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Module II
Marketing mix
Marketing mix: meaning - product, product mix- -product life cycle - importance of branding -packaging
and labelling.
Marketing mix
Marketing identifies consumers needs andsupplies various goods and services to satisfy those
needs most effectively. So the businessman needs to:(a) produce or manufacture the product according to
consumers need; (b) make available it at a price that
the consumers find reasonable; (c) supply the productto the consumers at different outlets they can
conveniently approach; and (d) inform the consumers
about the product and its characteristics through the
media they have access to. So the marketing manager
concentrates on four major decision areas while
planning the marketing activities, namely, (i) products,(ii) price, (iii) place (distribution) and (iv) promotion.These 4 Ps are called as elements of marketing and
together they constitute the marketing mix. All these
are inter-related because a decision in one area affectsdecisions in other areas.
According to Philip Kotler Marketing Mix is the set ofcontrollable variables that the firm can use to influence
the buyers response. The controllable variables in this
context refer to the 4 Ps [product, price, place
(distribution) and promotion].
Product : Product refers to the goods and services
offered by the organisation. All these are purchasedbecause they satisfy one or more of our needs. We are
paying not for the tangible product but for the benefit itwill provide. So, in simple words, product can be
described as a bundle of benefits which a marketeer
offers to the consumer for a price. Product can also takethe form of a service like an air travel,
telecommunication, etc. Thus, the term product refers
to goods and services offered by the organisation for
sale.
Price: Price is the amount charged for a product orservice. It is the second most important element in the
marketing mix. Fixing the price of the product is a
tricky job. Many factors like demand for a product, costinvolved, consumers ability to pay, prices charged by
competitors for similar products, governmentrestrictions etc. have to be kept in mind
while fixing the price. In fact, pricing is a very crucial
decision area as it has its effect on demand for theproduct and also on the profitability of the firm.Place: Goods are produced to be sold to the consumers.
They must be made available to the consumers at a
place where they can conveniently make purchase. Theorganisation has to decide whether to sell directly to the
retailer or through the distributors/wholesaler etc.
Promotion: If the product is manufactured keeping theconsumer needs in mind, is rightly priced and made
available at outlets convenient to them but the
consumer is not made aware about its price, features,
availability etc, its marketing effort may not be
successful. Therefore promotion is an importantingredient of marketing mix as it refers to a process
of informing, persuading and influencing a consumer to
make choice of the product to be bought. Promotion isdone through means of personal selling, advertising,
publicity and sales promotion.
PRODUCTProduct refers to the goods and services offered
by the organisation for sale. Here the marketers have torecognise that consumers are not simply interested in
the physical features of a product but a set of tangibleand intangible attributes that satisfy their wants. For
example, when a consumer buys a washing machine heis not buying simply a machine but a gadget that helps
him in washing clothes. It also needs to be noted thatthe term product refers to anything that can be offeredto a market for attention, acquisition,
or use. Thus, the term product is defined as anything
that can be offered to a market to satisfy a want. It
normally includes physical objects and services. In abroader sense, however, it not only includes physicalobjects and services but also the supporting services
like brand name, packaging accessories, installation,
after sales service etc.
William J. StantonProduct is a set of tangible and intangible attributes
including packaging, colour, price, manufacturersprestige, retailers prestige and manufacturers and
retailers services which buyer may accept as offeringsatisfaction of wants and services.
Jerome McCarthyA product is more than just a physical product with its
related functional and aesthetic features. It includes
accessories, installation, instructions on use, the
package, perhaps a brand name, which fulfills somepsychological needs and the assurances that service
facilities will be available to meet the customer needsafter the purchase.
PRODUCT CLASSIFICATION
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Product can be broadly classified on the basis of (1)
use, (2) durability, and (3) tangibility.
1. Based on use, the product can be classified as:
(a) Consumer Goods; and
(b) Industrial Goods.(a) Consumer goods: Goods meant for personal
consumption by the households or ultimate consumers
are called consumer goods. This includes items liketoiletries, groceries, clothes etc. Based on consumersbuying behaviour the consumer goods can be further
classified as :
(i) Convenience Goods;
(ii) Shopping Goods; and
(iii) Speciality Goods.(i) Convenience Goods : convenience goods are
bought frequently without much planning or shopping
effort and are also consumed quickly. Buying decisionin case of these goods does not involve much pre-
planning. Such goods are usually sold at convenientretail outlets.
(ii) Shopping Goods: These are goods which arepurchased less frequently and are used very slowly like
clothes, shoes, household appliances. In case of these
goods, consumers make choice of a product considering
its suitability, price, style, quality and products of
competitors and substitutes, if any. In other words, the
consumers usually spend a considerable amount of timeand effort to finalise their purchase decision as they
lack complete information prior to their shopping trip.
It may be noted that shopping goods involve much
more expenses than convenience goods.
(iii) Speciality Goods : Because of some specialcharacteristics of certain categories of goods people
generally put special efforts to buy them. They areready to buy these goods at prices at which they are
offered and also put in extra time to locate the seller tomake the purchase. In fact, prior to making a trip to
buy the product he/she will collect complete
information about the various brands. Examples of
speciality goods are cameras, TV sets, new automobiles
etc.(b) Industrial Goods: Goods meant for consumption
or use as inputs in production of other products or
provision of some service are termed as industrialgoods. These are meant for non-personal and
commercial use and include (i) raw materials, (ii)
machinery, (iii) components, and (iv) operatingsupplies (such as oil, stationery etc).
2. Based on Durability, the products can be classified
as :
(a) Durable Goods; and
(b) Non-durable Goods.(a) Durable Goods : Durable goods are products which
are used for a long period i.e., for months or years
together. Examples of such goods are refrigerator, car,
washing machine etc. Such goods generally require
more of personal selling efforts and have high profitmargins. In case of these goods, sellers reputation and
presale and after-sale service are important
determinants of purchase decision.
(b) Non-durable Goods: Non-durable goods areproducts that are normally consumed in one go or last
for a few uses. Examples of such products are soap,
salt, pickles, sauce etc. These items are consumedquickly and we purchase these goods more often. Suchitems are generally made available by the producer
through large number of convenient retail outlets. Profit
margins on such items are usually kept low and heavy
advertising is done to attract people towards their trial
and use.3. Based on tangibility, the products can be classified
as:
(a) Tangible Goods; and(b) Intangible Goods.
(a) Tangible Goods : Most goods, whether these areconsumer goods or industrial goods and whether these
are durable or non-durable, fall in this category as theyhave a physical form, that can be touched and seen.
Thus, all items like groceries, cars, raw-materials,
machinery etc. fall in the category of tangible goods.(b) Intangible Goods : Intangible goods refer to
services provided to the consumers. Services are
essentially intangible activities which provide want orneed satisfaction. Medical treatment, postal, banking
and insurance services etc., all fall in this category.
Product Line
A product line is a group of products that areclosely related because they function in a similar
manner, are sold to the same customer groups, are
marketed through the same types of outlets, or fall
within given price ranges. For example, Nike producesseveral lines of athletic shoes, Motorola producesseveral lines of telecommunications products, and
AT&T offers several lines of long-distance telephoneservices.
PRODUCT MIX.
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A product mix (or product assortment) consists ofall the product lines and items that a particular seller
offers for sale. The product mix of a company, which is
generally defined as the total composite of products
offered by a particular organization, consists of bothproduct lines and individual products. A product line is
a group of products within the product mix that are
closely related, either because they function in a similarmanner, are sold to the same customer groups, aremarketed through the same types of outlets, or fall
within given price ranges.
One of the realities of business is that most firms
deal with multi-products .This helps a firm diffuse itsrisk across different product groups/Also it enables the
firm to appeal to a much larger group of customers or to
different needs of the same customer group . Forexample; Bajaj Electricals, a household name in India,
has almost ninety products in its portfolio ranging fromlow value items like bulbs to high priced consumer
durables like mixers and luminaries and lightingprojects .The number of products carried by a firm at a
given point of time is called its product mix. This
product mix contains product lines and product items
.In other words its a composite of products offered for
sale by a firm.
PRODUCT-MIX ANALYSIS
Since top management is ultimately responsible for the
product mix and the resulting profits or losses, theyoften analyze the company product mix. The first
assessment involves the area of opportunity in aparticular industry or market.
Opportunity is generally defined in terms of current
industry growth or potential attractiveness as aninvestment. The second criterion is the company's
ability to exploit opportunity, which is based on its
current or potential position in the industry. Thecompany's position can be measured in terms of market
share if it is currently in the market, or in terms of its
resources if it is considering entering the market. Thesetwo factorsopportunity and the company's ability to
exploit itprovide four different options for a companyto follow.
1. High opportunity and ability to exploit it result in
the firm's introducing new products or expandingmarkets for existing products to ensure future
growth.2. Low opportunity but a strong current market
position will generally result in the company's
attempting to maintain its position to ensure
current profitability.
3. High opportunity but a lack of ability to exploit
it results in either (a) attempting to acquire thenecessary resources or (b) deciding not to
further pursue opportunity in these markets.
4. Low opportunity and a weak market position
will result in either (a) avoiding these marketsor (b) divesting existing products in them.
These options provide a basis for the firm to evaluatenew and existing products in an attempt to achieve
balance between current and future growth. Thisanalysis may cause the product mix to change,
depending on what management decides.
The most widely used approach to product portfolio
analysis is the model developed by the Boston
Consulting Group (BCG). The BCG analysisemphasizes two main criteria in evaluating the firm's
product mix: the market growth rate and the product'srelative market share.
Once the analysis has been done using the marketgrowth rate and relative market share, products areplaced into one of four categories.
Stars: Products with high growth and market
share are know as stars. Because these productshave high potential for profitability, they
should be given top priority in financing,
advertising, product positioning, and
distribution.
Cash cows: Products with a high relative
market share but in a low growth position arecash cows. These are profitable products thatgenerate more cash than is required to produce
and market them.
Dogs: Products in the category are clearly
candidates for deletion. Such products have low
market shares and unlike problem children,
have no real prospect for growth.
As can be seen from the description of the four BCGalternatives, products are evaluated as producers or
users of cash. Products with a positive cash flow will
finance high-opportunity products that need cash.
Product Life Cycle.
Like human beings, products also have a life-cycle.From birth to death, human beings pass through various
stages e.g. birth, growth, maturity, decline and death. A
similar life-cycle is seen in the case of products. The
product life cycle goes through multiple phases, involves
many professional disciplines, and requires many skills,tools and processes. Product life cycle (PLC) has to do
with the life of a product in the market with respect to
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business/commercial costs and sales measures. To say
that a product has a life cycle is to assert three things:
Products have a limited life,
Product sales pass through distinct stages, eachposing different challenges, opportunities, and
problems to the seller, Products require different marketing, financing,
manufacturing, purchasing, and humanresource strategies in each life cycle stage.
A product's life cycle, abbreviated PLC, the life cycle refers
to the period from the products first launch into the marketuntil its final withdrawal and it is split up in phases. Since
an increase in profits is the major goal of a company that
introduces a product into a market, the products life cycle
management is very important.
The understanding of a products life cycle, canhelp a company to understand and realize when it is time to
introduce and withdraw a product from a market, its
position in the market compared to competitors, and theproducts success or failure. The products life cycle -
period usually consists of five major steps : Product
Development, Introduction Stage, Growth Stage, Maturity
Stage and finally Decline Stage. These phases exist and are
applicable to all products or services from acertain make of automobile to a multimillion-dollar
lithography tool to a one-cent capacitor. These phases can
be split up into smaller ones depending on the product and
must be considered when a new product is to be introduced
into a market since they dictate the products sales
performance.
)))) Product Development:Product development phase begins when a companyfinds and develops a new product idea. This involves
translating various pieces of information andincorporating them into a new product. A product is
usually undergoing several changes involving a lot ofmoney and time during development, before it is
exposed to target customers via test markets.
B) Introduction Stage:
The introduction stage starts when the new product is
first launched. Introduction takes time, andsales growth is apt to be slow. In this stage, as
compared to other stages, profits are negative or low
because of the low sales and high distribution and
promotion expenses. Much money is needed toattract distributors and build their inventories.
Promotion spending is relatively high to inform
consumers of the new product and get them to try it.
It is highly unlikely that companies will make profits on
products at the Introduction Stage. Products at this
stage have to be carefully monitored to ensure that they
start to grow. Otherwise, the best option may be to
withdraw or end the product.
C)Growth Stage
If the new product satisfies the market, it will enter
a growth stage, in which sales will start
climbing quickly. The early adopters will continue to
buy, and later buyers will start following theirlead, especially if they hear favorable word of mouth.
Attracted by the opportunities for profit, newcompetitors will enter the market. They will introduce
new product features, and the market will
expand.
The Growth Stage is characterised by rapidgrowth in sales and profits. Profits arise due to an
increase in output (economies of scale)and possiblybetter prices. At this stage, it is cheaper forbusinesses to invest in increasing their market share aswell as enjoying the overall growth of the market.
Accordingly, more amount and efforts are invested inpromotional activities. The firm uses several strategies
to sustain rapid market growth as
long as possible. It improves product quality and adds
new product features and models. It enters
new market segments and new distribution channels.
By spending a lot of money on productimprovement, promotion, and distribution, the companycan capture a dominant position. In doing so, however,
it gives up maximum current profit, which it hopes tomake up in the next stage.
D) Maturity Stage
The Maturity Stage is, perhaps, the mostcommon stage for all markets. it is in this stage that
competition is most intense as companies fight to
maintain their market share. Here, both marketing and
finance become key activities. Marketing spend has tobe monitored carefully, since any significant moves are
likely to be copied by competitors.
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This maturity stage normally lasts longer than
the previous stages, and it poses strongchallenges to marketing management. Most products
are in the maturity stage of the life cycle, and
therefore most of marketing management deals with the
mature product. Competitors begin marking downprices, increasing their
advertising and sales promotions, and upping their
R&D budgets to find better versions of theproduct. The company might also try modifying theproductchanging characteristics such as quality,
features, or style to attract new users and to inspire
more usage. It might improve the product's
quality and performanceits durability, reliability,
speed, or taste. Or it might add new featuresthat expand the product's usefulness, safety, or
convenience. For example, Sony keeps adding new
styles and features to its Walkman and Discman lines,and Volvo adds new safety features to its
cars.
Finally, the company can try modifying themarketing miximproving sales by changing one or
more marketing mix elements. It can cut prices toattract new users and competitors' customers. It
can launch a better advertising campaign or use
aggressive sales promotionstrade deals, centsoff,
premiums, and contests.
E) Decline Stage
The sales of most product forms and brands
eventually dip. The decline may be slow, as in thecase of oatmeal cereal, or rapid. Sales may plunge to
zero, or they may drop to a low level where theycontinue for many years. This is the decline stage.Sales decline for many reasons, including technological
advances, shifts in consumer tastes, and increased
competition. As sales and profits decline, some firms
withdraw from the market. They may drop smaller
market segments and
marginal trade channels, or they may cut the promotionbudget and reduce their prices further.
Carrying a weak product can be very costly to a firm. A
weak product may take up too much of management's
time. It often requires
frequent price and inventory adjustments. It requires
advertising and sales force attention thatmight be better used to make "healthy" products more
profitable. A product's failing reputationcan cause customer concerns about the company and its
other products.
Then, management must decide whether to
maintain, harvest, or drop
each of these declining products. Management may
decide to harvest the product, which means
reducing various costs (plant and equipment,
maintenance, R&D, advertising, sales force) and
hoping that sales hold up. If successful, harvesting willincrease the company's profits in the short
run. Or management may decide to drop the product
from the line. It can sell it to another firm or
simply liquidate it at salvage value.
The Product Life Cycle can be extended by two
ways either by modifying the target market byfinding and adding new users etc or by modifying theproduct Adding new features, variations,
model varieties will change the consumer reaction -
create more demand therefore you attract
more users To prevent the product going into decline
you modify the product
Ultimately, depending on whether the product remains
profitable, a company may decide to end the product.
Examples
Set out below are some suggested examples of productsthat are currently at different stages of the product life-
cycle:
INTRODUCTION GROWTH MATURITY DECLINE
Thirdgenerationmobile phones
PortableDVD Players
PersonalComputers
Typewriters
E-conferencing Email FaxesHandwrittenletters
iris-based
personalidentity cards
Smart cards Credit cards Chequebooks
The concept of PLC is a very useful since it provides
knowledge about the developments at various phases of
a products life. The marketing manager can adoptsuitable strategies if he knows the pattern of profits and
promotional efforts based on stages of products life.
BRANDING
American Marketing Association (AMA)definition describes a brand as a name, word, mark,symbol, device or a combination thereof, used to
identify goods or services of one seller and todifferentiate them from those of competitors. Brand
name helps a consumer in instant recall, and this servesan important function for differentiating competing
products of similar nature. A legally protected brand
name is called a trademark.
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Umbrella branding and individual branding
Under umbrella branding all the products gel
the same brand name. This is also called family
branding. Godrej, Vidoecon and L&T follow this kind
of policy. One basic advantage of using the Familybrand is that it reduces the costs of product launching
and promotional expenditure substantially. The firm has
to promote only one brand, which, if successful, wouldbe able to sell the entire product line. Under theindividual branding each product is given a different
name. For example, Hindustan Lever sells its products
under different brand names like Rin, Surf, Lux, etc.
Importance of branding.
Branding as an aspect of product marketing can
be analysed from two different standpoints: that ofbuyers and of sellers. It is also possible to have a
societal viewpoint.
a) BuyersThe buyers can derive several advantages:
A brand generally denotes uniform quality.
It makes shopping easier.
Competition among brands can, over a period
of time, lead to quality improvements.
Purchasing a socially visible brand can give
psychological satisfaction to the buyer.
There are, however, some negative aspects as well
Since brand development costs money, product
prices tend to go up.
Taking advantage of the popularity of a brand,
a manufacturer may reduce quality gradually.
b) SellersA marketer can also derive certain advantages such as:
It helps in product identification.
Differentiate product offering from
competitors
In a highly competitive market, it can carve out
a niche for itself through productdifferentiation.
If brand loyalty can be developed throughsuccessful promotion, the firm will be able toexert quasi-monopolistic power.
But to obtain the advantages, it is necessary for the
manufacturer to invest resources in promoting the brandname.
c) Societal view
From a macro-standpoint, a brand's role inimproving and maintaining product quality can be
considered as positive. Brands also help in better
dissemination of product knowledge; better knowledgecan contribute to more scientific and rational decision
making.
Selecting a Brand nameFinding an appropriate name for a new product is a
difficult task. The following points should be taken into
account in selecting a brand name.
1). A Brand name should reflect directly or indirectly
some aspect of the product, viz. benefit, function,
etc. For example, the name `BURNOL'
immediately connotes that the product has to do
something with bums.
2). A Brand should be distinctive, especially if the
product requires such distinction, e.g., a name like`CHANCELLOR' for a cigarette conjures up ideas
of status, power and opulent life style.
3). A Brand name should be easy to pronounce andremember. Examples are VIMAL, HAMAM, etc.
4). It should be such that it can be legally protected, if
necessary.
Packaging
A package is basically an extension of theproduct offered for sale. Sometimes the package ismore important than the product it contains as it
contains the product and protects it till the consumer is
ready for the consumption or use. Some marketers even
call packaging a 'fifth P', along with product, price,promotion and place. Packaging is necessary to deliverthe product to the consumer in sound condition.
According to Philip Kotler and Gary Annstrong, the
packaging may include up to three levels of material.
The primary package is the product's immediate
container. If you consider a toothpaste, the tube holdingthe toothpaste is the primary package. The secondary
package is the card board material that protects theprimary package and that is thrown away when the
product is about be used.The shipping packaging is the packaging
necessary to store, identify, and ship the product (acarton in this case, which contains hundred toothpaste
units). Finally labeling is part of packaging and
consists of printed information appearing on or with the
package.To summarize the key functions of packaging we can
say that packaging should perform the following basicfunctions: it should (1) protect, (2) appeal, (3) perform,
(4) offer convenience to the end-users, and (5) be cost-effective. We will now discuss these five key functions
of packaging.
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I ) Protection: The primary function of packaging is to
protect the products from the environmental andphysical hazards to which the product may be exposed
in transit from the manufacturer's plant to the retailer's
shelves and while on display on the shelves. It helps to
avoid i) Breakage due to rough handling, 2) Extremesof climatic conditions which may lead to melting,
freezing, etc, 3)Contamination, either bacterial or non-
bacterial, such as by dirt or chemical elements. 4)Absorption of moisture or odors of foreign elements.And 5) Loss of liquid or vapors.
2) Appeal: The package is increasingly being used as a
marketing tool. The importance is also increasing clue
to the changed structure of retail business, especiallythe emergence of self-service stores. In the case of
consumer products, package serves as a silent salesman.
The following characteristics have been identified to
help a package perform the self-selling tasks:i) The package must attract attention
ii) The package must tell the product storyiii) The package IIIUSL build confidence
iv) The package must look clean and hygienic
v) The package must be convenient to handle, to carry
out, to store and to use
vi) The package must reflect good value
3) Performance: This is the third function of a
package. It must be able to perform the task for which it
is designed. This aspect becomes critical in certain
types of packaging. For example, an aerosol spray is
not only a package but also an engineering device. Ifthe package does not function, the product itself
becomes totally useless.
4) Convenience: The package must be designed in away, which is convenient to use. It should be
convenient not only to the end user but also to the
distribution channel members, such as wholesalers and
retailers. From the intermediaries standpoint the
convenience relates to handling and stocking ofpackages. From the standpoint of the domestic or
institutional end users, the convenience would refer to
the ease of using the package, such as opening andclosure of the package, the repetitive use value,
disposability etc.
5) Cost-effectiveness: The package finally must becost-effective. Packaging cost as a percentage of
product cost varies dramatically from one industry to
another, from less than one percent in engineering
industry to more than ten percent in the cosmetics
industry.
6) Security - Packaging can play an important role inreducing the security risks of shipment. Packages canbe made with improved tamper resistance to deter
tampering and also can have tamper-evident features to
help indicatetampering.
Packaging Strategies
Packaging plays a greater role in the promotion
of the product. It serves the core function of protection
and also provides information to the consumers. Forexample, Colgate Dental Cream is always perceived ina red color package. When the company decided to go
for a sales promotion program of giving 20% extra for
every purchase of a 100 grams toothpaste, it brought a
yellow strip marked with 20% extra on red as a
promotional tool which could catch the attention of thecustomer on the shelf immediately.
Some of the widely used promotional packagingtechniques include
1) Discount Packing :a word or sentence indistinctive colour is superimposed on the package,
announcing the special price discount being offered.This is the most widely used form.
2) Coupon-Pack: A coupon of certain values, either as
a part of the package or placed separately in the
package, can be redeemed after the purchase of the
product.
4) Prime Packaging: A specially made package havingeither a re-use or prestige value is referred to as prime
package. Instant coffee packed in glass tumblers having
colours is an example of the first type.
5) Self-Liquidators: The buyer has to send to thecompany a number of packages or part thereof as
evidence of buying the product. In return, he maypurchase additional quantity of the same product at
reduced prices or be rewarded with a different product.
Bundle Packaging: Placing more than one unit in one
container is referred to as bundle or multiple packaging.
This packaging strategy increases the sales to a large
extent. This is seen in bathing and washing soapcategory in India.
LABELLING:
The label is the text printed on a product
package or, in the case of items like clothing, attached
to the product itself. Legally, labels include all written,
printed, or graphic material on the containers of
products that are involved in interstate commerce or
held for sale. The main body of legislation governing
packaging and labeling is the Fair Packaging and
Labeling Act of 1966. It mandates that every product
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package or label specify on its "principal display label"
(the part of the label most likely to be seen by
consumers) the following information: 1) the product
type; 2) the producer or processor's name and location;
3) the quantity (if applicable); and 4) the number and
size of servings (if applicable).
Labeling Decisions:
1)Brand Name:
It is necessary for the label to contain the brand
name. It has to be decided that how should that brand
name appear on the product.
2) Label Text, Graphics and Design:
Text, graphics and design on the label must becarefully selected because label in as important part of
branding process. It plays a role in communicating the
image and identity of a company.
3) Features and Benefits
Listing a products key benefits on its label
helps support the brand promise and can help
differentiate the product from others, while reaching
out to customers seeking those particular benefits.
4)Weights and Measures
Weights on measure of a product are importantfor stocking, inventory and selection. There are
international standards that apply for formatting this
information. Identifying the weights and measures of
products helps customers select the appropriate amount
of product to suit their needs.
5)Instructions for Use
Listing a products key benefits on its label
helps support the brand promise and can help
differentiate the product from others, while reaching
out tocustomers seeking those particular benefits
6)Package InsertsPackage inserts, which may contain
instructions for using a product, are made when the
information cannot fit on the product itself.
7)Safety HazardsPossible dangers that could result from
misusing a product must be identified on products to
reduce liability and comply with regulations.
8)Statement of ContentsThe contents of a product must be accurately
described on its packaging label according to local
regulations.
Module III
PricingPricing policies objectives factors influencing
pricing decisions - different pricing strategies:skimming- penetration Market structure channel of
distribution and its importance
Pricing
Pricing is the process of determining what a
company will receive in exchange for its products. This
is perhaps the most important decision taken bymarketer, as it is the only revenue earning function and
success and failure of the product may depend upon this
decision. Therefore, the decision regarding how muchto charge should be taken such that the price is
acceptable to the prospective buyers and at the same
time fetches profits for the company.
Price determination is very important aspect of strategic
planning. Marketers fix the price of the product on thebasis of cost, demand or competition. Dell, which
allows customers to customize the product adoptedflexible pricing methods. In contrast, Indian oil
companies product prices are fixed by the government
where company does not have any control.
Price is the consideration in terms of money paid by
consumers for the bundle of benefits he/she derives byusing the product/ service. In simple terms, it is the
exchange value of goods and services in terms of
money. Pricing (determination of price to be charged) is
another important element of marketing mix and it
plays a crucial role in the success of a product in themarket. If the price fixed is high, it is likely to have an
adverse effect on the sales volume. If, on the other
hand, it is too low, it will adversely affect theprofitability. Hence, it has to be fixed after takingvarious aspects into consideration.
Factors influencing pricing decisions
The factors usually taken into account while
determining the price of a product can be broadly
described as follows:
(a) Cost: No business can survive unless it covers
its cost of production and distribution. In large
number of products, the retail prices are
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determined by adding a reasonable profit margin to
the cost. Higher the cost, higher is likely to be the
price, lower the cost lower the price.
(b) Demand: Demand also affects the price in a
big way. When there is limited supply of a product
and the demand is high, people buy even if high
prices are charged by the producer. But how high
the price would be is dependent upon prospective
buyers capacity and willingness to pay and their
preference for the product. In this context, price
elasticity, i.e. responsiveness of demand to changes
in price should also be kept
in view.
(c) Competition: The price charged by the
competitor for similar product is an important
determinant of price. A marketer would not like to
charge a price higher than the competitor for fear
of losing customers. Also, he may avoid charging a
price lower than the competitor. Because it mayresult in price war which we have recently seen in
the case of soft drinks, washing powder, mobile
phone etc.
(d) Marketing Objectives: A firm may have
different marketing objectives such as
maximisation of profit, maximisation of sales,
bigger market share, survival in the market and so
on. The prices have to be determined accordingly.
For example, if the objective is to maximise sales
or have a bigger market share, a low price will be
fixed. Recently one brand of washing powderslashed its prices to half, to grab a bigger share of
the market.
(e) Government Regulation: Prices of some
essential products are regulated by the government
under the Essential Commodities Act. For
example, prior to liberalization of the economy,
cement and steel prices were decided by the
government. Hence, it is essential that the existing
statutory limits, if any, are also kept in view while
determining the prices of products by the
producers.
Pricing strategies.
A firm must set a price for the first time when it
develops a new product, introduces its regular product
into a new distribution channel or geographical area,
and enters bids on new contract work. In setting aproducts price, marketers follow a six-step procedure:
(1) selecting the pricing objective; (2) determining
demand; (3) estimating costs; (4) analyzing
competitors costs, prices, and offers; (5) selecting a
pricing method; and (6) selecting the final price
1.) Price skimming.
Price skimming is a pricing strategy in which a
marketer sets a relatively high price for a product or
service at first, then lowers the price over time. It is atemporal version of price discrimination/yield
management. The objective with skimming is to skim
off customers who are willing to pay more to have the
product sooner; prices are lowered later. The successof a price-skimming strategy is largely dependent on
the inelasticity of demand for the product either by the
market as a whole, or by certain market segments.
High prices can be enjoyed in the short term where
demand is relatively inelastic. In the short term the
supplier benefits from monopoly profits, but as
profitability increases, competing suppliers are likely to
be attracted to the market (depending on the barriers toentry in the market) and the price will fall ascompetition increases.
The main objective of employing a price-skimming
strategy is, therefore, to benefit from high short-termprofits (due to the newness of the product) and from
effective market segmentation.
There are several advantages of price skimming
Where a highly innovative product is launched,
research and development costs are likely to be high, as
are the costs of introducing the product to the market
via promotion, advertising etc. In such cases, the
practice of price-skimming allows for some return onthe set-up costs
By charging high prices initially, a company can builda high-quality image for its product. Charging initial
high prices allows the firm the luxury of reducing themwhen the threat of competition arrives.
Skimming can be an effective strategy in segmenting
the market. A firm can divide the market into a number
of segments and reduce the price at different stages ineach, thus acquiring maximum profit from eachsegment
For prestige goods, the practice of price skimming
can be particularly successful, since the buyer tends to
be more prestige conscious than price conscious.Similarly, where the quality differences between
competing brands is perceived to be large, or forofferings where such differences are not easily judged,
the skimming strategy can work well.
2) Penetration pricing.
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Penetration pricing involves the setting of lower, ratherthan higher prices in order to achieve a large, if not
dominant market share.
This strategy is most often used businesses wishing to
enter a new market or build on a relatively small marketshare.
This will only be possible where demand for the
product is believed to be highly elastic, i.e. demand isprice-sensitive and either new buyers will be attracted,
or existing buyers will buy more of the product as aresult of a low price.
A successful penetration pricing strategy may lead to
large sales volumes/market shares and therefore lower
costs per unit. The effects of economies of both scale
and experience lead to lower production costs, which
justify the use of penetration pricing strategies to gain
market share. Penetration strategies are often used by
businesses that need to use up spare resources (e.g.factory capacity).
Before implementing a penetration pricing strategy, asupplier must be certain that it has the production and
distribution capabilities to meet the anticipated increasein demand.
The most obvious potential disadvantage of
implementing a penetration pricing strategy is the
likelihood of competing suppliers reduce their pricesalso, thus nullifying any advantage of the reduced price.
A second potential disadvantage is the impact of the
reduced price on the image of the offering, particularlywhere buyers associate price with quality.
3) Prestige pricing
Prestige pricing refers to the practice of setting a highprice for an product, throughout its entire life cycle as
opposed to the short term opportunistic, high price of
price skimming. This is done in order to evoke
perceptions of quality and prestige with the product orservice.
For products for which prestige pricing may apply, the
high price is itself an important motivation forconsumers.
4) Pre-emptive pricing
Pre-emptive pricing is a strategy which involves settinglow prices in order to discourage or deter potential new
entrants to the suppliers market, and is especially suited
to markets in which the supplier does not hold a patent,
or other market privilege and entry to the market is
relatively straightforward.
By deterring other entrants to the market, a supplier has
time to
Refine/develop the productGain market share
Reduce costs of production (through sales/ experienceeffects)
Acquire name/brand recognition, as the originalsupplier
5) Follower pricing -- This strategy entails the
business owner adopting follow-the leader
approach and setting prices in response to all major
competitors. This is a reactive strategy that
assumes that the dominant leader will not respond
to price competition from the new product or
service.
6) Psychological pricing approach is suitable when
consumer purchases are based more on feelings or
emotional factors rather than rational, such as love,
affection, prestige, and self-image etc
7) Odd-Even Pricing: Marketers sometimes set their
product prices that end with certain numbers. The
assumption is that this type of pricing helps sell more ofa product. It is supposed that if the price is Rs. 99.95,
consumers view it not as Rs. 100 and certaintypes of consumers are attracted more by odd prices
rather than even.
8) Loss Leader Pricing: Sometimes large retail
outlets use loss leader pricing on wellknown
brands to increase store traffic. By attracting
increased number of consumers to store the
retailers hope that sales of routinely purchased
products will rise and increase sales volume and
profits. This compensates for the lower margins on
loss leader brands.
9) Superficial Discounting: It is superficialcomparative pricing. It involves setting an
artificially high price and offering the product at a
highly reduced price. The communication might
say, Regular price was Rs. 495, now reduced to
Rs. 299. This is a deceptive practice and often
used by retailers.10) Special Event Pricing: This involves coordinatingprice cuts with advertising for seasonal
or special situations to attract consumers by offering
special reduced prices.
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SELECTION OF A PRICING METHOD
After selection of the pricing strategy or strategies
to accomplish the pricing objectives, a company
decides about a pricing method. A pricing method
is a systematic procedure for setting the prices on a
regular basis. The pricing method structures the
calculation of actual price of a product based on
considerations of demand, costs, and competition.1 Cost-based Pricing
Cost-based pricing methods are fairly common. Price isdetermined by adding either rupee amount or a
percentage to the products cost to achieve the desired
profit margin. Cost-based pricing methods do not take
into consideration factors such as supply and
demand, or competitors prices. They are not
necessarily related to pricing policies or objectives.11.9.2 Markup Pricing
In markup pricing a certain predetermined
percentage of products cost, called markup, is
added to the cost of the product to determine theprice.11.9.3 Competition-based Pricing
This approach is also called going rate pricing.
Competition-based pricing pushes the costs and
revenues as secondary considerations and the main
focus is on what are the competitors prices. This
pricing acquires more importance when different
competing brands are almost homogeneous and
price is the major variable in marketing strategy,
such as cement or steel.
11.9.4 Demand-based Pricing
Companies using this method mainly consider the
level of demand. The price is high when the
product demand is strong and low price when the
demand is weak. This approach is fairly common
with hotels, telephone service companies, and
museums etc.
Perceived-value Pricing
Many companies perceived-value pricing. In this
approach the price is based on customers
perceived value of a product or service. Thecompany must deliver the promised value
proposition it communicates to its target
customers. And of course, it is important that
customers must perceive this value.
Two-part Pricing
This pricing method is fairly common with service
providing companies. They charge a fixed price for
providing the basic service plus a variable usage
rate. For example telephone service providers
charge a monthly fixed price plus variable per call
charges for calls beyond a certain number.
Bid Pricing
This type of pricing involves submitting either a
sealed or open bid price from the marketer forbuyers consideration. The buyer notifies potential
suppliers to submit their bids by a fixed date. The
buyer evaluates these quotations in terms of quoted
prices, product specifications, and the ability of
suppliers to deliver specified products according to
the buyers schedule when and where needed.
Usually the lowest bidder is awarded the contract.
Channel of distribution and its
importance.
Distribution involves the physical movement of
products to ultimate consumers. A distribution channelconsists of the set of people and firms involves in the
flow of a product, as it moves from producer to ultimateconsumer or business users. A distribution channel
always include both the producers and final customerfor product as well as any middle man.(retailers orwholesalers).
Types of channels & distribution:-
Common channels for distribution of consumer goods,
business goods and services are discussed below.
1) Distribution of channel goods:-There are five channels are used for distribution of
tangible goods to ultimate consumer.
a) Producer---->Consumer:
The shortest, simplest channels of distribution fordistributing gods are from producer to consumer. It
involves no middle man. The producer may sell fromdoor to door or by mail.
Door to Door:-In these channels companies use their representatives to
sell their gods from door to door such as insurance
magazines, newspapers, milk etc.
By Mail:-
Some companies also sell their products by mails. Afarmer sells their fruit and vegetables directly toconsumer at road is also using this method. It is short
and direct method.
b) ProducerRetailerConsumer:-
Many large retailers buy directly from manufacturersand agricultures large no. of our purchases are mad
through this channel such as automobiles, clothing,gasoline etc. In this case manufacturers keep contactwith retailers, take purchase orders. The retailers then
sell to ultimate consumers.
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C) ProducerWholesalerRetailerConsumer:-
This type of channel mostly used by smallmanufacturers and small retailers to distribute such
things that have a large market need. The products such
as drugs, lumber, hardware and many food items are
distributed in such channel process.
d) ProducerAgentsRetailersConsumers:-
Instead of using wholesaler many producers prefer to
use manufacturers agents, a broker or some otheragents middleman to reach the retail market. A glassmarker selected a food broker to reach store market.
e)ProducerAgentWholesalerRetailerConsum
er:-
To reach small retailers, the producers often use agentmiddleman, who in turn cal on with wholesales that sell
to small stores. Agent can be especially useful for
making contacts and bringing buyers and sellerstogether. They are common in food industry, where
they are called food brokers.
2) Channels for Distribution of Business Gods:-a) ProducersIndustrial Users:-This direct channel is used for most expensive products.
Manufacturers of large installations such as air planes,
generators etc use this channel.
b) ProducerIndustrial DistributionUsers:-Producers of operating supplies and small accessoryequipment frequently use industrial distributors to reach
their market.
Importance of Distribution Channels
Cost Savings in Specialization
Members of the distribution channel are specialists inwhat they do and can often perform tasks better and at
lower cost than companies who do not have distribution
experience. Marketers attempting to handle too many
aspects of distribution may end up exhausting company
resources as they learn how to distribute.
Reduce Exchange Time Not only are channel
members able to reduce distribution costs by beingexperienced at what they do, they often perform their
job more rapidly resulting in faster product delivery.
Customers Want to Conveniently Shop for Variety Marketers have to understand what customers want in
their shopping experience.
Resellers Sell Smaller Quantities Not only do
resellers allow customers to purchase products from a
variety of suppliers, they also allow customers to
purchase in quantities that work for them. Suppliersthough like to ship products they produce in large
quantities since this is more cost effective than shipping
smaller quantities.
Create Sales Resellers create demand for themarketers product. In some cases resellers perform an
active selling role using persuasive techniques to
encourage customers to purchase a marketers product.
Offer Financial Support Resellers often provide
programs that enable customers to more easily purchase
products by offering financial programs that easepayment requirements. These programs includeallowing customers to: purchase on credit; purchase
using a payment plan; delay the start of payments; and
allowing trade-in or exchange options.
Provide Information Companies utilizing resellersfor selling their products depend on distributors to
provide information that can help improve the product.
High-level intermediaries may offer their suppliers real-time access to sales data including information showing
how products are selling by such characteristics asgeographic location, type of customer, and product
location.
. Channel Members Create Utility: Marketing
channels create time, place, and possession utility.
Time utility refers to making products available to
customers when they want them. They create place
utility by making products available in locations, wherecustomers desire them to be available for buying.
Possession utility means customers having access to
obtain and have the right to use or store for future use.
This may occur through ownership or some
arrangements such as rental or lease agreements thatentitle the customer the right to use the product.
. Other Functions: Distribution channels share
financial risk by financing the goods moving throughpipeline and also sometimes extend the credit facility to
next level operators and consumers as well as handle
personal selling by informing and recommending the
product to consumers, and partly look after physical
distribution such as warehousing and transportation,provide merchandising support, and furnish market
intelligence.
Module IV
Promotion:- Advertising objectives and
functions - types of advertising - personal selling
and direct marketing - sales promotion.
Promotion.
Promotion is the aspect of selling and
advertising, or communicating the benefits of theproduct or service, to the target customers or the market
segment involved in order to persuade them to purchasesuch products or services.
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It includes selling through advertising as well
as the sales force. Besides, a certain amount ofpromotion is done through special seasonal discounts,
competitions, special price reductions, etc. collectively
called sales promotion.
A promotion mix (sometimes called a
marketing communications mix) is the particular
combination of promotional methods a firm uses to
reach a target market. Marketers can use severalpromotional methods to communicate with individuals,
groups, and organizations. Advertising, personalselling, direct marketing, sales promotion, and publicity
are the five major elements in an organizationspromotion mix.
Promotions role is to communicate withindividuals, groups, or organizations to directly or
indirectly facilitate exchanges by informing andpersuading one or more of the audiences to accept an
organizations products. To facilitate exchanges
directly, marketers communicate with selectedaudiences about their companies and their goods,
services and ideas.
Advertising
In modern times advertising prevails in all
areas of human life. Advertising constitutes one of the
four components of a firms promotion mix, which in
turn forms an integral element of the firms marketingmix. Advertising is an impersonal mass selling and
communication method. It makes use of various types
of media to reach the target public in short time. Being
persuasive in nature, advertising broadly aims ingaining exposure, creating awareness and changing
attitudes of customers in favor of sponsors products.Advertising can be defined as any paid form of non-
personal presentation and promotion of ideas, goods orservices by an identified sponsor. Norman. A. Hart says
that advertising is the action of calling something to
the attention of the public, especially by paid
announcements.
IMPORTANCE AND OBJECTIVES.
Advertising has an indispensable place foritself in the marketing mix of a firm. Advertising is
likely to make greater contribution when buyer
awareness is minimal and when the product hasfeatures normally not observable to the buyer.
1. Advertising informs the customers about product
attributes. It can help to sell products, by giving
information what product is, what it does, where it
can be found etc. It informs possible customers of whatis an offer, and persuades them to buy the goods.
2. In the case of new products, it can begin to develop areputation for the product and to the Company. In
modern market conditions, where the differencesbetween competing products are fairly marginal, an
established reputation can make the difference betweenmarket leader and others. If we look at the brands
which have been successful for 30, 40 or 50 years like
Bajaj, Lux, Colgate etc, they have been continuously
advertised.
3. Advertising is a weapon of competition as well
as merely a way of achieving sales. It helps in
distinguishing one brand from its competitors, it can
affect consumer preferences and tastes and can
differentiate product from competitive offerings.
4. Even in competitive markets, advertising is usedas a way of reminding customers that the brand exists
and retaining their confidence in it ability to meet theirneeds. It can also keep the product in customers mind
during off seasons. For example most of the COCA-
COLA ads, and ads of FEVICOL are designed
primarily to remind primarily people about these
products.
5. Advertising affects the economy also. It can
encourage economic growth, investments and jobs. Itmaintains competition by informing customers. In that
way it can even brake monopoly.
6. The effect of advertising on the Co, and industry arealso very high. Advertising can provide increasing
return and will reduce marketing risk and uncertainty. It
can provide free information and can even serve as a
tool for quality control.
7. Advertising can support and motivate distributors. Inmany cases from car to electronic equipments, the
advertisement will often include lists of stores or
Personal
selling
Sales
promotio
n
publicity
Direct
marketing
advertisin
g
Promotio
n mix
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dealers selling the products, to make sure that the
prospective customers can find them.
8. Advertising provides a revenue for the media; and
the entertainment and informational value of
advertising is also important. Government and varioussocial institutions and groups also make use of
advertising, to raise issues, influence ideas, affect
legislation or even to protect the animals and forests.
Advertising also helps to eliminate the seasonal
fluctuations in sales, makes the product known widely,
keep a steady demand and even to appoint best
available employees.
So advertising helps to
1. To announce a new product or service:
2. To expand, the to new buyers: Here what hasbeen successfully sold to one segment of the
market is advertised to a new segment.3. To announce a modification:
4. To announce a price change5. To announce a new pack
6. To make a special offer:
7. To announce the location of stockiest:
8. To educate customers:
9. To maintain sales
10.To recruit staff:11.To attract investors:
12.Advertising makes distribution easier.
13.Advertising benefits the customers. They come
to know about the products and product
information14.Advertising creates goodwill for the
manufacturers of quality products because ofconstantly associating the name of the
manufacturers with the standard products.
TYPES OF ADVERTISING.
Several categories of organizations are large
users of advertising, most important among them beingthe manufacturing, trading and service firms, non-profit
institutions and the government
agencies. Advertising can also be classified accordingto types. The principal means of classification are: (1)
by geographical spread, such as national, regional and
local, (2) by target group, such as consumer advertising,Industrial advertising or trade advertising, (3) by typeof impact such as: i) primary demand or selective
demand advertising and (ii) direct or indirect action
advertising and (iii) institutional advertising
1. Geographical Spread: On the basis of geographical
spread, advertising can be classified asa. National,
b. Local and
c. Global.
a. National Advertising: Some manufacturers maythink that their target is, the entire country. They select
media with a countryside base. Generally large,
established firms belong to this category. Among them
are Hindustan Lever, Brooke Bond, Larsen & Toubro,Escorts, Associated Cement Companies and the like.
b. Local Advertising: Small firms may like to restricttheir business to State or regional level. Thearea to be covered would generally be a state, city or a
town and media would be selected which principally
relates to that area.
c. Global Advertising: Multinational firms treat the
world as their market. Firms such as National IBM orSony or Ford advertise globally, e.g., in periodicals like
Times, Readers Digest.
2. Target Group: It is on the basis of target groups
aimed at it can further be divided into sub category as:a. Consumer Advertising
b. Industrial Advertisingc. Trade Advertising
d. Professional Adverting.
a. Consumer Advertising: A very substantial portion of
total advertising is directed to buyers of consumer
products who purchase them either for their own use orfor their households. The fact that buyers of consumer
items are generally very large and are widely
distributed over a large geographical area enhances the
importance of advertising as a
marketing tool. The preponderance of such advertisingcan be seen by looking into at random any general print
media, such as newspapers and magazines etc. Theseadvertisements are intended to promote sale of the
advertised products by appealing directly to thebuyers/consumers. Such advertising is called consumer
advertising.
b. Industrial Advertising: Industrial advertising on the
other hand refers to those advertisements which areissued by the manufacturers/distributors to the buyers
of industrial products. This category would include
machinery and equipment, industrial intermediates,parts and components, etc.
c. Trade Advertising: Advertisements, which aredirected by the manufacturers to the distributionchannel members, such as wholesalers or retailers, are
called trade advertising. The objective of such
advertising is to promote sales by motivating the
distribution channel members to stock more or to attract
new retain outlets.
d. Professional Advertising: There are certain products
for which the consumers themselves are not responsible
for the buying choice. The classic examples are
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pharmaceuticals where the decision is made by doctors
while the consumers are the patient.
Other types of advertisements are
Public Relations Advertising (PRA)Organizations these days are concerned with the
type of image they project they have to communicate
their objectives to the general public. They also have toIntake the public understand what their activities are.
Public relations, in short, try to build rapport with
various constituents of public such as employees,customers, local authorities, pressure groups, vendors,
customers, shareholders, government and public at
large. Public relations advertising helps to maintain this
relationship. Its main objective is to build a good
corporate image. It represents management and
communicates its policies, problems and performances
to the public.
Public Service Advertising
Public Service Advertising (PSA) is alsoinstitutional advertising, which seeks to promoteimportant social issue. It is created to promote greater
awareness of public causes. The examples of such
social issues, which have been promoted, are
handicapped children and their help, national
integration, flood donation, AIDS etc
Political Advertising
As most of the political advertising is directed to
public, it comes under the category of public relations
advertising. Political advertising is created either by
political parties or candidates. Mostly we come across
such advertising at the time of elections. Electionadvertising either lists the achievements of the party of
candidate or propagates their ideological basis.
Financial AdvertisingWhen public limited companies invite the general
public to subscribe to the share capital of the company,it is called financial advertising. In a broader sense, it
includes all advertising by financial industry such as
banks, car loan companies, insurance companies, non-
banking financial companies etc. Financial advertisingmotivates the public to invest, educate the public on
various aspects of the issue, works in favour of the
brokers/underwriters, and builds a good corporate
image.
Directory Advertising
Another type of advertising is called directorybecause people refer to it to find out how to buy a
product or service. The best known form of directoryadvertising is the Yellow Pages, although many
different kinds of directories perform the samefunction.
Direct-Response Advertising
Direct-response advertising can use any advertisingmedium, including direct mail, but the message is
different from that of national and retail advertising inthat it tries to stimulate a sale directly. The consumer
can respond by telephone or mail, and the product isdelivered directly to the consumer by mail or some
other carrier.
Business-to-Business Advertising
Business-to-business advertising includes messages
directed at retailers, wholesalers, and distributors, as
well as industrial purchasers and professionals such aslawyers and physicians. Advertisers-place most
business advertising in business publications orprofessional journals.
Institutional Advertising
Institutional advertising is also called corporate
advertising. These messages focus on establishing a
corporate identity or winning the public to the
organizations point of view.
Interactive Advertising
Interactive advertising is delivered to individualconsumers who have access to a computer and the
Internet. Advertisements are delivered via Web pages,banner ads, and so forth. In this instance, the consumer
can respond to the ad, modify it, expand it, or ignore it.
DIRECT AND INDIRECT ADVERTISING.If the message is to be communicated to
specific persons, the advertising is direct. The
advertiser may write letters to consumers directly
persuading them to buy his product or service. Indirectadvertising is meant for people at large. Advertising
made through indirect media can be heard and seen byany body.
INDOOR AND OUT DOOR ADVERTISING
The media which are available to the modern
advertisers are really numerous. One can sit indoorsand read news papers, magazines, journals, listen toradio, and see TV. These Medias are called indoor
Medias.On the other hand outdoor advertisements
are seen out doors. These advertisements are so located,so as to catch the eye of the passers immediately. Eg
are posters, hoardings, neon signs
etc. because out door advertisements are fixed at somespecific places, people are able to see them again and
again and there fore their impact is better.
PRINT OR PRESS MEDIA.
Press advertising remains the most popular and
effective method of publicity today. News papers andmagazines have become the part of the culture and life
of the people today. It plays a very important part in
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advertising. Press publicity takes two forms - News
Papers and Magazines.NEWS PAPERS.
Perhaps the oldest , powerful and the most popular
media available to advertisers is news paper. It can
communicate the information to a large number ofpeople and is also able to reach the most interior part of
the country. News papers has become the most
common habit of literate people.
MAGAZINES AND JOURNALS.
Besides news paper, magazines and journals which arepublished at frequent intervals also forms another
media of advertising. Magazines and journals are
periodicals published monthly or quarterly andgenerally contain articles and news of current interest.
Journals are published on subjects like trade, industry,
agriculture, commerce, banking, economy, religion,politics, etc. some times specific magazines and
journals enjoy a longer life than news papers.
DIRECT MAIL ADVERTISING.This is one of the oldest media of advertising. Direct
mail advertising is a way of sending sales messages
directly to the prospects, either through post or through
salesman or dealers. This is a kind of printed
advertising carried on by having direct contact with
prospects through postal services. This method issuitable for explaining details about products and
services.
RADIO ADVERTISING.
Radio advertising appeals through the ears. Now a
days, several broad casting stations all over the worldare selling time for the purpose of commercials.
TELEVISION ADVERTISING.Another development in advertising media in our
country is TV. It provides a scientific synchronizationof features of sound, sight and motion, that no other
medium has been able to provide. That is why TV is thebest selling mode of advertising ever invented.
Other types include posters, painted display,
window display, trade fairs, and skywriting.
DIRECT MARKETING.
Direct marketing is the use of consumer-direct
(CD) channels to reach and deliver goods and
services to customers without using marketing
middlemen. Direct marketers can use a number of
channels to reach individual prospects and
customers: direct mail, catalog marketing,
telemarketing, interactive TV, kiosks, Web sites,
and mobile devices. They often seek a measurable
response, typically a customer order, through
direct-order marketing. Direct marketing has been
a fast-growing avenue for serving customers,
partly in response to the high and increasing costs ofreaching business markets through a sales force.
MAJOR CHANNELS FOR DIRECT
MARKETING
1. Face to Face Selling - Many companies usedirect sales force or agents to locate prospects and
develop them into customers. Amway, Avon andTupperware are examples of such companies.
2. Direct Mail - Direct mail marketing involves
sending an offer , announcement , reminder or otheritem to a person. Using highly selective mailing lists ,direct marketers send out millions of mail pieces each
year letters , flyers ,foldouts etc.
3. Catalog Marketing - In catalog marketing,companies may send full-line merchandise
catalogs, specialty consumer catalogs, and businesscatalogs, usually in print form but also sometimes as
CDs, or online catalogues.4. Telemarketing - Telemarketing involves theuse of the telephone and call centers t attract
prospects,sell to existing customers, and provide service by taking
orders and answering questions. Telemarketing helpscompanies increase revenue, reduce selling costs, and
improve customer satisfaction.
5. E-marketing - The newest channels for directmarketing are electronic. E-business describes a wide
variety of electronics platforms, such as the sending ofpurchase orders to suppliers via electronics data
interchange (EDI) or extranets; the use of fax and e-
mail to conduct transactions; the use of ATMs, and
smart cards to facilitate payment and obtain digital
cash; and the use of the Internet and online services.
Sales Promotion.
Sales promotion is a Short-term incentives to
encourage the purchase or sale of a product or service.
It is about stimulating customers to buy a product.
Sales Promotion is An activity designed to boost the
sales of a product or service. It may include an
advertising campaign, increased PR activity, a free-
sample campaign, offering free gifts or trading stamps,arranging demonstrations or exhibitions, setting up
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competitions with attractive prizes, temporary price
reductions, door-to-door calling, telemarketing,personal letters on other methods.
Objectives of Sales Promotion
i. To introduce new productsii. To attract new customers and retain the existing ones
iii. To maintain sales of seasonal products
iv.To meet the challenge of competition
(i) To introduce new products: Many companies
distribute free samples while introducing new products.
The consumers after using these free samples may
develop a taste for it and buy the products later for
consumption.
(ii) To attract new customers and retain the existing
ones: Sales promotion measures help to attract or create
new customers for the products. While moving in themarket, customers are generally attracted towards the
product that offers discount, gift, prize, etc on buying.These are some of the tools used to encourage the
customers to buy the goods. Thus, it helps to retain theexisting customers, and at the same time it also attracts
some new customers to buy the product.
(iii) To maintain sales of seasonal products: There
are some products like air conditioner, fan, refrigerator,
cooler, winter clothes, room heater, sunscreen lotion,
glycerin soap etc., which are used only in particularseasons. To maintain the sale of these types of products
normally the manufactures and dealers give off-season
discount. For example, you can buy air conditioner in
winter at a reduced price. Similarly you may get
discount on winter clothes during summer.(iv) To meet the challenge of competition: Todays
business faces competition all the time. New productsfrequently come to the market and at the same time
improvement also takes place. So sales promotionmeasures have become essential to retain the market
share of the seller or producer in the product-market.
Importance of Sales PromotionThe business world today is a world of
competition. A business cannot survive if its products
do not sell in the market. Thus, all marketing activitiesare undertaken to increase sales. Producers may spend a
lot on advertising and personal selling. Still the product
may not sell. So incentives need to be offered to attractcustomers to buy the product. Thus, sales promotion isimportant to increase the sale of any product. Let us
discuss the importance of sales promotion from the
point of view of manufacturers and consumers.
From the point of view of manufacturers.Sales promotion is important for manufacturers
because
i. it helps to increase sales in a competitive
market and thus, increases profits;
ii. it helps to introduce new products in the
market by drawing the attention of potential customers;iii. when a new product is introduced or there is
a change of fashion or taste of consumers, existing
stocks can be quickly disposed off;
iv. it stabilizes sales volume by keeping itscustomers with them. In the age of competition it is
quite much possible that a customer may change his/her
mind and try other brands. Various incentives undersales promotion schemes help to retain the customers.
From the point of view of consumers.Sales promotion is important for consumers
because
i. the consumer gets the product at a cheaper
rate;ii. it gives financial benefit to the customers by
way of providing prizes and sending them to visit
different places;iii. the consumer gets all information about the
quality, features and uses of different products;iv. certain schemes like money back offer
creates confidence in the mind of customers about thequality of goods; and
v. it helps to raise the standard of living of
people. By exchanging their old items they can use
latest items available in the market. Use of such goods
improves their image in society.
Consumer sales promotion techniques.
Price deal: A temporary reduction in the price, such as
happy hour Cents-off deal: Offers a brand at a lower price. Price
reduction may be a percentage marked on the package. Price-pack deal: The packaging offers a consumer a
certain percentage more of the product for the sameprice (for example, 25 percent extra).
Coupons: coupons have become a standard
mechanism for sales promotions.
Free-standing insert (FSI): A coupon booklet is
inserted into the local newspaper for delivery. On-shelf couponing: Coupons are present at the shelf
where the product is available.
Checkout dispensers: On checkout the customer isgiven a coupon based on products purchased.
On-line couponing: Coupons are available on line.
Consumers print them out and take them to the store. Online interactive promotion game: Consumers playan interactive game associated with the promoted
product.
Rebates: Consumers are offered money back if the
receipt and barcode are mailed to the producer.
Contests/sweepstakes/games: The consumer is
automatically entered into the event by purchasing theproduct.
Point-of-sale displays:-
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o Dump bin: A bin full of products dumped
inside.o Lipstick Board: A board on which messages
are written in crayon.
o Necker: A coupon placed on the 'neck' of a
bottle.
Trade sales promotion techniques.
Trade allowances: short term incentive offered toinduce a retailer to stock up on a product.
Dealer loader: An incentive given to induce a retailer
to purchase and display a product.
Trade contest: A contest to reward retailers that sell
the most product. Point-of-purchase displays: Extra sales tools given to
retailers to boost sales.
Training programs: dealer employees are trained inselling the product.
Push money: also known as "spiffs". An extracommission paid to retail employees to push products.
Trade discounts (also called functional discounts):These are payments to distribution channel members
for performing some function.
IMPORTANCE OF PERSONAL SELLING
1. The increase in complexity of products and
services has increased the importance of personal
selling. Suppliers, producers or manufacturers of
highly specialised and technical products such as
computers, computer softwares, etc. depend more
heavily on personal selling.
2. Ever growing competition from domestic andforeign sources has also increased the importance
of salespersons in the marketing effort of a firm.
3. When the nature of the product is such that the
buyer needs special information in order to use it
properly, the sales representatives act as a
consultant to the consumer to apprise him or her of
the products technicalities and usage. They also
provide help and guidance for choosing a product
of ones own choice.
4. In case of industrial products, the promotion mix
mostly consists of personal selling rather than
advertising. Being a high value and complexproduct, personal contact with the customer is
essential to convince him or her of the products
quality, value and utility.
5. Companies which cannot afford a large outlay
for advertising on a regular basis finds personal
selling a more reliable method.
6. The power of negotiation for services and their
price increases with personal selling.
7. In some cases the nature of the product or
service is such that the chances of a sale are much
more through personal selling when compared to
other modes.
8. A S a l e s m a n e x p l a i n s t o
h i s c u s t o m e r s h o w w e l l t h e
p r o d u c t h e i s s e l l i n g c a n s a t i s f y
t h e i r n e e d s . H e g i v e s t h e m
opportunity to make more enquiries about
his product. This helps then to match their
needs and the product.
9. He informs them of new products and
explains to them how best they can use
these products.
10. He may also give a demonstration of use
and also explains to them the precautions
they should take while using the products.
11. He provides their after-sales servicealso.
SALES PERSONNEL : QUALITIES.Some people say salespersons are born
salespersons while others believe that training can
help in making good salespersons. Irrespective of
these opinions a good salesperson has certain
qualities and abilities as a result he or she is able to
perform better than others. Let us discuss the
qualities of a good salesperson.
Philip Kolter has identified two basic qualities of agood salesperson namely, empathy and
persuasion. But others have listed more. Some of
the qualities of a good salesperson are as follows:
1) Ability to estimate customers needs and
desires : He or she is alert and quickly determines
what the customer wants and the best way to sell.
2) Ambition: He or she likes to do a good job
and is interested in getting ahead with the
company.
3) Appearance: Appearance mean a lot today and
the successful salesperson is neat and organised.
He or she presents himself or herself well inperson. Also, he or she keeps his or her desk,
books and manuals neat and ready for use.
4) Business Sense: He or she understands that
you are in business to make a profit and quickly
learns the ins - and - outs of the organisation.
5) Courtesy : He or she reveals a sincere desire to
help customers and treats them as guests even
when he or she visits their places of business.
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6) Creativeness : Imagination, vision and the
ability to create ideas make a salesperson
dynamic.
7) Curiosity : He or she wants to learn all he or
she can about his or her products and customers.
8) Enthusiasm: There is nothing that can drain
away a prospects buying interest more than a half-
dead salesperson. Dullness should be left at home.
A salesperson must radiate enthusiasm during and
after the sales call.
9) Figure Sense : He or she should have the
mathematical ability to figure and fill up order
form correctly and to make the necessary reports.
10) Flexibility : A good salesperson is able to
adapt himself or herself to a variety of customers.
Each contact may require adapting the sales talk,
speech habits and even appearance.
11) Friendliness : A salesperson should be able to
make people like him or her and he or she must
like to meet people12) Handwriting : He or she must write legibly so
that his or her paper work can be readily
understood by his or her office people and by his
or her customers.
13) Health : Good health generates energy and
energy is needed to sell. Poor health prevents many
salesperson from fulfilling their potentials.
14) Integrity : A salesperson must be trusted to do
his or her job well. He or she cannot help but be
successful when his or her customers trust him or
her.
15) Interest in job : He or she likes selling andworking for the company.
16) Knowledge : In some businesses, a
salesperson must also have a through knowledge of
the highly specialised products or services his or
her employer offers. In some cases, this
knowled