Chapter No.

Product

1
 Chapter Tour
Meaning, The Role of Product as a market offering, Goods & Services
Continuum, Classification of consumer products- convenience,
shopping, shopping, unsought goods. Classification of industrial
products- materials and parts, capital items, supplies and services.
The Product Hierarchy, Product Systems and Mixes, Product Line
Analysis, Product Line Length, The Customer Value Hierarchy.

New Product Development Need, Booz Allen &

- Hamilton New
Classification Process
Development Scheme for Generation
- Idea Products,
to commercialization.
New
Product
Branding: Concept, Definition, Commodity Vs.
Brand, Product Vs
Brand, Concept of Brand equity.
2
Marketing mix

According to Stanton marketing mix is a combination of

four elements (4Ps)Product, Pricing structure, Physical
distribution system, and Promotional activities used to satisfy
the needs of an organization’s target market (s)and, at the same
time, achieve its marketing objectives

The 'marketing mix' is of controllable,

marketing a set tactical company's
tools that work to achieve
objectives together
Marketing-mix is the marketing manager's instrument for
the attainment of marketing goals.

3
Marketing mix

Marketing mix is a set of marketing variables that the firm

uses to pursue its marketing objectives in the target market.

E.Jerome McCarthy classified these

variables ,which he called the four Ps of Marketing.

PRODUCT
PRICE PLACE
PROMOTION

4
Marketing Mix

Marketing
Mix

Target

Product Market
Product Variety
Quality Promotion
Design
Feature
Brand Name
Place Advt.

Packaging
Price Sales Promotion
Sales Force
Channels
Sizes Coverage Direct marketing
Services List price Assortment Public Relation
Warranties Discount Location
Return Allowances Inventory
Payment Period Transport
Credit Terms
5
6
Product

7
Product

A Product is a set of or a bundle of Attributes , Benefits

& Value.

A Product is Anything that can be offered to a market

for attention, acquisition, use or consumption that might satisfy
a want or a need
e.g. Car, Mobile, Computer, Washing Powder & etc.

Anything that can be offered to Satisfy a need or want of

end user.

A product is not necessarily an object; it can also be a

scheme, an exchange offer, a holiday trip or even an idea. All
8
these things can be referred to as products.
 PERSONS PROPERTIES
GOODS

ORGANISATIONS
SERVICES
MARKETING

INFORMATION
EXPERIENCES

PLACES IDEAS
EVENTS
9
Five Product Levels

Potential product – all possible

Augmented product – fresh flowers
Expected product – clean bed
Basic product – hotel room
Core benefit - Sleep

10
Types or Stages of Product Development
1. Core Product :-
Fundamental Need or a Basic Need
e.g. Hotel Room booking – Rest & Sleep

2. Generic Product :-
Basic Version of Product
e.g Building with rooms & rent

3. Expected Product :-
Set of attributes & Conditions that a buyer normally
expect & agree to when they purchase a Product .
e.g. Clean bed, Soap, Towel, Telephone.

4. Augmented Product :-
Additional Service, more than expectation
e.g. TV set, Fresh flowers, e-Payment Facility & etc.

5. Potential Product :- All 11

Possible
12
13
14
15
16
17
18
Goods & Services
•Goods would be defined as anything that have physical
dimensions can be offered to market to satisfy anyone wants or
needs.
e.g. Electronics goods, grocery products, soaps etc..

•Services are activities, benefits or satisfactions which are offered

for Sale or provided in connection with sale of goods. Services are
human efforts which provide succor to needy.
• e.g. Medical service to ailing person, education
to student, transportation, insurance, lawyer etc….

19
 Goods Services

1.Goods are tangible in 1.Services are intangible in

nature Can be seen, touch & nature Can’t be seen, felt or
tasted & having physical touch
dimensions
Eg. Transportation ,insurance etc..
Eg. Furniture, mobile, fans etc…

2.Goods produced 2.Whereas services sold

sold consumed Produced consumed

3.Ownership is transferred 3.Ownership is not transferred from

from Seller to buyer One person to another in
services
4. Goods can be inventoried or
Stored 4. Services cannot be inventoried
or
5. Quality of goods can be stored
measured easily. of services 20

5. It is difficult to measure quality

 Goods Services
6.In case of goods production 6.Services are produced and
And consumption are separate consumed at same time

7. Needs low customer 7. Needs high customer

interaction interaction

8.Goods does not disappeared

8.Services frequently disappears
can be consumed later
if not utilized at time…
9. Goods may not knowledge
9. Services are knowledge based
based
eg. Doctors service, lawyer…
10. Consistent product
10. Inconsistent product
definition unchanged with
definition
time… 11. Service provider, not
11. Goods are transportable product often transportable
12. Reselling of services unusual
12. Goods can be resold
13. Small area of operations 21

13. Large area of operations

Marketing Mix (4p’s) Product

Product Decisions

Branding Quality Features

Benefits offered

We must remember that Marketing is fundamentally about

providing the correct bundle of benefits to the end user, hence the
saying ‘Marketing is not about providing products or services it is
essentially about providing changing benefits to the changing needs
and demands of the customer’
22
 Produc
t
• The product is at the core of the marketing strategy.
• Products refer to more than tangible goods and are
usually some combination of goods, services, ideas, and
even people.
• Products in and of themselves are of little value.
– The real value a product provides is derived from its ability to
deliver benefits that enhance the buyer's situation.

• Organizations that keep their sights set on developing

products, systems, and processes that identify and meet
needs of the target market are more likely to be
successful.

Anything can be marketed as a products, be it a place

, an idea ,an event ,a cause or even a person ;but it
becomes a product
solution to only
a problem or when
need .it is stated as a
23
24
⮚ Quality :- Best quality

⮚ Size :-Depend upon area wise or market

e.g.-Pack of biscuits

⮚Varity :-to cover major market there should be variants in

product
e.g.-Fords car is available in black colour only

⮚Features :- customers prefer products cover

which maximum features
e.g. mobile phone

25
⮚ Packaging :-Attract the customers

⮚ Brand Name :-Products can be sold by itself

e.g. Woodland ,Nike Cadbury

⮚Warrant :-Has effect on customer ,but not necessary it attract

the customer
e.g.-electronic item

⮚After sale service :-this also has effect but does not attract
customer.

⮚ Design :-Product styles attract customer

e.g.-soap in animals shape are used to attract
children 26
 Product Classifications
1. Consumer-goods classification.
Convenience goods that are usually purchased frequently, immediately,
and with a minimum of effort, such as newspapers.

Shopping goods that the customer, in the process of selection and

purchase, characteristically compares on the basis of suitability, quality,
price, and style, such as furniture;

Specialty goods with unique characteristics or brand identification,

such as cars, for which a sufficient number of buyers are willing to make a
special Purchasing effort

Unsought goods that consumers do not know about or do not normally

think of buying, such as smoke detectors, funeral services and life
insurance .
Product Classifications

2. Industrial-goods classification

• Raw material: Farm products & natural

goods
• Manufactured Items: Assembly’s, components/parts,

• Capital Items: Machinery, Equipments

• Tools, Consumables etc.

• Industrial Services: AMC’s, Business advisory services

28
 Product Mix

A product mix (also called product assortment) is the

set of all products and items that a particular seller offers.

A product mix consists of various product lines.

A product line is a group of products that are closely

related, because they function in a similar manner, are sold
to the same customer groups, are marketed through the
same types of outlets, or fall within given price ranges.

29
 Product Mix

Width – Number of different product lines offered

Length – Number of products offered within a

particular product line.

Product Line Depth – Number of versions offered of

each product in the line.

Consistency – how closely related the various

product lines are in end use, production requirement,
distribution channel.
30
 Width
Hair Oils Shampoo Oral Care Baby & Skin Health
care Supplement
Dabur Amla Dabur Vatika Dabur Red Dabur s
Dabur
L Hair Oil Shampoo Ayurvedic Chyawanpras
e Toothpaste Baby h
care
Vatika Hair Babool Gulabari Skin Dabur Honey
n Oil Toothpaste Care
Dabur Anmol Promise Herbal & Dabur
g Medicated Glucose
t Soaps

Meswak
h
Dabur India Ltd. 31
32
Customer Value Hierarchy
 New Product Development

What does mean by NPD….????

When any organisation develops a new concept in it’s product

category which leads towards innovation which was not done
in past & which may lead towards excellence, achieving more
market share, high sales volume, customer satisfaction & etc.
How the New Product Development is Done ???

Booz, Allen &Hamilton Classification Scheme for New Products

1. New to the world

2. New Product Lines

3. Additions to existing Product lines

4. Improvement in Revisions to existing Product

5. Repositioning

6. Cost Reduction
How the New Product Development is Done ???

Booz, Allen &Hamilton Classification Scheme for New Products

1. New to the world

New products that creates an entirely
new market
e.g. Mobile, PC, DVD & etc…
2. New Product Lines
New Products that a company to
allow established market for enter an
the
e.g. firstSamsung
time. & Sony enter into Mobile
manufacturing process.

3. Additions to existing Product lines

New product that supplement a
company’s established product lines (additions in Package,
How the New Product Development is Done ???

4. Improvement in Revisions to existing Product

New Product that Provides improved
performance or greater perceived value & replace
existing products
e.g. Microsoft Windows, Hero-Honda CBZ
Splendor & etc.

5. Repositioning
Reaching the minds of cosumers with enhanced
performance & product offer. Existing Products that are
targeted to new market or market segment
TOI – Launching in new cities, Nokia launched in India.

6. Cost Reduction
New Products that provide similar performance at lower
Why an Organisation thinks about New Product
Development
Reasons for New Product Development

1. To enter into Business.

2. To Cope up with Changing Demand & customer Habits.
3. To earn higher profit that Old Product.
4. Repositioning Organisation Brand.
5. To stay ahead of competitors.
6. To Increase Product Depth
7. To Increase sales volume & market Share.
The Process of NPD OR Steps involved in NPD

1. Ideas Generation P

2. Ideas Screening R

3. Concept Development & Testing

O
4. Business Analysis
C
5. Product Development
E
6. Test Marketing

7. Commercialisation S
 Branding

Branding: Concept, Definition, CommodRity Vs.

Brand, Product Vs Brand, Concept of BOrand

equity.
 Branding

Brand: A Brand is a Name, Sign, Symbol, term, design or combination of them

which is intended to identify the goods services of a seller or group of
sellers and to differentiate them from those of competitors.
Philip Kotler

Brands matter because they are:

• Drivers of Growth

• Promise of value

• Meets expectation

• Differentiation strategy

• Supports awareness & promotion

• Connects on emotional level

 Branding

Branding Challenges:
• Intelligent & educated customers
• Growth of private labels
• Brand proliferation (expanding)
• Increasing Trade Power
• Media Fragmentation (Disintegration)
• Increasing cost of Product
• Increasing Job Turnover

Branding Opportunities:
• Define the Brand
• Strong social media connect
• Blogging for branding
• Customer service as a priority
 Branding

Discussion

Commodity Vs Brand

Product Vs Brand
 Branding

Brand Equity:

Brand equity is a concept that describes a brand’s value. That value is

determined by consumer perception of and experiences with the brand. If
people think highly of a brand, it has positive brand equity (Apple, TATA
Auto).

When a brand consistently under-delivers and disappoints to the point

where people recommend that others avoid it, it has negative brand equity
(Goldman Sachs, Toyota, Nano).
 Branding

Developing Brand Equity:

• Awareness – The brand is introduced to its target audience – often with
advertising – in a way that gets it noticed.
• Recognition – Customers become familiar with the brand and recognize it
in a store or elsewhere.
• Trial – Now that they recognize the brand and know what it is or stands
for, they try it.
• Preference – When the consumer has a good experience with the brand, it
becomes the preferred choice.
• Loyalty – After a series of good brand experiences, users not only
recommend it to others, it becomes the only one they will buy and use in
that category. They think so highly of it that any product associated with
the brand benefits from its positive glow.
Thank you

46
Unit No. 2

Price
 Chapter Tour
Meaning, The Role of Pricing, Importance and Factors
influencing pricing decisions.

Setting the Price: Setting pricing objectives, Determining

demand, Estimating costs, Analyzing competitors’ pricing,
Selecting pricing method, selecting final price.

Adapting the Price: Geographical pricing, Price discounts &

allowances, Promotional pricing, Differentiated pricing,
concept of transfer pricing, Dynamic pricing (surge pricing,
auction pricing), Pricing in online marketing (free, premium,
freemium).

Price Change: Initiating & responding to price changes.

 Price
Economist :-
• “Price is the exchange value of a product or service
always express in Money”

• “Price is what is charged for ‘something’. That something

is generally value of the product attributes or utility value
of the product or service.”

• Price is the amount of money & or other items with

utility needed to acquire a product
Thus price may involve more than money.
Price
• Price is the combination of the specific goods or service that is
the object of transaction, Several supplementary services
(Warranty, after sales service), & In a very real sense, the want
satisfying benefit provided by the product.
e.g. A table @ Rs. 2000 & 3000

For Consumer :-
• “Price is a package of expectation & satisfaction”
• “Bundle of expectation or satisfaction”
Physical Product + other attributes such as delivery,
installation, credit, return privilege, after sales servicing & so on…

For Seller :-
• “Price is a source of revenue and a main determinant of profit”
Price is the important factor in all Marketing
Mix because this is the only one way of
Revenue in term of money or profit rest are
the Expenditure element.
Pricing Objectives

1. Survival

2. Maximum Current Profit

3. Maximum Market share

4. Maximum Market Skimming

5. Product Quality Leadership

6. Predetermined Profit Level

7. Meet or Follow competition

Pricing Objectives
1. Survival
when company is facing
* Overcapacity
* Intense competition
* Changing consumer wants
* Price = Variable cost + some fixed cost

2. Maximum Current Profit

Estimating the demand & cost associated with alternative prices
& choose the price that produces maximum current profits, cash
flow, or rate of ROI.

Difficult to estimate the demand & the cost exactly

Company just thinks about a Short term profit but may be harmful in
long-run.
Pricing Objectives

3. Maximum Market share

Higher Market share will lead to lower unit cost and
higher long-run profit
Setting the lower price assuming that the market is
price sensitive

4. Maximum Market Skimming

Charging very high price in launching or initial phase of the
product in the market then pries are slowly lowered over time.
e.g. When Sony introduced the world’s first High
Definition Television (HDTV) to the Japanese market in 1990 it
was prices at $43000 so that Sony can “skim” the maximum
amount of revenue.
price dropped steadily through the years, a 28-inch HDTV cost just
over $6000 in 1993 & 42-inch HDTV cost about $ 1200 in 2004
21”,Wega base model Rs.18,990/- in 2001 & Rs. 12990/- in 2004-05
Pricing Objectives

5. Product Quality Leadership

The perception of sum customers are like
High Price – high Quality
e.g. Mercedes

6. Predetermined Profit Level

Mgmt Profit forecasting

7. Meet or Follow competition

Importance of Price

In the ECONOMY
Wages
Rent
Interest
Profits
Importance of Price

In the Customers mind

Some customer prefer low price and
Some are more concerned about other factors
Such as Service, Quality, Value, & brand Image

segment of Shoppers (buyer)

Brand Loyal
Relatively uninterested in price
System beater
Prefer certain brands but try to buy them at reduced prices.
Deal Shopper
Driven by low price
Uninvolved
Seemingly not motivated by either brand preference or low prices
Importance of Price

In the Individual Firm

⮚ Revenue & Profit
In a study of 1000 companies it is found that a 1% increase in price
would improve profits by 7%, assuming no change in sales valume

⮚ Maintain Competitive Position

⮚ Market Share & demand

Setting the Price – Step I

1. Selecting Objective
Survival
Maximum Current Price
Maximum Market Share
Maximum Market Skimming
Product- Quality Leadership
Other Objective
 Seating the Price – Step II
2. Determining Demand
Low of Demand
Following factors should be considered

1. Price Sensitivity of consumer

Frequently Buying product – More sensitive
Infrequently Buying product – less sensitive
They are also less sensitive when price is only small part of the total cost
of obtaining, Operating & servicing the product over it’s lifetime
Brand Loyal
Relatively uninterested in price
System beater
Prefer certain brands but try to buy them at reduced prices.
Deal Shopper
Driven by low price
Uninvolved
Seemingly not motivated by either brand preference or low prices
 Seating the Price – Step II
2. Determining Demand
2. Estimating Demand Curves

Statistical Analysis
Past Prices
Quantities sold
Other Factors

Price Experiments
Charging Different Price in Similar Territories
Selling the Goods Through Discount Stores

Surveys
Consumers Habit
Market Demand & supply
 Seating the Price – Step II
2. Determining Demand
3. Price Elasticity Of demand
Elastic Demand
When Demand changes with the changes in the price
Inelastic Demand
When Demand hardly changes with the changes in the price

Demand Is likely to be Elastic under Following condition

No substitutes or competitors
Unawareness of buyer
Buyers are slow to change their buying habits.
when Buyer thinks that higher price is justify

Long Run Elasticity may differ from short run elasticity.

 Seating the Price – Step III

3. Estimating Cost
The company wants to charge the price that covers it’s cost of
Producing, Distributing and Selling the product including a fair
returns for it’s efforts & risk.
Types of Cost
1. Fixed Cost or Overhead
Do not vary with production or sales volume
2. Variable cost
Vary directly with the level of production.
3. Total cost
Sum of Fixed & Variable cost for any given level of production
4. Average Cost
cost per unit at the level of production
Total Cost
Production
 Seating the Price – Step IV

4. Competitors Analysis
Cost
Prices

Offers
 Seating the Price – Step V

5. Selecting a Pricing Method / Pricing Strategy

Or Approaches to Pricing
1. Cost Based Pricing
2. Demand Based Pricing
3. Competition oriented Pricing
4. Value Pricing
5. Product Line oriented Pricing
6. Auction Pricing
7. Affordability based pricing
8. Differentiated Pricing
9. Psychological Pricing
10. Geographical Pricing
 Setting the Price – Step VI
6. Selecting the final price
Before selecting final price company should think
followings….
1. Impact of other marketing activities.
⮚ Brand image & advertising
2. Company Pricing Policies.
⮚ Pricing decision Dept
⮚ Should not spoil Bran image
3. Gain & Risk Sharing Pricing.
⮚ Seller promises to absorb part or all of the risk if product won’t
deliver the full promised value
⮚ Ask or the share if delivered value is more than promise.
4. Impact of price on other parties.
⮚ Distributors & dealers, Competitors, Government,
⮚ Pricing regulation laws & etc…
Approaches to Pricing

1. Cost Based Pricing

A) Mark-up Pricing / Cost plus Pricing
⮚ Selling price is fixed by adding a margin to it’s cost price.
⮚ The markups may vary depending on the nature of the product
and markets.
⮚ Higher the unit cost of the product, Larger the Markup vise versa
and Slower the turnover of sales volume, Larger is the Markup
& vise versa
⮚ Generally adopted by Distributors, wholesaler, Retailers &
Marketing firm who don’t have their manufacturing operations.
⮚ Assumption is that demand can’t be known accurately, but cost
are known
⮚ The objective is to maximize the profits in the short & Medium
run without sales being sacrificed due to excessive price.
⮚ Generally markups are high on seasonal items (to cover the risk)
⮚ Cigarettes, Perfumes 20% to 30%
 Approaches to Pricing

A) Mark-up Pricing / Cost plus Pricing

Markup price = Unit Cost

(1- desired return on
sales)
Fixed cost
e.g. Variable = Rs.
cost per unit = Rs. 10
Expected unit sales 300000
Desired return = 5000
= 20%

Unit Cost = Total cost / Total Production

= 800000 / 50000 = Rs.16
Markup Price = 16 / 1- 0.2 = Rs. 20

What will be final selling price if a retailer wants to earn 50% markup ??
Approaches to Pricing

B) Target Return Pricing

⮚ The firm determines the price that would yield it’s target rate
of return on investment (ROI)
⮚ Needs to determine Fixed cost & variable cost to determine
Break Even Point
⮚ Many industrial Products, High value consumer durables &
defense equipment.

TRP = Unit cost + Desired return x invested capital

Unit sales
Suppose the Manufacturer has invested Rs. 10,00,000 /-
Desired ROI 20 %
= 16 + 0.20 x 10,00,000 / 50000 = Rs. 20
Approaches to Pricing

C) Absorption cost Pricing

⮚ Standard Costing techniques
⮚ Calculation of Fixed & variable cost involved in
Manufacturing, selling, & administering the products.
⮚ Addition of above all we get Total cost
⮚ And the selling price of the product is arrived at by adding
the required margin towards profit to such total cost.
⮚ This method is also known as full cost pricing.
 Approaches to Pricing

2. Demand Based Pricing

A) Skimming Pricing
B) Penetration Pricing

A) Skimming Pricing
⮚ Skim the market in the first instant through high price and
subsequently settle down for lower price
⮚ E.g. Electronic goods

High Skimming : - high price is charged with heavy promotion

expenditure

Slow Skimming : - high price is charged with limited promotion

expenditure
 Approaches to Pricing

2. Demand Based Pricing

A) Skimming Pricing
B) Penetration Pricing

B) Penetration Pricing
⮚ Seeks to achieve greater market penetration through relatively low
price.
⮚ Skimming pricing covers profit through a high price range
whereas penetration pricing covers profit through higher sales
volume
⮚ Useful for new product entry in to market.
⮚ To win competitive market
⮚ e.g. Dish T.V. set

High Penetration : - low price is charged with heavy promotion

expenditure

Slow Penetration : - low price is charged with limited promotion

Approaches to Pricing
Approaches to Pricing

3. Competition Oriented Pricing

A) Premium Pricing
⮚ Competitors price as a reference price
⮚ Charging Higher than Competitors (Brand Name,
Quality)
e.g. parker Pen, Mercedes

B) Discount Pricing
⮚ Pricing the product below the competitors product.
⮚ To attract new market , new customer
e.g. Beauty soaps

C) Going Rate Pricing

⮚ Matching the competitors pricing
 Approaches to Pricing

4. Value Pricing
⮚ Price is the exchange Value of product.
⮚ Purpose of pricing is not to recover costs, but to capture
the value of the product perceived by the customer
Some possible Cost-value chains are
a) Value > Price > Cost
b) Price > Value >
Cost > Value
c)
d) Price
Price =>Value
Cost > Cost
Approaches to Pricing

4. Value Pricing
a) Value > Price > Cost
⮚ Price is set to cover the cost but not the value of the
product perceived by the customer
⮚ More customer can be attracted
⮚ Customer is delighted
⮚ Loosing high profit

b) Price > Value > Cost

⮚ Price is set so high than cost & value
⮚ Less customer
⮚ Customer dissatisfaction
⮚ May earn high profit in short run in relatively low sales valume
Approaches to Pricing

4. Value Pricing
c) Price > Cost> Value
⮚ Very less value
⮚ Cost of the product is more than value
⮚ Will loose market share very soon

d) Price = Value > Cost

⮚ Best Value pricing strategy
⮚ Matches the price with value & cost
⮚ More customer get attracted because value is more than
cost
Approaches to Pricing

5. Product-Line Oriented Pricing

⮚ A particular company produces & markets a variety

of products grouped into suitable product line
⮚ The product in the product line are related with
each other
⮚ Manufacturing cost, Distribution cost, Promotional
expenses & other costs are interrelated.
⮚ Company can fix the prices of different product in
such a manner that the product line as whole is
priced optimally.
 Approaches to Pricing

6. Auction Pricing
A) English Auctions (Ascending bids)
⮚ One seller & many Buyers
⮚ Price is raised until the top price is reached

B) Dutch Auctions (Descending Bids)

⮚ One seller & many Buyers or Many seller & few or one
Buyers
⮚ Auctioneer announces high price & then slowly decreases
the price until a bidder accepts the price.
⮚ Or buyer announces something that he wants to buy & then
potential seller compete to get the sale by offering the
lowest price.
C) Sealed bid Auction
⮚ Supplier can submit only one bid & can’t know the others bid
e.g. Government Tenders
Approaches to Pricing

7. Affordability based pricing

⮚ Is relevant in respect of essential commodities, which
meet the basic needs of all sections of people.
⮚ The price should be affordable to the all section of the
society
⮚ Cost is not main constraints.
⮚ Government may provides subsidies.

8. Differentiated Pricing
⮚ Charging different prices for the same product.
⮚ On the basis of customer class, Purchase volume
Approaches to Pricing

9. Psychological Pricing
⮚ Psychology of Customer is targeted
⮚ Customer perceive price as an indicator of quality.
⮚ Rs.99/-, Rs.199/-, Rs.299/-, Rs.9999/-
Approaches to Pricing

10. Geographical Pricing

a) Free on Board or FOB Origin Pricing
⮚ Customer pays actual freight from the factory to destination
b) Uniform delivered pricing
⮚ company charges same price plus freight to all
customer, regardless of their location
c) Average pricing
⮚ ********
d) Zone Pricing
⮚ Different areas pay different prices on freight but all
customer
within the same area pay the same freight charges
e) Basing point Pricing
⮚ All customer are charged freight from a specified
 Factors Influencing Pricing
⮚ Internal ⮚ External
1. Corporate & marketing 1. Market characteristics
Objective of the firm (demand customer & Competition)
2. Manufacturing & Advt cost 2. Buyer behaviour
3. The image sought by the 3. Customer bargaining power
firm through pricing 4. Supplier bargaining Power
4. The characteristic of 5. Competitors pricing policy
the product 6. Govt. controls & regulation
5. Price elasticity of demand of 7. Social consideration
the product
6. The stage of the product in it’s
life cycle
7. Product distinctiveness
8. Other marketing mix element
 Price & Non-price Competition
When sellers attempt to move up or down their
individual demand curves by changing prices is
called a Price competition

When a seller stabilise prices & attempt to improve

their market positions by emphasising other
aspects of their marketing programs is called as
Non-price competition
Factors of Non-Price Competition

• Product Quality
• Product Differentiation
• Building Strong Brand Equity
• CRM (Customer Relationship Management)
• Advt. & Promotional activity.
• Middlemen Promotional activity
• Supplementary services
• Scheme
• After Sales Service
 Adapting Pricing

1. Geographical pricing,

2. Price discounts & allowances,

3. Promotional pricing,

4. Differentiated pricing
 Adapting Pricing
1. Geographical pricing
Geographical pricing involves the company in deciding how to price its
products to different Customers in different locations and countries.
e.g. should the company charge higher prices to distant customers to cover
the higher shipping costs or a lower price to win additional business?
Another issue is how to get paid. This issue is critical when buyers lack
sufficient hard currency to pay for their purchases.
Many buyers want to offer other items in payment, a practice known as
counter trade. American companies are often forced to engage in counter
trade if they want the business.
Counter trade may account for 15 to 25 percent of world trade and takes
several forms:
Barter, Compensation Deals, Buyback Agreements, And Offset.
 Adapting Pricing
1. Geographical pricing
1. Barter – The direct exchange of goods, with no money and no third party
involved

2. Compensation deal – The seller receives some percentage of the payment in

cash and the rest in products. A British aircraft manufacturer sold planes to
Brazil for 70 percent cash and the rest in coffee.

3. Buyback arrangement – The seller sells a plant, equipment, or technology

to another country and agrees to accept as partial payment products
manufactured with the supplied equipment. A US. Chemical company built a
plant for an Indian company and accepted partial payment in cash and the
remainder in chemicals manufactured at the plant.

4. Offset – The seller receives full payment in cash but agrees to spend a
substantial amount of the money in that country within a stated time
period. For example, PepsiCo sells its cola syrup to Russia for rubles and
agrees to buy Russian vodka at a certain rate for sale in the United States.
 Adapting Pricing
2. Price Discounts and Allowances

1. Cash and settlement discounts

2. Quantity discounts
3. Promotional discounts
 Adapting Pricing
2. Price Discounts and Allowances
1. Cash and settlement discounts –
These are intended to bring payments in faster. However, since such
discounts need to be at least 2.5% per month to have any real effect, this
means paying your customer an annual rate of interest of 30% just to get
in money which is due to you anyway.
What is more, customers frequently take all the discounts on offer and
still do not pay promptly, so that you lose both ways.
⮚ Much better, we believe, is either to eliminate these discounts
altogether and introduce an efficient credit control system, or change
your terms of business so that you can impose a surcharge on
overdue accounts instead.
⮚ Whilst you may lose some business by doing this, these will probably
be the worst payers anyway. If some customers will not pay you for
months you are probably better off trying to win others who will.
 Adapting Pricing
2. Price Discounts and Allowances
2. Quantity discounts –
The trouble with these is that, when formalized on a published price list,
they become an established part of your pricing structure and as a result
their impact can be lost.
If you are not very careful, although they may have helped you win the
business to start with, in the long run the only effect they have is to spoil
your profit margin.
As a general rule, only publish the very minimum of quantity discounts
– your very largest customers will probably try to negotiate something
extra anyway.
Also keep quantity discounts small, so that you hold something in reserve
for when your customers do something extra for you, such as offering you
sole supply, or as part of a special promotion.
 Adapting Pricing
2. Price Discounts And Allowances
3. Promotional discounts –
These are the best kind of discounts because they enable you to retain the
power to be flexible.
There may be times when you want to give an extra boost to sales – to shift an old
product before launching an updated one for example. At times like these special
offers or promotional discounts can be useful.
But try to think of unusual offers – a larger pack size for the same price or a ” five
for the price of four ” can often stimulate more interest than a straight percentage
discount. They also make sure that the end user gets at least some of the benefit,
which doesn’t always happen with other types of discounts.
Two other points to remember are
• Make sure you retain control over your special promotions, with a specific objective, a
beginning and an end point. Be sure to terminate them once they have outlived their
usefulness.
• Ensure that your offers are linked to sales and not simply to orders. Otherwise you may
find that orders to you are up for a while, only to be followed by a barren period whilst
your customer supplies the end user from his accumulated stocks.
 Adapting Pricing
3. Promotional Pricing strategies
Companies can use several pricing techniques to stimulate early purchase:

1.Loss-leader pricing
2.Special-event pricing –
3.Cash rebates
4.Low-interest financing
5.Longer payment terms
6.Warranties and service contracts
7.Psychological discounting
 Adapting Pricing
3. Promotional Pricing strategies
Companies can use several pricing techniques to stimulate early purchase:
• Loss-leader pricing – Supermarkets and department stores often drop the
price on well Known brands to stimulate additional store traffic. This pays if
the revenue on the additional sales compensates for the lower margins on the)
boss-leader items.
Manufacturers of loss-leader brands typically object because this practice can
dilute the brand image and bring complaints from retailers who charge the list
price. Manufacturers have tried to restrain intermediaries from loss leader
pricing through lobbying for retail-price -maintenance laws, but these laws
have been revoked.

• Special-event pricing – Sellers will establish special prices in certain seasons to

draw in more customers

• Cash rebates – Auto companies and other consumer-goods companies offer

cash rebates to Encourage purchase of the manufacturers’ products within a
specified time period. Rebates can help clear inventories without cutting the
stated list price.
 Adapting Pricing
3. Promotional Pricing strategies
Companies can use several pricing techniques to stimulate early purchase:
• Low-interest financing – Instead of cutting its price, the company can offer
customers low- interest financing. Automakers have even announced no-
interest financing to attract Customers.
• Longer payment terms – Sellers, especially mortgage banks and auto
companies, stretch loans over longer periods and thus lower the monthly
payments. Consumers often worry less about the cost (i.e., the interest rate) of
a loan and more about whether they can afford the monthly payment.
• Warranties and service contracts – Companies can promote sales by adding a
free or low- cost warranty or service contract.
• Psychological discounting – This strategy involves setting an artificially high
price and then offering the product at substantial savings
Promotional-pricing strategies are often a zero-sum game. If they work,
competitors Copy them and they lose their effectiveness. If they do not work, they
waste money that could have been put into other marketing tools, such as building
up product quality and service or strengthening product image through
advertising.
 Adapting Pricing
4. Discriminatory / Differentiated pricing strategies
Companies often adjust their basic price to accommodate differences in customers,
products, locations, and so on. Price discrimination occurs when a company sells a
product or service at two or more prices that do not reflect a proportional
difference in costs.
⮚ In first-degree price discrimination, the seller charges a separate price to each
customer depending on the intensity of his or her demand.
⮚ In second-degree price discrim-ination, the seller charges less to buyers who
buy a larger volume.
⮚ In third-degree price discrimination, the seller charges different amounts to
different classes of buyers, as in the following cases:
– Customer-segment pricing – Different customer groups are charged
different prices for the same product or service. For example, museums
often charge a lower admission fee to students and senior citizens.
– Product-form pricing – Different versions of the product ‘are priced
differently but not proportionately to their respective costs
 Adapting Pricing
4. Discriminatory / Differentiated pricing strategies
• Channel pricing – Coca-Cola carries a different price depending on whether it is
purchased ill a fine restaurant, a fast-food restaurant, or a vending machine.

• Location pricing – The same product is priced differently at different locations

even though the cost of offering at each location is the same. A theatre varies its
seat prices according to audience preferences for different locations.

• Time pricing – Prices are varied by season, day, or hour. Public utilities vary
energy rates to commercial users by time of day and weekend versus weekday.
Restaurants charge less to “early bird” customers. Hotels charge less’ on
weekends. Hotels and airlines use yield pricing, by which they offer lower rates
on unsold inventory just before it expires. Coca-Cola considered raising its
vending machine soda prices on hot days using wireless technology, and
lowering the price on cold days. However, customers so dis-liked the idea that
Coke abandoned it.
 Price Change
Initiating and Responding to Price Changes

Internal or external forces often lead an organization to change its prices. Price
changes are often initiated by the organization. The organization also has to design
its strategy to deal with price changes initiated by competitors.

Initiating price changes

An organization may initiate price changes to deal with new forces arising within
the organization or the market. The price change may occur at both directions:
1.Increasing price
or 2.Lowering
prices.
 Price Change
Initiating and Responding to Price Changes

1.Increasing price
Increasing price of a product is an attractive proposition for every
business organization, since a small increase in the price results in huge
increase in the revenue and profits. If an organization feels that the sales
volume will not be affected by a small price increase, it may always be
tempted to increase the price.
Causes of Increase in Price
1.Results of inflation that causes the organization's costs to increase.
2.Government introduces new taxes or raises the current tax rates.
3.Increase in the price of any factors of production - wage levels, raw materials
prices and interest rates - cause the price to increase.
4.Organizations anticipate such increases and may raise the price of its products
in advance.
5.Sometimes, an organization may increase the price in order to reduce the
demand for the product. When an organization cannot increase the supply of its
over demanded product, it may raise the price level to manage the demand at the
current supply point.
 Price Change
Initiating and Responding to Price Changes

2. Lowering price
Several situations lead an organization to reduce the price of its products.
Organizations with excess capacity try for extra sales in order to achieve
higher capacity utilization rates. In such a situation, it may find lowering
price the most easy method of achieving higher sales volume.

Causes of Lowering Price

1.To achieve higher sales volume, and thereby capture larger market share.
2.Government introduces new taxes or raises the current tax rates.

Lowering price is very risky strategy. It usually invites sharp reactions from
competitors and often results into a price war.
 Price Change
Responding to price changes
An organization faces a strategic decision situation when competitors initiate price
changes. Responding to the price change, particularly in the case of price cuts is a
difficult question. The organization has to consider the objective and time frame of
the price change.

The following clues are important in responding to price changes:

1.If the price cut has been initiated in order to use excess capacity or to cover
rising costs, it does not warrant any response.
2.If the price change is temporary or short term, initiated to clear old stocks, there
is no need for response.
3.If the objective is to dominate the market and the price change is long term, the
organization has to respond quickly and effectively.
4.The organization should also evaluate the consequences of non response to
the price change.
5.If the price change does not seriously affect it current sales and market share,
there is no need for response.
6.Before showing any response, it should carefully watch
how other
 Price Change
Responding to price changes
If the price cut is expected to seriously hurt
the market share and profit situation, the leader
organization may take one or more of the strategic options:

Option 1: Increase customers perceived value of the product by increasing

promotional level.

Option 2: Increase the price complemented by an improvement in quality and

features of the product. This requires a re-positioning strategy to establish the
brand at a higher price position.

Option 3: Add a new lower price brand to the current product line and position it
directly with the attacker's brand. This trading down strategy helps the
organization to maintain high quality image for the old brand.

Option 4: As a last option, reduce the price to off set the negative effects of the
price attack.
Thank you
 Unit No. 3

Place / Physical Distribution

 Unit No. 3
Chapter Tour

Meaning, The Role of Marketing Channels, Channel

functions & flows, Channel Levels, Channel Design
Decisions - Analyzing customers’ desired service output
levels, establishing objectives & constraints, Identifying &
evaluating major channel alternatives.

Channel Options - Introduction to Wholesaling, Retailing,

Franchising, Direct marketing, Introduction to Omni
channel & hybrid channel options. Market Logistics
Decisions - Order processing, Warehousing, Inventory, and
Logistics
Place / Physical Distribution
 Place / Physical Distribution

Introduction
Ultimate purpose of manufacturing any goods & services is to
handover the same to the end users or customer for it’s utilisation. This
entire function of getting goods into the hands of customer is called as
Distribution.

Physical Distribution is the process of delivering the product to

the marketing channels & consumer promptly, safely & in time.

P D involves Mgmt. (planning, action & control) of the physical flows

of (1) Raw material (2) Finished Products from the point of origin to the
point of consumption to meet the customer needs at a profit.
 Place / Physical Distribution

Activities covered in Physical distribution

Distribution planning & accounting Inbound transportReceiving

Inventory mgmt In plant warehousing Order processing
Packaging / repackaging Dispatch of goods Outbound transport
Field warehousing customer service communication

The component are dissimilar but they are related bye the common bond of
an efficient flow of goods

The major Components are only three

1. Transportation
2. Warehousing
3. Inventory Mgmt.
Eleven Components of Warehousing

11.
Customer
6. service
Order
processing 10.
Fiend
8. Warehousing
1. 7. Dispatch of
4. good
Distribution Packaging 9.
Inventory
Planning & Outbound
Accounting
Mgmt 5. transport
In plant
Warehousing

3
Receiving
2
Inbound
transpor
t
 Importance of Physical Distribution

1. Ensure physical flow

2. Place & Time utility

3. To satisfy Customer demand

4. Transportation

5. Storage

6. Information

7. Promotion

8. Other
Channel of distribution

Channel of distribution is a path traced in direct or indirect transfer of

the title of the product as it moves from the producer to ultimate
consumer or industrial users

Channel of Distribution is a pathway for the flow of ownership

possession of goods & services

Transfer of ownership :- an exchange process which includes channel of

distribution
Transfer of Possession :- Physical distribution which involves problem of
warehousing & transportation

Marketing channel is a set of interdependent organisations involved

in the process of making a product or service available for use or
consumption.
Function of Distribution Channel

Regular / Routine Non Routine

1. Buying 1. Financing
2. Storing 2. Information to manufacturer
3. Transportation 3. Information to Customer
4. Promotion 4. Communication
5. Selling
6. Safety Delivery
7. Cash collection
8. Cash Payment
Level of Distribution channels – Consumer
Goods
0 Level 1 Level 2 Level 3 Level

Manufacturer Manufacturer Manufacturer Manufacturer

Wholesaler / Wholesaler Wholesaler

Retailer

Agents

Retailer Retailer

Consumer Consumer Consumer Consumer

Level of Distribution channels – Industrial
Goods
0 Level 1 Level 2 Level 3 Level
Manufacturer Manufacturer Manufacturer Manufacturer

Manufacturer
Sales Branch

Manufacturer Manufacturer
Representatives Representatives

Industrial Industrial Industrial

Distributor Distributor Distributor

Industrial Industrial Industrial Industrial

Consumer Consumer Consumer Consumer
 Flow in Distribution channels
1. Physical Flow
Transporters, Transporters, Dealer Transporters
Supplier Manufacturer Customer
Warehouses
Warehouses
2. Title Flow
Supplier Manufacturer Dealer Customer

3. Payment Flow
Supplier Banks Manufacturer Banks Dealer Banks Customer

4. Information Flow
Transporters, Transporters,
Supplier Manufacturer Dealer Transporters, Customer
Warehouses Warehouses
Banks
Banks Banks

5. Promotion Flow

Supplier Advt Agency Manufacturer Advt. Agency Dealer Customer

Designing Marketing Channels /
Channel design Decision
1. Analysing customers desired service output levels
2. Establishing Channel Objective
3. Identifying Channel Function
4. Identifying Major Channel Alternatives
5. Evaluating the major alternative
6. Selecting channel Member
7. Training channel Members
8. Motivating Channel Members
9. Evaluating channel Members
10. Modifying Channel Members
 Designing Marketing Channels /
Channel design Decision
1. Analysing customers desired service output levels
Dynamic & crucial step because Customer needs,
like-dislike, preferences, behaviours & habits vary
from segment to segment

1. Lot size
2. Waiting & delivery time
3. Convenience
4. Product variety
5. Service backup (Credit, Delivery, Installation, Repairs )
 Designing Marketing Channels / Channel
design Decision
2. Establishing Channel Objective
Channel objectives must be decided, these objective
may vary from companies main objective
Some are as follows
⮚ Minimizing Channel distribution cost
⮚ Effective coverage of the target market
⮚ Ensure all-time availability in stores

Depend on product characteristics

⮚ Perishable product Direct marketing (milk, agri product)
⮚ Bulky product which minimises shipping distance & handling
⮚ Product requiring installation & maintenance services such as
heating & cooling system are sold by company & etc…..
 Designing Marketing Channels / Channel
design Decision
3. Identifying Channel Function
already studied

4. Identifying Major Channel Alternatives

A channel alternative is described by three elements

1. Types of available business intermediaries

Depending upon the need & requirement of the business.
Distributors, Dealers, Wholesaler, Retailers,

2. The number of intermediaries needed

3. The terms & responsibilities of each channel

member Profit margin, service delivery,
investment, credit
period, pricing policy, discounts, sales target, promotional
activities & etc.
 Designing Marketing Channels / Channel
design Decision
5. Evaluating the major alternative
Available Major channel alternative should be evaluated
on the basis of
1. Economic Criteria
⮚ Channel cost
⮚ Company distribution or agency sales
⮚ Cost & sales volume
2. Control
⮚ Independent Agency seeks for individual profit
⮚ Agent may concentrate on the customer who buy more may
not concentrate on those who buy manufacturers pro.
3. Adaptive
⮚ Adaptive to company
⮚ Adaptive to channel member
 Designing Marketing Channels /
Channel Management
6.Decision
Selecting channel Member
⮚ Channel members are representatives of the company
⮚ Comparison among available alternatives
⮚ Past performance, Future planning, Financial Strengths,
Service reputation

7. Training channel Members

⮚ Product Training (Feature & Usage Training)
⮚ CRM Training
⮚ After Sales Service

8. Motivating Channel Members

⮚ Attractive scheme
⮚ Discounts
⮚ Promotional Materials
⮚ Incentives
 Designing Marketing Channels / Channel
Mgmt Decision
9. Evaluating channel Members
⮚ Periodically evaluation of performance against standard set
of performance
⮚ Sales quota, Average inventory level, customer
delivery time, treatment of damage & lost of goods
10. Modifying Channel Members
⮚ When distribution channels are not working as per standard
modification is needed
⮚ When company objectives get changed
⮚ When market expands, Competition arises.
Factors affecting on selection of Distribution channel
Or Considerations
1. Market considerations
⮚ Type of market
⮚ Number of potential customers
⮚ Geographic concentration of the market
⮚ Order size
⮚ Consumer behaviour
2. Product considerations
⮚ Unit value :- Rs. 1,00,000/- Printing machine & Rs. 2/ Pen
⮚ Perish ability
⮚ Bulk & Weight
⮚ Technical nature
high technical product – direct sales
Factors affecting on selection of Distribution channel
Or Considerations

3. Middlemen considerations
⮚ Service provided by middlemen
⮚ Availability of desired middlemen
⮚ Difference bet‘n producer & middlemen policies
⮚ Middlemen attitude
⮚ Past performance

4. Company considerations
⮚ Companies Objectives
⮚ Management policies
Various channels of Distribution

Channels of Distribution

Wholesalers Retailers

Wholesaler Agent Middlemen 1. Independent Large Retailers

( Merchant 1.Manufacturers Retailers Consumer
Middlemen ) agents, Stockers 2. Mobile co-operative 1. Department store
2. Selling Agent Retailers stores 2. Chain Store
3. Broker 3. Fixed Shops 3. Self-service store
4. Auctioneers 4. Supermarket
5. Sole Agents or 5. Discount store
Distributors 6. Mail order house
7. One price shop
8. Vending machine
Wholesalers / Wholesaling

• Wholesale trade is defined as

“All establishments or places of business primarily engaged in selling
merchandise to retailers; to industrial, commercial, institutional or
professional users or to other wholesalers; or acting as an agent in
buying merchandise for or selling merchandise to such person or
companies”

“Wholesalers are individuals or business firms who will sell

products to be used primarily for resale or for industrial use”

“The wholesaler is a bulk purchaser with the object of resale to

retailers or other traders after breaking down his ‘Bulk’ in smaller
quantities and, if necessary, repacking the smaller lots into suitable lots
for his customer.”
 Types of wholesalers
1. Merchant wholesaler
⮚ Independently Owned
⮚ Takes title of goods
2. Full service Wholesaler
⮚ Carry stock, maintain a sales force, offer credit, make deliveries,
provide mgmt. assistant
3. Limited service wholesaler
⮚ sell limited line of FMCG to small retailers on cash (Cash &
Carry)
4. Commission agent
⮚ Independent ownership
⮚ But not title of goods
⮚ Only negotiate for sale/purchase of goods
5. Manufactures own Branches / Distribution Center
⮚ Attractive showroom
Functions / Duties / Roles / Services
Of Wholesalers
To The Manufacturer or Producer
1. Order Collector
Collect from Retailer & other Agent
Due to that Manufacturer can concentrate on Production only.

2. Risk Transfer
Placing Advance orders ensure manufacturer for sales volume

3. Concrete relief
Storage , Distribution, Cash collection, Credit services,
Advance payment

4. Expert Advice
Wholesaler knows the pulse of the market
Collect customer information from retailers
Indicator of demand in the market which regulate production.
New Product development, Product extension.
 Functions / Duties / Roles / Services
Of Wholesalers
To the Retailers
1. No need to hold large stock of varied Goods
⮚ Large no. of customer.
⮚ Different choice, habit & demand.
⮚ Act as warehouse.

2.Prompt delivery of goods

3. Benefits of specialisation
⮚ Marketing function
⮚ Wholesalers are the specialised person in buying Quality Goods.
⮚ Can advice to retailers when to buy & how much to buy

4. Announcement of new product

⮚ Window display, personally informs

5. Grant of credit
 Merchant Wholesaler Agent Wholesaler
V/s
Merchant Wholesaler Agent Wholesaler
1. Merchant wholesaler is employed 1. Is employed when the product is
when the product is standerdised, custom-made, i.e. made to order
branded, complex, or sophisticated or simple, e.g. handicraft
2. is useful when product is to be 2. Is preferred when product is to be
sold to many or numerous sold to few customer
customers
3. is essential when buyers
3. Can manage distribution if
scattered
customer are concentrated and
& they are in many industries are in few industries

4. Is required when order frequency 4. Is suitable when orders are

is considerable and much shorter infrequent and delivery time is
longer, say, 15 days
delivery time e.g. 2 days
5. Profit margin is smaller e.g. 5 %
5. Profit margin is larger e.g. 10 %
Retailing / Retailers

Definition

Retailing is trading activity directly related to the sale

of goods or services to the ultimate consumer for personal,
non-business use.

The trade which includes activities such as selling

variety of goods in small quantities to the final consumer
is called as Retailing.
 Three main Characteristics

⮚ Deal in a small quantities & business is usually local in

character

⮚ Retail trade always shows tendency towards variety as it

has to satisfy innumerable wants of consumer

⮚ Operating near about the residential areas of consumer,

sells directly to the consumers
 Types of Retailers

Retail Trade Organisation

Large – scale Consumer Direct Marketing

Small / Medium Retailers co-operatives Channel less Retailing
size Retailers
1. Supermarket stores 1. Co-operative stores 1. In-home selling
1. Mobile Retailers, 2. Combination stores 2.Supermarkets & (House to
Hawkers, Peddlers. 3. Department store Super bazaars house
2.Neighbourhood 4. Chain Store & 3. Sahakari Bhandars canvassing)
convenience stores Multiple shops 4. Grahak Bhandars 2. Telemarketing
3. Specialty stores 5. Hyper Markets 5. Apna Bazaars 3. Mail Order Sale
6. Discount store 4. Direct Response
7. Retail catalogue marketing
showroom 5. Vending Machines
8. Manufacturer’s 6. Order-placing
showrooms machines
9. Factory outlet
& off-price retailer
 1. Small Medium Size Retailer
1. Mobile Retailers
⮚ Local Convenience to Purchase
⮚ Charge Lower Price as they have no establishment charges
and buy from wholesalers at wholesale rates
⮚ Sell useful goods through house-to-house contact & home
delivery

2. Convenience Stores
⮚ Small or Medium-size General stores
⮚ Found in residential area as well as in shopping areas
⮚ Stay open long hours
⮚ Carry limited line of rapidly turnover items such as food,
beverage, common drugs, etc….
⮚ Charge little higher price than supermarket
⮚ Generally it is side by side family business
e.g. Grocery shops & provision stores
 1. Small Medium Size Retailer

3. Specialty Stores
⮚ Specialize in single line of goods with deep assortment to give wider
choice to customer

⮚ Located in central busy places & shopping centers

⮚ Work on the concept of product specialisation & segment targeting

⮚ Generally they store & sale readymade garments, electronic goods,

e.g. TV, Freeze, washing Machine & etc…

⮚ May be specialised as Exclusive Men or Women Clothes stores, Sport

shoes, & etc….

⮚ This type of retailers have a threat from Organised retail outlet ,

Malls, Hypermarket & etc.
 The Reasons for Survival of Small/Medium Size
Retailer in the market

1. Offer of greater local convenience to customer.

2. Personal attention & service.
3. Temporary credit.
4. Longer shop hours.
5. Free home delivery service.
6. Guidance to the customer in making wise selection of
goods.
7. Quick after sales service.

⮚ It requires low operating cost & limited managerial skill

⮚ The proprietor has a flexible selling policy
 2. Large scale Retailers
1. Supermarket Stores
A supermarket is a self-service food store with grocery
A Supermarket is a novel form of retail Organisation specialising in
necessaries & convenience goods. Usually it concentrate on all food articles-
groceries, meat, fruits, vegetable and tinned products.
e.g. Reliance Fresh ,Subhiksha
⮚ It has minimum selling area of 3,600 sq. meters (60 mt. by 60 mt.)
⮚ Cash & carry store, it saves in terms of credit facilities & delivery
expenses
⮚ No sales pressure, Self service
⮚ Packaging plays a very important role
⮚ Low pricing
⮚ May be operated by Co-operatives and department stores or
limited companies.
⮚ They give very keen competition to al types of retail shops
⮚ Attract through various Discount & Schemes
 2. Large scale Retailers

2. Combination Stores

⮚ It is a Combination of two complimentary lines

– Grocery & Drugs.

⮚ A Combination store has a supermarket and also

a full line drug store with a common pay area.
 2. Large scale Retailers
3. Department Store
⮚ Dept Store is a huge retail shop situated at a central place in the city.
⮚ Divided into a number of small shops or depts each dealing with one or two
lines of goods & specialising in those lines.
⮚ All the Dept are under one roof & under one management control.
⮚ It requires huge capital & usually owned by big companies
⮚ Often referred as “one stop shop”
⮚ E.g. Big Bazaar, Shoppers Stop, Pyramid (India bulls)

Features
⮚ Large no. Consumer goods & wide variety of their designs, colours &
Styles
⮚ Sales volume (universal supplier of a vide variety of goods )
⮚ Located in a central place of the city
⮚ Needs to pull customer by continuous Advt., Widows Display & etc…
⮚ Sometime in order to boost the sales of other dept. one of the dept may
3. Department Store
3. Department Store
3. Department Store
 Advantages

1. Shopping convenience
2. Mutual Advertising
3. Complete service offer –attract Large no of customer
4. Central location
5. Wide selection
6. Large investment
7. Bulk buying or Direct buying
8. Low price
 2. Large scale Retailers

4. Multiple shops & Chain Stores

⮚ Network of a no. of branches
⮚ Situated at different locality of city or different parts of the
country
⮚ Central ownership, Mgmt & control
⮚ Purchases are centralise & sales are decentralised

Features
⮚ Specialised in one or couple of lines of goods.
⮚ Limited range but uniform nature & price of goods
⮚ Local convenience
⮚ Cash sales only
e.g. Joshi wadewale, Ranka Jewelers shops
4. Multiple shops & Chain Stores
4. Multiple shops & Chain Stores
4. Multiple shops & Chain Stores
 Types of Multiple shops

1. Manufacturers Organisation
⮚ Manufacturer wants to approach consumer directly
⮚ He undertakes all the three functions of producer, wholesaler
and retailer

2. Retailers Organisation
⮚ Owned by big retailers
⮚ Obtain goods from directly manufacturers no need from
wholesalers
 Advantages
1. Local Convenience
2. Eliminates all kinds of middlemen
3. Specialisation in particular line of goods
4. Uniform Quality & Price, Store layout, Display
5. Decentralisation of selling
6. Common Advt.
7. Shortage of one stock can be remedied by
transfer
8. Cash sales, No bad debts
 2. Large scale Retailers

5. Hypermarket (Super - Supermarket)

⮚ Combination of Supermarket , Department store, Specialty store,
service shop in one giant size store.
⮚ Very broad & deep assortment of goods acting as a shopping mall
⮚ Goods & services are……….
Apparel, house wares, hardware item, photographic
materials,
Sport goods, garden products, electronic goods, hobby item, etc.
Even household services, such as laundry, beauty parlors,
⮚ Middle & upper class are the target market
⮚ Emphasis on low price & better quality
 2. Large scale Retailers
6. Discount stores

⮚ Generally this concept is developed after second world war

⮚ USP is low price & limited service
⮚ They usually prefer less costly location, building & fixture

7. Retail catalogue Showroom

⮚ complete catalogue & sample are kept in the showroom

⮚ Shoppers examine sample & make out orders, order is checked & then
sent to the warehouse for filling & then the customer is given the delivery
at the showroom.
⮚ Repeat customer may be mailed a catalogue copy.
⮚ Product sold are jewelry, house wares, electronic small appliances,
luggage, toys, sporting goods, cameras and so on,…..
 2. Large scale Retailers

8. Manufacturer’s showroom
⮚ Manufactures own outlet, exclusive showroom.
⮚ This concept is developed since 1980
⮚ 1900 authorised of Vimal showroom in all urban areas across the country.
⮚ Low price

9. Factory outlet / Off price Retailer

⮚ Factory outlets are owned & operated by manufacturer to sell
surplus, irregular or discontinued goods
⮚ Generally offer more than 50% discount
⮚ Off- price retailer buys from a producer their excess stock at the end of
the fashion season or irregular goods of inferior or 2 nd quality rejected
under quality control at lower than normal or wholesale price.
 Consumer Co-operative Stores

Consumer co-operative store is an organisation owned,

managed & controlled by consumer themselves to reduce
the number of middlemen and their commission.

Features
⮚ It’s voluntary association of consumer duly registered under
the prevalent co-operative societies Act.
⮚ At least 10 members are required to register a society or store.
⮚ The registration gives certain privileges and exemptions which are
not available to other non-co-operative bodies.
⮚ Membership is open to all, financial strength is not the criteria, every
person has to pay an entrance fee
⮚ Democratic mgmt. one man one vote rule
⮚ General meeting of members every year appoints an
executive committee to look after the Mgmt. of the store.
 Consumer Co-operative Stores

Features
⮚ Profit Sharing at least…..
⮚ 25% of NP to the General Reserve.
⮚ 10% General welfare fund (Social & Educational Welfare)
⮚ Dividend not with the proportion of share value but with
the proposition of Purchase Volume.
⮚ Essentially meant for Working Class & Lower Middle class
Population.
⮚ Honesty & Loyalty are capitalised & more emphasis is
given on the moral character of the members.
⮚ The liability is Limited.
⮚ The accounts of store are audited by the registrar of
co- operative societies or a person authorised by him.
Consumer Co-operative Stores
Most of the Supermarket in India belong to the
Co- Operative Sector. Successful examples are
⮚ Sahakari Bhandar, Mumbai
Near Ambedkar Garden,Hotel Diamond Building
Chembur, Mumbai, Maharashtra 400071
022 22022248 / 022 25289260
⮚ Apna Bazaar, Mumbai
Apna Bazaar
Andheri West, Mumbai, Maharashtra
⮚ Super Bazaar, Delhi
Connaught Place, New Delhi Janak Puri, New Delhi
⮚ Chintamani Co-operative store, Coimbatore
⮚ Grahak Bhandars
 Franchising
Franchising refers to the methods of practicing
and using another person's philosophy of business.
It’s one of the method of Marketing
The franchisor grants the independent operator the
right to distribute its products, techniques, and trademarks
for a percentage of gross monthly sales and a royalty fee.
Agreements typically last from five to thirty years,
with premature cancellations or terminations policies.

Parties In Franchising
1. Franchiser (who gives the Franchise)
2. Franchisee (Who accepts the Franchise)
Franchising
Businesses for which franchising works best---
– Businesses with a good track record of profitability.
– Businesses built around a unique or unusual concept.
– Businesses with broad geographic appeal.
– Businesses which are relatively easy to operate.
– Businesses which are relatively inexpensive to
operate.
– Businesses which are easily duplicated.
Types of Franchising

⮚ Business format franchises,

⮚ Product franchises,
⮚ Manufacturing franchises,
⮚ Business opportunity ventures
Types of Franchising
Business format franchises
Business format franchises, the most common type, a company
expands by supplying independent business owners with an established
business, including its name and trademark. The franchisor company
generally assists the independent owners considerably in launching and
running their businesses. In return, the business owners pay fees and
royalties. The franchisee also often buys supplies from the franchisor.
e.g. Fast food restaurants are good examples of this type of
franchise

Product franchises
product franchises, manufactures control how retail stores
distribute their products. Through this kind of agreement, manufacturers
allow retailers to distribute their products and to use their names and
trademarks. To obtain these rights, store owners must pay fees or buy a
minimum amount of products.
e.g. Tire stores, operate under this kind of franchise agreement
Types of Franchising
Manufacturing franchises
Manufacturing franchises, a franchisor grants a manufacturer the
right to produce and sell goods using its name and trademark. This type
of franchise is common among food and beverage companies. e.g. soft
drink bottlers often obtain franchise rights from soft drink companies
to produce, bottle, and distribute soft drinks. The major soft drink
companies also sell the supplies to the regional manufacturing
franchises

Business opportunity
Business opportunity ventures involve an independent business
owner buying and distributing the products from one company. The
company supplies the business owner with clients or accounts and
therefore the business owner pays the company a fee in return.
e.g. Business owners obtain vending machine routes and
distributorships, through this type of franchise arrangement
Advantages / Benefits
To the Franchiser
⮚ The key to Rapid Growth
⮚ E.g. NIIT 100 branches in very short period & Parle agro – Frooti
⮚ Less Entry barriers
⮚ Brand Building
⮚ Ownership involvement of the franchisee
⮚ Cost Effective (Showroom cost, Sales force costs, employee cost)
Citi Bank Home loan by citihome franchisee.

To Franchisee
⮚ Instant connection with premium brand
⮚ Visibility & standing in the market
⮚ Promotion cost often born by the Franchiser
e.g. Holiday inn worldwide hotel chain
⮚ Free of cost Training
⮚ System / Software Supporte.g. Raymond
Disadvantages
For Franchisor
⮚ Control
⮚ Misconduct of Franchisee

For Franchisee
⮚ Initial Cost of Setup.
⮚ Franchiser Control & Guideline.
⮚ May affect by companies failure in different
areas.
⮚ Break-up of contract
Channels Conflict
Vertical Channel Conflict
a Conflict bet’n different levels within the same channel
For Margin or commission
HUL had come in conflict with it’s distributor in Kerala on the
issue of commission

Horizontal Channel Conflict

A conflict bet’n members at the same level within the channel.
Dealers frequently get into conflict with each other.

Multi-channel conflicts
Exist when Manufacturer has establish two or more channels
that sell to the same market.
e.g. Escort Ltd. 1980s Tried to create parallel dealership for a
line of tractor
Causes
⮚ Goal Incompatibility or Rapid
Growth
⮚ Unclear roles & right e.g. HCL
⮚ Different in perception
⮚ More Dependency
⮚ Resource Scarcities
⮚ Expectation Differences
⮚ Communication Difficulties
Managing Channel Conflict

Detecting
conflict

Appraising the
effect of
conflict

Resolving
Managing conflict
Conflict
Impact of Technology & Internet on Distribution

Over the years, the technology is improving day

by day it is said that in technological world

“whatever New you heard yesterday is old for Today ”

Technology is growing very fast & every Org. is

trying to match up with new updated technology then
how come Distribution channel system be idle.
Impact of Technology & Internet on Distribution

In Past
⮚ All the Distribution channel function were done manually.
⮚ Then they used to send to the Seniors
⮚ Seniors were checking Manually & Randomly
⮚ No control tools were used
⮚ Time consuming & hectic
⮚ Slow decision making & etc.

Then…
⮚ Technology was growing,
⮚ Many companies started to use computer & new technology in
their routine work,
⮚ But it was not fully integrated,
⮚ Every department was working independently,
⮚ Different software were used by different departments,
e.g. Sales Software, Purchase software & etc.
⮚ Then the result were combined to another server & then the
evaluation were done.
Impact of Technology & Internet on Distribution

Now…
⮚ The use of Technology & Internet has increased.
⮚ Companies have started to use computer in their daily working
system.
⮚ Systems & software are fully integrated.

IMPACT……
ERP (Enterprise Resource Planning)
ERP is an integrated business management system
Includes all aspects and computerization methods that are needed to
effectively plan and manage a business.

Enterprise Resource Planning, an Information Technology

term referring to a hardware or software system that serves all
departments within an enterprise.

ERP is an enterprise-wide information system designed to

coordinate all the resources, information, and activities needed to
complete business processes such as order fulfillment or billing
ERP Providers

1. BAAN – by Jan Baan 1978

2. Mfg / Pro

3. SAP

4. OpenMFG - from xTuple

5. Oracle e-Business Suite - from Oracle &

etc….
Impact of Technology & Internet on Distribution

ERP

Manufacturing Distribution HR Finance

Engineering,
Bills of material, MRP Human resources,
Journal, ledger,
Scheduling, Supplier payroll,
Cash management,
Capacity, Purchasing Time & Attendance, Accounts payable,
Workflow Mgmt, Transport
Training A/c Receivable,
Quality control, Manufacturing
Benefits Fixed assets
Cost Mgmt, Packaging
Manufacturing Warehousing
process, Merchandising
Manufacturing Sales
projects, CRM
Manufacturing flow
Impact of Technology & Internet on Distribution

For Management
MRP ( Material Requisite Planning )
⮚ Accurate Inventory Level
Purchasing
⮚ Purchasing software
⮚ Suppliers List are ready
⮚ Just need to check & select
⮚ If any new one is their just add in system
⮚ Receiving the Invoice & recording in the system
Transport
⮚ Preparation of Delivery Chelan (DC)
⮚ Gate Pass & checking
Manufacturing
⮚ Using high technology whish leads production faster &
qualitative
⮚ Bar-coding
Impact of Technology & Internet on Distribution

Packaging
⮚ New Trends in packaging
⮚ Coated & automated packaging

Warehousing
⮚ Data Warehouse
⮚ Storage Dept.
⮚ Inward & Outward Inventory records

Merchandising
⮚ Online merchandising
⮚ POP (Point of purchase merchandising)
⮚ Digital Display
Impact of Technology & Internet on Distribution

Sales
⮚ Customer Database
⮚ Sales Software
⮚ Invoice preparation

CRM
⮚ Sales and marketing,
⮚ Commissions,
⮚ Service,
⮚ Customer contact and call center
support
Impact of Technology & Internet on Distribution

For Customer
⮚ Online details at home

⮚ Reduce Distance

⮚ Quick problem solution

⮚ E – Payment

⮚ CRM
Overall Impact

1. Reduced Manual Work

2. Level of Accuracy has gone up

3. Time Saving

4. Quick Analysis, Interaction & better Quality control

5. Ready Financial statement & easy auditing

6. Better Decision making

7. CRM
Marketing Logistics Decision

Marketing Logistics

The supply chain management is essential for companies to

improve productivity and reduce costs. The purpose of marketing
logistic is to design and implement infrastructure, which will
deliver goods from the point of origin to point of sell in an effective
and least cost manner.

This objective mix of high customer satisfaction and lowest cost

possible are asymmetrical. The major decision involved with
marketing logistic relate to order processing, warehousing,
inventory and transportation.
Marketing Logistics Decision

Marketing Logistics

The supply chain management is essential for companies to

improve productivity and reduce costs. The purpose of marketing
logistic is to design and implement infrastructure, which will
deliver goods from the point of origin to point of sell in an effective
and least cost manner. This objective mix of high customer
satisfaction and lowest cost possible are asymmetrical.

The major decision involved with marketing logistic relate to

1. Order Processing,
2. Warehousing,
3. Inventory and
4. Transportation
Marketing Logistics Decision

1. Order Processing,
Companies look forward to shortening order to payment cycle. A long
cycle will lead to decrease in customer satisfaction and company’s profit.
Companies have to set benchmarks at each level from sales people
receiving orders to receiving payment from creditors.

2. Warehousing,
Warehousing for finished goods is another important hub for companies.
There has to be a right balance between sales order and quantity of
finished goods. Warehousing at strategic locations increases timely
delivery of goods and reducing in inventory. Technology has helped in
improving warehousing standards.
Marketing Logistics Decision

3. Inventory and
Piled up inventory is not a good sign for the company. Inventory
management involves making decision with time and quantity of raw
materials for matching customer requirements. Management principle
like Just In Time (JIT) are used for better inventory management. In JIT
focus is to develop well time flow of raw materials and finished goods.

4. Transportation
Transportation and freight cost plays an important role in final pricing,
delivery and condition of raw materials as well as finished products. Here
companies need to make the decision, whether to use a private carrier
(company ownership), contractual (Outside agency) or common carrier
(service shared at standard rates).
Thank you
 Unit No. 4

Promotion
 Unit No. 4
Chapter Tour

Promotion: Meaning, The role of marketing communications in

marketing effort.

Communication Mix Elements - Introduction to Advertising, Sales

Promotion, Personal Selling, Public Relations, Direct Marketing.

Concept of Integrated Marketing Communications (IMC), Developing

Effective Communication - Communication Process, Steps in Developing
effective marketing communication - identifying target audience,
determining communication objectives, designing a message, Choosing
media, Selecting message source, Collecting feedback.

Shaping the overall promotion mix: promotional mix strategy, push-

pull strategies
 Unit – 4

Communication:

Communication is the process of passing information and

understanding from one person to another.
--- Keith Davis

Communication is any behavior that results in an exchange of meaning.

---American Management Association

Elements of Communication:

✔ Source / Sender
✔ Audience / Receiver
✔ Goal / Purpose
✔ Context / Environment
✔ Message / Content
✔ Medium / Channel
✔ Feedback
 Unit – 4

Communication Process

One way Communication Process

Idea Message Received Idea

Transmitter Message Receiver
Encoding Decoding

Two way Communication Process

Feedback

Idea Message Received Idea

Transmitter Message Receiver
Encoding Decoding
 Unit – 4

Promotio
n
 Unit - 4
Promotion / Communication Mix:
Promotion is the process of marketing communication to inform,
persuade, remind and influence consumers or users in favour of
your products, services & ideas

Promotion is a form of communication with an additional element of

persuasion to accept ideas, products & services.

People must know that right product at the right price is available at
right place.

It is said that in a competitive market without promotion nothing can

be sold.
 Unit - 4

Promotion means communicating with Individuals, groups, or

organizations directly or indirectly facilitate exchanges by informing
and persuading one or more audiences to accept an organisation’s
Products, service & ideas.

Promotion is the business of communicating with customers. It

provides information that assists them in making a decision to purchase
a product or service.
 Unit – 4
Role / Objectives of Promotion in Marketing

1. Create awareness

2. Stimulate Demand

3. Encourage Product Trial

4. Identify Prospects

5. Retain Loyal customers

6. Facilitate Retailer Support

7. Combat Competitive Promotional Efforts

8. Reduce Sales Fluctuations

 Unit – 4

Integrated Marketing Communications (IMC):

IMC is a process for planning, executing and monitoring the brand
messages that create customer relationships.

IMC is a concept of Marketing communication planning that recognizes the

added value of a comprehensive plan that evaluates the strategic roles of a
variety of communication discipline.
– American Association of Advertising Agencies

IMC may be considered as the essential “P” of Marketing mix i.e.,

Promotion. It inspires & influences the Purchase decisions.
 Unit – 4

Integrated Marketing Communications (IMC):

Objectives:

✔ Behaviour Modification
✔ Objective to create awareness
✔ Objective to Persuade
✔ Objective to Remind
✔ Specific Objectives (shift the demand curve to upward position)
 Unit – 4

Scope / Elements of IMC

1. Advertising
2. Sales Promotion
3. Publicity
4. Personal Selling
5. Direct Marketing and Direct Response Method
6. Event Management
7. E-Commerce
8. Corporate Communication
9. Public Relations
10. Media Relations
11. Community, Industrial , Government , Employee Relations
12. Crisis Management
13. Trade Fairs and Exhibitions
 Unit – 4

IMC components :

✔ The foundation (Close view of the Market conditions, Target Customers,

Competitor’s Product, preparing the Mission for IMC)

✔ Advertising tools (Launching the Ads, choosing the medium, creating

awareness, supporting & driving sales)

✔ Promotional tools (Promoting Sales / Revenue, Ensuring the presence in

market, Promotions – Trade, Consumer promotions)

✔ Integrated tools (Measure IMC performance, Combining the IMC efforts,

Integrating Manual efforts with Technological support – Internet/Online)
 Unit – 4

IMC Planning Process:

Marketing Plan: Review &
Objective Setting

Situational Analysis
(Internal & External)

Decision of Communication Process

IMC Apportionment (Budget)

Developing the IMC

(Considering the view points of
All involved in Marketing)

Monitoring & Evaluation

 Unit – 4

The Value of IMC plans:

IMC Plans need to be implemented & controlled efficiently in order to
realise the essence of the efforts taken towards formulating the Plans.
The Value of IMC plans can be gauged & analysed while considering
following aspects:

⮚ Information technology,
⮚ Changes in channel power,
⮚ Increase in competition,
⮚ Brand parity,
⮚ Integration of information,
⮚ Decline in the effectiveness of mass-media advertising;
 Unit – 4

The Role Marketing Communication:

The Marketing Communication functions support every aspect of the

Marketing efforts, their Roles may get established in the following areas:

⮚ Marketing & Promotion

⮚ Market Strategy & Analysis
⮚ Target Marketing Process
⮚ Marketing Mix
 Unit – 4

Challenges in IMC:
The communication plans at the Organisation face
a huge challenge
through its internal & external environment. Here are a few possible
challenges that an IMC effort may experience:

⮚ Support of Top Management

⮚ Budget Allocation
⮚ Cultural Barriers
⮚ Lack of IMC Planning & Expertise
⮚ Fear of Change
 Unit No. 4

Communication / Promotion Mix Elements -

Advertising,
Sales Promotion,
Personal Selling,
Public Relations,
Direct Marketing
Promotion Mix

Promotion Mix

Advertising

Sales Promotion
Products
Events & Experiences Distribution Target
Company Channel Customer
Services
Price Public Relation

Direct Marketing

Personal Selling

Promotion Mix Model

 Unit – 4
Advertising

Any paid form of nonpersonal communication about an

organization, product, service, idea or cause by an identified sponsor.

Advertising is mass communication of

information intended to persuade buyers so as to maximize profits.

As per Copeland, “Advertising is all non-personal methods of

stimulating the sales and of increasing or retaining patronage”.

As per Gardner, “Advertising is a means of mass selling that

has grown up parallel with and has been made necessary by mass
production”.
 Unit – 4
Advertising

Types of Advertising:

✔ Print Advertising – Newspapers, Magazines, Brochures,

Fliers.
✔ Outdoor Advertising – Billboards, Kiosks, Tradeshows
and Events the
✔ Broadcast advertising – Television, Radio and
Internet
✔ Covert Advertising – Advertising in Movies
✔ Surrogate Advertising – Advertising Indirectly
✔ Public Service Advertising – Advertising for
Social Causes
✔ Celebrity Advertising – Advertisements by
involving Celebrities
 Unit – 4
Advertising

5 M’s of Advertising:

✔ Mission: What are the advertising objectives & sales

Goals?

✔ Money: How much can be spent?

✔ Message: What message should be sent?

✔ Media: What media should be used?

✔ Measurement: How should the results is

evaluated?
 Unit – 4 Sales Promotion

Sales Promotion:

Sales Promotion is the Marketing function that offers a tangible added

value designed to motivate and accelerate a response.

Sales Promotion:

Sales Promotion refers to those sales activities that supplement both

personal selling & & Co-ordinate them & help to make them effective,
such as displays, shows & expositions, demonstration and other non
recurrent selling efforts not in the ordinary routine.
-- American Marketing Association
 Unit – 4 Sales Promotion

Types of Sales Promotion:

✔ Consumer Promotion
✔ Trade Promotion

Objectives of Sales Promotion:

✔ Disseminating Information
✔ Help to Salesmen
✔ Increasing Sales

Advantages of Sales Promotion:

✔ Enhance Acceptability
✔ Effective Sales Support
✔ Effective Control
✔ Low Unit Cost
 Unit – 4 Sales Promotion

Introduce New Get Existing

Products Customers to
Buy More

Combat Attract New

Competitio
Competitio
n New
n Customers
Sales
Enhance Promotion Maintain Sales
Personal Selling Sales
In Off In
Season
Off
Selling Season

Tie In Increase Retail

Advertising & Inventories
Personal
Personal Selling
Selling
 Unit – 4 Sales Promotion - Tools of Sales Promotion

Coupons
Coupons
Samples
Samples Trade
Allowances
Premiums
Premiums
POPDisplays
POP Displays
Contests
Contests
Refunds/Rebates Training
Training
Refunds/Rebates Programs
Programs
BonusPacks
Bonus Packs Trade
Trade
LoyaltyPrograms
Loyalty Programs Shows
Shows
Coop
Events
Events Coop
Advertising
Advertising
• Consumer-oriented ● Trade-oriented
[For end-users] [For resellers]
 Unit – 4 : Sales
Promotion
Coordinating Sales Promotion and Advertising:

Advertising is the important element of Promotion Mix and Sales

Promotion is a supporting approach that considers the medium of
Advertising.

Awareness of Product

Dominant Impact of
Positioning Advertising

Providing Choice

Creating Desire
Dominant Impact of
Promotion
Actual Purchase
 Unit 4 Personal Selling

Direct person-to-person communication whereby a seller attempts

to assist and/or persuade perspective buyers to purchase a
product or service.

Advantages of Personal selling Disadvantages of Personal

selling
❑Direct contact between buyer ❑ High costs per contact
and seller allows for more
flexibility ❑ Expensive way to reach large
audiences
❑Can tailor sales message to
specific needs of customers ❑ Difficult to have consistent
and uniform message
delivered to all customers
❑Allows for more direct and
immediate feedback

❑Sales efforts can be targeted to

specific markets and customers
 Unit 4 Principles
Personal Selling

Personal selling is one of the tools of Promotion. To be successful is

personal selling salesman must have a thorough knowledge about the
product, familiarity with the company, motivation & commitment.

Principles of Personal Selling:

Three major aspects of Personal Selling:

1. Professionalism
2. Negotiation
3. Relationship Marketing
 Unit 4 - Personal Selling

Types of Selling Job:

✔Just Delivery (Delivery man of Soft drinks bottles, Newspaper, Gas

Cylinder, Petrol Pumps, Milk Man)

✔ Order Takers (Hardware shops, Retail shops, waiters)

✔Missionaries (Medical Representatives, Regional Sales people of

Mobile companies)

✔Sales Engineers (Sales people with good technical knowledge –

Representative from Philips)

✔ Creative Selling (Computer sales men, Concept sellers )

 Unit 4 - Personal Selling

Personal Selling Process:

Pre-approach Need
Prospecting Approach
planning the sale Assessment

Presentation & Meeting Gaining

Follow up
Demonstration Objections Commitment

Personal Selling Process

 Unit – 4 Public
Relations
Public Relations:

Public Relations involves a variety of programs designed to

promote or protect a company’s image or its individual
products.

Functions of Public Relations Department:

✔ Press Relations
✔ Product Publicity
✔ Corporate Communication
✔ Lobbying
✔ Counseling
 Unit – 4 Public Relations

Customer Shareholder
s
Public
Relatio
n

Employees Community

Parties Involved in Public Relation

 Unit – 4 : Public Relations

Media Relations:
Media Relations is an important part of Publicity which refers to
maintaining a positive professional relationship with the Media.

Gatekeepers:
These are the editors and reporters who select (or reject)
stories for their Publications or stations based on what they
think will Interest their audiences. Gatekeepers manage the flow
of information through the media channels.
Direct Marketing

Direct Marketing is the use of consumer-direct

(CD) channels to reach & deliver goods & services to
consumers without using marketing middlemen.
Direct marketing is concerned with establishing
an individual relationship between the business offering
a product or service and the final consumer.
Direct marketing is the “Demassification” of the
Market Direct Marketing may be called as “Non–Store
Retailing ”
Benefits of Direct Marketing

1. Direct Contact with Consumer.

2. Individual attention to consumer.

3. Deliver Perfect solutions to customer problems & query.

4. Facilitates sharper segmentation & targeting.

5. End to end communication.

6. Cost effective.

7. Customer Relationship building.

8. Benefits to Consumer.
Forms / Ways / Medias / channels/ Tools
of Direct Marketing

1. DIRECT MAIL

2. CATALOG
MARKETING

3. TELEMARKETING

4. TELEVISION &
RADIO

5. KIOSK MARKETING

6. INTERNET
 Unit – 4

Corporate Advertising
Corporate Advertising primarily aims at the image building exercise for the
Organisation. The focus is not on the product of the Organisation but on the
overall development of the brand value / Image. Majorly such exercises are the
paid efforts by the company.

Such efforts may be executed through the following ways:

✔ Public Relations
✔ Company Identity / Image building Advertisements
✔ Support to a Cause (CSR)
✔ Recruitment Advertisements

Corporate Advertising is a promotional tool for Organisation to gain Repute &

Goodwill. However the same may not be considered as substitute to Quality &
performance.
 Unit – 4
Advertising Design
Advertising Design:

The Effectiveness of Advertising depends on how message is designed and framed.

The decision regarding message content, message format, and message source
depends upon factors like Competition, Consumer characteristics, Buyer Behaviour,
product features, legal factors, Budgeting etc.

AIDA Model:

A – Attention: To start the communication attention must be to attract

Buying motive & the product quality of satisfying wants.

I – Interest: Interest in the customers mind for communication, discussion, product,

service, idea. From interest curiosity is generated

D – Desire: Ignite the desire. The salesmen must

use his power of persuasion & conviction to create
an urge to buy

A – Action: It means gaining order. The culmination of actual 1st 3 stages should be
Qualities of Good Salesmen

Physical
⮚ Good physical appearance
⮚ Well built & free from physical defects
⮚ Good glooming, appropriate dress, clean & tidy
appearance
⮚ Cheerful smile
Social
⮚ Good social behaviour
⮚ Manners & etiquettes
⮚ Practice of greeting thanking the
customer
⮚ Polite expression & sincere desire
Qualities of Good Salesmen

Mental
⮚ Sharp memory & observation
⮚ Recognise consumer by their character, buying
motive,
⮚ Imagination.
⮚ Must handle difficult situation individually

Moral or Character
⮚ Honesty & integrity
⮚ Customer must rely on salesmen
⮚ Hair & honest dealing
⮚ Loyal to company as well as consumer
 Unit No. 4

Promotional Push & Pull Strategies:

A push promotional strategy involves taking the product directly to the

customer via whatever means, ensuring the customer is aware of your
brand at the point of purchase. This attracts massive advertisements &
promotional efforts. This is possible for a newly launched product as well
as a product into its decline phase.

A pull strategy involves motivating customers to seek out your brand in

an active process. This is a milder approach as against the Push strategy.
This is resultant of Branding approach & implementing schemes.
"Push" Techniques

⮚ Point of sale displays, racks, stands

⮚ Trade deals, special displays
⮚ Dealer premiums, prizes, gifts
⮚ Cooperative advertising deals
⮚ Advertising materials, mats, inserts
⮚ Push money or "spiffs"
⮚ Collaterals, catalogs, manuals
⮚ Trade shows, conventions, meetings
"Pull" Techniques

⮚ Sampling, free trial

⮚ Coupons
⮚ Premiums or gifts
⮚ Contests, sweepstakes
⮚ Price-off deals
⮚ Refunds/rebates
⮚ Frequency/loyalty programs
⮚ Point-of-purchase advertising
 Push Versus Pull

Push Policy Pull Policy

Producer Producer

Wholesaler Wholesaler

Retailer Retailer

Consumer Consumer

Information Flow
Impact of Technology & Internet on Promotion

Over the years, the technology is improving day

by day it is said that in technological world

“whatever New you heard yesterday is old for Today ”

Technology is growing very fast & every Org. is

trying to match up with, new updated technology then
how come Promotion be idle.
Steps in Developing Effective Communication

Identify Determine Design Select

Target Market Objectives Comm’n Channel

Establish Decide on Measure Manage

Budget Media Mix Result IMC

Developing Effective Communication

Steps in Developing Effective
Communication
1. Identify Target Market Audience
⮚ Market Segmentation
⮚ Is the target new to the category ?
⮚ Is the target loyal to the brand, loyal to a competitor ?
⮚ What to say, How to Say, When to say, Where to say & whom to say.
⮚ Targeting the segment as per their Awareness level about
product

Never Heard of Know a Know a Know very

Heard of only Little Bit Fair Amount well

2. Determining the Communication Objectives

1. Create awareness 2. Stimulate Demand
3. Encourage Product Trial 4. Identify
Prospects 6. Facilitate Retailer Support
5. Retain Loyal customers
Promotional Efforts
7. Combat Competitive
Steps in Developing Effective Communication
3. Design the Communications
‘Formulating the communications to achieve
the desired
⮚ Message Strategy (What to Say)
response will require solving three problems.
⮚ Creative Strategy (How to say)
⮚ Message source (Who should say)

1.Message Strategy (What to say)

Management searches for appeals,
themes, or ideas that
will click customers mind.

Surf Excel - Dag acchhei hai

Airtel - Express yourself
idea - can Change your life
Steps in Developing Effective Communication
3. Design the Communications
2.Creative Strategy
Creative strategies are how marketers translate their message into
a specific communication .

1. Informational
⮚ elaborate on product or service attributes or benefits.
e.g. Problem solution ads – Saradon Stop headache quickly
Product demonstration – Godrej washing machine

2.Transformational
⮚ Elaborates on non-product related benefit.
⮚ Communicator use positive appeal such Prestige,
as
Feeling
⮚ Negative appeal such as fear guilt & shame.
e.g. Bajaj Pulsar depict relatively
Steps in Developing Effective Communication
3. Design the Communications
3. Message Source
⮚ Message Delivered by Attractive & Popular Sources
can potentially achieve higher attention and recall.
Audio, Audio-Video, Print Medias

Celebrity Endorsement :-
When a Company uses any well-known / Popular
/ Famous Celebrity to promote it’s product in the market to
attack on customer psychology & attract them towards products
is called as Celebrity Endorsement.
Steps in Developing Effective Communication
4. Select The Communication Channel
1. Personal Communication Channel
⮚ Direct Face to Face
⮚ On Telephone
⮚ By Email

2. Non – Personal
⮚ Media
⮚ Sales Promotion
⮚ Events & Exhibition
⮚ Public Relation
Steps in Developing Effective Communication
5. Establishing Budget
This is One of the Most difficult marketing decision is
determining how much to spend on promotion.
“It is said that Half of the Promotion expenses are wasted but
nobody knows which half ”
Methods
1. Affordable Method
⮚ The Level of company affordability
⮚ Here the role of promotion as an Investment towards sales
volume is totally ignored
⮚ Emphasis on Short term instead Long term

2. Percentage of Sales Method

⮚ In the proportion or In percentage of sales
⮚ Past or Anticipated sales
⮚ Through this we can understand th relationship among
Promotion cost, selling, price and profit
⮚ But discourages for extra spending or aggressive promotion
Steps in Developing Effective Communication
5. Establishing Budget

3. Competitive – Parity Method

⮚ Studding the Competitions Promotional Budget
⮚ Spending the same amount
⮚ Which prevents Promotion war
⮚ Companies reputation, resources, opportunities and
Objectives are neglected.

4. Objective and Task Method

⮚ Objectives are defined
⮚ Task is determined to achieve such objectives
⮚ & cost is estimated to perform such task
Steps in Developing Effective Communication
6. Deciding on a Marketing Communication Mix
⮚ Advertising
⮚ Sales Promotion
⮚ Public Relation
⮚ Event & Exhibition
⮚ Direct Marketing
⮚ Personal Selling
7. Measuring Communication Result
⮚ It is necessary to know the outcome & Revenue resulting from
Promotion Investment
⮚ Calculation of…..
reach & frequency, recall & recognition sores, persuasion
changes and cost per thousand calculation
⮚ Questions to the Target Audience.....
⮚ Whether the recognize or recall the message ,
⮚ How many times they saw it ?
⮚ What points they recall ?
⮚ How they felt about the Message ?
Steps in Developing Effective Communication
8. Managing Integrated Marketing
Communication

IMC is a concepts of marketing comm’ns planning that

recognises the added value of a comprehensive plan.
Such plan evaluates the strategic roles of variety of comm’n
disciplines e.g. general advt., direct response, sales promotion and
public relation and
combine these discipline to provide clarity , consistency, and
maximum impact through the seamless integration of the message.

IMC emphasises on 360 degree approach

1. Coordinating Media
2. Implementing IMC
Impact of Technology & Internet on Promotion

1. Web site

2. Internet

3. E-mail communication

4. Corporate Blogs

5. Online Advt

6. Online Transaction (Buying & selling)

⮚ B2B , B2C

7. Online Survey

8. Cost Effective

9. Time Saving
Thank you
 Unit 5

Product Level Planning

Chapter Tour

Preparation & evaluation of a product level marketing plan

Nature & contents of Marketing Plans - Executive Summary,

Situation Analysis, Marketing Strategy, Financials, Control.

Marketing Evaluation & Control - Concept, Process & types of

control - Annual Plan Control, Profitability Control,
Efficiency Control, Strategic
Control, Marketing audit.
 Unit 5

Preparation & evaluation of a Product level

marketing plan

Marketers Need to Prepare and Evaluate the plans to be prepared

for the every level in Marketing. Ideally there are Five Levels of
product – Core, Basic, Expected, Augmented & Potential.

Strategies in place for all these levels will be handy for the
marketers.
Five Product Levels

Potential product – all possible

Augmented product – fresh flowers
Expected product – clean bed
Basic product – hotel room
Core benefit - Sleep

4
Product Levels
1. Core Product :-
Fundamental Need or a Basic Need
e.g. Hotel Room booking – Rest & Sleep

2. Generic Product :-
Basic Version of Product
e.g Building with rooms & rent

3. Expected Product :-
Set of attributes & Conditions that a buyer
normally expect & agree to when they purchase a Product .
e.g. Clean bed, Soap, Towel, Telephone.

4. Augmented Product :-
Additional Service, more than expectation
e.g. TV set, Fresh flowers, e-Payment Facility & etc.

5. Potential Product :- All Possible 5

Planning

Marketing Plan:

“A Marketing Plan is a written document detailing the

current situation with respect to customers, competitors and the
external environment and providing guidelines for objectives,
marketing actions and resource allocations over the planning
period for either an existing or a proposed product or service.”
Planning

Contents of Marketing Plan: (Exercise for Students)

1. Executive Summary
2. Current Situation and Trend / Market Analysis
3. Performance Review (for existing product)
4. Key Issues / Competitor Assessment /
Product Analysis
5. Objectives (Goals for Market Profit &
Share, Sales Volume)
6. Marketing Strategy / Action Plans
7. Forecast and Budget
8. Implementation and Control
9. Contingency Plan (ETOP analysis)
Planning
Introduction to Marketing Strategy:
Strategy

“A strategy is a fundamental pattern of present and planned

objectives, resource deployment and interactions of an
organisation with markets, competitors and other
environmental factors.”

• The Hierarchy of Strategy:

1. Corporate Level Strategy

2. Business Level Strategy
3. Functional Level Strategy
 Marketing Planning

Strategy formulation and implementation grid:

Adequate
Strategy Formulation

Trouble Success

Failure Rescue or Ruin

Poor

Poor Adequate
Strategy Implementation
 Marketing Strategy Implementation

Implementation of Marketing Strategy:

A well formulated strategy requires a proper implementation.

Implementation means actually performing on the plans prepared for the execution.
One of the major threats in business is poor implementation of a well thought plan.

Success: When a strategy is well formulated and well implemented it is

likely to achieve success.

Failure: When strategy is poorly formulated and poorly implemented then not
surprisingly it results into failure.

Trouble: Strategy that is adequately formulated but poorly implemented

leads to trouble.

Rescue or Ruin: Strategy that is poorly formulated but well implemented leads to
rescue or ruin.
Control
Introduction

Control is one of the managerial functions like planning,

organizing, staffing and directing.

It is an important function because it helps to check the

errors and to take the corrective action so that deviation from
standards are minimized and stated goals of the organization are
achieved in desired manner.

According to modern concepts, control is a foreseeing action

whereas earlier concept of control was used only when errors
were detected.

Control in management means setting standards, measuring

actual performance and taking corrective action.
Control
Definitions

According to Henry Fayol,

Control consists of verifying whether everything occurs in
conformity with the plan adopted, the instructions issued, and
principles established. It‘s object is to point out weaknesses and
errors in order to rectify [them] and prevent recurrence.

According to Harold Koontz,

Controlling is the measurement and correction of
performance in order to make sure that enterprise objectives and
the plans devised to attain them are accomplished.
Marketing Control

Marketing Control is a process of

minimizing the deviation of marketing
performance from planned levels of
activity & expected results.
Marketing Control

⮚ Tool for ensuring the marketing programmes

that and
activities objectives
marketing of the are always directed
firm towards its
⮚ It involves gathering information on marketing performance
and comparing it with the planned or budgeted performance.

⮚ It provides feedback and exercises a restraining or redirecting

influence.
Marketing Control

Speedy Feedback and speedy corrective action are the two

important factors towards better marketing control.

It should monitor all Key Result Areas of Marketing

1. Sales Volume
2. Market Share
3. Marketing Costs
4. Profitability
5. Productivity of channel/promotion/sales force & etc…
Characteristics of Control

⮚ Control is a management process

⮚ Control is a continuous process

⮚ Control is implemented in each level of

organizational hierarchy
⮚ Control is forward looking

⮚ Control is closely linked with planning

⮚ Control is a tool for achieving organizational activities

Marketing Control

• Marketing control: the process of

– Setting goals
– Measuring performance
– Evaluating performance
– Taking corrective action

Setting goals What do we want to achieve?

Measuring performance What is happening?

Evaluating performance How & Why is it happening?

Analysing deviations &

What should we do about it?
Taking corrective action

The Control Process

 Unit - 5

Marketing Strategy Control / Assessment

Controlling is the essential function of the management. All marketing
strategies pass through the controlling process so as to ensure the effectiveness of the
strategy implemented.
Steps in Control Process:

Possible outcome #1 Corrective

15% market share Action

Evaluate
Set standards Take
Standards against action
(25% market share)
reality

Possible outcome # 2 30% Reinforcing

market share Action
Evaluation & Control

Types / Tools and Techniques of Marketing Control

1. Annual plan control

2. Profitability control

3. Efficiency control

4. Strategic control

5. Marketing Audit
1. Annual plan control

• The main Task of Annual Plan is to achieve the Org.

Objectives

Five ways of Evaluation

1. Sales Analysis
2. Market Share Analysis
3. Market Expense to Sales Analysis
4. Financial Analysis
5. Customer Satisfaction
1. Annual plan control

2. Profitability control

3. Efficiency control

4. Strategic control

5. Marketing Audit
1. Annual plan control

1. Sales Analysis
⮚ Comparison of Actual sales & Std. Sales
⮚ Deviation is calculated

2. Market Share Analysis

⮚ Company Sales vis-à-vis Competitors sales
⮚ Own sales to total market share

3. Market Expense to Sales Analysis

⮚ How much a company has spend to achieve 1. Annual plan control

it’s Sales goals 2. Profitability control

⮚ Under spending & Overspending
3. Efficiency control

4. Strategic control

5. Marketing Audit
1. Annual plan control

4. Financial Analysis
⮚ Overall Profitability of the company
⮚ Comparison of profit to sales
⮚ Comparison of sales to assets
⮚ Comparison of Profit to assets

5. Customer Satisfaction
⮚ Customer Complaints
⮚ Customer panel
⮚ Customer Survey
⮚ Customer satisfaction 1. Annual plan control

2. Profitability control

3. Efficiency control

4. Strategic control

5. Marketing Audit
2. Profitability control

• The strategic profit model is a useful technique for profitability

control. i.e. the financial performance in terms of profits and
return on investment. (ROI)

To analyse Profitability of
– Product
– Channel
– Order Size & etc….

This Helps Company in

1. Annual plan control
– Expansion, Reduction, Elimination of Product
2. Profitability control

3. Efficiency control

4. Strategic control

5. Marketing Audit
3. Efficiency and effectiveness control

• Efficiency control is used to increase productivity in marketing

activities. It focus on the sales volume, sales generated by
salesperson, number of accounts handled by each sales person,
etc.

• Customer satisfaction is one measure of effectiveness in selling.

Conducting customer satisfaction surveys, tracking customer
attitudes, and analyzing customer feedback are some of the
activates that help to assess the marketing effectiveness.

1. Annual plan control

2. Profitability control

3. Efficiency control

4. Strategic control

5. Marketing Audit
4. Strategic controls

• Schreyogg and Steinmann define strategic control as “

the critical evaluation of plans, activities, and results ,
thereby providing information for future action”

• According to John F. Preble , strategic control has four

components: premise control, implementation control,
strategic surveillance, and special alert control

1. Annual plan control

2. Profitability control

3. Efficiency control

4. Strategic control

5. Marketing Audit
 5. Marketing Audit

“The marketing audit has been defined by Phillip Kotler as a

comprehensive, systematic, Independent and Periodic
examination activities and resources in order to determine
problem areas and opportunities and to recommend a plan of
action.”

According to definition of Phillip Kotler, it can be identified some

characteristics of marketing audit.

✔ Comprehensive
✔ Systematic
1. Annual plan control
✔ Independen 2. Profitability control
t
3. Efficiency control
✔ Periodic
4. Strategic control

5. Marketing Audit
 Characteristics

1. Comprehensive
The marketing audit covers all the major marketing issues facing
an org., and not only one or a few marketing trouble spots. The
latter would be called a functional audit if it covered only the
sales force, or pricing, or some other marketing activity.

2.Systematic
The marketing audit an orderly sequence
involves diagnostic steps organization's
of marketing
environment,
covering
internal marketing
the system, and specific marketing
activities. The diagnosis is followed by a corrective action plan
involving both short-run and long-run proposals to improve the
markets.
 Characteristics

3. Independent
The marketing audit is normally conducted by an inside or
outside party who has sufficient independence from the
marketing department to attain top management's confidence
and the needed objectivity.

4. Periodic
The marketing audit should normally be carried out periodically
instead of only when there is a crisis. It promises benefits for the
organization that is seemingly successful, as well as the one that
is in deep trouble.
 Marketing Audit

Benefits /Advantages

1. The audit provides the marketers with an in depth view of the

marketing activities that are going around in the concern. It brings out
a complete picture of the entire operations of the concern. While
revealing the various drawbacks the audit process also leads to
efficiency. This process can also be used to lay down an improved
marketing plan.

2. A marketing audit can help a company refine its business practices

and improve its productivity and profitability.

3. Marketing audit helps to marketing executives, top management and

investors to ensure that they are doing the right things to help drive
growth for their organizations.
 Marketing Audit

4. A marketing audit is a careful examination and evaluation of

marketing practices and results. It offers a baseline for performance
measurements and a framework for effective business planning to
maximize positive external perception and demand generation.

5. An audit helps the company determine the value of a sale and

a sales lead.

6. There are no permanent "right" answers in marketing. Customers'

needs and wants are moving targets, and marketing programs require
testing and retesting to find the most profitable formula. A marketing
audit is the way to achieve success by providing an interim report
card to help the company and their staffs tap into inherent resource.

7. Marketing audits often lead to strategic marketing change.

Careful assessment of the changing environment, customers, channels,
and competitors may lead to a reassessment of firm direction,
 Component of Marketing Audit

1. Environmental Audit
❖ Macro Environmental Audit
❖ Task Environmental Audit

2. Marketing Strategy Audit

3. Marketing Organization Audit

4. Marketing System Audit

5. Marketing Productivity Audit

6. Marketing Functions Audit

Component of Marketing Audit

1. Environmental Audit
The auditor is firstly start their audit by looking at the factors
that affect all companies operating in marketplace, and also
looking at their customers and their profits.

Under marketing environment audit, following two

environments are concerned, because these are very important
under the marketing audit.

❖ The macro-environment
❖ The task / Internal/ Micro environment
 1. Marketing environment
audit.
Macro environment.
o Demographic.
o Economic.
o Ecological.
o Technological.
o Political.
o Cultural

Task / Internal/ Micro environment

o Markets.
o Customers.
o Competitors.
o Distribution & dealers.
o Suppliers.
o Facilitators & marketing firms.
o Publics.
 Component of Marketing Audit
2. Marketing Strategy Audit
The marketing strategy audit is vital for company, and the marketing
audit is make sure that the company’s marketing strategy is fit with
company’s marketing goals and objectives as well as corporate
goals and objectives.

Under the marketing strategy audit, the auditor evaluate marketing

performance by evaluating marketing goals and objectives,
company mission the move to the strategy of organization.

Under strategy evaluation, the auditor may concern following type of

questions:
❑ Has the management articulated a clear marketing strategy for achieving its
marketing objectives?
Is the strategy convincing?
Is the company using the best basis for market segmentation?
Does the company have clear criteria for rating the segments?
Has the company developed an effective positioning and marketing mix for
each target segment?
 Component of Marketing Audit

3. Marketing Organization Audit

The marketing organization audit is mainly considered for
effectiveness of the organization activities as well as efficiency of
operation of company. Here all the activities and main management
functions are considered such as manufacturing, purchasing,
financing as well as research and development. Here the marketing
auditor must make sure that the company has actually achieved the
effectiveness within the organization and also within the marketplace.

And also following types of questions are considered by marketing

auditors:
o Are there good communications and working relations between
marketing and sales?
o Is the product-management system working effectively?
o Are product managers able to plan profits or only sales volumes?
 Component of Marketing Audit

4. Marketing System Audit

Here the marketing auditor is considered whether the company is
using appropriate marketing systems to collect the information,
plan the activities, control the operations and to maintain smoothly
their day to day activities and whether these systems are properly
worded within the company or not. Those are the main things, the
marketing auditor must consider under marketing systems audit.

Today, most of the Organizations are having different type of marketing

systems to collect the information and control the operation. Such as
marketing information systems, marketing planning systems, marketing
control systems and new product development systems. These systems
have its own functions.

Here the marketing auditor task is to make sure whether the systems
are properly worked or not.
 Component of Marketing Audit

4. Marketing System Audit

o Marketing information system.

o Marketing planning system.

o Marketing controlling system.

o New product development system.

Component of Marketing Audit

Marketing Productivity Audit

Most of the companies are operating to earn so much of profits. The
marketing productivity audit is focused to evaluate the company profits
and revenue. So the marketing productivity audit is very important to
evaluate the marketing performance. The marketing auditor is used
profitability analysis and cost effectiveness analysis for their evaluation
process.

Under the marketing productivity audit, following type question asked

by marketing auditor:
o What is the profitability of the
company's different products, markets, territories and channels
of distribution?
o Should the company enter, expand, contract or withdraw from any
business segments?
o Do any marketing activities seem to have excessive costs?
o Can cost-reducing steps be taken?
 Component of Marketing Audit

Marketing Functions Audit

Under the marketing function audit, the auditor is using marketing mix
elements to analyze company functions such as product, price, place and
promotion. Here marketing auditor evaluates marketing performance by asking
questions under product, price, place and promotion such as
o What are the company's product-line objectives?
o Which products should be phased out?
o Which products should be added to?
o What are the company's pricing objectives,
policies, strategies and
procedures?
o To what extent are the prices set on cost, demand and competitive criteria?
o Do the customers see the company's prices as being in line with the value of its
offer?
o What are the organizations’s advertising objectives?
o Is there adequate market coverage and service?
o Should the company consider changing its distribution channels?
o Is the right amount being spent on advertising?
o What do customers and the public think about the advertising?
 Component of Marketing Audit

Marketing Functions Audit

o Product.
o Price.
o Distribution.
o Advertising sales promotion publicity.
o Sales force
The Marketing Audit Process

Review background materials / Identify the objectives,

scope, and methodology

Gather information

Perform analysis and develop

alternatives / Preparing & presenting
the Report
The Marketing Audit Process

Step I

Review background materials /

Identify the objectives, scope, and methodology

✔ Financial results, organization chart, business plans.

✔ Interview management and core facilities

✔ Ride with salespeople and visit customers

✔ Hold interim meetings to discuss findings and likely alternatives

The Marketing Audit Process

Step II

Gather information:

✔ Additional management and salesperson interviews

✔ Interview and written surveys with customers and trade

✔ Internal written survey

✔ Outside expert interviews

✔ Competitor interviews

✔ Product costs and profits, sales results, marketing budgets

The Marketing Audit Process

Step III

Perform analysis and develop

alternatives / Preparing & presenting the
Report

✔ Hold work sessions to develop marketing strategy and

next steps for implementation.
✔ Prepare notes for visual & verbal Presentation

✔ Submission of final Report

Tools of Marketing Audit

1. SWOT
2. PEST
3. Five Force Model
Tools of Marketing Audit
Strengths
Internal characteristics of the business, or project team
that give it an advantage over others

Weaknesses
Internal characteristics place the team at
that a
disadvantage relative to others
Opportunities
External chances to improve
performance (e.g. make greater profits) in the
environment

Threats
External elements in the environment
 Tools of Marketing Audit - SWOT

Strengths

✔ Your specialist marketing expertise

✔ A new, innovative product or service

✔ Location of your business

✔ Quality processes and procedures

✔ Any other aspect of your business that adds value to your product
or service
 Tools of Marketing Audit - SWOT

Weaknesses

Χ Lack of marketing expertise

Χ Undifferentiated products or services (i.e. in relation to

competitors) Χ Location of your business

Χ Poor quality goods or services

Χ Damaged reputation
 Tools of Marketing Audit - SWOT

Opportunities

✔ A developing market such as the Internet.

✔ Mergers, joint ventures or strategic alliances.

✔ Moving into new market segments that offer improved profits.

✔ A new international market.

✔ A market vacated by an ineffective competitor.

Tools of Marketing Audit - SWOT

Threats

⮚ A new competitor in your home market.

⮚ Price wars with competitors.

⮚ A competitor has a new, innovative product or service.

⮚ Competitors have superior access to channels of distribution.

⮚ Taxation is introduced on your product or service.

Economic
 Tools of Marketing Audit - PEST
Political
Political factors can have a direct impact on the way business
operates. Decisions made by government affect the operations of
units within the company to a varying degree.

Political refers to the big and small ‘p’ political forces and influences
that may affect the performance of, or the options open to the unit
concerned.

The political factors have a huge influence upon the regulation of

public and private sector businesses, and the pending power of
consumers and other businesses.

Political factors include government regulations and legal issues

and define both formal and informal rules.
Tools of Marketing Audit - PEST

Economical
All businesses are affected by economical factors nationally and
globally. Whether an economy is in a boom, recession or recovery
will also affect consumer confidence and behavior.

This will impact upon the nature of the competition faced by the
company and particular units within the company, upon service
provision, and upon the financial resources.

Economic factors affect the purchasing power of potential

customers, and the state of the internal/external economy in the
short and long-term.

The unit may need to consider: economic growth, interest rates,

inflation rate and inflation rate.
Tools of Marketing Audit - PEST

Social

Social factors will include the demographic changes, trends in the

way people live, work and think and cultural aspects of the macro
environment.

These factors affect customer needs and the size of potential

markets such as population growth rate, age distribution, career
attitudes, internal/external emphasis on safety and
internal/external attitudes to change.
 Tools of Marketing Audit - PEST
Technological
New approaches to doing new and old things and tackling new and old
problems do not necessarily involve technical factors, however,
technological factors are vital for competitive advantage, and are a major
driver of change and efficiency.

Technological; factors can for example lower barriers to entry, reduce

minimum efficient production levels, and influence outsourcing decisions.

New technology is changing the way business operates. The Internet is

having a profound impact on the strategy of organizations.

Technological revolution means a faster exchange of information

beneficial for businesses as they can react quickly to changes within their
operating environment.

For examples automation, technology incentives, rate of technological

change, perception of technological change within the unit and
stakeholder expectation.
Tools of Marketing Audit – Porter’s Five
Force Model
 Tools of Marketing Audit – Porter’s Five
Force Model
The threat of substitute product

The existence of close substitute products increases the

propensity of customers to switch to alternatives in response to
price increases (high elasticity of demand).

– buyer propensity to substitute

– relative price performance of substitutes
 Tools of Marketing Audit – Porter’s Five
Force Model
The threat of New Entrance

Profitable markets that yield high returns will draw firms. This
results in many new entrants, which will effectively decrease
profitability. Unless the entry of new firms can be blocked by
incumbents, the profit rate will fall towards a competitive level
(perfect competition).

– The existence of barriers to entry (patents, rights, etc.)

– Economies of product differences
– Brand equity
 Tools of Marketing Audit – Porter’s Five
Force Model
Rivalry among the competitors
For most industries, this is the of
major determinant
competitiveness of the industry. Sometimes rivals compete aggressively
and sometimes rivals compete in non-price dimensions such the as
innovation, marketing, etc.
• Number of competitors
• Rate of industry growth
• Intermittent industry overcapacity
 Tools of Marketing Audit – Porter’s Five
Force Model
The Bargaining Power of Customer
The ability of customers to put the firm under pressure and it also
affects the customer's
• Sensitivity to price changes.
• Buyer concentration to firm concentration ratio
• Degree of dependency upon existing channels of distribution
 Tools of Marketing Audit – Porter’s Five
Force Model
The Bargaining Power of Supplier
Suppliers of raw materials, components, labor, and services (such as
expertise) to the firm can be a source of power over the firm. Suppliers
may refuse to work with the firm, or e.g. charge excessively high prices
for unique resources.

• Supplier switching costs relative to firm switching costs

• Degree of differentiation of inputs
• Presence of substitute inputs
• Supplier concentration to firm concentration ratio
 Problems Faced in Marketing Audit

1. Setting Objectives

2. Lack of co-operation from top mgmt

3. Data gathering

4. Non Implementation of suggestions

Thank You