Professional Documents
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Principles of Marketing 240101 204413
Principles of Marketing 240101 204413
Published by:
Department of Distance and Continuing Education
Campus of Open Learning/School of Open Learning,
University of Delhi, Delhi-110007
Printed by:
School of Open Learning, University of Delhi
DISCLAIMER
Disclaimer
Disclaimer
u Unit 1, Lesson 1 & 3 of Unit 2 and Lesson 2 of Unit 3 are written a fresh
rest of the chapters are edited versions of study material prepared for the
courses under Annual & CBCS Mode.
u Corrections/Modifications/Suggestions proposed by Statutory Body, DU/
Stakeholder/s in the Self Learning Material (SLM) will be incorporated in
the next edition. However, these corrections/modifications/suggestions will
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UNIT-I
PAGE i
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
PAGE
Lesson 3 : Marketing Environment
3.1 Learning Objectives 47
3.2 Introduction 47
3.3 What is Marketing Environment 48
3.4 Micro Environment 55
3.5 Macro Environment 58
3.6 Importance of Marketing Environment 64
3.7 Indian Market and its Environment 66
3.8 Summary 69
3.9 Answers to In-text Questions 70
3.10 Self-Assessment Questions 70
3.11 Suggested Readings 71
3.12 Additional Readings 71
UNIT-II
ii PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
Contents
PAGE
Lesson 2 : Market Segmentation
2.1 Learning Objectives 95
2.2 Introduction 95
2.3 Nature and Significance of Market Segmentation 96
2.4 Bases for Segmenting Markets 100
2.5 Segmentation Strategy 104
2.6 Summary 109
2.7 Answers to In-Text Questions 110
2.8 Self-Assessment Questions 110
2.9 Suggested Readings 111
UNIT-III
PAGE iii
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
PAGE
1.5 Branding 149
1.6 Summary 153
1.7 Answers to In-Text Questions 153
1.8 Self-Assessment Questions 154
1.9 References 155
1.10 Suggested Readings 155
iv PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
Contents
PAGE
UNIT-IV
Lesson 1 : Pricing
1.1 Learning Objectives 195
1.2 Introduction 195
1.3 Meaning of Price 196
1.4 Pricing Policies/Decisions 201
1.5 Pricing Strategies 207
1.6 Summary 211
1.7 Answers to In-Text Questions 212
1.8 Self-Assessment Questions 212
1.9 Suggested Readings 213
PAGE v
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
PAGE
3.6 Answers to In-Text Questions 255
3.7 Self-Assessment Questions 256
3.8 Suggested Readings 257
UNIT-V
vi PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
Contents
PAGE
2.3 Sustainable Marketing 311
2.4 Rural Marketing 317
2.5 Social Marketing 326
2.6 Digital Marketing 330
2.7 Summary 335
2.8 Answers to In-Text Questions 336
2.9 Self-Assessment Questions 336
2.10 Suggested Readings 336
PAGE vii
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
UNIT - I
PAGE 1
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
L E S S O N
1
Nature and Scope of
Marketing
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Meaning and Concept of Marketing
1.4 Nature of Marketing
1.5 Difference Between Marketing and Selling
1.6 Scope of Marketing
1.7 Core Concepts of Marketing
1.8 Evolution of Marketing Concept
1.9 Holistic Marketing Concept
1.10 Summary
1.11 Answers to In-Text Questions
1.12 Self-Assessment Questions
1.13 Suggested Readings
PAGE 3
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
1.2 Introduction
The word Market is derived from Latin word “Marcatus” which means
a place of trade or a place where business is carried on.
Similarly, Marketing is derived from a word ‘Market’ which means a
place or a platform where buyers and sellers come in contact with each
other and help one another to satisfy their needs and wants by inter-
acting, exchanging, buying and selling. This statement easily explains
that a buyer’s need may be some kind of goods or services whereas
a Marketing has emerged as a concept in around 1950’s, this was the
time when preferences of consumers and customers was being given due
importance and that the firm could only earn, if it satisfies its respective
customer’s needs.
Marketing is bringing creativity in the process of selling; it ensures that
something which exists in the market was introduced for a reason. Many
people confuse marketing with just promotion but only a few know that
marketing does not began when a product is ready but it begins much
earlier, when a problem arises and its solution is being desired by the
consumers, marketers come up with a solution which is defined as a
product.
4 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
We see, Marketing Management as the art and science of choosing target Notes
markets and getting, keeping, and growing customers through creating,
delivering and communicating superior customer value.
Marketing is about identifying and meeting human and social needs. The
aim of marketing is to identify consumer needs, convert them into ideas,
products, services and deliver it to end user to satisfy his/her wants by
making optimum use of company’s resources. If we take the example of
E-commerce website eBay that identified that goods can be exchanged
online without actually visiting a market place, it gained popularity as
an idea. The success of eBay has not been hidden from us.
Similarly, Grofers was introduced when a gap between logistics and
delivery to customer was identified.
As we discussed marketing is not just an art but also a science, it can
be made successful only by careful planning and proper execution. Firms
that lack proper marketing campaigns today, are no longer preferred
by customers as they think that these firms lack creativity and are not
adopting new marketing realities.
Experts have analysed that marketing is the activity that can build
strong brand image and a loyal customer base, both contribute heavily to
enhance the value of the firm.
Definitions:
“Marketing is the process of discovering and translating consumer needs
and wants into products and services, creating demand for these products
and services and then in turn expanding this demand.”—H.L. Hansen
“Marketing is the business process by which products are matched with
markets and through which transfer of ownership are affected.”—Edward
W. Cundiff
“Marketing consists of the performance of business activities that direct
the flow of goods and services from producers or suppliers to consumers
or end-users.”—American Marketing Association
“Marketing is a societal process by which individuals and groups obtain
what they need and want through creating, offering and freely exchanging
products and services of value with others.”—Philip Kotler
“Marketing is the performance of activities that seek to accomplish an
organization’s objectives by anticipating customer or client needs and
PAGE 5
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes directing the flow of need satisfying goods and services from producer to
customer or client.”—William D. Perreault and E. Jerome McCarthy
6 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
TAKE A NOTE:
Concept of Customer’s Needs, Wants and Demands
Marketing begins with human needs and wants. Needs are feelings of
derivation of some satisfaction. To exist, people require access to air,
food, drink, clothing, and shelter. These requirements are inherent to
human biology and were not created by marketers.
Wants are desires for satisfaction of needs. Humans have few needs, but
many wants. Families, friends, cultural forces, etc. constantly influence
and re-influence human desires. A want is something one would like
to have; it is absolutely not necessary but it would be good to have.
Your body, for instance, requires fluids to survive. While water is a
wonderful liquid to consume, you might occasionally wish to substitute
milk, fruit juice, or a soft drink to meet this need. As we can conclude
that having fruit juices and soft drinks are not necessary if we are thirsty
so they are considered to be ‘wants’.
Demands are desires for particular goods that are supported by the capacity
and willingness to buy. Demands are created when wants are backed by
purchasing power. By making things appealing, inexpensive, and readily
PAGE 7
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School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
• I physically
Need need water to
survive
• I want clean,
Want safe to drink,
good tasting
water
CASE STUDY
Empowering Customers in Discovering New Tastes and
Experiences: A Case Study of Zomato
Two Bain & Co. workers from Gurgaon, Deepinder Goyal and Pan-
kaj Chaddah (Chaddah), co-founded Zomato in the year 2008 under
the name Foodiebay.com. Goyal got the idea for an online restau-
rant information service after observing their co-workers waiting in
line at the workplace cafeteria each day to browse through a file of
restaurant menu cards to buy food. The menu cards were scanned
and entered into an intranet website. Soon, many workers began
utilising the service. After seeing the high volume of visitors, Goyal
and Chaddah made their website public in 2008. By the end of 2008,
the website foodiebay.com, which listed restaurants in Delhi NCR,
had grown to become the largest restaurant directory in the area.
Foodiebay changed its name to Zomato in 2010. In January 2018,
8 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
Zomato introduced its Zomato Gold service, which allowed custom- Notes
ers to order an additional drink or food item for the price of one
when they were dining in a restaurant. The statistics show that 6,450
restaurants signed up for Gold. Zomato just took things a step further
and added online ordering to Gold too. This is how Zomato came to
the limelight, and now the success of it is not hidden from anyone.
Identifying a problem in the market and looking for its solution gives
us the best products and services.
Questions:
1. According to you, what promotion strategies were used by the
company to make Zomato popular?
2. Can you identify some of the advantages of food delivering
apps?
3. What is the road ahead for a company like Zomato? Share your
views.
PAGE 9
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
10 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
I. Goods: These include all of the consumer and producer items that Notes
are bought and sold in the market, such as fruits, vegetables, soft
drinks, clothing, bikes, televisions, refrigerators, and other equipment.
II. Services: These include expert services provided by doctors, lawyers,
chartered accountants, electricians, and others, as well as other
services like banking, insurance, transportation, etc. Nowadays,
marketing services is a crucial aspect of doing business.
III. Ideas: Similarly promoted are concepts like “no smoking,” “Save
Environment,” “Say no to plastic bags,” “stop polio,” etc. Advertisements,
street plays, and other methods are used to influence the target
population to adopt such viewpoints.
IV. Persons: Everyone is marketed, including singers, CEOs, doctors,
attorneys, and politicians. For instance, during an election campaign,
voters are convinced to support a candidate.
V. Places: Another typical trend of the day, is the marketing of locations.
Travel and tourism companies encourage people to visit a variety
of tourist and health destinations, including Kashmir, the Taj Mahal
in Agra, the Pink City in Jaipur, Europe, Singapore, and others. It
is also known as destination marketing.
VI. Organisations: Numerous organisations, such as social, political,
religious, and educational ones, advertise themselves to enhance
their reputations and raise awareness of their initiatives. Many
Universities have also appointed Chief Marketing Officers (CMO)
positions to better manage their school identity and image, via
admission brochures, social media platforms, hoardings etc.
VII. Properties: Real estate and financial properties (stocks & bonds)
are also marketed. As people are now engaging more and more
in buying and selling of financial instruments, they need to be
informed what’s new in the market and how can they easily trade
these securities and so performing marketing activities becomes a
necessity for the company.
VIII. Events: Time-based events like trade fairs, artistic performances,
sporting events, theatre performances, etc. are promoted by marketers.
The Olympics and the Cricket World Cup are two international
sporting events that are heavily advertised to businesses and fans.
PAGE 11
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes Farmers markets, craft fairs, and book fairs are a few examples of
local events.
The scope of marketing can be understood in terms of functions that an
entrepreneur has to perform. These include the following:
u Exchange Function: This function includes function of purchasing,
developing, and selling of goods and services.
u Supply Function: This includes warehousing, storage, delivery and
transportation of goods and services.
u Facilitation Function: Product development, branding, packaging,
grading, standardisation, marketing research, sales promotion, and
financing.
12 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
PAGE 13
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes After Sales Services and Feedback: The provision of after-sales service
is essential for ensuring that consumers are satisfied. After sales service
includes free repairs, the ability to return or replace a product throughout
its guarantee term if it turns out to be damaged or useless, and other
similar services. In today’s scenario after sales service is a game changer
for a business. Customers recommend those brands to others, which offer
good after sales services, have good reviews for their products and have
an understanding and alert customer care team.
14 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
their targget market, build
b a relattionship withh them, asceertain their wants,
w and provide
p themm
with the goods and services that will satisfy tthose demannds. The person who deccides to buy a
product or o who payss for it is typpically referrred to as thee customer. Numerous
N teerms, such as
a
client, traaveller, subsscriber, readeer, guest, annd student, caan be used to characterise customers.
The term minology cann convey infformation abbout the relaationship bettween a com mpany and itts
customerrs. For exam mple, the terrms "patient"" and "passeenger" suggest a caringg relationshipp,
"client" implies
i a cusstomer seekiing advice annd help in a formal or innformal way respectivelyy.
ThePRINCIPLES
coree conceptsOF o MARKETING
of market aree not limitedd to need, wants
w and deemands of customers
c buut
they exteend to produucts and serrvices providded, marketss where thesse are to be sold, moneey
paid for them
t and even the satisffaction proviided by thesee products.
Notes
Value, Exchange,
Nee
ed, Wants Transacctions
Produccts saatisfaction Markets
& Demand &
and Quality
Relation
nships
Figure
Fig 1.2 : Core
1.2: Core Concepts
Cooncepts M of Marketing
of Marketing
Each customer in a market has a unique set of wants that they are try-
ing to meet. A business would need to modify its offering 13to| Psuit a g e each
customer’s wants
© Departme inDistanc
ent of orderce &to beuing
Continu truly marketing-oriented.
Education, Campus off Open Learniing,
School of Open Learrning, Univerrsity of Delhi
1.7.2 Products
Products satisfy people’s needs and desires. A product is anything offered
to meet a need or desire. The product concept is not limited to goods.
Anything that can meet a need can be called a product. More broadly,
products include experiences, people, places, organizations, information,
and ideas. The term product therefore includes more than just physical
goods and services. Consumers decide which events to experience, which
PAGE 15
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes attractions to visit, which hotels to stay in, and which restaurants to
visit. For consumers, these are all products. All products are made at a
cost and sold at a price. The price charged varies by market in which
the product is being sold, quality, marketing techniques being used, and
target segment.
16 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
1.7.5 Markets
The term “market” is traditionally used to describe the place where people
or buyer’s shop. Here, vendors meet customers to exchange goods and
services (e.g. a vegetable market). But here a market can be defined as the
set of actual and potential buyers of a particular product or service. For
creating these relationships, marketers must perform the following tasks:
I. Searching for buyers and their needs,
II. Designing useful market offerings or products,
III. Setting prices for them, promoting them, and
IV. Function of warehousing and delivering the products and services
PAGE 17
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
18 PAGE
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
Principples of Mark
keting
The mark keting conceept refers to any strategyy that a businness aims too use to increease profit by
b
growing sales, satisffying custom mer wants, anda outperfo orming rivalss. The idea is to create a
scenario that benefitss both the cliient and the business. Thhe goal of thhe marketing
g concept is to
t
anticipatee and fulfil customers'
c needs and dessires more effectively thhan the comppetitor.
PRINCIPLES OF MARKETING
Marketinng Concept evolved from various oother conceppts such as the producttion Conceppt,
product concept
c and selling conccept.
Notes
Societal
Marketing
Marketingg
Concept
SSelling
Concept
C
Produ
uct
Conce
ept
Production
Concept
PAGE 19
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
B.Com
m. (Program
mme) / B.Com
m. (Hons.)
Notes miss or fall short in their attempts to appeal to consumers whose needs
are influenced by other criteria like price, availability, usability, etc.
This ideaa operates under
u the preesumption thhat consumeers like "highher quality" products annd
that However,
"price and firms sometimes
avaiilability" ve nofall
hav into
bearin thetheir
ng on trap.choice
Theyto are
buy.knowledgeable
As a reesult, the firm
m
and skilled at producing goods. They give too much attention to their
spends he
th majority of its time c
creating a hiigher-quality
y product, w
which turns o
out to be morre
expensiv ve. Since
product andpro oduct
not quality
enough ytois the
the mar rketers'
needs of prim
themary concern
market n, they
and frequ
uentlyAs
consumers. miss or
o
fall ashor
result, while items are creative, they lack enthusiasts. As a result poor er
rt in their attempts
a to a
appeal to co
onsumers w
whose needs are influen
nced by othe
criteria liikeoccur
sales price, for
avvailability, ussability, etc.
these products.
However r, firms in
Companies som
metimes falll intosector
the technology the trap.
oftenThey are knowl
experience a ledgeable annd skilled
lot of change due at
producinng goods. Thhey give too much attenttion to their product andd not enoughh to the needds
to new innovations taking place every day, these firms often focus on
of the maarket and coonsumers. Ass a result, whhile items arre creative, thhey lack entthusiasts. As a
product
result concept.
pooor sales occu
ur for these products.
p
Companies in the tecchnology sector often exxperience a lot of changge due to new
w innovationns
1.8.3 Selling Concept
taking pllace every daay, these firm
ms often foccus on produ
uct concept.
1.8.3Production
Sellling Concep
andptproduct concept both focus on production, but the selling
concept
Producti on andfocuses
prodducton actually
concept both making
focus oon aproductio
sale of
on,the
but product.
the sellingThe
conceconcept
ept focuses on
o
of sales aims to take every possible step to sell the product, regardless
actually making a saale of the prooduct. The cooncept of salles aims to taake every poossible step tot
of the
sell the p quality
product, of theofproduct
regaardless or of
thee quality thettheneed of or
product othetheconsumer.
need oof the consummer.
The main focus of the business is on making money, and not on building
long term quality relationships with the customers. Companies that fol-
The mainn focus of th he business is on makinng money, and a not on building
b long
g term qualitty
low hips
relations this with
concept even try
t custome
the ers.toCompan
trick nies
customers into this
that folllow buying theireven
cooncept products.
n try to tricck
Companies
customer that
rs into buyin follow
ng their this philosophy
prooducts. Com takefollow
mpanies that a short-sighted
this philosophyapproach
take a shorrt-
because
sighted a theybeccause
approach “try to sell
they "ttrywhat they
to sell whhatmake, not
they makke,what thethe
not what market
marketwants.”
w
wants."
This conncept is used for items that consum mers don't normally
n need, items th hat they donn't
Thisbuy
usually b concept
such asisinsurance,
used for etc.
items that pproducts
These consumers don’t normally
are forcibly need,
sold by findinng items
the desireed
that they don’t
fragmentt of customeers. usually buy such as insurance, etc. These products are
forcibly
Compan sold ybyapply
ies typically finding cthe desired
this concept wheen fragment of customers.
they havee excess cappacity of stocck with themm.
Instead
Companies typically apply this concept when they have excess capacity ts.
o
of piling up in
i warehous ses and increeasing costs, they activelly promote th
heir product
Firms
of us
se technique
stock with esthem.
likes Instead
advvertising, salles promotio
of piling up inon, personall selling,
warehouses etcc. to promote
and increasing
18 | costs,
P a g e they actively promote their products. Firms use techniques likes
20 PAGE © Departm
ment of Distannce & Continuuing Educatioon, Campus of Open Learn
ning,
Schooll of Open Lea
arning, Unive rsity of Delhi
© Department of Distance & Continuing Education, Campus of Open Learning, i
School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
advertising, sales promotion, personal selling, etc. to promote their man- Notes
ufactured products. Selling products using aggressive promotion methods
is not always successful. It’s easier to sell what customers want than to
sell what they don’t want.
PAGE 21
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes may follow anything other than the market orientation principle, those
that do have a better chance of success.
The following characteristics define the marketing concept:
1. Customer Orientation: Marketing begins with determining what the
customer wants. It is based on the notion that corporate success
can only be accomplished by discovering, anticipating, and meeting
consumers’ needs and aspirations. “The purpose of a business is to
create customers,” said Peter Drucker. “What business is determined
by the customer.”
2. Marketing Research: Knowledge and awareness of customers’ needs,
wants, and preferences are critical in the marketing concept. To stay
on top of the market, a frequent and methodical marketing research
program is essential.
3. Integrated Marketing: The marketing concept requires businesses to
operate in an integrated manner. To achieve set goals, the activities
and operations of multiple organizational units must be adequately
coordinated.
4. Long-term Perspective: The marketing idea strives to grow the firm
and earnings over time. The goal is to develop long-term connections
with clients and keep them in the future.
Significance of Marketing Concept
The ‘Marketing notion’ arose from customer-oriented marketing. Customer
creation and satisfaction is the justification for business, according to
this ideology. In other words, the product is designed to meet the needs
of the consumer rather than the availability of resources and tools. The
application of the marketing concept results in the following advantages:
1. Product Acceptability: When a company provides a product that meets
the needs of its clients, the demand for promotion is minimized,
which raises the product’s acceptability. It also minimizes the
likelihood of a business becoming a sick unit.
2. Changes in the Environment: The company pursuing the marketing
strategy can effectively respond to changes in the environment.
It will deal with competition, new technologies, and a changing
environment effectively.
22 PAGE
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PRINCIPLES OF MARKETING
PAGE 23
© Department of Distance & Continuing Education, Campus of Open Learning,
School of Open Learning, University of Delhi
IN-TEXT QUESTION
NS
• Custom mer perceivved value iss equal to benefits
b deriived from a product
divideed bycost of acquiring thhe product. True/
T False
• This concept
c ms to take every posssible step tto sell the product,
aim
regard
dless of the quality
q of thee product or the need off the consum
mer. Name
the Cooncept? B.COM. (PROGRAMME)/B.COM. (HONS.)
• Is marrketing is a multi-discipl
m inary approaach? Yes/ Noo
• This idea
i operatees under thee presumptiion that connsumers likee "higher
Notes 1.9 Holistic Marketing
quality
y" products. Name theConcept
cooncept.
• Value and satisfacction is not included un nder core cooncepts of marketing
m
“The Holistic Marketing Concept is based on the development, design
1.9 and
H implementation
HOLISTIC C MARKE ofETING
marketing
CO processes, programmes, and activities
ONCEPT
that understand its depth and interdependencies.” Like a human body, a
"The Hol listic Market
business hasting Concep
many pt is based
different onn thebut
parts, develop
likepment, desiggnbody,
a human and imple
it ementation
can only of o
marketinng processees, program mmes, and activities that undeerstand its depth annd
function well when all of those parts cooperate to achieve the same goal.
interdepeendencies." Like a hum man body, a business has h many diifferent partts, but like a
humanThebody,holistic omarketing
it can only functionnidea
wellupholds
whenn allthis interconnectedness
of thosee parts coopeerate to and holds
achi that
ieve the sam
me
the
goal. The greatestmaarketing
e holistic outcomesideaarequire
upholdsa thhis
wide-ranging, comprehensive
interconnnectedness annd holds tha viewpoint.
at the greatesst
outcomes s requiremarketing
Holistic a wide-ranging
w g, comprehen
believes that nsive viewpoint.
everything Holistiin
matters c marketing
marketingg believes
and athaat
everythinng matters
broad in
n marketingviewpoint
and integrated and a broaddisand integra
always ated viewpoito
necessary int run
is always s necessary tto
a business.
run a bussiness.
21 | P a g e
Figure 1.5: Holistic Marketing Dimensions (Philip Kotler)
© Departmeent of Distancce & Continuuing Education, Campus off Open Learniing,
Let’s discuss the School
aboveof Holistic marketing
Open Learrning, dimensions:
Univerrsity of Delhi
Relationship Marketing: It is an essential part of holistic marketing.
Establishing a long-term relationship with clients is important for mar-
keters. Relationship marketing is the act of establishing long-term, mu-
tually rewarding relationships with various types of customers in order
to obtain and maintain consumer loyalty. Relationship marketing’s main
objective is to keep existing customers and win back lost ones. In order
to provide value to the customers and profit to the business, this mar-
keter has to make consistent and long-term efforts. Four constituents of
relationship marketing are: Customers, Employees, Marketing partners
and financial community. A marketing network is to be created keeping
all of them in loop.
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PRINCIPLES OF MARKETING
1.10 Summary
Marketing involves finding out what customers wants, planning and
developing a product or a service that will satisfy those wants and
determining the best way to price, promote and distribute this product
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Notes or service. Since the industrial revolution, the concept of marketing has
undergone significant changes. Marketing concept evolved from production
to societal marketing concept. Activity of marketing is totally different
from selling as selling focus on seller’s needs but marketing focuses on
buyers needs and satisfaction. With liberalisation and globalisation, the
availability of products and services has increased so the producer who
knows the right marketing game can only grow in the market. The scope
of marketing has also widened and therefore a balanced combination of
7 Ps of marketing will be needed for all future products and services.
1. Demands
2. (c) Marketing is business
3. Understand Customer needs
4. True
5. Selling Concept
6. Yes
7. Product Concept
8. False
9. “Marcatus”
10. True
11. Relationship Marketing
12. Marketing is Dynamic
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PRINCIPLES OF MARKETING
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L E S S O N
2
Marketing Mix
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Marketing Mix
2.4 Service Marketing
2.5 Summary
2.6 Answers to In-text Questions
2.7 Self-Assessment Questions
2.8 References
2.9 Additional Readings
2.2 Introduction
As mentioned in a previous section, the marketing process requires developing a market
offering to meet the needs and preferences of both current and potential customers. The
actual issue is how to develop a product for the market. Many different things influence
marketing decisions. These can be broadly classified into two categories first elements that
can be controlled and secondly those that cannot be controlled, which we will address
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PRINCIPLES OF MARKETING
in the upcoming section. The components of the marketing mix will be Notes
covered in this lesson, along with how they have evolved to keep up
with modern demands. The four Ps of marketing—commonly referred to
as the four categories into which the marketing mix has been generally
classified—are made up of Product, Price, Place, and Promotion.
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Notes I. Marketing Mix promotes synergy: When the four marketing pillars
are properly combined, they produce coordination, give the product
a good pitch, and work more effectively as a unit than they would
separately.
II. Guides in decision making: Marketing mix is crucial in helping us
make decisions. For instance, the promotion of a product will be
done appropriately if it is based in a remote area. As a result, the
product’s quality and price will also be decided accordingly.
III. Creation of brand loyalty and value: the product gains the consumer’s
loyalty and trust by putting a primary emphasis on meeting their
wants and expectations while also ensuring their satisfaction and
this can only be achieved with the blend of all 7P’s of marketing
mix.
IV. Higher Sales: The more improved customer satisfaction and better
the market scale will consecutively lead to higher sales volume.
Product
People Price
Process Promotion
Physical
Place
Evidence
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PRINCIPLES OF MARKETING
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PRINCIPLES OF MARKETING
PRODUCER CONSUMER
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Notes (b) One Stage Channel of Distribution: Here there is one middleman
i.e., the retailer facilitates the sale.
PRODUCER RETAILER CONSUMER
PRO
ODUCT PR
RICE
PLAACE/
PROM
MOTION PHYYSICAL
DISTRIIBUTION
•Advertising •Channels of distribution
•Publicitty •Warehousing
•Public policy
p •Logistics
•Sales Prromotion •Inventory
•Direct Marketing
M •Market Coveerage
•Digital Marketing
M
Fig 2.2: 4 P
P’s of Marketing
Phillip Kotler
K Figure 2.2: 4 P’s of Marketing
has given
g an exttended versiion of markketing mix, w which will also apply to t
services. These are discussed
d bellow:
Phillip Kotler has given an extended version of marketing mix, which
5. P
People:Becau
c
crucial
use they proovide the serrvice to custtomers, the company's
to maarketing. No
c
o matter if thhey work at a help deskk, in custom
e
employees arre
mer service, as
a
will also apply to services. These are discussed below:
c
copywriters, programmers, etc., it iss critical to hire and traain the relevvant people to
t
p
provide cliennts with outsstanding servvice. Findingg people whho sincerely believe in thhe
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes they are far more likely to give their best effort in making the sale
possible. The organisation should also ask and accept the feedback
provided by its employees and should also provide proper training
and development sessions to these personals.
6. Process: It refers to the business procedure through which a client’s
service is delivered. It becomes vital to regularly monitor the
procedure of delivering a service, in order to catch any errors and
prevent them on time. Examining the process means assessing aspects
such as the sales funnel, payment systems, distribution procedures,
and customer relationships management. A smooth and error free
business process will ensure minimum cost and maximum profit
to the owner. Some examples are the volume of queries the sales
force receive in a day and locations to which they refer consumers
for assistance, how performance is tracked and measured, it also
discusses which steps in the process can be customised for each
customer and which are standardised for everyone.
7. Physical Evidence: In marketing, maintaining physical evidence
involves maintaining evidence/proof that a service or purchase was
made, as well as evidence or validation of the brand’s presence.
Physical evidence offers observable indicators of the standard of the
services a business is providing. These are considered useful when
a customer has never purchased from a particular organisation and
needs assurance. For e.g.: Physical evidence for a restaurant could
be the atmosphere, staff clothing, food menus, and online reviews
to show what kind of experience should be expected, for an agency,
its website, customer testimonials, etc. hold as valuable physical
evidence.
The integration of these 7 P’s help us to stand out against competitors
and offer products that will satisfy customers needs and consequently
help us to earn more goodwill and profit.
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PRINCIPLES OF MARKETING
CASE STUDY
Marketing Mix of Sony
One of the biggest media empires in the world is thought to be Sony
Corporation. During its evolution, it went through three key phases:
small producer, specialised, and large monopoly. Sony’s goods are
designed with a variety of people and businesses in mind, which
enables them to appeal to a large audience. Customers are constantly
on the lookout for high-quality brands. They are also able to compete
successfully and thrive in the market because of a big range of their
products. The quality of Sony Corporation’s products is typically
reflected in their pricing. For a fantastic product, consumers are willing
to pay the average price. As a result, they utilise a variety of ways
to sell their goods. This brand caters to every customer interested in
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Notes their products using the three distribution branches namely exclusive,
selective, and intensive. Speaking about promotion, Sony Corporation
has a sizable promotional expenditure that includes public relations,
advertising, personal selling, sales promotion, and direct marketing.
Promotion boosts consumer demand andraises the calibre of the
goods. As a result, this brand utilises the marketing mix’s various
elements successfully.
ACTIVITY
Students are required to prepare a marketing mix for one tangible
and one intangible product or service. Include all the seven elements
of marketing mix that we have discussed above. For example, If
we take Maggi noodles as a tangible product, we will talk about its
branding, labelling and packaging in the first P i.e., product, then its
price, its distribution as we see it is very easily available in nearby
stores, then comes promotion techniques used by the company to
promote Maggi, its customer service (people), are different process
being followed by the company, running smoothly and what is the
evidence that a consumer enjoys Maggi?
IN-TEXT QUESTIONS
1. Marketing Mix has only three elements. (True/False)
2. In marketing, maintaining ____________involves maintaining
evidence/proof that a service or purchase was made.
3. Following are the components of a product mix:
(a) Packaging, labelling, and branding
(b) Advertisement
(c) Wholesaler and retailer
(d) Skimming pricing
4. ______________might include advertising, sales promotion,
personal selling, public relations, etc.
5. During the introduction stage, focus is on attracting more and
more customers towards the product therefore, a good amount
of money is spent on advertising and other promotion tools.
(True/False)
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Notes For example, you can enjoy good food and comfort at a hotel but
cannot own purchase that comfort and bring it to your house.
3. Perishable: A service is considered a perishable product because,
unlike goods that survive a long time, it is likely to expire quickly.
This is due to the fact that a service is only rendered for as long
as a customer is present at the location where it is being provided.
Due of the rapidly perishable nature of services, many audience
members are difficult to persuade. Markets need to be very careful
and conscious while promoting intangible products like services.
4. Inseparability: Services cannot be separated from the service provider.
In contrast to a product, which a buyer can physically own, a service
is an integrated whole that must seem intriguing enough to the
audience to be consumed. A service at a beauty parlour, for example,
is linked to its creators and cannot be separated from them.
5. Variability: In contrast to standardised products, services have
different nature despite using the same personnel, processes, way of
work, etc. Even when the same service is used, different customers
may have distinct experiences. A telecom user, for instance, can
have a different experience with the same service provider.
M
mi
ak
ro
ing
eP
ng
Ex
th
eti
ter
th
eP
ark
na
Service
g
lM
M
lin
ro
al
ark
mi
ab
Marketing
ern
eti
se
En
Int
ng
Triangle
Interactive Marketing
Employee Customer
Delivering the Promise
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People : Your firm depends greatly on its employees and workers as well Notes
as on your goals, corporate vision, and guiding values. The employees who
work for you are in charge of generating satisfied and loyal customers.
Your company’s employees are the centre of the calibre of its services,
so they must possess the best skills to win the trust and loyalty of its
consumers. They are the service providers, therefore they are the most
important aspect of service marketing.
Process : A key component of your service plan is how effectively your
services are provided to the consumer, thus you must place a strong em-
phasis on creating a process for achieving this. Companies compete with
one another to provide services as fast, effectively, and with the highest
quality possible in today’s competitive market. We have seen how blink
it, zepto, swiggy instamart are competing to deliver the service faster
than other.
Physical Evidence : When providing your services, one can either do it
impersonally or by differentiating your offering by including a component
that will pleasure the customer. For example, would you rather visit a
bookshop with only a rack of books and a cashier sitting nearby, or one
with a seating area where you may explore the book you’re interested in
and listen to soft music while you make a decision? The physical evidence
of a service includes things like the ambience of a store or restaurant, the
music, your travel host’s welcoming face, etc. These things are crucial
components of the service marketing mix.
IN-TEXT QUESTIONS
6. A _______is any activity or benefit that one party can offer
to another that is essentially intangible and does not result in
the ownership of anything. The language to be used for this
purpose should be hard. (True/False)
7. What do you think is challenge for marketer, in case of service
marketing:
(a) Creating trust in the customers
(b) Process of providing the service
(c) Providing customization
(d) All of the above
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2.5 Summary
The term “marketing mix” refers to the combination of a product, price,
place (distribution), promotional activities, people, process, and physi-
cal evidence. Anything that may be sold to a market to fulfil a need is
considered a product. In addition to tangible goods and services, it also
covers additional services like packing, installation, after-sale services,
etc. Price is the consideration that consumers pay in monetary terms for
advantages they receive from using a product or service. Cost, demand,
competition, marketing goals, and governmental regulations all have a
role in determining how much a product costs. Distribution channels serve
as a crucial link between producers and end users/consumers. It also
includes the middlemen and agents involved in the transfer of products’
ownership. Marketing professionals utilise promotion as a functional kind
of communication to share information and persuading messages with
potential customers. Because they provide the service to customers, the
company’s employees are crucial to marketing. No matter if they work
at a help desk, in customer service, as copywriters, programmers, etc.,
it is critical to hire and train the relevant people to provide clients with
outstanding service. Process refers to the business procedure through
which a client’s service is delivered. In marketing, maintaining physical
evidence involves maintaining evidence/proof that a service or purchase
was made, as well as evidence or validation of the brand’s presence.
“A service is any activity or benefit that one party can offer to another
that is essentially intangible and does not result in the ownership of any-
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PRINCIPLES OF MARKETING
1. False
2. Physical Evidence
3. (a) Packaging, labelling, and branding
4. Promotion
5. True
6. Service
7. (d) All of the above
8. Inseparability
9. Place
10. Promotion
11. Societal concept
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2.8 References
u Kapoor, Neeru, Principles of Marketing, PHI
u Kotler, P., Armstrong, G. and Agnihotri, P. (2018), Principles of
Marketing (17th Edition), Pearson Education. Indian Edition.
u Kotler, P. & Keller, K. L. (2017), Marketing Management, Pearson
u Chhabra, T.N. (2014), Principles of Marketing, Sun India Publications
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L E S S O N
3
Marketing Environment
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 What is Marketing Environment
3.4 Micro Environment
3.5 Macro Environment
3.6 Importance of Marketing Environment
3.7 Indian Market and its Environment
3.8 Summary
3.9 Answers to In-Text Questions
3.10 Self-Assessment Questions
3.11 Suggested Readings
3.12 Additional Readings
3.2 Introduction
Marketing operations must be carried out in a specific setting. By attentively studying
the environment, it is necessary to scan for and identify the marketing opportunities and
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Notes
threats. In the context of a specific marketing environment, the marketing
mix is also chosen. Marketing managers must consider these forces while
making marketing decisions even when they have no control over them.
The environment in which they are operating must be carefully observed
by marketers as they have to develop their marketing plans accordingly.
You will learn about the elements that make up the marketing environ-
ment in this lesson.
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PRINCIPLES OF MARKETING
(2) Relative: Each firm has a particular marketing environment that is Notes
distinctive. It explores the causes of variations in demand between
nations. Due to differences in the marketing climate, a certain
product from your business might sell more quickly in the U.S. than
in India. Sarees, for instance, are in high demand because they are
the women’s traditional clothing in India. The demand for sarees,
however, may be nil in any other western nation.
(3) Uncertain: It suggests that the nature of market forces is unpredictable.
To develop strategies and revise their plans, every marketer strives
to anticipate market forces. Given how frequently things change,
some of them could be challenging to anticipate. For example,
fashion preferences among customers shift regularly. As a result,
the fashion sector faces a lot of uncertainty. The style may only
last a few days or it may last for years.
(4) Complexity: It suggests that a variety of factors, circumstances, and
impacts are present in the marketing environment. The marketing
environment is complicated in nature due to the interactions between
all of these components.
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PRINCIPLES OF MARKETING
The study of environmental evaluations enables the firm to select the Notes
optimum alternative for the firm’s performance and growth.
SWOT
Strengths Weaknesses
What do you do well? What could you improve?
What unique resources can you draw on? Where do you have fewer resources than others?
What do others see as your strengths? What are others likely to see as weaknesses?
Opportunities Threats
What opportunities are open to you? What threats could harm you?
What trends could you take advantage of? What is your competition doing?
How can you turn your strengths into opportunities What threats do your weakness expose to you?
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PRINCIPLES OF MARKETING
The expenses and pricing of the goods and services marketed are direct- Notes
ly influenced by tax legislation, such as sales tax, excise duty, octroi,
income tax, etc. Likewise with the import and export policies. Thus,
political stability increases businessman’s confidence to make long-term
investments for the expansion of the economy. Political unrest may
undermine that assurance. In a similar vein, how government officials
view business may have a favourable or bad effect on it. For instance,
foreign companies found it very challenging to obtain permissions for
conducting business in India even after our economy was opened to the
world in 1991. Even the processing of their application for this purpose
took months. Over the time, this situation was improved.
As we discussed above that tax policies, environmental laws, trade
reforms and restraints, tariffs, and political stability are all examples of
political factors. These elements determine how much a government can
affect a sector or a business. For instance, the government might intro-
duce new tax laws that could completely alter a company’s mechanism
for earning money.
Factors under political environment:
(a) Government stability.
(b) Freedom of press, rule of law and levels of bureaucracy and
corruption.
(c) Tax policy, and trade and tariff controls.
(d) Environmental and consumer-protection legislation, etc.
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Notes and pay rates are all considered economic issues. These variables affect
a company immediately and have long-lasting impact on the success of
the economy. If we take another example, A rise in the rate of inflation
in any economy would have an impact on how much businesses charge
for their goods and services. Additionally, it might disrupt the demand
and supply models for that economy and have an impact on consumer
purchasing power. Economic factors are also connected with supply and
demand of money and relate to financial variables of the economy.
Factors under economic environment:
(a) Inflation: It affects consumers’ demand for various goods as price
rises and purchasing power is affected in an economy. For instance,
decreased demand for autos is a result of increasing gas prices.
(b) Unemployment: It results in a state of no income, which has an
impact on a person’s ability to make purchases which in turn has
a effect on the economy.
(c) Financial and monetary policy: It has an impact on all enterprises.
While fiscal policy regulates government expenditure in many
areas by obtaining revenue from the people by taxing their income,
monetary policy stabilises the economy by regulating interest rates
and the money supply in an economy.
(d) Interest rates: They control the organization’s borrowing activity.
For instance, a rise in loan interest rates might force businesses to
downsize its future activities or plans.
(e) Customer Income: It controls a customer’s purchasing habits.
Customers’ purchasing habits alter in response to changes in their
income.
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PRINCIPLES OF MARKETING
items has gone unexplored. The Indian market can be divided into Notes
four sections based on region:
u Northern market
u The southern market
u Western market
u The Eastern market
2. Rural Market: The vast majority of Indians reside in rural areas. As
a result, rural markets have a substantial impact on the company’s
marketing approach.
3. Cultural & Religious: India is a country with various religions,
each with its own culture, and the majority of Indians are religious.
People’s habits are influenced by their culture. As a result, it must
be considered before determining what to sell. For example, Jainism
strictly prohibits the intake of meat. As a result, selling meat in
areas where Jains live is problematic.
4. Economic Situation: India is one of the world’s fastest growing
economies. Every year, the standard of living rises. This shows
that our country has a plethora of marketing options.
5. Government: India has a mixed economy, which means that the market
is neither completely free (Capitalism) nor completely controlled
(Socialism). Because the government promotes consumerism,
marketers are gradually accepting the marketing notion.
6. Intermediaries: There are two types of distribution systems in India.
They are as follows:
(a) Public distribution system, in which necessary items are sold
directly to customers by government organizations.
(b) An open distribution system in which products are sold on
the open market. In our country, the classic open distribution
system is used. The distribution chain is one of the most
efficient in the world. In our country, the intermediaries are
wholesalers, retailers, brokers and so forth.
7. Press: India’s press is not as sophisticated as that of wealthy countries.
The majority of newspapers and periodicals are owned by large
corporations.
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PRINCIPLES OF MARKETING
strength. Coke, for example, acquired Parle drinks to compete with Notes
Pepsi.
IN-TEXT QUESTIONS
6. ‘P’ in PESTEL refers to ‘Political environment’? (True/False)
7. ‘Age’ is a factor under _______________ environment.
8. Which of the following is not a part of macro environment:
(a) Suppliers
(b) Political Environment
(c) Demographic environment
(d) Economic Environment
9. ____________________ macro environment factor consist of
inflation, unemployment, monetary policy and fiscal policy.
10. Which is the new ‘E’ added in PESTELE?
3.8 Summary
Every corporate organization’s marketing strategy is influenced by a wide
range of external, uncontrollable circumstances. ‘The players and outside
influences that influence a company’s marketing management’s capacity
to establish and sustain successful business relationships with its target
customers are referred to as the marketing environment. These environ-
mental elements can be divided into macro and micro environments.
The term “micro environment” refers to an organization’s immediate
surroundings, or those environmental elements that are in its immediate
area. They consist of the company’s own production and customer service
capabilities, as well as those of its dealers and distributors, competitor
businesses and customers. Larger societal forces make up the macro en-
vironment and can be arranged in an outer circle. These include forces
relating to the population, the economy, the environment, technology,
politics and culture. These influences have an indirect impact and fre-
quently take time to reach the organisation. While the business has no
control over macro environmental issues, it does have some control
over micro environmental factors. The business must regularly scan the
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes ever-changing environment and create marketing mix tactics that reflect
the latest advances and trends in the industry.
1. Yes
2. False
3. (d) All of the above
4. Dynamic
5. True
6. True
7. Demographic
8. (a) Suppliers
9. Economic environment
10. Ethical Factors
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PRINCIPLES OF MARKETING
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UNIT - II
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L E S S O N
1
Consumer Behaviour
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Introduction to Consumer Behaviour
1.4 Need for Studying Consumer Behaviour
1.5 Types of consumer Behaviour
1.6 Factors Influencing Consumer Buying Decisions
1.7 Consumer Buying Decision Process
1.8 Summary
1.9 Answers to In-Text Questions
1.10 Self-Assessment Questions
1.11 References
1.12 Suggested Readings
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Notes These two terms are used interchangeably by common people but these
carry the following differences:
Basis Customer Consumer
Definition A person who buys the A person who uses or
products and services actually consumes these
from a shop or a business products and services.
for resale, gifting or
consuming.
Motive of buying The motive of buying The motive of buying is
is either for resale or purely for consumption
for consumption
Ability to resell A customer can definitely A consumer do not resell
resell the product for a product for making
making profit. profit.
Payment Customers always need Consumers may or may
to make the payment not pay the price of the
for buying a product product i.e., monetary
or service transaction is optional.
Examples Organisations, individ- An Individual or entity
uals, parents, or anyone that uses a product
of purchases a product or service. They are
or service. termed as end-users of
the product.
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Notes 8. Development of new products: New products are created with the
target market’s demands and preferences in mind. A marketer needs
to have a solid understanding of the market in order to create the
best-fit product. The foundation for effectively producing a new
product is hence the research of consumer behaviour.
IN-TEXT QUESTIONS
1. Studying consumer behaviour helps the marketer in development
of new products. (Yes/ No)
2. Which of the following points explain the importance of studying
consumer behaviour:
(a) Helps in consumer differentiation
(b) Deals with dynamic nature of market
(c) Retention of consumers
(d) All of the above
3. Customers are those who buy products for their own needs and
use them. (True/ False)
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PRINCIPLES OF MARKETING
Notes
Complex Variety-seeking
e.g. buying a house e.g. trying a
new restaurant
Habitual
Few brand
differences
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it after doing some research, and at the point of consumption forms Notes
an opinion about it. In this instance, a client exhibits a low level
of involvement by hopping between companies out of curiosity or
desire for variety rather than displeasure. For example, individuals
might purchase soap without giving it any thought. They’ll pick a
different brand the next time to switch up the fragrance. Example
of products used under this behaviour are soaps, cosmetics, food
items, etc.
ACTIVITY
Make a list of items that you and your family purchased in past
2-3 months and classify the behaviour highlighted by you and your
family members in the above four mentioned behaviour. For example:
If your father purchased a car, it would be classified under complex
consumer behaviour.
Savings, family
Economic
income, credit,
Factors
etc.
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Notes
1.6.1 Psychological Factors
A key factor in determining customer behaviour is human psychology.
These elements have the potential to affect a buyer’s choice despite being
difficult to measure. Consumer preferences, likes and dislikes for a given
product and set of services are heavily impacted by human psychology.
Psychological factors include motivation, perception, Attitudes and beliefs
and learning.
(a) Motivation: It is the positive force that influences an individual
to perform a certain action. Motivation also affects the purchase
decisions of consumers. A consumer’s motivation to purchase goods
and services can be influenced by their physiological (necessities)
and security needs.
(b) Perception: Perception means gathering information about something
and then forming one’s own views on a particular domain. Perceptions
in marketing can be formed by using different tools of promotion
namely advertising, personal selling, digital media, etc. If a consumer
forms a positive perception about a brand, it will surely influence
his buying decision.
(c) Learning: A person gains greater knowledge about a product when
they purchase it. Over time, via experience, we learn new things.
Learning is dependent on a consumer’s abilities and knowledge.
While practise can help with skill development, experience is the
only way to learn new things. Learning might be cognitive or
conditional. In conditional learning, the customer is repeatedly
exposed to a circumstance, which causes the consumer to form
a response about it. Contrarily, in cognitive learning, the buyer will
use his knowledge and abilities to find fulfilment and a solution in
the product he purchases.
(d) Attitudes and Beliefs: If a consumer has a positive attitude towards
certain brands or manufacturers there is a very high chance that
he will buy things from them. Therefore, attitudes play a very
significant role in influencing a purchase decision. The brand image
of a product is significantly influenced by this attitude and belief.
Therefore, to build promising marketing strategies, marketers work
very hard to decode consumer attitudes and beliefs.
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Notes
1.6.2 Social Factors
Due to their social nature, humans are constantly surrounded by people
who can affect their purchasing decisions. Humans attempt to mimic other
people and also strive to fit in with society. The purchase decisions of
humans are influenced by people around them in many ways, these ways
are regarded as social elements. Several societal factors include:
(a) Family: Family and its members are the most influential group
of people who motivate our purchase decision. A person forms
preferences as a youngster by observing their family members
purchase goods, and they maintain those choices as they get older.
(b) Reference groups: A person’s “reference group” is a collection of
persons associates himself. The reference group’s members typically
have similar purchasing habits and have mutually beneficial effects.
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Notes (a) Age: Age affects the purchase preferences of individuals. A college
going student will have different purchase intentions when compared
to an adult. Similarly a person with an old age will spend more on
healthcare and less on stationery.
(b) Income: A person’s purchasing behaviour may be influenced by their
income. Individuals with high disposable income spend more on
goods and services as compared to individuals with lower incomes.
(c) Occupation: A consumers purchase decision also depends on his
or her occupation. A nutritionist will need different products when
compared to a Carpenter. Therefore occupation and profession play
a crucial role in shaping individuals purchase behaviour.
(d) Lifestyle: A person’s lifestyle is their attitude and how they interact
with others in society. The lifestyle of a consumer has a significant
impact on their purchasing habits. For instance, when a customer
follows a healthy lifestyle, his purchases will be related to healthier
substitutes for fast food.
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(b) Family income: The income of all the family members when combined Notes
together forms family income. It is therefore said that when a family
has more bread earners they will spend more on daily and extra
goods whereas a family with low income will spend less on these.
(c) Savings: It is that amount from the income that is set aside for a
purpose or future uncertainties. It holds a specific place in purchase
decision of a customer. When a consumer makes his mind to do
more saving his purchases decline whereas when he is wishing to
save less, his purchases increase or we can say that his disposable
income increase.
(d) Consumer Credit: Easy credit options for consumers who want to
buy items encourage greater expenditure. Customers can now easily
obtain credit from sellers through the use of credit cards, easy
instalment loans, bank loans, hire buy, and numerous other credit
options. Consumers tend to buy more luxuries and comforts when
credit is more readily available.
IN-TEXT QUESTIONS
4. Age, Income, Occupation are related to ________________
factor influencing consumer behaviour.
5. Which of the following does not relate to psychological factor
of consumer behaviour:
(a) Motivation
(b) Learning
(c) Attitude
(d) All of the above
6. Consumers either purchase their preferred brand, the one they
frequently use, the one that is readily accessible at the store,
which behaviour is being talked about?
7. Family has a strong impact on how individuals behave in a
certain way, when take a purchasing decision. (True/False)
8. A person’s purchasing behaviour may be influenced by their
income. Consumers with higher incomes have more purchasing
power. (Yes/No)
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Notes
1.7 Consumer Buying Decision Process
Competencies
Understanding the customer journey, particularly of a target category,
is critical for brand success. Marketers must comprehend and analyse
changes in customer purchasing decision processes in order to acquire
important insight. As a result, they may change their marketing strategies
to reflect current consumer trends.
Understanding the purchase decision process enables marketers to build
marketing campaigns that are distinctive and identifiable by customers,
allowing them to recall the product in times of need.
Five Steps in the Purchasing Decision Process
The purchase process consists of five steps. It begins with pre-purchase
and concludes with post-purchase. The following steps comprise the
buyer choice process:
1. Need recognition
2. Information search
3. Evaluation of options
4. Purchase decision
5. Post-purchase evaluation
The marketing department must take action to impact their customers
and leave a lasting impression.
1. Stage of Recognition: The initial step in the buyer decision process is
need recognition. The buyer detects a need or learns that a product
or service they require is absent at this step. They may realize this
requirement as a result of external or internal cues.
Hunger and thirst are examples of internal stimuli. Marketers have little
control over this because they cannot produce internal sensations.
A successful campaign must generate an external stimulus for the
product’s marketing.
Marketers must use campaigns to raise brand recognition and guarantee
that customers remember the brand when they are in need. The
brand must be distinctive and trustworthy in the eyes of the target
audience.
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Notes Example
1. Need Recognition: Sagar recognizes the need for a new laptop after
noticing that his present laptop’s battery is weak and causes him
inconvenience.
2. Information Search: Sagar gathers information about numerous
laptop brands by reading specs, reviews, and speaking with friends
and colleagues.
3. Evaluation of options: Sagar selects a few alternatives and weighs
their advantages and disadvantages in order to make the best logical
selection in light of other perks and his budget.
4. Purchase decision: When making the final purchase decision, Sagar
may be impacted by people’s views and unforeseen circumstance
situations.
5. Post-purchase evaluation: Sagar interacts with the brand based on
his product experience. He will be satisfied if the product meets
or surpasses his expectations, but he will be disappointed if it falls
short.
1.8 Summary
Consumer behaviour can be summed up as the mental and physical
processes people use to decide whether to buy, use, or discard products
and services.
Understanding consumer behaviour is crucial for marketers because it
enables them to better communicate with customers.
Marketing professionals can display their goods in a way that has the
greatest influence on consumers by researching consumer behaviour.
Understanding consumer purchasing behaviour is the key to connecting
with, involving, and convincing potential customers to make a purchase
from you. Consumer behaviour is of four types namely habitual consumer
behaviour, variety seeking consumer behaviour, Dissonance reducing
Buying Behaviour and complex buying behaviour. All the consumers
perceive marketing campaigns differently. Therefore, it is necessary for the
marketer to keep an eye on the changing patterns of consumer behaviours.
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1. Yes
2. (d) All of the above
3. False
4. Personal
5. (d) All of the above
6. Habitual behaviour
7. True
8. Yes
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1.11 References
u https://businessjargons.com/types-of-consumer-behavior.html.
u https://snov.io/glossary/buyer-behavior/.
u https://www.omniconvert.com/blog/consumer-behavior-in-marketing-
patterns-types-segmentation/.
u http://consumerbehaviourr.blogspot.com/2017/03/consumer-behaviours-
nature.html.
u Kapoor, Neeru, Principles of Marketing, PHI.
u Kotler, P. & Keller, K. L. (2017), Marketing Management, Pearson.
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L E S S O N
2
Market Segmentation
Shri Raman Chawla
Shaheed Bhagat Singh Evening College
University of Delhi
STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Nature and Significance of Market Segmentation
2.4 Bases for Segmenting Markets
2.5 Segmentation Strategy
2.6 Summary
2.7 Answers to In-Text Questions
2.8 Self-Assessment Questions
2.9 Suggested Readings
2.2 Introduction
One of the most intriguing and practical marketing tools is market segmentation. Market
segmentation, according to the American Marketing Association, is the process of breaking
down a large, heterogeneous market into smaller and more manageable groups. Buyers
are not identical and so some bases have to be formed to divide them into smaller groups
and perform various marketing functions. These bases may range from geographical to
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Notes
2.3.1 Segmentation Criteria
Segmentation strategy uses the following four criteria:
(a) Identity: The marketing manager interested in segmentation must
have, first of all, sonic means of identifying members of the segment
– some basis for classifying an individual as being or not being a
member of the segment. That is, there must be some evident want
or desire, or at least some common characteristic or behaviour
pattern.
(b) Accessibility: Once a segment has been identified, the next question
is: Can we communicate with them? The organisation must be able
to focus its marketing efforts on the chosen segment.
(c) Responsiveness: If the segment can be identified and communicated
with the next criterion to consider is whether or not the segment will
respond to marketing effort. For example, certain product features,
a lower price or more service, may more precisely satisfy the needs
of a given segment than would a general marketing effort.
(d) Significance: Suppose that a segment meets the first three criteria
i.e., it can be identified, reached with marketing effort, and would
respond to that effort. The last and the most crucial question form
marketing management’s point of view is : Is it really significant?
The segment must possess buying power (willingness and ability
to buy) to make a worthwhile contribution to the organisation &
objective.
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Notes services, exclusive points of sale, product variations and the like. A
typical segment-based price variation is by region. The generally higher
price level in big cities is evidence for this. When differentiating
prices by segments, organizations have to take care that there is
no chance for cannibalization between high-priced products with
high margins and budget offers in different segments. This risk is
the higher, the less distinguished the segments are.
3. Facilitates Tapping of the Market, Adapting the offer to the
Target: Segmentation also enables the marketer to crystallize the
needs of target buyers. It also helps him to generate an accurate
prediction of the likely responses from each segment of the target
buyer. Moreover, when buyers are handled after careful segmentation,
the responses for each segment will be homogeneous. This in turn,
will help the marketer develop marketing offer/programmers that
most to each groups. He can achieve specialization that is required
in product, distribution, promotion and pricing for matching the
particular customer group and develop offers and appeals for the
segmented group.
4. Stimulating Innovation: An undifferentiated marketing strategy
that targets at all customers in the total market necessarily reduces
customers’ preferences to the smallest common basis. Segmentations
provide information about smaller units in the total market that share
particular needs. Only the identification of these needs enables a
planned development of new or improved products that better meet
the wishes of these customer groups. If a product meets and exceeds
a customer’s expectations by adding superior value, the customers
normally is willing to pay a higher price for that product. Thus,
profit margins and profitability of the innovating organizations
increase.
5. Makes the Marketing Effort more Efficient and Economic:
Segmentation ensures that the marketing effort is concentrated on
well-defined and carefully chosen segments. After all, the resources
of any firm are limited and no firm can normally afford to attack
and tap the entire market without any delimitation whatsoever. It
would benefit the firm if the efforts were concentrated on segments
that are more profitable and productive ones. Segmentation also
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PRINCIPLES OF MARKETING
helps the marketer assess as to what extend existing offer from Notes
competitors match the needs of different customer segments. The
marketer can thus identify the relatively less satisfied segments and
succeed by concentrating on them and satisfying their needs.
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Thus, there are swingers, who seek up-to-date goods and fast paced, Notes
be domestic living. Status seekers, who try to buy goods that will
reject a high status in society, and plain and simple people, who
seek ordinary, untreated goods that do their job – one implication of
differentiating buyers along personality is that they can be reached
with different marketing programmes and organisational objectives
can better be served in the wake of serving their needs with the
required attention and care. For example, because of their unique
features swingers will respond to costlier goods more favourably than
the ordinary people. Various research studies have been conducted
in the U.S.A. and other advanced nations to test the validly of this
psycho-segmentation. These studies have been directed from time
to time at whatever different consumer formalities are attracted to
different products which they have different images. Each product
needs to be studied separately for the possible strength of personality
factors in purchase behaviour. The theoretical connections between
product images and personality types remain to be worked out better.
Rogers defines a person’s level of innovativeness as “the degree to which
an individual is relatively earlier in B.Com. adopting new ideas
(Programme) than
/ B.Com. the other
(Hons.)
members of his social system.” After a slow start, an increasing number
of people adopt the innovation, the number reaches a peak, and then it
innovation, the number reaches a peak, and then it diminishes as fewer no adopters
diminishes
remain.as fewer no adopters remain.
Fig2.2
Figure 2.2 :: Technology
Technology Adoption CurveCurve
Adoption by Everett
by Rogers (Source:
Everett Rogers
https://incentive-intelligence.typepad.com/)
(Source: https://incentive-intelligence.typepad.com/)
Understanding of psychographics of consumers enables marketers to better select
potential markets and match the product image with the type of consumer using it.
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Rogers
©classified consumers
Department as follows:
of Distance & Continuing Education, Campus of Open Learning,
1. School of enthusiasts;
Innovators: They are technology Open Learning, University
they are of Delhi
venturesome and enjoy
tinkering with new products and mastering their intricacies. In return for low prices,
they are happy to conduct alpha and beta testing and report on early weaknesses.
2. Early adopters: They are opinion leaders who carefully search for new technologies
that might give them a dramatic competitive advantage. They are less price sensitive
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optimal. All that can be said is that differentiated marketing is sales Notes
oriented, and this explains why marketing men like this strategy.
But whether it is profit oriented depends upon whether it can cause
sales to rise by more than costs.
(C) Concentrated Marketing: Both undifferentiated and differentiated
marketing imply that the firm goes after the whole market. However,
many firms see a third possibility, that is especially appealing when
the company’s resources are limited. Instead of going after a small
share of a large market, the firm goes after a large share of one or
a few sub-markets.
Through concentrated marketing the firm achieves a strong position
in the particular segment it serves, owing to its greater knowledge
of the segment’s needs and the special reputation it acquires.
Furthermore, it enjoys many operating economics because of
specialisation in production, distribution, and promotion. If the
segment of the market is well chosen the firm can earn high rates
of return on its investment. Concentrated marketing, however,
involves company’s future growth to one segment of the market
and this carries obvious risks. One possible risk is that demand may
continue but other companies enter the same segment and cause a
decline in the profits.
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ACTIVITY Notes
Make a list of brands that you consume on a regular basis and classify
them into undifferentiated, differentiated and concentrated on the
basis of their market appeal and marketing strategy.
IN-TEXT QUESTIONS
4. Segmentation strategy begins with the selection of the target
market. (True/False)
5. _______________bases constitute nationality, religion, race,
gender, age, income level, education level, occupation, family
size, stage in family cycle, disposable incomes (purchasing
power), social status and so on.
6. Under ______________ marketing strategy the producer treats
the market as an aggregate, focusing on what is commonly the
needs of people rather than on what is different.
7. Through differentiated marketing the firm achieves a strong
position in the particular segment it serves, owing to its greater
knowledge of the segment’s needs and the special reputation it
acquires. (True/False)
2.6 Summary
Growing competition has made sure that consumers have plenty of choices
in the majority of product categories and that supply is typically greater
than demand.
Market segmentation must be used in such cases. Market segmentation,
according to the American Marketing Association, is the process of breaking
down a large, heterogeneous market into smaller and more manageable
groups. The attractiveness of the market segments that the organisation
has identified must be assessed based on factors including measurability,
growth potential, profitability, actionability, and accessibility. After
market segmentation, the business must choose its targeting strategy. The
basis for performing market segmentation are demographic, marketing-
factor segmentation, product space segmentation, volume segmentation,
benefit segmentation, psychographic and demographic segmentation.
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1. False
2. (d) All of the above
3. Volume Segmentation
4. True
5. Demographic
6. Undifferentiated
7. False
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L E S S O N
3
Positioning and Targeting
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 Targeting
3.4 Positioning
3.5 Product Repositioning
3.6 Product Differentiation
3.7 Summary
3.8 Answers to In-Text Questions
3.9 Self-Assessment Questions
3.10 References
3.11 Suggested Readings
3.2 Introduction
In a broadly defined market, not every consumer has the same wants. Successful marketers,
however, make decisions regarding the products to offer and the markets to serve. Not
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everyone fits into one size well. No two people can be the same because Notes
and so with their preferences. These serve as segmentation’s building
blocks. Market segmentation is essential to marketing for this reason.
Many businesses have risen to the top by using targeted segmentation
and effective segmentation. You have to create a strong marketing plan
once you identify the most practical methods of segmenting a market.
Marketers utilise segmentation, targeting, and positioning, or STP, to
establish differentiation. Customers purchase goods and services that best
meet their individual needs and preferences. Wendell Smith is known as
the Father of Market Segmentation.
3.3 Targeting
By going through market segmentation we have got an idea about how
market is divided into various segments and the concept of market
segmentation. During the targeting phase, the company must assess
several market segments to determine how many and which one’s to
target. Market targeting is the name of this technique. A target market is
a group of customers with whom a business chooses to do business and
who have similar wants or traits. It is crucial to choose the target market
that the business will serve knowing how consumers make decisions, what
criteria they use to purchase things, and what the target market’s traits
and lifestyles can help marketers create effective marketing strategies.
According to Philip Kotler, “a target market as a well-defined set of
customers whose needs the organization plans to satisfy.” He further
suggests that the target market may be the total focus of the organization
or it may be viewed as only a starting point for later expansion to other
market segments i.e. he recognizes that there are many groups and you
probably won’t target them all.
Every marketing plan entails spending money on advertising, and the
return on investment of a marketing programme can only be determined
if we are aware of the target market for which it is intended. Research
has shown that the majority of marketing expenses are essentially a
waste of company’s funds because non-buyers are the target audience.
Therefore, knowing the nature and traits of the target market will assist
the marketer get more out of a marketing campaign. The success of the
business as a whole will depend on the marketer’s ability to alter and
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Notes build new marketing plans with knowledge of the target market’s taste
and attitude changes. Therefore, a major marketing decision is to have a
thorough understanding of the target market and how desirable they are.
S
Segmentation
T
Targeting
P
Positioning
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You start by segmenting a market. Then you choose one or more segments Notes
to target. As a result, it is a critical business notion, especially when you
are just starting out. The target market of a company is essentially the
group of individuals to whom it will offer its products or services, but
it also includes how these potential consumers think, their purchasing
habits, and their wants. The following is the procedure for selecting a
target market:
1. Product/service sort: The target market will be determined by the
sort of product or service that the organization sells. This will be
its specialty, and it should be something the firm is familiar with
or enjoys. Web design, infant toys, and wedding gowns are all
examples.
2. Narrow its Niche: Specific niches could include Web design for
restaurants, baby toys produced from sustainable materials, and
wedding outfits for plus-size brides.
3. Solve the Target Market’s Problem with one’s Product or Service:
If your target market does not have a problem, the firm is unlikely
to make money because there will be no need for what it is giving.
Assume a company wants to launch a business generating video
games for ladies. One issue that could be addressed is the absence
of commercially available action and strategy games for female
players.
4. Affordability: A company must determine whether its target market
can afford to acquire what it is selling. If not, it must change the
market it intends to serve. For example, if it wishes to sell laundry
cleaning services to middle-class working mothers, it may discover
that they generally do not have the money to spare. However,
certain sorts of businesses may be able to afford and require laundry
services.
5. Media Type: A company must examine the types of media that its
target market commonly consumes, such as websites, publications,
television shows, news channels, radio stations, and social networking
mediums. This information can be obtained by conducting polls,
asking around, and reading industry reports.
6. Examine Competitors: For example, if the company intends to
open a bakery specializing in traditional Southern sweets, it must
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Notes compile a list of other bakeries in the area that provide the same
or similar things. Examine their areas of vulnerability and how the
firm might use those flaws to gain some of their customers.
IN-TEXT QUESTIONS
1. Which market is also known as ‘niche marketing’?
2. Compared to concentrated marketing, micromarketing takes one
step beyond and it is further classification of niche marketing.
(True/False)
3. Identify the factors considered before selecting a target market:
(a) Accessibility
(b) Measurable
(c) Growth
(d) All of the above
4. The__________________________, also known as mass marketing,
essentially ignores the distinctions between market groups.
5. Dividing the market into various small groups is known as market
targeting.(True/False)
3.4 Positioning
The company’s next managerial problem is deciding what position it
wants to hold in the chosen segment after it has chosen its market
targeting strategy. According to Kotler, product positioning refers to
how consumers describe a product based on key characteristics and the
position it holds in comparison to rival items in their minds. Therefore,
a product’s ranking indicates significant qualities that customers assign
to it. Customers frequently express their opinions about certain product
qualities in regard to the product’s location in their minds’ perceptual
spaces in relation to those of competitors’ products. Product positioning
is influenced by market structure, the firm’s competitive position, and the
ideas of product replacement and competition. Brand positioning involves
instilling in customers’ minds the brand’s distinctive advantages and
characteristics. In the Indian market, Maggi noodles are positioned as a
quick meal that can satisfy the growing children’s frequent eating needs.
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PRINCIPLES OF MARKETING
Dove soap is marketed as a high-end brand with a lot of moisturizer that Notes
can also be used as a face cleanser. Vicks Vapo-rub is advertised as a
rub used just to treat colds and coughs.
According to Andrie et al. (2010), Positioning is one of the most powerful
marketing concepts. Originally, positioning focused on the product and
with Ries and Trout grew to include building a product’s reputation and
ranking among competitor’s products. Primarily, it is about “the place a
brand occupies in the mind of its target audience”.
According to Bell (2008), Positioning is now a regular marketing activity
or strategy. A national positioning strategy can often be used, or modified
slightly, as a tool to accommodate entering into foreign markets.
According to Ries and Trout (2001), Positioning has also been called
product positioning, but that is a limiting description because it focuses
on the product itself, while the positioning marketing technique focuses
on the minds of the consumers.
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Notes 2. Value for money: The extent to which the benefits of the product
are a fair trade-off for the price being requested.
3. Reliability and quality: Products are frequently advertised as being
more (or less) reliable and trustworthy than those of their rivals.
4. Country of origin: Some nations are known for creating the top
products in particular product categories. For instance, German
engineering is well-known, whereas French cuisine and wine are
well-known.
5. Brand name: Branding is a crucial component of positioning since
it serves to identify the product and project an image of its quality.
Selectivity: The degree to which the consumer can distinguish between
brands and make choices from a variety is known as selectivity. It is a
major base for positioning of a product.
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based product positioning. With this type of positioning, the product’s Notes
aesthetic appeal and beauty are less significant.
4. Efficiency based product positioning: The focus of this kind of
product positioning strategy is on how the product will make the
customer’s life more effective and simple. Due to a product being
sold as a tool to make your duties less labourious or to increase your
productivity, you can employ efficiency-based product positioning
with anything.
5. Sustainability-based Product Positioning: Although this product
positioning could be regarded as niche, you see it as frequently as
others because of how the market and product categories are evolving.
Sustainable product positioning is a strategy used by eco-friendly
businesses to market their goods as reusable and sustainable.
6. Aesthetic-based Product Positioning: This type of product positioning
focuses on how a product’s appearance and aesthetic fit with the
needs and lifestyle of its target market. You don’t need to compare
your product to those of other brands if you position it using this
method. The focus of this product positioning is solely on the
current product and how attractive it is.
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Analyzing Customers
fourth step in the positioning process. The differences in market can Notes
be understood by comparison.
5. Determine Unique Positioning: The fifth phase in the positioning
process involves determining a particular issue or need that was
missing and is addressed by the good or service. This enables a
business to have a strong and distinctive positioning in comparison
to its rivals.
6. Execute Marketing Plan: Developing a solid marketing strategy
that will aid in expressing the brand’s value proposition is the sixth
step in the positioning process.
7. Measure & Evaluate: Measurement and evaluation are the final
steps in the positioning process, and they involve tracking the
effectiveness of brand positioning in consumers’ minds. This is
crucial since a customer’s perspective could be quite different from
the message that the business is attempting to convey. Companies
may reposition their goods and services from time to time in an
effort to rebrand them.
IN-TEXT QUESTIONS
6. Researching the competition and its products is the first stage
in product positioning. (True/False)
7. __________________refers to how consumers describe a product
based on key characteristics and the position it holds in
comparison to rival items in their minds.
8. This type of product positioning focuses on how a product’s
appearance is, identify it from the following:
(a) Performance based
(b) Aesthetic based
(c) Variety based
(d) Reliability based
9. Last step of the product positioning process is to execute marketing
plan. (True/False)
10. Positioning creates a particular image of the brand and the
company. (Yes/No)
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3. Target audience no longer the best target: When a brand discovers Notes
that its target demographic is no longer the best and most profitable
one, it may consider product repositioning. From the year 1920
to the early 1950s, a brand called ‘Marlboro’ focused solely on
women. When they realized that women were not the most profitable
demographic, they changed their strategy and began targeting male
audiences.
4. Faulty existing positioning: A brand may use repositioning when
its present position is flawed and it is unable to attract customers.
Brand may be over-positioned if its existing market position is
defined precisely, limiting its entire growth level. On the other side,
it may be under-positioned, making it ineffective at causing clients
to associate their feelings, thoughts, emotions, qualities, and so on.
Both of these issues have a negative impact on the brand and must
be addressed through the repositioning process.
5. Future plans: Companies’ future plans play an important impact
in determining the repositioning of their products. These plans
are acquisition plans, in which the business plans to acquire or
be acquired by someone else, threat aversion plans, in which the
brand anticipates some major threats in the future and must deal
with them, and opportunity capitalization plans, in which the brand
identifies opportunities that will be most profitable in the future.
6. Changes in the macro environment: The macro environment consists
of elements that are uncontrollable by business organizations yet
have a significant impact on their operations. Changes in economic
conditions, technological innovation, differences in government
policies, changes at the industrial level, and so on are examples
of such influences. All of these differences, which are out of the
brand’s control, push it to reposition itself in the market.
7. Failed extensions: Companies may confront failure while pursuing
brand extensions, in which an established brand name is leveraged
for a newer product or category. The failure of brand extensions
has a detrimental impact on the current image of the brand. As a
result, brands must reposition themselves in order to change people’s
perceptions of them.
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Notes 8. Evolved products: Over time, businesses introduce new products, refine
existing ones, extend their operations, and so on. They provide a
broader range of benefits to a broader audience by making significant
investments in product improvement. The branding approach with
which the business began may no longer be effective over a long
period of time as the brand evolves and adds new items.
9. Changes in strategic direction: When a firm decides to make
significant changes in its strategic direction, brand repositioning must
be taken into account. Assume a brand was previously focused on
products but is now considering expanding into consulting services;
all such significant changes necessitate a brand repositioning.
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PRINCIPLES OF MARKETING
paying more for when that one unique attribute or distinction sets Notes
it apart from others.
3. Promotion of Brand Loyalty: Another effect of product differentiation
is that it influences brand loyalty. Consumer brand loyalty typically
results from a company’s effective product differentiation, which
makes a few key products stand out from the other alternatives
available in the market. This is so that customers can simply start
purchasing other things from that one particular brand once they
are satisfied with a couple of its products. The customer thinks that
the company’s other items are equally as exceptional and fantastic
as the ones they currently use.
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Horizontal
differentiation
Vertical
differentiation
Mixed
differentiation
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3.7 Summary
Through the use of the target marketing strategy, managers frequently
define their market in detail. Three issues are involved with target
marketing. These include market positioning, market segmentation, and
market targeting. Market targeting is done to identify the precise clients,
learn about their attributes, and determine how they react to marketing
initiatives. A corporation can have a higher return on investment through
market targeting since the marketing program’s efficacy will rise. Three
approaches can be used to target a market. Full market coverage, concentrated
marketing, and differentiated marketing are these. The company’s next
managerial problem is deciding what position it wants to hold in the chosen
segment after it has chosen its market targeting strategy. According to
Kotler, product positioning refers to how consumers describe a product
based on key characteristics and the position it holds in comparison to
rival items in their minds. Positioning have several benefits including
creating a competitive edge, creating a positive image in market, earning
more profits, etc. Product differentiation is a marketing technique used to
set one offering, such as a product or service, apart from others in order
to reach out to the target market more efficiently. Types of differentiation
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PRINCIPLES OF MARKETING
1. Concentrated marketing
2. True
3. (d) All of the above
4. Undifferentiated strategy
5. False
6. True
7. Product positioning
8. (b) Aesthetic based
9. False
10. Yes
11. Product differentiation
12. Horizontal differentiation
13. Yes
14. (c) Flat
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Notes 4. Define market targeting and explain the factors considered before
selecting a target market.
5. What is positioning? How it is done? What are the bases of product
positioning?
6. What is product differentiation? Explain its advantages and disadvantages.
7. What is meant by product differentiation? Explain various types of
product differentiations.
8. What do you mean by product repositioning? Why do companies
reposition their products?
3.10 References
u https://corporatefinanceinstitute.com/resources/management/product-
differentiation/.
u https://corporatefinanceinstitute.com/resources/management/market-
segmentation-and-targeting/.
u https://www.studysmarter.us/explanations/marketing/customer-driven-
marketing-strategy/market-segmentation-targeting-and-positioning/.
u Smith, W.R.: ‘Product differentiation and market segmentation as
alternative marketing strategies’, Journal of Marketing.
u Kotler, P. & Keller, K. L. (2017), Marketing Management, Pearson.
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UNIT - III
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L E S S O N
1
Product Decisions
Dr. N Mishra
Motilal Nehru College
University of Delhi
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Concept of Product
1.4 Product Mix
1.5 Branding
1.6 Summary
1.7 Answers to In-Text Questions
1.8 Self-Assessment Questions
1.9 References
1.10 Suggested Readings
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Fig 1.11.1:
Figure : Levels of of
Levels product
product
(Source:
(Source: https://www.marketing91.com/five-product-levels/)
https://www.marketing91.com/five-product-levels/)
1.3.1 Levels of Product
1. Core LevelsIt of
1.3.1Product: Product
represents the basis features and aspects of the product. Core
product is the bundle of tangible and intangible features that sellers offer in the
1. Core Product:
marketplace. It represents
It represents the essentialthe basis
utility featuresthat
or benefit and aspects
is being of theto, or
offered
product. Core product is the bundle of tangible and intangible
116 | P a g e features that sellers offer in the marketplace. It represents the
essential utility or benefit that is being offered to, or sought by
© the
Department
buyer. ofThe
Distance
core &product
Continuing Education,the
represents Campus of Open Learning,
fundamental benefit or
School of Open Learning, University of Delhi
value that the customer is seeking when purchasing a product. It
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes addresses the core need or problem the customer wants to solve.
The core product goes beyond the physical attributes and features;
it focuses on the emotional, psychological and functional benefits.
For example the purchaser of a cosmetic product is buying beauty,
the purpose of checking in a hotel is buying rest and comfort and
the buyer of lottery is buying hope.
2. Basic Product: The basic product includes the core benefit along
with the essential features and attributes that allow the product to
function. It includes the tangible elements of the product required
to deliver the core benefit. For Example: In a smartphone, the basic
product includes the physical device, the ability to make calls,
send messages, etc. The marketer must transform the advantages
customers consider into a basic product. For example a customer
buying a washing machine is buying a collection of drum, nuts and
bolts, switch, plastic, etc.
3. Expected Product: The expected product incorporates features and
attributes that customers expect as standard in a product category.
These features fulfil customer expectations and are often based
on industry norms and competitors’ offerings. It provides a list of
qualities and requirements that the customer expects the marketer to
meet before the sale can be made. For Example: In a smartphone,
expected features might include a camera, access to apps and internet
browsing.
4. Augmented Product: The fourth level of product is known as
augmented level. At this level additional features benefits, and services
that enhance the product’s value are in focus. The manufacturer
tries to differentiate his product from the competitors. Augmented
features aim to provide a competitive advantage and differentiate the
product. For Example: For a smartphone, augmented features could
include a longer battery life, cloud storage and customer support.
5. Potential Product: This covers all future enhancements and modifications
a product might experience. A company must continue to enhance
its products in order to not only satisfy the current customer base
but also surprise them with their transformations. These innovations
are not currently offered but represent the product’s future potential
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PRINCIPLES OF MARKETING
Product development is more limited terms and includes the technical Notes
activities of product research, engineering and design. The main
concern of product development is product innovation or improvement.
Advantages of product Planning:
(i) Basis of Marketing Programme: Product planning determines the
nature of the product which constitutes the basis of the entire
marketing activities. A sound product enables the marketing
manager to increase the effectiveness of other elements of
marketing mix. It is needless to point out that sound product
which is consistent with market demand is easy to price,
promote and distribute.
(ii) Increase in Sales: In order to create new customers and increase
sales, it is necessary that the business enterprise is innovative
and comes out regularly with new and better products and
new uses of existing products. And all these become possible
only through product planning.
(iii) Survival and Growth: Product planning leads to crease sales
which ultimately ensure survival and growth. Through product
planning a firm can continuously adapt its products to the
changing market conditions and thus sustain its profits and
sales.
(iv) Facing Competition: Today’s market is characterized by
growing competition. A Firm can face competition better by
constantly improving upon its products.
(v) Minimising Risk: Modern business firms are exposed to greater
degree of risk as the mortality rate of new products is pretty
high. Product planning helps the firm to minimize such risks
by bringing out new products, effecting improvements in the
existing products and dropping of unprofitable products from
the product mix.
(vi) Improved Performance: Product is the focal point around
which other marketing activities revolve. It is the product
that determines the amount of resources employed and the
types of decisions made in respect of pricing, promotion and
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PRINCIPLES OF MARKETING
“A product mix is the set of all product lines and items that a particular
seller offers for sale to buyers”- Philip Kotler
A product line is a collection of connected goods sold by the same business
and marketed under a single brand. It makes the selling of products easy
i.e., if the brand is already famous any new product will not need to start
from scratch for ensuring its introduction in the market. A single brand
can have a lot of product lines under its name. For example, Reliance
as a company has different product lines, it deals in Reliance trends for
fashion, Reliance fresh for groceries, Reliance digital for electronics,
Reliance jewels for jewellery and so on.
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4. Consistency: This describes how closely products are related to each other in a
product line. If there are commonalities in terms of end use, production needs,
distribution methods, and other factors, a product mix is said to be consistent.
For example: Let us take the example of a very popular beverage company named, Coca
B.COM. (PROGRAMME)/B.COM. (HONS.)
Cola. Let’s assume that this company works only on two product lines namely soft drinks and
minute made juice.
Notes
Fig:1.2
Figure Example of Product
: Example Mix Mix
of Product
In the above
In theexample
above we can conclude
example we canthe followingthe
conclude things:
following things:
a) The
(a) brand Coca Coca
The brand Cola has
Colatwo
hasproduct lines namely
two product soft drinks
lines namely and minute
soft drinks and maid
juices.minute maid juices.
b) The
(b)brand
The has product
brand length oflength
has product eight products.
of eight products.
(c)brand
c) The The has
brand has aof width
a width two, asofit has
two,two
as product
it has two
linesproduct
only. lines only.
(d) soft
d) The Thedrinks
soft drinks
sectionsection has a depth
has a depth of as
of four, four, as it serves
it serves four products
four products namely coca
namely
cola, Fanta, cocaand
sprite, cola,
cokeFanta, sprite andminute
zero. Similarly, coke made
zero. juices
Similarly, minute
also have a depth of
four. made juices also have a depth of four.
(e) Coca-Cola’s
e) Coca-Cola's consistency
consistency would bewould be high
high because because
beverage beverage
is the categoryisthat
theall of its
category that all of its products fall under. Additionally, each product
products fall under. Additionally, each product continues to use identical production
continues routes.
and distribution to use identical production and distribution routes.
124 | P a g1.4.2
e Importance of Product mix
The©product
Department
mixof Distance
is of much& Continuing Education,
importance for theCampus
firm of Open
and its Learning,
marketing
School of Open Learning, University of Delhi
strategies. The following points explain the importance of product mix:
1. Ensures low risk: A wider range of products can give the business
the opportunity to meet the wants or desires of various customers,
hence reducing risk.
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Notes 4. Demand: Decisions on the product mix are typically made in light
of demand. A marketer should investigate consumer behaviour to
determine how well-liked their existing goods are. The company’s
product mix needs to adapt to changes in customer preferences,
particularly those related to fashion, interests, and habits for capturing
the larger share of consumers in the market.
5. Government Rules and Regulations: Business houses have to work
with certain Rules and Regulations designed by the government.
When a product or variety is deemed illegal, a business occasionally
should stop selling it. Therefore, a product mix is to be designed
according to the existing rules and regulations of the existing
government.
6. Competition: All businesses strive to have a product mix that allows
for a robust response to the competition. The product mix of the
company is significantly impacted by the product mix strategy used
by its immediate competitor.
7. Economy: A business must consider how the home economy is doing
in relation to the global economy. If recession is in picture, then
the company should avoid introducing new product lines as there
are more chances of failure.
IN-TEXT QUESTIONS
5. A _____________is the set of all product lines and items that
a particular seller offers for sale to buyers.
6. A product mix ensures wider choice for the consumers.
(True/False)
7. Which of the following are/is the factors affecting the product
mix:
(a) Profit
(b) Objectives of company
(c) Demand
(d) All of the above
8. Product length describes how closely products are related to each
other in a product line. (True/False)
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Notes For example, Bata shoes, Weston T.V., Usha fans, Havells bulbs, etc. As
far as possible, a brand name should be short, and easy to pronounce,
spell and member. It should also be attractive and distinctive.
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PRINCIPLES OF MARKETING
help customers remember about the nature of the goods. For example, Notes
Ujala conveys brightness, Maybelline means lovable, Burger king
denotes burgers and eatables, etc.
4. New and attractive: Any product having a brand name that is fresh
and appealing can easily capture the minds of the customers. The
brand name chosen should be original and not in use already. New
and fresh brand names ought to be memorable as well.
5. Legal: It is a crucial component of a strong brand name. The chosen
brand name should be legally occupied and not be stolen from any
other brand.
6. Flexible: The brand name is established just once and then all products
are introduced under this umbrella term. Therefore, it should be
flexible enough to denote and represent all products launched under
its name. For example, the word ‘Reliance’ means ‘being able to
trust somebody’, so under this brand name any kind of product can
be introduced.
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Notes 3. Service branding: Just like products, services are also known by its
brand name. We all must have known the name of “HDFC”, this
group offers a lot of services like banking, insurance and loan, etc.
This branding aims at promoting intangible services.
4. Geographical branding: Geographic branding as the name suggests
is a branding for cities, states, regions and even countries. This also
has a second definition that explains promotion of products coming
from a specific location. For example, Darjeeling tea, Mysore Pak,
Banaras Sari, etc. these all have the name of location attached with
the product.
5. Online branding: The term “online branding” describes how a
business promotes itself in the market via websites, social media
platforms, and everything else that happens online and using internet.
Digital branding and internet branding are other names for online
branding. Online advertisements, emails, newsletters, etc. are all
components of online branding. Online branding is the extension
of offline branding with the use of internet.
6. Offline branding: As the name suggests this type of branding happens
in a offline mode. It can promote products, persons, services, places,
etc. by using offline tools. Merchandise, pamphlets, magazines,
samples, etc. are parts of offline branding. It is one of the oldest
and most common type of branding used around the world.
7. Co-branding: Co-branding is the process through which two (or more)
brands collaborate strategically to raise the profit of each partner’s
brand. It is also known as brand partnership or collaboration. For
example, Dell and Intel have established very successful collaboration,
combining personal computers and processors effectively for better
speed and design.
IN-TEXT QUESTIONS
9. When a brand name or brand mark is registered and legalized
it becomes a________.
10. A ______________is the part of the brand, that appears in the
form of a symbol, design, or distinctive colouring or lettering.
11. Geographic branding as the name suggests is a branding for
cities, states, regions and even countries. (True/False)
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PRINCIPLES OF MARKETING
12. _____________is the process through which two (or more) brands Notes
collaborate strategically to raise the profit of each partner’s
brand:
(a) Co-branding
(b) Online branding
(c) Offline branding
(d) Personal branding
1.6 Summary
One of the most important components of the marketing mix is the
product. The nature of the product, its features have significant impact
on distribution, promotion, and pricing methods. A particular product has
different levels, usually five namely core, basic, expected, augmented and
potential. Product mix is the blend of product length, depth, width and
consistency. “A product mix is the set of all product lines and items that
a particular seller offers for sale to buyers”.
A brand is an essential component of every product. These are the
names given to goods and services so that consumers can quickly recognise
and promote them. A brand is anything that identifies a seller’s products
and sets them apart from those of competitors. It can be a name, a term, a
symbol, a design, or any combination of these. A brand should have some
major qualities like it should be short, easy to pronounce and remember,
denote the nature and idea of the product, legal, appropriate and flexible.
Branding can be of various types namely: personal, product, geographical,
online, offline, service, etc.
1. Core product
2. False
3. (c) Crust
4. Product
5. Product mix
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Notes 6. True
7. (d) All of the above
8. False
9. Trademark
10. Brand mark
11. True
12. (a) Co-branding
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PRINCIPLES OF MARKETING
u https://coschedule.com/marketing/branding.
u https://corporatefinanceinstitute.com/resources/management/product-
mix/.
u https://hbr.org/2016/03/branding-in-the-age-of-social-media.
u Gronlund, J. (2013) ‘What is branding really about?’, Business Expert
Press.
u Kotler, P. & Keller, K. L. (2017), Marketing Management, Pearson
PAGE 155
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L E S S O N
2
Packaging and Labelling
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Packaging
2.4 Labelling
2.5 Product Support Services
2.6 Summary
2.7 Answers to In-Text Questions
2.8 Self-Assessment Questions
2.9 References
2.10 Suggested Readings
2.2 Introduction
In this lesson we will discuss about various product support services like billing,
consultation, after sales service, etc. provided by the seller accompanying the product. A
crucial component of the product mix is labelling. A product’s packaging is also deemed
156 PAGE
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Principles of Marketing
• Learn about different types of product support services and their benefits to the firm
and the customers.
PRINCIPLES OF MARKETING
2.2 INTRODUCTION
deficient in the absence of a label. A label, also known as a wrapper, Notes
In thisseal, orwe
lesson imprinted message,
will discuss is a piece
about various ofsupport
product information
servicesthat
likeisbilling,
applied to a
consultation,
after product or its packaging.
sales service, etc. provided Customers
by the are primarily
seller informed
accompanying theofproduct.
the product’s
A crucial
contents and usage instructions through it. Labelling is a crucial part of in
component of the product mix is labelling. A product's packaging is also deemed deficient
the absence of a and
a product label.soAitlabel,
shouldalsobeknown as a wrapper,
ethically seal, or ethical
sound, various imprinted message,
aspects of is a
piece labelling
of information that is applied
are also discussed below.to a product or its packaging. Customers are primarily
informed of the product's contents and usage instructions through it. Labelling is a crucial
part of a product and so it should be ethically sound, various ethical aspects of labelling are
2.3 Packaging
also discussed below.
2.3 Packaging
PACKAGINGmay be defined as all the activities involved in designing and
producing the container or wrapper for a product.
Packaging may isbethe
Packing defined as allofthecovering,
process activities wrapping
involved inordesigning and producing
crating goods into a the
container or wrapper for a product.
package for the purpose of delivering the articles to the consumers or
Packing
foristhe
thepurpose
process ofofcovering, wrapping
transport. or crating
Therefore, goods into
packaging is aa broader
package for
termtheand
purpose
of delivering the articles to the
packing is a narrower term. consumers or for the purpose of transport. Therefore,
packaging is a broader term and packing is a narrower term.
A physical product needs some packaging incorporate. Developing the
A physical product
package for aneeds
new some packaging
product incorporate.
requires Developing
large number the package
of decisions for a new
in which
product requires large number of decisions in which representatives from marketing and
representatives from marketing and production participate along with
production participate along with technical experts. These steps are as follows :-
technical experts. These steps are as follows :-
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PRINCIPLES OF MARKETING
(vi) Chemical change in the product, e.g., metal erosion, rusting, Notes
etc.
(vii) Insect attack, e.g., moths in clothing.
B. Convenience: Properly packed goods are convenient to store as they
require less space. Also, it is quite convenient to take goods from
a right pack and keep the balance intact.
C. Economy: Packing and packaging provide a number of economies
to the trades as well as the consumers. For example, prevention
from loss of quantity, facilitation of re-use of the product economy
in transportation and storage, etc.
D. Promotion. The marketing activities of packing and packaging
seek to perform promotional function in respect of the product.
A nicely made package attracts attention, describes the producer’s
and product’s features, develops consumer confidence and makes
an overall favourable impression. All these features tend to develop
consumer preference. Also, well thought-out packaging may provide
innovative opportunity in sales promotion thereby leading to higher
sales and profits. For example, packaging of tea in plastic jars which
can be used in kitchen or packaging of coffee in coffee-mugs, etc.
Importance of Packaging
1. First Impression: Packaging is often the first thing consumers see
when encountering a product. It creates an initial impression that
can spark interest and curiosity, encouraging customers to explore
further.
2. Visual Appeal: Attractive and well-designed packaging catches the
eye and stands out on shelves crowded with competing products.
Aesthetically pleasing packaging can entice consumers to choose
one product over another.
3. Differentiation: In a saturated market, packaging can differentiate
a product from its competitors. Unique and distinctive packaging
helps a brand stand out and become memorable.
4. Communication: Packaging communicates information about the
product’s features, benefits, ingredients, usage instructions, and
more. Clear and informative packaging aids customers in making
informed purchase decisions.
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PRINCIPLES OF MARKETING
packs are backed by hi-tech systems like flawless printing, bar coding, vacuum gas flushing,
2.3.2 Types of Packaging
grease and oil resistant coating as well as shrink-stretch or cling-wrap systems.
2.3.2Usually
Typespackaging is classified into three categories: primary, secondary
of Packaging
and packaging
Usually tertiary. is classified into three categories: primary, secondary and tertiary.
2.4 Labelling
Labelling is the process of identifying a product by attaching a label that
contains information about it to the product or its container.
The American Marketing Association defines labelling as, “The information
attached to or on a product for the purpose of naming it and describing
its use, its dangers, its ingredients, its manufacturer, and the like. A
label is generally thought of as printed material, but labelling in the
broader sense has been ruled to include spoken information and separate
promotional pieces, if they serve the information purpose and are closely
allied to the product”.
According to Prof. William J. Stanton, “Label is the part of a product
that carries verbal information and manufacture’s identification.”
According to Mason and Rath , “Labelling is an information tag, wrapper
or seal attached to a product or product’s package.”
A crucial component of the product mix is labelling. A product’s packaging
is also deemed deficient in the absence of a label. A label, also known as
a wrapper, seal, or imprinted message, is a piece of information that is
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PRINCIPLES OF MARKETING
PAGE 163
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Principles of Marketing
Fig 2.3
Figure 2.3:: Types
Types of
ofLabels
Labels
1. 1. Brand
Brand Label:Label: Thename,
The brand brandtrademark,
name, trademark,
or logo is or logo isonprovided
provided the brandon
label. It
theoffer
does not brand label. details
sufficient It doesonnot offer sufficient
the product. details
It just helps on the
us know thebrand
product.
name.
2. It just helps
A Descriptive Labelus know how
explains the to
brand name. maintain, and use other aspects of the
use, operate,
2. A Descriptive
product. Label:
Date and storage Explains
details how toon
are included use, operate, maintain,
a descriptive and use
label for food products.
other aspects
On non-food items, of theare
there product. Date for
instructions andproper
storageapplication
details areandincluded
product care,
customer
on acare numbers, etc.
descriptive label for food products. On non-food items, there
3. are label
A grade instructions
identifies for
the proper application
commodity's andquality.
anticipated product care,
After customer
using the goods, the
care numbers, etc.
purchaser can anticipate this. Product may be classified of grade A, B, or C.
3. can
Labelling A grade
also belabel: Identifies
classified the commodity’s
with respect to the purpose anticipated quality.
it serves to the After
customers as:
using the goods, the purchaser can anticipate this. Product may be
1. Usage Labelling: Usage labels offer instructions on how to use or assemble a product.
classified of grade A, B, or C.
They ensure safe and effective product use. For Example: Assembly instructions for
Labelling
furniture. can also be classified with respect to the purpose it serves to
the customers as:
1. Usage Labelling: Usage labels offer instructions on how to use or
assemble a product. They ensure safe and effective product use.
For Example: Assembly instructions for furniture. 141 | P a g e
2. ©
Environmental Labelling:
Department of Distance Environmental
& Continuing Education, labels
Campusconvey
of Open information
Learning,
School of Open Learning, University of Delhi
about a product’s environmental impact or eco-friendliness. They cater
to environmentally conscious consumers. For Example: “Recyclable”
or “Biodegradable” labels on packaging.
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PRINCIPLES OF MARKETING
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PRINCIPLES OF MARKETING
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Notes is their duty to provide a correct bill to the customer and if any
fault is discovered, they may correct it with apologies.
(6) Payments: When buying items, customers demand a simple and
convenient payment method, including credit. Self-service, pay
directly to payee or intermediary, automatic withdrawals from
financial deposits, control, and verifications are some of the payment
features. Customers should be guided clearly for different modes
of payment available to them in case of a product or a service.
(7) Exceptions: It includes a collection of services that aren’t often
provided as part of standard service delivery. The exceptions include
extraordinary requests, where an individual or business customer
may ask for a certain level of tailored or customised service that
involves a deviation from the standard operating practices.
The above seven points are both for tangible and intangible products. If
a producer want to achieve a big market share, all these product support
services should have a set standard of delivery and the staff should be
well trained to provide these services.
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PRINCIPLES OF MARKETING
IN-TEXT QUESTIONS
5. A Grade Label explains how to use, operate, maintain, and use
other aspects of the product. (True/False)
6. Efficient product support services help in retaining the old
customers and acquiring new customers. (Yes/No)
7. Which of the following are not a type of product support service:
(a) Billing and Payment
(b) Informing customers
(c) Hospitality
(d) Brand labelling a product
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2.6 Summary
The broad range of tasks involved in a product’s planning can be referred
to as packaging. These tasks centre on developing a package design and
creating a suitable and appealing container or wrapping for a product.
Packaging can be of four types: primary, secondary, tertiary and ancillary.
Labelling is the process of identifying a product by attaching a label that
contains information about it to the product or its container. Anything
that is written, printed digitally, or graphically represented on a product
constitutes labelling, which is an essential component of packaging. We
can classify labelling in the following types: brand label, descriptive
label and grade label usage label, environmental label, warning label,
etc. Labelling also helps in promotion, information and grading of the
product. It helps the company to promote consumer protection also.
Every marketer’s responsibility is to develop happy customers. In the
market, product support is essential for achieving and sustaining consumer
happiness. After purchasing a product, a customer could have a number
of questions about it, all of which should be addressed by the product
support services offered by the business. Some of the product support
services are: information, consultation, billing, hospitality, payments, etc.
1. False
2. (c) Attractive label
3. Primary packaging
4. True
5. False
6. Yes
7. (d) Brand labelling a product
8. Ancillary packaging
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PRINCIPLES OF MARKETING
1. Explain the term labelling? What are different types of labels, discuss
with examples.
2. Define Labelling. What are some of the ethical issues involved in
the process of labelling? Discuss in detail.
3. Explain the concept of product support services. What are different
types of product support services offered by firms? Take an imaginary
company in any sector (travel, consumer goods, fashion, etc.) and
list various products sold, and services offered by it.
4. What do you mean by the term ‘packaging’? What are its functions
for a marketer?
5. Write short notes on the following:
(a) Tertiary packaging
(b) Labelling
(c) Types of packaging
(d) Ethical aspects of labelling
6. How is packaging different from labelling? Are there any ethical
aspects involved in labelling? Discuss in detail.
7. Are there any benefits to the marketer for providing product support
services to its customers, or is it just a waste of funds for him?
Discuss.
8. “Labelling is not just information it is a powerful weapon for consumers,
that provides them with all the information about the brand and the
product.” Do you agree? State reasons for your answer.
2.9 References
u https://www2.deloitte.com/us/en/pages/consumer-business/articles/
wholesale-distribution-trends-disruption.html.
u https://www.magestore.com/blog/omnichannel-distribution/.
u https://www.packaging-labelling.com/articles/importance-of-labelling-
in-marketing.
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes u https://blog.wiser.com/5-unethical-pricing-pitfalls-to-avoid/.
u Kotler, P. & Keller, K. L. (2017), Marketing Management, Pearson.
174 PAGE
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L E S S O N
3
New Product Development
Dr. N. Mishra
Motilal Nehru College
University of Delhi
STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 Product Life Cycle
3.4 New Product Development
3.5 Summary
3.6 Answers to In-Text Questions
3.7 Self-Assessment Questions
3.8 Suggested Readings
3.2 Introduction
A product has a life cycle once it enters the market. It begins from being new and helpful
to the customers to eventually being retired from the market. This is an ongoing process
for all products but not same for all types of products existing in the market. The product
life cycle starts from the introduction stage, then through maturity, decline, and eventually
abandonment.
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products but not same for all types of products existing in the market. The product life cycl
Notes Offering goods that satisfy customers’ requirements and expectations is
starts from the introduction stage, then through maturity, decline, and eventuall
more crucial than ever in the competitive market of today. Therefore, every
abandonment.
firm must follow a seven step procedure, that will eventually lead to new
Offering
product goods that satisfy This
development. customers'
lesson requirements
will discuss and expectations
all these steps in isdetail.
more crucial tha
ever in the competitive market of today. Therefore, every firm must follow a seven ste
procedure,3.3that will eventually
Product Life Cycle lead to new product development. This lesson will discuss al
these steps in detail.
Products, like human beings, have life cycles. And the life cycle of a
3.3product
PRODUCT has many LIFE similarities
CYCLE with the human life cycle. In the same
way that a human being passes through different stages of life after the
birth,like
Products, a product
humantoo passes,
beings, haveafter
lifebeing
cycles.born,
Andthrough
the lifedifferent
cycle ofstages and has man
a product
in different
similarities with thecompetitive
human lifeenvironments.
cycle. In the The sameproduct
way thatlife cycle being
a human refers passes
to throug
stages
different a product
stages progress
of life after through
the birth, while too
a product on passes,
the market.
after Specifically, the
being born, through differen
stagesconcept
and in of productcompetitive
different life cycle seeks to describe
environments. The a product’s
product life sales,
cycleprofits,
refers to stages
customers,
product progress competitors
through while andonmarketing
the market.emphasis fromthe
Specifically, its concept
beginning until life cycl
of product
it is removed from the market. The life of a product
seeks to describe a product’s sales, profits, customers, competitors and marketing begins with its emphasi
from introduction
its beginningtountil the itmarket,
is removedfollowed
from by theits growth,
market. Thematurity,
life of adecline
productand begins with it
finally its
introduction death
to the (abandonment).
market, followed byDuring each stage
its growth, the level
maturity, declineof and
product
finally its deat
acceptance During
(abandonment). purchases eachby customers
stage the levelinofaproduct
marketacceptance
change. The life cycle
purchases by customers i
concept
a market is applied
change. to whole
The life cycle classes
conceptofisproducts,
applied toproduct
whole form,classesorofdesigns
products, produc
and to individual brands. The measure of a product’s age or
form, or designs and to individual brands. The measure of a product’s age or its position i its position
in cycle
the life the life cycle basically
depends depends on basically on threetime,
three variables: variables: time,profits.
sales, and sales, and
Fig. 3.1 depict
profits.stages
the various Figure 3.1 product
of the depicts lifethe cycle.
various stages of the product life cycle.
Fig.
Figure 3.1Product
3.1: Productlife
lifecycle
cycle
152 | P a g e
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ofDepartment
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Continuing
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Continuing of Open
Education, Learning,
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School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
FigureFig
3.2:
3.2:Four
FourIntroductory
introductory Marketing Strategies
marketing Strategies
Notes (1) A Rapid-Skimming Strategy: It means launching the new product with
a high price and high promotion. High price is set in order to recover
as much gross profit per unit as possible. High promotional expenses
are made to convince the market of the product’s merits even at the
high-price level. The assumptions underlying this strategy are
(a) The entire potential market is unaware of the product.
(b) Those who become aware are eager to have it and are capable
of payment.
(c) The firm faces potential competition and want to build up
brand preference.
(2) Slow-Skimming Strategy: It implies Launching the new product with
a high price and low promotion. (This combination, is expected to
draw a lot of profit from the market.)
The assumptions are:—
(a) The market is relatively limited in size.
(b) Most of the market is aware of the product.
(c) Those willing to buy are capable to pay.
(d) There is little danger of potential competition.
(3) A Rapid-Penetration Strategy: It consists of launching the product
with a low price and heavy promotion. This strategy aims at bringing
the fastest rate of market penetration and largest market share for
the company. The underlying assumptions are:—
(a) The market is large in size.
(b) The market is relatively unaware of the product.
(c) Strong potential competition.
(d) Most buyers want to pay a low price; and
(e) The company’s unit manufacturing cost fall with the scale of
production and experience.
(4) A Slow-Penetration Strategy: It consists of launching the new
product with a low price and low level of promotion. The purpose
is to realize more net profit.
The assumptions are:—
(a) The market is large.
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PRINCIPLES OF MARKETING
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PRINCIPLES OF MARKETING
to be mostly older people, the firm may try to reposition the drink Notes
in the youth market.)
B. Product Modification: Managers, here, try to increase the sales by
initiating changes in the product’s characteristics that will attract
new users or more usage from current users. Product modifications
can take many forms. Some are:—
(i) Quality Improvement: This strategy aims at increasing the
functional performance of the product (such aspects as its
durability, reliability, speed and taste.)
(ii) Feature Improvement: Such a strategy has the goal of adding
new features which expand the product’s versatility, safety,
or convenience. For example, the addition of power to hand
lawn mowers increased the speed and ease of cutting grass.
(iii) Style Improvement: Under this strategy the basic aim is to
increase the aesthetic appeal of the product in contrast to its
functional appeal. For example, in case of package-food and
household products, companies introduce colour and texture
variations and mostly put great emphasis on package restyling,
treating the package as an extension of the product.
C. Marketing Mix Modification: Here, the product manager should
consider the possibility of stimulating sales through change one or
more elements of the marketing mix. One possibility is to cut prices
in order to attract new tries and competitor’s customers. Another
possibility is to develop a more effective advertising campaign
which attracts consumer’s attention and interest or through sales
promotion, like, gifts, contests, discounts, etc. The company can
also move into higher-volume market channels, especially discount
channels, if they in a growth stage.
4. Decline stage
Decline is the period when sales continue to decline strongly, and profits
decrease toward the zero point. Most products forms and brands gradually
enter a stage of sustained sales decline. The decline may be slow or rapid.
Sales may decline due to technical advances, change in fashion or
tastes or lower cost of imported products. All of these have the effect
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PRINCIPLES OF MARKETING
(iv) Niche Marketing: Identify niche segments of the market that still Notes
have a demand for the product. Tailor your marketing efforts to
these smaller, specialized audiences to maintain sales.
(v) Price Adjustments: Carefully consider pricing strategies. You could
reduce prices to attract price-sensitive consumers or maintain higher
prices to focus on premium buyers who value the product’s unique
features.
(vi) Bundle Offerings: Bundle the declining product with other related
products or services to provide greater value to customers. This can
encourage sales while also promoting other offerings.
(vii) Promotions and Clearance Sales: Offer special promotions, discounts,
or clearance sales to clear out remaining inventory. This can help
generate quick sales while freeing up resources for other products.
C. The drop decision
When a product has been singled out for elimination, the firm needs
some further actions. First, it must decide whether to sell or transfer
the product to someone else or dropping it completely. Second, it has to
decide whether the product should be dropped quickly or slowly. Third,
it has to decide about the level of parts-inventory and services to be
maintained to cover the existing products units.
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Notes (d) Strategic Planning: The PLC helps businesses anticipate and plan
for the challenges and opportunities that arise at different stages.
(e) Resource Allocation: Understanding where a product stands in its
life cycle helps allocate resources effectively. In the growth stage,
for instance, more resources may be allocated to marketing and
production to meet increasing demand.
(f) Product Development: Businesses can use the PLC to plan product
improvements, extensions, or modifications based on the specific
needs and preferences of customers at each stage.
(g) Pricing Strategies: The PLC guides pricing decisions. Pricing may
be aggressive during the introduction and growth stages to gain
market share, while pricing strategies might shift in response to
competition during maturity and decline.
IN-TEXT QUESTIONS
1. Growth is the first stage in the product life cycle for every type
of product existing in the market. (True/False)
2. PLC concept produces a product-oriented picture rather than a
market-oriented picture (True/False)
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PRINCIPLES OF MARKETING
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Principles of Marketing
Notes The crucial importance of product development is clear; “innovate or
bringingperish”
forth new should be the
products maywatchword
also be quite forhigh
management.
which may be Thereflected
need for product
in the form of
development
company’s lower salesarises
volume because consumers
and profits from its and industrial
old-standby customers
products. Businesswant andare
firms
expect a stream of new and improved products, and it has been made
increasingly recognizing that the key to their survival and growth lies in the continuous
development of new andbecause
indispensable improved ofproducts.
the presence of ever-rising intense competition.
It should,
The crucial however,
importancebe of remembered that innovations
product development are hard
is clear; “innovate to achieve
or perish” should
be the because
watchword of many odds in the The
for management. way,needparticularly
for producthighdevelopment
rate of product failure.
arises because
It is,
consumers andtherefore, necessarywant
industrial customers thatand
effective
expect aorganizational
stream of new and arrangements
improved products,are
and it made
has been made product
to handle indispensable because of
development, andthe presencetechniques
improved of ever-rising intense
are used
competition. It should, however, be remembered
at each stage of the product development process. that innovations are hard to achieve because
of many odds in the way, particularly high rate of product failure. It is, therefore, necessary
that effective organizational arrangements are made to handle product development, and
3.4.1 Product
improved techniques are used Development Process
at each stage of the product development process.
3.4.1 Product
The new Development Process
product development process the sequence of stages a product
mustnew
The pass through
product to arriving
development at the
process the introductory stagea of
sequence of stages the product
product must pass
throughlife
to arriving
cycle. atThese
the introductory
stages are:stage of the product life cycle. These stages are :
(ii) Idea Screening: It refers to the critical appraisal of product ideas. Notes
It is important because a firm can afford to undertake development
of only a limited number of product ideas. The less promising ones
must be dropped. In deciding whether to proceed further with a
new idea judgment, experience and environmental factors need to
be give due weightage.
(iii) Concept Development and Testing: Those product ideas which clear
screening should be developed into fully mature product concepts. A
product idea is a possible product described in objective functional
terms that the company can see itself offering to the market, whereas
a product concept is a particular subjective consumer meaning that
the company tries to build into the product idea. For example,
Philips conceives the idea of manufacturing VCR. This product idea
must be developed into product concept – identifying its features,
users, benefits, competition, price, etc. After the product concept
has been developed, it is put to testing. Concept testing calls for
showing the concept to a sample of target consumer and getting
their reactions on the features, benefits, uses, competitive strength,
etc., of the concept and their suggestions for improvements.
(iv) Business Analysis: After the product concept has been developed and
tested, management undertakes business analysis of the proposed
product. The purpose of this stage is to study the commercial viability
of the concept. It is concerned with projecting future sales, profits
and rate of return for the proposed new product, and to determine
whether these meet the company’s objectives. The techniques
generally employed for business analysis are break-even analysis,
discounted cash flow, Bayesian Decision theory, risk analysis, etc.
(v) Development: If the product concept survives the business analysis
stage, it is committed to technical and marketing development. During
this stage, the idea is converted into a concrete form of product.
Pilot models or small quantities of the product are manufactured
according to the specifications, and various tests and technical
evaluation are conducted to determine whether the product idea can
be translated into technically and commercially feasible product.
(vi) Test Marketing: If a go decision is made, test marketing of the actual
product begins. Its basic purpose is (a) to determine if targeted
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes customers will buy the product, (b) to test the other marketing mix
elements, and (c) to prepare more reliable sales and profit forecasts.
If test results are unfavourable, the product introduction is postponed
or the product is dropped., Ideally, individual product features that
can be evaluated before the market test should be pretested.
(vii) Commercialization: After the company, is satisfied that the product
is through in test marketing, it decides to undertake full scale
commercial production and marketing of the product. This requires
finalizing the product’s introductory marketing strategy. During
commercialization, the marketer also develops the product’s marketing
plan over its projected life cycle. Expenditures are greatest in this
stage and interdepartmental cooperation and coordination are required
in planning, implementing and controlling the marketing effort for
the new product. Among the activities that take place are acquiring
production facilities to produce the product in volume and preparing
final budgets. The sales force and intermediaries must be acquainted
with new product and be trained and motivated to help ensure a
successful introduction. The advertising agency and the marketer
must work together in developing the promotional programme and
final plans for physical distribution must be made.
It should be remembered that each of the seven stages noted above become
increasingly more expensive in terms of money and manpower. The first
four stages may be considered as critical ones requiring greater attention
from managers. This is so because the practical experience indicates
that products fail largely because of wrong decisions about a product
at the idea or concept stages and not because the company lacked the
production or marketing know-how. The chances of product failure can
be minimized by careful handling of each stage of product development
process. The use of mathematical models and other quantitative techniques
in the product development process has proved to be of great value in
eliminating the risk of product failures.
IN-TEXT QUESTIONS
8. ______________is a method that aims to explore consumer
response to a product or marketing campaign by making it
available on a limited basis.
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PRINCIPLES OF MARKETING
9. After the product concept has been developed and tested, Notes
management undertakes business analysis of the proposed
product.(True/False)
10. Which of the following are/is not a stage in new product
development process:
(a) Idea Generation
(b) Stage marketing
(c) Idea screening
(d) Test Marketing
11. ____________refers to the critical appraisal of product ideas.
3.5 Summary
Products, like human beings, have life cycles. And the life cycle of a
product has many similarities with the human life cycle. In the same
way that a human being passes through different stages of life after the
birth, a product too passes, after being born, through different stages and
in different competitive environments. The life of a product begins with
its introduction to the market, followed by its growth, maturity, decline
and finally its death (abandonment). Product life cycle helps the firm in
form of a planning, control and forecasting tool.
New products differ with respect to their potential impact on the firm.
Some products involve new processes or technologies which other do not.
Similarly, from the marketing point of view, some new products may offer
a variety of new benefits while others may not be so. Depending upon
the degree of newness of a product to the firm and to the market, the
process of development of each new product would vary significantly. New
product development process involves 7 stages namely idea generation,
idea screening, concept development, business analysis, development of
product, test marketing and commercialisation.
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1. False
2. True
3. (d) All of the above
4. Rapid Skimming strategy
5. Slow penetration strategy
6. Maturity
7. False
8. Test marketing
9. True
10. (b) Stage marketing
11. Idea Screening
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PRINCIPLES OF MARKETING
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UNIT - IV
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L E S S O N
1
Pricing
Dr. N. Mishra
Motilal Nehru College
University of Delhi
STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Meaning of Price
1.4 Pricing Policies/Decisions
1.5 Pricing Strategies
1.6 Summary
1.7 Answers to In-Text Questions
1.8 Self-Assessment Questions
1.9 Suggested Readings
1.2 Introduction
It is important that the marketing manager determines correct price-the price that should
be asked for the products or services that are being marketed. Price is a crucial and
essential element in marketing. In fact, without price there is not marketing. Products may
be matched with markets, but only when buyers and sellers may propose do ownership
transfers occur. Prices are always on trial-either a buyer or a seller may propose a price, but
it does not become one unless accepted by the other. A marketing executive is confronted
with pricing problem in at least four types of situations:
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Notes (a) When a firm must set price for the first time, e.g., when it develops
a new product, or introduces its existing product in a new market.
(b) When a firm initiates a price change, e.g., when the firm feels that
price changes have made it necessary to establish new prices.
(c) When competition initiates a price change.
(d) When the products of a firm have interrelated demands and/or costs
so that changes in demand and costs of one product necessitate
changes in the prices of other products.
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Notes purchase a product in large quantities, its price can be set low
because marketing costs involved are relatively less.
(viii) Economic Climate: The ups and downs in business influence
significantly the pricing decisions of a firm and while setting prices
the management must forecast and take account of impending
economic changes.
(ix) Governmental Legislation: In our country the Government seeks
to exercise control over prices of quite a number of commodities
through legislation. Where such controls exist, a marketer is required
to set price in accordance with provisions of the relevant legislation.
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes a bundle of price policies to arrive at price decisions to suit the firm
and its pricing objectives as well its overall marketing situation. The
various pricing policies and decisions alternatives available to a firm are
discussed below:
1. Cost-oriented Pricing Policies: It is also referred to as ‘cost-plus’
pricing. This pricing policy assures that no product is sold at a loss
since the price covers the full incurred. As a general rule, long-run
sales revenue must cover all long-run costs, but short-run prices
need not necessarily cover all short-run costs. The following two
pricing alternatives are available under this policy:
(i) Full-cost pricing: Under full-cost pricing policy the prices set
must cover, total costs-both variable are fixed. Mark-up pricing
and Cost-plus pricing are most elementary examples of such
pricing practices. Both these practices involve determination
of price by adding some fixed percentage to the unit cost.
Mark-up pricing is most common with retailers, and cost-
plus pricing is very frequently used to price jobs which are
of non-routine type and difficult to cost in advance, such as
construction work. Target pricing is another practice based on
full costs. Under this approach price is so determined as to
give a specified target rate of return on its total costs at an
estimated standard sales volume.
Example: If a pair of football shoes costs the seller 100, and
the seller wants a mark-up of 25 per cent, the price will be
set as following:
Cost-plus price = Cost + (Cost × desired mark-up) Selling price
= Cost + (Cost × desired markup)
= 100 + (100 × 25%) = 100 + 25 Cost-plus price = 125
(ii) Contribution Pricing: Under contribution policy a firm sets
prices on full-cost basis wherever possible but will price, under
certain conditions, at any level above the relevant incremental
costs. In other words, if the price charged is enough to
cover all incremental costs and make a contribution to fixed
costs and/or profits, the firm will go for it. The assumption,
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PRINCIPLES OF MARKETING
Notes A firm may adopt any of the following four alternative practices
relative to competition:
(i) Competitive pricing: It is also called going rate pricing, i.e.,
setting a price just what the competition are charging.
(ii) Pricing above the competition, i.e., to set a price higher than
the price of the competitors. In those situations where higher-
than-average price convey an impression of above-average
product quality or prestige, this type of pricing may be resorted
to.
(iii) Pricing below the competition, i.e., this involves setting a price
below the market. Such pricing practice may be followed by a
firm whose products are of a lower quality or which substitutes
lower prices for the promotional efforts of its competitors.
(iv) Sealed-bid pricing: Where firms compete for jobs on the basis
of bids, the bid offered by the firm for a job is based primarily
on expectations of how competitors will price rather than on
a rigid relation based on the firm’s own costs or demand.
Here also, the firm tries to set a price which is lower than
those of its competitors so that it is able to get the contract.
However, the firm will not set its price below a certain level,
i.e., below marginal cost, because that would mean incurring
losses on the new contract.
3. Uniformity of Prices to Different Buyers: A firm may charge either
a uniform price or different prices from different buyers. Thus, the
firm may follow one-price policy or variable price policy. As the
name suggests, under one-price policy the firm charges the same
price from all buyers. The sellers of many consumer as well as
industrial goods follow this policy. Variable-price policy, on the
other hand, means charging different prices from different customers.
This policy is followed in selling most industrial products and also
where individual sales are large. However, this policy is not very
uncommon for selling consumer products too.
4. Price Differentials: The following pricing alternatives are available
under this policy:
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PRINCIPLES OF MARKETING
(i) Quantity Discounts: These are deductions offered from the Notes
list prices by a seller to large buyers. Quantity discounts may
attract large buyers or induce small buyers to order large
quantities.
(ii) Trade Discounts: A trade discount, also called functional
discount, is a reduction in price allowed by a manufacturer
to a wholesaler or by a wholesaler to a retailer. These
discounts are allowed usually to compensate the trade for his
performance of a particular marketing function. The chief merit
of trade discount lies in the fact that if offers an easy way
of suggesting resale price. Thus, if a manufacturer offers 30
per cent discount to wholesalers and 10 per cent to retailers,
while selling to wholesalers an item of Rs. 60/- list price he
is suggesting him to sell to retailers at Rs. 42/-.
(iii) Cash Discounts: Cash discount is a deduction granted by the
seller to the buyer for prompt payment. However, in many
cases cash discounts are used as a means of giving what
amount to discriminatory price.
(iv) Promotional Discounts: These discounts or allowances are allowed
by manufacturers to wholesalers and retailers, specially the latter,
for undertaking specific and direct forms of sales promotion.
For example, the retailer may advertise the manufacturer’s
product locally, may undertake window and interior display
of the product, or may simply “push” the product at the
retail sale point, and for his services he is paid promotional
allowance.
(v) Seasonal Discounts: Seasonal discounts are offered to the
customers during a particular season, usually “off-peak”
season. For example, off-season discounts offered on sales
of woollen clothes and garments during summer and fans are
refrigerators during winter.
5. Geographical Pricing Policies: Geographical pricing refers to a
firm’s policy its products for customers located in different parts
of the country. Depending on who should pay the freight (delivery)
charges, there are three main options available to a firm. First,
the firm may quote the same (factory) price to all customers who
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PRINCIPLES OF MARKETING
the period of guarantee. The guarantee against price decline may Notes
be given in two ways-price may be guaranteed till the orders are
delivered or well into the season when the product is being sold
by the middlemen.
11. Pricing as a Promotional Device: While pricing its products, a
firm must also decide the extent to which it will use pricing as
a promotional device. Some firms may reduce price temporarily
as a promotional device under certain conditions such as while
introducing a new product, while others, as a matter of policy,
refrain from even temporary price reduction and instead rely upon
other promotional devices like advertising, personal selling, etc.
12. Resale Price Maintenance: Resale Price Maintenance (RPM), or fair
trade, as it is popularly (though erroneously) called, is a pricing
policy under which is a manufacturer fixes the price of his product
for sale by middlemen and no seller shall sell the product below
the fixed resale price. RPM thus refers to that price policy under
which the manufacturer of a branded product in open competition
establishes the price, or the minimum price, at which, such product
shall be resold to the consumer. RPM is feasible in case of branded
product only and thus in practice it is resorted to in a case primarily
of consumer goods.
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PRINCIPLES OF MARKETING
(b) High initial prices often generate higher sales revenues and Notes
profits than a low initial price.
(c) A manufacturer can set high initial prices to keep demand
within limits of his productive capacity. He can also use this
strategy to avoid losses resulting from the competition when
the entry into that line is quite easy.
(d) It acts as a strong hedge against a possible mistake in price
setting. If an introductory price is too high it is easy to reduce
it, but it is too low, it is very difficult to raise it.
(ii) Penetration pricing: Penetration pricing is the opposite to skim-
the-cream pricing. In this strategy a low introductory price is set
to speed up the product’s widespread market acceptance. Thus,
the objective of this strategy is to capture a certain market share
before competitors enters the market. This strategy can also be
used at a later stage during the product’s life cycle. It is based
on two assumptions-first that there is a large potential market that
will respond to a low price, and second that there are potential
economics of producing at a large scale. The penetration pricing
strategy is often used in retailing where sellers set their prices still
lower keeping in mind those charged by competitors. Penetration
pricing can be used with advantage when any or all of the following
four different conditions exist:
(a) When the demand of the product is highly elastic.
(b) When substantial manufacturing and marketing economies of
large-scale operation exist;
(c) When the product is expected to face strong competition soon
after its introduction; and
(d) When the market is such that price-skimming cannot be used.
(iii) Premium Pricing: The prices of goods and services in the premium
pricing strategy are a little bit higher than the average costs. These
are focused mostly on consumers in the premium market. Some
individuals could believe that if a product’s price is high, then only
its quality will remain acceptable. For such customers premium
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes pricing is kept. They even question the dependability and quality
of that thing when someone declares a discounted deal or half
price. The premium pricing strategy was employed specifically
for them at the same time that they wanted to retain the quality,
which meant that price.
(iv) Economy Pricing: One of the best pricing strategies that takes into
account the broad category of buyers is economy pricing. These
are very cost-effective and sensible in terms of what they can
offer. If we think about the scenario of plane tickets, it is simple
to understand what the economy class represents. The cost for the
economy category will be set at the lowest amount necessary for
the full trip.
(v) Psychological pricing is one of the three main pricing strategies.
This pricing strategy is very popular to induce middle class. For
instance, Bata has a new style of shoe that costs 1,999 rupees.
Human psychology is prepared to tolerate 1999 rupees, but it
is not prepared to accept 2,000. Many businesses employ this
psychological pricing strategy for this reason. Initially, this Pricing
Strategy was applied to electronic appliances, but it is being used
by many popular brands including Bata, Samsung, Amazon, and
other companies.
(vi) Product Line Pricing: It is one of the strategies for differential
pricing. The size of the product may affect the prices in this case.
If we buy a single thing, the cost can be 10 rupees even though
the product is the same. The cost might 100gm of oil costs 30/-
and 500ml costs 140/-. It depends on the quantity of product.
ACTIVITY
Make a list of items that you and your family purchased in past
2-3 months and classify them under which pricing strategy do these
items fall.
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PRINCIPLES OF MARKETING
1.6 Summary
Pricing decisions involve more than just “mechanically” increasing profit
margins over costs. Price setting must be a crucial component of the
company’s marketing strategy and must be in line with overall corporate
and marketing goals as well as other mix components. In addition to
these factors, the marketer must also think about demand, cost, and rivals
when setting prices. Major factors to be considered for deciding a price
include cost of the product, public image desired by the firm, promotional
factors, distribution strategy, competitors price, buyers behaviour, market
conditions, government legislations and economic climate in the market.
Various pricing decisions are to be made by the firm including cost
oriented pricing policies, competition oriented pricing policies, Uniformity
of Prices to Different Buyers, price differentials, geographical pricing
policies, leadership pricing policy, etc.
Pricing strategies are specific and short-run while pricing policies are
general and long-run. These include skim the cream pricing, penetration
pricing, premium pricing, economical pricing, product line pricing, etc.
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes
1.7 Answers to In-Text Questions
1. Price
2. (d) All of the above
3. False
4. Cost-oriented Pricing
5. (c) Skimming Pricing
6. True
7. True
8. Economic Pricing
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PRINCIPLES OF MARKETING
Notes
1.9 Suggested Readings
u McCarthy, E. J., Cannon, J. & Perreault, W. (2014), Basic Marketing,
McGraw Hill.
u Kotler, P., Armstrong, G. and Agnihotri, P. (2018), Principles of
Marketing (17th Edition), Pearson Education, Indian Edition.
u Sharma, K., & Swati Aggarwal, (2018), Principles of Marketing,
Taxmann Publications Pvt. Ltd.
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L E S S O N
2
Channels of Distribution
Dr. N. Mishra
Motilal Nehru College
University of Delhi
STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Introduction to Channels of Distribution
2.4 Introduction to Types of Middlemen
2.5 Functions of Middlemen
2.6 Elimination of Middlemen
2.7 Summary
2.8 Answers to In-Text Questions
2.9 Self-Assessment Questions
2.10 Suggested Readings
2.2 Introduction
Whatsoever has been produced must be distributed through appropriate channels. How
efficiently and economically goods are made available to the consumers depends largely
on the channels of distribution selected. Wholesalers, retailers, distributors, and the Internet
are examples of distribution channels. Under direct distribution channels the products are
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PRINCIPLES OF MARKETING
directly delivered by the producer to the end customer whereas in indirect Notes
channels the products are delivered with the help of middlemen. A new
concept in this distribution is the ‘reverse distribution channels’ these make
the goods flow from the end consumer to the producer. The existence of
middlemen is not willingly accepted either by the manufacturers or by
the customers. However, it is also not possible to eliminate middlemen
from all areas. Some views in favour and against of middlemen are also
discussed below.
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B.Com. (Programme) / B.Com. (Hons.)
Figure
Fig 2.1:2.1: ChannelsofofDistribution
Channels Distribution
1. Direct Channel (Zero level channel)
1. Direct Channel (Zero level channel)
Producers sell their goods and services directly to consumers through
Producers sell
this their goods
channel. and is
There services directly to between
no intermediary consumers thethrough
producersthisand
channel.
the There is
no intermediary between
consumers. the producers
Producers andtotheconsumers
may sell consumers. Producers
directly maydoor-to-
through sell to consumers
directly through door-to-door
door salesmen salesmen
and their own and
retailtheir own retail establishments.
establishments. For example, Bata For example
Bata India India
Ltd, HPCL, and Liberty
Ltd, HPCL, Shoes Shoes
and Liberty Limited all have
Limited alltheir
haveown retail
their ownstores
retailwhere they
offer their stores
wares where
to customers.
they offerConsumers
their warescan obtain services
to customers. directlycanfrom
Consumers some service
obtain
groups. Banks,
servicesconsulting
directly frombusinesses,
some service telephone
groups. Banks,companies, passenger
consulting businesses,and freigh
telephone
transportation companies,
services, and so onpassenger and of
are examples freight
directtransportation services,
service distribution and
channels.
so on are examples of direct service distribution channels.
PRODUCER CONSUMER
2. The Indirect Channel
2. The Indirect Channel
If the manufacturer manufactures
If the manufacturer things onthings
manufactures a hugeonscale,
a hugehescale,
may he
notmaybe able to sell them
not be
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184 | P a g e
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SchoolofofDistance & Continuing
Open Learning, Education,
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School of Open Learning, University of Delhi
PRINCIPLES OF MARKETING
producers and sells them to end users. The involvement of different Notes
middlemen in the distribution process constitutes the indirect distribution
channel. Thus, when a manufacturer enlists the assistance of one or more
middlemen to transport items from the point of manufacture to the point
of consumption, the distribution channel is referred to as an indirect
channel. The following are the most common types:
(a) Single Level Channel: An intermediary is used in this procedure.
Instead of selling via agents or distributors, a manufacturer sells
directly to the retailer. This method is utilized for high-end watches
and other similar items. This technique can also be used to sell
FMCG (Fast Moving Consumer Goods). Producers sell through
this channel to one or more retailers, who then sell to the final
customers. This channel is used in the following situations:
(i) When the goods cater to a local market, such as breads,
biscuits, patties, and so on.
(ii) When large retailers buy in bulk yet sell in smaller amounts
straight to customers.
PRODUCER
RETAILER CONSUMER
(b) Two Level Channel: In this method, a manufacturer sells the
material to a wholesaler, the wholesaler to the retailer and then the
retailer to the consumer. Here, the wholesaler after purchasing the
material in large quantity from the manufacturer sells it in small
quantity to the retailer.
Then the retailers make the products available to the consumers.
This is mostly used for the products with widely scattered market.
This is the common channel for the distribution of goods to ultimate
consumers. Selling goods through wholesaler may be suitable in case
of food grains, spices, utensils, etc. and mostly for items, which
are smaller in size.
PRODUCER WHOLESALER RETAILER CONSUMER
(c) Three Level Channel: This adds one more level to the two level
channel in the form of an agent. An agent helps to bridge the gap
between the manufacturer and the distributor. Some large corporations
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B.COM. (PROGRAMME)/B.COM. (HONS.)
Notes use agents because they cannot contact wholesalers directly. Such
businesses establish agents in each location and sell the material
to them.
The material is then sold by the agents to wholesalers, who in turn
sell it to retailers, who in turn sell it to consumers. This channel
is appropriate for the wider distribution of a variety of industrial
items.
PRODUCER AGENT WHOLESALER RETAILER CONSUMER
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PRINCIPLES OF MARKETING
at the right time and right place. The channel decision determines Notes
where and when the product will be available to ultimate consumers
and users.
u It performs marketing functions: The real importance of channel
decision lies in the fact that distribution channel performs several
functions in the overall marketing system. First, it facilitates
exchange process. Secondly, it enables the producer to adjust
discrepancies in assortment via a process called ‘sorting’. A producer
tends to maximize quantity of a selection of alternatives. Sorting
is the process that alleviates such discrepancies by adjusting the
buyer’s and the producer’s needs. Thirdly, it standardizes exchange
transactions. Thus, each transaction is not negotiated separately;
rather transactions are standardized in terms of the product grades
and varieties, order points, prices, payments, delivery schedules,
etc. Finally, it accommodates the search behaviour for both buyers
and sellers-buyers are searching for specific products and services
to satisfy their wants while sellers are attempting to find what
consumers want.
u It entails firm’s commitment: The channel decision entails long-term
commitment of the firm. The relations between the manufacturer
and the middlemen depend largely upon the choice-of appropriate
channels of distribution.
u It facilitates control: The choice of a suitable channel ensures
continuous and effective distribution thereby reducing fluctuations in
production. This leads to steady employment and proper budgetary
control. Thus the manufacturer can continuously monitor the sales
and stake of his middlemen to exercise effective control over
distribution network.
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(iii) Units Value: The lower the unit value of the product, the longer is Notes
the channel used for its distribution. On the other hand, products
of high unit value and often sold through company’s own sales
network than through middlemen.
(iv) Technical nature: Complex products such as custom-made installation
or computer equipment’s are typically sold by the producer to the
buyer. Products requiring regular service or specialized repair service
usually are not distributed through channels employing independent
wholesalers; rather the manufacturers of such products attempt to
sell through their network of retail dealers whose employees receive
training on service and maintenance of the product. Standardized
products usually are marketed by wholesalers because the channel
of distribution of standardized products is longer.
(v) Product line: The broader the product line, the shorter is the channel.
The manufacturer with a wide product line can go directly to retailers
whereas the may have to employ wholesaler as well as retailer if
he produces a single item.
3. Company Considerations
(i) Age: An old established company may have its own marketing network
whereas a new company or a company planning to introduce a new
product or enter a new market may have to rely on middlemen.
(ii) Size: The company that has been successful enough to become large
is almost certain to have shorter channel – it may employ its own
sales force to reach directly to consumers. But small companies are
compelled to market their products through middlemen.
(iii) Resources: A company having strong financial and managerial
resources is less compelled to utilize middlemen in marketing its
products. It can employ its own sales force, warehouse its own
products, and grant credit to retailers or consumers. On the other
hand, a financially weak company must rely on middlemen for
those services. Similarly, a company having managerial experience
and ability will not need the service of middlemen for marketing
its products.
(iv) Desire for control of channel: The manufacturer’s desire for control
over the channel also influences channel selection. Thus, if aggressive
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Notes promotion is required at the retail level, the producer choices the
shortest available channel. For new products, however the producer
may be compelled to implement an introductory advertising campaign
before wholesalers will handle the items.
(v) Services provided by the producer: The channel selection is also
influenced by the quantity and quality of marketing service provided
by the producer to middlemen. Often retailers and other middlemen
agree to carry the producer’s products only if the latter undertakes
to provide certain marketing services like advertising, supply of
spares, provision for repairs and maintenance, building of in-store
displays and sending of missionary salesmen to call on retailers
and consumers.
4. Middlemen considerations: Since middlemen constitute a channel of
distribution, their nature and role exert considerable influence on channel
selection. The following factors pertaining to middlemen should be given
due consideration:
(i) Services provided by middlemen: What middlemen will be used by
a producer for marketing his products depend on what services
he expects the middlemen to provide. Thus, where aggressive
promotion is needed to introduce a new product in the market, the
manufacturer will appoint his own agent whereas for providing
storage facility for an established product he may use the services
of a wholesaler.
(ii) Availability of desired middlemen: If the desired type of middlemen
are not available, the manufacturer will go for a different channel.
Thus, instead of using traditional channel of wholesaler to retailer
wherein middlemen are also carrying the competitor’s product, a
manufacturer may decide to shift to house-to-house selling.
(iii) Attitude of middlemen: Many a time a manufacturer cannot use
certain middlemen simply because they are not prepared to accept
the marketing policies of manufacturer. For example, middlemen
may want manufacturer’s guarantee against a price decline, long-
term credit, exclusive dealership, regular supply of spares, etc.
(iv) Sale potential: Ordinarily a manufacturer will select that channel
which offers the highest potential sales volume in the long run.
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However, not only that it is very difficult to forecast sales volume Notes
likely to be generated by different channels, but some of the factors
do also not remain constant with increased sales potential of a
channel. For example, a high-volume channel may also turn out to
be a high-cost channel.
(v) Cost: The channel selected should be less costly. The expenses of
using middlemen must be equated with functions performed by them
because a particular middleman may be costlier only because the
provides so many services. While analyzing these costs, a marketing
manager should study the total channel expense rather than the
expenses of separate types of middlemen.
From the discussion presented above, it is clear that manufacturer (or
seller) is required to consider a variety of factors while deciding how
he will get his goods most economically and efficiently into the hands
of potential customers. There are also no readily available packages
of guidelines which could provide a ready-made answer. In each case,
therefore, the manufacturer has to weigh his own marketing objectives,
the market to be served, the product to be distributed, the availability of
middlemen and the competitive edge of firm.
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Auctioneer Manufacturer
Itinerant Fixed Shop
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From what has been stated above, it is clear that middlemen perform
several useful services to the consumers. The producers and the community
at large. It should, however, be noted that the various functions involved
in the process are not performed free of cost but are charged for. And
the larger the number of middlemen, the higher is the cost. These costs
are borne by the ultimate consumer in the form of higher prices. It is at
this stage that severe criticism is levelled that the charges made by the
middlemen are more than what is due to them.
In view of this, one comes across an on-going debate on whether middlemen
are unnecessary and can be eliminated without seriously impairing he
efficiency of the distribution system. A meaningful appraisal of this issue
also requires us to remember that the elimination of middlemen does
not at all mean eliminating he functions performed by middlemen. That
is, the functions involved in the distribution process must be performed
by someone. That is, the middlemen may be eliminated but not their
functions. In the light of this, let us examine the arguments for and
against the elimination of middlemen.
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Notes
2.6.1 Arguments in favour of Elimination of Middlemen
The following arguments are advanced in favour of eliminating middlemen:
(i) Enormous number: The number of middlemen interposing between
the producer and the ultimate consumer is excessively large and
they add a lot to the cost of marketing which raises the price the
consumer is required to pay. These middlemen may be described
as marketing parasites who earn their commission or profit without
rendering commensurate service.
(ii) Superfluous service: Many of the middlemen are mere agents and
they render services of superfluous nature. In reality their presence
in the channel hampers the unrestricted flow of goods from the
manufacturer to the consumer.
(iii) Absence of risk-bearing: None of the middlemen bears any risk of
the type borne by manufacturers or the consumers. Thus whereas
manufacturers and consumers are adversely affected by strikes, lock-
outs, changes in demand, etc., the middlemen in many cases take
advantage of such adversities and indulge in anti-social activities
like hoarding, black marketing and profiteering.
(iv) Manufacturer’s discontent: Manufacturers in general feel discontented
with the performance of middlemen. Their complaint is that wholesalers
do not take much interest in increasing sales volume in spite of
large incentives offered to them. Also, most of the middlemen do
not perform marketing functions like storing and transporting they
merely help in changing the ownership of goods.
(v) Obstruction to direct contact: In one way or the other, middlemen
prevent the coming together of producers and consumers. As a
result, the producers are not in a position to follow the exact
demand potentials nor can be consumers present their grievances to
the producers. The creation of such a wide gap between producers
and consumers acts as a major hurdle in the betterment of mutual
interest of both parties.
(vi) Disservice to the society: In so far as middlemen indulge in clever
business practices like corning, profiteering, black marketing,
hoarding, etc., they render disservice to the society.
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Notes
2.6.2 Arguments against Elimination of Middlemen
The opponent of elimination of middlemen gives the following arguments:
(i) Middlemen perform useful marketing functions like assembling,
dispersal, warehousing, transportation and risk-bearing. None of
these functions can be performed so efficiently by the manufacturers
who lack specialization in marketing services.
(ii) They relieve manufacturers of the botheration of marketing activities
thereby allowing them to concentrate on production.
(iii) They promote specialization in distribution as they concentrate in
marketing activities. Thus, they make movement of goods smooth
and timely.
(iv) They facilitate distribution. In many cases middlemen become almost
indispensable for distribution of goods easily, efficiently and without
undue delay. In case of certain products, manufacturing cannot be
combined with retailing because customers are widely scattered.
In some other cases, goods are manufactured by a large number
of small manufacturers who find it convenient and economical to
delegate distribution of their products to the middlemen. Similarly,
middlemen are a great value in distributing agricultural products.
In short, now the existence of middlemen is not willingly accepted either
by the manufacturers or the customers. However, it is also not possible
to eliminate middlemen from all areas. Besides, also mentioned earlier,
elimination of middlemen does not mean elimination of the functions
performed by middlemen. The various marketing functions performed by
the channel must be performed by the someone – if not by middlemen,
by the manufacturer or the customer himself. The desired objective
is to perform these functions at the lowest possible cost and with the
greatest possible efficiency so as to serve the consumer best. To the
extent these functions can be performed efficiently and economically with
few middlemen or without them, it is possible to reduce or eliminate
middlemen. In most cases, however, the targets of criticism are the
functional middlemen or the wholesales, and not the retailers who do
provide useful services to the consumers and the community at large. A
general disenchantment with middlemen is, however, widely demonstrated
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PRINCIPLES OF MARKETING
2.7 Summary
Distribution of goods is a crucial component of a company’s marketing
strategy. The entrepreneur can pick the zero level distribution channels by
which the product will move from the production to potential buyers after it
has been developed. The business owner also has the option of distributing
the goods directly to consumers without the use of any middlemen. Or
as an alternative, he might employ one or more intermediaries, such as
wholesalers, retailers, and agents. Big businesses have authorised agents
or dealers in every zone or region of the nation. Dealers collaborate with
distributors and retailers to deliver the goods produced by the company.
1. True
2. False
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L E S S O N
3
Distribution – Wholesaling
and Retailing
Dr. N. Mishra
Motilal Nehru College
University of Delhi
STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 Wholesalers
3.4 Retailers
3.5 Summary
3.6 Answers to In-Text Questions
3.7 Self-Assessment Questions
3.8 Suggested Readings
3.2 Introduction
We have already seen in the preceding unit that wholesalers and retailers fall under the
category of merchant middlemen and occupy a predominant position in the channel of
distribution. The importance of these middlemen lies in the fact that they actually take
ownership title to the goods and effect sales on their own accord. A Brief discussion of
wholesalers and retailers is as follows.
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Notes
3.3 Wholesalers
Wholesalers are merchant middlemen engaged in wholesaling. Wholesaling
involves the activities of persons or firms who sell to retailers and other
wholesalers or to industrial users, but not in significant amounts, to
ultimate consumers. Wholesalers provide an important link between the
producers and the retailer.
Peter D. Bennet has defined it as, “Wholesalers are the merchants who
buy products from producers or other wholesalers and release them to
retailers, organizational buyers or to other wholesalers.”
Characteristics of Wholesalers
The followings are the characteristics of wholesaler:
1. Wholesalers purchase commodities from producers or manufacturers
directly.
2. Wholesalers purchase massive amounts of items and sell in smaller
quantities.
3. They sell various variations of a same product line. A paper
wholesaler, for example, is expected to stock diverse types of paper,
cardboard, card, and so on.
4. They may hire a number of agents or personnel to help with product
distribution.
5. Wholesalers require a significant quantity of capital to be committed
in their business.
6. They typically extend credit to retailers.
7. He also assists the producers or manufacturers financially.
8. They are usually found in one specific region of the market in a
city or town. Cloth merchants, for example, can be found in one
neighbourhood, book publishers and sellers in another, furniture
dealers in another, and so on.
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Notes (i) Pure Wholesaler: A pure wholesaler, also called a proper wholesaler
or distributor, is engaged in only buying and selling of goods in large
lots and does not engage himself in such activities as manufacturing
or retailing as other wholesalers do.
(ii) Retail Wholesaler: Such wholesalers combine retailing with their
wholesaling function. Thus, they purchase goods in-large lots from
manufacturers and sell them to retailers as well as consumers.
(iii) Manufacturer Wholesaler: A manufacturer wholesaler engages
himself in the manufacture of goods besides undertaking wholesaling
functions. He may also deal in goods of other manufacturers with
the purpose of meeting the retailer’s demand, increasing his turnover
and thus reducing overhead expenses.
ACTIVITY
Try classifying the businesses/stores/shops/websites around you into
wholesale and retail business.
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(vi) Pricing: The wholesaler fixes the price of the goods he sells to Notes
retailers/industrial users. This price often forms the basis on which
the retailer fixes the price that he will charge from customers.
(vii) Financing: The wholesaler provides financial accommodation to both
manufacturers and retailers. He purchases from the manufacturers
on cash and at time gives advance to the manufacturer. He provides
credit facilities to the retailers too.
(viii) Risk-bearing: The wholesaler assumes several marketing risks
which otherwise would have to be borne by the manufacturers or
retailers. These risks are the risks of changes in demand, bad debts,
spoilage, etc., which the wholesaler assumes after purchasing goods
from the manufacturers.
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Notes 3. They provide financial aid to shops, sell items on credit to merchants,
and so assist retailers in operating with little working capital.
4. As the market’s warehouse keeper, wholesalers safeguard retailers
from the danger of loss associated with retaining significant supplies
of the product.
5. They may also separate various grades of products based on quality
and bundle the goods into little lots for retailers.
C. Services provided by Wholesalers to Society
1. The wholesalers educate the public about new products created by
the producers. In other words, wholesalers, by organizing supply
from diverse manufacturers, arrange to make these items available
to customers through the means of retailers.
2. Because wholesalers sell things at the same uniform price to all
retailers, retailers charge the same uniform price to the public
everywhere.
3. Through the means of retailers, wholesalers gain knowledge of
the public’s interests and fashions and procure products created by
producers appropriately. Furthermore, wholesalers stock products
from a variety of producers.
4. Wholesalers know the wishes, likings, and fashions of the masses by
doing market research, and they consequently advise to manufacturers
to develop the goods that help society.
5. Because wholesalers foster specialization by purchasing in bulk,
society benefits from good products at reduced prices.
6. Wholesalers attempt to preserve product price stability by reaching
an equilibrium between demand and supply.
IN-TEXT QUESTIONS
1. ___________ wholesaler is engaged in buying and selling of
goods in large lots and does not engage himself in activities
such as manufacturing, retailing, etc.
2. The wholesaler is not at all engaged in fixing the price of the
goods which he sells to retailers/industrial users. (True/False)
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3. Which of the following are the types of risks borne by the Notes
wholesaler?
(a) Theft (b) Spoilage
(c) Storage (d) All of the above
4. A ____________ wholesaler engages himself in the manufacture
of goods besides undertaking wholesaling functions
5. Wholesalers and retailers provide customers with information
about new products, technical information about product line,
etc.(True/False)
3.4 Retailers
According to William J. Stanton, “retailing includes all activities directly
related to the sale of goods or services to the ultimate consumers for
personal, non-business use.” Although the bulk of all retail sales occurs
in retail stores, the definition of retailing also includes several forms of
non-store retailing. Thus, a retailer is a middleman who sells primarily
to ultimate consumers for non-business use.
Notes
3.4.2 Services Rendered by Retailers
A close look at the various functions performed by retailers to the
consumers, wholesalers and manufacturers. The various services provided
by a retailer to the consumers are:
(a) He acts as the consumer’s purchasing agent and thus anticipates their
wants.
(b) He makes available demanded goods of right quality at reasonable
price and convenient location.
(c) He performs the function of bulk breaking to provide goods in smaller
lots.
(d) He offers the facility of selection of goods of different kinds, sizes,
colour, style, etc.
(e) He performs the functions of transporting and storing.
(f) He grants credit to the customers.
(g) He bears certain consumer’s risks in that he gives guarantees for the
goods he sells.
(h) He adds to the convenience and ease of consumer’s purchasing by
providing such services as convenient location, comfortable store
layout, longer business hours, parking space, and free home delivery.
The retailer provides the following services to manufacturers and
wholesalers:
(a) He sells in small lots to the ultimate consumers thereby saving the
manufacturers and wholesalers from the botheration of contacting
a large number of customers and selling them in small quantities.
(b) He undertakes promotion work like advertising, displays and personal
selling to aid in moving the manufacturer’s products.
(c) He purchases good in advance of the season and thus removes some
of the risk burden of the manufacturer.
(d) He helps the manufacturer to produce in line with market demand
by providing him the necessary marketing information.
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Notes
3.4.3 Kinds of Retailing
Retail business is carried on in a variety of ways and it is in retailing
that very drastic changes have taken place during the last fifty or so
years. Some retail institutions have disappeared whereas newer one has
been added. The various retailing institutions may be classified on the
following basis:
(i) Scale of operations – Small and large scale
(ii) Permanence of business place – Itinerant and fixed
(iii) Extent of product line handled – General stores, departmental stores,
single line stores, etc.
(iv) Geographical location – Urban and rural.
(v) Form of ownership – Chain stores, supermarkets, department stores,
etc.
For the purpose of our study, the classification of retail business according
to scale of operations and permanence of business place is more appropriate.
Such classification is shown in Figure 3.1:
RETAILERS
(a) Hawkers and pedlars (a) Stall holders (c) Cooperative stores
(b) Street traders (b) Second-hand goods sellers (d) Mail-order houses
(c) Cheap jacks (c) General shops (e) Hire purchase and instalment sale
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unit which handles a wide variety of shopping and specialty goods and Notes
is organized into well-defined separated departments for purposes of
promotion, service, accounting and control. Essentially it represents a
combination of a number of single-line stores under one roof and unified
control. In a departmental store a shopper can get almost every time of
his requirement-from pin to airplane. Location is the most important
element that decides the successful existence of a departmental store. A
departmental store is generally located at a central point in the city so
as to offer convenient shopping facility to customers.
Organization: A department store, being a large-scale business unit, is
usually organized as a company. It is headed by a managing director or
manager, and its various departments are controlled by managers who
are under the direct control of the chief executive. The various activities
of a departmental store are divided into the following major sections;
merchandise, sales, storage, staff, accounts, secretariat and building sections.
Features: The key features of a departmental store are as under:
(i) It is Located at a central place, usually in the heart of the city, where
maximum number of customers come every day for same purpose.
(ii) It deals in a variety of goods.
(iii) Each department of a departmental store deals in a single line of
product.
(iv) Its management and control are unified.
(v) Its purchases are centralized.
(vi) Its selling is decentralized.
(vii) It provides several customer services like restaurant, entertainment,
free home delivery and car parking.
Advantages:
(i) Shopping Convenience: It provides a wide range of products under
one roof these making shopping convenient to the customers.
(ii) High Turnover: Because of its central location it attracts a large
number of customers. This leads to increased sales.
(iii) Central Location: The central location it attracts department stores
offers convenience to customers in shopping.
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and ‘chain stores’ in the U.S.A. Bata, D.C.M., Raymond’s and Mafatlal Notes
are a few examples of multiple shops in our country.
Organization: Multiple shops are organized in the form of a company.
A multiple shop can be divided in two parts: head office and individual
stores. The head office works under the management and control of the
Board of Directors and looks after such matters as office management,
policy formulation and working of stores. The head office consists of many
departments like purchase, storage and warehousing, personnel, accounts
and finance, building, administration, and secretariat. Each department is
headed by a departmental manager.
The day-to-day operation and management of stores is looked after by
branch managers who work under the supervisors. District supervisors
report to regional manager who is responsible to the managing director.
Features:
(i) Limited Line: Multiple shops deal in one or a couple of lines of
goods.
(ii) Unified Management and Control: All the stores in the chain are
run under a central management and control.
(iii) Centralized Purchase: All the purchases for the stores are centralized
and made by the Head Office.
(iv) Uniformity: All stores follow uniform practice of interior layout,
window-dressing, display, etc. They also have uniform pricing of
articles they sell.
(v) Cash Sale: All sales are strictly on cash basis; on credit is granted
to customers.
(vi) Shopping Convenience: Every effort is made to take the stores as
near the customers as possible so as to provide them maximum
possible convenience in shopping.
Advantages:
(i) Economics of Large Scale: Multiple shops enjoy the benefits of
large scale buying.
(ii) Economy in Advertising: Common advertising covering all the shops
are feasible and this reduces advertisement expenditure. It is also
claimed that one shop itself becomes an advertisement for others.
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Notes (iii) Spread of Risk: Unlike the departmental store, the principle of
multiple shops is not to “Lay all eggs in one basket”. By trial and
error, a store running into losses may be shifted to some other place
or even dropped.
(iv) Lower Prices: This is mainly possible due to economy in operations—
rapid turnover, no bad debts, economical advertising and so on so
forth.
(v) Adjustment of Stocks: The risk of shortage of good or of dead stock
at any store is minimized because inter-store transfer of stocks is
possible.
(vi) Elimination of Bad Debts: Is possible because the chain stores do
not grand credit.
(vii) Convenient Location: These stores are located in places where
customers are concentrated and not in a centrally located place
for away from many residential areas, and at the same time too
expensive.
Limitations:
(i) Limited Line: Multiple shops deal in a limited line of products and
hence they cannot provide the variety of choice to the customers.
(ii) False Claim: Lower price is a false claim made by chain stores.
Such a price comparison is not possible because chain stores deal
in only limited items.
(iii) Inflexibility: The operation of chain stores is inflexible because firstly,
they deal in a limited line of standardized products, and secondly,
each store is controlled by the central office which prevents the
units from adjusting to local conditions and opportunities.
(iv) Lack of Interest and Initiative: The branch manager of a store is just
a paid head salesman who is required to act strictly in conformity
with the head office. He does not have much say in running the
store. Hence, he tends to lose interest in his work and ceases to
take initiative in the sale of goods.
(v) Limitations of Large Scale: Being a large organization, it is always
susceptible to problems associated with large-scale business. For,
Example, personnel problems, Government legislation, public
suspicion, etc.
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(vi) Poor Public Image: Various consumer services such as credit facility, Notes
home delivery, entertainment, parking, etc., are completely absent
in a chain store. Also, the customers feel the absence of personal
touch in their dealings with salesman.
Distinction between Departmental Stores and Multiple Shops
Basis Departmental Stores Multiple Shops
1. Location Located at some central Established in different
place. localities.
2. Range of Products Deal in wide variety of Deal in a limited range of
Goods. goods.
3. Pricing Different pricing policies Uniform prices in all stores;
in various stores; charge charge lower prices.
higher prices
4. Services Provide a variety of Provide no service.
consumer services.
5. Flexibility Enjoy operational flexibility. Operational inflexibility.
III. Cooperative Stores
A cooperative store, also called consumer’s cooperative store, is an
organization owned, managed, and controlled by consumers themselves
to provide to their members (sometimes to non-members also) goods and
services at lower prices by reducing the number of middleman and their
margin. These stores are established under the Cooperative Societies Act.
Under this form of retailing consumers form cooperative stores for the
purpose of opening retail stores through which goods to meet their own
needs (as also of others) may be supplied. The movement has gained
momentum because its approval has economic, sociological, and in some
instances, even religious foundations. These cooperatives are based on
the following basis principles:
(i) Open membership - The consumers are free to join the cooperative.
(ii) Democratic control - Its management is run by its members who
have one vote each irrespective of the number of shares held.
(iii) Cash sale - All sales are made at cash.
(iv) Dividend - Dividend is assured subject to a ceiling.
(v) Bonus - members are paid ‘purchase bonus’ which is based on their
purchases from the society.
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Notes Advantages
(i) Cooperative stores provide goods at lower prices because of their
low operating costs, economics of large scale buying and service
motive.
(ii) Consumers are assured of better-quality goods.
(iii) The problem of bad debts does not arise because no credits are
allowed.
(iv) Cooperatives seek to eliminate middlemen they reducing prices
charged from consumers.
(v) The consumer-members have complete control over the cooperative
society running the store.
Hence, it is possible to meet the genuine needs of a majority of the
consumers and to put a check on unfair and anti-consumer trade
practices.
(vi) These stores can avoid paying high rentals of business premises
because they need not always be located in busy places.
Limitations: As an institution of retail trade, cooperative stores suffer
from the following limitations:
(i) Lack of consumer’s interests.
(ii) Lack of competitive strength
(iii) Lack of finance.
(iv) Lack of trained managers.
(v) Absence of personal touch in dealings with consumers.
(vi) Bureaucratic management.
IV. Mail Order House
A mail order house is a retail institution which carries on retail business
though mail. Mail order retailing is also known as ‘non-store impersonal
retailing’, ‘arm-chain shopping’, ‘shopping by post’, and ‘selling by
post’. Under this system trading is done mainly through the post office.
It is through the medium of post that customers are informed about the
product, orders are collected, and goods are delivered. At no stage, the
buyer comes into face-to-face contact with the seller. To describe this
method of retailing briefly:
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(a) The retailer prepares a mailing list of its prospective customers, Notes
(b) sends them circulars, price lists, catalogues, booklets pamphlets, etc.,
through the post,
(c) receives orders from buyers through the post, and
(d) sends the goods further for distribution. Thus, the post office receives
the payments from the buyer and sends back to the sellers.
Suitability: Mail order retailing is suitable for those articles which possess
the following characteristics.
(i) It should be light in weight.
(ii) It should be valuable.
(iii) It should be standardized and branded.
(iv) It should not be easily perishable.
(v) It should offer sufficient margin of profit to cover postage, advertisements,
publicity, and delivery costs.
(vi) Its supply should be perennial.
Examples of goods sold by mail order are patent medicines, toys,
jewellery, books, electrical goods, etc.
Advantages:
(i) Easy availability: The goods that are not readily available in the
market could be got through this method.
(ii) Easy operation: The business can be operated from any place where
the postal facility is available.
(iii) Elimination of bad debts: Since money is collected before the goods
are delivered, bad debts are fully eliminated.
(iv) Wide market: This system widens the market and also helps the
trader to discover untapped markets.
(v) Small investment: The requirement of capital is substantially small
in this system of trading.
(vi) Shopping convenience: It amounts to shopping at the door. Customers
enjoy the benefit of taking delivery at their doors.
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Notes Limitations:
(i) This form of trading may involve heavy expenditure on advertising
and publicity.
(ii) The buyers do not get the opportunity of inspecting and selecting
the goods.
(iii) Even the most illustrated catalogue cannot give the exact idea about
the product.
(iv) It is suited for a limited type of products. In particular, articles
requiring demonstration cannot be sold through this retail outlet.
(v) Delays in the delivery of goods are quite frequent.
(vi) Credit facilities and after-sale service are not available under this
method.
(vii) This is considerable scope for fraudulent dealing under this type
of retailing.
The progress of mail order business in our country has been quite slow
because of illiteracy and ignorance of the majority of buyers, unscrupulous
and fraudulent practices of many traders under this system, and the
undeveloped stage of advertising and publicity. However, this system of
retail trade has a better scope of development as the level of education is
gradually increasing in the country. In U.S.A., where mail order business
is very popular, scars and Roebuck, the largest mail order house, actually
controls a Lion’s share in retail trade.
V. Hire Purchase and Instalment Sales.
Hire purchase trading is a system of retailing under which the seller agrees
to sell the article on the condition that the buyer shall pay the purchase
price by a fixed number of instalments. Here the article is not legally
sold out to the buyer and hence the ownership in the goods does not
pass to him. Only after paying the last instalment, he gets the ownership
of goods. Till that time, he is merely a hirer and the instalment money
paid by him is treated as hire charges. In case of default in the payment
of instalments. The seller can take back the goods from the buyer.
Instalment sale is basically the same but with certain legal differences.
Under instalment selling, also called deferred payment system, the legal
as well as physical possession rights of the goods pass to the buyer with
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the payment of the first instalment. Each instalment is treated as part Notes
payment of the price of the goods sold. If the buyer makes default in the
payment of instalment money, the instalment seller can sue the buyer for
the balance but he cannot recover the goods except through a court of law.
Suitability. This form of retailing is suited to those products which
possess certain important features: (a) durability of life, (b) stability in
demand, (c) high unit price, (d) standardized specifications and (e) easy
cognizable.
Advantages:
(i) Convenience to Consumers: The buyers enjoy the convenience of
buying costlier articles without having to pay a large sum immediately
at the time of purchase.
(ii) Boon to Manufacturers: The manufacturers are enabled to install
costly machinery and equipment on instalment basis, and they can
pay for instalments which they earn from the use of those assets.
Besides, this system widens the markets for their products.
(iii) Useful to Traders: The instalment system is effective in tempting a
large number of customers to pay costly articles. Thus, this system
helps trader in pushing up sales of non-essential luxury articles
which will otherwise sell slowly.
Limitations:
(i) It encourages extravagance and stimulates living beyond means.
(ii) The price charged in this form is high because of the inclusion of
interest for the deferred period.
(iii) The business risks of trader are high in that it is quite difficult to
recover goods from the buyer in case of default. Equally difficult
it is to dispose of such goods at attractive prices.
(iv) It tends to serve selected customers whose paying capabilities are
known to the traders.
(v) It requires heavy capital investment.
VI. Supermarkets
Supermarkets were first started in the U.S.A. during the depression days of
the early 1930s. Since then supermarkets have gone through a considerable
amount of change with regard to their organization, control, management
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PRINCIPLES OF MARKETING
from the latte in two ways: first, a superstore is much large in size than Notes
a supermarket, and second, it deals in much wider variety of products
than a supermarket. Superstores may thus be described as giant-sized
supermarket. Their main advantages include low cost, wide range, and
large turnover.
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PRINCIPLES OF MARKETING
8. Which of the following is not covered under small scale retailers? Notes
3.5 Summary
Wholesalers are merchant middlemen engaged in wholesaling. Wholesaling
involves the activities of persons or firms who sell to retailers and other
wholesalers or to industrial users, but not in significant amounts, to
ultimate consumers. Wholesalers provide an important link between the
producers and the retailer. Wholesalers perform functions starting from
buying, selling, storing, transporting, packaging, pricing, financing, risk
bearing of goods. A wholesaler may be classified into a pure, retail and
manufacture one.
A retailer is a middleman who sells primarily to ultimate consumers for
non-business use. His/her functions involve buying and assembling of
goods, selling of goods, transportation and delivery, packaging, storing,
risk bearing and conveying the customers demands to the wholesalers
and producers.
Retailers can be small scale: Having a fixed shop or itinerant or large
scale: Having big departmental stores, multiple shops, hire purchase,
supermarkets, superstores, cooperative stores, etc.
Some new trends in retailing are: Use of social media and internet in
retailing, non-store retailing, elimination of middlemen in producer and
retailer, flexible payment options to customers, etc.
1. Pure
2. False
3. (d) All of the above
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Notes 4. Manufacturer
5. True
6. True
7. Multiple shop
8. (d) Supermarkets
9. False
10. Superstores
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L E S S O N
4
Logistics Decisions
Dr. N. Mishra
Motilal Nehru College
University of Delhi
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
4.1 Learning Objectives
4.2 Introduction
4.3 Concept of Marketing Logistics
4.4 Components of Marketing Logistics
4.5 Supply Chain Management
4.6 Summary
4.7 Answers to In-Text Questions
4.8 Self-Assessment Questions
4.9 Suggested Readings
4.2 Introduction
No matter how excellent a company’s product may be, a lot of hard work would be wasted
if it failed to reach to the users at the appropriate time, in the correct place, and in the best
physical condition. The operations involved in handling and moving items from the place
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Notes 3. Creates time and place utility: The company uses time utility so
that all the components and materials are available when they are
needed, and the manufacturing line is unaffected. Place utility
denotes that all necessary commodities and services are accessible
where and when they are needed.
4. Boosting Profits: When goods are manufactured on time and delivered
to the end user on time, wastage tends to be very low which tends
to increase the profits of the firm.
5. Helps to align with the changing work environment: As we all
know business trends are changing rapidly and involvement of
information technology has increased in every sector, so is the case
with the logistics. Online tracking systems help the customers to
track and place their orders easily, which creates a happy customer
base.
6. Larger Market Share: An efficient management of the physical
distribution may secure to a company. It is possible to achieve a
larger market share by decentralizing its warehousing operations and
by using economic and efficient modes of transportation to reach
those far-flung market segments which have hitherto been untapped.
Also, by avoiding out-of-stock situations it can arrest the loss of
loyal customer bases.
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PAGE 261
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.
Fig 4.1 : Stages in Marketing
Figure Logistics
4.1 : Stages in (Source: https://www.slideserve.com/)
Marketing Logistics
a) Inbound Logistics:
(Source:These are logistics that flow from the supplier to the
https://www.slideserve.com/)
manufacturing unit. These are basically the raw materials needed by the firm to
(a) Inbound
manufactureLogistics: These are logistics that flow from the supplier
a certain good.
b) to the manufacturing
Outbound Logistics: Theyunit.
flow These arehebasically
from the manufacturer the toraw
the materials
point of
needed by the
consumption. firm toof manufacture
Shipments items to othera firm
certain good.such as temporary
facilities,
warehouses, physical stores, suppliers, and production facilities, are also included in
(b) Outbound Logistics: They flow from the manufacturer to the point
this logistics step. Outbound logistics' primary goal is to make sure that the products
of
are consumption.
delivered to their Shipments
destination in ofthe items to other
appropriate amountsfirm
and facilities, such
in the given time
as temporary warehouses, physical stores, suppliers, and production
frame.
c) facilities, are also
Reverse Logistics: included
Reverse in this
logistics is thelogistics step.
process of Outbound
sending logistics’
goods back to the
primary goal is to make sure that the products are delivered to their
supply chain from end users to either the producer or the retailer. Reverse logistics
begin with the in
destination endthe
userappropriate
and end at the producer
amountsof andthe good.
in the given time frame.
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227 | P a g e
(c) Reverse Logistics: Reverse logistics is the process of sending goods Notes
back to the supply chain from end users to either the producer or
the retailer. Reverse logistics begin with the end user and end at
the producer of the good.
IN-TEXT QUESTIONS
1. ______________ logistics that flow from the supplier to the
manufacturing unit.
2. Customer satisfaction and cost cutting are the two primary goals
of a marketing logistics system of a business. (True/False)
3. Identify the objectives of marketing logistics:
(a) Reduction in distribution cost
(b) Improving customer satisfaction
(c) Timely delivery
(d) All of the above
4. Outbound logistics is the process of sending goods back to
the supply chain from end users to either the producer or the
retailer. (True/False)
5. Place utility in marketing logistics denotes that all necessary
commodities and services are accessible where and when they
are needed. (True/False)
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4.4 COMPONENTS OF MARKETING LOGISTICS
The important decisions in respect of marketing logistics are: i) how orders should be
handled? ii) where should the stock be located? iii) how much stock should be kept on hand?
and iv) how should goods be transported?
B.COM. (PROGRAMME)/B.COM. (HONS.)
4.4.1 Order Processing
Processing consumer orders serves as the foundation of marketing logistics. The customer
Notes Whenorders
all should
the steps of order
be completed processing
as quickly as possible inprocess area better
order to give carried quickly
customer service. or
Order processing starts from receiving a order, recording it, filling it, processing it and
before time and with a better degree of accuracy, ultimately customer
assembling all received orders for further transportation.
satisfaction is received.
When all the steps of order processing process are carried quickly or before time and with a
Nowadays, processes
better degree of accuracy,like taking
ultimately orders,
customer recording
satisfaction and processing them
is received.
is allNowadays,
done with the like
processes helptaking
of orders,
onlinerecording
software’s. Therefore,
and processing it done
them is all is necessary
with the
help of online software’s. Therefore,
to have a good command on technology. it is necessary to have a good command on technology.
4.4.2 Transportation
In the context of marketing, transportation means the movement of goods
from one place to another. Transportation is a necessary function of
marketing because most of the markets are geographically separated from
the areas of production. A firm’s ability to transport undamaged products
to appropriate distributors in a timely fashion effects the firm’s success
in satisfying consumer’s needs and wants. Thus, transportation decisions
should be weighed carefully and could serve as an important differentiating
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Notes suitable for very heavy goods, railway is better for heavy goods
over long distance, and airways should be preferred for valuable and
light goods if they must be delivered at the destination urgently.
(ii) Speed: Air transport, being the fastest should be used for transporting
light and valuable goods if delivery is required urgently. Rail, road
and water come next in that order.
(iii) Economy: Air transport is the costliest. Railways are cheaper for
carrying heavy goods over long distances and road transport for
transporting small quantity of goods over short distance. Water
transport is the cheapest if natural waterways are available.
(iv) Flexibility: Road Transport ranks first in flexibility in that its time,
route etc., can be easily adjusted according to the requirements of
the company. Other means of transport are not so flexible.
(v) Safety: Railways are safe and secure and less exposed to risk of
accidents and break downs. The rate of accidents is extremely low
in air transport as well. But truck transport is prone to frequent
accidents and water transport is exposed to perils of the sea.
(vi) Reliability: Reliability means dependability and consistency of service
associated with a given mode of transportation. Thus, a mode of
transportation which is regular and punctual can be relied upon.
Railway transport is most reliable because it follows a predetermined
timetable, and it is not affected by vagaries of nature. All other
means of transport possesses relatively smaller degree of reliability.
(vii) Availability: Obviously, a firm’s choice of mode of transport is
influenced by the availability of various means at desired locations.
At very place all means of transport are not available. So, the choice
is to be made out of the available means of transport.
(viii) Convenience: A company will also consider the convenience in
using means of transport. It is easy to negotiate with and engage
the services of a truck transporter than other means of transport.
Similarly, trucks can pick up consignments right from the customer’s
godowns and deliver the same at the door of the consignee. Such
convenience is not available with other means of transport. These
days railways have started offering such customer services as home
delivery, container service, special wagons and fast good-trains.
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Notes stocks are moved to retail outlets in small lots as and when required.
This results into reduction of distribution costs.
(v) Benefits to Customers: If the warehouses are available in or around
the area where customers are located, they can be served most
economically and at lower expenses.
(vi) Financial Assistance: Some kinds of warehouse, for instance bonded
warehouses, offer financial help to their customers.
Kinds of Warehouses: Warehouses are classified into three categories
on the basis of their location ownership and special provision. These
warehouses are discussed briefly as under:
I. Warehouses according to Location
(i) In-plant Warehouses: As the name suggest, these warehouses are
located at the place of manufacture itself. Since the entire production
cannot be immediately sent to the market, some part of the stocks
must be stored in in-plant. In plant warehousing is also required in
those cases where manufacturers adopt the practice of distributing
goods directly to retailers.
(ii) Field Warehouses: These are also known as custodian warehouses are
mixing centers. These are centrally located warehouses from where
goods are distributed to wholesalers and retailers. Such warehouses
are needed where products from different plants are to be mixed
together before dispatching to the channel members.
(iii) Distribution Centers (Warehouses): These are of recent origin and
are a special type of warehouses. A distribution center is a large,
centralized warehouse facility designed to facilitate the movement
of goods in and out of storage as fast as possible. Whereas more
traditional warehouses hold goods for extended periods of time,
the goal of a distribution center is to move products, not to hold
them. The emphasis of such a warehouse is either on making bulk
(concentrating) or breaking bulk (dispersing) and not on storage.
Such distributions centers are located mostly near major markets
and transportation centers so as to minimize delivery time.
(iv) Bonded Warehouses: These warehouses are located near the ports
and are either government owned or privately owned. Where a
bonded warehouse is privately owned. It is required to work under
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the supervision and control of the Government. Such warehouses are Notes
used by importers for storage of imported goods before payment of
customs-duty. Only such goods on which customs duties are paid
can be withdrawn from such warehouses. The goods deposited with
these warehouses are called ‘gods in bond’.
II. Warehouses according to Ownership
(i) Private Warehouses: Private warehouses are owned and operated by
large business firms for storing their own goods. In-plant warehouses,
field warehouses and distribution centers in most cases are private
warehouses.
(ii) Public Warehouses: These warehouses are owned and operated
by individuals, firm or body corporate for providing storage and
related physical distribution facilities and services to Organization
on a rental basis.
(iii) Bonded Warehouses: These warehouses are generally owned and
operated by the government and are located at the ports for storing
goods on which duty is unpaid.
(iv) Co-operative Warehouses: The ownership of these warehouses is
vested in the hands of a few primary cooperative societies in the
field of agricultural production and marketing.
III. Specially Warehouses
(i) General Merchandise Warehouses in which practically any kind of
goods which need resting time could be stored.
(ii) Special Warehouses which are specially constructed to store certain
commodities which require special treatment/storage. For example,
eggs, vegetables and other perishable items need a different storage
facility than food grains or cement. Similarly, petroleum products
need still another type of storage.
(iii) Cold Storages: Such warehouses are constructed for storing products
which must be kept under certain level of temperature. Such products
as fish, meat, eggs, vegetable, etc., come under this category of
products.
(iv) Grain Elevators: Grain elevators, also known as grain silo are common
in the U.S.A., the U.K. and other European countries where large-
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Notes (vi) To keep up to date records showing the receipt, issue, and balance
of inventory items, and the time when replenishment of inventories
becomes necessary.
To keep inventories active by reviewing design and pattern change in
various items and disposing of superseded items.
Techniques of Inventory Control: The goal of inventory is to fill
customer’s orders promptly, completely, and accurately while minimizing
both the investment and fluctuations in inventories. For efficient and
effective inventory control answers should be obtained to the following
three questions: efficient and effective inventory control answers should
be obtained to the following three questions:
(a) What type of control is required?
(b) How much of inventory would be ordered?
(c) When should an order be placed?
The answers to these questions are provided in terms of techniques of
inventory control discussed below:
(i) ABC Analysis: The ABC analysis tells the type of inventory control
that should be exercised. It is neither desirable nor feasible to
exercise the same degree of control overall items of inventory which
may run into hundreds and thousands. Therefore, the firm should
be selective in its approach to inventory control-maximum control
should be exercised over items of inventory involving excessive
capital investment, and inexpensive items may be paid a minimum
of attention. Accordingly, inventory items are classified into three
categories A, B and C and this technique is called ABC analysis.
Category A items of inventory are the least costly items in category
B are less costly and those included in category C are the least
costly items. In accordance with their importance, category A items
are paid utmost attention, category B is controlled in ordinary-
store-routine way and items in category C may be ordered in bulk
to minimize ordering and handling costs.
(ii) Economic Order Quantity (EOQ): The EOQ model tells how much
to order when inventory is replenished. The EOQ model considers
the following three types of basic costs:
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Notes demands. Firms must predict what their future needs will be and
act accordingly. This relates to raw materials needed during each
stage of manufacturing, equipment capacity and limitations, and
staffing needs along the SCM process. Large entities often rely on
ERP system modules to aggregate information and compile plans.
2. Sourcing: Efficient SCM processes rely very heavily on strong
relationships with suppliers. Sourcing entails working with vendors
to supply the raw materials needed throughout the manufacturing
process. A company may be able to plan and work with a supplier
to source goods in advance. However, different industries will have
different sourcing requirements. In general, SCM sourcing includes
ensuring:
u the raw materials meet the manufacturing specification needed
for the production of goods.
u the prices paid for the goods are in line with market expectations.
u the vendor has the flexibility to deliver emergency materials
due to unforeseen events.
u the vendor has a proven record of delivering goods on time
and in good quality.
Supply chain management is especially critical when manufacturers
are working with perishable goods. When sourcing goods, firms
should be mindful of lead time and how well a supplier can comply
with those needs.
3. Manufacturing: At the heart of the supply chain management process,
the company transforms raw materials by using machinery, labour,
or other external forces to make something new. This final product
is the ultimate goal of the manufacturing process, though it is not
the final stage of supply chain management.
The manufacturing process may be further divided into sub-tasks such
as assembly, testing, inspection, or packaging. During the manufacturing
process, a firm must be mindful of waste or other controllable factors that
may cause deviations from original plans. For example, if a company is
using more raw materials than planned and sourced for due to a lack of
employee training, the firm must rectify the issue or revisit the earlier
stages in SCM.
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4. Delivering: Once products are made and sales are finalized, a Notes
company must get the products into the hands of its customers.
The distribution process is often seen as a brand image contributor,
as up until this point, the customer has not yet interacted with the
product. In strong SCM processes, a company has robust logistic
capabilities and delivery channels to ensure timely, safe, and
inexpensive delivery of products.
This includes having a backup or diversified distribution methods
should one method of transportation temporarily be unusable. For
example, how might a company’s delivery process be impacted by
record snowfall in distribution center areas?
5. Returning: The supply chain management process concludes with
support for the product and customer returns. It’s bad enough that
a customer needs to return a product, and it’s even worse if its
due to an error on the company’s part. This return process is often
called reverse logistics, and the company must ensure it has the
capabilities to receive returned products and correctly assign refunds
for returns received. Whether a company is performing a product
recall or a customer is simply not satisfied with the product, the
transaction with the customer must be remedied.
Many consider customer returns as an interaction between the customer
and the company. However, a very important part of customer returns
is the intercompany communication to identify defective products,
expired products, or non-conforming goods. Without addressing the
underlying cause of a customer return, the supply chain management
process will have failed, and future returns will likely persist.
4.6 Summary
Marketing cannot exist in absence of logistics. Marketing logistics refers
to the activities involved in handling and moving goods from the point
of production to the point of use. The five important components of an
effective marketing logistics system are order processing, transportation,
warehousing, inventory control and information management. Logistics are
divided into 3 stages namely: inbound, outbound, and reverse logistics.
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1. Inbound
2. True
3. (d) All of the above
4. False
5. True
6. True
7. Ordering costs
8. (c) Correct order quantity
9. False
10. True
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UNIT - V
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L E S S O N
1
Promotion Decisions
Ms. Ritika Sharma
Assistant Professor
School of Open Learning
University of Delhi
STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Concept of Promotion
1.4 Promotion Decision
1.5 Communication Process
1.6 Integrated Marketing Communication
1.7 Summary
1.8 Answers to In-Text Questions
1.9 Self-Assessment Questions
1.10 Suggested Readings
1.2 Introduction
Once a product is developed, its price is decided and its distribution channel is selected, the
prospective customers must be informed of its availability, and they need to be persuaded
to buy it. All the activities involved in informing and persuading the customers to create
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Notes (vi) To Build Image: Publicity, public relations, advertising, and other
promotional activities are often used to build a favourable public
image of the firm.
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Notes direct and personal contact between the prospective buyer and
the seller or his representative. Personal selling is the most,
effective tool of promotion.
(ii) Advertising: Advertising is any non-personal presentation or
promotion of goods, services, or ideas. It involves transmission
of a standard message to a large number of people. The
message which is transmitted is known as advertisement.
Advertising is a paid communication issued by an identified
sponsor.
(iii) Publicity: Publicity is a non-personal stimulation of demand for
a product, service, or a business unit by planting commercially
significant news about it in a published medium or by obtaining
favourable presentation of it upon radio, television or stage
that is not paid for by the identified sponsor.
(iv) Sales Promotion: It includes all the activities, other than personal
selling, advertising, and publicity, that stimulate consumer
purchasing and dealer effectiveness. Sales promotion activities
are designed to supplement and reinforce advertising and
personal selling. Distribution of samples, coupons, premium
on sales, point of purchase displays, shows and exhibitions
are examples of sales promotion.
And many more methods are covered under promotion mix, which
will be discussed further.
u Types of Promotion Mix
Based on the emphasis place on a particular set of channels of
distribution, the promotional mix (or promotional blend) can be of
two types:
(i) Pull Blend: In pull blend promotion, the greatest emphasis
is laid on mass impersonal sales efforts. The promotional
tools like advertising and sales promotion will be restored to
with the purpose of reselling to the final consumers so that
they demand the product at the retail level in the channel of
distribution. The net effect of pull blend of promotions is to
pull down the product from the manufacturer to the consumer.
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(ii) Push Blend: The push type of promotion mix emphasizes Notes
personal selling tools of promotion. This type of promotional
activities have the effect of pursuing the product through the
channel of distribution. The firms adopting this blend would
develop a strong sales force at both the distributor and the
dealer level.
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The profit margins on many of these items are too low to justify Notes
the involvement of salespeople, and most customers do not need, or
even want, advice from sales personnel when making such routine
purchases.
9. Nature of Technique. Each technique of promotion has its own
feature which must be understood while deciding the promotion
mix. For example, advertising is an impersonal and mass method
of promotion whereas personal selling involves personal face-to-
face discussions.
IN-TEXT QUESTIONS
1. In AIDA model of promotion D stands for Demand.
(True/False)
2. Which of the following are the factors affecting the promotion
strategy of a product:
(a) Promotional budget
(b) Nature of Market
(c) Nature of Product
(d) All of the above
3. In push blend promotion, the greatest emphasis is laid on mass
impersonal sales efforts. (True/ False)
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Noise
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Figure Fig
1.3:1.3: Integrated
Integrated MarketingCommunication
Marketing Communication
256 | P a g e
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Notes trade promotions that are targeted at retailers, such as display and
merchandising allowances, volume discounts, pay for performance
incentives, and incentives to salespeople. It can also include consumer
promotions that are targeted at consumers, such as the distribution
of free samples, coupons, offers on purchases of a higher quantity,
discounts, and premiums. Benefits of using sales promotion are:
(a) Launching a new product: Even very successful businesses
require a little assistance. Long-term customers may be
dedicated to their typical items, whereas new customers may
require incentives to purchase.
(b) Sales promotion helps in selling out items that are available in
large stocks and the company wants to get rid of this stock.
(c) Sales promotion can be used for rewarding current customers.
Taking care of existing customers is equally important as it is
with the new customers, sales promotion rewards both type of
customers and helps in keeping loyalty and credibility high.
Distinctive Characteristics of Sales Promotion
(1) Short Term Focus: Sales promotions are typically designed
for short-term goals, such as increasing sales within a specific
period, clearing out excess inventory, or generating interest
during a limited-time event.
(2) Incentives and Rewards: Sales promotions offer incentives
or rewards to consumers, such as discounts, coupons, free
samples, contests, giveaways, or loyalty rewards, to motivate
them to make a purchase or take a desired action.
(3) Transactional Nature: Sales promotions are transaction-
oriented, with the primary aim of driving immediate sales or
conversions. They often rely on discounts or special offers to
entice customers to buy.
(4) Variety of Strategies: Sales promotions encompass a wide
range of strategies, including price reductions, limited-time
offers, bundle deals, buy-one-get-one (BOGO) offers, rebate
programs, etc.
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(e) Direct marketers are able to maintain a connection with each Notes
customer and receive regular feedbacks from them.
Tools of Direct Marketing
A variety of tools are available to direct marketers for connecting with
clients and customers. Online marketing is currently the most recent type
of direct marketing, for marketing purposes, it makes use of Internet
technology. Various direct marketing tools are discussed below:
(a) Email Marketing: The most recent direct marketing method for
developing relations with customers is email. With the use of
Internet, users can transmit a message or file straight from one
computer to another using e-mail, often known as electronic mail.
These are routinely delivered by marketers to their clients informing
them about sales, discounts, promotions, and other communications.
Newsletters are being used to generate interest of consumers in
products.
(b) Mobile Marketing: Marketers are increasingly using mobile phones
to communicate with millions of consumers. Marketing messages are
sent to current and potential clients using SMS, MMS, WhatsApp,
and other apps.
(c) Catalogue marketing: Advertising and selling products using
catalogues sent to agents and clients via the mail or in-person is
catalogue marketing. In the past, catalogue marketing was a type
of mail order where agents gave the catalogue to family members
and friends who placed orders with the agent.
(d) Telemarketing: In the telemarketing system, qualified professionals
employ information and communication technology to carry out
marketing and sales activities. Call-centre representatives make
contact with a list of potential customers and explain the benefits
of buying their goods to them.
(e) Direct mail: Material sent by mail to a residence or business address
with the intention of marketing a good or continuing an existing
relationship is known as direct mail.
(f) Kiosk Marketing : There are always opportunities to draw people’s
attention to your business in crowded public spaces. In various
locations, such as shopping malls, representatives of a company
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Notes can set up kiosks and can speak with potential clients directly by
attracting their attention with their goods and services.
6. Personal Selling: Personal selling is the process of persuading a
customer to purchase a specific goods or services. It is also regarded
as one of the most expensive and successful forms of advertising ever
used. It works well because the seller and the buyer communicate
face-to-face, allowing the seller to adapt their advertising strategies
as the situation demands. Here, the salesperson tries to emphasise
the benefits of the product to persuade the client that it will be
advantageous in the long run. However, the goal of personal selling
is not necessarily to convince a buyer to purchase a product; it can
also serve to inform customers about new goods available on the
market.
Importance of Personal Selling
(a) Two-way communication: It is the ideal instrument for selling
goods to individuals. Salesperson can collect client feedback and
give them the essential information about the company’s offer.
Customer might ask the salesperson then and there if they have
any questions about the product.
(b) Personal Attention: Personal selling is concentrated and is focused
on one person, as compared to publicity and advertising which are
mass communication instruments, and the outcomes of personal
selling are more assured.
(c) Demonstration: Sales representatives may give a thorough presentation
or demonstration and can supervise the buyer through personal
selling, because television demos are limited and unrealistic to the
buyers.
(d) Immediate feedback: This is the only method of marketing that
prompts quick customer feedback.
ACTIVITY
List the shopping products purchased by you/your family in the
last six months. Make a list and specify what factors influenced the
purchase of each of these products and what type of promotional
tools were used by each of these brands or companies.
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1.7 Summary
Promotion is a marketing tool, used as a strategy to communicate between
the sellers and buyers. Through this, the seller tries to influence and
convince the buyers to buy their products or services. The various factors
affecting a manager’s promotional mix decision are firms’ objectives,
budget for promotions, nature of market, nature of product, stage of
product life cycle, availability of promotional tools, distribution intensity,
price of product, etc.
Promotion is a type of communication that flows from the sender
(organisation) towards the receiver (customers).
We have also discussed the concept of integrated marketing communication
which is referred as a “a planning process designed to assure that all
brand contacts received by a customer or prospect for a product, service,
or organization are relevant to that person and consistent over time.” It
has involvement of several promotional tools like advertisement, personal
selling, sales promotion, direct marketing, publicity, etc. This tool helps
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Notes in delivering a clear and consistent message to the entire customer base
through integration of all promotion tools.
1. False
2. (d) All of the above
3. False
4. True
5. (d) All of the above
6. True
7. Decoding
8. Publicity
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L E S S O N
2
Developments in
Marketing
Ms. Neha Goyal
STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 Sustainable Marketing
2.4 Rural Marketing
2.5 Social Marketing
2.6 Digital Marketing
2.7 Summary
2.8 Answers to In-Text Questions
2.9 Self-Assessment Questions
2.10 Suggested Readings
2.2 Introduction
In the previous unit you have studied about communication process, the concept of
promotion mix and various promotional tools and different characteristics of advertising,
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personal selling, sales promotion, public relations, publicity, and direct Notes
marketing. The previous unit also provided knowledge about the factors
influencing promotional mix decision.
In this unit, you will come across the concept of sustainable marketing,
social marketing, digital marketing, and rural marketing. How different
it is to market products and services in rural market of the business?
What are the four P’s in rural marketing-mix? Which growth drivers are
available in rural marketing and how to implement such drivers for the
growth of the business?
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4. The business should add __________ to its goods rather than Notes
just delivering low pricing and deals.
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that are prevalent in rural areas. By doing this, they will be able Notes
to connect with potential customers, build vital brand awareness,
and entice sensible people to their products
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Notes 7. Marketing Mix: Different sets of items are created for rural consumers
to meet their needs rather than simply dumping metropolitan products
on them. The components of the marketing mix must be modified
to meet the needs of rural consumers.
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Rural markets operate differently from urban market types, and marketing Notes
methods targeted at rural consumers differ dramatically from those used
in urban or industrial markets. This and several other similar concerns
have generated a great deal of discussion and controversy in nations
like India and China, and even served as the topic of conferences held
internationally there.
The following section focuses on components of the marketing mix
for rural segments:
1. Product Mix: Product is a key factor in determining a company’s
success. In all material ways, the products must be suited for rural
consumers. The corporation must produce goods in accordance with
the current and anticipated conditions of rural consumers. Size,
shape, colour, weight, and other product attributes, quality, brand
name, packaging, labelling, services, and other pertinent aspects must
match the demands, desires, and financial capability of the target
market. For a product to maintain its applicability throughout time,
required adjustments and upgrades must be made. Organisations
must keep in mind that the effectiveness of other choices, such as
pricing, advertising, and location, also depends on the product.
2. Price Mix: Particularly for rural areas, the price is the distinctive
component of the marketing mix. Due to their higher price sensitivity,
rural consumers tend to make more impulsive purchases. Pricing
plans and policies need to be developed with attention and caution.
When setting and changing pricing, it’s necessary to take into
account factors including price level, discounts and rebates, credit
and instalment options, and more. Typically, low-cost goods draw
purchasers from rural areas. However, some rural clients are concerned
with status and quality.
3. Promotional Mix: Rural markets have a subtle but potent power.
To serve the needs of the rural population, several adjustments are
necessary. The distribution and promotion tactics are of utmost
significance. Ad producers now know how to take advantage of
expanded media reach and infrastructure. Because the majority of
rural India owns and is glued to TV sets, they are confident that
their commercials reach the intended audience when they run on
television.
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4. Place Mix: The crucial distributional difficulties are present in rural Notes
markets. The marketer needs to make the distribution plans stronger.
It is a huge effort to distribute little and medium-sized packages
over long distances and on bad roads into remote areas of rural
India while convincing the rural retailers to believe in the mobility.
To guarantee that products are easily accessible for rural purchasers,
both physical distribution and method of distribution should be
carefully chosen. Some of the crucial choices in rural distribution
include selecting an appropriate mode of transportation, positioning
warehouses at strategic locations, purchasing enough insurance,
maintaining adequate inventory, maintaining a sufficient number of
retail outlets in various regions, and deploying a specially trained
sales force.
Typically, one-or two-level indirect channels are better suited to
service dispersed rural customers. To serve urban and rural stores,
wholesalers are situated in metropolitan and semi-urban areas in two-
level channels. Local producers (farmers and others) do, however,
distribute directly to consumers in both progressive and backward
states.
Employees of rural branches and agents can perform better in terms
of service marketing. In villages of some states, the markets for
banking, insurance, investment, satellite and cable connections, cell
phones, auto sales and services, etc. are booming. By using locally
based agents and staff who have received specialized training, service
sectors are attempting to expand into rural areas. Surprisingly,
online, or cyber marketing is slowly but surely gaining traction in
rural areas of developed nations.
The nature of rural segments may differ significantly from that of
urban markets; thus, marketers must regularly plan and adapt their
distribution strategies to account for these differences.
IN-TEXT QUESTIONS
5. Agricultural marketing which was limited to just selling farm
equipment and other inputs, has been replaced by a unique
marketing method called __________ marketing.
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2. Strategy: You may target your resources cost-effectively using social Notes
marketing and choose the activities that will have the biggest long-
term impact. For example: England’s Lung Disease Strategy.
3. Delivery and Implementation: Social marketing makes it possible to
create products and services and express the needs and motivations
of consumers. For example, Child safety seats in Texas, for instance.
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IN-TEXT QUESTIONS
9. Social marketing uses marketing tactics and principles to
raise___________ of a social issue.
10. Policy and strategy are the only components of social marketing.
(True/False)
Fig 2.2:
Figure 2.2: Tools
ToolsofofDigital
Digitalmarketing
marketing
284 | P a1.g eSearch Engine Optimisation: It is one of the most crucial tools for
generating
© Departmentleads that eventually
of Distance & Continuingturn into customers.
Education, It isLearning,
Campus of Open the natural
process of attracting
School ofquality free traffic
Open Learning, fromof potential
University Delhi customers to
your website via search engines like Google, Bing, and Yahoo. It
is essential to rank on the search engine result page for improved
visibility, recognition, and reach of your product or service.
The following are organic SEO strategies:
u Content improvement
u Authentic blog writing
u Social media engagement
There are numerous ways to approach SEO in order to get qualified
traffic for your website.
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Notes A. On-page SEO: With this, you can respond to queries by looking up
keywords with a high search volume on search engine result pages
that lead to search result pages.
B. Off-page SEO: This technique involves managing backlinks from
publishers you are familiar with and optimizing your websites. By
collaborating with other editors, contributing your articles to these
websites, and attracting outside interest, you can obtain the backlinks
you need to move your website up the appropriate Search Engine
Results Page (SERPs).
C. Technical SEO: This type of SEO concentrates on your website’s
backend and also on how a website is constructed. Technical SEO
refers to image structure compression on the website.
2. Pay Per Click (PPC): Pay per click is also very important type of
digital marketing model which follows paid form for advertisement
to attract the target customers. The main distinction between search
engine optimization and pay per click is that PPC is a paid form of
digital promotion while SEO is an unpaid method, both of which
fall under the umbrella of social media marketing. PPC adheres
to a formula to calculate the cost of an online advertisement by
focusing on its target audience and by using relevant keywords.
Google AdWords or Google Ads are examples of PPC.
PPC formula: Total advertising expenses incurred/number of
ad clicks.
3. Social Media Marketing: The most widely used social media
platforms are Facebook, Instagram, Twitter, Snapchat, YouTube,
and Pinterest. These platforms can be used very effectively to
promote your brand, product, or service because they encourage
direct communication with the user. Social media is a natural part
of life, and social media marketing is the most well-known type of
digital marketing. There is always the added benefit of a one-to-one
connection which makes the medium reliable and trustworthy. These
are excellent venues to publish enticing material about the product
or service. It equips with the power of appraising the people about
your business and aids in generating leads. Following are the steps
to ensure digital marketing optimization:
(a) know the target audience
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2.7 Summary
In this course, a variety of new marketing concepts were covered, including
digital marketing, social marketing, rural marketing, and sustainable
marketing. Strong social links are developed between the stakeholders
through social marketing.
Digital marketing is the component of marketing that uses the internet
and online based digital technologies such as desktop computers, mobile
phones and other digital media and platforms to promote products and
services.
Sustainable marketing is that type of marketing in which the products and
services are used which are related to environment and important social
aspects around it. Sustainable marketing also known as green marketing
that considers the environmental and social issues.
“Rural marketing is the process of developing, pricing, promoting, and
distributing goods and services specifically for the rural market, leading to
exchanges between the urban and rural markets, which satisfies consumer
demand and also achieves organisational objectives.”
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1. Sustainable Marketing
2. Mission
3. Innovation
4. Value
5. Rural Marketing
6. Utilization
7. Consumption
8. True
9. Awareness
10. False
11. Search Engine Optimization
12. False
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