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Comprehensive Notes
___________________________________________________________________________According to the syllabus of University of Azad Jammu & Kashmir
Composed and edited by: Tariq Rajput 03335885711Majid Rajput 03452227077Department of Commerce & Business Administration University of AJK
Made easy by. Miss Ambreen Bilal
Marketing Management
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By keeping in mind the outline for Marketing Management MBA II of university of Azad Kashmir, I put my knowledge and research into work to compile thesecomprehensive notes. These will prove a good source of knowledge and preparation of exam. Please support & appreciate my effort by not trying to reproduce my work without any prior permission.Ms Ambreen Bilal MBA Finance, University of AJK
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MARKETING MANAGEMENT
COURSE OUTLINE
1. Nature and definition of marketing management
Meaning and importance of products
Importance of product innovation
Planning and development of new product
Product line and product mix
Major product line strategies
Factors influencing change in product mix
Planned obsolescence and fashion
Branding, packaging, labeling and image building factors
2. Price-pricing system
Meaning and importance of price and pricing system/objective
Procedure for price determination
Basic methods of setting price
Price polices and strategies
3. Distribution structure
Channel of distribution
Nature of retail market, economics basis of retailing and its Classification. Retailer’swhole seller and methods of operation.
Designing and managing channel of distribution.
Managing of physical distribution
3. Promotional activities
The promotional program
Campaign concept
Promotional mix- sales promotions, personal selling
Nature and importance of advertising
Development of advertising.
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CONTENTSOUT LINE: 01. INTERODUCTION
1.1 definition Marketing management----------------------------------------------------------------- 061.2 Meaning and importance of products-----------------------------------------------------------------081.2Nature of marketing management-----------------------------------------------------------------------101.3 Product, classification of a product--------------------------------------------------------------------141.4 Importance of product innovation----------------------------------------------------------------------171.5 Planning and development of new product-----------------------------------------------------------191.6 product life cycle-----------------------------------------------------------------------------------------231.7 Product line and product mix---------------------------------------------------------------------------261.8 Factors influencing change in product mix-----------------------------------------------------------261.9 Planned obsolescence and fashion---------------------------------------------------------------------3110 Branding, --------------------------------------------------------------------------------------------------34Packaging, ----------------------------------------------------------------------------------------------------37Labeling and image building factors----------------------------------------------------------------------39
OUTLINE: 02. PRICE-PRICING SYSTEM
2.1 Meaning and importance of price----------------------------------------------------------------------402.2 Pricing system/objective---------------------------------------------------------------------------------422.3 Procedure for price determination OR Basic methods of setting price----------------------------442.4 Price polices and strategies------------------------------------------------------------------------------47
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OUT LINE: 03. DISTRIBUTION STRUCTURE
Channel of distribution--------------------------------------------------------------------------------------51 Nature of retail market, -------------------------------------------------------------------------------------54Economics basis of retailing and its Classification. ----------------------------------------------------55Retailer’s whole seller---------------------------------------------------------------------------------------58Methods of operation. ---------------------------------------------------------------------------------------58Designing and managing channel of distribution.-------------------------------------------------------61Managing of physical distribution-------------------------------------------------------------------------61
OUT LINE: 03 .PROMOTIONAL ACTIVITIES
The promotional program-----------------------------------------------------------------------------------64Promotional mix----------------------------------------------------------------------------------------------64Sales promotions,---------------------------------------------------------------------------------------------64Personal selling----------------------------------------------------------------------------------------------68 Nature and importance of advertising----------------------------------------------------------------------71Development of advertising. -------------------------------------------------------------------------------77
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Marketing Management
Outline 01
1.1 Marketing management1.2 Nature and definition of marketing management1.3 Meaning and importance of products
Classification of product
1.4 Importance of product innovation1.5 Planning and development of new product
Reasons of failure of new product
New Product Strategy
1.6 Product line and product mix
Product mix
Major Product-Mix Strategy
Product line
Major product line strategies
1.7 Factors influencing change in product mix1.8 Planned obsolescence and fashion
Nature of planned obsolescence
Nature of Style & Fashion
Fashion adoption process
Marketing consideration in fashion
1.8 Branding, packaging, labeling and image building factors
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Marketing Management
1.1 What is marketing management? Market:-
Market is a place where buyers and sellers meets and goods and services sales and buys producers.
Marketing:-
It is a total system of business activities design to plan promote and distribute wantsatisfying goods and services to target market.
Marketing management:-
It can be define as a art and science of choosing target volume and getting keeping andgrowing customer to creating delivering and communicating superior customer value.
Explanation:-
1) Science and art2) Choosing target market3) Getting, keeping, growing customer (4ps)
1) Marketing Management is both a Science as well as an Art:-
Marketing Management is both a science as well as an art. The science of marketingmanagement provides certain general principles which can guide the managers in their professional effort. The Art of Marketing management consists in tackling every situation in aneffective manner. As a Matter of fact, science should not be over-emphasized nor should art bediscounted the science and the art of marketing management go together and are both mutuallyinterdependent and complimentary. Marketing Management is thus a science as well as an art. Itcan be said that-"the art of Marketing management.
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2) Choosing target Market:-
A marketer can rarely satisfy everyone in a market. Not everyone likes the same softDrink, automobile, college, and movie. Therefore, marketers start with market segmentation.They identify and profile distinct groups of buyers who might prefer or require Varying productsand marketing mixes. Market segments can be identified by examining Demographic, psychographic, and behavioral differences among buyers. The firm then decides which segments present the greatest opportunity—those needs the firm can meet in a superior fashion.
3) Marketing Mix
Marketers use numerous tools to elicit the desired responses from their target markets.These tools constitute a marketing mix Marketing mix is the set of marketing tools that the firmuses to pursue its marketing objectives in the target market. As shown in Figure 1-3, McCarthyclassified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion.Figure 1-3 The Four P Components of the Marketing Mix
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1.2 Nature & Importance of Marketing Management
IMPORTANCE OF MARKETING MANAGEMAGEMENT
It would be difficult to imagine the world without marketing. But it may be equallydifficult to appreciate the importance effective marketing plays most aspect of our lives. We takefor granted the media that are largely supported by advertising. The vast assortment of goodsdistributed through stores close to your homes, and the ease with which we can make purchases.Lets consider for a moment how marketing plays a major role in the global economy , in theAmerican socioeconomic system in any individual organization and in your life.
1) Globally:-
Profit and growth objectives are most likely to be achieved through a combination of domesticand international marketing rather then solely from domestic marketing.Until the late 1970s American firms had a large and secure domestic market. The onlysignificant foreign competition was in selected industries, Such as agriculture, or for relativelynarrow markets, such as luxury automobiles. But this change domestically through the 1980s asmore foreign firms developed attractive products, honed their marketing expertise, and thensuccessfully entered the US market. Imported products in some industries, such as officeequipment, autos, apparel, watches and consumer electronics, have been very successful. As aresult in recent years the U.S. has been importing more then its exports, creating large annualtrade deficits.
2) Domestically:-
Aggressive, effective marketing practices have been largely responsible for the highstandard of living in the United States. The efficiency of mass marketing – extensive and rapidcommunication with customers through wide verity of media and a distribution system thatmakes products rapidly available- Combined with mass production brought the cost of many products within reach of most customers.
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a) Employment and costs:-
When we get an idea of significant marketing in the U.S. economy by looking at howmany of us are unemployed in same way in marketing and how much of what we spend coversthe cost of marketing. Between one third and one fourth of the U.S. civilian labor force isengaged in marketing activities.
b) Creating Utility:-
A customer purchases a product because it provides satisfaction. The Want satisfying power of a product is called its utility and it becomes in many forms. It is through marketing thatmuch of a products utility is created.
3) Organizationally:-
Marketing consideration should be integral part of all short and long range planning in anycompany. Here’s why:
The success of any business comes from satisfying the wants of its customers which isthe social and economic basis for the existence of all organizations.
Although many activities are essential to a company’s growth , marketing is the only onethat produce revenue directly.
a) Services marketing:-
The U.S has gone through from primarily manufacturing economy to the world’s firstservice economy. As opposed to goods, services are activities that are the object of a transaction.For example transportation, communication entertainment, medical care, financial services,education and repair services account of over two third of the nation’s gross domestic product.
b) Not for profit marketers:-
During 1980s and early 1990s many not for profit organizations realized thy neededeffective marketing programs to make up for shrinking government subsidies a decrease incharitable contribution and other unfavorable economic.
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Not for profit organizations need to improve their image and gain greater acceptanceamong donors, government agencies, news, media, and consumers all of which collectivelydetermine an organization’s success.
4) Personally:-
Consider how many marketers view you as a part of their market. With people like you inmind, firms such as Nike, VSA, and Microsoft have designed products, set prices, createdadvertisement and chosen the best methods of marketing their product available to customers. Inresponse customers watches TV. With its commercials buy various articles over internet and instores etc.Marketing occupies a large part in our daily life. Studying marketing will make you better informed. You will have a better idea for why some firms are successful and other seemingly run business fail. More especially you will discover how firms go about deciding what products to offer, and what price is to charge. Marketing will help you understand the manyforms of promotion and how they are used to inform and persuade customers. And it will helpyou the modern miracle of efficient distribution that make product available when and where buyers want them.
NATURE OF MARKETING MANAGEMENT
Marketing as a process:-
Marketing is a process that marketing managers execute. In a number of instances, amarketing manager does not manage people, but manages the marketing process. A productmanager is an example of such a marketing manager; s/he manages the marketing process for a product within a larger marketing organization. We, as consumers, see the results of that processin the form of products, stores, shopping malls, advertisements, sales pitches, promotions, prices,etc. This process usually involves four phases.
Analysis:-
Markets must be understood, and this understanding flows from analysis. Marketingmanagers spend weeks analyzing their markets before they undertake the development of marketing plans for influencing those markets.
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Planning:-
Once a market is understood, marketing programs and events must be designed for influencing the market's customers and consumers, and even the firm's competitors.
Execution:-
The marketing events are executed in the markets: advertisements are run, prices are set,sales calls are made, etc.
Monitoring:-
Markets are not static entities and thus must be monitored at all times. After eventsexecute, they need to be evaluated. The planning assumptions upon which the upcoming eventsare based must be continually tested; they are not longer true then the events may needmodification.
The D Roles of a marketing manager:-
Marketing managers play many roles, and we can describe them with words that begin withthe letter D:
Detective:-
The marketer is charged with understanding markets, and thus must spend considerabletime learning about consumers, competitors, customers, and conditions in the markets. Thislearning takes many forms: formal marketing research studies, analysis of market data, marketvisits, and discussions with people in the markets. The result of these studies include insightsabout market conditions, and the identification of problems and opportunities in the variousmarkets.
Designer :-
Once a problem or opportunity has been identified, the marketer turns her/his attention todesigning marketing programs that solve the problems and/or capture the opportunities.
Decision maker:-
Marketing is a group process that involves many different people, each of whom may bedesigning marketing programs and events. Thus the marketer must make decisions about which programs to execute.
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Decision Influencer:-
Marketers exist in corporate structures that require higher level executives to approve themarketing plans, programs, and events that come out of the marketing group's work. Thus themarketer must influence the decisions of these senior executives.
Diplomat:-
Marketers design marketing events that others must execute: the sales force must executethe sales plan; the advertising agency must execute the advertisements, etc. These units do notusually "report to" the marketing managers, and they are undertaking tasks given to them bymultiple marketing managers. Thus, each manager must plays a diplomatic role while inducingthese units to execute his/her program in a timely and high quality way.
Discussant:-
All of these roles require considerable discussion among many parties within and outsidethe company. Thus the marketing manager spends most of his/her time in discussions withothers.
Managing the Marketing Mix
Marketing managers can control or influence four aspects of the firm's output: its products, promotions, prices, and the places that all of these are offered.
ProductProduct management involves the design of the physical product along with its packagingand warranties, the positioning of that product in terms of the benefits it delivers, and thedevelopment of the product's brand identify.
Promotion:-
It is generally not true that consumers will beat a path to your door if you have a superior product; they must be told about it and induced to buy it ... thus the need for promotion.Promotion includes personal selling, advertising, sales promotions, and public relations.
Price:-
Pricing strategies and tactics must be determined for the product, and then followed to set prices for all the sizes and variants of the product. The result is usually a price schedule thatincludes the regular price, volume discounts, payment terms, seasonal prices, introductory prices,etc.
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Place:-
Marketing managers are involved in decisions about where the product is offered to theconsumer in terms of the channels of distribution.
Operating within constraints:-
Marketing managers must undertake all of the above activities within various constraints, allof which start with the letter C. None of these constraints are under the direct control of themarketing managers; some can be influenced; all can be understood.
Competition:-
Other companies are competition for the same consumers and channels of distribution.
Channels:-
Retail stores, electronic markets, communications media exist to serve the marketer. Inthe short run, they must be accepted as constraints; in the long run, the marketer can exert somecontrol over them ... even vertically integrate into the channels.
Consumers:-
Consumers have
needs and wants
. The marketers must understand those
needs
beforethey can design marketing programs aimed at impacting consumer
wants
.
Conditions:-
Markets are not static but in constant evolution under the influences of the economy,changing tastes and fashions, population dynamics, etc.
Company:-
Company policies, procedures, practices, and cultures place constraints upon themarketing resources and programs that the marketer can deploy.
Marketing is Collaboration:-
The nature of marketing requires marketing managers and professionals to work together on all aspects of marketing. It is common for the marketing manager to be at the center of a setof activities being worked on by people within the company (sales force, promotion manager, product development teams, etc.) and outside the company (ad agencies, consultants, marketingresearch firms, etc). Thus marketing managers must spend considerable time in consultation andcollaboration with other people.
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1.3 Meaning and importance of products and classification of product
PRODUCT DEFINATION
Product:-
A product is a set of tangible and intangible attributes which may include, packaging,color, price, and quality, brand, and seller reputation and seller services.The first commandant in marketing is the customer and the second is the product. Innarrow sense product is the product is set of basic attributes assembled in an identified form.Each product is identified by a commonly understood descriptive name, such as steel, insurance,tennis rackets etc.
There are many definitions of product by different authors.1-
A product is a set of tangible and intangible attributes, which may include packaging,color, price, quality, brand and seller’s services and reputations.2-
Product is a service that provides the benefit of a comfortable night rest at a reasonable price.3-
Product is a place that provides sun and sand, relaxation, romance, cross culturalexperiences and other benefits.
Explanation:-
We treat each brand as separate product. Any change in a feature (design, color, size, packing) however minor, creates another product. Each such change provides the seller with anopportunity to use a new product. A product may be a good, service, place, person or idea.Customers buy products to satisfy their needs.
Classification of product:-
Products or goods are basically of two types.(1). Consumer goods(2). Industrial goods.
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(1). Consumer goods:-
Consumer products are produced for personal consumption by households. There are four types of consumer goods.
(1). Convenience goods:-
Goods that the consumer usually purchase frequently, immediately, and with theminimum of effort in comparison and buying for most buyers, convenience goods include manyfood items, inexpensive candy, drugs like aspirin and tooth paste, hardware items such as light bulbs and batteries. Convenience goods have low price an are not greatly affected by fad andfashion. A manufacturer prepares these products to distribute it widely and rapidly.
(2) Shopping goods:-
A tangible product for which a consumer wants to compare quality, price and perhapsstyle in several stores before making a purchase is known as shopping goods. Examples of shopping are furniture, automobiles, major appliance etc. The process of searching andcomparing continues as long as consumer feels satisfaction. The shopping goods can be dividedinto homogeneous and heterogeneous goods. The homogeneous goods are similar in quality butdifferent in price. The heterogeneous products are different in quality and prices.
(3) Specialty goods:-
A tangible product for which a customer give preference to a strong brand and he wantsto expend substantial time and effort in locating the desire brand is called a specialty good.Examples of specialty goods are men’s suits, stereo sound equipment, health foods, photographequipment, new automobiles and certain home appliances. The specialty goods do no involve the buyer’s making comparisons, the buyer only invest time to reach the dealers carrying the wanted products.
(4) Unsought goods:-
An unsought good is a new product from which a consumer is not aware. More peopleare unaware of interactive movies. An electric car might be an unsought good for most people, because they are unaware of it. Bathroom tissue made strictly from cotton fiber would seem to be
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an unsought good. A firm faces a very difficult, perhaps impossible advertising when trying tomarket unsought goods. Marketers market unsought goods by placing ads on bus-stop benchesor in church buildings.
(b). Industrial goods/Business goods:-
Industrial products are purchased to produce other products or for use in a firm’soperations. Industrial products are purchased on the basis of organization’s goals and objectives.On the basis of their uses and characteristics, industrial or business products can be classifiedinto seven categories.
1).Raw material:-
Raw materials are the basic materials that actually become part of the product. They are provided form mines, forests, oceans, farms and recycled solid wastes.
2).Fabricating Materials and parts/Capital items:-
Major equipment includes large tools and machines used for production purposes.Examples are rather, cranes, Stamping machines.
3). Accessory Equipment:-
Accessory equipment does not become part of the final product but is used in productionor office activities. Examples include, hand tools, type writers, fractional horse power motors etc.Accessory equipments are less expensive than capital items.
4).Component Parts:-
Component parts become a part if the physical product and either are finished items readyfor assembly or are products that enter the finished product completely with no further change inform, as when small motors are put into vacuum cleaners and tires are added on automobiles.Spark plugs, tires, clocks and switches are all component parts of the automobile.
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5).Process material:-
Process materials are used directly in the production of other products. Unlike component parts, however process materials are not identifiable process materials are further fabricated. For example, Pig iron is made into steal and Yarn is woven into cloth.
6).Supplies:-
Supplies facilitate productions, but they do not become part of he finished product. Paper, pencils, oils, cleaning agents and paints are examples.
7).Industrial Services:-
Industrial services include maintenance and repair services. (e.g.; window cleaning,typewriter repair) and business advisory services. (e.g.; legal, management, consulting,advertising, marketing research services). These services can be obtained internally as well asexternally.
1.4 Product innovation & Importance of product innovation
IMPORTANCE OF PRODUCT INNOVATION
The main purpose of business is to satisfy customers and to make profit fundamentally; acompany fulfills this purpose through its products. New product planning and development arevery important for an organization’s success. The new products must satisfy customers need aswell as must be profitable for the firm.
Requirement for growth:-
Sooner or later, many products brands become outdated. Their sales volumes and marketshares drop because of changing desires or superior competing products.
Examples of outdated products:-
⇒
Once successful products that are now become outdated include fountain pen, audiocassettes.
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⇒
Now many dated products are becoming successful rapidly for example, white cloud bathroom tissue, computers, etc.Thus the guideline for management is innovating or die. Introduction a new product at the righttime can help sustain a firm. In fact, companies that are leaders in terms of profitability and salesgrowth obtain 39% of their revenues from new products.Some firms that were successful innovators for long periods like Nike, Procter andGamble, haven’t maintained a steady flow of new products in recent years. Some of their competitors have been more successful. Business profitability and success depends oninnovation. IF we innovate well, we will ultimately win.
High Failure Rates:-
For many years, “the rule of thumb” has been that about 80% of new product fail. New products higher failure rate is due to no change in existing products or new products are not being different that existing products. For example, Vaseline after shave lotion, Pepsi A.M, andFarrah Shampoo. A new product is also fail if it does not deliver on its promise. Further, a product can be failed if it is perceived as offering poor value in relation to its price. Other factorsthat can undermine new products include poor positioning and lack of marketing support.Firms that are inattentive to their new products can face higher failures. Firms andorganizations that effectively manage product innovation can get higher advantage, higher salesand profits and solid foundation for the future.
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1.5 Planning and development of a new product
NEW PRODUCT
There are several possible categories of new products. Each separate category mayrequire quite a separate marketing programmed to ensure a reasonable probability of marketsuccess.Three considerable categories of new products are:-
1) Products which are really innovative:-
Truly unique, e.g., a hour restores, cancer cure products for which there is a real used but for which no existing substitutes are considered satisfactory. In this case we also includes productthat are quite different from existing product but satisfy the same need.
2) Replacement for existing products:-
That are significantly different from existing goods. Annual model, change automobiles and newfashions in clothing, belong to this category.
3) Imitative Product:-
That are new to a particular company but not new to market, with a “me-too” product. Perhapsthe key criterion as to whether a given product is new is how to intend market perceives it. If a buyer perceives a product is significantly different from competitive goods in somecharacteristics then it is a new product.
Reasons of failure of new product:-
The new product fails due to certain reasons in market.1.
The idea is good, but market size is overestimated.2.
The product is not well-designed.3.
The product is incorrectly positioned in market, no advertised effectively and over- priced.4.
The product fails to gain sufficient distribution coverage or support.5.
Development costs are higher than expected.6.
Competitors fight back harder than expected.
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Organizing new product development:-
Companies handle organizational aspects of new product development in several ways.Many companies assigned responsibility for new product ideas to product manager. But productmanagers are often busy in managing existing lines that they give little time and effort to new products other than line extensions. They also lack specific skills and knowledge needed todevelop and critique new product.
New Product Strategy:-
A new product strategy is a statement identifying the role of new product is expected to play in achieving corporate and marketing goals. New product development process
Stages:-
A new product is best developed through a series of eight stages.As compared to unstructured development the formal development of new product provides benefits such as improved team work, lesser work, earlier failure detection and most importanthigher success rate.
1).Idea generation:-
The new product Development process with the search for ideas. New product ideascomes through interacting with various group of people , such as customer, scientists,competitors , employees and top management. Companies can also find good ideas by searchingcompetitor’s products and services. From this they can find out what the customers likes anddislike about competitors products. They can buy their competitors products, take them a partand build better ones. Many companies also encourage employees particularly those on production line to come forth with ideas, often offering cash reward for good suggestion. New product ideas also come from inventors, university and commercial laboratories, advertisingagencies. As the ideas start to flow, one will sprat another, and within a short time hundred of new ideas may be brought to surface.
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2) Idea screening: -
Idea screening is second stage in new product development once a large pool of ideas has been generated by what ever their means, their number have to be pruned to manageable level. Inscreening ideas the company must avoid two types of error.
Drop error: -
Occurs when the company dismisses an otherwise good idea.
Go error: -
Mean adoption of poor ideas
The purpose of screening is to drop poor ideas as early as possible. Many companiesrequire their executives to write up new product on a standard form that can be received by anew product committee. The write up describes product idea, target market and competition. Itmakes some rough estimate of market size, product price, development cost and rate of return.
3) Concept development and testing: -
A product idea is possible product the company might offer to the market. A productconcept is an elaborated version of ideas expressed in a meaningful consumer terms. Throughoutthe stages of idea generation and screening, the developers are only with the product idea,general concept of what product might be.Concept development involves many questions:i) Who will buy the new product?ii) What is the primary benefit of new product?iii) Under what circumstances, the new product may be used?
Concept testing:-
Concept testing involves presenting the product concept to appropriate target consumersand getting their reactions.
4) Marketing Strategy: -
Following the successful concept test, the new product manager will develop a preliminary marketing strategy plan for introducing the new product into market. The planconsists of three parts. The first part describes the target market size, structure and behavior, the planned product positioning and sales, market share, profit goals sought in the first few years.The second part outlines the planned price, distribution strategy and marketing budget for first year.The third part of marketing strategy plan describes the long run sales and profit goals and
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marketing strategy overtime.
5) Business Analysis: -
The next step in new product development is business analysis. The market must project costs, profit and return on investment for the new product if it were placed in market.Business analysis is not a short process; it is a detailed realistic projection of bothmaximum and minimum sales and their impact on economy or company. For some productssuch as another candy bar, marketers can use existing sales data to guide themselves. But with a product, for which sales data does not exist, only estimation can be used.
6) Product Development: -
If the result of business analysis is favorable then a prototype of the product is developed.In development stage, the idea is given in a concrete or tangible form. Up to now, the producthas existed only a word description, a drawing or a prototype. This step involves a largeinvestment. The company will determine whether the product idea can be translated into atechnically and commercially feasible product.
7) Test marketing: -
After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packaging and put into a market test.Test marketing involves how large the market is and how consumers and dealers react tohandling, using and repurchasing the product.The amount of test marketing is influenced by investment cost and risk on one hand andtime pressure and research cost on the other.
8) Commercialization: -
As the company goes ahead with commercialization, it will face its large gest costs todate. The company will have to contract for manufacturing facility. Another major cost ismarketing
Example:-
To introduce a major new consumer packaged good into the national market, thecompany may have to spend b/w $20 million and $80 million in advertising and promotion in thefirst year. In the introduction of new food products, marketing expenditures typically represents57% of sales during the first year
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1.6 Product life cycle
PRODUCT LIFE CYCLE
A product life cycle consists of the aggregate demand over an extended period of time for all brands comprising a generic product category. A product life cycle can be graphed by plottingaggregate sales volume for a product category over a time, usually years. It is also worthwhile toaccompany the sales volume curve with the corresponding profit curve for the product category.As shown in the figure 9.2After all a business in interested in profit not in just sales. The shape of these two curves variesfrom one product category to another. Still for most categories, the basic shape of the relationship between the sales and the profit curves are illustrated in figure 9.2. In this typical life cyclethe profit curve for most new product is negative, satisfying a loss, through much of introductorystages. In the later part of growth stage, the profit curve starts to decline while the sales volumeis still rising. Profit declines because the companies in an industry usually must increase their
IntroductionGrowthMaturityDeclineProfit
Times in year
Dollars
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advertising and selling efforts or cut their prices to sustain sales growth in the face of intensifying competition during the maturity stage.The product life cycle consist of four stages
1) Introduction:-
During introduction stage, some times called pioneering stage, a product is launched intothe market in a full scale of marketing program. It has gone through product development,including idea screening, prototype, and market test. The entire product may be new, such as thezipper, the video cassette recorder, etc for a new product there is very little competition.However, if the product has tremendous promise, numerous companies may enter into theindustry early on. That has occurred with digital TV, introduced in 1988.Introduction is the most risky and expensive stage because substantial dollars must bespent not only to develop the product but also to seek consumer acceptance of the offering.
2) Growth:-
In the growth stage on market acceptance stage, sales and profit rise frequently at a rapid rate.Competitors enter the market, often in large number if the profit outlook is particularly attractive.Mostly as a result of competition profit start to decline nears the end of the growth stage.As a part of firm’s efforts to build sales and in turn, market share, prices typically declinegradually during this stage. ‘’The only thin that matters is if the exponential growth of your market is faster then the exponential decline of your prices’’
Maturity:-
During the first part of the maturity stag, sales continue to increase, but at a decreasing rate.When sales level off, profits of both producers and middle-man decline. The primary reasonincrease price competition. Some firms extends their product lines with new models, other comeup with a new improved version of their primary brand. During the later part of this stagemarginal producers those with high cost or no differentiate advantage drop out to the market.They do so because the lack sufficient customers or profit.
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Decline:-
For most products a decline stage, as gauged by sales volume for the total category is inevitablefor one of the following reason.
A better or less expensive product is developed to fill the same need.
The need for product disappears, often because of other product development.
People simply grow tired of a product so disappear from the market.
Length of product life cycle:
The length of product life cycle from the start of introduction stage to the end of decline stagevaries across the product categories. It ranges from a few weeks or a short season ( for a clothingfashion) to many decades ( for autos or telephones). And it varies because of differences in thelength of individual stages from one product category to the next.
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8) Commercialization: -
As the company goes ahead with commercialization, it will face its large gest costs todate. The company will have to contract for manufacturing facility. Another major cost ismarketing
Example:-
To introduce a major new consumer packaged good into the national market, thecompany may have to spend b/w $20 million and $80 million in advertising and promotion in thefirst year. In the introduction of new food products, marketing expenditures typically represents57% of sales during the first year
1.7 Product line and product mix
PRODUCT MIX & PRODUCT LINE
Product Mix: -
A product mix is the set of all the products offered for sale by a company. The structureof product mix has width, depth, length and consistency. or
Product mix can be defined as:-
“Product mix is defined as, the set of all product lines and items that a particular seller offers for sale to buyers.”
The product mix is also known as product assortment. Or factors influencing change inproduct mixWidth:-
The width of the product mix refers to how many product lines the company carries.
For Example:-
proctor & gamble markets a fairly wide product mix consisting of many product lines includingfood, household, cleaning , mechanical, cosmetics and personal care products
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Depth:-
The depth of the product mix refers to how many varieties are offered of each product inthe line.
For example: -
P&G Crest tooth paste comes in three sizes and two formulations (past ,gel)
Length:-
The length of the product mix refers to the total number of items in its product mix.
For example:
P&G typically carries many brands within each line It sells eight laundry detergents, sixhand soaps , six shampoos, & four dish washing detergents.
Consistency: -
The consistency of the product mix refers to how closely relate the various product linesare in end-use, production requirements, distribution channels or in some other way.
For example: -
P&G product lines are consistent insofar as they are consumer products that go throughthe same distribution channels. The lines are less consistent insofar they provide differentfunctions for buyers.These four dimensions of the product mix provide the handles for defining the company’s product strategy. The company can adopt product lines, thus widening its product mix.
Major Product-Mix Strategy: -
Manufacturers we several major strategies in managing their product mix.
1) Expansion of product mix: -
A firm may decide to expand its present mix by increase the number of lines or the depthwith in the lines. Now lines may be related or unrelated to the present products. The companymay also increase the number of items in its product mix.
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2) Contraction of product mix: -
Another product strategy is to thin out the product mix, either by eliminating entire lineor by simplifying the assortment with in a line. The shift from fat and long lines to thin and shortlines, is designed to eliminate low-profit products and to get more profit from fewer products.There are many examples of product mix contraction, sometimes involving will knownfirms. For example, Unilever, and English, Dutch firm decided to produce more than 1000 brands from its total set of about 1600. The company wants to concentrate its marketingresources on the 400 or so remaining brands including Lipton teas, Lever soap that generate 90%of annual revenues.
3) Alteration of existing product: -
In spite of developing a complete new product, management should take a fresh look atthe company’s existing products. Often, improving and established product can be more profitable and less risky than developing a completely new one.For material goods, especially, redesigning is often the key to products, renaissance packaging has been a very popular area for product alteration, particularly in consumer products.
4) Positioning the product: -
Positioning of product in the market is a major determinant of company profits. A product position is the image that the product projects in relation to competitive product and toother products marketed by the same company.Marketing executives can choose from a variety of positioning strategies. These strategiescan be grouped into following six categories:
1). positioning in relation to a competitor: -
Position is directly against the competition.
2). positioning by product attribute: -
The company associates its product with some product features.
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3). positioning by price and quality:
-To position on high price, high quality or low price, low quality basis.
4). Positioning in relation to product use.5). Positioning in relation to a target market: -
(Market Segmentation)
6). Positioning in relation to product class: - (
Associating the Product) a class of product
5) Trading up & trading down: -
As product strategies, trading up and trading down involves, essentially, an expansion of the product line and a change in product positioning.Trading up means adding a higher priced prestige product to a line in the hope of increasing the sales of existing lower priced products. When a company going on a policy of trading up, at least two ways are open with respect to promotional emphasis.(1) The seller may continue to depends upon the older, lower-priced product for the bulk of thesales volume and promote it heavily or (2) The seller may gradually, promote the new product and expect it to share a major salesvolume.A company is said to be trading down when it adds a lower priced item to its line of prestige products. The company wants to sale its products rapidly.
Product Line
A product line includes a group closely related products that are considered a unit because of marketing, technical or end-use consideration.
Definition: -
A broad group of products intended for essentially similar uses and possessing reasonablysimilar physical characteristics, constitutes a product line. Or
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“A product line is defined as” A product line is a group of products that are closely related, either because(1) They function in a similar manner.(2). Sold to the same customer groups(3). Marketed through the same type of outlets,(4). Fall with in a given price ranges.Clothing is an example of product line. But in a different context, say in a small specialtyshop, men’s furnishings (shirts, ties and under wears) and men’s ready-to-wear (suits, jackets,topcoats and stocks) would each constitute a line.There are product line managers for refrigerators, stoves and washing machines.
Product line decisions, management and responsibilities:-
Product line decisions are concerned with the combination of the individual products offeredwithin a given line. The product line manager supervises several product managers who areresponsible for the individual products and the line. Decisions about a product line are usuallyincorporated into a marketing plan at the divisional level. Such a plan specifies changes in the product lines and allocation to the products in each line. Generally, product line managers havethe following responsibilities;1.
Considering expansion of a given product line2.
Considering candidates for deletion from the product line3.
Evaluating the effects of the product addition and deletions on the profitability on theother items in the line.4.
Allocating resources to individual products in the line on the basis of marketingstrategies recommended by product managers.
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1.9 Planned obsolescence and fashion
PLANNED OBSOLENCENCE AND FASHION
American consumers seem to be constantly searching for “what’s new” but not too new.They want newness, new products, new style and new colors. However they want to be movedgently out of their habitual patterns, not shocked out of them,So, consequently, many manufacturers use a product strategy of planned obsolescence. The purpose of this strategy is to make an existing product out-of-date and to increase the market for replacement of products. Consumers often satisfy their thirst for newness through fashion. And producers of fashion rely heavily on planned obsolescence.
Nature of planned obsolescence: -
The term planned obsolescence is used to refer to either two developments.
(i). Technological obsolescence: -
The significant technical improvements result in a more effective product. For examplecassette types made phonograph records out-modes and then compact discs rendered cassettesobsolete. This type of obsolescence is generally considered to be socially or economicallydesirable because the replacement product offers more benefits or at a lower cost.
(ii). Style obsolescence: -
In style obsolescence superficial characteristics of a product are altered so that newmodel is easily differentiated from the previous model. Style obsolescence sometime called psychological or fashion obsolescence is intended to make people feel out of date. If theycontinue to use old models. Normally, when people criticize planned obsolescence, they mean style obsolescence.
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Nature of Style & Fashion: -
Although the words style and fashion are often used interchangeably, but there is a clear distinction. A style is a distinctive manner of construction or presentation in any art, product.Thus we have style in automobiles, in furniture and in music.A fashion is any style that is popularly accepted or purchased by successive group of people over a reasonably long period of time. Not every style becomes fashion. To be considereda fashion or to be called fashionable, a style must be accepted by many people.
Fashion adoption process: -
The fashion adoption process reflects the concept of 1) Cultural, social class and reference group influences on consumer buying behavior.
2) Diffusion of innovation: -
Thus fashion adoption process is a series of buying waves that arise as a particular style is popularly accepted is one group then another group and another, until it finally out of fashion.This movement representing the introduction, rise, popular culmination and decline of themarket’s acceptance of a style is referred to as fashion cycle.There are three theories of fashion adoption.
(1).Trickledown: -
Where a given fashion cycle follows downward through several socioeconomic levels.
(2). Trickle across: -
Where the cycle moves. Horizontally and simultaneously within several socioeconomiclevels.
(3)Trickle up: -
Where a style first becomes popular at lower socioeconomic levels and then flowsupward to become popular among higher levels.
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Traditionally, the trickle down theory has been used to explain the fashion adoption process. For example, designers of women’s apparel first introduce a style to opinion leaders inupper socioeconomic groups. If they accept the style, it quickly appears in leading fashion stores.Soon the middle income and then low income markets want to emulate the leaders and the styleis mass marketed. As its popularity wanes, the style appears in bargain price stores and finally isno longer considered fashionable.The trickle up process also explains some product adoption processes. Consider ho stylesof music such as Jazz and rap become popular. Also look at blue pants and jackets, athletic footwears. They were popular first with lower socioeconomic groups and later their popularity“trickled up” to higher income markets.Today the trickle across theory best explains the adoption process for most fashions. Nowthe designers of expensive fashions are displaying their new offerings on the internet.Within each class, the chesses are purchased early in season by opinion leaders theinnovators. If the style is accepted, the sales curve rises as it becomes popular with early adoptersand late adopters. Eventually sales decline as style loses popularity
Marketing consideration in fashion: -
In fashion merchandising accurate forecasting is critical to success. This is extremelydifficult; however, the fore caster must dial with complex sociological and psychological factors.For example, noticing an upward trend in late 1998 sales for a T-shirts with deep V-neck,a banana republic merchandiser emphasized this style in spring 1999. Now the deep V-neck shirts become a hot seller.
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10 Branding, Packaging and labeling
BRANDING
The word brand is comprehensive, it encompasses other narrower terms. A brand is aname and a mark intended to identify the product of one seller or groups of sellers anddifferentiating the product from competing products.A brand name consists of words, letters and numbers that can be vocalized. And a brandmark is the part of brand that appears in the form of symbol, design or distinctive color. A brandmark is recognized by sight but cannot be expressed. When a person pronounces the brand name.Trademark is a brand that has been adopted by a seller and given legal protection.One method of classifying brand is on the basis of who owns them. Thus we have producer’s brands and middle men’s brand and later being owned by retailer or whole sellers.
Reason for branding and non-branding: -
In the past, producers and intermediaries sold their goods out of barrels, cases withoutany superior identification. And buyers depend upon seller’s integrity. The earliest signs of branding were the “medieval guilds” efforts require crafts people to product themselves andconsumer against inferior quality.But today branding is such a strong force that hardly anything goes unbranded. So calledcommodities do not have to remain commodities. e.g., salt is packaged in distinctive container,oranges are stamped with growers cane and fresh food products such as chicken, turkey areincreasingly being sold under strongly advertised brand name.
Branding Strategies: -
Both producer and middlemen faces strategic decisions regarding branding of their goodsand services.
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(A). Producer’s Strategies: -
Producer’s most deciding whether to brand their products and whether to sell any or all of their output under middlemen’s brands.
(1). marketing entire output under producer’s own brands: -
Companies that rely strictly on their own brands usually are very large, well-financed andwell-managed.The examples are I.B.M that has broad product lines, well established distribution systemand large shares of market.Branding of fabricating parts and materialsSome producers use a strategy of branding fabricating parts and materials. With thisstrategy, the seller seeks to develop a market preference for its branded parts or materials.The strategy is most likely to be effective when particular type of fabricating parts or materials have two characteristics.(1) The product is also consumer good that is brought for replacement.(2) The item is a key part of finished products, a microprocessor within a personal computer, for example Intel developed the slogan,” Intel inside” to strengthen its product’s position. Thecampaign become so successful that some computer makers, including IBM feared that brand of personal computer would become less important than the brand of microprocessor contained inmachine.
(3) Marketing under middlemen’s brand: -
A wide spread strategy among manufacture is to sell part or all of their output tomiddlemen for branding by these customers. Firms such as Borolen and Keebler have their ownwell-known brands and they also produce goods for branding by middlemen. This approachallows a manufacturer to “hedge its bets”
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A company employing this strategy hopes that its own brands will appeal to some loyalcustomers; where as middlemen’s brands are of interest to other.One drawback of that strategy is that the manufacturer may lose some customers for itsown brands.
(B). Middlemen’s Strategies: -
There are also some middlemen strategies.Carry only producer’s brandsMost retailers and whole sellers follow this policy, because they do not resources to promote a brand and maintain its quality.Carry both producers and middlemen’s brandMany large retailers and some large wholesaler stock popular producers brands and alsohave their own labels.Middlemen may own brands, in place of or in addition to producer’s brands, because itincreases their control over their target markets.Further more, middlemen usually can sell their brands at prices be low those of producer’s brands and still earn higher gross margins.
Carry Generic products: -
Generic products are simply labeled according to the contents such as peanut butter,cottage cheese.
Strategies common to producers & middlemen: -
Producers and middlemen alike must choose strategies with respect to branding their product mixes, branding for market with other companies.
Branding within a product mix: -
At least three different strategies are used by firms that sell more than one product
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A separate name for each product: This strategy is employed by Lever Brothers and proctors andGamble.The company name combined with a product name. Examples include Johnson’s Pledge andJohsons Glo-coat.The company name alone: Today few companies rely exclusively on this policy.Branding for market saturationWith frequency, firms are employing a multi brand strategy to increase their total sales ina market. They have more than one brand of essentially some product.
Co branding: -
Most often, two companies or two divisions within the same company agree to place bothof their respective brands on a particular product or enterprise. The agreement termed as co branding or dual branding.Co branding has potential benefits and drawbacks.Co-branding can be provide added revenues for one or both of the participating firms,such as fee paid to Sunkist Growers by Generals Mills in order to use Sunkist name as packagesof Betty Crocker lemon bar mix.The biggest potential drawbacks to co-branding are possible over-exposure of a brand of name.
PACKAGING
Most physical products have to be packaged. One package, such as coke bottle is worldfamous. Many marketers have called packaging a fifth “P” along with product, price place and promotion.Packaging is defined as all the activities of designing and producing the container for a product.Purpose & importance of packaging
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(1). Protest the product on its way to customer.(2). Provide protection often the product is purchased.(3). Help gain acceptance of the product from middleman.(4). Help persuade consumer to buy the product.Historically, packaging was intended primarily to provide protection. Today packaging is amajor factor in gaining distribution and promotion.And packaging may become a product’s differential advantage, or at least a significant part of it. That was certainly true with coca-cola and its distinctive contour glass bottle.
Packaging Strategies: -
In managing the packaging of a product, executive must make the following strategicdecisions.
1). Packaging the product line: -
A company must decide whether to develop a family resemblance when packagingrelated products. Family packaging uses either higher similar package for all products with acommon and clearly noticeable feature. Family packages makes since when products are of similar quality and have a similar use.
2). Multi packaging: -
For many years, there has been a trend toward multiple-packaging, the practice of placingseveral units of same product in one container.For example, dehydrated soups, motor oil, beer, candy bars and count less other products are packaged in multiple units.
3). changing the package: -
When something is detected in package then company must change a poor feature in anexisting package. For this firm’s need to consider continuing developments such as new
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packaging materials, uncommon shapes, innovative closures, all these are intended to provide a benefit to middlemen and to consumer and as a result are selling points for markers.
LABELING
A label is the part of product that carries information about the product and the seller. Alabel may be the part of package, or it may be a tag attached to product. Obviously there is closerelationship among labeling, packaging and branding.
Types of labels(1) A brand label: -
Is simply the brand alone applied to the product or package.(
2). Descriptive label: -
Gives objective information about product’s use, care, instruction and performance.
(3). A grade label: -
Identifies the product’s judged quality with a letter, number or a word.Brand labeling is an acceptable form of labeling but it does not supply sufficient information to a buyer. Descriptive labeling provides more product information but not necessarily all that isneeded or desired by a consumer in making a purchase decision.
Statutory labeling requirements: -
Labeling has received its share of criticism. For example, consumers have charged thatlabels contain incomplete or misleading information and there were a confusing number of sizesand shapes of packages for a given product. The public’s complaints about false or deceptivelabeling and packaging have lead to a number of federal labeling and packaging have lead to anumber of federal labeling laws.
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Laws: -
The Food and Drug Act 1906 and its amendment, the food, drug and cosmetic Act 1938 provide explicit regulations for labeling drugs, food, cosmetic and therapeutic devices.
Design: -
One way to satisfy customers and gain a differential advantage is through product design,which refers to arrangements of elements that collectively from a good or service.Good design can improve the market ability of a product, by making it easier to operate,upgrading its quality, improving its appearance and reducing production costs. For example,computer programs are supposed to assure that any new software is very user-friendly.According to an IBM, executive, design has become a strategic marketing tool. Design isreceiving more and more attention for several reasons.(1). rapidly advancing technologies are generating not only few products that need attractive yetfunctional designs, but also new materials that can enhance design capability.(2). A growing number of firms have turned to low prices as a competitive tool.For example, for most consumer and business goods, ranging from furniture to electronicequipment design has long been recognized as important.
Color: -
Like design, product color often is the determining factor in a consumer’s acceptance or rejection of a product, whether it is a dress, a table or an automobile. In fact color is soimportant, that U.S Supreme Court confirmed in early 1995 that color of a product or its packaging can be registered as a part of trade mark under the Lanham Act. Color by itself canqualify the trademark status when according to court’s ruling it identifies and distinguishes a particular brand and thus indicates its resources.But poor color choices results in differential disadvantages. For example if a garmentmanufacturer or a person responsible for purchasing merchandize for a retail store guesses wrongon what will be fashionable color in women’s color disaster may ensure.
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So, in short, color is extremely important for packaging as well as for product itself.
Quality: -
There is no agreed definition of product quality, even though it is universally recognizedas significant. On professional society defines product quality as the set of features andcharacteristics of a good or service that determines its ability to satisfy needs.In quality, personal taste is deeply involved, what you like? Another person may dislike.Beside personal taste, individual expectations also affect judgment of quality. Quality was themost mentioned basis for a strong differential advantage. At least an enterprise needs to avoiddifferential disadvantages related to a product quality.ISO 9000 is a set of related standards of quality management that have been adopted byabout 60 countries including U.S companies that meet ISO 9000 standards are awarded acertificate which often put them in a favorable position with a large customers.
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PRICE-PRICING SYSTEMOutline 02
2.1 Meaning and importance of price2.2 Pricing system/objective
Profit oriented goals
Sales oriented goals
Status Quo goals
Limitation
2.3 Procedure for price determination
OR
Basic methods of setting price
Cost plus pricing
Balance between demand and supply:-
Price set in relation to market alone:-
Breakeven point
2.4 Price polices and strategies
pricing strategies
New product
Pricing an imitative products
Product mix pricing strategies
Bye product pricing
Product brindle pricing
Price adjustment strategies
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PRICING2.1
Meaning and importance of price
Meaning:-
Price goes by many other names, rent, fare, rate, interest, toll, premium and even bribe but all these names add up to one thing.“”What consumers pay for product or services””
Services:-
Price is an offer or experiment to test the plus of market. Prices are always on trail.If customers accepted the offer then the price is fine. If they reject it, the price is not fine.Price is all around us, we pay rent for our apartment, tuition for education, and fee to our physician. The air line, railways, taxes and business companies charge us a fare.In economics theory, we learn that price, value and utility are related concepts.Utility creates value measures price
Price:-
There are many definition of price1) Price is a value expressed in terms of dollars, Cents, Rupee or any other monetary medium of exchange.2).In summary, price is value placed on goods and services. Price is the amount of money neededto acquire some combination of other good services.3) Price is which is exchanged in order to acquire something else of value.
Importance of price:-1).In economy:-
Products prices may be wages, rent, interest and profits. These prices paid for factors of production, land labor, capital and entrepreneurship. Price thus is a basic regulator of incomesystem because it influences the allocation and retaining the factors of production to their mostefficient use. Price as allocator of source determinations what will be produced (supply) and whowill get goods and services that are produced (Demand). Price helps to determine a company’s profits. It is profit that enable companies to spend money for research and development. Profits
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lead to new technology and better products that provide more satisfaction and an improvedstandard of living. Prices influences the spending and saving habits of consumers. When the price of product rises, consumers buy less. When prices decreases, people buy more. In setting prices marketers must consider these long run effects as well as their own desire for profit s.
2).To an individual firm:-
a) For any business firm, profits are determined by difference between its revenues andits costs. But profits revenue depends on price charged by firm and quantity of product sold.Profit = total revenue – total costOr Profit = (price x quantity)- total cost. b) A product’s price has a strong effect on its sales. For some products, an increase in price ,mayresult in an increase in sales revenue , for other products reduction in price may result in increasein sales revenue.c) The price of a product determines where it will be sold, when retailers can realize hire profits by carrying hire price items, they are more likely to handle such products.d) Pricing can effects a firm’s entire marketing program, which in turn, determines the firm’ssuccess as well as the total satisfaction provided to consumers and society in general.
Conclusion:-
It is clear that price is important to marketers, both because of profit equation and because of symbolic aspects of a products price.
3). Relationship to product quality:-
Consumers rely hearty on price, when they must make purchase decisions withincomplete information. If the price is higher, they perceived goods quality. Consumer’s quality perceptions can also be influenced by such things as so reputation and advertising.
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2.2 pricing system/objectives
PRICING OBJECTIVES
Management should decide on its pricing objectives before determining the price. Themain goals in pricing are oriented toward profit, towards sales or towards maintaining the status.Thus they are
1) Profit oriented goals:-
Profit may be set for short run or for longer period of time.
A) Achieve a target return:-
A firm may price its products to achieve a certain percentage return an its sales or on itsinvestment. Such goals are used by middleman and producers. Many retailers are whole sellersuse the target return as a pricing objective for short run periods such as a year or fashion season.
Example:-
The typical target return for manufacturers that are leaders in their industry – e.g. lever brothers, Suzuki motors etc ranges firm 10 to 20 percent after paying taxes.
B) Maximizing profit:-
It is the goal of almost all companies that they enjoy maximum profit. The term profitmaximization has an ugly imagination. People consider it high prices and monopoly.Theoretically if profits become high because supply is short in relation to Demand newcapital will be attracted in this field. This will increase supply and decrease profit to normallevel.To maximize profit over the long run firms may have to accept short run losses. A firmentering a new geographic market or introducing a new product does best by selling at low priceto build large client.
2) Sales oriented goals:-
In some companies, management’s pricing attention is focused on sales volume rather then on profits. In this situation the pricing goal may bea) To increase sales volume. b) To maximize or increase market share.
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a) To increase sales volume:-
This pricing goal is usually stated as a percentage increase in sales volume over period of time, say 1 year or 3 years. But it is not necessary that due to increase in sales volume profit willalso increase. So due to this reason management some times willing to take a short run loss.Increased sales enable that company to get a foot- hold in its market.
b) Maintain or increase Market share:-
In some companies, the major pricing objective is to increase the share of market held byfirm. Market share of company shows health of company and its important goals.A price war is started when one firm cuts its price in an effort to increase its market share.
3) Status Quo goals:-
To closely related goals – stabilizing prices and meeting competition are least aggressiveof all pricing goals because they are designed to maintain the pricing status quo.
a) Price stabilization:-
Price stabilization is goal in industries with a price leader. Especially in industries wheredemand can fluctuate frequently and where leader some time try to maintain stability in their pricing.A major reason for seeking stability in pricing is to avert price wars whether demand isincreasing or decreasing.
b) Meet competition:-
Countless firms price there products simply to met the competition.
Limitation:-
1) Differentiated products features of favorite brands may be more important to customer then price2)when economic condition are good and customer feel rich then price is not rated as importantas products planning or promotional activities.3) During the period of recession and inflation, pricing becomes extremely important.
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2.3 Procedure for price determination
METHODS OF STTING PRICE
There are three methods of setting price1) Price is based on total cost plus a desired profit.(balance between supply and demand.2) Prices are based on marginal analysis.3) Prices are based only on competitive market condition.
1) Cost plus pricing;
It means that costing the prices of one unit of a product is equal to the total cost of theunit plus the desired profit on the unit.
Example:-
Suppose the total fixed cost (TFC) of company for production is $30,000 themanagement whishes to earn $ 20,000 as profit and firm has decided to produce 400 units. Thusthe formula for determination of price,TFC+TVC+ Projected profitPrice = ----------------------------------------------------------Units produced30, 0000+90,000+20,000= --------------------------------------------------400This cost plus pricing approach ensure that desired profit level will be achieved however , itrelies on forecasts which can be dangerous because costs often change rapidly.There are some situations where cost plus pricing approach to pricing is perfectlysuitable.
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For example:-
The price of some products remain suitable from year to year e,g Milk , bread, paper chips etc. The cost plus pricing system is useful in such fields where the firms aregiven a job or government contract because the demand is known.Setting price can be determined asS.P = C+M WhereS.P = setting priceC= costM= markup.
Drawbacks:-
1) It relies on forecast cost.2) This method also fails to ensure that how much quantity of output will actually be sold.
2) Balance between demand and supply:-
Another method of setting price involves balancing demand with cost to determine the best price for profit maximization. This method is thus best suited for companies whose pricinggoals are to maximize profit. Some companies can use this method to compare prices determined by different methods.The firm in market of perfect competition has horizontal demand curve which showssingle seller has control over price and his production can be sold at the market price. Butindustry has downward slopping curve which shows industry can sell more units on lower pricethat at higher price.
3) Price set in relation to market alone:-1) Going rate pricing:-
In this method, firm basis its price largely on competition and pay less attention to itsown cost and demand.Going rate pricing is quite popular where demand elasticity is difficult to measure.
a) Pricing below competition level:-
A variation of market- based pricing is to set a price at some point by discount retailers.These stores offer fewer services and operate on principle of low mark up and high volume.
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b) Price above competition level:-
Producers or retailers sometimes set their prices above market level. Usually abovemarket pricing works only when the product is distinctive or when seller has acquired prestige inits field. E, g prestigious stores of jewelry, clothing, perfumes etc.
2) Sealed- Bid pricing:-
In this method price on expectations of how competitors price rather then to firms costsor demand. The firm wants to win contracts and this requires pricing lower then other firms. Yetthe firm cannot set its price below cost.
3) Select the final price:-
Before selecting the final price, the company must evaluate some additional consideration.
a) Psychological pricing:-
The seller should consider the psychology of prices. May people relates prices withquantity, many sellers believe that price should be 299, 1.95 rather then 200 or 200.
b) Impact of price on other parties:-
Management also considers the reaction of other parties on the price selected. How willthe distributors and dealers feel it? How will competitor react the price? Etc.
4) Breakeven point:-
A breakeven point is the quantity of product at which the sellers revenue equal to the totalcosts assuming a certain selling price. Thus there is deferent breakeven point for each differentselling price. The breakeven point may be found with this formula,Total fixed costBreak even point = -------------------------------------------------------Selling price – average variable cost
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2.4 Price strategies
PRICING SRATEGIES
A company not sets a single price but a pricing structure that covers different items in itsline. This pricing structure change with products life cycles. The company adjusts product priceto reflect changing costs and situations. There are many price strategies available tomanagement.1) New product pricing strategies,2) Product mix pricing strategies,3) Price adjustment strategies.
1) New product pricing strategies:-
New product pricing strategies include,(1) Pricing on innovative product.2) Pricing on innovative product.Pricing innovative include sub heading as(a) Market skimming pricing.(b) Market penetration pricing,Which have been discussed earlier.
1) Pricing imitative products:-
A company that involves pricing imitative products faces a product positioning problem.It must decide where to position the product on quality & price.(1) Positioning in relation to competitors.(2) Positioning by price and quality.(3) Positioning in relation to target market.(4) Positioning in relation to product class.
2) Product mix pricing strategies:-
In this case, the firms, looks for set of prices that maximize the profit on the total productmix.
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The product mix pricing strategies has to face different degree of competitors
(1) Product line pricing:-
Companies usually develop product lines rather than single product. In this type of pricing management must determine the price steps to set between the various product in a line.
(2) Optional product pricing:-
Many companies use optional product pricing-offering to sell optional or accessory products along with their main products. A car buyer can order electric windows etc. Pricingthese options is a problem. Automobile companies must decide to offer options in base price.
(3) Captive product pricing:-
Companies that make product which must be used along with a main product use captive product pricing e.g., laser blades, camera films and computer software.
(4) Bye product pricing:-
In producing processed needs petroleum products, chemicals and other products. Theseare often by products. In the by product have no value, this will affect the product pricing, themanufacturers should accept any price that cover more than cost.
(5) Product brindle pricing:-
Using product brindle pricing sellers often combine several of their products and offer the brindle at a reduced price.
Price adjustment strategiesDiscounts and allowances:-
Discount and allowances results in a deduction from the list price in the form of cash or something else.
1) Cash discount:-
Cash discount is a price reduction to buyers who pay their bills promptly. The typicalexample is 2/10; n/30 which means the buyer can deduct 2% from the cost by paying the billwithin 10 days.
2) Quantity discounts:-
A quantity is a deduction in price to buyers who buy large volume. The discount may be based on dollar amount. Quantity discounts are offered by seller to encourage customer to buy inlarge amount.
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3) Cumulative and non-cumulative quantity:-
A non cumulative discount is based on the size of an individual order of one or more products. Cumulative discounts are based on the total volume purchased over a period of time.
4) Trade or functional discounts:-
Trade or functional are offered by manufacturers to trade channel members who performed certain functions such as selling, storing and record keeping.
5) Promotional discounts:-
These are payments or price reduction to reward dealers for participating in advertisingand sale support programs.
6) Seasonal discounts:-
A seasonal discount is a price reduction to buyers who buy products or services out of seasons.
7) Trade-in-allowances:-
These are price reduction granted in a sold item when buying a new one. It is common inautomobile companies.
8) Allowance:-
Allowance is another type of reduction from list price e.g. promotional allowances, tradein allowances etc.
Price Determination
The sellers can and some sellers do charge different prices from different people for thesame product, or same price of different products. This is known as determination.It should be kept in mind that seller often charge more prices on inelastic consumer andless from elastic one.
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DISTRIBUTION STRUCTURE
Outline 03
3.1 Channel of distribution
Distribution
Channel of distribution
Types of channels & distribution
3.2 Nature of retail market,
Retailing
Nature of Retail
3.3 economics basis of retailing and its Classification.
Classification Of Retailers
Whole selling
3.4 Retailer’s whole seller and methods of operation.
Classification of whole seller
Methods of operation.
3.5 Designing and managing channel of distribution.
Managing of physical distribution
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3.1 Channel of distribution
DISTRIBUTION:
Distribution involves the physical movement of products to ultimate consumers.Distribution is not simply a matter of moving products into the hands of consumers, it involves a products movement throughout all stages of development from finding resources, throughmanufacturing to final sales.
Distribution Channels:-
A distribution channel consists of the set of people and firms involves in the flow of a product, as it moves from producer to ultimate consumer or business users. A distributionchannel always include both the producers and final customer for product as well as any middleman.(retailers or wholesalers).
Types of channels & distribution:-
Common channels for distribution of consumer goods, business goods and services arediscussed below.
1) Distribution of channel goods:-
There are five channels are used for distribution of tangible goods to ultimate consumer.
a) Producer---->Consumer:
The shortest, simplest channels of distribution for distributing gods are from producer toconsumer. It involves no middle man. The producer may sell from door to door or by mail.
Door to Door:-
In these channels companies use their representatives to sell their gods from door to door such as insurance magazines, newspapers, milk etc.
By Mail:-
Some companies also sell their products by mails. A farmer sells their fruit andvegetables directly to consumer at road is also using this method. It is short and direct method.
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b) Producer
Retailer
Consumer:-
Many large retailers buy directly from manufacturers and agricultures’ large no. of our purchases are mad through this channel such as automobiles, clothing, gasoline etc.In this casemanufacturers keep contact with retailers, take purchase orders. The retailers then sell to ultimateconsumers.
C) Producer
Wholesaler
Retailer
Consumer:-
This type of channel mostly used by small manufacturers and small retailers to distributesuch things that have a large market need. The products such as drugs, lumber, hardware andmany food items are distributed in such channel process.
d) Producer
Agents
Retailers
Consumers:-
Instead of using wholesaler many producers prefer to use manufacturer’s agents, a broker or some other agent’s middleman to reach the retail market. A glass marker selected a food broker to reach store market.
e) Producer
Agent
Wholesaler
Retailer
Consumer:-
To reach small retailers, the producers often use agent middleman, who in turn cal onwith wholesales that sell to small stores. Agent can be especially useful for making contacts and bringing buyers and sellers together. They are common in food industry, where they are called“food brokers”.
2) Channels for Distribution of Business Gods:-a) Producers
Industrial Users:-
This direct channel is used for most expensive products. Manufacturers of largeinstallations such as air planes, generators etc use this channel.
b) Producer
Industrial Distribution
Users:-
Producers of operating supplies and small accessory equipment frequently use industrialdistributors to reach their market.
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c) Producer
Agent
User:-
Firms without their own marketing department find this channel. Also a company thatwants to introduce a new product or enter a new market may prefer to use agents rather than itsown sales force.
d) Producer
Agent
Industrial Distributers
Users:-
This channel to similar to previous one. It is used when it is not possible to sell throughagents directly to business users.
3) Distribution of Services:-
The intangible nature of services creates special distribution requirements. There are onlytwo common channels.
a) Producer-
Consumer:-
As service is intangible so it requires direct contact b/w consumer and producer. Thusdirect channel is used, as for many professional services such as health, care, legal advice and personal services as hair cutting etc.
b) Producer
Agent
Consumer:-
While direct distribution is often necessary for a service to be performed, producer consumer contact may not be required for key distribution activities; Agents frequently assista service without producer. Many services as travel, loading, advertising media and insuranceuse agents.
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3.2 Nature of retail market
RETAILING
Retailing includes all activities associated with selling goods and services to ultimateconsumers for personal or non business use. It may be done through retail stores.
Retail Sales:-
Any firm manufacturers retailer or wholesaler that sells some thing to ultimate consumer for their personal use is called retail sale.
Retailer:-
It is business enterprise that sells primarily to household consumers for non business use.The word “Dealer” is also used for retailer
Nature of Retail:-1) Easy To Entry into Retailing:-2)
It is easier to go into retailing than any other trade, profession or line of business. To start amanufacturing firm one must have money to acquire a plant, equipment and material. But tooperate a retail store, no exams are required and necessary business licenses are easy to acquire.Many under formed and poorly qualified people enter in the field and son fail.
3) Economic Justification For Retailing:-
To get into retailing is easy but to forced out is just as easy. Thus to survive to retailing, acompany must perform its primary role i-e to provide gods and services to customer.
Secondly role i-e, to serve producer and wholesaler. This dual responsibility is both, the justification for retailing and key to success in retailing.
1) Size OF Retail Market:-
There is a large no. of retail stores in the world. In spite of the population boom and raisingconsumer incomes over the past three decades, there has been no appreciable change in thenumber of retail stores. Sales through retail store increased from late 1960,s to early 1990,s due
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to increase in per capital income, in spite of increase in price goods, total sales and per capitalretail sales have increased.
2) Cost and Profit of Retailers:-
The total average operating expenses for al retailers combined are about 25% to 27% of retail sales.
Wholesaling expenses are estimated at about 8% of wholesaling sales. Retailers cost and profitvery depending on the type of operation and major product line. Higher retail costs are generallyrelated to the expense of dealing directly with ultimate consumer.
3.3 Economics basis of retailing and its Classification
Classification of Retailers:-
There are four classifications of retailers. These are1.
By Sale-Volume2.
By Product Line3.
By Fore Of Ownership4.
By Method Of Operation5.
1) By sales volume:-
Sale volume is useful basis for classifying retail stores, because stores of different sizes present different management problems.Buying, Promotional, Financing personal relations and expense control al influencedsignificantly by, whether a store sales volumes large or small. On this basis relating is both alarge scale and small scale operation.
1) By product line:-
We can group them into two categories
a) General Merchandized Store:-
General Merchandized store carry a large no. of product lines. Departmental store aretype of general merchandized store with largest sale volume.
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b) Limited Line Store:-
Limited line store is considerable assortment of goods but in only one or few relatedlines. We identify these stores by the name of the product. Examples are Food store, shoe store,furniture’s store, and ladies ware store and so on.
3) By form of ownership:-
Another useful way of classifying retail stores is based on ownership. Thus a retailer mayoperate the business independently or may be part of chain.The major store ownership categories are
a) Independent Store:-
In an independent store, there are close personal relationship b/w customers and retailers.About 90% of operations fall into this category. Flower shop, tobacco shop, booth store fall inthis category.
b) Corporate Chain Stores:-
A corporate chain store is an organization of two or more stores, centrally owned andmanaged, that generally handle the same line of products on the same level in distributionstructure.
4) By method of operation:-
The four types of retailers, classified by method of operation.
a)
Full Service Retailing:-
Full service retailing is stick quite prevalent, although its used has declined during thelast 30 years, while the super market discount retailing, non retailing store has increased duringthe last 3 decades.
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b) Super Market Retailing:-
Super market will be defined as a large scale retailing institutions offering a variety of merchandize including (meat and dairy products).
c) Telephone Retailing:-
Telephone retailing involves the sales of goods and services over the telephone. It is agrowing form of retailing. Telephone orders are published by advertisement in news papers,magazines and on radio and on TV.
d) Vending Machine Retailing:-
Retailing is non personal form of selling in which customers buy products directly formconveniently located machinist.
CLASSIFICATION OF RELAILERS
By sales volume By product line By form of ownershipBy method of operationGeneralmerchandize Limited lineIndependent store Corporate chain Non store retail Discount Retail Supermarket Full Service retailMail order Retailing Door to door retailingTelephone Vending
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3) Discount Retailing:-
The modern discount houses are large stores that are freely open to the public, advertisedwidely and carry a complete selection of well known brands of hard goods (furnishing jewel etc).They sell below nationally advertised list price.
4) Non Store Retailing:-
There are four important stores of non important stores of retailing.
a) Mail Order:-
Mail order retailing may involve catalogue, advertising through mass-media. It has bothadvantages and disadvantages
b) Door To Door Retailing:-
The process in which all the transactions occur in the consumer’s home. Door to door sales may be conducted by producers or retailers.
c) Telephone Retailingd) Vending Machine Retailing
3.4 whole seller and methods of operation.
WHOLE SELLING
Definitions:-
Whole selling includes all sales made to any person or organization other thanultimate consumers, who use the product for personal non business purpose. Any transactionfrom one producer to another producer is a whole selling exchange.Whole selling and whole sell trade consists of the sale, and al activities directly related to sale of goods and services to parties for resale, use in producing other goods or service or operating anorganization.
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Classification of whole seller:-
There are three categories of whole sale1); Merchant Whole Seller 2; Agent and Broker 3): Manufacturer Whole Selling
1): Merchant Whole Seller:-
These are sometimes called jobbers and distributors. They are the largest single group of whole seller which are measured either by sale or by no. of establishments. There are two typesof merchant whole sellers
a)
Full Service Whole Selling b)
Limited Service Whole Selling
a): Full Service Whole Selling:-
Full service whole service almost all the service that a whole seller can provide such acarrying stock can provide such a carrying stock using a sale force, offering a credit, makingdeliveries and providing management assistance. They are divided into two groups.
1). General Merchandise Full Services:-
They handle a broad line of non perishable items such as drugs, cosmetics, hardware’setc. They provide full range of services
1) Limited Line Full Service Whole Selling
:-Limited line service whole seller carry out a few product lines but offer a full range of service. They are also called industrial distributors.
b) Limited Service whole selling:-
Limited service whole selling offer service to their suppliers and customers. There areseveral types of limited service whole selling.
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1) Cash and Carry Whole Selling:-
Cash and whole sellers have a limited line of fast moving goods and sell to small retailersfor cash and normally do not dollars.
2) Drop Shipping Whole Selling:-
Drop shipper whole sellers operate in bulk industries such as coal and heavy equipment.They do not physical possession products.
3) Truck/Wagon Whole Sellers:-
These are also called truck jobbers. They perform a selling or delivering function. Theycarry a limited line of semi-perishable merchandise (milk, breads, snacks) which they sell for cash as they make their rounds to supermarkets, small groceries, hospital, hotels and cafeteriaetc.
4) Material Order Whole Selling:-
Male order whole sellers send catalogue to retailer, industrial and institutional customers,generally for cosmetics, specially food and other small items. Orders are filled and sent by mail,truck or other means of transport.
2) Agents and brokers:-
These middlemen never own the products. Their activity is bringing buyers and sellerstogether and facilitating the sale. Brokers are paid by the party who hire them. They do notinvolve in financing.
Agents and brokers work on commission basis, ranging from 2 to 6%. Of the selling price. They perform useful function for small producers who cannot afford the high cost of hiring, trainingand paying their own sales force.
3) Inside or manufacturing whole selling:-
This type of whole selling consists of whole selling operations conducted by buyers andsellers themselves rather than through independent whole seller. There are two types of wholeselling.
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a) Sale Branches and Offices:-
Manufacturers often set up their sales branches and offices improve inventory control, sellingand promotion.
2): Purchasing Offices:-
Many whole sellers set their offices in market centers such as Lahore and Karachi. These purchasing offices perform a role similarly to that of agent or brokers but are the part of organization.
3.5 Designing and managing channel of distribution
&Managing of physical distribution
DESIGNING DISTRIBUTION CHANNELS
To design channels that satisfy customers and out of competition, an organized approach isrequired. We suggest a sequence of four decisions.1)
Specify The Role Of Distribution
:-A channel strategy should be designed with in the context of the entire marketing mix.Firstly, the firm’s marketing objectives are review and than the roles assigned to product, priceand promotion are specified.Each element may have separate role or two elements may have together roles. For Example Amanufacturer of pressure gauges may use both middle man and direct mail advertising toconvince customers.
2) Select the Type of Channel:-
Once distribution role is specified, the most suitable type of channel for the companies’ product must be determined. At this point a firm needs to decide whether middleman will beused in its channel and, if so, which type of middle man.
3) Determine Intensity of Distribution:-
The next decision relates to intensity of distribution that is, the mo. Of middle man usedat the wholesale and retail levels. Because of the desires of prospective customers good year
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found it necessary to intensity its distribution and as a result, started selling most of a tire linesthrough discount outlets.
4) Choose Specific Channel Members:
The last decision concerns the selection of specific firms to distribute the product.Sometimes a company trying to market a new product, it has little choice regarding whichchannel members to use. In this case, the company goes must with those middleman that arewilling to distribute the product
Physical distribution:-
Physical distribution consists of all activities concerned with moving activities the rightamount of the right products to the right place at the right time.Physical distribution for manufacturers includes the flow of raw materials from their sources of supply to the production line and the movement of finished goods from end of this productionline to final user’s locations. Middleman manages the flows of goods onto their shelves as wellas their shelves to customer homes, store or other places of business.
Activities
:-The activities of physical distribution are order processing, inventory control, inventorylocation and warehousing, materials handling and transportation.
Strategic Use of Physical Distribution:-
The management of physical distribution can enables company to satisfy customers need bitterly by reducing operating costs. The management of physical distribution can also effect afirms marketing mix.
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PERMOTIONAL ACTIVITIES
Outline 044.1 Promotional activities
The promotional program
Campaign concept
4.2 Promotional mix- sales promotions,4.3Personal selling
Personal selling process
Prospecting
Qualifying prospects
Prospects
Re-approach to individual
Presenting the sales messages
Past sale services
4.4 Nature and importance of advertising
4.5 Types of advertising4.6 Features of advertising
4.7 Development of advertising.
Developing advertising campaign
Defining objectives
Establishing a budget
Creating a message
Selecting media
Yellow pages
4.8 Aim of advertising.
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PROMOTION
4.1 Promotional activities
From a market perspective, promotion serves three essential roles-it informs, persuadesand reminds prospective and current customers and other selected audience about a company andits products.
To inform:-
The most useful product or brand will be consider failed, if no one knows that it isavailable. Because distribution channels are often long, a product may pass through many handsa producer and consumers. Therefore, a producer must inform middleman as well as businessusers and ultimate consumers about a product. Wholesalers in turn must inform retailers andretailers must inform consumers.
To persuade:-
Another purpose of promotion is to persuade. The intense competition among differentindustries as well as among different firms in the same industry puts a tremendous pressure on promotional programs of sellers. In our economy of a abundance, we need strong persuasive promotion, because consumers have many alternatives to choose from.For example, in case of luxury product, for which sales depend on its ability to convinceconsumers that the product’s benefit exceed those of other luxuries, persuasive is even moreimportant.
To remind:-
Consumer also must be reminded about products availability and its potential to satisfy.
4.2 Promotional mix- sales promotion
Determining the promotional mix:-
A promotional mix is an organization’s combination of personal selling, advertising sales promotion and public relation. An effective promotional mix is a critical part of virtually all
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marketing strategies. Product differentiation, market segmentation, trading up and trading downand branding all requires effective promotion.Designing effective promotional mix involves a number of strategic decisions about fivefactors.
1) Target audience:-
Decision on promotional mix will be greatly influenced by target audience. The targetmay be final consumer, who could be further defined as existing customer or new prospects. Insome order to gain their support in distributing a product or in case of a company about to makea stock offering.A promotion program aimed primary at middlemen is called push strategy and promotion program directed primarily at end users is called pull strategy.Using a push strategy means a channel member directs its promotion primarily at themiddlemen that are next link forward in the distribution channel. With a pull strategy, promotionis directed at end users usually ultimate consumers.
2) Promotion objectives:-
A target audience can be in any one of six stages of buying readiness. These stagesawareness, knowledge, liking, preference, conviction, and purchase are called hierarchy of effects, because they represent stages a buyer goes through in moving toward a purchase andeach describes a possible objective or effect of promotion. The goal of promotion is to get the prospect to the final or purchase stage.
i) Awareness: -
At the awareness stage, the seller’s task is to let the buyer know that the product or brandexists. Here the objective is to build familiarity with product and brand name.
ii) Knowledge: -
Knowledge goes beyond the awareness to learning about a product’s feature.
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iii) Liking: -
Liking refers to how the market feels about the product. Promotion can be used to move aknowledgeable audience from being indifferent to liking a brand. A common technique is toassociate the item with an attractive symbol or person.
iv) Preference: -
Creating preference involves distinguishing among brands such that the market findsyour brand more attractive than alternative. It is not uncommon to like several brands of thesame product but the customer can’t make a decision until one brand is preferred over the other.
v) Conviction: -
Conviction entails the actual decision or commitment to purchase. For example a studentmay prefer IBM over a clone, and not yet be convinced to buy a computer. The promotionobjective here is to increase the strength of buyer’s need.
vi) Purchase: -
Purchase can be delayed or postponed indefinitely, even for customers who areconvinced they should buy a product. There may be some situational factor involved such as nothaving enough money at that moment or natural resistance to price.
3) Nature of Product:-
Several product attributes influences the promotional mix. We consider three that aresignificant are:
i) Unit value: -
A product with low unit value is usually relatively uncomplicated, involves little risk for buyer and must appeal to mass market to survive. As a result, advertising would be primary promotional tools. In contrast high unit value products are complex and complicated.
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ii) Degree of customization: -
If a product is adapted to an individual customer need, personal selling is important.However the benefits of most standardized products can be effectively communicated inadvertising. Although this principle holds true for many products, it is being challenged by firmimplementing mass customization.
iii) Presale and Post sale services: -
Products that must be demonstrated for which there are trade in, or that require frequentservicing to stay in good working order lend themselves to personal selling.
iv) Stages in product life cycle: -
Promotional strategies are influenced by product life cycle-stages. When a new product isintroduced prospective buyer must be informed about its existence and its benefits andmiddlemen must be convinced to carry it. Thus both advertising and personal selling are criticalin a product introductory stage. At introduction a new product also may be something of novelty,offering excellent opportunities for publicity. Later, if a product becomes successful, competitionintensities and more emphasis is placed on persuasive advertising.
v) Funds available: -
Regardless of the most desirable promotional mix, the amount of money available for promotion is often the ultimate determinant of mix. A business with more funds can make moreeffective use of advertising than a firm with limited financial resources.For example, television advertising can carry a particular promotional message to for more people and at a lower cost per person then most other media.
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4.3 Personal selling
PERSONAL SELLING PROCESS
Personal selling is the individual to individual communication. It has some advantagesover advertising. Personal selling provides the human touch that is backing in adverting.The value of personal selling as a promotional activity depends on the product beingoffered and market involved.Inexpensive consumer products can be marketed successfully through personal selling.
Personal selling process:-
The personal selling process is a logical sequence of four steps that a sales person takes indealing with a perspective buyer. The process is designed to produce some desired consumer actions and ends with a follow-up to ensure customer satisfaction. The desired action usually is a purchase by the customer.Prospecting
Reproach
Presentation
Post sale service
(i) Identifying prospective customers.
(ii) Qualifying prospects
(i) Information(ii)Habits
(iii) Preferences
AIDA(i) Attention
(ii) Interest(iii)Desire(iv)Action
(i)Reduce decisionBuild good will
Steps: -1) Prospecting: -
The first step in personal selling process is really two related steps. Prospecting consistsof identifying possible customers and then qualifies them that are determining whether they havenecessary potential to buy. They are combined as a single step because they are typically done atthe same time.
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a) Identifying: -
The identification process is an application of market segmentation. By analyzing thefirm’s database of pas and current customers, a sales rep can determine characteristics of an ideal prospect. Comparing this profile to a list of potential customers will produce a set of prospect.A List of potential customers can be constructed using suggestions from currentcustomers, trade associations and industry directories.
Qualifying prospects:-
After indentifying prospective customers, a seller should qualify them, that is determinewhether they have necessary willingness, purchasing power and authority to buy. To determinewillingness to buy, a seller can seek information about any changes in the prospect’s situation.For example, a business firm or a household consumer may have had a recent problemwith an insurances provider. In this case there may be an opportunity for a sales person from acompeting insurer to get that prospect’s business.To determine a prospect’s financial ability to pay, a seller can refer to credit ratingservices. For household consumers or small business, a seller can get credit information from alocal credit bureau.Indentifying who has authority to buy is a business or a household can be difficult. For example, a purchasing agent may have buying authority, but what he or she buys may depend onthe recommendation of an office secretary.
(2) Re-approach to individual prospects:-
Before calling on prospects, sales people should conduct a pre approach-learning allabout the companies and persons to whom they hope to sell. This might includes finding thatwhat products the prospects have used in the past, what they are now using and their reactions tothese products. In business to business selling a sales person or selling team should find out how buying decisions are made in customer’s organization.
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Sales people should try to get all the information, so they will be able to tailor their presentation to individual buyer.
(3) Presenting the sales messages:-
With the appropriate pre approach information, a sales person can design a sales presentation that will attract the prospect’s attention. The sales person will then try to hold the prospect’s interest while building a desire for the product, and when the time is right, attempts tostimulate action by closing sales. This approach is called AIDA (Attention interest, desire andaction) is used by many organization.
a) Attract attention the approach:-
First task in a sales presentation is to attract the prospect’s attention and to generatecuriosity. In case where the prospect is aware of a need and is seeking a solution by simplystating the Sellers Company and product may be enough, provided by company.For example, if sales person was offered to the prospects by a customer, the right approach might be to start out by mentioning this common acquaintance, or a sales person might suggest the product benefits by making some startling statement.
b) Hold interest and arouse desire:-
After attracting the prospect’s attention the challenge for sales rep is to hold it andstimulate a desire for product with a sales presentation.For example, some companies train their sales people to use a canned sales talk, a memorized presentation designed to cover all points determined by management to be important.
c).Meet objections and close the sale:-
After explaining products and its benefits, a sales person should try to close the sale, thatis obtain action on the consumer’s part. Periodically in a presentation, the sales person mayventure a trial close to test the prospect’s willingness to buy.
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The trial close tends to uncover the buyer’s objection. A sales person should encouragethe buyer to state their objections. Then the sales person has an opportunity to meet theobjections and bring out additional product benefit or reemphasize previously stated points.
(4) Past sale services:-
An effective selling job does not end when the order is written up. The final stage of aselling process is a series of post sale activities that can build customer goodwill and lay thegroundwork for future business.Post sale services reduce the customer’s post purchase cognitive dissonance. In this finalstage of personal selling, a sales person can minimize the customer’s dissonance by(1) Summarize the products, benefit after purchase.(2) Repeat why product is better than other alternative.(3) Emphasizing how satisfied customer will be with product.
ADVERTISING
Advertising is an art of influencing the customers through paid non-personal presentationto purchase and posses a product. It can also be defined as “any paid form of non-personal presentation and promotion of ideas goods or services by an identified sponsor. The two mainobjectives of advertising are to expose a product to a large market and to encourage the buyer toaccept the product.
4.4 Nature and importance of advertising
Nature Objectives of advertising:-
Establish advertising objectives to optimize performance of the product or service, andMeet advertiser needs.1) Communication effects are analyzed and assessed for their ability to achieve Specifiedresponses.
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2) Brand awareness objectives that enhance buyer empathy with the product or service aredeveloped, evaluated, and determined.3) Brand attitude objectives that enhance positive buyer brand evaluation and distinguish rationaland emotional responses to brand attitude are developed, evaluated, and determined.4) Brand purchase intention objectives that encourage buyer purchase action are developed,evaluated, and determined.5) Objectives that achieve the required effects for the product or service are developed andintegrated to meet overall brand strategy and advertising objectives.6) Proposed advertising objectives are assessed for their compatibility with advertiser needs for the development and execution of effective messages and advertisements that achieveadvertising and marketing objectives.7) Provisions are made for monitoring, evaluating, and adjusting advertising responses to ensurethat these continue to meet brand strategy and advertising objectives.
Importance of advertising:-
Advertising is of great importance in our world of competition. It is important for bothseller and buyer. Even the government cannot do without it. First, of all, advertising introducesnew products to general public.For example, the public come to know about useful new medicines for some diseases. We oftenlearn about new machines for agriculture and industry for ads.
Secondly:-
Advertising introduces different brands of same product. Advertisement tells about qualities of each brand and we can easily select.
For example:-
There are three different brands of bicycle produced by same company.
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Thirdly:-
Government can very profitably advertise its schemes and policies. It can tell general publicwhat it might do for good of nation.
Fourthly:-
It is through advertisements that we come to know of new service jobs. Qualified people applyfor them and get adjusted in life.
Fifthly:-
Advertisement is a dependable and effective means of expanding education and of bringingstudents to educational institutions. Schools, colleges and universities advertise their classes,courses, and fees and attract students for admission.Advertising can also be harmful. When advertisement misstates qualities of their products, theymisguide public. When manufacturers advertise harmful products like cigarettes, they da adisservice. Advertising is useful awithin proper limits. These limits Cleary lay down by religion,law and our traditions.
4.5 Types of advertising
Types of advertising:-
Mentioned below are the various categories or types of advertising:
Print Advertising – Newspapers, Magazines, Brochures, Fliers
The print media have always been a popular advertising medium. Advertising productsvia newspapers or magazines is a common practice. In addition to this, the print media alsooffers options like promotional brochures and fliers for advertising purposes. Often thenewspapers and the magazines sell the advertising space according to the area occupied by theadvertisement, the position of the advertisement (front page/middle page), as well as thereadership of the publications. For instance an advertisement in a relatively new and less popular newspaper would cost far less than placing an advertisement in a popular newspaper with a highreadership. The price of print ads also depend on the supplement in which they appear, for
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example an advertisement in the glossy supplement costs way higher than that in the newspaper supplement which uses a mediocre quality paper.
Outdoor Advertising – Billboards, Kiosks, Tradeshows and Events
Outdoor advertising is also a very popular form of advertising, which makes use of several tools and techniques to attract the customers outdoors. The most common examples of outdoor advertising are billboards, kiosks, and also several events and tradeshows organized bythe company. The billboard advertising is very popular however has to be really terse and catchyin order to grab the attention of the passers by. The kiosks not only provide an easy outlet for thecompany products but also make for an effective advertising tool to promote the company’s products. Organizing several events or sponsoring those makes for an excellent advertisingopportunity. The company can organize trade fairs, or even exhibitions for advertising their products. If not this, the company can organize several events that are closely associated withtheir field. For instance a company that manufactures sports utilities can sponsor a sportstournament to advertise its products.
Broadcast advertising – Television, Radio and the Internet
Broadcast advertising is a very popular advertising medium that constitutes of several branches like television, radio or the Internet. Television advertisements have been very popular ever since they have been introduced. The cost of television advertising often depends on theduration of the advertisement, the time of broadcast (prime time/peak time), and of course the popularity of the television channel on which the advertisement is going to be broadcasted. Theradio might have lost its charm owing to the new age media however the radio remains to be thechoice of small-scale advertisers. The radio jingles have been very popular advertising media andhave a large impact on the audience, which is evident in the fact that many people still remember and enjoy the popular radio jingles.
Covert Advertising – Advertising in Movies
Covert advertising is a unique kind of advertising in which a product or a particular brandis incorporated in some entertainment and media channels like movies, television shows or evensports. There is no commercial in the entertainment but the brand or the product is subtly ( or
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sometimes evidently) showcased in the entertainment show. Some of the famous examples for this sort of advertising have to be the appearance of brand Nokia which is displayed on TomCruise’s phone in the movie Minority Report, or the use of Cadillac cars in the movie MatrixReloaded.
Surrogate Advertising – Advertising Indirectly
Surrogate advertising is prominently seen in cases where advertising a particular productis banned by law. Advertisement for products like cigarettes or alcohol which are injurious toheath are prohibited by law in several countries and hence these companies have to come up withseveral other products that might have the same brand name and indirectly remind people of thecigarettes or beer bottles of the same brand. Common examples include Fosters and Kingfisher beer brands, which are often seen to promote their brand with the help of surrogate advertising.
Public Service Advertising – Advertising for Social Causes
Public service advertising is a technique that makes use of advertising as an effectivecommunication medium to convey socially relevant messaged about important matters and socialwelfare causes like AIDS, energy conservation, political integrity, deforestation, illiteracy, poverty and so on. David Oglivy who is considered to be one of the pioneers of advertising andmarketing concepts had reportedly encouraged the use of advertising field for a social cause.Oglivy once said, "Advertising justifies its existence when used in the public interest - it is muchtoo powerful a tool to use solely for commercial purposes.". Today public service advertising has been increasingly used in a non-commercial fashion in several countries across the world inorder to promote various social causes. In USA, the radio and television stations are granted onthe basis of a fixed amount of Public service advertisements aired by the channel.
Celebrity Advertising
Although the audience is getting smarter and smarter and the modern day consumer getting immune to the exaggerated claims made in a majority of advertisements, there exist asection of advertisers that still bank upon celebrities and their popularity for advertising their products. Using celebrities for advertising involves signing up celebrities for advertising
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campaigns, which consist of all sorts of advertising including, television ads or even printadvertisements.
4.6 Features of advertising
Features of advertising:-
Nan and Faber (2004)
made a first attempt to identify four unique features of advertisingcompared to other forms of communication by reviewing the literature and logic reasoning.These features included;
consumer skepticism,
message repletion,
message coordination,
Clutter.Building on their study, we provided a more objective view of what makes advertisingunique. We gathered what can be called experts' opinions on what makes advertising uniquethrough a survey with a systematically drawn sample of researchers in various fields of communication. These results indicate a number of unique features of advertising that have often been ignored in previous work. Seven unique features of advertising are identified through thissurvey. These unique features are
untrustworthiness of the source,
appeal to emotions,
message repetition,
explicit conclusions,
variety of media channels,
message coordination,
Persuasion goal.Three characteristics identified here, untrustworthiness of the source, message repetitions,and message coordination, have also been identified in the previous study as the unique features
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of advertising. Surprisingly, message competition was not perceived as a unique feature of advertising as compared to other form of communication.
4.7 Development of advertising.
DEVELOPING AN ADVERTISING COMPAIGN
An advertising campaign consists of all the tasks involved in transforming a theme into acoordinated advertising program to accomplish a specific goal for a product or brand. Typically,a campaign involves several different advertising messages, presented over an extended periodof time using a variety of media.An advertising campaign is planned within the framework of overall strategic marketing plan and broader promotional program. The framework is established when management:(1) Identifies the target audience(2) Establishes the overall promotional goals.(3) Set the total promotion budget(4) Determine the overall promotional theme.With these task completed the firm can begin formulating an advertising campaign. Thesteps in developing a campaign are developing objectives, establishing budget, creating message,selecting media and evaluating effectiveness.
1) Defining objectives:-
The purpose of advertising is to sell something, a good service, idea to person or a place. This goal is reached by setting specific objectives that can be expressed in individual adsincorporates into an advertising campaign.The main advertising objectives are to:
a). Support personal selling: -
`Advertising may be used to support personal selling.
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b). Improve dealers relations: -
Wholesalers and retailers used advertising to improve dealer’s relations.
c). introduce a new product: -
Consumers need to be informed ever about line extensions that make use of familiar brand names.
d). expand the use of product: -
Advertising may be used to expend the use of product.
2) Establishing a budget:-
Once a promotion budget has been established, it must be allocated among variousactivities comprising the overall promotional program.One method that the firm uses to extend their budget is cooperative advertising, which isa joint effort by two or more firms intended to benefit each of the participants. There are types of cooperative ads. Vertical and horizontal.Vertical advertising involves firms on different level of distribution.Horizontal cooperative advertising is joint advertising in which two or more firms onsame level of distribution, such as group of retailers, share the costs.
3) Creating a message:-
Whatever the objective of an advertising campaign, the individual ads must accomplishtwo things: get and hold the attention of audience and influence the audience in a desired way.There are many ways to achieving attention, surprising, shocking, amusing and arousingcuriosity are all common techniques to gain attention.If the ad succeeds in getting the audience’s attention, the advertiser has few second totransmit a message to influence behavior. The message has two elements, the appeal anexecution.
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4) Selecting media:-
Creation of message can be discussed before selecting the advertising media in which to place ad. The advertiser must make decision before selecting media.(i) Which type of media will be used?(ii) Which category of the selected medium will be used?(iii) Which specific media vehicles will be used?
(1) News Paper:-
As advertising medium newspapers are flexible and timely. The life of newspaper is veryshort. They are discarded soon after being read. In many cities circulation of daily newspapers isdecreasing, because of growth of internet.
(2) Television:-
Television combines motion, sound and special visual effects. In T.V message can be presented bitterly. However, TV ads lack performance, so they must be seen and understoodimmediately.
(3) Direct mails:-
Direct mail has the potential of being most personal and selective of all media. Becausethe direct mail goes only to the people, the advertiser wishes to contact, there is almost nowastage coverage.
(4) Radio:-
Radio is low cost per thousand medium because of its broad reach. Nearly 80% of American listens to the radio daily. Radio commercials can be produced in less than a week, at acost for below T.V. Because radio makes only an audio impression.
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(5) Yellow pages:-
The yellow pages are a source of information from which most consumers are familiar.They are used by consumers at or very near buying decisions.
(6) Magazines:-
Magazines are the medium to use when high quality printing and color are desired in anadd. Magazines can reach a national market at a relatively low cost per reader.
(7) Out-of-Home advertising:-
Spending out of home advertising is growing at about 10% a year. Most of out-of-homeadvertising is for local businesses.(
5) Evaluating the advertising effort:-
Top executive want to proof that advertising is worthwhile. They want to know whether dollar spent on advertising are producing as many sales as could be reaped from dollars spent onother marketing activities.
Difficulty of evaluations:-
It is hard to measure sales effectiveness of advertising. These difficulties aries due to:(1) Different objectives(2) Effects overtime(3) Measurement problems.Methods used to measure effectivenessAd effectiveness means are either direct or indirect.Direct test which compile the responses to an add or campaign, can be used only with afew types of ads.Indirect tests measures something other than actual behavior.
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4.8 Five aim of advertising
FIVE AIM OF ADVERTISING
1.
Increasing the sales of the product/service2.
Creating and maintaining a brand identity or brand image.3.
Communicating a change in the existing product line.4.
Introduction of a new product or service.5.
Increasing the buzz-value of the brand or the companyThere are various aims of advertising but the primary aim is to attract the sales for thecompany. In fact, the ultimate aim of any organization is to enhance its profitability and it is only possible when the company may attract more sales. The second aim of advertising is to enhancethe visibility of the products and services among the consumers. In other words, advertising isaimed to increase the awareness of the customers. Advertising also plays an important role to build the image of the organization in the market. Through ads the company can build the imagewhich it wants to make in the minds of the people. Therefore, nowadays, companies spend ahuge amount of their budgets on advertising and promotional strategies.
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Very nice presentation
tanks
notes on marketing management
thanks, it is very nice miss Billal
thanks alot...
thanks for it
fantastic........................
thanks alot ........... ver helpfull :)
thank you.. will be uploading more soon