Functional Management - BBA III Year - Dr. ShikhaAgrawal - Unit 3 &4

GRADUATE SCHOOL OF BUSINESS
BBA – III year

Functional Management
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
Compiled by Dr. Shikha Agrawal

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a controlled manner to add value in accordance with the policies communicated by management. A
simplified production system is shown in diagram.
The production system has the following characteristics:

1. Production is an organised activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organisation system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.
Classification of Production Function
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.

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5. Detailed planning is essential for sequencing the requirements of each product, capacities for each
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.
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5. Flexibility to accommodate and process number of products.
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.
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2. Line layout needs major change with the changes in the product design.
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
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related to production processes so that the resulting goods or services are produced according to
specifications, in the amount and by the schedule demanded and out of minimum cost.”
Objectives of Production Management

The objective of the production management is ‘to produce goods services of right quality and quantity
at the right time and right manufacturing 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.
4. RIGHT MANUFACTURING COST

Manufacturing costs are established before the product is actually manufactured. Hence, all attempts
should be made to produce the products at pre-established cost, so as to reduce the variation between
actual and the standard (pre-established) cost.
What is Production Planning?
Production planning is the process of deciding how a product or service will be manufactured before
the manufacturing process begins. Thus, it is about how you plan to manage your supply chain, raw
materials and components, employees, and the physical space where your manufacturing processes
take place.
It is thus an important process for manufacturers like you as it affects other important aspects of your
business like:
 Supply chain management
 Production scheduling
 Material requirements planning
 Production lead time

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 Resource capacity planning
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.

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In fact, a poorly designed production plan can cause production problems and even carries with it the
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
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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
In this step of production planning, you will be determining the resources, steps, and processes that
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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
needed. This will help you improve their efficiency and profitability by huge measures.
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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
 Accidents
And so on.

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While some of the downtimes might be essential, like, for example, downtime for machine
maintenance, generally, the lesser the downtime, the better it is.
Setup Time
This is also known as the changeover time and is the amount of time it takes to switch between jobs.
Setup time affects overall productivity because, during these periods, production is halted.
Thus, it is important that production schedules take into consideration how much time and effort it
takes to reconfigure production for each job. This includes but is not limited to the following:
 Changes to the equipment
 Changes to the raw materials

 Changes to the workforce
In order to increase your efficiency, it is important that you design your production schedules such
that they minimize changeover time.
Production Rate
In a manufacturing environment, this is typically measured as the number of units produced during a
specific period. The advantage of comparing the actual production rate for each process with its
planned rate will help you identify your strengths as well as weaknesses. It will also help you to address
your problems.
Overall Equipment Effectiveness (OEE)
This is the measure of the overall manufacturing productivity that accounts for quality, performance,
and availability. The formula for OEE is:
OEE = Quality x Performance x Availability
Typically, quality is measured as the percentage of parts that meet the quality standards. Performance
is how fast a process is running compared to its maximum speed, which is expressed as a percentage.
Availability is the percentage of uptime during a company’s scheduled operating hours.
Thus, you can increase your OEE by lowering downtime, reducing waste, and maintaining a high
production rate.
Rejection Rate
This is the percentage or number of products that have failed to pass quality checks. Depending on the
nature of the product and the problem, it may be possible to salvage some of the rejected items by
reworking them. However, there may be others that need to be scrapped.
On-Time Orders
Production delays can be costly in terms of reputation as well as money. This is because if you are
able to generate products on schedule, then there would be fewer chances of you needing to use costly
expedited shipping or other emergency measures to meet deadlines.
Additionally, delivering orders on time will keep your customers happy, which means that they are
more likely to continue doing business with your company while also helping in your company’s
positive brand awareness.

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What is the New Product Development Process?

A structured and meticulously implemented new product development process (NPD) is the best way
to obtain new products. Companies need a constant stream of new ideas developed into new products
to survive and succeed in the wake of maturing products.
The complete set of actions through which a firm visualizes and delivers a new offering is referred to
as the product development process. It includes all of the necessary phases, from determining product-
market fit to determining the optimal approach for producing and launching the product to determining
its cost and go-to-market strategy.
The goal of the new product development process is to humanize technology in order to suit the needs
of end users. The following are the results of good product development:
 Creating new business prospects and expanding existing businesses
 Increasing profitability and productivity

 Enhancing customer pleasure
The terms “product development” and “new product development” are not interchangeable. Product
development focuses on introducing products that already have a Proof of Concept (POC),
whereas new product development focuses on completely new concepts with a significant level of
uncertainty around their development and subsequent adoption.
Seven critical stages must occur during the new software product development process, as well as an
organizational mindset that welcomes doing something besides what has already been perfected that
will keep your company competitive in an ever-changing marketplace.
7 Stages of New Product Development
The process of creating a new product is divided into seven stages. By following this method, you’ll
be able to consistently think of new product ideas.
Although new product development stages can be a lengthy process that often necessitates iteration,
it’s all done to guarantee that your product is as superior as it can be before it reaches your buyers and
meets their demands in the most efficient manner possible.
To ensure that the original idea can finally make it to market, the seven steps of the new product
development process demand strong concept development and product innovation. This is usually
accomplished by fostering design and product advancements through innovative ideas and
professional technical approaches, such as:
 Using Concept Generation to analyze the user’s demands
 Coming up with solutions to the problem
 In order to improve existing products further, addressing usability, safety, and user acceptance
issues
 Using Ergonomic and Aesthetic Principles
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 Comparing and ranking all concepts and ideas
Let’s have a look at the various stages of new product development.
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
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
 Performing a competitor analysis

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 Identifying the core product features
 Creating a value proposition chart
The test is the next logical step once you’ve developed a well-designed concept. Consumers should
be able to comprehend the concept and see if it has been effectively created. Your next step should be
to demonstrate your idea to a limited group of potential customers and evaluate it.
4. Business and marketing strategy development
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.
According to Gartner, many firms believe in involving customers in the early stages of product
development. This places them in a stronger position to create a product while adhering to ergonomic
guidelines.
R&D and operational expenses create a significant increase in spending at this stage. One or more
physical copies of the product concept will be developed and tested by the R&D department.
6. Test marketing
You’re doing market testing when you release prototypes to the target demographics and ask for their
feedback on how well the product works. It involves inquiring about what your target audience enjoys
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about your proposed product and what they want to see fixed or incorporated into it.
Running a test of your product early on can ensure its success before investing too much time and
money. A positive response indicates that there is sufficient demand for the product, which leads to
the start of the manufacturing process.
There are two types of market testing methodologies:
 Alpha testing involves test engineers analyzing a product’s performance. They keep track of
the marketing mix’s effects on the final product. If there are any issues, changes are planned
and implemented before the final thumbs up.
 Beta testing involves customers using the product and giving input to the company. It has to
do with paying close attention to the customer’s voice. If there are any problems, they are
returned to the project team for correction.
7. Commercialization
Commercialization is the ultimate stage of the new product development process, where you put your
products on the market. The business will need to establish or rent a production facility in this phase,
which will incur the biggest expenditures. In the first year, a significant amount of money might be
spent on advertising, product promotion, and other marketing operations.
Here are a few of the most important considerations:
 Calculate the global market for your product and introduce an appropriate quantity based on
that estimate
 Make the relevant advertisements and stick to a marketing strategy that works
 Ensure your marketing strategy includes digital channels
 Prepare your consumers for a new product launch
 Choose a launch date and location for your product
 Keep a tight eye on your product and pay attention to its performance
Benefits of New Product Development for an Organization
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
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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
 Analyzing statistics such as product pricing, distribution technique, and marketing budget for
the first year.
 Forecasting long-term sales and profit margins.
What Is Product Diversification?

To stay relevant and successful, businesses must keep a close eye on current market trends and product
success.
When businesses see an opportunity to expand their product lines for greater marketability, they
frequently embark on a process called product diversification.
Product diversification can help organizations grow their brand’s presence by expanding a product’s
present market.
This article defines product diversification, discusses why it is essential for organizations, the

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strategies and types of product diversification, and presents practical examples of diversifying your
products.
So what is product diversification?
Product diversification is a company’s strategy for increasing profitability and sales volume
through new products or expansions.
You can implement product diversification at two different levels. One is the business level, while the
other is the corporate level.
Let’s understand what these two levels of diversification are:
Business-level product diversification refers to expanding into a new section of an industrial
category the company already operates in.
For example, suppose your company operates in the SaaS industry, providing portfolio management
tools. In that case, you may now expand and offer product management software for product
managers.
Corporate-level product diversification refers to expanding into a new industrial category where the
company doesn’t currently operate.
For example, suppose you’re a company like Chisel, working in the SaaS industry. In that case, you
may expand into a new industry such as education or finance.
The level at which you diversify your product or service depends on your market research and product
portfolio management.
Product diversification is one of the four growth strategies given in Igor Ansoff’s product/market
matrix. The four strategies include market penetration, product development, market development,
and product diversification.
Let’s not confuse product development with product diversification. They are two different processes.
You must understand the difference between the two.
Difference Between Product Development and Product Diversification.
The main difference between product development and product diversification is that product
development creates a new product or improves an existing one. In contrast, product diversification is
the process of marketing new products to existing markets.
With product development, you are targeting a specific market with a particular need and trying to fill
that need with a new or improved product.
With product diversification, you take your existing products and market them to new markets to
expand your customer base.
While product development and diversification are different, they include equal amounts of risks and
opportunities for your company.
Also, a product development manager usually heads the product development process. However,
based on product diversification, different teams may manage it.
What Are the Best Product Diversification Strategies?
Now that you know enough about the meaning of product diversification, let’s understand the
strategies.
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Here are some of the best product diversification strategies:
Repackaging
Companies can repackage their products to diversify their offerings.
The way you display your products on the shelf can considerably impact their marketability to different
groups or demographics of customers.
Repackaging could mean redesigning your platform or website for software or digital products.
This is especially true for versatile products that are only promoted for a single purpose or to a single
sort of person. Companies can theoretically expand the market for a product line by changing how
they advertise it.
Repricing
Sometimes, businesses vary their products by altering prices or repositioning them for different sales
channels.
Repricing a product at a reduced cost is a rare product diversification approach, whereas raising a
product’s price is more usual.
For example, if a corporation wants to sell its product at a higher price, it may produce a similar version
targeted at higher-end stores.
These products may have minor changes to the materials used in their creation or how the corporation
styles them in marketing campaigns.
For example, while Chisel offers a ‘free forever’ version of its product management tools, we also
have pricing plans that provide different service levels.
Renaming
Companies rebrand things to make them more marketable on a global scale.
Renaming products, like repackaging, might assist attract new buyers who speak various languages or
prefer different modes of product marketing.
Your diversified product is identical to the original but under a different name or brand.
Companies can sell their products more efficiently in various locations by renaming them and aligning
their marketing strategies with local cultural norms.
Companies often rename products to make the brand sound more relatable to the user.
Perhaps Shakespeare was wrong when he said, “What’s in a name?”
Resizing
Diversifying products by resizing them is a typical practice.
Some businesses sell products in standard sizes or quantities but may alter their sizes to appeal to a
broader range of customers.
For example, if a business sells vast amounts of its products to wholesale merchants, it may start
selling lower quantities to appeal to a smaller retail market.
On the other hand, companies may expand the size of their products to advertise them to value buyers
who want to save money by buying in bulk.
Product extension
You can use the strategy of product extension to diversify products.
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Companies expand their product lines by offering multiple variations of the same item, such as
alternative styles or colors.
You may also sell different versions of the same product with additional upgrades.
This method may help attract customers interested in acquiring products with specific aesthetic
preferences or sophisticated features.
Brand extension
Companies can add higher or lower-end options to their product line to broaden their existing brand
of products.
Companies that make high-priced or luxury goods, such as vehicles, laptops, jewelry, smartphones,
and other items, sometimes employ brand extension as a strategy.
These products may meet the needs of a diverse economic demographic of customers.
Consumers who may not be able to justify expensive purchases but are interested in similar things that
align with the brand’s quality and name might benefit from brand expansion.
What Are the Types of Product Diversification?
It’s time to understand the types of product diversification. Only when we know the product
diversification types will we be able to understand the strategies.
There are three types of product diversification:
Concentric Product Diversification
Concentric diversification means expanding an existing business with similar products or services.
Concentric diversification is at play when a computer company that typically manufactures desktop
computers begins to manufacture laptops.
Horizontal Product Diversification
Horizontal diversification includes offering existing customers new and unrelated products and
services.
A notebook manufacturer entering the pen business, for example, is adopting a horizontal
diversification strategy.
Conglomerate Product Diversification
Conglomerate diversification refers to adding new products or services that are fundamentally
unrelated and have no technical or commercial parallels.
A computer manufacturer, for example, that decides to develop notebooks is adopting a conglomerate
diversification strategy.
Why Is Product Diversification Essential?
There are many reasons why product diversification can be beneficial for businesses.
First and foremost, it can help to reduce risk. If one product line fails, the company will still have other
products generating revenue.
Additionally, product diversification can help businesses to achieve economies of scale. A company
can spread its assets across multiple investments by producing various products.
Thirdly, it helps in optimizing the resource capacity of the company.
Product diversification also helps enhance your product portfolio and manage stakeholder expectations
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better.
Diversification helps a company with change management while shifting economic conditions.
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.
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.

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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:
“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
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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.
 By minimizing the operations in the production process it provides facility to introduce
mechanization and use of more specialized tools and equipment.
 Service and maintenance costs, as well as marketing expenses, are reduced.
 Encourages the manufacturer to products of the new style, use, and performance with an object
to generate more customers.
 The value of the standardized product lying in stocks or in stocks or in transit can be easy for
the purpose of advancing loans.
Disadvantages of Standardization:
Product standardization leads to some disadvantages also. These are:
 Too much standardization has an adverse effect on the efficiency and morale of the workers.
They, in the long run, feel bored and fed-up in doing the same routine again. The spirit of
challenge and initiative vanishes with the passage of time.
 During the initial process of product Development where frequent improvements and changes
may be necessary to bring the product and production process up to the mark, standardization
may create obstacles in innovations.
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 For small-scale enterprises, standardization may not be advantageous.
Simplification:
In production, simplification can be done at two places namely (i) for product or) for work.
Simplification in product development is used for products; In fact, simplification should be done
before standardization.
In the words of F. Clark and Carrie, “simplification in an enterprise connotes the elimination of
excessive and undesirable or ‘marginal lines’ of product to hammer out waste and to attain economy
connotes the elimination of excessive and undesirable or ‘marginal lines’ of product to hammer out
waste and to attain economy coupled with the main object of improving quality and reducing costs
and prices leading to increased sales.”
W.R Spiegel and R.H Lansburg also define,” Simplification refers to the elimination of superfluous
varieties, size dimensions etc.” Simplification can be advantageous to both producer and the consumer
of a product. These can be listed as:
To the producer:
 Eliminates surplus use of materials to provide economy in production cost.
 More production increases the inventory size which avoids delays in supply.
 Less obsolescence of materials and machinery.
 Due to simplification in operation, the efficiency of the production process increase and this
leads to more productive due to the scope of better training and learning facility with
simplification operation.
 Human efforts become more productive due to the scope of better training and learning facility
with simplified operation.
 After-sales service prospects are minimized.
 Production planning and control operations become easy and simple.
 Reduction in cost of production leads to more sales.
To jobber-wholesalers and detailers:

 Increased turn over.
 Sales effort on fewer items.

 Reduction in storage space for.
 Fewer overheads and handling expenditures.
To the consumer:
Explain it to each one with Advantage and Disadvantage, the following are:

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Specialization:
Specialization implies expertise in some particular area or field. It is experienced that as the companies
expand the range of their products, manufacturing system, involves more and operations for
transforming inputs into output. This often results from an increase in operating cost and a decline in
profits. The problem can be solved by identifying the products contributing to losses and then eliminate
their production. This will lead to confine the production of profitable items only and consequently a
reduction in the number of operation required in the process. The minimization of operation can lead
to the use of expert knowledge, skill, and techniques in the production system, the nature and the type
of product. The operation required manufacturing it and the nature of the market. Specialization
implies the reduction in the variety of products manufacturing by the organization.
Advantages of specialization are:
 Specialization and standardization lead to higher productivity.
 In the case of output and reduction in per unit cost of production,

 Savings in the purchase of raw material and improvement in the quality of the finished goods.
Disadvantages of specialization are:

 Less flexibility in adjustment to changed situations.
 Monotony and boredom may adversely affect the efficiency.
Diversification:
It implies the policy of producing different types of products by an enterprise. Thus it is reverse of
simplification are associated with the nature of the industry e.g. in the case of capital goods industry
simplification is more important as the customers give preference to economy, accuracy and
performance of the product, whereas in a consumer goods industry diversification leads to produce a
variety of goods in; terms of style, shape, color, design etc. The establishment facing tough
competition is forced to diversify this activates to capture the market. In general, diversification can
be adopted for the purpose of the market. In general, diversification can be adopted for the purpose of
(a) utilization of idle/surplus resources, (b) stabilization of sales, (c) to cope with demand fluctuations
and (d) for the survival of the organization.
Due care and precautions should be taken in the formulation of diversification policy. Proper and
extensive market analysis at different levels of the quality and quantity of the products should be done
to determine the levels of profitability. This will help in selecting the most appropriate diversification
strategy under the prevailing circumstances.
Advantages of Diversifications are:
 Increase in sales due to the production of different kind of products. This also leads to an
increase in the volume of business.
 Needs of the wider section of the consumer are fulfilled.

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 Risk minimization’ in the case of quick and unpredictable demand variations.
 Uniform and balanced production programme can be chalked out without any consideration of
wastage by production by-products.
 Elimination of wastage by producing by-products.
Disadvantages of Diversifications are:

 Due to the increase in the number of operations, the production process becomes quite
complicated and sometimes expensive.
 Production Planning and control operation becomes complicated and time-consuming

requiring extra Efforts.
 The size and the variety of items in; the inventory increases with diversification introducing
more problems.
 The worker of different types of skill and expertise is required.
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:
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 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.
Scope of Marketing
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
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(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)
 Standardisation and Grading : Standardisation refers to the process of setting up standards so as to

ensure that goods are produced as per those standards. A standard is a constant physical feature of the
product like design, shape, size and colour. Standardisation brings uniformity in quality which further
helps in marketing. A buyer can buy goods only by examining the sample rather than inspecting the
whole lot. This saves lot of time and botheration of buyers and sellers. Grading means dividing the
products into different classes as per their size, quality and other features. Products with similar
features are placed in one grade and are distinguishable from other products. Since, all products of the
manufacturer may not be of same quality, so they are divided into different groups in accordance with
specifications set in standards and are given different grades. e.g. Basmati rice differs in quality, so
they are classified according to quality and grades are assigned. Thus grading creates heterogeneity
among groups but homogeneity within the group. Grading provides various benefits such as (i) sale
of goods by description (ii) raising of loan by giving graded goods as collateral security (iii) smooth
trading in commodity exchanges (iv) winning buyer’s confidence as he is assured of a particular
standard of goods.
 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
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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.
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.
There exists various methods of selling such as :

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(i) Sale by Description
(ii) Sale by Inspection
(iii) Sale by Sample
(iv) Sale on Approval or Return basis
(vi) Hire purchase selling.
Physical distribution functions
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:
 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.
Need for warehousing

Warehousing is primarily needed to adjust demand and supply of goods in the market. Its need has
been highlighted in the following points :
 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
Warehousing provides following benefits / services :
 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.
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 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
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

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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
goods in convenient sized lots like bottles, jars, cans, bags etc. It will help in making goods familiar
with consumers. Packaging facilitates branding and advertising of goods.
 Branding : Branding means giving name or symbol to a product so as to enable consumer to
distinguish it from other similar products. Branding helps in popularizing the products. Mass
advertising media plays an important role in creating popularity of certain products among consumers.
However, to survive in market, producers should provide quality in branded goods. Further it is
necessary that brand name should be attractive, suggestive and easy to spell and remember. Branding
can be done by giving special names to the product like Dalda Ghee, Dove Shampoo or by using names
of manufacturers such as LG refrigerators, Bata Shoes etc.
 Advertising and Sales Promotion : These activities are necessary to create, maintain and develop
demand for the product. Even best products may fail to attract customer due to lack of proper
advertising and sales promotion.
 Market analysis : Marketing involves the study of market environment which consists of political,
legal, cultural, social, technical and ecological factors. These factors constitute remote environment.
There is need to collect information about consumers, competitors and suppliers that constitute
operating marketing environment. The analysis of market environment provides information about
opportunities and threat prevailing in the external environment. Marketers can make or adjust plans
according to the trends prevailing in the market. The marketing information will enable firms to
produce products as per customers’ needs and wants and develop a good marketing mix. It will also
help in accelerating sales by proper product positioning and pricing.
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:

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 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.
 Marketing gives boost to other activities: Marketing increases demand of various related activities
like banking, insurance, warehousing and transport. Advertising, sales promotion and direct marketing
efforts also get a boost as they are needed more to accelerate sales.
 Marketing raises standard of living of people: A society enjoys a better standard of living when
necessities, comforts and luxuries are within the reach of a large number of people. Large scale
production and availability of wide variety of products have become possible due to marketing.
Transportation and warehousing functions have facilitated the transfer of goods to distant places.
People living in remote areas or other places are able to use a variety of goods at affordable prices.
Thus, people are enjoying a better standard of living.
 Marketing provides satisfaction of human wants: Marketing informs and guides the people about
product availability and its utility. People come to know about variety of products. They are able to
select the product which can satisfy their need and wants in best possible manner. Marketing makes
possession of goods easier for consumers and thus provides satisfaction.
 Marketing creates job opportunities: In the highly competitive market, only organized marketing
programs can be implemented. It calls for the need of services of people who are specialized in their
fields. Marketing of goods has become complex. Therefore, organisation creates a separate department
for marketing which is headed by a marketing manager. Other staff is also appointed to assist him.
Thus, gainful employment is provided to large number of people. Apart from this,
demand for product has been extended to a larger region. During the process of transfer of goods,
services of various agencies are required. The increasing volume of trade has increased demand for
these specialized services. Many people are now employed in insurance sector, banking
sector and advertising companies.
 Marketing creates stable economy: Marketing creates a link between production and consumption.
Goods are easily available at any part of the country or even in other countries due to fast means of
transportation, communication and warehousing facilities. There is no shortage of goods. Goods are
produced in abundance and stored to supply as per their demand. Hence, prices of goods do not
fluctuate. Marketing creates and maintains demand for product through various promotion tools. Large
scale production, higher demand, more employment and minimum price fluctuation create a stable
economy.
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 Marketing helps in optimum use of resources: The unused plant capacity increases cost per unit as
that portion of plant does not contribute anything but consumes resources in the form of maintenance
charges, rent of plant, insurance charges and depreciation. Marketing creates more demand. To meet
this demand, plants are used at maximum capacity. Standing charges are justified due
to increase in volume of production and as a result cost per unit reduces. Thus, men, machinery,
money and plant are optimally utilized and benefit (in the form of less cost) is passed to consumers.
 Marketing helps in increasing national income: Marketing activities help in more production of
goods and services and increase in sales. It also improves earning capacity of people due to
employment opportunities. The net effect of marketing efforts is thus increase in per capita income as
well as national income.
 Marketing provides base for making production decisions: Marketing research is an important
marketing function. Customer needs and wants are assessed through market surveys. Consumer
demands are forecasted on the basis of surveys as well as retailers and wholesalers’ estimates. The
buying pattern of customers is analyzed. This provides valuable information to producer regarding
what to produce, when to produce and how to produce. Thus, decision regarding production becomes
more effective.
 Marketing serves various sections of society: Marketing helps producer in increasing sales.
Consumers are benefited as they get products and services to satisfy their wants. Government gets
more revenues in the form of taxes. NGO gets more funds to carry on welfare activities. Society at
large is benefited in terms of more employment opportunities, optimum utilization of resources, better
services, innovations and reasonable cost of 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
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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
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 is indispensable in today’s business world. It facilitates exchange of goods and services,
increases market base, gives boost to other activities, raises standard of living of people,
provides satisfaction of human wants and increases national income. It provides invaluable services
to various sections of society. It is responsible for the progress of nation.

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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
 Supporting you in identifying your current and potential customers

 Helping you determine future marketing plans
 Aiding you in assessing current trends
Types of marketing environments

Here are the three main types of marketing environments:
 Internal marketing environment: Marketing professionals work with the resources, company
values, systems and processes that exist within a company. These influence the tasks that a
company's marketing and advertising teams complete and how effectively they can create
campaigns and content to be competitive in a market.
 External microenvironment: An external microenvironment covers the relationships outside of

the company. A company's external contacts may include customers, suppliers or other outside
agencies.
 External macroenvironment: The term macroenvironment refers to the market or field in which
a company performs. While macro factors may affect the entire industry, they rarely have a
direct impact on a specific company.
7 elements of macro-marketing environments

1. Demographic environment
Demography is the study of populations. The demographic environment for a company encompasses
the people who are part of a specific market. This environment includes the size and density of a
particular population and the common occupations people have. It also covers the age, race and gender
of prospective customers in a demographic group.
Understanding the company's demographic environment can help you adjust marketing strategies,
develop products and target advertising effectively. Some factors that companies might monitor to
determine their demographic environment include population growth, population shifts and economic
class shifts.
2. Economic environment

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A company's economic environment refers to the factors that influence consumer buying habits and
the company's performance. A company's economic environment may fluctuate based on government
funding, credit availability, market trends, interest rates and shifts in the global economy. For example,
an economic recession could negatively affect a business's profits, but an economic surplus might
encourage customers to make larger purchases.
3. Natural environment
A natural environment, or physical environment, refers to both the location a business operates and
the place it sources any natural resources it needs. For example, a lumber shortage is a natural
marketing environment that may affect a construction business. Here are a few common factors that
impact the natural environment of a business:
 A shortage or surplus of raw goods
 A fluctuation in the cost of energy

 A change in the quality of air
 Natural disasters
 Climate change
 A change in government policies
Resource availability can often increase production costs, which may raise product prices and reduce
a customer's purchasing ability. If a business is aware of its natural environment, it can adjust its
processes and budgets accordingly.
4. Technological environment
A technological environment includes a specific market, technological equipment and innovative
practices and products. Technology like laptops, automated machines and social media can all improve
an organization's productivity and reach. In this type of marketing environment, it's important for
companies to understand customer behavior.
This can provide them with basic market information and help them determine if they need to develop
additional technology to follow market trends. Companies may also gather information about customer
behavior to help them evaluate and update their technology regularly.
5. Political environment
Changes in a country's national or local political situation can modify a company's external marketing
environment. Politics might determine tariffs, regulations and other standards that affect the cost of
purchasing goods and conducting business operations. Political environments may sometimes
influence the global economy, which can alter the behavior of a market.
6. Social environment
A social environment refers to the way companies and consumers respond to social experiences. For
example, an organization might donate a portion of its earnings to nonprofits or government agencies
that help communities in need.
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The values, opinions and beliefs of a potential customer may change based on what they experience,
who they interact with and what values they observe in a company. Learning about the customers'
social needs and how it affects their shopping behaviors may help the company develop more effective
advertising campaigns.
7. Cultural environment
Similar to social environments, a cultural environment refers to the way local communities interact
with each other and your brand. Depending on the region, this type of marketing environment can vary
widely. Some factors that influence a cultural environment include people's opinions about their
community, other social groups and the company.
For this reason, identifying and monitoring your customers' opinions can help the company adapt
quickly to cultural shifts. This can help improve the success of the company's marketing efforts and
show how the company's values align with the culture of its customers.
6 elements of micro-marketing environments
Micro-marketing environments often have a direct impact on business operations. Learning about the
components of microenvironments can help a company decide how to handle conflicts and improve
relationships with external partners and consumers. Here are some elements that comprise a micro-
marketing environment:
1. Suppliers
Suppliers provide raw materials, services or goods to a company. The prices, service availability and
product quality that a supplier offers can affect the cost and condition of products that customers
purchase.
Companies often consider their suppliers to be their partners and may expect suppliers to commit to
delivering quality goods to customers. Researching a variety of suppliers can help the company
determine which one may provide the product quality and prices your customers are seeking.
2. Distributors and resellers
Distributors help companies store and deliver their goods, often using warehouses. They also assist
organizations by delivering products safely and on time. They may represent a specific brand,
especially if they deliver to different outlets.
Resellers may also deliver goods, but they often purchase them from a company first before selling
them for a profit. For example, most retailers are resellers. To select the right reseller to work with, a
company could consider which retailers best represent its brand and how that retailer might help it
reach its target market. Companies often choose both distributors and resellers that have similar
company values.
3. Partners
Partners are organizations that a company collaborates with to develop a product, deliver a service or
provide a promotion. Typically, the members of a partnership include two or more companies that
may operate in similar industries. However, a company may sometimes partner with a business from
a different industry to expand its customer base.
For example, a frozen food brand may partner with a soda company to offer consumers a discount
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when they purchase products from both brands. Each company has its own microenvironment and
macroenvironment. In a partnership, the behavior of one company can directly affect the marketing
environments of the other.
4. Customers
Customers exercise a major influence on a company's marketing environment. Companies may collect
information about customer behaviors and opinions to help inform future business decisions.
To manage this aspect of its marketing environment, a company may monitor the changes in customer
preference and behavior and adjust its offerings as needed. For example, if a company receives
negative feedback about a product, it might alter its product development practices.
5. Competitors
A company's competitors are part of its microenvironment because they directly affect daily business
operations. A company can determine its position in the market to decide on strategies that can help it
outperform its competition. Competing businesses often share customers, so it's helpful to monitor
how the competitors are succeeding to understand ways that the company you work for might improve.
6. The public
The public includes any person who might engage with the company. The public can also include
potential investors and people who refer new customers to the business. Understanding the public as
a group of potential customers can help you target new markets to increase brand awareness.
The Importance of Marketing Information and Research

Marketing Information System
Definition:
The Marketing Information System refers to the systematic collection, analysis, interpretation, storage
and dissemination of the market information, from both the internal and external sources, to the
marketers on a regular, continuous basis.
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.
Components of Marketing Information System
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.

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2. Marketing Intelligence System:

The marketing intelligence system provides the data about the happenings in the market, i.e. data
related to the marketing environment which is external to the organization. It includes the information
about the changing market trends, competitor’s pricing strategy, change in the customer’s tastes and
preferences, new products launched in the market, promotion strategy of the competitor, 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.
4. Marketing Decision Support System:

It includes several software programs that can be used by the marketers to analyze the data, collected
so far, to take better marketing decisions.With the use of computers, the marking managers can save
the huge data in a tabular form and can apply statistical programs to analyze the data and make the
decisions in line with the findings.
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
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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.
Marketing Research Process

To begin with the marketing research, the following steps have to be followed:
1. Define the Problem-

The foremost decision that every firm has to undertake is to find out the problem for which the research
is to be conducted.The problem must be defined adequately because if it is too vague, then it may
result in the wastage of scarce resources and if it is too narrow, then the exact conclusion cannot be
drawn.In order to define the problem appropriately, each firm must have a clear answer to the questions
viz. What is to be researched (content and the scope)? And Why the research is to be done (decisions
that are to be made)?
2. Develop the Research Plan–

This step involves gathering the information relevant to the research objective. It includes:
Data Sources: The researcher can collect the data pertaining to the research problem from either the
primary source or the secondary source or both the sources of information.The primary source is the
first-hand data that does not exist in any books or research reports whereas the secondary data is the
second-hand data which is available in the books, journals, reports, 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:
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 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.
4. Present the Findings:

Finally, all the findings and the research are shown to the top management level viz. Managing
director, CEO, or board of directors to make the marketing decisions in line with the research.
5. Make the Decision:

This is the last step of the marketing research, once the findings are presented to the top level
management it is up to them either to rely on the findings and take decisions or discard the findings as
unsuitable. Thus, marketing research is done to gather all the relevant information about the market
and design the marketing strategies accordingly.
efinition of Marketing Mix
The marketing mix is defined by the use of a marketing tool that combines a number of components
in order to become harden and solidify a product’s brand and to help in selling the product or service.
Product based companies have to come up with strategies to sell their products, and coming up with a
marketing mix is one of them.
What is Marketing Mix?
Marketing Mix is a set of marketing tool or tactics, used to promote a product or services in the market
and sell it. It is about positioning a product and deciding it to sell in the right place, at the right price
and right time. The product will then be sold, according to marketing and promotional strategy. The
components of the marketing mix consist of 4Ps Product, Price, Place, and Promotion. In the business
sector, the marketing managers plan a marketing strategy taking into consideration all the 4Ps.
However, nowadays, the marketing mix increasingly includes several other Ps for vital development.
What is 4 P of Marketing

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Product in Marketing Mix:

A product is a commodity, produced or built to satisfy the need of an individual or a group. The product
can be intangible or tangible as it can be in the form of services or goods. It is important to do extensive
research before developing a product as it has a fluctuating life cycle, from the growth phase to the
maturity phase to the sales decline phase.
A product has a certain life cycle that includes the growth phase, the maturity phase, and the sales
decline phase. It is important for marketers to reinvent their products to stimulate more demand once
it reaches the sales decline phase. It should create an impact in the mind of the customers, which is
exclusive and different from the competitor’s product. There is an old saying stating for marketers,
“what can I do to offer a better product to this group of people than my competitors”. This strategy
also helps the company to build brand value.
Price in Marketing Mix:
Price is a very important component of the marketing mix definition. The price of the product is
basically the amount that a customer pays for to enjoy it. Price is the most critical element of a
marketing plan because it dictates a company’s survival and profit. Adjusting the price of the product,
even a little bit has a big impact on the entire marketing strategy as well as greatly affecting the sales
and demand of the product in the market. Things to keep on mind while determining the cost of the
product are, the competitor’s price, list price, customer location, discount, terms of sale, etc.,
Place in Marketing Mix:
Placement or distribution is a very important part of the marketing mix strategy. We should position
and distribute our product in a place that is easily accessible to potential buyers/customers.
Promotion in Marketing Mix:
It is a marketing communication process that helps the company to publicize the product and its
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features to the public. It is the most expensive and essential components of the marketing mix, that
helps to grab the attention of the customers and influence them to buy the product. Most of the
marketers use promotion tactics to promote their product and reach out to the public or the target
audience. The promotion might include direct marketing, advertising, personal branding, sales
promotion, etc.
What is 7 P of Marketing:
The 7Ps model is a marketing model that modifies the 4Ps model. As Marketing mix 4P is becoming
an old trend, and nowadays, marketing business needs deep understanding of the rise in new
technology and concept. So, 3 more new P’s were added in the old 4Ps model to give a deep
understanding of the concept of the marketing mix.
People in Marketing Mix:
The company’s employees are important in marketing because they are the ones who deliver the
service to clients. It is important to hire and train the right people to deliver superior service to the
clients, whether they run a support desk, customer service, copywriters, programmers…etc. It is very
important to find people who genuinely believe in the products or services that the particular business
creates, as there is a huge chance of giving their best performance. Adding to it, the organisation should
accept the honest feedback from the employees about the business and should input their own thoughts
and passions which can scale and grow the business.
Process in Marketing Mix:
We should always make sure that the business process is well structured and verified regularly to avoid
mistakes and minimize costs. To maximise the profit, Its important to tighten up the enhancement
process.
Physical Evidence in Marketing Mix:
In the service industries, there should be physical evidence that the service was delivered. A concept
of this is branding. For example, when you think of “fast food”, you think of KFC. When you think of
sports, the names Nike and Adidas come to mind.
Marketing Mix Example:
This article will go through a marketing mix example of a popular cereals company. At first, the
company targeted older individuals who need to keep their diet under control, this product was
introduced. However, after intense research, they later discovered that even young people need to have
a healthy diet. So, this led to the development of a cereals product catered to young people. In
accordance with all the elements of the marketing mix strategy, the company identified the product,
priced it correctly, did tremendous promotions and availed it to the customers. This marketing mix
example belongs to Honeycomb, one of the most renowned companies in the cereal niche. Following
these rules clearly has managed to make the company untouchable by all the other competitors in the
market.
This makes Honeycomb, the giant we know and love today to eat as morning breakfast!
Marketing Mix Product
All products can be broadly classified into 3 main categories. These are :
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1. Tangible products: These are items with an actual physical presence such as a car, an
electronic device, and an item of clothing or a consumer good.
2. Intangible products: These are items that have no physical presence but can be felt indirectly.
An insurance policy is an example of this. Online items such as software, applications or even
music and video files are also intangible products.
3. Services: Services are also intangible products but they are the result of an economic activity
that does not result in ownership. It is a process that creates benefits for customers. Services
depend highly on who is performing them and remain difficult to reproduce exactly.
Importance of Marketing Mix

The marketing mix is a remarkable tool for creating the right marketing strategy and its
implementation through effective tactics. The assessment of the roles of your product, promotion,
price, and place plays a vital part in your overall marketing approach. Whereas the marketing mix
strategy goes hand in hand with positioning, targeting, and segmentation. And at last, all the elements,
included in the marketing mix and the extended marketing mix, have an interaction with one another.
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.

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For instance, an advertisement on the first page of the newspaper costs more than on other pages.
Likewise, an advertisement on a thick, glossy paper or a highlighted corner would be more expensive
than in an ordinary quality paper.
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.

BBA – III year
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.

BBA – III year
10. Advocacy Advertising: Such advertising is used in an attempt to change public opinion in areas
of controversies. For example, ads run by the coal industry to encourage the use of coal by power
plants. However, this advertising type is not very prevalent.
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.
The pros and cons of sales promotions
Some of the benefits to running a sales promo include:
Creating loyalty and enthusiasm for your brand
Increasing sales and revenue
Gaining valuable insights into customer behavior and price sensitivity
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.”

BBA – III year
Therefore, the definition of a good sales promotion is one that’s run strategically to work in
conjunction with your sales cycle.
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.
Generate new leads
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.
Introduce a new product, service or feature
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.
Sell out extra inventory
Sales promotions are an efficient way to clear out extra inventory at the end of a sales period. If there’s
a particular product taking up too much space, going out of production or becoming redundant,

BBA – III year
retailers can run a sales promotion such as ‘buy one get one free’ to help clear it out. You’ve probably
seen this kind of promotion in stores marketed as the acronym: BOGOF.
Gain valuable insights
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.
Encourage existing customers to buy more
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.
Sell during off-season or slow periods
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.
Short burst of revenue increase
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.
Once a person makes a purchase, they’re often subscribed to your email list. By sending them a mix
of helpful content as well as sales promotions, you can continue to keep them engaged.

BBA – III year
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.
12 types of sales promotions
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:
1. Competitions and giveaways
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.
2. Flash sale or limited-time price reduction
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.
3. Bundling of products or services
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.
4. Free trial or demo

BBA – III year
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.
5. Limited-time free shipping or transfer between platforms or services
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.
7. First purchase coupon
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.
8. Buy one, get one free

BBA – III year
“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.
9. Coupon or voucher code
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.
10. Tripwire (upsell)
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.
11. Recurring sale
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.
12. Portion of purchase goes to a charitable cause
Running a sales promotion that dedicates a portion of your purchase to an important cause or charity
can be a great way to spark business. Your customers will feel good about their purchase, and you’ll
be able to enhance your brand image by associating it with an important cause. This is also an easy
way to build customer loyalty with leads who support that cause themselves.
BBA – III year

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GRADUATE SCHOOL OF BUSINESS

BBA – III year

Compiled by Dr. Shikha Agrawal

The production system has the following characteristics:

Classification of Production Function

Compiled by Dr. Shikha Agrawal

Objectives of Production Management

4. RIGHT MANUFACTURING COST

Compiled by Dr. Shikha Agrawal

Compiled by Dr. Shikha Agrawal

Compiled by Dr. Shikha Agrawal

 Changes to the raw materials

Compiled by Dr. Shikha Agrawal

What is the New Product Development Process?

 Increasing profitability and productivity

 Coming up with solutions to the problem

Let’s have a look at the various stages of new product development.

 Performing a competitor analysis

Benefits of New Product Development for an Organization

What Is Product Diversification?

Compiled by Dr. Shikha Agrawal

Let’s understand these.

Compiled by Dr. Shikha Agrawal

To jobber-wholesalers and detailers:

 Sales effort on fewer items.

Compiled by Dr. Shikha Agrawal

 In the case of output and reduction in per unit cost of production,

Disadvantages of specialization are:

 Monotony and boredom may adversely affect the efficiency.

Compiled by Dr. Shikha Agrawal

Disadvantages of Diversifications are:

 Production Planning and control operation becomes complicated and time-consuming

 Standardisation and Grading : Standardisation refers to the process of setting up standards so as to

There exists various methods of selling such as :

Physical distribution functions

Need for warehousing

Warehousing provides following benefits / services :

Compiled by Dr. Shikha Agrawal

Compiled by Dr. Shikha Agrawal

Compiled by Dr. Shikha Agrawal

 Supporting you in identifying your current and potential customers

Types of marketing environments

 External microenvironment: An external microenvironment covers the relationships outside of

7 elements of macro-marketing environments

Compiled by Dr. Shikha Agrawal

 A fluctuation in the cost of energy

The Importance of Marketing Information and Research

Components of Marketing Information System

Compiled by Dr. Shikha Agrawal

2. Marketing Intelligence System:

4. Marketing Decision Support System:

Marketing Research Process

1. Define the Problem-

2. Develop the Research Plan–

3. Analyze the Information:

4. Present the Findings:

5. Make the Decision:

Compiled by Dr. Shikha Agrawal

Product in Marketing Mix:

Functional Management - BBA III Year - Dr. ShikhaAgrawal - Unit 3 &4

Functional Management - BBA III Year - Dr. ShikhaAgrawal - Unit 3 &4

Functional Management - BBA III Year - Dr. ShikhaAgrawal - Unit 3 &4