Unit-4-Lecture 15- Meaning & Elements of Marketing Mix, Characteristics

Introduction to Marketing Mix

Marketing is the process of identifying, anticipating, and satisfying customers' requirements

with the purpose to make profits. In this process marketing managers and marketing
representatives have to take various marketing decisions to make the operations profitable.
They have to decide what combination of marketing policies and procedures be adopted to
bring about desired behaviour of trade and consumers at minimum cost. They have to decide
how can advertising, personal selling, pricing, packaging, channels, warehousing, and the
other elements of marketing be manipulated and mixed to make marketing operations
profitable. More specifically, they have to decide a marketing mix - a decision making
method in relation with the product, price, promotion, and distribution.

The term Marketing Mix was introduced by Neil H. Borden in his article - "The Concept of
Marketing Mix". He learned about it in a research bulletin on the management of marketing
costs, written by his associate, Prof. James Culliton. in 1948. In this study of manufacturers'
marketing costs he described the business executive as a "decider," an "artist" - a "mixer of
ingredients," who sometimes follows a recipe prepared by others, sometimes prepares his
own recipe as he goes along, sometimes adapts a recipe to the ingredients immediately
available, and sometimes experiments with or invents ingredients no one else has tried.

Definition of Marketing Mix

According to Philip Kotler - "Marketing Mix is the combination of four elements, called the
4P's (product, Price, Promotion, and Place), that every company has the option of adding,
subtracting, or modifying in order to create a desired marketing strategy"

Elements of Marketing Mix

The components of the marketing mix consist of 4Ps Product, Price, Place, and Promotion. In
the business sector, the marketing managers plan a marketing strategy taking into
consideration all the 4Ps. However, nowadays, the marketing mix increasingly includes
several other Ps for vital development.

Product in Marketing Mix:

A product is a commodity, produced or built to satisfy the need of an individual or a group.

The product can be intangible or tangible as it can be in the form of services or goods. It is
important to do extensive research before developing a product as it has a fluctuating life
cycle, from the growth phase to the maturity phase to the sales decline phase.

A product has a certain life cycle that includes the growth phase, the maturity phase, and the
sales decline phase. It is important for marketers to reinvent their products to stimulate more
demand once it reaches the sales decline phase. It should create an impact in the mind of the
customers, which is exclusive and different from the competitor’s product. There is an old
saying stating for marketers, “what can I do to offer a better product to this group of people
than my competitors”. This strategy also helps the company to build brand value
Price in Marketing Mix:

Price is a very important component of the marketing mix definition. The price of the product
is basically the amount that a customer pays for to enjoy it. Price is the most critical element
of a marketing plan because it dictates a company’s survival and profit. Adjusting the price of
the product, even a little bit has a big impact on the entire marketing strategy as well as
greatly affecting the sales and demand of the product in the market. Things to keep on mind
while determining the cost of the product are, the competitor’s price, list price, customer
location, discount, terms of sale, etc.,

Place in Marketing Mix:

Placement or distribution is a very important part of the marketing mix strategy. We should
position and distribute our product in a place that is easily accessible to potential
buyers/customers.

Promotion in Marketing Mix:

It is a marketing communication process that helps the company to publicize the product and
its features to the public. It is the most expensive and essential components of the marketing
mix, that helps to grab the attention of the customers and influence them to buy the product.
Most of the marketers use promotion tactics to promote their product and reach out to the
public or the target audience. The promotion might include direct marketing, advertising,
personal branding, sales promotion, etc.

What is 7 P of Marketing:

The 7Ps model is a marketing model that modifies the 4Ps model. As Marketing mix 4P is
becoming an old trend, and nowadays, marketing business needs deep understanding of the
rise in new technology and concept. So, 3 more new P’s were added in the old 4Ps model to
give a deep understanding of the concept of the marketing mix.

People in Marketing Mix:

The company’s employees are important in marketing because they are the ones who deliver
the service to clients. It is important to hire and train the right people to deliver superior
service to the clients, whether they run a support desk, customer service, copywriters,
programmers…etc. It is very important to find people who genuinely believe in the products
or services that the particular business creates, as there is a huge chance of giving their best
performance. Adding to it, the organisation should accept the honest feedback from the
employees about the business and should input their own thoughts and passions which can
scale and grow the business.

Process in Marketing Mix:

We should always make sure that the business process is well structured and verified
regularly to avoid mistakes and minimize costs. To maximise the profit, Its important to
tighten up the enhancement process.

Physical Evidence in Marketing Mix:

In the service industries, there should be physical evidence that the service was delivered. A
concept of this is branding. For example, when you think of “fast food”, you think of KFC.
When you think of sports, the names Nike and Adidas come to mind.

Characteristics/Features/Nature of Marketing Mix:

1. Marketing mix is the crux of marketing process:

Marketing mix involves many crucial decisions relating to each element of the mix. The
impact of the mix will be the best when proper weightage is assigned to each element and
they are integrated so that the combined effect leads to the best results.

2. Marketing mix has to be reviewed constantly in order to meet the changing

requirements:The marketing manager has to constantly review the mix and conditions of the
market and make necessary changes in the marketing mix according to changes in the
conditions and complexity of the market.

3. Changes in external environment necessitate alterations in the mix:

Changes keep on taking place in the external environment. For many industries, the customer
is the most fluctuating variable of environment. Customers’ tastes and preferences change
very fast. Brand loyalty and purchasing power also change over a period. The marketing
manager has to carry out market analysis constantly to make necessary changes in the
marketing mix.

4. Changes taking place within the firm also necessitate changes in marketing mix:

Changes within the firm may take place due to technological changes, changes in the product
line or changes in the size and scale of operation. Such changes call for similar changes in the
marketing mix.

5. Applicable to business and non-business organization:

Marketing mix is applicable not only to business organizations but also to non-business
organizations, such as clubs and educational institutions. For instance, an educational
institution is expected to provide the right courses (product), charge the right fees (price),
promote the institution and the courses, and provide the courses at the right place.

6. Helps to achieve organizational goals:

An application of an appropriate marketing mix helps to achieve organizational goals such as

profits and market share.

7. Concentrates on customers:

A thorough understanding of the customer is common to all the four elements. The focus
point of marketing mix is the customer, and the marketing mix is expected to provide
maximum customer satisfaction.
Classification Of products
Meaning of Product

Product is one of the important elements of marketing mix. A marketer can satisfy consumer
needs and wants through product. A product consists of both good and service. Decisions on
all other elements of marketing mix depend on product. For example, price is set for the
product; promotional efforts are directed to sell the product; and distribution network is
prepared for the product. Product is in the center of marketing programme. Therefore,
product has a major role in determining overall success of marketing efforts. A marketer tries
to produce and sell such products that satisfy needs and wants of the target market. Other
words used for product are good, commodity, service, article, or object. In marketing
literature, product has comprehensive meaning.

Definitions: Philip Kotler: “Product is anything that can be offered to someone to satisfy a
need or a want.” William Stanton: “Product is complex of tangible and intangible attributes,
including packaging, colour, price, prestige, and services, that satisfy needs and wants of
people.” Alderson defines, “A product is a bundle of utilities consisting of various product
features and accompanying services.” Stanton defines, “A product is a set of tangible and
intangible attributes, including packaging, colour, price, manufacturer’s prestige, retailer’s
prestige, and manufacturer’s and retailer’s services, which the buyer may accept as offering
satisfaction or wants or needs.”
PRODUCT CLASSIFICATION:

Product can be classified as 1. Consumer and Industrial products. 2. Durable and Non-
durable products. 3. Convenience, Shopping and Specialty goods.4. Unsought goods

1. Consumer and Industrial products: Consumer products are those which are meant for
the consumption or final use of consumers or households. These are the products which are
used without further commercial processing. In other words, consumer goods are meant for
personal and non-business use. On the other hand, industrial goods are those which are used
by business buyers as inputs for further commercial processing. Thus, shampoo, biscuits,
watches, two-wheelers are consumer goods while, raw-materials, spare-parts, supplies and
equipment or machinery are industrial products.

This classification cannot be called as clear-cut because, a particular product may be

consumer or industrial depending on the use for which it is put. Thus, milk used for drinking
is a consumer product, while it is industrial if used in biscuit manufacturing or making milk-
powder. However, the buying motives, approaches and attitudes differ in case of these two
classes of products. In case of consumer products, the buyer is more impulsive than rational.
In case of consumer product, consumer gives more significance to outward product attributes
than in case of industrial goods. Therefore, mere the purpose of buying should not be the only
basis.

Industrial Goods:

Industrial Goods: Industrial goods classification is based on how industrial buyers retard
products and on how products are to be used. That is, the classification is not based on buying
habits or impulses but the use for which they are put. Accordingly, industrial products can be
classified into six categories as Installations, Accessory equipments, Raw materials,
Component parts and materials, supplies and services as given by Professor David W.
Cravens, Professor Gerald E. Hill and Professor Robert B. Woodruff.

Installations: These are expensive capital items that do not become part of the final product
but are expanded, depleted or worn-out during years of use. These include plants, buildings
and other custom-made standard major equipment. These are immovable once installed.

Accessory Equipments: These comprise of tools and equipments or instruments and

appliances that facilitate production of office activities such as lift-trucks, trolleys, drills,
spanners, exhaust-fans, jacks, pincers, hammers, pliers, saws, type-writers and so on. Like
installations, these are capital items that do not become part of the final product, but they are
usually inexpensive and short-lived than the installations. Mostly these are movable.

Raw Materials: These are the basic commodities such as logs, ores, sand, and sea products
such as fish, oysters, shrimps that are processed only as needed for safe, convenient and
economical transport handling to reach the next processing stage or the place of end-use. Raw
materials become part of final product losing original entity.
 Component parts and materials: These are the items that have already undergone
processing to meet buyer specifications. Component parts are ready or nearly ready items to
be assembled into a final product. The examples are car batteries, tyres, tubes, bulbs, small
motor castings and the like. On the other hand, component materials require further
processing. Thus, paper, cement, glues, fibre may be needed in assembly.

Supplies: Supplies include items of repairs, maintenance and operation. These are less
expensive items and are continually used up and these do not become part of the final
product. These supplies may be factory supplies. The examples of factory supplies are
greases, glues, belt-fasteners, paints, nails nuts and bolts, oils, cotton waste, and wash-room
supplies. On the other hand, the examples of office supplies are papers, pens, clips, pencils,
carbons, inks, refills, lubricating oils, tags, cleaners and the like.

2. Durable and non-durable products: Both the consumer and industrial products can be
further classified as durable and nondurable products. Durable products are those tangible
products that last longer or they do not get exhausted even after repeated use. For instance,
the chair on we sit, the cars we drive, the refrigerators we use, the utensils we have in kitchen
do not get exhausted overnight.

On the other hand, non-durable products are those which get exhausted with a single or a few
uses. For instance, food- items we eat, the soft-drinks we drink, the soaps, pastes, paper we
use are of this kind in this area. This is just an alternative classification as to the first or can
take a secondary classification if we like the first one as the primary classification.

3. Convenience, shopping and speciality products: It was Professor Melvin T. Copeland

of Harvard Business School who classified consumer goods as convenience, shopping and
speciality products based on the nature and extent of shopping efforts put in by the
consumers. “Convenience” goods are those products which are bought with the minimum of
efforts, at short notice and from convenient location.

These products have the features such as purchase at convenient location full knowledge of
product enjoy continuous and regular demand small lot purchases highly standardized keen
competition among producers and are perishable in nature. The examples are all those articles
sold by grocers a wide range from cigarettes to medicines like soaps, cosmetics, bakery
products, gasoline, staple hardware products, paper and so on.

Shopping” goods are those where consumers devote considerable time in making selection
of those before they buy. The consumers want to compare a quality, price and style in several
shops before they buy. The basic features of these products are they are durable, higher unit
price, comparison in selection, pre-planned purchase, existence of exclusive stores. The
examples of this kind are office and household furniture, automobiles, audio and audiovisual
sets, refrigerators, sewing machines, jewelleries, millinery products and the like.

“Speciality” goods are those which enjoy certain special features and special efforts are
made in their purchase. These products have unique characteristics and brand identification
calling for special efforts. The special features are full knowledge of products, bias on a
particular brand, limited demand, and high unit price. The examples of this type are
wristwatches, wall- clocks, transistors, radio-sets, cameras, two-in and three-in ones, cars,
shoes, goggles, cloth, ties, and musical door-bells and so on. This traditional classification of
products has its own limitations. First, this classification classifies the products into discrete
classes by placing all products into one of these classes which is not always possible. Thus, a
product can be classified as convenience, shopping and speciality product. For instance,
‘Coconut Crunchy’ biscuits may be classified as either convenience, or shopping or speciality
product depending on the merit of each situation and perception. Secondly, the classification
should take into account product characteristics in addition to the shopping efforts put in.

[Link] goods – the consumer does not know about the product or does not normally
think of buying.

(E.g.) life insurance, encyclopedia, etc.

- it requires advertising and personal selling support.

Services: Services are usually those made available by specialists in support of firm’s
operations. These services are provided by engineering consultants, maintenance contractors.
Services are intangibles and are expensive and are normally made available under service
contracts. Service as Product: A service is an intangible product involving a deed,
performance, or an effort that cannot be physically possessed. Dominant component is
intangible. Like primary and secondary sectors, service (tertiary) sector also plays an
important role for the economic development of a country. According to economists like
Colin Clark, Simon Kuznets etc., the development of a country depends on the performance
of the service sector. In a modern economy the share of primary sector towards national
income is gradually reducing, whereas; the shares of secondary and tertiary sectors are
improving day by day. In 1950-51, the contribution of service sector in national income was
34%, which rose up to 48.5% in 2000-01. Service sector mainly includes transports and
communications, banking and insurance, education, health etc.

Features of Services:

1. Intangibility: A physical product is visible and concrete. Services are intangible. The
service cannot be touched or viewed, so it is difficult for clients to tell in advance what they
will be getting. For example, banks promote the sale of credit cards by emphasizing the
conveniences and advantages derived from possessing a credit card.

2. Inseparability: Personal services cannot be separated from the individual. Services are
created and consumed simultaneously. The service is being produced at the same time that
the client is receiving it; for example, during an online search or a legal consultation. Dentist,
musicians, dancers, etc. create and offer services at the same time.

3. Heterogeneity (or variability): Services involve people, and people are all different. There
is a strong possibility that the same enquiry would be answered slightly differently by
different people (or even by the same person at different times). It is important to minimize
the differences in performance (through training, standard setting and quality assurance). The
quality of services offered by firms can never be standardized.
4. Perishability: Services have a high degree of perishability. Unused capacity cannot be
stored for future use. If services are not used today, it is lost forever. For example, spare seats
in an aeroplane cannot be transferred to the next flight. Similarly, empty rooms in five-star
hotels and credits not utilized are examples of services leading to economic losses. As
services are activities performed for simultaneous consumption, they perish unless consumed.

5. Changing demand: The demand for services has wide fluctuations and may be seasonal.
Demand for tourism is seasonal, other services such as demand for public transport, cricket
field and golf courses have fluctuations in demand.

6. Pricing of services: Quality of services cannot be standardized. The pricing of services

are usually determined on the basis of demand and competition. For example, room rents in
tourist spots fluctuate as per demand and season and many of the service providers give
offseason discounts.

Product Mix, Product Line &Product decision

Product Mix: A product mix is also referred to as a product assortment. It is the full range of
products offered by a firm. Firms will have sets of products in what is known as a product
line. Large firms would generally offer several product lines to the marketplace – such as
Coca-Cola with soft drinks, juices, water, sport drinks, and so on. Under each product line
they offer a variety of different products.

Philip Kotler: “A product mix is the set of all product lines and items that a particular seller
offers for the sale to buyers.”

William Stanton: “The product mix is the full list of all products offered for the sale by the
company.” Thus, product mix means total number of products items offered by the company.

Product mix dimensions:

i. Product Mix Length: It refers to the total number of items (in all the product lines) in
product mix. For example, product mix of Bajaj Company has more than 100 items in various
product lines, such as fans, bulbs and tubes, heaters, motorbikes, shooters, rich-show,
processing machines, and many other ranges.

ii. Product Mix Width or Breadth: It indicates the total number of product lines a
company carries. For example, two wheelers (including various models) constitute one of the
product lines of Bajaj Company.

iii. Product Mix Depth: It refers to a number of varieties in forms of sizes, colors, and
models offered within each product line. It can be said as the average number of product
items offered by the firm in each product line.

iv. Product Mix Consistency: It refers to degree to which different product lines are related
in one or other ways. It indicates how closely various product lines are related. The
consistency can be judged on the basis of production requirements, uses of products,
distribution channels, or some other ways. For example, product lines of Philips India Ltd.,
include radios, bulbs and tubes, different television sets, VCR, CD-DVD player, tape
recorders, etc., can have higher consistency. While Hindustan Machines and Tools produce
wrist watches as well as tractors, it is called inconsistent product mix.

Product-Line:

o Philip Kotler: “Product line is a group of products that are closely related because they
function in a similar way, are sold to same customer groups, are marketed through the same
type of outlets, or fall within given price range.” Thus, product line is the group of similar
products.

o The similarity may be seen in one or more ways. Product line consists of product items
belonging to same class. It is a group of products that are related in some way by being
alternatives to fulfilling the same customer need, by being marketed to the same target
markets or through the same distribution net-work or by being in a common price category.

o A product-line is a group of closely related products which are able to satisfy a class of
need, to be used together, to be sold to the same customer groups, to be moved through the
same distribution channels, or fall within a given price range.

o It refers to a group of products that are closely related either because they satisfy a class of
need or are used together, are sold to the same customers, are marketed through same type of
outlets or fall within the price range or that are considered a unit because of marketing,
technical or end-use considerations.

o In precise terms, a broad group of products which are designed essentially for similar uses
and possess reasonably similar physical characteristics constitute a product-line. Thus, baby
product-line of Ponds India stands for toiletries, vaporizers, nursery equipment’s and baby
clothes.

o Thus, TTK’s ladies product-line includes bras, panties, tops, nighties, napkins, kerchiefs,
sanitary napkins, hooks, zips, buttons, threads, needles and so on. Similarly, Zodiac India
cares for men for ready shirts, pants, ties, cuff-links, vests, briefs, kerchiefs, belts, wallets and
so on. Camlin India is known for stationery of any kind, for any age group and any purpose
or any purse. Product-line again is a dynamic concept because a given product-line may not
and cannot satisfy the consumer needs for longer.

o This warrants a modification or change in the existing product-line. Modification of

product-line implies contraction expansion, changing models and quality standards. Product-
line ‘contraction’ or simplification’ is the method by which a fat or a long product-line is
thinned out.

o Normally an unprofitable product is eliminated; even a less profitable product can be

eliminated if resources can be better utilized by switching over to other products. Product-line
‘expansion’ stands for adding new products to the existing list. The reasons may be the
exploitation of marketing opportunities.
o Even the more profitable products may be taken. Such an addition may speak of width or
depth. Thus, a company may go in for new products from textiles to food products, fertilizers,
cosmetics or pharmaceuticals. It may take up in cosmetics say, new varieties of shampoos,
soaps, after shave lotions, hair-oils, face creams and powders.

o Changing the ‘model’ or the ‘style’ of the existing products is another wise device of
product modification. New models or styles help in meeting the ever-changing needs of
consumers. Thus, each firm brings about improved model of his earlier product, be it a
calculator or a dry cell or an automobile or a man-made fibre cloth. Changing the ‘quality’
standards of the existing products is another way of product-line modification.

o Quality needs of consumers differ widely and, hence, it becomes essential to bring about
quality variations. Quality variations are possible in two ways as upward and downward. This
is achieved through ‘trading up’ and ‘trading down’ approaches. ‘Trading up’ is the act of
adding a high priced prestigious product to the existing product-line with a view to increase
the sales of currently available low priced product. We come across the case of the use of
labels ‘Export Quality’ in case of consumer durables and non-durables. It is a strategy most
matching to the requirements of a manufacturer who is well-known for low quality product or
products so far.

o Thus, makers of Sumeet mixers have come out with Sumeet Sp 16 vis-a-vis normal
Sumeet grinder-mixer. Here, consumers are persuaded to go in for high priced product from
low priced one. The firms may be willing to exchange old low-priced products in exchange
for new high priced one with additional payment.

o This is also done by Godrej in case of electronic type-writers, Hawkins and Prestige in
case of pressure cookers and makers of television sets sewing machines and so on. On the
other hand, ‘trading down’ is an approach where a manufacturer of high-quality products
encourages his customers to go in for low quality products, naturally making them available
at lower prices than before.

o The obvious reason of ‘trading down’ is to widen the market for the product. This strategy
is a success in case of a manufacturer who is known for high quality products already. Thus,
sound gadgets of Sony, Hitachi, San Sui, Philips have become a much lower priced as
compared to the past. Thus, Videocon sound system is available for say Rs. 7,000/- as against
the original earlier prices of Rs. 10,000/- .

o Earlier, the spare parts were metallic but now replaced by plastic and silicon. Take
another example of 100 cc two wheelers in place of 150 cc or 200 cc of earlier models. The
prices have come down because of lower quality standard pattern adopted.

Product Mix Decision

Product mix decision refers to the decisions regarding adding a new or eliminating any
existing product from the product mix, adding a new product line, lengthening any existing
line, or bringing new variants of a brand to expand the business and to increase the
profitability.

 Product Line Decision - Product line managers takes product line decisions
considering the sales and profit of each items in the line and comparing their product
 line with the competitors' product lines in the same markets. Marketing managers
have to decide the optimal length of the product line by adding new items or dropping
existing items from the line.
 Line Stretching Decision - Line stretching means lengthening a product line beyond
its current range. An organisation can stretch its product line downward, upward, or
both way.

1. Downward Stretching means adding low-end items in the product line,

for example in Indian car market, watching the success of Maruti-Suzuki in small car
segment, Toyota and Honda also entered the segment.
2. Upward Stretching means adding high-end items in the product line,
for example Maruti-Suzuki initially entered small car segment, but later entered
higher end segment.
3. Two-way Stretching means stretching the line in both directions if an organisation is
in the middle range of the market.

Line Filling Decision - It means adding more items within the present range of the product
line. Line filling can be done to reach for incremental profits, or to utilise excess capacity

Unit 4-Lecture 18-Addition or deletion of products

 Product line Addition or Deletion: A firm may add or delete existing ones or do
both in the existing product lines. The firm may also upgrade its technology and use
upgrades its technology or may decide to stretch product line downwards a simpler
technology. Thus, in case of Bajaj Electricals, when it decided to launch the state-of-
the-art washing machine in collaboration with a in multi-national it was wrong up in
technology.
 This is called as stretching the product line upwards. If meant that Bajaj Electricals
not only moved up technology but is the customer group that it has attracted.
 The customer was no more a low income-group housewife but high-income group
house-wife what is more important is that this upgraded washing machine was much
more than just washing, cleaning, rinsing and drying.
 It was a status symbol and the old image of a housewife raised to progressive and
Liberated house-wife.
 However, when the same company decided to round manual washing machine at a
price almost down by 60 percent of the high-end model prices, it was stranding its
product line down words.
 That means, it reached out low-level income consumer who may not be highly
educated. However, within her segment of low-income group. She may be previewed
as an “opinion leader”.
 She buys sit for not only washing her family’s clothes but also to demonstrate her as
being superior to her neighbours, friends and peer group.
 Adding or stretching product line upwards or down wards is due to structural
changes in market place the most significant being customer life styles and
demographic characteristics. Such as rising incomes and lower proportion of
consumer income being spent on food and other items Development in media leading
to increased awareness may also motivate a firm to stretch its product line.
 It is clearly demonstrated by the facts that TV channels are multiplying and going
more regional. Internet advertising including mobile advertising all have increased the
awareness of new products and ideas apart from services.
  That is why; more and more companies are developing their own brands. Further
competitive pressures also drive a firm to expand its product line to include hi-teach
products.
 Thus, cut throat competition and imitation forced the companies such as Bajaj
Electricals Blue Star and Volters and good many others to vacate from low- tech
products to - high-tech products. Further a firm’s market position brand image
distribution net work and sales force and the like encourage the company to stretch
product lines upwards.

Unit 4-Lecture 18-Addition or deletion of products

 Product line Addition or Deletion: A firm may add or delete existing ones or do
both in the existing product lines. The firm may also upgrade its technology and use
upgrades its technology or may decide to stretch product line downwards a simpler
technology. Thus, in case of Bajaj Electricals, when it decided to launch the state-of-
the-art washing machine in collaboration with a in multi-national it was wrong up in
technology.
 This is called as stretching the product line upwards. If meant that Bajaj Electricals
not only moved up technology but is the customer group that it has attracted.
 The customer was no more a low income-group housewife but high-income group
house-wife what is more important is that this upgraded washing machine was much
more than just washing, cleaning, rinsing and drying.
 It was a status symbol and the old image of a housewife raised to progressive and
Liberated house-wife.
 However, when the same company decided to round manual washing machine at a
price almost down by 60 percent of the high-end model prices, it was stranding its
product line down words.
 That means, it reached out low-level income consumer who may not be highly
educated. However, within her segment of low-income group. She may be previewed
as an “opinion leader”.
 She buys sit for not only washing her family’s clothes but also to demonstrate her as
being superior to her neighbours, friends and peer group.
 Adding or stretching product line upwards or down wards is due to structural
changes in market place the most significant being customer life styles and
demographic characteristics. Such as rising incomes and lower proportion of
consumer income being spent on food and other items Development in media leading
to increased awareness may also motivate a firm to stretch its product line.
 It is clearly demonstrated by the facts that TV channels are multiplying and going
more regional. Internet advertising including mobile advertising all have increased the
awareness of new products and ideas apart from services.
 That is why; more and more companies are developing their own brands. Further
competitive pressures also drive a firm to expand its product line to include hi-teach
products.
 Thus, cut throat competition and imitation forced the companies such as Bajaj
Electricals Blue Star and Volters and good many others to vacate from low- tech
products to - high-tech products. Further a firm’s market position brand image
distribution net work and sales force and the like encourage the company to stretch
product lines upwards.
PRODUCT LIFE-CYCLE

The product life-cycle or PLC model is one of the most frequently encountered concepts in
marketing management.

The product life-cycle is a conceptual representation. It is a product aging process. Just as

human-beings have a typical life-cycle going from childhood, adolescence, youth and old-
age, so also products follow a similar route.

Product life-cycle is simply graphic portrayal of the sales history of a product from the time it
is introduced to the time when it is withdrawn.

According to Professor Philip Kotler, it is “an attempt to recognize distinct stages in the sales
history of the product”. Product life cycle is the historical study of (sales of) the product. It
includes when it was introduced; when it was getting rapid acceptance; when it was on the
peak of its position; when it started falling from the peak; and when it disappeared. Product
passes through certain stages during its life span

1. Products move through the cycle of Introduction, Growth, Maturity and Decline at
different speeds.

2. Both sales volumes and unit profits rise correspondingly till the growth stage. However, in
the period of maturity stage, sales volume rises but profits fall.

3. The successful product management needs dynamic functional approach to meet the
unique situations of sales and profitability

I. INTRODUCTION:
Whenever a new product is introduced, it has only a proved demand and not the effective
demand. That is why; sales are low and creeping very slowly. It may be the case with a
product like instant coffee, frozen orange juice or a powdered coffee cream.

This first stage of product life-cycle is characterized by:

1. Low and slow sales: The product sales are the lowest and move up very slowly at snail’s
pace. The basic reasons for this are

(a) Delays in expansion of production capacity.

(b) Delays in making available the product to consumers due to lack of retail outlets which
are acceptable and adequate.

(c) Consumer resistance to change over from the established consumption behavioural
patterns.

2. Highest promotional expenses:

During this period of introduction or the development, the promotional expenses bear the
highest proportion of sales. It is so because; the sales are of smaller volume on one side and
high level promotion efforts to create demand on the other. Demand creation is not an easy
task as it is a matter of breaking the barriers and breaking new ice which is done by:

(a) Informing potential and present consumers of the new and unknown product,

(b) Inducing a trial of the product, and

(c) Screening distribution net-work.

3. Highest product prices: The prices charged at the beginning are the highest possible
because of:

(a) Lower output and sales absorbing fixed costs.

(b) Technological problems might not have been mastered fully.

(c) Higher margin to support higher doses of promotional expenses a must for growth.

(d) Very few competitors or no competitors.

(e) Sales to higher income groups in a limited area for cultivating the effective demand
II. Growth: Once the market has accepted the product, sales begin to rise. The prices may
remain high to recover some of the development costs. With high sales and prices, profits rise
sharply. This encourages competition leading to possible product improvement.

Although the contribution to sales is sizeable from the high income group buyers, middle
income group buyers do not contribute towards sales. The basic characteristics of this stage
of product life-cycle are:

1. Sales rise faster: The sales start climbing up at faster rate because of:

(a) Killing the consumer resistance to the product,

(b) The distribution network retail outlets is built to the needs and

(c) Production facilities are streamlined to meet the fast moving sales. Thus, sales increase at
an increasing rate over the period of time.

2. Higher promotional expenses: During the period of growth, the promotional strategy
changes. The problem is no longer one of persuading the market to buy the product, but
rather to make it to buy a particular brand. The question is one of creating and maintaining
and extending selective demand. The advertising moves towards brand identification,
awareness to have the effects of a brand image. Special offers, concessions, allowance to
stockiest and dealers are given to push a particular brand or brand group.

3. Product improvements: With the high sales and prices, profits rise sharply and because of
this, there is greater incentive for the companies to enter the market. Competitors have the
advantage of entering the market because; research and development have already been
completed by innovating firm at its costs. Once the originator has paved the pattern of
market, competitors can become stronger by coming out with modified products.

Along with product modification, they may reduce prices too. This makes the originators to
further improve the product and bring down the price to nab competition.

III. Maturity: Eventually, market becomes saturated because, the house-hold demand is
satisfied and distribution channels are full. Sales level off and over capacity in production
becomes apparent. Competition intensifies as each manufacturer wants to ensure that he can
maintain production at a level which gives him low unit costs. The greater the cost of
production and the initial investment, the more important it is to maintain high output so as to
cover fixed costs at lower rates of revenue. Lower prices are essential to stave off the
competition. Though production costs are reduced, the margin of distributors may not taper
off. The efforts are made to extend the maturity stage. That is why; this period is much longer
than the growth stage.

1. Sales increase at decreasing rate: As most of the customers are knowing the uses of the
product, the sales grow at failing rates giving an overall picture of “off level’ situation. It
shows that there is apparent gap in production level and sales level.

2. Development of new markets: The first possibility is the development of new markets for
existing products by isolating areas where the product is not used and modifying it to suit to
those particular segment requirements.
3. Development of wider range of products: This is another viable strategy. Today, we see
practically an explosion in the flavours of ice-cream available in the market. Today, we get

IV. Decline: In this terminal stage, sooner or later actual sales begin to fall under the impact
of new product competition and changing consumer tastes and preferences. Prices and, hence,
profits decline. It is stages where the market for the product has been superseded by a
technological or style change which replaces the existing demand altogether. That is, the old
products are rendered obsolete. For instance, the development of tough water based paint
‘oil-bond’ has made significant inroads into the traditional market for oil-based varnish
enamel paints. That is, alternatively, interest in the product may fade, leading to a rapid
reduction in sales.

Lecture 20-Product Planning

Product planning

Ø In order to maximise his sales revenue and profits, a business firm must
continuously adjust and adapt its products and services to the changing
requirements of customers. From time-to- time, it may have to design and
develop new products.

Ø Product planning is the process of searching ideas for new products,

screening them systematically, converting them into tangible products and
introducing the new product in the market. It also involves the formation of
product policies and strategies.

Ø Product planning includes improvements in existing products as well as

deletion of unprofitable or marginal products. It also encompasses product
design and engineering which is also called product development. Product
planning comprises all activities starting with the conception of product idea
and ending up with full scale introduction of the product in the market.

Ø It is a complex process requiring effective coordination between different

departments of the firm. It is intimately related with technical operations of
the organisation, particularly with engineering, research and development
departments.

Ø Any product has two broad objectives—immediate objectives and ultimate

objectives. Immediate objectives include satisfaction of immediate needs of
consumers, increasing sales, utilising idle plant capacity, etc. Permanent or
ultimate objectives consist of reduction in production costs, creation of brand
loyalty, monopolising the market, etc.

Significance &Importance of Project Planning:

Ø Product planning and development is a vital function due to several

reasons. First, every product has a limited life span and needs improvement
or replacement after some time. Secondly, needs, fashions and preferences
of consumers undergo changes requiring adjustments in products.
Ø Thirdly, new technology creates opportunities for the design and
development of better products. Product planning and development facilitate
the profitability and growth of business. Development of new products
enables a business to face competitive pressures and to diversity risks.
Product is the most important constituent of marketing mix.

Ø Finding and meeting the needs of customers is the key element in a

successful marketing strategy. New product development has become all the
more important in the modern world characterised by technological change
and market dynamics.

Ø New product development brings opportunities but also involves heavy

commitment of finance, technology and even emotional attachment. New
product decisions are necessary as well as costly. Many new products fail
causing ruin to business firms.

What is Product Diversification?

Product diversification is the practice of expanding the original market for a
product. This strategy is used to increase the sales associated with an
existing product line, which is especially useful for a business that has been
experiencing stagnant or declining sales.

Product Diversification Techniques

There are a number of ways to engage in product diversification, including
the following:

Repackaging. The manner in which a product is presented can be altered to

make it available to a different audience. For example, a household cleaning
product could be repackaged and sold as a cleaning agent for automobiles.

Renaming. An existing product could be renamed, perhaps along with

somewhat different packaging, and sold in a different country. The intent is to
remain true to the original purpose of the product, but to adjust it to match
the local culture.

Resizing. A product could be repackaged into a different size or standard

selling quantity. For example, a product normally sold as a single unit could
be packaged into a quantity of ten and then sold through a warehouse store.

Repricing. The price of a product can be adjusted, along with other

improvements, to reposition it for sale through a new distribution channel.
For example, a watch movement could be inserted into a platinum casing and
sold through jewelry stores, rather than its original positioning as a sport
watch.
Brand extensions. It may be possible to extend an existing brand at the low
or high end, or fill in a hole somewhere in the middle of the product line. For
example, a car company decides to build a sports car that is positioned at the
top end of its product line.

Product extensions. It may be possible to sell several versions of the same

product, perhaps by adding additional features or by offering the product in
different colors. For example, a smart phone may be offered in several colors.

Product diversification can be expensive, especially when launching it broadly

in a new market. Consequently it can make sense to launch in several test
markets to determine customer acceptance before rolling out a new concept
more broadly.

Unit-4-Lecture 22-Product Positioning

Product Positioning
Product positioning is the creation of a clear
image in the minds of consumers within the
targeted segment about the nature of the
product and the benefits to be gained from
purchasing the product. Positioning is the
compliment of segmentation.
A product or service may be positioned on the
basis of an attitude or benefit, use or application,
user, class, price, or level of quality.
The company can position a product using a
positioning statement that answers these
important questions:
1. For who is the product designed?
2. What kind of product is it?
3. What is the single most important benefit it
offers?
[Link] is its most important competitor?
5. How is your product different from that
competitor?
6. What is the significant customer benefit of that
difference?
Importance of product positioning
1. To Make Entire Organisation Market-
Oriented:
Product positioning is a part of the broader
marketing philosophy. It concerns with
identifying superior aspects of product and
matching them with consumers more effectively
than competitions. This philosophy makes the
entire organisation market oriented.
2. To Cope with Market Changes:
Once the product is positioned successfully
doesn’t mean the task of manager is over. He
has to constantly watch the market. As per new
developments in the marketplace, new
competitive advantages should be identified,
discovered or developed to suit the changing
expectations of the market. It makes the
manager active, alert, and dynamic.

3. To Meet Expectation of Buyers:

Generally, the advantages to be communicated
are decided on the basis of expectations of the
target buyers. So, product positioning can help
realize consumers’ expectations.
4. To Promote Consumer Goodwill and
Loyalty:
Systematic product positioning reinforces the
company’s name, its product and brand. It
popularizes the brand. The company can create
goodwill and can win customer loyalty.
5. To Design Promotional Strategy:
More meaningful promotional programme can be
designed. Based on what advantages are to be
communicated, appropriate means are selected
to promote the product.
6. To Win Attention and Interest of
Consumers:
Product positioning signifies those advantages
that are significant to consumers. When such
benefits are promoted through suitable means of
advertising, it definitely catches the interest and
attention of consumers.
7. To Attract Different Types of Consumers:
Consumers differ in terms of their expectations
from the product. Some want durability; some
want unique features; some want novelty; some
wants safety; some want low price; and so on. A
company, by promoting different types of
competitive advantages, can attract different
types of buyers.
8. To Face Competition:
This is the fundamental use of product
positioning. Company can respond strongly to the
competitors. It can improve its competitive
strength.

Product Positioning Strategies

The tried and tested Product Positioning
Strategies are listed below. As an entrepreneur
and a business student, you must well familiar
with all of them.
[Link] Strategies
[Link] Competition Strategies
[Link] benefits strategies
[Link] Attributes strategies
[Link] Categories
[Link] Occasions Approach
[Link] Approach
[Link] Approach
The manufactures to design and choose the
Product Positioning Strategies according to the
manufactured products and the unique features
of that product. Choosing the right strategy for
the product is crucial for brand success.
 [Link] Strategies
These Product Positioning Strategies require a
unique or superior product attribute in regard to
a competing product. Positioning a Product
against the Competitors product requires a claim
of superiority. A very good example to
understand this concept is of Avis Rental Cars.
The superiority claim was, “We are number two.
We try harder”
2. Reducing Competition Strategies
This concept of Product Positioning Strategies
can help to differentiate a product in the
dominant market of an already well-established
brand.
3. Product Benefits Strategies
In these Product Positioning Strategies, the
company focuses on defining and communicating
the product benefit, unique features that the
product offers to the targeted customers. In this
strategy, the companies emphasize on the
various product benefits. The product features
include durability, availability, economy or
reliability can be illustrated in this type of
product positioning.
4. Product Attributes Strategies
Positioning a product based upon a specific
attribute can also be compelling to the targeted
audience.
5. Product Categories
Positioning your product by differentiating it from
other products based upon a category is a very
effective way to resonate with the key message
in the targeted audience. A product can be
positioned along with two or more characteristics
at the same time.

6. Usage Occasions Approach

This concept is used when marketers positioned
there product based upon the usage situation of
the product by the tarred audience. These types
of Product Positioning Strategies are done
intentionally to expand the market for a
particular brand. Introducing new and different
uses of the same product will automatically
expand the horizons for the product, increase the
market share and will lead to more sales.
7. Pricing Approach
Using the price and quality approach to position a
product can ensure easy sales of a product. In
this concept, the marketers play with human
perception and the thinking of associating quality
with price. The customer often perceives that
there is direct relation in quality and price i.e. the
higher the price the greater the quality of the
product. The Marketers use this Price – quality
approach to positioning the products and can
easily charge higher margins of profits.
 Users Approach
Another interesting form of a product positioning
strategy is to focus on the specific characteristics
of the users of the product. In this case, the
makers of a specific brand use a personality or a
model to effectively influencing the product
image in the minds of the consumer. This type of
positioning resulted in an increased market
share.
NEW PRODUCT DEVELOPMENT

Definition
In general, the Product Development can be defined as "creating, innovating,
or developing entirely a new product , or presenting an existing product with
enhanced utility, improved features, more appealing design, better quality
and reliability to satisfy the requirements of its end-users."

Meaning

Product means a good, service, idea or object created as a result of a

process and offered to serve a need or satisfy a want. Development means
the act or process of growing, progressing, or developing.

Product Development is a process of improving the existing product or to

introduce a new product in the market. It is also referred as New Product
Development. The functions of product development are as follows :-

1. Creation of an entirely new product or upgrading an existing product,

2. Innovation of a new or an existing product to deliver better and
enhanced services,
3. Enhancing the utility and improving the features of an existing product,
4. Continuous improvement of a product to satisfy rapidly changing
customer needs and wants.

Product Development Process

Product development process is a crucial process for the success and survival
of any business. Today, businesses are operating in a highly dynamic and
competitive environment. Business organisations have to continuously
update their products to conform to current trends. The product development
process starts from idea generation and ends with product development and
commercialisation. Following are the steps in the process of product
development.

1. Idea Generation - The first step of product development is Idea

Generation that is identification of new products required to be
developed considering consumer needs and demands. Idea generation
is done through research of market sources like consumer liking,
disliking, and competitor policies. Various methods are available for
idea generation like - Brain Storming, Delphi Method, or Focus Group.
2. Idea Screening - The second step in the process of product
development is Idea Screening that is selecting the best idea among
the ideas generated at the first step. As the resources are limited, so
all the ideas are not converted to products. Most promising idea is kept
for the next stage.
3. Concept Development - At this step the selected idea is moved into
development process. For the selected idea different product concepts
are developed. Out of several product concepts the most suitable
concept is selected and introduced to a focus group of customers to
understand their reaction. For example - in auto expos different
concept cars are presented, these models are not the actual product,
they are just to describe the concept say electric, hybrid, sport, fuel
efficient, environment friendly, etc.
4. Market Strategy Development - At this step the market strategies
are developed to evaluate market size, product demand, growth
potential, and profit estimation for initial years. Further it includes
launch of product, selection of distribution channel, budgetary
requirements, etc.
5. Business Analysis - At this step business analysis for the new product
is done. Business analysis includes - estimation of sales, frequency of
purchases, nature of business, production and distribution related costs
and expenses, and estimation of profit.
6. Product Development - At this step the concept moves to production
of finalised product. Decisions are taken from operational point of view
whether the product is technically and commercially feasible to
produce. Here the research and development department develop a
physical product.
7. Test Marketing - Now the product is ready to be launched in market
with brand name, packaging, and pricing. Initially the product is
launched in a test market. Before full scale launching the product is
exposed to a carefully chosen sample of the population, called test
market. If the product is found acceptable in test market the product is
ready to be launched in target market.
8. Commercialization
9. - Here the product is launched across target market with a proper
market strategy and plan. This is called commercialisation phase of
product development.

Unit-4-Lecture24-Product Development
Strategies
Product development strategies

Some companies may focus on adapting their

current products while others may mostly create
innovations, but both types of product
development require a clear strategy to
implement. Here are some useful product
development strategies for introducing a product
and remaining competitive within your market:

Change ideas
Modify an existing product
Increase product value
Offer a trial
Specialize and customize
Create package deals
Create new products
Find new markets
Modify an existing product

Creating a new version of an existing product

with slight changes can provide your market with
the motivation to purchase an upgrade.
Modifying one of your existing products and
focusing on the updates in your marketing
influences customers to try the newer version of
the product. This strategy focuses on
determining which features consumers would like
to see improved and making those changes.

Increase product value

Many companies engage customers by including

additional value with the purchase of a product.
You can increase value by including a larger
quantity of products, adding customer support or
offering premium features. New customers may
be drawn to your product because of the added
benefits, while existing customers may purchase
your products again to receive a better deal.

Offer a trial

Offering a free or less expensive sample version

of your product can convince customers to try
your product who might not have otherwise
purchased the full version. This method relies on
the quality of the product by assuming that many
of the customers who experience the free trial
will purchase the full version. Offering a trial can
show customers how they can benefit from the
rest of your products.

Specialize and customize

Many products can be specialized to target a

specific customer group or customized to create
a unique and personal gift. Allowing customers to
personalize your product to fit their needs and
lifestyle can encourage them to choose that
product over a competitor who only offers a
generic version.

Create package deals

You can encourage customers to purchase more

of your product by creating package deals. This
strategy exposes customers to a variety of your
products through sample packs or assortments
that could solve different problems for the
customer. Package deals can also introduce
customers to a product they may not have
otherwise purchased and encourage them to buy
it in the future.

Create new products

Another way to develop a product line is to
create a new product that relates to your market.
When creating new products, be mindful of what
customers are looking for without discouraging
them from buying your other products. Any new
products should supplement what your existing
product does for the customer instead of
replacing the original, encouraging customers to
buy multiple products from your business.

Change ideas

One strategy for developing a product can be to

change your product idea. If a market is not
responding to innovation, the company may
consider devoting their resources to researching
what that market wants. Not all ideas will result
in a successful product, so a willingness to
change ideas when needed can be an effective
strategy.

Find new markets

Many products can be successfully sold in

multiple markets. One product development
strategy is to consider marketing an existing
product to a different market or demographic.
This could include targeting businesses instead of
individual consumers, marketing toward a
different age group or expanding your product
geographically.
Unit-4 -Lecture 25-Branding

Branding

There are millions of products and services all over the world, each claims to
be the best among their category. But, every product is not equally popular.
Consumer doesn't remember every product, only few products are
remembered by their name, logo, or slogan. Such products generate desired
emotions in the mind of consumer. It is branding that makes product popular
and known in the market; branding is not an activity that can be done
overnight, it might takes months and even years to create a loyal and
reputed brand.

Branding gives personality to a product; packaging and labelling put a face

on the product. Effective packaging and labelling work as selling tools that
help marketer sell the product.

According to American Marketing Association - Brand is "A name, term,

design, symbol, or any other feature that identifies one seller’s good or
service as distinct from those of other sellers. The legal term for brand is
trademark. A brand may identify one item, a family of items, or all items of
that seller. If used for the firm as a whole, the preferred term is trade name."

According to Philip Kotler- "Brand is a name, term, sign, symbol, design, or

a combination of them, intended to identify the goods or services of one
seller or group of sellers and to differentiate them from those of competitors"

Branding is “a seller’s promise to deliver a specific set of features, benefits

and services consistent to the buyers.”

Meaning of Branding

Branding is a process of creating a unique name and image for a product in

the mind of consumer, mainly through advertising campaigns. A brand is a
name, term, symbol, design or combination of these elements, used to
identify a product, a family of products, or all products of an organisation.
Branding is an important component of product planning process and an
important and powerful tool for marketing and selling products.

Definition of Branding:

“Brand is a name, term, sign, symbol or design, or a combination of these,

that is intended to identify the goods and services of one business or group of
businesses and to differentiate them from those of competitors”. Branding is
a combination of tangible and intangible attributes symbolised in a
trademark, which, if properly managed, creates influence and generates
value. Brands are a means of differentiating a company’s products and
services from those of its competitors. There is plenty of evidence to prove
that customers will pay a substantial price premium for a good brand and
remain loyal to that brand. It is important, therefore, to understand what
brands are and why they are important.

Importance of Branding:

(i) It helps in product identification and gives ‘distinctiveness’ to a product.

(ii) Indirectly it denotes the quality or standard of a product.

(iii) It eliminates imitation of the product.

(iv) It ensures legal rights of the product.

(v) It helps in advertising and packaging activities.

(vi) It helps to create and sustain brand loyalty to a particular product.

(vii) It helps in price differentiation of products.

(viii) It helps the manufacturer for identifying the product.

(ix) It improves the effectiveness of product advertising and promotion.

Product identity can be created easily which would help easy ‘Repeat Sales’.

(x) It helps to increase and control the share of market. A brand has distinct
image and character that may make it more acceptable than a virtually
identical competitor.

(xi) An accepted brand makes the introduction of new products easier and
thereby helps in expansion of product mix.

Elements of Branding
Brand includes various elements like - brand names, trade names, brand
marks, trade marks, and trade characters. The combination of these
elements form a firm's corporate symbol or name.

• Brand Name: It is also called Product Brand. It can be a word, a group of

words, letters, or numbers to represent a product or service. For example -
Pepsi, iPhone 5, and etc.

• Trade Name: It is also called Corporate Brand. It identifies and promotes a

company or a division of a particular corporation. For example - Dell, Nike,
Google, and etc.

• Brand Mark: It is a unique symbol, colouring, lettering, or other design

element. It is visually recognisable, not necessary to be pronounced. For
example - Apple's apple, or Coca-cola's cursive typeface.

• Trade Mark: It is a word, name, symbol, or combination of these elements.

Trade mark is legally protected by government. For example - NBC colourful
peacock, or McDonald's golden arches. No other organisation can use these
symbols.

• Trade Characters: Animal, people, animated characters, objects, and the

like that are used to advertise a product or service, that come to be
associated with that product or service. For example - Keebler Elves for
Keebler cookies

Branding Strategies

There are various branding strategies on which marketing organisations rely

to meet sales and marketing objectives. Some of these strategies are as
following:

• Brand Extension: According to this strategy, an existing brand name is

used to promote a new or an improved product in an organisation's product
line. Marketing organisations uses this strategy to minimise the cost of
launching a new product and the risk of failure of new product. There is risk
of brand diluting if a product line is over extended.

• Brand Licensing: According to this strategy, some organisations allow

other organisations to use their brand name, trade name, or trade character.
Such authorisation is a legal licensing agreement for which the licensing
organisation receives royalty in return for the authorisation. Organisations
follow this strategy to increase revenue sources, enhance organisation
image, and sell more of their core products.
• Mixed Branding: This strategy is used by some manufacturers and
retailers to sell products. A manufacturer of a national brand can make a
product for sale under another company's brand. Like this a business can
maintain brand loyalty through its national brand and increase its product
mix through private brands. It can increase its profits by selling private
brands without affecting the reputation and sales of its national brand.

• Co-Branding: According to this strategy one or more brands are combined

in the manufacture of a product or in the delivery of a service to capitalise on
other companies' products and services to reach new customers and increase
sales for both companies' brands.

Functions of Branding:

Branding is a powerful instrument of promotion which performs the

following functions:

(i) Distinctiveness:

A brand name creates a distinctive impression among the customers. For

instance, different brands of soap such ‘Cinthol’, ‘O.K.’, ‘Lux’, Tears’, ‘Vigil’,
etc. create different impressions upon the users, though the article is the
same, i.e., soap. Thus, a branded product enjoys distinct or separate identity.

(ii) Publicity:

A brand name enables its holder to advertise his product without any
difficulty. Once a brand name becomes popular, people remember it for long.

(iii) Protection of Goods:

Generally, the branded products are packed in suitable containers or

wrappers which provide protection to the goods against heat and moisture
and facilitate convenient handling. The customers derive many other benefits
from the branded products. They are assured of the quality of the branded
products.

(iv) Consumer Protection:

The prices of branded products are fixed by the manufacturers and are
printed on the packages. This protects the interest of the consumers because
the retailers cannot charge more than the printed prices. The prices of
branded goods remain fixed at different places and over a considerable
period of time. They are not changed so frequently since it involves great
inconvenience to the firm and a considerable cost in advertising the new
price.

(v) Wide Market:

Branded products are quite popular and have wide market. The wholesalers
and retailers readily handle the branded products which are advertised.

(vi) Customer Loyalty:

Branding ensures better quality at competitive prices. Branded products are

available in all parts of the country at uniform prices. This tends to create
brand loyalty on the part of customers. They ask for the goods by their brand
name such as Taj Mahal (tea leaves), Nescafe (Coffee), Tata (Iodised Salt),
Natraj (Pencils), etc.

Unit-3-Lecture 27-Packaging & Labelling

Labelling is the process of assigning a label to the product to make it more
recognizable and identifiable by adding products information and the
manufacturer. Where, a prodcut label may be any tag, symbol, a small piece
of paper, wrapper, or means of recognition directly attached to the product.

A label consists of valuable verbal information about the products such as

product’s manufactured date, producer name, address, ingredients used in
products, product’s benefits, product’s expiry date, how & when to use the
products, and other necessary information customers seek to know. As such
the important information is attached to the product by labelling – it makes
customers feel blessed while identifying and making a purchase decision on
what they want to buy.

Brand Label

Brand label is the level that is used in the packaging of the products. Brand
label is a brand in itself and labels too. It is when a company uses its brand
name in the packaging of the products.

The brand label consists of brand name, logo, trademark, and it does not
consist of any other information. For example, the logo of Honda.

Grade Label

Grade label is when the quality of the prodcuts is shown in grades such as
numbers or words. The grade label of the products is determined by company
production standards and legal requirements. The product’s quality grade
can be in terms of A, B, C, D, or 1,2,3,4, or good, better, best, etc. For
example, grade label for Lipton tea.

Informative Label

The informative label means that provides various information related to the
prodcuts. It describes various aspects of the prodcuts. It provides information
on aspects like – who made it? where it was made? when it was made? what
ingredients are used? how to use it? when to use? and so on. Since an
informative label describes the products, it is also called a descriptive label.
For example,

Elements of Labelling

To be a good prodcut label, the labelling needs to have at least six essential
elements. They are:

Brand Name. While labelling the product the brand name is vital. The brand
name is what makes your offerings different than others. The brand name
may include logo, trademark, special character, symbol, or any brand
messages however make sure the brand name should be readable and
memorable.

Product Information. Product information includes all the significant

information that enables a prodcut identifiable. The product name,
ingredients used in the product, packaging, description, manufactured date,
expiry date, usage instructions, size, weight, etc. As such labeling enables it
easy to know by outside what product is inside.

Manufacturer Information. A good product label also includes proper

information about the product manufacturers. The label should include the
company or manufacturer name, address, contact details, country, zip code,
and other information that enables customers to make contact if the
company becomes the default.

Legal Information. From country to country the legal requirements for the
product label may be different. Thus it is necessary to study the concerned
country’s product label guidelines before attaching anything to any labels.

Language. While labeling the languages used must be readable

and recognizable. If the language used in the product label is
ununderstandable by the customers it becomes meaningless. Though the
languages vary from country to country and areas too the languages should
be used by considering the target market languages.

UPC/Barcode. UPC – universal product code/barcode is now also an

important part of labelling products. This makes it easy to identify the
product’s prices, manufactured dates, and other product essential
information and makes payment billing easy just by scanning. If the product
is selling in the store barcode is necessary.

Quality Certificates. If the product you are selling has certificates such as
No GMO, No Toxic elements, 100% Natural, and any quality certification
marks, it should be included in the label.

Functions of Labelling
The significant functions of product label can be mentioned as below:

Product Identification. The primary function of labelling is to make

products more identifiable. It enables customers to clearly know what
particular product they are buying by rightly adding product information. As
such customers do not confuse between substitute products.

Grading. Labelling helps to categorize different products in different grades.

Simply, the product can be graded as A grade, B grade, and C, or D by one
could stand against the other products in quality and customers can also
know what level of quality products they are buying.

Consumer Protection. Labelling helps customers to get informed about the

accurate information of the products before making a purchasing decision. A
good product label protects customers from any deception or fraud from the
sellers. If the seller attaches anything other than the manufacturer’s label the
customer can file against him if he had been involved in the deception
activities.

Legality Fulfillments. An unforgettable function of labelling is that it makes

firms free from legal obligations. Product labelling is compulsory in every
nation. Here, the company may include legal information such as product
quality grade, quality certifications, allergy information, statutory warning
(e.g. smoking is injurious to health), etc.

Enhance Marketing Programs. Product labelling also enhances marketing

programs of the firm like branding and packaging. As an important element
of marketing, it makes more identifiable the product in the market and
promotes different sales promotional tools by easing customers’
understanding of products. An effective product label may attract more
potential customers and makes more sales for the firm.
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Unit-4-Lecture 26-Packaging

Packaging Meaning

Packaging means the wrapping or bottling of products to make them safe

from damages during transportation and storage. It keeps a product safe and
marketable and helps in identifying, describing, and promoting the product.

“Packing is the preparation of product or commodity for proper storage

and/or transportation. It may entail blocking, bracing, cushioning, marking,
sealing, strapping, weatherproofing, wrapping, etc.” –

The packaging is an important factor in the product mix. It has played a

major role in the success and failure of the product. It is very important for
some products to have proper packing but when products are packed
properly and are attractive then the consumers are inclined towards buying
them. The packaging is also a factor through which consumers judge the
quality sometimes. Some common packaging methods for a product can be
wood, plastic, metal, glass, paper, polyester etc. Following are different levels
of packaging which a product can have and they are as under-

Primary Packaging :

Primary packaging refers to the materials that make direct physical contact
with your product. This level of packaging is often called the retail or
consumer packaging of an item. Primary packaging serves two important
purposes. The first is to provide ample protection for your product, whether
that means keeping out moisture with barrier protection or cushioning
against impact. The second purpose of primary packaging is usually to inform
the customer and provide details about that product’s uses and features. This
second purpose often allows us to classify product labels as primary
packagings, such as the nutrition facts label often attached to food
containers.

There are many examples of primary packaging you can explore, but two of
the most common would have to be canning for beverages and pill blister
packs. Both of these packaging items represent primary packaging as they
are the direct materials containing the product. Pill blisters and cans are
often put into other boxes or cartons to create bundles of products, which
leads us to the next level of packaging below.

Secondary packaging

It is another level of protection that is commonly used for protection,

bundling, and marketing purposes. The secondary packaging of a product
often combines multiple items together, such as the box that holds multiple
cans of soda together in one convenient pack. The soda cans would be your
primary packaging and the box that keeps them together is considered the
secondary level of packaging.

Secondary packaging is visually enticing to help attract customers to your

product. This level of packaging will typically be printed with high-quality
images, logos, and other branding material. The secondary packaging is what
your customers see first when shopping in-store, so it can make a huge
difference in your sales numbers. The more attractive your secondary
packaging, the more likely a customer is to buy your product. When a
company decides to rebrand its packaging, it’s often the secondary
packaging that gets the most attention.

Tertiary packaging:

It is different from both primary and secondary packaging because it’s not
usually seen by the end-user. There is no need for visual appeal with tertiary
packaging because its main goal is to provide protection during shipping and
storage, although, some companies choose to use minimal marketing at this
level. Tertiary packaging also provides a convenient way to move inventory
quickly with easy handling.

Tertiary packaging could be anything from a large box that combines smaller
containers holding your products to a full pallet setup with corner board and
stretch wrap keeping multiple products bundled together. This level of
packaging should be optimized to combine products as tightly as possible
and to provide all the protection the products will need during travel.
Shipping and storage environments can present harsh conditions, so tertiary
packaging is where you beef up your protection to make sure products make
it to their final destination without a scratch.

Now that you have a full understanding of the three levels of packaging, you
should be able to identify which materials you currently use are
representative of each level. All three levels of packaging play an important
role in protecting and presenting your products. Each one is equally
important in your packaging strategy, so be sure you have the right materials
today by browsing our online inventory of thousands of packaging products.
From boxes to poly bags, we’ve got everything you need for your packaging
operations, plus fast delivery to get your order there in no time.

Essentials of good packaging

 1. Attractive: the design, color, shape and size of the package should be
attractive to arouse customer interest in the product. They should be
visible on the store shelves. Innovative packages attract customers
2. Convenient: the package should be convenient for the customer to
carry, open, use and store. The size and shape should be appropriate
to the needs of customers. It should be suitable for product assortment
3. Economic: the cost of packaging should not be high. Over packaging
should be avoided. The nature of product should be properly
considered for packaging. Bulk packaging should be used for industrial
products
4. Reusable: the package should be reusable or it should have multiple
uses. Customers value increases by such package
5. Environment friendly: packaging material should not pollute the
environment. Recyclable material should be preferred.
6. Communicative: packaging should provide information required by
law and desired by customers

Package functions

i) Product Identification:

Packaging serves as an identification of the product. A product is packed in

special sized, coloured and shaped container for keeping its difference from
the products of competitors. For example, the yellow and black coloured pack
of KODAK ROLL tells itself of its producer.

(ii) Product Protection:

The main function of packaging is to provide protection to the product from

dirt, insects, dampness and breakage. For example, the products like biscuit,
jam, chips, etc., need to be protected from environmental contact. That is
why they are tightly packed.

iii) Convenience

Packaging provides convenience in the carriage of the product from one

place to another, in stocking, and in consuming. For example, the new pet
bottles of COKE make the carriage and stocking easier. Similarly, the pack of
FROOTI provides convenience in its consumption.

(iv) Product Promotion:

Packaging simplifies the work of sales promotion. Packing material in the
house reminds the consumers constantly about the product. In this way, the
packaging performs the role of a passive salesman. Consequently, it
increases the sales.

Importance 0f Packaging

First impressions are very important, and your packaging is often a

consumer’s first introduction to the product. As such, product packaging is a
factor that manufacturers should never overlook. The importance of product
packaging is multi-faceted and can go a long way in securing a good first
impression and lasting brand loyalty.

Protects the product

At its most base level, product packaging serves to protect the product
inside. Packaging must keep the product safe during shipment between the
manufacturing facility and the retailer and must prevent damage while the
product sits on the shelf. Therefore, product packaging must be sturdy and
reliable. Many companies package their products with seals and locks that
prevent tampering and further ensure the safety and integrity of the product.
Consumers expect their products to function exactly as intended—secure,
dependable product packaging is the best way to ensure just that.

Displays and promotes the product

Another functional aspect of product packaging is how it promotes and

displays the product within. Many products, particularly food products,
include a description of ingredients and nutritional information on the
packaging. Other product packaging may display instructions explaining how
to set up and use the product. Displaying important information regarding
the product helps manage consumer expectations and promotes customer
satisfaction. The better the buyer understands what they are purchasing, the
more likely they are to be happy with said purchase. Still, other product
packaging forgoes wordy instructions and simply lets the product speak for
itself. Utilizing window box packaging or clear plastic boxes, the customer
can properly view the product in real-time. Many prefer this over-relying on
drawn diagrams and written explanations. Being able to properly view the
product for themselves can increase customer satisfaction and the likelihood
of purchase.

Attracts buyers

When considering the importance of product packaging, it’s crucial to

consider the wants and needs of the consumer. The main goal of creating any
product, after all, is to attract customers and encourage them to buy your
product. Because first impressions are so important to the buying process,
well-designed product packaging can go a long way in putting your product
into the hands of buyers. Choosing a style and colors that will appeal to
consumers and encourage them to pick up your product is very important, as
is choosing high-quality packaging materials. The product packaging is a
reflection of the product inside and the brand as a whole. When designing
product packaging, therefore, many brands conduct extensive research into
the wants and needs of consumers to ensure their packaging is attractive and
compelling.

Differentiates the product from competitors

When walking through the aisles of a store, it quickly becomes clear that
there is no shortage of new and interesting products on the market. Many
retailers often group similar products on shelves, so the need to separate
your products from the competition is highly important. Well-made, eye-
catching product packaging is a great way to do just that. While the size and
shape of the packaging may be similar to the competition, the design should
be different. The colors, fonts, and style you choose for your packaging can
easily help set your product apart from other companies. Innovative designs
such as clear plastic boxes will catch the consumer’s eye and help put your
product a cut above the rest

Pricing

Meaning of Pricing:

Pricing is a process of fixing the value that a manufacturer will receive in the
exchange of services and goods. The pricing method is exercised to adjust
the cost of the producer’s offerings suitable to both the manufacturer and the
customer. The pricing depends on the company’s average prices, and the
buyer’s perceived value of an item, as compared to the perceived value of a
competitor’s product.

Every businessperson starts a business with a motive and intention of

earning profits. This ambition can be acquired by the pricing method of a
firm. While fixing the cost of a product and services the following point should
be considered:

 The identity of the goods and services

 The cost of similar goods and services in the market
 The target audience for whom the goods and services are produces
 The total cost of production (raw material, labour cost, machinery cost,
transit, inventory cost etc).

Objectives of Pricing:
 Survival- The objective of pricing for any company is to fix a price that
is reasonable for the consumers and also for the producer to survive in
the market. Every company is in danger of getting ruled out from the
market because of rigorous competition, change in customer’s
preferences and taste. Therefore, while determining the cost of a
product all the variables and fixed cost should be taken into
 consideration. Once the survival phase is over the company can strive
for extra profits.
 Expansion of current profits-Most of the company tries to enlarge
their profit margin by evaluating the demand and supply of services
and goods in the market. So the pricing is fixed according to the
product’s demand and the substitute for that product. If the demand is
high, the price will also be high.
 Ruling the market- Firms impose a low figure for the goods and
services to get hold of large market size. The technique helps to
increase the sale by increasing the demand and leading to low
production cost.
 A the market for an innovative idea- Here, the company charge a
high price for their product and services that are highly innovative and
use cutting-edge technology. The price is high because of the high
production cost. Mobile phones, electronic gadgets are a few examples.

What is Pricing Method?

The pricing method is a technique that a company applies to evaluate the

cost of its products. This process is the most challenging challenge
encountered by a company, as the price should match the current market
structure and also compliment the expenses of a company and gain profits.
Also, it has to take the competitor’s product pricing into consideration so,
choosing the correct pricing method is essential.

Factors Influencing Pricing policy

An enormous number of factors affect pricing decisions. A marketing

manager should identify and study the relevant factors affecting the pricing.
Some factors are internal to the organization and, hence, controllable while
other factors are external or environmental and are uncontrollable.

Factors are also classified in terms of competition-related factors, market-

related factors, product-related factors, and so forth. However, we will
consider internal and external factors affecting pricing decisions. Due to
these factors, price is set high or low, fixed or variable, and equal or
discriminative. Figure 2 shows a list of internal and external factors. Let us
analyze some of the main factors influencing pricing decisions.

(A) Internal Factors:

Internal factors are internal to the organization and, hence, are controllable.
These factors play a vital role in pricing decisions. They are also known as
organizational factors. The manager, who is responsible to set price and
formulae pricing policies and strategies, is required to know adequately about
these factors.

1. Top Level Management:

Top-level management has full authority over the issues related to pricing.
The marketing manager’s role is administrative. The philosophy of top-level
management is reflected in forms of pricing also. How does top management
perceive the price?

How far is pricing considered as a tool for earning profits, and what is the
importance of price for overall performance? In short, overall management
philosophy and practice have a direct impact on pricing decisions. The price
of the product may be high or low; may be fixed or variable, or maybe equal
or discriminative depends on top-level management.

2. Elements of Marketing Mix:

Price is one of the important elements of the marketing mix. Therefore, it

must be integrated into other elements (promotion, product, and distribution)
of the marketing mix. So, pricing decisions must be linked with these
elements so as to consider the effect of price on promotion, product and
distribution, and the effect of these three elements on price.

For example, a high-quality product should be sold at a high price. When a

company spends heavily on advertising, sales promotion, personal selling,
and publicity, the selling costs will go up, and consequently, the price of the
product will be high. In the same way, high distribution costs are also
reflected in form of the high selling prices.

3. Degree of Product Differentiation:

Product differentiation is an important guideline in pricing decisions. Product

differentiation can be defined as the degree to which a company’s product is
perceived different as against the products offered by the close competitors,
or to what extent the product is superior to that of competitors in terms of
competitive advantages. The theory is, the higher the product differentiation,
the more will be freedom to set the price, and the higher the price will be.

4. Costs:

Costs and profits are two dominant factors having a direct impact on selling
price. Here, costs include product development costs, production costs, and
marketing costs. It is very simple that costs and price have a direct positive
correlation. However, production and marketing costs are more important in
determining the price.

5. Objectives of Company:

The company’s objectives affect the price of the product. Price is set in
accordance with general and marketing objectives. Pricing policies must the
company’s objectives. There are many objectives, and the price is set to
achieve them.

6. Stages of Product Life Cycle:

Each stage of the product life cycle needs different marketing strategies,
including pricing strategies. Pricing depends upon the stage in which the
company’s product is passing through. Price is kept high or low, allowances
or discounts are allowed or not, etc., depending on the stage of the product
life cycle.

7. Product Quality:

Quality affects price level. Mostly, a high-quality-product is sold at a high

price and vice versa. Customers are also ready to pay a high price for a
quality product.

8. Brand Image and Reputation in the Market:

Price doesn’t include only costs and profits. Brand image and reputation of
the company are also added to the value of the product. Generally, a
company with a reputed and established brand charges a high price for its
products.

9. Category of Product:

Over and above costs, profits, brand image, objectives and other variables,
the product category must be considered. Product may be imitative, luxury,
novel, perishable, fashionable, consumable, durable, etc. Similarly, product
may be reflective of status, position, and prestige. Buyers pay price not only
for the basic contents but also for psychological and social implications.

10. Market Share:

Market share is the desired proportion of sales a company wants to achieve

from the total sales in an industry. Market share may be absolute or relative.
Relative market share can be calculated with reference to close competitors.
If a company is not satisfied with the current market share, the price may be
reduced, discounts may be offered, or a credit facility may be provided to
attract more buyers.

(B) External Factors:

External factors are also known as environmental or uncontrollable factors.

Compared to internal factors, they are more powerful.

Pricing decisions should be taken after analyzing the following

external factors:

1. Demand for the Product:

Demand is the single most important factor affecting the price of products
and pricing policies. Demand creation or demand management is the prime
task of marketing management. So, price is set at a level at which there is
the desired impact on the product demand. A company must set a price
according to the purchase capacity of its buyers.
Here, there is a reciprocal effect between demand and price, i.e., price
affects demand and demand affects price level. However, demand is more
powerful than price. So, the marketer takes decisions as per demand. Price is
kept high when demand is high, and the price is kept low when the demand
for the product is low. Price is constantly adjusted to create and/or maintain
the expected level of demand.

2. Competition:

A marketer has to work in a competitive situation. To face competitors,

defeat them, or prevent their entry by effective marketing strategies is one of
the basic objectives organization. Therefore, pricing decision is taken
accordingly.

A marketer formulates pricing policies and strategies to respond to

competitors, or, sometimes, to misguide competitors. When all the marketing
decisions are taken with reference to competition, how can a price be an
exception?

Sometimes, a company follows a strong competitor’s pricing policies

assuming that the leader is right. Price level, allowances, discount, credit
facility, and other related decisions are largely imitated.

3. Price of Raw Materials and other Inputs:

The price of raw materials and other inputs affect pricing decisions. Change
in price of needed inputs has a direct positive effect on the price of the
finished product. For example, if the price of raw materials increases, the
company has to raise its selling price to offset increased costs.

4. Buyers Behaviour:

It is essential to consider buyer behavior while taking a pricing decision.

Marketers should analyze consumer behavior to set effective pricing policies.
Consumer behavior includes the study of social, cultural, personal, and
economic factors related to consumers. The key characteristics of consumers
provide a clue to set an appropriate price for the product.

5. Government Rules and Restrictions:

A company cannot set its pricing policies against rules and regulations
prescribed by the governments. Governments have formulated at least 30
Acts to protect the interest of customers. Out of them, certain Acts are
directly related to pricing aspects. Marketing manager must set pricing within
limit of the legal framework to avoid unnecessary interference from the
outside. Adequate knowledge of these legal provisions is considered to be
very important for the manager.

6. Ethical Consideration or Codes of Conduct:

\Ethics play a vital role in price determination. Ethics may be said as moral
values or ethical codes that govern managerial actions. If a company wants
to fulfill its social obligations and when it believes to work within limits of the
ethics prescribed, it always charges a reasonable price for its products. Moral
values restrict managerial behavior.

7. Seasonal Effect:

Certain products have seasonal demand. In peak season, demand is high;

while in the slack season, demand reduces considerably. To balance the
demand or to minimize the seasonal-demand fluctuations, the company
changes its price level and pricing policies. For example, during a peak
season, prices may be kept high and vice versa. Discount, credit sales and
price allowances are important issues related to seasonal factors.

8. Economic Condition:

This is an important factor affecting pricing decisions. Inflationary or

deflationary condition, depression, recovery or prosperity condition influences
the demand to a great extent. The overall health of the economy has a
tremendous impact on the price level and degree of variation in the price of
the product. For example, price is kept high during inflationary conditions. A
manager should keep in mind the macro picture of the economy while setting
a price for the product.

Unit 4: Lecture 29 - Method of pricing

Selection of Pricing Methods
After selection of the pricing strategy or
strategies to accomplish the pricing objectives, a
company decides about a pricing method. A
pricing method is a systematic procedure for
setting the prices on a regular basis. The pricing
method structures the calculation of actual price
of a product based on considerations
of demand, costs, and competition

1. Cost-based Pricing:
Cost-based pricing refers to a pricing method in
which some percentage of desired profit margins
is added to the cost of the product to obtain the
final price. In other words, cost-based pricing can
be defined as a pricing method in which a certain
percentage of the total cost of production is
added to the cost of the product to determine its
selling price. Cost-based pricing can be of two
types, namely, cost-plus pricing and markup
pricing.
Cost based pricing
i. Cost-plus Pricing:
Refers to the simplest method of determining the
price of a product. In cost-plus pricing method, a
fixed percentage, also called mark-up
percentage, of the total cost (as a profit) is added
to the total cost to set the price. For example,
XYZ organization bears the total cost of Rs. 100
per unit for producing a product. It adds Rs. 50
per unit to the price of product as’ profit. In such
a case, the final price of a product of the
organization would be Rs. 150.
ii) Markup Pricing:
Refers to a pricing method in which the fixed
amount or the percentage of the cost of the
product is added to the product’s price to get the
selling price of the product. Markup pricing is
more common in retailing in which a retailer sells
the product to earn profit. For example, if a
retailer has taken a product from the wholesaler
for Rs. 100, then he/she might add up markup of
Rs. 20 to gain profit.
2. Demand-based Pricing:
Demand-based pricing refers to a pricing method
in which the price of a product is finalized
according to its demand. If the demand for a
product is more, an organization prefers to set
high prices for products to gain profit; whereas, if
the demand of a product is less, the low prices
are charged to attract the customers.
The success of demand-based pricing depends
on the ability of marketers to analyze the
demand. This type of pricing can be seen in the
hospitality and travel industries. For instance,
airlines during the period of low demand charge
less rates as compared to the period of high
demand. Demand-based pricing helps the
organization to earn more profit if the customers
accept the product at the price more than its
cost.
3. Competition-based Pricing:
Competition-based pricing refers to a method in
which an organization considers the prices of
competitors’ products to set the prices of its own
products. The organization may charge higher,
lower, or equal prices as compared to the prices
of its competitors. The aviation industry is the
best example of competition-based pricing where
airlines charge the same or fewer prices for the
same routes as charged by their competitors. In
addition, the introductory prices charged by
publishing organizations for textbooks are
determined according to the competitors’ prices.
Other Pricing Methods:
In addition to the pricing methods, there
are other methods that are discussed as
follows:
i. Value Pricing:
Implies a method in which an organization tries
to win loyal customers by charging low prices for
their high-quality products. The organization aims
to become a low-cost producer without sacrificing
quality. It can deliver high-quality products at low
prices by improving its research and
development process. Value pricing is also called
value-optimized pricing.
ii. Target Return Pricing:
Helps in achieving the required rate of return on
investment done for a product. In other words,
the price of a product is fixed on the basis of
expected profit.
iii. Going Rate Pricing:
Implies a method in which an organization sets
the price of a product according to the prevailing
price trends in the market. Thus, the pricing
strategy adopted by the organization can be the
same or similar to other organizations. However,
in this type of pricing, the prices set by the
market leaders are followed by all the
organizations in the industry.
iv. Transfer Pricing:
Involves selling of goods and services within the
departments of the organization. It is done to
manage the profit and loss ratios of different
departments within the organization. One
department of an organization can sell its
products to other departments at low prices.
Sometimes, transfer pricing is used to show
higher profits in the organization by showing fake
sales of products within departments.
Need for Channels of Distribution

i) Searching out of buyers and sellers.

ii) Matching goods to the requirements of the market.

iii) Offering products in the form of assortments or packages of items usable

and acceptable by users.

iv) Persuading and influencing the prospective buyers to favor a certain

product and maker.

v) Implementing pricing strategies in such a manner that would be

acceptable to buyers and ensure effectively distribution.

vi) Looking after all physical distribution functions.

vii) Participating actively in creation and establishment of market for new

product.

viii) Offering pre – and after – sale services to customers.

ix) Transferring of new technology to the users along with supply of products
and playing role of change agents.
x) Feedback information, marketing intelligence for suppliers.

xi) Offering credit to retailers and consumers.

xii) Risk bearing with reference to stock holding / transport.

Channel management decision

Types of marketing channels

Types of marketing channels;

1. Manufacturer – Consumer – Channel (Direct Sale):

- sales through advertising and direct methods.

- sales through traveling sales force.

- sale through retail shops of the manufacturer.

2. Manufacturer – Retailer – Consumer:

- directly supply to large retailers (Hypermarkets, Supermarkets, etc).

- wholesaler is by-passed.

- suitable for perishable products.

- manufacturer performs the function of a wholesaler – Storage and

transportation.

3. Manufacturer – Wholesaler – Retailer – Consumers:

- narrow product line.

- wholesalers are specialized and can provide strong promotional support.

- products are durable.
4. Manufacturer – Agent – Wholesaler – Retailer- Consumer:
- producer uses the service of an agent middlemen such as a sole selling
agent, for initial dispersion of goods.

- agricultural Marketing.
5. Manufacturer – Wholesaler – Consumer:

- Institutional Buyers.

1. Brokers:
 “Broker is an agent who does not have direct physical possession of goods
in which he deals but he represents either the buyer or the seller in
negotiating purchases or sales for his principals.”

- they may organize as individuals, partnership, and act as clients,

producers, dealers, manufacturers, etc.

- they experts in grades, qualities, trade terms, and contract terms.

2. Agents:

“ Agent is a person who may buy or sell on their own account at their own
risk and who do not take any title to goods.”

- they are important in agricultural markets and it is used by manufacturers

to maintain resale prices of their goods.

- selling agents sell the entire output of their goods have full authority to
finalize prices, terms and conditions of sale.

- all commission agents work for a fee or commission (E.g.) 3% to 5% on

sales or purchase.

Manufacturer’s agents help in three circumstances –

i) For a small manufacturer with a few products and having no sales force.

ii) For entering into a new market to be fully developed.

iii) For the sale of a new line of product which the present sales force is
unable to manage or new market is not within their territory.

3. Dealers – in primary and commodity markets, we have different merchant

dealers and they are backbones of our markets.

- dealers act as principals, buying and selling commodities on own account

at own risk.

Wholesalers:

“Wholesalers are individuals or business firms who will sell products to be

used primarily for resale or for industrial use.”

“The wholesaler is a bulk purchaser with the object of resale to retailers or

other traders after breaking down his ‘Bulk’ in smaller quantities.”
Importance of promotion

- It attracts more customers to the product. The incentive like price off,
premium, etc, offered by manufacturers attracts people to the product.

- It encourages middlemen to buy and store more: offer incentives more to

people to go shops where product are available. If sufficient quantity is not
stocked customers may shift to some other brands.

- It encourages the sales force by offering incentives to salesmen. It will

influence salesmen to participate in the campaigns.

- It boosts sales in the short and long term.

- It reinforces the brand image with the customers.

An integrated promotion or marketing communication strategy is -

1. Product:
§It is one-factor determining the form of promotion and effectively shown on
TV and mass selling goods easily promoted through radio and television
advertising.

2. The Buyer:

§Marketers should know about needs and desires, attitudes and values,
expectations of customers if they want to provide realistic solutions to
buyer's problems.

3. The Company:

§Firm’s image must be closely associated with promotional strategy so that

goodwill is exploited.
§It emphasizes more on characters, reputation and responsibility of firm.

4. The Channel Choice:

§It depends on channel or route through which products of the firm flow to
customers.

§Firms well-known brand that can control over channels through pull
promotion strategies.

§Extensive and heavy use of advertising and sales promotion is necessary to

generate consumer demand.

§Industrial marketing strategies rely on personal selling.

§Push strategy successfully used when – a) we have high-quality product with

unique selling points, b) we have high-priced products and c) we can offer
adequate incentives to middlemen.

§Ratio of pull strategy to push the strategy may differ according to

requirements of the market situation.