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Elements of marketing book

  2. 2. ELEMENTS OF MARKETING ELEMENTS OF MARKETING SYLLABUSModern Marketing Concept – approaches to the study of marketing Features ofIndustrial, Consumer and Services MarketingConsumer Behaviour – Meaning – Consumer Behaviour models – their relevanceto marketing – Market Segmentation Strategies – Marketing Mix.Product Planned and Development – Test Marketing – Product positioning –Product life cycle – Brand policies and practicesPricing policies and Methods – New Product Choice and managementPromotional Mix : Personal and Impersonal selling Salesmanship –Compensation plans – Evaluation of performance salesforce – Advertisementpractices – Measurement of effectiveness advertisement – publicity – Salespromotion : Methods and their uses. Contents SL. No. Lessons 1. Marketing – Meaning and Importance 2. Marketing Concept 3. Approaches to the study of marketing 4. Features of industrial, consumer and service marketing 5. Marketing Mix 6. Market Segmentation 7. Consumer Behaviour 8. Product Planning an Development and PLC BABASAB PATIL
  3. 3. ELEMENTS OF MARKETING9. Branding and Packaging10. Pricing policies and method11. Physical distribution12. Personal Selling13. Sales Management14. Advertising15. Sales Promotion ************** BABASAB PATIL
  4. 4. ELEMENTS OF MARKETING LESSON – 1 MARKETING – MEANING AND IMPORTANCE Marketing has been defined by different authors differently. A populardefinition is that “marketing is the performance of business activities that directthe flow of goods and services from producer to consumer or user”. Anothernotable definition is that “marketing is getting the right goods and services tothe right people at the right place at the right time at the right price with theright communication and promotion”. Yet another definition is that “marketingis a social process by which individuals and groups obtain what they need andwant through creating and exchanging products and values with other.” Thisdefinition of marketing rests on the following concepts. i) needs, wants and demands. ii) Products, iii) Value and satisfaction, iv) Exchange and transactions, and v) MarketsNeeds, wants and demands: A human need is a state of felt deprivation of some basic satisfaction.People require food, clothing, shelter, safety, belonging, esteem etc. Theseneeds exist in the very nature of human beings. Human wants are desires for specific satisfiers of these needs. Forexample, cloth is a need but Raymonds suiting may be want. While people’sneeds are few, their wants are many. Demands are wants for specific products that are backed up by an abilityand willingness to buy them. Wants become demands when backed up bypurchasing power. BABASAB PATIL
  5. 5. ELEMENTS OF MARKETINGProducts: Products are defined as anything that can be offered to some one tosatisfy a need or want.Value and satisfaction: Consumers choose among the products, a particular product(s) that givethem maximum value and satisfaction. Value is the consumer’s estimate of the product’s capacity to satisfy a setof his goals.Exchange and transactions: Exchange is the act of obtaining a desired product from someone byoffering something in return. A transaction involves atleast two things of value,conditions of agreement.Markets: A market consists of all the potential customers sharing a particular needor want who might be willing and able to engage in exchange to satisfy thatneed or want.Importance of Marketing 1. Marketing process brings goods and services to satisfy the needs and wants of the people. 2. It helps to bring new varieties and quality goods to consumers. 3. By making goods available at all places, it brings balanced distribution. 4. Marketing converts latent demand into effective distribution. 5. It gives wide employment opportunities. BABASAB PATIL
  6. 6. ELEMENTS OF MARKETING 6. It creates time, place and possession utilities to the products. 7. Efficient marketing results in lower cost of marketing and ultimately lower prices to consumers. 8. It is vital link between production and consumption and primarily responsible to keep the wheels of production and consumption constantly moving. 9. It creates and raises standard of living of the society.Marketing Vs Selling The marketing and selling are frequently confused. Theodore Levitt in hissensational article ‘Marketing Myopia’ draws the following contract betweenmarketing and selling. Selling focuses on the needs of the seller, marketing on the needs of thebuyer. Selling is preoccupied with the seller’s need to convert his product intocash, marketing with the idea of satisfying the needs of the customer by meansof the product and the whole cluster of things associated with creating,delivering and finally consuming it. Selling Marketing 1. It is a part of the marketing 1. It is a comprehensive term or process total system. 2. The emphasis is on product 2. The emphasis is on customer 3. It aims at seller’s needs 3. It aims at buyer’s needs 4. Its aim is sales volume 4. Its aim is buyer’s satisfactionMarketing Management: Marketing Management takes place when atleast one party to a potentialexchange gives thought to objectives and means of achieving desired respondsfrom other parties. Marketing Management is defined as “the analysis, planning,implementation and control of programmes designed to create, build and BABASAB PATIL
  7. 7. ELEMENTS OF MARKETINGmaintain beneficial exchanges and relationships with target markets for thepurpose of achieving organizational objectives.” Marketing managers have to carry marketing research, marketingplanning, marketing implementation and marketing control. Within marketingplanning, marketers must make decision on target markets, market positioning,product development, pricing, channels of distribution, physical distribution,communication and promotion. Thus, the marketing managers must acquireseveral skills to be effective in market place.REVIEW QUESTIONS: 1. Bring out the importance of marketing 2. Distinguish marketing and selling 3. What do you understand by marketing management? ************ BABASAB PATIL
  8. 8. ELEMENTS OF MARKETING LESSON – 2 MARKETING CONCEPTS There are five competing concepts under which business organisationcan conduct their marketing activity. 1. Production concept 2. Product concept 3. Selling concept 4. Marketing concept 5. Societal marketing conceptProduction concept: The production concept holds that consumers will favour those productsthat are widely available and low in cost.Product concept: The product concept holds that consumers will favour those productsthat offer the best quality, performance and features.Selling Concept: The selling concept holds that consumers will ordinarily not buy theorganization’s products on their own unless that organisation undertakes andaggressive selling and promotion effort. The selling concept is undertaken most aggressively with ‘unsoughtgoods’, those goods that buyers normally do not think of buying such asinsurance. The selling concept is also practiced in the areas like politics wherethe political parties sell their candidates to the votes. BABASAB PATIL
  9. 9. ELEMENTS OF MARKETINGMarketing Concept: In a modern industrial economics, productive capacity has been built upto a point where most markets are buyers markets (i.e. the buyers are dominant)and sellers have scramble hard for consumers and ultimately consumers beganto occupy a place of unique importance. The business firms recognize that“there is only one valid definition of business purpose to create a customer”. Inother words, the recognition of the importance of marketing leads to theacceptance of marketing concept. The marketing concept holds that the key to achieving organizationalgoals consists in determining the needs and wants of the target markets anddelivering the desired satisfactions effectively and efficiently: On other words, marketing concept is a customer’s needs and wantsorientation backed by integrated marketing effort aimed at generatingcustomer satisfaction as the key to satisfying organizational goals. The salient features of the marketing concept are: 1. Consumer orientation 2. Integrated marketing 3. Consumer satisfaction 4. Realization of organizational goals. 1. Consumer orientation: The most distinguishing feature of the marketing concept is theimportance assigned to the consumer. The determination of what is to beproduced should not be in the hands of the firms but in the hands of theconsumers. The firms should produce what consumers want. All activities of themarketer such as identifying needs and wants, developing appropriate productsand pricing, distributing and promoting them should be consumer – oriented. Ifthese things are done effectively, products will be automatically bought by theconsumers. BABASAB PATIL
  10. 10. ELEMENTS OF MARKETING 2. Integrated marketing: The second feature of the marketing concept is integrated marketing i.e.integrated management action. Marketing can never be an isolatedmanagement action. Marketing can never be in isolated management function.Every activity on the marketing side will have some bearing on the otherfunctional areas of management such as production, personnel or finance.Similarly any action in a particular area of operation in production or financewill certainly have an impact on marketing and ultimately on consumer. In abusiness firm that accepts the marketing concept as the corner stone of itsbusiness philosophy, no management area can work in isolation. Therefore inan integrated marketing setup, the various functional areas of management getintegrated with the marketing function. Integrated marketing presupposes aproper communication among the different management areas with marketinginfluencing the corporate decision making process. Thus, when the firmsobjective is to make profit – by providing consumer satisfaction, naturally itfollows that the different departments of the company are fairly integrated witheach other and their efforts are channelized through the principal marketingdepartment towards the objective of consumer satisfaction. 3. Consumer satisfaction: The third feature of the marketing concept is consumer satisfaction. Theobjective of the company adopting marketing concept is to satisfy thecustomers’ needs so perfectly that they will become regular or permanentsatisfied customer. For example, when a consumer buys a tin of coffee, heexpects a purpose to be served, a need to be satisfied. If the coffee does notprovide him the expected flavour, the taste and the refreshments his purchasehas not served the purpose. Or more precisely, the marketer who sold thecoffee has failed to satisfy his consumer. Thus, ‘satisfaction’ is the properfoundation on which alone any business can build its future. BABASAB PATIL
  11. 11. ELEMENTS OF MARKETING 4. Realization of organizational goals including profits: Though the organizational goals may differ from firm to firm, though keyareas such as innovation, market standings, profits and social responsibility arecommon to all firms. According to the marketing concept, the right way toachieve these organizational goals is through ensuring consumer satisfaction. A distinguishing feature of the marketing concept is that it considers thecreation of profits as an essential requirement for any business concern. Themarketing concept is against profiteering but not against profits. Reasonablereturns or surplus are essential for the survival and growth of an business. Benefits of Marketing Concept : i) Benefits to firms: A firm that believes in the marketing concept always feels the pulse ofthe market through continuous marketing audit and marketing research. It isfast in responding to the changes in buyer behaviour. It rectifies any drawbackin its product and this proves beneficial to the firm. The firm gives moreimportance to planning, research and innovation and its decisions are no longerbased on hunches but on reliable scientific data and the proper interpretationof such data. The profits for the firm become more certain. ii) Benefits to consumers: The concept on the part of various competing firms to satisfy theconsumer puts the later in an enviable position. Reasonable prices, betterquality and easy availability at convenient places are some of the benefits thataccrue to the consumer as a direct result of marketing concept. iii) Benefits to society: BABASAB PATIL
  12. 12. ELEMENTS OF MARKETING The practice of marketing concept contributes to better life style, betterstandard of living and also results in the development of entrepreneurial talents.All these sets the pace for social and economic development. Thus the marketing concept benefits the organisation, the consumer andsociety at large. A proper understanding of this concept is fundamental to thestudy of modern marketing.Societal Marketing Concept: Now the question is whether the marketing concept is an appropriateoranisational goal in an age of environmental deterioration, resource shortages,explosive population growth etc., whether the firm is necessarily acting in thebest long run interests of consumers and society. For example, many moderndisposable packing materials create problem of environmental degradation.Situations like this, call for a new concept, which is called ‘Societal MarketingConcept’. The societal marketing concept holds that the organization’s task is todetermine the needs, wants and interests of target markets and to deliver thedesired satisfaction more effectively and efficiently than competitors in a waythat preserves or enhances the consumer’s and the society’s well being. The societal marketing concept calls upon marketers to balance threconsideration in setting their marketing policies namely firm’s profits,consumer wants satisfaction and society interests.REVIEW QUESTIONS: 1. Briefly discuss the various concepts of marketing. 2. Discuss in detail the modern marketing concept. 3. Write a note on societal marketing concept. ****************** BABASAB PATIL
  13. 13. ELEMENTS OF MARKETING LESSON – 3 APPROACHES TO THE STUDY OF MARKETINGMarketing may be studied by different approaches. To facilitate the study theseapproaches may be broadly classified as follows: i) Commodity approach, ii) Functional approach, iii) Institutional approach, and iv) Management approach. v) System approach i) Commodity approach: The first approach is the commodity approach under which a specificcommodity is selected and then its marketing methods and environments arestudied in the course of its movement from producer to consumer. In thisapproach, the subject matter of discussion centres around the specificcommodity selected for the study and includes the sources and conditions ofsupply, nature and extent of demand, the distribution channels used,promotional methods adopted etc. ii) Functional approach The second approach is the functional approach under which the studyconcentrates on the specialized functions or services performed by themarketers and the problems faced by them in performing those functions. Suchmarketing functions include buying, selling, storage, standardizing, transport,finance, risk-bearing, market information etc. This approach certainly enablesone to gain detailed knowledge on various functions of marketing. BABASAB PATIL
  14. 14. ELEMENTS OF MARKETING iii) Institutional approach: The third approach is the institutional approach under which the maininterest centres around the institutions or agencies that perform marketingfunctions. Such agencies include wholesalers, retailers, merchantile agents andfacilitating institutions like transport undertakings, banks, insurance companiesetc. This approach helps one to find out the operating methods adopted bythese institutions and the various problems faced because institutions and toknow how whey work together in fulfilling their objectives. iv) Management approach: In the management approach, the focus of marketing study is on thedecision-making process involved in the performance of marketing function atthe level of a firm. The study encompasses discussion of the differentunderlying concepts, decision influencing factors, alternative strategies – theirrelative importance, strengths and weaknesses and techniques and methods ofproblem-solving. This approach entails the study of marketing at themicro-level of a business firm – of the managerial functions of analysis,planning, implementation, co-ordination and control in relation to themarketing functions of creating, stimulating, facilitating and valuingtransactions. v) System approach: Modern marketing is complex, vast and sophisticated and it influencesthe entire economy and standard of living of people. Hence marketing expertshave developed one more approach namely ‘System approach’. Under thisapproach, marketing itself is considered as a sub-system of economic, legaland competitive marketing system. The marketing system operates in anenvironment of both controllable and uncontrollable forces of the organisation.The controllable forces include all aspects of products, price, physicaldistribution and promotion. The uncontrollable forces include economic, BABASAB PATIL
  15. 15. ELEMENTS OF MARKETINGsocio-logical, psychological and political forces. The organisation has todevelop a suitable marketing programme by taking into consideration boththese controllable and uncontrollable forces to meet the changing demands ofthe society. The system approach, in fact, examines this aspect and alsointegrates commodity, functional, institutional and managerial approaches.Further, this approach emphasizes the importance of the use of ‘marketinformation’ is marketing programmes. Thus from the foregoing discussion, one could easily understand that themarketing could be studied in any of the above approaches and the systemsapproach is considered to be the best approach as it provides a strong base forlogical and orderly analysis and planning of marketing activities.REVIEW QUESTIONS: 1. Discuss the various approaches to the study of marketing. 2. Explain ‘Systems Approach’ to the study of marketing. **************** BABASAB PATIL
  16. 16. ELEMENTS OF MARKETING LESSON – 4 FEATURES OF INDUSTRIAL, CONSUMER AND SERVICES MARKETINGProduct may be classified broadly into two major categories namely consumergoods and industrial goods.Consumer goodsConsumer goods are those goods meant for use by the ultimate householdconsumer and in such form that they can be used by him without furthercommercial processing.Consumer goods are generally divided into three sub-categories according tothe method in which they are purchased namely convenience goods, shoppinggoods are specialty goods. i) Convenience goods: There are goods which the consumer usually purchases frequently and with the minimum efforts. Usually they have easy substitutes and the unit value will be low. The consumer may not have much of a preference for a particular brand. E.g. Match Box. ii) Shopping goods: These are goods which the consumer purchase less frequently and the unit value will be higher. The consumer will look for their suitability, quality, price and style. Consumer will exercise considerable effort in choosing the product. Many consumer durables come under this category. Example: Textiles, foot wear. iii) Specialty goods: These are consumer goods which the consumer buys rarely and the unit value will be very high. Hence buyers expect certain special characteristics and for which they make a special purchasing effort. E.g. car, jewellaries.Industrial goods: BABASAB PATIL
  17. 17. ELEMENTS OF MARKETING Industrial goods are those goods which a reused in producing othergoods or rendering services. They cannot be used without further processing.Industrial goods fall into three main categories. 1. Raw materials: These are industrial goods which in part or in whole become a part of the physical product and which have undergone only a minor change before becoming ready for a final consumption. Stainless steel which are used for making steel utensils is an example. 2. Equipments: These goods are exhausted only after repeated use such as installation, equipment, accessories etc. 3. Fabricated materials: These are industrial goods which have undergone processing Metals, plastics, cement come under this category.the marketing practices for industrials and consumer goods differ due to theircharacteristics.Features of Industrials The marketing of industrial goods generally possesses the followingfeatures. 1. Industrial goods are those which are produced by and sold to industries. They are mostly meant for producing consumer gods. 2. The demand for industrial goods is a derived demand. For example, the demand for paper manufacturing machinery will increase when the demand for paper increases. 3. Industrial marketing is normally backed by technical details and usually done by people with technical knowledge. In many cases, there may not be substitutes. 4. Industrials buying is comparatively a rational process. Precise specifications and quality of products are the main criteria. 5. Number of buyers are limited. 6. Advertising are made in technical and trade journals backed by direct mailing and personal selling. BABASAB PATIL
  18. 18. ELEMENTS OF MARKETING 7. In many cases, it is short channel, involving either direct selling or with a limited number of middlemen. 8. Each sale would generally be high value. 9. Supplier’s reliability and reputation is important criterion in the industrial market. 10. The demand is normally inelastic.Features of manufactured consumer goods: 1. The consumer goods are those goods which are bought by ultimate consumer for their consumption. 2. The consumer goods are manufactured on mass scale. 3. The number of buyers are also large and widespread. 4. Majority of consumer goods are non-durable. 5. Demand is primary in nature. 6. Other than essential products, most of the durable consumer goods have elasticity in demand. 7. The unit cost of consumer goods is normally not very high. 8. The unit of purchase is normally low. But the frequency of purchase is greater. 9. The consumer goods are very often bought by emotional impulse. 10. The goods are subject to serve competition. They may be price competition, quality competition and competition from substitute products. 11. Branding and packaging also add some strength to the products. 12. The goods are under constant threat from fashion/design changes. 13. The channel of distribution is normally long as the buyers are widespread. 14. Mass advertisement is a must. The marketer has to give equal importance to personal as well as impersonal methods of sales promotion. 15. The products are not usually technical complex. BABASAB PATIL
  19. 19. ELEMENTS OF MARKETINGServices marketing: A service may be defined as an activity which has some element ofintangibility associated with it, which involves some interaction with customersor with property in their possession and does not result in a transfer ofownership. The American Marketing Association defines services as “activities,benefits or satisfactions which are offered for sale or are provided in connectionwith the sale of goods.”Scope of services marketing:Services marketing extend to the activities listed below: - Insurance, banking, financial services, investment counselling, credit and loan services. - Business and professional services such as legal, accounting, consultancy and computer services. - Transportation and communication. - Housing and accommodation and hotels, apartments, holiday resorts, motels etc. - Recreation and entertainment. - Medial and health care. - Personal care services, E.g., beauty parlours, barber shop etc.Features of services marketing: 1. Services are to a large extent abstract and intangible. 2. Services are non-standard and highly variable in dispensation. 3. Services are produced and consumer simultaneously and hence cannot be separated from the person who sells them. 4. Services are perishable and cannot be stored. 5. The demands for services are not stable. BABASAB PATIL
  20. 20. ELEMENTS OF MARKETINGThe analysis of the target market, planning and developing the services, pricingthe channels of distribution and promotion of the services should be covered ina programme for marketing of services.Review Questions: 1. Explain different kinds of consumer and industrial goods. 2. What are the characteristics of manufactured industrial goods? 3. What are the features of services marketing? ********************** LESSON – 5 MARKETING MIXMarketing mix is one of the major concepts in modern marketing. It is thecombination of various elements which constitutes the company’s marketingsystem. It is the set of controllable marketing variables that the firm blends toproduce the response it wants in the target market. Though there are manybasic marketing variables, it is Mc Carthy, who popularized a four-factorclassification called the four Ps: Product, Price, Place and Promotion. Each Pconsists of a list of particular marketing variables.The first P – Product consists of i) Product Planning and development; ii) Product mix policies and strategies; and iii) Branding and packaging strategies.The second P – Price consists of i) Pricing policies and objectives, and ii) Methods of setting prices.The third P – Place consists of BABASAB PATIL
  21. 21. ELEMENTS OF MARKETING i) Different types of marketing channel, ii) Retailing the wholesaling institutions, and iii) Management of physical distribution system.The fourth P – Promotion consists of i) Advertising; ii) Sales promotion; and iii) Personal selling.A detailed discussion on each of the above four P’s follows now:PRODUCT:Product stands for various activities of the company such as planning anddeveloping the right product and/or services, changing the existing products,adding new ones and taking other actions that affect the assortment ofproducts. Decisions are also required in the areas such as quality, features,styles, brand name and packaging.A product is something that must be capable of satisfying a need or want, itincludes physical objects, personalities, places, organizations and ideas. Thus,a transport serviced, as it satisfies, human need in a product. Similarly, placeslike Kashmir and Kodaikanal, as they satisfy need to enjoy cool climate are alsoproducts.The second aspect of product is product planning and development. Productplanning embraces all activities that determine a company’s line of products. Itincludes: i) Planning and developing a new product, ii) Modification of existing product lines, and iii) Elimination of unprofitable items. BABASAB PATIL
  22. 22. ELEMENTS OF MARKETINGProduct development encompasses the technical activities of product research,engineering and decision.The third aspect of product is, product mix policies and strategies.Product mix refers to the composite of products offered for sale by a company.For example Godrej company offers cosmetics, steel furnitures, officeequipments, locks etc. with many items in each category.The product mix is four dimensional. It has breadth, length, depth andconsistency.The breadth of the product mix refers to how many different product lines aremanufactured by a company. The product line is the group of products that areclosely related either because they satisfy a class of need, are used together,are sold to the same customer groups, are marketed through same types ofoutlets, or fall within given price ranges. Thus, the Godrej companymanufactures several product lines such as – Cosmetics, steel furnitures, officeequipments and locks.The depth of the product mix refers to how many items are found in eachproduct line. Thus, the Godrej produces, for example. - Five product items is steel furniture such as almirah and table. - Three product items in office equipments such as typewriters, filing cabinets and racks. - Four product items in locks, such as five levers, six levers, seven levers etc.The consistency of the product mix refers to how closely related the variousproduct line are in end use, production requirements, distribution channels orin some other way. BABASAB PATIL
  23. 23. ELEMENTS OF MARKETINGMajor product mix strategies are expansion of product mix, contraction ofproduct mix and modification of existing product. a) Expansion of product mix means increasing the number of lines and/or the items.Contraction of product mix – means either eliminating an entire line or a fewitems within a line. Alteration of product-means modifying the existing productto suit the changing consumer requirements.All products, like human beings, have certain length of life cycles during whichthey pass through different identification stages. Broadly, the stages areintroduction, growth, maturity and decline. It is the responsibility of thecompany to identify the stage through which its product passes, so that it couldevolve an appropriate marketing strategy to capitalize the opportunities and toovercome the problems.The second major component of product is branding. A brand, brand name andbrand mark are used synonymously. A brand is a name, term, sign symbol ordesign or a combination of them which is intended to identify the products orservices. Thus ‘Liril’ ‘Colgate’ are examples for brand name and ‘Maharaja’ orAir India and ‘Butterfly’ of Co-optex are examples for brand mark.When a brand is registered with the Registrar of Brand Names, it becomes atrade mark. The significance of registration is that no other producer could usethe same name or mark for his products.Brands help identify the product and differentiate the product from those ofcompetitors. It is an indicator of product quality. For example, any product ofTVS – either Sri Chakra Tyres or TVS Washing Machine creates a feeling that itmust be a good quality product. Further, brands increase the success thesuccess of advertising and personal selling. Once the manufactures succeeds increating brand loyalty for his products, then it would be easier for him tointroduce new product it the market. BABASAB PATIL
  24. 24. ELEMENTS OF MARKETINGYet another integral part of product is packaging. Packaging not only protectsthe contents, but also helps to identify the product, offers convenience inhandling and promoters sales by inducing the customers to buy the product. Itis common experience that consumers, sometimes, buy the product attractedmerely by the containers.PRICEThe second element of the marketing mix is Price. Price stands for themonetary value that customers pay to obtain the product. In pricing, thecompany must determine the right price for its products and then decide onstrategies concerning retail and wholesale prices, discounts, allowances andcredit terms.Before fixing prices for the product, the company should be clear about itspricing objectives and strategies. The objectives may be to set low initial priceand raising it gradually or to set high initial price and reducing it gradually orfixing a target rate of return or setting prices to meet the competition etc. Butthe actual price setting is based on three factors namely cost of production,level of demand and competition.Regarding retail pricing, the company may adopt two policies. One policy is thathe may allow the retailers to fix any price without interfering in his right.Another policy is that he may want to exercise control over the products.Discounts and allowance result in a deduction from the base price.PRICEThe third element of marketing mix is place or physical distribution. Placestands for the various activities undertaken by the company to make theproduct accessible and available to target consumers. There are four differentlevel channels of distribution. The first is-zero-level channel which meansmanufacturer directly selling the goods to the consumers. BABASAB PATIL
  25. 25. ELEMENTS OF MARKETINGThe second is-one-level channel which means supplying the goods to theconsumer through the retailer. The third is-two-level channel which meanssupplying the goods to the consumer through wholesaler and retailer. Thefourth is-three-level channel which means supplying goods to the consumerthrough wholesaler-jobber-retailer and consumer.It is the responsibility of the company to select the right channel through whichthe products will reach the right market at right time. The factors affecting thechoice of channel are the nature of the product, supply, middlemen, customer,environment, the distribution policy of the company and the cost of the channel.There are large-scale retail institutions such as departmental stores, chainstores, mail order business, super-market etc. and small-scale retailinstitutions such as small retail shop, automatic vending, franchising etc. Thecompany must choose to distribute their products through any of the aboveretailing institutions depending upon the nature of the product, area of themarket, volume of scale and cost involved.The actual operation of physical distribution system requires company’sattention and decision-making in the areas of inventory, location ofwarehousing, materials handling, order processing and transportation.PROMOTION:The fourth element of the marketing mix is promotion. Promotion stands forthe various activities undertaken by the company to communicate the merits ofits products and to persuade target customers to buy them. Advertising, salespromotion and personal selling are the major promotional activities. A perfectco-ordination among these three activities can secure maximum effectivenessof promotional strategy.Advertising to marketing is that steam to machinery. It is impersonalpresentation and promotion of ideas, goods or services. It has a strongpersuasion power. It is a common technique for mass selling. BABASAB PATIL
  26. 26. ELEMENTS OF MARKETINGThe advertisement copy must be able to attract the attention of the audience,arouse interest, create desire and stimulate action. The advertisement mediachosen should be able to reach maximum number of people at minimum cost.The second element of promotional mix is the sales promotion. It includes allthose marketing activities that stimulate consumer purchasing and dealerstocking the goods. Such activities include issue of free samples, coupons,gift-offer, conducting contest, demonstrations in exhibition etc. The distinctfeature of sales promotional activities is that they are purely temporary innature and are meant for short duration only.The third element of promotional mix is personal selling. Personal sellinginvolves oral presentation in a conversation with prospective purchases for thepurpose or making sales. The purpose is to bring the right products intocontract with the right customers and to make certain that sales takes place.The salesman should have right aptitude and qualities to be successful. Hencegreat care has to be taken in selection, training and compensating the salespeople.For successful marketing, the marketing manager has to develop a bestmarketing mix for his product.REVIEW QUESTION:1.Define Marketing Mix. Briefly explain elements of marketing mix. ******************** BABASAB PATIL
  27. 27. ELEMENTS OF MARKETING LESSON – 6 MARKET SEGMENTATIONMarket in heterogeneous both in the supply side and in the demand side. Onsupply side, many factors like differences in production equipments, processingtechniques, nature of resources or inputs available to different manufacturers,unequal capacity among the competitors in terms of design and improvementand deliberate efforts to remain different from others account for theheterogeneity. Similarly, the demand side, which constitute consumers- is alsodifferent due to differences in physical and psychological traits. As a result,imperfect markets are common. This problem is to be solved by the strategy ofproduct differentiation and market segmentation.According to William Stanton, “Market segmentation is the process of dividingthe total heterogeneous market for a product into several sub-markets orsegments each of which tend to be homogeneous in all significant aspects.Market segmentation is a strategy of ‘divide and rule’. The strategy involves thedevelopment of two or more different marketing programmes for a givenproduct or service, with each marketing programmes aimed at a different groupof individuals whose expected reactions to the seller’s marketing efforts will besimilar during a specified time period. A strategy of market segmentationrequired that the marketer first clearly define the number and nature of thecustomer groupings to which he intends to offer his product or service. This isa necessary condition for optimizing efficiency of marketing effort.Bases for market segmentation:There are a number of bases on which a firm may segment its market. 1. Geographic basis a. Nations b. States BABASAB PATIL
  28. 28. ELEMENTS OF MARKETING c. Regions d. Cities 2. Demographic basis a. Age b. Sex c. Material status d. Family size e. Education f. Occupation 3. Socio-economic a. Income b. Nationality c. Religion d. Culture 4. Psychographic a. Social class b. Life style c. Personalities d. Loyalty status e. Benefits sought – price or quality or durability f. Usage rate (volume segmentation) g. Buyer readiness stage (unaware, aware, informed, interested, desired, intend to buy) h. Attitude stage (Enthusiastic, positive, indifferent, negative, hostile)Bases for segmenting industrial markets: 1. Geographical 2. Behaviouristic BABASAB PATIL
  29. 29. ELEMENTS OF MARKETING a. Benefits sought b. User status c. Loyalty status d. Readiness stageRequirements for Effective Segmentation: 1. Measurability – the degree to which the size and purchasing power of the segments can be measured. 2. Accessibility – the degree to which the segments can be effectively reached and served. 3. Substantiality – the degree to which the segments are large and /or profitable enough 4. Actionability – the degree to which effective programmes can be formulated for attracting and serving the segments.Possible market coverage strategies:The firm can adopt one of three market coverage strategies known asundifferentiated marketing, differentiated marketing and concentratedmarketing.Undifferentiated marketing: The firm might decide to ignore market segmentdifferences and go after the whole market with one market offer.Differentiated marketing: Here the firm decide to operate in several segmentsof the market and designs separate marketing programmes to each. Thus,“Maruti Udyog” produces cars for every ‘purse, purpose and personality’.Similarly Bajaj two-wheelers.Concentrated marketing: Under this strategy, the firm goes after a large sharein one or a few sub-markets. BABASAB PATIL
  30. 30. ELEMENTS OF MARKETINGBenefits of market segmentation:Market segmentation gives a better understanding of consumer needs,behaviour and expectations to the marketers. The information gathered will beprecise and definite. It helps for formulating effective marketing mix capable ofattaining objectives. The marketer need not waste his marketing effort over theentire area. The product development is compatible with consumer needs,pricing matches consumer expectations and promotional programmes are intune consumer willingness to receive, assimilate and possibility react tocommunications.In short, the strength of market segmentation lies in matching products toconsumer needs that augment consumer satisfaction and firm’s profit position.However, the major limitation of market segmentation is the inability of a firmto take care of all the segmentation bases and their numerous variables. still,the strengths of market segmentation outweigh its limits and offersconsiderable opportunities for market exploitation.REVIEW QUESTIONS 1. What is market segmentation? What are its bases? 2. What are the benefits of market segmentation? BABASAB PATIL
  31. 31. ELEMENTS OF MARKETING LESSON – 7 CONSUMER BEHAVIOURUnder the modern marketing ‘Consumer’ is the fulcrum, he is lifeblood, he isvery purpose of the business and hence the business firms have to listenconsumer voices.... understand his concerns. His needs have to be focused andhis respect has to be earned. He has to be closely followed – what he wants .......when, where and hos. The new business philosophy is that the economic andsocial justification of a firm’s existence lies in satisfaction of consumer wants.Charles G. Mortimer has rightly pointed out that, ‘instead of trying what iseasiest for us to make, we must find out much more about what the consumeris willing to buy..... we must apply our creativeness more intelligently to peopleand their wants and needs rather than to products.’ To achieve consumersatisfaction, the marketer should know, understand consumer behaviour – theircharacteristics, needs attitudes and so on But, the study of consumer behaviouris not an easy task as it involves complex system of interaction of variousfactors namely sociological, cultural, economical and psychological.BUYER BEHAVIOUR MODELSThe influence of these social on buyer behaviour has promoted marketingexperts to propound certain models for explaining buyer behaviour. Broadly,they include the economic model, the learning model, the psychoanalyticalmodel and the sociological model.The Economic ModelAccording to the economic model of buyer behaviour, the buyer is a rationalman an his buying decisions are totally governed by the concept of utility. If hehas a certain amount of purchasing power, a set of need to be met and a set ofproducts to choose from, he will allocate amount over the set of products in avery rational manner with the intention of maximizing the utility or benefits.The Learning Model BABASAB PATIL
  32. 32. ELEMENTS OF MARKETINGAccording to the learning model which takes its cue from the Pavlovian stimulusresponse theory, buyer behaviour can be influenced by manipulating the drives,stimuli and response of the buyer. The model rests on man’s ability at learning,forgetting and discriminating.The Psychoanalytical ModelThe psychoanalytical model draws from Freudian psychology. According to thismodel, the individual consumer has a complex set of deep-seated motiveswhich drive him towards certain buying decisions. The buyer has a private worldwith all his hidden fears, suppressed desires and totally subjective longings. Hisbuying action can be influenced by appealing to these desire and longings.The Sociological ModelAccording to the sociological model, the individual buyer is influenced bysociety – by intimate groups as well as social classes. His buying decisions arenot totally governed by utility, he has a desire to emulate, follow and fit in withhis immediate environment. And several of his buying decisions may begoverned by societal compulsions.The Nicosia ModelIn recent years, some efforts have been made by marking scholars to buildbuyer behaviour models totally form the marketing man’s standpoint. TheNicosia model and the Howard and Sheth model are two important models inthis category. Both of them belong to the category called the systems model,where the human being is analyzed as a system with stimuli as the input to thesystem and behaviour as the output of the system.Francesco Nicosia, an expert in consumer motivation and behaviour put forwardhis model of buyer behaviour in 1966. The model tries to establish the linkagesbetween a firm and its consumer towards the product. Depending on thesituation, be develops a certain attitude towards the product. If these steps BABASAB PATIL
  33. 33. ELEMENTS OF MARKETINGhave a positive impact on him, it may result in a decision to buy. this is the sumand substance of the ‘activity explanations’ in the Nicosia model. The Nicosiamodel groups these activities into four basic fields.Field One has two sub-fields- the firm’s attributes and the consumer’sattributes. An advertising message from the firm reaches the consumer’sattributes. Depending on the way the message is received by the consumer, acertain attribute may develop, and this becomes the input for Field Two. FieldTwo is the area of search and evaluation of the advertised product and otheralternatives. If this process results in a motivation to buy, it becomes the inputfor Field Three. Field Three consists of the act of purchase. And Field Fourconsists and the use of the purchased item. There is an output from Field Four– feedback of sales results to the firm.The Howard – Sheth ModelJohn Howard and Jagadish Sheth put forward the Howard and Sheth model in1969, in their publication entitled. ‘The Theory of buyer Behaviour’. The logic ofthe model runs like this. there are inputs in the form of Stimuli. There areoutputs beginning with attention to a given stimulus and ending with purchase.In between the inputs and the outputs there are variables affecting perceptionand learning. These variables are termed ‘hypothetical’ since they cannot bedirectly measured at the time of occurrence.Over the years, several other models have also been put forward, with theintention of explaining buyer behaviour. All these models have certain merits aswell as limitations. They do not fully explain the complex subject of buyerbehaviour. Nor do they establish a straight input-output equation on buyerbehavior.And, none of them provides a precise answer to the why’s or how’s of buyerbehaviour. They merely explain the undercurrents of human behaviour fromdifferent angles and premises. But these models will certainly be helpful ingaining at least a partial insight into buyer behaviour. BABASAB PATIL
  34. 34. ELEMENTS OF MARKETINGFactors influences consumer behaviour:Consumer are stimulated by two types of stimuli - internal and environmental.The internal influence comprise of motivation, perception, learning andattitudes – all concepts drawn from the field of psychology. The environmentalinfluences include cultural, social and economical. Experts in these areasattempt to explain why people behave as they do as buyers. All these influencesinteract in a highly complex ways, affecting the individual’s total pattern ofbehaviour as well as his buying behavour.Cultural Factors:Culture is the most fundamental determinant of a person’s wants andbehaviour. It encompass customs, traditions and any other capabilities andhabits required by an individual as a member of a society. Each culture containssmaller groups of sub-cultures such as national culture, religious culture andcaste culture that provides more specific identification and socialization for itsmembers. Thus, the Japanese culture provides for certain manners of dressingwhile the Indian culture provides for different patterns. Similarly, religiousgroups such as Hindus, Christians and Muslims possess distinct culturalpreferences and taboos. Each culture evolves unique pattern of social conduct.The prudent marketer has to analyze these pattern to understand theirbehaviour to evolve a suitable marketing programme.Sociological Factors:The sociological factors are another group of factors that affect the behaviourof the buyers. These include reference groups, family and the role and status ofthe buyers. The reference groups are those groups that have a direct or indirectinfluence on the person’s attitudes, options and values. These groups includepeer group, friends, and opinion leaders. The marketers, therefore, aim theirmarketing efforts to reach reference groups and through them reach thepotential buyers. A more direct influence on buying behaviour is one’s familymembers namely, spouse and children. The person will have certain position inhis family, that is called a status and has a duty assigned - that is role and thisstatus and role also determine buying behaviour. The marketer needs to BABASAB PATIL
  35. 35. ELEMENTS OF MARKETINGdetermine which member normally has the greater influence on the purchase ofa particular product and should try to reach him to market his product.Personal Characteristics:An individual’s buying behaviour is also influenced by his personalcharacteristics such as his age and life cycle stage, occupation, income, andpersonality.For example, if the target market is kids, their food and other reqirements willcertainly be different from aged people. Similarly, behavour and need differsdepending on the nature of occupation, of the buyers. For example, factoryworkers and other defence people require footwear of mainly durable type thatcould withstand severe strain whereas people with white collar jobs requirefootwear of light and fashionable type. Hence, marketers should try to identifythe occupational groups that have interest in their products and services. Anorganisation can even specialize in manufacturing products needed by aparticular occupational group.Basically it is the level of income, its distribution and the consequentpurchasing power that determine one’s buying behaviour. Out of the one’s totalincome, a part may be saved and the remaining part is available for spending.Again out of this, a sizable part has to be reserved for meeting essentialexpenses and it is only the balance – the individual has the discretion to spend.An intelligent marketer has to watch the income – serving trend of hisconsumer and basing on that evolve a marketing programme.Each person has a distinct personality that will influence his buying behaviour.A person’s personality is usually described in terms of such traits asself-confidence, dominance, autonomy, and adaptability. Personality can be auseful variable in analyzing consumer behaviour.Psychological Factors: BABASAB PATIL
  36. 36. ELEMENTS OF MARKETINGPsychological characteristics play the largest and most enduring role ininfluencing the buyers behaviour. A person’s buying choices are influenced byfour major psychological processes – motivation, perception, learning andattitudes.Motivation is one which leads the individual to behave in a particular way. Itmay be conscious or subconscious – a force that underlies a behaviour. It is thecomplex network of psychological and physiological mechanism. Motives canbe instinctive or learned, conscious or unconscious, rational or irrational. Themost popular human motivation theories are profounded by Maslow’s, Freud’sand Herzberg. For example, Maslow has classified human needs into five typesin the order of importance – basic, safety, social, esteem and self actualizationneeds. The most urgent motive is acted upon first. If this is fulfilled, theindividual proceeds to fulfill them next higher need. It is important for themarketer to understand the motives that lead consumers to make purchasesand he must be able to explain the prospective buyers how best his product cansatisfy a particular need. But he must be sure that the target consumers havealready fulfilled the previous need.Freud’s Theory deals with sub-conscious factors. He asserts that people are notlikely to be conscious of the real motives guiding their behaviour because thesemotives are often repressed from their own consciousness. Only throughspecial methods of probing such as in depth interviews, projective techniquestheir motives can really be discovered and understood. The marketer should beaware of the role of visual and tactile elements in triggering deeper emotionsthat can stimulate or inhibit purchase.Frederick Herzberg develop a two factor theory of motivation whichdistinguishes between dissatisfiers and satisfiers. The implication of this theoryis that the marketers should do their best to prevent dissatisfiers from affectingthe buyers and then he should carefully identify the major satisfiers ormotivators of purchase.Perception means how one views or thinks about a particular situation. Themarketer while issuing advertisement message should be sure that a givenmessage is properly perceived by the consumers. If the message is susceptibleto different types of perceptions, it would defeat the purpose. BABASAB PATIL
  37. 37. ELEMENTS OF MARKETINGLearning is the changes that occur in an individual’s behaviours arising fromexperience. Learning is produced through the interplay of drives, stimuli, cues,responses and reinforcement. A drive is a strong internal stimulus impellingaction and it becomes a motive when it is directed toward a particulardrive-reducing stimulus object. Cues are minor stimuli that determine when,where and how the person responds. These cues can influence response to buya product and if its experience is rewarding, he will continue to buy the sameproduct which means his response is reinforced. The principal importance oflearning theory for marketing is that they can build up demand for a product byassociating it with strong drives, using motivating cues and providing positivereinforcement.A belief is a descriptive thought that a person holds about something. Thesebeliefs may be based on knowledge, opinion or faith. Marketers are very muchinterested in the beliefs of people about their products and service becausethey influence their buying behaviour. If some of the beliefs are wrong andinhibit purchase, the marketer should launch a campaign to correct thesebeliefs.An attitude describes a person’s enduring favourable or unfavourable cognitiveevaluations, emotional feelings and action tendencies toward some object oridea. Attitudes put them into a frame of mind of liking and disliking an object,moving toward or away from it. This leads people to behave in a fairlyconsistent way towards similar objects. Hence, the marketer should try to fit hisproduct into existing attitudes rather than to try to change people’s attitudes.From the above discussions, it becomes obvious that consumer behaviour isinfluenced by economic, sociological and psychological factors. But it is wrongto assume that consumer behaviour is influenced by any ‘one’ of these factors.The fact is that at a point of time and in a giver set of situation, it is influencedby a sum total of these diverse yet interrelated factors. When a consumer is inthe process of taking a purchase decision, all these factors are prove to worksimultaneously and influence his choice. But it is possible that the relativeimportance of these factors vary in a given situation. It is the intelligence of themarketer to find out the nature and intensity of the influence exerted by thesefactors and to formulate appropriate marketing programme. BABASAB PATIL
  38. 38. ELEMENTS OF MARKETINGREVIEW QUESTIONS: 1. Bring out the importance of studying consumer behaviour. 2. Discuss the influence of socio-cultural factors in determining consumer behaviour. 3. Explain how the psychological determine buyer behaviour. ***************** BABASAB PATIL
  39. 39. ELEMENTS OF MARKETING LESSON – 8 PRODUCT : PLANNING AND DEVELOPMENTIn common parlance, any tangible items such as textiles, books, tooth pasteand many other items are called as ‘products’. But an individual’s decision tobuy an item is based not only on its tangible attributes but also on a variety ofassociated non-tangible and psychological attributes such as services, brand,package, warranty, image etc. Hence, it is essential to understand the term‘product’.According to Alderson, “Product is a bundle of utilities consisting of variousproduct features and accompanying services”. The bundle of utilite is composedof those physical and psychological attributes that the buyer receives when hebuys the products.A product is anything that can be offered to a market for attention, acquisition,use or consumption might satisfy a want or need. It includes physical objectsservices, persons, places, organisation and ideas.In order to further facilitate understanding it would be appropriate to know themeaning of some other also which often recur in any discussion on product.Some of these terms are discussed below.Product item: A distinct unit that is distinguishable by size, appearance orsome other attribute.Product line: A product line is a group of products that are closely related, areable to satisfy a class of need are used together, are sold to the same customergroups, are marketed through the same type of outlets or fall within given priceranges. Example: cosmetics, office furniture. BABASAB PATIL
  40. 40. ELEMENTS OF MARKETINGProduct mix: A product mix is the set of all product lines and items that aparticular seller offers for sale to buyers. It is also called Product assortment.A product mix can have certain width, length, depth and consistency.The width of product mix refers to how many different product lines thecompany carries.The length of product mix refers to the total number of items in its product mix.The depth of product mix refers to how many variants are offered of eachproduct item in the line.The consistency of the product mix refers to how closely related the variousproduct lines are in end use, production requirements, distribution channels orsome other way.Above four dimensions of the product mix defines the firm’s product strategy.Product Planning:Product planning is the process of determining that line of products which cansecure maximum net realization from the intended markets. It is an “act ofmarking out and supervising the search, screening, development andcommercialization of new products, the modification of the existing lines andthe discontinuance of marginal or unprofitable items”.Thus, product planning encompasses the following aspects: 1. Planning and developing new products. 2. Modification of existing products, 3. Elimination of marginal or unprofitable product items. BABASAB PATIL
  41. 41. ELEMENTS OF MARKETINGNew Product Development Process:New product development process consists of the following eight steps. 1. Idea generation 2. Screening of ideas 3. Concept development and testing 4. Marketing strategy development 5. Business analysis 6. Product development 7. Test marketing 8. Commercialization of new product.Idea generationThe new product development process starts with the search for ideas. Aproduct idea is an idea for a possible that the firm can see itself offering to themarket.The new product ideas can be derived from the following sources.Customers: Customers’ needs and wants are the logical place to start in thesearch for new product ideas. Firms can identify consumer needs and wantsthrough direct consumer surveys, projective tests, focused group discussionsand suggestion and complaint letters from customers.Scientists: The Company’s scientists will also be able to supply new productideas.Competitors: Companies can find new ideas by monitoring their competitor’sproducts. The company should assess who is buying competitor’s new productsand why. Many companies buy competitors products, take them apart and buildbetter ones. BABASAB PATIL
  42. 42. ELEMENTS OF MARKETINGSales representatives and dealers: Since sales representative and dealers havefirst hand exposure to customer’s needs and complaints, they are good sourceof new product ideas.Top management is another major source of new product ideas because its vastexperience in the particular field.Besides the above, new product ideas can come from a variety of sources suchas University and commercial laboratories, industrial consultant, advertisingagencies, marketing research firms and industrial publications.Really good ideas come out of inspiration and creativity. The followingtechniques may help generate better ideas. 1. Attribute listing: The major attributes of an existing product are listed and then each attribute is modified in the search for an improved product. 2. Problem analysis: Consumers may be asked for the problem they encounter in using a particular product. 3. Brain-storming: Groups can be stimulated to greater creativity through the technique called brain-storming.Screening of ideas:Under this stage, the ideas are pruned and the purpose of screening is to spotand drop poor ideas as early as possible.In the screening stage the company must avoid two types of errors. Adrop-error’ occurs when the company dismisses a good idea. A ‘go-error’occurs when the company permits a poor idea to move into development andcommercialization.The purpose of screening is to spot and drop poor ideas as early as possible.The ideas are screened considering the target market, market size, competition BABASAB PATIL
  43. 43. ELEMENTS OF MARKETINGprice, development time and costs, manufacturing costs and rate of return. Theideas are also screened in terms of company’s objectives, strategies andresources. Ideas that do not satisfy these are dropped. The remaining ideas canbe rated using the weighted index method – considering the factors requiredfor the successful launching of the product and weights assigned by themanagement to these factors to reflect their relative importance.Concept development and testing:The selected ideas, then be developed into product concepts. A productconcept is an elaborated version of the idea expressed in meaningful consumerterms.Concept testing implies testing these concepts with an appropriate group oftarget consumers. The concept may be presented symbolically or physically. Atthis stage a picture description is also sufficient. The consumers’ responses willhelp the firm determine which concept has the strongest appeal. Conceptdevelopment and testing methodology applies to any product or service.Marketing strategy development:The preliminary marketing strategy consists of three aspects. The first aspectdescribes the size, structure and behaviour of the target market, the sales, themarket share and profit goals planned in the first few years.The second aspect outlines the product’s planned price, distribution andpromotional strategies for the first year and the third part describes theplanned long-run sales and profit goals and marketing – mix strategy over time.Business analysis:Once management develops the product concept and marketing strategy, it canevaluate the business alternativeness of proposal by reviewing the sales, costand profit projections to determines whether they satisfy the company’sobjectives. BABASAB PATIL
  44. 44. ELEMENTS OF MARKETINGManagement needs to estimate whether sales will be high enough to return asatisfactory profit to the firm. It has to estimate first – time sales of the newproduct, replacement sales and repeat sales.After preparing the sales forecast, management can estimate the expectedcosts – Research and development, manufacturing, marketing and financedepartments and profits of this venture.Product development:Under this stage, the product concept is converted into a real physical product.This stage will answer whether the product idea can be translated into atechnically and commercially feasible product. Whenever possible, a prototypecould be produced, otherwise products should be produced only in limitedquantities. When the prototypes are ready, they must be put through rigorousfunctional and consumer tests. The functional tests are conducted underlaboratory and field conditions to make sure that the product performs safelyand effectively. Consumer testing can take a variety of forms such as givingsamples to use in their homes.Market testing:After management is satisfied with the product’s functional performance, theproduct should be given a brand name, packaging and a preliminary marketingprogramme to test it in real market. The purpose of market testing is to learnhow consumers and dealers react to handling, using and repurchasing theactual product and to know the size of the market, marketing programmeeffectiveness and other matters. The amount of market testing is influenced bythe investment, cost and risk, time pressure and research cost.Commercialization: BABASAB PATIL
  45. 45. ELEMENTS OF MARKETINGIn this stage, management makes a final decision about whether to launch thenew product. In launching a new product, the management must make fourdecisions a) the right time to introduce the new product b) The geographicalarea – single locality, a region, the national market – or the international marketto introduce the product c) The target market prospects and d) action plan tointroduce the new product in the market. It must allocate the marketing budgetamong the marketing-mix elements and sequence the various activities.The Consumer – Adoption Process:The consumer – adoption process begins where the firm’s innovation processends. It describes how potential consumers learn about new product, try themand adopt or reject them. Management must understand this process in orderto build in effective strategy for early market penetration.Innovation - Diffusion and Adoption:An innovation refers to any good, service or idea that is ‘perceived’ by someoneas new.The diffusion is defined as “the spread of a new idea from its source ofinvention or creation to its ultimate users or adopters.Adoption is the decision of an individual to become a regular user of a product.Adoption process:The adoption process focuses on the ‘mental process through which anindividual passes from first hearing about an innovation to final adoption.The adoption process consists of five stages: BABASAB PATIL
  46. 46. ELEMENTS OF MARKETING a) Awareness: The consumer becomes aware of the innovation but lacks information about it. b) Interest: The consumer is stimulated to seek information about the innovation. c) Evaluation : The consumer evaluates whether it would be beneficial to try the innovation. d) Trial: The consumers tries the new product on a small scale to find out his estimate of its value. e) Adoption: If the consumers is satisfied, he decides to make full and regular use of the new product.Product Diversification:Product diversification means adding a new product to the existing product lineor mix. It does not mean that the new product should be complementary or anallied product to the existing one. It may be a product which may be entirelydistinct and different from the existing products. For example, Bata enteringinto readymade garments, Raymonds entering into footwear business etc.Reasons for diversification: 1. To offset declining market for the existing products. 2. To compensate for technological obsolescence. 3. To utilize the existing spare capacities more profitability. 4. To take advantage of the reputation of the company’s image. 5. To maintain employment of labour force. BABASAB PATIL
  47. 47. ELEMENTS OF MARKETINGProduct Modification:Product modification is any deliberate alternation in the product’scharacteristics in a way that will attract new users and/or more usage fromcurrent users. It may be quality improvement aiming at increasing functionalperformance of the product its durability, reliability, speed, taste etc. and/orfeature improvement aiming at adding new features such as size, weight,materials etc that expand the product’s versatility, safety or convenience. Itwould also be style appearance improvement. E.g. new car models.Product Elimination:Product elimination is the process of withdrawing or dropping a product in theexisting product line if they are unprofitable.Such product tend to consumer a disproportionate amount of management’stime, the advertising and sales force effectiveness will go waste, requiresfrequent price, adjustments and affects the company’s image.Product life cycle:Like human beings, every product has a life span. When a new product islaunched in the market, its life starts and the product passes through variousdistinct stages and after the expiration of its span dies – dies in terms of itscapacity to generate saels and profits. This is called Product Life Cycle (PLC)The Product Life Cycle is an attempt to recognize ‘distinct stages’ in the ‘saleshistory’ of the product. In each stage, there are distinct opportunities andproblems with respect to marketing strategy and profit potential. Hence,products require different marketing, financing manufacturing, purchasing andpersonal strategies in the different stages of their life cycle. The PLC conceptprovides a useful framework for developing effective marketing strategies indifferent stages of the Product Life Cycle. There are four stages in the ProductLife Cycle which are known as Introduction, growth, maturity and decline. BABASAB PATIL
  48. 48. ELEMENTS OF MARKETINGIntroduction Stage:When a new product is launched, the company has to stimulate awareness,interest, trial and purchase. This takes time. In introductory stage only a fewpersons will buy the product. Further, it takes time to fill the dealer pipelineand to make available the product in several markets. Hence, sales will be lowand profit will be negative or low. The distribution and promotion expenses arevery high. There are only a few competitors. Regarding pricing, themanagement can pursue either skimming strategy i.e., fixing a high price orpenetration strategy i.e., fixing a low price.Growth Stage:The growth stage is marked by rapid increase in sales and profits. Newcompetitors enter the market, attracted by the opportunities for high profits.Prices remain the same. Companies maintain their promotional expenditure atthe same level to meet competition and continue educating the market. Salesrise much faster.During this stage, the company uses the following marketing strategies. - The company improves product quality and adds-product features and models. - It enters new market segments. - It enters new distribution channel - It changes the price.Maturity Stage: BABASAB PATIL
  49. 49. ELEMENTS OF MARKETINGThis stage normally lasts longer than the previous stages. At this stage, saleswill slow down. This stage can be divided into three phases – growth maturity,stable maturity and decaying maturity.In the growth phase, the sales start to decline because of distribution saturation.In the stable phase, sales become static because of market saturation.In decaying maturity phase, the absolute level of sales now starts to decline andcustomers start moving toward other products and substitutes. Competitionbecomes acute.Marketing strategies in the maturity stage: - Market Modification: The company should seek to expand the market. - Product modification: The company should modify the product’s characteristics such as quality improvement, feature improvement, style improvement to attract new users and/or usage from current users. - Marketing – mix modification: The company should also try to stimulate sales through modifying one or more marketing-mix elements such as price cut, step up sales promotion, change advertisement copy, extending credit etc.A major problem with marketing-mix modification is that they are highlyimitable by competitors. The firm may not gain as much as expected and in factall firms may experience profit erosion as they compete each other.Decline stage:In this stage, sales decline due to number of reasons including technologicaladvances, consumer changes in tastes and acute competition. As sales andprofit decline, some firms withdraw from the market. Those remaining mayreduce the number of product offerings. BABASAB PATIL
  50. 50. ELEMENTS OF MARKETINGThey may drop smaller market segments and marginal trade channels. Theymay reduce the promotion budget and prices further.Marketing strategies during the decline stage: - Identify the weak products by appointing a product-review committee with representatives from marketing, manufacturing and finance. - The firms may adopt the following strategies. i) Continuation strategy by increasing the firm’s investment to reap the profits. ii) Concentration strategy by continuing sales only in selected pockets. iii) Harvesting strategy by selling to get profit whatever is possible in the market.When a company decides to drop a product, the firm can sell or transfer theproduct to someone else or drop it completely. It must decide to drop theproduct quickly or slowly. It must decide on how much parts in inventory andservice required to maintain service to past customers.Use of PLC Concept:PLC concept’s real usefulness varies in different decision-making situations. Asa ‘planning tool’, the PLC concept characteristics the main marketing challengesin each stage and suggests major alternative marketing strategies the firmmight pursue. As a ‘control tool’, it allows the company to compare productperformance against similar products in the past.Criticism of PLC concept:1. PLC stages do not have predictable durations. It may vary from product of product.2. The marketer cannot tell at what stage the product is in, as there is no definite line of demarcation between one stage to another stage. BABASAB PATIL
  51. 51. ELEMENTS OF MARKETING3. Not all products pass through all the stages. It is possible that the product may travel to the first and second stage and then die out.4. A product may not be in an identical stage in all the market segments, it may be in the second stage in one segment whereas in the third stage in another segment at a point of time.Product Positioning:Each competitive product occupies a given place in the market segment. What isimportant is the consumer perception of the place each product occupies in themarket. Product positioning is the act of designing the company’s product andmarketing mix to fit a given place in the consumer’s mind in relation tocompetitor’s product.Every product offered to a market needs positioning strategy so that its place inthe total market can be communicated to the target market. The following sixalternatives are identified for a product-positioning strategy. - Positioning on specific product features. - Positioning on benefits or needs - Positioning for specific usage occasions. - Positioning for user category - Positioning against competitor’s product - Positioning for another product class. E.g. Positioning a recreational theme park not as recreation but as an educational institution.The company’s product positioning decision further defines its customers andcompetitors. At this point the company can start planning the details of itsmarketing mix.REVIEW QUESTIONS: 1. Discuss the new product development process. 2. Explain PLC concept. What are its uses? BABASAB PATIL
  52. 52. ELEMENTS OF MARKETING3. Write a not on product diversification and product modification.4. What are the steps involved in the adoption process.5. Write a note on product positioning. ****************** BABASAB PATIL
  53. 53. ELEMENTS OF MARKETING LESSON – 9 BRANDING AND PACKAGINGBranding and packaging are the integral part of the product. The word ‘brand’is a comprehensive term. A brand is a name, term, sign, symbol or design or acombination of them, which is intended to identify the goods or services of oneseller or group of sellers and to differentiated them from those of competitors.Brand name: It consists of words, letters and/or numbers which can bevocalized or pronounced. E.g. ‘Crompton’, ‘Kelvinator, No/: 1 Premier.Brand mark: It is that part of a brand which can be recognized such as asymbol, design or distinctive colouring or lettering. E.g ‘Maharaja’ of Air India.Red inverted triangle of Family Welfare Dept.Trade Name/Trade Mark: When a brand name or brand mark is registered andgiven legal protection, it becomes trade name/trade mark respectively. A trademark protects the seller’s exclusive rights to use the brand name and/or brandmark.Reasons for branding: 1. It helps in product identification 2. It helps indicate the product quality and other characteristics 3. It helps create brand image and brand loyalty to products. 4. It helps increase the success of advertisement and personal selling. 5. It helps increase sales 6. It ensures legal right on the products. 7. It helps product and price differentiation. 8. It helps introduce new product easily.Characteristics of a good brand name: BABASAB PATIL
  54. 54. ELEMENTS OF MARKETING 1. It should be short, simple, easy to pronounce, spell and remember. 2. It should suggest something about product’s benefits, quality and action. E.g. ‘Stopache cream balm. ‘Ruchi pickles’. 3. It should be distinctive 4. It should be versatileTypes of brands:Individual brand name: When each product has a unique brand name, it iscalled individual brand name. E.g. TVS XL, TVS Champ, TVS Scooty.Family brand name: When a same brand name is given to all the products of asingle manufacturer, it is called family brand name. E.g. Godrej, Tata.Packaging:Packaging may be defined as the activities of designing and producing thecontainer or wrapper for a product. The container or wrapper is called thepackage.In recent times, packaging has become a potent marketing tool.The package must perform many of the sales tasks. It must attract attention,describe the products’ features, give the consumer confidence and make afavourable impression.Packaging protects the products and provides convenience, appearance,dependability and prestige for the products. BABASAB PATIL
  55. 55. ELEMENTS OF MARKETINGPackaging helps create brand and corporate image for the products.Innovative packaging can bring benefits to consumers and profits to products.Packaging decisions:Developing an effective packaging for a new requires a number of decisions.The first task is to establish the packaging concept i.e., what the packageshould basically be or do for a particular product – protection, convenience orimage building.Decisions must be made on further elements of package design – size, shape,materials and colour. The packaging elements must also be harmonized withdecions on pricing, advertising and other marketing elements.After the packaging is designed, it must be put through a number of tests.Engineering tests are conducted to ensure that the package stands up undernormal conditions, visual tests are conducted to ensure that the letters andcolours are legible, dealer tests to ensure that dealer find the packagesattractive and easy to handle, and consumer test to ensure favourableconsumer response.Labelling:Label is a small ship placed on or near the product to denote its nature,contents ownership etc.Labels perform several functions: - The label helps identify the product or brand - The label might describe several things about the product, who made it, where it was made, when it was made, its contents, how it is to be used and how to use it safely etc. BABASAB PATIL
  56. 56. ELEMENTS OF MARKETING - It might promote the product through its attractive design.Kinds of labels: 1. Brand labels: These labels are exclusively means for popularizing the brand name of the product. E.g. Soaps, Cigarettes. 2. Grade labels: These labels give emphasis to standards or grades. E.g. Dust tea, Cloth etc. 3. Descriptive Labels: The label which are descriptive in nature are called descriptive labels. They describe product features, contents, method of using it etc. E.g. Milk – food products and medicines. 4. Promotional Labels: These labels aim at attracting the attention, arousing desire and creating interest among the consumers to buy the product. The marketers should make sure that their labels contain all the required information before launching the product.REVIEW QUESTIONS: 1. Define brand. What are the reasons for branding the product? 2. Define packaging. What are the functions of packaging? 3. What is labeling? What are the usual contents of labeling. ********************** BABASAB PATIL
  57. 57. ELEMENTS OF MARKETING LESSON – 10 PRICING POLICIES AND METHODSAmong the different components of the marketing –mix, price plays animportant role to bring about product-market integration. Price is the onlyelement in the marketing-mix that produces revenue.Price may be defined as the value of product attributes expressed in monetaryterms which a consumer pays or is expected to pay in exchange and anticipatedof the expected or offered utility. It helps to establish mutually advantageouseconomic relationship and facilitates the transfer of ownership of goods andservices from the company to buyers. The managerial tasks involved in productpricing include establishing the pricing objectives, identifying the pricegoverning factors, ascertaining their relevance and relative importance,determining product value in monetary terms and formulation of price policiesand strategies. Thus, pricing plays a far greater role in the marketing-mix of acompany and significantly contributes to the effectiveness and success of themarketing strategy and success of the firm.Factors influencing pricing:Price is influenced by both internal and external factors. In each of thesecategories some may be economic factors and some psychological factors,again, some factors may be quantitative and yet others qualitative.Internal factors influencing pricing: - Corporate and marketing objectives of the firm - The image sought by the firm through pricing - The characteristics of the product - Price elasticity of demand of the product - The stage of the product on the product life cycle - Turn around rate of the product BABASAB PATIL
  58. 58. ELEMENTS OF MARKETING - Costs of manufacturing and marketing - Product differentiation practiced by the firm - Other elements of marketing mix of the firm and their interaction with pricing. - Composition of the product line of the firm.External factors influencing pricing: - Market characteristics - Buyers behaviour in respect of the given product. - Bargaining power of the major customers - Bargaining power of the major suppliers - Competitors’ pricing policy - Government controls/regulations on pricing - Other relevant legal aspects - Social considerations - Understanding, if any, reached with price cartels.Pricing Objectives:A business firm will have a number of pricing objectives. Some of the them areprimary, some of them are secondary, some of them are long-term while othersare short-term. However, all pricing objectives emanate from the corporate andmarketing objectives of the firm.Some of the pricing objectives are discussed below: 1. Pricing for a target return 2. Pricing for market penetration 3. Pricing for market skimming. BABASAB PATIL
  59. 59. ELEMENTS OF MARKETING 4. Discriminatory pricing 5. Stablishing pricing 6. Competitor – oriented pricing 7. Achieving market share 8. Profit maximization pricing. 1. Pricing for a target return:This is a common objective found with most of the established business firms.Here, the objective is to earn a certain rate of return on investment (ROI) andthe actual price policy is worked out to earn that rate of return. The target is interms of ‘return of investment’. There are companies which set the target at, forexample, 20 percent return on investment after taxes. They target may be for ashort-term or a long-term. A firm also may have different targets for itsdifferent products but such targets are related to a single overall rate of returntarget. 2. Pricing for market penetration:When companies set a relatively ‘low price’ on their new product in initial stageshoping to attract a large number of buyers and win a large market-share it iscalled penetration pricing policy. They are more concerned about growth insales than in profits. Their main aim is capturing and to gain a strong footholdin the market. This object can work in a highly price sensitive market. Is it alsodone with the presumption that unit cost will decrease when the level of salesreach a certain target. Besides, the lower price may make competitors to stayout. When market share increases considerably, the firm may gradually increasethe price. 3. Pricing for market skimming:Many companies that launch a new product set ‘high prices’ initially to skim themarket. They set the highest price they can charge given the comparativebenefits of their product and the available substitutes. After the initial sales BABASAB PATIL
  60. 60. ELEMENTS OF MARKETINGslow down. They lower the price to attract the next price-sensitive lover ofcustomers. 4. Discriminatory Pricing:Some companies may follow a differential or a discriminatory pricingpolicy-charging different prices for different customers or allowing differentdiscounts to different buyers.Discrimination may be practices on the basis of product or place or time forexample, doctors may charge different fees for different patients, railwayscharge different fares for usual passengers and season ticket holders.Manufacturers may offer quantity discounts or quote different list prices tobulk-buyers, institutional buyers and small buyers. 5. Stabilising pricing:The objective of this pricing policy is to prevent frequent fluctuations in pricingand to fix uniform or stable price for a reasonable period. When price is revised,the new price will be allowed to be remain for sufficiently a long period. Thispricing policy is adopted, for example, by newspapers and magazines. 6. Competitor – oriented pricing:Under this method, pricing is fixed on par with competitor’s pricing policy. Ifthe competitors reduces the prices, the firm will also correspondingly reducethe price. If the competitors increases the price, the firm will also increase theprice or keep the price as it is thereby prevent competition. 7. Achieving market share: BABASAB PATIL
  61. 61. ELEMENTS OF MARKETINGA firm may aim to secure a target market share by employing price as an input.Target market share means that share of the industry sale which a firm aspiresto attain. It is usually expressed as percentage. 8. Profit maximization pricing:Profit maximization is the most common pricing objective. It means in a givenset of market conditions, firm attempts to maximize profit through theinstrument of price.Besides the above, fast turn around and early cash recover, Profit optimizationin the long term and target sales volume could also be other pricing objectives.Pricing Methods:The pricing method must be appropriate for achieving the desired pricingobjectives. There are several methods of pricing. Each of them is appropriatefor achieving a particular pricing objective or combination of pricing objectives.The different methods of pricing can be grouped under the following broadcategories. 1. Cost-based PricingUnder this category, there are several approaches: i) Make-up pricing ii) Rate of return pricing iii) Marginal cost pricing 2. Demand-based pricing method:Under this category, there are different approaches. i) Skimming pricing BABASAB PATIL
  62. 62. ELEMENTS OF MARKETING ii) Penetration pricing 3. Competition – Oriented Pricing Method:Three alternatives are available under this method. i) Premium – pricing ii) Discount pricing iii) Parity pricing 4. Product-line Pricing Method:Under this method, the firm fixes the price of each product is such a mannerthat the entire product line is prices optimally resulting in optimal sales of allthe products in the line put together and optimal total profits from the line. 5. Affordability-based Pricing Method:The affordability-based pricing method is relevant in respect of essentialcommodities which meet the basic needs of all sections of people. Under this,often, an element of state subsidy is involved and the product items are oftendistributed by the Public distribution system.New Product Pricing:Firms launching a new product can choose between market-skimming pricingand market penetration pricing. i) Market skimming Pricing: BABASAB PATIL