Commerce ePathshala: IGNOU : BCOM : BCOE 141 - Principles of Marketing ( NOTES FOR FREE )

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IGNOU : BCOM

BCOE 141 – PRINCIPLES OF MARKETING

Q - What are the marketing concepts? Explain the process of evolution of these concepts.

Ans. MARKETING CONCEPTS

There are five different marketing concepts under which business enterprises conduct their marketing activity:

· Production concept

· Product concept

· Selling concept

· Marketing concept

· Societal concept

Production Concept

This is probably the oldest concept. Some businessmen believe that the consumers are interested only in low priced, easily and extensively available goods. The finer points of the product are not very important to them. So the producers believe they must concentrate only in efficient (economical) and extensive (large scale) production. A company which believes in this approach concentrates on achieving high production efficiency and wide distribution coverage.

Product Concept

As against the production concept, some organisations believe in product concept. The product concept implies that consumers favour those products that offer the most quality, performance and features. They also believe that consumers appreciate quality features and will be willing to pay 'higher price for the 'extra' quality in the product or service made available. Hence, those companies which believe in this concept concentrate on product and its improvement. While improving the product they rarely take into consideration the consumers' satisfaction and his multifarious needs. Even when new products are planned, the producer is concerned more with the product and less with its uses or the consumer needs. For example, a biscuit manufacturer produced a new brand of biscuits with good ingredients, colour, packaging, etc., without taking into account consumer tastes and preferences. This may fail in the market if the biscuit does not taste good to the ultimate consumer.

Selling Concept

Sometimes the main problem of the enterprise is not more production, but to sell the output. Similarly, a better product may not assure success in the market. Hence selling assumes greater importance. So some producers believe that aggressive persuasion and selling is the crux of their business success, and without such aggressive methods they cannot sell and survive. Therefore, attention is paid to find ways and means to sell. They also believe that customer/consumers left to themselves, will not buy enough of organisation's products and services, and hence considerable promotional effort is justified. Thus, the selling concept assumes that consumers on their own will not buy enough of organisation's products, unless the organisation undertakes aggressive sales and promotional efforts. Many insurance agents, sales persons of certain electrical gadgets, health drinks, soft drinks, and fund raisers for social or religious causes come under this category.

Marketing Concept

In an evolutionary process, many organisers have come to change their focus and to see their marketing tasks in a broader perspective. Marketing concept is considered a business philosophy wider in its implications. Under the marketing concept, the organisation considers the needs and wants of consumers as the guiding spirit and the delivery of such goods and services which can satisfy the consumer needs more efficiently and effectively than the competitors. It is also said that the marketing concept is consumer orientation with the objective of achieving long run profits. It is a modern marketing philosophy for dynamic business growth. In other words, under this concept the task of marketing begins with finding what the consumer wants, and produce a product which will meet that want and provide maximum satisfaction. Implicitly, the consumer is the boss or king who dictates. The focus which moved from the product to selling, now rests with the consumer.

Societal Concept

With the growing awareness of the social relevance of business, there is an attempt to make marketing also relevant to the society. In a sense, marketing is not a business activity alone but must take into account the social needs. Excessive exploitation of resources, environmental deterioration and the customer movements in particular have necessitated the recognition of the relevance of marketing to the society. Marketing then must be a socially responsible or accountable activity. The societal concept holds that the business organisation must take into account the needs and wants of the consumers and deliver the goods and services efficiently so as to enhance consumer's satisfaction as well as the society's well being. The societal concept is an extension of the marketing concept to cover the society in addition to the consumers.

In effect, a company which adopts the societal concept has to balance the company profit, consumer satisfaction and society’s interests. The problem is almost the same as that of social responsibility of business. What is good for the society is a question to be decided. A voluntary acceptance of this concept is desirable for the long run survival of private business. An effective implementation of the societal concept will certainly enhance the goodwill of the business house. The business enterprises which believe in this concept will produce and market those goods and services which are beneficial to the society, those that do not pollute the environment, and give full value for the money spent.

Q – State the difference between Selling & Marketing.

Ans.

.No.	SELLING	MARKETING
01.	Selling refers to creating products and selling them to customers.	Marketing refers to finding wants of people/customer and fill them.
02.	Selling revolves around the needs and interest of the seller.	Whereas Marketing revolves around the needs and interest of the consumer.
03.	It emphasis more on product or service.	It emphasis more on consumer needs and wants.
04.	Selling is a only an integrated part of the marketing process.	While marketing is a wider term consisting of number of activities.
05.	Selling is based on short term business planning.	Marketing is based on long term business planning.
06.	It manufactures the product first.	It identifies the market first.
07.	It is sales volume oriented.	It is customer satisfaction with profit oriented.
08.	It views business as a goods producing and selling process.	It views business as a consumer satisfying process.
09.	Here seller is considered as king pin of market.	Here consumer is considered as king pin of market.

Q – What is marketing environment? Describe the macro environment and micro environment of marketing.

Ans. Marketing Environment

Marketing system of every business organisation is influenced by a large number of controllable and uncontrollable factors that surround the company. So the marketing system of a company must have to operate within the framework of the environmental forces. According to Philip Kotler, a company's marketing environment consists of the actors and forces outside of marketing that affect marketing management's ability to develop and maintain successful transactions with its target consumers. For example, the relevant environment to a car manufactures and buyers, tyre manufacturer may be the other car manufacturers competitors and the tyre manufacturing technology, the tax structure, imports and export regulations, the distributors, dealers, competitors, etc.

Micro Environment

Organisation's Internal Environment: Organisations financial, production and human resource capabilities influence its marketing decisions to a large extent. For instance, while deciding about the sales targets, it is necessary to see whether the existing production facilities are enough to produce the additional quantities or not. If the existing facilities are not enough and expansion to plant and machinery is required, it is necessary to think about financial capabilities.

Suppliers: For production of goods or services, you require a variety of inputs. The individuals or firms who supply such inputs are called suppliers. Success of the marketing organisation depends upon the smooth and continuous supply of inputs in required quantities on reasonable terms. Hence suppliers assume importance. The timely supply of specified quality and quantity makes the producer to keep up the delivery schedule and the quality of the final product. The dependence on the supplier is naturally more when the number of suppliers is more. During periods of shortages, some suppliers may not supply materials on favourable terms. Each supplier may negotiate his own terms and conditions, depending upon the competitive position of his firm. Some suppliers, for example, expect payment in advance, and goods are supplied on the basis of a waiting list, whereas others may be ready to supply on credit basis.

Intermediaries: Normally, it is not possible for all the producers to sell their goods or services directly to the consumers. Producers use the services of a number of intermediaries to move their products to the consumers. The dealers and distributors, in other words the marketing intermediaries, may or may not be willing to extend their cooperation. These persons normally prefer well established brands. Newcomers may find it extremely difficult to find a willing dealer to stock his goods. From newcomers they may demand favourable terms by way of discount, credit, etc., and the producer may find it difficult to satisfy them. There are also other intermediaries like transport organisations, warehousing agencies, etc., who assist in physical distribution. Their cost of service, accessibility, safe and fast delivery, etc. often influence the marketing activities.

Competitors: Competitors pose competition. Competitors, strategies also affect the marketing decisions. Apart from competition on the price factor, there are other forms of competition like product differentiation. There are also competitors who use brand name, dealer network, or close substitute products as the focal point. Their advertising may present several real or false attributes of their product. If one advertises that his product has an imported technology, the other may say that he is already exporting his product. Competitor's strategies sometimes may change an opportunity in the environment into a challenge.

Customers: There are many types of customers. A firm may be selling directly to the ultimate users, (consumers) the resellers, the industries, the Government or international buyers. It may be selling to any one or all of these customers. Each type of consumer market has certain unique characteristics and the marketer should be fully acquainted with the art of persuading and selling to these consumers. The environment presented by customer profile will have a direct influence on these marketing activities.

Macro Environment

The macro environmental factors that exert influence on an organisation's marketing system are: 1) physical environment, 2) technological environment, 3) political and legal environment, 4) economic environment, 5) demographic environment, and 6) social-cultural environment.

Let us discuss about these factors in a little more detail.

Physical Environment: The earth's natural renewable resources (e.g. forest, food products from agriculture, etc.) and finite non-renewable resources (e.g. oil, coal, minerals, etc.), weather (climatic) conditions, land shapes and water resources are components of an environment which quite often change the level and type of resources available to a marketer for his production. For example, India does not have enough petroleum resources, and imports petrol and other products. India’s international relations may facilitate the supply of petrol and diesel. This has lot of implications for the companies consuming petro-products.

Technological Environment: Technology is shaping the destiny of the people. The revolution in computers, electronics and communication in general may make one's production out of the tune with the current products and services. For example, printing technology like laser printing and desk top publishing, has already made the labour-intensive type-set printing uneconomical. Digital printing is tremendously cutting down the cost of large print jobs. New printing has gone a notch higher. 3D printing is being used in the clothing industry.

Political and Legal Environment: Political changes bring in new policies and laws relevant to industry. Government regulation continues with different intensities and the law and the rules framed there under are becoming complex. Many areas of business are brought under one law or the other, and the marketer cannot escape from the influence of these laws. The tax laws, the Goods and Services Tax (GST) excise duty, octroi, income-tax, etc., have direct bearing on the costs and prices of the products and services marketed. So also the policies relating to imports and exports. Since these factors affect all the units, (they do not affect a single marketer alone), these are considered as the forces in the macro environment.

Economic Environment: The state of the economy measurable in terms of the Gross National Product (GNP) and per capita income as well as the favourable or unfavourable position of the balance of trade determine the economic environment. Occurrences of war, famine and per capita income as well as the favourable or unfavourable position of the country. For example, if the monsoon is good, the agriculture output will be more and the people depend on agriculture get more income. This enables people to buy more consumer goods. Thus, the demand for consumer goods increases. Similarly, a bad monsoon will adversely affect the demand for fertiliser. The personal and corporate tax system also determines the available income for spending on a variety of goods.

Demographic Environment: Marketers are keenly interested in the demographic characteristics such as the size of the population, its geographical distribution, density, mobility trends, age distribution, birth rate, death rate, the religious composition, etc. The changing life styles, habits and tastes of the population, have potentials for the marketer to explore. For example, when both husband and wife go for jobs, the demand for gadgets that make house-keeping easier and the semi-cooked food products increase.

Socio-Cultural Environment: There are core cultural values which are found stable and deep rooted, and hence change very little. There are also secondary cultural values which are susceptible to fast changes. Some of them like hair styles, clothing, etc. just fade. Even in a given culture, the entire population may not adopt the changes. There are different degrees with which people adopt them. Religion is also an important component of culture which has implications for the marketer. For example, Hindus worship the cow and do not eat beef. So the products made out of beef meat do not have demand. Thus the culture of the society influences the consumption pattern to a certain extent also pervades other human activities by determining their values and beliefs.

Q – Describe the marketing environment in India.

Ans. India is a vast country populated by more than 138 crore people. Its unique feature is its diversity of religions, languages, social customs, regional characteristics, which is both a boon and a bane for the marketer. Its boon because there is tremendous scope for a wide variety of products and services to be successfully marketed and a bane because the marketer often needs to adapt his marketing strategy to suit different tastes and values. There are marketers who may find that the Indian environment is full of profit potential. It means that there are buyer for anything one may produce and there is market for everything. There are others who take a somewhat pessimistic view by considering the poverty and shortages of requisite inputs. However, one can confidently say that the market is vast, quality consciousness among consumers is increasing, and there is demand for new and improved products and services and these trends may continue for a long time.

Despite 75 years of Independence, India is still dominated by villages and almost 65 per cent of population is located in the rural areas. These rural areas are today enjoying the fruits of the Green Revolution and the purchasing power of the rural population is increasingly demanding attention from the marketer who had so far concentrated only in urban areas. No doubt the urban areas with their concentration of numbers and market potential are the priority target markets, but a firm which wants to ensure its future survival must start making inroads into the rural mark well. Government expenditure on rural development has increased the purchasing power of the rural public. Improvements in transport, communication, literacy etc have made many new markets accessible. The capacity to see the opportunity and work out an appropriate marketing strategy can open the doors to the marketers.

There are a large number of companies, public sector undertakings, factories and small-scale units, all of which comprise the organisational consumers, operating in the country. While the public sector usually follows a bureaucratic long winded and time consuming procedure for making even the smallest purchase, the private sector decision-making is relatively quicker and free of procedures. If you are marketing your products/ services to both the public and private sectors, you may like to think about having separate marketing organisations for them. Another major difference between the public and private sector is in the timing of the purchase decision. The public sector companies have an annual budget sanctioned to them by the government and the money from this is used for purchasing a variety of products. The public sector units feel compelled to use the entire budget amount, because if they do not, they run the risk of having a reduced budget in the subsequent years. You would find a flurry of purchases during the quarter preceding March when the financial year ends. So if the public sector companies are your major consumers, you should bear the timing factor in mind. In case of private sector companies, you would generally not find such a peaking of purchases in any particular month of the year unless it is linked to seasonality of production or sales.

Q – What is market segmentation? Explain the importance of segmenting markets.

Ans. Lack of homogeneity may be seen in the real world in both supply side and demand side. On the supply side, many factors, like difference in production equipment and processing techniques, difference in the nature of resources or inputs available to different manufacturers, progress among the competitors in terms of design and improvement, etc., account for the heterogeneity. As a result, imperfect markets in which firms lack uniformity in their size and influence) are common. This problem may be solved to some extent, by market segmentation.

Market segmentation, is the process of dividing the total market into one or more parts (submarkets or segments) each of which tends to be homogeneous in all significant aspects.

IMPORTANCE OF MARKET SEGMENTATION

In marketing a product is not possible to appeal to all buyers in that market. The buyers are numerous, widely scattered, and varied in their buying requirements and buying practices. Some competitors may be in a better position to serve a particular segment of the market. Each company has to identify the most attractive segment of the market which it can serve effectively. Accordingly, market segmentation has the following advantages:

1) You need not waste your marketing efforts over the entire area. You can concentrate on a specific segment and achieve better.

2) As you are not treating all customers alike, you can take care of specific requirements of each segment more effectively.

3) It helps to pay proper attention to particular areas.

4) Market segmentation enables you to frame and adopt separate policies to meet the needs of the different buyer groups.

5) You can use the advertising media effectively by developing promotional programmes specifically for each segment.

6) More efficient use of the marketing resources is possible.

7) Each of the 4Ps of the marketing mix-(product, price, promotion and physical distribution) can be designed with the target market in mind.

Q – Why do new Products Fail in Market?

Ans. Even after thorough screening at each and every stage, all the new products introduced in the market may not succeed. Many of them fail and are withdrawn from the market. For example, as stated earlier, Hindustan Unilever failed with their Hima Peas and Fast Foods. Similarly, Parle's hamburger 'Big Bite' was a failure in some markets while successful in other markets. Thus, every product introduced in the market may not succeed. Now the question is: Why do 32 products fail in the market? The reasons for product failure are attributed to six factors by Cundiff and Still. They are:

1) Product Problems: The products fail in the market due to certain problems with product itself. For example, as neglect of market needs or ignorance of market preferences, defects in product function, poor technical design or external appearance, poor packaging or inappropriate sizes, undependable performance or too high a variation in quality, etc.

2) Distribution and Channel Problems: Products fail due to certain problems in Distribution such as inappropriate channels or outlets, lack of co-operation from middlemen, poor system of physical distribution, etc.

3) Promotional Problems: Promotional problems that contribute to the product failure are: inadequate or ineffective promotion, advertising directed towards wrong market segments, improper use of wrong appeals, failure to co-ordinate adequately with distribution system, improper training to sales force, etc.

4) Pricing Problems: Pricing problems such as bad forecast of price that buyers would pay, price not on par with product quality, poor cost estimates caused ‘asking price’ to be too high, inadequate margins for the middlemen, etc. also responsible sometimes for product failure.

5) Timing Problems: Timing of product introduction is very important. If product is introduced too soon or too late, it may fail.

6) Competitive Problems: Competitors' aggressive strategies with respect to product distribution, promotion and price may cause serious setback to the product in the market. The company had to react defensively rather than pursuing strategies.

The number and variety of the reasons for product failure suggest that success of a new product depends on the skills and strategies not only in product innovation but in formulating and implementing marketing strategy. Throughout the product innovation process, management should carefully watch the target market. An appropriate organisation is required to guide and co-ordinate the product innovation process at each and every stage. Besides introducing the product at appropriate time components of marketing strategy (product, distribution and marketing channels, promotion, and price) must be combined in appropriate proportions at each stage of the product life cycle. Skill in implementing the marketing plan is required and be capable of changing the strategies in accordance with the changing market and competitive conditions.

Criticism of Packaging

Packaging is also subject to severe criticism because of the following reasons:

1) After consuming the product, consumers throw-away the containers in public places causing environmental problems. How to dispose of used containers is one of the major problems.

2) Scarce raw materials are consumed for the manufacture of containers. This depletes our natural resources. However, this criticism is offset as more and more recycled materials are used for packaging.

3) Packaging increases the product cost and this leads to higher prices to consumers. But it is argued that effective packaging reduces the transport costs and the losses due to spoilage. The benefits so derived may offset the cost of packaging.

4) Health hazards occur from some forms of plastic packaging and some aerosal cans.

5) It is also felt that sometimes packaging is deceptive. Customers may feel that the product inside is of good quality due to attractive packaging. Products of poor quality may be packed in attractive containers to catch the attention of customers.

Q – State the requirement of segmenting a maket.

Ans. REQUIREMENTS FOR SEGMENTING A MARKET

The variable on the basis of which the market is segmented should be capable of measurement and quantification. It should not be merely a subjective phenomenon. For this measurement, adequate data should be available or be capable of being collected. If the data is not available and not quantifiable, the segmentation will be difficult or unscientific.

The objective of segmentation is effective direction of marketing efforts to specific segments. Therefore, the segments themselves should be accessible through various channels of distribution advertising media, sales force, etc. If the accessibility is difficult, segmentation will become meaningless. The purpose of segmentation is, sometimes, to evolve separate marketing programmes or develop separate products to cater to the needs of separate segments of consumers. So the segments should be large enough to warrant such efforts. Otherwise, various diseconomies in production, marketing, inventory holding, etc., may arise. To be useful, market segments must exhibits the following characteristics:

Measurability: It is the degree to which the size and purchasing power of the segments can be measured. Certain segmentation variables are difficult to measure. For instance, it is difficult to measure the size of the segment of teenage smokers who smoke primarily to rebel against their parents.

Accessibility: It refers to the degree to which the segments can be effectively reached and served. Suppose, a perfume manufacturing company finds that the regular users of its brands are unmarried men who are out late at night and frequently visit bars. Unless this group of men lives in a specific locality or do shopping at certain places, for the company it will be difficult to identify them and reach them. When markets are segmented, each segment should be accessible and approachable.

Substantiality: The segments should be large enough to make efforts yield enough profits. A segment should be the largest possible homogeneous group worth going after with a definite 46 marketing programme. For example, for an automobile manufacturer it may not be profitable to develop cars for a category of persons whose height is more than 7 feet, because the number of such persons will be few.

Actionability : It is the degree to which effective programmes can be formulated for attracting and serving the segments. A small tourist car operator, for example, identified seven market segments, but its staff was too small to develop separate marketing programmes for each segment.

Q – Explain product mix. Describe various product line strategies.

Ans. PRODUCT MIX AND PRODUCT LINE STRATEGIES

Product mix of a seller, while giving expression to its current position, is also an indicator of the future. Thus, product mix is not a static position but a highly dynamic concept. A company may withdraw a product from its existing mix, if the product is not contributing to the profitability and growth of the company. Similarly, a new product may also be added to cash on some attractive opportunity that comes its way, Thus, the companies always attempt to maintain an optimal product mix with a view to maintain a balance between current profitability, and future growth and stability. For this end, a company alters or modifies the existing product line in any of the following ways:

1) Contraction of the Product Line: When a company finds that some of its products are no more profitable, it may decide to suspend their production. Similarly, changes in the marketing environment may also necessitate withdrawal of a product. A product may also be dropped from the product line if it is found that the same resources used for the production of the product can be put to more profitable use by producing another product. Decisions relating to these aspects are termed as "Contraction of the Product Line". Thus, thinning out the product mix either by eliminating an entire line or simplifying the product items within the line is called contraction of product line. This is also called Contraction of Production Mix or Product Line Simplification. This strategy is adopted mainly to eliminate low-profit products and to get more profit from fewer products.

2) Expansion of Product Mix: To cash on available opportunities, a company decides to expand its present product line. It may also increase the number of product lines and/or the depth within a line. Such new lines may be related or unrelated to the existing product mix. For example, a company dealing in drugs and chemicals may add products in a relatively new area like Computers.

3) Changes in Quality Standards: When the market expectations undergo a change a firm may have to react by altering the quality standards of the existing product techniques. Such changes can be brought about through Trading Up and Trading Down techniques.

· Trading Up: When we add a higher priced prestige product to the existing lowpriced product line, it is termed as trading up. This strategy is adopted with the hope of increasing the sales volume of the existing low-priced products. If conditions so demand in future, the company may increase promotional efforts for the new product and thus add to overall sales volume through the new product, thereby improving profitability of the firm.

· Trading Down: It is the reverse of trading up. When a firm adds low quality products at relatively lower price to its line of high priced prestige products, it is termed as trading down strategy. It helps in widening the marketing base and results in expanding overall sales volume. Introduction of moped by a company manufacturing motor cycles is a case of trading down.

4) Affecting Change in Model/Style of an Existing Product: The desire of the consumer varies with varying times. To cope with such change in the consumer mood a company can react by offering new models of a product or changing the style of an existing product.

5) Product Differentiation: Under this strategy, a firm tries to differentiate its products from the competitor's products or other products within the same product line offered by the company by highlighting quality or design. This strategy is aimed at avoiding competition on price basis. The competition is then met at non-price front and a pricewar is avoided. The firm, thus, promotes awareness of the good attributes of the product offering. In view of the fact that this strategy involves large promotional effort with huge financial outlays, it is also known as promotional strategy.

6) Product Positioning: As an integral part of product segmentation, after the market is segmented, it becomes necessary to pinpoint the needs of each segment and offer products to satisfy the needs of specific segments. This process is referred to as product positioning. It includes all activities from identification of a market segment to directing marketing effort.

7) New Product: In view of increasing competition, scientific advancement, enhanced consumer expectations, it is necessary that new products are introduced. Such introduction is essential for the survival and growth of an organisation. The rate of increase in expenditure on Research and Development by many organisations is a clear proof of the need and realisation to introduce new products.

Q – Describe Packaging strategies.

Ans. Packaging Strategies Product package often plays an important role in implementing sales promotion campaigns. Promotion is defined as a short-term special measure to boost sale of a specific product. There are several accepted promotional packaging techniques. Some of these are :

1) Money-off Pack: A 'flash' in distinctive colour is superimposed on the package announcing the special price discount being offered. This is the most widely used form.

2) Coupon-pack: A coupon of a certain value, either as a part of the package or placed separately in the package, can be redeemed after the purchase of the product.

3) Pack-in-Premium: A premium, i.e., the gift is packed within the original product package, viz., a handkerchief in a cosmetic product package.

4) Premium-package: A specially made package having either a re-use or prestige value is referred to as premium package. Instant coffee packed in glass tumblers having closures is an example of the first type. The set of audio cassettes presented in a specially designed wooden box is an example of the second type.

5) Self-liquidator: The buyer has to send to the company a number of packages or part thereof as evidence of buying the product. In return, he may purchase additional quantity of the same product at reduced prices or be rewarded with a different product. Several companies in India, in the processed foods and beverages industry, occasionally use this technique.

6) Changing the Package: Introduction of a new package can also be used as a promotional technique. For example earlier, edible oils were packed in tin cans in India which looked messy and dirty. Most of the larger firms have been using transparent one litre PET (polyethylene terephthalate) bottles which look gleaming and fresh. The companies are using this change of packaging quite effectively as an additional element in their advertising campaigns. Initially, Panama cigarettes were introduced in a soft packet of twenty for the first time in India. The instant popularity of the brand was substantially due to this novelty. The strategy of package changes is followed either to correct a poor feature in the existing container or to take advantage of new materials.

7) Odd Size Packaging: Packaging can also be used ingenuously to avoid direct price comparison with the competing products. This is done by a deliberate choice of odd size, while the competing brands follow a standard size. In India Maggi Ketchup was introduced in the market in 400 grams bottle, while the industry-wise standard size was 500 grams bottle.

8) Packaging the Product Line: Packaging can be used to develop a family resemblance in the packaging of its several products. Identical packages or the packages with some common line. This kind of packaging strategy had the benefits of family branding. Under this strategy, when new products are added to a line, promotional values associated with old products extend to the new ones.

9) Multiple Packaging: Placing more than one unit in one container is referred to as multiple packaging. This packaging strategy increases the sales to a large extent.

10) Other Applications of Packaging as Marketing Tool: There are several other innovative ways in which the packaging can be used for achieving higher sales. The area of processed foods the shelf-life of the product is an important consideration. Any firm which can guarantee a higher shelf-life would be one-up on its competitors. Indian company, Tasty Bite Eatables which is in the area of frozen and pre-cooked foods, identified the 18 months shelf-life of its products as the major strength. The increased shelf-life is to a large extent due to better packaging.

Q – Write brief notes on the following:

i) Break-even analysis

ii) Cost-plus pricing

iii) Going-rate pricing

iv) Profit-maximisation objective

v) Survival objective

vi) Perceived-value pricing

Ans. Break-even analysis - Break-even analysis is used regularly to check the progress of manufacturing industry by comparing the sales achieved for the particular product.

Break even analysis is a simple and effective technique that can be used to evaluate the relationship between sales volume, product cost and revenue generated.

Cost-plus pricing - Cost-plus Pricing Some firms set the selling price of their products by aggregating all the costs of the product (including the manufacturing cost, distribution and marketing costs) plus a predetermined margin of profit.

To make this method of cost-plus pricing more realistic, the company must consider the changes that are expected to occur in these costs as a result of change in the volume of production.

The pricing method enables the firm in covering all the costs and, in addition, to earn the desired margin of profit. Thus, the method is quite justifiable on grounds of fairness to both the sellers and the buyer. The method is also easy to understand and implement as there is generally less uncertainty about cost than the demand for the product. The margin of profit to be added to the cost has to be determined by the company. It can vary from industry to industry and from situation to situation. Retailers using the cost-plus method of pricing do not necessarily apply the same percentage of mark-up to every item.

This may also be a safe method in an uncertain market. It can safely be used for pricing the jobs like government contracts that are difficult to estimate in advance. For fixing prices for services, often cost-plus pricing method is adopted.

Q – State the criticism for packaging.

Ans. Criticism of Packaging

Packaging is also subject to severe criticism because of the following reasons:

1) After consuming the product, consumers throw-away the containers in public places causing environmental problems. How to dispose of used containers is one of the major problems.

4) Health hazards occur from some forms of plastic packaging and some aerosal cans.

Q – Describe Various Packaging strategies.

Ans. Packaging Strategies

Product package often plays an important role in implementing sales promotion campaigns. Promotion is defined as a short-term special measure to boost sale of a specific product. There are several accepted promotional packaging techniques. Some of these are :

1) Money-off Pack: A 'flash' in distinctive colour is superimposed on the package announcing the special price discount being offered. This is the most widely used form.

2) Coupon-pack: A coupon of a certain value, either as a part of the package or placed separately in the package, can be redeemed after the purchase of the product.

3) Pack-in-Premium: A premium, i.e., the gift is packed within the original product package, viz., a handkerchief in a cosmetic product package.

6) Changing the Package: Introduction of a new package can also be used as a promotional technique. For example earlier, edible oils were packed in tin cans in India which looked messy and dirty. Most of the larger firms have been using transparent one litre PET (polyethylene terephthalate) bottles which look gleaming and fresh. The companies are using this change of packaging quite effectively as an additional element in their advertising campaigns. Initially, Panama cigarettes were introduced in a soft packet of twenty for the first time in India. The instant popularity of the brand was substantially due to this novelty. The strategy of package changes is followed either to correct a poor feature in the existing container or to take advantage of new materials.

9) Multiple Packaging: Placing more than one unit in one container is referred to as multiple packaging. This packaging strategy increases the sales to a large extent.

Q – State the factors affecting Price determination.

Ans. FACTORS AFFECTING PRICE DETERMINATION

The major factors affecting the price of product or service are as follows:

1) The value of the product to the buyer

2) Product costs

3) Competition

4) Legal considerations

5) Other elements of marketing.

Let us now discuss these factors in detail.

1. Value of the Product to the Buyer

A person buys a product only when it is of any value to him (i.e., it provides any utility to him) in relation to the price demanded. Since a man's wants are unlimited and purchasing power is limited, he would buy those products which will give him the maximum satisfaction in relation to the price paid. Each consumer, in a subjective manner, prepares priority schedule of goods and services that can be purchased with his entire income. This scheduling is usually done subconsciously and subjectively. Because of the subjectivity involved, it is difficult to measure the utility provided by a product to a consumer.

2. Product Costs

It seems more logical to start the process of fixing price with costs. While fixing the price, the questions like: What is the cost? What profit should be earned on the sale of products? They seem easier to answer than the question. What can people pay for the product? Yet the third question (i.e., what people pay for the product) is the most important of the three. Nevertheless, many marketers think in terms of total costs (manufacturing cost + distribution cost + administering cost) plus a reasonable profit as the proper procedure for fixing the price.

3. Competition

While the upper and lower limits of the price of a product is set by keeping in view the value of the product to the buyer and the cost of the product to the seller, the actual price to be 12 fixed is influenced greatly by the degree of competition in the relevant market. If there is no competition or negligible competition in the market, the price will tend to be on the higher side. On the other hand, a free and healthy competition may result in reduction of the price. The price and features of the products offered by the competitors will greatly affect the price charged by the company. Moreover, even the prices of substitute products should also be taken into consideration while fixing the price of the product.

4. Legal Considerations

Pricing is a very sensitive and important decision in marketing. An increase in price often attracts public criticism and may also attract legal restraint. Suppose an essential commodity, like medicine, costs Rs. 10 per unit, whereas the buyer is prepared to pay any amount in case of an emergency. In the absence of any competition, the seller will be tempted to charge a very high price, say Rs. 100 per unit. However, the law can restrain the unscrupulous seller from charging 'what the traffic will bear’. This can be done by the Government by declaring the said medicine as an ‘essential commodity' under the Essential Commodities Act, 1955. Then, the seller does not have the freedom to charge above the price level fixed by the government in accordance with the guidelines laid down in the law. A number of legislations seek to regulate excessive discriminatory and unreasonable prices. The marketing manager must keep in view the legal restraints in matters of price fixation.

5. Other Elements of Marketing

The elements of the company’s marketing (or the marketing methods) also have a significant effect on the pricing decision of a product. The channel of distribution, quality and amount of advertising, efficiency of sales personnel, the type of product differentiation, credit facility, after sales service, etc. affect the final price charged from the buyer. If the company is in a strong position in these respects, it gives the company a freedom to charge relatively higher prices. If the company is lacking or deficient on any of these counts, it may have to keep lower prices. For example, if a company is providing home delivery or ‘money back’ guarantee or is selling through expensive outlets (like air conditioned showrooms) the selling prices of its product can be on a higher side.

Q – State the functions of Channels of distribution.

Ans. FUNCTIONS OF CHANNELS OF DISTRIBUTION

The functions performed by distribution channels may be grouped into three categories as follows:

1) Transactional Functions

2) Logistical Functions

3) Facilitating Functions

1) Transactional Functions: Functions necessary to a transaction of the goods are called transactional functions. Buying, selling and risk bearing functions come under this category. Participants in the channel of distribution undertake these three functions. Producers sell the goods and intermediaries buy them. Later intermediaries sell the goods and consumers buy them. Because of this buying and selling by the channel participants, title to goods changes hands and goods flow from producer to consumer. If there is no willingness for buying and selling, there would be no transaction. When goods are bought, it involves risk also. For instance, an intermediary bought goods from the producer with the intention of selling at a profit. But he may incur loss due to fall in price. All the participants in the distribution channel assume such risk of loss.

2) Logistical Functions: The functions involved in the physical exchange of goods are called logistical functions. Distribution channel performs some functions like assembling, storage, grading and transportation which are essential for physical exchange of goods.

Goods are assembled in sufficient quantity to constitute an efficient selling and shipping quantity. Sometimes, it is also necessary to assemble a variety of goods to provide an assortment of items desired by buyers. Grading and packing of goods facilitate handling and sale of goods promptly. Proper storage of goods prevents loss or damage as well as helps regular supply of goods to consumers whenever they want. Transportation makes goods available at places where buyers are located. In the channel of distribution all these functions are performed so that goods may reach market place at proper time and may be conveniently sold to the ultimate consumers.

3) Facilitating Functions: These functions facilitate both the transaction as well as physical exchange of goods. These facilitating functions of the channel include: postpurchase service and maintenance, financing, market information, etc. Sellers provide necessary information to buyers in addition to after sales services and financial assistance in the form of sale on credit. Similarly, traders are often guided by producers to help them in selling goods, while the traders also inform producers about the customers' opinions about the products.

Thus a Channel of distribution performs a variety of functions such as buying, selling, risk bearing, assembling, storage, grading, transportation, post-purchase service and maintenance, financing, market information, etc. But the relative importance of storage is more important for perishable goods and bulky material such as coal, petroleum products, iron, etc. In the case of automobiles and sophisticated electronic goods like computers, after sales service is very important.

Q – State the criticism against packaging.

Ans. Criticism of Packaging Packaging is also subject to severe criticism because of the following reasons:

1) After consuming the product, consumers throw-away the containers in public places causing environmental problems. How to dispose of used containers is one of the major problems.

4) Health hazards occur from some forms of plastic packaging and some aerosal cans.

Q - Write brief notes on the following:

i) Break-even analysis

ii) Cost-plus pricing

iii) Going-rate pricing

iv) Profit-maximisation objective

v) Survival objective

vi) Perceived-value pricing

Ans.

1. Break-even analysis

This pricing method is slightly different from the cost-plus pricing method. Here, the firm wants to determine a price that will enable it to earn the desired profit. For the purpose, the break-even analysis is used by the firm and the break-even point is determined.

A break-even analysis relates total cost to total revenue. A break-even point is that level of production at which the total sales revenue (TR) equals the total cost (TC). In other words, a break-even point is the level of production or supply where firms neither earns any profit nor suffers any loss. It is represented by the intersection of TC and TR. There are different break-even points for different selling prices. Any amount of sale above the break-even point gives profits to the firm. If the amount of sale is below the break-even point the firm will incur loss. The break-even point can be calculated in the following way:

Break - even Point (In Unit) - Total Fixed Costs / Per unit Contribution

= Total Fixed Costs /Selling price per unit (p) - Average variable costs per unit (p)

or B. E. P = F / P-V

2. Cost-plus Pricing

Some firms set the selling price of their products by aggregating all the costs of the product (including the manufacturing cost, distribution and marketing costs) plus a predetermined margin of profit.

3. Going Rate Pricing

This is the important method under competition-oriented pricing approach. In this case, the firm does not maintain an elaborate record of various product costs. The firm also does not try to ascertain the difference in the intensity of demand or the perceptions of the value of the product in the minds of the buyers. The firm decides the price of its products on the 'goingrate prices’ in the market. The price is not necessarily the same as that charged by the competitors or by the industry leader, it can be lower or higher. Whenever the industry leader or the trade association increases / decreases the price, the firm follows them. The practice of fixing the going rate price is quite popular among traders, especially among the retailers.

4. Profit Maximisation:

Profit maximisation is the most common objective of business firms. The firm which aims at maximising profit will charge heavy margin of profit and, therefore, keep high prices. The major limitation of this objective is that the term profit maximisation often has an adverse connotation. It suggests profiteering, high prices and consumer exploitation.

If profit maximisation is the objective of the firm, it will estimate the demand and costs at different prices, and select the price which will bring maximum profits.

The objective of profit maximisation is likely to be far more beneficial to a company and to the public if it is practiced over the long run. To maximise profits in long run, however, the firms sometimes have to accept short run losses. A Company entering a new market segment or introducing a new product often fix low prices to attract new buyers.

5. Perceived-value Pricing

Different buyers often have different perceptions of the same product on the basis of its value to them. A cup of tea is priced differently by hotels and restaurants of different categories, because buyers will assign different value to the same item. When you follow this ‘perceivedvalue’ method of pricing, you have to ascertain how different buyers perceive the product in terms of its quality, features and attributes (like colour, size, durability, softness etc.), and how do they perceive the value of the product in terms of such product differences.

Q – Describe the Communication Process.

Ans. Communication itself may be defined as “the process of influencing others behavior by sharing ideas, information or feeling with them,” The basic goal of communication is a common understanding of the meaning of the information being transmitted. In other words, the receiver of the information should understand as closely as possible the meaning intended by the sender of the message. It is largely the responsibility of the sender to ensure that this purpose is achieved.

Elements of Communication Process

Communication has been described as “who says what to whom through which channels with what effect”. We notice that the two major parties involved in the process are the sender (who) and the receiver (whom). The tools that senders use to reach their extended receivers are called messages and channels (media). Thus, communication occurs when : 1) a sender transmits a message, 2) a receivers received that message, and 3) the sender and the receiver have a shared meaning. The communication process itself involves the functions of encoding, decoding, response and feedback. Let us understand each of these elements in communication process:

1. Sender: It is also called the source. Sender is the party who sends the message to another party called the receiver or destination. The sender is engaged in the mental process of putting thought into a form in which it can be communicated.

2. Receiver : Person for whom the message is intended and is an active part of the communication process. How meaning is assigned to a message by the receiver depends upon on the receiver's attitudes, values, previous experience, needs and the timing of the message.

3. Encoding: It is the process of translating the idea to be communicated into a symbolic message consisting of words, pictures, numbers, gestures, etc. This step is necessary because there is no way of sending an idea from one person to another in its raw or pure form.

4. Message: It is a combination of symbols representing objects or experiences that a sender transmits in order to induce a change in the receiver's behaviour. Since most symbols (words, pictures, numbers, etc.) have more than one meaning, the symbols selected for the message should be simple and familiar to receivers.

5. Medium: It is a means by which the sender conveys the message to the receiver. Broadly there are two types of media: 1) inter personal media, and 2) mass media. In inter personal medium there is a direct contact between the sender and receiver. For example, in personal selling salesperson contacts the customers and directly communicates about the product. Here, communication flows in both directions and the salesperson receives immediate and direct feedback. This enables the salesperson to have greater control over the communication process. Mass media are non-personal communication media which provide contact between the sender and a large number of receivers simultaneously. Newspapers, magazines, television, radio, hoardings, billboards, etc., are examples of mass media.

6. Decoding: Just as the sender encodes the message, the receiver must decode it. Decoding is the process by which the receiver attempts to convert symbols conveyed by the sender into a message. Receivers may decode or interpret the message in different ways because of their individual characteristics, experiences and backgrounds. For example, a famous airline had once advertised “if you fly with us you will never walk again”. Although the airline intended to convey to the receiver (i.e., potential passengers) that the airline provides such an excellent services that passengers would always want to fly with this airline, it could be misunderstood by many as a threat or a warning of physical damage to their limbs.

7. Response: Receiver responds to sender's message by reacting in different ways such as asking questions, buying or not buying the product or seeking more information, etc. Thus, response is a set of reactions a receiver has after being exposed to the message.

8. Feedback: It is the communication from a receiver to the sender about how he/she understood the message and reacted to it. In this reverse flow of communication, receivers encode their messages and send them to the sender. The sender must then decode the feedback message. The longer it takes the sender to receive and decode the feedback, the less valuable it becomes. Feedback is more direct, more frequent and more immediate when interpersonal communication (sales personnel) channels are used e.g. salesperson to prospect. Good salespeople receive feedback directly and immediately from their prospects and can modify their sales presentations to suite the prospect's requirements.

Q – State the Qualities of a good Sales Person.

Ans. Qualities of a Good Salesperson

Although different types of selling situations require different qualities in salespeople, there are, however, some common qualities that are needed in all types of sales work. The extent to which each quality is required will vary according to the type of sales job.

1) Physical Qualities: This relates to the person's health and appearance. As we have seen that most sales jobs involve a lot of travelling, sometimes under adverse conditions, good health is very important. Good health also has an indirect effect on the person's mental make-up and general attitude towards work. Physical illness might lead to a state of mental depression and frustration. A good physical appearance is also necessary. This means a neat, clean and impressive dress. A sales person should look well groomed.

2) Communication Ability : Creative selling in particular and other types of selling in general, involve a two communication process. The success of a sales presentation depends a lot on the presentation quality of the salesperson. This means that the salesperson should have a controlled voice (no speech defects), a good command over the language, good impression and the ability to listen. A salesperson should be not only a good talker, but also a good listener.

3) Mental Qualities: Characteristics such as analytical ability, intelligence, conceptual skills, etc., are also essential for a good salesperson. He should be able to apply his mind to various problems of customers.

4) Education and Experience: The Salesperson should have the minimum educational qualifications needed for the job. In most situations, he has to be at least a graduate, except in cases where sales engineers are required. For jobs requiring experience, greater emphasis is given to related work experience.

5) Enthusiasm: It is another essential quality required in a salesperson, especially where creative selling is involved. A salesman should be excited and proud about his product and his company. For this he needs to have a thorough knowledge of not only his company and product, but also of competitors. Enthusiasm and sincerity can help in gaining the prospect's attention.

6) Courtesy: Good manners are important to all salespeople including order takers. They must listen to prospects attentively, speak considerately and differ respectfully.

7) Initiative: Initiative is very crucial in selling. Since most salespeople are very much on their own, they have to be self-starters. They have to seek out new customers, and find new ways to sell to old customers. For all this, salesperson should have initiative. +

8) Empathy: This refers to the ability to put one self in the other's shoes. A salesperson should see the sales problem from the buyer's point of view.

9) Dependability: The salesperson should be able to handle anything not covered in his training. The company should be able to depend on him for dealing with unfamiliar situations.

10) Integrity and Honesty: Since the salesperson has access to the company's funds, he needs to be totally honest in handling this responsibility. He should not hide facts or mislead the company even if he loses sales.

Q – State the Features of Rural Market.

Ans. Features of Rural Markets

There are certain specific features of rural market that need to be considered before going for rural marketing. These are as follows:

1. Population is large and scattered - In India around 65 percent of population lives in rural areas. Rate of increase in population is also higher. This large population is scattered in over six lakh villages. Although it poses some difficulty to the marketers but also gives them a huge and promising market.

2. Rising purchasing power- Gone are the days when income level of rural people was low. With the green revolution and opening up of the economy after 1990, India has seen an overall growth. This has raised the income level of rural consumers as well. It is needless to mention that higher the income level, higher shall be the purchasing power and demand.

3. Steady market growth- Rural market is growing steadily over the years. Consumption pattern and preference is also changing. Unlike the past years, rural market has demand for branded products along with the traditional products such as bicycles, mopeds and agricultural inputs. IT and media has further increased the awareness amongst the rural consumers and there is a surge in demand of cosmetics, FMCGs, consumer durables etc. over the years.

4. Development of infrastructure facilities- Infrastructure facilities have developed in the rural areas. This has reduced the distance of villages to the cities. With the construction of roads and transportation, communication network, rural electrification and several public service projects run by the government, connectivity of villages to cities has increased. This has increased the scope of rural marketing.

5. Low standard of living- Although many developments are taking place in rural areas in India, still the fact remains that the standard of living in villages is relatively lower for people who comes under the second and third groups of consumers (see section on rural consumers, discussed above in this unit. People who have sizeable land holdings but they are not very rich farmers (second group) and the people who are daily laborers (third group) who mostly demand the goods and services which are necessities, in small quantities more frequently.

Q – State the advantages & Disadvantages of Direct Marketing.

Ans. Advantages and Limitations of Direct marketing

Advantages: Direct marketing is quite an established concept. What is important here is to understand the fact that it is gaining importance in today’s time. It has several benefits. Few of them are listed below:

• It allows the marketers to market the products and services directly to the target customers.

• It enables to measure the customers’ response quickly.

• It reaches the target customers with more personalised messages.

• It enables the marketers to set realistic goals.

• It is less costly. With a lesser cost maximum profit can be earned.

• It establishes proper interaction with the customer and builds and maintains relationship with them.

• This combined with other loyalty programs may provide better results to the company.

Limitations:

Limitations of direct marketing are as follow:

• People may find direct marketing intrusive and annoying. As not everyone may like to get promotional emails or calls especially when they are absorbed in their activities.

• Response rate of direct marketing is very low. This means most of the time and efforts are going waste by contacting the uninterested customers.

• Tools such as telemarketing are costly affair. It may not give the desired return on investment.

• Competition is fierce and it may become difficult for the companies to compete with their competitors’ messages.

Q – State the Objectives of Advertising.

Ans. Generalised Objectives

Typically advertising has one or more of the three fundamental or basic Objectives:

i) To inform target customers. This information essentially deals with areas such as new products introduction, price changes or product improvement or modifications.

ii) To persuade target audiences, which includes functions such as building brand preference, encourage people to switch from one brand to the other brand etc.

iii) To remind target audience for keeping the brand name dominant.

Generalised advertising objectives fall under one or more of the following categories:

1) To announce a new product or service: In a saturated market, the introduction of new products and brands can give the seller a tremendous opportunity for increasing his sales. In the case of innovative products (totally new to the market) such as 3D printers and Apple Airtags, a great deal of advertising has to be done over an extended period of time to make people aware of “What the product is” and “What it does” and “How the customer would find it useful”. In addition, the advertisement also carries information about the availability of the product and facilities for demonstration/trial, etc. Similarly new brands of existing product categories are also promoted quite aggressively.

2) Expand the market to new buyers: Advertising can be used to tap a new segment of the market. hitherto left unexplored. For example TV and Video Camera manufacturers who have been concentrating on domestic users and professionals can direct their advertising to the government institutions and large organisations for closed circuit TV networks, security systems and educational purposes. Another way of expanding the consumer base is to promote new uses of the product. For example, Johnson's baby oil and baby cream were originally targeted to mothers.

3) Announce a product modification: For such advertising, generally, the term “new”, “improved” etc. , are used as prefixes to the brand name. For example, “New turbo power cleaner” gives the impression of a new, although there may be no tangible difference between the earlier brand and the new one. Sometimes a minor packaging change might be perceived by the customer as a modified product e.g., “a new refill pack for Nescafe”.

4) To make a special offer : On account of competition, slack season, declining sales, etc., advertising may be used to make a special offer. For example Buy groceries online and get Rs. 1 deal at Flipkart. We often come-across advertisements announcing. “Rs. 2 off” on buying various quantities of products such as soaps, toothpastes, etc. Hotels offer special rates during off season. Similarly many products like room heaters, fans, airconditioners, etc. , offer off season discounts to promote sales.

5) To announce location of stockists and dealers: To support dealers, to encourage selling of stocks and to urge action on the part of readers, space may be taken to list the names and addresses of stockist and dealers. Look at Figure 16.4 for the advertisement which gives the addresses of the dealers.

6) To educate customers: Advertising of this type is “informative” rather than “persuasive”. This technique can be used to show new users for a well established product. It can also be used to educate the people about an improved product e.g. Pearl Pet odour free jars and bottles. Sometimes societal advertising is used to educate people on the usefulness or harmful effects of certain product. For example, government sponsored advertising was directed at promotion consumption of "Eggs and Milk". Similarly, advertisements discouraging consumption of liquor and drugs.

7) To remind users: This type of advertising is useful for products which have a high rate of “repeat purchase” or those products which are bought frequently e.g., blades, cigarettes, soft drinks, etc. The advertisement is aimed at reminding the customer to ask for the same brand again.

8) To please stockists: A successful retail trader depends upon quick turnover so that his capital can be reused as many times as possible. Dealer support is critical, particularly for those who have limited shelf space for a wide variety of products. Advertisers send “display” material to dealers for their shops, apart from helping the retailer with local advertising.

9) To create brand preference: This type of advertising does two things: (i) It creates a brand image or character. (ii) It tells the target audience why is Brand X better than Brand Y. In this type of advertisement the product or band acquires a ‘personality’ associated with the user, which gives the brand a distinctive ‘image’. The second type of advertising also known as ‘comparative advertising’ takes the form of comparison between two brands and proves why is one brand superior. Advertisements of “Colgate and Pepsodent, “Reliance Jio and Airtel” are examples.

10) Other objectives: Advertising also helps to boost the morale of sales people in the company. It pleases sales people to see large advertisements of their company and its products, and they often boast about it. Other uses of advertising could include recruiting staff and attracting investors through “Public Issue” advertisements announcing the allotment of shares, etc.

Q – State the meaning & Role of middleman.

Ans. MEANING AND ROLE OF MIDDLEMEN

The term middlemen refer to the business organisations which are the link between producers and consumers of goods, and render services in connection with the purchase and/or sale of products as they move from producer to the consumers.

Some people often question the wide use of middlemen and feel that it may not only delay the availability of goods but also add to the cost of distribution and hence, the price charged from customers may be higher. But it is not the case in practise. In fact, the middlemen play a very useful role in the distribution of goods by providing a variety of functions at reasonable cost. They undertake all the channel functions (such as assembling, grading, packaging, storing, financing, risk-bearing, etc.). We may however put them more specifically as follows:

1) Creation of utilities: By performing various functions in the process of distribution middlemen create place utility, time utility, convenience utility and ownership utility in the goods and services. Thus, the channels greatly help in market by adding value to the products. In fact, in the case of several consumer products, the value added in distribution is higher than that added during manufacture/production.

2) Economy in effort: Middlemen greatly increase the efficiency of the exchange process by reducing the amount of effort on the part of the manufacturers contacting the consumers. This, in turn, reduces the total cost of distribution of the products. For example, assume that there are five manufacturers and ten customers.

3) Market coverage: With the increasing liberalisation in trade, the products manufactured at one place have to be distributed throughout the length and breadth of not only one country but many nations of the world. This vast coverage is possible only through effective management of the distribution channels.

4) Provide local convenience to consumers: Merchant middlemen like retailers are located at convenient shopping centres. They provide ready delivery of goods to the consumers at the convenient points.

5) Provide field stocks: The agents and wholesalers are spread all over the country. They buy in bulk and keep the goods in stock. The retailers can approach them any time and buy their requirement. The producers, therefore, need not stock their goods in different cities which would be quite a cumbersome activity involving huge investment and management problems.

6) Financing: The agents finance the distribution activity in many ways. They often pay cash for their bulk purchases from the producers and even advance money to them against their orders. The funding of field stocks is thus fully handled by the middlemen.

7) Servicing: They arrange for the after sales services and handle all kinds of complaints by the consumers locally. The manufacturer does not have to open his own service centres at all places.

8) Help in promotion: They also help the sales promotional activity through displays and salesmanship. It is literally impossible for the producers to organise such activity more effective through any other means. Even otherwise, the middlemen being local people are more effective.

Q – State the Functions of Retailers.

Ans. Functions

Like the wholesalers, retailers also perform a variety of functions connected with the buying and selling of goods. They, in brief perform the following functions:

1) Estimating the demand: All retailers - big or small have to make an estimate of the demand for different products and have to determine the nature of products that consumers need to be supplied.

2) Procurement of goods: Most retailers deal in a variety of products. So they may have to procure goods from different wholesalers. Besides, they must decide to buy from those wholesalers who supply goods suited to the requirements of consumers considering the quality and price.

3) Transportation: Usually the retailers are to arrange the transportation of goods procured from the wholesalers' place. Sometimes delivery is also arranged by the wholesalers on the basis of orders placed with their salesmen.

4) Storing goods: Small-scale retailers have limited space for the goods to be kept in stock. Large retail stores often have godowns to store different varieties of goods in adequate quantities. But in all cases, goods have to be held in stock so as to meet the customer’s needs. For this purpose storage of goods must be so arranged that customers may be served without delay. They must be given an opportunity to select goods of their choice. This is often done by display of goods on shelves and in show cases.

5) Grading and packaging: Large-scale retailers often have to sort out goods according to the quality and price to be charged. They also make convenient packages of goods for the benefit of consumers. For instance, fruit vendors purchase apples in containers (boxes), sort out on the basis of size and charge different rates for different sizes. Spices which are procured in bags, may be divided into small packets of 100 or 200 grams each.

6) Risk-bearing: Since goods are held in stock, the retailers are to bear the risk of loss on account of deterioration of quality, fire, theft, etc. Large retail stores are insured to cover the risks of theft or fire. But losses due to damage or deterioration of quality caused by improper storage cannot be insured.

7) Selling: The main function of retailers is selling the goods to ultimate consumers. They have to satisfy the needs and preferences of different types of customers and deal with them tactfully and politely so as to make them regular buyers.

Q – State the Advantages & Disadvantages of Departmental stores.

Ans. Advantages:

Departmental stores have the following advantages:

1) Departmental stores make shopping convenient to consumers by providing them a whole range of goods in one building.

2) The central location attracts a large number of customers leading to a large turnover. Thus, they can afford to make large profits even with smaller margins.

3) Bulk-buying by Departmental stores enables them to obtain heavy discounts from manufacturers, and thus buy at a cheaper rate. There are savings in freight charges as well.

4) Departmental stores can afford to have effective advertising through press, radio and television and thus they are able to attract more and more customers.

5) Being large business units, departmental stores can afford to employee skilled and expert staff for all their operations and thus they are able to achieve a high degree of efficiency in their working.

Disadvantages:

Departmental stores suffer from the following limitations:

1) Experience has shown that operating costs of departmental stores tend to become very high because of the necessity to run some departments at a loss to attract customers and heavy emphasis in service. As a result, more often, their goods may be marked at higher prices.

2) Central location also involves higher rents and thus higher overheads. Central location may not be convenient to persons living in far off places which means that they will make their purchases of articles of everyday use from nearby shops. However, in recent years, departmental stores have branched themselves out to suburban areas as well to reach the customers nearer their location.

3) It may not be possible for customers in general to receive personal attention which is possible when they deal with small retailers.

Q – State the Objectives of physical distribution.

Ans. OBJECTIVES OF PHYSICAL DISTRIBUTION

Determining the objectives is the first step in managing an activity in a planned and systematic way. It is so because the objectives serve as a guiding force for chalking out the strategy for the successful completion of the task. In the area of physical distribution too, the strategy will depend upon the objectives sought to be achieved in this regard. Thus, it is important for the firm to specify the major objectives of the physical distribution system.

The objective of any physical distribution system is to move the goods to the right place at the right time, and at the lowest cost. Thus, customer service and cost reduction are the two basic objectives of an effective distribution system in an organisation. However, there may be some more specific objectives in a given marketing situation. Some such objectives are described in detail below:

Improving Customer Service : As you know, the marketing concept assumes that the sure way to maximise profits in the long run is through maximising the customer satisfaction. Thus, an important objective of all marketing efforts, including the physical distribution activities, is to improve the customer service. This in turn, produces better sales and profits.

Reduce Distribution Costs : Another most commonly stated objective is to reduce the cost of physical distribution of the products. It has already been explained that the cost of physical distribution consists of various elements such as transportation, warehousing and inventory maintenance, and a reduction in the cost of one of the elements may result in an increase in the cost of the other elements. Thus, the objective of the firm, should be to reduce the total cost of distribution and not just the cost incurred on any one element. For this purpose, the total cost of alternative distribution systems should be analysed and the one which has the minimum total distribution cost should be selected.

Generating Additional Sale : Another important objective of the physical distribution system in a firm is to generate additional sales. A firm can attract additional customers by offering better services at lower prices through improvements in the physical distribution of the products. For example, by decentralising its warehousing operations or by using economic and efficient modes of transportation, a firm can achieve larger market share. Also by arresting the out-of-stock situation, the loss of loyal customers can be arrested.

Creating Time and Place Utilities : The physical distribution system also aims at creating time and place utilities in the products. Unless the products are physically moved from the place of their origin to the place where they are required for consumption, they do not serve any purpose to the users. Similarly, the products have to be made available at the time they are needed for consumption. Both these purposes can be achieved through the physical distribution system. For example, in order to create maximum time and place values, the products should be kept in warehouse during the period they are available in excess till they are in short supply. For this the warehouse should be located at places from where they can be delivered and sufficient stocks levels should be maintained so as to meet the emergency demands of the customers quickly.

A quicker mode of transport should be selected to move the products from one place to the other in a short time. Thus, time and place utilities can be created in the products through an efficient system of physical distribution.

Price Stabilisation : Physical distribution may also aim at achieving stabilisation in the prices of the products. It can be achieved by regulating the flow of the products to the market through a judicious use of available transport facilities and compatible warehouse operations. For example, in the case of Industries such as cotton textile industry using agricultural products as raw material, there will be fluctuations in the supply of raw materials. In such cases if the market forces are allowed to operate freely, the raw material would be very cheap during harvesting season and very dear during off season. This fluctuation may be stabilised by keeping such raw material in warehouses during the period of excess supply (harvest season) available during the periods of short supply. Thus, prices can be stabilised with the help of physical distribution activities.

Q – Describe Integrating Marketing Communicaton.

Ans. INTEGRATED MARKETING COMMUNICATION

As the marketers today use variety of communication channels to reach customers, marketing communication have assumed a new meaning. Companies invest heavily and use number of promotion tools in order to promote their products and services. The main problem which arises here is that these different tools are designed by different people and put forward before customers through different sources. These can result in delivering conflicting, blurred or inconsistent business messages to the target audience. Marketing communication becomes effective and give the desired results only when all the communication or promotion tools are integrated and co-ordinated to give a clear and consistent picture of the company’s products and services. Therefore, Integrated Marketing Communication (IMC) has been gaining popularity in the 21st century.

In the words of Philip Kotler, “carefully integrating and co-ordinating the company’s many communications channels to deliver a clear, consistent and compelling message about the organization and its products is integrated marketing communication”.

The idea behind integrated marketing communication is that the marketers need to carefully combine the promotion elements into a co-ordinated promotion mix.

Q – Describe the Personal Selling Process.

Ans. THE PERSONAL SELLING PROCESS

As you know, the basic objectives of personal selling are:

1) to find prospective customers, 2) to convert these prospective customers into customers, and 3) to keep them (retain them) as satisfied customers. The importance of each objective to an organisation depends upon the role played by personal selling in the overall promotion mix.

The personal selling process, also known as the creative selling process or selling dynamics or salesmanship, explains how do salespeople find prospects, convert customers and keep them as customers. This process involves a series of steps as follows: 1) prospecting, 2) pre-approach, 3) approach, 4) sales presentation 5) handling objections, 6) closing the sale, and 7) follow up. Let us study these steps in detail one by one.

Prospecting

The process of searching (locating), identifying and qualifying potential customers is referred to as prospecting. Sales calls by salespersons to regular customers are only a part of the sales job. In fact new customers also must be sought for the growth of the business. The first step in this direction is to generate leads. Sales leads are the names of people or organisations that might have some use for the salesperson’s product. The sources of these leads could be trade journals and trade directories, advertising inquiries (such as coupons returned to the organisation in response to an advertisement), business sections of newspapers, trade shows and even present customers.

The Pre-approach

It is part of the salesperson’s home-work before contact with the prospect. It involves gathering more specific information about the prospect’s background, product needs, personal characteristics, etc. The information could cover a wide range of areas. For instance in the case of individuals the information may include: the prospect's age, marital status, hobbies, interests, number of years in business, education, etc. Similarly in the case of companies, information may include: background of the company, types of products, present suppliers, actual demand, the prospect’s decision-making authority, people who can influence decisions, etc.

The Approach

It deals with making initial contact and establishing rapport with the prospect. It is the manner chosen by the salesperson to gain access to the prospect and get the prospect’s attention and interest. The quality of the first impression will determine whether the salesperson will be able to develop an ongoing relationship-with the prospect.

The Presentation

This is the main phase of the sale. It is an attempt by the salesperson to communicate the product’s benefits and explain appropriate courses of action to the potential buyer. Miniature models of the product, along with slides, pictures, video tapes, booklets, flip charts, etc., help to communicate the product’s message to the prospect.

Handling Objections

If the prospect says no, he is interested. Even if the prospect is friendly and interested in the product, he may have reservations (doubts) about the purchase. Questions or objections are likely to arise. Since objections explain the reason for resisting or delaying the purchase, the salesperson should listen and learn from them.

Closing the Sale

It has been said that “if a salesperson does not ask for the order and get it, he is not only wasting his time but is working for the competition”. There comes a point when the presentation must be drawn to its logical conclusion i.e., close the sale which means ask for the order.

Follow up

Getting an order is not the end of the selling process. It is in fact the beginning. The salesperson has to follow-up to make sure that everything was handled as promised, and the order was shipped on time and received on time by the prospect. A good follow-up is the key to building up loyal customers and increasing business. The customer should be reassured that he has made the right purchase decision, and the salesperson will always be ready to help in case of any future problem.

Commerce ePathshala

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Monday, January 30, 2023

IGNOU : BCOM : BCOE 141 - Principles of Marketing ( NOTES FOR FREE )

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