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Functional Management - BBA III Year - Dr. ShikhaAgrawal - Unit 3 &4
Functional Management - BBA III Year - Dr. ShikhaAgrawal - Unit 3 &4
Unit III
Meaning of System
System consists of elements or components. The elements or components are interlinked together to
achieve the objectives for which the system exists. For example - a human body is made up of group
of organs, called organ system, that work together to keep the body in balance, or a business
organisation is made up of many administrative and management functions, products, services,
groups and individuals.
Business System
Business organisation is classified into different subsystems based on the functions like marketing,
finance, human resource, or production and operation. Each subsystem will have more sub-
subsystems. In this post we'll study in detail the production/operation system.
Concept of Production
Any process which involves conversion of raw material into finished product for satisfaction of
human wants is called as production. Production function refers to creation of goods and services in
order to satisfy human needs by converting resources into outputs. Production function is that part of
an organisation, which is concerned with the transformation of a range of inputs into the required
outputs having the requisite quality level.
Definition of Production
Production is defined as “the step-by-step conversion of one form of material into another form
through chemical or mechanical process to create or enhance the utility of the product to the
user.” Thus production is a value addition process. At each stage of processing, there will be value
addition.
Edwood Buffa defines production as ‘a process by which goods and services are created’.
Production System
The production system of an organisation is that part, which produces products of an organisation. It
is that activity whereby resources, flowing within a defined system, are combined and transformed in
Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems.
JOB-SHOP PRODUCTION
Job shop production are characterised by manufacturing of one or few quantity of products designed
and produced as per the specification of customers within prefixed time and cost. The distinguishing
feature of this is low volume and high variety of products.
A job shop comprises of general purpose machines arranged into different departments. Each job
demands unique technological requirements, demands processing on machines in a certain sequence.
Characteristics
The Job-shop production system is followed when there is:
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for each
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
work centre and order priorities.
Advantages
Following are the advantages of job shop production:
1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning opportunities.
3. Full potential of operators can be utilised.
4. Opportunity exists for creative methods and innovative ideas.
Limitations
Following are the limitations of job shop production:
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.
BATCH PRODUCTION
Batch production is defined by American Production and Inventory Control Society (APICS) “as a
form of manufacturing in which the job passes through the functional departments in lots or batches
and each lot may have a different routing.” It is characterised by the manufacture of limited number
of products produced at regular intervals and stocked awaiting sales.
Characteristics
Batch production system is used under the following circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for the production of item in a batch and change of set
up is required for processing the next batch.
4. When manufacturing lead time and cost are lower as compared to job order production.
Advantages
Following are the advantages of batch production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
6. Job satisfaction exists for operators.
Limitations
Following are the limitations of batch production:
1. Material handling is complex because of irregular and longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.
MASS PRODUCTION
Manufacture of discrete parts or assemblies using a continuous process are called mass production.
This production system is justified by very large volume of production. The machines are arranged
in a line or product layout. Product and process standardisation exists and all outputs follow the
same path.
Characteristics
Mass production is used under the following circumstances:\
1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Advantages
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
Limitations
Following are the limitations of mass production:
1. Breakdown of one machine will stop an entire production line.
2. Line layout needs major change with the changes in the product design.
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.
CONTINUOUS PRODUCTION
Production facilities are arranged as per the sequence of production operations from the first
operations to the finished product. The items are made to flow through the sequence of operations
through material handling devices such as conveyors, transfer devices, etc.
Characteristics
Continuous production is used under the following circumstances:
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.
Advantages
Following are the advantages of continuous production:
1. Standardisation of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilisation due to line balancing.
4. Manpower is not required for material handling as it is completely automatic.
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.
Limitations
Following are the limitations of continuous production:
1. Flexibility to accommodate and process number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.
Production Management
Production management is a process of planning, organising, directing and controlling the activities
of the production function. It combines and transforms various resources used in the production
subsystem of the organisation into value added product in a controlled manner as per the policies of
the organisation.
E.S. Buffa defines production management as, “Production management deals with decision
making related to production processes so that the resulting goods or services are produced
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
according to specifications, in the amount and by the schedule demanded and out of minimum cost.”
1. RIGHT QUALITY
The quality of product is established based upon the customers needs. The right quality is not
necessarily best quality. It is determined by the cost of the product and the technical characteristics
as suited to the specific requirements.
2. RIGHT QUANTITY
The manufacturing organisation should produce the products in right number. If they are produced in
excess of demand the capital will block up in the form of inventory and if the quantity is produced in
short of demand, leads to shortage of products.
3. RIGHT TIME
Timeliness of delivery is one of the important parameter to judge the effectiveness of production
department. So, the production department has to make the optimal utilisation of input resources to
achieve its objective.
Production scheduling
Material requirements planning
Production lead time
Resource capacity planning
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
Considering that production planning will also spell out everything surrounding your production
targets, it will also map out all the operational steps involved and their dependencies in reaching
them.
The primary goal of production planning is to design the most efficient way to make and deliver
your company’s products at the desired level of quality. In fact, a well-designed production plan will
help your company in increasing its output and save money by developing a smoother workflow and
reducing waste.
As is evident, production planning is a broad discipline that involves much more than a focus on
manufacturing process efficiency.
In fact, production planning activities include demand forecasting as well so that you will be able to
determine the right mix of products to meet customer needs. Additionally, it will also help you in
choosing the optimal approach to building those products.
Also, production planning will assess the resources needed to meet production goals and lay out in
detail all the operations in the production process.
Lastly, production plans must include the flexibility to make operational adjustments when problems
occur- such as staffing shortages, supply chain problems, and machine breakdowns.
Difference between Production Planning vs. Production Scheduling
Production Planning: Production planning is the process of determining the number of goods and
services that an organization will produce in a given period of time.
It involves making decisions on the number of resources, such as raw materials, labor, and capital,
that will be required to meet the desired production output.
It also involves the selection of production processes, the determination of production schedules, and
the coordination of activities within the production process.
Production Scheduling: Production scheduling is the process of organizing and planning the
sequence of production operations and activities in order to ensure that the desired output is achieved
within the specified time frame.
It involves the allocation of resources, the determination of task sequences, and the creation of
production schedules.
It also involves the coordination of activities within the production process in order to ensure that the
desired output is achieved in the most efficient manner possible.
Therefore, while production planning provides an overview of what your company plans to do,
production scheduling creates a more detailed view of exactly how your company will do it.
This means that the production schedule will describe when each step of your production plan will
occur and consequently by using which resources and how.
Why is Production Planning Important?
Considering that a well-constructed production plan will help you boost your revenue, net
profits, financial KPIs, operational metrics, and even customer satisfaction, production planning is
vital for your business and its success.
In fact, a poorly designed production plan can cause production problems and even carries with it the
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
risk of sinking your company.
Some of the specific benefits of production planning are:
Knowledge
Your production plan will provide you with a framework that will help you understand your
resources and the production steps that you will need to undertake to meet your customers’ needs.
Additionally, it will also help you understand the potential problems that may occur during
production and how you can mitigate them. This will help you improve your cash flow and the
health of your financial statements. It will also help you improve customer retention.
Efficiency
One of the other benefits of production planning is that it will help you reduce bottlenecks and help
minimize costs. This will thus keep your net working capital stronger and prepared for other uses
that will lead to the growth and development of your business.
Additionally, production planning will also help you ensure that your products are of high quality
and that your expenses do not exceed the budget.
Lastly, it will also help ensure that your resources are used efficiently and that wastage is avoided. In
fact, production planning will also help in reducing manufacturing lead times through efficient
planning and processes.
Customer Satisfaction
With production planning, you will be able to ensure that your company is able to make and deliver
products to customers on time. This will lead to strong customer loyalty, as well as a positive brand
image that will encourage returning customers as well as increased sales referrals.
5 Types of Production Planning
Depending on the production method that your company uses, as well as on other factors like
product type, order size, and equipment capabilities, the design of your product plan will be decided.
The five types of production planning that are used most frequently are:
Batch Production Planning
This type of production planning refers to when you need to manufacture identical items in groups or
in a continuous process rather than one at a time.
Batch production often leads to increased efficiency for several businesses. This leads to
increased gross profits, reduction in the cost of goods manufactured, and better customer
satisfaction.
For example, a clothing manufacturer making goods for the summer might first set up its cutting and
sewing machines to make 500 red t-shirts, then switch to navy fabric and thread to make 400 tank
tops.
A good production plan for batch processing is one that looks out for potential bottlenecks or delays
when switching between batches. This will help you avoid additional expenses and maximize your
profitability as well as productivity.
Job - or Project-Based Planning
Used most often by small and medium-sized businesses, here, the focus is on the creation of a single
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
item by one person or team. Typically, job or project-based planning is used when there is a
specificity of each client’s requirements, thereby making it difficult to make the products in bulk.
Several construction businesses and makers of custom jewelry and dresses adopt this production
planning method to get the job done.
Flow Production Planning
Flow production is also known as continuous production, and here, the standardized items are mass-
produced continuously on an assembly line. This method is most often used by large manufacturers
who want to create a constant stream of finished goods.
In flow production planning, it is important that each item moves seamlessly from one step along the
assembly line to the next. This will help avail the benefits of adopting flow production, which
reduces costs and delays, especially when there is a steady demand for your products.
Based on the steady demand for your products and adoption of flow production, it will become easy
for you to determine your needs for materials, equipment, and labor at each stage along the assembly
line. This will help you streamline your production and avoid delays.
For example, companies in the automotive industry and makers of canned food and drinks use this
method.
Process Production Planning
This is a method wherein there will generally be different types of machinery that are completing
separate tasks to put together the finished goods.
Mass Production Planning
While this method is similar to flow production planning because it is primarily focused on creating
a continuous flow of identical products, this happens at a much bigger scale. This means that by
implementing this method, you would be able to cut your production costs through economies of
scale.
This method will be the aptest for you when the uniformity of your products is as important as the
efficiency of your production process.
5 Steps to Make a Production Plan
Production planning is a complex and dynamic process that starts with forecasting and includes
process design and monitoring. The five typical production planning steps are:
Forecast Product Demand
The first step to production planning is to estimate how much of each product you will need to
produce over a given period of time.
Your historical data will be able to help you with forecasting, however, during demand planning, and
consequently production planning, you will also need to take other demand-affecting factors like
market trends and the economic situation of your buyer personas into consideration.
Implementing a demand planning software like Deskera MRP, which will also be able to help you
with production planning, will help you make more informed decisions. This, in turn, will lead to
increased profits, productivity, and more satisfied customers.
Map Out Production Steps and Options
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
In this step of production planning, you will be determining the resources, steps, and processes that
you will need to produce the required output in a given time period. Here, you can also examine
different options available for achieving your production goals, like considering outsource
manufacturing.
One of the added benefits of production mapping is that it will help you identify which steps are
interdependent and which can be performed simultaneously.
For example, you want to produce 1,000 children’s bicycles. Manufacturing the bicycle frames
consists of a series of steps that must happen in sequence - like cutting metal tubes, welding, and
painting, etc. However, there are other activities that can happen simultaneously, like assembling the
wheels.
Lastly, this step will also help you determine if you have all the necessary resources and the right
equipment. It will also help you identify what you will need to do if your machine breaks down. In
fact, production mapping will also help you determine whether your suppliers are meeting your
demand on time or not.
Thus, production mapping will assist you in inventory management, keeping a check on
your inventory costs, and shop floor scheduling. It will also help you improve the ratio of
your operating income to operating expenses.
Choose a Plan and Schedule Production
After comparing the cost, the time required, and the risks for each option, in this step, you would
select a production plan to implement. Sharing the selected plan with all the necessary stakeholders
will help you ensure a smoother production process, as they will all be aware of what is going to be
needed and when.
Then, you will create a detailed production schedule that will lay out in detail how your company
will execute the plan, including the resources and timing for each step. In fact, this will set the basis
for the master production schedule while shortening your order fulfillment cycle time.
Monitor and Control
Once you have completed the above steps, your production will start. This means that you will now
need to track performance and continuously compare it against the target described in the production
plan.
The benefit of doing this is that it will help you ensure that you are adhering to the plan as well as
the schedule. Additionally, it will also help you detect any issues as soon as they pop up, letting you
address them quickly, thereby mitigating the losses they might have caused.
Adjust Accordingly
It is going to be inevitable for your production to be affected by events that you cannot plan for or
predict. Some of those events include supply chain lags, client specifications, equipment failures,
and worker illness.
Additionally, after seeing your production plan in action, you might have even identified ways to
improve it and make it more profitable.
Thus, it is crucial that you keep your production plans flexible enough to allow for adjustments when
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
needed. This will help you improve their efficiency and profitability by huge measures.
3 Common Production Planning Mistakes
One of the best ways to avoid or mitigate problems once production has started is by being aware of
the potential pitfalls ahead of time. The three most common production planning mistakes are:
Not Anticipating Hiccups Along the Way
It is very likely that the plans will go awry in any complex production process. It is thus important
that your production planning includes risk management strategies. This should also include backup
plans that your company can rely on in case any problem arises. If you fail to do so, you might face
serious problems.
For example, if a machine breaks on the line and you have not kept aside a budget for repairs
and overtime of the workforce, then this issue will lead to financial strain on your company’s
resources.
Keeping Your Distance
While implementing production management software will lead to you getting real-time visibility
into your company’s production status, you should make sure that this information is supported by
in-person visits to the production line.
These visits will give you valuable insights into how production is working in practice. These
insights might prove useful in changing your production planning to make it more profitable and
productive.
If you or your employees continue to only sit behind the desk, then you will be missing out on these
valuable insights, which will even improve your several relevant key performance indicators.
Failing to Maintain Equipment
It is crucial that you regularly maintain your company’s equipment because this is what is making
your production happen. Thus, you must have a strategy in place to track the usage, as well as a
budget to pay for the regular preventive maintenance that will ensure that they keep running
smoothly.
Which Production Planning KPIs Must You Track?
KPIs or key performance indicators are those important metrics that will help your company track
the health of its production processes.
By monitoring KPIs and comparing them to target values defined in your production plans, you
would be able to assess whether your production is on track or not.
Additionally, you would also be able to identify problems that might need addressing.
Some of the typical production planning KPIs that you must track are:
Downtime
This is one of the key efficiency metrics that will track the percentage of time that production is not
occurring during the scheduled operating hours. Some of the reasons why this is happening are:
Machine breakdowns
Tool adjustments
1. Idea generation
The process of developing a new product begins with the generation of ideas. It is one of the most
crucial phases of product development and entails brainstorming an idea (or ideas) that would help
you overcome an existing customer problem in a novel and creative way. It’s critical to have a
thorough understanding of the target audience and their pain points, which you should tackle while
brainstorming ideas to help you meet customer needs.
There are two potential sources of fresh ideas:
Internal source:The company generates new ideas internally. It includes both R&D and
staff contributions. Employees are frequently the biggest source of fresh ideas, as they are
constantly exposed to the product as well as consumer feedback.Organizations like
Toyotahave created incentive programs to encourage their employees to come up with viable
ideas in this regard.
External sources:The company seeks out new ideas from outside sources. It includes
external sources such as distributors and suppliers, as well as competitors. Customers are the
most significant external source since the new product development process stages must be
centered on delivering value to customers.
2. Idea screening
The new product development process’s second step builds on the first. You’ve amassed as many
ideas as possible and made a list of them. It’s now time to cross off any ideas that aren’t good
enough from your list.
However, there are more things to consider while screening a product idea than whether it is
“strong” or “weak.” Ideas must also be compatible with a company’s broader business plan and
direction.
The usability of these product concepts should be determined by three primary factors: return on
investment, affordability, and market potential. Other considerations include the product’s capacity
to be successfully marketed, its link to competing products, distribution, product pricing, and
production time.
A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis might prove to be useful
when shortlisting new product development concepts.
3. Concept development & testing
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
Rather than testing the product itself, you would test the concept of your product at this stage. A
product concept is a more thorough version of the idea expressed in consumer-friendly terms.
The essential steps involved in concept creation are as follows:
Measuring the gain/pain ratio
Setting profit expectations is the purpose of this step in the new product development process.
Business analysis and marketing strategy are intertwined with developing a strategy for reaching out
to and connecting with a specific demographic and must be regarded as a critical phase in the new
product development process’s seven stages.
This stage, also known as marketing strategy development, involves a few key elements in the
construction of a good marketing mix. The following are some of these aspects:
Definition of the target market, as well as the value proposition offered from the customer’s
point of view
Profit targets over time, particularly during the first year
Pricing, distribution, and overall budget
Sales forecasts for the long run
5. Product development
Your product is fit to become a prototype or the first edition of a product at this point in the new
product development process. This way, you’ll have a physical representation of your concept that
you can test in real life rather than just on paper. This prototype, also known as a minimal viable
product (MVP), is a simple version of your product that will help you gain a sense of how it works
and point out areas that have to be improved.
For iterative and incremental development, a minimum viable product (MVP) could be introduced
and deployed in the market with minimal features. Naturally, modifications are based on the
fundamental response from customers, which is obtained through effective communication and
collaboration.
As a company, you must strike a balance between the necessity and difficulties of new product
development in order to maintain your competitive advantage. It’s here that the new product
development process stages kick off. It assists you in determining the new product’s market viability
and economic utility.
Here are a few ways you may assist your company in reaping the rewards of new product
development:
1. Your concept becomes foolproof
Properly following the new product development process steps allows you to test the concept with a
real audience and get feedback before implementing it. It also provides reliable information on
whether the product is acceptable or not, and it also helps in determining the audience’s reaction to
the concept.
2. Enhances product quality
During the planning step, you will plan everything from the raw materials used in product
development to the product’s features. You’ll also assess for market fit and test your prototype at the
end of the process. It will ensure that the company delivers a high-quality, widely available product.
3. It reduces expenses and the chances of failure
According to Fundera research, over 20% of new enterprises fail in their first year. It happens due to
several factors, including insufficient market research, inefficiency, and the lack of commercially
viable business strategies. The different phases of product development process are aimed at
minimizing these risks for your organization by evaluating the feasibility of your idea and the
existing market scenario.
Identifying the efficacy of new products in the NPD process before they can be placed on the market
allows you to change your concept to market needs or completely abandon it to save time and
money.
4. Accelerates innovation
The new product development process works as a catalyst for fresh ideas in your company.
It’s only natural that having a framework to examine the feasibility of new ideas will lead to their
adoption rather than more ad hoc ways of idea development that are more likely to fail.
5. Leads to better marketing strategies
The development of a marketing strategy for your product can be aided by the new product
development phases. You can leverage the information you gathered during the development process
into a well-defined marketing plan. After that, the workflow is simplified and hastened. The
following are the three most important aspects of your new product marketing strategy:
Targeting a specific market and various methods of communicating with them
Of course, offering a segmented niche product is an excellent strategy when you’re just starting.
However, as you scale your business, product diversification becomes essential.
How To Implement Product Diversification?
You can diversify your products through any of the abovementioned strategies and types of product
diversification.
However, you must decide your approach before you pick out a strategy.
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
There are two approaches to diversifying your products:
1. New Markets
2. New Products
Let’s understand these.
New Markets
The first approach is to find new markets. When we say new markets, we don’t just mean
geographical locations.
Diversifying into new markets can include any of the following:
1. Age range.
2. User persona.
3. Business size.
4. Economic class.
5. Niches.
6. Moving from B2C to B2B.
Remember that if you explore a new market with your current product, you’ll almost certainly need
to change it for better market validation.
New Products
The second approach is to develop new products that cater to your target market.
Spending time with your research and development (R & R&D) team is essential. Look at
your product feedback and see whether or not you’ve achieved customer success.
While developing a new product, prioritizing customer ideas in your product roadmap is essential.
Product roadmap tools like Chisel offer segments for feedback that help you track how your product
is doing. You can try it for free today!
Once you’ve decided which approach is most suitable for your company, you can proceed to
implement a complementary strategy from the ones we’ve already discussed.
Standardization:
This means fixation of some appropriate size, shape, Quality, manufacturing process, weight, and
other characteristics as standard to manufacture a product of desired variety and utility e.g.
manufacture of television sets of standard size of the screen using standard components and
technology; shaving blades are made of standard size and shape to suit every kind of razor. The
concept of standardization is applicable to all factors of production namely men, materials, machines
and finished goods. These standards can become the basis to evaluate the performance of various
components of production in the manufacturing process. In the words of Behel, Smith, and
Stackman:
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
“A standard is essentially a criterion of measurement, quality, performance, the practice established
by custom, consent or authority and used as a basis for comparison over a period of time. The setting
of standards and the coordination of the industrial factors to comply with these standards and to
maintain them during the periods for which they are effective is known as industrial
standardization”.
According to Dexter S Kimball of production control operation in the manufacturing, the sense is the
reduction of any one line to fixed types, sizes, and characteristics.” Standardization becomes the
basis of production control operations and works as a catalyst in directing and operating the working
of a business enterprise. It identifies and compares various products, systems, and performances in
an enterprise. It is the function of the department responsible for designing the product to provide the
guidelines and infrastructure for standardization of the whole system keeping into consideration the
designing stage towards standardization may be too expensive to be rectified.
For an organization designing the product without considering the standardization, aspect is of no
value of significance. Franklin F. Folts has described the concept of standardization as,”
simplification of product lines and concentration on a restricted predetermined variety of output is
one common application of the principles of standardization may be extended to all factors in the
production process”. Standardization is an instrument to manufacture the maximum variety of
products out of the minimum variety of components by means of a minimum variety of machines
and tools. This decreases working capital requirements and a reduction in manufacturing costs.
Standardization also implies that non-standard items are not to be manufactured except when
consumers order them specially. Some standards are enacted by law viz. automobile windscreen
which must be made of safety glass. Usually, there are institutions, societies, and governmental
departments that regulate the standards. In a factory, it is best to have standardization committee
drawing its members from sales, engineering, production purchasing, quality control, and
inspection. Sales department and engineering department have to work closely in effecting changes
towards standardization because the older products that have been sold are affected by after-sales
service needs. Within an organization, it is the engineering department who sets standards for the
materials to be procured and specification of the end products and the mode of testing the products.
Advantages of standardization:
Standardization in designing, purchasing of raw material, semi-finished and finished goods
and of the manufacturing process tries to eliminate wastage and reduces the cost of
production. Reduction in varieties of raw materials means reduced investments in stocks and
less attention to stock control.
Standardize product components reduce tool cost, permits larger and more economical lot
sizes of production, avoids losses for obsolescence and reduces capital requirements for work
in process.
Production in larger quantities can be planned which results in fewer set-up costs.
More production increases the inventory size which avoids delays in supply.
Less obsolescence of materials and machinery.
Unit IV
Meaning of Marketing
Marketing refers to performance of set of activities essential to direct, regulate and facilitate the
flow of goods and services from the manufacturer to ultimate consumer in the process of
distribution. These activities include market analysis, market planning, product planning, product
development, pricing of product or services, physical distribution, warehousing, financing, risk
bearing etc.
As per American Marketing Association, ‘marketing is a process of planning and executing the
conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizational objectives.’
Paul Mazur defined marketing as ‘the creation and delivery of standard of living to society.’
Nature of Marketing
The follow points describe the nature of marketing:
Marketing is a process of discovering and translating consumer wants into products and services.
Marketing is a concept and way of thinking.
Marketing is a dynamic process.
Marketing relates with movement of goods and services from producer to ultimate consumer.
Marketing creates time, place and possession utilities through warehousing, transportation
and selling.
It focuses on satisfaction of customer’s wants. Customer is considered as the ‘King’ of the market.
All activities of marketing begin and end with customers.
Marketing involves various activities such as product planning and development, product pricing,
promotion, physical distribution and selling.
Marketing is wider than selling. It not only aims at physical movement of goods but also focuses on
customer satisfaction.
Marketing involves creative thinking which provides a competitive edge to the organisation.
Marketing information system as well as integrated marketing is essential to achieve marketing
goals.
The scope of marketing is very wide. Various functions are performed under it. Different authors
have included different functions in marketing. However, the general functions of marketing have
been grouped under three major categories. These functions have been described as follows:
Merchandising Functions
It means those activities which are essential to make possible the availability of goods and
services to the market. Various activities that are covered under merchandising functions have been
described as follows:
Product Planning and Development: Planning for product, is the first step of marketing
programme in a firm. It implies all activities which are associated with the determination of line of
products which a firm can offer. It involves extensive marketing research so as to provide a product
or service as per customer’s needs. It helps in development and commercialization of new product,
modification of existing lines and discontinuance of unprofitable product lines.
Product development comprises of technical activities of product engineering and design. Product
planning and development involves certain activities as described below:
(i) Creation of Idea
(ii) Screening of Idea
(iii) Assessing technical feasibility
(iv) Analyzing its business prospects
(v) Designing the product i.e. giving shape, testing, packaging and labelling etc.
(vi) Test marketing (offering product as sample or launching it in small segment of market)
(vii) Analysing the reactions of customers and modifying the product accordingly
(viii) Pricing the product
(ix) Producing the product for sale in the local, national or international market
(commercialization)
Product Pricing : Product pricing is vital function of marketing and involves the determination of
adequate price which can achieve pricing objectives. There are various methods of pricing viz. cost-
based method, demand based method, competition based method and perceived utility method.
Prices of the products are determined by selecting an appropriate method. Correct pricing is
necessary for generating long term demand of the product. There is a need to follow proper pricing
strategies to survive in this highly competitive market. Prices should be fixed in such a manner that
on one hand, customer’s preference for product is created and on the other hand, genuine profits are
earned.
Buying and Assembling: Buying means procuring goods at right time, at right price, in right
quantity and quality and from a right source. It involves transfer of ownership from seller to buyer.
Buying is an important function of marketing. Manufacturers have to purchase raw materials and
other things. Trading houses buy goods for the purpose of selling them to others. Wholesalers and
retailers buy good for resale purpose. Good buying ensures acquiring of such goods which can
profitably be sold to customers. Buying decisions can be facilitated by gathering information through
marketing research, consumers and salesperson.
Buyers follow different buying practices while making purchases such as:
(i) Hand to mouth buying : This is also known as conservative buying. Under this system, buyers
purchase goods strictly as per their requirement.
(ii) Concentrated buying : It is the practice under which buyers make purchases from few
suppliers or from a single supplier. They are able to secure certain benefits from the seller being their
‘loyal buyers’.
(iii) Diversified buying : This is also called as scattered buying. This practice refers to buying
from different suppliers. Buyer can get competitive price, better service and wider choice.
(iv) Reciprocal buying : This refers to buying on reciprocal basis, i.e. if you buy from me, I will
buy from you. Under this, there is assured market for the buyer.
(v) Speculative buying : It is practice of making bulk purchases so as to sell them at higher price
in near future.
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
Assembling refers to collecting goods from different production houses and bringing them to a
central place for sale. Assembling facilitates in providing goods of different variety at a place and
time they are demanded. There are number of intermediaries who are involved in the process of
assembling.
Selling : Selling implies the process of transfer of title to goods or services in exchange of money.
The buyer gets the ownership of goods but may or may not hold their possession immediately.
Selling is considered as the vital function of marketing. In fact, all marketing activities are directed
towards effective selling. A firm can earn profit only through successfully selling i.e. disposing of
goods at reasonable prices. It is through selling that goods or services reach to ultimate consumer.
Selling consists of personal and non-personal activities aimed at creating, maintaining and even
developing demand for products or services. A seller has to establish contact with the buyer, create
demand, negotiate terms and conditions of exchange, complete all formalities and finally enter
into contract of sale i.e. legally transferring ownership of goods from seller to buyer. Selling is a
creative and difficult art. A seller should have zeal, imagination and presence of mind. Best selling
practices will ensure repeated or more sales. Selling can be personal or impersonal. Personal selling
refers to face to face interaction between buyer and seller. It usually includes sales talk,
demonstrations, handling prospective buyer’s queries, negotiations and transfer of ownership in
exchange of money which may be collected immediately or at some future date as happens in case of
credit transactions. Impersonal selling means selling the goods or services not through face to face
interaction but by making use of courier or postal services. The orders are received over phone,
through e-mail or by post and then goods are dispatched. Money can be collected before transferring
ownership i.e. before goods are delivered or at the time of transferring ownership i.e. by V.P.P.
It involves activities which are essential to move products from the place of production to the
place of consumption. Various activities carried out under physical distribution functions are as
follows:
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
Warehousing: Warehousing means storing the goods from the time of their production till they are
demanded and it involves certain other functions like sorting, packing in convenient lots, risk- taking
etc.
Middlemen have to keep stock of goods to earn profits by supplying goods on time.
Certain commodities are required to be stored to improve their quality like liquor, curing of tobacco
etc.
Warehousing is needed for goods which are produced regularly but have seasonal consumption.
There are certain commodities which have consistent consumption throughout the year but they are
produced seasonally like wheat. Such commodities are produced in large quantity and then stored.
Sometimes there is need to break-up lots and repack goods in small lots which can be delivered to
retailers. For this, bulk purchases are first stored in warehouses.
Warehousing aids in widening the market and also in foreign trade
It creates time utility in goods. Goods which are produced regularly but have seasonal consumption
are stored so as to deliver them when they are in demand.
Warehousing creates place utility in goods by making goods available at places of demand.
Sometimes transported goods have to be stored before their final disposal. Warehouses located at
different places help in it.
It stabilizes prices by matching demand and supply of goods in the market.
Warehousing helps in securing loan against security of goods deposited in the warehouses.
Public warehouses share the risk of loss of damage of goods in storage.
Sometimes, warehousing creates form utility in goods by improving their quality through storage
like tobacco, liquor etc.
Storage enables accumulation of stock and then transporting in bulk quantity. It saves transportation
cost.
Economies of large scale can be availed by producer or wholesaler. Goods produced in bulk or
purchased in bulk, can be stored in warehouses.
Transportation : Consumers are usually scattered geographically. They are made available goods
and services at their places through various means of transport like airways, waterways, roadways
and railways. Each mode of transport has its own merits and limitations. These modes are selected
by considering factors like nature of product, speed, performance, cost, and availability of mode of
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
transport. Goods are also made available to wholesalers and retailers through various means of
transport for resale. Transportation creates place utility in goods.
Inventory Management : Inventory management is important function of marketing. It aims at
reconciliation of two conflicting goals of management i.e. (i) to offer better customer service by
strictly dispatching orders as per scheduled delivery dates and (ii) to minimize capital investment
and cost of handling inventory. Inventory acts as a link between customer’s orders and
company’s production activity. There is a need to maintain an adequate inventory level which calls
for effective inventory management. The size of inventory is determined by keeping in mind market
demand and inventory cost. However, the optimum size is also decided by
considering responsiveness of distribution system and desired level of customer service. The firm
determines maximum stock level and minimum stock level. Maximum stock level helps in
meeting sudden rise in demand whereas minimum stock level points out the need to replenish the
stock and avoids in running out of stock position. Hence, inventory control is exercised to avoid (i)
out of stock position and (ii) piling up a large undesired stock.
Auxiliary Functions
These functions facilitate the process of transfer of goods from the manufacturer to the consumers
and are described below:
Risk bearing : The process of transfer of goods from the place of production to the ultimate
consumer involves many risks and loss during transportation and warehousing such as theft, damage,
pilferage, obsolescence, breakage, fall in demand etc. There is also a risk of loss due to non-payment
by buyer. Marketers are confronted with these risks. However, insurance and banking facilities try to
mitigate these losses or risks.
Financing : Finance is considered as lubricant of marketing machinery. Production of goods does
not mean immediate consumption too. There is time gap between the production of goods and their
sale. This results in blockage of working capital. However, funds are required to purchase raw
material and for paying warehouse rent and other associated warehousing costs. It is also required to
pay for transportation cost. There is further need of finance when sales are made on credit
basis. Many financial institutions and banks provide loan facilities to meet financial requirements of
firms and middlemen. Many a times, finance is raised against goods which are presented as
collateral securities. Thus, banking companies and financial institutions act as facilitators
in marketing of goods and services.
Packing and packaging: Goods may get damaged during transportation or they may be damaged in
warehouses. Goods are packed in suitable containers so as to protect them from leakage, spoilage or
breakage. Packing means to wrap or fill goods with the purpose of their protection and convenient
handling. It will also increase their durability. Package means specially designed wrapper, container
or case which is used for packing goods. It gives identity to the product. Packaging refers to putting
Importance of Marketing
Marketing is indispensable in today’s business world. It plays a significant role in smooth transfer
of goods and services from the place of production to the place of consumption. The following
points highlight the importance of marketing:
Marketing facilitates exchange of goods: Marketing helps in the possession of goods and transfer
of ownership from seller to buyer. Marketing through promotion brings together the buyers and
sellers and facilitates sale of goods as per need and wants of the consumers. It creates possession,
place and time utilities in goods and services. Through transportation, goods are provided to the
consumers who may be scattered throughout the geographical area or region. Warehousing provides
time utilities by holding the stock of goods when they are not in demand.
Marketing increases market base: Marketing locates the untapped areas, stimulates demand and
creates demand for new product and services. Banking, insurance and financing facilities
ensure smooth flow of goods to distant markets. It, thus, widens the market. The manufacturers are
able to increase production as well as sale of their products.
Thus, marketing is the driving force of the economy. No economic activity can be imagined without
marketing. It provides invaluable services to various sections of society. It is responsible for the
progress of the nation.
Summary
Marketing refers to performance of set of activities essential to direct, regulate and facilitate the
flow of goods and services from the manufacturer to ultimate consumer in the process of
distribution. Marketing creates time, place and possession utilities through
warehousing, transportation and selling. It focuses on satisfaction of customer’s wants. Customer is
considered as the ‘King’ of the market. All activities of marketing begin and end with customers.
Marketing is wider than selling. Marketing information system as well as integrated marketing are
essential to achieve marketing goals. The scope of marketing is very wide. Various functions are
performed under it. The general functions of marketing have been grouped under three major
categories i.e. Merchandising functions, Physical distribution functions and Auxiliary functions.
Merchandising functions means those activities which are essential to make possible the
availability of goods and services to the market. It includes product planning and development,
standardization and grading, product pricing, buying , assembling and selling. Product planning
implies all activities which are associated with the determination of line of products which a firm can
offer. Product development comprises of technical activities of product engineering and
design. Standardisation refers to the process of setting up standards so as to ensure that goods are
produced as per those standards. Grading means dividing the products into different classes as per
their size, quality and other features. Product Pricing involves the determination of adequate price
which can achieve pricing objectives. There are various methods of pricing viz. cost- based, demand
based, competition based and perceived utility method. Prices of the products are determined by
selecting an appropriate method. Buying means procuring goods at right time, at right price, in right
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
quantity and quality and from a right source. It involves transfer of ownership from seller to buyer.
Buyers follow different buying practices while making purchases such as hand to mouth buying,
concentrated buying, diversified buying, reciprocal buying and speculative buying. Assembling
refers to collecting goods from different production houses and bringing them to a central place for
sale. Selling implies the process of transfer of title to goods or services in exchange of money.
Selling consists of personal and non-personal activities aimed at creating, maintaining and even
developing demand for products or services.
Physical distribution functions refer to activities which are essential to move products from the
place of production to the place of consumption. It involves warehousing,
transportation and inventory management. Warehousing means storing the goods from the time of
their production till they are demanded and it involves certain other functions like sorting, packing in
convenient lots, risk- taking etc. Transportation involves making available goods and services to
customers at their places through various means of transport like airways, waterways,
roadways and railways. Transportation creates place utility in goods. Inventory Management aims at
reconciliation of two conflicting goals of the management i.e. (i) to offer better customer service by
strictly dispatching orders as per scheduled delivery dates and (ii) to minimize capital investment
and cost of handling inventory. Inventory control is exercised to avoid (i) out of stock position and
(ii) piling up a large undesired stock.
Auxiliary functions facilitate the process of transfer of goods from the manufacturer to consumers.
These functions include risk bearing, financing, packing and packaging, advertising, sales
promotion and market analysis.
Marketing Environment
A company's marketing environment includes every element that may affect its ability to connect
with its customers. This can include internal elements such as resources, equipment and a company's
corporate structure. It can also include external components like existing customers, delivery
platforms and top competitors. Both internal and external conditions can affect how a customer
responds to a business and determine how a business might grow.
Some benefits of understanding your marketing environment include:
Assisting you in understanding the company's competitors and the market
The marketing information system distributes the relevant information to the marketers who can
make the efficient decisions related to the marketing operations viz. Pricing, packaging, new product
development, distribution, media, promotion, etc.
1. Internal Records:
The Company can collect information through its internal records consisting of sales data, customer
database, product database, financial data, operations data, etc.
3. Marketing Research:
The Marketing Research is the systematic collection, organization, analysis and interpretation of the
primary or the secondary data to find out the solutions to the marketing problems.Several Companies
conduct marketing research to analyze the marketing environment comprising of changes in the
customer’s tastes and preferences, competitor’s strategies, the scope of new product launch, etc. by
applying several statistical tools. In order to conduct the market research, the data is to be collected
that can be either primary data (the first-hand data) or the secondary data (second-hand data,
available in books, magazines, research reports, journals, etc.)
The secondary data are publicly available, but the primary data is to be collected by the researcher
through certain methods such as questionnaires, personal interviews, surveys, seminars, etc.
Marketing research contributes a lot to the marketing information system as it provides the factual
data that has been tested several times by the researchers.
Marketing Research
Definition:
Marketing Research is the systematic collection, analysis, and interpretation of data pertaining to the
marketing conditions.
The basic reason for carrying out the marketing research is to find out the change in the consumer
behavior due to the change in the elements of the marketing mix (product, price, place, promotion).
The marketers need to know about the changing trends in the market viz. Changes in the customer’s
tastes and preferences, the new products launched in the market, prices of the competitor’s product,
the close substitutes of the product, etc.
Research Approaches:
Secondary data are readily available in books, journals, magazines, reports, online, etc. But the
primary data have to be collected and to do so, the following research can be conducted:
Observational Research:
Ethnographic Research:
Focus Group Research:
Survey Research:
Behavioral Data:
Experimental research:
Sampling plan:
Contact Methods:
Collect the Information:
3. Analyze the Information:
Once the information is collected the next step is to organize it in such a way that some analysis can
be obtained. The researchers apply several statistical techniques to perform the analysis, such as they
compute averages and measures of dispersion. Also, some advanced decision models are used to
analyze the data.
Compiled by Dr. Shikha Agrawal
GRADUATE SCHOOL OF BUSINESS
BBA – III year
Functional Management
Advertising Management
Advertising is the best tool for companies to promote their products and services both online and
offline. For this, they use various mediums, which help them to increase the sales of their product
and services and boost their brand value. It is basically the act of spreading awareness among the
consumers about a particular brand or its products. Also, it works by focusing on customer’s
requirement to buy the product. Hence, advertising has become an important part of the corporate
industry globally. And hence, organizations spend a lot of their budget on promotional campaigns.
Further, advertising helps in building a brand of the product, which goes a long way in making
effective sales.
There are various types of advertising organizations indulge in. Have a look at them.
Classification of Advertising
1. Print Advertising : This is probably the oldest form of advertising. Here, products and services
are promoted in the form of texts. Companies from various industries across the globe have been
using newspapers and magazines for over years now. With print media, companies can endorse their
brand or products through fliers and brochures through newspapers and magazines. They can buy
advertising space in any popular newspaper or magazine and the cost depends on various factors
including the quantity of space, type of paper, and the page of the publication.
2. Broadcast Advertising: This form of advertising is widespread all around the world.
Broadcasting includes radio, television, and Internet advertising. With this form of advertising,
companies can cover up large number of audiences, even in real-time. Advertisements on the
television are very popular. The length and time of the ad determines the cost of a particular
advertisement.
For instance, advertisements that are telecasted at the prime time would be more costly than the
regular ones. While, radio advertising has been a popular form of broadcasting, after the advent of
television and internet, its popularity has reduced greatly. However, it is still an important
advertisement form in rural areas. The radio campaigns are quite popular in some sections of society
helping to sell the products/services.
3. Outdoor Advertising: This type of advertising makes use of various tools to get customer’s
attention like the billboards, kiosks, and tradeshows and events which are an effective way to convey
the message of any organization. While billboards are there all around, the content displayed should
be capable enough to attract potential customers. This means it should be very attractive. Organizing
events, on the other hand, such as exhibitions and trade fairs for promoting the product or service
helps in effective endorsement of the product. Hence, outdoor advertising is also an effective
advertising tool.
4. Public Service Advertising: This type of advertisement is done for public causes to make people
aware about such public issues. Social, national and environmental matters such as political
integrity, AIDS, Cancer, energy conservation, population, illiteracy, poverty and many more which
need more awareness are spread through these advertising. Public service advertising has achieved
widespread importance in recent times and is an effective tool to communicate the message.
5. Covert Advertising: This is an entirely different way of advertisement. In this form, the product
is subtly included in a serial or movie. There’s no actual advertisement. It includes just mentioning
the product in the movie or TV serial. For instance, Katty Perry using Apple phone in her new
album. Seeing a product being used by a celebrity creates an impact on the audience which boosts
their interest in buying that product.
6. Celebrity Advertising: In this type of advertising, business owners bank upon celebrities for
advertising their products or services. Advertisers sign up popular celebrities for various advertising
campaigns and use their popularity to reach and attract customers. Celebrity advertising comprise all
kinds of advertising including, television ads, social media or even print advertisements.
7. Surrogate Advertising: This type of advertising is used when a particular product or services is
banned by the law. For instance, advertising products like alcohol and cigarettes which are harmful
for the health of consumers are prohibited by law in many nations. In order to continue their sale,
such companies have to come up with other products with the same name. This technique helps them
remind their consumers of cigarettes and hard drinks of the same brand. Kingfisher is a great
example of this type of advertising.
8. Response Advertising: Personalized messages are sent to the consumers in the form of offers
based on their personal interests. The main objective is to develop a ‘relationship’ with the customer.
This form of advertising encourages a response from the customer based on which brands build
commercial relation with them.
9. Interactive Advertising: It involves promotions through interactive mediums like internet, TV,
SMS, and Mobiles. Advertisers, through these interactive mediums influence the buying decisions of
the customers. With this type, advertisers can interact with their consumers directly or in a personal
way. This can affect the buying decision of a potential customer, especially in an e-commerce space.
Sales promotion
A sales promotion is a marketing strategy where a business will use short-term campaigns to spark
interest and create demand for a product, service or other offers.
Sales promotions can have many objectives and ideal outcomes, which we will explore in detail
throughout this article.
Primarily, sales promotions are used to motivate buying behavior or trigger an uptick in purchases in
the short term, in order to reach a benchmark or goal. Although the immediate purpose of a sales
promotion is an uptick in sales, there are plenty of other benefits to building out a strategic sales
promotion technique with your marketing team.
Strategically using sales promotions helps support a variety of business interests and keep your
existing audience engaged with your offers.
The downside of sales promotions is that some businesses suffer from becoming overly dependent
on them in an effort to boost sales. As a result, they enter a precarious short-term marketing cycle
and struggle to plan for long-term goals and growth.
Further, if your competitors also run tons of sales promotions, the market itself may be negatively
affected. Bidyut Bikash Das, former Demand Manager at OYO, notes that, “...when a number of
competitors extensively use promotions to differentiate products or services, and other competitors
copy the strategy, [it can result in] no differential advantage and a loss of profit margins to all.”
In addition, too many promotions can damage your business reputation because the offers no longer
seem exclusive or valuable and clients begin to see your product or service as worth less than what
you typically sell it for.
Overall, sales promotions are a powerful tool to rapidly inject sales, attention and demand into your
business. To ensure they remain effective, they should be used strategically and with a specific goal
in mind.
Although the main driver of running a sales promotion is to increase demand for a particular offer,
sales promotions can help you to achieve multiple outcomes, depending on your end-goals.
In the short-term, sales promotions can help you attract new leads or customers. However, this
should also be seen as one piece in a long-term strategy, since you’ll need to continue to nurture
these leads to move them along the sales pipeline or turn them into loyal customers that don’t churn.
An example of using a sales promotion to generate new leads is to offer a free trial for a SaaS tool so
that potential customers can see if your product is the solution they’ve been looking for.
Or, if you’re selling a digital template at a reduced price, people may share it with others who could
benefit from the discount as well. In this way, sales promotions are a great way to attract qualified
leads for your sales team.
Sales promotions are a great way to grab attention and increase demand when introducing a new
product, service or feature that doesn’t yet have social proof within your market.
For example, pairing the announcement of your new SaaS feature with a limited-time discount might
be enough to turn long-time leads into paying customers. Alternatively, if you’re revealing a new
product, you could share an introductory price that will expire after the first “X” number of
purchases.
Sales promotions work to generate valuable insights into what your customers desire, how they
make purchasing decisions and what kinds of promotions they value the most – useful information
for both your sales and marketing teams.
When designing your sales promotion campaign, you’ll need to conduct research into your
customers’ interests, as well as what your competitors offer. Taking time to do this research can help
you and your team learn how to attract new clients, improve customer service and create compelling
offers that resonate with your target audience. Just imagine, you wouldn’t want to run a campaign
for 15% off the same week when your competitor is running a promo for 20% off.
A great sales promotion idea could focus specifically on repeat customers. Encouraging repeat
business is easier and more cost-effective than attracting new clients. In fact, a 5% increase in
customer retention generates more than a 25% increase in profit, on average.
By providing existing customers with exclusive incentives, you can increase loyalty, generate repeat
purchases and hopefully draw high-quality referrals. You can also attract long-term and repeat
customers. This practice is a good one for any sales pipeline, as repeat clients move through the
funnel quickly, since they already know what to expect.
Similar to selling out extra inventory, if your business is seasonal or has slower periods, well-timed
sales promotions can help inject purchases and galvanize interest during a time where sales are often
slow or stagnant.
Sales promotions can help companies increase the number of products or services sold. Although the
sale often occurs at a reduced price, the increased quantity sold helps counteract the difference.
Email is a great vehicle for this communication, as research shows that 49% of people would like to
receive weekly email blast campaigns from their favorite brands. By segmenting your list, you can
ensure that you’re sending them only the most relevant offers.
Regardless of the type of business or industry you’re in, there are a variety of sales promotion
examples and techniques at your disposal that you can align with your sales needs. B2B and B2C
sales promotions can use several techniques, such as:
Customer competitions can be about getting the most engagement on a social media post your brand
is tagged in, or a social media challenge that enters them in a giveaway. This is a fun way to both
create buzz around your business and reward customers for being avid supporters and promoters of
your brand.
A flash sale is a sales promotion that offers a discount, promotion or rebate that’s only valid for a
short period of time, ranging from just a few hours to a few days. Flash sales work well to create a
sense of urgency, which can help nudge consumers to make a purchase decision.
Even though the buying window is short, marketers can build interest ahead of time by sharing
exactly when the flash sale will occur.
If you have a product set that has the potential to create more value as bundled offerings rather than
standalone items, selling them as a package for a discounted rate can help to increase overall sales.
This can be highly incentivizing for customers that were struggling to choose between several of
your products or services and a competitor’s and can now get both (or many) at a discounted price.
Free trials are a great way to get a lead to try out your product or service with no risk to or
commitment from them. In practice, retailers can offer free samples at the point of purchase, and
B2B or B2C services might offer a free trial or demo of their products or services so that their leads
and potential customers can take the product for a spin.
To support conversion, consider pairing the free trial or demo with a limited-time discount.
In e-commerce, Baymard Institute estimates that nearly 70% of consumers abandon their shopping
cart and 50% of those consumers attribute their cart abandonment to unexpected extra costs like fees,
shipping and tax.
Sales promotions that use free shipping and free returns can help eliminate one of the obstacles that
cause people to abandon their cart. If you are a B2B or SaaS brand, the final hurdle for purchase
might be your customer’s resistance to deal with the challenge of switching providers.
6. Limited-time freebies
If you can’t be flexible on price, you can still generate a sense of urgency by creating a limited-time
offer for a free product added to an order.
For example, you could offer an existing product or service alongside a free bonus feature or add-on.
This adds perceived value without hurting your bottom line or constraining your resources.
If someone becames connected to your business in a way other than making a purchase, such as a
free trial, it might take time for them to warm up to becoming a paying customer.
To speed up the process, offer a discount on their first purchase. In fact, some brands even offer
discounts on first purchases in their welcome email as a way to thank their new customer or lead for
joining their community. For best results, limit the offer to a couple of days. Even if they don’t use
the coupon, they may browse your products or services and learn more about your business.
“Buy one, get one free” (also called BOGOF), or “Buy two and get the third free” are commonly-
used sales promotion tactics. These campaigns are useful when you want or need to sell several
products at once.
This type of promotion can also work to build brand awareness, as your customer may share the
extra items with a friend or family member.
Coupons are versatile because they can be delivered in a variety of ways, such as via your website,
social media, or print materials like on your receipts or product packaging. Coupons are a great way
to thank current customers or incentivize first-time customers to return.
Tripwire refers to the idea of offering an entry-level product or service to a potential customer. By
doing this, your salespeople can get them into your ecosystem or sales CRM and begin nurturing
them through the buyer’s journey.
Once you build trust, you can show them why upgrading to a higher-priced offer is in their best
interest.
If it suits your business, you might consider becoming known for your one-time or biannual sale. A
recurring sale can help build anticipation so that when it does finally come around, people are ready
and excited to spend.