MBA DUAL SPEC. (Marketing management)

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I ns t i t ut eofManage me nt & Te c hni c alSt udi e s

MARKETI NG MANAGEMENT 500

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IMTS (ISO 9001-2008 Internationally Certified) MARKETING MANAGEMENT

MARKETING MANAGEMENT

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MARKETING MANAGEMENT

CONTENTS:

UNIT I

01-58

Introduction – core concept of marketing – marketing and markets – scope of marketing – production concept – product concept – selling concept – marketing concept – marketing environment – micro factors and macro factors.

UNIT II

59-106

Product strategies and branding strategies – product mix decisions and line decisions – brand – definition, naming decisions and strategy decisions – packaging and labelling

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UNIT –I MARKETING MANAGEMENT INTRODUCTION - MARKETING

WRITE SHORT NOTES ON MARKETING OR WHAT IS MARKETING

Before studying about the concept of marketing we must know about the word MARKET. ‘Market’ in derived from a Latin noun “MARCATUS” meaning merchandise, ware traffic on trade. Market is defined as an area or atmosphere for a potential exchange – “KOTLER”. It covers place – convenient place for buyers and sellers to come together. An area stands for the contract between the buyers and sellers to strike the dealing. Demands stand for people with need and want to satisfy and it also includes the purchasing power of the consumers. Involvement – 2 types. 1) Physical – Goods and services movement. 2) Mental – Behaviour (what, where, of what quantity, price). Definitions of marketing: 

Def 1: Any inter personal and inter organizational relationship involving in a exchange ( a transaction) is marketing – ‘KOTLER’

Def 2: Marketing could be defined as that business function which is mostly concerned with the three activities – Recognition of demand, stimulation of demand, and satisfaction of demand.

Def 3: Marketing involves all those activities that are devoted to finding out what the customers want and satisfying those wants.

Def 4: According to CUNDIFF – Marketing is the business process of by which products are matched with the market and through which transfers of ownership are affected.

Def 5: Marketing consists of all activities designed to generate and facilitate any exchange intended to satisfy human needs and wants.

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Def 6: The American Marketing association (AMA) defines Marketing as – the performance of business activities that direct the flow of goods and services from producer to consumer.

Def 7: KOTLER as defined marketing as a social and managerial process by which individuals and groups obtain what they needed and want through creating, offering and exchanging products of value with others.

Def 8: A process, which converts a source, distinct knowledge into a contribution of economic value in the market place. The purpose of the business is to create a customer.

Def 9: Marketing is an economic process by which goods and services are exchanged and their values determined in terms of money, prices.

Def 10: Marketing is a delivery of a standard of living to society.

Def 12: Marketing is a creation and delivery of a standard of living to society.

Def 13: CLARK AND CLARK defines a market as” A center about which or an area in which the forces leading to exchange of title to a particular product operate and towards which the actual goods tend to travel”.

Def 14: In the words of CHAPMAN “ The term market refers not to a place but to a commodity or commodities and buyers and sellers who are in direct competition with one another”.

Business aims at profit:  To realise profit, a sale has to be made.  To make sale, a customer has to be created.  To retain the customer, he has to be satisfied.  To satisfy the customer, his needs have to be met.  To meet the needs, the product should conform to the requirements of the customer. This leads us to the conclusion that the process of market begins with conceiving of an idea of business itself. DEFINTION: According to HANSEN” Marketing is the process of discovering and translating consumer needs and wants into product and service specifications creating demand for these products and services and then in turn expanding this demand” CUNDIFF defines “ Marketing is the business process by which products are matched with market and through which transfers of ownership are effected”.

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AMERICAN MARKETING ASSOCIATION defines “ Marketing is concerned with the people and activities involved in the flow of goods and services from producer to consumer”. MARKETING MANAGEMENT What do you understand by Marketing Management? The marketing management activities include analusis, planning, implementation and evaluation of performance. It is a purposeful activity which aims at bringing about the desired exchanges.

It stresses the adaptations and co-

ordination of several factors like the product price, promotion and place to achieve the effective response. Definitions: According to Philip Kotler, “Marketing management is the analysis, planning, implementation and control of programmes designed to bring about the desired exchange with target markets for the purpose of achieving organizational objectives. It relies heavily on designing the organizations offering in terms of the target markets needs and desires and using effective pricing communication and distribution to inform, motivate and service the market”. What are the important functional areas of management? 

Co-ordination of marketing effort: All the elements of the marketing programme must be in consonance with one another and strengthen each other. But it is not an easy task to achieve co-ordination among various marketing effort because persons engaged in various marketing functions are almost, physically separated like distribution channel, pricing, advertising etc are framed in the head office, salesmen are in the field distributors are spread over different regions.

Co-ordination with production department: Decision regarding introduction of a new product should be made by the marketing manager only in consultation with the production manager because the question of production seasibility, cost of product, possibility of manufacturing can be very well answered by the production manager only. The marketing manager knows about the quality, nature, colour, size etc., that are expected by the customer, from the product.

Co-ordination with purchase department: If the raw materials are purchased at the proper time, cost of materials can be reduced to the minimum. The purchase manager must plan for the

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future by collecting market information from the marketing manager so that he may be in a position to purchase the required materials in time and production may go on smoothly. 

Co-ordination with Finance Department: Manufacturers, wholesalers, consumers all require finance to produce, sell and purchase goods, marketing manager should have clear cut idea about the financial methods used in his firm because progress of the concern can be measured with these methods. He must know exactly about the overhead and other expenses incurred on different products.

Co-ordination with personnel Department: Co-operation with in the marketing and personnel departments ensure the placing of right job and also of utilizing the same to the maximum extent. The marketing manager depends heavily on the availability of human resources for the ultimate success of the business. The personnel department should cooperate with the marketing department by providing a strong marketing group. Marketing department should give clear idea to the personnel department as to the nature and type of work that the new employee required to perform. The marketing manager should co-operate with the personnel department to improve the selection methods. The personnel department also should help the marketing department to develop and introduce proper training programmes for marketing personnel.

Co-ordination with legal Department: There are various acts, the provisions of which every marketing department is required to be duly complied with. For instance, trade mark act, patents and copyright act, sale of goods act, etc. The assistance and advice of legal department are essential for solving the problems if any arise relating to such acts.

What are the functions (Or) Principles of Marketing Management (Or) What are the functions of Marketing Manager? 

Integrated Marketing: The marketing manager co-ordinates the activities of all the departments in an organization engaged in manufacture.

Some of the

important activities of the marketing management: 1.

Collection of necessary data relating to market.

2.

Analysing the date so collected and drawing conclusions.

3.

Developing the product.

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4.

Developing new techniques of marketing.

5.

Framing a detailed marketing programme.

6.

Implementing the marketing programme.

7.

Co-ordinating the wants and satisfaction of the customers.

Determining objectives: To be effective any activity of a firm must be goal-oriented. These goals are the interpretations of the management of its specific needs at a given time and place, and they guide the activities for the progress of the company.

Planning: Once the management has determined its objectives, the next step is to determine the manner in which these goals can be achieved. This type of managerial activity is called planning.

The marketing managers are

engaged in short run and long run planning as regards to markets, products, distributive channels etc., It is deciding in advance what to do, where to do, how to do, who to do, when to do. 

Organising: It demotes the process of arranging the activities and personnel of a firm in such a manner that the maximum output with greater degree of efficiency may be achieved. The marketing manager under his direction and control should design the most appropriate organization for achieving the goals.

Staffing: It is the process of assembling the human resources. Proper selection of persons both in executive and non-executive lines will reduce many management problems and makes the executives’ job easier. Marketing manager recruits and selects the efficient marketing force. He makes the necessary arrangements for their training and formulates policies with regard to their remuneration.

Co-ordination: The marketing manager should not only co-ordinate the work of his subordinates but also co-ordinates his own efforts with those of executives in other departments. He should co-ordinate the advertising plans with the selling plans, manufacturing schedules with the plans for physical distribution of goods.

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Controlling: Effective marketing managers also need skill on controlling,

1.

Establishment of performance standards.

2.

Measurement and feed back of performance results.

3.

Evaluation of actual performance against the standards.

4.

Taking suitable action on the basis of the results.

Evaluation: The results of the company are analysed and evaluated to determine. Whether the set goals have been reached or not in the following manner. 1.

The performance of each and every salesman may be evaluated.

2.

The effectiveness of the advertisement programmes given by the manufacturers and middlemen will be analysed.

3.

The performance of the middlemen will be evaluated individually against their quota and reactions of the customers Based on the above said evaluation, changes may be introduced

wherever necessary and direction given for future course of action. What are the tasks of the marketing management? 

Conversional Marketing: It refers to the conversion of a negative demand into a positive demand which all or most of the potential buyers dislike the firms product or indifferent towards the services rendered by the firm. Negative demand applies to many products and conditions. For example, vegetarians have a negative demand for meat.

Situational marketing: This is the process of creating a demand for a product which has no demand. No demand is a state in which all the prospects are uninterested or indifferent to a particular product. However, this a rare condition. If such a condition prevails, the marketer should experience much difficulty even to start with. Thus, situational marketing is a rough and an extremely difficult task.

Developmental Marketing: It refers to the conversion of the latent demand into actual marketing. Latent demand refers to a state when a substantial number of prospects have a strong desire or need for something or quality that does not found or exist in the actual product. In this case, the marketer has an opportunity of

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developing the product incorporating all the qualities in the product needed by the prospects. 

Remarketing: It is the process of revitalizing or rebuilding a faltering demand into its earlier state. Faltering demand is a state in which the demand for a product is less than what it has originally and further fall is expected if no remedial measures are taken to rectify the defect.

Synchro Marketing: The process of converting an irregular demand into a regular demand is known as synchro marketing. Irregular demand is a state in which the timing pattern of the demand is marked by seasonal or volatile fluctuations that depart from the timing pattern of the supply. Ex: Hotels in hill stations are over booked in hot summer and less booked or even un-booked in other seasons.

Maintenance Marketing: Where the market is full, it should be maintained. Full demand is a state in which the current level and timing of demand is equal to the desired level and timing of the demand. Various goods and services reach the stage of full demand in the market.

De-Marketing: It refers to the task of reducing an overfull demand. Sometimes the actual demand for a product may exceed the level at which the marketer is able or motivated to supply it. This situation is known as overfull demand. Thus state of affairs may arise due to temporary shortages in supply or excessive popularity for the product. The process of reducing the overall demand can be done either by discouraging all the buyers in general or a certain classes of buyers in particular.

Counter Marketing:

De-marketing tries to reduce the market, whereas counter market tries to destroy the market altogether. It is also known as un-selling. Classic examples are alcohol, cigarettes etc. This measure is generally taken by the producers only when the Government prohibits or bans the production of such goods.

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CORE CONCEPT OF MARKETING There are three main alternatives to adopting a marketing orientation. These are: (1) Sales orientation (2) Production orientation, and (3) Product orientation. These are described briefly below. Production Concept A production-orientated business is said to be mainly concerned with making as many units as possible. By concentrating on producing maximum volumes, such a business aims to maximise profitability by exploiting economies of scale. In a production-orientated business, the needs of customers are secondary compared with the need to increase output. Such an approach is probably most effective when a business operates in very high growth markets or where the potential for economies of scale is significant.

Product Concept This is subtly different from a production orientation. Consider a business that is “obsessed” with its own products – perhaps even arrogant about how good they are. Their products may start out as fully up-to-date and technical leaders. However, by failing to consider changing technological developments or subtle changes in consumer tastes, a product-orientated business may find that its products start to lose ground to competitors Marketing management in a customer-orientated business The process of marketing management is about attracting and retaining customers by offering them desirable products that satisfy needs and meet wants. Marketing management in a customer-orientated business consists of five key tasks summarised in the table below: Sales / selling concept Some businesses see their main problem as selling more of the product or services which they already have available. They may therefore be expected to make full use of selling, pricing, promotion and distribution skills (just like a marketingorientated business). The difference is that a sale-orientated business pays little attention to customer needs and wants, and does not try particularly hard to create suitable products or services.

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WHAT ARE THE DIFFERENCES BETWEEN MARKETING AND SELLING? SELLING

MARKETING

S.NO 1

Selling starts after production

Marketing starts before production.

2

Emphases on the production.

Emphases on customer’s wants.

3

Internal, company orientation

External, market orientation

4

Company’s need is the motive

Buyer’s need is the motive.

5

Cost determines price.

Consumer determines price.

6

It is an activity that converts the It is a function that converts the

7

goods into cash.

consumer needs into products.

It is done towards the end.

It is the starting point of all business activities.

8

It is static

It is a changing concept.

9

Marketing is not part of selling

Selling is part of marketing.

10

The

11

12

13

profit

maximization

is

the The philosophy of marketing is

philosophy of selling.

“customer satisfaction”.

Selling in total means moving of

Marketing in total means obtaining

products.

customer.

It revolves around the need and

Marketing revolves around the

interest of the seller.

needs of interests of the buyers

Converts the goods into cash.

Converts the consumer needs into products.

COMPARE MARKET – MARKETING OR EXPLAIN THE DIFFERENCES BETWEEN THE TERM MARKETING AND MARKETS Market: It consists of all the potential customer sharing a particular need and want who might be willing and able to engage in exchange to satisfy that need or want. – PHILIP KOTLER Marketing: It is a social or managerial process by which individuals and group obtain what they need and want through creating and offering and exchanging products of values with others.

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What are all the– 4" C ”s

10

of Marketing?

1) Customer solution 2) Customer cost 3) Convenience 4) Communication

CUSTOMERS OR CONSUMERS? What is the difference between a customer and a consumer? The following distinction should help: • A customer – purchases and pays for a product or service • A consumer – is the ultimate user of the product or service; the consumer may not have paid for the product or service Consider the following example: • A food manufacturing business makes own-label, Italian ready meals for the major supermarkets. • So far as the business is concerned; the customer is the supermarket to whom it supplies meals • The consumer is the individual who eats the meal In terms of its marketing effort, who should the business above target? In reality – it needs to understand the needs and wants of both the customer and the consumer. It needs to develop a strong understanding of the needs of the supermarkets in terms of their requirements for ready meals (e.g. packaging, recipes, price & delivery). It also needs to understand (perhaps with the help of the supermarkets) the needs and wants of the consumer. How are tastes changing? Are consumers happy with the standard / taste of the product? STATE THE IMPORTANCE OF MARKET?  It enables the seller to sell.  It enables the buyers to buy what the want.  It makes available goods and services that raise the standard of living of the people.  It gives the buyers access to goods that are made in different parts of the country and in different parts of the world.

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 It generates lot of employment opportunities.  It enables many like brokers, commission agents and coolies to earn their live hood.  It generates income and thereby promotes trade and commerce.  It is essential for the economic development of any nation.

WHAT ARE ALL THE IMPORTANCE OR ADVANTAGES OR MERITS OR SIGNIFICANCE OR USES OR WHY MARKETING NEEDED OR EFFECTIVENESS OF MARKETING: 1. It enables the marketers to know the tastes and preferences of the consumers and accordingly make a product. As a result they are able to sell their goods easily. 2. It fulfils the needs of the buyers by giving them what they want. Buyers get their money’s worth. 3. Innovations in marketing have given the buyers superior goods at affordable prices. 4. Marketing today has developed to such an extent that the buyers are able to get international brands of goods at their doorstep. 5. Olden days – the buyers had to but what was available / modern marketing – buyers have many alternatives. 6. Updated technological products are available. 7. It guides the marketers in determining the correct price for their products by taking into account the various price determinants like cost, profit completion and soon. 8. It helps the marketers in matters of selection of the right promotional tool. 9. It also guides the manufacturers in selecting the correct channel of distribution.

10. It provides the employment opportunities to many 11. The lifestyles of the people have certainly improved over the years, thanks to the revolution in marketing. 12. Marketing has certainly converted “yesterday’s luxuries into today’s necessaries”. IMPORTANCE TO THE MAREKTING SOCIETY

FIRM - Helpful in

Provides employment

Helpful in Business planning and decision-making.

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Deliver the standards living

Helpful in Distribution.

Reduces the distribution cost

Helpful in increasing profits.

Protection against slump

12

Helpful in communication between the firm and the society.

Increases national income Facilitates the choice

IMPORTANCE TO THE SELLERS AND BUYERS

Increase the knowledge of IMPORTANCE TO THE DEVELOPMENT OF A customers

COUNTRY

Customer satisfaction HOW ARE MARKETS CLASSIFIED ACCORDING TO GEOGRAPHICAL AREA? OR WHAT ARE THE KINDS OF MARKETS? 1) GEOGRAPHIC AREA: 

LOCAL MARKET: When a product for a market is restricted to particular town or state, such a market is called local market. Example: “Kali Mark” a Chennai based soft drink.

NATIONAL MARKET: When the market for a product extends, to the whole country. Such a market is called a National Market. Example: The soap of “ Godrej”.

INTERNATIONAL MARKET: a product, which is marketed throughout the world, is said to be having an International Market. Example: Coca cola, fanta are International brands of soft drinks that are marketed throughout the world.

2) ECONOMIC: 

PERFECT MARKET: The homogeneous nature of goods and uniform price thought the market are the key characteristics of a perfect market.

MONOPOLISTIC MARKET: The market for those products which are not identical and whose prices are different is known as a monopolistic market the market for soaps, face powder, toothpaste etc is a monopolistic market.

MONOPOLY MARKET: It is a market having just one seller. In India, for e.g., The Railways are being managed by the government it is said to be monopoly.

OLIGOPOLY MARKET: It is a market in which there are a few sellers who work according to a common understanding. Their price strategy is the same. The market for soft drinks can be cited as an example.

3) VOLUME OF BUSINESS; 

WHOLESALE MARKET: A wholesaler is a person who sells in large quantities to retailers.

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RETAIL MARKET: A retailer is one who buys in bulk quantities from the wholesaler and generally from the wholesaler and generally sells in small quantities to the consumers.

4) TIME: 

VERY SHORT PERIOD MARKET: It is a market that exists for just a day at a particular place. Such one-day markets are quite common in our villages.

SHORT PERIOD MARKET: when the market exists for a week or month, it can be called a short period market.

LONG PERIOD MARKET: The market for most consumer goods and services is a long period market.

5) IMPORTANCE: 

PRIMARY MARKET: It is the market for agricultural commodities.

SECONDARY MARKET: It is the market for se4mi-manufactured goods.

TERMINAL MARKET: It is the market in which the final products are sold to the ultimate consumers.

6) NATURE OF GOODS: a) COMMODITY MARKET: b) AGRICULTURAL GOODS MARKET: It is a market for agricultural goods c) INDUSTRIAL GOODS MARKET: It is a market in which goods used by the manufacturers as inputs in production are sold. d) BULLION MARKET: It is the market for gold and silver. e) CAPITAL MARKET: 

MONEY MARKET: It is the market in which money is borrowed and lent. The commercial banks are the participants of the money market.

FOREIGN EXCHANGE MARKET: In this market the currencies of foreign countries are bought and sold.

STOCK MARKET: The shares of companies and other securities are trade in a stock market.

7) REGULATION: 

REGULATED MARKETS: These markets are governed by rules and regulations. The stock market, the commodity market and foreign exchange markets are examples.

UNREGULATED MARKETS: These markets operate according to demand and supply forces and are not governed by rigid rules and regulations.

8) NATURE OF TRANSPORT: 

SPOT MARKET: In this kind of a market delivery of goods takes place immediately.

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FORWARD MARKET: Here, only a contract to delivery is entered into now, actual delivery of goods takes place only at a later date.

IMPORTANCE OF MARKETING?  It enables the marketers to known the tastes and preferences of the customers and accordingly make the product. As a result they are able to sell their goods easily.  It fulfils the needs of the buyers by giving them what they want. The buyers get their money’s worth.  Innovations in marketing have given the buyers superior goods at affordable prices.  Marketing today, has developed to such an extent that the buyers are able to get international brands of goods at their doorstep.  The growth of marketing has now given the buyers very many alternatives. The buyers are now in a position to select the best from among the many alternatives.  It has eliminated outdated or obsolete products over the years; it has updated the technology in tune with the needs.  It guides the marketers in determining the correct price for their products by taking into account the various price determinants like cost, profit and so no.  It helps the marketers in the matter of selection of the right promotional tool.  It guides the manufacturers in selecting the correct channel of distribution for their products.  It provides employment opportunities to many.  Marketing has certainly converted “yesterday’s luxuries into today’s necessaries”. Goods that were once considered as beyond the reach of the common man are now common household items. Differences between Goods and Services Goods are tangible. You can see them, feel them, touch them etc. Services are intangible. The result of human or mechanical efforts to people or objects. Major distinguishing characteristics of Services: 

Intangibility-major component of a service is intangible

Pershibality-many cannot be stored for future sales Airline/Amusement ride Number of hair cut hours in one week: i.e., if Christies employs 3 people, who work forty hours per week, they have potentially 120 hair cut hours to offer. If they

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do not have any customers at a particular period during the day, they will lose the opportunity to cut hair at that time and therefore the opportunity to generate revenue...the opportunity has perished...they no longer have the ability to earn revenue from 120 hair cut hours that week!! 

Inseparability-customer contact is often the integral part of the service...Legal services/hair dresser, therefore often a direct channel of distribution.

Variability-in service quality, lack of standardization, because services are labor intensive.

Sales of goods and services are frequently connected, i.e. a product will usually incorporate

a

tangible

component

(good)

and

an

intangible

component.

Levels of Product There are 3 levels of products 

Core Product- Marketers must first define what the core BENEFITS the product will provide the customer.

Actual Product-Marketer must then build the actual product around the core product. May have as many as five characteristics:

EXPLAIN THE OBJECTIVES OF MARKETING? BARKER AND ANSHEN says,” The end of all the marketing activities is the satisfaction of human wants.” though the satisfaction of human wants, profits are rewarded to the business and the reward is inducement for marketing. Now the time has changed and than securing profits. The following are the aim of marketing.  Intelligent and capable application of modern policies.  To develop the marketing field.  To develop guiding policies and their implementation for a good result.  To suggest solutions by studying the problem relating to marketing.  To find source for further information concerning the market problems.  To take appropriate actions in the course of actions.

EVOLUTION OF MARKETING 1) BARTER SYSTEM: The goods are exchanged against goods, without any other medium of exchange lice money. 2) PRODUCT ORIENTATION: During the early days of business activities the emphasis was mainly on production. The businessmen thought that they could

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produce anything and sell. To a certain extent they were successful too. The later phase of this stage witnessed mass production by industrial units. This has come to be called as “ Industrial Revolution” 3) SALES ORIENTATION: The idea of mass production of goods as conceived in the previous stage did not work later in a condition of supply exceeding the demand. Further, with the growth of transport and communication and improvement in the lifestyle of people the attitude of businessman had to change. They realised the need for selling efforts. Thus, emphasis shifted from production to sales. 4) MARKETING ORIENTATION: Customer’s importance was realised but only as a means of disposing of goods produced. Competition became stiffer. Aggressive advertising, personal selling large-scale promotion etc are used as tools to boost sales. 5) CONSUMER ORIENTATION: Under this stage only such products are brought forward to the market, which are capable of satisfying the tastes, preferences and expectations of the consumer’s satisfaction. 6) MANAGEMENT ORIENTATION: The marketing function assumes a managerial role to co-ordinate all interacting business activities with the objective of planning promoting and distributing want satisfying products and services to the present and potential customers.

MARKETING CONCEPT

WHAT ARE THE FEATURES OF MODERN MARKETING CONCEPT? The marketing concept is a consumer’s needs orientation backed by integrated marketing aimed at generating consumer satisfaction as the key to satisfying organisation goals. In earlier years, marketing was viewed as not much different from selling. But marketing concept can be expressed such as “ find wants and fill them”.

“ Make

what you can sell, instead of trying to sell, what you can make”, “ Love the customers and not the product”. 

In ancient days the concepts are not familiar in this area. The traditional concepts are completely different from the modern concept. In ancient days, marketing is conducted on the philosophy that products are matched with the markets i.e., the firm takes the responsibility on itself to design, develop and sell its products to suit the need of its customers.

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The principal followed is CAVEAT VENDOR – let the seller behalf. The main object behind this thinking is to satisfy customer through constant study of their changing needs and wants. While, under the later, the firm does not take any responsibility for its goods – The philosophy that work is CAVEAT EMPTOR i.e., let the buyer behalf.

The goods produced as per the decision of the marketing manager and are put on the market and the purpose of marketing ends. Ex. In olden days BPL Televisions are produced by its own technology and model. They are not bothering about the need and wants of the customer i.e., style required by the peoples.

It was changed now readymade shirts are the basic example of ancient marketing concepts. In modern marketing the goods and services are produced according to the needs and wants of the customer. The desire of the customer is the key factor.

Now a day, the production and marketing departments are interrelated. After done a big marketing survey in the hands of customer, the products were design. If we did not done or study the customer mind the product will get failure. Competition is the factor. Based on the potentials of the customer the marketing department plans the price, promotion and distribution activities. The present potential customer needs and wants basic criteria for a real marketer.

Some of the ideas of Modern Marketing Concepts are: 1) CONSUMER’S NEED ORIENTATION: “Selling focuses on the need of the buyer selling is preoccupied with the seller’s need to convert his product into cash, marketing, with the idea of satisfying the need of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it”. It is expressed in the following ways also:  Consumer is the king. He gets what he needs.  Consumer has voice and tops in the organisation chart.  Consumer’s need and desires are considered in production planning.  Consumer’s need and desires are shaped through products.  Firms produce acceptable products and not the product easy to manufacture. 2) INTEGRATED MARKETING: All the departments in an organisation recognize the importance of buyers. For instance, a firm may have different department headed by

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department heads. When the buyer has any dealing with the departments, a good feeling or goodwill must be created through the dealing. 3) CONSUMER SATISFICATION: Firms aim to give satisfaction to consumers through marketing concept. The firm trys to help the buyers in solving the problems, better than the competitors. In the concept of consumer satisfaction, there are short-run and long-run consumer satisfaction is achieved by supplying items like liquor, cigarettes but not nutritious food. The long-run consumer welfare further broadens the concept of marketing. E.g., Servicing one’s market and society.  Consumer has been given supreme place.  Buyers do not buy products and services themselves but for the promise of what these purchases will do for them. E.g., They do not buy toothpaste but they buy the promise of healthy teeth and an attractive smile.

WHAT ARE THE FACTORS INFLUENCING MARKETING CONCEPT? Some of the factors influencing Marketing Concept are: 1) POPULATION GROWTH: The increase in population naturally increases the demand too. Markets are made up of people. Increase in population causes increasing the markets, increasing the consumers, who have increased demand for goods, in kinds, verities, preferences etc. thus the production have to meet the changing demand of people. 2) INCREASING HOUSEHOLDS: The growth of demand for household products is more than it is to the total population at any time. Joint family system has become unpopular because of many reasons. Most of the families are sub-divided and this increases the number of families and their demands. Example: Automobiles, Electrical appliances. 3) DISPOSAL OF INCOME: Automation in industries, births of many new firms etc. open the door of employment. Thus people have increased their income and in turn aim for more satisfaction and more comforts. When the income continues to increase, the purchasing power also increases. 4) SURPLUS INCOME: The people have surplus income left after meeting the expenses on essential items. This surplus amount will be spent on non-necessary products or luxury goods. People select such items, if they can give satisfaction to their needs and desires.

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5) TECHNOLOGICAL DEVELOPMENT: Science and technology improves day by day. New inventions of products take place often. None will have the guarantee that his products will always possess demand in the market. People always prefer to have the latest model. Therefore, consumer-oriented marketing system is essential. 6) MASS COMMUNICATION MEDIA: The growth of mass communication medianewspaper, magazines, television, radio etc. Facilitates the buyer to learn about the new products available for sale. The buyer gets information about the new products faster and more effectively before the product comes to the market. 7) CREDIT PURCHASE: Credit purchases through hire-purchase schemes and instalment scheme are common today. Credit purchase pushes sales. The customers can enjoy the facilities and this widens the market.

Explain briefly about the evolution of marketing concept: 1.

Self sufficient stage: In the earlier days of human history, each family was self sufficient. It produced the goods needed by itself and there was no need for exchange.

2.

Exchange oriented stage: When the people began to realize the importance and uses of division of labour and specialization, the next stage i.e., exchange oriented stage came into being. Competition was totally absent in those days. With the invention of money, many problems connected with the exchange of goods and services were solved to a great extent. This is the first stage of the evolution of marketing.

3.

Production oriented stage: It is the result of industrial revolution. The producers concentrated their attention only on the production side ignoring the problem of marketing.

They cared very little about the consumer and even sales,

because the competition between various producers was not so acute as it is today. 4.

Sales oriented stage: The sales oriented stage, witnessed major changes in all the spheres o economic life only in this stage, the business managers began to realize the importance of marketing.

The place of the consumer was though

accepted no serious steps were taken to satisfy his wants. The consumer

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had no other alternative other than to accept only those goods produced by the producers. 5.

Marketing oriented stage: The competition became more stiff than it was in the previous stage. In this stage the business units began to expand their production and produced more than the immediate needs of the society. The producers began to realize that their products cannot be sold without an effective sales force.

What are the essentials of modern marketing concept? 

The firm should appreciate and understand the strategic. Position of the consumers.

The marketing system should be designed to serve the

consumer needs. 

The marketing activities should be a planned one.

Various marketing activities should be integrated and well co-ordinated.

Marketing research should be undertaken.

Product innovation and product planning should be recognized and emphasized.

There should be a continuous reshaping of the firms products, services and other activities to meet the demands and the opportunities of the market place effectively.

Explain the benefits or advantages of the modern concept of marketing? 1.

Understanding of the consumer: The first advantage is that the management recognizes and appreciates the customer needs which are of basic importance.

The

products the designed and produced to suit the needs of the customer. Changes in the tastes of the consumers are immediately noticed and the goods are brought to suit the changing situations. 2.

Innovation and new opportunities: This concept enables the producer to identify new opportunities and effect broad improvements in his products and services. Many changes in the product design can also be introduced to suit the changing taste of the customers.

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21

Creation of prestige and image: By understanding the customer and satisfying his wants effectively, the businessman can add his prestige and acquire a better image in his line of business.

4.

Cordial Relationship with the consumer: By accepting the modern concept of marketing the firm gives due consideration to satisfy the consumers along with its goal of profit making. The consumers pay only for those goods which provide them adequate satisfaction. This ensures a cordial relationship between the producer and the consumer.

5.

Elimination of Dead Stock: Since the business firm constantly reviews its operations and produces only those goods required by the consumer, the question of slow moving item or dead stock and the consequent losses do not arise.

6.

Consumer advertising and repeated sales: The satisfied customer is the best advertiser. He advertises the utility of the product to his neighbours.

The consumer advertising is more

effective than the other forms of advertising by the producer. It increases the number of customers and consequently the volume of sales. Besides, the firm can get a repeated sale which is vital to the success of any firm.

Enumerate the factors influencing marketing concept? A firm operating under the concept, receives direction from the market i.e. information regarding the customers wants needs and desires through market. The factors in brief are: 1.

Population Growth: The increase in population naturally increases the demand too. Markets are made up of people. Increase in population causes increasing the markets, increasing the consumers, who have increased demand for goods, in kinds, varieties, preferences etc. Thus the producers have to meet the changing demands of people.

2.

Increasing Households: The growth of demand for household products is more than it is to the total population at any time. Joint family system has become unpopular because of many reasons. Most of the families are sub divided and this increases the number of families and their demands.

Ex: Automobiles,

refrigerators, electrical appliances, T.V. Sets etc.

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3.

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Disposal of Income: Automation in industries, births of many new firms etc., open the door of employment. Thus people have increased their income and in turn aim for more satisfaction and more comforts. When the income continues to increase, the purchasing power also increases.

4.

Surplus Income: The people have surplus income left after meeting the expenses on essential items.

This surplus amount will be spent on non-necessary

products or luxury goods. Such items are selected by people, if they can give satisfaction to their needs and desires. 5.

Technological Development: New inventions of products take place often.

None will have the

guarantee that his products will always possess good demand in the market.

Some technological advancement may outmode the existing

products, in turn the whole industry many come to a standstill.

People

always prefer to have the latest model. 6.

Mass communication media: The growth of mass communication media-Newspapers, magazines, radio television etc. facilitates the buyers to learn about the new products available for sale.

The buyer gets information about the new products,

faster and more effectively before the products come to the market. 7.

Credit purchases: Credit purchases through hire-purchases schemes and installment schemes are common today. Credit purchases push sales. The customers can enjoy the facilities and this widens the market.

EXPLAIN THE APPROACHES TO THE STUDY OF MARKETING? 1) Product or Commodity: Under the commodity approach the focus is placed on the product or it is an approach on the marketing on commodity wise basis. In other words, the study relates to the flow of a certain commodity and its movement from the original producer right up to the ultimate customer. The subject matter, under this study, is commodity. When one studies the marketing on this basis – commodity approach, one must begin to study and analyze the problems relating to a commodity (i.e) Sources and conditions of supply nature and extent of demand, mode of transporting, storage, packing etc.

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2) Institutional Approach: In the institutional approach the focus is on the study of institutions – middlemen, wholesaler’s retailers, importer, exporter, etc., - engaged in the marketing during the movement of goods.

The approach is also known as

middlemen approach. In the process of moving the goods from the producer to the final consumers, a large number of persons are engaged.

This system pays

attention to the problems and functions of marketing institutions – transporting, banks and other financial institutions, etc. 3) Functional approach: The functional approach gives importance to various marketing functions. In other words, one concentrates attention on the specialized services or functions performed by marketers. In this approach, marketing splits in to many functions – buying, selling, pricing, storage, transportation, packing, advertising etc. This system gives too much importance to various marketing functions. 4) Management Approach: This approach is the latest and scientific. It concentrates upon the activities or marketing functions and focuses on the role of decision – making at the level of the firm. This approach is mainly concerned with now managers handle specific problems and situations. It aims through evaluation of current market practices to achieve specific marketing objectives. Generally there are two factors. Controllable – Include price adjustment, advertisement etc. Uncontrollable – Economical, Political, Sociological etc. The above said are the causes of market changes. 5) System Approach: The system approach can be defined as “set of objects together with the relationship among them and their attributes”. System focuses on interrelations and interconnections among the functions of marketing. The system examines marketing connections inside as well as outside the firm. 6) Societal Approach: The approach has been originated recently.

The marketing process is

regarded, as a means by which society meets its own consumption needs. This system gives no importance as to how the business meets the consumer’s needs. 7) Legal approach: This approach emphasizes only one aspect i.e., transfer of ownership to buyer. It explains the regulatory aspect of marketing. In India marketing activities are largely controlled by sales of goods Act, carrier Act etc.

This study is

concentrated only on legal aspects, leaving other important aspects.

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8) Economic approach: This approach deals with only the problems of supply, demand & Price. These are important in the economic point of view, but fail to give a clear idea of marketing.

MARKETING CONCEPT EXPLAIN THE CONCEPT OF MARKETING MIX? MARKETING MIX

PRODUCT

PRICE

PROMOTION

INTRODUCTION: Marketing Mix is the policy adopted by the manufacturers to get success in the field of marketing. Manufacturers take various policies to get success in the market and the Marketing Mix is one of important policy. Thus the identification of demand and supply involves various functions marketing to attain success in the market and the combination of these functions is known as Marketing Mix. DEFINITION: According to BORDEN” The marketing mix refers to the appointment of efforts, the combination, the designing and the integration of the demands of marketing into a programme or mix which, on the basis of an appraisal of the market forces will best achieve an enterprises at a given time. MEANING: The Marketing Mix is the combination of the product, the distribution system, and the price and promotion activities. The term Marketing Mix is used to describe a combination of four elements- the product, price, physical distribution and promotion. These are popularly known as “ Four Ps “. Marketing Mix is developed to satisfy the anticipated needs of the identified markets.

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MARKETING MIX 1) PRODUCT: The product itself is the first element. Products must satisfy consumer needs. The management must first decide the products to be produced, by knowing the needs of the consumers. The product mix combines the physical product, product services, brand and packages. The marketing authority has to decide the quality, type of goods or services, which are offered for sale. Not only the production of right goods but also their shape, design, style, package, brand etc are important. 2) PRICE: The second element to affect the volume of sales is the price. The marked or announced amount of money asked from a buyer is known as basic price- value placed on a product. Basic price alterations may be made by the manufacturer in order to attract the buyer. This may be in the form of discount, allowances etc. Apart from this, the term of credit, liberal dealings will also boost sales. 3) PROMOTION: The product may be made known to the consumers. Firms must undertake promotion work advertising, publicity, personal selling etc, which are the major activities. And thus the public may be informed of the customers promotion is the persuasive communication about the products, by the manufacturer to the public. 4) PLACE: Physical distribution is the delivery of products at the right time at the right place. The distribution mix is the combination of decisions relating to marketing channels storage facility inventory control, location, transportation warehousing etc. What are the types of transport and its merits and demerits? MODES OF TRANSPORT

Land

Pathway

Road

Water

Railway

Others

Inland

River

Air

Canal

Ocean

Coastal

Overseas

Land Transport: It is the oldest one and is very important to each and every person. Without land transport nothing can be done. Land transport can be divided in to four: 1. Path ways 2. Road ways 3. Train ways

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4. Railways 1.

Path Ways: Pathways are still useful in remote villages, forests and hilly areas where road

cannot be built. It is divided in to two types:

i.

i)

Head Load

ii)

Pack Animals.

Head Load: This is the only form of transport found in hilly tracts where even animals cannot reach. Goods are taken from one place to another on the head or back of men or women. Even today it is a common practice to use coolies to carry the luggage in the railway stations and bus stands. Merits: (i)

It is suitable if the distance to be covered is very short

(ii)

The cost of this transport is very low.

Demerits:

ii.

(i)

The carrying capacity is very little.

(ii)

The speed is slow.

Pack Animals: Animals like horse, donkey, camel, elephant etc. are used in those areas where vehicular traffic is not developed or it is impossible. Merits: (i)

This type of transport is highly flexible.

(ii)

It requires no special roads.

(iii) The cost is also low. Demerits: (i)

Carrying capacity is very much limited and the speed is also very slow.

(ii)

It is better than head loads.

2.

Road Transport: Road is the oldest, artificial medium of transport. Its importance was recognized by all the ancient kings and emperors and they spend huge amount from their excheques for the construction of roads.

Roads are

heterogeneous in composition. Many kinds of vehicles play on it. Its use is of a multipurpose character. Merits of Road Transport: ďƒ˜Highly Flexible: The greatest advantages of road lies in its flexibility. It is not tied to a particular route as in the case of railways. If a route is blocked deviations can be made and the vehicles can adopt any route depending on the circumstances.

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Door Delivery of Goods: It is capable of door delivery as well as clearance. This is the peculiar advantage to its users, not offered by other forms of transport. Only means for small distance: If the distance to be covered is relatively short, i.e., where the distance, is more than 3-4 miles but less than 40-50 miles, the road is the only suitable, viable and economical medium of transport. Cheaper means of transport: The road transport is relatively cheaper when compared with other means of transport.

Particularly for perishable goods, if they are to be

transported from rural areas, it is the cheaper and the only means of transport. It ensures quick delivery. Own Vehicles: Even farmers and small businessmen can have their own vehicles such as bullock carts or motor cars. If so, they can dispatch their goods immediately and effect early delivery of their products. Demerits of Road Transport: Unsuitable for longer distances: The road transport is unsuitable and costlier than railways for transporting bulky and low grade goods on longer routes. It is not economical because consumption of petrol and other running expenses per ton are more than that of railways. Unreliable: The road services are generally unreliable. During certain seasons of the year such as rainy and flood seasons, roads may not remain suitable and for use. Less Safe: Road transport is less safe than other mediums of transport.

The

proportion of accidents is higher than the other means of transports. The roads are also badly maintained. Limited Speed: The speed of the road vehicles is also limited.

Therefore, long

distances cannot be covered at a shorter period.

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Different kinds of Road Transport: 1.

Bullock Carts: It is the most popular means of transport used for carrying goods from villages to the market. There is economy as the bullocks are also used for other farm operations. Merits of Bullock Carts: 

The structure and design of the cart is simple and can be built by village artisans.

It can be easily repaired.

Cost of service and maintenance is very low.

It can be owned by the producer. Its cost is very little.

It is the only means in rural areas during rainy seasons.

Demerits of Bullock Carts:

2.

Its speed is very slow.

Its carrying capacity is limited.

Thelas: Thelas are two or four wheeled vehicles driven by human beings. They are commonly used to carry goods from the platforms of the railway stations to the rickshaw or motor car. They are also used to carry goods from the godown to the shop or the markets.

3.

Rickshaws: Rickshaws are three wheeled vehicles driven by human beings. They are very convenient form of transport. They are easily available and cheap. Their working expenditure is also very little.

4.

Tongas: Tongas are driven by horses. They are found both in rural and urban areas. This type of transport is also cheap and easily available.

5.

Motor cars and Trucks: There are a number of reasons for popularity of motor truck transport. This transport is cheaper for short distance when compared to railway transport. It carries perishable goods to their destination speedily and safely. Merits of Motor Transport:  Flexible: The greatest advantage is its flexibility. The motor car or lorry is not tied to any particular route. If one route is blocked, it can shift over to some other road.

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 Door Delivery:

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Goods consigned can be delivered at the door of the

consignee. The goods can be loaded at the door of the consignor by bringing the vehicle to his place. The goods can be taken direct to its destination. This delivery of goods in facilitates the delivery of goods in a better condition and minimizes breakage of goods in transit.  Widening of the Market: The modern developments in the motor transport system have enabled the products available over a wide area. Even villages are well served by this medium of transport.  Quicker in Speed: Motor transport is comparatively quicker than the other means of road transport.

Even for relatively shorter distances, motor

transport is preferable.  Less Expensive: Since door delivery is the greatest advantage of motor transport, door delivery at both ends is possible. This factor reduces the cost of packing, loading and reloading charges which are unavoidable in case of rail transport.  Comparatively wider market:

Market which cannot be reached by rail

transport can be reached by motor transport. Even in remote areas, motor transport can serve well. Demerits of Motor Transport:  Unreliable: Motor transport is not a reliable means always. Roads are often blocked by rain, flood, ice and accidents. Markets which are to be reached through such roads cannot be served by motor vehicles in those circumstances.  More chances for Accident: The proportion of accidents in case of motor transport is comparatively higher than other means of transport.  Unsuitable for Bulky and Low grade traffic: It is suitable for the movement of heavy commodities and low grades traffic on longer routes besides, it is also costly in such cases.  Limited speed: Its speed is also comparatively limited than air transport. Motor vehicles cannot be driven fastly on roads due to public safety and to avoid accidents. This factor limits the speed of the motor vehicles.

3.

Train ways: Train ways is another mode of road transport. The train ways were popular in large cities like Madras, Calcutta and Bombay. They are highly useful for carrying passengers and goods during peak hours. Their carrying

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capacity is also larger than that of motor vehicles but however is less than railways.

Merits of train ways: 

The life of a train car is longer than that of a motor car,

The capital requirements are comparatively less than railways.

They can run through congested streets and roads with frequent stoppages.

Chances for accidents are minimized considerably.

Natural calamities like flood and rain shall not affect the traffic more adversely than that of motor and other means of transport. Demerits of Train ways:

Its speed is also very much limited.

It is not flexible. It can run only through fixed routes.

4.

Railways: Railways play a crucial role in the promotion of trade and industry in India. They carry consignments of different nature ranging from fruits and fish to coal and steel to different parts of the country. Merits of Rail Transport:

Suitable for carrying goods to distant places.

Suitable for transporting bulky and heavy goods.

More dependable than road transport.

Bad weather does not affect rail transport as much as it affects road transport.

It is as economical as road transport and in some cases even more economical.

Railway accidents are much less when compared to accidents in highways.

Railways will have to strictly adhere to the time schedule. This avoids delay. Demerits of Rail Transport:

Not all places are connected by trains.

Trains cannot carry goods to the doorstep. From the destination point, one has to arrange to collect and carry the goods to the intended place.

Rail transport is generally not suitable for short distances. It is preferred mostly when the consignment is to be taken to distant places.

Railways have fixed routes. This mode of transport, therefore, lacks flexibility.

Railways have monopoly in India. This gives the administration an upper hand in the matter of fixation of charges.

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WATER TRANSPORT Water Transport is another primitive mode of transport.

It is

comparatively cheaper than land transport. The water transport is solely responsible for the development of international trade. It is highly suitable for transporting bulky and heavy goods from one place to another. Merits of Water Transport: 

Cheapest of the various modes of transport, it is only the sea transport that offers the highest carrying capacity. A ship can even carry several aero planes.

Water ways are the gifts of nature and therefore no investment is required for their maintenance.

The operating cost, in case of sea transport, is also less when compared with the other modes of transport.

There is no problem of traffic congestion in the mid sea.

Sea transport plays a crucial role in the international trade of any country. Demerits of Sea Transport:

It is the slowest mode of transport. Perishable goods cannot be sent by sea route.

It is very much affected by weather and climatic conditions.

Lack of stable political conditions in many countries also comes as a barrier in sea transport.

Sea transport doesn’t offer any scope for extension.

All other modes of

transport can be extended to newer areas. 

There are many formalities to be complied with in sending shipments.

Different kinds of water transport: Water transport can be broadly classified into two kinds:

(i)

(i)

Inland water Transport.

(ii)

Ocean transport

Inland Water Transport: It refers to the water ways within the political boundaries of a country. It can be sub divided into two kinds viz.,

(i)

(i)

River Transport

(ii)

Canal Transport

River Transport: Rivers are the ancient means of water transport. Early civilization and trade and commerce developed only through this medium of

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water transport. In countries like U.S.A. and U.K. rivers are as important as roadways. (ii)

Canal Transport: Canals are the man made waterways which have been designed for the purpose of navigation and irrigation. This type of transport is not popular due to the absence of navigable canals

Merits of Inland Waterways: 

Bulk Carriage: Bulky items like sand, coal, bricks, wood can be moved easily when compared to railways.

Safety and Less Risky:

Inland waterways have no vibration, shaking or

jerking. Therefore, commodities which require careful handling like glass wares etc. can be transported safely. 

Link between land and ocean transport: This system is acting as a link between the land transport and ocean transport. It is so particularly in England and U.S.A. where the people are taking maximum advantage.

Less congestion:

Its capacity for traffic is greater than that of railways.

Therefore, the possibility of delay due to congestion is less than the railways. Demerits of Inland waterways: 

Limited Speed: As rivers are natural highways, the boats and steamers are to adjust the mood of the river flow. The speed of boats and steamers is very much limited in the case of canals. The overall speed works out lower than railways so it is totally unsuitable for goods which require quick delivery.

Not Reliable: These highways are not all weather conditions winter season makes the rivers to get frozen. In summer days, the depth is lessened due to least flow of water.

Particularly in out country, most of the rivers have no

continuous flow of water throughout the year. 

Services to Limited Areas: The inland water ways can serve only a limited area because the cost of bringing the goods from areas that are situated far away from the rivers and canals is very high. The people in those, areas depend on railways that have continuous movements even though they fixed then little costlier.

Unsuitable for small traders: Since the journey time is more, small traders cannot depend on this mode of transport. Their stock is less and requires quicker replenishment.

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AIR TRANSPORT The contribution made by air transport to the growth of trade ad industry throughout the world is significant. Consignments of different nature are being sent in air crafts daily to different parts of the country and the world. Merits of Air Transport:  Regular and Comfortable: The planes fly according to fixed time schedules. They are regular and punctual than other means of transport. the journey is comfortable, as all the comforts are provided to the passengers. There is no jolting or jerks which are common in the road transport.  Speedy and unbroken Journey: It is the fastest means of transport which provides continuous journey over thousand miles of distances. The Jasmine flowers from Madurai fly to various distant places to adorn the flower ports of many foreigners.  Expansion of trade: Air transport enabled the busy businessmen to travel extensively over a wide area within a shorter period. This factor enables them to expand the market for their products.  Reliable in times of emergency: Its real importance is felt when the land is submerged by water dye to heavy rains and flood and cannot be reached by other means of transport. Helicopters and planes are used to save the lives for the people during flood period and periods of emergencies.  Only means of Perishable Goods: Perishable commodities like vegetables, fruits, flowers are now available even in distant markets only because of the air transport. The people in these areas cannot use such commodities if there is no air transport.

Thus, air transport has created place and time

utilities to a number of products which other means of transport cannot provide.  Powerful war Fare vehicle: Modern wars are sought mainly by aero planes. Its upper hand is destroying the enemy properties and lives within a few minutes. It supports other wings of defense to a greater extent. Demerits of Inland Waterways:  Less Safety: The climatic conditions and mechanical defects are responsible for the frequent accidents. Hence, it is considered as dangerous and unsafe.  Cannot serve all the areas: It cannot serve all the markets. Barely a few places have airports.

Only those places can be served by this media of

transport and other places will remain unserved.

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 More costly:

34

The cost of maintaining the airports and the runways are

comparatively higher. The factor makes the fare fro factor makes the fare for the passenger traffic higher than the railway fare for the first class.  Not suitable for Bulky goods: It is suitable only for high grade costly goods. It is also a boon to perishable goods. But heavy and bulky goods cannot be transported through this media because its currying capacity is very much limited.  Political Barriers: Another limitation arises out of international laws is no aero plane can fly over the territory of any other country without an air agreement with that country.

FUNCTIONS OF MARKETING WHAT ARE THE FUNCTIONS OF MARKETING? Marketing Functions

Functions of Exchange 1.Buying &Assembling 2. Selling

Functions of Physical supply 1.Transportation, Storage warehousing.

Facilitating functions 1. Financing 2. Risk bearing 3. Standardization 4. Market information

1. Buying and Assembling: Buying is the first step in the process of marketing. It may be done directly or through middlemen.

Manufacturers buy raw materials for converting them into

finished products. Likewise, wholesalers and retailers buy goods for the purpose of reselling the same.

1. Selling begins after the goods have been purchased already. Assembling Assembling means creation and maintenance of the stock of goods purchased from different sources. 2. Selling: Selling is the crucial function in the marketing process. It is the actual point where transfer of ownership occurs.

The profit-making objective of a business

enterprise is achieved only through sale of goods. Now-a-days the selling activity involves the tackling of a number problems such as advertising, facing competition,

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creating demand for new products, conducting market research, supplying goods in the right time and place, selection of channel of distribution, etc. II. Functions of physical supply: The physical transfer of goods from the producer to consumer takes place by means of transportation and storage. 1. Transportation: In modern days, transportation is an essential marketing activity because markets are geographically separated from the areas of production. Transportation involves the movement of goods from the point of production to the place of consumption. Large-scale production has become possible now-a-days only because of the rapid development in the means of transport. Transportation provides place utility to the product. Land, Water and Air are the principal means of transport for transporting goods from one place to another. 2. Storage and Warehousing: Storage involves the loading and preserving of goods between the time of their manufacture and the time of their consumption.

Most of the mass consumption

goods are produced in anticipation of demand. This factor requires storage for at least sometime at the production centers and also at the distribution point. In fact, all middlemen engaged in the process of marketing should do some sort of storage work because they should hold sufficient stock to meet the anticipated demand and to ensure smooth supply of goods. Storage is also necessary for products with uneven demand period and with seasonal demand. Further in some cases storage increases the value of the product. However, storage involves certain risks and expenses such as storing expenses and interest on capital. Therefore, the management should establish a balance between the advantages and disadvantages of storing. III. Facilitating functions: These functions are subsidiary in nature. But they have a direct relationship with marketing process and hence important.

The functions grouped under this

category are discussed below: 1. Financing: Money is required at each stage on the process of marketing. Without adequate finance even the very existence of the business concern shall be affected. Although procurement of funds is the responsibility of the Finance Department of

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the business firm, yet the amount of capital required for marketing division is considerably influenced by the decision of the marketing manager. 2. Risk bearing: Risks are involved at almost all stages in the process of marketing. Risk is possible right from the product policy, due to reasons like changes in demand and supply conditions, loss in storage and transport and other natural hazards. Thus, risk in fact is part and parcel of every business as such. The successful businessman is one who takes a calculated risk. He can avoid or atleast minimize the risk by carefully anticipating the risks that may arise in future. The marketer therefore should estimate the extent to which these risks can be transferred, borne and insured against it. 3. Standardization and grading: The term standardization refers to establishment of standards for products. A standard is a measure, which generally recognized as having a fixed value. Standards are generally determined on the basis of weight, colour, quality and other special or specific features of a product. Grading is a part of standardization. It refers to the application of certain qualities, specifications and size. Grading is usually necessary for goods over which the producers cannot exercise control in terms of their physical properties. For example, food grains, fruits etc. Both standardization and grading make it possible for purchases by description. The sellers can also get better sales value and volume by adopting price discrimination. 4. Market information: For a rational formulation of marketing programmes, the marketing executives must be adequately informed not only about the market for his firm’s product, but also the attitude of the customers using the product etc. should be collected, analysed and interpreted.

For this, information’s

In fact the success in marketing

largely depends on the volume of information, the management have. 5. Pricing: Pricing is also an important function, which is closely related to selling. Price policy of a business concern affects its successful functioning by directly influencing the element. Therefore, price policy should be carefully determined by considering

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the factors like cost of the goods, prices fixed by the competitors, marketing policies etc.

WHAT ARE THE DIFFERENT KINDS OF BUYING? A brief idea of the various kinds of buying, identified by marketing experts, given below:  HAND-TO-MOUTH BUYING: It refers to buying in small quantities. Most families buy the vegetables needed for daily use on this basis.  SPECULATIVE BUYING: Businessmen, who anticipate a rise in the price of certain goods, accumulate stock of such goods in the hope of selling at a higher price. Such a kind of buying is quite common in a share market” share” are goods as per the “ Sale of Goods Act”.  BUYING BY INSPECTION: As buyers, we have the right to examine the goods we buy. But in some cases, the buyer may not be in a position to exercise such a right either because the seller is in a different place.  BUYING BY SAMPLES: It is not unusual for a buyer to ask for samples of certain items before buying. For example, when we buy sweets we do ask samples.  BUYING BY DESCRIPTION: Manufacturers of furniture items usually make available catalogue showing different models to enable their customers to choose.  CONTRACT BUYING: Manufacturers who require regular supply of raw materials often enter into long-term contracts with the suppliers. The suppliers provide certain quantity of such materials at a certain price for a fairly longer period of time.  SCHEDULED BUYING: Two business units do this kind of buying. Where the output of one is the input of another. For e.g.: there may be an agreement between a manufacturer of paper and a manufacturer of notebooks by which the former will supply the latter certain quantity of paper at regular interval, by this practices they help each other.

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 PERIOD BUYING: This refers to the practice of buying at regular intervals. For example: most of us buy the provisions needed for our kitchen in the beginning of each month. We usually buy from a particular provision store.  BUYING BY REQUIREMENT: Certain goods are demanded mainly during a period of season. Example: Crackers are demanded during Deepavali.  OPEN MARKET BUYING: It refers to the practice of buying certain goods not out of necessity built mainly because their prices have been slashed. This is done in the case of jewellery.  RECIPROCAL BUYING: When two business units agree mutually to buy from each other is know as reciprocal buying.  CONCENTRATED BUYING: It refers to a situation where goods need to be purchased from a particular source only. It happens because the source of supply is confined to a particular region. For example most of the publishers of college books are Delhi based.  SCATTERED BUYING: It is just the opposite of concentrated buying. In this case, buying is done from any source that is profitable and convenient.

WHAT ARE THE ELEMENTS OF BUYING? Buying is not a single function. It is a combination of various sub-functions. The following are the individual elements involved in the buying functions. 1) ESTIMATING THE DEMAND: This is referred to as “quantity decisions” in buying. The quantity to be bought is dependent on the purpose of buying. Accordingly, two purposes may be noted: a) Buying for consumption-either for intermediate or final consumption. b) Buying for resale. 2) ASSEMBLING: Assembling in fact is one of the sub-functions of buying. By assembling. We mean gathering goods from various sources and bringing them to our business place of goods fundamentally is not meant to be sold direct to consumers. They are temporarily stored and before they reach consumers various other marketing

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functions are to be performed. Assembling is a place where goods are kept for a while. 3) MERCHANDISING: It is defined as “ product planning”. Merchandising is closely related to several aspects of buying and stock management. The success of any firm depends on the speed with which the stocks are sold out. This speed in sales is termed as “ Rate of turnover of stock”. Used to find out whether an item is “ slow moving” or “ fast moving”. 4) LOCATING SOURCE OF SUPPLY: This is also known as “ contractual function” of buying. It is concerned with the source of supply and establishing and maintaining contracts with them. With the development of communications and with the emergence of trade magazines and directories locating the sources of supply of products is no longer difficult. In the selection of suitable supplier, the businessmen should consider the efficiency; reputation and financial resources of the supplier’s local suppliers should be given preference if they are prepared to offer fair and competitive terms. 5) MARKET NEWS: Buyers should be well informed of the market especially with regard to the suppliers, prices, demand position etc. he should also be aware of the changes in fashion, tastes and attitude of the consumers. The arrival of new goods and their impact over the market should be closely watched. 6) NEGOTIATION OF TERMS: After considering the above-mentioned factors, the buyer has to finalise buying. Since the buyer has to invest money, he should take all reasonable precautions to get maximum yield from his investment time of delivery etc, have to be settled beyond doubt before the buying agreement is made. 7) TRANSFER OF TITLE: The last stage in the process of buying is the transfer of title over the good purchased. As soon as the price is paid the buyer should get the title transferred in his name. He should get the relevant document such as invoices, lorry receipt, etc. he should not accept goods without proper invoices as it may lead to several legal complications in future.

EXPLAIN THE SCOPE OF MARKETING?

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1. MARKETING IS CUSTOMER ORIENTED: A business exists to satisfy the human needs. Therefore, business must first find out what the consumers the want and then produce goods according to the needs of the customers. Only such products should be produced which best satisfy customer needs and at a profit to the maker. 2. MARKETING STARTS AND ENDS WITH THE CONSUMER: Often it is thought that marketing is concerned only with the flow of goods and services from the producer to the consumer. 3. MODERN MARKETING PROCEEDS AND SUCCEEDS PRODUCTION: A market transaction takes place when there is a successful matching of a buyer and a seller. The power of either party influence a transaction is basically depends upon the competitive strength. 4. MODERN MARKETING IS THE GUIDING ELEMENT OF BUSINESS:It would be clear now that marketing has become a pervasive force capable of guiding and even controlling production, in fact, it is the market potential and not production resources that guide a business today. 5. MARKETING IS A SCIENCE AS WELL AS AN ART: Marketing was born as the stepchild of economics. But it has moved into closer relationship with various social behavioural sciences. Marketing is inter disciplinary in nature, orientation and design. It has borrowed heavily form economics, law, psychology, anthropology, and sociology. Etc. 6. MARKETING IS A SYSTEM: It consists of several inert dependent and interacting sub systems. It obtains the inputs from the environment, transforms these inputs ands supplies the output (customer satisfaction, profits. Etc.,) 7. EXCHANGE PROCESS OF THE ESSENCE OF MARKETING: All Marketing activities revolve around exchange process. Exchange implies transactions between buyer and seller. 8. MARKETING IS GOAL ORIENTED: Like any other business activity Marketing seeks to achieve some useful results. The ultimate aim of marketing is to generate profits through the satisfaction of human wants. 9. MARKETING PROCESS: It comprises a series of functions, which are interrelated. It is a dynamic process because it keeps on adjusting to the changes in the environment of business.

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Focus on customer: selling is a traditional concept of marketing. In olden days the barter system was followed, the n the improvement of technology, new marketing was introduces Is marketing a science of Art? Science is a classified and systematized body of knowledge.

Art

means the application of principles laid down, to the practical life. The word art means, it is the application of a set of rules to practice. Marketing is an art? 1.

Marketing is an art The practice or method of marketing is applied by a marketing manager in his own way. He must have good knowledge of the situations, which are always, dissimilar from situation to situation.

2.

The aim is to get satisfaction from the consumers. The marketer tackles the situation, aiming to get success in his filed.

3.

The success of a marketer depends upon his ability and skill. His brain is applied and follows in his own ways. The prosperity of marketing depends upon the ability of the marketer or salesman and not on marketing rules.

Marketing is a science: Men of science have to develop a systematic approach to their problems which is known as the scientific method. Hypotheses are developed and facts are collected and tested to known and soundness of the hypothesis.

In

marketing research, scientific method of study is adopted. Like science, theoretical knowledge is derived, tested and generalized into theories, law etc. Science has systematic knowledge.

Marketing managers by experience derive scientific

approach and apply to the problems. Modern market is a science in the field of prediction of marketing result. Marketing is both a science and art base. WRITE SHORT NOTES ON TYPES OF MARKETING: 1. STIMULATIONAL MARKETING: a. This applies where there is no demand for a product or service. Peoples are not interested in purchasing a particular product. It may be due to lack of knowledge over a product. Here the strategy is to ‘no demand’ to ’positive demand’.

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2. CONVERSIONAL MARKETING: It arises only when there is a negative demand of a product or service. EXAPMLE: Dislikes of a product – vegetarians have a negative demand for all kind of meat. 3. DEVELOPMENTAL MARKETING: It is a case of latent demand of product. A state latent demand exists when a substantial no of people share a strong need for something that does not exist in the form of an actual product task converts latent demand in to actual demand example cigarettes. 4. MAINTENANCE MARKETING: The task is to maintain the full demands of the product demand forces – changing the needs and wants and competition, maintain the right quality, brand name, offer incentives. Etc., 5. DEMARKETING: Also called counter marketing. The main stage affairs under which the demand far exceeds the supply. The customers are discouraged the\rough heavy increase in prices or creating temporary shortage of the product. Example alcoholic, cigarettes, hard drugs etc., 6. AGGRESSIVE MARKETING: Large-scale efforts are made to increase the sales of a product. It applies to industries where the product in line has to be kept busy thought in order to cover costs with the result that must be sold continuously. Capture new and foreign market / heavy investment to be.

7. MACRO MARKETING: It is concerned with how effectively a society uses its resources and how fairly it allocates its output of goods and services. Micro marketing is responsible for effective performance of the following functions, information, distribution and centralized exchange function. Broad view of our whole production and distribution system. 8. MICRO MARKETING: It may be described as the process of formulating and implementing such strategies by a firm (product development, pricing, promoting and distributing) that ensures flow of need satisfying goods and services at a profit. Kotler – “ marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others”. Applies to profit and non-profit organization, begins with customer needs,

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does not do it alone, and builds the relationship with customer. Micro marketing looks at customer and the organization that serve them. 9. META MARKETING: The literal meaning of ‘ meta ‘ is more comprehensive. In marketing Meta means – ‘is to designate a new concept which deals critically with marketing as a discipline. The object of Meta marketing is to bring the whole of scientific, social, ethical and managerial experience toe bear on marketing. SOCIAL MARKETING Give the meaning and definition of social marketing? Meaning: Marketing can be used to bring not only products and services but also social cause to the attention of a market. In recent times, an increasing number of non-profit organizations are getting involved in the last type of marketing namely social cause or social change. The efforts made by such organizations to gain the support of the society for a social change is named as social marketing. Definition: Philip Kotler says, “Social marketing is the design implementation and control of programme, seeking to increase the acceptability of a social idea, cause or practice in a target

group.

It utilize market segmentation, consumer research

concept, development communication, facilitation, incentive and exchange theory to maximize target group response”.

DEMARKETING What do you understand by de-marketing? De-marketing consists of all activities by which efforts are made to reduce the demand and bring about equitable distribution of a product for short or long period tell the company is able to meet the demand fully. Definition: The aspect of marketing which deals with discouraging customers in general or a certain class of customers in particular on either a temporary or permanent basis.

Discuss the various types of de-marketing categories? 1. Selective de-marketing 2. Ostensible de-marketing 3. General de-marketing

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Selective De-marketing: A company is interested in reducing the demand of specific segment of the market

2.

Ostensible De-marketing: It means that the company goes through the motions of de-marketing in the hope of achieving the opposite effect. By creating the appearance of not wanting more customers, it helps to make the product even more desirable to people. The seller works on the principle that people want what may be hard to get and may even masochistically, enjoy being neglected by the seller.

3.

General De-marketing: It is required when a company wants to reduce the level of total demand. It may be temporary shortage due to production or distribution problems or the normal demand may be much larger than the company production capacity. The stabilize or reduce demand, the normal marketing functions are used in reverse.

What are the steps to reduce demand? 

To reduce sales promotion expenditure

To increase the price

To curtail the number of distribution outlets

To curtail advertising expenditure.

To cut back salesmen’s selling time.

To reduce product quality and content.

Explain the steps in marketing process or process of marketing or how to design the marketing efforts or write short notes on marketing process? Analyzing marketing opportunities: To analyze and final the opportunities in the market, we may use survey, questionnaire, research study etc. by use the above methods we may obtain the opportunity areas in the markets. Developing marketing strategies: Means positioning of the customer. The grand plan / strategies are formed to direct the marketing process. So we must form and develop the marketing strategies. Planning of marketing programmes: To activate the marketing process, we have to plan what types of the programmes are to be used to make the process effective.

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Managing the marketing efforts: Final stage we may manage the above process output control also been done here. MARKETING ENVIRONMENT

DEFINE MARKETING ENVIRONMENT?  Marketing environment consists of all those internal and external factors.  KOTLER – “ a marketing environment consists of all factors and forces external to the marketing management function of the firm that impinges on the marketing mangers ability to develop and maintain successful transactions with its target market consumers or customers. ” 

In this way, the uncontrollable external forces are included in the marketing environment. Marketing environment to all factors, which are external to and beyond the

control of individual business enterprises and their management. Environment is the totality of forces and entities that are external and potentially relevant to a company. The environment also includes a company’s internal organizational environment which also acts as an important force, influencing the activities of the company. Definitions: 1.

Cravens says “Marketing environment is that which is external to the marketing management function largely uncontrollable, potentially relevant to marketing decision making and changing and constraining in nature”.

2.

Kotler and Armstrong defines “A company’s marketing environment consists of the actors and forces outside marketing that absect marketing managements ability to develop and maintain successful transactions with its target customers”.

What are all the components or forces or factors affecting or types or kinds or classifications or classes of marketing environment? I)

MACRO OR EXTERNAL COMPONENTS OR FACTORS OR FORCES Environment

Demographic environment

COMPONENTS OR FACTORS OR FORCES Age, sex, Life style, income group, martial status, profession

Economic environment

Demand, supply, income and expenditure. Etc.

Social and cultural environment

Cultural norms, life styles, purchasing pattern,

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social problems, educational Political situations, liberalization, globalization

Legal or political or public policy

and privatization (LPG), fiscal polices,

environment

constituent. Etc.,

Scientific and technological

Growth and development in science and

environment

technology

Competition environment

Prevailing competition in the world of market

Consumer demand environment

Consumer behaviour

Ecology or nature of physical

Nature and its change

environment

II)

MICRO OR INTERNAL COMPONENTS OR FACTORS OR FORCES ENVIRONMENT

COMPONENTS OR FACTORS OR FORCES

CORPORATE RESOURCE

Infrastructure facilities Product, price, place, promotion and packaging

MARKETING MIX

(5 P’s) ENVIRONMENT

MICRO FACTORS

MACRO FACTORS

Suppliers Demographic factors Market intermediaries Physical forces Customers Technological forces Competitors Political and legal forces Public Social and cultural forces

Enumerate the nature and characteristics of marketing (Or) What are the major components of micro and macro marketing environment (Or) Explain the impact of environmental forces on marketing? 1.

Micro and Macro forces.

2.

Volatile orientation.

3.

External orientation.

4.

Comprises of opportunities and threats

5.

Potentially relevant

6.

Affects the managing of target market.

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Micro and Macro forces: The micro environments consist of the factors in the company’s immediate environment that affects its ability to serve the markets. Micro forces: 

The company

Supplier

Market intermediaries

Customers

Competitors

Public The macro environments consist of the larger societal forces that

affect all of the factors in the company’s micro environment. 

The Demographic

Economic

Physical

Technological

Political

Legal and

Socio-cultural force. Globalization of business had added another external dimension to

marketing environment and that is multinational competitors.

It made

marketing environment more complain in nature. 2.

3.

Volatile Orientation: 

Changing customer income

Technological innovations.

Changing government rules and policies

Changing social values and beliefs

Shifting consumer values and preferences.

External Orientation: The marketing environment is outside the function of marketing management.

(i.e) marketing planning, implementation and control.

The

environmental forces do not fell within marketing function. They are largely uncontrollable. 4.

Comprises of opportunities and threats: The internal strength of the marketing department of a company prove helpful in availing the opportunities and successfully dealing with threats or

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problems on the other hand, its weakness, may prove fatal even the survival of the company as a whole. 5.

Potentially relevant:

Marketing environment is highly relevant and

influencing to marketing decision making potentially relevant is environment, is different for different companies.

Eg. The potentially relevant

environment firm is very different from that for a soap or food item producer. 6.

Affects the managing of Target markets: The marketing environments affect the manager’s ability to serve the targets. Customers and there by influences the continuity and closeness of relationship with them. It acts as a constraining force against the managerial skills and abilities.

Explain briefly the advantages of scanning Marketing Environment? 

Customer delight when marketers are able to know stated unstated, secret and real needs of the customers and presents the product.

Adopting to the uncontrollable environment becomes easy.

Marketer is able to know the organizational strengths, capabilities and related opportunities.

Marketer is able to appropriately remove weaknesses and counter threats from the environment

Marketing mix strategy can be properly formulated.

Trendy products can be brought out in market.

First moves advantages by looking at unmet needs.

Competitors moves can be anticipated and countered,

What are the various factors affecting the marketing environment? The internal forces are inherent in the organization and are controlled by management. The external forces which cannot be controlled by the firm may be divided into two groups namely. 1. Macro forces 2. Micro forces I.

Internal Forces: Internal forces are largely controllable by management to some extent, an organization’s marketing system is also shaped by a set of internal forces. These forces normally constitute non marketing resources of the organization.

For ex. Company’s location, R & D strength production,

finances etc.

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External Forces: It is divided into two types:

1. 

1.

External macro environment.

2.

External micro environment.

External Macro Environment:

Demographic environment: The term demography refers to the statical study of human population and its distribution. Geographical distribution of population, density of population, urban and rural population, characteristics, age distribution, sex distribution, racial, caste, religious, ethemic and class distribution of population all will be useful in making suitable marketing strategies for target consumers and a good market share.

Economic environment: People alone do not const6itute market. They must have surplus income to purchase goods.

The economic environment includes the factors which

affect the purchasing power and spending pattern of consumer. Marketered should know well about major trends in income and change in consumer spending patterns consumer buying behaviour is influenced by consumer’s saving habit and debt pattern and the consumers expenditure will change with change in the income level. 

Socio- cultural environment: Socio-cultural environment plays a major role in deciding the wants and needs of the people, because their life style pattern depends mainly on these forces. It includes economic, political, legal and technological forces in it. That is, fundamentally, political legal system, economy and technology are all shaped by the social-cultural forces only. Three sets of forces are as follows:

i)

Personal life style and social values of Individuals: Personal life styles and social values of individuals are the set of forces that have significant marketing implications.

ii)

a)

From cash purchase to purchase on credit basis.

b)

From natural to artificial.

c)

From substandard goods to quality goods.

Social problems: The second set of social forces encompasses broader, nonpersonal social problems. 

Environmental pollution.

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Safety in products and occupations.

Conservation of scarce resources

Maintaining ethical and socially responsible position in marketing.

Political and legal environment: Every company’s conduct is influenced legal greatly by the political legal environment forces. i.

General Monetary and Fiscal policies:

The level of Government

spending, the money supply and tax legislation have their own influence on marketing systems. ii.

Government relationship with individual industries:

Examples of

such relationships are subsidies given to industries in certain fields like agriculture, ship building etc., tariff and import quotes to specific industries etc iii.

Technological environment: Technology has a tremendous impact on our lives. Technological changes are faster in the last twenty five years. We don’t know VCR, VCP, Satellite communication system, washing machine, personal computer, fax machines, calculators etc., and two decades ago. Major technological changes carry certain market impact such as: 

Starting of entirely new industries like computers

Altering or abolishing existing industries – cable TVs ruined the movie

industries. 

Stimulating the markets for other products which are not related to the new technology.

Competitors: Competitors are those business organizations that seek to satisfy the markets much against each other. Marketing decisions by an individual firm influence not only consumer responses in the market place but also affect the marketing strategies of competitors.

Customer Demand: Customer demand is ever changing.

It is unpredictable and cannot be

measured accurately. Under the modern concept of marketing, customer needs, tastes and requirements acts as the centre of the marketing world. Marketing system must act as per the needs and desires of customers.

Marketing policies.

Programmes, strategies etc., are formulated, organized and executed with the role aim of achieving customer satisfaction.

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External Micro Environment: 

The Market: The market is really what marketing and this book are all about how to reach the market and serve it efficiently, profitably and in a socially responsible manner. 

Suppliers: For production of goods or services, a company requires a variety of inputs. The firms or individuals that provide the inputs or resources needed by the company to produce good and services, are called suppliers. Success of the marketing organization depends up on the smooth and continuous supply of inputs in required quantities, of desired quality and on reasonable terms. Marketing managers should also monitor the price trends of their inputs and negotiate terms and conditions with the suppliers.

Marketing intermediaries: Marketing intermediaries include middlemen, physical distribution firms, marketing service agencies and financial intermediaries. They aid the company in promoting, selling and distributing its goods to purchasers. They operate as a middlemen between a company and its markets and also between a company and its markets and also between a company and its suppliers occasionally firms operate on its own without using marketing intermediaries. But marketing intermediates perform variety of services.

They are specialists in their

respective fields. WHAT ARE ALL THE FACTORS INFLUENCING THE PURCHASING DECISIONS OR VARIABLES OF CONSUMER BEHAVIOUR: These decisions taken by consumers in connection with purchases are influenced by various variables. 1. CULTURAL FACTORS: A cultural factor consists of ideas, customs, and arts that are produced or shared by a part of the society. Culture is a set of values, ideas, attitudes and symbols and objects created by people which shape human behaviour. Culture does not refer to an individual’s intrinsic response. Eg: quality of life, role of women, changes in home and family life, increased leisure time. Etc. Hinduism, castes, and subcultures. 2. SOCIAL FACTORS:

A novel class is defined as group of individual who

share similar behaviour, values, interests and life styles. Social group - upper class, middle class, lower class. It varies to media preferences, shopping patterns, leisure time activities and saving and spending habit. Eg: Raymond’s cloths are especially for upper class people. Reference groups:

a set of

individuals that influence another individual when he or she makes a decision.

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Eg: Lions club, Indian Medical Association (IMA), religious group, political parties, cinema actors, (Kushpoo sarees). Etc., Family – Husband, Wife and children’s family buyers’ behaviour. Buyers’ behaviour varies according to ones role

3. PERSONAL FACTORS:

and status. Individual has to play a different role in family such as father, husband, and brother, sister. Etc., in a company as a manager, as a boss, as a Colleague. Etc. Professor in university, MD of a company, Physician. Etc., Eg. Personality, job responsibilities, young or old man, cricketer. Etc., 4. PSYCHOLOGICAL FACTORS:

Factors

like

motivation,

perception,

learning, believes, beliefs and attitudes. Here the motivational theory is applied like Maslows (Author) hierarchy of needs - Psychological need (Basic needs), safety needs, social needs, esteem needs, self-actualization needs. 5. SUBCULTURE:

Within a culture group, there is a smaller group, which

has been termed as subculture. He gives as illustrations, groups, such as Catholics and Jews: Racial groups such as block and whites having different culture styles and attitudes. TYPES OF CONSUMER BEHAVIOUR OR BUYERS BEHAVIOUR OR THEORIES OF CONSUMER BEHAVIOUR: 1. COMPLEX BUYING BEHAVIOUR: Involvement of the consumers is high over the Product. Even though the product is expensive, these peoples are continually buying the products. The consumer is aware of the product quality and characteristics among the brands. Under these circumstances the consumer goes to these type of complex behaviour to buy the product. The concept of these peoples is brand preferences and the quality preferences of the product. They are not bothering about the money or price of the product. Normally upper class of the society will have these types of behaviour and others too. Eg: even though the Rolex Watches are highly expensive - these peoples are purchasing those products because of the brand preferences as like BENZ CAR. 2. DISSONANCE – REDUCING BUYERS’ BEHAVIOUR: ~ Consumer’s involvement is high, but the brand differences are not prominent. The item is expensive and the consumers purchases infrequently. For Example an ordinary cooking gas stove. The consumers buy the less expensive product. Here the marketer is conveniences the customer by explaining the features of the product. Consumers buy the products, but later experiences - “

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post purchase dissonance”. These types of peoples are deciding their purchase only at the time of purchase only. 3. VARIETY SEEKING BUYING BEHAVIOUR: Consumer involvement is low, brand differences are Significant, and the products are least expensive- is the features of this type of behaviour. Here the customers indulge in “ brand switching”. They purchase different brands on each occasion. It is usually adopted simply for the sake of variety rather than satisfaction. Eg- Toffees, ice creams, soft drinks, toilet soaps. Etc., they requires some difference from the ordinary products, they want to project themselves to the society. Normally these types of peoples are called BANDHA peoples. They are having heroes thinking about themselves. The promotional techniques are lower prices, coupons, free samples, competitions for consumers i.e. contexts. 4. HABITUAL BUYING BEHAVIOUR: Consumer involvement is very low. Brand differences are in Significant. Products are expensive – purchased frequently. Eg. Cooking oils, salt. Etc. The consumers are going on the same brand, not interested in collection of information about the product. These customers are fixed with some brand and they are lazy peoples. They are not bothered about the product information quality, price, and advertising techniques. They are purchasing the products as per their convenience. If the product is available near to his / her home then are purchase the product. No other factors control their buying behaviour.

What is meant by marketing planning? Explain the nature and scope of marketing planning? Or Explain the importance of marketing planning. What are the difficulties in marketing planning? Discuss. Or Discuss the importance of planning in implementing marketing programme. Marketing planning is a process that consists of analyzing current situation and information about marketing opportunities, forecasting and establishing planning premises, selecting target markets, determining marketing objective, designing and developing marketing strategy or courses of action to achieve these objectives and allocating resources to the ingredients of marketing effort i.e marketing mix and developing procedure and policies.

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Every company must look ahead and determine when it wants to go and how to get there. Its future should not be left to chance. To meet this need, companies use two systems –  A strategic planning system and  Marketing planning system. Strategic planning provides the route map for the firm. Strategic planning serves stream of decisions and actions, which lead to effective strategies and which in term, help the firm to achieve its objective. Strategy is not something that can be taken out of one’s packet and pushed into the market all of a sudden. No magic formula exists to prepare for the future. The requirements are excellent insight to understand changing consumer needs, clear planning to focus our efforts on meeting those needs, and flexibility, because change is the only constant. Most important, we must always offer products of quality and value to the consumers.

Nature or Features and Characteristics of Marketing planning: 1. The success of marketing planning depends to a large extent upon human behaviour and response. 2. Marketing planning complicated in nature. 3. Marketing decisions have long-term effects on efficiency, profitability and market standing of the firm. 4. Marketing planning is a formal and systematic approach towards planning of all marketing activities – product positioning, price setting, distribution channels etc. 5. Marketing planning, as rational activity requires thinking, imagination and foresight. Market analysis, market projection, consumer behaviour analysis and marketing guided conclusions are based on data and measurements drawn form internal and external environment. 6. Marketing planning is a forward looking and dynamic process designed to promote market oriented or consumer oriented business actions. 7. Planning is concerned with two things: (i) Avoiding incorrect action(s) and (ii) Reducing frequency of failure to exploit opportunities. Thus, marketing planning has both an optimistic

and a pessimistic component.

8. Marketing planning is done by the marketing department’s various subdivisions and sections under the department and the subdivisions and sections give their proposals based on which the overall company marketing plans are developed and designed.

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9. Planning is a process of deciding in advance what to do and how to do it. If the marketing planner desires to achieve a target market at some future date and if the needs some time to decide what to do and how to do it, he must make the necessary marketing decisions before taking action. 10. Planning is basically a decision making process. Marketing planning is a programme of marketing based actions regarding the future with object of minimizing risk and uncertainty and devising a set of interrelated decisions. Importance and Scope of Marketing Planning: During the times of economic affluence, when the market demand is high and the supply is low and the penalties for failing to plan marketing activities are minimal, the incompetent often succeed despite no planning are not apparent. But as the time changes and the gap between the demand and the supply begin to reduce, the marketers begin to think in terms of planning the resources. Planning reduces the wastage of resources, reduces uncertainty and channelizes the human efforts towards the well-defined objectives. The importance of planning can be understood by the following points:  Planning is future oriented and hence the basic objective gives the direction of growth.  Planning serves as a basis for control. Planning provides standards of performance for comparison and evaluation of actual performance.  Marketing planning helps the marketer to tune its business with the environment, and  A precise marketing plan leads to develop the balance between corporate resources, corporate effort and market potential.  Marketing planning reduces the uncertainty of the environment.  Planning provides a decision-making framework and facilitates integration of efforts. Limitations and Difficulties in Marketing Planning: No Doubt, marketing planning is must for implementing the marketing programme successfully, but there are some difficulties in doing marketing planning. These are: 1. One difficulty in the way of effective planning is the vacillating policies of the government. In India, there is no hard and fast government policy. Frequent changes are made by the government from time to time. It affects the planning. 2. The top executives always complain lack of time. Their pre-occupations in other affairs is a definite hurdle in the way of preparing a scientific marketing plan which demands time, the efforts to analyze and evaluate the available data.

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3. Some marketing thinkers are of the opinion that scientific marketing plan is not possible at all because the marketing factors are uncertain and changeable. They are not subject to logical analysis. 4. Some experts are of the opinion that scientific marketing plan is a very expensive procedure, which entails huge expenditure. Most of the companies are not in a position to meet the heavy burden of planning and hence do away with the marketing planning. 5. One great difficult in the way of planning is that there are many alternatives to deal with a certain problem. 6. Production costs are not fixed; they are changing all the time. It necessitates frequent changes in the price of products, which in its turn has a direct bearing on the demand in the market. 7. Some marketing authorities complain that customer’s behaviour in India is very uncertain. In the face of uncertain behaviour, correct forecasts are not possible. In the absence of accurate forecasts, marketing planning is a useless effort. 8. Even if correct estimate of demand is made in marketing, there is no control over supply. Sometimes supply cannot be possible in conformity with demand. In such circumstances, proper marketing planning is not possible. What do you understand by marketing plan? Discuss the various marketing sub-plans prepared for successful implementation of marketing programme & strategy.

Types of marketing plan/marketing sub-plans: Following

marketing

sub-plans

are

prepared

for

the

successful

implementation of marketing programme & strategies. 1. Product Mix plan: Product mix determination is very important in industries with complex and changing technologies. It is an especially effective instrument in market where the consumer is affluent and has an elaborate system of preference. The decisions relating to product elimination, dropping, adding or developing are included in it. 2. Distribution Channel Plan: This sub-plan involves the future course of action as regard distribution channels- their number and forms, their management and remuneration, etc. 3. Marketing Research Plan: Marketing research is the gathering, reduction and analysis of market data. Because it describes and evaluates demand, the behaviour of buyers and

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intermediaries, and competition, it allows more rational and efficient decision making. Research is the key to an optimum allocation of marketing resources. 4. Marketing organisation Plan: Considering only physical distribution of goods and products is only half way to success in marketing efforts. The firm should chalk out a proper plan regarding the organisation structure of marketing department, communication policies and procedures, co-ordination of marketing activities to that of other departments of the firm, etc. Hence, a marketing organisation plan is also to be developed. 5. Sales Force Plan: The plan signifies the efficiency of salesmen and other personnel engaged in selling the goods. The decisions relating to hiring and training salesmen, motivating them, and assignment of sales quotas, determining sales territories, compensating salesmen and introducing the incentive plans are included in it. 6. Advertising and Sales Promotion Plan: The sub plan incorporates the selection of advertising media, channels of distribution, sales promotion techniques, advertising strategies, and tactics, etc. Thus this plan is mainly concerned with promotion mix. 7. Pricing Plan: Pricing is theoretically the single most important instrument of competition in a market economy. The firms have to consider different pricing policies, strategies, legal constraints relating to pricing and so on. Elements of Marketing Planning: Marketing planning involves setting of objectives and making plans for how these objectives can be achieved. It involves deciding the policies, strategies, procedures, programmes, schedules and budget. The marketing planning has the following elements: 1. Objectives: Objectives are the ends, which an organisation wants to achieve through various means. It is the responsibility of the marketing executives(s) not only to set objectives but also to explain them very clearly to the other members of the organisation. 2. Strategies: A strategy is gamesmanship or an administrative course of action designed to achieve success. It provides direction for the deployment of resources to new environmental opportunities and threats. Strategies are very much external environment related as changes in environment ask for change in strategy.

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3. Policies: Policies are the guidelines for achieving the set objectives of the firm. The policies guide the manager and subordinates of the company as what is to be done. Policies guide the internal environment of the organisation. Policies can be verbal, written or implied and they are more rigid than strategies. 4. Procedures: Procedures serve as guidelines to the actual marketing activity. A procedure is a chronological sequence of steps to be undertaken to enforce a policy and to maintain an objective. It lays down the specific manner in which a particular activity is to be performed. 5. Programme: A programme is a concentrate scheme of action designed to accomplish a given task. A well conceived programme covers all actions needed to achieve a specific goal and it shows who does what and when. It specifies the steps to be taken, resources to be used, time limits for each step and assignment of task. All planning activities culminate in drawing up a programme for action. In other words, programme is the end product of the planning process. 6. Schedule: A schedule specifies time limits within which activities are to be completed. Scheduling is the process of establishing a time sequences for the work to be done. In the field of marketing, when advertising and sales promotion programmes have to be applied, schedule shows the actual time of starting a particulars programme with a view to achieve the overall objectives of the firm. 7. Budget: A budget is a statement of expected results expressed in numerical terms for definite period of time in the future. Budget indicates the financial aspect of the marketing operations. Budget serves as means of coordination, control, standard of measuring actual performance. Different budgets may be prepared for each marketing activity.

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UNIT – II NEW PRODUCT DEVELOPMENT What is the meaning for new product development? The development and distribution of new product are of great current interest among business man. Business firm are placing increasing reliance on new products for the achievement of their profit objective. Even among a group of well managed companies in America, the success rate for the products, which reached the market, was still only 2 out of 3. Hence a good programme for planning and development of new product is essential for the success of new products.

Product is concerned with the technical activities of product research, engineering and design. 

Products they introduce to the market as new – whether they are genuine innovations or slight modifications of the existing product. Genuine innovations the nearly innovations are television, computers, mobile phones, and ATM facilities of banking sector.

Categories – o

Really innovate

o

Different from existing product

o

New to the company not to the market

WHAT ARE ALL THE ADVANTAGES OR IMPORTANCE OR NEED FOR A NEW PRODUCT 

Increased consumer selectivity.

Product life cycle.

Product is a basic profit determinant.

New Products are essential to growth.

Resources and environmental conditions.

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WHAT ARE ALL THE FACTORS TO BE CONSIDERED WHILE SELECTING A NEW PRODUCT MANUFACTURES CRITERIA

MIDDLEMEN CRITERIA

Adequate demand

Relationship with the producer

Suitable to current environment

In store polices

Suitable to current market structure

Distribution net work

Product fit

Time and cots aspects

Financial considerations

Present market scenario

Legal objections Managerial considerations Companies image and objectives

WHAT ARE ALL THE REASONS FOR THE FAILURE OF NEW PRODUCT 1. Inadequate market analysis 2. Product problems and defect. 3. Higher costs than estimating costs 4. Poor and Bad timing of Introduction 5. Strength of competition 6. Inefficiency or ineffective marketing effort. 7. Entering too may new products. 8. Many productions are not new as perceived by consumers.

List the steps in the development of a new product. “The new product development process starts with search for goods ideas”. Explain New product Development: The development and distribution of new products are of great current interest among businessmen. Business firms are placing increasing reliance on new products for the achievement of their profit objective. But most of new products are marketing failures. Even among a group of well-managed companies in America, the success rate for products, which reached the market, was still only two out of three. Hence a good programme for planning and developing new products is essential for the success of new products.

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Steps in new product Development process: The new product planning process, progresses from the idea stage to the production and marketing stage. Although there may seem to be no particular pattern, in general it includes the following six steps:

1. Exploration of new product ideas. 2. Evaluation of new product ideas. 3. Business analysis. 4. Development. 5. Test marketing. 6. Commercialization. 1. Sources of new product ideas: This is the first stage, in the new product planning process. New product ideas originate from many sources. Most concerns rely solely in internal sources such as the company’s engineers, its managers, its marketing department, or from its workers in the form of suggestion box ideas. Outside ideas can come from such sources as the company’s wholesale distributors, retailers, customers, and independent inventors and outside consultants. Sometimes, the marketing information system of the firm may also supply the new product ideas. There seems to be no one single source for good ideas. Each idea regardless of its source should be evaluated on its own merits, considering both market needs and opportunities and the company’s capabilities. 2. Evaluation of new product ideas: The first crucial stage of new product development process is the screening of the new ideas. Numerous considerations enter into the evaluation of a new product idea. Apart from consideration of market potentials and profitability of the new product, the following factors must be also considered. 

Existing production facilities.

Existing marketing organization.

Availability of using the exiting plants.

Possibility of using the existing plants.

Availability of finance.

Competition.

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

62

Image of the firm.

The basic step is to find out which of them warrant further study. All the departments of the concern devote full attention to evaluate the new product idea and decide whether the new product is to be produced or not. Evaluation stage involves a through investigation of the competitive market situation and company resources with respect to each idea. Thus evaluating or screening new product ideas is of great importance.

3. Business analysis: Those ideas that are passed through the screening contain many unknown. The development group must now determine if the product can be made and sold profitably. The idea is converted into a concrete business proposal in which the management should think about the following things: 1. Products market potentials. 2. Production cost and problems. 3. Capital requirement. 4. Distribution problems 5. Investment research and development. At this stage, the management must spend some money to get, some fairly accurate answers to these questions.

4. Product development: At this stage, the idea on paper is converted into physical product. The first phase of the development stage is to manufacture model products, in small quantities so that they can be taken to the market for use testing. Use testing is important, because products often perform differently in actual use than they do under laboratory conditions, where the operating variables can be closely on controlled. This stage can be time consuming and costly. Sometimes, before putting into a commercial production, a firm will have a product in the development stage for several years. Management must take care that at each stage throughout the new product-planning programme, evaluation sessions are held, at which time the economic feasibility of the product is re-evaluated.

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5. Test marketing: Up to this stage, potential customers have been asked to react to one or more product features and to comment on the advertising appeals. The reaction of potential customers can be tested by means of use testing. Test marketing is the stage, where commercial experiments in limited geographic areas are conducted in order to ascertain feasibility of the full marketing programme. The test marketing is more frequently used by consumer companies than industrial companies. Test marketing may yield several benefits to the manufacturer. It may determine the potential success or failure of a new product prior to full-scale launching. During the test marketing, (1) The company may discover a product fault that escaped its attention in the product development stage. (2) The company may get information regarding distribution problems. (3) The company may also gain a richer understanding of the various segments of the market. 6. Commercialization: Once test marketing is completed, the management has to take a final decision regarding the commercialization of the product. If the test marketing results are favourable for the introduction of the new product, then full-scale production and marketing programmes should be planned. The firm must invest in new equipment and facilities to make large scale production possible. It must arrange for promotional programmes with its agency. The product generally is introduced first in prime markets and regions and then at national level. If the test marketing results are very encouraging, the company may try to introduce the product on a full-scale basis. In the development process, up to this stage, the management has complete control over the product. Once product is ‘born’ the external competitive environment becomes a major determinant of its destiny. When a company introduces its new products swiftly or gradually it needs to schedule its commercial introduction carefully.

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Why do companies manufacture new products? What are the causes of failure of new products in the market? Or Why new products fail? Reasons for product innovation: 1. Competition: Competition is perhaps the most compelling reason for product innovation. Every industrial enterprise wants to capture a major share of the market to defeat their competitors in the market. It is, therefore, necessary for the enterprise to represent its product in the market in the new and improved style to attract the consumers so that the demand of its product may be increased over other products. 2. Business Growth: Product innovation is a tonic for the growth of the business and industrial enterprise. If business grows, new products are introduced in the market to attract the customers. Firms, which adopt product innovation, succeed in achieving its marketing objectives. 3. Marketing Changes: Conditions and environment of the market keeps on changing from time to time. Habits, tastes, attitudes, preferences of the consumers change at a very fast rate because of the change in economic, social and political environment. These changes prompt the producers to innovate their products so as to meet the needs and wants of the consumers. 4. To Minimize Risk: Every product has its own life cycle. When a product reaches at saturation or decline stage, it becomes necessary for the enterprise to innovate its product otherwise the existing product would soon die down. Thus, product innovation is necessary to meet the risk of dying down of the existing product. 5. Technological changes: Due to scientific and technological changes world wide, it has become necessary for every industrial enterprise to use newer and latest technology. If new technology is used, new product will be produced or there is product innovation. If the producers ignore these technical changes, their product will be out of the market very soon.

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Causes for Failure of New Product: 1. Inadequate market analysis: Where the product is introduced in the market without proper market analysis or with biased and incomplete data, the product fails in achieving its objectives. It is because the enterprise fails in (i) Understanding the consumer’s needs and wants properly, (ii) Making correct estimates of sales, and (iii) Meeting the standards of utility etc. 2. Product Defect: This arises out of technical flaws in the process of production. This is a fundamental reason for product failure. Low quality of products, poor design or packing may lead to product failure. This can be done away through the proper product testing. 3. Higher costs: Higher final costs than anticipated at the time of product planning are another reason for product failure. It might be partly due to wrong pricing policies adopted by the firm. The cost estimates also often go wrong when the products are finally introduced into the market. 4. Poor Timing: The fundamental principle to be followed in product planning is to find out the exact time at which the product is to be introduced in the market. Usually when and how are the two questions a manufacturer is often finding difficult to answer. A close analysis of the market conditions and consumer behaviour and attitudes is essential to find an answer to the two problems. 5. Distribution problems: This includes channels of distribution; failure to train marketing personnel for new products and new markers; failure to co-operate with middlemen; poor physical distribution of goods. 6. Promotion problems: Inadequate advertisement, use of wrong appeals, failure to cooperate with distribution system etc. 7. Pricing problems: This includes higher costs than anticipated. This led to higher prices, which in turn led to lower sales volume than anticipated.

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What do you mean by product life cycle? What are the gradual stages in the product life cycle of a particular product? Or Write a short essay on the concept and uses of product life cycle. A product is defined as: "Anything that is capable of satisfying customer needs" This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, banking, private health care). The process by which companies distinguish their product offerings from the competition is called branding. For most companies, brands are not developed in isolation - they are part of a product group. A product group (or product line) is a group of brands that are closely related in terms of their functions and the benefits they provide (e.g. Dell's range of personal computers or Sony's range of televisions). There are two main types of product brand: (1) Manufacturer brands (2) Own-label brands Manufacturer brands are created by producers and use their chosen brand name. The producer has the responsibility for marketing the brand, by building distribution and gaining customer brand loyalty. Good examples include Microsoft, Panasonic and Mercedes. Own-label brands are created and owned by distributors. Good examples include Tesco and Sainsbury's. The main importance of branding is that, done well, it permits a business to differentiate its products, adding extra value for consumers who value the brand, and improving profitability for the company.

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Businesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. Two models of product portfolio planning are widely known and used in business: • The Boston Group Growth-Share Matrix, and • GE Market Attractiveness model These models are described in more detail in other tutor2u revision notes. Businesses need to regularly look for new products and markets for future growth. A useful way of looking at growth opportunities is the Ansoff Growth matrix which suggests that there are four main ways in which growth can be achieved through a product strategy: (1) Market penetration - Increase sales of an existing product in an existing market (2) Product development - Improve present products and/or develop new products for the current market (3) Market development - Sell existing products into new markets (e.g. developing export sales) (4) Diversification - Develop new products for new markets products - product life cycle We define a product as "anything that is capable of satisfying customer needs. This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, banking, private health care). Businesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. The stages through which individual products develop over time is called commonly known as the "Product Life Cycle".

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The classic product life cycle has four stages (illustrated in the diagram below): introduction; growth; maturity and decline

Like childhood, teenage, adulthood and old age the product has five stages. The length of a particular stage in the life cycle may be long or short depending on the type of product. A difficult to initiative product will have a long span before competitors enter the same field.

For an “easy to initiate” product the life stage, will be short. The marketer should know their product life cycle at any given time. This information will be useful for

TIME OR DURATION

INTRODUCTION

GROWTH

Third generation

Portable DVD

mobile phones

Players

E-conferencing

Email

All-in-one racing skin-

Breathable synthetic

suits

fabrics

iris-based personal identity cards

Smart cards

MATURITY

DECLINE

Personal Computers Typewriters

Faxes

Handwritten letters

Cotton t-shirts

Shell Suits

Credit cards

Cheque books

i. INTRODUCTORY STAGE: 

This is the first stage in the life cycle of a product, which commences when a product is marketed for the first time. At this stage the operation costs and

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OBSOLESCENCE

DECLINE

MATURI TY

GROWTH

SALES VOLUME

INTRODUCTION

designing strategies, because strategies will differ according the stage.


MARKETING MANAGEMENT

69

promotion expenses are they high. As a result profits will be loss. This period is characterized by high percentage of product failures. i. GROWTH STAGE: 

This is a stage characterized by a rapid increase in sales, showing the sign of consumer acceptance. During this period profits will increase due to the fall in the cost of production and promotional expenses. Being attracted by the success and profit earning capacity of the product, competitors will enter the market. They will introduce products with additional features and ‘extras’. i. MATURITY STAGE:

It is difficult to keep sales always on the upswing and after some time, the growth rate of sales will slow down. This is the maturity stage. This stage lasts longer than the previous stages and offer greater challenge to marketers. The slow down sales rate leads to intensified competition. Price cuts discount etc. resulting in declining profits. New entrants may find it difficult to enter the market. i. DECLINING STAGE:

In course time competitors and the old one’s will be rejected by the consumers will market new product. Sales decline may also be due to change in consumer takes, technologies etc. This is the beginning of the declining stage. i. ABANDONMENT:

In the declining stage the marketer has to develop strategies to over come the situation. Cost reduction, introduction of better technology, product improvement are examples of such strategies. If a firm fails to receive the market, even after the application of counter strategies, may be forced to abandon the product. The cite an example, gramophone, once vary popular was abandoned when ‘disc record player’ – got consumer acceptance. Now gramophone is finding place in the show costs of home. With the introduction of tape recorder and be later on cassette recorder, record player is being abandoned. Early models of standard motorcar are another example.

WHAT ARE ALL THE FACTORS AFFECTING THE PRODUCT LIFE CYCLE OR WHAT FACTORS DECIDES THE PRODUCT LIFE CYCLE CURVE 

The length of Product Life Cycle is governed by the

Rate of technological changes.

Rate of market acceptance.

Case of Competitive entry.

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Economic forces

Protection of patent

Personnel strategy

70

STRATEGIC CONSIDERATION ON PRODUCT LIFE CYCLE: Effects

And

Responses COMPETITION OVER

INTRODUCTION

GROWTH

Importance

Some

ALL Market

STRATEGY

establishment

MATURITY Market

DECLINE

rivals Few

for small price

Market

Creation

penetration

brand loyalty

in

numbers

of Removal

or

renewal Declining

High price and PROFITS

Negligible

growing

Increasing

volume

competition

pushes costs

cuts and profit up

demand

margins

and

eliminating profit

High to take advantage RETAIL PRICE

High to recover

of

heavy

Avoid

price

war

consumer

Low

demand DISTRIBUTION

Selective

ADVERTISING

Aims at the needs

STRATEGY

of early adopters

CONSUMER

Heavy to entice

SALES

target group with

PROMOTION

samples,

EXPENDITURE

coupons. Etc.,

Intensive Mass

Intensive

market Use

aware

Emphasis is

of advertising

brand benefit Moderate create

Selective

to

brand

preferences – advertising better suited

low price

vehicle Heavy encourage brand

to Minimum

switching

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INTRODUCTION

GROWTH

Third generation

Portable DVD

mobile phones

Players

E-conferencing

Email

All-in-one racing skin- Breathable synthetic suits

fabrics

iris-based personal identity cards

Smart cards

71

MATURITY

DECLINE

Personal Computers Typewriters

Faxes

Handwritten letters

Cotton t-shirts

Shell Suits

Credit cards

Cheque books

What are the main causes for failure of new product? The following are the causes for failure of new product. (i) Inadequate market analysis (ii) Product defect (iii) Higher costs (iv) Poor timing (v) Distribution problem (vi) Promotion problems (vii) Pricing problems

(i) Inadequate market analysis: where the product is introduced in the market with out proper market analysis or with biased and incomplete data, the products fails in achieving its objectives it is because the enterprise fails in,  Understanding the consumers needs and wants properly.  Making correct estimates of sales.  Meeting the standard of utility. (ii) Product defect: This arises out of technical flaws in the process of production low quality of the product, poor design or packing may lead to product failures. (iii) Higher costs: Higher costs then anticipated at the time of product failure. It might be partly due to the wrong pricing policies adopted by the firm. The cost estimates also often go wrong when the products are finally introduced into the market.

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(iv) Poor timing: The fundamental principle to be followed in product planning is to find out the exact time at which the product is to be introduced in the market. Usually when and how are the two questions, manufacturer is often finding difficult to answer. (v) Distribution problem: This includes channels of distribution failure to train marketing personnel for new marketer, failure to co-operate with middleman, poor physical distribution of goods. (vi) Promotion problems: Inadequate ad, use of wrong appeals, failure to co-operate with distribution system etc.,

(vii) Pricing problems: This includes higher costs then anticipated. This led to higher prices, which in term led to lower sales volume then anticipated.

WHAT IS MEANT BY PRODUCT DIVERSIFICATION OR DEFINE PRODUCT DIVERSIFICATION OR WRITE SHORT NOTES ON PRODUCT DIVERSIFICATION: When a manufacturer or a distributor deals in more than one product it is known as product diversification. This diversification is also known as product line expansion diversification include. Introducing an altogether new product or adding different sizes of the existing product. OBJECTIVES: 1. To use more effectively the existing selling and distribution facilities. 2. To meet consumer requests mainly in industrial goods. 3. To take advantage of the existing reputation. 4. To increase the sale of existing products. 5. To meet the needs of the distribution channels. MEANING OF PRODUCT DIVERSIFICATION: Diversification is a policy or management philosophy of operating a company so that its business and profits come from a no of sources, usually form divide products that differ in market or production characteristics. It occurs only when a

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company enters in to a new market or product. Generally it means adding a new product to existing product line or mix.

What are all the types or kinds or classifications or ways of doing product diversification?

HORIZONTAL PRODUCT DIVERSIFICATION: Reliance: 

RELIANCE PETRO CHEMICAL CORPORATIONS

RELIANCE – VIMAL SUITING

RELIANCE INFORMATION & TECHNOLOGY SERVICES

RELIANCE – COMPUTER SERVICES

RELIANCE – FINANCIAL DIVISION

RELIANCE – TELECOMMUNICATIONS

THE SAME COMPANY ENTER INTO DIFFERENT TYPES OF INDUSTRIES – IS THE HORIZONTAL DIVERSIFICATION

VERTICAL CLASSIFICATION: EXAMPLE - TATA GROUPS OF COMPANIES

TATA VEHICLE DIVISION

SUMO

SAFARI

SUMO – VICTIM

LORRIES

ESTATE

INDICA

SIERRA

THE COMPANY EXPAND HIS BUSINESS IN TO THE SAME INDUSTRIES – IS THE VERTICAL DIVERSIFICATION

HORIZONTAL DIVERSIFICATION

Introduction of new product of products, which are, ask into the industry’s product line. The new product introduce May not contribute anything to the present products in any way but cater mission which lie within the realm if the industry.

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VERTICAL DIVERSIFICATION

Inclusion of new products such as parts, components and materials in the current portfolio of the company, these new products form distinct and different missions from that of the original products.

What are all the reasons for product diversification or explain - what circumstances the company may go for product diversification or describe the situations of product diversification?

 To level off production and eliminate seasonal fluctuations.  To utilize the unused capacity.  To use more effectively the existing selling and distribution system or facilities.

 To arrest declining profit margins.  To reduce dependence of existing products.  To adopt modern and technological improvements and innovations.  To meet new product of competitors.  To provide more customer satisfaction.  To offset declining or vanishing product.  To meet social change such as fashion, behaviour, style. Etc.  To make advantages of existing reputation of the company  To comply with the changes in the industrial and economical policies like 

Liberalization

Globalization

Privatalisation

LPG

 To offset cyclical fluctuations.  To maintain or increase the market share.  To provide balance between old and new products.

Current Information about Marketing Trends: Link between Sales and Marketing: According to Kotler there is a disconnect between the two departments ie., Sales and marketing departments and thy keep blaming each other if the sales is disappointing. Both have an important role to play.

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 “While marketing helps to build the brand sales team’s objectives is to maximize profitability both have to work together to get rid of the disconnect and win”.  “The sales team should be brought into marketing planning stages as they know the customers well. The marketing people should also watch the sales process”. 

The marketing is not an isolated activity, must work closely with the Sales, Finance and IT teams.

Integrated Development:  Marketing is the best source of ideas for a firms development and evaluation.  Taking an example of Microsoft Dr.Kotler said that the company didn’t involved the marketing people in software development for long and hence there was no customer input. And when it is realized the need to include marketing in product development, it brought in marketing research people to communicate with the public. Adding Value:  Touching upon “the customer is the king”. “it is important to deliver value to the customer. Be customer centric, fixate on their needs and wants and not on the products”.  Earlier it was about meeting needs. Now it’s all about creating needs and driving the market with new things. One has got to guess what the desired product features will be three years from now.” Get American higher education here……… in India:  American Higher Education Inc. (AHEd) has opened its first overseas learning center in India.  The learning education under its Indian operations American Higher Education India Pvt Ltd., will be based in Gurgaon and will offer Videoconferencing facility, Work station laboratory and other facilities to the students to enrolling into the online courses of the three-partner universitiesHardvard, Columbia and Bosston.  AHEd is in the process of opening such learning centers in the other parts of the world including Seoul, Kuala Lumpur, Beijing and Kuwait.  “They also try to identify Indian partners who would bring branch campuses of American Universities to India.”

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 The company will offer on-line engineering courses in 14 disciplines from School of Engineering and Applied Science of the Columbia University and Skill enhancement Programms for teachers from Hardvard Graduate School of Education. Managers’ Marketing Myopia: Theodore Levitt of Harvard Business School (HBS), who passed away recently, urged Marketing professionals to think strategically and creatively.  Marketing Myopia’ back in 1960’s a Concept which remains totally valid and current even today. This way his way of alerting the profession of marketing to the dangers of limited blinkered view of the market and its future potential and indeed a definition of marketing itself.  “What Business are you really in?”- What was the real “need or Benefit” segment that one whished to address, in other words the market in terms of what the customer really wanted in his or her current stage of evolution. It was not defined by the product or the producer’s concerns. It is usual for the entrepreneurs, especially those who pioneered a technology or a process to fall in love with the product and to lose all focus.  Why is marketing Myopia such an enduring concept? The circumstance typically cause managements to lose the clarity of sight continued successes of a model or a brand is one of them , leading to what in IBM was eventually branded as ‘Corporate hubris’. Sustain market relationship by a huge margin naturally seems to precede a declined and fall, as bad news about the product is internally taboo and no one wants to tell top managers that they are wearing the ‘emperor’s new clothes’.  No one wants to question a success formula, and winners do not like to be challenged by contrarian’s opinions.  Listening to the customer and respecting a different opinion is the best guard against the disasters caused by Myopia.  The simplest way to apply the concept is to see business as a way of providing something for someone else to pay for and to value.  Therefore internally focused, and to think of the advantages and benefits of any product or services in one’s own terms.

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The Messiah of Marketing:- Dr.Philip Kotler: - 38-years-old romance with marketing. When the topic of discussion is marketing, there is only one name that springs immediately to mind. This person has, over the past four decades, established a reputation for himself as the “Father of Marketing”.  As the first person to define marketing as a field, he has achieved iconic status in countries all over the world including Indonesia, where his invaluable contributions have led to a postage stamp being brought out in his honour.  His Book Marketing Management: Application, Planning, Implementation and Control (1967), now in its Twelfth edition, is widely considered to be the “‘Bible’ of Marketing”.  Philip Kotler says he has had “a 38-year-old romance with marketing”.  Kotler started off his career as an economist , Working with such doyens of economics as Paul Samuelson and Milton Friedman, he trained at the University of Chicago and Massachusetts Institute of Technology.  Feeling that the role of Price, distribution, advertising and promotion were oversimplified by economists, Kotler made the transition in to marketing.  Kotler not only stuck to marketing products and services for profit-oriented organizations, but also helped to design stratiges to market individuals, nonprofit organization, Political parties and even Nations.  Kotler’s “passion for sharing is as big as his passion for learning”.  Kotelr’s role modle are the late Dr.Peter Drucker and Dr. Don Jacobs.  “Marketing is not the art of finding clever ways to dispose of what you make. It is the art of creating genuine customer value.”- Philip Kotler. Explain about the Product Mix Strategy: William Stanton suggests six different strategies of the product mix. They are the following. (i) Expansion of product mix: A firm may decide to expand its present product mix either by increasing the number of line or by increasing the depth with a line. The introduction of new lines may be related to the present product. A firm will give several sound reasons for the additions of the product to its lines. 1. The success in one product may involve the marketer to come out with more.

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2. When a business knows that it has the goodwill of the customers, it may like to capitalize on it. 3. To face the challenge posed by competitors, a market may add new products to his existing list. 4. Availability of surplus funds may add new products to his existing list. 5. Sometimes even surplus production capacity may force markets to bring out something new. (ii) Contraction of product mix: The product mix is said to be contracted when certain products are dropped from the list contraction of production mix is usually done under the following circumstances. 1. A marketer may drop an existing product if he is unable to sell it in the market. 2. Availability of better products in the market may also force marketers to give up production of certain goods. 3. A product mix that is only bringing losses for the marketer has to be abandoned. (iii) Alternation of existing product: As an alternation to developing a completely new product management should take as fresh look at the company’s existing product can be more profitable and less risky then developing a completely new one. (iv) Product Positioning: A product’s position is the image which that product projects or holds in relation to images projected by other competitive products or in relation to its own other products. So it is the management responsibility to position the product appropriately in order to achieve its market goals. (v) Trading Up and Down: Trading up refers to the decision of a business, which is marketing low priced product, to add a high price product to its list. Eg: T.Series a Delhi based company was initially selling audio cassettes. It undertaken the production of TV’s, Music system and CD Player etc., Trading Down is nothing but a decision of a business, selling mainly high priced goods, to introduce low priced goods into the market. By doing, so the marketer can later to the needs of different classes of buyer. Eg: TATA group of companies has been basically engaged in the production of trucks, buses, cars and so on over the year they have undertaken the production of low priced goods like Wrist Watches, Salt and Tea and Coffee Powder. (vi) Product differentiation and marketing segment:

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Product differentiation and market segment means developing and promoting an awareness of difference between one company’s product and those of others. Market segment is a natural reflection of the diverse and constantly shifting needs of the population. By this time the whole market into a small number of specific markets. This market has different wants and motivation.

Marketing strategies in various stages of PLC: A) Marketing strategies in introduction stage: Following are the strategies opted in the introduction stage By taking only two variables i.e., price and promotion, the management can opt one of the four strategies as shown below 1)Rapid skimming strategy: Marketer can opt this strategy for launching the new product in the market at a higher price and high promotional expenses. 2)Slow skimming strategy: The strategy is being opted for launching a new product at higher prices but with the low promotion expenditures. The marketer go for this strategy by assuming that the market is limited in size. 3)Rapid penetration strategy: Launching the new product at a low price and heavy promotional expenditure with the assumption that the market is large. 4)Slow penetration strategy: Launching the new product at low price as well as low promotion expenses, with the assumption that the market is highly aware about the product, most of buyers are price sensitive and there is some potential competition. B)Market strategy at growth strategy During this stage, the firm, uses several strategies. They are  It improves product quality  It adds new models  It enters new market segments.  It increase its distribution channels  It shifts from product-awareness advertising to product-preference advertising.  It lowers price.

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C)Marketing strategies in Maturity stage: During this stage marketer can consider the strategies of market modification and product modification. Market modification: The company can modify or expand the market by increasing sales volume. The sales volume can be increased by increasing number of brands user and user rate per user. Product modification; 

Quality of the product can be improved.

Brand name of product can be changed.

Packaging style, size of the product or package may be changed.

New and advance technology must be introduced from time to time, to see the fashion and taste of the customer.

D) Marketing strategies at decline stage: 1) Increase the firm’s investment.

Marketing strategy Meaning: 

Marketing strategy is the goal and unbeatable instrument or a plan shaped and designed specifically for attaining the marketing objectives of a firm.

Marketing strategy outlines the manner in which the marketing mix is used to attract and satisfy the target market(s)

and accomplish the organization’s

objectives. 

It provides the much desired direction for allocating the marketing efforts.

Nature of marketing strategy: The exact nature strategy is self evident from the meaning. The nature is spoken by following points. 1) They are dynamic 2) They are futuristic 3) They are complex 4) They provide direction 5) They are the link between the environment and the marketing department 6) They are the top management’s blue print.

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Formulating Marketing strategy: Formulation of marketing strategy consist of two steps 1) Selecting the target market 2) Assembling the marketing mix 1. Selecting target market Target market: Target market is the act of evaluvating and comparing the identified groups and then electing one or more of them as the prospects with the highest potentials. It shows to whom the firm intends to sell the products. There are three basic target market strategies. a) Undifferentiated marketing It is a marketing strategy created by the same marketing mix – product, price, place and promotion for al markets. The firm considers the target market as one and same. It requires extensive distribution in the maximum number of retail outlets. Ex. Pepsi b)Concentrated marketing; it involves devising a marketing mix on one product, one segment, one principle and it is used by small companies. Ex .Cosmetics by Lakmi c)Differentiated marketing: It involves devising a multiple market mix offering different range of products. Ex. HLL. Procter and Gamble 2.Assembling of marketing mix The formulation of marketing strategy involves four areas of marketing mix. a)Product, b)price, c) Promotion, and d)Physical distribution. These four areas are interrelated and strategic decisions regarding one affect the success of the others. The determinants of marketing strategy can be listed in the summary chart

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Elements of Marketing strategy

Product strategy

Price strategy

Promotion strategy

Distribution strategy

Features Design Style Branding Package Service Warranty Quality Variations

Price range Discounts Rebates Payment Terms Price Differentials

Advertising Communicat ion Publicity Personal selling Salesman ship

Physical Distribution Geographic coverage Inventories Transport Sales Wholesale and retailing

DEFINE MARKETING STRATEGIES? To maximize profits a firm develops several marketing alternatives. These alternatives came to be called marketing strategies. Strategy – the art of the general. Marketing strategy cannot a broadest determination that would direct the entire marketing plan process? KOTLER: Marketing strategy is the basic approach that the business unit will use to achieve its objectives and it consists of broad decisions on target market, marketing positioning and mix and marketing expenditure levels. DAVID W. GRAVENS says “the design and implement action and management over time of the total marketing efforts as it relates to the product, channels of distribution, price, advertising and sales force. FACTORS AFFECTING THE MARKETING STRATEGY:

A. Competitor’s countermoves:

Most competitors can easily and quickly match

or otherwise adjust to price changes.

B. Tastes, needs, nature and behaviour of the customers: The marketing strategy should match the taste, needs, nature and behaviour of the customers.

C. Synergistic potential:

Marketing inputs are capable of being mutually

reinforcing having synergistic potential and marketing executives should consider this working towards an optimum over all marketing strategy. Displays, advertisements, product inputs and marketing channel can be mutually reinforcing, depending upon the effectiveness with which they are integrated.

D. Elasticity of marketing inputs:

Different marketing inputs are elastic and they

influence the demand of the product.

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E. Assessing consistent strategies: As every has to be operated in future, which is absolutely uncertain, the need for consistent strategies cannot be over looked. For example, if a company develops strategy based on certain state of technology, and if a new discovery materially changes the technological environment, the immediate need for such a company is to establish a contingent strategy.

F. Development of sales personnel: If sales are to be pushed up undertaken competition, marketing executives must learn to develop term offensive strategies in anticipation of customer needs.

EXPLAIN DIFFERENT TYPES OF STRATEGIES OR STATE THE CLASSIFICATION OF STRATEGIES

STRATEGIES AT PRODUCT LIFE CYCLE (PLC)

STRATEGY BASED ON THE SHARE OF FIRMS IN THE TARGET MARKET

DURING SHORTAGES INFLATION AND RECESSION

STRATEGIES AT PRODUCT LIFE CYCLE (PLC) o

Is a distinct stage through which a product passes in its sales history Introduction, Growth, Maturity, Decline:

o

KOTLER: PLC is an attempt recognizes distinct stages in sales history of the products.

INTRODUCTORY STAGE:  RAPID SKIMMING STRATEGY – High price for the product, more promotion expenses, and convenience the public about marketing the product.  SLOW SKIMMING STRATEGY – Product price will be high, not spend heavily promotion ---- (applies) ---- Size of market is small, consumers are aware of the product; consumers are willing to pay movement, non-availability of substitutes.  RAPID PENETRATION STRATEGY – Low Price, Heavy promotional expenses.-- Conditions – Size of the market is large, customers are unaware of the market, customers are price sensitive, intensive competition. Eg. Sunrise coffee, Maruthi 800, Magee Noodles.  SLOW PENETRATION STRATEGY: Low price and very little promotional expenses --- Large market size, buyers are aware of the product; consumers are price-sensitive, substitutes in the market. Eg. Toilet soaps.

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 Growth Stage --- The Strategies are related to o

Product Improvement

o

Enter or finding of new market

o

Modify the distribution channel.

 Maturity Stage – Retain the existing position of a company.  Declining Stage – Safe guard everything.  Abandonment stage – go for new product II. STRATEGY BASED ON THE SHARE OF FIRMS IN THE TARGET MARKET 

MARKET LEADER – having more no of consumers in the market

MARKET CHALLENGER – he is the challenger to the competitor, he do the marketing activities are better than the competitor. Eg. If competitors reduces the price, the he reduces more, than the competitors

MARKET FOLLOWER – do the activities following by the competitor. If he reduces the price then he also reduces the price.

MARKET NICHER – very, very, very small size of market is focused and marketed III. DURING SHORTAGES INFLATION AND RECESSION – normally the strategies may be related to safeguard the current assts and quit the business.

Pricing Meaning of price and definition of Pricing:  Pricing is also an important function, which is closely related to selling. Price policy of a business concern affects its successful functioning by directly influencing the element. Therefore, price policy should be carefully determined by considering the factors like cost of the goods, prices fixed by the competitors, marketing policies etc.  Price may be defined as the amount of money paid by the consumers for an exchange for combined assortment of a product and its accompanying service.  Price is the exchange value of the goods or services in terms of money. The exchange value of product is called price. The value and utility of a product have to be set against its price.  Pricing is the marketing mix elements that produce revenue to the others produce costs. Price is also one of the most flexible elements. It can be changed quickly, unlike product features and channel commitments. At the same time, price

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competition is the number one problem facing companies. Yet many companies do not handle pricing well. The most common mistakes are these pricing is too cost oriented; price is not revised after enough to capitalize on market changes.  Pricing assumes a significant role in competitive economy. Price is the main factor, which affects the marketing organisation. A good pricing policy is of great importance to the manufacturer, wholesalers, retailers and customers. Price affects volume of production and the amount of profit. It is the regulator of production & allocation of resources.  Price is the perceived value of goods or services. A price is the amount we pay for goods or a service or an idea. The amount of money that must be given up to acquire ownership or use of a product. Price may be defined as the amount of money paid by the consumers for an exchange for combined assortment of a product and its accompanying service. Price is the exchange value of the goods or services in terms of money. The exchange value of product is called price. The value and utility of a product have to be set against its price. Pricing is the marketing mix elements that produce revenue to the others produce costs. Price is also one of the most flexible elements. It can be changed quickly, unlike product features and channel commitments. At the same time, price competition is the number one problem facing companies. Yet many companies do not handle pricing well. The most common mistakes are these pricing is too cost oriented; price is not revised after enough to capitalize on market changes.

What is pricing Mix? Prices and pricing policies are of great importance not only to manufactures and middlemen but also to the consumers. Prices affect not only goods already produced but also future plans for production and future marketing. Therefore soundpricing policies must be adopted to ensure that the organization secures satisfactory profits. If the prices are too high it will affect the sales volume. If the prices are low, it will affect the profits. So while fixing the prices, the following must be objectives: 1) Achieving target return on investment. 2) Stabilizing prices. 3) Maintaining a target share of the market.

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4) Meeting or preventing competition; and 5) Maximizing profits. What is Pricing Plan? Pricing is theoretically the single most important instrument of competition in a market economy. The firms have to consider different pricing policies, strategies, legal constraints relating to pricing and so on.

OBJECTIVES OF PRICING Explain the Objectives or advantages of pricing Decisions: What do you mean by pricing? Explain the objectives and contents of pricing decisions. Or Explain about the pricing objectives of a business. Or “The success or failure of a business depends upon its product price policy”. Explain this statement. Some specific objectives of company’s pricing may be noted below: 1. To maximize the profits: The primary objective of the pricing decision is to maximize profits for the concern and therefore pricing policy should determined in such a way so that the company can earn the maximum profits. 2. Price Stability: As far as possible, the prices should not fluctuate too often. A stable price policy above can win the confidence of the consumers. It will also add to the goodwill of the firm. For this purpose, the concern should consider long run and short-run elements. 3. Competitive situation: One of the objectives of the price decision is to face the competitive situation in the market. Prices of the commodities should be fixed keeping in the mind the competitive situation.

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4. Achieving a Target-return: This is a common objective of well-established and reputed firm in the market (either for the company’s name, or its brand or the quality of the product) to fix a certain rate of return on investment. 5. Ability to pay: Price decisions are sometimes taken according to the ability of customers to pay, i.e., more prices can be charged from persons having a capacity to pay. 6. Long-run Welfare of the firm: The main aim of some concerns is to fix the price of the product, which is in the best interest of the firm in the long run keeping the market conditions and economic situations in mind. IMPORTANCE OF PRICING a) Pricing for target return (ROI): Business needs capital, i.e., investment in the shape of various types of assets and working capital. When a businessman invests capital in a business, he calculates the probable return on his investment. A certain rate of return ion investment is aimed. Then, the price is fixed accordingly. The price includes the pre-determined average return. Many well establishes firms adopt the objective of pricing in terms of return on investment. b) Market shares: The target share of the market and the expected volume of sales are the most important consideration in pricing the products. Some companies adopt the main pricing objective so as to maintain or to improve the market share towards the product. A good market share is better indication of progress. For this, the firm may lower the price, in comparison to the rival products, with a view to capture the market. c) To meet or to prevent competition: The pricing objective may be to meet or prevent competition. While fixing the price, the price of similar products, produced by other firms, will have to be considered. Generally, producers are not in a haste to fix a price at which the goods can be sold out. One has to look to the prices of rival products and the existing competition and to chalk out proper price policy so as to enable to face the market competition.

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d) Profit maximization: Business of all kinds is run with an idea of earning profit at the maximum. Profit maximization can be enjoyed where monopolistic situation exists. The goal should be to maximize profits on total outputs, rather than on every item. The scarcity conditions offer chances for profit maximization by high pricing policy. The profit maximization by high pricing policy. The profit maximization will develop an unhealthy image. When a short-run policy is adopted for maximization the profit, it will exploit the customers. e) Stabilize price: It is a long time objective and aims at preventing frequent and violent fluctuations in price. It also prevents price war amongst the competitors. When the price often changes, there arises non-confidence on the product. The prices are designed such a way that during the period of depression, the prices are not allow to fall below a certain level and in the boom period, the prices are not allowed to rise beyond the certain level. f) Customer’s ability to pay: The prices that are changed differ from person to person, according to his capacity to pay. For instance, doctors charge fees for their services according to the capacity of the patient. g) Resource mobilization: This is a pricing objective, the products are priced in such a way that sufficient resources are made available for the firm’s expansion; developmental investment etc. marketers are interested in getting back the amount invested as speedily as possible.

FACTORS AFFECTING PRICING DECISIONS Explain the factors influencing pricing decisions. Or Explain the internal and external factors affecting pricing decisions. Or Examine the various factors that must be carefully considered by the sales manager while fixing the price of a product and for minimum resale price maintenance. Factors affecting the price of a product: 1. Economic factors – Consumer demand, competition, political consequences, legal aspects, ethical aspects.

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2. Internal factors – Those factors, which are well within the control of the business, are called internal factors. These include: (1) Costs and (ii) Business objectives 1. Costs: A conventional approach to the determination of price for a product is based on its cost of production and distribution. All that is done here is to add up all the costs incurred (material cost, labour cost, administration overhead and selling and distribution overheads) and divide the same by the number of units produced. This will give us the cost per unit of output. To this figure, if a certain percentage of profit, as desired by the business, is added we can arrive at the selling price per unit. The drawback of this approach is that it ignores several external factors like demand, extent of competition and so on. Irrespective of the cost of production and distribution, the buyer may be willing to buy a particular product at a certain price. 2. Business objectives: Apart from the basic preference for profits, every business has certain other objectives. These objectives can also influence pricing decisions. These are given below: a. Return on investment: Every business expects a certain rate return on the investment made every year. The rate of return is expressed in percentage terms. b. Market share: If a business is aiming only for a small share of the market, i.e., catering to the needs of a certain category of buyers only, the price of its product has to be naturally high. On the other hand, if the business is aiming for a large share of the market, i.e., catering to different classes of buyers, the price of its product can be fixed low. c. Preventing competition: If the goal of a business is to prevent its competitors from gaining upper hand, it will probably keep the price of its product low. Such a strategy will certainly work if the market consists mainly of middle and lower income buyers and the business is able to offer the product at a price lower than that of the competitors. To prevent competition, a business may also keep its price high if it is able to convince the buyers that the quality of its product is much more superior to that of the competitors.

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d. Meeting competition: If the aim of the marketer is just to meet competition, his price will fall in line with that of the competitors. The very nature of the soft drinks market is such that whoever enters the industry will keep the price on par with their rivals. e. Stability in price: A marketer, who is aiming for a stable price for his product, will keep it unchanged over a fairly longer period of time. He ignores all other factors like demand, competition, etc., and is determined to deep his price stable. Those buyers, who are specific about stability in price, may wholeheartedly offer their support to such a product. f. Maximizing profits: The objective of ‘profit maximization’ can be achieved by adopting any of the following measures: a. Large-scale production. b. Curtailing the cost of production and distribution. c. Maximizing sales. d. Increasing the market share and so on. 3. External Factors: Those factors, which are behind the control of the marketer, are called external factors. Although they are beyond the marketer’s control, they cannot be ignored. They play a crucial role in pricing decisions and are as important as the internal factors. These include the following: (a) Demand: The demand for a product is nothing but a buyers desire to have a product backed by his ability and willingness to pay for it. The law of demand says that ‘the quantity demanded of a commodity will be less when its price increases and it will be more when the price decreases, other things (tastes and preferences of the consumers, competitive pressures etc.) remaining the same. Marketers do alter the price according to the demand position in the market. For this, they closely monitor the market conditions.

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(b) Competition: Only a monopolist is free from competitive pressures. If the competing products are all identical, price variation cannot be adjusted. If they are dissimilar, i.e., each has certain unique features, price differences may be accepted. (c) Middlemen: He does not directly market the goods produced by a manufacturer. Normally, there are wholesalers and retailers in the market. In addition to wholesalers and retailers, there are also other intermediaries in the market like brokers, commission agents and so on. All these intermediaries have to be paid for their services. All these charges come to be included in the price and it is only the ultimate consumer who finally bears the burden. Longer the chain of intermediaries, greater will be price payable by the consumer. (d) Government regulations: The Government does regulate business activities. If the excise and customs duties payable by the producers to the Government are hiked by the latter, the producers usually shift their burden on the consumers by increasing the price. Similarly, if the sales tax is increased by the Government the burden will again fall only on the consumer. All such increases will be reflected in the price. (e) Political conditions: The political conditions, prevailing both at the national and international level, influence pricing. The ‘share market’ is particularly vulnerable to political changes. A change in the portfolios of ministers may influence share prices. The recent war between U.S.A and Iraq has brought about a hike in the price of gold and petroleum products.

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PROCEDURE FOR PRICE DETERMINATION EXPLAIN THE PROCESS OR STEPS OR DESIGNING OR SETTING UP OF PRICING POLICY OR HOW A COMPANY SET HIS PRICE AND EXPLAIN THE PROCEDURE:

STEP -I

SELECTING PRICING OBJECTIVES

STEP -II DETERMINING DEMAND

STEP -III

ANALYZING COMPETITIONS COST PRICE

STEP -IV

STEP -V

ESTIMATING COSTS

SETTING THE FINAL PRICE.

1. Estimating the demand for the product: Estimating the anticipated demand of the product. It is estimated by a. Estimated price – can be anticipated on the basis of the relative importance of the product to the consumers in their budget estimates. b. Estimated demand of the product at different price level. 2. Anticipating competition: It can be done by a. Competition from the producers or similar products

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b. Competition from the substitutes of the product reactions and activities of both types of competitors should be made extensively. Estimated the future competition situation is more important in fields where production of the product can be started with low initial capital and effort and the profit margin is quite attractive. 3. Determining expected share of market: Determine the share, which a company will try to capture. It depends on various factors such of present production capacity, cost of extension programmes, cost of production and competition etc. 4. Selecting a suitable price strategy: Select the skimming, penetration, strategy or discouraging potential competitors or follow the competition. 5. Making policies of the company: The making policies regarding production, channels of distribution, promotion, should consider of next step. The nature of the product i.e., whether it is a new or old product, perishable or durable product, consumer or industrial product etc., should also be considered product mix is also one of the considerations. Channels of distribution also affects the price of the product i.e., transport cost etc. 6. Fixing the price: Having completed all the above said steps the next and final step is fixing the price, that time we should consider the interest of producers, middlemen, consumer, the price should be fixed in such a fashion to five fair returns to the producer a good profit margin to the middlemen and a nominal price to the consumers. It will give stability too. Consultation with the various departments like plan, marketing, finance etc., also essential. As there are no hard and fast rules to fix the price, it heavily relies upon the ability and experience of the management.

Methods PRICING POLICIES AND STRATEGIES Describe in brief the main pricing methods that can be followed by a firm for its products. Or Discuss the various kinds of pricing. Types or kinds or methods of Pricing:

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1. Odd pricing: When the price of a product is an odd number, such pricing method is knows as odd pricing. Example: Conventionally, Bata shoe company has been fixing the price of shoes and chapples by the method of odd pricing, e.g. Rs. 399.95 2. Psychological pricing: When the price of a product is a round number, such a method of pricing is known as psychological pricing. For example, a product may be priced Rs. 10 or Rs. 15. Such a method preferred by those marketers who do not believe in the techniques of off pricing. Many consumers use the price as an indicator of quality. Costs and other factors are important in pricing. Yet, psychology of the prices is also considered. Certain people prefer high priced products, considered to be of high quality. Costly items like diamonds, jewellery etc, and reveal the status of the personal, which wear them. They demand highly priced items. For example: Highly priced TV sets carrying prestige prices are in demand. Then in retail shops another pricing “odd pricing� is used. Odd prices, by psychology may bring more sales. An article priced at Rs.9.90 will have more sales than when it is priced at Rs.10. 3. Price based on the prevailing or ruling price: Such a method is followed by those marketers who want to fall in line with their competitors. They keep the same priced as decided already by their rivals. Example: Manufacturers of cement follow a uniform price policy 4. Prestige pricing: This method is followed by those who deal in luxury goods. Such marketers, generally, keep the price of goods high for they think that customers will judge quality by the price. Example: Those who sell cosmetic items, leather goods, electronic items, etc., follow prestige pricing. 5. Customary prices: By custom or convention, certain products are sold almost at the same price by different marketers. Example: Milk, butter, coffee powder, soft drinks, etc.

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Customers expect a particular price to be charged for certain products. The prices are fixed to suit local conditions. The customers are familiar with the rates and market condition. Manufacturers cannot control the price. Such products are typically a standardized one. For example: Confectionery item. 6. FOB (Free on Board) Pricing: Such a pricing has relevance when goods are to be transported to the buyer’s place. In case of FOB origin, the buyer will bear the transit charges himself and in the case if FOB destination, he need not pay the transit charges. 7. CIF (Cost, Insurance and Freight) price: In the case of CIF price quotation, the price paid by the buyer (may be an importer) is inclusive of cost, insurance and freight charges. 8. Dual pricing: It refers to the practice of some marketers who quote two different prices for the same product, one may be for bulk buyers and one for small quantity buyers. Under this dual pricing system, a producer is required compulsorily to sell a part of histones production to the government or its authorised agency at a substantially low price. 9. Administered pricing: Here the pricing is divided only the administration (or) the owner (or) the seller. He is not interested is reading the competitor, demand, supply or any thing what the policy division of a company (or) a owner, that is the factor declines the pricing of a product. 10. Monopoly Pricing: Here the new products are fix the price based on this policy only. Here the substitutes are not available, so the decision of one seller or person is the pricing of a product. Kingmaker pricing is done. 11. Price lining: In this case, the price, once determined remains unchanged for a fairly longer period of time. The retailers than wholesalers generally follow this method of pricing. This method consists of selecting a limited number of prices at which the store will sell its

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merchandise. Pricing decisions are made initially and remain constant for a long period. For example: A shoe firm has several types of shoes. Priced at Rs.120, 140, 170etc. 12. Mark-up pricing: It refers to the price arrived at by a retailer by adding a certain percentage (towards his margin of profit) to the manufacturer’s price. It is only at this price that he sells the goods to the consumers. This method is also known as cost plus pricing. Wholesaler’s ans retailers generally adopt this method. When they set up the price initially, a certain percentage is added to cost before marketing the price. For example, the cost of an item is Rs.10 and is sold at Rs.13. The mark up is Rs.3 or 30%. 13. Penetration pricing: Here consumers are the target peoples. Initially we fix very less price and after reaching the product into consumer minds, we may increase the price. A low price is designed in the initial stage with a view to capture greater market share. That is, if the pricing policy is to capture greater market share, then this is done only by adoption of low prices in the initial stage. Because of low price, sales volume increased, competitions fall down. 14. Expected pricing: The price, that is expected by the consumers, study the consumer minds and find out what price they are expected and fix a price. 15. Sealed bit pricing (or) contract price: This is for a particular work. The work value is calculated and fixes a price through the tender or contract. 16. Negotiated pricing: Manufacturer of industrial goods, who need components from suppliers, negotiate with the latter before finalizing the price. This becomes necessary in view of the high cost of the components. It is also known as variable pricing. The price is not fixed. The prie4 to be paid on sale depends upon bargaining. In certain cases, the product may be prepared on the basis of specification or design by the buyer.

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17. Skimming pricing: It refers to the practice of setting a very high price for a product, when it is introduced into the market for the first time and to reduce the same gradually as competitors enter the market. It involves a high introductory price in the initial stage to skim the cream of demand. The products, when introduced in the market have limited period free from other manufacturers. During this period, it aims at profit maximization, according to the favourable market condition. Generally, the price moves downward when competitors enter into the market field. 18) Geographical pricing: The distance between the seller and the buyer is considered in geographic pricing. In India, the cost of transportation is an important pricing factor, because of the wide geographical distance between the production centre and consuming centre. The majority of the production centers are located on Bombay, Delhi, Calcutta, Madras and the same time the consuming centers are dispersed through out India. 19) Zone pricing: Under this, the company divides the market into zones and quotes uniform prices to all buyers who buy within a zone. The prices are not uniform all over India. The price in one zone varies from that of another zone. The prices are uniform within a zone. 20) Base point pricing: Base point policy is characterized by partial absorption of the transport cost by the company. One or more cities are selected as points from which all shipping charges are calculated. 21) Administrated price: Administrated price is defined as the price resulting from managerial decision, and not on the basis of cost, competition, demand etc. But the management after considering all relevant factors sets this price. There are many similar products manufactures by different firms and more or less, the price tends to be uniform. 22) Negotiated pricing: It is also known as variable pricing. The price is not fixed. The prie4 to be paid on sale depends upon bargaining. In certain cases, the product may be prepared on the basis of specification or design by the buyer.

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23) Competitive bidding: Big firms or the government calls for competitive bids when they want to purchase certain products or specialized items. The probable expenditure is worked out. Then the offer is made quoting the price, which is also known as contract price. The lowest bidder gets the work. 24) Monopoly pricing: Monopolistic conditions exist where exclusively one producer or the seller sells a product. When a new product moves to the market, its price is monopoly price. There is no competition or no substitutes. Monopoly price will maximize the profits, as there is no pricing problem. 25) Oligopolistic pricing: Oligopoly is a competitive market situation and the presence of few large sellers, who compete for larger market share. None has control over the price it charges. For example: watch, tyre. 26) Trade discount: Trade discount is allowed in the form of deduction from the list price. Manufacturer gives this type of discount to wholesalers and retailers as a consideration for the remaining marketing function to be performed by them. 27) Quantity discount: Quantity discount is allowed to encourage a buyer to purchase in bulk. It is used as a sales device for slow moving items. Rs. 3 for one pen, Rs.10 for 5 pens. In this case quantity discount is in the form of free units. 28) Cash discount: It is concession or dedi8uction given to the consumer by the seller for remitting the bill within the specified period of time. What are the pricing policies? Explain them briefly. Pricing policies: It provides the framework and consistency needed by the firm to make reasonable, practicable and effective pricing decisions. The correctness of any pricing depends on such variable as managerial philosophy. Competitive conditions

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and the firm’s marketing and pricing objective. The following are however, the policies recognize for pricing. 1. Cost oriented pricing policy 2. Demand oriented pricing policy 3. Competition oriented pricing policy 1. COST ORIENTED PRICING POLICY: It is also referred to as cost-plus pricing. Such a policy considers only the cost of production and distribution. The production and distribution costs of product are added and then divided by the number of units produced. The resultant figure is the cost per unit. To this, the percentage of profits desired by the marketer is added to arrive at the selling price. This policy ignores altogether the influence of demand, competition and all other external forces. 2. DEMAND –BASED PRICING POLICY: In this case, the price of the product will be determined in accordance with the demand position in the market. If the demand is more, the price will be hiked and if it is less the price will be reduced. 3. COMPETITION-BASED PRICING POLICY: Here, the price of the competing products is taken as the basis. The price of the product may be more or less than the price of the competitors’ products. It may even be equal to the price of the competitors’ products. The drawback of this approach is that it ignores cost and demand. The price might have been hiked although there would not have been any increase in the cost. Explain the pricing strategy to be used to determine the price of a new product. Or Write a brief note on skimming the cream pricing policy or low penetration pricing policy. Or How will you fix the price for a new product? What are the problems involved in pricing a new product? New products howsoever distinctive have limited period free of competition. The period depends on innovation, potentiability, and the rate at which it gains market acceptance and potential competitors product development capability. In the market pioneering stage, marketer has three price strategies: 1. Skim the Cream Pricing:

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The ‘Skim the cream Pricing strategy’ uses a very high introductory price to skim the cream of demand at the very outset. This strategy is adopted when there is no competition in the market or the new product has come exclusive characteristics. Such prices continue to be high till the competitors begin to enter the field. As soon as competitors enter the market, the producer reduces the prices of his product. This is a method of recovering the product development cost very soon. It is a short-range pricing objective and is followed when the producer feels that there will be rapid competition in roads and he wants to take the cream before this happens. Attraction of price skimming – this policy is attractive in the following cases: (i)

In the beginning, there is lack of competition and therefore, innovative company can fix the monopolistic price of its product.

(ii)

This policy is suitable especially pricing the luxury products because it is an index of social status and price sensitivity is less.

(iii)

It attracts the prompt return of investment.

(iv)

If the price is highly distinctive, it tends to have more price in elastic demand at first then it will be reduced later on, because advertising and personal selling have more influence on sales than price does during a products market pioneering stage.

(v)

A high introductory price divides the market into segments differing in their responsiveness to price – the skimming price taps the market segment that is relatively insensitive to price. Later price reduction can reach more price conscious market segments.

2. Market penetration pricing: This is just opposite of the ‘skim the Cream’ technique. It offers a very low introductory price to speed up its sales and therefore widening the market base. Low price is used as a major tool for rapid penetration of a mass market and is based on a long-term viewpoint. It aims at capturing the market. If, there is already a competing product, its aim may be to capture a share of the market from a company product, which the new product it is hoped will replace. It also discourages competitors from entering the market.

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Conditions making penetration Pricing Appropriate: Management should seriously think using penetrating pricing under any or all of four different conditions: (i)

When the new product’s demand is highly price elastic even early in the pioneering stage.

(ii)

When the marketer can realize substantial manufacturing and marketing economies if he obtains a large sales volume (such economies bring down average total costs).

(iii)

When the marketer expects strong competition very soon after introducing the product, i.e., when he expects the product’s market pioneering stage not to last long.

(iv)

When there is little or no ‘elite’ market for the product in a market segment made up at buyers who will probably buy regardless of price.

3. Follow the leader Pricing: In a competitive market, some big firms assume the role of a leader in pricing. When a company starts production such competitive product, it follows the pricing policy of such leader firms. It fixes the prices near about their prices, which are generally lower than those of their leaders. This policy has no scientific and rational basis for fixing the prices. Attraction of the policy: (i)

This policy is suitable when competitive situation exists in the market.

(ii)

Small firms, which cannot afford various market survey techniques generally, follow the big firms, on the assumption that big firms in the field have broad marketing research base and their prices are more scientific.

(iii)

Such pricing is successful when buyers are price-conscious.

The policy has no scientific base. Cost of the product and other marketing factors are not considered at all under this policy.

Explain briefly the pricing policies to be sued in different stages of the life cycle of a product. The product life cycle have different stages such as (1) Introduction, (ii) Growth, (iii) Maturity, (iv) Saturation, (v) Decline, (vi) Obsolescence. Different

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pricing policies are adopted at different stages of a product’s life cycle. These policies can be explained as: 1. Pricing at Introduction stage: At this stage, a new product is introduced into the market and intensive advertising campaign is launched to make the public familiar with the product. At this stage of product life cycle either of the two strategies may be adapted – skimming the cream pricing and low penetration price strategy. 2. Pricing under Growth: At this stage of product life cycle, the demand and sales volume of the product go up. The consumer prefers the product to other products available in the market. The producer should very careful at this stage in determining the price because it is the time when the firm can earn the maximum profits through maximum sales. The producer in determining the price at this stage must consider the pricing policy of the competitors. If the existing price may be reduced at this stage, maximum benefit can be taken of the increasing popularity of the firm. If the producer feels that there is no close competition, price of the product may be raised slightly. Stress should be for intensive and extensive advertising. 3. Pricing under the Stage of Maturity: At this stage the sale of the product continue to increase but at a lower rate. It is because at this stage new competitors enter the market with superior quality product. The customers shift their brand loyalty to other new and superior products. The popularity of the enterprise begins to fall. At this stage, low price must be determined to check the customers shifting to new brand. The enterprise must also stress upon marketing research and product research so that a new improved product may be introduced in the market. Efforts should also be made to develop new uses of the product so that some customers may be attracted to the product. 4. Pricing under the stage of saturation: Under this stage of product life cycle, the total sales volume becomes stagnant. At this stage price of the product should be kept lower or reduced to a great extent, if possible. In addition to it, the efforts must be made to change the physical and chemical attributes of the product so that it may look better.

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5. Pricing under Decline: In the declining stage, the sales of the product continuously go declining in spite of the best selling efforts the hope of future sale becomes almost nil. At this stage the producer must use Break-even pricing. Policy of price-differentiation may also be adapted at this stage. 6. Policy under the stage of Obsolescence: At this stage, demand and sales of the product are reduced to a minimum low and possibilities of future sales are also bleak. Continuance of such product will cause loss to the firm. At this stage of life cycle, it is better to discontinue the production of the product in order to avoid losses and sue the resources to other profitable products. These different pricing policies are required to be adopted under different stages of a product life cycle. The main is to maximize or maintain the price of the product.

DISTINGUISH SKIMMING AND PENETRATION PRICING METHODS. Distinction Between Skimming Pricing and Penetration pricing: Skimming pricing

Penetration pricing

1. Setting a high initial price.

1. Setting a low initial price.

2. Suitable for the market which is

2. Suitable for the market which is

not sensitive to price.

very sensitive to price.

3. It is preferred when the marketer

3. It is preferred when the marketer

is doubtful about the correct price.

faces

threat

from

competition.

4. It helps to take the cream of the market.

constant

4. It helps the marketer to find a place in the market.

5. It will certainly offer scope for price reduction when necessary.

5. As the initial price itself is low, the question of price reduction does not arise.

Pricing Strategies

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What are the meanings for pricing strategies? Pricing strategy/ Method means the route taken by the firm in fixing the price. Evidently, the methods/strategy must be appropriate for achieving the desired pricing objectives.

What are the methods or factors of pricing strategies? The following are the factors influencing the choice of pricing strategies.

Skimming strategy:

Penetration pricing strategy:

Differential pricing strategy:

Geographic pricing strategy:

Product line strategy:

Skimming strategy: One of the most commonly discussed strategies is the skimming strategy. This strategy refers to the firms desire to skim the market, by selling at a premium price. This strategy delivers a result in the following situations.

 When the target market associates quality of the product with its price, and high price is perceived to mean high quality of the product  When the customer is aware and is willing to buy the product at a higher price just to be an opinion leader.  When competition is non existent or the threat from potential competition exists in the industry because of low entry and exit barriers.  When the product is perceived as enhancing the customer’s status in society.  When the product represents significant technological break through and is perceived as a ‘high technology’ product. n adopting the skimming strategy the firm’s objectives is to achieve an early break-even point and to maximize profits in a shorter time span or seek profits from a niche. 

Penetration pricing strategy: s opposed to the skimming strategy, the objective of penetration price

strategy is to gain a foothold in a highly competitive market. The objective of this strategy is market share or market penetration.  When the size of he market is large and it is a growing market.

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 When customer loyalty is not high customers have been buying the existing brands more because of habit rather than any specific preferences for it.  When the market is characterized by intensive competition.  When the firm uses it as an entry strategy.  Where price quality association is weak. 

Differential pricing strategy: This strategy involves a firm differently its price across different market

segments. The

assumption in this strategy is that different market segments

do not communicate or have

different search costs and value perceptions of

the product. In other words heterogeneity in

the market motivates a firm to

adopt this strategy. Example: Passenger seats sold by an Air lines. 

Geographic pricing strategy: This strategy seeks to exploit economies of scale by pricing the

product below the

competitors in one market and adopting a penetration

strategy in the other. The essential

requirement of this strategy is that the

markets should be separated by transportation costs.  A firm should not discriminate between competing buyers in the same region.  A firm’s strategy should not appear to be predatory.  A firm should not attempt to fix prices among competitors for basing point or zone pricing. 

Product line strategy: These are a set of price strategies which a multi product firm can usefully adopt. An important fact to be noted is that these products have to be related, in other words belonging to the same product family. Example: Shampoos – Normal, Conditioner, etc., with in each of this, it may have different brands. Faced with the multi- products and fluctuating demand, the firm may adopt a combination of the following strategies to effectively manage its product line or maximize its profits cross the product line.

Price bundling - The firm to even out the demand for its product uses this strategy.

Premium pricing -The firm that has heterogeneity of demand for substitute products with joint economies of scale uses this strategy.

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