31

[Link]
Elective Courses (EC)
Discipline Specific Elective (DSE)
Courses
BUSINESS MANAGEMENT -
MARKETING MANAGEMENT
(SUPPLEMENT)
 © UNIVERSITY OF MUMBAI

Dr. Suhas Pednekar

Vice-Chancellor
Universityof Mumbai,
Mumbai

Dr. Kavita Laghate Anil R Bankar

Professor cum Director, Associate Prof. of History & Asst. Director &
Institute of Distance & Open Learning, Incharge Study Material Section,
Universityof Mumbai, Mumbai IDOL, University of Mumbai

Course and Programme : Dr. Madhura Kulkarni

Co-ordinator Asst. Prof-cum-Asst. Director, IDOL,
University of Mumbai, Mumbai-400 098

Course Writers : Dr. Sujata Karmarkar

G. Saraf College of Arts and Commerce
Malad (W), Mumbai

January 2020, [Link].,Elective Courses (EC) Discipline Specific

Elective (DSE) Courses, Business Management - Marketing Management
Published by : Director Incharge
Institute of Distance and Open Learning ,
Universityof Mumbai,
Vidyanagari, Mumbai - 400 098.
ipin Enterprises
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 CONTENTS
Unit No. Title Page No.

SECTION I
1 Marketing Management and Marketing Environment 1
2 Understanding Competition and Strategic Marketing 14
3 Product 21
4 Pricing 29

SECTION II
5 Distribution 37
6 Promotion 45
7 Understanding Buyer Behaviour 51
8 Marketing of Service and Rural Marketing 60


 IMPORTANT INSTRUCTIONS

Dear Students,
1. The revised syllabus for the subject Business Management –
Marketing Management has become applicable for IDOL
students from the academic year 2019-20.
2. As per the old pattern this subject was in [Link]. As per the
revised pattern the same subject is shifted to [Link].
Therefore we are providing the old original book that is of T.Y.
[Link].
3. We are providing this supplement for newly added chapters in
each module.
4. To know about the topics to be refer from the old book,
please check the unit structure of each module in the
supplement.
5. In the unit structure of each module you will get the
detailed information about the points and page numbers to
be referred from the old book.
6. Please follow the revised syllabus. The New Question Paper
Pattern is available under the syllabus.


 I

Revised Syllabus of S.Y. [Link].

From the Academic Year 2019-20
Elective Courses (EC)
Discipline Specific Elective (DSE) Courses
Business Management-Marketing Management

SECTION I
Modules at a Glance
Sr. No. Modules
1 Marketing Management and Marketing Environment
2 Understanding Competition and Strategic Marketing
3 Product
4 Pricing

Sr. Modules
No.
1 Marketing Management and Marketing Environment
 Marketing management : Definition, need and importance of
marketing management
 Functions of Marketing Management
 Micro and Macro Environment with specific reference to India
 Emerging Marketing opportunities in India – Marketing at the
bottom of the pyramid, growing middle class
 International marketing environment
2 Understanding Competition and Strategic Marketing
 Marketing strategy : Definition and Features
 Steps in strategic marketing planning process
 SWOT Analysis
 Michael Porter’s Five Forces Model
 Analyzing competition
3 Product
 Definition, Product Levels – Customer Value Hierarchy
 Product Classification : Based on durability and tangibility,
consumer goods classification and industrial goods
classification
 Product Life Cycle : Stages and features of each stage
 Product Positioning : Meaning and Importance
 Steps in Product Positioning
 II

4 Pricing
 Meaning and objective of Pricing
 Factors affecting pricing decisions
 Methods of pricing : Mark-up pricing, Target-return Pricing,
Perceived-value Pricing, Value Pricing, Going-Rate Pricing and
Auction Pricing
 Steps in Pricing

SECTION II

Sr. No. Modules

1 Distribution
2 Promotion
3 Understanding Buyer Behaviour
4 Marketing of services and Rural Marketing

Sr. No. Modules

1 Distribution
 Types of middlemen
 Factors affecting channel by middlemen
 Functions performed by middlemen
 Logistics : Meaning and components
 E-marketing : Meaning, merits and demerits of e-marketing
 Online retailing – successful online retailers in India and
abroad
2 Promotion
• Elements of promotion mix
• Objectives of promotion and marketing communication
• Factors affecting promotion mix decisions
• Steps in designing a marketing communication program
 Role of Social Media in marketing communication
3 Understanding Buyer Behaviour
• Comparing consumer markets (individuals and households)
with organizational buyers (Industrial / Business houses)
• Factors affecting consumer behaviour
• Steps in consumer purchase decision process (with respect
 III

to high involvement and low involvement products)

• Factors affecting organizational buyer behaviour
• Steps in the organizational purchase decision process (with
respect to different buying situations)
4 Marketing of services and Rural Marketing
 Services : definition and features
 Marketing mix for services marketing
 Managing service quality and productivity
 Rural market scenario in India
 Factors contributing to the growth of rural markets in India
 Challenge of Rural Marketing
 Strategies to cope with the challenges of rural marketing.

Reference Books:
1. Philip Kotler (2003). Marketing Management : Eleventh Edition. New
Delhi : Pearson Education
2. V. S. Ramaswani and S Namakumari (2002). Marketing : Planning,
rd
Implementation and Control (3 Edition) New Delhi, Macmillan India
3. Michael Porter – Competitive Advantage
4. Theodore Levitt – Marketing Management
5. Fundamentals of Marketing – William Stanton
6. Customer Driven Services Management (1999) Response Books


 IV

QUESTION PAPER PATTERN

SECTION I

1. Explain the terms (Any five) 10

2. Answer Any Three Out of six questions 30
3. Write notes on Any two out of four 10

SECTION II

4. Explain the terms (Any five) 10

5. Answer Any Three Out of six questions 30
6. Write notes on Any two out of four 10


 1

SECTION I
MODULE 1

1
MARKETING MANAGEMENT AND
MARKETING ENVIRONMENT
Unit Structure :

 Marketing Management: Definition, need and importance

(Old Book Page Nos.1 to 5)
1.1 Functions of Marketing Management
1.2 Internal environment Analyses
1.3 Emerging Marketing Opportunities in India
1.4 International marketing environment
1.5 Exercise

1.1 FUNCTIONS OF MARKETING MANAGEMENT

Market environment includes the factors and forces that

affect a firm’s ability to build and maintain successful relationships
with customers. Marketing environment is the cumulative form of
the factors that encapsulate within themselves the ability of a firm to
connect with the consumers and also the potency of the product as
a growth driver to the firm.

According to Philip Kotler, “A company’s marketing

environment consists of the internal factors & forces, which affect
the company’s ability to develop & maintain successful transactions
& relationships with the company’s target customers”.

In simple words the term marketing environment can be

defined as “The various external forces that can directly or indirectly
affect the many activities of an organization. This is an integral part
of environmental scanning. These activities include acquisition of
human resources, raw materials, financial resources, and
development of goods and services. The marketing environment
includes forces such as: political, legal, regulatory, economic,
social, technological, and competitive."

Two levels of the environment are Micro (internal)

environment - small forces within the company that affect its ability
to serve its customers and macro (external) environment - larger
societal forces that affect the micro environment.
 2

Marketing is the process of production and / or purchase of

goods and or services for satisfying the needs and wants of the
consumers. Management of marketing activities is called Marketing
Management.

Following are the functions of Marketing Management:

1) Setting Marketing Objectives : The process of marketing
management starts with setting marketing objectives for short and
long term. Marketing objectives of an organization can be
increasing sales turnover, overcoming competition, getting higher
market share and so on marketing objectives should be in line with
the overall organisational objectives.

2) Planning : Planning functions refers to deciding the future

course of action. After setting the marketing objectives, the
management has to decide the course of action to achieve those
objectives. This includes conducting market survey, sales
forecasting and deciding marketing policies and strategies.

3) Organisation : Once marketing policies and strategies are

formulated, they are required to be implemented properly. For this,
marketing function is required to be organized. It refers to deciding
the structure of marketing organization, allocation of duties and
responsibilities to various sectional heads and so on.

4) Co-ordination : Marketing is a comprehensive term. Various

activities are required to be performed for marketing of goods and
services such as conducing market survey, sales forecasting,
product planning, product development, pricing, promotion,
warehousing, transportation, selling after sales service and so on.
All these activities are required to be coordinated to achieve
effective marketing of goods and services.

5) Direction : Direction in marketing management refers to

development of new products and markets, fixing targets,
motivating employees by giving monetary and non-monetary
incentives, guiding and supervision of the employees and so on.

6) Controlling : Controlling is the major function of marketing

management. It refers to fixing standards, evaluation of actual
performance and comparing the actual performance with the
standards fixed. If the actual performance is not as per the
standards, measures can be taken to improve the performance.

7) Staffing : Marketing is a specialized job. It requires capable,

experienced and qualified people to perform the job effectively and
efficiently. The marketing manager co-ordinates with HR manager
to recruit the required staff.
 3

Thus marketing manager has the responsibility of performing

many functions in the field of marketing such as planning,
organizing, directing motivating, co-ordinating and controlling. All
these functions are undertaken to carryout the marketing plan &
policies which in turn results in achievement of marketing
objectives.

1.2 INTERNAL ENVIORNMENT ANALYSIS

Internal environment is a term that describes the elements

within an organization which define employee behavior. These
elements influence the activities and choices of the employees in
an organization. They include the culture, leadership styles and
organization structure. An organization's internal environment is
composed of the elements within the organization, including current
employees, management, and especially corporate culture, which
defines employee behavior. Although some elements affect the
organization as a whole, others affect only the manager. A
manager's philosophical or leadership style directly impacts
employees. Traditional managers give explicit instructions to
employees, while progressive managers empower employees to
make many of their own decisions. Changes in philosophy and
leadership style are under the control of the manager.

Following are the important elements of internal environment

which have to be analyzed properly:

1. Mission Statement:
An organization's mission statement describes what the
organization stands for and why it exists. It explains the overall
purpose of the organization and includes the attributes that
distinguish it from other organizations of its type. A mission
statement should be more than words on a piece of paper; it should
reveal a company's philosophy, as well as its purpose. This
declaration should be a living, breathing document that provides
information and inspiration for the members of the organization. A
mission statement should answer the questions, “What are our
values?” and “What do we stand for?” This statement provides
focus for an organization by rallying its members to work together
to achieve its common goals. Effective mission statements lead to
effective efforts. In today's quality- conscious and highly
competitive environments, an effective mission statement's purpose
is centered on serving the needs of customers.
2. Company policies:
Company policies are guidelines that govern how certain
organizational situations are addressed. Company policies are an
indication of an organization's personality and should coincide with
its mission statement.
 4

3. Organization structure:
The formal structure of an organization is the hierarchical
arrangement of tasks and people. This structure determines how
information flows within the organization, which departments are
responsible for which activities, and where the decision- making
power rests. Some organizations use a chart to simplify the
breakdown of its formal structure. This organizational chart is a
pictorial display of the official lines of authority and communication
within an organization.

4. Organization culture:
The organizational culture is an organization's personality.
Just as each person has a distinct personality, so does each
organization. The culture of an organization distinguishes it from
others and shapes the actions of its members. Four main
components make up an organization's culture are:

 Values: Values are the basic beliefs that define employees'

successes in an organization.
 Heroes: A hero is an exemplary person who reflects the image,
attitudes, or values of the organization and serves as a role
model to other employees.
 Rites and rituals: Rites and rituals, the third component, are
routines or ceremonies that the company uses to recognize
high- performing employees. Awards banquets, company
gatherings, and quarterly meetings can acknowledge
distinguished employees for outstanding service.
 Social Network: Is the informal means of communication within
an organization. This network, sometimes referred to as the
company grapevine, carries the stories of both heroes and
those who have failed. It is through this network that employees
really learn about the organization's culture and values.

5. Organizational Climate:
The overall tone of the workplace and the morale of its
workers are elements of daily climate. Worker attitudes dictate the
positive or negative “atmosphere” of the workplace. The daily
relationships and interactions of employees are indicative of an
organization's climate. The company's internal workplace culture,
and how that may have shifted over time from its original mission
and goals, will likely be assessed. Sometimes a company will use
an outside firm to conduct the analysis. Such a move may occur,
when the company wants an outside, objective view of the internal
inner workings of the company.
 5

6. Resources:
Resources are the people, information, facilities,
infrastructure, machinery, equipment, supplies, and finances at an
organization's disposal. People are the paramount resource of all
organizations. Information, facilities, machinery equipment,
materials, supplies, and finances are supporting, nonhuman
resources that complement workers in their quests to accomplish
the organization's mission statement. The availability of resources
and the way that managers value the human and nonhuman
resources impact the organization's environment.

 Tangible Resources – Assets that can be seen and quantified

 Intangible Resources – Family commitment, networks,
organizational culture, reputation, intellectual property rights,
trademarks, copyrights

7. Management Philosophy:
Philosophy of management is the manager's set of personal
beliefs and values about people and work and as such, is
something that the manager can control. The managerial
philosophies have a subsequent effect on employee behavior,
leading to the self- fulfilling prophecy. As a result, organizational
philosophies and managerial philosophies need to be in harmony.

8. Leadership style:
The number of coworkers involved within a problem- solving
or decision- making process reflects the manager's leadership
style. Empowerment means delegating to subordinates
decision- making authority, freedom, knowledge, autonomy, and
skills. Fortunately, most organizations and managers are making
the move toward the active participation and teamwork that
empowerment entails. When guided properly, an empowered
workforce may lead to heightened productivity and quality, reduced
costs, more innovation, improved customer service, and greater
commitment from the employees of the organization.

External factors are beyond the control of a firm; its success

depends to a large extent on its adaptability to the environment.
The external marketing environment consists of:
a) Macro environment, and
b) Micro environment

a) Micro environment:
The micro environment refers to the forces that are close to
the company and affect its ability to serve its customers. It includes
the company itself, its suppliers, marketing intermediaries,
customer, markets competitors and publics.
 6

1. Internal Environment
The company aspect of microenvironment refers to the
internal environment of the company. Each of these departments
has an impact on marketing decisions. For example, research and
development have input as to the features a product can perform
and accounting approves the financial side of marketing plans and
budgets.

2. The Supplier
The Supplier of a company is also an important aspect of the
microenvironment because even the slightest delay in receiving
supplies can result in customer dissatisfaction. Marketing managers
must watch supply availability and other trends dealing with
suppliers to ensure that product will be delivered to customers in
the time frame required in order to maintain a strong customer
relationship.

3. The Market intermediaries

Marketing intermediaries refers to resellers, physical
distribution firms, marketing services agencies, and financial
intermediaries. These are the people that help the company
promote, sell, and distribute its products to final buyers. Resellers
are those that hold and sell the company’s product.

4. The Customer
Another aspect of microenvironment is the customers. There
are different types of customer markets including consumer
markets, business markets, government markets, and reseller
markets. The consumer market is made up of individuals who buy
goods and services for their own personal use or use in their
household. Business markets include those that buy goods and
services for use in producing their own products to sell. This is
different from the reseller market which includes businesses that
purchase goods to resell as is for a profit. These are the same
companies mentioned as market intermediaries. The government
market consists of government agencies that buy goods to produce
or transfer goods to there that need them. International markets
include buyers in other countries and includes customers from the
previous categories.

Competitors are also a factor in the microenvironment and

include companies with similar offerings for goods and services. To
remain competitive a company must consider who their biggest
competitors are while considering its own size and position in the
industry. The company should develop a strategic advantage over
their competitors.
 7

5. The Publics
The final aspect of the microenvironment is publics, which is
any group that has an interest in or impact on the organization’s
ability to meet its goals. For example, financial publics can hinder a
company’s ability to obtain funds affecting the level of credit a
company has. Media publics include newspapers and magazines
that can publish articles of interest regarding the company and
editorials that may influence customers’ opinions. Government
publics can affect the company by passing legislation and laws that
put restrictions on the company’s actions. Citizen-action publics
include environmental groups and can question the actions of a
company and put them in the public spotlight. Local publics are
neighbourhood and community organizations and will also question
a company’s impact on the local area and the level of responsibility
of their actions. The general public can greatly affect the company
as any change in their attitude, whether positive or negative, can
cause sales to go up or down because the general public is often
the company. And finally, the internal publics include all those who
are employed within the company and deal with the organization
and construction of the company’s product.

b) The macro environment: It refers to all forces that are part of

the larger society and affect the microenvironment. Macro
environment factors act external to the company and are quite
uncontrollable. These factors do not affect the marketing ability of
the concern directly but indirectly the influence marketing decisions
of the company. It includes concepts such as demography,
economy, natural forces, technology, politics, and culture. The
factors are:

1. Demographic Forces:
Here, the marketer monitor the population because people
forms markets. Marketers are keenly interested in the size and
growth rate of population in different cities, regions, and nations;
age distribution and ethnic mix; educational levels; households
patterns; and regional characteristics and movements.
Demography refers to studying human populations in terms of size,
density, location, age, gender, race, and occupation. This is a very
important factor to study for marketers and helps to divide the
population into market segments and target markets. An example
of demography is classifying groups of people according to the year
they were born. Each classification has different characteristics and
causes they find important. This can be beneficial to a marketer as
they can decide who their product would benefit most and tailor
their marketing plan to attract that segment. Demography covers
many aspects that are important to marketers including family
dynamics, geographic shifts, work force changes, and levels of
diversity in any given area.
 8

2. Economic Factors:
Another aspect of the macro environment is the economic
environment. This refers to the purchasing power of potential
customers and the ways in which people spend their money. The
economic environment consists of macro-level factors related to
means of production and distributions that have an impact on the
business of an organization within this area are two different
economies, subsistence and industrialized. Subsistence economies
are based more in agriculture and consume their own industrial
output. Industrial economies have markets that are diverse and
carry many different types of goods. Each is important to the
marketer because each has a highly different spending pattern as
well as different distribution of wealth.

3. Physical Forces or Natural Environment:

Components of physical forces are earth’s natural renewal
and non-renewal resources. Natural renewal forces are forest, food
products from agriculture or sea etc. Non- renewal natural
resources are finite such as oil, coal, minerals, etc. Both of these
components quite often change the level and type of resources
available to a marketer for his production. Natural environment
includes the natural resources that a company uses as inputs that
affect their marketing activities. The concern in this area is the
increased pollution, shortages of raw materials and increased
governmental intervention. As raw materials become increasingly
scarcer, the ability to create a company’s product gets much
harder. Also, pollution can go as far as negatively affecting a
company’s reputation if they are known for damaging the
environment. The last concern, government intervention can make
it increasingly harder for a company to fulfill their goals as
requirements get more stringent.

4. Technological Factors:
The technological environment consists of factors related to
knowledge applied, and the materials and machines used in the
production of goods and services that have an impact on the
business of an organization. The technological environment is
perhaps one of the fastest changing factors in the macro
environment. This includes all developments from antibiotics and
surgery to nuclear missiles and chemical weapons to automobiles
and credit cards. As these markets develop it can create new
markets and new uses for products. It also requires a company to
stay ahead of others and update their own technology as it
becomes outdated. They must stay informed of trends so they can
be part of the next big thing, rather than becoming outdated and
suffering the consequences financially.
 9

5. Political and Legal Forces:

Developments in political and legal field greatly affect the
marketing decisions. sound marketing decision cannot be taken
without taking into account, the government agencies, political party
in power and in opposition their ideologies, pressure groups, and
laws of the land. These variables create tremendous pressures on
marketing management. Laws affect production capacity,
capability, product design, pricing and promotion. Government in
almost all the country intervenes in marketing process irrespective
of their political ideologies. The political environment includes
all laws, government agencies, and groups that influence or limit
other organizations and individuals within a society. It is important
for marketers to be aware of these restrictions as they can be
complex. Some products are regulated by both state and federal
laws. There are even restrictions for some products as to who the
target market may be, for example, cigarettes should not be
marketed to younger children. There are also many restrictions
on subliminal messages and monopolies. As laws and regulations
change often, this is a very important aspect for a marketer to
monitor.

6. Social and Cultural Forces:

This concept has crept into marketing literature as an
alternative to the marketing concept. The social forces attempt to
make the marketing socially responsible. It means that the business
firms should take a lead in eliminating socially harmful products and
produce only what is beneficial to the society. These are numbers
of pressure groups in the society who impose restrictions on the
marketing process. The aspect of the macro environment is the
cultural environment, which consists of institutions and basic values
and beliefs of a group of people. The values can also be further
categorized into core beliefs, which passed on from generation to
generation and very difficult to change, and secondary beliefs,
which tend to be easier to influence. As a marketer, it is important
to know the difference between the two and to focus your marketing
campaign to reflect the values of a target audience.

1.3 EMERGING MARKETING OPPORTUNITIES IN

INDIA

India is moving towards becoming the third-largest consumer

market behind only the U.S. and China. So Indian market will offer
both opportunities and challenges to marketing companies. There
will be marketing opportunities because of the following
developments taking place in Indian economy.

1) Growth in income will change India from a ‘bottom of the

pyramid economy’ to a middle class-led one.
 10

2) In coming decades, consumption will grow at a faster rate. It is

estimated that consumer spending will grow from $1.5 trillion
today to nearly $6 trillion by 2030.
3) The consumption in India will increase because of rising
incomes and a broad-based pattern of growth and benefit
sharing with under privileged people. It is estimated that the
growth of the middle class will lift nearly 25 million households
out of poverty. In addition, India will have 700 million millennial
and Gen Z consumers who have grown up in a more open and
liberal environment.
4) In India, the users of internet and mobile phones are very high
and are going to increase further. So in future, E-commerce will
play a major role.
5) Future consumption growth will come not only from the diverse,
rich and densely populated cities but also from the thousands of
geographically dispersed and developed rural towns. The rural
demand for certain FMCG products like soaps, washing
powders, tea etc. is quite large. A study on rural markets states
that the rural demand for non-durables is increasing rapidly. It is
estimated that it will increase to Rs. 860 billion in 2020.
6) Working population: Nearly 10-12 million working age people
will emerge in India over the next - decade so they will have to
be provided with right skills and gainful employment to enable
the income and consumption growth in future. More than one -
half of Indian workers will require reskilling to meet the talent
demands of the future. Society, industry educational institutions
and policy makers need to work in co-ordination to fill up the
current skills gap.

The positive vision for the future of India will only materialize
if business and policy makers pursue an inclusive approach to the
country’s economic and consumption growth.

1.4 INTERNATIONAL MARKETING ENVIRONMENT

International marketing environment consists of factors or

forces that affect international marketing of a company. These
forces or factors may affect international marketing favourably or
unfavourably and hence, provides either opportunities or threats
and challenges. So Company’s success largely depends on the
influence of marketing environment and ability of the firm to
respond to it effectively.

International marketing environment forces may be internal

(such as resource availability and management attitudes), may be
domestic (such as government policy towards international
business and facilities) and global (such as overall international
 11

business environment of relevant part of the world). Global forces

are more relevant and are to considered in international marketing.

The following are some key global forces / factors that are
required to be considered when making any international marketing
decisions -

1) Cultural factors - Cultural factors include languages spoken,

eating habits regional differences colors. Customs & taboos, values
consumer habits and other demographic factors and so on. Thus
culture of a particular country is the collective programming of the
mind which distinguishes the members of one human group from
another. As these factors influence consumer’s behaviour,
understanding cultural dissimilarities is very important for the
success of international marketing.

2) Economic Environment : International marketers equally need

to be aware of economic factors while undertaking marketing
decisions such as size of population, and its potential growth, per
capita income level, consumption pattern, inflation level the
availability and quality of local infrastructure, regional economic
integrations tariff and non tariff barriers competitive forces and so
on.

3) Political and legal Environment : The politics and regulations

of the company’s home country can determine its’ opportunities in
international markets. Companies are also required to take into
account the legal and political environment the legal and political
environment of the host country. Such as the host country’s
government, it’s political actions stability & laws, particularly
intellectual property rights.

4) Technological Environment :
The level of technological development of a nation affects
the attractiveness of doing business there, as well as the type of
operations that are possible. Marketers in developed nations
cannot take many technological developments for granted. They
may not be available in lesser developed nations. Technologically
related problems that may be faced by the firms can be provision of
training to operate unfamiliar equipment, poor transportation and
communication facilities, Lack of data processing facilities and so
on.

5) The Economic Environment :

Nation’s economy decides it’s current and potential capacity
to produce goods and services and thereby marketing opportunities
available in that nation. So the firm has to take into consideration
the factors like per capita income, availability of labour,
infrastructure facilities, other resources and so on.
 12

6) The Competitive Environment :

The firm has to consider the competitive environment of that
particular nation. The competition can be from local firms and / or
from other multinational corporations. So the strategies adopted by
them must be considered before entering the international market.

7) Trade blocks & Agreements :

Regional trading blocks represent a group of nations that join
together and formally agree to reduce trade barriers among
themselves.

The Association of Southeast Asian Nations (ASEAN) is an

example of a regional trading block. A free trade agreement within
ASEAN member nation allows for the free exchange of trade,
service, labour and capital

One of the potentially interesting results of trade agreements

like ASEAN or NAFTA is that many products previously restricted
by dumping laws, would be allowed to be marketed. The practice of
dumping refers to selling products in overseas markets at very low
prices. These laws were designed to prevent pricing practices that
could seriously harm local competition.

Almost all the countries of the world have entered into one or
more regional trade agreements. Such agreements are designed to
facilitate trade through the establishment of a free trade area,
customs union or customs market - Free trade areas and customs
unions eliminate trade barriers between member countries while
maintaining trade barriers with non member countries customs
union maintain common tariffs and rates for non member countries.
A common market - provides for harmonious fiscal and monetary
policies while free trade areas and customs unions do not. Trade
agreements are facilitating trade liberalization and creating
opportunities for companies with global operations.

Many firms from industrialized nations engage in

international marketing for market expansion and profit
maximization.

Basic principles of domestic marketing apply to international

marketing. However international marketing firm has to adjust its
operations with above mentioned environmental factors that can
have effects on their marketing activities.
 13

1.5 EXERCISE

1. Explain the importance of Marketing management.

2. Describe the Functions of Marketing Management.
3. Explain the factors of Micro Environment factors.
4. Write short Notes
a) Factors of Macro environment
b) Emerging Marketing Opportunities in India
c) International Marketing Environment
5. Explain the following terms
a) Marketing
b) Marketing Management

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MODULE 2

2
UNDERSTANDING COMPETITION AND
STRATEGIC MARKETING
Unit Structure :

2.1 Marketing strategy: Definition and Features

2.2 Steps in strategic marketing planning process
2.3 SWOT Analysis
2.4 Michael Porter’s Five Forces Model
2.5 Analyzing competition
2.6 Exercise

2.1 MARKETING STRATEGY: DEFINITION AND

FEATURES

The term strategy refers to a firm game or action plan

designed to help the firm gain a competitive advantage over its
rival’s competitors for achieving its objectives. It helps the firm to
use its resources like skills, technologies finance to adjust with its
external environment enables the firm to survive and grow in a
competitive environment.

Marketing strategy is an important aspect of overall business

strategy. It outlines overall business strategy. It outlines overall
action plan for finding clients and customers for the business. It
focuses on what the company wants to achieve for it’s business
and marketing efforts. Specially it covers marketing aspect like
designing marketing plan, market segmentation, targeting and
positioning, promotional activities monitoring and evaluating
marketing efforts and so on.

Marketing strategy can be used to achieve the following

goals -

1) Increase sales
2) Finding out new customers
3) Encouraging existing customers to buy more
4) Introduce a new product or service
5) Increase market share
6) Establishing a brand
7) Improve customer loyalty
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Features / Characteristics of marketing strategy can be given

as below -

1) It is an action plan designed to achieve marketing goals in a

competitive environment.
2) Designing marketing strategy is a continuous process involving
study and analysis of business environment.
3) Effective marketing strategy aims of making optimum utilization
of organisation’s resources.
4) Marketing strategy is a flexible or dynamic concept. The
organization is required to make suitable changes in it’s strategy
to adjust with it’s environment.
5) Marketing strategy basically makes effective use of four
elements of marketing mix - product, price, promotion and
physical distribution.
6) The term marketing strategy can be used in all walks of life,
wherever the question of defeating the rivals arises. Such as all
types of business organizations, military, politics sports and
even in individual initiatives.
7) The effects of marketing strategy are long term in nature in
terms of its financial and non financial performances.

2.2 STEPS IN STRATEGIC MARKETING PLANNING

PROCESS:

Formulation of strategic marketing planning is a continuous

process. It is required to make necessary adjustments in marketing
planning as per the changes taking place in marketing environment.
The following are the steps involved in strategic marketing planning
process -

1) Identifying target customers -

The first step in strategic marketing planning is to identify
target customers. It means to know who are the customers, where
are they located and what their tastes are, likes and dislikes,
expectations, motives aspirations and so on. This can be done by
conducting market survey. It makes an organization confident that it
is marketing the goods / services to people who are actually
interested to buy them.

2) Studying and analyzing the competitors -

No business exists in a vacuum every business unit has to
face competition so the organization is required to know who its
competitors are and what their strategies to capture the customers
 16

are. After knowing the competitors the organization can formulate

its strategies according.

3) Taking decisions on the marketing mix -

After studying and analyzing customers and competitors, the
organization can take decisions related to product, pricing,
promotion and physical distribution. These are marketing tools that
can be used effectively to overcome competition and to achieve
marketing objectives.

4) Setting marketing goals -

It is very significant to set-marketing goals in clear and
specific terms. Marketing goals should be specific, measurable,
actionable, relevant and time bound. Marketing goals can be to
increase sales turnover to increase market share, to enter into new
markets to expand the existing market, to get goodwill and
reputation and so on. Such goals give direction to the marketing
efforts of an organization.

5) Evaluation -
It is very important to evaluate the performance of the
marketing plan on a continuous basis. It helps the firm to know
weaknesses, shortcomings of the marketing plan and to take
necessary measures to correct them.

2.3 SWOT ANALYSIS :

SWOT Analysis refers to identifying studying and analyzing

strengths and weaknesses, of an organization and opportunities
which may arise and threats which may be required to be faced by
the organization. Such anslysis is very important while formulating
marketing strategies for an organized.

These can be described as below -

1) Strengths -
Strengths are inherent strong points of an organisation’s
internal environment. They can be effectively used for the benefit of
the organization. Examples of strengths can be superior research
and development facilities, good location, positive attitude of
management and so on.

2) Weaknesses -
Weaknesses are inherent weaker points of an organisation’s
internal environment. If possible, certain measures can be taken to
overcome them. They may create certain obstacles or difficulties in
the working of the organization. Examples of weaknesses can be
overdependence on a single product line, non availability of good
supplier, negative attitude of management and so on.
 17

3) Opportunities :
Opportunities are favourable conditions created by the
organisation’s external environment. The ogranisation can identify
them and make efforts to take advantage of them. Examples of
opportunities can be growing demand of the product or service, exit
of strong competitor from the market and so on.

4) Threats -
Threats are unfavourable conditions created by the
organisation’s external environment. The organization can identify
them and take certain measures to overcome them. Examples of
threats can be entry of strong competitor in the market, decline in
demand of the product or service, increase in tariffs and so on.

2.4 MICHAEL PORTER’S FIVE FORCES MODEL

An industry is defined as a group of companies dealing in

products or services that are close substitutes of each other. The
close substitutes are those products or services that satisfy the
same basic customer needs. Michal E Porter has given a model
about competitive forces study and analysis of these forces can
help the firm in dealing with it’s competitive environment. The firm
can take necessary measures to overcome / face competitive
forces and to survive in the market successfully.

Following is the chart showing Porter’s 5 forces model of

competition in an industry.

These competitive forces affecting the working of the firm

can be explained as follows :

1) Entry of new firms in an industry :

When a particular industry shows rising trend in terms of
profits, there is a possibility that new firms may enter the industry.
Entry of new firms in the industry affects the existing firms. It affects
the market share and sales turnover of the existing firms as new
firms also start sharing the market. If the existing firms are stronger
ones, they can adopt strategies to discourage the entry of new
firms in the market.
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2) Competitive environment of the firm or Rivalry among

competitors -
Competitive environment of the firm or rivalry among
competitors is created when the firms in an industry try to be the
market leader by capturing a larger market share. Such highly
competitive environment affects every firm in the industry. The firm
has to formulate strategies to overcome / face such competitive
environment.

3) Bargaining power of buyers -

When there is severe competition in the market, it’s a
buyer’s market. Buyer’s market or bargaining power of buyers of
firms in an industry refers to the ability of buyers, individually a
collectively to force the firms to reduce the prices of products a
services marketed by them and / or to sell better quality of product /
service. A high buyer bargaining power creates unfavourable or
negative factors for the firms. The firms may require to formulate
strategies to overcome such situation.

4) Bargaining power of suppliers -

When suppliers enjoy relatively less competitive market, they
can have high bargaining power or sellers market. The suppliers
are in a position to sell the products at higher prices and / or to
make the buyers to accept a lower quality of product a service. A
high supplier bargaining power acts as a negative factor /
unfavourable condition for the firms. They have to take suitable
measures to face such a situation.

5) Competition from substitute products / services :

Substitute products are these that satisfy the same set of
customer needs. Examples are alternative modes of
communication like postal services, fax, courier services, electrical
gadgets like bulbs, tube lights and so on. The availability of close
substitutes constitutes a negative competitive force in an industry.
On the other hand, those industries which have no close substitutes
are more attractive than those that have one are more of such
substitutes.
Obviously, firms in an industry having no close substitutes
can charge a higher price and earn higher returns. For industries
where close substitutes are available, the level of price fixed is
restricted by the price of the substitutes available. Thus, firms have
to formulate their business strategies keeping in view the intensity
of the competitive force arising out of the presence or absence of
the substitutes.
Using the five forces model of industry competition, a firm
can analyse it’s strengths and weaknesses opportunities and
threats, its position within the industry, and can do strategic
planning accordingly.
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2.5 ANALYSING COMPETITION :

In order to survive and grow in the business, it is very

essential to study and analyse the macro environment factors such
as the trends and movements within the economy, global
environment and particularly the extent of competition within the
industry and market segment. It is impossible for an organization to
develop strong competitive positioning strategies without a good
understanding of the environment and its competitors that is their
strengths and weaknesses.

Industry Analysis -
For analyzing the industry, two basic questions are required
to be answered. First, what are the major trends affecting the
growth of the industry in the future? And secondly at what rate the
industry will grow in future?

Industry Competitiveness Analysis -

Michael E. Porter has identified five competitive forces that
influence every industry and every market. These forces determine
the intensity of competition and hence, the profitability and
attractiveness of an industry. These forces are bargaining power of
suppliers, buyers, availability of substitutes, entry of new firms and
rivalry among existing firms. The objective of corporate strategy
should be to adjust with these competitive forces in under to
improve competitive position of the organization. The analysis of
competitive forces helps the firm to take decisions about entry to, or
exit from, an industry or a market segment. The Five Forces Model
is based on microeconomics. It takes into account supply and
demand, complementary products and substitutes the relationship
between volume of production and cost of production and market
structures like monopoly, oligopoly or perfect competition
management can study and analyse these factors and formulate
strategies to improve organisation’s competitive position.

Competition Analysis - It is done to know in details about the

actual competitors business strategies. It requires research about
various aspects of competitors’ business such as

1) Identifying key competitors and their market positioning.

2) Size of their business in units or rupees.
3) Market share of key competitors
4) Sales trends of key competitors
5) Strengths and weaknesses of key competitors compared to your
organisation’s
6) Perceived marketing strategies of key competitors and their
probable impact on the organization.
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Thus competitive analysis helps the organization

1) To identify competitors
2) To evaluate their strategies
3) To identify strengths and weaknesses of the organization.
4) To formulate competitive marketing plan to survive and grow in
a competitive market.

2.6 EXERCISE

1. Explain the steps in the Strategic Marketing Planning.

2. Discuss in detail the Michael Porter’s Five Forces Model.
3. Write short notes:
a) Features / Characteristics of marketing strategy
b) Competition Analysis
c) SWOT Analyses
4. Explain the terms:
a) Marketing strategy
b) SWOT analyses

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MODULE 3

3
PRODUCT
Unit Structure :

3.1 The concept of Product

3.2 Product Classification
3.3 Product Life Cycle
 Product Positioning : Meaning and Importance (Old
book page nos. 67 to 73)
3.4 Steps in Product Positioning
3.5 Exercise

3.1 THE CONCEPT OF PRODUCT

3.1.1 Meaning and Definition

In marketing, a product is anything that can be offered to
a market that might satisfy a want or need. In retailing, products are
called merchandise. In manufacturing, products are bought as raw
materials and sold as finished goods. Commodities are usually raw
materials such as metals and agricultural products, but a
commodity can also be anything widely available in the open
market. In project management, products are the formal definition
of the project deliverables that make up or contribute to delivering
the objectives of the project. In insurance, the policies are
considered products offered for sale by the insurance company that
created the contract. A product is a set of tangible and intangible
attributes that leads to customer satisfaction.

A product is a good, service or idea having certain tangible

and intangible attributes that satisfy consumers. Consumer gets it
in exchange for money or some other unit of value. Depending
upon type of product it can be produced by an industrial process or
is grown through farming or extracted from soil. It satisfies the
desire or need of a consumer. Examples of product are consumer
and industrial goods, agricultural produce, minerals and so on.

Definitions of product:

According to Philip Kotler, “A product is anything that can

be offered to a market for attention, acquisition, user or
consumption that might satisfy a want or a need.”
 22

According to Skinner, ‘A product is any good, service or

idea that satisfies need or wants and can be offered in an
exchange.”

3.1.2 Product Levels / Customer Value Hierarchy -

Product is sold only when it satisfies needs and wants of
consumers. Consumers are individuals having different needs,
wants and expectations. A business unit cannot satisfy needs,
wants and expectations of every consumer. So it tries to select a
particular segment or section of consumers and satisfies the needs,
wants and expectations of that segment. According to Philip Kotler,
consumers have five levels of need, ranging from functional or care
needs to emotional needs. Customer chooses a product based on
their level of need. A customer is satisfied when the product more
than matches his level of need. So there are five levels of product
for satisfying different levels of needs.

The five product levels are

1) Core benefit product level - It refers to the level of the product
or service that satisfies the fundamental need or want of the
consumers. For example the product level that satisfies the need
for shelter.

2) Generic Product level - It refers to the product level having

those characteristics or attributes for satisfying the fundamental or
basic need. For example the product level which gives basic
structure for protecting the consumer as a shelter.

3) Expected Product Level - It refers to the product level that has

the set of attributes or characteristics that buyers normally expect
when they purchase a product. For example the house which fulfils
the basic expectations such as protection, basic amenities such as
electricity water, ventilation, and so on

4) Augmented Product Level - It refers to the product level which

tries to provide additional features, benefits, attributes or related
services that serve to differentiate the product from its competitors.
For example the house with concealed wiring granite flooring, good
quality bathroom fittings, centralized air conditioning, parking
facility, children play area, swimming pool and so on.

5) Potential Product Level - It is the product level of the future

with technological advancements and environmental
considerations. For example the house with remote controlled
operations.
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3.2 PRODUCT CLASSIFICATION

Different types of products are produced by producers for

satisfying different needs, wants and expectations of consumers. In
product classification, products are separated or grouped into
different categories for marketing purpose.

Products are basically divided into two groups - goods and

services. Goods are articles or items that are used or consumed by
consumers. They are tangible in nature i.e. they can be seen and
touched. They generally have longer life. Ownership in products
can be transferred from one person to another. Products when
manufactured by making use of machines are standardized in
nature. They are produced in large quantities stored and supplied
to customers as per the need. The examples of goods are
consumer goods and industrial goods. Those products that are
purchased by final consumers for personal consumption are called
consumer goods such as daily necessities, consumer durables and
so on. Industrial goods are purchased for producing or
manufacturing goods such as raw materials, spare parts and
components, machinery etc.

Services are products that are intangible in nature. They are

in the form of actions, experiences and performances. They cannot
be seen or touched but they can be felt or experienced. They are
perishable in nature. They cannot be stored for future needs.
Ownership in services cannot be transferred from one person to
another. Examples of services are banking, insurance, education,
entertainment, repairs and maintenance, free home delivery etc.

a) Consumer goods -
Consumer goods are classified into three categories.

1) Convenience Goods - They are daily necessities of life and

consumers buy them very frequently like food items, soaps and
detergents shampoo, toothpaste, umbrellas, shoes, winter wear,
medicines and so on. They are generally purchased by consumers
as impulse buying or without much thought or planning. Many times
consumers develop brand loyalty towards a particular brand. They
are to be made available to consumers so that they can be
purchased easily and conveniently by consumers without spending
much time and money.

2) Shopping Goods - Shopping goods some of the convenience

goods are perishable in nature so special arrangement is required
for their distribution such as milk, flowers, fruits etc. are also called
as consumer durables such as clothes home appliances, furniture,
etc. consumers’ decisions to purchase these products are
 24

influenced by their price, quality and value for products. Generally

consumers take some time to take purchase decisions. Business
firms are required to formulate marketing strategies to market their
products in the competitive market. Marketing decisions can be to
offer better value with higher quality for the same price, to spend on
heavy advertising to appoint trained sales people to influence
consumer choices and so on.

3) Speciality Goods - These are high priced expensive goods

purchased by high income level segment of consumers. Examples
are stereos, computers, cameras, diamond jewellery, the most high
end brands of cars and clothing. The buyers of such products are
brands conscious and spend more time finding the product they
want. They generally select the brand with high market image and
reputation.

b) Industrial Goods –
Industrial goods are those goods that are bought and used
for industrial and business use. Examples of industrial goods are
machinery, manufacturing plants, raw materials, and any other
good or component used by industries or firms. Industrial goods are
used in the production of other goods. So the demand for industrial
goods depends on the demand for consumer goods.

Industrial goods are classified as either production goods or

support goods. Production goods are used in the production of a
final consumer’s goods or product, while support goods help in the
production process of consumer goods such as machinery and
equipment.

Consumer goods are purchased by the general public,

whereas there are very specific buyers of industrial goods such as
industrial units, component - part buyers such as car
manufacturers, dealers or distributors, business units providing
services and so on.

The decision to buy industrial goods is rational compared to

consumer goods. Industrial goods are usually complex in nature
because they can be highly technical. Those who use them must
be highly skilled. The buyers of industrial goods need to invest a lot
of money to purchase industrial goods.

3.3 PRODUCT LIFE CYCLE

Every product has its life cycle like a human being. It passes
through different stages of its life like introduction, growth, maturity
and decline etc. after its launching; this is known as product life
cycle. It is another approach to examining product mix by looking at
 25

the life cycle phase of each product. As it passes through its

stages, it gives effect on products sales and profit. Therefore it is
very essential to the firm or marketer to know in which stage the
product is, as each stage is characterized by a typical marketing
behaviour. This will be made more clear with the help of following
diagram.

Following are the stages of Product Life Cycle (PLC):

1) Product Development Stage:-

This is first stage of PLC. It begins when the company
develops new product idea. The Research and Development
department (R & D) develops the product concept into a physical
product, hopping that it will satisfy the customer and will excite
consumers. Then the product is tested under laboratory to make
sure that the product performs safely and effectively. No doubt
product being newly developed and given physical form, there is no
sale of product and simultaneously the cost on R & D increases. In
other words there is no profit or earning in this stage. So there is no
marketing strategy.
2) Introduction stage
The introduction stage begins when a new product is
launched for the first time in the market. There is no sale or low-
sale of product depends upon the nature of product. Naturally
promotional expenses will be substantial in order to make the
product popular among the customers. Due to heavy promotional
expenses, the profit margin will be less. Therefore at time of
designing policies marketers use to adopt the following strategies
for introductory stage:

 The firm will concentrate on one product only

 Adequate funds will be allocated to research and development
 The firm may adopt skimming pricing strategy or penetration
pricing strategy depending upon the nature of the product.
 26

 The firm may adopt concentrated or mass distribution strategy

depending on the area of market to be covered.

3) Growth stage
It is the second stage in product life. During this stage
product is known to customer and demand for the product is
increased. Along with this, the cost of production and promotional
expenses will fall down gradually. As a result the firms get good
profit through marketing of the product. However due to market
demand and profit incentive, new firms will enter in the market with
modified product. Therefore at this juncture marketer decides the
following strategies:

 Product improvement strategy will be adopted to cover large

market.
 The firm may adopt penetration pricing strategy.
 Aggressive sales promotion techniques will be used to improve
sales.
 Modified distribution channels will be accepted to cover large
area etc.

4) Maturity stage
During this stage, firm being well established in the market,
sales of the firm remain more or less stagnant. The competitors are
more with identical products. Its overall results are there is
reduction in firm’s profit. Because of intense competition, entering
into new markets becomes difficult. Therefore the firm always
thinks to introduce new product and new marketing mix. Along with
this the firms use to study the competitors startles to compete and
adjust the production and marketing activities to counteract the
same. Generally marketer adopts the following strategies:

 The firm may adopt production modification to improve upon the

existing product.
 The firm will continue penetration pricing strategy.
 The firm may stress on promotion expenses and undertake
more promotional work.
 The firm may try to concentrate on specific market segment etc.

5) Decline stage
This is last stage of product, in its life. Here product has law
demand as rivals are coming up with new modified products in the
market. Firm’s sales might have declined noticeably.

Here marketer may reposition the product or modify the

product or even take a decision to drop the product from the
product mix. Special efforts are necessary at this stage, failing
which the firm will have to go out of market within a short period.
 27

The marketer implements the following way to deal with the

situation-
 Replace existing product with an improved product.
 Loss making brand will be withdrawn from the market
 There will be reduction in price of the product
 Goods may be sold to selective segment.
 The firm may become economical on expenses

3.4 STEPS IN PRODUCT POSITIONING

The process of creating an image of a product in the minds

of the consumers is called as product positioning. If the product is
positioned effectively, it helps to create good impression of the
brand in the minds of consumers so effective product positioning is
a key to success of the firm, particularly in the case of a new
product.

Business firms, that are positioning their product try to create

a unique identify of the product by following the steps as given
below.

1) Knowing the consumers - The business firm must first

understand who are it’s consumers? Where are they located? And
what are their needs, wants and expectations? After knowing the
consumers, the firm can try to fulfil the demands of the consumers.

2) Identifying the product features - The business firm must be

well aware of the features and benefits that the consumers will get
by using the product. It is rightly said that you can’t sell something
unless and until you yourself are convinced of it.

3) Unique selling Propositions (USP) -

Every product / brand should have USPs, at least some
features which are unique as compared to the competitive brands
and the firm should effectively communicate them to consumers by
using promotional techniques.

4) Know your Competitors - The business firm must study and

analyse the competitors’ brands and their strategies. After knowing
the competitors’ brands, the firm can effectively communicate to
consumers, how it’s brand is superior to competitors’ brands.

5) Use of promotional techniques - The firm can effectively

position its brand by having the right advertising message with right
tagline copywriting and illustration.
 28

6) Maintain the position of the brand - For an effective

positioning the firm requires to meet the expectations of the
consumers by constantly improving product pricing, and offering
effective after sales service to consumers

3.5 EXERCISE

1. What do you mean by Product? Explain the product levels.

2. Explain the term Product Positioning and its importance.
3. Write short notes on:
a) Product Classification
b) Product life Cycle
c) Steps in product positioning

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 29

MODULE 4

4
PRICING
Unit Structure:
4.1 Meaning, objective and Importance of Pricing
4.2 Factors affecting pricing decisions
4.3 Methods of Pricing (Also refer the page nos. 79 to 86 of
the old book)
4.4 Steps in Pricing
4.5 Exercise

4.1 MEANING, OBJECTIVE AND IMPORTANCE OF

PRICING

4.1.1 Meaning and Definition

Pricing decision has strategic importance in any enterprise.
Pricing governs the very feasibility of any marketing programme
because it is the only element in a marketing mix accounting for
demand and sales revenue. Other elements are cost factors. Price
is the only variable factor determining the revenues or income. A
variety of economic and social objectives came into prominence in
many pricing decision. We now come to the most absorbing
questions of pricing. Economist defines price as the exchange
value of a product or service always expressed in money. To the
consumer the price is an agreement between seller and buyer
concerning what each is to receive. Price is the mechanism or
device for translating into quantitative term i.e., rupees and paisa
the perceive value of the product to the customer at a point of time

When marketers talk about what they do as part of their

responsibilities for marketing products, the tasks associated with
setting price are often not at the top of the list. Marketers are much
more likely to discuss their activities related to promotion, product
development, market research and other tasks that are viewed as
the more interesting and exciting parts of the job.

4.1.2 Importance of Pricing

Yet pricing decisions can have important consequences for the
marketing organization and the attention given by the marketer to
pricing is just as important as the attention given to more
recognizable marketing activities. Some reasons pricing is
important include:

 Most Flexible Marketing Mix Variable – For marketers price is

the most adjustable of all marketing decisions. Unlike product
 30

and distribution decisions, which can take months or years to

change, or some forms of promotion which can be time
consuming to alter (e.g., television advertisement), price can be
changed very rapidly. The flexibility of pricing decisions is
particularly important in times when the marketer seeks to
quickly stimulate demand or respond to competitor price
actions. For instance, a marketer can agree to a field
salesperson’s request to lower price for a potential prospect
during a phone conversation. Likewise a marketer in charge of
online operations can raise prices on hot selling products with
the click of a few website buttons.

 Setting the Right Price – Pricing decisions made hastily

without sufficient research, analysis, and strategic evaluation
can lead to the marketing organization losing revenue. Prices
set too low may mean the company is missing out on additional
profits that could be earned if the target market is willing to
spend more to acquire the product. Additionally, attempts to
raise an initially low priced product to a higher price may be met
by customer resistance as they may feel the marketer is
attempting to take advantage of their customers. Prices set too
high can also impact revenue as it prevents interested
customers from purchasing the product. Setting the right price
level often takes considerable market knowledge and, especially
with new products, testing of different pricing options.

 Trigger of First Impressions - Often times customers’

perception of a product is formed as soon as they learn the
price, such as when a product is first seen when walking down
the aisle of a store. While the final decision to make a purchase
may be based on the value offered by the entire marketing
offering (i.e., entire product), it is possible the customer will not
evaluate a marketer’s product at all based on price alone. It is
important for marketers to know if customers are more likely to
dismiss a product when all they know is its price. If so, pricing
may become the most important of all marketing decisions if it
can be shown that customers are avoiding learning more about
the product because of the price.

 Important Part of Sales Promotion – Many times price

adjustments is part of sales promotions that lower price for a
short term to stimulate interest in the product. However, as we
noted in our discussion of promotional pricing in the sales
promotion tutorial, marketers must guard against the temptation
to adjust prices too frequently since continually increasing and
decreasing price can lead customers to be conditioned to
anticipate price reductions and, consequently, withhold
purchase until the price reduction occurs again.
 31

4.1.3 Pricing Objectives

Firm may choose its pricing objectives from any of the following
a. Maximise current profits and return on investment
b. Exploit competitive position
c. Survival in the competitive market
d. Balance price over product line.

a. Maximise current profits and return on investment: Many a

times set a price in order to maximise their current profit and
returns on investments. They estimate the current demand and
cost associated with different alternative prices and then selects
the price that ensures maximum current profits, returns on
investment or cash flow. This objective presupposes the firm’s
knowledge of cost and demand function. In reality it may be
difficult to precisely estimate the demand function or even the
cost functions. Besides this objective does not consider the
influence of other marketing mix variables on the customer‘s
demand.

b. Exploit the competitive position: Another pricing objective is

to exploit the firm’s competitive position in the market place. This
presupposes that the firm is a leader in the market. This
leadership may arise from the customer’s perception of its
product quality or technology .Being the leader, a firm may
adopt both a skimming, penetrating or geographic pricing policy
and strategy.

c. Survival in a competitive market: Some firms face difficulties

surviving in the market place. This problem gets worse when the
firm loses its distinctiveness and or its products are in maturity
phase, when the customer has a choice from among more
efficient and contemporary substitutes. A firm caught in the web
of a matured market, shifting customer preferences and
undifferentiated offers, has to have a pricing strategy that will
help it to stay afloat. This firm may resort to discounting its
product or even consider running a promotion to liquidate its
stocks.

d. Balancing price over product line: Product line pricing to

maximise long term profits is another pricing objectives. The
product line of a firm may have high popular and low image
product items .Further, there may be fast selling product items
and not so fast selling items. A pricing strategy has to consider
all these different categories of products. Firms have to resort to
strategies to achieve maximisation of profits on their particular
product line.
 32

4.2 FACTORS AFFECTING PRICING DECISIONS:

Fixing price of the product is very crucial and significant

marketing decision as it affects demand, sales and revenue of the
business firm so the decision is taken after considering various
factors. The factors affecting pricing of the product can be classified
into two groups.

a) Internal factors
b) External factors

Following is the chart showing factors influencing pricing

decision of the firm.

a) Internal Factors :
1) Cost - The cost is first consideration while fixing the price of the
product. The cost includes the cost of production, distribution and
overhead costs.

2) Objectives of the firm - While fixing the price of the product the
marketer should consider the objectives of the firm. The objectives
of the firm can be to increase return on investment, to capture a
large market share, to gain goodwill and reputation. If the objective
of the firm is to increase return on investment, then it may charge a
higher price and if the objective is to capture a large market share,
to gain goodwill and reputation. If the objective of the firm is to
increase return investment, then it may charge a higher price and if
the objective is to capture a large market share and gain goodwill
and reputation, then it may charge a lower price.

3) Image of the firm - If the firm is enjoying positive market image

then it can charge higher price and vice versa.

4) Product Life Cycle - The stage at which the product is in its

product life cycle also affects its price. For instance, if the product is
in the introductory stage, the firm may charge lower price to capture
 33

the demand of the product and during the growth stage, the firm
may increase the price.

5) Credit period offered - The pricing of the product is also

affected by the credit period offered by the company to the
customers. Longer the credit period, higher may be the price
charged and vice versa.

6) Product - The type of product to be marketed also affects

pricing decision of the firm. If the product is convenience product,
the price fixed may be lower and if the product is specialty product,
the firm may charge higher price.

b) External Factors -
1) Intensity of Competition - While fixing the price of the product,
the firm needs to understand the intensity of competition in the
market. If the market is highly competitive, the firm has to fix the
price at lower level and vice versa.

2) Consumers - While fixing the price, the consumer factors has

to be considered such as the price sensitivity of the buyer,
purchasing power and so on.

3) Channel of Distribution - The longer the channel of

distribution, higher would be the price and vice versa.

4) Demand of the product - If the product is enjoying higher

demand, then the firm can fix the price at higher level and vice
versa.

5) Government Control - Government rules and regulations must

be considered while fixing the price. In certain products such as
essential medicines government may fix administered prices and
therefore the firm has to consider such regulation while fixing the
price.

6) Economic Conditions - The business firm has to consider

economic conditions prevailing in the country. During recession,
lower price may be fixed and vice versa.

4.3 METHODS OF PRICING

1. Mark-up Pricing / Cost plus pricing:

Cost-plus (or “mark-up”) pricing is widely used in
retailing, where the retailer wants to know with some certainty what
the gross profit margin of each sale will be. This appears in two
forms, full cost pricing which takes into consideration both variable
and fixed costs and adds a percentage as markup. The other is
 34

direct cost pricing which is variable costs plus a percentage as

markup. The latter is only used in periods of high competition as
this method usually leads to a loss in the long run. An advantage of
this approach is that the business will know that its costs are being
covered. The main disadvantage is that cost-plus pricing may lead
to products that are priced un-competitively.

2. Target pricing:
It is a pricing method whereby the selling price of a product
is calculated to produce a particular rate of return on investment for
a specific volume of production. The target pricing method is used
most often by public utilities, like electric and gas companies, and
companies whose capital investment is high, like automobile
manufacturers.

Target pricing is not useful for companies whose capital

investment is low because, according to this formula, the selling
price will be understated. Also the target pricing method is not
keyed to the demand for the product, and if the entire volume is not
sold, a company might sustain an overall budgetary loss on the
product.

3. Value-based pricing:
Pricing a product based on the value the product has for the
customer and not on its costs of production or any other factor. This
pricing strategy is frequently used where the value to the customer
is many times the cost of producing the item or service. For
instance, the cost of producing a software CD is about the same
independent of the software on it, but the prices vary with the
perceived value the customers are expected to have. The
perceived value will depend on the alternatives open to the
customer. In business these alternatives are using competitor’s
software, using a manual work around, or not doing an activity. In
order to employ value-based pricing you have to know your
customer's business, his business costs, and his perceived
alternatives. It is also known as Perceived-value pricing.

4. Competitor-Based Pricing:
In this method of pricing competitor prices is the main
influence on the price. If there is strong competition in a market,
customers are faced with a wide choice of who to buy from. They
may buy from the cheapest provider or perhaps from the one which
offers the best customer service. But customers will certainly be
mindful of what is a reasonable or normal price in the market. Most
firms in a competitive market do not have sufficient power to be
able to set prices above their competitors. They tend to
use “going-rate” pricing – i.e. setting a price that is in line with
the prices charged by direct competitors. In effect such
businesses are “price-takers” – they must accept the going
 35

market price as determined by the forces of demand and supply.

An advantage of using competitive pricing is that selling prices
should be line with rivals, so price should not be a competitive
disadvantage. The main problem is that the business needs some
other way to attract customers. It has to use non-price methods to
compete – e.g. providing distinct customer service or better
availability.

4.4 STEPS IN PRICING

While setting the price of a new product, the firm has to

undertake the following steps -

1) Considering the Organisational objective -

The organizations can have various objectives. Business
objectives can be survival in competitive market, profit
maximization, increasing market share, gaining market image and
reputation and so on. While fixing the price of the product, the
management must consider the objective for which the organization
is carrying out its business operations.

2) Estimating demand of the product -

The price of the product has great influence on the demand
of the product. Normally, there is inverse relationship between price
and demand of the product and it can be observed with the help of
demand and curve. The higher the price, the lower the demand and
vice versa. Business firms have to study and analyse their demand
curves to understand the impact of different price levels on the
demand of their products.

3) Estimating Costs -
The price fixed should cover the total cost of the product.
Total cost of the product includes the cost of production, distribution
and overhead costs. So while fixing the price of the product, total
cost has to be estimated.

4) Analysing Competitors costs, price and offers - The firm

also has to consider the price of the competitor’s product, the
quality of competitor’s product and the competitor’s costs.

5) Selecting a pricing method - Various pricing methods are

available for fixing the price of the product such as markup pricing,
Target Return pricing, Perceived value pricing, Value pricing, Going
Rate Pricing, Auction Type Pricing. The business firm has to select
the particular method of pricing by considering various factors
affecting the price of the product.
 36

6) Selecting the Final Price - In this last stage, the firm has to
take decision on the price to be fixed for the product after
considering additional factors such as impact of other marketing
activities, firm’s pricing policies and impact of price on other parties.

4.5 EXERCISE

1. Explain the Meaning and objective of Pricing

2. Describe the Factors affecting on the pricing decisions
3. Discuss the Methods of pricing
4. Write short notes
a) Steps in pricing
5. Explain the terms
a) Mark-up pricing
b) Target-return Pricing
c) Value based


 37

SECTION II
MODULE 5

5
DISTRIBUTION
Unit Structure :

5.1 Types of middlemen

5.2 Factors affecting channel of Distribution
5.3 Functions performed by middlemen
5.4 Logistics: Meaning and components
5.5 E-marketing: Meaning, merits and demerits of e-marketing
5.6 Online retailing – successful online retailers in India and
abroad
5.7 Exercise

5.1 TYPES OF MIDDLEMEN

Producers / Manufacturers produce goods. The function of

distributing goods to ultimate consumers is performed by
middlemen in the distribution channel. They act as a link between
producers and consumers.

Basically, these middlemen are of three types - a) Merchant

middlemen b) Agent middlemen c) Others

a) Merchant Middlemen –
A merchant middleman is one who takes title a ownership in
the goods and later carries out sales. The following are the types of
merchant middlemen.

1. Wholesalers - They are the dealers who purchase directly from

the producers in large quantities and sell them to retailers in
small quantities. They are link between producers and retailers.

2. Retailers - They are the dealers who buy in small quantities

from the wholesalers and sell to the ultimate consumers.

3. Dealers - They are business houses that resell goods.

 38

b) Agent Middlemen –
Agent middlemen do not take title to goods. They only get
orders from the buyers and pass them on the producers.

The following are the types of agent middlemen.

1. Agents - They are the middlemen who do not take ownership in
goods. They work on behalf of the seller or the buyer. They get
commission for their work.

2. Brokers - Like agents, they also act as a link between the buyer
and the seller. They get brokerage for their work.

3. Jobbers - Jobbers deal in stock exchanges in certain securities.

He works for a broker and does not deal directly with the public.

c) Other types of Middlemen -

1. Branches - Branches are like retail shops established by
manufacturers to market their goods. They are generally
opened at different places.

2. Company show room - Business firms may have their own

showrooms for promoting & marketing specialty goods. They
are sophisticated and decent in nature and give pleasant buying
experience to consumers.

3. Consumer Co-operatives - They are managed in the form of

co-operative organization. They are owned and managed by
consumers to protect their interests. They buy and distribute
goods mainly to the members. They work on no profit no loss
basis.

d) Facilitating Agencies –
These are agencies which work as aids to trade and perform
certain functions and help in marketing of goods, directly or
indirectly. These are transport organizations, warehouses, banks,
insurance companies and so on.

e) E - Marketing –
E-marketing refers to the use of the internet and digital
media capabilities for marketing goods and services. E-marketing is
also called as Internet Marketing, Online marketing or web
marketing. It is used for finding, attracting, winning and retaining
customers.
 39

5.2 FACTORS AFFECTING SELECTION OF A

CHANNEL OF DISTRIBUTION -

Middlemen are agencies which take up the responsibility of

distributing goods produced by producers. As they play an
important role in distribution of goods, producers should be careful
in the selection of a suitable channel or channels of distribution.
Longer channel of distribution refers to making use of wholesalers
and retailers. While shorter channel can be eliminating wholesalers
in the channel of distribution and even making are of direct
marketing.

The following are the factors to be considered while

selection of suitable channel of distribution.

1) Nature of the product - The product to be distributed can be

durable or perishable, consumer a industrial and convenience or
specialty product. For distributing durable, consumer and
convenience products, producers generally select longer channel of
distribution and for perishable, industrial and specialty product,
shorter channel can be selected.

2) Nature of the Market - Nature of the market can be global or

local and dispersed or concentrated. For distributing goods in
global and disposed market, producers may use longer channel of
distribution while for local and concentrated market - shorter
channel may be used.

3) Nature of the middlemen - Selection of middlemen should be

done after considering their prior performance, abilities in providing
services, and promotional activities and

4) Nature of the organization - The organisation’s financial and

managerial capabilities also influence the channel selection
decision. The organization with higher managerial and financial
capability can distribute the goods by using shorter channel or even
direct selling to consumers and vice versa. An organization desiring
to exercise greater control over channel may prefer a shorter
channel as it facilitates better co-ordination, communication and
control of marketing activities.

5) Marketing Environment - During recession or depression,

shorter channel is preferred and vice versa.

6) Competitors’ Strategies - The organization may consider the

channel used by its competitors while selecting a channel of
distribution.
 40

7) Customer characteristics - While selecting a suitable channel

of distribution, the organization has to consider the consumers i.e.
their geographical distributions, frequency of purchase, average
quantity purchases, number of customers and so on.

8) Channel Compensation - Selection of channel of distribution

also depends on cost of distribution incurred by middleman and
their remuneration in the form of margin of profit or commission.

5.3 FUNCTION PERFORMED BY MIDDLEMEN -

Middlemen refer to the agencies that perform activities of

buying and selling of goods. They are responsible for transferring
goods from producers to consumers. They act as a link between
producers and consumers. They are specialized in the function of
distribution of goods and relieve the producers from taking up of
distribution function. Because of middlemen, producers can
concentrate on production function. Middlemen play very important
role in a complicated and global business by transferring goods
from producers to consumers.

In the modern business world, middlemen render the

following services / functions.

1) As middlemen act as a link between producers and

consumers, they provide valuable information about consumers to
producers. This information helps the producers to know about
consumer likes dislikes, tastes, expectations, behaviour and so on.
It helps the producers in production planning.

2) As middlemen shoulder the responsibility of distributing

goods, the producers can concentrate on production only and they
are relieved from the botheration of distribution of goods.

3) By making advance payments for the goods purchased,

middlemen can provide financial help to the producers.

4) Middlemen offer various services to consumers such as

helping in making brand selection, providing credit facility after
sales service, free home delivery etc. and help in improving
consumer satisfaction.

5) As middlemen are specialized agencies in distribution of goods,

they can carry out certain functions like transportation,
warehousing, window display, more efficiently can help in
reducing cost of distribution.
 41

6) Middlemen are an important link between the producers and

consumers and help in transfer of ownership in goods from
producers to consumers.

7) They help in making the goods available to consumers at right

time, right place, right price and in right quality and quantity.

5.4 LOGISTICS - MEANING AND COMPONENTS -

5.4.1 Meaning
Logistics is the process of planning and executing the
efficient transportation and storage of goods from the point of origin
to the point of consumption. The goal of logistics is to meet
customer requirements in a timely and cost-effective manner.

The term is originated from military operation in which it

refers to the movement of military personnel, equipment and goods.

Transportation and warehousing are the major functions of

logistics. Various modes of transportation can be used for moving
goods between warehouses, retail locations and customers.
Warehousing or warehouse management includes such functions
as inventory management and order fulfillment. It also involves
managing warehouse infrastructure, supervision and process of
handling goods.

Thus logistics play an important role by delivering wide

variety of goods to consumers quickly and conveniently.

The term logistics is one of the component of supply chain

management. Supply chain management is wider term than
logistics. Logistics focuses on moving products and materials as
efficiently as possible. Whereas supply chain management covers
areas like demand planning and execution, strategic sourcing etc.

5.4.2 Components of a Business Logistics System -

A business logistics system consists of three main
components such as -
a) Order processing
b) Inventory management
c) Freight transportation

a) Order Processing - Order processing includes a number of

operations such as receiving a request - from a customer for a
particular product by filling up an order form, checking of the form
for is completeness and accuracy, verifying availability of the
product and customer’s credit status, and finally delivery of the
 42

product from the stock. Customers are communicated to inform

them about their order status.

b) Inventory Management - Inventory management refers to

maintaining optimum stock level by avoiding over stacking and
under stocking of goods. It is very essential to enable the firm to
supply goods as per the demand of consumers and reducing
overall operating costs. The ultimate objective is to satisfy customer
service requirements.

c) Freight transportation - In global economy, production of

goods takes place at one place but goods are consumed
throughout the world. So transportation of goods plays an important
role in logistics system. A manufacturer or distributor can choose
from private transportation contract transportation and public
transportation to transport his goods. Various modes of
transportation can be used to ensure door to door services such as
water rail, road and air transport.

Logistics is a field that makes extensive use of information

technology use of information technology to perform day to day
operations efficiently and effectively. In today’s world, logistics play
an important role in transferring goods from producers to
consumers.

5.5 E-MARKETING - MEANING AND ITS MERITS

AND DEMERITS -

5.5.1 Meaning
E-marketing refers to the use of the internet and digital
media capabilities for marketing goods or services. E-marketing is
also called as Internet marketing, Online marketing or Web-
marketing. Like traditional or conventional marketing winning and
retaining customers.

E-marketing is wider in scope as it makes use of internet as

well as email and wireless media for promoting and marketing
goods. E-marketing also can be used for getting digital customers
data, electronic customer relationship management and several
other business management functions.

5.5.2 Merits
The following are various merits of E-marketing

1) Saving in time and cost - E-marketing makes use of

inexpensive and time saving channels for promoting goods and
services such as internet, websites and social media.
 43

2) Wider Geographical Coverage - As internet is easily used by

consumers throughout the world the scope of e-marketing has
widened. Naturally, it can cover wider geographical area.

3) Easier quick and specific communication with consumers -

With the help of digital medium it is possible to communicate with
target consumers easily and quickly.

4) Brand awareness - As a large number of consumers are

targeted quickly and easily, it can help in creating brand awareness
among a large number of consumers.

5) Increased ROI - As a large number of consumers are

communicated with less cost, efforts and time, it can lead to
increased ROI.

6) Selectivity - It enables an organization to personalize message

a more effectively select the targeted customers.

7) It can supplement - The traditional marketing strategies. It can

very well supplement the traditional and marketing strategies.

5.5.3 Demerits -
1) It can be used only for the consumers who have access to
internet services. A large number of consumers still are not in a
position to use internet services.

2) It has intensified competition which is a major demerit of E-

marketing.

5.6 SUCCESSFUL ONLINE RETAILERS IN INDIA

AND ABROAD.

5.6.1 Meaning
Online retailing refers to the buying and selling of goods by using
the internet that is a web browser. Online retailing helps to
communicate with consumers very easily with less cost, time and
efforts. It enables the firm to widen its market. It helps to
understand the customers needs, wants and expectations.

5.6.2 Examples of successful online retailers

The examples of successful online retailers in India and abroad are
as follows -

[Link] - It was established in India in 2007 by two

youngsters, Sachin Bansal and Binny Bansal. It basically deals in
11 product categories like books, music, video - games, computers
electronics, mobile phones, T.V. and home theatre systems, pens
 44

and stationary, healthcare and personal product categories. It has

recently introduced digital music store.

Amazon is the leader in online retailing. In 2017, the U.S.

giant-captured 43.5% of the market. It deals in vast range of goods
and has gained reputation of it’s trustworthiness and its rapid
delivery. Market research firm e-Marketer lists the nine closet
competitor’s. however their combined volume does not come close
to Amazon’s volume. E Bay has 6.6% of the market, Apple 3.9%,
Walmart 3.7%, Home Depot 1.5%, Best Buy 1.3%, QVC Group
1.2%, Macy’s 1.2%, Costco 1.2% and way fair 1.1%.

E Marketer forecasts Amazon will capture 49.1% market

share in 2018, a major jump of almost 6% points. Amazon’s
dominance is seen in the category of computers and consumer
electronics. These products accounted for more than a quarter of
its e-commerce business. Next is apparel and accessories. The
fastest growing category for Amazon is food and beverages with
the acquisition of about 470 whole. Foods units the company can
achieve a dominant position in this sector also.

The challenge for the industry is to compete with this e-

commerce giant. Other retailers such as Walmart, Home Depot,
Best Buy, Macy’s and Costco are having in-store business also. So
they have not yet focused on online retailing channels to a great
extent. They have to take into account such consumer factors as
product selection, pricing, shipping and handling, returns and
consumer service. They can gain share of the e-commerce market
through their own distinctive and aggressive promotions.

5.7 EXERCISE

1. Explain the Factors affecting channel distribution by the

middlemen.
2. Describe the Functions performed by middlemen.
3. Write short notes
a) Types of Middlemen
b) Components of Logistics
c) Merits and Demerits of E-marketing
d) Successful online retailers in India and abroad
4. Explain the terms
a) E-marketing
b) Online retailing
c) Logistics
d) Middlemen


 45

MODULE 6

6
PROMOTION
Unit Structure:

 Meaning, Objectives, Elements of promotion mix, Factors

affecting promotion mix decisions (Old book page nos.
74 to 78)
6.1 Definition and Objectives of Marketing Communication
6.2 Steps in designing a marketing communication program
6.3 Role of Social Media in marketing communication
6.4 Exercise

6.1 DEFINITIONS AND OBJECTIVES OF

MARKETING COMMUNICATION

6.1.1 Definitions:
 The UK chartered institute of marketing defines the
promotional mix (marketing communication) as “the set of tools
that a business can use to communicate effectively the benefits
of its products or services to its customers.”
 Marketing communication is basically marketing promotion
process. Brink and Kelly define the marketing communication
as “The coordination of all seller initiated effort to set up channel
of information and persuasion of facilitate the sales of a product
or services, or the expectance of idea.”
 William Stanton defines the marketing communication as
“promotion is the elements of an organization marketing mix that
is used to inform and persuade the market regarding the
organization products and services.”
 Alderson and Paul Green defines marketing communication as
“Promotion is any marketing effort whose function is to inform or
persuade actual or potential consumer about the merits of the
product or the service at the same (given) price.”

6.1.2 Objectives of Marketing Communication:

Marketing communication plays an important role in the
marketing of the goods and services. The overall objectives of
marketing communication are to affect behaviours of the customers
 46

in favours of the product or service. In general, the main objectives

of integrated marketing communication are:

1. Educating the Customers: Integrated Marketing

communication may be undertaken to educate the customers.
For instance, some of the advertising is undertaken to educate
the audience regarding the use of the product, handling
operations, etc.
2. Counter competitors: The marketer may counter the claims
made by the major competitors. For instance, competitive
advertising is undertaken to counter the claims made by
competitors either directly or indirectly.
3. Reminder: If target customers already have a positives attitude
towards a firm’s product or service then a reminder objective
may be necessary. The reminder objective is necessary,
because the satisfied customers can be targets for competitor’s
appeals.
4. Attitudes: Marketing communication is required to build or to
reinforce attitudes in the minds of target audience. The marketer
expects the target audience to develop a favourable attitude
towards his brand. Positive attitude towards the brand helps to
increase its sales. Through promotional techniques like trade
fare, and personal selling the marketer can correct negatives
attitudes towards the product if any.
5. Persuasion: When business firms offer similar products, the
firm must not only inform the customers about the product’s
availability, but also persuade them to buy it. Through
persuasive messages, the marketer tries to provide reasons
regarding the superiority of his product as compared to others
available in the market.
6. Information: Marketers must inform the target audience about
the product. Providing information is closely related to creating
awareness of the product. Potential customers must know about
a product, such as product features, uses etc. product
information is very much required, especially when the product
is introduced in the market, or when product notification is
undertaken. Proper product information can help the consumers
in their purchase decision.

6.2 STEPS IN DESIGNING A MARKETING

COMMUNICATION PROGRAM

Marketing communication is a two way communication

between the company and its customers at different stages of
marketing a product such as pre-selling, selling, consuming and
 47

post consuming stages. Companies not only desire to reach their

customers but also they are interested to know the reactions and
feedback of customers companies can make use of different
communication techniques to be in touch with the customers.

Following are the steps to develop effective marketing

communication.

1) Identify the target audience - The Company requires to know

customers’ perception about its product and organization as against
its competitors. To know the current status of company’s image is
very important to develop communication message for them.

2) Determine the communication objectives -

The company requires to identify the objective behind
marketing communication. The communication objectives can be
informing the consumers about the product and organization,
changing their attitude, convincing them to purchase the product
and so on.

3) Design the communication message -

The communication message is generally based on AIDA
formula - i.e. it should gain attention, hold interest create desire and
activate action of buying the product. Formulating the message
involves decisions about message content, structure, format and
source.

4) Selection of communication channels -

The organization should select an affective communication
channel to communicate the message to customers. Basically,
there are two types of communication channels - personal and non-
personal. Personal communication channels involve two or more
persons communicating directly with each other either by face to
face or by using telephone or through email. These channels are
effective as they are selective in approach and can give desired
message to the specific persons. Non personal channels include
different types of media, atmospheres and events. media consists
of print media, broadcast media, network media, electronic media
and display media. Non personal media can communicate with
large number of audience with less cost.

5) Deciding the communication budget -

The organizations should decide the communication budget
i.e. how much they will spend on promotion. The amount of budget
varies from industry to industry and organization to organization,
depending on the financial position of the organization, the amount
of sales turnover, competitors’ strategy and so on.
 48

6) Deciding on the media mix i.e. Marketing Communication

mix -
Companies must decide how to allocate the budget over the
five communication tools. They are advertising, sales promotion
trolls, public relations / publicity. Direct marketing and personal
selling. The relative merits and demerits of these communication
trolls should be considered while deciding marketing
communication mix.

7) Evaluation of Impact -
After implementing the communication plan, the organization
must measure its impact. Such evaluation is done by interviewing
the target audience whether they recognize or recall the message,
how many times they saw it, what points they recall, whether they
liked the message or not, and their previous and present attitude
towards the product and the company. The organization should
also know about behavioural measures of audience response, such
as how many people bought the product, the degree of their
satisfaction, and whether they talked to others about it or not.

8) Managing the Integrated Marketing Communication

process -
Organisations generally make use of all five communication
tools in order to communicate with the target audience effectively.
These five communication tools - advertising, sales promotion,
public relations, direct marketing and personal selling should be
complementary / integrated to each other. In order to reach the
right customers, with the right messages at the right time and the
right place.

6.3 ROLE OF SOCIAL MEDIA IN MARKETING

COMMUNICATION

Social media represents low cost tools that are used to

combine technology and social interaction with the use of words.
These tools are making use of interest and mobile applications. The
examples of social media are Twitter, Facebook and YouTube.

Through social media, the organizations can communicate

with peers, customers and potential customers. It helps to improve
brand image by giving effective messages to customers. It is
becoming one of the most important aspects of digital marketing
which provides many benefits of reaching millions of customers
worldwide.

Following are the benefits of using social media in marketing

communication.
 49

1) Social media helps in improving brand awareness - Social

media profiles help in increasing business visibility and in improving
networking with customers and thus helps in improving brand
awareness.

2) Cost - effective - Social media marketing is the most cost

effective way of delivering the required message to all concerned
with the business especially customers.

3) Two way communication - Social media is very effective for

interacting with customers. It is the way for achieving two way
communications with customers. It helps in delivering the required
message to customers and also to know about their reactions about
the product and the organisaton. It gives the organization a chance
to respond to the customers’ queries and complaints.

4) Brand Loyalty - Social media helps the organization to remain

connected with the customers. It helps in ensuring that they are
satisfied and thereby to ensure their loyalty to the brand.

5) Improvement in brand image -

Through social media, the organization can promptly reply to
customers’ queries by posting original content and thus helps in
improving brand image in the minds of the customers.

6) Increase in website traffic -

Positive content on social media, makes the users to click
through to the organisation’s website and thereby helps in
increasing website traffic, and thereby creating opportunities for
increasing sales.

7) To face Competition - In the competitive business world, more

and more companies are making use of the benefits of social
media. In order to be able to boost online traffic to the
organisation’s website and increase sales, it needs to be active on
social media.

8) Effective marketing - The organization can use social media

creatively to advertise its products and services and to create
positive image of the business. Thus it helps in effective marketing
efforts of the organization.

Thus social media is being used as a communication tool for

approaching to these interested in the organisation’s product and
also for informing to those who do not know the product. Social
media is so diversified that it can be used in several ways to suit
the interest and the needs of the business.
 50

6.4 EXERCISE

1. Explain in detail the elements of promotion mix

2. Describe the Objectives of promotion and marketing
communication
3. Write short notes
a) Factors affecting promotion mix decisions
b) Steps in designing a marketing communication program
c) Role of Social Media in marketing communication

4. Define the terms

a) Marketing communication
b) Promotion mix
c) Social media


 51

MODULE 7

7
UNDERSTANDING BUYER BEHAVIOUR

Unit Structure :

7.1 Introduction
7.2 Consumers Behaviour Meaning and Features
7.3 Understanding buyer
7.4 Factors affecting consumer behaviour
7.5 Steps in consumer purchase decision process
7.6 Factors affecting organizational buyer behaviour
7.7 Steps in the organizational purchase decision process
7.8 Exercise

7.1 INTRODUCTION

Consumers around the world vary tremendously in age,

income, education level, and tastes. These diverse consumers buy
an incredible variety of goods and services with other elements of
the world around them impacting their choices among various
products, services. In marketing consumer is the most significant
element / participant. His likes, dislikes, attitudes, behaviour, needs
and reactions play an important role in regards to marketing plans
and policies of the companies. So consumer psychology needs
special attention in the today’s highly competitive and consumer
oriented marketing system.

Consumer is the cause and purpose of all production and

marketing activities. He is the centre of all marketing activities as
well as for satisfying his needs. Modern marketing is consumer
oriented and not profit oriented. Naturally, consumer behaviour, his
motives behind purchasing goods and services and his psychology
should be given due attention by the marketers. This is necessary
for the expansion of marketing activities. Consumer behaviour is
normally flexible and uncertain as it is based on various
economical, social, and cultural considerations. There fore
marketer before developing their marketing plans, need to study
consumer, buying behaviour.
 52

7.2 CONSUMERS BEHAVIOUR MEANING AND

FEATURES

7.2.1 Meaning and Definition

The aim of marketing is to satisfy the needs of the

consumers. The study of consumer behaviour helps to the firms to
improve their marketing strategy. And understanding consumer
behaviour is a difficult task. Consumer behaviour refers to the
knowledge of the consumer, his buying motives and habits, which
are the basic necessity for a marketer to understand. The marketer
those who do not understand their consumer behaviour offer lose
out in the market. Therefore every marketer tries to understand
consumer behaviour.

“Consumer behaviour means the way, in which customer act

and the process involved in making a purchase decision. It involves
the use and disposal of products as well as the study of how they
are purchased. Such behaviour occurs either for the individuals or
in the context of a group, for e.g. a friend influences by the cloths a
person wear in an organization”.

In short we can define the term consumer behaviour in the

following manner.

1. “The study of individuals, groups or organisation and the

processes they use to select, secure, use and dispose of
products services, experiences or ideas to satisfy needs and the
impacts that these processes have on the consumer and
society.”
2. “All psychological, social and physical behaviour of potential
customer as they become aware of evaluate, purchase,
consume and tell others about the products and services”

These two definitions give us the following features of the

consumer behaviour.

7.2.2 Features of Consumers Behaviour :

Consumer behaviour involves individual aspects as well as social
aspects.
1. Consumer behaviour is the result of interaction of consumer
with the environmental forces.
2. Consumer behaviour is the net result of various external /
internal environmental factors which are mainly social and
psychological in character.
3. Consumer behaviour includes behaviour of buyers of consumer
goods, consumer durables, and industrial products.
 53

Organisational buying behaviour also comes within the scope of

consumer behaviour.
4. Consumer behaviour reflected through satisfaction or
dissatisfaction on the part of consumer after actual purchase of
product.
5. Consumer buying behaviour is a challenge and an opportunity
to a marketer. Large scale marketing is possible only when
consumer behaviour is anticipated accurately.
6. Consumer behaviour is always uncertain.
7. Consumer behaviour gives answers to all questions like why,
what and how consumers purchase goods and services.

7.3 UNDERSTANDING BUYER

Comparison between Consumer and Organisational Buyers :

1) Consumers are final consumers or end users and they buy
product for use or consumption.
Organizational buyers buy goods for their business purpose or
resale.
2) Organisational buyers purchase goods in large quantities
whereas consumers purchase products in small quantities.
3) Consumers buy for personal, family or household usage
organizational buyers include products of goods and services,
intermediaries, government units, and non-profit organizations.
4) Consumers may buy products impulsively. However when
organizations make purchases there is always a meticulous
formal process that is to be undergone before actual
purchasing. The buying decision making is very long and
complicated.
5) Organisational buying is mostly a multi person activity. Many
departmental heads and managers at different levels are
involved in decisions for some of the bigger purchases whereas
consumers may take buying decisions alone or friends or
relatives may be with the help of family members.

7.4 FACTORS AFFECTING CONSUMER

BEHAVIOUR

Consumer behaviour refers to understanding of why a

particular consumer decides to purchase a product and particular
brand of the product against other competing brands. It tries to
analyse the factors that makes him to purchase a particulars brand
of the product.
 54

The factors that influence the consumer’s decisions can be

broadly classified into five groups as shown in the following chart.

A) Psychological - The consumer’s decisions to purchase a

particular product and a brand depends to a great extent on his
psychological make up some of the important psychological factors
are their motivation perception education, attitudes and beliefs and
so on. These factors generally refers to age, life style, personality
etc. These are personal distinctiveness for e.g. the young people
may have different behavior compare to elder people in terms of
style, colour, quality of products etc. Personality is the distinctive
quality of a person. It is seen in terms of self confidence,
intelligence, adaptability, independence etc. Personality is
important variable affecting choice of brands.

B) Social - Consumers are social human beings and they are

surrounded by the group of people or the society in which they live.
So their purchase decisions are influenced by behaviours and
attitudes of their family members, and their roles and status in the
society. Social factors are those factors which relate to an
individual’s social class like family, reference group, social role and
status etc. Practically all buyers’ behaviour is influenced by other
people that are members of the family, friends, etc. Social
influences act in two directions, first they provide information and
second the standards of behavior against which alternative buying
behaviors are measured. Even social status and location affect the
buyer considerably.

C) Cultural factors - Consumers behaviours and attitudes are

developed from the values beliefs that they have inculcated from
their childhood. Their social class also can indirectly decide their
buying decisions. Cultural factor means values, beliefs, faith and
traditions accepted willingly by buyers or specific class of buyers. It
is social heritage. It relates to social values, attitudes towards work,
beliefs, moral, language and so on. These are so pervasive that
they are hard to identified and analyze. These act as basis for
market segmentation, product development and advertising. As
cultural factors exert deepest influence on consumer behavior,
marketer, needs to be aware of all these cultural influences on
buyer behavior and adjust his marketing activities.
D) Personal Factors - Consumers personal factors like their age
group income level, occupation, lifestyle are also deciding factors
for their buying decisions.
 55

E) Economic Factors - Economic factors which decide

purchasing power of the consumers are their income, savings,
family income, liquid assets and so on. Economical factor
consisting of income size of the family, propensity consumes and
save consumer credit. These factors affect consumers buying
behavior for e.g. a rich person may not be very conscious / alert
about the price and can be purchase high priced product, where as
a person belongs to low income will be very sensitive about the
price and can purchase low priced product. Here consumers’
behavior is affected due to High or Low purchasing power.

The economic factor like a family size or disposable personal

income or propensity to consume and save are also compelling
buyer to change their style of purchase for e.g. the small family
where every member is earning will have higher disposable income
and vice-versa or the people who saves for future and have less
consumption and wanted to have balance between consumption
and saving also spent less. All these behaviors of the people are
directing the marketer to design his marketing policy with the
consideration of their economic aspects.

These are the factors that decide consumers’ behaviour and

they are required to be studied and analysed by business firm while
formulating marketing strategies.

7.5 STEPS IN CONSUMER PURCHASE DECISION

PROCESS

Consumers buying decisions process is lengthy and involves

many steps. It is a mental process and the marketer should try to
help him to take the purchase decision to purchase a particular. It is
the process by which consumers decide whether a product will
meet a need well enough to warrant purchasing and using it,
decides where and how to make purchase and determine
satisfaction with the purchase. Generally it involves five steps:

Need Information Evaluation Purchase Post –

Recognition Search Of Decision Purchase
Alternatives Behaviour

Step – 1 Step – 2 Step - 3 Step – 4 Step - 5

In actual practice, this buying process exists in regular
product purchase of the customer. However customer will follow all
five stages while purchasing costly, durable and personal items.
This suggests that the consumer involvement in purchasing activity
decides the time and stage in the buying process. Naturally the
decision making process differs across products group. Here
marketer’s job is to understand the buyer’s behaviour at each stage
 56

and finally find out the influences that are operating on his
behaviour. He has to focus on entire buyer behaviour process and
not only the purchase decision. This facilitates the large scale
selling with satisfaction to consumer.

The consumer decision process is influenced by

psychological, socio-cultural, situational factors as well as
marketing mixes of marketing firm and its competitors. It means
consumer takes the final decision of purchasing particular products
in the market through proper process which is as under:

1) Need Recognition - The consumer is required to believe that

he needs the particular brand. The marketer has to convince him
that by buying his brand it can really fulfil his need.
2) Getting information - Once the consumer is convinced about
the need to purchase the product, he starts looking for the solution
to fulfil his need. The marketer has to communicate that his brand
is superior compared to his competitor’s brands.
3) Evaluation of Alternatives - The consumer then starts
collecting inform action about various alternative brands available in
the market particularly as regards price and desired quality of the
product. The consumer wants to compare the alternatives available
before making the final decision.
4) Purchase decision - After comparing various options available
in the market, the consumer is at the stage where he has to take
decision to purchase the brand or not. There are also the chances
that the consumer may postpone the purchase decision due to
some reasons. In that case, the marketer must try to find out the
reasons and try to solve them either by providing sufficient
information to the consumer or by giving him guarantee regarding
the brand’s value.
5) Post purchase behaviour - After buying the brand the
consumer may be either satisfied or dissatisfied. It satisfied, he may
continue to buy the particular brand in future and if dissatisfied, it is
the duty of the marketer to take necessary measures to satisfy the
consumer.

7.6 FACTORS AFFECTING ORGANIZATIONAL

BUYERS BEHAVIOUR -

A) External environmental factors have a major impact on the

firm’s business operations including its buying decisions. Following
are the external factors that affect organizational buying decisions.

1) Economic Conditions - The fluctuations in the money markets

and the interest rates influence the buying decisions of the
 57

organization. An increase in the interest rates may have an adverse

or negative impact on buying and vice versa.

2) Regulatory changes - Changes in the corporate laws, rules

and regulations have influence on how, when and what the
organizations buy.

3) Political factors - A change of the government or policy has a

direct impact on the economic conditions and thereby on the
organizational buying decisions.

4) Social Environmental factors - Business has to change its

practices and policies as per the changes taking place in social
values, beliefs and culture. Social values and practices go on
changing with every generation. For example the ideas about good
health environmental issues, education keep on changing and it
has an impact on organizational buying decisions.

5) Competition - In order to get competitive position, the

organization may have to introduce new product and / or
technology and it can have influence on it’s buying decisions.

B) The following are the internal organizational factors that

influence organizational buying -

1) Organisation’s goals and objectives - The organization which

operates with the objective of profit maximization by increasing
turnover, may look for suppliers who are supplying large quantities
at a lower price. Whereas the organization which intends to
improve its market image will be more quality conscious and not
price conscious.

2) Organisational structure - An organizations buying decisions

also depend on it’s organizational structure i.e. whether the
purchase decisions are taken by purchase department, or HR or
Administration department or collecting by all concerned
departments. Also purchase decisions can be taken at different
levels of management.

3) Policies and producers - How does the buying procedure

begin who will participate in taking purchase decisions and who has
the ultimate authority to decide on the purchase depend on the
policies and procedures of the organization. There are also
budgetary policies that affect the purchase decisions. i.e. while
some organistions make purchases as and when the need arises,
others may have to take consideration of the annual or biannual
budget.
 58

4) Technological levels - Buying decisions of organizations are

also affected by the technology they are presently using because
technical purchases may be made to replace old one or they may
be made to supplement the old ones.

5) Manpower skills - While making purchases especially

equipment and machinery, the organization has to consider
whether it has required skilled manpower to operate it.

C) Interpersonal and Individual Factors -

Since organizational buying decisions are taken jointly by
many people, interpersonal relations among the decision makers
play an important in buying decisions such as the ultimate deciding
authority, interpersonal conflicts risk taking ability education and
general awareness, age, cultural background and social status of
team members and so on.

D) Situational factors -
Situational factors that can influence organizational buying
can be availability of time and money availability of required
supplier, special offers given by the supplier and so on.

7.7 STEPS IN THE ORGANISATIONAL PURCHASE

DECISION PROCESS -

The consumer purchasing decision process is mainly a

series of mental stages, whereas industrial purchasing decision
making involves more physical and formal stages which can be
given as follows -
1) Recognition of a Problem - the organizational purchase
decision process starts when someone feels problem a need which
can be met by acquiring goods are services. Such need generally
arises when the company decides to develop a new product, to
diversity or expand the business, it replacement of old equipment or
machinery by new one, the need to change the supplier and so on.

2) The need specification - When the need to buy any product or

service is felt, the next step is to exactly specify the need identified
in the earlier space. Specification of the need includes the aspects
like understanding type of the product performance specifications,
quantity to be purchased and so on.

3) Product Specifications - Once the product to be purchased is

decided in need specification, the buying organization has to
develop the technical specifications of the product to be purchased.
Also the technical and financial feasibility is studied and analysed.
 59

4) Supplier Search - In this stage, the organization makes a list of

qualified and potential suppliers. For this the organization may
make periodic visits to all potential suppliers to create awareness.
Also the advertisements are placed in specific media and brochures
are circulated.
5) Inviting Proposals - A few suppliers are short listed out of the
list of qualified suppliers. They are asked to submit their proposals
which should cover details like product specification, price, delivery
schedule, payment terms, taxes and duties applicable, other
overhead costs, often sales service and so on.
These proposals are then studied and analysed based on
product specifications delivery schedule and cost.
6) Selection of supplier - Each of the supplier’s proposals is rated
according to certain criteria. The buying organization may also
negotiate with its preferred suppliers for better prices and terms
before making a final decision.
7) Placing on Order - After the supplier is selected, the buyer
prepares the final order listing the technical specifications the
quantity needed, the expected time of delivery, return policies,
warranties etc.
8) Performance Review - The final phase in the purchasing
process consists of review and feedback regarding the product and
the vender performance.

It is done based on several criteria using a weighted score

method.

7.8 EXERCISE

1. What is consumer behaviour? Explain the features of consumer

behaviour.
2. Discuss the factors affecting consumer behaviour.
3. What is consumer buying process? Explain the steps involved in
buying process.
4. Write short notes
a) Factors affecting organizational buyer behavior
b) Steps in the organizational purchase decision process
5. Define the following terms:
a. Consumers behavior
b. Consumers buying
c. Socio-cultural factors
d. Psychological factors


 60

MODULE 8

8
MARKETING OF SERVICES AND RURAL
MARKETING
Unit Structure :
8.1 Introduction
8.2 Meaning and Definition
 Services : Features / Nature/ Characteristics (Old book
Page nos. 168 to 176)
 Marketing mix for services marketing (Old book page
nos. 186 to 193)
8.3 Managing service quality and productivity (also refer Old
book Page Nos. 177 to 183)
8.4 Rural market scenario in India
8.5 Factors contributing to the growth of rural markets in India
8.6 Challenge of Rural Marketing
 Strategies to cope with the challenges of rural marketing /
Marketing mix for the Rural Markets: (Old Book page
nos. 200 to 203)
8.7 Exercise

8.1 INTRODUCTION

Marketing is all about analyzing the market, choosing the

target segment, appropriately positioning the offer's image and
designing the communication and using the right marketing mix
variables to achieve the strategic goals. Services, due to their
unique characteristics require extended marketing mixes to achieve
the firm's strategic goals.

While designing a process the process designer must

maintain a balance between functionality, security, aesthetics and
ease of use by the consumer. This is not always possible and at
times there can be difficulties. In order to ensure safety of
passengers in the mid 90’s British Railways introduced a new door
locking mechanism to many carriages. While the new system
worked well in terms of improving safety of passengers it was a
difficult task informing passengers about system functionality and
ease of use because people were too used to the old system of
opening a door manually.
 61

Process in service has turned out to bring in systems and

designs, giving better vision to both external as well as internal
customers about the functioning of the services, the firm and the
service product. Process and design then makes service a
deliberate exercise, greatly affecting quality and the image of the
firm. Process as a marketing tool has the following attributes:

 Service design and development

 Design of flow of activities
 Standardized process
 Customized process
 Number of steps in the process
 Simple
 Complex
 Customer involvement
 Blueprints

By monitoring service encounters it is possible to design

service delivery systems which guide the interactions between front
line and support staff, between staff and consumers, pre delivery,
during delivery, post delivery and between staff and suppliers. This
is referred to by Shostack as service blueprinting which is about
bringing together elements and interactions in service deliveries
which make it work for customers and brings profitable transactions
to the organization. But service delivery is as much about
processes as people.

8.2 MEANING AND DEFINITION OF MARKETING OF

SERVICES

8.2.1 Introduction
Services are rendered and experienced simultaneously. It is
the process through which the consumers interact with the service
provider e.g. in tourism, they include booking systems for transport
and accommodation, the use of plastic money for payments, design
of the queuing system at visitor attractions etc. They are designed
to assist interactions between staff and customers at the critical
point of contact.

A service is an act or performance offered by one party to

another. They are economic activities that create value and provide
benefit for customers at specific times & places as a result of
bringing about a desired change in or on behalf of the recipient of
the service.

Put in the simplest terms, services is deeds processes and

performances. Services are not tangible things that can be touched,
 62

seen and felt but rather are intangible deeds and performances for
example teaching, hotels, hospitals, banking babysitting etc.

8.2.2 Definition of Services:

According to Kotler, Armstrong, Saunders and Wong, “A
service is any activity or benefit that one party can offer to another
which is essentially intangible and does not result in the ownership
of anything. Its production may or may not be tied to a physical
product.”

It can also be defined as “Services include all economic

activities whose output is not a physical product or construction is
generally consumed at the time its is produced and provides added
values in forms such as convenience, amusement, timeliness,
comfort or healthy that are essentially intangible concerns of its first
purchaser.”

8.3 MANAGING SERVICE QUALITY AND

PRODUCTIVITY -

Service sector has to undergo various challenges due to its

unique characteristics which are different from goods. Services
refers to any action or performance which can be only felt or
experienced. Services have certain special characteristics such as
intangibility, inconsistency, inventory less inseparability etc. On
account of intangibility, services cannot be demonstrated or pre-
purchase inspection of services by customer is not possible. For
providing services, the presence of service provider is required so
service provider cannot provide it over a long distance. The service
quality may vary from person to person and even from time to time.
Services cannot be stored so it becomes difficult to fulfil higher
demand in peak season.

However in order to satisfy the customer by providing him

the service of his expectation and at the some time to improve
efficiency and productivity of service provider following measures
can be taken -

1) Most of the services are provided by the service staff. So the

quality of service depends on the quality of staff providing the
service. So in order to provide the quality service, the firm should
take to care in recruiting capable knowledgeable, skilled, trained
and experienced staff. Their performance should be evaluated by
taking feedbacks from customers. They should be motivated by
giving them monetary and non-monetary incentives.
 63

2) In order to achieve consistency in providing services, the

service provider can make use of certain machines or
equipments.

3) Some services are highly intangible in nature, therefore

physical evidence can be improved in order to create positive
image such as external surroundings of the firm, the structure and
layout of the building, the internal environment i.e. ambience or
décor of the place, the furniture fixtures the dress / uniform of the
service staff lighting and ventilation of the place.

4) The firm providing services can enter into franchise

agreements in order to cater to customers of different locations.

5) In order overcome fluctuations in the demand of services, the

firm can adopt flexible or dynamic pricing. The firm can fix
higher prices during peak season and lower prices during off
season.

Thus by adopting several measures, the firm can meet

customer expectations while improving efficiency, productivity and
profitability of the firm.

8.4 RURAL MARKETING DEFINITION AND RURAL

MARKET SCENARIO IN INDIA

8.4.1 Introduction
The rural scene is transforming at an accelerating pace. So,
organizations aiming to achieve success in the rural market need to
constantly research the developments in rural territories. Rural
areas are consuming a large quantity of industrial and urban
manufactured products. In this context, a special marketing
strategy, namely, rural marketing has emerged. The Rural
population is nearly three times the urban, so that rural consumers
have become the prime target market for consumer durable and
non-durable products, food, construction, electrical, electronics,
automobiles, banks, insurance companies and other sectors
besides hundred per cent of agricultural-input products such as
seeds, fertilizers, pesticides and farm machinery. Marketing gurus
advice on going rural and tapping the vast untapped rural market in
India. Due to significant differences in almost all the major
marketing variables, it becomes very difficult to optimally tap the
rural market potential with an urban mindset. In most cases, it
requires a modified approach, philosophy and marketing mix.

Prime Minister Man Mohan Singh talked about his vision for
rural India: “My vision of rural India is of a modern agrarian,
industrial and services economy co-existing side by side, where
 64

people can live in well-equipped villages. Rural incomes have to be

increased. Rural infrastructure has to be improved. Rural health
and education needs have to be met. Employment opportunities
have to be created in rural areas.”

The rural areas are consuming a large quantity of industrial

and urban manufactured products. In this context, a special
marketing strategy, namely, rural marketing has emerged. The
Rural population is nearly three times the urban, so that rural
consumers have become the prime target market for consumer
durable and non-durable products, food, construction, electrical,
electronics, automobiles, banks, insurance companies and other
sectors besides hundred per cent of agricultural-input products
such as seeds, fertilizers, pesticides and farm machinery.
Marketing gurus advice on going rural and tapping the vast
untapped rural market in India.

8.4.2 Meaning and Definition

The concept of rural marketing in India is often been found to
form ambiguity in the minds of people who think rural marketing is
all about agricultural marketing. Agricultural marketing denotes
marketing of produce of the rural areas to the urban consumers or
industrial consumers. However, rural marketing determines the
carrying out of business activities bringing in the flow of goods from
urban sectors to the rural regions of the country as well as the
marketing of various products manufactured by the non-agricultural
workers from rural to urban areas. Rural Marketing in India
Economy covers two broad sections, viz., marketing of agricultural
items in the urban areas and marketing of manufactured products
in the rural regions.

From time to time, the definition of rural marketing has been

undergoing change to accommodate its widening scope. Thus the
definition of rural marketing has widened slightly to include
marketing of both agricultural produce as well as inputs required for
its production. Thus it can be said that rural marketing includes
agricultural marketing. Or in simple terms we can say that accept
urban to urban marketing, all marketing is rural marketing. Thus
rural marketing may be defined as:

1. “Rural marketing is a two-way marketing process which

encompasses the discharge of business activities that direct the
flow of goods from urban to rural areas and vice-versa as also
within the rural areas.” – Gopalaswamy.

2. “The study of rural marketing comprises of all operations, and

the agencies conducting the, involved in the movement of farm
produced food, raw materials and their derivatives such as
textiles from the farms to the final consumers and the effect of
 65

such operations on producers, middlemen and consumers.” -

Thompson

3. “Rural marketing is a process which starts with a decision to

produce a saleable farm commodity and it involves all the
aspects of market structure or system, both functional and
institutional based on technical and economic considerations,
and includes per and posts harvest operations assembling,
grading, storage transportation and distribution.”

8.4.3 Characteristics of Indian Rural Marketing

1. Difficult to predict rural market: Unlike urban markets, rural

markets are difficult to predict and possess special
characteristics. The featured population is predominantly
illiterate, have low income, characterized by irregular income,
lack of monthly income and flow of income fluctuating with the
monsoon winds.

2. Unsteady income of people: Rural markets face the critical

issues of Distribution, Understanding the rural consumer,
Communication and Poor infrastructure. The marketer has to
strengthen the distribution and pricing strategies. The rural
consumer expects value for money and owing to has unsteady
and meager status of weekly income; increasing the household
income and improving distribution are the viable strategies that
have to be adapted to tap the immense potential of the market.
The following table shows the income generation in rural areas.

Income Generation in Rural Areas.

SOURCES OF INCOME PROPORATION TO TOTAL
AGRICULTURE 59
AGRICULTURE WAGES 16
BUSINESS AND CRAFT 9
NON AGRICULTURE WAGES 7
SALARIES 3
CURRENT TRANSFERS 2
OTHERS 4
TOTAL 100

3. Media reach: Media reach is a strong reason for the

penetration of goods like cosmetics, mobile phones, etc., which
is only used by the urban people. Increasing awareness and
knowledge on different products and brands accelerate the
 66

demand. The rural audience are however critical of glamorous

ads on TV, and depend on the opinion leaders who introduce
the product by using it and recommending it.

4. Rural youth: Opinion leaders play a key role in popularizing

products and influence in rural market. Nowadays educated
youth of rural also influences the rural consumers. Rural
consumers are influenced by the life style they watch on
television sets. Their less exposure to outside world makes
them innocent and fascinated to novelties. The reach of mass
television media, especially television has influenced the
buying behaviour greatly

5. Needs tailored promotion: The method of promotion needs to

be tailored to suit the expectations of the market. Techniques
that have proved to be successful are Van campaigns,
edutainment films, generating word of mouth publicity through
opinion leaders, colourful wall paintings. The Wide reach of
television has exposed the otherwise conservative audience to
westernization. Panchayat televisions in Tamilnadu carries
message that are well received and contribute to community
development.

6. Heterogeneous market: Indian rural market is highly

heterogeneous with 24 languages, 1642 dialects, high literacy
rate in rural south India and lower in rural north. The Belief,
values and attitude of people differ from region to region. The
consumers in rural south are more brand conscious than the
people in the rural north. Rural market highly differs in demand,
consumption, occupation patterns and life-style.

7. Huge Market: Indian market is basically a rural market with

over 70% of its population living in rural areas. Further the rural
population is increasing at a much faster rate than the urban
population, throwing a large untapped market for FMCG (Fast
moving Consumer Goods) and durable goods and services. As
against the 621million rural population in 1991, the rural
population is 2001 was 741 million.

8. Scattered population: The rural population is highly scattered

over a vast geographical area. About 1,45,098 villages, or 23%
of the total number of villages in India, have population less
than 200, and another 21% have population between 200 and
500. It is difficult to cater to the needs of rural population as
India’s rural market is large and scattered. It is also difficult to
ensure that goods and services are available at the right time at
the right place as and when required by the rural consumer.
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9. Occupation: About 77% of the rural population depends on

agriculture and agriculture-related activities for their living. The
other small portion of population is engaged in secondary and
tertiary sector like construction, wholesale and retail sales,
hotels, banking, insurance and salary earners. The occupation
pattern shows that the income generation in rural areas highly
depend use of land, rainfall, weather conditions and availability
of latest technology. Thus the development of rural market to a
large extent depend on the progress of agriculture.

10. Electrification: Majority of rural households are without

electricity and there is also an uneven distribution of electricity.
About 90% rural households in Punjab and Goa are electrified
and 25%in Jharkhand, whereas only 10.3% in Bihar. Due to
lesser duration of power availability and regular power
fluctuations rechargeable products, gas operated products,
sturdy products with reduced chances of breakdown have a
good scope in rural markets.

11. Communication: In spite of major steps taken by the

government to provide landline and mobile phone services to
the rural areas, around 20% of the villages are without
telephone facility even today. Various companies like ITC give
rural consumer an exposure to world market through projects
like e-choupal.

12. Consumption: As per the NCAER data, during the period

between 1988 and 1993 the growth rate of FMCG sector was
greater in rural areas than in the urban areas. The agriculture
sector growth reduced to 1.94%, whereas the FMCG growth
was 12%. This shows that the rural economy is gradually
getting fewer dependants on agriculture. There is an increasing
share of non-agricultural income in the rural economy. It has
also been found that the population who depend on non-
agricultural activities enjoy a better standard of living than the
population who depend on agriculture.

8.5 FACTORS CONTRIBUTING TO THE GROWTH

OF RURAL MARKETS IN INDIA

About 70% of India’s population lives in villages. As per the

recent census, India’s population is 1.35 billion. It means over 930
million population lives in over 6,40,000 villages. Currently, the rural
demand is growing faster than urban India. Following are the
factors contributing to the growth of rural markets in India.
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1) Favourable Government Policies for rural development -

In order to achieve balanced sustainable economic
development, the government has been taking measures for rural
development. Government is taking steps to attract huge
investment in rural India for creating employment income and
purchasing power certain positive measures are being undertaken
to develop agricultural sector and to improve returns for farmers.
Such as higher support prices for farm products, agricultural
research, provision of required necessities such as water electricity
fertilizers seeds at subsidized rates credit facilities / from PSU &
Co-op. banks and so on. Various measures like tax exemption in
backword areas, subsidy, concessions, incentives, assistances,
etc. are also responsible for developing rural areas.

2) Higher Purchasing Power - Job opportunities are being

created in different sectors in rural areas such as public, private,
agricultural, small and medium sector, self employment etc. Higher
job opportunities result in higher income and purchasing power
among the rural people. Also the transfer income has increased the
purchasing power of the rural people.

3) Green Revolution - Green revolution has revolutionalised

Indian agricultural sector by better research, seeds, fertilizers,
irrigation facilities etc. It has improved agricultural output many fold.

4) Literacy Growth - Government policy of Education for all has

resulted in increased literary rate among rural people. It has
brought about social and cultural changes in the buying behaviour
of the rural consumers. They are exposed to mass media such as
press, radio, T.V. which has created new demand for shopping and
specialty goods. They have become aware of improving their
standard of living by consuming better quality of different types of
products and services.

5) Influence of mass media and urban culture - Mass media is

easily available in rural areas such as press, T.V., hoardings, radio
etc. Mass media has created impact on rural people as regards
availability of different types of goods and western and urban
culture.

6) Marketing efforts - A large number of firms are focusing their

attention on rural markets. They are using innovative strategies to
market their products in rural areas. Such strategies also have
resulted in creating demand for consumer goods in rural markets.

7) Infrastructure facilities - Rural areas as being developed due

to implementation of public service projects. Government is
increasing in infrastructure project to develop transportation and
communication, irrigation facilities, generation and distribution of
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electricity and so on. This has resulted in improved marketing

activities in rural areas.

Thus, the higher growth rate in rural markets is mainly on

account of above factors.

8.6 CHALLENGES OF RURAL MARKETING -

India is the country of village Rural India lives in over

6,40,000 villages. Villages are characterized by certain unique
features. These unique features of villages create challenges or
problems of for marketers of goods and services. Challenges or
problems of rural markets are as follows -

1) Scattered nature of rural markets - Rural india has over

6,40,000 villages. About 10% of Indian villages have over 5000 plus
population. Majority of the villages have a population below 500.
This data shows that density of population is very low in villages
and this creates distribution problems to marketers in rural markets.

2) Poor infrastructure facilities - Most of the villages do not have

basic facilities like road and rail transport, water, regular electric
supply, banking & communication etc. so poor infrastructure
facilities create transportation warehousing and distribution
problems.

3) Seasonal demand - Most of the people in villages have

agriculture as their main occupation. Agriculture is seasonal
activity. People get income only during harvest seasons of Kharif
and rabi. So demand for goods especially shopping goods is
seasonal in nature.

4) Low per Capita Income - Most farmers in villages have small

farm lands and people in villages also work as bonded labourers.
Output of agricultural sector mainly depends on weather conditions
so income of villages is low and uncertain.

5) Consumer behaviour in rural areas - Most of the consumers

in rural markets are price conscious and they prefer to purchase in
small quantities and mainly on cash basis. These factors are
required to considered by marketers while deciding pricing and
packaging strategies.

6) Lower literacy level - It is estimated that about 65 to 70% of

the rural populatis is functionally literate. Most of them may not be
in a position to read and write. So lower literacy level in rural areas
creates problems of communication. Print media cannot be used to
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a large extent. So emphasis may have to be given on other media

of communication.

7) Many languages - India is a country of many languages.

Language becomes a barrier in effective communication in the
marketing efforts. The language and dialets differ from state to
state, place to place, district to district. There are now 18 schedule
languages spoken in India.

8) Problems in Sales force management - Sales force is

generally reluctant to work in rural areas due to differences in
languages inadequate facilities in rural areas and difficulty to adjust
to the rural environment.

Marketers need to adopt certain effective strategies to

overcome the problems in rural marketing and to take the benefit of
opportunities available in rural markets.

8.7 EXERCISE

1. Explain the term Services and its characteristics.

2. Discuss about the Marketing mix for services.
3. Factors contributing to the growth of rural markets in India
4. Explain in detail the Challenges of Rural Marketing
5. Explain the Strategies to cope with the challenges of rural
marketing.
6. Write short notes:
a) Features / Nature of Services
b) Managing service quality and productivity
c) Rural market scenario in India
d) Explain the terms:
a) Rural Marketing
b) Services

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