Marketing Chapter PDF

chapter 10 Marketing Learning Objectives Where Do Companies Do Their Business? I...

chapter 10 Marketing Learning Objectives Where Do Companies Do Their Business? In the Markets or in the Society? After studying this chapter, It is an undisputed fact that a company’s survival you should be able to: does not depend upon its consumers alone, but a diverse set of stakeholders like the government, ¾¾ explain the meaning of religious leaders, social activists, NGOs, media, ‘marketing’; etc. Hence, earning the satisfaction of these segments is also as imperative as they add to the ¾¾ distinguish between power of the brand by word of mouth. ‘marketing’ and The social concern adds to the strength of the ‘selling’; brand. Corporates that embraced the deepest social values, have been successful in building ¾¾ l i s t o u t i m p o r t a n t powerful brand, and, eventually, robust customer functions of marketing; relationship. The area of corporate social justice fall under two broad categories. The issues such ¾¾ examine the role of as the nutrition of children, child care, old-age marketing in the homes, amelioration of hunger, offering aid to development of an those affected by natural calamities, etc. needing economy in a firm, instant attention with humanitarian perspective, to the society and to comes under the first category. consumers; The issues that contribute to making society a pleasant place to live in the long run, may be grouped ¾¾ explain the elements of under the second category. The issues which come marketing-mix; under this category are health awareness and aid, education, environmental protection, women’s ¾¾ classify products into employment and empowerment, preventing unjust different categories; discriminations (on the basis of caste, community, religion, ethnicity, race, and sex), eradication ¾¾ analyse the factors of poverty through employment, preservation affecting price of a of culture, values, and ethics, contribution to product; research, etc. Procter and Gamble’s (P&G) philosophy is that it ¾¾ l i s t o u t t h e t y p e s should lead the industry in implementing a global of channels of environmental programme. P&G is one of the distribution; and first companies in the world to actively study the influence of consumer products on the environment ¾¾ e x p l a i n t h e m a j o r and introduce concentrated products, recycled tools of promotion, viz. plastic bottles, and refill packages to the industry. P&G contributes to sustainable development advertising, personal and addresses environmental and social issues selling, sales promotion connected with its products and services. and publicity. Source: Adapted from ‘Effective Executive’ 2024-25 Ch_10.indd 242 10-08-2022 10:04:27  Marketing 243 The term marketing has been described pricing are required. All these activities by different people in different ways. are referred to as marketing activities. Some people believe that marketing is Thus, ‘merchandising’, ‘selling’ and same as ‘shopping’. Whenever they go distribution are all parts of a large out for shopping of certain products or number of activities undertaken by services, they describe it as marketing. a firm, which are collectively called There are some other people who marketing. confuse marketing with ‘selling’ and It may be noted here that marketing feel that marketing activity starts is not merely a post- production after a product or service has been activity. It includes many activities produced. Some people describe it to that are performed even before goods mean ‘merchandising’ or designing a are actually produced, and continue product. All these descriptions may be even after the goods have been partly correct but marketing is a much sold. For example, activities such broader concept, which is discussed as identification of customer needs, as follows: collection of information for developing Traditionally, marketing has been the product, designing suitable product described in terms of its functions or package and giving it a brand name are activities. In this respect, marketing performed before commencement of has been referred to as performance of the actual production. Similarly, many business activities that direct the flow follow up activities are required for of goods and services from producers maintaining good customer relations to consumers. for procuring repeat sale. As we know, most of the In modern times, emphasis is placed manufacturing firms do not produce on describing marketing as a social goods for their own consumption process. It is a process whereby people but for the consumption or use exchange goods and services for money by others. Therefore, to move or for something of value to them. Taking the goods and services from the the social perspective, Phillip Kolter has producer to consumers, a number of defined marketing as, “a social process activities, such as product designing by which individual groups obtain what or merchandising, packaging, they need and want through creating warehousing, transportation, offerings and freely exchanging products branding, selling, advertising and and services of value with others”. “Business is not financial science, it’s about trading, buying and selling. It’s about creating a product or service so good that people will pay for it.” — Anta Roddick “Marketing takes a day to learn. Unfortunately it takes time to master.” — Philip Kotler 2024-25 Ch_10.indd 243 10-08-2022 10:04:27  BUSINESS  STUDIES 244 Understanding Market In the traditional sense, the term ‘market’ refers to the place where buyers and sellers gather to enter into transactions involving the exchange of goods and services. It is in this sense that this term is being used in day to day language, even today. The other ways in which this term is being used is in the context of a product market (cotton market, gold or share market), geographic market (national and international market), type of buyers (consumer market and industrial market) and the quantity of goods transacted (retail market and wholesale market). But in modern marketing sense, the term market has a broader meaning. It refers to a set of actual and potential buyers of a product or service. For example, when a fashion designer designs a new dress and offers it for exchange, all the people who are willing to buy and offer some value for it can be stated to be the market for that dress. Similarly, market for fans or bicycles or electric bulbs or shampoos refers to all the actual and potential buyers for these products. Thus, marketing is a social process Needs are basic to human beings where in people interact with others, and do not pertain to a particular in order to persuade them to act in product. Wants, on the other hand, a particular way, say to purchase are culturally defined objects that are a product or a service, rather than potential satisfiers of needs. In other forcing them to do so. A careful analysis words, human needs shaped by such of the definition shows the following factors as culture, personality and important features of marketing: religion are called wants. A basic need 1. Needs and Wants: The process for food, for example, may take various of marketing helps individuals and forms such as want for dosa and rice groups in obtaining what they need for a South Indian and chapatti and and want. Thus, the primary reason or vegetables for a North Indian person. motivation for people to engage in the A marketer’s job in an organisation process of marketing is to satisfy some is to identify needs of the target of their needs or wants. In other words, customers and develop products and the focus of the marketing process is services that satisfy such needs. on satisfaction of the needs and wants 2. Creating a Market Offering: On of individuals and organisations. the part of the marketers, the effort A need is a state of felt deprivation involves creation of a ‘market offering. or feeling of being deprived of Market offering refers to a complete something. If unsatisfied, it leaves a offer for a product or service, having person unhappy and uncomfortable. given features like size, quality, taste, For example, on getting hungry, we etc; at a certain price; available at a become uncomfortable and start given outlet or location and so on. Let looking for objects that are capable of us say the offer is for a cell phone, satisfying our hunger. available in four different versions, 2024-25 Ch_10.indd 244 10-08-2022 10:04:27  Marketing 245 on the basis of certain features such offering the same by giving something as size of memory, television viewing, in return. For example, a person internet, camera, etc., for a given price, feeling hungry may get food by offering say between ` 5,000 and ` 20,000 to give money or some other product (depending on the model selected), or service in return to someone who available for sale at say firm’s exclusive is willing to accept the same for food. shops in and around all metropolitan In the modern world, goods are cities in the country. A good ‘market produced at different places and are offer’ is the one which is developed after distributed over a wide geographical analysing the needs and preferences of area through various middlemen, the potential buyers. involving exchanges at different levels 3. Customer Value: The process of distribution. Exchange is, therefore, of marketing facilitates exchange of referred to as the essence of marketing. products and services between the For any exchange to take place, it is buyers and the sellers. The buyers, important that the following conditions however, make buying decisions on are satisfied: their perceptions of the value of the (i) Involvement of at least two parties product or service in satisfying their viz., the buyer and the seller. need, in relation to its cost. A product (ii) Each party should be capable will be purchased only if it is perceived of offering something of value to to be giving greatest benefit or value the other. For example, the seller for the money. The job of a marketer, offers a product and the buyer, therefore, is to add to the value of the money. product so that the customers prefer it (iii) Each party should have the ability in relation to the competing products to communicate and deliver the and decide to purchase it. product or service. No exchange 4. Exchange Mechanism: The process can take place if the buyers and of marketing works through the sellers are not able to communicate exchange mechanism. The individuals with each other or if they can not (buyers and sellers) obtain what they deliver something of value to need and want through the process of the other. exchange. In other words, the process of marketing involves exchange of (iv) Each party should have freedom to products and services for money or accept or reject other party’s offer. something considered valuable by (v) The parties should be willing to the people. enter into transaction with each Exchange refers to the process other. Thus, the acceptance or through which two or more parties rejection of the offer takes place on come together to obtain the desired voluntary basis rather than on the product or service from someone, bases of any compulsion. 2024-25 Ch_10.indd 245 10-08-2022 10:04:27  BUSINESS  STUDIES 246 The points listed above are the standards of people and providing necessary conditions for an exchange medication to the sick. to take place. Whether the exchange actually takes place or not depends on Marketing Management the suitability of the act of exchange to Marketing management means both the parties, whether it makes the management of the marketing function. parties better off or at least not worse off. In other words, marketing management Another important point to be refers to planning, organising, directing noted is that Marketing is not merely a and control of the activities which business phenomena or confined only facilitate exchange of goods and services to business organisations. Marketing between producers and consumers or activities are equally relevant to non- users of products and services. Thus profit organisations such as hospitals, the focus of marketing management schools, sports clubs and social and is on achieving desired exchange religious organisations. It helps these outcomes with the target markets. organisations in achieving their goals Taking a management perspective, the such as spreading the message of term marketing has been defined as family planning, improving the literacy “the process of planning and executing What can be Marketed? Physical Products : DVD player, Motor cycle, ipods, Cell phone, Footwear, Television, Refrigerator. Services : Insurance, Health Care, Business Process Outsourcing, Security, Easy Bill service, Financial Services (Investment),Computer Education, Online Trading. Ideas : Polio Vaccination, Helpage, Family Planning, Donation of Blood (Red cross), Donation of money on Flag Day (National Foundation for Communal Harmony). Persons : For Election of Candidates for Certain Posts. Place : ‘Visit Agra – ‘City of Love’, ‘Udaipur – ‘The City of Lakes’, ‘Mysore – The City of Gardens’, ‘When Orisa celebrates, Eleven the God Join In’. Events : Sports events (say Olympics, Cricket series), diwali mela, fashion show, music concert, film festival, elephant race (Kerala Tourism). Information : Production packaging and distribution of information by organisations such as by universities, research organisation, providing information as market information (marketing research agencies), technology information. 2024-25 Ch_10.indd 246 10-08-2022 10:04:27  Marketing 247 the conception, pricing, promotion prospective buyers and persuade and distribution of ideas, goods and them to buy these products. services to create exchanges that satisfy Marketing management involves individual and organisational goals” by performance of various functions American Management Association, such as analysing and planning the similarly Philip kotler has defined marketing activities, implementing Marketing management as the art and marketing plans and setting control science of choosing target markets mechanism. These functions are and getting, keeping and growing to be performed in such a way that customers through creating, delivering and communicating superior customer organisation’s objectives are achieved values of management. at the minimum cost. A careful analysis of the definition Marketing management generally reveals that the process of management is related to creation of demand. of marketing involves: However, in certain situations, the (i) Choosing a target market, say a manager has to restrict the demand. manufacturer may choose to make For example, if there is a situation of readymade garments for children ‘overfull demand’, i.e., the demand up to the age of 5 years; being more than what the company (ii) In respect of the target market can or want to handle, (like what chosen, the focus of the process of the situation in our country was management is on getting, keeping before the adoption of policies of as well as growing the customers. liberalisation and globalisation, in That means the marketer has to early 90’s, in most consumer products create demand for his products be it automobiles or electronics goods so that the target customers or other durable products. The job of purchase the product, keep them marketing mangers, in these situations satisfied with the firm’s products would be to find ways to reduce the and also attract more customers demand temporarily by say reducing to the firm’s products so that the the expenditure on promotion or firm can grow; and increasing the prices. Similarly, if the (iii) The mechanism for achieving demand is ‘irregular’, such as in case of the objective is through creating, seasonal products, (say fans, woollen developing and communicating clothes) the marketer’s job is to change superior values for the customers. the time pattern of demand through That means, the primary job such methods as providing short-term of a marketing manager is to incentives, to the buyers. Thus, the create superior values so that marketing management in not only the customers are attracted to concerned with creating demand but the products and services and with managing the demand effectively, communicate these values to the as per the situation in the market. 2024-25 Ch_10.indd 247 10-08-2022 10:04:27  BUSINESS  STUDIES 248 Marketing Versus Selling Many people confuse ‘selling’ for ‘marketing’. They consider these two terms as one and the same. Marketing refers to a large set of activities of which selling is just one part. For example, a marketer of televisions, before making the sale, does a lot of other activities such as planning the type and model of televisions to be produced, the price at which it would be sold and selecting the distribution outlets at which the same would be available, etc. In short, marketing involves whole range of activities relating to planning, pricing, promoting and distributing the products that satisfy customer’s needs. The function of selling, on the other hand, is restricted to promotion of goods and services through salesmanship, advertising, publicity and short-term incentives so that title of the product is transferred from seller to buyer or in other words product is converted into cash. Marketing Management goods started picking up but the Philosophies number of producers were limited. As a result, the demand exceeded In order to achieve desired exchange the supply. Selling was no problem. outcomes with target markets, it is Anybody who could produce the goods important to decide what philosophy or was able to sell. The focus of business thinking should guide the marketing activities was, therefore, on production efforts of an organisation. An of goods. It was believed that profits understanding of the philosophy or could be maximised by producing the concept to be adopted is important at large scale, thereby reducing the as it determines the emphasis or average cost of production. It was the weightage to be put on different also assumed that consumers would factors, in achieving the organisational favour those products which were objectives. For example, whether the widely available at an affordable price. marketing efforts of an organisation will Thus, availability and affordability focus on the product—say designing of the product were considered to its features etc or on selling techniques be the key to the success of a firm. or on customer’s needs or the social Therefore, greater emphasis was concerns. placed on improving the production The concept or philosophy of and distribution efficiency of the firms. marketing has evolved over a period of time, and is discussed as follows. The Product Concept The Production Concept As a result of emphasis on production capacity during the earlier days, the During the earlier days of industrial position of supply increased over revolution, the demand for industrial period of time. Mere availability and 2024-25 Ch_10.indd 248 10-08-2022 10:04:27  Marketing 249 low price of the product could not advertising, personal selling and sales ensure increased sale and as such the promotion were considered essential survival and growth of the firm. Thus, for selling of products. Thus, the focus with the increase in the supply of the of business firms shifted to pushing products, customers started looking the sale of products through aggressive for products which were superior in selling techniques with a view to quality, performance and features. persuade, lure or coax the buyers Therefore, the emphasis of the firms to buy the products. Making sale shifted from quantity of production through any means became important. to quality of products. The focus of It was assumed that buyers can be business activity changed to bringing manipulated but what was forgotten continuous improvement in the quality, was that in the long run what matters incorporating new features, etc. Thus, most is the customer satisfaction, product improvement became the key rather than anything else. to profit maximisation of a firm, under the concept of product orientation. The Marketing Concept Marketing orientation implies that The Selling Concept focus on satisfaction of customer’s With the passage of time, the marketing needs is the key to the success of any organisation in the market. environment underwent further It assumes that in the long run change. The increase in the scale of an organisation can achieve its business further improved the position objective of maximisation of profit by with respect to supply of goods, identifying the needs of its present resulting in increased competition and prospective buyers and satisfying among sellers. The product quality them in an effective way. All the and availability did not ensure the decisions in a firm are taken from survival and growth of firms because the point of view of the customers. In of the large number of sellers selling other words, customer’s satisfaction quality products. This led to greater become the focal point of all decision importance to attracting and persuading making in the organisation. For customers to buy the product. The example, what product will be business philosophy changed. It was produced, with what features and at assumed that the customers would what price shall it be sold, or where not buy, or not buy enough, unless shall it be made available for sale will they are adequately convinced and depend on what do the customers motivated to do so. Therefore, firms want. If the customers want features must undertake aggressive selling like double door in a refrigerator or a and promotional efforts to make separate provision for water cooler in customers buy their products. The it, the organisation would produce a use of promotional techniques such as refrigerator with these features, would 2024-25 Ch_10.indd 249 10-08-2022 10:04:27  BUSINESS  STUDIES 250 price it at a level which the customers (i) I d e n t i f i c a t i o n o f m a r k e t o r are willing to pay and so on. If all customer who are chosen as the marketing decisions are taken with target of marketing effort. this prospective, selling will not be any (ii) Understanding needs and wants problem. It will automatically follow. of customers in the target market. The basic role of a firm then is to (iii) Development of products or ‘identify a need and fill it’. The concept services for satisfying needs of implies that products ad-services are the target market. bought not merely because of their (iv) Satisfying needs of target market quality, packing or brand name, better than the competitors. but because they satisfy a specific need of a customer. A pre-requisite (v) Doing all this at a profit. for the success of any organisation, Thus, the focus of the marketing therefore, is to understand and concept is on customer needs and the respond to customer needs. customer satisfaction becomes the To sum up, the marketing concept means to achieving the firms’ objective is based on the following pillars: of maximising profit. The purpose of Differences in the Marketing Management Philosophies Philosophies/ Production Product Selling Marketing Societal Bases Concept Concept Concept Concept Concept 1. Starting Factory Factory Factory Market Market, Point Society 2. Main Quantity of Quality, Existing Customer Customer Focus product performance, product needs needs and features of society’s product well being 3. Means Availability Product Selling Integrated Integrated and improve- and marketing marketing affordability ments promoting of product 4. Ends Profit through Profit through Profit Profit Profit volume of product through through through production quality sales customer customer volume satisfaction satisfaction and social welfare 2024-25 Ch_10.indd 250 10-08-2022 10:04:27  Marketing 251 marketing is to generate customer to consumers or users in such a way value at a profit. that maximises the satisfaction of customers’ needs. From the view point The Societal Marketing Concept of management function, number of activities are involved, which have The marketing concept, as described been described as below: in the preceeding section cannot be considered as adequate if we look 1. Gathering and Analysing Market at the challenges posed by social Information: One of the important problems like environmental pollution, functions of a marketer is to gather deforestation, shortage of resources, and analyse market information. This population explosion and inflation. It is is necessary to identify the needs so because any activity which satisfies of the customers and take various human needs but is detrimental to the decisions for the successful marketing interests of the society at large cannot of the products and services. This be justified. The business orientation is important for making an analysis should, therefore, not be short-sighted of the available opportunities and to serve only consumers’ needs. It threats as well as strengths and should also consider large issues of long- weaknesses of the organisation and term social welfare, as illustrated above. help in deciding what opportunities The societal marketing concept can best be pursued by it. For example, holds that the task of any organisation rapid growth is predicted in several is to identify the needs and wants areas in the Indian economy, say in of the target market and deliver the the use of the Internet, market for cell desired satisfaction in an effective phones and several other areas. Which and efficient manner so that the long- of these areas a particular organisation should enter, or in which area should term well-being of the consumers and it expand, requires a careful scanning the society is taken care of. Thus, of the strengths and weaknesses of the the societal marketing concept is the organisation, which is done with the extension of the marketing concept help of careful market analysis. as supplemented by the concern for With the growth of computers, the long-term welfare of the society. a new trend has emerged in the Apart from the customer satisfaction, collection of market information. it pays attention to the social, ethical More and more companies are using and ecological aspects of marketing. interactive sites on the internet, to There are large number of such issues gather customer views and opinions, that need to be attended. before taking important business decisions. One of the popular TV Functions Of Marketing News Channel (in Hindi) seeks viewers Marketing is concerned with exchange choice (through SMS) on which of the of goods and services from producers given four or five main news stories 2024-25 Ch_10.indd 251 10-08-2022 10:04:27  BUSINESS  STUDIES 252 of the day would be broadcasted as and consistency in the output. detailed story at the prime time, to Standardisation ensures the ensure that the viewers get to listen buyers that goods conform to the to the story of their own choice. predetermined standards of quality, 2. Marketing Planning: Another price and packaging and reduces important activity or area of work of the need for inspection, testing and a marketer is to develop appropriate evaluation of the products. marketing plans so that the marketing Grading is the process of objectives of the organisation can be classification of products into different achieved. For example a marketer of groups, on the basis of some of its colour TV, having 10 per cent of the important characteristics such as current market share in the country, quality, size, etc. Grading is particularly aims at enhancing his market share necessary for products which are not to 20 per cent, in the next three years. produced according to predetermined He will have to develop a complete specifications, such as in the case marketing plan covering various of agricultural products, say wheat, important aspects including the plan oranges, etc. Grading ensures that for increasing the level of production, goods belong to a particular quality promotion of the products, etc., and and helps in realising higher prices for specify the action programmes to high quality output. achieve these objectives. 5. Packaging and Labelling: Packaging 3.Product Designing and refers to designing and developing the Development: Another important package for the products. Labelling marketing activity or decision refers to designing and developing the area relates to product designing label to be put on the package. The and development. The design of label may vary from a simple tag to the product contributes to making complex graphics. the product attractive to the target Packaging and labelling have customers. A good design can improve become so important in modern day performance of a product and also marketing that these are considered give it a competitive advantage in the as the pillars of marketing. Packaging market. For example, when we plan is important not only for protection to buy any product say a motorbike, of the products but also serves as we not only see its features like cost, a promotional tool. Sometimes, the mileage, but also the design aspects quality of the product is assessed by like its shape, style, etc. the buyers form packaging. We have 4. Standardisation and Grading: seen that in the success of many of the Standardisation refers to producing consumer brands in recent times such goods of predetermined specifications, as Lays or Uncle Chips potato wafers which helps in achieving uniformity Clinic Plus shampoos, and Colgate 2024-25 Ch_10.indd 252 10-08-2022 10:04:27  Marketing 253 Toothpaste, etc., packaging has played Customer support services are very an important role. effective in bringing repeat sales from 6. Branding: A very important decision the customers and developing brand area for marketing of most consumer loyality for a product. products is whether to sell the product 8. Pricing of Product: Price of in its generic name (name of the product refers to the amount of money category of the product, say Fan, Pen, customers have to pay to obtain a etc.) or to sell them in a brand name product. Price is an important factor (such as Pollar Fan or Rottomac Pen). affecting the success or failure of a Brand name helps in creating product product in the market. The demand differentiation, i.e., providing basis for for a product or service is related to distinguishing the product of a firm its price. Generally lower the price, with that of the competitor, which in higher would be the demand for the turn, helps in building customer’s product and vice-versa. The marketers loyality and in promoting its sale. have to properly analyse the factors The important decision areas in determining the price of a product and respect of branding include deciding take several crucial decisions in this the branding strategy, say whether respect, including setting the pricing each product will be given a separate objectives, determining the pricing brand name or the same brand name strategies, determining the price and will be extended to all products of the changing the prices. company, say Phillips bulbs, tubes 9. Promotion: Promotion of products and television or Videocon washing and services involves informing the machine, television, and refrigerator. customers about the firm’s product, Selection of the brand name plays its features, etc., and persuading an important role in the success of a them to purchase these products. product. The four important methods of 7. Customer Support Services: promotion include advertising, A very important function of the Personal Selling, Publicity and marketing management relates Sales Promotion. A marketer has to developing customer support to take several crucial, decisions in services such as after sales services, respect of promotion of the products handling customer complaints and services such as deciding the and adjustments, procuring credit promotion budget, the promotion services, maintenance services, mix, i.e., the combination of the technical services and consumer promotional tools that will be use, information. All these services aim the promotion budget, etc. at providing maximum satisfaction 10. Physical Distribution: Managing to the customers, which is the key to physical distribution is another marketing success in modern days. very important function in the 2024-25 Ch_10.indd 253 10-08-2022 10:04:27  BUSINESS  STUDIES 254 marketing of goods and services. 12. Storage or Warehousing: The two major decision areas under Usually there is a time gap between this function include (a) decision the production or procurement of regarding channels of distribution goods and their sale or use. It may or the marketing intermediaries (like be because of irregular demand for whole salers, retailers) to be used the products such as in the case and (b) physical movement of the of woollen garments or raincoats, product from where it is produced or there may be irregular supply to a place where it is required by the because of seasonal production such customers for their consumption or as in the case of agricultural products use. The important decision areas (sugarcane, rice, wheat, cotton, etc.). under physical distribution include In order to maintain smooth flow managing inventory (levels of stock of products in the market, there of goods), storage and warehousing is a need for proper storage of the and transportation of goods from one products. Further, there is a need for place to the other. storage of adequate stock of goods to 11. Transportation: Transportation protect against unavoidable delays in delivery or to meet out contingencies involves physical movement of goods in the demand. In the process of from one place to the other. As marketing, the function of storage generally the users of products, is performed by different agencies particularly consumer products such as manufacturers, wholesalers are wide spread and geographically and retailers. separated from the place these are produced, it is necessary to move them to the place where it is needed Marketing Mix for consumption or use, For example, The marketing mix consists of various tea produced in Assam has to be elements, which have broadly been transported not only within the state classified into four categories, popularly but to other far off places like Tamil known as four Ps of marketing. These Nadu, Punjab, Jammu and Kashmir are: (i) Product, (ii) Price, (iii) Place, and Haryana, Rajasthan, where it is and (iv) Promotion. These are briefly consumed. discussed as follows: A marketing firm has to analyse 1. Product: Product means goods its transportation needs after taking or services or ‘anything of value’, into consideration various factors which is offered to the market for such as nature of the product, cost sale. For example, Hindustan lever and location of target market and offers number of consumer products take decisions in respect of mode like toiletries (Close-Up toothpaste, of transportation to be chosen and Lifebuoy soap, etc.), detergent powder other related aspects. (Surf, Wheel), food products (Refined 2024-25 Ch_10.indd 254 10-08-2022 10:04:27  Marketing 255 Vegetable Oil); Tata offers Tata Steel, etc. These aspects are very important, Trucks, Salt and a large number of particularly in the marketing of other products; LG electronics offers consumer durable products (like televisions, refrigerators, colour Automobiles, refrigerators, etc.). The monitors for computers, etc; Amul important product decisions include offers a number of food products deciding about the features, quality, (Amul milk, ghee, butter, cheese, packaging, labelling and branding of chocolates, etc.). the products. The concept of product relates 2. Price: Price is the amount of money to not only the physical product as customers have to pay to obtain mentioned in the above examples but the product. In case of most of the also the benefits offered by it from products, level of price affects the level customer’s view point (for example of their demand. The marketers have toothpaste is bought for whitening not only to decide about the objectives teeth, strengthening gums, etc.). of price setting but to analyse the The concept of product also include factors determining the price and fix a the extended product or what is price for the firm’s products. Decisions offered to the customers by way have also to be taken in respect of of after sales services, handling discounts to customers, traders and complaints, availability of spare parts credit terms, etc., so that customers Marketing Mix: Elements Product Price Product Mix Price Level Product Quality Margins New Product Pricing Policy Design and Development Pricing Strategies Packaging Price Change Labelling Branding Place Promotion Channel Strategy Promotion Mix Channel Selection Advertising Channel Conflict Personal Selling Channel Cooperation Sales Promotion Physical Distribution Publicity Public Relations 2024-25 Ch_10.indd 255 10-08-2022 10:04:27  BUSINESS  STUDIES 256 perceive the price to be in line with the newspaper, magazines, the objections value of the product. of customers, etc.). 3. Place: Place or Physical Distribution The success of a market offer will include activities that make firm’s depend on how well these ingredients products available to the target are mixed to create superior value for customers. Important decision areas the customers and simultaneously in this respect include selection of achieve their sale and profit objectives. dealers or intermediaries to reach the Let us say a firm would like to achieve customers, providing support to the necessary volume of sale at a cost that intermediaries (by way of discounts, will permit a desired level of profit. But so many alternative mixes can promotional campaigns, etc.). The be adopted by a firm to achieve this intermediaries in turn keep inventory objectives. The issue before a firm then of the firm’s products, demonstrate is to decide what would be the most them to potential buyers, negotiate effective combination of elements to price with buyers, close sales and achieve the given objectives. also service the products after the sale. The other decision areas relate Products to managing inventory, storage and warehousing and transportation of From the customer’s point of view, a goods from the place it is produced to product is a bundle of utilities, which the place it is required by the buyers. is purchased because of its capability 4. Promotion: Promotion of products to provide satisfaction of certain need. and services include activities that A buyer buys a product or service communicate availability, features, for what it does for her or the benefit it provides to her. There can be three merits, etc., of the products to the types of benefits a customer may target customers and persuade them to seek to satisfy from the purchase of a buy it. Most marketing organisations, product, viz., undertake various promotional (i) functional benefits, activities and spend substantial amount of money on the promotion (ii) psychological benefits, and of their goods through using number (iii) social benefits. of tools such as advertising, personal For example, the purchase of a selling and sales promotion techniques motorcycle provides functional utility (like price discounts, free samples, of transportation, but at the same etc.). A large number of decisions time satisfies the need for prestige and are to be taken in each of the area esteem and provides social benefit by specified above. For example, in the the way of acceptance from a group, respect of advertising it is important to by riding a motorbike. Thus, all these decide about the message, the media aspects should be considered while to be used (example, print-media– planning for a product. 2024-25 Ch_10.indd 256 10-08-2022 10:04:27  Marketing 257 Classification of Products 1. Convenience Products: Those consumer products, which are purchased Products may broadly be classified frequently, immediately and with least time into two categories — (i) consumers’ products, and (ii) industrial products. and efforts are referred to as convenience The consumer products may further goods. Examples of such products be classified into different groups, as are cigarettes, ice creams, medicines, detailed below: newspaper, stationery items toothpaste etc. These products have low unit-value Consumer Products and are bought in small qualities. 2. Shopping Products: Shopping Products, which are purchased by products are those consumer goods the ultimate consumers or users for where buyers devote considerable satisfying their personal needs and time, to compare the quality, price, desires are referred to as consumer products. For example, soap, edible style, suitability, etc., at several stores, oil, eatables, textiles, toothpaste, fans, before making final purchase. Some etc. which we use for our personal and of the examples of shopping products non-business use are consumer goods. are clothes, shoes, jewellery, furniture, We can classify the consumer product radio, television, etc. into the following three categories as 3. Speciality Products: Speciality here under: products are those consumer goods Products Consumer Products Industrial Products Durability Basis Shopping Efforts Involved Non- Durable Services Conven- Shopping Speciality Durable ience Products Products Products Classification of Products 2024-25 Ch_10.indd 257 10-08-2022 10:04:27  BUSINESS  STUDIES 258 Convenience Products which have certain special features Durability Of Products because of which people make special On the basis of their durability, efforts in their purchase. These the consumer products have been products are such, which have reached classified into three categories— a brand loyalty of the highest order, Durable, Non-durable and Services. with a significant number of buyers. 1. N o n - d u r a b l e P r o d u c t s : The The buyers are willing to spend a lot consumer products which are of time and efforts on the purchase normally consumed in one or of such products. For example, if few uses are called non-durable there is a rare collection of artwork products. For example, products like or of antiques, some people may be toothpaste, detergents, bathing soap willing to spend a lot of shopping and stationary products etc. From effort and travel long distance to buy the marketing point of view, these such products. In our day-to-day life, products generally command a small we see people going to a particular margin, should be made available hair-cutting saloon or restaurant, or in many locations and need to be heavily advertised. a tailor. The demand for these goods is relatively inelastic, i.e., even if the 2. Durable Products: Those tangible price is increased, the demand does consumer products which normally survive many years, for example, not come down. 2024-25 Ch_10.indd 258 10-08-2022 10:04:27  Marketing 259 Shopping Products refrigerator, radio, bicycle, sewing Industrial Products machine and kitchen gadgets are Industrial products are those products, referred to as durable products. which are used as inputs in producing These goods are generally used for other products. The examples of such a longer period, command a higher products are raw materials, engines, per unit margin, require greater lubricants, machines, tools, etc. In personal- selling efforts, guarantees other words, industrial products are and after sales services, on the part meant for non-personal and business of the seller. use for producing other products. 3. Services: By services we mean The market for industrial products those intangible activities, benefits consists of manufacturers, transport agencies, banks and insurance which are offered for sale, e.g., dry companies, mining companies and cleaning, watch repairs, hair cutting, public utilities. Industrial products postal services, services offered by a are those products, which are used as doctor, an architect and a lawyer. inputs in producing other products. The examples of such products are 2024-25 Ch_10.indd 259 10-08-2022 10:04:27  BUSINESS  STUDIES 260 Speciality Products raw materials, engines, lubricants, petroleum, iron ore), fish and lumber; machines, tools, etc. In other words, and (b) manufactured material and industrial products are meant for parts. These are again of two types – non-personal and business use for component materials like glass, iron, producing other products. plastic and component parts such as The market for industrial products tyre, electric bulb, steering, and battery. consists of manufacturers, transport (ii) Capital Items: These are such agencies, banks and insurance goods that are used in the production companies, mining companies and of finished goods. These include: (a) public utilities. installations like elevators, mainframe Computers, and (b) equipments like Classification Hand Tools, Personal Computer, Fax The industrial goods are classified Machines, etc. into the following major categories: (iii) Supplies and Business Services: (i) Materials and Parts: These include These are short lasting goods and goods that enter the manufacture’s services that facilitate developing or products completely. Such goods managing the finished product. These are of two types: (a) raw material: include: (a) maintenance and repair including farm products like cotton, items like Paint, Nails, etc., and (b) sugar cane, oil seed and natural operating supplies like Lubricant, products such as minerals (say crude Computer Stationary, Writing Paper, etc. 2024-25 Ch_10.indd 260 10-08-2022 10:04:27  Marketing 261 Industrial Goods Materials and Capital Items Supplies and Parts Business Services Raw Manufactured Installations Equipments Maintanence Operating Material Material and Parts and Repair Supplies items Farm Natural Component Component Products Products Material Parts Classification of Industrial Goods Branding If products were sold by generic names, it would be very difficult for the One of the most important decisions marketers to distinguish their products that a marketer has to take in the area from that of their competitors. Thus, of ‘product’ is in respect of branding. most marketers give a name to their He has to decide whether the firm’s product, which helps in identifying and products will be marketed under distinguishing their products from the a brand name or a generic name. competitors’ products. This process of Generic name refers to the name of giving a name or a sign or a symbol the whole class of the product. For etc., to a product is called branding. example, a book, a wristwatch, tyre, The various terms relating to branding camera, toilet soap, etc. We know are as follows: that a camera is a lens surrounded 1. Brand: A brand is a name, term, sign, by plastic or steel from all sides and symbol, design or some combination of having certain other features such them, used to identify the products— as a flash gun and so on. Similarly goods or services of one seller or group book is a bunch of papers, which of sellers and to differentiate them from are in a bound form, on which some those of the competitors. For example, useful information about a subject some of the common brands are Bata, is printed. Thus, all products having Lifebuoy, Dunlop, and Parker. Brand these characteristics would be called is a comprehensive term, which has by the generic name such as camera two components—brand name and or book. brand mark. 2024-25 Ch_10.indd 261 10-08-2022 10:04:28  BUSINESS  STUDIES 262 2. Brand Name: That part of a brand, (ii) A brand should suggest the which can be spoken, is called a brand product’s benefits and qualities. name. In other words, brand name is It should be appropriate to the the verbal component of a brand. product’s function. 3. Brand Mark: That part of a brand (iii) A brand name should be distinctive. which can be recognised but which is (iv) T h e b r a n d n a m e s h o u l d b e not utterable is called brand mark. It adaptable to packing or labelling appears in the form of a symbol, design, requirements, to different distinct colour scheme or lettering. advertising media and to different 4. Trade Mark: A brand or part of a languages. brand that is given legal protection (v) T h e b r a n d n a m e s h o u l d is called trademark. The protection is be sufficiently versatile to given against its use by other firms. accommodate new products, which Thus the firm, which got its brand are added to the product line. registered, gets the exclusive right for (vi) It should be capable of being its use. In that case, no other firm can registered and protected legally. use such name or mark in the country. (vii) Chosen name should have staying Though branding adds to the cost power i.e., it should not get out e.g., to the cost of packaging, labelling, of date. legal protection, and promotion, it provides several advantages to the sellers as well as the consumers. Packaging One of the most important developments Characteristics of Good Brand Name affecting the business world in Choosing the right brand name is recent years has been in the area of not an easy decision. What makes packaging. Many products, which we this decision important is the fact thought could never lend themselves that once a brand name is chosen to packing because of their nature, and the product is launched in have been successfully packed e.g., the market, changing the brand Pulses, Ghee, Milk, Salt, Cold Drinks, name is very difficult. So, getting it etc. Packaging refers to the act of right the first time is very essential. designing and producing the container Following are some of the considerations, or wrapper of a product. Packaging which should be kept in mind while plays a very important role in the choosing a brand name. marketing success or failure of many (i) The brand name should be short, products, particularly the consumer easy to pronounce, spell, recognise non-durable products. In fact if one and remember e.g., Ponds, VIP, makes an analysis of the reasons for Rin, Vim, etc. the success of some of the successful 2024-25 Ch_10.indd 262 2/6/2024 10:04:04 AM  Marketing 263 products in the recent past, it can be product (e.g., a toothpaste tube, a noted that packaging has played its match box, etc.). due role. For example, it was one of 2. Secondary Packaging: It refers to the important factors in the success of additional layers of protection that are products like Maggie’s Noodles, Uncle kept till the product is ready for use, Chips or Crax wafers. e.g., a tube of shaving cream usually comes in a card board box. When Levels of Packaging consumers start using the shaving There can be three different levels of cream, they will dispose off the box packaging. These are as below: but retain the primary tube. 1. Primary Package: It refers to the 3. Transportation Packaging: It refers product’s immediate container. In to further packaging components some cases, the primary package is necessary for storage, identification kept till the consumer is ready to use or transportation. For example, a the product (e.g., plastic packet for toothpaste manufacturer may send the socks); whereas in other cases, it is goods to retailers in corrugated boxes kept throughout the entire life of the containing 10, 20, or 100 units. Levels of Packaging 2024-25 Ch_10.indd 263 1/23/2024 05:45:40 PM  BUSINESS  STUDIES 264 Importance of Packaging perception of customers about the quality of the product. For example, Packaging has acquired great by looking at the package of a significance in the marketing of goods product say Paint or Hair Oil, one and services, because of following can make some guess about quality reasons: of the product contained in it. (i) R i s i n g S t a n d a r d s o f H e a l t h and Sanitation: Because of the increasing standards of living Functions of Packaging in the country, more and more As stated above, packaging performs a people have started purchasing number of functions in the marketing packed goods as the chances of of goods. Some of the important adulteration in such goods are functions are as follows: minimised. (i) Product Identification: Packaging (ii) Self Service Outlets: The self- greatly helps in identification service retail outlets are becoming of the products. For example, very popular, particularly in major Colgate in red colour, or Ponds cities and towns. Because of cream jar can be easily identified this, some of the traditional role by its package. assigned to personal selling in (ii) Product Protection: Packaging respect of promotion has gone to protects the contents of a product packaging. from spoilage, breakage, leakage, (iii) Innovational Opportunity: Some of pilferage, damage, climatic effect, the recent developments in the etc. This kind of protection area of packaging have completely is required during storing, changed the marketing scene distribution and transportation in the country. For example, of the product. milk can now be stored for 4-5 (iii) Facilitating Use of the Product: The days without refrigeration in size and shape of the package the recently developed packing should be such that it should be materials. Similarly, in the area convenient to open, handle and of pharmaceuticals, soft drinks, use for the consumers. Cosmetics, etc., lots of new innovations have medicines and tubes of toothpastes come in respect of packaging. As a are good examples of this. result, the scope for the marketing (iv) Product Promotion: Packaging is of such products has increased. also used for promotion purposes. (iv) Product Differentiation: Packaging A startling colour scheme, is one of the very important means photograph or typeface may be of creating product differentiation. used to attract attention of the The colour, size, material, etc., of people at the point of purchase. package makes real difference in the Sometimes it may work even better 2024-25 Ch_10.indd 264 1/23/2024 05:45:40 PM  Marketing 265 than advertising. In self-service ‘Complete Germicheck Formula’; stores, this role of packaging the Package of a brand of Coconut becomes all the more important. Oil describes the product as pure coconut oil with Heena, Amla, Lemon Labelling and specifies how these are good for Hair. Thus, one of the most important A simple looking but important task functions of labels is to describe the in the marketing of goods relates to product, its usage, cautions in use, designing the label to be put on the etc. and specify its contents. package. The label may vary from a simple tag attached to the product 2. Identification of the Product (such as in case of local unbranded o r b r a n d : The other important products like sugar, wheat, pulses, function performed by labels is etc.) indicating some information to help in identifying the product about the quality or price, to complex or brand. For example, the brand graphics that are part of the package, name of any product, say Biscuits like the ones on branded products. or Potato Chips imprinted on its Lables are useful in providing detailed package helps us to identify, from information about the product, its number of packages, which one is contents, method of use, etc. The our favourite brand. Other common various functions performed by a label identification information provided are as follows: by the labels include name and address of the manufacturer, net 1. Describe the Product and specify weight when packed, manufacturing its contents: Let us look at some of the date, maximum retail price and labels of the products used by us in our Batch number. day to day life. The label on the package 3. Grading of Products: Another of a local tea company describes the important function performed by company as ‘Mohini Tea Company, an labels is to help grading the products ISO 9001:200C Certified Company’; a into different categories. Sometimes popular brand of Prickly Heat Powder, marketers assign different grades to describes how the product provides indicate different features or quality of relief from prickly heat and controls the product. For example, a popular bacterial growth and infection, giving brand of Hair Conditioners comes in caution forbidding its application on different categories for different hair, cuts and wounds. Package of fast food say for ‘normal hair’ and for other products like ready to eat Dosa, Idli categories. Different type of tea is sold or Noodles, describe the procedure of by some brands under Yellow, red and cooking these products; the Package Green Label categories. of a toothpaste brand lists the ‘Ten Teeth and Gum Problems’, which 4. Helps in Promotion of Products: the product claims to fight with its An important function of label is to 2024-25 Ch_10.indd 265 1/23/2024 05:45:40 PM  BUSINESS  STUDIES 266 aid in promotion of the products. A represent the sum of values that carefully designed label can attract consumers exchange for the benefit attention and give reason to purchase. of having or using the product and is We see many product labels providing referred to as the price of the product. promotional messages for example, Similarly, money paid for the services the pack of a popular Amla Hair Oil such as fare for the transport service, states, ‘Baalon mein Dum, Life mein premium for an insurance policy, and Fun’. The label on the package of a fee to a doctor for his medical advise brand of Detergent Powder says, ‘keep represent the price of these services. cloth look good and your machine in Price may therefore be defined as the top condition’. Labels play important amount of money paid by a buyer (or role in sales promotional schemes received by a seller) in consideration launched by companies. For example of the purchase of a product or the label on the package of a Shaving a services. Cream mentions, ‘40% Extra Free’ or Pricing occupies an important package of a toothpaste mentioning, place in the marketing of goods and ‘Free Toothbrush Inside’, or ‘Save ` 15’. services by a firm. No product can be launched without a price tag or 5. Providing Information Required at least some guidelines for pricing. by Law: Another important function Pricing is often used as a regulator of of labeling is to provide information the demand of a product. Generally, required by law. For example, if the price of a product is increased, packaged food articles must have list its demand comes down, and of ingredients declaration regarding vice-versa. vegetarian or non-vegetarian food Pricing is considered to be an additives and date of manufacturing effective competitive weapon. In the or packing on the label. Such conditions of perfect competition, information is required on processed most of the firms compete with each foods, drugs and tobacco products. other on the basis of this factor. It is In case of hazardous or poisonous also the single most important factor material, appropriate safety-warning affecting the revenue and profits of a need to be put on the label. firm. Thus, most marketing firms give Thus, labels perform number high importance to the fixation of price of important functions relating to for their products and services. communicating with the potential buyers and promoting the sale of Factors affecting Price the products. Determination There are number of factors which Pricing affect the fixation of the price of a When a product is bought, some product. Some of the important factors money is paid for it. This money in this regard are discussed as below: 2024-25 Ch_10.indd 266 1/23/2024 05:45:40 PM  Marketing 267 1. Product cost: One of the most Semi variable costs are those costs important factor affecting price which vary with the level of activity of a product or service is its cost. but not in direct proportion with it. This includes the cost of producing, For example, compensation of a sales distributing and selling the product. person may include a fixed salary of The cost sets the minimum level or say ` 10,000 plus a commission of 5 the floor price at which the product per cent on sales. With an increase may be sold. Generally all marketing in the volume of sales, the total firms strive to cover all their costs, compensation will increase but not in at least in the long run. In addition, direct proportion with the change in they aim at earning a margin of profit the volume of sale. over and above the costs. In certain Total Costs are the sum total of the circumstance, for example, at the time fixed, variable and semi-variable costs of introducing a new product or while for the specific level of activity, say entering a new market, the products volume of sales or quantity produced. may be sold at a price, which does not 2. The Utility and Demand: While cover all the costs. But in the long run, the product costs set the lower limits a firm cannot survive unless at least of the price, the utility provided by the all its costs are covered. product and the intensity of demand of There are broadly three types of the buyer sets the upper limit of price, costs: viz., Fixed Costs, Variable Costs which a buyer would be prepared and Semi Variable Costs. Fixed costs to pay. In fact the price must reflect are those costs, which do not vary with the interest of both the parties to the the level of activity of a firm say with transaction—the buyer and the seller. the volume of production or sale. For The buyer may be ready to pay up to example, rent of a building or salary the point where the utility from the product is at least equal to the sacrifice of a sales manager remains the same made in terms of the price paid. The whether 1000 units or 10 units are seller would, however, try to at least produced in a week. cover the costs. According to the law of Those costs which vary in direct demand, consumers usually purchase proportion with the level of activity are more units at a low price than at a called variable costs. For example, the high price. costs of raw material, labour and power are directly related with the quantity of 3. Extent of Competition in the goods produced. Let us say, if the cost Market: Between the lower limit and of wood for manufacturing one chair the upper limit where would the price comes to ` 100 the cost of wood for 10 settle down? This is affected by the chairs would be ` 1000. Obviously, nature and the degree of competition. there will be no cost of wood if no chair The price will tend to reach the upper is produced. limit in case there is lesser degree of 2024-25 Ch_10.indd 267 1/23/2024 05:45:40 PM  BUSINESS  STUDIES 268 competition while under conditions of maximising profit in the short run and free competition, the price will tend to in the long run. If the firm decides to be set at the lowest level maximise profits in the short run, it Competitors’ prices and their would tend to charge maximum price anticipated reactions must be for its products. But if it is to maximise considered before fixing the price its total profit in the long run, it would of a product. Not only the price but opt for a lower per unit price so that it the quality and the features of the can capture larger share of the market competitive products must be examined and earn greater profits through carefully, before fixing the price. increased sales. 4. Government and Legal Regulations: Apart from profit maximisation, In order to protect the interest of public the pricing objectives of a firm may against unfair practices in the field of include: price fixing, Government can intervene (a) Obtaining Market Share Leadership: and regulate the price of commodities. If a firms objective is to obtain Government can declare a product larger share of the market; it will as essential product and regulate its keep the price of its products at price. For example, the cost of a drug lower levels so that greater number manufactured by a company having of people are attracted to purchase monopoly in the production of the the products; same come to ` 20 per strip of ten (b) Surviving in a Competitive Market: and the buyer is prepared to pay any If a firm is facing difficulties in amount for it, say ` 200. In the absence surviving in the market because of of any competitor, the seller may intense competition or introduction be tempted to extort the maximum of a more efficient substitute amount of ` 200 for the drug and by a competitor, it may resort intervene to regulate the price. Usually to discounting its products or in such a case, the Government does running a promotion campaign to not allow the firms to charge such a liquidate its stock; and high price and intervene to regulate the (c) A t t a i n i n g P r o d u c t Q u a l i t y price of the drug. This can be done by Leadership: In this case, normally the Government by declaring the drug higher prices are charged to cover as essential commodity and regulating high quality and high cost of its price. research and Development. 5. P r i c i n g O b j e c t i v e s : Pricing Thus, the price of a firm’s products objectives are another important factor and services is affected by the pricing affecting the fixation of the price of a objective of the firm. product or a service. Generally the 6. Marketing Methods Used: Price objective is stated to be maximise the fixation process is also affected by profits. But there is a difference in other elements of marketing such 2024-25 Ch_10.indd 268 1/23/2024 05:45:40 PM  Marketing 269 as distribution system, quality of promoted, these must be made salesmen employed, quality and available to customers at the right amount of advertising, sales promotion place, in right quantity and at the right efforts, the type of packaging, product time. For example, a person convinced differentiation, credit facility and about the qualit