Definition of marketing

Product-oriented definition

Duddy and Revzan have defined marketing as an economic process by which goods and services are
exchanged and their values determined in terms of money price.

Consumer-oriented definition

J.F. Pyle views marketing as that phase of business activity through which human wants are satisfied
by the exchange of good and services

Meaning

Marketing deals with identifying and meeting human and social needs

Philip Kotler defines marketing as “the set of human activities directed at facilitating and
consuming exchanges.

Scope of Marketing

1. Irregular demand

In this case , demand for the product and service will vary on a seasonal, monthly , weekly or daily
basis. For example, students buy text books either at the beginning of year or just before the
examination. Similarly, a high demand for hot drinks in winter and cold drinks in summer.

2. Declining demand

This is a common problem faces by many organizations. For example, with the popularity of mobile
phones, land phones have been disconnected by many consumers. Similarly , designer trousers and
shirts have created declining demand for stitched shirts and pants. The role of marketing is to
analyze the cause for declining demand and whether the demand can be created by changing the
product features.

3. Full demand

In this case, business firms enjoy monopoly and are pleased with their volume of business. For
example, the sale of petrol diesel, medicine, cooking gas, etc. the role of marketing in this case is to
maintain the current level of demand in the midst of changing consumer preferences and increasing
competition

4. Negative demand

A product is said to have negative demand , when a major part of the market dislikes the product
.for example , children and some adults dislike vaccination, surgeries , hospitalization etc, here the
role of marketing is to analyze that reason for dislike and devise a new marketing strategy to change
the perception , beliefs and attitude of the community
Importance of Marketing

1. Marketing gives employment to many people and so it helps to reduce the rate of
unemployment

2. A reduction in the cost of marketing is a direct benefit to the society, by making the goods
and services available at a reduced cost

3. Marketing tries to find out the right type of products , at the right place through the right
channel

4. In this era of information technology, companies are advertising widely about the variety of
products and services with distinctive features. Hence marketing provides valuable
information to consumers

Functions of Marketing
l. Functions of exchange

1.Buying

Buying refers to the purchase of raw materials to be converted into finished products, or the
purchase of finished goods for the purpose of resale. The buying function involves the following:

a. Method of payment

b. Negotiating the price and terms and conditions of sale

c. Selecting the mode of purchase

2. Selling

The purpose of all marketing activites is to sell goods or services at a profit, in order to achieve the
objectives of the organization. The selling function involves the following:

a. Search of buyers

b. Transferring the title of goods through sale of goods

c. Negotiating the terms of sale

3. Merchandising

Merchandising is giving products as per the needs and desires of the society. This includes activities
aimed at planning and adjusting the product line according to the expectations and desires of
customers. Thus, this function analyses the market and the probable products that can be sold in
such a market

ll. Function of physical supply

Goods lying with producers, wholesalers, etc have to be transported to the place of consumption.
This is the function of physical supply and it includes transportation and storage

a) Transportation

Goods can be transported from one place to another using different modes of transportation like
roadways, railways, airways, shipping, etc. Thus it links the producers and consumers spread
throughout the world

b) Storage

There is a time lag between production and consumption. So , the goods produced must be properly
stored, so that they can be utilized whenever there is demand. Warehousing is helpful for the
marketing activity of mass production and distribution of goods and at the same time production
can be carried out throughout the year

lll. Facilitating Marketing function

These functions are facilitating of ownership, transfer and physical distribution of goods and
services. In other words, these functions have to perform their role to complete the marketing
function and ensure the smooth flow of goods and services.

a) Standardization and grading

Standardization means that goods are of a specified and uniform quality. It refers to the prices of
setting down basic standards that the product must conform to, and to ensure that goods actually
have those standards. For example the ISI mark.

Grading is the process of sorting individual units of a product into well defined grades. For example
in the case of fruits and vegetables it is classified as first quality, second quality etc.

b) Branding

Branding is the process of assigning a distinctive name to the product, by which it is known and
remembered. In India, big business firms brand products with their producers name. For example,
Tata Iron and Steel , Bajaj Autos, etc. branding helps the consumers to identify and recognize the
product

c) Packing

Packing refers to wrapping, crating ,of goods to protect them from spoilage, breakage, leakage etc.
This ensures protection, safety and convenient handling
d) Salesmanship

Salesmanship is the process of ascertaining the needs and wants of the buyer, by personally
approaching him and satisfying his needs and wants. The salesman goes from house to house
explaining the features of the product and if the buyer is satisfied, the sales takes place

e) Advertising

Advertising is a form of mass communication. The seller who wants to communicate his product to
his customer, advertises his products or services. It is paid communication because the advertiser
has to pay for the space or time in which his advertisement appears. It can be defined as mass paid
communication of goods, services or ideas by an identified sponsor. Advertising appears on the
internet, news papaper, Magazines, Television, Radio etc.

f)Sales Promotion

It covers those marketing activities, otherthan advertising, publicity and personal selling that
stimulates consumers, purchasing desires and dealer effectiveness. This includes displays, shows,
exhibitions, demonstrations and many other non routine selling efforts at the point of purchase.

For example: in a sarree shop if the customer is confused to select mannequins are used to
demonstrate so that the customer can select one.

g)Marketing research

This refers to the systematic gathering, recording and analysis of data about marketing problems, in
order to provide useful information for taking decisions related to marketing. Each organization now
has a separate marketing research section, to analyse the best possible information so that the firm
can take timely action whenever and wherever needed.

Marketing Concepts
The Marketing Concepts are as follows:

1. The Production Concept

2. The Product concept

3. The Selling concept

4. The Marketing concept

5. The Societal concept

1. The Production Concept:

The production concept says that consumers will like those products that are widely available and
low in cost. Managers of production-oriented organizations concentrate on achieving higher
production efficiency and wide distribution coverage.”

It was applicable when there was no competition and market was dominated by sellers. Here, it is
assumed that consumers are interested only in the products, which are cheap in price and are widely
available.
2. The Product Concept:

The product concept holds that consumers will favour those products that offer quality,
performance, and innovative features. Managers in product-oriented organizations focus their
energy on making superior products and improving them over time.

The product concept is an improvement over the production concept. Under this concept, it is
assumed that consumers will favour the products, which offers higher quality, attractive features,
and better performance.

3. The Selling Concept:

The selling concept holds that consumers, if left alone, will not buy enough of the organization’s
products. The organisation must, therefore, undertake aggressive selling and promotional efforts.

It is assumed that consumers will not buy company’s products (even products are cheap, widely
available, and of better quality, features and performance) if they are not informed, convinced, or
requested. Consumers like to be requested, contacted, and informed. They like to feel importance.

4. The Marketing Concept:

The marketing concept holds that the key to achieve organisational goals consists in determining the
needs and wants of target markets and delivering the desired satisfaction more effectively and
efficiently than competitors.

This concept operates under severe competition. It is a consumer centric concept. Here, it is
assumed that consumers will buy our product if they are satisfied.

5. The Societal Concept:

The societal concept holds that the organization’s task is to determine the needs, wants, and
interests of target markets and to deliver desired satisfaction more effectively and efficiently than
competitors in a way that preserves or enhances the consumer’s and society’s well-being.”

Marketing Mix
1. Product

A product is the heart of the marketing mix. All marketing activities begin with the product. The
product is not a physical entity alone; it captures the whole tangible and intangible aspects like
services, personality, organization, and ideas.Without a product, we have nothing to price,
promote or place.

The decisions regarding product mix will depend on many factors like :

 Design
 Features
 Brand name
 Product variety
 Quality
 Services
 Packaging
2. Price

Price is the monetary value that has to be paid by a customer to acquire or own the product of a
company. It is the critical revenue-generating component of the firm.Pricing decisions should be
taken with great care, as it is a double-edged sword. If your product is priced too high, it may exude
a feeling of high quality. At the same time, it will make your product placing to limited and standard
stores.

The pricing mix decisions need to consider the below marketing variables :

 Methods of pricing; policies; strategies

 Allowances
 Discounts
 Payment period
 Credit policy

3. Promotion

It aims to serve two objectives. One, it informs the potential customers about your product and
secondly, it persuades them to buy your product. The promotion mix will thus include the various
means that you can use to communicate with the target audience. An effective promotion mix will
ensure good sales and a marketer must strive to create a conducive environment.

The main elements of a promotion mix are:

 Advertising
 Personal selling
 Public relations
 Direct marketing
 Publicity -social media, print, etc.
 Sales promotion

4. Place.

Place or physical distribution deals with the transfer of ownership of the product from the
manufacturer to the customer.

The margin of your profit depends on how quickly you can turn over the goods. The more swiftly the
products reach the point of sale, the more likely are the chances of satisfying the customers
and increase brand loyalty. Hence the Place factor is crucial in ensuring your product’s
competitiveness in the market.

The following are the elements of a distribution mix :

 Channels of distribution
 Warehousing decision
 Transport
 Order processing
 Coverage
 Market segmentation
Market segmentation is a marketing concept which divides the complete market set up into smaller
subsets comprising of consumers with a similar taste, demand and preference.

A market segment is a small unit within a large market comprising of likeminded individuals

Types of Market Segmentation

1. Demographic segmentation
Here, marketing manager differentiate the groups of customers on the basis of demographic
variables viz. age, gender, ethnicity, family size, marital status, education, race, religion, language,
income, occupation, etc. The variables used for demographic segmentation helps in dividing a large
population into specific customer groups and helps an organization to target its consumers more
accurately. With this type of segmentation, an organization can categorize the needs of consumers.
Some of the advantages of Demographic basis are as follows:
 These are easy to recognize and easy to measure.
 Their data can be easily available.
 These can be easily correlated with sales and other marketing efforts.

2. Behavioural segmentation
Here, the marketing manager differentiate the groups of customers according to their knowledge of,
attitude towards, usage rate, response, loyalty status, and readiness stage to a product. Many
marketers believe that behaviour variables are the best starting point for building market segments.

3. Geographic segmentation
It is one of the simplest methods of market segmentation. Here, marketers can segment the people
according to the geographic criteria such as nations, states, regions, countries, cities, postal codes or
neighbourhoods. In it, the regional differences in terms of climate, population and its density may be
considered as the base for market segmentation. The entire market of a production may be
segmented on geographic basis. The whole market may be divided and sub-divided on area basis and
geographic basis.

4. Psychographic segmentation
It describes the human characteristics of consumers. To define a market segment, psychographic
segmentation plays a crucial role. In it, consumers are classified into market segments on the basis of
their personality, attitude, values, self-image, interests, opinions, lifestyle, etc. According to attitude
towards life, people may be classified as traditionalists, achievers, etc.
Meaning of Product

A product is any good, service, or idea that can be offered to a market to satisfy a want or need.

Types of Products

Products are broadly classified into two categories – consumer products and industrial products.
Consumer products are products that the ultimate consumer purchases himself for direct use. The
consumer purchases these consumer products to satisfy his personal needs and desires. Some examples
of consumer products are toothpaste, eatables, textiles, computers etc and various such products.

Consumer products are further divided into 3 categories

Consumer products

 Convenience Products: These are consumer goods that are very convenient to purchase. They
are bought frequently and with very little effort. Examples include medicines, toiletries,
newspapers etc. Such convenience products have ongoing and continuous demand. Such goods
are also bought in small quantities and are also generally lowly priced.

 Shopping Products: To shop for these consumer products, consumers devote considerable time
and effort. They compare prices and features and a lot of thought is involved before making the
decision to buy. Some such examples are electronics, furniture, jewelry etc. These products
generally fall in the higher price range. Such products are pre-planned purchases.

 Specialty Products: For specialty products, consumers make special efforts to buy them. They
are not your regular run of the mill consumer products. The buyer is willing to go through a lot of
effort to purchase such products. Take for example any artwork, paintings, sculptures etc. The
demand for such specialty products is usually pretty limited and the prices are high.

Industrial products
These are products which are used as input for manufacturing other products. Unlike consumer goods,
these are not for direct consumption. These are meant for business and non-personal use. Some
examples of industrial products are raw materials, machines, tools etc.

Here the demand for industrial products is limited. Since they are not consumer goods the demand for
them is not vast. The three broad categories of Industrial goods are as follows
  Manufactured material and Parts: These goods are used entirely in the manufacturing process.
These include raw materials like cotton, lumber, petroleum etc. They also include manufactured
products like glass, rubber etc.

 Capital items: These are goods/products used to manufacture finished goods. They include
installations (lifts, mainframe computers etc) and equipment (hand tools, personal computers
etc)

 Business Services and Supplies: These are industrial goods and services that facilitate the
manufacturing process. They include services such as painters, technicians, maintenance, and
repairs. And products such as lubricants, stationary etc.

Product life-cycle

The life cycle of human beings can be divided into childhood, adolescence, youth and old-age.
Similarly every product has a life cycle that starts from its entry into the market and ends with falling
sales. The product life-cycle is an attempt to recognize distinct stages in the sales history of the
product because the product sales position and profitability will change over time.

1.Introduction stage

This is the stage when a new product is first introduced into the market. Before the introduction of
product might have been test marketed in few cities, but it would not have been a full scale launch.

At this stage profits may be negative or very low due to heavy distribution and promotion expenses.

Sometimes free samples are also distributed to popularize the product and to create awareness
about the new product in the market. In this stage weakness of the product may be revealed and
they must be removed immediately.

2.Growth stage

This is the stage when sales will increase considerably due to the popularity of the new product.
Similarly profits also increase at an high rate. New competitors will enter the market expecting
opportunities for large-scale production and profit. This will force the firm to introduce the new
features in the product, to increase the number of distribution outlets etc.

3.Maturity stage

During this stage heavy competition puts pressure on prices and may reduce profits. So at this stage
additional expenditure is involved in product modification, improvement or broadening the product
line. The firm is forced to stimulate demand and face competition through additional advertising and
sales promotion.

4.Decline stage

This is the last stage in the product life cycle, when the product enters the decline stage and
becomes obsolete. The product may be completely displaced from the market due to a new
invention. At this stage the firm is forced to reduce the expenditure on advertising and sales
promotion.

Product Mix
Product mix, also known as product assortment, is the total number of product lines that a company
offers to its customers. The product lines may range from one to many and the company may have
many products under the same product line as well. All of these product lines when grouped
together form the product mix of the company.

Dimensions of Product mix

The product mix has four dimensions: Breadth, Length, Depth, and Consistency.

Breadth This shows the different kinds of product lines that firm carries. Simply, it shows the
number of items in the product line. This dimension of the product mix represents the extent to
which the activities of the firm are diversified.

Length
The length of the product mix refers to the total number of products in the mix. That is if a company
has 5 product lines and 10 products each under those product lines, the length of the mix will be 50
[5 x 10].

Depth
The depth of the product mix refers to the total number of products within a product line. There can
be variations in the products of the same product line. For example – Colgate has different variants
under the same product line like Colgate advanced, Colgate active salt, etc.

Consistency
Product mix consistency refers to how closely products are linked to each other. Less the variation
among products more is the consistency. For example, a company dealing in just dairy products has
more consistency than a company dealing in all types of electronics.

Product planning

Product planning is the process of searching ideas for new products, screening them systematically,
converting them into tangible products and introducing the new product in the market.
Factors responsible for the success of product plan

A product plan or strategy is a company's plan for marketing its products. The success of product
plan depends on the following factors:

1. Product line
2. Product mix
3. Packaging
4. Labelling
5. Branding
6. Service after sale

1. Product line
Philip Kotler has defined a product line as, ”a group of products within a product class that are
closely related, either because they function in a similar manner, are sold to the same customer
groups, are marketed through the same types of outlets or fall within a given price range”. For
example, a range of detergents, toilet soaps, cosmetics, washing machines, television, cars, etc.

2. Product mix
It is the entire range of products offered by the company for sale. This may be either related
products or totally different products. Anchor company produces thread, paste, tube lights and
bulbs. This is an example of a company producing totally different products. Similarly, Times of India,
the leading national newspaper group, has launched its banking division, Times Bank. An example for
totally related products can be explained with Maruti Udyog Ltd. It has a range of cars, Maruti 800,
Gypsy, Maruti Esteem, Maruti van etc.

The product mix of a company can be described as having a certain width, depth and consistency.
For example, BPL Ltd. produces computers, televisions, refrigerators, telephone answering
machines, washing machines, etc

3. Packaging
A package is a wrapper or container in which a product is enclosed or sealed. Packaging can be
defined as ”an act of designing and producing the package for a product”, Now packaging is done
according to consumer convenience. For example, in a super market, goods are packed in different
sizes and packages that are easy to open and carry. Cadbury’s chocolates are also available in gift
packs.

4. Labelling
Labelling is the right of consumers, to be informed with accurate and up to date information about
the content and necessary guidance regarding the use of the product. A significant move in this
direction was made by the Union Health Ministry, by amending the Prevention of Food Adulteration
(PFA) rules, making it mandatory for all packed food products to carry the special logo, indicating
whether it contains any non vegetarian ingredient. India is the first country to go for the ”non
vegetarian” labelling, though most countries require that, there be a label with the ingredients and
in some countries with the nutritive value of each food item. The logo is in the form of a red
coloured circle, with a single chord running diagonally through the centre of the circle. Health
Ministry officials took this decision, because in a predominantly vegetarian country, such labelling
would help the people be informed about what they are offered.

5. Branding
Branding is the practice of giving a specified name to a product or group of products from one seller.
The brand names of Mercedez Benz, Opel, Maruti, etc., are examples of branding, which help
distinguish their product in the market and create individuality. A well promoted brand name has an
earned reputation in the market. Examples are Pepsi, Coke, KFC, Macdonalds, etc.

6. Service after Sale

Marketing focuses on the idea of satisfying the needs of the customer, as the customer is considered
king in marketing terminology. Marketing approach is a customer oriented approach and in this
context, service after sales is very important. The entry of multinationals in the Indian market, has
made companies start giving importance to after sales service. For example, Kenstar mixer grinder is
providing 12 years of free servicing, Aqua Guard is giving yearly service, etc.

Product planning

The four ways of product planning are

1. Market penetration

2. Market development

3. Product development

4. Product diversification

Market penetration

It involves an expansion of the sales of existing products in existing markets, by selling more to
present customers or by gaining new customers in existing markets. This is done through a more
forceful marketing mix. In this process customers of rivals or potential buyers can also be attracted
at the cost of a temporary price cut.

Market development

In Market development a present product is introduced to a new market or segment. For example, a
Maruthi van can also be used as an ambulance. Similarly the firm can offer it’s existing products to a
new market. For example, Deccan Herald the popular daily in Karnataka has been introduced in
tamilnadu. This will help the firm expand market opportunities to prolong product life cycles,
profitability, survival etc.

Product development

Product development is the process of introducing new products by a firm into a market in which it
is well established, that is, new products for existing markets. The idea behind this process is that,
the firm can better satisfy its present customers by offering newer improved products. For example,
good night mosquito repellent machine was first introduced with a long cord. Due to the
inconvenience the company introduced cordless machines and then the liquid mosquito repellent
machines.

Product Diversification

This is the process of experimenting with new products and new markets. Here the company adds
new products that have no relationship to current technology, product or markets. These products
will appeal to a new class of customers. The idea behind diversification is that, profits come from a
number of sources and this increases the number of products in the product portfolio of the
company. For example, anchor company’s first product was threads, then it diversified into
tubelights, bulbs, toothpaste.

New Product development

1.Idea generation

This is the stage in the new product development process. Ideas may be contributed by scientists,
professional designers, competitors, customers, dealers, top management; company salesman etc.
companies must monitor the new product development of the competitors. Many companies often
copy the competitors’ products and build a better one.

2.Idea Screening

If the purpose of idea generation is to create a number of good ideas, ideas screening is done to
reduce the number of ideas. At this stage though ideas are not clear, some rough guess work is done
as to the ,market size, product price development time and cost, target market etc, on the basis of
this analysis, poor or bad ideas are removed and only the most profitable ideas are picked up.

3.Concept development and testing

At this stage those ideas that have survived screening must be developed into fully mature product
concepts. For example, if the Bangalore diary development corporation gets an idea to produce a
milk powder that consumers can use instead of milk, then this is a product idea and it can be turned
into a large number of product concepts like, whether the product can be substitute for baby food or
whether the product can be a substitute for milk. At this stage it advisable to conduct a consumer
survey which will enable the company to know which concept has the strongest appeal.

4.Marketing strategy and development

This is the stage of introducing the product into the market, based on the ideas and consumer
preferences gathered at the concept development stage. A marketing strategy is developed for the
product. At this stage the introductory price may be half of the original price and free gifts may be
offered as a part of promotion. The company gathers information from the market about the
behavior of the target market, the expected sales, distribution strategy etc.

5.Business analysis

The management must analyze future sales, cost, profit etc, to evaluate whether they satisfy the
company’s objectives. If they satisfy the desired objectives then the product concept is moved to the
product development stage. Thus, at this stage the economic prospects of the new product are
analyzed in detail.

6.Product development Programme

A product concept that is found feasible during business analysis is turned over to the research and
development department to be developed into a physical product. To develop and convert the
product description into a physical and feasible product huge capital investment is involved.
Consumer testing is also done at this stage, usually by distributing free samples in sachets.
Moreover, the branding, packaging and labeling of the product are also finalized at this stage.

7.Market testing

Market testing is the stage where the product and marketing programme is introduced in select
cities or areas. This helps the company understand consumer reaction through a trial and error
approach. The company can gather valuable information for product improvement, modifications,
marketing mix, marketing strategy etc. test marketing helps predict future sales and helps in trying
out different marketing plans.

8.Commercialization

This is the last stage of new product development. At this stage the management takes the final
decision of launching the new product. If the decision is to go ahead with the idea, the company will
have to arrange for the machinery for the required production, along with the full fledged
advertising and sales promotion campaign to go with mass production. The decision to
commercialize involves four important decision.
1. Timing
2. Geographical strategy
3. Target market
4. Introducing new marketing strategy

Reasons for failure of a product

Higher price: Another reason for the failure of certain products is the price factor. Higher production
and distribution costs may lead to higher price. Such a product cannot be sold in a market consisting
of middle and lower income buyers.

Poor timing: It is important that a product, to be successful, is introduced in the market at the
correct time. If it is introduced at an unsuitable time it may turn out to be a failure.
Example: Publishers of textbooks usually bring out books in the beginning of the academic year.

Lack of promotional measures: Popularizing the brand, particularly, in the introduction stage of a
product is essential. Such a step will ensure repeated buying and bring long-term benefits for the
marketer. Failure to do so will ‘prove to be disastrous for the product.
Faulty distribution policy: It is important that a product reaches the right market at the right time
and at the right price. The faulty distribution policy of the marketer may lead to many problems, i.e.,
the goods may not be available when required, may lead to higher price and so on.

Unavailability of spare parts: In the case of durable goods like televisions sets, Air-conditioners, etc.,
and also in the case of two wheeler and cars, easy availability of spare parts is an important
requirement. Unavailability of spares may frustrate the buyers. Such buyers would not recommend
the product to their friends and relatives.

Imitation products: Last, but not the least, the presence of a number of imitation products in the
market makes the genuine products vulnerable. An average buyer may not be able to distinguish
between the genuine product and the fake one.

Pricing

Pricing is the method of determining the value a producer will get in the exchange of goods and
services.

Objectives of Pricing

• To enable the firm to earn a fair percentage of profit.

• To meet or stay ahead of competition.

• To maintain or increase the firm’s share of the market

• Finding new market or deeper penetration.

• Keeping competitor out.

• Charging the price affordable by weaker section.

Factors influencing pricing decision

1.Cost of the product

Pricing decisions are based on the cost of productions. If a product is priced less than the cost of
production the firm has to suffer the loss. But the cost of production can be reduced by coordinating
the activities of production properly; the firm can reduce the price accordingly.

2.Product Differentiation

If a product is different from its competitive products, with features such as New style, Design,
Package etc then, it can fetch a higher price in the market. If the product has unique features then
the firm has greater freedom in fixing the price and customers will also be willing to pay that price.

3.Marketing Mix

Price, product, promotion and place are the four P’s of marketing mix. The pricing policy of a firm
must consider the other components of a marketing mix because, these factors are closely related.
Moreover these factors will change according to changing marketing conditions and will be different
for each market.
4.Demand

Market demand for a product or service has great impact on pricing. If there is no demand for the
product the product cannot be sold at all. If the product enjoys good demand the pricing decision
can be aimed to utilize this trend.

5.Buyers

If there are no ready takers or buyers for the product it is said to have failed in the market. Pricing
decision is thus related to the characters, nature and preference of the buyers.

6.Competition

The market is flooded with too many products both Indian and foreign. The number, size and pricing
strategy followed by competitors have a significant role to play in the pricing decision. If the product
cannot be differentiated with special features a firm cannot charge a higher price than that of its
competitors.

METHODS OF PRICING
1.Cost Plus Pricing or full cost pricing

This is a common pricing method used by business firms. As per this method the selling price of a
product includes the cost of a product and an estimated amount of profit. The principal is that the
selling price of a product must cover it’s full cost along with a reasonable margin of profit.

2.Price based on the buyer

Many firms are basing their prices on the products perceived value. In other words, pricing is based
on what the buyer is willing to pay and not the sellers cost which usually is the key to pricing. In this
method non price variables in the marketing mix are used to build up a perceived value in the buyers
mind. Accordingly the price is set to capture the perceived value. For example, a consumer may be
willing to pay Rs.2 for a cup of tea in a roadside Tea stall, Rs.4 in a moderate hotel, Rs.15 in a 5 star
hotel. These sellers charge different prices in different places because of other attractions and the
value added by the atmosphere.

3.Pricing to meet competition.

This method is usually adopted when the market is highly competitive, products are homogeneous
and not capable of differentiation. The company has to price at a rate identical to what the
competitors are charging for similar products. This method of pricing may therefore be described as
a method of pricing in which a company attempts to maintain it’s price more or less with that of it’s
competitors in other words, a company maintains it’s price according to the prices charged by it’s
competitors. Example, Coco-Cola & Pepsi and Surf & Tide.

4.Pricing below Competition

This is the method in which prices are kept below the level of the competitor. It is done by giving
discounts at the retail level. If this method is accepted by the consumer then, the brand with the
lowest price is chosen.

5.Pricing above Competition

This method can be adopted when the product is unique and has prestige or status value in the
market. For Example, Mercedez Benz Cars are sold for rupees 27 Lakhs due to their Reputation. Only
reputed manufacturers can resort to the above market pricing.

Meaning of promotion
Promotion is a process of marketing communication , involving communication, persuasion and
influence .

It communicates information about the product of the firm to the consumers, persuades the
consumer to purchase the firms product and finally influences or makes the consumer purchase the
product.

Objectives of Promotion
1. To communicate: ( eg new soap)

Communication is the basis of all marketing efforts. So the main objective of promotion is to
communicate or to inform the consumers about the availability, features and uses of the product.
Informational tools like advertising, personal selling, publicity etc are used to communicate about
the product

2. To convince:

The information must be communicated to the consumers in such a convincing manner as to ensure
necessary action on the part of the consumers. For this purpose the seller should highlight the
outstanding features of his products in a manner most convincing to consumers.

3. To motivate: (washing machine)

Another important objective of promotion is to motivate the consumers to purchase the products.
For this purpose, the consumers should be reminded time and again to purchase the firms products
by highlighting the superiority of the firms products

4. To differentiate: (yippe and maggi)

One of the important objectives of promotion is to differentiate the product of the firm from the
products of the competitors by highlighting the unique features of the product.

5. To stabilise sales :

Another important objective of promotion is to stabilise the sales of the firm by reducing
fluctuations or variations in sales caused by seasonal or irregular factors

Promotion strategies
Push strategy

A "push" promotional strategy makes use of a company's sales force and trade promotion activities
to create consumer demand for a product. A push strategy tries to sell directly to the consumer,
bypassing other distribution channels.
It takes the product to the customer - the customer knows about the product when they buy it.
Producer promotes product wholesalers > wholesalers promote product to retailers > retailers
promote product to consumers. Examples:Trade shows , Direct selling

Pull Strategy

A “pull” selling strategy is one that requires high spending on advertising and consumer promotion
to build up consumer demand for a product: it brings the customer to the product - the customer
is motivated to buy it.

Consumers ask retailers for product > retailers ask wholesalers for product > wholesalers ask
producers for product

Examples

 Advertising
 Referrals (word of mouth)
 Promotions
 Discounts

Promotion mix
Promotion mix refers to a combination of various promotional elements or promotional tools , such
as advertising , personal selling , sales promotion , publicity and public relations used by a
marketer to create, maintain and increase the demand for the product

Promotion mix refers to a combination of various promotional elements or promotional tools , such
as advertising , personal selling , sales promotion , publicity and public relations used by a marketer
to create, maintain and increase the demand for the product

Elements of Promotion mix

1. Sales Promotion
2. Advertising
3. Public Relation
4. Publicity
5. Personal selling

1. Sales Promotion

The marketing activities other than advertising, publicity and personal selling are known as sales
promotion. It is a short term incentive to encourage purchase or sale of commodities or services.
Sales promotion includes, sampling, fair and trade shows, low interest financing schemes,
exhibitions etc.

2. Advertising

It is any paid form of non personal presentation and promotion. Advertising includes : packaging,
mailing, house magazines, posters and leaflets, bill boards, audio-visual material etc.
3. Public Relation

Public relation is the operating philosophy by which management sets up policies designed to serve
both in the company and the interests of the public. It is the basis of communication techniques
which management employs to achieve good relations with the public.

4. Publicity

Publicity is a non-personal stimulation of demand for products and services by planting commercially
significant news about in a published medium. Publicity includes different tools like press kits,
seminars, speeches, public relations etc.

5. Personal Selling

Personal selling is the oral presentation in a conversation with one or more prospective purchasers
for the purpose of making sales. It includes sales presentation, sales meeting, incentives programme,
fair and trade shows etc.

Distribution channel
Distribution channel is a path traced in the direct or indirect transfer of title to a product, as it moves
from a producer to ultimate consumers or individual users.”

Functions of Distribution Channels

1] Channels of distribution are the link between manufacturers and ultimate consumers. Now, goods
and services produced anywhere in the world are available to us only with the help of channels of
distribution. For example, the US-based Kentucky Fried Chicken counters are functional in all Indian
metros.

2] Goods are stored by the middlemen while being transferred from manufacturers to consumers
and released in the market depending on the demand. For example, in the case of jams and juices,
manufacturers have to store the fruits in the season, but the end products are available throughout
the year.

3] Channels of distribution are helpful in promoting goods and services. Through their widespread
network, they talk about the new products and help manufacturers create demand. This is very
helpful in promoting new products and services.

4] They also help in fixing prices, as they know about market conditions. The possible price accepted
by the consumers is known through them and is helpful to manufacturers.

5] Channels of distribution serve as an effective tool for building up clientele. On the other hand,
inefficient physical distribution leads to the loss of customers and markets.
Classification of Distribution Channels

Non-lntegrated or Conventional Channels

Non-integrated channels are also known as individualistic channels. Here, manufacturers,

wholesalers and retailers bargain with each other for their terms of sale, trade discounts and terms
and conditions of payment.Non-integrated distribution channels are divided into two categories:

a) Direct distribution

b) Indirect distribution

Direct Distribution Channel

In the case of direct distribution channel, the company chooses to sell its products and service
directly to consumers without any intermediaries or middlemen.

In the case of bakery products, the direct distribution channel is followed. If we buy a pastry from a
Nilgris counter, it is a direct transfer from the manufacturer to the consumer.

Indirect Distribution Channels

In the case of an indirect distribution channel, a company chooses to engage intermediaries to

channelize its products and services to consumers. Three options are available in this type of
distribution.

1] Manufacturers- Retailers -Consumers

This channel consists of only one type of intermediary called the retailer, through whom a
manufacturer sells goods to consumers. The advantage of this distribution channel is that,
manufacturers are always in constant touch with the trends in demand, which can be immediately
fulfilled. For example, KFC, McDonalds, Batta, Raymonds sell their products through this type of
distribution channel.
2] Manufacturers –Wholesalers- Retailers Consumers

This is the most widely used and most traditional distribution channel in India. It consists of two
types of intermediaries, namely the wholesalers and retailers. In this type of channel, manufactures
move further away from the ultimate consumer due to the presence of wholesalers and ‘ retailers in
the chain, Examples of this type of distribution channels are, Godrej, V-guard, Samsung and many
other consumer durable companies.

3] Manufacturer -Agent Middlemen- Wholesaler- Retailer -Consumer

This is the longest channel of distribution where the manufacturer has relatively lesser contact with
the ultimate consumer. It consists of three types of intermediaries, namely agent middlemen,
wholesaler and retailer. This type of distribution channel exists in the case of agricultural products
like wheat, paddy, jowar, pulses, etc.

Integrated Channels

In contrast to non-integrated distribution channels, integrated channels are networks in which

channel components participate in a coordinated manner. These channels are well organized and
managed by professionals.

For example, in the travel and tourism industry we see integrated marketing channels among hotels,
tour operators, taxi services, travel agents etc.

Integrated distribution channels can be divided into two:

1. Vertical integrated distribution channels, and

2. Horizontal integrated distribution channels

Factors affecting the choice of Distribution channels

Different factors affect the choice of a distribution channel and differs from firm to Firm. We can
divide these factors under five heads:

1. Market Factors

2. Product Factors

3. Company Factors

4. Environmental Factors, and

5. Financial Factors
Market Factors

1] Consumers

The number of consumers, their geographic location and purchase pattern affect the choice of a
channel for distribution. If the number of consumers is large, spread over a wide area and their
purchases are frequent and in small lots, then the indirect channel is preferable. On the other hand,
if the number of consumers is small, concentrated in a small geographic location, then it is
preferable to use the direct channel.

2] Middlemen : The terms and conditions of middle men also affects the channel choice. For
example, if the wholesaler asks for more commission, then the manufacturer may have to go for a
direct channel. .

3] Competitors : The distribution channel used by competitors also influences the channel choice,
because it may mean choosing a customary channel in the same line of business activity.

Product Factors

1] Industrial or Consumer Goods

If the product to be distributed is an industrial good, then the direct channel is adopted, because
there are very few customers who can be given personal attention and provided with good after
sales services. But for consumer goods, the indirect channel is preferable.

2] Perishable Nature

If the goods are of a perishable nature, like milk, vegetables, fruits, etc., then it is better to adopt
direct methods.

3] Standardisation

If the goods are standardised (for example, lSl Mark, AG Mark, etc.) then the indirect method is
preferable, because standardisation is a proof of uniformity and quality.

4] Unit Value

lf the unit price of the product is high, then it is preferable to use the direct method and if the unit
price is less, then the firm can go for an indirect channel.

Environmental Factors

1]Economic Conditions

This affects the choice of a channel. During depression, economic activities are dull and therefore a
shorter and cheaper channel is preferable, But in times of inflation, it is full of business activities and
so a wider channel may be adopted.

2] Legal Factors

In India, various Acts prevailing in the country, viz., the Companies’ Act influence the choice of a
channel. These Acts have been passed with a view to control monopoly, to prevent retail price
maintenance and to protect the rights and interests of companies. Therefore, channel selection is
also influenced by various Acts passed in the country.

3] Technological Factors

Various inventions in the technological field also influence the choice of a channel. For example, if
perishable items are to be distributed, proper refrigerated storage facilities are a must. Only if that is
possible, can the firm can go for indirect channel methods, otherwise it has to restrict distribution
through the direct method.