*MBA 2SEM MARKETING MANAGEMENT*

UNIT-1

Introduction to marketing, Need, Want, Demands, Products,

Exchange transactions, Marketing mix, Marketing environment,
Green marketing, production concept, sales concept, Product
concept, Social concept, Marketing concepts,

Introduction to marketing
 Marketing is dynamic and impactful.
 The details differ between industries, but at its most basic marketing is how
businesses reach prospective customers and communicate the unique
benefits of a product or service.
 It encompasses all the activities that companies undertake to promote, sell,
and distribute that product or service.
 The goal is to generate sales and build a loyal customer base by informing
prospective and existing buyers about the offering.
Your target audience must first be aware that your product or service exists
before you can hope to inspire a purchase.
 An essential function in any business, marketing supports efforts to acquire,
keep, and grow customers.
 But marketing does not end there — ongoing engagement also helps build
loyalty and establish a long-term relationship.
 Effective programs and campaigns reach and engage audiences, differentiate
the company from competitors, and support larger business objectives, such
as increasing sales or expanding to a new market.

Definition: Marketing is the process of converting prospective buyers into actual

customers by communicating complete information of the product or services to
the customer. The key elements which are the secret to a successful marketing
practice are thorough market survey and research, framing a competitive strategy,
designing a realistic marketing plan and implementing different tactics to execute
the plan.

Content: Marketing

1. Types
 2. Nature
3. Objectives
4. Functions
5. Conclusion

Types of Marketing Entities

Goods: Any product manufactured in mass quantity, requires proper marketing to

make it available to its consumers located in different places of the country or
world.
For example; Mobile phones manufactured in China and sold all over the world

Services: An economic activity performed to meet the consumer‗s demand, needs,

promotion and marketing.
For example; Ola cabs providing for local taxi services

Events: Various trade fairs, live shows, local events and other promotional events
need advertising and publicity.
For example; Indian Fashion Expo is the event where leading fashion houses
participate in displaying exhibit their creation needs marketing to reach customers,
manufacturers and traders.

Experiences: It even organises and customises the impression made by certain

goods and services to fulfil the customer‗s wish.
For example; A Europe trip package provided by makemytrip.com or
tripadvisor.com

Persons: A person who wants to promote his skills, profession, art, expertise to
acquire customers, take the help of marketing functions.
For example; A chartered accountant updates his profile over linkedin.com to
publicise his skills and talent to reach clients.

Places: Marketing of tourist places, cities, states and countries helps to attract
visitors from all over the world.
For example; India‗s Ministry of Tourism promoting India through ‗Incredible
India‗ campaign

Properties: It provides for selling of tangible and intangible properties like real
estate, stocks, securities, debentures, etc.
For example; Real estate agents publicise the residential plots to investors

Organizations: Several corporations and non-profit organisations like schools,

colleges, universities, art institutes, etc. create and maintain a public impression
through marketing.
For example; Circulars and advertisements made by colleges as ‗admission open.‗

Information: Certain information related to healthcare, technology, science,

media, law, tax, market, finance, accounting, etc. have to demand among the
corporate decision-makers who are marketed by some leading information
agencies.
For example; Bloomberg provides all current financial, business and market data

Ideas: Brands market their products or services through advertisements spreading

a social message to connect with the consumers.
For example; Idea 4G‗s advertisement spreading the message of ‗sharing our real
side.‗
CONCEPT OF MARKETING –
Needs: A driver of human action which marketers try to identify, emphasize, and
satisfy, and around which promotional efforts are organized.
Wants : This is quite different from needs. Wants aren‗t permanent and it regularly
changes. As time passes, people and location change, wants change accordingly.
Wants aren‗t essential for humans to survive, but it‗s associated with needs. For
example, if we always manage to satisfy our wants, it transforms into a need.
Demands: Let‗s discard the boring explanation process and start with an example.
There are two options; you either buy a Samsung‗s or Apple‗s product. Though,
the prices are really different. The Samsung‗s phone costs $150 and the Apple‗s
iPhone
$780.We‗d prefer to purchase the Apple product, but the question is, can we? If
we, financially, are strong enough and can allow ourselves to buy a $780 iPhone, it
means that we‗ve transformed our want/need into a demand. So, the key difference
between wants and demand is desire. Consequently, for people, who can afford a
desirable product are transforming their wants into demands. In other words, if a
customer is willing and able to buy a need or a want, it means that they have a
demand for that need or a want.
Products: product is anything that can be offered to a market that might satisfy a
want or need. In retailing, products are called merchandise. In manufacturing,
products are bought as raw materials and sold as finished goods. A service is
another common product type.
Exchange: Open, organized marketplace (such as a stock exchange) where buyers
and sellers negotiate prices. Exchanges require an almost instant (real time) bid and
ask matching mechanism, settlement and clearing, and market wide price
communication and determination.
Transactions: Exchange of goods or services between a buyer and a seller. Every
transaction has three components:
(1) transfer of good/service and money,
(2) transfer of title which may or may not be accompanied by a transfer of
possession, and
(3) transfer of exchange rights.
MARKET: A market is defined as the sum total of all the buyers and sellers in the
area or region under consideration. The area may be the earth, or countries,
regions, states, or cities.
The value, cost and price of items traded are as per forces of supply and demand in
a market. The market may be a physical entity, or may be virtual. It may be local
or global, perfect and imperfect.
MARKETING:
Marketing is the study and management of exchange relationships. Marketing is
used to create, keep and satisfy the customer. With the customer as the focus of its
activities, it can be concluded that Marketing is one of the premier components of
Business Management - the other being innovation.
There are 5 different concepts of marketing, each of which vary in the function that
they deal with
MARKETER:
A person whose duties include the identification of the goods and services desired
by a set of consumers, as well as the marketing of those goods and services on
behalf of a company.
□ Overseeing and developing marketing campaigns
□ Conducting research andanalyzing data to identify and define audiences
□ Devising and presenting ideas and strategies
□ Promotional activities
□ Compiling and distributing financial and statistical information
□ Writing and proofreading creative copy
□ Maintaining websites and looking at data analytics
□ Organising events and product exhibitions
□ Updating databases and using a customer relationship management (crm) system
□ Coordinating internal marketing and an organisation‗sculture
□ Monitoring performance
□ Managing campaigns on social media.

NEED OF NEED OF MARKETING IN BUSINESS SECTOR - NON-

PROFIT SECTOR AND GOVERNMENT SECTOR
(1) Marketing Helps in Transfer, Exchange and Movement of Goods:
Marketing is very helpful in transfer, exchange and movement of goods. Goods
and services are made available to customers through various intermediaries‗ viz.,
wholesalers and retailers etc. Marketing is helpful to both producers and
consumers.
To the former, it tells about the specific needs and preferences of consumers and to
the latter about the products that manufacturers can offer. According to Prof.
Haney Hansen ―Marketing involves the design of the products acceptable to the
consumers and the conduct of those activities which facilitate the transfer of
ownership between seller and buyer.‖
(2) Marketing Is Helpful in Raising and Maintaining the Standard Of Living
of the Community: Marketing is above all the giving of a standard of living to the
community. Paul Mazur states, ―Marketing is the delivery of standard of living‖.
Professor Malcolm McNair has further added that ―Marketing is the creation and
delivery of standard of living to the society‖.
By making available the uninterrupted supply of goods and services to consumers
at a reasonable price, marketing has played an important role in raising and
maintaining living standards of the community. Community comprises of three
classes of people i.e., rich, middle and poor. Everything which is used by these
different classes of people is supplied by marketing.
In the modern times, with the emergence of latest marketing techniques even the
poorer sections of society have attained a reasonable level of living standard. This
is basically due to large scale production and lesser prices of commodities and
services. Marketing has infact, revolutionised and modernised the living standard
of people in modern times.

(3) Marketing Creates Employment:

Marketing is complex mechanism involving many people in one form or the other.
The major marketing functions are buying, selling, financing, transport,
warehousing, risk bearing and standardisation, etc. In each such function different
activities are performed by a large number of individuals and bodies.
Thus, marketing gives employment to many people. It is estimated that about 40%
of total population is directly or indirectly dependent upon marketing. In the
modern era of large scale production and industrialisation, role of marketing has
widened.
This enlarged role of marketing has created many employment opportunities for
people. Converse, Huegy and Mitchell have rightly pointed out that ―In order to
have continuous production, there must be continuous marketing, only then
employment can be sustained and high level of business activity can be continued‖.

(4) Marketing as a Source of Income and Revenue:

The performance of marketing function is all important, because it is the only way
through which the concern could generate revenue or income and bring in profits.
Buskirk has pointed out that, ―Any activity connected with obtaining income is a
marketing action. It is all too easy for the accountant, engineer, etc., to operate
under the broad assumption that the Company will realise many dollars in total
sales volume.
However, someone must actually go into the market place and obtain dollars from
society in order to sustain the activities of the company, because without these
funds the organisation will perish.‖
Marketing does provide many opportunities to earn profits in the process of buying
and selling the goods, by creating time, place and possession utilities. This income
and profit are reinvested in the concern, thereby earning more profits in future.
Marketing should be given the greatest importance, since the very survival of the
firm depends on the effectiveness of the marketing function.

(5) Marketing Acts as a Basis for Making Decisions:

A businessman is confronted with many problems in the form of what, how, when,
how much and for whom to produce? In the past problems was less on account of
local markets. There was a direct link between producer and consumer.
In modern times marketing has become a very complex and tedious task.
Marketing has emerged as new specialised activity along with production.
As a result, producers are depending largely on the mechanism of marketing, to
decide what to produce and sell. With the help of marketing techniques a producer
can regulate his production accordingly.

(6) Marketing Acts as a Source of New Ideas: The concept of marketing is a

dynamic concept. It has changed altogether with the passage of time. Such changes
have far reaching effects on production and distribution. With the rapid change in
tastes and preference of people, marketing has to come up with the same.
Marketing as an instrument of measurement, gives scope for understanding this
new demand pattern and thereby produce and make available the goods
accordingly.
(7) Marketing Is Helpful In Development Of An Economy:
Adam Smith has remarked that ―nothing happens in our country until somebody
sells something‖. Marketing is the kingpin that sets the economy revolving. The
marketing organization, more scientifically organised, makes the economy strong
and stable, the lesser the stress on the marketing function, the weaker will be the
economy
Nature of Marketing

 Managerial Function: Marketing is all about successfully managing the

product, place, price and promotion of business to generate revenue.
 Human Activity: It satisfies the never-ending needs and desires of human
beings.
 Economic Function: The crucial second marketing objective is to earn a
profit.
 Both Art and Science: Creating demand for the product among consumers
is an art and understanding human behaviour, and psychology is a science.
 Customer-Centric: Marketing strategies are framed with the motive of
customer acquisition.
 Consumer-Oriented: It practices market research and surveys to know
about consumer‗s taste and expectations.
 Goal-Oriented: It aims at accomplishing the seller‗s profitability goals and
buyer‗s purchasing goals.
 Interactive Activity: Marketing is all about exchanging ideas and
information among buyers and sellers.
 Dynamic Process: Marketing practice keeps on changing from time to time
to improve its effectiveness.
 Creates Utility: It establishes utility to the consumer through four different
means; form (kind of product or service), time (whenever needed), place
(availability) and possession (ownership).
Objectives of Marketing
Marketing majorly focuses on achieving consumer satisfaction and maximising
profits.

Following are the illustration of different aims of marketing practices:

 Customer Satisfaction: The primary motive of a company is to satisfy the

needs of customers.
 Ensure Profitability: Every business is run for profit, and so goes for
marketing.

 Building Organizational Goodwill: It portrays the product and the
company‗s positive image in front of the customers.
 Create Demand: It works for generating the demand for products and
services among the customers.
 Increase Sales Volume: It is a rigorous process of increasing the sale of
product or service to generate revenue.
 Enhance Product Quality: Marketing initiates customer feedback and
reviews to implement them for product enhancement.
 Create Time and Place Utility: It makes sure that the product or service is
available to the consumer whenever and wherever they need it.
Functions of Marketing
Marketing is not just selling off goods and services to the customers; it means a lot
more than that.

It starts with the study of the potential market, to product development, to market
share capturing, to maintain cordial relations with the customers.

Following multiple operations of marketing helps the business to accomplish long-

term goals:
Market Research: A complete research on competitors, consumer expectations
and demand is done before launching a product into the market.

Market Planning: A proper plan is designed based on the target customers,

market share to be captured and the level of production possible.

Product Design and Development: Based on the research data, the product or
service design is created.

Buying and Assembling: Buying of raw material and assembling of parts is done
to create a product or service.
Product Standardisation: The product is graded as per its quality and the quality
of its raw materials.

Packaging and Labelling: To make the product more attractive and self-
informative, it is packed and labelled listing out the ingredients used, product use,
manufacturing details, expiry date, etc.

Branding: A fascinating brand name is given to the product to differentiate it from

the other similar products in the market.

Pricing of the Product: The product is priced moderately keeping in mind the
value it creates for the customer and cost of production.

Promotion of the Product: Next step is to make people aware of the product or
service through advertisements.

Warehousing and Storage: The goods are generally produced in bulks and
therefore needs to be stored in warehouses before being sold in the market in small
quantities.

Selling and Distribution: To reach out to the consumers spread over a vast
geographical area, selling and distribution channels are to be selected wisely.

Transportation: Transportation means are decided for transfer of the goods from
the manufacturing units to the wholesalers, retailers and consumers.

Customer Support Service: The marketing team remain in contact with the
customers even after selling the product or service to know the customer‗s
experience, and the satisfaction derived.
The scope of marketing is determined by the marketing offering of an
organisation. Market offering is a combination of goods, services, ideas, persons,
places, information, etc. offered to a market to satisfy specific needs and wants of
people. Market offerings are not limited to physical goods. They also include
services like banking, air travel, hotel stay, tourism, etc. which are not tangible in
nature and can‗t be owned by the buyers.

Market offerings can also include ideas, persons, organisations, places, etc. as
discussed below:
(i) Goods:
These include all the consumer and producer goods, i.e., vegetables, fruits, soft
drinks, cloth, bike, T.V., fridge, machinery, etc. which are bought and sold in the
market.

(ii) Services:
These consist of services of professionals like doctors, advocates, chartered
accountants, electricians, etc. and other services such as banking, insurance,
transport, etc. Marketing of services has become an important business activity
these days.

(iii) Ideas:
Certain ideas are also marketed such as ‗no smoking‗, protection of railways
property, pulse polio, etc. Target people are persuaded through advertisements,
street plays and other techniques to follow such ideas.

(iv) Persons:
We observe marketing of persons also. For example, in an election campaign, a
candidate is marketed and voters are persuaded to vote for him.

(v) Organisations:

Many organisations including social, political, religious, educational, etc. market

themselves to build up their reputation and to make people aware about their
activities.
(vi) Places:

The marketing of places is also a common feature of the day. Tour and travel
agencies induce people to visit various tourist and health resorts, such as Pink City
(Jaipur), Taj Mahal (Agra), Kashmir, Europe, etc. It is also known as destination
marketing.

Definition of 'Marketing Mix'

Definition:
The marketing mix refers to the set of actions, or tactics, that a company uses to
promote its brand or product in the market. The 4Ps make up a typical marketing
mix - Price, Product, Promotion and Place. However, nowadays, the marketing mix
increasingly includes several other Ps like Packaging, Positioning, People andeven
Politics as vital mix elements.
Price: refers to the value that is put for a product. It depends on costs of
production, segment targeted, ability of the market to pay, supply - demand and a
host of other direct and indirect factors. There can be several types of pricing
strategies, each tied in with an overall business plan. Pricing can also be used a
demarcation, to differentiate and enhance the image of a product.

Product: refers to the item actually being sold. The product must deliver a
minimum level of performance; otherwise even the best work on the other
elements of the marketing mix won't do any good.

Place: refers to the point of sale. In every industry, catching the eye of the
consumer and making it easy for her to buy it is the main aim of a good
distribution or 'place' strategy. Retailers pay a premium for the right location. In
fact, the mantra of a successful retail business is 'location, location, location'.
Promotion: this refers to all the activities undertaken to make the product or
service known to the user and trade. This can include advertising, word of mouth,
press reports, incentives, commissions and awards to the trade. It can also include
consumer schemes,direct marketing, contests and prizes.
The Five Marketing Concepts Described

In marketing, businesses will design strategies that satisfy customers‗ needs,

increase sales, maximize profit and beat their competition. That is a nice truth and
statement, but many might ask, ―what philosophy is the best for a company in
setting marketing strategies?‖
Well, in this article we will discuss 5 different concepts of marketing that each
have a specific function in a holistic marketing strategy. The concepts are:

 The Production Concept

 The Product Concept
 The Selling Concept
 The Marketing Concept
 The Societal Marketing Concept
Now, you might be wondering what each of those entails and before you get the
cart before the horse, let‗s break down each of these marketing concepts in detail.
We might even find some strong examples and trends of usage throughout history!
Let‗s dive in!

The five basic marketing concepts are a key part of putting together any new
marketing campaign. Here‗s what you need to know.

THE PRODUCTION CONCEPT

The production concept is the most operations-oriented than any of the other
marketing concepts on this list. It speaks to the human truth that we prefer products
that are easily available and inexpensive.
This concept was founded during the production era of early Capitalism in the mid-
1950s. During that era, businesses concerned themselves primarily with
production, manufacturing, and efficiency issues. This is also the time when the
―Says Law‖ was created exciting the idea of supply and demand.

The basic idea of this concept is that businesses will want to produce widely cheap
products in maximum volumes to maximize profitability and scale. Businesses
assume that consumers are primarily interested in product availability and low
prices while customer‗s needs might not be fully addressed.
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.
The problem with this concept is that businesses run the danger of not creating
quality products and might have customer service problems with impersonal
production. An example of this is the use of developing country to output cheaper
products in higher quantities. Another historical example is Ford automobiles that
manufactured a ton of cars through its assembly line but all came out the same
without customizations or user input.
THE PRODUCT CONCEPT

The product concept is not so much about the production and business output but
focuses more on the customer.

Potential customers favor products that offer quality, performance, or innovative

features.

This marketing concept believes in potential customers and how their brand loyalty
is closely tied to options of products, the quality of those products and the benefits
they get from the product and the business they invest in.
This is seen most commonly with our obsession with Apple products and looking
forward to their new gadgets and features upon launch!

In this marketing concept, businesses will concentrate on making superior products

and improving them over time. The problem is many businesses do not balance the
need for a product all while realizing what the marketing needs. There is a fine line
between focusing on the customer and still defining your role and leadership in the
industry.
THE SELLING CONCEPT

The selling concept is the bread and butter of marketing efforts as it believes that
people will not buy enough of a business‗s product so businesses need to persuade
them to do so.
Of course, in today‗s marketing, we know that selling is not the way to full
marketing success. We more so find this marketing concept popular in the days of
WWII where there was aggressive advertising to promote people to buy bonds and
different products.

This concept puts a lot of power into the hands of a business who has a whole plan
to effectively stimulate more buying with its potential customers. A lot of the time
we also see this action used when a business has to deal with overcapacity and
needing to sell what they make rather than what the market needs or wants.

Businesses that choose to use this marketing concept must be good at finding
potential customers and emotionally sell them on the benefits of their ―not needed
product.‖

THE MARKETING CONCEPT

The marketing concept is the concept of competition. It is a marketing concept that
believes that the success of a business depends on the marketing efforts that deliver
a better value proposition than its competitors.
This concept focuses on the needs and wants of target marketing as well as
delivering value better than its competition. Through marketing, it‗s your goal to
be the preferred option compared to your competitors. Competitive advantage is
key!
We find typically this in the 1950s era of companies trying to carve themselves out
in the industry. We also can look at modern-day competition between Pepsi and
Coke who sell similar items but their value propositions are completely different!

Pepsi: Focuses on winning over the younger generations

Coke: Focuses on winning over everyone in a more holistic approach!

The marketing concept has evolved into a fifth and more refined company
orientation: the societal marketing concept.

THE SOCIETAL MARKETING CONCEPT

The societal marketing concept is the most progressive and modern-day applicable
marketing mindset to have. It is a marketing concept that believes in giving back to
society by producing better products that help the world be a better place.
This orientation arose as some questioned whether marketing and businesses are
addressing the massive problems society has like environmental deterioration,
resource shortages, population growth, poverty, and social disruption.

A business in today‗s world will need to ask itself the following question in
relation to this marketing concept: A re businesses that create products people love
acting in the best long-run interests of consumers and society?

For example, McDonald‗s and other fast-food restaurants and not really getting
this ―societal marketing thing…‖ Most fast-food companies offer tasty but
unhealthy food. (The bane of our existences)
The food typically will have high fat content and will then supplement those meals
with fries, pies and soda which also are not healthy choices either. The food is then
wrapped in convenient packing which most times ends up on the ground
somewhere as waste.

Now, I love McDonald‗s food and a lot of people enjoy what fast-food chains offer
therefore satisfying consumer wants but at what cost? These companies, although
making customers happy, may be hurting consumer health and causing
environmental problems.
 Marketing Environment
Definition: The Marketing Environment includes the Internal factors
(employees, customers, shareholders, retailers & distributors, etc.) and the
External factors( political, legal, social, technological, economic) that surround
the business and influence its marketing operations.

Some of these factors are controllable while some are uncontrollable and
require business operations to change accordingly. Firms must be well aware
of its marketing environment in which it is operating to overcome the negative
impact the environment factors are imposing on firm‟s marketing activities.The
marketing environment can be broadly classified into three parts

1. Internal Environment – The Internal Marketing Environment includes all the

factors that are within the organization and affects the overall business operations.
These factors include labor, inventory, company policy, logistics, budget, capital
assets, etc. which are a part of the organization and affects the marketing decision
and its relationship with the customers. These factors can be controlled by the firm.
2. Microenvironment- The Micro Marketing Environment includes all those
factors that are closely associated with the operations of the business and
influences its functioning. The microenvironment factors include customers,
employees, suppliers, retailers & distributors, shareholders, Competitors,
Government and General Public. These factors are controllable to some extent.
 These factors are further elaborated:

 Customers– Every business revolves around fulfilling the customer’s needs and
wants. Thus, each marketing strategy is customer oriented that focuses on
understanding the need of the customers and offering the best product that fulfills
their needs.
 Employees– Employees are the main component of a business who
contributes significantly to its success. The quality of employees depends on
the training and motivation sessions given to them. Thus, Training &
Development is crucial to impart marketing skills in an individual.
 Suppliers– Suppliers are the persons from whom the material is purchased
to make a finished good and hence are very important for the organization. It
is crucial to identify the suppliers existing in the market and choose the best
that fulfills the firm‗s requirement.
 Retailers & Distributors– The channel partners play an imperative role in
determining the success of marketing operations. Being in direct touch with
customers they can give suggestions about customer‗s desires regarding a
product and its services.
 Competitors– Keeping a close watch on competitors enables a company to
design its marketing strategy according to the trend prevailing in the market.
  Shareholders– Shareholders are the owners of the company, and every firm
has an objective of maximizing its shareholder‗s wealth. Thus, marketing
activities should be undertaken keeping in mind the returns to shareholders.
 Government– The Government departments make several policies viz.
Pricing policy, credit policy, education policy, housing policy, etc. that do
have an influence on the marketing strategies. A company has to keep track
on these policies and make the marketing programs accordingly.
 General public– The business has some social responsibility towards the
society in which it is operating. Thus, all the marketing activities should be
designed that result in increased welfare of the society as a whole.3. Macro
Environment-The Macro Marketing Environment includes all those factors
that exist outside the organization and can not be controlled. These factors
majorly include Social, Economic, Technological Forces, Political and Legal
Influences. These are also called as PESTLE framework.

The detailed description of Macro factors is given below:

 Political & Legal Factors– With the change in political parties, several changes
are seen in the market in terms of trade, taxes, and duties, codes and practices,
market regulations, etc. So the firm has to comply with all these changes and the
violation of which could penalize its business operations.
 Economic Factors– Every business operates in the economy and is affected by the
different phases it is undergoing. In the case of recession, the marketing practices
should be different as what are followed during the inflation period.
 Social Factors– since business operates in a society and has some
responsibility towards it must follow the marketing practices that do not
harm the sentiments of people. Also, the companies are required to invest in
the welfare of general people by constructing public conveniences, parks,
sponsoring education, etc.
 Technological Factors– As technology is advancing day by day, the firms
have to keep themselves updated so that customers needs can be met with
more precision.
 Therefore, marketing environment plays a crucial role in the operations of a
business and must be reviewed on a regular basis to avoid any difficulty.

Why is green marketing important?

Our planet is facing a lot of threats among them air and water pollution, food
waste, plastic pollution, and deforestation. Chemicals manufactured by factories
can be found everywhere. To support the earth, many companies consider
producing their goods in an environmentally friendly manner. Moreover, the level
of ecological awareness among consumers is getting higher so people rather
purchase eco-friendly products although their price might be higher.

Many brands try their best to address the wishes of customers and have started the
production of such goods and respect our responsibilities as residents of this planet.
Green marketing has a positive influence on the health of people and the
cleanliness of the environment. This type of marketing entails every stage of a
business, from packaging to public relations.

Let‗s walk you through the benefits of this approach to explore this topic in more
detail before implementing it into your business.

Benefits of Green Marketing

With green marketing, companies have the great opportunity to change our planet
for the better and support people who are aware of the situation and try to help the
environment. By creating sustainable products, companies want to reduce the
negative impact of waste products on our nature. Going green enables you to win
the trust and loyalty of the concerned customers. It helps you:

 stand out in the increasingly competitive environment;

 reduce the negative impact of the production on the environment;
 save energy, reduce the use of natural resources and carbon footprint;
 produce recyclable products;
 improve the credibility of a certain brand;
 enter a new audience segment;
 ensure long-term growth;
 implement innovations;
 obtain higher revenue.
It‗s not enough just to know about the benefits of green marketing since you
should also be aware of the strategies. Luckily, nowadays there are many ways to
go green. Let‗s review them right away.

4 Green Marketing Strategies

You can find a lot of strategies related to green marketing that can help you create
a sustainable brand to help our planet. So let‗s review some of them.

1. Sustainable design. It‗s not just about a recycling logo on your product
packaging, it‗s about a full life cycle of the product in mind. You should pay
attention to the details: the sources of your materials, the workers involved
in the process. Especially, your company should control the amount of waste
generated and the way your products are packaged and delivered. You have
to consider a lot of things that have an impact on our environment when
designing for sustainability.
2. Responsibility. If you‗re giving a thought to going green, your brand should
be ready for a profound change. Green marketing is about becoming
conscious of pollution. To prove the sincerity of your intentions, rethink
your company in terms of ecological and social responsibility and show
customers that you care about our planet.
 3. Green pricing. Environmentally friendly products are considered to have a
high value due to the increased cost of sustainable design. However, despite
the high price, customers are still willing to pay. So if you charge high prices
for your eco products, ensure to communicate the specifics to prove that
your goods are worth the price you‗re asking for. Keep in mind that the
greater your mission, the greater your opportunity to gain exposure for your
brand‗s goods.
4. Sustainable packaging. The excessive use of plastic is the number one
reason for the pollution of our planet. According to Greenpeace, 8.3 billion
tonnes of plastic has been produced since the 1950s and only around 9% of
this plastic has been recycled. Nowadays consumers are more responsible
and try to avoid plastic packaging. That‗s why it‗s advisable to create
recycled or no-plastic packaging for your brand.
Now that you know some of the strategies, it‗s time to proceed to the ideas.

6 Green Marketing Ideas

1. Use recycled materials

2. Consider using bulk email service
3. Upgrade your equipment and vehicles
4. Highlight that your company is eco-friendly
5. Invest in social media marketing
6. Support environmental initiatives
Sustainable brands admit that environmental protection empowered their
companies to obtain even more revenue and a wider customer base. Yet it‗s not
that easy to become a company friendly to our environment. You should be ready
to utilize green marketing ideas and invest more funds than you expect to get such
a long-awaited profit. Below you‗ll find great ideas to implement if going green is
your aim.

Use recycled materials

Try your best to use recycled materials and reduce the consumption of virgin
products. Recycling reduces refining and processing of raw materials which causes
substantial air and water pollution. It also helps save energy and reduce greenhouse
gas emissions.

Let‗s take Allégorie, for example. The brand uses recycled apple and mango peels
to create textiles through eco-friendly processes.

Consider using bulk email service

Newsletters give you an incredible opportunity to reach your target

audience without any necessity in printing promotional flyers. It enables you to
save trees. Besides, email marketing is more effective in obtaining feedback from
customers about your campaigns.

With SendPulse, you can send the necessary number of email campaigns to your
customer base. You can inform your audience about your decision to produce
goods safe for our environment. Use our drag and drop editor to create your unique
emails.
Upgrade your equipment and vehicles

If you have enough resources, it would be great to allocate some of them to buy
new equipment and vehicles. It‗s advisable to change to electrical models and
reduce the level of carbon your company produces. The vehicles you usually use to
deliver your products have an impact on our environment. Due to this fact, many
brands prefer to use fuel-efficient vehicles. Don‗t forget to include your logo on
such a car.

Highlight that your company is eco-friendly

If your brand incorporates eco-friendly practices among them using energy-

efficient office equipment, collaborating with vendors that prioritize sustainability,
or developing an in-house recycling program for paper and electronics, tell people
about it. Some customers prefer to purchase green products, so it‗s necessary to
inform them about your practices. It will give them a wider choice of products and
an opportunity to select the best.For example, on the website of Dr. Scholl's Shoes,
a shopper can find all the necessary information about the brand‗s sustainability.
Invest in social media marketing

Since social media marketing is more environmentally friendly and nowadays isn‗t
less popular than offline marketing, it would be a great step to invest in it to reach
your customers with your innovative ideas and eco-friendly products.For example,
The Body Shop‗s campaigns against animal testing through its Instagram account.

Support environmental initiatives

Some brands make donations to support our planet. Some of them even create
special foundations and charities. Donating funds allows your company to support
environmental initiatives, make our planet a better place, and as a result gain
credibility and trust. People Tree, a brand founded in 1991 and known for its
clothes from environmentally-friendly materials, supports various initiatives. The
company has the People Tree Foundation, an independent charity aimed at
promoting environmental justice. With the help of this foundation, People Tree
tries to protect our planet and develop awareness about the issues that threaten it.

So now let‗s see how famous brands implement some of these ideas.
 UNIT-2

MARKET SEGMENTATION ,TARGETING, POSITIONING

Identification of market segments, consumer & institutional
corporate clientele, Segmenting consumer markets ,segmentation
basis, Evaluation & selection of target markets, Positioning
significance, Developing & communicating a postioning strategy

Market segmentation is an increasingly important part of a strong marketing strategy and can
make all the difference for companies in competitive market landscapes, such as e-commerce.

When up against a range of online competitors, effective communication is the best way to
differentiate your business. Market segmentation offers an opportunity to pinpoint exactly what
messaging will drive your customers to make a purchase.

The 4basic types of market segmentation are:

1.DemographicSegmentation
2.PsychographicSegmentation
3.GeographicSegmentation
4. Behavioral Segmentation

The 4 types of market segmentation with examples

The purpose of market segmentation is to identify different groups within your target
audience so that you can deliver more targeted and valuable messaging for them.

There are four main customer segmentation models that should form the focus of any marketing
plan.For example, the four types of segmentation are Demographic, Psychographic Geographic,
and Behavioral. These are common examples of how businesses can segment their market by
gender, age, lifestyle etc.

Let‟s explore what each of them means for your business and your market segmentation
strategy.
 1. Demographic segmentation: The who
Demographic segmentation might be the first thing people think of when they hear „market
segmentation‟. This is perhaps the most straightforward way of defining customer groups, but it
remains powerful. Demographic segmentation looks at identifiable non-character traits such as:

 Age
 Gender
 Ethnicity
 Income
 Level of education
 Religion
 Profession/role in a company

For example. demographic segmentation might target potential customers based on their
income, so your marketing budget isn‟t wasted directing your messaging at people who likely
can‟t afford your product.

Luxury goods manufacturer Montblanc worked with Yieldify to present a selection of offers
across their website. One sought to raise conversions using a Father‟s Day deal that offered a
free gift to those spending over £200 – an amount that acknowledged the spending
expectations of Montblanc‟s target audience and saw a +118% uplift in conversions for those
targeted.

Another offer was aimed specifically at corporate gift buyers – a market segment that Montblanc
particularly appeals to – and resulted in a +30% uplift for that segment.

Market Segmentation isn‟t just about your business reaching customers more effectively – it‟s
also about those customers seeing messaging that is more relevant to them!
 2. Psychographic segmentation: The why
Psychographic segmentation is focused on your customers‟ personalities and interests. Here we
might look at customers and define them by their:

 Personality traits
 Hobbies
 Life goals
 Values
 Beliefs
 Lifestyles

Compared to demographic segmentation, this can be a harder set to identify. Good research is
vital and, when done well, psychographic segmentation can allow for incredibly effective
marketing that consumers will feel speaks to them on a much more personal level.

In our experience working with luxury resort business Omni Hotels & Resorts, for example, were
aware that a big sector of the company‟s target audience was always keen to get the very best
price they could. By targeting a notification campaign specifically towards comparison shoppers,
Omni Hotels & Resorts achieved a 39% conversion rate uplift.

3. Geographic segmentation: The where

By comparison, geographic segmentation is often one of the easiest to identify, grouping
customers with regards to their physical location. This can be defined in any number of ways:

 Country
 Region
 City
 Postal code

For example, it‟s possible to group customers within a set radius of a certain location – an
excellent option for marketers of live events looking to reach local audiences. Being aware of
your customers‟ location allows for all sorts of considerations when advertising to consumers.

Using Yieldify‟s tools, an online shoe store could show different products depending on where
the visiting customer was based: wellington boots for someone in the countryside, pavement-
friendly trainers for a city-dweller, strappy sandals to resort visitors, and so on!

In large nations like the United States, customers could be presented with options that match
with local weather patterns. Geographical identification is an important part of seasonal
segmentation, which allows businesses to market season-appropriate products to customers.
Some recent examples of proper geographic segmentation came from the response by e-
commerce businesses to the coronavirus pandemic. During lockdown stages, many businesses
shifted their focus to local communities to highlight how their services could still be accessed
online.

Conversely, as public spaces began to open up again purely e-commerce brands had to shift
their marketing plans to maintain the levels of business they had seen over the lockdown period.

4. Behavioral segmentation: The how

Behavioral segmentation is possibly the most useful of all for e-commerce businesses. As with
psychographic segmentation, it requires a little data to be truly effective – but much of this can
be gathered via your website itself. Here we group customers with regards to their:

 Spending habits
 Purchasing habits
 Browsing habits
 Interactions with the brand
 Loyalty to brand
 Previous product ratings

All of these are datasets that can be harvested from a customer‟s usage of your website. At
Yieldify, we utilize behavioral segmentation to deliver highly relevant and targeted
campaigns based on a number of behavioral patterns:

 Number of sessions to your website

 Number of pages visited
 Time spent on site
 URLs visited
 Page types visited
 Shopping cart value
 Campaign history
 Referral source
 Exit intent
 Inactivity, and more.

For example, we can distinguish between a first-time visitor and someone who‟s already been on
your site multiple times but haven‟t purchased. Based on this behavioral data, we can tailor our
messaging accordingly:

First time visitor: Hey, learn about our latest collection!

Returning visitor: Join our loyalty program and start saving!
Working with online wine club Vinomofo, we used behavioral segmentation to target three
distinct audiences: new visitors, returning visitors, and returning clients.

One of the best examples of this type of segmentation is showing new visitors a $15 incentive in
exchange for joining the community. Returning visitors who had already subscribed but have not
redeemed their coupon yet were reminded on their first order incentive. Whereas returning
customers saw a campaign about Vinomofo‟s premium services.

This targeted approach focused on purchasing habits reached 34.02% conversion rate uplift with
new and 29.24% CR uplift with returning visitors!

Institutional Clients means U.S. registered investment companies, major U.S. commercial banks,
insurance companies, pension funds or substantially similar financial institutions which as part of
their ordinary business operations purchase or sell Financial Assets and make use of custodial
services in the applicable jurisdiction or market.

Institutional Clients means U.S. registered investment companies, or major, U.S.-based

commercial banks, insurance companies, pension funds or substantially similar domestic or foreign
financial institutions which, as a substantial part of their business operations, purchase or sell
securities and make use of custodial services. Sample 1 Sample 2 Sample 3 Based on 8 documents
Save Copy

Institutional Clients. : means corporate entities specially approved by the SICAV and
subscribing i) for their own account or ii) on behalf of individuals within the framework of a collective
savings scheme or any comparable scheme.

Sample 1 Sample 2 Sample 3 Based on 3 documents Save Copy Examples of Institutional Clients in a
sentence In the case of the purchase or sale of securities the settlement of which occurs outside of
the United States or the receipt of which and payment therefor take place in different countries, such
securities shall be delivered and paid for in accordance with local custom and practice generally
accepted by Institutional Clients in the applicable country or countries. For purposes of this
Agreement, the term "Institutional Clients" means U.S. registered investment companies or major
U.S. commercial banks, insurance companies, pension funds or substantially similar institutions
which, as a part of their ordinary business operations, purchase or sell securities and make use of
global custody services.
For purposes of this Contract, "Institutional Clients" means U.S. registered investment companies or
major U.S. based commercial banks, insurance companies, pension funds or substantially similar
institutions which, as a part of their ordinary business operations, purchase or sell securities and
make use of global custody services.

For purposes of this Agreement, "Institutional Clients" means U.S. registered investment companies,
or major, U.S.-based commercial banks, insurance companies, pension funds or substantially similar
financial institutions which, as a substantial part of their business operations, purchase or sell
securities and make use of custodial services.

Our Corporate & Institutional Clients business serves the needs of corporations and institutional
clients, mainly in Switzerland. Our Corporate & Institutional Clients business serves large corporate
clients, small and medium-sized enterprises, institutional clients, external asset managers, financial
institutions and commodity traders. As of 31 December 2018, Citigroup was managed pursuant to
the following segments: Global Consumer Banking, Institutional Clients Group and
Corporate/Other.B.9Profit forecast or estimateNot Applicable. For purposes of this Agreement,
"Institutional Clients" means U.S. registered investment companies, or major, U.S.-based commercial
banks, insurance companies, pension funds or substantially similar domestic or foreign financial
institutions which, as a substantial part of their business operations, purchase or sell securities and
make use of custodial services.

Citi Research is part of the Citi Institutional Clients Group ("ICG"). The Private Banking division
comprises the Wealth Management Clients and Corporate & Institutional Clients businesses.

Related to Institutional Clients

Institutional pharmacy means the physical portion of an institutional facility that is engaged in the
compounding, dispensing, and distribution of drugs, devices, and other materials, hereinafter
referred to as „drugs‟, used in the diagnosis and treatment of injury, illness, and disease and which is
permitted by the State Board of Pharmacy.

Institutional control means a legal or administrative action or requirement imposed on the Property
to minimize the potential for human exposure to Contamination or to protect the integrity of a
Remedy. Examples include deed notices, deed restrictions, and long-term site monitoring or site
security requirements.
Institutional use means use within the lines of, or on property necessary for the operation of
buildings such as hospitals, schools, libraries, auditoriums, and office complexes.

Institutional Controls or “ICs” shall mean Proprietary Controls and state or local laws, regulations,
ordinances, zoning restrictions, or other governmental controls or notices that: (a) limit land, water,
or other resource use to minimize the potential for human exposure to Waste Material at or in
connection with the Site; (b) limit land, water, or other resource use to implement, ensure non-
interference with, or ensure the protectiveness of the RA; and/or (c) provide information intended to
modify or guide human behavior at or in connection with the Site.

Institutional facility means any organization whose primary purpose is to provide a physical
environment for a patient to obtain health care services, including but not limited to a:

Institutional means land, buildings, structures or any part thereof used by any organization, group
or association for promotion of charitable, educational or benevolent objectives and not for profit or
gain;

Institutional Lender means one or more commercial or savings banks, savings and loan
associations, trust companies, credit unions, industrial loan associations, insurance companies,
pension funds, or business trusts including but not limited to real estate investment trusts, any other
lender regularly engaged in financing the purchase, construction, or improvement of real estate, or
any assignee of loans made by such a lender, or any combination of any of the foregoing entities.

Institutional Accredited Investor means an institution that is an “accredited investor” as defined in

Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.

Institutional Review Board or “IRB” means, in accordance with 45 C.F.R. Part 46, 21 C.F.R. part 56,
and other applicable regulations, an independent body comprising medical, scientific, and
nonscientific members, whose responsibility is to ensure the protection of the rights, safety, and well-
being of the Human Subjects involved in a study.

Institutional Investor means (a) any Purchaser of a Note, (b) any holder of a Note holding (together
with one or more of its affiliates) more than 5% of the aggregate principal amount of the Notes then
outstanding, (c) any bank, trust company, savings and loan association or other financial institution,
any pension plan, any investment company, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any
holder of any Note.
Institutional fund means a fund held by an institution exclusively for charitable purposes. The term
does not include:

Institutional Investor(s means any regulated investment company, segregated asset account,
foreign investment company, common trust fund, group trust or other investment arrangement,
whether organized within or without the United States of America.

Institutional Accredited Investor Certificate means a certificate substantially in the form of Exhibit
G hereto.

Professional Client means a client meeting the criteria laid down in Annex II;

Banking organization means a bank, trust company, savings bank, industrial bank, land bank, safe
deposit company, private banker, or any organization defined by law as a bank or banking
organization.

Investment Client means (i) any investment company registered as such under the Investment
Company Act, any series thereof, or any component of such series for which the Adviser acts as
investment adviser; or (ii) any private account for which the Adviser acts as investment adviser.

Provider Organization means a group practice, facility, or organization that is:

Business Relation means any current or prospective client, customer, licensee, or other business
relation of the Company Group, or any such relation that was a client, customer, licensee, supplier, or
other business relation within the six (6) month period prior to the expiration of the Employment
Period, in each case, to whom I provided services, or with whom I transacted business, or whose
identity became known to me in connection with my relationship with or employment by the
Company.

Investment Company Client means any Investment Company (or series thereof ) as to which the
Firm is an investment adviser or investment sub-adviser.

Educational institution means a preschool, a public or private elemen- tary or secondary school, an
institu- tion of undergraduate higher edu- cation, an institution of graduate high- er education, or an
institution of pro- fessional education, or an institution of vocational education, that operates a
program of scholarly research. To be in this category, a requester must show that the request is
authorized by and is made under the auspices of a qualifying institution and that the records are not
sought for commercial or private use, but are sought to further scholarly re- search.

Qualified Institutional Lender means each of the Initial Note Holders and any other U.S. Person that
is:

Authorized entity means a nonprofit organization or a governmental agency that has a primary
mission to provide specialized services relating to training, education, or adaptive reading or
information access needs of blind or other persons with disabilities;

Regulated investment company means regulated investment company as defined in section 851(a)
of the Internal Revenue Code or a fund of the regulated investment company as defined in section
851(g) of the Internal Revenue Code.

Local government entity means a county, incorporated city, independent school district, public
junior college district, emergency services district, other special district, joint board, or other entity
defined as a political subdivision under the laws of this state that maintains the capability to provide
mutual aid.

Managed care organization means an entity that (1) is under contract with the department to
provide services to Medicaid recipients and (2) meets the definition of “health maintenance
organization” as defined in Iowa Code section 514B.1.

Educational institutions means the state universi- ties, the regional universities, The Evergreen State
College, and the community colleges.

Top 4 Bases for Segmenting Consumer Market

The four bases for segmenting consumer market are as follows: A. Demographic
Segmentation B. Geographic Segmentation C. Psychographic Segmentation D.
Behavioural Segmentation.

A. Demographic Segmentation:
Demographic segmentation divides the markets into groups based on variables such as age,
gender, family size, income, occupation, education, religion, race and nationality.
Demographic factors are the most popular bases for segmenting the consumer group. One
reason is that consumer needs, wants, and usage rates often vary closely with the
demographic variables. Moreover, demographic factors are easier to measure than most
other type of variables.

1. Age:
It is one of the most common demographic variables used to segment markets. Some com-
panies offer different products, or use different marketing approaches for different age
groups. For example, McDonald‘s targets children, teens, adults and seniors with different
ads and media. Markets that are commonly segmented by age includes clothing, toys,
music, automobiles, soaps, shampoos and foods.

2. Gender:
Gender segmentation is used in clothing, cosmetics and magazines.

3. Income:
Markets are also segmented on the basis of income. Income is used to divide the markets
because it influences the people‘s product purchase. It affects a consumer‘s buying power
and style of living. Income includes housing, furniture, automobile, clothing, alcoholic,
beverages, food, sporting goods, luxury goods, financial services and travel.

4. Family cycle:
Product needs vary according to age, number of persons in the household, marital status,
and number and age of children. These variables can be combined into a single variable
called family life cycle. Housing, home appliances, furniture, food and automobile are few
of

the numerous product markets segmented by the family cycle stages. Social class can be
divided into upper class, middle class and lower class. Many companies deal in clothing,
home furnishing, leisure activities, design products and services for specific social classes.

B. Geographic Segmentation:
Geographic segmentation refers to dividing a market into different geographical units such
as nations, states, regions, cities, or neighbourhoods. For example, national newspapers are
published and distributed to different cities in different languages to cater to the needs of
the consumers.

Geographic variables such as climate, terrain, natural resources, and population density
also influence consumer product needs. Companies may divide markets into regions
because the differences in geographic variables can cause consumer needs and wants to
differ from one region to another.

C. Psychographic Segmentation:
Psychographic segmentation pertains to lifestyle and personality traits. In the case of
certain products, buying behaviour predominantly depends on lifestyle and personality
characteristics.

1. Personality characteristics:
It refers to a person‘s individual character traits, attitudes and habits. Here markets are
segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness,
etc. This type of segmentation is used when a product is similar to many competing
products, and consumer needs for products are not affected by other segmentation
variables.

2. Lifestyle:
It is the manner in which people live and spend their time and money. Lifestyle analysis
provides marketers with a broad view of consumers because it segments the markets into
groups on the basis of activities, interests, beliefs and opinions. Companies making
cosmetics, alcoholic beverages and furniture‘s segment market according to the lifestyle.

D. Behavioural Segmentation:
In behavioural segmentation, buyers are divided into groups on the basis of their
knowledge of, attitude towards, use of, or response to a product. Behavioural segmentation
includes segmentation on the basis of occasions, user status, usage rate loyalty status,
buyer-readiness stage and attitude.
1. Occasion:
Buyers can be distinguished according to the occasions when they purchase a product, use
a product, or develop a need to use a product. It helps the firm expand the product usage.
For example, Cadbury‘s advertising to promote the product during wedding season is an
example of occasion segmentation.

2. User status:
Sometimes the markets are segmented on the basis of user status, that is, on the basis of
non-user, ex-user, potential user, first-time user and regular user of the product. Large
companies usually target potential users, whereas smaller firms focus on current users.

3. Usage rate:
Markets can be distinguished on the basis of usage rate, that is, on the basis of light,
medium and heavy users. Heavy users are often a small percentage of the market, but
account for a high percentage of the total consumption. Marketers usually prefer to attract a
heavy user rather than several light users, and vary their promotional efforts accordingly.

4. Loyalty status:
Buyers can be divided on the basis of their loyalty status—hardcore loyal (consumer who
buy one brand all the time), split loyal (consumers who are loyal to two or three brands),
shifting loyal (consumers who shift from one brand to another), and switchers (consumers
who show no loyalty to any brand).

5. Buyer readiness stage:

The six psychological stages through which a person passes when deciding to purchase a
product. The six stages are awareness of the product, knowledge of what it does, interest in
the product, preference over competing products, conviction of the product‘s suitability,
and purchase. Marketing campaigns exist in large part to move the target audience through
the buyer readiness stages.
 Bases of Market Segmentation
Everything you need to know about the bases of market segmentation. Market
segmentation is based on the assumption that all the potential customers are not identical
and that the firm should address their needs with appropriate product Land other marketing
strategies or else should concentrate on only one single segment and tailor the strategy
accordingly.

Marketers establish the basis to segment the market.

There are several basis available for segmenting the market where marketers may use any
one or a combination of more than one basis to segment the market.

In this article we will discuss about the bases of market segmentation. Learn about:- 1.
Demographic Segmentation 2. Geographic Segmentation 3. Geodemographic
Segmentation 4. Psychographic Segmentation 5. Behavioural Segmentation.

The bases of market segmentation have gone a long way through different stages. It started
with demographic segmentation, as the data was easily available. Then it moved on to
Geographic segmentation, Geo-demographic segmentation, Psychographic Segmentation
and Behavioural Segmentation.

Bases of Market Segmentation: Demographic, Geographic, Geodemographic,

Psychographic and Behavioural Segmentation

Bases of Market Segmentation

As product markets tend to mature, customer needs often become more specialized.
Depending on the level of competition in the product market, segmentation is the natural
response of marketers to deal with the situation in market. Market segmentation has
become a norm today.

Market segmentation is based on the assumption that all the potential customers are not
identical and that the firm should address their needs with appropriate product Land other
marketing strategies or else should concentrate on only one single segment and tailor the
strategy accordingly.
Market segmentation simply means dividing up a market into distinct groups that-(i) have
common needs, and (ii) will respond similarly to a marketing action.
Segmentation process involves five distinct, steps:
1. Finding ways to group consumers according to their needs.
2. Finding ways to group marketing actions- usually the products offered- available to the
organization.
3. Developing a market-product grid to relate the market segments to the firm‘s
4. Selecting the target segments toward which the firm directs its marketing actions.
5. Taking marketing actions to reach target segments.
Though market segmentation is considered to be a natural process, yet there is always an
upper limit on consideration of the number of segments in the market. The hypotheses
which appears to be true also holds that as the market gets more and more segmented,
marketers‘ notion about their customers would get more and more clear and precise. But
such narrowly defined segments may leave fewer customers in the segment and the
segment may loose its shine for the marketers.
Obviously, one may get skeptical about the process of segmentation unless and until it
ensures that:
1. Individuals within the segments are similar in nature, having the same needs, attitudes,
interest and opinions.
2. Market segments differ from the population as a whole and segments are distinct from
other segments.
3. Such market segment is large enough to be financially viable to target with a separate
marketing campaign.
4. Market segment is reachable through some type of media or marketing communication
model.
As a first step, marketers establish the basis to segment the market. There are several bases
available for segmenting the market where marketers may use any one or a combination of
more than one basis to segment the market.
Base # 1. Demographic Segmentation:
Demographics are the statistical description of population characteristics in terms of age,
gender, income, education, family size and so on. People differ for their demographic
characteristics and marketers‘ use of these variables as segmentation basis is based on the
premise that people with different characteristics have different needs and in the case of a
product these differences may lead to behavioural differences as well.
Marketers need to focus more on some specific demographic groups and not all, as
mentioned already the group should be distinct for its behaviours. Companies develop
products and services to meet the needs of individual demographic segments and also tailor
their messages to those specific groups.
Market segmentation based on differences in population age recognizes that people in
different age groups seek different features or benefits of the product, choose different
brands and also process the information differently. Due to differences in their information
processing behaviour, marketers decide for using different promotional and advertising
approaches in terms of both message and media techniques.
Coco- Cola India (CCI) in an attempt to enter, understand and influence the daily lives of
its young consumers launched its brand-led mall hangout space – Coke Red lounge- in
Pune. The lounge offers music, movies, surfing on internet, console gaming and videos
piped in via a plasma-screen and the entire decor is in brand red colour. The purpose is to
get engaged with young consumers in India and offer them the safe hangout zone.
For a product, marketers may target children, young adults, adults, middle age grownups
and senior citizens, and each one of them belongs to certain chronological age group.
Though senior citizens belong to 60+ age group marketers, however, recognize sub-groups
within the senior citizen group and evolve more specific strategies particularly advertising
strategies to approach specific sub-group.
Marketers also keep track of the likely growth of population size of various age groups as a
major pointer to future growth patterns and the market size. It is, however, observed that
‗cognitive age‘ rather than the ‗chronological age‘ of a person is a better predictor both of
his purchase and communication behaviour. For example, despite belonging to different
age groups, the middle aged adult may appear similar to a young adult for his brand and
media choices.
Gender-wise market segmentation is relevant when for a product category men and women
differ for their purchase and purchase related behaviours.
First, there are certain gender specific products and their messages for these products are
targeted only for a particular gender, e.g. ads for after-shave lotion. The tone of the
message appeal may also differ for men and women.
Secondly, same products purchased for different reasons by men and women require
different advertising appeals to attract their attention.
Thirdly, in the same product category, men and women may seek different features, e.g.
deodorants, and these differences are taken care at the time of developing message content
and its execution.
Fourthly, men and women may differ for their influences on decision making for a product
purchase. Where men often are the prime purchasers in the case of automobiles, women
influence the decision making for the choice of colour and design. Therefore, advertisers in
their ad executions for a product prefer to include both men and women making joint
decisions.
Lastly, information processing differs between men and women. As compared to men,
women tend to go for more detailed information processing. Unlike women, men have
more dislike for celebrity endorsements.
Income level decides one‘s affordability for various goods categorized as necessities,
sundries or luxuries, and also one‘s sensitivity to price vis-a-vis the quality of the product.
The hypothesis is that income and consumer‘s price sensitivity is negatively correlated and
as income tends to increase consumer looks forward to more quality purchases as against
cost saving purchases.
Marketers, therefore, decide about targeting different income groups and accordingly vary
the message content of ads, with less or more emphasis on savings in the product price.
Media and programme preferences also vary for different income groups. While targeting
specific income groups marketers also consider changing patterns of saving and
expenditure in the light of growth of dual income households.
Base # 2. Geographic Segmentation:
Depending on their area of location, consumers are often found to have differences in their
consumption behaviour. Marketers divide the markets into different geographical units at
national, regional. State, local or neighbourhood level. These locations differ for their
spread as well as for the extent and types of differences and the level of complexity.
The message and media strategies, therefore, differ for each of the location. Small firms
targeting a local area employ local media as against national marketers who develop
specific advertising and marketing programmes for specific regions of the country. The
multinational firm operating in different nations requires greater adaptations to suit the
differences in culture and language.
Base # 3. Psychographic/Lifestyle Segmentation:
Information about consumers‘ psychographics or lifestyle factors adds richness to the
demographic information because it attempts to explain that why demographically alike
people buy different products or require different message appeals to approach them.
Psychographic profiles are prepared on the basis of patterns of responses that emerge from
people‘s activities, interests and opinions called as AIO inventory.
With the help of various market analysis techniques marketers identify such groups which
exhibit unique lifestyle patterns and thus generate market segments based on differences in
their lifestyle. Lifestyle as a segmentation variable is found useful mainly for product
categories where user‘s self/image is important. When the differences in lifestyle are
correlated with the consumers‘ product, brand and/or media usage, it allows for a fine-
tuning of marketing strategies, particularly media and message strategies.
Base # 4. Segmentation Based on Product Usage:
The frequency of product use, i.e. the usage rate, could be heavy, medium or light and the
markets may be segmented to align the product with the given usage rate for the product.
Market research provides that out of the total customers, light and medium users are 70 to
80 per cent and constitute only 20 to 30 per cent of the product demand.
Whereas heavy users are only 20 to 30 per cent of the population, but for their usage rate
they take 70 to 80 per cent of the product demand. This is known as 80- 20 rule for product
demand and marketers often use it to build demand for their product through appropriate
marketing and communication programmes targeted at different user groups.
There may be different usage occasions for the product and consumers seek different
benefits in different usage occasions. Ad campaigns promote the different use occasions
for the product to make the consumer learn about new uses for the product. This is done to
push forward the product usage rate.
Base # 5. Segmentation Based on Brand Loyalty:
Market for the product may differ on the basis of user‘s status also. There are always some
users and some non-users of the product category. The users of the product are of .various
types-category users (NCU), brand loyal users (BL), frequent brand switchers (FBS), other
brand switchers (OBS), or other brand loyal (OBL). The potential brand purchaser belongs
to any of these five groups which are mutually exclusive and also define the potential
customers of the product.
New category users (NCU) do not always provide good sales potential for the product as it
all depends upon the level of awareness about the product in the market. Among the
category users those who buy the brand on a regular basis are referred to as brand loyal.
Frequent brand switchers of the product hold moderately favorable attitude towards the
brand.
Together these two types represent the brand sale in the market. The non-loyal group of
consumers, FBS and OBS, often seek the least expensive or the most convenient brand
selection. They can be made to increase their proportion of product purchase by creating
ads that tend to reinforce the loyalty of such purchasers.
However, marketers do not keep much faith in other brand loyal (OBL) category of buyers
as they are likely to hold a negative or neutral attitude towards the advertiser‘s brand. The
group of other loyal buyers tends to avoid advertising for other brands; they do not seek
information and need solid reasons to get convinced about the brand. This makes the entire
exercise of attracting them to a trial purchase costly and difficult. However, for their
tendency to be loyal, if once attracted, there is a greater chance of their becoming loyal
buyers of the brand.
Base # 6. Segmentation Based on Benefits:
Markets are also segmented for the benefits that the customer seeks in product use. The
rationale for a benefit based market segmentation lies in the fact that products are actually
the bundle of benefits and various products available in the market serve not all but some
benefits to the customers. Different customers seek different benefits from the product;
marketers choose some specific products and communicate those benefits using specific
promotional programmes.
Advertising programmes differ for the use of different media and copy elements. Russell
Haley carried out a benefit based segmentation of the toothpaste market and identified four
market segments, viz. sensory segment, sociable, decay prevention and independent
segment. Each segment had its preferred brands of toothpaste serving the required benefits.
Details on various benefit based segments in the toothpaste market.
Base # 7. Segmentation Based on Attitudes:
There are different attitude groups in the market. There may be some who feel enthusiastic
about the product, while others may just hold a positive attitude but less excitement about
the product. There are some who seem to be neutral, some as indifferent and some with a
negative attitude for the product.
At times marketers decide about targeting specific attitude groups and carry out required ad
campaigns to sustain the declining product sale or to give a further boost to it. Honda, the
manufactures of motor bikes in Japan, once initiated aggressive ad campaigns to change
potential customers‘ negative attitude that motorbikes are used by bad people. Through an
appropriate ad campaign saying ‗one meets good people while riding on motorbikes‘,
people were made to feel positive towards motorbikes.
The rest is the success story of Honda‘s motorbikes. Marketer, however, needs to know
that for a given product it is the positive attitude of the people which forms the basis to the
product sale and not simply the familiarity and knowledge about the brand. There are
certainly many purchase situations where attitude formation does not really take place
before the actual purchase like in the case of low involving products.
To select a particular segmentation basis, it can be noted that the geographic specifications
of the market is simple and easy to apply, but it confines the target selection process to
geographical boundaries only. Most commonly, markets are segmented logically on
demographic and/or psychographic basis to expect differences in behaviour.

However, the knowledge about potential customers‘ membership to a buyer group, viz.
NCU, BL, FBS, OBS or OBL brings more clarity to the target audience selection. The
overlapped area between the two circles, representing different market specifications in,
constitutes a clear representation of the target audience for the product. Otherwise, also if
not looking for the overlapped area, the understanding of the buyer status of targeted
audiences may help in sharpening of the strategies.
 Evaluating Target Markets
How to Evaluate Marketing Segments
Segmentation is an important marketing technique that helps you reach each group of
potential customers with an approach that appeals to them. Evaluating each segment
ensures that your company doesn't waste resources on segments that won't buy your
products. You have to match the characteristics of the marketing segment to the
qualities of your product and the abilities of your company to achieve your sales
performance objectives.

Market Potential
You can evaluate the market potential of a segment by looking at the number of potential
customers in the segment, their income and the number of people in the segment who
need the kind of product you offer. A market participant is one who is going to buy such
a product, and the total number of participants times their purchases forms the total
market. A market participant has to need the product, have the ability to pay the price of
the product and has to want to buy the product. Evaluating how many such people are in
each segment lets you gauge the potential market.

Sales Potential

The sales potential is the share of the potential market of a segment that your company
expects to achieve. You can estimate your company's share based on your performance in
other markets, or you can build up your share by asking how much of your product you
expect an average customer of a segment to buy and multiplying by the total number of
customers. The result of this evaluation gives you an idea of how valuable each segment
is to your company.

Competition

A key factor in the evaluation of each segment is the competitive situation. If the total
sales of existing suppliers are below the market potential, then you can achieve sales
without taking business away from competitors. If the sales of your competitors are close
to the market potential, then any sales you make will result in fewer sales for them. This
means you will have to lower your prices or spend more money on promotion to achieve
your sales potential, and it makes the segment less valuable for your company.
Cost

Some markets cost a lot of money to service and this affects the value of the segment. If
you physically have to deliver large items over long distances, the freight costs will be
high and the resulting prices may put your product out of the reach of the customers'
income range. If the cost of the promotional campaign you think is required to introduce
your product to a particular segment is high in relation to the expected sales, then the
value of the segment is low. Your evaluations identify the segments which will be the
most valuable for your company.

POSITIONING SIGNIFICANCE

What is Positioning and Why is it Important?

Although many business intelligence (BI) managers see themselves as technologists
first, unless they understand the soft skills of sales, marketing, and communication, they
won't succeed professionally or make good on their organization's investments in BI. One
skill BI managers need to perfect is how to position their BI programs to their core
audiences of executive sponsors and business users.

Somewhat ironically, BI marketers at companies like Microsoft, SAS and SAP aren’t
doing a good job of positioning their products in the minds of their target audience – you.
In a future blog, I will show you how all the vendors in the BI market are positioned. While
my blogs are written for the B2B software marketer because that’s what I know, most of
the advice is directly applicable to your situation. When it’s not, I’ll point that out to you.

Positioning is a mental space in your target audience’s mind that you can own with an
idea that has compelling meaning to the recipient. It’s in this mental space where your
service, product, solution or company’s most important benefit and the customer’s most
important need meet, and hopefully form a meaningful relationship.

Positioning is like story telling. Done well it can engross you. Done poorly and you stop
reading. It is the most important aspect of B2B software marketing because it is the
foundation for everything you do in marketing. Effectively done, positioning quickly tells
the recipient of your marketing message why they should care about your service,
product, solution, technology or company.

In Crossing the Chasm, Geoffrey Moore writes, "Positioning is the single largest influence
on the buying decision." Moore describes a position as a buyer's shorthand for the best
solution for a particular problem.
Effective positioning makes prospects want to know more
Good positioning entices a potential prospect to learn more about your offering. It also
serves as the first level of qualification. Ideally you want a recipient to react to your
message by thinking either “that’s me,” or “that’s not me.”
In order to get that reaction, and to gain access to that mental space in your target
market’s mind, you need a thorough understanding of what I call the 3Cs – your
customer, channel (how you sell) and competition. For more information about the
research you need to do to position effectively, read my blog about the 3Cs of Successful
Positioning.
BI directors who market their programs internally don’t need to spend much time – if any
– on researching the channel or the competition. You do need to understand user
problems, and explain to them how you solve one of their pressing business problems.

Once you have done your research, you need to document your findings in a “Rational
document” which is used as a reference by stakeholders providing input and feedback
during the positioning process. Later your rationale document will be used by writers who
will execute your message strategy in marketing communications.

I have used terminology that I will be using regularly in future blogs about positioning in
the analytics and business intelligence market. Here’s what I mean when I refer to:

Positioning: a mental space in your target audience’s mind that you can own with an idea
that has compelling meaning to the recipient. It’s in this mental space where your solution
to the recipient’s problem meet and form a meaningful relationship. This means you need
to know your customers and their problems as well as you know your own product.
Positioning statement: a short, declarative sentence that addresses the target market’s
most pressing problem by stating a benefit. In 12 words or less, not counting your
company or product name, a positioning statement makes it clear why the target market
should care about your claim and take action. Your positioning statement becomes the
central theme for all your marketing communications.
Support points: three or four sentences that unfold your story in more detail and explain
how you deliver on the promise made in the positioning statement. “That’s interesting, tell
me more,” is how you want your target audience to respond to your positioning
statement. Good support points will pique their interest.
Support points provide a structure for product or service demonstrations. While the
positioning statement articulates a high-level, abstract benefit, the claims made in the
support points should be readily demonstrable; that is, in just a few steps, you should be
able to show how the product or your service delivers concrete benefits. Under each
support point, you can drill down into as much detail as needed to prove your claims.

Message strategy: a positioning statement and three to four support points. The
combination can be extremely detailed and is like a recipe for all marketing
communications. Follow the recipe and you get a good dish…. a story! Your message
strategy makes it easier to deliver the same message in all your marketing
communications, which is one of the keys to claiming a position in your market.
Rationale document: summarizes the research you’ve gathered about the 3C’s – your
customer, competition and channel. Your rationale document summarizes the evidence
that supports your proposed message strategy. It documents customer problems, how
competitors are positioned, and any challenges in the channel.
Positioning strategy: includes your message strategy and a rationale document that
presents the research that helped you converge on your message strategy. Your
understanding of the 3C’s leads you to a message strategy that is unique, important and
believable.
Good positioning never gets old or stale
To claim a position requires patience and conviction while others in your company may
want to try something new. Stay the course! You need to stick with your positioning
statement for at least 18 months, and ideally several years, if not longer.

Your positioning statement becomes the central theme for all marketing from your web
site to collateral materials to press releases. But no matter how clever or compelling your
positioning statement is, it won’t stick unless is executed consistently, and repeatedly
over a long period of time. Remember, the longer you stick with your positioning strategy,
the more likely you will be to claim that mental space in your target audience’s mind.

How to develop a market positioning strategy

One of the first important steps for any fledgling business is to identify your target market.
Once you have done so it‘s equally important to develop a strategy to position your brand
and solidify its identity, setting itself apart from competitors and the industry noise,
influencing the way your target audience perceives you.

If you want your business to be viewed in a particular way, it‘s vital that you convey the
right messages about your product(s) or service(s).

The concept of market positioning first came to light in 1969 by Jack Trout and was later
popularised when Trout and co-author Al Ries published ‗Positioning – The Battle for
Your Mind‘ in 1981.

Both Trout and Ries describe market positioning strategy as a battle to create a unique
impression in a customer‘s mind so that they associate something distinctly desirable with
your brand.The core elements of competitive market positioning

A market position strategy can be distilled into the following key steps below:

o Pen a positioning statement

This should outline the basis of the identity you have determined for your business.

o Critique your identity against competitors

Compare and contrast the differences between your own messaging strategy across all
types of communication channels and those of your competitors to outline gaps and
opportunities to exploit within your new messaging. Determine what you‘re good at and
where your weaknesses lie in contrast with the competition. It‘s best to focus on your
strengths and how those talents can fill gaps in the market left by competitors.
o Outline your existing market position
In order to suitably compete for your market share you need to determine your existing
market position and how your new positioning sets you apart from the rest.

o Understand the conditions of the marketplace

By understanding the positioning of your competitors you can better comprehend the
overall conditions of the market and how much influence they currently have on your
target demographic.

o Develop a unique market position

Once you‘ve identified the ideal market position for your brand the goal then is to
develop a unique impression of your business in the mind of your competitors, distinct
from other companies within your space. This exercise will enable you to outline who
you are as a company and more importantly, who you are not. Subsequently your main
task here will be to ascertain how best to cater to the customer base that will be best
served by working with you.

o Qualitative and quantitative testing of your market positioning

Once you‘ve outlined the final concept of your brand positioning, the final key step is to
test your own model on your industry and target audience. The methodology of your
testing should feature a blend of qualitative and quantitative research: from focus groups
and in-depth one-on-one interviews to surveys and polls that can be sent out en-masse.
Based on the response of these tests, your market positioning strategy can then be
solidified across all internal and external communications.

In summary, your brand‘s optimal market position provides the overarching focus for
ongoing marketing and advertising efforts that turns prospects into customers and
customers into advocates.

The key to any successful business is the ability to make well informed business decisions.
To get a real picture of how your market sector is developing and stay abreast of key
legislation affecting your business, sign up to the Business & IP Centre‘s ‗Introduction to
using the Business & IP Centre‘ workshop. The workshop will highlight and provide
practical guidance in using key British Library sources to give you the confidence to make
the right choices for your growing company.
 UNIT-3

PRODUCT & PRICING ASPECTS Productmix, Product life

cycle,Obsolescence, Pricing,Objectives of pricing, Methods of
pricing, Selecting the final price, Adopting price, Intiating pricing
cuts, Intiating price increases, Responding to competitors price
changes
Product Mix
Definition: The Product Mix also called as Product Assortment, refers to the
complete range of products that is offered for sale by the company. In other words,
the number of product lines that a company has for its customers is called as
product mix.

The Product Line refers to the list of all the related products manufactured or
marketed by a single firm. The number of products within the product line are called
as the items, and these might be similar in terms of technology used, channel
employed, customer‟s needs and preferences or any other aspect. For example, the
product lines of ITC are FMCG, Hotels, Paper Board and Packaging, Agribusiness.

The product mix has four dimensions: Breadth, Length, Depth, and Consistency.
The Breadth of a product mix 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.
In the example below, there are 4 product lines that show the width of the ITC.

The Length of a Product mix refers to the number of items in the product
mix. In the example below the length is 11. As in the foods line, the number of
items is 3, in cigarettes is 3 and so on.. On adding all the items, we get the
length of a product.
 The Depth of a product mix refers to the variants of each product in the product
line. For example, in the example below, curry, pastes, biryanis, conserves, etc.
shows the depth of the foods product line.

The Consistency of a product mix shows the extent to which the product lines are closely
related to each other in terms of their end-use, distribution requirements, production
requirements, price ranges, advertising media, etc. In the above example, it is clear that
ITC‘s product lines are less consistent as these perform different functions for the
buyers.These terms in a product assortment help the firm to take a decision regarding the
addition or removal of the product items in the product lines. Generally, the firms
introduce a new product item into the existing product line as it is easy to gain the
customer support for the new product due to the customer‘s familiarity with the existing
product line.
What Is the Product Life Cycle?

The product life cycle is the process a product goes through from when it is first introduced
into the market until it declines or is removed from the market. The life cycle has four
stages - introduction, growth, maturity and decline.

While some products may stay in a prolonged maturity state, all products eventually phase
out of the market due to several factors including saturation, increased competition,
decreased demand and dropping sales.

Additionally, companies use PLC analysis (examining their product's life cycle) to create
strategies to sustain their product's longevity or change it to meet with market demand or
developing technologies.

4 Stages of the Product Life Cycle

Generally, there are four stages to the product life cycle, from the product's development to
its decline in value and eventual retirement from the market.

1. Introduction

Once a product has been developed, the first stage is its introduction stage. In this stage,
the product is being released into the market. When a new product is released, it is often a
high-stakes time in the product's life cycle - although it does not necessarily make or break
the product's eventual success.

During the introduction stage, marketing and promotion are at a high - and the company
often invests the most in promoting the product and getting it into the hands of consumers.
This is perhaps best showcased in Apple's (AAPL) - Get Apple Inc. (AAPL)
Report famous launch presentations, which highlight the new features of their newly (or
soon to be released) products.

It is in this stage that the company is first able to get a sense of how consumers respond to
the product, if they like it and how successful it may be. However, it is also often a heavy-
spending period for the company with no guarantee that the product will pay for itself
through sales.

Costs are generally very high and there is typically little competition. The principle goals
of the introduction stage are to build demand for the product and get it into the hands of
consumers, hoping to later cash in on its growing popularity.

2. Growth

By the growth stage, consumers are already taking to the product and increasingly buying
it. The product concept is proven and is becoming more popular - and sales are increasing.

Other companies become aware of the product and its space in the market, which
isbeginning to draw attention and increasingly pull in revenue. If competition for the
product is especially high, the company may still heavily invest in advertising and
promotion of the product to beat out competitors. As a result of the product growing, the
market itself tends to expand. The product in the growth stage is typically tweaked to
improve functions and features.

As the market expands, more competition often drives prices down to make the specific
products competitive. However, sales are usually increasing in volume and generating
revenue. Marketing in this stage is aimed at increasing the product's market share.

3. Maturity

When a product reaches maturity, its sales tend to slow or even stop - signaling a largely
saturated market. At this point, sales can even start to drop. Pricing at this stage can tend to
get competitive, signaling margin shrinking as prices begin falling due to the weight of
outside pressures like competition or lower demand. Marketing at this point is targeted
at fending off competition, and companies will often develop new or altered products to
reach different market segments.

Given the highly saturated market, it is typically in the maturity stage of a product that less
successful competitors are pushed out of competition - often called the "shake-out point."
In this stage, saturation is reached and sales volume is maxed out. Companies often begin
innovating to maintain or increase their market share, changing or developing their product
to meet with new demographics or developing technologies.

The maturity stage may last a long time or a short time depending on the product. For some
brands, the maturity stage is very drawn out, like Coca-Cola (KO) - Get Coca-Cola
Company Report .

4. Decline

Although companies will generally attempt to keep the product alive in the maturity stage
as long as possible, decline for every product is inevitable.

In the decline stage, product sales drop significantly and consumer behavior changes as
there is less demand for the product. The company's product loses more and more market
share, and competition tends to cause sales to deteriorate.

Marketing in the decline stage is often minimal or targeted at already loyal customers, and
prices are reduced.

Eventually, the product will be retired out of the market unless it is able to redesign itself
to remain relevant or in-demand. For example, products like typewriters, telegrams and
muskets are deep in their decline stages (and in fact are almost or completely retired from
the market).

Planned Obsolescence in Marketing

Planned obsolescence is a method of stimulating consumer demand by designing
products that wear out or become outmoded after limited use. It describes a strategy of
deliberately ensuring that the current version of a given product will become out of date
or useless within a known time period. It is a policy of planning or designing a product
with an artificially limited useful life so that it becomes obsolete (i.e., unfashionable, or no
longer functional) after a certain period of time. This proactive move guarantees that
consumers will seek replacements in the future, thus bolstering demand. The rationale
behind this strategy is to generate long-term sales volume by reducing the time between
repeat purchases. It is the deliberate shortening of a lifespan of a product to force
consumers to purchase replacements.
Planned obsolescence is the calculated act of making sure the existing version of a
product will become dated or useless within a given time frame. Producers that pursue
this strategy believe that the additional sales revenue it creates more than offsets the
additional costs of research and development, and offsets the opportunity costs of
repurposing an existing product line. In a competitive industry, this is a risky policy,
because consumers may decide to buy from competitors instead if they notice the
strategy.

Planned obsolescence can be achieved in many ways, including:

 Using relatively unreliable parts in a product, so it mechanically fails within a relatively

predictable period of time.
 Using software to program a product, like a printer, to fail after a set period of time or
number of actions, even if mechanically and structurally the product is fine.
 Using clever marketing and an insignificant upgrade in a newer product to get you to
discard the „uncool‟ old one even if it works just fine.

Obsolescence can be achieved through introducing a superior replacement model, or by

intentionally designing a product to cease proper function within a specific window.
Planned obsolescence tends to work best when a producer has at least an oligopoly.
Before introducing planned obsolescence, the producer has to know that the consumer is
at least somewhat likely to buy a replacement from them. It is a business strategy in
which the obsolescence of a product is planned and built into it from its conception, by
the manufacturer. In these cases of planned obsolescence, there is an information
asymmetry between the producer, who knows how long the product was designed to
last, and the consumer, who does not.

Planned obsolescence means manufacturers deliberately designing products to fail

prematurely or become out-of-date, often to sell another product or an upgrade – a
practice that is barred in some countries. When a market becomes more competitive,
product lifespans tend to increase. Some manufacturers also restrict consumers‟ ability
to repair their products – by using digital locks or copyrighted software, using
incompatible screws or gluing components together, or by refusing to share their repair
manuals. For example, when Japanese vehicles with longer lifespans entered the
American market in the 1960s and 1970s, American carmakers were forced to respond
by building more durable products.
 5 Main Objectives of Pricing Policy | Business Management

Objectives of a properly planned pricing policy should be logically related to overall

managerial goals.

(i) Achieving a Target Return on Investments:

This is the most important objective which every concern wants to achieve. The objective
is to achieve a certain rate of return on investments and frame the pricing policy in order to
achieve that rate. For example, the concern may have a set target of 20% return on
investment and 10% return on investments after taxes. The targets may be a short term
(usually for a year) or a long term. It is advisable to have a long term target.

Sometimes, it is observed that the actual profit rates may be more than the target return.
This is because the targets already fixed are low and new opportunities and demand of the
product exceeding the return rate already fixed.

(ii) Price Stability:

This is another important objective of an enterprise. Stability of prices over a period
reflects the efficiency of a concern. But in practice, on account of changing costs from time
to time, price stability cannot be achieved. In the market where there are few sellers, every
seller wants to maintain stability in prices. Price is set by one producer and others follow
him. He acts as a leader in price fixation.

(iii) Achieving Market Share:

Market share refers to the share of the company in the total sales of the product in the
market. Some of the concerns when introduce their product in the competitive market want
to achieve a certain share in the market in the initial stages. In the long run the concern
may aim at achieving a sizeable portion of the market by selling its products at lower
prices.

The main objective of achieving larger share in the market is to enjoy more reputation and
goodwill among the people. The other consideration of widening the markets by lowering
prices is to eliminate competitors from the market.
It has been observed that companies may not like to increase the size of their share on
account of fear of Govt, intervention and control. General Motors, America, capturing
about 50% of the automobile market, passed through this situation. Some companies like
General Electric and Johns-Mauville preferred to have relatively small market say 20%
rather than 50%.

(iv) Prevention of Competition:

Modern industrial set up is confronted with cut throat competition. Pricing can be used as
one of the effective means to fight against the competition and business rivalries. Lesser
prices are charged by some firms to keep their competitors out of the market. But a firm
cannot afford to charge fewer prices over a long period of time.

(v) Increased Profits:

Maximisation of profits is one of the main objectives of a business enterprise. A firm can
adopt such a price policy which ensures larger profits. However, such enterprises are also
expected to discharge certain social obligations also.

4 Types of Pricing Methods –

Explained!
An organization has various options for selecting a pricing method. Prices are
based on three dimensions that are cost, demand, and competition.

The organization can use any of the dimensions or combination of

dimensions to set the price of a product.

Figure-4 shows different pricing methods:

The different pricing methods (Figure-4) are discussed below;
Cost-based Pricing:
Cost-based pricing refers to a pricing method in which some percentage of
desired profit margins is added to the cost of the product to obtain the final
price. In other words, cost-based pricing can be defined as a pricing method
in which a certain percentage of the total cost of production is added to the
cost of the product to determine its selling price. Cost-based pricing can be of
two types, namely, cost-plus pricing and markup pricing.

These two types of cost-based pricing are as follows:

i. Cost-plus Pricing:
Refers to the simplest method of determining the price of a product. In cost-
plus pricing method, a fixed percentage, also called mark-up percentage, of
the total cost (as a profit) is added to the total cost to set the price. For
example, XYZ organization bears the total cost of Rs. 100 per unit for
producing a product. It adds Rs. 50 per unit to the price of product as‟ profit.
In such a case, the final price of a product of the organization would be Rs.
150.

Cost-plus pricing is also known as average cost pricing. This is the most
commonly used method in manufacturing organizations.

In economics, the general formula given for setting price in case of

cost-plus pricing is as follows:
P = AVC + AVC (M)

AVC= Average Variable Cost

M = Mark-up percentage
AVC (m) = Gross profit margin

Mark-up percentage (M) is fixed in which AFC and net profit margin (NPM)
are covered.

AVC (m) = AFC+ NPM

ii. For determining average variable cost, the first step is to fix prices. This is
done by estimating the volume of the output for a given period of time. The
planned output or normal level of production is taken into account to
estimate the output.

The second step is to calculate Total Variable Cost (TVC) of the output. TVC
includes direct costs, such as cost incurred in labor, electricity, and
transportation. Once TVC is calculated, AVC is obtained by dividing TVC by
output, Q. [AVC= TVC/Q]. The price is then fixed by adding the mark-up of
some percentage of AVC to the profit [P = AVC + AVC (m)].

iii. The advantages of cost-plus pricing method are as follows:

a. Requires minimum information

 b. Involves simplicity of calculation

 c. Insures sellers against the unexpected changes in costs

 The disadvantages of cost-plus pricing method are as follows:

 a. Ignores price strategies of competitors

 b. Ignores the role of customers

 iv. Markup Pricing:

 Refers to a pricing method in which the fixed amount or the percentage
of cost of the product is added to product‟s price to get the selling price
of the product. Markup pricing is more common in retailing in which a
retailer sells the product to earn profit. For example, if a retailer has
taken a product from the wholesaler for Rs. 100, then he/she might add
up a markup of Rs. 20 to gain profit.

 It is mostly expressed by the following formulae:

 a. Markup as the percentage of cost= (Markup/Cost) *100
 b. Markup as the percentage of selling price= (Markup/ Selling
Price)*100

 c. For example, the product is sold for Rs. 500 whose cost was Rs. 400.
The mark up as a percentage to cost is equal to (100/400)*100 =25. The
mark up as a percentage of the selling price equals (100/500)*100= 20.
 Demand-based Pricing:
 Demand-based pricing refers to a pricing method in which the price of a
product is finalized according to its demand. If the demand of a product
is more, an organization prefers to set high prices for products to gain
profit; whereas, if the demand of a product is less, the low prices are
charged to attract the customers.

 The success of demand-based pricing depends on the ability of

marketers to analyze the demand. This type of pricing can be seen in the
hospitality and travel industries. For instance, airlines during the period
of low demand charge less rates as compared to the period of high
demand. Demand-based pricing helps the organization to earn more
profit if the customers accept the product at the price more than its
cost.

 Competition-based Pricing:
 Competition-based pricing refers to a method in which an organization
considers the prices of competitors‟ products to set the prices of its own
products. The organization may charge higher, lower, or equal prices as
compared to the prices of its competitors.

 The aviation industry is the best example of competition-based pricing

where airlines charge the same or fewer prices for same routes as
charged by their competitors. In addition, the introductory prices
charged by publishing organizations for textbooks are determined
according to the competitors‟ prices.

 Other Pricing Methods:

 In addition to the pricing methods, there are other methods
that are discussed as follows:
 i. Value Pricing:
 Implies a method in which an organization tries to win loyal customers
by charging low prices for their high- quality products. The organization
aims to become a low cost producer without sacrificing the quality. It
 can deliver high- quality products at low prices by improving its
research and development process. Value pricing is also called value-
optimized pricing.

 ii. Target Return Pricing:

 Helps in achieving the required rate of return on investment done for a
product. In other words, the price of a product is fixed on the basis of
expected profit.

 iii. Going Rate Pricing:

 Implies a method in which an organization sets the price of a product
according to the prevailing price trends in the market. Thus, the pricing
strategy adopted by the organization can be same or similar to other
organizations. However, in this type of pricing, the prices set by the
market leaders are followed by all the organizations in the industry.

 iv. Transfer Pricing:

 Involves selling of goods and services within the departments of the
organization. It is done to manage the profit and loss ratios of different
departments within the organization. One department of an
organization can sell its products to other departments at low prices.
Sometimes, transfer pricing is used to show higher profits in the
organization by showing fake sales of products within departments.

SETTING THE PRICE – Let us now attempt to understand the process of how firms
set prices. When does a firm set prices? A firm must set a price for the first time when
it develops a new product, when it introduces its regular product into a
new distribution channel or geographical area, and when it enter bids on new contract
work. Is Setting prices easy ?. It involves making a number of guesses about the
future. You would want to Know how , an organization should proceed as follows:

1. Identify the target market segment for the product or service, and decide what
share of it is desired and how quickly.
2. Establish the price range that would be acceptable to occupants of this segment.
If this looks unpromising, it is still possible that consumers might be educated to
accept higher price levels, though this may take time.
3. Examine the prices (and costs if possible) of potential or actual competitors.
4. Examine the range of possible prices within different combinations of the
marketing mix (e.g. different levels of product quality or distribution methods).
 5. Determine whether the product can be sold profitably at each price based upon
anticipated sales levels (i.e. by calculating break-even point) and if so, whether
these profits will meet strategic objectives for profitability.
6. If only a modest profit is expected it may be below the threshold figure
demanded by an organization for all its activities. In these circumstances, it may
be necessary to modify product specifications downwards until costs are
reduced sufficiently to produce the desired profit.

An organization goes through the following steps in setting its pricing policy

1) Selecting the pricing Objective –

You would agree that the foremost step is identifying pricing objectives. The company
first decides where it wants to position its marketing offering. The clearer a firm‟s
objectives, the easier it is to set price. What are pricing objectives ? A company can
pursue any of five major objectives through pricing: survival, maximum current profit,
maximum market share, maximum market skimming, or product-quality leadership.

Companies pursue survival, as their major objective if they are plagued with
overcapacity intense competition, or changing consumer wants. As long as prices
cover variable costs and some fixed costs, the company stays in business. Survival is
a short-run objective: in the long run, the firm must learn how to add value or face
extinction.
What happens when companies wants to maximize profit ? Many companies try to
set a price that will maximize current profits. They estimate the demand and costs
associated with alternative prices and choose the price that produces maximum
current profit, cash flow or rate of return on investment. This strategy assumes that
the firm has knowledge of its demand and cost functions; in reality these are difficult
to estimate.

Some companies want to maximize their market share. They believe that a
higher sales volume will lead to lower unit costs and higher long-run profit. They set
the lowest price, assuming the market is price sensitive. The following conditions
favor setting a low price. The market is highly price sensitive, and a low price
stimulates market growth. Production and distribution costs fall with accumulated
production experience; A low price discourages actual and potential competition
Companies unveiling a new technology favor setting high prices to “skim” the
market. Sony is a frequent practitioner of market skimming pricing.

Whatever the specific objective, businesses that use price as a strategic tool will profit
more than those who simply let costs or the market determine their pricing

2) Determining the demand –

Following the identification of objectives , the firm needs to determine demand. Each
price will lead to a different level of demand and therefore have a different impact on
a company‟s marketing objectives. In the normal case, demand and price are
inversely related: the higher the price, the lower the demand .In the case
of prestige goods, the demand curve sometimes slopes upward. E.g. Perfume
Company raised its price and sold more perfume rather
than less! Some consumers take the higher price to signify a better product. However
if the price is too high, the level of demand may fall.

Do you agree that generally speaking customers are most price-sensitive to products
that cost a lot or are bought frequently? They are less price-sensitive to low cost
items or items they buy infrequently. They are also less price-sensitive when price is
only a small part of the total cost of obtaining, operating and servicing the product
over its lifetime. A seller can charge a higher price than competitors and still get the
business ifthe company can convince the customer that it offers the lowest total cost
of ownership (TCO).

The process of estimating demand therefore leads to

i. Estimating Price sensitivity of market
ii. Estimating and analyzing demand curve
iii. Determining price elasticity of demand.
3. Estimating Costs –
Demand sets a ceiling on the price the company can charge for its product. Can you
discuss this statement in detail. Costs set the floor. The company wants to charge a
price that covers its cost of producing, distribution and selling the product, including a
fair return for its effort and risk.

Do you know different costs of organization? How are these costs related with
pricing? A company‟s cost take two forms, fixed and variable. Fixed costs (also
known as overhead) are costs that do not vary with production or sales revenue. A
company must pay bills each month for rent heat, interest, salaries and so on. ,
Regardless of output. Variable costs vary directly with the level of production. These
costs tend to be constant per unit produced. They are called variable because their
total varies with the number of units produced. Total costs consists have the sum of
the fixed and variable costs for any given level of production. Average cost is the cost
per unit at the level of production; it is equal to total costs divided by production.

To price intelligently, management needs to know how its costs vary with different
levels of production.

Do you want to know what the Japanese do?

The Japanede Method – TARGET COSTING – Costs change as a result of

a concentrated effort by designers, engineers and purchasing agents to reduce them.
The Japanese use a method called target costing. They use market research to
establish a new product‟s desired functions. Then they determine the price at which
the product will sell, given its appeal and competitor‟s prices. They deduct the
desired profit margin from this price, and this leaves the target cost they must
achieve.

4. Analyzing competitor‘s costs, prices and offers –

You would agree that analyzing competitor‟s costs, prices and offers is also important
factor in setting prices . Within the range of possible prices determined by market
demand and company costs, the firm must take the competitor‟s costs, prices and
possible price reactions into account.

While demand sets a ceiling and costs set a floor to pricing, competitors‟ prices
provide an in between point you must consider in setting prices. Learn the price and
quality of each competitor‟s product or service by sending out comparison shoppers
to price and compare. Acquire competitors‟ price lists and buy competitors‟ products
and analyze them. Also ask customers how they perceive the price and quality of
each competitor‟s product or service. If your product or service is similar to a major
competitor‟s product or service, then you will have to price close to the competitor or
lose sales. If your product or service is inferior, you will not be able to charge as much
as the competitor. Be aware that competitors might even change their prices in
response to your price.

5. Selecting a pricing method –

Do you Know any pricing methods ? As consumers have you been able to distinguish
between pricing strategies ? Let us have a look at various pricing methods.

WHAT ARE VARIOUS PRICING METHODS?

There are three pricing methods that can be employed by a firm:

1. Cost Oriented Pricing
2. Competitor Oriented Pricing
3. Marketing Oriented Pricing

Cost Oriented Pricing

Companies often use cost oriented pricing methods when setting prices. Two
methods are normally used

Full cost pricing – Can you attempt to explain this? What does a firm do here? Here
the firm determines the direct and fixed costs for each unit of product. The first
problem with Full-cost pricing is that it leads to an increase in price as sales fall. The
process is illogical also because to arrive at a cost per unit the firm must anticipate
how many products they are going to sell. The is an almost impossible prediction.
This method focuses upon the internal costs of the firm as opposed to the prospective
customers‟ willingness to pay.

Direct (or marginal) Cost Pricing – Do you have some idea about this? This involves
the calculation of only those costs, which are likely to increase as output increases.
Indirect or fixed costs (plant, machinery etc) will remain unaffected whether one unit
or one thousand units are produced. Like full cost pricing, this method will include a
profit margin in the final price. Direct cost approach is useful when pricing services for
example. Consider aircraft seats; if they are unused on a flight then the revenue is
lost. These remaining seats may be offered at a discount so that some contribution is
made to the flight expenses. The risk here is that other customers who paid the full
price may find out about the discounted offer and complain. Direct costs then, indicate
the lowest price at which it is sensible to take business if the alternative is to let
machinery, aircraft seats or hotel rooms lie idle.
Competition-based approach

Going-Rate Pricing – In going-rate pricing, the firm bases its price largely on
competitors‟ prices, with less attention paid to its own costs or to demand. The firm
might charge the same, more, or less than its major competitors. Where the products
offered by firms in a certain industry are very similar the public often finds difficulty in
perceiving which firm meets there needs best. In cases like this (for example in
financial services and delivery services) the firm may attempt to differentiate on
delivery or service quality in an attempt to justify a higher selling price.

Competitive Bidding – Many contracts are won or lost on the basis of competitive
bidding. The most usual process is the drawing up of detailed specifications for a
product and putting the contract out for tender. Potential suppliers quote a price,
which is confidential to themselves and the buyer. In sealed-bid pricing (i.e. only
known to client and not to the other parties tendering for the service), firms bid for
jobs, with the firms basing the price on what it thinks other firms will be bidding rather
than on its own costs or demand. All other things being equal the buyer will select the
supplier that offers the lowest price.

Marketing Oriented Pricing

The price of a product should be set in line with the marketing strategy. The danger is
that if price is viewed in isolation (as would be the case with full cost pricing) with
no reference to other marketing decisions such as positioning, strategic objectives,
promotion, distribution and product benefits. The way around this problem is to
recognize that the pricing decision is dependent on other earlier decisions in the
marketing planning process. For new products, price will depend upon
positioning, strategy, and for existing products price will be affected by strategic
objectives.

6. Selecting the final Price –

Pricing methods narrow the range from which the company must select its final price.
In selecting that price, the company must consider additional factors,
including psychological pricing, gain and risk pricing, the influence of other marketing
-mix elements on price, company -pricing policies, and the impact of price on other
parties.
 How to respond to competitor price changes without
starting a price war?

With the increased transparency in the market, pricing becomes a very

competitive game. All retailers are monitoring one another, and a single price
change can trigger a chain of price changes.

This is especially true for leading enterprise retailers, the one being
monitored by competitors. A small price change provokes main competitors
to follow. Within a day, the new status quo can become a few euros lower
than before.

So how can you create a sustainable setup that keeps you competitive yet
does not disrupt the market?

We have 3 tips on how you can make smart pricing decisions.

1 - Split competitors into different tiers

It is important to take a wide range of competitors into account. This

establishes a price benchmark, even if your main competitors are not selling
this product.

However, keep in mind you may not want to follow the price change of a
smaller competitor at the risk of pulling your major competitor (and the rest
of the market) down with you.

This can best be avoided by analyzing your competition and splitting it into
different tiers:

 Tier 1 competitors are major competitors. They generally decide the

pricing level and everybody follows.
  Tier 2 competitors have a proper shop (not the image you and major
competitors have)
 Tier 3 competitors are all other competitors selling the product

Once you split them into tiers, apply more sophisticated logic. For example:

 Tier 1 competitors: when one of my tier 1 competitors is priced lower I

do the same
 Tier 2 competitors: when at least two of my tier 2 competitors are
priced lower, then I follow.
 Tier 3 competitors: do not follow down, only up

If you sell products in a wide variety of categories, we‟d highly recommend

creating competitor tiers for each. For example, your competitor landscape
for high-end cameras is different than those for kitchen appliances.

2 - Accept a small pricing gap to avoid a race to the

bottom

A single euro difference can make a huge difference in terms of revenue

when comparing prices to that of your competitors. However, you do not
have to match the prices of every competitor.

Some example scenarios:

 For the tier 2 or 3 competitors be willing to accept that they are priced a
few euros or percentages lower than you. Your stronger brand should
be able to compensate for the difference. However, do lower your price
if the gap gets too large.
 Regarding competitors continuously undercutting you by a few euros or
cents, do not continue the pricing war and allow a small price gap.
Otherwise, within a few days, you will lose all the margins and the new
status quo is low.
3 - Think Of When To Price-up & Work Towards
Healthier Margins

When implementing dynamic pricing, most consider how to compete with

competitors when prices are going down. But, it is equally important to think
about scenarios where you have an opportunity to price-up.

If your competitors follow your prices down all the time, there is also a big
chance they will follow you up. For example, if there is only one other (tier 1)
competitor, and you are both priced on the same level, you can try to price-
up a few euros. There is a big chance that your competitor will follow your
pricing strategy.

You both remain equally competitive (so revenues will not drop that much)
but you will have a better margin.

In the blogpost related to “margin vs revenue: how to stay competitive and

profitable” there are more examples of how to price-up and increase
margins.

So... how do you implement such Logic?

We recently added new (beta) functionality to our pricing engine,

called market conditions. This allows you to select parts of your assortment
on both product assortment conditions as well as market conditions:

Product assortment conditions

The *if* statement that you are familiar with lets you select any product
characteristics. Either static parameters, like categories and brands, or more
dynamic parameters, like sales and stock levels.

Market conditions
An additional layer of conditions that allows you to select any combination of
market scenarios. There are 3 templates:

 When a certain number of competitors are present for that product

 When a certain number of competitors are lower/higher than my
current selling price
 When a min/max/avg/most-occuring price is lower/higher than my
selling price

The combination of product assortment and market conditions is very

powerful and enables you to outsmart competitors by tuning our repricing
engine. This allows you to follow your desired pricing strategy regarding any
subset of your assortment and in any market scenario.

The market conditions will allow you to implement the above tips. Moreover,
conditions allow you to create solutions for other dilemmas as described in
the “dilemma blogs”
 Price Adaptation Strategies and Marketing
Management

How should a company adapt prices to meet varying circumstances and opportunities?
The answer is agile price adaptation strategy. Price adaptation is the ability of a business
to change its pricing models to suit different geographic areas, consumer demands and
prevailing incomes.

Marketing plays a significant role in price adaptation because pricing strategy is one of
the four main components in determining product positioning, which is is how a company
chooses to present products to consumers and generate interest. The more adaptability a
business has, the better chance it has of appealing to more consumers.

Geographic Pricing and Marketing

Geographic pricing relates to how a business chooses to price its products within
different regions, as explained by Marketing91. This can mean different parts of a
particular state, country or even around the globe. In selecting its product prices for
different regions, a business also adapts its marketing strategies to fit those pricing
models.

For example, a company may increase its product prices in areas where median income
among consumers is high, and reduce its prices in areas where median income is low. A
business may also keep prices low as a means of generating product interest in areas of
the country outside its normal target market areas. This allows a company to spread
interest for its products across wider geographic areas and ultimately increase sales.

Offering Product Discounts

Adapting pricing models to include product discounts is a marketing strategy used to
attract bargain hunting consumers and to fend off new competitors attempting to enter
target market areas. Product discounts allow marketing management to create short
advertising campaigns to stimulate excitement over a company's brands and individual
product offerings. Business marketers can also use discounts to create consumer interest
in market areas with traditionally lower median incomes. This allows those consumers to
try products they might not otherwise be able to afford on a regular basis.

Managing Cost and Demand

The cost to create a company's products plays an integral part in how much adaptability
the business has with its product pricing, suggests NetMBA. Usually, goods with low
production costs have the largest price flexibility because the organization can accept
discounted retail prices and still turn a profit. Higher production costs leave less room for
a business to adjust its retail price and still recoup costs. To help with price flexibility,
marketing managers create advertising campaigns designed to stimulate demand for a
company's products. These campaigns emphasize a variety of product aspects to stimulate
consumer interest, including pricing points and attractive features.

Marketing Product Lines

Creating product lines composed of items with different features and target audiences
provides a business with a wide range of price adaptability. The business can create an
item to fit each target market area and assign a price to match the median incomes in
those areas. Marketing managers within the business can develop promotional campaigns
to emphasize the different strengths of these products to various target consumer groups.
For example, emphasizing the durability of items within a product line can appeal to
consumers who search for bargains, while pushing the high end features of products can
attract consumers who always purchase products from industry leaders.

Initiation Price Changes:

Companies are bound to face market situations where they are required to
initiate price changes. It means, either they are to cut the prices or increase
the present prices to survive, maintain status quo or further growth.
Initiating price changes involves two possibilities of price cuts and price
increases.

Initiating Price Cuts:

There are good many circumstances where a firm is to resort to price cuts.

There are genuine reasons for cutting prices

There are good many circumstances where a firm is to resort to price cuts.

There are genuine reasons for cutting prices:

First may be existence of excess capacity. In such situation the firm is badly
in need of additional business and cannot generate it through increased sales
efforts, product improvement or even price rise.
It may resort to aggressive pricing, but in initiating price out, the company
may trigger a price war. Second reason for initiating price cut is a drive to
dominate the market through lower costs.

Here, either the company starts with lower costs than its
competitors or it initiates price cuts in the hope of gaining the
market share and lower costs to price cutting policy involves the
following possible traps:
1. Low-quality trap:
Consumers will assume that quality is low.

2. Fragile-market share trap:

A low price buys market share but not market loyalty. The same customers
will shift to any lower- priced firm that comes along.

3. Shallow-pockets trap:
The higher priced competitors may cut their prices and may have longer
staying power because of deeper cash resources.

Initiating Price Increases:

Price increase is a source of maximising the profit or maintaining it if done
carefully. Say a company earns 3 percent profit on sales, and one percent
price increase will increase profits by 33 per cent if sales volume is not
affected.

The factors leading to price increase can be:

1. Increase in cost inflation. That is rising costs unmatched by productivity
gains squeeze profit margins and lead companies to regular rounds of price
increases. Companies often raise their by more than the cost hike, in
anticipation of further inflation or government price controls, in a practice
called anticipatory pricing.
2. Over demand can be another cause that leads to price increase. When the
company cannot supply all of its customers, it can raise its prices, ration or
cut supplies to customers or both.

The price can be increased by at least four ways:

1. Delayed quotation pricing:
Here, the company does not set final price until product is finished or
delivered. This pricing is prevalent in industries with long production lead
times like construction and heavy industrial equipments.

2. Unbundling:
The company under this plan maintains its price but removes or prices
separately one or more elements that were part of the former offer, such as
free delivery or installation.

Automobile companies, sometimes, add antilock brakes and passenger-side

air-bags as supplementary extras to their whiles.

3. Escalator clauses:
Under this, the company asks the customer to pay today‟s price and all or
part of any inflation increase that takes place before delivery. This hike based
on specified price index. These escalation clauses are quite common in
construction line whether it is a house or industrial project or air-craft and
ship building.

4. Reduction of discounts:
The company asks the sales force to offer its normal cash and quantity
discounts at reduced rate. To gain four such attempts, the company must
avoid looking like a price gouger. Companies also think of who will bear the
brunt of the increased prices.
It is so because, customer memories are long, and they can turn against the
company which is perceived as price gauger.

Reactions to Price Changes:

Naturally any price change provokes response or reaction from customers,
competitors, distributors and suppliers and even the government. Here, we
shall touch only the reactions of consumers and competitors.

Customer Reactions:
Consumers are more interested in knowing the cause or causes of price
change.

A price cut can be interpreted in several ways:

1. The item or product is about to be replaced by a new model.

2. The item is faulty and it is not selling well.

3. The firm‟s financial position is badly affected.

4. The price will come down further.

5. The quality has been reduced.

A price hike may have some positive meanings:

1. The items is „hot‟

2. It has a high value because of quality.

Competitor Reactions:
Competitors are most likely to react when the number of firms is few, the
product is homogeneous, and buyers are highly informed. Competitor
reactions can be a special problem when they have a strong value
proposition. The price hike them to take steps based on objectives of such
price hike where they will resort to advertising and product improving
efforts.

In case of price cuts, they have different interpretations:

1. That the company‟s trying to steal the market

2. That the company is doing poorly and trying to boost its sales

3. That company wants the whole industry to reduce prices to stimulate total
demand.

INITIATING PRICE CHANGES –INITIATE PRICE CUTS AND

INCREASES SUCCESSFULLY
In many cases, companies must initiate either a price cut or a price increase. But initiating
price changes should be done right to lead to success. Just initiating price changes without
considering possible buyer and competitor reactions can be a regretful mistake.

Initiating price cuts – Initiating price changes

Initiating price cuts may appear easier than imitating price changes. In fact, customer
response to price cuts is normally better than to price increases. On the other hand, price
cuts reduce the profit margin for the company. But what situations may lead a firm to
consider cutting its prices?
One such circumstance is excess capacity, which requires initiating price changes. Another
situation is falling demand in the face of strong price competition or a weakening
economy. In such cases, several options exist for the firm to choose from: it may
aggressively cut prices to boost sales and market share. But cutting prices is not always the
best option: This way of initiating price changes can easily lead to price wars as
competitors try to hold on to market share.

The company may also cut prices in a drive to dominate the market through lower costs.
Either the company starts with lower costs than its competitors, or it cuts prices in the hope
of gaining market share that will further cut costs through larger volume. An example for
this strategy of imitating price changes is the company Lenovo: it uses an aggressive low-
cost, low-price strategy to increase its market share of the PC market in developing
countries.

Initiating price increases – Initiating price changes

Initiating price increases can be a greater challenge than initiating price cuts, since it
often leads to displeased customers. However, a successful price increase can greatly
improve profits. For instance, if the company‘s profit margin is 3% of sales, a 1% price
increase will boost profits by 33% if the sales volume is unaffected. A major factor in price
increases is cost inflation.
Rising costs squeeze profit margins and lead companies to pass cost increases on to
customers. Another factor leading to price increases is over demand: when a company
cannot supply all that its customers need, it may raise its prices, ration products to
customers, or both. An example for this tactic of initiating price changes is the worldwide
oil and gas industry.

When raising prices, the firm must avoid being perceived as a price gouger. For instance,
in the face of constantly rising petrol prices, angry customers often accuse the major oil
companies of enriching themselves at the expense of consumers. And in fact, customers
have long memories, meaning that they will eventually turn away from companies or even
whole industries perceived as charging excessive prices. In the extreme, claims of price
gouging may even lead to increased government regulation.
In order to avoid these problems in initiating price changes, some techniques can be
applied. One is to simply maintain a sense of fairness surrounding any price increase. Price
increases should be supported by company communications telling customers why prices
are being raised. If there is no tangible reason for them, customers will not feel willing to
pay more. Also, wherever possible, the company should consider ways to meet higher
costs or demand without raising prices. For instance, more cost-effective ways to produce
or distribute the products could be the key to avoiding price increases. The company could
shrink the product or substitute less-expensive ingredients instead of raising the price. Or it
can unbundle its market offering, by removing features, packaging or services, and
separately pricing elements that were formerly part of the offer.

Of course, buyer reactions to price changes can be of quite diverse nature. They often
depend on the way of initiating price changes. Customer reactions to price changes are not
always straightforward: A price increase, which would normally lower sales, may have
some positive meaning for buyers. For instance, what would you think if Rolex raised the
price of a watch? It might be even more exclusive or better made. Similarly, a price cut in
the case of Rolex would rather indicate reduced quality and a tarnished brand luxury image
than that you get a better deal on an exclusive product.
Most important to know is that a brand‘s price and image are often very closely linked,
which is why initiating price changes must be done carefully. Especially a drop in price
can adversely affect how consumers view the brand.
UNIT-4
MARKETING COMMUNICATION
Communication process, Communication mix, Integrated marketing communication,
Managing advertising sales promotion, Pubic relation & direct marketing, Sales force,
Determining sales force site, Sales force compensation
Communication
Communications is fundamental to the existence and survival of humans as
well as to an organization. It is a process of creating and sharing ideas,
information, views, facts, feelings, etc. among the people to reach a common
understanding. Communication is the key to the Directing function of
management.

A manager may be highly qualified and skilled but if he does not possess good
communication skills, all his ability becomes irrelevant. A manager must
communicate his directions effectively to the subordinates to get the work done
from them properly.

Communications Process
Communications is a continuous process which mainly involves three elements
viz. sender, message, and receiver. The elements involved in the
communication process are explained below in detail:

1. Sender
The sender or the communicator generates the message and conveys it to the
receiver. He is the source and the one who starts the communication

2. Message
It is the idea, information, view, fact, feeling, etc. that is generated by the
sender and is then intended to be communicated further.

Browse more Topics under Directing

 Introduction, Meaning, Importance & Principles of Directing

 Elements of Direction
 Incentives
 Leadership
3. Encoding
The message generated by the sender is encoded symbolically such as in the
form of words, pictures, gestures, etc. before it is being conveyed.

4. Media
It is the manner in which the encoded message is transmitted. The message
may be transmitted orally or in writing. The medium of communication
includes telephone, internet, post, fax, e-mail, etc. The choice of medium is
decided by the sender.

Learn more about Types of Communication here in detail.

5. Decoding
It is the process of converting the symbols encoded by the sender. After
decoding the message is received by the receiver.

6. Receiver
He is the person who is last in the chain and for whom the message was sent by
the sender. Once the receiver receives the message and understands it in proper
perspective and acts according to the message, only then the purpose of
communication is successful.

7. Feedback
Once the receiver confirms to the sender that he has received the message and
understood it, the process of communication is complete.

8. Noise
It refers to any obstruction that is caused by the sender, message or receiver
during the process of communication. For example, bad telephone connection,
faulty encoding, faulty decoding, inattentive receiver, poor understanding of
message due to prejudice or inappropriate gestures, etc.

Importance of Communication
1. The Basis of Co-ordination
The manager explains to the employees the organizational goals, modes of
their achievement and also the interpersonal relationships amongst them. This
provides coordination between various employees and also departments. Thus,
communications act as a basis for coordination in the organization.

2. Fluent Working
A manager coordinates the human and physical elements of an organization to
run it smoothly and efficiently. This coordination is not possible without
proper communication.

3. The Basis of Decision Making

Proper communication provides information to the manager that is useful
for decision making. No decisions could be taken in the absence of
information. Thus, communication is the basis for taking the right decisions.

Learn more about Barriers of Communication here in detail.

4. Increases Managerial Efficiency

The manager conveys the targets and issues instructions and allocates jobs to
the subordinates. All of these aspects involve communication. Thus,
communication is essential for the quick and effective performance of the
managers and the entire organization.

5. Increases Cooperation and Organizational Peace

The two-way communication process promotes co-operation and mutual
understanding amongst the workers and also between them and
the management. This leads to less friction and thus leads to industrial peace in
the factory and efficient operations.

6. Boosts Morale of the Employees

Good communication helps the workers to adjust to the physical and social
aspect of work. It also improves good human relations in the industry. An
efficient system of communication enables the management to motivate,
influence and satisfy the subordinates which in turn boosts their morale and
keeps them motivated.
 MARKETING THEORIES – THE COMMUNICATIONS MIX
Visit our Marketing Theories Page to see more of our marketing buzzword
busting blogs.
The communications mix involves all the tools you use to
communicate with your customers or potential customers. This could
be through advertising, social media, product packaging, direct
marketing, websites, events, exhibitions – the list goes on!
Successful campaigns consider all elements of the communications mix. To see even
better results, you must effectively use all areas to create an integrated multi-channel
or omni-channel campaign.
What‘s the difference between the marketing communications mix and the marketing
mix?
They may both include mix in their names, and they do link together – but they are
actually very different tools.
On one hand, the Marketing Mix is used to shape brand strategies through factors
unique to each business (the 7 Ps – product, price, promotion, place, physical
evidence, people and process).
On the other hand, the Communications Mix defines the ways you
communicate with your customers, i.e. the tools you use.
Marketing communications tools
The promotional mix is made up of five elements, shown below:
1. Advertising (TV, radio, press, PPC)
Advertising covers all avenues where a business pays for their message to be
broadcast.
In 1922, the first radio advertisement was aired in New York, promoting apartments
in Jackson Heights. Video came next, but luckily, it didn‘t quite kill the radio star.
Instead, it became its own highly effective advertising tool, working harmoniously
alongside radio.
Television has mostly been confined to brands with deep pockets. However, with the
digital age came more affordable online tools such as PPC and social media
advertising.
Successful advertising campaigns can be emotive, creative, eye-catching, catchy,
musical, or even intentionally annoying (anything to grab attention!)
2. Direct marketing & digital marketing (email, social media, gamification, etc)
The emergence of digital didn‘t just bring social media and online shopping. It also
gave us a whole new way to do marketing. This way is significantly cheaper; and if
done correctly can be even more effective than broadcasting to the masses through
TV or radio.
One of the major benefits of direct marketing is its targeted approach. So, if you‘ve
done the best and most accurate market research on your customers, you‘ll know
exactly who to target. It‘s also attractive to marketers because its results can be
directly measured.
3. Public relations (PR)
Public relations turns brand messages into stories that appeal to the media and its
target audiences. It amplifies news, strategies and campaigns to create a positive
view of a company through partnerships with newspapers, journalists and other
relevant organisations.
But not everything can be shared via PR. The idea is to separate the stories they think
could be developed into an effective PR strategy. So, usually anything considered
too ‗salesy‘ is a no no. A great PR campaign revolves around a public interest,
current event or trend that can be connected to a product, service or brand.
4. Personal selling
Personal selling is, you guessed it, selling through a person (usually in a face-to-face
setting). This includes salespeople, representatives, brand ambassadors or even
influencers.
Using their experience, specialist knowledge and communication skills, their aim is
to inform and encourage customers to buy or try a product or service.
5. Sales promotion
Sale! 50% off selected lines!
Using various online and offline outlets, sales promotion creates limited time deals
or promotions on products or services in order to increase short-term sales. It can
include sales, coupons, contests, freebies, prizes and product samples.
When conducting a sales promotion, it's important to consider:

 how much it costs and whether the volume of sales will make up for the lost revenue
 whether it will build loyalty or just attract one-off purchasers
 if the promotion fits with the brand's image

Loyalty cards are a more recent addition to the sales promotion sphere,
adding important elements such as customer retention and brand loyalty. Discounts
or special offers reward loyal and repeat purchasers. It's also a great way to gather
valuable customer data on purchasing habits and behaviour.
Extras
Social media
A relatively new tool, and always expanding with „the next big thing‟, social
media has changed the way we communicate. As part of the Direct
Marketing section of the communications mix, it can be used to advertise,
retain and gain customers, gather feedback about products or services and
as a customer service tool.
Sponsorship
Just about anything can be sponsored. Sponsorship is something you see a
lot of with major brands and especially in sports. It is often used to get the
attention of new communities and align with them.
Effective sponsorship as a marketing and communications tool requires
detailed target audience research and setting clear objectives.
Product packaging
Packaging is an element which can be considered as part of the marketing
mix as well as the communications mix. It‟s the last point of sale for the
company, and the impact of packaging could set brands apart from their
competitors.
Communicating effectively through packaging can include the visual design,
what‟s written on the product, size and shape of the packaging, materials it's
made from etc. All of these aspects could sway a customer to buy or not buy
the item.
New variables/innovations
We have many more communications tools now than existed 10 years ago -
or even 5 years. This is why it's really important to keep track of new
innovations and releases that could become a fantastic way to communicate
with your demographic. Some stick around for the long haul, and others end
up more like one-hit wonders (what ever happened to Vine?!) - but it's still
great to keep an eye out.
Examples include new social media platforms (networking, video,
messaging), gaming platforms, forums, mobile apps and more!
We hope this blog post has helped you understand the
communications mix and given a valuable insight into how these tools
can complement your marketing campaigns.
Integrated Marketing Communication – Meaning, Tools, & Examples
July 15, 2021 by Akshit Bagaria
In this competitive world with innumerable marketing and advertising mediums and
powerful marketing campaigns, you‘ve got to communicate a consistent marketing
message using a 360-degree approach to strengthen your position in the market and
have an impact on your prospective as well as existing customers.

Here‘s a guide on integrated marketing communication to help you move forward with
this approach.

What Is Integrated Marketing Communication?

Integrated Marketing Communications (IMC) is a concept under which a company
carefully integrates and coordinates its many communications channels to deliver a
clear and consistent message. It aims to ensure the consistency of the message and the
complementary use of media.

IMC is an integration of all marketing tools, approaches and resources within a

company which maximizes impact on the consumer mind resulting in maximum profit
at minimum cost.

It uses several innovative ways to ensure that the customer gets the right message at the
right place and right time.

IMC Tools
The eight major Integrated Marketing Communication tools are as follows:-

Advertising
Advertising refers to any paid form of non-personal promotion of products or services
by an identified sponsor. The various media used are print (newspapers and magazines),
broadcast (radio and television), network (satellite, wireless and telephone), electronic
(web page, audio and videotape) and display (billboards, signs and posters).

The primary advantage of advertising is that it reaches geographically dispersed

consumers. Consumers generally tend to believe that a heavily advertised brand must
offer some ‗good value‘ but at the same time, advertising proves to be an expensive
form of promotion.

Sales promotion
It is a variety of short-term incentives to encourage trial or purchase of a product or
service. It may include consumer promotions – focused towards the consumer – such as
a distribution of free samples, coupons, offers on purchase of higher quantity, discounts
and premiums or trade promotions – focused on retailers – such as display and
merchandising allowances, volume discounts, pay for performance incentives and
incentives to salespeople.

Sales promotion helps to draw the attention of the consumers and offers an invitation to
engage in a transaction by giving various types of incentives.

Personal Selling
Face-To-Face interaction with one or more buyers for the purpose of making
presentations, answering questions and taking orders. This proves to be the most
effective tool in the later stages of the buying process.

The advantage is that the message can be customized to the needs of the buyer and is
focused on building a long-term relationship with the buyer.
 Public Relations
A variety of programs directed toward improving the relationship between the
organisation and the public. Advertising is a one-way communication whereas public
relations is a two-way communication which can monitor feedback and adjust its
message for providing maximum benefit. A common tool used here is publicity which
capitalizes on the news value of the product or service so that the information can be
disseminated to the news media.

Articles in the media prove to be more objective than advertisements and enjoy high
credibility. Also, it has the ability to reach the hard-to-find consumers who avoid
targeted communications.

Direct Marketing
Direct Marketing involves the use of mail, telephone, fax, e-mail, or internet to
communicate directly with or solicit response or dialogue from specific customers or
prospects. Shoppers have started relying on credit cards and online purchasing more
than ever which makes it essential for marketers to approach the consumers directly
thus helping them in the purchase process.

Companies have a database of contact details of consumers through which they send
catalogues and other marketing material making it easier for the consumer to purchase
online. The relevance of direct marketing has increased in recent years.

Events and Experiences

These are company sponsored activities and programs designed to create brand-related
interactions with customers. Sponsorships improve the visibility of the company.
Companies provide customers with an experience of using the product which ends up
leading to a higher brand recall than competitors. These events prove to be engaging
with the audience.

Social Media Marketing

The concept of social media marketing basically refers to the process of promoting
business or websites through social media channels. Companies manage to get massive
attention on such channels and can interact with consumers as and when they are
browsing the internet.
New and modern ways of communications are developing on these social media
platforms and are proving to be the future of promotions. They have the ability to be
highly interactive and up to date with the customers.

Mobile Marketing
Mobile marketing involves communicating with the consumer via a mobile device,
either to send a simple marketing message, to introduce them to a new participation-
based campaign or to allow them to visit a mobile website.

Cheaper than traditional means for both the consumer and the marketer, mobile
marketing really is a streamlined version of online marketing the use of which is
increasing as time progresses. Examples are advertisements that we see on mobile
applications.

Managing Advertising, Sales Promotion,

Advertising
Any paid form of non-personal presentation & promotion or ideas, goods or services by an
identified sponsor. To develop advertising program, need to start with identifying the target
market & buyer motives. Consider these 5 decisions:

1. Objectives: Can be classified according to whether their aim is to inform (good to build
primary demand), persuade (tool to build selective demand for a particular brand) or
remind (to purchase or that they made a right choice -reinforcement ad.-).
2. Budget: Consumer-packaged-goods firms tend to overspend to insure against not
expending enough, & industrial co. underestimate the power of the co. therefore under
spend on advertising. Need to consider:
o Stage in the product life cycle (established brands have lower ratio)
o Market share & consumer base (high share, less ratio)
o Competition & clutter (more competitors, more ad./sales ratio)
o Advertising frequency & product substitutability.
3. Message: 4 steps to develop a creative strategy:
o Message generation: The message should be decided as part of developing the
product concept. In generating advertising messages, agencies use inductive
(talking to customers, dealers, experts & competitors) & deductive (buyers
expect one of these types of reward from a product: rational, sensory, social or
ego satisfaction).
 o Message evaluation & selection: Advertiser evaluates the alternative messages,
good ad need to be rated on desirability, exclusiveness & believability.
o Message execution: Not only what you say is important, but also how it is said.
Some ads aim to rational positioning & others for emotional positioning. In
preparing an ad campaign, a copy strategy statement should be prepared,
describing the objective, content, support & tone of the desired ad. Creative
people must find a style (lifestyle, fantasy, image, musical, personality symbol,
etc.), tone (positive, humor, emotions, etc.), words -memorable-(news, question,
narrative, command, etc.), format (size, color, illustration, etc. People see in
order: picture, headline & last the copy. Many ads aren‘t creative because many
companies want comfort (risk averse), not creativity).
4. Media
o Media Selection: involves finding the most cost-effective media to deliver the
desired number of exposures to the target audience. The effect of exposures on
audience awareness depends on the exposures‘ reach (# of persons or households
exposed to a particular media schedule at least once), frequency (# of times that
the average household is exposed to the message in a specified period) & impact
(the qualitative value of an exposure through a given medium).

Total # of exposures (gross rating points) = reach * frequency

Weighted # of exposures = reach * frequency * impact

o Media types: Have to consider several variables like: target-audience media

habits, product, message & cost (what counts is the cost-per-thousand exposures
rather than the total cost). New media: Outdoor ad (excellent way to reach
important local consumer segments), the store itself (displays & price tags
supplemented by talking shelves), best-selling paperback books, movie theaters,
movie videotapes, monthly bills, etc.
o Media vehicles (programs): Media planners calculate the cost-per-thousand
persons reached by a vehicle & rank them. Also need to consider: audience
quality, audience attention probability & editorial quality.
o Media timing: In deciding which types of media to use, the advertiser faces a
macro-scheduling problem (calls for deciding how to schedule the advertising in
relation to seasonal & business-cycle trends) & micro-scheduling problem (calls
for allocating advertising expenditures within a short period to obtain the
maximum impact). Timing pattern should consider 3 factors: buyer turnover,
purchase frequency & forgetting rate; the higher this rate, the more continuous
the ad should be. In launching a new product, advertiser has to choose among ad
continuity (scheduling exposures evenly), concentration (expending all in a
single period), flighting (seasonal) & pulsing (continuous ad at low-weight levels
reinforced periodically by waves of heavier activity).
5. Advertising effectiveness: Most of the money is spent by agencies on pre-testing ads,
& much less on post-evaluating their effects. Better to first limit the campaign to one or
a few cities, instead of nationally, to test the ad.
 o Communication-effect research: Seeks to determine whether an ad is
communicating effectively, also called copy testing. Pre-testing ad methods:
direct rating (asks consumers to rate alternative ads), portfolio tests (ask
consumers to view or listen to several ads, then asked to recall them) &
laboratory tests (use equipment to measure consumers‘ physiological reactions).
Post-testing ads: To what extent did the ad increase brand awareness, brand
comprehension, stated brand preference, & so on.
o Sales-effect research: Harder to measure than communication effect. A way to
measure it: share of market / share of voice; one is OK, less than one means they
are overspending, more than one mans money is spent super efficiently & should
probably increase its expenditures. Researchers try to measure the sales impact
through analyzing either historical (correlating past sales to past advertising
expenditures using advanced statistical techniques) or experimental data
(company spends more in some territories & less in others).

Sales Promotion
A diverse collection of incentive tools, mostly short term, designed to stimulate quicker
&/or grater purchase of particular products/services by consumers or the trade. Where
advertising offers a reason to buy, sales promotion offers an incentive to buy. It includes
tools for consumer promotion, trade promotion & business & sales force promotion.

 Rapid growth: A decade ago, ad-to-sales promotion ratio was about 40:60, now is
like 25:75 & growing. This is due to managers need to increase sales (internal) &
some external causes like: the # of brands has increased (seen as similar),
competitors use prom frequently, consumers are more price oriented, etc.
 Purpose of Sales promotion: Sellers use incentive-type promotions to attract new
triers, to reward loyal customers, & to increase the repurchase rates of occasional
users. Price promotions usually build short-term volume that is not maintained, but it
enables manufacturers to adjust to short-term variations in supply & demand.
 Sales promotion objectives: Encouraging purchase, building trial for nonusers,
attracting switchers from competitors, increase inventory in retailers, encourage off-
season buying, support of a new product, etc.
 Sales promotion tools: Distinguished between manufacturer promotions & retailer
promotions to consumers. Sales prom seems most effective when used together with
advertising, & even more with point-of-purchase display.
 Trade-promotion tools: A higher proportion pie is devoted to trade-promotion tools
than to consumer promotion, with media advertising capturing the rest. This is
because trade promotion can persuade the retailer or wholesaler to carry the brand
(shelf space), can persuade the retailer or wholesaler to carry more units, can induce
the retailers to promote the brand by featuring, display, & price reductions, also can
stimulate retailers & their sales clerks to push the product.
 Developing the sales- promotion program: In deciding to use a particular
incentive, marketers have several factors to consider: size of the incentive,
 conditions for participation, duration of the prom, distribution vehicle, timing of
prom & finally the total sales-promotion budget.
 Pre-testing the sales-promotion program: To see if the tools are appropriate, the
incentive size optimal, & the presentation method efficient.
 Evaluating the sales-prom results: Manufactures can use 3 methods to measure
sales-promotion effectiveness: sales data (using scanner sales data), consumer
surveys (who recalled the prom, what they thought about it, how many took
advantage of it, & how the prom affected subsequent brand-choice behavior) &
experiments (vary attributes as incentive value, duration, & distribution media).
 There are other potential costs & problems: Promotions might decrease long-run
brand loyalty, can be more expensive than they appear, there are costs of special
production runs, & certain promotions irritate retailers.

Explain Public Relations and major functions of public relations.

We commonly see a great story on an organisation in newspapers even though the
organisation may have experienced lawsuits recently. This is the effort from the
organisation to create a positive image about itself in the market. The organisation has used
part of its promotion budget to create positive image.
Public Relations is referred to as managing communications by an organisation between
itself and its publics. An organisation is not only concerned about its customers, business
partners, dealers and suppliers but also the public at large. Public Relations involves
various programs to disseminate information that an organisation wants the public to know.
The public consists of customers, employees, stakeholders, intermediaries and general
public at large. Some organisations don‘t take advantage of this promotion tool considering
it as a minor element. But most of the major successful organisations use Public Relations
to build and maintain successful relations with the public.
Explain Marketing Public Relations. What are common Public Relation tools?
Marketing Public Relations (MPR) –
In the past Public Relations was not considered as part of marketing function. PR
supported the organisation in maintaining its reputation and good attitude with the publics.
It was not much concerned about the public‘s viewpoint. We can say that PR is not
dependent on Marketing but Marketing is incomplete without PR. This concept gave rise to
Marketing Public Relations (MPR) to support corporate or product promotion as well as
image making. MPR serves the marketing department by helping it achieve the marketing
goals.
Marketing Public Relations not only does publicity but also assists in many different tasks.
Professor Kotler gives the list of these tasks –

What are the major decisions in ―Marketing Public Relations ?

The management has to work on the Marketing Public Relations through proper planning
to get effective results. The management must have clear idea on the objective it wants to
achieve, finalise the public relations message and tools, implementing the plan and
evaluation.

1) Marketing objectives – The organisation can be greatly benefitted by MPR before the
launch of a product, service, organisation, personality, etc. Even before the advertisement
or other promotion tools are utilised in the target market, MPR can create lot of excitement
about a product, etc. in the market place. It can be an editorial in a leading newspaper that
will boost the dealers, shareholders, salesforce, business partners, and public at large. The
announcement through PR campaign of a launch of a new product creates lot of awareness
in the market place. For example, Reliance Jio created lot of news through its MPR
campaign of cheapest call and internet service provider through its mobile SIM in the
India. As a result of this, major international players in the Indian market were forced to
change their plans and strategies.
Explain Direct Marketing, its advantages and disadvantages.
Direct Marketing involves communicating directly with buyers about their products via
different channels. The individual buyer is the target in direct marketing and not the
masses. Examples: direct mail, e-mail, apps, telephone calls (telemarketing), catalogues,
fliers, promotional letters, etc.The goal is to generate sales or leads for sales representatives
to pursue. If the customer is interested, he/ she can directly contact the concerned
department or person on the telephone number of address given with the message. Direct
marketing allows a business to engage in one-way communication with its customers. It
helps organisations inform the prospective buyers about product announcements, special
promotions, etc.

People in today‘s times prefer at-home shopping rather than travelling to different outlets.
Marketers take this opportunity to reach out to the customer directly with all the
information about the product, special promotions, etc. in order to generate sales. The
marketer‘s ensure that customers have easy access to them via toll-free numbers, chat
tools, email, etc. at any time of day or night throughout the week to justify their credibility
and commitment towards customers.

Filed under Public Relations and Direct Marketing | Comments Off on Explain Direct
Marketing, its advantages and disadvantages.
What are major Direct Marketing tools or channels?
There are many tools at a marketer‘s disposal for contacting the prospective buyers through
Direct Marketing. We will discuss the major tools-
1) Direct mail – It is referred to a message sent to the prospective buyers through mail. It
can be an announcement, offer, reminder, products (pre-approved credit cards, etc.), etc. It
advertises the organisation, and its product and services. Marketers need to shortlist the
buyers carefully and send the messages accordingly. Most of the organisations get the
benefit of lower rates when the mails are sent in bulk. The organisations get the details of
buyers when they visit store.
For example, some retailers ask the buyers to fill small form to get membership at minimal
costs. This way the organisation gets the contact details as well as the preferences of the
buyer. The online shopping sites track the visitor‘s site visits for certain products. Then
mostly a reminder message is sent to the visitor. For example, ―you were interested in an x
product. Now it‘s available at a discounted rate.‖

Sales Force Definition – Objectives And Process

With Examples

Definition

Sales force definition described as the muscles behind the marketing plans. Salesforce is
referred to the management employees responsible for making the sale. Thus, these are
called the mussels which are used to execute the marketing plans and strategies.

Another point that is included in the sales force definition is these forces operations include
money-making or the profit generator for the business. It creates or brings business or
included in the actual business of the organization.
Sales Force Meaning

The sales force is the employee force of an organization that is responsible for selling the
products and services. The primary functions which are included in the sales force
definition are the interaction with the customer.

They are responsible for communicating the details, information to the customers and
gathering information in the form of feedback from the customer. Hence, the sales force is
an important aspect of marketing management, customer relationship management.

Sales Force Management

Sales force management is subdivided into part of marketing management. As marketing
part involves the designing and creating of marketing strategies. Whereas, it is the
responsibility of sales force management to implement those strategies. Moreover, sales
management is of the elements of the marketing process.

Sales force management involves personal selling, customer relationship management.

Because of these reasons, sales force management is a customer-oriented department.
And, one of the basic aspects which are described in of sales force is personal selling.

As the success of a business depends upon the performance of its salesperson. Moreover,
how the build a relationship with their customers.

Objectives Of Sales Force

Sales force definition explains what are the reasons and objectives of a sales force. Sales
managers are not only responsible for personal selling activity. But also they are
responsible for managing a large and often diverse set of salespeople. Plus, they are also
responsible for managing sales efforts within and outside companies.

Here are the objectives of any salesforce which are desired by the sales management:

Objectives Of Sales Force

Organization Growth

A very basic and primary objective of any organization is growing. As every organization
working to grow and improve performance. So, it becomes a primary objective for the
basic operation department i:e sales management to contribute to organizational growth.

With continuous growth in sales and improvement in marketing strategies organization

tends to increase its market share, which results in the rapid growth of an organization.
Compliment Marketing Activities

As we discussed in the sales force definition, they are the muscles of marketing
management. So, sales need to compliment the marketing strategies and planings.

For example: when marketing teams design strategies for sale or market test or brand
promotion, they will only be successful when the sales force will implement those
strategies correctly.

Moreover, complimenting marketing strategies includes implementing and getting

feedback from customers as well.

Revenue Generation

Another important and necessary objective of salesforce is to create more revenue for an
organization. With constant growth and increase volume of sales, the proportion of revenue
also starts to increase.

And the most important and basic purpose of the sales force is creating or generating
revenue for the organization

Market Leadership

Higher profits, revenue, sales are the results of how much an organization can achieve the
market share. So, it‘s important for a sales team to achieve and capture the
maximum market share or to become the market leader to maximize their sales, revenue
and growth.

For example, Jio has maximized its profits, revenue by becoming the market leaders in the
telecom industry. As a result, they have maximum market share, revenue, growth.

Motivate The Sales Force

Another important job which counts in the sale force definition is that the employees or the
force require to have motivated people. To so, sales managers requires to keep incentives,
awards rewards, seminars, training. All these help in motivating the employees, so they can
give their best performance.

Note: Number of incentives and rewards given mostly in the sales department.

Also, it is one of the HR-related roles of sales manager which they have to perform.
Increase In Sales Volume

A very basic and primary objective of a sales team is to increase the volume of
organization sales. As, when the sales increase with the market share increases, with this
revenue increases and there is an increase in the organization‘s growth.

Sustained Profits

With increasing profits, sales and market share organization targets to achieve stability in
the organization‘ growth. According to the sales force definition sales management strives
to increase sales and reducing costs, this ensures good profits for the organization.

Converting Prospects To Customers

Converting a prospect into a customer requires planning and creativity. The process,
techniques and strategies are created and accomplished by the sales force management.

Converting the prospects increases the market share and there way toward market
leadership. As a result, the organization achieve high sales, revenue and growth.

These were the objectives of the sales force that the organization set for the sales
department to achieve the organization‘s vision and mission. The objectives of the sales
force predefine in sales force definition.

SalesForce Process

The process of communication between salesperson and customer seems simple and small.
But, in reality, the process of selling and working of sales managers have more
comprehensive and rich work.

Any type of selling either personal or online requires a lot of planning, preparation, and
analysing before and after the sales has been done. As the sales force definition describes
the requirement a salesperson is knowledgeable about the product and the product
hierarchy of the organization.

Here is the entire process of which followed in sales management:

1. Pre-Sale Preparation

Before making sales every sales manager needs to gather information regarding the
product and about the customer‘s problems as well. Since customers face problems
regarding the use of the product or purpose or details or features of the product.

So, a sales force needs to know about the product and they have to prepare and find
solutions for customers problem. According, to sales force definitions sales-person, must
prepare themselves regarding company, product, market, customers, environment,
competitors.

Organization prepare provide sales and leadership training programs to develop skills for
problem-solving and understanding customers demands.

2. Prospecting

After preparing themselves about the surroundings, products etc, now salesperson needs to
find the prospects. Prospects refer to potential customers. Prospects are the people, who are
unwilling, not have the ability, unsatisfied, Not knowledgeable about the product to buy.

As, the sales force definition describes salesforce find the potential customers from current
customers, other sales-people, online actives, location targeting. Afterwards, the salesforce
prepares the list of prospects, who have the willingness, power, and motivation to buy the
product. So, the salesperson can approach them for sale.

3. Pre-Approach

Once the salesperson has selected their prospects, now its time to prepare themselves for
the sale. Sale preparation includes finding the customers problems, needs and wants.
Afterwards, the salesperson finds solutions to customer problems.
Last, they prepare their presentation in such a way that it provides a solution and make a
sale to the customer.

4. Approach & Sales Presentation

In the next step as the sale force definition describes the salesperson who contacts the
customer. Contacting can be in form of face to face, phone, interview, the salesperson. The
approach consists of two major parts. Obtaining an interview, and the first contact.

Once the salesman has sought and found potential customers and he has matched their
wants with his product, he is ready to formally present that product to the customer.

The presentation can be:

1. Oral

2. Visual

3. Verbal

A good presentation must be:

1.Clear

2. Complete

3. Confident

4. No Dimining of Competition

5. Post-Sale Activities

As the sales force definition describes the customer‘s problems and solution. Post-sale
activities include analysing performance.
Analysing what wrong and what good has been done on how to improve the sales force
process to improve sales management and the organization revenue.

Another thing which counts in the post-sales activity is customer relation, post-sales
services. To build strong relationships with the customer, it is important to provide post-
sale service, ask them about their experience. It not only builds strong relationships with
customers but also makes future sales with the customer easier.

Post sale Activity Must include:

1. Post-sale services

2. Feedback

3. Asking for any other requirement

Sales Force Planning In Sales Management

Definition describes the sales managers have to plan their every step in sales management.
Sales force planning incudes the objectives, barriers etc to how to create a call of action.

Careful sales force planing gives a much clear vision to the organization and a proper
roadmap for the sales department to follow.

Here are the steps which sales force planning follows while doing

Evaluate The Current Situation

A very first step an organization have to is to evaluate their current position. Evaluating
their current position in the market or environment, helps them to understand what are the
important and requirements for the organization in the current position.
For example: if an organization is having a great position, a good market share and have
the ability to invest in more further projects. The organization can plan or set the objective
in the next step of expanding according to Horizontal Marketing.

Define Your Objective

As we discussed earlier in the sales force definition it is important to lay down the
objective for the salesforce to achieve. The objective is not only referred to as department
objectives. These are ay down considering the organizational needs and requirements. Plus
the objectives in sales force planning are mostly inspired by the mission and vision of an
organization.

Knowing The Barriers

After knowing where the organization is heading towards, a manager should also analyse
the barriers which can be proved as road blockers or disturbed the sales force planning. As
we discussed in the sales force definition customers have issues with products. Similarly, a
sales force faces barriers like competitions products, customers services, market
environment etc.

SWOT Analysis

After the organization has known the barries which can cause the problems externally.
Now, the organization should also know about the internal position of an organization as
well.

For example: In our earlier example organization was desired to expand its operation. For
that purpose, the organization conduct a SWOT analysis to identify the threats and
opportune within the Sales management of the organization.

Create Your Sales Call Strategy

Creating a sales strategy refers to creating a plan to implement marketing strategies. As

sales management are the muscles of the marketing management described in the sales
force definition. So, in a sales force, the planning call designs a strategy in such a way that
complements the marketing management strategies and plans.

Identify Needs

Once the sales team finalizes their strategy, then its time to identify the requirements which
need to be present for the implementation of the strategy. Generally, the needs for
implementing the sales force plan are related to:
1. Recruitment

2. Training

3. Technology

4. Funds

Requirements could also include a list of accounts. The important thing is to identify
needs upfront.

Outline An Action Plan

Outlining the action plan which in the sales force definition explains including items such
as finalizing pricing with your company before you make the sale. It is more like a to-do
list that is done by the sales professionals to make a sale.

Let‘s assume an organization has set the target of increasing the sales volume by 40%. And
the marketing department set the marketing strategy as well to increase sales volume.
Afterwards, sales management creates the call strategy- increase in sales of each
salesperson by 7%. So, the action plan will be the individual plan which each employee
creates to achieve their specific target.

Here were the steps which are included in sales force planning. It describes the sales force
definition, meaning and its application in an organization.

Sales Force Example

Sales force example are some real-life examples of some industry which operates with big
salesforce team in an organization. Here are a few sales force examples of some industry to
give a more clear idea of sales force definition.

 Examples of consumer sales forces include automobile salespersons.

 Sales staffs found in a variety of retail stores.
 Salesforce of the Telecom industry focused on telephonic sales
 Another example of telephonic sales is insurance industry agents.
 The largest sales force are employed in industrial goods industries.
These were the few sales force examples of industries that helps to connect the theoretical
knowledge of sales force definition to a real-life example.
 Methods of Determining Sales Force Size (With
Illustration)

There are some methods to decide on sales force size.

1. Equalized Workload Method:

For this method, the workload means the calls the salesmen have to make.
The method depends on total workload (i.e., calls). Here, salesmen‟s duties,
functions, or activities are said as „calls.‟ A call may include a number
functions like pre-approach, approach, and sales presentation, abjection
handling, and closing sales.

However, a call can be defined by the company as per its requirements or

expectations.

The method can be applied only if a company is in position to

decide on:
(1) Different groups of customers based on size of purchase,

(2) Number of calls required by the different groups of customers, and

(3) Average number of calls a salesman can make in a year.

Steps:
Equalized workload method involves following steps:
i. Classification of Customers:
Customers are classified into several groups on the basis of their average
annual consumption.

ii. Deciding Desirable Call Frequency:

Number of calls for each of the groups of customers is determined.

iii. Calculating Total Workload:

To calculate total workload, different customer groups are multiplied by
corresponding call frequency.

iv. Determining Average Number of Calls:

Average number of calls a salesman can make in year is determined.

v. Determining Sales Force Size:

Sales force size (number of salesmen) is determined by dividing total
workload (calls) by average number of calls a salesman can make in a year.

Let‟s take an example to understand the method.

ABC Ltd provides following information:

The company has three groups of buyers, such as:
i. Class A – Heavy Users:
There are 500 heavy users and desired call frequency is 10 calls a year.

ii. Class B – Medium Users:

There are 2000 medium users and desired call frequency is 6 calls a year.

iii. Class C – Light Users:

There are 5500 light users and desired call frequency is 4 calls a year.

Based on experience and study, a company has concluded that in an industry

an average salesmen can make 1000 calls in a year.

Let us calculate sales force size for ABC Ltd,

Sales force size can be calculated as:
Sales force size = Total workload + Average number of calls per salesman

= 39000 + 1000

= 39

Company‟s sales force size is 39 salesmen. It needs 39 salesmen to meet its

workload.

2. Incremental Productivity Method:

In this method, additional (incremental) cost of salesman is compared to
additional (incremental) sales revenue. Thus, additional contribution of
additional salesman is calculated. First of all, a company can appoint any
number of salesmen (normally minimum number).

Then, it will continue adding more salesmen as long as the additional sales
revenues are greater than additional selling costs. This method is not much
useful as it requires a lot of calculations and it is based on the notion that
increase in sales revenue is due to additional salesmen, which is always not
true.

3. Experts’ Opinion Methods:

Here, experts are asked to suggest the right number of salesmen a firm
requires. Experts may be internal such as general managers, marketing
manager, sales managers, senior salesmen, marketing research officer, etc.,
or external like marketing consultants, advertising agencies, and marketing
research firms.

The experts are provided with needed details about company‟s objectives,
market share, profitability, financial condition, competition, and other
relevant aspects. On the basis of their experience and research, they suggest
specific number of salesmen a company should appoint. This is not scientific
methods as their opinions depend on their perception. There is possibility of
bias. Company must follow experts‟ opinion carefully considering its own
situations.

4. Affordable Methods:
In real sense, this is not a method. The number of salesmen depends on a
company‟s financial capacity to spend. Obviously, a company with sound
financial position appoints more salesmen and vice versa. Its actual needs are
not taken into account.

The fact is, a company‟s financial position depends on sales and profits; sales
and profits depend on selling efforts. Ironically, a company with poor
financial position needs more salesmen, instead of less, to increase sales and
profits!

5. Arbitrary Fixation Method:

Here, sales force size is determined arbitrarily or randomly. A sales manager
doesn‟t relate sales efforts to any other aspects, neither takes opinion of
experts. He can determine any number of salesmen that seems appropriate
according to his views. His experience, assumptions, and calculation play
important role.

Sales Compensation Plan

A sale compensation plan refers to the determination of the right
compensation schemes and application of it to the sales force to bring a
balance between compensation and the sales force performance.
Sale Compensation is an integral part of an employee’s sustenance and
survival which has a motivational element also. An organization always
wants to draw an effective compensation plan to make their employees
content and motivated.
In a broad sense, compensation is a kind of employee reward. An
organization lays an effective reward system management that works for
the selection of rewards and its distribution to the employees.
Learn about:- 1. Introduction to Sales Compensation Plan 2. Definition of
Sale Compensation Plan 3. Characteristics 4. Methods 5. Steps 6. Factors 7.
Schemes 8. Strategic Compensation System 9. Trends.

Sales Compensation Plan: Introduction, Definition, Characteristics, Methods, Steps,

Factors, Schemes and Other Details
Sales Compensation Plan – Introduction
Money, as we know by now, is not the only motivator. It has relevance till our
physiological needs are satisfied and some of the security and safety needs. In
satisfying our higher needs like self-esteem and self-actualisation, it declines
in importance. According to Herzberg, money is a hygiene factor, the
presence of which avoids job dissatisfaction. However, it has no motivational
force otherwise.
Sales compensation plan (SCP) is, however, integrated to the motivational
aspects. Any compensation plan has to provide a fair living wage, should be
related to performance and should reward the efficiency. It also provides a
mechanism to integrate our personal goals and the organisational goals.
Appropriately designed compensation plan is beneficial both to the company
and its sales employees. It optimises the cost of reaching the sales goals and
profit objectives. When efficiency and effectiveness are rewarded, the morale
is high.
Sales Compensation plans are catalysts for motivation. They do not replace
the proper motivational plans. As we know, man does not live by bread alone.
Each individual likes to achieve something, likes to excel and likes to belong.
It is necessary to design the compensation plans properly, and then
administer them properly.
In established companies, compensation plans are already installed, and it is
then only a question of review and revision of the already existing plan. Most
changes are minor in nature, e.g., paying more bonus, putting more
incentives and so on. Major changes are not affected as there is a tendency to
resist them.
Far reaching changes are to be introduced in phased manner by taking
everyone into confidence. When morale of the sales force is very low, it calls
for an overhaul of the entire sales plan. While new markets are being tapped,
we may require drastic changes in the compensation plan.
 Sales Compensation Plan – Definition (Defined by Some
Eminent Authors)
A sale compensation plan refers to the determination of the right
compensation schemes and application of it to the sales force to bring a
balance between compensation and the sales force performance. The basic
purpose of the plan is to establish an equitable and fair distribution of
salaries or wages, and other incentives amongst working personnel in a way
that maintains equity between proportionate performance contribution of an
employee and compensation received. So, a well-laid out compensation plan
keeps away dissonance in compensation structure and policies.
It should be judiciously devised so that no single employee feels deprived and
thinks compensation packages as unjustified. Otherwise, an experienced or
skilled salesperson can feel under-compensated. The compensation plan, at
the same time does not make room for overcompensation for young or rookie
salespeople. Compensation is part of the organization‟s cost. So, one
precondition for a sound compensation plan is that the total compensation
should be decided at a level to be consistent with the total earnings of the
firm and it does not violate the sales and profit objectives of the firm.
Motivation of employees is the central objective of compensation. In the
selling context, it stimulates salespeople to work with more vigour and spirit.
Cost is the guiding component of motivation. As compensation itself is a cost,
it must be within the manageable level of the total profit and sales volumes of
the firm. It regards the prevailing compensation level of the industry and is
very much in congruence with the compensations offered by the competing
firm.
A leading firm may even offer compensation above that of the average
industry level to the sales force. It is flexible to meet the future changes in the
compensation level. Future changes may imply company growth, sales
turnover, increase of market share, etc. Secondly, it is flexible to
accommodate the individual employee‟s increase of compensation. The
compensation is impartial in all senses so that the right compensation for the
right employee is decided. Here lies the fairness of compensation. It is
commensurate with the financial capacity of the firm if it meets its
requirements.
A compensation scheme is manageable in cases where its various elements
such as – salary, commission, fringe benefits, etc., are controllable and
differences of it amongst employees are well-maintained to the satisfaction of
both – the employees and the employer. Moreover, the coordination of
compensation and financial power of the firm needs to be managed
effectively as well.
Compensation is defined as the money received by employees from the
organization on account of the performance they render. When the employee
receives the money in terms of salary or wage, it is known as direct
compensation. When the employee receives benefits such as – health
insurance, medical benefits, travel allowances, etc., these are known as
indirect compensations.
Sale Compensation is an integral part of an employee‟s sustenance and
survival which has a motivational element also. An organization always wants
to draw an sales effective compensation plan to make their employees
content and motivated. An effective compensation plan fulfils the
expectations of the employees and satisfies them. At the same time, it works
towards the overall fulfilment of an organization‟s objectives.
Flippo (1984) defined compensation as the adequate and equitable
remuneration of personnel for their contributions to the organizational
objectives.
Foulkes and Livernash (1989) defined compensation as the payment of wages
and salaries including incentive, bonus payments, and benefits to employees
in exchange of wo
Agarwala (2007) defined compensation as the sum total of all forms of
payments and rewards provided to the employees for performing tasks to
achieve organizational objectives.
In a broad sense, compensation is a kind of employee reward. An
organization lays an effective reward system management that works for the
selection of rewards and its distribution to the employees.

Sales Compensation Plan – Aims and Characteristics of

SCP
Sale Compensation plan (SCP) is a part of strategic marketing plan. It is the
line managers and their subordinates who are ultimately responsible for the
implementation of these plans. A sound compensation plan should be
consistent with the strategic marketing plan because it is linked to sales force
motivation, coordination, and control. Satisfaction with the compensation
schemes stimulates the salespeople to exert more selling efforts and achieve
better results. Managers, too, can lead and supervise salespeople easily.
A good compensation plan is crucial for the financial health of the firm. It
consolidates the position of the firm on both the financial and human
resources.
Moreover, it establishes an image of the firm in the broad societal
environment and employees, being happy, carry the image to everywhere in
the society.
The important characteristics of the compensation plan are
summarized as follows:
Characteristics of a Good Compensation Plan:
Following are the characteristics of a good compensation plan:
1. It is consistent with the position held by a salesperson and the job
description laid down for such a position.
2. It decides the right salary and other benefits befitting the position and is at
least in conformity with the prevalent salary structure for such a position in
the industry.
3. It acts as a catalyst to improve the productivity of the organization.
4. Money is a great motivator. It acts in this direction. It provides satisfaction
and security to the sales force.
5. It helps to improve the financial health of the employees, organization, and
the society at large.
6. It does not distract the team spirit and the group cohesion within the sales
force.
7. It helps to generate a hearty and a cordial relation between the salespeople
and the sales managers.
8. It is simple and very easy for the salespeople to understand. The sales
managers find no difficulty to apprise them on the plan.
9. It is flexible so that future changes in the compensation structure can
easily be accommodated.
10. One of its components (particularly variable part such as – commissions,
bonuses, etc.,) has a direct relationship with the sales force performance.
11. It helps to retain the existing sales force particularly those who perform
satisfactorily for the firm. Alternatively, it keeps the competing firms away to
pull out the efficient salespeople.
12. It is in sync with the sales and profit objectives of the firm.
13. It is acceptable to both the salespeople and the employers.
14. It generates a positive correlation between compensation and motivation,
and motivation and performance.
15. It provides salespeople with a direction for individual goal-fulfilment.
16. It enhances the job involvement and the commitment to the job.
17. It increases the sense of belongingness of the salespeople to the company.
18. It acts within the contours of the strategic marketing plans of the
company.
Characteristics of a Good Compensation Plan
1. A compensation plan must provide a living and fair wage. It should ideally
give a secure income; as monetary difficulties prevent the employees to put in
their best.
2. It should be integrated to the motivational programme.
3. It should be fair and should ensure equal pay for equal work.
4. It should be easy to understand. Each employee should be in a position to
compute his own salary.
5. It should be flexible enough to accommodate changes in salary as per
performance.
6. It should be economical to administer.
7. It should further the objectives of the sales organisation.
How Compensation Plans are Designed?
First of all, the nature of the job is understood. Sales job descriptions are
systematically developed and constantly revised. How other functions affect
the sales job is also examined. Sales objectives are also examined. Sales
related marketing policies are studied.

Sales Compensation Plan – 4 Main Methods of SCP

Basically, the remuneration that is given to salesmen is justified on two
factors, viz. – (1) the amount of sales made and (2) the amount of time spent
on this job of selling. Based on these two factors, different plans are designed.
There are three fundamental methods of sales compensation plan – , viz. –
(1) Straight-salary method, (2) Straight-commission method, (3) Mixed
method. Apart from these three, we have two more incentive plans, viz. – (1)
Bonus and (2) Profit-sharing.
1. Straight Salary Method:
This method is based on the time-spent on the job. Under this method,
salesman is paid a predetermined amount by way of his salary at the close of
every month. Salary paid to him is irrespective of sales performance during
the month. Increments are given in the salary- scale he is appointed, in and,
after experience and required length of service, is promoted to the higher
salaries of scale.
UNIT-5
DISTRIBUTION MARKETING ORGANISATION & CONTROLL
Channels of distribution, intensive selective & exculsive distribution, organizing marketing
department, marketing implementation, Controlling of marketing performance, Annual
plan control, Efficiency control, Strategic control

What is a Distribution Channel?

A distribution channel (also called a marketing channel) is the path or route decided by the
company to deliver its good or service to the customers. The route can be as short as a
direct interaction between the company and the customer or can include several
interconnected intermediaries like wholesalers, distributors, retailers, etc.

Hence, a distribution channel can also be referred to as a set of interdependent

intermediaries that help make a product available to the end customer.

Functions of Distribution Channels

In order to understand the importance of distribution channels, businesses need to

understand that it doesn‘t just bridge the gap between the producer of a product and its
user.

 Distribution channels provide time, place, and ownership utility. They make the
product available when, where, and in which quantities the customer wants. But
other than these transactional functions, marketing channels are also responsible to
carry out the following functions:
 Logistics and Physical Distribution: Marketing channels are responsible for
assembly, storage, sorting, and transportation of goods from manufacturers to
customers.
 Facilitation: Channels of distribution even provide pre-sale and post-purchase
services like financing, maintenance, information dissemination and channel
coordination.
 Creating Efficiencies: This is done in two ways: bulk breaking and creating
assortments. Wholesalers and retailers purchase large quantities of goods from
manufacturers but break the bulk by selling few at a time to many other channels or
customers. They also offer different types of products at a single place which is a
huge benefit to customers as they don‘t have to visit different retailers for different
products.
 Sharing Risks: Since most of the channels buy the products beforehand, they also
share the risk with the manufacturers and do everything possible to sell it.
 Marketing: Distribution channels are also called marketing channels because they
are among the core touch points where many marketing strategies are executed.
They are in direct contact with the end customers and help the manufacturers in
 propagating the brand message and product benefits and other benefits to the
customers.
Types of Distribution Channels

Channels of distribution can be divided into the direct channel and the indirect channels.
Indirect channels can further be divided into one-level, two-level, and three-level channels
based on the number of intermediaries between manufacturers and customers.

Direct Channel or Zero-level Channel (Manufacturer to Customer)

Direct selling is one of the oldest forms of selling products. It doesn‘t involve the inclusion
of an intermediary and the manufacturer gets in direct contact with the customer at the
point of sale. Some examples of direct channels are peddling, brand retail stores, taking
orders on the company‘s website, etc. Direct channels are usually used by manufacturers
selling perishable goods, expensive goods, and whose target audience is geographically
concentrated. For example, bakers, jewellers, etc.

Indirect Channels (Selling Through Intermediaries)

When a manufacturer involves a middleman/intermediary to sell its product to the end

customer, it is said to be using an indirect channel. Indirect channels can be classified into
three types:

 One-level Channel (Manufacturer to Retailer to Customer): Retailers buy the

product from the manufacturer and then sell it to the customers. One level channel of
distribution works best for manufacturers dealing in shopping goods like clothes,
shoes, furniture, toys, etc.
 Two-Level Channel (Manufacturer to Wholesaler to Retailer to
Customer): Wholesalers buy the bulk from the manufacturers, breaks it down into
small packages and sells them to retailers who eventually sell it to the end
customers. Goods which are durable, standardised and somewhat inexpensive and
whose target audience isn‘t limited to a confined area use two-level channel of
distribution.
 Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to
Customer): Three level channel of distribution involves an agent besides the
wholesaler and retailer who assists in selling goods. These agents come handy when
goods need to move quickly into the market soon after the order is placed. They are
given the duty to handle the product distribution of a specified area or district in
return of a certain percentage commission. The agents can be categorised into super
stockists and carrying and forwarding agents. Both these agents keep the stock on
behalf of the company. Super stockists buy the stock from manufacturers and sell
them to wholesalers and retailers of their area. Whereas, carrying and forwarding
agents work on a commission basis and provide their warehouses and shipment
 expertise for order processing and last mile deliveries. Manufacturers opt for three-
level marketing channel when the userbase is spread all over the country and the
demand of the product is very high.
Dual Distribution

When a manufacturer uses more than one marketing channel simultaneously to reach the
end user, he is said to be using the dual distribution strategy. They may open their own
showrooms to sell the product directly while at the same time use internet marketplaces
and other retailers to attract more customers.

A perfect example of goods sold through dual distribution is smartphones.

Distribution Channels for Services

Unlike tangible goods, services can‘t be stored. But this doesn‘t mean that all the services
are always delivered using the direct channels.

With the advent of the internet, online marketplaces, the aggregator business model,
and the on-demand business model, even services now use intermediaries to reach to the
final customers.

The Internet as a Distribution Channel

The internet has revolutionised the way manufacturers deliver goods. Other than the
traditional direct and indirect channels, manufacturers now
use marketplaces like Amazon (Amazon also provide warehouse services for
manufacturers‘ products) and other intermediaries like aggregators (Uber, Instacart) to
deliver the goods and services. The internet has also resulted in the removal of unnecessary
middlemen for products like software which are distributed directly over the internet.

Factors Determining the Choice of Distribution Channels

Selection of the perfect marketing channel is tough. It is among those few strategic
decisions which either make or break a company.

Even though direct selling eliminates the intermediary expenses and gives more control in
the hands of the manufacturer, it adds up to the internal workload and raises the fulfilment
costs. Hence these four factors should be considered before deciding whether to opt for the
direct or indirect distribution channel.

Market Characteristics
This includes the number of customers, their geographical location, buying habits, tastes
and capacity and frequency of purchase, etc.

Direct channels suit businesses whose target audience lives in a geographically confined
area, who require direct contact with the manufacturer and are not that frequent in
repeating purchases.

In cases of customers being geographically dispersed or residing in a different country,

manufacturers are suggested to use indirect channels.

The buying patterns of the customers also affect the choice of distribution channels. If
customers expect to buy all their necessaries in one place, selling through retailers who use
product assortment is preferred. If delivery time is not an issue, if the demand isn‘t that
high, the size of orders is large or if there‘s a concern of piracy among the customers,
direct channels are suited.

If the customer belongs to the consumer market, longer channels may be used whereas
shorter channels are used if he belongs to the industrial market.

Understanding consumer behaviour is essential for deciding the most effective marketing
channel for the business.

Types of Distribution: Intensive, Selective and Exclusive Distribution

Some of the important types of distribution in international

market are 1. Intensive 2. Selective and 3. Exclusive distribution.
It represents the level of international availability selected for a particular
product by the marketer; the level of intensity chosen will depend upon factor
such as the production capacity, the size of the target market, pricing and
promotion policies and the amount of product service required by the end-
user.

There are three broad options:

1) Intensive Distribution:
Intensive distribution aims to provide saturation coverage of the market by
using all available outlets. For many products, total sales are directly linked
to the number of outlets used (e.g., cigarettes, beer). Intensive distribution is
usually required where customers have a range of acceptable brands to
choose from. In other words, if one brand is not available, a customer will
simply choose another.

This alternative involves all the possible outlets that can be used to distribute
the product. This is particularly useful in products like soft drinks where
distribution is a key success factor. Here, soft drink firms distribute their
brands through multiple outlets to ensure their easy availability to the
customer.

Hence, on the one hand these brands are available in restaurants and five
star hotels and on the other hand they are also available through countless
soft drink stalls, kiosks, sweetmarts, tea shops, and so on. Any possible outlet
where the customer is expected to visit is also an outlet for the soft drink.

2) Selective Distribution:
Selective distribution involves a producer using a limited number of outlets
in a geographical area to sell products. An advantage of this approach is that
the producer can choose the most appropriate or best-performing outlets and
focus effort (e.g., training) on them. Selective distribution works best when
consumers are prepared to “shop around” – in other words – they have a
preference for a particular brand or price and will search out the outlets that
supply.

This alternative is the middle path approach to distribution. Here, the firm
selects some outlets to distribute its products. This alternative helps focus the
selling effort of manufacturing firms on a few outlets rather than dissipating
it over countless marginal ones.
It also enables the firm to establish a good working relationship with channel
members. Selective distribution can help the manufacturer gain optimum
market coverage and more control but at a lesser cost than intensive
distribution. Both existing and new firms are known to use this alternative.

3) Exclusive Distribution:
Exclusive distribution is an extreme form of selective distribution in which
only one wholesaler, retailer or distributor is used in a specific geographical
area.

When the firm distributes its brand through just one or two major outlets in
the market, who exclusively deal in it and not all competing brands, it is said
that the firm is using an exclusive distribution strategy. This is a common
form of distribution in products and brands that seek a high prestigious
image.

Typical examples are of designer ware, major domestic appliances and even
automobiles. By granting exclusive distribution rights, the manufacturer
hopes to have control over the intermediaries price, promotion, credit
inventory and service policies. The firm also hopes to get the benefit of
aggressive selling by such outlets.

 Marketing Department: Organization, Tools & Responsibilities

 Marketing is the most important parts of any business activity. It is what creates
customers and generates income, guides the future course of a business and defines
whether it will be a success or a failure. Without marketing, a business is like sitting
in the dark and expecting people to find you without a light. Marketing can be done
without a marketing team, but you cannot expect to go too far or succeed by
marketing on your own. For a sustained marketing effort, a business of any size
requires a dedicated marketing department or a marketing team.
 In this article, we will explore the following: 1) concept of marketing,
2) organization of a marketing department, 3) tools of marketing department,
and 4) responsibilities of marketing department.
 INTRODUCTION
Concept of Marketing
Marketing can be described as any activity that is carried on with the specific purpose of
conveying information about the use, quality and value of a product or service in order to
promote or sell the product or service. Marketing is the way to announce the availability of
a commodity, service, idea or a brand to the world in such a way that people are interested
in it and wish to acquire it and use it. It serves the purpose of plugging the gap between the
public‘s requirement and the products that are available.
Importance Of A Marketing Department
The Marketing Department is the key to good marketing and sales. It promotes and
establishes a business in its niche, based on the products or services the business is
offering. It identifies the areas in which the product fits and where the business should
focus its marketing strategy and, therefore, spend its budget for the maximum coverage and
results. The marketing department helps a business to do the following:

 Build relationship with the audience: Creates awareness of the business and its products
as well as provide inputs that create interest for the audience. It brings in new customers
and creates new business opportunities for the enterprise.
 Involve the customer: It engages existing customers, tries to understand them and hear
what they have to say. It monitors the competition, creates new ideas, identifies outlets,
plans the strategy to involve customers and retain them.
 Generate income: Finally, the aim of the marketing department is to generate revenue. All
its activities are aimed at broadening the customer base and finding opportunities that
would create more revenue for the enterprise.

ORGANIZATION OF A MARKETING DEPARTMENT

The marketing department of any enterprise is responsible for promoting the products,
ideas and mission of the enterprise, finding new customers, and reminding existing
customers that you are in business. It organizes all the activities that are concerned with
marketing and promotion. It may consist of a single person or a group of people working in
a hierarchal system who are responsible for bringing the product of the business to the
attention of its targeted customers. Since this department is the key to your revenue and
business activity, it requires people who have the skills for dealing with people and
understanding what they require.
There is no hard and fast rule to the organization of a marketing department, which
depends entirely upon the needs of the business, its size and the amount of money that it
wants to spend on marketing. But a typical marketing department in a large business
operation is organized as follows:
 Chief Marketing Officer: This is the person who is at the top of the pyramid and is in
charge of the marketing department. The responsibilities of CMO lie in the decision
making within the process of the development of the major marketing strategies, as well as
running the marketing department. CMO is also answerable to the Board of Directors or
the Management about the results of the marketing strategies.
 Marketing Director: The person in this role is responsible for all the marketing strategies
that are created and implemented. With his tasks he assists the CMO of the company.
 Vice President Marketing: He is answerable to the Marketing Director. His responsibility
is the implementation of the marketing strategies of the organization. He works with the
marketing manager in determining the strategies, messages, and media to be employed for
marketing.
 Marketing Manager: Marketing Manager works under the vice president marketing and
assists him with the implementation of all marketing strategies including creating messages
or advertisements for marketing, choosing the medium of displaying the messages, which
might include print media, television, banners and hoarding, website and social media
marketing, etc. A marketing manager is also responsible for managing the other employees
of the department. There may be one or several marketing managers depending upon the
size and requirements of the business.
 Marketing Analyst or Researchers: These individuals are responsible for research and
analysis that drives the marketing department and guides its marketing strategies by
finding out about the target customers and the competition of the business. Marketing
Analysts employ marketing tools such as surveys or studies to discover information that
may be useful for marketing. They report to the marketing manager.
 Public Relations: Public Relation Officer is in charge of managing the reputation and
goodwill of the company. His job is to create understanding of the clients and try to
influence their thinking and behavior. PRO uses media management and communication to
build up the company‘s profile. The PRO works under the Marketing Manager and reports
to him.
 Social Media Expert/Creative services: With the internet becoming a major player in
marketing, a company benefits from the services of Social Media Experts (SME) and
creative services. While the SMEs concentrate on marketing the business and its service on
the internet so that more people become aware of it, the creative services take care of
designing and presentation part of the business, these include websites, web pages,
brochures, booklets, flyers, advertisements, mailers and e-mailers, and all other
promotional material that is required by the marketing department. The creative services
and social media marketing report to the marketing manager and work under him.
 Marketing Coordinator: Coordinates all the various sections of the marketing department
and manages the advertising and marketing campaigns. Marketing Coordinator is
responsible for tracking sales data, maintaining the promotional material inventory,
 planning events, preparing reports, etc. They work with the Marketing Manager and assist
him.
 Marketing Assistant: Assists and reports to the marketing manager to run the day to day
business of a marketing department. Carries out administrative work required for the
smooth running of the department.
Depending on a company size, there might be implemented a hierarchical organization of a
marketing departments within a company.

TOOLS OF A MARKETING DEPARTMENT

In order to succeed in its aim of creating market awareness for the business and its
products, the marketing department requires some tools to facilitate its work. It needs to
discover what the consumers want or require and provide them with it. This requires that
the marketing department has a proper direction and strategy at its disposal to study the
market, create the right product, and promote the product and the brand, towards the final
aim of developing the business and enhancing the value of the business. The tools that are
employed by the marketing team are:
Marketing Research
Marketing department is responsible for all marketing research. Research is essential to
understand the consumer needs and also to identify the market for the products that the
company hopes to sell. Marketing research also helps to identify the strengths and
weaknesses of the business and its competitors. This eventually helps a business to
eliminate its weakness, work upon its strength and to exploit the weaknesses of the
competitors to wean away the customers from the competitors. The entire enterprise
benefits from market research and the insights it generates.
Product Development
Marketing department helps to create products that customers need or want and improve
upon the ones that already exist to create better value for the customers. It is the job of the
marketing department to analyze the sales of products already in the market, look for
opportunities to introduce new products where there are gaps or change and improve
products that are hard to sell. Marketing personnel provides information to product
development team about the customer preferences, so that new products can be developed
based on the customer insight provided by the marketing team. The marketing team is also
responsible for determining the price of a product based on its research and for launching
the product into the market.
Advertising and Promotional Campaigning
Once the enterprise has a product to sell, it is the responsibility of the Marketing
Department to promote the product and the brand. This will be performed through the help
of the creative team by creating campaigns, events, advertisements, as well as promotional
material. Such promotional material is used to promote the product, services, and brand to
the public in order to create awareness and to convert prospects into customers. The
marketing department is provided with a budget for promotion, and it has to design its
promotional activities within the budget. The marketing department also manages the
social media marketing for businesses. It does so with the help of social media experts who
design and implement the strategy to promote the business and its product on the internet,
create a buzz and utilize that buzz to attract customers and improve sales.
Business Development
In order to create new business, marketing and sales departments have to work together.
The marketing team devises ways to engage prospects. This may be facilitated through
advertisements in the media or internet via the website or the social media. It uses
information and incentives to keep the prospects interested and provides an opportunity for
the sales department to convince the prospect to buy the product. So the marketing
department creates or generates leads for the sales department to pursue. Not all leads
convert to customers. The process of lead generation and creating new marketing avenues
is a continuous process, and the marketing department is responsible for it.

RESPONSIBILITIES OF A MARKETING DEPARTMENT

Marketing department has a huge responsibility of making a business viable and profitable.
It needs to do this by creating awareness, engaging customers, researching competitors and
their product, preparing promotional activities and materials and a whole host of other
responsibilities. The marketing department is like the jack of all trades in any organization.
Anything that other departments do not handle is given to the marketing department to deal
with. When we look in-depth at the responsibilities of the marketing department, it
becomes very clear why it is the key department of any organization, without which it
would be very difficult for the business to exist profitably.
Applying customer-centric approach
The Marketing Department needs to have a relationship with the customer so that they can
understand what the customers‘ demand from the business and thus aim to meet those
demands. Customer feedback is an important part of marketing and companies need to
conduct surveys to get the feedback from customers and prospects. There are two ways to
understand the customer needs and focus the business activities to reflect the customer‘s
demands; these are through internal channels by taking feedback from the sales department
and the customer service department regarding customer preferences and their feedback.
This can be done via data analysis as well as conducting surveys within the company. The
other way to collect information is via external channels, through interaction with social
media and internet. In the end, the focus should be to provide the customer with a valuable
and pleasant experience when interacting with the company.
Keeping up with the competition
The marketing department is also responsible for researching the competition and keeping
up with them to know what they are doing, which products they are launching, what are the
weaknesses of the competitors and how to avoid making the same mistakes as the
competitors. It is also essential to know how the company is placed in relation to its
competitors, why the customers prefer the other companies, what customers the
competitors target and the relationship they have with their customers. Once all this
information is available then the marketing department can analyze it and create a better
marketing and customer relation strategy for the company.
Branding
A brand is the identity of a company. It is the practice of creating a name, design or symbol
that denotes a particular product or business and makes it stand apart from other similar
products or businesses. Branding helps to enhance the image of a business and make it
more credible, elicit an emotionally positive response from the audience, motivates the
audience to buy and creates loyalty for the brand and its products. It is the duty of the
marketing department to create and promote a brand through images, words, ideas, and
promises of benefits to the customer. The message needs to be delivered to the audience by
all the members of the enterprise consistently and frequently.
Finding the Right Partners
The marketing department of all organizations cannot be extensive enough to handle all the
marketing needs of the organization. In order to bring the full range of marketing tools and
expertise to a business, it is often essential to hire specific expertise and people from
outside the organization. It is essential to find the right partners who understand the
philosophy and needs of the organization. It is the work of the marketing department to
identify, hire and oversee these partners to bring best value to the business. These strategic
partners could be advertising agencies to create and manage advertising campaigns, social
media experts to manage the social media marketing side of the business, web designers,
data analysts, copywriters, and other such people.
Being creative and innovative
The marketing department needs to be on its toes at all times. It is the responsibility of the
marketing department to come up with creative ideas, whether it is for promotional
purposes or to create a new product. Feedback and ideas from the marketing team are
responsible for policy decisions regarding products, such as whether to create new products
or improve the old one. It also needs to come up with creative ways to position the brand
and the product to create additional revenue for the company. In order to fulfill all its
responsibilities, the marketing department often takes the help of outside partners.
Communicating with other departments
One of the key responsibilities of the marketing department is to create a channel of
communication with all the other departments within an organization. It has to familiarize
all the employees with the marketing ethics, company‘s philosophy, and customer
relationship. It can do so by conducting workshops, training sessions and talks or
presentation regarding customer handling and brand awareness.
 Budgeting
Marketing departments work on budgets. They are given a certain amount of money to
spend upon creating a presence for the company or product in the market. It is the
responsibility of the marketing department to estimate the cost of all the marketing
activities it intends to carry out and prepare a budget that would use the allocated amount
of money most efficiently. It is essential that the marketing personnel stick to the budget.
Being aware of ROI
The marketing department needs to be aware of the concept of return on investment. Since
all marketing activities cost money, the concept of ROI can help the marketing team to
create a marketing strategy that gives the highest exposure for the least amount of money
spent. They should constantly monitor themselves and evaluate whether the strategies that
have been used have yielded the desired benefit or not, and what was the cost of the
strategy in terms of time, effort, and most importantly money.
Managing Strategy
Managing the key activities of a business to work together is another responsibility of the
marketing department. It is the duty of the marketing department to create and implement
strategies that would enhance the business activities of the enterprise.
Managing Research
Managing research for the company is also the duty of the marketing department. This
includes research about the products, marketing strategies, strengths and customers of the
competitors in comparison to that of the organization. The Marketing Department also
provides inputs regarding the pricing of a product.
Managing Events
Managing events also comes within the scope of responsibilities of the marketing
department. This including promotional events, exhibitions, seminars, training sessions,
trade meetings, conventions, etc.
We can thus see that the marketing department is essential not only for positioning and
promoting a product but also for providing vital information to the organization about all
aspects of the business. It is the key department of any organization and cannot be
dispensed with. Even in tough times, a business cannot do away with the marketing
department. On the other hand, marketing department becomes the key player to pull a
business out of troubles and set it back on the path to profitability.
 Marketing Implementation: Definition, Aspects

Marketing implementation defines as the process that turns marketing plans into action
assignments and ensures that such assignments are executed to accomplish the plan‘s
stated objectives. No marketing program will succeed if it is not implemented properly.

To implement, the marketing executive must;

1. obtain the support of all the people and institutions who will be involved,
2. time all aspects of the program so that they are synchronized to precision, and
3. retain some flexibility in the program to adjust to changes in the market environment.

Different Aspects of Implementing Marketing Activities

The planning and organizing functions provide purpose, direction, and structure of
marketing activities.

However, until marketing managers implement marketing activities (plan), exchanges

cannot occur.

Proper implementation of marketing activities depends on the coordination of marketing

activities, the motivation of personnel who perform those activities, and the effective
communication within the marketing department.

Coordinating Marketing Activities

Because of job specialization and differences in approaches, interests, and timing related to
marketing activities, marketing managers must synchronize individuals‘ actions to achieve
marketing objectives.

They must work closely with managers in research and development, production, finance,
accounting, and personnel to see that marketing activities mesh with other firm functions.
Marketing managers must coordinate the activities of marketing staff within the firm and
integrate those activities with the marketing efforts of external organizations advertising
agencies, researchers, shippers, and resellers, among others.

Marketing managers can improve coordination by making each employee aware of how
one job relates to others and how each person‘s actions contribute to the achievement of
marketing plans.

Motivating Marketing Personnel

One important element in implementation is motivating marketing personnel to perform

effectively. People work to satisfy physical, social, and psychological needs.

Since individuals try to achieve personal goals through the work environment, marketing
managers must show each individual how personal goals can be attained. To

motivate marketing personnel, managers must discover their employees‘ needs and then
base their motivation methods on those needs. The degree to which a marketing manager
can motivate personnel has a major impact on all marketing efforts‘ success.

Putting this other way, managers must base their motivational efforts on individuals‘ value
systems within a specific organization. Various studies have shown that income, power,
and prestige that accompanies a high organization position are often motivators.

Marketing managers can motivate marketing personnel to perform at a high level if they
identify employees‘ goals and provide rewards and some means of goal attainment.

It is most important that the plan to motivate personnel to be fair, that it provides
incentives, and that employees understand it. Also, keep in mind that a minor reward or
accomplishment for one employee may be the ultimate fulfillment for someone else.

Communicating Within the Marketing Department

Without good communication, marketing managers can neither motivate personnel nor
coordinate their efforts. Marketing managers must be able to communicate with the firm‘s
top-level management to ensure that marketing activities are consistent with the company‘s
overall goals.

Communication with top-level executives keeps marketing managers aware of the

company‘s overall plans and achievements.
 It also guides what the marketing unit is to do and how its activities are to be integrated
with those of other departments – such as personnel, production, or finance – with whose
management the marketing manager must also communicate to coordinate marketing
efforts.

Marketing personnel must work with the production staff, for example, to help design
products that customer groups want.

To direct marketing activities, marketing managers must communicate with marketing

personnel at the operations level, such as researchers, package designers, advertising and
sales personnel, wholesalers, and retailers.

To facilitate communication within the marketing department, marketing managers

should establish an information system within the marketing department. This system
should allow for easy communication among marketing managers, sales managers, and
sales personnel.

The information system should aid marketers in preparing internal and external reports.
Marketers need an information system to support various activities, such as planning,
budgeting, sales analyses, and performance evaluations.

A useful information system should be designed to expedite communications with other

departments in the organization and to minimize destructive competition among
departments for organizational resources.

CONTROLLING MARKETING PERFORMANCE - MARKETING

STRATEGY

In contrast to mechanical systems, marketing activities are inherently more

volatile. This is due to a constantly changing business environment driven by the
needs and wants of the market. Measuring marketing performances a process of
determining appropriate criteria by which to judge activity. Kotler (1997)
identifies four main areas associated with the control of marketing activity (see
Figure):

Control of marketing activities

 Annual planning :This has the purpose of evaluating the extent to which marketing
efforts, over the year, have been successful. Evaluation will focus on analyzing sales,
 market share,expenses and customer perception. Commonly, sales performance is a
major element of this analysis. All other factors provide explanation of any variance in
sales performance.
 Profitability :All marketing managers are concerned with controlling their profit levels.
By examining the profitability of products, or activities, it is possible to make decisions
relating to the expansion, reduction or elimination of product offerings. Additionally, it
is common to break distribution channels and segments down in terms of profitability.
Remember, it is important to have a systematic basis for allocating cost and defining
profit.
 Efficiency control :Efficiency is concerned with gaining optimum value from the
marketing assets. Managers are looking to obtain value for money in relation to
marketing activity. The promotional aspects of marketing (sales, advertising, direct
marketing, etc.) are commonly subject to such controls. Figure displays examples.
 Strategic control :There is a need to ensure that marketing activities are being directed
towards strategic goals and that marketing is an integral part of the overall process of
delivering value. A strategic review will aim to assess that marketing strategy, and
subsequent implementation, is appropriate to the market place. A review of this nature
will take the form of a marketing audit – a comprehensive examination of all marketing
activity to assess effectiveness and improve marketing performance.

Evaluating and Controlling Marketing Performance

These areas of marketing control are general in nature and specific measures of marketing
performance are required. Performance measures and standards will vary by organization
and market conditions. A representative sample of the type of data required to control
marketing activities successfully is shown in Figure . The aim is to break the general areas
(annual plan, profitability, efficiency and strategy) into measurable component parts to
which responsibility can be assigned.Remember, in the context of marketing a balanced
view is required.
Control of marketing activity
No one variable should dominate the control process. For example, marketing strategists
have been guilty of following a credo of ‗market share at any cost‘.While such a variable is
important, it is not a panacea and consideration needs to be given to other factors such as
profitability. Additionally, marketing control should measure only dimensions over which
the organization has control. Rewards, sanctions and management actions only make sense
where influence can be exerted. Control systems should be sensitive to local market
conditions and levels of competition. For instance, developing markets and mature markets
may require different control mechanisms.
What is annual plan control? Why is it needed in an organisation?
Marketing control

There are four types of marketing control, each of which has a different purpose: annual-
plan control, profitability control, efficiency control, and strategic control.
Annual-plan control

The basis of annual-plan control is managerial objectives—that is to say, specific goals,

such as sales and profitability, that are established on a monthly or quarterly basis.
Organizations use five tools to monitor plan performance. The first is sales analysis, in
which sales goals are compared with actual sales and discrepancies are explained or
accounted for. A second tool is market-share analysis, which compares a company‘s sales
with those of its competitors. Companies can express their market share in a number of
ways, by comparing their own sales to total market sales, sales within the market segment,
or sales of the segment‘s top competitors. Third, marketing expense-to-sales analysis
gauges how much a company spends to achieve its sales goals. The ratio of marketing
expenses to sales is expected to fluctuate, and companies usually establish an acceptable
range for this ratio. In contrast, financial analysis estimates such expenses (along with
others) from a corporate perspective. This includes a comparison of profits to sales (profit
margin), sales to assets (asset turnover), profits to assets (return on assets), assets to worth
(financial leverage), and, finally, profits to worth (return on net worth). Finally, companies
measure customer satisfaction as a means of tracking goal achievement. Analyses of this
kind are generally less quantitative than those described above and may include complaint
and suggestion systems, customer satisfaction surveys, and careful analysis of reasons why
customers switch to a competitor‘s product.
Profitability control

Profitability control and efficiency control allow a company to closely monitor its sales,
profits, and expenditures. Profitability control demonstrates the relative profit-earning
capacity of a company‘s different products and consumer groups. Companies are
frequently surprised to find that a small percentage of their products and customers
contribute to a large percentage of their profits. This knowledge helps a
company allocate its resources and effort.
Efficiency control

Efficiency control involves micro-level analysis of the various elements of the marketing
mix, including sales force, advertising, sales promotion, and distribution. For example, to
understand its sales-force efficiency, a company may keep track of how many sales calls a
representative makes each day, how long each call lasts, and how much each call costs and
generates in revenue. This type of analysis highlights areas in which companies can
manage their marketing efforts in a more productive and cost-effective manner.
Strategic control

Strategic control processes allow managers to evaluate a company‘s marketing program

from a critical long-term perspective. This involves a detailed and objective analysis of a
company‘s organization and its ability to maximize its strengths and market opportunities.
Companies can use two types of strategic control tools. The first, which a company uses to
evaluate itself, is called a marketing-effectiveness rating review. In order to rate its own
marketing effectiveness, a company examines its customer philosophy, the adequacy of its
marketing information, and the efficiency of its marketing operations. It will also closely
evaluate the strength of its marketing strategy and the integration of its marketing tactics.