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nsscollegerajakumari 1

Module II

Marketing mix

Marketing mix: meaning - product, product mix- -product life cycle - importance of branding -packaging

and labelling.

Marketing mix

Marketing identifies consumers needs andsupplies various goods and services to satisfy those

needs most effectively. So the businessman needs to:(a) produce or manufacture the product according to

consumers need; (b) make available it at a price that

the consumers find reasonable; (c) supply the productto the consumers at different outlets they can

conveniently approach; and (d) inform the consumers

about the product and its characteristics through the

media they have access to. So the marketing manager

concentrates on four major decision areas while

planning the marketing activities, namely, (i) products,(ii) price, (iii) place (distribution) and (iv) promotion.These 4 Ps are called as elements of marketing and

together they constitute the marketing mix. All these

are inter-related because a decision in one area affectsdecisions in other areas.

According to Philip Kotler Marketing Mix is the set ofcontrollable variables that the firm can use to influence

the buyers response. The controllable variables in this

context refer to the 4 Ps [product, price, place

(distribution) and promotion].

Product : Product refers to the goods and services

offered by the organisation. All these are purchasedbecause they satisfy one or more of our needs. We are

paying not for the tangible product but for the benefit itwill provide. So, in simple words, product can be

described as a bundle of benefits which a marketeer

offers to the consumer for a price. Product can also takethe form of a service like an air travel,

telecommunication, etc. Thus, the term product refers

to goods and services offered by the organisation for

sale.

Price: Price is the amount charged for a product orservice. It is the second most important element in the

marketing mix. Fixing the price of the product is a

tricky job. Many factors like demand for a product, costinvolved, consumers ability to pay, prices charged by

competitors for similar products, governmentrestrictions etc. have to be kept in mind

while fixing the price. In fact, pricing is a very crucial

decision area as it has its effect on demand for theproduct and also on the profitability of the firm.Place: Goods are produced to be sold to the consumers.

They must be made available to the consumers at a

place where they can conveniently make purchase. Theorganisation has to decide whether to sell directly to the

retailer or through the distributors/wholesaler etc.

Promotion: If the product is manufactured keeping theconsumer needs in mind, is rightly priced and made

available at outlets convenient to them but the

consumer is not made aware about its price, features,

availability etc, its marketing effort may not be

successful. Therefore promotion is an importantingredient of marketing mix as it refers to a process

of informing, persuading and influencing a consumer to

make choice of the product to be bought. Promotion isdone through means of personal selling, advertising,

publicity and sales promotion.

PRODUCTProduct refers to the goods and services offered

by the organisation for sale. Here the marketers have torecognise that consumers are not simply interested in

the physical features of a product but a set of tangibleand intangible attributes that satisfy their wants. For

example, when a consumer buys a washing machine heis not buying simply a machine but a gadget that helps

him in washing clothes. It also needs to be noted thatthe term product refers to anything that can be offeredto a market for attention, acquisition,

or use. Thus, the term product is defined as anything

that can be offered to a market to satisfy a want. It

normally includes physical objects and services. In abroader sense, however, it not only includes physicalobjects and services but also the supporting services

like brand name, packaging accessories, installation,

after sales service etc.

William J. StantonProduct is a set of tangible and intangible attributes

including packaging, colour, price, manufacturersprestige, retailers prestige and manufacturers and

retailers services which buyer may accept as offeringsatisfaction of wants and services.

Jerome McCarthyA product is more than just a physical product with its

related functional and aesthetic features. It includes

accessories, installation, instructions on use, the

package, perhaps a brand name, which fulfills somepsychological needs and the assurances that service

facilities will be available to meet the customer needsafter the purchase.

PRODUCT CLASSIFICATION

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Product can be broadly classified on the basis of (1)

use, (2) durability, and (3) tangibility.

1. Based on use, the product can be classified as:

(a) Consumer Goods; and

(b) Industrial Goods.(a) Consumer goods: Goods meant for personal

consumption by the households or ultimate consumers

are called consumer goods. This includes items liketoiletries, groceries, clothes etc. Based on consumersbuying behaviour the consumer goods can be further

classified as :

(i) Convenience Goods;

(ii) Shopping Goods; and

(iii) Speciality Goods.(i) Convenience Goods : convenience goods are

bought frequently without much planning or shopping

effort and are also consumed quickly. Buying decisionin case of these goods does not involve much pre-

planning. Such goods are usually sold at convenientretail outlets.

(ii) Shopping Goods: These are goods which arepurchased less frequently and are used very slowly like

clothes, shoes, household appliances. In case of these

goods, consumers make choice of a product considering

its suitability, price, style, quality and products of

competitors and substitutes, if any. In other words, the

consumers usually spend a considerable amount of timeand effort to finalise their purchase decision as they

lack complete information prior to their shopping trip.

It may be noted that shopping goods involve much

more expenses than convenience goods.

(iii) Speciality Goods : Because of some specialcharacteristics of certain categories of goods people

generally put special efforts to buy them. They areready to buy these goods at prices at which they are

offered and also put in extra time to locate the seller tomake the purchase. In fact, prior to making a trip to

buy the product he/she will collect complete

information about the various brands. Examples of

speciality goods are cameras, TV sets, new automobiles

etc.(b) Industrial Goods: Goods meant for consumption

or use as inputs in production of other products or

provision of some service are termed as industrialgoods. These are meant for non-personal and

commercial use and include (i) raw materials, (ii)

machinery, (iii) components, and (iv) operatingsupplies (such as oil, stationery etc).

2. Based on Durability, the products can be classified

as :

(a) Durable Goods; and

(b) Non-durable Goods.(a) Durable Goods : Durable goods are products which

are used for a long period i.e., for months or years

together. Examples of such goods are refrigerator, car,

washing machine etc. Such goods generally require

more of personal selling efforts and have high profitmargins. In case of these goods, sellers reputation and

presale and after-sale service are important

determinants of purchase decision.

(b) Non-durable Goods: Non-durable goods areproducts that are normally consumed in one go or last

for a few uses. Examples of such products are soap,

salt, pickles, sauce etc. These items are consumedquickly and we purchase these goods more often. Suchitems are generally made available by the producer

through large number of convenient retail outlets. Profit

margins on such items are usually kept low and heavy

advertising is done to attract people towards their trial

and use.3. Based on tangibility, the products can be classified

as:

(a) Tangible Goods; and(b) Intangible Goods.

(a) Tangible Goods : Most goods, whether these areconsumer goods or industrial goods and whether these

are durable or non-durable, fall in this category as theyhave a physical form, that can be touched and seen.

Thus, all items like groceries, cars, raw-materials,

machinery etc. fall in the category of tangible goods.(b) Intangible Goods : Intangible goods refer to

services provided to the consumers. Services are

essentially intangible activities which provide want orneed satisfaction. Medical treatment, postal, banking

and insurance services etc., all fall in this category.

Product Line

A product line is a group of products that areclosely related because they function in a similar

manner, are sold to the same customer groups, are

marketed through the same types of outlets, or fall

within given price ranges. For example, Nike producesseveral lines of athletic shoes, Motorola producesseveral lines of telecommunications products, and

AT&T offers several lines of long-distance telephoneservices.

PRODUCT MIX.

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A product mix (or product assortment) consists ofall the product lines and items that a particular seller

offers for sale. The product mix of a company, which is

generally defined as the total composite of products

offered by a particular organization, consists of bothproduct lines and individual products. A product line is

a group of products within the product mix that are

closely related, either because they function in a similarmanner, are sold to the same customer groups, aremarketed through the same types of outlets, or fall

within given price ranges.

One of the realities of business is that most firms

deal with multi-products .This helps a firm diffuse itsrisk across different product groups/Also it enables the

firm to appeal to a much larger group of customers or to

different needs of the same customer group . Forexample; Bajaj Electricals, a household name in India,

has almost ninety products in its portfolio ranging fromlow value items like bulbs to high priced consumer

durables like mixers and luminaries and lightingprojects .The number of products carried by a firm at a

given point of time is called its product mix. This

product mix contains product lines and product items

.In other words its a composite of products offered for

sale by a firm.

PRODUCT-MIX ANALYSIS

Since top management is ultimately responsible for the

product mix and the resulting profits or losses, theyoften analyze the company product mix. The first

assessment involves the area of opportunity in aparticular industry or market.

Opportunity is generally defined in terms of current

industry growth or potential attractiveness as aninvestment. The second criterion is the company's

ability to exploit opportunity, which is based on its

current or potential position in the industry. Thecompany's position can be measured in terms of market

share if it is currently in the market, or in terms of its

resources if it is considering entering the market. Thesetwo factorsopportunity and the company's ability to

exploit itprovide four different options for a companyto follow.

1. High opportunity and ability to exploit it result in

the firm's introducing new products or expandingmarkets for existing products to ensure future

growth.2. Low opportunity but a strong current market

position will generally result in the company's

attempting to maintain its position to ensure

current profitability.

3. High opportunity but a lack of ability to exploit

it results in either (a) attempting to acquire thenecessary resources or (b) deciding not to

further pursue opportunity in these markets.

4. Low opportunity and a weak market position

will result in either (a) avoiding these marketsor (b) divesting existing products in them.

These options provide a basis for the firm to evaluatenew and existing products in an attempt to achieve

balance between current and future growth. Thisanalysis may cause the product mix to change,

depending on what management decides.

The most widely used approach to product portfolio

analysis is the model developed by the Boston

Consulting Group (BCG). The BCG analysisemphasizes two main criteria in evaluating the firm's

product mix: the market growth rate and the product'srelative market share.

Once the analysis has been done using the marketgrowth rate and relative market share, products areplaced into one of four categories.

Stars: Products with high growth and market

share are know as stars. Because these productshave high potential for profitability, they

should be given top priority in financing,

advertising, product positioning, and

distribution.

Cash cows: Products with a high relative

market share but in a low growth position arecash cows. These are profitable products thatgenerate more cash than is required to produce

and market them.

Dogs: Products in the category are clearly

candidates for deletion. Such products have low

market shares and unlike problem children,

have no real prospect for growth.

As can be seen from the description of the four BCGalternatives, products are evaluated as producers or

users of cash. Products with a positive cash flow will

finance high-opportunity products that need cash.

Product Life Cycle.

Like human beings, products also have a life-cycle.From birth to death, human beings pass through various

stages e.g. birth, growth, maturity, decline and death. A

similar life-cycle is seen in the case of products. The

product life cycle goes through multiple phases, involves

many professional disciplines, and requires many skills,tools and processes. Product life cycle (PLC) has to do

with the life of a product in the market with respect to

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business/commercial costs and sales measures. To say

that a product has a life cycle is to assert three things:

Products have a limited life,

Product sales pass through distinct stages, eachposing different challenges, opportunities, and

problems to the seller, Products require different marketing, financing,

manufacturing, purchasing, and humanresource strategies in each life cycle stage.

A product's life cycle, abbreviated PLC, the life cycle refers

to the period from the products first launch into the marketuntil its final withdrawal and it is split up in phases. Since

an increase in profits is the major goal of a company that

introduces a product into a market, the products life cycle

management is very important.

The understanding of a products life cycle, canhelp a company to understand and realize when it is time to

introduce and withdraw a product from a market, its

position in the market compared to competitors, and theproducts success or failure. The products life cycle -

period usually consists of five major steps : Product

Development, Introduction Stage, Growth Stage, Maturity

Stage and finally Decline Stage. These phases exist and are

applicable to all products or services from acertain make of automobile to a multimillion-dollar

lithography tool to a one-cent capacitor. These phases can

be split up into smaller ones depending on the product and

must be considered when a new product is to be introduced

into a market since they dictate the products sales

performance.

)))) Product Development:Product development phase begins when a companyfinds and develops a new product idea. This involves

translating various pieces of information andincorporating them into a new product. A product is

usually undergoing several changes involving a lot ofmoney and time during development, before it is

exposed to target customers via test markets.

B) Introduction Stage:

The introduction stage starts when the new product is

first launched. Introduction takes time, andsales growth is apt to be slow. In this stage, as

compared to other stages, profits are negative or low

because of the low sales and high distribution and

promotion expenses. Much money is needed toattract distributors and build their inventories.

Promotion spending is relatively high to inform

consumers of the new product and get them to try it.

It is highly unlikely that companies will make profits on

products at the Introduction Stage. Products at this

stage have to be carefully monitored to ensure that they

start to grow. Otherwise, the best option may be to

withdraw or end the product.

C)Growth Stage

If the new product satisfies the market, it will enter

a growth stage, in which sales will start

climbing quickly. The early adopters will continue to

buy, and later buyers will start following theirlead, especially if they hear favorable word of mouth.

Attracted by the opportunities for profit, newcompetitors will enter the market. They will introduce

new product features, and the market will

expand.

The Growth Stage is characterised by rapidgrowth in sales and profits. Profits arise due to an

increase in output (economies of scale)and possiblybetter prices. At this stage, it is cheaper forbusinesses to invest in increasing their market share aswell as enjoying the overall growth of the market.

Accordingly, more amount and efforts are invested inpromotional activities. The firm uses several strategies

to sustain rapid market growth as

long as possible. It improves product quality and adds

new product features and models. It enters

new market segments and new distribution channels.

By spending a lot of money on productimprovement, promotion, and distribution, the companycan capture a dominant position. In doing so, however,

it gives up maximum current profit, which it hopes tomake up in the next stage.

D) Maturity Stage

The Maturity Stage is, perhaps, the mostcommon stage for all markets. it is in this stage that

competition is most intense as companies fight to

maintain their market share. Here, both marketing and

finance become key activities. Marketing spend has tobe monitored carefully, since any significant moves are

likely to be copied by competitors.

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This maturity stage normally lasts longer than

the previous stages, and it poses strongchallenges to marketing management. Most products

are in the maturity stage of the life cycle, and

therefore most of marketing management deals with the

mature product. Competitors begin marking downprices, increasing their

advertising and sales promotions, and upping their

R&D budgets to find better versions of theproduct. The company might also try modifying theproductchanging characteristics such as quality,

features, or style to attract new users and to inspire

more usage. It might improve the product's

quality and performanceits durability, reliability,

speed, or taste. Or it might add new featuresthat expand the product's usefulness, safety, or

convenience. For example, Sony keeps adding new

styles and features to its Walkman and Discman lines,and Volvo adds new safety features to its

cars.

Finally, the company can try modifying themarketing miximproving sales by changing one or

more marketing mix elements. It can cut prices toattract new users and competitors' customers. It

can launch a better advertising campaign or use

aggressive sales promotionstrade deals, centsoff,

premiums, and contests.

E) Decline Stage

The sales of most product forms and brands

eventually dip. The decline may be slow, as in thecase of oatmeal cereal, or rapid. Sales may plunge to

zero, or they may drop to a low level where theycontinue for many years. This is the decline stage.Sales decline for many reasons, including technological

advances, shifts in consumer tastes, and increased

competition. As sales and profits decline, some firms

withdraw from the market. They may drop smaller

market segments and

marginal trade channels, or they may cut the promotionbudget and reduce their prices further.

Carrying a weak product can be very costly to a firm. A

weak product may take up too much of management's

time. It often requires

frequent price and inventory adjustments. It requires

advertising and sales force attention thatmight be better used to make "healthy" products more

profitable. A product's failing reputationcan cause customer concerns about the company and its

other products.

Then, management must decide whether to

maintain, harvest, or drop

each of these declining products. Management may

decide to harvest the product, which means

reducing various costs (plant and equipment,

maintenance, R&D, advertising, sales force) and

hoping that sales hold up. If successful, harvesting willincrease the company's profits in the short

run. Or management may decide to drop the product

from the line. It can sell it to another firm or

simply liquidate it at salvage value.

The Product Life Cycle can be extended by two

ways either by modifying the target market byfinding and adding new users etc or by modifying theproduct Adding new features, variations,

model varieties will change the consumer reaction -

create more demand therefore you attract

more users To prevent the product going into decline

you modify the product

Ultimately, depending on whether the product remains

profitable, a company may decide to end the product.

Examples

Set out below are some suggested examples of productsthat are currently at different stages of the product life-

cycle:

INTRODUCTION GROWTH MATURITY DECLINE

Thirdgenerationmobile phones

PortableDVD Players

PersonalComputers

Typewriters

E-conferencing Email FaxesHandwrittenletters

iris-based

personalidentity cards

Smart cards Credit cards Chequebooks

The concept of PLC is a very useful since it provides

knowledge about the developments at various phases of

a products life. The marketing manager can adoptsuitable strategies if he knows the pattern of profits and

promotional efforts based on stages of products life.

BRANDING

American Marketing Association (AMA)definition describes a brand as a name, word, mark,symbol, device or a combination thereof, used to

identify goods or services of one seller and todifferentiate them from those of competitors. Brand

name helps a consumer in instant recall, and this servesan important function for differentiating competing

products of similar nature. A legally protected brand

name is called a trademark.

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Umbrella branding and individual branding

Under umbrella branding all the products gel

the same brand name. This is also called family

branding. Godrej, Vidoecon and L&T follow this kind

of policy. One basic advantage of using the Familybrand is that it reduces the costs of product launching

and promotional expenditure substantially. The firm has

to promote only one brand, which, if successful, wouldbe able to sell the entire product line. Under theindividual branding each product is given a different

name. For example, Hindustan Lever sells its products

under different brand names like Rin, Surf, Lux, etc.

Importance of branding.

Branding as an aspect of product marketing can

be analysed from two different standpoints: that ofbuyers and of sellers. It is also possible to have a

societal viewpoint.

a) BuyersThe buyers can derive several advantages:

A brand generally denotes uniform quality.

It makes shopping easier.

Competition among brands can, over a period

of time, lead to quality improvements.

Purchasing a socially visible brand can give

psychological satisfaction to the buyer.

There are, however, some negative aspects as well

Since brand development costs money, product

prices tend to go up.

Taking advantage of the popularity of a brand,

a manufacturer may reduce quality gradually.

b) SellersA marketer can also derive certain advantages such as:

It helps in product identification.

Differentiate product offering from

competitors

In a highly competitive market, it can carve out

a niche for itself through productdifferentiation.

If brand loyalty can be developed throughsuccessful promotion, the firm will be able toexert quasi-monopolistic power.

But to obtain the advantages, it is necessary for the

manufacturer to invest resources in promoting the brandname.

c) Societal view

From a macro-standpoint, a brand's role inimproving and maintaining product quality can be

considered as positive. Brands also help in better

dissemination of product knowledge; better knowledgecan contribute to more scientific and rational decision

making.

Selecting a Brand nameFinding an appropriate name for a new product is a

difficult task. The following points should be taken into

account in selecting a brand name.

1). A Brand name should reflect directly or indirectly

some aspect of the product, viz. benefit, function,

etc. For example, the name `BURNOL'

immediately connotes that the product has to do

something with bums.

2). A Brand should be distinctive, especially if the

product requires such distinction, e.g., a name like`CHANCELLOR' for a cigarette conjures up ideas

of status, power and opulent life style.

3). A Brand name should be easy to pronounce andremember. Examples are VIMAL, HAMAM, etc.

4). It should be such that it can be legally protected, if

necessary.

Packaging

A package is basically an extension of theproduct offered for sale. Sometimes the package ismore important than the product it contains as it

contains the product and protects it till the consumer is

ready for the consumption or use. Some marketers even

call packaging a 'fifth P', along with product, price,promotion and place. Packaging is necessary to deliverthe product to the consumer in sound condition.

According to Philip Kotler and Gary Annstrong, the

packaging may include up to three levels of material.

The primary package is the product's immediate

container. If you consider a toothpaste, the tube holdingthe toothpaste is the primary package. The secondary

package is the card board material that protects theprimary package and that is thrown away when the

product is about be used.The shipping packaging is the packaging

necessary to store, identify, and ship the product (acarton in this case, which contains hundred toothpaste

units). Finally labeling is part of packaging and

consists of printed information appearing on or with the

package.To summarize the key functions of packaging we can

say that packaging should perform the following basicfunctions: it should (1) protect, (2) appeal, (3) perform,

(4) offer convenience to the end-users, and (5) be cost-effective. We will now discuss these five key functions

of packaging.

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I ) Protection: The primary function of packaging is to

protect the products from the environmental andphysical hazards to which the product may be exposed

in transit from the manufacturer's plant to the retailer's

shelves and while on display on the shelves. It helps to

avoid i) Breakage due to rough handling, 2) Extremesof climatic conditions which may lead to melting,

freezing, etc, 3)Contamination, either bacterial or non-

bacterial, such as by dirt or chemical elements. 4)Absorption of moisture or odors of foreign elements.And 5) Loss of liquid or vapors.

2) Appeal: The package is increasingly being used as a

marketing tool. The importance is also increasing clue

to the changed structure of retail business, especiallythe emergence of self-service stores. In the case of

consumer products, package serves as a silent salesman.

The following characteristics have been identified to

help a package perform the self-selling tasks:i) The package must attract attention

ii) The package must tell the product storyiii) The package IIIUSL build confidence

iv) The package must look clean and hygienic

v) The package must be convenient to handle, to carry

out, to store and to use

vi) The package must reflect good value

3) Performance: This is the third function of a

package. It must be able to perform the task for which it

is designed. This aspect becomes critical in certain

types of packaging. For example, an aerosol spray is

not only a package but also an engineering device. Ifthe package does not function, the product itself

becomes totally useless.

4) Convenience: The package must be designed in away, which is convenient to use. It should be

convenient not only to the end user but also to the

distribution channel members, such as wholesalers and

retailers. From the intermediaries standpoint the

convenience relates to handling and stocking ofpackages. From the standpoint of the domestic or

institutional end users, the convenience would refer to

the ease of using the package, such as opening andclosure of the package, the repetitive use value,

disposability etc.

5) Cost-effectiveness: The package finally must becost-effective. Packaging cost as a percentage of

product cost varies dramatically from one industry to

another, from less than one percent in engineering

industry to more than ten percent in the cosmetics

industry.

6) Security - Packaging can play an important role inreducing the security risks of shipment. Packages canbe made with improved tamper resistance to deter

tampering and also can have tamper-evident features to

help indicatetampering.

Packaging Strategies

Packaging plays a greater role in the promotion

of the product. It serves the core function of protection

and also provides information to the consumers. Forexample, Colgate Dental Cream is always perceived ina red color package. When the company decided to go

for a sales promotion program of giving 20% extra for

every purchase of a 100 grams toothpaste, it brought a

yellow strip marked with 20% extra on red as a

promotional tool which could catch the attention of thecustomer on the shelf immediately.

Some of the widely used promotional packagingtechniques include

1) Discount Packing :a word or sentence indistinctive colour is superimposed on the package,

announcing the special price discount being offered.This is the most widely used form.

2) Coupon-Pack: A coupon of certain values, either as

a part of the package or placed separately in the

package, can be redeemed after the purchase of the

product.

4) Prime Packaging: A specially made package havingeither a re-use or prestige value is referred to as prime

package. Instant coffee packed in glass tumblers having

colours is an example of the first type.

5) Self-Liquidators: The buyer has to send to thecompany a number of packages or part thereof as

evidence of buying the product. In return, he maypurchase additional quantity of the same product at

reduced prices or be rewarded with a different product.

Bundle Packaging: Placing more than one unit in one

container is referred to as bundle or multiple packaging.

This packaging strategy increases the sales to a large

extent. This is seen in bathing and washing soapcategory in India.

LABELLING:

The label is the text printed on a product

package or, in the case of items like clothing, attached

to the product itself. Legally, labels include all written,

printed, or graphic material on the containers of

products that are involved in interstate commerce or

held for sale. The main body of legislation governing

packaging and labeling is the Fair Packaging and

Labeling Act of 1966. It mandates that every product

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package or label specify on its "principal display label"

(the part of the label most likely to be seen by

consumers) the following information: 1) the product

type; 2) the producer or processor's name and location;

3) the quantity (if applicable); and 4) the number and

size of servings (if applicable).

Labeling Decisions:

1)Brand Name:

It is necessary for the label to contain the brand

name. It has to be decided that how should that brand

name appear on the product.

2) Label Text, Graphics and Design:

Text, graphics and design on the label must becarefully selected because label in as important part of

branding process. It plays a role in communicating the

image and identity of a company.

3) Features and Benefits

Listing a products key benefits on its label

helps support the brand promise and can help

differentiate the product from others, while reaching

out to customers seeking those particular benefits.

4)Weights and Measures

Weights on measure of a product are importantfor stocking, inventory and selection. There are

international standards that apply for formatting this

information. Identifying the weights and measures of

products helps customers select the appropriate amount

of product to suit their needs.

5)Instructions for Use

Listing a products key benefits on its label

helps support the brand promise and can help

differentiate the product from others, while reaching

out tocustomers seeking those particular benefits

6)Package InsertsPackage inserts, which may contain

instructions for using a product, are made when the

information cannot fit on the product itself.

7)Safety HazardsPossible dangers that could result from

misusing a product must be identified on products to

reduce liability and comply with regulations.

8)Statement of ContentsThe contents of a product must be accurately

described on its packaging label according to local

regulations.

Module III

PricingPricing policies objectives factors influencing

pricing decisions - different pricing strategies:skimming- penetration Market structure channel of

distribution and its importance

Pricing

Pricing is the process of determining what a

company will receive in exchange for its products. This

is perhaps the most important decision taken bymarketer, as it is the only revenue earning function and

success and failure of the product may depend upon this

decision. Therefore, the decision regarding how muchto charge should be taken such that the price is

acceptable to the prospective buyers and at the same

time fetches profits for the company.

Price determination is very important aspect of strategic

planning. Marketers fix the price of the product on thebasis of cost, demand or competition. Dell, which

allows customers to customize the product adoptedflexible pricing methods. In contrast, Indian oil

companies product prices are fixed by the government

where company does not have any control.

Price is the consideration in terms of money paid by

consumers for the bundle of benefits he/she derives byusing the product/ service. In simple terms, it is the

exchange value of goods and services in terms of

money. Pricing (determination of price to be charged) is

another important element of marketing mix and it

plays a crucial role in the success of a product in themarket. If the price fixed is high, it is likely to have an

adverse effect on the sales volume. If, on the other

hand, it is too low, it will adversely affect theprofitability. Hence, it has to be fixed after takingvarious aspects into consideration.

Factors influencing pricing decisions

The factors usually taken into account while

determining the price of a product can be broadly

described as follows:

(a) Cost: No business can survive unless it covers

its cost of production and distribution. In large

number of products, the retail prices are

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determined by adding a reasonable profit margin to

the cost. Higher the cost, higher is likely to be the

price, lower the cost lower the price.

(b) Demand: Demand also affects the price in a

big way. When there is limited supply of a product

and the demand is high, people buy even if high

prices are charged by the producer. But how high

the price would be is dependent upon prospective

buyers capacity and willingness to pay and their

preference for the product. In this context, price

elasticity, i.e. responsiveness of demand to changes

in price should also be kept

in view.

(c) Competition: The price charged by the

competitor for similar product is an important

determinant of price. A marketer would not like to

charge a price higher than the competitor for fear

of losing customers. Also, he may avoid charging a

price lower than the competitor. Because it mayresult in price war which we have recently seen in

the case of soft drinks, washing powder, mobile

phone etc.

(d) Marketing Objectives: A firm may have

different marketing objectives such as

maximisation of profit, maximisation of sales,

bigger market share, survival in the market and so

on. The prices have to be determined accordingly.

For example, if the objective is to maximise sales

or have a bigger market share, a low price will be

fixed. Recently one brand of washing powderslashed its prices to half, to grab a bigger share of

the market.

(e) Government Regulation: Prices of some

essential products are regulated by the government

under the Essential Commodities Act. For

example, prior to liberalization of the economy,

cement and steel prices were decided by the

government. Hence, it is essential that the existing

statutory limits, if any, are also kept in view while

determining the prices of products by the

producers.

Pricing strategies.

A firm must set a price for the first time when it

develops a new product, introduces its regular product

into a new distribution channel or geographical area,

and enters bids on new contract work. In setting aproducts price, marketers follow a six-step procedure:

(1) selecting the pricing objective; (2) determining

demand; (3) estimating costs; (4) analyzing

competitors costs, prices, and offers; (5) selecting a

pricing method; and (6) selecting the final price

1.) Price skimming.

Price skimming is a pricing strategy in which a

marketer sets a relatively high price for a product or

service at first, then lowers the price over time. It is atemporal version of price discrimination/yield

management. The objective with skimming is to skim

off customers who are willing to pay more to have the

product sooner; prices are lowered later. The successof a price-skimming strategy is largely dependent on

the inelasticity of demand for the product either by the

market as a whole, or by certain market segments.

High prices can be enjoyed in the short term where

demand is relatively inelastic. In the short term the

supplier benefits from monopoly profits, but as

profitability increases, competing suppliers are likely to

be attracted to the market (depending on the barriers toentry in the market) and the price will fall ascompetition increases.

The main objective of employing a price-skimming

strategy is, therefore, to benefit from high short-termprofits (due to the newness of the product) and from

effective market segmentation.

There are several advantages of price skimming

Where a highly innovative product is launched,

research and development costs are likely to be high, as

are the costs of introducing the product to the market

via promotion, advertising etc. In such cases, the

practice of price-skimming allows for some return onthe set-up costs

By charging high prices initially, a company can builda high-quality image for its product. Charging initial

high prices allows the firm the luxury of reducing themwhen the threat of competition arrives.

Skimming can be an effective strategy in segmenting

the market. A firm can divide the market into a number

of segments and reduce the price at different stages ineach, thus acquiring maximum profit from eachsegment

For prestige goods, the practice of price skimming

can be particularly successful, since the buyer tends to

be more prestige conscious than price conscious.Similarly, where the quality differences between

competing brands is perceived to be large, or forofferings where such differences are not easily judged,

the skimming strategy can work well.

2) Penetration pricing.

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Penetration pricing involves the setting of lower, ratherthan higher prices in order to achieve a large, if not

dominant market share.

This strategy is most often used businesses wishing to

enter a new market or build on a relatively small marketshare.

This will only be possible where demand for the

product is believed to be highly elastic, i.e. demand isprice-sensitive and either new buyers will be attracted,

or existing buyers will buy more of the product as aresult of a low price.

A successful penetration pricing strategy may lead to

large sales volumes/market shares and therefore lower

costs per unit. The effects of economies of both scale

and experience lead to lower production costs, which

justify the use of penetration pricing strategies to gain

market share. Penetration strategies are often used by

businesses that need to use up spare resources (e.g.factory capacity).

Before implementing a penetration pricing strategy, asupplier must be certain that it has the production and

distribution capabilities to meet the anticipated increasein demand.

The most obvious potential disadvantage of

implementing a penetration pricing strategy is the

likelihood of competing suppliers reduce their pricesalso, thus nullifying any advantage of the reduced price.

A second potential disadvantage is the impact of the

reduced price on the image of the offering, particularlywhere buyers associate price with quality.

3) Prestige pricing

Prestige pricing refers to the practice of setting a highprice for an product, throughout its entire life cycle as

opposed to the short term opportunistic, high price of

price skimming. This is done in order to evoke

perceptions of quality and prestige with the product orservice.

For products for which prestige pricing may apply, the

high price is itself an important motivation forconsumers.

4) Pre-emptive pricing

Pre-emptive pricing is a strategy which involves settinglow prices in order to discourage or deter potential new

entrants to the suppliers market, and is especially suited

to markets in which the supplier does not hold a patent,

or other market privilege and entry to the market is

relatively straightforward.

By deterring other entrants to the market, a supplier has

time to

Refine/develop the productGain market share

Reduce costs of production (through sales/ experienceeffects)

Acquire name/brand recognition, as the originalsupplier

5) Follower pricing -- This strategy entails the

business owner adopting follow-the leader

approach and setting prices in response to all major

competitors. This is a reactive strategy that

assumes that the dominant leader will not respond

to price competition from the new product or

service.

6) Psychological pricing approach is suitable when

consumer purchases are based more on feelings or

emotional factors rather than rational, such as love,

affection, prestige, and self-image etc

7) Odd-Even Pricing: Marketers sometimes set their

product prices that end with certain numbers. The

assumption is that this type of pricing helps sell more ofa product. It is supposed that if the price is Rs. 99.95,

consumers view it not as Rs. 100 and certaintypes of consumers are attracted more by odd prices

rather than even.

8) Loss Leader Pricing: Sometimes large retail

outlets use loss leader pricing on wellknown

brands to increase store traffic. By attracting

increased number of consumers to store the

retailers hope that sales of routinely purchased

products will rise and increase sales volume and

profits. This compensates for the lower margins on

loss leader brands.

9) Superficial Discounting: It is superficialcomparative pricing. It involves setting an

artificially high price and offering the product at a

highly reduced price. The communication might

say, Regular price was Rs. 495, now reduced to

Rs. 299. This is a deceptive practice and often

used by retailers.10) Special Event Pricing: This involves coordinatingprice cuts with advertising for seasonal

or special situations to attract consumers by offering

special reduced prices.

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SELECTION OF A PRICING METHOD

After selection of the pricing strategy or strategies

to accomplish the pricing objectives, a company

decides about a pricing method. A pricing method

is a systematic procedure for setting the prices on a

regular basis. The pricing method structures the

calculation of actual price of a product based on

considerations of demand, costs, and competition.1 Cost-based Pricing

Cost-based pricing methods are fairly common. Price isdetermined by adding either rupee amount or a

percentage to the products cost to achieve the desired

profit margin. Cost-based pricing methods do not take

into consideration factors such as supply and

demand, or competitors prices. They are not

necessarily related to pricing policies or objectives.11.9.2 Markup Pricing

In markup pricing a certain predetermined

percentage of products cost, called markup, is

added to the cost of the product to determine theprice.11.9.3 Competition-based Pricing

This approach is also called going rate pricing.

Competition-based pricing pushes the costs and

revenues as secondary considerations and the main

focus is on what are the competitors prices. This

pricing acquires more importance when different

competing brands are almost homogeneous and

price is the major variable in marketing strategy,

such as cement or steel.

11.9.4 Demand-based Pricing

Companies using this method mainly consider the

level of demand. The price is high when the

product demand is strong and low price when the

demand is weak. This approach is fairly common

with hotels, telephone service companies, and

museums etc.

Perceived-value Pricing

Many companies perceived-value pricing. In this

approach the price is based on customers

perceived value of a product or service. Thecompany must deliver the promised value

proposition it communicates to its target

customers. And of course, it is important that

customers must perceive this value.

Two-part Pricing

This pricing method is fairly common with service

providing companies. They charge a fixed price for

providing the basic service plus a variable usage

rate. For example telephone service providers

charge a monthly fixed price plus variable per call

charges for calls beyond a certain number.

Bid Pricing

This type of pricing involves submitting either a

sealed or open bid price from the marketer forbuyers consideration. The buyer notifies potential

suppliers to submit their bids by a fixed date. The

buyer evaluates these quotations in terms of quoted

prices, product specifications, and the ability of

suppliers to deliver specified products according to

the buyers schedule when and where needed.

Usually the lowest bidder is awarded the contract.

Channel of distribution and its

importance.

Distribution involves the physical movement of

products to ultimate consumers. A distribution channelconsists of the set of people and firms involves in the

flow of a product, as it moves from producer to ultimateconsumer or business users. A distribution channel

always include both the producers and final customerfor product as well as any middle man.(retailers orwholesalers).

Types of channels & distribution:-

Common channels for distribution of consumer goods,

business goods and services are discussed below.

1) Distribution of channel goods:-There are five channels are used for distribution of

tangible goods to ultimate consumer.

a) Producer---->Consumer:

The shortest, simplest channels of distribution fordistributing gods are from producer to consumer. It

involves no middle man. The producer may sell fromdoor to door or by mail.

Door to Door:-In these channels companies use their representatives to

sell their gods from door to door such as insurance

magazines, newspapers, milk etc.

By Mail:-

Some companies also sell their products by mails. Afarmer sells their fruit and vegetables directly toconsumer at road is also using this method. It is short

and direct method.

b) ProducerRetailerConsumer:-

Many large retailers buy directly from manufacturersand agricultures large no. of our purchases are mad

through this channel such as automobiles, clothing,gasoline etc. In this case manufacturers keep contactwith retailers, take purchase orders. The retailers then

sell to ultimate consumers.

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C) ProducerWholesalerRetailerConsumer:-

This type of channel mostly used by smallmanufacturers and small retailers to distribute such

things that have a large market need. The products such

as drugs, lumber, hardware and many food items are

distributed in such channel process.

d) ProducerAgentsRetailersConsumers:-

Instead of using wholesaler many producers prefer to

use manufacturers agents, a broker or some otheragents middleman to reach the retail market. A glassmarker selected a food broker to reach store market.

e)ProducerAgentWholesalerRetailerConsum

er:-

To reach small retailers, the producers often use agentmiddleman, who in turn cal on with wholesales that sell

to small stores. Agent can be especially useful for

making contacts and bringing buyers and sellerstogether. They are common in food industry, where

they are called food brokers.

2) Channels for Distribution of Business Gods:-a) ProducersIndustrial Users:-This direct channel is used for most expensive products.

Manufacturers of large installations such as air planes,

generators etc use this channel.

b) ProducerIndustrial DistributionUsers:-Producers of operating supplies and small accessoryequipment frequently use industrial distributors to reach

their market.

Importance of Distribution Channels

Cost Savings in Specialization

Members of the distribution channel are specialists inwhat they do and can often perform tasks better and at

lower cost than companies who do not have distribution

experience. Marketers attempting to handle too many

aspects of distribution may end up exhausting company

resources as they learn how to distribute.

Reduce Exchange Time Not only are channel

members able to reduce distribution costs by beingexperienced at what they do, they often perform their

job more rapidly resulting in faster product delivery.

Customers Want to Conveniently Shop for Variety Marketers have to understand what customers want in

their shopping experience.

Resellers Sell Smaller Quantities Not only do

resellers allow customers to purchase products from a

variety of suppliers, they also allow customers to

purchase in quantities that work for them. Suppliersthough like to ship products they produce in large

quantities since this is more cost effective than shipping

smaller quantities.

Create Sales Resellers create demand for themarketers product. In some cases resellers perform an

active selling role using persuasive techniques to

encourage customers to purchase a marketers product.

Offer Financial Support Resellers often provide

programs that enable customers to more easily purchase

products by offering financial programs that easepayment requirements. These programs includeallowing customers to: purchase on credit; purchase

using a payment plan; delay the start of payments; and

allowing trade-in or exchange options.

Provide Information Companies utilizing resellersfor selling their products depend on distributors to

provide information that can help improve the product.

High-level intermediaries may offer their suppliers real-time access to sales data including information showing

how products are selling by such characteristics asgeographic location, type of customer, and product

location.

. Channel Members Create Utility: Marketing

channels create time, place, and possession utility.

Time utility refers to making products available to

customers when they want them. They create place

utility by making products available in locations, wherecustomers desire them to be available for buying.

Possession utility means customers having access to

obtain and have the right to use or store for future use.

This may occur through ownership or some

arrangements such as rental or lease agreements thatentitle the customer the right to use the product.

. Other Functions: Distribution channels share

financial risk by financing the goods moving throughpipeline and also sometimes extend the credit facility to

next level operators and consumers as well as handle

personal selling by informing and recommending the

product to consumers, and partly look after physical

distribution such as warehousing and transportation,provide merchandising support, and furnish market

intelligence.

Module IV

Promotion:- Advertising objectives and

functions - types of advertising - personal selling

and direct marketing - sales promotion.

Promotion.

Promotion is the aspect of selling and

advertising, or communicating the benefits of theproduct or service, to the target customers or the market

segment involved in order to persuade them to purchasesuch products or services.

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It includes selling through advertising as well

as the sales force. Besides, a certain amount ofpromotion is done through special seasonal discounts,

competitions, special price reductions, etc. collectively

called sales promotion.

A promotion mix (sometimes called a

marketing communications mix) is the particular

combination of promotional methods a firm uses to

reach a target market. Marketers can use severalpromotional methods to communicate with individuals,

groups, and organizations. Advertising, personalselling, direct marketing, sales promotion, and publicity

are the five major elements in an organizationspromotion mix.

Promotions role is to communicate withindividuals, groups, or organizations to directly or

indirectly facilitate exchanges by informing andpersuading one or more of the audiences to accept an

organizations products. To facilitate exchanges

directly, marketers communicate with selectedaudiences about their companies and their goods,

services and ideas.

Advertising

In modern times advertising prevails in all

areas of human life. Advertising constitutes one of the

four components of a firms promotion mix, which in

turn forms an integral element of the firms marketingmix. Advertising is an impersonal mass selling and

communication method. It makes use of various types

of media to reach the target public in short time. Being

persuasive in nature, advertising broadly aims ingaining exposure, creating awareness and changing

attitudes of customers in favor of sponsors products.Advertising can be defined as any paid form of non-

personal presentation and promotion of ideas, goods orservices by an identified sponsor. Norman. A. Hart says

that advertising is the action of calling something to

the attention of the public, especially by paid

announcements.

IMPORTANCE AND OBJECTIVES.

Advertising has an indispensable place foritself in the marketing mix of a firm. Advertising is

likely to make greater contribution when buyer

awareness is minimal and when the product hasfeatures normally not observable to the buyer.

1. Advertising informs the customers about product

attributes. It can help to sell products, by giving

information what product is, what it does, where it

can be found etc. It informs possible customers of whatis an offer, and persuades them to buy the goods.

2. In the case of new products, it can begin to develop areputation for the product and to the Company. In

modern market conditions, where the differencesbetween competing products are fairly marginal, an

established reputation can make the difference betweenmarket leader and others. If we look at the brands

which have been successful for 30, 40 or 50 years like

Bajaj, Lux, Colgate etc, they have been continuously

advertised.

3. Advertising is a weapon of competition as well

as merely a way of achieving sales. It helps in

distinguishing one brand from its competitors, it can

affect consumer preferences and tastes and can

differentiate product from competitive offerings.

4. Even in competitive markets, advertising is usedas a way of reminding customers that the brand exists

and retaining their confidence in it ability to meet theirneeds. It can also keep the product in customers mind

during off seasons. For example most of the COCA-

COLA ads, and ads of FEVICOL are designed

primarily to remind primarily people about these

products.

5. Advertising affects the economy also. It can

encourage economic growth, investments and jobs. Itmaintains competition by informing customers. In that

way it can even brake monopoly.

6. The effect of advertising on the Co, and industry arealso very high. Advertising can provide increasing

return and will reduce marketing risk and uncertainty. It

can provide free information and can even serve as a

tool for quality control.

7. Advertising can support and motivate distributors. Inmany cases from car to electronic equipments, the

advertisement will often include lists of stores or

Personal

selling

Sales

promotio

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publicity

Direct

marketing

advertisin

g

Promotio

n mix

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dealers selling the products, to make sure that the

prospective customers can find them.

8. Advertising provides a revenue for the media; and

the entertainment and informational value of

advertising is also important. Government and varioussocial institutions and groups also make use of

advertising, to raise issues, influence ideas, affect

legislation or even to protect the animals and forests.

Advertising also helps to eliminate the seasonal

fluctuations in sales, makes the product known widely,

keep a steady demand and even to appoint best

available employees.

So advertising helps to

1. To announce a new product or service:

2. To expand, the to new buyers: Here what hasbeen successfully sold to one segment of the

market is advertised to a new segment.3. To announce a modification:

4. To announce a price change5. To announce a new pack

6. To make a special offer:

7. To announce the location of stockiest:

8. To educate customers:

9. To maintain sales

10.To recruit staff:11.To attract investors:

12.Advertising makes distribution easier.

13.Advertising benefits the customers. They come

to know about the products and product

information14.Advertising creates goodwill for the

manufacturers of quality products because ofconstantly associating the name of the

manufacturers with the standard products.

TYPES OF ADVERTISING.

Several categories of organizations are large

users of advertising, most important among them beingthe manufacturing, trading and service firms, non-profit

institutions and the government

agencies. Advertising can also be classified accordingto types. The principal means of classification are: (1)

by geographical spread, such as national, regional and

local, (2) by target group, such as consumer advertising,Industrial advertising or trade advertising, (3) by typeof impact such as: i) primary demand or selective

demand advertising and (ii) direct or indirect action

advertising and (iii) institutional advertising

1. Geographical Spread: On the basis of geographical

spread, advertising can be classified asa. National,

b. Local and

c. Global.

a. National Advertising: Some manufacturers maythink that their target is, the entire country. They select

media with a countryside base. Generally large,

established firms belong to this category. Among them

are Hindustan Lever, Brooke Bond, Larsen & Toubro,Escorts, Associated Cement Companies and the like.

b. Local Advertising: Small firms may like to restricttheir business to State or regional level. Thearea to be covered would generally be a state, city or a

town and media would be selected which principally

relates to that area.

c. Global Advertising: Multinational firms treat the

world as their market. Firms such as National IBM orSony or Ford advertise globally, e.g., in periodicals like

Times, Readers Digest.

2. Target Group: It is on the basis of target groups

aimed at it can further be divided into sub category as:a. Consumer Advertising

b. Industrial Advertisingc. Trade Advertising

d. Professional Adverting.

a. Consumer Advertising: A very substantial portion of

total advertising is directed to buyers of consumer

products who purchase them either for their own use orfor their households. The fact that buyers of consumer

items are generally very large and are widely

distributed over a large geographical area enhances the

importance of advertising as a

marketing tool. The preponderance of such advertisingcan be seen by looking into at random any general print

media, such as newspapers and magazines etc. Theseadvertisements are intended to promote sale of the

advertised products by appealing directly to thebuyers/consumers. Such advertising is called consumer

advertising.

b. Industrial Advertising: Industrial advertising on the

other hand refers to those advertisements which areissued by the manufacturers/distributors to the buyers

of industrial products. This category would include

machinery and equipment, industrial intermediates,parts and components, etc.

c. Trade Advertising: Advertisements, which aredirected by the manufacturers to the distributionchannel members, such as wholesalers or retailers, are

called trade advertising. The objective of such

advertising is to promote sales by motivating the

distribution channel members to stock more or to attract

new retain outlets.

d. Professional Advertising: There are certain products

for which the consumers themselves are not responsible

for the buying choice. The classic examples are

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pharmaceuticals where the decision is made by doctors

while the consumers are the patient.

Other types of advertisements are

Public Relations Advertising (PRA)Organizations these days are concerned with the

type of image they project they have to communicate

their objectives to the general public. They also have toIntake the public understand what their activities are.

Public relations, in short, try to build rapport with

various constituents of public such as employees,customers, local authorities, pressure groups, vendors,

customers, shareholders, government and public at

large. Public relations advertising helps to maintain this

relationship. Its main objective is to build a good

corporate image. It represents management and

communicates its policies, problems and performances

to the public.

Public Service Advertising

Public Service Advertising (PSA) is alsoinstitutional advertising, which seeks to promoteimportant social issue. It is created to promote greater

awareness of public causes. The examples of such

social issues, which have been promoted, are

handicapped children and their help, national

integration, flood donation, AIDS etc

Political Advertising

As most of the political advertising is directed to

public, it comes under the category of public relations

advertising. Political advertising is created either by

political parties or candidates. Mostly we come across

such advertising at the time of elections. Electionadvertising either lists the achievements of the party of

candidate or propagates their ideological basis.

Financial AdvertisingWhen public limited companies invite the general

public to subscribe to the share capital of the company,it is called financial advertising. In a broader sense, it

includes all advertising by financial industry such as

banks, car loan companies, insurance companies, non-

banking financial companies etc. Financial advertisingmotivates the public to invest, educate the public on

various aspects of the issue, works in favour of the

brokers/underwriters, and builds a good corporate

image.

Directory Advertising

Another type of advertising is called directorybecause people refer to it to find out how to buy a

product or service. The best known form of directoryadvertising is the Yellow Pages, although many

different kinds of directories perform the samefunction.

Direct-Response Advertising

Direct-response advertising can use any advertisingmedium, including direct mail, but the message is

different from that of national and retail advertising inthat it tries to stimulate a sale directly. The consumer

can respond by telephone or mail, and the product isdelivered directly to the consumer by mail or some

other carrier.

Business-to-Business Advertising

Business-to-business advertising includes messages

directed at retailers, wholesalers, and distributors, as

well as industrial purchasers and professionals such aslawyers and physicians. Advertisers-place most

business advertising in business publications orprofessional journals.

Institutional Advertising

Institutional advertising is also called corporate

advertising. These messages focus on establishing a

corporate identity or winning the public to the

organizations point of view.

Interactive Advertising

Interactive advertising is delivered to individualconsumers who have access to a computer and the

Internet. Advertisements are delivered via Web pages,banner ads, and so forth. In this instance, the consumer

can respond to the ad, modify it, expand it, or ignore it.

DIRECT AND INDIRECT ADVERTISING.If the message is to be communicated to

specific persons, the advertising is direct. The

advertiser may write letters to consumers directly

persuading them to buy his product or service. Indirectadvertising is meant for people at large. Advertising

made through indirect media can be heard and seen byany body.

INDOOR AND OUT DOOR ADVERTISING

The media which are available to the modern

advertisers are really numerous. One can sit indoorsand read news papers, magazines, journals, listen toradio, and see TV. These Medias are called indoor

Medias.On the other hand outdoor advertisements

are seen out doors. These advertisements are so located,so as to catch the eye of the passers immediately. Eg

are posters, hoardings, neon signs

etc. because out door advertisements are fixed at somespecific places, people are able to see them again and

again and there fore their impact is better.

PRINT OR PRESS MEDIA.

Press advertising remains the most popular and

effective method of publicity today. News papers andmagazines have become the part of the culture and life

of the people today. It plays a very important part in

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advertising. Press publicity takes two forms - News

Papers and Magazines.NEWS PAPERS.

Perhaps the oldest , powerful and the most popular

media available to advertisers is news paper. It can

communicate the information to a large number ofpeople and is also able to reach the most interior part of

the country. News papers has become the most

common habit of literate people.

MAGAZINES AND JOURNALS.

Besides news paper, magazines and journals which arepublished at frequent intervals also forms another

media of advertising. Magazines and journals are

periodicals published monthly or quarterly andgenerally contain articles and news of current interest.

Journals are published on subjects like trade, industry,

agriculture, commerce, banking, economy, religion,politics, etc. some times specific magazines and

journals enjoy a longer life than news papers.

DIRECT MAIL ADVERTISING.This is one of the oldest media of advertising. Direct

mail advertising is a way of sending sales messages

directly to the prospects, either through post or through

salesman or dealers. This is a kind of printed

advertising carried on by having direct contact with

prospects through postal services. This method issuitable for explaining details about products and

services.

RADIO ADVERTISING.

Radio advertising appeals through the ears. Now a

days, several broad casting stations all over the worldare selling time for the purpose of commercials.

TELEVISION ADVERTISING.Another development in advertising media in our

country is TV. It provides a scientific synchronizationof features of sound, sight and motion, that no other

medium has been able to provide. That is why TV is thebest selling mode of advertising ever invented.

Other types include posters, painted display,

window display, trade fairs, and skywriting.

DIRECT MARKETING.

Direct marketing is the use of consumer-direct

(CD) channels to reach and deliver goods and

services to customers without using marketing

middlemen. Direct marketers can use a number of

channels to reach individual prospects and

customers: direct mail, catalog marketing,

telemarketing, interactive TV, kiosks, Web sites,

and mobile devices. They often seek a measurable

response, typically a customer order, through

direct-order marketing. Direct marketing has been

a fast-growing avenue for serving customers,

partly in response to the high and increasing costs ofreaching business markets through a sales force.

MAJOR CHANNELS FOR DIRECT

MARKETING

1. Face to Face Selling - Many companies usedirect sales force or agents to locate prospects and

develop them into customers. Amway, Avon andTupperware are examples of such companies.

2. Direct Mail - Direct mail marketing involves

sending an offer , announcement , reminder or otheritem to a person. Using highly selective mailing lists ,direct marketers send out millions of mail pieces each

year letters , flyers ,foldouts etc.

3. Catalog Marketing - In catalog marketing,companies may send full-line merchandise

catalogs, specialty consumer catalogs, and businesscatalogs, usually in print form but also sometimes as

CDs, or online catalogues.4. Telemarketing - Telemarketing involves theuse of the telephone and call centers t attract

prospects,sell to existing customers, and provide service by taking

orders and answering questions. Telemarketing helpscompanies increase revenue, reduce selling costs, and

improve customer satisfaction.

5. E-marketing - The newest channels for directmarketing are electronic. E-business describes a wide

variety of electronics platforms, such as the sending ofpurchase orders to suppliers via electronics data

interchange (EDI) or extranets; the use of fax and e-

mail to conduct transactions; the use of ATMs, and

smart cards to facilitate payment and obtain digital

cash; and the use of the Internet and online services.

Sales Promotion.

Sales promotion is a Short-term incentives to

encourage the purchase or sale of a product or service.

It is about stimulating customers to buy a product.

Sales Promotion is An activity designed to boost the

sales of a product or service. It may include an

advertising campaign, increased PR activity, a free-

sample campaign, offering free gifts or trading stamps,arranging demonstrations or exhibitions, setting up

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competitions with attractive prizes, temporary price

reductions, door-to-door calling, telemarketing,personal letters on other methods.

Objectives of Sales Promotion

i. To introduce new productsii. To attract new customers and retain the existing ones

iii. To maintain sales of seasonal products

iv.To meet the challenge of competition

(i) To introduce new products: Many companies

distribute free samples while introducing new products.

The consumers after using these free samples may

develop a taste for it and buy the products later for

consumption.

(ii) To attract new customers and retain the existing

ones: Sales promotion measures help to attract or create

new customers for the products. While moving in themarket, customers are generally attracted towards the

product that offers discount, gift, prize, etc on buying.These are some of the tools used to encourage the

customers to buy the goods. Thus, it helps to retain theexisting customers, and at the same time it also attracts

some new customers to buy the product.

(iii) To maintain sales of seasonal products: There

are some products like air conditioner, fan, refrigerator,

cooler, winter clothes, room heater, sunscreen lotion,

glycerin soap etc., which are used only in particularseasons. To maintain the sale of these types of products

normally the manufactures and dealers give off-season

discount. For example, you can buy air conditioner in

winter at a reduced price. Similarly you may get

discount on winter clothes during summer.(iv) To meet the challenge of competition: Todays

business faces competition all the time. New productsfrequently come to the market and at the same time

improvement also takes place. So sales promotionmeasures have become essential to retain the market

share of the seller or producer in the product-market.

Importance of Sales PromotionThe business world today is a world of

competition. A business cannot survive if its products

do not sell in the market. Thus, all marketing activitiesare undertaken to increase sales. Producers may spend a

lot on advertising and personal selling. Still the product

may not sell. So incentives need to be offered to attractcustomers to buy the product. Thus, sales promotion isimportant to increase the sale of any product. Let us

discuss the importance of sales promotion from the

point of view of manufacturers and consumers.

From the point of view of manufacturers.Sales promotion is important for manufacturers

because

i. it helps to increase sales in a competitive

market and thus, increases profits;

ii. it helps to introduce new products in the

market by drawing the attention of potential customers;iii. when a new product is introduced or there is

a change of fashion or taste of consumers, existing

stocks can be quickly disposed off;

iv. it stabilizes sales volume by keeping itscustomers with them. In the age of competition it is

quite much possible that a customer may change his/her

mind and try other brands. Various incentives undersales promotion schemes help to retain the customers.

From the point of view of consumers.Sales promotion is important for consumers

because

i. the consumer gets the product at a cheaper

rate;ii. it gives financial benefit to the customers by

way of providing prizes and sending them to visit

different places;iii. the consumer gets all information about the

quality, features and uses of different products;iv. certain schemes like money back offer

creates confidence in the mind of customers about thequality of goods; and

v. it helps to raise the standard of living of

people. By exchanging their old items they can use

latest items available in the market. Use of such goods

improves their image in society.

Consumer sales promotion techniques.

Price deal: A temporary reduction in the price, such as

happy hour Cents-off deal: Offers a brand at a lower price. Price

reduction may be a percentage marked on the package. Price-pack deal: The packaging offers a consumer a

certain percentage more of the product for the sameprice (for example, 25 percent extra).

Coupons: coupons have become a standard

mechanism for sales promotions.

Free-standing insert (FSI): A coupon booklet is

inserted into the local newspaper for delivery. On-shelf couponing: Coupons are present at the shelf

where the product is available.

Checkout dispensers: On checkout the customer isgiven a coupon based on products purchased.

On-line couponing: Coupons are available on line.

Consumers print them out and take them to the store. Online interactive promotion game: Consumers playan interactive game associated with the promoted

product.

Rebates: Consumers are offered money back if the

receipt and barcode are mailed to the producer.

Contests/sweepstakes/games: The consumer is

automatically entered into the event by purchasing theproduct.

Point-of-sale displays:-

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o Dump bin: A bin full of products dumped

inside.o Lipstick Board: A board on which messages

are written in crayon.

o Necker: A coupon placed on the 'neck' of a

bottle.

Trade sales promotion techniques.

Trade allowances: short term incentive offered toinduce a retailer to stock up on a product.

Dealer loader: An incentive given to induce a retailer

to purchase and display a product.

Trade contest: A contest to reward retailers that sell

the most product. Point-of-purchase displays: Extra sales tools given to

retailers to boost sales.

Training programs: dealer employees are trained inselling the product.

Push money: also known as "spiffs". An extracommission paid to retail employees to push products.

Trade discounts (also called functional discounts):These are payments to distribution channel members

for performing some function.

IMPORTANCE OF PERSONAL SELLING

1. The increase in complexity of products and

services has increased the importance of personal

selling. Suppliers, producers or manufacturers of

highly specialised and technical products such as

computers, computer softwares, etc. depend more

heavily on personal selling.

2. Ever growing competition from domestic andforeign sources has also increased the importance

of salespersons in the marketing effort of a firm.

3. When the nature of the product is such that the

buyer needs special information in order to use it

properly, the sales representatives act as a

consultant to the consumer to apprise him or her of

the products technicalities and usage. They also

provide help and guidance for choosing a product

of ones own choice.

4. In case of industrial products, the promotion mix

mostly consists of personal selling rather than

advertising. Being a high value and complexproduct, personal contact with the customer is

essential to convince him or her of the products

quality, value and utility.

5. Companies which cannot afford a large outlay

for advertising on a regular basis finds personal

selling a more reliable method.

6. The power of negotiation for services and their

price increases with personal selling.

7. In some cases the nature of the product or

service is such that the chances of a sale are much

more through personal selling when compared to

other modes.

8. A S a l e s m a n e x p l a i n s t o

h i s c u s t o m e r s h o w w e l l t h e

p r o d u c t h e i s s e l l i n g c a n s a t i s f y

t h e i r n e e d s . H e g i v e s t h e m

opportunity to make more enquiries about

his product. This helps then to match their

needs and the product.

9. He informs them of new products and

explains to them how best they can use

these products.

10. He may also give a demonstration of use

and also explains to them the precautions

they should take while using the products.

11. He provides their after-sales servicealso.

SALES PERSONNEL : QUALITIES.Some people say salespersons are born

salespersons while others believe that training can

help in making good salespersons. Irrespective of

these opinions a good salesperson has certain

qualities and abilities as a result he or she is able to

perform better than others. Let us discuss the

qualities of a good salesperson.

Philip Kolter has identified two basic qualities of agood salesperson namely, empathy and

persuasion. But others have listed more. Some of

the qualities of a good salesperson are as follows:

1) Ability to estimate customers needs and

desires : He or she is alert and quickly determines

what the customer wants and the best way to sell.

2) Ambition: He or she likes to do a good job

and is interested in getting ahead with the

company.

3) Appearance: Appearance mean a lot today and

the successful salesperson is neat and organised.

He or she presents himself or herself well inperson. Also, he or she keeps his or her desk,

books and manuals neat and ready for use.

4) Business Sense: He or she understands that

you are in business to make a profit and quickly

learns the ins - and - outs of the organisation.

5) Courtesy : He or she reveals a sincere desire to

help customers and treats them as guests even

when he or she visits their places of business.

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6) Creativeness : Imagination, vision and the

ability to create ideas make a salesperson

dynamic.

7) Curiosity : He or she wants to learn all he or

she can about his or her products and customers.

8) Enthusiasm: There is nothing that can drain

away a prospects buying interest more than a half-

dead salesperson. Dullness should be left at home.

A salesperson must radiate enthusiasm during and

after the sales call.

9) Figure Sense : He or she should have the

mathematical ability to figure and fill up order

form correctly and to make the necessary reports.

10) Flexibility : A good salesperson is able to

adapt himself or herself to a variety of customers.

Each contact may require adapting the sales talk,

speech habits and even appearance.

11) Friendliness : A salesperson should be able to

make people like him or her and he or she must

like to meet people12) Handwriting : He or she must write legibly so

that his or her paper work can be readily

understood by his or her office people and by his

or her customers.

13) Health : Good health generates energy and

energy is needed to sell. Poor health prevents many

salesperson from fulfilling their potentials.

14) Integrity : A salesperson must be trusted to do

his or her job well. He or she cannot help but be

successful when his or her customers trust him or

her.

15) Interest in job : He or she likes selling andworking for the company.

16) Knowledge : In some businesses, a

salesperson must also have a through knowledge of

the highly specialised products or services his or

her employer offers. In some cases, this

knowled

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