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B.Com 5th Sem. (Hons.) Subject- Marketing Concept & Consumer Behavior

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SYLLABUS

Class – B.Com. V Sem. (Hons.) Subject – Marketing Concept & Consumer Behavior

UNIT – I Basics of marketing, meaning & definition of market & marketing, nature scope & importance of marketing; marketing concepts.

UNIT – II Consumer behavior: Nature, scope and significance types of consumers, factors influencing consumer behavior; market segmentation: Concept & importance basis for market segmentation.

UNIT – III Development of Marketing strategies & Plans, marketing & Customers values & satisfaction.

UNIT – IV Product: concept of product, consumer & Industrial goods, product planning & development packing role and functions, brand and functions, brand name.

UNIT – V Price concept of Price V/s cost; importance of price marketing importance of price in marketing mix; factors affecting price of a product or service; pricing policies.



DEFINITION OF MARKETING

Product-oriented Definition - Marketing may be narrowly defined as a process by which goods and services are exchanged and the valued determined in terms of money prices. Customer-oriented Definition - According to Cardiff and Still. “Marketing is the business process by which products are matched with the markets and through which transfers of ownership are effected.” System-Oriented Definition - William J. Stanton has given a system oriented definition of marketing. “Marketing is a total system of interacting business activities designed to plan, price, promote and distribute wants satisfying products to target markets to achieve organisational objectives. Kotler’s Definition - Kotler has defined marketing as a social and managerial process by which individuals and groups obtain what need and want through creating, offering and exchanging products of value with others.

NATURE OF MARKETING 1. Marketing is Customer-focused.

2. Marketing must Deliver Value.

3. Marketing is Business.

4. Marketing is Surrounded by Customer Needs.

5. Marketing is a Part of Total Environment. 6. Marketing Systems Affect Company Strategy.

7. Marketing as a Discipline. 8. Marketing Creates Mutually-beneficial Relationships.

SCOPE AND FUNCTIONS OF MARKETING

Functions of Marketing The business by selling want satisfying goods and services to the customers. In order to achieve this purpose, the Marketing Manager performs the following functions:

Benefits

Cost

Customer Value=

(A) Functions of

Research

(B) Functions of

Exchange

(C) Functions of

Physical Treatment

(A) Functions Facilitating

Exchange

1. Marketing research

2. Product Planning

and Development

1. Buying and

Assembling

2. Selling

1. Standardisation Grading and Branding 2. Packaging 3. Storage 4. Transportation

1. Salesmanship 2. Advertising 3. Pricing 3. Financing 4. Insurance



(i) Marketing research. (ii) Product planning and development. (iii) Buying and assembling. (iv) Selling (v) Standardisation, grading and branding. (vi) Packaging. (vii) Storage (viii) Transportation (ix) Salesmanship (x) Advertising (xi) Pricing (xii) Financing (xiii) Insurance

Making management is an important operative function (as distinct from managerial function) of management. It performs all managerial functions in the field of marketing. It is responsible for planning, organising,, directing and controlling the marketing activities. OBJECTIVE OF MARKETING MANAGEMENT A business aims at earning reasonable long-term profits by satisfying the needs of customers.

1. To create customers for the business. 2. To satisfy the needs of the customers. 3. to determine marketing-mix that will satisfy the needs of the customers. 4. To generate adequate profits for the business. 5. To earn goodwill for the business. 6. To raise standard of living of the people.

PHILOSOPHY OF MARKETING

1. PRODUCTION CONCEPT: Managers of production oriented organizations concentrate on achieving high production efficiency and wide distribution coverage.

2. PRODUCT CONCEPT: The product concept holds that consumers will favour those products that offer the best quality, performance or innovative features.

3. THE SELLING CONCEPT: The selling concept holds that consumers, if left alone, will ordinarily not buy enough of the organisation’s products.

4. THE MARKETING CONCEPT: This is a customer oriented approach which points out that the primary task of a basis of latest and accurate knowledge of market demand, the enterprise must produce and offer the products which will give the desired satisfaction and services to the customer.

It involves the following orientation

(a) Customer orientation. (B) Integrated approach.- (C) Marketing information system (D) Profitability. (E) Societal marketing concept

What is the difference between a customer and a consumer? The following distinction should help: • A customer – purchases and pays for a product or service • A consumer – is the ultimate user of the product or service; the consumer may not have paid for the product or service



PRODUCT LIFE-CYCLE

INTRODUCTION Every product has its life. Industrial goods may have a longer life than consumer goods. What a product idea is commercialised, the product enters into the market and competes with the rivals, for making sales and earning profits. Product like human being, have length of life. This has been described as life-cycle in human beings, and when applied to products, its is called as product life-cycle. The product life-cycle is generally termed as product market life-cycle, because it is related to particular market. Every product passes through certain stages, collectively known as product life-cycle stages. These stages include:

Introduction, Growth, Maturity, and Decline

The advantages of PLC to a firm are as follows:

When the product life-cycle is predictable, the management must be cautions in taking advance steps before the decline stage, by adopting product modification, pricing strategies, style, quality change, etc.

The firm can prepare an effective product play by knowing the product life-cycle of a product.

The management can find new uses of the product for the expansion of market during growth stage and for extending the maturity stage.

The management can adopt latest technological changes to improve the product quality, features and design.

STRATEGIES IN PRODUCT LIFE-CYCLE

1. Introduction Stage a) Advertisement and publicity of the product-‘Money back’ guarantee may be offered to stimulate the

people try the product. b) Attractive gift to customers as an ‘introductory officer’. c) Selective distribution and attractive discount to dealers. d) Higher price of product to earn greater profit during the initial e) Ironing out of product deficiencies. 2. Growth Stage



a) The product is advertised heavily to stimulate sales. b) New versions of the product are introduced to cater to the requirements of different types of

customers. c) The channels of distribution are strengthened so that the product is easily available wherever

required. d) Brand image of the product is created through promotional activities. e) The price of product is completive. f) There is greater emphasis on customer service.

3. Maturity Stage a) Product may be differentiated from the competitive product and brand image may be

emphasised more. b) The warranty period may be extended. Fro instance, manufacturers of typewriters have

introduced the concept of life-time warranty. c) Reusable packaging may be intruded. d) New markets may be developed. e) New uses of the product may be developed.

4. Decline Stage a) New features may be added to the product and its packaging may be made more attractive. b) Economy packs or models may be introduced to revive the market. c) The promotion of the product should be selective to reduce distribution costs.

MARKET SEGMENTATION According to Stanton, "Market segmentation consists of taking the total, heterogenous market for a production dividing it. into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects." According to Kotler, 'tile purpose of segmentation is to determine difference among buyers which may be consequential in choosing among them or marketing to them.

FEATURES OR CHARACTERISTICS OF MARKET SEGMENTATION -

1. It consists of a group of customers who share a similar set of wants. 2. The marketer does not create the segments, but identify the segments and decide which one to

target. 3. Market segmentation is the result of -modern marketing concept' and micro marketing. 4. Varied and complex buyer behaviour is the root cause of market s egmentation. 5. It is a method for achieving maximum market response from limited marketing

resources by recognising differences in the response characteristics of various parts of the market.

6. It is being used as strategy of 'divide and conquer'. 7. It enables the marketers to give better alternatives to the selection of customers and offer

an appropriate marketing-mix . 8. To divide customers in homogeneous groups on the basis of their attributes and nature so that

suitable marketing programmes may be prepared for each segment (group). 9. To find out customers' preferences, their interests and buying habits so that it may be decided

whether homogeneous marketing efforts would be suitable for all customers or not. 10. To find out areas where new customers may be made while making proper marketing efforts. 11. To find out purchase potential of different customer groups. 12. To make organisation customer-oriented so that profit may be earned through customer

satisfaction. 13. Market segmentation provides a basis for improved performance through correct application of



selected marketing concepts and techniques.

FAVOURABLE CONDITIONS FOR EFFECTIVE MARKET SEGMENTATION The use ofthe concept of market segmentation will be more useful in the following conditions:

(1) The number of potential customers of the target market must be measurable. (2) The various required information and data about the target market must be accessible. (3) There must be consumers in sufficient number to provide profitable sales volume to the

company. (4) The prospective target segment must be accessible itself through the existing channels of

distribution of the company, the advertising media and sales-force to minimise cost and unnecessary wastage of efforts.

BASES FOR MARKET SEGMENTATION

SELECTION OF TARGET SEGMENT In evaluating different market segments, the firm must look at two factors: the segment's

overall attractiveness, and the company's objectives and resources. In brief, the following points should be kept in mind while evaluating and selecting a target market:



1. Size of the Segment. 2. Growth Potential. 3. Attractiveness. 4. Must be Measurable:. 5. Accessible. 6. Resources.

Stanton has suggested the following four guidelines about how to determine which segment should

be the target markets:' (i) The target market should be compatiable with the organisation's goals and image. (ii) It should match with the market opportunity represented in the target markt•l-, with the company's

resources. (iii) An organisation should seek markets that will generate sufficient sale,. volume at a low enough cost

to result in a profit. (iv) A company ordinarily should seek a market where there are the least and smallest competitors.

TARGETING STRATEGIES

MarketTargeting Strategies - In market segmentation, the sellers identify groups of buyers with different characteristics and wants. In market targeting, the sellers identify special market segments or groups that it intends to serve and satisfy.In a heterogeneous market, the marketer has three targeting options:

I. MASS MARKETING STRATEGY : It is also called as undifferentiated marketing strategy. In this case, the seller introduces only one product. The marketer intends to get many customers by introducing only one product.

Advantages : (a) Large number of customers can be served with a single product. (b) There are lower costs of production and marketing. (c) The marketer can save time and effort in marketing the product. (d) It may result in large profits for the marketer.

Disadvantages : (a) The marketer may not be able to satisfy the needs and wants of all customers. (b) The marketer may find difficult to face competition. (c) This strategy is not suitable for certain types of products such as luxury products or premium priced

products. (d) In the long run, the marketer may lose market share to the competitors.

II. CONCENTRATION MARKETING STRATEGY : In this case, a marketer can select one particular market segment and develop best ,possible product for that segment. Advantages :

(a) The marketer can easily understand needs and wants of its target buyers. (b) The marketer may enjoy economies of large scale production and distribution. (c) The firm may enjoy brand loyalty from its buyers. (d) This strategy is suitable to new entrants in the markets. Disadvantages :

(a) In the long run, the firm may find it difficult to enter in new segments. (b) There is more marketing risk to concentrate only on one segment. The firm may not be able to spread

marketing risks. (c) There may be competition from other new entrants in the market.



(d) This strategy may affect the profits of the marketer. III. MULTISEGMENT STRATEGY : It is also known as differentiated marketing strategy. In this case, the marketer caters to several segments of the market. The marketer develops several marketing mixes in order to satisfy the various segments of the market. Advantages :

a) The firm will be in a position to spread its marketing risks as it caters to several segments. b) The firm will be able to make optimum use of its production capacity by producing different types of

products. c) The firm is in a position to cater several segments of the market and as such it can earn name and goodwill

of large number of buyers in the market. d) The firm may find it easier to launch new products in the market as it enjoys the goodwill of several

segments. Disadvantages : (a) Promotion costs will be higher as the marketer have to use different media to satisfy various

sections or segments. (b) The firm may not be able to achieve economies of large scale in respect of various products. (c) The administrative expenses will be higher. (d) There may be large inventory costs, as the marketer have to maintain inventory of several

products.The marketer may fall into the trap of trying to satisfy everybody and ending up with satisfying nobody.

POSITIONING Philip Kotler defines positioning as "the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market." Importance of Product Positioning : 1. Develops Brand Image . 2. Creates Demand. 3. Helps to Face Competition . 4. Facilitates Consumers' Choice . 5. Creates Value .

STEPS INVOLVED IN PRODUCT POSITIONING 1. Identify Competitive Differences : The marketer should identify the competitive differences of his product or service. 2. Analyse the Differences : The marketer must analyse the differences. He must conduct cost-benefit analysis of each and every difference. 3. Selecting Important Differences : The marketer must select the most important differences that would differentiate it from that of the competitor. For example, if marketers of TV sets claim that they provide . 4. Developing Positioning Strategy : The marketer should then make efforts to develop positioning strategy. The marketer may position the brand by following any of the following positioning strategy



(a) Using specific product feature (b) Positioning by Price (c) Positioning by Use (d) Positioning by Competitor etc.

5. Communicating the Company's Positioning: The marketer should select proper media to communicate the company's positioning. The right media must be selected to communicate the image of the brand. 6. Follow-up of Positioning : The marketer may try to follow up the positioning of the brand. This can be done by undertaking research or by analysing the sales of the brand.

PRODUCT POSITIONING STRATEGIES.

The advertiser can adopt different positioning strategies in order to develop or reinforce a particular image for the brand in the mind of the audience. The various positioning strategies are: 1. Positioning by Product Benefits . (a) Functional Benefit-Positioning : can be used in the case of technologically superior product by

highlighting special features. "The leather that weathers" from Woodlands Shoes.

(b) Emotional Benefit-Positioning : Can be used by exploiting buying motives such as security, health, love and affection, beauty etc. "Beauty Soap of Film Stars" Lux Soap.

(c) Self-expressive Benefit : where style and appearance, of the product (motor-bikes/textiles/garments etc.) can be highlighted in positioning strategy. The advertiser may use high profile personalities or models to endorse the brand. 2. Positioning by Price and Quality . 3. Positioning by Use : The brand can be positioned by associating it with a use or application. 4. Positioning by User Category . 5. Positioning by Product Class . 6. Positioning by Cultural Symbols/Names .

CONSUMER BEHAVIOUR

Consumer behavior is the study of the way people seek, purchase, use, evaluate and dispose of products and services. It is the phycology of marketing, and it is used to determine why consumers seek one product alternative from the other. But why do consumers seek and purchase products? This is linked to the ideology of needs and wants. Needs and wants exist if a consumer is unsatisfied, consumers seek and purchase the products that can provide them with maximum satisfaction.Consumer behavior can be used by marketers to create the marketing strategy; targeting each consumer effectively once they understand their needs and wants through the research of consumer behavior. The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how

The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products, and retailers);

The psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media);

The behavior of consumers while shopping or making other marketing decisions;



Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome;

How consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer; and

How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.

One "official" definition of consumer behavior is "The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society." Although it is not necessary to memorize this definition, it brings up some useful points:

Behavior occurs either for the individual, or in the context of a group (e.g., friends influence what kinds of clothes a person wears) or an organization (people on the job make decisions as to which products the firm should use).

Consumer behavior involves the use and disposal of products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased consumption. Since many environmental problems result from product disposal (e.g., motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at landfills) this is also an area of interest.

Consumer behavior involves services and ideas as well as tangible products. The impact of consumer behavior on society is also of relevance. For example, aggressive marketing of

high fat foods, or aggressive marketing of easy credit, may have serious repercussions for the national health and economy.

There are four main applications of consumer behavior: The most obvious is for marketing strategy—i.e., for making better marketing campaigns. For example,

by understanding that consumers are more receptive to food advertising when they are hungry, we learn to schedule snack advertisements late in the afternoon. By understanding that new products are usually initially adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, we learn that (1) companies that introduce new products must be well financed so that they can stay afloat until their products become a commercial success and (2) it is important to please initial customers, since they will in turn influence many subsequent customers’ brand choices.

A second application is public policy. In the 1980s, Accutane, a near miracle cure for acne, was introduced. Unfortunately, Accutane resulted in severe birth defects if taken by pregnant women. Although physicians were instructed to warn their female patients of this, a number still became pregnant while taking the drug. To get consumers’ attention, the Federal Drug Administration (FDA) took the step of requiring that very graphic pictures of deformed babies be shown on the medicine containers.

Social marketing involves getting ideas across to consumers rather than selling something. Marty Fishbein, a marketing professor, went on sabbatical to work for the Centers for Disease Control trying to reduce the incidence of transmission of diseases through illegal drug use. The best solution, obviously, would be if we could get illegal drug users to stop. This, however, was deemed to be infeasible. It was also determined that the practice of sharing needles was too ingrained in the drug culture to be stopped. As a result, using knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the cleaning of needles in bleach before sharing them, a goal that was believed to be more realistic.

As a final benefit, studying consumer behavior should make us better consumers. Common sense suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay less per ounce than if you bought two 32 ounce bottles. In practice, however, you often pay a



size premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize you to the need to check the unit cost labels to determine if you are really getting a bargain

CONSUMER DECISION MAKING PROCESS

INTRODUCTION - CULTURE AND CONSUMER BEHAVIOUR 1. The study of culture is a challenging undertaking because its primary focus is on the broadest component

of social behavior in an entire society. 2. In contrast to the psychologist, who is principally concerned with the study of individual behavior, or the

sociologist, who is concerned with the study of groups, the anthropologist is primarily interested in identifying the very fabric of society itself.

WHAT IS CULTURE? 1. Given the broad and pervasive nature of culture, its study generally requires a detailed examination of the

character of the total society, including such factors as language, knowledge, laws, religions, food customs, music, art, technology, work patterns, products, and other artifacts that give a society its distinctive flavor.

2. In a sense, culture is a society’s personality. For this reason, it is not easy to define its boundaries. 3. Culture is the sum total of learned beliefs, values, and customs that serve to direct the consumer behavior

of members of a particular society. 4. Beliefs consist of the very large number of mental or verbal statements that reflect a person’s particular

knowledge and assessment of something. 5. Values also are beliefs, however, values differ from other beliefs because they must meet the following

criteria: a) They are relatively few in number.



b) They serve as a guide for culturally appropriate behavior. c) They are enduring or difficult to change. d) They are not tied to specific objects or situations. e) They are widely accepted by the members of a society.

6. In a broad sense, both values and beliefs are mental images that affect a wide range of specific attitudes that, in turn, influence the way a person is likely to respond in a specific situation.

THE INVISIBLE HAND OF CULTURE 1. The impact of culture is so natural and automatic that its influence on behavior is usually taken for granted. 2. Often, it is only when we are exposed to people with different cultural values or customs that we become

aware of how culture has molded our own behavior. 3. Consumers both view themselves in the context of their culture and react to their environment based upon

the cultural framework that they bring to that experience. Each individual perceives the world through his or her own cultural lens.

4. Culture can exist and sometimes reveal itself at different perceived or subjective levels. 5. Those interested in consumer behavior would be most concerned with three “levels of subjective culture:

a) Supranational level – reflects the underlying dimensions of culture that impact multiple cultures or different societies.

b) National level factors – such as shared core values, customs, personalities, and predispositional factors that tend to capture the essence of the “national character” of the citizens of a particular country.

c) Group Level factors – are concerned with various subdivisions of a country or society. They might include subcultures’ difference, and membership and reference group differences.

CULTURE SATISFIES NEEDS 1. Culture exists to satisfy the needs of people within a society.

a) It offers order, direction, and guidance in all phases of human problem solving by providing “tried and true” methods of satisfying physiological, personal, and social needs.

b) Similarly, culture also provides insights as to suitable dress for specific occasions (e.g., what to wear around the house, what to wear to school, what to wear to work, what to wear to church, what to wear at a fast food restaurant, or a movie theater).

2. Cultural beliefs, values, and customs continue to be followed as long as they yield satisfaction. 3. In a cultural context, when a product is no longer acceptable because it’s related value or custom does not

adequately satisfy human needs, it must be modified. 4. Culture gradually evolves to meet the needs of society.

CULTURE IS LEARNED 1. At an early age we begin to acquire from our social environment a set of beliefs, values, and customs that

make up our culture. 2. For children, the learning of these acceptable cultural values and customs is reinforced by the process of

playing with their toys. a) As children play, they act out and rehearse important cultural lessons and situations.

How Culture Is Learned 1. There are three distinct forms of learning:

a) Formal learning—adults and older siblings teach a young family member “how to behave.” b) Informal learning—a child learns primarily by imitating the behavior of selected others. c) Technical learning—teachers instruct the child in an educational environment as to what, how, and

why it should be done. 2. Advertising and marketing communications can influence all three types of cultural learning..

a) It most influences informal learning by providing models of behavior to imitate.



b) This is especially true for visible or conspicuous products that are evaluated in public settings, where peer influence is likely to play an important role.

3. The repetition of advertising messages creates and reinforces cultural beliefs and values. 4. Cultural meaning moves from the culturally constituted world to consumer goods and from there to the

individual consumer by means of various consumption-related vehicles (e.g., advertising or observing or imitating others’ behavior.)

TYPES OF CULTURE :IT CAN BE IDENTIFIED ON THE BASIS OF: race nationality religion age geographic location gender social class - Etc.

CROSS CULTURAL CONSUMER BEHAVIOUR Characteristic features of a firm going global: 1. High market share in the domestic market 2. Advantageous economies of scale 3. Access to marketing/manufacturing bases across global borders 4. Availability of resources and capability to absorb huge losses 5. Product/technology clout 6. Cost and differentiation advantages Cross-cultural marketing is defined as “the effort to determine to what extent the consumers of two or more nations are similar or different. This will facilitate marketers to understand the psychological, social and cultural aspects of foreign consumers they wish to target, so as to design effective marketing strategies for each of the specific national markets involved.” Cross cultural marketing Objectives and Policies A company can enter a foreign market as a- · Domestic exporter · Foreign importer · Foreign government-solicit the firm to sell abroad The firm’s objectives could be: · To determine how consumers in two or more societies are similar/different and devise suitable, appropriate strategies · Devise individualized marketing strategy if cultural beliefs, values and customs of a specific country are different Basic areas to be understood for cross cultural marketing 1. Language & meaning 2. Difference in market segmentation opportunities 3. Differences in the criteria for evaluating products and services: Apparel firms in India believe that that the quality of the fabric determines the quality of the garment whereas, the Japanese think that every aspect of the garment from sewing to packaging decides quality. 4. Differences in consumption pattern and perceived benefits of products and services: leather exports by India



5. Differences in the economic and cultural social condition and family structure: Social class differences have beenuseful in explaining differences in consumer behaviour in relation to (a) preferences for products and brands (b) storepatronage or shopping behaviour (c)exposure to promotion media and (d) savings and the use of the creditfor purchasing products Problems in Cross Cultural marketing 1. Problems related to product selection: The marketer going for cross cultural marketing has to select the customers/market not on the basis of the superficial similarities of age or income, but by using the real motivating factors thatprompt them to accept or reject products. 2. Problems related to promotion/marketing communication: e.g. Ariel in the middle east and also Pepsi. 3. Problems related to pricing: the marketer has to adjust his pricing policies according to the local economic conditionsand customs. 4. Problems related to selection of distribution channels. Cross-Cultural Consumer Analysis To determine whether and how to enter a foreign market, we need to conduct some form of cross-cultural consumer analysis. Let us first define what is cross-cultural consumer analysis and then move ahead in knowing how to do it. Cross-cultural consumer analysis can be defined as the effort to determine to what extent the consumers of two or more nations are similar or different. Such analysis can provide marketers with an understanding of the psychological, social, and cultural characteristics of the foreign consumers they wish to target, so that they can design effective marketing strategies for the specific national markets involved. Similarities and differences among people A major objective of cross-cultural consumer analysis is todetermine how consumers in two or more societies are similarand how they are different. Shown in this figure:

For More Text Refer the Book; Marketing Management –Kothari & Mehta, Marketing Management – Kothari, Grover & Mehta.

THE MARKETING MIX

(THE 4 P'S OF MARKETING) Marketing decisions generally fall into the following four controllable categories:

Product Price Place (distribution) Promotion



The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below: The Marketing Mix

These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. Product Decisions - The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made:

Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty Accessories and services

Price Decisions Some examples of pricing decisions to be made include:

Pricing strategy (skim, penetration, etc.) Suggested retail price Volume discounts and wholesale pricing



Cash and early payment discounts Seasonal pricing Bundling Price flexibility Price discrimination

Distribution (Place) Decisions Distribution is about getting the products to the customer. Some examples of distribution decisions include:

Distribution channels Market coverage (inclusive, selective, or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation Reverse logistics

Promotion Decisions- In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include:

Promotional strategy (push, pull, etc.) Advertising Personal selling & sales force Sales promotions Public relations & publicity Marketing communications budget

Limitations of the Marketing Mix Framework The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it.

PACKAGING o Definition of Packaging o Functions of Packaging o Requisites of a Good Package

INTRODUCTION Standardization of goods and services is the backbone of modern marketing. The term 'standard' implies a set of

requirements or specifications as to denature of a product. It is a measurement of the physical characteristics of i product. Standard does not mean the product of the best quality. It only means that the product is of a specified quality.

Goods of different standards are produced for satisfying the demands of different types of customers. Standardization implies that the goods are of a specified and uniform quality. Gradingand branding of goods are important mechanisms of standardization. Grading stands for division of agricultural products into standard classification such as A grade, B grade and so on.

Branding is the process of stamping a product with a specific name and mark to give it an individuality. Brand names are printed or inscribed not only on the products but also on their packages to make them easily distinguishable.

http://www.netmba.com/marketing/concept/



Packaging which is an important part of the product-offer has also received lot of attention in the recent years. It is called the fifth 'P of marketing-mix. Modern organizations are resorting to innovative packaging :oadd more value for the customers. Another area which will be taken up in -.his chapter is the after-sales service for the complete satisfaction of the customers.

“Packaging is called the fifth 'P’ of marketing.”

Packaging is concerned with designing and producing of appropriate packages for a product.The sig-nificance of packaging has increased these days because of severe competition in the market and rise in the standard of living of the people.

Good packaging protects a product on its route from the seller to the buyer and in some cases even during its life with the user. Packaged goods are generally more convenient to handle. Packaging facilitates the sale of a product.

It acts as a sileni salesman of the manufacturer, particularly at a place where there is widespread use of self-service, automatic vending and other self-selection methods of retail selling. Sometimes, packages are duly sealed to ensure products of right quality to the consumers. In the absence of sealing, duplicate products may be distributed to the consumers by the unscrupulous dealers, Definition of Packaging

(Packing means wrapping, compressing, filling or creating of goods forth purpose of protection of goods and their convenient handling^)Bulky materials like cotton and jute are compressed into bales, liquid materials like wine and squash are placed in bottles and cans. Heavy goods are crated and fragile goods are placed in boxes or special containers.

Packing is essential for placing various kinds of goods in appropriate packages. Good packing not only means greater attention of the customers but also increases the durability of the product.

Package means a case, container, wrapper or other receptacle for packing p goods. It can be made of metals, plastics, wood, paper, glass, laminates, polyster or HOPE.

Packaging is the designing and producing of the container or wrapper for a product in order to prepare the goods for transport, sale, and usage.

There are two parts of this definition : one, physical transportation and sale for ultimate usage of the product and two, the science and technology as well as art part of the package. The science and technology refers to functional part of the product. For example, Dettol liquid conies in a package which facilitates easy pressing of the top portion by thumb and ultimate released the liquid Dettol.

If this function cannot be performed, the package would useless for the consumer. Thus, properly designed package would enhance! value of its contained product. Functions of Packaging -

(1) Protection of the product. (2) Appeal to the consumer. (3) Perfect functionally. (4) Convenient. (5) Cost-effective. (6) Easy handling. (7) Preventing adulteration. (8) Publicity.



REQUISITES OF A GOOD PACKAGE

Packaging is an important device of sales promotion. It acts as acolourfuf and silent salesman. It gives full information about the uses and features ofl the product to the users. It helps in giving individuality to the product. It may; be noted that branding is not possible without packaging. Both are interlinked. Brand name and mark are to be printed on the package to make the j product easily identifiable by the customers. In other words, the package must tell the product story at a glance. The basic purpose of packaging is to provide protection to the goods and to facilitate their easy handling and storage. But in the modern age of competitive marketing, packaging has assumed certain other objectives also. Packaging is used as a medium of publicity and as a silent salesman. It helps in preventing adulteration of goods and ensures their safety. In order to achieve its objectives efficiently, a good package should possess the following , features: Suitability: A. package should suit the! requirements of the goods to be' packed in. That means the package designer should consider the size and quality of the product and the quantity to be flacked in the container. Protectiv:. The package must be so designed that it protects the contents contained in it. Articles subject to deterioration in quality such as /nc Seines, powders, acids, and edible oils require a special type of packaging, \ Wherever required, the package must protect its contents from sun, moisture, germs, etc. Requirements of Consumers: The same product might meet the requirements of different segments of consumers who have different levels of income. The package may be more attractive and costly for selling the product It should be quite economical for selling the product to the users of the lower income group. For

instance, polythene bags have become quite popular with the manufacturers of Ghee for selling it in small quantities, say 1 Kilogram, to the customers from low and middle income groups.. Packaging Materials: This factor is very important as it influences the cost jf packaging. Materials to be used in packaging depend partly on the nature of hoods and partly on its appealing power to customers. For instance sugar, food grains, cement, etc. are traditionally packed in gunny or jute bags, anj now in HDPE bags. Biscuits are packed in air tight containers or packets so that they remain fresh, crisp and original in taste and flavor. Oils, Ghee, Jams, Pickles, etc. are store'd in glass jars, metallic jars or tins. Materials used in packaging industry include glass, aluminium paper,tin, paper and card boards, cellophane, plastic, polythene and gunny bagsjr-Their relative merits and demerits in terms of cost, utility, customer appealhave to be analysed before choosing any of the above materials for packaging.These factors have been discussed later in this chapter. ' Cost: The cost of package is to be considered in the context of nature and value of article and the nature of buyers. As a general rule, articles of common use such as sugar, soap, tea leaves, cereals, etc. should be packed in low cost containers. Articles of high value and catering to the requirements of high income group such as cosmetics, jewellery, etc. should be packed in attractive and durable packages. Attraction Value: As far as possible, the package must possess attraction value. Design and label of the package, and the colour combination of the package are all important. Attractive packages earn reputation and increase sales and profits of the manufacturer.)The use of a picture on the package is made quite often to attract the attention of people. The picture and other information printed on the package should be suggestive of the contents and its characteristics inside. It should be ensured that there is maximum information in minimum words. Attractive packaging is not



always costly. Even the low cost packages can be made very attractive. It depends upon the imagination of the designer. Size and Shape: The size and shape of packaging depends upon the type and value of product to a large extent. Size and shape of the package do add to its attraction value^ They also facilitate proper display of the product at retail stores. Durability: of packages is also an important cunsidei ation. If a package is durable, it will be reusable even after the product has been consumed. For example, plastic containers of ghee, coffee jars and pickle jars are reusable.Prom publicity point of view also, such packages are quite useful. Materials Used in Packaging -

The packaging industry uses glass, aluminium paper, tin, paper and card boards, cellophane, plastic, polythene, etc. for producing packages of a very large number and variety of products. As packing material, glass is quite cheap and transparent and can take any shape and size. It is attractive also, Its main drawback is that it is very delicate and fragile and can be easily broken, if mishandled. That is why, a glass package requires another outer package made of cardboard.

Aluminium paper is used for wrapping chocolates, biscuits, cigarettes, etc. Tin is easily malleable and ductile. It can take any shape. Tin containers are used for storing liquids such as edible oils, ghee, etc. However, the inner side of the tin container should bu lined with lead in order to prevent acidic reaction. Lead is also quite popular for making tooth paste and shaving cream tubes.

Paper and cardboards are very popular packing materials. They are very cheap, but have very little strength as compared to other packing materials except glass. Paper cannot pack liquid materials. However, paper offers an opportunity to present colourful and attractive matter on it. Cellophane is used as a substitute for paper. It can protect the contents from moisture and cannot be easily torn. It is transparent and light, and looks decent.

Plastic material has revolutionised the packing industry. Plastic packages are durable, transparent and air-tight. They can also carry printed matter. They are used for packing liquids also. A plastic package does not corrode as tin. It is not heavy like glass and does not absorb moisture as paper does. In the recent years, polythene packaging has gained popularity for packaging milk, ghee, fruit juice, cereals, and a large number of items of daily use. Polythene bags are virtually unbreakable, transparent and very lightin weight. Like paper, they are printable after surface treatment. They look very neat and have an attractive appearance. They can be reused after the contents have been taken out. Innovative (Value added) Packaging With competition get ting increasingly difficult in the marketplace, marketers are now turning to innovative packaging to establish the distinctive edge for their products. They attempt to provide more value addition to their products and more benefits during usage. Harpic liquid toilet cleaner with its directing nozzle, Catch 22, salt and pepper in self-contained dispensers save the consumers of the botheration of transferring the products into shakers, Bo urn vita's 200 gin, reusable tnug-cum jar pack, Cadbury's drinking chocolate in a shaker pack, its cocoa in a special measuring cup are examples of innovative packaging .

DISTRIBUTION / CHANNEL MANAGEMENT Definitions and Meaning Distribution channel is an important element of marketing-mix. The ultimate objective of every firm is making product available to its target customers and execution of this objective is distribution. Meaning of channels of distribution can be understand well with the help of some definitions:



(1) According to Richard M. Clewett, "Channel is the pipe line through which a product flows on its way to the consumer. The manufacturer puts his product into the pipe line or marketing channel and various marketing people move it along to the consumer at the other end of the channel." (2) In the words of W.J. Stanton, "A channel of distribution (some time called a trade channel) for a product is the route taken by the title to the goods as they move from the producer to the ultimate consumer or industrial user." (3) According to Cundiff, Still and Govoni, "Marketing channels are the distribution network through which producer's products flow to the market." (4) According to W. Alterson, "Marketing channel is a group of firm which constitute a loose coalition engaged in exploiting joint opportunity in the market."

From the analysis of above definitions it is clear that channel of distribution is a route to deliver goods from the producer to ultimate consumer or industrial users.Channels of distribution provides smooth flow of goods or products from centres of production to centres of consumptions. Characteristics (1) Channels of distribution is an important element of four Ps of marketing-mix. (2) Distribution channel is a route through which a product flows from centres of production to centres of consumptions. (3) Ultimate destination of channel of distribution is target customers or users. (4) Channels of distribution include middlemen. If the firm is using indirect distribution policy, then role of middlemen becomes very important. Middlemen is an independent business concern standing between producer and ultimate consumer or industrial users. (5) Therefore, the role of middlemen is a connecting link between producer and consumer, in case of indirect distribution. (6) Channels of distribution may be without middlemen. This will happen in the case of direct distribution policy, where the manufacturer himself is selling products to ultimate customers. (7) Channels of distribution do not include firms such as Shipping companies, Railway companies, Road Transporters, Banks, Insurance companies etc. Though they provide their valuable role in the process of distribution of products, but they are not the part of channels of distribution. (8) Distribution cost does not increase the marketability of firm's products. Thus, every marketing company tries to minimize the cost of distribution in order to earn more profits.



TYPES OF DISTRIBUTION CHANNEL FOR CONSUMER AND INDUSTRIAL PRODUCTS

WHOLESALING

Wholesalers play their significant role in the distribution of goods. They do not sell to ultimate users or consumers. Definitions and Meaning

According to W.J. Stanton - Wholesaling (or wholesale trade) is the sale' and all activities directly related to the sale' of goods and services to businesses and other organisations for (i) resale, (ii) use in producing other goods or services, or (iii) operating an organisation. According to Philip Kotler - Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use In the opinion ofLipson and Darling - A wholesaler is a middleman whose customers are activated by a profit or business motive in making their purchases. According to American Marketing Association - Wholesalers sell to retailers or other merchants and/or industrial, institutional and commercial users, they do not sell in significant amounts to ultimate consumers.



The Census Bureau of U:S.A. has defined wholesaling as - All merchants, agents and assemblers who intervene between producers on theone hand and retailers on the other are wholesale establishments.

Characteristics of Wholesalers – (1) Wholesalers do not sell goods or services to ultimate consumers or users. (2) Exceptionally, they may sell to ultimate consumers or users, but their substantial sales will be to middlemen. (3) Wholesalers deal in limited products or services. (4) Wholesalers functions as a linking pin between producer to retailers. (5) Profit margin of wholesalers remains very limited. (6) Wholesalers operates at large volume of business. (7) Wholesaling requires enormous financial resources. (8) Location of the business establishment of wholesaler is not important.Warehousing capacity and supply-chain management is very significant for the success of a wholesaler. (9) Wholesalers provide number of selling and non-selling services to producer and retailers. '(10) Strong wholesalers now-a-days are using their own brands for marketing the products.

TYPES OF WHOLE SALERS –AS UNDER :

RETAILING Retailing assumes vita! Significance in the channels of distribution. Retailers sell the goods or services to ultimate consumer or users. According to Philip Kotler, "Retailing includes all the activities involved in selling goods or services directly to-final consumers for personal, non-business use."1

In the words of WJ. Stanton, "Retailing (or retail trade) consists of the sale, and all activities directly related to the sale of goods and services to ultimate customers for personal, non-business use."2 From above definitions it could be said that retailers are those business institutions, who are selling goods or services to final consumers for their personal use. Characteristics of retailers may be explained as under: (1) Retailer is an important linking-pin between marketing company and final consumer. (2) Manufacturer may directly sell the product or services to ultimate customers. In this situation, the manufacturer has to play the role of retailer also. (3)- Retailers buy the products from manufacturers or from wholesalers. (4) Retailers sell the products to final or ultimate consumers.



(5) Consumers buy the products or services from the retailers for their personal use. (6) By and large, the retailers purchase the products from manufacturer or wholesaler on credit terms. (7) Retailers sell the products or services to ultimate customers on both terms— - either on cash or on credit. (8) Location of the shop is very important for retailers. (9) Generally the retailers deal in variety of products and brands. (10) Inner lay-out and window-dressing play crucial role in their success. (11) Retailers remain in direct touch of ultimate customers. The marketing company may redesign its marketing-mix on the basis of feedback provided by the retailers. (12) Most of the retailing business may be started with limited capital. (13) Good behavior and desired services to customers play an important role in the success of retailers.

TYPES OF RETAILERS FRANCHISING Franchising as a business format is the most powerful economic engine in the world today. In U.S., Franchising creates 1.5 lac jobs a year and employs 80 lac people. The country has 5 lac franchisees. The modern concept of franchising was born in America and developed actively after World War II. It emerged as a force to be reckoned within the early 1950s. It boomed in the 1960s, finally maturing in 1980s and 1990s. Franchising has become one of the most dominant forces in the world economy today. In India, the concept finds its roots in the early 1990s, mostly in the IT segment, when some aggressive companies adopted it for furthering their business. In a large country like India, businesses with a large network can not be effectively and efficiently managed from one central location. Thus, the concept of franchising becomes ideally suited for demographically large country like India, where the economies of scales and geographical environment play an important part in the success of a business. Distribution and franchising hold a good deal of similarity. The distributors are paid commission, and franchiser receives royalty. Area of operations is clearly defined in distribution, so is the case with franchising. The only difference is that the franchisee is given full support and business know-how from the franchiser, along with the product or service.



DEFINITION OF FRANCHISING According to Stanton, Etzel and Walker: "Franchising is a type of contractual vertical marketing system that involves a continuing relationship a franchiser (the parent company) provides the right to use a trademark plus various forms of management assistance in return for payments from a franchisee (the owner of the individual business unit).

The combination of the franchiser and franchisee is called the franchisee system.

The most prevalent form of franchising is Business Format Franchising. This kind of franchising covers an entire method (or format) for operating a business.

The franchiser may be a manufacturer that provides franchisees with merchandise and management assistance like marketing expertise.

A franchiser may also be a successful retail business selling the rights to operate the same business in different geographic areas under specified guidelines.

The franchiser receives from each franchisee a share in business called royalty, and also conformance to policies and standards.

WHY FRANCHISING? For franchisers, selling franchisees can be attractive because of the following reason: • Expansion is expedited, because franchisees provide capital when they purchase franchisee. • Because franchisees have an investment at risk, they are typically highly motivated to work hard and adhere to the parent company's proven format. Purchasing a franchisee is attractive for an entrepreneur because of the following reasons: • He is given access to years of business experience and a proven concept. • He gets an established brand name. • He gets to sell a product or service that is already accepted in many markets. • The foundation and operation of a successful business has already been established, which assists an entrepreneur in running business. From the franchisee's point of view let us discuss the advantages of owning a franchisee in detail: • NAME RECOGNITION • MINIMISED RISK • SUPPORT • TRAINING • PROVEN SYSTEMS • SITE SELECTION • FINANCE • ADVERTISING • COST SAVING 212 A PRACTICAL APPROACH TO MARKETING MANAGEMENT COMPONENTS OF TYPICAL FRANCHISEE SYSTEM 1. FRANCHISER: Franchiser is the company which offers the franchisee. A franchiser is responsible for providing the complete know-how of the business to the franchisee. 2. FRANCHISEE: A franchisee is the entrepreneur or the company who makes investment in establishing the franchisee business. He also pays a certain amount to the franchiser for taking up the franchisee and is directly responsible for running franchisee business. 3. FRANCHISEE AGREEMENT: An agreement is a set of conditions, which bind the franchiser and the franchisee, valid legally. 4. INITIAL FRANCHISEE FEE: This is the lump sum amount paid by the franchisee to the franchiser to take up the franchisee. This amount may vary from company to company and is often non-refundable.



5. CONTINUING ROYALTY PAYMENTS: Royalties, based on percentage of the weekly or monthly gross income, are generally paid to the franchiser. Royalties are also paid even if the outlet has not earned significant income during that time. 6. ADVERTISING FEE: A franchisee may be required to pay a nominal advertising fee as a part of his share in the national advertising campaign by the franchiser. 7. SITE APPROVAL: Many franchisers pre-approve sites for outlets. This may increase the likelihood that a franchisee's outlet will attract customers. 8. DESIGN OR APPEARANCE STANDARDS: Franchisers may impose design or appearance standards so that customers receive the same quality of goods and services in each outlet. Some franchisers require periodic renovations or seasonal design changes. 9. RESTRICTIONS ON GOODS, SERVICES OFFERED FOR SALE: Franchisers may restrict the goods and services offered for sale. For example, a restaurant franchisee may not be able to add his menu popular items, or delete items that are unpopular. Similarly, as an automobile repair franchise owner, he might not be able to perform automotive work other than the one specified. 10. RESTRICTIONS ON METHOD OF OPERATION: Franchisers may require a franchisee to operate in a particular manner, such as, to operate during certain hours, use only pre-approved signs, employee uniforms, and advertisements, or abide by certain accounting or book keeping procedures. 11. RESTRICTIONS OF SALES AREA: Franchisers may limit a franchisee's business to a specific territory.

PRICING DECISIONS Among the various components of the marketing mix of a company, Price plays an important role in bringing about product –market integration. Price is all around us. We pay rent for house ,tuition fee for education, consultation fee for physician’s advice, fare for bus,railway,taxi or airline service, and of course money value for goods we consume in our daily life. Definitions – According to W.J .Stanton – Price is amount of money which is needed to acquire a product . According to Cundiff & Still – Price policies provide the guidelines within which pricing strategy is formulated & implemented. According to S.K. Groover – Price as the amount of money which is charged by a seller from a buyer for combined of a product and its accompanying services. Characterstics of price –

1) Price is the value of a product or service expressed in monetory terms. 2) In the free market situation it a result of demand and supply position of a product in the market. 3) Price offers a link between company and consumers .A marketing company offers the product

at a price and the consumer ,if he is willing purchases the product at the notified price. 4) Pricing is a managerial activity .It involves various managerial tasks e.g.determination of pricing

objectives ,identification of factors affecting pricing decision ,ascertaining their importance and relevance ,selection of a method of setting price .

5) The price of a product is an important tool in the hands of management of a company to regulate the demand for its product.

6) Price is also the fundamental regulator of the total economy.The market price of product influences wages,rent ,interest and profit .Higher wages attract s labour ,high profits attracts new investment.Thus price is a basic regulator of the entire economic system

7) Its an important component of marketing mix. 8) Price plays an important role in bringing about product market integration.

Objectives of Pricing –



a) Target return on investment (ROI) – b) Price stabilization c) Maintain or improve market share d) To meet or Prevent Competition e) Profit Maximization f) Resource Mobilization

FACTORS AFFECTING PRICING DECISIONS

1) INTERNAL FACTORS –

a) Objectives of the firm -.Firm may pursue a variety of objectives, such as maximizing sales revenue, maximizing market share, maximizing customer delight, maintaining a particular image, maintaining stable price etc.Pricing Policy should be established only after proper considerations of the objectives of the firm.

b) Role of top management - It is the top management which generally has full authority over pricing .Pricing activities have such direct effect on sales volume and profit that the marketing manager cannot keep himself aloof from pricing policy making & strategy formulation.

c) Marketing Mix – Price is one of the important elements of the marketing mix and therefore must be coordinated with the other elements; Production, promotion and distribution. In some industries a firm may use price reduction as a marketing technique; others may raise prices as a deliberate strategy to build a high prestige product line.

d) Product Differentiation - Generally customers pay more prices for the product which is of the new style, design, better package etc.

e) Cost of the Product – Cost and price of a product are closely related .The most important factor is the cost of production .In deciding to market a product; a firm should also try to decide what prices are realistic, considering current demand and competition in the market.

2. EXTERNAL FACTORS – a) Demand –The Market demand for product or service has big impact on pricing .If the demand of the product is in elastic, high prices may be fixed. On the other hand ,if demand is elastic the firm should not fix high prices ,rather it should fix flexible prices than that of the competitors.



b) Competition – marketing company having virtual monopoly in its product or service category will set high prices .In the case of stiff competition the firm is bound to set competitive prices of its products or services. c) Buyers – the nature and the behavior of the consumers and users, for the purchase of a particular product or service, do affect pricing particularly if their number is large.] d) Suppliers – The suppliers of raw materials and other inputs can have a significant effect on the price of a product. For Example – if the price of cotton goes up, the increase is passed on by suppliers to manufacturers. Manufacturers, in turn pass it on to consumers. e) Economic Conditions – To meet shortage or rising pricing and decreased demands several pricing decisions are available such as: (i)Prices can be boosted to protect profit against rising costs. (ii) Price protection systems can be linked with the price on delivery to current costs as done by most of automobile sector like Maruti, Bajaj, Tata etc., or (iii) The emphasis can be shifted from sales volume to profit margin and cost reduction.

f) Government Regulations – The regulatory pressures ,anti price rise and control measures effectively discourage companies from cornering too large a share of the market and controlling prices .

(Selection of pricing strategies and design the appropriate strategies according to specific situation) - PRICING STRATEGIES –

A) New Product Pricing – Pricing strategies usually change as the product passes through its life cycle.The introductory stage is especially challenging .Companies bringing out a new product facr the challenge of setting price for the first time ; they cn choose between two broad strategies : 1) Market Skimming Pricing - Initially set high prices to "skim" revenue layer by layer from the market.Works when:

Quality and image support the higher price Enough buyers want the product at that price Cost of producing a small volume cannot be high Competitors should not be able to enter the market easily.

2) Market Penetration: Set a low initial price in order to penetrate the market quickly and deeply to win a large market share. It Works when: Market is highly price sensitive, Production and distribution costs fall as sales volume increases, Low price must help keep out the competition



B) Product Mix Pricing Strategies – The Strategy for setting a product price often has to be changed when the product is part of a product mix. We now take a closer look at the five product mix pricing situations as below –

Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits.

Optional Product: Many Companies use Optional Product Pricing offering to sell optional or accessory products along with their main product .For example – A Car buyer may choose tp order power windows& a CD player. Refrigerator come with optional ICE MAKERS

Captive Product Pricing: Company’s that make products that must be used along with a main product are using captive pricing. Examples of captive products are RAZOR BLADES,VIDEOGAMES,& PRINTER CARTRIDGES.Producers of the main product often price them low and set high markups on the supplies .Gillete sells low priced razors but make money on the replacement cartridges .Hewlett Packard makes very low margins on printers cartridges & other supplies.

By Product Pricing Strategies – In Producing petroleum products, chemicals,and other products there are often by –products. If the By – Products have no value and if getting rid of them is costly this will affect the pricing of the main product. Using by product pricing the manufacturer will seek a market for these by product and should accept any price that covers more than the cost of storing and delivering them.

Product Bundle Pricing - Using this kind of pricing, Sellers often combine several of their products and offer the bundle at a reduced price. For example – fast food restaurants bundle a burger, fries,and a soft drink at a combo price.

C) Price Adjustment strategies - Companies usually adjust their basic prices to account for various customer differences and changing situations .This strategy is depend upon discounts and allowances,segmentation of market, psychology of consumers, new promotion mix, geographical selectivity, and international market.Price adjustments strategy involves the following –

Discounts & allowances strategy – This is a widely used pricing strategy in the situation of stiff competition .The area and scope of discounts and allowance strategy is broad due to various objectives .It may serve to motivate consumers to purchase more, to induce middleman to sell more, to keep production lines in operation etc.This strategy have some forms as discussed as below –

No Discount Strategy Under this strategy…..

1 Quality Discount

Deduction offered from the prices by seller in order to encourage middleman or dealers to buy larger quantities of products. Quantity discounts may be divided into two categories :

a) Cumulative Quality Discount b) Non cumulative quality discount

2 Trade Discounts Trade discount is price cut offered on list price of the product. Manufacture may offer it to middleman .Middleman may offer it to customer

3 Cash Discount Cash discount is a cash deduction granted to buyers for paying their bills within a specified period of time .Wholesalers usually adopt this method to motivate retailers to pay their bills to secure cash discount.

4 Seasonal Discount If a marketing company produces a product which is purchased seasonally, it may adopt the strategy of granting a seasonal discount to buyers. By seasonal discount a company can maximize its sales.



5 Off – season discount

To keep the production lines in operation reasonable order during the slack season, a marketing company may off season discount to the buyers of its product.

6 Promotional allowances

Promotional allowances are price reductions granted by a marketing company in payment for promotional services performed by channel members.

Segmented pricing – Company will often adjust their basic prices to allow for difference in customers , Products and locations .In this pricing the company sells a product or service at two or more price,even though the difference in price is not based on differences in costs .

Psychological pricing - This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 thousands not one lakh.

Geographical Pricing - Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Promotional Pricing- Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

BRAND/BRANDING “Isn’t branding only relevant in the fmcg sector?” Brand A brand is a collection of images and ideas representing an economic producer; more specifically, it refers to the concrete symbols such as a name, logo, slogan, and design scheme. Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service, both directly relating to its use, and through the influence of advertising, design, and media commentary. A brand is a symbolic embodiment of all the information connected to a company, product or service. A brand serves to create associations and expectations among products made by a producer. A brand often includes an explicit logo, fonts, color schemes, symbols, sound which may be developed to represent implicit values, ideas, and even personality. The brand, and "branding" and brand equity have become increasingly important components of culture and the economy, now being described as "cultural accessories and personal philosophies". Branding as a discipline is probably most commonly associated with fmcg (fast moving consumer goods) – physical products bought more or less routinely. Many consumer companies such as Coca-Cola, Unilever, Nestlé and Procter & Gamble have set the standard for brand marketing. However, brands are developed in every category and it is important to understand what these categories are and how the process of branding differs in each one. Perhaps the most significant development is the evolution of the organization brand which introduces the idea of stakeholders as a key target audience.

http://en.wikipedia.org/wiki/Advertising

http://en.wikipedia.org/wiki/Design

http://en.wikipedia.org/wiki/Symbolism

http://en.wikipedia.org/wiki/Product_%28business%29

http://en.wikipedia.org/wiki/Service

http://en.wikipedia.org/wiki/Expectation

http://en.wikipedia.org/wiki/Production%2C_costs%2C_and_pricing

http://en.wikipedia.org/wiki/Logo

http://en.wikipedia.org/wiki/Trade_dress

http://en.wikipedia.org/wiki/Symbol

http://en.wikipedia.org/wiki/Sound

http://en.wikipedia.org/wiki/Value_%28personal_and_cultural%29

http://en.wikipedia.org/wiki/Ideas

http://en.wikipedia.org/wiki/Personality

http://en.wikipedia.org/wiki/Brand_equity

http://en.wikipedia.org/wiki/Culture

http://en.wikipedia.org/wiki/Economy



Different types of brands In terms of complexity, the branding issues multiply as the underlying product becomes less tangible. Product brands lie at the relatively simple end of the scale. They are easy to understand. Service brands are on the other end of the scale, as they are difficult to evaluate prior to purchase. Although all brands have one goal – to enhance their perceived value – it is important to understand how that value delivery differs across different types of brands.

1. Product brands (1) Fast moving consumer goods (fmcg) such as cereals, drinks, washing powders, personal care, confectionery. Characteristics: Cost- Inexpensive. Balance of product to service - Almost exclusively tangible product, although service

component can be present (eg, customer-care lines). How purchased -Mainly through conventional fmcg distribution networks – supermarkets,

other shops, vending machines, relatively large volume outlets. Frequency of purchase - Frequent. Degree of research/thought/search - prior to purchase & Typically none, the brand is part of

the consumer repertoire, likely to be habitual. Degree of customization - Very little. Often wide range of variants but no real customisation

for individual customers.

2. Product brands (2) Big ticket items (eg, appliances, cars, houses,boats, furniture, and luxury items such as jewellery, high fashion and watches). Characteristics: >Cost - Expensive. >Balance of product to service - Service is likely to take on a more important role, before, during and after purchase. >How purchased -Traditionally through specialised outlets (luxury = high status outlets) but increasingly more widely distributed. For example, luxury cosmetics are now available in chemists, electrical appliances in supermarkets and computers available for purchase via the Internet. >Frequency of purchase - Infrequent. >Degree of research on purchase - A great deal of thought, research and comparison goes into the decision, although with luxury goods, investment is more emotional than financial. >Degree of customization - Can be considerable.

3. Service brands Service brands are characterised by the need to maintain a consistently high level of service delivery throughout hundreds, or even thousands of staff. Although a product component may be involved, it is essentially the service that is the brand. These are more complex than product brands for two reasons: both because it is always harder to brand something you can’t touch and because they are delivered directly by employees. Characteristics: >Intangibility - Service brands can seldom be tried out in advance, which requires the establishment of a greater degree of trust. >Inseparability of production and consumption - Services cannot generally be stockpiled in advance but are produced and consumed in real time. >Inconsistency - Since humans are usually instrumental in delivering services.



Different categories of service brands: >Classic service brands - eg, airlines, hotels, car rentals and banks. >Pure service providers- eg, member associations like The Automobile Association or RAC. >Professional Service Brands -eg, advisors of all kinds – accountancy,management consultancy. >Agents - eg, travel agents and estate agents.This category of a brand has become endangered by the rise of the Internet.Unless value is added in some way, thesemiddlemen will become extinct t>Retail brands- eg, supermarkets, fashion stores and restaurants.Retail Brands are complex and multifaceted.Consumers have a much more involved and interactive experience with retail brands. The meanings of retail brands are more heavily derived from consumer’s direct experience rather than from advertising Retail brands will differentiate themselves in different ways, including: >explicit customer oriented policies – eg,Prêt à Manger, Carphone Warehouse. >Particularly unique combination of offerings – eg, Selfridge. >Concentration in one category or breadth of range – eg, Amazon, Toys-R-Us. >Own label – eg, Tesco Finest, M&S St Michael.

4. Brands from other spheres E-brands -The Internet is a medium that presents new challenges for brand owners, but the underlying principles of branding are unchanged. The Internet is developing a more direct style of relationships between customers and brand owners, and all those interactions give an opportunity for strengthening the brand identity. A distinction needs to be made between ‘e-tailers’ like Amazon.com, whose primary activity is to deliver physical products, and other e-brands, which focus on delivering a service or experience, like lastminute.com or monster.co.uk. In both cases, however, it is the intangibles, the brand values that will attract online customers. Five success factors for e-branding: 1. A clear brand identity – knowing your brand and what associations you want it to have, what user profiles, brand personality, organisational associations, emotional and functional benefits. 2. The Internet needs to be fully-integrated into the total brand-building of your company – no longer can the Internet be perceived as another communication medium to be managed by silo organisations of specialists. 3. Website design needs to be consistent with brand presence off-line – the website look, feel and personality need to support the brand’s overall identity. 4. Consumers need to be motivated to return to the site – motivation usually involves information, entertainment and interactive communications. 5. Only when off-line and on-line efforts are truly linked, will traffic be driven to the website – the big pay-off occurs when visiting the website is not a discrete action, but rather part of a larger brand experience. Not-for-profit organisation brands - Non-profits are often at a disadvantage when it comes to branding. After all, they don’t have the deep pockets of corporations who can afford to hire brand specialists, nor do they have staff whose job it is to protect the integrity of the brand, and promote it at every turn. But successful branding can have a great effect on raising awareness of the charity and its mission, and on fund-raising. Nation brands - New ways of thinking lead to countries being positioned as tourist destinations, enhancing status of goods and services produced, and aiding under-developed countries. Government brands - Governments and political parties often have strong brands as they are centred on passionately held core values, eg low taxes for Republicans, environmental issues for the Green party. Branding is important in both securing votes and in international diplomacy.



Global brands- Companies have been marketing their products and brands in different countries for decades. However they were almost always marketed according to local conditions. The exceptions are the famous ones – Coca-Cola, Marlboro, McDonald’s and a few others. FEATURES OF GLOBAL BRANDS 1.strong in home market – cash flow generated from domestic market enables the company to fund a global rollout. 2. at least minimum level of awareness,recognition and sales all over the world 3. the products meet the same human needs world-wide, even though the physical product may be adapted locally (eg, McDonald’s). 4.consistent positioning. 5.consumers value the provenance of the brand, its country of origin, and even associate the country’s expertise with specific products (eg, German cars,American jeans). 6 focus on a specific product category. 7 use single corporate brand name.

“Brands don’t ‘work’ – surely it’s just about spending money to makeproducts look good?”

SPECIFIC WAYS IN WHICH BRANDS WORK – Brands work as: A bridge between buyers and sellers Influencers of choice A marketing tool Surrogate people Symbols of quality Trust-marks,career enhancers Signifiers of discernment Spawning grounds for developing newproducts Magnets, even attracting vandals A source of added value.

Brands work by: Creating an emotional response Dividing people into ‘for me’ or ‘not for me’ Reassuring Tapping into values Appealing to the emotions Confirming beliefs Bypassing rational scrutiny Raising the bar’ for competitors Operating differently across the purchase cycle Generating faith.

Brands work to: Shock Command a premium Reassure Lower barriers to resistance Generate affinity with users Promise consistency Create belief Create markets Command a mindspace Create loyalty.



Brand onion – cross-section showing the layers that underpin brand positioning

“A strong brand will look after itself.” BRAND STRATEGY

Brand strategy is one of the most fraught areas of marketing, though clearly also one of the most important. There are many problems with definition. The key point is you can’t have a strategy without a clear objective. Restating a goal is not strategy, execution is not strategy, and tactics are not strategy. A brand cannot function without a strategy and the function of brand management is to implement brand strategy. What is strategy? “The objective of strategy is a sustainable competitive advantage, which may come fromany part of the organisation’s operation. The market is the judge of this advantage. Brand strategy is the process whereby the offer is positioned in the consumer’s mind to produce a perception of advantage.” [Arnold, 1992 ] >Strategy is essentially a discipline of planning, of setting a course for the long term or to achieve a specific goal. >Its origins lie in game theory and the military. The dictionary definition is ‘the science and art of conducting a military campaign in its large scale and long term aspects’. It is mainly used to refer to corporate strategy and business strategy. >It was made fashionable in the ’80s by Michael Porter in his classic text, Competitive Strategy (1980), in which business is acknowledged as a competitive battle in which strategy is essential to winning. Competitive advantage could either be achieved by low cost or differentiation. >A brand’s longevity and strength has to be built less on price and more on differentiation. In markets cluttered with messages, and where a certain level of quality of product and/or service is expected by customers, brand owners have to find ever new ways to foster loyalty. Who should be responsible for brand strategy? “Corporate conviction and commitment offer the key to excellence in brand management and these are things that can originate only at the highest level within a business, otherwise,like a thinly-rooted plant, good practice will be washed away by the first winter storm.”[Sir George Bull, Market Leader, Spring 1998].



>For several decades marketing was characterized by powerful brand management systems that devolved marketing responsibility onto the shoulders of bright but young brand managers eager to make their mark quickly. They had substantial powers over the brand strategy, image and positioning. >This is changing irrevocably as brand strategy becomes too fundamental a part of a company’s worth to be left to a relatively self-contained marketing department. Marketing is now too complex a discipline and one with too many cross-functional implications for companies to entrust it entirely to junior managers. Of course,strategic branding programs are highly specific to industries. As such, the following key points should be adapted as necessary to suit one’s particular product and service line. 1. Establish and Maintain the Brand - As a threshold issue, it will be extremely important to establish and maintain the brand. When doing so, the adoption of a holistic approach, or an “overall brand strategy” is recommended. Such overall brand strategy should be implemented with full recognition that the brand may traverse numerous different product lines and geographic regions. Adopting an overall brand strategy also requires recognition that brands are significant to both the traditional retail and the online market. 2. Ensure Consistency Between the Brand Licensing Strategy and Overall Business Goals - Effective brand management strategies also necessitate emphasis on ensuring consistency between the brand licensing strategy and the enterprise’s overall business goals. Efforts should be undertaken to ensure that the brand reflects positively on the company, does not detract from other product lines and remains profitable with other parts of company. 3. Select Profitable and Innovative License Partners - The importance of consistency should also be reflected in the selection of license partners. Focus should surely be placed upon license partners that



enjoy healthy businesses and that offer innovative products. At the same time, however, emphasis should also be placed upon licensee partners with similar cultures and business goals since doing so may help to reduce the amount of time that is expended on reaching the basis business terms. 4. Focus On Maximizing Leverage of the Brand - Successful brand management will involve focus on the maximizing the leverage of the brand. Of course, this may mean different things in different context. However, in all circumstances, a considered judgment regarding brand placement will be crucial. 5. License Agreements: Exclusive or Non-Exclusive? - The exclusivity of the license agreement will be a key factor in brand management. Whether the license agreement will be exclusive or non–exclusive will have important implications for all of the business. When considering the exclusivity of a license grant, it must be recalled that the license can only be granted once as an exclusive license. Accordingly, particular scrutiny must be directed towards the strategies and business goals of potential exclusive licensees. 6. License agreements Must Include Effective Means For Enforcing Key Provisions - All license agreements should include effective means of enforcement. Most license agreements will address extremely important issues including quality control standards and reporting standards. However, such standards and requirements will not be of much use without effective enforcement mechanisms to back them up. 7. Be Pro-Active on Products & Services - Licensors should be not adopt a “hands off” approach when dealing with the licensee’s products and services. Rather, efforts should be undertaken to ensure that the licensee’s products are desirable and up-to-date. Clearly, it will be in the licensor’s interest to ensure that its brand will be affixed to the most popular products and services. Of course, consumer interest can change over time so it will be essential to periodically monitor changes in demand for the licensee’s product and services. 8. Allocate Ownership & Control of IP Assets Equitably - When undertaking a brand licensing relationship, it will also be important to allocate equitably ownership and control of the IP assets. While this will be an important issue in all relationships, it will be particularly important when a long-term relationship is contemplated.

CASE STUDIES 1.Marketing of Honey

In a very basic form, honey is being used in India for centuries. The product finds reference in our ancient scripts and its considered an integral part of good health, and is also used for its medical value in many Ayurvedic and Unani medicines. The products come from beehives, which are found in jungles and at old places. The business of honey is mostly unorganized and in the urban market, sales are limited to outlets at village/ cottage industry emporiums and small industry promotion outlets, which are owned by various government agencies. In the organized sector, Neptune Industries Ltd., a Rs. 300 crore company, was the first to enter the market with its branded honey, Sweet. The company sourced large volume of honey from beehives developed by them and marketed the product in glass jars at retail outlets. The product was handled by ayurvedic products division of Neptune, which produced a range of natural medicated products for common ailments. The products were distributed and sold through the existing network of the company and were initially available at around 30,000 outlets in the market. Though the company managed to raise sales revenue of Rs. 10 crore in the first three years, the demand for ‘sweet’ was low. For a virtually competition-free market and high equity product, this sales figure was not at all impressive. The reason for low growth was the company’s reluctance to aggressively push the product or promote it through any systematic campaign.



After three years of marketing, Neptune still had no competitor and the market grew by 6%. The Head, products, Ramanuj S. still felt that the market would take some time to grow but had a vast potiental. He decided to develop a long-term strategy for the product and push the advertising efforts slowly. By the year 1993, three more companies entered the market with branded honey in different regions. Several regional players entered the market and scored over ‘Sweet’ in terms of price. With little product differentiation. The sales of ‘Sweet’ fell by 20% in the interior regions. Within one year’s time, the market of branded honey, which stood for about 65 crore, had four major brands and 3-4 regional brands in direct competition of ‘Sweet’. Meanwhile, an international company, which sold branded honey overseas, also entered the Indian market. The company, according to industry speculations, was to enter market with huge advertising support and had decided to position its product as a healthy breakfast supplement. It was also believed that the company would buy out one leading south-based brand. This was the right time for Neptune to leverage on its image and reputation and push the product heavily to ward off any threat to its growth and market share. Ramanuj called the ad agency, which handled major products for Neptune, and assigned them the task of developing the campaign for ‘Sweet’. An ad budget of Rs. 50 lakh was recommended for the next year. The agency started with a consumer and retailer survey to identify the characteristics of the market. The surveys result showed that:

1. The average household consumption of honey in cities is 32 gms annually. 2. The branded honey Neptune was considered more of a remedy for cough/cold or as a medicine. 3. Neptune Ayurvedic products used honey and hence honey as a single product was considered

as an extension to health-related medicinal products only. 4. The brand personality was dull and traditional. 5. Using honey as a tasty breakfast supplement was not a hot favourite with consumers, who so

far considered honey as a medical value. The agency decided to use a three-fold approach to handle the product:

1. Promote honey as a nutritional supplement to be used along with breakfast/food. 2. Target the housewife and offer her a healthy and tasty product for her family. Also inform her

about the various use occasions. 3. Emphasize quality and purity of ‘Sweet’ by leveraging on reputation of brand and company.

The agency wanted to expand both the consumer base and usage frequency among the consumers. The consumers for the product were children as well as adults and hence the agency wanted to target the whole family as a unit. The ads were designed keeping in mind that the buyer of food products is mainly the housewife and hence the message theme was oriented toward appealing and convincing her. The agency used TV commercials and print advertisements. The TV commercials were used to create awareness of the product and the theme was “A quality health product from Neptune.” The print advertisements provided detailed copy about how honey can be used with breakfast or other meals. Another innovative approach used by the agency was to participate in parent-teacher meetings of schools for children up to Class VIII. Neptune also sponsored some activities in these schools, such as sports activities and distributed prizes to children. During the ad campaign that would continue for four months, for a period of two months, the company introduced a free gift of a launch-box with the purchase of two 500 gms bottle of ‘Sweet’. The retailers were given incentives to reserve attractive shelf-space for ‘Sweet’ and several POP materials were displayed. Questions

1. According to you, what are the deciding/influencing factors in the purchase of food products? 2. Write two appeals that you consider most appropriate for ‘Sweet’. 3. What advertising and sales promotion efforts can Neptune use to attract consumers who have

not responded so far?



2.CASE STUDY - ELASKA REFRIGERATORS

Elaska Home Application is apublic sector undertaking and manufactures a large number of home appliances, such as refrigerators, microwave ovens, refrigerators, televisions, and washing machines, under the corporate brand name “Elaska”. The company entered the market in late 70s under collaboration with a German manufacturer to produce home appliances. At this time, Elaska was one of the major three manufacturer and established itself as a leading company in home appliances with a market share of about 35 percent. In the year 1979, the German collaboration of Elaska was liquidated and the partnership ended. For one and a half-year the company faced major problem and the management settled down for a new collaboration with a Japanese giant in home appliances, Hankwa. This company was a market leader and technologically superior to most of its competitors. Elaska continued to sell all its products under its own brand name. The early 1980s witnessed the entry of a number of manufacturers in the home appliances industry and as a result of intensifying competition Elaska gradually began losing its position as one of the leaders. Its market share dropped to nearly half of the earlier share by 1992. its major competitor was West ways, a highly reputed company in India. Unlike Elaska, West ways was involved in manufacturing and marketing a wide rained of products, ranging from FMCG to appliances to soft drinks, and office equipment. West ways had entered the market in 1982 and by 1992, had captured a market share of about 37% in home appliances market.

Table: Market share of major home appliance manufacturer Company 1987 1993 West ways 245 37%

Elaska 37% 195 Beetle 9% 11% Hi-tech 6% 4%

3.CASE STUDY –CONSUMER BEHAVIOR :MODERNIZING SALES OUTLETS

Mr. Harish Panjwani was a refugee when he started his small grocery business about 40 years back. Initially, he hawked his good door to door and soon developed a sizeable number of steady customers. This was largely due to his sober temperament,reliable dealings and his amiable nature. His extrovert nature helped him develop many friends and well-wishers. Over a period of time, Mr Panjwani became a socially prominent person with good acquaintances from many walks of life. He expanded the range of his business activities and he now own several shops dealing in consumer durables, dairy products and also has a general store besides a large medical shop. Beingof a conservative frame of mind, he feels emotionally attached to his original grocery business and continues to operate it with enthusiasm. His business place has even come to be associated with a meeting venue for people of his generation to meet.

His children are grown up and the eldest one, Rajesh, has just returned from abroad after completing his management education there. Ambitious by nature, Rajesh would like to expand his business fast. He feels that he needs to be ‘professional’ in his approach. In his option, his father’s way of dealing with people is outdated. Many a times, he feels irritated when his father’s old friends drop in at the shops and spend time talking with him. Rajesh feels that this type of casual come together is a waste of time. He would prefer to be more ‘business’ like. He would to deal with them as customers only, serving them with precision and in a methodical manner. He expects that his customer should appreciate this ‘modern’ way of doing business. He has, however, broached his inner feelings only in an indirect way to his father, and he found that this father believes in maintaining close personal links with his customers. Some of the customers have, anyhow, started noticing the change in the way in



which Rajesh deals with them.They feel that the old ‘warmth’ of their relationship with the senior Panjwani is somehow missing and they are now less welcome at the shops. Questions 1. What do you think is the contribution of personal relationship in such a business? 2. Do you agree with the approach adopted by Rajesh? Do you have any suggestion to make? Taken from the fourth semester examination question paper of Pune University.