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TIRUNELVELI 627012, TAMIL NADU

B.B.A. - III YEAR

DJB3C - MARKETING MANAGEMENT

(From the academic year 2016-17)

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DD & CE, M.S University, Tirunelveli DJB3C - Marketing Management

DJB3C- MARKETING MANAGEMENT

Syllabus
Unit – I
Marketing – Definition – Nature and Scope – Role of Marketing in India – Concepts of
Marketing – Consumer Buying Behaviour – Buying motives, Perception, Learning, reference
Groups – Consumer Decision Making – Market Segmentation.
Unit – II
Product – Product Classification – Product Planning and Policies – New Product
development – Product Modification, Product diversification and product elimination,
Branding and Packaging – Product life cycle – Product Positioning.
Unit – III
Pricing – Methods of price determination – Cost oriented Pricing. Demand oriented
pricing – Competitive pricing – New Product Pricing – Product line pricing – Geographical
pricing – Psychological pricing – Price discounts.
Unit – IV
Channels of Distribution – Channel Functions – Factors to be considered in channel
selection – Motivation of Channel Members – Retailing and Wholesaling.
Unit – V
Advertising – Objectives – Advertising as a process of communication – Types of
Advertising – Advertising budgets – message design – media selection – sales promotion and
types.
Note : In Section C – A case Problem from the area of marketing should be asked and this
case question should be made compulsory.
Suggested Readings:
1. Fundamentals of Marketing – William J. Stanton
2. Marketing Management – Philip Kotler
3. Marketing Management (In the Indian Context) – V.S. Ramasamy and S.
Namakumari, Macmillan Ltd.
DD & CE, M.S University, Tirunelveli DJB3C - Marketing Management

Unit no. Contents Page no.

Marketing- Definition, Functions 3
1 Role of marketing in India 5
Consumer Buyer behavior 9
Market segmentation 21
New product development 29
Product modification 32
2 Branding 34
Packaging 35
Product life cycle 39
Product positioning 41
Pricing 42
Methods of price determination 46
3 Pricing policies 48
Pricing discounts 53
Channel functions 56
4
Channel selection 58
Wholesaling 61
Retailing 63
Advertising 66
Types of advertising 67
5 Advertising budget 70
Media selection 72
Sales promotion 78

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UNIT I
INTRODUCTION
Marketing, as indicated in the term, denotes a process that is continuous in
nature. The market should be continuously involved in initiating, conducting and
finalizing transactions and exchange. This is an unending process and would continue
till production and consumption cease to exist in the world.
The term ‘marketing’ can be defined analytically or operationally. The analytic way
of explaining the terms to show how marketing differs from various other activities of a
firm, marketing deals with identifying and meeting human and social needs. One of the
shortest definitions of marketing is “meeting needs profitably”.
DEFINITION OF MARKETING

According to American Marketing Association (2004) - "Marketing is an

organisational function and set of processes for creating, communicating and delivering value
to customers and for managing relationships in a way that benefits both the organisation and
the stakeholder."

According to Eldridge (1970) - "Marketing is the combination of activities designed

to produce profit through ascertaining, creating, stimulating, and satisfying the needs and/or
wants of a selected segment of the market."

According to Kotler (2000) - "A societal process by which individuals and groups
obtain what they need and want through creating, offering, and freely exchanging products
and services of value with others."

NATURE OF MARKETING

When discuss the nature of marketing management, we come to know that it is both a
science as well as an art. The handling of marketing responsibilities clearly calls for a
diversity of human talents. These responsibilities require the men who have personality traits
which will enable them to do an effective job in dealing with customer. They must be artistic
and imaginary people to create effective advertising and sales programmes and to develop
new ideas in distribution methods. They must have strong analytical abilities to cope with the
strategically and logistical aspects of marketing operations. This all proves that marketing
management is a science. On the other hand, a continuous practice in the problems of
personalising, advertising and sales promotion etc., develops in them a group of ’artists’.
Thus, we conclude that marketing is both science as well as an art.

In modern times, these two streams the scientific aspect of marketing management
and artistic aspect of marketing management, influence and educate each other and out of
this intermingling comes the new generation of successful marketing managers. In order to
be a successful marketing manager, a person needs to acquire multidisciplinary skills from
fields like art, psychology, economics, sociology, technology, accounting etc. The customer
needs are varying and before purchasing any product he may ask several questions to the

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marketers which must be answered to the satisfaction of the customer. This is possible only
when a marketer has skill and expertise to take up his job.

SCOPE OF MARKETING
Barker and Anshen say, ―The end of all the marketing activities is the satisfaction of
human wants. Through the satisfaction of human wants, profits are rewarded to the business
and the reward is inducement for marketing. Now the time has changed and scope of
marketing is more than securing profits. The following are the aims of marketing.
• To intelligent and capable application of modern marketing policies.
• To develop the marketing field.
• To develop guiding policies and their implementation for a good result.
• To suggest solutions by studying the problems relating to marketing.
• To find sources for further information concerning the market problems.
• To revive existing marketing function, if shortcomings are found.
• To take appropriate actions in the course of actions.
FUNCTIONS OF MARKETING
Marketing function Description
A. Exchange functions
1. Buying -Ensuring that product offerings are available in sufficient
quantities to meet customer demands
-It starts after the goods have been produced
2. Assembling -Using advertising, personal selling and sales promotion to
3. Selling match goods and services to customer needs
B. Physical distribution functions
4. Transporting -Moving products from their points of production to
locations convenient for purchasers
5. Storing -Warehousing products until needed for sale
C. Facilitating functions
6. Standardizing and grading -Ensuring that product offerings meet established quality and
quantity control standards of size, weight and so on
-Providing credit for channel members or consumers
7. Financing -Dealing with uncertainty about consumer purchases
8. Risk taking resulting from creation and marketing of goods and services
that consumers may purchase in the future
-Collecting information about consumers, competitors and
9. Securing marketing information channel members for use in marketing decision making

Firms must spend money to create time, place and ownership utilities as discussed
earlier. Several studies have been made to measure marketing costs in relation to overall
product costs and service costs and most estimates have ranged between 40-60 percent.
These costs are not associated with raw materials or any of the other production functions

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necessary for creating form utility. What does the consumer receive in return for this
proportion of marketing cost? This question is answered by understanding the functions
performed by marketing.
In the above table, marketing is responsible for the performance of 8 universal
functions: buying, selling, transporting, storing, standardizing and grading, financing, risk
taking and securing marketing information. Some functions are performed by manufacturers,
others by marketing intermediaries like wholesalers and retailers. Buying and selling, the
first two functions represent exchange functions. Transporting and storing are physical
distribution functions. The final four marketing functions – standardizing and grading,
financing, risk taking and securing market information – are often called facilitating
functions because they assist the marketer in performing the exchange and physical
distribution functions.
ROLE OF MARKETING IN INDIA

In ancient and medieval period, the marketing practices from 2,000 years ago to the
17th century, when the British East India Company started operating in India. The colonial
encounter changed the marketing system and consumption in considerable ways. on the post-
colonial period some of the developments in marketing after India’s independence in 1947.
The centres of marketing and selling India have a fairly diverse geography and climate, and
the nature of commercial activity in the littoral towns differed considerably from that in the
interiors. Physical constraints in navigation meant that items such as spices, silks and pearls
were easier to trade, given that these items did not weigh much and could be transported
easily (Roy, 2012). Moreover, that towns situated on coasts, or at places where the river met
the coast, enjoyed advantages with regard to trade, since it was much easier to carry cargo
through rivers and the sea, as compared to over land.

The selling and buying activity in these sites was however more akin to that
happening in a seasonal trade fair, rather than that of an established commercial centre (Roy,
2012).Early records indicate that urban centers appeared in north India in the Gangetic plain,
around the first millennium, and the 1st century period was marked by considerable
economic growth and prosperity (Ray, 1985).

Merchants obtained goods such as wheat, rice, clarified butter, sesame oil, cotton
cloth and honey from ships that arrived in port through mutual agreement with merchants
living in other regions, or directly from producers, and these goods were then sold in urban
centers through retail outlets (Ray, 1985). Major ports such as Bharuch in western India and
other ports along the Konkan coast in the south-west facilitated trade with the Persian Gulf
(Ray, 1985). From the findings, many centuries ago, a fairly complex marketing network
comprising producers, wholesale merchants, retailers and itinerant merchants, all of whom
exchanged goods and services in major ports and urban centers. Looking at the marketing
centers of a later era, the Chola period had roughly from 850 to 1279.

Currently in India, the national economy and marketplace are undergoing rapid
changes and transformation. A large number of reasons could be attributed to these changes.

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One of the reasons in these changes in the Indian Market Scenario is Globalization, and the
subsequent and resulting explosive growth of global trade and the international competition.
The other reason for these changes in the Indian Market Scenario is the technological change.
This is an important factor because the technological competitiveness is making, not only the
Indian market, but also the global marketplace cutthroat.

In the Indian Marketing Scenario, the market success goes to those companies that are
best matched to the current environmental imperatives. Those companies that can deliver
what the people want and can delight the Indian customers are the market leaders. Today the
companies are operating in such a marketplace where survival of the fittest is the law. In
order to win, the companies are coming out with various new and evolving strategies because
the Indian market is also changing very fast. It is to capture the Indian market, that the Indian
and the Multi National Companies are using all of their resources.

The Indian market is no longer a sellers market. The winner is the one who provides
value for money. A large number of companies have huge idle capacities, as they have
wrongly calculated the market size and installed huge capacities. This has further contributed
to converting the Indian market into a buyers market. The Indian Marketing Scenario is one
of the biggest consumer markets and that is precisely the reason why India has attracted
several MNC’s. These large Multi National Companies have realized that to succeed in the
Indian market-place they need to hire Indian representative who are much more aware of the
Indian economic, political, legal and social realities. In the Indian Marketing Scenario, it is
the MADE FOR INDIA marketing strategies that work.
CONCEPTS OF MARKETING
Marketing Concept means the philosophy which guides the marketing, efforts, i.e.,
what weight should be given to the interests of the organization, consumers and the society.
Very often these interests are conflicting. There are five marketing concepts which are
adopted by organizations for their marketing activities.
1. The production concept
2. The product concept
3. The selling concept
4. The marketing concept
5. The socio marketing concept
1. The production concept
This concept holds that the consumer will support those products that are produced in
large quantities at low unit cost. The authorities of this view believe that marketing can be
managed by managing production. It involves high production efficiency and wide
distribution network. This concept holds good in cases where there is more demand than
supply. In such a situation consumers readily accept the product that is made available e.g.,
cooking gas. Hence large-scale production (easy availability) assumes much significance.
There is another situation where the products cost is high; to expand the market, it is desired
to reduce the unit cost by large-scale production, e.g., price of electronic calculators and
quartz watches have come down considerably. But easy availability and low cost are not

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only the conditions governing customers buying decisions.

2. The product concept
The product concept holds that consumers will favour those products that offer the
most quality, performances and features. Managers in these product oriented organisation
focus their energy on making good products and improving them over time. Philip Kotler.
Here emphasis on product excellence, i.e., quality, performance, and features. The
assumption is that customers will automatically buy products of high quality and evaluates
product excellence and is willing to pay for ―extras. Therefore, producers claim that they
make the best and their products have several extras, e.g., a three-dimensional TV. Godrej
puff Refrigerator, etc. They are much immersed in their product and they enter into a ―love
affair with the product forgetting other factors that contribute to consumers satisfaction.
The problem is that they fail to study the market and the consumers in depth, that is, the
consumer needs, what the consumer would gladly accept etc.
3. The selling concept
This concept assumes that consumers in the absence of any selling effort, will not
purchase the products. Hence they must be induced or pleased to purchase the products by
means of selling and promotion efforts. This concept is often practiced in selling unsought
goods, i.e., those goods that buyers normally do not think of buying. For example unless
some promotional efforts are made, people will not purchase dictionaries, encyclopedias,
insurance policies, invest in savings schemes etc., people in the non- profit areas also
practice selling concept. e.g., by charitable institutions, educational institutions, political
parties etc. At the time of election, a political party sells its candidate as the ― most fantastic
person for the job. He offers ― Namaste with folded hands, shaking hands, fondling children,
enquires about the welfare of old people etc.
Many firms give prime importance to selling. They try to sell what they have
manufactured, rather it should be the other way: make what they can sell. They forget the
fact that if selling is to be effective, it should be preceded by an assessment of the need,
marketing research, product, price and distribution, Pre-occupation with selling concept
gives an impression that marketing is aggressive selling and advertising. The fact that
marketing is not selling it is only one aspect of marketing is not taken into consideration.
4. The Marketing Concept
Marketing concept is a philosophy of business that states that the customers want
satisfaction is the economic and social justification for a firm existence. As a result, all
activities of a company should be directed towards finding out the needs of the customers
and then satisfying those needs; at the same time make profits by fulfilling customers
satisfaction.
The distinguishing features of marketing concept are: market focus, customer
orientation, co-ordinate marketing and profitability. No company can satisfy the needs of
customers, in a particular market. For example, a company cannot manufacture different
types of dress materials for the readymade garments market. So it focuses on a particular
segment, say, readymade shirts for gents and so on. In customer orientation the company
finds the needs from the customers point of view and not from the point of view of the

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company.
In the above example, the company may manufacture shirt from finest textiles for
the upper class market, to suit their requirements. Fuel efficient motor bikes are another
example. Co-ordinate marketing indicates that the various marketing functions such as
sales force, advertising, distribution, marketing etc., must be fully coordinated It also stresses
need that marketing must be co-ordinate with other departments such as finance,
manufacturing etc., in the company. Profitability in a business firm means profit and in a
non-profit organisation it indicates its survival and attracting sufficient funds for its working.
This goal is to be achieved by the organisation by satisfying the needs of their customers.
Differences between selling and marketing:
SELLING MARKETING
Selling starts with seller Marketing starts with buyer
Selling focuses on the needs of the seller Marketing on the needs of the buyers
Selling refers goods and services Marketing refers customer satisfaction
Packing is enough for product protection Packing is for convenient to customers
Cost determines price Consumer determines price
Customer is last Customer is first

5. The socio marketing concept

No doubts that the customers needs are to be satisfied. But a school of thought that is
gaining momentum is that while satisfying the needs of the customer, in the long- run, the
society welfare also should be looked into. The new thinking has slowly encroached upon the
marketing concept. The new concept is known as ―the human concept, ―the intelligent
consumption concept, ―The ecological imperative concept – all stressing different aspects.
Kotler calls it as ―the societal marketing concept. According to him: The societal marketing
concept holds that the organizations task is to determine the needs, wants, and interests of
target markets and to deliver the desired satisfactions more effectively and efficiently than
competitors in a way that preserves or enhances the consumers and the society’s well-being.
The distinguishing feature is that the company should balance three factors: profits,
consumer want satisfaction and public interest. Under this approach a company has to take
into consideration several factors affecting the product and the society e.g., product safety,
non-pollutant motor vehicles, using containers which decompose naturally etc. The societal
marketing approach imposes several responsibilities on marketers.
MARKETING PROCESS
The Marketing Process of a company typically involves identifying the viable and
potential marketing opportunities in the environment, developing strategies to effective
utilise the opportunities, evolving suitable marketing strategies, and supervising the
implementation of these marketing efforts. Marketing process involves ways that value
can be created for the customers to satisfy their needs. Marketing process is a continual
series of actions and reactions between the customers and the organisations which are
making attempt to create value for and satisfy needs of customers. In marketing process

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the situation is analysed to identify opportunities, the strategy is formulated for a value
proposition, tactical decisions are taken, plan is implemented, and results are
monitored. The marketing process can be divided in several different ways. One popular
conceptualization of marketing tasks is:
• Strategy formulation – the development of the broadest marketing/business strategies
with the longest term impact.
• Marketing planning – the development of longer-term plans which have generally
stronger impact than the short-term programs.
• Marketing programming, allocating and budgeting – the development of short-term
programs which generally focus on integrated approaches for a given product and on the
allocation of scarce resources such as sales effort or product development time across
various products and functions.
• Marketing implementation – the actual task of getting the marketing job done.
• Monitoring and auditing – the review and analysis of programs, plans and strategies to
assess their success and to determine what changes must be made.
• Analysis and research – the deliberate and careful acquisition and examination of
qualitative and quantitative data to improve decision making.
CONSUMER BUYING BEHAVIOUR
The modern marketing management tries to solve the basic problems of consumers in
the area of consumption. To survive in the market, a firm has to be constantly innovating and
understand the latest consume r needs and tastes. It will be extremely useful in exploiting
marketing opportunities and in meeting the challenges that the Indian market offers. It is
important for the marketers to understand the buyer behaviour due to the following reasons .
▪ It is significant for regulating consumption of goods and thereby maintaining
economic stability.
▪ It is useful in developing ways for the more efficient utilisation of resources of
marketing. It also helps in solving marketing management problems in more
effective manner.
▪ Today consumers give more importance on environment friendly products. They
are concerned about health, hygiene and fitness. They prefer natural products.
Hence detailed stud y on upcoming groups of consumers is essential for any firm.
▪ The growth of consumer protection movement has created an urgent need to
understand how consumers make their consumption and buying decision.
▪ Consumers tastes and preferences are ever changing. Study of consumer behaviour
gives information regarding colour, design, size etc. which consumers want. In
short, consumer behaviour helps in formulating of production policy.
▪ For effective market segmentation and target marketing, it is essential to have an
understanding of consumers and their behaviour.
Classification of consumers
• Personal Consumers
• Organizational Consumers

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• Impulse Consumers
• Need-based Consumers
• Discount Driven Consumers
• Habitual Consumers
Personal Consumers: This type of consumer is an individual consumer who buy
products or services for own use, or for family, or for household use. Finished
products are purchased by personal consume r and the purchases are done in small
quantities.
Organisational Consumers: This type of consume r can be a business, government,
profit or non-profit organisation, or agency who purchases goods or services for
organisation to function or for resale purpose. Purchases are done in the form of
raw-materials that are processed to finished goods and offered for sale to other
consumers.
Impulse Consumers:his type of consume r do unplanned purchases. Purchasing a
particular product was not a priority, but when the consume r encounter that
product, he makes swift buying decision. Impulse consume r purchase what seems
good at the time.
Need Based Consumer: This type of consume r has a specific intent ion to purchase a
particular type of product. Need-based Consume r is driven by a specific need. He
makes buying decision when he actually need that product and not any other time.
Discount Driven Consumers: This type of consumers do purchases when they get some
lucrative offer or discount. Their buying decision is highly based on offers or
discounts.
Habitual Consumers: Person who is habitual to the usage or consumption of a kind of
product is called habitual consumer. For example - person who smoke.
Factors Influencing Purchase Decisions
The act of purchasing a product can be very complex. The buyer has to take several
factors into consideration. The purchasing decision process is looked at from different angles
by economists, sociologists, psychologists etc. An economist may argue that the consumer
takes price and utility into consideration while a psychologist says it is emotional reasons
behind purchase etc. But it is to be noted that a single factor alone will not induce purchase
decisions; whereas several factors influence the customer in his purchase decision. They are:
Cultural Factors
Social Factors
Personal Factors
Psychological Factors
Cultural factors
Culture consists of ideas, customs and art that are produced or shared by a particular
society. Culture is a set of values, ideas, attitudes and other symbols and objects created
by people which shape human behaviour. Culture does not refer to an individual’s instinctive
response. The symbols may be intangible (attitudes, beliefs, values, languages, religious) or

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tangible (tools, housing, products works of art). A culture implies a totally learned ―handed-
down way of life.
Individuals buying behaviour is largely influenced by culture. It mainly determines a
person’s wants and behaviour. Culture is dynamic, changing and adaptive over time. As a
result the values and needs of the society change. The influence of culture can be seen in
areas such as quality of life, role of women, changes in home family life, changing attitudes
towards work and pleasure, increased leisure time, desire for convenience goods etc.
Marketers must see that products and services do satisfy these changing roles, values and
needs.
a) Sub-Culture
A sub-culture is a distinct cultural group having specific identification and
mobilisation, existing within a larger culture. The people in the sub-culture have many of the
cultural values of the over all society, but at the same time they profess beliefs, values and
customs which identify them as a separate group, e.g., Hinduism has a culture but Hindus are
divided into several groups on caste lines and each castes has its own beliefs, values and
customs. Marketer should have knowledge of the sub-culture, because the members of each
sub-culture show different purchase behaviour patterns.
Social factors
Social stratification has become part and parcel of the society. A novel class may be
defined as a group of individuals who share similar behaviour, values, interests and life-
styles. Usually people nominally choose their friends and associates on the basis of
commonality of interests. In this respect, social classes restrict their interaction especially
with regard to social function. The hierarchical nature of social group prompts people to
position their social group as either above or below other groups. For convenience we can
classify social class as upper-class, middle-class and lower-class.
a) Social Class and Consumption Behaviour
The behaviour patterns of social classes vary with regard to media preferences,
shopping patterns, leisure time activities, and saving and spending habits. Usually members
of upper-class prefer magazines and newspapers and television programs stressing current
events, while lower-class prefer publications and TV programs dramatizing romance; serials
and quiz shows. Exclusive shops, e.g., Raymonds shops are usually patronized by upper-
class; and middle class and lower class shop from the ordinary retail stores. Different types
of social classes choose different types of leisure time activities. Parks, museums and
swimming pools which are open to the public are most frequented by the middle class and
rarely by the lower class. Exclusive clubs with facilities for tennis, golf etc., are preferred by
the upper-class.
With regard to saving and spending habits, the tendency to save money increases
with the higher social class. People in the higher classes take life insurance policies and
invest in stock market. Lower class people usually put money in savings bank. Bank credit,
installment facilities are utilised for purchasing durable home appliances and furniture by the
middle and lower classes whereas bank credit cards are utilized for convenience purposes by
the higher classes. In short, social classes exert much influence on products and brand

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preferences relating to clothing, selecting restaurants, entertainments, home furnishings, etc.

b) Reference Groups
A reference group is any set of individuals that influence another individual
when he or she makes a decision. But if a group does not affect a person’s attitudes or
behaviour it is not a reference group. Examples of reference groups are Lions Club, Indian
Medical Association, religious groups, political parties etc.
Marketers give much importance to reference groups, because reference groups
influence consumers in several ways: An individual is exposed to new behaviours and life-
styles; influences a person’s attitudes and self-concept, and the person’s choice of product
and brands are indirectly pressurized to conformity with the group. In other words, a
person’s purchase behaviour is greatly influenced by the reference groups to which he
belongs. This can be clearly seen in the case of clothing, cigarettes etc. Manufacturers often
spend large amount of money to create images of the type of people who use their products,
e.g., advertisements of Wills Cigarettes, Louis Phileppe shirts etc.
c) Family
Family is the most important reference group that shapes a buyer’s behaviour.
According to Kotler, we can distinguish between two families in the buyer’s life. First, the
family orientation consists of one’s parents. A person acquires an orientation towards
religion, politics, and economics and a sense of personal ambition, self-worth and love from
parents. The influence of parents will be more where children continue to live with their
parents. The second is the family people form when they marry and live separately from
their parents. Parental influence is less in this case.
Marketers are interested in studying the role and influence of the members of the
family – husband, wife and children – in purchasing products and services. In family
purchases, usually, husband is dominant in taking decisions regarding life insurance,
automobiles etc., and wife has a dominant role in selecting washing machines, kitchenware
and the like, whereas both husband and wife jointly decide about vacation plans, housing,
outside entertainment etc. Now-a-days, teenage children with their exposure to so many
advertisements and influence of friends, also play an important role in making purchases
especially in the case of TV sets, stereos, their clothing etc.
Personal factors
Purchasing behaviour varies according to one’s roles and status. An individual has to
play different roles in the society – in the family as father, in the company as manager etc.
Depending on the role, society accords status to it, e.g., Managing Director of a company,
University Professor, Physician etc. People make purchase that shows their role and status
in the society. In the same way, purchases also vary according to the age and life-cycle stage.
Occupation of a person is another deciding factor. Usually people purchase products to suit
their occupation, e.g., white stocking and white shoes for nurses. Economic circumstances of
a person, his disposable income, borrowing power, spending versus saving habit etc., exert
influence on purchases. Life-style of a person reflects the items he or she usually purchases. A
person’s life style is the person’s pattern of living in the world as expressed in the person’s
activities, interests and opinions. Life-style portrays the ―whole person interacting with his

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or her environment. Kotler-. Marketers try to identify their products with different life-style
groups, e.g., advertisements of Gwalior Suiting and Raymond’s Park Avenue readymade
dresses show certain specific life-styles.
Personality and self-concept influence the buying behaviour of consumers. William
J. Stanton, defines personality ―as an individual’s pattern of traits that are a determinant
of behaviour response. It is an individual’s most consistent pattern of responses. Personality
is very often described as the sum total of traits such as self- confidence, dominance,
autonomy, sociability, defensiveness and adaptability. We note inconsistency in the
behaviour of individuals. Based on the inconsistency in behaviour, people are usually
categorized as egoistic, ambitious, introvert, extrovert etc. In short, each person has a distinct
personality and this affects one’s buying behaviour. Marketer’s advertising appeals to suit
each personality groups.
Self-concept or self-image is another determinant of buyer behaviour. Self-image is
how we see our self and at the same time, it is the picture we think others have about us. For
example, a young man may view himself as an intellectual self-confident, ambitious business
executive. Usually a distinction is drawn between self-image (the way we really see our self)
and the ideal self image (the way we want to be seen) . The ideal self-image is the ―image to
which a person aspires. Self-image is influenced by physiological and psychological needs
and conditioned by economic and demographic factors and influence of social groups. In
buying behaviour, people choose goods and services that are close to their ideal self- image.
For example, those who think themselves as good players join sports clubs, a young business
executive may join a tennis club because he thinks tennis is the sport for rising executives.
Marketers try to project their products to suit the target market.
Psychological factors
The psychological factors which influence a person’s buying behaviour are
motivation, perception, learning and beliefs and attitudes.
a) Motivation
Motivation is considered as the ―why of behaviour. According to Marguerite C.
Burk, ―motivation refers to the drives, urges, wishes or desires which initiate the
sequence of events known as behaviour. A motive (or drive) may be defined as a stimulated
need that an individual seeks to satisfy. ―Motives are inner that direct people toward the
goal of satisfying a felt need. The individual is moved to take action to reduce a state of
tension and to return to a condition of equilibrium. Hunger, security and prestige are
examples. It is to be noted that a need be aroused or stimulated before it becomes a motive.
The arousal may be internal (feeling hungry) or external (an advertisement for food or dress).
Besides, just thinking about a need (dress materials) may trigger the arousal of that need
(say, a new shirt).
Psychologists classify motives into two broad categories: (1) biogenic needs (food,
shelter, clothing etc.) Which arise from physiological states of tension, and (2)
psychogenic needs (affection, love, status etc). which arise from psychological states of
tension.
Abraham Maslow, in his book, ―Motivation and Personality has put forward a

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theory of motivation called ―holistic-dynamic theory. Maslow identified a hierarchy of five

levels of needs – physiological needs, safety needs, social needs, esteem needs and self-
actualization needs. According to him when the needs of people at one level are satisfied,
they will go to the next higher level and so on. At the same time it is to be noted that only
very few people move through all five levels. Maslow’s hierarchy of needs is shown below.

Self-Actuali
zation Needs
(Self-fulfilment)
Esteem Needs
(Respect from others and self,
Recognitions, Status, Prestige)
Social Needs
(Sense of belonging, affection love)

Safety Needs
(Security, protection, family stability, economic security)
Physiological Needs
(Biological needs; hunger, thirst, shelter, clothing)

Physiological Needs
The basic needs such as food, shelter, clothing are present in all human beings and
have to be satisfied first. Products under this category require comparatively lesser marketing
techniques. This holds good in the case of food materials such as rice, wheat, vegetables,
milk, pulses etc. But in the case of clothing, the situation has changed considerably. Now we
find stiff competition among marketers. Through advertisements, Gwalior Suiting, Bombay
Dyeing, and many others try to woo the customers to purchase their products.
Safety Needs
This category includes physical security, economic and social security, protection etc.
Bank accounts, life insurance policies, fire and theft insurance policies, membership in a
health scheme are examples. Life insurance Corporation of India’s ―Jeevan Dhara, Unit
Trust of India’s ―ULI (Unit Linked Insurance Policy). Cancer Care for Life introduced by
Regional Cancer Centre, Trivandrum – are now being successfully marketed.
Social Needs
Sense of belonging, affection and love or the desire to be accepted by the members of
the family and other individuals and groups come under social needs. The individual may
join a group or club (Lions/Rotary Club) and naturally he tries to conform to their standards
in the matter of dress and behaviour. So marketers try to introduce products which cater to
the requirements of the group. Special attention is required with regard to make, packing,
branding etc., of the products and he should keep in view the sentiments of the consumer.
The consumers state of mind and feelings shall be exploited by the marketers in marketing
such goods.
Esteem Needs
Respect from others and self, recognition, status, prestige etc., are associated with

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esteem needs. The individual feels a sense of accomplishment, achievement and respect from
others. He wants to ―excel others. ―The person has a desire to stand out from the crown in
some way. As regards goods satisfying the esteem needs of customers the motto seems to be,
―Higher the price, the higher the demand. Quality improvements, at tractive appearance
and costly inputs may be the salient features of production of goods under this category.
Examples are: Rolex watches, Maruti 1000 cars, Cartier pens, perfumes, costly silk sarees,
diamond ear rings etc. A careful impression management technique can be adopted in
marketing such goods.
Self-actualization Needs
Maslow defines self-actualization as. ―The healthy man is primarily motivated by his
needs to develop and actualize his fullest potentialities and capacities. What man can be, he
must be this is the desire to achieve to the maximum of one’s capabilities. Consumers
coming under this category are rare and they may find satisfaction of their need in
specialized selling institutions. A trophy for a prestigious tournament can be included in this
category of goods. Firms trying to market such goods should go for excellence in
workmanship and innovation in product manufacture and presentation. Standardized
production is of little signification here. Hence, workmanship and innovation themselves
serve as strategies, of course, with the necessary communication in the form of
advertisement etc.
b) Perception
Perception is the meaning we attribute to stimuli received through the five senses. It
is the process by which individuals become aware of products of services. We become aware
of the environment around as through our five senses: seeing, hearing, touching, tasting and
smelling. Perception is the process by which individuals become aware of and giving
meaning to their environment. Our past experience also influences perception. Very often
question is asked why people perceive situations/products differently. This is because each
of us interprets information in an individual way, that is, very often we perceive only what
we want to perceive.
An understanding of perception is very important to marketers because it gives them
an idea about what consumers believe. For example, all brands of Soda are practically
the same. But some brands are promoted as superior and many consumers believe them as
such, because they perceive them differently. Everyday, we are exposed to a large number of
stimuli, say, advertisements. So unless something, special stimuli is provided, marketer will
not be able to attract consumersattention. That is why marketer gives a colour advertisement,
where most advertisements are in black and white or just the opposite. Again he may give
one or two colours in a black and white advertisement copy (e.g., Colgates Gel
advertisement) or just the opposite.
c) Learning
Learning refers to changes in behaviour, as a result of experience. That means, most
of human behaviour results from the process of learning. From the marketers point of view,
learning involves five concepts: drive, cue, response, reinforcement and retention. A drive is
any strong internal stimulus that impels action, e.g., fear, hunger etc. A cue is an external

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stimulus in the environment which determines how the individual responds to drive.
Advertisement of a restaurant may serve as a cue for an individual to satisfy his drive
(hunger) by visiting the restaurant. The individuals reaction to the drive and cues is the
response. The reaction of individuals varies depending on their past responses.
Reinforcement results when the satisfaction is derived from a response. Retention is
remembering what is learned.
Marketing implications of learning are many. Learning and brand loyalty are closely
related. We purchase most of regular use items based on past experience. If we are satisfied
with an item, we may again purchase the same – there is repeat purchase. Dissatisfaction
may force the consumers to select another brand. Hence marketers aim should be to develop
a group of consumers who are loyal to their products – repeatedly purchasing their products
– and ―even search for a particular brand.
Advertising plays the major role in providing cues to consumers about products and
their performances. Advertising also suggests responses and increases consumer anticipation
of reinforcements. Retaining the cues, given in the advertisement in the consumers mind
depends on a number of factors. If the consumer is exposed to the advertisement frequently,
it is likely that he will remember it. Again, spreading the advertising message over a
particular period of time rather than concentrating it on a short period also enhances
retention.
d) Beliefs and Attitudes
Beliefs and attitudes develop gradually over a period of time as a result of
experience. Family, friends and reference groups influence beliefs and attitudes. ―A
belief is a descriptive thought that a person holds about something. Beliefs may be based on
knowledge, opinion or faith. Our attitude to something is the way we think and feel about it..
Attitudes are a persons enduring favorable or unfavorable evaluations, emotional feelings or
positive or negative tendencies towards some object or idea e.g., attitude towards religion,
politics, food, films etc. Attitudes are seldom neutral; they reflect positive or negative
feelings. Beliefs and attitudes indicate value judgments and they exhibit positive or negative
preferences and viewpoints towards a product, brand or service.
Marketers are interested in studying the consumer’s attitudes towards products and
services. These help in introducing products and services. The marketer’s ability to
understand, predict and influence consumer attitudes helps, to a great extent, the success of a
product. A marketer has three options will regard to consumer attitudes. Conform or change
existing attitudes or create new attitudes. Conforming to the existing attitudes is the easiest
one. Changing or creating new attitudes are difficult. Advertising is very often used
extensively in changing attitudes. Social environment also influences attitude changes e.g.,
preference for cholesterol free oils. When introducing a new product or repositioning an old
product, the strategy of creating new attitude is employed.
Other factors affecting buyer behaviour
Apart from the various factors discussed above, quite a number of other factors affect
buyer behaviour. Government policies, taxation, sudden price-hikes by the government,
social and health programs etc., have their influence on buyer behaviour. Total ban or

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restrictions on imports of certain products may make the product not available or force the
consumer to restrict its purchases or look for alternative items. Higher taxes and sudden
increases in prices also restrict consumption. e.g., the recent hike in the prices of petroleum
products. Fixing quotas also affect the supply of goods. Advertisements against smoking and
drinking also have their influence on a section of consumers. Exhorting people to have
regular exercise encourage sale of sports goods, shoes, etc. Advertisements and publicity
warning people against cancer, heart disease, blood-pressure also discourage to a certain
extent sales of cigarettes, alcoholic drinks, fatty oils etc.
CONSUMER DECISION MAKING PROCESS
We all make purchases everyday. But we never analyse the processes behind the
purchase decision, as it has become a routine affair. Generally, the decision process consists
of the following stages, while purchasing a high-priced or durable product.
Problem Recognition
The consumer recognises some needs and wants or desire or problem, e.g., a
consumer may feel the need of a fridge to preserve food, the need of a vehicle to move
around conveniently, the need of a prestigious item for social status etc., Marketers must find
out which one of these stimulates the individual to initiate the purchase process.
Information Search
The consumer tries to collect information regarding various products/services.
Information may be collected from magazines, catalogues, retailers, friends, family
members, business associates etc. Marketers should find out the sources of information and
their relative degree of importance to the consumer.
Evaluation of Alternatives
The various products/services (i.e., purchase alternatives) are evaluated by the
consumer on the basis of some criteria. The criteria may include price, electricity
consumption in the case of refrigerator, fuel efficiency in the case of a car or scooter, experts
opinion about the products, opinion of family members, friends etc. The marketer must
know which criteria the consumer will use in the purchase decision.
Purchase Decision
From among the purchase alternatives, the consumer makes the selection. It may be
to buy or not to buy. If the decision is to buy, then other additional decisions are: which type
(brand) of refrigerator he must buy, from whom to buy and how the payment to be made and
so on. The marketer, up to this stage, has tried every means to influence the purchase
behaviour, but the choice is purely consumers.
Post-purchase Behaviour
After making the purchase, the consumer will experience some degree of
satisfactions/dissatisfaction. The buyer of a new refrigerator, it satisfied, will feel happy
about its purchase and say nice things about it. But, if he is not satisfied, he may dissuade
his friends from purchasing it or advise them not to commit the same mistake. How the
consumer gets satisfaction/dissatisfaction is a crucial feedback for the marketer.
MARKET SEGMENTATION
Market consists of buyers, and buyers differ in one or more respects. Buyer’s

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behaivour is a complex phenomenon. An understanding of the economic, psychological and

socio-cultural characteristics of the consumers and their motivations. Attitudes, cognitions.
personalities and perceptions can help to discover new market opportunities, clear and
specific market segmentation. All markets are made up of segments and these segments are
made up of sub-segments.
Segmentation is a consumer oriented marketing strategy. It is a process of dividing
the market on the basis of interest, need and motive of the consumer. Market segmentation
simply means dividing market or grouping of consumers. It refers to grouping of consumers
according to such characteristics as income, age, race, education, sex, geographic location
etc. Therefore market segmentation is the strategy that subdivides the target market into sub-
groups of consumers with distinct and homogenous characteristics with a view to develop
and follow a distinct and differentiated marketing programs for each sub-group in order to
enhance satisfaction to consumers and profit to the marketer.
According to Philip Kotler, “ Market segmentation is the sub-dividing of a market
into homogenous sub-sects of consumers where any sub-sects may conceivably be selected
as a market target to be reached, With a distinct marketing mix.”
Characteristics of effective segmentation
The main criteria’s of effective segmentation are
▪ Measurability
▪ Substantiality
▪ Accessibility
▪ Differentiability
▪ Actionable
▪ Nature of Demand
▪ General considerations
The main purpose of market segmentation is to measure the changing behaviour
patterns of consumers. The size, profile, and other relevant characteristics of the segment
must be measurable and obtainable in terms of data. Therefore, segments should be capable
of giving accurate measurements.
Substantiality refers to the size of the segmented market. Segments must be large
enough to be profitable. For small segment, it may not be possible for the marketer to
develop separate marketing mix for such non profitable segments.
The segment must be accessible, which means marketers must be able to reach the
market segments at lower costs. Segments must be reachable by company’s sales persons,
distributors advertising media etc.
The segment should be large enough to be considered as a separate market. Such
segments must have individuality of their own so that it leads to different segments.
The segments which the company wishes to pursue must be actionable in the sense
that there should be sufficient finance, personnel and capability to take them all. Hence,
depending upon the reach of the company, the segments should be selected.
Segmentation is required only if there are marked differences in the nature of
demand. Nature of demand refers to the different quantities demanded by various segments.

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Each segmented market must exhibit difference in consumption rates from another segment.
Apart from the above characteristics, the segment must have growth potential, be
profitable, carries no unusual risks and has competitors who do not fight directly with the
product or brand.
Need and importance of market segmentation
According to Sheth, “Market segmentation is the essence of modern marketing.” It is
advantageous to firms as well as consumers.
Advantages to firms
▪ Increases sale volume.
▪ Helps to win competition.
▪ Enables to take decisions.
▪ Helps to prepare effective marketing plan.
▪ Helps to understand the needs of consumers.
▪ Makes best use of resources.
▪ Expands markets.
▪ Creates innovations.
▪ Higher markets share.
▪ Specialised marketing.
▪ Achieves marketing goals.
Advantages to consumers
• Customer oriented.
• Quality product at reasonable price.
• Other benefits such as discounts, prize etc.
Bases of market segmentation
Different variables are used to segment the consumer markets. They can be broadly put
into four categories: Geographic segmentation, Demographic segmentation, Psychographic
segmentation and behavioral segmentation.
Geographic segmentation
The marketer divides the market into different geographical units. Generally
international companies segment markets geographically. The theory behind this strategy is
that people who live in same area have some similar need and wants and that need and wants
differ from those of people living in other areas.
(a) Area: This type of segmentation divides the market into different geographical units
such as country, state, region, district, area etc. Some manufacturers split up their sales
territories either state-wise or district-wise. Markets may also be divided into urban and
rural markets.
(b) Climate: Different types of climate prevail in different places. On the basis of climate,
areas can be classified as hot, cold, humid and rainy region. Climate determines the
demand for certain goods.
(c) Population Density: The size and density of population affects the demand for
consumer goods. In those areas where size and density of population is high, there will

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be good demand for consumer goods.

Demographic segmentation
In Demographic segmentation, the market is segmented on the basis of demographic
variables such as age, sex, family size, family life cycle, income, occupation, education etc.
Demographic variables or characteristics are the most popular bases for segmenting the
market.
(a) Age: Age is an important factor for segmenting the market. This is because demand and
brand choice of people change with age. On the basis of age, a market can be divided into
four- Children, Teenagers, Adults and Grown-ups. For consumers of different age groups,
different types of products are produced. Johnson and Johnson cater to the needs of
children below 6 years by presenting baby powders, baby soaps, oils etc.
(b) Sex: Sex based segmentation means grouping customers into males and females. The
wants, tastes, preferences, interests, choices etc, of men are different from that of women.
For instance, women are more fond of cosmetics and other fancy articles. Marketers use
gender differences for marketing garments, personal care products, bikes, cosmetics and
magazines.
(c) Family Life Cycle: It refers to the important stages in the life of an ordinary family.
Broadly divided into the following stages.
Stage 1: Childhood.
Stage 2: Bachelorhood (unmarried).
Stage 3: Honeymooners- Young married couple.
Stage 4: Parenthood- (a) Couple with children.
(b) Couple with grown up children.
Stage 5: Post- parenthood- Older married couple with children living away from Parents
(due to job or marriage of sons and daughters).
Stage 6: Dissolution- One of the partners is dead. Wants, tastes, interests,
buying habits etc vary over different life cycles stages.
(d) Religion: Religious differences have important effect on marketing. The male folk
among the muslims have a demand for striped lungis and the woman folk for pardhas.
(e) Income: Income segmentation is used for automobiles, clothing, cosmetics, travel,
financial services etc. For example, BMW (car manufacturer concentrates on high income
segment)
(f) Occupation: Market segmentation is done also on the basis of occupation of consumers.
For instance, doctors may demand Surgical equipment, lawyers may demand coat etc.
(g) Family Size: A marketer launches different sizes of products in the market according to
size of the family. For example, shampoos and oil are available in 100 ml. 200ml. 500ml
etc.
(h) Education: On the basis of education, market for books may be divided as high school,
plus two, graduate and post graduate.
Psychographic segmentation
It refers to grouping of people into homogeneous segments on the basis of psychological
make up namely personality and life style.

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(a) Life Style: A person’s life style is the pattern of living as expressed in the person’s activities, interests
and opinions .They express their life styles through the products they use. For example, the life style of
a college student is different from that of an ordinary worker. Car, clothing, cosmetics, furniture, liquor,
cigarettes etc. are segmented by using life style
(b) Personality: Personality reflects a person’s traits, attitude and habits. It is in this background that a
person is classified as active or passive, rational or impulsive, creative or conventional, introvert or
extrovert. For example, Raymond’s advertisement says “Raymonds. The Complete Man”
(c) Social Class: On the basis of Social class, consumers may be grouped into lower class, middle class
and upper class. Social class is determined by income, occupation and education.
Behavioural segmentation
Behavioural segmentation is based on buyer behaviour i.e. the way people behave
during and after purchase.
(a) Attitude: Customers can be segmented on the basis of attitude such as enthusiastic,
positive, indifferent, negative, hostile etc. Fashionable and latest products are used by
enthusiastic consumers. Liquor, cigarette etc are used by negative consumers.
(b) Product Segmentation: The market segmentation is done on the basis of product
characteristics that are capable of satisfying certain special needs of customers.
1. Prestige products, e.g., Automobiles, clothing, Home furnishing.
2. Maturity products, e.g., Cigarettes, Blades etc.
3. Status products, e.g., Most luxuries.
4. Anxiety products, e.g., Medicines, soaps etc.
5. Functional products, e.g., Fruits, vegetables etc.
(c) Occasion Segmentation: According to the occasions, buyers develop a need, purchase
a product or use a product. There can be two types of situations- regular and special. For
example, for regular use, women purchase cotton or polyester sarees or churidars. For
attending marriage or reception(special occasion) they buy silk sarees.
(d) Benefit Segmentation: Benefit segmentation implies satisfying one benefit group. The
benefit may be classified into Generic or Primary and Secondary or Evolved.
(e) Volume Segmentation: The market is segmented on the basis of volume or quality of
purchase. The buyers are grouped into categories like bulk buyers, moderate buyers, and
small buyers. Heavy buyers are often small percentage of the market but account for a
high percentage of total consumption. Marketers prefer to attract one heavy buyer rather
than several small buyers.
(f) Loyalty Segmentation: Consumers have varying degree of loyality to specific brands.
On the basis of brand loyality, buyers can be divided into the following five groups. (1)
Hard-core loyals (2) Soft- core loyals (3) Shifting loyals (4) Switchers (5) Consumer
innovators.
Thus all these variables affect the market segmentation, particularly of the consumers
market. An ideal marketer can adopt suitable criterions for market segmentation in the
background of the results obtained from the aforesaid variables. The geographic,
demographic, psychographic, behavior and a few other variables are the criterions on which
a marketer can rely.

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Objectives of market segmentation

1. To prepare appropriate marketing programs
It is essential for a marketer to prepare appropriate marketing programs and for this
purpose, the sub-division of buyers on the basis of nature, quality and class is undertaken. It
helps to find out the varied and complex buyer behaviour failing which the marketing
programs cannot be appropriate. Thus, the purpose of market segmentation is to divide the
consumers or buyers into different groups or segments as the wants and desires of consumers
are diverse and we cannot do it without sub-dividing them in the background of different
variables.
2. To trace out the taste and buying habits
The market segmentation is also undertaken with the purpose of locating the taste,
temperament and buying habits of the different groups or segments. The behavioral scientists
feel that al buyers are different. They appear keenly interested in segmenting the market as
the significant differences in market behaviour between the various segments of society can’t
be ruled out. In this background, the formulation of marketing policies or programs or tactics
for all segments becomes urgent.
3. To find out or locate the new market
The market segmentation is also done with the purpose of locating new market. The
group wise or segment wise study of buyer’s taste, temperament, living habits and so on help
a marketer, particularly while searching new market. A marketer is required to adopt all
practices which help to locate the availability of buyers in a particular region, group or
segment.
4. To study the purchase potentiality
The marketing programs cannot be pro-active unless and until, we have detailed
information regarding the marketing goals. The market segmentation helps to furnish
concrete information’s regarding the purchasing potentiality as it studies the buying habits
of almost all the groups.
5. To make the market customer-oriented
In addition to the aforesaid objectives, the market segmentation is also undertaken with
the purpose of making the market customer-oriented. In a virtual sense, the market
segmentation is a customer-oriented philosophy. The identification of customer demand and
further formulation of appropriate strategies are the important premises of market
segmentation. Thus, it would not be wrong to conclude that market segmentation is carried
on with the ultimate purpose of getting or preparing a customer-oriented market.
MARKETING MIX

The marketing mix refers to the set of actions, or tactics, that a company uses to
promote its brand or product in the market. The 4Ps make up a typical marketing mix - Price,
Product, Promotion and Place.

Price: refers to the value that is put for a product. It depends on costs of production, segment
targeted, ability of the market to pay, supply - demand and a host of other direct and indirect
factors. There can be several types of pricing strategies, each tied in with an overall business

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plan. Pricing can also be used a demarcation, to differentiate and enhance the image of a
product.

Product: refers to the item actually being sold. The product must deliver a minimum level of
performance; otherwise even the best work on the other elements of the marketing mix won't
do any good.

Place: refers to the point of sale. In every industry, catching the eye of the consumer and
making it easy for her to buy it is the main aim of a good distribution or 'place' strategy.
Retailers pay a premium for the right location. In fact, the mantra of a successful retail
business is 'location, location, location'.

Promotion: this refers to all the activities undertaken to make the product or service known
to the user and trade. This can include advertising, word of mouth, press reports, incentives,
commissions and awards to the trade. It can also include consumer schemes, direct
marketing, contests and prizes.

All the elements of the marketing mix influence each other. They make up the
business plan for a company and handled right, can give it great success. But handled wrong
and the business could take years to recover. The marketing mix needs a lot of
understanding, market research and consultation with several people, from users to trade to
manufacturing and several others.

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UNIT II
PRODUCT
Meaning and Definition
As consumers we buy different kinds of products so as to satisfy our varied needs.
We buy food-grains, textiles, shaving cream, toothpaste, books, pen, pencils and many other
such items in our daily life. In common parlance, we name these items as products.
However, our decision to buy an item is based not only on its tangible attributes but also on a
variety of associated non-tangible and psychological attributes such as services, brand,
package, warranty, image etc.
According to Schwartz, a product is something a firm markets that will satisfy a
personal want or fill a business or commercial need, and includes, ―all the peripheral
factors that may contribute to consumers satisfaction. These factors may include reputation
of the manufacturer, the warranty, credit and delivery terms, the brand name, and the
courtesy shown by the sales and service personnel.
William Stanton says ―a product is a complex of tangible and intangible attributes
including packaging, colour, price, manufacturers prestige retailers prestige and
manufacturers and retailers services which the buyer may accept as offering satisfaction of
wants or needs.
From a perusal of these definitions, it is obvious that a product is not only a tangible
entity. The intangible services and psychological attributes such as prestige, image, etc.,
which consumers look for and marketers provide in these tangible items are also an integral
part of the product.
Features of Product
Not with standing variations in the emphasis and focus in the above definitions, the
consensus of opinion about the meaning of the term product converges on some points.
These points may be referred to as the essential features of product. These are briefly
described here.
1. Tangible attributes
To be called a product, an item should have the characteristic of tangibility. It means
it may be touched, seen, and its physical presence felt as, for example, an automobile,
scooter, pressure cooker, shaving cream, toothpaste, etc.
2. Intangible attributes
Alternatively, it may be intangible in the form of a service for example, repairing,
hair-dressing, banking or insurance services. These services may be bought
independently/exclusively or may be associated with tangible products.
3. Peripheral or associated attributes
Product may have peripheral or associated attributes to facilitate its identification
and acceptance by buyers. Such attributes may be a brand, package, warranty, credit and
delivery terms. By and large, brand and package are such attributes which are common to
many products. For example, Hindustan Levers vanaspati ghee has a brand name DALDA
and its package exhibits a conspicuous palm tree with which it has come to be identified by
consumers. Its brand name has developed such an image in the market that all kinds of

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vanaspati ghee that being sold is often referred to as Dalda ghee; it has become a generic
name for all types of vanaspati ghee.
4. Exchange value
For marketing purposes, every product, whether tangible or intangible, should have
an exchange value and should be capable of being exchanged between buyer and seller for a
mutually agreed or acceptable consideration.
5. Consumer satisfaction
From the marketing viewpoint, products should have the ability to deliver value
satisfaction to consumers for whom these are intended. This satisfaction may be both
real/and or psychological. For example, when a housewife buys a Lakme lipstick she not
only buys a chemical compound having some tangible features but also buys beauty. The
former may deliver a real value but the psychological value is delivered by the latter
6. Business need satisfaction
In order to be a product, an item should also have the attribute of satisfying a
business need. The basic business need obviously is to earn profit on the product sold.
However, it may be to meet a societal need also. For example, cholesterol-free edible oil
product may satisfy a societal need; it may or may not generate profit. The test is, therefore,
not whether it generates profit or not, but whether it has that attribute of generating profit or
not.
After having described the essential features of the term product, it may be defined as
a set of tangible, intangible and associated attributes capable of being exchanged for a value
with ability to satisfy consumer and business need(s).
PRODUCT CLASSIFICATION
Products are not always bought for end consumption by buyers. They are bought for
intermediate uses also; they are bought for conversion into other kinds of products through
a manufacturing process. Some products, therefore, serve as inputs for other products. Some
products survive a number of uses while others do not; some products are bought frequently
relative to others. It is because of these differences in the purposes, motives, attitudes,
shopping effort and frequency of purchases that in marketing products have been classified
differently as follows:
Consumer and industrial products
Consumer products are those products which are destined for use by ultimate
consumers or households and in such form that they can be used without further commercial
processing. Whereas industrial products, are those products which are destined to be used by
buyers (customers) as inputs in producing other products and for further commercial
processing. In other words, consumer products are meant for personal and non-business use
whereas industrial products are meant for non-personal and business use. For example, soap,
toothpaste, wrist watch, hair-oil, cigarettes, etc. are meant for personal use and are, therefore,
classified as consumer products while machine tools, computers, trucks, machinery etc. are
meant for non-personal and business use of producing other products. These are, therefore,
classified as industrial products.
However, no product may be exclusively classified as consumer product or industrial

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product. It depends on a specific purchase situation. For example, coconut oil is a consumer
product when bought by a housewife for cooking purpose while the same coconut oil is an
industrial product when bought by a hair-oil or soap manufacturer who buys it as an input,
process it and then sells it to ultimate consumers as a different product. In the economic
parlance, such as industrial buyer, therefore, adds more utilities to the product before selling
it to the ultimate consumer.
Durable and Non-durable products
Products, both consumer and industrial, have also been classified as durable, non-
durable and services, Durable products are those tangible products which normally survive
many uses like, for example, machinery, cars, scooters, furniture, coolers, air- conditioners
and refrigerators. Non-durable products, on the other hand, are those tangible products
which are normally consumed in one or a few uses like, for example, lubricating oils, soap,
toffees and cornflakes. Services are those intangible products like activities, benefits or
satisfactions which are offered for sale, for example, hairdressing, banking and insurance etc.
Convenience, Shopping and Specialty products
Consumer products have further been sub classified on the basis of the degree and
nature of shopping effort put in by consumers. Two attempts in this connection are relevant.
The first attempt was made by Melvin T. Copeland of the Harvard Business School back in
1923 whose classification of consumer products has received wide support. Accordingly,
consumer products have been divided into the following three types.
(a) Convenience Products
Convenience products are those consumer goods which a customer usually purchases
frequently, immediately, and with the minimum of effort in comparison and buying, as for
instance, soap toothpaste, bread, chewing tabacco, biscuits, etc.
(b) Shopping Products
Shopping products are those consumer goods which the customer, in the process of
selection and purchase, characteristically compares on such bases as suitability, quality, price
and style, as for example, refrigerator, cooler, fans, mopeds, suiting’s, etc.
(c) Specialty Products
Specialty products are those consumer good with unique characteristics and/or brand
identification for which a significant group of buyers are habitually willing to make a special
purchasing effort, as for instance, ice-cream, special eating items, fancy goods etc.
Product Mix
A product mix (also called product assortment) is the set of all product lines and items
that a particular seller offers for sale to buyers. An organisation with several product lines has a
product mix. Product mix need not consist of related products. In other words, product mix is
―the composite of products offered for sale by a firm. It is a collection of products manufactured
or distributed by a firm. It is the full list of all products offered by a firm. For instance, a firm
manufactures watches, machinery items, electric lamp etc. It has four main characteristic: (1)
Length (2) Width (3) Depth (4) Consistency.
Length of product mix refers to the total number of items in its product mix. Width or
breadth of the product mix refers to the number of different product lines offered by the

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company. Depth of the product mix refers to the average number of items offered by the
company in each product line. Consistency of the product mix refers to how closely the
various product lines are related in production requirements, distribution, channels etc. For
instance, products manufactured by an electric company have an overall consistency, as most
products involve electricity power.
Factors Influencing Product Mix
Generally it is very difficult for a concern to take a decision about the number of
products it should produce at a given time because the number of products or product mix is
affected by several factors. Changes in the product mix, that is, adding or eliminating
products, may be due to the following factors.
1. Change in demand of a product due to population changes,
2. Changes in purchasing power or behaviour of the customers,
3. Change in company desire,
4. Development of by-products by using residuals, at low cost,
5. The competitors actions and reactions,
6. To utilise the available marketing capacity fully,
7. Financial influences of the firm,
8. Advertising and distribution factors,
9. Goodwill of the firm,
10. Possibility of adding new product to its product line at less cost.
Product Mix Strategies
A company has several major strategies at its disposal, with respect to the width,
depth and consistency of its product mix. One major management aspect involved in product
policy is the decision concerning product mix. The product mix is one of the elements in the
product policy. This is more important now-a-days since most of the manufacturers are
diversifying their products.
The following strategies are generally employed by the producer or wholesaler of the
product
1. Expansion of Product Mix
2. Contraction of Product Mix
3. Alteration of existing products
4. Positioning the product
5. Trading up and Trading down
6. Product differentiation and Market segmentation We discuss them briefly:
(1) Expansion of product Mix
It is also referred to diversification. A firm may expand its present product mix by
increasing the number of product lines or increasing the number of product items within the
same line. New lines may be related or unrelated to the present products. For instance, a
provision stores may add drugs, cosmetics, baby foods, dry fruits etc.
(2) Contraction of Product Mix (Product line contraction)
In certain circumstances, the management has to drop the production of unprofitable
products. A firm may either eliminate an entire line or simplify the assortment within a line,

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this is termed as contraction of product mix.

This is also termed as simplification. The process of avoiding or stopping the
production of a particular product is called simplification. Simplification may be defined as
deleting or eliminating those product items, which are unsatisfactory or unnecessary, from
the product line. It is opposite to product diversification. It is also termed as pruning,
deletion, elimination, contraction, dropping or abandonment.
(3) Alteration of Existing Products
As an alternative to developing a completely new product, management should take a
fresh look at the company’s existing products. Often, improving an established product can
be more profitable and less risky than developing a completely new one. Alterations may be
made in the designs size, colour, packaging, quality etc.
(4) Positioning the Product
When a product can offer satisfaction in the manner the buyer expects, a strong
position is created in the market. The products position is the image which that product
projects in relations to rival products. A products features will attract the customers or prove
attractive to the customers. The positioning of the product is attained by (1) product
differentiation (2) market segmentation and (3) market aggregation. There is a match
between product attributes and consumer expectations.
(5) Trading up and trading down
Trading up both trading up and trading down involve bringing out changed versions
of a product and altering the nature and direction of promotion. Normally, a firm will trade
up or down, but not both. Trading Up refers to adding of higher priced and more prestigious
products to their existing line, in the hope of increasing total sales volume. In other words,
when a marketer has already gained a good reputation through marketing his low priced
products in the initial stage and later on introduces high priced products, it is termed as
trading up. For instance, a factory marketing terry cotton is trading up by introducing
polyester.
Trading Down is the opposite to trading up. A company is said to be trading down,
when it adds a lower priced item to its line of prestige products in the hope that people who
cannot afford the original products, will want to buy the new one, because it carries some of
the status of the higher priced product. In other words, a manufacturer of high quality
products, starts producing and selling a lower quality product. The manufacturer having
already gained and established, a good name in the markets wishes to widen the market for
his products. In trading down new market is looked for, where the old product has not
reached.
(6) Product Differentiation and Market Segmentation
When there is a fundamental difference between one product and another, there will
be a product differentiation. The product differentiation involves developing and promoting
an awareness of differences between the advertisers products and the products of others. The
purpose of this differentiation is to make ones product different from those of other
competitors. Awareness of differentiation is developed and promoted on company’s product
from the product of others. This strategy is useful and facilitates a business to remove itself

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from price competition. This system is adopted by many firms that wish to engage a non-
price competition in the market. Thus a firm establishes that its product is different from, and
better than, other products. This differentiation sometimes, causes monopolistic competition.
When a firm has exclusive features like trade-mark, trade-name patent-rights etc., the
product is differentiated. Quality, design, colour, brand, packaging etc., also make a product
differentiated. For instance, toilet-soap, tooth paste, paint etc. are differentiated by increasing
the price, taking into account the cost of advertisement and promotion. The seller hopes that
the demand can be directed to his differentiated market products which are reasonably
standard.
PRODUCT PLANNING AND POLICIES
Product planning is the process of determining that line of products which can secure
maximum net realization from the intended markets. It is an ―act of marking out and
supervising the search, screening, development, and commercialization of new products; the
modification of existing lines; and the discontinuance of marginal or unprofitable items. The
managerial decision making in this area centre’s around deciding the type of products
company should develop and sell so that product serves as an instrument of achieving
marketing objectives. It also involves surveillance of product behaviour and deciding
whether it deserves to be on the product line, abandoned, or repositioned.
NEW PRODUCT DEVELOPMENT
New product planning process consists in the creation of new ideas, their evaluation
in terms of sales potentials and profitability production facilities, resources available,
designing and production testing and marketing of the product. The main task of the product
planners is in identify specific customer needs and expectations and align company’s
possibilities with the changing market demands. In each of this stage management must
decide (a) whether to move on to the next stage (b) to abandon the product or (c) to seek
additional information.
Stages in the new product development process
1. Idea Generation
The beginning of a successful product is a creative idea. For the generation of new
ideas, knowledge about the unfulfilled needs of the customer, their attitudes the attributes
that may be needed in a product to be of use to the customer and some useful information
has to be gathered. This step starts with a sound need – oriented analysis and assessment of
market opportunities and company resources.
New ideas for the generation of a product may come from company’s own research
and development studies, technicians, scientists, management judgment, company’s
salesmen, employees, middlemen, company suppliers of raw materials, governmental
agencies, company competitors and their products, trade associates, private research
organisations, inventors, exhibits and trade fairs, wholesalers and retailers advertising
agencies, commercial laboratories and trade journals etc. Good ideas come out of inspiration,
perspiration and techniques. Creativity techniques such like attribute listing, forced
relationships, Morphological analysis, and brain storming can help individuals and groups
generate better ideas.

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2. Idea screening
The purposes of idea generation is to create a large number of ideas. The purpose of
the succeeding stages is to reduce the number of ideas to an attractive, practicable few. The
first idea-pruning stage is screening. The different idea screening techniques are follows.
a) Check-List technique
The checklist enumerates desirable product characteristics on a rating scale, that
guide the screener. These are widely used by marketers in the screening process. The
qualities to be screened may be benefits to target consumers significantly different from rival
products, can be produced economically, fits in with company image, company personnel
have needed expertise and time to produce and sell it, will not consume excess amount of
funds, and is economically sound.
b) Rating chart
In rating chart, the marketer screens the idea regarding characteristics (such as
distribution, relationship to present product lines price-quality comparison with
competitive products, merchandising potential, effect on present products, etc). demand
(durability market dimensions, dependence on economic climate, social stability) and
potential (originality, market position, future customers etc).
3. Concept development and testing
During this stage, idea – on the paper is turned into a product-on-hand. In other
words, the idea is converted into a product that is producible and demonstrable. This stage is
also termed as Technical Development. It is during this period that all developments of the
product, from idea to final physical form, take place.
Any product idea can be turned into several product concepts. First, the question,
who is to use this product? The powder can be aimed at infants, children, teenagers, or young
or middle-aged adults. Second what primary benefit should be built into this product? Taste,
nutrition, refreshment, energy? Third what is the primary occasion for this drink? Break fast,
midmorning lunch, midafternoon, dinner, late evening? By asking these question a company
can form several concept.
Concept 1: An instant breakfast drink for adults who want a quick nutritious breakfast
without preparing a breakfast.
Concept 2: A tasty snack drink for children to drink as a midday refreshment.
Concept 3: A health supplement for older adults to drink in the late evening before retiring.
Concept testing
This is concerned with measuring customer reactions to the idea or concept of a
product. In fact, it is a kind of research in which the product idea is screened before any
money, time or labour are committed to making the prototype products. The idea of a
product with as many details as possible is made known to the customers either verbally or
through the use of suitable blueprints. The response of the customers is checked and only if it
is found encouraging that the development of product prototype is taken up.
The concept testing can tell whether the product is likely to be a future success or not.
To achieve better results, the product concept should include the finished product itself, with
all details ie, packaging, price category, the brand name etc. On the basis of these details

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interviews are conducted to collect the opinion of the would be purchasers.

4. Marketing strategy development
The new-product manager must now develop a marketing – strategy plan for
introducing this product into the market. The marketing strategy plan consists of 3 parts. The
first part describes the size, structure and behaviour of the target market, the planned product
positioning, and the sales, market share and profit goals sought in the first few years.
The second part of the marketing strategy outlines the products planned price,
distribution strategy and marketing budget for the first year. The third part of the marketing
strategy plan describes the long-run sales and profit goals and marketing-mix strategy over
time.
5. Business analysis
After developing the product concept and marketing strategy, the management needs
to prepare the sales, cost and profit projections to determine whether they satisfy the
company’s objectives. Business analysis is evaluating the business proposals attractiveness.
(i) Estimating sales
Management needs to estimate whether sales will be high enough to yield a
satisfactory profit. Sales-estimation methods depend on whether the product is a one-time
purchase product an infrequently purchased product, or a frequently purchased product.
a. Estimating first-time sales
The first task is to estimate first-time purchases of the new product in each period.
b. Estimating replacement sales
To estimate replacement sales, management has to research the survival-age
distribution of its product. The low end of the distribution indicates when the first
replacement sales will take place. Since replacement sales are difficult to estimate before the
product is in actual use, some manufacturers base their decision to launch a new product on
their estimate of first-time sales.
c. Estimating repeat sales
For a frequently purchased new product, the seller has to estimate repeat sales as well
as first-time sales. The seller should note the percentage of repeat-purchases that take place
in each repeat-purchase class: those who buy once, twice, three times and so on. It is
important to estimate whether the repeat purchase ratio is likely to rise or fall, and at what
rate, with deeper repeat-purchase classes.
(ii) Estimating cost and profits
After preparing the sales forecast, management can estimate the expected costs and
profits of this venture. The costs are estimated by the R+D, manufacturing, marketing and
finance departments.
6. Product Development
In this stage, the paper idea is duly converted into a physical product. There are 3
steps in this stage (a) Prototype development giving visual image of the product
(b) consumer testing of the model or prototype and (c) branding, packaging and labeling.
7. Test marketing
After management is satisfied with the products functional and psychological

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performance, the product is ready to be dressed up with a brand name, packaging and a
preliminary marketing program to test it in more authentic consumer settings. The purpose of
market testing is to learn how consumers and dealers react to handling using and
repurchasing the actual product and how large the market is.
The objectives of test marketing are:
a. To evaluate a complete marketing plan including advertising, distribution sales,
pricing etc.
b. To determine media mix, channels etc.
c. To forecast sales volume
Limitations of test marketing are:
a. Competitors response and their defensive action may not allow test marketing to
be conclusive.
b. Test marketing is a costly affair
c. It is a time-consuming method.
Many firms avoid test marketing, since they wish to be the first in the market. Test
marketing is generally done by consumer goods companies rather than by industrial goods
firms who usually try out new products with selected customers or obtain general reactions
by having their sales people demonstrate products when they make their rounds.
8. Commercialisation
This is the last stage, which involves the launching of the product with a full-scale
marketing programme. This stage is considered to be a critical one for any new product and
should therefore be handled carefully. For instance, it should be checked whether advertising
and personal selling have been done effectively and whether proper outlets have been
arranged for the distribution. The following activities are usually undertaken during this
stage:
1. Completing final plans for production and marketing.
2. Initiating coordinated production and selling programmes
3. Checking results at regular intervals.
All the stages explained above stress the fact that the development of new product
must pass through certain logical stage. At each stage, except for the first and the last,
management has 3 alternative decisions.
✓ Move the proposed product on to the next stage for evaluation there
✓ Terminate the product
✓ Send the proposed product back to an earlier stage for further development or
evaluation there.
PRODUCT MODIFICATION
Product modification is an adjustment made to an existing product, usually made for
greater appeal or functionality. A modification may include a change to a product's shape,
adding a feature or improving its performance. Often a product modification is accompanied
by a change in packaging. It is:
i. A strategy of quality improvement aims at increasing the product’s functional
performance - its durability, reliability, speed , taste.

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ii. A strategy of feature improvement aims at adding new features ( for example
- size, weight, materials, additives, accessories ) that expand the product’s
versatility, safety, or convenience.
iii. A strategy of style improvement aims at increasing the product’s aesthetic
appeal. The periodic introduction of new car models amounts to style
competition rather than quality or feature competition.
PRODUCT DIVERSIFICATION
Product diversification is the process of expanding business opportunities through
additional market potential of an existing product. Diversification may be achieved by
entering into additional markets and/or pricing strategies. Often the product may be
improved, altered or changed, or new marketing activities are developed. The planning
process includes market research, product adaptation analysis and legal review.
Product diversification involves addition of new products to existing products either
being manufactured or being marketed. Expansion of the existing product line with related
products is one such method adopted by many businesses. Adding tooth brushes to tooth
paste or tooth powders or mouthwash under the same brand or under different brands aimed
at different segments is one way of diversification. These are either brand extensions or
product extensions to increase the volume of sales and the number of customers.

PRODUCT ELIMINATION
Product elimination = Withdrawal of a product from the normal market place
The decision to drop a product (for example, in the decline stage of its life cycle) in
order to use the costs associated with it to enhance profits or to release resources that could
be more effectively used in other ways. Product elimination is elimination or complete
withdrawal of a product from the market. For example, withdrawal of ZEN model of car by
Maruti Suzuki from Indian markets. The process of evaluation of a product’s performance
falls into the below categories-
1) Performance – sales, market share, costs involved in manufacturing, promotion and
profit made
2) Product line/mix – if the product elimination will have impact on the sale or other
products (product mix), brand, and customer needs. For example, pharmaceutical companies
ensure that their product elimination doesn’t affects the need in the market.
3) Customer need – ability/ inability of the product to satisfy the need of the customer.
4) Operations – impact on manufacturing activity, marketing, resources, management’s
and employee’s time, support activities line servicing and maintenance.
5) Distributors and Suppliers – how the product elimination will impact the profits and
relationships with suppliers and distributors. The organisation has to assess how they will
react to its decision.
6) Competitors – will the product elimination give advantage to competitors?
PRODUCT LINE
Product lining is the marketing strategy of offering for sale several related products.
Unlike product bundling, where several products are combined into one, lining involves

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offering several related products individually. A line can comprise related products of
various sizes, types, colors, qualities, or prices. Line depth refers to the number of product
variants in a line. Line consistency refers to how closely related the products that make up
the line are. Line vulnerability refers to the percentage of sales or profits that are derived
from only a few products in the line. If a line of products is sold with the same brand name,
this is referred to as family branding.
When you add a new product to a line, it is referred to as a line extension. When you
add a line extension that is of better quality than the other products in the line, this is referred
to as trading up or brand leveraging. When you add a line extension that is of lower quality
than the other products of the line, this is referred to as trading down. When you trade down,
you will likely reduce your brand equity. You are gaining short-term sales at the expense of
long term sales.
✓ Product Line Contraction
✓ Product Line Expansion
✓ Changing Models or Styles of the Existing Products
BRANDING
Branding means giving a name to the product by which it could become known and
familiar among the public. When a brand name is registered and legalised, it becomes a
Trade mark. All trade marks are brands but all brands are not trade marks. Brand, brand
name, brand mark, trade mark, copy right are collectively known as the language of
branding.
Types of brands
In many markets, brands of different strength compete against each other. At the top
level are national or international brands. A large investment has usually been put into
extensive brand building— including advertising, distribution and, if needed, infrastructure
support. Although some national brands are better regarded than others—e.g., Dell has a
better reputation than e-Machines—the national brands usually sell at higher prices than to
regional and store brands. Regional brands, as the name suggests, are typically sold only in
one area. In some cases, regional distribution is all that firms can initially accomplish
with the investment capital and other resources that they have. This means that advertising is
usually done at the regional level. Store, or private label brands are, as the name suggests,
brands that are owned by retail store chains or consortia thereof. (For example, Vons and
Safeway have the same corporate parent and both carry the “Select” brand). Typically, store
brands sell at lower prices than do national brands.
Co-branding involves firms using two or more brands together to maximize appeal to
consumers. Some ice cream makers, for example, use their own brand name in addition to
naming the brands of ingredients contained. Sometimes, this strategy may help one brand at
the expense of the other. It is widely believed, for example, that the “Intel inside” messages,
which Intel paid computer makers to put on their products and packaging, reduced the value
of the computer makers brand names because the emphasis was now put on the Intel
component.
In order for a business organisation to successfully create an effective brand that is

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capable of enhancing a products value, it needs to understand how the delivery of value
differs across different types of brands. This means that a company has to know the kind of
brand suitable for its offering. So what are the different kinds of brand? They are the
following:
• Manufacturer Brands: These are developed and owned by the producers, who are usually
involved with distribution, promotion and pricing decisions for the brands. For example,
Apple computers.
• Dealer Brands: These are brands initiated and owned by wholesalers or retailers.
• Generic Brands: It indicates only the product category and do not includes the company
name or other identifying terms.
• Family Brands: A single brand name for the whole line closely related items. For
example, Amul for milk products.
• Individual Brands: Each product has a special brand name such as surf etc.
• Co-Brands: It uses two individual brands on a single product.
• Licensed Brands: It involves licensing of trade marks. For example, P&G licensed its
Camay brand of soap in India to Godrej for a few years.
BRAND LOYALTY
It simply means loyalty of a buyer towards a particular brand. Loyalty defined as, “A
favourable attitude and consistent purchase of a particular brand.” For example, if a customer
has a brand loyalty towards ‘Pears’, he will buy and use only that soap. There are four levels
of Brand Loyalty.
i. Brand Recognition: This means that people are familiar with the product and
they are likely to buy it.
ii. Brand Preference: At this level people adopt the product- that is, they habitually
buy it if it is available.
iii. Brand Insistence: It is the stage at which people will not accept any substitute.
iv. Brand equity: it is a set of assets and liabilities linked to a brands name and
symbol that add to or subtract from the value provided by a product or service
to a firm or that firms customers”.
PACKAGING
The packaging of a consumer product is an important part of the marketing plan.
There are many factors to be considered while designing a package. A good number of
companies adopt square packages in place of round packages which save space. Lip- sticks
and eye brow cosmetics are designed as pencil to be carried in ladies purses or hand bags.
Packing means wrapping of goods before they are transported or stored or delivered
to consumers. On the other hand, packaging is the sub-division of the packing function of
marketing. ―Packaging has been defined a ―an activity which is concerned with protection,
economy, convenience and promotional considerations. Many marketers have called
packaging a fifth P, along with four Ps i.e., price, product, place and promotion. Thus
packaging is one among the activities of designing and producing the container or wrapper
for a product. The wrapper or the container is called package.

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The Growth of Packaging

The following are the factors which influence the growth ad recognition of packaging
as a marketing tool:
1) Self Service
A number of products are being sold year after year, through the supermarkets, on a
self-service basis. Thus, they are packed and kept ready for sale. Packages attract attention,
telling product features, create overall impression and win consumers confidence. So, good
package is a must.
2) Consumer Affluence
Consumers are willing to pay a little more for conveniences, appearance,
dependability and prestige of better packages.
3) Company and Brand Image:
To enjoy a distinctive attraction, there must be a good brand and packaging.
4) Innovational Opportunity
Innovative packaging can bring large benefits to consumers and profit to producers.
Functions of Packaging
1. Product Protection
Package protects the products and is fundamental in idea. Their journey for
manufacturer to consumer is facilitated. Package prevents breakage, contamination,
pilferage, chemical change, insect attack etc.
2. Product Containers
Package means using just the space in which a product will be contained.
Ordinary packing is in the form of throw-away containers.
3. Product Attractiveness
The size and shape of the package, its colour, printed matter on it etc., must make the
package attractive to look at. The psychological feeling is that a good package contains good
quality product in it. Attractiveness is a major consideration in modern packaging. A
pictorial label on the package plays a role of silent salesman.
4. Product Identification
Packages differentiate similar products. Packaging and labelling are inseparable and
are closely related to branding. Package has more significance, when the product cannot be
seen by the buyer-packed milk, fruit juice etc. Buyers depend on the package label in
understanding the product in the package. An attractive label is a means of success in
marketing.
5. Product Convenience
The purpose of packaging is not merely confined to consumer service. The design
and size of the package must be in accordance with the contents ie., product, it must be
convenient to the ultimate customers. Package which can be easily handled, opened, moved
etc., is appreciably favoured by customers.
6. Effective Sales Tool
A good package stimulates sales: A designed and attractive package invites
customers. As is the product, so is the package. Many people think that a good package,

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taller in size, not shorter, contains bigger products. Women like round or curved shape of
packages. Packaging, attractive and innovative, has value, as many people buy the products,
for the sake of containers.
Some general functions of packaging are:
1. It is an advertising medium
2. It encourages re-purchases
3. It facilitates retailers functions
4. It creates product image and individuality
5. It enables easy display
6. It protects the contents
7. It facilitates easy storing, transporting etc.
8. It becomes easy to identify the products
9. It helps memory and recognition
10. It provides convenience, economy, adjustability etc.
Kinds of materials used for packaging
1. Earthen wares
2. China Jars
3. Wooden Boxes
4. Card Board Container
5. Straw Baskets
6. Gunny Bags
7. Glass Bottles
8. Tin Containers
9. Plastic Containers
10. Clothes etc.
Kinds of Packaging
A consumer Package
It is a kind of package which holds the required volume of product for the household
consumption. For example, toothpaste, shoe polish etc.
A Family Package
When products are related in use and are of similar quality, the firm makes the
packages identical for all products by using common feature on all the packages. In this type
of package system a producer uses similarity in packages i.e., material, appearance, method
etc.
Re-use Package
It is also known as dual package. A producer sells the contents in such a package,
which can be re-used for other purposes after the product is consumed; the package has a
secondary use, after the contents are consumed. For instance, the glass jar of Nescafe Instant
Coffee, and many other products are packed in such a way that the package can be put into
many uses.
Multiple Package
The practice of placing several units in one container is known as multiple packaging.

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For instance, Make-up set, Baby’s care set etc.

Requisites of Good Package
1. It must protect the contents
2. It must look attractive
3. It must establish identity
4. It must provide convenience
5. It must have less cost
6. It must develop the interest to possess
7. It must arouse the people to re-purchase
8. It must enhance the image of the brand
9. It must occupy less space
10. It must give out a brief idea of the product
11. It must build confidence
12. It must have a clean look
13. It must look like an asset.
14. It must possess a status to display
15. It must minimize the sellers job
16. It must resist soiling
17. It must have trade characters
18. It must have label-pasted
19. It must have eye-catching look
20. It must be simple in design
21. It must be convenient to handle
22. It must look like a fast-seller
LABELLING
Label is a part of the product, which carries verbal information about the product or
the seller. It may be part of a package, or it may be a tag attached directly to the product.
Label may be a small slip or a printed statement. It may be a part of a package or it may be
attached to the product. It conveys verbal information about the product and seller. The
producer gives necessary information to the consumers through the label. The act of
attaching or tagging the label is known as labeling. Labels are of three types.
(1) A Brand Label is simply popularizing the brand name of the product. It gives
only the brand names. For example sanforised on clothes.
(2) A Grade Label identifies or emphasizes the quality standards or grades, as A, B,
C or 1, 2, 3 etc. In other words, it identifies the quality.
(3) A Descriptive Label gives written or illustrative objective information about the
use, care, performance and other features of the product.
Functions of Labeling
1. It enables the producer to give clear instructions about the uses of the product
2. Price variations caused by the middlemen are avoided because price is printed
and maintained.
3. Manufacturer-buyer relation is established

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4. It encourages producers to make only standard products.

5. Buyers can easily identify the product.
A complete label gives the following information
1. Brand name
2. Address of the producer
3. Gross and net quantity of the content
4. Ingredients in the product
5. Directions for the use
6. Precautionary measures
7. Nature of the product
8. Date of packing and expiry
9. Retail price
Advantages of Labeling
1. It grades the product
2. It facilitates buyers to pay the right price.
3. It helps in avoiding confusion
4. It brings home the characteristics of a product
5. It helps advertising activity
6. It gives all needed information to buyers
7. It gives guarantee for the standard
8. Label is the media to popularise the product
Disadvantages
1. It is of no use to ignorant or illiterate population
2. It increases the cost of the product
3. Labelling must be preceded by grading and standardisation
4. It aims at mainly popularising the product rather than giving information to the
consumers.
THE PRODUCT LIFE CYCLE
Since the product is not well known and is usually expensive (e.g., as microwave
ovens were in the late 1970s), sales are usually limited. Eventually, however, many products
reach a growth phase— sales increase dramatically. More firms enter with their models of
the product. Frequently, unfortunately, the product will reach a maturity stage where little
growth will be seen. For example, in the United States, almost every household has at least
one color TV set. Some products may also reach a decline stage, usually because the product
category is being replaced by something better. For example, typewriters experienced
declining sales as more consumers switched to computers or other word processing
equipment.
The product life cycle is tied to the phenomenon of diffusion of innovation. When a
new product comes out, it is likely to first be adopted by consumers who are more innovative
than others— they are willing to pay a premium price for the new product and take a risk on
unproven technology. It is important to be on the good side of innovators since many other
later adopters will tend to rely for advice on the innovators who are thought to be more

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knowledgeable about new products for advice. At later phases of the PLC, the firm may need
to modify its market strategy. For example, facing a saturated market for baking soda in its
traditional use, Arm & Hammer launched a major campaign to get consumers to use the
product to deodorize refrigerators. Deodorizing powders to be used before vacuuming were
also created. Products often go through a life cycle. Initially, a product is introduced.

Introduction Stage
This is the first stage in product life cycle. Before a new product is introduced in the
market place, it should be created first. The processes involve in this stage include
generation of idea, designing of the new product, engineering of its details, and the whole
manufacturing process. This is also the phase where the product is named and given a
complete brand identity that will differentiate it from the others, particularly the competitors.
Once all the tasks necessary to develop the product is complete, market promotion will
follow and the product will be introduced to the consumers. Product development is a
continuous process that is essential in maintaining the products quality and value to
consumers. This means that companies need to continuously develop or innovate their
products to out ride new and existing competitors.
Growth Stage
This is a period where rapid sales and revenue growth is realised. However, growth
can only be achieved when more and more consumers will recognize the value and benefits
of a certain product. In most cases, growth takes several years to happen, and in some
instances, the product just eventually died without achieving any rise in demand at all.
Hence, it is important that while the product is still in the development and introduction
stages, a sound marketing plan should be put in place and a market and primary demand
should be established.
Maturity Stage
In the maturity stage, the product reaches its full market potential and business
becomes more profitable. During the early part of this stage, one of the most likely market
scenarios that every business should prepare for is fierce competition. As business move to
snatch competitors customers, marketing pressures will become relatively high. This will be
characterized by extensive promotions and competitive advertising, which are aimed at
persuading customer to switch and encouraging distributors to continue sell the product.
In the middle and late phases of the maturity stage, the rate of growth will start to
slow down and new competitors will attempt to take control of the market. In most cases,
many businesses falls and lose money in these stages as they focus more on increasing

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advertising spending in hope of maintaining their grip of the market.

Decline Stage
The decline stage is the final course of the product life cycle. This unwanted phase
will take place if companies have failed to revitalize and extend the life cycle of their
products during the maturity stages early part. Once already in this phase, it is very likely
that the product may never again recover or experience any growth, eventually dying down
and be forgotten.
PRODUCT POSITIONING
The act of creating an image about a product or brand in the consumers mind is
known as positioning. In the words of Kotler, “Positioning is the act of designing the
companys offer and image so that it occupies a distinct and valued place in the target
consumers minds.” In short, the process of creating an image for a product in the minds of
targeted customers is known as product positioning. Close-up tooth paste is looked upon by
the consumers more as a mouth wash than a teeth cleaner, while ‘pepsodent’ has created an
impression of germ killer in the consumers minds.
Steps in product positioning
1) Identifying potential competitive advantages: Consumers generally choose products
and services which give them greatest value. The key to winning and keeping customers is to
understand their needs and buying processes far better than the competitors do and deliver
more values.
2) Identifying the competitors position: When the firm understands how its customers
view its brand relative to competitors, it must study how those same competitors position
themselves.
3) Choosing the right competitive advantages: It refers to an advantage over competitors
gained by offering consumers greater value either through lower price or by providing more
benefits.
4) Communicating the competitive advantage: The company should take specific steps
to advertise the competitive advantage it has chosen so that it can impress upon the
minds of consumers about the superiority claimed in respect of the product over its
competing brands.
5) Monitoring the positioning strategy: Markets are not stagnant. They keep on changing.
Consumer tastes shift and competitors react to those shifts. After a desired position is
developed, the marketer should continue to monitor its position through brand tracking
and monitoring.
Elements of positioning
It is concerned with the following four elements.
1) The Product: Design, special feature, attributes, quality, package etc. of product create
its own image in the minds of the consumers. Material ingredient of a product is also
important in the process of product positioning.
2) The Company: The goodwill of a company lends an aura to its brand. For example,
Tata, Godrej, Bajaj etc have very good reputation in the market
3) The Competitors: Product image is build in consumers mind in relation to the

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competing product. Thus a careful study of competition is required.

4) The Consumer: Ultimate aim of positioning policy is to create a place for the product
in consumer’s minds. Therefore, it becomes necessary to study the consumer behaviour
towards the product.
Techniques of product positioning
Following technique are used in positioning a product in the market:
o Positioning by corporate identity: The companies that have become a tried and
trusted household name. For example, Tata, Sony etc.
o Positioning by brand endorsement: Marketers use the names of companies
powerful brands for line extensions or while entering another product category. Lux,
Surf, Dettol etc.
o Positioning by product attributes and benefits: It emphasize the special attributes
and benefits of the product. Close-up is positioned on fresh breath and cosmetics
benefits.
o Positioning by use, occasion and time: It is to find an occasion or time of use and
sit on it. For example, Vicks vaporub is to be used for childs cold at night.
o Positioning by price and quality: Company position its brand by emphasizing its
price and quality. Eg. Nirma detergent powder.
o Positioning by product category: Brand is perceived to be another product
category. Eg. Maruti positioned its van as omni , family car.
o Positioning by product user: Positioning the product as an exclusive product for a
particular class of customers. Eg. Scooty as a two wheeler for teenagers.
o Positioning by competitor: An offensive positioning strategy and is often seen in
cases of comparative advertising. Eg. Tide and Rin
o Positioning by symbols: Some companies use some symbols for positioning their
products. [Link] symbol.

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UNIT – III
PRICING
Pricing decisions have strategic importance in any enterprise. Pricing governs the
very feasibility of any marketing program because it is the only element in a marketing mix
accounting for demand and sales revenue. Other elements are cost factors. Price is the only
variable factor determining the revenues or income. A variety of economic and social
objectives came in to prominence in many pricing decision.
Definition of price
Economist defines price as the exchange value of a product or services always
expressed in money. To the consumer the price is an agreement between seller and buyer
concerning what each is to receive. Price is the mechanism or device for translating into
quantitative terms (Rupees and paise) the perceived value of the product to the customer at a
point of time. The buyer is interested in the price of the whole package consisting of the
physical product plus bundle of expectations or satisfactions. The consumer has numerous
expectations such as accessories, after – sales – service, replacement parts, technical
guidance, extra service, credit and many other benefits. Thus price must be equal to the total
amount of benefits (physical, economic, social and psychological benefits).
Any change in the price will also bring about alterations in the satisfactions side of
the equation. To the ultimate consumer, the price he pays for a product or service represents
a sacrifice of purchasing power. Price is the only objective criteria (although an imperfect
measuring rod) for the consumer for comparing alternative items and making the final
choice. To the consumer price is a product disfeature, i.e., a feature of which he disapproves.
However, to the seller price is a source of revenue and a main determinant of profit. To the
seller it is a product feature most welcome.
Pricing is equivalent to the total product offering. This offering includes a brand
name, a package, benefits, service after sale, delivery, and credit and so on. From the
marketers point of view, the price also covers the total market offering, i.e., the consumer is
also purchasing the information through advertising, sales promotion and personal selling
and distribution method that has been adopted. The consumer gets these values and also
covers their costs. We can now define price as the money value of a product or service
agreed upon in a market transaction. We have a kind of price equation, where:
Money (price) = Bundle of Expectations.
Included in the bundle of expectations may be physical product plus other attributes such as
delivery, installation, return privileges, after- sale servicing and so on.
Importance of Pricing
Price is a matter of vital importance to both the seller and the buyer in the market
place. In money economy, without prices there cannot be marketing. Price denotes the value
of a product or service expressed in money. Only when a buyer and a seller agree on price,
we can have exchange of goods and services leading to transfer of ownership.
In a competitive market economy, price is determined by free play of demand and
supply. The price will move forward or backward with changing supply and demand
conditions. The going market price acts as basis for fixing the sale price. Rarely an

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individual seller can dishonor the current market price. In a free market economy, we have
freedom of contract, freedom of enterprise, free competition and right to private property.
Price regulates business profits, allocates the economic resources for optimum production
and distribution. Thus price is the prime regulator of production, distribution and
consumption of goods. Economics revolves around pricing of resources. Price influences
consumer purchase decisions. It reflects purchasing power of currency. It can determine the
general living standards. In essence, by and large, every facet of our economic life is directly
or indirectly governed by pricing. This is literally true in our money and credit economy.
Pricing decisions inter-connect marketing actions with the financial objectives of the
enterprise. Among the most important marketing variables influenced by pricing decisions
are:
1. Sales volume,
2. Profit margins,
3. Rate of return on investment,
4. Trade margins,
5. Advertising and sales promotion,
6. Product image,
7. New product development.
Therefore, pricing decisions play a very important role in the design of the marketing
mix. Pricing strategy determines the firms position in the market vis-a-vis its rivals.
Marketing effectiveness of pricing policy and strategy should not suffer merely on account
of cost and financial criteria.
Price is a powerful marketing instrument. As a marketing weapon, pricing is the big-
gun. However, it must be used with great caution. It is a dangerous and explosive marketing
force. It may doom a good product to failure. Low pricing strategies are irreversible
decisions. They must be used correctly from the outset. Every marketing plan involves
pricing decision. Therefore, all marketing planners must take accurate and planned pricing
decisions.
Pricing Objectives
The duty of the marketing manager is to decide the objectives of pricing before he
determines the price itself. Pricing objectives are over all goals that describe the role of price
in an organisations long-range plans. Pricing objectives provide guidance to decision makers
in formulating price policies, planning pricing strategies and setting actual prices. The most
important objective of the companies is to have maximum profits. Other goal in pricing may
be:
(i) To achieve target return of investment;
(ii) To stabilize prices;
(iii) Maintain or improve a target share of the market;
(iv) Meet or prevent competition
(v) Survival
(i) To achieve target return of investment
An adequate return on investment or net sales is one of the main objectives of

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pricing. The idea is to secure a sufficient return on capital used for specific products or
divisions so that the sales revenues will ultimately yield a pre-determined average return for
the whole company. This is generally a long –range goal. This objective is commonly used
by companies that are ―industry leader and those that sell in ―protected markets , such as
those for new and uniquely different products. They fix up a percentage mark up
on sales to include their operating costs plus a desired profit.
(ii) Stabilize price
The objective of stabilising prices is to even out or, if possible, eliminate cyclical
price fluctuations. During periods of depressed business, they work to keep prices from
falling too low, and during periods of good business, they try to stop prices from rising.
Companies seeking stability in their prices are anxious to avert price wars, when demand is
declining. Price leaders tend to take a long run point of view in achieving stability. Their
goal is to live and let live
(iii) Maintain or improve target share of market
Market position or sales in relation to competition, is a very, meaningful benchmark
of success. Therefore, a company may set a target market share as its major pricing
objective, so that by focusing attention on it, it may not lose its former market position. It
tries to at least maintain status quo or to improve its position through continuous low pricing.
(iv) Meet or Prevent Competition
Pricing is often done to meet or even prevent competition. If a company is its
industrys price leader, it may set prices designed to discourage new competitors from
entering the market. Similarly, companies that are price followers set their prices in order to
meet competitors prices. When introducing a new product, frequently low prices would be
set in order to discourage competition.
(v) Maximise Profits
This objective aims at making as much money as possible. The goal should be to
maximise profits on total output rather than on each single item. A manufacturer may
maximise total profits by practically giving away some articles which will attract the buyers
attentions or will stimulate sales of other goods. A retailer may sell goods at a very small
profit but he attracts a large numbers of customers so that the overall profit is enhanced
considerably.
(vi) Survival
The fundamental pricing objective is to survive. Most organizations will tolerate
short-run losses, internal upheaval, and many other difficulties if these are necessary to
continue existence. Price is used to increase sale volume to levels that match the
organizations expenses.
Factors Influencing Pricing Decisions
Pricing decisions are influenced by numerous factors. Such decisions must be
consistent with companies desired public image i.e., they should derive directly from
companies objective. Further, price policies should be consistent with pricing objectives, and
pricing strategies should be in conformity with both price policies and pricing objectives.
Pricing decisions also require a knowledge of the company’s over-all marketing

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environment—viz., the internal factors such as company objectives, company brand image;
nature and objectives of promotional effort, marketing channels, and the physical distribution
system; and the environment factors, such as competition, economic climate and government
controls/regulations etc. ―Pricing is but one components of marketing strategy and to achieve
maximum results, all components must be carefully coordinated, both in their formulation
and in their implementation.
METHODS OF PRICE DETERMINATION
After formulating the objective of pricing , the next step is to determine the base price
of products or services. Usually, the steps in setting price involve the following procedure:
1. Estimate the demand for the product.
2. Anticipate the competitive reaction.
3. Establish the expected share of the market.
4. Select the price strategy to be used to reach the market target.
5. Consider company policies regarding products, channels and promotion.
6. Select the specific price.
Step 1. Estimate the Demand for the Product
The demand for an established product is easier to be known than for an entirely new
product. However, two steps are available for demand estimation. First to determine whether
there is a price which the customers think the product is worth, i.e., the expected price may
range between, say Rs.10 and 20. The seller may determine the expected price by
submitting the product to an experienced retailer or wholesaler for appraisal. Producers
of industrial products may know the expected price by seeking advice of the technical
persons working for the customers.
By showing models or blue prints, necessary information may be gathered as to what
the price would be or he may observe prices or competitive prices, or the potential
customers may be surveyed. The most effective approach is to market the product in a few
limited test areas. By quoting different prices under controlled subject, a reasonable range of
price may be determined. Second, to estimate the sales volume at different prices. A product
with elastic market demand is usually priced lower than the product with an inelastic
demand.
Step 2. Anticipate the Competitive Reaction
Present and potential competition also influences price determination. Competition
may come from three existing sources. First, from directly similar products such as the
producer such as the producer may have to compete his vegetable oil product under the name
of Dalda with that of Madhuram or Malti or any other new brand or different types of nylon
saris. Second, the competition may be from available substitutes, e.g., butter and ghee., fluid
milk and powdered milk. Third competition may be from unrelated items seeking the same
consumer rupee. The shrewd marketing manager tries to discourage the potential
competition, in case of new products, by keeping the prices low so that the competitors may
not dare to enter the market.
Step 3. Establish Expected Share of the Market
A firm which wants to win a large share of the market, will price its products

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differently from a firm which is content with its present share in the [Link]
towards capturing a large market are manifested in heavy advertisements and other forms of
non-price competition. What the share of a particular firm in the market should be, would be
influenced by such factors as present production capacity, cost of plant extension and ease of
competition.
Step 4. Select Pricing Strategy to Reach Market Target
Broadly speaking two alternatives are available for pricing of new products. First,
Skimming Pricing and penetrating pricing.
(a) Skimming Pricing
This strategy involves setting a very high price so that in the initial stages, the cream of
demand may be skimmed, and enormous profits made for an indefinite period or the price
may be lowered later in order to tap other segments of the market. By this method the
investment made in the product may be quickly realised. Skimming is probably most
effective with a highly distinctive article which is aggressively promoted in the early stages
of its life cycle.
There are five reasons why skim-the-cream pricing may be particularly suitable for new
products. First, demand is likely to be less elastic in the early stages of the products life
cycle, because price is less important and competition is also at a minimum… …Second, the
strategy can effectively segment the market on an income basis. The product may first be
offered to the customers who are relatively little insensitive to price. Later on, price may be
lowered to appeal to the customers who are highly sensitive to price. Third, it acts as a strong
hedge against a possible mistake in setting the price. Fourth, the initial high price generates
more profits which can be subsequently earmarked for market expansion. Fifth, high initial
prices can be used to keep demand within the limits of a company’s productive capacity.
(b) Penetrating pricing
In this strategy, a low price is set to reach the market immediately, i.e., rapid
penetration of the mass market is the aim and this is based on a long-term viewpoint. This
type of aggressive penetration can be more satisfactory where: (I) there exist a high short run
price elasticity of demand; i.e., the quantity sold is highly sensitive to price; (ii) substantial
economies of large scale production are possible; (iii) the product faces very strong
competition after it is introduced to the market; (iv) there is possibility that public will accept
the new product as a part of its daily life, and (v) there is an inadequate high income market
to sustain a skim-the-cream price.
Low initial pricing may result into two things: (I) it may discourage other firms from
entering the field because the investment need in production and marketing facilities would
be too great in comparison to low margin of profit; and (ii) low prices may give the initiator
a strong hold on his share of the market that the competitor cannot dare to enter the field.
Step. 5. Consider company marketing policies
This is concerned with the consideration of the product policies, distribution system;
and the promotional programmes.
Product policies involve knowing the economic characteristics of the products so that
pricing may be done suitably. Whether a product is of permanent nature or is of perishable

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nature, influence the pricing policy. Perishable products have to be disposed of within a
limited time to save them from spoilage. Hence, throw-away prices may be set for fruits,
vegetables, milk etc. after the days close. But so far as motor-cars, radios, cloth or such other
durable products are concerned, their price need not be reduced, for demand exists for these,
though it may be postponed for the time being, Change in fashion also compels the seller to
dispose of his stock, before the fashion goes old.
Channels of Distribution: The nature of the channels used, and the gross-margin
requirements of the middlemen influence the pricing decisions. Pricing discretion differ with
the length and complexity of the chain of distribution. A firm selling through wholesalers
and also directly to retailers often sets a different factory price for each of these two classes
of customers.
Promotional programmes.:The larger the promotional methods used, the higher will be the
pricing, for expenses incurred will have to be covered from the price set.
Step 6. Select the specific price
After taking all the above facts into consideration, the last stage would be of selecting
the specific price for the products by the producer. This will depend upon the cost of the
product.
PRICING POLICIES
Pricing policies are more specific than the objectives and deal with situations in the
foreseeable future that generally recurs. Pricing policies provide the framework and
consistency needed by the firm to make reasonable, practicable and effective pricing
decisions. The correctness of any pricing policy depends on such variables as managerial
philosophy, competitive conditions, and the firms marketing and pricing objectives. The
following are, however, the policies recognized for pricing.
1. Cost-oriented pricing policy,
2. Demand-oriented pricing policy, and
3. Competition-oriented pricing policy
1. Cost-oriented pricing policy
It is also referred to as cost-plus pricing. This pricing method assures that no product
is sold at a loss, since the price covers the full cost incurred. Definitely, costs furnish a good
point from which the computation of price could begin. Fixing a tentative price is easier
under this method. But the criticism against this policy is that it ignores completely the
influences of competition and market demand.
Cost-plus policies are often used by retail traders and in manufacturing industries
where the production is non-standardized. The method of pricing here is based on simple
arithmetic, adding a fixed percentage to the unit cost. Thus the retail price of a particular
item might be the manufacturers cost plus his gross margin plus the wholesalers gross
margin, plus the retailers gross margin. This method is known as sum of margins method.
Another common method used under cost-oriented pricing is known as Target
Pricing. This is invariably adopted by manufacturers who fix a target return on its total cost.
Manufacturers these days use Break-Even Analysis for deciding cost-plus pricing. As
mentioned earlier one defect of this pricing policy is that it ignores the demand factor. This

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analysis helps to calculate in advance the likely relationship between the cost, volume and
profit over various time periods. It has also proved to be a highly useful technique for the
broad planning of manufacturing facilities.
The break-even analysis helps a firm to determine at what level of output the
revenues will equal the costs, assuming a certain selling price. For this purpose the cost of
manufacture is also divided into two. Fixed and Variable costs. Fixed costs (Rent, Rates,
Insurance etc.) theoretically remain constant over all levels of output. Variable costs
(Labour and Material) vary with changes in output level. Fixed costs naturally decrease per
unit when production increases. Variable costs, on the other hand, change as production
varies i.e., no production, no variable cost.
The break-even point, therefore, is a point where there is neither loss nor profit.
This is found out by using the following equation.
BEP = Total fixed costs / Margin of contribution.
Margin of contribution = Unit selling price – Unit variable costs.
2. Demand-Oriented Pricing Policy
As the name suggests, under this method of pricing, the demand is the pivotal factor.
Price is fixed by simply adjusting it to the market conditions. A high price is charged when
or where the demand is intense, and a low price is charged when the demand is low, Price
discrimination is usually adopted under such market situations.
3. Competition-Oriented policy
Most companies set prices after a careful consideration of the competitive price
structure. Deliberate policies may be formulated to sell above, below, or generally in line,
with competition. One important feature of this method is that there cannot be any rigid
relation between the price of a product and the firms own cost or demand. Its own cost or
demand may change but the firm maintains its price. Conversely, the same firm will change
its price when the competitors change theirs, even if its own cost or demand has not altered.
KINDS OF PRICING
Adopting basic principle explained above, firms may choose various kinds of pricing
for their products. These are discussed below.
1. Odd pricing
The term odd prices is used in two ways. It may be a price ending in an odd number
or a price just under a round number. The seller of specialty or convenience goods adopts
such a pricing generally; for example, a shoe manufacturer pricing one of his products, at
say, Rs. 49.92.
2. Psychological pricing
The price under this method is fixed at a full number. The price-setters feel that such
a price has an apparent psychological significance from the view point of buyers. For
example, it is stated that there are certain critical points at prices such as 1, 5 and 10. The
experiments conducted proved that change of price over a certain range, has little effect until
some critical point is reached.
3. Customary prices
Such prices are fixed by custom. For example, sweets manufacturers price their

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products in such a way that a particular variety of sweets are sold at approximately the same
price. Soft drinks are also priced in the same manner. Such a pricing is usually adopted by
chain stores.
4. Pricing at the prevailing prices
This kind of pricing is undertaken to meet the competition. Hence, such a pricing is
also termed as Pricing at the Market. Such a strategy presumes a market inelasticity of
demand below the current market price. In other words, a price above those of the
competitors would sharply bring down sales while a lower price would not significantly
increase them. Obviously, such a policy is aimed at avoiding price competition and price
wars. In such circumstances it is not possible to have any further price reduction.
5. Prestige pricing
Many customers judge the quality of a product by its price. Generally prestige pricing
is applied to luxury goods, where the seller is successful in creating a prestige for his
product. The price fixed normally will be in excess of those asked for near-perfect
substitutes. In such cases sale would be less at low prices than at higher ones. The
merchandise can be priced too high. Customers may fear that at the low price it cannot be of
good quality, and will actually buy more at a somewhat higher price than they would at a
lower price.
6. Price lining
This policy of pricing is usually found among retailers. Technically, it is closely
related to both psychological and customary prices. Under this policy the pricing decisions
are made only initially and such fixed prices remain constant over long periods of time. Any
change in the market conditions is met by adjustments in the quality of merchandise. In other
words, the decision is made with reference to the prices paid for merchandise rather than the
prices at which it will be sold.
7. Geographic pricing
This policy is sometimes used where a manufacturer serves a number of distinct
regional markets. He can adopt different prices in each area without creating any ill-will
among customers. For example, petrol is priced in this way, depending on the distance from
the storage area to the retail outlet. It is evident from this example that a price that is quoted
without transportation cost may be a different price than price quotation on which the seller
agrees to absorb such cost. There are three methods that relate to the absorption of
distribution cost in the price.

a) FOB pricing,
b) Zone pricing, and
c) Basic point pricing
FOB pricing (Free on Board) may be of two types. FOB origin and FOB destination.
In the first case the buyer will have to incur the cost of transit, and in the latter, the price
quoted is inclusive of transit charges.
Zone pricing denotes some amount of equality of prices in the same zone. For
instance, if India is divided into South zone, North zone, etc., a product will be sold in the

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South zone at the same price irrespective of the difference in distance between two places
inside the zone.
Basic point pricing system charges the buyer the transportation cost from the basic
points to the buyers location.
8. Dual pricing
When a manufacturer sells the same product at two or more different prices, it is dual
pricing. This is possibly only if in the same market, different brands are marketed. The
method should not be confused with the geographical pricing. There, for the same products,
the prices are different at two places. The price differential is justified on account of varying
distribution costs. The dual pricing is adopted in Railways. For the same distance of travel,
in the very same vehicle, the services are sold to passengers at different prices under
different classes. (Except for a few advantages, first class passengers do not gain much either
in speed or in the distance traveled). This is also referred to as discriminatory pricing.
9. Administered pricing
This applies to the practice of pricing the products for the market, not on the basis of
cost, competitive pressures, or the laws of supply and demand, but purely on the basis of the
policy decisions of the sellers. In theory, this would mean that the seller disregards all other
considerations except his own desire for maximising profits. The administered prices usually
remain unchanged for substantial periods of time. In a sense, every price is an administered
one. In other words, to the extent the management makes conscious pricing decision of its
own it is an administered price.
10. Monopoly pricing
New product pricing is, in essence, monopoly pricing. Since competition is absent,
the seller has a free hand in fixing the price. Such pricing will be on the principles of ―what
the traffic will bear. Such a price will maximize the profit.
11. Skimming pricing
This is also termed as ―Skim-the-Cream-pricing (Stanton). It involves setting a
very high price for a new product initially and to reduce the price gradually as competitors
enter the market. It is remarked,: launching a new product with high price is an efficient
device for breaking up the market into segments that differ in price elasticity of demand.
The initial high price serves to skim the cream of the market, that is relatively
insensitive to price. In the case of textbooks having a high price for the first edition and
lesser prices for subsequent editions follows this method. When an item is clearly different
and the right price is not apparent, this method may be used.
This approach to pricing is, in effect, an experimental search for the right price, and it
may result in a market-determined price. The method starts with a high price (skim price)
and moves the price downward by steps until the right price is reached. The idea is that when
one is unsure about what price to charge, it is advantageous to begin with too high an initial
price and move systematically downwards. This procedure is thought better than starting the
price experiment at too low a price and subsequently increasing the price. It is, therefore, a
self or automatically administered price.
12. Penetration pricing

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This method is opposite to the skimming method outlined above. The skimming price
policy is most convenient and profitable in the case of new products, especially in the initial
years. Penetration pricing, on the other hand, is intended to help the product penetrate into
market to hold a position. This can be done only by adopting a low price in the initial period
or till such time the product is finally accepted by customers. This method of pricing is most
common and is desirable under the following conditions.

When sales volume of the product is very sensitive to price, When a large volume of
sales is to be effected, When the product faces a threat from competitors, and When stability
of price is required.
13. Expected pricing
In this method, the price that will be accepted by the consumers is found out.
Naturally a fixed price cannot be decided beforehand and hence price range is offered. The
response of consumers to the price is analyzed and, later, a price is fixed.
14. Sealed big pricing
This method is followed in the case of specific job works. Government contracts are
usually awarded through a system known as Tenders. The expenditure anticipated is worked
out in detail and the competitors offer a price (known as contract price). The minimum price
quoted is accepted and the work is awarded to the party.
15. Negotiated pricing
This method is invariably adopted by industrial suppliers. Manufacturers who require
goods of highly specialized and individually designed nature often negotiate and only then
fix the price. For example, in the case of automobiles, various components required for the
manufacturer are not actually produced by the companies marketing the automobiles. They
find out the suppliers and entrust them with the work of manufacturing and supplying
various components. This ensures fixed prices, or otherwise the price of their final product
would also go up. Under such circumstances the prices are negotiated and fixed.
16. Mark-up pricing
Wholesalers and retailers in establishing a sale price adopt this method. When the
goods are received, the retailer adds a certain percentage to the manufacturers price to arrive
at the retail price. For example, an item that costs Rs. 20 is sold for Rs. 25, the mark-up is
Rs. 5, or 25%.
Pricing of New Products
Pricing a new product is an art. It is one of the most important and puzzling
marketing problems faced by a firm. Pricing is important in two ways, as far as a new
product is concerned.
(a) It affects the quantity of the product to be sold, and
(b) It determines the amount of the revenue of a firm
New products, when introduced, appeal to many as novel items. But this
distinctiveness created by novelty is only temporary. The price factor which may be ignored
initially would become important when the product becomes an ordinary one because of
being constantly used. Further more, competitors may also appear in the market. Therefore,

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the new products are hard to be priced, especially with a right price. Incorrect pricing will
definitely lead to product failure. For setting a price on a new product, three guidelines are to
be adopted.
1. Making the product accepted
2. Maintaining the market, and
3. Retaining the profits
There are two options available for pricing a new product. Skimming and Penetration
pricing. If product is entirely new in all respects, skimming method could be used. A strategy
of high prices coupled with large promotional expenditure in the initial stages has proved
successful in a number of cases. Skimming pricing is recommended on account of the
following reasons:
1) Initial sales would be less,
2) Helps to take the cream of market through high prices,
3) As pointed out people may like to own a new product even at a
higher cost,
4) Helps to develop demand as the price is gradually reduced, and
5) High sales volume on account of higher price.

However, it should be noted that high initial prices may also prevent quick sales. The second
option is to adopt penetration pricing. The conditions where such pricing policy would be
suitable have been explained already. A comparative analysis of these two pricing systems
reveals that both these methods are not free from errors.
In the case of new products, pricing has to be made with little knowledge of demand,
cost and competition. The new product has also to bear the cost of promotion or creating a
market. The initial cost, therefore, will be definitely greater. The cost incurred in
constructing a proper channel of distribution may also be accounted for in pricing. [All these
factors are to be taken into consideration in pricing. In addition, depending upon the
company objectives, a company may adopt either a skimming or penetration price for its new
product].
Special Problems in Pricing
After fixing a price a manufacturers is often beset with the problems of price
reduction. It is needless to say that this should be considered even before fixing a price.
Hence, there must always be built-in flexibility in the price structure to accommodate such
requests. These are known as ―Discounts, Allowances, Guarantees, etc.
PRICE DISCOUNTS
Discounts are deductions allowed by the seller from the base price of a product.
These discounts could be of the following types.
1. Trade discounts
A manufacturer allows these discounts to a wholesaler or by a wholesaler to retailer.
They are usually found in bulk purchasing. These discounts are given as a consideration for
performing marketing functions.
2. Quantity discounts

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These are deductions offered from the list prices by a seller in order to encourage a
customer to buy larger amounts. This is also the case applicable to the wholesalers and
retailers. Quantity discounts may attract large buyers or induce small buyers to order large
quantities. Quantity discounts are sometimes changed in to cumulative and non cumulative
quantity discount.
3. Cash discounts
It is a deduction granted by the seller to the buyer for paying his dues in time. Some
suppliers offer a special discount for payment within a stipulated period from the date of
invoice.
4. Seasonal discount
This refers to discounts offered during a particular season. It is usually done during
the off-peak periods. Example: fans sold during winter season.
Allowances
These are also the same as discount but are usually given as a consideration for
performing specific services. The various types of allowances given are:
1. Promotional allowances
Samples given at concessional rates or supplying advertising materials, etc., come
under this type.
2. Brokerage allowances
This is only another form of trade discounts. A broker usually performs the function
of linking together the seller and the buyer.
Besides the above deductions, the manufacturers have sometimes to bear the cost of
marketing also. For example, when FOB price is quoted, the manufacturer will have to bear
a part of freight. This definitely reduces his profit margin.

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UNIT IV
MEANING OF DISTRIBUTION
Distribution is the act of carrying goods or services from the producer to the
consumer. It consists of an operation or series of operations which physically brings. The
goods from the producer into the hands of the final user Goods have no value If they simply
lie in the godown of the manufacturer. They must be made available to the consumers.
Various agencies are involved in the movement of goods from the plant door of the
manufacturer to the place of the consumer. The term distribution collectively refers to all the
acts or services rendered by various agencies.
Marketing and distribution
The term Marketing and distribution are often used synonymous. Marketing is
a comprehensive term and distribution is the last, perhaps the most crucial phase in the
process of marketing. Thus, distribution is an integral part of the marketing process. Its
function is to distribute or sub-divide the total products of a producer on a geographical basis
to various specific Markets.
Role and importance of distribution
The important benefits of distribution are as follows:
✓ Distribution has enabled the consumers to satisfy their wants. It has created place,
time and possession utilities:
✓ It has brought into existence of the services of the bankers and insurers;
✓ Means of communication and transportation has developed.
✓ Problems of scarcity and famine in certain areas are solved by effective distribution.
✓ Scope for specialization and divisions of labour have enlarged;
✓ It has offered gainful employment opportunities to millions of persons;
✓ Grading, packing and branding are made possible;
✓ Price stability is made possible;
✓ The total wealth production of the world has increased.
CHANNELS OF DISTRIBUTION
The word ―Channel is derived from the French word ―Canal. The channel of
distribution, thus, refers to the pathway taken by the goods as they flow from the point of
production to the point of consumption. A channel of distribution consists of various
specialized marketing institutions that relates to each other as buyers and sellers. These
specialized institution or agencies are called middlemen. Scholars have devoted much time
to define the expression. Some of the important definitions are given below.
Definition of the American Marketing Association
According to the Definitions Committee of the American Marketing Association A
channel of distribution or marketing channel is the structure of intra-company
organisation units and extra company agents and dealers, wholesale and retail – through
which a commodity, product or service is marketed.
Definition of Cundiff and Still
Cundiff and Still in their work ―Basic Marketing Concepts, Decisions, Strategies
define a distribution channel as ―a path traced in the direct or indirect transfer of the title to a

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product as it moves from a producer to the ultimate consumers or industrial user.

Thus, the path through which goods move from the place of production to the place
of consumption is known as the ―channel of distribution. The path taken by the goods in
their flow may be short and direct or rather long and indirect. When the manufacturer
establishes his own shop or agencies for the distribution of the goods the channel is said to
be direct. It is indirect when the distribution of the goods is done through the wholesaler,
retailer or special middlemen. It must also be remembered that a channel of distribution is
not confined to the middlemen alone but it includes both the producer and the final consumer
for the product. However, firms and institutions like railways, road transport orgainsations
bankers, and insurers should not be included in the channel though they render a valuable
service in the process of distribution.
Distribution strategy is the method one uses to get products and services on to
different distribution channels and networks to reach the end customer or the purchaser; it is
how and where the customer buys the product. A distribution channel is a chain of
businesses or intermediaries through which a good or service passes until it reaches the end
consumer. It can include wholesalers, retailers, distributors and even the internet itself.
CHANNEL FUNCTIONS
Information: Gathering and distributing marketing research and intelligence
information about actor and faces in the marketing environment immediate for
planning and aiding exchange.
Promotion: Developing and speeding persuasive communication about an offer.
Contact: Finding and communication with prospective buyers.
Negotiation: Reaching an agreement on price and other terms of the offer so that
ownership or possess ion can be transferred.
Physical distribution: Transporting and storing goods.
Matching: Shaping and fitting the offer to the buyer’s needs, including activities such
as manufacturing, grading, assembling and packing.
Financing: Acquiring and using funds to cover the cost of the channel work.
Risk taking: Assuming the risks of carrying out the channel work.
Different Types of Channels
Goods may be supplied to the consumers in many ways. Each way is a separate
possible channel to reach the particular target market. Hence the manufacturer can employ
any one of the alternative channels best suited to him. Different channels can be used for the
distribution of consumers goods and industrial goods. Mainly there are two types of
channels. They are: Indirect channels and Direct marketing channels.
Indirect channels
This indicates the number of intermediaries between the manufactures and
consumers. Mainly there are four channel levels. They are:
Distribution of Consumer Goods
1. Zero level channel: (Producer Consumer)
This is a direct channel since no middlemen are involved. Here the goods move directly
from producer to consumer. That is, no intermediary is involved. This channel is

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preferred by manufactures of industrial and consumer durable goods.

2. One level channel: (Producer  Retailer Consumer )
In this case there will be one sales intermediary i.e, retailer. This is the most common
channel in case of consumer durable such as textiles, shoes, ready garments etc.
3. Two level channel: (Producer  Wholesaler/ Agent  Retailer  Consumer)
This channel option has two intermediaries, namely wholesaler and retailer or agent
and retailer. The companies producing consumer non durable items use this level.
4. Three level channel: (Producer AgentWholesaler Retailer  Consumer)
This contains three intermediaries. Here goods moves from manufacture to agent to
wholesalers to retailers to consumers. It is the longest indirect channel option that a
company has.
Distribution of Industrial Goods
Industrial goods are generally distributed by the manufacturer by employing any one
of the alternative channels.
1) ProducerIndustrial User : - This is also a direct channel involving no
middlemen. This channel is suitable for large installations like generators, heating
plants etc.,
2) ProducerIndustrial distributor User : This channel though indirect is
comparatively shorter. It is best suited for the distribution of small accessory
equipments like building materials, construction equipments, air conditioning
equipments. etc,.
3) ProductAgentuser : This channel is best suited for marketing new products.
4) ProducerAgentIndustrial DistributorUser.

Direct Marketing Channels

Direct marketing channel-agnostic form of advertising that allows businesses and non
profits organisation to communicate straight to the customer, with advertising techniques
such as mobile messaging, email, interactive consumer websites, online display ads, fliers,
catalog distribution, promotional letters, and outdoor advertising. Any medium that can be
used to deliver a communication to a customer can be employed in direct marketing and it
includes:
Email Marketing: Sending marketing messages through email is one of the most
widely used direct-marketing methods. According to one study email is used by 94% of
marketers, while 86% use direct mail.
Mobile Marketing: Through mobile marketing, marketers engage with prospective
customers and donors in an interactive manner through a mobile device or network, such
as a cell phone, smart phone , or tablet. Types of mobile marketing messages include:
SMS: (short message service) — marketing communications are sent in the form of text
messages, also known as texting. MMS: (multi-media message service)
Direct Mail: The term "direct mail" is used to refer to communications sent to potential
customers or donors via the postal service and other delivery services. Direct mail is sent
to customers based on criteria such as age, income, location, profession, buying pattern,

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etc. Direct mail includes advertising circulars, catalogs, free-trial CDs, pre-approved
credit card applications, and other unsolicited merchandising invitations delivered by
mail to homes and businesses.
Telemarketing: Another common form of direct marketing is telemarketing in which
marketers contact customers by phone. The primary benefit to businesses is increased
lead generation, which helps businesses increase sales volume and customer base.
Voicemail Marketing: Voicemail marketing emerged out of the market prevalence of
personal voice mailboxes, and business voicemail systems. Voicemail marketing
presented a cost effective means by which to reach people directly, by voice
Direct Response TV : Direct marketing via television (commonly referred to as DRTV)
has two basic forms: long form (usually half-hour or hour-long segments that explain a
product in detail and are commonly referred to as infomercials) and short form, which
refers to typical 30-second or 60-second commercials that ask viewers for an immediate
response (typically to call a phone number on screen or go to a website).
Catalogue marketing: In catalogue marketing , an organisation provides a catalogue
from which customers make selection and place orders by mail or telephone. It involves
selling of products through catalogues mailed to selected customers.

FACTORS TO BE CONSIDERED IN CHANNEL SELECTION

It is very important to select a channel for the distribution of goods and services to
the ultimate consumers in an effective way. The marketer has to select the most suitable
channel. While selecting the channel of distribution, the marketer has to consider the
following factors:
1. Nature of Product: The selected channel must cope up perish ability of the product. If
a commodity is perishable, the producer prefer to employs few middlemen. For
durable and standardized goods, longer and diversified channel may be necessary. If
the unit value is low , intensive distribution is suggested. If the product is highly
technical, manufacture is forced to sell directly, if it is not highly technical, intensive
distribution can be selected. Seasonal products are marketed through wholesalers.
2. Nature of market: If the market is a consumer market, then retailer is essential. If it is
an industrial market, we can avoid retailer. If consumers are widely scattered large
number of middlemen are required. When consumers purchase frequently, more buyer
seller contacts are needed and middlemen are suggested.
3. Competitors’ Channel: The distribution channel used by the competitors will
influence the channel selection. There is nothing wrong in copying the channel
strategy of the competitor if it is a right one.
4. The financial ability of channel members: Before selecting the channel, the
manufacture has to think about the financial soundness of the channel members. In
most of the case financial assistance are required to the channel members in the form
of liberal credit facilities and direct financing.
5. The Company’s financial position: A company with a strong financial background
can develop its own channel structure. Then there is no need to depend other channel

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intermediaries to market their product.

6. Cost of Channel: The cost of each channel may be estimated on the basis of unit sale.
The best type of channel which gives a low unit cost of marketing may be selected.
7. Economic factors: The economic conditions prevailing in he country have bearing on
channel selection decision. During the period of boom, it is better to depend channels
directly. During the periods of deflation direct relation with the consumers are
desirable.
8. The legal restrictions: Before giving the final shape to channels of distribution, we
have to consider the existing legal provisions of the various Acts. For eg. MRTP Act
prevent channel arrangements that tend to lessen competition, create monopoly and
those are objectionable to the very public interest.
9. Marketing policy of the company: The marketing policy of the company have a
greater and deeper bearing on the channel choice. The marketing policies relating to
channels of distribution are advertising, sales promotion, delivery, after sale service
and pricing. A company has a heavy budget on advertising and sales promotion, the
channel selected is bound to be direct as it requires a few layers of people to push the
product.
Marketing Intermediaries (Middlemen)
Meaning and Definition of Middlemen:
Middlemen as the name suggests refer to such institutions or business concerns
situated in the marketing channels at points between the producer and the final buyers. They
are the connecting links between the producer on one side and the consumers on the other.
Producers regard them as extensions of their own marketing organizations and the final
buyers consider them as sources of supply and points of contact with the producers. They are
independent business concerns specialising in the task of selling.
Definition of the American Marketing Association
The definition committee of the American Marketing Association formulated the
following definition.
A middlemen is one who specializes in performing operations or rendering
services that are directly involved in the purchase and sale of goods in the process of their
flow from the producer to the final buyer.
Thus, middlemen specialise in carrying out the transfer of title between the producers
and the final consumers.
Classification of Middlemen
A number of institutions exist in every country to carry out the function of
middlemen. These institutions on the basis of the work performed by them can be classified
into two kinds – viz – (1) Agent Middlemen and (2) Merchant Middlemen.
I) Agent Middlemen :
Agent Middlemen or functional middlemen are those intermediaries who negotiate
purchases or sales or both but do not take the title to the goods. They are also known
mercantile agents.

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The basic Characteristics of agent middlemen are :

1. They act as the agent of the manufacturers or buyers.
2. They work on commission basis i.e., they receive a certain percentage of
commission on the volume of sales or purchases negotiated by them.
3. They do not take away the title to goods in which they deal.
4. They either act as a substitute for the sales force of the producer or serve as
an addition to it.
Kinds of Agent Middlemen
The various types of agent middlemen can be listed as follows:
1) Brokers
Are those who negotiate and make contract for the sales or purchases of goods
without physically handling the goods in which they deal. They bring the buyer and seller
together. Brokers have no right to fix the price or settle the terms of sales. Generally they
work for the sellers. However, they are at liberty to work for the buyer or for both. Brokers
are very useful for producers engaged in the manufacture of seasonal products, textile goods,
and agricultural goods.
2) Commission Agents
Just like brokers, commission agents also procure buyers or sellers, negotiate with
them, and make contract for the sale or purchase of goods. But they enjoy wider powers than
the brokers. They exercise physical control over the goods. They can fix the price, settle the
terms of sale, deal with the third parties in their own name, accept bills, extend credit
facilities and collect the dues from the customers. After deducting their dues they can remit
the balance to the principal. Their services are highly useful in marketing agricultural
products like fruits, vegetables and grains.
3) Manufacturer’s Agents
As the name suggests, they are employed by the manufactures to sell a part or his
entire product at a specified price in a specified area. They have to carrya huge stock with
them and so they must maintain large sales staff to dispose of their stock. They are
remunerated in the form of commission. Such agents cannot deal in competing products.
They are considered as a more economic agency to introduce new products. Their services
are also highly helpful to small and new firms having limited number of products.
4) Selling Agents
They are employed by the manufacturers to undertake the entire marketing functions
for all there output for the whole market. They exercise full authority and control over prices,
and terms and conditions of sales also. They are financially sound and very frequently they
render financial assistance even to the manufacturers. Selling agents are generally employed
in the marketing of [textile goods, food products, groceary and house furnishings.
5) Auctioneers
They are generally appointed by the sellers. They have common places of business.
The intending sellers must bring their product or samples to the business place and the
auctioneers‘ sell them in auction. The auctioneers can sell the products ―With Reserve
or ―Without Reserve. If the goods are offered for sale ―with Reserve‘‘ it cannot be

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sold below the price fixed by the sellers. In case of ―without reserve the auctioneers
can sell the product to the highest bidder.
6) Packing and Forwarding Agents
They are employed, to procure, deliver and forward goods on behalf of others.
Their remuneration is very small when compared to other agents.
7) Export and Import Agents
Their services are confined to few leading port cities. They cater to the needs of the
principals who seek foreign markets or overseas sources of supply.
8) Factors
The functions of the factors are similar to commission agents. They are also
vested with the powers similar to that of commission agents.
9) Purchase Agents:
They are appointed by the manufactures to purchase industrial raw material for
them.
10) Residence Buyers
They are independent men appointed by the retailers to purchase goods for foreign
consumers.
Merchant Middlemen
Merchant middlemen are those who take title to the goods and channelize the goods
from previous step to the next step with a view to making profit. They buy and sell goods in
their own risk and the price for their effort is profit. They act as an intermediaries between
producers and consumers. These merchant middlemen are broadly classified into
wholesalers and retailers.
The basis characteristics of merchant middlemen can be outlined as follows.
1. They act in their own right but not in the capacity of the agent of the manufacturer.
2. They have title over the goods in which they deal;
3. They are independent agencies and do not act as substitute for the sales force of the
producer;
4. They buy the goods and resell the same at a profit;
5. They have to bear the risk involved in the process of marketing.
WHOLESALING
This includes all the activities involved in selling goods and services to those who
buy for resale purpose. In the case of wholesaling this excludes manufacturers or producers
who are involved directly in the production of the goods. They are the marketing
intermediaries that buy from one source and sell it to another. The main function of a
wholesaler is facilitating the transportation of the product and at times in the transfer of the
titles. The intermediaries’ performing the wholesaling function is predominantly divided into
two types namely merchants and agents. The difference between the two forms lies in if they
take title to the goods they sell.
Wholesalers
Wholesaler is a trader who deals in large quantity. He purchases goods from the
producers in bulk quantity and sell it to the retailers in small quantity. According to

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American Management Association, “wholesalers sells to retailers or other merchants and/or

individual, institutional and commercial users but they do not sell in significant amounts to
ultimate consumers.”
Functions of wholesalers
1. Assembling and buying: It means bringing together stocks of different
manufactures producing same line of goods, and making purchases in case of
seasonal goods.
2. Warehousing: The warehousing function of the wholesalers relieves both the
producers and the retailers from the problem of storage.
3. Transporting: In the process of assembling and warehousing, the wholesaler do
undertake transportation of goods form producers to their warehouse and back to
retailers
4. Financing: They grant credit on liberal terms to retailers and taking early delivery
of stock from the manufacturers to reduce their financial burden.
5. Risk bearing: Wholesaler bear the risk of loss of change in price, deterioration of
quality, pilferage, theft. Fire etc.
6. Grading, Packing and packaging: By grading they sort out the stocks in terms of
different size, quality shape and so on.
7. Dispersing and selling: Dispersing the goods already stored with them to the
retailers.
8. Market information: Finally providing the market information to the
manufactures.
Services of wholesalers:
A. Services to Manufacturers:
1. The wholesaler helps the manufacture to get the benefit of economies
of large scale production.
2. Wholesalers helps the manufactures to save his time and trouble by collecting
orders from large number of retailers on behalf of the manufactures.
3. The wholesaler provides market information to the manufactures which will
helps him to make modifications in his product.
4. The wholesaler buys in large quantities and keeps the goods in his warehouses.
This relieves the manufacturer the risk of storage and obsolescence.
5. The wholesales helps to maintain a steady prices for the product by buying the
product when the prices are low and selling when the prices are high.
B. Services to Retailers:
1. He gives valuable advices to the retailers on his business related matters.
2. He helps the retailer to get the goods very easily and quickly.
3. He render financial assistance to the retailer by granting credit facilities.
4. The wholesalers bears the risk associated with storage and distribution of goods
to a certain extend.
5. The wholesaler helps the retailers to keep price steady.

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RETAILING
Retailing is one of the largest sectors in the global economy. It employees almost 23
million people in United States alone, generating about $3 trillion in sales annually. About
50 organizations in the Fortune 500 are from the retail sector. Retail is one among the fastest
growing industry. Consider Wal-Mart, the biggest retailer in the world with approximately
$250 billion in sales was started in the early sixties, while Fortune came with its annual
ranking of top 500 organizations in 1952, a year when nobody would have dreamt about
Wal-Mart. In the early nineties for the first time Wal-Mart became the top organization
according to Fortune Magazine, which it still continues to hold. Retail is the buzzword today
and this lesson explores the emerging retail scenario and the strategies available for different
retail formats. The word ‘retail’ is derived from the French word retaillier, meaning ‘to cut a
piece off’ or ‘to break bulk’.
Retailers
The term ‘retail’ implies sale for final consumption. A retailer is the last link
between final user and the wholesaler or the manufacturer. According to Professor William
Standton, “retailing includes all activities directly related to the sale of goods and services
to the ultimate consumers for personal or non business use.” In other words retailer is one
whose business is to sell consumers a wide variety of goods which are assembled at his
premises as per the needs of final consumers. In India, Most of the Indian retail outlets are
owner managed and have few or no sales assistant. Most important issues of these outlets
are those of inventory management and funds management.
Functions of retailers:
1. Buying and Assembling:- A retailer buys goods from the best and most
dependable wholesalers and assemble the goods in a single shop.
2. Warehousing: It helps the retailer to ensure adequate and uninterrupted supply of
goods
3. Selling: A retailer sells the products in small quantities to the needy consumers.
4. Risk bearing: It is the basic responsibility of a retailer to bear the risk arising out of
physical deterioration and changes in prices.
5. Sales promotion: Retailer undertakes some sales promotion through displaying of
goods in the shop, distribution of sales literature, introduction of new product etc.
6. Financing: A retailer granting credit in liberal terms to the consumer and it helps
the consumers a lot to purchase the required goods.
7. Supply of market information: As being in close and constant touch with the
consumers, a retailer can supply the market related information to the wholesalers
and manufactures at the earliest.
8. Grading and Packing: Retailers undertake second round grading and packing
activities left by the manufacturers and wholesalers.
Services rendered by Retailers:
A retailer render a number of services to the manufacturers, wholesalers and to the
final users. These services are outlined below:-
A. Services to the manufactures and wholesalers:

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(1). Providing information: Retailer do provide the wholesalers and manufactures

the information about the latest consumer movements and it helps the manufactures
to produce goods according to the needs of consumers.
(2) Looks after the distribution process: A retailer, in general, looks after the
entire distribution process and it helps the manufactures to concentrate on
production.
(3 )Creation of demand: By giving local ad and display of goods, retailers helps to
create demand for the goods.
(4)A big relief: A retailer gives a relief to the manufacturers and wholesalers from
the problem of selling goods in small quantities.
B. Services to the consumers:
(1)No need to store goods: A retailer holds goods on behalf of the customers at a
convenient place and in convenient lot. Hence, the consumer need not buy and
stock in large quantity.
(2)Largest choice: Retailers collects products of different manufactures and it
enables the consumers to have a largest choice at cost, quality and so on.
(3) Providing information: A retailer supplies information about the introduction
of a new product in the market and its features.
(4)Granting credit: Most of the retailers granting credit facilities to regular
customers.
(5) After sale services: In certain cases a retailer provides after sales services to
the ultimate consumers to ensure the customers shop loyalty.
Types of retailers:
The retailers can be classified in to Small scale retailers and large scale retailers:
1. Small Scale Retailers: It includes
(a) Unit stores: These are the retail stores run on proprietory basis dealing in general
stores or single line stores.
(b) Street traders: They are the retailers who display their stock on foot paths or the side
walks of the busy street.
(c) Market traders: These retailers open their shops on fixed days or dates in specified
areas. The time interval may be week, or a month.
(d) Hawkers and peddlers: This type of retailers do not have any fixed place of business.
They carry goods from one place to another. They keep on moving from locality to
locality.
(e) Cheap-jacks: Cheap jacks is retailer who has fixed place of business in a locality but
goes on changing his place to exploit the market opportunities.
2. Large scale retailers: It includes
(a) Departmental stores: A departmental stores carries several product line, invariably all
that is required by a typical house hold. It includes food, clothing, appliances, other
house hold goods, furnishings and gifts etc. It is a central location and a unified control.
In a typical department store each product line is managed independently by specialist
buyers.

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(b) Multiple shops: It is a chain of retail store dealing in identical and generally restricted
range of articles operating in different localities under central ownership and control. It
works on the principles of centralized buying and administration and decentralized
selling. It is also known as chain store.
(c) Mail order houses: Here, the customers do not visit the seller’s premises and there is no
personal inspection of goods before the purchase. Orders are received from customers
through post and the goods are also sold through post. The transaction is settled
through postal medium. Eg. Leather goods, ready made garments etc.
(d) Consumer co-operatives: These are the stores owned by a group of consumers
themselves on co- operative principles. Here the store purchasing in bulk quantity and
sells it to the consumers at a reasonable price. It is formed to eliminate the exploitation
of middlemen.
(e) Super markets: This is a large, low cost, low margin, high volume, self service
operation designed to serve customer’s need for food laundry and house hold products.
The wide range of product mix carried by these stores make them a favorite retail
outlet.
(f) Discount stores: Discount stores are the ones that sell standard merchandise at lower
prize than conventional merchants by accepting lower margins but pushing for higher
sales volume.
(g) Convenience store: These are generally food stores that are much smaller in size than
in supermarkets. They are conveniently located in residential areas. Due to a high
degree of personalized service and home delivery by store clerk, these stores fill in a
very important need of a house wife.
(h) Speciality store: These are ones that carry a narrow product line with a deep
assortment within that line. According to some marketing thinkers, the future scenario
belongs to super specialty store as they provide increasing opportunities for market
segmentation, focused marketing, and creation of brand equity.

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UNIT V
ADVERTISING
It is a paid form of mass communication and can be traced to an identified sponsor.
Now a day s Advertising plays a significant role in awareness creation and attitude
formation. In a macro concept, it stands for the managerial function of an organization
intending to send information to the other members of the society.
American Marketing Association defined it as, “Any paid form of non –personal
presentation of ideas, goods, or services by an identified sponsor.”
Features of Advertising:
✓ It is a mass communication medium.
✓ It is a salesmanship in print.
✓ It is a paid form of communication by an identified sponsor.
✓ It is a non personal communication.
✓ It helps to stimulate sales.
✓ It may be written or spoken.
Role / Advantages /Importance of Advertising
Advertising is an integral part of our social and economic system. As a powerful
technique of promoting sales, it has been doing wonders in the domain of distribution. The
role of advertising can be analyzed from five distinct angles.
Advantages to Manufactures:
1. It maintains the existing market and explores the new.
2. It increases the demand for the product
3. It helps to build up or increase goodwill of the company.
4. It controls product price.
5. It helps to introduce a new product into the market .
Advantages to Middlemen:
1. It guarantees quick sales
2. It acts as a salesman.
3. It increases the prestige of the dealers.
4. It makes retail price maintenance possible.
5. It enables the dealers have a product information.
6. Sales-force and Advertising(Advantages to salesmen).
7. It creates a colourful background for a salesmen to begin his work.
8. It reduces his burden of job.
9. It helps to develop self confidence and initiative among the salesmen.
Advantages to consumers:
1. It ensures better quality product at reasonable price.
2. It provides product related information to the customers and thereby makes
the purchasing an easy task.
3. It helps the consumers to save time by providing information related to the
availability of product.
4. Helps the consumers in intelligent buying.

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Advantages to society:
1. It helps to generate gainful employment opportunities.
2. It provides new horizons of knowledge.
3. It up-holds the culture of a nation.
Types of Advertising
Now a day’s businessman spends a lot on advertising with the idea that today‘s
expenditure may multiply manifold in future. Sales have to be increased to maximize profits.
For this, they have to stimulate not only the existing customers but also the prospective
customers. The following are the classification for advertising.
✓ Product Advertising.
✓ Institutional Advertising.
✓ Commercial Advertising.
✓ Non-commercial Advertising.
✓ Rational Advertising.
✓ Emotional Advertising.
✓ National Advertising.
✓ Local Advertising.
✓ Co-operative Advertising.
✓ Classified Advertising.
✓ Display or point of purchase Advertising.
✓ Non product or idea advertising
Product advertising
When advertising is done with the aim of maximum sales of a specific product or
service it is called product advertising. Importance is given to the product than the producers
or traders. When a new manufacturer enters the market mostly his advertising will be
product advertising.
Product advertising may be either
➢ Direct action Advertising
➢ Indirect Action Advertising
➢ Primary Demand Advertising
➢ Selective Demand Advertising
Direct Action Advertising
With direct action advertising, sellers are seeking a quick response to their
advertisements. It influences the buyer to take action immediately. Direct mail
advertising is able to get immediate response from the buyers.
Indirect Action Advertising
It is designed to stimulate demand over a long period of time. It creates a lasting
picture about the product in the minds of the buyers. It is intended to inform the
consumers the availability and the uses of their products. (E.g.) Advertisements for
washing machines.
Primary demand advertising
Its main aim is to introduce a product in the market. It is also called as pioneer

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advertising. It aims at informing the people about the product, its uses, and it
whereabouts. Here, advertising creates primary demand for the product. (E.g.)
advertising about vacuum cleaner.
Selective demand advertising
This type of advertising informs about the special features, uses and benefits to
the consumers compared to their competing product. It is also called as competitive
advertising.(E.g.) prestige pressure cooker.
Institutional advertising
The main aim of this advertising is to project the image of the company or
manufacturer or trader. It is designed to build goodwill rather than selling a specific product
or service.
Institutional advertising may be subdivided into
➢ Patronage advertising
➢ Public relation advertising and
➢ Public service advertising.
Patronage advertising
It is information about the advertiser’s business. A retailer’s advertisement
regarding its new store hours or change of its delivery system is of this type.
Public relation advertising
This type gives a clear picture about the advertiser role in the community. It is
used to create a favourable image among the consumers, traders and the general public
(E.g.) Automobile manufacturers advertisement regarding their role in controlling
smoke and sound pollution.
Public service advertising
It shows the advertiser as a good citizen. This is being done to get a lot of public
support (E.g.) Advertisements regarding drug addiction, blood donation etc.
Commercial advertising
Advertising aimed at the maximum sales of a product or service is called as
commercial advertising. It is also called as business advertising. It may be classified into:
Industrial advertising
Advertising used mainly to increase the sales of industrial products are called
industrial advertising (E.g.) machineries of different types.
Trade Advertising
Advertising techniques used by traders such as wholesalers, retailers etc, are called
trade advertising
Form Advertising
Advertising related to the sale of farm inputs like farm implements, fertilizers, and
their price are called Farm advertising.
Consumer Advertising
Advertising made to attract the final consumers are called consumer advertising.
Defensive Advertising
Advertising steps taken to defend a product from their rivals are called

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defensive advertising. This will not result in an increase in sales, but helps to retain its
market share (E.g.) Ujala.
Reminder Advertising
When advertising is done to remind consumers about an established brand, it use,
characteristics etc., it is called reminder advertising‘. (E.g.) Godrej, prestige cooker.
Reinforcement Advertising
It aimed at informing the current users that they have made a correct choice and to
tell them about the new uses of the product are called reinforcement advertising. (E.g.)
Advertising for wet Grinders.
Professional Advertising
Advertising undertaken by professional people like doctors, engineers etc., are called
as Professional advertising. (E.g.) Advertising for hearing aids.
Financial Advertising
When advertising is made on capital issue like raising public deposits, issue of shares
and debentures etc., it is known as financial advertising. Usually, these advertisements carry
information‘s of promoters, names, addresses, highlights of the project, details of issue
company name and address etc.
Service Advertising
Services are activities, which give satisfaction. Advertising which carries details of
services rendered by different service agencies are called service advertising. (E.g.)
advertisements related to personalized services like hair grooming, beauty parlours.
Non-commercial advertising
Advertising undertaken by non-profit organisation like charitable institutions and also
government are called non-commercial advertising. (E.g.) Advertising for collection of
donations.
Rational advertising
When advertising aims at explaining the reasons to buy a product, it is rational
advertising. It helps the consumers to know the reason for buying a particular product. (E.g.)
Medimix, herbal powder etc. It is more suitable for industrial product.
Emotional advertising
This advertising persuades the buyers who do not care about the reason for
purchasing the product. This type of advertising influences the consumers to buy a product
immediately. (E.g.) Denim powder, baby spray. It is more suitable for consumer products.
National advertising
Advertising a product to focus the attention of the consumers at the national level is
called National advertising. Generally manufacturers undertake this type of advertising. It has
no relation to the geographical coverage. This type of advertising carries the message to buy
our brand the manufacturer cares little where the product is purchased.
Local advertising
Advertising a product to focus the attention of the consumers in particular locality is
called local advertising. It is made by retailers. In this type advertisers give importance to the
shop. They do not care what product or brand we buy but buy them in their establishment. In

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local advertising the message says Buy at our store. There may be difference between
various types of advertising on the basis of advertising being done. But, the ultimate aim of
all these types is to maximize profit or publicity of service.
Co-operative advertising
When two or more manufacturers join together and advertise different products
produced by them, it is co-operative advertising. Some times, manufacturers and dealers
(wholesalers and retailer) join together and advertise the product to minimize selling cost.
This advertising is also called as collaborative advertising. For example, manufacturers of
cars, fan, and refrigerators use this type of advertising.
Classified advertising
Advertising having similar characteristics are grouped on the basis of nature and
contents are called classified advertising. Usually, newspapers sponsor such classified
advertisements. Advertisements having common theme like overseas, financial market,
matrimonial education are some of the classified advertising.
Display advertising (Point of purchase advertising)
It is a means by which the product or idea is brought to the notice of the individual by
visual presentation. It is an art of bringing life to the message. Proper display of products
attracts the attention of prospects. It makes an immediate appeal to the eye. It is also
described as Dealer aids.
Non-product or idea advertising
Churches, political parties, individuals and groups use this type of advertising.
Institution, Ideologies and social betterment are nationally and locally advertised to citizens
and community leaders. The messages they carry are Accept our idea Vote for our candidate
or Help our cause.
ADVERTISING BUDGET
An organized plan for expenditure of money on advertising is called advertising
budget. Like all budgeting, advertising budgeting is also a basic management technique of
planning and controlling operations. It is also a financial tool that is concerned with future
operations. The shape of an advertisement depends on the amount of money that is invested
on it.
Features of Advertising Budget
Advertising budget fixes the maximum amount to be spent on advertising and
publicity for a specific period, usually one year. It enables the advertisers to allocate funds to
different activities within the scope of advertising.
✓ It sets limit to the advertising expenditure within a specific period.
✓ It acts as a planning and controlling mechanism with regard to advertising
activities of a company.
✓ It regulates the disbursement of expenditure on advertising over a fixed period
of time.
✓ Steps in Budgetary Process
The actual budgetary process consists of four steps. They are
a) Preparation

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b) Presentation.
c) Execution
d) Control.
Preparation
Determining the size of the future advertising is the first step in preparing the
advertising budget. Then, budget specifics must be established. The total budget is
allocated among the various media and advertising functions. The budget must be
allocated among different market segments, time periods and geographic areas. This is
being done on the basis of market potential within segments, periods or areas. It is
prepared by the head of the advertising department in consultation with the agency. It
should be compatible with sales goals.
Presentation
The next step in advertising budget is to get the approval of the authorities concerned.
The president or Chief Executive Officer should approve it. The financial committee
may be involved in the final approval of the budget. These officials act as a watchdog-
group over company‘s fund. The prudent management of expenditures is one of their
prime responsibilities. It will help to maximize the firm‘s profit.
Execution
Purchase of authorized advertising time and space is the primary task. The
advertising agency handles these jobs. The advertising manager should monitor whether
media discounts are being taken and special services are being purchased at competitive
rates. The marketing manager has to make sure that the market situations remain
unchanged. If there are changes, the budget should be made flexible enough to permit
programme changes. One device that facilitates such action is the contingency funds.
Control
The advertising manager controls the budget operations. He monitors whether
advertising expenditures are being made as per plan. Information‘s regarding current
expenditures should be brought to the attention of the advertising manager. Planned
expenditures and actual expenditures must run parallel if the budget is to serve as a
controlling tool.
Thus, an advertising budget is prepared to show how much, where and for what
purpose amount has to be spent. However, advertising budgeting involves two areas of
decision:
• The total size and
• The manner of spending.
The factors that determine the total size of the budget are:
✓ The importance attached to advertising in the marketing plan;
✓ The items to be charged to advertising: and
✓ The method used for determining the total size of the budget.
Budgeting methods
The total size of an advertising budget may be determined by using a variety of

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methods. No single method is ideal for all situations. So an advertiser should be aware of all
the methods of budgeting below.
✓ Percentage of sales method
✓ Objective-task method
✓ Competitor’s –Expenditure method
✓ Arbitrary method
✓ Affordability method
✓ Mail-order method
✓ Profit-Planning method
✓ Return-on-Investment method
The Advertising Copy
Advertisement Copy is the soul of any advertisement. An advertisement copy is
all the written or spoken matter in an advertisement expressed in words or sentences and
figures designed to convey the desired messages to the target consumers. A good ad
copy has the following attributes:
Attributes of good Advertisement copy
✓ It is brief: Being brief is not dropping words or chopping sentences, It is the work of
eliminating and substituting the words with out jeopardizing the meaning.
✓ It is clear: A clear copy is one which is easily and quickly read and grasp by the
readers.
✓ It is apt: Writing an apt copy is the art of putting in the words that create strong
desire to possess the product where the product features satisfy the consumer’s
desire to possess.
✓ It is honest: Credibility of an ad message is decided by the extend of honesty.
✓ It is conforming: Every ad copy is to conform to standards, rules and regulations
acceptable to the advertisement media and the laws of the land.
MEDIA SELECTION
A large number of advertising media are available for advertising a product or
service. Newspapers, TV, Radio, etc., are examples. Selecting a suitable medium for
advertisement is one of the important decisions in advertisement strategy. The considerations
that influence the selection are:
1. Objectives of Advertisement: The choice of media will be influenced by the purpose
for which advertisement is to be given. For instance if the purpose of advertisement is to
induce action within a day or two, a newspaper will be a better medium than a monthly or
weekly magazine. Bit notices, radio, and loudspeaker announcements also are effective while
the rest of the media are not so much effective. Similarly, when the advertiser wants to
motivate a class of people to buy his products, press media will be effective only if they are
literate.
2. Cost of Media: The cost of advertisement media influences the selection of media.
Some media like television, radio, etc., are very costly, while bit notices, posters, etc., are
cheap. The cost of press media varies according to its reputation and circulation.
Advertisement in reputed magazines like Reader‘s Digest, Illustrated Weekly and the like

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costs more than in local magazines like Malayala Manorama, Mangaiar Malar etc. The
advertiser chooses the media according to the budget allocation.
3. Circulation of the Media: The circulation of the media should match with the extent of
market. The selected media must be able carry the matter to the whole area of the present and
probable market. To take an example, if a product has a national market, advertisement in a
local daily will produce only a little benefit. In such a case, a medium that has national
coverage should be selected.
4. Requirement of the Message: Sometimes the message to be advertised may require
pictorial presentation to make it more attractive. In such cases, newspapers, magazines, film
or television will be better than radio.
5. Time and Location of Buying Decision: The advertisement should reach the prospective
buyers at the time and place they make their buying decisions. For instance, various, textile
dealers in town give large-scale advertisement during festival seasons like Christmas,
Diwali, etc., offering maximum discount. They use outdoor banners and posters to
persuade consumers. Such media will attract people who come to the town for buying
textiles, without deciding from which shop they should buy.
6. The Type of People: The type of people for whom advertisement is made influences the
selection of media. To take an example, if the advertisement is meant for ordinary working
class people in Tamil Nadu, Tamil dailies produce better results than English dailies. If the
people are illiterate, film advertisement or loudspeaker advertisement can attract more
people.
7. Media Adopted by Competitors: Media selection also will be influenced by the media
used by competitors. Now in Kerala, radio advertisement is becoming popular. When one
dealer advertises through radio, other competing dealers also are induced to use the same
medium to advertise their products. Example, textile dealers.
TYPES OF ADVERTISEMENT MEDIA
There are different advertisements Media, they are
Press Advertising
The press advertising is the most popular advertising media for the present world. It
includes advertising in newspapers, trade journals, magazines and so on. To be more specific
in the Indian condition, the press advertising is considered the most popular form of
advertising. Such type of advertising disseminates news and moulds public opinion. And so,
the press advertising plays an important role in the national socio-economic condition. The
press advertising is found in four forms, e.g., Newspapers, Magazines, Trade Journals and
Miscellaneous.
The newspaper advertising carry news and so widely read by the group of readers.
For securing quick sales, we consider it a sensitive form. It makes time-honoured appeals.
The advertisers do not need advance planning. But we also find myriad objections against
newspaper advertising. The critics say that we find in it lack of staying power. The small
advertisements have very little chance of their display in the newspapers because the
newspapers contain a good number of advertisements. Generally, we read newspapers in
haste and so, we find least possibilities of gravitation of the interest of the potential buyers

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on the newspapers.
Despite the aforesaid favour and objections, it would be right to conclude that
particularly in the developing countries, the newspaper advertising may be more popular.
This is based on the logic that it is economic but widely read by the potential buyers or
prospects. The magazines are printed on the standard paper and remain longer with the
readers. The magazines are published periodically, viz., weekly, fortnightly, quarterly or so.
But the matters go to the press in advance and so, the magazine advertising has not been
found so sensitive.
The trade journals and class publications are circulated among a particular group of
readers. Thus, such type of media is found suitable for the selective advertising. In addition,
we find a few journals, which come out annually or bi-annually. Such media is found
suitable, particularly for the products to be sold on all-India basis. But it is suitable for the
products of general consumption behaviour. Besides, we also find Directories and Guide
Books, which also constitute an important advertising media.
Outdoor or Mural Advertising
The outdoor or mural advertising is suitable for the outdoor readers. The indoor
readers generally read the earlier mentioned press advertising. In the outdoor advertising, we
find outdoor advertisements, particularly displayed on the walls. It includes posters or small
boards fixed on lampposts, telephone posts or so. Such type of advertising media also
includes vehicular advertising, field signs, electric light signs, sky advertising and so on.
The outdoor advertising media is instrument in localising the potential buyers. It is
found helpful to gravitate the attention of passers by, especially by using colourful
advertisements. Generally, it has a long life and so, repetitive influences. It is an excellent
form of reminding the prospects or the buyers.
Despite all, the passers by generally notice the outdoor or mural advertising. The
frequent changes in the messages are found costly. It becomes difficult to measure the
effectiveness of this advertising media.
The outdoor or mural advertising includes the following forms of advertisements:
The Posters are generally displayed at the central point where the potential buyers
frequently come. Attractiveness is its outstanding properly. The Advertising Board is also a
suitable form of outdoor advertising. It is generally displayed at the focal points of big cities
where the potential buyers are expected. Such advertisements are displayed on the big
boards. This is aimed at attracting the general consumers with the viewpoints of reminding
them.
Electric Display is also a suitable form of outdoor advertising:
This is also to attract the passers by. It is also found on the central or focal points.
Like the advertising board, this form of advertising is also to remind the consumers.
Sandwich Board Advertising is the most vital form of outdoor advertising:
In this form of advertising, we find moving of persons with the advertising boards.
The dress materials of the movers are to create a sense of humour among the potential
buyers. Bus, Tram and Train Advertising also constitute an important place, specially among
the out-door advertisements. The advertisements are displayed on the bus, tram and trains

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where general passengers view the advertisements. We find display of posters on the
different modes of transportation either inside or outside.
Sky Advertising :
It is generally found in the advanced countries where aero planes are used for
advertisements. We find use of colourful smokes designing the map or shape of products to
be advertised. No doubt, it is a costly advertising media, which is suitable for the big
business houses.
Sticker Advertising :
It is also a suitable form of outdoor advertising. In this form of advertising, we find
advertisements by the famous sportsman using the stickers, specially while playing the
international matches. In the Indian context, such type of advertising is found at the very
nascent stage. Air-India has introduced it and of late a good number of big business houses
have also been using sticker advertising. Generally, we find use of TV for displaying the
sticker advertisements. No doubt, it is a costly form of advertising but throws cascade impact
on the potential buyers.
Direct Mail Advertising
The direct mail advertising is also a sensitive media. The latest developments in the
field of communication have raised the significance of this form of advertisements. In the
advertising media, we find supply of written messages to the potential buyers. Regarding the
direct mail advertising, noted expert Richard Messner says, Direct advertising is a vehicle for
transmitting a publicist‘s message in permanent printed, written or processed form with
controlled distribution direct to the selected individuals. The other expert Cassels says,
Direct mail advertising is using the letterbox to sell the right people about the right goods at
the right time in the right way.
In the face of aforesaid viewpoints, it would be right to mention that the direct mail
advertising is based on mail services. The consumers are dispatched messages through post
offices, which may be either in the shape of leaflets or circular letters or price list or so. If the
buyers are satisfied with the information’s supplied, they place an order for the purchase of
goods. The goods are dispatched through VPP. We find in it the use of telephone and trade
directories. On the basis of information’s received from these directories, the buyers select
the goods and place an order. Often, the suppliers prepare a mailing list and send to the
respective potential buyers the concerned details.
The mail advertising literature includes circular letter, business reply envelopes, price
list, catalogues, leaflets and folders, booklets, novelty gifts, personal letters and so on. In the
following passages, we have presented a brief analysis of these forms.
The Circular Letter is sent to the group of buyers. Generally, this form is utilized as
and when the producers penetrate a new product in the market. It includes the details of
goods, e.g., outstanding properties, price list and the gifts to be offered. We find the use of
duplicate machine for preparing the circular letter. As and when, the manufacturers need to
expand their business relations, this form is taken in to practice.
The Price List is also supplied to the concerned buyers. We find time-to-time changes
in the price structure of goods and services. It is pertinent that the buyers get all these

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information’s in time. The price list covers all information’s regarding the prices. Generally
the standard producers adopt this form of advertising.
The Business Reply Envelopes are sent to the respective buyers with the motto of
avoiding their inconveniences. The letter includes the details regarding the goods
advertised. We also find the use of post cards for this purpose. The outstanding property of
this form is immediate decision making by the respective buyers.
The Catalogue is used to supply to the respective buyers the details regarding the
concerned goods. It includes information’s regarding the prices and specialty of the goods.
The Leaflets and Folders include details regarding the gods. Generally, it is published
on the standard and colourful papers. Its imprint on the buyers is found positive.
The Booklets are found of small size. We find detailed information’s in the booklets.
It covers detailed information’s, viz., information’s regarding quality, price, gift and so on.
The Novelty Gift is also form of direct mail advertising. In this form the businessmen
send the buyers goods of daily consumption behaviour, calendar, diary and so on as gift. All
gifts send to the buyers cover details regarding the products and producers.
The Personal Letters are sent to the buyers with the motto of furnishing to them the
detailed information’s regarding the goods. In such letters, we find micro-scopic analysis of
the product features.
Miscellaneous Advertising
In addition to the aforesaid medias, we find other medias also. These medias include
TV, Radio, Cinema or Cinema Slide, Fairs and Exhibitors, Drama and Music Programme,
Demonstration, Loudspeaker, Free Distribution of Goods and so on. In the following
passages, we have presented a brief explanation of a few medias.
The Radio and TV have emerged as sensitive medias of advertising, particularly in
the yester decades. Particularly the TV has been instrumental in revolutionizing the
advertising programmes. No doubt, in the Indian condition, the Radio or TV has thrown
positive imprints on the buyer‘s psychology. To be more specific, the TV has been doing a
lot in the very context. With the emergence of these medias, the small business houses have
also been efficacious in influencing the potential buyers or prospects.
The Cinema or Cinema Slides are also used for momentising the advertising
programmes. Generally, the big business houses also prepare their advertisement films and
get themselves displayed in the cinema houses.
The Fairs and Exhibitions are also an effective advertising media. In this respect, the
producers organize fairs or exhibitors. Particularly to enter the global market, these medias
are found more suitable. We have witnessed the positive influences of Expo70, Industrial
Fair, Asia Fair or so. These fairs or exhibitions are generally organised in the big cities.
The producer or businessmen have successfully conducted the Drama and Music
Programmes. We find organisation of different shows, particularly in the rural areas or
remotest parts. The Life Insurance Corporation of India has been conducting these
programmes, particularly to influence the rural population. In the beginning or in interval,
we find display of advertisements.
The Loudspeaker is an economic media of advertising. It has been found more

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effective, particularly in the rural areas. In this system, the advertising appeals are
propagated through loudspeaker.
The Demonstration is also an effective media of advertising. In this media, the
advertisers display the functions or workings of the related goods. It throws direct imprint on
the buyer‘s buying behaviour. The potential buyers are convinced and do not hesitate to
place an order.
The Free Distribution of Goods has also been successful in conducting the
advertising programmes. In this system the businessmen or the manufacturers make
provisions for the distribution of goods as gift to the potential buyers. Generally, the new
producers engaged in penetrating the goods in the market use this media of advertising.
PROMOTION
Promotion is a term taken from Latin word promovere . It means ‘move towards’. In
marketing, promotion means all those tools that a marketer uses to take his product from the
factory to the customer and hence it involves advertising, sales promotion, personal selling,
and public relation. It is necessary to flow the information about the product from the
producer to the consumer either along with the product or well in advance of the introduction
of the product. This role is played by promotion.
In the words of Masson and Ruth, “Promotion consists of those activities that are
designed to bring a company’s goods or services to the favorable attention of customers”.
Importance of Promotion
Importance to business:- Now a days, it is very necessary to communicate information
regarding quality, features, price uses etc.. of the product to the present and potential
customers. Then only the consumers will select the product from a wide range of competing
products. Most modern institutions cannot survive in the long run without performing
promotion function effectively.
Economic importance: In economic sense, it helps to generate employment opportunities to
thousands of people. As a result of promotion sales will increase and it brings economies in the
production process and it reduces the per unit cost of product.
Social importance: Promotion has become an important factor in the campaign to achieve
some socially oriented objectives. For eg. Against smoking, drinking etc. It also helpful to
provide informative and educational service to the society
Importance to non business organizations: The non business organizations like govt.
agencies, religious institutions, educational institutions etc also realized the importance of
promotion and they are using the various elements of promotion mix very widely.
Promotion Mix
Firms select a mix of promotional tools to effectively communicate with their target
customer group. The different elements of this group are:
a) Advertising
b) Personal selling
c) Sales Promotion
d) Public relations and
e) Direct Marketing

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Factors affecting Promotion Mix decisions

Promotion mix includes all those activities undertaken to promote sales. There are
two types of promotion blend, Push blend and Pull blend. A push blend is related to personal
selling and a pull blend give emphasis on impersonal selling. There are many factors which
influence the promotion mix.
The important factors among them are briefly explained below:-
Nature of the Market: It is an important factor which affects the promotion mix. Depending
up on the customers the promotion strategy may vary. For individual customers the strategy
may vary according to the age, sex, income etc. For industrial customers it directly depends
up on size of the company, bargaining power etc.
Nature of the Product: Depending up on the nature of product, the promotion mix may
vary. For marketing consumer goods, a mass advertisement is necessary. But at the same
time marketing of industrial goods and specialty goods requires personal selling. Complex
and complicated products are also require personal selling.
Market size: If the market size is comparatively very small, then direct selling is used. For a
market having large number of buyers, advertising is the most suitable promotion tool.
Buyer readiness stage: The choice of different elements of the promotion mix is also
dependent on the buyer’s readiness and awareness of the brand. Advertising will play a
major role in creating awareness, while demonstration and samples will helps to bring about
a change in the behavioral level.
Overall marketing strategy: It means, whether the firm wishes to “push” the product or
create a “pull” for the product. Often the marketing strategy of a firm is a combination of
both these strategies.
Product life cycle stages: This will also play a role in deciding on the promotion mix.
For e.g. In the introduction stage, advertising and publicity are very important. But in the
maturity stage, sales promotion and personal selling are very necessary.
Cost : Cost of promotion element is also very important. If the total cost incurred for using a
particular element of promotion tool is not affordable to the manufacturer then it is better to
select the next best promotion mix.
SALES PROMOTION
Sales promotion is another major component of promotion mix. The phrase sales
promotion has a distinct meaning. It stands for all those activities that supplement, co-
ordinate and make more effective the efforts of personal selling and advertising. It
collectively comprises of the tools used to promote sales in a given territory and time. It
consists of short term incentives designed to achieve a specific marketing goal in the
immediate future.
According to American Marketing Association,” those marketing activities other than
personal selling, advertising and publicity that stimulate consumer purchasing and dealer
effectiveness such as display, shows and exhibitions, demonstrations and various non-
recurrent selling effort in the ordinary routine.”

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Role/Advantages of Sales Promotion

The role or advantages of sales promotion to various parties like manufactures,
middlemen and consumers are given below:
Manufacturers and sales promotion:
✓ It helps to retains the existing customers
✓ It helps to create new customers.
✓ It promote sales
✓ It helps to enhance the goodwill of the firm
✓ It helps to slashes down the cost
✓ It helps to face the competition.
✓ Middle men and sales promotion:
✓ It reduces strain of the middlemen to a greater extend.
✓ It helps to increase the sales of middlemen
✓ It builds and enhance the goodwill of the shop
✓ It gives some personal benefits to the middle men.
✓ Consumers and sales promotion:
✓ It helps to improve the standard of living of people by making available goods and
services at least cost.
✓ It gives knowledge of new products available in the market.
✓ It gives both cash and non cash incentives.
✓ It helps to get more credit facility and special concession because of his brand
and store loyalty.
Disadvantages of sales promotion
✓ It has the shortest life impact as promotion tool like advertisement.
✓ It is only a supplementary device of personal selling and advertising
✓ In most of the cases, too much sales promotion may damage the brand image.
✓ Sales promotion techniques are non-recurring in their nature.
TYPES OF SALES PROMOTION
The sales promotion tools can be seen from the angle of dealers, consumers and sales force.
Dealer promotion/Trader promotion
Trade promotion objectives are to motivate market intermediaries to invest in the
brand and aggressively push sales. It includes
Price deals: Under this method, special discounts are offered over and above the regular
discounts.
Free goods: Here, the manufactures give attractive and useful articles as presents to the
dealers when they buy a certain quantity.
Ad Materials: In this case, the manufacturer distributes some ad materials for display
purpose.
Trade allowance: It includes buying allowance, promotional allowance and slotting
allowance.
Dealer contests: It is a competition organized among dealers or salesmen.
Trade shows: Trade shows are used to familiarize a new product to the customers.

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Consumer promotion
The broad objective of consumer promotion is to create pull for the brand and it
includes-
Rebates: Simply it is a price reduction after the purchase and not at the retail shop.
Money refund offer: Here, if the customer is satisfied with the product, a part or whole
of the money will be refunded.
Samples: While introducing a new product, giving samples to the customers at their
doorstep.
Price packs: In this method the customer is offered a reduction from the printed price of
product.
Premium offer: Here goods are offered at a lower price or free as an incentive to
purchase a special product.
Consumer contests: Various competitions are organized among the customers. The
winners are given prizes.
Free trials: In this case, inviting the buyers to try the product without cost.
Sales force promotion
contests: Sales contests are declared to stimulate the sales force increase their selling
interest.
Bonus to sales force: Bonus is the extra incentive payment made for those who cross the
sales quota set for a specific period.
Sales meeting conventions and conferences: Sales meeting and conferences are
conducted with a view to educate, train and inspire the salesmen.
Essential qualities/traits of a salesman:
1. Sound health
A salesman should posses a sound and physique in order to become efficient. A
salesman who is not healthy cannot maintain a pleasing appearance. He will also not be able
carry on his duties efficiently.
2. Good posture
Good posture enhances the appearance and personality of the salesman. A salesman
should maintain an alluring posture, i.e. he should stand erect or sit erect while meeting a
customer. It makes a good impression on the customer. Therefore the salesman should try to
acquire certain good posture in order to attract customers.
3. Pleasant voice
Voice is the index of one’s own feelings than the facial expression. The quality and
the tone of the voice also have its influence on the hearer. The salesman should have
pleasant, clear and forceful voice. The voice should not be coarse, high pitched, shrill,
commanding or nasal. These types of voices generally irritate customers.
4. Good appearance
A good physical appearance is a big asset for salesman. The first impression on the
customer is created by the appearance of the salesman. A good appearance generally gives
more confidence to a salesman and he is able to convince the customers more easily. The
appearance of the salesman may be divided into 3 important segments:

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1. Cleanliness, 2. Grooming and 3. Clothes.

5. Cheerfulness
Cheerfulness is the greatest virtue of a good salesman. Everyone wants to be with
persons, who are cheerful. If the salesman is cheerful, possesses a good health, vigour and a
rich sense of humor, then he can attract large number of customers.
6. Imagination
It is an important consideration which detects the exact need of the customers. This
quality helps the salesman to understand the problems of customers in his position. But it is
depressing to see in India that many salesmen have absolutely no imagination.
7. Alertness
Alertness refers to active sensitivity to the situation before oneself. It is nothing but
presence of mind as to what to say, how to say and on what occasion. It consists of keen
power of observation and common sense to take correct decisions quickly.
8. Resourcefulness
It is a mental ability to think and find out alternatives. It includes devising new
approaches to make people do what you want them to do. Resourcefulness has great role to
play in salesmanship.
9. Initiative
Initiative is the ability to work on his own without any guidance from anybody. It is
very useful quality for success in dealing with customers. Of course, in early stages a
salesman has to work under the supervision and guidance of senior salesman. But in course
of time, he has to depend upon himself and take independent decisions.
10. Observation
Power of observation is another important quality of a salesman. A good salesman
must be a keen observer. He should observe the changes in style, fashion of people, activities
of rivals, Government policies, general attitude of customers and other things.
11. Self-confidence
Self-confidence is another important quality, which every salesman should possess.
The salesman should keep Self-confidence both on himself and the goods he sells to the
customers. A salesman lacking Self-confidence can not convince his customer properly or
overcome his objections.
12. Memory
Sharp memory is another important attribute of a salesman. Sharp memory refers to
capacity to recognize this customer, recall his past interviews with them, recalling their
requirements and suggestions. As a matter of fact, lack of memory is responsible for
committing many errors. For this purpose, it is better for a salesman to keep a notebook and
write important points for future reference.
13. Sociability
It refers to ability of salesman to meet the public and make friends with them. A true
salesman must be an extrovert, i.e., a man who likes mixing with people in every type of
situation. Moreover, he should not hesitate to meet unknown persons. He must be a friend,
philosophers and guide to customers.

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14. Enthusiasm
A salesman should be enthusiastic; otherwise he will fail to create interest in the
minds of the prospects. Enthusiasm creates assurance in the minds of the buyers for a
salesman’s products and services.
15. Tact
A salesman should be a man of tact. Tact means doing the right thing at the right
time, in the right way. It further includes mental awareness of the salesman to tackle all
kinds of situations. However, tact should not mean cheating or cunningness. Tact or
diplomacy helps in avoiding objections, obstacles in sales programme.
16. Courtesy
There is a saying that “Courtesy costs nothing but returns high dividend”. This
particularly holds good in the field of salesmanship. Courtesy is a mixture of politeness and
consideration. It is an indication of refinement and culture. The salesman must be polite,
modest, and courteous to turn the hearts of customers.
17. Patience and tolerance
Patience and tolerance take a very important place in the development of a salesman.
A salesman to become successful must be extremely patient in dealing with a buyer. In no
case he should lose his temper, but to show a spirit impatient and angry, but a salesman
should remain calm and cool.
18. Effective speech
A salesman should be a good conversationalist. Ability to speak correctly and clearly
impresses the customers favourably. The sales talk should be clear, pleasant and persuasive,
but not like the situations; each situation may have to be treated in a special manner. The
salesman should have a good command over English and other languages, sweet voice, clear
pronunciation, fluent expressions, etc.
19. Honesty
The salesman should be extremely and thoroughly honest. An honest salesman is
liked by every customer. While dealing with a customer, the salesman must be true and frank
about the products he wants to sell. He should not misrepresent or exaggerate facts. If a
salesman cheats a customer, that customer is lost forever.
20. Integrity
Integrity of a salesman is an important trait in his character. Integrity means
uprightness of character, moral soundness, good behavior, honesty, fulfillment of promises,
and strength of character. A salesman who does not have integrity of character will not be in
a position to create good impression upon his employer, fellow salesman and customers.
21. Loyalty
Loyalty means willingness of obey. Loyalty of a salesman can be classified into four
groups : (i) loyalty to the organization, (ii) loyalty to the customers, (iii) loyalty to the
fellow-workers.
22. Reliability
A salesman should be trustworthy and reliable. He should take his work seriously and
with responsibility. He should not give exaggerated promises. He must be truthful in his

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statements and honest in his dealings. If a salesman is reliable, customers will have no fear
of being cheated while purchasing goods from him.
23. Courage
It refers to moral strength of a person. Sometimes a salesman may commit mistakes
and make false promises, which may lead to an unpleasant atmosphere. But a good salesman
must have enough courage to face such situations boldly. He should be daring enough to take
risk and should be firm in his decisions.
24. Sincerity
Sincerity is another good quality of a successful salesman. A sincere salesman attends
his customers sincerely and explains them all the merits and demerits of the product. He also
attends to the customers promptly. A sincere salesman does not face any difficulty to achieve
his target.
PUBLIC RELATION
It is the actions of a corporation, store, government, individuals, etc. in promoting
goodwill between itself and the public, the community, employees, customers, etc. It can be
defined as the practice of managing communication between an organization and its public.
Public relation is used to build rapport with employees, customers, investors, or the general
public. This method of marketing does not aim at promoting a single product/service but the
company as a whole.
This is done by spreading a positive feel about the company through various stories
and articles or positive feedback from customers about the company in different media
channels. In comparison to advertising, PR is a very cost effective method of marketing. A
full page advertisement of a product may fail to attract customers attention, but a positive
response about the same from a satisfied customer when appears in the form of an article in
the same news paper will work wonders for the company. PR is quite understandably
considered as a very genuine method of marketing. It creates a favorable atmosphere for
conducting business of the firm.
According to UK Institute of Public relation, “ It is the deliberately planned and
sustained efforts to establish and maintain mutual understanding between the organisation
and its public.”
Advantages of public relations:
Credibility: The information communicated through public relation department is more
reliable and it has more credibility. For e.g.,an article in newspapers or magazines discussing
the virtues of aspirin may be perceived very much as more credible than an ad for a
particular brand of aspirin.
Cost: In both absolute and relative terms, the cost of PR is very low, especially when the
possible effects are considered. While a firm can employ advertisement agencies and spend
millions of dollars on advertisements, for smaller companies, this form of communication
may be the most affordable alternative available.
Lead generation : Information about the technological innovations, medical break-through
and the like results almost immediately in a multitude of inquiries. These inquiries may give
the firm some quality sales lead.

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Ability to reach specific groups: Because some products appeal to only small market
segments, it is not feasible to engage in advertising and / or promotions to reach them. If the
firm does not have the financial capabilities, to engage in promotional expenditures, the best
way to communicate to these groups is through PR.
Image Building: Effective PR helps to develop positive image for the organization. A strong
image is insurance against later mis-fortunes.
Stimulate awareness: Public relation techniques helps to stimulate awareness among the
customers regarding the products of the company and thereby creating demand for your
product.
Functions of public relations
The functions of public relation is given below:-
• Creating awareness for a company or client and building a positive image for
them through articles and stories in the various channels of media.
• Keeping an eye on all media channels for any public feedback on the client
company or its products.
• Crisis management in cases where the company may be endangered.
• Building goodwill and rapport with customers through special events, charity
and community work.
Types of public relation tools:
The important types of tools available to carry out the public relations function include:
✓ Media Relations
✓ Media Tours
✓ Newsletters
✓ Special Events
✓ Speaking Engagements
✓ Sponsorships
✓ Employee Relations
✓ Community Relations and Philanthropy
PERSONAL SELLING
Personal selling is the art of convincing the prospects to buy the given products and
services. Though it is basically a method of communication, it is two way as it involves
direct face to face contact between the salesman and the prospect. It is the ability to convert
human needs into wants. It is the process of contacting the prospective buyers personally and
persuading them to buy the products.
According to American Marketing Association, “Personal selling is the oral
presentation in a conversation with one or more prospective purchasers for the purpose of
making sales; it is the ability to persuade the people to buy goods and services at a profit to
the seller and benefit to the buyer”.
In the words of Garfield Blakde, “Salesmanship consists of winning the buyers
confidence for the seller’s house and goods, thereby winning the regular and permanent
customer.”

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Features of Personal Selling

✓ It is one of the important tools for increasing sales.
✓ It is a two way communication between salesmen and the prospect.
✓ It is a persuading process to buy the goods and services.
✓ The objective of personal selling is to protect the interest of both seller and
buyer.
✓ The essence of personal selling is interpretation of product and service
features in terms of benefit and advantages.
Process of Personal Selling
Selling is the sequence of steps involved in the conversion of human desire into
demand for a product or service. Personal selling process involves the following stages.
Prospecting: It is the work of collecting the names and addresses of persons who are likely
to buy the firm’s product of services. While collecting the details, ‘suspects’ must be
separated from ‘prospects’ to avoid waste of time.
Pre approach: Pre approach is to get more detailed facts about a specific individual to have
effective sales appeal on him or her. It is closer look of prospects like habits, financial status,
social esteem, family background, material status, tastes and preferences etc.
Approach: Approach means the meeting of the prospect in person by the salesmen. It is a
face to face contact with the prospect to understand him better.
Presentation and demonstration: A good sales presentation is one that not only gives all
the benefits that the prospect gets but also proves to the latter that he or she will better off
after the product is bought and used. An effective sales presentation demands the sales
person use skills like presentation and explanation.
Managing objections: This is the most important stage of personal selling. For every action
of salesman there is prospect’s pro action or reaction, i.e., approval or disapproval. An
efficient sales man has the ability to identify the reasons for raising objections by the
prospects and the ways to overcome these objections.
Sale: If all the above stages have been concluded successfully, then the next stage is ultimate
sale of the product.
Merits of Personal Selling
Flexibility and adaptability:
It is capable of providing more flexibility and adaptability.
Minimum waste:
The chances of wastage is minimum in case of personal selling while comparing to
other methods of sales promotion.
Acts as feedback:
Being in direct contact with the consumers, he can understand the feeling and
reactions of the customers. It helps to modify the product according to the requirements of
customers.
Creates lasting impression:
It helps to create a long lasting relationship with the customers through the personal
contact of salesmen.

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Limitations of Personal Selling:

It is expensive:
Personal selling as a method of promotion is quite expensive. Getting salesmen and
retaining him for a long period is very difficult and expensive.
Difficulty of getting right kind of salesman:
In practice, it is very difficult to get a trained salesmen from company’s point of
view.
More administrative problems: Personal selling involves more administrative problems than
impersonal selling.

Prepared by
Dr. A. JAFAR SATHIC
Assistant Professor,
Department of Business Administration,
Manonmaniam Sundaranar University College,
Sankarankovil-627 756

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