DSC 9 Unit1 5 Marketing

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© Department of Distance and Continuing Education

ISBN: 978-81-19417-07-0
1st Edition: 2023
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University of Delhi, Delhi-110007
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This Study Material is duly recommended and approved in Academic Council

meeting held on 11/08/2023 Vide item no. 1015 and subsequently Executive
Council Meeting held on 25/08/2023 vide item no. 1267.
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
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Contents
PAGE
UNIT-I
Lesson 1 : Nature and Scope of Marketing

1.1 Learning Objectives 3
1.2 Introduction 4
1.3 Meaning and Concept of Marketing 4
1.4 Nature of Marketing 6
1.5 Difference Between Marketing and Selling 9
1.6 Scope of Marketing 10
1.7 Core Concepts of Marketing 14
1.8 Evolution of Marketing Concept 18
1.9 Holistic Marketing Concept 24
1.10 Summary 25
1.11 Answers to In-text Questions 26
1.12 Self-Assessment Questions 26
1.13 Suggested Readings 27
Lesson 2 : Marketing Mix

2.2 Introduction 28
2.3 Marketing Mix 29
2.4 Service Marketing 39
2.5 Summary 44
2.8 References 46
2.9 Additional Readings 46
PAGE i
B.COM. (PROGRAMME)/B.COM. (HONS.)
PAGE
Lesson 3 : Marketing Environment
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
3.12 Additional Readings 71
UNIT-II
Lesson 1 : Consumer Behaviour

1.2 Introduction 76
1.3 Introduction to Consumer Behaviour 76
1.4 Need for studying Consumer Behaviour 80
1.5 Types of Consumer Behaviour 82
1.6 Factors Influencing Consumer Buying Decisions 85
1.7 Consumer Buying Decision Process 90
1.8 Summary 92
1.9 Answers to In-Text Questions 93
1.11 References 94
ii PAGE
Contents
PAGE
Lesson 2 : Market Segmentation
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
Lesson 3 : Positioning and Targeting

3.2 Introduction 112
3.3 Targeting 113
3.4 Positioning 118
3.5 Product Repositioning 124
3.6 Product Differentiation 126
3.7 Summary 130
3.10 References 132
UNIT-III
Lesson 1 : Product Decisions

1.3 Concept of Product 136
1.4 Product Mix 145
PAGE iii
PAGE
1.5 Branding 149
1.6 Summary 153
1.9 References 155
Lesson 2 : Packaging and Labelling

2.3 Packaging 157
2.4 Labelling 162
2.5 Product Support Services 168
2.6 Summary 172
2.9 References 173
Lesson 3 : New Product Development

3.3 Product Life Cycle 176
3.4 New Product Development 185
3.5 Summary 189
iv PAGE
Contents
PAGE
UNIT-IV
Lesson 1 : Pricing
1.3 Meaning of Price 196
1.4 Pricing Policies/Decisions 201
1.5 Pricing Strategies 207
1.6 Summary 211
Lesson 2 : Channels of Distribution

2.3 Introduction to Channels of Distribution 215
2.4 Introduction to Types of Middlemen 224
2.5 Functions of Middlemen 226
2.6 Elimination of Middlemen 228
2.7 Summary 231
Lesson 3 : Distribution – Wholesaling and Retailing

3.3 Wholesalers 235
3.4 Retailers 239
3.5 Summary 255
PAGE v
PAGE
Lesson 4 : Logistics Decisions

4.3 Concept of Marketing Logistics 259
4.4 Components of Marketing Logistics 263
4.5 Supply Chain Management 274
4.6 Summary 277
UNIT-V
Lesson 1 : Promotion Decisions

1.3 Concept of Promotion 284
1.4 Promotion Decision 293
1.5 Communication Process 296
1.6 Integrated Marketing Communication 297
1.7 Summary 307
Lesson 2 : Developments in Marketing

vi PAGE
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
PAGE vii
UNIT - I
PAGE 1
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

u Define the concept of marketing and understand why marketing is an important part
of business.
u Learn about evolution of marketing concept.
u Understand what core concepts of marketing as an activity are and how they can be
applied in a particular business.
PAGE 3
Notes u Understand the difference between the concepts of selling and

marketing.
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.
1.3 Meaning and Concept of Marketing

According to Philip Kotler ‘Marketing is a social and managerial process
by which individuals and organizations obtain what they need and want
through creating, offering and freely exchanging products and services
of value with one other.’
This definition has two aspects one is a social aspect that shows the role,
marketing plays in the society and other is the managerial aspect that
produces a need to have a certain skill for coping up with these processes
of creation and exchange.
The above definition gives a prime focus to management of processes
involved in marketing, thus the need for marketing management arises.
4 PAGE
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
Notes directing the flow of need satisfying goods and services from producer to
customer or client.”—William D. Perreault and E. Jerome McCarthy
1.4 Nature of Marketing

In order to meet the needs of both current and potential customers, mar-
keting requires the execution of numerous tasks in an integrated manner.
The following points can help in understanding the nature of marketing:
1. Marketing is Customer - focused: The goal of marketing is to excite
and please the consumer. The customers should be the primary
focus of all marketing efforts. Identification of consumer needs and
requirements is the first step in marketing.
2. Marketing is an Integrated Process: Marketing is a broad field
of endeavour. Instead, it involves the coordination of a number of
linked tasks, including those connected to product planning, pricing,
advertising, finance, packaging, etc.
3. Marketing is Goal - Oriented: By meeting human wants, marketing
aims to bring benefits to both customers and sellers. The ultimate
objective of marketing is to increase revenue by ensuring customer
satisfaction.
4. Marketing is a Dynamic Process: Marketing practice keeps on
evolving from time to time to improve its effectiveness. It ensures
that level of creativity is enhanced with every new introduction.
5. Marketing Creates Utility: Marketing generates a variety of utilities,
including form, time, and place utilities. It produces place utility by
properly delivering commodities to clients, time utility by storing
and preserving items in warehouses, and form utility by producing
the right output using inputs.
6. Marketing is Pervasive: Organizations in both the business and
non-business sectors need to engage in marketing. For instance,
marketing is essential for spreading socially beneficial concepts and
initiatives such as adult education, family planning, environmental
conservation, etc as much as it is important for selling a product
or a service.
6 PAGE
7. Marketing is a Multi-disciplinary Approach: The study of Notes

marketing has evolved majorly out of commerce and economics.
Additionally, marketing is benefited from disciplines like anthropology,
psychology, law, statistics, sociology, mathematics, etc. All these
disciplines have together led to the enhancement of marketing as
a concept, it is today.
IN-TEXT QUESTIONS
1. _______________are desires for particular goods that are supported
by the capacity and willingness to buy.
2. Which of the following does not relate to nature of marketing:
(a) Marketing is Customer - focused
(b) Marketing is Goal - oriented
(c) Marketing is business
(d) Marketing is pervasive
3. The first and the foremost task performed during marketing is
_______________.
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
Notes available to their target market of consumers, marketers can influence

wants and demands.
• I physically
Need need water to
survive
• I want clean,
Want safe to drink,
good tasting
water
• I create a demand for

Smartwater since it is
Demand vapor distilled with added
electrolytes for taste
Figure 1.1 : Concept of Need, Want and Demand

(Source: myventurepad.com)
ACTIVITY
The concept of Need, Want and Demand is explained above. Learners
can make a list of 4-5 needs, wants and demands that relate to their
daily lives. To understand these concepts in a detail learners can also
perform this activity with their friends, relatives and even parents and
ask them how their wants and demands have evolved with their age.
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
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.
1.5 Difference Between Marketing and Selling

Some people use the terms ‘marketing’ and ‘selling’ interchangeably.
But this is not correct as marketing is much wider term than selling. It
involves all the activities from determination to satisfaction of customers’
wants whereas selling is restricted to transfer of goods and services from
producers to consumers. Thus, it is essential to understand the difference
between marketing and selling:
Basis Marketing Selling
Focus Marketing focuses on customers’ Selling focuses on sellers’ need
needs of want satisfying goods. i.e. converting goods into cash.
Sequence It begins before actual production It takes place after production.
takes place.
Emphasis Emphasis is given on product, Emphasis is placed on sale of
planning and development to goods already produced.
match products with customers’
needs.
Pre-domi- Customer is treated as a King. It aims at profit through sales
nance He is given supreme importance. volume.
PAGE 9
Notes Basis Marketing Selling

Aim It aims at profits through cus- It aims at profit through sales
tomer satisfaction. volume.
Principle The principle of caveat ven- The principle of caveat emp-
dor (Let the seller beware) is tor (Let the buyer beware) is
followed. followed.
Approach Integrated approach to marketing Fragmented approach to selling
is followed. It includes market- is followed. Attempt is made
ing research, product planning, to sell whatever is produced.
advertising etc.
Perspective It has long perspective as it lays It has short term perspective
emphasis on growth and stability as it emphasize on profit max-
of sale. It takes an outside-in imization.
perspective.
1.6 Scope of Marketing

According to American Marketing Association “Marketing is the activity,
set of institutions, and processes for creating, communicating, delivering,
and exchanging offerings that have value for customers, clients, partners,
and society at large.” The field of marketing is very broad as it covers
all actions from idea generation to profit realisation.
The marketing offerings of a firm determine the scope of marketing.
Market offering can be termed as a collection of products, services,
concepts, people, places, information, etc. that are made available to a
market in order to meet customers’ individual requirements and desires.
The market offers more than just tangible commodities. They also include
non-tangible services that the buyers cannot possess, such as banking,
air travel, hotel stays, and tourism. Traditionally, marketing used to be
just about buying and selling products and services, but today its focus
has expanded to include a variety of activities, such as managing client
relationships and ensuring customer satisfaction.
1.6.1 What is Marketed?

The following categories of entities are primarily promoted by marketers.
Let’s take a quick look at these categories:
10 PAGE
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
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.
1.6.2 Spectrum of Marketing

Marketing is now practically required for a firm to succeed in today’s
environment. Therefore, understanding the extent of marketing is crucial.
The following are included in the marketing spectrum:
Market Research: Market research is a tool for making decisions about
the components of the marketing mix. To determine the demands, tastes,
preferences, interests, financial situation, purchasing power, and effica-
cy of certain advertisements, research must be conducted on the target
audience. Data is gathered, collated, codified, analysed, and presented
for this reason using advanced methodologies designed to show what
customers will purchase, why they will purchase it, and how much they
will pay for it. The goal of market research is to tailor products to con-
sumer preferences. A questionnaire is frequently used to get customer
feedback. These results are to be helpful to marketing managers and the
firm therefore, they must actively participate in the research process.
Pricing: Pricing is crucial since it has a direct impact on the sales and
profits of a company. A variety of considerations must be made when de-
termining the pricing of the product, including the cost of manufacturing,
the customer’s purchasing power, market demand, competitor’s prices,
and the desired profit margin. Pricing also ties the components of the
marketing mix together. Therefore, the marketing manager must evaluate
and balance all the components of those factors, that affect price before
12 PAGE
deciding on an ideal pricing strategy. A solid price strategy is essential Notes

to engaging and attracting consumers.
Sales promotion & Advertisement: Sales promotion and advertising
are now practically an integral component of marketing in this period of
intense competition. It aids in increasing customer awareness of the goods
and helps to stimulate interest, which encourages sales. There are several
resources for advertising and sales promotion. Making the choice of the
best source to use is another crucial step in the marketing management
process. Using a variety of media, including newspapers, magazines,
television, radio, hoardings, window displays, and the internet, marketers
are able to position their items in the minds of consumers through adver-
tising. The approaches of face-to-face personal selling, mass selling to
many clients through advertising, and sales promotion must be combined
by marketing managers.
Distribution Channels: The core of marketing is bringing buyers and
sellers together and facilitating their interaction. Distribution channels
are an essential component of a complex system that was created to ease
exchange transactions by adapting to cultural and social patterns. Market-
ers must choose the finest distribution strategies for their specific items
on the basis of products perishability, size, weight, after sales service,
etc. There are several different distribution channels, including retailers,
wholesalers, chain stores, department stores, and supermarkets. Firms must
also decide how long and complex its distribution channel should be.
Financing: Without access to sufficient and affordable financing, it is
challenging to carry out numerous marketing initiatives. The statement
that “Money or Credit is the lubricant that facilitates the running of the
marketing machine as modern marketing requires massive resources” has
been made with good reason. The term “finance” covers choices like
setting a budget for marketing initiatives, obtaining the money required
for operations, and offering customers financial aid so they may buy
the company’s goods and services. The financing of client purchases
has grown in importance in the age of global competition. To improve
the amount of sales, marketers must provide customers with a variety of
financing options. There are many different sources of marketing finance,
including government organisations, commercial banks, and cooperative
credit societies.
PAGE 13
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.
1.7 Core Concepts of Marketing

According to the marketing concept, identifying target audiences’ require-
ments and wants and satisfying them more effectively and efficiently
than rivals is the key to accomplish organisational goals. The focus of
the marketing concept is on selling satisfaction rather than just a product.
Marketing’s goal is to maximize revenues through customer happiness,
not by increasing lucrative sales volume. The consumer is the central
point around which all marketing activities operate and revolve. There-
fore, it is crucial for entrepreneurs to identify their target market, build
a relationship with them, ascertain their wants, and provide them with
the goods and services that will satisfy those demands. The person who
decides to buy a product or who pays for it is typically referred to as the
customer. Numerous terms, such as client, traveller, subscriber, reader,
guest, and student, can be used to characterise customers. The terminology
can convey information about the relationship between a company and its
customers. For example, the terms “patient” and “passenger” suggest a
caring relationship, “client” implies a customer seeking advice and help
in a formal or informal way respectively.
The core concepts of market are not limited to need, wants and demands
of customers but they extend to products and services provided, markets
where these are to be sold, money paid for them and even the satisfaction
provided by these products.
14 PAGE
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
1.7.1 Needs, Wants and Demands

Needs are the basic human requirements, such as air, water, food, shelter
and clothing. Humans also have strong needs for recreation, education,
and entertainment. These needs become wants when they are directed to
specific objects. And Demands are wants for specific products backed
by and ability to pay.
We can distinguish five types of needs:
1. Stated needs
2. Real needs
3. Unstated needs
4. Delight needs
5. Secret Needs
Needs are the starting point for any marketing activity. Refer to ‘Take a
Note’ given above for reference.
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
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.
1.7.3 Value Satisfaction and Quality

The proportion of perceived advantages to price paid is how consumers
define value. Customers will assess benefits based on how much a prod-
uct allows them to satisfy their needs. Customers also assess how well
a product’s benefits enhance their own well-being when compared with
the benefits provided by rivals offering.
Customer perceived value = Benefits deriving from a product/Cost
of acquiring the product
Customer satisfaction is based on how well a product is regarded to
perform in meeting customer expectations for value. Buyer dissatisfaction
occurs when the performance of the product falls short of the customer’s
expectations. When performance meets expectations, the customer is hap-
py. Whenever performance meets or surpasses expectations, the customer
is delighted. Smart businesses promise only what they can provide and
then go beyond in order to please customers. Highly satisfied consumers
are more likely to repurchase goods, be less price sensitive, to be around
longer, and to recommend the business and its goods to others.
Customer expectations are based on prior purchasing experiences, friends
and families recommendations, and market data and information. The
appropriate level of expectations must be carefully set by marketers. If
they set expectations too low, they may satisfy existing customers, but
fail to attract new customers towards their product. Customers will surely
be dissatisfied if the marketer set unrealistic expectations. Most of to-
day’s most successful companies are raising expectations- and delivering
performance to match those expectations.
Quality is defined as freedom from defects, it is directly related to
performance of a good or service. When the product is of good quality
it will perform the task nicely and customer will gain a high level of
satisfaction.
16 PAGE
1.7.4 Exchange Notes
Exchange is defined as giving something and receiving something in return

of almost the same value. Back in time during olden days, barter system
was the most common system of exchange. Due to absence of money
(Coins and notes) people used to exchange goods for goods, grains for
milk, animals for clothes, etc. In modern times every good has a defined
value in terms of money, i.e. a monetary value so people pay money and
obtain what they need. A fair exchange emerges when both parties are
happy with the outcomes of exchange.
In a market-based economy it is assumed that each party can choose
whether or not to enter into an exchange with your opponent. Each party
is also free to choose among a large number of potential partners avail-
able in the market area. Marketing helps to create an environment where
exchange can take place. Exchange can only take place, if :
I. Any type of exchange must involve at least two parties.
II. Both the parties should have some common interest.
III. Each party must be willing to have an exchange with other party.
IV. Each party must be completely released from any obligation to accept
or decline the offer.
V. Each party must be able to communicate and deliver products in
accordance with the requirements of the other party.
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
Notes Activities such as consumer research, product development, communica-

tion, distribution, pricing, and service must stay ahead of the competitors
in the market. The size of a market depends on three things; the number
of people who demonstrate the need, have resources to take part in an
exchange, and are willing to exchange these resources for what they want.
TAKE A NOTE:
Marketing Myopia:
Marketing myopia is a narrow-minded, inward-looking approach to
marketing that prioritises meeting the urgent needs of the business over
marketing from the perspective of the consumer. Marketing myopia is
exemplified by a company that focuses on creating high-quality items
for consumers who only care about pricing and ignore quality. Mismatch
in the expectations of the producer and consumer creates this situation.
Many companies have lost their market share because of this, e.g. Nokia
losing its marketing share to android and IOS.
1.8 Evolution of Marketing Concept

The development of science and technology, particularly the development
of information technology, has fundamentally changed how people live,
conduct business, sell and buy things. Since the great Industrial Revo-
lution, which happened in the second half of the 18th and the first half
of the 19th century, this marketing concept has experienced a profound
and steady shift. Production orientation period, sales orientation period,
customer orientation period, and social orientation period are the four
times and captions that can be used to track this progressive transition.
The marketing concept refers to any strategy that a business aims to
use to increase profit by growing sales, satisfying customer wants, and
outperforming rivals. The idea is to create a scenario that benefits both
the client and the business. The goal of the marketing concept is to
anticipate and fulfil customers’ needs and desires more effectively than
the competitor.
Marketing Concept evolved from various other concepts such as the
production Concept, product concept and selling concept.
18 PAGE
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.
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
Figure 1.3: Marketing Philosophies

Figg 1.3: Mark
keting Philossophies
1.8.1 Pro
oduction Co
oncept
1.8.1 Production Concept
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as "prod without
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c is based
b on ‘Suupply createss its own deemand’; hencce companiees
with the hope that people would buy them. This philosophy assumes that
focus onn manufacturring more and a more off the produccts and makking sure thaat it is easilly
customers
available want products
e everywhere e. that are readily available and are affordable. This
concept is based on ‘Supply creates its own demand’; hence companies
Businesses get a bennefit of econ
nomies of sccale as a ressult of increased producct productionn.
focus on
Because of manufacturing
the prod
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affordablle product overo anotheer. Numerouus other connsiderations also play a role in hiis
New consumers
decision to buy. may be drawn in by a low price, but the focus is on
production rather than product quality. If the product does not meet the
1.8.2 Pro
oduct Conceept
criteria, this could lead to a decline in sales. This philosophy only works
in some cases, additionally a buyer may not always choose an affordable
product over another. Numerous other considerations also play a role 17 |in
Page
his decision to buy.
© Departmeent of Distancce & Continuuing Education, Campus off Open Learniing,
School of Open Learrning, Univerrsity of Delhi
1.8.2 Product Concept
This idea operates under the presumption that consumers like “higher
quality” products and that “price and availability” have no bearing on
their choice to buy. As a result, the firm spends the majority of its time
creating a higher-quality product, which turns out to be more expensive.
Since product quality is the marketers’ primary concern, they frequently
PAGE 19
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
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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
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that folllow buying theireven
cooncept products.
n try to tricck
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customer that
rs into buyin follow
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this philosophyapproach
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approach “try to sell
they "ttrywhat they
to sell whhatmake, not
they makke,what thethe
not what market
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w
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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,
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items that pproducts
These consumers don’t normally
are forcibly need,
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the desireed
that they don’t
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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
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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
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.
1.8.4 Marketing Concept

All the above concepts are somehow old and may not match the consum-
er preferences in the 21st century. Therefore, a need for a new concept
emerged. This concept was known as the marketing concept. This concept
assumes that consumers buy products that meet their needs. Companies
that follow marketing concept conduct researches to know their customers’
needs and wants and release products that outperform their competitors.
As a result, the company builds relationships with its customers and
generates long-term profits. But this is not the only philosophy that all
companies should follow. Many companies still follow different concepts
and make a profit. It totally depends on the supply and demand and the
needs of the customers involved.
Identify
Conduct Create the
Customer
Research Product
Needs
Figure 1.4 : Marketing Concept
The concept focuses on creating, mediating, and communicating custom-
er benefits through the products and services offered. In contrast to the
selling concept, this concept focuses on the needs of consumers in the
target market. Here, through its products, the company offers solutions
to satisfy its consumers.
This concept is considered to be better of all others as under it a firm
creates what is being demanded by the customers and therefore conducts
a better business and earns high level of profit. Loyal customer relations
are built and extra market share can be captured by the companies that
focus on this philosophy. It can also be called ‘Consumer Centric’ concept.
Features of Marketing Concept
In today’s competitive environment, strategically placing the client at the
centre of the operation is critical. While certain firms in specific industries
PAGE 21
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
3. Strategic and Philosophical worth: The marketing notion has Notes

strategic and philosophical worth. It assists management in directing
organizational efforts toward the firm’s stability and growth through
customer satisfaction.
The marketing concept, however, is not without constraints. It fails to grasp
business’s broader societal perspective. It concentrates only on gratifying
customers while ignoring other stakeholders such as employees, investors,
suppliers, the state, and the general public. As a result, the concept may
inspire managers to engage in behaviours that are damaging to diverse
populations, such as polluting the air or water, evading taxes, and so on.
1.8.5 Societal Marketing Concept

This is the fifth marketing idea, and it focuses primarily on satisfying
customer requirements while also attempting to safeguard the environment,
its natural resources, and the general welfare of society. According to
this marketing concept, as businesses are an integral part of society, they
should give something back by providing social services like fighting
poverty, boosting literacy, environment protection, etc. So, this philoso-
phy focuses on meeting consumer wants while avoiding negative effects
on society or the environment. With the introduction of this concept the
marketing initiatives of many large corporations now involve corporate
social responsibility as their integral exercise.
IN-TEXT QUESTIONS
4. Customer perceived value is equal to benefits derived from a
product divided by cost of acquiring the product.(True/False)
5. This concept aims to take every possible step to sell the product,
regardless of the quality of the product or the need of the
consumer. Name the Concept?
6. Is marketing is a multi-disciplinary approach? (Yes/No)
7. This idea operates under the presumption that consumers like
“higher quality” products. Name the concept.
8. Value and satisfaction is not included under core concepts of
marketing.(True/False)
PAGE 23
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.
24 PAGE
Integrated Marketing: Coordinating all of a business’ marketing initia- Notes

tives while developing marketing plans for things like packaging, media
promotion, point-of-purchase materials, after-sales services, etc. It involves
combining and matching marketing initiatives to enhance both their
individual and group effects. Demand management, resource management,
and network management systems in marketing firms must be integrated.
Internal Marketing: It explains the process of recruiting, developing,
and motivating competent individuals who desire to provide excellent
customer service. It also refers to spending money on training and
energising staff members so they can provide better customer service.
Marketing succeeds only when all departments work together to achieve
common goals. Internal marketing requires vertical alignment with senior
management and horizontal alignment with other departments so everyone
understands, appreciates and support the marketing effort.
Performance Marketing: It focuses on the outcomes of marketing
efforts. Some measures like market share, customer satisfaction, demand
for the product, profit generated are kept in mind while understanding
performance marketing.
IN-TEXT QUESTIONS
9. The word Market is derived from Latin word ___________
which means a place of trade or a place where business is
carried on.
10. Intangible goods and services can also be marketed. (True/False)
11. __________________________ is the act of establishing long-
term, mutually rewarding relationships with various types of
customers in order to obtain and maintain consumer loyalty.
12. “Marketing practice keeps on evolving from time to time to
improve its effectiveness.” What point in ‘nature of marketing’
is being talked about?
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
PAGE 25
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

1. What is meant by the term marketing? Also, discuss the scope of
marketing in detail.
2. Comment on Holistic marketing concept. Is it being practised in
India?
3. Write short notes on the following:
(a) Needs and Wants
(b) Marketing Myopia
26 PAGE
(c) Marketing Concept Notes

(d) Types of markets
4. “Marketing is not merely selling of goods”. Comment on the statement
and discuss the nature and scope of marketing.
5. Do you think the concept of marketing is applicable to all type of
organisations? Give reasons for your answer.
6. Discuss the marketing orientations and philosophies that have guided
the concept of marketing over a period of time.
7. Explain the significance of marketing for a firm and explain all core
concepts used in the process of marketing.
8. “Modern marketing concept is applicable to all business organisations
irrespective of their size or nature of goods or services they offer.”
Do you agree? Give reasons for your answer.
9. “Marketing is not merely a departmental function but a guiding
philosophy for the whole firm”. Comment
10. Define Relationship marketing. Give reasons why is it an important
concept in today’s marketing scenario.
11. State the difference between Selling and Marketing?

u Kotler, P. & Keller, K. L. (2017), Marketing Management, Pearson.
u McCarthy, E. J., Cannon, J. & Perreault, W. (2014), Basic Marketing,
McGraw Hill.
u Kapoor, Neeru. Principles of Marketing, PHI
u Sharma, K., & Swati Aggarwal, (2018), Principles of Marketing,
Taxmann Publications Pvt. Ltd.
u Chhabra, T.N. (2014), Principles of Marketing, Sun India Publications.
PAGE 27
L E S S O N
2
Marketing Mix
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
2.2 Introduction
2.3 Marketing Mix
2.4 Service Marketing
2.5 Summary
2.6 Answers to In-text Questions
2.8 References
2.9 Additional Readings

After studies this lesson students will be able to:
u Explain the concept of marketing mix and all its components.
u Understand the factors responsible for determining the marketing mix.
u Explore the concept and features of service marketing.
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
28 PAGE
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.
2.3 Marketing Mix

The combination of marketing strategies that a company use to offer
goods and services to its target audience is known as the marketing mix.
By paying attention to the components of the marketing mix, a business
can maximize its chances of a product being recognized and bought by
customers. The components of the marketing mix consist of 4Ps Product,
Price, Place, and Promotion. However, nowadays, the marketing mix
increasingly includes several other Ps for vital development.
Technically, businesses have always used marketing strategies to publicize
and sell their products, but the phrase “marketing mix” wasn’t first used
until the middle of the 20th century. Its initial application was in a 1953
address to the American Marketing association by a Harvard professor.
A company can make profitable marketing choices at every level by iden-
tifying and organising the components of its marketing mix. Decisions
related to marketing mix will help the firm to:
I. Identify strengths of businesses and limit the weaknesses.
II. Gain market share and become more flexible and competitive.
III. Boost efficient communication between partners and departments.
2.3.1 Importance of Marketing Mix

The components of the marketing mix interact with one another. They
help in creating a company’s business plan and, if managed well, can
contribute significantly to its success. But if handled incorrectly, it might
take years for the business to recover. To get the intended results, the
marketing mix needs to be thoroughly understood, thoroughly researched,
and thoroughly discussed with a variety of stakeholders, including us-
ers, traders, manufacturers, and many others. Following are some of the
important points:
PAGE 29
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.
2.3.2 Elements of Marketing Mix
Product
People Price
Process Promotion
Physical
Place
Evidence
Figure 2.1: 7P’s of Marketing
30 PAGE
1. Product: A product is a commodity that is created or developed to Notes

meet the needs of a certain person or group e.g.: Car, pen, books,
cups, etc. The product can take the form of tangible as well as
intangible commodities such as services. Prior to establishing a
product, it is crucial to do in-depth research because the product’s
life cycle fluctuates from the growth period through the maturity
phase and the sales decline phase enters. The company’s product
should leave a lasting impression on the customers that it is unique
and distinct from the product of the rival. Along with providing
quality items, attention should be paid to their branding, packaging,
colours, and other characteristics (i.e., width, depth, consistency,
length of a product).
“Product is a set of tangible and intangible attributes including
packaging, colour, price, manufacturer’s prestige, retailer’s prestige
and manufacturer’s and retailer’s services which buyer may accept
as offering satisfaction of wants and services”- William J. Stanton.
Components of Product
The following product components should receive priority in order
to satisfy consumer demands:
(a) Branding: It is the process of giving a product a name, sign,
symbol, or design. A brand serves as a product’s label. The
brand name refers to the part of the name that may be spoken,
such as Dettol, Nike, etc. The brand mark is the part of a
brand that cannot be spoken but can be recognised such as
the Nike arrow logo, the Mercedes star, etc. Trademark refers
to a mark that has received legal protection from being used
by other businesses. Branding aids in product differentiation
also. Companies might use differential pricing for their products
when they become an established brand. Customers are ready
to accept a high price if the brand is well established and
popular, according to them these brands can be trusted easily.
(b) Packaging: It involves creating the right container or cover for
the goods in order to safeguard it and deliver it securely. It
aids in product identification. It makes handling the product
easier. A packaging serves as a silent salesman by boosting a
product’s sales. Packaging could be classified in three levels
i.e., primary, secondary and final packaging.
PAGE 31
Notes (c) Labelling: The label is a section on a product’s cover that

contains information about the product’s name, contents,
owner, expiration date, manufacturing date, etc. A label aids
in product identification. It is jam-packed with details on the
product. It acts as an information or guiding source when a
customer has to make a buying decision.
2. Price: Price is the cost to purchase a product. Because it determines
a company’s ability to survive and make money, price is the most
important component of a marketing strategy. Even a small change
in the product’s pricing can have a significant impact on the overall
marketing plan, as well as sales and demand for the product.
Many strategies for determining price of a product which will be
discussed in the coming pricing unit. The competitor’s price, list
price, customer location, discount, terms of sale, etc., should also
be kept in mind while determining the price of the commodities.
The following list broadly summarises the factors that are typically
examined when deciding a product’s price:
(a) Cost: If manufacturing and distribution costs are not covered,
no business can stay in operation. The retail prices of a big
number of products are established by raising the cost by a
justifiable profit margin. Lower the cost, the lower the price;
higher the cost, the higher the price is a situation that is likely
to exist in the market.
(b) Demand: Demand has a significant impact on the price as well.
People will purchase a thing even if the producer is charging
high rates when there is a limited supply and a high demand.
However, the price would vary depending on the ability and
willingness of potential customers to pay as well as their
preference for the goods.
(c) Competition: The cost imposed by the competitor for a
comparable product is a significant price determinant. For
fear of losing customers, a marketer would prefer not to offer
a price that is higher than the rivals. Additionally, he might
refrain from setting a cheaper price than the rival. Because a
pricing war could follow, as we have seen in some brands.
(d) Government regulation: Under the Essential Commodities
Act, the government controls the cost of a few basic goods.
32 PAGE
For instance, the government used to set prices of cement Notes

and steel before the economy was liberalised. Therefore, it
is crucial that the producers consider any applicable statutory
constraints while setting the prices of their goods.
(e) Marketing objectives: A company may have several marketing
goals, such as maximising profit, maximising sales, gaining a
larger market share, remaining competitive, and so forth. Prices
must be established in accordance with this. For instance, a
cheap price will be set if the goal is to maximise sales or
have a larger market share.
3. Place: Distribution or place plays a crucial role in the marketing mix
strategy. Our goods should be placed and distributed in an area that
is convenient for potential buyers. These decisions are associated with
channels of distribution and serve as a medium between the potential
buyer and the firm. Basic consumer goods, i.e., daily need goods,
are easily accessible in numerous stores. But, just a small number
of retailers carry high-end consumer goods. Therefore, the nature of
goods have to be identified and then the mode of distribution is to
be finalised. Since everything is moving towards digital platforms
today, businesses must employ digital marketing for placing their
products on online platforms. Placement decisions include channel
selection, logistics, market coverage, transportation, etc.
A channel of distribution performs the following functions:

(i) It assists in creating continuous communication with customers
and gives them access to the relevant product information.
(ii) Both the delivery of products and the transfer of ownership
are made easier.
(iii) It facilitates finance by providing credit.
(iv) If necessary, it helps in the execution of after-sales services.
Types of Distribution Channels:
(a) Zero Stage Channel of Distribution: There is a zero-stage
distribution channel is where products are sold directly from
the producer to the consumer.
PRODUCER CONSUMER
PAGE 33
Notes (b) One Stage Channel of Distribution: Here there is one middleman
i.e., the retailer facilitates the sale.
PRODUCER RETAILER CONSUMER
(c) Two Stage Channel of Distribution: For the sale of consumer

goods, this is the distribution channel that is most frequently
employed. Two intermediaries are employed in this situation:
a wholesaler and a retailer.
PRODUCER WHOLESALER RETAILER CONSUMER
(d) Three Stage Channel of Distribution: The manufacturers

frequently use the services of mercantile agents, who serve
as a channel between the producer and the wholesaler.
PRODUCER AGENT WHOLESALER RETAILER CONSUMER
4. Promotion: It is a method of marketing communication that assists

the business in making the public aware of the product and its
qualities. It is t The most costly and crucial element of the marketing
mix that work to attract customers’ attention and persuade them to
purchase the goods or try a service. Promotion activities might include
advertising, sales promotion, personal selling, public relations, etc.
When attempting to reach the intended audience with the help of
promotion, marketing professionals carefully craft a message that
frequently includes specifics from the other three Ps. Determination
of the best mediums to communicate a message and decisions about
its frequency are the crucial decisions taken under this head.
The main objectives of promotion are:

(i) To draw customers attention towards the product
(ii) To arouse customers interest in the product
(iii) To notify customers about products availability (online available
or in stores)
(iv) To inform and explain customers, as to how the product is
different from competitors
Tools used for promotion of products and services:
(a) Advertising: The most popular method for alerting current
and potential customers about a product’s qualities, features,
34 PAGE
availability, etc. is advertising. It is a sort of impersonal and Notes

paid form of communication.
(b) Publicity: This procedure of generating a wide range of
communication is unpaid but contributes to a positive attitude
about the organisation and the products. You may have read
newspaper articles on a company, its practises, and products,
this is a form of publicity.
(c) Personal Selling: We all have encountered salesmen from
various businesses knocking on our doors and attempting to
get us to purchase their goods. It involves a salesman directly
presenting the product to customers or potential customers.
(d) Sales Promotion: This relates to quick, temporary incentives
launched to encourage the use of new products. The tool
consists of giveaways, games,
B.Com contests,
m. (Program discounts,
mme) / B.Com
m. (Hons.) and trade
fairs.
•Brandin ng •Pricing
•Packaging •Discounts
•Positioning •Allowances
•Qualityy •Credit policyy
•Servicees •Offer Price
•Warran nty
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
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services. These are discussed
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Phillip Kotler has given an extended version of marketing mix, which
5. P
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5. People: Because they provide the service to customers, the company’s

g
goods or serrvices that a certain com mpany offerrs is crucial since they are far morre
liikely to givee their best effort in maaking the saale possible. The organiisation shoulld
employees are crucial to marketing. No matter if they work at a
a ask and accept the feedback
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traininng and devellopment sesssions to these personals.
help desk, in customer service, as copywriters, programmers, etc.,
6. P
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32 | P a g e
with outstanding service.

© Departm
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Continuuing Educatioon, Campus of who sincerely believe in
Open Learn
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Schooll of Open Leaarning, University of Delhii
the goods or services that a certain company offers is crucial since
PAGE 35
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.
2.3.3 Factors Determining Marketing Mix

Nature of Product: Consumer goods require different type of marketing
mix as compared to industrial goods. Big warehouses would be required
to manufacture and store industrial goods but in case of consumer goods
more number of warehouses would be required irrespective of their size.
36 PAGE
Greater and innovative type of promotion is needed in case of consumer Notes

goods.
Finance: The business should consider how much money is to be spent
on marketing. In case the firm has adequate funds, it can spend a good
amount in introducing more product lines, improving quality of products
and set a heavy budget for promotion.
Competitors: The marketing mix can be applied as a reaction to market
competitors’ behaviour. This can entail rolling out a competing product
or matching new prices set by the competitor.
Technology: According to changes in technology, a firm may alter the
locations where items are brought in and sold, the variations that are to
be created in new or existing products, and the methods to be used to
promote a product. For e.g. With the introduction of internet goods are
now being promoted on social media platforms, the company that lacks
in promoting its products online is lagging behind in the promotion and
sales race.
Stage of Product Life Cycle: 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.
Similarly in introduction a price for a product is kept low so more and
more consumers are willing to try it. But in decline stage focus is on
reviving the product as compared to other elements of marketing mix.
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
PAGE 37
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)
38 PAGE
2.4 Service Marketing Notes
A company’s intangible benefits and products are promoted and highlighted

through the use of service marketing, which increases value for the end
user. When a service or intangible good is advertised and marketed to the
target market, this phenomenon is known as service marketing. Service
marketing, a cutting-edge approach to marketing, is now widely used to
support businesses in promoting their services globally. Service marketing
calls for the promotion of a service that is not physically available but is
nonetheless marketed to the customers, in contrast to product marketing,
which entails a physically apparent object being pushed across multiple
media. According to Kotler, “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 anything”.
2.4.1 Features of Service Marketing

1. Intangibility: The focus of service marketing is an intangible
performance. Instead of being a consumable product, a service is
a performance.
Additionally, it is an intangible good that the general public uses.
Despite being invisible and intangible, services differ from products
in many ways. This calls for a distinct sort of marketing approaches
that advertise an invisible service yet do it effectively from the
perspective of performance. Service marketing is therefore depiction
of an intangible performance that the general public uses in their
daily lives.
For example, the hotel businesses like Radisson, only sells services
instead of things. In order to reach a wider audience, the industry
uses numerous forms of advertising to promote and provide an
intangible service.
2. No ownership involved: Service marketing does not make the same
claims that product marketing does of product ownership. This is
due to the fact that a service might be used and but not be owned
by an individual who is receiving it.
PAGE 39
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.
2.4.2 Challenges in Service Marketing

There are many challenges that a service marketer faces, some of them
is discussed below:
1. Trust: One of the essential components of services is this. Your customer
should have complete faith in your abilities. Trust is developed over
the time and not suddenly. One has to focus on campaigns such
as providing testimonials of customers who have already used the
service, to motivate new customers to at least use the service once.
2. Process: The service delivery method enhances the service’s total
value offering. A few of the procedures used in the service sector
are kindness, adaptability, customization, and responsiveness.
3. Customization: A service provider should constantly be adaptable
enough to tailor their offerings to their clients’ needs. In the service
sector, one size does not fit all and it is never considered as the
best approach.
40 PAGE
2.4.3 Service Marketing Triangle Notes
The service marketing triangle, often known as the service triangle,

involves the relationship between the service, the service provider, and
the service customer. Building and keeping relationships is critical to
the success of any organization, and the service industry is no excep-
tion. However, the service triangle often has three categories of service
marketing, which are as follows:
Company
se
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
Figure 2.3: Service Triangle

(Source: https://www.marketingtutor.net/service-marketing/)
1. Internal marketing: It is utilized in the service triangle by corporations
and organizations who want to encourage their staff. They throw
parties for their personnel to keep their morale up. The goal is to
keep them satisfied because when they are satisfied, they may use
their creative ability to better satisfy customers. Such businesses
also decentralize power to their employees, allowing them to make
their own decisions. Giving them decision-making authority would
strengthen their loyalty and make them take responsibility for their
actions.
2. External Marketing: It is a broad category of marketing that
businesses use to enhance sales and brand exposure. It includes
all of the activities that businesses typically engage in with their
customers. External marketing includes sales promotion, personal
selling, direct sales, offers, and direct marketing.
PAGE 41
Notes 3. Interactive Marketing: Interaction between your company’s staff

and customers constitutes interactive marketing. It happens in shop
stalls, bank customer service counters, hotels, restaurants, and any
other site where employees and consumers interact.
Interaction marketing promotes consumer decision-making because the client
requires assistance in making a decision, and your company’s personnel
assist him in doing so. If the representative delivers good and valuable
information on what clients are seeking for, the conversion rate will rise
2.4.4 Marketing Mix in Service Marketing

Product: A service, unlike a product, is intangible and cannot be com-
pared to the sight, feel, or other characteristics of a product. However,
it can be altered to meet the needs of the user and provide a unique
touch. To maximise customer’s happiness, the service must be carefully
created because it is heterogeneous and perishable in nature, unlike a
tangible products.
Pricing : Unlike with goods, where the ultimate price depends on the
raw materials, cost of manufacture, and distribution, etc., pricing services
is a challenging task. However, it is difficult to quantify the cost of the
services you provide when it comes to service pricing. How would you
establish the price for the quality of education provided, in the education
sector? Therefore, pricing needs set by taking some characteristics of
services in account, like popularity of service, equipment’s being used
to provide the service, place where service is being provided, profession
of the service provider, etc.
Place : Your organization’s ability to expand will either be made or
broken by where you decide to perform your service business. You must
consider how apparent your setup will be to potential customers and how
often they will visit it. You will, for instance, open a Maggi stall close
to a college or office where people can quickly grab a bite to eat.
Promotion : The service sector typically features fierce competition across
several verticals, therefore your company would require a lot of promotions
to effectively communicate with prospective customers. Although direct
marketing, web marketing, and advertising are the finest ways to sell
your service, you still need to use a variety of communication channels
to reach a wider audience.
42 PAGE
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
PAGE 43
Notes 8. A service at a beauty parlour, is linked to its creators and cannot

be separated from them. Which feature is being talked about?
9. Name the component of marketing mix that relates to channels
of distribution.
10. Name the element of marketing mix relating to informing,
persuading and influencing a consumer to make choice and
buy the product.
11. A candy manufacturing company is using chemicals to make
its product, name the marketing philosophy which is ignored
here?
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-
44 PAGE
thing”. Features of service marketing include perishability, intangibility, Notes

inseparability, and variability.
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

1. What is meant by Marketing Mix? Describe the four components
of marketing mix.
2. Why is it important to have a right and perfect marketing mix?
Also discuss the elements of marketing mix.
3. Do you agree with the view that 4 P’s existing framework ignored
marketing of services and other intangible products? Give reasons
for your answer.
4. Why the need of an expanded marketing mix was felt? Explain
additional 3 P’s that have been added to the traditional marketing
mix.
5. Define service marketing and its features. What are the challenges
that a marketer faces when he has to promote a service?
6. Define marketing mix. Prepare a marketing mix for a brand of cold
drink. You can take any existing brand or create a new brand name.
PAGE 45
Notes 7. Write short notes on:

(a) Significance of marketing mix
(b) Extended marketing mix
(c) Service marketing
(d) Service Triangle
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

u Grewal, D. & Levy, M. (2017), Marketing (5th ed.), McGraw-Hill
Education.
u Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2013), Principles of
Marketing: A South Asian Perspective (13th ed.), Pearson Education.
u Saxena, R. (2006), Marketing Management (3rd ed.), Tata McGraw
Hill.
46 PAGE
L E S S O N
3
Marketing Environment
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
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

After studying this lesson students will be able to:
u Understand a marketing environment and its types.
u Learn how marketing environment affects various marketing decisions.
u Know about different forms of Macro and Micro Environment.
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
PAGE 47
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.
3.3 What is Marketing Environment

Every corporate organization’s marketing strategy is influenced by a wide
range of external, uncontrollable circumstances. As a result, a company’s
marketing strategy must take into account environmental factors. Philip
Kotler claims that a company’s marketing environment is made up of
all the variables and forces outside of marketing that have an impact on
marketing management’s capacity to create and sustain profitable rela-
tionships with its target customers. A bike tyre manufacturer’s relevant
environment, for instance, can include automobile producers and custom-
ers, tyre manufacturing technologies, taxation, import and export laws,
distributors, dealers, rivals, etc.The environment becomes crucial since
it is constantly changing and unknown. These environmental influences
include some factors that are unavoidable. These changes present both a
risk and an opportunity to the business. These environmental elements
can be divided into two categories: Macro and micro environments. These
elements can also be divided into internal and external environmental
elements.
According to Philip Kotler, ― “the company’s marketing environment is
made up of the sectors and forces outside the firm’s marketing function
which infringe upon the ability of marketing management to develop
and maintain a successful relationship with the firm’s target audience.”
3.3.1 Features of Marketing Environment

(1) Dynamic: The components that impact marketing environment are
changing constantly. Therefore, they are termed as dynamic forces
these include consumers’ preferences, industry regulations, or
technology changes.
48 PAGE
(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.
3.3.2 Importance of Marketing Environment

It is critical for a company’s management to properly comprehend its
external environment and build plans and strategies to deal with envi-
ronmental influences. If a corporation can adapt to its surroundings. It
would be successful in the long run. The following are the advantages
of understanding the marketing environment:
1. Identifying Opportunities: Opportunities are positive or favourable
external variables that are likely to assist a firm in growing its
business. An firm can recognize opportunities at the earliest by
staying in touch with developments in the external environment.
Nestle Company, for example, recognized consumers’ growing health
consciousness and produced new multi grain Maggi as well as Atta
Maggi to meet the needs of health-conscious consumers.
2. Threat Identification: A great entrepreneur is one who can not only
recognize possibilities, but also threats that are likely to present
roadblocks for a company.
PAGE 49
Notes 3. Plan and Policy Formulation: Environmental analysis assists in

identifying market threats and opportunities, and so serves as the
foundation for management to formulate appropriate plans and policies.
The majority of the largest corporations have hired consultants to
monitor environmental developments.
4. Image Building: A company that adapts to changes in the environment
will be better able to satisfy the changing demands of its customers
and will improve its reputation in society.
3.3.3 Environmental Scanning

External and internal variables influence the organizational environment.
The environment must be examined in order to determine the develop-
ment and projections of factors influencing organizational success. The
possession and use of information concerning events, patterns, trends,
and linkages inside an organization’s internal and external environment is
referred to as environmental scanning. It assists managers in determining
the organization’s future direction. Scanning must discover potential risks
and possibilities in the environment. When developing a strategy, a busi-
ness must consider the Opportunities must be maximized while risks must
be minimized. An opportunity for one group may be a threat for another.
It is an important part of the worldwide environmental analysis. The world-
wide environmental analysis is completed by environmental monitoring,
environmental forecasting and environmental assessment. The term “global
environment” refers to the macro-environment, which includes industries,
marketplaces, businesses, customers and competitors. As a result, there are
equivalent micro-level analyses. Within the industry analysis, suppliers,
consumers, and rivals comprise a company’s micro-environment.
Environmental scanning is defined as “the study and interpretation of
political, economic, social, and technological events and trends that affect
a business, an industry, or even the entire market.” Events, trends, chal-
lenges, and expectations of various interest groups must all be considered
when conducting environmental scanning. Trend breaks are frequently
preceded by issues. A trend break could be a societal value shift, a long-
term technology advance, or a paradigm shift. Issues are less rooted and
can be described as a “temporary, short-lived reaction to a social phe-
50 PAGE
nomenon.” A trend is described as a “environmental phenomenon with Notes

a structural character.”
Thus, environmental scanning is the practice of collecting information
on numerous aspects of the marketing environment. Scanning relies on a
variety of data sources, both secondary (trade, corporate and government
publications) and primary (personal observation). Marketing research can
be useful in acquiring such information from many sources.
Environmental analysis is defined as “the process of assessing and inter-
preting (the data) gathered through environmental scanning.” The mar-
keting manager must evaluate the collected data based on factors such
as correctness, source credibility, relevancy and comprehensiveness. It is
just as crucial to interpret such data as it is to analyse it, because it helps
marketing managers understand and comprehend the current situation as
well as the predicted changes in the environment. It aids in identifying
existing or anticipated possibilities and risks in such a setting.
Environmental analysis will assist the firm in understanding what is
happening both inside and outside the organization and will increase the
likelihood that the organizational strategies developed will appropriately
reflect the organizational environment, whereas environmental scanning
is required because there are rapid changes occurring in the environment
that have a significant impact on the business firm’s operations.
Need for environment Scanning
Analysis of the corporate environment aids in the identification of strengths,
weaknesses, opportunities and threats. SWOT analysis is essential for
the survival and success of any firm. As a result, understanding the
environment is critical before developing a marketing strategy.
The following are the reasons for and the significance of environmental
scanning:
1. Identifying Strength: A business firm’s strength is its ability to acquire
an advantage over its competitors. Internal business environment
analysis aids in determining the firm’s strengths. Following the
identification of the strength, the firm must attempt to consolidate
or maximize its strength by improving its existing plans, policies
and resources.
PAGE 51
Notes 2. Identifying Weaknesses: A firm’s weaknesses are its limitations.

Monitoring the internal environment aids in identifying the firm’s
strengths as well as weaknesses. A company may be strong in some
areas while lacking in others. The weaknesses should be detected
as soon as feasible in order to address them for ongoing growth
and progress.
3. Opportunity Identification: Environmental analysis aids in the
identification of market prospects. The company should make every
attempt to seize possibilities when they arise.
4. Threat Identification: Businesses face threats from competition and
other sources. Environmental evaluations assist them in identifying
external threats. Early danger detection is usually advantageous
because it aids in the mitigation of some threats.
5. Optimal resource use: Proper environmental assessment aids in the
optimum utilization of scarce human, natural and capital resources.
Systematic studies of the business environment assist the firm in
reducing waste and making the best use of available resources;
resources cannot be used effectively unless the internal and external
environments are understood.
6. Survival and Growth: Systematic evaluations of the business
environment assist the firm in maximizing its strengths, minimizing
its weaknesses, seizing opportunities and diffusing dangers. This
allows the company to survive and grow in a competitive business
environment.
7. Long-term company Strategy Planning: A company organization
has both short-term and long-term goals. Proper evaluations of
environmental elements assist the business firm in developing
plans and policies that will aid in the easy achievement of those
organizational objectives. The firm cannot build a successful business
plan unless it does environmental scanning.
Aids for Environmental Scanning Decision-making: The process of
selecting the best alternative from among several accessible alternatives
is known as decision-making. An environmental analysis is a critical
tool for understanding and making decisions in any business setting. The
firm’s success is dependent on its capacity to make precise decisions.
52 PAGE
The study of environmental evaluations enables the firm to select the Notes
optimum alternative for the firm’s performance and growth.
3.3.4 SWOT Analysis for Smart Marketing

A SWOT analysis is a crucial part of marketing and strategic planning.
SWOT analysis, which stands for Strengths, Weaknesses, Opportunities
and Threats, is a useful tool for creating a broad marketing strategy or
organising specific campaigns and even analysing market environment
Creating a marketing campaign might occasionally feel like taking a
chance. Alternatively, we design advertisements based on what is popular
or the latest trend. Making informed decisions based on various elements,
such as impending difficulties and pertinent internal and external issues,
and then building more targeted campaigns is made easier when using a
SWOT analysis to develop a marketing strategy.
SWOT
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
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?
Figure 3.1: SWOT Analysis Matrix

(Source: https://www.mindtools.com/pages/article/newTMC_05.htm)
No matter how long you’ve been in business or how well you understand
your market, neither factor matters. To make business judgments, you
need facts. Every aspect of the corporate world today is evolving more
quickly than ever. You don’t just conduct a SWOT analysis once. Every
time you have to make choices about your marketing strategy, workforce,
product line, or any other aspect of your company, you should conduct a
PAGE 53
Notes SWOT analysis. That is why it is considered as a crucial and important

concept of marketing environment. Every opportunity and threat coming
your way, needs a SWOT analysis.
Importance of conducting a SWOT analysis
(a) SWOT analysis leads to a competitive advantage.
(b) Conduct a SWOT analysis to uncover your weaknesses so you can
address them even before they become a problem in order for better
functioning of your organisation.
(c) The actions taken by your competitors could likewise pose a threat
to your company. Make sure to prepare for them and proactively
obstruct their marketing initiatives.
3.3.5 Types of Marketing Environments

Environmental factors can be divided into two categories: Macro and
micro environments. These elements can also be divided into internal and
external environmental elements.
Micro Environment: The term “micro environment” describes the im-
mediate surroundings of a business, or the environmental elements that
are nearby. They consist of the company’s own capacity to create and
cater to consumer needs, dealers and distributors, rival businesses and
customers. Additionally, these are the groups directly influencing the
performance of the company. The micro environment factors include
customers, employees, suppliers, retailers & distributors, shareholders,
Competitors, Government and General Public. These factors are control-
lable to some extent.
Macro Environment: A group of environmental variables known as the
macro environment are out of an organization’s control. These elements
have a considerable impact on the organisational actions. The macro
environment is constantly changing. Opportunities and risks are brought
into an organisation by changes in the macro environment.
E.g.: A sudden environmental change, such as the COVID-19 pandemic
that came in 2020, brought a huge impact on how we operate, market
and conduct business globally.
One may consider the forces in the outer circle to be the macro environment
of a business, and those in the inner circle to be the micro environment.
54 PAGE
Macro Environmen
E nt: A group of environm mental variabbles known aas the macroo environmennt
are out of an organnization's coontrol. Thesse elements have a connsiderable im mpact on thhe
organisattional actionns. The maccro environm ment is connstantly channging. Oppoortunities annd
risks are brought intoo an organisation by chaanges in the macro
m enviroonment.
E.g.: A sudden
s envirronmental change,
c suchh as the COVVID-19 panddemic that came
c in 2020,
brought a huge impaact on how we w operate, m market, and conduct
c busiiness globallly.
One mayy consider th he forces in the outer ciircle to be thhe macro ennvironment of o a businesss,
and thosee in the inneer circle to bee the micro eenvironmentt.
Notes
Fig 3.2: Ma FigureEn

arketing 3.2: Marketing
nvironment Environment
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(Source: https://openbooks.uct.ac.za/)
3.4 Micro Environment

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environment. Environments on the supply and demand sides can be dis-i
tinguished. The suppliers, marketing middlemen, and rivals who provide
raw materials or supply products are considered to be part of the supply
side environment. Customers who buy things are included in the demand
side environment, on the other hand.
Let’s talk about the following aspects of the micro environment forces:
1. Suppliers: You need a range of inputs to produce commodities or
services. The success of the marketing organisation depends on the
smooth and constant delivery of inputs in the needed quantities on
acceptable terms. These persons or businesses are referred to as
suppliers. Suppliers thus are a very significant part of a business.
The producer is forced to maintain the delivery schedule and the
quality of the finished product by receiving timely supply of the
required quality and quantity. When there are more suppliers, there is
PAGE 55
Notes a natural increase in supplier dependence. In times of shortages, some

suppliers might not provide materials under favourable conditions
which may create a hindrance in business activities. Some suppliers,
for instance, require payment in advance and offer items based on
a waiting list, while others might be prepared to do so on a credit
basis. So we can see how suppliers are a crucial part in smooth
functioning of our businesses.
2. Intermediaries: Normally, not all manufacturers are able to sell
their products or services to customers directly. To get their goods
to customers, producers employ a variety of intermediaries. The
marketing intermediates, or dealers and distributors, may or may not
be eager to extend their co-operation. These people typically favour
trusted brands. It could be very challenging for newcomers to locate
a dealer who will stock their goods. They might demand favourable
terms from newcomers in the form of a discount, credit, etc., and
the producer might find it challenging to meet their demands. Other
middlemen that help with physical distribution include transport
companies, warehousing firms, etc.
3. Competitors: Competitors present a challenge to a business. Marketing
choices are also influenced by competitors’ strategies. Other types
of rivalry, such as product differentiation, exist in addition to
competition on the basis of price. Competitors may also highlight
their brand identity, dealer network, or closely related products.
Competition is a scenario in which numerous businesses provide
comparable goods and compete for market share using various
marketing tactics. A corporation can create its marketing strategy
in accordance with the trend currently dominating the market by
closely monitoring its competitors.
4. Customers: Numerous different types of customers exist in the market.
A business might offer products or services directly to consumers,
resellers, businesses, the government or foreign consumers. Any
or all of these individuals could be the target market for a seller.
The art of persuading and selling to each sort of consumer has its
own specific qualities, therefore marketers need to be well-versed
in them. The audience includes people who might become the
company’s potential buyers. Finding the people who are most likely
56 PAGE
to become a company’s customer may not be simpler. The reputation Notes

a business has established can sometimes persuade consumers to
become its client or customer. Companies typically work to improve
their reputations with the public and foster a positive outlook
among individuals or groups of individuals. Government agencies
and consumer advocacy organisations are two groups that should
be treated with respect and their guidelines and rules should be
followed. Therefore, the general public also contributes significantly
to the market environment.
5. Company’s Internal Environment: Marketing choices made by an
organisation are heavily influenced by its financial, production and
human resource abilities. For instance, it is important to consider
the firm’s financial capacities while deciding on increasing the sales
and production of a particular product, especially if the existing
facilities are insufficient and an extension of the plant and machinery
is required. To create a new product, you might have a responsive
research and development team. To produce the new product, the
production department may also have access to its own facilities
(equipment’s, raw material, labour, etc.). It’s also important to think
about how the organization’s non-marketing departments work with
the marketing department. The senior management might disagree
with the marketing department’s assessment of the marketing
plans or how they should be put into effect, marketing department
should find ways to overcome this situation and satisfy the top
management. Additionally, the marketing division must collaborate
closely with all other divisions, particularly the production and
quality control divisions. All the departments should work closely
for the success of a product or service.
IN-TEXT QUESTIONS
1. Mr. Rajan is supplier to ABC company, will he be considered
as a part of Micro environment? (Yes/No)
2. In SWOT analysis ‘S’ stands for ‘Summary”. (True/False)
3. Micro environment includes:
(a) Shareholders
(b) Consumers
PAGE 57
Notes (c) Public

4. “The components that impact marketing environment are changing
constantly.” Which feature of marketing environment is being
referred here?
5. Intermediaries refer to marketing intermediaries which cover
agents, merchants, distributors, dealers, wholesalers, resellers,
etc.(True/False)
3.5 Macro Environment

A group of environmental variables known as the macro environment are
out of an organization’s control. These elements have a considerable impact
on the organisational operations. The macro environment is constantly
changing. Opportunities and risks are brought into an organisation by
changes in the macro environment. Political changes, for example, might
have a significant impact on how you can advertise and run your business
in a particular country or region. The macro marketing environment is
made up of all the components outside company’s control. Making use
of the acronym ‘PESTLE’ makes it simple to remember these elements.
P : Political factors
E : Economic factors
S : Social and demographic factors
T : Technological advancement factors
L : Legal and regulatory factors
E : Environmental factors
Let’s talk about the following aspects of the macro environment forces:
3.5.1 Political Environment

Political changes result in new laws and policies that affect business.
Government regulations continues in various ways, and the laws and
regulations formed under them grow more complex. Numerous commer-
cial sectors governed by one type of law or another, and the market is
unable to resist their effect.
58 PAGE
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.
3.5.2 Economic Environment

The economic environment is determined by the state of the economy as
measured by the Gross National Product (GNP), per capita income, and
the favourable or unfavourable position of the trade balance. For instance,
if the monsoon is good, there will be a greater output of agricultural
products, increasing the income of those who depend on agriculture. As
a result, people can purchase more consumer products or equipment’s for
their fields. As a result, there is a rise in consumer demand. A poor mon-
soon will similarly have a negative impact on the demand for fertilizers
and farm equipment’s. The cost of living, minimum wage, working hours,
local and national unemployment, interest rates, currency rates, inflation,
PAGE 59
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.
3.5.3 Socio-Cultural Environment

The socio-cultural environment is influenced by factors like societal
norms, attitudes, perceptions and actions. These factors assist in under-
standing the types of things that customers prefer, what influences their
attitude toward or choice of purchases, which brand they favour, and
when they acquire products. The characteristics of the society in which
the organisation exists are explained by the socio-cultural environment.
An organisation can better recognise its challenges and possibilities by
60 PAGE
analysing its sociocultural environment. Religion is a significant part of Notes

culture as well, and this has implications for marketers and the products
they are offering.
For instance, people’s lifestyles are evolving daily. The ladies are now
seen as a contributing member of the family who works actively. If
every member of the family works, the family will have less free time
for shopping. Due to this, shopping centres and super markets have
emerged, allowing people to save time by getting everything they need
under one roof.
Hence, the society’s culture has a good amount of influence on how
people’s consumption and buying patterns.
3.5.4 Demographic Environment

Age, race, wealth, and other variables are only a few examples of the
many characteristics of the people in a certain area that are covered by
demographics. Additionally, these characteristics might have an impact
on a business’s ability to expand and succeed, most firms find the infor-
mation about them through survey of the population. For instance, India,
which is second to China in terms of population, makes up about 16%
of the global population. India’s population is also considerably younger
than China’s. As a result, India is being targeted by numerous global
businesses as a prospective market for a range of goods and services.
Four major characteristics of the demographic environment:
(a) Population Size: For the business model to make sense, certain
companies need a certain number of potential consumer base. As a
result, any changes in the population could have a serious effect on
the company. Some such changes in the population size are increase/
decrease in the population’s birth rate, changes in the average family
size, an overall increase/decrease in the population size, migration
of people to other countries, etc.
(b) Geographical Distribution: The target market of an organisation
may, over time, move from one area of a country to another for a
variety of reasons. Therefore, it is important to consider issues like
company’s location remains attractive to the population, or the firm
must consider relocation and adapt well to the geographical shifts
of the people.
PAGE 61
Notes (c) Income Distribution: Understanding the purchasing power of a target

market is crucial for every organisation when producing products
or services. Any changes in the population’s income distribution
typically result in adjustments to saving and spending habits. In
order to spot possibilities and take advantage of them, firms must
monitor these changes in the population.
3.5.5 Technological Environment

Technology has advanced significantly over the past few decades, changing
everything from the way we interact to the way we purchase and trav-
el. Additionally, technology has had a significant impact on businesses
globally. The term “technological environment” refers to the country’s
current status of science and technology as well as related elements like
the speed of technological development, institutional setups for the cre-
ation and use of new technology, etc. The use of technology in marketing
and advertising has greatly changed. Advertising was primarily limited
to newspapers and billboards a century ago. The human environment is
dominated by marketing and advertising today. Commercial communi-
cations are now present on the Internet, cell phones, buses, and even in
the sky in addition to radio, television and print media.
Factors under technological environment:
(a) Research and development: It aids in expanding an organization’s
opportunities for growth. Many businesses have created a distinct
R&D team to bring innovation to their products. Pharmaceutical
companies like Ranbaxy and Cipla have started to invest more
heavily in R&D, and their efforts have created fantastic potential
in international markets.
(b) Speed of Technological Change: It quickly causes products to
become obsolete. If technology innovation is occurring at a quick
speed, businesses must adjust their products as needed.
(c) Risk of technological environment: Opportunities bring threats with
them. The company runs the risk of becoming outdated if it does
not keep up with the latest developments and ideas in the market.
A company may be forced out of the competition if it cannot accept
new technology.
62 PAGE
3.5.6 Environmental Factors Notes
In the last fifteen years or so, environmental elements and issues

have gained attention. They have received attention as a result of the
rising cost of raw materials, government-set pollution targets, the need
for businesses to operate ethically and sustainably, and government-set
carbon footprint targets. Consumers are becoming more and more deter-
mined that the goods they purchase come from suppliers who are both
ethical and sustainable.
Natural resources are found in the environment and are used by the
company as raw materials to produce products. These natural resources
are harmed by marketing efforts, such as the ozone layer being destroyed
due to use of certain chemicals in the products. The deterioration of the
natural environment is getting worse every day and has started affect-
ing the entire world.
It should be the duty of the manufacturer and marketer to opt for eco
friendly processes to manufacture or promote a product and make sure that
the harm on environment can be minimized. Such environment conscious
businesses are the new popular businesses among today’s generation.
Following natural factors that affect the marketing activities of an orga-
nization:
(a) Natural resources: It is used as a raw material to make a variety
of goods. Natural resources are used by every business to produce
its goods. Organizations are becoming more aware of the issue of
resource depletion and making every effort to use their resources
wisely. As a result, several businesses have started de-marketing
their goods. For instance, Indian Oil Corporation (IOC) promotes
advertising like “Save Oil, Save India” in an effort to lower the
demand for its products.
(b) Weather and Climate: It creates chances or threats for the
organisations. For instance, demand for things like water coolers, air
conditioners, cotton clothing, and water grows during the summer,
whereas demand for things like wool clothing and heaters rises
during the winter. The climate of a nation has a big impact on its
marketing environment.
PAGE 63
Notes (c) Pollution: Environmental deterioration is brought on by contamination

of the air, water, and noise. Organizations today frequently use their
marketing efforts to promote environmentally friendly products. The
organisations, for instance, encourage the use of paper and jute bags
rather than plastic ones.
3.5.7 Ethical Factors

The extra E has recently been added to PESTEL, making it PESTELE
or STEEPLE. The term “ethical” refers to both moral or ethical issues
that could develop in a business as well as ethical standards. It takes
into account issues like fair trade, acts of slavery, and child labour, as
well as Corporate Social Responsibility (CSR), in which a firm supports
regional or societal objectives by participating in volunteer work or other
philanthropic, activist or charity endeavours.
Ethical factors include the following acts:
(a) Removing hazardous elements from workplace and providing workers
safe working conditions.
(b) Using ethical marketing practises and being honest about items and
services being offered by the firm.
(c) Respecting the morals and values of co-workers, customers and
partners.
(d) Insider trading, failing to disclose information about mergers,
acquisitions, investments, and other corporate events should all be
avoided.
(e) Firms should use environment friendly products and processes to
manufacture a product. They should also promote 3 R Mantra i.e.,
Reduce, Reuse and Recycle.
3.6 Importance of Marketing Environment

We have learned that a company’s marketing environment is made up
of a number of forces. The majority of these forces are external to the
business and might not be under the marketing executives’ control.
Therefore, the company’s marketing system must function within the
constraints of these dynamic environmental influences. This ambiguous
64 PAGE
marketing landscape presents opportunities as well as surprises and Notes

risks. As a result, it is essential for businesses to regularly monitor their
environment as it changes and adjust their marketing mix plans to reflect
new trends and advances.
CASE STUDY
Importance of Marketing Environment: A case of NOKIA
Nokia, a well-known name in mobile technology, enjoyed a solid
position in the market while the company’s management gave the
importance of the marketing environment the attention it deserved.
The company, however, was unable to keep up with the evolving
preferences of its customers and technological advancements as a
result of the shifting business dynamics and the general marketing
environment. Slowly but surely, the brand began to lose its dominant
share of the market to new and technologically advanced mobile brands
like Apple, Blackberry, and Samsung that embraced the smartphone
revolution. Nokia eventually lost the war and disappeared from the
market. Nokia was not able to identify what customers were about
to prefer, instead of shifting towards android software it went for
windows system which eventually didn’t get much preference and
demand in the existing market.
Questions
1. What were the mistakes, a well-known company like Nokia
made? Can those be ratified?
2. Do you think analysing and understanding business environment
is equally important in case of services also?
(Refer: https://pestleanalysis.com/pestle-analysis-of-nokia/)
Importance of studying marketing environment:
(a) Identification of Opportunities: It assists a company in taking
advantage of opportunities or possibilities for profit. For instance,
if a company learns that customers prefer its products to those of
its rivals, it may take advantage of this by offering discounts on
those products to increase sales.
(b) Identification of Threats: Organizations are given warnings to take
the necessary action before it’s too late by identifying threats in
the environment. For instance, if a company learns that a foreign
PAGE 65
Notes multinational is entering the market, it might counter this danger

by adopting measures like lowering the price of the product or
implementing aggressive marketing tactics.
(c) Managing Changes occurring in the market: It facilitates navigating
the unpredictable marketing environment. An organisation must adjust
to the changes taking place in the marketing environment if it hopes
to endure over the long term. With the use of new technologies
processes can be managed easily.
(d) Understanding the Competitors: Different competitors are competing
for the same slot in every niche. The marketer can learn more
about the competition and the advantages that they have over
their business and vice versa by having a deeper awareness of the
marketing environment.
(e) Understanding Customers: Understanding the marketing environment
in depth enables marketers to identify and anticipate what the
customer genuinely wants. A thorough examination of the marketing
environment helps the marketer better comprehend consumer behaviour
by lowering (or even eliminating) the interference between them.
(f) Helps in Tapping Trends: It takes a great deal of understanding of
the marketing environment to break into new areas and capitalise
on emerging trends. To develop a flawless strategy, the marketer
must conduct exhaustive study into every area of the environment.
Marketer has to keep an eye on all the new technologies emerging
in the market and the age group who is thought to be deceived by
this new introduction. Keeping an eye on the competitor is also
equally important.
3.7 Indian Market and its Environment

Analysing the environmental elements affecting the Indian market is
complex. It is a large country with many religions, castes, sub-castes,
dialects, cultures and so on. Each of these elements functions at various
levels and in various locations:
1. Large Market: In terms of population, the Indian market is the
world’s second largest. When it comes to consumption, it has one of
the lowest levels. As a result, the majority of the market for diverse
66 PAGE
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.
PAGE 67
Notes 8. Technology: The majority of our country’s industries import

technology from foreign countries. Research funding is among the
lowest in the world.
Strategies to Deal with Marketing Environment
Organizations might take a reactive or proactive approach to dealing with
environmental changes. Marketing professionals claim that marketing
environmental pressures can be controlled to some extent and that mar-
keting itself is an important force that can be used to drive change and
expand its environmental influence. To deal with the uncertainties in the
environment, a marketer can employ the following strategies:
1. Anticipating and Adapting: The marketer must anticipate and adjust
to environmental changes. It can assist the company in dealing
with external changes and anticipating environmental demands.
Restaurants and food outlets, for example, can provide food and
services on weekends.
2. Buffering and Smoothing: This entails generating enough inputs and
outputs to meet erratic demands. Organizations frequently employ
smoothing in addition to buffering to decrease or level normal
swings. Sweets shops, for example, usually offer discounts after
10 p.m. to clear out stock that cannot be sold the next day.
3. Competitive Advertising: In order to compete, businesses may use
competitive advertising. PepsiCo and Coca-Cola, for example, have
frequently used this method to grow or maintain their market share.
4. Domain Shift: In this strategy, the firm uses its existing knowledge
to join a new market or industry. This could include adjustments
to the organization’s current product and service mix. Reliance,
for example, has expanded into textiles, finance, petrochemicals,
information technology and other industries.
5. Technological Upgradation: In order to compete with the fierce
competition, a business must constantly adopt innovations and
technology in order to gain an advantage over other firms in the
industry.
6. Mergers and acquisitions: Two or more competing enterprises may
join forces to gain a monopoly and strengthen their competitive
68 PAGE
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
PAGE 69
Notes ever-changing environment and create marketing mix tactics that reflect
the latest advances and trends in the industry.
1. Yes
2. False
4. Dynamic
5. True
6. True
7. Demographic
8. (a) Suppliers
9. Economic environment
10. Ethical Factors

1. What is marketing environment? Describe the macro environment
and micro environment of marketing.
2. Compare and contrast a Company’s micro and macro environments.
Also explain Economic and Political environment in detail.
3. You are a manufacturer of Mobile phones and TVs. What will be
the effect if Government abolishes import duty on these products.
4. What will be the impact on automobile industry if a new cheaper
source of energy is invented? Will it be an opportunity or threat
to a existing business?
5. If the winter season is severe, which industries lose and which gain?
Which macro environment factor is responsible for weather change,
explain it.
6. List all the factors of micro environment and explain with illustrations.
7. What is Environmental Scanning? Discuss the various strategies that
will help a firm deal with the changing marketing environment?
70 PAGE
8. Write short notes on the following and give examples: Notes

(a) Importance of analysing marketing environment
(b) Demographic environment
(c) Economic Environment
(d) Political Environment

u Baines et al. (2021), Fundamentals of Marketing, Oxford University
Press.
u Jain, P & Singhal, N. (2021), Principles of Marketing, Delhi: Scholar
Tech Press.
Marketing (17th Edition), Pearson Education, Indian Edition.

u Grewal, D. & Levy, M. (2017), Marketing (5th ed.), McGraw Hill
Education.
u Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2013), Principles of
Marketing: A South Asian Perspective (13th ed.), Pearson Education.
u Sharma, K. & Aggarwal S. (2021), Principles of Marketing, Delhi:
u Mamoria C.B. & Bhattacharya, A. (2022), Marketing Management.
Delhi: Kitab Mahal.
PAGE 71
UNIT - II
PAGE 73
L E S S O N
1
Consumer Behaviour
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
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
1.11 References

After reading this chapter you should be able to:
u Comprehend the concept of consumer behaviour and need for studying consumer
behaviour
u Learn how a customer is different from a consumer
u Identify all types of consumer behaviours and factors influencing consumer buying
decisions
PAGE 75
Notes 1.2 Introduction

Consumer behaviour is the study of how different consumers, groups, or
organisations choose, purchase, utilise, and dispose of concepts, products, and
services to meet their needs and desires. It relates to consumer behaviour in
the marketplace and the underlying causes of that behaviour. All marketing
decisions are founded on presumptions about customer behaviour, which
includes communicating, purchasing, and consuming. Consumer behaviour
is a complicated, dynamic, multidimensional process. Consumer behaviour
changes in every stage of life and varies from person to person, region
to region, one age group to another, etc. Studying consumer behaviour
has become a crucial part of marketers schedule. Taking an opinion of
consumers in advance helps in designing products accordingly, helps in
consumer differentiation, retaining of customers, creating a best suited
products for a niche and helps in understanding consumer psychology.
In this lesson we will discuss various how a consumer is different from
a customer, types of consumer behaviours and various factors affecting
consumer behaviour.
1.3 Introduction to Consumer Behaviour

The study of consumer behaviour focuses on how individuals, communities,
and organisations choose, acquire, utilise, and dispose of ideas, products,
and services to fulfil their needs and desires. It relates to consumer
behaviour in the marketplace and the underline causes of that behaviour.
Marketers anticipate being able to identify which products are needed in
the marketplace, which are outdated, and how best to offer the commodities
to consumers by understanding what drives people to purchase specific
goods and services.
The assumption made in the study of consumer behaviour is that
customers are participants in the marketplace. Role theory holds the
view that customers participate in a variety of roles in the marketplace.
Consumers perform these roles in the decision-making process, starting
from the information provider, moving from the user to the payer, and
finally to the disposer.
The roles also change depending on the context of consumption; for
instance, a mother may influence a child’s decision to buy something.
76 PAGE
According to Engel, Blackwell, and Mansard, “consumer behaviour is Notes

the actions and decision processes of people who purchase goods and
services for personal consumption.”
“Consumer behaviour is the process whereby individuals decide what,
when, where, how and from whom to purchase goods and services.” –
Walter and Paul
“Consumer behaviour refers to the actions and decision processes of people
who purchase goods and services for personal consumption.”- Peter D.
Bennett, ed. Dictionary of Marketing Terms, 2nd ed. 1995
According to Schiffman and Kanuk1, “Consumer behaviour is the study
of how individuals make decisions to spend their available resources
(time, money and effort) on consumption related items.”
According to Kotler and Keller (2011) state that “consumer buying
behaviour is the study of the ways of buying and disposing of goods,
services, ideas or experiences by the individuals, groups and organizations
in order to satisfy their needs and wants.”
Individual differences make studying consumer behaviour challenging.
Behaviour is a difficult assignment for marketers. Therefore, marketers
saw a need to learn in-depth about how people behave while they shop.
Finally this information was a crucial tool in the hands of marketers,
enabling them to forecast consumer purchasing trends and develop
marketing tactics for building long-term relationships with customers.
1.3.1 Customer and Consumer

A customer is someone who consistently purchases goods and services
from a supplier and pays for it to meet their requirements. The buyer
of a thing is frequently also the user, but this isn’t always the case. The
parent is considered as customer and the child is the consumer when
parents buy something for their kids. They may also be referred to as
customers or buyers.
Consumers are those who buy products for their own needs and use them.
Although a consumer cannot resell the commodity or service, but can
consume it. Consumers are anyone other than the buyer who purchases
the good or services and uses them with that person’s consent. The final
user of the products or services is referred to as a consumer.
PAGE 77
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.
1.3.2 Nature of Consumer behaviour

The sphere of consumer behaviour includes the activities of both final
and intermediate users. The former is called as end or ultimate users
while the intermediate users are the industrial users who do not consume
the goods and services but add further value before they are consumed
by the final users.
When one formulate a business and marketing plan, s/he must take the
time to identify their ideal target market. The target market is the group
of people most likely to patronize the business. As a business owner or
operator, one should understand the difference between a buyer and a
consumer so as to properly market your products and services to the public.
78 PAGE
1. Dynamic in nature: Consumer behaviour changes throughout life. Notes

Depending on the nature of the products, it changes gradually over
time. For instance, young people enjoy trendy footwear, whereas
teenagers and young adults prefer colourful and stylish footwear,
and middle-aged and elderly people choose more sober footwear. A
number of other factors, such as an increase in income level, level
of education, and promotions, may also contribute to the shift in
purchasing behaviour.
2. Varies from customer to customer: Not all consumers act in the
same way. Distinct shoppers exhibit different behaviours. Individual
characteristics including consumer nature, lifestyle, and culture are
to blame for the variations in consumer behaviour. Some consumers,
for instance, are tech enthusiasts. They go shopping and overspend
their budget for a newly launched technology.
3. Leads to purchase decision: A choice to buy is influenced by
favourable consumer behaviour. A consumer’s decision to purchase
a product may be influenced by a variety of factors. The decision to
buy results in greater demand, which boosts the marketers’ revenues.
Therefore, in order to boost consumer spending, marketers must
change consumer behaviour towards their product.
4. Varies from product to product: Different products possess different
consumer behaviour. Some customers might purchase larger quantities
of some products while purchasing little to no amounts of others.
Teenagers, for instance, might spend a lot of money on branded
clothing and cell phones whereas a middle-aged individual might
spend less on stationery, but they might put money in policies,
insurance, and other types of investments.
5. Complex in nature: Because everyone has different requirements
and goals, consumer behaviour is complex. Each person behaves
differently in the market since they each have specific wants.
Recognizing each person’s wants and behaviour patterns is a
highly challenging assignment for marketers. Consequently, for the
business, identifying each customer’s behaviour and targeting them
accordingly becomes a challenging task.
6. Systematic Process: Consumer behaviour is a systematic procedure
made up of a number of phases that go into making a consumer’s
PAGE 79
Notes purchase decision. It has to do with how shoppers choose what to

buy. Consumers go through a number of phases before making a
purchase, including determining their need for the product, researching
it, building a list, and weighing various options. Finally, they decide
to buy the goods, and the marketer then conducts a post-purchase
analysis too.
1.4 Need for Studying Consumer Behaviour

In order to forecast consumer behaviour in markets, buyer behaviour
is examined. A company succeeds in the market if it comprehends its
customers. Understanding the customer and offering what they want in
terms of products are key components of every business success.
The customer makes decisions regarding what to buy, when to buy it, and
what not to. A consumer cannot be forced to buy a product. A marketer
sells what consumers are interested in. Therefore, a focus is made on
understanding what consumers desire.
Studying consumer behaviour is important because of the following reasons:
1. To satisfy customer needs: Consumers respond favourably while
examining the products that best suit their demands. A marketer
investigates how consumers spend their available resources on the
consumption of connected things. It involves examining what people
purchase, when they do so, where they do it, and how frequently
they utilise it. Therefore, understanding consumer behaviour will be
crucial to the marketer’s ability to meet customers’ requirements.
Marketer can understand the consumer’s reaction to a firm’s
marketing initiatives. Planning and putting into action marketing
strategy would benefit from it.
2. Helps to understand consumer psychology: Marketing professionals
can better grasp consumer psychology by studying consumer behaviour.
Based on his knowledge, attitude, intention, and motive, consumer
psychology is used. The psychology of consumer evolves on the
basis of knowledge he possesses. Sales marketing plays an important
part to convey the understanding of the goods to consumers. An
attitude is an emotion or state of mind. Behaviour is explained by
attitude. To have an intention is to want to do something. A marketing
80 PAGE
strategy is only created after knowing consumer intentions. The Notes

fundamental state that controls a person’s conduct is their motive.
3. Helps to understand consumer motives: To comprehend a consumer’s
motivations for making purchases, consumer behaviour must be
studied. A motive is an inclination for which someone looks for
fulfilment. A Consumer has several motives, It’s possible that not all
of these reasons/ motives for buying are equally strong. Only a few
strong reasons influence a consumer’s decision to purchase a good
or service. Both motivations for buying and consumer behaviour
are studied.
4. Helps to understand consumer choices and preferences: Understanding
how consumers make decisions is crucial for the marketer. Most of the
time, people are pretty rational. Before making a purchase, individuals
systematically use the information available in the market. A marketer
observes the customer’s behaviour and adjusts his presentation to
appeal to the consumers to purchase the particular product.
5. Consumer Differentiation: There are significant differentiations in
the market. Different products are needed and desired by different
groups. Every niche need its own marketing strategy. Understanding
how consumers differ from one another is essential for matching
marketing offerings to various buyer groups. Information about
customer differentiations is provided via studies of consumer
behaviour.
6. Creation and retention of customers: A ready market is available
for the products of marketers who build their offerings on an
understanding of customer wants. The business finds it simple
to market its goods. Similar to this, the business is able to keep
customers for a considerable amount of time because of the ongoing
research into consumer behaviour and efforts done by the marketer to
fulfil changing customer expectations.
7. Dynamic nature of market: Consumer behaviour highlights the
market’s dynamic nature. Being active, aware, and creative helps the
manager to fulfil customers preferences faster and more effectively
than rivals. Consumer behaviour is essential for observing market
trends and reacting to them in a positive and creative way.
PAGE 81
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
3. Customers are those who buy products for their own needs and
use them. (True/ False)
1.5 Types of Consumer Behaviour

The type of goods that a buyer needs to purchase is the primary factor
influencing consumer purchasing behaviour. As a result, the purchasing
behaviour would vary depending on the product, i.e., the consumer behaviour
when purchasing cheese would differ from the consumer behaviour when
purchasing a computer.
There are four types of consumer buying behaviour:
(a) Complex buying behaviour
(b) Dissonance-reducing buying behaviour
(c) Habitual buying behaviour
(d) Variety seeking behaviour
82 PAGE
Notes
High involvement Low involvement

brand differences
Significant
Complex Variety-seeking
e.g. buying a house e.g. trying a
new restaurant
Habitual
Few brand
differences
Dissonance-reducing e.g. buying the same

e.g. using comparison brands every week at
websites the supermarket
Figure 1.1: Types of Consumer behaviours

(Source: https://www.open.edu/openlearn create/mod/oucontent/view.
php?id=81567&section=2)
(a) Complex Buying Behaviour: Consumers often exhibit complex
purchasing behaviour while purchasing expensive goods. Consumer
involvement in the choice to buy is significant in this infrequent
transaction. Consumers will do extensive research before making an
investment. When purchasing a costly product or a product they are
unfamiliar with, consumers respond quite differently. A consumer
seeks advice from friends, family, and professionals before purchasing
a purchase when the risk is very high.
For example, when a consumer purchases a car for the first time, it
is a significant decision because it carries a high level of financial
risk. A lot of consideration is given to how it seems, how his
friends and family will respond, how his social status would alter
after purchasing the car, and other factors. The customer will go
through a learning process when engaging in complex purchasing
behaviour. Prior to making a thoughtful buying decision, he will
first form beliefs and attitudes related to the product and the brand.
Example: Taking decision to buy a house, bike, etc.
PAGE 83
Notes (b) Dissonance reducing Buying Behaviour: Consumer involvement is

very high in dissonance-reducing purchasing behaviour. This may
be the result of high costs and occasional purchasing. Additionally,
there aren’t many options available, and brand differences aren’t as
noticeable. In this case, a customer purchases a readily accessible
goods. Customers will be compelled to purchase things for which
there are not many options, which will leave them with little
room for choice. Customers purchase specific things without doing
much investigation because of the products that are offered, time
constraints, or financial constraints. Dissonance occurs when a
product is expensive, infrequently purchased, and has high risk.
When a customer is dissatisfied, it may be because they fear they
will regret their choice if they discover that a similar product
supplied by a different brand is higher-quality and more durable.
Although the consumer is very active in the purchase, they struggle
to distinguish between the products supplied by various brands, and
the choice is also limited, which influences their decision-making.
Example of such behaviour are selecting paint colour for your house,
design of tiles for your office, etc.
(c) Habitual buying behaviour: A consumer exhibits habitual buying
behaviour when they play a minor role in making a purchase. The
consumer is only able to distinguish a small number of distinct
variations across brands in this case. Customers do not give much
attention to the things they purchase while they are making daily
purchases. They either purchase their preferred brand, the one they
frequently use, the one that is readily accessible at the store, or the
least expensive option.
For example, when a consumer buys bread and butter, he typically
does it without doing a lot of study or spending a lot of time on it.
Many items fall under this category including salt, sugar, biscuits,
toilet paper, etc.
(d) Variety seeking Behaviour: When a customer switches brands, it’s
usually not because they were unhappy with their prior purchase
but rather because they want variety, they want to try something
new, or they just want to avoid being bored. In this scenario, the
customer has made assumptions about the product, decides to buy
84 PAGE
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.
1.6 Factors Influencing Consumer Buying Decisions

A marketer should try to make continuous efforts to decode and understand
different factors that influence consumer behaviour. Following are the
elements that affect how consumers behave:
Psychological Motivation,
Factors learning, atti-
tude etc.
Social Family and

Factors friends, reference
groups
Factors influencing Cultural Culture and
consumer buying subculture
decisions
Factors
Personal Age, Income

Factors and occupation
Savings, family
Economic
income, credit,
Factors
etc.
Figure 1.2 : Factors influencing consumer buying decisions
PAGE 85
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.
86 PAGE
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.
1.6.3 Cultural Factors

A collection of individuals is connected to a certain community’s beliefs
and ideologies. A person’s behaviour is greatly influenced by the culture
associated with the community from which they originally belong. Some
of the cultural factors are:
(a) Culture: Major beliefs, perceptions, behaviours, traditions, etc. shape
a culture of an individual. Culture is an important constituent in
an purchase decision of an individual. Culture usually comes from
a region, family and relatives.
(b) Sub-Culture: There are numerous sub-cultures within each cultural
group. Sub-culture also includes people from diverse religions, castes,
geographic locations, and nations but in a more concentrated way.
1.6.4 Personal Factors

Consumers’ personal circumstances have an impact on what they buy.
These individual characteristics vary from person to person, resulting
in various views and purchasing patterns. Some examples of personal
factors include:
PAGE 87
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.
1.6.5 Economic factors

The consumer buying habits and decisions mainly depend on the economic
status of a country or a market. When a country is rich, its economy
is powerful, which results in more money available on the market and
better consumer purchasing power. Consumers are more inclined to
spend money on goods when they perceive the economy to be in good
shape. A weak economy, however, reveals a market that is in trouble
as a result of unemployment and declining purchasing power. Purchase
decision of buyers is influenced by many factors, economic factor is
one of these. Economic factors broadly include personal income, family
income, savings, etc.
(a) Personal Income: A person’s purchasing power rises parallel with
their level of disposable income. The money that is left over after
meeting a person’s fundamental necessities is referred to as disposable
income. Increased disposable income results in higher spending on
a variety of goods. But decline in disposable income is a decline
in multi-item spending.
88 PAGE
(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
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)
PAGE 89
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.
90 PAGE
2. Stage of Information Gathering: When a consumer is prompted by Notes

an internal or external stimulus, they begin gathering information
about potential solutions from numerous sources. Consumers may
make purchasing decisions based on previous brand encounters. A
brand must successfully give all of the information that its clients
require. Customers should be able to communicate with a brand, for
example, by leaving reviews and comments for potential customers.
3. Stage of Alternative Evaluation: Customers analyse their options
in this step; different companies offer ways to satisfy their needs.
Marketers must persuade customers that their product is better than
competitors’. Consumers compare available options and select the
best one for their needs. This decision may be influenced by pricing,
additional features, or other aspects of the product or service.
4. Stage of Purchase Decision: Once the customer gets all of the
information, they will choose one of the possibilities. This decision
is influenced by two major components: attitudes and unanticipated
situational factors.
Attitudes refer to how consumers are impacted by the opinions of
other consumers (for example, through word-of-mouth). If someone
whose opinion we esteem speaks in support of a brand, we are more
likely to buy from that brand.
Unexpected situational circumstances are unanticipated changes in
any factor that may influence customers’ purchasing decisions.
These could include an unexpected price increase, improved product
benefits, and so forth.
Marketers should have persuaded clients that their product is the
best on the market at this point.
5. Stage of Post-Purchase Behaviour: It is incorrect to believe that a
marketer’s duty is complete after a customer makes a purchase. It is
also critical to know whether the buyer was satisfied or dissatisfied
with the purchase. If the brand promises more than it can deliver,
the product or service will fall short of the customer’s expectations.
It is critical to ensure that the customer is satisfied with the
performance of the product because this is the key to establishing
trust and a loyal customer base for the brand.
PAGE 91
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.
92 PAGE
Psychological, personal, economic, cultural, and social factors influence Notes

the behaviour of consumers. These are factors are sub-divided further into
age, occupation, attitude, perception, belief, culture, subculture, family
income, savings, etc.
1. Yes
3. False
4. Personal
6. Habitual behaviour
7. True
8. Yes

1. Define the term Consumer behaviour. Why is it important for a
marketer for studying consumer behaviour.
2. What are different types of consumer behaviours? Explain in detail.
3. Explain the term ‘consumer behaviour’? What are the various
psychological and personal factors affecting consumer behaviour?
4. Define various economic factors affecting consumer behaviour?
5. Is a consumer different from customer? What is the need for studying
consumer behaviour?
6. “Consumers hold specific perceptions and ideas, which have an
impact on their purchasing decisions”. Explain the personal factors
affecting consumer behaviour.
7. How is a consumer different from a customer? Define various
consumer behaviours showcased by the buyers.
8. “Consumer behaviour is dynamic and varies from person to person”.
Do you agree with this statement? Support your opinion with
examples.
PAGE 93
Notes 9. Write short notes on the following:

(a) Perception
(b) Reference groups
(c) A Customer
(d) Complex buying behaviour
(e) Economic factors influencing consumer behaviour
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 McCarthy, E. J., Cannon, J. & Perreault, W. (2014), Basic Marketing.
McGraw Hill
u Etzel, M. J., Walker, B. J., Stanton, W. J., & Pandit, A. (2010),
Marketing (14th ed.). McGraw Hill.
94 PAGE
L E S S O N
2
Market Segmentation
Shri Raman Chawla
Shaheed Bhagat Singh Evening College
University of Delhi
STRUCTURE
2.2 Introduction
2.3 Nature and Significance of Market Segmentation
2.4 Bases for Segmenting Markets
2.5 Segmentation Strategy
2.6 Summary

u Understand the concept of market segmentation and its importance for a firm.
u Learn about different bases of segmenting a market.
u Learn and identify different strategies used to segment a market.
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
PAGE 95
Notes demographic, cultural, psychographic, etc. In this lesson we will be

introduced to the idea of market segmentation and why segmenting a
market into different groups is important for a firm.
2.3 Nature and Significance of Market Segmentation

Market segmentation strives for successful attainment of organisational
objectives by identifying and serving groups of people with similar wants.
It is a compromise between the inefficiency of treating all consumers
alike and the inefficiency of treating each one differently. Whenever a
market of product or service consists of two or more buyers the market
is capable of being segmented. Market segmentation is the subdividing
of a market into homogeneous subsects of customers, where any subset
may conceivably be selected as a market target to be reached with a
distinct marketing programme. The power of this concept is that in an
age of intense competition for the mass market, individual sellers may
prosper through creatively serving specific market segments whose needs
are imperfectly satisfied by the mass market offerings.
The concept of market segmentation is based on the fact that markets,
rather than being homogenous, are really heterogeneous. No two buyers
or potential buyers of a product are ever identical in all aspects. However,
large groups of potential buyers share certain characteristics of distinctive
significance to marketing and each group constitutes a market segment.
Existence of a group of individuals with common characteristics, as buyers
then it constitutes a market segment. By grouping such individuals into
market segments, R degree of homogeneity is attained, making it possible
to tailor optimal marketing strategies to each segment.
According to Philip Kotler, “It is the subdividing of market into homogenous
subsets of consumers where any subset may be selected as a market target
to be reached with distinct Marketing Mix”.
According to Stanton, “Market segmentation consists of taking the total
heterogeneous market for a product and dividing it into several sub-
markets or segments, each of which tends to be homogeneous in all
significant aspects.”
96 PAGE
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.
2.3.2 Benefits of Segmentation

1. Facilitates Proper Choice of Target Marketing: Segmentation helps
the marketers to distinguish one customer group from another within
a given market and thereby enables him to decide which segment
should form his target market.
2. Higher Profits: It is often difficult to increase prices for the whole
market. Nevertheless, it is possible to develop premium segments in
which customers accept a higher price level. Such segments could
be distinguished from the mass market by features like additional
PAGE 97
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
98 PAGE
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.
2.3.3 Steps in Segmentation Process

The process of developing discrete segments within a large market in
order to pick the best target market for multiple brands is referred to as
segmentation. Market segmentation assists marketers in developing and
implementing relevant strategies for promoting their items to their target
market.
A market segment is made up of people who have similar choices, interests,
and preferences. They generally think along the same lines and prefer
similar things. Once a firm has determined its target market, it can easily
develop strategies and plans to make its brands popular among consumers.
The following are the steps taken to segment the market:
1. Needs-based Segmentation: Group customers into segments based
on similar needs and benefits sought by customers in solving a
particular consumption problem.
2. Segment Identification: For each needs-based segment, determine
which demographics, lifestyles and usage behaviours make the
segment distinct and identifiable.
3. Segment Attractiveness: Using predetermined segment attractiveness
criteria (such as market growth, competitive intensity, and market
access), determine the overall attractiveness of each segment.
4. Segment Profitability: Determine segment profitability.
5. Segment Positioning: For each segment, create a “value proposition”
and product-price positioning strategy based on that segment’s unique
customer needs and characteristics.
6. Segment “Acid Test” : Create “segment storyboard” to test the
attractiveness of each segment’s positioning strategy.
7. Marketing - Mix Strategy: Expand segment positioning strategy to
include all aspects of the marketing mix: product, price, promotion
and place.
PAGE 99
Notes 2.4 Bases for Segmenting Markets

On the basis of various variables, we can have the following forms of
segmentation:
Geographic Psychographic Volume Product space

segmentation segmentation segmentation segmentation
Demographic Benefit Marketing

segmentation segmentation factor
segmentation
Figure 2.1 : Bases for Segmenting markets

(1) Geographic Segmentation: In this form of segmentation, sellers
distinguish carefully among the regions in which they can operate
and choose those in which they can enjoy a comparative advantage. A
small retailor may distinguish between neighbourhood customers and
more distant customers. A local fertilizer salesman may distinguish
between city customers and rural customers. A national manufacturer
can classify his customers by sales territory and each state like U.P.,
M.P. and H.P. may represent one sales territory.
In all these cases, the geographical units become the basis of
differentiated marketing effort.
(2) Demographic Segmentation: In this form of segmentation, sellers
attempt to distinguish different groups on the basis of demographic
variables such as age, sex, family, size income, occupation, education,
family life cycle, region, nationality, or social class. Demographic
variables have long been the most popular bases for distinguishing
significant groupings in the market. One reason is that these variables
correlate well with the sales of many products; another is that they are
easier to recognize and measure than most other types of variables.
(3) Psychographic Segmentation: In this form of segmentation, the basic
idea is that buyer’s needs may be more differentiated along lifestyle
or personality lines than along straight – forward demographic lines.
100 PAGE
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.
PAGE 101
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
Notes Understanding of psychographics of consumers enables marketers to

better select potential markets and match the product image with the
type of consumer using it.
Rogers classified consumers as follows:
1. Innovators: They are technology enthusiasts; they are 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 and willing to adopt the
product if given personalized solutions and good service support.
3. Early majority: They are deliberate pragmatists who adopt the new
technology when its benefits are proven, and a lot of adoption has
already taken place. They make up the mainstream market.
4. Late majority: They are sceptical conservatives who are risk averse,
technology shy, and price sensitive.
5. Laggards: They are tradition bound and resist the innovation until
the status quo is no longer defensible.
(4) Benefit Segmentation: In this form of segmentation, buyers are sub-
divided in relation the various benefits which they expect from a
particular product. A sample of consumers are interviewed for this
purpose. In the case of toothpaste, for example, there are customers
who seek decay prevention, bright teeth, taste or low price. The
idea behind benefit segmentation is very simple – the company
can choose the benefit it wants to emphasize, create a product that
delivers it, and direct a message to the group seeking that benefit.
For example, in our country, makers of Colgate have repeatedly been
emphasizing that 7 out of 10 users of Colgate benefited (avoided
tooth decay). At the same time, we also find that Colgate makers
have been emphasizing the importance of bright teeth. When they
show an advertisement in film about a young unmarried couple –
before use and after use. So the idea is that by choosing different
benefits which potential buyers of a particular expect from the
product, the company in the ultimate analysis can have a larger
volume of sales.
102 PAGE
(5) Volume Segmentation: In this form of segmentation, seller distinguishes Notes

the heavy, medium, light and non-users of his product. Then he
accepts to determine whether these groups differ in demographic or
psychographic ways. In particular, he is interested in the characteristics
of the heavy-user group. But he should give thought to other volume
groups also, because they may present different opportunities. So the
idea this volume segmentations is quite simple, thought the actual
attempt to identify different volume segmentations is quite simple,
thought the actual attempt to identify different volume groups may
be bit complicated and difficult. This is a general remark and can
practically be taken for almost every form of segmentation.
An important implication of volume segmentation for making
management is that by identifying volume groups, the seller can
approach each volume group with a distinct marketing programme
and thereby increase the total satisfaction provided by his product
to different buyers. Needless to say that it sill result in increased
sales and profits.
(6) Marketing-factor Segmentation: In this form of segmentation, the
seller attempts to subdivide the market into groups responsive to
different marketing factors, such as price and price deals, product
quality, retail advertising, and so on. The idea is that if a manufacturer,
for example, know that one identifiable group of his customers were
more responsive to changes in advertising expenditures that others,
be might find it advantageous the amount of advertising aimed at
them. The same sort of tailoring might also be appropriate if it
was found that customers reacted differently to changes in pricing,
packaging, product quality and like.
(7) Product Space Segmentation: In this form of segmentation, buyers
are asked to compare existing brands according to their perceived
similarity and in relation to their ideal brands. Through non-metric
multidimensional scaling, the analyst infers the latest attributes that
consumers are using to perceive the product class. Next, through
cluster analysis, the respondents are classified into different clusters,
internally homogenous but quite different from cluster to cluster.
Each cluster of respondents perceives the product in a distinct way
or has a distinct ideal brand. Then the analyst sees whether the
PAGE 103
Notes different clusters have distinctive demographic or psychographic

characteristics. If so, he has found ‘natural’ segments based on
different product perceptions or preferences.
The main conclusion from this discussion of market segmentation
is that the seller may proceed to segment his market in many
different ways. His goal is to determine the most decisive mode
of segmentation – that is, the differences among buyers that may
be the most consequential in choosing among them or marketing
to them.
IN-TEXT QUESTIONS
1. In psychographic segmentation, sellers distinguish carefully
among the regions in which they can operate. (True/False)
2. Which of the following are considered as importance of Market
segmentation.
(a) He is in a better position to spot and compare marketing
opportunities
(b) Differences in customers can be identified
(c) Retention of consumers
3. In this form of segmentation, seller distinguishes the heavy,
medium, light and non-users of his product, name this
segmentation_________________.
2.5 Segmentation Strategy

Segmentation strategy begins with the selection of the target market. The
term target market refers to those segments upon which the marketing
effort will be found. This involves matching the characteristics of both
the segment and the marketing organisation. Once the target market is
selected, a marketing programme for teaching this market is formulated in
terms of marketing mix decisions and the integration of these decisions.
Then the programme is implemented in the market place and control
procedures are instigated. The following figure summarise the process
of strategy formulation:
104 PAGE
(A) Segment Delineation Notes

1. Identification of wants and desire
2. Estimates of segment potential
(B) Target market selection (the matching process)

Segment characteristics Organisational situation
1. Wants and desires 1. Objectives
2. Buying power (Target) 2. Constrains
1. Competition (Market) 3. Alternatives
2. Environment
(C) Marketing Programme Formulation

1. Marketing Programme Formulation
Product, price, place and promotion
2. Integration of these decisions
(D) Implementation and control
2.5.1 Alternative Strategies towards Market Segmentation

Every market can be segmented to some extent, since the buyers who
compose it are never all alike. However, a firm may or may not wish to
shape its marketing strategies around these differences.
In fact, three different strategies are available. The firm may put only
one product and try to draw in all buyers with one marketing programme.
This can be called undifferentiated marketing. Or it may design separate
products and/or the marketing programmes for each segment. This can
be called undifferentiated marketing. Finally, it may concentrate all its
effort in one or a few lucrative segments of the market. This can be
called concentrated marketing:
(A) Undifferentiated Marketing: Under this strategy the firm chooses not
to recognize the different demand curves that make up the market.
PAGE 105
Notes Instead, it treats the market as an aggregate, focusing on what is

commonly the needs of people rather than on what is different.
Examples are coca cola and cigarettes.
Under this strategy, the firms tries to design a product and a marketing
programme that appeal to the broadcast number of buyers. It relies
on mass channels, mass advertising media, and universal channels.
Undifferentiated marketing is primarily defended on the grounds
of cost economics. The undifferentiated advertising programme
enables the firm to enjoy media discounts through large usage. The
absence of segmental marketing research and planning lowers the
costs of marketing research and executive overhead. On the whole
undifferentiated marketing results in keeping down several costs of
doing business.
(B) Differentiated Marketing: Under this strategy, a firm decides
to operate in several or all segments of the market but designs
separate product and/or marketing programmes for each. A firm
following this strategy tries to produce a product for every purse,
purpose and personality, for example General Motors in U.S.A. By
offering product and marketing variations, the firm hopes to obtain
higher sales and a deeper position within each market segment. It
hopes that a deep position in several segments will strengthen the
customer’s overall identification of the company with the product
field. Furthermore, it hopes for greater loyalty and repeat purchasing,
because the firm’s offerings have been bent to the customer’s desire
rather than the other way round.
Today cigarettes are manufactured in a variety of lengths and filter
types. The consumer often has the option of buying his favourite
brand filtered or unfiltered, or long or shot. Earlier, when cigarette
manufacturers adopted undifferentiated marketing, the question of
customer’s choice simply not arise. The net effect of differentiated
marketing is to create more total sales than undifferentiated marketing.
But one thing should be kept in mind, that is, differentiated marketing
is likely to produce more company sales but at the price of creating
higher company costs. Therefore, nothing can be said in advance
regarding the relative optimality of this strategy. Yet the literature
is full of implications that differentiated marketing is more nearly
106 PAGE
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.
2.5.2 Selecting a Marketing Strategy

Among other things, the most important characteristics for selecting a
strategy are the following:
(a) Company Resources: If the firm’s resources are too limited to
permit complete coverage of the market, its only realistic choice is
concentrated marketing. But where resources permit, the firm can
have a choice between differentiated and undifferentiated marketing.
(b) Product Homogeneity: Product homogeneity refers to the invariance
of the product’s characteristics. Most consumers do not perceive
differences in such basic commodities as salt, grapefruit or steel. An
undifferentiated marketing strategy for such products is, therefore,
more natural than a differentiated or concentrated marketing strategy.
On the other hand, products that are capable of great variation,
PAGE 107
Notes such as cameras and automobiles, are more naturally suited to

differentiated marketing.
(c) Product Stage in the Life Cycle: This factor makes a difference
especially at the extreme stages of market introduction and market
situation. When a firm introduces a new product into the marketplace
it usually does not find it practical to introduce more than one,
or, at the most, a few product versions. Its interest is to develop
primary demand, and undifferentiated marketing strategy seems the
suitable strategy. The firm may alternatively develop the product for
a particular segment of the market and concentrate its efforts there.
As the product moves through its life cycle towards the saturation
stage, the firm starts to search harder for new and untapped needs
in order maintain or increase sales. Thus in the nature phase of the
product life cycle, firms tend to pursue a strategy of differentiated
marketing.
(d) Market Homogeneity: This refers to the degree to which customers
are alike in their needs, preferences, and characteristics. In such
markets segmentation would be somewhat forced. Thus, the firm could
try to stimulate customer to have more divers preferences, but in
general, homogenous markets are best tapped by an undifferentiated
marketing strategy. Conversely, heterogeneous markets can be tapped
by either differentiated marketing or concentrated marketing.
(e) Competitive Marketing Strategies: This factor refers to what competitors
are doing when competitors are practising active segmentation, it is
hard for a firm to compete through undifferentiated marketing. It
would lost most of the battles. On the other hand, when competitors
are practising undifferentiated marketing, a firm can often gain by
practising active segmentation.
Conclusion: The conclusion of the foregoing discussion is that no
particular strategy is superior to others in all circumstances. There can
be under differentiation, over differentiation, or over concentration.
Much depends on such circumstances as company resources, product
homogeneity, product stage in the life cycle, market homogeneity and
competitive marketing strategic.
108 PAGE
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.
PAGE 109
Notes Undifferentiated, differentiated and concentrated marketing are some of

the strategies towards market segmentation.
1. False
3. Volume Segmentation
4. True
5. Demographic
6. Undifferentiated
7. False

1. What do you mean by market segmentation? What is the difference
between geographic and demographic segmentation?
2. Will the bases of segmenting a market be same for B2B and B2C
businesses. Think and discuss.
3. Define market segmentation. What are the various benefits of effective
market segmentation?
4. List five bases of market segmentation. Which one according to you
is the more popular among all these, give reasons for your answer?
5. Write short notes on the following
(a) Geographic segmentation
(b) Undifferentiated market strategy
(c) Volume segmentation
(d) Nature of market segmentation
(e) Steps in segmentation process
6. What are the most important characteristics for selecting and opting
for a particular market strategy?
110 PAGE
2.9 Suggested Readings Notes

McGraw Hill.
u Sharma, K., & Swati Aggarwal (2018), Principles of Marketing,
u https://incentive-intelligence.typepad.com/incentive_intelligence/2011/06/
where-do-you-fit-on-the-engagement-adoption-curve.html.
PAGE 111
L E S S O N
3
Positioning and Targeting
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
3.2 Introduction
3.3 Targeting
3.4 Positioning
3.5 Product Repositioning
3.6 Product Differentiation
3.7 Summary
3.10 References

u Comprehend the concept of targeting and its various strategies
u Identify meaning, bases, and benefits of product Positioning
u Describe the concept of product differentiation, its types, bases, and advantages.
u Understand the concept product repositioning and reasons for doing it.
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
112 PAGE
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
PAGE 113
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.
STP Marketing Model
S
Segmentation
T
Targeting
P
Positioning
Divide market into Determine how to

Select most attractive
distinct groups position your product
segments to focus
of customers. for each target
your marketing on.
(segments) segment.
Figure 3.1: Segmentation, Targeting and Positioning

(Source: https://expertprogrammanagement.com
/2019/11/stp-marketing-model/)
3.3.1 Factors Considered before Selecting a Target Market

Choosing your most desirable target segment is the first step in targeting.
In essence, you’re attempting to evaluate each segment’s commercial
viability. Following factors are to be considered before selecting a target
market.
1. Size of the market or segment: The market should be large enough
to make sales and earnings from the same. Small segments generally
have less consumers and it is not easy to derive profits from the
same.
2. Accessibility: The segment that is chosen by the marketing department
should be within the reach of the firm and should be easy to
accessible.
3. Growth: The chosen segment should also have growth prospects,
in absence of these opportunities the profit will be limited to a
particular time period.
114 PAGE
4. Measurable: The results of the targeted segment should be measurable Notes

so, analysing results become an easy process.
ACTIVITY
Go to your colony market and find how many atta brands are available?
Which brand is targeting which segment of market and why?
3.3.2 Market Targeting Strategies

In essence, your targeting strategy is assessing the desirability of each
segment before deciding which to enter and how to target it. We’re going
to focus on the 4 main targeting techniques that companies employ:
1. Undifferentiated Marketing: The undifferentiated strategy, also
known as mass marketing, essentially ignores the distinctions
between market groups and considers the entire market as a single
target. There is fundamentally almost no targeting at all. Anyone
can become a customer. Reaching as many people as you can in
the hopes that they would support your brand is the goal of mass
marketing. Cost-effectiveness is one benefit of this strategy. It is
less expensive for firms to make products and create content that
is geared toward, well, everyone.
When a brand offers a product or service with significant market
appeal, mass marketing typically occurs. When it comes to items
that people will always need or want like toothpaste, toilet paper,
milk, furniture, etc.
2. Differentiated Marketing: It is sometimes referred to as “segmented”
marketing and comprises focusing on a few (typically two or more)
major target categories that have the greatest potential for generating
revenue for the business. A brand will then create unique marketing
tactics for each of those select targets after defining them. One
of the most popular methods of market targeting is this one. It
makes sense for brands to choose a variety of market groups and
then develop unique, focused strategies for each. It makes sense
for brands to choose a variety of market groups and then develop
unique, focused strategies for each. By doing this, businesses avoid
just producing identical goods on a continuous basis in the hopes
PAGE 115
Notes that customers will take whatever is on offer. Segmented market

targeting is aware that consumers fall into many categories and that
personalization is necessary and well-received by these groupings.
3. Concentrated Marketing: Concentrated marketing is also known as
‘niche marketing’. In essence, niche marketing focuses exclusively
on one or a small number of extremely niche consumer groups.
Brands concentrate all of their marketing efforts on a narrowly
defined population group with the intention of dominating it over
their rivals. The brand hopes to do this in order to realise its full
development potential, foster strong brand loyalty, and build enduring
connections with its target customer base.
4. Micro Marketing: Compared to concentrated marketing, micromarketing
takes one step beyond. In actuality, a niche market’s micromarketing
focuses on a particular group (microsegments) or individual. All
marketing efforts are concentrated on the distinctive qualities of
these tiny groups or individuals, making this method extremely
targeted. Groupon is a fantastic example of a company that utilises
micromarketing well. Group on is an internet store where customers
can find discounts coupons for, nearly everything from vacations
and consumer goods to sports equipments, etc. Users of Groupon
can access location-based offers from practically any digital device.
Since its 2008 introduction, Groupon has been the most widely used
website in the US for deals and promotions.
3.3.3 Process of Choosing Target Market

Market segmentation is related to, but not synonymous with, selecting
the target market. The means or instrument is segmentation; the goal
is to select the target market. It can also be seen as a prerequisite for
selecting a target market. Choosing a target market usually involves multi-
level segmentation on many basis. In addition to segmentation, it entails
looking at each segment as a distinct marketing opportunity, evaluating the
worth of each segment (sales/profit potential), and determining whether
the segment is distinguishable, measurable, sizable, accessible, profitable,
and compatible with the firm’s resources.
116 PAGE
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
PAGE 117
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
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.
118 PAGE
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.
3.4.1 Benefits of Product Positioning

Market positioning is the capacity to shape consumers’ perceptions of a
brand or product in comparison to rivals. Establishing a brand’s identity
or image with the intention of influencing how consumers view it is the
goal of market positioning. The advantages of improved positioning in
marketing are as follows:
u Creates a particular image of the brand and the company.
u Positively affects how customers view the brand.
u Specifies the demography of the target market.
u Determine where you stand in relation to your competitor.
3.4.2 Bases of Positioning

Research shows that buyers use a relatively small list of factors in
determining the position of a product. These are as follows:
1. Top of the range: This is the product that consumers consider to
be “the best” or “the most expensive” one. It is usually considered
premium when compared to other products available in the market.
PAGE 119
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.
3.4.3 Product Positioning Strategies

1. Quality based product positioning: This is the approach that
Tesla and Apple employ. As the name implies, product positioning
focus on the product’s quality as the main selling element. This tactic
is used frequently since it can be used with any kind of product.
Companies frequently contrast the quality of their products with
that of their rivals.
2. Variety based product positioning: The diversity of products the
brand offers is primarily the focus of this kind of product positioning.
The audience will be aware of their range of choices in this way.
Variety-based product positioning can be utilised for services even
though it is often employed for goods.
The brand may contrast the variety offered by its competitors with
the diversity offered by it to demonstrate that the company offers
a wide variety of products. They can also explain why each of the
features, variations, etc., is special and why they are superior to
everything else.
3. Performance Based product positioning: Product performance and
how well it completes the task are the core topics of performance-
120 PAGE
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.
3.4.4 Product Positioning Process

For businesses, positioning their brands, goods, and services is a never-
ending challenge. It is a constant process so that businesses can build a
favourable brand image in the customer’s mind based on their product
offering. A bold, distinctive, and original positioning statement is the
ultimate goal of a successful positioning strategy. Steps involved in
product positioning process are discussed below:
PAGE 121
Notes Competition Identification
Product Characteristics Identification
Analyzing Customers
Comparative qualitative analysis
Determine Unique Positioning
Execute Marketing Plan
Measure & Evaluate
Figure 3.2 : Process of Product Positioning

1. Competition Identification: Researching the competition and its
products is the first stage in positioning. Every business, brand, item,
or service occupies a certain segment of the market. Understanding
the competition that exists in that specific market is essential
for developing a unique positioning. The competitors frequently
use technique of perceptual mapping or brand mapping to position
its products.
2. Product Characteristics Identification: The assessment of all
qualitative aspects, qualities, and uses of a good or service constitutes
the second step in the positioning process. The numerous qualities
of a product can include its use, durability, benefit, ability to solve
problems, emotional appeal, etc.
3. Analyzing Customers: Understanding the needs, psychology,
personality, etc. of the client is the third step in the positioning
process. A organization cannot develop an effective positioning
statement unless it comprehends its customer. Customer surveys,
feedback forms, and other tools can aid in improving customer
comprehension.
4. Comparative qualitative analysis: Comparing and analysing competition
data, qualitative customer inputs, external influences, etc. is the
122 PAGE
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)
PAGE 123
Notes 3.5 Product Repositioning

Product repositioning refers to shifting a product’s position in the eyes
of its target market. It basically entails upgrading prospects’ perceptions
and comprehension of product features. Product positioning describes how
customers perceive a product and compare it to competitors. Repositioning,
as a result, dramatically transforms the product to make it more suited
and acceptable to the current target market. Product changes are made in
response to changing market demands, allowing them to service customers
more efficiently. Customer wants and demands change throughout time,
which any firm must address in order to survive in the market. This
necessitates product repositioning in order to pique the interest of a broad
number of prospects.
The repositioning strategy first assesses the existing position of a product
or service to determine what changes must be made to improve its
competitiveness. Changes might be made to the real product itself, its
selling price, or, in many cases, the advertising efforts employed by brands
to attain their goals. The repositioning process continuously examines the
product position to determine what is working and what is not working
in order to advise future positioning initiatives.
Product Repositioning Reasons
There are numerous reasons why brands prefer product repositioning.
Some of the most essential causes are as follows:–
1. Declining sales: The most common reason for brand product
repositioning is when sales are declining or they are unable to capture
the attention of their target audience. When sales fall, businesses
must take a step back and figure out what is wrong. To attract the
audience, the brand’s identity may need to be renewed. Marlboro’s
product repositioning in the early 1950s is an excellent example of
repositioning occurring as a result of a reduction in sales.
2. Increased competition: Due to the existence of severe competition,
the brand may frequently lose its competitive advantage over other
market participants. It will result in a lack of apparent differentiation
in people’s thoughts between the brand and its competitors. As
a result, in such cases, a brand must reposition itself in order to
obtain and accentuate its competitive advantages.
124 PAGE
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.
PAGE 125
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.
3.6 Product Differentiation

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. Product differentiation refers to the
addition of distinguishing or distinctive qualities or features to a product
in order to secure the product’s USP (unique selling proposition). A
corporation can get a competitive edge over other businesses that are
providing product alternatives similar to their product through the process
of product differentiation. It is a crucial marketing step that is very
important for an organisation.
3.6.1 Advantages of Product Differentiation

1. Provides economic benefits: A corporation can benefit economically
through the act of product differentiation. It gives buyers a justification
for why sellers product is worthwhile to purchase compared to all
the other alternatives on the market. A company’s revenues are
significantly increased and given a competitive edge by a successful
differentiation strategy.
2. Helps achieve a high price as compared to competitors: Additionally,
because of the additional value or feature added to a product,
product differentiation enables a business to function at a higher
price point. Customers are more likely to think a product is worth
126 PAGE
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.
3.6.2 Bases for Product Differentiation

1. Pricing: The most frequent factor in determining which target market
will be drawn to a brand’s goods is ‘price’. It distinguishes quality
products from budget options. For example, goods from big brands
like Apple, BMW, GUCCI are considered more premium as compared
to small brands.
2. Features: Features that distinguish products in the same price range
include size, form, ingredients, origin, etc. Additionally, they support
the brand’s high pricing decisions.
3. Performance & Quality: A high-quality product is always distinguishable
from those of lower quality. Duracell batteries, for instance, last
ten times longer than regular batteries.
4. Reliability: Some goods are reputed to be more dependable and
reliable than others. In other words, there is a lower chance that
they will malfunction or fail within the allotted time.
5. Texture and Looks: In the case of clothes and other luxury goods,
looks are particularly crucial in differentiating the product.
6. Distribution Channels: A product must stand out from the competitors
through the use of effective distribution channels. For instance,
Amway positions itself as a premium brand by using a limited
distribution strategy.
PAGE 127
Notes 7. After-sale Services: Customers distinguish a brand from others and

have faith in it when they receive good after-sale services and better
customer support. Firms can use this strategy to distinguish their
products from its competitors.
3.6.3 Types of Product Differentiation

Product differentiation can be of the following types:
Horizontal
differentiation
Vertical
differentiation
Mixed
differentiation
Figure 3.3: Types of Product differentiation

1. Horizontal Differentiation: Making variations in the products that
consumers select based more on preference than on quality or
price is known as horizontal differentiation. The basic features
of products with horizontal differentiation are the same, and they
are priced similarly. Packaging, forms, flavours, and colours are
examples of factors that might affect horizontal differentiation.
To emphasise its long-term success in the market and appeal to
customers’ reminiscence, a soft drink business might develop a
horizontal differentiation strategy that entails producing the product
in its original release (traditional) packaging for a short period of
time. In order to attract a younger intended audience, its rival may
take the opposite tactic by presenting modern packaging, vibrant
ads, and fresh flavours. Examples of horizontal differentiation are
mineral water, soft drinks, salt companies, etc.
2. Vertical differentiation: Describes the contrasts clients make between
products based on quantifiable factors like price or quality. Some
128 PAGE
consumers focus their purchasing decisions on how effectively a Notes

brand competes with others since popular brands may be indicative
of higher quality. Other customers may make their decisions on price
and be more likely to choose a product that is more affordable than
alternatives. For a specific type of product in any market, there is
a hierarchy of quality that places products of that sort in ascending
order of quality, from the lowest to the highest. This phenomenon
is kept in mind when firms use vertical differentiation. Examples:
shirts, jackets, rice, cars, etc.
3. Mixed Differentiation: This kind of differentiation combines both
horizontal and vertical differentiation. If a product satisfies certain
tastes, customers may select it based on blended differentiation at
a medium or high price point. When making significant purchases
that people want to use for a long time, consumers frequently take
both price, quality, and characteristics of products into account.
That is why mixed differentiation is referred to as differentiation
depending on a variety of characteristics or features. Example:
When customer goes for purchasing a laptop or speakers they look
for basic work these products can perform with the advancements,
portability and look of them.
3.6.4 Disadvantages of Product Differentiation

1. Increased pressure on the producers: Product differentiation places
a great deal of pressure on the manufacturers to choose the feature
that might end up being the product’s USP.
2. Can result in higher cost and price: Differentiating a product
occasionally increases production and marketing expenses, which
may be passed along to consumers.
3. Product distinction doesn’t guarantee increased sales or money because
a company could also fail to forecast whether the USP would be
valued by the target market or not.
PAGE 129
Notes IN-TEXT QUESTIONS

11. _____________________is a marketing technique used to set
one offering, apart from other competitors.
12. Making variations in the products that consumers select based more
on preference than on quality or price is known as____________.
13. Can products be differentiated on the basis of after sales services.
(Yes/No)
14. Which of the following is not a type of product differentiation:
(a) Vertical
(b) Horizontal
(c) Flat
(d) Mixed
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
130 PAGE
are classified as vertical, horizontal, and mixed. Product differentiation Notes

helps in creating a loyal customer base, more amount of profits and a
goodwill in the market.
1. Concentrated marketing
2. True
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

1. Distinguish between concentrated marketing and differentiated
marketing?
2. What do you mean by product positioning? Enumerate the process
of positioning of a product.
3. Nissan Motors India started a road show in 100 locations over ten
weeks with the goal of reaching one million people as it launches its
Datsun brand to compete with Maruti Suzuki’s Alto and Hyundai’s
Eon. Will you refer to its marketing approach as mass or niche
marketing?
PAGE 131
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 Baines Et. AL. (2021), Fundamentals of Marketing, Oxford University
Press.
132 PAGE
UNIT - III
PAGE 133
L E S S O N
1
Product Decisions
Dr. N Mishra
Motilal Nehru College
University of Delhi
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
1.2 Introduction
1.3 Concept of Product
1.4 Product Mix
1.5 Branding
1.6 Summary
1.9 References

u Comprehend the concept of product and product mix.
u Identify and learn about various levels of product and dimensions of product mix.
u Describe the concept of branding, its types and qualities of a good brand name.
PAGE 135
Notes 1.2 Introduction

The product is the medium through which a firm satisfies consumer
wants. It is the basic tool with which the marketing manager bargains
for revenues. Naturally, therefore, all strategies and tactics in marketing
revolve around the product. In fact, the product is the starting point
for all planning activities in marketing-it is impossible to price, plan
promotions, or choose channels of distribution without the product. It
is, therefore, necessary that proper product policies are established, and
the exact nature of the product determined. Unless this is done, little
else happens in marketing. Product mix involves product line, length,
width, depth, and consistency which shall be discussed below. A product
is known with its brand name therefore it should have certain qualities,
that are also listed below.
1.3 Concept of Product

In its narrow sense, a product is simply a set of tangible, physical and
chemical attributes assembled in an identifiable form. Every product has a
descriptive name as TV, Car, radio, cement, etc. However, this definition
does not say anything about product attributes that motivate consumers to
purchase a given product. A consumer does not buy merely the physical
and chemical attributes of a product; he really buys want-satisfaction.
And a wise firm sells product benefits rather than just the product.
The broad interpretation of product recognizes each brand as a separate
product. Similarly, each change in a physical feature (design, colour, size,
packaging, etc.) of the product is treated to have created a separate product.
Similarly, a slightly improved service, higher satisfaction, changed terms
of sale, etc., also create, in effect, another product. Hence, in a broad
sense, a product “is a combination of tangible and intangible attributes,
including packaging, colour, price, manufacturer’s prestige, retailer’s
prestige and manufacturer’s and retailer’s services, which the buyer may
accept as offering satisfaction of wants of needs”.
Thus, a product is composed of :
(a) Physical and chemical attributes,
(b) Want-satisfying attributes,
136 PAGE
B.Com. (Programme) / B.Com. (Hons.)
Thus, a product is composed

PRINCIPLES of :
OF MARKETING
(a) Physical and chemical attributes,

(b) (c) Brand, package,
Want-satisfying label, etc.,
attributes, Notes
(c) Brand, package,
(d) Colour, label,
size, etc. finish, style, etc.,
shape,
(d) Colour, size, shape, finish, style, etc.,
(e) Price,
(e) Price,
(f) Services, and
(f) Services, and
(g) Reputation of manufacturers and dealers.
(g) Reputation of manufacturers and dealers.
According to Kotler, “A product is anything that can be offered to a
According to Kotler, “A product is anything that can be offered to a market for attention,
market for attention, acquisition or consumption; it includes physical
acquisition, or consumption; it includes physical objects, services, personalities, places,
objects, and
organizations, services,
ideas.” personalities, places, organizations and ideas.”
KotlerKotler
makes amakes a distinction
distinction between
between concept conceptnamely,
of product, of product, namely,
core product, basiccore
product,
product, basic product, expected product, augmented product and potential
expected product, augmented product and potential product. These concepts are described
belowproduct. These
and depicted concepts are described below and depicted in Figure 1.1.
in Fig.1.1.
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
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Continuing Education,the
represents Campus of Open Learning,
fundamental benefit or
value that the customer is seeking when purchasing a product. It
PAGE 137
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
138 PAGE
for improvement and expansion. A loyal customer base can be Notes

created if potential products are introduced on time. In the case of
smartphones and computers new software’s and AI technologies,
holographic displays, and new connectivity options can be regarded
as potential products.
Kotler’s Five Levels of Product framework provides a comprehensive
view of how customers perceive product value and how businesses can
deliver value at different levels. It helps marketers understand customer
expectations, differentiate their offerings, and plan for future improvements.
1.3.2 Classification of Product

Products can be classified into various categories based on different criteria
such as consumer preferences, industry characteristics, marketing strategies,
and usage patterns. Products can be broadly classified as follows:
(1) Consumer Products:
(a) Convenience Products: Everyday items that customers purchase
frequently with minimal effort, such as snacks, toiletries and
soft drinks.
(b) Shopping Products: Products consumers buy less frequently and
often after comparing different options for features, quality,
price, etc., such as electronics, clothing and furniture.
(c) Specialty Products: Unique or highly specific products that
consumers are willing to put effort into finding, like luxury
cars, designer clothing and high-end electronics.
(d) Unsought Products: Products that consumers may not actively
seek out, such as life insurance or burial plots, and require
marketing efforts to generate interest.
(2) Industrial Products:
(a) Materials and Parts: Raw materials or components used in the
production of other goods, like steel, plastic and electronic
chips.
(b) Capital Items: Products that aid in the production or operations
of a business, such as machinery, equipment and vehicles.
PAGE 139
Notes (c) Supplies and Services: Consumable items used in day-to-day

operations, like office supplies, maintenance services and
cleaning products.
(3) Product by Use or Application:
(a) Consumer Durables: Products intended for long-term use by
consumers, like appliances, electronics and furniture.
(b) Consumer Non-Durables: Products meant for immediate
consumption, like food, beverages and toiletries.
(c) Industrial Durables: Products used in the production process,
like machinery and equipment.
(d) Industrial Non-Durables: Consumable items used in production
and operations, like lubricants and chemicals.
(4) Product by Tangibility and Intangibility:
(a) Tangible Products: Physical products that can be touched and
felt, such as cars, clothes and smartphones.
(b) Intangible Products: Services or experiences that lack physical
form, like banking services, education and entertainment.
(5) Product by Durability:
(a) Durable Products: Products that have a longer lifespan and can
be used multiple times, such as appliances and automobiles.
(b) Non-Durable Products: Products that are used up or worn out
quickly, like food and beverages.
(6) Product by Price and Quality:
(a) Premium Products: High-quality products with premium pricing,
often associated with luxury and exclusivity.
(b) Economy Products: Products offered at lower prices, targeting
price-sensitive consumers.
(7) Product by Branding and Differentiation:
(a) Branded Products: Products associated with a specific brand,
carrying the brand’s reputation and identity.
(b) Generic Products: Unbranded or less-known products often
sold at lower prices.
140 PAGE
(8) Product Line and Product Mix: Notes

(a) Product Line: A group of related products offered by a company,
such as a line of smartphones with varying features.
(b) Product Mix: The complete set of products offered by a
company, including all product lines.
These classifications help marketers understand the characteristics and
behaviour of different types of products, enabling them to tailor their
marketing strategies accordingly.
1.3.3 Product Policy

Simply stated, policy is principle of operation adopted by the management
to guide those who carry out action. A policy sets the objectives to be
achieved and also the limits within which the management has to operate.
In the context of a product, policies guide management action with regard
to the development of new product, or for retaining an existing product
in the market.
Elements of Product Policy
While formulating a product policy, the following aspects of the product
are considered:
1. Product Item, Product line and Product Mix : Product policy
decisions are made at three different levels of product aggregation—
product item, product line and product mix. Product item is an
individual product or a specific version of a product that has a
separate designation in the seller’s list. Product line refers to a
group of product that can be classified together for reasons of
similarities with regard to any such criterion as customer needs,
simultaneous rise, customers served, channels of distribution used,
etc. Product mix refers to the composite of all products offered
for sale by a firm. For example, Philips C D System Model FW
790P is a products item; Philips stereos constitute a product line;
and the whole list of products like radios, two-in-ones, televisions,
refrigerators, bulbs, irons, etc., represent its product mix.
PAGE 141
Notes The product mix of a firm is three-dimensional: It has a certain

width, depth and consistency. The width of the product mix refers
to the number of different product lines offered by the company. For
example, Philips produces a variety of products lines like electric
irons, two-in-ones, televisions, bulbs, etc. The depth of the product
mix refers to the average number of product items offered by the
company in each product line. Thus Philips offers more than a dozen
models of two-in-ones, different varieties of bulbs, televisions, etc.
The Consistency of the product mix refers to how closely related
the various product lines are in end use, production requirements,
distribution channels, or in some other way. Thus the product lines
offered by Philips show an overall consistency in that almost all the
products fall under the broad category of electronics and electrical.
2. Product Planning and Development : Product planning comprises
all those activities which enable producers and middlemen to
determine what should constitute a company’s line of products. The
American marketing Association defines product planning as “the act
of making out and supervising the search, screening, development
and commercialization of new products; the modification of existing
lines, and the discontinuance of marginal or unprofitable items.
Simply stated, product planning involves decisions on issues such
as what to manufacture or buy, how to have its packaging, how to
fix its price, and how to sell it?
Product planning thus determines the nature and other related aspects
of the product produced and sold and usually covers the following
functions:
(a) Evaluation of product idea, market and product.
(b) Evaluation of company resources.
(c) Finding out customer specifications.
(d) Improving the existing product and weeding out the unprofitable
product items.
(e) Developing the new product.
(f) Testing the product.
(g) Marketing the product, and
(h) Evaluating the result.
142 PAGE
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
PAGE 143
Notes distribution areas. Product planning helps in improving the

quality of managerial performance by ensuring the right match
between the product and the demand.
3. Product Standardisation: Standardisation means setting of standards
– a measure that is generally recognized as having a fixed value.
Standards are determined with regard to weights and measures,
size, shape and dimension, chemical or technical properties, product
performance, quality, colour or other special or general features
of product. According to F.C. Clark, “Standardisation includes the
establishment of standard, the sorting and grading of products to
conform to these standards, repacking, breaking up larger quantities into
smaller units of desirable size and product inspection.” Standardisation
includes various elements such as grading, packaging, labelling,
branding, etc. Standardisation facilitates sale by description and
thus relieves the buyer from examining the product. It promotes
uniformity of products and assures quality. In our country the Indian
Standards Institution (ISI) approves products for quality. The ISI-
marked products are accepted by the consumers as quality products
IN-TEXT QUESTIONS
1. _____________ is the first level of product.
2. Basic Product covers all future enhancements and modifications
a product might experience. (True/False)
3. Identify from the following the incorrect level of product:
(a) Core
(b) Expected
(c) Crust
(d) Potential
4. According to Kotler, “A ______________is anything that can
be offered to a market for attention, acquisition or consumption;
it includes physical objects, services, personalities, places,
organizations and ideas.”
144 PAGE
1.4 Product Mix Notes
“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.
1.4.1 Dimensions/Components of Product Mix

As we have studied about marketing mix that it is a mix of 7 P’s.
Similarly, product mix is mix of 4 components namely width, length,
depth and consistency.
1. Width: The range of product lines that a firm offers to its consumers
is referred to as the width or breadth in the product mix.
2. Length: The length refers to all the products existing in the product
mix.
3. Depth: The variety of items offered in each product line serves as
an assessment of a product mix’s depth.
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 Cola. Let’s assume that this company works only on two
product lines namely soft drinks and minute made juice.
PAGE 145
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
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
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mixof Distance
is of much& Continuing Education,
importance for theCampus
firm of Open
and its Learning,
marketing
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.
146 PAGE
2. Better catering of demands: The company may be able to better Notes

serve its present consumers by increasing the depth of the product
mix.
3. Wide Choice: A company having a wide variety of products in their
product mix offers customers with a wider choice. And a wide
choice is the demand of current customers, this will not only help
in satisfying the customers but will also help in retaining them for
a long period of time.
4. Helps in creating trust: When a particular brand becomes known
in the market, customers trust it because of its popularity. More
and more people are ready to own it and use it.
5. Promotes cost effectiveness: Developing a product mix helps in
saving a lot of promotion cost, as the brand under which a new
product is being launched already exist in the market and is known
to the customers.
1.4.3 Factors affecting Product Mix

1. Objectives of the Company: In order to achieve its goals, an
organisation formulates its product mix. As a result, the company’s
aim informs the addition, deletion, or replacement of product lines
or individual product items. As a result, the product mix is created
and altered in accordance with business policies and its objectives.
2. Profit: To increase profitability, a business likes to add new product
lines or product items to its already existing product lines that are
new and in most demand in the market.
The brand may contrast the variety offered by its competitors with
the diversity offered by it to demonstrate that the company offers
a wide variety of products. They can also explain why each of the
features, variations, etc., is special and why they are superior to
everything else.
3. Production capacity : The capacity of the manufacturing facility
or the company’s production unit heavily influences the decisions
made about the marketing mix. If the products being introduced
are more consistent with the existing one’s it is easy for the firm
to bring them to the market as compared to fully new products.
PAGE 147
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
8. Product length describes how closely products are related to each
other in a product line. (True/False)
148 PAGE
1.5 Branding Notes
The word brand is a comprehensive term and it includes other, narrower

terms. A brand is a name, term, symbol, or special design, or some
combination of these elements, that is intended to identify the goods or
services of one seller or a group of sellers. Therefore, a brand differentiates
one seller’s products or services from those of competitors. For example
differs from Hammam Soap in terms of size, shape, colour, packaging,
labelling, etc.
Brand name: A brand name consists of words, letters, and/or numbers
that can be vocalized or pronounced. Thus, a brand name is a part of a
brand, e.g. Usha fans, Godrej appliances and so on. These are combination
of words used to identify a product and to differentiate it from other
products.
Brand Mark: A brand mark is the part of the brand, that appears in
the form of a symbol, design, or distinctive colouring or lettering. It is
recognized only by sight but is not expressed when a person pronounces
the brand name, e.g., the symbol of ‘Maharaja of Air India’ etc.
Trademark: When a brand name or brand mark is registered and legalized
it becomes a trademark. In this sense all trademarks are brands but not
all brands are trademarks. Therefore, the trade mark is essentially a
legal term protecting the manufacturer’s right to use the brand name
and/or trademark. A trademark is a legal term for brand name which is
registered under the Trade and Merchandise Marks Act, 1958 and Trade
Marks Act, 1999.
Product Branding : Branding means giving a name to the product by
which it should be known in the market and differentiated from rivalry
products. A brand name has been defined by the American Marketing
Association as “part of a brand consisting of a word, letter, group of
words or letters comprising a name which is intended to identify the
goods or services of a seller or a group of sellers and to differentiate
them from those of competitors.”
A brand name may be assigned to a product in three ways. First, symbols
and marks may be used as brand names. For example, Taj Mahal tea, Red
Fort rice, Rath vanaspati etc. Second, special names may be assigned to
the product. Finally, manufacturer’s name may be used as a brand name.
PAGE 149
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.
1.5.1 Functions of Branding

Branding performs the following functions:
1. It helps in product identification and gives distinctiveness to product.
2. It is indicative of the quality or standard of a product.
3. It puts a check on imitation products.
4. It ensures legal rights on the product.
5. It helps in advertising & packaging.
6. It tends to ease the selling process and thus leads to larger sales.
7. It helps to create and sustain brand loyalty to particular products.
8. It helps in price differentiation of products.
9. It reduces price flexibility. This in turn reduces the risk in business.
1.5.2 Quality of a Good brand name

There may be many more qualities and features of a good brand name.
Only some of them are discussed here:
1. Simple and easy to pronounce: The key quality of a good brand
name is simplicity. For a product that is to be used by all types
of customers and is to be pronounced by them, a simple and
easy-to-pronounce brand name should be chosen. The name that
is simple for people of all ages, education levels, and accents to
pronounce, quickly gains popularity in the market as compared to
its competitors.
2. Short and concise: A short brand name is considered as the ideal
one. A brand that looks short can be printed in less space and is
easy to remember and pronounce. It looks eye catching and in the
era of hashtags and WhatsApp “short is in trend”.
3. Reflect nature of product: A good brand name need to be able to
convey the characteristics of the product. Such a brand name can
150 PAGE
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.
1.5.3 Types of Branding

Following are types of branding used in day to day lives:
1. Product branding: This is the most common branding that all the
customers witness on a daily basis. We are surrounded by products,
each of which has its own identity, personality and function. The
goal of product branding is to impact perception in the marketplace
and in the minds of consumers by using interesting names, slogans,
bright colours and even mascots.
2. Personal branding: When you think of branding, you often think
of goods or services, but human beings may also be viewed as a
distinctive brand, this is known as personal branding. Although
personal branding occurs across all industries, it is particularly
common among influencers, politicians, singers, athletes, fashion
designers and actresses. Personal branding helps in developing
an ability to differentiate yourself from the competition and gain
a competitive advantage that can help you progress professionally
and change how others perceive you.
PAGE 151
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)
152 PAGE
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
PAGE 153
Notes 6. True
8. False
9. Trademark
10. Brand mark
11. True
12. (a) Co-branding

1. What do you mean by the term ‘Product’? List various categories
of products?
2. Define each level of product with certain examples?
3. What do you mean by product mix? Develop a product mix for an
imaginary smartphone brand.
4. Define the term ‘brand’. What are necessary qualities of a good
brand name?
5. How many levels does a product have? Explain these levels by taking
the example of a computer manufacturing company.
6. List all the different types of branding with daily life examples.
7. “One of the most important components of the marketing mix is the
product”. Do you agree with this statement? List the reasons for
your answer.
8. What is meant by branding? List the various functions of branding.
(a) Geographical branding
(b) Potential level of a product
(c) Qualities of a good brand name
(d) Co-branding
(e) Functions of branding
154 PAGE
1.9 References Notes
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.

Press.
PAGE 155
L E S S O N
2
Packaging and Labelling
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
2.2 Introduction
2.3 Packaging
2.4 Labelling
2.5 Product Support Services
2.6 Summary
2.9 References

u Understand the concept of packaging and its importance for a firm.
u Understand the concept of labelling, its ethical aspects, and its importance for a firm.
u Learn about different types of product support services and their benefits to the firm
and the customers.
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
Principles of Marketing
• Learn about different types of product support services and their benefits to the firm
and the customers.
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 :-
Figure 2.1: Steps

Fig 2.1 : Steps in Packaging
in Packaging
1. The
1. The first istask
first task is to establish
to establish the packaging
the packaging concept. concept. The packaging
The packaging concept means
whatconcept means
the package what
should the package
basically be or doshould
for thebasically
particular be or do The
product. for two
the particular product. The two traditional packaging concerns
135 | P a g e
of manufacturers are product protection and economy. Economy
© implies that
Department the manufacturer
of Distance & Continuingwant to keep
Education, packaging
Campus costs down.
of Open Learning,
School ofobjective
A third packaging Open Learning,
which University of Delhi
is relevant for the consumers is
convenience. This means such things as size options and packages
that are easy to open. The fourth objective is promotional function.
The sales department may be more interested in promotional aspects.
PAGE 157
Notes Promotional aspect means that package should be such that it is

able to increase sales.
2. After the packaging concept is clearly defined, there are other
decisions which are to be taken on component elements of the
package design. Those elements are size, colour, shape, materials, test
and brand mark. Each elements presents a large number of options.
Therefore, decision is to be taken considering those options. Besides,
each packaging elements must be developed in harmony with the
other packaging elements. For instance, size suggests certain things
about materials, materials suggest certain things about colours, and
so on. The packaging elements must also be guided by decisions
on pricing; advertising and other marketing elements.
3. After the package design being made, a number of test are applied
before finalising the package. (a) Engineering tests which are meant
to make sure that the packaging stands up under normal conditions,
(b) Visual tests which are conducted to assure that the script is
legible and the colours harmonious, (c) Dealer tests that are applied
to assure that dealers find the package attractive and easy to handle
and (d) Consumer tests which are conducted to assure favourable
consumer reaction.
2.3.1 Purpose of Packaging

Packing and packaging serve three categories of purposes as under:
A. Protection from Damages:
(i) Damage by mechanical handling. The products are exposed
to the risk of damage in the process of handling during
transportation. Such risks are exceptionally high if the goods
are being handled mechanically.
(ii) Loss of product if it is exposed. For example, cement, oil,
petroleum products, etc.
(iii) Pilferage which is easier if the product is not properly packed.
(iv) Contamination by dirt, dust, water, etc.
(v) Moisture gain or loss to unpacked products.
158 PAGE
(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.
PAGE 159
Notes 5. Brand Identity: Packaging serves as a canvas to showcase a brand’s

personality, values, and identity. It reinforces brand recognition and
helps consumers connect emotionally with the brand.
6. Consumer Experience: The tactile experience of interacting with
packaging can enhance the overall product experience. High-quality
and user-friendly packaging can create a positive impression.
7. Protection and Preservation: Packaging safeguards products from
damage, contamination, and deterioration during transportation,
storage, and handling. This ensures the product reaches the customer
in optimal condition.
8. Convenience: Packaging can enhance user convenience by providing
easy-to-use features like resealable closures, portion control, and
single-serving options.
9. Information Accessibility: Packaging communicates essential product
information, such as nutritional facts, usage guidelines, safety warnings,
and expiration dates, ensuring consumer safety and satisfaction.
10. Environmental Considerations: Sustainable and eco-friendly
packaging choices demonstrate a brand’s commitment to environmental
responsibility, which resonates with environmentally conscious
consumers.
11. Marketing and Promotion: Packaging serves as a tangible advertising
platform. Brands can use packaging to highlight promotions, discounts,
loyalty programs, and cross-selling opportunities.
12. Target Audience Appeal: Packaging design can be tailored to
resonate with specific target demographics, making the product
more appealing to a particular audience.
13. Giftability: Packaging that is visually appealing and well-presented
can make a product an attractive option for gifts, boosting sales
during occasions and holidays.
14. Premium Perception: High-quality packaging can elevate the perceived
value of a product, enabling brands to charge premium prices.
15. Legal and Regulatory Compliance: Packaging ensures that products
meet legal and regulatory requirements, such as ingredient labelling
and safety information.
160 PAGE
In today’s consumeristic society outward appearances matter the most Notes

or so it would seem. And so, the first stage of a buying decision is
determined by the packaging of a product. Presently the importance of
packaging has grown way beyond the imagination of the consumer and
is considered one the most vital marketing tools. New techniques are
being pressed into use to develop packages which are at one efficient
and cost effective as also attractive and sophisticated. Some up-market
companies have resorted to eco-friendly packaging by changing the packing
material. For example, substitution of craft paper for wood, and glass
for tin. Today even things like automobile oils are sold in glossy stand
pack see-through bags. Branded edible oils, soft drinks and shampoos
come in lightweight, attractive bottles. There are flex packs for branded
tea and coffee, shrink-wrapped packaging for battery cells; blister packs
for various medicines; tetra packs for fruit juices and drinks; besides a
range of bags, boxes, cartons and containers for everyday use products.
All these packs are backed by hi-tech systems like flawless printing, bar
coding, ofvacuum
Principles gas flushing, grease and oil resistant coating as well as
Marketing
shrink-stretch or cling-wrap systems.
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.
Fig 2.2 : Types of packaging

Figure 2.2: Types of Packaging
1. Primary Packaging: This is the nearest and the most crucial type of packaging
1. Primary Packaging: This is the nearest and the most crucial type of
needed for a product. It involves Laminations, tubes, glass jars, tin cans, bubble wrap,
packaging needed for a product. It involves Laminations, tubes, glass
and other materials for the packaging of the product. Removing the primary
jars, tin cans, bubble wrap, and other materials for the packaging of
packaging can affect the quality and life of a product.
the product. Removing the primary packaging can affect the quality
2. Secondary
and lifepackaging: The second packing layer, which customers typically don’t
of a product.
observe, is formed by secondary packaging. In order to transport large quantities of
2. Secondary Packaging: The second packing layer, which customers
the product to the point of sale, it is primarily used to bundle and hold together
typically don’t observe, is formed by secondary packaging. In order
individual pieces of the product. The quality or characteristics of the product are
unaffected by removing secondary packaging. Secondary packaging also does the
PAGE 161
work of promotion of the product and its manufacturer. For example: the cardboard
box outside toothpaste tube, plastic
School of cover outside theUniversity
Open Learning, jar of pickle, etc.
of Delhi
3. Tertiary packaging: This packaging's primary goal is to facilitate simple storage and
handling while permitting secure transportation of high quantities or huge numbers of
a product. For example: Big carton boxes carrying large quantities of toys, jars,
bottles, books, etc.
Notes to transport large quantities of the product to the point of sale, it is

primarily used to bundle and hold together individual pieces of the
product. The quality or characteristics of the product are unaffected
by removing secondary packaging. Secondary packaging also does
the work of promotion of the product and its manufacturer. For
example: the cardboard box outside toothpaste tube, plastic cover
outside the jar of pickle, etc.
3. Tertiary Packaging: This packaging’s primary goal is to facilitate
simple storage and handling while permitting secure transportation
of high quantities or huge numbers of a product. For example: Big
carton boxes carrying large quantities of toys, jars, bottles, books,
etc.
4. Ancillary Packaging: The aim is to protect the finished packed
items, by using certain materials such as labels, tapes, padding, foam
material, bubble wraps, adhesives, etc.
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
162 PAGE
applied to a product or its packaging. Customers are primarily informed Notes

of the product’s contents and usage instructions through it.
Customers are provided with the relevant information about the products
via labelling. Customers can learn about a product’s qualities and benefits
without even tasting it. They are able to identify the product’s grade and
standard on the basis of a label. Because of the information on the label
about the product’s price, quantity, quality, etc., consumers may make an
informed purchase without hesitation. Based on the information on the
label, they compare the product to similar items from other companies.
Labels help retailers to move or sell more of their inventory. Customers
are safeguarded from middlemen’s dishonesty by this.
A product’s labelling, which gives customers precise information about
the grade, quantity, price, brand name, characteristics, etc., is a crucial
component in the sales and distribution process. Many goods, including
food and medicines, must bear particular labels in various nations, such
as those stating ingredients, providing nutritional data, or providing usage
cautions. The product packaging has labels on it that list the product’s
manufacturer, date of manufacturing, expiration date, ingredients, instructions
for use, and handling.
Numerous symbols for product labelling are standardised both domestically
and internationally. There are symbols for product certifications, trademarks,
and proof of purchase on consumer packaging. To convey information
about consumer use and safety, there are several rules and symbols. For
instance, a hallmark seal on jewellery is required since it demonstrates
the purity of the accessory.
2.4.1 Types of Labelling

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:
PAGE 163
2.4.1 Types of Labelling

Anything that is written, printed digitally, or graphically represented on a product constitutes
labelling, which is an essential component ofB.COM.packaging. We can classify
(PROGRAMME)/B.COM. labelling in the
(HONS.)
following types:
Notes
Labelling
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,
about a product’s environmental impact or eco-friendliness. They cater
to environmentally conscious consumers. For Example: “Recyclable”
or “Biodegradable” labels on packaging.
164 PAGE
3. Warning Labelling: Warning labels provide safety information, Notes

cautioning consumers about potential hazards or risks associated
with the product. They ensure user safety and prevent misuse. For
Example: “Flammable” warning on inflammable products.
4. Promotional Labelling: Promotional labels highlight special offers,
discounts, contests, or other promotional activities. They attract
attention and encourage purchases. “Buy One, Get One Free” labels
are the example of promotional labelling.
5. Private Labelling: Private labels are used by retailers to market
products under their own brand name. They offer exclusivity to
the retailer and build customer loyalty. For Example: Store-brand
products in supermarkets.
6. Nutritional Labelling: Nutritional labels provide information about
the product’s nutritional content, including calories, nutrients, and
serving sizes. They help consumers make informed dietary choices.
7. Country of Origin Labelling (COOL): COOL labels indicate
the country where the product was made or produced. They help
consumers identify the product’s origin and make informed choices.
For Example: “Made in Italy” label on clothing.
8. Barcode Labelling: Barcode labels contain machine-readable codes
used for inventory tracking, pricing, and point-of-sale transactions.
They streamline retail operations and improve inventory management.
9. QR Code Labelling: QR code labels contain Quick Response
codes that can be scanned with a smartphone to access additional
information or promotions. They bridge the gap between physical
products and digital content.
2.4.2 Functions of Labelling

1. Identification: A product’s label provides it a unique identity that sets
it apart from competing products on the market. Due to the label
that is attached to the product, customers can instantly recognise the
goods. It keeps customers from becoming puzzled and switching to
competitive goods. Based on their labelling, consumers may easily
recognise products from different brands like Tata Tea, Horlicks,
and Maggi.
PAGE 165
Notes 2. Promotion: The use of labels in product marketing is crucial. By

highlighting important elements, it enhances the product’s appeal
and grabs consumers’ attention. Labels make persuasive claims
about items to persuade consumers to buy them. For instance, the
Dabur Red toothpaste packaging advertises that buyers will receive
a free toothbrush with their purchase.
3. Grading: Things are categorised into distinct grades through labelling.
One type of product, for instance, can be categorised as A, B, C,
or D. Leading manufacturing nations make comparable things and
ship them to their destinations based on the product’s grades and
quality. For instance, Apples available in the market are referred
with grade A, B, C, etc. same is the case with basmati rice etc.
4. Promotes consumer protection: Consumers are safeguarded by labels
against truth modification or manufacturer’s dishonesty. Customers
may make knowledgeable selections about what to buy because to
the reliable information it provides about the products. Accurate
information regarding the ingredients, production process, and
expiration date must be included on labels for products including
food, cosmetics, and medications, among other things.
5. Helps to create compliance with law: It enables the business to
adhere to all legal requirements by including all required warnings
on product packaging. On pan masala packaging and cigarette
containers, tobacco companies are required by law to print the
statements “Smoking is dangerous to health” and “Chewing tobacco
is harmful to one’s health.”
2.4.3 Ethical Aspects in Labelling

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. In today’s world, the competition has grown way too much,
every manufacturer wants to maximise his sales and reduce the cost of
production. Therefore, ethical issues come into the picture. Some brands
use labels to mislead buyers and spread fake promises. Some ethical
issues in labelling are discussed below:
166 PAGE
(1) Misleading information on Labels: Marketers occasionally employ Notes

labels that clearly mislead consumers. They give out data that is
false or greatly overstated. Examples of labels that provide nutrition
information are those that say something is low fat, fat free,
cholesterol-free, or 100% pure juice. For instance, when thinking of
fat-free dairy, one may assume that there are zero calories present,
but this is untrue.
(2) Acquiring of Licence: Every operator of a food business must be
registered with the FSSAI, and the licence issued for the firm must
be displayed on the major panel with the licence number and the
FSSAI symbol.
(3) The majority of people believe that using technical terms, small
fonts, and more advertising space for other variants on food labels,
where the product’s essential information ought to be displayed can
be termed unethical by the users.
(4) Information on whether a product contains dangerous substances
should be included on the label, especially if it is a product intended
for children.
IN-TEXT QUESTIONS
1. Labelling is the process of covering, wrapping or crating goods
into a package for the purpose of delivering the articles to the
consumers or for the purpose of transport. (True/False)
2. Which of the following is not a type of label?
(a) Grade label
(b) Descriptive label
(c) Attractive label
3. _____________ is the nearest and the most crucial type of
packaging needed for a product.
4. The brand name, trademark, or logo is provided on the brand
label. It does not offer sufficient details on the product. It just
helps us know the brand name. (True/False)
PAGE 167
Notes 2.5 Product Support Services

Customer service is a mindset that encourages all employees to feel and
act responsible for generating happy customers. All employees of the
company are accountable for providing value-added customer services.
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.
2.5.1 Classification of Product Support Services

Product support services are broadly classified into the following categories:
Figure 2.4: Fig 2.4 : Classification

Classification of product
of Product support
Support services
Services
Information:To
(1)1)Information: Todecide
decide on
on aa product,
product,potential customers
potential and newbies
customers require a lot of
and newbies
information. They are interested in learning which product will best satisfy their
require a lot of information. They are interested in learning which
demands. Existing consumers also require knowledge on how to use and maintain the
product will best satisfy their demands. Existing consumers also
product over its lifetime. Customers for online purchases also require information to
require
directknowledge on how
them to the site to use
that will give and
themmaintain theInformation
information. product overwas its
traditionally
distributed through printed announcements, leaflets, brochures, and instruction books.
168 PAGE The most recent techniques include menu-driven recorded phone messages, videotapes,
CDs, software-driven
© Department of Distance & Continuing tutorials, touchCampus
Education, screen video displays,
of Open etc. As we have seen these
Learning,
already tapped or recorded messages when
School of Open Learning, University of Delhi we call our bank or mobile operators.
2) Consultation: Giving information implies a straightforward response to customers'
inquiries as we discussed above. Consultations entail conversation to discover customer
requirements before creating a customised solution. Consulting services include
guidance, auditing, personal counselling, tutoring, product usage training, management,
lifetime. Customers for online purchases also require information to Notes

direct them to the site that will give them information. Information
was traditionally distributed through printed announcements, leaflets,
brochures, and instruction books. The most recent techniques include
menu-driven recorded phone messages, videotapes, CDs, software-
driven tutorials, touch screen video displays, etc. As we have seen
these already tapped or recorded messages when we call our bank
or mobile operators.
(2) Consultation: Giving information implies a straightforward response
to customers’ inquiries as we discussed above. Consultations entail
conversation to discover customer requirements before creating a
customised solution. Consulting services include guidance, auditing,
personal counselling, tutoring, product usage training, management,
and technical consulting.
(3) Ordering: After the selling process is done, order taking follows,
it includes accepting applications, orders, and making reservations.
Some service providers, such as insurance companies, credit card
issuers, and clubs, provide a formal membership to its customers.
A reservation is a particular kind of order taking that entitles
consumers to preferential treatment. Examples include memberships
in an aeroplanes, theatres, resorts and restaurant tables.
(4) Hospitality: Some services require the consumers to visit a premise
and stay till the service delivery process is complete. When the
customer is waiting for his/ her turn they should be offered a good
hospitality via, greeting them well, offering water or other beverages,
providing them a proper waiting area, washroom facility, security,
etc. Overall the hospitality of the business should be satisfying or
else it may lose its customers.
(5) Billing: Billing is the end of receiving a service. Bills that are
inaccurate, unreadable, or incomplete give you the chance to let
customers down. The speedy completion of billing will also lead to
quicker payments. There are many different types of billing practises,
from manual billing practises to automated billing practises to online
billing practises. Some customers may seek an explanation when
the generated bill is given to them, representatives of the business
should be alert enough to provide such information to them and it
PAGE 169
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.
2.5.2 Benefit of Providing Good Product Support Services

1. Helps in Retaining Old Customers: When the performance matches
the customers’ requirements, there is customer satisfaction. Meeting
expectations alone might not be adequate in this competitive industry.
With regular new product introductions, customers also need to be
pleasantly surprised by businesses by challenging themselves to
surpass expectations which can be done by bringing innovation to
the firm, creating sense of loyalty in the customers, and providing
quick solutions to customer problems.
2. Increase profitability: When your service is good, referrals are
good, you’ll be able to pick up fresh customers for a lot less money
than you had planned. A typical firm invests a lot of money in
advertising, marketing, and other activities to get customers within.
However, with good customer service, all of it is handled by your
customer interaction. This ensures amazing profitability because
you are getting the highest returns possible with just your initial
investment.
170 PAGE
3. Boost confidence of the employees: When a customer recommends Notes

your company, it also improves employee morale. Naturally, as time
goes on, your trust in your company and its employees grows, and
you realise that providing excellent customer service is the key to
motivate and inspire your staff.
4. Creates a holistic marketing scenario: The business as a whole
transform into a holistic marketing scenario, where everyone is
contributing to the ultimate goal of customer satisfaction. This is
achieved when your employees are motivated, and you have insight
into the customer mindset. Because even the youngest employee is
aware of his contribution to customer satisfaction, it is the ideal
outcome for a company.
5. Competitive advantage: Last but not least, your ability to provide
excellent customer service and hire a skilled workforce can provide
you a competitive edge. If staff is developing trust and building
relationships with its customers than there is no way that customers
will feel dissatisfied and thus, your competitor will not be able to
capture a large market share.
ACTIVITY
Let’s imagine you have a brand “ABC” which sells cakes. Make a
list of product support services that you will offer to your customers.
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
PAGE 171
Notes 8. ___________aims is to protect the finished packed items, by

using certain materials such as labels, tapes, padding, foam
material, bubble wraps, adhesives, etc.
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
172 PAGE
2.8 Self-Assessment Questions Notes
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?
(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.
PAGE 173
Notes u https://blog.wiser.com/5-unethical-pricing-pitfalls-to-avoid/.

McGraw Hill.
u Etzel, M. J., Walker, B. J., Stanton, W. J., & Pandit, A. (2010),
Marketing (14th ed.), McGraw Hill.
u Sharma, K., & Swati Aggarwal (2018), Principles of Marketing.
u Chhabra, T.N. (2014). Principles of Marketing, Sun India Publications.
174 PAGE
L E S S O N
3
New Product Development
Dr. N. Mishra
University of Delhi
STRUCTURE
3.2 Introduction
3.3 Product Life Cycle
3.4 New Product Development
3.5 Summary

u Understand the concept and stages of product life cycle.
u Know and understand various marketing strategies employed in every stage of product
life cycle.
u Learn the various stages involved in the process of new product development.
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.
PAGE 175
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
176 PAGE
© Department ©
ofDepartment
Distance & of
Continuing
Distance &Education, Campus
Continuing of Open
Education, Learning,
Campus of Open Learning,
3.3.1 Stages in Product Life Cycle Notes

1 Introduction: The introductory stage of product life cycle begins when
the new product first becomes available for sale, and it ends when sales
3.3.1 Stages in Product Life Cycle
start picking up. During this stage, the product is launched into the market
1. in a Introduction: The introductory
full-scale production stage programme.
and marketing of product lifeThe cycle begins during
objective when the new
this product
stage isfirst becomes aavailable
to develop for sale, and
customer-market forit the
endsproduct.
when sales start picking up.
During this stage, the product is launched into the market in a full-scale production
The and
chief features
marketing of this stage
programme. are:
The objective during this stage is to develop a customer-
(a)market
Salesfor
which are low initially start showing increasing tendency:
the product.
The
(b) chief features ofisthis
Competition stage are:
limited.
(c)(a)Undetected
Sales which are lowand/or
technical initiallymarketing
start showing increasing
problems tendency:
may surface.
(b) Competition is limited.
(d) Initial customers are innovators who are willing to take risk and like
(c)the status
Undetected technical
of buying and/or marketing problems may surface.
first.
(d) Initial customers are innovators who are willing to take risk and like the status
(e) One basic model is offered.
of buying first.
(f)(e)Distribution
One basicmaymodel be isextensive
offered. (for convenience Items like soap) or
(f)exclusive (for luxury
Distribution may beitems like (for
extensive a car)
convenience Items like soap) or exclusive
(for luxury items like a car)
(g) Pricing may be high or low, depending upon the product.
(h)(g)LossesPricing may bemore
are much high or low, depending
likely to occur upon
than the product.
profit.
(h) Losses are much more likely to occur than profit.
(i) Promotion must be informative, and coupons, gifts discounts, etc.
(i)may Promotion
be offeredmust be informative,
to attract customers. and coupons, gifts discounts, etc. may be
offered to attract customers.
Marketing Strategies
In launching a new product, marketing management can set a high or low
levelInfor
launching a new product, marketing management can set a high or low level for
each marketing variable such as price, promotion, distribution,
each marketing variable such as price, promotion, distribution, and product quality. With
and product quality. With price and promotion management can choose
price and promotion management can choose one the four possible strategies shown below.
one the four possible strategies shown below.
FigureFig
3.2:
3.2:Four
FourIntroductory
introductory Marketing Strategies
marketing Strategies
153 | P a g e PAGE 177

SchoolSchool
of OpenofLearning,
Open Learning, University of Delhi
University of Delhi
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.
178 PAGE
(b) The market is highly aware of the product. Notes

(c) The buyers want or can afford to pay allow price.
(d) There is some potential competition.
2. Growth stage
It is a period of rapid market acceptance and substantial profit improvement.
Thus, both the sales and profit curves rise at a rapid rate.
Characteristics of this stage are:-
1. The early innovators (buyers) will continue their purchasing and a
large number of conventional consumers will begin to follow their
lead, especially if there are favourable words of mouth.
2. New competitors enter the market, and in large numbers, if the profit
outlook is particularly attractive.
3. The increase in the number or competitors leads to an increase in
the number of distribution outlets.
4. Economies of scale are also introduced.
5. Prices either remain where they are or fall only slightly.
6. Promotional expenditures remain at the same or at a slightly raised
level to meet competition and continue informing the market.
7. Sales rise much faster thus declining the promotion-sales ratio.
8. Profit margins peak during this stage due to economies of scale.
Marketing strategies to sustain rapid market growth as long as
possible:-
1. Improve product quality and add new features and models.
2. Search out new market segments to enter.
3. Finding new distribution channels to gain additional product exposure.
4. Shifting some advertising copy from creating product awareness to
trying to bring about product acceptance and purchase.
5. Deciding the right time to lower prices in order to attract price
sensitive buyers into the market.
Although by adopting these, the firm will be more competitive, but it
will have additional cost. The result is that it will capture a dominant
position in the market at the cost of forgoing maximum current profit.
PAGE 179
Notes 3. Maturity Stage

Maturity is a period of a slowdown in sales growth because the product
has achieved acceptance by most of the potential buyers. Profits peak in
this period and start to decline because of increased marketing outlays
in order to maintain the product’s position against competition.
The maturity stage can be divided into three phases:—
(a) Growth Maturity: Here, the rate of sales growth starts to decline
because of absence of new distribution channels to fill.
(b) Stable Maturity: Here, most potential consumers have tried the product
and future sales are governed by the rate of population growth and
replacement demand. So, sales growth rate starts to decline because
of market’s standstill.
(c) Decaying Maturity: The absolute level of sales, here, starts to
decline as some of the customers move towards other products and
substitutes.
Characteristics of Maturity Stage: During the first part of this period,
sales continue to increase, but at a decreasing rate. While sales are levelling
off, the profits of both the manufacturer and the retailers are starting to
decline. Marginal producers are forced to drop out of the market. Price
competition becomes increasingly severe. The producer assumes a greater
share of the total promotional effort in the struggle to retain dealers.
Other firms increase their research and development budgets to find new
models or better versions of the product.
A. Marketing Modification: Here, the product manager looks for
opportunities to find new buyers for the product. There are many
possibilities. One is that the manager looks for new markets and
market segments in which he has not yet tried the product. Another
possibility is that he may look at various ways to stimulate increased
usage among present customers (for example, in case of food
manufacturers, one way is to list various recipes on their package
to increase the consumer’s uses of product). Another possibility may
be to consider repositioning the brand to achieve larger brand sales
(For example, if heavy users of a chocolate drink mix are found
180 PAGE
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
PAGE 181
Notes of increasing over-capacity and price competition or, leading to serious

decline in profits.
A company faces a number of tasks and decisions to ensure the
effective handling or its aging products. These tasks are:
A. Identifying the weak products
The first task is to establish a system that will identify those products
which are in a declining stage. For this purpose, a product-review
committee has to be appointed fir developing a system for periodically
reviewing weak products in the company’s mix. This committee include
representatives from marketing, manufacturing and the controller’s office.
The controller’s office supplies data for each product showing trends in
market size, market share, prices, costs and profits. This information is
then run against a computer programme which identifies the weakest
products—the criteria being the number of years of sale decline, market-
share trends, gross profit margin, and return on investment. After this
step, such products are reported to the managers responsible for pushing
their sales. The managers fill out there rating forms showing the position
of sales and profits with the current marketing programme and with their
recommended changes in the current programme. Lastly, the product review
committee examines the product-rating form for each weak product and
makes a recommendation (a) to leave it alone, (b) to modify its marketing
strategy, or (c) to drop it.
B. Determining marketing strategies
As in the case of declining sales, some firms will withdraw from the
market earlier than others, the remaining firms enjoy a temporary increase
in sales. Thus, any particular firm has to decide as to whether it should
be the one to stay in the market until the end. If it decides to stay, it has
to choose a strategy. The firm can follow any of 3 strategies:—
(i) A Continuous Strategy: under this it continues its past marketing
strategy (i.e. same market segments, channels, pricing and promotion).
The product continues to decline until it is dropped at last.
(ii) A Concentration Strategy: Here the firm concentrates its resources
only in the strongest markets and channels.
(iii) A Harvesting Strategy: Here, the firm reduces its expenses sharply
to increase its current profits.
182 PAGE
(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.
3.3.2 Usefulness of PLC

Its usefulness differs in different decision-making situations as given
below:—
(a) As a Planning Tool : The PLC concept is useful in telling the main
characteristics of each stage and indicating the main alternative
marketing strategies available to the firm in each stage.
(b) As a Control Tool: The PLC concept enables the company to roughly
estimate the position of its product(s) in relation to successful and
comparable products that were launched in the past.
(c) As a Forecasting Tool: As a forecasting toll PLC concept may be
of less usefulness because sales histories show various patterns in
practice, and the stages last varying durations.
PAGE 183
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.
3.3.3 Criticism of PLC

1. The Life-cycle patterns are too variable.
2. It is difficult to know what stage the product really is in.
3. The company’s marketing actions can influence the course of the
product life cycle.
4. PLC concept produces a product-oriented picture rather than a
market-oriented picture. The reason is that it focuses on what is
happening to a particular product rather than on what is happening
in the overall market.
ACTIVITY
Create a product lifecycle for the mobile brand ‘Nokia’ being marketed
in Indian market
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)
184 PAGE
3. Which of the following are/ is marketing strategy used in decline Notes

stage?
(a) Continuous strategy
(b) Harvesting strategy
(c) Concentration strategy
4. _____________means launching the new product with a high
price and high promotion.
5. ______________ consists of launching the new product with a
low price and low level of promotion.
6. __________is a period of a slowdown in sales growth because
the product has achieved acceptance by most of the potential
buyers. Profits peak in this period and start to decline because
of increased marketing outlays.
7. All products have the same movement in the product lifecycle.
(True/False)
3.4 New Product Development

What is a new product? 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.
The complex problems arising from the development and distribution
of new products are gradually attracting, more and more attraction of
businessman. On the one hand, the mortality rate among new products
is quite substantial and, on the other hand, the costs of not bringing
forth new products may also be quite high which may be reflected in the
form of company’s lower sales volume and profits from its old-standby
products. Business firms are increasingly recognizing that the key to
their survival and growth lies in the continuous development of new and
improved products.
PAGE 185
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 :
Fig 3.3: Product

Figure Product Development
DevelopmentProcess
Process
(i) Idea Idea Generation:
(i) Generation: The generation
The generation of new
of new products products
idea signifies idea signifies
exploration – the
search exploration – the
for product ideas search for product
and opportunities. New productideas
ideasand
mayopportunities.
originate from the
company’s
Newown R & Dideas
product department
may or from external
originate fromsources like customers,
the company’s ownscientists,
R &
competitors, distributors, salesman, professional innovators, etc.
D department or from external sources like customers, scientists, The particular
source competitors,
of ideas is not as important as salesman,
distributors, the company’s system for stimulating
professional innovators, newetc.
ideas
and then acknowledging and reviewing them promptly.
The particular source of ideas is not as important as the company’s
system for stimulating new ideas and then acknowledging and
reviewing them promptly.
161 | P a g e

186 PAGE School of Open Learning, University of Delhi
(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
PAGE 187
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.
188 PAGE
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.
PAGE 189
Notes 3.6 Answers to In-Text Questions
1. False
2. True
4. Rapid Skimming strategy
5. Slow penetration strategy
6. Maturity
7. False
8. Test marketing
9. True
10. (b) Stage marketing
11. Idea Screening

1. What do you mean by new product development? Discuss its process
step by step.
2. What are the marketing strategies employed in the introduction
stage of product life cycle.
3. Design a product life cycle for an umbrella company, whose sales
will rise in the rainy season and fall in the next season. Also share
the marketing strategies involved in each stage.
4. Define a product life cycle? List its importance for the firm.
5. What is meant by ‘test marketing’? Why do you think it is important
in the process of product development?
6. Write short notes on:
(a) Commercialization
(b) Product life cycle
(c) Criticism of Product life cycle
(d) Rapid Skimming strategy
190 PAGE

Press.
u https://hbr.org/1965/11/exploit-the-product-life-cycle.
PAGE 191
UNIT - IV
PAGE 193
L E S S O N
1
Pricing
Dr. N. Mishra
University of Delhi
STRUCTURE
1.2 Introduction
1.3 Meaning of Price
1.4 Pricing Policies/Decisions
1.5 Pricing Strategies
1.6 Summary

u Comprehend the concept, importance and objectives of pricing under marketing.
u Understand various pricing policies and decisions taken by the firm.
u Identify and understand various pricing strategies used by the marketer.
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:
PAGE 195
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.
1.3 Meaning of Price

The term ‘price’ denotes money value of a product. It represents the amount
of money for which a product can be exchanged. In other words, it is
the amount of money which the buyers pay to the seller for a product.
While talking of pricing, it is important to determine exactly what it is
that a person is buying. A person does not buy a physical product alone;
he also acquires certain services and want-satisfying benefits along with
the product (Thus a seller usually prices a combination of the physical
product) plus several other services and benefits like free home delivery,
warranty, repair facilities, package, credit facilities, etc. Therefore, price
may be defined is the amount of money which is needed to acquire in
exchange some combined assortment of a product and its accompanying
services.
According to Prof. William J. Stanton, “Price is the amount of money
and/or other items with utility needed to acquire a product.”
According to Prof. Philip Kotler, “Price is the only element in the
marketing mix that produces revenue, the other elements produce cost.”
According to David J. Schwartz, “Price is the exchanged value of the
product or service expressed in terms of money.”
1.3.1 Significance of Price

Price is of crucial importance to the firm, the consumer and the society
in general. The significance of price is discussed below:
196 PAGE
(i) Determines the firm’s success: Price is an important determinant Notes

of the success of a firm. If the price is too high the business is
lost; if the price is too low the firm may loose again. Through its
impact on sales volume and sales revenue price has an important
influence on the profits of the firm.
(ii) Affects the firm’s competitive position and its share of the market:
Since the price of a product is a major determinant of the market
demand for the product, it affects considerably the competitive
position of the firm and its share of the market.
(iii) Influences the firm’s marketing progress: The overall performance
of the marketing managers is greatly affected by the price of the
product. In product planning, for example, if the management seeks
to improve the quality of its product or add some differentiating
features, this decision can be implemented only if the market will
accept a price high enough to cover the costs of these changes.
(iv) Important to the consumer: Price of a product is important to the
consumer in as much as it determines his purchasing power and
thus affects his standard of living. Any upward movement in price
tends to adversely affect the consumer’s cost of living.
(v) Help to the consumer: Notwithstanding the above, price mechanism
provides help and guidance to the consumer in taking buying decision
aimed at ensuring optimum utilization of his limited purchasing
power among various alternative uses.
(vi) Important to the firm: The price of a product is of crucial importance
to the firm. It influences wages, interests, rents and profits, regulates
production, and channelizes productive resources into profitable
activities. Thus the price not only determines the success of the
firm, it becomes a hub around which the entire business activities
of the firm revolve.
1.3.2 Factors Affecting Price of a Product

A variety of factors influence the price of a product. These factors may be
internal (cost of the product, desired public image, product-market factors,
distribution strategy, and promotional strategy) or external (competitor’s
PAGE 197
Notes prices, buyer’s behaviour, economic climate and governmental legislation).

A brief description of these factors follows:
(i) Cost of the product: Cost of a product is the basic determining
factor of the product’s price. As a basic economic rule, (prices
charged must be sufficient to) recover all costs over the long run.
However, short-run prices need not necessarily cover all short-run
costs. This implies that the price of a product should be such that
recovers the average total cost per unit. Another point which should
be remembered is that cost should not a ceiling on price; the price
is ultimately determined by market demand for the product.
(ii) Desired public image: Pricing decisions can promote or harm the
public image of the company that has been built over the years.
While setting product prices the management must ensure that prices
are consistent with the public image the top management is trying
to create for the company.
(iii) Product market factors: The product-market factors include stage
in product life cycle, product differentiation, price elasticity of the
product’s demand, size and relative density of the potential market,
etc. The stage in product life cycle has considerable influence
on pricing decision. The management has a very high (degree of
freedom to set a very high price) (price skimming) or low price
(penetration pricing) during market pioneering stage. Such freedom
is, however, not available during the periods of growth, maturity
or market decline. Pricing of the product is also influence by the
relative importance that prospective customers attach to product
differentiation in comparison to price. The higher the importance
they give to product differentiation, the lesser the significance of
pricing in attracting customers. The price elasticity of the product’s
demand is yet another factor to be taken into account. In general,
if the demand of a product is price elastic, there is little scope
for reducing price, rather price can be increased to augment sales
revenue which will increase faster than decline in unit sales. Size
and relative density of the potential market have also a bearing on
pricing as they affect marketing costs of promotion and distribution
will be lower. Hence, the product can be offered at a lower price.
198 PAGE
(iv) Distribution strategy: The distribution strategy adopted by the Notes

manufacturers influences price of a product because firstly, each
middleman in the distribution expects gross margin according to
the number of services he performs for the manufacturer. Thus, if
there are more than one level of middlemen and they are providing
important services, their costs and gross margin expectations will be
higher, thus pushing up the prices. Similarly, where a manufacturer
follows an exclusive distribution policy and declares provide such
services as local advertising, promotion, repairs, etc. The gross-
margin expectations will be higher. On the other hand, where a
manufacturer follows mass distribution policy, dealer’s margins will
be lower.
(v) Promotional Strategy: If the promotional strategy of a marketer
requires middlemen to undertake a larger part of advertising, sales
promotion, etc., they will expect greater than normal gross margins
and vice versa.
(vi) Competitor’s prices: Pricing decisions of a marketers are also
influenced by the competitor’s prices. Ordinarily a marketer seeks to
avoid price competition; rather he uses non-price competition-product,
distribution and promotion, keeping his price essentially the same
as competitor’s price. Non-price competition has a distinguishable
feature that, unlike price changes, it is difficult to copy easily and
quickly changes in product, promotion and distribution.
(vii) Buyer behaviour: Buyer behaviour and psychology play an important
role in the pricing decisions by a market. Buyers of novelty and
fashion items attach higher importance to design, style, appearance,
etc., than to price; buyers of expensive items lend to buy a brand
simply because its price is high and hence it carries prestige
and status; and buyers of machinery, etc., look for durability,
performance, etc., and not so much for price. As against this, price
is an important consideration for buyers of goods of daily needs
and of products difficult to differentiate. Then, buyers generally
attach higher importance to price of products they buy frequently,
e.g., rice, tea, sugar, etc. such products can, therefore, be sold
profitably by middleman at low mark-ups. Similarly where buyers
PAGE 199
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.
1.3.3 Pricing Objectives

The pricing objectives of a firm may be one or more of the following:
(i) Target Return: The pricing objectives of many a firm is to achieve
a certain target Return on Investment (ROI), certain return on sales,
or some targeted amount of profit. Target ROI pricing requires
price setting in such a way that anticipated total sales revenues
exceed total costs by enough profits to provide for the desired rate
of return on total investment. From the point of view of investors,
the objective of a target return is the most appropriate objective as
its seeks to compensate the investment made.
(ii) Target Market Share: Another major pricing objective of a firm
is to maintain or increase the share of the market held by the firm.
Increase in the market share is the best method of evaluation as
far as efficiency of pricing is concerned. This is so because many
firms believe that maintaining or increasing market share is a key
to effectiveness of their marketing mix.
(iii) Meeting or Preventing Competition: The pricing method adopted
to achieve this objective is referred to as ‘Extinction Pricing’. It
is viewed as long-run strategy and is used as a way of eliminating
competition. Firms seeking to meet competition simply set their
prices, particularly during a price war, to defeat their competitors.
Similarly, firms frequently set a very low price so as to discourage/
prevent competition. It involves generally pricing the product below
variable cost.
200 PAGE
(iv) Profit Maximisation: Profit maximisation is an economically justifiable Notes

goal of pricing because if profits become unduly high due to short
supply of a given product, new capital will be attracted into the
industry thus balancing demand and supply. Also, this objective is
desirable from the point of view of economy as a whole. However,
it cannot be made operational because its achievement is difficult
to measure. Usually profit objectives are set in terms of percentage
change or in terms of actual rupees in relation to profits earned
during the previous period.
(v) Price Stabilisation: Some firms seek to stabilize their prices over
long period, hoping to smooth out possibly even to eliminate,
cyclical price fluctuations. Where price stabilization is the pricing
objective, the firm tries to keep prices from falling too far during
depression and rising too high during (depression and rising too
high during) periods of good business. Price stabilization objective
is often found in industries that have a price leader. In industries
where demand can fluctuate frequently and sometimes violently,
price leaders will try to maintain stability in their pricing.
IN-TEXT QUESTIONS
1. The term ________________ represents the amount of money
for which a product can be exchanged.
2. Which of the following are the factors affecting the price of a
product:
(a) Cost of the product (b) Distribution strategy
(c) Product market factors (d) All of the above
3. Through its impact on sales volume and sales revenue price
does not have any influence on the profits of the firm.
(True/False)
1.4 Pricing Policies/Decisions

Price policies are more specific than the objectives and deal with
situations in the foreseeable future that generally recur. Pricing policies
thus constitute the general framework within which pricing decisions
are made. A firm does not follow a single price policy; rather it needs
PAGE 201
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,
202 PAGE
however, is that incremental costs consist of variable costs, Notes

and proposed volume does not add to fixed costs.
Principles Break-even
(iii) of Marketing Pricing: The situation when income and total costs
become equal is called breakeven pricing. This is another
important
(iii) method used
Break-even to determine
Pricing: The situationprice
whenof income
products andortotal costs
services.become
In thisequal
analysis, relation
is called between
breakeven cost,This
pricing. quantity and important
is another
profit ismethod
studied.used
For toanalysing
determinebreakeven point, cost
price of products or can be In this
services.
divided analysis,
into tworelation
classesbetween
as (a) cost,
fixed quantity
and (b)and variable.
profit isIt studied.
is For
believedanalysing breakeven
that while point, cost
calculating can be divided
breakeven point, into
totaltwo classes as (a)
fixed
fixed and (b) variable. It is believed
cost and variable cost remain same per unit. that while calculating breakeven
point, total fixed cost and variable cost remain same per unit.
Break-even point = Fixed costs/unit variable cost
Break-even point = Fixed costs/unit variable cost
Figure Break Even Chart where, BEP = Break Even Point

Figure 1.1: Break Even Chart where, BEP = Break Even Point
In the above given figure, total revenue and total cost are crossed by each other.
In thepoint
Breakeven aboveisgiven figure,
located at thetotal revenue and
cross-point. totalpoint,
At this cost are
the crossed
total income can
recoverbytotal
each other.
cost. So, atBreakeven
this point ofpoint is located
production, at the
firm can cross-point.
neither earn profit nor incur
loss. IfAtthethis
firmpoint,
producesthemore
totalthan breakeven
income can point, it can
recover earncost.
total profit,So,
otherwise it
incursatlosses. If the sale price is increased, BEP (Breakeven
this point of production, firm can neither earn profit nor point) and market
demand decrease.
incur loss. IfThis
themethod helps to more
firm produces recoverthan
production
breakeven cost point,
throughit selling at
certain price. However, fixed cost does not remain always fixed and cost cannot be
can earn profit, otherwise it incurs losses. If the sale price is
classified in fixed and variable. So, it does not become useful in practice.
increased, BEP (Breakeven point) and market demand decrease.
2. Competition-oriented
This method helps toPricingrecoverPolicies: Under
production costcompletion-oriented
through selling pricing
policy a firm sets prices after a careful consideration of the competitor’s prices
at certain price. However, fixed cost does not remain always
and the relationship between the price of the firm’s product and its costs is given
fixed and cost cannot be classified in fixed and variable. So,
very little consideration. A firm may adopt any of the following four alternative
it does not
practices become
relative useful in practice.
to competition.
2. Competition-oriented
(i) CompetitivePricing
pricing:Policies:
It is alsoUnder
called competition-oriented
going rate pricing, i.e., setting a
pricing policy a just
price firmwhat
sets
theprices after are
competition a careful
charging.consideration of
the competitor’s
(ii) Pricingprices
aboveand
the the relationship
competition, between
i.e., to thehigher
set a price pricethan
of the price
the firm’s product and its costs
of the competitors. is given
In those very where
situations little consideration.
higher-than-average price
convey an impression of above-average product quality or prestige, this
type of pricing may be resorted to.
PAGE 203
© Department of Distance & Continuing Education, Campus of Open173 Learning,
|Page
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:
204 PAGE
(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
PAGE 205
Notes will bear freight charges according to their locations. It is called

Free on Board (FOB) pricing. Secondly, the firm may quote the
same delivered price to all customers regardless of their locations.
It is called ‘uniform delivered pricing’ and is typically used in
those situations where freight charges constitute a small part of the
sellers total costs. ‘Free deliver’ pricing practice followed by many
a retailer is an example of such pricing. Thirdly, ‘zone pricing’
where the firm divides the market into 3 limited number of broad
geographical zones and then sets a uniform delivered price for
each zone. All customers within a zone pay the same total price;
and the price is higher in the most distant zones. Thus, a marketer
can divide the country’s market into five zones: East, West, South,
North and Central.
6. Product Line Pricing Policy: The pricing of a firm should also outline
its policy in respect of different items in a product line because
these items compete with each other. The pricing policy must state
clearly the amount of price space that should exist between the
prices of individual member of the line. If the price space between
two items of the line is too small, it may cause confusion in the
minds of buyers. But if this space is too large, the competitors can
move in and make sales.
7. Leadership Pricing Policy: A firm may initiate or follow price
changes. So it must decide whether it will be a price leader or
price follower.
8. Prestige Pricing is another alternative under psychological pricing
under which prices are set at high levels for luxury items like air-
conditioned cars, remote control TV, automatic electrical appliances,
etc.
9. Dual Pricing: When the same product or service is charged at two
or more different rates, it is called dual pricing or discriminatory
pricing. For examples, the electricity charges are different for light
consumption and power consumption; the railways charge different
rates from different class of customers for the same distance travelled
in the same train, and so on.
10. Guarantee against Price Decline: A firm following this policy
makes a refund to its middlemen in case it reduces its price during
206 PAGE
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.
1.5 Pricing Strategies

Another important aspect of pricing decisions of a firm pertains to
pricing strategies. Pricing strategies refer to pricing decisions management
takes to fit the changing competitive situations encountered by specific
product whereas pricing policies provide management with general
guidelines in making price decisions over long periods. Thus, pricing
strategies are specific and short-run while pricing policies are general
and long-run. Pricing strategies available to a marketer are many and
differ according to the situation, type of the product (new or existing),
market conditions, etc. The following two strategies are commonly
employees by a marketer during market pioneering stage when a new
product is introduced:
PAGE 207
Notes Marketing Entry Strategy

u Market skimming pricing
u Market penetration pricing
Product Life Cycle Strategy

u Introduction stage of product
u Growth stage of product
u Maturity stage of product
u Decline stage of product
Price Change Strategy

u Price increase strategy
u Price decrease strategy
Psychological Pricing Strategy

u Odd even pricing strategy
u Customary pricing strategy
u Prestige pricing strategy
u Discount strategy
u Promotional pricing strategy
Figure 1.2 : Pricing Strategies

(i) Skim-the-cream pricing: As its name suggests, this strategy is
employed during the introductory stage of the product simply to
skim the “cream” of demand by setting higher prices. Its aim is
not to maximize profits but to recover product development costs
quickly. Besides the introduction of a new product when this
strategy is most appropriate, it can also be used with advantage by
a monopolist with a feeling that competitors will enter the market
soon, by a merchants who feels he can do better job of serving
his segment than his competitors, and by a marketer of a fashion
or novelty item with an expected short life cycle. Price-skimming
strategy offers the following advantages:
(a) A high introductory price tends to divide the market into
segments on income basis. The initial high price serves to skim
the cream of demand by making appeal to those prospective
buyers who are responsive to distinctiveness and exclusiveness
in a product and are relatively insensitive to price. The marketer
can reduce price subsequently and appeal to segments of the
market which are highly sensitive to price.
208 PAGE
(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
PAGE 209
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.
210 PAGE
IN-TEXT QUESTIONS Notes
4. _________________ is also referred to as ‘cost-plus’ pricing.

5. This strategy is employed during the introductory stage of the
product simply to take out the “cream” of demand by setting
higher prices.
(a) Penetration Pricing (b) Psychological Pricing
(c) Skimming Pricing (d) None of the above
6. Under completion-oriented pricing policy a firm sets prices after
a careful consideration of the competitor’s prices.(True/False)
7. The prices of goods and services in the premium pricing strategy
are a little bit higher than the average costs. (True/False)
8. ______________ type of pricing is very cost-effective and sensible
in terms of what they can offer.
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.
PAGE 211
Notes
1. Price
3. False
4. Cost-oriented Pricing
5. (c) Skimming Pricing
6. True
7. True
8. Economic Pricing

1. Define one of the important “P” of marketing mix, known as pricing.
What is the significance of pricing for a marketer?
2. Discuss the various factors affecting the price of a commodity? Give
examples with each factor.
3. What are the functions and objectives of pricing?
4. What are the various pricing policies designed by a firm? Which
one do you think is the most suitable for an IT firm?
5. Define competition-based pricing policies of a firm? Do you agree
this pricing is used in our country? Give examples with your answer.
6. What are the various factors affecting the price of a commodity?
Discuss three pricing strategies used by the firm.
(a) Skim the Cream Pricing
(b) Economic Pricing
(c) Pricing Objectives
(d) Significance of Price for a Marketer.
212 PAGE
Notes
McGraw Hill.
PAGE 213
L E S S O N
2
Channels of Distribution
Dr. N. Mishra
University of Delhi
STRUCTURE
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

u Comprehend the concept channels of distribution and their importance for a firm.
u Understand the reasons behind selection of a particular distribution channel.
u Know the types and functions of a middlemen.
u Understand the pros and cons of eliminating the middlemen.
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
214 PAGE
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.
2.3 Introduction to Channels of Distribution

Channels of distribution, also called marketing channels or trade channels,
are used to provide consumers with a convenient means of obtaining
the products and services they require. Channels of distribution refer
to various marketing institutions (middlemen) and the interrelationships
engaged in effecting the physical and title flow of goods and services
from producers to consumers or industrial users. Thus, the route or path
through which goods move from the place of production to the place
of consumption is called channel of distribution. Middlemen present in
the channel of distribution are business firms and individuals operating
between the produces and the consumer or industrial purchaser.
According to Prof. William J. Stanton, “A channel of distribution (sometime
called a trade channel) for a product is the route taken by the title to
the product as it moves from the producers to the ultimate consumers
or industrial users.”
According to Prof. Philip Kotler, “Distribution channel as the set of firms
and individuals that take title or assists transferring title to the particular
goods or services at it moves from the producers to the consumers.”
In the view of McCarthy, “Any order of the institutions from the producer
to the consumer in which either one middleman or any number of them
might be there, is known as the channel of distribution.”
2.3.1 Types of Channels of Distribution

Normally, commodities and services move through numerous hands
before reaching the consumer’s hands for consumption. However, in other
PAGE 215
2.3.1 Types of Channels of Distribution

Normally, commodities and services move through numerous hands before reaching the
consumer'ssituations,
Notes
hands for manufacturers
consumption. sell
However, in other situations, manufacturers sell goods
goods and services directly to consumers
and services directly
without the to
useconsumers withoutwhich
of a middleman, the use of a middleman,
is known which isAsknown as a
as a direct channel.
direct channel. As athere
a result, result,
are there are two
two kinds kinds of channels:
of channels: direct and
direct channels channels and indirec
indirect
channels. channels.
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
directly to able
customers.
to sell As a result,
them directlyhe to
sells things via
customers. Asmiddlemen.
a result, heThese intermediaries
sells things via could
be wholesalers or retailers.
middlemen. TheseA intermediaries
wholesaler is someone
could be who buys items
wholesalers in big numbers
or retailers. A from
producers, wholesaler
whereas a is retailer is someone
someone who buyswho buys
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a retailer involvement
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wholesalers anddistribution
184 | P a g e
216 PAGE
© Department
SchoolofofDistance & Continuing
Open Learning, Education,
University of Delhi Campus of Open Learning,
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
PAGE 217
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

2.3.2 Importance of Channels of Distribution

The importance of channels of distribution lies in the fact that they provide
the means by which goods and services are conveyed from the producers
to the consumers and other users. The importance of distribution channels
can be explained as follows:
u It creates utility: The channel of distribution creates three types of
utilities namely time, place, and possession. Time utility is created
when channel of distribution makes products or services available
for sale when the consumer wants to purchase them, place utility
is created by making goods and services available in a convenient
location and possession utility is created when channel of distribution
facilitates passing of the title of the goods from the producer or
middleman to the purchaser.
u It entails cost: The cost involved in the use of distribution channel
enters the price of the product that the ultimate consumer has to
pay. Any such increase in price due to a wrong decision regarding
channel distribution cost may be very high, and sales may be very
limited.
u It affects other marketing decisions: Distribution of channel is an
important element of the marketing mix of a firm and the channel
selected affects other marketing decisions like pricing, promotion
and physical distribution. An error in the choice of channel may
affect adversely the whole marketing mix of the firm.
u It determines the availability of the product: The usefulness of
a product to consumers lies in the fact that it is available to them
218 PAGE
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.
2.3.3 Selection of Distribution Channel

Usually, manufacturers consider which distribution channel would be
effective and efficient. The channel selected must be economical, yet
very effective and profitable. The various factors affecting the choice of
channels of distribution are as follows:
PAGE 219
Notes 1. Market Consideration: An important factor influencing the choice

of channel is the nature of market – type of consumers, size of demand,
geographical location of market, order size, customer buying habits and
preferences, etc.:
(i) Consumer or industrial market: If the product is meant for industrial
uses, retailers will not be required, and the channel may be kept
short whereas for consumer goods retailers will be necessary.
(ii) Size of market: The number of middlemen used in the channel
depends largely on the size of the market; the larger the size the
larger the number of middlemen.
(iii) Geographical concentration of market: Direct sales and possible
where the firm’s potential market is concentrated. On the other
hands, if the market is geographically spread, middlemen will be
used in the channel.
(iv) Order size: The choice of distribution channel is also affected by
the size of the orders frequently received by the firm. Producers
are likely to use short, more direct channels in cases where retail
customers or industrial buyers place relatively small numbers of
large orders. Retailers often employ buying officers to negotiate
directly with manufacturers for large scale purchases. Wholesalers
may be used to contact small retailers.
(v) Customer buying habits and preferences: The buying habits and
preferences of ultimate consumers and industrial users - desire for
credit, preference for self-service, liking for direct mail business,
willingness to purchase from door-to-door sales people-significantly
affect channel selection.
2. Product Consideration
(i) Perishability: Perishable products such as fresh produce and fruits
and fashion products with short life cycles typically move through
relatively short channels directly to the retailer or the ultimate
consumer because of the risks associated with delays and frequent
handling.
(ii) Size: Products that are bulky usually need short channels so that
distance and number of handlings from producer to ultimate consumers
may be reduced.
220 PAGE
(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
PAGE 221
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.
222 PAGE
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.
2.3.4 Selection of channels for New Products or new

Companies
The selections of channels of distribution by an established manufacturer
for a new product or by a new company starting out with either a new
product or an established product involves consideration of certain other
factors which are as under:
(i) The channel selected must be appropriate for two purposes: first,
for informing the potential buyer that the (new) product exists,
and secondly, for making him realize that he needs that product to
satisfy his wants.
(ii) Aggressive selling is needed for introducing a new product or for
a new company entering the market. Hence, the choice of channel
becomes limited. As we know, a wholesaler cannot undertake
aggressive selling. The manufacturer, therefore, has no choice but
to develop his own sales force to call directly on retailer/industrial
PAGE 223
Notes users/consumers. Or he may employ an agent and give him a

commission large enough to encourage him to sell the product
aggressively. In both these cases, wholesalers may be retained to
reach retailers/industrial users.
(iii) The existing channel may not be eager or willing to take on an
unknown product or company. Here the company will be just forced
to user away channel which will accept the product.
IN-TEXT QUESTIONS
1. Channels of distribution are also known as trade channels.
(True/False)
2. In indirect channels of distribution, there are no middlemen
involved.(True/False)
3. Selection of a distribution channel is based on which of the
following factors?
(a) Market Consideration
(b) Product Consideration
(c) Company Consideration
4. Paths where goods flow from consumer or industrial user to
producer or any other marketing intermediary are known as
_____________.
5. Considerations related to middlemen does not affect the decision
of selecting a particular type of distribution channel.
(True/False)
2.4 Introduction to Types of Middlemen

The term ‘middlemen’ refers to those individuals or institutions in the
channel which either take title to the goods or negotiate or sell in the
capacity of an agent or broker. Thus, a middleman may be defined as
an independent business firm operating between the producer and the
consumer or industrial user. A middleman facilitates the purchase and/
or sale or products as they move from producer to consumer. As noted
earlier, either he takes title to the goods as it passes between producer
and consumer, or he actively negotiates the transfer of title.
224 PAGE
Types of Middlemen: Based on the nature of their functions, middlemen Notes

are classified into two broad categories: agent middlemen and merchant
middlemen. These groups are discussed below and their sub-classification
is presented in figure below:
CLASSIFICATION OF MIDDLEMEN
Agent Middlemen Merchant Middlemen
Brokers Wholesalers Retailers
Commission Agents Pure Wholesalers
Factors Retail Wholesalers Small Scale Large Scale
Auctioneer Manufacturer
Itinerant Fixed Shop
Figure 2.2: Types of Middlemen

1. Agent Middlemen: Agent middlemen are also called mercantile agents
or mercantile middlemen. They are also known as functional middlemen
because they perform several marketing functions, though without having
title to the merchandise involve. They act not a principal in their own
right but as agents of the owners of goods. These middlemen do not earn
any profit, they do not take ownership of the goods and they charge a
commission for various services rendered by them. Brokers, commission
agent and auctioneers, etc., are examples of this category:
A. Brokers: They negotiate deals and make connections between parties
for a fee known as brokerage. They create space for discussion
between the buyers and sellers.
B. Commission Agents: They receive a set rate of compensation for
their services while taking no risk with the products. They are
knowledgeable about market trends and producers in addition to
being experts in initiating deals. They receive orders and coordinate
the delivery, transportation, and financial arrangements.
C. Factors: Factors are another type of agent middleman who makes
money by selling things. They can set their own pricing for the
product and sell it under their own name.
PAGE 225
Notes D. Auctioneer: A person who oversees an auction, often known as a

public sale where buyers can place bids, is known as an auctioneer.
2. Merchant Middlemen: These middlemen take ownership little to the
goods and later effect sales on their own accord. They work for a margin
of profit, and not for a commission. The two major group of merchant
middlemen are wholesalers and retailers:
A. 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.
B. Retailers: A retailer is a middleman who sells primarily to ultimate
consumers for non-business use.
IN-TEXT QUESTIONS
6. Middleman may be defined as an independent business firm
operating between the producer and the consumer.
(True/False)
7. A wholesaler is a middleman who sells primarily to ultimate
consumers for non-business use. (True/False)
8. Which of the following is not a type of agent middlemen?
(a) Brokers (b) Commission Agent
(c) Wholesalers (d) Auctioneer
9. ___________ negotiate deals and make connections between
parties for a fee known as brokerage.
10. Merchant Middlemen work for a margin of profit, and not for
a commission. (True/False)
2.5 Functions of Middlemen

The importance of middlemen lies in the functions they perform in the
channel towards facilitating smooth transfer of goods from producers to
consumers. Thus, middlemen bridge the gap of time, place and possession
that separate products from those who would use them. The important
functions performed by middlemen are as follows:
226 PAGE
(i) Providing Marketing Assistance: Many producers lack resources Notes

as well as willingness to take up direct marketing which can be
performed in a better way by different middlemen.
(ii) Reducing the number of Transactions: If all producers were to
deal with individual consumers separately the total number of
transactions would be too large. The presence of middlemen in the
channel reduces the transactions to the optimum level.
(iii) Relieving the Producer: Middlemen relieve the producers from
discharging disparate marketing activities which the former can
perform better because of their specialization producers can therefore
concentrate on the production function.
(iv) Breaking the Bulk: Producers cannot sell in small varying lots to
different types of customers and the latter do not purchase in uniform
big lots. Middlemen are capable of eliminating such discrepancies
in quantity by breaking the bulk, i.e., dividing a big lot into small-
order quantities.
(v) Eliminating Assortments Discrepancies: Manufacturers produce
goods in assortments which are different from the assortments
demanded by customers. It is the middlemen who eliminate such
discrepancies in assortments by collecting the goods from different
producers and making them available to customers according to
their requirements.
(vi) Matching Supply and Demand: Middlemen seek to match supply
and demand side of the market by performing three types of
marketing functions, viz., concentration, equalization and dispersion.
Concentration (functions facilitate assembly of various goods demand),
equalization helps in maintaining adequate inventory levels and
dispersal functions help in the distribution of the products.
(vii) Providing Link: Middlemen collect information from the market
and provide it to the producers for decision making. The link so
provided by middlemen between the producers and the markets
serves to improve various marketing decisions.
(vii) Financing: Middlemen performs financial functions of acquisition
and allocation of funds required to finance inventories at different
levels of the marketing channel.
PAGE 227
Notes (ix) Risk-bearing: Risks in various measures are involved in undertaking

various marketing activities in the channel. Such risks are taken by
middlemen present in the channel.
(x) Stabilizing the Price: Middlemen help to stabilize the price by
stocking goods and assuring constant flow of goods to the market.
This has the effect of equalizing demand and supply which stabilizes
prices not only in a single market but also maintains the same price
level in all markets.
(xi) Promotion: Middlemen at various stages in the distribution channel
perform promotion functions through development and dissemination
of persuasive communications about the offer designed to attract
customers.
2.6 Elimination of Middlemen
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.
228 PAGE
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.
PAGE 229
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
230 PAGE
in the market. This is well-evidenced by some successful attempts on Notes

the part of the manufacturers to eliminate middlemen from the trade
channel. For example, many manufacturers have started opening their own
retail shops. Similarly, the customers have tried to eliminate middlemen
by opening consumer’s cooperative stores. However, these efforts have
been made on a limited scale and for a few products only. Despite their
shortcomings and manipulative practices, middlemen continue to exist
today in the channel of distribution for the majority of the products.
IN-TEXT QUESTIONS
11. “Larger the number of middlemen, the higher is the cost. These
costs are borne by the ultimate consumer in the form of higher
prices.” This argument is in favour or against the middlemen?
(Favour/Against)
12. Which of the following are considered as functions of middlemen?
(a) Providing Marketing Assistance
(b) Financing
(c) Promotion
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
PAGE 231
Notes 3. (d) All of the above

4. Reverse channel
5. False
6. True
7. False
8. (c) Wholesalers
9. Brokers
10. True
11. Against

1. What do you mean by the term ‘channels of distribution’. List the
different types of channels of distribution and give a brief description
about them?
2. “Larger the number of middlemen, the higher is the cost. These costs
are borne by the ultimate consumer in the form of higher prices.”
Do you agree with this statement? Give reasons for your answer.
3. How is a wholesaler different from a retailer? Distinguish between
both the terms with suitable examples.
4. Who according to you is a ‘middleman’? What functions a middleman
performs?
5. Explain the concept of ‘Elimination of middlemen’. Give arguments
in favour and against this concept?
6. According to you on what basis a particular channel of distribution
is selected. Give a brief description of each point.
7. What is meant by the term ‘Logistics’? Also explain the need for
and importance of existence of channels of distribution in the field
of marketing?
8. Are wholesalers same as manufacturers? Give reasons for your
answer.
232 PAGE
9. Write short notes on the following: Notes

(a) Indirect channels of distribution
(b) Importance of channels of distribution
(c) Functions of Middlemen

Press.
Marketing (17th Edition), Pearson Education. Indian edition.
PAGE 233
L E S S O N
3
Distribution – Wholesaling
and Retailing
Dr. N. Mishra
University of Delhi
STRUCTURE
3.2 Introduction
3.3 Wholesalers
3.4 Retailers
3.5 Summary

u Understand the meaning, functions, and types of Wholesalers.
u Identify meaning, types, and functions of retailers.
u Describe the current trends in retailing and wholesaling.
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.
234 PAGE
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.
3.3.1 Types of Wholesalers

Based on the functions they perform; wholesalers may be of the following
types:
PAGE 235
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.
3.3.2 Functions of Wholesalers

Wholesalers provide the following important functions:
(i) Buying: The wholesalers anticipate customer demands gather information
regarding alternative sources of supply and purchase and assemble
goods from these sources.
(ii) Selling: The wholesalers sell goods in large lots to retailers and
industrial users.
(iii) Storing: Wholesalers provide warehousing services at lower cost
than most individual producers or retailer could provide.
(iv) Transporting: The wholesalers transport goods from the place of
manufacture to their own godowns from where they further move
the goods to retailers.
(v) Grading and Packaging: The wholesalers perform grading of the
assembled goods according to certain standards, often give a brand
name and undertake packaging of goods to convince the buyers of
the quality of goods being purchased.
236 PAGE
(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.
3.3.3 Services Offered by Wholesalers

A. Services provided by Wholesalers to manufacturers
1. They place advance orders for the product based on their forecasted
demand for the product. This allows the manufacturer to plan his
output and take advantage of economies of scale.
2. They may also provide transportation services by transporting goods
from manufacturers to godowns and ultimately to retailers.
3. They conduct advertising and sales promotion operations and use
skilled sales representatives to do so.
4. They offer financial assistance to manufacturers in the form of cash
payments for goods acquired from them, as well as financing.
5. They keep producers informed of changes in consumer behaviours,
interests, preferences, and fashion.
6. They also play a crucial role in determining final product prices.
B. Services provided by Wholesalers to Retailers
1. They function as the retailer’s ‘purchasing agent,’ saving them the
bother of locating and assembling goods from various producers.
2. They inform stores about latest items, their applications, and pricing
changes. They also help merchants with product advertising and
sales.
PAGE 237
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)
238 PAGE
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.
3.4.1 Functions of Retailers

Retailing constitutes the final link in the distribution chain. It performs
the following essential functions:
(i) Buying and assembling of goods from favour wholesalers and
manufacturers with a view to meeting the needs of ultimate consumers.
(ii) Selling of goods in retail to the ultimate consumers.
(iii) Storing of goods to hold stocks so as to maintain uninterrupted supply
of products demanded by the consumers.
(iv) Transporting goods from wholesalers.
(v) Dividing, packaging and pricing of goods purchase from wholesalers.
(vi) Risk-taking against possible loss of goods due to fire, theft,
determination, etc.
(vii) Acting as agent of customers and collecting market information
on customer’s needs and demands and supplying the same to the
wholesalers and manufacturers.
PAGE 239
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.
240 PAGE
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
Small Scale Large scale
(a) Departmental stores

Itinerant Fixed shop
(b) Multiple shops
(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
(d) Market traders (d) Speciality shops (f) Supermarkets

(e) One-price shops (g) Superstores
(f) Vending machines
(g) Sale shops
Figure 3.1: Classification of Retailers
PAGE 241
Notes 3.4.3.1 Small Scale Retailers

I. Itinerants:
Itinerant retailers are mobile retailers who move from place to place to
sell their goods as they do not have any fixed business premises. Their
investment is quite small, they deal generally in a single lira of products,
and after shift to another line of products, and often shift to another
line with change in demand of seasonal items. Important types of such
retailers are:
1. Hawkers and Peddlers: The hawker uses a beast of border or vehicle
to carry his wares whereas the peddlers carry it bodily. Such retail
sale is of a very odd origin and now confined mostly to rural areas.
Their retailers generally handle cheap goods with low unit’s value
like toys, kitchen wares, and readymade garments, etc. Generally,
they sell goods at very tempting prices which are considerably
lower than the market sates.
2. Street Traders: As their name suggests, street traders sell their wares
in the busy streets or on footpaths of busy roads. These day street
traders have become very popular in big towns and metropolitan
cities.
3. Cheap Jacks: A cheap jack has independent shop in a business
locality though he keeps on shifting his shop from on locality to
another for earning higher profits.
4. Market Trader: These traders even their shops at different places on
fixed days known as ‘market says’. Such days are fixed generally
on weekly basis.
3.4.3.2 Large Scale Retailing
Large scale retailing in our country is of recent origin and it is assuming
greater importance day by day. Important institutions engaged in large
scale retailing are discussed below:
I. Department Stores
The Department store is considered to be of French origin. It is stated
that Bon Marche and the other departmental stores of Paris came into
existence and flourished during the period of the Second French Empire,
i.e., 1852-71. A departmental store is a large-scale retailing business
242 PAGE
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.
PAGE 243
Notes (iv) Economics of Scale: Because of large scale buying a departmental

store can buy merchandise at lower cost and effect economy in
storage and transportation of goods.
(v) Better Promotion: Because the size of a departmental store is
large and its financial position strong, it can make better use of
promotional tools like advertising and personal selling.
(vi) Service: A departmental store provides several services to its customers,
e.g., entertainment, restaurant car parking, telephone, free home
delivery, etc.
Limitations: Against these advantages, a departmental store suffers from
the following drawbacks:
(i) High Operating Costs: Operating costs of department stores are
usually very high particularly on account of high rentals of business
premises, expensive maintenance, and a variety of services they
provide they provide to customer’s expensive window dressing,
interior decoration and advertising further add to their costs.
(ii) Inconvenient Locations: A departmental store, though centrally
located, may prove to be a quite inconvenient location in that many
customers do not like to visit it just for shopping.
(iii) Inefficient Departments: Certain departments are to be retained in
spite of their inefficient working and recurring losses.
(iv) Competition: A departmental store faces shift competition from other
forms of retailing organizations.
(v) Lack of Personal Element: The personal attention which an individual
trader pays to the customer is missing in a departmental store where
paid salesmen work.
II. Multiple Shop or Chain Stores
Under this form of retail organization similar shops are established in
multiple by the same management. A multiple shop system is a network
of a number of branches situated in different localities in the city or in
different parts of the country. All branches operate under central ownership
and control. Each store of the chain receives supply from and remits
the sale proceeds regularly to the centra office. Unlike a departmental
store, these stores are established at those places where customers are
concentrated. This system of retailing is called ‘multiple shops’ in Europe
244 PAGE
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.
PAGE 245
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.
246 PAGE
(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.
PAGE 247
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:
248 PAGE
(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.
PAGE 249
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
250 PAGE
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
PAGE 251
Notes and method of operation. W.J. Stanton defines a supermarket as “a large

scale, departmentalized retailing institution offering a wide variety of
merchandise, operating largely on a self-service basis with a minimum
customer service, and featuring a price appeal and usually ample parking
space.” The essential features of a supermarket are as under:
(i) It is a large ‘cash and carry’ store.
(ii) It provides a wide variety of articles.
(iii) It uses heavy advertisements and mass display of merchandise.
(iv) It does not offer credit facility.
(v) If offers very few services.
(vi) It does not normally employ salesmen and hence it is called ‘self-
service store’.
(vii) It sells at low prices due to economics of large scale buying, few
customer services, and lower profit margins.
In India, at present there are no supermarkets of the type found in the
U.S.A and Europe. The name is, however, indiscriminately used for most
of the departmental stores organized on the lines of cooperative. The Super
Bazar of Delhi is an example of this type—it sells partly though salesmen
and partly through self-service method; the variety of merchandise it
deals in is not as wide as that of the supermarkets in western countries;
besides it does not sell only those articles which are packed and stored
conveniently in shelves.
Supermarkets offer many advantages: the customer enjoys perfect freedom
in purchasing because pressure-selling is completely missing; prices are
low due to self-service combined with elimination of various organizational
and establishment charges; economies of large-scale buying are available;
and shopping time is considerably reduced because the customer can get
almost every article of his requirements from the same place. Supermarkets
have great scope or expansion in our country.
VII. Superstores
Superstores are also known as hypermarkets or super-supermarkets.
They represent the latest innovation in large scale retailing. A superstore
combines the features of a supermarket and a general merchandise store.
Though it operates basically on the lines of a supermarket, it differs
252 PAGE
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.
3.4.4 New Trends in Retailing

The following new trends are visible in retail trading:
(a) Large scale retailing is becoming quite popular.
(b) Both the manufacturers and the retailers are making efforts to eliminate
middlemen.
(c) There is a continuing move towards scrambled merchandising, i.e.,
the practice of product diversification by retailers.
(d) Non-store retailing is becoming popular day by day.
(e) The institutional structure of retailing is undergoing a constant change
from traditional retail stores towards large scale supermarkets.
(f) Social media and internet marketing are two of the biggest digital
trends in the retail industry.
(g) Flexible payment options are becoming increasingly important to
attract the young customers. Nowadays, options like pay through
a credit card or even pay later are becoming popular trends.
3.4.5 Difference between Wholesaler and Retailer

Wholesalers Retailers
1. Wholesalers buy from the Retailers buy from the wholesalers and
manufactures and sell goods to sell goods to the consumers.
the retailers.
2. Wholesalers usually sell on credit Retailers usually sell for cash.
to the retailers.
3. They specialise in a particular They deal in various kinds of goods.
product.
4. They buy in bulk quantities from They buy in small quantities from the
the manufacturers and sell in wholesalers and sell in smaller quantities
small quantities to the retailers. to the ultimate consumers.
PAGE 253
Notes Wholesalers Retailers

5. Wholesalers always deliver goods Retailers usually sell at their shops.
at the doorstep of the retailers. They provide door delivery only at the
request of the consumers.
6. A wholesaler needs mainly a A retailer needs a shop or a showroom
godown to stock the goods he to sell.
handles.
7. A wholesaler goes to different A retailer usually sells at a particular
places to supply. place. Sometimes he may have branches
in other places.
8. A wholesaler need not provide A retailer usually provides shopping
shopping comforts like luxurious, comforts mainly to attract customers.
interiors, provision of air-
condition, trolleys, etc.
9. As the wholesaler specialises in As the retailer deals in a variety of
a particular product, he has to goods, he need not influence buyers.
necessarily convince the retailers He can let the buyer choose any brand
about the product quality. Only of product he likes.
then the latter will place an order.
10. As per the custom of their trade, The retailers normally do not allow any
wholesalers allow the retailers discount to their customers. Some of
trade discount each time the them may offer cash discount to bulk
retailers buy. buyers. Sometimes, they may offer
seasonal discounts.
(Source: https://accountlearning.com/top-10-differences-wholesalers-retailers/)
IN-TEXT QUESTIONS
6. A departmental store is a large-scale retailing business unit
which handles a wide variety of shopping and specialty goods
and is organized into well-defined separated departments for
purposes of promotion, service, accounting and control.
(True/False)
7. A _______________ system is a network of a number of branches
situated in different localities in the city or in different parts
of the country.
254 PAGE
8. Which of the following is not covered under small scale retailers? Notes
(a) Hawkers (b) Market traders

(c) General stores (d) Supermarkets
9. Departmental stores are established under the Cooperative Societies
Act. (True/False)
10. _________ are also known as hypermarkets or super-supermarkets.
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
PAGE 255
Notes 4. Manufacturer
5. True
6. True
7. Multiple shop
8. (d) Supermarkets
9. False
10. Superstores

1. What is meant by a wholesaler or a wholesaling business? List the
different types of wholesalers existing in your area with examples.
2. How are retailers different from wholesalers? Give a detailed
description of their functions.
3. Define a Retailer? What are various kinds of retailing?
4. Do you agree that retailing as an activity has evolved? What are the
latest trends in retailing?
5. What are the differences between small scale and large-scale retailers?
Give examples of both.
6. Explain the concept of retailers? What are the differences between
wholesalers and retailers?
7. What are the services rendered by wholesalers to the retailers and
producers?
8. Differentiate between departmental stores and cooperative stores?
9. Write short notes on:
(a) Supermarkets
(b) Functions of retailers
(c) Latest trends in wholesaling and retailing
(d) Small Scale retailers
(e) Functions of wholesalers
256 PAGE

Press.
PAGE 257
L E S S O N
4
Logistics Decisions
Dr. N. Mishra
University of Delhi
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
4.2 Introduction
4.3 Concept of Marketing Logistics
4.4 Components of Marketing Logistics
4.5 Supply Chain Management
4.6 Summary

u Comprehend the concept of marketing logistics.
u Identify and understand the types and functions of marketing logistics.
u Describe the objectives of marketing logistics.
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
258 PAGE
of production to the point of usage are referred to as marketing logistics. Notes

A company’s ability to accomplish its marketing goals is significantly
aided by an efficient marketing logistics system. The logistic tasks are
classified further into order processing, warehousing, transportation,
information monitoring and inventory control which are discussed in the
lesson below.
4.3 Concept of Marketing Logistics

The term “logistics” stems from the Greek word “logisticos” meaning the
science of computing and calculating. In the military sense, Webster defines
Logistics as the “procurement, and transportation of military materials,
facilities and personnel”. Today in the industrial and commercial world,
logistics has acquired a wider meaning. Essentially it covers activities
for the material flow from the source to the processing facilities and
subsequent distribution of finished goods to the ultimate users.
Marketing logistics has been described by Philip Kotler as “planning,
implementing and controlling the physical flows of materials, final goods
and related information from point of origin to point of consumptions to
meet customers’ requirements at a profit”. In short, it involves getting
the right product in right quantity to the right customer in the right place
at the right time.
The term “logistics” refers to the complete process of bringing raw
materials and component parts into an organisation, then moving to next
stage of work-in-progress through the organisation and transporting finished
goods out of the organisation. To carry out this logistics task, effective
marketers establish and nurture long-term partnerships with suppliers,
companies, partners, customers, wholesalers, etc.
Major Elements in logistics are transportation, inventory maintenance,
warehousing, Order processing, etc.
4.3.1 Importance of Marketing Logistics

Following points explain the importance of marketing logistics:
1. Improving customer experience: Logistics management helps to
provide faster and quality service.
2. Accessibility: Ensures access to the right product at right time.
PAGE 259
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.
4.3.2 Objectives of Marketing Logistics

Any marketing logistics system’s goal is to deliver the items at the lowest
possible cost and at the appropriate time and location. Customer satisfaction
and cost cutting are thus the two primary goals of a marketing logistics
system of a business. However, in a particular marketing scenario, there
might be some more focused aims of logistics department, these are
discussed below:
1. Improving Customer Service: The modern marketing concept
has always talked about the importance of customer satisfaction,
same is the case in logistics. By creating a productive system of
warehousing, quick and affordable transportation, and an ideal
amount of inventory, a successful management of marketing logistics
contributes to raising the quality of customer service.
260 PAGE
Many marketing surveys have shown that improving customers Notes

service is a major priority in the distribution industry. To this end,
an organization must develop a set of service specification, called
a customer service standard, identifies a specific and measurable
goal appropriate to physical distribution. For instance, a firm may
promise to “process an order and deliver within two days.” If it does
fulfils its promise the customer feels delighted and this develops a
good image of the company towards its customer base.
2. Selecting Modes of Transportation: A major function of the physical
distribution system in many companies is transportation-moving
products to customers. Management must decide on both the mode
of transportation and the carriers. Transportation is discussed in
detail in latter section.
3. Designing and operating Warehouse Facilities: Warehousing is
the design and operation of storage facilities. Products must be
stored until they are demanded by channel members. Warehousing
is discussed in detail in a latter section.
4. Designing the Order Processing System: The physical distribution
process is activated by customer orders. Order Processing is the receipt
and transmission of sales order information. Efficient processing of
orders can reduce the time required for delivery and thus reduce
storage period and increase customer satisfaction. Order processing
consists of three major steps: order entry-receiving and recording
orders from customers; order handling-transmitting orders to the
concerned departments/section; and delivery-moving the product
from its location to customer’s place.
5. Physical Handling of Products: Also called as materials handling, it
refers to the physical handling of products in warehouse operations
and in the transportation of products from manufactures to distributors
and ultimate consumers. How a product will actually be handled
depends primarily on the characteristics of the products. For example,
physical handling of bulk liquids and gases will be quite different
from that of cement bags, eggs, food grains etc.
6. Establishing Inventory Control: Inventory control consists- of
physical distribution activities that help marketers develop and
maintain adequate assortments of products to satisfy target markets
PAGE 261
Notes and meet customer’s needs. Inventory control is discussed in detail

in a latter section.
7. Reduction in Distribution Cost: All the activities involved in physical
distribution involve monetary costs. Even stock-out situation, speedier
than needed physical movement of products and more than optimum
customers service, add to the cost of distribution. A systematic
planning and execution of physical distribution programme leads
to considerable savings in distribution costs.
8. Stabilization of Price: By a judicious use of available transport
facilities
Principles and compatible warehouse operations a company may
of Marketing
regulate the product flow in the market and thereby, prevent
price fluctuations
8. Stabilization of Price.arising from the
By a judicious usesupply factor.
of available This contribution
transport facilities and
is particularly
compatible warehouserelevant
operationsina our markets
company on account
may regulate of flow
the product consumer
in the
dissatisfaction with and governmental regulation of rising prices
market and thereby, prevent price fluctuations arising from the supply factor. This
contribution is particularly relevant in our
attributed to product scarcity and price spiral. markets on account of consumer
dissatisfaction with and governmental regulation of rising prices attributed to product
scarcity and price spiral.
4.3.3 Stages in Marketing Logistics
4.3.3 Stages in Marketing Logistics
Marketing
Marketing logistics are divided
logistics are into the following
divided stages:
into the following stages:
.
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/)
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262 PAGE
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
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)
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?
4.4.1 Order Processing

Processing consumer orders serves as the foundation of marketing logistics.
The customer orders should be completed as quickly as possible in order
to give a better customer service. Order processing starts from receiving
a order, recording it, filling it, processing it and assembling all received
orders for further transportation.
PAGE 263
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?
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
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Figure 4.2 : Order

Fig 4.2 Processing
: Order Processing Process
Process
228 | P a g e
Order Placement: This is the stage at which the customer successfully
places their ©order. Typically,
Department of Distance &itContinuing
contains details
Education, about
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of Open customer, the
address, the items requested and their quantities, the order number, etc.
Picking Inventory: This step involves picking the right items in the right
quantity from the inventory as per the order details.
Sorting: According to the requests placed by customers’, the goods are
sorted at this step based on their place of demand, place of delivery,
destination, type, size, etc.
Packing: Here, the order is labelled, packed and sent for further action.
The package is also weighted and then moved.
Shipping: This process involves shipping orders to their final locations.
Organisations have a choice between two methods for shipping the orders,
either they ship the order on them on or involve a reliable shipping
partner with them.
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
264 PAGE
variable in a marketing strategy. The selection of a transportation mode Notes

or method affects all aspects of the physical distribution system.
Function of Transportation: Transportation performs the following
important functions in the field of marketing:
(i) It creates times and place utilities by moving products from one
place to another.
(ii) It equalizes supply of products. Transportation makes it possible
to undertake production at certain ideal locations and move the
products to different areas thereby equalizing the supply. It thus
become possible for consumers to obtain, at reasonable prices, the
products which are produced at distant points.
(iii) It stabilizes prices of several commodities. This is achieved by moving
commodities from surplus area to deficit areas, thereby equalizing
supply and demand factors and making the prices of commodities
to even out.
(iv) Helps in the growth of industries whose products require marketing
without much loss of time. For example, fish, eggs, milk, vegetables,
etc.
(v) It ensures smooth flow of commodities into the hands of the consumers.
(vi) It enables the consumers to consume a large variety of products
which are not produced locally.
(vii) It intensifies competition and by creating demand, enables large scale
production. This has the effects of reducing prices.
Means of Transport: The various means of transport can be put into three
broad categories: land transport, water transport and air transport. Land
transport is further sub-divided into roadways, railways, and pipelines;
water transport is sub-divided into inland waterways (canals, rivers, lakes
and channels) and ocean ways (costal and overseas) and air transport is
sub-divided into cargo flights and passenger flights.
Choice of Mode Transport: There are several modes of Transport and
each one of them possesses certain merits and demerits. While selecting a
particular mode of transport a firm should consider the following factors:
(i) Suitability: The mode of Transport chosen should be suitable for
the produced to be Transported. For example, water Transport is
PAGE 265
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.
266 PAGE
While selecting a particular mode of transport, a company is required to Notes

consider various factors discussed above while keeping in mind its own
transport requirements size, weight, and durability of the goods to be
transported and the distance and time of transportation.
4.4.3 Storage and Warehousing

Storage involves holding and preserving of goods between the time of
their production and the time of their use. Storage is necessary because
of many reasons first, when production is seasonal but consumption is
perennial second, when production is continuous but consumption is
seasonal; third, there is no perfect time synchronisation between production
schedules and consumer demands, fourth, the existence of middleman like
wholesalers and retailers in the channel required storage of goods for
supply to customer in small lots; fifth, storage of goods & raw materials
becomes necessary to avoid interruptions in production schedules; finally,
goods may be stored by traders for speculative purposes, or by produces
to guard against constantly receding princes. Storage is considered as a
function of equalization – it tends to adjust supply to demand so as to
equalize them in the interest of the manufacturer middlemen and consumers.
A warehouse is a place where goods are stored or accumulated. The storage
function is thus made effective through the establishment of warehouse.
And warehousing is the design of operation of storage facilities, i.e.,
warehouses.
Advantages of Warehousing: The storage of goods in warehouses offers
the following advantages:
(i) Stabilisation of Prices: Warehousing ensures judicious movement
of goods between different centres, thereby stabilizing prices.
(ii) Smooth Trading: Warehouses assist in maintaining continuous sales.
They avoid out-of-stock conditions and thereby increase the sales
volume.
(iii) Safety: Warehousing ensures the safety of stocks from natural and
human causes.
(iv) Reduction in Costs: The warehouses provide a resting place for
heavy stocks purchased in anticipation of demand and/or use. These
PAGE 267
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
268 PAGE
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-
PAGE 269
Notes scale farming is popular. A silo is a device for storage of grain in

bulk. It is movable and has parts. One is used as a working house,
while the other is a storage house with a number of bins. Grain
is lifted on to these bins and discharged whenever necessary. All
the operations in a grain elevator are mechanical which facilitate
movement of grain.
4.4.4 Inventory Control

Inventory, in its broadest sense, means stock of raw materials, purchased
part, tools and jigs general stores and supplies, work-in-process, and
finished products kept in reserve for certain period of time. In the context
of our discussing regarding marketing. Inventory means the stock of goods
held by a firm in anticipation of sales. Inventory may be of two types:
in-transit inventory which is moving through the distribution system,
and warehouse inventory, i.e. stock of goods lying in the factory and/
or warehouses. Every business enterprise must carry some amount of
inventory for the following reasons:
(a) To carry reserves in order to avoid stock-outs causing interruptions
in production.
(b) To maintain sufficient stocks to provide customers with adequate
service while replacement stocks are in transit.
(c) To take advantage of bulk buying.
Whereas it is necessary for every enterprise to maintain some level of
inventory, holding inventory involves blocking up of a sizeable amount
of capital which remains idle and entails considerable amount of carrying
costs. It is therefore necessary that inventories are maintained at some
desirable level. The technique of maintaining the size of the inventory
at some desirable level keeping in view the best interest of an enterprise
is known as inventory control. Inventory control involves the following
two types of functions:
(a) Operational control aimed at maintaining the inventory of each item
at the optimum level; and
(b) Accounting control to maintain proper records of receipts, withdrawals,
and balance of each item.
270 PAGE
Objectives of Inventory Control: The primary concern of inventory Notes

control is to determine and maintain the optimum level of inventory
investment because a too big or small inventory is always uneconomical
to the firm. Thus inventory control seeks to achieve the following two
objectives which are conflicting in nature:
(i) To maintain adequate size of inventory for continuity of operations
and sales: The greatest insurance against stock-out of any item
at a crucial moment is maintain huge amount of inventories. But
holding of large amount of inventories is uneconomical because it
blocks a sizeable amount of capital and entails considerably high
carrying costs.
(ii) To maintain minimum investment in inventories: With a view to
reducing costs involved in holding inventories, the inventory control
system seeks to minimize investment in inventories. However, this
objective of inventory goes down, the risk of stock-outs increases.
Moreover, reduced inventories may result in increased purchasing
and handling costs because of frequent purchases in smaller lots.
In view of the above, it is the function of inventory control personnel
to see that best or optimum level of inventories is maintained so as to
avoid unnecessary investments in them, and to ensure smooth production
and/or sales operations.
Functions of Inventory Control
In order to achieve its objective of maintaining an optimum level of
inventories the inventory control system must perform the following
functions:
(i) To set up and maintain inventories in accordance with the requirements
of enterprise operations.
(ii) To order for fresh stocks to replenish inventories.
(iii) To control all types of inventories, i.e., keeping a check on receipt,
issues, pilferage, unauthorized removals, etc.
(iv) To properly classify and index all items of inventory.
(v) To work in coordination with planning department to determine new
lines of inventory and the methods used to order and stock such
items.
PAGE 271
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:
272 PAGE
(a) Ordering costs: These consist of cost of placing orders, Notes

transportation and handling charges. The ordering costs increase
in proportion to the number of orders place.
(b) Carrying costs: These costs include storage costs, cost of
deterioration and obsolesce, insurance, taxes, and most importantly,
the opportunity costs of funds invested in inventories. These
costs move in direct proportion to inventory size. Thus, the
lower the size of inventory held, the smaller is the carrying
costs.
(c) Total costs: The total cost of holding inventory is the sum of
the ordering and carrying costs.
The EOQ model seeks to weigh the cost of carrying a large inventory
(with infrequent orders) against the cost of processing many small orders
and then determines the economic order quantity—the order size that
minimizes the total cost of ordering and carrying inventory. The EOQ
formula for the optimal order quantity is thus:
2DR
EOQ=
I
Where EOQ = Optimum average order size (Units)
D = Total demand (units)
R = Cost of processing an order (Rs.)
I = Cost of maintain one Unit of inventory per year (Rs.)
4.4.5 Information Monitoring

The marketing logistics managers constantly want the most recent data on
stock, shipping, and warehousing. For instance, information regarding the
current stock position, future engagements, and replenishment capabilities
are constantly needed in relation to inventory. Similar to this, information
regarding the availability of different modes of transportation, their
costs, services, and suitability for a particular goods, etc., is necessary
before picking a shipping company. Information on space utilization,
work schedules, unit load performance, etc., is needed with regard to
warehousing.
PAGE 273
Notes An excellent management information system would be extremely

helpful in regulating expenses, enhancing services, and figuring out the
distribution’s overall efficacy in order to receive all the information about
the tasks mentioned above. It is challenging to accurately estimate the
distribution and operations’ cost. However, if accurate data is provided and
recorded, it may be more predictable and near figure can be generated,
guaranteeing a significant cost savings.
IN-TEXT QUESTIONS
6. The primary concern of inventory control is to determine and
maintain the optimum level of inventory investment because a
too big or small inventory is always uneconomical to the firm.
(True/False)
7. ________ costs consist of cost of placing orders, transportation,
and handling charges.
8. Which of the following are not techniques of inventory control:
(a) ABC Analysis
(b) Economic Order Quantity
(c) Correct order quantity
9. Order processing process starts from order packing and ends at
sorting. (True/False)
10. Warehousing ensures judicious movement of goods between
different centres, thereby stabilizing prices. (True/False)
4.5 Supply Chain Management

“A Simplified Supply Chain” denotes the flow that begins with the acquisition
of raw materials and ends with the sale to end customers. Supply Chain
Management (SCM) refers to the process of integrating all activities in
the supply chain. SCM necessitates a high level of coordination among
chain members. To optimize the final customer’s happiness, all parties
must be willing to exchange information and collaborate.
The supply chain includes all parties who are directly or indirectly involved
in fulfilling a client request. Supply Chain Management (SCM) is the
274 PAGE
intricate network of trade ties that connects manufacturers, suppliers, Notes

wholesalers, retailers, and the logistical infrastructure providers.
Supplier Manufacturer Distributor Retailer Customer
SCM is the administration of a network of interconnected businesses

that are involved in the final provision of product and service packages
required by end customers. It entails connecting the network and
communication infrastructure of businesses and suppliers to ensuring
that the correct product is available at the proper time, place, price, and
condition. SCM encompasses all raw material, work-in-process inventory,
and finished goods movements and storage from point of origin to point
of consumption. In essence, it blends supply and demand management
both locally and nationally. It employs strong tools that let organizations
to exchange information such as inventory levels, sales trends, and so
on in an effort to cut cycle times in order to fulfil orders more quickly,
minimize surplus inventory, and improve customer service.
Collaboration, cooperation, coordination, and connectivity are the four Cs
of SCM. It allows collaboration among business partners, collaboration
among business enterprises and supplies to provide prompt execution of
orders, logistics coordination for timely delivery of goods, and connectivity
through networking infrastructure to ensure constant response.
4.5.1 Elements of SCM

The supply chain manager tries to minimize shortages and keep costs
down. The job is not only about logistics and purchasing inventory.
According to Salary.com, supply chain managers “oversee and manage
overall supply chain and logistic operations to maximize efficiency and
minimize the cost of organization’s supply chain.”
Productivity and efficiency improvements can go straight to the bottom
line of a company. Good supply chain management keeps companies out
of the headlines and away from expensive recalls and lawsuits. In SCM,
the supply chain manager coordinates the logistics of all aspects of the
supply chain which consists of the following five parts.
1. Planning: To get the best results from SCM, the process usually begins
with planning to match supply with customer and manufacturing
PAGE 275
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.
276 PAGE
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.
PAGE 277
Notes Good management of marketing logistics helps in improving customer

experience, accessibility, creating time and place utility, boosting profits
and capturing a large market share.
The main components of logistics are order processing, transportation,
warehousing, inventory control and information monitoring.
Supply Chain Management (SCM) refers to the process of integrating all
activities in the supply chain.
1. Inbound
2. True
4. False
5. True
6. True
7. Ordering costs
8. (c) Correct order quantity
9. False
10. True

1. Define the term ‘Logistics’? What are the main objectives of marketing
Logistics?
2. Do you think marketing logistics play a crucial role in the process
of marketing? Give reasons for your answer.
3. What are the various stages of marketing logistics? Discuss with
the help of an example.
4. What according to you are the components of marketing? Give a
brief description of all the components.
5. What is the role of transportation in logistics? How according to
you a mode of transport is chosen?
278 PAGE
6. How does warehousing play an important role in the process of Notes

logistics? Can the activity of marketing logistics be carried without
warehousing? Discuss the various kinds of warehouses used by a
producer?
7. Define the term inventory control. What are its objectives and
functions? Discuss two techniques of inventory control.
8. Define the concept of supply chain management? Discuss various
elements of SCM.

PAGE 279
UNIT - V
PAGE 281
L E S S O N
1
Promotion Decisions
Ms. Ritika Sharma
Assistant Professor
University of Delhi
STRUCTURE
1.2 Introduction
1.3 Concept of Promotion
1.4 Promotion Decision
1.5 Communication Process
1.6 Integrated Marketing Communication
1.7 Summary

u Comprehend the concept, importance, and objectives of promotion: the fourth ‘P’ of
marketing.
u Understand the concept and tools of integrated marketing communication.
u Understand the process of communication and the concept of promotion mix.
u Learn about various factors affecting the promotion mix of an organisation.
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
PAGE 283
Notes and stimulate demand are collectively known as promotion. We will

discuss the various tools of promotion below.
1.3 Concept of Promotion

Promotion is the process of communication with the potential buyers
involving information, persuasion and influence. It includes all types of
personal or impersonal communication with the customers and middlemen.
According to the American Marketing Association. Promotion is “the
personal or impersonal process of assisting and /or persuading a perspective
customer to buy a commodity or service or to act favourably upon an
idea that has commercial significance to the seller.”
Promotion is a vital element of the marketing mix of a business enterprise.
It is the spark plug of the marketing mix. No business enterprise can sell
its goods and services without informing the people about the availability
of products and without creating in them the desire to buy the goods and
services. Customer demand is largely dormant. It must be awakened
and stimulated through promotion. The prospective customers have to
be informed about the features, utility and availability of products. The
purpose of promotion is to inform, persuade and influence the prospective
customers. The need for promotion has increased due to stiff competition,
widening market, rapid changes in consumers’ tastes and technology and
growing distance between producers and consumers.
Promotion is persuasive communication and to be effective it must
perform four tasks. First of all, it must gain the attention of the potential
customer. Secondly, the promotional message must arouse interest in the
product or service. Thirdly, it must stimulate desire by convincing the
prospective buyer of the product’s utility. Lastly, it must produce action
in the form of purchase. These tasks can be summed up in the AIDA
(attention—interest—desire—action) model.
These tasks can be accomplished if the promotion is well planned.
Promotion planning refers to the formulation of objectives, budgets
and strategies of promotion and selection of promotional techniques in
the light of marketing conditions. The promotional strategy of a firm
should be consistent with the nature and quality of product, distribution
channels and pricing policy. To be specific promotion planning involves
managerial decisions in the following areas:
284 PAGE
(1) Determination of promotion objective through analysis of the target Notes

market.
(2) Formulation of promotion budget.
(3) Choice of promotion budget.
(4) Implementation and evaluation of promotion mix.
1.3.1 Objectives of Promotion

The objectives of promotional activities are as follows :
(i) To Provide Information: The first aim of promotion is to inform
the prospective customers about the availability, features, and uses
of products so that they need not search out for them.
(ii) To Stimulate Demand: Promotional activities are undertaken to
create awareness and interest of consumers in new products. Various
tools of promotion are used to influence buyer behaviour in favour
of a company’s products. A seller wants to increase the sale of his
products by changing the demand pattern in his favour.
(iii) To Differentiate the Product: A businessman carries on promotional
activities in order to differentiate his product from the competitive
products. The objective of promotion is not only to increase one
time sale of a products but to build the consumer loyalty for its
brand so that consumers keep on buying the same brand again
and again. Such brand loyalty helps a business firm in tackling
competition and in gaining control over the market.
(iv) To Highlight the Utility of the Product: Promotional activities
add value to a product by emphasizing its special features. For
examples, in the advertisement of Surf washing powder its whitening
power and safety of clothes are emphasized. Such value fetches
a higher price and provides more utility to the consumers. The
image of the product continues to be high.
(v) To Meet Competition and Stabilise Sales: Promotional activities
are undertaken to counter competition by reassuring the customers
about the quality and price of the product or service. Customers
tend to buy the more heavily advertised brands. Promotion is also
aimed at stabilising sales volume in the long run.
PAGE 285
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.
1.3.2 Importance of Promotion

Promotion plays a pivotal role in the success of any business, organization,
or individual endeavour. It involves effectively communicating and
showcasing products, services, ideas, or messages to a target audience.
Following are the advantages of promotion:
(1) Increased Awareness: Promotion helps to create awareness about
a product, service, brand, or cause among the intended audience.
Without effective promotion, even the best offerings might go
unnoticed, leading to missed opportunities.
(2) Customer Engagement: Engaging with potential customers is crucial
for building relationships and trust. Promotional activities allow
businesses to interact with their audience, answer questions, and
address concerns, fostering a sense of connection.
(3) Market Differentiation: In today’s competitive landscape, businesses
need to stand out. Promotion allows them to highlight their Unique
Selling Propositions (USPs) and differentiate themselves from
competitors, showcasing why they’re the better choice.
(4) Boost in Sales: Effective promotion can lead to increased sales and
revenue. By reaching out to the target audience with compelling
messages, businesses can persuade potential customers to make a
purchase or take a desired action.
(5) Brand building: Consistent promotion contributes to brand building
by creating a distinct identity in the minds of consumers. Strong
branding can lead to brand loyalty and higher perceived value,
which can translate to long-term success.
(6) Introduction to New products: When launching a new product or
service, promotion is essential to generate excitement and interest.
It educates potential customers about the features, benefits, and
value of the offerings.
286 PAGE
(7) Relationship Building: Promotion isn’t limited to transactions; it can Notes

also foster a sense of community and engagement. Social media and
online platforms enable businesses to build ongoing relationships
with customers, leading to brand advocacy.
(8) Credibility and Trust: A well-executed promotion builds credibility
and trust. When potential customers see consistent, informative, and
appealing messages, they are more likely to trust the business and
its offerings.
1.3.3 Promotion Mix

The term ‘promotion mix’ is used to refer to the combination of different
kinds of promotional techniques used by a business enterprise to create
and maintain sales of its products. A firm can utilize one or more of
four basic tools of promotion, viz.., personal selling, advertising, sales
promotion, and publicity. These are known as elements of promotion
mix. Determination of promotion mix is important because of two
reasons. Firstly, a combination of promotional activities has to be used
because one simple promotional tool may not prove effective. In the
modern business world, firms cannot depend upon a single technique
of promotion. They have to employ all promotional tools in different
degrees. Secondly, all promotional tools are not of equal importance
and their value may change with change in the business environment.
There is no one ideal or tailor-made promotion mix for all firms or
for all times. Every firm has to design its own promotion mix. The
elements of promotion mix represent alternative ways to influence
buyers. Therefore, there can be cross-substitution among them. In order
to develop a promotional strategy, alternative combinations of personal
selling, advertising, sales, promotion and overall marketing strategy of the
firm can be used. Once the overall promotion mix is decided, objectives,
policies and strategies must be formulated for each component of the
promotion mix.
u Promotion Mix Tools
(i) Personal Selling: Personal selling or a salesmanship is the
process of assisting and persuading a prospective buyer to buy
a product or service, in a face-to-face situation. It involves
PAGE 287
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.
288 PAGE
(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.
1.3.4 Factors Affecting Promotion Mix

Although a promotion mix can be composed of all four elements, a
marketing manager may not use all four. Moreover, firms that market
multiple product lines generally use different promotion mixes for each
line or product. The various factor affecting a manager’s promotional
mix decision are, discussed as follows:
1. Promotional Objectives and Policies: The composition of promotion
is for the receiver (target customer) to take some type of actions
to buy a product, stop smoking, or make a donation to charity.
But to achieve this primary objective a firm may have what is
sometimes referred to as a hierarchy of objectives. This hierarchy
represents the response process the receiver may go through before
taking action. One model of this response processes is the AIDA
model. The AIDA model maintains that the receiver goes through
four successive stages: attention, interest, desire, and action. This
is promotional tools seek to attract the prospective customer’s
attention, hold his interest while building a desire for the product,
and gain his action. The AIDA model in given figure, illustrates
how an organization’s promotion mix depends on its promotional
objectives. For example, if a firm’s promotional objective is to make
consumers aware of a new product, its promotion mix likely to be
heavily oriented towards advertising, sales promotion, and possibly
publicity. If a non-profit organisation’s selling efforts might be used
to target potential donors and to facilitate publicity and advertising
efforts. To get audiences to overcome their apprehension about a
movie that shows a great deal of pain and suffering, movie studios
try and explore other themes as well.
PAGE 289
about a movie that shows a great deal ofB.COM.

pain (PROGRAMME)/B.COM. (HONS.)
and suffering, movie studios try and
explore other themes as well.
Notes
Fig 1.11.1: The

Figure : TheAIDA
AIDAModel andPromotion
Model and Promotion mix
mix
2. Promotional
2. Promotional Budget. The Budget: The available
resources resources available
limit howlimit
much howanmuch an
organization can
organization can spend on promotion. A company with a very small
spend on promotion. A company with a very small proportional budget will probably
proportional budget will probably rely on personal selling because
rely on personal selling because it is easier to measure a salesperson’s contribution to
it is easier to measure a salesperson’s contribution to sales than to
sales than tomeasure
measurethe the contribution
contribution of advertising
of advertising or publicity.
or publicity. To implement
To implement
regional or national
regional oradvertising sales promotion
national advertising activities,
sales promotion a business
activities, must have a
a business
considerablemust
promotional budget.
have a considerable promotional budget.
3. Nature of3.theNature
Market.of the
TheMarket: The influencing
third factor third factor influencing thepromotional
the nature of nature of blend is
the nature ofpromotional
the market toblend is the nature
be contacted. Theofgeographical
the market to be contacted.
dispersal of the market is
The geographical dispersal of the market is the first feature to be
the first feature to be considered. If the target market is local, personal selling,
considered. If the target market is local, personal selling, posters,
posters, bills, etc., may be used whereas newspapers advertising will be appropriate
bills, etc., may be used whereas newspapers advertising will be
for national markets. Concentration of the market is another aspect to keep in mind
appropriate for national markets. Concentration of the market is
while deciding promotional blend. If the size of prospective customers is small
personal selling may prove useful whereas for longer potential customers advertising
290 PAGE
may be used more profitably. Again, if the firm sells to one type of customers or
School of Open Learning, University of Delhi 249 | P a g e

another aspect to keep in mind while deciding promotional blend. Notes

If the size of prospective customers is small, personal selling may
prove useful whereas for longer potential customers advertising may
be used more profitably. Again, if the firm sells to one type of
customers or industries, e.g., doctors or sugar mills, the promotional
tool will be different from that used when the potential customers are
of different types, e.g., sale of hand tools, cycles etc. The type of
customers which also explains the nature of the market, influences
management’ decision on promotional mix. The promotional tool
to be used is highly influenced by whether the firm is aiming
its sales campaign at (a) industrial uses, household consumers or
middlemen; (b) educated or uneducated customers; and (c) rural or
urban customers.
4. Natures of the Product: The promotional strategy used is often
different for industrial goods and consumer goods for example,
a firm marketing convenience goods will normally rely more on
manufactures’ advertising, dealer displays, gifts, discount coupons,
etc., and personal selling may not be used much. This mix is
best for such firm because the market of a convenience product
is fairly wide and competitive, the product does not require any
demonstration or explanation, and buying decisions are generally
made at the point of purchase. On the other hand, the promotional
mix for the sale of heavy machinery, vehicle or industrial goods is
tilted in favour of personal selling because its market can be easily
pinpointed, products are often presale and post-sale personal service
is involved.
5. Stage of the product’s life cycle: The promotional mix of a product
is also influenced by the stage of life cycle in which the product is
at a given time. Thus, when a product is in its introduction stage,
the firms’ promotional activities must stimulate primary demand—
the demand for a particular brand. During the introduction stage,
the customer is to be informed about the availability of the product
and educated about is uses, benefits, etc. Hence, the firm will rely
heavily on personal selling, trade shows, etc. However, during the
growth (or middle) stage of a product’s life the firm will put heavy
emphasis on advertising because what is now required to not to
PAGE 291
Notes inform or educate the customer but to persuade them to purchase a

given brand in the face of stiff competition from similar products.
Lastly, during the decline and abandonment stage of a product, the
firms usually make drastic cuts on promotional efforts.
6. Availability of Promotional Methods: Availability of promotional
techniques is another factor that marketers must explore when
formulating a promotional mix. A company may discover that
no available advertising media are effective in reaching a certain
market. Finding an appropriate medium may be especially difficult
when marketers try to advertise in foreign/international markets.
Some media, such as television, are simply not available or not in
widespread use. Other media that are available may be restricted
in the types of advertisements they can run for example, in Spain,
marketers cannot advertise tobacco and alcohol products (with the
exception of beer and wine) on television, and in Germany marketers
are prohibited from appealing to children in advertisements.
7. Distribution Intensity: Distribution intensity is yet another factor
that affects promotion mix decisions. Sales of products, typically
convenience goods, marketed through intensive distribution depends
heavily on advertising and sales promotion. Coupons, cash rebates,
free samples, and other sales promotions can increase sales of many
convenience products, including toiletries, cereals, food, cake mixes
and coffee. Products marketed through selective distribution have
widely varying promotion mixes. Exclusively distributed products,
generally high-priced items, frequently necessitate more personal
selling and less advertising.
8. Price of the Product: The price of a product also has an impact on
the composition of the promotion mix. High-priced products like
automobiles and major appliance require personal selling efforts, as
well as advertising, because consumer associate greater risk with the
purchase of an expensive product and therefore expect information
and advice from a knowledgeable salesperson. For this reason, most
consumers would be reluctant to purchase an expensive refrigerator
from a self-service establishment. On the other hand, advertising is
more practical than personal selling at the retail level for low-priced
convenience goods such as milk, flour, soft drinks, and newspapers.
292 PAGE
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
3. In push blend promotion, the greatest emphasis is laid on mass
impersonal sales efforts. (True/ False)
1.4 Promotion Decision

A promotion decision refers to the process of choosing and implementing
various promotional strategies and tactics to effectively communicate and
market a product, service, or brand to the target audience. The promotion
decision involves the following key considerations:
(i) Identification of the Target Audience
While developing a total communication and promotion programme a
marketer must identify the target audience, i.e., potential customers.
This step assumes importance because it is the target audience that
will vertically influence his decisions on what to communicate, how,
when, where and to whom to communicate. The target audience
may be industrial users or consumers, urban or rural, educated, or
uneducated, and so on.
PAGE 293
Notes (ii) Determination of the Promotion Objectives

We have already seen how promotional objectives influence the
promotional mix. Depending on at what stage of AIDA model
(see Fig.1) the firm is operating, the promotional mix will vary in
respect of promo-tools and their resource requirements.
(iii) Development of Effective Message
The message is the vehicle which carries the idea and understanding
to the audience. Hence, the message should be designed carefully
by seeking the following answers:
(a) What to say (content)?
(b) How to say it (structure)?
(c) How to say it symbolically (format)?
(d) Who should say it (source)?
(iv) Selection of the Communication Channel
Communication channel is the path or route through which messages
are transmitted from the sender to the receiver. From the point
of view of business promotion, channels of communication may
be of two types: personal and non-personal. Personal channels of
communication involve direct personal communication between two
or more persons.
The communications may take place face-to-face, person to mass
audience, telephonically or through the mails. Non-personal
communication, on the other hand, implies communication of
messages without personal contact or interaction. The communication
channels may be media, broadcast media, electronic media, and
display media.
(v) Establishment of Promotion Budget
The establishment of promotional budget is a challenge because
management lacks reliable standards for determining how much to
spend altogether on various elements of promotion. A firm may
set its promotion budget at a level the management thinks the firm
can afford; or the budget amount may be fixed as a percentage of
past or anticipated sales; or a budget amount which is matching
294 PAGE
the promotional budgets of competitors; or a budget that will be Notes

justifiable for achieving a given object or task.
(vi) Decision on the Promotion Mix
The marketing manager should divide the total promotional budget
among the various elements of promotion mix that is publicity,
advertising, sales promotion, and personal selling. The various
factors influencing promotional mix decision have already been
discussed in the preceding section.
(vii) Measurement of Promotion’s Results
It is the follow-up of the promotional programmes. The programme
must be evaluated in terms of its results—the audience contacted,
purchases made, and the consumer satisfaction created. Since
promotional activities cost to the firm, they can be justified only
in terms of increased sales and profits; otherwise, the company’s
money has been wasted.
(viii) Organisation and Management of integrated Marketing
Communications
In today’s fast-changing market economy, the wide range of communication
tools, messages, and audiences make it extremely important to have
fuller use and orchestration of communication tools. For achieving
this objective large number of companies are adopting the concept
of Integrated Marketing Communications (IMC) which recognises
the importance of a strategic role of a variety of communication
disciplines –for examples general advertising, direct response, sales
promotion, and public relation –and combines these disciplines to
provide clarity, consistency, and maximum communication’ impact
through the integration of discrete messages. Thus, IMC aims at
producing more message consistency and greater sales impact. It
holds someone responsible for unifying the company and brand
images and messages coming through thousands of company
activities. Other things remaining favourable, IMC will improve
the company’s ability to reach the right customers with the right
messages at the right time and in the right place.
PAGE 295
Notes 1.5 Communication Process

The figure given below shows the basic model of the communication
cycle: sender, encoding, medium/message, decoding, receiver, and feedback.
Sender: S/he begins the process as s/he feels the need or is professionally
required to communicate ideas, thoughts, or messages. So, the ‘message’ is
put into words which will be understood by the receiver and sent through
a medium available to both the sender and the receiver.
Encoding: The sender selects the codes or structure which will be the
‘content’ or ‘form’ of the message. This selection depends on the language
or communication skills of the sender and the comprehension level of
the receiver. Encoding can be verbal or non-verbal.
Message/Medium: Just as ‘water’ is the ‘message’ which is carried
through the ‘pipes’ which become the medium, the message requires the
medium. Verbal messages can go through telephones or face to face and
written messages can be sent by e-mail or post.
Decoding: Decoding means interpretation of the message by the receiver.
It depends on the clarity of the encoding, comprehension skills and noise
free environment for oral messages.
Receiver: The receiver is the person who receives the message. S/he
should be attentive and ready to ‘receive’ the complete message, i.e., its
verbal and non-verbal components.
Feedback: Receiver’s response to the message is the final step in the
communication cycle as it indicates if the message received is the one
intended by the sender. In one way communication like notices, memos,
feedback is not possible.
feedback
Sender encoding Message decoding Receiver
Noise
Figure 1.2: Communication Process
296 PAGE
1.6 Integrated Marketing Communication Notes
The process of synchronizing a brand’s messaging so that it is consistent

across all media that the brand utilises to reach its target audience is
known as Integrated Marketing Communications (IMC).
The American Marketing Association defines IMC as “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.”
For many years, mass media advertising predominated the promotional
function in the majority of businesses. For help in practically all elements
of marketing communication, businesses generally looked to their advertising
firms. Although the majority of marketers also employed additional
promotional and marketing communication tools, sales promotion and
direct marketing agencies were frequently hired on a project-by-project
basis and were typically seen as additional services.
In the 1990s, a lot of businesses realised they needed to integrate their
promotional materials more strategically. These businesses started shifting
to the Integrated Marketing Communications (IMC) method, which entails
coordinating the numerous promotional components and other marketing
initiatives that help company’s get in touch with shoppers.
1.6.1 Importance of IMC

1. Building of Trust: The goal of integrated marketing initiatives is
to develop a relationship with the consumer. By promoting their
brands and enhancing their reputations, businesses attempt to
establish rapport. Successful integrated communications strategies
encourage customers to discuss the brands and their goods in
everyday discussions, much like they may do when talking about
watching a new movie or running into an old acquaintance. An
IMC advertising plan aids in increasing customer and brand trust.
2. Creating Consistency: Marketing professionals can effectively
communicate a consistent brand story and messaging across a variety
of communication channels to raise awareness because of IMC and
it is one of its key advantages.
PAGE 297
Notes 3. Personalized marketing campaigns: Individualised emails are used

in personalised communications as a tool; they also include loyalty
programmes that offer discounts or one-time promotions as rewards
for their customers.
4. Cost effective: IMC creates multi usable campaigns that can be used
in every type of media; therefore it isB.Com. (Programme)
considered as a cost/ B.Com. (Hons.)
effective
tool.
4. 5. Return on investment:
Cost effective: IMC creates A company’s
multi return on
usable campaigns thatinvestment
can be usedcan be type of
in every
increased moreiteffectively
media; therefore is consideredbyas using unified messages
a cost effective tool. across many
channels than by using a number of inconsistent advertisements or
5. Return on investment: A company's return on investment can be increased more
commercials.
effectively by using unified messages across many channels than by using a number
of inconsistent advertisements or commercials.
1.6.2 Tools of IMC
1.6.2 Tools of IMC
Varioustools
Various toolsofof integrated
integrated marketing
marketing communication
communication are mentioned
are mentioned below: below:
Figure Fig
1.3:1.3: Integrated
Integrated MarketingCommunication
Marketing Communication
1. Advertisement: The impersonal and monetary type of communication

1. is advertising. The
Advertisement: Animpersonal
advertisement, commonly
and monetary type ofknown as Ad, is
communication is advertising.
a
form of communication
An advertisement, commonlydesigned
known astoAd,
promote or ofmarket
is a form a product,
communication designed to
service, idea,
promote or or aevent.
market It service,
product, is one idea,
of the
or most
event. efficient modes
It is one of of efficient
the most
modes of communication since it can quickly and efficiently reach a large number of
298 PAGE people all at once. It not only boosts sales but also raises consumer awareness.
Marketers
© Department of Distance must make sure
& Continuing that theCampus
Education, right message is sent to consumers in the
of Open Learning,
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appropriate OpenPrint,
Learning,
radio,University of television,
billboards, Delhi and other media are some of the
different mediums used for advertising.
256 | P a g e
communication since it can quickly and efficiently reach a large Notes

number of people all at once. It not only boosts sales but also
raises consumer awareness. Marketers must make sure that the right
message is sent to consumers in the appropriate way. Print, radio,
billboards, television, and other media are some of the different
mediums used for advertising.
Advantages of Advertising:

(a) It helps in reaching a large group of audiences in a short period
of time.
(b) It helps in creating awareness and building brand image among
new and old customers.
(c) It promotes mutual trust among consumers, merchants, suppliers,
and producers.
(d) Creative advertisements help in building a distinctive image
and capturing a huge market share.
Distinctive Characteristics of Advertisement

(1) Paid Communication: Advertising involves a payment from
the advertiser to the platform or medium where the message
is being communicated. It’s a form of marketing that requires
financial investment to reach a wider audience.
(2) Mass Communication: Advertising is designed to reach a large
and diverse audience. It is broadcasted through various media
channels such as television, radio, print, online platforms, and
social media to maximize its reach.
(3) Promotional Intent: The primary purpose of advertising is to
promote and persuade. It aims to create awareness, generate
interest, and encourage action, whether it’s making a purchase,
signing up for a service, or supporting a cause.
(4) Controlled Message: Advertisers have a high degree of control
over the content, tone, and message of their advertisements.
They carefully craft their messages to align with their branding
and marketing objectives.
2. Sales Promotion: There are various short-term incentives available
to promote trying out or buying a product or service. It can include
PAGE 299
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.
300 PAGE
3. Publicity: “Publicity is any promotional communication regarding Notes

an organisation and/or its products where the message is not paid
for by the organisation benefiting from it.” -William J. Stanton
Publicity is a basic method of advertising that involves spreading
brand knowledge among the public through media coverage and
other forms of communication. The main goal is to raise brand
awareness by disseminating information about the brand through
unpaid mass media channels. It’s critical to realise that publicity
doesn’t depend on promoting your goods or services. Instead, it
puts a neutral emphasis on promoting your brand identity.
Advantages of Publicity:

(a) Advertisements are less real and believable in the eyes of
readers; publicity has high credibility. As it is generated through
third party sources, such as news media or influencers rather
than being directly paid for by the entity being promoted.
(b) Publicity involves low or no cost as compared to other tools
of promotion.
(c) Social media and internet have made it super easy for brands to
disperse information in the minimum possible time. Therefore,
if your brand is promoted by using publicity as a tool, there
are high chances that it will capture a big market size and
lead to good promotion of a particular good/service.
(d) Publicity allows brands to reach a massive audience in a minimum
time. As the brand will become more publicly known, more
and more customers will attract towards it.
Distinctive characteristics of Publicity:

(1) Earned Media: Publicity is considered “earned media” as
opposed to “paid media” like advertising. It involves getting
media coverage, mentions, or features without directly paying
for the exposure.
(2) Credibility: Publicity is often perceived as more credible than
advertising because it’s presented by independent third-party
sources such as journalists, bloggers, or influencers. This can
lend authenticity and trustworthiness to the message.
PAGE 301
Notes (3) Unpredictability: Unlike advertising, where the message is

controlled and paid for, publicity’s outcomes can be less
predictable. The media’s editorial decisions determine whether
a story or message is covered and how it’s presented.
(4) Limited Control: Unlike Advertising, where advertisers have
full control over the content and placement, publicity offers
limited control. Journalists and media outlets may alter the
message or choose not to cover it all.
4. Public Relations: Public Relations (PR) is the collection of methods
and approaches used to control how news about a person or
business is presented to the general public, particularly the media.
Its key objectives are to communicate significant business news or
events, preserve a corporate image, and limit the negative effects
of negative occurrences by giving them a good spin. Celebrities,
political personalities, sports persons, etc. have their own PR agencies
that help in managing their image and work in the eyes of public.
Likewise, every company also has a PR department for managing
its image and creating a positive framework in the market.
Public relations, to put it simply, is a planned process of controlling
the distribution and dissemination of information about an organisation
to the public in order to uphold the organization’s and its brands’
positive reputations.
Public relations efforts strive to do the following:
(a) Helps in building and maintaining a positive image
(b) Informing the audience about the positive associations of the
brand with government, different firms, influencers, etc.
(c) Create demand for the product, service, and ideas.
(d) Create goodwill in the market and among customers.
Advantages of Public relations:
(a) Credibility: People trust the messages coming from reliable
sources, so public relations department try to collaborate
with third parties that are already established in the eyes of
customers.
302 PAGE
(b) Reach: A successful public relations campaign can draw Notes

numerous news organisations, exposing the content to a wide
audience. Additionally, this medium can assist the business in
utilising some natural connections that would be challenging
to use otherwise.
(c) Improved Communication: Compared to other forms of media,
public relations support the corporation in informing the public
with more information.
Distinctive Characteristics of Public Relations

(1) Relationship Building: PR focuses on building and maintaining
positive relationships between an entity and its target audiences.
It involves fostering mutual understanding and goodwill.
(2) Two-Way Communication: Unlike many other forms of
communication, PR emphasizes two-way communication. It
involves listening to the concerns, feedback, and opinions of
stakeholders and responding appropriately.
(3) Reputation Management: PR is closely tied to reputation
management. It works to shape public perception, manage
crises, and mitigate negative publicity that could harm an
entity’s reputation.
(4) Long Term Focus: While PR can address short-term goals,
its primary focus is on long-term strategies that build and
maintain a positive public image over time.
5. Direct marketing: According to American Marketing Association
(1995), “direct marketing involves the use of mail, telephone, fax,
e-mail, or Internet to communicate directly with or solicit a direct
response from specific customers and prospects.” In direct marketing,
businesses connect with their target customers directly in an effort
to generate a response or a transaction. It makes use of a range of
techniques, including database management, telemarketing, direct
mail, online and mobile marketing, and digital marketing. The
buying of goods from direct response advertisements has also been
made easier by the availability of credit cards and toll-free phone
numbers. Direct marketing is expanding due to the rapid growth
of the Internet and the introduction of smart phones more recently.
PAGE 303
Notes Reader’s Digest magazine, Amway, Tupperware, Amazon.com,

Myntra.com, Flipcart.com, and other companies are some examples
of direct marketing’s success.
Distinctive Characteristics of Direct marketing:
(a) Personal messages: In contrast to all other promotional tools,
which utilise general terminologies for everyone, direct mail
messages are intended for a specific audience and are typically
addressed individually and avoid using non-personal phrases.
(b) Customized: As previously mentioned, the majority of direct
marketing messages are created with the target audience in
mind. They are provided directly to the person who is affected,
and they are asked for instant feedback.
(c) Maintaining secrecy: By addressing their messages directly
and personally to the target population, direct marketing
techniques give manufacturers the unique benefit of keeping
their advertising campaign a secret from the competitors.
(d) Multichannel Approach: Direct marketing can be carried out
through various communication channels, including email,
direct mail, telemarketing, SMS, social media, and more. The
choice of channel depends on the preferences of the target
audience.
(e) Measurable Results: Direct marketing campaigns can be
tracked and measured in terms of response rates, conversion
rates, click-through rates, and other metrics. This data helps
marketers assess the effectiveness of their efforts.
Benefits of Direct marketing:

(a) Customers find direct marketing to be an extremely handy and
hassle-free method of shopping.
(b) It saves time and introduces buyers to a wider range of goods.
(c) Direct marketing offers marketers the chance to communicate
with potential customers on a more personal level.
(d) It can assist marketers in evaluating the effectiveness of their
efforts and selecting the most beneficial strategy.
304 PAGE
(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
PAGE 305
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.
306 PAGE
IN-TEXT QUESTIONS Notes
4. Identification of the Target Audience is the first step of developing

a promotion programme. (True/False)
5. Which of the following is/are tools of integrated marketing
communication process.
(a) Advertisement
(b) Direct marketing
(c) Publicity
6. Encoding can be verbal or non-verbal. (True/False)
7. ____________ means interpretation of the message by the receiver.
8. Raising brand awareness by disseminating information about
the brand through unpaid mass media channels is known
as____________.
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
PAGE 307
Notes in delivering a clear and consistent message to the entire customer base
through integration of all promotion tools.
1. False
3. False
4. True
6. True
7. Decoding
8. Publicity

1. Define ‘Promotion’. What is its importance for a marketer?
2. What are the various factors affecting the promotion strategy of a
firm? Discuss in detail with the help of certain examples.
3. What do you mean by ‘Promotion’? Is it a type of communication?
Discuss the process of communication with reference to promotion.
4. What do you mean my promotion mix? What are the various tools
of promotion mix?
5. Define Integrated marketing communication? What is its importance
for a firm?
6. Discuss the various tools of integrated marketing communication?
Do you think it really creates a difference in the market when
showcasing a particular brand?
7. What is the difference between Advertising and personal selling?
Which one is a better technique for promoting large industrial
goods?
308 PAGE
8. What is the difference between publicity and personal selling? Do Notes

you think publicity can affect the image of a firm negatively? Give
reasons for your answer.
(a) Advertising
(b) Publicity
(c) Importance of IMC
(d) AIDA model

McGraw Hill.
PAGE 309
L E S S O N
2
Developments in
Marketing
Ms. Neha Goyal
STRUCTURE
2.2 Introduction
2.3 Sustainable Marketing
2.4 Rural Marketing
2.5 Social Marketing
2.6 Digital Marketing
2.7 Summary

u Explain the principles of sustainable marketing adopted in today’s businesses.
u Narrate the importance, components, and steps necessary for rural marketing.
u Describe the term rural marketing-mix with its P’s.
u Understand the meaning, advantages, and components of social marketing.
u Explain the issues in social marketing and digital marketing generated in today’s
businesses.
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,
310 PAGE
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?
2.3 Sustainable Marketing

Promoting goods, services, and behaviours that are socially responsible
is known as sustainable marketing. Businesses that are not anchored in
sustainability can still use its ideas in their strategy, even though eco-
friendly brands naturally work on sustainable marketing strategies. Its
objective is to advance a cause, not a good or service. Sustainability
marketing encourages consumers to choose sustainable products over throw
away ones by portraying a brand as socially conscious and accountable.
One aspect of sustainable marketing is green marketing. It emphasizes
components of marketing that are completely green and ecologically
friendly and promotes the usage of environmentally friendly products. Green
marketing is a subset of the broader concept of sustainable marketing.
To optimize effectiveness, sustainability in marketing calls for advocating for
and encouraging moral behaviour on all fronts—socially, environmentally,
and commercially. Green marketing, also known as sustainable marketing,
is a strategy that incorporates waste management and energy regeneration
into marketing and promotional strategies. Sustainable marketing draws
attention to a company’s efforts to improve its social and environmental
sustainability.
The practice of conveying commitments to partners, customers, employees,
and others is known as sustainable marketing. The essential principles
that the company and its stakeholders genuinely value—environmental
wellness, human health, resource security, fair trade, and social equity—
are promoted by sustainable marketing. For sustainable marketing to be
PAGE 311
Notes as effective as possible, sustainability must be taken into account in all

aspects of the business.
2.3.1 Benefits of Sustainability to Business

1. Bringing in clients from the expanding market of eco-conscious
consumers.
2. Attracting staff members who are driven to change the world.
3. Increasing the number of bids, one receives as a supplier as big
businesses and governments start looking for ecologically and
socially conscious vendors.
4. Fostering a solid reputation for the brand.
5. Using employee involvement to create a culture that is motivated by
purpose.
6. Other advantages include lower chance of violating changing industry
laws and regulations, cost savings from increased resource efficiency,
room for creativity and problem-solving, and solution development.
2.3.2 Principles of Sustainable Marketing

1. Consumer-Focused Marketing: Every business should put the demands
of its consumers first and plan its operations accordingly instead
of causing a market demand for a product based on your offerings.
Businesses should find creative ways to give customers what they
desire while also addressing their needs. Instead of a one-time
buy-and-sell relationship, this will foster long-lasting relationships
with clients. This is a genuine statement: When companies put their
customers first, their consumers put their interests first.
2. Customer Value Marketing: It is giving the customer value in the
firm and its products. The business should add value to its goods
rather than just delivering low pricing and deals. Customers are more
willing to pay extra for goods and services when they have value.
There is competition in this circumstance, and customers have more
options, but it was through adding value to a brand that was able
to reach the greatest number of customers with a premium brand
312 PAGE
and grows to be a billion-dollar corporation. For Example: Apple Notes

iPhones.
3. Innovative Marketing: The business should keep enhancing its
current goods and services while looking for novel ways to meet
consumer demands. The secret to good and prosperous sustainable
marketing is continuous improvement. Customers want innovations
in new products; thus, it is up to businesses to reinvent their
offerings so that they are appealing, sustainable, and cost-effective
for consumers. Innovations may not always have to be included in
the final product. Innovation can also be defined as altering the
product’s flavour, type, packaging, or presenting a less expensive
option.
4. Mission Marketing: A corporation must express its mission in broad
social terms as opposed to specific product words. Better staff
service will result from this. Customers see a sense of seriousness
from businesses when they include a sense of mission into their
marketing strategy. It communicates that while the business is eager
to make a profit from the market, it is also eager to contribute back
to the community. This sense is more crucial because it contributes
to the organization’s long-term, sustainable growth.
5. Societal Marketing: The company, the client, and the social interest
are the three main goals of sustainable marketing. Societal marketing
has grown in significance since it establishes a company’s presence
among different social classes and helps to position the company
as a source of solutions rather than a money-making enterprise.
2.3.3 Issues in Sustainable Marketing

Following are the issues in sustainable marketing which explains below:
1. Lack of Awareness: Or under appreciation of the advantages of
sustainability among corporate leaders, consumers, and other
stakeholders: In this situation, marketers must acknowledge their
pioneering roles in sustainability. Sustainable education should
involve ongoing efforts because it cannot be accomplished in one
go. Its information ought to be continuously updated, clarified, and
distributed.
PAGE 313
Notes 2. Lack of Profitability: This is also possible, particularly when companies

jump headfirst into green efforts without doing adequate testing.
Marketers frequently have to handle the consequences of these losses.
Regular marketing programs, or sustainable marketing activities,
must be tested before going into effect. Negative connotations are
attached to sustainability, leading some people to believe that if a
corporation prioritizes sustainability, it must be compromising on
quality.
3. Reputational Damage: It is another important issue generated in
sustainability marketing practice. Companies are required to make
their customers stable for their products buying but if consumers
switch from one product to another then the reputation of the
company suffers.
4. Behavioural Change: Encouraging consumers to adopt more sustainable
behaviours can be difficult due to habits, cost considerations and a
perception that sustainable products are less convenient.
5. Green Washing: Many companies claim to be environmentally friendly
without substantiating their claims, which misleads consumers and
undermines the credibility of genuine sustainability efforts.
6. Measurement & Verification: Accurately quantifying the environmental
impact of products and verifying sustainability claims can be complex
and require standardized metrics.
The enormous chance to build a brand-new, sustainable world is one
that most marketers pass on. Except for a few firms with a clear sense
of purpose, many marketers with marketing myopia miss the bus. They
are misguidedly focused on pushing mindless consumption for their own
egotistical financial gain, wreaking havoc on the environment. Marketers
have been pursuing the wrong rabbit, according to Einstein, who believed
that not everything that can be counted does and vice versa.
In the fashion, accessories, and beauty industries, just a few young, startup
firms actually practice sustainability. Other companies, due to their small
consumer bases, poor operational scales, low levels of knowledge, and
low levels of willingness to pay for their purportedly sustainable products,
they are still not sustainable. If marketers do not change their approach
314 PAGE
on marketing malpractices, sustainability marketing will fade away as a Notes

trend. Following are a few more issues in sustainable marketing:
1. Fraudulent Marketing: Only a few marketers actually carry out good
activities, even though marketing feeds on moral ideals and ideas.
They lack empathy even when they are attuned to pressing societal
issues like climate warming. Ironically, the situation has only been
made worse by marketing. Marketing has been used improperly
while profitably resolving customer issues. Profit focus has misled
marketers, who should be able to help passengers on the plane
instead of just treating their symptoms. A good illustration of this
misconduct is found in product packaging. As consumers browse
through products on shop shelves, both offline and online, marketers
employ packaging to entice consumers. However, excessive plastic
use harms the environment over time by depleting the planet’s
valuable resources.
Since marketing focuses primarily on serving the targeted markets,
it is also to blame for societal inequalities.
While the wealthy have access to everything, there are significant
disparities in the way that the poor have access to the internet,
healthcare, media, finances, and food. Further causing unequal
access to resources is the digital divide.
2. Consumers’ Unpredictable Conduct: It is incorrect for marketers
to believe that sustainable marketing is applicable globally because
consumers are generally the same everywhere. We see that industrialized
nations frequently have very significant carbon footprints and are vocal
about tackling the issue. Developing nations like India, meanwhile,
have historically had lower carbon footprints. The majority of people
still place a strong emphasis on sustainable behaviours.
Less packaged goods are purchased; for instance, in Kerala’s rural
areas, people prefer to drink “chukku vellum” (herbal water) than
packaged water. However, there is another side to the consuming
habits of developing nations. People with low levels of awareness
and knowledge practice wasteful consumption. According to the
author’s investigation on green hotels in India, patrons value high
materialism over environmentally friendly methods. They request
daily linen cleaning in an effort to maximize their financial resources.
PAGE 315
Notes Travellers from developed nations, however, frequently exhibit higher

attentiveness when they enjoy luxury responsibly. Consumer views
vary depending on a number of things.
People may make sustainable decisions and advance the welfare of all
life on the earth with the aid of education and awareness. Marketers
must develop messages that are appealing to many cultures in order
to promote sustainable choices among different client segments.
The time is right to encourage customers to buy at thrift stores or
vintage or reusable products in order to bring about long-lasting
change.
3. Overall Sustainability is Lacking: Even though the government
introduced the “eco mark” program in 1991, it was unsuccessful in
aggressively promoting to producers and consumers. On the one hand,
getting an eco-label (ISO 14020 certification) hasn’t always been
required. On the other hand, there hasn’t been much encouragement
for consumers to adopt environmentally friendly items.
Since it is optional, the majority of brands simply participate for
their own self-interest in developing a successful value proposition
within their commoditized categories.
Brands take into account eco-friendliness to differentiate their services
in a surplus world where sameness has been floating. Marketers must
include comprehensive sustainability into their business processes
and behaviour rather than using gimmicks like “greenwashing” In
order to address climate change, more than merely putting the planet
before money is required. Additionally, it ought to work to reduce
the stark inequities in access to resources and promote inclusivity.
Marketing needs to stimulate social change in addition to being the
engine of the economy.
IN-TEXT QUESTIONS
1. Promoting goods, services, and behaviours that are socially
responsible is known as __________ marketing.
2. A corporation must express its __________ in broad social
terms as opposed to specific product words
3. __________ can also be defined as altering the product’s flavour,
type, packaging, or presenting a less expensive option.
316 PAGE
4. The business should add __________ to its goods rather than Notes
just delivering low pricing and deals.
2.4 Rural Marketing

For many people, the rural market may signify a variety of things.
Rural markets have long been associated with agricultural marketing or
marketing of agricultural inputs. Dairy goods, along with other agricultural
and agribusiness items, are traded in rural markets, while they are also
marketed in urban ones. It involves business dealings involving non-
agricultural goods produced in villages but sold in cities. Examples of
such things include hand-painted artwork, handmade clothing, handicrafts,
and traditional crafts. Rural markets also encompass products and services
made and sold in rural areas as well as those consumed there. These items
include earthenware pots, hair services, tailoring, and local carpentry, all
of which are created and used locally. Both the selling and consumption
of items produced by organized industry take place in rural marketplaces.
2.4.1 Introduction to Rural Marketing

Rural marketing is the process of creating the product, price, place,
and promotion elements of the marketing mix for a good or service. It
entails interacting with the rural and urban markets, meeting consumer
expectations, and achieving organizational goals.
Rural marketing has unique difficulties and distinguishing characteristics.
India’s agricultural sector has grown remarkably, and as a result, rural
consumers are now utilizing a wide range of metropolitan goods and
services. Rural marketing is a new process that has emerged as a result
of changes in rural agriculture output and consumption.
This greatly promotes the expansion of the Indian economy. In developing
nations like India, rural marketing is still not a fully established process
due to numerous obstacles in the areas of product design, price, promotion,
and distribution. Organizations must adopt a rural marketing mindset
in order to grow their businesses and better understand how the rural
economy operates. They must create a strategic perspective of the rural
market for this reason. For the organization to achieve its marketing goals,
PAGE 317
Notes rural marketing must be understood in terms of its distinctive marketing

mix and how it must be conceptualized.
The most crucial element of rural marketing is product utilization, which
also influences other factors like price, promotion, brand recognition, and
organization’s image. A better understanding of how the product is used
enables the company to efficiently manage and arrange the marketing
mix’s components for overall success.
2.4.2 Four A’s of Rural Marketing

There are various components of rural marketing called 4A which are
broadly described below:
1. Affordability: Compared to cities, rural communities typically
have substantially lower salaries. There, consumers frequently lack
the means to purchase luxuries and instead prioritize necessities.
Marketers must take into account rural consumers’ ability to pay
and their preference for low-cost goods. Always strive to create
products that satisfy customers’ needs and stay inside their price
range.
2. Availability: Reaching the customer is the main difficulty in the
rural market. Consumers in rural areas typically have modest
incomes and spend their money on daily essentials. Rural retailers
may not always have easy access to certain products, which leads
some customers to switch to an alternative. Businesses should strive
to make their items available to customers earlier. Although many
products are effectively marketed, by the time they are delivered,
it is sometimes too late.
3. Acceptability: To benefit rural consumers, items should be designed
in a user- friendly manner. The product should be designed in such
a way that consumers would perceive value in it, even if they have
to spend more money on it. Customers should feel at ease while
utilizing the goods and should take the plunge without hesitation.
4. Awareness: The goal of the customer awareness campaign should be
to influence their thinking. To reach customers, commercials on TV,
radio, and billboards might be employed. For this reason, marketers
must concentrate on the communication and entertainment channels
318 PAGE
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
2.4.3 Characteristics of Rural Marketing

1. Large and Dispersed Population: 740 million Indians, or 70% of
the country’s population, reside in rural areas, according to the
2001 census. The rate of population growth in rural areas is also
faster than in urban areas. There are about 6 lakh villages where
the rural population is dispersed. Despite being widely dispersed,
the rural population offers great potential for marketers.
2. Greater Capacity for Purchases: Rural residents’ purchasing power is
increasing. Marketers are growing their activities in rural India as a
result of realising the potential of these areas. Since the economy as
a whole has grown, rural people’ purchasing power has significantly
increased, giving rural marketplaces increased importance in nations
like China and India.
3. Market Expansion: Over the years, the rural market has shown
consistent growth. The demand for branded, conventional, and
consumer goods has all increased over time.
4. Development of Infrastructure: Rural marketing now plays a
bigger role in India thanks to the development of infrastructural
amenities like bridge construction, transportation, communication,
rural electricity, and public service initiatives.
5. Low Quality of Living: Rural customers suffer from a variety of
socioeconomic backwardness, and rural areas have a low standard
of living. In various regions of the nation, this varies. Because of
poor literacy, low per capita income, social backwardness, and low
savings, consumers in rural areas have a low standard of living.
6. A Traditional Outlook: Rural consumers value long-standing
traditions and practices. Change is not what they prefer. The demand
pattern of the rural population is gradually shifting, and companies
have a market for branded goods too in the rural areas.
PAGE 319
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.
2.4.4 Importance of Rural Marketing

India’s rural marketplaces are the ones of the future. They are vital
for manufacturers and marketers. For instance, given that the urban
markets are already saturated, businesses like Hindustan Unilever Ltd.
(HUL), ITC, Parley Foods, and many others are focusing on the rural
markets. The growth of rural markets will determine the extent of future
expansion. In actuality, large corporations ought to view rural marketing
as developmental marketing. It has more significance now in India because
the rural communities’ purchasing power has significantly increased as
a result of the country’s overall economic growth. Due to India’s green
revolution, the rural areas are consuming a significant amount of industrial
and consumer goods made close to the cities. In this setting, agricultural
marketing, which was limited to just selling farm equipment and other
inputs, has been replaced by a unique marketing method called rural
marketing.
The urban market is more or less saturated as a result of competition,
as most of the potential customers have been targeted by the marketers.
Therefore, the marketers are seeking to expand their product categories
to a market that has not yet been much explored and taped, namely the
rural market. This has also led to corporations engaging in CSR initiatives
to assist the underprivileged in acquiring some money to spend on the
goods they desire.
For instance, HUL’s Project Shakti is assisting the village’s disadvantaged
women in earning some money, which will undoubtedly enhance their
purchasing power while also helping the company generate some revenue.
Similar to this, ITC’s e-Chaupal is assisting the underprivileged farmers
in obtaining all weather-related information as well as market prices for
the food grains they are growing and the inputs (seeds, fertilizer, etc.)
they wish to purchase.
320 PAGE
According to a recent report by the Rural Marketing Association of Notes

India, the global economic recession has not had an influence on the
rural economy of India (RMAI). According to the report (Source: www.
vskills.in), India’s rural and small-town economy, which generates 60%
of the country’s income, has escaped the effects of the global economic
recession.
Additionally, the continued expansion of agriculture throughout the years
and the expansion of employment options in rural areas are major factors
in the rising rural incomes.
According to the Technopark report, sales in urban regions would likely
soon match rural demand for Fast Moving Consumer Goods (FMCG),
pharmaceuticals, automobiles, and consumer durables. India’s urban market
for durables shrank, but the rural sector is growing at a 15% rate. Sales
of FMCG products are up 23%, and telecom sales are up 13%.
So leading manufacturers of consumer goods are now expanding into
rural India.
2.4.5 Steps taken by the big corporations for rural marketing

From the start of the 1990s, the big corporations used the following
tactics to market their goods to the villagers:
1. Onida: When the industry was experiencing a downturn with little
signs of recovery, the world’s largest manufacturer of colour
television, Onida, made the decision to target the rural market.
Their debut attempt was catastrophic because they used expensive
models and advertising packages that were inappropriately focused
on cities. They gained access through the black and white segment
and were able to establish themselves in the rural marketplaces.
Onida’s excursion into the countryside has evolved into a full-
fledged military operation called Gramin Bharat. Its urban-focused
advertising campaign, which starred the devil, underwent significant
change. The distribution network has also been upgraded by Onida
company.
PAGE 321
Notes 2. Procter and Gamble: The international corporation with several

products “Procter & Gamble” realized that a brand’s packaging in
rural areas could make or break it, so it adopted user-friendly sizes
and made them available.
3. Colgate-Palmolive (India) Limited: Colgate Palmolive (India) Ltd.
created small quantity sachets of their toothpastes after realizing
that offering goods at the lowest unit pricing was vital to access
the rural market. Additionally, the firm abandoned its long-running
Sing of Confidence marketing campaign, which clearly favoured
urban consumers, in favour of a less time promotional film that
was especially made with rural consumers in mind.
4. Godfrey Philip India: Godfrey Philip India (GPI) discovered that
rural shops were not receiving its products. It was much harder
for GPI to reach its target audience due to the lack of mass media
outlets like TV and radio. To combat this, GPI installed five Toyota
vans equipped with TVs on the road. An entertainment show with
commercial breaks followed their normal stops in the villages. Their
activity in the countryside has expanded, and the video vans aid
in raising awareness, encouraging brand sampling, and keeping an
eye on the market.
2.4.6 Rural Marketing Mix

Product, pricing, promotion, and place are only a few examples of the
multiple controllable forces that make up a marketing mix (or program).
Any commercial enterprise’s ability to succeed depends on its marketing
mix. The manager can use these four components as potent weapons to
protect his market and/or take on competitors. A manager must have
a thorough understanding of his rural market, taking into account all
significant characteristics of rural customers.
Designing marketing mix tactics for the rural segments is a difficult
assignment for the marketing manager since rural consumers’ behaviour
is unique and less predictable. A manager must create a custom program
to satisfy the goals and desires of particular groups due to the significant
level of variability.
322 PAGE
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.
PAGE 323
Notes Advertising (goals, message, media, budget, scheduling, etc.),

sales promotion (tools, levels, costs, timing, etc.), personal selling
(goals, sales force size, recruitment and selection, training and
development, remuneration, training, controlling, etc.), publicity,
and public relations are just a few examples of the promotional
tools that marketing managers must choose. To meet the demands
of the market, the promotion strategy must be modified. Techniques
like van/vehicle ads, edutainment movies, using opinion leaders
to spread the word about products, vibrant wall paints, etc., have
been proven successful. The broad appeal on television has revealed
the westernization of the conservative audience. Similar to puppet
shows, dance, dramas, and legendary music, rural markets are now
using these specially devised mediums for product promotion.
These traditional arts are easily communicated through in rural
communities. Village fairs and festivals make excellent locations
to screen these programs. Public gatherings can also be utilized
to promote products in rural areas. Using music cassettes (CDs)
is another productive way to communicate in remote areas. It is a
desirable media that is also rather inexpensive.
With a small expenditure, different linguistic groups can be reached.
They can be viewed in theatres or other public spaces where rural
residents congregate. Additionally, it is crucial to keep the rural
word in mind in any rural communication. The rural context must
be taken into consideration while developing the theme, message,
copy, language, and delivery.
Clearly, originality and imagination are necessary for rural communi-
cation. The delay between the debut of a product and its economic
size sale is typically longer in rural marketing. This is because the
adoption process for rural buyers takes a little bit longer.
In order to gain attention in the rural market and influence, opinion
leaders are crucial. Modern educated rural kids have an impact on
rural customers as well. The lifestyles people see on television have
an impact on rural customers. They are naiver and more intrigued
by novelty since they have less exposure to the outer world. The
influence of the media, particularly television, on consumer behaviour
is considerable.
324 PAGE
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.
PAGE 325
Notes 6. The most crucial element of rural marketing is product __________

which also influences other factors like price, promotion, brand
recognition, and organization’s image.
7. Rural marketing is a new process that has emerged as a result
of changes in rural agriculture output and __________
8. One-or two-level indirect channels are better suited to service
dispersed rural customers. (True/False)
2.5 Social Marketing

Social marketing is the application of marketing to promote societal
change. Through the use of various marketing and advertising strategies,
it can be used to accomplish certain behavioural goals. Social marketing
is the application of marketing strategies to benefit the general population
rather than the corporation in terms of financial gain. Environmental
issues, health, safety, ethics, legislation, human rights, peace, and other
causes that benefit society as a whole are covered by social marketing.
Social marketing is the methodical use of marketing along with other
ideas and strategies to accomplish particular behavioural objectives for
a social good. For example, it includes requesting the people to respect
speed limits and refrain from smoking in public places. Social good is
social marketing’s main goal.
The development of initiatives aiming at altering or sustaining people’s
behaviour for the benefit of both individuals and society at large is known
as social marketing. It mixes concepts from social sciences and business
marketing. It has been shown to be a reliable and economical method for
changing behaviour. Social media marketing aids in identifying who to
collaborate with, what behaviours to change, how to support the intended
process, and how to evaluate the outcome.
The terms “social marketing” and “social media marketing” should not
be used interchangeably because they refer to fundamentally different
marketing strategies. While social media may or may not be utilized for
financial gain, social marketing is strictly for charitable purposes.
326 PAGE
2.5.1 Difference between social marketing and social media Notes

marketing
1. In order to alter people’s attitudes and behaviours for the betterment
of society, social marketing uses marketing tactics and principles to
raise awareness of a social issue. While social media marketing is
the marketing of goods or services with the help of social media
like Twitter, Facebook, and Instagram to connect with potential
customers.
2. While social media marketing tries to build brand exposure and
boost conversions by reaching a wider market, social marketing
aims to alter people’s attitudes and behaviours for the betterment
of society.
3. Understanding the target demographic is the cornerstone of the social
marketing strategy, which is followed by campaign customization.
While a new product is primarily introduced to the audience using
social media marketing strategies.
4. The scope of social marketing is heavily concentrated on a certain
area, industry, or behaviour. Unlike social media marketing, which
targeted to a wider market.
5. Social media marketing success is dependent on data like sales media,
clicks, and views, whereas the success of social marketing is the
influence of the campaign on individuals
2.5.2 Advantages of Social Marketing

Social marketing is crucial for businesses, the environment, and society.
This idea was created to address consumerism and profit as the sole
driver of company. The idea of “societal marketing” fosters enduring
relationships with clients while assisting a business in maximising
revenues. It promotes the creation of goods that satisfy consumers and
benefit society throughout time.
Following are the advantages:
1. It contributes to the improvement of the company’s reputation.
PAGE 327
Notes 2. It guarantees that economic planning is more important and beneficial

to society.
3. Societal marketing enhances the general level of life.
4. Financial resources are utilized effectively.
5. Social welfare and society at large should be given priority in products
and corporate policy.
6. Promote long-term growth and expansion.
7. Expands market share and sales.
8. It offers one a competitive edge over rivals.
9. It is beneficial for long-term connections and client retention.
2.5.3 Components of Social Marketing

Policy, strategy, and implementation are three key components of operational
and strategic actions that social marketing supports.
Fig 2.1 : Components of social marketing (Source: www.thensmc.com)

Figure 2.1 : Components of Social Marketing
These components are: (Source: www.thensmc.com)
1 These
Policy: Social marketing
components are: aids in ensuring that policy is grounded in knowledge of
people's lives, making policy objectives realistic and doable. For example: Jordan's
1.policy
Policy: Socialwater.
of limiting marketing aids in ensuring that policy is grounded in
knowledge of people’s lives, making policy objectives realistic and
2 Strategy: You may target your resources cost-effectively using social marketing and
doable. For example: Jordan’s policy of limiting water.
choose the activities that will have the biggest long-term impact. For example:
328 PAGE England’s Lung Disease Strategy.
© Department
3 of Distance
Delivery & Continuing Education,
and implementation: Campus makes
Social marketing of Openit Learning,
possible to create products
and services and express the needs and motivations of consumers. For example, Child
safety seats in Texas, for instance.
2.5.4 Issues in social marketing:
1. The ultimate goal of social marketing is to advance the interests of the target market
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.
2.5.4 Issues in Social Marketing

1. The ultimate goal of social marketing is to advance the interests of
the target market or society as a whole, not the marketer. Due of
this, it differs from commercial marketing but resembles non-profit
marketing. However, it differs from the latter in that it is specifically
targeted at directly enhancing welfare. As a result, when we discuss
social marketing, we are not referring to political campaigning,
lobbying (apart from the removal of limits for social marketing),
or fundraising.
2. Behaviour influence, or more specifically, bringing about a change
in behaviour, is the fundamental method of generating increased
welfare. Social marketers work in the field of behaviour. The goal
in social situations is to influence behaviour, just as it is in private
situations. The ‘market share’ of episodes of diarrhoea that are
treated with oral rehydration solutions of some sort will be used
by social change agents in Egypt to gauge the performance of
oral rehydration initiatives. Behavioral change is important, even
though it frequently takes a long time. All other success indicators
are merely stepping stones that stimulate progress toward the final
goal.
3. The main player in the social marketing process is the target audience.
Excellent social media marketing is always completely focused on
the target audience. The optimum term to employ is “customer,”
even though “client” and “target audience member” can be used
more or less interchangeably with it. These terms are less successful
in highlighting the active part the target audience member plays
in the process. Since the individual to be influenced must perform
some sort of action before their behaviour can be changed, social
PAGE 329
Notes marketing entails actions as concrete as purchasing an airline ticket

or a soft drink. The most successful social marketers are aware that
the “customer” is the secret to their success.
The customer is ultimately responsible for taking the action that the
marketer is encouraging. Therefore, a competent social marketer approaches
everything they do from the standpoint of the customer. This is crucial
in distinguishing between programs that should function and those that
actually do, as we shall see.
ACTIVITY
Write about any social campaign that you have come across?
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)
2.6 Digital Marketing

Online marketing is another name for digital marketing. This includes
not only email, social media, and web-based advertising, but also text
and multimedia messages as a marketing channel. Digital marketing takes
into account how each tool or digital channel can convert prospects.
A brand’s digital marketing strategy may use multiple platforms or
concentrate all of its efforts on a single platform. Business to business
clients typically have longer decision-making processes, which results
in longer sales funnels. For B2B clients, relationship-building strategies
work better, whereas B2C customers typically respond better to short-
term offers and messages. Digital marketing strategies are effective for
both B2B, business to business and B2C, business to consumer-based
companies. While B2C content is built on emotions and focuses on
making the customers feel good about a purchase, B2B transactions are
typically based on reasoning and proof, and B2B digital marketers have
these skills present. Business-to-business decisions need the involvement
of more people, whereas business-to-consumer interactions prefer one-
on-one relationships with a brand.
330 PAGE
prospects. A brand's digital marketing strategy may use multiple platforms or concentrate all
of its efforts on a single platform. Business to business clients typically have longer decision-
making processes, which results in longer sales funnels. For B2B clients, relationship-
building strategies work better, whereas B2C customers typically respond better to short-term
offers and messages. Digital marketing strategies are effective for both B2B, business to
business and B2C, business to consumer-based companies. While B2C content is built on
emotionsPRINCIPLES
and focuses OFon making the customers feel good about a purchase, B2B transactions
MARKETING
are typically based on reasoning and proof, and B2B digital marketers have these skills
present. Business-to-business decisions need the involvement of more people, whereas
2.6.1 Types or Tools of Digital Marketing Notes
business-to-consumer interactions prefer one-on-one relationships with a brand.
2.6.1To achieve
Types the of
or Tools best results,
digital we can utilise a variety of digital marketing
marketing
tactics. the
To achieve Digital marketing
best results, utilizes
we can utilisea avariety
varietyofof tools
digitaland technologies
marketing tactics. toDigital
promote
marketing products,
utilizes services,
a variety andand
of tools brands online. These
technologies tools products,
to promote help businesses
services, and
reach
brands their
online. target
These audience,
tools engagereach
help businesses customers, andaudience,
their target achieve their marketing
engage customers, and
goals.
achieve theirThe sorts of
marketing digital
goals. The marketing thatmarketing
sorts of digital are usedthatto are
promote
used togoods
promote orgoods
services
or services are are as follows:
as follows:
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.
PAGE 331
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
332 PAGE
(b) Employ pertinent content Notes

(c) Determine the key performance indicators
(d) Changed with the update
(e) A suitable method for promoting the brand
4. Content Marketing: It is the form of digital promotion and online
marketing. Some of the forms of content marketing are interviews,
surveys, case studies, infographics, product reviews, vlogs, press
releases, and templates. This is the most significant type of digital
marketing because it creates pertinent and valuable content, designs,
publishes, and distributes it in different digital media to reach
specific target audiences.
5. Affiliate Marketing: Currently, affiliate marketing is a common
form of promotional strategy in digital marketing, where a marketer,
blogger, or vlogger sells or provides links to a seller’s products
to their target audience. Affiliates give businesses a wider reach,
and businesses pay the affiliates financially. There are a few risks
associated with this online strategy, most notably the promotion of
fake or subpar products.
6. Influencer Marketing: Influencer marketing helps a brand to generate
more leads and draw in new customers. It is a tried-and-true tactic
that is a part of the larger marketing mix. In order for influencer
marketing to be successful, you must establish a connection between
the takers of the influencer’s content and yourself.
7. E-mail Marketing: A well-designed signing form helps to build the
trust and reliability factor for your brand. Engaging and relevant
content also helps in email marketing. The content should be written
in a way that uplifts the consumer because they want real information.
This is one of active and important types of digital marketing that
is successfully used by many businesses to communicate with their
users and leads who visit their website. There are many investors in
the various social media platforms. For instance, Instagram records
the existence of the most influencers on its site.
PAGE 333
Notes 2.6.2 Digital marketing Challenges

Following are the biggest digital marketing challenges:
1. Establishing a Content Marketing Plan: For the success of content
marketing plan, a strong, holistic, and comprehensive strategy is
required that can induce target audience and generates profit. A term
“Content calendar” helps every marketer to organize the content
or message in organised manner and in order. The five important
elements are must for good content plan: Audience personas,
positioning brand and story, content mission statement, content
marketing goals and the last element is action plan.
2. Budgeting for PPC and Determining Which Ads to Run: The budget
of content marketing means a document containing the amount of
money business is investing for the content creation, publication,
and distribution. So, every company is required to make a budget
for the content preparation.
3. Producing Material/Content that Users Want: It is the procedure
of creating and developing visual and written content like videos,
electronic books, blog posts, whitepapers, or infographics. Production
of content is not sufficient while optimization of content with best
inducing quality is important.
4. Using Omnichannel or Multiple Channels: It is a marketing strategy
in which marketing campaigns are carrying out by using all channels,
platforms, and devices for the promotion of goods and services
to customers. In this channel, the customer data is automatically
updated and triggered message across all channels to adjust. This
channel provides the customers an integrated shopping experience
from starting to the endpoint.
5. Designing with Mobile and Responsiveness in Mind: This is the
biggest challenge for a marketer to create a responsive web design
that adapt to all devices, platforms, and screen sizes in respect of
form and function.
6. Data Measurement and Practical Analytics: Another biggest
challenge for the marketers to measure the data and its practical
implication.
334 PAGE
7. Remaining up to Date with Evolving Digital Marketing Trends: Notes

There is no common method of brand awareness for all time.
Adopting different methods or follow with same method is also a
biggest challenge.
IN-TEXT QUESTIONS
11. _______________is the natural process of attracting quality
free traffic from potential customers to your website via search
engines like Google, Bing, and Yahoo.
12. Total advertising expenses incurred X number of ad clicks=
Pay per click. (True/False)
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.”
PAGE 335
Notes 2.8 Answers to In-Text Questions
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

1. Explain the various challenges faced by firm in India in respect of
rural market with suitable examples?
2. What do you understand by the term sustainable marketing? Explain
the issues arising in sustainable marketing.
3. Assume you are the marketing manager of a large real estate
company in India, suggest and discuss how different digital marketing
strategies will reach your target audience?
4. What is meant by digital marketing? Explain the digital marketing
tools employed in promotion of a business in the current time.
5. What is meant by the term social marketing? List the issues faced
by a firm after opting for social marketing?

u Digital Marketing (6th Edition) by Dave Chaffey, Fiona Ellis-
Chadwick, Publisher: Pearson
336 PAGE
u Principles of Internet Marketing-New Tools and Methods for Web Notes

Developers, Jason I. Miletsky, Course Technology, Cengage Learning.
u Manoff, R. K.1985, Social Marketing New Imperative for Public
Health, Praeger Publishers: N .Y.
PAGE 337

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Editorial Board

Sh. K.B.Gupta & Ms. Ritika Sharma

© Department of Distance and Continuing Education

This Study Material is duly recommended and approved in Academic Council

© Department of Distance & Continuing Education, Campus of Open Learning,

© Department of Distance & Continuing Education, Campus of Open Learning,

Lesson 1 : Nature and Scope of Marketing

Lesson 2 : Marketing Mix

Lesson 1 : Consumer Behaviour

Lesson 3 : Positioning and Targeting

Lesson 1 : Product Decisions

Lesson 2 : Packaging and Labelling

Lesson 3 : New Product Development

Lesson 2 : Channels of Distribution

Lesson 3 : Distribution – Wholesaling and Retailing

Lesson 4 : Logistics Decisions

Lesson 1 : Promotion Decisions

Lesson 2 : Developments in Marketing

1.1 Learning Objectives

Notes u Understand the difference between the concepts of selling and

1.3 Meaning and Concept of Marketing

1.4 Nature of Marketing

7. Marketing is a Multi-disciplinary Approach: The study of Notes

Notes available to their target market of consumers, marketers can influence

• I create a demand for

Figure 1.1 : Concept of Need, Want and Demand

1.5 Difference Between Marketing and Selling

Notes Basis Marketing Selling

1.6 Scope of Marketing

1.6.1 What is Marketed?

1.6.2 Spectrum of Marketing

deciding on an ideal pricing strategy. A solid price strategy is essential Notes

1.7 Core Concepts of Marketing

1.7.1 Needs, Wants and Demands

1.7.3 Value Satisfaction and Quality

1.7.4 Exchange Notes

Exchange is defined as giving something and receiving something in return

Notes Activities such as consumer research, product development, communica-

1.8 Evolution of Marketing Concept

Figure 1.3: Marketing Philosophies

1.8.4 Marketing Concept

3. Strategic and Philosophical worth: The marketing notion has Notes

1.8.5 Societal Marketing Concept

Integrated Marketing: Coordinating all of a business’ marketing initia- Notes

1.11 Answers to In-Text Questions

1.12 Self-Assessment Questions

(c) Marketing Concept Notes

1.13 Suggested Readings

2.1 Learning Objectives

2.3 Marketing Mix

2.3.1 Importance of Marketing Mix

2.3.2 Elements of Marketing Mix

Figure 2.1: 7P’s of Marketing

1. Product: A product is a commodity that is created or developed to Notes

Notes (c) Labelling: The label is a section on a product’s cover that

For instance, the government used to set prices of cement Notes

(c) Two Stage Channel of Distribution: For the sale of consumer

(d) Three Stage Channel of Distribution: The manufacturers