Unit 4_Marketing Notes.pptx

Unit-4
[Channel of Distribution – importance –
Selection of distribution channel –
Promotion Mix – Advertising – Personal
Selling – Kinds of Salesmen – Sales
Promotion]
Ms. Vidhi Modi
Assistant Professor
Department of Bank Management
Ethiraj College for Women
(Autonomous)
Chennai-8.

Channels of Distribution
Meaning:
 Goods produced by the manufacturers must
come to the knowledge of the ultimate
consumers.
 This is arranged by sales promotion activities like
salesmanship and advertising.
 Channels of distribution are paths through which
products move from the points of production to
the points of consumption.
 Distribution channels are also called trade
channels.

A channel represents three flows:
a) Goods flow downwards from producer to
consumer,
b) Cash flows upwards from consumer to producer
representing payment for goods,
c) Information flows in both the directions
downstream and upstream representing two-
way traffic of communication. Upward flow
indicates feedback of information, i.e.,
consumer feelings, desires and reactions.

Importance
• Among the most critical management decisions.
• Not only serve markets, they ‘make’ market.
• Affects all other marketing decisions.
• Firm’s sale depends upon training and motivation
of dealers.

Channels of Distribution
i) Direct Selling by Manufacturers
ii) Middlemen/intermediaries*
* Middlemen are those individuals in the
channels that take title to take goods and sell at
a profit. They are directly involved in process of
flow of goods from manufacturer to consumer.

Types of intermediaries
 Wholesalers
 Retailers
 Agents

Wholesalers
Functions:
Assembling and buying, warehousing, transporting, financing,
risk bearing, dispersing and selling, providing market
information.
Service to Manufacturers:
Better use of capital, price stabilization and saving in time.
Service to Retailers:
Saving in cost and time, better use of limited factors and
expert knowledge.

Retailers
Functions:
Buying and assembling, warehousing, selling, grading and
packing, financing and advertising.
Service to Manufacturers and Wholesalers:
Offers opportunity, provides information and reduces the
risk of loss.
Service to Consumers:
Largest choice, relief from storage, supply of information.

Agents
o Help in the transfer of goods to the ultimate
users without acquiring the ownership of
these goods.
o Operate for a commission.
o Types of middle agents:
Commission agents, brokers, auctioneers,
selling agents, and clearing agents.

Common Routes for bringing the
product in the market:

Common Routes for bringing the
product in the market:
1. Manufacturer-Consumer (Direct Sale AKA 0
– level)
 Shortest Channel
 Used for Industrial goods
 Not popular for a wider market

2. Manufacturer-Retailer-Ultimate Consumer
(1 – Level)
Large retailers. Example: Departmental stores and
Super market.
Wholesalers can be by passed in this trade route.
Perishable products and require speed in distribution.
Example: Automobiles and Appliances.
Manufacturer has to perform the function of a
wholesaler (storage, insurance, financing of
inventories, and transport).

3. Manufacturer-Wholesaler-Retailer-
Consumer (2 – Level)
Regular and popular channel. Example,
groceries.
Suitable for a producer when he has a
narrow product line, wholesaler’s provide
strong promotional support and products are
durable, irrespective of fashion changes.

4. Manufacturer-Agent-Wholesaler-Retailer-
Consumer (3 – level)
 Producer uses an agent middleman (sales agent),
for the initial dispersion of goods.
 Agent -> Wholesalers -> Retailers
 Agent middlemen operate at the wholesale level;
common in agricultural marketing.
 Agents are used by the manufacturers to make
themselves free from marketing tasks.
 An agent sells on commission basis directly to
wholesalers/large retailers.

5. Manufacturer-Wholesaler-Consumer
 Wholesaler may bypass retailer when there
are large and institutional buyers.
 Example: Industrial buyers, Government,
Consumer co-operatives, hospitals,
educational institutions, business houses, etc.

Selection of Distribution Channel
Most fundamental factor: Economic criteria (Cost
and Profit)
Other critical factors:
1) Product
2) Market trends
3) Middlemen
4) Company
5) Marketing Environment
6) Competitors

1. Product
• Perishable goods: Shorter channel
• Durable goods: Longer channel
• Customised goods: Direct distribution
• Technical products: Shortest channel
• High unit value products: Direct distribution

2. Market
• Consumer markets- Retailer is essential
• Industrial markets- eliminate the retailer
• Large size market- many channels
• Small size market- direct selling (more
profitable)
• Highly concentrated markets- direct selling
• Widely scattered- Many channels

3. Middlemen
• They should provide all the required
marketing services.
• They must offer maximum cooperation in
promotional services.
• Must accept marketing policies and
programmes of the manufacturers.
• The channel generating the largest sales
volume at lower unit cost will be given top
priority. This will minimise distribution cost.

4. Company
• Company’s size determines the size of the
market.
• Company’s product mix influences the pattern
of channels. Broader the product line, shorter
the channel.
• If substantial financial resources, the company
need not rely on middlemen.

5. Marketing Environment
• During recession or depression, shorter and
cheaper channel is always preferable.
• In times of prosperity, we have a wider choice
of channel alternatives.
• Technological innovations also have an impact
on distribution. Example, the distribution of
perishable goods in distant areas has become
possible due to cold storage facilities in
transport and warehousing.

6. Competitors
• Marketers closely watch the channels used by
rivals.
• Sometimes, similar channels may be desirable
to bring about distribution of products and
sometimes deliberately avoid customary
channels (dominated by rivals) and adopt
different channel strategy.

[Channel of Distribution – Importance –
Promotion]
We have completed so far…

• It refers to the use of communication with the
twin objectives of informing potential customers
about a product and persuading them to buy.
• Promotion involves disseminating information
about the product, product line, brand or
company. It is one of the four key aspects of the
marketing mix.
• To generate sales and profits, the benefits of
product have to be communicated to customers.
In marketing this is commonly known as
“promotions”.

OBJECTIVES OF PROMOTION
Build Awareness
Create Interest
Provide Information
Stimulate Demand
Reinforce the brand

Promotion Mix
Involves an appropriate integration of
The elements of promotion mix are designed for
the purpose of conveying an effective message
to the target audience, collectively called
‘communication mix’.

Factors guiding the selection of
a promotion mix are:

Elements of Promotion Mix
•Advertising
•Personal selling
•Sales promotion
•Direct Marketing
•Public Relations
•Publicity

A message designed to promote a product, a
service or an idea.
Business firms, charitable trusts and government
agencies use advertising to promote their
products, services and ideas.
The word advertising is derived from two Latin
words ‘Ad’ and ‘Verto’
Ad- towards; Verto- “I turn”
Literally, it is meant to turn the people’s attention
to a specific thing.

Definitions:
“Advertising is any paid form of non-personal presentation and
promotion of ideas, goods or services by an identified sponsor.”-
American Marketing Association (AMA).
“Advertising is a mass paid communication, the ultimate purpose of
which is to import information, develop attitudes and induce action
beneficial to the advertiser (generally, in the sale of a product or
service)”- Colley.
“Advertising is non-personal form of communication conducted
through paid media under clear sponsorship.”- Philip Kotler.

Source: Phillip Kotler- Marketing Management
Decisions in developing an advertisement
programme:

Advertising Decisions: The 5 Ms
1. Mission: Setting advertising objective
2. Money: Setting advertising budget
3. Message: Message decision
4. Media: Media decisions
5. Measurements: Evaluating advertising effectiveness

1. Setting the Advertising Objectives
An advertising objective is a specific
communication task and achievement level to be
accomplished with a specific audience in a
specific period of time.
Thus, it is classified as:
i) Informative advertising
ii) Persuasive advertising, and
iii) Reminder advertising
(Mission)

2. Deciding on Advertising budget
 Advertising has ‘carry over effect’ which lasts
beyond current period. In this sense,
expenditure on advertisement is an
investment.
Factors to be considered- Stage in the product
life cycle, market share and consumer base,
competition, advertising frequency and
product substitutability.
(Money)

3. Choosing the advertising message
 Creativity factor >imp than amount spent.
 Creative strategy has four steps:
a) Message generation
b) Message evaluation and selection
c) Message execution
d) Review of social responsibility
(Message)

4. Deciding on media
 This involves finding the most cost effective media to
deliver the desired number of exposures to the largest
target audience.
 Major advertising media include:
Newspapers, television, direct mail, radio, magazines,
yellow pages, news letters, brochures, telephone, and
internet.
 Other emerging media includes:
Digital magazines, Interactive TV, Web-based advertising.
(Media)

5. Evaluating advertising effectiveness
 Measuring advertising effectiveness help
good planning and ensure control of
advertising.
 Communication effect research seeks to
determine whether an advertisement is
communicating effectively.
 Cannot be measured merely on sales because
sales are influenced by product’s features,
price, availability, and competitor’s efforts.
(Measurement)

Features of Advertising
1. Mass non-personal communication:
– message to the large group of buyers.
2. Benefits the buyers:
– Assists the buyers to make satisfactory purchase
of goods and services.
3. Persuades the buyers to buy the goods
advertised:
– Interprets the qualities of a product/service in
terms of consumer’s needs and wants.

Features of Advertising (Contd.)
4. Maximises the profit:
― Reaches millions->cost per message is low-
>selling job easier->increases the profit
5. Paid form of publicity:
― Publicity enables an idea to be known to people.
It is intentional and involves cost.
6. Identified with a sponsor:
― openly sponsored by the advertiser. So, it
discloses the source of the message it presents.

Advertising Objectives/Benefits
• Increases sales volume; reducing unit production
costs.
• Stabilises a firm’s business.
• Increase the percentage of net profit.
• Protects a company from competition.
• Creates new uses of the product.
• Creates mass demand.
• Has a vast educational influence.
• Establishes and controls buying habits.

A recap and additional notes on
Advertising:
• Advertising: meaning, scope and functions:
https://slideplayer.com/slide/7279584/
• Features of advertising:
https://www.youtube.com/watch?v=Qm6QsFq9uz8
• Types of advertising media:
https://www.slideshare.net/sevianj/types-of-
media?next_slideshow=1

We have completed so far…
[Channel of Distribution – importance –
Promotion]

Personal Selling
A process of informing customers and persuading them to
purchase products through personal communication.
Such people are called sales people, sales representatives,
sales executives, sales consultants, sales engineers, agents
and marketing representatives.
It involves ‘two-way’ personal communication between a
salesman and individual customers.
They can adjust the offer to suit the special needs of each
customer by negotiating the terms of sale.
They can build long-term relationship with customers.

Can Salesmanship and Personal
Selling be used interchangeably?
S.No. Personal Selling Salesmanship
1. Broader concept. Part of personal selling.
2. Brings right product into contact with right
customers and make ownership transfer.
It is one of the skills used in
personal selling.

Objectives of Personal Selling
i) Quantitative objectives:
o Increase sales volume that contributes to profit
objectives.
o Keep personal selling expenses within limits.
o Secure and retain a certain share of the market.
ii) Qualitative objectives:
o Search and obtain new customers.
o Keep customers informed about new product line.
o Provide technical advice and assistance to customers.

Duties of a salesman
 To sell the products or services.
Have a thorough knowledge of the product he
sells.
Must travel widely in search of customers.
Guide customers in making wise selection.
Furnish full information to the buyers.
Create a goodwill for the firm and its products.
Collect the payment for the sales made.

Qualities of a good salesman
• Quick action, imagination, enthusiasm,
initiative, and observation. Mental
• Good appearance, sound health, good posture,
pleasing voice. Physical
• Good manners, courtesy, tactfulness,
helpfulness, politeness, friendly, and
dependability.
Social
• Determination, sincerity, integrity, loyalty,
courage, and self management. Moral

Types
of
salesmen Manufacturer’s
salesmen
Missionary
Merchandising
Dealer servicing
Sales promotion
Technical
Wholesaler’s
salesmen
Retail salesmen
Indoor
Outdoor
Speciality
salesmen

1. Manufacturer’s Salesman
He who works directly for a manufacturer is known
as manufacturing salesman.
a) Missionary salesmen: creates demand for the
product and goodwill of the firm they represent.
b) Merchandising salesmen: helps dealers in
display of goods, stores, layout, etc.
c) Dealer servicing salesmen: give sample of new
products to dealers.
d) Sales promotion salesmen: Known as retail
salesmen. They focus on promotion of their
goods.
e) Technical salesmen: sales engineers. Possess a
thorough technical knowledge of the product.

2. Wholesaler’s salesmen
They visit retailers, take orders, and collect bills
from them. They also collect information about
market trend and help retailers improve sales.
3. Retail salesmen
They work for retailers. Indoor salesmen work
within the retail store, dealing with regular
buyers. Outdoor salesmen travel widely, visit
customers and take orders and pass on the same
to the store for execution.

4. Speciality salesmen:
They deal with speciality goods such as furniture,
washing machines, automobiles, etc.

Theories of Personal selling
AIDAS Theory of Selling
Right set of Circumstances
Buying Formula Theory
Behaviour Equation Theory

AIDAS
A - Attract Attention
I - Sustain Interest
D - Create Desire
A - Inducting Action (clarify the objections
and close the sale)
S - Building Satisfaction (after sale services)

Difference between Advertising and
Salesmanship
S.No. Advertising Salesmanship
1. Non-personal presentation Involves personal contact
2. Large group of buyers Specific individuals
3. The design is pre-planned Changed according to situation
4. A mass appeal, so cost per message is
less.
Costly. Involves one to one selling.
5. Creates an initial awareness of the
product.
Creates interest in the product,
depending upon the needs of
individual buyers.

Sales Promotion
Advertising takes the buyer towards the product,
while sales promotion takes the product towards
the buyer.
Promotion means to move forward or to push
forward an idea.
Sales promotion is designed to supplement and
coordinate personal selling and advertisement
efforts.

Definition:
“Those activities that supplement both personal
selling and advertising, coordinate them and
help to make them more effective.”- American
Marketing Association.
“Sales promotion consists of short-term
incentives to encourage purchase or sales of a
product or service.”- Philip Kotler.

OBJECTIVES
OF
SALES PROMOTION
Bridge between
advertising and
personal selling
Introduction of
new products
Attracting new
customers
Inducing present
customers to buy
Increasing sales
during off
season
Encouraging
business buyers
Improving
public image of
the firm

Objectives of Sales Promotion
1. Bridge between advertising and personal selling.
2. Induces buyers to purchase a new product.
3. Stimulate customers to make purchase promptly on the spot. Example: coupons,
samples, money refund offers, free trials, etc.
4. Induces customers to buy more of the product; making the salesmen’s effort more
productive.
5. Retains customer’s interest in the product during off-season.
6. Promotional activities are undertaken to attract retailers and wholesalers to stock
the products more.
7. Huge amounts are now being spent on determining appeals for arresting the
attention of the prospects towards the product. Ultimately, they enhance the public
image of the firm.

Kinds or Methods
Sales Promotion
Consumer Sales
Promotion
Samples, Coupons,
Demonstration,
contests, Cash refund
offer, etc.
Dealer Sales
Promotion
Price deals,
merchandise
allowance, dealer’s
sales contests, etc.
Sales force promotion
Bonus, sales force
contests, Salesmen
meetings and
conferences.

Advantages and disadvantages
Advantages:
• Price discrimination
• Effect on consumer behaviour
• Attracting new customers with price
Disadvantages:
• Increase price sensitivity
• Short term orientation

Difference between Advertising and
Sales Promotion
S.No. Advertising Sales Promotion
1. Recurring. Non-recurring.
2. Long term effect, creating a good
image of the company.
Short-term nature, reveals consumer
preference towards a new product.
3. Varied media carry a message
(press, audio, video, etc).
Media includes premiums, prizes,
sampling, consumer contests, etc.
4. Acts in pre and post transaction
phase.
Plays its role in the transaction phase.
5. Benefits occur over a fairly large
period.
Immediate objective of stimulating
sales.

A recap and additional notes on
Sales Promotion:
• Methods of sales promotion:
https://www.youtube.com/watch?v=2hrX8q1Bjd0
• Sales promotion:
https://www.youtube.com/watch?v=BDcTSTMKfbE

Direct Marketing
Manufacturers sell their products and
services directly to customers without
intermediaries.
Also known as direct-order marketing.
“An integrative marketing system that uses
one or more advertising media to effect a
measurable response and or transaction at
any location.”- Direct Marketing Association.

Publicity and Public Relations
Publicity comes from news reporters, columnists and journalists.
It comes to the receiver as the truth rather than as a commercial.
Every time a firm tries to create a good public relations so as to
give good publicity.
Under the social marketing concept, publicity and public relations
are assuming unique importance in the firm’s promotion mix.
Defective products, unfair trade practices, anti-social activities
often result in unfavourable publicity.
Reducing the impact of bad news is as important as creating good
publicity.

Publicity and Advertising
Similarities:
 Non-personal presentation,
 Increases sales, and
 Identified with a message.
Differences:
 Publicity is general term, Advertising is a specific
attempt to popularise a specific product.
 Publicity may or may not be paid for. Advertising
is a purposeful attempt sponsored by the party.

Public Relations
• The total process of building goodwill towards a
business enterprises and securing a bright public image
of the company is called public relations.
• There are four groups of public:
 Customers
 Shareholders
 Employers
 The Community
• Public relations complement advertising by creating
product and service credibility.

Functions of Public Relations
Department:
i) To place newsworthy information to attract
attention to a product/service.
ii) To publicise specific products.
iii) To promote internal and external
communication
iv) To deal with legislators and government
officials
v) To advise management about public issues.

Unit 4_Marketing Notes.pptx

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