problem /Need Recognition: It starts with realization of need or

problem within the organization. For example: It may be need for a
new computers, printers etc. or problem like inventory shortage and
under production which can be solved by procuring more stock and
buying new machines..
(2) Definition of Characteristic and Quantity Needed: In this stage,
problem is clearly defined and noted down the general characteristics
of a product or service that may solve the problem. For e.g. deciding
the cost, type, quantity and quality computer, stock or machine to be
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Marketing Management bought. This may be done by a purchase committee, production
manager, technical manager or the top management.
(3) Development of Product Specification: Once the general
specifications have been set down, the buyers find out information
about various product alternatives and set down well-defined product
specifications that are to be bought. This is generally done by the
department or group or individual who will use or distribute the
product. For e.g. an engineer may develop technical specifications of
PC‟s to be bought or the production manager may take decisions on
different items that are to be stocked on the basis of brand, quality,
demand of products.
(4) Search and Qualification of Potential Sources: This phase involves
searching for qualified suppliers among the potential sources. After
product specifications have been set down, the buyer enters the
marketplace and makes trails and collects the sample. Buyers also
conduct a value analysis and determine various cost reduction that
will effectively solve the problem. The buyers determine various
sellers that have the ability to provide the required quantity and good
quality of product needed.
(5) Acquisition and Analysis of Proposal: This step involves getting
quotations and different sellers and floating senders. The offers
received by various parties are then scrutinized against the previously
developed criteria and few sellers are shortlisted who can satisfy all
requirements.
(6) Evaluation and Selection of Suppliers: The shortlisted suppliers are
then evaluated on the basis of:
Past Reputation
Quality of Product
Price of the Product
Delivery and Payment Terms
Guarantees, Warrantees, Discounts, Assurance Offered by the seller
After Sales Service
Suppliers are reviewed again and again and then one or more than one
supplier may be selected.
(7) Selection of on Order Routine: At this stage the buyers place the
final order with the chosen supplier or suppliers specifying all the
technical specifications, quantity needed, expected delivery time,
payment and return terms, installation or after sale service etc.
required.
(8) Performance Feedback and Evaluation: The last stage involves
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54 deciding whether to re-order, modify the order or drop the seller. The
 buyers evaluate their satisfaction with the product and the sellers and Consumer Buying Process &
communicate the response to the sellers. An order schedule is Organizational Buying
prepared for a monthly, quarterly or yearly and the organizations enter Behavior
into a contract with the seller.

5.6 FACTORS INFLUENCING ORGANIZATIONAL

BUYING BEHAVIOR
The factors influencing buyer‟s purchase decisions can be conveniently
divided into following categories:
1. External Environment:
Environmental factors constitute an important determinant of
organizational purchasing. This includes economic situation, government
policy, competitive development in the industry, technological
development and their introduction. For example, if the organizational
buyer feels that the government is going to increase tax on industrial
buying is likely to increase in the near future, his buying of material will
increase as buying will become costly in future due to tax burden. An
organization buyer may update his technology if machinery is available at
fair rates and interest charges are low. Purchases will be made at lower
level, if the recession trends are clearly visible in the economy. An
industrial purchaser will be cautions and careful in his buying decisions so
that decision will prove appropriate and will not bring loss to the
organization. An industrial purchaser will collect information about
economic situation in the country and will take appropriate decisions after
analyzing such economic information. He has to give special attention to
economic environment while taking purchase decision.
2. Organizational Factors:
Organizational factors are internal factor affecting buying decision. Every
purchasing organization has certain objectives and goals, well accepted
procedure and system for purchasing, and an appropriate organizational
structure. These factors directly and indirectly influence its purchase
decision. These characteristic provide clues for determining buying
decision. The objectives of an organization influence the types of products
it needs and the criteria by which it evaluates supplies. Companies frame
their procedures/policies for making purchase decision. Government
organization normally uses bidding while making a purchase. Products
specifications are well established and suppliers have to submit bids as per
the general notice. In the case of other industrial purchasers may have
different procedures for purchasing. Suppliers have to note the procedural
differences among the organizations as regards purchases procedures and
adjust their quotations; according structure assigns authority and
responsibilities for decision making to job positions across a company.
Some companies assign authority for purchase decisions to purchase
managers while others do not. Informal relations among people (with the
organization) in different positions in a purchase organization can affect
buying decisions. In many small family owned firms, centralized
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Marketing Management structures are used. Purchase decisions require the family‟s consent. This
delays the purchase decisions. In decentralized structure, quick decision is
possible at the departmental level. Policies like inventory holding and
procedures such as payments or bidding also influence purchase decisions
of organizational buyers.

3. Inter-Personal Factors:
Industrial buying decisions are normally collective and also as per the
procedures decided. The buying center involves several individuals with
different formal authority, status and persuasiveness. Buying center
consists of individuals of the organization concerned with purchase
decision process. They share the risk arising out of it. They also have a
common goal. There is interaction among the members of a buying center
as regards purchases to be made. There is also a possibility of conflict
among the members (of a buying centre) in marketing buying decision.
The suppliers need to know about such conflicts in order to resolve them
so that the marketing/purchasing program can be adjusted accordingly.
Conflicts among buying center participants need to be solved promptly so
that buying will be done promptly i.e. as per the production schedule
prepared. A knowledge of group dynamics helps the marketer to settle
conflicts and early release of purchase order.
4. Individual Factors:
In the final analysis, individual factors play an important role in buying
decision. The other factors (environmental, organizational, etc.) are
important but individuals concerned with purchase decision are equally
important. A supplier needs to have complete details of all individuals
involved in the purchase decision process. Personal factors/ characteristics
include age, education, job position, maturity, etc. as these factors affect
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individual perception, preference and motivation. Final decision is based Consumer Buying Process &
on such factors even when their importance is limited in the decision- Organizational Buying
making. In the final analysis, individual/officer are responsible for taking Behavior
buying decision far the organization. The make-up of these individual is a
major factor influencing buying decision. The supplier has to consider this
factor and adjust his sales personnel's accordingly. The industrial buyer
may be assertive or may have co-operative attitude. The supplier‟s
representative has to adjust with all types/ categories of industrial buyers
in order to finalize purchase deal.

5.7 TEST YOUR KNOWLEDGE

1. Any individual who purchases goods and services from the market for
his/her end-use is called a...................
(a). customer (b). purchaser
(c). consumer (d). all of these
2. ------------- is a branch which deals with the various stages a consumer
goes through before purchasing products or services for his end use.
(a). consumer behavior (b). consumer interest
(c). consumer attitude (d). consumer perception
3. Which of the following is NOT one of the five stages of the buyer
decision process?
(a). need recognition (b). brand identification
(c). information search (d). purchase decision
4. According to the buyer decision process suggested in the text, the first
stage is characterized as being one of:
(a). awareness (b). Information search
(c). need recognition (d). demand formulation.
5. The stage in the buyer decision process in which the consumer is
aroused to search for more information is called:
(a). information search (b). evaluation of alternatives
(c). search for needs (d). perceptual search.

5.8 SUMMARY
Any individual who purchases goods and services from the market for
his/her end-use is called a consumer. Consumer behavior is the study of
how individual customers, groups or organizations select, buy, use, and
dispose ideas, goods, and services to satisfy their needs and wants. It
refers to the actions of the consumers in the marketplace and the
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Marketing Management underlying motives for those actions. In other words, consumer behavior
can be defined as the decision-making process and physical activity
involved in acquiring, evaluating, using and disposing of goods and
services.
The consumers follow a decision process characterized by need
recognition, information search, evaluation of alternative, purchase
decision and post-purchase evaluation. An individual consumer‟s decision
to purchase a product is influenced by a number of variables, which can be
classified into four categories, namely psychological, social, cultural, and
personal factors etc.
Understanding the consumer behavior of the target market is the essential
task of marketing managers. Consumers differ fundamentally in income,
education level, taste and age. Therefore, the marketer must know more
and more about the consumer so that the products can be produced in such
a fashion as to give satisfaction to them. The government also plays a vital
role in protecting the interest and rights of the consumers.
Organizational buying process refers to the process through which
industrial buyers make a purchase decision. Every organization has to
purchase and services for running its business operations and therefore it
has to go through a complex problem solving and decision-making
process. The behavior that the industrial buyer‟s exhibit while making a
purchase decision, is known as Organizational Buying Behavior and
sequential steps taken by buyers to make a purchase decision is known as
organizational buying process.

5.9 QUESTIONS
Q.1 What is Consumer Behavior? What are factors influencing for
Consumer Behavior?
Q.2 Explain the stages of Consumer Buying Decision process.
Q.3 What is Organization Buying Behavior? What are factors
influencing for Organizational Buying Behavior?
Q.4 Explain steps in Organizational Buying process.

5.10 REFERENCES
 Kotler, P., Keller, K. L., Ang, S. H., Tan, C. T., & Leong, S. M.
(2018). Marketing management: an Asian perspective. Harlow:
Pearson.

 Saxena, R. (2005). Marketing management. Tata McGraw-Hill

Education.

 Karunakaran, K. (2008). Marketing management. Himalaya

Publishing House.

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 Khan, M. (2007). Consumer Behavior. New Age International. Consumer Buying Process &
Organizational Buying
 Kotler, Philip, “Marketing Management - Analysis, Planning, Behavior
Implementation, and Control”, PHI, New Delhi.

 Namakumari S, and Ramaswamy, V.S., “Marketing Management”,

MacMillan Publishers, New Delhi.

 Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,

Boston.

 Dawn Iacobucci, “Marketing Management”, Cengage Learning

*****

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 6
PILLARS OF MARKETING
Unit Structure
6.0 Objectives
6.1 Introduction and Definition
6.2 Benefits of Segmentation
6.3 Bases for Segmentation
6.4 Target Marketing
6.5 Product Positioning
6.6 Differentiation
6.7 Summary
6.8 Questions
6.9 References

6.0 OBJECTIVES
1) Imparting knowledge of various important marketing concepts.
2) To know the Market Segmentation, their benefits and bases
3) To understand the concept of Target Marketing
4) To Know the Product Positioning and Product Differentiation

6.1 INTRODUCTION
A market consists of people or organizations with wants, money to spend,
and the willingness to spend it. However, most markets the buyers' needs
are not identical. Therefore, a single marketing program for the entire
market is unlikely to be successful. A sound marketing program starts with
identifying the differences that exist within a market, a process called,
market segmentation, and deciding which segments will be treated as
target markets. Market segmentation is customer oriented and consistent
with the marketing concept. It enables a company to make more efficient
use of its marketing resources. After evaluating the size and potential of
each of the identified segments, it targets them with a unique marketing
mix. The marketer must somehow persuade the members of each segment
that its product will satisfy their needs better than competitive products.

Definition of Market Segmentation:

“Market Segmentation is the process of dividing a market into distinct
subgroups of consumes with distinct needs, characteristics, or behaviour,
who might require separate products or marketing mixes”- According to
Philip Kotler

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Marketing Segmentation is just the first step in a three-phase marketing Pillars of Marketing
strategy. After segmenting the market into homogeneous clusters, the
marketer must select one or more segments to target. So the second step is
target marketing, which is the process of evaluating each market
segment‟s attractiveness and selecting one more segments to enter. To
accomplish this, the marketer must decide on a specific marketing mix-
that is, a specific product, price, channel ad promotional appeal for each
distinct segment. The third step is market positioning, which involves
arranging for a product to occupy a clear, distinctive, and desirable place
relative to competitive products, in the minds of target consumers.

6.2 BENEFITS OF SEGMENTATION

1. The manufacturer is in a better position to find out and compare the
marketing potentialities of his products. He can judge product
acceptance or to assess the resistance to his product.
2. The result obtained from market segmentation is an indicator to adjust
the production, using man, materials, and other resources in the most
profitable manner. In other words, the organization can allocate and
appropriate its efforts in a most useful manner.
3. Change required may be studied and implemented without losing
markets. As such, as product line could be diversified or even
discontinued.
4. It helps in determining the kinds of promotional devices that are more
effective and their results.
5. Appropriate timing for the introduction of new products, advertising
etc., could be easily determined.

Examples:
Market segmentation benefits both the consumer and the marketer, and
because of these marketers of consumer goods and eager practitioners.
Maruti Udyog Ltd, offers cars for different segments- the small, the less
costly Maruti 800, recently average oriented cars like Celerio; the middle
levels cars- Swift, and High Level Model like Breeza. Hotels also segment
their markets and target different levels hotels (1 star, 2 star, 3 star, 5 star)
to different market segment. Industrial firms also segment their markets
for operational economy and efficiency, as do non-profit organizations and
the media.

6.3 BASES FOR SEGMENTATION

In developing a market segmentation strategy is to select the most
appropriate bases on which to segment the market. The marketer will have
to try different segmentation bases or segmentation variables, alone or in
combination, to find the best way to view the market structure.

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Marketing Management Segmenting Consumer Markets:
The major basis used to segment consumer markets are the following:
1) Geographic Segmentation
2) Demographic Segmentation
3) Psychographic Segmentation
4) Behavioural Segmentation

1) Geographic Segmentation
 Geographic segmentation divides the market based on geography.
This type of market segmentation is important for marketers as people
belonging to different regions may have different requirements.
 For example, water might be scarce in some regions which inflates
the demand for bottled water but, at the same time, it might be in
abundance in other regions where the demand for the same is very
less.
 People belonging to different regions may have different reasons to
use the same product as well. Geographic segmentation helps
marketer draft personalized marketing campaigns for everyone.
Ex. Woollens sold in North India and limited segments in the South like
Bangalore, Hyderabad, Ooty and Kodaikanal.

2) Demographic Segmentation:
 Demographic segmentation divides the market based on demographic
variables like age, gender, marital status, family size, income,
religion, race, occupation, nationality, etc.
 This is one of the most common segmentation practices among
marketers. Demographic segmentation is seen almost in every
industry like automobiles, beauty products, mobile phones, apparels,
etc and is set on a premise that the customers‟ buying behaviour is
hugely influenced by their demographics.
E.g. Garments- Children‟s Clothes, Women wear, Men‟s wear
Cosmetics and Toiletries – beauty aids for women and shaving aids for
men.
Airlines- Economy Class, Clubs/ Executive class
Fridge – Different sizes like 180, 230 litres for different family sizes.

3) Psychographic Segmentation:
 Psychographic Segmentation divides the audience based on their
personality, lifestyle and attitude. This segmentation process works on
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 a premise that consumer buying behaviour can be influenced by his Pillars of Marketing
personality and lifestyle.
 Personality is the combination of characteristics that form an
individual‟s distinctive character and includes habits, traits, attitude,
temperament, etc. Lifestyle is how a person lives his life.
 Personality and lifestyle influence the buying decision and habits of a
person to a great extent. A person having a lavish lifestyle may
consider having an air conditioner in every room as a need, whereas a
person living in the same city but having a conservative lifestyle may
consider it as a luxury.
E.g.- Titan Watches- FastTrack meant for teenagers for casual, stylish
look
Ramond, Reid & Taylor- suiting for the elite class.

4) Behavioural Segmentation:
 It divides buyer into group based on their knowledge, attitude, uses or
responses to a product. Many marketers believe that behaviour
variables are best starting point for building market segments.
 Occasions- Buyer can be grouped to occasions- when they get the
idea to buy, actually buy or use the product.
Ex.: Jewellery and expensive saris on festivals or weeding occasions
Cornflakes, oats, bread and Jam as breakfast food.
Haldiram‟s Products as snack food.
Benefits: A powerful form of segmentation is to group buyers according
to the different benefits that they seek from the product.
Ex- Proctor & Gamble- different laundry detergent segments, each with a
unique benefit- Cleaning, bleaching, fabric softening, fresh smell, strong
and mild etc.
 User Status: Markets can be segmented into groups of non-users, ex-
users, potential users, first time users and regular users of the product.
 User Rate: Markets can also be segmented into light, medium and
heavy product users. Heavy users are often a small percentage of the
market but accounts for a high percentage of total consumption.
 Loyalty Status: A market can also be segmented by consumer
loyalty. Consumers can be loyal to brands, stores and companies.
Buyer can divided into groups according to their degree of loyalty.

Multiple/ Hybrid Segmentation:

Marketers increasingly use combinations of segmentation bases to identify
smaller, better defined target groups. Companies often begin by 63
Marketing Management segmenting their markets using a single base, then expand using other
bases. This is called Hybrid segmentation or Multiple Segmentation,
Ex: Geo-demographic Segmentation, which uses both geographic and
demographic bases.

Examples Of Market Segmentation:

Market segmentation is a common practice among all the industries. It is
not possible for a marketer to address the mass with same marketing
strategy. Here are some examples of market segmentation to prove this
point.

Beauty Products:
While marketing beauty products, marketers often segment the target
market according to the age of the users, the skin type, and also the
occasion. A perfect example of this is Olay.
The company developed its „Age Defying‟ product range to cater to
mature adults and „Clearly Clean‟ range to cater to young adults and teens.

Fast Food:
Fast food chains like McDonald‟s often segment their target audience into
kids and working adults and develop different marketing plans for both.
Marketing efforts like distributing a toy with every meal works well for
kids and providing the food within 10 minutes, free WiFi, and unlimited
refills work well for working adults.

Sports:
Sports brands like Nike, Adidas, Reebok, etc. often segment the market
based on the sports they play which help them market the sports-specific
products to the right audience.

6.4 TARGETING MARKET SEGMENT

Market segmentation explained how the market should be subdivided into
small portions to be more manageable efficiently and effectively. Market
Targeting strategies explain how companies evaluate and select the target
marketing segment which they can serve best and which they can achieve
the biggest profit.
When evaluating different market segments to decide the best segment for
the product, the organization must consider three main factors to identify
the most approachable market targeting strategies for the business.
1. Segment Size and growth: The size of the market segment should be
aligned with the organization‟s production capability and
development characteristics. The market segment should cater growth
capacity and the growth capacity should be able to handle by the
organization
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2. Segment structural attractiveness: The organization should analyze Pillars of Marketing
the long-run attractiveness of the market segment.
3. company objectives and resources: The organization‟s objectives
should match the output of the market segment and the available
resources should have the capability of catering to the need of the
target market segment.
The market targeting strategies can be identified under four main
segments.
1. Undifferentiated Marketing or Mass Marketing
2. Differentiated Marketing
3. Concentrated Marketing
4. Micromarketing

1. Undifferentiated Marketing or Mass Marketing:

This is also known as the Mass marketing strategy. Under this strategy, the
organization decides to ignore the market segmentation and decide to
produce it to the entire market. This is suitable for productions such as
garment and necessary food. This type of strategy focuses on the common
needs of the consumers and products to satisfy those common needs.
There is no uniqueness or specification for the product. The organization
should invest a large amount of capital for mass production. The firm
relies on mass distribution and mass advertising. It aims to endow the
product with a superior image in people‟s mind. Ex- Coca cola (initially)

2. Differentiated Marketing or Segmented Marketing:

Differentiated Marketing strategy is also known as the segmented
marketing strategy. It decides to select several target markets in the
industry and produce customized products for each market segment. By
offering separate product types for each market segment, the organization
is expecting to achieve a higher market share in each market segment and
plan to stabilize separately in each segment. This strategy requires many
research and development skills, innovative and creative skills to produce
products that can satisfy all the selected market segments.
Differentiated marketing is a highly costly strategy. Apart from that, it can
be considered as one of the safest ways of production. If one marketing
segment fails to achieve the expected income, the organization has a few
more options to improve and encourage.
Ex- Nike Shoes- for running, golf, aerobics, cycling and basketball
Procter & Gamble- eight brands of laundry detergents

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Marketing Management 3. Concentrated Marketing or Concentrated Marketing:
Concentrated marketing is known as Niche marketing as well. Under the
concentrated marketing strategy, the organization focuses on a large share
of one or more small segments (niches). Through concentrated marketing,
the organization is planning to achieve a strong market share and create
brand loyalty in the customers. By focusing on one or a few niches the
organization is planning to obtain better knowledge on the customer needs
and provide exactly what they are expecting from the product.
This strategy helps smaller companies to focus on their resources and
provide with minimum waste and achieve bigger and better market share.

Ex-
1) For Niche marketing in India is Shahnaz Hussain‟s herbal product in
the cosmetic sector. When most other cosmetics products are
synthetic or chemical based, this company identified a group of
consumers who disliked chemicals and desired for safe to use herbal
cosmetics. This group was educated and financially sound and was
prepared to pay a premium price also.
2) Logitech International is another niche marketer with a global success
story. They offer many variations of computer mouse. Logitech
produces mouse for left and right handed people, optical mouse,
cordless mouse, 3-D mouse etc.

4. Micromarketing or Local and Individual Marketing:

Micromarketing strategy is about producing the product and the marketing
method to suit the taste of a specific individual or specific location. Rather
than producing for every customer, micromarketing concentrates on
satisfying the needs of specific, prestigious customers. It includes local
marketing and individual marketing.
1. Local Marketing: This is about providing a product or a service
based on the requirement of a customer groups- cities, neighborhoods,
and even specific stores.
2. Individual Marketing: This is about providing a product or a service
based on an individual customer. This can be identified as one-to-one
marketing or mass customization. Mass customization is the process
through which companies interact on a one to one basis with masses
of customers to create customer- unique value by designing products
and services tailormade to individual needs.
Ex: Dell Computers, Mattel Barbie Dolls etc.
The organizations use the above-mentioned market targeting strategies to
find the best market segmentation for their product and try to expand the
market share within that market segment.

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6.5 PRODUCT POSITIONING Pillars of Marketing

Product positioning is a form of marketing that presents the benefits of

your product to a particular target audience. Through market research and
focus groups, marketers can determine which audience to target based on
favourable responses to the product. Product positioning is an important
component of any marketing plan, but it doesn‟t have to be limited to one
audience. For example, a product may have a main target audience and a
secondary audience that is also interested in the product, but perhaps in a
different way. Each audience will find the product appealing for different
reasons, which is why it‟s important to tailor marketing messages to focus
on the benefits each audience values most.
Positioning is the act of designing the company‟s offering and image to
occupy a distinctive place in the mind of the target market. The end result
of positioning is the successful creation of a customer-focused „value
proposition‟, a cogent reason why the target market should buy the
product. The significance of product positioning can be understood from
Dacid Ogilvy‟s words:

 The results of your campaign depend less on how we write your

advertising, than on how your product is positioned.

 Often, factors like luxury, economy, quality and fashion from planks
for positioning. While positioning a brand, the leader‟s position has to
be reckoned. Product differentiation, in a way, is the prelude to
product positioning. They are inter-related strategies and are
employed in close alignment with each other.

Examples of Product Positioning:

 Product positioning can involve different elements. A product can be
positioned in a favourable way for a target audience through
advertising, the channels advertised through, the product packaging,
and even the way the product is priced.
 For example, market research may have revealed that the product is
popular among mothers. What do they like about the product? What
should be highlighted about the product to attract them? And where
should the product be advertised to reach them? With the answers to
these questions, an effective marketing campaign can be created to
send benefit-driven messages to the target audience wherever they
may be (such as Facebook, where targeted ads can be purchased based
on demographics and interests).

6.5.1 Principles of Positioning

The fundamental principles of positioning are as below:

 It is better to be the first than to be late. The selectivity of the mind is

such that the pioneer will always have a presence in the mind set of
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Marketing Management the consumers. Hence, first mover companies like Mc Donald‟s.
Thums Up, Amul, Xerox etc. are still in the minds of the customers.

 In case not the first, the company should be able to create a new
category by making even a small changes in the marketing mix
elements. Maruti Udyog created a small car market in India through
product innovation.

 It is important to understand the position and strategies of the

competitors. The competitors strengths and weaknesses should be
known to the company. Britannia did the repositioning exercise to
overcome the competition and similarly, Tata gave a scare to Maruti
when they introduce their small car Indica in the market.

6.5.2 Advantages and Disadvantages of Positioning

Advantages of Positioning

 It helps to focus the product/ brand on a specific target customer

group/ segment.

 It offers the product/ brand a new appeal in the market.

 A distinctive place can be occupied in the target customers mind.

 Successful creation of the market for a product/ brand.

Disadvantages of Positioning

 It is not possible to offer a product wholly for a specific type of

customers.

 Positioning errors affect a number of Product/ brands

6.6 PRODUCT DIFFERENTIATION

 Product differentiation is a process used by businesses to distinguish a
product or service from other similar ones available in the market.
 The goal of this tactic is to help businesses develop a competitive
advantage and define compelling unique selling propositions
(USPs) that set their product apart from competitors.
 Organizations with multiple products in their portfolio may use
differentiation to separate their various products from one another and
prevent cannibalization.
All products can be differentiated to some extent. But not all brand
differences can be worthwhile or meaningful. A difference is worth
establishing to the extent that it satisfies any of the following criteria

 Important: The difference delivers a highly valued benefit to a

sufficient number of buyers.
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 Distinctive: The difference is delivered in a distinctive way. Pillars of Marketing

 Superior: The difference is superior to other ways of obtaining the

benefit

 Pre-emptive: The difference cannot be easily copied by competitors.

 Affordable: The buyer can afford to pay for the difference.

 Profitable: The company will find it profitable to introduce the

difference.

6.7 SUMMARY
Market segmentation is process of dividing the total market into several
sub-markets, or segments, each of which tends to be homogeneous. There
are three important principles applied for market segmentation:
measurability of segments, accessibility of the segments, and represent
ability of the segments. In market targeting, we evaluate each market
segment and finally select the appropriate segment company finds worth
entering. After targeting, marketers attempt to develop a special image for
its products in consumer mind relative to competitive products; this is
known as market positioning.

6.8 QUESTIONS
1. Discuss the significance of segmentation. Also write in brief different
bases of segmentation.
2. What do you mean by market targeting? Write in brief the process of
evaluating and selecting the market segment for targeting.
3. Write a detailed note on market positioning with suitable examples.

6.9 REFERENCES
 Stanton, Etzel and Walker- Fundamentals of marketing (TMH)
 Philip Kotler- Marketing Management (PHI)
 Philip Kotler and Armstrong- Principles of marketing (PHI)
 Ramaswamy and Namakumari- Marketing management (Macmillan)
 Namakumari S, and Ramaswamy, V.S., “Marketing Management”,
MacMillan Publishers, New Delhi.
 Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,
Boston.
 Dawn Iacobucci, “Marketing Management”, Cengage Learning
*****

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 7
MARKETING MIX AND PRODUCT
DECISION
Unit Structure
7.0 Objectives
7.1 Concept & Definition of Product
7.2 Levels of Product
7.3 Classification of Products
7.4 The Product Life Cycle
7.5 Product Decisions
7.6 Brands and Brand Evaluation
7.7 Summary
7.8 Questions
7.9 References

7.0 OBJECTIVES
1) To know the concept of Products and its classification
2) To learn the stages of Product life cycle and product decision
3) To understand the concept of Brands and Brand Evaluation

7.1 CONCEPT & DEFINITION OF PRODUCT

Product is a key element. Marketing mix planning starts with formulating
an offer that brings value to target customers and satisfies their specific
needs. A company‟s market offer often includes both tangible goods and
services. Today, some companies are developing and delivering total
customer experience. Experiences are memorable, personal and take place
in the minds of individual consumers. Examples are visit to theme park,
Open space theater, exhibition etc.

7.1.1.Definition:
“ A product is anything that can be offered to a market for attention,
acquisition, use, or consumption and might satisfy a want or need.” -
According to Philip Kotler
Products refers to intangible and tangible goods like physical objects,
services, events, persons, places, organizations, ideas or combinations of
these. Ex- Cars, washing machines, soaps, exhibitions, business schools
etc.

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“ Services are a form of product that consists of activities, benefits or Marketing Mix and
satisfactions offered for sale, that are essentially intangible and do not Product Decision
result in the ownership of anything” – According to Philip Kotler
Ex- Banking, Hotel, Hospital, Airlines, Legal services, Consultancy etc.

7.2 LEVELS OF PRODUCT

Five Product Levels Model provides a way to show the different levels of
need customers have for a product, such as: Core benefit, Generic Product,
Expected Product, Augmented Product and Potential Product.

Customers will choose a product based on their perceived value of it and

are only satisfied if the product‟s value to them meets or exceeds
expectations. If the product‟s actual value falls below expectations, they
will be dissatisfied. An explanation of Kotler‟s Five Levels follows below:
1. Core benefit: The core benefit is the basic need or want that the
customer satisfies when they buy the product. For example, a hotel
provides a bed to sleep in when a person is away from home.
2. Generic product: The generic product is a basic version of the
product made up of only those features necessary for it to function. In
this example, a hotel would provide not only a bed, but a few
additional items such as sheets, towels and a bathroom.
3. Expected Product: The expected product includes additional features
that the customer might expect. In the hotel example, the sheets,
towels and bathroom would be clean.
4. Augmented Product: The augmented product refers to any product
variations or extra features that might help differentiate the product
from its competitors and make the brand a clearer choice amongst the
competition. This could be additional amenities such as a helpful
concierge service or tourist guides available to hotel guests.
5. Potential Product: The potential product includes all augmentations
and improvements the product might experience in the future. This
means that to continue to surprise and delight customers the product
must be constantly improved. In the hotel example, this could mean
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Marketing Management gifts, chocolates, or luxury bath products that will make the customer
happy and choose that product over others in the future.
The greatest advantage of Kotler’s Five Product Levels Model is that it
enables an organization to identify how to satisfy the needs and wants of
the customer, in order to help differentiate itself from its competitors.

7.3 CLASSIFICATIONS OF PRODUCTS

Goods or products are classified as either consumer goods or industrial
goods. Consumer goods are produced for the personal use of the ultimate
consumer, while industrial goods are produced for industrial purposes.
There are many goods, such as typewriters and stationery can be classified
as both industrial and consumer good.

1. Consumer Products:
Consumer products are those products that are bought by the final
customer for consumption. It consists of four types:

i. Convenience Products:
Convenience Products are usually low priced, easily available products
that customer buys frequently, without any planning or search effort and
with minimum comparison and buying effort. Such products are made
available to the customers through widespread distribution channels-
through every retail outlets. This category includes fast moving consumer
goods (FMCG) like soap, toothpaste, detergents, food items like rice,
wheat flour, salt, sugar, milk and so on.

ii. Shopping Products:

Shopping products are high priced (compared to the convenience product),
less frequently purchased consumer products and services. While buying
such products or services, consumer spends much time and effort in
gathering information about the product and purchases the product after a
careful consideration of price, quality, features, style and suitability.
Such products are distributed through few selected distribution outlet.
Examples include television, air conditioners, cars, furniture, hotel and
airline services, tourism services.

iii. Speciality Products:

Speciality Products are high priced branded product and services with
unique features and the customers are convinced that this product is
superior to all other competing brands with regard to its features, quality
and hence are willing to pay a high price for the product. These goods are
not purchased frequently may be once or twice in lifetime and are
distributed through one or few exclusive distribution outlets. The buyers
do not compare speciality products.

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iv. Unsought Products: Marketing Mix and
Product Decision
Unsought product is consumer products that the consumer either does not
know about or knows about but does not normally think of buying. In such
a situation the marketer undertakes aggressive advertising, personal selling
and other marketing effort. The product remains unsought until the
consumer becomes aware of them through advertising. The price of such
product varies. Examples of unsought product are cemetery plots, blood
donation to Red Cross, umbilical cord stem cell banking services.
2. Industrial Products:

Industrial Products are purchased by business firms for further processing

or for use in conducting a business .The distinction between consumer
product and industrial is based on the purpose for which the product is
bought.
i. Material and parts:
Material and parts include raw material like agricultural products, crude
petroleum, iron ore, manufactured materials include iron, yarn, cement,
wires and component parts include small motors, tires, and castings. Most
manufactured materials and parts are sold directly to industrial users. Price
and services are the major marketing factors. Branding and advertising
tend to be less important.
ii Capital items:
Capital items help in production or operation and include installations
like factories, offices, fixed equipments like generators, computer systems,
elevators and accessory equipments like tools office equipments.

iii. Supplies:
Supplies include lubricants, coal, paper, pencils and repair maintenance
like paint, nails brooms.

iv. Services:
Services include maintenance and repair services like computer repair
services, legal services, consultancy services, and advertising services.
Classification of Products – On the Basis of Durability, Tangibility
and Use:
Marketers have traditionally classified products on the basis of three
characteristics- durability, tangibility and use.
(a) Non-durable goods: tangible goods normally consumed in one or a
few uses. For example, soaps, salt and biscuits.
(b) Durable goods: tangible goods that can normally be used for many
years. For example, colour TV, refrigerators, washing machines and
vacuum cleaners.
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Marketing Management (c) Services: intangible, inseparable, variable and perishable products.
For example, airline and banking services.

7.4 THE PRODUCT LIFE CYCLE

The product life cycle is the process a product goes through from when it
is first introduced into the market until it declines or is removed from the
market. The life cycle has five stages – Product Development,
introduction, growth, maturity, and decline. While some products may
stay in a prolonged maturity state, all products eventually phase out of the
market due to several factors including saturation, increased competition,
decreased demand and dropping sales. Generally, there are four stages to
the product life cycle, from the product's development to its decline in
value and eventual retirement from the market.

1. Product Development Stage

Product development begins when the company finds and develops a new
product idea. The process involves idea generation, idea screening,
concept development and testing, marketing strategy development,
business analysis, product development, test marketing and
commercialisation.

2. Introduction Stage:
In this stage, the product is being released into the market. When a new
product is released, it is often a high-stakes time in the product's life cycle
- although it does not necessarily make or break the product's eventual
success.
During the introduction stage, marketing and promotion are at a high - and
the company often invests the most in promoting the product and getting it
into the hands of consumers. Costs are generally very high and there is
typically little competition. The principle goals of the introduction stage
are to build demand for the product and get it into the hands of consumers,
hoping to later cash in on its growing popularity. Promotional
expenditures are at their highest ratio to sales because of the need for a
high level of promotional effort to
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1) inform potential customers of the new and unknown product Marketing Mix and
Product Decision
2) induce trial of the product
3) Secure distribution in retail outlets

Marketing Strategies:
While launching a new product, marketing management can set a high or
low level for each marketing variable, such as price, promotion,
distribution and product quality. Considering only price and promotion,
marketing management can pursue one of the four strategies as below:
a) Rapid skimming strategy: Launching the new product at a high
price and a high promotion level, to skim the market.
b) Slow skimming strategy: Launching the new product at a high price
and low promotion
c) Rapid penetration strategy: Launching the new product at a low
price and spending heavily on promotion.
d) Slow penetration strategy: Launching the new product at a low price
and low level of promotion.

3. Growth Stage:
In the growth stage, consumers are already taking to the product and
increasingly buying it. The product concept is proven and is becoming
more popular - and sales are increasing. Other companies become aware
of the product and its space in the market, which is beginning to draw
attention and increasingly pull in revenue. If competition for the product is
especially high, the company may still heavily invest in advertising and
promotion of the product to beat out competitors. As a result of the
product growing, the market itself tends to expand. The product in the
growth stage is typically tweaked to improve functions and features.As the
market expands, more competition often drives prices down to make the
specific products competitive. However, sales are usually increasing in
volume and generating revenue. Marketing in this stage is aimed at
increasing the product's market share.

Marketing Strategies
During this stage, the firm uses several strategies to sustain market growth
as long as possible.
a) The firm improves product quality and adds new product features and
models.
b) It enters new market segments
c) It enters new distribution channels

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Marketing Management d) It shifts some advertising from building product awareness to bringing
about product conviction and purchase.
e) It lowers prices at the right time to attract the next layer of price
sensitive buyers

4. Maturity Stage:
When a product reaches maturity, its sales tend to slow or even stop -
signaling a largely saturated market. At this point, sales can even start to
drop. Pricing at this stage can tend to get competitive, signaling margin
shrinking as prices begin falling due to the weight of outside pressures like
competition or lower demand. Marketing at this point is targeted
at fending off competition, and companies will often develop new or
altered products to reach different market segments. Given the highly
saturated market, it is typically in the maturity stage of a product that less
successful competitors are pushed out of competition - often called the
"shake-out point."
In this stage, saturation is reached and sales volume is maxed out.
Companies often begin innovating to maintain or increase their market
share, changing or developing their product to meet with new
demographics or developing technologies. The maturity stage may last a
long time or a short time depending on the product.

Marketing Strategies:
a) Market Modification
The firm should seek to expand the market for its brand by working with
the two factors that make up sales volume.
Volume = Number of brand users * Usage rate per user
The firm can try to expand the number of brand users by converting non
users, entering new market segments, and by winning competitors
customers.

b) Product Modification:
Managers also try to turn sales around by modified the products
characteristics in a way that will attract new users and/or more usage from
current users. The product relaunch can take several forms like quality
improvements, feature improvements and style improvements.

c) Marketing Mix Modification:

The product manager should also try to stimulate sales through modifying
one or more marketing mix elements like price, distribution, advertising,
sales promotion, personal selling and services.

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5. Decline Stage: Marketing Mix and
Product Decision
The sales of most product forms and brands eventually decline. The sales
decline may be slow or rapid. Sales may plunge to zero, or they may
petrify at a low level and continue for many years at that level.
Sales decline for a number of reasons, including technological advances,
consumer shifts in tastes, and increased domestic and foreign competition.
All of these lead to overcapacity, increased price cutting and profit
erosion.
As sales and profits decline, some firms withdraw from the market. Those
remaining may reduce the number of product offerings. They drop smaller
market segments and marginal trade channels. They may cut the
promotion budget and reduce their prices further.
Unless strong reasons for retention exists, carrying a weak product is very
costly to the firm

Marketing Strategies:
A firm faces a number of tasks and decisions to handle its ageing products.
Identifying the weak products is normally done by a product review
committee. They must decide whether to „maintain‟ the product without
change, hoping that competitors will drop out of the market; „harvest‟ the
product, reducing costs and trying to maintain sales; or drop the product. If
the decision is to continue, special marketing strategies are evolved. If the
decision is to drop the product, the firm has to decide whether to sell or
transfer the product to someone else or drop it completely. It must also
decide whether to drop the product quickly or slowly, and the volume of
spares inventory needed to service past customers of the product.

7.5 PRODUCT DECISIONS

Three types of product decisions are normally involved in marketing.
They are
1) Individual Product Decisions
2) Product Mix Decisions
3) Product Line Decisions

1) Individual Product Decisions:

The important product decisions involved are product attributes, branding,
packaging, labelling and product support services.
a) Product attribute decisions: The steps start with the design of the
product itself – the decisions relating to the product attributes (in
particular, product quality, product features and product design/style).

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Marketing Management b) Branding decisions: Branding is an important tool for marketers to
create separate identify for a company‟s product. A brand is a name,
term, sign, symbol, or design or a combination of these, that identifies
the maker or seller of a product or service(Philip Kotler). Branding
adds value to a product and consumers view a brand as an important
part of a product. Ex- Tata salt, Amul Milk.
c) Packaging and labeling decisions: If the product is a physical good,
then various decisions in large warehouse to packaging and labeling
need to be made. Packaging has multiple roles, including promotion,
identification, brand support, as well as a role in transport and
logistics. Labelling can vary from simple tags attached to products to
complex graphics that are part oof the package. Label identifies the
product or brand, describes several things about the product like
manufacturer‟s name, place of manufacture, date, contents, using
instructions and safety precautions. Label can also promote the
product through attractive graphics.
d) Product support services decisions (product augmentation):The
next stage is developing the product‟s support services, this is
sometimes called referred to as product augmentation (where
additional services are provided).

2. Product Mix Decision:

Product mix decision refers to the decisions regarding adding a new or
eliminating any existing product from the product mix, adding a new
product line, lengthening any existing line, or bringing new variants of a
brand to expand the business and to increase the profitability. For Ex.
Hindustan Lever carries a variety of product line like cosmetics,
detergents, beverages (coffee, tea), food items etc. The product mix of a
company has four important dimensions.
i. Product mix width: refers to the number of different product line the
company carries. Ex- P & G carries 250 + brands in lines of fabric
and home care, baby care, feminine care, beauty care, health care etc.
ii. Product mix length: refers to the total number of items the company
carries within its product lines.
Ex: P & G has many brands with each line- 7 laundry detergent, 6
soaps, 5 shampoos
iii. Product mix depth: refers to the number of versions offered of each
product in the line. Ex- P & G Crest Toothpaste comes in 13 varieties-
Multi care, cavity protection, sensitivity protection etc.
iv. Product mix consistency: refers to how closely related the various
product lines are in end use, production requirements, distribution
channels, or some other way. Ex- P & G‟s product mix consists of all
consumer products that go through the same distribution channels and
mostly to same retail shops and all for domestic end use.
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3. Product Line Decision: Marketing Mix and
Product Decision
A product line is a group of products that are closely related manufactured
by a single company. Product line managers takes product line decisions
considering the sales and profit of each items in the line and comparing
their product line with the competitors' product lines in the same markets.
Marketing managers have to decide the optimal length of the product line
by adding new items or dropping existing items from the line.
To give an example for a product line, a cosmetic company‟s makeup
product line might contain concealer, powder, blush, eyeliner, mascara
and lipstick products. All of them are closely related and therefore part of
one product line. The same company might also offer other product lines.
For instance, one product line could be geared toward teenagers and
another one toward woman older than 50 (ex-. an anti-age product line).
Each of these product lines requires specific product line decisions.
A) Line Stretching Decision - Line stretching means lengthening a
product line beyond its current range. An organisation can stretch its
product line downward, upward, or both way.
1. Downward Stretching means adding low-end items in the product
line, for example in Indian car market, watching the success of
Maruti-Suzuki in small car segment, Toyota and Honda also entered
the segment.
2. Upward Stretching means adding high-end items in the product line,
for example Maruti-Suzuki initially entered small car segment, but
later entered higher end segment.
3. Two-way Stretching means stretching the line in both directions if an
organisation is in the middle range of the market.
B) Product Line Filling- involving addition of new items within the
existing range of product line. Line filling is usually done to get extra
profit, to satisfy dealers, use excess capacity, and plugging holes to
keep out competitors. If line filling is overdone, it may result in
cannibalism and customer confusion. The marketer should also ensure
that new items added are noticeable different from existing products.

7.6 BRAND
The origin of the word „brand‟ could be traced to the Norwegian word
„brandr‟ meaning to „burn‟. A brand is a name or a symbol - and its
associated tangible and emotional attributes - that is intended to identify
the goods or services of one seller to differentiate them from those of
competitors. At the heart of a brand are trademark rights. Brands are
intangible, which means you can't actually touch or see them. As such,
they help shape people's perceptions of companies, their products, or
individuals. Brands often use identifying markers to help create brand
identities within the marketplace. They provide enormous value to the
company or individual, giving them a competitive edge over others in the
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Marketing Management same industry. As such, many entities often seek legal protection for their
brands by obtaining trademarks. Ex. Apple, Amul,

7.6.1 Brand Evaluation:

A brand designates a product or service as being different from
competitors' products and services by signaling certain key values specific
to a particular brand. It is the associations which consumers make with the
brand that establish an emotional and a rational 'pact' between the supplier
and the consumer. This pact is an ongoing relationship between the
supplier and consumer, and because of this, brands provide a security of
demand that the supplier would not enjoy if they did not own the brand.
This security of demand means a security of future brand earnings, and
this is what defined as brand evaluation.

7.6.2 Need for Brand Evaluation:

Although public perceptions of brand valuation are often focused on
balance sheet valuations, the reality is that the majority of valuations are
now actually carried out to assist with brand management and strategy.
Companies are increasingly recognizing the importance of brand
guardianship and management as key to the successful running of any
business. The values associated with the product or service is
communicated through the brand to the consumer. Consumers no longer
want just a service or product but a relationship based on trust and
familiarity. In return businesses will enjoy an earnings stream secured by
loyalty of customers who have 'bought into' the brand.

7.6.3 Methods of Brand Evaluation:

Today, a widely accepted method of valuing a company or business is to
discount the profit or cash flows it produces to a net present value. A
similar approach can be used for brands. The profit streams produced by
the brand are discounted to their net present value using a discount rate
which reflects the riskiness of those income streams being realized i.e.
which reflects the strength of the brand - the drivers of those profit
streams.
Interbrand, the original pioneers of Brand Valuation employ an economic
use method, which is the most widely accepted and has made Interbrand a
worldwide authority in this field. It is based on the premise that brands,
when well-managed, affect the way that consumers behave in the market
and the brand owner derives an economic benefit as a result.
Interbrand bases its valuation method on this concept of economic use and
the fundamental question: how much more valuable is the business
because it owns certain brands? It is thus a marketing measure that reflects
the security and growth prospects of the brand and a financial measure that
reflects the earnings potential of the brand.
Given this concept of economic worth, the value of a brand reflects not
only what earnings it can generate in the future, but also the likelihood of
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those earnings actually being realized. Broadly speaking Interbrand's Marketing Mix and
brand valuation methodology comprises four elements: Product Decision

1. Financial Analysis: To identify business earnings and 'Earnings from

Intangibles' for each of the distinct segments being assessed.
2. Market Analysis: To measure the role that a brand plays in driving
demand for services in the markets in which it operates and hence to
determine what proportion of Earnings from Intangibles are
attributable to the brand (this is measured by an indicator referred to
as the 'Role of Branding Index').
3. Brand Analysis: To assess competitive strengths and weaknesses of
the brand and hence the security of future earnings expected from that
brand (this is measured by an indicator referred to as the 'Brand
Strength Score').
4. Legal Analysis: To establish that the brand is a true piece of
'property' Brand valuation techniques originally developed in response
to mergers and acquisitions activity: valuing the brands owned by a
company to help calculate the true value of the business.

7.7 SUMMARY
A brand is a trademark or combination of trademarks that, is intended to
identify goods and services of one seller in order to differentiate them
from those of competitors. The value of the brand is the amount another
party is prepared to pay for it. Sometimes this is easily ascertainable when
one company purchases a brand but no other asset of another company.
There are several applications of brand valuation such as brand
management and development, enhancing management communication,
benchmarking of competitors, monitoring value year on year, merger and
acquisition, joint venture negotiations.

7.8 QUESTIONS
1. Explain the stages of the product life cycle using a diagram
2. Discuss how marketing strategies changing during the product‟s life
cycle.
3. What are consumer products? Discuss the classifications of consumer
products giving at least two examples for each.
4. What are industrial products? Classify industrial products giving at
least two examples for each.
5. What do brands mean to you? What are your favourite brands and
why?

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Marketing Management
7.9 REFERENCES
 K. Ashwathappa, Business Environment for Strategic Management,
Himalaya Publishing House, Mumbai.

 Francis Cherrunilam, Business Environment, Himalaya Publishing

House, New Delhi.

 S.K. Misra and V.K. Puri, Indian Economy, Himalaya Publishing

House, New Delhi.

 B.B. Tandon and K.K. Tandon, Indian Economy, Tata McGraw Hill,
New Delhi.

 Kotler, Philip, “Marketing Management - Analysis, Planning,

Implementation, and Control”, PHI, New Delhi.

 Namakumari S, and Ramaswamy, V.S., “Marketing Management”,

MacMillan Publishers, New Delhi.

 Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,

Boston.

 Dawn Iacobucci, “Marketing Management”, Cengage Learning

*****

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 8
NEW PRODUCT DEVELOPMENT
PROCESS
Unit Structure
8.1 Introduction
8.2 New Product Options
8.3 Factors Contributing to New Product Development
8.4 New Product Development Process
8.5 Challenges of New Product Development
8.6 Success of New Product Development
8.7 Reasons for Failure of New Product Development
8.8 Summary
8.9 Test Your Knowledge
8.10 Questions
8.11 References

8.0 OBJECTIVES
 To study new product options.

 To understand factors responsible for new product development.

 To learn the process of new product development.

 To understand challenges in new product development.

 To understand measures for success of new product development

 To understand reasons for failure of new product development.

8.1 INTRODUCTION

A new product is a product that is new to the company introducing it even

though it may have been made in same form by others. For example, in the
area of toilet soaps, different brands introduced by each company are that
way, new products as it is new to the company.

The definitions of new product development are given as under:

“By new product we mean original products, product improvements,
product modification and new brands that the firm develops through its
own research and development efforts”.
In the light of above definition, a new product will be considered anything
which is perceived as such by the consumer or with which the firm has no
previous experience. It means that a consumer views a product as new if
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Marketing Management any new thing is experienced or any additional variants are provided with
the existing product.

8.2 NEW PRODUCT OPTIONS

Broadly new products can be classified into the following four categories:

i. New to the World:

These products represent innovative novel creations that did not exist
earlier. A large number of products that are now taken for granted and
considered old were once new to the world. Consider products such as
microprocessor, transistor, television, mobiles phones and airplane were
new products when they were created for the first time. Sony introduced to
the world a device called Walkman that allowed people to listen to music
on the go.

ii. New to the Company:

As the name of this category suggests, these products are not new to the
world but are new for the company. Companies expand their offering to
grow like ITC added readymade apparels and food products to its
portfolio. Addition of new product lines fall into this category.
Micromax started its operations as a mobile handset marketer and added
television line later. Sony added digital camera line to its existing portfolio
in 1996.

iii. Additions to Product Line:

Firms add new items to their existing product line in order to meet
evolving consumer and competitive conditions. For example, Pepsi added
Pepsi Blue to cash in on a particular cricketing season. Nokia added Asha
to its mobile phone line. Sony introduced a new model to its mobile phone
line, Sony Xperia Z2, which they promoted as the „best phone ever‟.

iv. Product Improvement:

Improved products are considered new because of their newness. These
are linear improvements to a product. For instance, Maruti launched its
cars with new K Series engines that delivered superior fuel efficiency.
Blue Star improved its air conditioners by improving its compressor to
inverter technology. Sony listened to customer feedback and it was the
first to improve its camera by making their devices dustproof and
waterproof.

8.3 FACTORS CONTRIBUTING TO NEW PRODUCT

DEVELOPMENT
Bringing a successful product to market is a team effort. While designers
are responsible for usability, utility and the rest of the user
experience there are many factors which contribute to the success or
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failure of new product development and many of these are outside of the New Product
designer‟s direct control. Development Process

The following are the main factors which contribute to new product
development:
 Knowledge Management
 Market Orientation
 Technology
 Top Management Support

1. Knowledge Management:
Knowledge management is the process by which an enterprise collects,
organizes shares and analyzes its knowledge in a way that is easily
accessible to employees or organizations. This knowledge includes
technical resources, frequently asked questions, training documents and
people skills etc. In many organizations today; knowledge is treated like
gold dust and guarded by its owners as they would stolen treasure.
Unfortunately, creating knowledge silos like these makes it impossible for
knowledge to be effective. Market research data, for example, can be
incredibly useful to a design team but only if they can access that data and
it‟s not kept securely in the marketing department under lock and key.

2. Market Orientation:
Market orientation is a business approach wherein the processes of
product development and creation are focused on satisfying the needs of
consumers. It is a type of marketing orientation technique that designs
products with qualities that consumers want, which is completely different
from the conventional marketing approach. Market orientation is a
company philosophy focused on discovering and meeting the needs and
desires of its customers through its product mix. It seems reasonable to
suggest that while a design team does not have control over company
philosophy it should be in a good position to influence this.
Conducting user research and where appropriate market research – two
fundamentals of developing high quality user experiences; will enable the
discovery of customer/user needs and how to meet them.

3. Technology:
The technology used to create and deliver the product must be suitable for
the market. While it is unlikely that the design team will have the final say
in technology budgets or appropriation it is likely that they will be able to
influence the development teams in their choice of technology. It is clear
that, for example, multi-million dollar hardware and software
requirements will make a product inaccessible to the consumer market but
may not be an insurmountable hurdle for government or corporate
markets.
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Marketing Management 4. Top Management Support:
At first glance, this appears to be completely out of control of the design
team. After all, top managers make the decision as to what to support and
what not to support right? Unfortunately, it‟s not that simple. The support
of top management is critical to a project‟s success. Without that support,
budget or resources are not likely to be granted to the project and it may
not get the priority it needs within the business as a whole. However,
while the design team cannot force management to support their projects
they can develop the political savvy to persuade management to support
the best projects.

8.4 NEW PRODUCT DEVELOPMENT PROCESS

If a company wants to be successful in the long-term, it has to engage in
new product development process to introduce new products and satisfy
its customers‟ needs. There are thousands of new products entering into
the process but only few reach to the market. Therefore, it is very
important to understand your customers, market conditions and
competitors who are offering the same type of products. Every product
goes through 7 steps of new product development process.

Stage I- Idea Generation:

Idea generation is the first step of New Product Development process. It is
a systematic search to find out new ideas. It comes from everywhere and
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in any form. In the first stage, new ideas are collected from many sources, New Product
which are Development Process

Internal Sources:
Most of the ideas come from the company within. Brain storming
sessions, sales person, guest contact employees, management can ask the
employees to share their observations
Customers:
Watching and listening to the customers provide good ideas. Needs and
wants are better explained through customer surveys. Sales person can
collect suggestions from the customer. Sometimes, customers make their
own products. The company has to only think innovative methods of
collecting these ideas. Marketers must try to do a casual chat with frequent
travelers.
Competitors:
Companies observe competitors, products, advertisements, communication
to collect clues about the new products but the marketer must take care
that they are not using any unethical means to collect the information.
Often these copied products are superior or inferior in quality with respect
to the original ones. In both the cases, the original marketer has to cope
up. In case of the copiers has inferior quality then company has to
overcome the bad image perceived about the product, if the copiers have
good quality then the original marketer has to compete with an already
established product. The annual reports of publicly trading companies are
an excellent source of information.

Distributors and suppliers:

They are good source of information about consumer problems, new
products possibilities, new concepts, techniques, trends, competitive
strategies and to meet important contacts.

Others:
Trade shows / magazines, government agencies, seminars, marketing
research firms, new product consultants, inventors, etc. are good source of
information.

Stage II- Idea Screening:

Idea generation can provide us with a pool of ideas. But the second step of
new product development process is to find good ideas and drop the poor
one. Following are some of the factors influencing evaluating criteria to
make it succeeded
 Is the product useful to customer‟s needs?
 Company objectives and resources (people and skills) are achieved?
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Marketing Management  Company strengths and weaknesses?
 Affordability, advertising and distribution?
 Current trends?
 What is the expected return on investment?

Stage III- Concept Development and Testing:

Concept development and testing is the third step of new product
development process. A product concept provides a detailed description of
the idea; keep in mind your consumer perspective.
Those ideas qualify the screening stage to become a concept and it must
be tested. Companies cannot launch a new product without properly
testing the concept. Concept testing help companies to investigate
customer‟s reactions before introducing to the market.
A more physical and visual presentation is required for a more reliable
concept test. The concept further engages target market. After exposing
the concept, companies ask questions from consumers. Companies want to
know the customer‟s reactions in term of feedback.

 Is the concept appealing to customers?

 Is this concept fulfilling the customer‟s wants?

Stage IV- Marketing Strategy and Business Analysis:

In this step, the company develops marketing and business strategy to
introduce a new product in the market successfully. The company engages
different business units – to perform marketing and financial analysis – to
meet the marketing objectives.
The company initially explains target market and product positioning. It
should also explain sales forecast, market share and profit both in short
and long-run. The company also describes the marketing mix strategy.
Business analysis involves a detailed review of company cost, sales, profit
projections whether the company is satisfied with objectives.

Stage V- Product Development:

When all the marketing and business strategies are finalized. In this step,
the product concept is transformed into a physical product. In the
development stage, a prototype is designed that is functional and able to
satisfy the consumer wants. The product undergoes serious tests to make
sure its effectiveness and performance.

Stage VI- Test Marketing:

After designing a successful prototype, it is introduced for further research
and feedback. With the help of test marketing, the company tries to
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88 understand the consumers and dealers feedback and reaction. Important
changes are made in the actual product if needed. This step completes the New Product
process empowers the company to successfully introduce the new product Development Process
in the market.

Stage VII- Commercialization:

Test marketing helps the company to make decisions and launch the new
product in the market. Commercialization is introducing the new product
in the target market. The marketing mix strategies are applied. Four
decisions are important when launching a new product.
 When to introduce the product.
 Where to launch a new product in single or multiple location,
national or international market.
 To whom the company must decide distribution and promotion
(already decided in test marketing phase).
 How (action plan) a company should introduce the new product in the
target market.

8.5 CHALLENGES OF NEW PRODUCT

DEVELOPMENT
Manufacturing a new product is a challenging task for every organization.
Only a Few companies will succeed in it. There are some points which
make life challenging for the development teams. Following are the
challenges of Product development.

Economics:
If the firm invests in product development, the firm will expect a
reasonable ROI (Return on Investment) with this product. The product
should be inexpensive to produce and the price should be reasonable so
that customers are willing to pay. These are the challenges that can make
product development more challenging for a firm and the enterprise level.
There are a few other challenges for the development teams.

Creation:
As the idea takes shape and comes to reality as a physical component or
equipment, each and every creative action performed by the individual in
the development team will contribute to the success of the product.

Trade-Offs:
Trade-off means a balance achieved between two desirable features. This
is the most difficult part of product development. Recognizing and
understanding these trade-offs will maximize the success of the product.
For example, an aeroplane can be made lighter but this will result in an
increase in the manufacturing costs. So here we need to balance between
the manufacturing costs while making the plane even lighter.
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Marketing Management Team Diversity & Team Spirit:
Successful product development requires skills and talents. As a result, the
product development teams involve people with a wide range of
experiences, personalities and perspectives put together for success. For
this, they need to be motivated and cooperative together as a team to bring
up the energy in every one increasing the product.

Dynamics:
Being successful in the market is not only the end but sustaining the
competition in the market is also even more challenging. As the
technologies improve, customer preferences change/evolve and the
introduction of new products in the markets. Decision-making in this kind
of environment is a challenging task.

Time Pressure:
The product development decisions should be made under time pressure
even though there is incomplete information about the market.

8.6 SUCCESS OF NEW PRODUCT DEVELOPMENT:

The acceptance of product by the customers is called success of it. Further,
the accepted product continues to be there in market for more number of
years. In other words, a product has to undergo all phases before it dies,
could be termed as successful. The duration is undefined. It changes
according to customers repeated buying‟s and preferences. The lessons of
product failure suggest the way and means to be followed for the success
of it.

The following are the probable measures to be followed to attain

success of product:

 Proper research and development activities are to be carried out for

the identification of new product concept.

 Proper studies are to be conducted to know accurately the market

conditions.

 Product ideas are to be refined and redefined by the research team.

 Proper co-ordination is needed at all the levels of management. The

Research and Development department, production wings, purchase,
finance, marketing etc., have to with co-operation & co-ordination.

 Successfully launch the product with needed promotional support.

 Property conduct the sample-test, pre-launch offer before heavy

investment in production.

 Be ready to modify the product in case market expects slight

modification.
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 Add the values to the products which would satisfy the customers for New Product
the long-term Development Process

8.7 REASONS OF FAILURE OF NEW PRODUCT:

A lot of products fail although there is a well-developed product
development process. Following are some of the reasons for the same-
 Sometimes a high-level authority pushes his idea without enough
feasibility testing.
 The market is overestimated during the research and the actual size of
the market is not so big.
 Designing of the product is not proper.
 There is incorrect positioning of the product.
 Product prices are kept higher than customer„s expectations.
 Advertising of the product is in-effective.
 The raw material required to manufacture a product is not available in
sufficient quantity as suppliers failed to supply it.
 As there is tough competition in the market, the manufacturer needs to
spend more on advertising but to make the product competitive in the
market, prices have to be reduced.
Therefore, we can conclude that the planning of the product has to be very
systematically done.

8.8 TEST YOUR KNOWLEDGE

1. Encourage all stakeholders like customers, dealers, employees etc to
send ideas to the idea manager and formally recognize the program to
reward best new ideas is characteristic of which stage in the “New
Product Development Process”.
(a) Idea generation
(b) Idea screening
(c) Testing
(d) Development
2. Which is the next stage after “Idea Generation” in “New Product
Development Process”?
(a) Feature specification
(b) Testing
(c) Development
(d) Idea Screening
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Marketing Management 3. _______________________ Stage introduces a new product in the
market.
(a) Evaluation
(b) Commercialization
(c) Feature specification
(d) Development
4. Presenting new-product ideas to consumers in symbolic or physical
ways to measure their reactions occurs during which of the following
stages?
(a) idea generation
(b) concept testing
(c) marketing strategy
(d) Screening
5. Executives, manufacturing employees, and salespeople are all
examples of ________.
(a) core members of innovation management systems
(b) internal sources for new-product ideas
(c) research and development team members
(d) external sources for new-product ideas

8.8 SUMMARY
It is essential for companies to develop new products for the sake of their
survival. Researchers have identified some categories of new products
depending on their newness to the world, new to the company, new to the
product line and product improvement etc. New product development
involves seven stages: Idea generation: involves searching for new product
ideas; Idea screening: refers to selecting the potential ideas, Concept
testing: is presenting product concepts and product benefits to target
customers to assess their responses to identify and eliminate poor product
concepts
Marketing strategy and business analysis: assesses the new product‟s
profit potential and compatibility also develops marketing and business
strategy to introduce a new product in the market successfully Product
development: a prototype is designed that is functional and able to satisfy
the consumer wants Test marketing: the company tries to understand the
consumers and dealers feedback and reaction Commercialization: phase of
introducing the new product in the target market

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8.9 QUESTIONS New Product
Development Process
Q.1 What are the factors contributing for new product development?
Q.2 Explain the stages of new product development?
Q.3 What are the probable measures to achieve success of new product
development?
Q.4 What are the reasons for failure of new product development?
Q.5 What are the challenges in new product development?

8.10 REFERENCES
 Kotler, P., Keller, K. L., Ang, S. H., Tan, C. T., & Leong, S. M.
(2018). Marketing management: an Asian perspective. Harlow:
Pearson.

 Saxena, R. (2005). Marketing management. Tata McGraw-Hill

Education.

 Karunakaran, K. (2008). Marketing management. Himalaya

Publishing House.

 Kotler, Philip, “Marketing Management - Analysis, Planning,

Implementation, and Control”, PHI, New Delhi.

 Namakumari S, and Ramaswamy, V.S., “Marketing Management”,

MacMillan Publishers, New Delhi.

 Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,

Boston.

 Dawn Iacobucci, “Marketing Management”, Cengage Learning

Websites:

 https://www.economicsdiscussion.net/marketing-2/product-
development/new-product-development/32209

 https://www.marketingtutor.net/new-product-development-steps/

*****

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 9
PRICING DECISIONS
Unit Structure
9.0 Objectives
9.1 Introduction
9.2 Pricing Objectives
9.3 Pricing Methods
9.4 Pricing Policies
9.5 Adopting the Price
9.6 Responding to Price Change
9.7 Summary
9.8 Test Your Knowledge
9.9 Questions
9.10 References

9.0 OBJECTIVES
 To understand the pricing objectives.

 To learn various pricing methods.

 To understand the pricing policies.

 To learn about adopting the price by various organizations.

 To understand how to respond to price change.

9.1 INTRODUCTION

Pricing is a process of fixing the value that a manufacturer will receive in

exchanging services and goods. The pricing method is exercised to adjust
the cost of the producer‟s offerings suitable to both the manufacturer and
the customer. The pricing depends on the company‟s average prices and
the buyer‟s perceived value of an item compared to a competitor‟s
product. Every business person starts a business with a motive and
intention of earning profits. This ambition can be acquired by the pricing
method of a firm. While fixing the cost of a product and services the
following point should be considered:
a) The identity of the goods and services
b) The prices of similar goods and services in the market
c) The target audience for whom the goods and services are produced
d) The total cost of production (raw material, labour cost, machinery
cost, transportation, inventory cost etc).
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e) External elements like government rules and regulations, policies, Pricing Decisions
economy, etc.,

9.2 PRICING OBJECTIVES

 Price-Profit Satisfaction: The firms are interested in keeping their
prices stable within a certain period of time irrespective of changes in
demand and costs, so that they may get the expected profit

 Sales Maximization and Growth: A firm has to set a price which

assures maximum sales of the product. Firms set a price which would
enhance the sale of the entire product line. It is only then, that it can
achieve growth.

 Making Money: Some firms want to use their special position in the
industry by selling products at a premium and making a quick profit
as possible.

 Preventing Competition: Unrestricted competition and lack of

planning can result in wasteful duplication of resources. The price
system in a competitive economy might not reflect society's real
needs. By adopting a suitable price policy the firm can restrict the
entry of rivals.

 Market Share: The firm wants to secure a large share in the market
by following a suitable price policy. It wants to acquire a dominating
leadership position in the market. Many managers believe that
revenue maximization will lead to long-run profit maximization and
market share growth.

 Survival: In these days of severe competition and business

uncertainties, the firm must set a price which would safeguard the
welfare of the firm. A firm is always in its survival stage. For the sake
of its continued existence, it must tolerate all kinds of obstacles and
challenges from its rivals.

 Market Penetration: Some companies want to maximize unit sales.

They believe that a higher sales volume will lead to lower unit costs
and higher long-run profit. They set the lowest price, assuming the
market is price sensitive. This is called market penetration pricing.

 Marketing Skimming: Many companies favour setting high prices to

„skim‟ the market. Dupont is a prime practitioner of market skimming
pricing. With each innovation, it estimates the highest price it can
charge given the comparative benefits of its new product versus the
available substitutes.

 Early Cash Recovery: Some firms set a price which will create a
mad rush for the product and recover cash early. They may also set a
low price as a caution against the uncertainty of the future.

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Marketing Management  Satisfactory Rate of Return: Many companies try to set the price
that will maximize current profits. To estimate the demand and costs
associated with alternative prices, they choose the price that produces
maximum current profit, cash flow or rate of return on investment.

9.3 PRICING METHODS

Definition:
Pricing method can be seen as the process of determining the value of a
product or service at which the manufacturer is willing to sell it in the
market. The demand of the product, cost of manufacturing the product,
and market competition are the three significant factors which influence a
product‟s price. Pricing of products or services is a crucial decision-
making strategy of the firm. Since it has a long-lasting impact over the
business and its existence. Hence, a suitable pricing method needs to be
adopted for this purpose. We will further discuss the various methods of
price determination, based on cost, demand and market determinants

1) Cost-Oriented Methods:
These are the traditional methods of product pricing. The major factors
which influence the product price are the fixed cost, variable cost other
overheads incurred in manufacturing the products.
a) `Cost Plus Pricing: Cost-plus pricing is one of the simplest ways of
price determination. A certain percentage of cost is added as a profit
margin to the value of the product to acquire the selling price.
Example: If the unit cost of manufacturing a bag is Rs 100 and profit
margin is 20% is added in it , the selling pricing of the product is:
Selling Pricing = Unit Cost + Unit Cost X Profit Margin Percentage
Selling Pricing = 100 + 100 X 20 %
Selling Pricing = 100 +20

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96 Selling Pricing= Rs 120
b) `Mark-up Pricing: It is a form of cost-plus pricing, but here the profit Pricing Decisions
margin is presented as a percentage of expected return on sales. The
formula for mark-up pricing is:
Example: If the unit cost of manufacturing a bag is Rs 100 and the
expected return on sales is 20%, determine the mark-up price.
Mark-up Price=Unit Cost (Fixed +Variable)/(1-Percentage of
Expected Return on Sales)
Mark-up Price = 100/(1-20%) = 100/(1-0.20) = 100/0.80
Mark-up Price = Rs 125
c) Marginal Cost Pricing: The primary aim of the company adopting
this pricing method is to meet its marginal cost and overheads. The
marginal costing method is suitable for entering the industries which
are dominated by giant players, posing a fierce competition for the
organization to sustain in the business.
d) Target Return Pricing: The Target-Return Pricing is a method
wherein the firm determines the price on the basis of a target rate of
return on the investment i.e. what the firm expects from the
investments made in the business. Here, the firm calculates the
amount invested in the business activities and then determines the
return they expect from these assuming a particular quantity of the
product is sold.
Suppose the ABC manufacturer has invested Rs 20 Lakhs in his venture
and he expects to earn 20% as an ROI. Therefore, he will set the price
accordingly. The cost and sales expectation are:
Unit cost: 20
Expected sales: 50,000 units
The Target-Return Pricing is given by:

Target-Return Pricing = Unit cost + (Desired % ROI x Invested

capital) /Unit Sales
Thus, Target-Return Pricing = 20 + (0.20 x 2,000,000) / 50,000 = Rs 28
To earn the ROI of 20%, the company must sell the product at Rs 28,
provided 50,000 units are sold.
e) Break-Even Pricing: This method is similar to break-even analysis,
here the company needs to price the products such that it generates
profit after recovering the fixed and variable costs. The selling price
should be equal to or more than the break-even price (the point at
which the sales revenue matches the cost of goods sold).

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Marketing Management The formula for ascertaining the break-even limit is:

For instance, a company incurs Rs 500000 as fixed cost and Rs 25 as a

variable cost. If the selling price is Rs.75, find out the break-even limit.

Break-Even Limit=Total Fixed Cost/(Selling Price Per Unit-Variable

Cost Per Unit)
Break-Even Limit=500000/(75-25)
Break-Even Limit=10000 Units
Thus, the organization either needs to sell more than 10000 units or price
the product higher than Rs.75 to earn a profit.
f) Early Cash Recovery Pricing: When it comes to rapidly growing
technological products or the ones with a short life cycle, the cost
needs to recover as early as possible. This method is very similar to
target return pricing; the only difference is that it considers a high
value of return on investment owing to a short recovery period.

2) Market-Oriented Methods:
In a highly competitive market, the company cannot survive with cost-
oriented pricing. Hence, it needs to price its products according to the
market demand and competitor‟s pricing strategy.
a) Going Rate Method: In the going rate-pricing method, price is
determined on the basis of present rates prevailing in the market.
Companies may set prices high or low depending on product/services
to their competitor's prices. This method of pricing is useful for
products/services which show fewer variations between producers. It
is also called a competitive parity method. In this method,
competitor's price is taken as base and price is set according to
objectives, services offered and product quality.
b) Sealed Bid Pricing Method: When it comes to industrial marketing
or government projects, the supplier needs to bid specific product
price, which he/she assumes to be the lowest, in a sealed quotation. In
other words, the organization needs to fill a tender, which indicates its
costing and competitiveness. The pricing should be done smartly by
estimating the profit margin at different price levels and enclosing the
most competitive price.
c) Customer-Oriented Method|: This method is also called perceived
value pricing. It is demand-based pricing where the company
determines the product price on value perception in terms of
consumer demand for the particular goods or service. This perceived
value is based on the following constituents:
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d) Acquisition Value: The acquisition value is based on the opportunity Pricing Decisions
cost of a product or service, which is estimated through the
comparison of the perceived benefit and the perceived sacrifice.
e) Transaction Value: The comparison of the customer‟s reference
price (assumed or quoted price) with the actual price paid for the
product or service is the transaction value.

3) Other Pricing Methods:

There are specific other methods for determining the price of a product or
service, other than considering the cost or market competition as the basis.
a) Market Skimming Pricing: The skimming method is usually
implemented in case of specialty, luxury or innovative products. Here,
the company avails the profit opportunity in the initial stage of
marketing by selling the products at a high price in a non-price-
sensitive market segment. Later, the prices are dropped down
gradually to sustain in the market.
b) Limit Pricing: This is defensive pricing strategy. The company price
its products immensely low (and this price is known as entry
forestalling price), to retain the monopoly in the market. It is done to
discourage the entry of competitors by presenting the business as
unattractive and non-profitable.
c) Peak Load Pricing: The peak load method is demand-based pricing,
where the companies charge high prices in the peak seasons or period
when the demand for the product is quite high. However, in the off-
peak time or season when the demand falls, the prices are kept low. It
is applied for seasonal product pricing, airline travel pricing, tourism
package pricing, etc.
d) Bundle Pricing: Bundling refers to compiling of two or more
products together and selling it as a single product. The company
prices the complete bundle at a single price known as the offer price.
An organization can either opt for pure bundling, where the products
in a bunch are strictly not available individually. Or it may go for a
mixed bundling, i.e. the products in a bundle can be sold separately
but at a higher price.
e) Psychological Pricing: This pricing method aims to influence the
consumers mentally by posing a low product price. Here, the product
is priced slightly less than a round figure, for instance: a product is
priced at Rs 99 instead of Rs100 or 1.98$ instead of 2$. This makes
the consumer assume that the product price lies within the range of Rs
100 or 2$ and therefore it is worth buying.
Every business organization has a different objective; not all the
companies aim at profit-making. Some may look forward to capturing the
market and others may focus on long term existence.

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Marketing Management Thus, these organizational goals determine the pricing methods to some
extent. However, the prevailing market trends or industry type also
influence these decisions massively.

9.4 PRICING POLICIES

Generally, pricing policy refers to how a company sets the prices of its
products and services based on costs, value, demand, and competition.

Cost Based Pricing Policy:

Cost-based pricing involves the determination of all fixed and variable
costs associated with a product or service. After the total costs attributable
to the product or service have been determined, managers add a desired
profit margin to each unit such as a 5 or 10 percent markup. The goal of
the cost-oriented approach is to cover all costs incurred in producing or
delivering products or services and to achieve a targeted level of profit.

Value Based Pricing Policy:

Value prices adhere to the thinking that the optimal selling price is a
reflection of a product or service's perceived value by customers, not just
the company's costs to produce or provide a product or service. The value
of a product or service is derived from customer needs, preferences,
expectations, and financial resources as well as from competitors'
offerings.

Demand-Based Pricing Policy:

Managers adopting demand-based pricing policies are, like value prices,
not fully concerned with costs. Instead, they concentrate on the behavior
and characteristics of customers and the quality and characteristics of their
products or services. Demand-oriented pricing focuses on the level of
demand for a product or service, not on the cost of materials, labor, and so
forth.
Competition Based Pricing Policy:
With a competition-based pricing policy, a company sets its prices by
determining what other companies competing in the market charge. A
company begins developing competition-based prices by identifying its
present competitors. Next, a company assesses its own product or service.
After this step, a company sets it prices higher than, lower than, or on par
with the competitors based on the advantages and disadvantages of a
company's product or service, as well as on the expected response by
competitors to the set price.

9.5 ADOPTING THE PRICE

 Every organization whether it aims to gain profit or not has to fix
price for its products. An organization follows various pricing
strategies to attract the customers.
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 A pricing strategy can be defined as an action, task, or approach to Pricing Decisions
achieve the pricing objectives of the organization.

1. Differential Pricing:
Differential pricing implies charging different prices from different
customers for same products. This type of pricing strategy is used in the
market where the multiple customer segments exist to avoid confusion
regarding the different prices of products. In these types of markets,
customers purchasing the product at the lower prices cannot resell the
product at higher price in another market. An example of differentiated
pricing can be selling Coca-Cola at Rs. 10 in supermarkets, Rs. 15 in
theatres, and Rs. 20 in restaurants.

The discussion of the types of differential pricing is as follows:

i. Negotiated Pricing: It implies pricing strategy in which a price is
decided through bargaining between the customer and seller.
ii. Secondary Market Pricing: It implies setting different prices for
different markets. The price for a primary market is different from the
price in the secondary market. The primary market is the target
market where the product is introduced for the first time; whereas, the
secondary market is the target market where the product is introduced
after it has gained success in the primary market.
The price in the primary market is generally higher than the secondary
market. However, if the cost of serving the secondary market is higher as
compared to the cost of primary market then the price charged in the
secondary market is higher. The example of secondary market can be an
isolated area in the domestic and foreign country markets.
A secondary market also involves a segment that buys the product during
off-peak times. For instance, the restaurants give several discount options
to early customers of the day during the off-peak season. The customers
are offered early bird menus that offer food items at lower prices.
iii. Periodic Discounting: It refers to the type of pricing strategy that
involves a temporary reduction in the prices of products. This
reduction is done on a systematic basis. For instance, many clothing
outlets offer discounts in festive seasons or on a seasonal basis. The
main problem with periodic discounting is that the customers easily
predict the reduction in the prices; therefore, they delay their
purchases. For example, Big Bazaar has introduced a famous
Wednesday bazaar concept, in which it provides discount on almost
all of its products on every Wednesday. It has declared Wednesday as
Hafte Ka Sabse Sasta Din.
iv. Random Discounting: It implies giving discounts on an unsystematic
basis so that customers cannot predict the discount easily. When the
prices are reduced randomly, then the customers cannot predict the

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Marketing Management reduction in prices. The random discounting is mainly used to attract
new customers.

2. Promotional Pricing:
Promotional pricing refers to a pricing strategy that helps in promoting the
product. It is defined as a policy of reducing the prices to attract customers
towards a product.

Now, let us discuss the types of promotional pricing in brief:

i. Price Leaders: It refers to a policy that involves setting the prices of
a product less or equal to its cost. This type of pricing is generally
used in supermarkets. The marketers believe that this strategy helps in
increasing sales. However, this type of pricing is also called loss
leader pricing as sometimes the product is sold at loss.
ii. Special Event Pricing: It involves reduction in the prices of a
product according to special events, such as festivals or seasons. The
organizations follow this strategy to gain revenue. The sales gap in
organizations is filled by this type of pricing.
iii. Comparison Discounting: It involves setting the price of a product at
a specific level and simultaneously comparing it with the higher price.
The higher price can be the product‟s last price, price of competitor‟s
brand, or price of the same brand at the other retail outlet.
For example, marketer while demonstrating his/her product to the
customer tells the competitor‟s high price of the same product to induce
sale of his/her product. Comparison discounting is a kind of informative
pricing method as it helps customers to make purchase decisions.

3. Product Line Pricing:

Product line pricing can be defined as the setting of prices of all the high
priced and low priced products in a way that maximizes the profit on
whole product line. For instance, Hindustan Unilever Limited offers a
wide price range for its hair care product line that include oil, shampoo,
and conditioner to optimize the profit on its hair care product line.
Setting prices in product line pricing requires a relationship between the
products in the product line. For instance, computer hardware and
software are complementary products. The increase in demand for one
leads to the increase in the demand for the other. If both the products are
in the same product line then the high price of software will lead to low
demand for software as well as hardware. Thus, a marketer should
carefully set the prices in the product line.

The types of product line pricing are discussed as follows:

i. Captive Pricing: It refers to a pricing where the price of the basic
product is kept at a lower level; whereas, the price of the items that
are required with the basic product is high. For instance, a marketer
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 may set the low price of a video camera; whereas, the price of film Pricing Decisions
used to operate camera is high.
ii. Premium Pricing: It implies pricing for the different versions of
same products. The product with enhanced feature is priced high than
the product with basic features. For instance, a simple vanilla ice-
cream costs less than the ice-cream enriched with dry fruits. Similarly,
in the hospitality industry, the rooms with luxurious facilities are
priced high than ordinary rooms with basic facilities.
iii. Bait Pricing: It refers to a tactic that involves luring customers by
setting low prices of some of the items in the product line with the
intention of selling high priced products. This type of pricing strategy
is adopted when there is high competition in the market. Thus,
organizations advertise low-price products to attract the customers.
Sometimes, advertisements show the low prices of products with
attached terms and conditions, which force customers to visit the
shop.
iv. Price Lining: It implies setting a single price for all the products in
the store. For example, a store can set Rs. 100 for all the items. This
type of pricing was started in North America‟s Five &Dime General
stores where everything costs 5 or 10 cents. Price lining helps
customers in making the easy selection of products as prices of all the
products are same.

4. New Product Pricing:

The most significant and difficult part of marketing strategy is to set the
price of a new product. The price can be set high to cover the production
cost or low to attract customers.

The discussion of the types of product pricing is as follows:

i. Price Skimming: It refers to charge the maximum price for a product
by the marketer. It gives flexibility to the marketer to set low prices
whenever needed. This type of pricing helps the marketer to know
what the customer is willing to pay for a product and generate the
profit for short and long term.

The other reasons for using price skimming are as follows:

a. Covers the production cost before competitors set low prices
b. Attracts customers who value high-price products.
ii. Penetration Pricing: It refers to charging minimum price for a
product for gaining large market share. It is expected that the
customers switch to the product because of the lower price.

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Marketing Management The main benefits of penetration pricing are as follows:
a. Discourage the entry of competitors as low prices do not suit them
b. Results in the fast adoption of product.

The limitations of the penetration pricing are as follows:

a. Raises the expectations of customers that the prices will remain low
for a long period.
b. Creates low-profit margins that make it difficult for the organization
to survive.
When the objective of penetration pricing is achieved, the price of the
product is increased.

5. Psychological Pricing:
Psychological pricing tries to influence the perception of customers about
the price of a product. It is used when a marketer wants customers to
respond emotionally rather than rationally. Psychological pricing is based
on the fact that some prices have psychological impact on customers.
Some customers believe that high price is an indicator of the good quality
of a product. For example, products, such as high quality perfumes are
more costly than normal perfumes. The price becomes a good factor to
judge the quality of a product if no other information is available
regarding a product.

The discussion of the types of psychological pricing is as follows:

i. Reference Pricing: It refers to a pricing in which the marketer sells
the product at the price lower than the price of competitor‟s product.
The competitor‟s product seems less attractive to the customers. The
price of the competitor‟s product is called reference price. While
buying a product, the customers compare the price of a product with
the reference price.
ii. Bundle Pricing: It refers to packaging two or more complementary
products together and selling them at a single price. The bundle
pricing is seen as a profitable option by the customers as the price of
the bundled products is less than the total price of the products taken
individually. This type of pricing helps in saving the packaging cost
of the organization.
iii. Multiple Unit Pricing: It implies packaging two or more products
together at a single price. It involves lower price per unit, thus,
customers benefit from this pricing as it leads to cost saving. Selling a
pack of two potato chips and six soft drinks are the examples of
multiple unit pricing. This type of pricing is used to attract new
customers and increase the consumption of the product. It allows
customers to buy in large quantity that in turn increases the sales
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iv. Odd-Even Pricing: It implies a type of psychological pricing, which Pricing Decisions
assumes that customers are sensitive to the prices. The prices ending
in 1, 3, 5, 7 and 9 are odd prices; whereas, the prices ending in 0, 2, 4,
6, 8 are even prices. According to a research, setting odd prices imply
low prices. For instance, a customer has to select between two brands
of the same product where one product costs Rs. 30 and the other
costs Rs. 29.93.
The customer will prefer the product for Rs. 29.93 as it is considered
to be less expensive though there is only a difference of 7 paisa.
Setting even prices generally indicate the high quality of products. For
example, a pen-maker sets the price of its pen to Rs. 40 instead of Rs.
38.95 to lay emphasis on the good quality of the product.
v. Prestige Pricing: It implies a pricing strategy where the prices of
products are kept at higher level to express the quality of the product.
This is used for customers who think that high prices denote high
quality. The products whose prices are set as per the prestige pricing
are perfumes, jewelry, cars, and liquor.

9.6 RESPONDING TO PRICE CHANGE

While changing price of any products, many reactions may come from
concerned sides. At first reaction may come from consumers. Such
reactions may be positive when price is cut down and negative when it is
increased. The company should carefully as well as logically answer both
reactions. In the same way, competitors‟ reactions may also come. The
company should give satisfactory answer to them with all reasons such as
cost, market study, transport expenses, administrative expenses, etc. The
following strategies should be adopted to face reactions of competitors and
distributors.

1. Maintaining Price:
The producers should try their best to maintain price at the same rate.
Producers may cut down some percent of profit. The existing market
segments can be maintained with such strategy. Along with this,
opportunity can be found to enter new market segments. In this way, sale
quantity may increase.

2. Increasing price and quality:

Producer may increase in existing quality and price. Production companies
may bring in markets the new products or adding new features to the
products challenging their competitors. Little more prices of such products
do affect competitors so much. However, such analysis cannot last long.
Other competitors also may adopt such strategy. This may be only a
periodical means to stop competitors‟ reactions. After sometime, the
company should seek other alternatives.

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Marketing Management 3. Reducing price:
Most of the customers become conscious about price. So, the producer
should cut down the price of the products after certain
time. Competitors of similar products also may adopt this strategy. The
producers who cannot adopt such policy may get compelled to quit main
market segments among many segments. Such markets once quitted need
very hard labor to supply products to there again. Policy of taking low
percent of profit should be adopted. Even decreasing price, quality,
features and services should be maintained same. Only then, products can
control markets.

9.7 SUMMARY
Pricing is a process of fixing the value that a manufacturer will receive in
exchanging services and goods. The pricing method is exercised to adjust
the cost of the producer‟s offerings suitable to both the manufacturer and
the customer. While fixing the cost of a product and services the following
point should be considered:
a) The identity of the goods and services
b) The prices of similar goods and services in the market
c) The target audience for whom the goods and services are produced
d) The total cost of production (raw material, labour cost, machinery
cost, transportation, inventory cost etc).
Pricing of products or services is a crucial decision-making strategy of the
firm. Since it has a long-lasting impact over the business and its existence.
Hence, a suitable pricing method needs to be adopted for this purpose such
as cost oriented, market oriented and other pricing methods are used.
Maintaining price, increasing price and quality and reducing pricing
strategies are adopted to face reactions of competitors and distributors.

9.8 TEST YOUR KNOWLEDGE

1. In the process of maximum market skimming,
(a) Prices start high and slowly decline over time
(b) Prices start low and gradually increase over time
(c) Prices remain constant
(d) All of the above
2. In going rate pricing an organization bases its price based on
(a) Consumers preferences
(b) Competitors price
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 (c) Self decision Pricing Decisions

(d) None of the above

3. What is value-based pricing?
(a) Companies base their prices on buyers' perceptions of value, not
their own costs
(b) Offering just the right combination of quality and good service at
a fair price
(c) Companies set prices to make a target profit and to get some
value for their production and marketing efforts
(d) Companies set prices to break-even on production and marketing
costs
4. The pricing approach where prices are set based on costs is
called:___________
(a) Cost Oriented Approach
(b) Value Oriented Approach
(c) Competitor Oriented Approach
(d) Demand Oriented Approach
5. ABC Company priced the product as of Rs. 19.99 instead of Rs.20.
Which of the following pricing techniques is ABC Company using?
(a) Dodging pricing
(b) Deceptive pricing
(c) Premium pricing
(d) Psychological pricing

9.9 QUESTIONS
Q.1 What do you mean by pricing? Explain the objectives of pricing.
Q.2 Explain the methods of pricing.
Q.3 Explain the pricing policies.
Q.4 Explain the pricing strategies adopted by organizations?
Q.5 How do organizations respond to price changes?

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Marketing Management
9.10 REFERENCES
 Kotler, P., Keller, K. L., Ang, S. H., Tan, C. T., & Leong, S. M.
(2018). Marketing management: an Asian perspective. Harlow:
Pearson.

 Saxena, R. (2005). Marketing management. Tata McGraw-Hill

Education.

 Karunakaran, K. (2008). Marketing management. Himalaya

Publishing House.

 Kotler, Philip, “Marketing Management - Analysis, Planning,

Implementation, and Control”, PHI, New Delhi.

 Namakumari S, and Ramaswamy, V.S., “Marketing Management”,

MacMillan Publishers, New Delhi.

 Skinner, J., S. Steven, “Marketing”, Houghton Miami Company,

Boston.

 Dawn Iacobucci, “Marketing Management”, Cengage Learning

Websites

 https://theinvestorsbook.com/pricing-methods.

 https://businessjargons.com/

*****

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 10
DISTRIBUTION DECISIONS - LOGISTICS
AND CHANNEL DECISIONS (RETAIL, E-
COMMERCE ETC.)
Unit Structure
10.0 Objectives
10.1 Introduction, Channels of Distribution: Meaning and Definition
10.2 Importance of Distribution Channel
10.3 Channel Design Decision, Steps in Deciding the Channels of
Distribution, Factors Affecting the Selection of Channels of
Distribution
10.4 Retail: Traditional Distribution Channel
10.5 E-Commerce: Modern-Day Distribution Channel
10.6 Questions
10.7 References

10.0 OBJECTIVES
1) To understand the concept channels of Distribution.
2) To know the factors affecting for the selection of channels of
Distribution
3) To acquire knowledge about the modern day distribution channels
through E-commerce.

10.1 INTRODUCTION, CHANNELS OF DISTRIBUTION:

MEANING AND DEFINITION
Introduction:
The primary objective of all business enterprises is to earn profit by selling
goods and services to ultimate consumers or users. In order to bring goods
from the place of manufacture to the place of consumers, the goods have
to follow a path or route which is known as channel of distribution or trade
channel. A trade or marketing channel consists of producer, middlemen
and consumers or users. The channel serves as a link between the producer
and consumers.
The role of distribution is to provide a company with the accomplishment
of the task of delivering the product at a right time, place and quantity at a
minimum cost. Although the distribution problem was one of the first
issues analyzed by the marketing researchers in the beginning of the 20th
century, the distribution problem has an enormous importance in the
marketing literature and managerial contexts today.
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Marketing Management Channels of Distribution: Meaning and Definition:
Meaning:
A channel of distribution or trade channel is the path or route along which
goods move from producers to ultimate consumers or industrial users. In
other words, it is the distribution network through which a producer puts
his product in the hands of actual users. The channel of distribution
includes the original producer, the final buyer and any middleman; either
wholesaler or retailer. The term middleman refers to any institution or
individual in the channel which either acquires title to the goods or
negotiates or sells in the capacity of an agent or broker. But facilitating
agencies that perform or assist in marketing function are not included as
middlemen in the channel of distribution. This is because they neither
acquire title to the goods nor negotiate purchase or sale. Such facilitating
agencies include banks, railways, roadways, warehouses, insurance
companies, advertising agencies, etc.

Definitions:
Any sequence of institutions from the producer to the consumer including
one or any number of middlemen is called Channel of Distribution.

- McCarthy
According to Philip Kotler, Every producer seeks to link together the set
of marketing intermediaries that best fulfill the firm‟s objectives This set
of marketing intermediaries is called the marketing channel, also trade -
channel or channel of distribution.
William J. Stanton has defined a trade channel in these words, A channel
of distribution (sometimes called a trade channel) for a product is the route
taken by the title to the goods as they move from the producer to the
ultimate customer or industrial users.
After going through the above definitions, you can now summarize that
channel of distribution is a very important tool of marketing. Channels of
distribution are the means employed by manufacturers and sellers to get
their products to the market and into the hands of users. Channels are
management tools used to move goods from place of production to place
of consumption. They are the means by which title to goods is transferred
from sellers to buyers. The process of transferring is not so simple in the
present days marketing that is characterized by heterogeneity on both the
demand and supply sides.
The channel is therefore, the vehicle for viewing marketing organization
in its external aspects and for bridging the physical and non-physical gaps
which exist in moving goods from producers to customers through the
determination of price. In any developing economy, there is an increasing
emphasis on specialization and the division of labor. As a result of this, a
gap gets developed between producers and users. The primary purpose of
a distributive channel is to bridge this gap by resolving spatial
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(geographical distance) and temporal (relating to time) discrepancies in Distribution Decisions -
supply and demand. For these certain essential functions need to be Logistics and Channel
performed. These are: Decisions

(i) Transfer of title to the goods involved

(ii) Physical movement of goods from the point of production to the point
of consumption
(iii) Storage function
(iv) Communication of the information concerning the availability
characteristics and price of the goods in transit, inventory and on
purchase.

10.2 IMPORTANCE OF DISTRIBUTION CHANNEL

Importance of Decision Relating to the Channels of Distribution:
What should be the channel of distribution for a particular product? How
many channels must be used for distribution of a particular product? What
will be the cost of distributing product through these channels? What
changes should be made in the present channels of distribution? Are the
questions, replies to which are called decisions, related to channels to
distribution? Decisions relating to channels of distribution are very
important because the success of marketing efforts of an enterprise
depends to a large extent upon the accuracy and correctness of these
decisions.
Ultimate objective of every business and industrial enterprise is to earn
heavy profit through maximum turnover. This objective can be achieved
only if the goods and services produced by the enterprise are made
available to their customers at the right time and place. It is not possible
for any producer to distribute all the goods and services produced by him
to the consumers. He cannot keep himself in constant touch with the
frequent changes in the wants of customers. He cannot provide personal
services to all the consumers. He cannot come to know about their
problems. For these reasons, he has to depend upon the services of middle
men for the distribution of his product to his consumer. Channels of
distribution solve all these problems of any producer and manufacturer.
They make the goods and services available wherever it is required by the
consumer. Thus, it is very much desirable that a product must be
distributed to its consumer through channels of distribution.

These decisions regarding channels of distribution are due to the

following reasons:
(i) Distribution channel is an important element in the marketing mix of
the firm. Other elements in the marketing mix are interdependent and
interrelated with the decision of channels of distribution. The choice
of channels of distribution affects the pricing, physical distribution

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Marketing Management mid- promotion decisions to a considerable extent. A mistake in the
selection of distribution channel may upset the whole market mix.
(ii) Cost involved in the use of a distribution channel enters the price of
the product that is ultimately to be paid by the consumers. If the cost
is high, the sales will be adversely affected. Thus, if decision
regarding channel is wrong, the cost of distribution will be very high
and sales of the product might be limited. On the other hand, a sound
channel decision will reduce the cost of distribution and ultimately the
price of the product. It will maximize sales.
(iii) A product or service is really useful only when it is available to the
end users at the right time and right place. The channel decision
determines where and when the product will be available to the
consumers.
(iv) The channel decision involves long term commitment of the firm. The
relations between manufacturer and middlemen depend largely upon
the choice of channel of distribution. Changes in channel are not easy.
(v) The right choice of channels of distribution will reduce the
fluctuations in the production due to continuous and effective
distribution, The stability in demand and supply will ensure steady
employment and proper budgetary control. The manufacturer can
continuously monitor in sales and stock position of his middlemen to
exercise effective control over distribution network.
In this way, channel decision is very important in maximizing saint and
profits. The decision is also important from consumer‟s point of view as
they can get the required goods at proper time and place, in the right
quantity at a reasonable price. So, the producer should be very cautious in
selecting the channels of distribution for his products.

10.3 CHANNEL DESIGN DECISION, STEPS IN

DECIDING THE CHANNELS OF DISTRIBUTION,
FACTORS AFFECTING THE SELECTION OF
CHANNELS OF DISTRIBUTION
Channel Design Decision:
We have seen that a firm can take its product to the user in more ways
than one. It can use different types of intermediaries; it can also structure
its channel in different ways. For example, it can have a single-tier or a
two-tier or a three-tier channel structure. It can reach different market
segments with different channel arrangements or with the same channel
arrangement. It can also use different channel arrangements for reaching a
single market segment. The options are indeed many.
 How does the firm make the choice? How does it determine which
one is the best?

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 Should it go for own channels, company showrooms and depots? Or Distribution Decisions -
prefer conventional intermediaries, i.e., the wholesale/retail trade? Logistics and Channel
Decisions
 How many levels/tiers should there be in the chosen channel design?
 How many wholesale points should it have to ensure satisfactory
market coverage? Where should they be located?
 How many retail points should it have? Which are the places where it
should have them?
 What should be the relationship between the wholesalers and the
retailers?

Steps in Deciding the Channels of Distribution:

a. Formulating the Channel Objectives:
Formulation of channel objectives is the first step in designing a channel
system. The objectives clarify what is sought to be achieved by having the
channels. All firms seek to realize certain common objectives by having
the channel. In addition, they may also have some specific objectives
depending on their unique circumstances. The common objectives which
firms seek from channels are:
 Effective coverage of the target market
 Efficient and cost-effective distribution
 Ensuring that consumers incur minimum exertion in procuring the
product
 Helping the firm to carry on manufacturing uninterrupted and
confident that the channels will take care of sales.
 Partnering the firm in financing and sub-distribution tasks

b. Identifying Channel Functions:

Identification of the functions to be performed by the channel is the next
step in designing a channel system. We have already discussed the channel
functions in detail. Suffices to add here that channel design depends on the
functions expected of the channel and that channel function must be
identified in the specific context of the firm in order to get practical
direction in designing the channel system.

c. Linking Channel Design to Product Characteristics:

Different products require different channel systems. The firm should
analyze the characteristics of the product and choose the channel system
that matches the product best. Consumer and industrial goods, for
example, need different channels. And within the category of consumer
goods, different sub-categories such as convenience goods, shopping
goods and specialty goods, may need different channel systems.
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Marketing Management d. Evaluation of the Distribution Environment:
While selecting the channel design, the firm should also take into account
the distribution environment obtaining in the country/territory. It should
evaluate the vital features of the distribution environment and ensure that
the proposed channel design is compatible with them. Distribution
environment in the broader sense includes the trade related legal
environment as well. The legal implications of the channel design must be
carefully examined before taking a final decision.

e. Evaluation of Competitor’s Channel Designs:

The firm should also study the competitor‟s channel patterns before
deciding its channel design. While the firm may not necessarily follow the
competitors in channel design, it should analyze the plus and minus of the
channel patterns adopted by each of its major competitors. Quite a number
of firms do settle down for a follow the leader policy in channel design.
They find it an easy route. But such an approach may deprive them of the
chance to score an edge over competition through the channel strategy.

f. Matching the Channel Design to Company Resources:

Choice of channel is also governed by the resources available with the
organizations. Firms with limited resources settle for conventional
channels. Firms with limited resources and small volume of business will
normally find it difficult and uneconomical to opt for own channels. For
such firms, establishing branch showroom/depots/retail outlets of their
own will result in a high unit cost of distribution which they cannot afford.
They are better off by depending on conventional channels. In fact, they
are usually content with a small network of conventional intermediaries.
Firms with larger resources have more options: Firms with larger
resources and larger marketing operations can go in for varied distribution
channels. In fact, in India, in several businesses, firms which are strong in
resources, usually operate two parallel channels; one reaching out to the
customer through company depots and showrooms and the other through
conventional intermediaries.

g. Evaluating the Alternatives and Selecting the Best:

With the completion of the foregoing steps, the number of alternatives
would have narrowed down considerably. The firm must evaluate these
alternative designs and choose the best among them. Actually, two distinct
evaluations, an economic evaluation and a conceptual evaluation may be
necessary.
 Economic Evaluation; balancing cost, efficiency and risk: Cost
and efficiency are the main parameters in economic evaluation. Often,
though not necessarily, the two are directly proportional. The firm has
to rate the risk associated with the different alternatives. The firm‟s
choice is a compromise among the three parameters.

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The first step here is the determination of the sales volume that can be Distribution Decisions -
obtained through each alternative design. Second, the costs of selling that Logistics and Channel
volume through that alternative have to be assessed. In other words, the Decisions
firm determines the unit cost of selling in each of the alternatives. The
firm chooses the one which is attractive from the cost efficiency angle and
is also relatively less risky.
• Conceptual Evaluation; flexibility and controllability: Conceptual
evaluation is also equally important. It has to be used for assessing the
flexibility and controllability of the alternative. It is possible that
economic evaluation points to one particular alternative as superior
while conceptual evaluation gives it a low rating.
After deciding the design of the channel and the number of tiers in the
channel, the firm has to decide the number of members needed in each tier
and their locations. It has to select suitable persons/ establishments and
appoint them as stockiest, distributors and dealers as the case may be. It
has to administer them, service them and motivate them.

Factors Affecting the Selection of Channels of Distribution:

There may be many channels of distribution for a product and a
manufacturer has to select any one or more of these channels. Selection of
a particular channel is a decision upon which the success of all the
marketing efforts of an enterprise depends.
Therefore, a particular channel must be selected only after a careful study
and consideration of all the relevant factors. Factors affecting the selection
of channels of distribution can be divided into five parts:
1. Factors related to the manufacturer
2. Factors related to the product
3. Factors related to the market
4. Factors related to the middlemen and
5. Factors related to the environment. The details in this regard are as
follows:

10.4 RETAIL : TRADITIONAL DISTRIBUTION

CHANNEL
The word „retail‟ has its origin in French word retailer and means „to cut a
piece‟ or „to break bulk‟. Retailing covers all the activities involved in the
sales of products to final consumers for personal, family, household use
and not for business. These activities include anticipating what consumers‟
want, developing assortments of products, acquiring market information,
and financing.
Retailers primarily get their sales volume from retailing. The value added
by retailers is important both for final consumers and marketers. Retailers
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Marketing Management add value, provide service and help consumers in making product
selections. The image of a retailer can enhance product value though,
contributing to consumers‟ experience, availability, or convenience.
Retailers provide technical advice, demonstrate, deliver, extend credit, and
provide after-sales repair services etc. Retailing is not confined to stores
only but it also takes place door-to-door, through mail, Internet etc.
Successful retail isn‟t just a matter of sticking up a sign or a website and
announcing to the world that you have products for sale. It‟s also a
logistical game, a matter of making sure that you have the right goods in
the right place at the right time to serve your customers. The best retail
professionals understand the importance of retail distribution channels and
strategies meant to pair the right distribution approach to the right product.

Retail Distribution Channels:

Retail Distribution Channels are the paths goods and services take to reach
the consumer from a vendor. These paths can be short, direct distribution
channels from the vendor straight to the consumer. They may also be
longer, involving wholesalers, distributors, or other agents who act as
intermediaries. The more intermediaries involved, the higher the price of
the product will be. However, these lengthier distribution channels are
needed in some areas where direct sales are infeasible or impractical.

Retail Distribution Strategies:

Retail distribution strategies deal with how many and what kind of
vendors companies use to get their products to consumers. In general,
there are three basic retail distribution strategies:
Intensive distribution floods the market with products by selling them
using any and all available outlets. For a wide variety of products where
sales have a direct link to the number of outlets used, this is a winning
strategy. According to business experts, intensive distribution is typically
best employed where customers have a wide variety of brands to choose
form and are willing to settle for another brand if their preferred brand
isn‟t available. Soft drinks are common examples of products that fit in
well with an intensive distribution strategy.
By using all available outlets, retailers ensure that their products are
available to nearly all potential customers. Companies using this method
can develop a wider distribution network than their rivals, giving them a
natural sales edge.
This strategy may not be appropriate for niche products or products where
part of their branding and appeal is a sense of exclusivity. Higher priced
products also often fare poorly when this strategy is employed.
 Selective distribution strategies are a more targeted approach to
distribution. Instead of selling to any and all outlets, companies
winnow down their distribution network to a limited number of
outlets in a particular geographical area. This strategy works well
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 when consumers are willing to shop around for a particular product Distribution Decisions -
and are unwilling to substitute another for their preferred product. Logistics and Channel
Decisions
 Many retail distribution experts consider selective distribution to be a
“middle ground” strategy. There is still a pretty wide network of
outlets selling the company‟s products, but the strategy is not as
scattershot as intensive distribution or as restrictive as exclusive
distribution.
 There are two major benefits of this approach. It allows companies to
select best-performing outlets and intensively train their staff how to
effectively market the product. Also, selective distribution encourages
companies to work closely with the vendors selling their product and
develop strong relationships with them. Costs associate with selective
distribution are also typically less than intensive distribution.
 Exclusive distribution is a highly targeted form of distribution. In this
strategy, distribution is severely restricted to just one wholesaler,
retailer or distributor in a geographic area.
 Exclusive distribution works well for products that cater to an upscale
audience that‟s willing to pay a premium for a specific brand, or a
higher quality product than normal. Common examples of products
benefiting from an exclusive distribution strategy include automobiles
and major appliances.
 A key benefit of this strategy is that it allows companies to retain
greater control over the price of their products and customer service
agreements. For companies that keep a tight rein over their products,
this strategy is essential. Exclusive distribution also allows companies
to provide a high level of training and support to the staff of the
outlets selling their products.

Making a Choice:
When selecting a retail distribution strategy for your business, experts
suggest company leaders take the following in mind:
 Consider the competition: What retail distribution strategies are
your competitors using? Why are they using that strategy? Is it
working? Would another retail distribution strategy work better and
potentially give your company an advantage? For new companies,
observing the competition and learning from their successes and
missteps is key.
 Costs & Benefits: Determining whether a strategy is financially
feasible for your business is important. Retail distribution plans are
tough to set up and expensive to reverse if you find that the plan
you‟ve chosen is the wrong path for your company. Carefully
weighing the costs and benefits of a retail distribution strategy before
implementation is essential.

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Marketing Management  Have a Few Choices on the Table: By ranking your options by order
of preference, you give yourself a convenient reference should you
decide against your most favored option or if you obtain sufficient
capital to try multiple strategies.

Getting the Right People:

Companies that want to be successful in getting products in the hands of
consumers need to understand retail distribution and choose the strategies
most appropriate for their business. Managers and decision makers with
experience in choosing and implementing retail distribution strategies and
working with outlets is challenging task.

10.5 E-COMMERCE
Electronic commerce, also known as E-commerce, is a popular emerging
distribution channel. It is expanding for Business to Business (B2B) and
Business to Customer (B2C) activities where it started to substitute the
conventional way of purchasing and interaction for businesses and
customers. E-commerce distribution networks have changed the way
businesses sell, package and ship consumer goods. Because of this, more
pressure is on IT teams to help online retailers fulfill their orders.

The Internet as the Modern-Day Distribution Channel:

The internet has revolutionised the way manufacturers deliver goods. With
e-commerce growing tremendously over the past couple of decades,
manufacturers and producers are now able to use online marketplaces to
sell their goods. Other than the traditional direct and indirect channels,
manufacturers now use marketplaces like Flipkart and other intermediaries
like aggregators (Uber, Instacart) to deliver the goods and services. The
internet is also ideal for service providers.
Examples of online market places are Amazon (Amazon also provide
warehouse services for manufacturers‟ products), AliExpress, eBay, and
Alibaba. Other internet intermediaries can be delivery services, such as
Uber. The internet has also resulted in the removal of unnecessary
middlemen for products like software which are distributed directly over
the internet.

E-Commerce Distribution Network:

A distribution network is the route decided on and designed by the
company that will eventually deliver its products or services to their
consumers. The route can be short or long depending. For example, a
quick route may be a quick exchange between the company and the
customer, while a longer route may include a number of intermediaries
such as wholesalers and distributors.
There are numerous benefits for a business that decides to do this.
Businesses are able to lower the sales prices and attract more customers
thanks to the reduced operating expenses that come with having very few
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to no overheads. The success or failure of an e-commerce distribution Distribution Decisions -
network will depend on their offline and online features. Logistics and Channel
Decisions
Important online features include:
 System quality
 Information quality
 Service quality
 User-friendliness of a system
There should be detailed product information, such as accuracy,
timeliness, and more. Excellent customer service and appropriate
information must be maintained and provided at all times.
In order to create an effective e-commerce distribution network, the
following must happen:
 Create a base: In addition to traditional wholesalers and retailers,
companies may benefit from asking big buyers if they want to become
resellers for the brand
 The relationship must be profitable on both sides
 Communication is key
 Aim to build strong relationships
 Gather feedback and act on it

E-commerce distribution networks make products available when,

where, and in which quantities the customer wants. They are also
responsible for:
 Logistics and Physical Distribution
 Facilitation: channels might provide pre-sale and post-purchase
services like financing, maintenance, channel coordination, and more
 Creating Efficiencies
 Sharing Risks: they also share the risk with the manufacturers and do
everything possible to sell the product
 Marketing: also called marketing channels because many marketing
strategies are executed

Challenges in e-Commerce distribution channels:

The trend in logistics planning has been to minimize levels of stock held.
One of the problems for Internet marketers is that although it is easy to
place an order, many sometimes fail to deliver. In the run-up to Christmas
2009, some dissatisfied customers who ordered Christmas presents via the
Internet found they were not going to be delivered until the middle of 119
Marketing Management January. Internet supply requires holding larger stocks than would be
considered „normal‟ in conventional channel systems. However, it has
beneficial effects on managing logistics. Effective supply chain
management requires good communication between channel members and
from the extent to which the Internet facilitates this we see advantages that
accrue through the application of Internet technology to logistics.
Products selling or purchasing via e-commerce distribution channels are
unlike via retailer or wholesaler where there is an exchange of product and
monetary term simultaneously. The transaction between a business and a
customer is not complete after checking out from the online store.
Customers would expect the offline features to be up to their expectation
when they receive their purchases.
Hence, the logistic capability to deliver the products to customers on a
timely basis is vital for e-commerce. The logistic capability for e-
commerce differs from the conventional logistic expectation. The logistic
capability is challenging as e-commerce delivery would be on a smaller
order size, high volume with same day delivery expectations. The business
is expected to deliver the product as soon as the goods been purchase via
online store and delivery tracking system should be in place and shared
with the customer.
Products that are delivered to customers must also meet the expectation of
the customers in terms of the quantity and quality. The business should
provide an assurance of the quality of the product which otherwise
provides a full refund to the customer. Failure in offline features of the
online store such as failure to deliver the products on a timely basis and
product quality issues will lead to failure in the e-commerce distribution
channel.

10.6 QUESTIONS
1. Define channels of distribution with its meaning.
2. Explain the importance of channels of distribution.
3. Explain the steps in Deciding the Channels of Distribution.
4. What factors should be considered in channels building decision?
5. Explain the „Retail‟ with reference to channels of distribution.
6. Describe – „The Internet as the Modern-Day Distribution Channel‟

10.7 REFERENCES
 Bharadwaj. S., (2006, December 14). Distribution and
Channel Management. http://www.nptel.iitm.ac.in/courses/IIT-
MADRAS/Management_Science_II/Pdf/1_4.pdf
 Coughlan, A., Anderson, E., Stern, Ansary, A, (2001). Marketing
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120 channels. New York: Prentice Hall.
 Channels and Distribution, (1997). South-Western College Distribution Decisions -
Publishing. Logistics and Channel
http://busman.nmmu.ac.za/busman/media/Store/documents/2nd%20 Decisions
Year/11SU10.pdf
 Channels of distribution. (n.d.) from
http://www.nos.org/srsec319/319-23.pdf.
 Desai, V.,(2004). Management of Small Scale Enterprises. New
Delhi: Himalaya Publishing House.
 Gupta, C.B. & Nair N.R. (2009) Marketing Management. New Delhi:
Sultan Chand & Sons
 Jain, S. (2000) Marketing: planning & strategy Cincinnati: Thomson
learning,
 Mamoria, C.B., Suri, R.K., &Mamoria, S., (2011). Marketing
Management. Allahabad: Kitab Mahal
 Martz, W. Marketing Channel Strategy and Management, from
http://homepages.wmich.edu/~wmartz/assets/08-distribution.pdf
 Nair, N.R. & Nair, S.R. (1993). Marketing. New Delhi: Sultan Chand
&Sons
 Rudani, R. B., (2009). Basics of marketing management. New Delhi:
S. Chand & company Ltd.
 Wilkinson, I., (2001 March 9). A history of network and channels
thinking in marketing in the 20th Century. Australian journal of
marketing http://homepages.wmich.edu/~wmartz/assets/08-
distribution.pdf
 Cho, J., Ozment, J. and Sink, H. 2008. Logistics capability, logistics
outsourcing and firm performance in an e‐commerce market. [online]
Available at: http://www.emeraldinsight.com.ezproxy-
f.deakin.edu.au/doi/full/10.1108/09600030810882825
 Bakos, Y. 2001. The Emerging Landscape for Retail E-Commerce.
[online] Available at: http://www.jstor.org.ezproxy-
f.deakin.edu.au/stable/2696540
 Ahna, T., Ryub, S. and Han, I. 2003. The impact of the online and
offline features on the user acceptance of Internet shopping malls.
[online] Electronic Commerce Research and Applications. Available
at: http://www.sciencedirect.com.ezproxy-
f.deakin.edu.au/science/article/pii/S1567422304000195
 Peterson, R., Balasubramanian, S. and Bronnenberg, B. 2001.
Exploring the implications of the internet for consumer marketing.
[online] Marketing In The 21st Century. Available at:
http://link.springer.com.ezproxy-
f.deakin.edu.au/article/10.1177%2F0092070397254005 121
Marketing Management Sources:
 https://education-portal.com/academy/lesson/retail-distribution-
strategies.html
 https://wholesalers.about.com/od/SellingYourProducts101/a/Choose-
The-Right-Distribution-Channel.htm
 https://www.yourarticlelibrary.com/distribution

Suggested Readings:
International Marketing R. Srinivasan
Marketing Management Mukesh Dhunna
Basics of Marketing Management Dr. R.B. Rudani
Marketing Management C.N. Sontakki

*****

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 11
PROMOTION DECISIONS
Unit Structure
11.0 Objectives
11.1 Introduction
11.2 Objectives of Promotion
11.3 Promotion Decisions
11.4 Promotion Mix and Tools of Promotion Mix
11.5 Integrated Marketing Communication (IMC) and Tools of IMC
11.6 Sales Promotion
11.7 Summary
11.8 Test Your Knowledge
11.9 Questions
11.10 References

11.0 OBJECTIVES
 To understand about promotion.
 To understand about promotion objectives.
 To study about promotion decisions.
 To study about promotion mix and elements of promotion mix.
 To study about Integrated Marketing Communications (IMC) and
tools of IMC
 To study about different ways of Sales Promotion.

11.1 INTRODUCTION
The purpose of communication is to directly or indirectly influence
individual groups, and organizations, to facilitate exchanges by informing
and persuading one or more audiences to accept a company‘s products
and/or services The marketer needs to communicate and promote the final
product to consumers through various channels of communication. He has
to make sure that all the channels and methods of communication present
a unified message about the product or service of the organization.
Marketing communications (promotion) is one of the four major elements
of the company‘s marketing mix. Marketers must know how to use
advertising, sales promotion, direct marketing, public relations, and
personal selling to communicate the product‘s existence and value to the
target customers.

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Marketing Management Promotion:
―Promotion is the co-ordination of seller‘s aim to set up channels of
information and persuasion to facilitate the sales of goods/services or
acceptance of an idea‖. ―It includes all those activities which are aimed at
creating and stimulating demand‖. In our daily life we all are exposed to
various tools of promotion aiming at communicating one thing or the other
to us.

Types of Promotion:
Advertising:
It helps to outspread a word or awareness, promote any newly launched
service, goods or an organization. The company uses advertising as a
promotional tool as it reaches a mass of people in a few seconds. An
advertisement is communicated through many traditional media such as
radio, television, outdoor advertising, newspaper or social media. Other
contemporary media that supports advertisement are social media, blogs,
text messages, and websites.

Direct Promotion:
It is that kind of advertising where the company directly communicates
with its customers. This communication is usually done through various
new approaches like email marketing, text messaging, websites, fliers,
online adverts, promotional letters, catalog distributors, etc.

Sales Promotion:
This utilizes all sorts of a marketing tool to communicate with the
customers and increase sales. However, it is for a limited time, used to
expand customers demand, refresh market demand and enhance product
availability

Self-promotion:
It is a process where the enterprises send their agents directly to the
customers to pitch for their product or service. Here, the response for the
feedback of the customer is prompt and therefore, easy to build trust.

Public Relation:
Popularly known as PR is exercised to broadcast the information or
message between a company (NGO, Government agency, business), an
individual or a public. A powerful PR campaign can be valuable to the
company.

Online Promotion:
This includes almost all the elements of the promotion mix. Starting from
the online promotion with pay per click advertising. Direct marketing by
sending newsletters or emails.
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11.2 OBJECTIVES OF PROMOTION Promotion Decisions

Promotion serves three essential roles—it informs, persuades, and reminds

prospective customers about the company and its products. Ultimately,
using all these three in various ways, the company tries to modify the
behavior of the consumers to suit its objectives, viz., to buy its Products
/services.

1. To Stimulate Demand: It is the primary objective of market

promotion. Though the use of appropriate means of market
promotion, such as advertising, sales promotion, personal selling, and
so forth, the company can stimulate demand for the product. Market
promotion efforts covert potential buyers into actual buyers.
Company, by focusing product benefits, features and advantages etc.
tries to match the product with needs, wants, and expectations of
buyers. As per requirement, various means of market promotion are
used to establish the information link with the target customers.
2. To inform Consumers: Promotion is aimed at informing consumers
about features, qualities, performance, price and availability of firm‘s
products. Market promotion is also a valuable means to inform
consumers the changes made in the existing products and introduction
of new products. In the similar way, market promotion, by various
tools of market communication, is used for communicating the special
offers, price discount, utility of products, and incentives offered by
the company.
3. To Persuade Consumers: Market promotion is as effective way to
persuade consumers the superiority of product over competitors. A
firm can communicate competitive advantages the product offers to
distinguish it from competitor‘s products. Obviously, market
promotion can assist the firm‘s product is the best solution to their
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Marketing Management unmet needs and wants. Advertising is one of the most effective tools
to distinguish the product from competitor‘s products.
4. To Promote a New Product: In a large and decentralized market,
market promotion is inevitable medium to promote a new product.
By adopting suitable promotional strategies, a company can
successfully introduce a new product in the market as against existing
products. Company can inform about availability, distinct features,
and price of newly launched product. In every stage of consumer
adoption of a new product, market promotion has critical role to play.
5. To Face Competition: Market promotion enables the firm to face
competition effectively. In today‘s market situation, it is difficult to
stand without the suitable promotional efforts. In short, it can be said
that the marketer can fight with competitor effectively, can prevent
their entry, or can throw competitor away from the market by
formulating and implementing effective market promotion strategies.
6. To Create or Improve Image: Advertising, personal selling, and
publicity and public relations etc. all promotional tools are capable to
create or improve image and reputation of the firm. Many companies
have become popular in the market due to effective market
promotion. Company can reach the customers at every corner of the
world through market promotion

11.3 PROMOTION DECISIONS

1) Marketing Plan:
The marketing plan of the organization gives the direction for all the
promotion decisions. Marketing planning involves analyzing the
organization's capabilities, economic conditions, competitors and
customers to list out the strengths, weaknesses, threats and opportunities
(SWOT analysis). This sets the framework and gives direction for
promotion activities.

2) Defining the Target Audience:

It becomes important for an organization to clearly define its target
audience. Unless the firm has a clear target audience, the communication
message as well as tools for dispersing this message will be like shooting
an arrow in the dark. The target audience consists of potential buyers,
current buyers, media, individuals, groups, public at large, intermediaries,
etc. that can influence the sale of the product. Basis the target audience, a
marketer decides on the content of the message, its dispersing frequency,
tools to communicate, and at which places to disperse it, etc.

3) Promotion objective:
Promotion objective is directed towards a favorable response from buyers
to drive sales, increase market share, create a positive image of the brand,
and retain the customers by way of reminding the brand for future, etc.
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These can be long term as well as short term. The basis for this is the Promotion Decisions
marketing program of the organization. In order to drive immediate sales,
organizations adopt direct mail and personal selling. For creating
awareness about the product and creating demand, promotion tools like
TV advertising, sales promotions are utilized. For creating and altering the
image, organizations opt for Public Relation programs- organize events
like blood donation, marathons, etc. for health awareness in the society.
This helps an organization create an image that it is committed to society.
Similarly organizations invest in eco-friendly infrastructure that utilizes
solar power for operations, etc. which is often highlighted
in press, etc. The marketers have to decide to what extent the audience‘s
perceptions, attitudes, beliefs, and behavior should change. Depending on
this the marketer decides on the frequency of dispersing the message in the
market relevant to the objective of how fast the change should occur.

The objective usually revolves around defining a desired response:

 Creating awareness,
 Educating the buyers, (what could be the reason for not buying?,
negative perception to be changed),
 Influence buying, differentiate,
 remind, persuade.
For example, Motorola launched its Moto G models in India. Its
promotion objective was to capture market share via creating awareness
about its product highlighting a better priced product with high end
features.

4) Designing the Message:

The next step involves designing a message that will serve the promotion
objective. There are a lot of ways in which a message can be constructed.
When designing a message the marketer has to consider these things –
message content and message structure or format. The results of a well-
designed message are substantial. The message content includes images
and logos along with the text message. The message structure or format
consists of graphics, color, clarity, presentation content in case of personal
selling, etc. The local culture and beliefs need to be considered when
designing a message. Certain color selection or image selection might be
fine in one region and may be considered offensive in another region.
When Gerber launched its baby products in Africa, they went ahead with
the same packaging and image of a baby on the package. The company
later learned that companies in Africa put pictures of the product which is
inside the package. Organizations determine which strategy will have the
most advantageous result in the target market. Some organizations
highlight the specific benefits that the customer may regard as beneficial
to them – Unique selling proposition (USP). Subway‘s stresses on ―Eat
Fresh‖, Domino‘s, ―Pizza delivery in 30 minutes or its free‖ are good
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Marketing Management examples of unique selling propositions. The organizations communicate
value to the customers. Marketers strive to understand the culture and
belief system of the target market to ensure maximum impact of the
message. For example, Amazon has been creating advertisements to target
the family values of the Indian market. Almost all the advertisements have
an elder in the family who is emotionally touched by the need of a family
member, and comes across an option of a product available among 60
million products on Amazon India website.

5) Promotion budget:
Deciding on the promotion budget is one of the most difficult decisions a
marketer takes. If the right tool is not selected because of budget
constraints, the entire process of promotion or even marketing goes waste.
There are many ways of assigning a budget for promotion activities. The
marketing plan sets the direction for promotion budget decisions. Below
are the common methods for setting budget for promotion-

Affordable method:
An organization sets aside a budget as it deems affordable without much
concerns of the impact it will make on the sales and revenues. When a
company is doing well in the market, the promotion budget will be high
and if the product is not doing good and generating less revenue, the
promotion budget is less. The budget is decided after taking all
expenditures into consideration. Whatever returns are left deducting the
expenditures, a promotion budget is decided. This is the most ineffective
way of deciding the promotion budget, as the end results of promotion are
not taken into consideration.

In Percentage of sales method:

The budget is set aside basis the projection of sales for the year. Instead of
a promotion plan taking priority, the sales determine the promotion
budget. It doesn‘t consider the market opportunities. Though illogical, it
has advantages like, simple to calculate and less risky as it is linked to
sales.

6) Select the promotion tool:

Marketers have to select the most efficient promotion tool to ensure the
message is dispersed as intended. It usually involves a three step process.
 First selecting the promotion tool. For example, advertising.
 In the second step, the marketer needs to choose from various
advertising components live TV, radio, print, billboards, display
signs, symbols and logos, etc.
 Thirdly, the marketer has to decide on the aspect within each
component. In TV advertising, for example, which TV shows the
target customer usually watches and at which time maximum
coverage can be attained.
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The promotion tool selection usually depends on the cost, coverage, and Promotion Decisions
availability with regard to the target market. The communication strategy
has to adapt to the market environment of each target market or region.
Else, a communication message as well as the tool should be acceptable in
all target markets.

7) Decide promotion mix:

An organization has to wisely use its promotion budget over the
promotional tools. Each of these tools offer advantages and disadvantages.
An average person is bombarded with many messages in a day. It is the
job of the marketer to choose the appropriate channel or channels so that
the message generates a favorable response in the target market. For
example, a consumer product like stain remover meets the need of both
the consumer as well as business markets. To reach these two markets, an
organization will need to adopt advertising as well as print ads in business
journals. The scope of further penetration in the market increases if the
organization adopts enthusiastic salesmen for personal selling.

8) Evaluation and management:

A marketer‘s job doesn‘t end at implementing the promotion tools and
sending the message across in the target market. First the job of the
marketer is to study the response of buyers, and make changes to its
promotion strategy if the expected response is not achieved. He/ she has to
employ different tools to influence, remind, persuade, or educate the
customers about the product. For example, when a product moves through
the different stages of its product life cycle, different strategies are needed
at each of these stages to generate maximum sales. Secondly, even if the
promotion strategy is successfully implemented, a regular study of the
target market is needed to consider various environmental factors like
competitor‘s promotion strategy, economic changes, policy changes by
government, behavioral changes of customers, etc. These factors have to
be constantly monitored, evaluated, and corrective actions should be taken
accordingly.

11.4 PROMOTION MIX AND TOOLS OF PROMOTION

MIX
Definition: The Promotion Mix refers to the blend of several promotional
tools used by the business to create, maintain and increase the demand for
goods and services.
The fourth element of the 4 P‘s of Marketing Mix is the promotion; that
focuses on creating awareness and persuading the customers to initiate the
purchase. The several tools that facilitate the promotion objective of a firm
are collectively known as the Promotion Mix.

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Marketing Management Tools of Promotion Mix:
Promotion mix consists of following elements or tools:
 Advertising: The advertising is any paid form of non-personal
presentation and promotion of goods and services by the identified
sponsor in the exchange of a fee. Through advertising, the marketer
tries to build a pull strategy; wherein the customer is instigated to try
the product at least once. The complete information along with the
attractive graphics of the product or service can be shown to the
customers that grab their attention and influences the purchase
decision.
 Personal Selling: This is one of the traditional forms of promotional
tools wherein the salesman interacts with the customer directly by
visiting them. It is a face to face interaction between the company
representative and the customer with the objective to influence the
customer to purchase the product or services.
 Sales Promotion: The sales promotion is the short term incentives
given to the customers to have an increased sale for a given period.
Generally, the sales promotion schemes are floated in the market at
the time of festivals or the end of the season. Discounts, Coupons,
Payback offers, Freebies, etc. are some of the sales promotion
schemes. With the sales promotion, the company focuses on the
increased short-term profits, by attracting both the existing and the
new customers.
 Public Relations: The marketers try to build a favorable image in the
market by creating relations with the general public. The companies
carry out several public relations campaigns with the objective to have
the support of all the people associated with it either directly or
indirectly. The public comprises the customers, employees, suppliers,
distributors, shareholders, government and the society as a whole. The
publicity is one of the forms of public relations that the company may
use with the intention to bring newsworthy information to the public.
E.g. Large Corporate such as Dabur, L&T, Tata Consultancy, Bharti
Enterprises, Services, Unitech and PSU‘s such as Indian Oil, GAIL,
and NTPC have joined hands with the Government to clean up their
surroundings, build toilets and support the Swachh Bharat Mission.
 Direct Marketing: With the intent of technology, companies reach
customers directly without any intermediaries or any paid medium.
The emails, text messages, Fax, are some of the tools of direct
marketing. The companies can send emails and messages to the
customers if they need to be informed about the new offerings or the
sales promotion schemes.

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11.5 INTEGRATED MARKETING COMMUNICATION Promotion Decisions
(IMC) AND TOOLS OF IMC
Integrated Marketing Communications (IMC) is a concept under which a
company carefully integrates and coordinates its many communications
channels to deliver a clear and consistent message. It aims to ensure the
consistency of the message and the complementary use of media.
IMC is an integration of all marketing tools, approaches and resources
within a company which maximizes impact on the consumer mind
resulting in maximum profit at minimum cost.
It uses several innovative ways to ensure that the customer gets the right
message at the right place and right time.

IMC Tools:
The eight major Integrated Marketing Communication tools are as
follows:
1. Advertising: Advertising refers to any paid form of non-personal
promotion of products or services by an identified sponsor. The
various media used are print (newspapers and magazines), broadcast
(radio and television), network (satellite, wireless and telephone),
electronic (web page, audio and videotape) and display (billboards,
signs and posters).The primary advantage of advertising is that it
reaches geographically dispersed consumers. Consumers generally
tend to believe that a heavily advertised brand must offer some ‗good
value‘ but at the same time, advertising proves to be an expensive
form of promotion.
2. Sales Promotion: It is a variety of short-term incentives to encourage
trial or purchase of a product or service. It may include consumer
promotions – focused towards the consumer – such as a distribution
of free samples, coupons, offers on purchase of higher quantity,
discounts and premiums or trade promotions – focused on retailers –
such as display and merchandising allowances, volume discounts, pay
for performance incentives and incentives to salespeople. Sales
promotion helps to draw the attention of the consumers and offers an
invitation to engage in a transaction by giving various types of
incentives.
3. Personal Selling: Face-To-Face interaction with one or more buyers
for the purpose of making presentations, answering questions and
taking orders. This proves to be the most effective tool in the later
stages of the buying process. The advantage is that the message can
be customized to the needs of the buyer and is focused on building a
long-term relationship with the buyer.
4. Public Relations: A variety of programs directed toward improving
the relationship between the organization and the public. Advertising
is a one-way communication whereas public relations is a two-way
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Marketing Management communication which can monitor feedback and adjust its message
for providing maximum benefit. A common tool used here is publicity
which capitalizes on the news value of the product or service so that
the information can be disseminated to the news media.
5. Direct Marketing: Direct Marketing involves the use of mail,
telephone, fax, e-mail, or internet to communicate directly with or
solicit response or dialogue from specific customers or prospects.
Shoppers have started relying on credit cards and online purchasing
more than ever which makes it essential for marketers to approach the
consumers directly thus helping them in the purchase process.
Companies have a database of contact details of consumers through
which they send catalogues and other marketing material making it
easier for the consumer to purchase online. The relevance of direct
marketing has increased in recent years.
6. Events And Experiences: These are company sponsored activities
and programs designed to create brand-related interactions with
customers. Sponsorships improve the visibility of the company.
Companies provide customers with an experience of using the product
which ends up leading to a higher brand recall than competitors.
These events prove to be engaging with the audience.
7. Social Media Marketing: The concept of social media
marketing basically refers to the process of promoting business or
websites through social media channels. Companies manage to get
massive attention on such channels and can interact with consumers
as and when they are browsing the internet. New and modern ways of
communications are developing on these social media platforms and
are proving to be the future of promotions. They have the ability to be
highly interactive and up to date with the customers.
8. Mobile Marketing: Mobile marketing involves communicating with
the consumer via a mobile device, either to send a simple marketing
message, to introduce them to a new participation-based campaign or
to allow them to visit a mobile website. Cheaper than traditional
means for both the consumer and the marketer, mobile marketing
really is a streamlined version of online marketing the use of which is
increasing as time progresses.

11.6 SALES PROMOTION

Definition:
Sales Promotion is the marketing actions excluding personal selling,
advertising and promotion that provoke customer buying and dealer
efficiencies like display shows, written description, trials and distinct non-
current selling exercise not in the normal routine.
Sales promotion is amidst the three pillars of the promotional mix. The
alternative two pillars are personal selling and advertising. It is the
associating link amidst personal selling and advertising, and a significant
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and specific function of marketing. It involves coupons, discount deals, Promotion Decisions
contests, prizes, rebates and other procedures outlined to obtain a quick
response. It only affects the timing of purchase instead of the decision to
purchase.

Different ways of Sales Promotion:

 Coupons: Rs 500 off, buy one get one free, save Rs 100 on purchase
of 500 they are used frequently to attract customers to buy our
products.
 Premiums: These low-cost items were given to customers at a
discount or for free to build loyalty and fascinate customers. Logo
pens, keychains and coffee mugs are typical examples of it.
 Incentives: Incentives build the customer‘s excitement. Marketers use
contests, sweepstakes and rebates to do this.
 Product samples: Providing samples of your product with other
famous products also increases the sales of your products.
 Sponsorship: This is what in which a company pays a fee to put their
name and logo on a physical site.
 Product placement: We have seen in many realities shows a mug
having a logo of a particular drink name is kept in front of celebrities,
that is a product placement method of sales promotion and this
method brings recognition for their brand.
 Loyalty programs: It is also known as buyer programs; customers
are awarded for their purchases.
 Point- of- Purchase displays: We see almost everywhere particular
corners are made displaying the products of a specific brand, they are
usually placed in high traffic areas and encourage impulse buying.

11.7 SUMMARY
Marketing communication is one of the four major elements of the
company‘s marketing mix. ―Promotion is the co-ordination of seller‘s aim
to set up channels of information and persuasion to facilitate the sales of
goods/services or acceptance of an idea‖. Promotion serves three essential
roles - it informs, persuades, and reminds prospective customers about the
company and its products.
The promotional mix is a specific mix of advertising, personal selling,
sales promotion, public relations, and direct-marketing tools that a
company uses to pursue its marketing objectives. Integrated Marketing
Communications (IMC) is a concept under which a company carefully
integrates and coordinates its many communications channels to deliver a
clear and consistent message. It aims to ensure the consistency of the
message and the complementary use of media. IMC is an integration of
all marketing tools, approaches and resources within a company which 133
Marketing Management maximizes impact on the consumer mind resulting in maximum profit at
minimum cost.

11.8 TEST YOUR KNOWLEDGE

Multiple Choice Questions:
1. The individual who represent company by performing selling,
servicing, information gathering, and prospecting is called as
(a) sales person (b) promoting manager
(c) prospecting manager (d) persuasion manager
2. The short term benefit given to the customers to attract more
customers is called
(a) sales promotion (b) inbound promotion
(c) outbound promotion (d) organizational promotion
3. Which of the following promotional forms is often described as being
too impersonal and only a one-way communication form?
(a) advertising (b) personal selling
(c) public relations (d) sales promotion
4. Advertisement aims at _________
(a) Product selling (b) Marketing
(c) Customer relations (d) Mass communication
5. A consumer contest is an example of _____.
(a) Personal Selling (b) Sales Promotion
(c) Advertisement (d) Indirect Selling

11.9 QUESTIONS
Q.1 What is promotion? What are the types of promotion? Explain
objective of the promotion.
Q.2 What are the promotional decisions?
Q.3 What is promotion mix? Explain the tools of promotion mix.
Q.4 What is Integrated Marketing Communication (IMC)? Explain the
tools of IMC.
Q.5 What is sales promotion? What are different ways of sales
promotion.

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11.10 REFERENCES Promotion Decisions

 Kotler, P., Keller, K. L., Ang, S. H., Tan, C. T., & Leong, S. M.
(2018). Marketing management: an Asian perspective. Harlow:
Pearson.

 Saxena, R. (2005). Marketing management. Tata McGraw-Hill

Education.

 Karunakaran, K. (2008). Marketing management. Himalaya

Publishing House.

 Kotler, P., Keller, K. L., Ang, S. H., Tan, C. T., & Leong, S. M.
(2018). Marketing

 management: an Asian perspective. Harlow: Pearson.

 Kotler, Philip, ―Marketing Management - Analysis, Planning,

Implementation, and

 Control‖, PHI, New Delhi.

 Namakumari S, and Ramaswamy, V.S., ―Marketing Management‖,

MacMillan

 Publishers, New Delhi.

 Skinner, J., S. Steven, ―Marketing‖, Houghton Miami Company,

Boston.

 Dawn Iacobucci, ―Marketing Management‖, Cengage Learning

*****

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 12
PERSONAL SELLING AND SALES
MANAGEMENT
Unit Structure
12.0 Objective
12.1 Introduction, Conceptual framework, Definitions
12.2 Advantages and Disadvantages, Examples
12.3 Importance, Challenges and Types of personal selling
12.4 The Personal Selling Process
12.5 Principles of Personal Selling
12.6 Summary
12.7 Question
12.8 References

12.0 Objective
1) To know the concept of Personal Selling
2) To understand the importance, challenges and types of Personal
Selling
3) To acquire the knowledge about the personal Selling process

12.1 INTRODUCTION, CONCEPTUAL FRAMEWORK,

DEFINITIONS
Introduction:
In the era of e-Commerce, personal selling has its own unique importance
in terms of customer satisfaction. Personal Selling is an olden art, which
has multiplied a large literature and many principles. Selling is a
profession that involves mastering and using a whole set of principles and
techniques. In the absence of personal selling, organisations will find it
difficult to dispose off their products and services. Personal selling occurs
in nearly each and every human interaction. It is the most important
component of promotion mix in attaining the goal of all marketing efforts,
to increase profitable sales by offering want satisfaction to consumers over
the long run.

Conceptual framework:
Sales management, management of sale force, sales force management,
personal selling as salesmanship are few important terms and concepts
associated with personal selling. To understand these terms let us study
the following framework.

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 Personal Selling and
Sales Management

Sales management covers two broader concepts, management of sales

force and personal selling. Sales management directs the personnel-selling
effort which, in turn, is implemented largely through salesmanship.
Management of sales force or sales force management refers to
recruitment and selection, training and development, administration,
motivation, and control of field sales force. In a way it is the application of
personal management concepts to the sales personnel.
Sales management, originally referred exclusively to the direction of sales
force personnel. Later, the term looks on broader significance -in addition
to the management of personal selling, “Sales management” meant
management of all marketing activities, including advertising, sales
promotion, marketing research, physical distribution, pricing, and product
merchandising.

Definitions:
Committee of American Marketing Association defined sales management
as “the planning, direction and control of personnel selling, including
recruiting, selecting, equipping, assigning, routing, supervising, paying
and motivating as these tasks apply to the personal sales force”.
“Personal selling is an ancient art. Effective sales persons have more than
instinct; they are trained in a method of analysis and customer man-
agement. Selling today is a profession that involves mastering and
applying a whole set of principles”.

-Phillip Kotler
“Salesmanship consists of winning the buyer‟s confidence for the seller‟s
house and goods thereby arising a regular and permanent customer”

-G. Blake
Personal selling is defined as, „the oral presentation in a conversation with
one or more prospective purchasers or the purpose of making sales.
Salesmanship is the art of successfully persuading customers to buy
products or services from which they can derive suitable benefits, thereby
increasing their total satisfaction.‟

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Marketing Management Personal selling:
Face-to-face interaction with one or more prospective purchasers for the
purpose of making presentations, answering questions, and procuring
orders.
Personal selling requires salesmanship or the art of successful persuasion.
Besides salesmanship, it includes negotiation and relationship building. In
managing personnel selling, the sales executive must understand the many
activities comprising the sales executive must understand the many
activities comprising the sales person‟s job, know the problems sales
personnel meet, and suggest solutions. The executive also has to negotiate
with the prospective customer to clinch the deal and also has to make good
relations that are very important for repeat purchase.

12.2 ADVANTAGES AND DISADVANTAGES,

EXAMPLES
Personal selling, just like other elements of the promotion mix, comes
with its own set of advantages and disadvantages.
Personal selling offers several advantages over other forms of
promotion:
 Personal selling provides a detailed explanation or demonstration of
the product. This capability is especially needed for complex or new
goods and services.
 The sales message can be varied according to the motivations and
interests of each prospective customer. Moreover, when the prospect
has questions or raises objections, the salesperson is there to provide
explanations. In contrast, advertising and sales promotion can only
respond to the objections the copywriter thinks are important to
customers.
 Personal selling can be directed only to qualified prospects. Other
forms of promotion include some unavoidable waste because many
people in the audience are not prospective customers.
 Personal selling costs can be controlled by adjusting the size of the
sales force (and resulting expenses) in one-person increments. On the
other hand, advertising and sales promotion must often be purchased
in fairly large amounts.
 Perhaps the most important advantage is that personal selling is
considerably more effective than other forms of promotion in
obtaining a sale and gaining a satisfied customer.
 Personal selling helps the business convey more information than any
other form of promotion. It is all about understanding the customers‟
needs, finding an opportunity in it, and capitalising on it by

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 developing a relationship with them while convincing them to try the Personal Selling and
company‟s product. Sales Management

 It‟s more impactful as the salesperson assist the customer throughout

the buying process, answering questions, and solving doubts.
 Unlike other promotional tools like advertising or public relations,
personal selling allows the customers to communicate with the
business and clear their doubts before making the purchase.
 Personal sales last long, include interpersonal relationships, and
capitalizes on trust between the salesperson and the customer.

Disadvantages:
 Expensive: Since personal selling person-to-person contact, it is
substantially more expensive than other forms of sales tools as a
human can approach only a few prospects in a specified time period.
 Labour extensive: Personal sales require a lot of effort from the
salespersons‟ side, and it may take considerable time and resources to
convert a prospect to a final customer.
 Limited reach: Since personal sales is a one-to-one promotional tool,
its reach is limited compared to other tools like advertising or public
relations.

Personal Selling Examples:

Personal selling is one of the most traditional sales methods used by
businesses. The sales history started with personal sales where salesperson
conducted face-to-face interactions with prospective customers, inquiring
about their needs and wants, and suggesting their business‟s offering to the
customers.

Today, one can witness personal sales in:

 Retail Stores: Retail stores like D-Mart, Big Bazaar, Pantaloon
etc. employ a sales staff that help customers choose the best product
according to their own needs and wants.
 Door-to-Door Sales: Some B2C businesses (like Eureka Forbes) and
B2B businesses (like PayTM) employ sales staff that visit prospective
customers homes and offices to educate them about the company‟s
offerings and persuade them to use or buy the same.
 B2B Outreach: B2B salespersons often outreach prospective clients
online or offline and use person-to-person communication to close
sales.

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Marketing Management
12.3 IMPORTANCE, CHALLENGES AND TYPES OF
PERSONAL SELLING
Importance of personal selling:
Personal selling is useful for almost every product or service. It is
particularly important when:
 The market is concentrated either geographically or in a few
industries, or in a few large customers.
 The produce has a high unit value, is quite technical in nature, or
requires a demonstration.
 The product requires to be fitted to an individual customer‟s need, as
in the case of securities or insurance.
 The product is in the introductory stage of its life cycle.
 The organization does not have enough money for an adequate
advertising campaign.
 Personal selling is the individual, personnel communication of
information, in contrast to the mass, impersonal communication of
advertising, sales promotion and other; promotional tools. This means
personal selling is more flexible than other tools.
 Sales people can tailor their presentations to fit the needs and
behaviour of individual customers.
 Personal Selling can usually be focused or pinpointed on prospective
customers, thus, minimizing wasted effort.
 The goal of Personal Selling is to actually make a sale. Other forms of
promotion are designed to move a prospect closer to a sale.

Challenges for personal selling:

To capture the potential in the market, personal selling is very essential for
any organization but there are certain challenges like:
 A high-cost involvement is a major limitation even though personal
selling can minimize wasted effort, the cost of developing and
operating a sales force is high.
 The company is often unable to attract the quality of people needed to
do the job. At the retail level, many firms have abandoned their sales
forces and shifted to self-service selling for this very reason.

Types of Personal selling:

There are two major kinds of Personal Selling:
1. Inside Selling - Across the counter.
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2. Outside Selling – Through sales force. Personal Selling and
Sales Management
Across the counter selling is one where the customers come to the sales
people. It primarily involves retail-store selling. In this kind of selling,
those sales people are also included who are with catalog retailers who
take telephone orders.

The other kind of Personal Selling is where sales people go to the

customers.

These people sell in person at a customer‟s place of business or home.

Types of sales jobs:

The types of selling jobs and the activities involved in them cover a wide
range. People who sell are called by various names: salesmen, sales
representatives, salespersons, account executives, sales consultants, sales
engineers, field representatives, agents, and marketing representatives.
Given below is the classification of sales jobs by Robert Mcmurry :

(a) Driver sales person (Deliverer): In this job the sales person
primarily delivers the product. For example, soft drinks, bread and
milk salesman who deliver the respective products to retailers and/or
other customers. In these types of jobs selling responsibilities are
secondary. Few of these salesmen originate sales.

(b) Inside order taker: This is a position in which the sales person takes
orders at the seller‟s place of business. Most of the sales person takes
orders at the seller‟s place of business. Most of the sales persons visit
grocery shops and general stores to take orders for various items.

(c) Outside order taker: In this position the sales person goes to the
customer in the field and accepts an order. Most of the sales person
who take orders by visiting various colonies and residential localities
fall in this type of category.

(d) Missionary sales person: This type of sales job is extended to build
goodwill, perform promotional activities, and provide information and
other services for the customers. This sales person is not expected to
solicit an order. Medical representatives calling on doctors fall in this
category.

(e) Sales engineer (Technician): In this position the major emphasis is

on the sales person‟s ability to explain the product to a prospective
customer, and also to adapt the product to the customer‟s particular
needs. The products involved here typically are complex, technically
sophisticated items. Sales engineer usually provides technical support,
and works with another sales representative who calls regularly on a
given account.

(f) Creative sales person - an order getter: This involves the creative
selling of goods and intangibles - primarily services, but also social 141
Marketing Management causes and ideas (do not use drugs, stop smoking, obey speed limits).
This category contains the most complex, difficult selling jobs-
especially the creative selling of intangibles, because you can not see,
touch, taste, or smell, then customers often are not aware of their need
for a seller‟s product. or they may not realise how that product can
satisfy their wants better than the product they are now using-creative
selling often involves designing a system to fit the needs of a
particular customer.

The above six types of sales jobs fall into three groups:

1. Order taker – [Categories (a), (b) & (c)]

2. Sales support personnel [Categories (d) & (e)]

3. Order getter [Category (f)]

One organisation may have several different types of sales jobs.

12.4 THE PERSONAL SELLING PROCESS

Process of Personal Selling:

These steps focus on getting new customers. However, most salesmen pay
attention to maintaining existing customers and building long-term
customer relationships. Now look at the following steps in the selling
process:

1. Prospecting and Qualifying:

In this step, the salesperson identifies potential customers. The salesmen

often must approach many prospects to obtain sales. Although the
company supplies some leads, by which salesmen must develop the skill
of finding their own. They can use the telephone and mail to track down
leads.

2. Pre-approach:

In this, the salesmen learn more about a prospective customer before

making a sales call.

To know about the customer, the salesperson can consult friends,

contacts, connections, and others. Then salesperson should set call
objectives, gathering information, qualifying the prospect, making an
immediate sale.

3. Approach:

The salesperson meets the buyer to get the good relations. It consists of the
salesperson‟s, opening lines, appearance and the follow-up remarks.

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4. Presentation and Demonstration: Personal Selling and
Sales Management
The salesmen tell the product „story‟ to the buyer, with explanation that
how the product will make or save money. The salesperson describes the
features of the product with focusing on highlighting customer benefits.

5. Handling Objections:
The salesperson gives the clarity, and overcomes the objections presented
by the customers for purchasing the product.

6. Closing and Follow-up:

This is the second last step, in which the salesperson asks for an order. He
can offer to write up the order, reexamine the order, that the buyer will
lose when the order is not placed at right time. The salesman explaining
the forward special reasons to close the sale process.
On the other side, Follow-up is the last step in the selling process in which
the salesperson ensures customer satisfaction and repeat business.

12.5 PRINCIPLES OF PERSONAL SELLING

Personal selling is an ancient art. Effective salespeople today have more
than instinct, however. Companies now spend hundreds of millions of
dollars each year to train them in methods of analysis and customer
management and to transform them from passive order takers into active
order getters. Delegates are taught the SPIN method to build long-term
relationships by asking prospects several types of questions:

1. Situation questions:
These ask about facts or explore the buyer‟s present situation.
For example, “What system are you using to invoice your customers?”

2. Problem questions:
These deal with problems, difficulties, and dissatisfactions the buyer is
experiencing.
For example, “What parts of the system create errors?”

3. Implication questions:
These ask about the consequences or effects of a buyer‟s problems,
difficulties, or dissatisfactions.
For example, “How does this problem affect your people‟s productivity?”

4. Need-payoff questions:
These ask about the value or usefulness of a proposed solution.

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Marketing Management For example, “How much would you save if our company could help you
reduce errors by 80 percent?”
Personal selling is the most effective tool at later stages of the buying
process, particularly in building up buyer preference, conviction, and
action. It has three notable qualities:
1. Customized: The message can be designed to appeal to any
individual.
2. Relationship-oriented: Personal selling relationships can range from
a matter-of-fact selling relationship to a deep personal friendship.
3. Response-oriented: The buyer is often given personal choices and
encouraged to directly respond.

12.6 SUMMARY
Personal Selling is a profession that involves mastering and using a whole
set of principles, techniques and has its own unique importance in terms of
customer satisfaction. Without personal selling, organisations will find it
difficult to dispose off their products and services. It is the most important
component of promotion mix in attaining the goal of all marketing efforts,
to increase profitable sales by offering want satisfaction to consumers over
the long run. It requires salesmanship, art of successful persuasion,
negotiation skills and relationship building.
Sales management covers two broader concepts, management of sales
force and personal selling. Management of sales force or sales force
management refers to recruitment and selection, training and development,
administration, motivation, and control of field sales force. In managing
personnel selling, the sales executive must understand the many activities
comprising person‟s job, know the problems sales personnel meet and
suggest solutions.
Personal selling offers several advantages like it provides a detailed
explanation or demonstration of the product, can be directed only to
qualified prospects, can be controlled by adjusting the size of the sales
force, personal selling is considerably more effective than other forms of
promotion in obtaining a sale and gaining a satisfied customer, it helps the
business convey more information than any other form of promotion, is
more impactful as the salesperson assist the customer throughout the
buying process, answering questions, and solving doubts, personal sales
last long, include interpersonal relationships and capitalizes on trust
between the salesperson and the customers. On the other hand, as
disadvantages, personal selling is expensive, requires more sale force and
its reach is limited as compare to other promotional tools.
Personal selling is useful for almost every product or service. It is
particularly important when market is concentrated either geographically
or in a few industries or in a few large customers, produce has a high unit
value, is quite technical in nature, or requires a demonstration, product
144
144
requires to be fitted to an individual customer‟s need, product is in the Personal Selling and
introductory stage of its life cycle, organization does not have enough Sales Management
money for an adequate advertising campaign.
There are two major types of personal selling i.e. inside selling - across the
counter where the customers come to the sales people and outside selling –
through sales force.
The Personal Selling Process is consisting certain steps like prospecting
and qualifying the potential customers, pre-approach about a prospective
customer before making a sales call, the approach of salesperson to get the
good relations when he meets the buyer, presentation and demonstration
with explanation that how the product will make or save money, handling
objections by salesperson gives the clarity, and overcomes the objections,
closing and follow-up in which the salesperson asks for an order, at the
end follow-up is the last step in the selling process in which the
salesperson ensures customer satisfaction and repeat business.

12.7 QUESTION
(i) What is personal selling? Discuss with the help of suitable examples.
(ii) Describe various stages of Personal Selling Process.
(iii) Discuss the process and advantages of personal selling.
(iv) Explain Sales Management in the detail.
(v) Write short notes on:
(a) Principles of Personal Selling
(b) Importance of Personal Selling
(vi) What are the types of Personal Selling?

12.8 REFERENCES
1) Ramaswamy, V.S. and Namakumari, S., "Marketing Management-
Planning, Implementation, and Control - The Indian context", 2nd
edition, Macmillan India Limited, New Delhi,1999.
2) Philip Kotler,"Marketing Management-Analysis, Planning,
Implementation, and Control", 6th edition, Prentice Hall of India Pvt.
Ltd., New Delhi, 1988,pp.685- 698.
3) Geoffrey Lancaster and David Jobber, "Selling and sales
management" 3rd edition, Macmillan India Ltd., New Delhi, 1994.
4) Richard R.Still, Edward W.Cundiff, and Norman A.P.Govoni,"Sales
Management- Decisions,Strategies, and Cases", 5th edition, Prentice
Hall of India Pvt. Ltd.,New Delhi, 1988, pp.16-57.

***** 145
 13
OVERVIEW OF MARKETING
STRATEGIES
Unit Structure
13.0 Objectives
13.1 Overview of Marketing Strategies
13.2 BCG
13.3 Ansoff
13.4 GE
13.5 Shell Model
13.6 Porter Generic Model
13.7 5 Forces Model
13.8 PLC
13.9 7s Model of Marketing
13.10 A little Model
13.11 Value Chain Model
13.12 Summary
13.13 Questions
13.14 References

13.0 OBJECTIVES
 To examine different types of marketing strategies.

 To study the advantages of marketing strategies.

 Understanding best methods for putting marketing strategies into

action.

 To study the efficient implementation of marketing strategy through

the development of an effective marketing implementation plan.

13.1 OVERVIEW OF MARKETING STRATEGIES

Introduction:
Marketing is about connecting a company with potential customers and
connecting those customers with the products of that company. The
process involves understanding customer needs, translating these needs
into products and services, appropriately packing and pricing the products
and services, and then convincing customers that they need to buy those
products and services.

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Hence, as an overview, marketing is the entire cycle from identifying Overview of Marketing
potential customers to satisfying those customers' needs and requirements Strategies
with the products the company produces.
A marketing strategy, on the other hand, is a long-term plan for achieving
a company's goals by understanding the needs of customers and creating a
distinct and sustainable competitive advantage. It includes determining
who your customers are and deciding what channels and mediums we use
to reach those customers.
With a marketing strategy, we can define how the company positions itself
in the market, the types of products the company produces, the different
strategic partners it has, and the type of advertising and promotion we
need to undertake.
Hence Marketing is more than just advertising and promotion – it's all
about connecting with the customer. A marketing strategy sets the
direction for all the product and marketing-related activities of the
company because having a marketing strategy helps keep all activities
related to marketing on track. Developing a marketing strategy involves
setting goals, researching the market, developing product plans, defining
your marketing initiatives, among other things.

A marketing strategy also determines the general direction for a variety of

marketing-related activities. The marketing strategy helps to define the
following areas:
 Target audience
 Value proposition
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Marketing Management  Product mix
 Brand messaging
 Promotional initiatives
 Content marketing

Marketing Models:

13.2 BCG

BCG Matrix
The Boston Consulting Group, also known as the BCG matrix, was
introduced by the Boston Consulting Group in 1970. It is a planning tool
that uses graphical representations of a company‘s products and services
in order to help the company decide what it should keep, sell, or invest
more in.
This matrix plots a company‘s offerings in terms of its products and
services in a four-square matrix, with the y-axis representing the rate of
market growth and the x-axis representing market share.

Understanding the BCG Model:

The BCG growth-share matrix is broken down into four categories,
known as "dogs," "cash cows," "stars," and ―question marks.‖ Each
category has its own unique characteristics.

Dogs:
This is situated at the bottom right of the matrix.
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If a company‘s product has a low market share and is growing at a low Overview of Marketing
rate, it is considered a "dog" and ideally should be sold, liquidated, or Strategies
repositioned. Dogs, found in the lower right hand of the grid, don't
generate much cash for the company since they have low market share and
little to no growth. Because of this, dogs can turn out to be a problem,
tying up company funds for long periods of time. For this reason, they are
considered prime candidates for divestiture. Amul has two products that
have not been able to generate sales and revenues as per the estimate. One
of the noteworthy examples in this regard is Amul Chocolates and Amul
Pizza.

Cash Cows:
This is situated at the bottom left of the matrix.
Products that are in low-growth areas but for which the company has a
relatively large market share are considered "cash cows," and the company
should thus milk the cash cow for as long as it can. Cash cows, seen in the
lower left quadrant, are typically leading products in markets that are
mature. Here are three products under the umbrella of Amul that come
under the Cash Cow category and they are Amul Milk, Amul
Butter, and Amul Cheese.

Stars:
This is situated at the top left of the matrix.
Products that are in high growth markets and that make up a sizable
portion of that market are considered ―stars‖ and should be invested in
more than the other categories. In the upper left quadrant are stars, which
generate high income but also consume large amounts of company cash.
If a star can remain a market leader, it eventually becomes a cash
cow when the market's overall growth rate declines.

Question Marks:
This is situated at the top right of the matrix.
The question mark indicates that uncertain opportunities are high in
markets with high growth rates but in which the company does not
maintain a large market share. Question marks are in the upper right
portion of the grid. They typically grow fast but consume large amounts of
company resources. Products in this category should be analysed
frequently and closely to see if they are worth maintaining over a period of
time.

13.3 ANSOFF
The Ansoff Model is one of the most widely used marketing models. It
helps marketers identify opportunities to grow revenue for a business
through developing new products and services or tapping into new
markets.
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The Ansoff Model

The Ansoff model is explained with the help of the above grid. The
products of the company, both existing and new, lie on the X axis,
whereas the markets, both existing and new, lie on the Y axis. The model
talks about the company‘s products and the strategies it should adopt in
various market situations in order to remain successful in the market. This
is further explained below.

Market penetration:
In the market penetration strategy, the organisation tries to grow by using
its existing products and services in existing markets. This is the least
risky growth option. The company tries to increase its market share in the
current market scenario. This is usually done by increasing the market
share within the existing market segments, which can be achieved by
selling more products or services to established and loyal customers or by
finding new customers within existing markets. In this scenario, the
company seeks increased sales for its present products in its present
markets through more aggressive promotion and distribution strategies.
Here are a few examples of such strategies:
 Price decrease/ discounts/ cash backs.
 Increase in promotion and distribution support.
 Acquisition of a rival in the same market.
 Some product updates or refinements.

Market development:
In a market development strategy, a firm tries to expand into new markets
(geographies, countries, etc.) using its existing offerings and also with
minimal product or service development.
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This can be accomplished by: Overview of Marketing
Strategies
 Different customer segments.
 Industrial buyers for a good that was previously sold only to the
households.
 Tapping into new areas or regions of the country.
 Entry into foreign markets.
The market development strategy is more likely to be successful
where:
 The firm has a unique product technology it can use as an advantage
in the new market.
 It benefits from economies of scale by producing in large quantities,
lowering per unit cost if output is increased.
 The new market is similar to the one it is familiar with.
 The buyers in the market are profitable in a smooth and natural
manner.
This kind of strategic move and decision by the company with regard to its
products or services increases uncertainty and thus increases the
company's risk further.

Product development:
A product development strategy attempts to create new products and
services aimed at existing markets in order to achieve growth and revenue.
This involves extending the product range available to the firm's existing
markets. These products may be obtained by:
 Investment in research and development of additional products.
 Acquisition of rights to produce someone else's product.
 Buying in the product and "badging" it as one's own brand.
 Joint development with ownership of another company who need
access to the firm's distribution channels or brands.
This strategy is riskier than market penetration but has a similar risk as
that of market development.

Diversification:
In diversification, an organization tries to grow its market share by
introducing new product or service offerings in new markets. It is the most
risky strategy because it requires product development as well as market
development to be implemented.

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Marketing Management Diversification is considered the riskiest growth option as two factors have
to be considered while planning for growth.

13.4 GE

The GE McKinsey Matrix

The General Electric model, also known as the McKinsey Model, is a tool
that helps in sound decision making with regards to marketing products
and services of a company. The grid is divided into 9 quadrants.
Business Strength, which lies on the X axis, refers to how the business
fares relative to its competitors within the industry.
Market attractiveness, which lies on the Y axis, refers to how easily the
business unit will be able to accumulate profit in the industry.
Other parameters are
The three degrees (High, Medium, and Low) of market attractiveness and
business strength provide nine different strategic postures for a business.
The strategic actions a company can choose from are:
1. Invest / Grow strategy
2. Protect / Earnings strategy
3. Harvest / Divest strategy
The best position for a business to be in is the Invest/Grow section. A
business can reach this situation if it is operating in a moderate to highly
attractive industry while having a moderate to highly competitive status
with regards to its product or services within that industry. In such a
situation, there is a huge growth potential.

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The protect strategy: a business in the selectivity/earnings section is a bit Overview of Marketing
trickier. The business is either in a low-to-moderate competitive position Strategies
in an attractive industry or in an extremely high competitive position in a
less attractive industry. Deciding whether to invest or not to invest largely
depends on the business‘s outlook. It could expect to either improve its
competitive position or shift to a more attractive industry.

Harvest/ Divest Strategy:

This strategy is most appropriate for a business that:
 has a low competitive position.
 is active in an unattractive industry.
 a combination of the two.

13.5 SHELL MODEL

Shell Directional Policy Matrix (Shell Model)

A Nine Celled directional Policy Matrix:
The Shell Directional Policy Matrix is another refinement to the Boston
Matrix. Along the horizontal axis are prospects for sector profitability, and
along the vertical axis is a company’s competitive capability. As with the
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Marketing Management GE Business Screen, the location of a Strategic Business Unit (SBU) in
any cell of the matrix implies different strategic decisions.

 Double or quit: take a chance on potential major SBUs in the future.

 Growth: grow the market by focusing just enough resources.

 Phased withdrawal: move cash to SBU‘s with greater potential.

 Divest: liquidate or move these assets as fast as possible.

However, decisions often span options and, in practice, the zones are an
irregular shape and do not tend to be accommodated by box shapes.
Instead, they blend into each other.

13.6 PORTER GENERIC MODEL

Porter Generic Model

1. Cost Leadership strategy:

By choosing the cost leadership strategy, companies target a broad market

and offer the lowest possible price. There are 2 options within this cost-
leader strategy. Companies can either choose to keep costs as low as
possible or ensure that they have a larger market share with average
prices.

In both cases, the point is to keep the company's costs as low as possible.
Organizations that apply this strategy successfully usually have a good
amount of investment capital at their disposal, efficient logistics, and low
costs when it comes to materials and labour. The organisation is generally
focused on internal processes.
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2. Differentiation: Overview of Marketing
Strategies
Companies target a broad market as their product or service has unique
features. With this strategy, companies make their product as exclusive as
possible, making it more attractive than comparable products offered by
the competition.

Succeeding using this strategy requires good research and development,

innovation, and the ability to deliver high quality. Effective marketing is
important, so that the market understands the benefits of their unique
product.

It‘s important to be flexible and to be able to adapt quickly in a changing

market, or the company risks losing market share to the competition. Such
an organization is focused on the outside world and has a creative
approach while strategizing.

3. Cost Focus:

Companies target a niche market and offer the lowest possible price.
Through this strategy, companies choose to target a clear niche market
and, through understanding the dynamics of these market segments and
the wishes of the consumers, ensure that the costs remain low (cost
advantages).

An example of low-cost producers like this is the low-cost budget airlines

that achieve market share growth by choosing cost focused strategies like
offering cheap, basic services at lower prices than the big airlines that
charge much higher prices.

4. Differentiation Focus:

Choosing the differentiation focus strategy, companies target a niche

market (little competition, ‗focused market‘) and their product or service
has unique features. This strategy often involves strong brand loyalty
among consumers.

During the focus on differentiation, it‘s very important to ensure that the
product remains unique in order to stay ahead of possible competition.

In order to choose the right strategy for an organization, it‘s important to

be aware of the competencies and strengths of the company.

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13.7 FORCES MODEL

5 forces Model
The Five Forces model is named after Harvard Business School professor
Michael E. Porter.
Porter's Five Forces is a model that identifies and analyses five
competitive forces that shape every industry and helps determine an
industry's weaknesses and strengths.
The Five Forces Model is frequently used to identify an industry's
structure to determine its corporate strategy.
Porter's model can be applied to any area of the economy to understand
the level of competition within the industry and enhance a company's
long-term profitability.

The five forces are:

1. Competition in the industry.
2. Potential of new entrants into the industry.
3. Power of suppliers.
4. Power of customers.
5. Threat of substitute products.

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13.8 PLC Overview of Marketing
Strategies
Product Life Cycle

Product Life Cycle

A product life cycle can be described as the length of time from a
product's first being introduced to consumers into the market until it is
removed from the market. A product‘s life cycle is usually broken down
into four stages: introduction, growth, maturity, and decline.
Product life cycles are used by organizations and marketing professionals
to help determine advertising timelines, price points, expansion to new
product markets, packaging redesigns, and other aspects. Studying the
schedule helps determine when newer products are ready to push older
ones off the market.

The product life cycle stages have been explained below:

 Introduction: This phase generally includes a substantial amount of
investment in advertising and various marketing campaigns focused
on making consumers in the market aware of the product and its
benefits.
 Growth: If the product is successful, it then moves to the growth
stage. This is characterized by growing demand, an increase in
production, and expansion with regards to its availability in the
market.
 Maturity: This is the most profitable stage as the costs of producing
and marketing the product decline.
 Decline: A product takes on increased competition as other
companies try to mirror its success—sometimes with enhancements
or lower prices. The product may lose market share and begin its
decline.

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13.9 7S MODEL OF MARKETING

7s Model of Marketing
The 7S marketing model was developed by McKinsey in the 1980‘s. It is
divided into "hard elements" and "soft elements."

Structure, strategy, and skills are the hard elements.

Staff, style, system, and shared value are also called "soft elements." This
is a strategic tool that helps analyse the company‘s organizational design
by looking at these 7 elements.

The 7 elements are explained below:

1. Strategy:

Strategy means having a long-term vision in mind that helps the firm to
attain a long-term and competitive advantage. Moreover, the short-term
strategy is a less effective and poor choice, but if you implement it
properly, it will surely bring the results as per the model.

2. Structure:

The structure aspect talks about the organizational chart of any firm. It
deals with the roles and responsibilities that are split amongst the different
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158 business divisions. Moreover, the units inside the business show who is
accountable and answerable to whom in the entire hierarchy. The 7S Overview of Marketing
model helps companies expand their structure to better manage and Strategies
present it in a unique way.

3. Systems:

The system of any business lets us know how to achieve goals and how to
do business in a particular way. In management, the system is the main
focus and members of the organization make it important to utilise it
during the process of organisational change. The 7S model system helps to
disclose the performance of daily activities of the business, which
ultimately helps them make better decisions about the company.

4. Skills:

This model also focuses on skills that are essential for any organization to
have. Skills are basically helping companies to reinforce the new
strategies and structure during the process of organizational change.
Moreover, skills are the abilities of employees to perform particular work
in an efficient manner. Skills also consist of capabilities required to attain
the goals and objectives of any organization.

5. Staff:

No business can run without staff. As a company, the focus is on people

who have good skills and qualities to do work. In the 7S marketing model,
the element of staff focuses on the type of employees the company needs
to be recruited, trained, rewarded, and motivated to attain its aims and
objectives. So, as an established organization, they must also focus on
employees that can work for you.

6. Style:

The sixth element of the 7S marketing model is style. The company's style
represents the management style of the company's leaders and the way
they manage their staff. Moreover, this element also focuses on how the
organisation achieves its goals and objectives. Here, managers play a great
role as they come up with new ideas that they believe their staff will use to
get higher returns for the company.

7. Shared values:

The last and most important element of the 7S marketing model is shared
values. It suggests that the guiding concept of the organization should be
visible via external as well as internal sources. If companies neglect shared
values, their survival will be at risk and lost in the crowd of competition.
This will lead to a loss of productivity, so focusing on shared values is
important.

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13.10 A LITTLE MODEL

A Little Model
The ADL Matrix (or Strategic Condition Matrix) allows companies to
manage their business strategies by making decisions around the overall
market and industry life cycle, along with their own placement within that
market. It can be a quick tool for creating a list of their products.

The industry is classified as:

 Embryonic: Very early in the market's development, businesses see
rapid growth and there is usually not much competition.
 Growth: The market is maturing but still growing at a good rate,
Companies may find more competitors than before, but they still have
scope for substantial development.
 Mature: Everything is stable and there may be some growth, but
businesses no longer see the rapid rise of the previous stages. There
are established competitors with industry maturity now playing in the
market, and the barrier to entry is higher than it was before.
 Aging: A company‘s market and market position are in decline;
there‘s less need for the product or service; prices are being reduced.
Competitors may diversify or exit the market.

The competitive positions are classified as:

 Dominant: Companies are the market leaders and have a strong
market position. There‘s little competition that can reach up to this
point.

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 Strong: Companies have a large market share, possibly as the leader Overview of Marketing
or number two, and a number of favorable trends (e.g., customer Strategies
loyalty). Competition may be present but is not a big concern.
 Favorable: Companies enjoy some market share, but there may be
many competitors with equal or similar shares. It‘s much harder to be
unique while struggling to establish their position, but the industry
can sustain the business.
 Tenable: Businesses operate in a niche or small market, which may
be geographically defined or defined by the product and service itself.
 Weak: This is not a profitable situation; companies are losing market
share or struggling to compete.
When combined together, the above two classifications provide companies
with 20 possible positions for them to place their current or future
products and services in the market.

13.11 VALUE CHAIN MODEL

Porter’s Value Chain Model

Porter's value chain works towards generating profit for the business while
creating value by working through the primary and secondary activities.

Primary Activities:
Primary activities are those activities which are directly related to the
physical creation, sale, maintenance, and support of a product or service.
They consist of the following:
 Inbound logistics: These are all the processes related to receiving,
storing, and distributing inputs internally. Supplier relationships and
interactions are a key factor in creating value in this activity.

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Marketing Management  Operations: These are the transformation activities that change inputs
into outputs that are sold to customers. The various operational
systems create value in this activity.
 Outbound logistics: These activities deliver the company‘s product
or services to their customer. These are activities like collection,
storage, and distribution systems, and they could be internal or
external to the organization.
 Marketing and sales: These are the processes a business may use to
persuade clients to purchase from them instead of their competitors.
The benefits offered to them and how well they are communicated to
them, are sources of value in this category.
 Service: These are the activities related to maintaining the value of a
business‘s product or service to its customers once it's been purchased
by the customers.

Support Activities:
These are the activities that support the primary functions discussed
above. In the diagram, it is shown that each support, or secondary, activity
can play a role in each primary activity. For example, procurement
supports operations with certain activities, but it also supports marketing
and sales with other activities.
 Procurement (purchasing): This is what the organization does to get
the resources it needs to operate. This includes finding vendors and
negotiating best prices with them.
 Human resource management: This is how well a company recruits,
hires, trains, motivates, rewards, and retains its workers. People are a
significant source of value, so businesses can create a clear advantage
with good HR practices and welfare activities.
 Technological development: These activities relate to managing and
processing information, as well as protecting a company's knowledge
base. Minimizing information technology costs, staying updated with
current technological advances, and maintaining technical excellence
are sources of value creation.
 Infrastructure: These are a company's support systems, and the
functions that allow it to maintain daily operations. Accounting, legal,
administrative, and general management are examples of necessary
infrastructure that businesses can use to add to their advantage.
Companies use these primary and support activities as building blocks to
create a valuable product or service for their businesses.

13.12 SUMMARY
Creating and implementing a marketing strategy is important as it sets the
direction not just for the marketing-related activities but also for the entire
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business. Marketing strategy helps business to stay up to date with the Overview of Marketing
customer base, develop the right products for them and determine how the Strategies
company should communicate information about those products.
Without a defined strategy, the company would be unable to determine
who their customers are, unable to develop the right products, and waste
unnecessary money on promoting the products and services.
In short, having a defined marketing strategy creates the potential for a
company to be successful.

13.13 QUESTIONS
1. What is the Ansoff matrix with examples?
2. What are the 3 main factors for a product's life cycle?
3. What does cow symbolize in BCG matrix?
4. What is focus strategy in Porter's generic?
5. What is competitive rivalry in Porter's five forces?

13.14 REFERENCES
1. Marketing Management (A South Asian Perspective) by Philip
Kotler, Kevin Lane Keller, Abraham Koshy & Mithileshwar Jha,
Pearson Education.
2. Marketing Management by R. Varshney, S. Chand.
3. Marketing Management by Rajan Saxsena, Tata McGraw Hill.
4. Basic Marketing by Jr., William Perreault, Joseph Cannon and E.
Jerome McCarthy.
5. Marketing Management – Planning, Implementation and Control by
V.S. Ramswamy and S. Namakumari, McMillian.
6. Business Marketing Management by M. Hutt, Cengage Learning.

*****

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 14
CASE STUDY AND PRESENTATION
Unit Structure
14.0 Objectives
14.1 Introduction
14.2 A Case Analysis Framework
14.3 Guidelines for an Operational Approach to Case and Problem
Analysis
14.4 Case Study
14.5 References

14.0 OBJECTIVES
1) To understand the case study method to remove the gap between
classroom learning and the so-called real world of management.
2) To identify marketing strategic issues that need to be addressed,
evaluating strategic alternatives, and formulating working plans of
actions.
3) To acquire something close to actual business experience

14.1 INTRODUCTION
Case Study assists in bridging the gap between classroom learning and the
so-called real world of management. They provide us with an opportunity
to develop, sharpen, and test our analytical skills at:
 Assessing situations.
 Sorting out and organizing key information.
 Asking the right questions.
 Defining opportunities and problems
 Identifying and evaluating alternative courses of action.
 Interpreting data. - Evaluating the results of past strategies.
 Developing and defending new strategies.
 Interacting with other managers.
 Making decisions under conditions of uncertainty.
 Critically evaluating the work of others.
 Responding to criticism.
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Case studies have been widely accepted as one effective way of exposing Case Study and
students to the decision-making process. Presentation

Basically, cases represent detailed descriptions or reports of business

problems. They are usually written by a trained observer who had been
involved in the firm or organization or any company and had some
dealings with the problems under consideration. Cases generally entail
both qualitative and quantitative data which the student must analyse and
determine appropriate alternatives and solutions.
The primary purpose of the case method is to introduce a measure of
realism into marketing management education. Although there is no one
format that can be successfully applied to all cases, the following
framework is intended to be a logical sequence from which to develop
sound analyses. This framework is presented for analysis of
comprehensive marketing management cases; however, the process should
also be useful for shorter cases, incidents, and problems.

14.2 A CASE ANALYSIS FRAMEWORK

A case study is a scenario in a particular professional context which
students are expected to analyse and respond to, guided by specific
questions posed concerning the situation. In many cases, the scenario or
case study involves several issues or problems that must be dealt with in a
professional workplace. Case study assignments usually require students
to identify problems and issues in a scenario, to demonstrate their
developing knowledge of theories and professional policies and to make
decisions and recommendations based on these to either prevent or solve
some of the issues in that scenario. There are several steps to writing an
answer to a case study assignment:

Step 1: Read the Case Study and Questions Carefully:

 Read the case and associated questions carefully.
 Highlight the main points of the case and any issues that you can
identify.
 Read the questions closely and analyse what they are requiring you to
do.
 Read the case again, linking the information that is relevant to each
question you have been asked.

Step 2: Identify the Issues in the Case Study:

Case studies describe a situation which may arise in a particular profession
or social context. They often involve complex situation. They will often
describe a situation which is problematic, possibly in how it is dealt with,
or in its complexity. An important part of your answer is to analyse the
situation and to identify the issues/actions described in the case which may
be problematic. The following questions may help you to do this:
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Marketing Management  What actions were taken in the case?
 Were these actions the most appropriate and why?
 Were there any consequences of the actions taken?
 Was anything omitted or not considered?
 Were actions/procedures in line with existing codes of practice, policy
or theories?

Step 3: Link Theory to Practice:

Use your knowledge of existing codes of practice, theories and/or other
professional documents and behaviours to decide what was done
appropriately and what was not.
e.g. Red Bull and GoPro have a best co-branding partnership example.
Both brands not just sell products- energy drinks and portable cameras
respectively- but a lifestyle. Both have established themselves as lifestyle
brands — in particular, a lifestyle that‘s action-packed, adventurous,
fearless, and usually pretty extreme. Using the different marketing
strategies to develop a brand.

Step 4: Plan Your Answer:

It can be useful to use the questions you have been set as headings and to
answer each part in turn, reducing the chance of omitting set questions.
You can always take out the headings before you submit if you wish.

Step 5: Start Writing Your Case Study Answer:

Introduction:
Your introduction should always make clear that corelates the topic you
are going to discuss. Introductions move from general to more specific
information to introduce your topic.

Body Paragraphs:
This is where you begin to discuss the case study. Depending on how
many questions you have been set and how much discussion is involved in
answering each one, you must decide on the number of paragraphs
required for each question. You may have, for example, four paragraphs
addressing one question and only one paragraph for another, depending on
its complexity. There should be one main point for each paragraph.
Including headings can help to make your answers clearer and often helps
to avoid repetition or rambling. Keep in mind about the total word count in
your answer.

Conclusion:
Your conclusion needs to draw together all the main points you have made
in the body of your answer, without adding anything that has not been
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discussed in the body. Spend time on it as it is the last part of your answer. Case Study and
Answer should be like that, all the issues have been addressed and Presentation
answered fully.

14.3 GUIDELINES FOR AN OPERATIONAL

APPROACH TO CASE AND PROBLEM ANALYSIS
1. Read the case quickly to get an overview of the situation.
2. Read the case again thoroughly. Underline relevant information and
take notes on potential areas of concern.
3. Review outside sources of information on the environment and the
industry. Record relevant information and the source of this
information.
4. Perform comparative analysis of the firm with the industry and
industry averages.
5. Analyze the firm.
6. Analyze the management program.
7. Record the current situation in terms of relevant environmental,
industry, firm, and management program parameters.
8. Make and record necessary assumptions to complete the situational
framework.
9. Determine and record the major issues, problems, and their core
elements.
10. Record proof that these are the major topics.
11. Record potential courses of actions.
12. Evaluate each initially to determine constraints that preclude
acceptability.
13. Evaluate remaining alternatives in terms of costs and benefits.
14. Record analysis of alternatives.
15. Select an alternative.
16. Record alternative and defense of its selection.
17. Record the who, what, when, where, how, and why of the alternative
and its implementation.
Above points are considered while solving the cases, it depends on the
nature of cases. Sometime case and questions are given then it is expected
that students should answer the questions only. If there is only case is
given then it is assumed that student should treat himself/herself as a
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14.4 CASE STUDY
Case Study 1
ICPL’s Foray into The Household Market:
Indian Chemical and Pharmaceutical Ltd. (ICPL) is producing highly
ethical products sold through doctors all over the country. The ICPL is
planning to enter into the household insecticides market. They have the
technical know how to manufacture and the infrastructure to market the
insecticides. Its sales force, of 250 sales representatives supported by 20
sales offices located in all major cities, contacted all the important doctors
and chemists and made a direct distribution of company products to retail
outlets.
The marketing research department was given the job to make a quick
study and to provide suitable information so as to facilitate the company in
taking a decision regarding entering the household insecticides market.
1) Outline the information needs of the company for its new product
planning and suggest the investigation process.
2) Suggest a suitable format of the final report to be submitted to the
Managing Director
(AIMA June, 1996)

Case Study 2
Case: Yuva Fitness Band:
―Yuva‖ is a fitness band catering to Indian youth in lower price segment.
There is a vast market who are health conscious and wants the latest tech
in wearable device category. There are currently two fitness band that is
being sold by the company. The product quality is good given the price
range. It has all fitness feature supported by a colourful design. It has a
bigger display as compared to their competitors. The company has
purposely kept the display bigger for the youth audience as they want the
feel of a smart watch at the price of fitness band.
The company has a plan to sell only through online platform. The product
is available on major ecommerce platform as well as on the company‘s
own website. It has just been 15 days that the product is launched but it
doesn‘t have any demand from consumers. There is no problem with the
product but there are no promotions done by the company. You have been
hired as a Marketing head of the brand Yuva.
1) Suggest various types of segmentation for the brand Yuva.
2) How will you promote the brand Yuva online? Suggest minimum five
online platforms through which you will promote the brand and
increase the sale.

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3) a. Explain any five factors that will influence the consumer behavior Case Study and
for the purchase of Yuva Fitness Band. Presentation

b. Explain various stages that a customer will go through in

purchasing decision of Yuva fitness band.

Case Study 3
Apple IPOD’S Promotional And Positioning Strategies:
In January 2001, Apple introduced its ‗Digital Hub‘ strategy where it
decided to make its computers, a hub for commonly used digital
commodities like digital cameras; camcorders etc. iPod was a product of
this strategy. Since iPod was launched just a month after the 9/11 terrorist
attacks, the launch was kept a low key affair. However, just to launch it as
a surprise product, it was not pre-announced. This strategy was used by
Apple for launching all the generations of iPod. Extensive advertising and
marketing was undertaken for the iPod.
A series of innovative advertising campaigns via television commercials,
print ads, posters in public places, wrap advertising etc were used. The
case also describes how Apple created an iconic image for iPod that
attracted the young and the old alike. It was positioned as a ‗cool‘ product
for the present generation.
Q1. Understand how iPod was promoted by Apple using co-branding
strategies
Q2. Critically examine how iPod was positioned as a ‗cool‘ product.

14.5 REFERENCES
1) Modern Marketing Principles and Practices- R.S. N Pillai Bagavathi, S.
Chand Publication

2) Marketing, 10e Lamb, Hair, McDaniel – South-Western Cengage Learning

3) Guidelines for Business Case Analysis- Prof. Dr. Christoph Rasche, Dr.
Achim Seisreiner University of Potsdam

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