vidyarthiplus.com MARKETINGMANAGEMENT Topic Title .MarketingConcepts . ApproachestotheStudyofMarketing .MarketSegmentation.MarketingEnvironment.ConsumerPurchaseProcess.ConsumerBehavio ur.MarketingInformationSystemandMarketingResearch.ProductMix .NewProductPlanningandDevelopment.Product MarketIntegrationStrategies.BrandingandP ackagingDecisions.PricingDecisions.ChannelDecisions.Advertising.SalePromotion.

Pe rsonalSelling

vidyarthiplus.com LESSON-1MARKETINGCONCEPTSLearningObjectivesAfterreadingthislesson,youshouldbeabl etounderstandMeaningandimportanceofmarketing; Thedifferentconceptofmarketing; Themodernmarketingconcept. Thesocialmarketingconcept. Marketinghasbeendeferentbydifferentauthorsdifferently.Apopulardefinitionisthat mar ketingistheperformanceofbusinessactivitiesthatdirecttheflowofgoodsandservicesfro mproducertoconsumeroruser .Anothernotabledefinitionisthat marketingisgettingtheright goodsandservicestotherightpeopleattherightplaceattherighttimeattherightpricewith therightcommunicationandpromotion .Yetanotherdefinitionisthat marketingisasocialproc essbywhichindividualsandgroupsobtainwhattheyneedandwantthroughcreatingandexchang ingproductsandvalueswithothers .Thisdefinitionofmarketingrestsonthefollowingconcep ts: (i) (ii) Needs,wantsanddemands; Products;

vidyarthiplus.com (iii) (iv) (v) Valueandsatisfaction; ExchangeMarkets. NEEDS,WANTSANDDEMANDSAhumanneedisastateoffeltdeprivationofsomebasicsatisfaction. Peoplerequirefoods,clothing,shelter,safety,belonging, esteemetc.theseneedsexistintheverynatureofhumanbeings. Humanwantsaredesiresforspecificsatisfiersoftheseneeds.Forexample,clothisaneedsbu tRaymondssuitingmaybewant.Whilepeople sneedsarefew,theirwantsaremany. Demandsarewantsforspecificproductsthatarebackedupbyanabilityandwillingnesstobuyt hem.Wantsbecomedemandswhenbackedupbypurchasingpower. ProductsProductsaredefinedasanythingthatcanbeofferedtosomeonetosatisfyaneedorwan t. ValueandSatisfaction Consumerschooseamongtheproducts,aparticularproductthatgivethemmaximumvalueandsat isfaction. Valueistheconsumer sestimateoftheproduct scapacitytosatisfytheirrequirements.

ExchangeandTransactionsExchangeistheactofobtainingadesiredproductfromsomeonebyof feringsomethinginreturn.Atransactioninvolvesatleasttwothingofvalue,conditionstha tareagreedto,atimeofagreementandaplace vidyarthiplus.comExchangeandTransactionsExchangeistheactofobtainingadesiredprodu ctfromsomeonebyofferingsomethinginreturn.Atransactioninvolvesatleasttwothingofva lue,conditionsthatareagreedto,atimeofagreementandaplace vidyarthiplus.com ofagreement. Market Amarketconsistofalltheexistingandpotentialconsumerssharingaparticularneedorwantw homightbewillingandabletoengageinexchangetosatisfythatneedorwant. Thus,alltheaboveconceptsfinallybringsusfullcircletotheconceptofmarketing. IMPORTANCEOFMARKETING1.Marketingprocessbringsgoodsandservicestosatisfytheneeds andwantsofthepeople. 2.Ithelpstobringnewvarietiesandqualitygoodstoconsumers. 3.Bymakinggoodsavailableatalplaces,itbringsequipmentdistribution. 4.Marketingconvertslatentdemandintoeffectivedemand. 5.Itgiveswideemploymentopportunities.

6.Itcreatestime,placeandpossessionutilitiestotheproducts. 7.Efficientmarketingresultsinlowercostofmarketingandultimatelylowerpricestoconsu mers. 8.Itisvitallinkbetweenproductionandconsumptionandprimarilyconstantlymoving. 9.Itcreatestokeepthestandardoflivingofthesociety. MARKETINGMANAGEMENTMarketingmanagementisdefinedas theanalysis,planning, implementationandcontrolofprogrammesdesignedtocreatebuildandpurposeofachievingor ganizationalobjectives . Marketingmanageshavetocarrymarketingresearch,marketingplanning,marketingimplemen tationandmarketingWithinmarketingplanning,marketermustmakedecisionsontargetmarke ts, marketpostphoningproductdevelopment,pricingchannelsofdistribution,physicaldistri bution,communicationandpromotion.Thus, themarketingmanagersmustacquireseveralskillstobeeffectiveinmarketplace. CONCEPTSOFMARKETINGTherearefivedistinctconceptsunderwhichbusinessorganisationcan conducttheirmarketingactivity. ProductionConcept vidyarthiplus.comresponsibletokeepthewheelofproductionandconsumptioncontrol. Itcreatestime,placeandpossessionutilitiestotheproducts. 7.Efficientmarketingresultsinlowercostofmarketingandultimatelylowerpricestoconsu mers. 8.Itisvitallinkbetweenproductionandconsumptionandprimarilyconstantlymoving. 9.Itcreatestokeepthestandardoflivingofthesociety. MARKETINGMANAGEMENTMarketingmanagementisdefinedas theanalysis,planning, implementationandcontrolofprogrammesdesignedtocreatebuildandpurposeofachievingor ganizationalobjectives . Marketingmanageshavetocarrymarketingresearch,marketingplanning,marketingimplemen tationandmarketingWithinmarketingplanning,marketermustmakedecisionsontargetmarke ts, marketpostphoningproductdevelopment,pricingchannelsofdistribution,physicaldistri bution,communicationandpromotion.Thus, themarketingmanagersmustacquireseveralskillstobeeffectiveinmarketplace. CONCEPTSOFMARKETINGTherearefivedistinctconceptsunderwhichbusinessorganisationcan conducttheirmarketingactivity. ProductionConcept vidyarthiplus.comresponsibletokeepthewheelofproductionandconsumptioncontrol.

vidyarthiplus.com ProductConceptSellingConceptMarketingConceptSocietalMarketingConceptPRODUCTIONCO NCEPT Inthisapproach,afirmisconsideredasthecentralpointandallgoodsandcommoditiesproduc edweresoldinthemarket.Themajoremphasiswasontheproductionprocessandcontrolonthete chnicalperfectionswhileproducingthegoods. Theproductionconceptholdsthatconsumerswillfavourthoseproductsthatarewidelyavaila bleandlowincost.Managementinproductionorientedorganisationconcentratesonachievin ghighproductionefficiencyandwidedistributioncoverage. Marketingisanativeforminthisorientationanditwasassumedthatagoodproductsellsbyits elf.Onlydistributionandsellingwereconsideredtobe marketing .Thetechnologiststhoughts thatamenabilityandlowcostoftheproductsduetothelargescalesofproductionwouldbether ight MarketingMix fortheconsumers. But,theydonotthebestofcustomerpatronage.Customersareinfactmotivatedbyavarietyofc onsiderationsintheirpurchase.Asaresult,theproductionconceptfailstoserveastherigh tmarketingphilosophyfortheenterprise.

vidyarthiplus.com PRODUCTCONCEPTTheproductconceptissomewhatdifferentfromtheproductionconcept. Theproductconceptholdsthatconsumer swillfavourthoseproductsthatofferthemostquality ,performancefeatures. Managementintheseproduct-orientedorganizationsfocustheirenergyonmakinggoodproduc tsandimprovingthemovertime. Yet,inmanycases,theseorganizationsfailinthemarket.Theydonotbothertostudythemarke tandtheconsumerin-depth.Theygettotallyengrossedwiththeproductandalmostforgetthec onsumerforwhomtheproductisactuallymeant;theyfailtofindourwhattheconsumersactuall yneedandwhattheywouldaccept. MarketingMyopiaAtthisstage,itwouldbeappropriatetoexplainthephenomenonof marketingm yopia .Theterm marketingmyopia istobecreditedtoProfessorTheodoreLevitt.Inoneofhisclass icarticlesbearingthesametitle,intheHarvardBusinessReview,ProfessorLevitthasexpla ined marketingmyopia asacolouredorcrookedperceptionofmarketingandashort-sightednessa boutbusiness.Excessiveattentiontoproductionorproductorsellingaspectsatthecostoft hecustomerandhisactualneeds,createsthismyopia.Itleadstoawronginadequateunderstan dingofthemarketandhencefailureinthemarketplace.Themyopiaevenleadstoawrongorinade quateunderstandingoftheverynatureofthebusinessinwhichagivenorganisationisengaged andtherebyaffectsthefutureofthebusiness.Hefurtherexplainedthatwhileandor

businesskeepchangingwiththetimes,thereissomefundamentalcharacteristicineachbusin essthatmaintainsitselfthroughthechangingtimes,whichinvariablyrelatestothebasichu manneedwhichthebusinessseekstoserveandsatisfythroughitsproducts.Awisemarketersho uldunderstandthisimportantfactanddefinehisbusinessintermsofthisfundamentalcharac teristicofthebusinessratherthanintermsoftheproductsandservicesmanufacturedandmar ketedbyhim.Forinstance, theAirwaysshoulddefinetheirbusinessastransportationtheMovieSALESCONCEPTThesalesc onceptmaintainsthatacompanycannotexpectitsproductstogetpickedupautomaticallybyth ecustomers.Thecompanyhastoconsciouslypushitsproducts.Aggressiveadvertising,highpowerpersonalselling,largescalesalespromotion,heavypricediscountsandstrongpublic ityandpublicrelationsarethenormaltoolsusedbyorganisationthatrelyonthisconcept.In actualtheseorganizationstoodonotenjoythebestofcustomerpatronage. Thesellingconceptisthusundertakenmostaggressivelywith unsoughtgoods ,i.e.thosegoodst hatbuyersnormallydonotthinkofbuying,suchasinsurance,encyclopedias.Thesehaveperfe ctedvarioustechniquestolocateprospectsandwithgreatdifficultysellthemasthebenefit softheirproducts. Evidently,thesalesconcepttoosuffersfrommarketingmyopia. vidyarthiplus.commakersshoulddefinetheirbusinessasentertainment,etc. practice, industriesbusinesskeepchangingwiththetimes,thereissomefundamentalcharacteristici neachbusinessthatmaintainsitselfthroughthechangingtimes,whichinvariablyrelatesto thebasichumanneedwhichthebusinessseekstoserveandsatisfythroughitsproducts.Awisem arketershouldunderstandthisimportantfactanddefinehisbusinessintermsofthisfundame ntalcharacteristicofthebusinessratherthanintermsoftheproductsandservicesmanufact uredandmarketedbyhim.Forinstance, theAirwaysshoulddefinetheirbusinessastransportationtheMovieSALESCONCEPTThesalesc onceptmaintainsthatacompanycannotexpectitsproductstogetpickedupautomaticallybyth ecustomers.Thecompanyhastoconsciouslypushitsproducts.Aggressiveadvertising,highpowerpersonalselling,largescalesalespromotion,heavypricediscountsandstrongpublic ityandpublicrelationsarethenormaltoolsusedbyorganisationthatrelyonthisconcept.In actualtheseorganizationstoodonotenjoythebestofcustomerpatronage. Thesellingconceptisthusundertakenmostaggressivelywith unsoughtgoods ,i.e.thosegoodst hatbuyersnormallydonotthinkofbuying,suchasinsurance,encyclopedias.Thesehaveperfe ctedvarioustechniquestolocateprospectsandwithgreatdifficultysellthemasthebenefit softheirproducts. Evidently,thesalesconcepttoosuffersfrommarketingmyopia. vidyarthiplus.commakersshoulddefinetheirbusinessasentertainment,etc. practice, industries

vidyarthiplus.com DifferencebetweenSellingandMarketingThemarketingandsellingareconsideredsynonymou sly.Butthereisgreatofdifferencebetweenthetwo.TheodoreLevittinhissensationalartic les MarketingMyopia drawsthefollowingbetweenmarketingandselling. Sellingfocusesontheneedsoftheseller;marketingontheneedsofthebuyer.Sellingispreoc cupiedwiththeseller sneedtoconverthisproductintocash;marketingwiththeideaofsatisfy ingtheneedsofthecustomerbymeanoftheproductandthewholeofthingassociatedwithcreati ngdeliveringandfinallyconsumingit. contrastcluster Selling Marketing 1 Selling starts with the seller, Selling focuses with the needsof the seller. Seller is the center of the business universe. Activities start with seller s existing products. Marketing starts with the buyers. Marketing focuses on the needs ofthe buyer. Buyer is the centre of thebusiness universe. Activities follow

the buyer and his needs. 2 Selling emphasizes on profit. Itseeks to quickly convert products into cash ; concerns itself with the tricks and techniques of pushing theproduct to the buyers. Marketing emphasizes on identification of a market opportunity. It seeks to convert customer needs into products and emphasizes on fulfilling the needs of the customers. 3 Selling views business as

a goods producing processes . Marketing views business as a customer satisfying process .

vidyarthiplus.com 4 It over emphasizes the exchange aspect without caring for the value satisfactions to the buyers. It concerns primarily with the valesatisfactions that should flow to the customer from the exchange 5 Seller s convenience dominates the formulation of the marketing mix . Buyer determines the shape of the marketing mix . 6. The firm makes the productfirst the then decides how

to sell it and make profit. The customer determines what is to be offered as a product and the firm makes a total product offering that would match the needs of the customers. 7 Emphasizes accepting the existing technology and reducing the cost of production. Emphasis s on innovation of adopting the most innovative technology. 8. Seller s motives dominate marketing communications.

Marketing communications acts asthe tool for communicating the benefits/ satisfactions of the product to the consumers 9 Costs determine price. Consumer determines price. 10 Transportation, storage and other distribution functions are perceived as mere extensions of the productionfunction. They are seen as vital services toprovide convenience to customers. 11 There is no coordination among the different functionsof the total marketing

task. Emphasis is on integrated marketing approach.

vidyarthiplus.com 12 Different departments of the business operate separately. All departments of the business operate in a highly integrated manner with view to satisfy consumers. 13 The firms which practice selling concept , production isthe central function. The firms which practice marketing concept , marketing isthe central function. 14. Selling views the customer asthe last link in the business. Marketing views the customer

asthe very purpose of the business. MARKETINGCONCEPTTheMarketingconceptwasbornoutoftheawarenessthatmarketingstartswi ththedeterminationofconsumerwantsandendswiththesatisfactionofthosewants.Theconce ptputstheconsumerbothatthebeginningandattheendofthebusinesscycle.Thebusinessfirm srecognizethat thereisonlyonevaliddefinitionofbusinesspurpose:tocreateacustomer .Itp roclaimsthat theentirebusinesshastobeseenfromthepointofviewofthecustomer .Inacompany practicingthisconcept,alldepartmentswillrecognizethattheiractionshaveaprofoundim pactonthecompany stocreateandretainEverydepartmentandeveryworkerandmanagerwill think customer and actcustomer . Themarketingconceptholdsthatthekeytoachievingorganizationalgoalsconsistsindeterm iningtheneedsandwantsofthetargetmarketsanddeliveringthedesiredsatisfactionseffic iently,thancompetitors.Inotherwords,marketingconceptisaintegratedmarketingacusto mer.

effortaimedatgeneratingcustomersatisfactionasthekeytosatisfyingorganizationalgoa ls. Itisobviousthatthemarketingconceptrepresentsaradicallynewapproachtobusinessandis themostadvancedofallideasonmarketingthathaveemergedthroughtheyears.Onlythemarket ingconceptiscapableofkeepingtheorganisationfreefrom marketingmyopia . Thesalientfeaturesofthemarketingconceptare: vidyarthiplus.comeffortaimedatgeneratingcustomersatisfactionasthekeytosatisfying organizationalgoals. Itisobviousthatthemarketingconceptrepresentsaradicallynewapproachtobusinessandis themostadvancedofallideasonmarketingthathaveemergedthroughtheyears.Onlythemarket ingconceptiscapableofkeepingtheorganisationfreefrom marketingmyopia . Thesalientfeaturesofthemarketingconceptare: vidyarthiplus.com 1)Consumerorientation2)Integratedmarketing3)Consumersatisfaction 4)Realizationoforganizationalgoals. 1.ConsumerOrientationThemostdistinguishingfeatureofthemarketingconceptistheimpor tanceassignedtotheconsumer.Thedeterminationofwhatistobeproducedshouldnotbeintheh andsofthefirmsbutinthehandsoftheconsumers.Thefirmsshouldproducewhatconsumerswant .Allactivitiesofthemarketersuchasidentifyingneedsandwants,developingappropriatep roductsandpricing, distributingandpromotingthenshouldbeconsumeroriented.Ifthesethingsaredoneeffecti vely,productswillbeautomaticallyboughtbytheconsumers. 2.IntegratedMarketing

Thesecondfeatureofthemarketingconceptisintegratedmarketingi.e.integratedmanageme ntaction.Marketingcanneverbeanisolatedmanagementfunction.Everyactivityonthemarke tingsidewillhavesomebearingontheotherfunctionalareasofmanagementsuchasproduction ,personnelorfinance. Similarlyanyactioninaparticularareaofoperationinproductiononfinancewillcertainly haveanimpactonmarketingandultimatelyinconsumer.Therefore,inanintegratedmarketing set-up,thevariousfunctionalareasofmanagementgetintegratedwiththemarketingfunctio n.Integratedmarketingpresupposesawithmarketinginfluencingthecorporatedecisionmak ingprocess. byprovidingconsumersatisfaction,naturallyitfollowsthatthedifferentdepartmentsofh ecompanyarefairlyintegratedwitheachotherandtheireffortsarechannelizedthroughthep rincipalmarketing vidyarthiplus.comdepartmenttowardstheobjectivesofconsumersatisfaction. propercommunicationamongthedifferentmanagementareas, Thus,whenthefirmsobjectiveistomakeprofit Thesecondfeatureofthemarketingconceptisintegratedmarketingi.e.integratedmanageme ntaction.Marketingcanneverbeanisolatedmanagementfunction.Everyactivityonthemarke tingsidewillhavesomebearingontheotherfunctionalareasofmanagementsuchasproduction ,personnelorfinance. Similarlyanyactioninaparticularareaofoperationinproductiononfinancewillcertainly haveanimpactonmarketingandultimatelyinconsumer.Therefore,inanintegratedmarketing set-up,thevariousfunctionalareasofmanagementgetintegratedwiththemarketingfunctio n.Integratedmarketingpresupposesawithmarketinginfluencingthecorporatedecisionmak ingprocess. byprovidingconsumersatisfaction,naturallyitfollowsthatthedifferentdepartmentsofh ecompanyarefairlyintegratedwitheachotherandtheireffortsarechannelizedthroughthep rincipalmarketing vidyarthiplus.comdepartmenttowardstheobjectivesofconsumersatisfaction. propercommunicationamongthedifferentmanagementareas, Thus,whenthefirmsobjectiveistomakeprofit 3.ConsumerSatisfactionThirdfeatureofthemarketingisconsumersatisfaction.Themarket ingconceptemphasizesthatitisnotenoughifafirmahsconsumerorientation;itisessential thatsuchanorientationleadstoconsumersatisfaction. Forexample,whenaconsumerbuysatinofcoffee,heexpectsapurposetobeserved,aneedtobesa tisfied.Ifthecoffeedoesnot

providehimtheexpectedfiavour,thetasteandtherefreshmentshispurchasehasnotservedth epurpose;ormoreprecisely,themarketerwhosoldthecoffeehasfailedtosatisfyhisconsume r. Thus, satisfaction istheproperfoundationonwhichaloneanybusinesscanbuilditsfuture. 4.RealizationofOrganizationalGoalsincludingProfitIfafirmhassucceededingenerating consumersatisfaction,isimpliesthatthefirmhasgivenaqualityproduct,offeredcompetit ivepriceandpromptserviceandhassucceededincreatinggoodimage.Itisquiteobviousthatf orachievingtheseresults,thefirmwouldhavetrieditsmaximumtocontrolcostsandsimultan eouslyensurequality,optimizeproductivityandmaintainagoodorganizationalclimate.An dinthisprocess,theorganizationalgoalsincludingprofitareautomaticallyrealized.The marketingconceptneversuggeststhatprofitisunimportanttothefirm.Theconceptisagains tprofiteeringonly,butnotagainstprofits. BenefitsofMarketingConceptTheconceptbenefitstheorganisationthatpracticesit,theco nsumeratwhomitisaimedandthesocietyatthesocietyatlarge. 1.Benefitstotheorganisation:Inthefirstplace,ofthepracticeoftheconceptbringssubst antialbenefitstotheorganisationthat vidyarthiplus.comprovidehimtheexpectedfiavour,thetasteandtherefreshmentshispurch asehasnotservedthepurpose;ormoreprecisely,themarketerwhosoldthecoffeehasfailedto satisfyhisconsumer. Thus, satisfaction istheproperfoundationonwhichaloneanybusinesscanbuilditsfuture. 4.RealizationofOrganizationalGoalsincludingProfitIfafirmhassucceededingenerating consumersatisfaction,isimpliesthatthefirmhasgivenaqualityproduct,offeredcompetit ivepriceandpromptserviceandhassucceededincreatinggoodimage.Itisquiteobviousthatf orachievingtheseresults,thefirmwouldhavetrieditsmaximumtocontrolcostsandsimultan eouslyensurequality,optimizeproductivityandmaintainagoodorganizationalclimate.An dinthisprocess,theorganizationalgoalsincludingprofitareautomaticallyrealized.The marketingconceptneversuggeststhatprofitisunimportanttothefirm.Theconceptisagains tprofiteeringonly,butnotagainstprofits. BenefitsofMarketingConceptTheconceptbenefitstheorganisationthatpracticesit,theco nsumeratwhomitisaimedandthesocietyatthesocietyatlarge. 1.Benefitstotheorganisation:Inthefirstplace,ofthepracticeoftheconceptbringssubst antialbenefitstotheorganisationthat vidyarthiplus.com

practicesit.Forexample,theconceptenabletheorganisationtokeepabreastofchanges.Ano rganisatoinprcisingtheconceptkeepsfeelingthepulseofthemarketthroughcontinuousmark etingaudit,marketresearchandconsumertesting.Itisquicktorespondtochangesinbuyerbe haviour,itrectifiesanydrawbackinitstheseproducts,itgivesgreatimportanceplanning, researchandinnovation.Alltheseresponse,inthelongrun,proveextremelybeneficialtoth efirm.Anothermajorbenefitsisthatprofitsbecomemoreandcertain,asitisnolongerobtain edatthecostoftheconsumerbutonlythroughsatisfyinghim.Thebaseofconsumersatisfactio nguaranteeslong termfinancialsuccess. 2.BenefitstoConsumers:Theconsumersareinfactthemajorbeneficiaryofthemarketingconc ept.Theattemptsofvariousposition.Theconceptpromptstoproducestoconstantlyimprovet heirproductsandtolaunchnewproducts.Alltheseresultsinbenefitstotheconsumersuchas: lowprice,betterquality, improved/newproductsandreadystockatconvenientlocations. Theconsumercanchoose,hecanbargain,hecancomplainandhiscomplaintwillalsobeattended to.Hecanevenreturnthegoodsifnotsatisfied.Inshort,whenorganizationsadoptmarketing concept,asnaturalcorollary,theirbusinesspracticeschangeinfavouroftheconsumer. 3.Benefitstothesociety:Thebenefitfromthemarketingconceptisnotlimitedtotheindivid ualconsumerofproducts.Whenmoreandmoreorganizationsresorttothemarketingconcept,th esocietyin vidyarthiplus.comtocompetingfirmstosatisfytheconsumerputhimanenviablepracticesit .Forexample,theconceptenabletheorganisationtokeepabreastofchanges.Anorganisatoin prcisingtheconceptkeepsfeelingthepulseofthemarketthroughcontinuousmarketingaudit, marketresearchandconsumertesting.Itisquicktorespondtochangesinbuyerbehaviour,itr ectifiesanydrawbackinitstheseproducts,itgivesgreatimportanceplanning, researchandinnovation.Alltheseresponse,inthelongrun,proveextremelybeneficialtoth efirm.Anothermajorbenefitsisthatprofitsbecomemoreandcertain,asitisnolongerobtain edatthecostoftheconsumerbutonlythroughsatisfyinghim.Thebaseofconsumersatisfactio nguaranteeslong termfinancialsuccess. 2.BenefitstoConsumers:Theconsumersareinfactthemajorbeneficiaryofthemarketingconc ept.Theattemptsofvariousposition.Theconceptpromptstoproducestoconstantlyimprovet heirproductsandtolaunchnewproducts.Alltheseresultsinbenefitstotheconsumersuchas: lowprice,betterquality, improved/newproductsandreadystockatconvenientlocations. Theconsumercanchoose,hecanbargain,hecancomplainandhiscomplaintwillalsobeattended to.Hecanevenreturnthegoodsifnotsatisfied.Inshort,whenorganizationsadoptmarketing concept,asnaturalcorollary,theirbusinesspracticeschangeinfavouroftheconsumer. 3.Benefitstothesociety:Thebenefitfromthemarketingconceptisnotlimitedtotheindivid ualconsumerofproducts.Whenmoreandmoreorganizationsresorttothemarketingconcept,th esocietyin vidyarthiplus.comtocompetingfirmstosatisfytheconsumerputhimanenviable

Totobenefits.Theconceptguaranteesthatonlyproductsthatarerequiredbytheconsumersar eproduced;therebyitensuresthatthesociety seconomicresourcesarechannelizedintherigh tdirection.Italsocreatesentrepreneursandmanagersinthegivensociety.Moreover,itact sasa changeagent anda valueadder ; improvesthestandardoflivingofthepeople;andacceleratesthepaceofeconomicdevelopmen tofthesocietyasawhole.Italsothelifeofthepeople. Infact,thepracticeofconsumerorientedmarketingbenefitssocietyinyetanotherwaybyena blingbusinessorganizationstoappreciatethesocietalcontentinherentinanybusiness.Wh entheorganisationsmoveclosertothecustomers,theyseeclearlythevalidityofthefollowi ngobservationofDrucker, Thepurposeofanybusinessliesoutsidethebusiness insociety. Andth isawarenessofthesocietalcontentofbusinessoftenenthusesorganizationstomakeanotabl econtributiontotheenrichmentofsociety. SocietalMarketingconceptNowthequestioniswhetherthemarketingconceptisanappropriat eorganizationalgoalinanageofenvironmentaldeterioration, resourceshortages,explosivepopulationgrowthetc.andwhetherthefirmisnecessarilyact inginthebestlongruninterestsofconsumersandsociety.Forexample,manymoderndisposabl epackingmaterialscreate vidyarthiplus.commakeseconomicplanningmoremeaningfulandmorerelevanttoTotobenefit s.Theconceptguaranteesthatonlyproductsthatarerequiredbytheconsumersareproduced;t herebyitensuresthatthesociety seconomicresourcesarechannelizedintherightdirection. Italsocreatesentrepreneursandmanagersinthegivensociety.Moreover,itactsasa changeag ent anda valueadder ; improvesthestandardoflivingofthepeople;andacceleratesthepaceofeconomicdevelopmen tofthesocietyasawhole.Italsothelifeofthepeople. Infact,thepracticeofconsumerorientedmarketingbenefitssocietyinyetanotherwaybyena blingbusinessorganizationstoappreciatethesocietalcontentinherentinanybusiness.Wh entheorganisationsmoveclosertothecustomers,theyseeclearlythevalidityofthefollowi ngobservationofDrucker, Thepurposeofanybusinessliesoutsidethebusiness insociety. Andth isawarenessofthesocietalcontentofbusinessoftenenthusesorganizationstomakeanotabl econtributiontotheenrichmentofsociety. SocietalMarketingconceptNowthequestioniswhetherthemarketingconceptisanappropriat eorganizationalgoalinanageofenvironmentaldeterioration, resourceshortages,explosivepopulationgrowthetc.andwhetherthefirmisnecessarilyact inginthebestlongruninterestsofconsumersandsociety.Forexample,manymoderndisposabl epackingmaterialscreate vidyarthiplus.commakeseconomicplanningmoremeaningfulandmorerelevantto

vidyarthiplus.com problemofenvironmentaldegradationSituationslicallforanewkethis, concept,whichiscalled SocialMarketingConcept . Thesocietalmarketingconceptholdsthattheorganization staskistodeterminetheneeds,wan tsandinterestsoftargetmarketsandtodeliverthedesiredsatisfactionmoreeffectivelyan defficientlythancompetitorsinawaythatpreservesorenhancestheconsumer sandthe society swellbeing. A-fewmagazinessuchasKalki,AnandaVikadan,dotanynotaccepadvertisementsforCigarette soralcoholicliquorstislossofrevenueforthem.Thisisatypicalexampleofsocietalmarket ingconcept. Thesocietalmarketingconceptcallsuponmarketerstobalancethreeconsiderationsinsetti ngtheirmarketingpoliciesnamelyfirm sprofits,consumerwantsatisfactionandsocietyinte rest. META MARKETINGthoughi Likesocietalmarketing,theconceptofmeta-marketlsoofingisarecentorigin.Ithasconsid erablyhelpedtodevelopnsightintothisexcitingfieldoflearning.Theliteralmeaningofth eterm meta is morecomprehensive andis usedwiththenameofadisciplinetodesignateanewbutrelate ddisciplinedesignedtodealcriticallywiththeoriginalone . Inmarketing,thistermwasoriginallycoinedbyKellywhilediscussingtheissuesofethicsan dscienceofmarketing.Kotlergavethebroadenedapplicationofmarketingnationstonon-bus inessorganisations,persons, causesetc.Inbroadeningtheconceptofmarketing,marketingwasnewi

assignedamorecomprehensiverole.Heusedthetermmeta-marketingtodescribetheprocesses involvedinattemptingtodevelopormaintainexchangerelationsinvolvingproducts/servic esorganizations,persons, vidyarthiplus.comassignedamorecomprehensiverole.Heusedthetermmeta-marketingtodes cribetheprocessesinvolvedinattemptingtodevelopormaintainexchangerelationsinvolvi ngproducts/servicesorganizations,persons, vidyarthiplus.com placesorcauses. includeFamilyWelfareProgrammesandtheideaofprohibition. DEMARKETINGTheexamplesofnon-businessmarketingormeta-marketingmay Thedemarketingconceptisalsoofrecentorigin.Itisaconceptwhichisofgreatrelevancetod evelopingeconomieswheredemandsforproducts/servicesexceedsupplies. Demarketinghasbeendefinedas thataspectofmarketingthatdealswithdiscouragingcustomer ,ingeneral,oracertainclassofcustomersinparticularoneitheratemporaryorpermanentba sis.Thedemarketingconceptespousesthatmanagementofexcessdemandisasmuchamarketingp roblemasthatofexcesssupplyandcanbeachievedbytheuseofsimilarmarketingtechnologyas usedinthecaseofmanagingexcesssupply.Itmaybeemployedbyacompanytoreducetheleveloft otaldemandwithoutalienatingloyal(GeneralDemarketing),todiscouragethedemandcoming fromcertainsegmentsofthemarketthatareeitherunprofitableorpossessthepotentialofin juringloyalbuyers(SelectiveDemarketing),toappeartowantlessdemandforthesakeofactu allyincreasingit(OstensibleDemarketing). customers

Whatevermaybetheobjective,thereisalwaysadangerofdamagingcustomerrelationsinanyde marektingstrategy.Therefore,tobecreative, everycompanyhastoensurethatitslong-runcustomerrelationsremain vidyarthiplus.comWhatevermaybetheobjective,thereisalwaysadangerofdamagingcustome rrelationsinanydemarektingstrategy.Therefore,tobecreative, everycompanyhastoensurethatitslong-runcustomerrelationsremain vidyarthiplus.com undamaged. REVIEWQUESTIONS: 1.Definemarketing.Bringoutitsimportance2.Brieflydiscussthevariousconceptofmarket ing. 3.Discussindetailthemodernmarketingconcept. *****************

vidyarthiplus.com LESSON 2APPROACHESTOTHESTUDYOFMARKETING LearningObjectivesAfterreadingthislesson,youshouldbeabletounderstand Theapproachestothestudyofmarketing. Thesignificanceofdifferentapproaches. Therearedifferentapproachesstothestudyofmarketing.Theseapproacheshaveimmenselyco ntributedtotheevolutionofthemodernapproachandtheconceptofmarketing.Tofacilitatet hestudy,theseapproachesmaybebroadlyclassifiedasfollows: (i)Commodityapproach(ii)Functionalapproach(iii)Institutionalapproach(iv)Manageri alapproach;and(v)SystemsapproachCommodityApproach specificcommodityisselectedandthenitsmarketingmethodsandenvironmentsarestudiedin thecourseofitsmovementfromproducertoThefirstapproachisthecommodityapproachunderw hicha

consumer.Inthisapproach,thesubjectmatterofdiscussioncentresaroundthespecificcomm odityselectedforthestudyandincludesthesourcesandconditionsofsupply,natureandexte ntofdemand,the vidyarthiplus.comdistributionchannelsused,promotionalmethodsadoptedetc. consumer.Inthisapproach,thesubjectmatterofdiscussioncentresaroundthespecificcomm odityselectedforthestudyandincludesthesourcesandconditionsofsupply,natureandexte ntofdemand,the vidyarthiplus.comdistributionchannelsused,promotionalmethodsadoptedetc. FunctionalApproachThesecondapproachisthefunctionalapproachunderwhichthestudyconc entratesonthespecializedfunctionsorservicesperformedbythemarketersandtheproblems facedbytheminperformingthosefunctions.Suchmarketingfunctionsincludebuying,sellin g,storage, standardizing,transport,finance,risk-bearing,marketinformationetc. Thisapproachcertainlyenablesonetogaindetailedknowledgeonvariousfunctionsofmarket ing. InstitutionalApproachThethirdapproachistheinstitutionalapproachunderwhichthemain interestcentresaroundtheinstitutionsoragenciesthatperformmarketingfunctions.Such agenciesincludewholesalers,retailers, mercantileagentsandfacilitatinginstitutionsliketransportundertakings, banks,insurancecompaniesetc.Thisapproachhelpsonetofindouttheoperatingmethodsadop tedbytheseinstitutionsvariousproblemsfacedbythemandtoknowhowtheyworktogetherinfu lfillingtheirobjectives. ManagerialApproachandthe

Inthemanagerialapproach,thefocusofmarketingstudyisonthedecision-makingprocessinv olvedintheperformancemarketingfunctionsatthelevelofafirm.Thestudyencompassesdisc ussionofthedifferentunderlyingconcepts,decisioninfluencingfactors;alternativestr ategies theirrelativeimportance,strengthsandweaknesses,adtechniquesandmethodsofpro blem-solving.Thisapproachentailsthestudyofmarketingatthemicro-levelofabusinessfi rmofthemanagerialfunctionsofanalysis,planning,implementation,coordinationandcont rolinrelationtothemarketingfunctionsorcreating,stimulating, facilitatingandvaluingtransactions. SystemsApproachModernmarketingiscomplex,vastandsophisticatedanditinfluencestheen tireeconomyandstandardoflivingofpeople.Hencemarketingexpertshavedevelopedonemore approachnamely Systemapproach .Underthisapproach,marketingitselfisconsideredasasub-s ystemofeconomic,legalandcompetitivemarketingsystem.Themarketingsystemoperatesina nenvironmentofbothcontrollableanduncontrollableforcesoftheorganisation.Thecontro llableforcesincludeallaspectsofproducts,price,physicaldistributionandpromotion.T heuncontrollableforcesincludeeconomic,sociological,psychologicalandpoliticalforc es.Theorganisationhastodevelopasuitablemarketingprogrammebytakingintoconsiderati onboththesecontrollableanduncontrollableforcestomeetthechangingdemandsofthesocie ty.Thesystemsapproach,infact,examinesthisaspectandalsointegratescommodity,functi onalinstitutionalandmanagerialapproaches.Further, vidyarthiplus.comof Inthemanagerialapproach,thefocusofmarketingstudyisonthedecision-makingprocessinv olvedintheperformancemarketingfunctionsatthelevelofafirm.Thestudyencompassesdisc ussionofthedifferentunderlyingconcepts,decisioninfluencingfactors;alternativestr ategies theirrelativeimportance,strengthsandweaknesses,adtechniquesandmethodsofpro blem-solving.Thisapproachentailsthestudyofmarketingatthemicro-levelofabusinessfi rmofthemanagerialfunctionsofanalysis,planning,implementation,coordinationandcont rolinrelationtothemarketingfunctionsorcreating,stimulating, facilitatingandvaluingtransactions. SystemsApproachModernmarketingiscomplex,vastandsophisticatedanditinfluencestheen tireeconomyandstandardoflivingofpeople.Hencemarketingexpertshavedevelopedonemore approachnamely Systemapproach .Underthisapproach,marketingitselfisconsideredasasub-s ystemofeconomic,legalandcompetitivemarketingsystem.Themarketingsystemoperatesina nenvironmentofbothcontrollableanduncontrollableforcesoftheorganisation.Thecontro llableforcesincludeallaspectsofproducts,price,physicaldistributionandpromotion.T heuncontrollableforcesincludeeconomic,sociological,psychologicalandpoliticalforc es.Theorganisationhastodevelopasuitablemarketingprogrammebytakingintoconsiderati onboththesecontrollableanduncontrollableforcestomeetthechangingdemandsofthesocie ty.Thesystemsapproach,infact,examinesthisaspectandalsointegratescommodity,functi onalinstitutionalandmanagerialapproaches.Further, vidyarthiplus.comof

thisapproachemphasistheimportanceoftheuseof marketinformation inmarketingprogrammes. Thus,fromtheforegoingdiscussion,onecouldeasilyunderstandthatthemarketingcouldbes tudiedinanyoftheaboveapproachandthesystemsapproachisconsideredtobethebestapproac hasitprovidesastrongbaseforlogicalandorderlyanalysisandplanningofmarketing vidyarthiplus.comthisapproachemphasistheimportanceoftheuseof marketinformation inmar ketingprogrammes. Thus,fromtheforegoingdiscussion,onecouldeasilyunderstandthatthemarketingcouldbes tudiedinanyoftheaboveapproachandthesystemsapproachisconsideredtobethebestapproac hasitprovidesastrongbaseforlogicalandorderlyanalysisandplanningofmarketing vidyarthiplus.com activities. REVIEWQUESTIONS 1.2.Explain SystemsApproach tothestudyofmarketing. Discussthevariousapproachestothestudyofmarketing.

vidyarthiplus.com LESSON 3MARKETSEGMENTATION LearningObjectivesThemeaning,basesandbenefitsoftheconceptofmarketsegmentation; Afterreadingthislesson,youshouldtoabletounderstandTheconceptoftargetmarket; MeaningandtypesofpositioninganditsimplicationsAllfirmsmustformulateastrategyfora pproachingtheirmarkets.Ontheonehand,thefirmmaychoosetoprovideoneproducttoallofit scustomer;ontheotherhand,itmaydeterminethatthemarketissoheterogeneousthatithasno choicebuttodivideorsegmentpotentialusersintosubmarkets. Segmentationisthekeytothemarketingstrategyofmanycompanies. Segmentationisademand-orientedapproachthatinvolvesmodifyingthefirm sproductand/orm arketingstrategiestofittheneedsofindividualAccordingtoWilliamStanton, Marketsegmen tationistheprocessofdividingthetotalheterogeneousmarketforaseveralsub-marketsors egmentseachofwhichtendtobehomogeneousinallsignificantaspects. marketsegmentsratherthanthoseoftheaggregatemarket. productinto

Marketsegmentationisbasicallyastrategyof divideandrule .Thestrategyinvolvesthedevelo pmentoftwoormoredifferentmarketingprogrammesforagivenproductorservice,marketingp rogrammeaimingateachsegment.Astrategyofmarketsegmentationrequiresthatthemarketer firstclearlydefinethenumberandnatureofthecustomergroupingstowhichheintendstooffe rhisproductorservice.Thisisanecessaryconditionforoptimizingefficiencyofmarketing effort. RATIONALEFORMARKETSEGMENTATIONTherearethreereasonswhyfirmsusemarketsegmentations : BecausesomemarketsareheterogeneousBecausemarketsegmentsresponddifferentlytodiffe rent vidyarthiplus.comwitheachMarketsegmentationisbasicallyastrategyof divideandrule .The strategyinvolvesthedevelopmentoftwoormoredifferentmarketingprogrammesforagivenpr oductorservice,marketingprogrammeaimingateachsegment.Astrategyofmarketsegmentati onrequiresthatthemarketerfirstclearlydefinethenumberandnatureofthecustomergroupi ngstowhichheintendstoofferhisproductorservice.Thisisanecessaryconditionforoptimi zingefficiencyofmarketingeffort. RATIONALEFORMARKETSEGMENTATIONTherearethreereasonswhyfirmsusemarketsegmentations : BecausesomemarketsareheterogeneousBecausemarketsegmentsresponddifferentlytodiffe rent vidyarthiplus.comwitheach promotionalappeals;andBecausemarketsegmentationconsiderwiththemarketingconcept. HeterogeneousMarkets: Marketisheterogeneousbothinthesupplyanddemandside.Onsupplyside,manyfactorslikedi fferencesinproductionequipments, processingtechniques,natureofresourcesorinputsavailabletodifferentmanufactures,u nequalcapacityamongthecompetitorstermsofdesignandimprovementanddeliberateefforts toremaindifferentfromotheraccountfortheheterogeneity.Similarly,thedemandside,whi chconstituteconsumers isalsodifferentduetodifferencesinphysicalandpsychologicaltra itsofconsumer.Modernbusinessmanagersrealizethatundernormalcircumstancestheycanno tattractallofthefirm spotentialin

customerstooneproduct,becausedifferentbuyerssimplyhavedifferentthesellermustprov idedifferentproducts.Forexample,intwowheelers,theTVSCompanyfirstintroducedTVS50M oped,butlateronintroducedavarietyoftwowheelers,suchasTVSXL,TVSPowerport,TVSChamp ,TVSSport, TVSScooty,TVSSuzuki,TVSVictor,tosuittherequirementsofdifferent vidyarthiplus.comneedsandwants.Toaccommodatethisheterogeneity, customerstooneproduct,becausedifferentbuyerssimplyhavedifferentthesellermustprov idedifferentproducts.Forexample,intwowheelers,theTVSCompanyfirstintroducedTVS50M oped,butlateronintroducedavarietyoftwowheelers,suchasTVSXL,TVSPowerport,TVSChamp ,TVSSport, TVSScooty,TVSSuzuki,TVSVictor,tosuittherequirementsofdifferent vidyarthiplus.comneedsandwants.Toaccommodatethisheterogeneity, classesofcustomers. 2.VariedPromotionalAppeals: Astrategyofmarketsegmentationdoesnotnecessarilymeanthatthefirmmustproducediffere ntproductsforeachmarketsegment.Ifcertainpromotionalappealsarelikelytoaffecteachm arketsegmentdifferently,thefirmmaydecidetobuildflexibilityintoitspromotionalFore xample,manypoliticalcandidateshavetriedtosellthemselvestotheelectoratebyemphasiz ingonemessagetolabour,anothertobusiness,andathirdtofarmers. strategyratherthantoexpanditsproductline. Asanotherexample,theSheratonHotelservesdifferentdistrictmarketsegments,suchascon ventioneers,businesspeopleandtourists. Eachsegmentshasdifferentreasonsforusingthehotel.Consequently, Sheratonusesdifferentmediaanddifferentmessagestocommunicatewiththevarioussegment s.

3.ConsistencywiththeMarketingConceptAthirdreasonforusingmarketsegmentationisthat itisconsistentwiththemarketingconcept.Marketsegmentationrecognizestheexistenceof distinctmarketgroups,eachwithadistinctsetofneeds. Throughsegmentation,thefirmdirectsitsproductandpromotionaleffortsatthosemarketst hatwillbenefitmostfromorthatwillgetthegreatestenjoymentfromitsmerchandise.Thisis theheartofthe vidyarthiplus.com3.ConsistencywiththeMarketingConceptAthirdreasonforusingmarkets egmentationisthatitisconsistentwiththemarketingconcept.Marketsegmentationrecogni zestheexistenceofdistinctmarketgroups,eachwithadistinctsetofneeds. Throughsegmentation,thefirmdirectsitsproductandpromotionaleffortsatthosemarketst hatwillbenefitmostfromorthatwillgetthegreatestenjoymentfromitsmerchandise.Thisis theheartofthe vidyarthiplus.com marketingconcept. Overtheyears,marketsegmentationhasbecomeanincreasinglypopularstrategictechniquea smoreandmorefirmshaveadoptedthemarketingconcept.Otherhistoricalforcesbeingtheris eofmarketsegmentationincludeneweconomiesofscale,increasededucationandaffluence,g reatercompetition,andtheadventofnewsegmentationtechnology. BasesofMarketSegmentationThereareanumberofbasesonwhichafirmmaysegmentitsmarket1. Geographicbasisa.Nationsb.Statesc.Regions2.Demographicbasisa.Age

b.Sexc.Incomed.SocialClasse.MaterialStatus vidyarthiplus.comSexc.Incomed.SocialClasse.MaterialStatus vidyarthiplus.com f.FamilySizeg.Educationh.Occupation3.Psychographicbasisa.Lifestyle b.Personalities c.Loyaltystatusd.Benefitssoughte.Usagerate(volumesegmentation) f.Buyerreadinessstages(unaware,aware,informed,interested, desired,intendtobuy) g.Attitudestage(Enthusiastic,positive,indifferent,negative, hostile) METHODSOFSEGMENTATION

variouscharacteristicsofthecustomersandgeographicalcharacteristicsetc.,commonmet hodsofmarketsegmentationscouldbedone.Commonmethodsusedare: GeographicalSegmentationWhenthemarketisdividedintodifferentgeographicalunitasreg ion,continent,country,state,district,cities,urbanandruralareas,itiscalledasgeogr aphicalsegmentation.Evenonthegeographicneedsandpreferenceproductscouldbemade.Eve nthroughTataTeaissoldonanationallevel,itisflavouredaccordinglyindifferentregions .TheBajajhassub-dividedtheentirecountryintotwodistinctmarkets.Owingtothebetterro adconditionsinthenorth,thesuperFESectorispromotedbetterwithsmallwheels;whereasin thecaseofsouth,BajajpromotesChetakFEwithlargewheelsbecauseofthebadroadconditions . DemographicSegmentationDemographicsisthemostcommonlyusedbasisformarketsegmentati on.Demographicvariablesarerelativelyeasytounderstandandmeasure,andtheyhaveproven tobeexcellentsegmentationcriteriaformanymarkets.Informationinseveraldemographicc ategoriesisOnthebasisofthebasesusedforthemarketsegmentation, particularlyusefultomarketers. Demographicsegmentationreferstodividingthemarketintogroupsonthebasisofage,sex,fa milysizecycle,income,education, vidyarthiplus.comstrengthoftheteadiffersineachregionsofthecountry. variouscharacteristicsofthecustomersandgeographicalcharacteristicsetc.,commonmet hodsofmarketsegmentationscouldbedone.Commonmethodsusedare: GeographicalSegmentationWhenthemarketisdividedintodifferentgeographicalunitasreg ion,continent,country,state,district,cities,urbanandruralareas,itiscalledasgeogr aphicalsegmentation.Evenonthegeographicneedsandpreferenceproductscouldbemade.Eve nthroughTataTeaissoldonanationallevel,itisflavouredaccordinglyindifferentregions .TheBajajhassub-dividedtheentirecountryintotwodistinctmarkets.Owingtothebetterro adconditionsinthenorth,thesuperFESectorispromotedbetterwithsmallwheels;whereasin thecaseofsouth,BajajpromotesChetakFEwithlargewheelsbecauseofthebadroadconditions . DemographicSegmentationDemographicsisthemostcommonlyusedbasisformarketsegmentati on.Demographicvariablesarerelativelyeasytounderstandandmeasure,andtheyhaveproven tobeexcellentsegmentationcriteriaformanymarkets.Informationinseveraldemographicc ategoriesisOnthebasisofthebasesusedforthemarketsegmentation, particularlyusefultomarketers. Demographicsegmentationreferstodividingthemarketintogroupsonthebasisofage,sex,fa milysizecycle,income,education, vidyarthiplus.comstrengthoftheteadiffersineachregionsofthecountry.

Inbetterdistinctionsamongthecustomergroupsthissegmentationhelps.Theabovedemograp hicvariablesaredirectlyrelatedwiththeconsumerneeds, wantsandpreferences. organizations.Someaspectsofageasasegmentationvariablearequiteobvious.Forexample, childrenconstitutetheprimarymarketfortoysandpeople65yearsandolderaremajorusersof medicalservices.Ageandlifecycleareimportantfactors.Forinstanceintwowheelermarket ,asBajajhas Sunny forthecollegegirls; BajajChetak foryoungsters; BajajChetak fortheofficegoingpeopleandBajajM80forruralpeople. Inappealingtoteenagers,forexample,themarketingexecutivemustcontinuallymonitorthe irever-changingbeliefs,politicalandsocialattitudes,aswellsastheentertainersandcl othingthataremostpopularwithyoungpeopleataparticulartime.Suchfactorsareimportant indevelopingeffectiveadvertisingcopyandillustrationsforaproductdirectedtotheyout hmarket. Sexsegmentationisappliedtoclothing,cosmetics,magazinesandhairdressing.Themagazin eslikeWomen sEra,Femina,(inMalayalam), MangaiyarMalar(inTamil)aremainlysegmentedforwomen.Recentlyevenacigaretteexclusiv elyforwomenwasbroughtout.BeautyParloursarenotsynonymsfortheladies. occupation,religion,race,castandnationality. Incomesegmentation:Ithaslongbeenconsideredagoodvariableforsegmentingmarkets.Weal thypeople,forexample,aremorelikelytobuyexpensiveclothes,jewelleries,cars,andtoli veinlargehouses.In vidyarthiplus.comAge:MarketsegmentsbasedonagearealsoimportanttomanyInbetterdisti nctionsamongthecustomergroupsthissegmentationhelps.Theabovedemographicvariablesa redirectlyrelatedwiththeconsumerneeds, wantsandpreferences. organizations.Someaspectsofageasasegmentationvariablearequiteobvious.Forexample, childrenconstitutetheprimarymarketfortoysandpeople65yearsandolderaremajorusersof medicalservices.Ageandlifecycleareimportantfactors.Forinstanceintwowheelermarket ,asBajajhas Sunny forthecollegegirls; BajajChetak foryoungsters; BajajChetak fortheofficegoingpeopleandBajajM80forruralpeople. Inappealingtoteenagers,forexample,themarketingexecutivemustcontinuallymonitorthe irever-changingbeliefs,politicalandsocialattitudes,aswellsastheentertainersandcl othingthataremostpopularwithyoungpeopleataparticulartime.Suchfactorsareimportant indevelopingeffectiveadvertisingcopyandillustrationsforaproductdirectedtotheyout hmarket. Sexsegmentationisappliedtoclothing,cosmetics,magazinesandhairdressing.Themagazin eslikeWomen sEra,Femina,(inMalayalam), MangaiyarMalar(inTamil)aremainlysegmentedforwomen.Recentlyevenacigaretteexclusiv elyforwomenwasbroughtout.BeautyParloursarenotsynonymsfortheladies. occupation,religion,race,castandnationality. Incomesegmentation:Ithaslongbeenconsideredagoodvariableforsegmentingmarkets.Weal thypeople,forexample,aremorelikelytobuyexpensiveclothes,jewelleries,cars,andtoli veinlargehouses.In vidyarthiplus.comAge:Marketsegmentsbasedonagearealsoimportanttomany

addition,incomehasbeenshowntobeanexcellentsegmentationcorrelateforanevenwiderran geofcommoditypurchasedproducts, includinghouseholdtoiletries,paperandplasticitems,furniture,etc. SocialClasssegmentation:Thisisasignificantmarketsegment. Forexample,membersofdifferentsocialclassesvarydramaticallyintheiruseofbankcredit cards.Peopleinlowe4rsocialclassestendtousebankcreditcardsasinstallmentloans,whil ethoseinhighersocialclassesusethemforconveniencepurposes.inbehaviourcanbesignifi cantwhensegmentingamarketanddevelopingamarketingprogramtoserveeachsegment. PsychographicSegmentationOnthebasisofthelifestyle,personalitycharacteristics,buy ersaredividedandthissegmentationisknownaspsychographicssegmentation. Certaingroupofpeoplereactsinaparticularmannerforanappealprojectedintheadvertisem entsandexhibitbehaviouralpatterns.Marketershavealsousedthepersonalityvariablesas independent,impulsive,masculine,aggressive,confident,nave,shyetc. formarketingtheirproducts.Oldspicepromotestheiraftershavelotionforthepeoplewhoar eselfconfidentandareveryconsciousoftheirdresscode.Theseadvertisementsfocusmainly personalityvariablesassociatedwiththeproduct. BehaviouralSegmentationBuyerbehaviouralsegmentationisslightlydifferentfrompsycho graphicsegmentation.Herebuyersaredividedintogroupsonthebasisoftheirknowledge,att itude,useorresponsetoaproduct. vidyarthiplus.comThesedifferencescommonontheaddition,incomehasbeenshowntobeanexc ellentsegmentationcorrelateforanevenwiderrangeofcommoditypurchasedproducts, includinghouseholdtoiletries,paperandplasticitems,furniture,etc. SocialClasssegmentation:Thisisasignificantmarketsegment. Forexample,membersofdifferentsocialclassesvarydramaticallyintheiruseofbankcredit cards.Peopleinlowe4rsocialclassestendtousebankcreditcardsasinstallmentloans,whil ethoseinhighersocialclassesusethemforconveniencepurposes.inbehaviourcanbesignifi cantwhensegmentingamarketanddevelopingamarketingprogramtoserveeachsegment. PsychographicSegmentationOnthebasisofthelifestyle,personalitycharacteristics,buy ersaredividedandthissegmentationisknownaspsychographicssegmentation. Certaingroupofpeoplereactsinaparticularmannerforanappealprojectedintheadvertisem entsandexhibitbehaviouralpatterns.Marketershavealsousedthepersonalityvariablesas independent,impulsive,masculine,aggressive,confident,nave,shyetc. formarketingtheirproducts.Oldspicepromotestheiraftershavelotionforthepeoplewhoar eselfconfidentandareveryconsciousoftheirdresscode.Theseadvertisementsfocusmainly personalityvariablesassociatedwiththeproduct. BehaviouralSegmentationBuyerbehaviouralsegmentationisslightlydifferentfrompsycho graphicsegmentation.Herebuyersaredividedintogroupsonthebasisoftheirknowledge,att itude,useorresponsetoaproduct. vidyarthiplus.comThesedifferencescommononthe

Benefitsegmentation:Theassumptionunderlyingthebenefitsegmentationisthatmarketsca nbedefinedonthebasisofthebenefitsthatpeopleseekfromtheproduct.Althoughresearchin dicatesthatmostpeoplewouldliketoreceiveasmanybenefitsaspossiblefromaproduct, ithasalsobeenshownthattherelativeimportancethatpeopleattachtoparticularbenefitsv ariessubstantially.Thesedifferencescanthenbesuedtosegmentmarkets. Oncethekeybenefitsforaparticularproduct/marketsituationaredetermined,theanalystm ustcompareeachbenefitsegmentwiththerestofthemarkettodeterminewhetherthatsegmenth asuniqueandidentifiabledemographiccharacteristics,consumptionpatterns,ormediahab its.Forexample,themarketfortoothpastecanbesegmentedintermsoffourdistinctproductb enefits;flavourandproductappearance, brightnessofteeth,decaypreventionandprice. Themajoradvantageofbenefitsegmentationisthatitisdesignedtofitthepreciseneedsofth emarket.Ratherthantryingtocreatemarkets,thefirmindentifiesthebenefitorthatprospe ctivecustomerswantfromtheirpurchasesdesignsproductsandpromotionalstrategiestomee tthoseneeds.Asecondandrelatedadvantageisthatbenefitsegmentationhelpsthefirmavoid cannibalizingitsexistingproductswhenitintroducesnewones. Buyerscanbedividedbasedontheirneeds,topurchaseproductforanoccasion.Thenumberofti mesaproductisusedcouldbealsoconsideredasasegmentationpossibility.Atoothpastemanu facturerurgesthepeopletobrushtheteethtwiceadayforavoidingtoothdecayandfreshness. Eitheracompanycanpositioninsinglebenefitordouble vidyarthiplus.comsetofbenefitsandthenBenefitsegmentation:Theassumptionunderlying thebenefitsegmentationisthatmarketscanbedefinedonthebasisofthebenefitsthatpeople seekfromtheproduct.Althoughresearchindicatesthatmostpeoplewouldliketoreceiveasma nybenefitsaspossiblefromaproduct, ithasalsobeenshownthattherelativeimportancethatpeopleattachtoparticularbenefitsv ariessubstantially.Thesedifferencescanthenbesuedtosegmentmarkets. Oncethekeybenefitsforaparticularproduct/marketsituationaredetermined,theanalystm ustcompareeachbenefitsegmentwiththerestofthemarkettodeterminewhetherthatsegmenth asuniqueandidentifiabledemographiccharacteristics,consumptionpatterns,ormediahab its.Forexample,themarketfortoothpastecanbesegmentedintermsoffourdistinctproductb enefits;flavourandproductappearance, brightnessofteeth,decaypreventionandprice. Themajoradvantageofbenefitsegmentationisthatitisdesignedtofitthepreciseneedsofth emarket.Ratherthantryingtocreatemarkets,thefirmindentifiesthebenefitorthatprospe ctivecustomerswantfromtheirpurchasesdesignsproductsandpromotionalstrategiestomee tthoseneeds.Asecondandrelatedadvantageisthatbenefitsegmentationhelpsthefirmavoid cannibalizingitsexistingproductswhenitintroducesnewones. Buyerscanbedividedbasedontheirneeds,topurchaseproductforanoccasion.Thenumberofti mesaproductisusedcouldbealsoconsideredasasegmentationpossibility.Atoothpastemanu facturerurgesthepeopletobrushtheteethtwiceadayforavoidingtoothdecayandfreshness. Eitheracompanycanpositioninsinglebenefitordouble vidyarthiplus.comsetofbenefitsandthen

benefitwhichtheproductoffers.Thestatusofthebuyersusingtheproductandthenumberofti mestheyusetheproductcanalsorevealthatbehaviouralpatternsofconsumersvaryonalarges cale. vidyarthiplus.combenefitwhichtheproductoffers.Thestatusofthebuyersusingtheproduc tandthenumberoftimestheyusetheproductcanalsorevealthatbehaviouralpatternsofconsu mersvaryonalargescale. vidyarthiplus.com Life-StyleSegmentationLife-stylesegmentationisarelativelynewtechniquethatinvolve slookingatthecustomerasa whole personratherthanasasetofisolatedparts.Itattemptstocla ssifypeopleintosegmentsonthebasisofabroadsetofcriteria . Themostwidelyusedlife-styledimensionsinmarketsegmentationareanindividual sactiviti es,interests,opinions,anddemographiccharacteristics.Individualsareanalyzedinterm sof(i)howtheyspendtheirtime,(ii)whatareasofinteresttheyseeasmostimportant,(iii)t heiropinionsonthemselvesandoftheenvironmentaroundthem,and(iv) basicdemographicssuchasincome,socialclassandeducation. Unfortunately,thereisnoonebestwaytosegmentmarkets.Thisfactshascausedagreatdealof frustrationmarketingexecutiveswhoinsistthatasegmentationvariablethathasproveneff ectiveinonemarket/productcontextshouldbeequallyeffectiveinothersituations.Thetru thisthatavariablesuchassocialclassmaydescribethetypesofpeoplewhoshopinparticular stores,butproveuselessindefiningthemarketforaparticularproduct.Therefore,inusing asegmentationcriteriainordertoidentifythosethatwillbemosteffectiveindefiningthei rmarkets. UNDERSTANDINGMARKETINGforsome

vidyarthiplus.com Herethecompanyoperatesinmostofthesegmentsofthemarketbydesigningseparateprogramme sforeachdifferentsegment.Bajaj, TVS-Suzuki,HeroCyclearethosecompaniesfollowingthisstrategy. Usuallydifferentialtedmarketingcreatersmreosalesthanundifferentiatedmarketing,bu ttheproductionproductmodificationandadministrativecosts,inventoryandproductpromo tionalbudgetsandcostswouldbeveryhigh.Themainaimofthistypeofmarketingisthelargevo lumeturnoverforaparticularbrand. Requirementsforeffectivesegmentations1.Measurability thedegreetowhichthesizeandpur chasingpowerofthesegmentscanbemeasured. 2.Accessibility thedegreetowhichthesegmentscanbeeffectivelycosts, costs, reachedandserved. 3.Substantiality thedegreetowhichthesegmentsarelargeand/orprofitableenough. 4.Actionability thedegreetowhicheffectiveprogrammescanbeformulatedforattractingand servingthesegments. BENEFITSOFMARKETSEGMENTATIONMarketsegmentationgivesabetterunderstandingofconsume rneeds, behaviourandexpectationstothemarketers.Theinformationgatheredwillbepreciseanddef inite.Ithelpsforformulatingeffectivemarketingmixcapableofattainingobjectives.The marketerneednotwastehismarketingeffortovertheentirearea.Theproductdevelopmentisc ompatiblewithconsumerneeds,pricingmatchesconsumer

expectationsandpromotionalprogrammesareintunewithconsumerwillingnesstoreceive,as similateandpositivelyreacttocommunications. Specifically,segmentationanalysishelpsthemarketingmanager. Todesignproductlinesthatareconsistentwiththedemandsofthemarketandthatdonotignore importantsegments. Tospotthefirstsignsofmajortrendsinrapidlychangingmarkets. Todirecttheappropriatepromotionalattentionandfundstothemostprofitablemarketsegme nts. Todeterminetheappealsthatwillbemosteffectivewitheach vidyarthiplus.comexpectationsandpromotionalprogrammesareintunewithconsumerwillin gnesstoreceive,assimilateandpositivelyreacttocommunications. Specifically,segmentationanalysishelpsthemarketingmanager. Todesignproductlinesthatareconsistentwiththedemandsofthemarketandthatdonotignore importantsegments. Tospotthefirstsignsofmajortrendsinrapidlychangingmarkets. Todirecttheappropriatepromotionalattentionandfundstothemostprofitablemarketsegme nts. Todeterminetheappealsthatwillbemosteffectivewitheach vidyarthiplus.com marketsegments. Toselecttheadvertisingmediathatbestmatchesthecommunicationpatternsofeachmarketse gment. Tomodifythetimingofadvertisingandotherpromotionaleffortssothattheycoincidewithth eperiodsofgreatestmarketresponse. Inshort,thestrengthofmarketsegmentationliesinmatchingproductstoconsumerneedsthat augmentconsumersatisfactionandfirm sprofitposition.However,themajorlimitationofmar ketsegmentationistheinabilityofafirmtotakecareofallsegmentationbasesandtheirinnu merousvariables.Still,thestrengthsofsegmentationoutweighitslimitsandoffersconsid erableopportunitiesformarketexploitation. market FEATURESOFCONSUMERMARKETING

Consumergoodsaredestinedforusebyultimateconsumersorhouse-holdsandinsuchformthatt heycanbeusedwithoutcommercial vidyarthiplus.comConsumergoodsaredestinedforusebyultimateconsumersorhouse-holdsa ndinsuchformthattheycanbeusedwithoutcommercial vidyarthiplus.com processing. Consumergoodsandservicesarepurchasedforpersonalconsumption. Consumerbuyersareindividualsandhouseholds. Impulsebuyingiscommoninconsumermarket. Thenumberofconsumerbuyersisrelativelyverylarge. Thenumberoffactorsinfluencingbuyingdecision-makingisrelativelysmall. Decision-makingprocessisinformalandoftensimple. Relationshipmarketingislesssignificant. Technicalspecificationsarelessimportant. Ordersizeisverysmall. Demandforconsumergoodsandservicesaredirectdemand. Manyconsumerpurchasesareinfluencedbyemotionalfactors. Serviceaspectsaregenerallylessimportant. Consumermarketingdependsheavilyonmassmediaadvertising. Salespromotionisverycommon. Directmarketingandpersonalsellingarelessimportant.

Supplyefficiency,isnotascriticalasinindustrialmarketing. Distributionchannelsaregenerallylengthyandthenumbersofresellersareverylarge. Systemssellingisnotimportant. Thescopeforreciprocityisverylimited. Vendorloyaltyisrelativelylessimportant. Lineextensionsareverycommon. Brandingplaysagreatrole. Packagingalsoplaysapromotionalrole. Consumersaredispersedgeographically. Demandforconsumergoodsispriceelastic. FEATURESOFINDUSTRIALMARKETINGInindustrialmarketing,themarketsisconcernedwiththem arketingofindustrialgoodstoindustrialusers.Theindustrialgoodsarethoseintendedfor useinproducingofothergoodsroerenderingofsomeserviceinbusiness.Theindustrialusers arethoseindividualsandorganizationswhobuytheindustrialgoodsforuseintheirownbusin ess. Thesegmentsforindustrialgoodsincludemanufacturing,miningandquarrying,transportat ion,communication,agriculture,forestry,finance, insurance,realestateetc. vidyarthiplus.comSupplyefficiency,isnotascriticalasinindustrialmarketing. Distributionchannelsaregenerallylengthyandthenumbersofresellersareverylarge. Systemssellingisnotimportant. Thescopeforreciprocityisverylimited. Vendorloyaltyisrelativelylessimportant. Lineextensionsareverycommon. Brandingplaysagreatrole. Packagingalsoplaysapromotionalrole. Consumersaredispersedgeographically. Demandforconsumergoodsispriceelastic. FEATURESOFINDUSTRIALMARKETINGInindustrialmarketing,themarketsisconcernedwiththem arketingofindustrialgoodstoindustrialusers.Theindustrialgoodsarethoseintendedfor useinproducingofothergoodsroerenderingofsomeserviceinbusiness.Theindustrialusers arethoseindividualsandorganizationswhobuytheindustrialgoodsforuseintheirownbusin ess. Thesegmentsforindustrialgoodsincludemanufacturing,miningandquarrying,transportat ion,communication,agriculture,forestry,finance, insurance,realestateetc. vidyarthiplus.com

Industrialgoodsareservicesareboughtforproductionofother vidyarthiplus.comIndustrialgoodsareservicesareboughtforproductionofother vidyarthiplus.com goodsandservices. Impulsebuyingisalmostabsentinindustrialmarket. Industrialbuyingdecisionsarebasedonrational,economicfactors. Thenumberofbusinessbuyersisrelativelysmall. Thenumberoffactorsinfluencingbuyingdecision-makingisrelativelylarge. Relationshipmarketingismorerelevantandsignificant. Technicalspecificationsaremoreimportant. Ordersizeisoftenverylarge. Serviceaspectsandperformanceguaranteesareveryimportant. DemandforindustrialgoodsandservicesisderiveddemandSpecificmedialiketradejournals aremoreimportantforindustrialmarketing. Industrialbuyersaremostlyfirmsandotherorganizations. Decision-makingprocesstendstobecomplexandformal. Directmarketingandpersonalsellingarehighlyimportant. Salespromotionisnotcommon. Supplyefficiencyisverycriticalbecausesupplyproblemcanevencausesuspensionoftheent irebusiness.

Distributionchannelsaregenerallytendtobedirectorshortandthenumberofresellersares mall. Systemssellingisveryimportant. Thescopeforreciprocityisverylarge. Vendorloyaltytendstobehigh. Lineextensionislimitedbyjustificationofclearbenefittothebuyer. Conformitytoproductspecificationsandreputationofthemanufacturersupplieraremoreim portant. Packaginghardlyhasapromotionalrole. Businessbuyersinmanycasesaregeographicallyconcentrated. Pricesensitivityofdemandforindustrialgoodsislow. FEATURESOFSERVICESMARKETINGServicemarketisrepresentedbyactivities,benefitsandsat isfactionsofferedforsalebyprovidersofservices.Theseservicesmaybelabourservices,p ersonalservices,professionalorinstitutionalservices.Thepeculiarcharacteristicsof servicescreatechallengesandopportunitiestotheservicemarkets.Thesearegiven vidyarthiplus.comservicesDistributionchannelsaregenerallytendtobedirectorshortan dthenumberofresellersaresmall. Systemssellingisveryimportant. Thescopeforreciprocityisverylarge. Vendorloyaltytendstobehigh. Lineextensionislimitedbyjustificationofclearbenefittothebuyer. Conformitytoproductspecificationsandreputationofthemanufacturersupplieraremoreim portant. Packaginghardlyhasapromotionalrole. Businessbuyersinmanycasesaregeographicallyconcentrated. Pricesensitivityofdemandforindustrialgoodsislow. FEATURESOFSERVICESMARKETINGServicemarketisrepresentedbyactivities,benefitsandsat isfactionsofferedforsalebyprovidersofservices.Theseservicesmaybelabourservices,p ersonalservices,professionalorinstitutionalservices.Thepeculiarcharacteristicsof servicescreatechallengesandopportunitiestotheservicemarkets.Thesearegiven vidyarthiplus.comservices below: INTANGIBILITY

Servicesareessentiallyintangible.Becauseservicesareperformanceoractionsrathertha nobjects,theycannotbeseen,felt, tasted,ortouchedinthesamemannerthatwecanseesensetangiblegoods.Forexample,healthcareservicesareactionssurgery, diagnosis,examinations,treatment)performedbyprovidersanddirectedtowardpatientsan dtheirfamilies.Theseservicescannotactuallybeseenortouchedbythepatientmaybeableto seenandtouchcertaintangible, componentsoftheservices(e.g.equipment,hospitalroom).Infact,manyservicessuchashea lthcarearedifficultfortheconsumertograspevenmentally.Evenafteradiagnosisorsurger yhasbeencompletedthepatientmaynotfullycomprehendtheserviceperformed. vidyarthiplus.com(e.g. Servicesareessentiallyintangible.Becauseservicesareperformanceoractionsrathertha nobjects,theycannotbeseen,felt, tasted,ortouchedinthesamemannerthatwecanseesensetangiblegoods.Forexample,healthcareservicesareactionssurgery, diagnosis,examinations,treatment)performedbyprovidersanddirectedtowardpatientsan dtheirfamilies.Theseservicescannotactuallybeseenortouchedbythepatientmaybeableto seenandtouchcertaintangible, componentsoftheservices(e.g.equipment,hospitalroom).Infact,manyservicessuchashea lthcarearedifficultfortheconsumertograspevenmentally.Evenafteradiagnosisorsurger yhasbeencompletedthepatientmaynotfullycomprehendtheserviceperformed. vidyarthiplus.com(e.g. INSEPARABILITYServicesarecreatedandconsumedsimultaneouslyandgenerallytheycannotb eseparatedfromtheprovideroftheservice.Thustheserviceprovider customerinteractionis aspecialfeatureofservicesmarketing. Unlikethetangiblegoods,servicescannotbedistributedusingconventionalchannels.Inse parabilitymakesdirectsalestheonlypossiblechannelofdistributionandthusdelimitsthe marketsfortheseller sservices.Thischaracteristicsalsolimitsthescaleofoperationofth eserviceprovider.Forexample,adoctorcangivetreatmenttolimitednumberofpatientsonly inaday. Thischaracteristicalsoemphasizestheimportanceofthequalityofprovider clientinteract ioninservices.Thisposesanothermanagementaschallengetotheservicemarketer.Whileaco nsumer ssatisfaction

dependsonthefunctionalaspectsinthepurchaseofgoods,inthecaseofservicestheabovemen tionedinteractionplaysanimportantroleindeterminingthequalityofservicesandcustome rsatisfaction.Forexample,anairlinecompanymayprovideexcellentflightservice,butadi scourteousonboardstaffmaykeepoffthecustomerpermanentlyfrom vidyarthiplus.comdependsonthefunctionalaspectsinthepurchaseofgoods,inthecaseofse rvicestheabovementionedinteractionplaysanimportantroleindeterminingthequalityofs ervicesandcustomersatisfaction.Forexample,anairlinecompanymayprovideexcellentfli ghtservice,butadiscourteousonboardstaffmaykeepoffthecustomerpermanentlyfrom vidyarthiplus.com thatcompany. Thereareexemptionsalsototheinseparabilitycharacteristic.Atelevisioncoverage,trav elagencyorstockbrokermayrepresentandhelpmarketingtheserviceprovidedbyanotherserv icefirm. HETEROGENEITYThischaracteristicisreferredtoasvariabilitybyKotler.Wehavealreadyse enthatservicescannotbestandardized.arehighlyvariabledependingupontheproviderandt hetimeandplacewheretheyareprovided.Aserviceprovidedonotheroccasions.Alsothestand ardofqualityperceivedbydifferentconsumersmaydifferaccordingtotheorderofpreferenc egivenbythemtothevariousattributeofserviceactuality.Forexample,thetreatmentsgive nbyahospitaltodifferentpersonsondifferentoccasioncannotbeofthesamequality.Consum ersofservicesareawareofthisvariabilityandbytheirinteractionwithotherconsumersthe yalsoessenefluncedorinfluenceothersintheselectionofserviceprovider. They PERISHABILITYANDFLUCTUATINGDEMANDPerisbabilatyreferstothefactthatservicescannotb esaved, stored,resoldorreturned.Aseatonanairplaneorinarestaurant,anhouroralawyer stime,ort elephonelinecapacitynotusedcannotbe

reclaimedandusedorresoldatlatertime.Thisisincontracttogoodsthatcanbestoredininve ntoryorresoldanotherday,orevenreturnediftheconsumerisunhappy. vidyarthiplus.comreclaimedandusedorresoldatlatertime.Thisisincontracttogoodsthat canbestoredininventoryorresoldanotherday,orevenreturnediftheconsumerisunhappy. vidyarthiplus.com TARGETMARKETINGmarketsegmentsanddevelopingproductsandmarketingmixessuitedtoeachs egments. Targetmarketingreferstoselectionofoneormoreofmany STEPSINTARGETMARKETING1.DefinetherelevantmarketThemarkethastobedefinedintermsofp roductcategory,theproductformandthespecificbrand. 2. geographiclocation,demographics,psychographicsproductrelatedvariable. 3.IdentifybasesforsegmentingthemarketFromtheprofilesavailableidentifythosehasstr engthadequatetoasegmentandreflectionthewantstokjdfgkjsdfgjsdkgjsfdkgjsf4.Definea nddescribemarketsegmentsAsanyonebasis,sayincomeismeaninglessbyitself,acombinatio nofvariousbaseshastobearrivedassuchthateachsegmentisTargetmarketingessentiallyco nsistofthefollowingsteps: AnalyzecharacteristicsandwantsofpotentialcustomersThecustomerswantsandneedsareto beanalyzedintermsofand

distinctlydifferentfromothersegmentsinbuyingbehaviourand vidyarthiplus.comdistinctlydifferentfromothersegmentsinbuyingbehaviourand vidyarthiplus.com wants. 5.Analyzecompetitor spositionsInsuchsegmentgdfkgjxfkgnfdkgdxngmdfgkdfjgkdfjdfkjgdf kbytheconsumersaretofoundourkjgfksjdfgdsfgsconsumersandthelist6.Evaluatemarketse gmentspotentialandcostofthemarketingeffort.Theinvolvesestimatingthedemandforthep roductwhilethelatterisanestimateofcostsinvolvedinreachingeachsegment. 7.SelectthemarketsegmentChoosingdfkjgdfkjgfdtheavailablesegmentsinthemarketoneha stobearinmindtheksdfjgksjgkjdandresources,thepresenceorabsenceofcompetitorsinthe sdkjgksjdfandthecapacityofthegrowinsize. ofattributeswhichtheyconsiderimportantisdetermined. Themarketsegmentshavetobeevaluatedintermsofrevenueformer 8.FinalisethemarketingmixThisinvolvesdecisionsonproduct,distribution,promotionsa ndprice. Productdecisionswillgkjsdfintoaccountproductattributedfdgkdjfwantedbyconsumers,c hoiceofappropriatebrandnameandimagewillhelpinpromotingtheproducttothechosensegme ntandpricingcanbedonekeepingthepurchasebehaviourinmind.

Hence,itcanbeseenthattargetedmarketingconsistsofsegmentingthemarket,choosingwhic hsegmentstoserveanddesigningthemarketingmixinsuchawaythatitisattractivetothechos ensegments.Thethirdsteptakesintoaccounttheuniquenessofacompany smarketingmixinarel ationtothatofcompetitors.Theuniquenessordifferentiationmaybetangibleorintangible dependinguponthephysicalattributesorthepsychologicalattributesoftheproduct.Estab lishingandcommunicatingthesedistinctiveaspectsis vidyarthiplus.comHence,itcanbeseenthattargetedmarketingconsistsofsegmentingthema rket,choosingwhichsegmentstoserveanddesigningthemarketingmixinsuchawaythatitisat tractivetothechosensegments.Thethirdsteptakesintoaccounttheuniquenessofacompany sm arketingmixinarelationtothatofcompetitors.Theuniquenessordifferentiationmaybetan gibleorintangibledependinguponthephysicalattributesorthepsychologicalattributeso ftheproduct.Establishingandcommunicatingthesedistinctiveaspectsis vidyarthiplus.com termedpositioning. MARKETINGMIXMarketingmixisoneofthemajorconceptsinmodernmarketing. Itisthecombinationofvariouselementswhichthecompany smarketingsystem.Itissetofcontr ollablemarketingvariablesthatthefirmblendstoproducetheresponseitwantsinthetarget market.Thoughtherearemanybasicmarketingvariables,itisMcCarthy,whopopularizedafou r-factorclassificationcalledthefourPs:Product,Price,PlaceandPromotion.EachPconsi stsofalistofparticularmarketingvariables. ThefirstP Productconsistsof(i)Productplanninganddevelopment; (ii)Productmixpoliciesandstrategies;and(iii)Brandingandpackagingstrategies. constitutes

ThesecondP Priceconsistsof(i)Pricingpoliciesandobjectives;and(ii)Methodsofsettingp rices. ThethirdP Placeconsistsof(i)Differenttypesofmarketingchannels; (ii)Retailingandwholesalinginstitutions;and(iii)Managementofphysicaldistribution systems. ThefourthP Promotionconsistsof vidyarthiplus.comThesecondP Priceconsistsof(i)Pricingpoliciesandobjectives;and(ii) Methodsofsettingprices. ThethirdP Placeconsistsof(i)Differenttypesofmarketingchannels; (ii)Retailingandwholesalinginstitutions;and(iii)Managementofphysicaldistribution systems. ThefourthP Promotionconsistsof vidyarthiplus.com (i) (ii) (iii) Advertising; Salespromotion;andPersonalselling. AdetaileddiscussiononeachoftheabovefourP sfollowsnow: PRODUCTProductstandsforvariousactivitiesofthecompanysuchasplanninganddevelopingt herightproductand/orservices,changingtheexistingproducts,addingnewonesandtakingo theractionsthataffecttheassortmentsofproducts.Decisionsarealsorequiredintheareas Aproductissomethingthatmustbecapableofsatisfyinganeedorwant,itincludesphysicalob jects,services,personalitiesplaces, organisationandideas.Thus,atransportservice,asitsatisfiershumansuchasquality,fea tures,styles,brandnameandpackaging.

needisaproduct.Similarly,placeslikeKashmirandKodaikanal,astheyThesecondaspectofp roductisproductplanninganddevelopment. Productplanningembracesallactivitiesthatdetermineacompany slike vidyarthiplus.comsatisfyneedtoenjoythecoolclimatearealsoproducts. needisaproduct.Similarly,placeslikeKashmirandKodaikanal,astheyThesecondaspectofp roductisproductplanninganddevelopment. Productplanningembracesallactivitiesthatdetermineacompany slike vidyarthiplus.comsatisfyneedtoenjoythecoolclimatearealsoproducts. ofproducts.Itincludea)Planninganddevelopinganewproduct; b)Modificationofexistingproductlines;andc)Eliminationofunprofitableitems. Productdevelopmentencompassesthetechnicalactivitiesofproductresearch,engineering anddecision. Thethirdaspectofproductisproductmixpoliciesandstrategies. Productmixreferstothecompositeofproductsofferedforsalebyacompany.ForexampleGodre jcompanyofferscosmetics,steelfurnitures, officeequipments,locksetc.withmanyitemsineachcategory. Theproductmixisfourdimensional.Ithasbreadth,length,depthandconsistency. Yetanotherintegralpartofproductispackaging. PRICE Thesecondelementofmarketingmixisprice.Pricestandsforthemonetaryvaluethatcustomer spaytoobtaintheproduct.Inpricing,thecompanymustdeterminetherightpriceforitsprodu ctsandthendecide

onstrategiesconcerningretailandwholesalediscounts, allowancesandcreditterms. Beforefixingpricesfortheproduct,thecompanyshouldbeclearaboutitspricingobjectives andstrategies.Theobjectivesmaybesetlowinitialpriceandraisingitgraduallyorosethig hinitialpriceandreducingitgraduallyorfixingatargetrateofreturnorsettingpricestom eetthecompetitionetc.ButtheactualpricesettingisbasedonthreefactorsRegardingretai lpricing,thecompanymayadopttwopolicies.Onepolicyisthathemayallowtheretailerstofi xwithoutprices, interferinginhisright.Anotherpolicyisthathemaywanttoexercisecontrolovertheproduc ts.Discountsandallowancesresultinadeduction vidyarthiplus.comnamelycostofproduction,levelofdemandandcompetition. anypriceonstrategiesconcerningretailandwholesalediscounts, allowancesandcreditterms. Beforefixingpricesfortheproduct,thecompanyshouldbeclearaboutitspricingobjectives andstrategies.Theobjectivesmaybesetlowinitialpriceandraisingitgraduallyorosethig hinitialpriceandreducingitgraduallyorfixingatargetrateofreturnorsettingpricestom eetthecompetitionetc.ButtheactualpricesettingisbasedonthreefactorsRegardingretai lpricing,thecompanymayadopttwopolicies.Onepolicyisthathemayallowtheretailerstofi xwithoutprices, interferinginhisright.Anotherpolicyisthathemaywanttoexercisecontrolovertheproduc ts.Discountsandallowancesresultinadeduction vidyarthiplus.comnamelycostofproduction,levelofdemandandcompetition. anyprice fromthebaseprice. PLACE Thethirdelementofmarketingmixisplaceorphysicaldistribution. Placestandsforthevariousactivitiesundertakenbythecompanytomaketheproductaccessib leandavailabletotargetcustomers.Therearefourdifferentlevelchannelsofdistribution .Thefirstiszero-levelchannelwhichmeansmanufacturedirectlysellingthegoodstothecon sumers. Thesecondisone-levelchannelwhichmeanssupplyingthegoodstotheconsumerthroughtheret ailer.Thethirdistwo-levelchannelwhichmeanssupplyingthegoodstotheconsumerthroughw holesalerandretailer.Thefourthisthree-levelchannelwhichmeanssupplying

goodstotheconsumersthroughwholesaler-jobber-retailerandconsumer. Therearelarge-scaleinstitutionssuchasdepartmentalstores, andsmall-scaleretailinstitutionssuchassmallretailshop,vending, franchisingetc.Thecompanymustchosetodistributetheirproductsthroughanyoftheabover etailinginstitutionsdependinguponthenatureoftheproducts,areaofthemarket,volumeof scaleandcostinvolved. Theactualoperationofphysicaldistributionsystemrequiredcompany sattentionanddecisio n-makingintheareasofinventory, locationofwarehousing,materialshandling,orderprocessingand vidyarthiplus.comchainstores,mailorderbusiness,super-marketetc. automaticgoodstotheconsumersthroughwholesaler-jobber-retailerandconsumer. Therearelarge-scaleinstitutionssuchasdepartmentalstores, andsmall-scaleretailinstitutionssuchassmallretailshop,vending, franchisingetc.Thecompanymustchosetodistributetheirproductsthroughanyoftheabover etailinginstitutionsdependinguponthenatureoftheproducts,areaofthemarket,volumeof scaleandcostinvolved. Theactualoperationofphysicaldistributionsystemrequiredcompany sattentionanddecisio n-makingintheareasofinventory, locationofwarehousing,materialshandling,orderprocessingand vidyarthiplus.comchainstores,mailorderbusiness,super-marketetc. automatic transportation. PROMOTION Thefourthelementofthemarketingmixispromotion.Promotionstandsforthevariousactivit iesundertakentocommunicatethemeritsofitsproductsandtopersuadetargetcustomerstobu ythem.Advertising,salespromotionandpersonalsellingarethemajorpromotionalactiviti es.Aperfectcoordinationamongthesethreeactivitiescansecuremaximumeffectivenessofp romotionalstrategy. Forsuccessfulmarketing,themarketingmanagerahstodevelopabestmarketingmixforhispro duct. REVIEWQUESTIONS: 1.Whatismarketsegmentation?Whatareitsbases? bythecompany

2.Whatarethebenefitsofmarketsegmentation? 3.Definemarketingmix.Brieflyexplaindifferentelementsofmarketingmix. vidyarthiplus.comWhatarethebenefitsofmarketsegmentation? 3.Definemarketingmix.Brieflyexplaindifferentelementsofmarketingmix. vidyarthiplus.com

vidyarthiplus.com LESSON 4MARKETINGENVIRONMENTLearningObjectivesAfterreadingthislesson,youshouldbeab letounderstand Thevariousmicroenvironmentalfactorsthataffectthemarketingsystem; Thevariousmacroenvironmentalforcesthataffectthesystem;andOneofthemajorresponsibi litiesofmarketingexecutivesistomonitorandsearchtheenvironmentwhichisconstantlysp inningoutnewopportunities.Themarketingenvironmentalsospinsoutnewthreatssuchasfin ancial,economicpoliticalandenergycrisisandfirmsfindtheirmarketscollapsing.Recent timeshavebeenmarkedbysuddenchangesinthemarketingenvironment,leadingDruckertodubi tan AgeofDiscontinuityandTofflertodescribeitasatimeof FeatureShock . Companymarketersneedtoconstantlymonitorthechangingenvironmentmorecloselysothatth eywillbeabletoaltertheirmarketingstrategiestomeetnewchallengesandopportunitiesin theenvironment. Thestrategiestobeadoptedbythemarketingexecutivesonthefaceofchallengesposedbythes eenvironmentalforces.

Themarketingenvironmentcomprisesthe noncontrollable actorsandforcesinresponsetowhich organizationsdesigntheirmarketingstrategiesSpecifically, andforcesexternaltothemarketingmanagementfunctionofthefirmthatimpingeonthemarket ingmanagement sabilitytodevelopandmaintainsuccessfultransactionswithitstargetcusto mers . Thecompany smarketingenvironmentconsistsofmicroenvironmentandmacroenvironment.Them icroenvironmentconsistsoftheactorsinthecompany simmediateenvironmentthataffectsits abilitytoservethemarkets:thecompany,suppliers, marketintermediaries,customers,competitorsandpublics.Themacroenvironmentconsists ofthelargersocietalforcesthataffectalloftheactorsinthecompany smicroenvironmentthe demographic,economic,physical,technological,political,legalandsocio-culturalforc es. vidyarthiplus.com Acompany smarketingenvironmentconsistsoftheactorsThemarketingenvir onmentcomprisesthe noncontrollable actorsandforcesinresponsetowhichorganizationsdesi gntheirmarketingstrategiesSpecifically, andforcesexternaltothemarketingmanagementfunctionofthefirmthatimpingeonthemarket ingmanagement sabilitytodevelopandmaintainsuccessfultransactionswithitstargetcusto mers . Thecompany smarketingenvironmentconsistsofmicroenvironmentandmacroenvironment.Them icroenvironmentconsistsoftheactorsinthecompany simmediateenvironmentthataffectsits abilitytoservethemarkets:thecompany,suppliers, marketintermediaries,customers,competitorsandpublics.Themacroenvironmentconsists ofthelargersocietalforcesthataffectalloftheactorsinthecompany smicroenvironmentthe demographic,economic,physical,technological,political,legalandsocio-culturalforc es. vidyarthiplus.com Acompany smarketingenvironmentconsistsoftheactors ACTORSINTHECOMPANY SMICROENVIRONMENTEverycompany sprimarygoalistoserveandsatisfyaspe cifiedsetofneedsofachosentargetmarket.Tocarryoutthistask,thecompanylinksitselfwi thasetofsuppliersandasetofmarketingintermediariestoreachitstargetcustomers.Thesu ppliers companymarketing

intermediaries customerschaincomprisesthecoremarketingsystemofthecompany.Thecompan y ssuccesswillbeaffectedbytwoadditionalCompanymanagementhastowatchandplanforallthe sefactors. SUPPLIERSSuppliersarebusinessfirmswhoprovidetheneededresourcetothecompanyanditsc ompetitorstoproducetheparticulargoodsandservices.ForexampleBakeryDesottamustobta inwheat, cellophanepaperandothermaterialstoproduceandpackageitsbreads. Labour,equipment,fuelelectreicityandotherfactorsofproductionarealsotobeobtained. Nowthecompanymustdecidewhethertopurchaseormakeitsown.Whenthecompanydecidestobuys omeoftheinputs,itmustmakecertainspecificationcallfortenderetc.andthenitsegregate sthelistofsuppliers.Usuallycompanychoosethesupplierswhoofferthebestmixofquality, deliveryschedulecredit,guaranteeandlowcost. Anysuddenchangeinthe suppliers environmentwillhaveasubstanceimpactonthecompany smarket ingoperations.Sometimessomeoftheinputstothecompanymightcostmoreandhencemanagersh avecontinuouslymonitoredthefluctuationsinsuppliersside. Marketingmanagerisequallyconcernedwithsupplyavailability.Suddensupplyshortagelab ourstrikesandothereventscaninterferewiththefulfillmentofdeliverypromisecustomers andlosesalesintheshortrunanddamagecustomergoodwillinlongrun.Hencemanycompaniespr efertobuyfrommultiplesourcestoavoidoverdependenceonanyonesupplier.Sometimesevenf ortheappendageservicestomarketinglikemarketingresearch,advertising,salestraining etc.thecompanyuse vidyarthiplus.comgroupsnamely,asetofcompetitorsandasetofpublics. sugar, theintermediaries customerschaincomprisesthecoremarketingsystemofthecompany.Thecom pany ssuccesswillbeaffectedbytwoadditionalCompanymanagementhastowatchandplanforall thesefactors. SUPPLIERSSuppliersarebusinessfirmswhoprovidetheneededresourcetothecompanyanditsc ompetitorstoproducetheparticulargoodsandservices.ForexampleBakeryDesottamustobta inwheat, cellophanepaperandothermaterialstoproduceandpackageitsbreads. Labour,equipment,fuelelectreicityandotherfactorsofproductionarealsotobeobtained. Nowthecompanymustdecidewhethertopurchaseormakeitsown.Whenthecompanydecidestobuys omeoftheinputs,itmustmakecertainspecificationcallfortenderetc.andthenitsegregate sthelistofsuppliers.Usuallycompanychoosethesupplierswhoofferthebestmixofquality, deliveryschedulecredit,guaranteeandlowcost. Anysuddenchangeinthe suppliers environmentwillhaveasubstanceimpactonthecompany smarket ingoperations.Sometimessomeoftheinputstothecompanymightcostmoreandhencemanagersh avecontinuouslymonitoredthefluctuationsinsuppliersside. Marketingmanagerisequallyconcernedwithsupplyavailability.Suddensupplyshortagelab ourstrikesandothereventscaninterferewiththefulfillmentofdeliverypromisecustomers andlosesalesintheshortrunanddamagecustomergoodwillinlongrun.Hencemanycompaniespr efertobuyfrommultiplesourcestoavoidoverdependenceonanyonesupplier.Sometimesevenf ortheappendageservicestomarketinglikemarketingresearch,advertising,salestraining etc.thecompanyuse vidyarthiplus.comgroupsnamely,asetofcompetitorsandasetofpublics. sugar, the

servicefromoutside.Thisdependencymayalsocreatesomebottlenecks, attimes,duetothebehaviouroftheseagenciesandconsequentlyaffectthemarketingoperati onsofthecompany. COMPANYMarketingmanagementatanyorganisation,whileformulatingmarketingplanshaveto takeintoconsiderationothergroupsinthecompany,suchastopmanagement,finance,R&D,pur chasing, manufacturingandaccounting.Financedepartmenthastobeconsultedforthefundsavailable forcarryingoutthemarketingplanapartfromothers.R&Dhastobecontinuouslydoingnewprod uctdevelopment. Manufacturinghastobecoordinatedbasedonthemarketdemandandsupplyoftheproducts.Acco rdinghastomeasurerevenuesandcoststohelpmarketinginachievingitsobjectives.Usually marketingdepartmenthastofacethebottlenecksputupbythesisterdepartmentswhiledesign ingandimplementingtheirmarketingplans. MARKETINGINTERMEDIARIESChannelmembersarethevanguardofthemarketingimplementationp art.Theyarethepeoplewhoconnectthecompanywiththecustomers.Therearenumberofmiddlem enwhooperateinthiscycle. Agentmiddlemenlikebrokersandagentsfindcustomersandestablishcontacts,merchantmidd lemenarethewholesalers,retailers,whotaketitletoandresellthemerchandise.Apartfrom thesechannelmembers, therearephysicaldistributionfirmswhoassistinstockingandmovinggoodsfromtheorigina llocationstotheirdestinations.Warehousefirms vidyarthiplus.comservicefromoutside.Thisdependencymayalsocreatesomebottlenecks, attimes,duetothebehaviouroftheseagenciesandconsequentlyaffectthemarketingoperati onsofthecompany. COMPANYMarketingmanagementatanyorganisation,whileformulatingmarketingplanshaveto takeintoconsiderationothergroupsinthecompany,suchastopmanagement,finance,R&D,pur chasing, manufacturingandaccounting.Financedepartmenthastobeconsultedforthefundsavailable forcarryingoutthemarketingplanapartfromothers.R&Dhastobecontinuouslydoingnewprod uctdevelopment. Manufacturinghastobecoordinatedbasedonthemarketdemandandsupplyoftheproducts.Acco rdinghastomeasurerevenuesandcoststohelpmarketinginachievingitsobjectives.Usually marketingdepartmenthastofacethebottlenecksputupbythesisterdepartmentswhiledesign ingandimplementingtheirmarketingplans. MARKETINGINTERMEDIARIESChannelmembersarethevanguardofthemarketingimplementationp art.Theyarethepeoplewhoconnectthecompanywiththecustomers.Therearenumberofmiddlem enwhooperateinthiscycle. Agentmiddlemenlikebrokersandagentsfindcustomersandestablishcontacts,merchantmidd lemenarethewholesalers,retailers,whotaketitletoandresellthemerchandise.Apartfrom thesechannelmembers, therearephysicaldistributionfirmswhoassistinstockingandmovinggoodsfromtheorigina llocationstotheirdestinations.Warehousefirms vidyarthiplus.com

storeandprotectgoodsbeforetheymovetothenextdestinations.Therearenumberoftranspor tingfirmsconsistsofrail,road,truckers,ship, airlineetc.thatmovergoodsfromonelocationEverycompanyhastodecideonthemostcost effec tivemeansoftransportTherearefinancialintermediarieslikebanks,insurancecompanies, thecompanybyprovidingfinanceinsurancecoveretc. Thebehaviourandperformanceofalltheseintermediarieswillaffectthemarketingoperatio nsofthecompanyandthemarketingexecutiveshavetoprudentlydealwiththem. vidyarthiplus.comtoanother. consideringthecosts,delivery,safetyandspeed. whosupportstoreandprotectgoodsbeforetheymovetothenextdestinations.Therearenumber oftransportingfirmsconsistsofrail,road,truckers,ship, airlineetc.thatmovergoodsfromonelocationEverycompanyhastodecideonthemostcost effec tivemeansoftransportTherearefinancialintermediarieslikebanks,insurancecompanies, thecompanybyprovidingfinanceinsurancecoveretc. Thebehaviourandperformanceofalltheseintermediarieswillaffectthemarketingoperatio nsofthecompanyandthemarketingexecutiveshavetoprudentlydealwiththem. vidyarthiplus.comtoanother. consideringthecosts,delivery,safetyandspeed. whosupport COMPETITORSIfonecompanyplansamarketingstrategyatoneside,therearenumberofothercom paniesinthesameindustrydoingsuchothercalculations.CokehascompetitorsinPepsi.Maru tihascompetitionsfromTataIndica,Santroetc.Notonlythatthecompetitioncomesfromtheb randedsegmentbutalsofromthegenericmarket,wherethereareonlyfewbrandedproductsofri cebuttherearenumerousgenericvarietyofriceaccordingtothelocaltastesineachcountry. AirlineshavetoovercomecompetitionsnotonlyfromtheotherAirlinesbutalsofromRailways andShips.Basicallyeverycompanythecompetitor,monitortheiractivitiesandcapturethei rmovesandmaintaincustomerloyalty.Henceeverycompanycomesoutwiththeirownmarketings trategies. regiontheSometimescompetitioncomesfromdifferentforms. hastoidentify

vidyarthiplus.com PUBLICSApubliccanfacilitateorseriouslyaffectthefunctioningofthecompany,PhilipKot lerdefinespublicasanygroupthathasanactualorpotentialinterestorimpactonacompany sab ilityachieveitsobjectives.Kotlernotesthattherearedifferentofpublics, Governmentpublics,citizenactionpublics,localpublics,generalpublicandinternalpubl ics.Since,thesuccessofthecompanywillbeaffectedbyhowvariouspublicsviewtheiractivi ty,thecompanieshavetomonitorthesepublics,anticipatetheirmovesdealingwiththeminco nstructiveways. totypes CUSTOMERSCustomersarethefulcrumaroundwhomthemarketingactivitiesoftheorganisation revolve.Themarketerhastofacethefollowingtypesofcustomers. CustomerMarkets:Marketsforpersonalconsumption. IndustrialMarkets:Goodsandservicesthatcouldbecomethepartofaproductinthoseindustr y. InstitutionalBuyers:Institutionslikeschools,hospital,whichbuyin bulk. ResellerMarkets:Theorganizationsbuygoodsforresellingtheirproducts.

vidyarthiplus.com GovernmentMarkets:Theypurchasetheproductstoprovidepublic services. InternationalMarkets:ConsistsofForeignbuyersandGovernments. MACROENVIRONMENT economic,physical,technological,political/legalandsocio-cultural.TheMacroenviron mentconsistsofsixmajorforcesviz,demographic, trendsineachmacroenvironmentcomponentsandtheirimplicationsonmarketingarediscusse dbelow: DEMOGRAPHICENVIRONMENTDemographyisthestudyofhumanpopulationintermsofsize, density,location,age,gender,occupationetc.demographicenvironmentisofmajorinteres ttomarketersbecauseitinvolvespeoplethepeoplemakeupmarkets. TheworldpopulationandtheIndianpopulationinparticularisgrowingatanexplosiverate.T hishasmajorimplicationsforbusiness.Agrowingpopulationmeansgrowinghumanneeds.Depe ndingpurchasingpowers,itmayalsomeangrowingmarketopportunities.Ontheotherhand,dec lineinpopulationisathreatsosomeindustrialandtheboontoothers.Themarketingexecutiv esoftoy-makingindustryspendalotofenergyandeffortsanddevelopedfashionabletoys,and evenadvertise Babiesareourbusiness-ouronlybusiness ,butquietlyTheon

droppedthissloganwhenchildrenpopulationtogonedownduedecliningbirthrateandlatersh iftedtheirbusinesstolifeinsuranceforoldpeopleandchangedtheiradvertisementslogana s thecompanyhas vidyarthiplus.comdroppedthissloganwhenchildrenpopulationtogonedownduedecliningbi rthrateandlatershiftedtheirbusinesstolifeinsuranceforoldpeopleandchangedtheiradv ertisementsloganas thecompanyhas vidyarthiplus.com notbabiestheover50s . Theincreaseddivorcerateshallalsohavetheimpactonmarketingdecisions.Thehigherdivor cerateresultsinadditionalhousingunits, furniture,appliancesandotherhouse-holdappliances.Similarly,whenspousesworkattwod ifferentplaces,thatalsoresultsinadditionalrequirementforhousing,furniture,better clothing,andsoon. Thus,marketerskeepclosetractofdemographictrendsdevelopmentsintheirmarketsandacco rdinglysuitablemarketingprogramme. ECONOMICENVIRONMENTMarketsrequirepurchasingpoweraswellaspeople.Totalpurchasingpo werisfunctionsofcurrentincome,prices,savingsandcreditavailability.Marketersshoul dbeawareoffourmaintrendsintheeconomicenvironment. (i)DecreaseinRealIncomeGrowthAlthoughmoneyincomerpercapitakeepsraising,realincom epercapitahasdecreasedduetohigherinflationrateexceedingthemoneyincomegrowthrate, unemploymentrateandincreaseinthetaxburden. evolvea Thesedevelopmentshadreduceddisposablepersonalincome; whichistheamountpeoplehaveleftaftertaxes.Further,many

peoplehavefoundtheirdiscretionaryincomereducedaftermeetingtheexpenditureforneces saries.Availabilityofdiscretionaryincomeshallhavetheimpactonpurchasing vidyarthiplus.compeoplehavefoundtheirdiscretionaryincomereducedaftermeetingtheex penditurefornecessaries.Availabilityofdiscretionaryincomeshallhavetheimpactonpur chasing vidyarthiplus.com behaviourofthepeople. (ii)ContinuedInflationaryPressureThecontinuedinflationarypressurebroughtaboutasu bstantialincreaseinthepricesofseveralcommodities.leadsconsumerstoresearchforoppo rtunitiestosavemoney,includingbuyingcheaperbrands,economysizes,etc. Inflation (iii) LowSavingsandHighDebt consumersaffectthemarketing.WhenmarketersmakeavailableConsumerexpendituresareals oaffectedbyconsumerssavingsanddebtpatterns.Thelevelofsavingsandborrowingsamonghi ghconsumercredit,itincreasesmarketopportunities. (iv) ChangingConsumerExpenditurePatterns categorieshavebeenchangingovertheyears.Forinstance,whenfamilyincomerises,theperc entagespentonfooddeclines,theConsumptionexpenditurepattersinmajorgoodsandservice spercentagespentonhousingandhouseholdoperationsremain

constant,andthepercentagespentonothercategoriessuchastransportationandeducationi ncrease. Thesechangingconsumerexpenditurepatternshasanimpactonmarketingandthemarketingexe cutivesneedtoknowsuchchangesineconomicenvironmentfortheirmarketingdecisions. PHYSICALENVIRONMENTTherearecertainfiniterenewableresourcessuchaswoodandotherfore stmaterialswhicharenowdearthincertainpartsofworld. coalandvariousminerals,whicharealsonotshortinsupply.Insuchcases,themarketershave tofindoutsomealternativeresources.Forinstance,themarketersofwoodenchairs,duetosh ortageandhighcostofwoodshiftedtosteelandlateronfiberchairs.Similarlyscientistsal lovertheworldareconstantlytryingtofindoutalternativesourcesofenergyforoilduetode arthinsupply. Therehasbeenincreaseinthepollutionlevelsinthecountryduetocertainchemicals.InMumb ai-Surat-Ahemedabedarea,arefacingincreasedpollutionduetothepresenceofdifferentin dustries. Marketersshouldbeawareofthethreatsandopportunitiesassociatedwiththephysicalenvir onmentandhavetofindouralternativesourcesofphysicalresources. SOCIOCULTURALENVIRONMENT vidyarthiplus.comSimilarlytherearefinitenon-renewableresourceslikeoilconstant,an dthepercentagespentonothercategoriessuchastransportationandeducationincrease. Thesechangingconsumerexpenditurepatternshasanimpactonmarketingandthemarketingexe cutivesneedtoknowsuchchangesineconomicenvironmentfortheirmarketingdecisions. PHYSICALENVIRONMENTTherearecertainfiniterenewableresourcessuchaswoodandotherfore stmaterialswhicharenowdearthincertainpartsofworld. coalandvariousminerals,whicharealsonotshortinsupply.Insuchcases,themarketershave tofindoutsomealternativeresources.Forinstance,themarketersofwoodenchairs,duetosh ortageandhighcostofwoodshiftedtosteelandlateronfiberchairs.Similarlyscientistsal lovertheworldareconstantlytryingtofindoutalternativesourcesofenergyforoilduetode arthinsupply. Therehasbeenincreaseinthepollutionlevelsinthecountryduetocertainchemicals.InMumb ai-Surat-Ahemedabedarea,arefacingincreasedpollutionduetothepresenceofdifferentin dustries. Marketersshouldbeawareofthethreatsandopportunitiesassociatedwiththephysicalenvir onmentandhavetofindouralternativesourcesofphysicalresources. SOCIOCULTURALENVIRONMENT vidyarthiplus.comSimilarlytherearefinitenon-renewableresourceslikeoil

Thesocio-culturalenvironmentcomprisesofthebasicbeliefs, valuesandnormswhichshapesthepeople.Someofthemainculturalcharacteristicsandtrends whichareofinteresttothemarketersare: vidyarthiplus.comThesocio-culturalenvironmentcomprisesofthebasicbeliefs, valuesandnormswhichshapesthepeople.Someofthemainculturalcharacteristicsandtrends whichareofinteresttothemarketersare: vidyarthiplus.com (i)CoreCulturalValuesPeopleinagivensocietyholdmanycorebeliefsandvalues,thatwillt endtopersist.People ssecondarybeliefsandvaluesaremoreopentochange.Marketershavemor echancesofchanging(ii)EachCultureConsistsofSub-CulturesEachsocietycontainssub-cu ltures,i.e.groupsofpeoplewithsharedvaluesystemsemergingoutoftheircommonlifeexper iences,beliefs,preferencesandbehaviors.Totheextentthatsub-culturalgroupsexhibitd ifferentwantsandconsumptionbehaviour,marketerscanchoosesub-culturesastheirtarget markets. secondaryvaluesbutlittlechanceofchangingcorevalues. Secondaryculturalvaluesundergochangesovertime.Forexample video-games , playboymagazine s andotherculturalphenomenahaveamajorimpactonchildrenhobbies,clothingandlifegoals. MarketershaveakeeninterestinanticipatingculturalshiftsinTECHNOLOGICALENVIRONMENT ordertoidentifynewmarketingopportunitiesandthreats.

Technologyadvancementhasbenefitedthesocietyandalsocauseddamages.Openheartsurgery ,satellitesallweremarvelsoftechnology, buthydrogenbombwasonthebittersideoftechnology.Technologyisacceleratingatapacethe manyproductsseenyester-yearshavebecomeobsoletenow.AlvinTofflerinhisbook TheFutureS hock hasmadearemarkontheaccelerativethrustintheinvention,exploitationanddiffusiono fnewtechnologies.Therecouldbeanewrangeofproductsandsystemsduetotheinnovationsint echnology. Thistechnologydevelopmentshastremendousimpactonmarketingandunlessthemarketingman agercopeupwiththisPOLITICALANDLEGALENVIRONMENTMarketingdecisionsarehighlyaffecte dbychangesinthepolitical/ legalenvironment.Theenvironmentismadeupoflawsandgovernmentagenciesthatinfluencea ndconstraintvariousandindividualsinsociety. Legislationsaffectingbusinesshassteadilyincreasedtheyears.Theproducttheconsumesa ndthesocietyagainstunethicalbusinessbehaviourandregulatesthefunctioningbusinesso rganizations.Removalofrestrictionstothecapabilities, enlargementofthespheresopentoMRTPandFEMAcompaniesandbroadbandingofindustriallice nsesweresomeoftheschemesevolvedbythegovernment.Thelegalenactmentsandrulesandregu lationsexerciseaspecificimpactonthemarketingpractices,systemsand vidyarthiplus.comdevelopmentbecannotsurviveinthecompetitivemarket. organizationsoveroftheexistingTechnologyadvancementhasbenefitedthesocietyandalso causeddamages.Openheartsurgery,satellitesallweremarvelsoftechnology, buthydrogenbombwasonthebittersideoftechnology.Technologyisacceleratingatapacethe manyproductsseenyester-yearshavebecomeobsoletenow.AlvinTofflerinhisbook TheFutureS hock hasmadearemarkontheaccelerativethrustintheinvention,exploitationanddiffusiono fnewtechnologies.Therecouldbeanewrangeofproductsandsystemsduetotheinnovationsint echnology. Thistechnologydevelopmentshastremendousimpactonmarketingandunlessthemarketingman agercopeupwiththisPOLITICALANDLEGALENVIRONMENTMarketingdecisionsarehighlyaffecte dbychangesinthepolitical/ legalenvironment.Theenvironmentismadeupoflawsandgovernmentagenciesthatinfluencea ndconstraintvariousandindividualsinsociety. Legislationsaffectingbusinesshassteadilyincreasedtheyears.Theproducttheconsumesa ndthesocietyagainstunethicalbusinessbehaviourandregulatesthefunctioningbusinesso rganizations.Removalofrestrictionstothecapabilities, enlargementofthespheresopentoMRTPandFEMAcompaniesandbroadbandingofindustriallice nsesweresomeoftheschemesevolvedbythegovernment.Thelegalenactmentsandrulesandregu lationsexerciseaspecificimpactonthemarketingpractices,systemsand vidyarthiplus.comdevelopmentbecannotsurviveinthecompetitivemarket. organizationsoveroftheexisting

institutionsinthecountry.Someoftheactswhichhavedirectbearingonthemarketingofthec ompanyinclude,thePreventionofFoodAdulterationAct(1954),TheDrugsandCosmeticsAct(1 940),TheStandardWeightsandMeasuresAct(1956)etc.ThePackagedCommodities(Regulative )Order(1975)providesforclearlymakingtheSimilarly,whenthegovernmentchanges,thepol icyrelatingtocommerce,trade,economyandfinancealsochangesresultinginchangesinbusi ness.Veryoftenitbecomesapoliticaldecisions.Forinstance,oneGovernmentintroducepro hibition,andanothergovernmentliftstheprohibition.Also,oneGovernmentadoptsrestric tivepolicyandanotherGovernmentadoptsliberaleconomicpolicies.Allthesewillhaveimpa ctonbusiness. Hence,themarketingexecutivesneedsagoodworkingknowledgeofthemajorlawsaffectingbus inessandhavetoadaptthemselvestochanginglegalandpoliticaldecisions. Alltheabovemicroenvironmentalactorsandmacroenvironmentalforcesaffectthemarketing systemsindividuallyandcollectively.Themarketingexecutivesneedtounderstandtheoppo rtunitiesandthreatscausedbytheseforcesandaccordinglytheymustbeabletoevolveapprop riatemarketingstrategies. REVIEWQUESTIONS: vidyarthiplus.compricesonallpackagedgoodssoldinretailexcludingcertainitems. institutionsinthecountry.Someoftheactswhichhavedirectbearingonthemarketingofthec ompanyinclude,thePreventionofFoodAdulterationAct(1954),TheDrugsandCosmeticsAct(1 940),TheStandardWeightsandMeasuresAct(1956)etc.ThePackagedCommodities(Regulative )Order(1975)providesforclearlymakingtheSimilarly,whenthegovernmentchanges,thepol icyrelatingtocommerce,trade,economyandfinancealsochangesresultinginchangesinbusi ness.Veryoftenitbecomesapoliticaldecisions.Forinstance,oneGovernmentintroducepro hibition,andanothergovernmentliftstheprohibition.Also,oneGovernmentadoptsrestric tivepolicyandanotherGovernmentadoptsliberaleconomicpolicies.Allthesewillhaveimpa ctonbusiness. Hence,themarketingexecutivesneedsagoodworkingknowledgeofthemajorlawsaffectingbus inessandhavetoadaptthemselvestochanginglegalandpoliticaldecisions. Alltheabovemicroenvironmentalactorsandmacroenvironmentalforcesaffectthemarketing systemsindividuallyandcollectively.Themarketingexecutivesneedtounderstandtheoppo rtunitiesandthreatscausedbytheseforcesandaccordinglytheymustbeabletoevolveapprop riatemarketingstrategies. REVIEWQUESTIONS: vidyarthiplus.compricesonallpackagedgoodssoldinretailexcludingcertainitems.

1.Explaintheimpactofmicroenvironmentalactorsonmarketing vidyarthiplus.comExplaintheimpactofmicroenvironmentalactorsonmarketing vidyarthiplus.com managementofafirm. 2.Discusshowthemacroenvironmentforcesaffecttheopportunitiesofafirm.

vidyarthiplus.com LESSON 5CONSUMERSPURCHASEPROCESSLearningObjectivesThedifferentstagesinvolvedinpurc hasedprocess; Thesuitablestrategytobeevolvedbythemarketateachstageofpurchaseprocess. Inordertounderstandconsumerbehaviour,tounderstandthebuyingprocess.Numerousmodels ofconsumerbehaviourdepictingthebuyingprocessweredevelopovertheyears. AmongallthesemodelstheonegivenbyHowardandShethisthemostcomprehensiveandlargelyap provedmodel.However,astheHoward-Shethmodelisaverysophisticatedmodelbasedonitasim plifiedisgivenbelow: Asimplemodelofconsumerdecision-makinggiventhefigurereflectsthenotionofthecognate orproblem-solvingconsumer.Thismodelhasthreecomponents:Input,ProcessandOutput. Input: Afterreadingthislesson,youshouldbeabletounderstanditisessential Theinputcomponentofconsumerdecision-makingmodelcomprisesofmarketing-mixactivitie sandsocio-culturalinfluences.

vidyarthiplus.com ProcessTheprocesscomponentofmodelisconcernedwith how consumermakedecisions.Thisinvol vesunderstandingoftheinfluencesofpsychologicalfactorsonconsumerTheprocesscompone ntofaconsumerdecision-makingmodelconsistsofthreestages:Needrecognition,informati onsearchandevaluationofalternatives. AModelofConsumerDecision-MakingInputProcessOutputExternalInfluencesConsumerDecis ion-makingPost-decisionbehaviors. BehaviourFirm sMarketingEfforts1.Product2.Price3.Place4.PromotionSocio-CulturalEnv ironment1.Family2.SocialClassNeedRecognitionInformationSearchEvaluationofAlterna tivenessPsychologicalFactors1.Motivation2.Perception3LearningnalitExperiencePurc hase1.Trial2.RepeatPurchasePostPurchaseEvaluation 3. Culture and Sub-culture 4 Inf l

Output: concernstwomorestagesofpurchaseprocessactivity:Purchasebehaviourandpost-purchase behaviour. Thebuyingprocessthus,iscomposedofanumberofstagesandisinfluencedbyaindividual spsyc hologicalframeworkcomposedoftheindividual spersonality,motivations,perceptionsanda ttitudes.Thevariousstagesofthebuyingprocessare: 1.NeedRecognition2.InformationSearch3.EvaluationofAlternatives4.PurchaseBehaviou r5.Post-PurchaserEvaluation1.NeedRecognitionTherecognitionofneeditslikelytooccur whenaconsumerisfacedwithaproblem,andiftheproblemisnotsolvedorneedsatisfied,theTh eoutputcomponentoftheconsumerdecision-makingmodelconsumerbuildsuptension.Example :Aneedforacookinggasforbusyhousewife.Theneedscanbetriggeredbyinternal(hunger, thirst,sex)andexternalstimuli(neighbor snewCarorTV).Themarketersneedistoidentifyth ecircumstancethattriggertheparticularneedorinterestinconsumers.Themarketersshoul dreach vidyarthiplus.comOutput: concernstwomorestagesofpurchaseprocessactivity:Purchasebehaviourandpost-purchase behaviour. Thebuyingprocessthus,iscomposedofanumberofstagesandisinfluencedbyaindividual spsyc hologicalframeworkcomposedoftheindividual spersonality,motivations,perceptionsanda ttitudes.Thevariousstagesofthebuyingprocessare: 1.NeedRecognition2.InformationSearch3.EvaluationofAlternatives4.PurchaseBehaviou r5.Post-PurchaserEvaluation1.NeedRecognitionTherecognitionofneeditslikelytooccur whenaconsumerisfacedwithaproblem,andiftheproblemisnotsolvedorneedsatisfied,theTh eoutputcomponentoftheconsumerdecision-makingmodelconsumerbuildsuptension.Example :Aneedforacookinggasforbusyhousewife.Theneedscanbetriggeredbyinternal(hunger, thirst,sex)andexternalstimuli(neighbor snewCarorTV).Themarketersneedistoidentifyth ecircumstancethattriggertheparticularneedorinterestinconsumers.Themarketersshoul dreach vidyarthiplus.com

consumerstofindoutwhatkindsoffeltneedsorproblemarose,what vidyarthiplus.combroughtthemabouthowtheyledtothisparticularproduct. consumerstofindoutwhatkindsoffeltneedsorproblemarose,what vidyarthiplus.combroughtthemabouthowtheyledtothisparticularproduct. 2.InformationSearchTheconsumerwillsearchforrequiredinformationabouttheproducttom akearightchoice.Howmuchsearchheundertakesdependsuponthestrengthofhisdrive,theamo untofinformationheinitiallyhas,theeaseofobtainingadditionalinformation,thevalueh eplacesonadditionalinformationandthesatisfactionhegetsfromsearch. Thefollowingarethesourcesofconsumerinformation: PersonalSources:Family,friends,neighbours,pastexperience. CommercialSources:Advertising,salespeople,dealers,displaysPublicSources:Massmedi a,consumerwelfareorganisation. Thepracticalimplicationisthatacompanydesignitsmarketingmixtogetitsbrandintothepr ospect sawarenessset,considerationsetandchoiceset.Ifthebrandfailstogetintotheseset s,thecompanylossesitsopportunitytoselltotheconsumer. Asforthesourcesoftheinformationusedbytheconsumer,themarketershouldidentifythemca refullyandevaluatetheirrespectiveimportanceassourceofinformation. 3.EvaluationofAlternatives

Whenevaluatingpotentialalternatives,consumerstendtousetwotypesofinformation(i)al istofbrandsfromwhichtheyplantomaketheirselection(theevokeset)and(ii)thecriteriat heywillusetoevaluateeachbrand.Theevokesetisgenerallyonlyapart asubjectofallthebran dsofwhichtheconsumerisawares. Thecriteriausedbytheconsumersinevaluatingthebrandsareusuallyexpressedintermsofpr oductattributesthatareimportanttothem.Theattributesofinteresttobuyersinsomefamil iarproducts vidyarthiplus.comWhenevaluatingpotentialalternatives,consumerstendtousetwotypeso finformation(i)alistofbrandsfromwhichtheyplantomaketheirselection(theevokeset)an d(ii)thecriteriatheywillusetoevaluateeachbrand.Theevokesetisgenerallyonlyapart asu bjectofallthebrandsofwhichtheconsumerisawares. Thecriteriausedbytheconsumersinevaluatingthebrandsareusuallyexpressedintermsofpr oductattributesthatareimportanttothem.Theattributesofinteresttobuyersinsomefamil iarproducts vidyarthiplus.com are: Two-wheeler:Fueleconomy,pullingcapacity,priceComputers:Memorycapacity,graphiccap ability, softwareavailabilityMouthwash:Colour,effectiveness,germ-killing, capacity,price,taste/flavourConsumerswillpaythemostattentiontothoseattributestha tareconcernedwiththeirneeds. 4.PurchaseBehaviour Consumersmaketwotypesofpurchasestrialpurchasesandrepeatpurchases.Ifheproductisfo undsatisfactoryduringtrial, consumersarelikelytorepeatthepurchase.Repeatpurchasebehaviouriscloselyrelatedtot heconceptofbrandloyalty.Forcertainproductssuchaswashingmachineorrefrigerator,tri alis

notfeasibleandtheconsumerusuallymovesdirectlyfromevaluationtoactualpurchase.Acon sumerwhodecidestopurchasewillmakebranddecision,quantitydecision,dealerdecision,t imingdecisionandpaymentmethoddecision. vidyarthiplus.comnotfeasibleandtheconsumerusuallymovesdirectlyfromevaluationtoac tualpurchase.Aconsumerwhodecidestopurchasewillmakebranddecision,quantitydecision ,dealerdecision,timingdecisionandpaymentmethoddecision. vidyarthiplus.com 5.Post-PurchaseEvaluationTheconsumer ssatisfactionordissatisfactionwiththeproductw illinfluencesubsequentbehaviour.Therearethreepossibleoutcomesofpost-purchaseeval uationsbyconsumersinlightoftheirexperiencewiththeproducttrialpurchase. neutralfeeling; thattheperformanceexceedsthestandardsleadingtopositivedisconfirmation,i.e.satisf action;anddisconfirmation,i.e.dissatisfaction. Iftheproductlivesuptoexpectationsoftheconsumers,theywillprobablybuyitagain.Ifthe productsperformanceisdisappointing, thewillsearchformoresuitablealternativebrand.Whethersatisfiedordissatisfiedwitht heproduct,theconsumerwillpassontheiropiniononothers. thattheactualperformancematchesthestandardleadingtothattheperformanceisbelowthes tandard,causingnegative

vidyarthiplus.com Themarketerscansendalettercongratualatingtheconsumersforhavingselectedafineprodu ct.Theycanplaceadvertisementsshowingsatisfiedowners.Theycansolicitcustomerssugge stionsforimprovements.Atlast,themarketerscanalsohelptheconsumerstodisposeoftheus edbrand,orexample,byBuy-back-method. Anillustration: Toillustratetheconsumer spurchasedecisionprocess, considerthestagesofanewcarpurchase.Thedecessbeginswhentheconsumerexperiencesanee dordesirefornewcar.Thisproblemrecognitionphasemaybeinitiatedforanyoneofseveralre asons becauserecentrepairbillshavebeenhighsethepresentcarneedsanewsetoftires,becau sethepresentcarhasbeeninanaccident,orbecausetheneighborhasjustbroughtanewcar.Wha teverthestimulus,theindividualperceivesadifferencesorconflict,betweentheidealand theactualsaleofaffairs. Whenhedecidedtogoinforanewcar,hestartssearchingforinformation.Theconsumermaycoll ectinformationthroughvarioussourcessuchas,automobilemagazine,fiends, automobilecompanies,automobileadvertisementsandsoon. Aftercollectingtheinformationaboutdifferentautomobiles,heevaluatesthealternative brandsandmodelsofcars.Atthispoint,theconsumermustdecideonthecriteriathatwillgove rntheselectionofthecar.Thesecriteriamayincludeprice,kilometerperliter,optionsava ilable, availabilityofservicenetwork,andfinally,optionoffamilyandfriends. fcisionpro,becaus,familymember

Duringthepurchasedecisionstage,theconsumeractuallymakesthepurchasedecision whether tobuyornottobuy.Iftheconsumerdecidestobuythecar,thenadditionaldecisionsmustbemad eregardingtypesormodelofcar,whentheformwhomthecarshouldbepurchasedandhowthecarco uldbepaidfor.HopefullytheoutcomeispositiveandDuringthepost-purchasestage,asatisf iedcustomerismorelikelytotakeaboutthejoysofanewcarpurchase.Ontheotherhand,proble msmaydeveloportheconsumermaybegintofeelawrongdecisionhasbeenmade.Adissatisfiedco nsumerwillprobablyattempttodissuadefriendsandassociatesfrombuyinganewcar,oratlea stwillcautionthemagainstmakingthesamemistake. vidyarthiplus.comtheconsumerfeelsthattherightdecisionshavebeenmade. Duringthepurchasedecisionstage,theconsumeractuallymakesthepurchasedecision whether tobuyornottobuy.Iftheconsumerdecidestobuythecar,thenadditionaldecisionsmustbemad eregardingtypesormodelofcar,whentheformwhomthecarshouldbepurchasedandhowthecarco uldbepaidfor.HopefullytheoutcomeispositiveandDuringthepost-purchasestage,asatisf iedcustomerismorelikelytotakeaboutthejoysofanewcarpurchase.Ontheotherhand,proble msmaydeveloportheconsumermaybegintofeelawrongdecisionhasbeenmade.Adissatisfiedco nsumerwillprobablyattempttodissuadefriendsandassociatesfrombuyinganewcar,oratlea stwillcautionthemagainstmakingthesamemistake. vidyarthiplus.comtheconsumerfeelsthattherightdecisionshavebeenmade. PurchaseDecisionProcessActivitiesofCar

vidyarthiplus.com ProblemRecognitionStageInformationSearchStage NeedforaNewCar InformationCollectionaboutthe Cars AlternativeEvaluationStage Criteriafor Selection YesNoAutomobilemagazinesAutomobile companiesPromotionliteratureandadvertisementsfriendsandfamilyPriceColourandappea ranceKilometersperlitreExpertopinion PurchaseDecision PurchaseDecisionStage BuyDonotbuy EconomyDeluxeversionLuxuryversionsNowLaterModelAModelBModelCDealerADealerB OwnfundsLoanablefunds WhatTypeofCarTimingofPurchaseWhichCarWheretoPurchaseHowtoFinance OtherDecisions DegreeofSatisfied

vidyarthiplus.com SatisfactiondissatisfiedREVIEWQUESTIONS: 1.Explainthevariousstepsinvolvedinpurchaseprocess. 2.Howdoesanunderstandingofpurchaseprocesshelpthemarketertoformulatemarketingstra tegy?

vidyarthiplus.com LESSON 6CONSUMERBEHAVIOURSLearningObjectivesAfterreadingthislesson,youshouldbeable tounderstand Thefactorsinfluencingconsumerbehaviour; Theirimplicationsonmarketingdecisions-making. CONSUMERBEHAVIOUR Underthemodernmarketing Consumer isthefulcrum;heisthelifeblood;heisverypurposeoftheb usinessandhencethebusinessfirmshavetolistenconsumervoices, .Understandhisconcerns.H isneedshavetobefocusedandhisrespecthastobeearned.Hehastobecloselyfollowed whathewa nts .when,whereandhow.Thenewbusinessphilosophyisthattheeconomicandsocialjustificati onoffirm sexistenceliesinsatisfactionofconsumerwants.CharlesGMortimerhasrightlypoi ntedourthat, insteadoftryingwhatiseasiestforustomake, wemustfindourmuchmoreaboutwhattheconsumeriswillingtobuy .wemustapplyourcreativeness moreintelligentlytopeopleandtheirwantsandneedsratherthantoproducts .Toachieveconsu mersatisfactions,themarketershouldknow,understandconsumerbehaviour

theircharacteristics,needs,attitudesandsoon.But,thestudyofconsumersbehaviourisnot aneasytaskastoinvolvescomplexsystemofinteractionofvariousfactorsnamelysociologic al,cultural,economicalandpsychological. FACTORSINFLUENCINGCONSUMERBEHAVIOURinternalandenvironmental.Theinternalinfluence scomprisemotivation, perception,learningandattitudes allconceptsdrawnfromthefieldofpsychology.Theenviro nmentalinfluencesincludecultural,socialandeconomical.Expertsintheseareasattempts toexplainwhypeoplebehaveastheydoasbuyers.Alltheseinfluencesinteractinhighlycompl exways,affectingtheindividual stotalpatternsofbehaviouraswellashisbuyingbehaviour. vidyarthiplus.comConsumersarestimulatedbytwotypesofstimuli of theircharacteristics,needs,attitudesandsoon.But,thestudyofconsumersbehaviourisn otaneasytaskastoinvolvescomplexsystemofinteractionofvariousfactorsnamelysociolog ical,cultural,economicalandpsychological. FACTORSINFLUENCINGCONSUMERBEHAVIOURinternalandenvironmental.Theinternalinfluence scomprisemotivation, perception,learningandattitudes allconceptsdrawnfromthefieldofpsychology.Theenviro nmentalinfluencesincludecultural,socialandeconomical.Expertsintheseareasattempts toexplainwhypeoplebehaveastheydoasbuyers.Alltheseinfluencesinteractinhighlycompl exways,affectingtheindividual stotalpatternsofbehaviouraswellashisbuyingbehaviour. vidyarthiplus.comConsumersarestimulatedbytwotypesofstimuli of CulturalFactorsCultureisthemostfundamentaldeterminantofaperson swantsandbehaviour. Itencompassessetofvalues,ideas,customs,traditionsandanyothercapabilitiesandhabit sacquiredbyanindividualasamemberofthesociety.Eachculturecontainsofsubculturessuc hasnationalculture,religiouscultureandsocialclassculturethatprovidesmorespecific identificationandsocializationforitsmembers.Asubcultureisadistinctculturalgroupe xistingasansmallergroups

identifiablesegmentwithinalargerculture.Themembersofasubculturetendtoadheretooma nyoftheculturalmoresoftheoverallsociety,yettheyalsoprofessbeliefs,valuesandcusto merswhichsetthemapart.Anunderstandingofsubcultureisimportanttomarketingmanagersb ecausethemembersofeachsubculturetendtoshowdifferentpurchase vidyarthiplus.comidentifiablesegmentwithinalargerculture.Themembersofasubculture tendtoadheretoomanyoftheculturalmoresoftheoverallsociety,yettheyalsoprofessbelie fs,valuesandcustomerswhichsetthemapart.Anunderstandingofsubcultureisimportanttom arketingmanagersbecausethemembersofeachsubculturetendtoshowdifferentpurchase vidyarthiplus.com behaviourpatterns. Thus,theJapanesecultureprovidesforcertainmannersofdressingwhiletheIndianculturep rovidesfordifferentpatterns.Inthesamewayone sreligiousaffiliationmayinfluenceone sma rketbehaviour. ThereligiousgroupssuchasHindus,ChristiansandMuslimspossesdistinctculturalprefere nces.Forinstance,Hindusconsiderwhiteandblackcoloursinauspiciousforbridesduringma rriage;whereasforChristianswhiteisaauspiciousbridaldressandblackisauspiciousforM uslims. Socialclassmaybebroughtofasaratherpermanentandhomogenousgroupofindividualswhohav esimilarbehaviour,interestsandlife-styles.Sincepeoplenormallychoosetheirfriendsa ndassociateonthebasisofcommonalityofinterests,socialclasseshaveatendencytorestri ctinteractions,especiallywithregardtosocialfunctions.Inaddition,socialclassesare hierarchicalinnature;thuspeopleusuallypositiontheirsocialfunctions.Inaddition,so cialclassesarehierarchicalinnature;thuspeopleusuallypositiontheirsocialgroupeith eraboveorbelowothergroups.Usuallysocialclassesaredividedintosix upper, lower-upper,upper-middle,lower-middle,upper-lowerandlower-lower.

Severalresearchstudieshavepointedoutthatdifferencesinconsumerbehaviourarelargely anfunctionThedifferencesinbehaviourscanbetracesincommunicationskills,shoppingEac hcultureevolvesuniquepatternofsocialconduct.Theprudentmarketerhastoanalyzethesep atternstounderstandtheirbehaviourtoevolveasuitablemarketingprogramme. vidyarthiplus.comofsocialclass. behaviours,leisureactivities,savingandspendinghabits. Severalresearchstudieshavepointedoutthatdifferencesinconsumerbehaviourarelargely anfunctionThedifferencesinbehaviourscanbetracesincommunicationskills,shoppingEac hcultureevolvesuniquepatternofsocialconduct.Theprudentmarketerhastoanalyzethesep atternstounderstandtheirbehaviourtoevolveasuitablemarketingprogramme. vidyarthiplus.comofsocialclass. behaviours,leisureactivities,savingandspendinghabits. SociologicalFactorsThesociologicalfactorsareanothergroupoffactorsthataffectthebe haviourofthebuyers.Theseincludereferencegroups,familyandtheroleandstatusofthebuy ers.Thereferencegrouparethosegroupsthathaveadirectorindirectinfluenceontheperson s attitudes,opinionsandvalues.Thesegroupsincludepeergroup,friendsandopinionleaders .Forinstance,anindividual sbuyingbehaviourforcouldbeinfluencedbyhisfriend,colleagu eorneighbours.Similarly,CinestarsandSportsheroesarealsoactingasreferencegroupsto influencebuyers. softdrinksetc., Sportsheroesarefocusedtorecommendedtheproductsoftwowheelersandfourwheelerstoinfl uenceconsumers.AlsothephysiciansareusedafootwearWhileCinestarsareusedtoadvertise toiletsoaps, asrefereesforinfluencingtheconsumersoftoothpaste.

Amoredirectinfluenceonbuyingbehaviourisone sfamilymembersnamely,spouseandchildren. Thepersonwillhavecertainpositioninhisfamily,thatiscalledastatusandhasadutyassign ed thatisroleandthisstatusandrolealsodeterminebuyingbehaviour.Forinstance,whilebuyi ngT.V.,clothingandotherhouse-holdappliances, familymembershaveatremendousroleininfluencingthebuyerbehaviour.Forexample,whileb uyingclothingmaterials,childrenmayinfluenceparentsandparentsmayinfluencechildren . Themarketers,therefore,aimtheirmarketingeffortstoreachreferencegroupsandthrought hemreachthepotentialbuyers.Themarketerneedstodeterminewhichmemberofafamilyhasthe greaterinfluenceonthepurchaseofaparticularproductandshouldtrytoreachtothecustome rtomarkethisproduct. PersonalCharacteristicsAnindividual sbuyingisalsoinfluencedbyhispersonalcharacteri sticssuchashisageandlifecyclestage,occupation,invomeandpersonality.Forexample,if thetargetmarketiskids,theirfoodandotherrequirementswillcertainlybedifferentfroma gedpeople.Similarly, behaviourandneeddiffersdependingonthenatureofoccupationofthebuyers.Forexample,fa ctoryworkersandotherdefencepeoplerequirefootwearofmainlydurabletypethatcouldwith standservestrain, whereaspeoplewithwhitecolorjobsrequirefootwearoflightandfashionabletype.Hence,ma rketersshouldbytoidentifytheoccupationalgroupsthathaveinterestintheirproductsand services.Anorganisatoin vidyarthiplus.comAmoredirectinfluenceonbuyingbehaviourisone sfamilymembersnamely,s pouseandchildren.Thepersonwillhavecertainpositioninhisfamily,thatiscalledastatus andhasadutyassigned thatisroleandthisstatusandrolealsodeterminebuyingbehaviour.Forinstance,whilebuyi ngT.V.,clothingandotherhouse-holdappliances, familymembershaveatremendousroleininfluencingthebuyerbehaviour.Forexample,whileb uyingclothingmaterials,childrenmayinfluenceparentsandparentsmayinfluencechildren . Themarketers,therefore,aimtheirmarketingeffortstoreachreferencegroupsandthrought hemreachthepotentialbuyers.Themarketerneedstodeterminewhichmemberofafamilyhasthe greaterinfluenceonthepurchaseofaparticularproductandshouldtrytoreachtothecustome rtomarkethisproduct. PersonalCharacteristicsAnindividual sbuyingisalsoinfluencedbyhispersonalcharacteri sticssuchashisageandlifecyclestage,occupation,invomeandpersonality.Forexample,if thetargetmarketiskids,theirfoodandotherrequirementswillcertainlybedifferentfroma gedpeople.Similarly, behaviourandneeddiffersdependingonthenatureofoccupationofthebuyers.Forexample,fa ctoryworkersandotherdefencepeoplerequirefootwearofmainlydurabletypethatcouldwith standservestrain, whereaspeoplewithwhitecolorjobsrequirefootwearoflightandfashionabletype.Hence,ma rketersshouldbytoidentifytheoccupationalgroupsthathaveinterestintheirproductsand services.Anorganisatoin vidyarthiplus.com

canevenspecializeinmanufacturingproductsneededbyaparticular vidyarthiplus.comcanevenspecializeinmanufacturingproductsneededbyaparticular vidyarthiplus.com occupationalgroup. Basicallyitisthelevelofincome,itsdistributiontheconsequentpurchasingpowerthatdet erminesone sbuyingbehaviour. Outoftheone stotalincome,apartmaybesavedandtheremainingpartisavailableforspending. Againoutofthis,asizableparthastobereservedformeetingessentialexpensesanditisonly thebalance theindividualhasthediscretiontospend.Anintelligentmarketerhastowatchthe income savingtrendofhisconsumerandbasingonthatevolveamarketingprogramme. Eachpersonhasadistinctpersonalitythatwillinfluencehisbuyingbehaviour.Aperson spers onalityisusuallydescribedintermsofsuchandtraitsasself-confidence,dominance,auton omyadaptability. Personalitycanbeausefulvariableinanalyzingconsumerbehaviour. PsychologicalFactorsand Psychologicalcharacteristicsplaythelargestandmostenduringrileininfluencingthebuy erbehaviour.Aperson sbuyingchoicesreinfluencedbyfourmajorpsychologicalprocessesmot ivation, perception,learningandattitudes. Motivationisthe why ofbehaviour.Accordingtoonewriter, motivationsreferstothedrives,urges,wishesordesirewhichinitiatethesequenceoftheeve ntsknowsasbehaviour .Motivationmaybeconsciousorsubconscious aforcethatunderlinesabeh aviour.Itisthecomplexnetworkofpsychologicalandphysiologicalmechanism.Motivescanb einstinctiveorlearned;consciousorunconscious,rationalor

irrational.ThemostpopularhumanmotivationtheoriesareprofoundedbyMaslow s,FreudsandH erzberg. Maslowhasclassifiedhumanneedsintofivetypesintheorderofimportance basic,safety,soci al,esteemandselfactualizationneeds. Themosturgentmotiveisacteduponfirst.Ifthisisfulfilled,theindividualproceedstoful fillthenexthigherneed.Itisimportantforthemarketertounderstandthemotivesthatleadm akepurchasesandhemustbeabletoexplaintheprospectivebuyershowbesthisproductcansati sfyaparticularneed.Buthemustbesurethatthetargetconsumershavealreadyfulfilledthep reviousneed. Freud sTheorydealswithsub-consciousfactors.Heassertsthatpeoplearenotleakytobeconsc iousoftherealmotiveguidingtheirbehaviourbecausethesemotivesareoftenrepressedfrom theirown consciousness.ThemostimportantimplicationofheFreudianmodelofmarketingisthathuman beingsthemotivatedbysymbolicaswellasbyeconomicandfunctionalconcerns.Attimes,them arketinganalystmustlookbeyondtheapparentreasonwhyanindividualpurchasedaproductin ordertofindtherealreason.Onlythroughspecialmethodsofprobingsuchasin-depthintervi ews,projectivetechniquestheirmotivescanreallybediscoveredandunderstood.Themarket ershouldbeawareoftheroleofvisualandtactileelementsintriggeringdeeperemotionsthat canstimulateorinhibitpurchase. FrederickHerzbergdevelopedatwotheoryofmotivationwhichdistinguishesbetweendissati sfiersandsatisfies.Theimplicationofthistheoryisthatthemarketersshoulddotheirbest topreventdissatifiers vidyarthiplus.comconsumerstoirrational.Themostpopularhumanmotivationtheoriesarep rofoundedbyMaslow s,FreudsandHerzberg. Maslowhasclassifiedhumanneedsintofivetypesintheorderofimportance basic,safety,soci al,esteemandselfactualizationneeds. Themosturgentmotiveisacteduponfirst.Ifthisisfulfilled,theindividualproceedstoful fillthenexthigherneed.Itisimportantforthemarketertounderstandthemotivesthatleadm akepurchasesandhemustbeabletoexplaintheprospectivebuyershowbesthisproductcansati sfyaparticularneed.Buthemustbesurethatthetargetconsumershavealreadyfulfilledthep reviousneed. Freud sTheorydealswithsub-consciousfactors.Heassertsthatpeoplearenotleakytobeconsc iousoftherealmotiveguidingtheirbehaviourbecausethesemotivesareoftenrepressedfrom theirown consciousness.ThemostimportantimplicationofheFreudianmodelofmarketingisthathuman beingsthemotivatedbysymbolicaswellasbyeconomicandfunctionalconcerns.Attimes,them arketinganalystmustlookbeyondtheapparentreasonwhyanindividualpurchasedaproductin ordertofindtherealreason.Onlythroughspecialmethodsofprobingsuchasin-depthintervi ews,projectivetechniquestheirmotivescanreallybediscoveredandunderstood.Themarket ershouldbeawareoftheroleofvisualandtactileelementsintriggeringdeeperemotionsthat canstimulateorinhibitpurchase. FrederickHerzbergdevelopedatwotheoryofmotivationwhichdistinguishesbetweendissati sfiersandsatisfies.Theimplicationofthistheoryisthatthemarketersshoulddotheirbest topreventdissatifiers vidyarthiplus.comconsumersto

fromaffectingthebuyersandthenheshouldcarefullyidentifythemajorsatisfiersormotiva torsofpurchase. Perceptionistheprocessbywhichindividualsbecomeawareof(thoughanyofthefivesenses)a ndgivemeaningtotheirenvironment. Severaltechnicalfactorsaffectthewayanobjectisperceived. Thesefactorsdonotrefertotheproduct stechnologyitself,butrathertohowtheindividualse estheobjects.Researchstudies,forexample,haveindicatedthatalargeandmulticoloureda dvertisementisperceivedmorequicklyandrememberedlongerthanasmallblack-and-white vidyarthiplus.comfromaffectingthebuyersandthenheshouldcarefullyidentifythemajors atisfiersormotivatorsofpurchase. Perceptionistheprocessbywhichindividualsbecomeawareof(thoughanyofthefivesenses)a ndgivemeaningtotheirenvironment. Severaltechnicalfactorsaffectthewayanobjectisperceived. Thesefactorsdonotrefertotheproduct stechnologyitself,butrathertohowtheindividualse estheobjects.Researchstudies,forexample,haveindicatedthatalargeandmulticoloureda dvertisementisperceivedmorequicklyandrememberedlongerthanasmallblack-and-white vidyarthiplus.com advertisement. Asecondimportantfactoristheindividual smentalreadinesstoperceiveaproduct.Researchh asshownthatbuyerstendtobecome fixed onamentalimage.Forexample,aconsumermaycontinueto purchaseaparticularbrandevenaftertheconsumerknowsthatabetterproductcanbeboughtat alowerprice.Mentalreadinessisalsoaffectedbythebuyer slevelofattention.Generallyspe aking,peoplehavealimitedattentionspan.Thatis,humanbeingsonlycomprehendalimitednu mberofobjectsormessagesinagivenamountoftime.Also,people sattentiontendstoshiftquic klyformoneobjecttoanother.Theseaspectsofperceptionsuggesttheimportanceofkeepingc ommercialssimpleandbrief. Socialandculturalfactorsalsoshapeperception.alreadymentioned,cultureandsocialcla sshaveasignificanteffectonhowandAswhatconsumerspurchase.Asanillustration,consume rsdifferastohowimportant upwardmobility istothem.Personsinterestedinclimbing

thesocialladderswillperceivecertainproductsasinferioriftheyfeelthePastexperience isafourthfactorinfluencingperception.Toillustrate,apersonmayperceiveabrandoftoot hpasteofhighqualitysimplybecauseofpastfavourableexperiencewiththeproduct.Finally , themoodoftheindividualisanimportantdeterminantofperception;apersonwhoisunhappyor depressedmayfinditdifficulttoseethepositivesideofaproduct. Perceptionhasthreebasiccharacteristics:itissubjective,selectiveandsummative.Itis subjectivebecausenotwoindividualsperceivethesameobjectinthesameway.Peopletendtos eewhattheywanttoseenandtohearwhattheywanttohear. Perceptionisselectiveinthatonlyafewofthesignalsthatpeoplereceiveeachdayareconver tedintomessages.Wereceivebetween1,500and2,000advertisingsignalsperdaythroughexpo suretobillboards, storesigns.Andotherformsofmassmedia.Sinceitisnotpossibletodealmentallywithsomany messages,ourmindseliminatemostofthemfromconsciousawareness.Becauseofselectiveper ception,advertisingmanagersmustcarefullychoosetheirmediaandplacementofadvertise4 mentsinordertomaximizeexposure.Inaddition, iftheadvertisementisclutteredwithmanymessages,prospectivebuyerswillprobablynotbe abletorememberanyofthem. Perceptionissummativeinthesensethatthereceptionandrecognitionofasignalisfrequent lyafunctionofthecumulativeeffectof vidyarthiplus.commembersoftheupperclassdonotpurchasethoseproducts. andthetimingthesocialladderswillperceivecertainproductsasinferioriftheyfeelthePa stexperienceisafourthfactorinfluencingperception.Toillustrate,apersonmayperceive abrandoftoothpasteofhighqualitysimplybecauseofpastfavourableexperiencewiththepro duct.Finally, themoodoftheindividualisanimportantdeterminantofperception;apersonwhoisunhappyor depressedmayfinditdifficulttoseethepositivesideofaproduct. Perceptionhasthreebasiccharacteristics:itissubjective,selectiveandsummative.Itis subjectivebecausenotwoindividualsperceivethesameobjectinthesameway.Peopletendtos eewhattheywanttoseenandtohearwhattheywanttohear. Perceptionisselectiveinthatonlyafewofthesignalsthatpeoplereceiveeachdayareconver tedintomessages.Wereceivebetween1,500and2,000advertisingsignalsperdaythroughexpo suretobillboards, storesigns.Andotherformsofmassmedia.Sinceitisnotpossibletodealmentallywithsomany messages,ourmindseliminatemostofthemfromconsciousawareness.Becauseofselectiveper ception,advertisingmanagersmustcarefullychoosetheirmediaandplacementofadvertise4 mentsinordertomaximizeexposure.Inaddition, iftheadvertisementisclutteredwithmanymessages,prospectivebuyerswillprobablynotbe abletorememberanyofthem. Perceptionissummativeinthesensethatthereceptionandrecognitionofasignalisfrequent lyafunctionofthecumulativeeffectof vidyarthiplus.commembersoftheupperclassdonotpurchasethoseproducts. andthetiming

multiplesignals.Themoreoftenasignalisreceived,thegreaterthechancethatitwillbeund erstood. Also,theprobabilitythatareceiverwillcorrectlyinterpretasignalisenhancedifthesign alissentthroughtwoormorechannels.Thesetwopointssuggestwhytelevisionadvertisersre peatcommercialsfrequently.Alsothesalespersonwhowantstoensurethatamessageisunders toodmaysendthecustomeradirect-mailpromotionandthenLearningisthechangesthatoccuri nanindividual sbehaviourarisingfromexperience.Learningisproducedthroughtheinterpla yofdrives,stimuli,cues,responsesandreinforcement.Adriveisastronginternalstimulus impellingactionsanditsbecomesamotivewhenit sdirectedtowardaparticulardrive-reducin gstimulusobjects.Cuesareminorstimulithedeterminewhen,whereandhowthepersonrespond s. Advertisementsfrequentlyserveascues.Ifapersonisthirty(drive),asoftdrinkadvertise mentmayencouragetheviewertoreducethedivebytakingasoftdrinkeitherfromthefridge,or visitingnearbycool-drinkbar.Thesecuescaninfluenceresponse,andiftheresponseifposi tive, theconsumerlearnsabouttheproductandbuysit,whichmeanshisresponseisreinforced. Learningisbeststudiedfromtheperspectiveofstimulus-responsetheoryandcognitivetheo ry. Stimulus-ResponseTheory:StimulusresponseitsbeginningwiththeRussianpsychologistPa vlov.Inhisfamousexperiment, Pavlovrangeabellimmediatelybeforefeedingadog.Eventually,thedog, vidyarthiplus.comtheirvisitthecustomerpersonallytodemonstratetheproduct. theoryhadmultiplesignals.Themoreoftenasignalisreceived,thegreaterthechancethatit willbeunderstood. Also,theprobabilitythatareceiverwillcorrectlyinterpretasignalisenhancedifthesign alissentthroughtwoormorechannels.Thesetwopointssuggestwhytelevisionadvertisersre peatcommercialsfrequently.Alsothesalespersonwhowantstoensurethatamessageisunders toodmaysendthecustomeradirect-mailpromotionandthenLearningisthechangesthatoccuri nanindividual sbehaviourarisingfromexperience.Learningisproducedthroughtheinterpla yofdrives,stimuli,cues,responsesandreinforcement.Adriveisastronginternalstimulus impellingactionsanditsbecomesamotivewhenit sdirectedtowardaparticulardrive-reducin gstimulusobjects.Cuesareminorstimulithedeterminewhen,whereandhowthepersonrespond s. Advertisementsfrequentlyserveascues.Ifapersonisthirty(drive),asoftdrinkadvertise mentmayencouragetheviewertoreducethedivebytakingasoftdrinkeitherfromthefridge,or visitingnearbycool-drinkbar.Thesecuescaninfluenceresponse,andiftheresponseifposi tive, theconsumerlearnsabouttheproductandbuysit,whichmeanshisresponseisreinforced. Learningisbeststudiedfromtheperspectiveofstimulus-responsetheoryandcognitivetheo ry. Stimulus-ResponseTheory:StimulusresponseitsbeginningwiththeRussianpsychologistPa vlov.Inhisfamousexperiment, Pavlovrangeabellimmediatelybeforefeedingadog.Eventually,thedog, vidyarthiplus.comtheirvisitthecustomerpersonallytodemonstratetheproduct. theoryhad

associatingthesoundofthebellwiththearrivalofdinner,learnedtosalivatewhenthebellw asrungregardlessofwhetherfoodwassupplied. Asresult,Pavlovconcludedthatlearningwaslargelyanassociativeprocess. Thestimulus-responsemodelhastwoimportantimplicationsformarketing.First,whenanewp roductisintroduced,thefirmshouldrealizethatifmayhavetoextinguishbrandhabitsandpr eferencesbeforeattemptingtoformnewbuyinghabits.Inthislight,thefirmwillwishtoseri ouslyconsiderthestrengthofitscues. Thesecondimplicationsformarketingisthatbecausepeopleareconditionedthroughrepetit ionandreinforcement,asinglecue,suchasatelevisionadvertisement,maynotbesufficient topenetrateanindividual sconsciousness.Therefore,itisoftennecessaryatadvertisement anumberoftimes. CognitiveTheory:Cognitivetheoristsbelievethathabitsareacquiredbyinsight,thinking andproblemsolvingaswellasthroughastimulus-responsemechanism.Fromthisperspective, centralnervoussystemandthebrainbecomeveryimportantintermediatriesinthelearningpr ocess. Cognitivetheoryhasseveralimplicationsformarketing.Forexample,whenthefirmisdesign ingasalesstrategy,itcannotassumethattheconsumerisgoingtobuytheproductsimplybecau seofprevioussatisfactionwiththefirm.Iftheconsumerhashadsuccessfultransactionsint hepast.Thiswillhelptheseller,butthebuyercanalsobeexpectedtoevaluatethefirm sproduc twithrespecttoitsmeritsas vidyarthiplus.comtorepeattheassociatingthesoundofthebellwiththearrivalofdinner,l earnedtosalivatewhenthebellwasrungregardlessofwhetherfoodwassupplied. Asresult,Pavlovconcludedthatlearningwaslargelyanassociativeprocess. Thestimulus-responsemodelhastwoimportantimplicationsformarketing.First,whenanewp roductisintroduced,thefirmshouldrealizethatifmayhavetoextinguishbrandhabitsandpr eferencesbeforeattemptingtoformnewbuyinghabits.Inthislight,thefirmwillwishtoseri ouslyconsiderthestrengthofitscues. Thesecondimplicationsformarketingisthatbecausepeopleareconditionedthroughrepetit ionandreinforcement,asinglecue,suchasatelevisionadvertisement,maynotbesufficient topenetrateanindividual sconsciousness.Therefore,itisoftennecessaryatadvertisement anumberoftimes. CognitiveTheory:Cognitivetheoristsbelievethathabitsareacquiredbyinsight,thinking andproblemsolvingaswellasthroughastimulus-responsemechanism.Fromthisperspective, centralnervoussystemandthebrainbecomeveryimportantintermediatriesinthelearningpr ocess. Cognitivetheoryhasseveralimplicationsformarketing.Forexample,whenthefirmisdesign ingasalesstrategy,itcannotassumethattheconsumerisgoingtobuytheproductsimplybecau seofprevioussatisfactionwiththefirm.Iftheconsumerhashadsuccessfultransactionsint hepast.Thiswillhelptheseller,butthebuyercanalsobeexpectedtoevaluatethefirm sproduc twithrespecttoitsmeritsas vidyarthiplus.comtorepeatthe

wellascompareittocompetitor sofferings.Therefore,insituationswherecognitivelearnin gislikelytotakeplace,thesellermustdeveloplogicalpresentationswhichhelpthepotenti albuyertoevaluatetheproductinafavourablelight. Thepracticalimportanceoflearningtheoryformarketersisthattheycanbuildupdemandfora productbyassociatingitwithstrong, drives,usingmotivatingcuesandprovidingpositivereinforcement. Abriefisadescriptivethoughtthatapersonhgksdjfjghdkfsomething.Thesebeliefsmaybeba sedonknowledge,fghjfghddgddfgdfgdfdgdfgdverymuchinterestedinthebeliefsofpeopleab outtheirfrgdgdffgdservicebecausetheyinfluencetheirbuyingbehaviour.Isomeofthefgdf gdfarewrongandinhibitpurchase,themarketershouldlaunchacampaigntocorrectthesebeli efs. Anattitudedescribesaperson senduringfavourableorunfavorablecognitiveevaluations,em otionalfeelingsactionstendenciestowardsomeobjectoridea.Attitudesputthemintoafram eofmindoflikinganddislikinganobject,movingtowardorawayfromit. Thisleadspeopletobehaveinfairlyconsistentwaytowardssimilarobjects.Hence,themarke tershouldtrytofirhisproductintoexistingbehaviourisinfluencedbyeconomic,sociologi calandpsychologicalfactors.Butitiswrongtoassumethatconsumerbehaviourisinfluenced byany one ofthesefactors.Thefactisthatatapointoftimeandinagivensetofsituations,itisi nfluencedbyasumtotalofthesediverseyet vidyarthiplus.comandattitudesratherthantotrytochangepeopleattitudes. Fromtheabovediscussions,itbecomesobviousthatconsumerwellascompareittocompetitor so fferings.Therefore,insituationswherecognitivelearningislikelytotakeplace,thesell ermustdeveloplogicalpresentationswhichhelpthepotentialbuyertoevaluatetheproducti nafavourablelight. Thepracticalimportanceoflearningtheoryformarketersisthattheycanbuildupdemandfora productbyassociatingitwithstrong, drives,usingmotivatingcuesandprovidingpositivereinforcement. Abriefisadescriptivethoughtthatapersonhgksdjfjghdkfsomething.Thesebeliefsmaybeba sedonknowledge,fghjfghddgddfgdfgdfdgdfgdverymuchinterestedinthebeliefsofpeopleab outtheirfrgdgdffgdservicebecausetheyinfluencetheirbuyingbehaviour.Isomeofthefgdf gdfarewrongandinhibitpurchase,themarketershouldlaunchacampaigntocorrectthesebeli efs. Anattitudedescribesaperson senduringfavourableorunfavorablecognitiveevaluations,em otionalfeelingsactionstendenciestowardsomeobjectoridea.Attitudesputthemintoafram eofmindoflikinganddislikinganobject,movingtowardorawayfromit. Thisleadspeopletobehaveinfairlyconsistentwaytowardssimilarobjects.Hence,themarke tershouldtrytofirhisproductintoexistingbehaviourisinfluencedbyeconomic,sociologi calandpsychologicalfactors.Butitiswrongtoassumethatconsumerbehaviourisinfluenced byany one ofthesefactors.Thefactisthatatapointoftimeandinagivensetofsituations,itisi nfluencedbyasumtotalofthesediverseyet vidyarthiplus.comandattitudesratherthantotrytochangepeopleattitudes. Fromtheabovediscussions,itbecomesobviousthatconsumer

interrelatedfactors.Whenaconsumerisintheprocessoftakingapurchasedecision,allthes efactorsareprovetoworksimultaneouslyandinfluencehischoice.Butitispossiblethatthe relativeimportanceofthesefactorsvaryinagivensituation.Itistheintelligenceofthema rketertofindoutthenatureandintensityoftheinfluenceexertedbythesefactorsandtoform ulateappropriatemarketingprogramme. vidyarthiplus.cominterrelatedfactors.Whenaconsumerisintheprocessoftakingapurchas edecision,allthesefactorsareprovetoworksimultaneouslyandinfluencehischoice.Butit ispossiblethattherelativeimportanceofthesefactorsvaryinagivensituation.Itisthein telligenceofthemarketertofindoutthenatureandintensityoftheinfluenceexertedbythes efactorsandtoformulateappropriatemarketingprogramme. vidyarthiplus.com REVIEWQUESTIONS: 1.2.Discusstheinfluenceofsocio-culturalfactorsindeterminingBringouttheimportanto fstudyingconsumerbehaviour. consumerbehaviour. 3.Whatarethepsychologicalfactorsthatinfluencebuyersbehaviour?

vidyarthiplus.com LESSON7MARKETINGINFORMATIONSYSTEMANDMARKETINGRESEARCHLearningObjectives Afterreadingthislesson,youshouldbeabletounderstand Thecomponentsofthemarketinginformationsystem; Themeaningandimportanceofmarketingresearch; Thescopeofmarketingresearch; Theprocedureofdoingmarketingresearch. Themeaningandtheneedformarketinginformationsystem; Tocarryoutmarketinganalysis,planning,implementationandcontrol,themarketingmanage rneedstomonitorthebehaviourofcustomers,competitors,dealersandtheirownsalesandcos tdata.Inordertopursuemarketopportunitiesaswellasanticipatemarketingproblems,they needtocollectcomprehensiveandreliableinformation.MarionHarperputitthisway: Tomanag eabusinesswellistomanageitsfuture;andtomanagethefutureistomanageinformation. andanalyze

ManycompaniesarestudyingtheinformationneedsoftheirexecutivesanddesigntheirMarket ingInformationSystem(MKIS)tomeetthoseneeds.MarketingInformationSystemsisdefineda sfollows: Amarketinginformationsystemisacontinuingandinteractingstructureofpeople,equipment andprocedurestogather,sort,analyze, evaluate,anddistributepertinent,timelyandaccurateinformationforusebymarketingdec isionmakerstoimprovetheirmarketingplanning, implementationandcontrol. vidyarthiplus.comManycompaniesarestudyingtheinformationneedsoftheirexecutivesand designtheirMarketingInformationSystem(MKIS)tomeetthoseneeds.MarketingInformation Systemsisdefinedasfollows: Amarketinginformationsystemisacontinuingandinteractingstructureofpeople,equipment andprocedurestogather,sort,analyze, evaluate,anddistributepertinent,timelyandaccurateinformationforusebymarketingdec isionmakerstoimprovetheirmarketingplanning, implementationandcontrol. vidyarthiplus.com Analysis Planning Implementati on OrganisationControl

Marketing Information Systems Assessing Internal Marketing Information Records Intelligence Needs Distribution Information Marketing InformationAnalysis Research

MarketingEnvironmen t Target M

Marketingchannels Competitor s Publics Macro Environmen t Forces ASSESSINGINFORMATIONNEEDSThecompanybeginstofindoutwhatinformantthemangerswouldli ketohave.Butmanagersdonotalwaysneedalltheinformationtheyaskforandtheymaynotaskfo ralltheyreallyneed. DEVELOPINGINFORMATION

frominternalcompanyrecords,marketingintelligenceandmarketingresearch.Theinformat ionanalysissystemprocessesthisinformationtomakeitmoreusefultomanagers. INTERNALRECORDSSYSTEMMostmarketingmanagersuseinternalrecordsandreportsregularlye speciallyformakingday-to-dayplanning,implementationandcontroldecisions.Internalr ecordsinformationconsistsofinformationgatheredfromsourceswithinthecompanytomarke tingperformanceandtodetectmarketingproblemsandopportunities. MARKETINGINTELLIGENCEMarketingintelligenceiseverydayinformationaboutdevelopments inthemarketingenvironment.Themarketingsystemdetermineswhatintelligenceisneeded,c ollectsitbysearchingtheTheinformationneededbymarketingmanagerscanbeobtainedenvir onmentanddeliversittomarketingmanagersneedit. Marketingintelligencecanbegatheredfromcompanyexecutives,dealers, salesforce,competitors,theaccountsandannualreportsofotherorganizationsetc.thathe lpsmanagersprepareandadjustmarketing vidyarthiplus.comevaluateintelligencewhofrominternalcompanyrecords,marketinginte lligenceandmarketingresearch.Theinformationanalysissystemprocessesthisinformatio ntomakeitmoreusefultomanagers. INTERNALRECORDSSYSTEMMostmarketingmanagersuseinternalrecordsandreportsregularlye speciallyformakingday-to-dayplanning,implementationandcontroldecisions.Internalr ecordsinformationconsistsofinformationgatheredfromsourceswithinthecompanytomarke tingperformanceandtodetectmarketingproblemsandopportunities. MARKETINGINTELLIGENCEMarketingintelligenceiseverydayinformationaboutdevelopments inthemarketingenvironment.Themarketingsystemdetermineswhatintelligenceisneeded,c ollectsitbysearchingtheTheinformationneededbymarketingmanagerscanbeobtainedenvir onmentanddeliversittomarketingmanagersneedit. Marketingintelligencecanbegatheredfromcompanyexecutives,dealers, salesforce,competitors,theaccountsandannualreportsofotherorganizationsetc.thathe lpsmanagersprepareandadjustmarketing vidyarthiplus.comevaluateintelligencewho plans. MARKETINGRESEARCH MarketingResearchisusedtoidentifyanddefinemarketingopportunitiesandproblems:toge nerate,refineandevaluatemarketingactions;tomonitormarketingperformanceandtoimpro veunderstandingofthemarketingprocess.

vidyarthiplus.com INFORMATIONANALYSISInformationgatheredbythecompany smarketingintelligenceandmarket ingresearchsystemsrequiredetailedanalysis.Thisincludeuseofadvancedstatisticalana lysis.Informationanalysismightalsoinvolveacollectionofmathematicalmodelsthatwill helpmarketersmakebetterdecisions.Eachmodelrepresentssomerealsystem,process,orout come. Thesemodelscanhelpanswerthequestionsofwhat,ifandwhichisbest. DISTRIBUTINGINFORMATIONTheinformationgatheredthroughmarketingintelligenceandmark etingresearchmustbedistributedtothemarketingmanagersattherighttime.Mostcompanies havecentralizedmarketinginformationsystemsthatprovidemanagerswithregularreports, intelligenceupdates,andreportsofresearchstudies.Mangersneedtheseroutinereportsfo rmakingregularplanning,implementation,andcontroldecisions. Developmentsininformationtechnologyhavecausedarevolutionininformationdistributio n.Withrecentadvancesincomputers,softwareandtelecommunication,mostcompaniesarethe irmarketinginformationsystems.Inmanycompaniesmarketingmanagershavedirectaccessto theinformationnetworkthroughpersonalcomputersandothermeans.Fromanylocation,theyc anobtainperformancedecentralizing

informationfrominternalrecordsoroutsideservices, analyzetheinformationusingstatisticalpackagesandmodels,preparereportsonaworkproc essorordesk-toppublishingandcommunicatewithordersinthenetworkthroughelectronic vidyarthiplus.cominformationsystem, informationfrominternalrecordsoroutsideservices, analyzetheinformationusingstatisticalpackagesandmodels,preparereportsonaworkproc essorordesk-toppublishingandcommunicatewithordersinthenetworkthroughelectronic vidyarthiplus.cominformationsystem, communications. Suchsystemsoffersexcitingprospects.Theyallowthemanagerstogettheinformationtheyne ededdirectlyandquicklyandtotailorittotheirownneeds. MARKETINGRESEARCHMarketingbasicallyconsistsofidentifyingtheandsatisfyingtheminth ebestpossibleway.Marketingresearchplaysakeyroleinthisprocess.Marketingresearchhe lpsthefirmtoacquireabetterunderstandingoftheconsumer,thecompetitionandthemarketi ngenvironment.Italsohelpstheformulationofrightmarketingmix,whichTheconductofmark etingresearchhasbecomesocomplexduetoincreasingcomplexityofmarketingandhencerequi resspecializedskillsandsophisticatedtechniques. Marketingresearchhasbeenvariouslydefinedbymarketingresearches. consumersincludedecisionsonproduct,price,placeandpromotion. RichardCrispdefinedmarketingresearch asthesystematic, objectiveandexhaustivesearchforandstudyofthefactsrelatingtoanyprobkeminthefieldo fmarketing .

AccordingtoGreenandTull,marketingresearchis thesystematicandobjectivesearchforanda nalysisofinformationrelevanttotheidentificationandsolutionofanyprobleminthefield ofmarketing . AmericaMarketingAssociationdefinedmarketingresearch, asthesystematicgathering,reco rdingandanalyzingofdataaboutproblemsrelatingtothemarketingofgoodsandservices. Ananalysisofabovedefinitionsclearlyhighlightssalientfeaturesofmarketingresearch: Itisasearchfordatawhicharerelevanttomarketing vidyarthiplus.comtheAccordingtoGreenandTull,marketingresearchis thesystematicandob jectivesearchforandanalysisofinformationrelevanttotheidentificationandsolutionof anyprobleminthefieldofmarketing . AmericaMarketingAssociationdefinedmarketingresearch, asthesystematicgathering,reco rdingandanalyzingofdataaboutproblemsrelatingtothemarketingofgoodsandservices. Ananalysisofabovedefinitionsclearlyhighlightssalientfeaturesofmarketingresearch: Itisasearchfordatawhicharerelevanttomarketing vidyarthiplus.comthe problems; Itinvolvesaprocessofgathering,recordingandanalysisofdata. Noneofthedefinitionsisexplicitaboutthemanagerialpurposesofmarketingresearch,exce ptsayingthatdataarerequiredforsolvingmarketingproblem. Abetterdefinitionofmarketingresearchis,thatitisanobjective, andsystematiccollections,recordingandanalysisofdata,relevanttomarketingproblemso fabusinessinordertodevelopanappropriateMARKETRESEARCHItiscarriedoutinasystematic andobjectivesmanner; informationbasefordecisionmakinginthemarketingarea.

Marketresearchisdifferentfrommarkingresearch.Marketresearchisasystematicstudyof fa ctsaboutmarketonly who,what, Ontheotherhandthescopeofmarketingresearchistowidethatitincludesallfunctionalarea sofmarketingincludingmarket. IMPORTANCEOFMARKETINGRESEARCHmarketingresearchtoidentifyconsumer needandensurethei r vidyarthiplus.comwhere,when,why,andhowofactualandpotentialbuyers. Theemergenceofbuyer smarketrequirescontinuousneedofMarketresearchisdifferentfromma rkingresearch.Marketresearchisasystematicstudyof factsaboutmarketonly who,what, Ontheotherhandthescopeofmarketingresearchistowidethatitincludesallfunctionalarea sofmarketingincludingmarket. IMPORTANCEOFMARKETINGRESEARCHmarketingresearchtoidentifyconsumer needandensurethei r vidyarthiplus.comwhere,when,why,andhowofactualandpotentialbuyers. Theemergenceofbuyer smarketrequirescontinuousneedof satisfaction. andintensivedistribution.Marketingresearchshouldhelpidentifyandsolvetheproblemso fmiddlemenanddistribution. Thereisalwaysachangeinthemarketconditionsandtherequirementsofconsumers.Marketing researchenablestoTheeverexpandingmarketsrequirelargenumberofmiddlemenanticipatea ndmeetanysuchchanges. Marketingresearchcanhelpbringaboutpromptadjustmentsinproductdesignandpackaging. Itcanhelpfindouteffectivenessofpricing. Itcanhelpfindouttheeffectivenessofsalespromotionandadvertisement. Itcanhelpidentifythestrengthandweaknessofsalesforce.

Theimpactofeconomicandtaxationpoliciesonmarketingcouldalsobeknownthroughmarketin gresearch. Inshort,marketingresearchenablesthemanagementtoidentifyandsolveanyprobleminthear eaofmarketingandhelpbettermarketingdecisions. SCOPEOFMARKETINGRESEARCHThescopeofmarketingresearchstretchesfromtheidentificatio nofconsumerwantsandneedstotheevaluationofconsumersatisfaction. Itcomprisesofresearchrelatingtoconsumer,sales, distribution,advertising,pricingandsalesforecasting.Aclearviewofthescopeofmarket ingresearchmaybeobtainedbythefollowingclassificationofmarketingresearchactivity. vidyarthiplus.comproducts, Theimpactofeconomicandtaxationpoliciesonmarketingcouldalsobeknownthroughmarketin gresearch. Inshort,marketingresearchenablesthemanagementtoidentifyandsolveanyprobleminthear eaofmarketingandhelpbettermarketingdecisions. SCOPEOFMARKETINGRESEARCHThescopeofmarketingresearchstretchesfromtheidentificatio nofconsumerwantsandneedstotheevaluationofconsumersatisfaction. Itcomprisesofresearchrelatingtoconsumer,sales, distribution,advertising,pricingandsalesforecasting.Aclearviewofthescopeofmarket ingresearchmaybeobtainedbythefollowingclassificationofmarketingresearchactivity. vidyarthiplus.comproducts, MarketResearchThepurposeofmarketresearchistogatherfactsaboutmarketsandtheforceso peratingtherein.Theareasofmarketresearchbroadlyinclude: Studyofthemarketsize/potentialStudyofthemarketprofileMarketshareanalysisStudyofm arketsegmentsMarkettrends

vidyarthiplus.com SalesforecastingStudyofseasonaltrendsConsumerResearch Theaimofthisresearchistodevelopanunderstandingaboutpresentandpotentialconsumersa ndthelevelofsatisfactionexpectedThebroadareasofandderivedbythemfromcompany sproduc ts. consumerresearchare: Studyofconsumerprofile Studyofconsumersatisfaction/dissatisfaction,reasons,etc. Studyofshiftsinconsumptionpatterns. Studyofconsumerbrandpreferences,tastesandreactions ProductResearchReviewingproductline,productquality,productfeatures,productdesign etc. StudyontheactualusesofagivenproductStudyonnewusesofanexistingproductTestingofnew productsStudyofrelatedproducts Studyofpacking,packagingdesign

Studyofbrandname/brandmark/itsimpact vidyarthiplus.comStudyofbrandname/brandmark/itsimpact vidyarthiplus.com DistributionResearchThepurposeofthisresearchistoidentifytheappropriatedistributi onchannelsforintermediaries,storage,transportproblemsetc. Theboardareasinclude: AssessingthegeneralpatternofpricingfollowedbytheindustryMeasuringpriceelasticity ofdemandEvaluatingthepricingstrategyofthefirmAdvertisingandPromotionResearchThep urposeofthisresearchistodevelopmostappropriateadvertisingandpromotionschemesande valuatetheireffectiveness.Thebroadareasinclude: AdvertisingcopyresearchMediaresearchAssessingtheeffectivenessofadvertisingAssess ingtheefficacyofsalespromotionalmeasures. SalesResearch Thepurposeistofindoutthesalespotentialandappraisesalesperformanceofcompany sproduc ts.Thebroadareasinclude:

TestingnewsalestechniquesAnalyzingofsalesmen strainingMeasuringsalesman seffectivene ssStudyofsalescompensationAnalyzingmethodsofsettingsalesquotaandsalesterritories . ResearchonCompetitionThepurposeofthisresearchistofindouttheintensityandeffectofc ompetitiontothefirm.Thebroadareasinclude: Studyofcompetitivestructureoftheindustryandindividualcompetitors. Studyofcompetitorsmarketingstrategies. Thescopeofmarketingresearchdescribedaboveisonlyindicativeandnotexhaustive.Furthe r,theaboveresearchareasarenotwatertightcompartments.Theyarecloselyinterrelated.T heactualscopedependsontheneedsofacompanyandthemarketingsituations. BENEFITSOFMARKETINGRESEARCHItisapparentthatthescopeofmarketingresearchactivityis verywide.Itcoversalmostallaspectsofmarketing.Themajorcontributionofmarketingrese archisthatitaugmentstheeffectivenessofmarketingdecisions.Marketingresearchuncove rsfactsfrombothoutsideandwithinthecompanyrelevanttomarketingdecisionsandprovides asustainableandlogicalbaseformakingdecisions. vidyarthiplus.comTestingnewsalestechniquesAnalyzingofsalesmen strainingMeasuringsa lesman seffectivenessStudyofsalescompensationAnalyzingmethodsofsettingsalesquotaan dsalesterritories. ResearchonCompetitionThepurposeofthisresearchistofindouttheintensityandeffectofc ompetitiontothefirm.Thebroadareasinclude: Studyofcompetitivestructureoftheindustryandindividualcompetitors. Studyofcompetitorsmarketingstrategies. Thescopeofmarketingresearchdescribedaboveisonlyindicativeandnotexhaustive.Furthe r,theaboveresearchareasarenotwatertightcompartments.Theyarecloselyinterrelated.T heactualscopedependsontheneedsofacompanyandthemarketingsituations. BENEFITSOFMARKETINGRESEARCHItisapparentthatthescopeofmarketingresearchactivityis verywide.Itcoversalmostallaspectsofmarketing.Themajorcontributionofmarketingrese archisthatitaugmentstheeffectivenessofmarketingdecisions.Marketingresearchuncove rsfactsfrombothoutsideandwithinthecompanyrelevanttomarketingdecisionsandprovides asustainableandlogicalbaseformakingdecisions. vidyarthiplus.com

Thespecificcontributionsofmarketingresearchtotheeffectivenessofthemarketingprogr ammeofafirmareasfollows: 1.Withtheguidanceofresearch,productsshouldbebettersuitedtothedemandandpricesreas onably. 2.Specificmarketshavingthegreatestsalespotentialitiescouldbe vidyarthiplus.comThespecificcontributionsofmarketingresearchtotheeffectivenessof themarketingprogrammeofafirmareasfollows: 1.Withtheguidanceofresearch,productsshouldbebettersuitedtothedemandandpricesreas onably. 2.Specificmarketshavingthegreatestsalespotentialitiescouldbe vidyarthiplus.com identified. 3.Researchcanhelptoidentifythebestsalesappealoftheproducts, thebestwayofreachingthepotentialbuyersandthemostsuitabletimingofpromotionetc. 4.Researchcanalsohelpminimizemarketingcostsbymakingmarketingeffortsmoreefficient andeffective. 5.Researchcanalsofindouttheeffectivenessofsalesforcemanagementsuchasrightselecti onprocedure,effectivetrainingprogrammes,scientificcompensationschemesandeffectiv econtrolmechanisms. Thecontributionsofmarketingresearchareconsiderable.Itfacilitatesboththedecisionmakingandtheoperationaltasksofmarketingmanagementeffectiveandefficientandthereby toconsumerssatisfactionandorganization sefficiency. LIMITATIONSOFMARKETINGRESEARCHThemarketingresearchisnotwithoutitsshareoflimitati ons. contributes

1.MarketingResearchcannotprovidecompleteanswertotheproblemsbecausetherearemanyin terveningvariableswhichare vidyarthiplus.comMarketingResearchcannotprovidecompleteanswertotheproblemsbecaus etherearemanyinterveningvariableswhichare vidyarthiplus.com difficulttobecontrolled. 2.Somemarketingproblemsdonotlendthemselvestovalidresearchconclusionsduetolimitat ionsoftoolsandtechniquesinvolved. Therearemanyintangibleandvariablesoperatingwhicharedifficulttobemeasured. 3.Inafastchangingenvironment,thedatacollectedbecomeobsoletesoonandtheresearchfin dingsbasedonthemwillbecomelittleuse. 4.Itonlyprovidesabaseforpredictingfutureevents;itcannotguaranteewithanycertainty theirhappening. 5.Marketingresearchinvolvesmoretime,effortandhighcost.Butitisveryoftensaidthatma rketingresearchischeaperthancostlymarketingmistakes. PROCEDUREINCONDUCTINGMARKETINGRESEARCHInmarketingresearch,thefollowingprocedurei sgenerallyadopted. 1.Definingtheproblemanditsobjectives2.Determinetheinformationneededandthesources ofinformation3.Decidingonresearchmethods4.AnalysisandInterpretationofdata5.Prepa ringresearchreport

6.Follow-up1.DeterminetheProblemThefirstbasicstepistodefinethemarketingproblemin specificterms.Onlyifthemarketingresearcherknowswhatproblemmanagementistryingtoso lve,hecannotdoaneffectivejobinplanninganddesigningaresearchprojectthatwillprovid etheneededinformation. Aftertheproblemhasbeendefined,theresearcher staskistolearnasmuchaboutitasthetimepe rmits.gettingacquaintedwiththecompany,itsbusiness,itsproductsandmarketenvironmen t,advertisingbymeansoflibraryconsultationandextensiveinterviewingofcompany soffici als.Theresearchertriestogeta feel ofthesituationsurroundingtheproblem.Heanalysesthec ompany,itsThisphaseofThisanalysisenablestheresearchertoarriveatahypothesistentat ivepresumptiononthebasisofwhichfurtherinvestigationsmaybedone. Whenaproblemhasbeenidentified,objectivesoftheresearchhavetobedetermined.Theobjec tivesoftheprojectmaybetodetermineexactlywhattheproblemisandhowitcanbesolved. vidyarthiplus.comThisinvolvesmarkets,itscompetitionsandtheindustryingeneral. preliminaryexplorationisknownassituationanalysis.oraFollow-up1.DeterminetheProbl emThefirstbasicstepistodefinethemarketingprobleminspecificterms.Onlyifthemarketi ngresearcherknowswhatproblemmanagementistryingtosolve,hecannotdoaneffectivejobin planninganddesigningaresearchprojectthatwillprovidetheneededinformation. Aftertheproblemhasbeendefined,theresearcher staskistolearnasmuchaboutitasthetimepe rmits.gettingacquaintedwiththecompany,itsbusiness,itsproductsandmarketenvironmen t,advertisingbymeansoflibraryconsultationandextensiveinterviewingofcompany soffici als.Theresearchertriestogeta feel ofthesituationsurroundingtheproblem.Heanalysesthec ompany,itsThisphaseofThisanalysisenablestheresearchertoarriveatahypothesistentat ivepresumptiononthebasisofwhichfurtherinvestigationsmaybedone. Whenaproblemhasbeenidentified,objectivesoftheresearchhavetobedetermined.Theobjec tivesoftheprojectmaybetodetermineexactlywhattheproblemisandhowitcanbesolved. vidyarthiplus.comThisinvolvesmarkets,itscompetitionsandtheindustryingeneral. preliminaryexplorationisknownassituationanalysis.ora 2.DeterminetheSpecificInformationNeededandSourcesofInformation

Theresearchershouldthendeterminethespecificinformationneededtosolvetheresearchpr oblems.Forsuccessfuloperationsofproductionandsalesdepartments,whatinformationisr equireddependstoalargeextentonthenatureofgoodsandthemethodusedforplacingitintheh andsoftheconsumers. Theinvestigatormustidentifythesourcesfromwhichthedifferentitemsofinformationareo btainableandselectthosethathewilluse.Hemaycollectinformationthroughprimarydata,s econdarydataorboth. Primarydataarethosewhicharegatheredspecificallyfortheprojectathand,directlye.g.t hroughquestionnairesandinterviews. Primarydatasourcesinclude:Companysalesmen,middlemen, consumers,buyers,tradeassociationsexecutives,andotherbusinessmenandevencompetito rs. Secondarydataaregenerallypublishedsources,whichhavebeencollectedoriginallyforsom eotherpurpose.Theyarenotgatheredspecificallytoachievetheobjectivesoftheparticula rresearchprojectathand,butarealreadyassembled.Suchsourcesareinternalcompanyrecor ds;governmentpubliscations;reportsandtrade, professionalandbusinessassociations publicationsandreports,privatebusinessfirms reco rds,advertisingmedia,researchorganizations,andlibraries. 3.DecidingonResearchMethodsIfitisfoundthatthesecondarydatacannotbeofmuchuse, collectionofprimarydatabecomenecessary.Thesewidelyusedmethodsofgatheringprimaryd ataare:(i)Survey,(ii)Observation,and(iii) vidyarthiplus.comjournals, UniversityTheresearchershouldthendeterminethespecificinformationneededtosolvethe researchproblems.Forsuccessfuloperationsofproductionandsalesdepartments,whatinfo rmationisrequireddependstoalargeextentonthenatureofgoodsandthemethodusedforplaci ngitinthehandsoftheconsumers. Theinvestigatormustidentifythesourcesfromwhichthedifferentitemsofinformationareo btainableandselectthosethathewilluse.Hemaycollectinformationthroughprimarydata,s econdarydataorboth. Primarydataarethosewhicharegatheredspecificallyfortheprojectathand,directlye.g.t hroughquestionnairesandinterviews. Primarydatasourcesinclude:Companysalesmen,middlemen, consumers,buyers,tradeassociationsexecutives,andotherbusinessmenandevencompetito rs. Secondarydataaregenerallypublishedsources,whichhavebeencollectedoriginallyforsom eotherpurpose.Theyarenotgatheredspecificallytoachievetheobjectivesoftheparticula rresearchprojectathand,butarealreadyassembled.Suchsourcesareinternalcompanyrecor ds;governmentpubliscations;reportsandtrade, professionalandbusinessassociations publicationsandreports,privatebusinessfirms reco rds,advertisingmedia,researchorganizations,andlibraries. 3.DecidingonResearchMethodsIfitisfoundthatthesecondarydatacannotbeofmuchuse, collectionofprimarydatabecomenecessary.Thesewidelyusedmethodsofgatheringprimaryd ataare:(i)Survey,(ii)Observation,and(iii) vidyarthiplus.comjournals, University

Experimentation.Whichmethodistobeusedwilldependuponthe(i)SurveyMethod:Inthismeth od,informationisgathereddirectlyfromindividualrespondents,eitherthroughpersonali nterviewsquestionsareusedeithertoobtainspecificresponsestodirect vidyarthiplus.comquestionsortosecuremoregeneralresponseto openend objectives,cost,time,personnelandfacilitiesavailable. orthroughmail,questionnairesortelephoneinterviews.TheExperimentation.Whichmethod istobeusedwilldependuponthe(i)SurveyMethod:Inthismethod,informationisgathereddir ectlyfromindividualrespondents,eitherthroughpersonalinterviewsquestionsareusedei thertoobtainspecificresponsestodirect vidyarthiplus.comquestionsortosecuremoregeneralresponseto openend objectives,cost,time,personnelandfacilitiesavailable. orthroughmail,questionnairesortelephoneinterviews.The questions. (ii)ObservationalMethod:Theresearchdataarenotgatheredthroughdirectquestioningofr espondentsbutratherbyobservingandrecordingtheiractionsinamarketingsituation.Thec ustomerisactsinhis/herusualfashion.Informationmaybegatheredbypersonalormechanica lobservation.Thistechniqueisusefulindeterminingwhatbrandshepushes.Inanothersitua tion,amotivateshimtopurchaseExperimentalMethod:Thismethodinvolvescarryingoutauna warethathe/sheisbeingobserved,sopresumablyhe/shegettinginformationaboutthecalibe rofthesalesmanorincustomermaybewatchedatadistanceandnoticed,what (iii) small-scaletrialsolutiontoaproblem,while,atthesametime, attemptingtocontrolallfactorsrelevanttotheproblems.Themainassumptionhereisthatth etestconditionsareessentiallythesameasthosethatwillbeencounteredlaterwhenconclus ionderivedfromtheexperimentareappliedtoabroadermarketingarea.Thetechniqueconsist ofestablishingacontrol

testmarketsinwhichonefactorisvaried. 4.AnalysisandInterpretationofDataAfterthenecessarydatahavebeencollected,theyaret abulatedandanalyzedwithappropriatestatisticaltechniquestodrawconclusions vidyarthiplus.commarketinwhichallfactorsremainconstantandoneormoreandfindings.Th isstageisregardedastheendproduct. testmarketsinwhichonefactorisvaried. 4.AnalysisandInterpretationofDataAfterthenecessarydatahavebeencollected,theyaret abulatedandanalyzedwithappropriatestatisticaltechniquestodrawconclusions vidyarthiplus.commarketinwhichallfactorsremainconstantandoneormoreandfindings.Th isstageisregardedastheendproduct. 5.PreparationofReportanalysisofthefindingsshouldbesubmittedinawrittenreport.Ther eportshouldbewritteninclearlanguage,properlyparagraphed,andshouldpresentthefacts andfindingswithnecessaryevidence. Thechoiceofthewords,adequateemphasis,correctstatisticalpresentation,avoidanceoff lowerylanguageandabilitytoexpressideasdirectlyandsimplyinanorganizedframeworkare essentialforagoodreport. REVIEWQUESTIONS: Theconclusionsandrecommendations,supportedbyadetailed 1.2.Discussthecomponentsandusesofmarketinginformationsystem. 3.Definemarketingresearchanddistinguishitfrommarketresearch. 4.Discussthescopeofmarketingresearch. Whatdoyouunderstandbymarketinginformationsystem?

5.Bringourthebenefitsandlimitationsofmarketingresearch. 6.Discusstheprocedureofdoingmarketingresearch. ************* vidyarthiplus.comBringourthebenefitsandlimitationsofmarketingresearch. 6.Discusstheprocedureofdoingmarketingresearch. ************* vidyarthiplus.com

vidyarthiplus.com LESSON 8PRODUCTMIXLearningobjectivesThemeaningandtypesofproducts; Theproductmixandlinedecisions; Thestrategiesinvolvedinproductmodificationandproductelimination. Product,thefirstofthefourPsofmarketingmixhasauniquepositionsasitconstitutesthemo stsubstantiveanyAfterreadingthisunit,youshouldbeabletounderstand marketingoffer.Theotherelements price,placeandpromotion arenormallyemployedtomaketheproductofferinguniqueanddistinct.Productis,thus,then umberoneweaponinthemarketer sarsenal. elementin Productiscomplexconceptwhichhastobecarefullydefined.Incommonparlance,anytangible itemssuchastextiles,books, televisionandmanyothersarecalledasproducts.Butanindividual sdecisiontobuyanitemisb asedonnotonlyonitstangibleattributesbutalsoonavarietyofassociatednon-tangibleand psychologicalattributessuchasservices,brand,package,warranty,imageetc.

Therefore,tocrystallizetheunderstandingoftheterm product ,itwouldbeappropriatetotake recoursetodifferentdefinitionsof product givenbymarketingpractioners. AccordingtoAlderson, Productisabundleofutilitiesconsistingofvariousproductfeatures andaccompanyingservice .Thebundleofutilitiesiscomposedofthosephysicalandpsychologi calattributesthatthebuyerreceiverwhenthebuystheproductandwhichthemarketerprovide saparticularcombinationofproductfeaturesand vidyarthiplus.comTherefore,tocrystallizetheunderstandingoftheterm product ,itwouldbe appropriatetotakerecoursetodifferentdefinitionsof product givenbymarketingpractioner s. AccordingtoAlderson, Productisabundleofutilitiesconsistingofvariousproductfeatures andaccompanyingservice .Thebundleofutilitiesiscomposedofthosephysicalandpsychologi calattributesthatthebuyerreceiverwhenthebuystheproductandwhichthemarketerprovide saparticularcombinationofproductfeaturesand vidyarthiplus.com associatedservices. AccordingtoSchwarz, aproductissomethingafirmmarketsthatwillsatisfyapersonalwantorf illabusinessneed ,andincludes alltheperipheralfactorsthatmayincludereputationofthema nufacturer, thewarranty,creditanddeliveryterms,thebrandnameandthecourtesyshownbythesalesands ervicepersonnel. PhilipKotlerdefinesproduct asanythingthatcanbeofferedtoamarketerforattention,acqui sition,useofconsumptionthatmightsatisfyawantorneed.Itincludesphysicalobject,serv icespersons, placesorganizationsandideas. Theperusalofabovedefinitionsitisrevealedthataproductisnotonlyantangibleentity,bu talsotheintangibleservicessuchasPrecisely,theanswerstothefollowingquestionsthepr oductpolicyofafirm: prestige,imageetc.formanintegralpartoftheproduct. Whatproductsshouldthecompanymake?

Whereexactlyaretheseproductstobeoffered? Towhichmarketormarketsegment? vidyarthiplus.comWhatshouldbetherelationshipamongthevariousmembersofWhereexactly aretheseproductstobeoffered? Towhichmarketormarketsegment? vidyarthiplus.comWhatshouldbetherelationshipamongthevariousmembersof aproductline? Whatshouldbethewidthoftheproductmix? Howmanydifferentproductlinescanthecompanyaccommodate? Howshouldtheproductsbepositionedinthemarket? Whatshouldbethebrandpolicy? Shouldtherebeindividualbrands,familybrandsand/ormultiplebrands? 1.Aproductpolicyguidesanddirectstheactivitiesoforganisationtowardasinglegoal.Onl yrarely,productdecisionsaremadesolelybytopexecutives.Moreoftensuchdecisions research,development,engineering,manufacturing,marketing,law, financeandevenpersonnel. 2.Aproductpolicyhelpstoprovidetheinformationrequiredfordecisionsontheproductline . 3. Aproductpolicyservesthefollowingthreemainfunctions: Aproductpolicygivesexecutivesasupplementarycheckontheusualestimatesofprofitandlo ss. wholerequirethespecializedknowledgeofexpertsinmanyfields

Asoundproductpolicyisthusanimportanttoolforcoordinationanddirections.Itappliesno tonlytothosemajordecisionswhichareultimateresponsibilityofgeneralmanagersalsotot hemanyPRODUCTCLASSIFICATIONMarketershavedevelopedseveralproductclassificationsch emesbasedonproductcharacteristicsasanaidtodevelopingappropriate vidyarthiplus.comlowerlevelemployeeswhoalsotakedaytodaydecisions. Asoundproductpolicyisthusanimportanttoolforcoordinationanddirections.Itappliesno tonlytothosemajordecisionswhichareultimateresponsibilityofgeneralmanagersalsotot hemanyPRODUCTCLASSIFICATIONMarketershavedevelopedseveralproductclassificationsch emesbasedonproductcharacteristicsasanaidtodevelopingappropriate vidyarthiplus.comlowerlevelemployeeswhoalsotakedaytodaydecisions. marketingstrategies. Productcanbeclassifiedintothreegroupsaccordingtotheirdurability: DurableGoods:Durablegoodsaretangiblegoodsthatnormallysurvivemanyusers.Examplesin cluderefrigerators,taperecorders, televisionsetc. Non-DurableGoods:Thesearetangiblegoodsthatnormallyareconsumedforshortperiod.Exam pleincludesoap,matchboxetc. Services:Servicesareactivities,benefitsorsatisfactionsthatareofferedforsale.Exam plesincludebanking,transport,insuranceserviceetc. Anothermethodofclassifyingproductsisonthebasisofconsumershoppinghabitsbecausethe yhaveimplicationsformarketingstrategy. Basingonthis,goodsmaybeclassifiedintothree:

ConvenienceGoods:Goodsthatthecustomerusuallypurchasesfrequently,immediatelyandwi ththeminimumeffort.Thepriceperunitislow,Example:soaps,matchboxetc. ShoppingGoods:Thesegoodsarepurchasedinfrequently.Thepriceperunitiscomparativelyh igher.Thecustomer,intheprocessofselectionandpurchaseofthesegoodscomparesthesuita bility,quality,priceandstyle.Exampleincludefurniture, vidyarthiplus.comConvenienceGoods:Goodsthatthecustomerusuallypurchasesfrequently ,immediatelyandwiththeminimumeffort.Thepriceperunitislow,Example:soaps,matchboxe tc. ShoppingGoods:Thesegoodsarepurchasedinfrequently.Thepriceperunitiscomparativelyh igher.Thecustomer,intheprocessofselectionandpurchaseofthesegoodscomparesthesuita bility,quality,priceandstyle.Exampleincludefurniture, vidyarthiplus.com clothing,footwearetc. SpecialityGoods:Goodswithuniquecharacteristicsand/orbrandidentificationforwhicha significantgroupofbuyersarewillingtomakeaspecialpurchasingeffort.Thegoodsareexpe nsiveandpurchasedrarely.Examplesincludepersonalcomputers,cars,hi-ficomponentsetc . IndustrialProducts Oneofthewaysofclassificationofindustrialproductsinvolvestwobroadcategoriesviz.,( 1)productsthatareusedintheproductionofothergoodsandbecomeaphysicalpartofanotherp roduct,and(2) productsnecessarytoconductbusinessthatdonotbecomepartofanotherproduct.Theproduct sthatbecomepartofanotherproductarerawmaterials,semi-manufacturedgoods,compeonets andsubcontractedproductionservices.Theproductsthatareneededtoconductthebusinessi nclude:Capitalgoods,operatingsupplies,contractedindustrialservices,contractedpro fessionalservicesandutilities.

Rawmaterialincludecrudeoil,coal,ironore,otherminedminerals, lumber,forestryproduct,agriculturalproducts,livestock,poultryanddiaryproductsand theproductsoffisheries. havealreadyundergonesomeprocessingbutareincompleteinthemselves.Examplesarecotton fiber,castings,plateglassandplastics. anotherlarger,morecomplicatedproduct.Examplesincludeautomobilebatteries,headligh ts,tyresetc. Subcontractedproductionservicesareinsueinlargeproducts. Examplesare,subcontractingforinstallationofelectrical,heating, air-conditioningandplumbingfacilitiestoothers. Capitalgoodsaremanufacturingplantsandinstallations,tools, machines,trucksetc.Operatingsuppliesareindustrialproductsusedtokeepabusinessoper atingnormally.Theseincludelubricatingoils,paperclips,cashregistersetc.Theoperati ngsuppliesusuallyhavearelativelylowunitvalue,andareconsumedquickly. Contractedindustrialservicesincludesuchitemsasmachineservicingandrepair,cleaning ,remodeling,wasteandtheoperationoftheemployees canteens.Contractedprofessionalserv icesincludeprintingexecutiverecruitment,advertisement,advertising,legaladvice,pr ofessionalaccounting,dataprocessingandengineeringstudies. Theindustrialproductsinthecategoryofutilitiesconsistsofenergy,telephone,andwater . vidyarthiplus.comSemi-manufacturinggoodsareproducts,thatwhenpurchased, ComponentsarecompletedproductsmeanttobecomepartofdisposalRawmaterialincludecrude oil,coal,ironore,otherminedminerals, lumber,forestryproduct,agriculturalproducts,livestock,poultryanddiaryproductsand theproductsoffisheries. havealreadyundergonesomeprocessingbutareincompleteinthemselves.Examplesarecotton fiber,castings,plateglassandplastics. anotherlarger,morecomplicatedproduct.Examplesincludeautomobilebatteries,headligh ts,tyresetc. Subcontractedproductionservicesareinsueinlargeproducts. Examplesare,subcontractingforinstallationofelectrical,heating, air-conditioningandplumbingfacilitiestoothers. Capitalgoodsaremanufacturingplantsandinstallations,tools, machines,trucksetc.Operatingsuppliesareindustrialproductsusedtokeepabusinessoper atingnormally.Theseincludelubricatingoils,paperclips,cashregistersetc.Theoperati ngsuppliesusuallyhavearelativelylowunitvalue,andareconsumedquickly. Contractedindustrialservicesincludesuchitemsasmachineservicingandrepair,cleaning ,remodeling,wasteandtheoperationoftheemployees canteens.Contractedprofessionalserv icesincludeprintingexecutiverecruitment,advertisement,advertising,legaladvice,pr ofessionalaccounting,dataprocessingandengineeringstudies. Theindustrialproductsinthecategoryofutilitiesconsistsofenergy,telephone,andwater . vidyarthiplus.comSemi-manufacturinggoodsareproducts,thatwhenpurchased, Componentsarecompletedproductsmeanttobecomepartofdisposal

vidyarthiplus.com AnaloguesTermsInordertofacilitiesfurtherunderstandingitwillbeappropriatetoknowth emeaningofsomeothertermsalsowhichoftenrecurinanydiscussionaboutproduct.Someofthe setermsarediscussedbelow: NeedFamily:Thecoreneedthatactualizestheproductfamily. Example:Safety. ProductFamily:Alltheproductclassesthatcansatisfyacoreneedwithmoreorlesseffective ness. ProductLine:Agroupofproductswithinaproductclassthatarecloselyrelated,becausethey functioninasimilarmannerorsoldtothesamecustomergroupsoraremarketedthroughthesame typesofoutletsorfallwithingivenpriceranges.Example:Cosmetics. ProductItem:Adistinctunitwithinabrandorproductlinethatisdistinguishablebysize,pr ice,appearanceorsomeotherattribute. Example:Talcumpowder. PRODUCTMIXDECISIONSProductMixAproductmix(alsocalledproductassortment)isthesetofa llproductlinesanditemsthataparticularsellerofferstosale.

width,length,depth,andconsistency. Acompany sproductmixcanbedescribedashavingacertainThewidthoftheproductmixreferstoh owmanyproductlinesthe vidyarthiplus.comwidth,length,depth,andconsistency. Acompany sproductmixcanbedescribedashavingacertainThewidthoftheproductmixreferstoh owmanyproductlinesthe vidyarthiplus.com companycarries. Thelengthofproductmixreferstothetotalnumberofitemsinitsproductmix. Thedepthofproductmixreferstohowmanyproductvariantsareofferedofeachproductitemint heline. Theconsistencyoftheproductmixreferstohowcloselyrelatedthevariousproductlinesarei nenduse,productrequirements, distributionchannelsorsomeotherway. Thesefourdimensionsoftheproductmixprovidethebasesfordefiningthecompany sproductstr ategy.Thecompanycangrowitsbusinessinfourways.Thecompanycanaddnewproductlines,thu swideningitsproductmixtocapitalizethecompany sreputationorthecompanycanlengthenits existingproductlinestobecomeamorefulllinecompanyorthecompanycanaddmoreproductvar iantstoeachproductandthusdeepenitsproductmix.Finallythecompanycanpursuemoreprodu ct-lineconsistencyorless,dependinguponwhetheritwantstoacquireastrongreputationin asinglefieldorparticipateinseveralfields. PRODUCTLINEDECISIONS

ProductLineAproductlineisagroupofproductsthatarecloselyrelated, becausetheyfunctioninasimilarmanner,aresoldtothesamecustomergroups,aremarketedth roughthesametypesofoutlets,orfallwithingivenpriceranges. Productlinemanagershavetwoimportantinformationneeds.Firsttheymustknowthesalesand profitsofeachitemintheline.Second, theymustknowhowtheproductlinecomparestocompetitor sproductlinesinthesamemarkets(Pr oductPositioning). Oneofthemajorissuesfacingproduct-linemanagersistheoptimallengthoftheproductline. Themanagercanincreasetheprofitseitherbyaddingtheproductitemsifthelineistooshorto rbydroppingtheitemsifthelineistoolong. Theissueofproduct-linelengthisinfluencebycompanyobjectives. /Companiesthatwanttobepositionedasfull-linescompaniesand/orareseekinghighmarkets hareandmarketgrowthwillcarrylongerlines. Theyarelessconcernedwhensomeitemsfailtocontributetoprofit. Companiesthatarekeenonhighprofitabilitywillcarryshorterlinesconsistingofselected items. Productlinestendtoincreaseovertime.Excessmanufacturingcapacitywillputpressureont heproduct-linemanagerstodevelopnewitems.Thesalesforceanddistributorswillalsopres sureforamorecompleteproductlientosatisfytheircustomers. LINE-STRETCHINGDECISION vidyarthiplus.comProductLineAproductlineisagroupofproductsthatarecloselyrelated, becausetheyfunctioninasimilarmanner,aresoldtothesamecustomergroups,aremarketedth roughthesametypesofoutlets,orfallwithingivenpriceranges. Productlinemanagershavetwoimportantinformationneeds.Firsttheymustknowthesalesand profitsofeachitemintheline.Second, theymustknowhowtheproductlinecomparestocompetitor sproductlinesinthesamemarkets(Pr oductPositioning). Oneofthemajorissuesfacingproduct-linemanagersistheoptimallengthoftheproductline. Themanagercanincreasetheprofitseitherbyaddingtheproductitemsifthelineistooshorto rbydroppingtheitemsifthelineistoolong. Theissueofproduct-linelengthisinfluencebycompanyobjectives. /Companiesthatwanttobepositionedasfull-linescompaniesand/orareseekinghighmarkets hareandmarketgrowthwillcarrylongerlines. Theyarelessconcernedwhensomeitemsfailtocontributetoprofit. Companiesthatarekeenonhighprofitabilitywillcarryshorterlinesconsistingofselected items. Productlinestendtoincreaseovertime.Excessmanufacturingcapacitywillputpressureont heproduct-linemanagerstodevelopnewitems.Thesalesforceanddistributorswillalsopres sureforamorecompleteproductlientosatisfytheircustomers. LINE-STRETCHINGDECISION vidyarthiplus.com

Everycompany sproduct-linecoversacertainpairofthetotalrangeofferedbytheindustryasa whole.Forexample,MarutiUdyogautomobilesarelocatedinthelow-mediumpricerangeofthea utomobilemarket.Linestretchingoccurswhenacompanylengthensitsproduct-linebeyondit scurrentrange.Thecompanycanstretchitslinedownward,upwardorbothways. vidyarthiplus.comEverycompany sproduct-linecoversacertainpairofthetotalrangeoffere dbytheindustryasawhole.Forexample,MarutiUdyogautomobilesarelocatedinthelow-mediu mpricerangeoftheautomobilemarket.Linestretchingoccurswhenacompanylengthensitspro duct-linebeyonditscurrentrange.Thecompanycanstretchitslinedownward,upwardorbothw ays. vidyarthiplus.com DownwardStretchManycompaniesinitiallylocateatthehighendofthemarketandsubsequentl ystretchtheirlinedownward.Forinstance,TATAwhoaretheproducersofmediumandhighprice /bigcarsegment,nowhavestretcheddownwardbyenteringintosmallcarsegmentbyreleasingT ATAIndica. Thecompanyisattachedatthehighendanddecidestocounterattachbyinvadingthelowend. Thecompanyfindsthatslowergrowthistakingplaceatthehighend. Thecompanyinitiallyenteredthehighendtoestablishaqualityimageandintendedtorolldow nward. Thecompanyaddsalow-endunittoplugamarketholethatwouldotherwiseattractanewcompetit or. Inmakingadownwardstretchthecompanyfacessomerisks.Thenewlow-enditemmaycannibalize higher-enditems.Orthelow-enditems

mightprovokecompetitorstocounteractbymovingintothehigherend.Orthecompany sdealersm aynotbewillingorabletohandlethelowerendproducts,becausetheyarelessprofitableordi lutetheirimage.Forinstance,GeneralMotorsresistedbuildingsmellerscarsquickly.Itis interestingthatafterseeingthesuccessofSuzukiinsmallcarsegment,theotherleadingcom paniessuchasHondaandToyotaarenewenteringintothemarket. vidyarthiplus.comandJapanesecompaniesspottedamajoropeningandmovedinmightprovokec ompetitorstocounteractbymovingintothehigherend.Orthecompany sdealersmaynotbewillin gorabletohandlethelowerendproducts,becausetheyarelessprofitableordilutetheirimag e.Forinstance,GeneralMotorsresistedbuildingsmellerscarsquickly.Itisinterestingth atafterseeingthesuccessofSuzukiinsmallcarsegment,theotherleadingcompaniessuchasH ondaandToyotaarenewenteringintothemarket. vidyarthiplus.comandJapanesecompaniesspottedamajoropeningandmovedin UpwardStretchenteringthehigherend.Theymaybeattractedbyahighergrowthrate,higherma rginsorsimplythechancetopositionthemselvesasfull-linemanufacturers.Again,itisMar utiwhoinitiallyenteredinthesmallcarsegmententeredhigherendbyproductionMaruti1000 andMarutiEsteem. Anupwarddecisioncanberisky.Notonlythehigherendcompetitorwellentrenchedbuttheymay counterattackbyenteringCompaniesinthelowerendofthemarketmightcontemplatethelower endofthemarket.Thecompany ssalesrepresentativesanddistributorsmaylackthetalentandt rainingtoservethehigherendofthemarket. Two-wayStretch

Companiesinthemiddlerangeofthemarketmaydecidetostretchtheirlineinbothdirections. Line-FillingDecisionsAproductlinecanalsobelengthenedbyaddingmoreitemswithinthepr esentrangeoftheline.Thereareseveralmotivesforline-fillingsuchasreachingforincrem entalprofits;tryingtosatisfydealerstocomplainaboutlostsalesbecauseofmissingitems intheline;tryingtoutilizeexcesscapacity;tryingtobetheleadingfull-linecompanyandt ryingtoplugholestokeeponcompetitors.Ifline-fillingisoverdoneitThecompanyneedstod ifferentativeeachitemintheconsumer smind.Eachitemshouldpossessajustnoticeablediffe rence.Thecompanyshouldcheckthattheproposeditemsenjoysmoremarketdemandasisnotbein gaddedsimplytosatisfyaninternalneed. REVIEWQUESTIONS1.Whatarethedifferentcomponentsofproductmix? 2.Whataredifferenttypesofproducts? 3.Explainproduct-linedecisions. vidyarthiplus.commayresultincannibalizationandcustomerconfusion. Companiesinthemiddlerangeofthemarketmaydecidetostretchtheirlineinbothdirections. Line-FillingDecisionsAproductlinecanalsobelengthenedbyaddingmoreitemswithinthepr esentrangeoftheline.Thereareseveralmotivesforline-fillingsuchasreachingforincrem entalprofits;tryingtosatisfydealerstocomplainaboutlostsalesbecauseofmissingitems intheline;tryingtoutilizeexcesscapacity;tryingtobetheleadingfull-linecompanyandt ryingtoplugholestokeeponcompetitors.Ifline-fillingisoverdoneitThecompanyneedstod ifferentativeeachitemintheconsumer smind.Eachitemshouldpossessajustnoticeablediffe rence.Thecompanyshouldcheckthattheproposeditemsenjoysmoremarketdemandasisnotbein gaddedsimplytosatisfyaninternalneed. REVIEWQUESTIONS1.Whatarethedifferentcomponentsofproductmix? 2.Whataredifferenttypesofproducts? 3.Explainproduct-linedecisions. vidyarthiplus.commayresultincannibalizationandcustomerconfusion.

vidyarthiplus.com LESSON 9NEWPRODUCTPLANNINGANDDEVELOPMENT LearningObjectivesDefinethenewproductandunderstandtheneedfornewproductdevelopmen t. Thestepsinthenewproductdevelopmentprocess; Theproductmodificationandeliminationprocess; Theproductsandservicesarethemostvisibleassetsoftheorganizationsandthenewproducts are,henceconsideredtobethecornerstoneofthelongtermsurvivalandprosperitymanyorgan izations.Therapidtechnologicalchanges,shiftingpatternsofworldmarketopportunities andtheintensecompetitioncompeltheAfterreadingthelesson,youshouldbeabletoundersta nd businessfirmstocontinuouslydevelopnewproductsandservicesfortheirsurvival.Butfail uretooinnewproductdevelopmentisnotuncommon.Apparently,newproductdevelopmentisanu nstableactivity,inherentinmostorganizations.Butwhenmarketconditionspressurizethe reisnoothergoexcepttotaketheriskofintroducingnewproducts. TheconceptandvariousstagesofProductLifeCycle(PLC). of NEWPRODUCTSDEFINITION

Defininganewproductisnotasimpletask.Inanabsolutesense,itissomethingnewwhichhasno texistedbefore.Whenconsideredinarelativesense,itissomethingnewwhichhasnotbeenexp eriencebeforeandperceivedasnew.Indefiningnewproducts,therelativeviewisconsidered moreusefulbecausewhetherornotsomethingisabsolutelynew,theinterestedpersonswhohav enotyetmayrepresentopportunitiesorproblemsforconsideration. Thus,anewproductisamulti-dimensionalconceptthathasneedsatisfyingcapabilitiesfort hestockholdersinterestedinitandwhichhasnotbeenexperiencedbyasignificantnumberoft hem;butcapableofofferingastrategiccompetitiveadvantage.Itmeansamajoropportunityf oranorganizationtocreatevalue.Althoughnumerousperspectivefromwhichonecoulddefine anewproduct,thefollowingdefinitionsareworthtobenoted. MusselmanandJacksonstatesthataproductissaidtobeaNewProductwhenitservesanentirely newfunctionormakesamajorimprovementinapresentfunction. AccordingtoStanton,newproductsarethosewhicharereallyinnovativeandtrulyuniquerepl acementsforexistingproductsthataresignificantlydifferentfromtheexistinggoodsandi ncludesinitiativeproductsthatarenewtoacompanybutnotnewtothemarket.Ifthebuyersper ceivethatagivenitemissignificantlydifferentfromcompetitivegoodsbeingreplacedwith somelikeappearanceorperformance,thenitisanewproduct. vidyarthiplus.comexperienceditthereisnewfeatures, Defininganewproductisnotasimpletask.Inanabsolutesense,itissomethingnewwhichhasno texistedbefore.Whenconsideredinarelativesense,itissomethingnewwhichhasnotbeenexp eriencebeforeandperceivedasnew.Indefiningnewproducts,therelativeviewisconsidered moreusefulbecausewhetherornotsomethingisabsolutelynew,theinterestedpersonswhohav enotyetmayrepresentopportunitiesorproblemsforconsideration. Thus,anewproductisamulti-dimensionalconceptthathasneedsatisfyingcapabilitiesfort hestockholdersinterestedinitandwhichhasnotbeenexperiencedbyasignificantnumberoft hem;butcapableofofferingastrategiccompetitiveadvantage.Itmeansamajoropportunityf oranorganizationtocreatevalue.Althoughnumerousperspectivefromwhichonecoulddefine anewproduct,thefollowingdefinitionsareworthtobenoted. MusselmanandJacksonstatesthataproductissaidtobeaNewProductwhenitservesanentirely newfunctionormakesamajorimprovementinapresentfunction. AccordingtoStanton,newproductsarethosewhicharereallyinnovativeandtrulyuniquerepl acementsforexistingproductsthataresignificantlydifferentfromtheexistinggoodsandi ncludesinitiativeproductsthatarenewtoacompanybutnotnewtothemarket.Ifthebuyersper ceivethatagivenitemissignificantlydifferentfromcompetitivegoodsbeingreplacedwith somelikeappearanceorperformance,thenitisanewproduct. vidyarthiplus.comexperienceditthereisnewfeatures,

ForKotler,newproductmeanoriginalproducts,improvedproducts,modifiedproductsandnew brandswhicharedevelopedbythefirmthroughitsownresearchanddevelopmenteffortsandinc ludesthoseproductswhichtheconsumersseeasnew. Anewproductisthusperceiveddifferentlybydifferentpeople.Itisaneedsatisfyingconcep twithbenefitforbuyersneedsatisfyingfeatures;formarketers,awaytoaddvalue;forinter mediaries, anopportunitytodesign;forR&Dandtoassembleandprocessfor vidyarthiplus.combundleofForKotler,newproductmeanoriginalproducts,improvedproduc ts,modifiedproductsandnewbrandswhicharedevelopedbythefirmthroughitsownresearchan ddevelopmenteffortsandincludesthoseproductswhichtheconsumersseeasnew. Anewproductisthusperceiveddifferentlybydifferentpeople.Itisaneedsatisfyingconcep twithbenefitforbuyersneedsatisfyingfeatures;formarketers,awaytoaddvalue;forinter mediaries, anopportunitytodesign;forR&Dandtoassembleandprocessfor vidyarthiplus.combundleof productiondepartment. Newproductdevelopmentisoneforthemostimportantcomponentsofproductpolicyandproduct management.Itisnotenoughiftheexistingproductlinesandproductsareappraisedproperly , positionedeffectivelyandbranddecisionstakenwisely.Whatisrequired, besidesallthesethings,isthattheorganisationhastoconsidernewproductdevelop9ejmntf ortheorganization sgrowth, Innovateordie , thusgoesandoldsaying.Thisisespeciallytrueinmarketing.Unlesstheorganisatoinsinnov ateandintroducenewproducts,itcannotsurviveinthecompetitivemarket.Inmanycasesthee ntirebusinessstrategiesdefininganorganization sfuturearebuiltupontheportfolioofnew products.Newproductsare,therefore,thebasisforfollowingstrategicreasons: NEEDFORNEWPRODUCTDEVELOPMENTThefollowingarethestrategicreasonsforlaunchingnewpro ducts: Newproductsmeetthechangesinconsumerdemands.

Newproductsarethesourceofcompetitiveadvantage. Theyprovideling-termfinancialreturnoninvestment. Theyutilizetheexistingproductionandoperationresourcestoan vidyarthiplus.comNewproductsarethesourceofcompetitiveadvantage. Theyprovideling-termfinancialreturnoninvestment. Theyutilizetheexistingproductionandoperationresourcestoan vidyarthiplus.com optimumlevel. Theycapitalizeonresearchanddevelopment. Theyprovideopportunitiesforreinforcingorchangingstrategicdirection. Theyleveragemarketing/brandequity. TheyenhancecorporateimageTheyaffecthumanresources. Theymeetenvironmentalthreats. Figure:NewProductDevelopmentProcess

vidyarthiplus.com ProductDevelopmentobjectivesIdeaGenerationScreeningofIdeasConceptDevelopmentandT estingMarketingStrategyDevelopmentBusinessAnalysisProductDevelopmentMarketTestin gMarketIntroduction STEPSINTHENEWPRODUCTDEVELOPMENTPROCESS1.GenerationofNewProductIdeas Corporate Objectives and Situation Analysis

vidyarthiplus.com 2.ScreeningofIdeas 3.ConceptDevelopmentandTesting 4.MarketingStrategyDevelopment 5.BusinessAnalysis 6.DevelopmentoftheProduct 7.MarketTesting 8.Commercialization1.GENERATIONOFNEWPRODUCTIDEASThenewproductdevelopmentprocesss tartswiththesearchforideas. Anidea\isthehighestformofabstractionofanewproduct.Itisusuallyrepresentedasadescr iptivestatement,writtenorverbalized. Generally,morethenumberofideas,thebetter. Theobjectiveofthisstageistoobtain(a)ideasfornewproducts, (b)newattributefortheexistingproducts,and(c)newusesoftheexistingproducts. SourcesofNewProductIdeascompetitors,distributorsandsuppliers,andothers. InternalSources: Majorsourcesofnewproductideasincludesources,customer

ideascomefromwithinthecompany.Thecompanycanfindnewideasthroughformalresearchandd evelopment.Itcangetideasfromitsscientists,engineersandmanufacturingpeople.Thecom pany ssalespeopleareanthergoodsourcebecausetheyareindailycontactwith vidyarthiplus.comOnestudyfoundthatmorethan55percentofallnew-productideascomefrom withinthecompany.Thecompanycanfindnewideasthroughformalresearchanddevelopment.It cangetideasfromitsscientists,engineersandmanufacturingpeople.Thecompany ssalespeop leareanthergoodsourcebecausetheyareindailycontactwith vidyarthiplus.comOnestudyfoundthatmorethan55percentofallnew-product customers. Customers: Almost28percentofallnew-productideascomefromwatchingandlisteningtocustomers.Thec ompanycanductsurveysorfocusgroupstolearnaboutconsumerneedsandwants.Thecompanycan analysescustomerproblems.Companiescanlearnagreatdealfromobservingandlisteningtoc ustomers.Finally,consumersoftencreatenewproductsontheirown;andcompaniescanbenefi tsbyfindingtheseproductsandputtingthemontothemarket. Competitors: competitor sproducts.Thecompanycanwatchcompetitors advertisementsandotherandothercom municationstogetcluesabouttheirnewproducts.Companiesbuycompetingnewproducts, takethemaparttoseehowtheywork,analyzetheirsales,anddecidewhetherthecompanyshould bringoutanewproductofitsown. Distributors,SuppliersandOthers: ResellerareclosetothemarketandcanpassalonginformationAbort30percentofnew-product ideascomefromanalyzingSuppliersaboutconsumerproblemsandnew-productpossibilities.

cantellthecompanyaboutnewconcepts,techniquesandmaterialsthatcanbeusedtodevelopne wproducts.Otherideasourcesincludetrademagazines,showsandseminars;governmentagenc ies; new-productconsultants;advertisingagencies;marketingresearchfirms;universityandc ommerciallabouratories. IdeaGeneratingTechniquesSWOTAnalysis:Itistheanalysisofthestrength,weakness, opportunitiesandthreats.ThroughSWOTanalysisacompanycanmakeaconscious,deliberate, andsystematicidentifyopportunitiesthatcanbeprofitabilityexploited.SWOTanalysisfa cilitatorsthegenerationsofideas. ClearArticulatingofObjectives:Topmanagementshoulddefinetheproductsandmarketstoem phasizeandbystatingtheoperationalobjectivesclearly,itcanchannelizetheeffortsofem ployeesandinducethemtothinkmoreimaginatively.Thereshouldbecleararticulationandpr ioritizationofobjectivestofacilitatethis. ForcedRelationships:Bythistechniqueseveralobjectsarelistedandconsideredinrelatio ntoeachother.Forexample,asofaandabed, twoseparateproductsarecombinedintoone,byremovingthearmsofasofaandmakingthebackco llapsible,toformasofa-cum-bed, fulfillingafeltneedofusingfurnitureinalimitedspace. MorphologicalAnalysis;Themorphologicalanalysiswillsystematicallyexplorethestruct uraldimensionsofaproblemitsbasicparametersandalltheknownalternativemeansoffulfil lingthem. vidyarthiplus.comefforttoRegularcantellthecompanyaboutnewconcepts,techniquesandm aterialsthatcanbeusedtodevelopnewproducts.Otherideasourcesincludetrademagazines, showsandseminars;governmentagencies; new-productconsultants;advertisingagencies;marketingresearchfirms;universityandc ommerciallabouratories. IdeaGeneratingTechniquesSWOTAnalysis:Itistheanalysisofthestrength,weakness, opportunitiesandthreats.ThroughSWOTanalysisacompanycanmakeaconscious,deliberate, andsystematicidentifyopportunitiesthatcanbeprofitabilityexploited.SWOTanalysisfa cilitatorsthegenerationsofideas. ClearArticulatingofObjectives:Topmanagementshoulddefinetheproductsandmarketstoem phasizeandbystatingtheoperationalobjectivesclearly,itcanchannelizetheeffortsofem ployeesandinducethemtothinkmoreimaginatively.Thereshouldbecleararticulationandpr ioritizationofobjectivestofacilitatethis. ForcedRelationships:Bythistechniqueseveralobjectsarelistedandconsideredinrelatio ntoeachother.Forexample,asofaandabed, twoseparateproductsarecombinedintoone,byremovingthearmsofasofaandmakingthebackco llapsible,toformasofa-cum-bed, fulfillingafeltneedofusingfurnitureinalimitedspace. MorphologicalAnalysis;Themorphologicalanalysiswillsystematicallyexplorethestruct uraldimensionsofaproblemitsbasicparametersandalltheknownalternativemeansoffulfil lingthem. vidyarthiplus.comefforttoRegular

Need/ProblemAnalysis:Thistechniquedifferfromtheprecedingonesinthattheyrequirecon sumerinputtogenerateideas.Here,theconsumersareapproachedtofindouttheirneeds,prob lemsandideaswithreferencetoaparticularproductorprojectcategory. Brainstorming:Brainstormingisanactivitydesignedtoprovidemaximumopportunityforthe emergenceofnewandcreativeides, approachesandsolutionstoparticularproblems. Synetics:Itisanoperationaltheoryfortheconscioususeofpreconsciouspsychologicalmec hanismspresentinman screativeactivityandisparticularlyusefulintheideagenerationsta gefornew vidyarthiplus.comNeed/ProblemAnalysis:Thistechniquedifferfromtheprecedingonesint hattheyrequireconsumerinputtogenerateideas.Here,theconsumersareapproachedtofindo uttheirneeds,problemsandideaswithreferencetoaparticularproductorprojectcategory. Brainstorming:Brainstormingisanactivitydesignedtoprovidemaximumopportunityforthe emergenceofnewandcreativeides, approachesandsolutionstoparticularproblems. Synetics:Itisanoperationaltheoryfortheconscioususeofpreconsciouspsychologicalmec hanismspresentinman screativeactivityandisparticularlyusefulintheideagenerationsta gefornew vidyarthiplus.com productdevelopment. LateralThinking:AccordingtoDeBono,lateralthinkingisawayofusinghemind,adeliberate process,ageneralattitudewhichmaymakeuseofcertaintechniquesonoccasion.Themostbasi cprincipleoflateralthinkingisthatnayparticularwayoflookingatthingsinonlyoneforma mongmanyotherpossibleways.Lateralthinkingisconsideredwithexploringotherwaysbyres tructuringandre-arrangingtheinformationthatisavailable. CheckLists:Literally,itisalistoffactorsoractinswhichshouldbeconsideredorimplemen tedinperformingapredefinedtasksuchaslaunchinganewproduct. 2.SCREENINGIDEAS

Thepurposeofideagenerationistocreatealargenumberofideas. idea-reducingstageisideasscreening.Thepurposeofscreeningisweedoutthepoorideasand willeliminatethoseideaswhichareinconsistentwiththefirm sproductpoliciesobjectives, existingskillsandresourcesandsoon.Inhesameway,ideaswhichareincompatiblewiththefi rm sexistingmarketsandcustomersarelikelytobescreenedout. Toreducethenumberofsuchideastoanattractive,practicablelevel,somekindofpreliminar yscreeningisrequired.Towardsthis, thefollowingaspectshavetobelookedinto: CompatibilitywiththepromoterConsistencywithgovernmentalpriorities vidyarthiplus.comThepurposeofscreeningistoreducethatnumber.Thefirsttospotgoodide asanddroppooronesassoonaspossible. InthisstagemanagersusetheirknowledgeandexperiencetoandThepurposeofideageneration istocreatealargenumberofideas. idea-reducingstageisideasscreening.Thepurposeofscreeningisweedoutthepoorideasand willeliminatethoseideaswhichareinconsistentwiththefirm sproductpoliciesobjectives, existingskillsandresourcesandsoon.Inhesameway,ideaswhichareincompatiblewiththefi rm sexistingmarketsandcustomersarelikelytobescreenedout. Toreducethenumberofsuchideastoanattractive,practicablelevel,somekindofpreliminar yscreeningisrequired.Towardsthis, thefollowingaspectshavetobelookedinto: CompatibilitywiththepromoterConsistencywithgovernmentalpriorities vidyarthiplus.comThepurposeofscreeningistoreducethatnumber.Thefirsttospotgoodide asanddroppooronesassoonaspossible. Inthisstagemanagersusetheirknowledgeandexperiencetoand AvailabilityofinputsAdequacyofmarketsReasonablenessofcostAcceptabilityofriskleve l CompatibilitywiththePromoter

personalityandresourcesofthefirm.Itshouldconformtotheobjectivesandgoalsofthefirm andshouldbeaccessible.Besides,itshouldoffertheprospectofrapidgrowthandhighreturn oninvestedcapital. ConsistencywithGovernmentalPrioritiesTheoperationalizationsoftheideamustbefeasib lewithinthegovernmentpoliciesandregulatoryframework.Itshouldbeascertainedthatthe ideadoesnotcontravenetheenvironmentaleffortsorthegovernmentandthattheideacanbepu rsuedbyobtainingnecessarylicenseandthattheforeignexchangerequirements,ifany,canb emet vidyarthiplus.comTheideabeingreviewedmustbeconsonantwiththeinterest, personalityandresourcesofthefirm.Itshouldconformtotheobjectivesandgoalsofthefirm andshouldbeaccessible.Besides,itshouldoffertheprospectofrapidgrowthandhighreturn oninvestedcapital. ConsistencywithGovernmentalPrioritiesTheoperationalizationsoftheideamustbefeasib lewithinthegovernmentpoliciesandregulatoryframework.Itshouldbeascertainedthatthe ideadoesnotcontravenetheenvironmentaleffortsorthegovernmentandthattheideacanbepu rsuedbyobtainingnecessarylicenseandthattheforeignexchangerequirements,ifany,canb emet vidyarthiplus.comTheideabeingreviewedmustbeconsonantwiththeinterest, with. AvailabilityofinputsThefirmmustbereasonablyassuredoftheavailabilityofresourcesan dinputsrequired.Theorganisationmustassesswhetherthecapitalrequirementsarewithinm anageablelimitsandtechnicalknow-howrequiredforthepursuanceoftheideaisobtainable. Theorganizationshouldalsoassesstheavailabilitymaterialsdomesticallyorifitistobei mported,willtherebeanyproblems. Availabilityofrequiredpowersupplyalsohastobeascertained. Adequacyofthemarketthattheofraw

offerstheprospectofadequatesalevolume.Theremustbeapotentialforgrowthandareasonab lereturnoninvestment. vidyarthiplus.comTheorganizationmustdecidewhetherthepresentmarketsizeoffersthepr ospectofadequatesalevolume.Theremustbeapotentialforgrowthandareasonablereturnoni nvestment. vidyarthiplus.comTheorganizationmustdecidewhetherthepresentmarketsize ReasonablenessofCostThecoststructureoftheproposalproductmustenabletorealizeanacc eptableprofitwithacompetitiveprice.regard,theorganisationshouldexaminethecostsof materialinputs,labourcosts, factoryoverheads,generaladministrationexpenses,andAcceptabilityofRiskLevelThedes irabilityofanideasiscriticallydependentontheriskcharacterizingit.Whileassessingt herisk,theorganizationshouldconsiderthevulnerabilitytobusinesscycles,technologic alchanges, competitionfromsubstitutes,competitionfromimportsandGovernmentalcontroloverprice anddistribution. 3.CONCEPTDEVELOPMENTANDTESTINGConceptDevelopmentInthissellingdistributioncosts,s ervicecostsandeconomicsofscale. Anattributeideamustbedevelopdintoaproductconcept.Aproductconceptisdistinguishedf ormaproductideaandproductimage. Whileaproductideaisapossibleproductthatthecompanymightoffertothemarket,itselabor atedversionexpressedinmeaningfulcustomertermsisaproductconcept.Productimageisthe particularpictureofanactualorpotentialproductperceivedbytheconsumers.

Atthisstage,itisimportanttodefinetheboundariesoftheconceptratherthanthedetails.T hetargetmarket,customers,theirapplications,majortechnicalrequirementetc.havetobe definedandissuesliketheseareaddressedinaconceptlevelbusinessplan.Thenewproductco ncept,morespecificindescriptionthanidea,shouldincludethecustomer,themajorconsume rbenefitsandfeaturesdefining vidyarthiplus.comanAtthisstage,itisimportanttodefinetheboundariesoftheconceptrat herthanthedetails.Thetargetmarket,customers,theirapplications,majortechnicalrequ irementetc.havetobedefinedandissuesliketheseareaddressedinaconceptlevelbusinessp lan.Thenewproductconcept,morespecificindescriptionthanidea,shouldincludethecusto mer,themajorconsumerbenefitsandfeaturesdefining vidyarthiplus.coman thenewproduct. Themanger staskistodevelopthenewproductintoalternativeproductconcepts,findouthowat tractiveeachconceptistocustomers, andchoosethebestone.Thenewproductconceptcanbeverbalorwrittendescription.Itmaybei ntheformofapicture,diagram,model,orappearinanothersuitablepresentationformatwhic hdepictstheidea. Ideasandconceptsareoftencombinedandareconsideredtobepartofonecreativeprocess. ConceptTesting: Concepttestingcallsfortestingnew-productconceptswithgroupsoftargetconsumers.Thec onceptmaybepresentedtoconsuersymbolicallyorphysically.Forsomeconcepttests,awordo rpicturedescriptionmightbesufficient.However,amoreconcreteandphysicalpresentatio noftheconceptwillincreasethereliabilityoftheconcept. ObjectivesofConceptTestingThemajorobjectivesofconcepttestingare: (1)Togetthereactionofconsumer sviewsofthenewproductidea. (2)Togivedirectionregardingthedevelopmentoftheproject.

(3) (4) potentialforitscommercialization. conceptsmorerealtoconcept-testsubjects.Customerfeedbackcanbecriticalinprovidingi nsightsintohowpotentialcustomerswilluseandevaluatethenewproduct. 4.Marketingstrategydevelopmentproductmanagershouldproceedtodevelopamarketingstra tegyplanforintroducingtheproductintothemarket. Themarketingstrategystatementconsistsofthreeparts: Thefirstpartdescribesthesize,structureandbehaviourofsales,marketshareandprofitgo alssoughtinthefirstthreeyears. Thesecondpartoutlinestheproduct splannedprice, Tochoosethemostpromisingconceptsfordevelopmentanddistributionstrategyandmarketin gbudgetforthefirstyear. Thethirdpartdescribestheplannedlong-runsalesandprofitgoalsandmarketing-mixstrate gyovertime. 5.BUSINESSANALYSIS vidyarthiplus.comToascertainwhethertheproductinquestionhasadequateToday,marketer sarefindinginnovativewaystomakeproductAfterdevelopingandtestingthenewproductconc ept,anewthetargetmarket,theplannedproductpositioningandthe(4) potentialforitscommercialization. conceptsmorerealtoconcept-testsubjects.Customerfeedbackcanbecriticalinprovidingi nsightsintohowpotentialcustomerswilluseandevaluatethenewproduct. 4.Marketingstrategydevelopmentproductmanagershouldproceedtodevelopamarketingstra tegyplanforintroducingtheproductintothemarket. Themarketingstrategystatementconsistsofthreeparts: Thefirstpartdescribesthesize,structureandbehaviourofsales,marketshareandprofitgo alssoughtinthefirstthreeyears. Thesecondpartoutlinestheproduct splannedprice, Tochoosethemostpromisingconceptsfordevelopmentanddistributionstrategyandmarketin gbudgetforthefirstyear. Thethirdpartdescribestheplannedlong-runsalesandprofitgoalsandmarketing-mixstrate gyovertime. 5.BUSINESSANALYSIS vidyarthiplus.comToascertainwhethertheproductinquestionhasadequateToday,marketer sarefindinginnovativewaystomakeproductAfterdevelopingandtestingthenewproductconc ept,anewthetargetmarket,theplannedproductpositioningandthe

Businessanalysisisastagewhereanewproductideaissubjectedtomoresophisticatedanddet ailedanalysis.Itinvolvesareviewofthesales,costsandprofitprojectionsforanewproduc ttofindoutwhethertheysatisfytheco0mpany sobjectives.Iftheydo,theproductcanmovetoth eproduct-developmentstage. Inamajorityofnewproductdevelopmentprocesses,threemajorinterrelatedquestionsemerg e.Theyareregarding. 1.Theestimatesizeandgrowthrateofthemarketsegment,thatis, themarketopportunityforthenewproductconcept. 2.Theestimatesalesandmarketshareforthenewproductconceptintheselectedmarketormark etsegment. 3.Thevaluesofthenewproductprogramintermsofitsexpectedfinancialperformance. Apparentlytheseimplythreetypesofnewproductforecasting,viz., marketopportunityforecasting,salesforecastingfinancialforecasting.Theseforecasti ngprocessesaddresssetsofproblemsandtheirforecastsmustbeintegratedtoprovideacompl etepictureofthecommercialviabilityofthenewproduct. Marketopportunityforecastingassessesmarketsizeandgrowthforanewproductinapotentia lmarketundervariousassumptions.Specificmarketingresearchandmodelingtechniquesare employertomeasuresalesresponsetoalternativeproductconcepts,prototypesandproducts andalsoprice,distribution,promotionetc.itensuresthatkeyproductdesigndecisionsare madeinteractivelywiththemarket. vidyarthiplus.comanddifferentBusinessanalysisisastagewhereanewproductideaissubje ctedtomoresophisticatedanddetailedanalysis.Itinvolvesareviewofthesales,costsandp rofitprojectionsforanewproducttofindoutwhethertheysatisfytheco0mpany sobjectives.I ftheydo,theproductcanmovetotheproduct-developmentstage. Inamajorityofnewproductdevelopmentprocesses,threemajorinterrelatedquestionsemerg e.Theyareregarding. 1.Theestimatesizeandgrowthrateofthemarketsegment,thatis, themarketopportunityforthenewproductconcept. 2.Theestimatesalesandmarketshareforthenewproductconceptintheselectedmarketormark etsegment. 3.Thevaluesofthenewproductprogramintermsofitsexpectedfinancialperformance. Apparentlytheseimplythreetypesofnewproductforecasting,viz., marketopportunityforecasting,salesforecastingfinancialforecasting.Theseforecasti ngprocessesaddresssetsofproblemsandtheirforecastsmustbeintegratedtoprovideacompl etepictureofthecommercialviabilityofthenewproduct. Marketopportunityforecastingassessesmarketsizeandgrowthforanewproductinapotentia lmarketundervariousassumptions.Specificmarketingresearchandmodelingtechniquesare employertomeasuresalesresponsetoalternativeproductconcepts,prototypesandproducts andalsoprice,distribution,promotionetc.itensuresthatkeyproductdesigndecisionsare madeinteractivelywiththemarket. vidyarthiplus.comanddifferent

ForSalesforecastingthecompanyshouldlookatthesaleshistoryofsimilarproductsandshou ldsurveymarketopinion.Itshouldestimateminimumandmaximumsalestoassesstherangeofri sk.Afterpreparingthesalesforecast,managementcanestimatetheexpectedproductcostand profits,includingmarketing,R&D,manufacturingaccounting,and vidyarthiplus.comForSalesforecastingthecompanyshouldlookatthesaleshistoryofsimil arproductsandshouldsurveymarketopinion.Itshouldestimateminimumandmaximumsalestoa ssesstherangeofrisk.Afterpreparingthesalesforecast,managementcanestimatetheexpec tedproductcostandprofits,includingmarketing,R&D,manufacturingaccounting,and vidyarthiplus.com financecosts. Financialforecastingaddressestheimportantquestionaboutthevalueofthenewproductand itslaunchprogram.Itreconcilesmarketpotential,marketpenetration,salescostsandinve stmentforecaststosupportdecisionmaking.Estimatesofprofitability,cashflow,andothe rproformafinancialmeasuresoveraplanningperiodcanbeestablished. Thenewproductforecastingaddressmajordecisionproblemsandineffect,provideaframewor kforacontrolsystemtotracknewproductlunchandmakenecessaryrevisionsandmodification stoachievedesiredresults. 6.PRODUCTDEVELOPMENT Productdevelopmentisdoneafterforecastedsalesandbudgetedcostspromiseasatisfactory returnoninvestmentthecompanyissatisfiedthatitcangainaccesstothetargetmarket.Atth isjuncture,theobjectiveistoestablishifitisphysicallypossibletoproductanobjectwit hthedesiredperformancecharacteristicswithinthecostconstraintsindicatedbytheforec astdemandschedule. Usuallythisphaseisthelongestinthewholeprocess,anditisvitallyimportantthat,throug houtdevelopment,theinnovatorshouldcontinuecriticallytoobserveeventsandchangesint heproposedandafter

targetmarkets.Inadditiontoupdatingtheproductconcepttoreflectchangesinthemarket.I nadditiontoupdatingtheproductconcepttoreflectchangesinthemarket,thedevelopmentph aseshouldalsoprovidefortestingtheproductunderrealusageconditiontoensurethatitwil ldeliverthepromisesatisfactions.Themorecomplextheproductandthemoreradicalthebeha vioralchangerequiredoftheenduser,themoreimportantthisstagebecomes.Inthecaseofman ycapitalmaterialandconsumerdurableinnovation,thedevelopmentstagefrequentlycontin ueswellintothemarketlaunchstageonthegroundthatdeficienciesanddefectsinthefinalpr oductwillonlybecomeapparentonceitisexposedtoabroadspectrumofusage vidyarthiplus.comtargetmarkets.Inadditiontoupdatingtheproductconcepttoreflectcha ngesinthemarket.Inadditiontoupdatingtheproductconcepttoreflectchangesinthemarket ,thedevelopmentphaseshouldalsoprovidefortestingtheproductunderrealusagecondition toensurethatitwilldeliverthepromisesatisfactions.Themorecomplextheproductandthem oreradicalthebehavioralchangerequiredoftheenduser,themoreimportantthisstagebecom es.Inthecaseofmanycapitalmaterialandconsumerdurableinnovation,thedevelopmentstag efrequentlycontinueswellintothemarketlaunchstageonthegroundthatdeficienciesandde fectsinthefinalproductwillonlybecomeapparentonceitisexposedtoabroadspectrumofusa ge vidyarthiplus.com situation. Prototype TheR&Ddepartmentwilldeveloponeormorephysicalversionsoftheproductconcepttofindout aprototypethatwillbeseenbytheconsumersasembodyingthekeyattributesdescribedinthep roductconceptstatement.Aprototypeisaworkingmodelorpreliminaryversionofthefinalpr oduct,achievedthroughanimplementationoftheproductconcept.Formanyproductstheproto typeisthefirstfull-scalelikenessoftheproduct;forother,itisascaled-downmodel. atleastasmall-scaleproductlaunch.Insuchcases,prototypingandproductdevelopmentpro ceedsimultaneouslyinmarket. Scientist,engineers,designers,marketersandotherresponsibleforproductdesignandcre ativitywillbeheavilyinvolvedinprototypedevelopment.Someprototypemayberelativelyd evelop, Forsomeproductsaprototypeisnotpossiblewithouteasyto

especiallyfororganizationalreadyinbusiness,forexample,anewsoap.Forotheritmaybemo redifficult. Itisnotsufficienttodesigntherequiredfunctionscharacteristicsalone.Butthenewprodu ctdevelopedteamshouldalsoknowhowtocommunicatethepsychologicalaspectsthroughphysi calcuesonthebasisofanunderstandingastohowconsumerreacttodifferentcolours,sizes,w eights,andotherphysicalcues. 7.MARKETTESTINGAfterdevelopingaprototype,theymustbeputthroughvigorousfunctionala ndconsumertests.Thefunctionaltestsareconductedinordertomakesurethattheproductper formssafelyandeffectivelyandtheyareconductedunderlaboratoryandconditions. Consumertestingisdoneinavarietyofways.Theymaybedonebybringingconsumersintolabora toryortheymaybegivensamplestouseintheirhomes.In-homeproductplacementtestsarecomm oninproductslikenewhomeappliances,Consumerpreferencetestingdrawsonvarietyoftechn iques,likesimpleranking,pairedcomparisons,andratingscales,eachwithitsownadvantag esanddisadvantages. Markettestingmethodsdifferintestingdifferenttypesofgoods. Whiletestingconsumerproducts,fourvariablesaresoughttobeestimated.Theyare,trial,f irstrepeat,adoptionpurchasefrequency.Intestingthetrade,acompanyseekstolearnhowma nyandwhattypesofretailerswillhandletheproduct,underwhatterms, andwithwhatshelfpositioncommitments. vidyarthiplus.comfieldandespeciallyfororganizationalreadyinbusiness,forexample,a newsoap.Forotheritmaybemoredifficult. Itisnotsufficienttodesigntherequiredfunctionscharacteristicsalone.Butthenewprodu ctdevelopedteamshouldalsoknowhowtocommunicatethepsychologicalaspectsthroughphysi calcuesonthebasisofanunderstandingastohowconsumerreacttodifferentcolours,sizes,w eights,andotherphysicalcues. 7.MARKETTESTINGAfterdevelopingaprototype,theymustbeputthroughvigorousfunctionala ndconsumertests.Thefunctionaltestsareconductedinordertomakesurethattheproductper formssafelyandeffectivelyandtheyareconductedunderlaboratoryandconditions. Consumertestingisdoneinavarietyofways.Theymaybedonebybringingconsumersintolabora toryortheymaybegivensamplestouseintheirhomes.In-homeproductplacementtestsarecomm oninproductslikenewhomeappliances,Consumerpreferencetestingdrawsonvarietyoftechn iques,likesimpleranking,pairedcomparisons,andratingscales,eachwithitsownadvantag esanddisadvantages. Markettestingmethodsdifferintestingdifferenttypesofgoods. Whiletestingconsumerproducts,fourvariablesaresoughttobeestimated.Theyare,trial,f irstrepeat,adoptionpurchasefrequency.Intestingthetrade,acompanyseekstolearnhowma nyandwhattypesofretailerswillhandletheproduct,underwhatterms, andwithwhatshelfpositioncommitments. vidyarthiplus.comfieldand

Althoughtestmarketingcantakeavarietyofforms,thethreepopulartypesusedinpracticein consumergoodsmarketsaresimulated,controlledandconventionaltestKotlerclassifiesth emaccordingtothecosttesting,fromtheleasttothemostcostly,are(1)Sales-waveresearch ,(2)Simulatedtestmarketing, (3)Controlledtestmarketing,and(4)conventionaltestmarketing. vidyarthiplus.commarketing. Althoughtestmarketingcantakeavarietyofforms,thethreepopulartypesusedinpracticein consumergoodsmarketsaresimulated,controlledandconventionaltestKotlerclassifiesth emaccordingtothecosttesting,fromtheleasttothemostcostly,are(1)Sales-waveresearch ,(2)Simulatedtestmarketing, (3)Controlledtestmarketing,and(4)conventionaltestmarketing. vidyarthiplus.commarketing. SalesWaveResearchInthismethodtheconsumersareinitiallyofferedtotrytheproductatnoc ostandsubsequentlytheyarereofferedtheproduct,oracompetitor sproduct,atslightlyredu cedprices.reoffering, referredtoassaleswaves,mayberestoredtoforasmanyasthreetofivetimesinordertofindou thowmanycustomerselectedtheproductagainandtheirreportedlevelofsatisfaction.Thism ethodmayalsoincludeexposingcustomerstooneormoreadvertisingconceptinroughformtoas certainitseffectsonrepeatpurchase.Thesaleswaveresearchcanbeimplementedquickly. These SimulatedTestMarketing(STM) Itisaresearchmethodthatfacilitatesthemeasurementofmarketresponsetoanewproductand itsmarketingprogramamongpotentialbuyersinapseudomarketenvironment.Itcanbeimpleme ntedinalaboratorysetting,nthehomesorplacesofbusinessofpotentialbuyersorinotherpl acesthatwillsimulatethebuyingprocessascloselyaspossible.

ThevalueofSTMsisrelativelylowcost,quickexecution,andsecrecyfromcompetitors.Inman ycasestheyareusedtodecidewhetherornotitisfeasibletoconductatestmarket,andinother casestheyareusedtobypasstestmarketsaltogetherandmoredirectlytolaunch. ControlledTestMarketingOneofthegrowingsourcesofdatafornewproducttestmarketingist hecontrolledorelectronictestmarketsthatprovidesingle-sourcedata.Typicallythesear ecommercialservicesthatareconductedinselectedcitiesfortestmarketing.Selectedreta iloutletsinthesecitiesareequippedwithelectroniccheckoutscannerstorecordsales.Are cruitedpanelofcustomersagreestoshopinthesestores,andtheindividualorderandaspecia lidentificationcarearescannedeverytime,apanelmembermakesapurchase.Eachcardcodeis associatedwithaprofileofacustomerkeptinadatabase(containingdemo-graphics, psychographics,andpreferencesandsoon).oflocaladvertisingandpromotionsduringthete starealsoevaluated.Bringingthesedatasourcestogetheronaweeklyorevendailybasiscanp rovideapowerfulandhighlycontrolledtestingenvironment. ConventionalTestMarketingItprovidesanopportunitytounderstandmarketresponsetothen ewproductanditsproposedmarketingprograminamorerealisticmarketenvironmentthatinsi mulatedandcontrolledtestmarketing.Itisespeciallyusefulformeasuringresponsetothep roductfromabroadersetofstakeholders,includingcompetitors,thetrade,media,regulato r vidyarthiplus.comTheimpactThevalueofSTMsisrelativelylowcost,quickexecution,andse crecyfromcompetitors.Inmanycasestheyareusedtodecidewhetherornotitisfeasibletocon ductatestmarket,andinothercasestheyareusedtobypasstestmarketsaltogetherandmoredi rectlytolaunch. ControlledTestMarketingOneofthegrowingsourcesofdatafornewproducttestmarketingist hecontrolledorelectronictestmarketsthatprovidesingle-sourcedata.Typicallythesear ecommercialservicesthatareconductedinselectedcitiesfortestmarketing.Selectedreta iloutletsinthesecitiesareequippedwithelectroniccheckoutscannerstorecordsales.Are cruitedpanelofcustomersagreestoshopinthesestores,andtheindividualorderandaspecia lidentificationcarearescannedeverytime,apanelmembermakesapurchase.Eachcardcodeis associatedwithaprofileofacustomerkeptinadatabase(containingdemo-graphics, psychographics,andpreferencesandsoon).oflocaladvertisingandpromotionsduringthete starealsoevaluated.Bringingthesedatasourcestogetheronaweeklyorevendailybasiscanp rovideapowerfulandhighlycontrolledtestingenvironment. ConventionalTestMarketingItprovidesanopportunitytounderstandmarketresponsetothen ewproductanditsproposedmarketingprograminamorerealisticmarketenvironmentthatinsi mulatedandcontrolledtestmarketing.Itisespeciallyusefulformeasuringresponsetothep roductfromabroadersetofstakeholders,includingcompetitors,thetrade,media,regulato r vidyarthiplus.comTheimpact

andothers.Itisalsoveryhelpfulfordiscoveringorganizationalandothermarketproblemsi nimplementingthenewproductprogram.Therealbenefitstoconventionaltestmarketingaret helearningandsubsequentadjustmentsthathelpensureasuccessfullaunch,especiallyforn ewproductsituationswithhighstakesandhighenvironmentandmarketuncertainty.However, thesebenefitsmustoftenbetradedoffagainstcostanddemandstospeedmarketentry. Industrialorbusinessgoodcanbetestedinanumberofways, includingtradeshows,in-usesituations,andsalespresentations.Thefirstmethodconsist sofdisplayinganddemonstratingtheproducttoobtainmeasuresofinterestandpossiblebuyi ngintentions.In-usetestplacetheproductwithsampleofpotentialbuyerswhoagreetotryit andtoprovideanevaluationofitsperformance.Salesdemonstrationssimplypresenttheprod ucttoasampleofprospectivecustomersinanefforttolearnhowmanywouldpurchaseit. 8.COMMERCIALIZATIONCommercializationcanbeconsideredasafinalphaseinthenewproductd evelopmentwhentheproductislaunchedintothemarketplace, thusinitiatingitslifecycle.Suppliescanbemadeavailabletothedistributionchannel,in tensivesellingmusttakeensurewidespreadavailabilityatthepointofsaleortocanvassord erfromprospectivebuyers.Maintenanceandservicingfacilitieswillbenecessaryandalarg epromotionalinvestmentwillbeneededtocreateawarenessofthenewproduct sexistence. vidyarthiplus.complacetoandothers.Itisalsoveryhelpfulfordiscoveringorganizationa landothermarketproblemsinimplementingthenewproductprogram.Therealbenefitstoconve ntionaltestmarketingarethelearningandsubsequentadjustmentsthathelpensureasuccess fullaunch,especiallyfornewproductsituationswithhighstakesandhighenvironmentandma rketuncertainty.However,thesebenefitsmustoftenbetradedoffagainstcostanddemandsto speedmarketentry. Industrialorbusinessgoodcanbetestedinanumberofways, includingtradeshows,in-usesituations,andsalespresentations.Thefirstmethodconsist sofdisplayinganddemonstratingtheproducttoobtainmeasuresofinterestandpossiblebuyi ngintentions.In-usetestplacetheproductwithsampleofpotentialbuyerswhoagreetotryit andtoprovideanevaluationofitsperformance.Salesdemonstrationssimplypresenttheprod ucttoasampleofprospectivecustomersinanefforttolearnhowmanywouldpurchaseit. 8.COMMERCIALIZATIONCommercializationcanbeconsideredasafinalphaseinthenewproductd evelopmentwhentheproductislaunchedintothemarketplace, thusinitiatingitslifecycle.Suppliescanbemadeavailabletothedistributionchannel,in tensivesellingmusttakeensurewidespreadavailabilityatthepointofsaleortocanvassord erfromprospectivebuyers.Maintenanceandservicingfacilitieswillbenecessaryandalarg epromotionalinvestmentwillbeneededtocreateawarenessofthenewproduct sexistence. vidyarthiplus.complaceto

Whilecommercializingaproduct,marketentrydbeecisionscancriticalMarketentrytendsto beahighlysituationicdecision.Thedynamicsoftheenvironment,themarket,theorganizati on,anditsnewproductdevelopmentsprocessmustbeassessedbythedecisionmaker. Throughrulesarelacking,thefollowingguidelineswillhelptomakea vidyarthiplus.comspecifWhilecommercializingaproduct,marketentrydbeecisionscancri ticalMarketentrytendstobeahighlysituationicdecision.Thedynamicsoftheenvironment, themarket,theorganization,anditsnewproductdevelopmentsprocessmustbeassessedbythe decisionmaker. Throughrulesarelacking,thefollowingguidelineswillhelptomakea vidyarthiplus.comspecif sounddecision. (1)Recognizethesituationalaspectsofmarketentry; (2)Clarifythestrategicimportanceofthemarketentrydecision; and (3)Formulatethemarketentrydecisionproblem. Thelaunchmarketingprogramatmarketentryrepresentsthepointofexecutionofabusinessst rategy.Thecompunchinganewproductmustfirstdecideonintroductiontiming.Next,thecomp anymustdecidewheretolaunchthenewproduct inasinglelocation,aregion,thenationalmarke t,ortheinternationalmarket.Fewcompanieshavetheconfidence,capital,andcapacitytola unchnewproductsintofullnationalorinternationaldistribution.Theywilldevelopapanne dmarketrolloutovertime. Inparticular,smallcompaniesmayenterattractiveorregionsoneatatime.Largercompanies ,however,mayquicklyintroducenewmodelsintoseveralregionsorintothefullnationalmark et. PRODUCTMODIFICATIONDECISIONanylacities

physicalattributesofaproductoritspackaging. NeedforProductModificationhisproduct. Tomakeadvantageofanewtechnologicaldevelopment. Tomodifytheproductoutofcompetitivenecessity. Toregenerateaproductsufferingfromdecliningsales. Theattributesoftheproductsuchastaste,colour,size,material, functionalfeatures,stylingandengineering,etc.orcombinationoftheseattributescould beconsideredformodification. Threeimportantandcontrastingproductmodification vidyarthiplus.comAproductmodificationismaydeliberatealterationintheAnumberoffact orsmaypromptthemanufacturertomodifyphysicalattributesofaproductoritspackaging. NeedforProductModificationhisproduct. Tomakeadvantageofanewtechnologicaldevelopment. Tomodifytheproductoutofcompetitivenecessity. Toregenerateaproductsufferingfromdecliningsales. Theattributesoftheproductsuchastaste,colour,size,material, functionalfeatures,stylingandengineering,etc.orcombinationoftheseattributescould beconsideredformodification. Threeimportantandcontrastingproductmodification vidyarthiplus.comAproductmodificationismaydeliberatealterationintheAnumberoffact orsmaypromptthemanufacturertomodify strategiesare: QualityimprovementFeatureimprovementStylingimprovement Astrategyofqualityimprovementaimsatincreasingthefunctionalperformanceoftheproduc t itsdurability,reliability, speed,tasteetc.Amanufacturercanoftenovertakecompetitionbylaunchingthenewandimpro vedautomobiles,televisionsetetc.

Astrategyoffeatureimprovementaimsataddingnewfeaturessuchassize,weight,material,a ccessoriesthatexpandtheproductsversatility,safetyorconvenience.Theof vidyarthiplus.comadvantagesAstrategyoffeatureimprovementaimsataddingnewfeaturess uchassize,weight,material,accessoriesthatexpandtheproductsversatility,safetyorco nvenience.Theof vidyarthiplus.comadvantages featureimprovementare: leadership; oftenmadeoptionalatlittleexpense; Newfeaturescanbringthecompanyfreepublicity; Newfeaturescangeneratesales-forceanddistributor senthusiasm. Astrategyofstyleimprovementaimsaincreasingtheaestheticappealoftheproduct.Theperi odicintroductionofnewcarmodelsamountstostylecompetitionratherthanqualityorfeatur escompetition.Inthecaseofhouse-holdproducts,companiesintroducecolourandtextureva riationsandoftentheNewfeaturesbuildacompanyimageofprogressivenessandpackage.Thea dvantageofastylestrategyisthatitmightconferauniquemarketidentity.Yetstylecompeti tiosnhassomeproblems. Firstitisdifficulttopredictwhetherpeople whichpeople willlikeanewstyle.Second,stylec hangesusually,andiscountingtheoldstyle,andthecompanyriskslosingsomecustomerswhol ikedtheoldstyle. Newfeaturescanbeadaptedquickly,droppedquicklyandNewfeaturescanwintheloyaltyofcer tainmarketsegments; restyle

iftheyweremutuallyexclusive.Inpractice,agenerallypursuessomemixtureofallthreestr ategies.Justtomaintainitscompetitiveposition,thefirmmustincorporatethelatestdeve lopmentinquality,stylingandfunctionalfeatures. PRODUCTELIMINATIONDECISIONStheexistingproduct.Manysickormarginalproductsneverdie ; theyareallowedtocontinueinthecompany sproductuntilthey fadeaway .Asaresult,thesemargin alproductslessenthefirm sThethreestagesofproductmodificationwerecontrastedasprofit abilityandreduceitsabilitytotakeadvantagenewopportunities. ReasonsforProductEliminationTheweakproducttendstoconsumeadisproportionateamounto f vidyarthiplus.comfirmProducteliminationsisanactofdiscontinuingordroppingofifthey weremutuallyexclusive.Inpractice,agenerallypursuessomemixtureofallthreestrategie s.Justtomaintainitscompetitiveposition,thefirmmustincorporatethelatestdevelopmen tinquality,stylingandfunctionalfeatures. PRODUCTELIMINATIONDECISIONStheexistingproduct.Manysickormarginalproductsneverdie ; theyareallowedtocontinueinthecompany sproductuntilthey fadeaway .Asaresult,thesemargin alproductslessenthefirm sThethreestagesofproductmodificationwerecontrastedasprofit abilityandreduceitsabilitytotakeadvantagenewopportunities. ReasonsforProductEliminationTheweakproducttendstoconsumeadisproportionateamounto f vidyarthiplus.comfirmProducteliminationsisanactofdiscontinuingordroppingof management stimeIfgenerallyinvolvesshortproductionrunsinspiteofexpensivesetuptimes . Itrequiresbothadvertisingandsales-forceattentionthatmightbetterbedivertedtomakin gthe healthy productsmoreprofitable. Itsveryunfitnesscancausecustomermisgivingsandcastashadowonthecompany simage. Ifoftenrequiresfrequentpriceandinventoryadjustments

Inviewofthecostsofcarryingweakproducts,whydoesmanagementshyawayfromproduct-pruni ngprogramsduetologicalaswellassentimentalreasons.Sometimes,itisexpectedthatprodu ctsaleswillpickupinthecourseoftimewheneconomicormarketfactorsbecomemorepropitiou s.Sometime,thefaultisthoughttolieinthemarketingprogrammewhichthecompanyplanstore vitalize.Itmaybefeltthatthesolutionliesinreviewingdealerenthusiasm,increasingthe advertisingbudget,changingtheadvertisingthemeormodifyingsomeothermarketingfactor .Managementmayfeelthatthesolutionliesinproductmodificationthroughquality,styling orfeatures. Theforegoingarealllogicalargumentsforretainingweakproductsinthemix.Butthereareal sosituationsuchasmanagementsentimentorjustcorporateinertiaorpresenceofvestedinte restsinretaining vidyarthiplus.comInviewofthecostsofcarryingweakproducts,whydoesmanagementshyaway fromproduct-pruningprogramsduetologicalaswellassentimentalreasons.Sometimes,itis expectedthatproductsaleswillpickupinthecourseoftimewheneconomicormarketfactorsbe comemorepropitious.Sometime,thefaultisthoughttolieinthemarketingprogrammewhichth ecompanyplanstorevitalize.Itmaybefeltthatthesolutionliesinreviewingdealerenthusi asm,increasingtheadvertisingbudget,changingtheadvertisingthemeormodifyingsomeoth ermarketingfactor.Managementmayfeelthatthesolutionliesinproductmodificationthrou ghquality,stylingorfeatures. Theforegoingarealllogicalargumentsforretainingweakproductsinthemix.Butthereareal sosituationsuchasmanagementsentimentorjustcorporateinertiaorpresenceofvestedinte restsinretaining vidyarthiplus.com weakproducts. Themajoritycompanieshavenotestablishedorderlyproceduresforpruningtheirproducts.S uchactionisusuallyundertakeneitheronapiece-mealbasisoronacrisisbasis,suchasdecli neintotalsales, pilinginventoriesorrisingcosts.Butneitherpiecemealrunningnorcrisispruningisreall yasatisfactorypractice. Asomewhatmoresystematicapproachisforthemanufacturertoreviewperiodicallyallproduc tswhoseprofitabilityislessthanthecorporateaverageforeachsuchproduct,themanageris requestedtorecommendedactionforimprovingearningoreliminationoftheproduct.

commititselftotheideaofperiodicproductreview,preferablybyaproductreviewcommittee .Theproductreviewprocessbeginswithcollectingandanalyzingthedataforeachproductsho wingindustrysales,companysales,unitcost,pricesandotherinformationoverthelastseve ralyears,whichmayrevealthemostdubiousproducts. Thedubiousproductsarethenratedbasingonthecriteriasuchas: Whatisthefuturemarketpotentialforthisproduct? Howmuchcouldbegainedbyproductmodification? vidyarthiplus.comAcompanythatwishesotmaintainastrongproductmixmustHowmuchcouldbe gainedbymarketingstrategymodification? Howmuchexecutivetime,couldbereleasedbyabandoningthecommititselftotheideaofperiod icproductreview,preferablybyaproductreviewcommittee.Theproductreviewprocessbegin swithcollectingandanalyzingthedataforeachproductshowingindustrysales,companysale s,unitcost,pricesandotherinformationoverthelastseveralyears,whichmayrevealthemos tdubiousproducts. Thedubiousproductsarethenratedbasingonthecriteriasuchas: Whatisthefuturemarketpotentialforthisproduct? Howmuchcouldbegainedbyproductmodification? vidyarthiplus.comAcompanythatwishesotmaintainastrongproductmixmustHowmuchcouldbe gainedbymarketingstrategymodification? Howmuchexecutivetime,couldbereleasedbyabandoningthe product? Howgoodarethefirm salternativeopportunities? Howmuchistheproductcontributingbeyondthedirectcosts. Howmuchistheproductcontributingtothesaleoftheotherproducts. decidesstrategiesforphasingoureachofthem. Foreachproducttobeeliminated,managementmustdetermineitsobligationstothevariouspa rtiesaffectedbydecisions. TheCommitteethendecideswhichproductstodropandthenManagementmaywanttoprovideastoc kofreplacementpartsandservicetostretchovertheexpectedlifeofmostrecentlysoldunits . the

Someoftheproductscanbedroppedquiteeasilywithlittlerepercussionwhileotherproducte liminationsanelaboratephasing-outplan.Someofthefactorsthatwillinfluencephasing-o urtacticsandtimingare: inventory;howmuchfinishedgoodsareindistributor sinventories? Whatkindsofguaranteesandcompensationsshouldbeofferedtodistributorsandconsumers. otherusefulassignments? Howmuchsalvagevaluewouldcompanygetforitsmachineryandunfinishedstock? ProductFailureThenewproductdevelopmentcanbeveryrisky.Onestudyfoundthatthenewprod uctfailureratewas40percentforconsumerproducts, 20percentforindustrialproductsand18percentforservices.Thefailurerateforconsumern ewproductsisspeciallydisturbing. ReasonsforNewProductsFailure(1)Aseniorexecutivemightpushafavouritideathroughinsp iteofnegativemarktingresearchfindings. (2) vidyarthiplus.comwillrequireHowmuchfinishedandsemi-finishedstockremainsinourHows ooncouldtheexecutiveandemployeesbeshiftedtoTheideamaybegood,butthemarketsizeisov erestimated. Someoftheproductscanbedroppedquiteeasilywithlittlerepercussionwhileotherproducte liminationsanelaboratephasing-outplan.Someofthefactorsthatwillinfluencephasing-o urtacticsandtimingare: inventory;howmuchfinishedgoodsareindistributor sinventories? Whatkindsofguaranteesandcompensationsshouldbeofferedtodistributorsandconsumers. otherusefulassignments? Howmuchsalvagevaluewouldcompanygetforitsmachineryandunfinishedstock? ProductFailureThenewproductdevelopmentcanbeveryrisky.Onestudyfoundthatthenewprod uctfailureratewas40percentforconsumerproducts, 20percentforindustrialproductsand18percentforservices.Thefailurerateforconsumern ewproductsisspeciallydisturbing. ReasonsforNewProductsFailure(1)Aseniorexecutivemightpushafavouritideathroughinsp iteofnegativemarktingresearchfindings. (2) vidyarthiplus.comwillrequireHowmuchfinishedandsemi-finishedstockremainsinourHows ooncouldtheexecutiveandemployeesbeshiftedtoTheideamaybegood,butthemarketsizeisov erestimated.

(3)Theactualproductisnotdesigned. (4) (5)Theproductmaynotbeadvertiseseffectively. (6)Theproductmaybeoverpriced. (7) (8)Thecompetitionsmaybeseverethanexpected. (9)Theproductmightfailduetogovernmentalregulation. vidyarthiplus.comTheproductmaybeincorrectlypositionedinthemarket. Thecostofproductdevelopmentmaybehigherthanexpected. Theactualproductisnotdesigned. (4) (5)Theproductmaynotbeadvertiseseffectively. (6)Theproductmaybeoverpriced. (7) (8)Thecompetitionsmaybeseverethanexpected. (9)Theproductmightfailduetogovernmentalregulation. vidyarthiplus.comTheproductmaybeincorrectlypositionedinthemarket. Thecostofproductdevelopmentmaybehigherthanexpected. (10) (11)poortiming. (12)Lackofmanagersattentiontocomplaints(13)Itmayfailduetopoorafter-sales-service . Poormarketingresearch; Technicalproblemsinthenewproductsdesignorinitsproduction; TheproductmightfailduetoinadequatemarketingresearchPoortiminginproductintroducti onorineffectivelaunching,andOtherpoormanagementpractices. TypesofProductFailureTheproductmayfailduetodelaysindecision-makingorThus,themain reasonsforthefailureofnewproductsare:

1.Anabsoluteproductfailure:itlossesmoneyanditssalesdonotcovervariablecosts. 2.Apartialproductfailure:itlosesmoneybutitssalecoverallthevariablecostsandsomeof thefixedcosts. 3.Arelativeproductfailure:ityieldsaprofitthatislessthanthecompany snormalrateofret urn. vidyarthiplus.comAnabsoluteproductfailure:itlossesmoneyanditssalesdonotcovervari ablecosts. 2.Apartialproductfailure:itlosesmoneybutitssalecoverallthevariablecostsandsomeof thefixedcosts. 3.Arelativeproductfailure:ityieldsaprofitthatislessthanthecompany snormalrateofret urn. vidyarthiplus.com PRODUCTLIFECYCLEproductislauncheddinthemarket,itslifestartsandtheproductpassesth oroughvariousdistinctstagesandaftertheexpirationofitslifespandies diesintermsofits capacitytogeneratesalesandprofit.ThisiscalledProductLifeCycle(PLC). TheProductLifeCycleisanattempttorecognize distinctstages inthe saleshistory oftheproduct .Ineachstage,therearedistinctopportunitiesandproblemswithrespecttomarketingstrat egyandprofitpotential.Hence,productsrequiredifferentmarketing,financing, manufacturing,purchasingandpersonnelstrategiesthedifferentstagesoftheirlifecycle .ThePLCconceptprovidesausefulframeworkfordevelopingeffectivemarketingstrategiesi ndifferentstagesoftheProductLifeCycle. growth,maturityanddecline. FigureLikehumanbeings,everyproducthasalifespan.WhenanewinTherearefourstagesinthe ProductLifeCycle introduction,

vidyarthiplus.com IntroductionStageTheintroductionstagestartswhenthenewproductisfirstlaunched.Inth isstageonlyafewconsumerswillbuytheproduct. Further,ittakestimetofillthedealerpipelineandtomakeavailabletheproductinseveralm arkets.Hence,saleswillbelowaprofitwillbenegativeorlow.Thedistributionandpromotio nexpenseswillbeveryhigh.Thereareonlyafewcompetitors.Regardingpricing,themanageme ntcanpursueeitherskimmingstrategyi.e.fixingahighpriceorpenetrationstrategyi.e.fi xingalowprice. Thecompanymightadoptoneofseveralmarketingstrategiesforintroducinganewproduct.Itc ansetahighorlowlevelforeachmarketingvariable,suchasprice,promotion,distributions andproductquality.Consideringonlypriceandpromotion,forexample,managementmightlau nchthenewproductwithahighpriceandlosepromotionspending.Thehighpricehelpsrecovera smuchgrossprofitperunitaspossiblewhichthelowpromotionsspendingkeepsmarketingspen dingdown.Suchastrategymakessensewhenthemarketislimitedinsize, whenmostconsumersinthemarketknowabouttheproductandare

willingtopayahighprice,andwhenthereislittlieimmediatepotential vidyarthiplus.comwillingtopayahighprice,andwhenthereislittlieimmediatepotential vidyarthiplus.com competition. withalowpriceandheavypromotionspending.Thisstrategypromisestobringthefastestmark etpenetrationandthelargestmarketshare.Itmakessensewhenthemarketislarge,potential buyerspricesensitiveandunawareoftheproduct,therestrongpotentialcompetitionandthe company sunitmanufacturingcostsfallwiththescaleofproductionandaccumulatedmanufactu ringexperience. GrowthStageIfthenewproductsatisfiesthemarket,itwillenteragrowthstage. Thisstageismarketbyquickincreaseinsalesandprofits.Theearlyadopterswillcontinueto buy,andlaterbuyerswillstartfollowingtheirlead,especiallyiftheyhearfavourableword ofmouth.Newcompetitorsenterthemarket,attractedbytheopportunitiesforhighprofit.Th eOntheotherhand,acompanymightintroduceitsnewproductmarketwillexpand.Pricesremain thesame.Companiesmaintaintheirpromotionalexpenditureatthesamelevelorslightlyhigh erleveltomeetcompetitionandcontinueeducatingthemarket. Duringthisstage,thecompanyusesthefollowingmarketingstrategies: featuresandmodels. areisThecompanyimprovesproductqualityandaddsnew-product Itentersnewmarketsegments. Itentersnewdistributionchannel.

Itchangesthepriceattherighttimetoattractmorebuyers. Inthegrowthstage,thefirmfacesatrade-offbetweenhighmarketshareandhighcurrentprofi t.Byspendingalotofmoneyonproductimprovement,promotionanddistribution,thecompanyc ancaptureadominantposition.Indoingso,itgivesupmaximumcurrentprofit, whichithopestomakeupinthenextstage. vidyarthiplus.comItchangesthepriceattherighttimetoattractmorebuyers. Inthegrowthstage,thefirmfacesatrade-offbetweenhighmarketshareandhighcurrentprofi t.Byspendingalotofmoneyonproductimprovement,promotionanddistribution,thecompanyc ancaptureadominantposition.Indoingso,itgivesupmaximumcurrentprofit, whichithopestomakeupinthenextstage. vidyarthiplus.com MaturityStageThisstagenormallylastslongerthanthepreviousstagesanditposesstrongch allengestomarketingmanagement.Atthisstage,saleswillslowdown.Thisstagecanbedivide dintothreephases. growthmaturity,stablematurityanddecayingmaturity. Inthegrowthmaturityphase,thesalesstarttodeclinebecauseofdistributionsaturation.I nthestablematurityphase,salesbecomestaticbecauseofmarketsaturation.Inthedecaying maturityphase,theabsolutelevelofsalesnowstartstodeclineandcustomersstartsmovingt owardotherproductsandsubstitutes.Competitionsbecomeacute. unchangedforlongperiods,mostsuccessfulonesareactuallyevolvingtomeetchangingconsu merneeds.Productmanagersshoulddomorethansimplyridealongwithordefendtheirmaturepr oducts agoodoffenseisthebestdefense.Theyshouldconsidermodifyingthemarket,productan dmarketingmix. Althoughmanyproductinthematurestageappeartoremain

MarketingModification:Thecompanyshouldseektoexpandthemarketandentersintonewmarke ts.Itlooksfornewusersandfindwaystoincreaseusageamongpresentcustomers. ProductModificaiton:thecompanyshouldmodifytheproduct scharacteristicssuchasquality improvement,featuresimprovement, styleimprovementtoattractnewusersand/orusagefromcurrentusers.Forgfdfgdsgdgdfgdfg dfgdfgdfgdfgdfgdfgdfgdfgdfgfdgdgdfgdfgdgdfgdfgdgdfgdfgdfgdggdfgdfgdfgdfgdfggdfgd gdgdgdgdfgdfgdfgdfgfdgggdf. Marketing-mixModification:Thecompanyshouldtrytoelementssuchaspricecut,step-upsal espromotion,changeadvertisementcopy,extendingcreditetc. Amajorproblemwithmarketing-mixmodificationisthattheyhighlyimitablebycompetitors. Thefirmmaynotgainasmuchasexpectedandinfactallfirmsmyexperienceprofiterosionasthe ycompleteeachother. vidyarthiplus.comalsostimulatesalesthroughmodifyingoneormoremarketing-mixMarketi ngModification:Thecompanyshouldseektoexpandthemarketandentersintonewmarkets.Itlo oksfornewusersandfindwaystoincreaseusageamongpresentcustomers. ProductModificaiton:thecompanyshouldmodifytheproduct scharacteristicssuchasquality improvement,featuresimprovement, styleimprovementtoattractnewusersand/orusagefromcurrentusers.Forgfdfgdsgdgdfgdfg dfgdfgdfgdfgdfgdfgdfgdfgdfgfdgdgdfgdfgdgdfgdfgdgdfgdfgdfgdggdfgdfgdfgdfgdfggdfgd gdgdgdgdfgdfgdfgdfgfdgggdf. Marketing-mixModification:Thecompanyshouldtrytoelementssuchaspricecut,step-upsal espromotion,changeadvertisementcopy,extendingcreditetc. Amajorproblemwithmarketing-mixmodificationisthattheyhighlyimitablebycompetitors. Thefirmmaynotgainasmuchasexpectedandinfactallfirmsmyexperienceprofiterosionasthe ycompleteeachother. vidyarthiplus.comalsostimulatesalesthroughmodifyingoneormoremarketing-mix DeclineStageInthisstage,salesdeclineandeventuallydipduetonumberofreasonsincludin gtechnologicaladvances,consumerchangesintastesandacutecompetitions.Assalesandpro fitdeclinesomefirmswithdrawfromthemarket.Thoseremainingmayreducethenumberofprodu ctofferings.

Theymaydropsmallermarketsegmentsandmarginaltradechannels.Theymayreducethepromoti onbudgetandpricesfurther. Hence,companiesneedtopaymoreattentiontotheiragingproducts.Thefirmhastoidentifyth oseproductsinthedeclinestagebyregular sreviewingsales,marketshares,costsandprofitt rends.Then, managementmustdecidewhethertomaintain,harvest,ordropeachof vidyarthiplus.comTheymaydropsmallermarketsegmentsandmarginaltradechannels.Theyma yreducethepromotionbudgetandpricesfurther. Hence,companiesneedtopaymoreattentiontotheiragingproducts.Thefirmhastoidentifyth oseproductsinthedeclinestagebyregular sreviewingsales,marketshares,costsandprofitt rends.Then, managementmustdecidewhethertomaintain,harvest,ordropeachof vidyarthiplus.com thesedeclaimingproducts. MarketingStrategiesduringtheDeclineStageIdentifytheweakproductsbyappointingaprod uct-reviewcommitteewithrepresentativesfrommarketing,manufacturingandfinance. Thefirmsmayadoptthefollowingstrategies. i)Managementmaydecidetomaintainitsbrandwithoutchangeinthehopethatcompetitorswill leavetheindustry. ii)Managementmayharvestbysellingwhateverispossibleinthemarket. iii)Managementmaydecidetodroptheproductfromtheline. Whenacompanydecidestodropaproduct,thefirmcansellortransfertheproducttosomeoneels eordropitcompletely.Itmustdecidetodroptheproductquicklyorslowly.Itmustdecideonho w

muchpartsininventoryandservicerequiredtomaintainserviceto vidyarthiplus.commuchpartsininventoryandservicerequiredtomaintainserviceto vidyarthiplus.com pastconsumers. USESOFPLCCONCEPTPLCconcept susefulnessvariesindifferentdecision-makingsituations.A saplanningtool,thePLCconceptcharacteristicsthemainmarketingchallengesineachstage andsuggestsalternativemarketingstrategiesthefirmmightpursue.Asacontroltool,itall owsthecompanytocompareproductperformanceagainstsimilarproductsinthepast. CRITICISMOFPLCCONCEPT1.PLCstagesdonothavepredictableduration.Itmayveryfromproduc ttoproduct. major 2.Themarketercannottellatwhatstagetheproductisinasthereisnodefinitelineofdemarca tionbetweenonestagetoanotherstage. 3.Notallproductspassthroughallthestages.Itispossiblethattheproductmaytraveltothe firstandsecondstageanddieout. 4. segments;itmaybeinthesecondstageinonesegment,whereasinthethirdstageinanothersegm entataparticularpointoftime. Notallproductspassthroughallthestagesofitslifecycle.Someproductsareintroducedand diequickly;othersstayinthenaturestageforalong,lingtime.Someenterthedeclinestagea ndrethencycledbackintothegrowthstagethroughstrongpromotionorrepositioning. Aproductmaynotbeinanidenticalstageinallthemarket

vidyarthiplus.com Reviewquestions: 1.Discussthevariousstepsinvolvedinnewproductdevelopmentprocess. 2.Whatarecausesandmethodsofproductmodificationandproductelimination? 3.Whatarethereasonsfornewproductfailure? 4.WhatisProductLifeCycleconcept?WhatarethestagesofPLCconcept?Explaintheirmarketi ngimplications? **********

vidyarthiplus.com LESSON 10PRODUCT-MARKETINTEGRATIONSTRATEGIESLearningObjectivesAfterreadingthisless on,youshouldbeabletounderstand Product-marketintegrationstrategies; Productpositioninganditssignificance; Themeaningandtheneedforproductdiversification; Product-linesimplification; Plannedproductobsolescence; Product,acomponentofthemarketing-mix,canhelpachievethemarketingobjectivesonlywhe nthereisintegrationbetweentheproductandmarket.Product-marketintegrationmaybedefi nedasastatewhereinbothproductimageandconsumerself-imageareinfocus;thereisamatchb etweenproductattributesandconsumerexpectations botheconomicandnon-economic.Suchmat chingiscruxofthemodernmarketingconcept,becauseitisessentialforeverymarketertodev elopsuchaproductimagewhichiscompatiblewiththeself-imageofhisconsumers.Thisshould betheessenceandobjectiveofallproductmanagementexercises.

INTEGRATIONPROBLEMSNevertheless,therearealwaysproblemsassociatedwithsuchexercise s.Theproblemssteamfromthefactthatwhileproductisoneorlimitedinnumber,consumersare numerousandtheirself-imagesmanyandvaried.Underthissituation,ifacompanymeetconsum er individualself-imagesthenitwouldhavetointroduceasmanyproductsastherearewrinkles onanoldman sface possiblyevenmore.Suchanattemptwouldbehighlyuneconomicalfromthestand pointofcostofproduction. Assuch,amarketerisfacedwithdilemmawhethertomeetconsumerself-imagesortoavoidpenal tiesofproducteconomics.Iftheformeristobeopted,thenproduct-timeproliferationandco stescalationareinevitable;inthelattercase,theproductlinewillbenarrowandthecostst ructurebalanced.However,bothoptionsarenotinescapableandwithoutproblems.Itis,ther efore,alwaysadvisabledevelopinOptimumMatchingStrategy(OMS)betweenthecompany sprodu ctsandmarkets. OptimumMatchingStrategy(OMS) matchingproductandconsumerself-imagesinsuchawaythatinsomemarketsegmentsthereisfu llmatchingwhereasinothersnotso,sothatthecost-revenueequilibriumismaintained.Thes trategycomprisesmarketsegmentation,productofferingandproductdifferentiation. Thewholemarketisdividedintothreesegments,viz.core,fringeandzoneofindifference.In thecoremarket,thecompanyattemptsto vidyarthiplus.comattemptstotoOptimummatchingstrategymaybedefinedasthemethodofINT EGRATIONPROBLEMSNevertheless,therearealwaysproblemsassociatedwithsuchexercises.T heproblemssteamfromthefactthatwhileproductisoneorlimitedinnumber,consumersarenum erousandtheirself-imagesmanyandvaried.Underthissituation,ifacompanymeetconsumer in dividualself-imagesthenitwouldhavetointroduceasmanyproductsastherearewrinklesona noldman sface possiblyevenmore.Suchanattemptwouldbehighlyuneconomicalfromthestandpoi ntofcostofproduction. Assuch,amarketerisfacedwithdilemmawhethertomeetconsumerself-imagesortoavoidpenal tiesofproducteconomics.Iftheformeristobeopted,thenproduct-timeproliferationandco stescalationareinevitable;inthelattercase,theproductlinewillbenarrowandthecostst ructurebalanced.However,bothoptionsarenotinescapableandwithoutproblems.Itis,ther efore,alwaysadvisabledevelopinOptimumMatchingStrategy(OMS)betweenthecompany sprodu ctsandmarkets. OptimumMatchingStrategy(OMS) matchingproductandconsumerself-imagesinsuchawaythatinsomemarketsegmentsthereisfu llmatchingwhereasinothersnotso,sothatthecost-revenueequilibriumismaintained.Thes trategycomprisesmarketsegmentation,productofferingandproductdifferentiation. Thewholemarketisdividedintothreesegments,viz.core,fringeandzoneofindifference.In thecoremarket,thecompanyattemptsto vidyarthiplus.comattemptstotoOptimummatchingstrategymaybedefinedasthemethodof

attainafullmatchbetweentheproductandtheself-imageofthegroupsofconsumers.Inthefri ngemarket,thematchbetweentheproductimageandtheself-imageofconsumersmaybeonlypart ial.Thispartialmatchmaybeintermsoflessthanfullocmpatibalityinrespectoftheproduct imageandallthevariablesofconsumerself-image,namely, economicandnon-economic psychological,sociologicalandcultural oralternatively,fullmatchinginrespectofothers.thezoneofindifference,thereisabsol utelynoattemptedmatchingbetweenproductimageandconsumerself-image.Whatevermatchin gthatmayemergeis vidyarthiplus.comInattainafullmatchbetweentheproductandtheself-imageofthegroupso fconsumers.Inthefringemarket,thematchbetweentheproductimageandtheself-imageofcon sumersmaybeonlypartial.Thispartialmatchmaybeintermsoflessthanfullocmpatibalityin respectoftheproductimageandallthevariablesofconsumerself-image,namely, economicandnon-economic psychological,sociologicalandcultural oralternatively,fullmatchinginrespectofothers.thezoneofindifference,thereisabsol utelynoattemptedmatchingbetweenproductimageandconsumerself-image.Whatevermatchin gthatmayemergeis vidyarthiplus.comIn onlyrandom. Wherethestrategyoffullmatchingisemployed,ahighermake-upmaybeattemptedrelativetop artialandnomatchingstrategiesinordertoearnlargerprofitsfromthecoremarketandtocom pensateforthelossofconsumersatisfactioninthefringemarketofindifferencearisingout ofthenon-0fulfilmentofthenon-economicexpectations. andzone Inthefringemarketandthezoneofindifference,sincethereisonlypartialandrandommatchi ngrespectively,thecompanymayattemptproductdifferentiationsoastoconveyanimpressio nofmatching.Thismaybeattainedwiththeeffectiveuseofadvertisementsalespromotion.Th roughthisstrategy,consumermaybemadetoperceiveproductsinsuchawaythatsemblanceofma tchingisattainedandproductsarebought.Inreality,inthisway,acompanyattemptstoresha peconsumerself-imagessoastofitwiththeproductimage. and

Theotherstrategiesthroughwhichproduct-marketintegrationmaybeattainedincludeprodu ctpositioning,diversification, simplification,plannedobsolescenceandbrandingandpackaging. PRODUCTPOSITIONINGPositioningisthesetofactivitieswhichhelpcreateaperceptiblediff erencebetweenabrandanditscompetitorsinthemindoftheconsumer.Positioninggoesbeyond thephysicalorfunctionalcharacteristicsofabrand.Itincludesalsothenon-functionalor psychologicalcharacteristicsofabrand.Intheconsumer smind-space,abrandoccupiesa posit ion inrelationtocompetitivebrands.SurfandArielareperceivedtobeclosertoeachotherwhi leWheelandNirmaare Positioned inquiteanotherspace.Theperceivedimageofabrandistheprop ertyoftheconsumer smind.Twobrandsofaproductmaybeidenticalintermsofphysicalattribut esbutcouldbeperceiveddifferentlybytheconsumer.Positioninginvolvesplacingabrandin certaindistinctandpreferablyuniquewayintheconsumer smind.Basically,onemaytakeeithe rthe informationroute orthe imaginaryroute tobuildaposition.Inthe100ccmotorbikescategory ,T.V.S.Suzukitooktheinformationroute,KawasakiBajajtooktheimageryrouteandHeroHond ausedaskilfulcombinationofboth anditiseasytorecognizethatthesebrandsareperceiveddi fferentlybytheconsumeralthoughtheymaynotbegenericallyverydifferent. Ifoneconsideraconsumer smindspaceasallottingspecificpositionsforvariousbrandofapro duct,theextentofcompetitionsa vidyarthiplus.comTheotherstrategiesthroughwhichproduct-marketintegrationmaybeatt ainedincludeproductpositioning,diversification, simplification,plannedobsolescenceandbrandingandpackaging. PRODUCTPOSITIONINGPositioningisthesetofactivitieswhichhelpcreateaperceptiblediff erencebetweenabrandanditscompetitorsinthemindoftheconsumer.Positioninggoesbeyond thephysicalorfunctionalcharacteristicsofabrand.Itincludesalsothenon-functionalor psychologicalcharacteristicsofabrand.Intheconsumer smind-space,abrandoccupiesa posit ion inrelationtocompetitivebrands.SurfandArielareperceivedtobeclosertoeachotherwhi leWheelandNirmaare Positioned inquiteanotherspace.Theperceivedimageofabrandistheprop ertyoftheconsumer smind.Twobrandsofaproductmaybeidenticalintermsofphysicalattribut esbutcouldbeperceiveddifferentlybytheconsumer.Positioninginvolvesplacingabrandin certaindistinctandpreferablyuniquewayintheconsumer smind.Basically,onemaytakeeithe rthe informationroute orthe imaginaryroute tobuildaposition.Inthe100ccmotorbikescategory ,T.V.S.Suzukitooktheinformationroute,KawasakiBajajtooktheimageryrouteandHeroHond ausedaskilfulcombinationofboth anditiseasytorecognizethatthesebrandsareperceiveddi fferentlybytheconsumeralthoughtheymaynotbegenericallyverydifferent. Ifoneconsideraconsumer smindspaceasallottingspecificpositionsforvariousbrandofapro duct,theextentofcompetitionsa vidyarthiplus.com

brandfacescanbestudieddependinguponthedistancebetweenthebrandandotherbrandsinthe space.Suchagraphicalrepresentationiscalledaperceptualmap.CORE,themarketingresear chdivisionofClarionAdvertisingconductedapositioningstudyofsometoiletsoapbrandand foundtheresultstobeasdepictedinthisfigure: vidyarthiplus.combrandfacescanbestudieddependinguponthedistancebetweenthebrandan dotherbrandsinthespace.Suchagraphicalrepresentationiscalledaperceptualmap.CORE,t hemarketingresearchdivisionofClarionAdvertisingconductedapositioningstudyofsomet oiletsoapbrandandfoundtheresultstobeasdepictedinthisfigure: vidyarthiplus.com feelsgood factorsandtheHealthrelatedbenefitsorthe doesgood factors.TheXaxisrepresentspopularpr icingversushighorpremiumpricing.Asthecosmeticsegment,whiletheutility cosmeticsegme ntiscrowded.MargoisthesolepurveyoroftheHealthrelated utilitysegment.Thisstudywasco nductedin1989,amongwomeninWestBengal.ItwouldbeinterestingtoincludeCamay,Medimix, Lesancy,Pears,Rexona,Evita,Palmolive, thelistisHeretheYaxisrepresentsthecosmeticbenefitorexhausting!Further,themen stoil etsoapcategoryhasalsoopenedup, thebabysoapscategoryboastsofafewbrandsandtheliquidsoapsfigureshows,therearehardl yanybrandsintheluxury Lifebuoy,NirmaBath,Moti,Santoor,Dove,Ganga,Dettol

categorypresentsitsinternationalappeal.Positioningalonecan vidyarthiplus.comdeterminethebrandsthatwillkeepgoingandthegoners! categorypresentsitsinternationalappeal.Positioningalonecan vidyarthiplus.comdeterminethebrandsthatwillkeepgoingandthegoners! TYPESOFPOSITIONINGAproduct simageiscreatedamongtheconsumersbasedonthefollowingaspe cts: 1.ProductAttributeImagesSincesomeofthebrandshaveexcellentproductfeaturestheydire ctlyappealtoconsumers.Exideisconsideredtobethebatterwhichhasnotroublesatall.Prom otionmessage,eachtime, concentratesontheconsumergainsresultingfromproductperformance.Philipemphasizesth equalityplankandBPLaudiosemphasisonthefidelityplatform. 2.SymbolicProjections Inthoseproductswithnotmuchdifferentiationwithothercompetitors,positionarisesfrom broadsymbolizationsratherthantheproductperformance.Beeradvertisingisonesuch.Sinc etheproductdoesnotdifferinmanybrands,theemotionalmoodsareusedasproductattributes .ONIDAhasusedthedeviltosellitsproductsasdepictedintheiradvertisements,onseeingad eviloneimmediatelyrecognizeONIDAtelevision. 3.DirectCompetitivePositioningInthisapproach,aproducts positionusethecompetitor spos itionasareferencepoint.Classicexampleisthatofpepsiand

coke.7-uppositionitselfasanuncola.Videoconusesthesalesfiguresofcompetitorsassell ingpoint.IndianAirlineshavealsostartedadvertisingwithresponsetotheprivateairline s vidyarthiplus.comcoke.7-uppositionitselfasanuncola.Videoconusesthesalesfiguresof competitorsassellingpoint.IndianAirlineshavealsostartedadvertisingwithresponseto theprivateairlines vidyarthiplus.com advertisement. REPOSITIONING created.Sincethecompetitiveenvironmentandnatureoftheproductchangesitisimperative torepositiontheproductamongtheconsumers. Repositioningwillsometimegivenewlifetothesalesofthebrand.Thisisdonealsointhecase sofdecliningmarketshare.Anychangeinmarketshareprovideadirectindicationofcompetit ivestandingmarketpotentialdatamayreflectontheexpansion,contractionorstabilityofi ndustryvolume.Inthecaseofdecliningmarketshareitisadvisabletorepositiontheproduct intonewmarket.Anexpandingorgrowingmarketrepresentsadditionalopportunitiesinthelo ngterm.Repositioningmaybenecessarywhenshareinagrowingmarketdeclines.Suchadecline suggeststhatthebrandinnotgettingadditionalsalesinproportiontowhatithadinthepast. Inthecaseofincreasingshareisanexpandingmarket,repositioningisnotrequired. PRODUCTDIVERSIFICATIONInthepursuitofproduct-marketintegration,anumberofpolicyand strategyoptionareavailabletoacompany.Oneamongthemisproductdiversification. Diversi ficationisapolicyormanagementAbranddoesnothavetobestuckwiththeimageithaso0ncphil osophyofoperatingacompanysothatitsbusinessandprofitscome

fromanumberofsources,usuallyfromdiverseproductsthatdifferinmarketorproductioncha racteristics . Unlikeotherproductpoliciesandstrategies,thedistinguishingfeatureofthepolicyofdiv ersificationis toincreasethenumberofproductsintheproductportfolioofthecompany .invol vesfundamentalchangeintheoldproduct,say,initsmodularconstruction, butnotmerelyatacticaladjustmentinthedesign,style,colourofsizeoftheproducttogaint emporarymarketadvantage. ReasonsforDiversificationAstudyofthebusinessliteratureandanalysisofthecompanyhis toriesrevealthatthequestionsofcorporatesurvival,stabilityandgrowtharetheprimemov ersofdiversification. SurvivalTooffsetdecliningorvanishingmarkets. Tocompensatefortechnologicalobsolescence. Tooffsetobsoletefacilities. Toarrestdecliningprofitmargins. Tooffsetanunfavourablegeographiclocationbroughtaboutbychangingeconomicfactors. vidyarthiplus.comItThefollowingarethespecificreasonsfordiversification: fromanumberofsources,usuallyfromdiverseproductsthatdifferinmarketorproductioncha racteristics . Unlikeotherproductpoliciesandstrategies,thedistinguishingfeatureofthepolicyofdiv ersificationis toincreasethenumberofproductsintheproductportfolioofthecompany .invol vesfundamentalchangeintheoldproduct,say,initsmodularconstruction, butnotmerelyatacticaladjustmentinthedesign,style,colourofsizeoftheproducttogaint emporarymarketadvantage. ReasonsforDiversificationAstudyofthebusinessliteratureandanalysisofthecompanyhis toriesrevealthatthequestionsofcorporatesurvival,stabilityandgrowtharetheprimemov ersofdiversification. SurvivalTooffsetdecliningorvanishingmarkets. Tocompensatefortechnologicalobsolescence. Tooffsetobsoletefacilities. Toarrestdecliningprofitmargins. Tooffsetanunfavourablegeographiclocationbroughtaboutbychangingeconomicfactors. vidyarthiplus.comItThefollowingarethespecificreasonsfordiversification:

vidyarthiplus.com Stability Toeliminateofoffsetslumps. Tooffsetcyclicalfluctuations. Tomaintainemploymentoflabourforce. Toprovideabalancebetweenoldandnewproducts. Tomaintainmarketshare. Tomeetnewproductsofcompetitors. Tomaintainanassumedsourceofsupply. Toreducedependenceonexistingproducts. Toprovideabalancebetweenhighandlowmarginproducts. KindsofDiversification: Horizontaldiversificationmaybedescribedasintroductiontonewproductswhichareakinto theindustry sproduct-line.Theynewproductssointroducedmaynotcontributeanythingtothe presentproductsinanywaybutmaycatertothemissionwhichliewithintheVerticaldiversifi cationmaybedescribedasinclusionofnewproductssuchascomponents,parts,andmaterialsi nthecurrentproductportfolioofthecompany.Thesenewproductsperformdistinctanddiffer entmissionsfromthatoftheoriginalproducts. realmoftheindustryofwhichthecompanyisamember.

Lateraldiversificationmaybedescribedasamovetoexpandproductlinebeyondtheconfineso ftheindustry.Itmayincludemaykindofproductwhichmaybetotallydifferent.Forinstande, theBatawhichareprimarilyinfootwearbusinesshavediversifiedtheirbusinessintoreadym adegarments.Similarly,theRaymondswhoarebasicallyintextilebusinesshavediversified theirbusinessintofootwear. PRODUCT-LINESIMPLIFICATIONSimplificationmaybedefinedas,deletingoreliminatingfrom theproduct-linethoseproductitemswhichnomoresatisfythecriterialaiddownbyacompanyf orretainingproductsintheline.Itistheoppositeofproductdiversificationandinvolvesa llthosemanagerialexerciseswhichaimatproduct-linerationalization. NeedforProductSimplificationDecliningabsolutesalesvolume. Salesvolumedecreasingasapercentageofthefirm stotalsales. Decreasingmarketshare. Pastsalesvolumenotuptoprojectedamounts. Expectedfuturesalesdisappointing. Futuremarketpotentialnotfavourable. Returnoninvestmentbelowminimallyacceptablelevel. Variablecostexceedsrevenues. vidyarthiplus.comLateraldiversificationmaybedescribedasamovetoexpandproductlineb eyondtheconfinesoftheindustry.Itmayincludemaykindofproductwhichmaybetotallydiffe rent.Forinstande,theBatawhichareprimarilyinfootwearbusinesshavediversifiedtheirb usinessintoreadymadegarments.Similarly,theRaymondswhoarebasicallyintextilebusine sshavediversifiedtheirbusinessintofootwear. PRODUCT-LINESIMPLIFICATIONSimplificationmaybedefinedas,deletingoreliminatingfrom theproduct-linethoseproductitemswhichnomoresatisfythecriterialaiddownbyacompanyf orretainingproductsintheline.Itistheoppositeofproductdiversificationandinvolvesa llthosemanagerialexerciseswhichaimatproduct-linerationalization. NeedforProductSimplificationDecliningabsolutesalesvolume. Salesvolumedecreasingasapercentageofthefirm stotalsales. Decreasingmarketshare. Pastsalesvolumenotuptoprojectedamounts. Expectedfuturesalesdisappointing. Futuremarketpotentialnotfavourable. Returnoninvestmentbelowminimallyacceptablelevel. Variablecostexceedsrevenues. vidyarthiplus.com

Variouscostsaspercentageofsalesconsistentlyincreasing. Pricemustbeconsistentlyloweredtomaintainsales. Promotionalbudgetedmustbeconsistentlyincreasedtomaintainsales. Onceadecisiontoabandonaproductistaken,companymustformulateaprogrammeforitssmooth deletionsothatitisimplementedwithminimumofproblems. PLANNEDOBSOLESCENCETheword obsolescence meansto wearout or fallintodisuse . Whenappliedtoproducts,obsolescencemeanswearingourorfallingWhenitisknownthatevery productisliabletogetoutofuse, therearetwooptionsavailabletoamarketer.Thefirstoptionistoallowtheproducttodieout inanaturalway.Inthis,marketers,acceptproductdeathasfaitaccompliafterhavingsuffer edsufficientcostpressuresandlostprofitopportunities. Thesecondoptionistoplanitsdeathinadvancesothatitquitsatatimedesiredbythemanageme nt.Itwearsoutandfallintodisseontheexpiryofafixedtimeperiod.Thisiscalledthestrate gyofPlannedObsolescenceandhasbeendefinedas, apurposefulprogrammeofvendorstoshorten thetimespanornumberofperformanceover vidyarthiplus.comIncreasinglygreaterpercentageofexecutivetimerequired. intodisuseofproductsintermsofconsumeracceptance. Variouscostsaspercentageofsalesconsistentlyincreasing. Pricemustbeconsistentlyloweredtomaintainsales. Promotionalbudgetedmustbeconsistentlyincreasedtomaintainsales. Onceadecisiontoabandonaproductistaken,companymustformulateaprogrammeforitssmooth deletionsothatitisimplementedwithminimumofproblems. PLANNEDOBSOLESCENCETheword obsolescence meansto wearout or fallintodisuse . Whenappliedtoproducts,obsolescencemeanswearingourorfallingWhenitisknownthatevery productisliabletogetoutofuse, therearetwooptionsavailabletoamarketer.Thefirstoptionistoallowtheproducttodieout inanaturalway.Inthis,marketers,acceptproductdeathasfaitaccompliafterhavingsuffer edsufficientcostpressuresandlostprofitopportunities. Thesecondoptionistoplanitsdeathinadvancesothatitquitsatatimedesiredbythemanageme nt.Itwearsoutandfallintodisseontheexpiryofafixedtimeperiod.Thisiscalledthestrate gyofPlannedObsolescenceandhasbeendefinedas, apurposefulprogrammeofvendorstoshorten thetimespanornumberofperformanceover vidyarthiplus.comIncreasinglygreaterpercentageofexecutivetimerequired. intodisuseofproductsintermsofconsumeracceptance.

thuspresumableyencouraginganearlypurchaseforreplacement. Theobsolescenceofaproductmaybeduetofollowingfactors.: Physicalincapacityoftheproducttocontinueperformanceofheintendedserviceorfunction duetobreakage,wearorcorrosion. Availabilityofcloseandbettersubstitutesofcurrentliabilities. vidyarthiplus.comwhichaproductcontinuestosatisfycustomers Changesinconsumerperceptionaboutproducts acceptablethuspresumableyencouraginganear lypurchaseforreplacement. Theobsolescenceofaproductmaybeduetofollowingfactors.: Physicalincapacityoftheproducttocontinueperformanceofheintendedserviceorfunction duetobreakage,wearorcorrosion. Availabilityofcloseandbettersubstitutesofcurrentliabilities. vidyarthiplus.comwhichaproductcontinuestosatisfycustomers Changesinconsumerperceptionaboutproducts acceptable usefulness. REVIEWQUESTIONS: 1.Suggestproduct-marketintegrationstrategy. 2.Whatdoyouunderstandby productpositioning ?whataretheobjectivesofpositioning? 3.Whatisproductdiversification?Specifythereasons. 4.Whatdoyouunderstandbyproduct-linesimplification?Whatistheneedforsuchsimplifica tion? 5.Whatisplannedproductobsolescence? ***********

vidyarthiplus.com LESSON 11BRANDINGANDPACKAGINGDECISIONS LearningObjectives: ThemeaningandreasonsforbrandingThedifferentandbrandingdecisionsThemeaning,typeso fpackagingThefunctionsanddecisionsareasofpackagingBRANDINGTheselectionofaproperb randnameisthemajorstepinmanagingaproduct.ThebrandingofaproductisaAfterreadingthi slesson,youshouldbeabletounderstandnew-bornchild.Itbasicallyservestoidentifytheoffering.Brandingcanaddvaluetoaprodu ctandisthereforeanintrinsicaspectofproductstrategy.Essentially,abrandisapromiseo fthesellerodeliversaspecificsetofbenefitsorattributesorservicestothebuyer.Eachbr andrepresentsalevelofquality. likenaming Somekeydefinitionsofbrandingare: Brand:Brandisaname,term,sign,symbolordesignoracombinationofthem,whichisintendedt oidentifythegoodsorservices

ofonesellerorgroupofsellersandtodifferentiatethemfromthoseofcompetitors.Thusabra ndidentifiesthemakerorsellerofaproduct. BrandName:Itisthatpartwhichcanbevocalized theutterableExample:Videocon,Dalda. BrandMark:itisthatpartofabrandwhichcanberecognizedsuchasasymbol,designordistinct ivecolouringorExample: Butterfly ofCo-optex , Maharaja ofAirIndiaor RedIndiaor Redcolourinvertedtriangle forFamilyp ning. TradeName/Mark:itisbrandnameofsymbolthatisgiven legalprotection becauseitiscapableof exclusiveappropriationbytheseller. vidyarthiplus.comlettering. ofonesellerorgroupofsellersandtodifferentiatethemfromthoseofcompetitors.Thusabra ndidentifiesthemakerorsellerofaproduct. BrandName:Itisthatpartwhichcanbevocalized theutterableExample:Videocon,Dalda. BrandMark:itisthatpartofabrandwhichcanberecognizedsuchasasymbol,designordistinct ivecolouringorExample: Butterfly ofCo-optex , Maharaja ofAirIndiaor RedIndiaor Redcolourinvertedtriangle forFamilyp ning. TradeName/Mark:itisbrandnameofsymbolthatisgiven legalprotection becauseitiscapableof exclusiveappropriationbytheseller. vidyarthiplus.comlettering. BRANDINGDECISIONThefirstdecisionsiswhetherthecompanyshouldputabrandnameforitspro duct.Historically,mostproductswentunbranded.Butto-day,brandinghasbecomesuchastro ngforcethatnothinggoesunbranded.Forinstances,saltisalsonowmarketedindistinctivem anufacturer sbrand. REASONSFORBRANDING 1.Thebrandnamemakesiseasierforidentificationoftheproductbothforthemarketerandcon sumer. 2.3.Thebrandnameandtrademarkprovidelegalprotectionofuniqueproductfeatureswhichwo uldotherwisebecopiedbycompetitors. Itmakeseasiertoprocessordersandtrackdownproblems.

4.Brandinggivesthemarketertheopportunitytoattractloyalandprofitablesetofcustomer sbycreatingbrandimageandbrandloyalty. 5.Goodbrandhelpsbuildthecorporateimage. 6.Brandinghelpsthemarketertomarkets. Brandnameshelpmakingtheproducteasiertohandle,identifyingsuppliers,holdingproduct iontocertainqualityandincreasingbuyerpreference.BrandnamesalsohelpconsumerstoSEL ECTIONOFBRANDNAMEThebrandnameshouldbecarefullychosen.Agoodnamecanaddgreatlytoapr oduct ssuccess.Mostlargemarketingcompanieshavedevelopedaformalbrandnameselectionpr ocess.Findingthebestbrandnameisadifficulttask.Itbeginswithacarefulreviewofthepro ductanditsbenefits,thetargetmarket,andproposedmarketing vidyarthiplus.comstandardsidentifyqualitydifferencesandtomakeefficientpurchase. Brandinggivesthemarketertheopportunitytoattractloyalandprofitablesetofcustomersb ycreatingbrandimageandbrandloyalty. 5.Goodbrandhelpsbuildthecorporateimage. 6.Brandinghelpsthemarketertomarkets. Brandnameshelpmakingtheproducteasiertohandle,identifyingsuppliers,holdingproduct iontocertainqualityandincreasingbuyerpreference.BrandnamesalsohelpconsumerstoSEL ECTIONOFBRANDNAMEThebrandnameshouldbecarefullychosen.Agoodnamecanaddgreatlytoapr oduct ssuccess.Mostlargemarketingcompanieshavedevelopedaformalbrandnameselectionpr ocess.Findingthebestbrandnameisadifficulttask.Itbeginswithacarefulreviewofthepro ductanditsbenefits,thetargetmarket,andproposedmarketing vidyarthiplus.comstandardsidentifyqualitydifferencesandtomakeefficientpurchase. strategies. Agoodbrandnameshouldbasicallypossesthefollowingqualities: Itshouldbeshort,simpleandeasytopronounce.Forexample, Usha,Lux,Rinetc. Thebrandnameshouldbedistinctive. Itshouldbepleasingwhenpronounced.Example:Matiz. Itshouldbeeasytorecognizeandremember.Example:Indica

Itshouldnotbeoffensive,obscenenegative. Itshouldbeadaptabletopackagingandlabelingrequirementsandtoanyadvertisingmedia. qualities.Example:Coldspot vidyarthiplus.comItshouldbecapableofregistrationandlegalprotection. Itshouldsuggestsomethingabouttheproduct sbenefitsandItshouldnotbeoffensive,obscene negative. Itshouldbeadaptabletopackagingandlabelingrequirementsandtoanyadvertisingmedia. qualities.Example:Coldspot vidyarthiplus.comItshouldbecapableofregistrationandlegalprotection. Itshouldsuggestsomethingabouttheproduct sbenefitsand Brand-SponsorDecisionoptionswithrespecttobrandsponsorship. Theproductmaybelaunchedasamanufacturer-owned.Oritmaybelaunchedbythemanufacturera salicensednamebrand.Orthemanufacturermayselltheproducttomiddlemen,whoputonapriva tebrand whocalledmiddlemenbrand,distributorbrandofdealerbrand. BrandNameStrategiesCompaniesfollowdifferentstrategiesinchoosingbrandnamesforInde cidingtobrandaproduct,themanufacturerhasseveralthewiderangeofproductstheymarket. IndividualBrandNames Somecompanieschoosedistinctnamesforeachoftheiroffering. Forinstance,HindustanLever,ProcterandGamblefavourindividualbrandnamesfortheirpro ducts.Therearemanyreasonsfordoingthis:

vidyarthiplus.comProductsmarketedbyacompanymaybecomediverseandhenceProductsmarke tedbyacompanymaybecomediverseandhence requiredistinctnames. Companiesmaywishtomarkettheircombinationofproductstodifferentmarketsegments. whichcompetewitheachother. Thecompanydoesnottieitsreputationtotheproduct sacceptance.Iftheproductfails,itdoes notcompromisethemanufacturer sname. conviction. FamilyBrandNameknownasumbrellabranding,foritsseveralproducts.Example:Bajaj, Godrej,Pondsetc.Usingablanketfamilynameforallproductshassomeadvantages: 1)Thecostofintroducingtheproductwillbelessbecausethereisnoneedfor name researchorfor heavyadvertisingexpenditurestocreatebrand-namerecognitionandpreference. 2)Saleswillbemoreifthemanufacturer snamehasareputation. Forinstance,TVSWashingMachine, Hitachi Airconditionersetc. Sometimescompaniesmayhave,multiplebrandofaproduct, AnewnamepermitsthebuildingupofnewexcitementandSomecompaniesuseacommonorsuccessfu lfamilyname,also

Theuseofthefamilybrandingstrategydoesnotalwaysguaranteesuccess.Therearemanyinsta nceswherethisstrategyhasfailed. Pondslauncheditstoothpaste,usingthedistinctivefloweredpintpackagingwhichitassoci atedwithitstalcumpowderwiththesamefamilybrandname.Marketsurveyrevealedthatthisto othpastehadfaileddespitename.itisalsoriskytolaunchanewproductunderthebrandnameof anotherhighlysuccessfulproduct,ifsuccessiveproductsunderafamilybrandnamedonotper formwell,theestablishedgoodwillorimagemaysuffer.Themoreeffectiveinmarketingnewva riationsofthebasicproduct.ForthisreasonLiril,CintholSoapwithanimprovedperfumewer ewell vidyarthiplus.comstrategyofusingacommonfamilybrandnamewillbeperhapsTheuseofthefa milybrandingstrategydoesnotalwaysguaranteesuccess.Therearemanyinstanceswherethis strategyhasfailed. Pondslauncheditstoothpaste,usingthedistinctivefloweredpintpackagingwhichitassoci atedwithitstalcumpowderwiththesamefamilybrandname.Marketsurveyrevealedthatthisto othpastehadfaileddespitename.itisalsoriskytolaunchanewproductunderthebrandnameof anotherhighlysuccessfulproduct,ifsuccessiveproductsunderafamilybrandnamedonotper formwell,theestablishedgoodwillorimagemaysuffer.Themoreeffectiveinmarketingnewva riationsofthebasicproduct.ForthisreasonLiril,CintholSoapwithanimprovedperfumewer ewell vidyarthiplus.comstrategyofusingacommonfamilybrandnamewillbeperhaps acceptedinthemarket. BRANDIMAGEThetermbrandimagesignifiesthereputationandthesymbolicmeaningattachedto abrand.Imageisanabstractconceptincorporatingtheinfluencesofpastpromotions, reputationsandpeerevaluationofthatbrand. Broadlyspeaking,thetotallyofanybrandismadeupofthreetypesofappeals. AppealtoReason:itbasicallyconsistsfomanyobjectivefactorsofevaluation.Forexample, whatdiesthebranddo?Whatdoesitcontain?Howdoesitperform?Whatbenefitsorfunctisndoes itserve?

AppealtoSenses:Howdoesthebrandlook,taste,smell,soundetc.Herebrandattempttosatisf ytheconsumer squestforsensorygratification,convenience,aestheticpleasure,intellect ual vidyarthiplus.comAppealtoSenses:Howdoesthebrandlook,taste,smell,soundetc.Herebra ndattempttosatisfytheconsumer squestforsensorygratification,convenience,aestheticp leasure,intellectual vidyarthiplus.com satisfactionetc. AppealtoEmotions:itreferstothebrand sstyle,themooditevokesandthepsychologicalrewar dsitgives.Althoughthesearemostlyintangiblefactorstheycreatesignificantimpression sontheconsumer. Theaboveappealscollectivelyproducethebrandimage.However, theimageofbrandmayvaryfromoneconsumertoanother.Thecoreofthebrandimageiscreatedby theadvertisingandothermarketingprogrammesinitiatedbythecompany.Ultimately,thetyp icalconsumerwillfiltervariouscommunicationsaboutthebrandandwilldevelopanimageont hebasisofhisexistingbeliefs, prejudicesandpredispositions. Manyfirmsstrivetobuilduniquebrandnamethatwilleventuallybecomeidentifiedwiththepr oductcategory.Forinstance,though Dalda isthebrandname,ithasidentifiedwiththeproductc ategory Vanaspathi. BRANDIDENTIFY Brandimage,asalreadyobserved,isperceptionalwhereasbrandidentityisaspirational.It meansbrandidentitycoverseventhoseperceptionswhichabrandmanagerswouldliketobeasso ciatedwiththe

brand.Itmeansabrandmanagerwouldlikeabrandimagetotraveltobrandidentitywhichistheg oal. Brandidentityhastwodimensionsstructurally aninnercoreidentityandextendedidentity. BrandIdentityinMarutiCar: Maruti scoreidentityisidentityisthatitisasmall,economical, fuelefficientcarwithproventechnology.Itsextendedidentityincludesitslargestmarket shareandavailabilityofcaresforeveryneed.ItsprovenJapanesetechnologyadaptedtoIndi anconditionsisalsoanimportantelementofextendedidentity. vidyarthiplus.combrand.Itmeansabrandmanagerwouldlikeabrandimagetotraveltobrandid entitywhichisthegoal. Brandidentityhastwodimensionsstructurally aninnercoreidentityandextendedidentity. BrandIdentityinMarutiCar: Maruti scoreidentityisidentityisthatitisasmall,economical, fuelefficientcarwithproventechnology.Itsextendedidentityincludesitslargestmarket shareandavailabilityofcaresforeveryneed.ItsprovenJapanesetechnologyadaptedtoIndi anconditionsisalsoanimportantelementofextendedidentity. vidyarthiplus.com BRANDPERSONALITYAsimplemethodtodescribebrandpersonalityistostateintermsofdemogra phiccharacteristics lifestyleandpersonalitytraits.Therearefivepersonalityfactorsna melysincerity,Excitement,competence, sophisticationandruggedness. Justlikehumanbeings,abrandalsohasapersonalitywithasetofcharacteristics.Thesechar acteristicsaredemographicsuchasasex,ageandsocio-economicclass.Forexample,mopedar efemininewhereasmobikesaremasculine.Rinisupperclasswhereas IdealSoap , PowerSoap aremidd leclass.ParagandApoorvaSareesareforthesophisticatedmodernwomen,whereasPoonamSare esareforcommonwomen.

Brandhavecertainphysicalcharacteristicsi.e.howtheylookandsoundhavecertainskillsa ndabilitiesi.e.whattheycandoandhowtheycanpersonandcertainassociationsandattitude s.Thebrandthereforeappealstosenses,toreasonandtoemotions.Eachbrandhasitshasown vidyarthiplus.comBrandhavecertainphysicalcharacteristicsi.e.howtheylookandsoundh avecertainskillsandabilitiesi.e.whattheycandoandhowtheycanpersonandcertainassoci ationsandattitudes.Thebrandthereforeappealstosenses,toreasonandtoemotions.Eachbr andhasitshasown vidyarthiplus.com personality. Thus,brandpersonalityisasumtotaloflook,anattitude,apatternofbehaviourandstyle. foryoungmenandnon-productrelatedfactorssuchasfilm-starsusingLux, tomakethemglamorousinfluencetheformationofbrandpersonality. Brandpersonalityprovidesanaddedinsight-intothebrand.Theconsumersassociatetheirpe rsonalitytotheproductsandthatdecidetheirattitudestowardstheproduct.Ithelpstodiff erentiatethebrandandhelpsinpositionstrategy.Furtheritmakespromotioneasier.Thebra ndpersonalityandproductattributeandcomplementtoeachother. BRANDPOSITIONINGBrandpositioningistheresultofconsumer sperceptionaboutthebrandrela tivetothecompetingbrands.Brandpositioningisapartofbrandidentityandvaluecompositi onthatistobeactivelycommunicatedtothetargetaudienceandthatdemonstratesovercompet ingbrands.AccordingtoKotlerpositioningistheactofdesigningthecompany soffersothatit occupiesadistinctandvaluedplaceinthemindofthetargetcustomers. BRANDEQUITYBothproduct-relatedfactorssuchas RufandTuf , Jeans anadvantage

marketplace.Somebrandsarelargelyunknowntomostbuyers.Othersbrands,havehighdegreeo fconsumerbrandawareness.Stillothersenjoybrandpreference buyersselectthemovertheoth ers.Finally,somebrandscommandahighdegreeofbrandloyalty. processofbrandbuilding. Albardefinesbrandequityasasetofassetsassociatedwithabrandandwhichaddtothevaluepr ovidedbytheproduct/servicetoitscustomers.Abrandequityisineffecttheaggregateofpot entialcustomer sbeliefsthatitwilldeliveronitspromise.Thusthetermbrandequityreferst othevalueinherentinawellknownbrandname. Apowerfulbrandhashighbrandequity.BrandshavehigherbrandBrandvaryintheamountofpowe randvaluetheyhaveintheequitytotheextentthattheyhavehigherbrandloyalty,nameawaren ess, perceivedquality,strongbrandassociation,andotherassetssuchaspatents,trademarksan dchannelrelationships.Abrandwithstrongbrandequityisavaluableasset.Infactitcaneve nbeboughtorsoldaprice.Theworld stopbrandsincludeCoca-Cola,Kodak,SonyandMercedes-Be nz.ThebestexamplefobrandequityisLifebuoywhichhasconsistentlyfollowedastrategyofa S oapforHealth andsimilarlyas HerbalSoap . Brandheritage meansbrandswhichhaveagloriouspast vidyarthiplus.comandacarefullynurturedimagebuildoveraperiodoftime. BrandequityistheHighbrandequityprovidesacompanywithmanycompetitivemarketplace.So mebrandsarelargelyunknowntomostbuyers.Othersbrands,havehighdegreeofconsumerbrand awareness.Stillothersenjoybrandpreference buyersselectthemovertheothers.Finally,so mebrandscommandahighdegreeofbrandloyalty. processofbrandbuilding. Albardefinesbrandequityasasetofassetsassociatedwithabrandandwhichaddtothevaluepr ovidedbytheproduct/servicetoitscustomers.Abrandequityisineffecttheaggregateofpot entialcustomer sbeliefsthatitwilldeliveronitspromise.Thusthetermbrandequityreferst othevalueinherentinawellknownbrandname. Apowerfulbrandhashighbrandequity.BrandshavehigherbrandBrandvaryintheamountofpowe randvaluetheyhaveintheequitytotheextentthattheyhavehigherbrandloyalty,nameawaren ess, perceivedquality,strongbrandassociation,andotherassetssuchaspatents,trademarksan dchannelrelationships.Abrandwithstrongbrandequityisavaluableasset.Infactitcaneve nbeboughtorsoldaprice.Theworld stopbrandsincludeCoca-Cola,Kodak,SonyandMercedes-Be nz.ThebestexamplefobrandequityisLifebuoywhichhasconsistentlyfollowedastrategyofa S oapforHealth andsimilarlyas HerbalSoap . Brandheritage meansbrandswhichhaveagloriouspast vidyarthiplus.comandacarefullynurturedimagebuildoveraperiodoftime. BrandequityistheHighbrandequityprovidesacompanywithmanycompetitive advantage. Apowerfulbrandenjoyshighlevelofconsumerbrandawarenessandloyalty.

Consumersacceptandwillingtopaymoreforethepowerfulbrand. Thecompanywillincurlowermarketingcostrelativetorevenues. Thecompanyhasmoreleverageinbargainingwithresellers,andThebrandnamecarrieshighcre dibility,thecompanycanmoreeasilylaunchbrandextensions. Apowerfulbrandoffersthecompanysomedefenseagainstfierce vidyarthiplus.comConsumersacceptandwillingtopaymoreforethepowerfulbrand. Thecompanywillincurlowermarketingcostrelativetorevenues. Thecompanyhasmoreleverageinbargainingwithresellers,andThebrandnamecarrieshighcre dibility,thecompanycanmoreeasilylaunchbrandextensions. Apowerfulbrandoffersthecompanysomedefenseagainstfierce vidyarthiplus.com pricecompetition. Measuringtheactualequityofbandnameisdifficult.Becauseitissohardtomeasure,compani esusuallydonotlistbrandequityontheirbalancesheets.Still,theypayhandsomelyforit.A ccordingtooneestimate,thebrandequityofCoca-Colais$36billion,Kodakfilm$10billion. Tobuildbrandequity,themanagerhastocreateandenhancebrandawareness,brandloyalityan dperceivedqualityofbrandandbrandassociations(i.e.associatingwithcertaintangiblea ndintangibleattributes).Itshouldbeunderstoodthatabrandisanintellectualpropertyan dthencepatentsformabrandasset. ThisrequirescontinuousR&Dinvestment,skillfuladvertisingandexcellenttradeandconsu merservice.Somecompaniesappoint brandequitymanagers toguardtheirbrands images,associat ionandquality. Someanalysisseebrandsasthemajorenduringassetofcompany, orlastingthecompany sspecificproductsandfacilities.Yet, behindeverypowerfulbrandstandsasetofloyalcustomer.

customerequity.Thissuggeststhatmarketingstrategyshouldfocusonextendingloyalcusto merlifetimevalue,withbrandmanagementservingasamajormarketingtool. BrandExtensionDecisionTherefore,thebasicgdgdsfgunderlyingbrandequityisAbrand-ext ensionsstrategyisanyefforttouseasuccessfulbrandnametolaunchproductmodificationor newproducts.Brandextensionalsocoverstheintroductionofnewpackagesizes,flavoursand models. Brandextensionsavesthemanufacturerthehighcostofpromotingnewnamesandcreatesinstan tbrandrecognitionofthenewproduct.Atthesametime,ifthenewproductfailstosatisfy,itm ighthurtconsumer sattitudetowardtheotherproductscarryingthesamebrandname. vidyarthiplus.comcustomerequity.Thissuggeststhatmarketingstrategyshouldfocusonex tendingloyalcustomerlifetimevalue,withbrandmanagementservingasamajormarketingtoo l. BrandExtensionDecisionTherefore,thebasicgdgdsfgunderlyingbrandequityisAbrand-ext ensionsstrategyisanyefforttouseasuccessfulbrandnametolaunchproductmodificationor newproducts.Brandextensionalsocoverstheintroductionofnewpackagesizes,flavoursand models. Brandextensionsavesthemanufacturerthehighcostofpromotingnewnamesandcreatesinstan tbrandrecognitionofthenewproduct.Atthesametime,ifthenewproductfailstosatisfy,itm ighthurtconsumer sattitudetowardtheotherproductscarryingthesamebrandname. vidyarthiplus.com Multi-BrandDecisionInmulti-brandstrategy,thesellerdevelopstwoormorebrandsinthesa meproductcategory.Manufactureradoptmulti-brandstrategiesforseveralreasons: retailer sdependenceontheirbrands. Afewconsumersaretoloyaltoabandthattheywillnottryofferseveralbrands. Manufacturerscangainmoreshelfspace,thusincreasingtheanother.Theonlywaytocapturet he brandswitchers isto

Creatingnewbrandsdevelopsexcitementsandefficiencywithinthemanufacturer sorganisati on. example,PalmoliveShavingCreamisofferedinLime, LavenderandAntisepticclasses. Towormorebrandscommonlycapturemoresalesandprofitsbecausetheycatertomoresegments. flavour,tasteetc.Forexample,Campa-OrangeandCampa-Cola. Indecidingwhethertointroduceanotherbrand,themanufacturershouldconsidersuchquesti onsas: Canauniquestorybebuiltforthenewbrand? Willtheuniquestorybebelievable? Howmuchwillthenewbrandconnibalisethemanufacturer sotherbrandsversuscompetitor sbrand s? Willthecostofproductdevelopmentandpromotionbecoveredbythesalesofthenewbrand? Amajorlimitationinintroducinganumberofmulti-brandentriesisthateachmayobtainonlya smallshareofthemarketandnonemaybeparticularlyprofitable.Thesecompaniesshouldweed outtheweakerbrandsandestablishtighterscreeningproceduresforchoosingnew vidyarthiplus.comAmulti-brandstrategypositionsthedifferentbenefitsandappealsande achbrandcanattractaseparatefollowing.ForIthelpstosellnewproductvariationsinterms ofcolour, Creatingnewbrandsdevelopsexcitementsandefficiencywithinthemanufacturer sorganisati on. example,PalmoliveShavingCreamisofferedinLime, LavenderandAntisepticclasses. Towormorebrandscommonlycapturemoresalesandprofitsbecausetheycatertomoresegments. flavour,tasteetc.Forexample,Campa-OrangeandCampa-Cola. Indecidingwhethertointroduceanotherbrand,themanufacturershouldconsidersuchquesti onsas: Canauniquestorybebuiltforthenewbrand? Willtheuniquestorybebelievable? Howmuchwillthenewbrandconnibalisethemanufacturer sotherbrandsversuscompetitor sbrand s? Willthecostofproductdevelopmentandpromotionbecoveredbythesalesofthenewbrand? Amajorlimitationinintroducinganumberofmulti-brandentriesisthateachmayobtainonlya smallshareofthemarketandnonemaybeparticularlyprofitable.Thesecompaniesshouldweed outtheweakerbrandsandestablishtighterscreeningproceduresforchoosingnew vidyarthiplus.comAmulti-brandstrategypositionsthedifferentbenefitsandappealsande achbrandcanattractaseparatefollowing.ForIthelpstosellnewproductvariationsinterms ofcolour,

brands.Ideally,acompany sbrandshouldcannibalizethecompetitor sbrandsandnoteachother. BRANDRE-POSITIONINGDECISIONHowever,wellabrandisinitiallypositionedinamarket,thec ompanymayhavetorepositionitlater.Acompetitormayhavelaunchedabrandnexttothecompan y sbrandandcutintoitsmarketshare.Orcustomerpreferencesmayhaveshifted,leavingthecom pany sbrand vidyarthiplus.combrands.Ideally,acompany sbrandshouldcannibalizethecompetitor sbrand sandnoteachother. BRANDRE-POSITIONINGDECISIONHowever,wellabrandisinitiallypositionedinamarket,thec ompanymayhavetorepositionitlater.Acompetitormayhavelaunchedabrandnexttothecompan y sbrandandcutintoitsmarketshare.Orcustomerpreferencesmayhaveshifted,leavingthecom pany sbrand vidyarthiplus.com withlessdemand. Managementmustweightwofactorsinmakingitschoiceofre-positioning.Thefirstisthecost ofshiftingthebrandtothenewsegment.Thecostincludeschangingtheproduct squalities,pac kaging, advertisingandsoon.Ingeneral,therepositioningcostriseswiththerepositioningdistan ces.Themoreradicallythebrandimagehastobemodified,thegreatertherequiredinvestment .Theotherfactoristherevenuethatwouldbeearnedbythebrandinthenewposition.Therevenu edependsuponthenumberofconsumersinthepreferencesegment,theiraveragepurchaserate, thenumberstrengthofcompetitorsinthatsegmentandthepricechargedbybrandsinthatsegme nt. Marketingresearchfirmshaveelaboratename researchproceduresincludingassociationtest s(whatimagescometomind?), learningtests(howeasilyisthenamepronounced?),memorytests(howwellisthenameremembe red?)andpreferencetests(whichnamesarepreferred?). and

HorlickswasrelaunchedasaNewHorlicksinanattractivenewjar. ThenewHorlicksclaimedmorenourishmentthroughadditionalproteinNow JuniorHorlicks hasbe enintroducedtargetingyoungsters. Lifebuoyisprobablytheoldesttoiledsoapavailabletoday.FromitssmallbeginningsinEngl andin1894,Lifebuoyhascomealongwaytobecomeoneofthemostpopularandlargessellingsoap sintheworld. WhenLifebuoywasintroducedintheIndianmarket100yearsago, itspositioningwasclear.Lifebuoywasthesoapthatwoulddestroygermsandkeepthebodyheal thy.Thoughthepropertieswereclear,thebrandfoundthegoingtoughinruralmarkets.Theref oreHindustanLeverLimiteddecidedtolaunchLifebuoyassoapforhandwashin1900.Thebrandb egantodevelopandatthisstage,Lifebuoywasrepositionedasabathsoap. WherethereisLifebu oy,thereishealth becameaverypopularslogan.In1964,thebrandwasrelaunchedwithaslightc hangeinitsshapeandwrapperdesignbackedbypowerfuladvertisementandintensificationin ruralmarkets.Withintensificationofcompetitionin1970,HindustanLeverLimitedlaunche d LifebuoyPersonal aperfumed,pink-coloured,75gmsoap.Butthebrandsufferedbecauseitdidno tcarrytheUSP shealthandvalueformoney.In1980,theHindustanLeverLimitedlaunched Lifebuo yPlus withanewperfume.Bythistime,LiquidLifebuoyalsostagesitsentrytostrengthenurban market.Intheruralmarkets,Lifebuoycontinueditsdominance.Eventoday60percentofLifeb uoysalesarefromruralareas.ThebrandremainsthelargessellingbrandandaCashCowforHind ustanLeverLimited. vidyarthiplus.comandcalcium,eightessentialvitaminsandironnutrients. aHorlickswasrelaunchedasaNewHorlicksinanattractivenewjar. ThenewHorlicksclaimedmorenourishmentthroughadditionalproteinNow JuniorHorlicks hasbe enintroducedtargetingyoungsters. Lifebuoyisprobablytheoldesttoiledsoapavailabletoday.FromitssmallbeginningsinEngl andin1894,Lifebuoyhascomealongwaytobecomeoneofthemostpopularandlargessellingsoap sintheworld. WhenLifebuoywasintroducedintheIndianmarket100yearsago, itspositioningwasclear.Lifebuoywasthesoapthatwoulddestroygermsandkeepthebodyheal thy.Thoughthepropertieswereclear,thebrandfoundthegoingtoughinruralmarkets.Theref oreHindustanLeverLimiteddecidedtolaunchLifebuoyassoapforhandwashin1900.Thebrandb egantodevelopandatthisstage,Lifebuoywasrepositionedasabathsoap. WherethereisLifebu oy,thereishealth becameaverypopularslogan.In1964,thebrandwasrelaunchedwithaslightc hangeinitsshapeandwrapperdesignbackedbypowerfuladvertisementandintensificationin ruralmarkets.Withintensificationofcompetitionin1970,HindustanLeverLimitedlaunche d LifebuoyPersonal aperfumed,pink-coloured,75gmsoap.Butthebrandsufferedbecauseitdidno tcarrytheUSP shealthandvalueformoney.In1980,theHindustanLeverLimitedlaunched Lifebuo yPlus withanewperfume.Bythistime,LiquidLifebuoyalsostagesitsentrytostrengthenurban market.Intheruralmarkets,Lifebuoycontinueditsdominance.Eventoday60percentofLifeb uoysalesarefromruralareas.ThebrandremainsthelargessellingbrandandaCashCowforHind ustanLeverLimited. vidyarthiplus.comandcalcium,eightessentialvitaminsandironnutrients. a

vidyarthiplus.com PACKAGINGDECISIONSPackaginghasbecomeaveryimportantpartofproductmanagement.Withco mpetitionincreasing,marketersturningtoinnovativepackagingtoestablishadistinctive Marketersareprovidingvalueadditiontoproductsandgreaterbenefitstoconsumersthrough packaging,therebyattemptingtoincreasethebrandvalue. Packagingincludestheactivitiesofdesigningandproducingthecontainerorwrapperforapr oduct.Thepackagetheproduct sprimarycontainer;asecondarypackagethatisthrownawaywhen theproductisabouttobeused.Labelingisalsopartofpackagingandconsistsofprintedinfor mationappearingonorwiththepackage. FunctionsofPackagingareedge. mayinclude Itcontainsandprotectstheproduct. Itattractstheattentionoftheconsumers. ItdescribestheproductIthelpsforeasilyhandlingIthelpsforself-servicesThefollowing arethemaindecisionareasinpackaging: PackageMaterial

vidyarthiplus.com PackageaestheticsPackageSizeandConveniencePACKAGINGMATERIALS Overtheyears,greatchangeshavetakenplaceinpackagematerials.Intheearlierdays,woodw asthemainmaterialforpackaging. Thisslowlygaveplacetopaperandpaperboards.Now,inadditiontopaperboard,polythenecar rybags.PlasticandmetalizedpolyesterlaminatematerialsarewidelyusedforpackagingThe yalsolendthemselvestoattractiveprinting/brandingonthem. ConsumerproductslikeTataTea,Nescafe,Dalda,Sweetshaveallgoneinforplasticpackagema terials.Therendgenerallyistowardsflexiblepackagingwherevertheproductslendthemsel vestosuchpackaging. Therearedurablerubbercontainers tanksanddrumsmadefromhightenacitypolyamidefabricma trixandcoatedwithcompatiblepolymers. Theyalsosavetransportationandhandlingcostconsiderably. PACKAGINGAESTHETICSWiththeincreasingneedforenhancingthesalesappealofpackaging,in creasedattentionisnowbeinggiventopackageaesthetics. Businessfirmsarealwaysinsearchofnewpackagematerials,designs, sizesandshapesthatwillenhancethesalesappealoftheirproducts.Ithasbecomeacommonpra cticeformarketers,especiallyinconsumerproductlines,torelyheavilyonpackageaesthet icsasapowerfultoolforsalesappeal,brandidentificationandproductdifferentiation.In somecasespackagingalsofacilitatesmerchandising.Thepackageaesthetics

playstheroleofa silentsalesmen inprojectingtherightimageofthe vidyarthiplus.complaystheroleofa silentsalesmen inprojectingtherightimageofthe vidyarthiplus.com product. Packagingisapowerfulcommunicationtool.Itcommunicatesalot; thepackageprovidesthefirstappealtotheconsumer.Theactualproductcomesonlylater.Its colour,itsshapeandsize,itslabelandlettering,thebrandname,thematerialused theyallca rrysomecommunication. Alongwithpackageaesthetics,packagesizeandconveniencealsocontributetothetotalprod uctappeal.Earlier,Pond sColdCreamwascominginabottle-shapedcontainer.Subsequently,P ond sintroducedtheColdCreaminaCandytube.Thenewpackagechangedtheveryconceptofthepro duct.Fromadressing-tableitem,isalsobecomeacarry-longproduct. Harpicliquidtoiletcleanerisanotherproductthathassuccessfullyexploitedtheconcepto fconsumerconvenienceThecontainer,fittedwithanozzleforcleaningthetoilet,givenHarp icanadvantageoverothersimilarproducts. Providingsmallunitpackageisalsoamethodofgoingwithcustomerpreferenceandconvenienc e.ToothandCoconutoilareallavailablenowinsmallquantitiesandsachets.Theuseofsachet sgainedpopularityforinducingproducttrialsandfortheconvenienceoffrequenttravelers .Inshampoo,brandslike Sunsilk and ClinicPlus havegainedalotofpenetrationintheruralmarket sthroughsachets.Thelowunitpriceofsachetsmakesthemaffordableeventothelowerendofhe marketandhelpsintrialandadoption. inpackaging. paste,Shampoo

Providingreusablecontainerinanotherwayofenhancingproductappeal. Nescafe ,comesinagla ssjarwhichcouldbelaterbeusedasaglass. Bournvita and Horlicks introduced1kghandlejarwhich wasmuchsoughtbytheconsumers. Refillpackagingisalsorelatedtoconsumerconvenienceandeconomy.SeveralproductslikeB ru,Bournvita,Horlicks,Parachute, Coconutoilarenotcomingrefillpacks.Therefillpacksaresoldataslightlylowerpricethan theregularpackageandthatitselfservesasa vidyarthiplus.comProvidingreusablecontainerinanotherwayofenhancingproductappeal. N escafe ,comesinaglassjarwhichcouldbelaterbeusedasaglass. Bournvita and Horlicks introduced 1kghandlejarwhichwasmuchsoughtbytheconsumers. Refillpackagingisalsorelatedtoconsumerconvenienceandeconomy.SeveralproductslikeB ru,Bournvita,Horlicks,Parachute, Coconutoilarenotcomingrefillpacks.Therefillpacksaresoldataslightlylowerpricethan theregularpackageandthatitselfservesasa vidyarthiplus.com salespromotioneffort. DEVELOPINGPACKAGING Developinganeffectivepackageforanewproductsrequiresalargenumberofdecisions. Thefirsttaskistoestablishthe packagingconcept .Theordofortheparticularproduct. Decisionsmustbemadeonfurtherelementsofpackagedesign size,shape,materials,colour,textandbrandmark. Afterthepackagingisdesigned,itmustbeputthroughanumberoftests. Engineeringtests areco nductedtoensurethatthepackagestandsupundernormalconditions, Visualtests toensurethat thescriptislegibleandthecolourharmonious; Dealertests toensurethatdealersfindthepack agesattractiveandeasytohandle,and Consumertests toensurefavourableconsumerresponse. packagingconceptisadefinitionofwhatthepackageshouldbasicallybe

Marketersmustgraspthroughsystematicresearch,consumerpreferencesontheonehandandth ecostandavailabilityaspectsontheotherandprovidetheconsumerswiththebestpossiblepa ckaging.Theyshouldalsorememberthatanychangeinpackagingmustbehandledcarefully.Fir msmustpayattention,however,tothegrowingsocietalconcernsaboutpollutioncausedbypac kingmakedecisionsthatservesociety sinterestaswellasimmediatecustomerand vidyarthiplus.commaterialsandMarketersmustgraspthroughsystematicresearch,consume rpreferencesontheonehandandthecostandavailabilityaspectsontheotherandprovidethec onsumerswiththebestpossiblepackaging.Theyshouldalsorememberthatanychangeinpackag ingmustbehandledcarefully.Firmsmustpayattention,however,tothegrowingsocietalconc ernsaboutpollutioncausedbypackingmakedecisionsthatservesociety sinterestaswellasim mediatecustomerand vidyarthiplus.commaterialsand companyobjectives. LABELING Labelsasmallslipplacedonorneartheproducttodenoteitsnature,contents,ownershipetc. Itmayrangefromsimpletagsattachedtoproductstocomplexgraphicsthatarepartofthepacka ge. Labelperformseveralfunctions: Thelabelhelpsidentifytheproductorbrand. Thelabelmightdescribeseveralthingsabouttheproduct whomadeit,wherewasmade,whenitwasmade,itsItmightpromotetheproductthroughitsattrac tivedesign. KINDSOFLABELS1.BrandLabels:Theselabelsareexclusivelymeantforpopularizing2.Gthebr andnameoftheproduct,Example:Soaps,Cigarettes. radeLabels:theselabelgiveemphasistostandardsorgrades, Example:Dusttea,Clothetc. contents,howtistobeusedandhowtouseitsafetyetc.

3.DescriptiveLabels:thelabelswhicharedescriptiveinnaturearecalleddescriptivelabe ls.Theydescribeproductfeatures,contents, methodofusingitetc.Example:Milk,foodproductsandmedicines. 4.PromotionalLabels:Theselabelsaimatattachingtheattention, product. Themarketersshouldmakesurethattheirlabelscontainalltherequiredinformationbeforel aunchingtheproduct. PRODUCT-SUPPORTSERVICESCustomerserviceisanotherelementofproductstrategy.Moreandm orecompaniesareusingproduct-supportservicesasamajortoolingainingcompetitiveadvan tage. Goodcustomerserviceisgoodforbusiness.Itcostslesstokeepthegoodwillofexistingcusto mersthatitdoesnewcustomersorwoobacklostcustomers.Firmsthatprovidehigh-qualityser viceusuallyoutperformtheirlessservice-orientedcompetitors.Astudycomparingheperfo rmanceofbusinessesthathadhighandlowcustomerratingsofservicequalityfoundthatthehi gh-servicebusinessesmanagedtochargemore,growfaster,andmakemoreprofit.Clearly,mar ketersneedtothingcarefullyabouttheirservicestrategies. Acompanyshoulddesignitsproductandsupportservicestomeettheneedstotargetcustomer.T hefirststepindecidingwhichproduct-supportservicestoofferistodetermineboththeserv ices vidyarthiplus.comarousingdesireandcreatingamongtheconsumerstobuythetoattractDesc riptiveLabels:thelabelswhicharedescriptiveinnaturearecalleddescriptivelabels.The ydescribeproductfeatures,contents, methodofusingitetc.Example:Milk,foodproductsandmedicines. 4.PromotionalLabels:Theselabelsaimatattachingtheattention, product. Themarketersshouldmakesurethattheirlabelscontainalltherequiredinformationbeforel aunchingtheproduct. PRODUCT-SUPPORTSERVICESCustomerserviceisanotherelementofproductstrategy.Moreandm orecompaniesareusingproduct-supportservicesasamajortoolingainingcompetitiveadvan tage. Goodcustomerserviceisgoodforbusiness.Itcostslesstokeepthegoodwillofexistingcusto mersthatitdoesnewcustomersorwoobacklostcustomers.Firmsthatprovidehigh-qualityser viceusuallyoutperformtheirlessservice-orientedcompetitors.Astudycomparingheperfo rmanceofbusinessesthathadhighandlowcustomerratingsofservicequalityfoundthatthehi gh-servicebusinessesmanagedtochargemore,growfaster,andmakemoreprofit.Clearly,mar ketersneedtothingcarefullyabouttheirservicestrategies. Acompanyshoulddesignitsproductandsupportservicestomeettheneedstotargetcustomer.T hefirststepindecidingwhichproduct-supportservicestoofferistodetermineboththeserv ices vidyarthiplus.comarousingdesireandcreatingamongtheconsumerstobuythetoattract

valuedbytargetconsumersandtherelativeofthese. Secondly,thecompanieshastodesigntheproductthatrarelybreakdownandareeasilyflexibl ewithlittleserviceexpense. Giventheimportanceofcustomerserviceasamarketingtool,maycompanieshavesetupstrongc ustomerserviceoperationtohandlecomplaintsandadjustments,creditservice,service, importancetechnicalserviceandconsumerinformation?Anactivecustomerserviceoperatio ncoordinatesallthecompany sservices,createsconsumersatisfactionandloyalty,andhelps thecompanytofurthersetitselfapart vidyarthiplus.commaintenancevaluedbytargetconsumersandtherelativeofthese. Secondly,thecompanieshastodesigntheproductthatrarelybreakdownandareeasilyflexibl ewithlittleserviceexpense. Giventheimportanceofcustomerserviceasamarketingtool,maycompanieshavesetupstrongc ustomerserviceoperationtohandlecomplaintsandadjustments,creditservice,service, importancetechnicalserviceandconsumerinformation?Anactivecustomerserviceoperatio ncoordinatesallthecompany sservices,createsconsumersatisfactionandloyalty,andhelps thecompanytofurthersetitselfapart vidyarthiplus.commaintenance fromcompetitors. REVIEWQUESTIONS: 1.Whatisbranding?Whatarethereasonsforbranding? 2.Whatdoyouunderstandby brandequity ? 3.Whatrethefunctionsofpackaging?Whatarethemajordecisionareasinpackaging? 4.Whatislabeling?Whataretheusualcontentsoflebeling? **********

vidyarthiplus.com LESSON 12PRICINGDECISIONS LearningObjectivesThemeaningforpricingandfactorsaffectingpricing, Thevariouspricingobjectives; Differentpricingmethods; Thepricingofnewproject. Amongthedifferentcomponentsofthemarketing-mix,priceplaysanimportantroletobringab outproduct-marketintegration.Priceistheonlyelementinthemarketing-mixthatproducts revenue. Inthenarrowestsense,priceistheamountofmoneychargesforaproductorservice.Morebroad ly,priceisthesumofallthevaluesthatcustomerexchangeforthebenefitsofhavingorusingt heproductorservice.Pricemaybedefinedasthevalueofproductattributesexpressedinmone tarytermswhichacustomerpaysorisexpectedtopayinexchangeandanticipationoftheexpect edorofferedutility. Afterreadingthislesson,youshouldbeabletounderstandPricinghelpstoestablishmutuallyadvantageouseconomicrelationshipandfacilitiesthet ransferofownershipofgoodsand

servicesfromthecompanytobuyers.Themanagerialtasksinvolvedinproductpricinginclude establishingthepricingobjectives,identifyingthepricegoverningfactors,ascertainin gtheirrelevanceandrelativeimportance,determiningproductvalueinmonetarytermsandfo rmulationofpricepoliciesandstrategies. Thus,pricingplayafargreaterroleinthemarketing-mixofacompanyandsignificantlycontr ibutestotheeffectivenessandFACTORSINFLUENCINGPRICINGPriceisinfluencedbybothinter nalandexternalfactors.Ineachofthesecategoriessomemaybeecono0micfactorsandsomepsy chologicalfactors;again,somefactorsmaybequantitativeothersqualitative. InternalFactorsinfluencingpricing. objectivesaresurvival,currentprofitmaximizaitn, market-shareleadershipandproduct-qualityleadership. Theimagesoughbythefirmthroughpricing. Thedesirablemarketpositioningofthefirm. Thecharacteristicsoftheproduct. Priceelasticityofdemandoftheproduct. vidyarthiplus.comsuccessofthemarketingstrategyandsuccessofthefirm. andyetCorporateandmarketingobjectivesofthefirm.Thecommonservicesfromthecompanyto buyers.Themanagerialtasksinvolvedinproductpricingincludeestablishingthepricingob jectives,identifyingthepricegoverningfactors,ascertainingtheirrelevanceandrelati veimportance,determiningproductvalueinmonetarytermsandformulationofpricepolicies andstrategies. Thus,pricingplayafargreaterroleinthemarketing-mixofacompanyandsignificantlycontr ibutestotheeffectivenessandFACTORSINFLUENCINGPRICINGPriceisinfluencedbybothinter nalandexternalfactors.Ineachofthesecategoriessomemaybeecono0micfactorsandsomepsy chologicalfactors;again,somefactorsmaybequantitativeothersqualitative. InternalFactorsinfluencingpricing. objectivesaresurvival,currentprofitmaximizaitn, market-shareleadershipandproduct-qualityleadership. Theimagesoughbythefirmthroughpricing. Thedesirablemarketpositioningofthefirm. Thecharacteristicsoftheproduct. Priceelasticityofdemandoftheproduct. vidyarthiplus.comsuccessofthemarketingstrategyandsuccessofthefirm. andyetCorporateandmarketingobjectivesofthefirm.Thecommon

Thesatgeoftheproductontheproductlifecycle. Turnaroundrateoftheproduct. Costsofmanufacturingandmarketing. Productdifferentiationpracticedbythefirm. Otherelementsofmarketingmixofthefirmandtheir vidyarthiplus.comThesatgeoftheproductontheproductlifecycle. Turnaroundrateoftheproduct. Costsofmanufacturingandmarketing. Productdifferentiationpracticedbythefirm. Otherelementsofmarketingmixofthefirmandtheir vidyarthiplus.com interactionwithpricing. Consumptionoftheproductlineofthefirm. ExternalFactorsInfluencesPricingMarketcharacteristicsBuyersbehaviorsinrespecttot hegivenproduct. Bargainingpowerofthecustomer. Bargainingpowerofthemajorsuppliers. Competitor spricingpolicy. Governmentcontrols/regulationonpricing. OtherrelevantlegalaspectsSocialconsiderations. Understanding,ifany,reachedwithpricecartels.

PRICINGPROCEDURE1.DevelopmentofInformationBaseThefirststepindeterminingthebasicp riceofacompany sproduct(s) istodevelopanadequateandup-to-dateinformationbaseonwhichpricedecisionscanbebased .Itiscomposedofdecision-inputssuchascostofproduction,consumerdemand,industry,pri cesandpractices,governmentregulations. 2.EstimatingSalesandProfitsHavingdevelopedtheinformationbase,managementshoulddev elopaprofileofsalesandprofitatdifferentpricelevelsinordertoascertainthelevelassu ringmaximumsalesandprofitsinagivensetofsituation.Whenthisinformationismatchedpri cingobjectives,managementgetsthepreviewofthepossiblerangeoftheachievementofobjec tivesthroughpricecomponentinthemarketing-mix. 3.AnticipationofCompetitiveReactionPricinginthecompetitiveenvironmentnecessitate santicipationofThepricingprocedureusuallyinvolvesthefollowingsteps: competitivereactiontothepricebeingset.Theco0mpetitionforcompany sproduct(s)mayaris efromsimilarproducts,closesubstitutes.Thecompetitor sreactionmaybeviolentorsubdued orevennone.Similarly,thereactionmaybeinstantordelay.Inordertoanticipatesuchavari etyofreactions,itisnecessarytocollect vidyarthiplus.comagainstPRICINGPROCEDURE1.DevelopmentofInformationBaseThefirstst epindeterminingthebasicpriceofacompany sproduct(s) istodevelopanadequateandup-to-dateinformationbaseonwhichpricedecisionscanbebased .Itiscomposedofdecision-inputssuchascostofproduction,consumerdemand,industry,pri cesandpractices,governmentregulations. 2.EstimatingSalesandProfitsHavingdevelopedtheinformationbase,managementshoulddev elopaprofileofsalesandprofitatdifferentpricelevelsinordertoascertainthelevelassu ringmaximumsalesandprofitsinagivensetofsituation.Whenthisinformationismatchedpri cingobjectives,managementgetsthepreviewofthepossiblerangeoftheachievementofobjec tivesthroughpricecomponentinthemarketing-mix. 3.AnticipationofCompetitiveReactionPricinginthecompetitiveenvironmentnecessitate santicipationofThepricingprocedureusuallyinvolvesthefollowingsteps: competitivereactiontothepricebeingset.Theco0mpetitionforcompany sproduct(s)mayaris efromsimilarproducts,closesubstitutes.Thecompetitor sreactionmaybeviolentorsubdued orevennone.Similarly,thereactionmaybeinstantordelay.Inordertoanticipatesuchavari etyofreactions,itisnecessarytocollect vidyarthiplus.comagainst

informationaboutcompetitorsinrespectoftheirproductioncapacity, coststructure,marketshareandtargetconsumers. 4.ScanningTheInternalEnvironmentBeforedeterminingtheproductpriceitisalsonecessar ytoscanandunderstandtheinternalenvironmentofthecompany.Inrelationtopricetheimpor tantfactorstobeconsideredrelatetotheproductioncapacitysanctioned,installedanduse d,theeaseofexpansion,contractingfacilities,inputsupplies,andthestateoflabourrela tions.Allthesefactorsinfluencepricingdecisions. 5.ConsiderationofMarketing-mixComponentsAnotherstepinthepricingprocedureistocons idertheroleofothercomponentsofthemarketing-mixandweightheminrelationtoprice.Inre spectofproductthedegreeofperishabilityandshelf-life,shapethepriceanditsstructure ;fastertheperishabilitylowerislikelytobetheprice. 6.SelectionsofPricePoliciesandStrategiesThenextimportantstepinthepricingprocedur eistheselectionofrelevantpricingpoliciesandstrategies.Thesepoliciesandstrategies provideconsistentguidelinesandframeworkforsettingaswellasvaryingpricestosuitspec ificmarketandcustomer vidyarthiplus.cominformationaboutcompetitorsinrespectoftheirproductioncapacity, coststructure,marketshareandtargetconsumers. 4.ScanningTheInternalEnvironmentBeforedeterminingtheproductpriceitisalsonecessar ytoscanandunderstandtheinternalenvironmentofthecompany.Inrelationtopricetheimpor tantfactorstobeconsideredrelatetotheproductioncapacitysanctioned,installedanduse d,theeaseofexpansion,contractingfacilities,inputsupplies,andthestateoflabourrela tions.Allthesefactorsinfluencepricingdecisions. 5.ConsiderationofMarketing-mixComponentsAnotherstepinthepricingprocedureistocons idertheroleofothercomponentsofthemarketing-mixandweightheminrelationtoprice.Inre spectofproductthedegreeofperishabilityandshelf-life,shapethepriceanditsstructure ;fastertheperishabilitylowerislikelytobetheprice. 6.SelectionsofPricePoliciesandStrategiesThenextimportantstepinthepricingprocedur eistheselectionofrelevantpricingpoliciesandstrategies.Thesepoliciesandstrategies provideconsistentguidelinesandframeworkforsettingaswellasvaryingpricestosuitspec ificmarketandcustomer vidyarthiplus.com needs. 7.PriceDetermination

poisedforthetaskofpricedetermination.Fordeterminationofprice,themanagementshould considerthedecisionsinputsprovidedbytheinformationbaseanddevelopminimumandmaximu mpricelevels.Thesepricesshouldbematchedagainstthepricingobjectives,competitivere actions,governmentregulations, marketing-mixrequirementsandthepricingpolicingandHavingtakentheabovereferredstep s,managementmaynowbestrategiestoarriveataprice.However,itisalwaysadvisabletotest themarketvalidityofitspriceduringtestmarketingtoascertainitsmatchwithconsumerexp ectations. GENERALPRICINGAPPROACHESCompaniessetpricesbyselectingageneralpricingapproachthat vidyarthiplus.comincludesoneormoreofthefollowingthreeapproaches: poisedforthetaskofpricedetermination.Fordeterminationofprice,themanagementshould considerthedecisionsinputsprovidedbytheinformationbaseanddevelopminimumandmaximu mpricelevels.Thesepricesshouldbematchedagainstthepricingobjectives,competitivere actions,governmentregulations, marketing-mixrequirementsandthepricingpolicingandHavingtakentheabovereferredstep s,managementmaynowbestrategiestoarriveataprice.However,itisalwaysadvisabletotest themarketvalidityofitspriceduringtestmarketingtoascertainitsmatchwithconsumerexp ectations. GENERALPRICINGAPPROACHESCompaniessetpricesbyselectingageneralpricingapproachthat vidyarthiplus.comincludesoneormoreofthefollowingthreeapproaches: (1)Thecost-basedapproachCost-PlusPricingBreak-EvenAnalysisandTarget-ProfitPricin g(2)TheBuyer-basedapproachPerceive-ValuePricing(3)TheCompetitionbasedapproachGoi ng-RatePricing Sealed-BidPricing1.Cost-PlusPricing

Thisistheeasiestandthemostcommonmethodofpricesetting. producttoarriveatitsprice.Forexample,thecostofmanufacturingafanisRs.1000/-adds25 percentmarkupandsetsthepricetotheretaileratRs.1250/-.Theretailerinturn,maymarkit uptosellatRs.1350/-whichis35percentmarketuponcost.Theretailer sgrossmargininRs.150 0/-. Butthismethodisnotlogicalasitignorescurrentdemandandcompetitionandisnotlikelytol eadtotheoptimumprice.Stillmarkuppriceisquitepopularforthreereasons: i) andbytyingthepricetocost,theysimplifytheirpricingtaskii)Whereallfirmsintheindust ryusethispricingmethod,theirpriceswillsimilarandpricecompetitionwillbeminimizedt othebenefitofalofthem; iii) fairertobuyersaswellastoseller. 2.Break-EvenPricingandTarget-ProfitPricingAnimportantcost-orientedpricingmethodi swhatiscalledtarget-profitpricingunderwhichthecompanytriestodeterminethepricetha twouldproducttheprofititwantstoearn.Thispricingmethodusesthepopular break-evenanal ysis .Accordingtoit,priceisdeterminedwiththehelpofabreak-evenchart.Thebreak-even vidyarthiplus.comInthismethod,astandardmarkupisaddedtothecostofaSellerhavemorece rtaintyaboutcoststhanaboutdemandandneednotfrequentlyadjustpricewithchangeindeman d. ItisusuallyfeltbymanypeoplethatcostpluspricingisThisistheeasiestandthemostcommon methodofpricesetting. producttoarriveatitsprice.Forexample,thecostofmanufacturingafanisRs.1000/-adds25 percentmarkupandsetsthepricetotheretaileratRs.1250/-.Theretailerinturn,maymarkit uptosellatRs.1350/-whichis35percentmarketuponcost.Theretailer sgrossmargininRs.150 0/-. Butthismethodisnotlogicalasitignorescurrentdemandandcompetitionandisnotlikelytol eadtotheoptimumprice.Stillmarkuppriceisquitepopularforthreereasons: i) andbytyingthepricetocost,theysimplifytheirpricingtaskii)Whereallfirmsintheindust ryusethispricingmethod,theirpriceswillsimilarandpricecompetitionwillbeminimizedt othebenefitofalofthem; iii) fairertobuyersaswellastoseller. 2.Break-EvenPricingandTarget-ProfitPricingAnimportantcost-orientedpricingmethodi swhatiscalledtarget-profitpricingunderwhichthecompanytriestodeterminethepricetha twouldproducttheprofititwantstoearn.Thispricingmethodusesthepopular break-evenanal ysis .Accordingtoit,priceisdeterminedwiththehelpofabreak-evenchart.Thebreak-even vidyarthiplus.comInthismethod,astandardmarkupisaddedtothecostofaSellerhavemorece rtaintyaboutcoststhanaboutdemandandneednotfrequentlyadjustpricewithchangeindeman d. Itisusuallyfeltbymanypeoplethatcostpluspricingis

chargedepictsthetotalcostandtotalrevenueexpectedatdifferentsalesvolume.Thebreakevenpointonthechartifthatwhenthetotalrevenueequalstotalcostandthesellerneitherma kesaprofitnorincursanyloss.Withthehelpofthebreak-evenchart,amarketercanfindoutth esalesvolumethathehastoachieve.Inordertoearnthetargetedprofit,asalsothepricethat hehastochargeforhisproduct. vidyarthiplus.com Buyer-basedApproachPerceive-ValuePricingManycompaniesbasetheirpriceontheproducts perceivedvalue. Theytakebuyer sperceptionofvalueofaproduct,andnottheseller scost,asthekeytopricing.A saresult,pricingbeginswithanalyzingconsumerneedsandvalueperceptions,andpriceisse ttomatchconsumers perceivedvalue. Suchcompaniesusethenon-pricevariablesintheirmarketingmixtobuildupperceivedvaluei nthebuyer sminds,e.g.heavyadvertisingandpromotiontoenhancethevalueofaproductinthem indsofthebuyers.Thentheysetahighpricetocapturetheperceivedvalue.Thesuccessofthis pricingmethoddependsonanddeterminationofthemarket sperceptionoftheproduct svalue. Competition-basedApproach1.GoingRatePricing

Underthismethod,thecompanybasesitspriceslargelyoncompetitor spricespayinglessatten tiontoitsowncostsordemand.Thecompanymightchargethesamepricesaschargedbyitsmainco mpetitors,oraslightlyhigherorlowerpricethanthat. Thesmallerfirmsinanindustryfollowtheleadingfirmintheindustryandchangetheirprices whenthemarketleader spriceschanges.Themarketerthinksthatthegoingpricereflectstheco llectivewisdomoftheindustry. 2.Sealed-BidPricingThisisacompetitiveorientedpricing,verycommonincontractbusines seswherefirmsbidforjobs.Underit,acontractorbaseshispriceonexpectationsofhowcompe titorswillpriceratherthanonastrictrelationtohiscostordemand.Asthecontractorwants towinthecontract,hehastopricethecontractlowerthantheothercontractors.Butabidding firmcannotsetitspricebelowcosts.Ifitsetsthepricemuchhigherthanthecost,itschanceo fgettingthecontractwillbelesser. PRICINGOBJECTIVESAbusinessesfirmwillhaveanumberofpricingobjectives.Someofthemare primary;someofthemaresecondary;someofthemarelong-termwhileothersareshort-term.Ho wever,allpricingobjectivesemanatefromthecorporateandmarketingobjectivesofthefirm . Someofthepricingobjectivesarediscussedbelow: vidyarthiplus.comUnderthismethod,thecompanybasesitspriceslargelyoncompetitor spric espayinglessattentiontoitsowncostsordemand.Thecompanymightchargethesamepricesasc hargedbyitsmaincompetitors,oraslightlyhigherorlowerpricethanthat. Thesmallerfirmsinanindustryfollowtheleadingfirmintheindustryandchangetheirprices whenthemarketleader spriceschanges.Themarketerthinksthatthegoingpricereflectstheco llectivewisdomoftheindustry. 2.Sealed-BidPricingThisisacompetitiveorientedpricing,verycommonincontractbusines seswherefirmsbidforjobs.Underit,acontractorbaseshispriceonexpectationsofhowcompe titorswillpriceratherthanonastrictrelationtohiscostordemand.Asthecontractorwants towinthecontract,hehastopricethecontractlowerthantheothercontractors.Butabidding firmcannotsetitspricebelowcosts.Ifitsetsthepricemuchhigherthanthecost,itschanceo fgettingthecontractwillbelesser. PRICINGOBJECTIVESAbusinessesfirmwillhaveanumberofpricingobjectives.Someofthemare primary;someofthemaresecondary;someofthemarelong-termwhileothersareshort-term.Ho wever,allpricingobjectivesemanatefromthecorporateandmarketingobjectivesofthefirm . Someofthepricingobjectivesarediscussedbelow: vidyarthiplus.com

1.Pricingforatargetreturn. 2.Pricingformarketpenetration. 3.Pricingformarketskimming. vidyarthiplus.comPricingforatargetreturn. 2.Pricingformarketpenetration. 3.Pricingformarketskimming. vidyarthiplus.com 4.Discriminatorypricing5.Stabilizingpricing. 1.Pricingforatargetreturn. Thisisacommonobjectivesfoundwithmostoftheestablishedbusinessfirms.Here,theobject iveistoearnacertainrateofReturnOnInvestment(ROI)andtheactualpricepolicyisworkedo uttoearnthatrateofreturn.Thetargetisintermsof returnoninvestment .Therearecompaniesw hichsetthetargetat,forexample,20%returnoninvestmentaftertaxes.Thetargetmaybefora short-termoralong-term.Afirmalsomayhavedifferenttargetsforitsdifferentproductsbu tsuchtargetsarerelatedtoasingleoverallrateofreturntarget. 2.Pricingformarketpenetration. Whencompaniessetarelatively lowprice ontheirnewproductininitialstageshopingtoattract alargenumberofbuyersandwinalargemarket-shareitiscalledpenetrationpricingpolicy.T heyaremoreconcernedaboutgrowthinsalesthaninprofits.Theirmainaimiscapturingandtog ainastrongfootholdinthemarket.Thisobjectcanworkinahighlypricesensitivemarket.Iti salsodone

withthepresumptionthatunitcostwilldecreasewhenthelevelofsalesreachacertaintarget .Besides,thelowerpricemaymakecompetitorstostayour.Whenmarketshareincreasesconsid erably, thefirmmaygraduallyincreasetheprice. 3.Pricingformarketskimming. Manycompaniesthatlaunchanewproductset highprices initiallytoskimthemarket.Theysetthe highestpricetheycanchargegiventhecomparativebenefitsoftheirproductandtheavailabl esubstitutes.Aftertheinitialsalesslowdown,theylowerthepricetoattractthenextprice -sensitivelayerofcustomer. vidyarthiplus.com 4.DiscriminatorypricingSomecompaniesmayfollowadifferentialoradiscriminatoryprici ngpolicy-chargingdifferentpricesfordifferentcustomersorallowingdifferentdiscount stodifferentbuyers. Discriminationmaybepracticesonthebasisorproductorplaceortime.Forexample,doctorsm aychargedifferentfeesfordifferentpatients;railwayschargedifferentfaresforusualpa ssengersandregularpassengers/students.Manufacturersmayofferquantitydiscountsorqu otedifferentlistpricestobulk-buyers,institutionalbuyersandsmallbuyers. 5.Stabilizingpricing. Theobjectiveofthispricingpolicyistopreventfrequentfluctuationsinpricingandtofixu niformorstablepriceforareasonableperiod.Whenpriceisrevised,thenewpricewillbe

allowedtoremainforsufficientlyalongperiod.ThispricingpolicyNEWPRODUCTPRICINGPric inganewproductisanart.Itisoneofthemostimportantanddazzlingmarketingproblemsfaced byafirm.Theintroductionofanewproductmayinvolvesomeproblemsinasmuchasthereneither anestablishedmarketfortheproductnorademonstrateddemandforit. Thefirmmayexpectasubstantialdemandfortheproductthoughitisyettobeestablished.Even iftherearesomenearsubstitutestheactualdegreeofsubstitutionhastobeestimated.Again ,theremaybenoreliableestimateofthedirectcostsofmarketingandmanufacturingtheprodu ct. Moreover,thecostpatternsarelikelytochangewithgreaterknowledgeandincreasingvolume ofproduction.Yetthebasicpricingpolicyforanewproductisthesameasforestablishedprod uct itmustcoverfullinthelongrunanddirectcostsintheshortrun.Ofcourse, thereisgreateruncertaintyaobutboththedemandandcostsoftheproduct. Apartfromtheproblemofestimatingthedemandforanentirelynewproduct,certainotherinit ialproblemslikelytobefacedare: 1)Discoveringacompetitiverangeofprice. 2) 3) Investigatingprobablesalesatseveralpossibleprices,andConsideringthepossibilityof relationfromproductssubstitutedbyit/ vidyarthiplus.comisadopted,forexample,bynewspapersandmagazines. allowedtoremainforsufficientlyalongperiod.ThispricingpolicyNEWPRODUCTPRICINGPric inganewproductisanart.Itisoneofthemostimportantanddazzlingmarketingproblemsfaced byafirm.Theintroductionofanewproductmayinvolvesomeproblemsinasmuchasthereneither anestablishedmarketfortheproductnorademonstrateddemandforit. Thefirmmayexpectasubstantialdemandfortheproductthoughitisyettobeestablished.Even iftherearesomenearsubstitutestheactualdegreeofsubstitutionhastobeestimated.Again ,theremaybenoreliableestimateofthedirectcostsofmarketingandmanufacturingtheprodu ct. Moreover,thecostpatternsarelikelytochangewithgreaterknowledgeandincreasingvolume ofproduction.Yetthebasicpricingpolicyforanewproductisthesameasforestablishedprod uct itmustcoverfullinthelongrunanddirectcostsintheshortrun.Ofcourse, thereisgreateruncertaintyaobutboththedemandandcostsoftheproduct. Apartfromtheproblemofestimatingthedemandforanentirelynewproduct,certainotherinit ialproblemslikelytobefacedare: 1)Discoveringacompetitiverangeofprice. 2) 3) Investigatingprobablesalesatseveralpossibleprices,andConsideringthepossibilityof relationfromproductssubstitutedbyit/ vidyarthiplus.comisadopted,forexample,bynewspapersandmagazines.

Inaddition,decisionshavetobetakenonmarkettargets,design,thepromotionalstrategyan dthechannelsofdistribution. Testmarketingcanbehelpfulindecidingthesuitablepricingpolicy.Undertestmarketing,t heproductisintroducedinselectedareas, oftenatdifferentpricesindeferentareas.Thesetestswillprovidethemanagementanideaof heamountandelasticityofthedemandfortheproduct,thecompetitionitislikelytoface,and theexpectedsalesvolumeandprofitssimulationoffull-scaleproductionanddistribution. Yetitmayprovideveryusefulinformationforbetterplanningofthefull-scaleeffort.Itals opermitsinitialpricingmistakestobemadeonsmallratherthanonalargescale. Thenextimportantquestionis whethertochargehighinitialpriceoralowpenetrationprice . AhighInitialPrice(SkimmingPrice) Ahighinitialprice,togetherwithheavypromotionalexpenditure, maybeusedtolaunchanewproductifconditionsareappropriate.Forexample: (a)Demandislikelytobelesspriceelasticintheearlystagesthanlater,sincehighpricesar eunlikelytodeterpioneeringconsumers. Anewproductbeinganoveltycommandsabetterprice. (b)Isthelifeoftheproductspromisestobeashortone,ahighinitialpricehelpsingettingas muchofitandasfastaspossible. vidyarthiplus.comInaddition,decisionshavetobetakenonmarkettargets,design,theprom otionalstrategyandthechannelsofdistribution. Testmarketingcanbehelpfulindecidingthesuitablepricingpolicy.Undertestmarketing,t heproductisintroducedinselectedareas, oftenatdifferentpricesindeferentareas.Thesetestswillprovidethemanagementanideaof heamountandelasticityofthedemandfortheproduct,thecompetitionitislikelytoface,and theexpectedsalesvolumeandprofitssimulationoffull-scaleproductionanddistribution. Yetitmayprovideveryusefulinformationforbetterplanningofthefull-scaleeffort.Itals opermitsinitialpricingmistakestobemadeonsmallratherthanonalargescale. Thenextimportantquestionis whethertochargehighinitialpriceoralowpenetrationprice . AhighInitialPrice(SkimmingPrice) Ahighinitialprice,togetherwithheavypromotionalexpenditure, maybeusedtolaunchanewproductifconditionsareappropriate.Forexample: (a)Demandislikelytobelesspriceelasticintheearlystagesthanlater,sincehighpricesar eunlikelytodeterpioneeringconsumers. Anewproductbeinganoveltycommandsabetterprice. (b)Isthelifeoftheproductspromisestobeashortone,ahighinitialpricehelpsingettingas muchofitandasfastaspossible. vidyarthiplus.com

(c)Suchapolicycanprovidethebasisfordividingthemarketintosegmentstodifferingelast icities.Boundeditionofabookisusuallyfollowedbyapaperback. (d)Ahighinitialpricemaybeuse4fulifahighdegreeofproductionskillisneededtomakethep roductsothatitisdifficultandtime(e)Itisasafepolicywhereelasticityisnotknowsandth eproductnotyetaccepted.Highinitialpricemayfinancetheheavycostsof vidyarthiplus.comintroducinganewproductwhenuncertaintiesblocktheusualconsumingfo rcompetitorstoenteronaneconomicalbasis. Suchapolicycanprovidethebasisfordividingthemarketintosegmentstodifferingelastici ties.Boundeditionofabookisusuallyfollowedbyapaperback. (d)Ahighinitialpricemaybeuse4fulifahighdegreeofproductionskillisneededtomakethep roductsothatitisdifficultandtime(e)Itisasafepolicywhereelasticityisnotknowsandth eproductnotyetaccepted.Highinitialpricemayfinancetheheavycostsof vidyarthiplus.comintroducinganewproductwhenuncertaintiesblocktheusualconsumingfo rcompetitorstoenteronaneconomicalbasis. sourcesofcapital. ALowPenetrationPriceIncertainconditions,itcanbesuccessfulinexpandingmarketrapidl ytherebyobtaininglargersalesvolumeandlowerunitcosts.Itis appropriatewhere: (a)thereishighshort-runpriceelasticity; (b) (c)theproductisacceptabletothemassofconsumers; (d)thereisnostrongpatentprotection;and(e)thereisathreatofpotentialcompetitionsot hatabigshareofthemarketmustbecapturedquickly. Theobvjectiveoflowpenetratiojnpriceistoraisebarriersagainsttheentryofprospective competitors.Stay-outpricingisappropriate: therearesubstantialcostsavingsfromvolumeproduction;

i)wherearetotaldemandisexpectedtobesmall.Iftheamajorportionofthedemand,alow-pric epolicycancapturethebulkofthemarketandsuccessfullyholdbacklow-costcompetition. ii)Whenpotentialofsalesappearstobegreat,pricesmustbesetastheirlong-runlevel.Insu chcases,theimportantpotentialcompetitorinalargemulti-productfirmforwhomtheproduc tinquestionisprobablymarginal.Theyarenormallyconfidentthattheycangettheircostsdo wntocompetitor slevelifthevolumeofproductislarge. PRODUCT-MIXPRICINGSTRATEGIESThestrategyforsettingaproject spriceoftenhastobechange dwhentheproductisapartofaproductmix.Inthiscase,thefirmlooksforasetofpricesthatma ximizestheprofitsonthetotalproductmix. Pricingisdifficultbecausethevariousproductshaverelateddemandandcostsandfacediffe rentdegreesofcompletion. Product-mixPricingSituationsProductLinePricingCompaniesusuallydevelopproductline sratherthanproducts.Inproductlinepricing,managementmustdecideonthepricestepstobe setbetweenthevariousproductsinaline. vidyarthiplus.commostefficientsizeoftheplantisbigenoughtosupplysinglewherearetot aldemandisexpectedtobesmall.Iftheamajorportionofthedemand,alow-pricepolicycancap turethebulkofthemarketandsuccessfullyholdbacklow-costcompetition. ii)Whenpotentialofsalesappearstobegreat,pricesmustbesetastheirlong-runlevel.Insu chcases,theimportantpotentialcompetitorinalargemulti-productfirmforwhomtheproduc tinquestionisprobablymarginal.Theyarenormallyconfidentthattheycangettheircostsdo wntocompetitor slevelifthevolumeofproductislarge. PRODUCT-MIXPRICINGSTRATEGIESThestrategyforsettingaproject spriceoftenhastobechange dwhentheproductisapartofaproductmix.Inthiscase,thefirmlooksforasetofpricesthatma ximizestheprofitsonthetotalproductmix. Pricingisdifficultbecausethevariousproductshaverelateddemandandcostsandfacediffe rentdegreesofcompletion. Product-mixPricingSituationsProductLinePricingCompaniesusuallydevelopproductline sratherthanproducts.Inproductlinepricing,managementmustdecideonthepricestepstobe setbetweenthevariousproductsinaline. vidyarthiplus.commostefficientsizeoftheplantisbigenoughtosupplysingle

Thepricestepsshouldtakeintoaccountcostdifferencesbetweentheproductsintheline,cus tomerevaluationsoftheirdifferentfeatures, andcompetitor sprices.ifthepricedifferencebetweentwosuccessiveproductsissmall,buye rsusuallywillbuythemoreadvancedproduct. Thiswillincreasecompanyprofitsifthecostdifferenceissmallerthatthepricedifference .Ifthepricedifferenceislarge,however,customerswillgenerallybuythelessadvancedpro ducts. Optional-ProductPricingManycompaniesuseoptional-productpricing offeringtoselloptio naloraccessoryproductsalongwiththeirmainproduct.Forexample,acarbuyermaychoosetoo rderpowerwidows,centrallockingsystem,andwithaCDplayer.Pricingtheseoptionsisastic kyproblem.Automobilecompanieshavetodecidewhichitemstoincludeinthebasepriceandwhi chtoofferasoptions.Theeconomymodelwasstrippedofsomanycomfortsandconveniencesthat mostbuyersrejectedit.Morerecently,however, makersandincludedinthestickerpricemanyusefulitemspreviouslysoldonlyasoptions.The advertisedpricenowoftenrepresentsawell-equippedcar. Captive-ProductPricing: Companiesthatmakeproductsthatmustbeusedalongwithamanproductareusingcaptive-produ ctpricing.Examplesofcaptiveproductsarerazorblades,camerafilm,andcomputersoftware .Producersofthemainproducts(razors,cameras,andcomputers)oftenpricethemlow vidyarthiplus.comGeneralMotorshasfollowedtheexampleofheJapaneseautoThepricesteps shouldtakeintoaccountcostdifferencesbetweentheproductsintheline,customerevaluati onsoftheirdifferentfeatures, andcompetitor sprices.ifthepricedifferencebetweentwosuccessiveproductsissmall,buye rsusuallywillbuythemoreadvancedproduct. Thiswillincreasecompanyprofitsifthecostdifferenceissmallerthatthepricedifference .Ifthepricedifferenceislarge,however,customerswillgenerallybuythelessadvancedpro ducts. Optional-ProductPricingManycompaniesuseoptional-productpricing offeringtoselloptio naloraccessoryproductsalongwiththeirmainproduct.Forexample,acarbuyermaychoosetoo rderpowerwidows,centrallockingsystem,andwithaCDplayer.Pricingtheseoptionsisastic kyproblem.Automobilecompanieshavetodecidewhichitemstoincludeinthebasepriceandwhi chtoofferasoptions.Theeconomymodelwasstrippedofsomanycomfortsandconveniencesthat mostbuyersrejectedit.Morerecently,however, makersandincludedinthestickerpricemanyusefulitemspreviouslysoldonlyasoptions.The advertisedpricenowoftenrepresentsawell-equippedcar. Captive-ProductPricing: Companiesthatmakeproductsthatmustbeusedalongwithamanproductareusingcaptive-produ ctpricing.Examplesofcaptiveproductsarerazorblades,camerafilm,andcomputersoftware .Producersofthemainproducts(razors,cameras,andcomputers)oftenpricethemlow vidyarthiplus.comGeneralMotorshasfollowedtheexampleofheJapaneseauto

andsethighmarkupsonthesupplies.Thus,Kodakpricesitscameraslowbecauseitmakesitsmon eyonthefilmitsells. Inthecaseofservices,thisstrategyiscalledtwo-partpricing.Thepriceoftheserviceisbr okenintoafixedfeeplusavariableusagerate. Thus,atelephonecompanychargesamonthlyrate thefixedfee pluschargesforcallsbeyondsomem inimumnumber thevariableusagerate. Theservicefirmmustdecidehowmuchtochargeforthebasicserviceandhowmuchforthevariabl eusage.Thefixedamountshouldbelowenoughtoinduceusageoftheservice,andprofitcanbema deonthe vidyarthiplus.comandsethighmarkupsonthesupplies.Thus,Kodakpricesitscameraslowbec auseitmakesitsmoneyonthefilmitsells. Inthecaseofservices,thisstrategyiscalledtwo-partpricing.Thepriceoftheserviceisbr okenintoafixedfeeplusavariableusagerate. Thus,atelephonecompanychargesamonthlyrate thefixedfee pluschargesforcallsbeyondsomem inimumnumber thevariableusagerate. Theservicefirmmustdecidehowmuchtochargeforthebasicserviceandhowmuchforthevariabl eusage.Thefixedamountshouldbelowenoughtoinduceusageoftheservice,andprofitcanbema deonthe vidyarthiplus.com variablefees. By-ProductPricing: Inproducingpetroleumproducts,chemicalsandotherproducts, thereareoftenby-products.Iftheby-productshavenotvalueandifgettingridofthemiscost ly,thiswillaffectthepricingofthemainproduct.Usingby-productpricing,themanufactur erwillseekamarketfortheseby-productsandshouldacceptanypricethatcoversmorethanthe costofstoringanddeliveringthem.Thispracticeallowsthesellertoreducethemainproduct s pricetomakeitmorecompetitive.Byproductscaneventurnouttobeprofitable. Product-BundlePricing: Usingproduct-bundlepricing,sellersoftencombineseveraloftheirproductsandoffertheb undleatareducedprice.Thuscomputermakersincludeattractivesoftwarepackagespersonal computers.Pricebundlingcanpromotethesalesofproductsconsumerswiththeir

vidyarthiplus.com mightnototherwisebuy,butthecombinedpricemenoughtoustbelow getthemtobuythebundle. PRICE-ADJUSTMENTSTRATEGIESCompaniesusuallyadjusttheirbasicpriceforvaomerdifferen cesandchangingsituations. TypesofPrice-AdjustmentStrategies(1)DiscountandAllowancePricing:Reducingpricesto rewardcustomerresponsesuchaspayingearlyorpromotinguct. (2)SegmentPricing:Adjustmentpricestoallowfordiffernecsincustomers,product,orloca ting. (3)PsychologicalPricing:Adjustingpricesforpsychologicaleffort. (4)PromotionalPricing:Temporarilyreducingpricestoincreaseshort-runsales. (5)ValuePricing:Adjustingpricestooffertherightcombinationofqualityandserviceataf airprice. (6)GeographicalPricing:Adjustingpricestoaccountforthegeographiclocationofcustome rs. riouscusttheprod (7)InternationalPricing:Adjustmentpricesforinternationalmarkets. DiscountandAllowancePricing: Mostcompaniesadjusttheirbasicpricetorewardforcertainresponses,suchasearlypayment ofbills,volumepurchasesandcustomers

vidyarthiplus.com off-seasonbuying.Thesepriceadjustments calledduntsandallowances cantakemanyforms. Acashdiscountisapricereductiontobuyerswhopaytheirbillspromptly.Aquantitydiscount isapricereductionstobuyerswhobuyiscolargevolumes.Aseasonaldiscountisapricereduct iontobuyerswhobuymerchandiseorservicesoutofseason. Atradediscountisofferedbytehsellertotradechannelmemberswhoperformcertainfunction s,suchasselling,storingandrecord-keeping.Manufacturersmayofferdifferenldiscounts todifferenttradechannelsbecauseofthevaryingservicestheyperform. Allowancesareanothertypeofreductionfromthelistprice.Tradeallowanceisgiven,forexa mple,orexchangePromotionalallowancesarepaymentorpricereductionstorewarddealersfo rparticipatinginadvertisingandsales-supportprograms. SegmentedPricingCompaniesoftenadjusttheirbasicpricestoallowfoerencesincustomers, productsandlocations.Insegmentedpricing,thecompanysellsaproductorserviceattwoorm oreprices,eventhoughthedifferenceinpricesisnotbasedondifferencesincosts.Segmente dpricingtakesseveralforms. Customer-segmentpricing:Differentcustomerfferentpricesforthesameproductorservice .Railways,forexample,chargeaconcessionalfaretochildrenandseniorcitizens. tfunctionaoffers. rdiffspaydi

Product-formpricing:Differentversionoftheproductareperioddifferently,butnotaccor dingtodifferencesintheircosts. Locationpricing:Differentlocationsarepriceddifferently,evenForinstance, theatersvarytheirseatpricesbecauseofaudiencepreferencesforcertainlocations,andst ateuniversitieschargehightuitionfeeforforeign vidyarthiplus.comthoughthecostofofferingeachlocationisthesame. Product-formpricing:Differentversionoftheproductareperioddifferently,butnotaccor dingtodifferencesintheircosts. Locationpricing:Differentlocationsarepriceddifferently,evenForinstance, theatersvarytheirseatpricesbecauseofaudiencepreferencesforcertainlocations,andst ateuniversitieschargehightuitionfeeforforeign vidyarthiplus.comthoughthecostofofferingeachlocationisthesame. students. Timepricing:Pricesvarybytheseason,themonth,theday,andeventhehour.Publicutilities varytheirpricestocommercialusersbytimeofdayandweekendversusweekday.Thetelephonec ompanyofferslower off-peak charges. PsychologicalPricing: Pricesayssomethingabouttheproduct.Forexample,manyconsumersusepricetojudgequality .Inusingpsychologicalpricing, sellersconsiderthepsychologyofpricesandnotsimplytheeconomics. Forexample,onestudyoftherelationshipbetweenpriceandqualityperceptionsofcardsfoun dthatconsumersperceivehigher-pricedcardashavinghigherquality.Bythesametoken,high erqualitycarsareAnotheraspectofpsychologicalpricingisreferenceprices pricesthatbuy erscarryintheirmindsandrefertowhenlookingatagivenproduct.Thereferencepricemightb eformedbynotingcurrentprices, rememberingpastprices,orassessingthebuyingsituation.Sellerscaninfluenceofusethes econsumers referencepriceswhensettingprice. perceivedtobeevenhigherpricedthantheyactuallyare.

vidyarthiplus.com Forexample,acompanycoulddisplayitsproductnexttomoreexpensiveonesinordertoimplyth atitbelongsinthesameclass. PromotionalPricing: Withpromotionalpricing,companieswilltemporarilypricetheirproductsbelowlistpricea ndsometimesevenbelowcost.Promotionalpricingtakesseveralforms.Supermarketsanddepa rtmentsstoreswillpriceafewproductsaslossleaderstoattachcustomerstothestoreintheh opethattheywillbuyotheritemsatnormalmarkups.Sellerswillalsousespecialeventpricin gincertainseasonstodrawmorecustomers. ValuePricingMarketersadoptvaluepricingstrategies offeringjusttherightcombinationto qualityandgoodserviceatafairprice.Inmanycases, thishasinvolvedtheintroductionoflessexpensiveversionsofestablished,brandnameprod ucts. GeographicalPricing Acompanymustalsodecidehowtopriceitsproducts to customerslocateindifferentpartsofthecountryorworld.Therearefivegeographicalprici ngstrategies. 1)FOBPricing:Thismeansthegoodsareplacedfreeonboardacarrier. 2)UniformDeliveredPricing:TheCompanychargesthesamepriceplusfreighttoallcustomers ,regardlessoftheirlocation.

3)ZonePricing:Allcustomerswithinagivenzonepayasingletotalprice;themoredistantthe zone,thehighertheprice. 4)Basing-pointpricing:Thesellerselectsagivencityasa basingpoint andchargesallcustome rsthefreightcostfromthatcitytothecustomerlocation,regardlessofthecityfromwhichth egoodsactuallyareshipped. 5)Freight-absorptionPricing:Thesellersabsorbsallorpartofthe vidyarthiplus.comactualfreightchargesinordertogetthedesiredbusiness. ZonePricing:Allcustomerswithinagivenzonepayasingletotalprice;themoredistantthezo ne,thehighertheprice. 4)Basing-pointpricing:Thesellerselectsagivencityasa basingpoint andchargesallcustome rsthefreightcostfromthatcitytothecustomerlocation,regardlessofthecityfromwhichth egoodsactuallyareshipped. 5)Freight-absorptionPricing:Thesellersabsorbsallorpartofthe vidyarthiplus.comactualfreightchargesinordertogetthedesiredbusiness. InternationalPricing: Companiesthatmarkettheirproductsinternationallymustdecidewhatpricestochargeinthe differentcountriesinwhichtheyoperate.InADMINISTEREDPRICEsomecases,acompanycanset auniformworldwideprice. Inreallivebusinesssituations,productpriceisntodeterminedasenvisagedinthepricethe ory,butisadministeredbythecompany smanagement.Anadministeredoradministrativebyacom panyofficialincontrasttothecompetitivemarketpricesdescribedintheory.Administered pricemay,therefore,bedefinedthepriceresultingfrommanagerialdecisionsofthecompany .Fromthis,the(1) followingcharacteristicsoftheadministratedpriceemerge: Pricedeterminationisaconsciousanddeliberateadministrativeactionratherthanaresult ofthedemandandsupplyinteraction. priceissetas

(2)Administeredpriceisfixedforaperiodoftimeorforaseriesofsaletransactions;itdoes notfrequentlychange. (3)Thispriceisusuallynotsubjecttonegotiation;pricestructureincorporatingdifferen tiation;pricestructureincorporatingdifferentvariationsmay,however,bedevelopedtom eetspecific vidyarthiplus.com consumerneeds. Theadministrativepriceissetbymanagementafterconsideringallrelevantfactorsimpingi ngonit,viz,cost,demandandcompetitors reactions.Sinceallcompaniessetadministrativep ricesonmoreorlessidenticalconsiderations,thepricesinrespectproductsavailableinth emarkettendtobeuniform.Thecompetition,therefore,isbasedonnon-pricedifferentiatio nthroughbranding,packagingandadvertising,etc.Itiswiththisadministrativepricethat marketersareconcernedwithand,asnaturalcorollary,ourwonconcernthroughoutthesubseq uentpageswillbewiththeadministrativeprice. REGULATEDPRICEofsimilar Theconceptofadministrativepricemaypossiblyimpartanotionthatacompanyisfreetofixwh ateverpriceifdeemsfitandbuyerhavebutonechoice eithertobuyornottobuy.Butinreallifes ituationitisnotlikethis.Forfearofdamagestoconsumerandnationalinterests, administeredpricesaresubjecttostateregulation.Therefore,whenevertheadministeredp riceisetandmanagedwithinthestateregulationitistermedasregulatedprice.Itmayassume twoforms.First,thepricemaybesetbysomeStateagency,say,theBureauofIndustrialCostaa ndPricesortheTariffCommissionandthecompanyjustacceptsitasgiven.

Second,thepricemaybesetbyacompanywithintheframeworkoronthebasisoftheformulagiven bytheState.InIndiacompanies,forexample,thefertilizer,aluminiumandsteelindustries selltheirproductsatpricesfixedbythegovernment,whilecompanies,forexample,thecotto ntextileindustrysellproductsatthepricefixedonthebasisofa vidyarthiplus.com givenformula. Inconclusion,itmaybesaidthatinthereallifeIndianbusinesssituationitisthe regulateda dministrativeprice thatisrelevantforcompaniesandatwhichproductsareofferedtargetcon sumers. forsaleto PRICINGOVERTHEPRODUCTLIFECYCLEThepricepolicycanbeconsideredintermsofproductlifec ycle.Anewproduct,withnocompetitorshasanadvantage,andtherefore, marketskimmingpolicymaybeapplied.Thispolicyisaimedatgettingthe cream ofthemarket(the topofthedemandcurve)atahighbeforecateringtothemoreprice-sensitivesegmentsofthema rket.Intheinitialstagestheskimmingpolicycanbeusefulforbetterunderstandingoftheex tentofdemandorconsumerresponseaswellastoearnadequatelytocovertheproductdevelopme ntcosts.Thepolicymaythenleadtoslowreductionofthepricewithaviewtoexpandthemarket. Forthenewcompany(ascomparedwiththenewproduct) productingaproductinthematuritystage,thepreferredobjectwouldbepenetrationpricing t heoppositeofskimming.Thisisunavoidablewhenthewholedemandiselasticandthenewentran tcompany sfirstaimistogainentry,astandingorrecognitioninthemarketevenatalossforage ttinga

shortperiod.Thispolicymayalsobeappliedfornewproduct,ifthefirmsFinally,itmaybesai d thereisnotwayinwhichthevariousfactorsanalyzedearliercanbefedintoacomputingmachin etodeterminethe right price.Individualfactorsassumevaryingimportanceatdifferenttimes .Basicallyitisthejudgmentofthepricemarkerwhichisthecatalyticagentthatfusesthesev ariousfactorsintoafinaldecisionconcerningprice.Pricingisanart,notascience.The feel o fthemarketofthepricemarketisfarmoresignificantthanhisadeptnesswithacalculatingma chine. GOVERNMENTCONTROLONPRICINGPricecontrolsrefertotheGovernmentalregulationsinrespec tof vidyarthiplus.comexpectsseriouscompetitionverysoonafterintroduction. shortperiod.Thispolicymayalsobeappliedfornewproduct,ifthefirmsFinally,itmaybesai d thereisnotwayinwhichthevariousfactorsanalyzedearliercanbefedintoacomputingmachin etodeterminethe right price.Individualfactorsassumevaryingimportanceatdifferenttimes .Basicallyitisthejudgmentofthepricemarkerwhichisthecatalyticagentthatfusesthesev ariousfactorsintoafinaldecisionconcerningprice.Pricingisanart,notascience.The feel o fthemarketofthepricemarketisfarmoresignificantthanhisadeptnesswithacalculatingma chine. GOVERNMENTCONTROLONPRICINGPricecontrolsrefertotheGovernmentalregulationsinrespec tof vidyarthiplus.comexpectsseriouscompetitionverysoonafterintroduction. pricefixation. Usuallystatutorypricecontrolentailsimpositionofpriceceilingsothatitdoesntoexceed sconsumercapacitytopay.Currentlyforexample, thepriceofpetrolinunderstatutorypricefirsmanufacturingtheseproductsareassuredret entionpriceswhicharebasedoncosts,andensurefairreturnoninvestment. Incaseofsugar,adualpricingsystemhasbeenintroduced.Underthissystem,amanufactureri srequiredtocompulsorilysellapartofitsproductiontotheGovernmentatsubstantiallylow prices,calledlevyprice. controls.The Therestofproductionmaybesoldintheopenmarketasapricethefirmdeemsfit.Thestatutoryp ricecontrolenvisagesthealso

announcementof supportprice forcertainagriculturalproductslikecotton,foodgrainsetc,s oastoprotectcultivatorsfromprice vidyarthiplus.comannouncementof supportprice forcertainagriculturalproductslikecotto n,foodgrainsetc,soastoprotectcultivatorsfromprice vidyarthiplus.com flunctuation. Voluntarypricecontrolenvisagesformulationofpricecontrolmeasuresbytherespectivein dustryassociationunderthedirectionofandaccordingtotheguidelinesbytheGovernment. ReviewQuestions: 1.Whatarethefactorsaffectingpricing? 2.Discussthevariouspricingobjectives. 3.Whatarethemethodsofpricingthenewproducts?

vidyarthiplus.com Lesson 13ChannelDecisionsLearningObjectivesAfterreadingthislesson,youshouldbeablet ounderstand Thechannelsconflictandcooperation; Thechanneldesigndecision; Physicaldistributionandlogisticsmanagement; Retailingestablishment; Thetypesandfunctionsofthemarketingintermediaries; Thefactorsaffectingthechoiceofdistributionchannels; marketingmixelements.Themainfunctionofthiselementistofindoutappropriatewaysthrou ghwhichgoodsaremadeavailabletothemarket.Itisamanagerialfunctionandhenceproperdec isionsaretobetakeninthismatter. Whentheproductisfinallyreadyforthemarket,ithastobeproducttothemarket,i.e.toultim ateconsumersandindustrialusers.Thisprocessinvolvesestablishingdistributionandpro vidingChannelsofDistributionarethemostpowerfulelementamongforphysicalhandlingadi stribution.Distributionisconcernedwithdeterminedwhatmethodsandrouteswillbeusedto bringthe

variousactivitiesinvolvedinthetransferofownershipfromtheproducertotheconsumer. Achannelofdistributionforaproductistheroutetakenbythegoodsastheymovefromtheorgan isationtotheultimateconsumeroruser. vidyarthiplus.com DEFINITIONpathtracedinthedirectorindirecttransferoftitletoaproduct,asitmovefroma producertoultimateconsumesorindustrialusers . distribution,ormarketingchannelisthestructureofintra-companyorganisationunitsand extra-companyagentsanddealerswholesaleandretail,throughwhichacommodity,productor serviceismarketed. PhilipKotlerdifinesamarketingchannelas thesetoffirmsandindividuals,thattaketitle,o rassistintransferringtitle,totheparticulargoodsorservicesasitmovesfromtheproduce rtotheconsumers. Adistributionchannelis asetofinterdependentCundiffE.W.andStillR.S.defineamarketing channelas aorganizationsinvolvedintheprocessofmakingaproductorserviceavailableforu seroconsumptionbytheconsumerofbusinessuser. AccordingtoAmericanMarketingAssociation, Achannelof

Thus,itmaybenotedthateverymarketingchannelcontainsoneormoreofthe transferpoints atea chofwhichthereiseitheraninstitutionorafinalbuyeroftheproduct.Fromtheviewpointoft heproducer,suchanetworkofinstitutionsusedforreachingamarketisknownasamarketingch annel. customeroftheproduct,aswellasagentsandmiddlemeninvolvedinthetransferoftitle.Howe ver,thechanneldoesnotincludefirmssuchabank,railwaysandotherinstitutionswhichrend eramarketingservice,butplaynomajorroleinpurchaseandsales.Ifaconsumerbuysricefrom thecultivator,orifthepublishersellsabookbymaindirecttoalecturer,thechannelisfrom producertoconsumer.Ontheotherhand,ifthepublishersellsbookstobooksellerswhointurn selltothestudentsandteachersarechannelisfromproducer-retailer-consumer. vidyarthiplus.comAchannelalwaysincludesboththeproducerandthefinalThus,itmaybenot edthateverymarketingchannelcontainsoneormoreofthe transferpoints ateachofwhichtherei seitheraninstitutionorafinalbuyeroftheproduct.Fromtheviewpointoftheproducer,such anetworkofinstitutionsusedforreachingamarketisknownasamarketingchannel. customeroftheproduct,aswellasagentsandmiddlemeninvolvedinthetransferoftitle.Howe ver,thechanneldoesnotincludefirmssuchabank,railwaysandotherinstitutionswhichrend eramarketingservice,butplaynomajorroleinpurchaseandsales.Ifaconsumerbuysricefrom thecultivator,orifthepublishersellsabookbymaindirecttoalecturer,thechannelisfrom producertoconsumer.Ontheotherhand,ifthepublishersellsbookstobooksellerswhointurn selltothestudentsandteachersarechannelisfromproducer-retailer-consumer. vidyarthiplus.comAchannelalwaysincludesboththeproducerandthefinal CHANNELFUNCTIONSTheprimarypurposeofadistributivechannelistobridgethegapbetweenpr oducersandusersbyremovingdifferencesbetweensupplyanddemand.Forthis,certainessent ialfunctionsneedtobeperformed.Theyare: 1.Information:gatheringanddistributingmarketingresearchandintelligenceinformatio naboutactorsandforcesinthemarketingenvironmentneededforplanningandaidingexchange . 2.Promotion:developingandspreadingpersuasivecommunicationsaboutanoffer.

3.Contact:findingandcommunicatingwithprospectivebuyers4.Matching:shapingandfitti ngtheoffertothebuyer sneeds, includingsuchactivitiesasmanufacturing,grading,assembling vidyarthiplus.com andpackaging. 5.Negotiation:reachinganagreementonpriceandothertermsoftheOthershelptofulfillthe completedtransactions. 6.Physicaldistribution:transportinganstoringgoods. 7.Financing:acquiringandusingfundstocoverthecostsofthechannelwork. 8.Risktaking:assumingtherisksofcarryingourthechannelwork. natureofthegoodsthemselves.Forexample:transportationandstoragetendtopredominatei nthecaseofbulkyrawmaterialssuchascoal,petroleumproductsandironone,wherepriceands pecificationarestandardizedandthemarketcomprisesalimitednumberofbuyersandsellers .Asthecomplexityoftheproductincreases,theprovisionofinformationandproductservice becomespredominant;forexample,computers,automobilesetc. Therefore,itisnecessarytoconsidertheprecisenatureoftheproductandtheseller-buyerr elationshiptodeterminetheirrelativeimportance. offersothatownershiporpossessioncanbetransferred. Theimportanceofthesefunctionsvariesdependinguponthe MAJORCHANNELSOFDISTRIBUTIONS

vidyarthiplus.com theproducerwhichmaybeemployedbyhimtobringhisproductstothemarket. DistributionofConsumerGoodschannels.Thechannelsusedare: ThereareanumberofchannelsofdistributionavailabletoConsumergoodsmaybedistributedg enerallythroughvarious i)ProducertoConsumerii)Producer-Retailer-Consumeriii)Producer-Wholesaler-Retaile r-Consumer. iv)Producer-Wholesaler-Jobber-Retailer-Consumer. DistributionofIndustrialGoodsIndustrialgoodsaredistributedbymanufacturer,through fourimportantchannels,althoughhemayalsousehissalesbrandorsales officeforthepurpose. i) ii) Producer-IndustrialUser:Throughthisdirectchannelaresold,largeinstallationslikege nerators,plantsetc.tousers. Producer-Industrialdistributor-User:Throughthischannel suchasbuildingmaterial,constructionequipment, air-conditioningequipment. aresoldoperatingsuppliesandsmallaccessoryequipment,

vidyarthiplus.com iii) iv) Producer-Agent-User:Thischannelisoftenusedwhenanewproductisintroduced,oranewmark etisentered. Producer-Agent-Industrialdistributor-User FACTORSAFFECTINGTHECHANNELSOFDISTRIBUTIONAlargenumberofchannelsofdistributionare availabletothemanufacturerforbringinghisproducttotheultimateconsumer.Fromthisvas tnumberofpotentialdistributionarrangements,themarketingexecutivemustscreenthoset hatmaybeappropriatefordistributionoftheproductatleastexpenseperunitofmerchandise andwhichsecurethedesiredvolumeofsales. Efficientdistributionattheleastcostandattainingthedesiredvolumeofsalecanbesecure donlyafterexperience,studyandanalysis. Thenoticeoftheproduct,itsunitvalue,itstechnicalfeatures,itsdegreeofdifferentiati onfromcompetitiveproductsetc.,arethefactorswhichmaylimitthenumberofpotentialchan nelalternatives. Thebestchannelisonethatworksbestinthemarketingstrategyachieveidealmarketexposure andshouldmeettargetcustomer sneedsandselectedbythecompany.Thechannelchosenshould preferences. ThechannelchoiceisinfluencedbyDistributionPolicyProductCharacteristicsSupplyCharacteristics

CustomerCharacteristicsMiddlemenCharacteristicsCompanyCharacteristicsEnvironment alCharacteristics vidyarthiplus.comCustomerCharacteristicsMiddlemenCharacteristicsCompanyCharacter isticsEnvironmentalCharacteristics vidyarthiplus.com CostofChannelDistributionPolicy Afirm sdistributionpolicymaybeofintensivedistributionselectivedistributionorexclus ivedistribution. Intensivedistributionreferstomaximumdistributionthougheverypossibletypeofoutlet. Thispolicyrequirestheuseofmorethantonechanneltoreachthetargetmarketwithmanyinter mediaries. Selectivedistributionisthesaleofproductthroughonlythoseoutletswhichwillbeabletos ellmoreproducts. Exclusivedistributioninvolvesgrantingofexclusiverightstothechannelmembertodistri butetheproducts.Thusthedistributionpolicyofthefirmdecidesthechoiceofachannel. ProductCharacteristicsTheproductCharacteristicssuchastheuseoftheproduct,itsfrequ encyofpurpose,perishability,value,theservicerequiredetc.decidethechannel.

Forexample,perishableproductsrequiremoredirectmarketing; whicharefrequentlypurchasedandlowunitvaluerequirelongchannel.Shoppinggoodssuchas refrigeratorrequireselectivechannel. SupplyCharacteristicsSmallnumberofproducers,geographicallyconcentrateduseshortch annel.Ifthenumberofproductsarelarge,andgeographicallydispersed,theyuselongchanne l. CustomerCharacteristicsCustomercharacteristicssuchastheirnumber,geographicaldisp ersion,frequencyandregularityofpurchasegreatlyinfluencethechannelselection. MiddlemenCharacteristicsThechoiceofchannelisalsodependsonthestrengthsandweakness esofvarioustypesofmiddlemenperformingvariousmarketingfunctions.Theirbehaviourald ifferences,productlines,thenumberandlocationsaffectthechoiceofthechannel. CompanyCharacteristicsThechoiceofchannelisalsoinfluencedbycompanycharachericsits suchasitsfinancialposition,size,productmix,pastchannelexperienceetc.Thecompanyma rketingpoliciessuchasspeedydelivery,after-salesservicesetc.alsoinfluencethechoic eofchannels. Environmentalcharacteristics vidyarthiplus.comconveniencegoodssuchassoaps,matchboxForexample,perishableproduc tsrequiremoredirectmarketing; whicharefrequentlypurchasedandlowunitvaluerequirelongchannel.Shoppinggoodssuchas refrigeratorrequireselectivechannel. SupplyCharacteristicsSmallnumberofproducers,geographicallyconcentrateduseshortch annel.Ifthenumberofproductsarelarge,andgeographicallydispersed,theyuselongchanne l. CustomerCharacteristicsCustomercharacteristicssuchastheirnumber,geographicaldisp ersion,frequencyandregularityofpurchasegreatlyinfluencethechannelselection. MiddlemenCharacteristicsThechoiceofchannelisalsodependsonthestrengthsandweakness esofvarioustypesofmiddlemenperformingvariousmarketingfunctions.Theirbehaviourald ifferences,productlines,thenumberandlocationsaffectthechoiceofthechannel. CompanyCharacteristicsThechoiceofchannelisalsoinfluencedbycompanycharachericsits suchasitsfinancialposition,size,productmix,pastchannelexperienceetc.Thecompanyma rketingpoliciessuchasspeedydelivery,after-salesservicesetc.alsoinfluencethechoic eofchannels. Environmentalcharacteristics vidyarthiplus.comconveniencegoodssuchassoaps,matchbox

Environmentalcharacteristicssuchaseconomicconditionsandlawalsoinfluencethechanne lselection.Forexample,economicconditionsaredepressedtheproductsprefershorterchan nelstoreduce vidyarthiplus.comwhen cost. CostofChannelAseachchannelwillbedoingsomeofthemarketingfunctions,thecostofperfor mingsuchmarketingfunctionsateachdistributionlevelandthetotalcostofperformingthee ntiremarketingtaskhasaninfluenceinthechoiceofthechannel.Thosechannelswhichensure efficientdistributionatleastexpenseandwhichsecurethedesiredvolumeofsalesshouldbe chosen. FUNCTIONSOFMIDDLEMENThemiddlemenmainly,comprisedofwholesalersandretailers. Theword wholesaler means tomarketgoodsrelativelylargerquantitiesandwhousuallydoesnotse lltoultimateconsumers . 1.Securingordersfromlargenumberofretailers. 2.Reducingthemanufacturer sneedforcarryinglargestocksandincurringwarehousingexpens es. 3.Savingthemanufacturerfromtheriskofcreditsaleswithnumerouscustomers. 4.Participationinsalespromotionandadvertisingtasksofthemanufacturers. inServicesRenderedbytheWholesalertotheManufacturers

5.6.Helpingthemanufacturersforcontinuousproduction. 7.Takingoverthemarketingfunctionsfromthemanufacturer,thusActingastheinterpretero fconsumerneedsandopinions. enablinghimtoconcentrateonproduction. vidyarthiplus.com ServicetotheRetailers1.Relievingtheretailerstoholdlargestocks. 2.Promptdeliveryofgoodstotheretailers3.Thewholesalerwhospecialistsinonelineofgoo dscanofferbetteradvisetotheretailerregardingthequalityofgoods. 4.Grantcredittotheretailers. 5.6.Sharingtheriskinvolvedinmarketing. RetailerInformingandinfluencingtheretailerstobuynewproducts. Retaileristhelastlinkinthechannelofdistribution.Hesellsthecommoditiestotheultima tecustomer.Asanintermediarybetweenthemanufacturer/wholesalerandtheconsumerheispe rformingthe followingservices. 1.Hemakesavailablewideassortmentofgoodstogiveconsumers. 2. customers. Hekeepsreadystocktomeetthedaytodaydemandsofthe 3.Hebringsnewproductsandnewvarietiestotheconsumers.

4.Heoffersexpertadvicetotheconsumersregardingsuitabilityof vidyarthiplus.comHeoffersexpertadvicetotheconsumersregardingsuitabilityof vidyarthiplus.com product. 5.Heisabletoascertainfirsthandneedsandrequirementsandreactionsofconsumers. 6.Heundertakessalespromotionactivities. 7.Heextendscreditfacilities. 8.Hemaintainpersonalcontactwithconsumersandexercisesconsiderableinfluenceontheir buyingdecisions. EliminationofMiddlemenMiddlemenareusebythemanufacturersbecausetheycanperformthem arketfunctionsmoreeconomicallyandmorethemanufacturerasagivecost. Furtherthemanufacturerdoesnothavetheabilitytoperformthosefunctionsandorbecausehe doesnotpossesfinancialresourcestoperformthemdefectively.Eventhoseproducerswhohav erequiredfinancialresourcestoselldirectlytofinalconsumersoftencanearnagreaterret urnbyincreasingtheirinvestmentinotheraspectsofbusiness.Theelementofriskalsoarise shere.DirectsellinginvolvesTheseinvolvefixedcostsandincreasetherisk.Butifmiddlem enareused, theserisksarebornebythemiddlemen.Thesemiddlemenbyvirtueoftheirspecializationande xperiencemaydothejobbetterthantheproducer. effectivelythanadequateowningwarehouses,deliveryequipmentsandsalespersonnel.

Itisawrongnotiontobelievethatgoodsaremarketedcheaplywheremiddlemenarenotused.The eliminationofmiddlemendoesnotmeantheeliminationofthemarketingfunctions.Thefuncti onsaretobeperformedandtheissueiswhoshouldperformitislargelyoneofrelativeefficien cyandeffectiveness.Therefore,oneofthereasonstheproducerdoesnotchoosetoperformanu mberofspecificmarketingfunctionsisthatthemiddlementhroughtheirspecializationmayp erformitatlesscost.Henceitisnotpossibletoeliminatethemiddlemenfromthechannelandi tiswrongtoblamethemasparasitesonthesocietybypointingtothedifferencebetweenthefin alpriceandtheproducers price.Itisonlywhenthemiddlementakeadvantageofshortageandcon sumerignoranceandexploitthem;theycanbetermedasparasites. CHANNELMANAGEMENTCHANNELBEHAVIOURSANDORGANISATOINAdistributionchannelconsistsoff irmsthathavebandedtogetherfortheircommongood.Eachchannelmemberplaysaroleinthecha nnelandspecializesinperformingoneormorefunctions.Ideally,becausethesuccessindivi dualchannelmembersdependsonoverallchannelsuccess, allchannelfirmsshouldworktogethersmoothly.shouldunderstandandaccepttheirroles,co ordinatetheirgoalsandactivities, andcooperatetoattainoverallchannelsgoals.Bycooperating,theycan vidyarthiplus.commoreeffectivelysense,serveandsatisfythetargetmarket. TheyItisawrongnotiontobelievethatgoodsaremarketedcheaplywheremiddlemenarenotused .Theeliminationofmiddlemendoesnotmeantheeliminationofthemarketingfunctions.Thefu nctionsaretobeperformedandtheissueiswhoshouldperformitislargelyoneofrelativeeffi ciencyandeffectiveness.Therefore,oneofthereasonstheproducerdoesnotchoosetoperfor manumberofspecificmarketingfunctionsisthatthemiddlementhroughtheirspecialization mayperformitatlesscost.Henceitisnotpossibletoeliminatethemiddlemenfromthechannel anditiswrongtoblamethemasparasitesonthesocietybypointingtothedifferencebetweenth efinalpriceandtheproducers price.Itisonlywhenthemiddlementakeadvantageofshortagean dconsumerignoranceandexploitthem;theycanbetermedasparasites. CHANNELMANAGEMENTCHANNELBEHAVIOURSANDORGANISATOINAdistributionchannelconsistsoff irmsthathavebandedtogetherfortheircommongood.Eachchannelmemberplaysaroleinthecha nnelandspecializesinperformingoneormorefunctions.Ideally,becausethesuccessindivi dualchannelmembersdependsonoverallchannelsuccess, allchannelfirmsshouldworktogethersmoothly.shouldunderstandandaccepttheirroles,co ordinatetheirgoalsandactivities, andcooperatetoattainoverallchannelsgoals.Bycooperating,theycan vidyarthiplus.commoreeffectivelysense,serveandsatisfythetargetmarket. They

vidyarthiplus.com However,individualchannelmembersrarelytakesuchabroadview. Theyareusuallymoreconcernedwiththeirownshort-rungoals.Theyoftendisagreeontherole seachshouldplay onwhoshoulddowhatandforwhatrewards.Suchdisagreementsovergoalsandro lesgenerate channelconflict. HorizontalconflictoccursamongfirmsatthesamelevelofthechannelVerticalconflictisev enmorecommonandreferstoconflictsbetweendifferentlevelsofthesamechannel. Someconflictinthechanneltakestheformofhealthycompetition. Suchcompetitioncanbegoodforthechannel withoutit,thechannelcouldbecomepassiveandnon -innovative.Butsometimesconflictcandamagethechannel.Forthechannelasawholetoperfo rmwell,eachchannelmember srolemustbespecifiedandchannelconflictmustbemanaged.Coope ration,roleassignmentandconflictmanagementinthechannelareattainedthroughstrongch annelleadership. CONFLICTMANAGEMENTSTRATEGIESInrecentyearsnewtypesofchannelorganizationshaveappea redVerticalMarketingSystemsthatprovidestrongerleadershipandimprovedperformance. AVerticalMarketingSystem(VMS)consistsofproducers, wholesalersandretailersactingasaunifiedsystem.Onechannelmemberownstheothers,hasc ontractswiththemandwieldssomuchpowerthattheyallcooperate.TheVMScanbedominatedbyt he

producer,wholesalerorretailer.VerticalMarketingSystemscameintobeingtocontrolchan nelbehaviourandmanagechannelconflict.Theyachieveeconomiesthroughsize,bargainingp owerandeliminationof vidyarthiplus.com duplicatedservices. TherearethreetypesofVMS.Eachtypeusesadifferentmeansforsettingupleadershipandpowe rinthechannel.InacorporateVMS, coordinationandconflictmanagementareattainedthroughcommonownershipanddifferentle velofthechannel.InacontractualVMS,theyareattainedthroughcontractualagreementsamo ngchannelmembers.InanadministratedVMS,leadershipisassumedbyoneorafewdominantchan nelmembers. HorizontalMarketingSystemAnotherchanneldevelopmentistheHorizontalMarketingSystem , inwhichtwoormorecompaniesatoneleveljointogethertofollowanewmarketingopportunity. Byworkingtogether,companiescancombinetheircapital,productioncapabilitiesormarket ingresourcestoaccomplishmorethananyonecompanycouldworkingalone.CompaniesTheymigh tworkwitheachotheronatemporarybasis. HybridMarketingSystemInthepast,manycompaniesusedasinglechanneltoselltoasinglemar ketormarketsegment.Today,withtheproliferationcustomersegmentsandchannelpossibili ties,moreandmorecompanieshaveadoptedmultichanneldistributionsystems hybridmarketin gchannels.Suchmultichannelmarketingoccurswhenasinglemightjointforceswithcompetit orsornon-competitors. oftencalled

firmsetsuptwoormoremarketingchannelstoreachoneormorecustomersegments. IBMprovidesagoodexampleofacompanythatuserssuchahybridchanneleffectively.Foryears ,IBMsoldcomputersonlythroughitsownsalesforce.However,whenthemarketforsmall,low-c ostcomputersexploded,thissinglechannelwasnolongeradequate.Toservethediverseneeds ofthemanysegmentsofthecomputermarket, IBMadded18newchannelsinlessthan10years. Hybridchannelsoffermanyadvantagestocompaniesfacinglargeandcomplexmarkets.Witheac hnewchannel,thecompanyexpandsitssalesandmarketcoverageandgainsopportunitiestotai loritsproductsandservicestothespecificneedstodiversecustomersegments.Butsuchhybr idchannelsystemsarehardertocontrol,andtheygenerateInsomecases,themultichannelmar keter schannelareallunderitsownershipandcontrol.Sucharrangementeliminateconflictwi thoutsidechannels,butthemarketermightfactinternalconflictoverhowmuchfinancialsup porteachchanneldeserves. CHANNELDESIGNDECISIONSDesigningachannelsystemcallsforanalyzingconsumerservicenee ds,settingthechannelobjectivesandconstraints,identifyingthemajorchannelalternati veandevaluatingthem. AnalyzingConsumerServiceNeeds vidyarthiplus.comconflictsasmorechannelscompeteforcustomersandsales. firmsetsuptwoormoremarketingchannelstoreachoneormorecustomersegments. IBMprovidesagoodexampleofacompanythatuserssuchahybridchanneleffectively.Foryears ,IBMsoldcomputersonlythroughitsownsalesforce.However,whenthemarketforsmall,low-c ostcomputersexploded,thissinglechannelwasnolongeradequate.Toservethediverseneeds ofthemanysegmentsofthecomputermarket, IBMadded18newchannelsinlessthan10years. Hybridchannelsoffermanyadvantagestocompaniesfacinglargeandcomplexmarkets.Witheac hnewchannel,thecompanyexpandsitssalesandmarketcoverageandgainsopportunitiestotai loritsproductsandservicestothespecificneedstodiversecustomersegments.Butsuchhybr idchannelsystemsarehardertocontrol,andtheygenerateInsomecases,themultichannelmar keter schannelareallunderitsownershipandcontrol.Sucharrangementeliminateconflictwi thoutsidechannels,butthemarketermightfactinternalconflictoverhowmuchfinancialsup porteachchanneldeserves. CHANNELDESIGNDECISIONSDesigningachannelsystemcallsforanalyzingconsumerservicenee ds,settingthechannelobjectivesandconstraints,identifyingthemajorchannelalternati veandevaluatingthem. AnalyzingConsumerServiceNeeds vidyarthiplus.comconflictsasmorechannelscompeteforcustomersandsales.

Likemostmarketingdecisions,designingachannelbeginswiththecustomer.Marketingchann elscanbethoughtofascustomervaluedeliverysystemsinwhicheachchannelmemberaddsvalue forthecustomer.Thus,designingthedistributionchannelstartswithfindingoutwhatvalue sconsumersinvarioustargetsegmentswantfromthechannel. willingtotraveltomoredistantcentralizedlocations? Dotheywantimmediatedeliveryoraretheywillingtowait? specialization? Doconsumerswantmayadd-onservices(deliver,credit, Themoredecentralizedthechannel,thefasterthedelivery,thesupplied,thegreaterthecha nnel sserviceslevel. SettingtheChannelObjectivesandConstraintsChannelobjectivesshouldbestatedintermso fthedesiredservicesleveloftargetconsumers.Usually,acompanycanidentifyseveralsegm entswantingdifferentlevelsofchannelservices.Thecompanyshoulddecidewhichsegmentst oserveandthebestchannelstouseineachcase.Ineachsegment,thecompanywantstominimizet he vidyarthiplus.comDoconsumerswanttobuyfromnearbylocationsoraretheyWouldtheyrather buyoverthephoneorthroughthemail? Doconsumersvaluebreadthofassortmentordotheypreferrepairsinstallation)orwilltheyo btaintheseelsewhere? greatertheassortmentperiod,andthemoreadd-onservicestotalchannelcostofmeetingcust omerservicerequirements. Likemostmarketingdecisions,designingachannelbeginswiththecustomer.Marketingchann elscanbethoughtofascustomervaluedeliverysystemsinwhicheachchannelmemberaddsvalue forthecustomer.Thus,designingthedistributionchannelstartswithfindingoutwhatvalue sconsumersinvarioustargetsegmentswantfromthechannel. willingtotraveltomoredistantcentralizedlocations? Dotheywantimmediatedeliveryoraretheywillingtowait? specialization? Doconsumerswantmayadd-onservices(deliver,credit, Themoredecentralizedthechannel,thefasterthedelivery,thesupplied,thegreaterthecha nnel sserviceslevel. SettingtheChannelObjectivesandConstraintsChannelobjectivesshouldbestatedintermso fthedesiredservicesleveloftargetconsumers.Usually,acompanycanidentifyseveralsegm entswantingdifferentlevelsofchannelservices.Thecompanyshoulddecidewhichsegmentst oserveandthebestchannelstouseineachcase.Ineachsegment,thecompanywantstominimizet he vidyarthiplus.comDoconsumerswanttobuyfromnearbylocationsoraretheyWouldtheyrather buyoverthephoneorthroughthemail? Doconsumersvaluebreadthofassortmentordotheypreferrepairsinstallation)orwilltheyo btaintheseelsewhere? greatertheassortmentperiod,andthemoreadd-onservicestotalchannelcostofmeetingcust omerservicerequirements.

Thecompany schannelobjectivesalsoareinfluencedbythenatureofitsproducts,companypoli cies,marketingintermediaries,competitors vidyarthiplus.comThecompany schannelobjectivesalsoareinfluencedbythenatureofitspro ducts,companypolicies,marketingintermediaries,competitors vidyarthiplus.com andtheenvironment. IdentifyingMajorAlternativesWhenthecompanyhasdefineditschannelobjectives,itshoul dnextidentifyitsmajorchannelalternativesintermsofintermediaries,numberofintermed iariesandtheresponsibilitiesofeachchannelmember. EvaluatingtheMajorAlternativesSupposeacompanyhasidentifiedseveralchannelalternat ivesandwantstoselecttheonethatwillbestsatisfyitslong-runobjectives.Thefirmmustev aluateeachalternativeagainsteconomic,controlandadaptivecriteria. typesof CHANNELMANAGEMENTDECISIONSOncethecompanyhasrevieweditschannelalternativesanddeci dedonthebestchanneldesign,itmustimplementandmanagethechosenchannel.Channelmanage mentcallsforselectingandmotivatingindividualchannelmembersandevaluatingtheirperf ormanceovertime. SelectingChannelsMembersWhenselectingintermediaries,thecompanyshoulddeterminewha tcharacteristicsdistinguishthebetterones.Itwillwanttoevaluatethe

channelmember syearsinbusiness,otherlinescarried,growthandprofitrecord,cooperative nessandreputation. vidyarthiplus.comchannelmember syearsinbusiness,otherlinescarried,growthandprofitr ecord,cooperativenessandreputation. vidyarthiplus.com MotivatingChannelMembersOnceselected,channelmembersmustbecontinuouslymotivatedto dotheirbest.Thecompanymustsellnotonlythroughtheintermediaries,buttothem.Attiesth ecompaniespositivemotivatorssuchashighermargins,specialdeals,premiums,cooperativ eadvertisingallowances,displayallowances,andsalescontests.Atothertimestheysueneg ativemotivators,suchasthreateningtoreducemargins,toslowdowndelivery,ortoendthere lationshipaltogether. EvaluatingChannelsMembersTheproducermustregularlycheckeachchannelmember sperforman ceagainststandardssuchassalesaverageinventorylevels, customerdeliverytime,treatmentofdamagedandlostgoods, cooperationincompanypromotionandtrainingprograms,andservicestothecustomer.Thecom panyshouldrecognizeandrewardintermediarieswhoareperformingwell.Thosewhoareperfor mingpoorlyshouldbehelpedor,asalastresort,replaced. Finally,manufacturersneedtobesensitivetotheirdealers.Thosewhotreattheirdealersli ghtlyriskonlylosingtheirsupportbutalsooffer causingsomelegalproblems. PHYSICALDISTRIBUTIONANDLOGISTICSMANAGEMENT

Intoday sglobalmarketplace,sellingaproductissometimeseasierthangettingittocustomer s.Companiesmustdecideonthebestwaytostore,handle,andmovertheirproductsandservices sothatareavailabletocustomerintherightassortments,attherighttime,andintherightpl ace.Logisticseffectivenesswillhaveamajorimpactonbothcustomersatisfactionandcompa nycosts. NATUREANDIMPORTANCETosomemanagers,physicaldistributionmeansonlytrucksandwarehous es.Butmodernlogisticsismuchmorethanthis.Physicaldistribution ormarketinglogistics in volvesplanning,implementingandcontrollingthephysicalflowofmaterials,finalgoodsan drelatedinformationfrompointsoforigintopointsofconsumptiontomeetcustomerrequirem entsataprofit. Thelogisticsmanager stasksistocoordinatethewhole-channelphysicaldistributionsystem t heactivitiesofsuppliers,purchasingTheseactivitiesincludeforecasting,informations ystems,purchasing,productionplanning,orderpossessing,inventory,warehousingandtra nsportation vidyarthiplus.comagents,marketers,channelmembersandcustomers. Intoday sglobalmarketplace,sellingaproductissometimeseasierthangettingittocustomer s.Companiesmustdecideonthebestwaytostore,handle,andmovertheirproductsandservices sothatareavailabletocustomerintherightassortments,attherighttime,andintherightpl ace.Logisticseffectivenesswillhaveamajorimpactonbothcustomersatisfactionandcompa nycosts. NATUREANDIMPORTANCETosomemanagers,physicaldistributionmeansonlytrucksandwarehous es.Butmodernlogisticsismuchmorethanthis.Physicaldistribution ormarketinglogistics in volvesplanning,implementingandcontrollingthephysicalflowofmaterials,finalgoodsan drelatedinformationfrompointsoforigintopointsofconsumptiontomeetcustomerrequirem entsataprofit. Thelogisticsmanager stasksistocoordinatethewhole-channelphysicaldistributionsystem t heactivitiesofsuppliers,purchasingTheseactivitiesincludeforecasting,informations ystems,purchasing,productionplanning,orderpossessing,inventory,warehousingandtra nsportation vidyarthiplus.comagents,marketers,channelmembersandcustomers. planning. Companiestodayareplacinggreateremphasisonlogisticsforseveralreasons: 1)Effectivelogisticsisbecomingakeytowiningandkeepingcustomers.Companiesarefindin gthattheycanattractmorecustomersbygivingbetterserviceorlowerpricesthroughbetterp hysicaldistribution.

2)Logisticsisamajorcostelementformostcompanies.Poorphysicaldistributiondecisions resultinhighcosts.evenlargecompaniessometimesmaketoolittleuseofmoderndecisiontoo lsforcoordinatinginventorylevels;transportationmodes,andplant, warehouse,andstorelocations.Improvementsinphysicaldistributionefficiencycanyield tremendouscostsavingsforboththecompanyanditscustomers. 3)Theexplosioninproductvarietyhascreatedaneedforimprovedlogisticsmanagement. 4)Finally,improvementsininformationtechnologyhavecreatedopportunitiesformajorgai nsindistributionTheincreaseduseofcomputer,point-of-salescanners,uniformproductco des,satellitetracking,electronicdatainterchange(EDI) andelectronicfundstransfer(EFT)hasallowedcompaniestocreateadvancedsystemsfororde rprocessing,inventorycontrolandhandling,andtransportationroutingandscheduling. GOALSOFLOGISTICSSYSTEMSThegoalofthemarketinglogisticssystemshouldbetoprovideatar getedlevelofcustomerserviceattheleastcost.Acompanymustfirstresearchtheimportance ofvariousdistributionservicestoitscustomers, andthensetdesiredservicelevelsforeachsegments. MAJORLOGISTICSFUNCTIONSGivenasetoflogisticsobjectives,thecompanyisreadytodesigna logisticssystemthatwillminimizethecostofattainingtheseobjectives. vidyarthiplus.comefficiency. Logisticsisamajorcostelementformostcompanies.Poorphysicaldistributiondecisionsre sultinhighcosts.evenlargecompaniessometimesmaketoolittleuseofmoderndecisiontools forcoordinatinginventorylevels;transportationmodes,andplant, warehouse,andstorelocations.Improvementsinphysicaldistributionefficiencycanyield tremendouscostsavingsforboththecompanyanditscustomers. 3)Theexplosioninproductvarietyhascreatedaneedforimprovedlogisticsmanagement. 4)Finally,improvementsininformationtechnologyhavecreatedopportunitiesformajorgai nsindistributionTheincreaseduseofcomputer,point-of-salescanners,uniformproductco des,satellitetracking,electronicdatainterchange(EDI) andelectronicfundstransfer(EFT)hasallowedcompaniestocreateadvancedsystemsfororde rprocessing,inventorycontrolandhandling,andtransportationroutingandscheduling. GOALSOFLOGISTICSSYSTEMSThegoalofthemarketinglogisticssystemshouldbetoprovideatar getedlevelofcustomerserviceattheleastcost.Acompanymustfirstresearchtheimportance ofvariousdistributionservicestoitscustomers, andthensetdesiredservicelevelsforeachsegments. MAJORLOGISTICSFUNCTIONSGivenasetoflogisticsobjectives,thecompanyisreadytodesigna logisticssystemthatwillminimizethecostofattainingtheseobjectives. vidyarthiplus.comefficiency.

vidyarthiplus.com Themajorlogisticsfunctionsincludeorderprocessing,warehousing, inventorymanagementandtransportation. OrderProcessingTheordersoncereceived,mustbeprocessedquicklyandaccurately.Theorde rprocessingsystempreparesinvoicesndsendsorderinformationtothosewhoneedit.Theappr opriatewarehousereceivesinstructiontopackandshiptheordereditems.Shippeditesmarea ccompaniedbyshippingandbillingdocuments,withcopiesgoingtovariousdepartments.Both thecompanyanditscustomersbenefitswhentheorder-processingstepsarecarriedouteffici ently. WarehouseEverycompanymuststoreitsgoodswhiletheywaittobesole.Astoragefunctionisne ededbecauseproductionandconsumptioncyclesrarelymatch.Acompanymustdecideonhowmaof warehouseitneeds,andwheretheywillbelocated.Themorewarehousethecompanyuses,themor equicklygoodscanbedeliveredtocustomers. However,morelocationsmeanhigherwarehousingcosts.Thecompany, therefore,mustbalancethelevelofcustomerserviceagainstdistributioncosts. nyandwhattypes Inventory

Inventorylevelsalsoaffectcustomersatisfaction.Themajorproblemstomaintainthedelic atebalancebetweencarryingtoomuchinventoryandcarryingtoolittle.Carryingtoomuchinv entoryresultsinhigher-thannecessaryinventorycarryingcostsandstockobsolescence. Carryingtoolittlemayresultinstock-outs,costlyemergencyshipmentsorproduction,andc ustomerdissatisfaction.inventorydecisions,managementmustbalancethatcostscarrying largerinventoriesagainstresultingsalesandprofit. Inventorydecisionsinvolveknowingbothwhentoorderandhowmuchtoorder.Indecidingwhent oorder,thecompanybalancestherisksofrunningourofstockagainstthecostofcarryingtoom uch.Indecidinghowmuchtoorder,thecompanyneedstobalanceorder-processingcostsagains tinventorycarryingcosts.Largeraverage-ordersizeresultsinfewerordersandlowerorder -processingcosts,butitalsomeanslargerinventorycarryingcosts. TransportationMarketersneedtotakeaninterestintheircompany stransportationdecisions .Thechoiceoftransportationcarriesaffectsthepricingofproducts,deliveryperformance ,andconditionofthegoodswhentheyarrive allofwhichwillaffectcustomersatisfaction. Thecompanycanchooseamongfivetransportationmodes:road, rail,sea,airandpipeline.Inchoosingatransportationmodeforaproduct,sendersconsider asmanyasfivecriteria,viz.speed, dependability,capability,availabilityandcost. vidyarthiplus.comInmakingofInventorylevelsalsoaffectcustomersatisfaction.Themajo rproblemstomaintainthedelicatebalancebetweencarryingtoomuchinventoryandcarryingt oolittle.Carryingtoomuchinventoryresultsinhigher-thannecessaryinventorycarryingc ostsandstockobsolescence. Carryingtoolittlemayresultinstock-outs,costlyemergencyshipmentsorproduction,andc ustomerdissatisfaction.inventorydecisions,managementmustbalancethatcostscarrying largerinventoriesagainstresultingsalesandprofit. Inventorydecisionsinvolveknowingbothwhentoorderandhowmuchtoorder.Indecidingwhent oorder,thecompanybalancestherisksofrunningourofstockagainstthecostofcarryingtoom uch.Indecidinghowmuchtoorder,thecompanyneedstobalanceorder-processingcostsagains tinventorycarryingcosts.Largeraverage-ordersizeresultsinfewerordersandlowerorder -processingcosts,butitalsomeanslargerinventorycarryingcosts. TransportationMarketersneedtotakeaninterestintheircompany stransportationdecisions .Thechoiceoftransportationcarriesaffectsthepricingofproducts,deliveryperformance ,andconditionofthegoodswhentheyarrive allofwhichwillaffectcustomersatisfaction. Thecompanycanchooseamongfivetransportationmodes:road, rail,sea,airandpipeline.Inchoosingatransportationmodeforaproduct,sendersconsider asmanyasfivecriteria,viz.speed, dependability,capability,availabilityandcost. vidyarthiplus.comInmakingof

INTEGRATEDLOGISTICSMANAGEMENTlogisticsmanagement.Thisconceptrecognizesthatprovid ingbetter vidyarthiplus.comToday,morecompaniesareadoptingtheconceptofintegratedINTEGRATEDL OGISTICSMANAGEMENTlogisticsmanagement.Thisconceptrecognizesthatprovidingbetter vidyarthiplus.comToday,morecompaniesareadoptingtheconceptofintegrated customerserviceandtrimmingdistributioncoststeamwork,bothinsidethecompanyandamong allthemarketingchannelorganizations.Insidethecompany,thevariousfunctionaldepartm entsmustworkcloselytogethertomaximizethecompany sownlogisticsperformance.Thecompan ymustalsointegrateitslogisticssystemofitssuppliersandcustomerstomaximizetheperfo rmanceoftheentiredistributionsystem.Thusthegoalofintegratedlogisticsmanagementis toharmonizeallofthecompany sdistributiondecisions. RETAILINGESTABLISHMENTwiththose establishment.Earlier,theretailersusedtooperateonasmallscale. However,withtheenlargementofthescaleofproduction,nowseveraltypesoflarge-scaleofp roduction,nowseveraltypesoflargescaleretailershavecomeintoexistence. House-to-HouseSellingHouse-to-Housesellingisalsoknownas Homeselling Door-to-doorselling .Underthismethod,salespersondirectlymeetsOvertheyears,wehavesee namushroomgrowthofretailingthecustomersintheirhomestopromotethenewproductsandtop opularizeexistingproductsextensivelyaswellaintensively.Itisflexibleor

methodandnofixedinvestmentisinvolvedforaretailstoreataspecificplace.Itisconvenie ntmethodofbuyingtocustomers,inmanycases vidyarthiplus.com afterdemonstration. MarketingbyMailOrderMailordermarketingalsoknownasMailOrderBusinessisoneofthepopu larmethods.Underthismethod,theprospectiveconsumersbecomeawareoftheproductthrough informationfurnishedbytheproductsthroughtheprintmediaorthroughbroadcastorthrough directmail.Interestedconsumersrespondbyplacingorderthroughmailtothesuppliers.The productsaresuppliedtotheconsumerbymailandpaymentmadeeitherbyVPPorbycheque. AdvantagesWidemarket. LoweroverheadexpensesConvenienceforcustomerslivinginfar-offplacesSmallcapitalinv estmentandlowriskNoriskofbaddebtsLimitations Lackofpersonalcontactbetweenthesellerandbuyer. NoopportunityforcustomerstoinspectgoodsNofacilityofcreditpurchase

MoretimeforexecutingordersUnsuitableforproductswhicharenotmailable. VendingMachinesVendingmachinesenablestheproducerstosupplytheproductstotheconsume rsthroughmachinewithoutemployingsalesmen.Usuallyproductswhichbelongtothe buyonimpu lse categorylikesoftdrinks, icecreams,cigaretteetc.aremarketedthroughthismethod. IndependentStoresImndependentstoresareretailshopsmarketingtheproductstotheconsum es.Theyhavethefollowingadvantages. Personalrelationshipwithcustomers. Locationatconvenientplacestothecustomers. Greaterflexibilityinworking. Cateringformoreindividualisticneed. vidyarthiplus.comMoretimeforexecutingordersUnsuitableforproductswhicharenotmaila ble. VendingMachinesVendingmachinesenablestheproducerstosupplytheproductstotheconsume rsthroughmachinewithoutemployingsalesmen.Usuallyproductswhichbelongtothe buyonimpu lse categorylikesoftdrinks, icecreams,cigaretteetc.aremarketedthroughthismethod. IndependentStoresImndependentstoresareretailshopsmarketingtheproductstotheconsum es.Theyhavethefollowingadvantages. Personalrelationshipwithcustomers. Locationatconvenientplacestothecustomers. Greaterflexibilityinworking. Cateringformoreindividualisticneed. vidyarthiplus.com Personalsupervision. Promptandquickdecisions. Betterservices. DepartmentStores Adepartmentstoreisdefinedas aretailinstitutionthathandlesawidevarietyofmerchandise groupedintowelldefineddepartmentfor

purposesofpromotion,service,accountingandcontrol .Itiscapableofsupplyingalltherequ irementsofthecustomerunderasingleroof. Mainfeaturesofdepartmentstoresare: vidyarthiplus.compurposesofpromotion,service,accountingandcontrol .Itiscapableofsu pplyingalltherequirementsofthecustomerunderasingleroof. Mainfeaturesofdepartmentstoresare: vidyarthiplus.com a)Awidevarietyofgoods: b)Departmentalorganisation; c)Largesize; AdvantagesCentralizedlocationAvailabilityofawiderangeofgoodsinonelocationConveni enceofshoppingforconsumersBeingalargeorganisatoinitcangettheeconomiesoflarge-sca leprocurement. Itcanaffordtohaveeffectiveadvertisementandcanderiveeconomiesoflargescaleadvertis ement. Ifcanofferbettersalesservices. DrawbacksHighcostofdoingbusinessLimitedpersonalattentiontocustomersNeedforhigher capital

Highermark-upinpricesDependenceonhiredemployees. ChainStoresorMultipleShopsAchainstoresystemconsistsofanumberofretailstoreswhichs ellsimilarproducts,arecentrallyownedandareaoperatedunderonemanagement.Thevarious storesmaybelocatedinthevariouslocalitiesofacityormaybespreadoveranumberofcitiesi nthecountry. AdvantagestotheManufacturerorOwneroftheChainLowoperationalexpenses vidyarthiplus.comHighermark-upinpricesDependenceonhiredemployees. ChainStoresorMultipleShopsAchainstoresystemconsistsofanumberofretailstoreswhichs ellsimilarproducts,arecentrallyownedandareaoperatedunderonemanagement.Thevarious storesmaybelocatedinthevariouslocalitiesofacityormaybespreadoveranumberofcitiesi nthecountry. AdvantagestotheManufacturerorOwneroftheChainLowoperationalexpenses vidyarthiplus.com LowcostofgoodsUniformityinpricesStandardizedmethodsofoperationMultiplicationofse llingpointsLowinvestmentsininventoryProximitytocustomersAdvantagestoCustomersEas yaccessibilityEliminationofmiddlemen sprofits Assuredquality

vidyarthiplus.com UninterruptedsupplyDirectcontactDisadvantagesProblemsrelatingtopersonnelandsuper visionInflexibilityinoperationsRiseindistributioncostLimitedvarietiesSuperMarket Asupermarketisdefinedas alargeretailingbusinessunitwithwidevarietyandassortments,s elf-servicesandheavyemphasisonmerchandiseappeal AdvantagesPricearenormallylow. Itoperatesontheprincipleofself-servicesItisalowcostretailinstitutionLimitationsS upermarketstocksawidevarietyofassortmentsofgoods. ItcanoperateintheareaofconcentrationofbuyersIthastofacttheproblemofpersonnelands upervisions.

REVIEWQUESTIONS1.2. Middlemencanbeeliminated Discuss. 3. Whatarethefactorsthatdecidethechoiceofachannel? Whatdoyouunderstandby channelconflict ?Howdoyoumanage vidyarthiplus.comREVIEWQUESTIONS1.2. Middlemencanbeeliminated Discuss. 3. Whatarethefactorsthatdecidethechoiceofachannel? Whatdoyouunderstandby channelconflict ?Howdoyoumanage vidyarthiplus.com suchconflicts? 4.Whatarethefactorsthatdeterminechanneldesign? 5.Bringoutthenatureandimportanceofphysicaldistributionandmarketinglogistics. 6.Statethemajorlogisticsfunctions7.Whataretheservicesrenderedbythewholesalersand retailers? 8.Evaluatethemeritsanddemeritsofdepartmentsstoresandchainstores. 9.Writenoton(i)automaticvending(ii)mailorderbusiness(iii) house-to-houseselling.

vidyarthiplus.com Lesson 14AdvertisingLearningObjectives Afterreadingthislesson,youshouldbeabletounderstand Thecomponentsofpromotionalmix; Theadvertisingobjectives,copy,budget,mediaevaluationofeffectivenessofadvertiseme ntThemeaningandneedforpublicrelationsThetoolsofpublicrelationsThemainpurposeofpr omotinistoattractcustomersandstimulatethemtoactinthedesiredmanner.Theneedforprom otionalactivitieshasbeenrecognizedbythemarketerforthefollowingreasons: i)Thephysicalseparationoftheconsumersandproducersandanincreaseinthenumberofpoten tialcustomers. ii)Impromentsinphysicaldistributionfacilitieshaveexpandedtheand arealimitsofthemarketsiii)Availabilityofalargenumberofwholesalingandretailingmid dlemeninthemarket

iv)Torestorethedemandfortheexistingproductwhensalebeginto vidyarthiplus.comTorestorethedemandfortheexistingproductwhensalebeginto vidyarthiplus.com decline. Acompany spromotionalprogram calledpromotionmix-consistsofthespecificblendofadvertis ing,personalsellingandsalespromotion. MEANING Theterm advertising originatesfromtheLatinword adverto , whichmeansto turnaround .Advertising,thus,denotesthemeansemployedtodrawattentiontowa rdsanyobjectthemarketingcontext,advertisinghasbeendefinedas anpaidformofnon-person alpresentationandpromotionofideas,goodsorservicesbyanidentifiedsponsor .Itisacompo nentoffirm spromotionalmix.Itisacommontechniqueofmassselling.Publicityisdifferentf romadvertising. Publicityisnotnormallypaidforandsponsorcouldnotbeidentified.Itisnoteasilycontrol ledbythefirm.Advertisingcanhavebothlong-termandshort-termobjectives. OBJECTIVESOFADVERTISEMENT1.Toinformandinfluencethebuyerstobuytheproductandthereb yincreasethesales. 2.Tointroduceanewproducttopotentialcustomers3.4. Toinfluencethemiddlementostoreandhandletheproduct. Ithelpsbuildupbrandimageandbrandloyaltytotheproductsorpurpose.In

5.Advertisingmaybenecessarytopublicizethechangesmadeinprices,channelsofdistribut ion,anyimprovementmadeinthequality,size,weightandpackingoftheproduct. 6.Itmaybeissued,sometimes,tocompetewithorneutralize vidyarthiplus.comAdvertisingmaybenecessarytopublicizethechangesmadeinprices,chan nelsofdistribution,anyimprovementmadeinthequality,size,weightandpackingoftheprod uct. 6.Itmaybeissued,sometimes,tocompetewithorneutralize vidyarthiplus.com competitor sadvertising. 7.Ithelpsbuildupcorporateimage. 8.Inthecaseofmailorderbusiness,advertisingdoesthesellingjobbyitself. 9.Bysupplementingpersonalselling,advertisingmakesthejobofsalesforceeasier. 10. Ithelpsincreasetheeffectivenessofsalespromotion campaign. 11. Finally,itencouragesthecreativeartsandtheartists. DecisionAreasinAdvertisingThedecisionareasinadvertisingcomprisesof: 1.Identifyingthetargetaudience2.Determiningtheresponsesought3.Decidingtheadverti singobjectives4.Decidingtheadvertisingbudget5.Decidingontheadvertisementcopy6.De cidingthemedia

7.Evaluatingtheeffectivenessofadvertisement vidyarthiplus.comEvaluatingtheeffectivenessofadvertisement vidyarthiplus.com IDENTIFYINGTARGETAUDIENCEAmarketingcommunicatorstartswithacleartargetaudienceinm ind.Theaudiencemaybepotentialbuyersorcurrentusers,thosewhomakethebuyingdecisiono rthosewhoinfluenceit.Theaudiencemaybeindividuals,groups,specialpublicsorthegener alpublic.Thetargetaudiencewillheavilyaffectthecommunicator sdecisionsonwhatwillbe said,howitwillbesaid,whenitwillbesaid,whereitwillbesaid,andwhowillsayit. DETERMININGTHERESPONSESOUGHTThestagesinvolvedinpurchase-processesareawareness, knowledge,linking,preference,convictionorpurchase.Thetargetaudiencemaybeinanyoft hesixstagesandthemarketingcommunicatorneedstoknowwherethetargetaudiencenowstands andtowhatstageheneedstobemoved.Thishelpsthemarketertodevelopasuitablepromotional programmes. DECIDINGTHEADVERTISINGOBJECTIVESAdvertisingobjectivesareessentialbecauseithelpst hemarketerknowinfkgjdfkjgdfthattheywanttoachieveandhelpsensureeffectivedevelopme ntoffgjdsgdsfprogramemsandguidesandcontrolsDECIDINGTHEADVERTISINGBUDGETdecisionmakingineachareafgdgjdfgjdkgjdjgdddjkgjd.

easytask.Thetypeofproductsinvolvedthecompetitivestructureoftheindustry,legalcons traints,environmentalconditionsinfluenceadvertisingexpenditure.Thedecisioncannot bestandardformula.Theanswervariesfromindustrytoindustryandfromcompanytocompanywi thinthesameindustry.Thesamecompany sDecidinghowmuchmoneytobespentonadvertisingisno tanadvertisementexpendituremaydifferfromtimetotime. MethodsofAdvertisingBudget vidyarthiplus.cometc. takena (1)Affordablemethod(2)Competitiveparitymethod(3)Percentageofsalesmethod(4)Object iveandtaskmethodAffordableMethodThismethodasthenameindicatesrestsontheprinciplet hatafirmwillallocateforwhateveritcanafford.Usuallysmallfirmsfollowthismethod.Eve nthelimitedfundsprovidedformaygetreallocatedforotheritemsdependingupontheemergen trequirements. CompetitiveParityMethodUnderthismethod,thefirmsmaketheiradvertisingbudgetcompara bletothatoftheircompetitors.Theysimplydowhatothersaredoing. advertising PercentageonSalesMethod

Underthismethod,theadvertisingbudgetissetintermsofaspecifiedpercentageofpastyear salesanticipated.Thefactthatdifferentproductsbrandsatdifferentstagesoftheirlifec yclewillrequirevaryinglevelsadvertisingssupportwhichisnottakenintoaccountbythism ethod. Anotherlimitationisthatthelevelofsalesdeterminedthelevelofadvertisingbudgetbutth eactual functionalrelationship wouldseemtobereserve.Henceitisadvisablethatpercentage ofprojectedsalesbeObjectivesandTaskMethodInactualpractice,marketersusuallyblends omeofthewellacceptedmethodstoafgjhkatacompromisebudgetwhichislogical.Inotherword s,thebudgetdecisioniscloselylinkedupwiththeadvertisingobjectives,themediadecisio nsandcopydecisions.Thesefourdecisionsareasinadvertisinginteractamongthemselvesan dinfluenceeachother. Thedecision-makingisanintegratedprocess,whichtakesintoaccountthetotaltaskofadver tisingtobeperformed. DECIDINGONTHEADVERTISEMENTCOPYTheterm copy includeseverysinglefeaturethatappearsinth ebodyofadvertisementsuchasthewrittenmatter,picture,logo,label, anddesigns. Developingthecopyisacreativeprocess.Itisanareawherenotrigidrulescanbeapplied.Som eessentialqualitiesthatmustbepresentinagoodadvertisementarethatitmustbeableto(i) attractthe vidyarthiplus.comallocatedratherthanpercentageofpreviousyear ssales. Underthismethod,theadvertisingbudgetissetintermsofaspecifiedpercentageofpastyear salesanticipated.Thefactthatdifferentproductsbrandsatdifferentstagesoftheirlifec yclewillrequirevaryinglevelsadvertisingssupportwhichisnottakenintoaccountbythism ethod. Anotherlimitationisthatthelevelofsalesdeterminedthelevelofadvertisingbudgetbutth eactual functionalrelationship wouldseemtobereserve.Henceitisadvisablethatpercentage ofprojectedsalesbeObjectivesandTaskMethodInactualpractice,marketersusuallyblends omeofthewellacceptedmethodstoafgjhkatacompromisebudgetwhichislogical.Inotherword s,thebudgetdecisioniscloselylinkedupwiththeadvertisingobjectives,themediadecisio nsandcopydecisions.Thesefourdecisionsareasinadvertisinginteractamongthemselvesan dinfluenceeachother. Thedecision-makingisanintegratedprocess,whichtakesintoaccountthetotaltaskofadver tisingtobeperformed. DECIDINGONTHEADVERTISEMENTCOPYTheterm copy includeseverysinglefeaturethatappearsinth ebodyofadvertisementsuchasthewrittenmatter,picture,logo,label, anddesigns. Developingthecopyisacreativeprocess.Itisanareawherenotrigidrulescanbeapplied.Som eessentialqualitiesthatmustbepresentinagoodadvertisementarethatitmustbeableto(i) attractthe vidyarthiplus.comallocatedratherthanpercentageofpreviousyear ssales.

attentionofaudience(ii)afggfsdinterest(iii)createdesireand(iv) stimulatetheactionsofbuying.ThisisknownasAIDA(Attention,Interest, vidyarthiplus.com DesireandAction). Formulatingthecopyrequirestheconsiderationofthefollowing: (1)Messagecontent whattosay? (2)Messagestructure howtosayitlogically? (3)Messageformat howtosayitsymbolically? (4)Messagesource whoshouldsayit/ MessageContentTheadvertiserhastodecide whatdosay tothetargetaudiencetoproducethedesi redresponse.Thebasisis advertisingobjectives . Dependingonthenatureoftheproductandthetargetmarket,themessagecanhaverationalvalu e,emotionalvalue,moralvalue, educationalvalue,attentionvalue,humourvalue,etc. MessageStructure Thestructuredealswiththeorganisatoinandarrangementofthevariouselementsofamessage .Thecommunicatormustdecidehowtohandlethreemessage-structureissues.Thefirstiswhet hertodrawaconclusionofleaveittotheaudience.Theadvertiserisbetteroffaskingquestio nandlettingbuyerscometotheirownconclusion.Thesecondmessagestructureissueiswhethe rtopresentaone-sidedargument,ortotwo-sidedargument.Usuallyone-sidedargumentsarem oreeffectiveinsalepresentations exceptwhenaudiencesarehighlyeducated.The

thirdmessage-structureissueiswhethertopresentstrongesttheargumentsfirstorlast.No rmallypresentingthemfirstgetsstrong vidyarthiplus.com attention. MessageFormatThemarketingcommunicatoralsoneedsastrongformatforthemessage.Inaprin tadvertisements,thecommunicatorhastodecideontheheadlines,copy,illustration,andco lor.attention, advertiserscanusenoveltyandcontrast;eye-catchingpicturesandheadlines;distinctive formats;messagesizeandposition;andcolor, shapeandmovement.Ifthemessageistobecarriedovertheradio,thecommunicatorhastochoos ewords,soundsandvoices. Ifthemessageistobecarriedontelevisionorinperson,thenalltheseelementsplusbodylang uagehavetobeplanned.Presentersplantheirfacialexpressions,gestures,dress,posturea ndhairstyle.Ifthemessageiscarriedontheproductoritspackage,thecommunicatorhastowa tchtexture,scent,color,size,andshape. MessageSourceThesourceofthemessagehasgreatdealofpersuasiveinfluenceonthebuyers.T hepersuasiveinfluencedependsmainlyonthecredibilityofthesource. Toattract Sourcefactorssuchasalevelofexpertise,trustworthinessandthedegreetowhichthecommun icatorhastheauthoritytobacktheclaim.Doctors,Scientists,andProfessorsrankhighonex pertiseintheirlikabilityusuallydecidethesource scredibilitywithaudience.Expertisei s

vidyarthiplus.com fields.Forexample,whenadoctorisseentorenderamessageaboutapaidreliever,thereceive rofamessageistemptedtoacceptitasauthenticinformation.Trustworthinessisrelatedtoh owobjectiveandhonestthesourceappearstobe.Ifanaudienceperceivesthesourceassincere ,honestandtrustworthy,thesourceeffectiveincommunicatingthemessage.Likabilityisho wattractivethesourceistotheaudience;peoplelikeopenhumorousandnaturalsources.Them osthighlycrediblesourceisapersonwhosourcehighonallthreefactors. willbe DECIDINGONMEDIAThecommunicatornowmustselectchannelofcommunication. Therearetwobroadtypesofcommunicationchannels personalandnonpersonal. Inpersonalcommunicationchannels,twoormorepeoplecommunicatedirectlywitheachother. Theymightcommunicatefacetoface,overthetelephone,oreventhroughthemail.Personalcom municationchannelsareeffectivebecausetheyallowforpersonaladdressingandfeedback. NonpersonalcommunicationchannelsaremediathatcarryTheyincludemajormedia,atmospher eandevents.Majormediaincludeprintmedia(newspapers,magazines,directmail);broadcas tmedia(radio,television); anddisplaymedia(billboards,signs,posters). Eventsarestagesoccurrencesthatcommunicatemessagestotargetaudiences.Forexample,pu blicrelationsdepartmentsarrangemessageswithoutpersonalcontractorfeedback.

vidyarthiplus.com pressconferences,grandopenings,showsandexhibits,publictoursandotherevents. FACTORSTOBECONSIDEREDWHILECHOOSINGMEDIADecidingonReach,FrequencyandImpactToselec tmedia,theadvertisermustdecidewhatreachandfrequencyareneededtoachieveadvertising objectives.Reachisameasureofthepercentageofpeopleinthetargetmarketwhoareexposedt otheadvertisementcampaignduringagivenperiodoftime. Frequencyisameasureofhowmanytimestheaveragepersoninthetargetmarketisexposedtothe message.Theadvertiseralsomustdecideonthedesiredmediaimpact thequalitativevalueofam essageexposurethroughagivenmedium. ChoosingamongMajorMediaTypesMediaplannersconsidermanyfactorswhenmakingtheirmedia choices.Themediahabitsoftargetconsumerswillaffectmediachoice forexample,radioandtelevisionarethebestreachingmediafor teenagers.Sowillthenatureoftheproduct fashionsarebestadvertisedincolormagazines,an dPolaroidcamerasarebestdemonstratedontelevision.Differenttypesofmessagesmayrequi redifferentmedia.A messageannouncingamajorsaletomorrowwillornewspapers;amessagewithalotoftechnicald atarequirerequireradiomagazinesordirectmailings.Costisalsoamajorfactorinmediacho ice. Whereastelevisionisveryexpensive,forexample,newspaperadvertisingcostmuchless.The mediaplannerlooksatboththetotalcostofusingamediumandatthecostperthousandexposure s thecostofreachingmight

1,000peopleusingthemedium.Mediaimpactandcostmustbe vidyarthiplus.com reexaminedregularly. SelectingSpecificMediaVehiclesThemediaplannernowmustchoosethebestmediavehicle specificmediawithineachgeneralmediatype.Forexample,newspapersisthemediaand TheHind u , TimesofIndia arevehicles.Ifadvertisingisplacedinmagazines,themediaplannermustlooku pcirculationfiguresandthecostsofdifferentadvertisementsizes,coloroptionsandposit ionsandfrequenciesforspecificmagazines.Thentheplannermustevaluateeachmagazineoff actorssuchasstatus, reproductionquality,editorialfocusandadvertisingsubmissiondeadlines.Themediaplan nerultimatelydecideswhichvehiclesgivethebestreach,frequencyandimpactforthemoney. Mediaplannersalsocomputethecostperthousandpersonareachedbyavehicle.Theywouldrank eachmagazinebycostperthousandandfavourthosemagazineswiththelowercostperthousandf orreachingtargetconsumers. advertisementsfordifferentmedia.Whereasnewspapersadvertisementsmaycostverylittle toproduce,flashytelevisionadvertisementsmaycostmillions. credibility, Themediaplanneralsomustconsiderthecostsofproducing Thus,themediaplannermustbalancemediacastmeasureagainstseveralmediaimpactfactors. First,theplannershouldbalancecostsagainstthatmediavehicle saudiencequality.Second, themediaplanner

shouldconsideraudienceattention.Third,theplannershouldassessthevehicle seditorialq uality. DecidingonMediaTimingTheadvertiseralsomustdecidehowtoscheduletheadvertisingovert hecourseofayear.SupposesalesofaproductpeakinDecemberanddropinMarch.Thefirmcanvar yitsadvertisingtofollowtheseasonalpattern. Finally,theadvertiserhastochoosethepatternoftheadvertisements,eithercontinuousor pulsing.Continuitymustschedulingadvertisementsevenlywithinagivenperiod.Pulsingme ansschedulesadvertisementsunevenlyoveragiventimeperiod. EVALUATINGADVERTISINGEFFECTIVENESSAftersendingthemessage,thecommunicatormtseffec tonthetargetaudience.Thisinvolvestakingthetargetaudiencememberswhethertheyrememb erthemessage,howmanytimestheysawit,whatpointstheyrecall,howtheyfeltaboutthemessa ge,andtheirpastandpresentattitudestowardtheproductandcompany.Thecommunicatoralso wouldliketomeasurebehaviourresultingfromthemessage howmanypeopleboughtaproduct,tal ksaboutit, orvisitedthestore.Feedbackonmarketingcommunicationsmaysuggestchangesinthepromoti onprogramsorintheproductofferitself. Evaluatingadvertisingeffectivenessisnoteasy.Inspiteofthedifficulty,firmsresortto evaluationofadvertisingts.Theytryto vidyarthiplus.comustresearchiedtootherresulshouldconsideraudienceattention.Third ,theplannershouldassessthevehicle seditorialquality. DecidingonMediaTimingTheadvertiseralsomustdecidehowtoscheduletheadvertisingovert hecourseofayear.SupposesalesofaproductpeakinDecemberanddropinMarch.Thefirmcanvar yitsadvertisingtofollowtheseasonalpattern. Finally,theadvertiserhastochoosethepatternoftheadvertisements,eithercontinuousor pulsing.Continuitymustschedulingadvertisementsevenlywithinagivenperiod.Pulsingme ansschedulesadvertisementsunevenlyoveragiventimeperiod. EVALUATINGADVERTISINGEFFECTIVENESSAftersendingthemessage,thecommunicatormtseffec tonthetargetaudience.Thisinvolvestakingthetargetaudiencememberswhethertheyrememb erthemessage,howmanytimestheysawit,whatpointstheyrecall,howtheyfeltaboutthemessa ge,andtheirpastandpresentattitudestowardtheproductandcompany.Thecommunicatoralso wouldliketomeasurebehaviourresultingfromthemessage howmanypeopleboughtaproduct,tal ksaboutit, orvisitedthestore.Feedbackonmarketingcommunicationsmaysuggestchangesinthepromoti onprogramsorintheproductofferitself. Evaluatingadvertisingeffectivenessisnoteasy.Inspiteofthedifficulty,firmsresortto evaluationofadvertisingts.Theytryto vidyarthiplus.comustresearchiedtootherresul

vidyarthiplus.com assesshowfarthesalestaskandthecommunicationtaskhavebeenaccomplishedbyadvertising . Copytestsareconductedduringdevelopmentprocess,attheendofactualproductionprocess( pre-test)andaftercampaigninlaunched(post-testing)tofindouttheeffectiveness. MethodsofAdvertisingPre-testing: Directrating:Underthistest,advertiserexposesaconsumerpaneltoalternativeadvertise mentsandasksthemtoratetheadvertisements.Thesedirectratingindicatehowwelltheadver tisementsgetattentionandhowtheyaffectconsumers.Ahighratingindicatesapotentiallym oreeffectiveadvertisement. Portfoliotests:Underthismethod,consumersvieworlistentoaportfolioofadvertisements ,takingasmuchtimeastheyneed. Theythenareaskedtorecallalltheadvertisementsandtheirthecontent,aidedorunaidedbyt heinterviewer.Theirrecalllevelindicatestheabilityofanadvertisementtostandoutandi tsmessagetobeunderstoodandrememberedLaboratorytests:Thesetestsuseequipmenttomeas ureconsumer sphysiologicalreactionstoanadvertisement heartbeat,bloodpressure,pupildi lation,perspiration.Thesetestmeasureanadvertisementsattentiongettingpower,butrev eallittleaboutitsimpactonbeliefs,attitudesorintentions. MethodsofAdvertisingPost-testing:

theandtotheandto vidyarthiplus.com Recalltests:Underthistheadvertiseraskspeoplewhohavebeenexposedtomagazinesortelev isionprogrammestorecalleverythingtheycanabouttheadvertisersandprsaw. Recallscoreindicatestheadvertisement spowertobenoticedandoductthey retained. Recognitionrests:Underthistesttheresearcherasksreadersofagivenmagazinetopointour whattheyrecognizeeenashavings before.Recognitionscorescanbeusedtoassess advertisement simpactindifferentmarketsegments comparethecompany sadvertisementswithcompetitor sadvertisements. PUBLICRELATIONSAnothermajormass-promotiontoolispublicrelationsbuildinggoodrelationswiththecompany svariousbyobtainingfavourablepublicity,buildin gupagood corporateimage ,andhandlingorheadingoffunfavorablerumours,storiesandevents. Theoldnameformarketingpublicrelationswaspublicity,whichwasseensimplyasactivities topromoteacompanyoritsproductsbyplantingnewsaboutitinmedianotpaidforbythesponsor .Publicrelatiomuchbroaderconceptthatincludespublicityaswellasmanyotheractivities .Publicrelationsdepartmentsmayperformanyorallofthefollowingfunctions. Pressrelationsorpressagency:Creatingandlacingnewsworthlyinformationinthemediatoa ttractattentiontoaperson,product, orserice. publicsnsisa Productpublicity:Publicizingspecificproducts.

vidyarthiplus.com Publicaffairs:Buildingandmaintainingnationalorlocalcommunityrelations. Lobbying:Buildingandmaintainingrelationswithlegislatorsandgovernmentofficialstoi nfluencelegislationandregulatis. Investorrelations:Maintainingrelationshipswithshareholdersandothersinthefinancia lcommunity. Development:Publicrelationswithdonorsormembersofnonprofitorganisationtogainfinan cialorvolunteersupport. Publicrelationsareusedtopromoteproducts,peos,ideas, activities,organizationandevennations.Publicrelationscanhaveastrongimpactonpubli cawarenessatamuchlowercostthanadvertising.Thecompanydoesnotpayforthespinthemedia .Rather,itpaysforastafftodevelopandcirculateinformationandtomanageevents.Iftheco mpanydevelopsaninterestingstory,itcouldbepickedupbyseveraldifferentmedia,havingh esameeffectasadvertisingthatwouldcostmillionsofdollars.Anditwouldhavemorecredibi litythanadvertising.Publicrelationsresultscansometimesbespectacular. Somecompaniesaresettingupspecialunitscalledmarketingpublicrelationstosupportcorp orateandproductpromotionandimagemakingdirectly.Manycompanieshiremarketingpublicr elationsfirmstohandletheirPRprogrammesthecompanypublicrelationsteam. MAJORPUBLICRELATIONSTOOLSonple,placeaceortimeortoassist

vidyarthiplus.com Publicrelationsprofessionaluseseveraltools.Oneofthemajortoolsisnews.PRprofession alfindorcreatefavourablenewsaboutthecompanyandinitsproductsorpeople.Sometimesnew sstoriesoccurnaturally,andsometimesthePRpersoncansuggesteventsoractivitiesthatwo uldcreatenews.Speechescanalsocreateproductandcompanypublicity.Increasingly,compa nyexecutivemustfieldquestionsformthemediaorgivetalksattradeassociationsorsalesme etings.Andtheseeventscaneitherbuildorhurtthecompany simage.AnothercommonPRtoolissp ecialevents,rangingfromnewsconferences,presstours,grandopeningsandfireworksdispl aystolatershows,hot-airballoonreleases, multimediapresentationsandstar-studdedspectacularsdesignedtoreachandinteresttarg etpublics. Publicrelationspeoplealsopreparewrittenmaterialstoreachandinfluencetheirtargetma rkets.Thesematerialsincludeannualreports, Audiovisualmaterials,suchafilms,slide-and-soundprogrammes,andvideoaaudiocassette s,arebeingusedincreasinglyascommunicationstools. Corporate identitymaterialsalsocanhelpcreateacorporateidentitythatthepublicimmedia telyrecognizes.Logos,stationery,brouchers, signs,businessforms,businesscards,buildings,uniformsandcompanycarsandtrucks allbec omemarketingtoolswhentheyareattractive, distinctiveandmemorable. Companiesalsocanimprovepublicgoodwillbycontributingmoneyandtimetopublic-servicea ctivities. brochures,articles,andcompanynewslettersandmagazines.

managementshouldsetPRobjectives,choosethePRmessagesandREVIEWQUESTIONS: 1.Defineadvertising.Whatareitsobjectives? 2.Whatarethedifferentmethodsofadvertisingbudget? 3.Whatarethetypesofadvertisingmedia?Whatarethefactorstobeconsideredinchoosingthe media. 4.Howtoevaluatethe effectivenessofadvertisement . Inconsideringwhenandhowtouseproductpublicrelations, 5.6.Discussthevariousmethodsofpublicrelations. Bringouttheimportanceofpublicrelationsinmarketing. ***************** vidyarthiplus.comvehicles,implementthePRplanandevaluatetheresults. managementshouldsetPRobjectives,choosethePRmessagesandREVIEWQUESTIONS: 1.Defineadvertising.Whatareitsobjectives? 2.Whatarethedifferentmethodsofadvertisingbudget? 3.Whatarethetypesofadvertisingmedia?Whatarethefactorstobeconsideredinchoosingthe media. 4.Howtoevaluatethe effectivenessofadvertisement . Inconsideringwhenandhowtouseproductpublicrelations, 5.6.Discussthevariousmethodsofpublicrelations. Bringouttheimportanceofpublicrelationsinmarketing. ***************** vidyarthiplus.comvehicles,implementthePRplanandevaluatetheresults.

vidyarthiplus.com LESSON 15SALESPROMOTIONLearningObjectivesAfterreadingthislesson,youshouldbeabletou nderstand Themeaningandobjectivesofsalespromotion; salesforce. Evaluatingtheeffectivenessofsalespromotion. Salespromotionisessentiallyadirectandimmediateinducementthataddsanextravaluetoth eproduct,sothatitinducesthedealersand thosesalesactivitiesthatsupplementbothperson alsellingandadvertisingandcoordinatethemandhelptomakethem,effective,suchsdisplay ,showsandexpositions,demonstrationsandoffernon-recurrentsellingeffortsnotintheor dinaryroutine . Salespromotionmeasuresaretemporarypromotionmethods.Itispracticedasacatalystandas supportingfacilitytoadvertisingandpersonalselling. NEEDFORSALESPROMOTIONMethodsofsalespromotionaimedatconsumers,dealersandultimatec onsumerstobuytheproduct.Itisdefinedas Marketersresorttosalespromotiontomeetthefollowingneeds:

(1)Tointroducenewproduct. (2)Toovercomeauniquecompetitivesituation. (3)Toexhaustaccumulatedinventory(4)Toovercomeseasonalslumps(5)Togetadditionalcus tomers(6)Toretaintheexistingcustomers(7)Tosupplementtotheadvertisingeffort(8)Tos upplementtothesalesmen seffort(9)Topersuadethesalesmentosellthefulllineofproducts vidyarthiplus.com (10) Topersuadedealerstoprocuremore. Thesalespromotioneffortmaybeaimedatconsumers,tradersdealersandsalesmen. MethodsofSalesPromotionThesalespromotionalmethodsaimedatconsumersinclude: (1)Samples(2)Coupons(3)Premiums (4)Contest,SweepstakesandGames(5)PointandPurchasePromotion

vidyarthiplus.com (6)Discounts/Rebates(7)AdvertisingSpecialties(8)Demonstrations(9)Tradefairsandex hibitionsSamples Samplesareoffersofatrialamountofaproduct.Somesamplesarefree,forothers,thecompany chargesandsmallamounttooffsetitscost.Thesamplemightbedelivereddoortodoor,sentbym ail,handedoutinastore,attachedtoanotherproduct,anadvertisement.Samplingismosteff ective butmostexpensive waytoorfeaturedin introduceanewproduct. Coupons Couponsarecertificateswhichofferpricereductionstoconsumersduringthesubsequentpur chaseofsameitems.Couponsaredistributedthroughnewspapersandmagazines,advertisemen tsorevenbydirectmail.Theseareusefulforintroducingnewproductandtoincreasethe saleofexistingproduct. PremiumorBonusOffer Anofferofacertainamountofproductatfreeofcosttobuyerswhobuyaspecifiedamountofprod uctiscalledpremiumofferorbonusoffer.ForexampleonesilverspoonwithHorlicksorplasti cbucketwith1kg.ofSurfpowder.Apremiummaycomeinsidethepackageoroutsidethepackage.I freusable,thepackageitselfmayserveasapremium.

Contests,SweepstakesandGamesIncontest,anopportunityisprovidedforconsumerstoparti cipateinacontestwithchancesofwinningcashprizes,goods,freeairtickets, cricketmatchticketsetc.Conteststakevarietyofformssuchasquizcontest,beautycontest ,carrallies,luckydrawsetc.Asweepstakeinvolvemerelyinclusionofthecustomer snameofhi sbillnumberwhobuymorethanthespecificvalueofproductgsinthedrawingofprizeswinners. Agamepresentsconsumerswithsomething missinglettersorcompletingaslogan everytimetheyb uy,whichmayormaynothelpthemwinaprize. PointofPurchase(POP)PromotionPointofPurchasepromotionsincludedisplayanddemonstra tionsthattakeplaceatthepointofpurchaseorsale.Attractivedisplaysofproductsinthesh elfspacetoinducetheconsumerstobuytheproduct. vidyarthiplus.comContests,SweepstakesandGamesIncontest,anopportunityisprovidedfo rconsumerstoparticipateinacontestwithchancesofwinningcashprizes,goods,freeairtic kets, cricketmatchticketsetc.Conteststakevarietyofformssuchasquizcontest,beautycontest ,carrallies,luckydrawsetc.Asweepstakeinvolvemerelyinclusionofthecustomer snameofhi sbillnumberwhobuymorethanthespecificvalueofproductgsinthedrawingofprizeswinners. Agamepresentsconsumerswithsomething missinglettersorcompletingaslogan everytimetheyb uy,whichmayormaynothelpthemwinaprize. PointofPurchase(POP)PromotionPointofPurchasepromotionsincludedisplayanddemonstra tionsthattakeplaceatthepointofpurchaseorsale.Attractivedisplaysofproductsinthesh elfspacetoinducetheconsumerstobuytheproduct. vidyarthiplus.com Discount/RebateItisgivingdiscountoncertainproductstoinducebuyerstobuytheproducts .Onecouldseegranddiscountsalesduringfestivalseasonsontextiles,homeappliancesetc. tostimulatesales. Installmentofferandcreditsalesareotherpopularmethodsofsalespromotion. AdvertisingSpecialties

Companiesalsodistributegiftstocustomerssuchaspen, calendars,diaries,tabledecorationsetc.whichwillcarrycompaniesname vidyarthiplus.com andlogo. DemonstrationFirmsresorttoproductdemonstrationswhentheyintroducenewproducts.Vacu umCleanersisabestexample.Demonstrationsmaybedoneatretailstores,schools,homesandi ntradefairsandexhibitions. TradeFairsandExhibitionsFirmscanintroducetheirproductsbydisplayingthemintradefai rsandexhibitionstoinducethebuyerstobuytheproduct.Especiallyininternationalmarket inginternationaltradefairsplayavitalrole. DEALERSALESPROMOTIONSTradepromotioncanpersuaderetailersorwholesalerstocarryabran d,giveitshelfspace,promoteitinadvertising,andpushittocustomers.Shelfspaceissosca rcethesedaysthatmanufacturersoftenhavetoofferprice-offs,allowances,buy-backguara ntees,orfreegoodstoretailersandwholesalerstogetontheshelfand,oncethereon,tostayo nit. Dealerssalespromotionsinclude: (1)Buyingallowance(2)Promotionalallowance(3)Salescontest

vidyarthiplus.com BuyingAllowanceItinvolvesanoffertopercentageoff,oneachminimumquantityofproductpu rchasedduringastatedperiodoftimebythedealer.Thebuyingallowanceisusuallygiveninth eformofcashdiscountorquantitydiscount. PromotionAllowanceThisisgiventocompensatethedealersforpromotionexpensesincurredb ythem.Theseincludeadvertisingallowance,displayallowanceetc. Themanufacturersmayalsoissueadvertisementorotherpublicitymaterialslikecalendars, keychainswhichcarrythenamesofretailerswhostocktheproduct. SalesContest TheThisisdonetostimulatethedistributions/dealers. SALESFORCEPROMOTIONSItisacontestamongthedealersinsellingtheproduct. Thetoolsatsalesforceforsalespromotioninclude: winnerswillbegivenprizesbythemanufacturers. i)Bonusii)Salesforcecontestiii)SalesmeetingsBonus

Aquotaissetforsalesforceforaspecificperiod.Bonusisofferedtosalesforceonsalesexce ssofthequota. vidyarthiplus.comAquotaissetforsalesforceforaspecificperiod.Bonusisofferedtosale sforceonsalesexcessofthequota. vidyarthiplus.com SalesForceContestThecontestsareconductedamongthesalesforcetostimulatesellingandp rizesareawardedtothetopperformers. SalesMeetings Salesmeetings,conventionsandconferencesareconductedforthepurposeofeducating,insp iringandrewardedNewproductsandnewsellingtechniquesarealsodescribedanddiscussed. FACTORSTOBECONSIDEREDINORGANISINGSALESPROMOTIONthesalesmen. CAMPAIGN1.IdentifyingandDefiningSalesPromotionalObjectivesIsittoenhancedealer soff -takeoftheproduct? Isittobringextrasales? Isittoclearaccumulatedstock? Isittosupplementadvertisement? 2.IdentifytheRightPromotionalProgrammeThefirmhastoselecttherightpromotionalprogr ammesuitabletothecurrentneedandthecurrentsituation.

3.EnlisttheSupportandInvolvementofSalesmenForsuccess,itisessentialthatsalesmenar ebriefedonthecontextandcontentofthepromotionprogramme,informedtheirrolesandgiven detailedinformation/guidesregardingwhattheytododuringdifferentstagesofthecampaig n. 4.EnlistingtheSupportofDealersSincemajorpartoftheactivityhastotakeplacearoundthe dealer, 5.TimingoftheCampaignTheprogrammehastobelaunchedattheappropriatetime. 6.LaunchingandFollow-upTheprogrammehastobeperfectlylaunchedandtemposhouldbemaint ainedtillendwithproperfollow-up. EVALUATIONOFSALESPROMOTIONAfterspendingasizeableamountonsalespromotion,itisverym uchessentialthatthecompanyhastoevaluatetheirsalespromotionalprogrammes.Companies canuseoneofmanyevaluationmethods.Themostcommonmethodistocomparesalesbefore,durin gandafterapromotion.Consumerresearchalsowouldshowthekindsofpeoplewhoprovideinfor mationonhowmanyconsumersrecallthepromotion,whattheythoughtofit,howmanytookadvant ageofit,andhowitaffectedtheirbuying.Salespromotionsalsocanbeevaluatedthrough vidyarthiplus.comitisessentialtoenlisttheirsupportandmotivatethem. respondedtothepromotionandwhattheydidafteritended.SurveyscanEnlisttheSupportandI nvolvementofSalesmenForsuccess,itisessentialthatsalesmenarebriefedonthecontextan dcontentofthepromotionprogramme,informedtheirrolesandgivendetailedinformation/gu idesregardingwhattheytododuringdifferentstagesofthecampaign. 4.EnlistingtheSupportofDealersSincemajorpartoftheactivityhastotakeplacearoundthe dealer, 5.TimingoftheCampaignTheprogrammehastobelaunchedattheappropriatetime. 6.LaunchingandFollow-upTheprogrammehastobeperfectlylaunchedandtemposhouldbemaint ainedtillendwithproperfollow-up. EVALUATIONOFSALESPROMOTIONAfterspendingasizeableamountonsalespromotion,itisverym uchessentialthatthecompanyhastoevaluatetheirsalespromotionalprogrammes.Companies canuseoneofmanyevaluationmethods.Themostcommonmethodistocomparesalesbefore,durin gandafterapromotion.Consumerresearchalsowouldshowthekindsofpeoplewhoprovideinfor mationonhowmanyconsumersrecallthepromotion,whattheythoughtofit,howmanytookadvant ageofit,andhowitaffectedtheirbuying.Salespromotionsalsocanbeevaluatedthrough vidyarthiplus.comitisessentialtoenlisttheirsupportandmotivatethem. respondedtothepromotionandwhattheydidafteritended.Surveyscan

experimentsthatvaryfactorssuchasincentivevalue,lengthand vidyarthiplus.com distributionmethod. Clearly,salespromotionplayanimportantroleinthetotalpromotionmix.Touseitwell,them arketermustdefinethesales-promotionobjectives,selectthebestthesales-promotionpro gram,pretestandimplementtheandevaluatetheresults. REVIEWQUESTIONS: 1.Definesalespromotion.Whatareitsobjectives? 2.Discussthevariousmethodsofsalespromotions. 3.Whatarethefactorstobeconsideredwhileorganizingsalespromotioncampaign? tools,designprogram, 4.Howwouldyouevaluatetheeffectivenessofsalespromotion? **************

vidyarthiplus.com LESSON 16PERSONALSELLINGLearningObjectives Afterreadingthislesson,youshouldbeabletounderstand Meaningandimportanceofpersonalselling; Stepsinvolvedinthesellingprocess; ThequalitiesrequiredforasuccessfulsalesmenManagementofsalesforceRecruitment,Trai ningandSelectionsofsalesforceCompensationofsalesforceEvaluatingperformanceofsale sforceThepeoplewhodothesellinggobymanyname:salespeople,salesrepresentatives,sale sconsultants,salesengineers,marketingrepresentativesandsalesforce,tonamejustafew . PersonalSellingistheonlypromotionaltoolwhichinvolvesthepersonalcommunicationbetw eenbuyersandtheseller.Personalsellingisspecificandtailormadefortherequirementsof eachcustomer. Promotionalmessagecouldbyeasilymadeinconsonancewiththecomplexsituationsatthebuye r splace.Inotherwords,personalsellingcreatesaclimateforinteractionbetweenthepartie sthatleadstoan

effectiveandtimelyresolutionoftheperceivedbuyingneed.Ineffectpersonalsellinggive saquickresponsetotheproblemandthepurchaseactionsiscarriedoutimmediatelyinmostoft heoccasionswithanexceptiontoindustrialmarketing.Personalsellingisanactiveeffortt ocommunicatewithhigh-potentialbuyersonadirectandfacetoface vidyarthiplus.com basis. Salespeopleformthevitalpartofthepersonalsellingmeasures. Theyprovidekeyinformationtoassistthecompaniesinmakingpurchasedecisions.Inthisint ensemarketdrivencompetition,abuyerwillnotbesatisfiedunlesshehashadaconversationw iththesalespeoplebeforebuyingwashingmachinescars,refrigerationetc.Dependingonthe typeofindustryandthecompany,theroleofpersonalsellingvariesinpromotionalstrategya doptedbythecompany.Thoseproductswhicharecomplex,technical,etc.theroleofpersonals ellingbecomesmoreimportant.Inthecaseofmassbasedproducts,promotionalstrategiesinv olvesmainlyadvertising.Theyalsorelyonpersonalsellingsinceeverytimetheybringoutne wproductsandhenceintroducingthenewproducttothedealer,customeretc.istakencarepart lybythesalesforce. the Thesalesforceservesasacriticallinkbetweenacompanyanditsthesellerandthebuyer.Firs t,theyrepresentthecompanytocustanddevelopnewcustomersandcommunicateinformationab outthecompany sproductsandservices.Theysellproductsbyapproachingcustomers,presenti ngtheirproducts,answeringobjections,negotiatingpricesandterms,andclosingsales.In addition,salespeopleprovidecustomers.Inmanycases,salespeopleservebothmasters omers.Theyfind

servicestocustomerscarryoutmarketresearchandintelligenceworkandfilloursalescallr eports. Atthesametime,salespeoplerepresentcustomerstothecompany, actinginsidethefirmas champions ofcustomer sinterests.Salespeoplepeopledfgdfgdfconcern saboutcompanyproductsandactionsbacktothosewhocangdjgfdsthem.Theylearnaboutcustom erneeds,andworkwithothersinthecompanytodevelopgreatercustomervalue.Thus,thesales personoftenactsasanaccountmanager ,therelationshipbetweenthesellerandbuyer. Ascompaniesmovetowardastrongermarketorientation,theirsalesforcesarebecomingmorem arketfocusedandcustomeroriented. Theoldviewwasthatsalespeopleshouldworryaboutsalesandthecompanyshouldworryaboutpr ofit.However,thecurrentviewholdsthatsalespeopleshouldbeconcernedwithmorethanjust producingsales theyalsomustknowhowtoatsalesdata,measuremarketpotential, gathermarketintelligence,anddevelopeffortstowarddeliveringcustomervalueandsatisf action.Amarket-orientedratherthanasales-orientedsalesforcewillbemoreeffectiveint helongrun.Beyondwinningnewcustomersandmakessales,itwillhelpthecompanytoPERSONALS ELLINGPROCESScreatelongtermprofitablerelationshipswithcustomers. Thesalesprocessisaseriesofinterrelatedstepsbeginningwithlocatingqualifiedprospec tivecustomers.Fromthereonthesalespersonplansthesalespresentation,makesappointmen ttoseethecustomer, vidyarthiplus.comwhomanagesservicestocustomerscarryoutmarketresearchandintellige nceworkandfilloursalescallreports. Atthesametime,salespeoplerepresentcustomerstothecompany, actinginsidethefirmas champions ofcustomer sinterests.Salespeoplepeopledfgdfgdfconcern saboutcompanyproductsandactionsbacktothosewhocangdjgfdsthem.Theylearnaboutcustom erneeds,andworkwithothersinthecompanytodevelopgreatercustomervalue.Thus,thesales personoftenactsasanaccountmanager ,therelationshipbetweenthesellerandbuyer. Ascompaniesmovetowardastrongermarketorientation,theirsalesforcesarebecomingmorem arketfocusedandcustomeroriented. Theoldviewwasthatsalespeopleshouldworryaboutsalesandthecompanyshouldworryaboutpr ofit.However,thecurrentviewholdsthatsalespeopleshouldbeconcernedwithmorethanjust producingsales theyalsomustknowhowtoatsalesdata,measuremarketpotential, gathermarketintelligence,anddevelopeffortstowarddeliveringcustomervalueandsatisf action.Amarket-orientedratherthanasales-orientedsalesforcewillbemoreeffectiveint helongrun.Beyondwinningnewcustomersandmakessales,itwillhelpthecompanytoPERSONALS ELLINGPROCESScreatelongtermprofitablerelationshipswithcustomers. Thesalesprocessisaseriesofinterrelatedstepsbeginningwithlocatingqualifiedprospec tivecustomers.Fromthereonthesalespersonplansthesalespresentation,makesappointmen ttoseethecustomer, vidyarthiplus.comwhomanages Prospecting

completesthesaleanddoespostsalesactivities.Thisprocessisshowninthefollowingfigur e vidyarthiplus.comcompletesthesaleanddoespostsalesactivities.Thisprocessisshownin thefollowingfigure vidyarthiplus.com Handling Pre-approacSalesPresentationSalesPresentationApproa ClosingSales Follow 1.ProspectingInitiallythesalespersonhastolocatethelistofprospectiveandpotentialc ustomers.Thesalesperson,mayuseexternalsourceslikereferenceconcertscommunitycontr acts,clubsetcandinternalsourcesliketherecordsmaintainedbythecompany,inquires,per sonalcontractsandothersalesseminars.Afteridentifyingthecustomerstheyhavetobescre enedforlocatingtheexact prospects .Iftheprospectisworthcallingirrespectiveofimmediat egrainsorforthefuturepurposes, 2.Pre-Approachhe/shemaybeincludedinthelistofprospectivecustomers. Salespersoncollectsinformationabouttheprospectthatwillbeusedtoformulatethesalesp resentation.Salespersonunderstandsthebuyersneeds,buyermotivesandotherdetailsrele vantformakingthesalespresentation.Careshouldbetakentoavoidinvasionofprivacyand

detailsshouldbeonlytotheknowingofintensityofpurchasebythecustomers. 3.SalesPresentationPlanningThesalespersonmustbeginspecificallystatedobjectivefor eachsalespresentation.Theobjectivescouldbeorderquantities,valueofpurchase,commun icationoragreementswiththebuyer.Salespersonshouldbeabletoidentifythebenefitstobe offeredtothebuyerforclinchingthesale.Formatsshouldbeusedforsalespresentation.Asa lesproposalmaybedevelopedcarefulinvestigationoftheprospect sneeds.Thisisoftencombi nedwithfacttofacepresentationsandquestionandanswerperiods.Thesalespersonshoulddr afttheappropriatepaceforpresentationandidentificationofbenefitsandtermsofsaletob ediscussed.Heshouldalsounderstandtheextentofinquiryintotheprospect sneedsanddecisi onmakingability.Thedegreeofinteractionwiththeprospectmustbewellthoughtof.Ifneedb e,salesaidsmaybeused.Theactualsellingbeginsassalespersonseeksaninterviewwiththep rospect. 4.ApproachApproachingthecustomerisdoneintwophases:Thefirstphaseisgettinganappoin tmentforthesalesinterview.Thiswillgiveafeelingofprospect stimeimportance.Appointsm aybemadeoverphone,mailorpersonalcontact. Inthesecondphase,thefirstfewminutesofsalescallharmoniousatmospheremustbemadelike normaletiquetteandcourtesywith vidyarthiplus.complanningtheafterdetailsshouldbeonlytotheknowingofintensityofpur chasebythecustomers. 3.SalesPresentationPlanningThesalespersonmustbeginspecificallystatedobjectivefor eachsalespresentation.Theobjectivescouldbeorderquantities,valueofpurchase,commun icationoragreementswiththebuyer.Salespersonshouldbeabletoidentifythebenefitstobe offeredtothebuyerforclinchingthesale.Formatsshouldbeusedforsalespresentation.Asa lesproposalmaybedevelopedcarefulinvestigationoftheprospect sneeds.Thisisoftencombi nedwithfacttofacepresentationsandquestionandanswerperiods.Thesalespersonshoulddr afttheappropriatepaceforpresentationandidentificationofbenefitsandtermsofsaletob ediscussed.Heshouldalsounderstandtheextentofinquiryintotheprospect sneedsanddecisi onmakingability.Thedegreeofinteractionwiththeprospectmustbewellthoughtof.Ifneedb e,salesaidsmaybeused.Theactualsellingbeginsassalespersonseeksaninterviewwiththep rospect. 4.ApproachApproachingthecustomerisdoneintwophases:Thefirstphaseisgettinganappoin tmentforthesalesinterview.Thiswillgiveafeelingofprospect stimeimportance.Appointsm aybemadeoverphone,mailorpersonalcontact. Inthesecondphase,thefirstfewminutesofsalescallharmoniousatmospheremustbemadelike normaletiquetteandcourtesywith vidyarthiplus.complanningtheafter

theprospect sunderstandingtheprospect ssignalsandinforming vidyarthiplus.comaboutthebenefitthroughthepurchaseoftheproductetc. 5.SelesPresentationThesalespersonexpandsonthebasicthemeestablishedinthefirstfewm inutesofthesalescallorduringtheprevioussalescalls.Inordertoreducetheperceptionof riskintheprospect,thesalespersonshouldpresenthimselforherselfasthecrediblesource ofinformation.Bydressingappropriatelyshowingthetraitsofhonestyandintegrityandabl etolistentotheprospect sviewsareconsideredtobeacrediblesourceofinformation.Evenquo tingathirdpartyforevidence,guarantees,warrantiesetc.,wouldalsoaddtotheprospect sli stening.Thepresentationshouldbehavingclarityofthoughtandthesalespersonshouldbeab letohandleobjectionsandquestion. 6.HandlingObjections Customersalmostalwayshaveobjectionsduringthepresentationorwhenaskedtoplaceanorde r.Theproblemcanbeeitherlogicalorpsychologicalandobjectionsareoftenunspoken.Inhan dlingobjections,thesalespersonshoulduseapositiveapproach,seekouthiddenobjections .Askthebuyertoclarifyanyobjections,takeobjectionsasopportunitiestoprovidemoreinf ormation,andturntheobjectionsintoreasonsforbuying.Everysalespersonneedstrainingi ntheskillsofhandlingobjections.

7.ClosingtheSaleThesalespersonmustbeabletofacilitatetheprospect sdecisionmakingpro cesstowardsmakingthepurchaseandtofurnishthestimulusforthedecisionattheappropriat etime.Severaltechniqueslikedirectclose,summaryclose,choicecloseetc.,areavailable forthesalespersontochooseforclosingthesale.Somesalespeoplefearrejectionandmayhen ceavoidthestimulusforthepurchasedecision.Thequestionofwhentoseekthecompletionoft hesaleisajudgmentbythesalespersonwiththeassistanceoftheprospect.Inthisstageoncet hesaleisclosedthe prospect becomesthe customer . 8.FollowUpInordertoascertainthedeliveryofthebenefitssatisfactionguaranteedbythep roductandtoestablishamutuallysatisfyinglongtermrelationshipwiththecustomersfollo wupisimportant.Byexpeditingtheorders,installingtheproductandaftersalesservicemay bethefollowupactivities.Buildingtrustwiththecustomerisimportantasitisachievedwhe nthesalespersonisperceivedasdependable, honest,competent,customer-orientedandlikable.Thesecustomerexpectationsarereasona bleandarecontrollablethroughrecruitment, selectiontrainingandsupervisionofsalespersonnel. QUALITIESOFAEFFECTIVESALESPERSONGoodsalesmanshipisnotamatterofsomerare,persuasiv e, inheritedskill,which,when, turnedon ,magicallygetstheorder.Onthecontrarygoodsalesman shipistheresultofcarefulanalysisofthebuyer sproblemcombinedwithsomearticulatenessi nexplainingtothebuyer vidyarthiplus.comandClosingtheSaleThesalespersonmustbeabletofacilitatetheprospec t sdecisionmakingprocesstowardsmakingthepurchaseandtofurnishthestimulusforthedecis ionattheappropriatetime.Severaltechniqueslikedirectclose,summaryclose,choiceclos eetc.,areavailableforthesalespersontochooseforclosingthesale.Somesalespeoplefear rejectionandmayhenceavoidthestimulusforthepurchasedecision.Thequestionofwhentose ekthecompletionofthesaleisajudgmentbythesalespersonwiththeassistanceoftheprospec t.Inthisstageoncethesaleisclosedthe prospect becomesthe customer . 8.FollowUpInordertoascertainthedeliveryofthebenefitssatisfactionguaranteedbythep roductandtoestablishamutuallysatisfyinglongtermrelationshipwiththecustomersfollo wupisimportant.Byexpeditingtheorders,installingtheproductandaftersalesservicemay bethefollowupactivities.Buildingtrustwiththecustomerisimportantasitisachievedwhe nthesalespersonisperceivedasdependable, honest,competent,customer-orientedandlikable.Thesecustomerexpectationsarereasona bleandarecontrollablethroughrecruitment, selectiontrainingandsupervisionofsalespersonnel. QUALITIESOFAEFFECTIVESALESPERSONGoodsalesmanshipisnotamatterofsomerare,persuasiv e, inheritedskill,which,when, turnedon ,magicallygetstheorder.Onthecontrarygoodsalesman shipistheresultofcarefulanalysisofthebuyer sproblemcombinedwithsomearticulatenessi nexplainingtothebuyer vidyarthiplus.comand

howthesellercansolvehisproblem.Thissize-upofsalesmanshipmaywellemphasizetheperso nalqualitiesrequiredofgoodsalesman. Mostcompaniesdesirethatcertainessentialpersonalitytraits, qualities,characteristics,aptitudes,attitudesandabilitiesshouldbepossessedbythep eoplewhomtheywanttorecruittothesaleforce. Howeverthereisnostandardizedformulaforessentialqualitiessuchthingastheidealsales personality.Therearemanykindofsellingjobsrequiringdifferenttypesofsalesman.So,th echaracteristicsofsalesmenusuallyvaryfromonesalespositiontoanotherandalsoformcom panytocompany.Thismeans,eachcompanyshouldmakeitsownstudyofitssellingjobanddecide thecharacteristicsofitsownsalesforce. However,anumberoflistsofessentialcharacteristicsareavailableMayerandHerbertconcl ude, itisenoughifagoodsalesmenhastwobasicqualities empathyandegodrive .Empathyistheabi litytofeelasthecustomerdoes.Egodrivereferstoastrongpersonalneedtomakethesalefori tsownsakeandnotmerelyforthemoneytobegained.Butthesearerarelyenough.Themajorityof scholarsfeelthatthefollowingshouldbetheessentialcharacteristicsofsuccessfulsales man. vidyarthiplus.comlistingthehowthesellercansolvehisproblem.Thissize-upofsalesmans hipmaywellemphasizethepersonalqualitiesrequiredofgoodsalesman. Mostcompaniesdesirethatcertainessentialpersonalitytraits, qualities,characteristics,aptitudes,attitudesandabilitiesshouldbepossessedbythep eoplewhomtheywanttorecruittothesaleforce. Howeverthereisnostandardizedformulaforessentialqualitiessuchthingastheidealsales personality.Therearemanykindofsellingjobsrequiringdifferenttypesofsalesman.So,th echaracteristicsofsalesmenusuallyvaryfromonesalespositiontoanotherandalsoformcom panytocompany.Thismeans,eachcompanyshouldmakeitsownstudyofitssellingjobanddecide thecharacteristicsofitsownsalesforce. However,anumberoflistsofessentialcharacteristicsareavailableMayerandHerbertconcl ude, itisenoughifagoodsalesmenhastwobasicqualities empathyandegodrive .Empathyistheabi litytofeelasthecustomerdoes.Egodrivereferstoastrongpersonalneedtomakethesalefori tsownsakeandnotmerelyforthemoneytobegained.Butthesearerarelyenough.Themajorityof scholarsfeelthatthefollowingshouldbetheessentialcharacteristicsofsuccessfulsales man. vidyarthiplus.comlistingthe 1.Ambition2.Enthusiasm3.Cheerfulness4.Sympathy5.Patienceandpersistence

vidyarthiplus.com 6.Tact7.Hardwork8.Determination9.Dependability10.Integrity11.Abilitytoaskquestio ns12.Abilitytomakequickandaccuratespotjudgments13.Abilitytoprovokeanswer14.Model sandconfidentanswerstoquestions15.Alertness16.Senseofhumour17.Storytellingabilit y18.Abilityofsmile19.Optimism20.Rightfacialexpression21.Abilitytomixeasilywithot herpeople22.Memory23.Leadership24.Powerofobservation25.Acceptanceofcriticism26.H abitofaskingfortheorder27.Knowledgeofthecompany28.Knowledgeoftheproduct29.Knowle dgeoftheprospect30.Personalappearance

vidyarthiplus.com Aspointedouralready,theabovearethecommonqualitiesrequiredofagoodsalesman.Inpract iceitisdifficulttofindfromasingleindividualalltheabovequalities.Butstill,theindi vidualcoulddeveloptheabovequalitiestobecomeabettersalesman. MANAGEMENTOFSALESFORCEManagementhasbeendefinedastheartof gettingthingsdonethroughp eople .Itisalso thedevelopmentofpeopleandnotthedirectionofthings .Salesmanagementisnoe xceptiontothis.Effectiveimplementationofthesalespoliciesdependslargelyontheeffic iencyandnumberofsalesmenatthesalesmanagement sdisposal.Salesforcemanagementisdefin edastheanalysis,planning,implementationandcontrolofsalesforceactivities.Itinclud esdesigningsalesforcestrategyandstructureandrecruiting,selecting,training,compen sating, supervisingandevaluatingsalesforce. DESIGNINGSALESFORCESTRATEGYANDSTRUCTUREAcompanycandividesalesresponsibilitiesalo nganyofseverallines.Thedecisionissimpleifthecompanysellsonlyoneproduct-linewithc ustomersinmanylocations.Inthatcase,thecompanywoulduseaterritorialsalesforcestruc ture.However,ifthecompanysellsmanyproductstomanytypesofcustomers,itmightneedapro ductsalesforcestructure,acustomersalesforcestructureoracombinationofthetwo. Intheterritorialsalesforcestructureeachsalespersonisassignedtoanexclusiongeograp hicterritoryandsellsthecompany sfull-lineof

vidyarthiplus.com productsorservicestoallcustomersinthatterritory.Thishasmanyadvantages.Itclearlyd efinessalespersonsjobanditalsoincreasesthesalespersonsdesiretobuildlocalbusiness relationshipthat,inturn, improvesellingeffectiveness.Finally,becauseeachsalespersontravelswithinalimitedg eographicarea,travelexpensesarerelativelysmall. Inproductsalesforcestructure,thesalesforcesellsaportionofthecompany sproductsorlin es.Thismeansthesalespeopletraveloverthesamerouteandwaittoseethesamecustomers.The seextracostsmustbecomparedwiththebenefitsofbetterproductknowledgeandattentiontoi ndividualproduct. Incustomersalesforcestructure,thecompaniesorganizethesalesforcealongcustomerorin dustrylines.Separatesalesforcesmaybesetupfordifferentindustries,forservingdiffer entcustomers.Organizingthesalesforcearoundcustomerscanhelpacompanybecomemorecust omerfocusedandbuildcloserrelationshipwithimportantcustomers. Complexsalesforcestructure:Whenacompanysellsawidevarietyofproductstomanytypesofc ustomersoverabroadgeographicalarea, itoftencombinesseveraltypesofsalesforcestructure.Salespeoplecanbespecializedbycu stomerandterritory,byproductandterritory,byproductandcustomer,orbyterritory,prod uct,andcustomer. Nosinglestructureisbestforallcompaniesandsituations.Eachcompanyshouldselectasale sforcestructurethatbestservestheneedsSALESFORCESIZEofitscustomersandfitsitsovera llmarketingstrategy.

Manycompanyusesomeformofworkloadapproachforcesize.Usingthisapproach,acompanyfirs tgroupsaccountsintodifferentclassesaccordingtosize,accountstatus,orotherfactorst osetsalesItthendeterminesthenumberofsalespeopleneededtocalloneachclassofaccounts thedesirednumberoftimes.Thecompanymightthinkas vidyarthiplus.comrelatedtotheamountofeffortrequiredtomaintainthem. follows: Supposewehave1,000Type-Aaccountsand2,000Type-BaccountsType-Aaccountsrequire36cal lsayearandType-Baccountsrequire12callsayear.Inthiscase,thesalesforce sworkload thenu mberofcallsitmustmakeperyear,is60,000calls[(1,000x36)+ (2,000x1)]. RECRUITMENTANDSELECTIONAsalesmanisanimportantcornerstoneuponwhichasalesorganisat ionisbuilt.Consequently,salesmanagersareconfrontedwiththetaskofplanningasoundsel ectionprogrammeofsalesmen.Training, motivationetc.areotherprimefactorsindevelopinganeffectivesalesorganisation.Butth edegreeofsuccessdepends,toalargeextent,ontheabilityofasalesmanagerto attract,disco ver,andhiretherightkindofman .Selectingapropermanisimportantduetofollowingreasons. (a) Supposeouraveragesalespersoncanmake1,000callsayear. Sellingjobshavebecomemoredifficultbecauseofthegreatercomplexityofproductorservic e,themultiplicityofchannelsofdistributionetc. Thus,thecompanyneeds60salespeople(60,000/1,000)

(b)Marketstodayarehighlycompetitive(c)Sellingasa career orprofessionhasnotbeenfullya ccepted,andhencethereisonlyalimitednumberofsalesmanwhocouldreally vidyarthiplus.com qualifyforthisjob. (d)Thereiswidevariabilityinthesaleseffectivenessofsalespeople. (e)Salespeopleareverycostly.Ifacompanydecidestoemployextrasalespersonnel,thecost willbemuchhigherthanjustbasicsalary(andcommission). (f)Otherimportantdeterminantsofsuccess,liketrainingandmotivationareheavilydepend entontheintrinsicqualitiesoftherecruit. Recruitmentisanactofinducingqualifiedandappropriatepeopletogetinterestedinandapp lyforasalesman spositionwiththecompany. Itinvolvestheidentification,locationandstimulationofjobaspirants. Sinceitisanongoingprocess,usuallycompaniesandcontinuouslyupdatetheprospectfilesa nddevelopwitheducationalandtraininginstitutionsandemploymentexchangesoastogetapp ropriateleadsforlocatingcandidates.Inbrief,recruitmentSelectionisaconsequenceofr ecruitmentactivitiesandimplieschoosingthedesirednumberofapplicantsforemploymentw iththecompanyfromamongstthosewhohaveapplied.Itinvolvestheprocessofmatchingeducat ion,aptitudinalandpersonalityattributesmaintaincontactmeansmakingpeopletoaspiref orajobwiththecompany.

oftheapplicantswiththeman-specifications,laiddownbythecompany. Thereareanumberofstagesintherecruitmentandselection vidyarthiplus.comoftheapplicantswiththeman-specifications,laiddownbythecompany. Thereareanumberofstagesintherecruitmentandselection vidyarthiplus.com process: 1.Preparationofthejobdescriptionandpersonnelspecification. 2.Identificationofsourcesofrecruitment. 3.Designinganeffectiveapplicationform. 4.TestandInterviewing. 5.ReferencecheckingandMedicalfitness. 6.Placement1.JobDescriptionandPersonalSpecificationJobdescriptionisastatementdef iningthenatureandcontentofthejobandspecifiesthedutiesandresponsibilitiesoftheinc umbentforthejob.Generallyajobdescriptionwillcoverthefollowingfactors: Thetitleofthejob. Dutiesandresponsibilitiesothermanagementpersonnel. Theorganizationalrelationshipwithpeers,supervisors,and

Theconditionsunderwhichjobistypicallyinvolved. Degreeofautonomy. Oncegenerated,thejobdescriptionwillactasablueprintforthepersonnelspecificationwh ichoutlinesthetypeofapplicantthecompanyisseeking.Personnelspecificationisastatem entspecifyingthekindofpersonrequiringforthejobdescribed.Apersonalspecificationma ycontainallorsomeofthefollowingfactors: 1)Physicalrequirements,e.g.speech,appearance. 2)Attainments,e.g.standardofeducationandqualifications, experienceandsuccesses. 3)Aptitudesandqualities,e.g.abilitytocommunicate, self-motivation. 4)Disposition,e.g.maturity,senseofresponsibility. 5)Interests,e.g.degreetowhichinterestsaresocial,active,inactive. 6)Personalcircumstances,e.g.married,single,etc. Thefactorschosentodefinethepersonalspecificationwillbeusedascriteriaofselectioni ntheinterviewitself. 2.IdentificationofSourcesofRecruitmentTherearesixmainsourcesofrecruitment: 1)Frominside thecompany sownstaff2)Employmentagencies vidyarthiplus.comTheconditionsunderwhichjobistypicallyinvolved. Degreeofautonomy. Oncegenerated,thejobdescriptionwillactasablueprintforthepersonnelspecificationwh ichoutlinesthetypeofapplicantthecompanyisseeking.Personnelspecificationisastatem entspecifyingthekindofpersonrequiringforthejobdescribed.Apersonalspecificationma ycontainallorsomeofthefollowingfactors: 1)Physicalrequirements,e.g.speech,appearance. 2)Attainments,e.g.standardofeducationandqualifications, experienceandsuccesses. 3)Aptitudesandqualities,e.g.abilitytocommunicate, self-motivation. 4)Disposition,e.g.maturity,senseofresponsibility. 5)Interests,e.g.degreetowhichinterestsaresocial,active,inactive. 6)Personalcircumstances,e.g.married,single,etc. Thefactorschosentodefinethepersonalspecificationwillbeusedascriteriaofselectioni ntheinterviewitself. 2.IdentificationofSourcesofRecruitmentTherearesixmainsourcesofrecruitment: 1)Frominside thecompany sownstaff2)Employmentagencies vidyarthiplus.com

3)Educationalestablishment vidyarthiplus.comEducationalestablishment vidyarthiplus.com 4)Competitors5)Pressadvertisements6)Causalapplicants 3.DesigninganEffectiveApplicationFormTheapplicationformisaquickandinexpensivemet hodofscreeningoutapplicantsinordertoproductashort-listcandidateforinterview.Theq uestionontheformshouldenablethesalesmanagertocheckiftheapplicantisqualifiedvis--v ispersonnelspecification.Questionsrelatingtoage,education,previousworkexperience andleisureinterestsareoftenincluded.Besidesgivingsuchfactualinformation,theappli cationformalsorevealsdefectssuchasaninabilitytospell,poorgrammarorinfollowingins tructions. Whateverthecriteria,theapplicationsformwilloftenbetheinitialscreeningdeviceusedt oproduceashort-list.Itscarefuldesignshould,therefore,beahighpriorityforthoseinvo lvedinselection. Fourcategoriesofinformationareusualonapplicationforms. 1.Personal2.Name3.Addressandtelephonenumber4.Sexofthecarelessness

5.Maritalstatus6.Children vidyarthiplus.comMaritalstatus6.Children vidyarthiplus.com 7.Dateofbirthandage2.EducationSchools:Primary/SecondaryFurtherandhighereducation :Intuitions,coursestakenQualificationsMembershipofprofessionalbodiesSpecializedt raining.E.g.apprenticeships,salestraining 3.EmploymentHistory CompaniesworkedforDatesofemploymentPositions,dutiesandresponsibilitiesheldMilita ryservices4.OtherinterestsSportsHobbies Membershipofsocieties/clubs

Togiveacommonbasisfordrawingupashortlist. ToprovideafoundationofknowledgewhichcanbeusedasthestartingpointfortheinterviewTo aidinthepost-interviewdecision-makingstage. Havingeliminatedanumberofapplicantsonthebasisoftheapplicationform,aninitialorfin alshort-listwillbedrawnupdependingonwhethertheinterviewingprocedureinvolvestwost agesoronlyonestage. 4.TestandInterviewInordertodevelopanin-depthunderstandingofthecandidates, thecompanymayadministerhim/heranumberofpsychologicalandothertests.Thepsychologic altestattempttoidentifyandquantifymoreaccuratelythevariouspersonalitytraitsandat tributesthatarenotblanksoreveninterviews.Threetypesofpsychologicaltestareusedint heselectionsystemofsalespersonneltestsofability,testsofhabitualcharacteristics, andtestsofachievement:Testsofabilityattempttomeasurehowwellapersoncanperformapar ticulartaskwithmaximummotivations.Theyaretestsofbestperformanceandincludetestsab ility(intelligencetests)andtestofspecialabilities,oraptitudetests.Testsofhabitua lcharacteristicsattempttogaugehowprospectiveemployeesSuchanapplicationformwillac hieveanumberofpurposes. wouldactintheirdailyworknormally,i.e.notwhentheyareontheirbestbehaviour.Theseare testsoftypicalperformanceandtheyincludeattitude,personality,andinteresttests.Ach ievementtestsaredesigned vidyarthiplus.comusuallymeasuredbythescreeningofapplicationofmentalTogiveacommon basisfordrawingupashortlist. ToprovideafoundationofknowledgewhichcanbeusedasthestartingpointfortheinterviewTo aidinthepost-interviewdecision-makingstage. Havingeliminatedanumberofapplicantsonthebasisoftheapplicationform,aninitialorfin alshort-listwillbedrawnupdependingonwhethertheinterviewingprocedureinvolvestwost agesoronlyonestage. 4.TestandInterviewInordertodevelopanin-depthunderstandingofthecandidates, thecompanymayadministerhim/heranumberofpsychologicalandothertests.Thepsychologic altestattempttoidentifyandquantifymoreaccuratelythevariouspersonalitytraitsandat tributesthatarenotblanksoreveninterviews.Threetypesofpsychologicaltestareusedint heselectionsystemofsalespersonneltestsofability,testsofhabitualcharacteristics, andtestsofachievement:Testsofabilityattempttomeasurehowwellapersoncanperformapar ticulartaskwithmaximummotivations.Theyaretestsofbestperformanceandincludetestsab ility(intelligencetests)andtestofspecialabilities,oraptitudetests.Testsofhabitua lcharacteristicsattempttogaugehowprospectiveemployeesSuchanapplicationformwillac hieveanumberofpurposes. wouldactintheirdailyworknormally,i.e.notwhentheyareontheirbestbehaviour.Theseare testsoftypicalperformanceandtheyincludeattitude,personality,andinteresttests.Ach ievementtestsaredesigned vidyarthiplus.comusuallymeasuredbythescreeningofapplicationofmental

tomeasure howmuchindividualshavelearntfromtheirtrainingoreducation .Besides,acompany mayalsoadministerphysical/medicalteststoascertainthephysicalfitnessofthecandidat eforahardand vidyarthiplus.com strenuoussellingjob. InterviewsmayprecedeorfollowtheadministrationoftestsInterviewinginvolvespersonal interactionbetweenthecandidateandinterviewer(s)ineitheraformal/patternedorinform alsetting.Intheseinterviewsacandidateisaskedanumberofquestionsoriginatingourofap plicationblankssoastoverifyandinterpretthefactscontainedthereinasalsotogathersup plementaryrelevantinformation. 5.MedicalCheck-upandReferenceCheckingTheinstitutionmayaskthecandidatestoundergom edicalcheck-uptofindouttheirphysicalfitnessforperformingthejob. Theorganisationmayasktheapplicanttofurnishafewnameswhocouldbecontactedbytheemplo yertoverifythevalidityoftheinformationprovidedbytheapplicantandhispersonalbehavi our. 6.Placementdependingontheconvenienceofthecompany. Whenanewrecruitisformallyassignedhisdutiesandeducatedabouthiswork,theselectionpr ocesscomestoanend.Thegeneraltraditionissuchthatsupervisorortheimmediatebossofthe newrecruittakeshimtotheplaceofwork,explainshimhiswork,andalsoinformshimabouttheh istory,developmentandtraditionsofthecompany.

Theselectedemployeeonbeingplacedininductedintheindustrybyacquaintinghimwiththeov erallorganisationstructure,aimsandobjectives,hisplaceintheorganizationalset-uphi sreportingauthority, hisresponsibilitiesetc.Heisgivenafeeloftheorganisation.Heisintroducedtohissuperi ors,peersandsubordinates.Thismakeshimcomfortableandputshimatease. Theselectionprocedurediffersfromoneorganisationtoanotherandalsowithinthesameorga nisatoindependingonthesituationandneedsoftheorganisatoinaswellasthelevelforwhich selectionisdone. Moreover,theselectionprocesstoselectlower-levelworkersisleastexpensive;whilethes electionoftop-levelemployeeswouldbemuchmoreexpensivebecauseitrequirestheuseofcom plicatedselectiontools. vidyarthiplus.com TRAININGTheessenceofalltrainingisthebeliefthatperformanceofpeoplecanbeimprovedth roughtraining.Thesamebasicapproachshouldgovernsalestrainingaswell.Itshouldreston theconvictionthateverysalesmancanbeimprovedthroughcarefullydesignedtraining. Theneedfortrainingarisesduetothefollowingreasons: (a)Traininghelpsrecruitstoadjusttonewmethodsandprocedureofthefirm. (b)Itenablestherecruittomeetstandardsofperformanceexpectedofhimwhichwillincrease hisvaluetothefirm.

(c)Inthecaseofexperiencehandsandpresentemployees,trainingenablesthemtoacquiremor eandgreaterskills. (d)Goodtrainingreducesdissatisfactionamongsalesmenandreducestherateofsalesmentur nover. vidyarthiplus.com CONTENTSOFTRAININGDecidingthecontentoftrainingisalsoaveryimportanttaskinorganizi ngsalesforcetraining.Someofthecommontopicsonwhichsalesmenaregiventrainingarelist edbelow: KnowledgeaboutmarketKnowledgeaboutcustomersKnowledgeaboutproductsKnowledgeaboutc ompetitionsKnowledgeaboutthecompanyKnowledgeaboutsellingtechniquesTRAININGMETHOD SForimpartingtrainingtosalesmenavarietyoftrainingmethodsareavailabletocompaniesr angingformsimplelecturingtocomplexsensitivitytraining. SelfStudyLectureMethod

vidyarthiplus.com DiscussionRolePlayingSensitivityTrainingCaseStudyOn-the-JobTrainingEvaluationofT raining Havingtrainedthesalesmen,marketingmanagementshouldevaluatetheeffectivenessofthet rainingsessionsandtheoverallimpactofthetrainingprogrammeonthesalesman sperformance .Theoverallimpactoftheprogramme,ontheotherhand,maybeevaluatedbycomparingsalesman s performanceintermsofsalesprofitability,ordersize,expensesetc.betweenpre-andposttrainingperiods.However,whensalesmenarenewrecruitsuchcomparisonsmaynotbepossible .Insuchacasetherefore,judgmentmaybeformedonthebasisofabsolutetotalperformance. COMPENSATIONSalesmen scompensationmeansmonetaryrewardgivenbyacompanytoitssalesmeni nconsiderationoftheservicesrenderedbythem.Itgenerallyincludescontractualpayments butmayalsoincludenon-contractualandadhocpayments. salesvolume,

Sinceeverycompensationplaninrespectofsalesmenattemptstorewardthemfortheirservice stoacompany,itservesasanimportantItnotonlykeepssalesmenonthecompanyrollsbutalsom otivatesthemtocontributetothegrowthofthecompanyandtherebygetgrownindividually.Be sides, compensationisanimportantmanagerialtooltocontrolanddirectsalesforcetoattainthesa lesobjectives.Italsoinfluencescustomerrelationsandgoodwill.Therefore,inthemanage mentthecompensationplanplaysaveryimportantrole. RequirementofGoodCompensationPlanItshouldbesimpletounderstandbysalesman. Itshouldensurealivingwagetosalesmen. Itshouldbeeasyandeconomicalforadministration. MethodsofCompensationTherearebasicallythreetypesofcompensationplan: vidyarthiplus.comvehicleforinducingthemtocontinuetoserveit. ofsalesforce, Itshouldbefairtoboththesalesmanandthecompany. Itshouldalsobeflexibletoprovidescopeforadjustment. Sinceeverycompensationplaninrespectofsalesmenattemptstorewardthemfortheirservice stoacompany,itservesasanimportantItnotonlykeepssalesmenonthecompanyrollsbutalsom otivatesthemtocontributetothegrowthofthecompanyandtherebygetgrownindividually.Be sides, compensationisanimportantmanagerialtooltocontrolanddirectsalesforcetoattainthesa lesobjectives.Italsoinfluencescustomerrelationsandgoodwill.Therefore,inthemanage mentthecompensationplanplaysaveryimportantrole. RequirementofGoodCompensationPlanItshouldbesimpletounderstandbysalesman. Itshouldensurealivingwagetosalesmen. Itshouldbeeasyandeconomicalforadministration. MethodsofCompensationTherearebasicallythreetypesofcompensationplan: vidyarthiplus.comvehicleforinducingthemtocontinuetoserveit. ofsalesforce, Itshouldbefairtoboththesalesmanandthecompany. Itshouldalsobeflexibletoprovidescopeforadjustment. FixedsalaryCommissiononlySalarypluscommission1.StraightSalary

Itisaverycommonmethodofcompensatingsalesmen.Itiscomposedofonlyafixedcomponentwhi chtheyreceiveintheformofsalarypaidintermsofaunitoftime,usuallyamonth.Itisfixedan dguaranteedanddoesandnotvarywithanymeasureofproductivity. vidyarthiplus.com 2.StraightCommissionItthismethod,compensationiscomposedofonlyavariablecomponentw hichisrelatedtosomemeasureofproductivitylikesalevolume,collectionofoutstandingtr adedebts,invoicing,netprofits, etc.However,usually,salesvolumeisthebasisonwhichsalesmen scommissionincomputed. 3.SalaryPlusCommissionWhenstraightsalaryandstraightcommissionmethodsofcompensati onarecombinedinsomeacceptableform,thecombinationmethodofcompensationemerges.Inth ismethodusuallyamixofsalary(fixedcomponent)andcommission(variablecomponent)isdev elopedinsuchawaythatsalesmenareassuredofasecuredsteadyincomeandalsoadequateincen tivetoworkharder. FringeBenefits Besidestheabove,salesmenareentitledtomostofthefringebenefitsgiventoothercompanye mployees. EVALUATIONOFPERFORMANCEOFSALESFORCEsignificantthanothers,isthecontrolofsalesforc eoperations.IntheThelastphaseinsalesforcemanagement,butinnowayless

contextofsalesforcemanagement,controlmeansofsalesman sperformancebothperiodicallya ndonacontinuingbasisinordertodeterminethecomplianceofpoliciesandachievementofpla ntargetsinrespectoftheirjob. appraisalTheobjectivesofsalesforcecontrolareto: (i)Determinetheperformancelevelsofsalesmen. (ii)Enforcethecomplianceofpolicydirectivesandachievementoftargetedperformancelev els,and vidyarthiplus.comcontextofsalesforcemanagement,controlmeansofsalesman sperformance bothperiodicallyandonacontinuingbasisinordertodeterminethecomplianceofpoliciesan dachievementofplantargetsinrespectoftheirjob. appraisalTheobjectivesofsalesforcecontrolareto: (i)Determinetheperformancelevelsofsalesmen. (ii)Enforcethecomplianceofpolicydirectivesandachievementoftargetedperformancelev els,and vidyarthiplus.com (iii) Identifytheareaswherecorrectiveactionisrequired Controlisalsointendedtodevelopabaseonwhichtoconsidersalesmenforvariouskindsofrew ardsandpenalties. MethodsofControllingSalesmen1.Fixingsalesquota 2.Establishingsalesterritories3.Establishingcontrolthroughreportsandrecords1.Fix ingSalesQuota:Salesquotasarequantitativemeasuresoftheeffectivenessofsalespeople. Thequotamaybesetintermsofvalueorintermsofunitorsales.Quotasmayalsobesetfornewcus tomersobtained,fororderstakenforparticularproductsorforalmostanytypeofmarketinga ctivity.

vidyarthiplus.com 2.EstablishingSalesTerritorles:Asalesterritoryis thebasicunitofsalesplanningandsal escontrol,representingacertainsegmentofthefuturesalesandprofitsofthecompany .Itmea nsthedivisionofthemarketofthecompanyintosmallsegments.Thisisnotonlypointofviewit hasimportantbearingsontheirsalesplanning. 3.EstablishingControlThroughReportsandRecords:Companyrecordsareavariablesourceof avarietyofinformationpertainingtosalesmen sperformance.Thisinformationiscontainedi nsalesinvoices,orders,creditnotes,ledgeraccountsetc.whicharelocatedintheaccounts andsalesdepartmentsofacompany.Ananalysisoftheserevealssalesmen sperformanceasregar dssalesvolume,grossmargins,averageordersize,marketshareetc. Reportssentbysalesmenabouttheiroperationsalsoprovideconsiderableinformationwhich whenanalyzedprovidetherequiredinputstomeasureperformance.Thereportsmaygiveinform ationaboutcallsmade,expenses,workplan,newbusinessbooked,lost-saleetc. Additionalinformationcomesfrompersonalobservation, consumer slettersandcomplaints,customerandothermeansforcontrollingthesalesmenbutfr omthemanagementtalkswith salespeople. Formalevaluationproducesthefollowingbenefits: judgingperformance. Managementmustdevelopandcommunicateclearstandardsfor

vidyarthiplus.comManagementmustgatherwell-roundedinformationabouteachManagementm ustgatherwell-roundedinformationabouteach salesperson. Salespeoplereceiveconstructivefeedbackthathelpsthemtoimprovefutureperformance. Salespeoplearemotivatedtoperformwellbecausetheyknowtheyareanswerable. Afollow-upactionisnecessarilyrequiredafterofperformance.Whenappraisalisnotfollow edbyanyactionislosesmuchofitsrelevance.Therefore,inordertosecuretheeffectiveness ofthecontrolsystem,managementmusttriggerappropriateactionnecessitatedasaresultof appraisal. ReviewQuestions: 1.Discussthestepsinvolvedinsellingprocess. evaluation2.3.Whatarethestepsinvolvedinrecruitmentandselectionsofsalesmen? 4. Enumeratethequalitiesrequiredforasuccessfulsalesman. Whatistheneedfortrainingsalesforce?Brieflyexplainvarioustrainingmethod.

5.Whatarethecharacteristicsofagoodcompensationplan?Specifydifferentmethodsofcomp ensationofsalesman. 6.Whatarethedifferentmethodsofevaluationofperformanceofsalesforce? **************** vidyarthiplus.comWhatarethecharacteristicsofagoodcompensationplan?Specifydiffere ntmethodsofcompensationofsalesman. 6.Whatarethedifferentmethodsofevaluationofperformanceofsalesforce? **************** vidyarthiplus.com

vidyarthiplus.com CASEANALYSISAcaseisadescriptionofsituationinvolvingproblemstobesolved. However,thecasemaynothaveascompleteinformationabouttheproblemasreaderwishes.Thea mountofdetailrequiredwouldmakethecasetoolongtoreadtotoodetailedtoanalyze.Acasema ybepresentedeitherinstructuredformorinunstructuredform.Inahighlystructuredcase,t hereareleadingquestionsattheendthatindicateafocusandThedescriptionofrealbusiness situationtoacquaintthelearnerIntroductionofrealismintoformalinstruction; Demonstrationofvarioustypesofgoals,problems,facts, conditions,conflictsandpersonalitiesobtainedinorganizationalsettings; Developmentofdecision-makingability;andDevelopmentofindependentthinkingbutcooper ativeapproachtoworkinteamsituations. GuidelinesforCaseAnalysispredeterminethedirectionsinwhichthediscussionwillgo. Thecasemethodoflearninghasthefollowingobjectives: withtheprinciplesandpracticesobtainedinworksetting; Thebasicapproachinacaseanalysisshouldbetogetontheproblemandprovideitssolution.Ho wever,thiscanbeachievedonly

whentheparticipantsgothroughanumberofsequentialactivities.Forexample,acaseanalys tcanputfollowingquestionsinsequencetofindtheproblemanditslikelysolutions: (i)Whataretheactualproblemsinvolvedinthecase? (ii)Whataretherelevantfacts? (iii)Whatarethecrucialunknownaspectsofthescene? (iv)Whatarethemajorcriticalquestionsrelatedtoeachspecificevent? (v)Inwhatways,canlogicandreasoningbeusedtodeterminecrucialinference,connectionsa ndrelationships? (vi)Inwhatmannerscontradictoryfactsandargumentscanbeweightedinmakingdecisions? vidyarthiplus.comwhentheparticipantsgothroughanumberofsequentialactivities.Forex ample,acaseanalystcanputfollowingquestionsinsequencetofindtheproblemanditslikely solutions: (i)Whataretheactualproblemsinvolvedinthecase? (ii)Whataretherelevantfacts? (iii)Whatarethecrucialunknownaspectsofthescene? (iv)Whatarethemajorcriticalquestionsrelatedtoeachspecificevent? (v)Inwhatways,canlogicandreasoningbeusedtodeterminecrucialinference,connectionsa ndrelationships? (vi)Inwhatmannerscontradictoryfactsandargumentscanbeweightedinmakingdecisions? vidyarthiplus.com (vii) Inwhatwayscanbedecisionsbeimplemented? Theanswersofthesequestionswillleadtodefinetheproblem, identifythealternativesforproblemsolution,thosealternatives,andfinallytochooseth esuitablealternative. BuyersandRetailerBehaviourforMatchboxes1.LightwelMatchCompanyMr.PankajGoswami,th eMarketingManagerofLightwelMatchCompanylookedatthereportplacedbeforehimentitled Wh yarepeopleStrikingFewerLightwelMatches? analysisof

TheperformanceofLightwelinrelationtothetotalmatchindustryhadnotbeenverysatisfact oryinthelastcoupleofyears.ThenormswhichLightwelhaddevelopedforaverageamountofsto ckfordifferentclassesofretailerswerenolongeracceptabletotheretail vidyarthiplus.comTheperformanceofLightwelinrelationtothetotalmatchindustryhadnot beenverysatisfactoryinthelastcoupleofyears.ThenormswhichLightwelhaddevelopedfora verageamountofstockfordifferentclassesofretailerswerenolongeracceptabletothereta il vidyarthiplus.com channel. TheBoardofDirectorsofthecompanyhadaskedMr.Goswamitoreportwhythesalesweredeclinin g,whytheseasonalvariationshadbecomesolarge,andtosuggestactionswhichshouldbetaken tostabilizethesales. abouttheoptionsopentoLightwel.Itwascleartohimthattheconsumerswerebecomingpricese nsitiveandbrandloyaltywaslow. AssaultsbycheaperandreasonablygoodqualitysmallscalebrandsloyaltyforLightwelbrand s.Theretailerbehaviourwasparticularlyworryingbecausehewasinstrumentalinmakingbra ndchoicedecisionsinamajorityofcases. Mr.Goswamiconductedamarketresearch,hebegantowonderhadweakenedthecustomers aswellas retailers Mr.Goswamiknewthatbecauseofhighoverheads,Lightwelcouldillaffordtolowerthepriceso fexistingbrands.Acheaperandsomewhatlowerquality fightingbrand couldbeintroducedbutth erewasariskofhurtingLightwel simage.Theresearchreportandindicatedmanypluspointsint ermsofqualityimageofLightwelbrands.Theconsumersbehaviourinmonsoonseasonconfirmed this. Mr.Goswamiwonderedwhetherhecouldcapitalizeonhissubstantialimageadvantagetoincrea sethesalesofLightwelmatches.

Questions: 1.WhyisLightwelfindingitsmarketpositionsslipping?Whatisthe2.Whatmarketingstrateg yoptionsareavailabletoLightwel?Whatshoulditdoanywhy? ******* IntroducingaNewProduct2.HouseholdProducts(India)Ltd. Mr.Rahul,themarketingManagerforToiletsoaps,wasexaminingthedraft TestMarketProposal f oranewtoiletsoap,whichwaspreparedbytheProductManager. TheMarketingManagerandtheProductManagerhadbeendiscussingtheneedfortestmarketingt heproducttogetsomefeedbackontheeffectivenessofthemarketingmixaswellastogetsomein dicationonthesharethatthebrandcouldachievenationality.Theywerenotverykeenoncommi ttinglargeresourcesatthisstageandwerethereforethinkingofrecommendingatownHowever , becauseoftheuniquepromiseof PureSoapmadefromPureVegetableOils ,theyfeltitwasalsonece ssarytotestitinamarketwhichwasnotlikelytobeparticularlyresponsivetothisbenefit.T heProductManagersuggestedthatIndoreandHyderabadcouldbeselectedasthetesttows.Indo rebeingamarketwhichislikelytorespondtothisuniquebenefitofpurityandHyderabadrepre sentingmarketswhichmaynotvaluesuchbenefitsomuch.Thesewerelarge vidyarthiplus.comdecisionissuesbeforeLightwelExecutivesatthisstages? test. Questions: 1.WhyisLightwelfindingitsmarketpositionsslipping?Whatisthe2.Whatmarketingstrateg yoptionsareavailabletoLightwel?Whatshoulditdoanywhy? ******* IntroducingaNewProduct2.HouseholdProducts(India)Ltd. Mr.Rahul,themarketingManagerforToiletsoaps,wasexaminingthedraft TestMarketProposal f oranewtoiletsoap,whichwaspreparedbytheProductManager. TheMarketingManagerandtheProductManagerhadbeendiscussingtheneedfortestmarketingt heproducttogetsomefeedbackontheeffectivenessofthemarketingmixaswellastogetsomein dicationonthesharethatthebrandcouldachievenationality.Theywerenotverykeenoncommi ttinglargeresourcesatthisstageandwerethereforethinkingofrecommendingatownHowever , becauseoftheuniquepromiseof PureSoapmadefromPureVegetableOils ,theyfeltitwasalsonece ssarytotestitinamarketwhichwasnotlikelytobeparticularlyresponsivetothisbenefit.T heProductManagersuggestedthatIndoreandHyderabadcouldbeselectedasthetesttows.Indo rebeingamarketwhichislikelytorespondtothisuniquebenefitofpurityandHyderabadrepre sentingmarketswhichmaynotvaluesuchbenefitsomuch.Thesewerelarge vidyarthiplus.comdecisionissuesbeforeLightwelExecutivesatthisstages? test.

enoughtownsfordrawingconclusionsfromexperiencethere.Itwasthusdecidedtorunthetest inthesetownsforaperiodof9 12 vidyarthiplus.comenoughtownsfordrawingconclusionsfromexperiencethere.Itwasthusde cidedtorunthetestinthesetownsforaperiodof9 12 vidyarthiplus.com months. Questions: 1.Didthecompanyhaveadequateinformationatvariousstagesofthenewproductintroduction effort? 2.Whatinformationwouldyouneedtoevaluatethetestmarketandrecommendadecisiononexten sionofthisproduct? 3.Whatresearchwouldyousuggestforthispurpose/ ************ PositioningaProduct3.AmbassadorTorchlights AmbassadorTorchlightsheldthesecondlargestshareofthemarketfordrycellbatteriesanda lliedproducts.Thecompanywantedtoutilizetheirdistributionstrengthandweretoyingwit htheideaoftakingoverthedistributionofsomeconsumeritems.Withaviewtoexploretheposs ibilityoftakingupdistributionsofblades,Mr.M.A.Habib,SalesManagerofAmbassadorTorc hlights,contractedMr.Patel, ManagingDirectorofCentralIndustries,apartfrommanufacturingbladesforotherorganiza tions,hasitsownlineofblades.Someofthebrandshadbeenlaunchedrecently.Encouragedbyr esponse, CentralIndustrieshadopenedRegionalSalesOfficesinallthefourmetrotownsandhadrecrui tedalargenumberofsalesstaffforeachoftheseVikram theinitial

offices.Overheadsforeachoftheseofficeswereconsiderable.AtthetimeMr.Habibcalledon Mr.Patel,themarketingdepartmentattheHeadOfficeofCentralIndustrieswasplanningapro motionalcampaigntoencouragerepeatpurchasingfortwoofitsprestigebrands. ThecostofthispromotionwasestimatedtobeaboutRs.10lakhs. DuringthemeetingittranspiredthatMr.PatelwasverykeenthatAmbassadorTorchlightsshou ldtakeoverthedistributionofhisownbrands, Splash and Awake .This,hefelt,wouldenablehimtoc losedowntheRegionalOffices.Hewas,however,willingtomaintainthecentralmarketingdep artmenttoadviseAmbassadorTorchlights,aslongatheyfeltitwasnecessaryagreeablebasis .He,however,insistedonmaintainingtherighttoterminateAmbassadorTorchlightsasselli ngagentsifhewasnotsatisfiedwiththeirperformance. AmbassadorCompany sProblems: WhenMr.Habibreportedtheresultsofhismeeting.Ambassador stopmanagementwerefacedwitht hefollowingproblems: 1.Whethertooptfortheirownprivatebrandortotakeoverdistributionof Splash and Awake ?Incase theychosetheletter, alreadycreated.Theproblemwas,eveniftheydidagoodjobandachievedsomesuccess,therewa snotguaranteethatMr.Patelwouldnotonedayexpressdissatisfactionswiththeirperforman ce, terminatethemandcashinontheir fruitsoflabour . 2. productbepositioned?Shouldtheygoforacarbonsteelor vidyarthiplus.comnationaltheycoulddefinitelycashinontheawarenessthebrandhadIfthe ypreferredtomarkettheirownbrand,howshouldtheoffices.Overheadsforeachoftheseoffic eswereconsiderable.AtthetimeMr.HabibcalledonMr.Patel,themarketingdepartmentatthe HeadOfficeofCentralIndustrieswasplanningapromotionalcampaigntoencouragerepeatpur chasingfortwoofitsprestigebrands. ThecostofthispromotionwasestimatedtobeaboutRs.10lakhs. DuringthemeetingittranspiredthatMr.PatelwasverykeenthatAmbassadorTorchlightsshou ldtakeoverthedistributionofhisownbrands, Splash and Awake .This,hefelt,wouldenablehimtoc losedowntheRegionalOffices.Hewas,however,willingtomaintainthecentralmarketingdep artmenttoadviseAmbassadorTorchlights,aslongatheyfeltitwasnecessaryagreeablebasis .He,however,insistedonmaintainingtherighttoterminateAmbassadorTorchlightsasselli ngagentsifhewasnotsatisfiedwiththeirperformance. AmbassadorCompany sProblems: WhenMr.Habibreportedtheresultsofhismeeting.Ambassador stopmanagementwerefacedwitht hefollowingproblems: 1.Whethertooptfortheirownprivatebrandortotakeoverdistributionof Splash and Awake ?Incase theychosetheletter, alreadycreated.Theproblemwas,eveniftheydidagoodjobandachievedsomesuccess,therewa snotguaranteethatMr.Patelwouldnotonedayexpressdissatisfactionswiththeirperforman ce, terminatethemandcashinontheir fruitsoflabour . 2. productbepositioned?Shouldtheygoforacarbonsteelor vidyarthiplus.comnationaltheycoulddefinitelycashinontheawarenessthebrandhadIfthe ypreferredtomarkettheirownbrand,howshouldthe

stainlesssteelblade?Whatsegmentofthepopulationshouldtheycaterto?Whatshouldthepri cebe?Whatshouldbetheadvertisingandpromotionalstrategy? 3.IftheyoptedforCentral sbrands Splash and Awake ,theyneededtoknowshytherepurchaseratewasl ow?Whatadvertisingandpromotionalstrategy? Feelingthattheissueswerequitecomplex,theycalledinaconsultant. Inviewoftheurgencyoftheproblemtheyrequestedhimtosubmithisrecommendationswithinaw eek. vidyarthiplus.comstainlesssteelblade?Whatsegmentofthepopulationshouldtheycaterto ?Whatshouldthepricebe?Whatshouldbetheadvertisingandpromotionalstrategy? 3.IftheyoptedforCentral sbrands Splash and Awake ,theyneededtoknowshytherepurchaseratewasl ow?Whatadvertisingandpromotionalstrategy? Feelingthattheissueswerequitecomplex,theycalledinaconsultant. Inviewoftheurgencyoftheproblemtheyrequestedhimtosubmithisrecommendationswithinaw eek. vidyarthiplus.com Questions: 1.ShouldAmbassadorTorchlightstakeupthedistributionsofblades? Ifyes,shouldtheygoinfortheirown(private)brandorshouldtheyuponeormoreofCentralInd ustriesbrands? 2.Whataretheproductpositionsofthemajorbrands?Isthereanattractiveproductpositiona vailablewhereAmbassadorcouldintroduceitsbrand? 3.WhatmarketingstrategyshouldberequiredifAmbassadorwantstocreateandsustainasucce ssfulbrandpositioninthehighlycompetitiveblademarket? ***********

vidyarthiplus.com MARKETINGMANAGEMENT SECTION AAnswerandFivequestionsAllquestionscarryequalmarks1.Whatismodernmarketingc oncept?Whatareitselements?Whatissocietalmarketingconcept? 2.Whatismarketsegmentation?Whatareitsbasesandbenefits? 3.Whataretheexternalenvironmentalfactorsaffectingmarketingdecisions? 4.Whatismarketingresearch?Brieflyexplaintheprocedureofconductingmarketingresearc h? 5.WhatisPLCconcept?Howdoesithelpsthemarketingmanagerinhisdecision-making? 6. managesuchconflict? 7.Whatarethestepsinvolvedinsellingprocess? 8.Howwouldyouevaluateeffectivenessofadvertising? Section BAnswerandFourquestionsQuestionNo.15iscompulsory. 9.Whatarethefactorsthatdetermineprocess. 10.Explainnewproductdevelopmentprocess. 11. pricingmethodsadoptedinpractice? 12.Whatarethefactorsthatdecidethechoiceofadistributionschannels? Whatdoyouunderstandbychannelconflict?HowwouldyouWhatarethegeneralapproachestopri cing?Whatarethe

13.Whatarethedecisionareasinadvertising? 14. methodsofsalespromotion. 15.AttemptthefollowingCase: DecisionRegardingNewSalesTrainingProgrammeSunriseBiscuit&BeverageCompanyMr.P.V.K rishnamoorthywastheDirectorofSalesandMarketingofSunriseBiscuit&BeverageCompany.H egavelectuiresatthesalesmentrainingprogrammeattheCompany sBangalorezoneinwhichagro upofsalesmenfromhisregionparticipated.Mr.P.V.Krishnamoorthyhadtomakeadecisionast owhethertocontinuethetrainingprogrammeornot. Herecalledthatinthetrainingprogrammewhichhadjustended,anexperiencedsalesmanofthe company,Mr.K.Rajagopalwhoparticipatedinthetrainingsaidthatthehehadenjoyedtheprog rammeandfoundthetopicsdiscussedquitestimulating. Untilrecently,theonlytypeofthetrainingdoneinthecompanywasinthefield.Thenewrecrui tswereattachedtoanexperiencedsalesman.Thetrainingperiodwas6weeks.Attheendwritten testwasconductedandassessmentwasmade. trainingbecauseofchangesinsellingenvironment.werebecomingmorecritical.Competitio nbecomeacute.Allenvironmentalchangesmadetodifficultforthecompanytooperateinthesa memannerthattheyhadbeenkkjkl;jlkto.Therewasalsoaconcern,whethertheoldersalesmenw ereadaptablekjjhhjkhkto.There vidyarthiplus.comWhataretheobjectivesofsalespromotion?ExplaintheOflate,hecompany hadbegansomerethingingonsalesmenDealerstheseWhatarethedecisionareasinadvertising ? 14. methodsofsalespromotion. 15.AttemptthefollowingCase: DecisionRegardingNewSalesTrainingProgrammeSunriseBiscuit&BeverageCompanyMr.P.V.K rishnamoorthywastheDirectorofSalesandMarketingofSunriseBiscuit&BeverageCompany.H egavelectuiresatthesalesmentrainingprogrammeattheCompany sBangalorezoneinwhichagro upofsalesmenfromhisregionparticipated.Mr.P.V.Krishnamoorthyhadtomakeadecisionast owhethertocontinuethetrainingprogrammeornot. Herecalledthatinthetrainingprogrammewhichhadjustended,anexperiencedsalesmanofthe company,Mr.K.Rajagopalwhoparticipatedinthetrainingsaidthatthehehadenjoyedtheprog rammeandfoundthetopicsdiscussedquitestimulating. Untilrecently,theonlytypeofthetrainingdoneinthecompanywasinthefield.Thenewrecrui tswereattachedtoanexperiencedsalesman.Thetrainingperiodwas6weeks.Attheendwritten testwasconductedandassessmentwasmade. trainingbecauseofchangesinsellingenvironment.werebecomingmorecritical.Competitio nbecomeacute.Allenvironmentalchangesmadetodifficultforthecompanytooperateinthesa memannerthattheyhadbeenkkjkl;jlkto.Therewasalsoaconcern,whethertheoldersalesmenw ereadaptablekjjhhjkhkto.There vidyarthiplus.comWhataretheobjectivesofsalespromotion?ExplaintheOflate,hecompany hadbegansomerethingingonsalesmenDealersthese

wasalsoaconcern,whethertheoldersalesmenwereadaptablibkjhnew vidyarthiplus.com methodsofselling. ThesalestrainingmanagerMr.Goswamifeltfurthertrainingwasdjhdfgsdintheareaofsellin gtechnique,consumerbehariouretc.tobeeffectiveijkhgfdnewcompetitiveenvironment. Hence,Mr.P.V.KrishnamoorthyinstructedMr.Goswamitoplananewtrainingprogrammeonanex perimentaltrainingprogrammeswereconductedatdifferentZonaloffices. Mr.P.V.Krishnamoorthywantedtoassesstheimpactoftrainingconductedkgjdgdexperimenta lbasis.AccordingMr.Goswamidevelopedarkghjsdfkgjdsfevalutionbasedonthefollowing. Asubjectiveonthespotevaluationwasmadebytheparticipantsimmediatelyaftertheprogram me. Thesalesmenwereencouragedtosendfeedbackofspecificinstancesoftheelementsofthetrai ningprogramme,whichwereimplemented. Thesalessupervisorsandtheareasalesmanagerswerealsogavetheiropinionabouttheimpact oftraining. Itwasalsodecidedtocarryoutanobjectiveevaluatingusinganexperimentaldesign. basis.The Thegeneralreactionregaredingthetrainingprogrammefromsalesmenandtheareasalesmanag erswerequitefavourable.Mr.P.V. KrishnamoorthywaspleasedaboutthisandaskedMr.Goswamitofind

outthetotalcoastoftrainingprogramme.Healsoaskedhimtothinkaboutalternativeswaysof utilizingthesamemoneyindevelopingthesalesmen.Mr.P.V.Krishnamoorthyalsowonderedwh etheritmaynotbeabetterideatodirectlyrecruitsalesmenwhosomeprofessionaltrainingin salesmanship.Healsosuggestedthatitmightbeworthwhileideatotrainthesalessupervisor swhocouldthendirectlytrainthesalesmeninthefield. vidyarthiplus.comalreadyhadoutthetotalcoastoftrainingprogramme.Healsoaskedhimtot hinkaboutalternativeswaysofutilizingthesamemoneyindevelopingthesalesmen.Mr.P.V.K rishnamoorthyalsowonderedwhetheritmaynotbeabetterideatodirectlyrecruitsalesmenwh osomeprofessionaltraininginsalesmanship.Healsosuggestedthatitmightbeworthwhileid eatotrainthesalessupervisorswhocouldthendirectlytrainthesalesmeninthefield. vidyarthiplus.comalreadyhad Question: 1.Shouldthecompanygoforthenewtrainingprogramme? 2.Shouldtheentiresalesforcebecovered? 3.Whatshouldbethecontentandformofthetrainingprogramme? 4.5.Whatistheroleoftrainingintheoveralldevelopmentofthesalesforce? Canthesellingefficiencybeimprovedinsomeotherway?

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