Class 12 business studies Chapter 11 Marketing
NCERT Notes for Class 12 business studies Chapter 11 Marketing, (business studies) exam are Students are taught thru NCERT books in some state boards and CBSE Schools. As the chapter involves an end, there is an exercise provided to assist students to prepare for evaluation. Students need to clear up those exercises very well because the questions inside the very last asked from those.
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NCERT Notes for Class 12 business studies Chapter 11 Marketing
Class 12 business studies Chapter 11 Marketing
Traditionally market refers to a place where goods are purchased and sold, such as Lulu Hyper Market, Thodupuzha Fish Market, Broadway Ernakulum etc .But today the term ‘market’ should not be restricted to specific place, it includes the entire area where buyers and sellers contact each other to purchase and sell commodities at certain price. Today business is conducted on telephone, through mail; through internet etc.We know that certain commodities have national and even international market.
Important Features of Market
Market must satisfy the following characteristics. There must be:
- Commodities to be buy and sell
- Buyers and sellers to purchase and sell commodities
- Area or infrastructure to meet buyer and seller
- Close contact between buyers and sellers.
Different forms of markets
Markets can be classified on the following basis:
On the Basis of Area – Local Market, National Market, International Market
On the Basis of Quantity of Commodity – Wholesale Market, Retail Market
On the Basis of Competition – Perfect Market, Monopoly, Imperfect Market
On the Basis of Legality – Open Market, Black Market
On the Basis of Commodities and Services – Commodity Market, Factor market
Note: Factor market is the market for services needed to complete the production process. In other words anything used in making a finished product—labor, raw materials, capital, and land—make up a factor market. Some examples are inputs like capital, labor, raw material, entrepreneurship, and land.
Marketing is a process through which goods and services exchange from producers to consumers in such a way that maximizes the satisfaction of consumer needs. It involves efforts to discover the needs and wants of customers and tries to develop products and services which
would satisfy them. Marketing also involves selection of a distribution channel to reach the product to customer’s place and finally develop and implement promotional strategy.
Features of marketing
Marketing is the process through which goods and services move from concept (Idea) to customer.
1- Needs and Wants
Marketing is the process of fulfilling the needs and wants of the consumers. This is why people get attracted to this process. All the people have almost the same needs but their wants happen to be different, e.g., feeling hungry is a need but satisfying it by eating only chicken biryani is a want. A seller tries to find out the needs of the consumers and how those needs are to be satisfied.
2- Creating a Market Offering
The second feature of marketing is creating market offering. It refers to providing complete information about the product and services, e.g., providing information about the name of the product and service, type, price, size, centre of availability, etc. A good market offer is always prepared keeping in mind the needs and priorities of the customers.
3- Customer Value
Buyers take a buying decision based on their view about the value of a product or service in satisfying their needs. Cost element is also an important factor. So what is needed on the part of the marketer is that of adding value to the product so that customers prefer it in relation to the competing products. A seller who does not give attention to the importance that a buyer pays to a product is sure to lag behind in the race of competition.
4- Exchange Mechanism
Literal meaning of marketing is exchanging things. Marketing has two sides-buyer and seller. Marketing becomes possible only by the medium of exchange between the two. The seller gives goods and services and in exchange the buyer gives money or something equivalent to it. These days the distance between the place of production and the place of consumption has increased. Intermediaries like the agents, wholesalers, retailers, etc.helps to reduce this distance through the medium of
marketing. Therefore, it can be said that exchange is the essence of marketing following things are important in respect of exchange.
- The presence of two sides the buyer and the seller.
- Both should be capable of playing each other something, e.g., money in exchange of product.
- Both must have the ability to communicate. In the absence of communication no buying and selling can take place.
- Each party should have freedom to accept or reject the other party’s offer.
- Both the parties make transaction for their own satisfaction on voluntary basis.
What is to be marketed?
We can market items like goods, services, ideas, persons, places etc.
It consists of all the consumer goods and capital goods ,vegetables ,books ,TV ,soft drinks ,equipments ,machinery etc
It consists of services of professionals like chartered accountants, doctors, advocates, financial services like banking,insurance,online trading etc.
Ideas like “blood donation”, “say no to drugs”, “No Smoking”, “Clean India”
We can market persons also. In election campaign, candidates are marketed and voters are convinced to vote for them.
Marketing of place is common today. Tourism departments promotes to visit various places like Agra ,Jaipur ,Kovalam ,Munnar ,Mysore etc.
Much scope to promote sports events like Olympics, World Cup Football etc.,festivals like Onam,Diwali etc.
Difference between Selling and marketing
Generally people consider selling and marketing as synonymous of each other. But actually two are different concepts. Selling is just a part of marketing activities. Marketing is a wider term, it includes wide range of activities such as analyzing the needs of customers, designing the products accordingly, pricing the product, selling the product ,after sales service etc.Selling refers to sale of goods or services through advertisement, promotion and salesmanship.
Distinction between selling and marketing
Point of Differences
Selling process starts after production and it is concerned with activities for promotion of sales and thereby facilitates transfer of goods from sellers to consumers.
Marketing in its first stage identifies the wants of customer’s .Secondly, it decides how the goods or services can be profitably produced/served and finally delivered to consumers for satisfying their needs.
Maximize profit through sales volume
Maximize profit through customer satisfaction
Start and end
Selling starts after production and ends with the sale of product
Marketing starts much before production and continuous even after sale
Selling involves efforts like promotion and influence
Marketing involves efforts involving strategies in respect of product ,promotion ,pricing and physical distribution
Focuses on seller’s needs
Focuses on customer’s needs
In selling process producer is the king
In marketing process consumer is the king
It creates demand for the product through advertisement and sales promotion measures.
Demand is created by producing product according to the needs of consumers.
Point of Differences
Emphasis is placed on sales of products already produced
Emphasis is placed on product planning and development to match products with the customers’ needs (market)
Scope of selling is limited; it is only a part of marketing.
Scope of marketing is wider; it consists of number of activities. It includes sales also.
Marketing management is a functional area of management concerned with planning, organizing, directing and controlling the activities related to the marketing of goods and services to satisfy the customers’ wants.
According to Philip Kotler ”marketing management as the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value management”
As per the above definition, the marketing manager first choose a target market and the he has to create demand for his products so that the target customers purchase the product, keep them satisfied with the firm’s products and also attract more customers to the firm’s products so that the firm can grow. Mechanism for achieving the objective is creating, developing and communicating superior values for the customers and persuades them to buy these products.
Marketing management Philosophies/Concepts
Marketing concepts/philosophies is a way of business thinking. Different concepts give different weightage to different factors like production, product, selling etc.
1)- Production Concept- Some companies believe that profits could be maximized by producing at large scale. Large scale production leads reduced cost per unit. Their outlook is that it is easy to sell the products when products are inexpensive and easily available. They mainly concentrate on quantity of products. Their aim is to earn more profits through large scale production.
2)- Product Concept- This concept says that, customers would favor those products with superior quality, performance and features. Therefore; firms should focus more on quality than quantity. These people believe that quality of product is more important than quantity. Product improvement became the key to profit maximisation of a firm, under product concept.
3)- Selling concept- According to this concept, it is assumed that customers would not buy, or not buy enough unless they are adequately attracted and convinced to do so. Therefore firms should undertake various promotional techniques such as advertising, sales promotion and personal selling in order to generate large demand for their products. It helps in pushing the sales volume of the products thereby increasing profits. Their main aim is to increase sales by any means so that maximum profit is enjoyed. Here customer satisfaction is not a key factor.
4)- Marketing Concept- Today market is customer oriented, customer is the king. Earning profit through customer satisfaction is the slogan of this concept. According to this concept, an organization can achieve its objective of profit maximization by identifying the needs of its present and prospective customers and effectively satisfying them. Their main aim is to profit maximisation through customer satisfaction.
5)- Societal Concept- This concept of marketing has emerged these days. According to this concept marketing strategy must honour the social values. It should aim at consumer satisfaction with environmental conservation. It means that marketing efforts should not be selfish enough to maximize profit at the cost of the society. Price stability, quality of goods, availability of resources, pollution control etc are examples related to the societal concept of marketing.
Functions of Marketing
Marketing is the process that comprises of all the activities involved from the concept of the product all the way till it reaches the final consumer. So there are a lot of activities in this process, which we call the functions of marketing.
1- Identify Consumer Needs/analysing Market information
Most important function of marketer is to gather and analyse market information. This will help to identify the needs of customers and take valuable decisions for efficient marketing of the products and services. Once you understand your customer thoroughly you can base your product design on this information.
2- Marketing Planning
Another important activity or area of work of a marketer is to develop appropriate marketing plans so that the marketing objectives of the organization can be achieved. Marketing planning includes the plan for increasing the level of production, promotion of the products, etc. and specifies the action programmes to achieve these objectives. For example, a marketer of cell phone, having 20% market share in India aims to achieve 40% market share in the next 3 years.
3- Product designing and Development
The next target is to develop products according to the needs of the consumer. The design of the product is also an important factor. For example when buying a car, a customer not only considers its features like cost, mileage etc. but also its shape, colour , style etc.
4- Standardisation and Grading
Standardisation refers to producing goods of predetermined specifications such as quality, price, packaging etc., which ensures uniformity in products. This will facilitate purchasing by description. Buyers need not inspect, test and evaluate goods every time.
Grading is the process of classifying products into different classes on the basis of some characteristics such as quality, size, weight etc. Grading is particularly necessary for products which are not produced according to predetermined specifications (example agriculture products like wheat, orange etc). Grading ensures that goods belong to a particular quality and helps in realising higher prices for high quality output.
5- Packing and Labeling
A package is a container or a wrapper in which a product is enclosed. Labeling refers to putting identification marks on the package. Packaging and labeling are considered as the pillars of marketing. They are not only to protect and identify the goods but are great marketing tools.
Branding is the process of giving a name, sign, symbol or design used to identify the products of one firm and to differentiate them from those of the competitors. Examples Sony, KFC Chicken, Pepsi etc.The brand name must be selected very carefully as the customer’s loyalty depends upon the brand name. Certain brands enjoy incredible goodwill in the market and it can benefit the product.
7- Setting up Customer Support Services
In present day marketing, customer is the king. So customer satisfaction is the main motto of every businessman. So a very important function of marketing management relates to developing customer support services such as handling customer complaints, after sale services, maintenance services, technical support etc.
The price of a product will largely determine its success or failure. Factors like demand, market conditions, prices of competitor etc. will be considered while fixing a price for the product.
Promotion refers to informing the customers about the firm’s products, their features, etc, and persuading them to buy these products. There are four major promotion methods – advertising, personal selling, sales promotion and publicity. The company must decide on its best promotion mix, a combination involving all or some of these four methods.
10- Physical Distribution
Another important function of marketing manager is making plans regarding distribution of goods or services. Physical distribution includes decisions like choice of channel of distribution, maintaining inventory, storage, ware house etc.
Transportation involves physical movement of the goods from its place of production to its place of consumption. The company must analyse its transportation needs after taking into account various factors such as nature of the product, cost and the geographical boundaries of its market. This will help them choose the correct modes of transportation.
As we have seen there is always a time lag between the production and the consumption of goods. Sometimes the products are seasonal or the supply is irregular or there are production difficulties. But companies like to maintain a smooth flow of goods. So storage and warehousing of goods are necessary.
Role of Marketing
In these days marketing plays very important role in a firm as well as economy as a whole.
- Role in a firm – Marketing helps a firm to earn maximum profit through customer satisfaction. Thus; marketing plays a vital role in the survival and growth of the firm.
- Role in the economy – Marketing plays an important role in the economic development of a nation. It helps in raising the standard of living of the people by making available goods and services that satisfy their needs and wants. Marketing leads to more employment opportunities, more sales, higher profits, attract more investments etc.
Factors affecting marketing decisions
There are various factors that will affect marketing decisions. We can classify them into two:
- Controllable factors – These are factors which can be influenced in marketing decision at the firm level. For example, in case of a particular product ,say ,bread, its packing, brand name, pricing, distribution networks to be used, promotion models etc.are controllable factors that can be decided by the marketing manager of a particular firm.
- Non-controllable factors – These are factors which are not controllable at the firm. For example customers demand political party’s attitude, government decisions, economic factors etc.
Elements of Marketing Mix / 4 Ps of Marketing
Marketing mix is a set of four decisions which needs to be taken before launching any product. It refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix – Price, Product, Promotion and Place. The four basic elements of marketing mix are inter-related and inter- dependent. However, nowadays, the marketing mix increasingly includes several other Ps like Packaging, Positioning, People and even Politics as vital mix elements. According to Williom J Stanton “marketing mix is the term used to describe the combination of the four inputs which constitute the core of a company’s marketing system, the product, the price structure, the promotional activities and the distribution system”
Elements of Marketing Mix (Four Ps of marketing)
The four main elements of marketing mix are:
- Product mix
- Price mix
- Place mix
- Promotion mix
Product means goods or services which is offered to the market for sale. Example: Samsung offers mobile phones, televisions, refrigerators, monitors etc. Product mix is the total number of product lines that a company offers to its customers. The product lines may range from one to many and the company may have many products under the same product line as well. All of these product lines when grouped together form the product mix of the company.
Product mix consists of important decisions related to product such as quality of product, size, colour etc.
The product mix has the following dimensions
Product mix Width
The width of the mix refers to the number of product line the company has to offer.
For example – Bajaj Electricals produce a wide variety of electrical appliances such as fans, mixers, lamps, iron box etc.Here product mix width is 4.
Width means number of product line offered by a company.
Product mix Depth
The depth of the product mix refers to the total number of products within a product line. There can be variations in the products of the same product line. Depth refers to the variety of size, colours and models offered within each product line. For example –Bajaj Electricals offers different types of fans like ceiling fans,wall fan exhost fan etc. They also fans in different colours,range etc.
Product mix Length
Length of the product mix refers to the total number of products in the mix. Suppose, if a company has 5 product lines and 10 products each under each product lines, then the length of the mix will be 50 [5 x 10].
Manufacturers try to add more and more utilities to the product to provide greater satisfaction to customers and winning edge over competitor. The manufacturer can follow the following product mix strategies:
- At first stage of the product mix the manufacturer ensures fundamental benefits/features that the customer seeks in the product or service which he buys. For example, the fundamental benefit offered by a car is transportation facility.
- At the second stage of product mix the manufacturer design the product according to the expectation of the customer. For example, a customer expects the car to be comfortable in driving; good pick up, good mileage, good shape, style etc.
- At the last stage of the product mix the producer design strategies to overcome the risk of competition. For this he adds some additional features to the product or service which is more than the basic expectation of the customer. For example, in case of a car marketer can offer free insurance, free seat covers or after sale services.
Price refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the market to pay, competition and other direct and indirect factors. Price mix refers to important decisions related to fixing of price of a commodity These decisions can be relate to pricing strategies, fixing prices by considering competrition,fixing prices according to the demand exist in the market etc. Price is an important factor affecting the success or failure of a product in the market. Price is the crucial element of marketing mix because customer is very sensitive to this element. Little variation in the price may shift your customer to competitor’s product, for example if the price of ‘MIRINDA’ is changed from Rs. 30 to Rs.33 then the customer will start demanding ‘FANTA’ which is still available Rs.30.Price must match with the utility offered by the product or services. If the demand is elastic, a small change in the price changes the demand by big magnitude (extent).
Place mix constitutes taking decisions regarding how the product will be available for the customers for the actual sale. There are two important decisions relating to this aspect.
- Decision regarding channel of distribution– It decides whether goods are to be marketed through wholesalers, retailers, own branches or any other way. It determines the place, where the product should be made available. Types of channels –it may be direct or indirect. In direct channel manufacturer directly sells goods to consumers. In indirect channel manufacturer sells his goods to consumers through middlemen like wholesalers, retailers etc.
- Decision regarding physical movement of goods– Physical movement involves handling the movement of goods from place of production to the place of consumption. It is also known as logistic management. It involves four major activities-order processing, transportation, and warehousing and inventory control. A good order processing involves timely receipt of order and timely delivery of goods. Transportation decisions involves proper evaluation and comparison of different modes of transport on the basis of speed, cost, availability etc and select the best suited one. Warehousing is necessary to maintain smooth flow of products in the market and to stabilize price. Management should wisely utilize warehouses to increase sales. Inventory control means maintaining stock of goods at a lower cost level and at the same time avoiding the risk of stock-outs.
It involves all activities concerned with informing the consumers about a product and persuading them to buy the product. Such activities include (1) Advertising (2) Personal selling (3) Sales promotion (4) Publicity.
Advertising-Advertising is a paid form of impersonal communication. It is the most commonly used tool of promotion. Adverting provides information regarding benefits, price, availability etc. of goods and services. Common modes of advertising are news papers,magazines,television and radio.
Sales Promotion: Sales promotion refers to short term use of incentives or other sales promotional activities that stimulate the customer to buy the product. Sales promotion activities include offering free samples, cash discounts, sales contests, free gifts etc.
Personal Selling: Personal selling means selling personally. This involves face to face interaction between seller and buyer for the purpose of sale.Companiers appoint sales person to contact prospective buyers and make them aware about the product and develop product performances to end up with sale.In personal selling two way communication is possible.
Publicity: Publicity is a non-paid form of impersonal communication. It is just like advertisement except that advertisement is a paid form whereas publicity in non-paid form. Publicity refers to favourable news about a company and its product appearing news papers and social media. Here communication with free of cost.
Nature and Classification of products
Product means goods or services which are offered to the market for exchange. Products may be broadly classified into two- (1) Consumer products and (2) Industrial products. These can be further classified as follows:
Consumer products are those products which are purchased by the ultimate consumers for satisfying their personal needs.Examples-Soap, Shoes, TV, Tooth pastes etc. It is also called final goods. Clothing, food, and jewelry are all examples of consumer goods. Consumer goods are ultimately consumed, rather than used in the production of another good.
The consumer products can be classified on the basis of two important factors. The consumer products can be classified on the basis of two important factors: (A) Durability of the product and (B) the extent of shopping efforts involved.
On the basis of durability of the product
On the basis of their durability, the consumer products can be classified into three categories— Durable, Non-durable and Services.
- Durable products:-The goods which are used for a longer period of time are known as durable goods. For example, refrigerator, washing machine, radio, etc.These goods are generally used for a longer period, high price, command a high per unit margin, require after sales service and promotion tools for sale.
- Non-durable products:- Those consumer goods which are normally consumed in one or few uses are called non-durable goods.They are purchased very frequently. Example toothpaste, soap, books, pen etc.These products are generally sold at low price and with fewer profit margins.
- Services: – Services are intangible in form. By services we mean those activities, benefits or satisfactions, which are offered for sale.
Example.Dry cleaning, watch repairs, hair cutting, postal services, services offered by a doctor, an architect and a lawyer.
Characteristics of services
- Services are intangible, i.e., we cannot see, feel or touch them;
- A service is inseparable from its source. That means we cannot separate the service from the person providing the service;
- The services cannot be stored. They are highly perishable. For example, if a tailor does not work for one week, the services he would have provided during such period go waste;
- Services are highly variable as their type and quality depends on the person providing them.
On the basis of shopping efforts involved
On the basis of the time and effort buyers are willing to spend in the purchase of a product, we can classify the consumer product into the following three categories as here under:
- Convenience Product:-Consumer products that people usually purchase frequently, immediately and with less purchasing efforts are called convenience products. Examples.Soap, bread, match box ,toothpaste ,magazines, pen, ice cream etc.
Characteristics of convenience products:
- These products have low unit-value and are bought in small qualities.
- These products are purchased at convenient locations, with least efforts and time;
- these generally come under the category of essential products;
- Sales promotion schemes or short term incentives such as sales contests, discount offers, etc play an important role in the marketing of such products
- Shopping products: – Shopping products are those consumer goods, in the purchase of which buyers devote considerable time, to compare the quality, price, style, suitability, etc., at several stores, before making final purchase.
Examples of shopping products are clothes, shoes, jewellery, furniture, radio, television, etc.
Characteristics of shopping products
- The shopping products are generally of durable nature, i.e., they normally survive many uses;
- The unit price as well as profit margin of shopping products is generally high;
- As these products have high unit price, customers compare the products of different companies before making selection;
- Purchases of shopping products are generally pre-planned and there is little degree of impulse buying in these products;
- Retailers generally play an important role in the sale of shopping products as lot of influential effort is needed to convince the buyers to purchase them.
- Specialty Products: – Specialty products are those consumer goods which have certain special features because of which people make special efforts in their purchase. These products are costly and their unit price is very high, the demand for these products is relatively inelastic
Example- rare collection of art works, painting etc.,
Characteristics of the specialty products
- The demand for specialty products is limited as relatively small number of people buy these products
- These products are generally costly and their unit price is very high;
- These products are available for sale at few places as the number of customers is small and are willing to take extra efforts in the purchase of these products;
2. Industrial Products
Industrial products are those products, which are used as inputs in producing other products. The examples of such products are raw materials, engines, lubricants, machines, tools, etc. In other words, industrial products are meant for non personal and
business use for producing other products. The market for industrial products consists of manufacturers, transport agencies, banks and insurance companies, mining companies and public utilities.
Characteristics of industrial products
- Number of buyers of industrial products is limited as compared to consumer products.
- Since there are limited number of buyers industrial products are marketed through shorter channels of distribution i.e., direct selling or one level channel.
- Derived Demand- The demand for industrial products is derived from the demand for consumer products.For example, the demand for leather will be derived from demand for shoes and other leather products in the market.
Materials and Parts
These include goods that enter the manufacture’s products completely. The cost of these items is treated by the purchasing company as the part of manufacturing cost. Materials goods are of two types:
Raw material: These are basic products which enter into the production process with little or no alteration.Eg.Farm products like cotton, sugar cane, oil seed and natural products such as minerals (say crude petroleum, iron ore), fish and lumber.
1- Manufactured material and parts
These are again of two types –
(i) component materials –It includes raw materials that are subjected to some amount of raw materials that are subjected to some amount of processing before entering the production process.
Eg.Steel sheets,copper wire, fuel oil, acid, glass, plastic etc.
(ii) Component parts –These are semi finished parts that can installed directly into the products with little or no additional change.
Eg.Tyre, switches, electric bulb, steering, and battery, small motors etc.
2- Capital Items-
These are such goods that are used in the production of finished goods. These include: (a) Generators, special purpose machines, installations like elevators, mainframe Computers, and (b) equipments like Hand Tools, Personal Computer, Fax Machines, etc
3- Supplies and Business Services
Supplies-These are short lasting goods and services that facilitate developing or managing the finished product. These include: (a) maintenance and repair items like Paint, Nails, greases etc., and (b) operating supplies like Lubricant, Computer Stationary, Writing Paper, etc.
Services-Company needs a wide range services like building maintenance services, auditing services, legal services, courier services
The difference in the nature of consumer products and industrial products is important because of the fact that the buyers of the two sets of study the cost of different available brands, their technical specifications and the goodwill of the supplier. Whereas, the buyer of a consumer product may be more impulsive and emotional who is susceptible to advertising and various sales promotion schemes.
Important components of Product Mix
A brand is the identification of a product. It can be in the form of name, symbol, design etc.Examples Close-up, Colgate, Fruity, Bata etc.The process of giving a name or a symbol to a product is called branding. Branding helps in identifying and distinguishing ones product from the competitor’s products. Branding is used for product differentiation, building distinct image of the product and to popularize the product and its manufacturers (Ujala & Jyothy Laboratories).
Various terms related to branding are:
- Brand: A brand is the identification of a product it can be in the form of name, symbol or both etc.Eg Nike,Close-up,Pepsi etc.
- Brand Name: The part of the brand which can be spoken is called brand name, it is the verbal part of a brand. Example HYUNDAI
- Brand Mark: The part of the brand which can’t be spoken but can be recognized is known as brand mark.Example Red & Blue ball of Pepsi,logo of Hyundai,logo of apple’s etc.
- Trade Mark: Trade mark is a legal version of a brand. When a brand gets registered and legalized it is called trade mark. All trademarks are brands but only legally protected brands are called trademarks.
Features of a good brand name
While selecting a brand name attention must be paid to the following:
- Brand name should be short and simple: The brand name should be short and simple. It should be easy to pronounce, spell, recognize and remember. Example Pepsi,Lux,Fanta,Innova etc
- Suggest product’s benefits: A brand name should suggest the product’s benefits and qualities and should be appropriate to its function. Example ‘Ujala’ suggests brightness, Reliance, Dairy Milk, Amul, Hair and Care suggests care of hairs etc.
- The brand name should be unique and distinctive: The brand name should be unique and should not lose its identity. Example Vicks,Jeep,Lux etc
- Meaningful: The brand name should be meaningful from the view points of other languages and culture. It should not be offensive and inappropriate in other languages.
- Legal protection: The brand name should be capable of being registered and protected legally.
Advantages of branding- To Manufacturers
Branding a product helps manufacturers in the following ways.
- Helps in making product differentiation: Branding helps a firm in distinguishing its product from the products of competitors.
- Helps in advertising: With the brand name advertising become more effective. Repetitive use of brand name ensures sale for his products.
- Easy introduction of new products: The companies which use their company’s name as brand name can easily introduce new product into the market. for Example ,Samsung extended the brand name of its television into washing machine, cell phone etc.
- Differential pricing: With established brand name a firm can easily charge high price for its products as compared to competitor’s products.
Example: prices of i Phone, price of BMW cars
Advantages of branding-To Customers
Branding a product helps consumers in the following ways.
- Helps in identification of products: Branding helps the customers to select the products easily. Once a customer is satisfied with a brand, there is no need of inspection every time. Thus shopping becomes easy for them.
- Status Symbol: Now a day’s use of branded goods adds to the status of customers and adds to their confidence level. Example Uses of BMW car, i phone,Parker pen, RADO watch etc.
- Ensures Quality: Branding ensures a certain level of quality of the product. It create confidence in the mind of consumers and helps increasing the level of satisfaction.
The companies always supply the products in packaged form for example; Pepsi comes in bottle, Surf in bag, and biscuits in wrapper, oil in Jar etc. Packaging is the process of designing and producing appropriate wrapper, container or bag for the product. Packaging plays an important role in the marketing success or failure of products. Packaging is essential for displaying necessary information regarding a particular product. Packaging reduces the risk of wastage, spoilage, leakage etc in the process of transportation and storage. Packaging used as a promotional tool. Sometimes, it works even better than advertising. In self service store packaging plays an important role. Hence good package acts as a silent salesman.
Different levels of packaging
There can be three different levels of packaging. They are:
- Primary packaging – It refers to the product’s immediate container. Example tooth paste tube.
- Secondary package – It refers to additional layers of protection that are kept till the product is ready for use. Example toothpaste tube usually comes in a card board box.
- Transportation package – It refers to further packaging of products necessary for storage and transportation. For example a tooth paste manufacturer may send the goods to retailers in corrugated boxes containing 20 or 100 units.
Functions / Importance of Packaging
- Product Protection – The fundamental function of packaging is that it protects the product from damage. Appropriate packaging protects the product from sun, rains, moisture, insects etc.
- Product identification – With the help of packaging customers can easily identify a product.
- Facilitating the use of the product – The size and shape of the package, should be such that there should be convenience in opening, handling, and using for the consumers. Example Shampoo package, shaving cream package etc.
- Product Promotion – Beautiful packages attract the consumers.It is used as a promotional tool.
- Rising the standard of health – Packaging helps in preventing adulteration as the product is properly packed.
- Product Differentiation – Packaging creates product differentiation. For example, by looking at the package of a product, say, hair oil, one can make some guess about quality of the product contained in it.
Labelling means putting identification marks on the package. It provides information like name of the product, name of the manufacturer; weight, price etc.Label may vary from a simple tag attached to the product to complex graphics that are part of the package. Labels are useful in providing detailed information about the product, its contents, method of use etc.
Functions performed by label
- Describe the product and specify its contents – One of the most important functions of labels is to describe the product, its usage, manufacturing and expiry dates, price etc.
- Identification of the product or brand – The label helps the customers to identify the product or brand from the various types available.
- Helps in grading – With the help of label products can be graded in different categories. For example milma’s milk packets in different colours.
- Promote sales – Attractive and colorful labels excite customer and induce him to buy the product.
- Providing information required by law – Labelling also provides information required by law.Eg statutory warning on the packet of cigarettes.
Price refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the market to pay, competition and other direct and indirect factors. Price mix refers to important decisions related to fixing of price of a commodity. Price is the crucial element of marketing mix because customer is very sensitive to this element. Little variation in the price may shift your customer to competitor’s product.
Factors affecting price determination
The following factors must be taken into consideration while determining the price of the product:-
- Cost of the product – The price of the product is affected by its cost. The price must cover all production cost and fair return of profit.
- Extent of competition in the market – When a firm does not face any competition then it can enjoy complete freedom in fixing the price. If there is competition in the market, the price must be fixed by keeping in mind the price of competitors product.
- Customer demand – If the demand of the product is inelastic the marketer can charge higher price without much loss of the market demand. If the demand is elastic, a small change in the price changes the demand by big magnitude (extent).
- Government and legal regulation – In India the government controls the prices of certain products, such as edible oil, sugar, medicine etc, in the public interest. In such situation, the firm will have to follow the price policy of the government.
- Objective of the firm – What is the objective of firm is a very important factor which helps in deciding the price. For example, if the objective of company is profit maximization, then generally high price is fixed whereas the companies having the objective sales maximization prefer low price to increase the sales and capture a big share in the market.
- Marketing methods used – Price determination is also affected by the distribution system, quality of salesmen employed, the type of packaging etc.For example, if a company provides free home delivery of goods, it can fix a relatively higher price for its product.
Broadly there are two pricing strategies. They are:-
- Price skimming
- Penetration pricing
- Price skimming – Under this strategy a high introductory price is charged for an innovative product and later on the price is reduced when more companies enter the market with same type of product. For example Apple,Samsung etc when they introduce a new technology then a high price is charged for the product. When the same technology is used by other companies in their products also then the price is reduced. Generally innovators use price skimming strategy to get reward for their research and development.
- Penetrating pricing – This strategy means using lower initial price to capture a large market. These forces the customers to buy the product and company can capture a very big share in the market. Penetration pricing is attractive when price elasticity of demand is high and easy substitutes of that product are available.Reliace company followed penetration pricing strategy when it introduced mobile phone. Reliance offered mobile phone at so low price and it helps to capture big share of mobile phone market.
Place Mix/ Physical Distribution of Goods
Place mix refers to important decisions related to physical distribution of goods and services. If the product is not made available to the customers at the right place at the right time then customer would not be able to buy them .In case of physical distribution, there are two important decisions relating to this aspect:
- Regarding channels of distribution
- Regarding physical movement of goods.
1- Channels of distribution
Channels of distribution refer to the team of merchants, agents, and business institutions who help in the physical movement of goods from the place of production to the place of consumption. For example, tea is mainly produced in Assam but it is consumed all over the country. It is very difficult for the producer to distribute tea all over India. At the same time channels of distribution make shopping easy for consumer .Consumer can get wide variety of products by visiting one retail shop. Middlemen also help in bringing efficiency in distribution by providing facilities like transportation, warehousing etc.The common type of channels of distributions are, wholesaler and retailer.
Functions of Distribution Channels
Middlemen procure goods from various manufactures and then they do sorting.i.e repack them according to quality, size or price.
This function involves accumulation of goods into larger homogeneous stocks, which help in maintaining continuous flow of supply.
3- Variety / Assortment
Middlemen maintain variety of goods. They produce goods from various manufactures and assemble them at one place so that consumer can fulfill his requirement by visiting one place only.
Allocation involves breaking homogenous stock into smaller, marketable lots. For example, once cashew nuts are graded and large quantities are built, these are divided into convenient packs of say 1 kg, 500 gms and 250 gms, to sell them to different types of buyers.
Although promotion techniques are generally used by producers but middlemen also offer some sales promotional tools to attract the customers. For example discounts, contests etc.
6- Risk Taking
In the process of distribution of goods the merchant middlemen take title of the goods and thereby assume risks on account of price and demand fluctuations, spoilage, destruction, etc. Types of Channels
The major types of channels are as follows:
- Direct Channel (Zero Level)
- Indirect Channels
Direct Channel (Zero Level)
The most simple and the shortest mode of distribution is direct distribution, where in the goods are made directly available by the manufacturers to customers, without involving any intermediary. This is also called zero level channels. A straight and direct relationship is established between the manufacturer and the customer.
For example, when a manufacturer sells his goods through his own retail outlets (e.g., Mc Donald, Bata); Similarly, mail order selling, internet selling and selling through own sales force, (e.g., Eureka Forbes) are example of direct selling or zero level channel.
When a manufacturer employs one or more intermediary to move goods from the point of production to the point of consumption, the distribution network is called indirect. This may take any of the following forms:
1- Manufacturer-Retailer Consumer (One Level Channel): In this form of arrangement one intermediary i.e., retailers is used between the manufacturers and the customers.
For example, Maruti Udyog sells its cars and vans through company approved retailers. This type of distribution network enables the manufacturers to cover wide area of market while retaining control over the Channels.
2- Manufacturer-Wholesaler-Retailer -Consumer (Two Level Channel): This is the most commonly adopted distribution network for most consumer goods like soaps, oils, clothes, rice, sugar and pulses. Here the wholesaler and retailer function as connecting links between the manufacturer and consumer
3- Manufacturer-Agent-Wholesaler-Retailer-Consumer (Three Level Channel): In this case, manufactures use their own selling agents or brokers who connect them with wholesalers and then the retailers. Thus, one more level is added to the levels discussed in the proceeding arrangement. It is done particularly when the manufacturer carries a limited product line and has to cover a wide market. An agent in each major area is appointed, who in turn contact the wholesalers.
Factors Determining Choice of Channels
The choice of channels depends on various factors, which are discussed as follows: 1. Product Related Factors:
Following are the product related factors which help in deciding the channels of distribution:
- Value of product-If the unit value of the product is high, direct sales from company is preffered.If product is less costly, longer channels are preferred.
- Nature of Product- The customized product or product produced according to the instruction of customers required direct marketing .Standardized products could be sold by using various intermediaries.
- Perishable products– Direct selling is used for perishable products.
- Product complexity- Technically complex product requires expert advice and guidance so direct sale is preferred.
Company Related Factors:
The important company characteristics affecting the choice of channels of distribution include the financial strength of the company and the degree of control it wants to hold on other channel members.
Direct selling involves lot of funds to be invested in fixed assets say for starting own retail outlets or engaging large number of sales force. Thus, if the firm has plenty of funds it may go for direct distribution. If spare funds are not available, it may go for indirect channels.
b.) Degree of control
If the management want to have greater control on the channel members, short channels are used but if the management do not want more control over the middlemen, it can go in for longer channel or large number of intermediaries.
The choice of channel is also affected by the channel selected by competitors in the same industry. If the competitor’s have selected a particular channel, the other fiirm may 0also like to select the similar channel.
The choice of channel is also influenced by market related factors. These factors are:
- Nature of market- In case of industrial products, the number of buyers is small, short channels are used. But if the number of buyers is large, as in case of most convenience products like soft drink, toothpaste etc., longer channels involving large number of intermediaries are used.
- Size of the market- If the numbers of customers are large then more intermediaries are required and vice versa.
- Geographical concentration- When buyers are concentrated in a limited area the directing selling is preferred and vice versa.
- Size of order- if the size of order is small, as in case of most consumer products, large number of intermediaries may be used. But if the size of order is large, direct channels may be used.
- Environmental Factors- Other important factors affecting the choice of channels of distribution include environmental factor such as economic condition and legal constraints. In a depressed economy marketers use shorter channels to distribute their goods in an economical way.
Physical Distribution (Logistic Management) of Goods
It is an important responsibility of the marketers to make the product physically available at a place where the customers would like them to buy. The physical handling and movement of goods from place of production to the place of distribution is referred to as physical distribution, which is a very important element of marketing mix. Important activities involved in the physical distribution include transportation, warehousing, material handling, and inventory control.
Components of Physical Distribution
The main components of physical distribution are explained as follows:
1- Order Processing:
Order processing means the time and steps involved between taking order from customer and delivery of goods as per order. There is direct relation between the time taken in order processing and satisfaction of customers .Fast order processing gives more satisfaction to customers but this involves cost of maintaining sufficient inventory.
Transportation is the means of carrying goods and raw materials from the point of production to the point of sale .Transportation adds value to the goods by moving them to place where they are required, but it must be seen that the value added to product by transportation must be higher than the cost of transportation. There are various means of transpiration available
i.e. rail road, air, water, pipeline etc.These modes are evaluated and compare on the basis of speed, flexibility, cost, availability etc.
Whatever is produced may not be sold off immediately. Therefore every company needs to store the finished goods until they are sold in the market. The company must compare the cost involved in using warehouse and the benefits which the company gets and try to create a balance between both.
4- Inventory control
Inventory refers to maintenance of stock of goods. So goods can be supplied whenever demanded. But inventory also involves costs. These include cost of capital blocked in and risk of price fluctuation. The firm must compare the benefits of inventory and the cost involved and accordingly maintain the optimum level of inventory should be maintained.
Advertising is the most commonly used tool of promotion. Adverting is the paid form of non-personal presentation and promotion of idea, goods or services by an identified sponsor. Advertising provides information regarding benefits, price, availability etc of goods and services. Common modes of advertising are news papers, magazines, television and radio.
Features of adverting
- Paid Form: Advertising is a paid form of communication. That is, the sponsor has to bear a cost to communicate with customers.
- Impersonality: There is no direct face to face contact between customers and the advertiser. It is therefore, referred to as impersonal method of promotion.
- Identified Sponsor: Advertising is undertaken by some identified individual or company like Malayalamanorama, Asianet, Times of India etc.
Advantages of advertising
- Creates demand – Advertising helps to create demand by making people aware of new products and new uses of existing products.
- Provides economies of scale – Advertising creates demand for the company’s products, which facilitates large scale production. Large scale production leads to low cost of production per unit.
- Educates consumers and makes shopping easier – Advertising educates consumers by providing useful information about the product. Advertising makes shopping easier for them.
- Facilitates introduction of new products Advertising helps in introduction of new products by communicating the positive features of newly introduced products.
- Enhance customer satisfaction and confidence Advertising media informs the consumers about the utility and uses of the product. Consumers feel more comforts and it increases their confidence level.
- Improvement in the quality of the product – The manufacturers of advertised goods go on improving their product, so that their reputation may be maintained in the market.
- Availability of the product at fair price – Advertising helps to increase sales and thereby reduced cost of production. Due to decreased cost of production these commodities are available at comparatively cheaper price.
- Encouragement to press work – Regular advertisement helps the press in reducing cost of publication.
Limitations of Advertising
Despite many benefits drawn from advertising, it suffers from a severe criticism advanced by different segments of society.
1- Increased price of the product
Advertising increases the cost of the product as the expenses on it form the part of the total cost of the product. The increased prices are borne by the consumers.
2- Multiplication of needs
Advertising creates artificial demand for the product and induces people to buy those products which are not needed by them.
3- Harmful for the society
Sometimes advertisements are un-ethical. Most often, these carry indecent language and virtually nude photographs in order to attract the customers. This adversely affects the social values.
4- It leads to monopoly
Advertising sometimes leads to monopoly in a particular brand of a product. By investing large sums in advertising of his brand, a big producer eliminates small producers of the same product from the market and creates brand monopoly. This leads to exploitation of consumers.
5- Advertising may act against the freedom of press
Mass media earn huge income from advertisements. If the media are dependent on income from advertisements sponsored by a few large business firms, it may be difficult to broadcast information in public interest when it is unfavourable to those big business firms.
6- Small Businesses Have Restricted Access
Small businesses cannot properly advertise their products due to limited resources. The entire market for many goods and services is dictated by the large companies through advertisement. This makes it virtually impossible for small businesses to compete, so they eventually disappear from the market.
7- Advertising encourages unnecessary competition
There is a distinction between informative advertising and competitive advertising. Informative advertising is that which passes on the useful information about a product or service to the customers. Such advertising is desirable. On the other hand, the competitive advertising is primarily meant to shift demand from one brand to another brand. In this case the advertisement has not created any additional demand. Therefore, such advertising is undesirable
Objections to Advertising
Though advertising is one of the most frequently used medium of promotion of goods and services, it attracts lot of criticism. The opponents of advertising say that the expenditure on advertising is a social waste as it adds to the cost, multiplies the needs of people and undermines social values. The proponents, however, argue that advertising is very useful as it increases the reach, brings the per unit cost of production down and adds to the growth of the economy. It is therefore, important to examine the major criticisms against advertising and see the extent to which these are true.
1- Advertising increases cost
Advertising unnecessarily adds to the cost of product, which is ultimately passed on to the buyers in the form of high prices. But opponents argue that advertisement helps to increase the demand for the product as large number of potential buyers come to know about the availability of the products, its features etc. and are persuaded to buy it. The increased demand leads to higher production, which brings with it the economies of scale. As a result, the per unit cost of production comes down as the total cost is divided by larger number of units.
2- Confuses the Buyers
Another criticism against advertisement is that so many products are being advertised which makes similar claims that the buyer gets confused as to which one is true and which one should be relied upon. The supporters of advertisement, however, argue that we are all rational human beings who make our decisions for purchase of products on factors such as price, style, size, etc. Thus the buyers can clear their confusion by analysing the information provided on the advertisements and other sources before taking a decision to purchase a product.
3- Encourages Sale of Inferior Products
Advertising does not distinguish between superior and inferior products and persuade people to purchase even the inferior products. In fact superiority and inferiority depends on the quality, which is a relative concept. The desired level of quality will depend on the economic status and preferences of the target customers. Advertisements sell products of a given quality and the buyers will buy if it suits their requirements. No advertisement should however, make false claim about the quality of a product. If a firm makes a false claims it can be prosecuted for the same.
Personal selling / Salesmanship
Personal selling means selling personally. This involves face to face interaction between seller and buyer for the purpose of sale. Companies appoint sales persons to contact prospective buyers and make them aware about the product and persuade the customer to buy the product.
Features of personal selling
- Personal Interaction – In personal selling the buyers and sellers have face to face interaction.
- Two way communications – In personal selling the sellers give information about the product; at the same time the buyer get a chance to clarify his doubts. It is suitable for sale of complex products where buyer wants to interact with the manufacturer.
- Relationship – When the seller and buyer comes together this may improve relationship between customer and seller.
- Better response – When the seller is personally explaining the utilities of product to the customers then customer do pay some attention and listen to the information.
- Better convincing – Personal selling is most effective form of promotion because with this sales person can convince the buyer by demonstration the use of product and making changes in the product according to the need of customer.
Sales promotion refers to short term use of incentives or other sales promotional activities that stimulate the customer to buy the product. Sales promotion activities include offering free samples, cash discounts, sales contests, free gifts, dealer discount etc.
Sales promotion techniques / Methods / Tools
The business enterprise adopts different measures to promote sales .These measures are mentioned as under.
- Sampling – It means offering free sample of product to potential customers at the time of launch of a new product. This done to make customers try the product and learn about it. HUL’s Surf Excel samples.
- Rebate – It means offering product at special prices, to clear off excess inventory. Example an offer to sell Maruti Alto car at a discount of Rs.10,000, for a limited period.Rs.30,000 rebate to Electric vehicles. The rebate is the amount of the purchase price refunded by the seller to the buyer. It is available to specific customers and only for a limited period.
- Discount – It is a practice of offering products at a price less than the list price. Example Woodland’s offer of discount upto 30 % for shirts. It is provided at the time payment is made. It is available to all types of customers.
- Refund – It means refunding a part of price paid by customer on presenting some proof of purchase, eg, on return of empty foils or wrappers get a refund of Rs.5.
- Contests – some firms hold contests for consumers .Consumers who buy the firm’s product are given an opportunity to participate in the contest .Example Bournvitta Quiz contest, drawing competition etc.
- Lucky draw – When buying product a coupon is given which is to be deposited in a box after filling the name. After a particular period the winner is selected by lucky draw method.
- Quantity gift – It means offering extra quantity of the same product as gift along with the purchase of a product.Exaple “Buy two, get one free”. Gillette shaving cream’s offer 33% extra etc. In this case the same product will get the extra volume.
- Product combinations – It means offering another product as gift along with the purchase of a product .Example Buy a 32” LED TV and get a DVD player free or buy a TV of 25+ and Get a Vacuum Cleaner Free’
- Financing – It is technique of sales promotion in which easy finance schemes are offered. For example sellers of electronics goods commonly offer “Full finance @ 0%, 12 easy installments”.
- Usable benefits – Under this method, a discount voucher is given to the customer on purchase of a product entitling him a special benefit or discount. Example purchase goods worth Rs.50,000 and get a holiday package worth Rs10,000 free.
Publicity is a non-paid form of non-personal communication. It is just like advertisement except that advertisement is a paid form whereas publicity in non-paid form. For example, some events are covered and reported by media at free of cost.
Features of publicity
- Unpaid form of communication
- There is no identified sponsor ,when message is given to general public.
Public relations means maintaining public relations with the public.Public relations involve a variety of programmes designed to promote or protect a company’s image and its individual products in the eyes of the public. Their main task is to disseminate information and build goodwill about the business. Concrete steps are to be taken to monitor the attitude of the general public and generate positive publicity. They are especially useful when there is negative publicity about the company or its products. Public does not mean only by customers, but it includes shareholders, suppliers, intermediaries etc.The firms success and achievement depends upon the support of these parties.
Tools to improve public relations
The company can use the following tools to improve their relations with public:
- News-Sometimes companies get involved in such kind of activities or make such policies so that they get some positive coverage in news.
- Speeches-The speeches given by the leaders of corporate sectors influence various members of public specially banks, share holders etc.
- Press conference- Events refer to organizing press conferences, multimedia presentation etc.
- Annual Reports– Sometimes written materials such as Balance Sheet, annual reports, brochures etc.are circulated to various parties to improve and maintain public image of the company.
- Public service activities- Some business houses often associate themselves with various social service projects such as women welfare programmes,charity shows, planting trees on road side, running schools, hospitals etc.
Example for public relation: Reliance Industries Ltd published its annual result for the year 2019-20 on 30th April. All media reported this news very prominently.
Difference between Advertising and Personal selling
Impersonal form of communication
Personal form of communication
Cost per person reached is very low
Cost per person is quite high
Not flexible, the message can’t be adjusted to the needs
of the buyer
Lacks direct feedback
Direct and immediate feedback
Use mass media such as
Make use of salespersons.
Limited number of people
Time / Coverage
It can cover the market in a short time
It takes lot of time to cover the entire market
It is more useful in marketing to the ultimate consumers who are large in number
Useful in selling industrial products or to intermediaries such as dealers who are few in numbers.
Founder of Microsoft Corporation
Father of modern marketing