812 MARKETING XII.pdf

MARKETING CLASS XII Study Material  INDEX Unit 1 – Product Unit 2 – Price Decision Unit 3 – Place Decision: Channels of Distribution Unit 4 – Promotion Unit 5 – Emerging Trends in Marketing  UNIT I: PRODUCT Unit Code:...

MARKETING CLASS XII Study Material  INDEX Unit 1 – Product Unit 2 – Price Decision Unit 3 – Place Decision: Channels of Distribution Unit 4 – Promotion Unit 5 – Emerging Trends in Marketing  UNIT I: PRODUCT Unit Code: UNIT TITLE: PRODUCT Duration: Location: SESSION1: MEANING AND IMPORTANCE OF PRODUCT Classroom Learning Outcome Knowledge Evaluation Performance Teaching and or Retail Evaluation Training Method outlet or 1. Meaning, 1.Meaning of product 1.Explain meaning Interactive Lecture: Company‟s importance of 2.Components of of Product in Introduction of four premises Product in Product marketing P‟s of marketing Marketing 3.Characteristics 2.To understand the mix with special Product components of focus on Product. 4.Importance of Product Product. Discussion of the to a firm 3.Provide various 5.Product Levels Information components and regarding importance importance of the associated with the Product product, along with 4.Elucidate the the various product various levels of levels. product Activity: Enlist the product levels of goods in the consumer products and services. SESSION 2: PRODUCT CLASSIFICATION Knowledge of types 1. Discussion of the 1. Detail the Interactive Lecture: of consumer goods consumer goods their classification of Explanation of the and industrial goods types and features. consumer goods types of consumer 2. Comprehension of along with their and industrial types of industrial goods features. goods. and their features. 3. Understand Product 2. Explain various Activity: Mix, Product line Types of industrial Identify and enlist goods and their different types of features. goods- consumer and industrial. 3. Comprehend the concept of Product Mix, Product line. SESSION 3: PRODUCT LIFE CYCLE 1. Discussion of 1. Enumerate different 1.Identify the Interactive Lecture: Product Life stages of the product life various stages in a Clarification on the Cycle cycle. product life cycle product life cycle stages A. Introduction 2.Understand the Activity:Prepare a Stage response of list of products and B. Growth Stage marketers in these observe how they C. Maturity Stage stages. have moved D. Decline Stage through different stages of product life cycle. SESSION 4: PACKAGING AND LABELLING Understanding the 1. Discussion of the 1. Detail the Detailing the concept role, importance of packaging concept and concept of of packaing, role, packaging and its role in marketing. packaging along importance, labeling 2. Comprehension of with the various functions and importance and roles it plays in types. In addition functions of Packing. marketing. understanding the 3. Understand the concept of labeling. essential qualities of 2. Explain the good packaging and its importance of types packaging and the 4. Discussion of concept functions of of Labeling. packaging. 3. Comprehend the important features of good packaging and the types of packaging. 4. Detail the concept of labeling in the current context. (Note: The location would depend upon the topic under discussion, wherein it will be the classroom for the theoretical interactions and the student will be required to visit field/retail outlet or the marketing department of an organization to observe and comprehend the concepts related to pricing of goods and services.) SESSION1: MEANING AND IMPORTANCE OF PRODUCT The term Product is mostly used as a need-satisfying entity. It represents solution to customers, problems. In the words of Peter Drucker, the product remains mere raw material or at the best an intermediate till it is not bought or consumed. Hence mostly they comprise of both tangible and intangible benefits. It may be anything that can be offered to a market to satisfy a want or need and include physical goods, services, experiences, events, places, properties, organization, information and ideas. In most of the cases products are made up a combination of physical elements and series. It is observed that consumers buy products or services that they require to fulfill their needs. The products could range from tooth brush, chocolates, cars, movie tickets to life insurance at various stages of our life. The decision to make a purchase is hence dependent not only on the tangible attributes of the product but also on the psychological attributes like brand, package, warranty, image or service to name a few. According to Philip Kotler, “Product is anything that can be offered to someone to satisfy a need or a want”. William Stanton, “Product is a complex of tangible and intangible attributes, including packaging, colour, price, prestige and services that satisfy needs and wants of people”. It is defined as a good or service that most closely meets the requirements of a particular market and yields enough profit to justify its continued existence COMPONENTS OF A PRODUCT Products have their own identity or a personality. Most of the users associate meaning with products, they obtain satisfaction by using them. The various features and functions built around them-the brand name, the package and labeling, the quality associated with it, the guarantees, the price, the manufacturer‟s name and prestige-all contribute to the personality or the total product offering, a marketers armory for satisfying the customer. It has been often stated that a customer never just purchases the generic product but he procures something that exceeds his expectation depending on for whom it is being bought. The components of the product include core product, associated features, brand name, logo, package and label. The Core Product It is the basic element of the product. For example if we take Dove Soap, the fragrance of the soap, the moisturizing ability, the pristine white colour, the brand name, the price, the positioning as luxury soap all have gone into the marketing of product personality. The core component is the soap, the generic constituent, as in the case of any other bathing soap, the only difference being the other components are superimposed on this basic component to develop the total personality of Dove. It is observed that the total product personality is dependent on basic constituent of the product. If the product is substandard the other elements associated like features, package, label, differentiation, positioning, branding will not be of any use. Hence focus on the core product is essential. The Associated Features The Product includes several associated features besides the core ingredient. In the example of Dove soap the fragrance of the soap, the moisturizing ability, the pristine white colour etc are its associated features. The total product personality is mostly enhanced through the associated features. Further, these also aid in distinguishing the product from its competitors. The Brand Name A brand is defined as a name, term, symbol, design or a combination of them which is intended to identify the goods and services of one seller and to differentiate them from those of competitors. A trade mark is a brand with legal protection, thus ensuring its exclusive use by one seller. In the current age consumers do not just pick products but they pick brands. The brand image is developed through advertising and other promotional measures to remain etched in the consumers‟ minds. The Logo It is the brand mark/symbol and an essential aspect of the product, extending its support to the brand effectively. Symbols and pictures ensure product/brand identification and recall with their importance being enhanced in rural markets where brands are mostly recognized by their picture in the logo. The Package It is another important component of the total product personality, particularly in packaged consumer products. The package performs three essential roles:  Ensures protection to the product   Provides information about the product  Increases aesthetics and sales appeal. Conventionally packaging was used to protect the product from damage en route and to facilitate handling at various points of distribution. Later on it also became a major tool in the promotion of the product. Currently packaging contributes to the total sales appeal of the product. The Label It is the part and parcel of a package. It provides written information about the product helping the buyer to understand the nature of the product, its distinctive features, its composition, its performance. The components discussed above make a preliminary impact on the consumer. The other „P‟ i.e Price, Place and Promotion also play an important role in shaping the total product personality. CHARACTERISTICS PRODUCT: 1. Product is one of the core elements of marketing mix. 2. Various people view it differently as consumers; organizations and society have different needs and expectations. 3. The product includes both good and service. 4. A marketer can realize their goals by manufacturing, selling, improving and modifying the product. 5. It includes both tangible and non-tangible features and benefits offered. 6. It is vehicle or medium to offer benefits and satisfaction to consumers. 7. The important lies in services rendered by the product and not ownership of product. People buy services and not the physical object. 8. Product includes total offers, including main qualities, features and services.  IMPORTANCE OF PRODUCT Product therefore, is the core of all marketing activities. Without a product, marketing cannot be expected. Product is a tool in the hands of the marketers which gives life to all marketing programmes. So, the responsibility of the marketers to know its product well is pertinent. The importance of the product can be judged from the following facts: 1) Product is the focal point and all the marketing activities revolve around it. Marketing activities like selling, purchasing, advertising, distribution, sales promotion are all meaningless unless there is product. It is a basic tool by which profitability of the firm is measured. 2) It is the starting point of planning. No marketing programme will commence if product does not exist because planning for all marketing activities distribution, price, sales promotion, advertising, etc. is done on the basis of the nature, quality and the demand of the product. Product policies thus decide the other policies. 3) Product is an end. The main purpose of all marketing activities is to satisfy the customers. Thus product is an end (satisfaction of customers) and the producer, therefore, must insist on the quality of the product so that it may satisfy the customers‟ needs. It has been observed that the life of low quality products in the market is limited. PRODUCT LEVELS The marketer has to take into consideration the benefits the product can offer and present it to the customer. Further he takes it to higher levels by introducing several inputs into the basic product with inputs like advanced features, functions, unique brand name, attractive, convenient packaging, affordable price points, convenient access, meaningful communication and exclusive service from sales people. The product is enriched constantly by the marketer so as to create value, add more customer base and counter competition. According to Levitt, a product offer can be conceived at four levels: the generic product, expected product, augmented product and the potential product. Further it has been explained through a seven level approach: 1. Core Benefit( Product) : This is the basic level that represents the heart of the product with a focus on the purpose for which the product is intended. For instance a car is  purchased for its convenience, the ease at which one can go or the speed at which one can travel around relatively fast. 2. Generic Product: It is the unbranded and undifferentiated commodity. Unbranded pulses, rice, wheat flour are some of the examples of generic product. 3. Branded Product: The branded products get an identity through a name. It belongs to a specific company and the marketer separates this product from the rest. 4. The differentiated product: All the branded products are supposed to be differentiated products, but in certain cases where the brand name alone has not earned enough distinction the case may be different. Here the marketer tries to differentiated his product from the clutter created by competitor products by highlighting some of the special attributes/features /qualities his brand is endowed with. The difference could be tangible or psychological. For example Knorr‟s Soups are tasty and healthy soups and can be prepared easily. 5. The customized product: When the product is modified to suit to the requirements/specifications of the individual customer, he is being offered a customized product. Earlier it was limited to industrial products but now the consumer goods are customized for the customers and he gets an opportunity to order and get a product/service as he desires and not just choose from mass/standardized product/service available in the outlets. Many companies manufacturing automobiles, computers, paints, shoes and garments have used this strategy to beat competition. 6. The augmented product: The augmented product aims to enhance the value of the product/offer through voluntary improvements. These improvements may be neither suggested by the customer nor expected by him. The manufacturer/marketer adds the feature/benefit on his own. The needs of the customer are identified through market research surveys and the insights thus obtained are used to add new features/functions to the product. 7. The Potential Product: The potential product is the „future‟ product inclusive of the advancement and refinement that is possible under the existing technological, economic, competitive conditions prevailing in that category. Potential product is only limited by economic and technological resources a firm can spare. Nevertheless todays‟ potential products can be tomorrows‟ real product.  FACTORS INFLUENCING PRODUCT MIX 1. Market demand: The demand of the product determines whether the product should be manufactured or its production discontinued. New products are introduced in the market after the need of the product is identified. 2. Cost of product: The Company can develop products which are low in costs and produce those products. Nirma, washing powder, a low priced product was launched to counter Surf which was priced high. 3. Quantity of production: The Company can add more items on its product line in case the production of the new product is to be made on large scale. 4. Advertising and distribution factors: An organization does not incur any additional efforts to advertise or distribute when the company adds one or more products to its product line. 5. Use of residuals: In case the by-products can be developed or utilized; a company should produce such products. Sugar manufacturing companies can also use molasses. 5. Competitor’s action: In order to meet the competition/market a firm may decide to include or eliminate a product. 6. 7. Full utilization of marketing capacity: The Company can start to produce another product to utilize the capacity completely if the existing marketing resources are not being utilized. 8. Goodwill of the company: When the company has good reputation in the market, new product can be launched without much difficulty. SOME PRODUCT TERMS / PRODUCT DECISIONS  PRODUCT MIX is the list of all products offered by a company. It is defined as the composite of products offered for sale by a firm or a business. The product mix is three dimensional:   Breadth is measured by the number or variety of products manufactured by a single manufacturer. E.g.: LG produces a variety of electrical gadgets such as television sets, washing machines, refrigerators etc.   Depth refers to the assortment of sizes, colors and models offered within each product line. E.g.: LG manufactures different varieties or models of refrigerators and washing machines, etc.   Consistency refers to the close relationship of various product lines or their end use to production requirements or to distribution channels. E.g: LG produces those goods which fall under the category of electrical appliances.  PRODUCT LINE is a group of products that are closely related, either because they function in a similar manner or are sold to the same customer groups or are marketed through the same types of outlets, or fall within given price ranges. Many businesses offer a range of product lines which may be unique to a single organization or may be common across the industry. Eg. "Accident, health and medical insurance premiums" and "income from secured consumer loans." within the insurance industry, product lines are indicated by the type of risk coverage, such as auto insurance, commercial insurance, and life insurance  PRODUCT POSITIONING – It refers to the manner in which a product is offered to a particular customer of a particular segment for the aim to meet the customer's needs. E.g.: Wagon R is positioned as a compact car for the smart urban, MTR‟s Ready to eat foods positioned as a convenient and a ready to eat foods, Coco cola‟s brand globally is positioned as Taste the feeling  PRODUCT REPOSITIONING – It refers to the manner in which a marketer changes the whole product in order to satisfy a particular segment or customer. Mostly repositioning is done when a product is changed physically.  PRODUCT DIFFERENTIATION: Product differentiation is the modification of a product to make it more attractive to the target market. This involves differentiating it from competitors „product as well as own product offerings. Three things that continuously change in product differentiation are PRODUCT QUALITY, PRODUCT DESIGN, and PRODUCT SUPPORT SERVICES:   PRODUCT DIVERSIFICATION: Product Diversification refers to the product expansion either in the depth and/or in width. Depth of product-line implies the assortment of colors, sizes, designs, quality, stability, etc. It refers to adding a new product to the existing product line or mix. e.g. - Godrej Company used to manufacture cupboards, locks, safes, refrigerators etc. on a large scale but has now diversified into cosmetics, soaps etc   PRODUCT MODIFICATION: Product modification may be defined as a deliberate alteration in the physical attributes of a product or its packaging. It is the process by which the existing products are modified to suit the changing demand on account of changes. E.g.: Television manufacturers are bringing out certain modifications in order to suit the changing demand.  PRODUCT STANDARDIZATION: Standardization implies a limitation of the number of varieties or the types of uniform quality that can be manufactured so as to reduce the unnecessary varieties. Eg. Ready-made Shirts and Trousers are manufactured in standard sizes   PRODUCT ELIMINATION: Products which cannot be improved or modified to suit the market needs need to be replaced by other profit generating products, this process of  Eg. Maruti 800 was replaced in the market for withdrawal is known as product elimination. other cars manufactured by Maruti Suziki. KNOWLEDGE ASSESSMENT 1 Fill in the blanks 1. Product represents solution to ______________problems. 2. Product is anything that can be offered to someone to satisfy a ______or a _______. 3. Products have their own ________ or a __________. 4. A ________is defined as a name, term, symbol, design o r a combination of them which is intended to identify the goals & services of one seller and to differentiate them. 5. Symbols and pictures ensure _________ identifications. 6. Product is the _______________ and all the marketing activities revolve around it. 7. ___________is the unbranded and undifferentiated commodity. 8. The ________ is the modified product to suit to the requirement/ specifications of the individual customer. 9. The ________ aims to enhance the value of the product / offer through voluntary improvements. 10. The potential product is the ________inclusive of the advancement and refinement that is possible under the existing circumstances. Answers: (1)Customers, (2)Need & want, (3)Identity & personality, (4) Brand, (5)Product/ brand, (6) Focal point, (7) Generic product, (8) customized product, (9) augmented product, (10) future‟ product  SESSION 2 PRODUCT CLASSIFICATION The product nature is found to have significant impact on the method of product positioning. Product classification assists the marketers to put the products before the consumer better. They can be segmented, targeted and positioned better. It can be undertaken on the basis of three essential characteristics namely durability, tangibility and user type. Durability implies the average life of the product available for consumption, tangibility means the physical attributes of the product and user type provides information regarding consumer products and industrial products. The following figures show a typical product classification: Classification of products 1. Durability and Tangibility 2. Consumer goods 3. Industrial Goods (a) Non- durable goods (a) Convenience goods (a) Material and parts (b) Durable goods (b) Shopping goods (b) Capital items (c) Services (c) specialty goods (c) Supplies and business services (d) Unsought goods  Detailed classification of goods and services Consumer goods Industrial goods Services On the basis On the basis of Raw Foundation Facilitating Accessories Shopping nature Materials Goods Goods and parts Installations Fixed Equipments Durable goods (cars, scooters, Furniture) Fast moving consumer goods or Non durable goods (Soap, Cornflakes) Convenience goods Shopping goods Specialty goods (Bread & Biscuits) (Suiting shoes, watches) (Paintings, Jewellery, Carpets) Law- enforcing Civil, Administrative and Business, Professional Services Hospitality Services Defence services Utilities Distributive Traders Insurance, Banking & Finance Transport and Communication  Classification on the basis of Durability and Tangibility Products can be classified on the basis of durability and tangibility. On the basis of durability they can be classified as non durable products. On the basis of tangibility, they can be classified as physical products and services  Non durable goods: Non durable goods are tangible goods normally consumed in either one or a couple of uses. These are purchased regularly and also consumed frequently. Smooth distribution and easy availability at all possible locations makes these products succeed in the market. The marketer has to advertise heavily to increase the purchase and build brand preference. Most of the fast moving consumer goods category products belong to this class. Examples include food items and toiletries.  Durable goods: Durable goods are tangible goods that can normally be used for many years. These products need more personal selling, after sales service, are often supported by guarantee and warranty programs. Examples include LCD TVs, mobile phones, washing machines and microwaves.  Services: On the basis of tangibility, products can be also be classified as physical products and services. Services are intangible, inseparable and inconsistent products. Service essentials include quality control, credibility of the supplier and adaptability to changing consumption behavior. Examples include hospitality service, airlines services, insurance and banking services. Classification of consumer goods Consumer products can be divided on the basis of the time and effort the buyer is willing to take out for the purchase of the product. They can be divided into two parts: (i) Convenience Products: They are goods that a customer purchases frequently, with minimum effort and time to make a buying decision. Example being soft drinks, soaps, bread, milk etc. These can be further classified into three categories: (a) Staple Goods: The products which are purchased on a regular basis. The decision to buy the product is programmed once the customer puts the item on his list of regular purchases. Example bread, milk, eggs (b) Impulse Goods: The consumer purchases these without any planning or search efforts. The desire to buy impulse is a result of the shopping trip. This is why  impulse products are located where they can be easily noticed. Example chocolates, magazines. (c) Emergency Goods: They are purchased to fulfill urgent need. The consumer ends up paying more. Examples of consumer shopping for tooth brushes or shaving blades at tourist destinations. Main Features: i. They are easily available and require minimum time and effort. ii. They are obtainable at low prices. iii. There is a continuous and regular demand for such products. iv. Both demand and competition for these products is high. v. Products are easily substitutable. vi. Heavy advertising and sales promotion schemes help in marketing of these products. MARKETING STRATEGY OF CONVENIENCE GOODS: (a) Price: These products are usually low priced and widely available. (b) Promotion: Mass promotion is done by the producer. (c) Place: These products are widely distributed and at convenient locations. Made available through vending machines in schools, offices etc., also kept in check-out stands etc., (ii) Shopping Products: These are the goods where the customer while selecting the product for purchase makes due comparisons on the bases of quality, price, style and suitability. Shopping products can be homogenous or heterogeneous. 1. Homogeneous Products: They are products which are alike, with the sellers engaging on price war. Manufacturers end up distinguishing based on design, services offered or other freebies. 2. Heterogeneous Shopping Products: They are products that are considered to unlike or non- standardized. The consumers always shop for a best quality buy. Price becomes secondary in case the focus is on style or quality. Main Features: i. They are durable in nature. ii. They have high unit price and profit margin. iii. The customer spends adequate time and compares products before making the final purchase. iv. Purchase of such products is planned prior. v. Important role played by the retailer in the sale of shopping goods MARKETING STRATEGY OF SHOPPING GOODS: (a) Price: These goods are available at moderate prices. The seller must apprise the buyer with the price. (b) Promotion: Heavy advertising and personal selling by both producers and resellers. (c) Place: As consumers will spend time to shop for these goods, stores that specialize in them are located near similar stores in active shopping areas. (d) Products: Furniture, clothes, used cars, etc… (iii) Specialty Products: These are goods with unique characteristic or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Consumers have strong convictions towards the brand, style, or type. For example Cars, High end Watches, Diamond jewellery etc. Main Features: i. The demand for such products is relatively infrequent. ii. Products are high priced. iii. Sale of such products is limited to few places. iv. Aggressive promotion is required for such products. v. After sales service is required for these products. MARKETING STRATEGY OF SPECIALTY GOODS: (a) Price: They are usually marked at high prices. As demand for these goods are low and Supply is also low (b) Promotion: Targeted promotion by both producer and reseller. High level of advertising (c) Place: Exclusive selling in only one or few selected outlets per market..Exclusively sold and are exclusively distributed. Consistency of image between the product and the store is also a factor in selecting outlets. (d) Product: Jewelry, Rolex watches, fine crystals, etc. (iv) Unsought Products These are products that are available in the market but the potential buyers do not know about their existence or there do not want to purchase them. There are two types of such products: Regularly Unsought Products: The products which exist but the consumers do not want to purchase them as of now, but might eventually purchase them. Example: Life Insurance Products or Doctor‟s services. New Unsought Products: The marketers task is to inform target consumers of the existence of the product, stimulate demand and persuade then to buy the product. Example: Oral Polio Vaccine was unsought initially, but heavy promotion and persuasion by the government has lead to eradication of polio. MARKETING STRATEGY OF UNSOUGHT GOODS: (a) Price: It varies from product to product. (b) Promotion: Personal selling and aggressive advertising by producer and seller. (c) Place: It depends upon the product. (d) Product: Life insurance, Red Cross Blood Donations, etc Industrial Products: The Products used as inputs to produce consumer products are known as industrial products. They are used for non-personal and business purposes. Examples being raw materials, tools, machinery, lubricants etc. Feature of Industrial products:  Limited number of buyer in comparison to consumer goods.  Length of Channel for distribution is short.  Demand for the product is concentrated in certain geographical locations and is derived from the demand of consumer goods.  Product purchase is based on fulfillment of technical considerations.  Reciprocal buying is involved is a company may purchase the raw material from a company and may sell the finished product to the same company.  In certain cases the companies may lease out the products rather than purchasing them due to high costs. Types of Industrial Products: (i) Materials and Parts: These are goods that are used for manufacturing the product. These are further divided into two types: (a) Raw Material: The raw materials could be either agri based products like sugar cane, rubber. Wheat etc or they can natural products like iron ore, crude petroleum etc. Farm products are renewable as they involve agricultural production. The natural products are very often limited and often available in great bulk and low unit value. There are a few but large producers and marketers supplying natural products. Long term supply contracts are a common phenomenon in these categories, as the industry needs an uninterrupted supply of products and services for running their business process. (b) Manufactured Materials and Parts: These include component materials like glass, iron, plastic or components like battery, bulbs or steering etc. The component materials are further fabricated from aluminum, pig iron to steel and cloth from yarn. Components enter the final product without being changed or  modified. In this case price, quality and services are important factors while making a decision. (i) Capital Items: They are the goods used in producing the finished goods. They include tools, machines, computers etc. They can be categorized into installations like lifts, mainframe computers etc and equipment‟s like fax machines, EPBX machines. Installations are major purchase for the organization. Equipment‟s include hand tools and office equipment‟s like personal computers, laptops. These equipment‟s are not everlasting and they need to be refilled at different periods of time. (ii) Supplies and Business Services: They are goods which are required for developing or managing the finished products. They can be of two kinds namely maintenance and repair items and operating supplies. Maintenance supplies include painting, nailing and operating supplies include writing papers, consumables for computer, lubricants and coal. Business services can be classified as maintenance service like copier repair, window and glass cleaning and business advisory services include consultancy, advertising and legal services. KNOWLEDGE ASSESSMENT 2 Fill in the blanks: 1. ______________________ are good that a customer purchases ______________, with ________________ effort and time to make a buying decision. 2. ____________________ are those that the consumer purchases these without any planning or search efforts. 3. __________________________ are products that are considered to unlike or non- standardized. 4. Speciality products are goods with __________________ or _______________________ for which a sufficient number of buyers are willing to make a special purchasing effort. 5. ____________________ are products that are available in the market but the potential buyers do not know about their existence or there do not want to purchase them. 6. ____________________________ are those which exist but the consumers do not want to purchase them as of now, but might eventually purchase them. 7. The products used as inputs to produce consumer products are known as ______________________. 8. __________________________ is involved is a company may purchase the raw material  from a company and may sell the finished product to the same company. 9. __________________________ are goods that are used for manufacturing the product. 10. ___________________________ are the goods used in producing the finished goods. ANSWERS (1) Convenience Products, frequently, minimum (2) Impulse Goods (3) Heterogeneous shopping products (4) Unique characteristics, brand identification (5) Unsought products (6) Regularly Unsought products (7)Industrial products (8) Reciprocal buying (9) Materials and parts (10) Capital items SESSION 3: MANAGING PRODUCT LIFE CYCLE Each product goes through a life cycle which includes the following stages of growth, maturity and decline. The product life cycle indicates the sales and profit of the product over a period of time. Most of the products follow the „S‟ shaped curve with certain products deviating showing a sharp growth followed by a sharp decline, or remain in the maturity phase for a long time, and may not face a decline. Trends and Fashion can be grouped in the first category; products in closed economies or in a monopolistic market represent the second type. In this category one may also have commodities like steel, cement, and food products, where the demand remains inelastic, relative to other manufactured products. In India, cars, refrigerators, and television sets etc did not experience a decline until 1991 as there were operating in the pre-liberalization era with less competition. But things started to change after 1991 with opening up of the markets and increase in competition. In the current scenario the product life cycles are also shortening with high competition and changing demands. As we move through the product life cycle, it is observed that profits are rarely a part of the introduction stage; the growth stage brings profits with an onset in decline in profits being observed in the maturity stages “The product life cycle (PLC) depicts a products sales history through 4 stages: 1) Introduction 2) Growth 3) Maturity and 4) Decline Adjustment and modifications need to be made in the product‟s marketing mix as the product moves through its life cycle because of changes in the environment, buyer behavior, and the composition of the market. The PLC concept can be applied to a product category (soaps), to a particular product form (soap bars, liquid soaps) or to a particular brand (Lux). The life cycle of the product category is the longest and that of the brand is shortest usually. It is useful most directly to product forms. Product forms like soaps, gel pens and televisions and mobile phones go through a sales history of introduction, growth, maturity and decline. Product categories often tend to stay in the maturity stage for longer duration, while the life cycles of individual brands can be extremely inconsistent depending on the effectiveness of their marketing programs. The four stages include: Introduction Stage In this stage a new product (from brand or category) is introduced and it is called the introductory stage. Introducing a new product is always a risky proposition, even for a skillful marketer. A new product category requires a long introductory period because primary demand ie demand for the product category must be aroused. Ex. When “Allout” in 1990 introduced liquid vaporizers as mosquito repellent, it was a pioneer in the product category as till 1990 mosquito coils were prevelant. This is true for those brands which have achieved acceptance in other markets and require introduction in new markets. This is followed by the selective demand ie a demand for a specific brand within a product category. Ex. Once the product category was tapped competition followed. The other brands within the same product category include Mortein, Good night which were competitors for Allout. This phase marks the launch of the product in the market. It is characterized by  Inducing acceptance and attaining initial distribution.  High operational costs, arising out of inefficient production levels or bottlenecks, high learning time, unwillingness of the trade to deal in the product, demand of higher margins or extended credit terms. I  High promotion costs on the expectation of future profits.  Customers have low awareness and those who are willing to try the product do so in small quantities called trial purchase.  Competition is limited to few firms, and is from indirect or substitute products.  Negative profits on account of low sales volume,  Distribution is limited and promotional expenses are high. MARKETING STRATEGIES IN INTRODUCTION STAGE 1. Products are promoted to create awareness and also develop market for the product.  2. The pricing of the product may be low to increase penetration and expand the market share or high priced to recover the development costs. 3. Distribution can be selective till consumers show acceptance of the product. 4. Marketing communication seeks to educate and enhance the product awareness Growth Stage The growth stage is the second stage where the product has been launched successfully with the sales beginning to increase rapidly in this stage, as new customers enter the market and old customers make repeat purchases. This is stage is characterized by  Reduced costs because of economies of scale.  Increase in competition with the customer having greater choices in form of different types of product, packaging and prices.  Market expansion with new customers being added.  Dominant position created by focusing on increasing selective demand  Increase in profits.  Costs incurred on identifying new uses, developing the product, promotion, and distribution.  The mobile handsets are in the growth stage, with new models being continuously launched. Apple launched its iphone 7 recently.  MARKETING STRATEGIES IN GROWTH STAGE There is an increase in competitors who offer similar in the market features. In this stage, the firm seeks to build brand preference and increase market share. 1) Product quality is maintained and additional features and support services may be added. 2) Pricing may remain same as the firm enjoys increasing demand with little competition. 3) Distribution channels are added as demand rises and customers accept the product. 4) Promotion is aimed at a broader audience. Maturity Stage The third stage is the maturity stage. The products that withstand the heat of competition and customers‟ approval enter the maturity stage. Rivals copy product features of successful brands and become more alike. The price wars begin along with heavy focus on unique brand features that still exist. Industry sales peak and decline as the size of potential markets begins to shrink and wholesaler and retailer support decreases because of declining profit margins. Middlemen also introduce their own brands, which makes the competition even tougher further lowering profits in industry. During this stage the marketers are focusing effort on extending the lives of their existing brands. Product managers have to play a very important role for carving a niche within a specific market segment through increase in service, image marketing and by creating new value image and strengthening through repositioning. They should also consider modifying the market, product and marketing mix to fight competition and take it closer to the customer so as to register adequate profits to remain in the business. The characteristics of this stage are  Costs would be decreased as a result of increase in production volumes  The Sales volumes peak and market saturation is visible.  Competitors entering the market increase  There is drop in prices due to entry of competing products  Advertising spend incurred on brand differentiation  Product feature diversification is emphasized to maintain or enhance market share.  The industrial profits decrease during this period. MARKETING STRATEGIES IN MATURITY STAGE 1. Product managers have to play a vital role for carving a niche within a specific market segment through enhanced service, image marketing and by creating new value image and strengthening through repositioning. 2. They should also consider modifying the market, product and marketing mix to fight competition and take it closer to the customer so as to register adequate profits to remain in the business Decline Stage This is the phase where sales decline as the customer‟s preferences have changed in favour of more efficient and better products. Product forms and brands enter into decline stages while product categories last longer. The number of competing firms also gets reduced and generally the industry has limited product versions available to the customer. Sales and profits decline rapidly and competitors become more cost conscious. Brands with strong loyalty by some customer segments may continue to produce profits. There are hidden costs in terms of management time, sales force attention, frequent stock re-adjustments and advertising changes. For these reasons, companies need to pay attention to their dying products. At times management may decide to maintain its brand without changes in the hope that some competitors will leave the market or it may decide to re-position the product in the hope of moving it back to the growth phase in a new image or eventually prune the product from the line. MARKETING STRATEGIES IN DECLINE STAGE 1. The product can be maintained by either by adding new features or finding new uses. 2. The costs can be reduced and it can be offered to loyal segment. 3. The product can be discontinued or sold to another firm that is willing to continue the product.  Examples: Colgate was the first toothpaste in tube in 1896, it went to capture the market world over and became the highest selling brand in the world in 1999, has diversified into oral care range and still a force to reckon with. 1. The -----------indicates the sales and profit of the product over a period of time. 2. Products also follow the „---------curve with certain products deviating showing a sharp growth followed by a sharp decline. 3. A new product category requires a long introductory period because ----------------for the product category must be aroused. 4. ---------------a demand for a specific brand within a product category. 5. In the ----------the profits are negative because the sales volume is low, distribution is limited and promotional expenses are high. 6. The --------------is the second stage where the product has been launched successfully  7. In the growth stage the company faces a trade-off between ----------and. 8. Products that withstand the heat of competition and customers‟ approval enter the--------- --------. 9. In the maturity stage the marketer should also consider entering ----------, product and marketing mix to fight competition. 10. --------and brands enter into decline stages while product categories last longer. Answers: 1. product life cycle, 2. S‟ shaped, 3. primary demand, 4. Selective demand, 5. introductory stage, 6. growth stage, 7. high market share, high current profit, 8. maturity stage, 9. New market, 10. Product forms SESSION 4: PACKAGING AND LABELLING INTRODUCTION Packaging can be defined as an art, science and technology of preparing goods for transport and sale. Packaging as an industry has two sectors – those who prepare the packaging material and those who convert these materials into packages. New packaging materials are fast replacing the old ones. A good packaging conveys the quality of the product: which is distinct from the value of the product. Attractive packaging is an also an efficient point of purchase (POP), and stimulates publicity for sales. It has been observed that packaging is an important advertising means helping in carrying messages from the marketer to the consumer. Packaging as a function has two separate dimensions – the physical aspects related to the science and technology and the behavioral aspect related to the art of product design associated with buyer behavior. PACKAGING CONCEPT In most cases, marketers define packages as the fifth „P‟ of marketing. It provides an enhanced value to the product and there are three levels of material for package: A. A primary package B. A secondary package C. The transportation package Packaging may be „primary‟ which refers to the product‟s immediate container, such as the PET bottle, tetra pack, can or a box: or secondary, which refers to additional layers of protection that are removed once the product is ready such as the tube of shaving cream, which is covered in a card board box or a glass bottle covered in card board box. The different levels of packaging, type and importance would vary with the nature of product, whether FMCG, durable consumables, industrial and liquid product. It would also differ on the distance over which it has to be transported. It should be regarded as one of the important requirements for a manufactured product. The quality control of a product would be meaningless if the package designed to carry the product from the factory to the ultimate consumer is not adequate. ROLE OF PACKAGING Packaging is an important element in the formulation of the marketing plan as it aids with promotion & performs the role of passive salesman, in addition to protecting the product. In the absence of salesman, the package should be able to grab the eyeballs of the buyers. Good packaging may lead to improved consumer acceptance. The product package has an important promotional function, establishing meaningful communication with the consumer. Designing the product package according to changing customer preferences and attitudes will enable the marketers to push the product. Consumer packaging is also intended to offer better convenience to the consumer and protect the product from pilferage and damage. It has been estimated that unit value realization can increase with good packaging. IMPORTANCE OF PACKAGING Initially Packaging was considered a production-related function and activity. While in the current context packaging has completely changed due to competition. New developments in packaging, have forced marketing managers to focus on packaging design. The following aspects highlight significance of packaging in marketing:  It provides information about the product  It helps in identifying brand name  It assists in protecting the product  It helps in product handling  It aids in promoting the product  It helps in offering customer convenience and satisfaction  It helps increase in the sales of the product.  It adds to the use of a product.  It contributes to the safety of a product.   It helps in storage of the product  It helps in product differentiation PACKAGING DECISIONS Packaging is an important component of a product as an attractive pack is the most important factor in impulse purchases. The basic functions of a pack are to attract the potential customer‟s attention, protect the product that is packed and reveal its identity. It is an essential tool for two categories of people – first, end-users of a product: and second, retailers. The material used may vary from metal to paper to plastic etc. The useful packaging decisions include: 1. Packaging design: It is not easy to design a package for various items. For example, all „Hand wash‟ come in bottles, but different brands of hand wash differ in their packaging. The high costs of packaging lead to bringing out refill packs too. 2. Attractive Color: Colour plays an important role for determining customer acceptance or rejection of a product. The use of right colours in packaging also assists marketers, reap huge advantage. Packaging colour should be attractive so that it may aid in promoting sales. 3. Packaging the product line. A company must decide whether to develop a family or similar kind of the packaging of its several products. It involves the use of identical packages for all products or the use of packages with some common feature. FUNCTIONS OF PACKAGING Packaging should perform the following basic functions: 1. Protection The basic function is to protect the products from the vagaries of weather the product can be exposed to, in transit from the manufacturer‟s plant to the retailer‟s shelves and issues related to handling the product while on display on the shelves. The reasons for protection for products through packaging are:  Control pilferage during transit or storage  Prevent the absorption of moisture  Avoid breakage/damage due to rough mechanical or manual handling during transit.  Protect liquid from evaporation. 2. Appeal  The emergences of self-service outlets have forced manufacturers to have attractive packaging. The following characteristics have been identified to help a package perform the self-selling tasks:  It helps in attracting attention of the customer  It helps to enhance the product image  It helps in the product looking and hygienic 3. Performance This is the third function of a package. It should perform the task for which it is designed. Bottled water has been introduced in 500 ml to 20 litres bottles. The purpose and place of use is the deciding factor in the purchase of various packs. A package must be made to consistent and rigid quality standards as the consumer demands uniformity each time he purchases a product. 4. Packaging for convenience It provides convenience to distribution channel members, such as wholesalers, retailers and consumers. The convenience will relate to handling and stocking of packages. It helps in the following ways:  The package must be convenient to stock  The package must be convenient to display  The package must not waste shelf-space.  The package can be easily carried.  It should be easy to dispose off. 5. Cost-effectiveness The package finally must be cost-effective. Packaging cost as a percentage of product cost differs from one industry to another. It is essential to understand that while analyzing packaging costs, the other costs like handling, storage, insurance and transit costs are also added. QUALITIES OF GOOD PACKAGING  Attractive appearance  Convenient for storage and display  Shield against damage or pilferage  Product description displayed on the package  Package should be as per the specifications Types of Packages There are four types of packages: (i) A consumer package (ii) a bulk package, (iii) an industrial , and (iv) a dual usage package. They are as discussed. (1) A consumer package is one which holds the required volume of a product for ultimate consumption is economical and can be easily purchased by the consumer. He has the option to purchase the pack size which he considers adequate for the consumption for his family over a length of time and does not involve additional investment during that period. (2) A bulk package is either for the consumer whose consumption is large or is bought to save cost. Example: oil cans etc. The consumer package itself very often requires an outside package in which it is transported and which is sometimes referred to as transit package or an out container. (3) An industrial package can be a bulk package for durable consumer goods. These are the basic package types although many sub-divisions can be listed, e.g., strip package, multiple package, etc., which can all be broadly listed under these basic headings. (4) A dual use package is one which possesses a secondary usefulness after its contents have been consumed. Drinking glasses, boxes of jewellery or cigarettes, plastic containers, refrigerator dishes, bags from flour and feed sacks are the examples. LABELLING LABELLING Labeling is regarded as part of marketing as packaging decisions involve the labeling requirements. It provides the customers with the requisite information about the product. The buyers also have complete information about the quality, features, standards, grade, price quantity etc. This helps them in making better and informed decisions. It is also helpful to the sellers as they can differentiate their products from their competitors. Attractive labeling also assists in encouraging the customers to pick the products off the shelf. In most countries across the globe, labeling is mandatory and they have specifications for labeling. For example in India, all the prepackaged foods sold in the country are required to comply with the Food and Safety Standards (Packaging and Labeling ) Regulations 2011 issued by the Food Safety and Standards Authority of India functioning under the Ministry of Health and Family Welfare. The important ones include information regarding the nutritional values, vegetarian and non-vegetarian symbols, information related to food additives or flavors, name and complete address of the manufacturer, net quantity, lot identification of batch identification, date of manufacture or packing, instructions for use, country of origin for imported products apart from the general labeling requirements. The CE marking or the estimated sign used in European Union weights and measures accuracy regulations. The Green Dot is the example of environmental symbol. According to the regulations labeling of food items should disclose information about a number of aspects like date of manufacturing, expiry date or optimum storage period for the product which do not have an indefinite storage period, composition, storage conditions, necessary method of use, if necessary, precautions to be taken, contra-indications etc. Labels are part of the printed material on the package. The label is a strong sales tool and an integral part of purchase advertising. Products may be adequately identified by giving the name of the product and the producer; most require somewhat more extensive descriptions of their nature and use. For example, processed foods, patent drugs, some cosmetics, etc. legally are bound to carry a fairly complete detail about their ingredients. Several products must give instructions for their use, as in the case of commercial plant food. Safety warnings should also be mentioned on labels of all potentially hazardous products or packages. For example “To be used under the direction of a medical practitioner” or keep out of reach of children “or Cigarette smoking is injurious to health”. Environmental awareness among the consumers has promoted the introduction of „eco-label‟ awarded on the basis of a product‟s environment friendliness. A good label is one which helps a potential buyer to help him take make decision with relevant and correct information. Apart from the information which must be given, the label should provide: i. Picture of the product accurate as to size, colour and appearance. ii. Description of ingredients used along with methods of processing. iii. Directions for use, including cautions against misuse. iv. Brand names v. Dates of manufacture and expiry vi. Statutory warning, if any. vii. Contra-indications and adverse effects, if any. In all packaging is an important component of marketing and manufacturers are coming with innovative packaging to attract the customer and labeling enables them to comprehend the materials used in the product. Role of Labeling (i) Provides description of the product and specifies its content: The label provides detailed information of the products, its ingredients, usage, care to be administered,  caution, batch number, manufacturing place, helpline number in certain cases, date of manufacturing and expiry etc. (ii) Identifies the product or brand: Labeling enables to identify the product amongst the multiple brands. SUNFEAST brand of biscuits can be easily identified from the other brands on the basis of their labeling. (iii) Aids in product grading: If a company manufactures different qualities of product, labeling aids in finding which pack contains what type of quality. The variants of tea manufactured by Hindustan Unilever Ltd are differentiated by the company through green, red and yellow colored labels. (iv) Facilitates in the promotion of products: It also helps in sales promotion. Consumers are to drawn towards buying products on account of their attractive labels. (v) Helps in providing information required as per the law: The labels provides statutory warnings as required by the law in case of products like cigarettes, pan masalas. They are required to carry the picture and the warnings too. In the case of hazardous or poisonous products too necessary statutory warnings are to be put on the label. William J. Stanton classifies the labels into four: a) Brand labels: They are majorly meant to popularize the brand name of the product. Cosmetics manufacturers prefer to use this kind. E.g: Perfumes, Lipsticks etc b) Grade labels: They emphasize on standards or grades used for product identification. E.g: Fabric, Tea Leaf, etc. c) Descriptive labels: They are descriptive in nature; state product features and explains the various uses of the products. The consumables items like milk etc have descriptive labels. d) Informative labels: The main object of these labels is to provide maximum possible information. In case of the medicines, detailed labels are attached which even specify the side effects in using them. KNOWLEDGE ASSESSMENT 4 Fill in the blanks 1. ________ Packaging cab be defined as an art, science and technology of preparing goods for transport and sale. 2. Attractive packaging is an also an efficient _________. 3. Marketers define packages as the __________of marketing. 4. Packaging may be ________which refers to the product‟s immediate container. 5. Good packaging may lead to improved __________. 6. Consumer packaging is also intended to offer better convenience to the consumer and protect the product from _____________. 7. __________ plays an important role for determining customer acceptance or rejection of a product. 8. A __________is one which holds the required volume of a product for ultimate consumption is economical and can be easily purchased by the consumer. 9. A __________is either for the consumer whose consumption is large or is bought to save cost. 10. Environmental awareness among the consumers has promoted the introduction of ___________awarded on the basis of a product‟s environmental friendliness. Answers – 1. Packaging 2. Point of purchase 3. fifth „P‟ 4. Primary 5. consumer acceptance.6 pilferage and damage. 7. Colour 8 consumer package 9 bulk package 10 „eco- label‟ QUESTIONS Q.1. Define a product. What are the various viewpoints to explain the concept of a product? Q.2. Discuss the core tangible and augmented product for your favorite brand of bathing soap. Q.3. Distinguish between generic market and product market. Q.4. Packaging is considered as the 5th P of Marketing Mix. What are its implications on the PLC? Discuss. Q.5. Discuss the importance of packaging as a tool for foe product differentiation and market cultivation. Q.6. “Packaging has been criticized as being expensive, giving no additional value and often deceptive.” How would you justify marketers use of packaging? Q.7. What is packaging concept? Explain various packaging decisions in brief. Q.8. What are the functions of packaging? Explain various packaging strategies. REFERENCES Saxena. R, “Marketing Management”, 5th Edition, Tata McGraw Hill Kotler. P & Keller. K, “Marketing Management”, 15th Edition, Pearson Ramaswamy & Namakumari, “Marketing Management – Indian Context: Global Perspective, 5th Edition, Tata McGraw Hill”. http://www.businessmanagementideas.com/ http://www.thehindubusinessline.com/news/variety/battle-of-the-oats/article3324566.ece https://en.wikipedia.org/wiki/Packaging_and_labeling#Packaging_types  UNIT II: PRICE DICISION Unit Code: UNIT TITLE: PRICE Duration: Location: SESSION1: MEANING AND IMPORTANCE OF PRICE Classroom Learning Outcome Knowledge Evaluation Performance Teaching and Training or Retail Evaluation Method outlet or 1. Meaning and 1.Introduction 1.Explicate meaning Interactive Lecture: Company‟s importance of 2.Meaning of Price and of price in  Introduction of four premises Price in Marketing Pricing marketing P‟s of marketing mix 3.Importance of pricing 2.To comprehend with special to a firm the relationship importance of Price. 4.Importance of pricing between price and  Discussion of how to a consumer other three P‟s of Price is crucial for a marketing mix firm as well as for 3.Information of consumers. significance of Activity: pricing for a firm  Identify different 4.Information of manufacturing and significance of service organizations pricing for and gather information consumers regarding their objectives associated with pricing. SESSION 2: FACTORS AFFECTING PRICING Knowledge of 1. Discussion of various 1. Enumerate Interactive Lecture: various factors internal factors internal factors  Discussion of how affecting pricing of affecting product affecting product internal and external Products and pricing pricing and their factors influence Services 2. Discussion of various significance product or service external factors pricing affecting product 2. Explicate various pricing external factors Activity: affecting product  Identify and enlist pricing different internal and external factors affecting product price in different types of firms.  SESSION 3: TYPES OF PRICING 1. Discussion of 1.Enumerate different 1.Differentiate and Interactive Lecture: various types of types of pricing assess the basis  Clarification on pricing in of different types various types of marketing A. Demand-oriented of pricing in pricing policies and pricing market their market conditions B. Cost-oriented pricing 2.Classify different Activity: C. Competition- pricing methods.  Prepare a list of oriented pricing various pricing D. Value- based 3.Adjudge the policies that have pricing rationale behind been adopted by ten different types of manufacturing and a 2.Explain the basis of pricing service firms. different pricing methods (Note: The location would depend upon the topic under discussion, wherein it will be the classroom for the theoretical interactions and the student will be required to visit field/retail outlet or the marketing department of an organization to observe and comprehend the concepts related to pricing of goods and services.) UNIT II: PRICE Learning Objectives After reading this unit, the students will be able to: 1. Explain the meaning of price and pricing in marketing. 2. Recognize the relationship between price and other three p‟s pf marketing mix 3. Understand the significance of pricing for a firm. 4. Understand the importance of pricing for consumers. 5. Explain the Internal factors affecting product pricing 6. Explain the external factors affecting product pricing 7. Understand various types of pricing 8. Distinguish different pricing methods adopted by firms  SESSION 1: MEANING AND IMPORTANCE OF PRICE Price is one of the most important elements of the marketing mix. This is the only element which generates revenue for an organization and determines its growth. The other three main elements of the marketing mix are Product, Place and Promotion. A firm incurs a certain cost to produce a Product or service. The Place element is concerned with the sale and distribution of the product through various channels, therefore a firm incurs some expense there, like in choosing the sales-methods, payment to salesmen, expense incurred on transporting products to place of selling, etc. The Promotion element, concerned with the advertising and promotion of the firm‟s product leads to expenditure on different promotion and advertising media like TV& Radio advertising, sample-promotion, etc. All of these are the variable costs for an organization, that is, these costs change with the changes in level of production and sales activity; therefore influence the process of setting the right price for the product. „Right price‟ denotes the level of price which can cover all these expenditures on the final product and brings some profit to the firm. Meaning of Price- The term price denotes money value of a product. It represents the amount of money that customers pay to the sellers to gain benefits of having or using a good or service. In fact it is marketers' assessment of the value customers see in the product. So price indicates the money value which a buyer is ready to exchange for purchase of certain good or service. Definition of Price- The definition of Price according to Philip Kotler is- “Price is the amount of money charged for a product or service.” Similarly according to Stanton “Price is the amount of money needed to acquire some combination of goods and its companying services.” Pricing is defined as „the process whereby a business sets the price at which it intends to sell its products and services’. It is the key variable in a firm‟s marketing plan. While setting prices for its products, i.e. goods or services, the business takes into account various aspects of production, listed below.  Price of raw material- The firm considers price at which it could acquire the goods and raw material to prepare final product to be sold in the market. A higher cost of acquiring these implies a higher product-price and vice versa.  Cost of manufacturing- If manufacturing cost is higher, the price of product will also be higher, whereas lower manufacturing cost leads to lower price. This cost includes the wages of labour, expenses on power and other overheads during manufacturing.   Market condition- When market has positive sentiment i.e. high demand for goods and services because of high income and purchasing power of consumers, companies set higher prices for their products. On the contrary when there is depression or negative sentiment due to lack of demand in market, price is also kept low by firms. For example, automobile companies increase prices of cars when there is high demand and offer heavy discounts when demand is low.  Competition in the market- If there is no other firm in the market offering similar product, the firm may set a higher price for its product or service, but if there are many market players for the same product, the price will be kept competitive. For example, Airtel initially kept high prices for its mobile services, but with entry of Vodafone, Idea and Reliance Jio the prices for various mobile services have been slashed.  Brand and quality of product- A higher brand-value and better quality corresponds to a higher product price in the market. For example, a simple jewellery store in the Chandni Chowk market of Delhi will set price of its ornaments based on cost of gold/silver and making charges (cost of labour for making a particular piece of jewellery). But a high-end jewellery store such as Kalyan Jewellers or Tanishq will price similar ornaments at a much higher price owing to its brand-value and reputation in the market. Price must be supporting other elements of the marketing mix. Too high or too low pricing of a product could mean lost sales for the organisation. Objectives of Pricing Survival is the basic objective of any business. In order to continue their existence organizations may tolerate short run losses, but to obtain working capital for uninterrupted operations and sustainability appropriate pricing for the product is very necessary. As an element of the marketing-mix, a firm‟s pricing strategy should be directed towards the achievement of specific marketing-objectives which would lead to the accomplishment of overall organisational objectives. Pricing is not an end in itself; but a means to achieve certain objectives of the marketing department of a firm. Therefore, every firm should carefully set pricing-objectives so that there is clarity and consistency in the firm with respect to pricing in the long run. The objectives of pricing are as follows: 1. Profitability objectives:  Target Rate of Return on Investment or Net Sales  This is an important goal of pricing policy of many firms. In this, the price represents cost of production and profit margin. The basic objective is to build a price structure to provide sufficient return on the investment or capital employed.  Profit Maximization In practice, no firm expressively states this as an objective for fear of public criticism. However, in economic theory, profit maximization is an important objective for any business for its survival. In recent times though, the business philosophy has changed. Businessmen have started to think from the perspective of society instead of only focusing on maximizing profits, and have incorporated business with other activities which help fulfil their societal obligations. 2. Market-Related Objectives:  Meeting or Preventing Competition in the Market Some firms adopt pricing policies to meet or prevent competition in the market. They are ready to fix their prices at a competitive level to meet competition in the market. They even follow “below cost pricing”, that is, charge less than the cost because they believe it will prevent new firms from entering the market.  Maintaining or Improving Market Share. Market share is meaningful measure of success of a firm‟s marketing strategy. This price objective helps to maintain the market share, i.e. either to increase or sometimes to decrease it. This pricing objective is followed by firms operating in expanding markets. When a market has a potential for growth, market share is a better indicator of a firm‟s effectiveness than target return on investment. A firm might be earning a reasonable rate of return on investment or capital employed but its market share could be decreasing. Target market share means that sale which a company wishes to attain and it is normally expressed as a % of the total industry sales. Therefore, this is a worthwhile pricing objective for firms operating in expanding markets.  Price Stabilization Price Stabilization as an objective is prevalent in industries that have a price- leader. For example, in an oligopoly, there are only a few sellers which follow one big seller who acts as the price leader, and try to stabilize their prices simultaneously. No firm is willing to engage in price wars. They may even forego maximizing profits in times of prosperity or short supply in order to  stabilize prices. This is because price stability helps in planned and regular production in long-run. 3. Public Relations’ Objectives  Enhancing Public Image of the Firm A company‟s public image is important to its success. Every company has an identity representing what it has done to convey the public about its product, packages, trademarks, brand names, employees and the marketing programme. This image is deeply influenced by how the company handles the delicate and sharp weapon of pricing. Suppose a company with an established reputation in the market based on existing products and price lines introduces a new product to a different market segment. This new product could be at a higher or lower price. If this segment hasn‟t tried the product but is aware of its prestige and brand-value, it might desire to purchase its products because price is no longer a deterrent factor. Similarly, a firm known for high quality and high priced products will lose its current customers if it goes in for low quality and low priced products. However, a company image well established will favour price policies of its choice because the customers have accepted the company.  Resource Mobilization – Resource Mobilizing means the creating resources for either self – development or reinvestment in the firm. Prices are deliberately set high in certain cases to generate surplus for reinvestment in the same firm or its sister concerns, e.g. petrol rates are kept very high as it yields a good surplus (excess of income over spending) because gasoline automobiles depend fully on petrol. As a governmental exercise, it works well as the public escapes tax on their backs. This objective of price is mostly found in the developed countries where it adds to the exchequer (former government departmental in charge of national revenue) for reallocation. Importance of Pricing Pricing is an important element of the marketing mix of the firm. All other Ps of marketing i.e. Product, Place and Promotion are highly dependent on the price at which the firm can sell its products to the buyers. Price will usually be set relatively high by the firm if manufacturing is expensive, distribution and promotion are exclusive. On the contrary a low price may be a viable substitute for product quality, but firm requires effective promotion and an energetic selling effort to increase its  market share. Similarly consumers‟ buying decisions also depends upon price of the product up to a great extent. Highly priced commodities generally witness a sluggish sale trend in comparison to moderately priced goods. A. Importance of Pricing for Firm- Pricing is significant for firms in the following manner- 1. To determine firm’s Competitive Position and Market share- Pricing Policy of a firm is a major determinant of a firm‟s success as it affects the firm‟s competitive position and share in the market. If prices are too high, the business is lost. If prices are too low,the firm may be lost. The wrong price can also negatively affect sales and cash flow to the firm. 2. To achieve the financial goals of the company- Price has an important bearing on the firm‟s financial goals, i.e. Revenue and Profit. For a given level of production, higher price means a higher revenue and higher profitability (revenue minus costs).With the help of price; a firm can make estimates of expected revenue and profits. 3. To determine the quantum of production – Price also helps in determining the quantum of production which should be carried out by the firm. The management of a firm can make estimates of profit at different levels of production at different prices and can choose the best combination of production, volume, and price. 4. To determine the product positioning and distribution in the market-The sale of product is supported by extensive advertising and promotional campaigns. What type of promotional techniques is to be used and how much cost will be incurred, these decisions depend upon prospective revenues of the firm, which again are influenced by the product price. 5. To determine the quality and variants in production-Before setting the price, managers try to explore „Will customers buy the product at that price?‟ to fit the realities of the marketplace. This helps them to determine various product models that can be produced to fit different market segment, e.g. Samsung offers Samsung Grand for a medium-income group and Galaxy S7 Edge for a high-income group of consumers. 6. To establish consistency with the other variables in the marketing mix- Pricing decisions and policies directly influence the nature and quality of product, its  packaging, promotion policies, channels of distribution etc. For instance, a firm may decide to improve the quality of a product, increase the number of accompanying services and spend more on promotion and packaging etc. only if it is confident to sell its product at the price which is good (high) enough to cover the cost of additional improvements and services. If this same product cannot command a very high price in the market, then the company will have to keep normal quality, reduce the number of accompanying services, go with different, less-expensive channels of distribution and simplify packaging etc. Therefore there is no doubt that the nature and type of product, promotion and distribution policies of the firm are influenced by the price-policy of the firm. 7. Helpful in maintaining system of free enterprise and long run survival of firms- Pricing is the key activity in the economy of a country which permits system of free enterprise. It influences factor prices, i.e. Wages, interest, rent and profit, by regulating production and allocating resources in a better way. The firms which are not able to market their products at good prices cannot survive in the long run as they are not able to pay for various factors of production. So pricing weeds out inefficient firms and shows way to long run survival. 8. Improvement in company’s image- A company‟s image is important to its success and pricing helps to make that image. A firm with an established reputation for quality at existing price lines may introduce a new product at either higher or lower prices to attract different market segments. Buyers who are aware of its prestige might desire to purchase its products because price no longer remains a limiting factor for them. For example different models of Apple mobiles have good demand in the market in spite of being high priced. B. Importance of Pricing to Consumers- 1. Helpful in decision-making- Goods and services offered by various producers at different prices help the consumer to make rational and informed buying decisions. For example, a person may choose to buy a T.V. from one shop which offers the product at Rs 20,000, or from another shop which offers the same T.V. at Rs 21,500 but gives free-repairs- service for five years. 2. Helps in satisfaction of needs: Goods and services offered by different producers at different prices help the consumer to take that buying-decision which will give him/her maximum satisfaction. By making a market survey and comparing the prices of different variants available vis a vis his budget, the consumer tries to make the best choice. It gives him value for his money spent, and maximizes his satisfaction and welfare.  3. Helps determine the purchasing power and standard of living of the consumer- If a consumer purchases expensive, luxury items, it implies that he/she has a higher purchasing power and enjoys good standard of living. On the other hand, if a consumer purchases only low-priced, essential items, then he/she has a lower purchasing power and standard of living. This tendency generally persuades consumers to buy branded goods to flaunt their status. 4. Enhancement in social welfare– Pricing decisions affect the competitive strength of the firm in the market. Since each firm tries to outsell others through price reduction and better quality products in competitive market, consumers are benefitted. In this way, quality goods are available at competitive price which maximizing social welfare in society. Knowledge Assessment I: A. State whether the following statements are true or false: 1. The main elements of the marketing mix are Price, Product, Place and Promotion. 2. Price is marketers' assessment of the value customers see in the product or service and are willing to pay for a product or service. 3. For a given level of production, higher price means a higher revenue and higher profitability. 4. Highly priced commodities generally witness an increasing sale trend. 5. The wrong price can positively affect sales and cash flow to the firm. 6. Goods and services offered by various producers at different prices help the consumer to make rational and informed buying decisions. 7. The firms which are not able to market their products at good prices are able to pay for various factors of production adequately. 8. If prices are too high, the business is lost. If prices are too low,the firm may be lost. 9. A consumer purchasing expensive and branded items implies that he/she has a higher purchasing power and enjoys good standard of living. 10. To flaunt their status consumers generally buy cheaper goods. Answers: 1. True, 2. True, 3. True, 4.False, 5. False, 6. True, 7. False, 8. True, 9.True, 10.False B. Make the right choice: 1. Price indicates the ----------which a buyer is ready to exchange for purchase of certain good or service. a) satisfaction b) money value 2. Buyers who are aware of Firm‟s----------- might desire to purchase its products because price no longer remains a limiting factor. a) location b) prestige 3. Availability of quality goods at competitive price ------------social welfare in society. a) neutralizes b) minimizes c) maximizes 4. Generally price will be set relatively --------by the firm if manufacturing is expensive, distribution and promotion are exclusive. a) high b) low 5. Management of a firm can make estimates of ------------at different levels of production at different prices and can choose the best combination of production, volume, and price. a) cost b) profit Answers: 1.b, 2.b, 3.c, 4.a, 5. B SESSION 2: FACTORS AFFECTING PRICING  The decisions related to price and pricing policies of a firm are affected by several factors present in marketing environment. A firm plans production keeping in view the customers' needs, market characteristics, competing firms, behaviour of suppliers and distributors for its product and certain legislative factors. These factors give important inputs to the management for marketing-decisions. A firm also gives due consideration to these factors while determining price of the product. These are studied under two categories- A. Internal factors B. External factors. A. Internal factors– Internal factors are the forces which are within the control of a firm up to certain extent. The firm can regulate and change these factors as per requirement. For example all the P‟s of marketing mix, procurement of raw material, employment of labour and cost of production etc.not only determine the success of firm‟s operations, but also have great influence on product pricing. The factors can be discussed as following- 1. Objectives of the firm: A firm may have various objectives and pricing contributes in achieving them. Firms may pursue different objectives such as maximizing revenue, maximizing profit, maximizing market share or maximizing customer satisfaction. The Pricing policy should be established only after clear consideration of the firm‟s objectives. 2. Role of Top Management: Usually, it is the top management that takes a firm‟s pricing decisions. But pricing activities are so crucial for future sales and profits that a marketing  manager has to remain involved with the pricing. The role of the marketing manager is to assist the top management in price-determination and ensure that pricing takes place within the policies laid down by top-management. 3. Cost of the Product: There is a direct relation between the cost of production and price of a product. If the cost of acquiring material and manufacturing cost of the product are high, the price of the product in the market will also be higher and vice versa. The firm should also fix prices that are realistic, considering current demand and competition in the market. 4. Product Differentiation: The price of a product also depends upon its specifications. Generally, producers add more and more features to their products to attract customers, and the customers pay a price for them. Therefore, a highly differentiated product will have more features and attributes, and a higher price than one which is less-differentiated. 5. Marketing Mix: Price being an important element of the marketing-mix must be coordinated with the other elements- product, place and promotion. The price should be such that it covers the expenses on the other elements of the marketing mix and corresponds to them ideally. For example- a high-priced branded electronic product should be sold in high-end urban showrooms instead of rural markets; the promotion technique should be TV-advertising and not personal-selling, etc. 6. Size of the organization: If the size of firm is big and the scale of production is large, it can afford to set lower product price and increase its sales. On the other hand small sized firm keep high price of its products. 7. Location of the organization: Location of the organization is an important determinant of the price of a product. The price and product-size will vary depending upon whether the market is located in a rural or urban area. For example, in the kirana stores in smaller towns and villages, one will find the Rs 1 or Rs 2 shampoo-sachets instead of a big 200ml or 250ml bottle found in departmental stores in a large city of the same shampoo. 8. Nature of Goods: If product is necessity good, firm may set a moderate price keeping in view social welfare purpose; but if the product is luxury good in nature and is being demanded by high end consumers; its price will be high. 9. Promotional programs: The extent of promotional programs and advertisement expenditure also influence the price of a product. If it is huge, the product will have high price and vice-versa. B. External Factors-  External factors are forces which are beyond control of the firm. A firm cannot alter or change these factors or forces for its advantage. These factors can be discussed as following- 1. Demand: The market demand for a product has a direct impact on its pricing. Since demand is affected by prospective buyers, their incomes, tastes and preferences etc., they should be taken into account while making decision of pricing. For an instance if the demand for a product is inelastic, as in case of necessity goods, a high price may be fixed. But if the demand for a product is elastic, i.e., changeable in response to change in price, the firm should not fix higher prices; rather fix lower prices to grab major market share. 2. Buyers’ behaviour: Buyers‟ behavior also affects the pricing decisions. If they are habitual of the product the price may be fixed high. Similar pricing decisio