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CHAPTER 11 LEARNING OBJECTIVES M ARKETING After studying this chapter, you WHERE DO COMPANIES DO THEIR should be able to: BUSINESS?...

CHAPTER 11 LEARNING OBJECTIVES M ARKETING After studying this chapter, you WHERE DO COMPANIES DO THEIR should be able to: BUSINESS? In the Markets or in the Society? Ø explain the meaning of ‘marketing’; It is an undisputed fact that a company’s survival does not depend upon its consumers alone, but a diverse set of Ø distinguish between ‘marketing’ stakeholders like the government, and ‘selling’; religious leaders, social activists, NGOs, media, etc. Hence, earning the Ø list out important functions of satisfaction of these segments is also as marketing; imperative as they add to the power of the brand by word of mouth. The social concern adds to the Ø examine the role of marketing in strength of the brand. Corporates that the development of an economy embraced the deepest social values, in a firm, to the society and to have been successful in building consumers; powerful brand, and, eventually, robust customer relationship. The area of Ø explain the elements of corporate social justice fall under two marketing-mix; broad categories. The issues such as the nutrition of children, child care, old-age homes, amelioration of hunger, offering Ø classify products into different aid to those affected by natural categories; calamities, etc. needing instant attention with humanitarian perspective, comes Ø analyse the factors affecting under the first category. price of a product; The issues that contribute to making society a pleasant place to live in the long run, may be grouped under Ø list out the types of channels of the second category. The issues which distribution; and come under this category are health awareness and aid, education, Ø explain the major tools of environmental protection, women’s promotion, viz. advertising, employment and empowerment, personal selling, sales preventing unjust discriminations (on promotion and publicity. the basis of caste, community, religion, ethnicity, race, and sex), eradication of poverty through employment, preservation of culture, values, and ethics, contribution to research, etc. 2015-16(21/01/2015)  MARKETING 297 Infosys Technologies, the leading software consulting service provider, has been certified ISO 14001, compliant by Det Norske Veritas for its development centers in Pune, Chennai, Bangalore, Bhubaneshwar, Hyderabad, Mangalore, Mohali, and Mysore, for its ‘Ozone Initiative’. Through this initiative, Infosys has committed for continual improvement. Procter and Gamble’s (P&G) philosophy is that it should lead the industry in implementing a global environmental programme. P&G is one of the first companies in the world to actively study the influence of consumer products on the environment and introduce concentrated products, recycled plastic bottles, and refill packages to the industry. The overall packaging per case has been reduced by an average of 27% and a reduction of 37% in air, waste, and water emissions has been achieved consistently since 1990. P&G contributes to sustainable development and addresses environmental and social issues connected with its products and services. Source: Adapted from ‘Effective Executive’, Feb. 2006 Let us consider a typical day in our life. Nestle, Atlas Cycles by Atlas cycle Right from the time we get up in the company, Kwality Ice-creams by morning to the time we go to bed, we Kwality Walls, LG Televisions by LG use number of products to satisfy our Electronics and so on. These firms are different needs. Beginning with the called marketers. These firms breakfast, we take such items as bread, undertake various activities to butter, milk, and rice, to satisfy our stimulate the demand for their hunger; use the services of a bus or an products and earn profit by satisfying auto or a cycle to reach to our school customer’s needs and wants. People or place of work; read books, magazines purchase products because these and newspapers, to keep ourselves satisfy some of their needs. informed and acquire knowledge; use Number of activities are performed computers, cell phone, television and by the marketers to facilitate exchange other gadgets for communication/ of goods and services between entertainment; and purchase many producers and the users of such other products like gifts, shoes, products. These activities are referred clothing, furniture, etc., from market to as marketing activities. to satisfy our different needs. For a proper understanding of Who makes these products and marketing, number of questions need why? These products are manufactured to be answered. These include: What and marketed by different firms. For do we mean by a market? What can be example, Lifebouy soap, Closeup marketed? Is it products or services or toothpaste, Surf detergent powder are something more? Who is a marketer? manufactured by Hindustan Lever; What is marketing management? Ariel detergent powder by Procter and These points have been taken up for Gamble, Dairy Milk Chocolate by discussion in the following sections. 2015-16(21/01/2015)  BUSINESS STUDIES 298 “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 W HAT IS A MARKET WHAT IS MARKETING In the traditional sense, the term The term marketing has been described ‘market’ refers to the place where by different people in different ways. buyers and sellers gather to enter into Some people believe that marketing is transactions involving the exchange of same as ‘shopping’. Whenever they go goods and services. It is in this sense out for shopping of certain products or that this term is being used in day to services, they describe it as marketing. day language, even today. The other There are some other people who ways in which this term is being used confuse marketing with ‘selling’ and is in the context of a product market feel that marketing activity starts after (cotton market, gold or share market), a product or service has been geographic market (national and produced. Some people describe it to international market), type of buyers mean ‘merchandising’ or designing a (consumer market and industrial product. All these descriptions may be market) and the quantity of goods partly correct but marketing is a much transacted (retail market and broader concept, which is discussed as wholesale market). follows: But in modern marketing sense, Traditionally, marketing has been the term market has a broader described in terms of its functions or meaning. It refers to a set of actual and activities. In this respect, marketing potential buyers of a product or service. has been referred to as performance For example, when a fashion designer of business activities that direct the designs a new dress and offers it for flow of goods and services from exchange, all the people who are willing producers to consumers. to buy and offer some value for it can As we know, most of the be stated to be the market for that manufacturing firms do not produce dress. Similarly, market for fans or goods for their own consumption but bicycles or electric bulbs or shampoos for the consumption or use by others. refers to all the actual and potential Therefore, to move the goods and buyers for these products. services from the producer to consumers, 2015-16(21/01/2015)  MARKETING 299 a number of activities, such as product particular way, say to purchase a designing or merchandising, packaging, product or a service, rather than forcing warehousing, transportation, branding, them to do so. A careful analysis of the selling, advertising and pricing are definition shows the following required. All these activities are important features of marketing: referred to as marketing activities. 1. Need Needss and Want Wants s: The process of Thus, ‘merchandising’, ‘selling’ and marketing helps individuals and distribution are all parts of a large groups in obtaining what they need and number of activities undertaken by a firm, want. Thus, the primary reason or which are collectively called marketing. motivation for people to engage in the It may be noted here that marketing process of marketing is to satisfy some is not merely a post-production activity. of their needs or wants. In other words, It includes many activities that are the focus of the marketing process is performed even before goods are on satisfaction of the needs and wants actually produced, and continue even after the goods have been sold. For of individuals and organisations. example, activities such as A need is a state of felt deprivation or feeling of being deprived of identification of customer needs, collection of information for developing something. If unsatisfied, it leaves a the product, designing suitable product person unhappy and uncomfortable. package and giving it a brand name For example, on getting hungry, we are performed before commencement become uncomfortable and start of the actual production. Similarly, looking for objects that are capable of many follow up activities are required satisfying our hunger. for maintaining good customer Needs are basic to human beings relations for procuring repeat sale. and do not pertain to a particular In modern times, emphasis is product. Wants, on the other hand, placed on describing marketing as a are culturally defined objects that are social process. It is a process whereby potential satisfiers of needs. In other people exchange goods and services for words, human needs shaped by such money or for something of value to factors as culture, personality and them. Taking the social perspective, religion are called wants. A basic need Phillip Kolter has defined marketing as, for food, for example, may take “a social process by which individual various forms such as want for dosa groups obtain what they need and want and rice for a South Indian and through creating offerings and freely chapatti and vegetables for a North exchanging products and services of Indian person. value with others”. A marketer’s job in an organisation Thus, marketing is a social process is to identify needs of the target where in people interact with others, customers and develop products and in order to persuade them to act in a services that satisfy such needs. 2015-16(21/01/2015)  BUSINESS STUDIES 300 2. Creating a Market Offering: On the what they need and want through the part of the marketers, the effort process of exchange. In other words, involves creation of a ‘market offering. the process of marketing involves Market offering refers to a complete exchange of products and services for offer for a product or service, having money or something considered given features like size, quality, taste, valuable by the people. etc; at a certain price; available at a Exchange refers to the process given outlet or location and so on. Let through which two or more parties us say the offer is for a cell phone, come together to obtain the desired available in four different versions, on product or service from someone, the basis of certain features such as offering the same by giving something 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 Rs. 5,000 and Rs. 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 area through various middlemen, of the potential buyers. involving exchanges at different levels 3. Customer Value: The process of of distribution. Exchange is, therefore, marketing facilitates exchange of referred to as the essence of products and services between the marketing. For any exchange to take buyers and the sellers. The buyers, place, it is important that the following however, make buying decisions on conditions 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 of will be purchased only if it is perceived offering something of value to the to be giving greatest benefit or value other. For example, the seller offers for the money. The job of a marketer, a product and the buyer, money. therefore, is to add to the value of the product so that the customers prefer (iii) each party should have the ability it in relation to the competing products to communicate and deliver the and decide to purchase it. product or service. No exchange can take place if the buyers and 4. Exchange Mechanism: T h e sellers are not able to process of marketing works through communicate with each other or if the exchange mechanism. The they can not deliver something of individuals (buyers and sellers) obtain value to the other. 2015-16(21/01/2015)  MARKETING 301 (iv) each party should have freedom to to take place. Whether the exchange accept or reject other party’s offer. actually takes place or not depends (v) the parties should be willing to on the suitability of the act of exchange enter into transaction with each to both the parties, whether it makes other. Thus, the acceptance or the parties better off or at least not rejection of the offer takes place on worse off. voluntary basis rather than on the Another important point to be noted is that Marketing is not merely a bases of any compulsion. business phenomena or confined only The points listed above are the to business organisations. Marketing necessary conditions for an exchange activities are equally relevant to non- 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’. Experience : Customised Experiences as Dinner with a cricketer (say Dhoni); Lunch with a celebrity (say Bill Gates or Aishwarya Roy) or experience of Baloon Riding, mountaineering, etc. Properties : Intangible rights of ownership of real estate in financial property (Shares, Debentures). 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. Organisations : For boosting their public image organisations such as Hindustan Lever, Ranbaxy, Dabur, Proctor and Gamble, communicate with people. Example, Phillips says, Let’s make Things Better’. 2015-16(21/01/2015)  BUSINESS STUDIES 302 profit organisations such as hospitals, idea (say Red Cross persuading to schools, sports clubs and social and donate blood) or a place (say Kerala religious organisations. It helps these Tourism persuading people to visit organisations in achieving their goals Kerala for health tourism). Thus, such as spreading the message of anything that is of value to the other family planning, improving the literacy can be marketed. It can be a product standards of people and providing or a service or a person or a place or medication to the sick. an idea or an event or an organisation or experience or properties. (see box) WHAT CAN BE MARKETED? Who is a marketer? Marketer refers to any person who takes more active The question commonly coming to the part in the process of exchange. mind is what can be marketed. Is it a Normally it is the seller who is more product or service or something else. Let active in the exchange process as he/ us first understand what is a product? she analyses the needs of the potential A product is a ‘bundle of utilities’ buyers, develops a market offering and or ‘source of satisfaction’, that can be persuades the buyers to buy the used to satisfy human needs and product. However, there may be wants. It is not confined to physical certain situations where the buyer objects, such as motor cycle, biscuit, may be taking more active role in the bulb and pencil but also refers to other exchange process. Let us say in things of value such as services, ideas, situations of rare supply, the buyer places, etc., that can be offered to the may be taking extra efforts in potential buyers for their use. In the persuading the seller to sell the marketing literature, anything that can product to him/her. This may be be of value to the buyer can be termed happening in defence deals or take a as a ‘product’. It can be tangible, i.e., situation where a country having which can be felt, seen and touched installed a nuclear plant needs the physically such as a pencil, a cycle or supply of nuclear fuel or ‘Heavy Water’. an intangible such as services rendered It may need to convince the supplier by a doctor, hairdresser or a lawyer. of the products to supply the same to Apart from the product, what can it, by promising that it will be used be marketed is a service or a person for peaceful purposes only. In this (say political parties persuading to case, the buyer will be treated as the vote for a particular candidate) or an marketer. Thus, any body, who takes Do it yourself Collect five advertisements each for the marketing of (a) ideas and (b) places from a newspaper or a magazine. Write in your notebook, the messages conveyed through these and discuss in the class indicating which of these messages are more appealing to you. Give reasons in support of your answer. 2015-16(21/01/2015)  MARKETING 303 more active role in the exchange management is on getting, keeping process will be taken as the marketer. as well as growing the customers. That means the marketer has to M ARKETING MANAGEMENT create demand for his products so that the target customers Marketing management means purchase the product, keep them management of the marketing satisfied with the firm’s products function. In other words, marketing and also attract more customers management refers to planning, to the firm’s products so that the organising, directing and control of the firm can grow; and activities which facilitate exchange of (iii) The mechanism for achieving the goods and services between producers objective is through creating, and consumers or users of products developing and communicating and services. Thus the focus of superior values for the customers. marketing management is on achieving That means, the primary job of a desired exchange outcomes with the marketing manager is to create target markets. Taking a management superior values so that the perspective, the term marketing has customers are attracted to the been defined as “the process of products and services and planning and executing the conception, communicate these values to the pricing, promotion and distribution of prospective buyers and persuade ideas, goods and services to create them to buy these products. exchanges that satisfy individual and organisational goals” by American Marketing management involves Management Association, similarly performance of various functions such Philip Kotler has defined Marketing as analysing and planning the management as the art and science of marketing activities, implementing choosing target markets and getting, marketing plans and setting control mechanism. These functions are to be keeping and growing customers through creating, delivering and performed in such a way that organisation’s objectives are achieved communicating superior customer values of management. at the minimum cost. Marketing management generally A careful analysis of the definition is related to creation of demand. reveals that the process of However, in certain situations, the management of marketing involves: manager has to restrict the demand. (i) Choosing a target market, say a For example, if there is a situation of manufacturer may choose to make ‘overfull demand’, i.e., the demand readymade garments for children being more than what the company up to the age of 5 years; can or want to handle, (like what the (ii) In respect of the target market situation in our country was before the chosen, the focus of the process of adoption of policies of liberalisation 2015-16(21/01/2015)  BUSINESS STUDIES 304 and globalisation, in early 90’s, in most of goods and services through consumer products be it automobiles salesmanship, advertising, publicity or electronics goods or other durable and short-term incentives so that title products. The job of marketing of the product is transferred from seller mangers, in these situations would be to buyer or in other words product is to find ways to reduce the demand converted into cash. temporarily by say reducing the The major differences between expenditure on promotion or selling and marketing are listed as increasing the prices. Similarly, if the below: demand is ‘irregular’, such as in case (i) Part of the Process vs Wider Term: of seasonal products, (say fans, woollen Selling is only a part of the process clothes) the marketer’s job is to change of marketing and is concerned with the time pattern of demand through promoting and transferring such methods as providing short-term possession and ownership of goods incentives, to the buyers. Thus, the from the seller to the buyer. marketing management in not only Marketing is a much wider term concerned with creating demand but consisting of number of activities with managing the demand effectively, such as identification of the as per the situation in the market. customer’s needs, developing the products to satisfy these needs, MARKETING AND SELLING fixing prices and persuading the potential buyers to buy the same. Many people confuse ‘selling’ for Thus, selling is merely a part of ‘marketing’. They consider these two marketing. terms as one and the same. Marketing (ii) Transfer of Title vs Satisfying refers to a large set of activities of which Customer Needs: The main focus selling is just one part. For example, a of selling is on affecting transfer marketer of televisions, before making of title and possession of goods the sale, does a lot of other activities such from sellers to consumers or users. as planning the type and model of In contrast, marketing activities televisions to be produced, the price at put greater thrust on achieving which it would be sold and selecting the maximum satisfaction of the distribution outlets at which the same customer’s needs and wants. would be available, etc. In short, (iii) Profit through Maximising Sales vs marketing involves whole range of Customer Satisfaction: All selling activities relating to planning, pricing, activities are directed at maximising promoting and distributing the sales and, thereby, the profits of the products that satisfy customer’s needs. firm. In other words, the emphasis The function of selling, on the other is on profit maximisation through hand, is restricted to promotion maximisation of sales. Marketing, 2015-16(21/01/2015)  MARKETING 305 on the other hand, is concerned with objectives. For example, whether the customer satisfaction and thereby marketing efforts of an organisation will increasing profit in the long run. A focus on the product—say designing its marketing organisation, thus, features etc or on selling techniques or attaches highest importance to on customer’s needs or the social customer satisfaction as a route to concerns. profit maximisation. The concept or philosophy of (iv) Start and End of the Activities: marketing has evolved over a period Selling activities start after the of time, and is discussed as follows. product has been developed while, marketing activities start much The Production Concept before the product is produced and During the earlier days of industrial continue even after the product revolution, the demand for industrial has been sold. goods started picking up but the (v) Difference in the Emphasis: In number of producers were limited. As selling, the emphasis is on bending a result, the demand exceeded the the customer according to the supply. Selling was no problem. product while in marketing, the Anybody who could produce the goods attempt is to develop the product was able to sell. The focus of business and other strategies as per the activities was, therefore, on production customer needs. of goods. It was believed that profits vi. Difference in the Strategies: Selling could be maximised by producing at involves efforts like promotion and large scale, thereby reducing the persuasion while marketing uses average cost of production. It was also integrated marketing efforts assumed that consumers would involving strategies in respect of favour those products which were product, promotion, pricing and widely available at an affordable price. physical distribution. Thus, availability and affordability of the product were considered to be the M ARKETING MANAGEMENT PHILOSOPHIES key to the success of a firm. Therefore, greater emphasis was placed on In order to achieve desired exchange improving the production and outcomes with target markets, it is distribution efficiency of the firms. important to decide what philosophy or thinking should guide the marketing The Product Concept efforts of an organisation. An understanding of the philosophy or the As a result of emphasis on production concept to be adopted is important as capacity during the earlier days, the it determines the emphasis or the position of supply increased over period weightage to be put on different factors, of time. Mere availability and low price in achieving the organisational of the product could not ensure 2015-16(21/01/2015)  BUSINESS STUDIES 306 increased sale and as such the survival were considered essential for selling of and growth of the firm. Thus, with the products. Thus, the focus of business increase in the supply of the products, firms shifted to pushing the sale of customers started looking for products products through aggressive selling which were superior in quality, techniques with a view to persuade, performance and features. Therefore, lure or coax the buyers to buy the the emphasis of the firms shifted from products. Making sale through any quantity of production to quality of means became important. It was products. The focus of business activity assumed that buyers can be changed to bringing continuous manipulated but what was forgotten 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 needs is the key to the success of any marketing environment underwent organisation in the market. It assumes further change. The increase in the that in the long run an organisation scale of business further improved the can achieve its objective of position with respect to supply of maximisation of profit by identifying goods, resulting in increased the needs of its present and competition among sellers. The prospective buyers and satisfying product quality and availability did not them in an effective way. All the ensure the survival and growth of decisions in a firm are taken from the firms because of the large number of point of view of the customers. In other sellers selling quality products. This words, customer’s satisfaction become led to greater importance to attracting the focal point of all decision making and persuading customers to buy the in the organisation. For example, what product. The business philosophy product will be produced, with what changed. It was assumed that the features and at what price shall it be customers would not buy, or not buy sold, or where shall it be made enough, unless they are adequately available for sale will depend on what convinced and motivated to do so. do the customers want. If the Therefore, firms must undertake customers want features like double aggressive selling and promotional door in a refrigerator or a separate efforts to make customers buy their provision for water cooler in it, the products. The use of promotional organisation would produce a techniques such as advertising, refrigerator with these features, would personal selling and sales promotion price it at a level which the customers 2015-16(21/01/2015)  MARKETING 307 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 are willing to pay and so on. If all bought not merely because of their marketing decisions are taken with this quality, packing or brand name, but prospective, selling will not be any because they satisfy a specific need of problem. It will automatically follow. a customer. A pre-requisite for the The basic role of a firm then is to success of any organisation, therefore, ‘identify a need and fill it’. The concept is to understand and respond to implies that products ad-services are customer needs. Test Your Understanding I State whether the following statements are true or false: (i) focus of marketing activities is on facilitating exchange of goods from producers to consumers or users; (ii) in modern marketing, the term market refers to the place where buyers and sellers meet for the exchange of goods and services; (iii) marketing is same thing as shopping for goods and services; (iv) marketing is a post production activity only; (v) marketing is equally relevant to non-profit organisations; (vi) The terms ‘need’ and ‘want’ are used interchangeably in the marketing literature; (vii) marketing management means management of the marketing function; and (viii) Product designing does not come under the purview of marketing activities. 2015-16(21/01/2015)  BUSINESS STUDIES 308 To sum up, the marketing concept The societal marketing concept is based on the following pillars: holds that the task of any organisation (i) Identification of market or is to identify the needs and wants of customer who are chosen as the the target market and deliver the target of marketing effort. desired satisfaction in an effective and efficient manner so that the long-term (ii) Understanding needs and wants well-being of the consumers and the of customers in the target market. society is taken care of. Thus, the (iii) Development of products or societal marketing concept is the services for satisfying needs of the extension of the marketing concept as target market. supplemented by the concern for the (iv) Satisfying needs of target market long-term welfare of the society. Apart better than the competitors. from the customer satisfaction, it pays (v) Doing all this at a profit. attention to the social, ethical and ecological aspects of marketing. There Thus, the focus of the marketing are large number of such issues that concept is on customer needs and the need to be attended. customer satisfaction becomes the means to achieving the firms’ objective FUNCTIONS OF MARKETING of maximising profit. The purpose of marketing is to generate customer Marketing is concerned with exchange value at a profit. of goods and services from producers to consumers or users in such a way The Societal Marketing Concept that maximises the satisfaction of The marketing concept, as described customers’ needs. From the view point of management function, number of in the preceeding section cannot be considered as adequate if we look at activities are involved, which have the challenges posed by social been described as below: problems like environmental 1. Gathering and Analysing Market pollution, deforestation, shortage of Information: One of the important resources, population explosion and functions of a marketer is to gather inflation. It is so because any activity and analyse market information. This which satisfies human needs but is is necessary to identify the needs of detrimental to the interests of the the customers and take various society at large cannot be justified. The decisions for the successful marketing business orientation should, of the products and services. This is therefore, not be short-sighted to serve important for making an analysis of only consumers’ needs. It should also the available opportunities and threats consider large issues of long-term as well as strengths and weaknesses social welfare, as illustrated above. of the organisation and help in 2015-16(21/01/2015)  MARKETING 309 The Future of Global Brands Role of Digital connection and consumer cooperation In China and India, booming middle classes and fast-rising disposable incomes have created a still-under-tapped consumer culture. Let’s not forget the lessons being learned about the brand-building, power of digital connections and consumer co-creation. Since the advent of the internet, sites that offer social interaction and connectivity have been at the forefront of our digital revolution, reshaping the way consumers expect to interact with each other and, ultimately, with brands. Online tag-sale site e-Bay, for example was one of the first sites to teach us that you can trust people online as well as you might trust a friendly neighbour. That social interaction paved the way for Friendster and MySpace and You Tube, a social networking tool that, in the past year, has empowered consumers to create their own content and post it to a global audience. Anyone who doubts the real market potential of such a platform only needs to check out October’s biggest business headlines: Google purchased the site for $ 1.65 billion. HSBC effort attempted a similar goal, to give consumers a forum for conversation. At your pointofview.com, consumers in 76 countries can weigh in and give their opinions on subjects including cloning, fashion, wind farms and video games. Teenagers in Chinese cities surf the web for 5.1 hours a week, and the online ad-market is booming—by more than 75% annually for the past three years, according to Business Week, Mobile phones are among the most coveted pieces of technology. And 17.5 million bloggers (and their 75 million readers), many of whom fall within the coveted 18–25 age groups, are shaping consumer opinions in China with more intensity than they do in the US. The internet age has put advertisers and branding experts face-to-face with an empowered consumer. And those consumers are happy to listen to our messages, as long as we are willing to listen to them. Source: Adopted from Brand Equity, Nov. 1, 2006 deciding what opportunities can best With the growth of computers, a be pursued by it. For example, rapid new trend has emerged in the growth is predicted in several areas in collection of market information. More the Indian economy, say in the use of and more companies are using the Internet, market for cell phones and interactive sites on the internet, to several other areas. Which of these gather customer views and opinions, areas a particular organisation should before taking important business enter, or in which area should it expand, decisions. (see the box on Global requires a careful scanning of the Brands) One of the popular TV News strengths and weaknesses of the Channel (in Hindi) seeks viewers organisation, which is done with the choice (through SMS) on which of the help of careful market analysis. given four or five main news stories of 2015-16(21/01/2015)  BUSINESS STUDIES 310 the day would be broadcasted as consistency in the output. Standardisation detailed story at the prime time, to ensures the buyers that goods conform ensure that the viewers get to listen to to the predetermined standards of quality, the story of their own choice. price and packaging and reduces the need 2. Marketing Planning: Another for inspection, testing and evaluation of important activity or area of work of a the products. marketer is to develop appropriate Grading is the process of marketing plans so that the marketing classification of products into different objectives of the organisation can be groups, on the basis of some of its achieved. For example a marketer of important characteristics such as colour TV, having 10 per cent of the quality, size, etc. Grading is particularly current market share in the country, necessary for products which are not aims at enhancing his market share to produced according to predetermined 20 per cent, in the next three years. He specifications, such as in the case of will have to develop a complete agricultural products, say wheat, marketing plan covering various oranges, etc. Grading ensures that important aspects including the plan for goods belong to a particular quality and increasing the level of production, helps in realising higher prices for high promotion of the products, etc. and quality output. specify the action programmes to 5. Packaging and Labelling: achieve these objectives. Packaging refers to designing and 3. Product Designing and developing the package for the Development: Another important products. Labelling refers to designing marketing activity or decision area and developing the label to be put on relates to product designing and the package. The label may vary from development. The design of the a simple tag to complex graphics. product contributes to making the Packaging and labelling have product attractive to the target become so important in modern day customers. A good design can improve marketing that these are considered performance of a product and also give as the pillars of marketing. Packaging it a competitive advantage in the is important not only for protection of market. For example, when we plan the products but also serves as a to buy any product say a motorbike, promotional tool. Sometimes, the we not only see its features like cost, quality of the product is assessed by the buyers form packaging. We have mileage, etc. but also the design seen that in the success of many of aspects like its shape, style, etc. the consumer brands in recent times 4. Standardisation and Grading: such as Lays or Uncle Chips potato Standardisation refers to producing wafers Clinic Plus shampoos, and goods of predetermined specifications, Colgate Toothpaste, etc., packaging which helps in achieving uniformity and has played an important role. 2015-16(21/01/2015)  MARKETING 311 6. Branding: A very important decision 8. Pricing of Product: Price of product area for marketing of most consumer refers to the amount of money products is whether to sell the product customers have to pay to obtain a in its generic name (name of the category product. Price is an important factor of the product, say Fan, Pen, etc.) or to affecting the success or failure of a sell them in a brand name (such as product in the market. The demand for Pollar Fan or Rottomac Pen). Brand a product or service is related to its name helps in creating product price. Generally lower the price, higher differentiation, i.e., providing basis for would be the demand for the product distinguishing the product of a firm and vice-versa. The marketers have with that of the competitor, which in t o properly analyse the factors turn, helps in building customer’s determining the price of a product and loyality and in promoting its sale. The take several crucial decisions in this important decision areas in respect of respect, including setting the pricing branding include deciding the branding objectives, determining the pricing strategy, say whether each product will strategies, determining the price and be given a separate brand name or the changing the prices. same brand name will be extended to 9. Promotion: Promotion of products all products of the company, say and services involves informing the Phillips bulbs, tubes and television or customers about the firm’s product, Videocon washing machine, television, its features, etc. and persuading them and refrigerator. Selection of the brand to purchase these products. The four name plays an important role in the important methods of promotion success of a product. include advertising, Personal Selling, 7. Customer Support Services: A very Publicity and Sales Promotion. A important function of the marketing marketer has to take several crucial, management relates to developing decisions in respect of promotion of customer support services such as after the products and services such as sales services, handling customer deciding the promotion budget, the complaints and adjustments, promotion mix, i.e., the combination procuring credit services, maintenance of the promotional tools that will be services, technical services and use, the promotion budget, etc. consumer information. All these 10. Physical Distribution: Managing services aim at providing maximum physical distribution is another very satisfaction to the customers, which is important function in the marketing the key to marketing success in of goods and services. The two major modern days. Customer support decision areas under this function services are very effective in bringing include (a) decision regarding repeat sales from the customers and channels of distribution or the developing brand loyality for a product. marketing intermediaries (like whole 2015-16(21/01/2015)  BUSINESS STUDIES 312 salers, retailers) to be used and (b) products such as in the case of woollen physical movement of the product from garments or Raincoats or there may where it is produced to a place where it be irregular supply because of is required by the customers for their seasonal production such as in the consumption or use. The important case of agricultural products decision areas under physical (sugarcane, rice, wheat, cotton, etc.). In distribution include managing order to maintain smooth flow of inventory (levels of stock of goods), products in the market, there is a need storage and warehousing and for proper storage of the products. transportation of goods from one place Further, there is a need for storage of to the other. adequate stock of goods to protect 11. Transportation: Transportation against unavoidable delays in delivery involves physical movement of goods or to meet out contingencies in the from one place to the other. As demand. In the process of marketing, generally the users of products, the function of storage is performed by particularly consumer products are different agencies such as wide spread and geographically manufacturers, wholesalers and separated from the place these are retailers. produced, it is necessary to move them to the place where it is needed for ROLE OF M ARKETING consumption or use, For example, tea All marketing organisations operate produced in Assam has to be either to earn profit or pursue some transported not only within the state other goals such as community but to other far off places like Tamil service, improvement of quality of life Nadu, Punjab, Jammu and Kashmir or promotion of a cause, say UNICEF and Haryana, Rajasthan, where it is working for the welfare of children or consumed. ‘Helpage’ working for the cause of A marketing firm has to analyse senior citizens. Whether it is a its transportation needs after taking profit organisation or a non-profit into consideration various factors organisation, marketing plays such as nature of the product, cost an important role in achieving its and location of target market and take objectives. It helps the individual decisions in respect of mode of consumers in raising their standard transportation to be chosen and other of living by making available the related aspects. products and services that satisfy their 12. Storage or Warehousing: Usually needs and wants. It also plays a there is a time gap between the significant role in the economic production or procurement of goods development of a nation. The role of and their sale or use. It may be marketing in different situations may because of irregular demand for the be described in brief as follows. 2015-16(21/01/2015)  MARKETING 313 Role in a Firm of a country and helps in raising the standards of living of the people. The modern concept of marketing plays Development of a nation can be a significant role in achieving the judged by the level of standard of living objectives of a firm. It emphasises that of its people. Another important customer satisfaction is the key to the criteria, which is related to the first survival and growth of an organisation one, is the per capita income of an in the contemporary competitive average citizen of a country. On this marketing environment. By adopting basis, an underdeveloped country may marketing orientation, an organisation be stated to be one which is whether profit making or non-profit characterised by factors like poverty, making, can achieve its goals in the scarcity of goods and services, most effective manner. It helps in predominance of agriculture, etc. focusing the activities of an Marketing can play a significant organisation on the needs and wants role in the economic development of a of the customers. For example, what nation. It can inspire people to products or services will be marketed undertake new activities and to set up by a firm will depend upon what do enterprises for producing goods that its customers need. Thus, an analysis are needed by the customers. of the needs of the customers shall be Marketing can help in overcoming undertaken in order to decide what to obstacles posed by high prices due to produce and sell. The product will then be designed according to the imbalances in the levels of production and consumption. It can also ensure needs of the potential buyers and be made available through the outlets smooth flow of goods through efficient physical distribution arrangements. convenient to customers and be priced at a level which the target customers In other words, marketing can help can afford. In other words, marketing in finding out right type of products as a business philosophy helps in and services that a firm should serving the customers by satisfying manufacture, the places where it their needs. It is a well known fact that should make such products available a satisfied customer is the most for sale, the price at which the valuable asset of any firm. Thus, products should be sold and the marketing plays a crucial role in the channels that should be used for survival and growth of a firm. moving the products to the ultimate place of consumption or use. This Role in the Economy linkage between the business and consumption centres, accelerates the Marketing plays a significant role in the economic activity leading to higher development of an economy. It acts as incomes, more consumption and a catalyst in the economic development increased savings and investment. 2015-16(21/01/2015)  BUSINESS STUDIES 314 Test your Understanding II State whether the following statements are true or false: (i) packaging serves as a promotional tool; (ii) storage adds time value to the product; (iii) financing is important for marketing only high value products; (iv) marketing play important role from the point of view of individual consumers only; and (v) marketing acts as a catalyst in the economic development of a country. M ARKETING MIX at what price it will be sold, (at par with the price at which other As stated in an earlier section, the competitive brands are sold or below process of marketing involves creating it or above it); what distribution a market offering, to satisfy the needs network will be used to make the and wants of the present and potential product available (e.g., hotels, buyers. The real question is how to create a market offering. Let us say a restaurants, groceries shops, kiosks profitable business opportunity is selling cigarette, paan, etc.) to the seen by some firm in the field of buyers whether the new soft drink will producing soft drinks. To develop and be promoted by putting up market a new brand of soft drinks, a advertisements in newspaper or number of important decisions will magazine or on radio or television; or have to be taken for example whether say if newspaper, whether in a local to go for any collaboration with a newspaper or a national daily; whether foreign manufacturer of soft drinks, in a paper of regional language or an whether to produce for the local English daily, etc. is decided at the market or for a wider market, what will level of marketing manager of the firm. be the features of the new product, However, there are certain other and so on. factors which affect the decision but There are large number of factors are not controllable at the firm’s level. affecting marketing decisions. These These are called environmental can broadly be divided into two variables. For example, the political categories: (i) controllable factors, and factors such as the government policy (ii) non-controllable factors. Controllable on whether to allow any technical or factors are those factors which can be financial collaboration in the area of influenced at the level of the firm. In soft drinks, production or economic the previous illustration, for example, factors such as rate of inflation whether the drink will be packed in prevailing in a given period or a credit glass bottles or plastic cans; what will policy of the central bank affecting the be the name (brand name) of the drink; total availability of money in the 2015-16(21/01/2015)  MARKETING 315 market, all of which affect the sale of chosen by a firm to prepare its market a particular product but can not be offering is also called marketing mix. controlled or influenced by the Thus, marketing mix is described as the decisions at the level of a firm. To be set of marketing tools that a firm uses successful, the decisions regarding to pursue its marketing objectives in a ‘controllable factors’ are to be taken target market. keeping the environmental variables into consideration. E LEMENTS OF MARKETING MIX The controllable variables become The marketing mix consists of various marketing tools, which are constantly elements, which have broadly been shaped and reshaped by marketing classified into four categories, managers, to achieve marketing popularly known as four Ps of success. For example, a firm can marketing. These are: (i) Product, (ii) reshape a market offering by bringing Price, (iii) Place, and (iv) Promotion. in a change in any of the variable under These are briefly discussed as follows: its own control, say introducing a change in the price or promotion offer 1. Product: Product means goods or product features or channel used to or services or ‘anything of value’, make the product available to buyers. which is offered to the market for Thus, from a number of alternatives sale. For example, Hindustan lever available a firm chooses a particular offers number of consumer combination to develop a market products like toiletries (Close-Up offering. The combination of variables toothpaste, Lifebuoy soap, etc.), 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 2015-16(21/01/2015)  BUSINESS STUDIES 316 detergent powder (Surf, Wheel), food traders and credit terms, etc. so that products (Refined Vegetable Oil); Tata customers perceive the price to be in offers Tata Steel, Trucks, Salt and a line with the value of the product. large number of other products; LG 3. Place: Place or Physical Distribution Electronics offers televisions, include activities that make firm’s refrigerators, colour monitors for products available to the target computers, etc; Amul offers a number customers. Important decision areas in of food products (Amul milk, ghee, this respect include selection of dealers butter, cheese, chocolates, etc.). or intermediaries to reach the The concept of product relates to customers, providing support to the not only the physical product as intermediaries (by way of discounts, mentioned in the above examples but promotional campaigns, etc.). The also the benefits offered by it from intermediaries in turn keep inventory of the firm’s products, demonstrate customer’s view point (for example them to potential buyers, negotiate toothpaste is bought for whitening price with buyers, close sales and also teeth, strengthening gums, etc.). The service the products after the sale. The concept of product also include the other decision areas relate to managing extended product or what is offered inventory, storage and warehousing to the customers by way of after sales and transportation of goods from the services, handling complaints, place it is produced to the place it is availability of spare parts etc. required by the buyers. These aspects are very important, 4. Promotion: Promotion of products particularly in the marketing of and services include activities that consumer durable products (like communicate availability, features, Automobiles, Refrigerators, etc.). The merits, etc. of the products to the important product decisions include target customers and persuade deciding about the features, quality, them to buy it. Most marketing packaging, labelling and branding of organisations, undertake various the products. promotional activities and spend 2. Price: Price is the amount of money substantial amount of money on the customers have to pay to obtain the promotion of their goods through using number of tools such as product. In case of most of the advertising, personal selling and sales products, level of price affects the level promotion techniques (like price of their demand. The marketers have discounts, free samples, etc.). A large not only to decide about the objectives number of decisions are to be taken of price setting but to analyse the in each of the area specified above. For factors determining the price and fix example, in the respect of advertising a price for the firm’s products. it is important to decide about the Decisions have also to be taken in message, the media to be used respect of discounts to customers, (example, print-media–newspaper, 2015-16(21/01/2015)  MARKETING 317 magazines, etc. the objections of bought a car or a pen or a Cell phone customers, etc.). or a tractor. The success of a market offer will Our decision to buy a product is depend on how well these ingredients not only affected by its physical are mixed to create superior value for qualities, but also by certain non- the customers and simultaneously tangible and psychological factors, achieve their sale and profit objectives. e.g., brand name, reputation, Let us say a firm would like to achieve guaranty, packaging etc. Let us say, necessary volume of sale at a cost that when a person buys a car, he/she is will permit a desired level of profit. But not just buying a few nuts and bolts, so many alternative mixes can be an engine, four wheels and so on. adopted by a firm to achieve this Rather he/she is buying a means of objectives. The issue before a firm then transport, a status symbol, guarantees is to decide what would be the most and warranties accompanying the effective combination of elements to product, image of the company and achieve the given objectives. many other such attributes. Thus, in marketing, product is a mixture of P RODUCT tangible and intangible attributes, which are capable of being exchanged In common parlance, the word for a value, with ability to satisfy ‘product’, is used to refer only to the customer needs. Besides physical physical or tangible attributes of a objects, we also include services, product. For example, we say we have ideas, persons, and places in the PepsiCo Eyes New Products, Acquisitions Aims at Adding Production Capacity for Gatorade and other Non-carbonated Drinks PepsiCo on Monday said it will launch new healthier products next year and focus on growth in emerging markets, a continuation of the strategy that helped the world’s No. 2 beverage company stay profitable ever as sales growth of its flagship soft drinks has slowed. PepsiCo’s new CEO Indra Nooyi, who took the reins on October 1, also said the company was on track to meet its annual target of volume and revenue growth in the mid-single digits and earnings per share growth in the low double digits. PepsiCo evolved from being known mostly for selling soda and salty snacks into a $33-billion food company that has embraced the push into healthier options like Tropicana juice, Aquafina water and whole grain Quaker Oats Cereals. The company said that moving forward, its capital expenditure as a percentage of sales would increase, and that most of the increased spending will go to expansion in developing and emerging markets and adding manufacturing capacity for Gatorade and other non-carbonated drinks. Source: Adopted from Economic Times, Oct. 25, 2006 2015-16(21/01/2015)  BUSINESS STUDIES 318 concept of product. Thus, product may by riding a motorbike. Thus, all these be defined as anything that can be aspects should be considered while offered to a market to satisfy a want planning for a product. or need. It is offered for attention, It is customer for companies to acquisition, use or consumption. review the progress of their present From the customer’s point of view, products and constantly look for a product is a bundle of utilities, which opportunities of diversifying into never is purchased because of its capability areas. (see box on PepsiCo.) to provide satisfaction of certain need. A buyer buys a product or service for LET US DO I T what it does for her or the benefit it provides to her. There can be three Enlist the functional, psychological types of benefits a customer may seek and social benefits that can to satisfy from the purchase of a be achieved by the purchase of product, viz., (i) functional benefits, (ii) (i) Personal computer, (ii) Colour psychological benefits, and (iii) social television, (iii) Wrist watch. benefits. For example, the purchase of CLASSIFICATION OF PRODUCTS a motorcycle provides functional utility of transportation, but at the same time Products may broadly be classified satisfies the need for prestige and into two categories — (i) consumers’ esteem and provides social benefit by products, and (ii) industrial products. the way of acceptance from a group, The consumer products may further Products Consumer Products Industrial Products Durability Basis Shopping Efforts Involved Non- Durable Services Conven- Shopping Speciality Durable ience Products Products Products Classification of Products 2015-16(21/01/2015)  MARKETING 319 be classified into different groups, as A. Shopping Efforts Involved detailed below: On the basis of the time and effort C ONSUMER PRODUCTS buyers are willing to spend in the purchase of a product, we can classify Products, which are purchased by the the consumer product into the following ultimate consumers or users for three categories as here under: satisfying their personal needs and 1. Convenience Products: Those desires are referred to as consumer consumer products, which are products. For example, soap, edible oil, purchased frequently, immediately and eatables, textiles, toothpaste, fans, etc. with least time and efforts are referred which we use for our personal and non- to as convenience goods. Examples of business use are consumer goods. such products are cigarettes, ice The consumer products have been creams, medicines, newspaper, classified on the basis of two important stationery items toothpaste. etc. These factors: (A) the extent of shopping products have low unit-value and are efforts involved, and (B) durability of bought in small qualities. Some of the the product. These have been important characteristics of such explained as below: products are: Convenience Products 2015-16(21/01/2015)  BUSINESS STUDIES 320 (a) These products are purchased at (f) Sales promotion schemes or short- convenient locations, with least term incentives such as sales efforts and time; contests, discount offers, etc play (b) Convenience products have a an important role in the marketing regular and continuous demand, of such products. as these generally come under the 2. Shopping Products: Shopping category of essential products; products are those consumer goods, (c) These products have small unit of in the purchase of which buyers purchase and low prices. For devote considerable time, to compare example the eggs are sold at Rs. the quality, price, style, suitability, 28 per dozen and the customers etc., at several stores, before making purchase them in small numbers; final purchase. Some of the examples Shopping Products (d) Convenience products have of shopping products are clothes, standardised price as most of these shoes, jewellery, furniture, radio, products are branded products; television, etc. The important (e) The competition in these products characteristics of shopping products is high as the supply is greater are as below: than the demand. The marketers (a) The shopping products are have, therefore, to heavily advertise generally of durable nature, i.e., for these products; and they normally survive many uses; 2015-16(21/01/2015)  MARKETING 321 (b) The unit price as well as profit order, with a significant number of margin of shopping products is buyers. The buyers are willing to spend generally high; a lot of time and efforts on the purchase (c) As these products have high unit of such products. For example, if there price, customers compare the is a rare collection of artwork or of products of different companies antiques, some people may be willing before making selection; to spend a lot of shopping effort and (d) Purchases of shopping products travel long distance to buy such are generally pre-planned and products. In our day-to-day life, we see there is little degree of impulse people going to a particular hair- buying in these products; and cutting saloon or restaurant, or a tailor. The demand for these goods is relatively (e) Retailers generally play an inelastic, i.e., even if the price is important role in the sale of increased, the demand does not come shopping products as lot of down. Some of the important persuasive effort is needed to characteristics of the speciality convince the buyers to purchase products may be summed up as them. follows: 3. Speciality Products: Speciality products are those consumer goods (a) The demand for speciality products which have certain special features is limited as relatively small because of which people make special number of people buy these efforts in their purchase. These products; products are such, which have (b) These products are generally costly reached a brand loyalty of the highest and their unit price is very high; Speciality Products 2015-16(21/01/2015)  BUSINESS STUDIES 322 (c) These products are available for normally consumed in one or few uses sale at few places as the number are called non-durable products. For of customers is small and are example, we purchase products like willing to take extra efforts in the toothpaste, detergents, bathing soap purchase of these products; and stationary products etc. From the (d) An aggressive promotion is required marketing point of view, these for the sale of speciality products, products generally command a small in order to inform people about margin, should be made available in their availability, features, etc.; and many locations and need to be heavily (e) After sales services are very advertised. important for many of the 2. Durable Products: Those speciality products. tangible consumer products which normally survive many uses, for B. Durability of Products example, refrigerator, radio, bicycle, On the basis of their durability, the sewing machine and kitchen gadgets consumer products have been are referred to as durable products. classified into three categories— These goods are generally used for a Durable, Non-durable and Services. longer period, command a higher per 1. Non-durable Products: The unit margin, require greater consumer products which are personal-selling efforts, guarantees Marketing of Services India Post Has 28% Market Share Against Blue Dart’s 20% Speed Post Leads the Race in Express Mail Speed Post has emerged as a market leader in the express mail category with a 27.55% volume share, a study commissioned by the Department of Post (DOP) and government of India shows. According to the study, almost 46.67% crore articles were sent by express mail in 05-06. The study values the express mail industry alone (excluding logistics and cargo which account for almost 35-40% of private firm’s turnover) at around Rs 1,500 crore. In value terms, while Speed Post is the leader, Blue Dart is a close second with a 20% market share, followed by DTDC with a 11.91% share and First Flight with a 10.89% share. “This has been possible because of our competitive pricing. We are offering the same services as other private couriers do, with the same efficiency but at half the rates”, added Mr. Samuel. In fact, Speed Post claims that its volumes have increased by almost 30-40% after the introduction of the One India One Rate scheme. Express companies are hopeful that the market is going to grow further with the setting up of SEZs and greater economic activity in the country fuelled by the increasing throughput from the manufacturing sector. Source: Adopted from Economic Times, Oct. 20, 2006 2015-16(21/01/2015)  MARKETING 323 and after sales services, on the part in producing other products. The of the seller. examples of such products are raw 3. Services: The durable and non- materials, engines, lubricants, durable goods are tangible in the machines, tools, etc. In other words, sense that these have a physical industrial products are meant for non- existence and can be seen and personal and business use for touched. Services are intangible in producing other products. form. By services we mean those The market for industrial products activities, benefits or satisfactions, consists of manufacturers, transport which are offered for sale, e.g., dry agencies, banks and insurance cleaning, watch repairs, hair cutting, companies, mining companies and postal services, services offered by a public utilities. The important doctor, an architect and a lawyer. Some characteristics of industrial products of the distinguishing characteristics of are given below: services are as follows: 1. Number of Buyers: As compared (a) By their very nature, services are to the consumer products, the intangible, i.e., we can not see, feel numbers of buyers of industrial or touch them; products are limited. For example, sugarcane is purchased by few (b) A service is inseparable from its producers of sugar, but sugar, which source. That means we cannot is a consumer product, is purchased separate the service from the by crores of people in our country. person providing the service; 2. Channel Levels: Because of limited (c) The services cannot be stored. number of buyers, the sale of They are highly perishable. For industrial products is generally made example, if a tailor does not work with the help of shorter channels of for one week, the services he would distribution, i.e., direct selling or one have provided during such period level channel. go waste; and 3. Geographic Concentration: (d) Services are highly variable as their Because of location of industries at type and quality depends on the certain points or regions, industrial person providing them. That is markets are highly concentrated, why, there is a difference in the geographically. For instance, the extent of satisfaction we get from demand for power loom comes from the services provided by different Bombay, Sholapur, Bangalore, etc. people. where the textile industry is concentrated in our country. INDUSTRIAL PRODUCTS 4. Derived Demand: The demand for Industrial products are those industrial products is derived from the products, which are used as inputs demand for consumer products. For 2015-16(21/01/2015)  BUSINESS STUDIES 324 example, the demand for leather will be Classification derived from demand for shoes and The industrial goods are classified into other leather products in the market. the following major categories: 5. Role of Technical Considerations: (i) Materials and Parts: These Technical considerations assume include goods that enter the greater significance in the purchase manufacture’s products of industrial products because these completely. Such goods are of products are complex products, two types: (a) Raw material: bought for use in business operations. including farm products like 6. Reciprocal Buying: Some big cotton, sugar cane, oil seed and companies from basic industries like natural products such as oil, steel, rubber, and medicines resort minerals (say crude petroleum, to the practice of reciprocal buying. For iron ore), fish and lumber; and example, Ashok Leyland may buy tyres (b) manufactured material and and tubes from MRF, which in turn parts. These are again of two may buy trucks from Leyland, types – component materials whenever it feels the need for the same. like glass, iron, plastic and 7. Leasing Out: A growing trend in component parts such as tyre, industrial product market is to lease electric bulb, steering, and out rather than to purchase the battery. products on outright basis because of (ii) Capital Items: These are such the heavy price of these products. goods that are used in the 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 2015-16(21/01/2015)  MARKETING 325 production of finished goods. products have different buying These include: (a) installations motives and have different attitudes like elevators, mainframe and use different approaches in the Computers, and (b) equipments purchase of the products. For like Hand Tools, Personal example, an industrial buyer is Computer, Fax Machines, etc. expected to be more rational who will Test Your Understanding III Please check whether the following statements are true or false: (i) Products purchased by ultimate consumers for satisfying their personal needs are referred to as industrial products. (ii) Speciality products are generally costly and their unit price is high. (iii) Purchase of convenience products in generally pre-planned. (iv) Shopping products are purchased frequently, immediately and with least efforts. (v) Sales promotional schemes play important role in the sale of industrial products. (vi) Product is anything that can be offered to a market to satisfy a want or need. (vii) Durable products are normally consumed in one or few uses. (viii) Services can not be stored. (ix) Furniture is an example of consumer non-durable product. (x) Toothpaste is an example of consumer product. (iii) Supplies and Business study the cost of different available Services: These are short brands, their technical specifications lasting goods and services that and the goodwill of the supplier. facilitate developing or Whereas, the buyer of a consumer managing the finished product. product may be more impulsive and These include: (a) maintenance emotional who is susceptible to and repair items like Paint, advertising and various sales Nails, etc., and (b) operating promotion schemes. supplies like Lubricant, B RANDING Computer Stationary, Writing Paper, etc. One of the most important decisions that a marketer has to take in the area The difference in the nature of of ‘product’ is in respect of branding. consumer products and industrial He has to decide whether the firm’s products is important because of the products will be marketed under a fact that the buyers of the two sets of brand name or a generic name. 2015-16(21/01/2015)  BUSINESS STUDIES 326 Generic name refers to the name of the most marketers give a name to their whole class of the product. For product, which helps in identifying and example, a book, a wristwatch, tyre, distinguishing their products from the camera, toilet soap, etc. We know that competitors’ products. This process of a camera is a lens surrounded by giving a name or a sign or a symbol etc., plastic or steel from all sides and having to a product is called branding. The certain other features such as a flash various terms relating to branding are gun and so on. Similarly book is a as follows: bunch of papers, which are in a bound 1. Brand: A brand is a name, term, form, on which some useful information sign, symbol, design or some about a subject is printed. Thus, all combination of them, used to identify products having these characteristics the products—goods or services of one would be called by the generic name seller or group of sellers and to such as camera or book. differentiate them from those of the If products were sold by generic competitors. For example, some of the names, it would be very difficult for the common brands are Bata, Lifebuoy, marketers to distinguish their products Dunlop, Hot Shot, and Parker. Brand from that of their competitors. Thus, is a comprehensive term, which has Brands and Branding Brands Branding is creating a corporate brand identity for consumer, and getting that brand identity imprinted on the minds of consumer, and this requires brand positioning and brand management. A brand today is an entity (product. service, company, person, technology, etc.), that offers a set of value exchange measures between what the owner/ market seeks and the price he is willing to pay for. It has always seemed to me that your brand is formed primarily, not by what your company says about itself, but what the company does. — Jeff Bezos A product is something made in a factory; a brand is something that is bought by the customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless. — Stephen King Your brand’s power lies in dominance. It is better to have 50% of one market, instead of 10% of five markets. — Al Ries Your brand image is primarily an emotional construct. Emotion is probably always more powerful in swaying people than reason. but people like to be able to rationalise their choices. — Drayton Bird Source: Adopted from Effective Executive, 2006 2015-16(21/01/2015)  MARKETING 327 two components—brand name and firm in distinguishing its product brand mark. For example, Asian Paints from that of its competitors. This has the symbol of Gattu on its pack, enables the firm to secure and which is its brand mark. control the market for its products. 2. Brand Name: That part of a brand, (ii) Helps in Advertising and Display which can be spoken, is called a brand Programmes: A brand aids a firm name. In other words, brand name is in its advertising and display the verbal component of a brand. For programmes. Without a brand example, Asian Paints, Safola, Maggie, name, the advertiser can only Lifebuoy, Dunlop, and Uncle Chips are create awareness for the generic the brand names. product and can never be sure of 3. Brand Mark: That part of a brand the sale for his product. which can be recognised but which is (iii) Differential Pricing: Branding not utter able is called brand mark. It enables a firm to charge different appears in the form of a symbol,