Panditji ka gyaan

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Concept of Marketing
Meaning of Marketing Concept
Meaning - According to ‘Philip Kotler’, ”The Marketing concept may be defined as a
management orientation that holds that the key tasks of the organisation is to determine the
needs, wants and values of a target market and to adapt the organisation to delivering the
desired satisfactions more effectively and efficiently than its competitor.”
In Simple words we can say that, The Marketing Concept is a kind of Management Philosophy
through which a marketing manager can set goals and objectives for the firm and the goals
and objectives are set in according to the market situation so as to satisfy the needs and
wants of the consumers.
This concept of marketing is based on three fundamental beliefs which are:
1. The planning of all the companies should be made according to its targeted customers.
2. The primary goal of the firm should be the profitability of the sales volume. And,
3. All the marketing activities should be flow and co-ordinate according to the prescribed
organisational structure.
Here, in the marketing concept, there are certain activities which should be kept in mind by the
marketing manager while setting up the marketing goals and objectives. These concepts of
marketing are-
 Production concept,
 Sales Concept,
 Marketing concept,
 Product concept, and
 Societal Marketing Concept.

The five competing concepts by which companies are guided in their marketing efforts are:

1. Production concept, which is based on the fact that consumers favor products that are
available and affordable. Concentration on production efficiency and effective distribution
networks outweigh the customer’s actual needs and wants. This is used primarily when demand
exceeds supply and the focus is on finding production methods that can bring the price down to
attract more customers.

2. Product concept, which is based on ways to improve the quality, performance, and
features to attract buyers. This philosophy tends to spend too much time adding features to
their products, rather than thinking about what people actually need and want.

3. Selling concept, which places the focus on sales rather than what people actually need
or want. Most of the time the product is misrepresented which results in high customer
dissatisfaction.
4. Marketing concept, which focuses on what people need and want more than the needs
of the seller. This concept is about the importance of satisfying the customer’s needs to achieve
company success. Products are developed around those needs and wants.

5. Societal marketing concept, which not only uses the same philosophy as the marketing
concept, but also focuses around the products benefit to the betterment of society as a
whole. Greater emphasis is put on environmental impacts, population growth, resource
shortages, and social services.

The marketing concept relies upon marketing research to define market segments, their size,
and their needs. The marketing department makes the appropriate decisions to satisfy those
needs.

Attributes of Market Driven and Market Driving

Market Driving firms - Market drivers see the world differently and focus on latent or
emerging customer needs.

Market drivers create new markets or redefine the category in a fundamental way that
competitors are rendered obsolete.

• Market driver’s attributes

1. They trigger industry breakpoints or what Andy Grove of Intel’s “strategic inflexion points”,
which change business innovation.
2. Core Values inspire their radical business concept.
3. Rather than learn from existing customers, they often teach potential customers to consume
their drastically different value proposition.

9 Ways To Differentiate
In pondering what it takes, or how one can observe and more deeply characterize one type of
company from another, let’s look at these key differentiators.

Market-driving Market-driven
Disruptive Reactive
Innovative Incremental
Creative Insignificant
Value Features
Agile Rigid
Competitive Tentative
Decisive Unsure
Clear Confused
Dynamic Static
To get a better understanding of these criteria, let’s explore them in more detail in the
comparisons that follow.

 Market-driving companies are disruptive to markets surprising customers with value.

Market-driven companies are reactive to clear shifts that are late and underwhelming.
 Market-driving companies are discontinuously innovative introducing radical efficiency.
Market-driven companies are incremental in adding features to automate existing
methods.
 Market-driving companies bring creative solutions to difficult customer challenges.
Market-driven companies bring insignificant responses leaving customer questions
unanswered.
 Market-driving companies create massive value to delight customers. Market-driven
companies add expected features that fall short of customer expectation set by
competition.
 Market-driving companies are agile in their ability to pivot both vision and strategy.
Market-driven companies are rigid, and unable to modify past decisions even for
course-correcting good reason.
 Market-driving companies are recognized as competitive by early activity. Market-
driven companies are perceived as tentative, by their late reactivity.
 Market-driving companies are decisive in quantifying and taking measured risk. Market-
driven companies are unsure in researching and over-analyzing seemingly irrelevant
risk.
 Market-driving companies are clear in articulating new business model value to
customers in simple terms. Market-driven companies are confused in their positioning
and value messages to the market.
 Market-driving companies are dynamic in regularly creating new and growing markets.
Market-driven companies are static and can only serve existing often declining markets.

How To Become Market-driving

 To become a market-driving organization, you must first decide and commit to making the
changes necessary.
 The transformation will require a shift in culture.
 Market-driving companies are led by marketing and the CMO’s leadership and backed up by
forward-looking predictive data and prescriptive analytics.
 Being market-driving requires the right people, the right leadership, and the will to
make the difficult changes.
 The vision for being a market-driving company must come from the top. The CEO must
create and communicate a clear picture of what your company looks like as a market-
driving company.
 It requires a pervasive strategy and continuous mentoring of management and staff
throughout the organization.
5) Product life cycle

Product Life Cycle

The Product Life Cycle (PLC) is used to map the lifespan of a product. There are generally four
stages in the life of a product. These four stages are the Introduction stage, the Growth stage, the
Maturity stage and the Decline stage. The following graph illustrates the four stages of the PLC:

There is no set time period for the PLC and the length of each stage may vary. One product's
entire life cycle could be over in a few months. Another product could last for years. Also, the
Introduction stage may last much longer than the Growth stage and vice versa.

The Four Stages of the Product Life Cycle

1. Introduction: The Introduction stage is probably the most important stage in the PLC. In fact,
most products that fail do so in the Introduction stage. This is the stage in which the product is
initially promoted. Public awareness is very important to the success of a product. If people don't
know about the product they won't go out and buy it. are two different strategies you can use to
introduce your product to consumers.

 You can use either a penetration strategy or a skimming strategy. If a penetration

strategy is used then prices are set very high initially and then gradually lowered over
time. This is a good stategy to use if there are few competitors for your product. Profits
are high with this strategy but there is also a great deal of risk. If people don't want to
pay high prices you may lose out.
 The second pricing strategy is a skimming strategy. In this case you set your prices very
low at the beginning and then gradually increase them. This is a good strategy to use if
there are alot of competitors who control a large portion of the market. Profits are not a
concern under this strategy. The most important thing is to get you product known and
worry about making money at a later time.
2. Growth: If you are lucky enough to get your product out of the Introduction stage you
then enter this stage. The Growth stage is where your product starts to grow. In this stage a very
large amount of money is spent on advertising. You want to concentrate of telling the consumer
how much better your product is than your competitors' products. There are several ways to
advertise your product. You can use TV and radio commercials, magazine and newspaper ads, or
you could get lucky and customers who have bought your product will give good word-of-mouth
to their friends/family. If you are successful with your advertising strategy then you will see an
increase in sales. Once your sales begin to increase you share of the market will stabilize. Once
you get to this point you will probably not be able to take anymore of the market from your
competitors.

3. Maturity: The third stage in the Product Life Cycle is the maturity stage. If your product
completes the Introduction and Growth stages then it will then spend a great deal of time in the
Maturity stage. During this stage sales grow at a very fast rate and then gradually
begin to stabilize. The key to surviving this stage is differentiating your product from the
similar products offered by your competitors. Due to the fact that sales are beginning
to stabilize you must make your product stand out among the rest.

4. Decline: This is the stage in which sales of your product begin to fall. Either everyone
that wants to has bought your product or new, more innovative products have been
created that replace yours. Many companies decide to withdrawal their products
from the market due to the downturn. The only way to increase sales during this period is to cut
your costs reduce your spending.

Very few products follow the same cycle. Many products don't even make it through all four
stages. Some stages even bypass stages. For example, one product may go straight from the
Introduction stage to the Maturity stage. This is the problem with the PLC. There is no set way
for a product to go. Therefore, every product requires a great deal of research and close
supervision throughout its life. Without proper research and supervision your product will
probably never get out of the first stage.

Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

Characteristics Introduction Growth Maturity Decline

Sales Low sales Rapidly rising Peak sales Declining sales

Costs High cost per sales Low cost per Low cost per customer
Profits customer Average cost per customer Declining profits
Customers Negative customer High profits Laggards
Competitors Innovators Rising profits Middle majority Declining number
Few Early adopters Stable number
Growing number beginning to
decline
Marketing Create product Maximize market Maximize profit Reduce expenditure and
Objectives awareness and trial share while defending milk the brand
market share
Strategies Offer a basic Offer product Diversity brands Phase out weak products
Product product extensions, and items models
service, warranty
Price Change cost-plus Price to penetrate Price to match or Cut price
Distribution Build selective market beat competitors Go selective: phase out
distribution Build intensive Build more unprofitable outlets
distribution intensive
distribution
Advertising Build product Build awareness Stress brand Reduce to level needed
awareness among and interest in the differences and to retain hard-core loyal
early adopters and mass market benefits
dealers
Sales Use heavy sales Reduce to take Increase to Reduce to minimal level
Promotion promotion to entice advantage of encourage brand
trial heavy consumer switching
demand

(Also Refer to MKtg PPT “L-6p Product slides 37 to 41)

DIFFUSION OF INNOVATIONS

 Diffusion of Innovations is a theory that seeks to explain how, why, and at what rate new
ideas and technology spread through cultures.
 Diffusion is the process by which an innovation is communicated through certain channels
over time among the members of a social system.
 There are four main elements that influence the spread of a new idea: the innovation,
communication channels, time, and a social system.
 This process relies heavily on human capital. The innovation must be widely adopted in
order to self-sustain. Within the rate of adoption, there is a point at which an innovation
reaches critical mass.

 The categories of adopters are: innovators, early adopters, early majority, late majority,
and laggards(or laggers).
 Diffusion of Innovations manifests itself in different ways in various cultures and fields and
is highly subject to the type of adopters and innovation-decision process.
 Diffusion of an innovation occurs through a five–step process. (steps): knowledge,
persuasion, decision, implementation, and confirmation. An individual might reject an
innovation at any time during or after the adoption process.
 Five stages of the adoption process

Stage Definition

In this stage the individual is first exposed to an innovation but

lacks information about the innovation. During this stage of the
Knowledge
process the individual has not been inspired to find more
information about the innovation.

In this stage the individual is interested in the innovation and

Persuasion
actively seeks information/detail about the innovation.

In this stage the individual takes the concept of the change and
weighs the advantages/disadvantages of using the innovation
and decides whether to adopt or reject the innovation. Due to the
Decision
individualistic nature of this stage Rogers notes that it is the
most difficult stage to acquire empirical evidence (Rogers 1964,
p. 83).

In this stage the individual employs the innovation to a varying

degree depending on the situation. During this stage the
Implementation
individual determines the usefulness of the innovation and may
search for further information about it.

In this stage the individual finalizes his/her decision to continue

using the innovation. This stage is both intrapersonal (may
Confirmation
cause cognitive dissonance) and interpersonal, confirmation the
group has made the right decision.
Niche Marketing ( Also Read ppt by Lalita and Priti
Sharma)
 Concentrating all marketing efforts on a small but specific and well defined segment
of the population.
 Niches do not 'exist' but are 'created' by identifying needs, wants, and requirements
that are being addressed poorly or not at all by other firms, and developing and
delivering goods or services to satisfy them.
 As a strategy, niche marketing is aimed at being a big fish in a small pond instead of
being a small fish in a big pond. Also called micromarketing.

Essential elements of a niche marketing strategy to consider include:

 • Know the customers. Segmenting the overall market allows the business manager
to target what the business venture can offer.
 • Set clear goals and objectives for what the business hopes to achieve by following
a niche marketing approach: Reach new customer segments? Lower marketing
costs?
 Secure premium pricing?
 • Does niche marketing match up with the resources, capabilities and preferences of
the venture?

 Three rules for niche marketing,:

1. Meet the market’s unique needs -- This may require consumer and/or market
research
2. Say the right thing -- • Develop promotional materials targeted at the motivations and
interests of the consumer segment
3. Test market -- Start small with minimal capital investment, which may require
partnering with established retailers or partners
Pricing

In terms of the marketing mix some would say that price is the least attractive
element. Marketing companies should really focus on generating as high a margin
as possible. The argument is that the marketer should change product, place or
promotion in some way before resorting to price reductions. However price is a
versatile element of the mix as we will see.

Our financial objectives in terms of price will be secured on how much money we
intend to make from a product, how much we can sell, and what market share will
get in relation to competitors. Objectives such as these and how a business
generates profit in comparison to the cost of production, need to be taken into
account when selecting the right pricing strategy for your mix. The marketer needs
to be aware of its competitive position. The marketing mix should take into account
what customers expect in terms of price.

While there is no single recipe to determine pricing, the following is a general sequence of steps that
might be followed for developing the pricing of a new product:
 Develop marketing strategy - perform marketing analysis, segmentation, targeting, and
positioning
 Make marketing mix decisions - define the product, distribution, and promotional tactics.
 Estimate the demand curve - understand how quantity demanded varies with price.
 Calculate cost - include fixed and variable costs associated with the product.
 Understand environmental factors - evaluate likely competitor actions, understand legal
constraints, etc.
 Set pricing objectives - for example, profit maximization, revenue maximization, or price
stabilization (status quo).
 Determine pricing - using information collected in the above steps, select a pricing method,
develop the pricing structure, and define discounts.

These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the
above list serves to present a starting framework.
There are many ways to price a product. Let's have a look at some of them and try
to understand the best policy/strategy in various situations.

Premium Pricing.
Use a high price where there is a unique brand. This approach is used where a
substantial competitive advantage exists and the marketer is safe in the knowledge
that they can charge a relatively higher price. Such high prices are charged for
luxuries such as Cunard Cruises, Savoy Hotel rooms, and first class air travel.

Penetration Pricing.
The price charged for products and services is set artificially low in order to gain
market share. Once this is achieved, the price is increased. This approach was used
by France Telecom and Sky TV. These companies need to land grab large numbers
of consumers to make it worth their while, so they offer free telephones or satellite
dishes at discounted rates in order to get people to sign up for their services. Once
there is a large number of subscribers prices gradually creep up. Taking Sky TV for
example, or any cable or satellite company, when there is a premium movie or
sporting event prices are at their highest – so they move from a penetration
approach to more of a skimming/premium pricing approach.

Economy Pricing.
This is a no frills low price. The costs of marketing and promoting a product are kept
to a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
Budget airlines are famous for keeping their overheads as low as possible and then
giving the consumer a relatively lower price to fill an aircraft. The first few seats are
sold at a very cheap price (almost a promotional price) and the middle majority are
economy seats, with the highest price being paid for the last few seats on a flight
(which would be a premium pricing strategy). During times of recession economy
pricing sees more sales. However it is not the same as a value pricing approach
which we come to shortly.

Price Skimming.
Price skimming sees a company charge a higher price because it has a substantial
competitive advantage. However, the advantage tends not to be sustainable. The
high price attracts new competitors into the market, and the price inevitably falls due
to increased supply.

Manufacturers of digital watches used a skimming approach in the 1970s. Once

other manufacturers were tempted into the market and the watches were produced
at a lower unit cost, other marketing strategies and pricing approaches are
implemented. New products were developed and the market for watches gained a
reputation for innovation.

Pricing
The diagram depicts four key pricing strategies namely premium pricing, penetration
pricing, economy pricing, and price skimming which are the four main pricing
policies/strategies. They form the bases for the exercise. However there are other
important approaches to pricing, and we cover them throughout the entirety of this
lesson.

Psychological Pricing.
This approach is used when the marketer wants the consumer to respond on an
emotional, rather than rational basis. For example Price Point Perspective (PPP)
0.99 Cents not 1 US Dollar. It's strange how consumers use price as an indicator of
all sorts of factors, especially when they are in unfamiliar markets. Consumers might
practice a decision avoidance approach when buying products in an unfamiliar
setting, an example being when buying ice cream. What would you like, an ice
cream at $0.75, $1.25 or $2.00? The choice is yours. Maybe you're entering an
entirely new market. Let's say that you're buying a lawnmower for the first time and
know nothing about garden equipment. Would you automatically by the cheapest?
Would you buy the most expensive? Or, would you go for a lawnmower somewhere
in the middle? Price therefore may be an indication of quality or benefits in unfamiliar
markets.

Product Line Pricing.

Where there is a range of products or services the pricing reflects the benefits of
parts of the range. For example car washes; a basic wash could be $2, a wash and
wax $4 and the whole package for $6. Product line pricing seldom reflects the cost
of making the product since it delivers a range of prices that a consumer perceives
as being fair incrementally – over the range.

If you buy chocolate bars or potato chips (crisps) you expect to pay X for a single
packet, although if you buy a family pack which is 5 times bigger, you expect to pay
less than 5X the price. The cost of making and distributing large family packs of
chocolate/chips could be far more expensive. It might benefit the manufacturer to
sell them singly in terms of profit margin, although they price over the whole line.
Profit is made on the range rather than single items.
Optional Product Pricing.
Companies will attempt to increase the amount customers spend once they start to
buy. Optional 'extras' increase the overall price of the product or service. For
example airlines will charge for optional extras such as guaranteeing a window seat
or reserving a row of seats next to each other. Again budget airlines are prime users
of this approach when they charge you extra for additional luggage or extra legroom.

Captive Product Pricing

Where products have complements, companies will charge a premium price since
the consumer has no choice. For example a razor manufacturer will charge a low
price for the first plastic razor and recoup its margin (and more) from the sale of the
blades that fit the razor. Another example is where printer manufacturers will sell you
an inkjet printer at a low price. In this instance the inkjet company knows that once
you run out of the consumable ink you need to buy more, and this tends to be
relatively expensive. Again the cartridges are not interchangeable and you have no
choice.

Product Bundle Pricing.

Here sellers combine several products in the same package. This also serves to
move old stock. Blu-ray and videogames are often sold using the bundle approach
once they reach the end of their product life cycle. You might also see product
bundle pricing with the sale of items at auction, where an attractive item may be
included in a lot with a box of less interesting things so that you must bid for the
entire lot. It's a good way of moving slow selling products, and in a way is another
form of promotional pricing.

Promotional Pricing.
Pricing to promote a product is a very common application. There are many
examples of promotional pricing including approaches such as BOGOF (Buy One
Get One Free), money off vouchers and discounts. Promotional pricing is often the
subject of controversy. Many countries have laws which govern the amount of time
that a product should be sold at its original higher price before it can be discounted.
Sales are extravaganzas of promotional pricing!

Geographical Pricing.
Geographical pricing sees variations in price in different parts of the world. For
example rarity value, or where shipping costs increase price. In some countries
there is more tax on certain types of product which makes them more or less
expensive, or legislation which limits how many products might be imported again
raising price. Some countries tax inelastic goods such as alcohol or petrol in order to
increase revenue, and it is noticeable when you do travel overseas that sometimes
goods are much cheaper, or expensive of course.

Value Pricing.
This approach is used where external factors such as recession or increased
competition force companies to provide value products and services to retain sales
e.g. value meals at McDonalds and other fast-food restaurants. Value price means
that you get great value for money i.e. the price that you pay makes you feel that
you are getting a lot of product. In many ways it is similar to economy pricing. One
must not make the mistake to think that there is added value in terms of the product
or service. Reducing price does not generally increase value.

(The likely question would need us to decide the pricing

strategy at a particular stage of the Life Cycle of a product –
(eg) pricing is different at Growth stage and Maturity
stage…!!)
Distribution

(The likely question would need us to decide the Distribution

strategy at a particular stage of the Life Cycle of a product –
(eg) Distribution is different at Growth stage and Maturity
stage…!!)

(Also Refer to MKtg PPT L_7_-_Distribution)

Channels of Distribution
Marketing Channels are sets of interdependent organizations involved in the process of
making a product available for use or consumption.

Channels of Distribution The path through which goods and services travel from the
vendor to the consumer or payments for those products travel from the consumer to the
vendor. A distribution channel can be as short as a direct transaction from the vendor
to the consumer, or may include several interconnected intermediaries along the way
such as wholesalers, distributers, agents and retailers. Each intermediary receives the
item at one pricing point and movies it to the next higher pricing point until it reaches the
final buyer. Coffee does not reach the consumer before first going through a channel
involving the farmer, exporter, importer, distributor and the retailer. Also called the
channel of distribution.

Steps to Design Distribution (Marketing) Channels

1. Analysis of Customers Desired service output level

2. Establishing channel objectives
3. Identifying Major channel Alternatives
4. Evaluating major channel alternatives
5. Selecting Suitable Channel members
6. Training & Motivating Channel Members

This channel consists of :- producers, consumers or users and the various

middlemen like wholesalers, selling agents and retailers(dealers) who intervene
between the producers and consumers. Therefore, the channel serves to bridge the gap
between the point of production and the point of consumption thereby creating time,
place and possession utilities.

Channel Of Distribution Consists Of Three Types Of Flows:-

 Downward flow of goods from producers to consumers

 Upward flow of cash payments for goods from consumers to producers

 Flow of marketing information in both downward and upward direction i.e. Flow of
information on new products, new uses of existing products, etc from producers to
consumers. And flow of information in the form of feedback on the wants, suggestions,
complaints, etc from consumers/users to producers.

These channels of distribution are broadly divided into four types:-

 Producer-Customer:- This is the simplest and shortest channel in which

no middlemen is involved and producers directly sell their products to the
consumers. It is fast and economical channel of distribution. Big firms adopt this
channel to cut distribution costs and to sell industrial products of high value.
Small producers and producers of perishable commodities also sell directly to
local consumers.

 Producer-Retailer-Customer:- This channel of distribution involves only

one middlemen called 'retailer'. This is often suited for distribution of consumer
durables and products of high value.

 Producer-Wholesaler-Retailer-Customer:- This is the most common

and traditional channel of distribution. Under it, two middlemen i.e. wholesalers
and retailers are involved. This channel is suitable for the producers having
limited finance, narrow product line and who needed expert services and
promotional support of wholesalers. This is mostly used for the products with
widely scattered market.

 Producer-Agent-Wholesaler-Retailer-Customer:- This is the longest

channel of distribution in which three middlemen are involved. This is used
when the producer wants to be fully relieved of the problem of distribution and
thus hands over his entire output to the selling agents. This channel is suitable
for wider distribution of various industrial products.

The factors affecting the choice of distribution channels may be classified as follows:
1. Product Considerations:
(a) Unit Value Products of low unit value and common use are generally sold
through middlemen as they cannot bear the cost of direct selling. Low-priced and
high turnover articles like cosmetics, hosiery goods, stationery and small
accessory equipment usually flow through a long channel.
On the other hand, expensive consumer goods and industrial products are sold
directly by the producers.
(b) Perish ability: Perishable products like vegetables, fruits, milk and eggs
have relatively short channels as they cannot withstand repeated handling.
(c) Bulk and weight: Heavy and bulky products are distributed through shorter
channels to minimise handling costs. Coal, bricks, stones, etc., are some
examples.
(d) Standardisation: Custom-made and non-standardised products usually pass
through short channels due to the need for direct contact between the producer
 and the consumers. Standardised and mass-made goods can be distributed
through middlemen.
(e) Technical nature: Products requiring demonstration, installation and after
sale services are often sold directly the producer appoints sales engineers to sell
and service industrial equipment and other products of technical nature.
(f) Product line: A firm producing a wide range of products may find it
economical to set up its own retail outlets. On the other hand, firms with one or
two products find it profitable to distribute through wholesalers and retailers.
(g) Age of the product: A new product needs greater promotional effort and few
middlemen may like to handle it. As the product gains acceptance in the market,
more middlemen may be employed for its distribution. Channels used for
competitive products may also influence the choice of distribution channels.

2. Market considerations: The nature and type of customers is an important

consideration in the choice of a channel of distribution. Following factors relating to the
market are particularly significant.
(a) Consumer or industrial market: The purpose of buying has an important
influence on channel. Goods purchased for industrial or commercial use are
usually sold directly or through agents. This is because industrial users buy in a
large quantity and the producer can easily establish a direct contact with them.
To ultimate consumers, goods are sold normally through middlemen.
(b) Number and location of buyers: When the number of potential customers is
small or the market is geographically located in a limited area, direct selling is
easy and economical. In case of large number of customers and widely scattered
markets, use of wholesalers and retailers becomes necessary.
(c) Size and frequency of order: Direct selling is convenient and economical in
case of large and infrequent orders. When articles are purchased very frequently
and each purchase order is small, middlemen may have to be used.
A manufacturer may use different channels for different types of buyers. He may
sell directly to departmental and chain stores and may depend upon wholesalers
to sell to small retail stores.
(d) Customer's buying habits: The amount of time and effort which customers
are willing to spend in shopping is an important consideration. Customer
expectations like desire for one-stop shopping, need for personal attention,
preference for self-service and desire for credit also influence the choice of trade
channel.

3. Company considerations: The nature, size and objectives of the firm play an
important role in channel decisions.
(a) Market standing: Well-established companies with good reputation in the
market are in a better position to eliminate middlemen than new and less known
firms.
(b) Financial resources: A large firm with sufficient funds can establish its own
 retail shops to sell directly to consumers. But a small or weak enterprise which
cannot invest money in distribution has to depend on middlemen for the
marketing of its products.
(c) Management: The competence and experience of management exercises
influence on channel decision. If the management of a firm has sufficient
knowledge and experience of distribution it may prefer direct selling. Firms
whose managements lack marketing know-how have to depend on middlemen.
(d) Volume of production: A big firm with large, output may find it profitable to
set up its own retail outlets throughout the country. But a manufacturer producing
a small quantity can distribute his output more economically through middlemen.
(e) Desire for control of channel: Firms that want to have close control over the
distribution of their products use a short channel. Such firms can have more
aggressive promotion and a thorough understanding of customers' requirements.
A firm not desirous of control over channel can freely employ middlemen.
(f) Services provided by manufacturers: A company that sells directly has
itself to provide installation, credit, home delivery, after sale services and other
facilities to customers. Firms which do not or cannot provide such services have
to depend upon middlemen.

4. Middlemen considerations: The cost and efficiency of distribution depend largely

upon the nature and type of middlemen as reflected in the following factors:
(a) Availability: When desired type of middlemen is not available, a
manufacturer may have to establish his own distribution network. Non-availability
of middlemen may arise when they are handling competitive products as they do
not like to handle more brands.
(b) Attitudes: Middlemen who do not like a firm's marketing policies may refuse
to handle its products. For instance, some wholesalers and retailers demand sole
selling rights or a guarantee against fall in prices.
(c) Services: Use of middlemen is profitable who provide financing, storage,
promotion and after sale services.
(d) Sales potential: A manufacturer generally prefers a dealer who offers the
greatest potential volume of sales.
(e) Costs: Choice of a channel should be made after comparing the costs of
distribution through alternative channels.
(f) Customs and competition: The channels traditionally used for a product
are likely to influence the choice. For instance, locks are sold usually through
hardware stores and their distribution through general stores may not be
preferred. Channels used by competitors are also important.
(g) Legal constraints: Government regulations regarding certain products may
influence channel decision. For instance, liquor and drugs can be distributed only
through licensed shops.
Communication

(The likely question …….

What kind media are we going to use for communication in a
rural sector for the marketing of a particular product like say
toothpaste, jeans, laptops, smartphones…..!!!)

 Rural Marketing is defined as any marketing activity in which the one dominant participant is
from a rural area. This implies that rural marketing consists of marketing of inputs (products
or services) to the rural as well as marketing of outputs from the rural markets to other
geographical areas.

 Rural areas of the country or countryside are areas that are not urbanized, though when
large areas are described country towns and smaller cities will be included. They have a low
population density, and typically much of the land is devoted to agriculture.

Marketing strategies that worked for urban markets do not necessarily work for the rural ones.
Why the rural market is different, - 7 differentiators identified
1. Intra community influences are relatively more important than inter-community ones.
Word-of-mouth in close knit communities is more powerful.
2. Scarcity of media bandwidth. Rural individual's access to media channels is limited and in
the case of broadband the comparable upload and download speed may be slower. Online
shopping is seen as a solution by many but will be dependent on broadband speed.[1]
3. Slow to adopt brands. Slow to give them up. Rural consumers will be slower to pick up
trends or brands but will remain loyal when accepted.
4. Expenses are year long; income is seasonal. Many rural areas rely on seasonal tourism
peaks when income will be high and to a lesser extent agricultural incomes from seasonal
crops. This means there will be more disposable income at certain times with rural businesses
and employees.
5. Information hungry; but entertainment starved. Isolation from entertainment centres has
led to companies trying edutainment to get their message across.
6. Higher receptivity to experience advertising. Retail outlets in rural areas have many
demonstration areas along with markets for tasting.
7. Commercially profitable; and socially acceptable. Brands with demonstrable local, rural,
environmental and/or social credibility stand a better chance.
 Research found that a hallmark of success in rural India is overcoming challenges in
the three stages of the consumer lifecycle reaching, acquiring and retaining the
rural customer.
 In terms of reaching the rural consumer, the biggest obstacles facing companies are
inadequate distribution networks, partners with limited capabilities, long payment
cycles, and weak marketing channels.
 Success in Indias rural markets hinges on the performance of companies on two key
measures:
 rural performance that is the degree to which rural markets are strategically
important to a companys growth agenda, defined by the contribution of rural
markets to the enterprises top and bottom lines.
 Rural innovation, or the level of rural focused innovations, in a companys
product, packaging, pricing, channels and operating models.

With these two measures in mind, companies have been into four categories of
success: rural masters, rural performers, rural voyagers and new entrants.

Rural masters are profitable companies that have secured a significant rural market
share. They excel at execution. They apply rigour to governance and control to make
sure their strategies translate into required actions. They have developed novel
strategies to serve rural consumers and draw on an intimate understanding of
consumers cultures and needs to enter rural markets. They have well-conceived
expansion strategies that they support with significant capital and resources.

Rural performers are profitable entities that have established a strong rural footprint by
using conventional approaches or by emulating Rural masters. They often lack an
innovative streak. They tend to focus on existing product portfolios and try to mitigate
risk through aggressive product marketing to strengthen their position. These
companies have been successful in the past. But in the future, they may struggle in a
changing and more competitive landscape.

Rural voyagers have adopted disruptive approaches to serve Indias rural markets. For
example, they create unique products and services, customise pricing or packaging, or
develop new channels to reach the last mile.

However, they are yet to make profits. Though rural voyagers often understand rural
consumers better than their competitors, they usually take a more cautious approach
toward expansion. Furthermore, they learn from their initial forays (such as pilots
conducted in a few states) to determine their next investment strategies and tactics. A
large number of companies fall into this quadrant, and they still face many challenges.
In some cases, rural voyagers can seek government help to subsidise their products on
a large scale. However, they must also invest in channel partners and engage with
community influencers to achieve acceptance among rural consumers and succeed.

New entrants are companies that have recently made forays in rural markets.
Conservative in nature, many of these enterprises have limited operations and have not
generated the profit needed to create economies of scale. Though these companies can
learn from the experience of rural masters, they face high barriers to entry. These
companies will need to make extra efforts to create a differentiated position for
themselves in the rural marketplace.

The above gyan was to write stories in the exam… this

part can give the answer to the question of the type of
media to be used for mktg in rural areas
As rural markets evolve and competition in rural markets intensifies, companies will
have to look for new approaches to harness this opportunity in ways that protect their
margins while also growing revenue.
 Deploying the correct sales and distribution model can assist companies in
driving profitable growth in a relatively short span of time.
 Rural masters will have to find ways to scale operations without hurting their
bottom line.
 For a rural performer, the challenge will be to create differentiated offerings and
brand loyalty to retain customers and sustain their business models.
 Rural voyagers will build their own ecosystems and brand awareness to acquire
new customers.
 New entrants will travel their own paths to penetrate rural markets. By focusing on
the specific needs, behaviours and preferences of the rural consumers, and by
applying a systematic approach to market expansion, companies can accelerate
their rural expansion journey.

STRATEGIES
 4 A’s Approach
1.Availability - Strive to reach at least 13 113 villages with a population market
penetration.
2.Affordability- Introduce small unit packs
3.Acceptability-
• Offers products and services that suit the rural market
• Easy to understand
4.Awareness
• One on one contact programs are extremely efficient.
• Educate and try to induce trial.
 • Melas are places where villagers gather once in a while for shopping. Companies
take advantage of such events to
• Demonstrate and market their products.
• Haats are a good place to create awareness. There are 42000 rural haats which
get more than 4500 visitors per haat.

 Distribution strategy Using company delivery vans, melas, haats, and mandis/
agri markets.
• Promotional strategy - Rich traditional media forms like puppetry, folk dances,
audio visuals, etc. should be used to convey the right message to the rural
folk.
• Forms with which the rural consumers are highly comfortable with should be used.

• By giving Indian terms for brands Companies use Indian words for brands.
Like LG has used India brand name ”Sampoorna” for its TV. The term is a part of
the Bengali, Hindi, Marathi and Tamil tongue.
• Companies can either go for the traditional media or the modern media or an
effective combination of both.
• The traditional media include melas, puppetry, folk theatre etc. while the modern
media includes TV, radio, and e chaupal.
• LIC uses puppets to educate rural masses about its insurance policies.
• In between such shows, the lights are switched off and a torch is flashed in the
dark(Eveready’s tact).

• SOME NOTEWORTHY SUCCESS STORIES

 "Yaara da Tashan..." ads with Aamir Khan created universal appeal for Coca
Cola. Coca-Cola India tapped the rural market in a big way when it introduced
bottles priced at Rs 5 and backed it with the Aamir Khan ads.
 In 2000, ITC took an initiative to develop direct contact with farmers who lived in
far-flung villages in Madhya Pradesh. ITC's E-chaupal was the result of this
initiative.

 In 1998 HUL’s personal products unit initiated Project Bharat, the first and largest
rural home-to-home operation by a company.
 The project covered 13 million rural households by the end of 1999.
 It had vans visiting villages across the country distributing sample packs
comprising a low-unit-price pack each of shampoo, talcum powder, toothpaste
and skin cream priced at Rs. 15 to create awareness of the company’s product
categories and of the affordability of the products.
 Small unit products like a one rupee or a five rupee sachets of shampoo for
single use or the small Hamam helps in giving the consumers a trial opportunity.
 Of two million BSNL mobile connections, 50% are in small towns / villages.
 Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT).
 41 million Kisan Credit Cards have been issued (against 22 million
credit-plus-debit cards in urban), with cumulative credit of Rs. 977 billion
resulting in tremendous liquidity.
 Of the 20 million Rediff mail sign-ups, 60% are from small towns. 50% of
transactions from these towns are on Rediff online shopping site.
 42 million rural households (HHs) are availing banking services in comparison to
 27 million urban households.
 HUL with its Project Shakti has already has a reach of 1.7 lakh villages, and
aspires to reach 5 lakh villages by 2020.
 In 2001-02, LIC sold 55% of its policies in rural India.
 Mahindra & Mahindra sells most of its SUVs in the rural market.

Services
(assuming that it means after sales services)
This question seems to be important so I am adding it also

Advertising and Public Relations:

(What is the difference between Advertising and Public

Relations )

1. Paid Space or  Advertising:  Public Relations:

Free Coverage Your job is to get free
The company pays for ad
publicity for the company.
space. You know exactly
From news conferences
when that ad will air or be
to press releases, you're
published.
focused on getting free media
exposure for the company
and its products/services.
2. Creative  Advertising:  Public Relations:
Control Vs. No Since you're paying for the You have no control over
Control space, you have creative how the media presents your
control on what goes into information, if they decide to
that ad. use your info at all. They're

3. Shelf Life  Advertising:  Public Relations:
Since you pay for the
space, you can run your
ads over and over for as
long as your budget
allows. An ad generally
has a longer shelf life than
one press release.
4. Wise  Advertising:  Public Relations:
Consumers Consumers know when
they're reading an
advertisement they're
trying to be sold a product
or service. "The consumer
understands that we have
paid to present our selling
message to him or her, and
unfortunately, the consumer
often views our selling
message very guardedly,"
Paul Flowers, president of
Dallas-based Flowers &
Partners, Inc., said. "After
all, they know we are trying
to sell them."
5. Creativity or a  Advertising:
Nose for News In advertising, you get
to exercise your
creativity in creating
new ad campaigns and
materials.
6. In-House or  Advertising:  Public Relations:
Out on the Town If you're working at an ad
agency, your main
contacts are your co-
workers and the agency's
clients. If you buy and
plan ad space on behalf of
not obligated to cover your
event or publish your press
release just because you sent
something to them.
You only submit a press
release about a new product
once. You only submit a
press release about a news
conference once. The PR
exposure you receive is only
circulated once. An editor
won't publish your same
press release three or four
times in their magazine.
When someone reads a third-
party article written about
your product or views
coverage of your event on
TV, they're seeing something
you didn't pay for with ad
dollars and view it differently
than they do paid advertising.
"Where we can generate some
sort of third-party 'endorsement'
by independent media sources,
we can create great credibility
for our clients' products or
services," Flowers said.
 Public Relations:
In public relations, you have
to have a nose for news and
be able to generate buzz
through that news. You
exercise your creativity, to an
extent, in the way you search
for new news to release to the
media.
You interact with the media
and develop a relationship
with them. Your contact is
not limited to in-house
communications. You're in
constant touch with your
 the client like Media
Director Barry
Lowenthal does, then
you'll also interact with
media sales people.
7. Target  Advertising:  Public Relations:
Audience or You're looking for your
Hooked Editor target audience and
advertising accordingly.
You wouldn't advertise a
women's TV network in a
male-oriented sports
magazine.
8. Limited or  Advertising:  Public Relations:
Unlimited Some industry pros such
Contact as Account Executive
Trey Sullivan have contact
with the clients. Others
like copywriters or graphic
designers in the agency
may not meet with the
client at all.
9. Special Events  Advertising:  Public Relations:
If your company sponsors
an event, you wouldn't
want to take out an ad
giving yourself a pat on
the back for being such a
great company. This is
where your PR department
steps in.
10. Writing Style  Advertising:  Public Relations:
Buy this product! Act
now! Call today! These
are all things you can
say in an advertisement.
You want to use those
buzz words to motivate
people to buy your
product.
contacts at the print
publications and broadcast
media.
You must have an angle and
hook editors to get them to
use info for an article, to run
a press release or to cover
your event.
In public relations, you are
very visible to the media. PR
pros aren't always called on
for the good news. If there
was an accident at your
company, you may have to give
a statement or on-camera
interview to journalists. You
may represent your company as
a spokesperson at an event. Or
you may work within
community relations to show
your company is actively
involved in good work and is
committed to the city and its
citizens.
If you're sponsoring an event,
you can send out a press
release and the media might
pick it up. They may publish
the information or cover the
event.
You're strictly writing in a
no-nonsense news format.
Any blatant commercial
messages in your
communications are
disregarded by the media.