CHAPTERS

1.​ PRODUCT
2.​ PRICING
3.​ PLACE
4.​ PROMOTION
5.​ PRODUCT LEVEL PLANNING
 Chapter 1

Product

1.1 Product Meaning: -

In marketing, a product is an object, or system, or service made available for

consumer use as of the consumer demand; it is anything that can be offered to
a market to satisfy the desire or need of a customer.

According to “Philip Kotler”-

“A product is more than physical. A product is anything that can be offered
to a market for attention, acquisition, or use, or something that can satisfy
a need or want.”

Therefore, a product can be a physical good, a service, a retail store, a

person, an organization, a place or even an idea. Products are the means to an
end wherein the end is the satisfaction of customer needs or wants.

1.2​ What is the role of product marketing?

“The role and value of product marketing is to express the distinct value
of our solutions to customers. Expression of value.”

A product marketer’s responsibilities never fade and they’re at the heart of

products and customers before, during, and after launch.

​ Product positioning and messaging (93%)

​ Managing product launches (85%)

​ Creating sales collateral (74%)

​ Customer and marketing research (71%)

​ Storytelling (60%)

​ Reporting on product marketing success (60%)

​ Content marketing (55%)

​ Website management (35%)

​ Onboarding customers (28%)

​ Product roadmap planning (27%)

[Link]
ng/#what-is-the-role-of-product-marketing (Link for More Details)
1.3 Goods And Service Continuum-
The goods and services continuum enables marketers to see the relative
goods/services composition of total products.
A product’s position on the continuum, in turn, enables
marketers to spot opportunities. At the pure goods end of the continuum,
goods that have no related services are positioned. At the pure services
end are services that are not associated with physical products. Products
that are a combination of goods and services fall between the two ends
 1.4-​

​ Classification of Products

[Link] PRODUCTS :

Products which are purchased by the ultimate final consumer for personal
consumption and satisfying their needs and desires.

A. BASED ON SHOPPING EFFORTS :

1. Convenience Goods

Those products customers buy often and without much thought or planning are
classified as convenience goods. ​
Consumers typically make a choice once on their brand preference for these
products and repeat that choice over many purchases. ​
Example - Soap, condiment

2 .Shopping Goods

Consumer goods in which buying decisions are detailed considerations of price,

quality , suitability and value for products are classified as shopping goods. ​
​
Example - Laptop , Jewellery , Furniture , Shoes , Television .​
​

3. Specialty Products

Consumer goods which have certain special features because of which

customers make special efforts to purchase.​
​
Example - Collection of artwork or antiques.​
​

1.5 INDUSTRIAL PRODUCTS:

Industrial products are mainly used for further production.
According to Philip Kotler “Industrial products are products bought by
individuals and organizations for further processing or for use in conducting a
business”.

​ CHARACTERISTICS OF INDUSTRIAL PRODUCTS :​

​
1. Number of Buyers-Limited .​
Example : Sugar Cane is purchased by few producers of sugar , but sugar
which is consumer product , purchased by many consumers .​
​
2. Channel Levels - Shorter : Direct selling or one level channel .​
​
3. Geographic Concentration : Highly Concentrated .​
​
 4. Derived Demand : The demand for industrial products is derived from
the demand for consumer products .​
​
TYPES OF INDUSTRIAL PRODUCTS :
​
1. Materials and parts: ​
​
Raw materials are the basic materials that actually become part of the
product and that enter the manufacturer’s product completely. ​
They are provided form mines, forests, oceans, farms and recycled solid
wastes. ​
It has two types:-​
​
a). Raw materials- Includes farm products like cotton , sugar cane , oil
seed and natural products like minerals (Iron ore , Crude petroleum ) .​
​
b). Manufactured materials and parts - Includes​

●​ Component materials : grass , iron , plastic .

●​ Component Parts : Tyre Bulb , Steering , Battery .

[Link] Goods/Items-
Capital items consist goods that are used in the production of finished goods
like office accessories and operating materials.​
​
It has two types:​
a). Accessory equipment​
b). Installations

[Link] & Service-

Supplies facilitate productions, but they do not become part of he
finished product. ​
​
EXAMPLES -Paper, pencils, oils, cleaning agents and paints .

1.6 Product Hierarchy-

A product hierarchy is a modeling of the hierarchical relationships between
products in a tree structure. A product hierarchy enables the grouping of
products and defines the relationship between products and groups at different
hierarchy levels (for example, food – frozen food – pizza).

Each product is related to certain other products. The product hierarchy

stretches from basic needs to particular items that satisfy those needs. There are
7 levels of the product hierarchy:
1. Need family:
The core need that underlines the existence of a product family. Let us consider
computation as one of needs.

2. Product family:
All the product classes that can satisfy a core need with reasonable
effectiveness. For example, all of the products like computer, calculator or
abacus can do computation.

3. Product class:
A group of products within the product family recognised as having a certain
functional coherence. For instance, personal computer (PC) is one product class.

4. Product line:
A group of products within a product class that are closely related because they
perform a similar function, are sold to the same customer groups, are marketed
through the same channels or fall within given price range. For instance,
portable wire-less PC is one product line.
5. Product type:
A group of items within a product line that share one of several possible forms
of the product. For instance, palm top is one product type.

6. Brand:
The name associated with one or more items in the product line that is used to
identity the source or character of the items. For example, Palm Pilot is one
brand of palmtop.

7. Item/stock-keeping unit/product variant:

A distinct unit within a brand or product line distinguishable by size, price,
appearance or some other attributes. For instance, LCD, CD- ROM drive and
joystick are various items under palm top product type.

1.7 Product systems & Mixes:

An organisations product line is a group of closely related products that are
considered a unit because of marketing, technical or end-use considerations. In
order to analyse each product line, product- line managers need to know two
factors. These are.

A product mix or assortment is the set of all products and items that a particular
seller offers for sale. A company’s product-mix has some attributes such as.

1. Width:
This refers to how many different product lines the company carries.

2. Depth:
This refers to how many variants, shades, models, pack sizes etc. are offered of
each product in the line

3. Length:
This refers to the total number of items in the mix.

4. Consistency:This refers to how closely the various product lines are related
in end use, production requirements, distribution channels or some other way.

​ What is A Product Line?

According to Philip Kotler, a product line can be defined as “a group of
products that are closely related because they function in a similar manner,
and sold to the same customer groups, are marketed through these same types
of outlets, fall within given price range.”
 ​ What is a product length?

A firm will usually have more than one product in a product line and offer
variations of a product. One of the key decisions that a firm needs to make is the
length of its product line. That means, how many products varieties should the
firm offer. Generally, firms look to increase the product line length – the number
of similar products offered.

Examples of P&G product mix:

​
1.7 The customer value hierarchy-

Customer value hierarchy is a system of worth that businesses across the

country, both large and small, have turned to as a means of determining
customer satisfaction.

1.8 New Product Development-

1.9 Need of NPD-

The need for new product development on various counts described below:
a.​ Putting All Eggs in One Basket:

If an organization depends on only one product to get all the business and
profits, it faces the danger of losing everything in one stroke.

b. Creating New Avenues for Growth:

The market is always evolving itself and newer consumer needs and demands
are created. To take care of such situations, organizations must come out with
new products that will create new avenues for the growth of organizations.
Organizations that are slow in creating new avenues fall behind others in
business.

c. Giving Choice to Consumers for Selection:

The consumer needs and demands keep changing and upgrading/downgrading
and organizations should create products in both upward and downward
changes.

d. Multiple Attacks on Competition:

When competition is the market leader, organizations introduce multiple
products to corner small portions of the competitor’s market share and
collectively win a larger market share.

e. Cater to New Tastes of Consumers:

Consumers keep changing their expectations and the organization needs to give
them newer products to take care of new needs.

f. Taking Advantage of Market Fads/Fashion:

There are many fads and fashions that rule a particular time and organizations
need to take care of them by introducing products for such fads/fashions.

1.10 New Product Classification Scheme Provided by A. Booz, Allen &

Hamilton and Robertson

A.​ Booz, Allen & Hamilton Classification Scheme for New Products:

Booz, Allen & Hamilton is a consulting firm headquartered in Tyson corner,

Fairfax County Virginia in Greater Washington DC with 80 offices in United
States and many other countries. It was founded by Edward Booz in 1914 and is
one of the oldest consulting firms in the world.

BAH (Booz, Allen & Hamilton) came out a new products classification scheme
based on newness to company and newness to the market. This classification
has been widely accepted ail over the world.

1.11 The 8 Steps of the New Product Development Process-

With a common understanding of what NPD actually is, let’s now jump into the
8 steps of the new product development process.
 A. Idea Generation
​ The new product development process starts with idea generation. Idea
generation refers to the systematic search for new-product ideas. Typically, a
company generates hundreds of ideas, maybe even thousands, to find a handful
of good ones in the end. Two sources of new ideas can be identified:​
Internal idea sources: the company finds new ideas internally. That means
R&D, but also contributions from employees. For instance, many companies
use a so-called suggestion box, which employees can throw new ideas into. In
many cases, employees are the best source of new ideas, as they work with the
product, but also the feedback of customers every day.
​ External idea sources: the company finds new ideas externally. This
refers to all kinds of external sources, e.g. distributors and suppliers, but
also competitors. The most important external source are customers,
because the new product development process should focus on creating
customer value. Collecting new product ideas from customers becomes
ever more important and simple in the digital era, where the conversation
between companies and customers is as interactive as never
before. Actively listening to customers’ suggestions can be a great source
of innovation.
B. Idea Screening
The next step in the new product development process is idea screening. Idea
screening means nothing else than filtering the ideas to pick out good ones. In
other words, all ideas generated are screened to spot good ones and drop poor
ones as soon as possible.

While the purpose of idea generation was to create a large number of ideas, the
purpose of the succeeding stages is to reduce that number of ideas. The reason is
that product development costs rise greatly in later stages. Companies cannot
afford to take every single idea to the next stages. Therefore, it is necessary to
filter and go ahead only with those product ideas that are likely to turn into
profitable products. Dropping the poor ideas as soon as possible is,
consequently, of crucial importance.

At this early stage, filtering for the potentially profitable ideas can be tricky. A
key to success is to initiate the conversation with customers early and look for
feedback. For instance, by surveys and focus group interviews, companies can
get early insights whether their ideas might meet customer demands in a better
way than existing products.

C. Concept Development and Testing

To go on in the new product development process, attractive ideas must be
developed into a product concept. A product concept is a detailed version of the
new-product idea stated in meaningful consumer terms. You should distinguish
the following sub-stages:

D. Marketing Strategy Development

The next step in the new product development process is the marketing strategy
development. When a promising concept has been developed and tested, it is
time to design an initial marketing strategy for the new product based on the
product concept for introducing this new product to the market.

E. Business analysis
Once the company has decided upon a product concept and marketing strategy,
management can evaluate the business attractiveness of the proposed new
product. The fifth step in the new product development process involves a
review of the sales, costs and profit projections for the new product to find out
whether these factors satisfy the company’s objectives. If they do, the product
can be moved on to the product development stage.

F. Product development
The new product development process goes on with the actual product
development. Up to this point, for many new product concepts, there may exist
only a word description, a drawing or perhaps a rough prototype. But if the
product concept passes the business test, it must be developed into a physical
product to ensure that the product idea can be turned into a workable market
offering. The problem is, though, that at this stage, R&D and engineering costs
cause a huge jump in investment.

The R&D department will develop and test one or more physical versions of the
product concept. Developing a successful prototype, however, can take days,
weeks, months or even years, depending on the product and prototyping
methods.

Also, products often undergo tests to make sure they perform safely and
effectively. This can be done by the firm itself or outsourced.

In many cases, marketers involve actual customers in product testing.

Consumers can evaluate prototypes and work with pre-release products. Their
experiences may be very useful in the product development stage.

G. Test marketing
The last stage before commercialization is test marketing. In this stage of the
new product development process, the product and its proposed marketing
program are tested in realistic market settings. Therefore, test marketing gives
the marketer experience with marketing the product before going to the great
 expense of full introduction. In fact, it allows the company to test the product
and its entire marketing program, including targeting and positioning strategy,
advertising, distributions, packaging etc. before the full investment is made.
The amount of test marketing necessary varies with each new product.
Especially when introducing a new product that requires a large investment,
when the risks are high, or when the firm is not sure of the product or its
marketing program, a significant amount of time may be spend on test
marketing.

H. Commercialization
Test marketing has given management the information needed to make the final
decision: Launch or do not launch the new product. The final stage in the new
product development process is commercialization. Commercialization means
nothing else than introducing a new product into the market. At this point, the
highest costs are incurred: the company may need to build or rent a
manufacturing facility. Large amounts may be spent on advertising, sales
promotion and other marketing efforts in the first year.

Some factors should be considered before the product is commercialized:

​ Introduction timing – For instance, if the economy is down, it might be wise to

wait until the following year to launch the product. However, if competitors are
ready to introduce their own products, the company should push to introduce the
new product sooner.
​ Introduction place – Where to launch the new product? Should it be
launched in a single location, a region, the national market, or the
international market? In many cases, companies may lack the confidence,
capital and capacity to launch new products into full international
distribution from the start. Instead, they usually develop a planned market
rollout over time.
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1.12 Branding definition

“Branding is endowing products and services with the power of a brand”
(Kotler & Keller, 2015)
Branding is the process of giving a meaning to specific organization, company,
products or services by creating and shaping a brand in consumers’ minds. It is
a strategy designed by organizations to help people to quickly identify and
experience their brand, and give them a reason to choose their products over the
competition’s, by clarifying what this particular brand is and is not.
 ​ The Concept of Branding​
Branding is a type of marketing practice where a company creates a name or a
symbol or even a design that can be easily identifiable, about the belonging of
the company. The brand acts as a true representation of the individuality of the
business, and the way the business wants to flourish, this can be perceived from
the brand of that particular company.
​

A brand concept consists of the core ideas behind a company's branding that
pull together its purpose and goals. A brand concept is all about how a brand
makes you feel, which becomes the base to build an entire brand and marketing
strategy.
What is the difference between a brand and a commodity?
The difference between a brand and a commodity is in the eye of the
customer. Brand loyal customers have an emotional connection with the
brand. They are willing to pay more for the feeling the brand inspires.
Customers see commodities is easily replaceable. Commodities are
perceived as having no differentiating features

1.13 CONCEPT OF BRAND EQUITY-

[Link] Loyalty
Brand loyalty dictates that a consumer who truly believes in the value of a
brand’s offerings will often make frequent and repeat purchases from it instead
of switching between brands.

High brand loyalty ensures that business is stable and consistent, and enables
the organization to capture a larger market share.

[Link] Awareness
Brand awareness concerns the extent to which a brand is known or recognizable
to a consumer.

A brand with high brand equity will spring to mind when a customer searches
for a particular product. This is also termed brand salience; the brand occupies a
prominent position in consumers’ minds.

[Link] Quality
This element centers on the brand’s reputation for high-quality products and
customer experience.

Good quality is favored more highly than particular product features, with
consumers often willing to pay premiums for high-quality products relative to
other brands.

[Link] Association
Brand association involves anything related to the brand, which evokes positive
or negative sentiments, for example, a product’s functional, social or emotional
benefits.
More broadly, this relates to the brand’s overall image, and what consumers
associate with that image – if consumers associate predominantly positive
attributes with the brand, then the brand possesses high brand equity.
 Chapter 2

PRICING

2.1 Meaning of Pricing:

Pricing is a process of fixing the value that a manufacturer will receive in the
exchange of services and goods.
Pricing method is exercised to adjust the cost of the producer’s offerings
suitable to both the manufacturer and the customer. The pricing depends on the
company’s average prices, and the buyer’s perceived value of an item, as
compared to the perceived value of competitors product.
 ●​ [Link]

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1.2 Role of Pricing:​

●​ Survival- The objective of pricing for any company is to fix a price that
is reasonable for the consumers and also for the producer to survive in the
market. Every company is in danger of getting ruled out from the market
because of rigorous competition, change in customer’s preferences and
taste. Therefore, while determining the cost of a product all the variables
and fixed cost should be taken into consideration. Once the survival phase
is over the company can strive for extra profits.
●​ Expansion of current profits-Most of the company tries to enlarge their
profit margin by evaluating the demand and supply of services and goods
in the market. So the pricing is fixed according to the product’s demand
and the substitute for that product. If the demand is high, the price will
also be high.
●​ Ruling the market- Firm’s impose low figure for the goods and services
to get hold of large market size. The technique helps to increase the sale
by increasing the demand and leading to low production cost.
●​ A market for an innovative idea- Here, the company charge a high price
for their product and services that are highly innovative and use
cutting-edge technology. The price is high because of high production
cost. Mobile phone, electronic gadgets are a few examples.
●​
[Link]

●​ [Link]

Importance of Pricing: Most Flexible Marketing Mix Variable, Setting the

Right Price, Determine the Profitability and a Few Others
Importance of Pricing – 4 Factors: Flexible Elements of Marketing Mix,
Right Level Pricing, Price Creates First Impression and Vital Element of
Sales Promotion
Pricing decisions can have very significant consequences for the organization. It
is one of the first considerations for many customers and it determines the profit
margin on products.
[Link]

[Link]

ADVERTISEMENTS:

Pricing is important due to the following factors:

Factor # 1. Flexible Element of Marketing Mix:

Price is the most adjustable aspect of the marketing mix. Prices can be changed
rapidly, as compared to other elements like product, place or promotion.
Changes in product design or distribution system would take a long time to be
implemented.
Bringing about changes in advertisements or promotional activities is also a
time consuming task. But price is very flexible and can be changed according to
the needs of the situation. Therefore it is a very important component of
marketing mix.
Factor # 2. Right Level Pricing:
The wrong price decision can bring about the downfall of a company. It is
extremely significant to fix prices at the right level after sufficient market
research and evaluation of factors like competitors’ strategies, market
conditions, cost of production, etc.
ADVERTISEMENTS:

Low prices may attract customers in the initial stages, but it would be very hard
for the company to raise prices on a future date. Similarly, a very high price will
ensure more profit margins, but lesser sales. So in order to maintain balance
between profitability and volume of sales, it is important to fix the right price.
Factor # 3. Price Creates First Impression:
Often price is the first factor a customer notices about a product. While the
customer may base his final buying decision on the overall benefits offered by
the product, he is likely to compare the price with the perceived value of the
product to evaluate it. After learning about the price, the customers try to learn
more about the product qualities.
If a product is priced too high, then the customer may lose interest in knowing
more. But if he thinks that a product is affordable, then he would try to get more
information about it. Therefore price is a critical factor that influences a buyer’s
decision.
Factor # 4. Vital Element of Sales Promotion:
Being the most flexible component of marketing mix, price is the most
important part of the sales promotion. In order to encourage more sales, the
marketing manager may reduce the price. In case of goods whose demand is
price sensitive, even a small reduction in price will lead to higher sales volume.
However prices should not be fluctuated too frequently to stimulate sales.
(ii) It increases a firm’s cost because of the inputs costing more, thus forcing
the price of the product upwards.

3. Mature Products and Markets:

At the time of entering the maturity stage the products, and the markets are
mature, the only way to differentiate the various offers is on the basis of
augmented service or price cuts.

4. Customer’s Value Perception:

The customer’s perception of the product’s current and potential value is
another factor contributing to the importance of pricing decisions. To a
customer, price always represents the product’s value. Many time, the
customer’s perception of the product value may not necessarily be in line with
its price.

There are instances in which the product is overpriced when its value perception
is lower than the price tag on it, and vice-versa. For a marketer, it is important
that products are priced at the right level.

5. Inter-Firm Rivalry:
As the entry and exit barriers in the industry are lowered the intensity in
inter-firm rivalry increases. With an increase in this rivalry, marketers find that a
firm’s cost of operation also increases, as it now has to spend more money to
lure customers and middlemen. It has also invest money in new product
development.

6. Product Differentiation Getting Blunted:

The differentiation among firms on the basis of the product is going to get
blunted when technologies get standardised. More products and brands will
transcend to a commodity situation. This is an unhealthy sign as commodities
are always subject to price fluctuations and price wars. For, at this stage, the
only way to differentiate between brands is the price.

Importance of Pricing

Traditionally, price has operated as the major determinant of buyer choice.

Although recently there has been a shift in buyer behaviour with non-price
factors also playing a role in the consumer decision process, price still remains
the major factor that influences the buyer’s decision. Price is the only element of
the marketing mix that generates revenues while all other elements lead to costs.
Similarly, price is also the most flexible element of the marketing mix, as in, it
can be changed quickly, unlike other elements such as – product features,
promotional campaigns or channel relationships.
Organisations are known to handle price in different ways. In small
organisations, prices are often set by the top management, whereas in large
organisations, it is seen that pricing is handled by Product Line Managers for
those lines of products that they are responsible for. However, irrespective of the
size of the organisation, the general pricing objectives and policies are laid
down by the top management.
Price is an important element of the marketing mix for the following
reasons:
i. Price is the most important factor for a consumer when it comes to making a
purchase decision. Rarely will it be otherwise. As such, the right kind of pricing
strategy can help achieve organisational goals.
ii. Price can be easily changed and is flexible thereby helping the organisation to
respond quickly to marketplace changes.
iii. Price can also be used as a differentiating factor to set aside the said product
from other products in the same category.
iv. Price is also often used to target a particular segment of customers.
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v. And, last but not the least; price is the only element of the marketing mix that
fetches revenue for the organisation.

Importance of Pricing – Economy, Determinant of Profit, Beating

Competition, Demand Regulator, Crucial Decision Input, Important Part
of Sales Promotion and a Few Others
We, the consumers take price for granted. It is something, the seller tells us, we
pay that and forget it, but price is a very important factor.
The following points highlight the importance of pricing:
i. The economy – The entire economy depends on the price. It is the price which
decides trade and the economy depends on the trading activity in the country.
Price of a product influences profit, rent, interest, wages which are the prices
paid to the factors of production-entrepreneurship, land, capital and labour
respectively. Thus price acts as a regulator of economy, because it influences the
allocation of the factors of production.
ii. Determinant of profit – Profit is the basic objective of any commercial
undertaking and the profit directly depends on the price.
iii. Beating competition – Price is a very important weapon which a seller can
use to overcome competition. A seller, by fixing a reasonable price and by
offering value for money can overcome competition.
iv. Demand regulator – It is a simple law in Economics that price and demand
are inversely proportional. Thereby a seller can either increase the demand or
decrease the demand for his products by setting a low or a high price.
v. Crucial decision input – Price as a factor constitutes a very important
decision. A company has to price appropriately because several factors depend
on the price such as the demand, the profit, the market share, the competition
etc. Factors such as product place and promotion are causes of expenditure but
price is the only factor that brings in revenue to the seller.
vi. Important Part of Sales Promotion – Many times price adjustments form a
part of sales promotion that a lower price in the short term stimulates interest in
the product.
vii. Trigger of First Impressions – Often, customers’ first perception of a
product is formed as soon as they learn the price
viii. Most Flexible Marketing Mix Variable – For marketers price is the most
adjustable of all marketing decisions. Unlike product 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.
ix. Perception of quality – Several customers develop a perception about the
quality of the product based on its price. To such customers, high price is better
quality and vice-versa. Therefore the right price must be fixed for the product
depending on the customer perception desired.
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x. Legal aspects – A wrong price may attract legal complications. Therefore a

seller has to consider these factors also while fixing price.

Importance of Pricing – Helps in Determining Return, Determines

Demand, Sales Volume and Market Share, Countering Competition, Builds
Product Image and A Tool of Sales Promotion
Pricing is an important decision making aspect after the product is
manufactured. Price determines the future of the product, acceptability of the
product to the customers and return and profitability from the product. It is a
tool of competition.
1. Helps in Determining Return:
The primary motive of all firms is to earn profit. Firms aim at maximising
profit. When the product is manufactured the manufacturer determines the price
of the product. Price includes the return or profits that the manufacturer or
marketer intends to earn. Price is fixed by the marketer by adding a certain
percentage of profit on cost.
2. Determines Demand, Sales Volume and Market Share:
Price is the most flexible tool in the marketing mix. A marketer can regulate the
demand for a product by increasing or decreasing the price. Price is an
important factor influencing consumer buying behaviour. Most of the time
consumer put importance on price of the product rather than on value, at the
time of purchase. Thus a change in price influences the demand, sales volume
and market share.
3. Countering Competition:
Companies regularly revise their pricing strategies to counter the competition. A
market leader who dominates the market designs the pricing strategy to prevent
new competitors entering into the market. While a price follower sets their price
in accordance to the competitor’s price and market leader’s price. A marketer’s
pricing strategy mostly depends upon competitor’s pricing policy.
4. Builds Product Image:
Price often builds an image of the product. Consumers often believe that high
priced products are of high value and benefit than low priced product. Marketers
also use price to position their products superior in the minds of the consumer.
5. A Tool of Sales Promotion:
Price is an important tool of sales promotion. Companies often resort to short
term price reduction like offering discounts to increase sales during a short time
period.

Importance of Pricing – Cost-Based Pricing, Competition-Based Pricing,

Demand-Based Pricing and Value-Based Pricing
The relationship between price and demand is well known. For items or services
of normal use, the higher the price, lower the demand and vice-versa.
This usually occurs because:
i. Customers have limited budgets or funds availability, which reduces the
purchases when the prices rise.
ii. The utility or the value for money perception declines as the prices go up.
Therefore, some of the customers might find the tradeoff between the two to be
unfavourable and opt out of the service purchase.
iii. Alternative solutions start to look more attractive. When the prices go up,
customers start to look for alternative suppliers or other ways of obtaining the
same solution by substitution. Thus, if the train travel prices go up significantly,
the customers may explore the idea of bus travel.
iv. In the case of services, customers start to look at self-service option more
seriously and may even adopt it. Thus, in the case of services which are not
technically very complicated, customers think of carrying out the service
themselves. Thus, if the school bus prices go up inordinately, the parents may
decide to drop and pick-up the children from the school themselves.
Not all the products or services get affected by this phenomenon in equal
measure. The susceptibility of each product or service to this demand reduction
phenomenon is generally called the price elasticity of demand. The change in
the volume demand brought about by change in the prices is called the price
elasticity of demand.
Thus, services which are highly susceptible to the price changes are termed as
elastic. Where the demand for services does not drop because of the nature of
demand or the type of service, service providers can take advantage of the
inelasticity.
In the case of services, each of the pricing strategies represents a marketing
solution to the service provider.
1. Cost-Based Pricing:
In the case of goods, the prices are often based on the cost of production. For
example, the price of petrol or diesel in India is based on the cost of oil in the
international markets. Similarly, in the case of services, the cost-based pricing
serves as the basic or starting point for the services. Cost-based prices are
calculated based on certain accumulation of the accounting data.
The usual components of costs are:
i. Variable cost – Consisting of direct materials and direct labour and
consumables. These are directly attributable to each unit of product or service.
ii. Fixed costs – Employee costs, marketing costs of advertising, and sales
promotion and distribution costs. These are not directly attributable to the
product or service but have to be incurred nonetheless.
iii. Financial costs and profits – Consisting of depreciation, interest, and return
on investment.
The situations under which service prices are based on costs are:
i. When the service is introduced for the first time and there are no other
references for price fixing. For example, when mobile telephony was first
introduced in India, the initial prices were based on the service operator’s costs,
expected number of connections, and the anticipated return on investment. Thus
the cost was the main basis of pricing.
ii. When the number of competitors in market is limited to one or two. Cost-
based pricing allows the competitors to make adequate returns and makes them
hopeful of achieving the target returns. This situation of ‘live and let live’
continues until either fresh competition enters the market place or the marketers
realize that the current pricing policy is not enabling them to grow and achieve
larger returns in the end. The cost-based pricing system continued in the mobile
telephone circles when only two operators were present in each circle.
iii. In the case of unusual work, or work whose content is difficult to
pre-estimate, the service provider and the client may come to a mutual
agreement on the basis of the cost of the effort made by the service provider.
In the case of supervision of civil or engineering construction work, the
engineering consultants and the client agree to a site supervision fee based on
the man-hours of the personnel required for supervision in lieu of a lump sum
fee. They may agree to different daily rates for the engineer, supervisor,
draughtsman, quantity surveyor, etc. This practice is common in the Indian
consulting business.
However, there are quite a few limitations of this cost-based pricing.
These include:
i. Estimation of variable cost of a service is difficult. For example, in the case of
the service provided to a hotel room occupant or the cost of flying a passenger,
the variable cost is difficult to measure. Without reference to the variable cost,
the total cost estimation may be even more difficult.
ii. The utility of services incurring the same costs may not be the same for the
customer. For example, changing of the zipper of a trouser and changing of the
zipper on a cloth handbag may involve the same amount of effort on the part of
the mender.
However, if charges are Rs. 25 in the case of trouser, the customer would
happily pay this, while in the case of handbag, the customer may think this to be
excessive, because the original cost of the trouser was about Rs. 750 while that
of the handbag was only Rs. 100. Thus the service provider may be able to
charge even Rs. 40 in the case of a trouser but not more than Rs. 15 for a
handbag.
iii. While the service provider may be aware of the cost structure, the customers
may not be aware of it; hence, the customers may be averse to paying the price.
For example, in a city there may be an expensive movie theatre very near the
railway station.
While it costs Rs. 5 to park a car at the railway station, it may cost Rs. 25 to
park the car in the basement of the movie theatre. To the customer, it does not
make sense to pay five times the amount for the same service, while for the
parking lot franchisee, this is the minimum that he can charge in order to pay the
rental to the cinema hall.
iv. Since, most of the service offers are usually not totally comparable, the
utility and cost comparison based on cost-based prices is confusing to the
customers.
While cost-based pricing may be the easiest to implement, the pricing in this
manner is not always practicable to implement.
2. Competition-Based Pricing:

Competition-based pricing is another way in which the prices are set by the
service providers. An example of this in the Indian context is the air-travel
prices between metropolitan cities. When Indian Airlines was the sole service
provider, the prices were quite high and were based on the cost of operations.
Competition between Jet airways, Sahara, and Indian Airlines has forced all of
them to reduce the prices of two-way airfares by as much as 40%. Thus,
competition leads to tremendous benefit for customers. When the American
domestic air travel was deregulated, the prices were no longer based on cost but
became dependent on the level of competition and led to severe price wars.
In the process, the volume of air travel went up enormously and the customers
benefited with lower fares. The service provider also benefited from higher
volumes.
Similarly, when mobile telephony was introduced in India, due to lack of
competition the customers during 1997-98 paid as much as Rs. 12.50 per minute
for outgoing and Rs. 6 per minute for incoming calls.
The continued competition, including the newest form of competition from the
WLL (Wireless in Local Loop) telephony, has reduced the rates drastically. By
2003, the rates have been reduced up to Rs. 0.40 per minute for the local
outgoing and STD calls within the circle, while incoming calls have become
completely free.
Going rate pricing is another form of competitive pricing. When there are a
large number of service providers, or when a new entrant comes into the market,
usually the price cannot be fixed by the new entrant or any single provider. For
example, there are a large number of Internet cafes in Indian cities.
The competition is intense and there are very few factors to differentiate the
service. Therefore, the rates for the access fell to as low as Rs. 10 per hour. The
same uniform rates are applicable wherever you go. In order to be able to charge
a rate that is higher than the going rate, it would be necessary to offer higher
speed access, better surroundings with restaurant facilities, or newer computers
to create the differentiation in the service. Improved benefit would be necessary
to justify higher prices.
3. Demand-Based Pricing:
In economics, the demand curve shows the relationship between the price and
the quantity demanded. We are familiar with the general axiom that higher
prices reduce the quantity demanded and vice versa.
Due to the perishable nature of services, whenever the demand exceeds the
supply, due to lack of inventory, it cannot be met. Similarly, when the demand
falls below the available capacity, the capacity is wasted and fails to generate
adequate revenue. Some of the pricing strategies try to take care of this concern.
i. Time Differential Pricing:
Telephone networks, Internet servers, etc. are quite busy during the office
working time. Business callers tend to call typically during the working hours.
Therefore, the network capacity, while sufficient for the daytime load, remains
idle during the evening and night. To increase usage during non-peak hours,
Bharat Sanchar Nigam Ltd introduced three different rates for inter-town
Subscriber Trunk Dialling.
Thus, there was a full daytime rate (7 am to 7 pm), an evening rate (7 pm to 11
pm) at half to one-third of daytime rate, and a night calling rate (11 pm to 7 am)
at one-fourth of the daytime calling rate.
Similarly, a number of business hotels offer very attractive low rates during the
weekends. At business hotels, rooms remain vacant from Friday night until
Monday mornings. The hotels try to offer rooms at special low rates,
introducing special tariffs for couples, families, etc. during the weekends. As
out-of-town customers are unlikely to make use of such tariff, it is mainly aimed
at local residents.
ii. Quantity Differential Pricing:
In line with the principle that the loyal high volume customers should enjoy
greater pricing advantage, a number of service providers have quantity
differential prices.
For local commuter services, Indian Railway offers a monthly pass that allows
unlimited travel on local trains. The price of the monthly offer is equivalent to
about eight to ten return journeys between points of origin and destination.
Similar tariff is offered on long-distance trains up to a distance of about 200
kilometres.
iii. Place Differential Pricing:
During a show of event, the demand to be close to the actors or actresses on the
stage, the singers on dais, or the tennis or cricket players on the grounds is quite
high. The customers feel they are more intimately involved in the action.
Consequently, the organizers try to make use of this demand factor to secure
hefty premium. Thus, the front row seats for a LataMangeshkar concert could
be as high as Rs. 5,000 while tickets for the back rows could be as low as Rs.
100 per person.
iv. Seasonal Differential Pricing:
The beach resorts and other hotels in Goa experience a slump during the
monsoon season from June until the end of September. Therefore, to make best
use of the capacity, a number of hotels offer very low off-season rates to attract
different type of clientele. This clientele includes honeymooners and other
people whose idea of holiday is inactivity or who want to make a pilgrimage to
Goa.
The common factor in all these types of pricing is to shift the demand from peak
to off-peak periods. We will deal with this topic in depth under supply and
demand balancing. In addition, this pricing strategy is based on marginal cost.
Marginal cost is the additional cost of serving the additional customer. Marginal
cost is the direct material and labour cost. As long as this cost is covered, any
additional revenue generated contributes towards overheads and profits.
4. Value-Based Pricing:
Value is defined as perceived benefits for the total cost of acquisition.
Thus, the value-based pricing can be divided into the following depending
on:

i. Higher value perception due to lower price for the service

ii. Higher value due to higher perceived benefit, which may accrue due to high
quality of the service or other value perceptions.
a. Price Discounting:
To a number of customers, if the same service is offered at a lower price, the
value perception of the service goes up. Thus, using a coupon published in a
health magazine, the customer may avail a discount for the first month’s fee in a
gymnasium.
Similarly, a number of credit card companies offer waiver of the joining or first
year’s fees in order to attract the customer.
b. Odd Pricing:
The prices of the services are set at a price just below the rounded sum. Thus a
large sized pizza may be priced at Rs. 199 instead of Rs. 200. Psychologically,
the customers feel that they have paid much less than Rs. 200.
c. Penetration Pricing:
This is the type of pricing used to build large volumes. Take nose or ear piercing
as the latest fashion. In order to get larger number of customers to do a trial, the
initial introductory offer is based on low price. Once the service becomes well
known, the prices are set back to the normal level. It is necessary to make
customers aware of this deadline date after which discounted prices will not be
available; otherwise the customers may be disappointed.
d. Bundled Pricing:
The typical word used by many marketers is ‘giving more for less’. The Pizza
Hut chain may separately offer medium-sized pizza for Rs. 149, garlic bread for
Rs. 50, and a 500 ml Pepsi for Rs. 13. However, in order to get customers to buy
all, the three may be offered as a combined meal for Rs. 189. This bundled price
lets the customers focus on the benefit of a total meal, instead of making them
nervous about spending well over Rs. 200 for a full meal.
The recent ‘DhirubhaiAmbani Pioneer Offer’ made by Reliance Infocom is a
similar bundled offer. The offer includes a mobile phone, free SMS service, free
incoming calls, 24-hour high speed internet access, 400 minutes of talk time per
month, STD service at local calling rate within the state/circle, and calling other
Reliance phones at local rate irrespective of the location.
The customers are not able to price the individual components of this offer, and
thus it does not let customers dwell on the price but lets them concentrate on the
benefits of such offers.
e. Prestige Pricing:
To some customers, part of the value perception is being different from others.
Those who want to make a statement about their status, wealth, leadership,
innovativeness, etc. are usually prepared to pay for it. Thus, the customers
would be prepared to pay high fee for a new health club or dance class started
by a celebrity, or to have a personal trainer and pay for it, etc.
This type of demand usually does not obey the law of price and demand.
Usually, in this case, the higher the price, the higher the demand. However, the
total size of such a market is usually limited. The moment the service becomes
commonplace, the attraction no longer remains.
f. Segment-Wise Pricing:
A number of software packages, including Microsoft Office and Microsoft
Windows XP, etc., offer different prices in different segments of the market.
(1) For the office users segment, the price is the highest as the companies would
consider the utility of the product rather than the price when making a decision
about purchase. In addition, the companies may consider purchase of multiple
licences or a server version of the software, or even the professional version.
(2) For individual users, the price is lower than the corporate segment price. It is
usually sold as a personal version rather than professional version.
(3) Students obviously are an important class of customers but are unable to pay
the full cost of such software. However, they are the future users and decision
makers, and must be groomed into using this software from the first
opportunity. Therefore, they are offered a student version of the software at very
attractive prices.
g. Loss Leadership Pricing:
In this type of pricing, the basic or fundamental services are priced at quite a
low level. However, if the client needs higher level or additional services, he has
to pay premium prices.
The home cable industry is likely to undergo a number of changes in the near
future. The pay channels want to charge a fee from the operators while the
government wants to ensure the availability of these channels at low cost to the
consumers. Due to the recent ordinance (of 2003) restricting the cable
operators/channel partners from overcharging, the pricing may undergo a
fundamental change.
Amongst the competing cable connection suppliers, the dominant supplier may
agree to exhibit the free channels package at very low prices. The cable operator
may even lose some money on the base offer. This would attract the buyers and
would secure excellent market share for the customers.
However, the prized channels such as Star Gold, Zee Cinema, etc. may be
offered at prices that are very profitable. Thus, on the whole, the operator may
benefit from larger market share and recover the loss on basic service from the
specially demanded services.
h. Bid Pricing:
The number of Indian students who join, and travel to, Universities in North
America (USA and Canada) and Great Britain during June to September each
year is quite high. All the competing airlines offering services on this route
including British Airways, KLM, Lufthansa, Alitalia, Delta, etc. want to attract
passengers in order to fill their seats on transatlantic routes, while keeping in
mind that the student travel market is price sensitive.
Airlines offer block bookings to agents who undertake to fill the quota of seats
on each of the flights from Mumbai-Delhi-Chennai during this period. The
agents would typically place the bids for block bookings, and successful travel
agents will be given the exclusive right to book seats in this period.
The agents in turn try to sell this at the best possible price. They would use
tactics such as non-confirmation to entice the buyers to pay extra for confirmed
booking. Due to the bidding, the airline itself has very less control on the matter.
However, the airline would have almost 100% seat occupancy on the day of
travel.
i. Money-Back Guarantees:
A number of software training institutes such as NUT, Aptech, Boston
Software, etc. offer a two or three-year student programme. Once the students
have enrolled, they are very likely to complete the programme due to parental
pressure. In addition, students pay a substantial portion of the fees up front, with
the balance being paid over the period of the training. Thus, it is important to
attract the students in the first instance to promote the sales.
The students are offered the lure of a guaranteed job at the end of the education;
otherwise the institute offers to refund a part of the fee. This is a type of belated
or postponed discounting. In any case, any student who fails to find a job
elsewhere is usually offered the job of an instructor at the same institute! As we
have seen above, the pricing in the case of services is quite complex, and
naturally it is dependent upon the overall marketing strategy.

Importance of Pricing – Most Flexible Marketing Mix Variable, Setting the

Right Price, Trigger of First Impression, Influences Demand Level and a
Few Others
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.
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 for which pricing is important include:
Importance # 1. Most Flexible Marketing Mix Variable:

For marketers price is the most adjustable of all marketing decisions. Unlike
product 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.
Importance # 2. 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.
Importance # 3. 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.
Importance # 4. Important Part of Sales Promotion:
Many times price adjustments are part of sales promotions that lower price for a
short term to stimulate interest in the product. 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.
Importance # 5. Influences Demand Level:
The chosen price directly influences demand level and determines the level of
activity. A price set too high or too low can endanger the product’s
development.
Importance # 6. Determines the Profitability:
The selling price directly determines the profitability of the operation, not only
by the profit margin allowed, but also through quantities sold by fixing the
conditions under which fixed costs can be recovered over the appropriate time
horizon. Thus, a small price difference may have a major impact on
profitability.
Importance # 7. Means of Comparison:
More than any other marketing variable, the price is an easy means of
comparison between competing products or brands especially when there is
hardly any brand differentiation. The slightest change in price is quickly
perceived by the market, and because it is so visible it can suddenly overturn the
balance of forces.
Importance of Pricing – Costly, Expensive, Cheap and Bargain
Proper pricing is very important for the business and the reason behind this is
very simple. All the customers are looking for ‘value for money’ if not a
‘bargain’. So if the customer finds that he/she is required to pay more than what
he/she is getting in return, the customer will not buy it, or if purchased under
duress, (no alternate available at that time/emergency purchase) will not
purchase it next time.
There is also a possibility of bad-mouthing the product. The manufacturer must
ensure that the product is being sold in the market at the suggested price and the
MOP (Market Operating Price) is not higher than MRP (Maximum Retail Price)
due to shortage of the product. If the product is being sold at a higher price than
MRP, it will lose its market position in the long run like what has happened to
Amul Spray.
How do we decide the proper price? Price determination methods are common
with very little variations in them. A manufacturer can determine the price and
may decide to sell the products at lower than or higher than the price determined
as a marketing strategy based on factors affecting pricing decisions. Let us first
look at the method of determining the price.
One must understand the correct meaning of the words costly/expensive, cheap
and bargain. Most of the time, most people use these words alternatively
without understanding that they are making a mistake in using these words
wrongly.

Let us look at the correct meanings of these words:

1. Costly:
When the customer pays a high price for a product and is unhappy and not
satisfied about the price paid for the product, it is costly.
2. Expensive:
When the customer pays a high price for a product and is happy and completely
satisfied about the price paid for the product, it is expensive.
3. Cheap:
When a customer pays a very low price for a product and feels that the price
paid is just enough and would not like to pay more than the price paid, the
product is a cheap product.
4. Bargain:
When a customer pays a very low price for a product and feels that the price
paid is less than the actual price of the product, it is a bargain product.

Selecting pricing method :

Top 6 Pricing Methods (Price Setting Methods)

Pricing method leads to a specific price. There are various methods used for
setting price of the product. Some methods are cost-oriented while some are
market-oriented. Each of the methods has its plus and minus points, and
applicability. Marketing managers apply the appropriate method for setting the
price. The appropriate method can be decided on the basis of the study and
analysis of internal and external aspects as well as suitability of the method.
Following part describes some widely used pricing methods.

1. Mark-up Pricing Method:

This is the most commonly used method. The method is also known as cost-plus
pricing. In this method, a standard mark-up (or profit margin) is added to the
product costs. This method is used in construction business, professions, and
even for consumer goods. The method can be used only when company has
necessary data about various costs and expected sales. Company may prefer
fixed per cent of costs or fixed per cent of selling price.

Merits:
Keeping in mind a lot of forces affecting market, the mark-up rate may be kept
high or low, fixed or variable.

This method is widely used. It offers following merits:

i. It recovers costs as rapidly as possible.
ii. It is relatively a simple method to practice.
iii. If it is used by the entire industry, price tends to be similar. And, price
competition can be minimized:’

iv. Experts believe that cost-plus pricing method is fair for both – buyers and
sellers.

Demerits:
The method suffers from following limitations:
i. It ignores current demand.

ii. It ignores consumers’ perception of price.

iii. It doesn’t consider competition. (However, mark-up rate may be decided on

the basis of competition).

iv. It is difficult to estimate exact sales.

v. The method is meaningful only if price of raw material and other inputs
remain unchanged. Otherwise, the method may be misleading.

2. Perceived-value pricing Method:

Perceived-value pricing is a market-oriented method for setting the price. Here,
price is based on the consumers’ perceived value of the product. Consumers’
views on price are given priority. Company takes consumers’ perception of
value as a key to set the price, and not its own cost and objectives.

Company tries to measure the views of buyers regarding price of the product.
Manager explains the consumers about total offers, including core product (key
benefits and features), product-related aspects (like brand image, reputation,
novelty, etc.), and product- related services (such as after-sales services like free
installation, free home delivery, guarantee, etc.) and asks them to estimate price
for that product or for total benefits offered by the product.

The key to the perceived-value pricing method is to measure accurately the

market’s perception of the offer’s value. The seller with inflated views of his
offers will overprice the product while with underestimated views will charge
less than what it should be. Market research is needed to estimate market
perception of price. Let us take an example,

ABC Company Limited wants to set price for the motorbike by the
perceived-value method. Market research officer considers following aspects
and takes the views of buyers.

Merits:
This method offers following merits:
i. Perceived-value method matches with consumer orientation.

ii. It considers indirectly competitors’ offers.

iii. It is more realistic than any other method.

iv. Perceived-value can be taken as base, with little adjustment in costs and
objectives, the most suitable price can be set.

Demerits:
However, there are certain practical problems in setting price via this method.

Main limitations include:

i. It is practically difficult to measure perception of the market. Unless relatively
a large sample of consumers is contacted, views may be misleading.

ii. A lot depends on the person who estimates buyers’ perception of price.
Possibility of bias cannot be ignored.

iii. The method is based on the trust. If their response is not normal, it is a
wasteful exercise.

iv. All the limitations of marketing research are equally applicable to this
method.

v. It is, compared to the first method, difficult and complex to understand and
apply.

3. Going-rate Pricing Method:

This is also said as competitive parity method. Even, sometimes, it is called as
competition- oriented pricing. The method is, normally, followed by small
firms, said as ‘the followers’ In going- rate pricing method, the company gives
less attention to its own costs, objectives, or product demand. But, pricing
decision is largely based on competitors’ prices.

The company may charge the same, more, or less than major competitors. The
notion is “follow the leader,” or “leader is right.” One must note that company
doesn’t select a price, which is far below or much higher than the real. However,
competitors’ pricing is taken as a base. And, final price may be set slight high or
low depending upon objectives, qualities of product, and services offered.

Merits:
The method can be justified on the following grounds:
i. It is the only way to set the price when costs are difficult to measure and
competitors’ response is uncertain.

ii. It considers competitors pricing policies as a base. In contemporary

marketing practices, it is more relevant method.

iii. Going rate pricing brings uniform pricing in the industry. It ensures fair
return to sellers and harmony in industry.

iv. It may protect consumers’ from cheating and misguiding. They can buy the
similar product at a, more or less, same price.

Demerits:
Going-rate pricing method has been criticized as under:
i. This is not an ideal method for pricing because it is one-sided, i.e., only
competition factor is considered.

ii. Company’s objectives, costs, qualities, services, and consumers’ perception

of value have been ignored.

iii. It is senseless to follow blindly the leaders or strong competitors as every

firm has its special problems, opportunities, situations, and capabilities.

iv. Temporary pricing of competitors may lead to erroneous decision.

4. Sealed-bid Pricing Method:

Sealed-bid pricing is followed in construction or contract business. It is also a
competitive pricing method. Here, price is selected on the basis of sealed bids
(quotation or estimated price) for the jobs.

The firm sets its price on expectations of how competitors will price the
product. The firm wants to win the contract requires submitting the lower price
than competitors. However, costs and profits are not totally ignored. The firm
cannot set price below the costs.

It is called as tender pricing also. In response to the proposal of jobs or works,

interested parties (businessmen or marketers) have to fill the tender (send
quotation or estimated costs) stating price and conditions of work and send in
forms of sealed-bids.

The bid is an offer of price for particular work or product. Generally sealed-bids
(sealed envelops containing a bid) are invited for a competitive work. Offers or
proposals come from charitable trusts, companies, organisations, or
governments. In our country, we say this method as “tender,” and proposal of
jobs as a “tender notice.”

Mostly, the tender notice is published in newspapers or circulars. The offer or

proposal for work contains type of work or job, time to complete the work,
quality of work, and other similar conditions.

In response to the tender or proposal, interested parties have to send sealed-bids

stating their prices and conditions within the permitted time. In this method, the
party inviting the sealed-bids is customer and those who bid by sealed
quotations are the marketers (because they will serve the inviting party).

On a due date – either publicly or otherwise – the sealed-bids (or quotations) are
opened, and the bid with lower price and more favourable conditions is selected.
Rate of selected bid is the price for the job. The selected bid is given the
business. The method has its plus and minus points.

5. Target Return Pricing:

This is one of the cost-oriented methods for setting price of the product. Here,
the firm determines that level of price at which it can yield the target return on
investment. Here, return on investment is taken as a base for price
determination.

Attempts are made to recover the cost of investment. Mostly, government

Companies, public utilities, cooperative societies, and the similar organisations
fix pricing for their products on this basis to ensure minimum return on
investment.

6. Break-even Analysis Method:

Some companies set the price for their products by Break-Even Analysis (BEP
method). It is a managerial tool that establishes relationship among costs,
volume of sales, and profits. It is also known as cost-volume-profit analysis.

It involves developing tables and/or charts that help a company to determine at

what level of sales, the revenue will be equal to the total costs. Under this
method, attempts are made to find out volume of sales at which total costs are
just equal to the sales revenue. This is such a level of sales at which there is no
profit, no loss.

Sales Revenue = Total Costs.

This level is called BEP (break-even point), at which the firm has neither profits
nor losses. The firm just covers its total costs. When sales revenue exceeds the
total costs, the result is profit; and when sales revenue is less than total costs, the
result is loss. Thus, BEP is the position of sales at which sales revenue is just
equal to total costs. BEP can be calculated either by a formula or by a chart.

Selecting the Final Price:

pricing methods help business to find out the final price. Other factors that help
to set the final price are:

●​ Psychological pricing
●​ The influence of other Marketing-Mix elements
●​ Company pricing policies
●​ Impact of price on other parties.

Let us discuss each of them one by one.

[Link] Pricing​
​
Many consumers feel high priced product offers high quality. If a consumer
knows about the quality features of a product, price plays a less significant
role in comparison to quality. When a consumer thinks of buying a product
they keep some budget in the mind which is decided by the past prices,
current prices, or the buying situation. Mostly high priced product is
thought of to have a high quality. So at times increasing the rates of a
product increases the sales also.

ii. The influence of other Marketing Mix Elements​

​
The final price of a product depends on the other marketing mix elements
also like the advertising, brand name etc.

iii. Company Pricing Policies​

​
The price of any product set should be decided according to the company's
pricing policies. In many companies a pricing department is set up to make sure
that product price should be reasonable for the customers, and that should give
profit to the company also.
iv. Impact of Prices on Other Parties​
​
According to Kotler, Management must also consider the reactions of other
parties to the contemplated price.

●​ How will distributors and dealers feel about it?

●​ Will the sales force be willing to sell at that price?
●​ How will competitors react?
●​ Will suppliers raise their prices when they see the company's price?
●​ Will the government intervene and prevent this price from being
charged? - In this case the marketers should know the laws regulating
prices.

Adapting the price:

Geographic Pricing and Marketing

Geographic pricing relates to how a business chooses to price its products
within different regions, as explained by Marketing91. This can mean different
parts of a particular state, country or even around the globe. In selecting its
product prices for different regions, a business also adapts its marketing
strategies to fit those pricing models.
For example, a company may increase its product prices in areas where median
income among consumers is high, and reduce its prices in areas where median
income is low. A business may also keep prices low as a means of generating
product interest in areas of the country outside its normal target market areas.
This allows a company to spread interest for its products across wider
geographic areas and ultimately increase sales.
Promotional Pricing:

What Is Promotional Pricing?

Promotional pricing is a sales strategy in which brands temporarily reduce the

price of a product or service to attract prospects and customers. By lowering the
price for a short time, a brand artificially increases the value of a product or
service by creating a sense of scarcity. Promotional pricing can help with
customer acquisition by encouraging cost-conscious shoppers to buy. It can
increase revenue, build customer loyalty, and improve short-term cash flow.
A promotional pricing strategy works best in the short-term. Used excessively, it
costs brands money by eroding profit margins. Customers become accustomed
to lower pricing—so-called “price orientation”—or they may stock up during
the promotional period. It also adds to the noise in an already-crowded
marketplace where promotions and discounts are commonly used.

How Is Promotional Pricing Used—And by Whom?

Promotional pricing is a popular strategy for consumer brands, including
retailers, airlines, gyms, restaurants, and service providers. B2B companies also
use their own variety of promotional pricing. Brands use promotional pricing to:
●​ Create buzz when launching a new product or service.
●​ Reward loyal customers.
●​ Increase customer traffic.
●​ Encourage repeat business.
●​ Move excess inventory.
Promotional pricing is a popular sales strategy. In fact, 80% of marketers say
that promotions and discounts are important in their customer acquisition
strategy.

Promotional Pricing Types & Examples

A promotional pricing definition or promotional discount definition covers a
wide range of promo pricing tactics, including:
●​
o​ Buy One Get One Free (BOGOF). To celebrate Youth
Soccer Month, Chipotle customers who wore a youth soccer
jersey could “score” a buy-one/get-one-free entree or kid’s
meal during Labor Day weekend.
●​
o​ Coupons. A coupon is a voucher entitling the holder to
a discount for a particular product. TackleDirect, a brand that
sells fishing gear, offers coupons to people who abandoned a
shopping cart. Researchers found that the average cart
abandonment rate is nearly 70%.
●​
o​ Flash Sales. For a very short time—sometimes just
hours—brands will slash their prices to unload excess
inventory, acquire customers, or lift profits. Travel brand
Globus boosted flash sale success by 20% by offering
personalized promotions to the military. The company’s
personalized promotion strategy reduced coupon abuse by 35%
and took 75% less effort and resources to implement.
●​
o​ Loyalty Programs. A loyalty program is a rewards
program a company offers to its customers who frequently
 make purchases. Since it costs five to 25 times more to acquire
a new customer than it does to retain an existing one, loyalty
programs are a popular type of pricing promotion. The Virgin
Atlantic Flying Club allows members to earn points that move
them up to different tiers. The higher the tier, the greater the
benefits.

●​ Seasonal Tie-Ins. Certain times of the year, such as Black

Friday, Cyber Monday, or Veterans Day are a good fit for promotional
pricing. U.S. News & World Report offers a shopper’s guide on the best
months to find the best deals.​
(Hint: Memorial Day is prime time for appliance shopping.)

●​ Segment-Specific Promotions. An effective promotional pricing

example targets certain buyer segments, such as students, teachers,
seniors, or the military. CheapCaribbean, a travel company that provides
low-cost luxury vacation packages in the Caribbean, Mexico, and Central
America, offers gated, personalized promotions to nurses. When the
brand launched its first nurses program, it brought 8,000 new nurses into
its travel club and reduced fraud by 36%.

Differentiated pricing:

What is Differential Pricing?

Differential pricing is a two-price system that focuses on segmented price
management, allowing your company to charge different prices for the same
product. The purpose is to streamline your business operations and increase
revenues based on customers’ demands for the product.

Differential pricing allows for a free market system based on the market demand
and supply. In addition, it focuses on a fluctuating price system, leading to
optimized price tracking, price matching, and price scraping.

Bear in mind that repricing is an essential part of your differential pricing

strategy, enabling you to set different prices for the same product for different
customers. Companies often make crucial decisions regularly, but when it
comes to analyzing prices, costs, expenses, and profits, they may apply
differential pricing to determine their best course of action.
Advantages of Differential Pricing
Price management is crucial because it defines your products’ value for you and
your customers. Whether you focus on eCommerce pricing, repricing, price
matching, or related operations, it is crucial to develop a solid differential
pricing strategy to let your customers know that your products are worth their
time and investment. Let’s look at a few advantages of having a differential
pricing strategy.

Concept of transfer pricing:

Transfer pricing can be defined as the value which is attached to the goods or
services transferred between related parties. In other words, transfer pricing is
the price that is paid for goods or services transferred from one unit of an
organization to its other units situated in different countries (with exceptions).

Transactions Subject to Transfer Pricing

The following are some of the typical international transactions which are
governed by the transfer pricing rules:

●​ Sale of finished goods

●​ Purchase of raw material
●​ Purchase of fixed assets
●​ Sale or purchase of machinery etc.
●​ Sale or purchase of intangibles
●​ Reimbursement of expenses paid/received
●​ IT enabled services
●​ Support services
●​ Software development services
●​ Technical Service fees
●​ Management fees
●​ Royalty fees
●​ Corporate Guarantee fees
●​ Loan received or paid

Purposes of Transfer Pricing

The key objectives behind having transfer pricing are:

●​ Generating separate profit for each of the divisions and enabling

performance evaluation of each division separately.
●​ Transfer prices would affect not just the reported profits of every centre,
but would also affect the allocation of a company’s resources (Cost
incurred by one centre will be considered as the resources utilized by
them).

Importance of Transfer Pricing

For the purpose of management accounting and reporting, multinational

companies (MNCs) have some amount of discretion while defining how to
distribute the profits and expenses to the subsidiaries located in various
countries.

Sometimes a subsidiary of a company might be divided into segments or might

be accounted for as a standalone business. In these cases, transfer pricing helps
in allocating revenue and expenses to such subsidiaries in the right manner.

The profitability of a subsidiary depends on the prices at which the

inter-company transactions occur. These days the inter-company transactions
are facing increased scrutiny by the governments. Here, when transfer pricing is
applied, it could impact shareholders wealth as this influences company’s
taxable income and its after-tax, free cash flow.

It is important that a business having cross-border intercompany transactions

should understand the transfer pricing concept, particularly for the compliance
requirements as per law and to eliminate the risks of non-compliance.
Transfer Pricing Methodologies

The Organisation for Economic Co-operation and Development (OECD)

guidelines discuss the transfer pricing methods which could be used for
examining the arms-length price of the controlled transactions.

Here, arms-length price refers to the price which is applied or proposed or

charged when unrelated parties enter into similar transactions in an uncontrolled
condition. The following are three of the most commonly used transfer pricing
methodologies.

For the purpose of understanding, associated enterprises refer to an enterprise

that directly or indirectly participates in the management or capital or control of
another enterprise.

Dynamic pricing :

Dynamic pricing refers to charging different prices for a product or service,

depending on who is buying it or when it sells. Dynamic pricing is sometimes
called demand pricing, surge pricing, or time-based pricing. And it’s a reaction
to changes in competition, supply, demand, and other market forces.
In 2020, dynamic pricing made headlines when the prices of everyday goods
such as toilet paper and hand sanitizer changed dramatically. More common
examples are happy hours at your local bar, airline pricing on travel websites,
and rideshare surge pricing.

In this article, we’ll explore whether dynamic pricing is an effective strategy for
your business.
What is dynamic pricing?
Dynamic pricing is a strategy that involves setting flexible prices for goods or
services based on real-time demand. Algorithms and machine learning help
facilitate this real-time pricing strategy. Companies can factor in things like
supply and demand changes, competitor pricing, and other market conditions to
help set product prices.

Dynamic pricing decisions won’t work for every business or industry. But
industries that often use dynamic prices include

●​ Hospitality
●​ Travel, including the airline industry
●​ Entertainment
●​ E-commerce businesses
●​ Retail
●​ Electricity
●​ Public transportation

Generally, dynamic pricing favors wealthier consumers. Wealthier consumers

have the means to handle price adjustments. Consumers with more limited
funds may find themselves priced out of the market when prices increase. They
may wait for lower prices or sales to purchase goods or services.
What is an example of dynamic pricing?
Sometimes, dynamic pricing results in unintended consequences for business
owners. Let’s take a look at a recent example of how real-time price changes
impacted a small business selling on Amazon.

Surge Pricing

Surge pricing is a dynamic pricing method where prices are temporarily

increased as a reaction to increased demand and mostly limited supply.
Therefore, this form of dynamic pricing responds to market factors and helps to
flexibly increase your prices. Surge pricing takes place in all kinds of industries,
such as hospitality, tourism, entertainment, and of course in retail.
Auction Pricing :

Auction pricing is the price and advertiser pays after participating in an ad

auction. The price the advertiser pays for a billboard ad, impressions or ad
placement depends on the outcome of the auction. Auction pricing is
determined by several factors including the participants in the auction,
out-of-home (OOH) inventory availability and the minimum price per ad or flip.
Outdoor billboard and online advertisers on Fliphound participate in ad auctions
using the platform’s Real-time-bidding (RTB) feature.

Premium Pricing-
When a company introduces a new product, the marketing manager has to
decide how to position the product in the marketplace and which pricing
strategy to use. The choice depends on many factors: the target demographic,
the price point of the product, its psychological image, and the amount of
money budgeted to promote the product. One strategy might be to use a low
price initially to penetrate a market and get an early foothold. The premium
price strategy lies at the other end of the spectrum and sets a high price for the
product.

What is Premium Pricing?

Companies use a premium pricing strategy when they want to charge higher
prices than their competitors for their products. The goal is to create the
perception that the products must have a higher value than competing products
because the prices are higher. The company is betting that the consumer will not
investigate to find out if the product is truly a higher-quality item. Marketing
managers want consumers to believe that the brand name by itself is enough to
assure them that the product is better than the competition's product.
A premium pricing strategy has the advantages of producing higher profit
margins, creating tougher barriers to entry for competitors, and increasing the
brand's value for all the company's products.

What is freemium pricing?

Freemium pricing—a mix of the words “free” and “premium”—is a pricing
strategy that businesses use if they want to offer customers free services in
addition to paid options. Generally, the free options are basic versions of the
service, and the paid options are upgraded, or premium, versions.
With freemium pricing, a business offers at least two tiers of services: paid and
complimentary. The free option typically has fewer features than the paid
option. Or, it might have a catch (e.g., advertisements or usage limits). The
premium choices are optional, but they typically offer additional features, a
better experience, or both.

Initiating and Responding to Price Change

Initiating to Price Change

After goods have been produce, price is determined on the basis of its cost and
taking reasonable profit. The price so determined may also need changes. Due
to external and internal environmental effects, prices may need changes. Two
main strategies can be adopted in leadership pricing as follows:

1. Initiating price cut

Every business firm wishes to increase its sale quantity. Changes in price may
be needed to achieve such objective. So, the producer should cut down
necessary amount of leadership price of the products. Sometimes companies’
products can enter in more markets segments only after cutting down prices.
This strategy should be adopted in order to face strong competition. Otherwise,
there may appear a situation either to quit the market segment or abandon the
production. On the other side, there may be a compulsion to cut down prices of
products to control the target market segments.

2. Initiating price increase

Sometimes a strategy to increase in price may be adopted not affecting sale

quantity. Price may need some changes due to cost inflation. Price may need
changes due to government’s policy to control price or to increase revenue. On
the other hand, demand for products may grow suddenly. In such situation, one
needs price change. In the situation when all continuations are suitable, price
may be increased according to the time. However, such increase should be very
low in percent. Price should not be increased at the rate which may spoil the
image and competition of the company.

Responding to Price Change

While changing price of any products, many reactions may come from
concerned sides. At first reaction may come from consumers. Such reactions
may be positive when price is cut down and negative when it is increased. The
company should carefully as well as logically answer both reactions. In the
same way, competitors’ reactions may also come. The company should give
satisfactory answer to them with all reasons such as cost, market study, transport
expenses, administrative expenses, etc. The following strategies should be
adopted to face reactions of competitors and distributors.
1. Maintaining Price

The producers should try their best to maintain price at the same rate. Producers
may cut down some percent of profit. The existing market segments can be
maintained with such strategy. Along with this, opportunity can be found to
enter new market segments. In this way, sale quantity may increase.

2. Increasing price and quality

Producer may increase in existing quality and price. Production companies may
bring in markets the new products or adding new features to the products
challenging their competitors. Little more prices of such products do affect
competitors so much. However, such analysis cannot last long. Other
competitors also may adopt such strategy. This may be only a periodical means
to stop competitors’ reactions. After sometime, the company should seek other
alternatives.

3. Reducing price

Most of the customers become conscious about price. So, the producer should
cut down the price of the products after certain time. Competitors of similar
products also may adopt this strategy. The producers who cannot adopt such
policy may get compelled to quit main market segments among many segments.
Such markets once quitted need very hard labor to supply products to there
again. Policy of taking low percent of profit should be adopted. Even decreasing
price, quality, features and services should be maintained same. Only then,
products can control markets.
 Chapter 3

Place

3.1 Meaning of Place :

Place marketing is the process of stimulating demand for a location’s goods and
services. It involves identifying target markets, developing advertising
campaigns and deploying selling tactics to influence buyer behavior that results
in more visitors and tourism, new business investment or attraction of new
residents.

[Link]

3.2 Role of Marketing Channels

 •​ Information gathering and distribution.

•​ Product promotion.
•​ Arranging contacts and matching products to meet buyers needs.

•​ Negotiation of prices and financing the costs of the activities in the

channel.

•​ Physical distribution of products through the channel.

There are basically four types of marketing channels:

•​ Direct selling;

•​ Selling through intermediaries;

•​ Dual distribution; and.

•​ Reverse channels.

3.3 channel functions and flows-

A marketing channel performs the work of moving goods from producers to
consumers. It overcomes the time, place and possession gaps that separate gaps
that separate goods and services from those who would use them

•​ What are the channel functions?

A channel performs three important functions: transactional, logistical, and

facilitating. Service marketers also face the problem of delivering their product
in the form and at the place and time their customer demands

•​ What are the channel flows?

The flow of physical goods and services, title, promotion, information

and payment along a channel of distribution.

3.4 channel levels marketing-

Channel level refers to the intermediary in marketing distribution channel

between the producer/manufacturer and the end consumer. Every channel level
plays a role in making the good available to the endconsumer. The number of
channel levels between the producer and consumer could be 0,1,2,3 or more.
3.5 Channel design-

Channel design is the strategic process that commercial organizations use to

balance resources across direct and indirect channels or routes to market. Direct
channels typically include field sellers and e-commerce platforms, while
indirect channels can include a mix of partners, distributors and marketplaces.

•​ What are the steps in channel design?

1.​ Recognizing the need for a channel design decision.

2.​ Setting and coordinating distribution objectives.
3.​ Specifying the distribution tasks.
4.​ Developing possible alternative channel structures.
5.​ Evaluating the variable affecting channel structure.
6.​ Choosing the “best” channel structure.
7.​ Selecting the channel members.

3.6 Analyzing customers desired service output level-

•​ What is service output level?

Service outputs are the productive outputs of the marketing channel that
consumers value and desire. By identifying the service outputs for each segment
of target buyers, the marketer can optimize the distribution strategy for each
major segment.
3.7 Establishing Objectives and Constraints-

Another factor in designing a marketing channel system is that marketers must

declare their channel objectives in terms of targeted service output levels. In
competitive conditions ,channel institutions should coordinate their functional
tasks to reduce total channel costs and still offer desired levels of service
outputs. Generally, planners can recognize several market segments that want
different service levels. Successful planning needs to determine which

3.8 & Identifying evaluating Major Channel alternative-

Other decisive factor in developing market channel is to recognize alternatives.

Companies may select array of channels to approach customers, each of which
has distinctive strengths as well as limitations. Each channel alternative is
explained by (i) the types of available intermediaries (ii) the number of
intermediaries needed; and (iii) the terms and responsibilities of each channel
member. Types of Intermediaries entails a firm needs to discover the types of
intermediaries available to run its channel work. Some inter merchants such as
wholesalers and retailers buy, take title to, and resell the products. Agents such
as brokers, manufacturers’ representatives, and sales agents chase customers
and may bargain on the producer’s behalf but do not take title to the
merchandise. Facilitators ,including transportation companies, independent
warehouses, banks, and advertising agencies, help in the distribution process but
neither take title to goods nor negotiate purchases or sales.

Identifying Major Channel Alternatives:-

Identifying Major Channel Alternatives Company Sales force:- Expend the

company’s direct sales force. Assign to contact all prospects in the area.
 •​ Company Sales force:- Expend the company’s direct sales force.
•​ Manufacture’s Agency:- Hire agencies in different regions sell the
equipment.
•​ Industrial Distributors:- Find distributors in the different regions who will
buy and carry device.
•​ How do you evaluate alternatives?

Evaluate alternatives by examining the benefits and drawbacks of each

alternative. During the evaluation of alternatives, careful consideration is given
to social, economic, and ecological factors that influence the predicted outcome.
Encourage discussion and use visual aids to help explain alternatives.

3.9 Channel Options-

A distribution channel is a chain of businesses or intermediaries through which
a good or service passes until it reaches the final buyer or the end consumer.

Introduction Channel-

1)​ Wholeselling –

The selling of merchandise to anyone other than a retail customer. The

merchandise may be sold to a retailer, a wholesaler, or to an enterprise that will
use it for business, rather than individual, purposes.

2)​ Retailing–

The selling of merchandise and certain services to consumers. It ordinarily

involves the selling of individual units or small lots to large numbers of
customers by a business set up for that specific purpose.

3)​ Franchising–

A franchise is a joint venture between a franchisor and a franchisee. The

franchisor is the original business. It sells the right to use its name and idea. The
franchisee buys this right to sell the franchisor’s goods or services under an
existing business model and trademark.

4)​ Direct Marketing–

Direct marketing is a promotional method that involves presenting

information about your company, product, or service to your target customer
without the use of an advertising middleman.
3.10 Introduction of omni channel and hybrid channel

1)​ Omni Channels –

A multichannel approach to sales that seeks to provide customers with a

seamless shopping experience

Examples :

An omni-channel retail experience will include brick-and-mortar stores,

app-based options, and online platforms. For instance, a clothing brand might
sell its products on its website, app, Instagram’s “Shopping” tab, and Amazon,
as well as brick-and-mortar stores.

2)​ Hybrid Channel –

Multichannel distribution system in which a single firm sets up two or more

marketing channels to reach one or more customer segments.

Examples

Brands that promote products online but don’t deliver them directly to
customers.

3.11 Marketing Logistics –

 Marketing logistics is the process of delivering the finished goods to the
intermediaries as well as customers. An efficient delivery system helps to
reduce the costs, improve customer service, and minimize time that finally
helps to gain customer loyalty.

1)​ Order Processing–

Communicates requirements to appropriate location through inventory

management. Start the physical distribution process

2)​ Warehousing –

A place where goods are stored till they are made available in the market place
when needed.

3)​ Inventory –

Ensures that right mix of products are available at right place /time in sufficient
quantity.
 CHAPTER 4
PROMOTION

1.​ What Is a Promotion?

4.1 meaning -
In terms of a career, promotion refers to advancing an employee's rank or
position in a hierarchical structure. In marketing, promotion refers to a different
sort of advancement. A sales promotion entails the features advertising or a
discounted price of a particular product or service.
[Link] is the role of marketing communication in marketing efforts?

Marketing communication helps move products, services, and ideas from

manufacturers to end users and builds and maintains relationships with
customers, prospects, and other important stakeholders in the company.
Advertising and sales promotion will continue to play important roles in
marketing communication mix.
i.​ [Link]
ii. [Link]

4.3 Communication mix elements?

Marketing communication helps move products, services, and ideas
from manufacturers to end users and builds and maintains relationships
with customers, prospects, and other important stakeholders in the
company. Advertising and sales promotion will continue to play important
roles in marketing communication mix.

A.​Introduction to Advertisement –

Advertisement (ad) is an efficient and effective technique to promote

goods, services, and ideas. It is a paid form of non-personal communication
wherein business information is made available for potential customers.
Types of advertising
●​ Newspaper. Newspaper advertising can promote your business to a wide range
of customers. ...
●​ Magazine. Advertising in a specialist magazine can reach your target market
quickly and easily. ...
●​ Radio. ...
●​ Television. ...
●​ Directories. ...
●​ Outdoor and transit. ...
●​ Direct mail, catalogues and leaflets. ...
●​ Online

B.​ Sales promotion

A sales promotion is a marketing strategy in which a business uses a

temporary campaign or offer to increase interest or demand in its product
or service. There are many reasons why a business may choose to use a sales
promotion (or 'promo'), but the primary reason is to boost sales.

Examples include contests, coupons, freebies, loss leaders, point of

purchase displays, premiums, prizes, product samples, and rebates. Sales
promotions can be directed at either the customer, sales staff, or distribution
channel members (such as retailers).

Types of Sales Promotion – 4 Important Types: Consumer Sales

Promotion, Dealer Promotion, Business Promotion and Public Relations.
 C.​Personal selling

Personal selling is also known as face-to-face selling in which one person who
is the salesman tries to convince the customer in buying a product. It is a
promotional method by which the salesperson uses his or her skills and abilities
in an attempt to make a sale.

D.​Public relations
PR involves communicating with your market to raise awareness of your
business, build and manage your business's reputation and cultivate
relationships with consumers. While marketing focuses on promoting actual
products and services, public relations focuses on promoting awareness,
attitudes and behaviour change.

E.​ Direct marketing

Direct marketing is a form of advertising that specifically targets a person or
company to generate new business, raise the profile of an organisation or
product, or make a sale. Direct mail, telemarketing and email marketing are all
popular types of direct marketing.
 4.4 Integrated marketing communication (IMC) –

Integrated marketing communication (IMC) can be defined as the process

used to unify marketing communication elements, such as public relations,
social media, audience analytics, business development principles, and
advertising, into a brand identity that remains consistent across distinct media
channels.

Concept of integrated marketing communication (imc)

[Link]

4.5 The development of effective marketing communications strategies

involves five steps:
●​ Identify the Target Audience.
●​ Determining the Communication Goals & Objectives.
●​ Designing a Compelling Message.
●​ Select Communications Channels.
●​ Feedback of communication Strategy.
 Developing effective communication

[Link]

A.​Communication process

The process of communication refers to the transmission or passage of

information or message from the sender through a selected channel to the
receiver overcoming barriers that affect its pace.
The process of communication is a cyclic one as it begins with the sender and
ends with the sender in the form of feedback.

B.​ Steps in Message Development

Key Steps in Message Development

●​ Review Data to Support Preparedness.
●​ Develop Message Maps.
●​ Review and Develop Messages.
●​ Link Messages to the SBCC Strategy.
●​ Link Messages to Materials.
●​ Pretest Messages and Materials.

4.6. Steps in developing effective marketing communication -

On the whole, effective communication plays a pivotal role in marketing. It
establishes and fosters relationships between employees and clients. With
proper communication, researching the market, targeting specific groups, and
understanding their needs has never been easier.

Step in communication developing effective market

I.[Link]

II.[Link]
A.​7 Ways to Determine Your Target Audience
1.​ Analyze Your Customer Base and Carry Out Client Interviews.
2.​ Conduct Market Research and Identify Industry Trends.
3.​ Analyze Competitors. ...
4.​ Create Personas. ...
5.​ Define Who Your Target Audience Isn't.
6.​ Continuously Revise. ...
7.​ Use Google Analytics.

What are the objectives of communication?

B.​ Objectives of Communication

●​ 1) Building Awareness.
●​ 2) Providing Information or Educating.
●​ 3) Creating Interest.
●​ 4) Motivating People/Audiences.
●​ 5) Promoting the brand, product or service.
●​ 6) Organizing Resources.
●​ 7) Offering better Coordination.
●​ 8) Increasing Efficiency.

C.​5 Steps to Creating Your Marketing Message

STEP 1 – Identify your target market.

The first step starts out by asking, “Who is my target market?” Once you have
narrowed this down then it’s easier to craft a message to that market.
Every successful business has a target market whether they know it or not. Even
the local dry cleaner has a target market, which is probably all the professional
people living within a five mile radius of their store.

STEP 2 – Identify the problems that your target market experiences.

The second step starts by asking, “What problems do my target market have and
how does it make them feel?”
 Each market experiences its frustrations and pains. The secret to crafting a
marketing message that will make your market sit up and listen is to identify
their problem and the pain and suffering they feel as a result of that problem.
Remember the old saying that goes, “People don’t care about you, until they
know you care.” Identifying your market’s pain and suffering tells them that you
understand and empathize with them.

STEP 3 – Present your solution to your market’s problem.

The third step starts by asking, “What is the solution that I have to offer my
prospect?
Present your solution as a simple cure for all the pain and suffering your market
is feeling as a result of their problem. This step is important in that most people
won’t lift a finger unless they feel an urgent excruciating pain.
Now, identify all the benefits of your solution and how those benefits will
improve the life of your prospect and take away all their pain and anguish.

STEP 4 – Present the results you’ve produced for other people in the same
situation.
The fourth step starts by asking, “What are the results that my solution has
produced?”
It’s not enough just to tell people you have a solution; you have to prove to them
that your solution works. And you can talk all day about how you solved this
and that problem, but people are skeptical and don’t automatically believe you.
People will believe other people who are similar to them that have achieved
positive results. In this step you’ll need to prove your results by giving
testimonials from current and former customers and provide case studies of
actual problems that were solved and the results that were achieved.

STEP 5 – Explain what makes you different from your competitors.

The fifth step starts by asking, “How am I different from my competitors?”
You need to communicate your differences!
●​ Prospects are looking for you to communicate your differences.
And those differences need to have perceived value to the prospect.
It needs to be something they care about.

D.​Choosing media for Advertising/promotion-

Putting together a media plan begins with getting the lay of the land, so you can
begin to weed out the strategies that aren’t a good fit and identify those that are.
Here’s the minimum you need to know about each of the major tactical
categories to make an educated evaluation.

Traditional public relations

Effectively implementing this tactic usually requires hiring a professional PR or

marketing firm that knows whom to contact in, and how to pitch to, the media.
The tactics associated with traditional PR center on you being interviewed in the
following places.

Radio. There are three types of radio: traditional AM/FM, internet and satellite.
Many PR professionals still consider traditional AM/FM and satellite radio
interviews to be of the highest value when it comes to brand building. One
reason is that the barrier to entry is significantly higher (Busy producers, who
are pitched potential guests all day long, say yes only to interviewees who meet
a certain level of professional achievement or expertise).

Mainstream TV. Often considered the big dog of public relations, landing a
spot as a guest on a national TV show (CNN, Fox News, MSNBC etc.) is a win
for any brand. Just be aware that the competition for placement on top networks
and popular shows is fierce, and more often than not, it requires using the
services (and paying the costs) of a PR professional. Since virtually every
national show requires video proof of a guest’s TV worthiness, it’s a good idea
to start by getting booked on local news and morning shows in your area and
working your way up.

Newspapers and Magazines.

Blogs and Online Publications. Top interview venues used to be the purview
of big glossy magazines and top-ten newspapers. Today, top blogs (The
Huffington Post, Mash able, Tech Crunch etc.) and online publications
([Link], [Link] etc.) carry just as much prestige.
Advantages of being covered by an online site include:
Publishing

In my experience, one of the most effective tactics for building brand and buzz
is publishing. One advantage to this strategy is that for online pieces, you can
include searchable keywords and get links back to your site. Here are some key
tactics:

Blogging. I’m totally biased toward blogging as a strategy for building a brand
-- it’s one of the major ways I’ve seen brands built and people and businesses
position themselves as thought leaders. Some people write exclusively for their
own blogs, while others write primarily for other sites to establish their thought
or industry leadership. Either strategy can work. The keys are quality, keyword
relevance, timeliness and consistency of posting.

Writing a Book. One of the best tactics for building your personal and business
brand is writing a book.

Writing Articles. Having articles published in trade publications and national

newspapers and magazines can add greatly to your credibility, but placing your
articles can take significant effort. Editors are swamped with writers wanting to
place stories, and most require a detailed query before inviting a writer to
submit a piece.

Newsletters. Penning a regular email newsletter (once a month or quarter) is an

effective way to stay front and center with your current audience and attract new
fans. Many businesses offer a sign-up for their newsletter on their website, often
in exchange for a free downloadable gift such as a podcast, webinar, ebook or
other content. Some common traits of effective newsletters include:
Speaking

The powerful thing about speaking as a tactic is that it puts you in front of a
large audience where you’re already positioned as the expert. There’s nothing
like talking about your topic to a room full of potential clients to elevate your
credibility. While I still believe that “live” speaking has an edge over online,
both are popular ways to build your brand.

Presenting at Conferences. This can include giving a keynote speech, offering

a session breakout or being a panelist. Regardless, presenting at a conference is
the Good Housekeeping seal of approval from that organization to your personal
or business brand.

Conducting Live Workshops or Seminars. If you choose to put on your own

seminars, all the work to make it happen falls on your shoulders. Alternatively,
associations, universities and other networking groups often sponsor workshops
for their members’ benefit. The advantage is that they then do the planning,
marketing and organizing. All you have to do is show up and be brilliant.

Webinars and Videocasting. One advantage of using the webinar or

videocasting tactic is that anyone with a computer, tablet or mobile phone has
access to your brand. In addition, with today’s desktop technologies, producing
a webinar is relatively inexpensive.

Podcasting. According to a 2015 report from Libsyn, of their 2.6 billion

podcast downloads in 2014, 63 percent were requested from mobile devices. In
part because of its accessibility, podcasting is fast becoming a favorite tactic of
brand builders everywhere.
The bar for entry into podcasting is low. With an investment of a few hundred
dollars, anyone can set up a virtual recording studio in their home office (or at
their kitchen table) and begin broadcasting their brand message.

Networking

Despite the highly touted benefits of online connection, I still believe in the
power of face-to-face networking. Tactics include:

Referral marketing is a type of word-of-mouth marketing where clients and

customers share about your brand with others in their network; you can also
proactively ask your clients to provide an introduction to potential clients.
Networking groups, such as Young Presidents’ Organization, Vestige, and
Entrepreneurs’ Organization, are made up of individuals who regularly attend
meetings to offer camaraderie, encouragement and education to each other.
These groups often invite guest speakers to come in and make a presentation.
Besides this one-off visitation, your personal and business brand can be greatly
enhanced by being an active member.
Social media

Social media is such a critical part of today’s marketing and branding landscape
that almost every personal or business brand must include it as part of their
overall strategy. The key is to focus on one channel (two or three at most) that
caters to the audience that’s best for you and then work that vertical consistently
-- and deeply. This can involve posting content, placing ads, active outreach and
more. There are hundreds of social media sites, but the 11 most popular are:

1. Facebook
 2. Twitter

3. LinkedIn

4. Pinterest

5. Tumblr

6. Instagram

7. YouTube

E.​ Selecting massage source-

The "source" is the sender of the message – in other words, you! And
the "message" refers to the information and ideas that you want to deliver.
You need to be clear about what message you want to communicate, and
why it's important

There are three main categories of message source attributes: credibility,

attractiveness and power. The source of your advertising messages can
be a paid spokesperson/celebrity, customers or the owner/ employees; the
decision should be based on the attribute you want them to portray.

Is your brand credible, attractive or powerful?

Now that you have researched your target audience, created your brand position
and chosen your media vehicles, it is time for the fun part of advertising:
 creating your message. While there are several elements to great creative
strategy that I will discuss in upcoming articles, this one focuses on message
source. The choice of your message source is important because it determines
how consumers will relate with your brand. There are three main categories of
message source attributes: credibility, attractiveness and power. The source of
your advertising messages can be a paid spokesperson/celebrity, customers or
the owner/ employees; the decision should be based on the attribute you want
them to portray.
The outcome or goal of source credibility is internalization. This strategy
utilizes trust, expertise, believability and honesty so that consumers adopt the
position in the message as their own. In other words, they internalize it.
Consumers will not internalize a message they do not believe to be true or from
a credible source. Lawrence Photo and Video is a great example of a local
business that uses its their messaging to establish credibility; even their logo has
"Since 1888" included in it. Mentioning the combined years of experience
among their employees, being the largest in the region and how long they have
been in business all serve the purpose of legitimizing their brand position as the
most knowledgeable in the category.

F.​ Collecting Customer Feedback-

 The best ways to collect customer feedback
1.​ Long form-based surveys. Customer feedback surveys are the most common
way of completing the feedback loop. ...
2.​ Short in-app surveys. ...
3.​ Customer Satisfaction Score Surveys. ...
4.​ Website feedback widgets. ...
5.​ Customer Interviews. ...
6.​ Transactional emails. ...
7.​ Suggestion boards.
What is Customer Feedback?

Customer feedback is information provided by customers about their experience

with a product or service. Collecting customer feedback can help product,
customer success, customer support, and marketing teams understand where
there is room for improvement. Feedback can be collected proactively by
polling and surveying customers, interviewing them, asking for reviews, or
implementing the right tools that collect implicit feedback.

The pertinent question now is: how do you utilize these channels to actually
learn from the feedback? Before you establish the viability of a channel, it is
crucial to develop a clear picture of WHY you are collecting feedback.

4.7 Why should you gather customer feedback?

Simply put, you cannot succeed without listening to your customers. How do
you know if what you are doing is right or wrong? How do you know the way
your customers are reacting? Customer feedback is the guiding light for your
company.

It not just helps improve your product, but impacts every part of your business.
Be it marketing, sales, or customer service, customer feedback helps you
understand what your customers truly like and dislike. Being close to your
customers will set you on a growth trajectory that you haven’t experienced
before.

But remember, there is no one-size-fits-all tactic to gain information from your

users. Different situations require different methods of collecting customer
feedback. For example, a survey form sent to an already disgruntled user will
only make matters worse; a phone call works better here.

4.8 Shaping the overall Promotion Mix

concept of integrated marketing communications suggests that the company

must blend the promotion tools carefully into a coordinated promotion mix. But
how does the company determine what mix of promotion tools it will use?
Companies within the same industry differ greatly in the design of their
promotion mixes. For example, Mary Kay Cosmetics spends most of its
promotion funds on personal selling and direct marketing, whereas competitor
CoverGirl spends heavily on consumer advertising. We now look at factors that
influence the marketer's choice of promotion tools.

4.9 Pull-Push Strategies :-

push strategy :-

A promotion strategy that calls for using the sales force and trade
promotion to push the product through channels. The producer promotes the
product to channel members who in turn promote it to final consumers.

Pull strategy:-

A promotion strategy that calls for spending a lot on advertising

and consumer promotion to induce final consumers to buy the product, creating
a demand vacuum that "pulls" the product through the channel. afterthought. Yet
a well-thought-out public relations campaign used with other promotion mix
elements can be very effective and economical.

Direct Marketing.

Although there are many forms of direct marketing—direct mail and catalogs,
telephone marketing, online marketing, and others—they all share four
distinctive characteristics. Direct marketing is less public: The message is
normally directed to a specific person. Direct marketing is immediate and
customized: Messages can be prepared very quickly and can be tailored to
appeal to specific consumers. Finally, direct marketing is interactive: It allows a
dialogue between the marketing team and the consumer, and messages can be
altered depending on the consumer's response. Thus, direct marketing is well
suited to highly targeted marketing efforts and to building one-to-one customer
relationships
[Link]
Promotional Mix Strategy-

The marketing mix in marketing strategy: Product, price, place and promotion.
The marketing mix is the set of controllable, tactical marketing tools that a
company uses to produce a desired response from its target market. It
consists of everything that a company can do to influence demand for its
product.

4.6 Promotional mix strategy=

1)[Link]

2)[Link]
 Chapter 5

PRODUCT LEVEL PLANNING

​
5.1 Preparation & Evaluation of a Product Level Marketing Plan-

​ What is a Marketing Plan?

A marketing plan is a document that lays out the marketing efforts of a business
in an upcoming period, which is usually a year. It outlines the marketing
strategy, promotional, and advertising activities planned for the period.
[Link]

[Link]

Structure of a Marketing Plan :

[Link]
Nature and contents of Marketing plan-

Executive Summary

The executive summary is the opening section of the marketing plan. It

presents a summary of the main goals and recommendations to be
presented in the plan.

The executive summary helps top management to locate the plan’s

major points quickly. A table of contents should follow the executive
summary.
Situation analysis:

This section presents relevant background data on sales, costs, the market,
competitors, and the various forces in the macro environment. How is the
market defined, how big is it, and how fast is it growing? What are the
relevant trends affecting the market? What is the product offering and what
are the critical issues facing the company? Pertinent historical information
can be included to provide context. All this information is used to carry out a
SWOT analysis.

Marketing strategy:

Here the product manager defines the mission and marketing and financial
objectives. The manager also defines those groups and needs that the market
offerings are intended to satisfy. The manager thus establishes the product
line’s competitive positioning, which will inform the “game plan�
to accomplish the plan’s objectives. All this is done with inputs from
other organizational areas, such as purchasing, manufacturing, sales, finance,
and human resources, to ensure that the company can provide proper support
for effective implementation. The marketing strategy should be specific
about the branding strategy and customer strategy that will be employed.

Financial Projections:

Financial projections include a sales forecast, an expense forecast, and a

break-even analysis. On the revenue side, the projections show the forecasted
sales volume by month and product category. On the expense side, the
projections show the expected costs of marketing, broken down into finer
categories. The break-even analysis shows how many units must be sold
monthly to offset the monthly fixed costs and average per-unit variable costs.

Implementation Controls:

The last section of the marketing plan outlines the controls for monitoring
and adjusting implementation of the plan. Typically, the goals and budget are
spelled out for each month or quarter so management can review each
period’s results and take corrective action as needed.
2)Marketing Evaluating and Controlling

[Link]

Marketing is a complex activity. It involves many options, it requires

coordination among many functions and tasks, and it must respond to changes
in customers and competitors. These factors make planning difficult and often
make the achievement of a marketing strategy or program even more
problematic. Without good control and evaluation procedures, even the best
marketing effort could produce unexpected and often undesirable results.

Meanings and Purposes of Control and Evaluation

The terms control and evaluation are often used with the same meaning, but
they can be distinguished. Control is “the feedback process that helps the
manager learn (1) how ongoing plans are working and (2) how to plan for the
future”.

Control means keeping on target. Control occurs while an activity or project is

in progress, and managers are informed immediately when any significant
deviation from objectives is detected or even suspected so that corrective action
can be taken.

Evaluation involves reviewing the results from a program or activity to

determine how well-intended objectives were achieved.

Evaluation is sometimes considered more diagnostic than control because

evaluation attempts to explain the reasons for results. But in a practical sense,
control and evaluation are closely related and often hard to separate since they
aim to better performance.

The essence of evaluation is obtaining relevant information for gauging

performance. Marketing executives are continually monitoring performance,
and often they must revise their strategies to cope with changing conditions.

To ensure the marketing program’s effective operation, some form of program

evaluation needs to be conducted periodically. Marketers cannot afford to leave
their performance to chance since the company’s very survival may depend on
the program’s success or failure.
Process/Steps Taken in Establishing an Evaluation Program

The major steps that must be taken in establishing an evaluation program are
discussed below:

To compare actual performance with performance standards, marketing

managers must know what marketers within the company are doing and have
information about external organizations’ activities that provide the firm with
marketing assistance.

Information is required about marketing personnel’s activities at the operations

level and various marketing management levels.

Most businesses obtain marketing assistance from external individuals or

organizations, such as advertising agencies, intermediaries, marketing research
firms, and consultants.

To acquire the most benefit from external sources, a marketing control process
must monitor their activities. Although it may be difficult to obtain the
necessary information, it is impossible to measure actual performance.

Records of actual performance are compared with performance standards to

determine whether and how much discrepancy exists. For example, a
salesperson’s actual sales are compared with their sales quota to determine how
much difference exists.

If a significant negative discrepancy exists, the marketing manager takes

corrective action. In some organizations, electronic data processing equipment
enhances a marketing manager’s ability to evaluate actual performance.
Marketing Control Process – Controlling Marketing Activity

To achieve marketing objectives and general organizational objectives,

marketing managers must control marketing activities effectively.

The marketing control process consists of establishing performance standards,

evaluating actual performance by comparing it with established standards and
reducing the differences between desired and actual performance.

No management process can be completed without control. Marketing control,

you know, is the process of evaluating achieved results against established
standards and of taking corrective action to exploit opportunities or solve
problems.

Planning and controlling are closely interrelated because plans include

statements about what to be accomplished.

For purposes of control, these statements function as performance standards. A

performance standard is an expected level of performance against which actual
performance can be compared.

Examples of performance standards might be reducing customers’ complaints

by 50 percent, a monthly sales quota of $100,000, or a 20 percent increase per
month in new customer accounts.

The Control Process

The control process involves evaluating results against objectives. Although this
stage of the process is crucial, it tells us if we have met, exceeded, or fallen
short of objectives. Perhaps the most creative aspect of control involves
establishing why those results were achieved and what we should do in response
– in other words, what, if any, corrective action should we take.

For example, suppose that Mr. Ali, the marketing manager for a division of a
pharmaceutical company, has established a sales objective of $5 million for the
year. The first quarter’s goal was $1.5 million, but the results reported by the
accounting department show sales of only $1 million.

Therefore, Mr. Ali will have to take a hard look at the planning process’s
assumptions and how the marketing plan has been implemented.

He will look for data on total industry sales compared with those forecast by the
pharmaceutical industry. He will reevaluate the company’s plan to add
salespeople and probably a dozen other marketing plan aspects.

The results of all this effort may lead Mr. Ali and other executives to the
conclusion that environmental factors have depressed the industry and that the
original objective of $5 million is no longer realistic. If that is the case, they
may revise the planned objectives accordingly.

However, their study may reveal that the industry is doing well and that the
problem is more specific to their firm. Perhaps the sales department has failed to
add salespeople as planned and, in fact, has failed to replace some who have
quit or retired.

In this case, a midcourse correction might be in order. The firm may wish to hire
a new sales manager who will be more successful at replacing personnel. Still, a
third conclusion may be reached.

The original marketing plan may be found to be valid. The $0.5 million
shortfalls in sales may be simply a technical problem. Clearly, these are
essential parts of the control process. Managers must not only measure the
results but also decide what to do about them.
Annual product plan:

The purpose of the annual product marketing plan is to provide top

management with a concise marketing and financial summary of objectives
and strategies along with the requirements to achieve the objectives.

Profitability control
Profitability control and efficiency control allow a company to closely monitor
its sales, profits, and expenditures. Profitability control demonstrates the
relative profit-earning capacity of a company's different products and consumer
groups.

[Link]
​

Strategic control:-

Strategic product planning is the process of defining how you will achieve
your vision. By working backward from your desired end state, you can set
goals and initiatives to guide your strategy and a timeline to achieve them. That
timeline is often referred to as a product roadmap.
Why is strategic planning important?

The goal of any product is to generate value for your customers and in turn,
drive meaningful results for the business. So it is essential to have a unified plan
that ties company objectives to the product-level work. For example, if your
company has a goal to grow sales in Europe by 20 percent, you might bring that
to the product level by expanding the languages that you support.
With the right strategic plan, you can identify business opportunities and make
the right investment decisions. Your team is focused on the work that will best
help your company achieve its goals and everyone is aligned around the "why"
behind it. The outcome is a product or portfolio that better meets your
customers' needs and maximizes value for the business.
[Link]

Marketing Audit:

A marketing audit is a full exploration and analysis of the entire marketing

environment of a business, assessing everything from strategies and targets
to specific marketing activities.
the 3 elements of marketing audit?
Conclusion. Marketing Audit is an organization's performance in the market that
depends on three factors, i.e., market position, the organization's outside
opportunities and threats related to its business environment and the way
the organization is coping with its internal strengths and weaknesses.

THE END