MSM - UNIT 3.pdf

UNIT 3
MR.T.SOMASUNDARAM
ASSISTANT PROFESSOR
DEPARTMENT OF MANAGEMENT
KRISTU JAYANTI COLLEGE (AUTONOMOUS)
BENGALURU
1

UNIT 3: MARKETING MIX
Meaning and Elements – Classification of
products; product life cycle, new product
development process; branding, packaging;
Pricing: Objectives, factors influencing pricing
policy; types of pricing methods, Distribution:
definition; need; types of marketing channels,
factors affecting channels;; Promotion: Nature
and importance of promotion; promotion mix;
advertising; sales promotion; public relation;
direct selling and publicity.
2

MARKETING MIX
Meaning:
Marketing Information is needed to
assess the marketing situation and need
specific marketing targets in form of market segments.
Each market segment has types of marketing activities that
integrate into single market.
Combination of all marketing methods or devices are
called as ‘Marketing Mix’.
Marketing mix is required to market strategy successful.
The elements or variable of marketing mix are:
i) Decisions on product or service ii) Decisions on price.
iii) Decision on promotion & iv) Decisions on distribution. 3

Definition:
“Marketing Mix is the combination of product
offerings used to reach a target market for the
organization.”
“It is a mix of controllable marketing variables like
product, price, promotion and place that best meet the
needs of targeted customers.”
- marketing mix offers an optimum (least cost) combination
of all marketing ingredients so that we can have realization
of company goals like profit, sales volume, market share,
return on investment and so on.
- it is changing according to changes in marketing
conditions with changes in external environmental factors
like technical, social, economic and political which affects
the market. 4

Features of an effective Marketing Mix:
It should match customer needs.
It should give competitive advantage to the company.
It should match corporate resources.
All the elements of marketing mix should reinforce each
other to support positioning of the product.
Marketing Management Functions:
1. Knowledge of demand (i.e.) customer needs unmet so far
and how demand can be developed.
2. Obtaining demand (i.e.) getting orders.
3. Fulfilling orders (i.e.) achieving a profitable turnover.
4. Ensuring satisfaction of customer needs (i.e.) aiming at
new or repeat business.
5

Marketing Management Functions
Marketing Management Function
Marketing
Research &
Information
Product &
Pricing
Planning
& Control
Physical
Distribution
Promotion
1. Marketing
Information
system.
2. Marketing
research.
3. Market
segmentation.
4. Distribution
cost analysis.
1. Product
research.
2. Product
development.
3. Packaging.
4. Branding.
5. Pricing.
6. Warranty.
7. After sales
services.
1. Sales
forecasting.
2. Marketing
Mix.
3. Marketing
plans.
4. Budget &
Control.
1.
Management
& control.
2. Sales
promotion.
3.
Advertising.
4. Exhibition
& trade fairs.
5. Public &
Government
relations.
1. Channel
choice &
Decisions.
2. Transport.
3. Warehouse.
4. Insurance
& order
processing.
5. Protective
package &
inventory
control.
6

a) Product Mix: Product is the thing possessing utility. It ahs
four components i) Product range, ii) Service after sale, iii)
Brand and iv) Package.
b) Price Mix: Price is the valuation placed upon the product
by the offerer. It has to cover pricing, discounts, allowances
and terms of credit and deals with price competition.
c) Place (Distribution) Mix: Distribution is the delivery of the
product and right to consume. It includes channels of
distribution, transportation, warehousing and inventory
control.
d) Promotion Mix: Promotion is the persuasive
communication about the product by the offerer to the
prospect. It covers advertising, personal selling, sales
promotion, publicity, public relations and demonstrations
used as promotion.
9

PRODUCT
Meaning:
Product is a bundle of all kinds of satisfaction of both
material and non-material kinds.
It may be a good, a service, good + service, or an idea.
It include physical objects, design, brand, package,
label, amenities and satisfaction.
Product supplies two kinds of utility –
a) Economic utility.
b) Supplementary utility in the form of social –
psychological benefits.
10

Definition:
“Product may be anything that can be offered to a market to
satisfy a want or need.” - Philip Kotler
“It is the sum total of physical, economic, social and
psychological benefits. Marketers must define their market
in terms of product functions – what the customer expects
from the product.”
11
P
R
O
D
U
C
T
Physical Goods
Ideas
Services
Organizations
Persons
Places
Any visible object pen,
book, etc.
Traffic, Safety, etc.
Health care, tourism,
etc.
Service organizations
Musicians recreators
Tourist spot, centres,
etc.

Selling points of a Product:
- it deals with physical attributes, utilities, design, colour,
size, shape, beauty, etc.
- buyers are not interested in competition of product.
- they are concerned with what product need, means to
them and what extent it satisfies their needs.
(E.g.) Manufacturer of Cosmetic products
* Toothpaste – it creates hopes and expectations, (i.e.) whiter
and cleaner teeth, pleasant taste, stronger gums and
smelling breath.
- customer buys these product based on expectations, these
expectations of benefits are called market offerings.
- selling a product is the capacity and competence of
product offer to expected use, performance & satisfaction.
12

Product Concept:
Product is the most tangible and important single
component of marketing programme.
Product policy and strategy is cornerstone of a marketing
mix.
If product fails to satisfy customer, no additional cost on
any of other ingredients of marketing mix will improve
product performance in market place.
Product decision are taken first by marketers and decisions
are central of all other marketing decisions like price,
promotion and distribution.
Product is like vehicle by which company provides
consumer satisfaction and pulls the rest of the marketing
programme.
13

Product has three dimensions –
a) Managerial dimensions – it covers physical attributes, related
service, product life cycle and development.
- product offering must balance customer citizens needs and
desires.
- product planning & development assure normal rate of return
on investment and continuous growth of firm.
b) Consumer Dimensions – product is actually a symbol or
meaning for buyers.
- they buy a product for not only they want and also what they
mean.
- it indicates bundles of expectations to the buyer.
- success or failure of product is depend consumer perception.
-once product is purchased by customer and made evaluation
(i.e.) post purchase.
14

c) Societal dimensions – salutary products and desirable
products will fulfill the expectation of social welfare and
social interests.
- salutary products yield long run advantages but may not
have immediate appeal.
- desirable products offer both benefits, immediate
satisfaction and long run consumer welfare.
Marketers have to fulfill following social responsibilities –
i) Conversation and best use of resources.
ii) Safety to users.
iii) Long – run satisfaction of consumers.
iv) Quality of life, concern for better environment.
v) Fulfillment of government regulations relating to
composition, packaging, promotion and pricing of many
products. 15

Product Perception
Product Perception
Managerial
Consumer Societal
1. Basic property.
(i.e.) product quality
2. Product utility.
3. Package.
4. Brand.
5. Product Life cycle
6. Product planning.
7. Product mix line.
1. Expectation of the
product like what
consumer wishes to
get from product.
2. Perception
leading to purchase.
3. Product should
give satisfaction.
1. Safety to
users.
2. Claim on use
of resources.
3. Environment
protection.
4. Long run
social benefits.
19

CLASSIFICATION OF PRODUCT
20
Product
Consumer
Goods
Convenience
Goods
Industrial
Goods
Shopping
Goods
Specially
Goods
Unsought
Goods
Raw
materials
Capital
items
Fabricated
Materials
Supplies
and
Services

Consumer Goods:
“Goods designed for use by the ultimate consumers or
household and in such form that they can be used without
commercial processing.”
- goods that are produced for final consumption are called
consumer goods.
a) Convenience goods – goods that are frequently purchased
by consumers with minimum efforts are called consumer
goods. (E.g.) newspaper, food item, toothpaste, etc.
- this goods have low unit value and consumed rapidly.
b) Shopping goods – goods those that are bought by the
customer only after careful comparison made with quality,
prices, etc. (E.g.) Home appliances, dress materials, etc.
- this goods have high unit value and purchased less.
21

c) Specialty goods – goods having unique characteristics and
for brand identification for which a significant group of
buyers are habitually willing to make special purchasing
effort.
- it doesn’t involve any comparisons.
- buyers invest time only to reach dealers carrying wanted
products.
- dealers don’t have convenient locations, but they must
create awareness through advertisement and sales
promotion. (E.g.) Cars.
d) Unsought goods – the consumer does not know about the
product or does not normally think of buying.
(E.g.) life insurance, encyclopedia, etc.
- it require advertising and personal selling support.
22

Industrial Goods:
“Industrial goods are those that are used by buyers as
inputs in producing other products.”
(E.g.) machine tools, trucks, etc.
a) Raw material – it directly enter the finished products.
- it is processed or assembled to create a product and after
processing it becomes consumer product.
(E.g.) Agricultural products jute, sugarcane, etc., semi
finished goods like steel & assembly parts like mobile or
computer.
b) Capital goods – goods are used for creating finished
goods.
- they create form utility to a product.
- they are long – lasting in nature.
23

It has three categories –
i) Installations – it include boiler, lathers, etc. and it is major
purchases.
- it is usually brought directly from manufacturers and
made according to specification of buyers.
ii) Equipment – it include portable factory equipments and
hand tools.
- this type of goods don’t become a part of finished goods.
iii) Plant and building – it include factory building and
office building.
c) Fabricated material – it become a part of finished goods.
- it reach ultimate consumer only when they are assembled
with other parts. (E.g.) automobile parts, batteries, etc.
24

d) Operating supplies and services – these items are
not part of finished goods.
- they are short lasting in nature like writing paper,
pencils, coal, etc.
- it was marketed through intermediaries because of
low unit value.
- it include services like maintenance and repair
services and provided under Annual Maintenance
Contract (AMC).
- it include other services like business advisory
services, legal, management consulting,
advertising, etc.
25

PRODUCT LIFE CYCLE
Product life Cycle:
 It derives from the fact that a product’s sales volume and
sales revenue by five phase cycle.
 Life cycle is a fact of existence for every product.
 It includes length of life cycle, duration of each phase and
shape of curve vary widely for different products.
 It is termed as product market life cycle as it is related to
particular market.
(E.g.) Old product have new life cycle when it is introduced
into another market. Product life cycle indicates that
product is born or introduced, grows, attains maturity and
saturation in that market and then sooner it is bound to
enter its declining stage (i.e.) decay in sales. 37

1. Introduction:
- product is introduced in a market, sales revenue begins to
grow.
- but rate of growth is very slow, profit is not be there as we
have low sales volume, large production and distribution.
- it require heavy advertising and sales promotion.
- products are bought cautiously on trial basis.
- product development and design are considered critical.
2. Growth:
- in this period, the product is accepted by consumers and
traders.
- rate of increase of sales turnover is rapid and profit
increase at accelerated rate.
- rise in sales and profits due to competition. 39

- it gives top priority to sales volume and quality maintenance
may be secondary.
- end of growth period is at the inflection point on the sales curve.
- effective distribution and advertising are considered as key
factors in this stage.
- word of mouth advertising leads to more new users.
3. Maturity:
- competition brings pressure on prices in this stage.
- increasing marketing expenditures and falling prices will
reduce profits.
- additional expenditures is involved in product modification and
improvement the product line.
- marketers adopt measures to stimulate demand and face
competition through advertising and sales promotion.
- overall marketing effectiveness becomes the key factor.
40

4. Saturation:
- it occurs in market when all potential buyers are using the
product and have only replacement sales.
- consumption achieves a constant rate and marketers have to
concentrate exclusively on market share.
- prices may fall rapidly and profit margins may become small
unless firm makes substantial improvements and realizes cost
economies.
5. Decline stage:
- product enters the declining stage once the saturation point is
reached.
- it may be gradually displaced by some new innovation.
- sales drops severely, competition dwindles and even product
can’t stand in the market.
- price become primary weapon of competition and reduce
expenditure on advertising and sales promotion. 41

- many products don’t follow the life cycle curve.
- time interval for each stage varies widely from product to
product.
(E.g.) Salt remains in maturity stage for ever.
Table radios now moved into declining stage after achieving
maturity and saturation.
- marketers alter product life cycle primarily through product
improvement and changes in rest of marketing mix.
Product Life Cycle and Marketing Strategy:
- the essential in life cycle is difference between sales curve and
profit curve.
- marketer generate stream of new products inn order to maintain
market position and firm hold profitability.
- life cycle governs strategic marketing planning at all levels.
- it is not involved in product planning & development but also in
pricing, promotion and distribution. 42

Diffusion (Adoption) of Innovations:
- diffusion process developed by E.M. Rogers which is
same as product life cycle.
- diffusion process looks at what is happening in market,
whereas product life cycle depicts the flows of revenues
and profits to business unit on account of diffusion process.
- diffusion process is described in form of normal
distribution curve. (bell – shaped curve)
- adoption and diffusion of any new product slowly
develops because of resistance to change and time taken
for communication of new innovation.
- adoption process gains momentum and grows rapidly.
- it achieve peak point when potential buyers have tried the
new product.
43

Diffusion Process
1. Innovators:
- they are risk takers &
act as forerunners.
- they take risk in
different aspects with
different life style and
personality like young, educated, etc.
2. Early Adopters:
- they are opinion leaders and taste makers in their circle of
connections, community also.
- they are educated, rich and more successful than average.
- they exposed to information from all sources.
44

3. Early Majority:
- to adopt new product, bringing total adopters to 50%.
- average people with regard to income, occupation, age,
education.
- they make innovation and no longer a luxury or novelty,
don’t hold leadership position.
- they form bridge between new and old values of society.
4. Late Majority:
- they are older and less educated buyers and have limited
purchasing power.
- they buy product only when public opinion clearly is in
favour of product.
- they depend more on word of mouth and personal
guidance and less exposed to mass media.
45

5. Laggards:
- they tend to be older, with less education, poorer and
traditional in their outlook on life.
- caution, conservation and price consciousness
characterize the laggards.
- they have little contact with mass media particularly
newspapers and rely only on radio, TV and reference group.
Marketing and Innovation:
- innovation is purposeful, organized, risk taking change
introduced by marketer in order to maximize economic
opportunities.
- successful innovation is necessary for effective marketing.
- it makes rich in business operation with customer oriented
marketing.
46

- innovation is act of developing a novel idea into a
process must be feasible and must have commercial
acceptability.
A successful innovation passes through three stages –
1. Idea or invention.
2. Implementation of idea.
3. Market acceptance.
- a firm control partially the first two stages.
- the acceptance decision is external factor and depends
upon consumers and their reactions.
- marketer rely on all modes of promotion or marketing
communications to exert influence on consumer
behaviour and induce potential customers to adopt the
innovation. 47

Adoption Process:
“An adoption process is a process bringing about a change in
buyer’s attitudes and perceptions”
- it covers the steps that consumer usually goes through in
determining feasibility of buying new products.
1. Awareness:
- person learn about new idea, product and general
information through advertisement.
- limited knowledge about special qualities, usefulness,
performance, etc.
2. Interest:
- it develops interest in innovation and demands more
detailed information about the new product.
- it seek information from salesperson, friends, TV, radio, etc.
48

3. Evaluation:
- the accumulated information and evidences are weighted by
person in order to assess worth of innovation.
- it finds pros and cons of new product and extend to which it
is good.
4. Trial:
- it is ready to put the change into practice.
- competent personal assistance necessary to put innovation
to use.
- large scale use depend upon success of small scale
experiment.
5. Adoption:
- it is final stage in buying decision making process.
- it decides to adopt new idea, product or practice for
continued use. 49

Product Innovation:
- the innovative attitude of a marketer is expressed in word
“innovate or die”
- it is integral part of marketing concept.
- Peter Drucker recognized the equal importance of
innovative attitude and marketing concept.
50
Methods of obtaining Products
Internal
Development
discovering and
developing new
products by firm
itself.
Acquisition
Buying the firm
that developed or
patented the
product.
Licensing
Securing right to
produce product
from a patent
holder.

- a firm have two basic functions: marketing and
innovation to attract the customers.
- every growth industries have important role for
innovation in marketing their marketing plans.
- innovation assures growth and survival while customer
orientation assures survival.
- evolution of new product is practical business function
and it is described as process of product management.
- process of planning and development is always adopted
for product innovation.
- product development is a general term covering the search
for new products and new innovations as well as the
improvement of existing products.
51

Planning and Development Strategy:
Marketers have four alternative ways for growth in sales and
profits –
1. Market Penetration:
- it involves expansion of sales of existing products in
existing markets by selling more to present customers or
gaining new customers.
- firm can market present products to existing markets
through more aggressive marketing mix.
- potential buyers can also be attracted and existing buyers
may be induced to increase their rate of use.
- temporary price cut to raise volume of sales and penetrate
market.
52

2. Market Development:
- present product is introduced to a new market or segment.
- it is the creation of new markets by discovering new
applications for existing goods.
- firm can offer its existing products to new markets.
- this is another alternative to expand market opportunity,
prolong product life cycle, profitability and survival.
3. Product Development:
- it occurs when firm introduces new products to a market in
which it is well established.
- it is the introduction of new products in present market.
- established firms have new product additions upon existing
market successes.
- by offering new or improved products can satisfy customer.
53

4. Diversification:
- it occurs when firm seeks to enter a new market with
completely a new product.
- firm has neither market expertise nor product knowledge.
- they adopt strategy by creating new products for entirely
new products.
- only innovating firm go for diversification in products.
- it has unfamiliar products for unfamiliar market.
Factors rating a new product introduction are:
a) Marketability.
b) Durability.
c) Productive ability.
d) Growth potential.
54

55
Existing Products New Products
1) Market Penetration 2) Product Development
(Or)
Product Differentiation
5) Creating sub product markets
Market Segmentation
3) Market Development 4) Diversification
Existing
Markets
New
Markets

Product Planning and Development Process:
Some of the steps in planning and development of a new
product is –
1. New Product Idea:
- ideas may be contributed by scientists, professional
designers, customers, sales force, dealers, etc.
- we need 60 new ideas to get one commercially viable
product.
2. Ideas screening:
- to evaluate all ideas and inventions.
- poor ideas are dropped and through process of
elimination only most promising and profitable ideas are
picked up for detailed investigation and research.
56

3. Concept Development and Testing:
- all ideas that survive the process of screening
(preliminary investigation).
- they will be developed into mature product concept.
- it will have precise description for the ideas and features
of proposed ideas.
- concept testing helps the company to choose best among
alternative product concepts.
- consumer are offer their comments on precise written
description of product concept (i.e.) attributes and expected
benefits.
4. Business Analysis:
- it is a combination of marketing research, cost benefit
analysis and profitability analysis.
57

- it will prove soundness and viability of the selected
product concept from business view point.
- it is subjected to rigorous scrutiny to evaluate its market
potential, capital investment, rate of return on capital.
- it concentrated on product development and offer realistic
profit objectives.
5. Product Development Programme:
It has three steps, when a idea duly converted into a physical
product –
i) Prototype development giving visual image of the product.
ii) Consumer testing of the model or prototype.
iii) branding, packaging and labelling.
- it will provide ground for final selection of most
promising model for mass production & distribution.
58

BRANDING
Meaning:
 The word ‘Brand’ is a comprehensive term, which may be name
or mark as proof of ownership.
 It means sign or symbol of quality and best means of advertising
and positioning in market.
 It capture and retain the consumer demand in a competitive
market.
 It is practice of giving a specified name to a product or group of
products from one seller.
 The sole purpose of branding is to distinguish your branded
product from those of competitors.
 It is broadly applied to all identifying marks like trade mark,
trade names, trade symbols, picture, design, colour and
attractive slogan. 63

Definition:
Brand:
“Brand is defined as a name, sign or symbol, mark, logo,
word, sentence or combination of these items used to
identify product or services of sellers and to differentiate
goods from competitors.”
Branding:
“It means of distinguish one firm’s products or services
from another’s and of creating and maintaining an image
that encourage confidence in the quality and performance
of that firms products or services.”
Brand extension or Stretching:
“It is a marketing strategy in which a firm marketing a
product with a well – developed image uses the same brand
name in a different product category.” 64

Brand Loyalty:
“It also refers to the degree to which a consumer
consistently purchases the same brand within a product
class.”
- preference by a consumer for a particular brand that
results in continual purchase of it.
Brand Equity:
“It also refers to attractiveness and familiarity of a
brand name in the general market place. Brand equity
permits companies to charge premium prices for
products and services, contributing to increased profit
margins. Brand equity is therefore a valuable asset that
companies invest huge amounts of money to develop.”
65

Importance of Branding:
1. bright image & recognized by customer.
2. control over the market.
3. compared with competing product & price flexibility.
4. lines of branded goods, it can add a new item to its list easily and
the new item.
Reasons for Branding:
The following reasons are –
1. competition.
2. distinct marketing function.
3. Need for advertising and publicity.
4. Development of consumer brand consciousness
5. It creates special consumer preference
6. demand – creation.
(E.g.) Vim, Pears, Lifebuoy, Colgate has great pulling power in India.
69

Essentials of Good Brand:
1. product benefits, use, quality, purpose or action, etc.
2. short, simple, easy to pronounce, to spell and remember.
3. registered and protected.
4. It should be stable life & fashion and style.
5. pleasant associations.
6. not used as common name for all products.
7. unique, attractive and distinctive.
Brand Strategy and Policy:
- use branding as an integral part of overall marketing strategy.
- it is important dimension of marketing strategy.
- identification of product & differentiation of branded product.
- entire marketing mix
- control of commercial process.
- it need advertising and promotional support
71

Types of Brand:
1. Individual Brand name:
- each product has special and unique brand name.
- it has to promote each brand separately in market.
- it creates practical difficulty in promotion.
2. Family Brand Name:
- it is limited to one line of a product (i.e.) products which
complete sales cycles.
(E.g.) Amul for milk, Hamam for bathing, Ponds for
cosmetics, etc.
- this method of branding assumes that end uses of all
products under family brand are similar.
- products for men and women should not sold under same
family brand name. 73

3. Umbrella Brand:
- it has for all products under the name of manufacturer or
company.
(E.g.) products like FMCG, chemicals, engineering goods,
jewels, etc manufactured by TATA will have one umbrella
brand called “Tata’s”
- it obtain low promotion cost and minimizing marketing
effort.
- it may be outstanding and shining in the market.
4. Combination Device:
- each product has individual name but it also has umbrella
brand to indicate company producing the product.
(E.g.) Tata Tea, Tata Tanishq, TCS, Tata Motors, Tata Salt,
Tata Glucose, etc.
74

5. Private or Middleman’s Brands:
- branding done by manufacturer or distributors like
wholesalers, retailers, etc.
- it helps small manufacturer to rely on middleman for
marketing.
(E.g.) Home appliances, materials, etc.
- middleman enjoy freedom in pricing products sold.
- they make either private and national middleman brands.
Brand Franchise:
- it enables company to influence customers and develop
customer preferences towards brands.
- it create brand awareness and recognition.
- it develop brand preference and brand loyalty.
75

- this is stage when consumer prefer given brand for
buying it.
- seller has brand franchise, if customer exhibits brand
loyalty, brand preferences towards product or service.
- seller try to move buyers from brand awareness to
brand preferences.
- it indicates that customer regards brand favourably but
will accept a substitute if said brand is not available in
shop.
- brand recognition indicates that consumer’s
favourable attitude toward brand.
- this is minimum expectation of advertiser while
developing brand franchise.
76

Branding and Marketing Programme:
- it is a instrument of advertising and sales promotion in order
to secure consumer loyalty toward the brand.
Some of the reasons for granting importance to branding are –
1. Product Differentiation.
2. Brand Image.
3. Creation of Market.
4. Advertisement and Publicity.
5. Brand Preference.
6. Brand Patronage.
7. Expanding the Product Mix.
77

Brand / Product Positioning:
- it is what the company do to the mind of the prospect (i.e.) to
create and build up brand equity, perceived value of product
position in minds of customer.
- the purpose of positioning must occupy particular space
continuously in consumer’s mind, which is called ‘renting mind
space’. (i.e.) finding a suitable space in mind of customer.
- positioning is based on Unique Selling Proposition (USP).
- it answers the question who am I and what is in me?
(E.g.) Complan is positioned as a health builder.
Amul milk powder is positioned as convenient and ready
substitute to milk.
Maruti car is positioned on fuel efficiency.
Some positioning depends on luxury, usage, convenience, quality,
etc.
79

Brand Future in India:
Brand is a proprietary name which has three important legs:
1. Brand equity – it is intrinsic value or worth of brand, in terms
of money a consumer is willing to pay for it in preference.
2. Brand image / values – consumer’s mind set which are
beneficial to purchase of brand.
3. Brand franchise – measures on – going relationships between
brand and consumers in terms of actual purchase.
- branding phenomenon has taken Indian market by storm.
Branding and Consumers:
Consumers while buying pre-packed branded goods use following
guidelines to measure quality in relation to price.
1. Tips from friend. 2. advertising.
3. slogans. 4. brands & trademarks.
5. labels. 6. comments from salesman. 80

- price is used as a measure of quality and high price is
indication of quality.
- repetitive advertisement tells consumers that brands
assures high quality and rarely given evidence to prove
higher quality.
- based on comparative testing there is no dependable
correlation among brand, price and quality.
- brand process may be against public interest and it needs
attractive packaging, heavy advertising and promotional
expenditure.
- utility of branding diminishes as consumer’s faith and
confidence in product increases.
- consumer demands the product by quoting the special
brand name. (E.g.) Prestige gas stove, Kenstar Micro
Owen, etc. 81

PACKAGING
Meaning:
 Packaging & labelling are
specialized activities demanding the product or services.
 Package and label represents the product personality.
 Aesthetically pleasing package can secure higher sales and
profit.
 It means of attractive display in the retailer’s shops.
 It is a physical action and provide a handling convenience,
necessary to prevent, maintains freshness and quality and
prevent danger of adulteration. (E.g.) reusable jar.
 It is an invaluable aid to decision making by customers and
package is important informational cue to many buyers.
83

Definition:
“Packaging may be defined as the general group of
activities in the planning of a product. It formulate a design
of package and producing an appropriate and attractive
container or wrapper for a product.”
Packaging value will be based on following contributions –
1. Condition of products on receipt by the customer.
2. Promotional and informative value of the package.
3. Role of package in physical distribution at all points in
marketing channel.
4. Environmental and ecological aspects of packaging.
- it decorates and beautifies the product.
- message on label is a constant remainder to user of
product.
84

Functions of Packaging:
From marketer’s point of view –
1. Packaging is a sales tool.
2. It identifies the maker as well as product and carries brand
name.
3. Packaging label informs buyer about inner contents and
how to use them.
4. It is the biggest advertising and promotion tool.
Attributes of good package:
1. Protect the contents from breakage or spoilage.
2. Be easy to open, dispense from and close.
3. Be safe to use. 4. keep product from deterioting.
5. Proper size and shape. 6. reusable.
7. Be economical. 8. available in appropriate sizes. 87

Good package will be -
1. Be attractive. 2. projecting a favorable image.
3. Play role of silent salesman.
4. Readily identifiable in shopping situations.
5. Act as a unique selling proposition.
6. Readable description of contents.
7. Offer information about preparation and use.
8. Communicate benefits of product.
Package Design:
- it must fulfill utility functions like protection,
identification and convenience.
- it should have informative labelling. (headlines,
guidelines).
- visibility of product in package helps to sell product. 89

- well designed and attractive package is an ever –
present.
A good package is -
a) economical, b) functional, c) communicative and d)
attractive.
- truth in packaging is absolutely necessary while
designing the package.
- deceptions in packages should be eliminated either
through self regulation or legislation.
- package must be honest and helpful to consumers.
- it should have deceptive communication under any
circumstances.
- consumerism insists on truth in package.
89

Innovative packaging (Value added Package):
- nowadays marketer are dividing link between value –
added package and promotion.
- there are spate of packaging innovations go beyond for
impulse purchase and excitement.
- innovative packaging based on customer needs can help in
retaining loyalty to brand.
- modern package provides more value added to products
and benefits during usage.
- it can be a promotional campaign to gain quick short term
market share.
(E.g.) Plastic bag with zip lock, five strips of Band-Aid,
Harpic liquid toilet cleaner with nozzle, Bournvita’s
reusable mug-cum jar pack, etc.
90

Revolutionizing the Packaging System:
- the types of plastics not only utilize depleted natural
resources but also revolutionized concept of packaging.
- new rigid plastic materials with printability and
metalizing property is revolutionize packaging system in
field of medical and food sectors.
- reprocess and reuse has solved the problem of pollution.
- in India, 40% of plastic are recycled, where plastic
containers are reused several times.
- weight of packing materials would be 300% higher,
volume of waste 150%.
- plastic recycling reduced substantially problem of waste
disposal and environmental degradation due to packaging.
92

Social View of Packaging:
Significance of social view of packaging are –
1. Pollution control is burning issue in packaging particularly
in Western countries. (E.g.) broken bottles, crushed
cartons, bent cans litter.
2. Resource scarcity is another problem. (natural resources
are being waster on non – returnable) (E.g.) soft drink
bottles, beer bottles, etc.
3. Among the resources which are wasted, energy sources are
most critical at present. (energy saving, returnable bottle
should be introduced).
4. Nutrition labelling, open dating (freshness in product), unit
pricing and grade labelling are latest demand of consumers.
93

Consumers Problems with Packaging:
1. Unless package is transparent, buyer can’t judge the
contents.
2. If customer wants a specific quantity, no amount when it
sold in packages.
3. There is no feasible way to check the weight and volume
of contents unless buyers opens the package.
4.Package size and designs inflate the contents. (E.g.) 10%
off in price may not be real.
5. Deceptive package have several problems in trade
practices.
6. Packages are same, contents are reduced and apparently
same prices are charged.
7. Package may create health hazards for consumers.
94

PRICING
Meaning:
 Price is the mechanism or
device for translating into quantitative terms (rupees and
paise) the perceived value of the product to the customer at
a point of time.
 Price must be equal to the total amount of benefits
(physical, economic, social and psychological benefits).
 Price is the only criteria for consumer for comparing
alternative items and making the final choice.
 Price is equivalent to total product offering includes brand
name, package, benefits, service after sale, delivery, etc.
Money (Price) = Bundle of Expectation or satisfactions.
95

Definition:
“Price is defined as the amount of money charged for a
product or service.”
“Price is defined as the amount of money expected, required
or given in payment for something or product or service.”
Importance of Pricing:
- it denotes the value of a product or service expressed in
money.
- price is determined by free play of demand and supply.
- market price acts as basis for fixing the sale price.
- price regulates business profits, allocates the economic
resources for optimum production.
- price is prime regulator of production, distribution and
consumption of goods.
96

Important marketing variables influenced by pricing
decisions are:
1. Sales volume.
2. Profit margins.
3. Rate of return on investment.
4. Trade margins.
5. Advertising and sales promotion.
6. Product image.
7. New product development.
- pricing is important role in design of marketing mix.
- it is a powerful marketing instrument.
- every marketing plan involves a pricing decision and it
should be accurate and planned.
97

Significance of the Price factor:
Price level –
a) Controls the sales volume and firm’s market share.
b) Determines the total sales revenue. (sales revenue = sales
volume unit price).
c) Regulates the rate of return on investment and through
ROI influences sales profitability.
d) Creates an impact on unit cost in mass production.
Objective of Pricing:
1. Growth in Sales
2. Market Share
3. Predetermined profit level
4. Meet or Follow Competition
5. Control cash flow 98

Factors influencing Pricing Policy:
1. Cost
2. Objectives
3. Demand
4. Competition
5. Distribution channel
6. Government
7. Economic Conditions
8. Ethical Consideration
9. Types of Buyers
10. Product Differentiation
11. Geographic Pricing
12. Prestige Pricing
13. Contract Pricing
100

Price Determination Process:
1. Market Segmentation
2. Estimate of Demand
3. Market Share
4. Marketing Mix
5. Estimate of Costs
6. Pricing Policies
7. Pricing Strategies
8. Price Structure
105

Pricing Methods:
1. Cost – Plus Pricing:
 Set the price at the production cost plus a certain profit
margins.
2. Target return pricing:
 Set the price to achieve a target return on investment.
(E.g.) suppose a pen manufacturer has invested 1 million
rupees in the business and wants to set a price to earn a 20%
ROI. The manufacturing cost of per pen is Rs.16. Assuming
that the sales can reach 50,000 units, the Target return price
will be = 16 + (0.2 * 1000000)/ 50,000 = Rs.20
3. Value – based pricing:
 Base the price on the effective value to the customer relative to
alternative products.
(E.g.) price based on materials. Shoe, Clothes, etc 109

4. Psychological pricing:
 Base the price on factors such as signals of product quality,
popular price points and what the consumer perceives to be
fair. (E.g.) Bata showroom price Rs.199, Rs. 399.
5. Skimming price:
 Enter the market by setting a high price and selling to those
customers who are less price sensitive. (E.g.) Electronics
6. Penetration Pricing:
 Enter the market by setting a low price and selling maximum
quantity to attract large no. of customers.
7. Managerial Cost pricing:
 Setting the price of the product to equal the extra cost of
producing an extra unit of output. (E.g.) fixing a price and
getting margin based on demand.
110

8. Going rate pricing:
 Setting a price for a product or service using the prevailing
market price as a basis. It is common practice with
homogeneous products with very little variation from one
producer to another.
(E.g.) Aluminum or steel, etc.
9. Customary pricing:
 Price for goods or service based on the perceived expectations
of customers. It is used for products with relatively long market
history of being sold for particular amount.
(E.g.) Milk, coffee powder, soft drinks, etc.
10. Mark – up pricing:
 It refers to the price arrived at by a retailer by adding a certain
percentage (towards his margin of profit) to the manufacturer’s
price. It is only at this price that he sells the goods to the
consumers. 111

Forces influencing Price Decision:
1. Base Price:
- it is realistic market price and resembles an ideal price.
- it is made ensure closer correlation between the product of
firm and consumer wants and desire (i.e.) matching the product
offering with the expected bundle of satisfactions.
- it acts as reference price and determined by adding extras and
deducting discounts.
2. Break – even analysis and pricing:
- it emphasize relationships among decision variables like price,
costs and volume of sales.
Sales Revenue = Total Costs
“Break even point is defined as neither gains nor losses”.
- it is the point at which sales revenue is just equal to the total
costs.
112

* Sales Volume – it is a function of prices charged and the
amount of products sold.
- it is based on sales budget and the sales forecasts (i.e.)
estimated sales volume.
* Costs – fixed costs are costs of being in business and variable
costs vary with the output or number of units produced.
* Contributions – it is important factor in break even analysis.
- it contributes to profit and overheads per unit of each
product.
3. Return on Investment (ROI):
- it is financial ratio of profit to equity.
- it improved through pricing that will increase turnover while
maintaining earnings.
- ROI can be improved by increasing the earnings ratio.
113

DISTRIBUTION
Definition:
“Channels of Distribution is defined as the set of
interdependent marketing institutions participating in the
marketing activities involved in the movement or flow of
goods or services from the primary producer to the
ultimate consumer.”
Components of distribution:
1. All kinds of merchant middlemen like wholesalers and
retailers.
2. All kinds of agent middlemen like commission, agents,
brokers, warehouse – keepers, etc.
3. All other facilitating agencies like bankers, advertising
agencies, etc. 121

Need for Channels of Distribution:
i) Searching out of buyers and sellers.
ii) Matching goods to the requirements of market.
iii) Offering products in the form of assortments or
packages of items usable and acceptable by users.
iv) Persuading and influencing the prospective buyers
to favour a certain product and maker.
v) Implementing pricing strategies in such a manner
that would be acceptable to buyers and ensure
effective distribution.
vi) Looking after all physical distribution functions.
122

vii) Participating actively in creation and
establishment of market for new product.
viii) Offering pre – and after – sale services to
customers.
ix) Transferring of new technology to the users along
with supply of products and playing role of change
agents.
x) Feedback information, marketing intelligence for
suppliers.
xi) Offering credit to retailers and consumers.
xii) Risk bearing with reference to stock holding /
transport.
123

Sub – divisions of Distribution Systems:
 Channel of Distribution – refers primarily to the
middlemen or intermediary marketing institutions which
perform certain marketing functions
 Physical Distribution – concerns with flow of goods to the
consumers – transportation, storage, warehousing,
packaging.
The Channel recognized as a system involve flow of –
a) Information. b) Marketing Communications
c) Materials. d) Manpower. e) Capital equipment.
f) Flow of goods and services.
g) Flow of ownership and risk of loss.
h) Flow of negotiation and transaction.
124

Channel Choice: (Channel Management Decisions)
Marketing channel decision influence all other marketing
decisions like pricing and promotion.
It requires special attention as involve long term
commitments to other firms.
It is a key external resources equal important with internal
resources.
The following are other critical factors –
1. Product:
 If commodity is perishable, producer prefers few and
controlled levels of distribution and speedy movements
need shorter channel.
 For durable goods, longer and diversified channel is
necessary.
125

 For custom goods, direct distribution to consumer may be
desirable.
 For technical product needs specialized selling and serving
talents.
 Products of high unit value are sold directly by travelling
sales force.
2. Market:
 For consumer market, retailer is essential and for business
market it eliminate retailer.
 If market size is large, we have many channels.
 For highly concentrated markets, direct selling is enough
but diffused markets.
 Size and average frequency of customer’s orders influence
channel decision.
126

 Adequate information like age, gender, religion, etc should
studied for market segments.
 Buying habits will influence our channel choice..
3. Middlemen:
 Middlemen provide wanted marketing services.
 Selected middlemen must offer maximum co-operation
particularly in promotional services.
 Channel generating largest volume at lower unit cost will
ne given top priority.
4. Company:
 Company’s size determines size of market and ability to get
middlemen’ s co-operation.
 Company’s product mix influences pattern of channels.
127

 Company with substantial financial resources need not rely
too much on middlemen and to reduce distribution level.
 New companies rely heavily on middlemen due to lack of
expertise.
 Company desiring to exercise greater control over channel
will prefer shorter channel.
 Heavy advertising and sale promotion can motivate
middlemen to handle displays and join in campaign.
5. Marketing Environment:
 It influence channel decision.
 During recession or depression, shorter and cheaper channel
is preferable.
 Technological inventions also have impact on distribution.
 It led to expanded role of intermediaries.
128

6. Competitors:
 Similar channels may be desirable to bring out distribution
of products also.
 Marketers avoid customary channels and adopt different
channel strategy.
Channel Decision:
 First problem of channel design is whether they want direct
sale to consumer or indirect sale (i.e.) sale through
middlemen.
 Channel is problem under direct sales.
 No. of middlemen and methods to be employed in
motivating and controlling them in case of indirect route.
 Selection of middlemen begins with needs and desires for
distribution services.
129

 No. of middlemen employed will be determined by
customer conveniences and economies of exclusive
distribution.
 Selection of channel is made after careful analysis of
product, consumers, dealers, policies, etc.
 It must resolve channels and bring product profitability
to the market.
 Company determine its basic channel design and levels
of distribution and to select middlemen, appoint them,
motivate their efforts, evaluate their periodically and
has to recognize channels in light of experience.
130

Market Coverage:
1. Extensive Distribution:
 It is essential when price is low, buying is frequent and brand
switching is a common phenomenon.
 It secures rising sales volume, wider consumer recognition
and impulse purchasing.
2. Selective or Limited Distribution:
 When special services are needed (e.g.) T.V. sets or right
prestige image is to be created.
 Certain cosmetics to be sold only through chemists, we have
selected distribution.
 It has limited middlemen and they spend more on sales
promotion and offer maximum cooperation.
 Product for long useful life and consumer brand preference,
selective distribution will be more profitable. 131

3. Exclusive Distribution:
 If amount of product service expected by final buyers, exclusive
distribution is preferable.
 One wholesaler or one retailer for given market to handle right
of distribution in market.
 It creates a sole agency in given market area.
 It offer tremendous loyalty of dealers and substantial sales
support from dealers.
 Manufacturer can have greater control over prices and markets
and get maximum co-operation from middlemen.
a) Exclusive dealing contracts – prohibit dealer from selling
products of rivals.
b) Tying contracts – they compel dealer to carry full line of
manufacturer.
c) Closed sales territory – it limits each dealer to sell only to
buyers located within assigned area. 132

4. Franchise Selling:
 Franchise means a privilege or exceptional right granted to a
person.
 It is a term to describe in effect selective or exclusive distribution
policies.
 It is contract where wholesaler or retailers are organized to act in
co-operation with each other to distribute products.
 It is a system which manufacturer grants to certain dealers the
right to sell his product.
The three forms of franchising –
1. Manufacturer-sponsored retail franchise. (car maker licenses
dealers).
2. Manufactured-sponsored wholesaler franchise. (Coca-Cola
licenses bottlers (wholesalers) in each market)
3. Service-firm sponsored retailer franchise system. (Fast-food
service, auto-rental business). 133

1. Manufacturer – Consumer – Channel (Direct Sale):
- sales through advertising and direct methods.
- sales through travelling sales force.
- sale through retail shops of manufacturer.
2. Manufacturer – Retailer – Consumer:
- directly supply to large retailers (Hypermarkets,
Supermarkets etc).
- wholesaler is by-passed.
- suitable for perishable products.
- manufacturer performs the function of a wholesaler –
Storage and transportation.
TYPES OF DISTRIBUTION CHANNELS
139

3. Manufacturer – Wholesaler – Retailer –
Consumers:
- narrow product line.
- wholesalers are specialised and can provide strong
promotional support.
- products are durable.
4. Manufacturer – Agent – Wholesaler – Retailer-
Consumer:
- producer uses the service of an agent middlemen
such as a sole selling agent, for initial dispersion of
goods.
- agricultural Marketing.
5. Manufacturer – Wholesaler – Consumer:
- Institutional Buyers. 140

MIDDLEMEN IN DISTRIBUTION
(KINDS)
Types of Wholesale / Retail Channels (Marketing Outlets)
Wholesale Retail
Wholesaler
(Merchant –
Middlemen)
Agent
Middlemen
1. Manufacturers
agents.
2. Selling agents.
3. Brokers.
4. Auctioneers.
5. Sole agents or
distributors.
Independent
Retailers
Mobile retailers
Fixed shops
Large retailers
1. Department
Store.
2. Chain store.
3. Self service
store.
4. Supermarket.
5. Discount
houses.
6. Mail order.
7. One price
shops.
8. Vending
machines.
Consumer co-
operative stores
142

1. Brokers:
“Broker is an agent who does not have direct physical
possession of goods in which he deals but he represents
either the buyer or the seller in negotiating purchases or
sales for his principals.”
- they may organized as individuals, partnership, and act as
clients, producers, dealers, manufacturers, etc.
- they experts in grades, qualities, trade terms and contract
terms.
2. Agents:
“ Agent is a person who may buy or sell on their own
account at their own risk and who do not take any title to
goods.”
- they are important in agricultural markets and it is used
by manufacturers to maintain resale prices of their goods.143

- selling agents sell entire output of their goods, have full
authority to finalize prices, terms and conditions of sale.
- all commission agents work for a fee or commission (E.g.) 3%
to 5% on sales or purchase.
Manufacturer’s agents help in three circumstances –
i) For a small manufacturer with a few products and having no
sales force.
ii) For entering into a new market to be fully developed.
iii) For sale of a new line of product which the present sales force
is unable to manage or new market is not within their territory.
3. Dealers – in primary and commodity markets, we have
different merchant dealers and they are backbone of our markets.
- dealers act as principals, buying and selling commodities on
own account at own risk.
144

Sole Selling Agency:
Good reputation firm in each area appoints sole agent or
distributor for their location.
Sole agency able to arrange for his goods to be advertised,
packed, warehoused, sold and delivered by selling agents
in market.
Sales manager ensure that agency is sound, honest and
practical proposition on mutual permanent benefit.
They should have regular legal agency agreement covering
mutual rights and obligations of both parties during agency.
Minimum period of agency should be normally 3 to 5 years,
with 3 months notice period on side of agency termination.
Sales agencies exclusive rights for territory and able to
handle the given area effectively.
145

Consignment Sale:
 Agent bought the stock by understanding the return for credit the
stock unsold.
 Stock is held on consignment by agent and property remains with the
seller until it is sold.
 It mention the maximum amount of stock to be held by agent at a
time.
 The goods are consigned to the selling agent called consignee on sale
or return basis.
 Expenses and commission are deducted from total sale proceeds and
net amount due is remitted by cheque along with account sale
 Sole agent or sole distributors are reasonable areas for exclusive
selling rights.
 Seller cannot put too much of business in hands of one agent.
 Change of agent is difficult in practice without loss of business and
prestige.
146

WHOLESALE TRADE
Wholesalers:
“Wholesalers are individuals or business firms who
will sell products to be used primarily for resale or for
industrial use.”
“The wholesaler is a bulk purchaser with the object of
resale to retailers or other traders after breaking down his
‘Bulk’ in smaller quantities.”
Wholesalers Vs Retail Trade:
Wholesalers Retailers
Operates on large scale in central
market and act as first outlet in
distribution.
Operates on small scale and in local
markets, selling directly to consumers a
variety of goods to satisfy the customers.
It needs large capital, wholesale prices
and margins are low, business carried
on with or without showroom.
It requires limited capital, the prices and
margins are relatively higher and business
requires a shop with or without display.
147

Types of Wholesalers:
There are three board categories of wholesalers:
1. Regular merchant wholesalers independently
owned, buying outright, offering full service and
have general – line or engage in speciality goods.
2. Wholesale commission agents with independent
ownership, but taking no title to goods and only
actively negotiating sale / purchase of goods.
3. Manufacturer’s own branches or branch offices,
owned by manufactured performing selling
functions. They maintain stock and have attractive
showrooms.
148

Typical Wholesale services:
Wholesalers offers typical services as middlemen between
producers and retailers in central market:
1. Maintenance of sales force.
2. Storage.
3. Delivery to retailers.
4. Financial help to both manufacturer and retailer.
5. Merchandising (i.e.) preparations for sale (packing,
grading, branding, etc.)
6. Sales promotional work.
7. Product servicing.
8. Marketing information.
9. Risk – bearing.
149

Managing Distribution Channel:
Guidelines for channel management are –
1. Interdependence – each channel members depends on
other channel member to achieve desired goals.
- potential to influence the decisions of another.
- proper coordination and relationships.
2. Trust – trust or confidence in reliability and integrity of
channel members.
- it brings coordination of channel relationships.
3. Support – producers should support channel members in
all possible ways.
- funds provided to intermediaries for purposes like
brochures, mailings and training related to product.
150

4. Goal setting and planning – meet members formally to set
joint goals and develop plans for coming year.
- this develops a feel of partnership in minds of channel
intermediaries and make commitment to goals.
- it is essential to involve intermediaries in goal setting
process to facilitate smooth functioning of marketing
activities.
5. Monitoring Intermediary activities – sales personnel must
keep track of marketing and selling efforts of each
intermediary.
6. Motivating intermediary – motivation is achieved through
financial and non – financial rewards to give their best
performance.
7. Conflict resolution – it occurs when members disagree about
course of their relationship, due to pressures, policy changes,
etc. 151

PROMOTION
Meaning:
Promotion is the process of marketing
communication involving information, persuasion
and influence.
Promotion has three specific purposes –
a) it communicates marketing information to
consumers, users and resellers.
b) it persuades and convinces buyer and enters into
this consumer behaviour.
c) it act as powerful tools of competition providing
the cutting edge of its entire marketing programme.
152

Definition:
Promotion is defined as the coordinated self – initiated
efforts to establish channels of information and persuasion
to facilitate or acceptance of ideas or point of view”.
 Promotion has two basic purposes –
a) Persuasive communication.
b) Tool of competition.
- promotion is responsible for awakening and stimulating
consumer demand for your product.
- it can create and stimulate demand, capture demand from
rivals and maintain demand.
- promotion try to influences consumer attitudes, beliefs,
ways of living or life style, values and preferences towards
a company and its products and influence behaviour.
153

Nature of Promotion:
1. Informative process:
 All promotions are designed to inform about firm’s product to
target market.
 It provides information about availability, features and uses of
products to consumers.
2. Persuasive process:
 The purpose of promotion is to persuade people to buy.
 It is designed to stimulate purchase and to create a positive
image in order to influence long term buyer behaviour.
3. Motivating process:
 It aims at motivating distributors to provide more floor space to
company’s product and push them.
4. Brand switching:
 It aims at attracting customers using competitor’s brand. 154

5. Promotion is an investment:
 It is a short term effort to gain sales.
 It creates positive attitude towards an organization or product.
6. Promotion is directed towards a target group:
 It developed by company aims at a target group.
 It start with a clear view of target group and it is to be covered
and what type of message and media should be selected.
7. Promotion calls for economics:
 It involves huge amount of expenditure.
 It is suggested that promotional expenditure should be raised to
point where marginal return matches marginal cost.
8. It is an intelligence process:
 It involves a lot of activities that are to be handled carefully.
 It includes identifying target audiences, determining sales
promotion objectives, sales promotion budget, etc. 155

Importance of Promotion:
 It attracts more customers to product. The incentive like
price off, premium etc, offered by manufacturers attracts
people to product.
 It encourages middlemen to buy and store more: offer
incentives more to people to go shops where product are
available. If sufficient quantity is not stocked customers
may shift to some other brands.
 It encourages the sales force by offering incentives to
salesmen. It will influence salesmen to participate in the
campaigns.
 It boosts sales in the short and long term.
 It reinforces the brand image with the customers.
156

Main purpose of Promotion:
 It is to influence buyer behaviour and later the location and
shape of consumer demand in favour of products.
The following concepts demonstrates the effect of promotion on
demand.
 Large quantity sold at the same price.
 Same quantity sold at the higher price.
 It is employed to retain price and secure increasing sales at
same price.
 It can also raise price but retain sales level by making
demand.
 Higher sales revenue can be accomplished with help of
persuasive marketing communications.
 It is influenced with help of personal selling, advertising,
publicity and sales promotion devices. 157

 There are five conditions indicating favourable opportunity to
promote –
1. Favourable trend in demand.
2. Strong product differentiation.
3. Hidden product qualities.
4. Emotional buying motives.
5. Adequate finance to promote.
Social Aspects of promotion:
 It aggravate the social problem like media control, waste
disposal, general welfare, deceptive advertising practices,
misleading packaging and labelling, etc.
 Criticism against promotion is greatest factor when product
fulfills needs of customers. (E.g.) Cigarettes or liquor.
 It should not mislead the average consumers, manipulate
consumer behaviour and market conditions. 158

Promotion Process:
 Buyers can induced to visit a store, listen to radio
commercials, watch television, read newspaper and
advertisements for more information.
 Individual buyers is induced to pass through several stages on
buying a product – a) Awareness (attention), b) Interest, c)
Desire and d) Action.
 The adoption process includes – a) awareness, b) interest, c)
evaluation, d) trial and e) adoption.
 The hierarchy of behavioural effects on consumer decision
making process – a) awareness, b) knowledge, c) liking, d)
preference, e) conviction and f) action.
 It is a systematic attempt to move forward step by step
prospects from a stage of unawareness to awareness and
finally to purchase action.
159

 The three distinct kinds of consumer responses to promotion
– a) awareness and knowledge emphasizing cognitive
response, b) changes attitudes, emphasizing affective
response, c) new behaviour including motivational response.
 Marketer must be aware of fact that his promotion is only
one persuasive influence operating among many other
influences in total situation.
 Marketers must know about their audience thoroughly.
 Buyers predispositions and behaviour are governed by socio-
economic, demographic and personality characteristics.
 It will determine behaviour and action toward a company
and its products.
 User is the key to whole exercise of communication and
consumer will accept which will interest him.
160

Promotion Strategy:
 Strategy lays down the principles by company to secure
advantage over competitors, exhibit attractiveness to buyers.
 It has four importance – a) product described in marketing,
b) prospect to be converted into a customer through
persuasion and influenced by promotion, c) seller or
sponsor who undertakes promotion, d) channel or route
along which product will move from marketer to buyer.
 Promotion strategy depends on four sides – a) blend of
promotional activities, b) amount allocated for various
forms of promotion particularly to advertising media like
TV, radio, etc, c) kind of promotion to be used.
 Mode of promotion depends on nature of products,
characteristics, stage of market development and stage of
buyer decision making.
161

An integrated promotion or marketing communication strategy
are -
1. Product:
 It is one factors determining form of promotion and
effectively shown on TV and mass selling goods easily
promoted through radio and television advertising.
2. The Buyer:
 Marketers should know about needs and desires, attitudes
and values, expectations of customers if they want to
provide realistic solutions to buyers problem.
3. The Company:
 Firm’s image must be closely associated with promotional
strategy so that goodwill is exploited.
 It emphasize more on characters, reputation and
responsibility of firm. 162

4. The Channel Choice:
 It depends on channel or route through which products of
firm flow to customers.
 Firms well known brand that can control over channels
through pull promotion strategies.
 Extensive and heavy use of advertising and sales promotion
is necessary to generate consumer demand.
 Industrial marketing strategies rely on personal selling.
 Push strategy successfully used when – a) we have high
quality product with unique selling points, b) we have high
priced product and c) we can offer adequate incentives to
middlemen.
 Ratio of pull strategy to push strategy may differ according
to requirements of market situation.
163

PROMOTION MIX
Promotion mix includes four ingredients –
I) Advertising:
“Advertising can be defined as mass,
paid communication (presentation and
promotion) of goods, services or ideas by an identified
sponsor”.
- it appears in recognized media such as newspapers,
magazines, radio, television, cinema film, posters, direct
mail, etc.
- sponsor wants to persuade and induce readers, viewers to
take some action like buy the advertised product.
164

Strengths of Advertising as a Promotion Tool:
 It offers planned and controlled message.
 It can contact and influence numerous people
simultaneously, quickly and at low cost.
 It has ability to deliver messages to audiences with
particular demographic and socio-economic features.
 It can deliver the same message consistently in variety of
contexts.
 It can reach prospects that can’t approached by salesmen.
 It helps to pre-sell goods and pull buyers to retailers.
 It offers a wide choice of channels for transmission of
messages like visual, audio – visual, etc.
 It is very useful to create maximum interest and offer
adequate knowledge of new product.
165

Weakness of Advertising as a Promotion Tool:
 It is much less effective than personal selling and sales
promotion.
 It is less flexible than personal communication.
 It is essentially one way means of communication.
 It is most efficient communication but least effective as tool
of communication.
 It is unable to reach prospects when they are in buying
mood.
 Advertising media carry many messages to secure attention
of audience.
 Advertising, many a time, lacks credibility and
trustworthiness.
166

Features of Advertising:
 It is a unique means of non – personal or mass
communication announcing sales of goods or services.
 It is non – personal salesmanship performing similar
function like personal salesmanship.
 It is openly sponsored sales message regarding product or
service.
 It is a paid communication – paid for sponsor.
 Advertising message can be addressed to numerous
persons at a time.
The differences between advertising and salesmanship –
 Salesmanship is personal involving direct face-to-face
communication. Advertising is non-personal and indirect
means of communication with prospect through media.
167

 Salesmanship is individual communication through personal
interview between sales person and prospect. Advertising is a
mass communication, advertiser reaching a large no. of
prospects simultaneously.
The difference between advertising and other forms of publicity –
 Advertising must be carried on by an identified sponsor.
Publicity need not have identified sponsor.
 Advertising is a paid form of communication. Publicity is not a
paid form of communication.
Importance of advertising:
 Mass production & mass distribution.
 Employment opportunities & rising standard of living.
 Industrialization and economic development.
 Guides, educates and protects buyers.
 Supplemented tool for sales promotion.
168

Purposes of advertising:
1. Promotion of new product:
 It make buyers at least aware of entry of new product.
2. Support to Personal selling:
 It moves the buyer nearer and nearer to point of purchase.
 Salesman job is easier and simple.
3. Brand Patronage:
 Effect of advertising on brands and companies are great
importance.
 It induced to purchase and repurchase and retain brand
preference and brand loyalty.
4. Immediate Buying action:
 It may attempt to obtain immediate buying action like point
of purchase advertisement, price deal offers, etc. 169

 Direct mail is usual medium for coupons, samples and
other forms of direct action advertising.
5. Pre – sold goods:
 Well advertised brands are pre-sold goods.
 Buyers are pulled by such advertisements.
 Supermarket advertisers pull customers and goods are sold
without active help of counter sales force.
6. Dealer support:
 It support dealers and distributors so that they assure
accelerated distribution.
 It create mass markets for products which are intrinsically
sound and easily fill the customer needs and desires.
 It brings reduction in cost of production as well as cost of
distribution.
170

Advertisement as Communication Process:
 The following criteria describes communication process –
a) communicator, b) idea, c) media, d) audience in process
of communication.
 Advertising is expected to influence buyer behaviour to
attempt – a) induce awareness, b) change certain attitudes,
c) induce customer to buy.
 Obstacles and difficulties by advertising are – a) resistance
or defence of audience, b) present predispositions and
habits change very slowly, c)advertising may be
inappropriate, d) picture and text may be used ineffectually,
e) there may be too quick change in theme, f) advertising
budget may be too small.
 Effectiveness of advertising measured in terms of
consumer’s attitude, preference and beliefs. 171

 Advertising objectives around process of communication
and its tasks are – a) developing brand awareness, b)
changing consumer attitudes, c) associating desirable
theme with product, d) informing consumers about product
attributes.
Classification of awareness levels has five levels –
 i) unawareness indicating those who have never heard of
product.
 ii) awareness covering those who know of existence of
product.
 iii) comprehension representing those who comprehend the
product but not yet convinced.
 iv) conviction pointing out those who are not yet convinced
about merits of product.
172

Advertising goals divided into four stages as –
1. Awareness – product become aware of existence of brand
or company.
2. Comprehension – it indicates that people are not only
aware of brand but also brand name and package or
trademark.
3. Conviction – it must mentally convinced to buy the brand
or product and shows brand preference.
4. Action – the prospect takes meaningful action.
 Advertising performs its role when it contributes to moving
the consumer from one level to another in communication.
 It is to perform certain parts of communication job with
greater economy, speed and volume than accomplished
through other means of promotion.
173

Types of Advertising:
1. Mural (or) Outdoor Advertising:
- it has long life, general and wide appeal.
- it can attract attention of numerous
people and good to remind buyers.
- it can’t have long message and useful for specialized
products and low retention value.
(E.g.) Bill boards, Banner, etc.
2. Press Advertising:
- it is very common method in publicity.
- periodical change in size and content is also easy.
- effectiveness is estimated by having key advertisements.
(E.g.) Newspaper, Magazines and Journals, etc.
174

3. Film Advertising:
- it has wide appeal and overcome language barriers.
- audio-visual technique has maximum impact on
audiences and communicating message.
- cost of distribution of slides and films are high.
4. Radio Advertisements:
- radio has shortest closing times and use only audio
signal.
- announcements made very quickly and secure dealer
support.
- it is even suitable for illiterate people and spoken word
has greater than written word.
- it may not be effective if listeners may not like.
- the message is lost, if radio is not tuned. 175

5. Television Advertisement:
- it use both audio and video signals and additional advantage
of sight.
- it reaches audience almost like personal face-to-face
contact.
- it get opportunity for product demonstration and
amplification of selling points with audio presentation.
- television combines all elements of communication like – a)
illustration, b) music, c) spoken words, d) written words.
6. Transit Advertising:
- it consists of car-card advertising, which is located within
buses, subways, railways and outside displays, appear on
front and back side of buses, public transport.
- it gives geographic and seasonal selectivity.
- it reach pedestrians and travelling public. 176

7. Direct Mail:
- it is an advertisement sent by mail including sales letters,
pamphlets, catalogues, etc.
- it is most personal and selective media and reached only
desired prospects.
- it can provide detailed information about the product or
service.
- the results of direct mail advertising can be checked by
means of an offer incorporated in mailing list.
- receiver may considered it as junk mail as it may not have
entertainment value.
- the advertising copy can be very flexible.
- it has maximum personal features even without personal
contact.
177

8. Advertising Specialties:
- it includes wide variety of items such as calendars, books,
matches, pens, diaries, paper weights, purses, etc.
- they given to advertising targets without cost or obligation.
- advertiser’s name, address, phone no and short message are
printed on item.
- it lead to customer re-order and limited space available for
sales message.
9. Point – of – Purchase Advertising:
- it represents sales promotion devices.
- it covers display material used in advertising programme
and include window banners, shelf – talkers, tags, shutters,
information folders and booklets and other displaying
materials.
178

Creation of Advertisement:
1. Advertisement Theme or Appeal:
- theme or appeal is central idea around which advertisement is
created.
- theme or appeal based on human emotion, feelings,
sentiments, needs and desires.
- it motivate, attract the right group of buyers.
2. Advertising Layout:
The elements of layout are –
a) Headline (main theme, sub heading in few words, simple, short
and attractive).
b) Illustrations (cartoons, pictures, symbols, photographs).
c) Colour ( attention – attracting power like red, green, black).
d) Body Copy or Text (advertising message, educates, reminds).
e) Slogan (contain brand name or company name, few words). 179

3. Advertising Copy:
- success of advertising depends on copy of advertisement.
- it is to attract customer and create image in their mind.
- it may be text of print, radio or TV advertising message to
hold the interest of buyers.
How to create successful advertising copy?
1. Define the goal of your message.
2. Know your audience and what they want.
3. Appeal to their self – interest not yours.
4. Make an emotional appeal, not a logical one.
5. Don’t give them any choices.
6. Make your best offer.
7. Simplify everything.
180

II) Sales Promotion:
“Sales promotion is referred to activities other than
personal salesmanship, advertising and publicity which
stimulate consumer purchasing and dealer effectiveness.”
(E.g.) Displays, exhibitions and showrooms, free samples,
coupons, etc.
- it is bridge or connecting link covering the gap between
advertising and personal salesmanship.
- sale of product has to be promoted through a no. of
influences at place where retailers and buyers meet face-to-
face (i.e.) point of purchase.
- it is a vital link between advertising and field – setting.
- it aims at stimulating consumer purchasing at point of sale
and dealers effectiveness.
181

Why use sales promotion?
- it is something extra that creates buying interest or spark an
immediate reaction from customer.
- it involve incentives which is something value added to
encourage some response from customers.
- point of purchase displays real off, sales rising by 25% to
50%.
Sales Promotion Objectives:
 To increase buying response by ultimate consumers.
 To increase selling efforts and intensity by dealers as well as
sales personnel.
The following reasons for sales promotion –
 Calling attention to new products and product improvements.
 Informing buyers of new brand and new package.
182

 Improving market share.
 Increasing usage rate by present customers.
 Maintaining customer patronage and brand loyalty.
 Obtaining dealer outlets.
 Securing additional shelf – space and added display.
 Creating talking points for sales persons.
Strengths of Sales Promotion:
1. It stimulates positive attitude towards product.
2. It gives extra incentive to consumer to make purchase.
3. It gives direct inducement to take immediate action.
4. It has flexibility and it can be used at any stage of a new product
introduction.
Sales promotion are effective – when new brand is introduced, when
communicate, want to simplify results of advertising and want to
increase no. of retail stores.
183

Limitations of Sales promotion:
 Temporary and short life not exceeding three months.
 It is supplementary devices for other promotion tools.
 They are non – recurring in their use.
 Too many sales promotions affect brand image and
suggest its lack of overstocking.
 Advertising agencies has low status to sales
promotions.
Sales promotion are ineffective –
 When established brands have a declining market.
 There are no product improvements.
 When there is intensive competition on consumer sales
promotion. 184

Kinds of Sales Promotion:
1. Consumer Sales Promotion:
The devices are –
i) consumer sampling (i.e.) free samples given to customer to
introduce new product.
ii) demonstrations or instructions educating the customers.
iii) coupon is a certificate that reduce price.
iv) money refund orders (i.e) full purchase price is refunded.
v) premium offers.
vi) price – off.
vii) fashion shows and parades are good promotion.
viii) contests and
ix) trading stamps.
185
Unit 4 – Marketing Mix

2. Dealer’s Sales Promotion:
The devices are –
i) There is a provision of free display material at point of purchase.
ii) Retail demonstrators supplied by manufacturers for distributing
product as a retail sample.
iii) Trade deals are offered to encourage retailers to give additional
selling support to product.
iv) Seller gives buying allowances of certain amount of money.
v) Buyback allowances.
vi) Seller gives free goods.
vii) Advertising and display allowances.
viii) Sales contests for salesmen are held.
ix) Dealer loader is premium given to retailer.
x) Dealer and distributor training for salesmen.
186

Reasons for Sales Promotion:
Some of the reasons are –
 Introduction of new product.
 Stimulus for a new use of a product.
 Encouragement for increasing frequency of purchase.
 Appeal to a special area of market.
 Combination offer to encourage use of other products.
 Creation of dealer interest and inducing them to stock articles.
 Securing shelf space in retail window.
 Counter balancing price competition.
 Special training of salesmen.
 Seasonal and grand reduction sales.
 Capturing bargain hunting and non brand conscious buyers.
 Acceleration to slow selling lines.
187
Unit 4 – Marketing Mix

III) Public Relations (PR):
“Public relations is referred to everything that is conducted
to improve mutual understanding between an organization and
target groups and all those with whom it comes into contact both
within and outside the organization with aim of building
goodwill and good image.”
Importance of PR:
 It helps in creating a good and favourable image of products.
 It helps in introduction of new products by providing
information about them to news media.
 It helps in improving the image and repositioning in market.
 It helps in influencing national and local government.
 It helps in influencing specific groups and establishing
relationships with them.
 It helps in keeping good and health relations with agencies.
188

Developing a PR Campaign:
Designing and developing a marketing PR programme involve
following steps –
a) Determining publicity objectives:
 To create awareness among publics of company’s productive
services.
 To build company’s credibility and image.
 To motivate and help distributors and channel members.
 To save promotion cost.
 To promote a social cause.
b) Designing message and selecting PR tools:
i) Company publications – it includes company magazines,
annual reports, newsletters, pamphlets.
- it tells audience about company, philosophy, how they work
and other public service. 189

ii) News and Press releases – giving facts and information about
company, about product and release to press for publications.
- it need to strike special report with media editors and reporters
to gain favour for publications.
iii) Events – companies organize and sponsor no. of special
events like sports tournaments, music, dance and other arts and
cultural programme.
iv) Advertising – it can also be communicated through advertising.
- companies, industries use Ads for lobbying (i.e.) lobbying
refer to publishing one’s arguments and support or against or
interest.
v) Social service activity – it build goodwill by donating or
contributing money and efforts to good social or community
causes.
- small part of money received from sale for charitable purpose
like Leprosy, Education of orphans, etc. 190

c) Implementing PR:
 It must be competent in organizing and conducting meetings and
should be well skilled in public speaking and reporting.
 It is entrusted to PR agencies and some companies appoint PR
consultants to advice on certain matters.
d) Evaluating PR Effectiveness:
 Evaluating result of PR is a difficult task.
 It can be measured through awareness, attitude change and sales
– profit contribution, etc.
IV) Publicity:
“Publicity is also called marketing public relations. It is not paid
for by the organization.”
- it comes from news reporters and journalists and come to the
receiver as truth rather than as commercial.
- it create good public relations to give good publicity.
191

Public Relations:
“The total process of building goodwill toward a business
enterprise and securing bright public image of the company is
called pubic relations.”
 There are four groups of public – a) customers, b) shareholders,
c) employees, d) community.
 It complement advertising by creating product and service
credibility.
 Bright image is created and maintained only by public relations.
V) Direct Marketing:
“Direct marketing is defined as an interactive system of
marketing which uses non – personal media of communication
to make a sale at any location.”
 It is essential which creates and exploits a direct relationship
between marketer and prospect or customer.
192

Methods of Direct Marketing:
a) In – home selling:
 Marketer use door-to-door selling through trained sales force.
(E.g.) Eureka Forbes.
 This method is costly but effective.
b) Tele buying / Tele selling:
 Telephone buying and direct phone contact with buyers and
secure orders on phone.
 It provides free home delivery which is very convenient and
also cheaper method for families.
 With the help of computer automatically dial a phone no. and
record a response from customer.
c) Mail Order Sale:
 Standardization, grading, branding and packaging brought
about growth of mail order sale
193

 Seller approaches the prospects by mail publicity (i.e.) sending
circulars, price list, catalogue, pamphlets, samples, etc.
 All selling is done invariably through regular advertisements
and direct mail publicity.
 (E.g.) Goods suitable for mail order – durable and branded
goods, goods having regular demand, goods with sufficient
margin of products, etc.
 (i.e.) books, toys, watches, clothes, footwear and small
appliances.
d) Direct response marketing:
 Magazines, newspapers, radio and television are used as direct
response offers to customers.
 Customer is requested to secure further information and place an
order directly using toll-free number.
 It is growing medium through network and cable channels.
194

e) Automatic Vending machine:
 Well known pre sold brands with good turnover are sold by
vending machines.
 Usually kept at work places and public places. (E.g.) cold
drinks, coffee, candy, snacks, etc.
f) Kiosk Shopping:
 It is order placing machines, kept in stores, air ports, stations,
etc.
 Electronic kiosks sell goods through video catalogue.
Advantages of Direct marketing:
 Focus marketing efforts effectively in terms of selling to
selected target markets.
 Marketer can contact prospects directly rather than wait for them
to appear in store.
 It gives convenience to consumer for make purchases.
195

 It is a lower cost way of doing business than retail store.
 It needs less capital to be invested in business.
 It can be a side activity.
Disadvantages of Direct marketing:
 Conventional retailers are not looked with suspicion by buyers.
 Marketer must be well known and established to remove this
fear.
 Direct marketing (i.e.) home selling, telemarketing affects
consumer privacy.
 Except for direct to home marketing, goods can’t inspected
prior to purchase.
 In absence of personal inspection, marketer has to offer liberal
return facilities.
 In – home selling through sales force is costly.
196

MSM - UNIT 3.pdf

Recommended

Recommended

More Related Content

Similar to MSM - UNIT 3.pdf

Similar to MSM - UNIT 3.pdf (20)

More from SOMASUNDARAM T

More from SOMASUNDARAM T (20)

Recently uploaded

Recently uploaded (20)

MSM - UNIT 3.pdf