NCERT Class 12 Business Studies Chapter 11 Marketing PDF

chapter 11 Marketing Learning Objectives Where Do Companies Do Their Business? I...

chapter 11 Marketing Learning Objectives Where Do Companies Do Their Business? In the Markets or in the Society? After studying this chapter, It is an undisputed fact that a company’s survival you should be able to: does not depend upon its consumers alone, but a diverse set of stakeholders like the government, ¾¾ explain the meaning of religious leaders, social activists, NGOs, media, ‘marketing’; etc. Hence, earning the satisfaction of these segments is also as imperative as they add to the ¾¾ distinguish between power of the brand by word of mouth. ‘marketing’ and The social concern adds to the strength of the ‘selling’; brand. Corporates that embraced the deepest social values, have been successful in building ¾¾ l i s t o u t i m p o r t a n t powerful brand, and, eventually, robust customer functions of marketing; relationship. The area of corporate social justice fall under two broad categories. The issues such ¾¾ examine the role of as the nutrition of children, child care, old-age marketing in the homes, amelioration of hunger, offering aid to development of an those affected by natural calamities, etc. needing economy in a firm, instant attention with humanitarian perspective, to the society and to comes under the first category. consumers; The issues that contribute to making society a pleasant place to live in the long run, may be grouped ¾¾ explain the elements of under the second category. The issues which come marketing-mix; under this category are health awareness and aid, education, environmental protection, women’s ¾¾ classify products into employment and empowerment, preventing unjust different categories; discriminations (on the basis of caste, community, religion, ethnicity, race, and sex), eradication ¾¾ analyse the factors of poverty through employment, preservation affecting price of a of culture, values, and ethics, contribution to product; research, etc. Procter and Gamble’s (P&G) philosophy is that it ¾¾ l i s t o u t t h e t y p e s should lead the industry in implementing a global of channels of environmental programme. P&G is one of the distribution; and first companies in the world to actively study the influence of consumer products on the environment ¾¾ e x p l a i n t h e m a j o r and introduce concentrated products, recycled tools of promotion, viz. plastic bottles, and refill packages to the industry. P&G contributes to sustainable development advertising, personal and addresses environmental and social issues selling, sales promotion connected with its products and services. and publicity. Source: Adapted from ‘Effective Executive’ 2020-21 Ch_11.indd 276 11/28/2019 3:29:48 PM  Marketing 277 The term marketing has been described pricing are required. All these activities by different people in different ways. are referred to as marketing activities. Some people believe that marketing is Thus, ‘merchandising’, ‘selling’ and same as ‘shopping’. Whenever they go distribution are all parts of a large out for shopping of certain products or number of activities undertaken by services, they describe it as marketing. a firm, which are collectively called There are some other people who marketing. confuse marketing with ‘selling’ and It may be noted here that marketing feel that marketing activity starts is not merely a post- production after a product or service has been activity. It includes many activities produced. Some people describe it to that are performed even before goods mean ‘merchandising’ or designing a are actually produced, and continue product. All these descriptions may be even after the goods have been partly correct but marketing is a much sold. For example, activities such broader concept, which is discussed as identification of customer needs, as follows: collection of information for developing Traditionally, marketing has been the product, designing suitable product described in terms of its functions or package and giving it a brand name are activities. In this respect, marketing performed before commencement of has been referred to as performance of the actual production. Similarly, many business activities that direct the flow follow up activities are required for of goods and services from producers maintaining good customer relations to consumers. for procuring repeat sale. As we know, most of the In modern times, emphasis is placed manufacturing firms do not produce on describing marketing as a social goods for their own consumption process. It is a process whereby people but for the consumption or use exchange goods and services for money by others. Therefore, to move or for something of value to them. Taking the goods and services from the the social perspective, Phillip Kolter has producer to consumers, a number of defined marketing as, “a social process activities, such as product designing by which individual groups obtain what or merchandising, packaging, they need and want through creating warehousing, transportation, offerings and freely exchanging products branding, selling, advertising and and services of value with others”. “Business is not financial science, it’s about trading, buying and selling. It’s about creating a product or service so good that people will pay for it.” — Anta Roddick “Marketing takes a day to learn. Unfortunately it takes time to master.” — Philip Kotler 2020-21 Ch_11.indd 277 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 278 Understanding Market In the traditional sense, the term ‘market’ refers to the place where buyers and sellers gather to enter into transactions involving the exchange of goods and services. It is in this sense that this term is being used in day to day language, even today. The other ways in which this term is being used is in the context of a product market (cotton market, gold or share market), geographic market (national and international market), type of buyers (consumer market and industrial market) and the quantity of goods transacted (retail market and wholesale market). But in modern marketing sense, the term market has a broader meaning. It refers to a set of actual and potential buyers of a product or service. For example, when a fashion designer designs a new dress and offers it for exchange, all the people who are willing to buy and offer some value for it can be stated to be the market for that dress. Similarly, market for fans or bicycles or electric bulbs or shampoos refers to all the actual and potential buyers for these products. Thus, marketing is a social process Needs are basic to human beings where in people interact with others, and do not pertain to a particular in order to persuade them to act in product. Wants, on the other hand, a particular way, say to purchase are culturally defined objects that are a product or a service, rather than potential satisfiers of needs. In other forcing them to do so. A careful analysis words, human needs shaped by such of the definition shows the following factors as culture, personality and important features of marketing: religion are called wants. A basic need 1. Needs and Wants: The process for food, for example, may take various of marketing helps individuals and forms such as want for dosa and rice groups in obtaining what they need for a South Indian and chapatti and and want. Thus, the primary reason or vegetables for a North Indian person. motivation for people to engage in the A marketer’s job in an organisation process of marketing is to satisfy some is to identify needs of the target of their needs or wants. In other words, customers and develop products and the focus of the marketing process is services that satisfy such needs. on satisfaction of the needs and wants 2. Creating a Market Offering: On of individuals and organisations. the part of the marketers, the effort A need is a state of felt deprivation involves creation of a ‘market offering. or feeling of being deprived of Market offering refers to a complete something. If unsatisfied, it leaves a offer for a product or service, having person unhappy and uncomfortable. given features like size, quality, taste, For example, on getting hungry, we etc; at a certain price; available at a become uncomfortable and start given outlet or location and so on. Let looking for objects that are capable of us say the offer is for a cell phone, satisfying our hunger. available in four different versions, 2020-21 Ch_11.indd 278 11/28/2019 3:29:48 PM  Marketing 279 on the basis of certain features such offering the same by giving something as size of memory, television viewing, in return. For example, a person internet, camera, etc., for a given price, feeling hungry may get food by offering say between ` 5,000 and ` 20,000 to give money or some other product (depending on the model selected), or service in return to someone who available for sale at say firm’s exclusive is willing to accept the same for food. shops in and around all metropolitan In the modern world, goods are cities in the country. A good ‘market produced at different places and are offer’ is the one which is developed after distributed over a wide geographical analysing the needs and preferences of area through various middlemen, the potential buyers. involving exchanges at different levels 3. Customer Value: The process of distribution. Exchange is, therefore, of marketing facilitates exchange of referred to as the essence of marketing. products and services between the For any exchange to take place, it is buyers and the sellers. The buyers, important that the following conditions however, make buying decisions on are satisfied: their perceptions of the value of the (i) Involvement of at least two parties product or service in satisfying their viz., the buyer and the seller. need, in relation to its cost. A product (ii) Each party should be capable will be purchased only if it is perceived of offering something of value to to be giving greatest benefit or value the other. For example, the seller for the money. The job of a marketer, offers a product and the buyer, therefore, is to add to the value of the money. product so that the customers prefer it (iii) Each party should have the ability in relation to the competing products to communicate and deliver the and decide to purchase it. product or service. No exchange 4. Exchange Mechanism: The process can take place if the buyers and of marketing works through the sellers are not able to communicate exchange mechanism. The individuals with each other or if they can not (buyers and sellers) obtain what they deliver something of value to need and want through the process of the other. exchange. In other words, the process of marketing involves exchange of (iv) Each party should have freedom to products and services for money or accept or reject other party’s offer. something considered valuable by (v) The parties should be willing to the people. enter into transaction with each Exchange refers to the process other. Thus, the acceptance or through which two or more parties rejection of the offer takes place on come together to obtain the desired voluntary basis rather than on the product or service from someone, bases of any compulsion. 2020-21 Ch_11.indd 279 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 280 The points listed above are the to business organisations. Marketing necessary conditions for an exchange activities are equally relevant to non- to take place. Whether the exchange profit organisations such as hospitals, actually takes place or not depends on schools, sports clubs and social and the suitability of the act of exchange to religious organisations. It helps these both the parties, whether it makes the organisations in achieving their goals parties better off or at least not worse off. such as spreading the message of Another important point to be family planning, improving the literacy noted is that Marketing is not merely a standards of people and providing business phenomena or confined only medication to the sick. 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’. 2020-21 Ch_11.indd 280 11/28/2019 3:29:48 PM  Marketing 281 Marketing Management so that the target customers purchase the product, keep them Marketing management means satisfied with the firm’s products management of the marketing function. and also attract more customers In other words, marketing management to the firm’s products so that the refers to planning, organising, directing firm can grow; and and control of the activities which facilitate exchange of goods and services (iii) The mechanism for achieving between producers and consumers or the objective is through creating, users of products and services. Thus developing and communicating the focus of marketing management superior values for the customers. is on achieving desired exchange That means, the primary job outcomes with the target markets. of a marketing manager is to Taking a management perspective, the create superior values so that term marketing has been defined as the customers are attracted to “the process of planning and executing the products and services and the conception, pricing, promotion communicate these values to the and distribution of ideas, goods and prospective buyers and persuade services to create exchanges that satisfy them to buy these products. individual and organisational goals” by Marketing management involves American Management Association, performance of various functions similarly Philip kotler has defined such as analysing and planning the Marketing management as the art and marketing activities, implementing science of choosing target markets marketing plans and setting control and getting, keeping and growing mechanism. These functions are customers through creating, delivering to be performed in such a way that and communicating superior customer organisation’s objectives are achieved values of management. at the minimum cost. A careful analysis of the definition Marketing management generally reveals that the process of management is related to creation of demand. of marketing involves: However, in certain situations, the (i) Choosing a target market, say a manager has to restrict the demand. manufacturer may choose to make For example, if there is a situation of readymade garments for children ‘overfull demand’, i.e., the demand up to the age of 5 years; being more than what the company (ii) In respect of the target market can or want to handle, (like what chosen, the focus of the process of the situation in our country was management is on getting, keeping before the adoption of policies of as well as growing the customers. liberalisation and globalisation, in That means the marketer has to early 90’s, in most consumer products create demand for his products be it automobiles or electronics goods 2020-21 Ch_11.indd 281 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 282 Marketing Versus Selling Many people confuse ‘selling’ for ‘marketing’. They consider these two terms as one and the same. Marketing refers to a large set of activities of which selling is just one part. For example, a marketer of televisions, before making the sale, does a lot of other activities such as planning the type and model of televisions to be produced, the price at which it would be sold and selecting the distribution outlets at which the same would be available, etc. In short, marketing involves whole range of activities relating to planning, pricing, promoting and distributing the products that satisfy customer’s needs. The function of selling, on the other hand, is restricted to promotion of goods and services through salesmanship, advertising, publicity and short-term incentives so that title of the product is transferred from seller to buyer or in other words product is converted into cash. or other durable products. The job of as it determines the emphasis or marketing mangers, in these situations the weightage to be put on different would be to find ways to reduce the factors, in achieving the organisational demand temporarily by say reducing objectives. For example, whether the the expenditure on promotion or marketing efforts of an organisation will increasing the prices. Similarly, if the focus on the product—say designing demand is ‘irregular’, such as in case of its features etc or on selling techniques seasonal products, (say fans, woollen or on customer’s needs or the social clothes) the marketer’s job is to change concerns. the time pattern of demand through The concept or philosophy of such methods as providing short-term marketing has evolved over a period incentives, to the buyers. Thus, the of time, and is discussed as follows. marketing management in not only concerned with creating demand but The Production Concept with managing the demand effectively, During the earlier days of industrial as per the situation in the market. revolution, the demand for industrial goods started picking up but the Marketing Management number of producers were limited. Philosophies As a result, the demand exceeded In order to achieve desired exchange the supply. Selling was no problem. outcomes with target markets, it is Anybody who could produce the goods important to decide what philosophy or was able to sell. The focus of business thinking should guide the marketing activities was, therefore, on production efforts of an organisation. An of goods. It was believed that profits understanding of the philosophy or could be maximised by producing the concept to be adopted is important at large scale, thereby reducing the 2020-21 Ch_11.indd 282 11/28/2019 3:29:48 PM  Marketing 283 average cost of production. It was among sellers. The product quality also assumed that consumers would and availability did not ensure the favour those products which were survival and growth of firms because widely available at an affordable price. of the large number of sellers selling Thus, availability and affordability quality products. This led to greater of the product were considered to importance to attracting and persuading be the key to the success of a firm. customers to buy the product. The Therefore, greater emphasis was business philosophy changed. It was placed on improving the production assumed that the customers would and distribution efficiency of the firms. not buy, or not buy enough, unless they are adequately convinced and The Product Concept motivated to do so. Therefore, firms must undertake aggressive selling As a result of emphasis on production and promotional efforts to make capacity during the earlier days, the customers buy their products. The position of supply increased over use of promotional techniques such as period of time. Mere availability and advertising, personal selling and sales low price of the product could not promotion were considered essential ensure increased sale and as such the for selling of products. Thus, the focus survival and growth of the firm. Thus, of business firms shifted to pushing with the increase in the supply of the the sale of products through aggressive products, customers started looking selling techniques with a view to for products which were superior in persuade, lure or coax the buyers quality, performance and features. to buy the products. Making sale Therefore, the emphasis of the firms through any means became important. shifted from quantity of production It was assumed that buyers can be to quality of products. The focus of manipulated but what was forgotten business activity changed to bringing was that in the long run what matters continuous improvement in the quality, most is the customer satisfaction, incorporating new features, etc. Thus, rather than anything else. product improvement became the key to profit maximisation of a firm, under The Marketing Concept the concept of product orientation. Marketing orientation implies that The Selling Concept focus on satisfaction of customer’s needs is the key to the success of With the passage of time, the marketing any organisation in the market. environment underwent further It assumes that in the long run change. The increase in the scale of an organisation can achieve its business further improved the position objective of maximisation of profit by with respect to supply of goods, identifying the needs of its present resulting in increased competition and prospective buyers and satisfying 2020-21 Ch_11.indd 283 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 284 them in an effective way. All the marketing decisions are taken with decisions in a firm are taken from this prospective, selling will not be any the point of view of the customers. In problem. It will automatically follow. other words, customer’s satisfaction The basic role of a firm then is to become the focal point of all decision ‘identify a need and fill it’. The concept making in the organisation. For implies that products ad-services are example, what product will be bought not merely because of their produced, with what features and at quality, packing or brand name, what price shall it be sold, or where but because they satisfy a specific shall it be made available for sale will need of a customer. A pre-requisite depend on what do the customers for the success of any organisation, want. If the customers want features therefore, is to understand and like double door in a refrigerator or a respond to customer needs. separate provision for water cooler in To sum up, the marketing concept it, the organisation would produce a is based on the following pillars: refrigerator with these features, would (i) I d e n t i f i c a t i o n o f m a r k e t o r price it at a level which the customers customer who are chosen as the are willing to pay and so on. If all target of marketing effort. 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 2020-21 Ch_11.indd 284 11/28/2019 3:29:48 PM  Marketing 285 (ii) Understanding needs and wants the society is taken care of. Thus, of customers in the target market. the societal marketing concept is the (iii) Development of products or extension of the marketing concept services for satisfying needs of as supplemented by the concern for the target market. the long-term welfare of the society. (iv) Satisfying needs of target market Apart from the customer satisfaction, better than the competitors. it pays attention to the social, ethical and ecological aspects of marketing. (v) Doing all this at a profit. There are large number of such issues Thus, the focus of the marketing that need to be attended. concept is on customer needs and the customer satisfaction becomes the Functions Of Marketing means to achieving the firms’ objective of maximising profit. The purpose of Marketing is concerned with exchange marketing is to generate customer of goods and services from producers value at a profit. to consumers or users in such a way that maximises the satisfaction of The Societal Marketing Concept customers’ needs. From the view point of management function, number of The marketing concept, as described activities are involved, which have in the preceeding section cannot be been described as below: considered as adequate if we look 1. Gathering and Analysing Market at the challenges posed by social Information: One of the important problems like environmental pollution, deforestation, shortage of resources, functions of a marketer is to gather population explosion and inflation. It is and analyse market information. This so because any activity which satisfies is necessary to identify the needs human needs but is detrimental to the of the customers and take various interests of the society at large cannot decisions for the successful marketing be justified. The business orientation of the products and services. This should, therefore, not be short-sighted is important for making an analysis to serve only consumers’ needs. It of the available opportunities and should also consider large issues of threats as well as strengths and long-term social welfare, as illustrated weaknesses of the organisation and above. help in deciding what opportunities The societal marketing concept can best be pursued by it. For example, holds that the task of any organisation rapid growth is predicted in several is to identify the needs and wants areas in the Indian economy, say in of the target market and deliver the the use of the Internet, market for cell desired satisfaction in an effective phones and several other areas. Which and efficient manner so that the long- of these areas a particular organisation term well-being of the consumers and should enter, or in which area should 2020-21 Ch_11.indd 285 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 286 it expand, requires a careful scanning the product contributes to making of the strengths and weaknesses of the the product attractive to the target organisation, which is done with the customers. A good design can improve help of careful market analysis. performance of a product and also With the growth of computers, give it a competitive advantage in the a new trend has emerged in the market. For example, when we plan collection of market information. to buy any product say a motorbike, More and more companies are using we not only see its features like cost, interactive sites on the internet, to mileage, but also the design aspects gather customer views and opinions, like its shape, style, etc. before taking important business 4. Standardisation and Grading: decisions. One of the popular TV Standardisation refers to producing News Channel (in Hindi) seeks viewers goods of predetermined specifications, choice (through SMS) on which of the which helps in achieving uniformity given four or five main news stories and consistency in the output. of the day would be broadcasted as Standardisation ensures the detailed story at the prime time, to buyers that goods conform to the ensure that the viewers get to listen predetermined standards of quality, to the story of their own choice. price and packaging and reduces 2. Marketing Planning: Another the need for inspection, testing and important activity or area of work of evaluation of the products. a 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 produced according to predetermined to 20 per cent, in the next three years. specifications, such as in the case He will have to develop a complete of agricultural products, say wheat, marketing plan covering various oranges, etc. Grading ensures that important aspects including the plan goods belong to a particular quality for increasing the level of production, and helps in realising higher prices for promotion of the products, etc., and high quality output. specify the action programmes to 5. Packaging and Labelling: Packaging achieve these objectives. refers to designing and developing the 3.Product Designing and package for the products. Labelling Development: Another important refers to designing and developing the marketing activity or decision label to be put on the package. The area relates to product designing label may vary from a simple tag to and development. The design of complex graphics. 2020-21 Ch_11.indd 286 11/29/2019 3:40:59 PM  Marketing 287 Packaging and labelling have 7. Customer Support Services: become so important in modern day A very important function of the marketing that these are considered marketing management relates as the pillars of marketing. Packaging to developing customer support is important not only for protection services such as after sales services, of the products but also serves as handling customer complaints a promotional tool. Sometimes, the and adjustments, procuring credit quality of the product is assessed by services, maintenance services, the buyers form packaging. We have technical services and consumer seen that in the success of many of the information. All these services aim consumer brands in recent times such at providing maximum satisfaction as Lays or Uncle Chips potato wafers to the customers, which is the key to Clinic Plus shampoos, and Colgate marketing success in modern days. Toothpaste, etc., packaging has played Customer support services are very an important role. effective in bringing repeat sales from 6. Branding: A very important decision the customers and developing brand area for marketing of most consumer loyality for a product. products is whether to sell the product 8. Pricing of Product: Price of in its generic name (name of the product refers to the amount of money category of the product, say Fan, Pen, customers have to pay to obtain a etc.) or to sell them in a brand name product. Price is an important factor (such as Pollar Fan or Rottomac Pen). affecting the success or failure of a Brand name helps in creating product product in the market. The demand differentiation, i.e., providing basis for for a product or service is related to distinguishing the product of a firm its price. Generally lower the price, with that of the competitor, which in higher would be the demand for the turn, helps in building customer’s product and vice-versa. The marketers loyality and in promoting its sale. have to properly analyse the factors The important decision areas in determining the price of a product and respect of branding include deciding take several crucial decisions in this the branding strategy, say whether respect, including setting the pricing each product will be given a separate objectives, determining the pricing brand name or the same brand name strategies, determining the price and will be extended to all products of the changing the prices. company, say Phillips bulbs, tubes 9. Promotion: Promotion of products and television or Videocon washing and services involves informing the machine, television, and refrigerator. customers about the firm’s product, Selection of the brand name plays its features, etc., and persuading an important role in the success of a them to purchase these products. product. The four important methods of 2020-21 Ch_11.indd 287 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 288 promotion include advertising, but to other far off places like Tamil Personal Selling, Publicity and Nadu, Punjab, Jammu and Kashmir Sales Promotion. A marketer has and Haryana, Rajasthan, where it is to take several crucial, decisions in consumed. respect of promotion of the products A marketing firm has to analyse and services such as deciding the its transportation needs after taking promotion budget, the promotion into consideration various factors mix, i.e., the combination of the such as nature of the product, cost promotional tools that will be use, and location of target market and the promotion budget, etc. take decisions in respect of mode 10. Physical Distribution: Managing of transportation to be chosen and physical distribution is another other related aspects. very important function in the 12. Storage or Warehousing: marketing of goods and services. Usually there is a time gap between The two major decision areas under the production or procurement of this function include (a) decision goods and their sale or use. It may regarding channels of distribution be because of irregular demand for or the marketing intermediaries (like the products such as in the case whole salers, retailers) to be used of woollen garments or raincoats, and (b) physical movement of the or there may be irregular supply product from where it is produced because of seasonal production such to a place where it is required by the as in the case of agricultural products customers for their consumption or (sugarcane, rice, wheat, cotton, etc.). use. The important decision areas In order to maintain smooth flow under physical distribution include of products in the market, there managing inventory (levels of stock is a need for proper storage of the of goods), storage and warehousing products. Further, there is a need for and transportation of goods from one storage of adequate stock of goods to place to the other. protect against unavoidable delays in delivery or to meet out contingencies 11. Transportation: Transportation in the demand. In the process of involves physical movement of goods marketing, the function of storage from one place to the other. As is performed by different agencies generally the users of products, such as manufacturers, wholesalers particularly consumer products and retailers. are wide spread and geographically separated from the place these are Marketing Mix produced, it is necessary to move them to the place where it is needed The marketing mix consists of various for consumption or use, For example, elements, which have broadly been tea produced in Assam has to be classified into four categories, popularly transported not only within the state known as four Ps of marketing. These 2020-21 Ch_11.indd 288 11/28/2019 3:29:48 PM  Marketing 289 are: (i) Product, (ii) Price, (iii) Place, mentioned in the above examples but and (iv) Promotion. These are briefly also the benefits offered by it from discussed as follows: customer’s view point (for example 1. Product: Product means goods toothpaste is bought for whitening or services or ‘anything of value’, teeth, strengthening gums, etc.). which is offered to the market for The concept of product also include sale. For example, Hindustan lever the extended product or what is offers number of consumer products offered to the customers by way like toiletries (Close-Up toothpaste, of after sales services, handling Lifebuoy soap, etc.), detergent powder complaints, availability of spare parts (Surf, Wheel), food products (Refined etc. These aspects are very important, Vegetable Oil); Tata offers Tata Steel, particularly in the marketing of Trucks, Salt and a large number of consumer durable products (like other products; LG electronics offers Automobiles, refrigerators, etc.). The televisions, refrigerators, colour important product decisions include monitors for computers, etc; Amul deciding about the features, quality, offers a number of food products packaging, labelling and branding of (Amul milk, ghee, butter, cheese, the products. chocolates, etc.). 2. Price: Price is the amount of money The concept of product relates customers have to pay to obtain to not only the physical product as the product. In case of most of the 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 2020-21 Ch_11.indd 289 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 290 products, level of price affects the level of tools such as advertising, personal of their demand. The marketers have selling and sales promotion techniques not only to decide about the objectives (like price discounts, free samples, of price setting but to analyse the etc.). A large number of decisions factors determining the price and fix a are to be taken in each of the area price for the firm’s products. Decisions specified above. For example, in the have also to be taken in respect of respect of advertising it is important to discounts to customers, traders and decide about the message, the media credit terms, etc., so that customers to be used (example, print-media– perceive the price to be in line with the newspaper, magazines, the objections value of the product. of customers, etc.). 3. Place: Place or Physical Distribution The success of a market offer will include activities that make firm’s depend on how well these ingredients products available to the target are mixed to create superior value for customers. Important decision areas the customers and simultaneously achieve their sale and profit objectives. in this respect include selection of Let us say a firm would like to achieve dealers or intermediaries to reach the necessary volume of sale at a cost that customers, providing support to the will permit a desired level of profit. intermediaries (by way of discounts, But so many alternative mixes can promotional campaigns, etc.). The be adopted by a firm to achieve this intermediaries in turn keep inventory objectives. The issue before a firm then of the firm’s products, demonstrate is to decide what would be the most them to potential buyers, negotiate effective combination of elements to price with buyers, close sales and achieve the given objectives. also service the products after the sale. The other decision areas relate Products to managing inventory, storage and warehousing and transportation of From the customer’s point of view, a goods from the place it is produced to product is a bundle of utilities, which the place it is required by the buyers. is purchased because of its capability 4. Promotion: Promotion of products to provide satisfaction of certain need. and services include activities that A buyer buys a product or service communicate availability, features, for what it does for her or the benefit merits, etc., of the products to the it provides to her. There can be three types of benefits a customer may target customers and persuade them to seek to satisfy from the purchase of a buy it. Most marketing organisations, product, viz., undertake various promotional (i) functional benefits, activities and spend substantial amount of money on the promotion (ii) psychological benefits, and of their goods through using number (iii) social benefits. 2020-21 Ch_11.indd 290 11/28/2019 3:29:48 PM  Marketing 291 For example, the purchase of a satisfying their personal needs and motorcycle provides functional utility desires are referred to as consumer of transportation, but at the same products. For example, soap, edible time satisfies the need for prestige and oil, eatables, textiles, toothpaste, fans, esteem and provides social benefit by etc. which we use for our personal and the way of acceptance from a group, non-business use are consumer goods. by riding a motorbike. Thus, all these We can classify the consumer product aspects should be considered while into the following three categories as planning for a product. here under: 1. Convenience Products: Those Classification of Products consumer products, which are purchased frequently, immediately and with least time Products may broadly be classified and efforts are referred to as convenience into two categories — (i) consumers’ goods. Examples of such products products, and (ii) industrial products. are cigarettes, ice creams, medicines, The consumer products may further newspaper, stationery items toothpaste be classified into different groups, as etc. These products have low unit-value detailed below: and are bought in small qualities. 2. Shopping Products: Shopping Consumer Products products are those consumer goods Products, which are purchased by where buyers devote considerable the ultimate consumers or users for time, to compare the quality, price, Products Consumer Products Industrial Products Durability Basis Shopping Efforts Involved Non- Durable Services Conven- Shopping Speciality Durable ience Products Products Products Classification of Products 2020-21 Ch_11.indd 291 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 292 Convenience Products style, suitability, etc., at several stores, hair-cutting saloon or restaurant, or before making final purchase. Some a tailor. The demand for these goods of the examples of shopping products is relatively inelastic, i.e., even if the are clothes, shoes, jewellery, furniture, price is increased, the demand does radio, television, etc. not come down. 3. Speciality Products: Speciality products are those consumer goods Durability Of Products which have certain special features On the basis of their durability, because of which people make special the consumer products have been efforts in their purchase. These classified into three categories— products are such, which have reached Durable, Non-durable and Services. a brand loyalty of the highest order, 1. Non-durable Products: The with a significant number of buyers. consumer products which are normally The buyers are willing to spend a lot consumed in one or few uses are called of time and efforts on the purchase non-durable products. For example, of such products. For example, if products like toothpaste, detergents, there is a rare collection of artwork bathing soap and stationary products or of antiques, some people may be etc. From the marketing point of view, willing to spend a lot of shopping these products generally command effort and travel long distance to buy a small margin, should be made such products. In our day-to-day life, available in many locations and need we see people going to a particular to be heavily advertised. 2020-21 Ch_11.indd 292 11/28/2019 3:29:48 PM  Marketing 293 Shopping Products 2. Durable Products: Those tangible Industrial Products consumer products which normally Industrial products are those products, survive many years, for example, refrigerator, radio, bicycle, sewing which are used as inputs in producing machine and kitchen gadgets are other products. The examples of such referred to as durable products. products are raw materials, engines, These goods are generally used for lubricants, machines, tools, etc. In a longer period, command a higher other words, industrial products are per unit margin, require greater meant for non-personal and business personal- selling efforts, guarantees use for producing other products. and after sales services, on the part The market for industrial products of the seller. consists of manufacturers, transport 3. Services: By services we mean agencies, banks and insurance those intangible activities, benefits companies, mining companies and which are offered for sale, e.g., dry public utilities. Industrial products cleaning, watch repairs, hair cutting, are those products, which are used as postal services, services offered by a inputs in producing other products. doctor, an architect and a lawyer. The examples of such products are 2020-21 Ch_11.indd 293 11/28/2019 3:29:48 PM  BUSINESS  STUDIES 294 Speciality Products raw materials, engines, lubricants, petroleum, iron ore), fish and lumber; machines, tools, etc. In other words, and (b) manufactured material and industrial products are meant for parts. These are again of two types – non-personal and business use for component materials like glass, iron, producing other products. plastic and component parts such as The market for industrial products tyre, electric bulb, steering, and battery. consists of manufacturers, transport (ii) Capital Items: These are such agencies, banks and insurance goods that are used in the production companies, mining companies and of finished goods. These include: (a) public utilities. installations like elevators, mainframe Computers, and (b) equipments like Classification Hand Tools, Personal Computer, Fax The industrial goods are classified Machines, etc. into the following major categories: (iii) Supplies and Business Services: (i) Materials and Parts: These include These are short lasting goods and goods that enter the manufacture’s services that facilitate developing or products completely. Such goods managing the finished product. These are of two types: (a) raw material: include: (a) maintenance and repair including farm products like cotton, items like Paint, Nails, etc., and (b) sugar cane, oil seed and natural operating supplies like Lubricant, products such as minerals (say crude Computer Stationary, Writing Paper, etc. 2020-21 Ch_11.indd 294 11/28/2019 3:29:48 PM  Marketing 295 Industrial Goods Materials and Capital Items Supplies and Parts Business Services Raw Manufactured Installations Equipments Maintanence Operating Material Material and Parts and Repair Supplies items Farm Natural Component Component Products Products Material Parts Classification of Industrial Goods Branding If products were sold by generic names, it would be very difficult for the One of the most important decisions marketers to distinguish their products that a marketer has to take in the area from that of their competitors. Thus, of ‘product’ is in respect of branding. most marketers give a name to their He has to decide whether the firm’s product, which helps in identifying and products will be marketed under distinguishing their products from the a brand name or a generic name. competitors’ products. This process of Generic name refers to the name of giving a name or a sign or a symbol the whole class of the product. For etc., to a product is called branding. example, a book, a wristwatch, tyre, The various terms relating to branding camera, toilet soap, etc. We know are as follows: that a camera is a lens surrounded 1. Brand: A brand is a name, term, sign, by plastic or steel from all sides and symbol, design or some combination of having certain other features such them, used to identify the products— as a flash gun and so on. Similarly goods or services of one seller or group book is a bunch of papers, which of sellers and to differentiate them from are in a bound form, on which some those of the competitors. For example, useful information about a subject some of the common brands are Bata, is printed. Thus, all products having Lifebuoy, Dunlop, and Parker. Brand these characteristics would be called is a comprehensive term, which has by the generic name such as camera two components—brand name and or book. brand mark. 2020-21 Ch_11.indd 295 11/28/2019 3:29:49 PM  BUSINESS  STUDIES 296 2. Brand Name: That part of a its use. In that case, no other firm can brand, which can be spoken, is use such name or mark in the country. called a brand name. In other words, Though branding adds to the cost brand name is the verbal component e.g., to the cost of packaging, labelling, of a brand. legal protection, and promotion, it 3. Brand Mark: That part of a provides several advantages to the brand which can be recognised sellers as well as the consumers. but which is not utterable is called brand mark. It appears in the form Characteristics of Good Brand Name of a symbol, design, distinct colour Choosing the right brand name is scheme or lettering. not an easy decision. What makes 4. Trade Mark: A brand or part of a this decision important is the fact brand that is given legal protection that once a brand name is chosen is called trademark. The protection is and the product is launched in given against its use by other firms. the market, changing the brand Thus the firm, which got its brand name is very difficult. So, getting it registered, gets the exclusive right for right the first time is very essential. Perspectives of Brands and Branding 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 2020-21 Ch_11.indd 296 11/28/2019 3:29:49 PM  Marketing 297 Following are some of the considerations, plays a very important role in the which should be kept in mind while marketing success or failure of many choosing a brand name. products, particularly the consumer (i) The brand name should be short, non-durable products. In fact if one easy to pronounce, spell, recognise makes an analysis of the reasons for and remember e.g., Ponds, VIP, the success of some of the successful Rin, Vim, etc. products in the recent past, it can be (ii) A brand should suggest the noted that packaging has played its product’s benefits and qualities. due role. For example, it was one of It should be appropriate to the the important factors in the success of product’s function. products like Maggie’s Noodles, Uncle Chips or Crax wafers. (iii) A brand name should be distinctive. (iv) The brand name sho u ld b e Levels of Packaging adaptable to packing or labelling requirements, to different There can be three different levels of advertising media and to different packaging. These are as below: languages. 1. Primary Package: It refers to the (v) T h e b r a n d n a m e s h o u l d product’s immediate container. In be sufficiently versatile to some cases, the primary package is accommodate new products, which kept till the consumer is ready to use are added to the product line. the product (e.g., plastic packet for socks); whereas in other cases, it is (vi) It should be capable of being kept throughout the entire life of the registered and protected legally. product (e.g., a toothpaste tube, a (vii) Chosen name should have staying match box, etc.). power i.e., it should not get out 2. Secondary Packaging: It refers to of date. additional layers of protection that are kept till the product is ready for use, Packaging e.g., a tube of shaving cream usually One of the most important developments comes in a card board box. When affecting the business world in consumers start using the shaving recent years has been in the area of cream, they will dispose off the box packaging. Many products, which we but retain the primary tube. thought could never lend themselves 3. Transportation Packaging: It refers to packing because of their nature, to further packaging components have been successfully packed e.g., necessary for storage, identification Pulses, Ghee, Milk, Salt, Cold Drinks, or transportation. For example, a etc. Packaging refers to the act of toothpaste manufacturer may send the designing and producing the container goods to retailers in corrugated boxes or wrapper of a product. Packaging containing 10, 20, or 100 units. 2020-21 Ch_11.indd 297 11/28/2019 3:29:49 PM  BUSINESS  STUDIES 298 Levels of Packaging Importance of Packaging respect of promotion has gone to packaging. Packaging has acquired great significance in the marketing of goods (iii) Innovational Opportunity: Some of and services, because of following the recent developments in the reasons: area of packaging have completely (i) Rising Standards of Health and changed the marketing scene Sanitation: Becau se o f the in the country. For example, increasing standards of living milk can now be stored for 4-5 in the country, more and more days without refrigeration in people have started purchasing the recently developed packing packed goods as the chances of materials. Similarly, in the area adulteration in such goods are of pharmaceuticals, soft drinks, minimised. etc., lots of new innovations have (ii) Self Service Outlets: The self- come in respect of packaging. As a service retail outlets are becoming result, the scope for the marketing very popular, particularly in major of such products has increased. cities and towns. Because of (iv) Product Differentiation: Packaging this, some of the traditional role is one of the very important means assigned to personal selling in of creating product differentiation. 2020-21 Ch_11.indd 298 11/28/2019 3:29:49 PM  Marketing 299 The colour, size, material, etc., of photograph or typeface may be package makes real difference in used to attract attention of the the perception of customers about people at the point of purchase. the quality of the product. For Sometimes it may work even better example, by looking at the package than advertising. In self-service of a product say Paint or Hair Oil, stores, this role of packaging one can make some guess about becomes all the more important. quality of the product contained in it. Labelling A simple looking but important task Functions of Packaging in the marketing of goods relates to As stated above, packaging performs a designing the label to be put on the number of functions in the marketing package. The label may vary from a of goods. Some of the important simple tag attached to the product functions are as follows: (such as in case of local unbranded (i) Product Identification: Packaging products like sugar, wheat, pulses, greatly helps in identification etc.) indicating some information of the products. For example, about the quality or price, to complex Colgate in red colour, or Ponds graphics that are part of the package, cream jar can be easily identified like the ones on branded products. by its package. Lables are useful in providing detailed information about the product, its (ii) Product Protection: Packaging contents, method of use, etc. The protects the contents of a product various functions performed by a label from spoilage, breakage, leakage, are as follows: pilferage, damage, climatic effect, etc. This kind of protection 1. Describe the Product and specify is required during storing, its contents: Let us look at some of the distribution and transportation labels of the products used by us in our of the product. day to day life. The label on the package of a local tea company describes the (iii) Facilitating Use of the Product: The company as ‘Mohini Tea Company, an size and shape of the package ISO 9001:200C Certified Company’; a should be such that it should be popular brand of Prickly Heat Powder, convenient to open, handle and describes how the product provides use for the consumers. Cosmetics, relief from prickly heat and controls medicines and tubes of toothpastes bacterial growth and infection, giving are good examples of this. caution forbidding its application on (iv) Product Promotion: Packaging is cuts and wounds. Package of fast food also used for promotion purposes. products like ready to eat Dosa, Idli A startling colour scheme, or Noodles, describe the procedure of 2020-21 Ch_11.indd 299 11/28/2019 3:29:49 PM  BUSINESS  STUDIES 300 cooking these products; the Package by some brands under Yellow, red and of a toothpaste brand lists the ‘Ten Green Label categories. Teeth and Gum Problems’, which 4. Helps in Promotion of Products: the product claims to fight with its An important function of label is to ‘Complete Germicheck Formula’; aid in promotion of the products. the Package of a brand of Coconut A carefully designed label can Oil describes the product as pure attract attention and give reason coconut oil with Heena, Amla, Lemon to purchase. We see many product and specifies how these are good for labels providing promotional Hair. Thus, one of the most important messages for example, the pack functions of labels is to describe the of a popular Amla Hair Oil states, product, its usage, cautions in use, ‘Baalon mein Dum, Life mein Fun’. etc. and specify its contents. The label on the package of a brand 2. Identification of the Product of Detergent Powder says, ‘keep cloth o r b r a n d : The other important look good and your machine in top function performed by labels is condition’. Labels play important to help in identifying the product role in sales promotional schemes or brand. For example, the brand launched by companies. For example name of any product, say Biscuits the label on the package of a Shaving or Potato Chips imprinted on its Cream mentions, ‘40% Extra Free’ or package helps us to identify, from package of a toothpaste mentioning, number of packages, which one is ‘Free Toothbrush Inside’, or ‘Save our favourite brand. Other common ` 15’. identification information provided 5. Providing Information Required by the labels include name and by Law: Another important function address of the manufacturer, net of labeling is to provide information weight when packed, manufacturing required by law. For example, date, maximum retail price and packaged food articles must have list Batch number. of ingredients declaration regarding 3. Grading of Products: Another vegetarian or non-vegetarian food important function performed by additives and date of manufacturing labels is to help grading the products or packing on the label. Such into different categories. Sometimes information is required on processed marketers assign different grades to foods, drugs and tobacco products. indicate different features or quality of In case of hazardous or poisonous the product. For example, a popular material, appropriate safety-warning brand of Hair Conditioners comes in need to be put on the label. different categories for different hair, Thus, labels perform number say for ‘normal hair’ and for other of important functions relating to categories. Different type of tea is sold communicating with the potential 2020-21 Ch_11.indd 300 11/28/2019 3:29:49 PM  Marketing 301 buyers and promoting the sale of Factors affecting Price the products. Determination There are number of factors which Pricing affect the fixation of the price of a When a product is bought, some product. Some of the important factors money is paid for it. This money in this regard are discussed as below: represent the sum of values that 1. Product cost: One of the most consumers exchange for the benefit important factor affecting price of having or using the product and is of a product or service is its cost. referred to as the price of the product. This includes the cost of producing, Similarly, money paid for the services distributing and selling the product. such as fare for the transport service, The cost sets the minimum level or premium for an insurance policy, and the floor price at which the product fee to a doctor for his medical advise may be sold. Generally all marketing represent the price of these services. firms strive to cover all their costs, Price may therefore be defined as the at least in the long run. In addition, amount of money paid by a buyer (or they aim at earning a margin of profit received by a seller) in consideration over and above the costs. In certain of the purchase of a product or circumstance, for example, at the time a services. of introducing a new product or while Pricing occupies an important entering a new market, the products place in the marketing of goods and may be sold at a price, which does not services by a firm. No product can cover all the costs. But in the long run, be launched without a price tag or a firm cannot survive unless at least at least some guidelines for pricing. all its costs are covered. Pricing is often used as a regulator of There are broadly three types of the demand of a product. Generally, costs: viz., Fixed Costs, Variable Costs if the price of a product is increased, and Semi Variable Costs. Fixed costs its demand comes down, and are those costs, which do not vary with vice-versa. the level of activity of a firm say with Pricing is considered to be an the volume of production or sale. For effective competitive weapon. In the example, rent of a building or salary conditions of perfect competition, of a sales manager remains the same most of the firms compete with each whether 1000 units or 10 units are other on the basis of this factor. It is produced in a week. also the single most important factor Those costs which vary in direct affecting the revenue and profits of a proportion with the level of activity are firm. Thus, most marketing firms give called variable costs. For example, the high importance to the fixation of price costs of raw material, labour and power for their products and services. are directly related with the quantity of 2020-21 Ch_11.indd 301 11/28/2019 3:29:49 PM  BUSINESS  STUDIES 302 goods produced. Let us say, if the cost the upper limit where would the price of wood for manufacturing one chair settle down? This is affected by the comes to ` 100 the cost of wood for 10 nature and the degree of competition. chairs would be ` 1000. Obviously, The price will tend to reach the upper there will be no cost of wood if no chair limit in case there is lesser degree of is produced. competition while under conditions of Semi variable costs are those costs free competition, the price will tend to which vary with the level of activity be set at the lowest level but not in direct proportion with it. Competitors’ prices and their For example, compensation of a sales anticipated reactions must be person may include a fixed salary of considered before fixing the price say ` 10,000 plus a commission of 5 of a product. Not only the price but per cent on sales. With an increase the quality and the features of the in the volume of sales, the total competitive products must be examined compensation will increase but not in carefully, before fixing the price. direct proportion with the change in 4. Government and Legal the volume of sale. Regulations: In order to protect Total Costs are the sum total of the the interest of public against unfair fixed, variable and semi-variable costs practices in the field of price fixing, for the specific level of activity, say Government can intervene and volume of sales or quantity produced. regulate the price of commodities. 2. The Utility and Demand: While Government can declare a product the product costs set the lower limits as essential product and regulate of the price, the utility provided by the its price. For example, the cost of a product and the intensity of demand of drug manufactured by a company the buyer sets the upper limit of price, having monopoly in the production which a buyer would be prepared of the same come to ` 20 per strip to pay. In fact the price must reflect of ten and the buyer is prepared to the interest of both the parties to the pay any amount for it, say ` 200. transaction—the buyer and the seller. In the absence of any competitor, The buyer may be ready to pay up to the seller may be tempted to extort the point where the utility from the the maximum amount of ` 200 for product is at least equal to the sacrifice the drug and intervene to regulate made in terms of the price paid. The the price. Usually in such a case, seller would, however, try to at least the Government does not allow the cover the costs. According to the law of firms to charge such a high price demand, consumers usually purchase and intervene to regulate the price more units at a low price than at a of the drug. This can be done by the high price. Government by declaring the drug as 3. Extent of Competition in the essential commodity and regulating Market: Between the lower limit and its price. 2020-21 Ch_11.indd 302 11/28/2019 3:29:49 PM  Marketing 303 5. P r i c i n g O b j e c t i v e s : Pricing Thus, the price of a firm’s products objectives are another important factor and services is affected by the pricing affecting the fixation of the price of a objective of the firm. product or a service. Generally the 6. Marketing Methods Used: Price objective is stated to be maximise the fixation process is also affected by profits. But there is a difference in other elements of marketing such maximising profit in the short run and as distribution system, quality of in the long run. If the firm decides to salesmen employed, quality and maximise profits in the short run, it amount of advertising, sales promotion would tend to charge maximum price efforts, the type of packaging, product for its products. But if it is to maximise differentiation, credit facility and its total profit in the long run, it would customer services provided. For opt for a lower per unit price so that it example, if a company provides free can capture larger share of the market home delivery, it has some of flexibility and earn greater profits through in fixing prices. Similarly, uniqueness increased sales. of any of the elements mentioned Apart from profit maximisation, above gives the company a competitive the pricing objectives of a firm may freedom in fixing prices of its products. include: