BRANDING STRATEGY

A brand is defined by the American marketing Association as “a name, term,

sign, symbol or design, or a combination of them which is intended to identify the goods

or services of one seller or group of sellers and to differentiate them from those of

competitions”.

Once a brand is used, it becomes an integral part of the product. From the

view point of the manufacturer, middle man, or retailer, who is considering employing a

brand, a brand can be defined as a device designed to assist in the processes of creating,

stimulating, strengthening or maintaining demand for his products.

A) Producer’s Strategies

Producer’s must decide whether to brand their products and whether to sell

any or all of their output under middlemen’s brands. Thus, three cases arise which are as

follows :

Case-I – (Marketing entire output under producer’s own Brands)

The large, well financed and well managed companies like IBM, etc. market

their entire output under their own brands. But it is particularly difficult for a new firm

to produce only for its own brands.

Case-II – (Branding of Fabricating Materials and parts)

Some producers use a strategy of branding manufactured goods that become

part of another product following subsequent manufacturing. This strategy is used in

marketing many automotive parts such as spark plugs, batteries, and oil filters. With this

strategy, strategy, the seller seeks to develop a market preference for its branded parts

or materials. This strategy is most likely to be effective when the particular type of

fabricating parts or materials has two characteristics :

(a) The product is also a consumer good that is bought for replacement purposes. For example, EXIDE batteries.

(b) The item is a key part of the finished product. For instance, an integral part of an automobile.

Case-III – (Marketing under Middlemen’s brands)

A strategy among manufacturers is to sell part or all of their output to

middlemen for branding by these customers. This strategy helps a manufacturer fully

utilize its plant capacity. Also this strategy helps the manufacturer to achieve additional

sales.

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B) Middlemen’s Strategies

An alternative to manufacturer’s own brand policy is the middlemen’s or

distributor’s brand policy. This is useful when the firm does not have strength in

marketing, adequate financial resources to build a brand and the competition in the

industry is high. Several small producers market their products under well-known brand

names like Bajaj, Voltas, and so forth. In fact, it is not uncommon to see ready-made

garments and other accessories being marketed under the store name or stores created

brand name. If customers prefer a given retailer’s brand sometimes called a store brand

they can get it only from that retailer.

Middlemen may find it advantageous to market their own brands, in place of

or in addition to producer’s brands, because it increases their control over their target

markets.

Middlemen may find it advantageous to market their own brands, in place of

or in addition to producer’s brands, because it increases their control over their target

markets.

The risks in this strategy are :

i) Loss of control over the product’s marketing.

ii) If the product succeeds, premium may go to the middlemen (distributor) but not

to the producer.

iii) Distributor may not extend the desired marketing support to the brand.

C) Strategies Common to Producers and Middlemen

Producers and middlemen (distributors) alike must choose strategies with

respect to branding their product mixes branding for market saturation, and joint

branding activity with another company.

Case-I – (Branding within a Product-Mid)

Three possible strategies are used by firms that sell more than one product.

(a) A separate name for each product.

(b) The company name combined with a product name.

(c) The company name alone.

Case-II – (Branding for Market Saturation)

With increasing frequency, firms are employing a multiple-brand to increase

their total sales in a market. They have more than one brand of essentially the same

product, aimed either at the same target market or at distinct target markets. Suppose,

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for example, that a company has built one type of sales appeal around a given brand. To

reach other segments of the market, the company may use other appeals with other

brands. Two &G detergents, Tide and Dreft, illustrate this point. Some people feel that if

Tide is strong enough o clean soiled work clothes, it should not be used on fine clothings.

For these people P&G has Drefts, a detergent promoted as being gentler than Tide.

Case-III – (Co Branding)

Sometimes two separate firms or two segments within the same

firm/company agree to place both of their respective brands on a particular product or

enterprise. This arrangement is called co-branding, or dual branding.

POSITIONING A BRAND

The concept of positioning wall first advocated by AI Ries and Jack Trout.

Positioning is the act of communicating company’s offer so that it occupies a distinct and

valued place in the mind of customers. There are different ways of positioning the brand.

These are as follows :

1. Use Situations : The marketer can identify use situations for his brand or product

and analyze customer perception of existing competitor brands in different use

situations. Based on this analysis the firm can position its brand.

2. Emphasizing Tangible Benefits : The ;positioning of brand may be done on the

basis of tangible benefits that the company offers to customers. These are in the

form of specific features and sometimes through its price and distribution. For

example - Colgate offers benefits of preventing cavity and fresh breath. Nirma

offers the benefit of low price.

3. Linking to Uses :- In this case, positioning of a brand is done by identifying the

possible uses which the firm’s brand can be put to.

4. Head-on Competitive Positioning : This is the strategy of placing a firm’s brand

next to the leader in the market and trying to uproot it on a specific tangible

variable. ONIDA colour TV was launched and positioned against the giants in the

CTV industry with the message that all others were clones and only ONIDA was

the leader.

5. Life Style Positioning :- A brand may be positioned as a life style component.

Many of today’s new kitchen appliances like the microwave oven, etc. are

positioned accordingly.

6. Benefits offered :- In this way of positioning the brand, the benefits that customers

get in using the product are highlighted.

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BRAND EQUITY

Brand equity can help a product survive changes in the operating environment,

such as business crisis or a shift in consumer tastes. Brand equity is often used to expand

a product-mix, especially by intending a product line.

Brand vary in the amount of power and value they have in the market place. At

one extreme are brands that are not known by most buyers. Then there are brands for

which buyers have a fairly high degree of brand awareness. Beyond this are brands with a

high degree of brand acceptability. Then there are brands that enjoy a high degree of

brand preference. Finally there are brands that command a high degree of brand loyalty.

David Aaker distinguished five levels of a customer attitude towards a brand, from lowest

to highest.

1. Customer will change brands, especially for price reason. No brand loyalty.2. Customer is satisfied. No reason to change the brand.3. Customer is satisfied and would incur costs by changing brand.4. Customer values the brand and sees it as a friend.5. Customer is devoted to the brand

Customers will pay more for a strong brand. One study found that 72% of

customers stated they would pay a 20% premium for their brand of choice relative to

their closest competitive brand; 50% said they would pay a 25% premium; and 40%

would pay upto a 30% premium. Coke Lovers are willing to pay a 50% premium over the

closest competitors; Tide users, a 100% premium and Volvo users a 40% premium and

although the Lexus and the Toyota Camry share the same exact engine, the Lexus brand

commands $ 10,000 more than the Camry brand.

Packaging strategies :

Packaging, thus, consists of all the activities of designing and producing the

container or wrapper for a product.

Importance of Packaging :

Packaging a product is very important for the following purposes :

i) It protects the product on its way to the consumer.

ii) It protects the product after it is purchased.

iii) It helps to meet the needs of wholesaling and retailing middlemen. For example,

a package’s size and shape must be suitable for displaying ad stacking the

product is the store.

iv) It can assist in getting a product noticed by consumers.

v) It makes the product distinct from that of the competitors.

Functions of a Package :

The following are some of the functions, a good package is expected to perform :

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i) A package protects a product during transportation, inventory processing, shelf-

life and in the customer’s home.

ii) Packaging serves a convenience function in that it provides both the middlemen

and the customer’s greater economy and convenience in the handling, opening

and storage of the products.

iii) Packaging can be used to achieve common identification of the various products

in a company’s line of products.

iv) Packaging helps to achieve a greater degree of product differentiation.

v) Packaging helps the selling function particularly in the shops and in advertising

i.e., packages can be designed to educate the customers and distribution

channels on the benefits of the product.

Objectives of Packing :

The following five basic objectives are generally highlighted.

i) To supply a consumer need.

ii) To increase total consumer demand.

iii) To redistribute existing consumer demand more in favour of the concerned firm.

iv) To reduce costs through efficient handling methods, better and less expensive

materials, greater reduction of waste and lower distribution costs

v) To improve profits by improving the product image.

The “A-I-D-A-S” Formula :

In designing a package this formula can be used as is done by salesman whilst

swelling and the advertiser whilst drafting advertisements.

A well designed package will immediately attract ‘Attention’, develop and sustain

‘interest’ about or, better still, purchase of the product, giving him, thereby, full customer

‘satisfaction’.

Packaging strategies :

In managing the packaging of a product, executives must make the following

strategic decisions.

1. Packaging the Product Line :- A company must decide whether the develop a

family packaging when packaging related products. Family Packaging uses either

highly similar packages for all products or packages with a common and clearly

noticeable feature.

2. Multiple Packaging :- It is a practice of placing several units of the same product in

one container, as it increases total sales of a product.

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3. Changing the Package :- Management must constantly evaluate the effectiveness

of the present packaging and be alert to introduce the necessary change. A

package change may become necessary through

i) Introduction of a new product, ii) Customer request or sales requestiii) Engineering requestiv) Altered conditionsv) As part of a regular programme.

LABELLING

Labeling means putting identification marks on the package. A label is the part of a

product that carries information about the product and the seller.

There are three primary kinds of labels : brand label, descriptive label and grate

label. A brand label is simply the brand alone applied to the product or package. A

descriptive label gives objective information about the product’s use, construction, care,

performance, and/or, other pertinent features.

A grade label identifies the product’s judged quality with a letter, number or word.

Example : ‘A’ grade product.

PRODUCT-MIX STRATEGIES

A product-mix is the set of all products offered for sale by a company. In other

words, product mix refers to the collection of products offered for sale by a business unit.

For example, Kodak’s cameras, Photographic suppliers, Chemicals, Plastics land Fibers are

its product mix. In this sense, product mix is the full list of all products offered for sale by

a company.

The American marketing Association defines product mix as “the composite of

products offered for sale by a firm or a business unit”.

The nature of the product mix is at times described by expressions such as depth,

width and consistency.

The word depth applies to the number of product items offered by the

organization within a particular product line. A broad group of products, intended for

essentially similar uses and having similar physical characteristics, constitutes a product

line.

The word width refers to the extent of different product lines in the product mix

offered by an organization.

The word consistency describes the relatedness of the various product lines.

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PRODUCT LINE DECISIONS

The American Marketing Association defines product line as “a group of product

that are closely related either because they satisfy a class of need, or used together, or

sold to the same customer groups, or marketed through the same types of outlets, or fall

within given price ranges”. A company may have following product line decision

strategies.

1. Expanding the line : It may be a valid decision if it is in an area in which consumers

traditionally enjoy a wide variety of brands to choose from and are accustomed to

switching from one to another; or if the competitors black a comparable product or if

competitors have already expanded into this area themselves. This strategy is limited

by the considerations of adequate finance, time and equipment. Expansion is done

by increasing the number of lines and/or the depth within a line.

2. Contracting or Dropping the Product : Contraction may be done by dropping a

product or products in the line so that fewer styles, sizes, or added benefits are

offered.

3. Trading up and Trading Downs : It involves an expansion of the product lines as well

as the promotional strategies. Trading up refers to the adding of a higher priced

prestige product to the existing lines with the intention of increasing sales of the

existing low-priced product. Trading down refers to the adding of the low priced

items to the line of prestige product, with the expectation that the people who

cannot buy the original product may buy these new ones because these carry some

of the status of the higher priced products.

PLANNED OBSOLESCENCE

The intent of this strategy is to make an existing product out of date and thus,

increase the market for replacement products, new styles, new colours and so forth.

Thus, this strategy is to satisfy their thirst for newness though fashion.

The concept of planned obsolescence refers to either of two strategies :

1. Technological Obsolescence : This is a strategy of making an existing product

obsolete due to significant technical improvements. For example, CDs and DVDs

rendered cassettes virtually obsolete.

2. Style Obsolescence : It is a strategy in which superficial characteristics f a product

are altered so that the new model is easily differentiated from the previous and now

declared obsolete model. Products subject to style or fashion or psychological

obsolescence include clothing, furniture, automobiles, and cell phones etc.

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PRICING DECISION

Pricing is the matter of vital importance to the seller as well as to the buyer

in the market place. Price refers to the exchange value of goods and services expressed

in terms of money.

OBJECTIVES OF PRICING

Price is very significant in our economy, in the consumers mind, and in an

individual firm. Thus, it is important to have a look on pricing objectives. Pricing

objectives are overall goals that describe the role of price in an organization’s long-range

plans. Pricing objectives aid planners in formulating price policies planning pricing

strategies and setting actual prices. Thus, all pricing objectives emanate form the

corporate and marketing objectives of the firm.

The various objectives sought to be realized through pricing are listed below :

1. Profit – Maximization in the short-run.

2. Profit-optimization in the long-run.

3. A minimum return (or target return) on investment.

4. A minimum return on sales turnover.

5. Target sales volume.

6. Target market share.

7. Deeper penetration of the market.

8. Entering new markets.

9. Target profit on the entire product line irrespective of profit level in individual

products.

10. Keeping competition out, or keeping it under check.

11. Keeping parity with compensation.

12. Fast turn around and early cash recovery.

13. Stabilising prices and margins in the market.

14. Providing commodities at prices affordable by weaker sections.

15. Providing commodities/services at prices that will stimulate economic

development.

FACTORS INFLUENCING PRICING

Two categories of factors – internal factors and external factors – influence

the pricing decisions of any enterprise. In each categories some may be economic factors

and some psychological factors; again, some factors may be quantitative and yet other

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qualitative. A fairly exhaustive list of internal and external factors which exercise an

influence on pricing is given below :

(A) Internal Factors :

1. Corporate and marketing objectives of the firm.

2. The image sought by the firm through pricing.

3. The characteristics of the product.

4. The stage of the product on the product life cycle.

5. Use pattern and turn around rate of the product.

6. Costs of manufacturing and marketing.

7. Extent of distinctiveness of the product and extent of product differentiation

practiced by the firm.

8. Other elements of the marketing mix of the firm and their interaction with pricing.

9. Composition of the product line of the firm.

10. Price elasticity of demand of the product.

(B) External Factors

1. Market characteristics- open or closed market; national or overseas market;

perfect competition, or monopoly, or monopolistic or oligopolistic market.

2. Buyer behaviour in respect of the given product.

3. Bargaining power of major customers.

4. Bargaining power of major suppliers.

5. Competitor’s pricing policy.

6. Government controls/regulations on pricing, and other relevant legal aspects.

7. Societal (or social) considerations.

8. Understanding, if any, reached with price cartels.

PRICING STRATEGIES

After deciding on pricing goals and setting the base price, marketers must

establish pricing strategies that are compatible with the rest of the marketing mix. There

are a number of pricing strategies available to a marketer. The choice of a pricing

strategy is dependent on corporate goals and objective, customer characteristic intensity

of inter-firm rivalry and phase of the product life cycle. When a firm is launching a new

product, it must choose a market-skimming or a market penetration pricing strategy.

Similarly, strategies must be devised for discounts and allowances. In this section a

thorough discussion will be made regarding pricing strategies.

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Market Entry Strategies :

(A) Skimming Pricing :

In skimming pricing, the new product is priced high and the cream of the

market is skimmed by concentrating on those segments of the market that are not price

sensitive. In other words, skimming pricing aims at high price and high profits in the early

stage of marketing the product. As the word skimming indicates, this strategy literally

skims the market in the first instance through high price and subsequently settles down

for a lower price. Ordinarily, the price is set at the highest possible level that the most

interested consumers will pay for the new product.

The skimming pricing strategy can prove ideal for really new and distinctive

products on account of the following factors.

1) The quantity of the product that can be sold is less affected by pricing in the early stages especially when the product has novelty.

2) Through skimming, the product is tapping profitably those segments of the market which do not bother much about price. Such tapping will not be possible at a later stage in the life cycle.

3) By skimming the ream of the market through a high price the product is fetching big funds which could be used for market development in the initial stage.

4) The Skimming pricing can be a way to feel and figure out the demand for the product. And by strategy at a higher price it is always possible to come down on price, when the situation warrants.

There are certain objectives of this skimming pricing strategy.

1) Since it is expected to provide healthy profit margins, this strategy intended primarily to recover and R&D costs as quickly as possible.

2) When the product has distinctive features strongly desired by consumers.

3) When demand for the new product is fairly inelastic.

4) When the new product is protected from competition through one or more entry barriers such as a patient.

(B) Penetration Pricing

In this pricing strategy, a relatively low initial price is established for a new

product. The price is low in relation to the target market’s range of expected prices. The

intention of this pricing strategy is to penetrate a brand market through low prices. The

income is generated by large sales spread over large markets. The large volume of sales

facilitates substantial economics in unit cost of production and marketing and the cycle

can continue in establishing the product in the market, through the low price strategy.

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This strategy advocates for starting with a low price as it is intended to discourage other

firms from introducing competing products.

The penetration pricing is most suitable under the following conditions :

1) When a large market exists for the product.

2) When demand is highly elastic.

3) When it is possible to achieve economics of scale (substantial reductions in unit costs) through large-scale operations.

4) When a fierce competition already exists in the market for this product or is expected soon after the product is launched.

The penetration pricing becomes the choice for the new product, when the product market characteristics are as follows :

1) The quantity of product that can be sold is highly price sensitive, even in the early stages of introduction.

2) There is no elite market for the product.

3) The product is likely to encounter heavy competition.

4) Large volume of sales is required to ensure economy in production and distribution.

Discounts and Allowances :

It is necessary that the strategies must be devised for discounts and

allowances which are very common in business dealings. Discounts and allowances are

deductions from the base price or list price. Management has the option of offering

quantity discounts, trade discounts cash discounts, and/or other types of deductions.

(A) Quantity Discounts

These are deductions from a seller’s list price intended to encourage

customers to buy in larger amounts or to buy most of what they need from the seller,

offering the deduction. There are two types of quantity discounts, viz, cumulative

discount and non-cumulative discount.

1. A cumulative discount is based on the total volume purchased over a specified period. This type of discount is advantageous to a seller because it ties customers closely to that firm.

2. A non-cumulative discount is based on the size of an individual order of one or more products. This type of discount is intended to encourage large orders.

Quantity discounts are given in terms of rupees or in physical units.

Quantity discounts can help a producer achieve true economies in production as

well as in selling. In this regard two points are noteworthy.

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1) Large orders, motivated by a non-cumulative discount can result in lower production and transportation costs.

2) Frequent orders, from a single customer, motivated by a non-cumulative discount, can enable the producer to make efficient and effective use of production capacity.

(B) Trade Discounts

These discounts are also called functional discounts. These are reductions from

the list price offered to buyers in payment for marketing functions the buyers will

perform. The marketing functions are storing, promoting and selling the product. For

example, a manufacturer may quote a retail price of Rs.10,000 with trade discounts of

30% & 10%. It means the retailer pays the wholesaler Rs.7,000 (Rs.10,000 – 30% of

Rs.10,000) and the wholesaler pays the manufacturer Rs.6,300 (Rs.7,000 – 10% of

Rs.7,000).

(C) Cash Discounts

A cash discount is a deduction granted to buyers for paying their bills within a

specified time. The discount is computed on the net amount due after first deducting

trade and quantity discounts from the base price.

(D) Other Discounts & Allowances :

1. Rebate : Some sellers offer rebates to prospective customers so as to stimulate sales.

A rebate is a discount on a product that a customer obtains by submitting a form or

certificate provided by the seller. There are three types of rebates.

(a) Coupon : A coupon is a small printed certificate that the buyer presents when

purchasing the product in order to obtain a discount equal to the value shown on the

certificate.

(b) Mail-in Rebate : A mail-in rebate, in which the buyer fill out a short form,

encloses proof of the purchases, and sends the paper work to specified address. If all

goes well, a rebate cheque arrives in the mail a short while later.

(c) e-coupon : A company places an e-coupon on its website or sends a coupon to

a customer via e-mail. A seller can redeem this kind of coupon in cyber space and/or at a

physical store that sells the firm’s products depending on the conditions attached to the

offer.

2. Seasonal Discount : The manufacturers of seasonal goods like air conditioners,

greetings cards, etc. consider granting a seasonal discount on purchases made in a

season.

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3. Promotional Allowance : It is a price reduction granted by a seller as payment for

promotional services performed by buyers.

Geographic Pricing Strategies :

Geographical pricing involves the company in deciding how to rice its

products to different customers in different locations and countries. For example, should

the company charge higher prices to distant customers to cover the higher shipping costs

or a lower price to win additional business? It may happen that in geographic pricing

strategy, a firm may charge a premium in one market, penetration price in another

market, and a discounted price in the third. The most important requirement of this

strategy is that the markets should be separated by transportation costs. Besides there

are certain conditions on which this strategy is based :

i) A firm should not discriminate between competing buyers in the same region.

ii) A firm’s strategy should not kill other firms operating in a market.

iii) A firm should not attempt to fix prices among competitors for basing point or zone pricing.

iv) The elasticity of demand for the product should differ with respect to markets or localities or regions or countries.

There are different pricing strategies coming under geographic pricing. These are : 1) Uniform Delivered Pricing Strategy : In this pricing the seller quotes the selling

price at the point of production and the buyer selects the mode of transportation

and pays all freight costs.

2) Uniform Delivered Pricing Strategy : In this pricing, the same delivered price is

quoted to all buyers regardless of their locations. This pricing strategy is used

where freight costs are a small part of the seller’s total costs.

3) Zone-Delivered Pricing Strategy : This pricing strategy divides a seller’s market

into a limited number of broad geographic zones and then sets a uniform

delivered price for each zone. The freight cost built into the delivered price is an

average of the charges to all points within a zone.

4) Freight-Absorption pricing strategy : Under this strategy a manufacturer quotes

to the customer a delivered price equal to its factory price plus the shipping costs

that would be charged by a competitive seller located near that customer. This

pricing strategy is due to the seller’s willingness to pay a part of the freight cost so

s to penetrate distant markets. This strategy is especially useful to a firm that has :

i) Excess capacity, ii) high fixed costs, & iii) Low variable costs per unit of product

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Special Pricing Strategies :

1) One Price Strategy : Under this pricing strategy, a seller charges the same price to

all similar customers who buy identical quantities of a product.

2) Flexible-price Strategy : This is also called variable price strategy. Under this

pricing strategy, similar customers are charged different prices when buying

identified quantities of a product.

For example :- Airways use this flexible-price strategy when charging lower-price

tickets requiring advance purchase, to passengers who would not fly at higher

prices.

3) Flat-Rate Pricing Strategy : It is a variation of the one price strategy, under which

a buyer pays a stipulated single price and then can consume as little or as much of

the product as desired.

4) Single-price Strategy : It is an extreme variation of the one-price strategy, under

which not only all customers are charged the same price, but all items sold by the

seller carry a single price.

5) Price Lining : It is a strategy which involves selecting a limited number of prices at

which a business will sell related products. The Athletic store, for example, sells

several styles of shoes at Rs.1999 a pair, another group at Rs.1499, and a thing

group at Rs.1999.

6) Odd Pricing : Odd pricing sets prices at uneven (or odd) amounts such as Rs.99.95,

rather than at even amounts. Bata, for instance, sets prices for shoes in this

manner. The rational for odd pricing is that it suggests lower prices and as a result,

yield greater sales than even pricing.

7) Leader Pricing : Many firms, primarily retailers, temporarily cut prices on a few

items to attract customers. This strategy is called leader pricing. The items, on

which prices are cut, are termed leaders.

8) High-low pricing : This strategy entails alternating between regular (high) and

‘sale’ (low) prices on the most visible products offered by a retail firm. Many

retailers, especially super-markets and department stores, that want to engage in

price competition rely on high-low pricing.

9) Every low Pricing : It involves consistently low prices and few if any temporary

price reductions. This strategy is featured by some large discounters.

10) Resale Price maintenance : Some manufacturers want to control the prices at which distributors and retailers resell their products; this is termed as resale price maintenance. Manufacturers seek to do this to protect the brand’s image. Thus, resale price maintenance means controlling the prices at which middlemen resell products.

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Pricing Methods1. Full Cost or Mark up pricing :

In this method, the marketer estimates the total cost of producing or manufacturing a product and then adds a mark up or the margin that the firm wants. This is indeed the most elementary pricing method and many services and products are priced accordingly. To arrive at the mark up price, one can use the following formula

Mark up price = alpha/(1-r)

Where alpha = Unit Cost (Fixed cost +Variable cost)

r = Expected return on sales expressed as a percent

For Example, if the fixed cost for 10,000 shirts is Rs.1,50,000 and the variable cost per

shirt is Rs.30. then cost per shirt is Rs.45. now the firm expects 30 percent return on sales.

Keeping this figure in mind, the mark up price will be

Mark up price = 45/(1-0.3)

=45/0.7

=Rs.64.28.

This, approach, ensures that all costs are recovered and the firm makes a profit. Indeed it

satisfies the finance oriented executives, but this method ignores the fact that it is not

necessary that the firm is able to sell its entire merchandise at this price. Some firms use

this as a launch strategy ,but this could prove fatal if competition already exists within the

industry. It may be a useful method, if everyone in the industry adopts it.

2. Customer oriented or perceived value pricing:

An increasing number of companies base their price on the customer’s perceived

value. Here positioning strategy is important. This method helps the firm in reducing

the threat of price wars. It can help the firm in reducing the threat of price wars. But

the key to this method is to correctly understand customer’s perception of product

value and not to overestimate the firm’s product value.

3. Going Rate or ‘ Follow the crowd’: This is a method which is competition

oriented. In this method, the firm prices its products at the same level as that of

Their major competitor. This methods assume that there will be no price war

within the industry. This is a method commonly used in an oligopolistic market

that sell a commodity such as steel, paper or fertilizer, firms normally charges the

same price. The small firm “follows the leader,” changing their prices when the

market leader’s prices change rather than when their own demand or costs

change is the key limitation.

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Going-rate price is is quite popular . where costs are difficult to measure and

competitive response is uncertain.

4. Auction-Type pricing :Auction type pricing is growing more popular, especially

with the growth of the internet. One major use of auctions is to dispose of excess

inventories or used goods. Companies needs to aware of the three major types of

auctions and their separate pricing procedure.

i)English auctions (ascending bids): one seller and many buyers. The seller puts

up an item and bidders raise the offer price until the top price is reached.english

auctions are being used today for selling antiques, real estateand used equipment

and vehicles.

ii)Dutch auctions(descending bids):one seller and many buyers, or one buyer and

many seller. In the first kind, an auctioneer announces a high price for a product

and then slowly decreases the price until a bidder accepts the price. In the other,

the buyer announces something that he wants to buy and the potential sellers

compete to get the sale by offering the lowest price. Each seller sees what the last

bid is and decide whether to go lower.

Ex: General Electric uses this method when it wants to buy some of its product.

iii)Sealed bid auction : The U.S. government often uses this method to procure

supplies. Here would-be suppliers can submit only one bid and cannot know the

other bids. Here a supplier will not bid below its cost but can’t bid too high for

fear of losing the order.

5. Target return pricing: In target return pricing, the firm determines the price that

would yield its target rate of return on investment (ROI). Target pricing is used by

General Motors, which prices its automobiles to achieve a 15 to 20 percent ROI.

This method is used when a firm wants to make a fair return on their investment.

The Target- return price can be calculated by using the following formula

Target-return price = unit cost + desired return * invested capital / unit sales.

6 .Psychological pricing: Many consumers use price as an indicator of quality.

Image pricing is especially effective with ego-sensitive products such as expensive

watches, cars etc. etc.. Higher –priced cars are perceived to possess high quality.

Higher quality cars are likewise perceived to be higher priced than they actually

are. When alternative information about true quality is available, price becomes a

less significant indicator of quality as a signal of quality.. When this information is

not available, price acts as a signal of quality.

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Many sellers believe that prices should end in an odd number. Many customer see

a shoe priced at Rs.999 instead of Rs.1000 as a price in the Rs.900 range rather

than Rs.1000 range. Another explanation is that odd endings convey the notion of

a discount or bargain, but if a company wants a high price image instead of a low

price image, it should avoid the odd ending tactic.

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PROMOTION

Promotion means all those tools that a marketer uses to take his product

from the factory to the customer and hence, involves advertising, sales promotion,

personal selling, public relations, publicity and merchandising. All these tools have one

dimension in common, they are all communicating a message to the customer-buy me. It

is therefore, important that marketers understand the communications process.

Usually a marketing communication process is a seven stage process.

Stage-I (Source) :

The information source originates the communication. There must be a

promotional idea in marketer’s mind. This idea should be properly formulated in the

form of a message. For instance, the marketing executive may have ideas, information,

instructions, to communicate to his sub-ordinates, sales force, and the target markets or

the middlemen about the product.

Stage-II (Encoding) :

The information that the sender (Marketer) wants to share must first be

encoded into a transmittable form. In marketing, this means transforming an idea into

words, or pictures, or a combination of the two.

Stage-III (Transmission) :

The encoded message carrying the idea must be transmitted from the

marketer to the receiver either by print media, some signs and symbols, words, gestures

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Transmitting the message select the

mediaEncoding the

message / create an ad display or

sales presentation

Decoding the message

Messages as received

Message as intended

Feed backResponse

Noise Competing message and

Other distractions

Noise Competing message and

Other distractions

and facial expression and images. These rooms, the electricity that carries invoices

through a telephone connection, the postal service and the like.

Stage-IV (Decoding) :

Once the message has been transmitted through some communication

channel, the symbols must be decoded, or given meaning, by the receiver. The message

is decoded, i.e., interpreted in the light of the experience of the receiver or frames of

reference. Whether the message is recognized or not depends upon the individual’s

threshold of awareness.

Stage-V (Receipt) :

If the message has been decoded successfully, there is some change in

the receiver’s knowledge beliefs, or feelings. This shows that the message has been

received effectively.

Stage-VI (Response) :

If the sender’s message has reached the receiver in its intended form,

the receiver will fortunate a response. The response could be non-verbal, verbal, or

behavioural. In marketing, this response could range from single awareness to purchase.

Stage-VII (Feedback) :

The response serves as feedback, telling the sender whether the

message was received and how it was perceived by the recipient. In other words,

feedback gives an idea whether and to what extent the message has been received or

learnt by the receiver. Through feedback the sender can learn what a communication

accomplished. Then a new message can be formulated and the process begun again.

All stages of the process can be affected by noise. Noise is any external

factor that interferes with successful communication. In other words, noise include

competing messages from competitors and other distractions.

Therefore, it is cleared that marketing depends heavily on an effective

communication flow between the company and the consumer. Communication is more

important than producing a product and making it available in the market.

Communication is significant, to make it known to the consumer that the product is

available in the market. It is essential to propagate the distinctive features of the

product, which can be accomplished through an effective, continuous and two-way flow

of information between the firm and the consumer.

PROMOTION-MIX

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The term promotion-mix refers to a combination of different types of

promotional tools used by a company/firm to advertise and sell its products. These are

as follows :

1. Advertising : It refers to any paid form of non-personal presentation and promotion

of ideas, goods, or services by an identified sponsor. There are different media for

advertising, viz, mass media (TV, radio, newspaper), magazines, print-or purchase

displays, packaging, billboards, banners, sponsorships, etc. Advertising can be used

to build up a long-term image for a product or trigger quick sales. Advertising can

efficiently reach geographically dispersed buyers.

2. Sales Promotion : It refers to a variety of short-term incentives to encourage trial or

purchase of a product or service. Sales promotion tools are coupons, contests,

premiums, and the like. Companies use sales promotion tools to draw a stronger and

quicker buyer response.

3. Public Relations and Publicity : It refers to a variety of programs designed to

promote or protect a company’s image or its individual products. This tool includes

press conferences, speeches, annual reports, events publications, and sponsorships.

4. Personal Selling : It refers to face-to-face interactions with one or more prospective

purchasers for the purpose of making presentations, answering questions, and

procuring orders. Personal selling is the most effective tool at later stages of the

buying process, particularly in building up buyer preference, conviction, and action.

5. Direct Marketing : It refers to the use of mail, telephone, fax, e-mail, or internet to

communicate directly with or solicit response or dialogue from specific customers

and prospects.

ADVERTISING MANAGEMENT

American Marketing Association has defined advertising as “any paid form

of non-personal presentation and promotion of ideas, goods or services by an identified

sponsor. The medium used are print, broadcast, and direct”.

Objectives of Advertising :

The purpose of advertising is to seal a good, service or idea either now or

later. This goal is reached by setting specific objectives that are reflected in individual ads

incorporated into an advertising campaign.

Typical advertising objectives are :

i) To support personal selling

ii) To improve dealer relations.

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iii) To introduce a new product.

iv) To expand the use of a product.

v) To counteract substitution

vi) To build brand preference.

vii) To remind users to buy the product.

viii) To combat or neutralize competitor’s advertising.

ix) To publicize some change in marketing strategy (e.g., a price change, a new

model, or an improvement in the product)

x) To extend the product’s life cycle by making buyers and prospects acquainted

with the new uses of the product.

The Media and Media Selection :

The most important step in developing an advertising campaign is the

selection of the advertising media in which to place the ad.

Media refers to daily newspapers, magazines, technical journals (called the

print media), hoardings, billboards, peon sign and so forth (called outdoor media) and

Cinema and television, video, cable TV and radio (called the electronic media).

Thus, media, as the very meaning implies, consists of channels for carrying

the intended advertising message to a selected audience.

Selecting the appropriate media and the media vehicle and arriving at a

sound media mix is a very crucial function in advertising. In this context, it is essential to

understand the distinction between the two commonly used terms-media and media

vehicle. Newspapers form a media. Under this media there are so many media vehicles.

The times of India, is a media vehicle, The Hindu is another media vehicle within the

Newspaper media. Thus, there are certain major media, and within each major media,

there are several medial vehicles.

Therefore, advertisers need to make following decisions :

i) Which type(s) of media will be used-Newspaper, television, radio, or magazine?

ii) Which category of the selected medium will be used? If internet is the selected

medium, then which category to select-portals or individual websites.

iii) Which specific media vehicles will be used? If the selected medium is

Newspaper, then which news paper – The Times of India or The Indian Express.

Furthermore, the selection of media gets influenced by the following factors :

(a) Objectives of the ad.(b) Audience coverage.(c) Requirements of the message.(d) Time and location of the buying decision.(e) Media cost.

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The Media Selection Process involves five steps : deciding on reach,

frequency and impact; choosing among major media types, selecting specific media

vehicles; deciding on media timing, and deciding on geographical media allocation.

Step-I – Deciding on Reach, Frequency and Impact :

Media selection is nothing but the finding

the cost-effective media to deliver the desired number

and type of exposures to the target audience.

Suppose an advertiser is trying to obtain a specified

advertising objective and response from the target

audience – for example, a target level of product trial.

The rate of product trial will depend on level of brand

awareness. Assume that the rate of product trial increases at a diminishing rate with the

level of audience awareness.

The Diagram shows the relationship between product trail and awareness. If

the advertizes seeks a trial rate of T*, he needs to have a brand awareness at level A*.

How many exposures, or E* will help achieve this level of awareness, is now the key

problem which is resolved by an understanding of the three important terms and the

inter-relationship among them. These are :

1. Reach(R) : It is the number of times within a specific time frame, an average person or household is exposed to the message.

2. Frequency(F) : It is the number of times within a specific time frame, an average person or household is exposed to the message.

3. Impact (I) : This is the qualitative value of an exposure through a given medium. For example, more modern and elegant looking women’s dress advertisement in Famine will have a higher impact then in woman’s Era.

Step-II Choosing among Major Media Types :

The Media planner has to know the capacity of the major media types to deliver

reach, frequency, and impact. Media planners make their choice among media

categories by considering the following variables :

i) Target-Audience media habitates. ii) Product characteristics.iii) Message characteristics. Iv) Cost of media type.

The media types which are ;available to choose from are Newspapers,

Television, Radio, direct mail, Magazines, Outdoor Media, Yellow pages, Newsletters, and

Internet. etc.

Step-III : Selecting specific Media Vehicles :

Title

Trail

T*

0 A* Awareness

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The media planner must search for the most cost-effective vehicles within each

chosen media type. In making choices, the planner has to rely on measurement services

that provide estimates of audience size, composition, and media cost.

Step-IV : Deciding on Media Timing :

This is nothing but the macro-scheduling and micro-=scheduling problems. The

macro-scheduling problem involves scheduling the advertising in relation to seasons an

the business cycle. The micro-scheduling problem calls for allocating advertising

expenditures within a short-period to obtain maximum impact.

The timing pattern should consider following three factors :

1. Buyer turnover : It is the rate at which new buyers enter the market. The higher this rate, the more continuous the advertising should be

2. Purchase Frequency : It is the number of times during the period that the average buyer buys the product. The higher the purchase frequency, the more continuous the advertising should be.

3. Forgetting Rate : It is the rate at which the buyer forgets the brand. The higher the rate of forgetting, the more continuous the advertising should be.

Step-V – Deciding on Geographical Allocation

A company has to decide how to allocate its advertising budget over space as

well as over time. The company makes “national buys” when it places ads on national TV

networks or in nationally circulated magazines. The company makes “Spot buys” when it

buys TV time in just a few markets or in regional editions of magazines.

……………………

SALES PROMOTION

Sales promotion includes those sales activities that supplement both

personal selling and advertising an co-ordinate them and help to make them effective,

such as displays shows and expositions, demonstrations and other non-recurrent selling

efforts not in the ordinary routine.

OBJECTIVES OF SALES PROMOTION

Sales promotion measures are used to introduce new products in the market

through educating people; to attract new customers; to increase sales; to create goodwill

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among the present as well as prospective customers; and to create good public image of

the product and the firm.

There are three broad objectives of sales promotion.

i) Stimulating business uses or household demand for a product.

ii) Improving the marketing performance of middlemen and sales people.

iii) Supplementing advertising and facilitating personal selling.

R E T A I L I N GRetailing includes all the activities involved in selling goods or services

directly to final consumers for personal, non-business use. A retailer or retail store is any

business enterprise whose sales volume comes primarily from retailing.

Any organization selling to final Consumers – whether it is a manufacturer,

wholesaler, or retailer is doing retailing. It does not matter how the goods or services are

sold or where they are sold.

Types of RetailersGenerally retailers are classified into four categories :

A) Retailing based on ownership.B) Retailing based on the extent of product lines handled.C) Retailing based on the services vs. goods retail strategy mix.D) Non-store based retailing.

A) Ownership :

Retailing based on ownership primarily includes independent retailers,

where a retailer owns only a single retail unit. In India, we have lakhs of retailers owning

single retail units. Individual retail units can be set up with minimum licensing

requirements. However, the market share of individual retailers is significantly low

compared to other forms of retail ownership.

Another form of retailing based on ownership is chain retailership. These

retailers own several retail outlets. Purchasing decisions and activities are carried out

centrally for these various outlets. Food World and Pantaloons are examples of chain

retailers. Franchising is another form of retailing based on ownership.

In leased department, another form of retailing based on ownership, a

retailer takes a portion of a major store or outlet on lease or rent and is responsible for

decorating his section of the store. In return for the leased or rented space, the retailer

pays an amount equal to a percentage of his sales to the store owner. Big Bazaar, a

major retailer in India, leases out space to other retailers. At its Hyderabad outlet, it has

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leased out space to Big Shoppy, another small retailer who deals in electrical and

electronic appliances. Similarly, for other categories of products, it leases out space to

other retailers.

Other types of ownership-based retailers are vertical marketing units and

consumer cooperatives. A vertical marketing unit comprises all the levels of

independently owned business along a channel of distribution. In vertical marketing unit,

all the three functions of business – manufacturing, wholesaling, and retailing – may be

owned by a single person, and comprise a fully integrated system. When the three

functions are owned by two persons, it comprises a partially integrated system, and

when owned by three different individuals, they are called independent systems.

Consumer cooperatives are retail outlets that are owned and operated by a group of

consumers. The representatives of these consumers look after the day to day operations

of the retail outlet. In India, Anand Milk Producers’ Union Limited (AMUL) and Delhi-

based Mother Dairy are examples of successful milk cooperatives. Mumbai-based Anand

Bazaar, which has outlets in several other cities of India, is another example of a

consumer cooperative.

B) The Extent of Product Lines Handled :

Based on the extent of product lines handled, retailers can be called as

general merchandise retailers. This category of retailing includes specialty stores,

departmental stores, discount stores, supermarkets, and hypermarkets. Some times,

there can be an overlap in these categories. For example, a retailer can be classified as a

supermarket as well as a discount store. Hence, these categories are not mutually

exclusive.

(a) Specialty Stores :- Specialty stores offer a wide selection of specially chosen goods

pertaining to a single product line. Thus these stores provide a narrow product

line but a wide assortment of choice within this product line. These stores

normally target selective and small segments of the market for sales. The stores

are manned by personnel who are knowledgeable about the product Line. An

example of specialty stores in India are the Health & Glow stores that have been up

in recent times by the Goenka Group and offer solutions for better health in the

form of Ayurvedic products.

(b) Department Stores :- Department stores are the general merchandise retailers

with considerably large retail space with separate sections allocated for toiletries,

food stuff, body care products and; also on. Thus they offer a wide selection of

products to consumers. Generally the quality of goods sold in department stores

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ranges from average to very good quality. Westside, Pantaloons, Shoppers’ Stop

and Lifestyle are example of department stores in India. They have branches in the

major cities.

(c) Discount Stores :- Discount stores are similar to the department stores, except that

these stores offer products at less than the retail price. The purpose of doing so is

to obtain profits on large volume sales. Discount stores are normally targeted at

middle and lower-middle class customers, who are price conscious. Big Bazaar and

Giant Hypermarket are examples of discount stores.

(d) Supermarkets :- Supermarkets are retail outlets that are based on the concept of

self-service. The customers can pick up products on their own from a wide variety

of brands displayed on the shelves. Food World and Trinetra are examples of

supermarkets in India.

(e) Hypermarkets :- Hypermarkets are a recent phenomenon in India. These are very

large supermarkets with the shop floor area ranging between two lakhs to three

lakh square feet. These stores also offer a wide variety of products ranging from

needles to household equipment. Giant Hypermarket set up by the RPG Group in

Hyderabad was the first of its kind in India with two more to come up in Mumbai

and Kolkata in the

(C) Retailing based on the Service vs. Goods Retail Strategy Mix :

Retailing business can also be classified into goods and services. In goods

retailing physical products are sold such as groceries. In services retailing, the consumer

does not get ownership of a product. However he has access to a service such as travel

agents. There are other retailers who offer a combination of both goods and services.

For example, a video parlor rents video CDs as well as sells them. Strategies for services

retailing differ from those for retailing of goods. The service sector is growing faster than

the goods and manufacturing sector globally. Most economies including India are

dependent on the service sector for their growth. Service retailing can again be

subdivided into rented goods services, owned goods services and non-goods services.

Hertz car rental is an example of rented goods services. In this case, the consumer pays a

fee for the time he uses the car but does not own it.

In owned goods service retailing, the service provider does not own the

goods he services. Annual maintenance contracts for PCs and printers are examples of

this category. A company or an individual who provides maintenance services does not

own the equipment (PCs and printers).

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In non-goods service retailing, personal services are provided. No physical

goods are involved; only the time and expertise of the person who is going to provide the

service is bought for a fee. Stockbrokers, tutors, personal trainers, real-estate brokers,

etc. are examples of this category.

In services retailing the following factors have to be taken into

consideration. The buyers are called clients not customers; services are perishable and

therefore, cannot be stocked; mass-production of services is not possible; and the

experience of each service client is different from that of the other.

D) Non-Store based Retailing

Non-store retailing involves selling products in ways other than via

conventional retail stores. Non-store retailing can be in the form of direct selling, direct

marketing, and automatic vending.

(a) Direct Selling is a process of selling the products directly to the customers by meeting

them personally in their homes, offices or other non-store locations. Products sold

using this method include vacuum cleaners, water purifiers, milk, newspapers and

magazines etc. Eureka Forbes Amway, Medicare and Tupperware are well known

companies involved in the direct selling.

(b) Direct marketing is a process of exposing the consumer to the product or service,

through mailers, telephone, calls, cable, satellite television, or radio and

subsequently soliciting a response from the consumer by asking him/her to contact

the company through telephone, email, or post. For example the United Tele

Shopping & Marketing Company, popularly known as the Tele Shopping. Network

(TSN) promoted new products to customers by exhibiting them on television

channels and invited direct response from the customers.

SUPPLY CHAIN MANAGEMENT (SCM)

SCM is larger in scope than both physical distribution and marketing

logistics. It encompasses materials management task as well. Supply chain actually

refers to the whole business chain, encompassing procurement of inputs, in-bound

logistics, conversion of inputs into products, physical distribution / marketing logistics

and channel functions, which finally take the end product to the ultimate consumers.

Essentially, SCM can be viewed as the combination of materials management and end

product distribution, which constitute the two vital components of the business process

and form the key tasks at the front and back ends of the process, respectively.

Merits of Supply Chain Management

1) It can improve on-time delivery by about 20%.2) Reduce necessary inventory levels by about 50%

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3) Boost the firm’s profit by an amount equal to 3% to 6% of sales.4) It facilitates the integrated handling of the functions of the business, especially the

procurement function and the logistics function at the front and back end of the business.

Demerits of Supply Chain Management

1) It gives prominence to materials management and treat the customers requirements of logistics as an appendix to the business cycle.

2) The requirement from the side of the customer or market get diluted on such an approach.

PERSONAL SELLINGPersonal Selling in an important method of selling. It is the process of

assisting an persuading a prospective buyer to buy a product in a face-to-face situation.

Thus, personal selling involves direct and personal contact between the seller or hi

representative with the respective buyer.

Definition : Personal Selling could be defined as face-to-face interaction with one or

more prospective buyers for the purpose of making sales.

Features of Personal Selling :

1) Personal selling involves pursuation of customers/buyers.

2) Personal selling involves winning buyer’s confidence.

3) Personal selling involves providing information about products availability, their broad features, uses and their utility to customers.

4) Personal selling involves mutual benefit to sellers and the buyers.

5) Personal selling is a way to the establishment of sound and casting relations between the salesman and his customers.

6) Personal selling is an ability to change human needs into human wants.

7) Personal selling is an activity of one human mind influencing another human mind.

Objectives of Personal Selling

1) To do the entire selling job.

2) To ‘service’ existing account, i.e. with present customers.

3) To search at and obtain new customers.

4) To secure and maintain customer’s cooperation in stocking and promoting the product line.

5) To keep customers informed on changes in the product line and other aspects of marketing strategy.

28

6) To assist customers in selling the product line.

7) To provide technical assistance and advice to customers.

8) To assist with or handle the training of middleman.

9) To provide advice and assistance to middlemen or various management problems.

10) To collect and report market information of interest and use to company management.

11) To obtain sales volume in ways that contribute to profit objectives, eg, by selling the proper mix of products.

12) To secure and retain a specified share of the market.

Importance of personal Selling

Personal selling is important for the sales and revenue growth of an

organization. It can be described as a handy took in the hands of markets for the

following reasons :

Personal Selling gives markets the freedom to make adjustments in the promotional message to satisfy the information needs of customers.

Unlike advertising, publicity and sales promotion, it allows the marketers to target their promotional message with utmost precision at the most promising leads.

It provides the marketer with more information about customer preferences and also serves as a means of obtaining feedback about the company and its products.

Personal selling facilities a two way flow of information and improves interaction between the customer and the company.

The interaction between sales persons and customers helps the company identify the strengths and weaknesses of their new products. It helps the company take necessary corrective action.

It is a powerful and effective took in convincing the customer about the product.

Through personal selling the time lag between introducing a product through the media and actually selling it is reduced.

Personal selling helps marketers obtain necessary feedback to improve their new product development and customize the product to suit the requirements of individual customers.

Effective sales force also helps a company build and improve relationship with customers.

Types of Personal Selling :

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In business situations, there are two types of personal selling, one is where

the customers come tote sales people. In the other kind of personal selling sales people

to the customers. The former is called inside selling and the latter is called outside

selling.

Inside selling primarily involves retail sales. In this group, we include the

sales people in stores and the sales people at catalog retailers, who take telephone

orders.

In outside selling, sales people contact customers by telephone or in

person. In this group we include :

1) Producers whose representatives sell directly to household consumers.

2) Representatives of retail organizations who go to consumer’s homes to demonstrate

a product, give advice, or provide an estimate etc.

PERSONAL SELLING PROCESS :

The objective of the personal selling process is to enhance customer

satisfaction and build a long-term relationship with the customer. The selling process

differs from one salesperson to another and also varies with the selling situation.

However, a typical selling process usually consists of (i) prospecting for and evaluating

the potential customer, ii) preparing before approaching the potential customer, iii)

approaching the prospect, (iv) making presentations to the prospect, v) handling the

objections raised by the prospect, vi) closing the sale and vii) following up after the sale.

This process is diagrammatically represented in Figure below. Some selling situations

warrant that the salesperson follows all the seven steps, whereas in some selling

situations, a few of these steps can be avoided. For example, a salesperson who sells the

same product to the same customer every time, be it an individual customer or a

corporate customer, can avoid the prospecting and pre-approach stages. In such cases,

the previous sales history provides the necessary data regarding the customer. Likewise,

a long-term relationship between a salesperson and a customer allows the former to skip

the prospecting and evaluating stages.

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Prospecting and Evaluation

Pre-approach Approach

Presentation

Handling Objectives

Follow up Closing

Personal Selling Process

Step-I : Prospecting and Evaluating :

Prospecting is the process of finding and evaluating potential customers.

For qualifying a person as a potential customer (prospect), the salesperson must identify

whether the customer (individual or organization) has an immediate or a distant need to

be satisfied. The salesperson must also identify if the potential customer has the

willingness, ability and authority. To buy the product. At this stage, the salesperson does

not generally come into contact with the customer. The amount of time and effort put in

by the salesperson in prospecting depends on the nature of the product and the

marketing goals of the company.

Prospecting involves – A) Generating sales leads, B) identifying prospects and C)

qualifying prospects.

Step-II – Pre-Approach

After having identified the hot leads, the salesperson plans and prepares for

making a sales call on them. The pre-approach stage of personal selling process involves

further sub-stages such as creation of the prospect’s profile, deciding on the approach,

establishing the objectives of the sales call, and preparing for the presentation.

Step-III – Approach

Approach is the stage in the personal selling process in which the

salesperson makes an initial contact with the potential customer and tries to find out his

needs. At this stage, creating a favourable impression on the buyer is more important to

the sales person than pushing the product. An effective salesperson will utilize the

approach stage to lay the foundation for a successful presentation later by attracting the

prospect’s attention, building a rapport with him and generating an interest in him for

the product.

Step-IV – Presentation

The sales presentation is the most important step in the sales process. The

aim of a sales presentation is to attract the prospect’s attention, stimulate his interest

and stir a desire for the product, so that he takes appropriate action. Sales presentations

are based on the AIDA (Attention, Interest, desire and Action) concept according to

which, marketers first attract the attention of the potential customer create interest and

stimulate a desire for the product or service, which directs the potential customer to take

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action to fulfill the desire. The salesperson can create interest about the product by

allowing the prospect to touch, hold and examine it, while he delivers the sales talk or

the presentation.

Sales persons can use a number of approaches like the canned sales

approach, formulated sales approach and need satisfaction approach to make the

presentation.

Step-V – Handling Objections

Sales persons need to clarify any doubts or objectives that the customer

may have. In fact, the conspicuous absence of objections can be an indication that the

customer is not interested in buying the product. An objection brings out the latent

concerns c prospective buyer and needs to be addressed. It should be viewed as a

reques further information regarding certain aspects of the sale or product. An efficient

sales person considers the objection as an opportunity to satisfy the customer attitude in

abstaining him from switching to a competitor. Therefore, the sales persons needs to

probe into the objection to understand the true nature of the problem and try to solve it.

Step-VI – Closing

The stage in which the salesperson asks the potential customer to make the

purchase is known as closing. In the closing stage too, customers may raise objections

due to various reasons. For example, the financial position of the customer may not be

good or the customer may not be mentally prepared to purchase the product. The

salesperson should refrain from duping the customer into buying the product, but should

try earnestly to clear the objections and then attempt to close the sale.

Salespersons can attempt to make a trial close at several points during the

presentation by enquiring about the financial terms and conditions suitable to the

customer, the preferred mode of delivery, etc. The response of the customer to such

questions will help the salesperson known how close the customer is to placing an order.

Step-VII – Follow upThe objective of every salesperson is to ensure repeat sales. This can be

achieved by enhancing customer satisfaction. The follow up stage is the last stage in the

personal selling process wherein the salesperson aims to develop a long-term

relationship with the customer. This stage plays an important role in showing that the

company and the salesperson are genuinely interested in nurturing a long-term

relationship with the customer, rather than just making a sale. Follow up after closing

the sale also helps reduce cognitive dissonance.

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GLOBAL MARKETING

Global marketing means using a standardized marketing strategy and

uniform marketing programmes of product development production, advertising and

distribution, etc, in worldwide markets to achieve marketing objectives. In global

marketing, the focus of the firm/company is the world as a market place thus diffusing

the difference between the domestic or foreign markets.

Objectives

The goal of global marketing is to maximise efficiency and returns on

investment in the world market and the strategy is dictated by local country market

conditions like customer preferences, laws and competition. Besides, there are certain

important objectives of global marketing. These are:

i) To sell out the domestic surplus.ii) To achieve sales and promotion stability.iii) To pay for imports.iv) To contribute to national goals.v) To achieve growth and development.vi) To lower the cost of business.vii) To reduce business risks.viii) To improve company mage.ix) To achieve technological improvement.

The process of designing and developing of marketing strategy for

international marketing is similar to that for domestic marketing and involves the

following steps :

1) Scanning and analyzing the global marketing environment, i.e. deciding whether

to go abroad.

2) Selecting the market(s), i.e deciding which market(s)to enter.

3) Formulating market strategies i.e. deciding how to enter.

4) Designing the marketing program, i.e. deciding on the marketing programme.

5) Deciding on the marketing organization.

SCANNING GLOBAL MARKETING ENVIRONMENT

While deciding whether to go abroad, it is very essential to examine and

analyse carefully, the unique features, marketing opportunities available therein, and

market attractiveness of targeted countries. The reason is that each country has its

unique characteristics which are reflected in its cultural, political, legal, economic and

social conditions and environments.

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* Factors drawing companies into the international arena :

(a) Global firms offering better products at lower prices can attack the company’s domestic market.

(b) The company discovers that some foreign markets present higher profit

opportunities than the domestic market.

(c) The company needs a larger customer base to achieve economies of scale.

(d) The company wants to reduce its dependence on any one market.

(e) The company’s customers are going abroad and need reserving.

MARKET SELECTION

Proper market section is an integral part of the strategies for international

business, i.e., global marketing. The opportunities available in various overseas markets

must be carefully observed and evaluated keeping in view the resources, distinctive

capabilities and constraints of the firm or company. Then the company/firm should

decide whether to market in few countries or many countries or only in a country.

According to Agal and Zif, a firm should enter fewer countries for marketing:

i) When market entry and market control cost are high.

ii) When [product and communication adaptation costs are high.

iii) When population and income size and growth are high in the initial countries

choosen.

iv) When dominant foreign firms can establish high barriers to entry.

In general, while selecting a market or markers to enter foreign countries the

market screening criteria followed may be : market potential, market attractiveness,

expected profits, expected return on investment, competitive advantage, political

stability, trade restrictions, available infrastructure, transportation costs, psychic

proximity and geographic proximity. It is essential that the risks involved in each market

should be assessed and evaluated.

ENTRY STRATEGIES

After deciding the market(s) to enter, it is important to formulate entry strategies

to make the entry successful and profitable. This is all about mode of entry. There are

five basic routes to enter foreign market. These are :

A) Indirect and Direct export

- Occasional exporting- Active exporting - Indirect exporting

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- Domestic-based export merchants- Domestic-based export agents- Cooperative organizations- Export-management companies

Companies can carry on direct exporting in several ways Domestic-based export department or division. Overseas sales branch or subsidiary Travelling export sales representatives Foreign based distributors or agents.

B) Licensing

The Licensor licenses a foreign company to use a manufacturing process,

trademark, patent, trade secret, or item of value for a fee or royalty.

C) Joint Ventures

Foreign investor may join with local investor to create a join venture company in

which they share ownership & control.

D) Direct Investment

Here the scope of direct ownership of foreign based assembly or manufacturing

facilities. The foreign company can buy part or full invest in a local company or

build its own facilities.

E) The Internationalization Process

Most country forces or inhabits their companies participate in foreign trade. This

keeps the country from earning foreign exchange to pay for needed imports.

These countries try to encourage their domestic companies to grow domestically

and grow globally. Many countries sponsor aggressive export promotion

programs to get their companies export. And all the process in known as

internalization process.

DESIGNING THE GLOBAL MARKETING PROGRAMME

The more acceptable strategy is localized marketing mix. This involves

decentralizing decision making at the local market level in foreign countries. Here a

company must decide how much to adapt its marketing mix (product, promotion, price,

and place) to local conditions.

(A) Product: At the product level the firm may pursue a strategy of straight extension,

product invention. The first strategy involves introducing the product which is

available in the domestic market, in its original form without making any change in it.

The second strategy, i.e. product adaptation, requires making changes in the

product so as to meet the needs and wants to customers in the foreign market. The

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third strategy, i.e. product invention, requires the company invent a brand new

product specifically for the new market in the foreign country according to the target

market requirements.

(B) Promotion :- At the promotion level, the firm may choose communication adaptation

or dual adaptation strategy. In the former strategy, the firm can run the same

advertising and promotion campaigns used in the domestic market or change them

for each local markets. But if it adapts both the product and the communication, the

company engages in dual adaptation.

(C) Price :- At the price level the firm may encounter problems like price escalation and

gray markets. Besides, it may be required to deal with transfer prices, and dumping.

Price escalation takes place due to various factors like transportation,

communication cost, currency fluctuation, tariff etc., which differ from country to

country. Gray market problem arises when the same product sells at different prices

geographically. The problem of transfer price rise when a company changes a price

to another unit of company located in another country. Last, dumping occurs when

a company either charges less than its cost or less than it charges in its home market

to win a market.

(D) Place (Distribution) :- At the place (distribution channels) level, the firm needs to

take a whole channel view of the challenge of distribution products to the final users.

The typical distribution arrangement for global marketing is shown below.

GLOBAL MARKETING ORGANIZATION

Based on the level of involvement in the international area the firm has to

manage its global marketing activities in three broad always – (a) by creating export

department (b) by creating international division, and (c) by creating a global

organization. The organizations operating in these regard in India and outside are :

In India

- India trade promotion organization (ITPO)

- State trading Organisation (STC)

- Confederation of India Industry CII)

- Federation of Indian Export & Import Organisation (FIEO)

- Commodity Boards (CB)

- Export Development Authorities (EDA)

- Indian Institution of Packaging (IIP)

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ProducerExporter or Importer

Channel between

nations

Channel within foreign country

Final customers or Users

Wholeselleror

Retailer

Outside India :

- International Trade centre (genera)

- Offices of Indian Embassies.

- Concerned Departments

- Organiation of foreign Govt.

- World trade Organiation (TWO)

SERVICE MARKETING

Service Marketing is the marketing of any activity or benefit that is essentially

intangible and does not lead to the ownership of anything.

Characteristics of Services

1. Service as a performance :- The products are produced, but the services are

performed.

2. Intangible :- The services can’t be seen, touched or smelt. Also the consumer

can’t sample the services in advance. Accordingly, it is difficult for the consumer to

judge the service before the purchasing. That’s why it creates the feeling of

uncertainty about the outcome of a service. The process of a company making a

service tangible should include location and physical setting. The location at

which the service outlets are established should be accessible to the target

consumers.

3. Inseparability :- Services can’t be separated from its provider. In fact, the

production, delivery and consumption of a service takes place simultaneously in

the buyer – seller interactions. This characteristic of a service creates a problem

to the marketer, particularly in the case of market expansion. Whenever the

service provider intends to offer services, he should have a service production unit

that offers the same service quality standards. However, some organizations can

introduce new technologies to decrease the direct interactions.

4. Variability / Heterogeneity :- Services are highly variable. It is always not

possible to have the same service from the same seller for the second time. Again

no two customers can have exactly similar service even though they experience it

simultaneously. The services are always variable, because :

(a) The inseparability of the service from the provider.(b) The services are highly people intensive.(c) The effect varies depends on when and where the service is provided.

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5. Perishability :- Services can’t be stored for a longer time. It is perishable as well.

As it is produced and consumed simultaneously. When the demand is stable,

perishability can’t be a problem to the service organization. But service

organizations face many problems when demand fluctuates.

6. No ownership :- Since the services are perishable and intangible, there is no

question of ownership. Service consumers only have experiences not the

ownerships.

7. Customer Participations :- The production quality of the service greatly depends

upon the ability and performance of the customers. As the role of the customers

can’t be overemphasized.

Factors Distinguishing Services from Products :

1. Services are intangible but products are tangible.

2. Services are perishable, but products are not so perishable like services.

3. Precise standardization of services is often not possible.

4. Production and consumption of services are often inseparable.

5. There is no ownership transfer of services.

6. There are no inventories of the services.

7. The quality of services is highly variable.

8. Middlemen role are different.

9. Customer is often involved in the distribution system of services.

10. Services are inseparable from the provider of services.

11. Services are little bit difficult to be patented.

12. Services are highly people intensive.

The Services Marketing Mix

Unlike the marketing mix for the marketing of any products, the services

market mix does not involve the conventional four P’s only; rather it involves three

additional P’s Thus, the seven P’s of services marketing mix are : Product, Price,

Promotion, Physical evidence, People, and Process.

A) Product Decision

Product is one of the key element of marketing mix service is an intangible

product. It consists of a bundle of features and benefits that have relevance to a

specific target market. As such, there is a high level of flexibility and opportunity to be

innovative in designing a product.

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The marketing of services can be a success only if there is a match between

the service product from the customer’s view point and the supplier’s view point. To

find this match, as a marketer one would have to analyse at the following levels.

Level-1 : Consumer Benefit concept which is concerned with what benefits do customers seek.

Level-2 :- Service concept which is concerned with what general benefits with the service offer.

Level-3 :- Service offer which is concerned a with greater detailed shopping of the service concept decision on service elements, service forms and service levels.

Level-4 :- Service Delivery system which is a creation and delivery of service using guidelines built into the service offer and is concerned with facilities, etc.

B) Physical Evidence :

It is the ambience, mood or physical presentation of the environment. All

physical tangible and controllable aspects of a service organization constitute the

physical evidence of the service.

Most services can’t be offered without the support of tangibles. Though

customers can’t see the service, they can definitely see the tangibles associated,

examine them and try to form an opinion on the service provider.

Thus, a passenger transport organisation’s promise of a safe, comfortable

and timely journey from one place to another will be examined by the transport

vehicle’s condition seating facilities and other physical facilities.

C) Pricing Decision

The pricing decision is a critical in services too, as this component of the

marketing mix alone determines the revenue of the firm. Consumer sensitivity to

price would be higher in services than in goods. Though the basic methods of pricing

are the same as in goods, the pricing strategies for services basically depends upon

value perceptions of various groups of people that are targeted by the organization.

The two methods which a service organization/firm/industry/company may

use to determine prices are cost-based pricing and market-oriented pricing.

(D) Promotion Decision

Consumers are the service business. The quality of service don’t depend

only upon the service provider but also on the performance of the service consumer.

It is the responsibility of the providers to make the consumers educate and if

necessary train them to make them prepared to use the services available. A well

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designed promotional programme is of immence help to organization to inform,

persuade and remind customers to better their experiences.

The four methods used for promoting services are advertising, personal

selling, publicity and sales promotion. These methods are used in the same way as in

the promotion of products.

(E) Place Distribution Decision

Services are intangible as well as inseparable. The two characteristics do not

allow a service firm to follow the same channel options available for goods marketing.

However services have an advantage to use direct selling approach, through which the

services can be offered to the customers at a lowest cost. This doesn’t mean that the

direct selling is the only method for services. There are other channel members such

as agents, brokers, franchises and electronic channel that are used for the distribution

of services.

F) People

People constitute an important dimension in the management of services in

their role both as performers of services and as customers. Service organizations are

people oriented and people based organizations. Employees of a service organization

constitute the major competency in undertaking business operations. Every

employee of the service organization is a marketing person, who undertakes full-time

or part time marketing activity. Service employees are to be better trained and

equipped so that they can better serve the customers. Also the customers who are

the opinion leaders can be trained accordingly to capture the other market fruitfully.

G) Process :

The process is the functional activity that ensures the service availability and

quality. The way the physical setting are designed technically and how the functions

are scheduled and routed provide promised services to the customers speaks the

efficiency of the services.

Therefore, it is cleared that for marketing of services, the seven P’s of

marketing mix should be used in a specific combination to arrive at the appropriate

and suitable marketing strategy.

CUSTOMER RELATIONSHIP MANAGEMENT

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Companies have realised that the competitive strength of their business is

very much dependent on their relationship with their target audiences i.e., target

customers. This necessitates for customer relationship management, which is a process

of enhancing customers loyalty. This is helpful for long term growth of the firm.

Customer loyalty is nothing but the strong interdependence between the customer and

the company. Loyalty is an outcome of the customer’s trust in the company’s offer. The

customer believes and continues to buy the product of a company for the reason that he

sees it reflecting his values. Loyal customers ensure growth and continued profits, which

is turn attract high performing employees and promote investor confidence. Thus,

customer loyalty is a good business objectives to pursue.

CUSTOMER LOYALTY DEVELOPMENT

The strategies for developing customer loyalty are : customer acquisition,

customer retention, and strategic customer care. In other words, in the process of

customer loyalty development, there are three stages, viz. customer retention and

strategic customer care.

In the acquisition stage, the focus of the company is generally on

transactions and the product-mix sold to each customer. The primary importance is on

the measurement of the total number of customer acquisition over a period of time.

In the customer retention stage, the focus is on the measurement of the

total number of customers continuing as the user of the product mix sold to them by the

company. This is nothing but loyalty which is assessed through measurement tools like

customer satisfaction surveys and the development of satisfaction index.

In the third phase, the effort is made to build strong interdependence

between the company and retained customers. Thus, attention is given to customer

needs, aspirations and expectations by adopting customer care strategies like new

product development product up gradation or modification and changes in distributions.

CUSTOMER RELATIONSHIP MANAGEMENT PROCESS

These days customer relationship management has been accorded with a

significant role in creating strong customer bondage. Customer relationship management

is a process the objective of which is to enhance customer loyalty. This process has four

stages. These are :

1) Creation and management of data mines and data warehouses.

2) Development of appropriate organizational structures.

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3) Investment in technology for data mining and also for responding to the customer in real time.

4) Development of a group of personnel who have the necessary perspective and understanding of their function, products, organization and a desire to be customer responsive.

Thus, customers relationship management is an organizational process which

includes people infrastructure, performance measure and controls, organizational

alignment to the environment and the raw strategic patterns

CUSTOMER SERVICES :

In marketing management delivering quality service to the customer is an

important strategy, getting popularity in these days to differentiate a company’s offer

from that of the competitors’. Thus, a company’s profits and long-term growth depends

on the strategy of providing competitive excellent service to the customer. IN other

words, customer service and delivering quality service have become the major issue in

determining the competitive edges of companies/firms. It is, therefore, essential to

understand the role and significance of customer service in corporate strategy.

QUALITY OF SERVICE :

In defining quality of service, we have to begin with the customer

satisfaction, the ultimate goal of marketing. Customer satisfaction is assumed to be a

function of customer expectation from the firm and the actual performance by the

firm/company. If the performance of the product and the concerning firm lie up to

customer’s expectations, customer will be satisfied. Expectations also shape a

customer’s perception of the product/firm’s performance. Customer perceptions of the

firm and its product are shaped by the word of mouth publicity like recommendations

from friends, relatives and neighbours, etc. in other words, quality service is judged if a

customer recommends the product of a firm/company to his friends and peers for ours,

being himself satisfied.

Service quality can be accessed by customers on five dimensions viz.

Tangibles, reliability, responsiveness, assurance and empathy. By tangibles we mean the

appearance of physical facilities, equipment, personnel and communication material,

reliability is the ability to perform the desired service dependably and accurately.

Responsiveness refers to the willingness to help customers and provide prompt service.

Assurance is measured by the competence of the firm in delivering the promised service,

courtesy extended to customer, the firm’s credibility and the extent to which the

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customer feels secure. Lastly, empathy is the carrying and individualized attention that

the firm provides to its customers.

The quality of service is nothing but the transformed form of customer

satisfaction. Thus, service quality is the difference between the quality of service

delivered by a company and quality of service expected by the customer. Any positive

difference is definitely a quality service. And a negative difference is the indicator of poor

quality of service and thus, needs improvement. But delivering quality service is not

cheap and easy. In order to deliver quality customers service, firms need to invest

resources in upgrading technology, service delivery systems, human resources and

“genuine” marketing, rather than sales and promotion alone.

MANAGING SERVICE QUALITY

Parasuram, Jeithmalini and Berry formulated, a service quality model that

highlights the main requirements for delivering high service quality.

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Word of Mouth Communication

Past Experience Personal Needs

EXPECTED SERVICE

SERVICE DELIVERY(INCLUDING PRE AND POST

CONTACTS)

PERCEIVED SERVICE

GAP-5

EXTERNALCOMMUNICATION

TO THE CONSUMERS

TRANSLATION OF PERCEPTIONS INTOSERVICE QUALITYSPECIFICATIONS

MANAGEMENTPERCEPTIONS OF

CONSUMEREXPECTATIONS

GAP-3

GAP-1

GAP-2

GAP-4

GAP-1 : GAP BETWEEN THE CUSTOMERS EXPECTATION AND MANAGEMENT PERCEPTION :

Management doesn’t always correctly perceive what customers want. Hotel

Management may think that customers are mostly interested for room services,

but customers may be more concerned with the surrendering and environments.

GAP-2 : GAP BETWEEN THE MANAGEMENT PERCEPTION AND SERVICE QUALITY SPECIFICATIONS :

Management might correctly perceive customers’ want but not set a

performance standard. Hotel Management may notice the sweepers to make

clean the Hotel premises without specifying how many times it should be per day.

GAP-3 : GAP BETWEEN THE SERVICE QUALITY SPECIFICATIONS AND THE SERVICE DELIVERY :

The personnel for cleaning may be poorly trained for incapable of or

unwilling to meet the standard or they may be held to conflicting standards, such

as taking time to listen to customers and servicing them fast.

GAP-4 : GAP BETWEEN THE SERVICE DELIVERY AND EXTERNAL COMMUNICATION :

Consumer expectations are affected by statements given by company

representatives or by advertisements. If the hotel information given prior to the

customers visiting are not found by them after reaching then the customers’

expectations are distorted.

GAP-5 : GAP BETWEEN THE PERCEIVED SERVICE DELIVERY AND EXPECTED SERVICE :

This gap occurs when the consumer misperceives the service quality. When

the room service boy visits the room more than the usual times as instructed by

the management for better customer care, the customer may perceive it wrongly.

And basing upon the service model, the above researchers have made

following five important determinants of service quality, such as :

Reliability : The ability to perform the promised service dependably and accurately.

Responsiveness : The willingness to help customers and provide prompt services.

Assurance : The knowledge and assurance of employees and their ability to convey trust and confidence.

Empathy : The provision of caring, individualized attention to customers.

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IMPORTANCE OF RURAL MARKETING

It is said that “the future lies with those companies who see the poor as their

customers”. Pradeep Kashyap rightly said that “to get rich, sell to the poor”. In recent

years, rural markets have acquired significance, as the overall growth of the economy has

resulted into substantial increase in the purchasing power of the rural masses. Another

reason may be green revolution. On account of green revolution, the rural masses are

consuming a large quantity of industrial and urban manufactured products. In this

context, a special marketing strategy has emerged call rural marketing.

It is very essential to distinguish between rural marketing and agricultural

marketing as these two terms often confuse the human mind. Agricultural marketing is

the marketing of produce of the rural areas to the urban consumers or industrial

consumers, whereas rural marketing involves delivering manufactured or processed

inputs or services to rural producers or consumers.

The important reasons for hopeful emerging of rural marketing are :

1. Urban markets are increasingly becoming competitive and in many products,

perhaps, even getting saturated. In this aspect, rural markets offer new

opportunities for marketing these products.

2. The significance of rural marketing has been increasing due to higher aspiration

levels and changing life styles in rural areas.

3. Infrastructural development and improvement in communication facilities have

been contributing in recent years to rural marketing.

4. The economic growth of rural sector is another reason for increasing trend of rural

marketing.

5. The lucrative size of the rural market offers an opportunity that all marketers now

want to grab. The most interesting fact is that the rural Indian market is growing at

an amazing rate of 25% per annum.

MARKETING MIX FOR RURAL MARKETS1. Product Decision

The unique consumption patterns, of the rural consumers should be analyzed

at the product planning stage so that they match the needs of the rural people. Products

for rural markets have to the simpler, easy to use, visually identifiable, affordable,

communicated in an interesting style and available at the customer’s doorsteps. Further,

the product should be dispensable in single units. For example a typical rural buyer buys

one unit of match box unlike an urban buyer who may buy a full pack of ten or twelve

match boxes.

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Product packaging should be done carefully looking into the fact that rural

consumer buys each time smaller units of the product. In this respect, sachet packaging is

the best alternative.

2. Pricing Decision

The rural consumers are very much price sensitive because of their lower

income levels. Thus, the product should be more affordable. The better strategy is to

offer a smaller unit size at a lower price. But so far as consumer durables are concerned,

the marketer should work through rural banks and offer consumer loans and hire-

purchase terms to the customers.

3. Promotion Decision

Firms must be very careful in choosing the vehicle to be used for

communication. Only 16% of the rural population has access to a vernacular newspaper.

So, the audio visuals must be planned to convey a right message to the rural folk. The

rich, traditional media forms like folk dances, puppet shows, etc. with which the rural

consumers are familiar and comfortable, can be used for high impact product campaigns.

4. Distribution (Place) Decision

The fourth ‘p’ of marketing mix is place decision or distribution is the key to

penetrating rural markets. It is here that the firm has to deploy a mobile distribution

strategy. One of the ways could be using company delivery vans which are serve two

purposes – it can take the products to the customers in every nook and corner of the

market and it also enables the firm to establish direct contact with them and thereby

facilitate sales promotion. However, only the bigwigs can adopt this channel. The

companies with relatively fewer resources can go in for syndicated distribution where a

tie-up between non-competitive marketers can be established to facilitate distribution.

Annual “melas” organized are quite popular and provide a very good platform for

distribution because people visit them to make several purchases.

DIRECT MARKETING

Direct Marketing attempts to acquire and retain customers by contacting

them without the use of an intermediary.

Meaning of Direct Marketing

Direct Marketing attempts to acquire and retain customers by contacting

them without the use of an intermediary. The objective is to achieve a direct response

which may take one of the following forms :

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A purchase over the telephone or by post. A request for a catalogue or sales literature An agreement to visit a location/event (e.g. an exhibition) Participation in some form of action (e.g. joining a political party) A request for a demonstration of a product. A request for a sales person’s visit.

Direct marketing, is, then, the distribution of products, information and

promotional benefits to target consumers through interactive communication in a way,

which allow response to be measured. It covers a wide array of methods, including the

following Direct mail, telemarketing) both inbound and outbound), Direct response

advertising (coupon response or ‘pone now’), Electronic media (internet, interactive

cable TV), Catalogue marketing, inserts (leaflets in magazines), Door-to-door leafleting,

Text messaging etc.

Importance of Direct Marketing :

Now various companies, rediff, Big Bazaar, HDFC Bank, are marketing their

goods and services available directly to customers. This approach in marketing is learned

as direct marketing. Companies traditionally relied on advertisements, sales promotion,

personal selling, etc. to reach customers. However, because of competitive pressures,

companies began to realize the need to compress or eliminate the intermediary

channels, reduce the costs in reaching customers, pass on the savings or benefits to their

customers, and maximize their reach. At the same time, they can also learn more about

their customers and their needs and wants. Therefore, more and more companies are

now adopting direct marketing to provide their products and services directly to

customers. According to Tim Searcy, Executive Director, American Teleservices

Association, Americans spent $654 billion in the year 2003 to purchase goods and

services over the telephone. This shows how big the market is for direct marketing an

the potential is even greater.

Difference between DM and Conventional Marketing

Conventional marketing is mass marketing. DM is demassified marketing; it deals

with customers one to one.

DM deals customers directly; conventional mass marketing deals them indirectly.

DM is interactive marketing, with two-way communication between the firm and

every one of the customers. Conventional marketing is a one-way activity.

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DM does not involve marketing channels/stores. Conventional marketing relies

heaving on it.

1. Catalogue Marketing :

Catalogue marketing is the process in which companies send their catalogs

containing details of products and services to customers and expect them to respond by

placing orders by telephone or by mail. Catalogue marketing is a convenient way for

customers to purchase products. Retailers too have an advantage in catalog marketing

as they can operate from remote locations with minimum store operating expenses and

need not spend heavy amounts on store decor. However catalogue marketing is suitable

only for a limited range of products. Otto Burlington in India sells its products exclusively

through catalogue marketing.

2. Direct Mail Marketing

Direct mail marketing is similar to the catalogue marketing or mail order

marketing. Direct mail is material sent by post to a home or business address with the

purpose of promoting a product and/or maintaining an ongoing relationship. An

important factor in the effectiveness of a direct mail campaign is the quality of the

mailing list. List houses supply lists on a rental or purchase basis. Since lists become out

of date quickly it is usually preferable to rent.

3. Telemarketing

Telemarketing is the process of communicating with customers through the

telephone, to promote products or services. Telemarketing needs highly trained

marketing staff who is given specific objectives. Telemarketing is usually aimed at people

who are prospective customers and require the services offered by a marketer. Unlike

telesales, telemarketing is a concentrated effort aimed at developing a long-term

relationship with customers rather than making immediate sales Telemarketing saves

customer time. A telemarketing executive can contact customers at a time that is

convenient to them. Most companies give their toll-free numbers for customers to

respond. This is beneficial for both parties, as it paves the way for increased response

from customers, while the customer has access to the firm at a time of his/her

convenience.

There are several organizations that offer telemarketing services for their

clients. For example, Sixth Element systems, a Hyderabad-based company, offer

telemarketing services, and additionally offers its clients information on sales leads and

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sales opportunities. It also identifies prospective customers for its clients and fixes up

appointments with them.

4. Teleshopping / Home Shopping :

Home shopping or television home shopping is generally done through

television Programs in which various products are displayed and their uses are

demonstrated to viewers. An attempt is made to persuade the viewers to lace orders for

these products on the phone or by writing to the company. Once the orders are placed,

these products arte delivered to the customers within two to three weeks, normally with

a payment-on-delivery option. Almost every day, Indian consumers are exposed to these

kinds of programs on television through the Telebrands programs, which usually present

fitness and health-related products. The length of these programs varies between ten

minutes to half-an-hour depending upon the extent of demonstration required for the

products.

Benefits of Teleshopping

a) Benefits to consumers :- 1) Less time is required for teleshopping. So middle class

consumer like it due to their busy schedule time, 2) Consumers can shop for these

products at their convenience from their homes.

b) Benefits to Manufacturers :- 1) Teleshopping promotes the manufacturer’s sales and

reduces their cost. 2) It proves them a direct link to the consumer. They also save

the margins, as they bypass the channels, 3) It reduces the necessity of more

advertisements cost to highlight the product.

5. Database Marketing :

Much direct marketing activity requires accurate information on customers

so that they can be targeted through direct mail or telemarketing campaigns. This

information is stored on a marketing database which comprises on electronic filing

cabinet containing a list of names, addresses and transactional behaviour. Information

such as type of purchase, frequency of purchase, purchase value and responsiveness to

promotional offers may be held in the database. This allows future campaigns to be

targeted at those people who are most likely to respond.

For example, a special offer on garden tools from a mail order company can

be targeted at those people who have purchased gardening products in the past.

Another example would be a car dealer, which by holding a database of customer names

and addresses and dates of car purchases could direct mail to promote service offers and

new model launches.

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6. Kiosk Marketing

Kiosk marketing involves the use of kiosks or electronic touch screens, which

provide information to customers regarding products and services of a company. The

use of kiosks is beneficial for customers because they can be set up at places convenient

for them, and enable them to obtain relevant information about the company without

visiting the company. They can be set up in even a very small area. On an average, each

kiosk requires around four square feet of space. These can be operated twenty-four

hours a day, seven days a week, without any supervision. There are certain kiosks that

can be used” for transactions like distributing tickets coupons, etc. Indian are Railways is

planning to install multi-lingual kiosks at railway stations” initially at major metropolitan

cities to distribute monthly seasoned tickets. These kiosks can be operated with a touch

screen and will provide comprehensive information about train and city related queries.

These kiosks are targeted at commuters who at present have to stand in long queues for

information and railway passes.

Kiosks are highly beneficial for retail outlets, especially groceries, banks

(ATM), etc. Once a customer fills in the details regarding the products he needs, they are

delivered to him either immediately (in an ATM) or at his address, where the payment

for the goods is made.

MANAGING THE SALES FORCE

Meaning :

The American Marketing Association has defined sales management as the

planning, direction, and control of the personal selling activities of a business unit,

including recruiting, selecting,. Training, equipping, assigning, rating, supervising, paying

and motivating as these tasks apply to the personal sales force.

Management of Sales Force

Management of personal selling requires planning implementation and

evaluation of sales force strategies. The first step in sales force management involves

setting the sales goals and planning the objectives of different sales activities of the sale

executives. Then, arises the need for designing the sales force to achieve the

predetermined goals. The final stage, the sales manager evaluates the performance of

the individual salespersons as well as the sales team as a whole.

Establishing Sales Objectives

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Similar to other promotional objectives, sales objectives are statements of

what the sales team expects to achieve in a specified period of time. Personal selling

objectives differ from one firm to another. They depend on the overall objectives of the

firm, the nature of its product, the channels of distribution, the target market and the

nature of competition in the market.

Objective

The most important objective of a sales person is a create an interest in the

customer, convince him about the product ad convert his interest into a sale by

persuading him. Sales objectives can be set either for the individual salesperson or for

the sales team as a whole They provide the direction and purpose for the functioning of

a sales team. They also act as a standard for evaluating the performance of the sales

persons and the sales team. Sales objectives for the entire sale team are usually stated in

terms of the sales volume, the market share and overall profit to the organization,

whereas sales objectives for an individual salesperson, also known as sales quotas, are

stated in terms of his unit sales volume, his average order size, the average number of

calls in the specified time and the ratio of orders generated in that time.

Fixing the Sales Quotas

After establishing the sales objectives, each salesperson is assigned a sales

quota on the basis of the number of potential customers in that territory. Sales quotas

are quantifiable objectives set for measuring and appraising the effectiveness of sales

personnel. Quotas are the targets that specify the desired performance required from

each salesperson or sales region to achieve the organizational sales target. When the

sales quotas are determined and communicated, they act as a motivational factor for the

sales personnel to achieve the desired goals.

Designing the Sales Force

Every company is different in terms of the product line, the nature of the

customer base and the type of sales personnel required. Thus, sales force is organized

differently in different companies. The most common bases for organizing sales

personnel are geographical territory, customers, product or a combination of these.

Determining the sales Force Size

After formulating the objectives and the structure of the sales force, a

manager needs to determine the number of people needed in each sales team. This is a

crucial decision because if the manager hires more people to cover the market

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adequately the costs would go up and consequently, the profit volume of the company

would come down. On the other hand, if less sales people are hired, the workload on

each salesperson would increase, making it difficult for them to meet the decline in sales

volumes. It is almost impossible for a sales manager to determine the exact number of

sales personnel he would require. Therefore an optimum number of sales people should

be hired to carry out the selling activities of the firm. The two common methods

employed by the sales manager to determine the size of the sales force are equalized

workload method and incremental productivity method.

Recruiting and Selecting Salespeople

The first step to develop an effective sales team is to recruit the right kind of

people. Recruitment is an ongoing process of selecting job applicants, whose profile

matches the company’s requirements. The HR department maintains a pool or database

of all the applicants to an organization, for their future requirements. Recruitment can

be either internal recruitment or external requirement. Internal recruits can be the

company’s own sales people (for higher job positions), employees from other

departments, etc. The company recruits from external sources through references from

its customers, suppliers,. Professional associates or through job fairs, advertisements,

placement consultancies, in-campus student recruitment, employee referrals, etc.

Selecting the sales team is a simple task, if the manager knows what qualities

he is looking for in a salesperson. Selection procedure can vary from a simple informal

interview to a structured process consisting of a written test and an interview, followed

by a physical examination. Written and oral tests evaluate the applicants’ abilities like

aptitude intelligence, language skills, problem solving skills etc. Personal interviews

evaluate the applicants’ desire to work their level of maturity, ability to work under

stress, etc.

Training Sales Personnel

Sales training aims as helping the sales personnel (both old and new) to

perform their job satisfactorily. It supplements experience, as sales personnel learn

varied skills over a period of time. Sales training improves the overall efficiency of the

salespersons. Even in the absence of training, it is possible for sales people to learn the

required skills. However, this comes from personal experiences and requires a longer

time. Therefore, sales persons who are trained reach higher levels of job performance

faster. Training also helps in bringing down the cost of recruitment, selection and the

rate of attrition. Xerox spends over $300 million a year on training its employees.

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Likewise Motorola, FedEx and Singapore Airlines spend a minimum of 3%, of their payroll

cost per annum, on training.

Compensation

Compensation is the reimbursement for the efforts put in by a salesperson.

Every organization has its own compensation plan. Compensation encourages the sales

personnel to put in the required efforts to meet the firm’s objectives.

CHANNELS OF DISTRIBUTION

The intermediaries are such as –

Merchants :– Wholesaler & Retailer who buy and resell the merchandise.

Agents :-- Brokers, Manufacturer’s representatives, sales agents, who search for

customers and may negotiate on behalf of the producers but don’t take the title of

the goods.

Facilitators :-- Transportation companies, independent warehouses, banks,

advertising agencies, who assist the distribution process but neither take title of the

goods nor negotiate purchases or sales.

Definition of Distribution Channel :-- “A channel is the pipeline/path/route through

which a product flows on its way to the consumer”.

Functions of Distribution Channel :--

i) Facilitate selling by being physically close to customer.

ii) Provide distributional efficiency by bridging the manufacturer with the user,

efficiently and economically.

iii) Assist in Sales Promotion.

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Producer

Middlemen

Users / Consumers

iv) Assist in introducing new products.

v) Assist in implementing the price mechanization.

vi) Assist in developing sales forecast.

vii) Gather information about potential and current customers, competitors and

forces of the environment.

viii) Maintain Records.

Objectives of Distribution Channel :--

i) To ensure availability of products at the point of scale.

ii) To build channel member’s loyalty.

iii) To stimulate channel members to put greater selling effort.

iv) To identify the level of the organization.

v) To have an efficient and effective distribution system, to make your products

and services available readily, regularly and in a fresh form.

Channel Flow :-- The Primary task of marketing channels is to move the goods from

the producer to the end user. In the process, the channel help close the gaps such as

those at time, space quantity and variety. IN order to close the gaps that arise

between producers and customers, those representing marketing flows perform a

No. of functions such as –

i) Possession :- The flows of goods physically from the producer to the final

consumer takes place with the help of intermediaries, like transporters. The

possession of goods thus, get transferred from the producers to the final

customer.

ii) Ownership : -- The flow of ownership or transfer of the title of the goods takes

place on physical receipt of the goods from one channel member to another.

iii) Financial Flow : -- The financial flow involves the payment process wherein the

customers pays for the goods on service they have received from the channel

members. Financial flow is usually in the opposite direction of the ownership

and physical flow of goods.

iv) Information flow : -- The flow of information from the channel to the customer

is essential in order to create awareness among them about the availability of

the products. It may also flow in the form of customer complaints from the

customers to producers.

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v) Risk Flow : -- Risk may flow from one channel member to another in the form of

product perishability, fluctuating demand patterns, price fluctuations, risks

generated by faulty products, and so on.

vi) Negotiation : -- It is the process of reaching an agreement on the price and

other conditions and other conditions for facilitating easier transfer of

ownership and possession of goods.

LEVELS OF CHANNELS OF DISTRIBUTION

The producer and the final customer are part of every channel. The various

intermediary levels to designate the length of a channel.

A Zero-Level Channel :- (Also called a direct marketing Channel) Consists of a manufacturer selling directly to the final customers.

A One-Level :- Channel contains one selling intermediary, such as a retailer. A Two-Level – Channel contains two selling intermediaries, such as wholesalers and

retailers. Similarly a Three Level—channel contains three intermediaries.

Steps involved in designing and channel System :-

i) Formulating the channel objectives.

ii) Identifying the functions to be performed by the channel.

iii) Analysing the product and linking the channel design to the product

characteristics.

iv) Evaluating the distribution environment, including legal aspects.

v) Evaluating competitor’s channel design.

vi) Evaluating company resources and matching the channel design to the resources.

vii) Generating alternative designs, evaluating them and selecting the one that suits

the firm best.

Distribution of Consumer Goods :

5 channels are widely used.

i) Producer ConsumerThis is the shortest and simplest distribution channel. The producer may sell from door to door or by mail.

ii) Producer Retailer consumer - Many large retailers buy directly from producers and sell to consumers.

iii) Producer Wholesaler Retailer Consumer - It is the traditional and regular channel for consumer goods.

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iv) Producer Agent Retailer Consumer – Instead of wholesaler, Agents are included in this channel.

v) Producer Agent Wholesaler Retailer Consumer

Distribution of services :-- 2 channels are basically used.i) Producer Consumerii) Producer Agent Consumer

Distribution of business goods :5 common channels for business goods.

i) Producer user.ii) Producer Industrial Distributor user.iii) Producer Industrial Distributor Reseller User.iv) Producer against user.v) Producer Agent Industrial Distributor user.

FACTORS AFFECTING CHANNEL SELECTION

The various factors that affect channel selection are –

A) Market consideration :

Nature of Market :- Whether consumer or Industrial Market.

Geographical consideration : - Whether to concentrate in one region by direct

marketing or go for the intermediaries / middleman.

The Number of potential customers : - A large potential market is likely to put

weight in favour of the use of intermediaries / middlemen.

Buying habits of the Customers : - When the buying habit of customers are

frequent and small, impulsive indirect channel is required. But when the

buying habits are deliberate direct channel is preferred.

Size of Order : - If the sales volume is large direct selling is convenient and

economical.

(B) Product Consideration

Unit sale value of the product. Bulk and weight of the product. Perishability of the product. Product line. Standard product.

(C) Company Consideration Whether small/large company. Financial resources/financial position. Reputation and goodwill of the company. Market control / share. Ability of Management.

(D) Middlemen Consideration Availability of desired middlemen. Financial ability. Attitude & Behaviour

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Sales potential Competition and legal constraints.

(E) Consumer Consideration

Number of customers. Location of potential customer. Frequency of purchase by the customers. Quantities purchase by the customers. Purchased.

WHOLESALING & PHYSICAL DISTRIBUTION

Wholesaling includes all the activities involved in selling goods or

services to those who buy for resale or business use. Wholesaler differ from retailers in

a number of ways. First, wholesaler pays less attention to promotion, atmosphere and

location because they are dealing with business customer rather than final consumers.

Second wholesale transactions are usually larger than retail transactions and

wholesalers usually cover a larger trade area than retailer.

TYPE OF WHOLESALING / CLASSIFICATION OF WHOLESALERS :

1. Merchant Wholesalers

These are the wholesalers who buy the products from other intermediaries,

or directly from the firm and resell them. They posses the title of the goods. More than

80% of the wholesalers and they account for almost 50% of the wholesales. The

merchant wholesaler are further divided into --

i) Full Service Merchant wholesaler

ii) Limited Service Merchant wholesaler

i) Full Service Merchant Wholesaler :

Carry stock, maintain a sales force, offer credit, make deliveries, and provide

management assistance. There are two types of full service wholesalers.

(1) Wholesaler merchants sell primarily to retailers and provide a full range of

services.

(2) Industrial distributors sell to manufacturers rather than to retailers and provide

several services – carrying stock, offering credit and providing delivery.

ii) Limited Service Merchant Wholesaler

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Offer fewer services to suppliers and customers. Cash and carry wholesalers

have a limited line of fast moving goods and sell to small retailers for cash. Tuck

wholesalers primarily sell and deliver a limited line of semi-perishable merchandise to

super markets, small grocery stores, restaurants and hotels. Drop Shippers operate in

bulk industries, such as coal and heavy equipment. Upon receiving an order, they select

a manufacturer, who ships the merchandise directly to the customer on the agreed

upon terms and time of delivery. The drop shipper assumes title and risk from the time

the order is accepted to its delivery to the customer.

2. Brokers & Agents

Do not take title of goods, and perform only a few functions. Main function

is to facilitate buying and selling, for which they earn a commission of 2 to 7 percent of

the selling price.

3. Manufacturer’s sales Branches & Offices

The manufacturer’s sales are the manufacturer-owned intermediaries,

similar to merchant wholesalers. They generate a significant percentage of wholesale

sale. The branches sell goods to the buyers and offer support to the manufacturer’s

sales people. The branches are situated at a different place from the production plant

of the manufacturers and do not carry any inventory.

WHOLESALER’S MARKETING DECISIONS

The different market decisions that are to be taken in the wholesaling

process pertain to the target market, price, promotion and place decisions.

A) Target MarketNow, a days wholesalers have stopped acting only as a distribution point.

Wholesalers have started identifying and targeting, the most profitable market

segments. Some wholesalers have changed their focus from traditional buyers to new

ones. Wholesalers have started directing their sales efforts towards emerging

institutional markets, including airlines, hotels, schools restaurants, hospitals and so on,

in addition to their existing market. The selection of type of products is based on the

demand for the products by the market. Wholesalers also analyze the cost involved in

entering new markets, when composed to satisfying the new requirements of existing

markets.

B) Price

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Though wholesalers do not have any control over the price of the products,

pricing is a major concern for them. They always want products to be priced I such a

way that they can earn adequate returns or profits and can sell their products in large

volumes. They fell that they should be involved in taking credit decisions such as

reviewing the credit policies, decreasing the credit periodic and so on.

C) Promotion Normally, for promotional activities, manufacturers assist wholesalers

through trade displays, dealer shows, advertisements, direct mails, catalogues, and so

on. Certain wholesalers prefer to design their own promotional activities rather than

depend on their manufactures. This type of strategy is followed by those wholesalers

who want to stand out in the market and prove to their customers that they are

different from the ordinary wholesalers.

(D) Place

Wholesalers distribute several types of products ranging from food, drugs,

tobacco, hardware, paper and paper products, industrial chemicals, building materials,

industrial tools, and so on. Due to the wide variety of products they provide,

wholesalers should make sure that they are easily accessible to their customers and

leverage location as a competitive advantage.

PHYSICAL DISTRIBUTION :

Physical Distribution involves planning implementing and controlling the

physical flows of materials and final goods from point of origin to the point of use to

meet customer requirements at a profit.

Importance of physical Distribution :

Ensures the physical flow of the product from the producer to the consumer. Without this flow marketing cannot take place.

Confers place and time utility on products.

Helps build clientele.

Where production location and marketers are distance, physical distribution becomes all the more crucial.

A promising area forcost reduction.

Objective of Physical Distribution

To minimize the total distribution cost through efficiency along with

providing predetermined level of customer service.

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To set objectives a firm has to do the following jobs –

1) Survey the target customers.

2) Determine the level of service required by them.

3) Decide whether price is the main factor or complete service is the main factor.

4) If it is level of service, which is much more important; the firm should then

provide the product with a minimum cost.

And to calculate the minimum cost in physical distribution, the components of it should

be considered with equal weightage, i.e. PDC = T = W =S

PDC = Physical Distribution Cost.

T = Total Transportation cost.

W = Total Warehouse cost.

S = Total cost of the Sales lost due to non-availability of the product at the

right time. S is an intangible factor, which is very important for the reduction of the cost

and also to satisfy the customer.

FUNCTION OF PHYSICAL DISTRIBUTIONS

Producers of physical products and services must decide on market logistics

– the best way to store and move their goods and services to market destinations.

The logistical task is to coordinate the activities of suppliers, purchasing

agents, manufacturers, marketers, channel members and customers. Major gains in

logistical efficiency have come from advances.

Although the cost of the market logistics can be high, a well planned market –

logistics programme can be potential tool in competitive marketing. The ultimate goal of

market logistics is to meet customers’ requirements in an efficient and profitable way.

Basically the three major functions of physical distributions are : (i) Transportation, ii)

Warehousing, iii) Inventory Management.

TRANSPORTATION MANAGEMENT

Transportation is the physical means whereby goods are transferred from

places of production to the places where they are to be consumed/used.

Transportation reduces the gap between the manufacturer and the customers.

The transportation can effect on –

1) Selling Price.2) Regional Specialization3) Consumption pattern.4) Price stabilization.5) National boundaries (become irrelevant)6) Land value (increase).

The economic functions of Transportation are –

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1) Widening the market.2) Increase the mobility of labour and capital.3) Specialization and division of labour.4) Time and place utility.5) Aid in stabilizing the price.6) Transportation of the economy.7) Scale of production.

WAREHOUSE MANAGEMENT

A warehouse is a place where surplus goods can be kept for future use. Modern

warehouses are equipped with latest equipments and facilities for the safety of goods

from theft, sun, moisture and rats, etc.

ROLE & IMPORTANCE OF WAREHOUSING

Like transportation, warehousing too vests the product with time utility and place utility.

In the case of some commodities, warehousing vets the products with ‘form utility’ as well.

It is common knowledge that a certain level of storage is inescapable in marketing of most products.

For products with high seasonality, storage is needed on a larger scale.

In some cases, sub-distribution realities necessitate extra storage.

Storage reduces the need for instant transportation, which is often difficult and costly.

Storage is also a competitive advantage, as with better storage, better servicing of the channel and consumer is possible.

Storage also helps in balancing demand and supply, and in stabilizing prices.

In the case of some products, storage by itself facts as a stimulant of demand.

FUNCTIONS OF MODERN WAREHOUSING

A warehousing performs the following functions :-

(a) Time utility :- It removes the hindrances of time. It is not necessary that the timings of production and consumption of goods coincide with each other. Goods that are not immediately required can be stored in the warehouses.

(b) No urgencies of Sales : - It safeguards the stocks of merchants and saves from the urgency of making sales for want of supply of stored goods.

(c) Smoother supply : - It facilitates smooth supply of goods in the market and removes violent fluctuation of supply.

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(d) Facilities further processing : - It provides the facilities of processing, packaging, blending etc. of the goods for the purpose of sale.

(e) Helps arranging Finance : - A bonded warehouse removes the urgency of paying the customs duty. An importer can postpone the payment of customs duty until the draws goods from the bonded warehouse.

(f) Delivery : - It delivers the goods according the instructions of the owners.

(g) Collateral Security : - It helps in financing the trade. Warehouse receipt can be used as collateral security to borrow from the financial institutions.

TYPES OF WAREHOUSE

There are 4 different types of warehouses, such as –

(a) Private :- Owned by the manufacturers (traders) to store the goods manufactured or brought by them until they resold out.

(b) Public :- are organized to provide storage facilities to the traders, manufacturers and agriculturists in return for a storage charge.

c) Anybody can keep his goods in the public warehouses by paying the necessary charges. The owner of the public warehouse stands as an agent of the owner of the goods. He is required to take as much as care of goods. Public warehouses are licensed by the Government and are subjects to Govt. regulations in respects of method of operation. The Govt. gives encouragement to start public warehouses in the cooperative sector. The public warehouse provide safety transportation facilities to traders of different goods.

(c) Co-operative :- This is set up run by cooperative societies. The farmers or traders can register a cooperative society to set up a cooperative warehouse. Food grains, fruits and vegetables are generally stored in such warehouses.

(d) Bonded Warehouse :- These are licensed to accept imported goods for storage before payment of customs duty. The bonded warehouses may be either Govt. owned or privately owned. In the later case, they work under the strict control and supervision of the customs authority. A Bonded warehouse acts in two capacities.

Firstly : It acts as a landlord who provides storage facilities on rent, andSecondly : It acts as the bailey of goods the warehouse must act with reasonable care to handle and store the goods and it has lie on the goods under its care for the charges of its services.

INVENTORY MANAGEMENT :

Inventory management is the third major component of physical

distribution task. It will be obvious that without effective management of finished

product inventory, it is impossible to run any business efficiently and profitably.

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Carrying inventories is inescapable in most business. This is because the

producing and consuming activities take pace at different times, in different locations

and at different rates.

Inventories are made up of several elements :- Operational stocks kept at

the point of sale/retail outlets for meeting ready demand is the first element, stocks in

transit at any given point of time the second, then there will be stocks awaiting

shipment; and finally, there will buffer stocks for meeting emerging sales requirements.

ELEMENT OF INVENTORY COSTS :

Interest on capital tied up in the inventory. Warehouse rent. Staff salaries Insurance Rates and taxes. Stationery Postage and communication charges. Administrative overheads. Costs of handling, unloading and stacking. Loss due to damage and deterioration while on storage. Cost of order processing / record keeping / according.

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