Small Business Management Notes - Marketing Management

Small Business Management Notes
Marketing Management
B.Com Notes

Marketing – Meaning, Nature and Functions

Marketing is an ancient art & is everywhere. Formally or informally, people & organizations engage in a vast numbers of activities that could be called marketing. Good marketing has become an increasingly vital ingredient for business success. It is embedded in everything we do- from the clothes we wear, to the web sites we click on, to the ads we see. Marketing deals with identifying & meeting human & social needs or it can be defined as “meeting needs profitably”.

The American Marketing Association has defined marketing as “an organizational function & a set of processes for creating, communicating & delivering value to the customers & for managing customer’s relations in ways that benefit the organization & the stake holders.”

Peter Drucker says it this way that,” the aim of marketing is to know & understand the customer so well that the product or service fits him & sells itself. All that should be needed is to make the product or the service available.”

Nature of marketing

Buyer and seller affect the demand for products in aggregate areas, market includes both the place and region which buyers and sellers are in a free inter course with another.

1) Marketing is a customer focus: Market intense to satisfy and delight the customer, the activities of marketing must be directed and focused at the customer marketers can remain in customers mind. As they are provided value for what they spend.

2) Marketing must deliver value: Marketer has to track customer needs and deliver the product as per their requirement. The co operate storage must be aimed at delivering greater customer value than competitors.

3) Marketing is business: When a customer is the focus of all activities the marketer has not to search customer to see response to his product. Customer group is decided from whom the product is prepared and presented.

4) Marketing is surrounded by customer need: Marketing starts with identification of customer needs and requirements’. These are termed into probable features that might satisfy the basic needs

5) Marketing is a part of total environment: Total environment mainly defined as the combination of all resources and institutions which are directly related to the production, distribution of goods, services, ideas, places and persons for satisfaction of human needs.

6) Marketing systems effect companies strategies: Marketing has its own sub-systems which interact with each other to turn complete marketing system that is responsible to company’s marketing strategy.

7) Marketing has a discipline: The sub of marketing has emerged out of business which has derived its existence from economic. These are different disciplines of marketing such as consumer behavior, legal aspects marketing research, advertising media, pricing, promotion method etc.

8) Marketing creates mutual beneficial relationship: As the customer is the focus of all marketing activities. The strategies of marketing have been shifting to different ways. Marketing is there for everything that results in mutual benefit of the customer.

9) Universal function: Marketing has a universal function in the sense that it can be applied to both profit motive and non-profit motive organization.

Functions of Marketing

a) Marketing research : Gathering and analysing marketing information i.e. what the customers want to buy, when they are likely to buy in what quantities do they buy, from where do they buy etc.

b) Marketing planning: Specific plan for increasing the level of production, promotion of the products etc and specify the action programmes to achieve these objectives.

c) Product designing and development; Marketer must take decision like, what-product? Which model / size? Brand name? Packaged? Quality level? So that customer needs are satisfied.

d) Buying & assembling: e.g. car. Raw material like steel, tyres, batteries, seats, stearing wheels etc are bought & then assembled in the form of a complete product.

e) Packing / labeling: designing the package & labeling.

f) Branding: Creating a distinct identity of the product from that of competitors e.g. Videocon washing machine.

Marketing Problems faced by Small Scale Industries

Small scale units are exposed to numerous problems. Major problems faced by these units are concerning raw-material, labour, financial and marketing. Problem of marketing is more complicated in case of small scale industries. These units are in no position to face the competition from large players and at the same time are not in a position to assess the prevailing market scenario or changes which are taking place with respect to tastes, liking, disliking, competition, technology etc. moreover these units do not possess the requisite expertise to adjust their operations according to the changed situation. Some of the important marketing problems faced by the small scale units are given below:

1) Problem of standardization: Small scale units face problems with respect to fixing the standards and sticking. This results in the poor quality of their products and it adversely effects their image or goodwill in the market.

2) Competition from large scale units: Small scale units are ill equipped to face competition from large scale units with respect to quantity, quality and cost. In the modern competitive world there is survival of the fittest, even the existence of small scale units is endangered.

3) High cost of advertisement: A final problem facing small-scale marketing efforts is the cost of advertising. Running a full-page Sunday newspaper ad or Super Bowl TV commercial is no financial hardship for certain large businesses. However, such costs are obviously prohibitive for small-scale businesses. Thus, many will circumvent this dilemma through forming co-ops to split advertising costs or using local advertising and word-of-mouth.

4) Poor bargaining power: Small scale units because of their limited resources and lower scale of operations are in a week position while negotiating with the suppliers of raw-material, finances (or) marketing agencies. They are always at the receiving end and as such are not in a position to safeguard their interests.

5) Poor sale promotion: Small scale units have limited financial resources and hence cannot afford to spend more on sale promotion. These units are not having any standard brand name under which they can sell their products. Various channel members too exploit them because of the lack of goodwill of their products in the market.

6) Transportation cost: Another marketing problem facing the small-scale business is transportation. A large-scale business can buy an item in bulk, which saves money. A small-scale business may not have the money or demand to order such quantity, which raises item cost. This creates a marketing issue: How can a small company sell the same item as its competition at a higher price and remain competitive? That is why many small-scale industries focus upon selling a higher-quality item than its mass-marketed competition.

Traditional and Modern Concept of Marketing

Traditional concept of marketing

According to this concept, marketing consists of those activities which are concerned with the transfer of ownership of goods from producers to consumers. Thus, marketing means selling of goods and services. In other words, it is the process by which goods are made available to ultimate consumers from their place of origin. The traditional concept of marketing corresponds to the general notion of marketing, which means selling goods and services after they have been produced. The emphasis of marketing is on sale of goods and services. Consumer satisfaction is not given adequate emphasis. Viewed in this way, marketing is regarded as production/sales oriented.

Modern concept of marketing

According to the modern concept, marketing is concerned with creation of customers. Creation of customers means identification of consumer needs and organising business to satisfy these needs. Marketing in the modern sense involves decisions regarding the following matters

1. Products to be produced

2. Prices to be charged from customers

3. Promotional techniques to be adopted to contact and influence existing and potential customers.

4. Selection of middlemen to be used to distribute goods & services.

Modern concept of marketing requires all the above decisions to be taken after due consideration of consumer needs and their satisfaction. The business objective of earning profit is sought to be achieved through provision of consumer satisfaction. This concept of marketing is regarded as consumer oriented as the emphasis of business is laid on consumer needs and their satisfaction.

Five Fundamental concept of Marketing are:

1) Exchange concept

2) Production concept

3) Product concept

4) Sales concept

5) Marketing concept

1) Exchange Concept: The Exchange concept holds that the exchange of a product between seller & buyer is the central idea of marketing Exchange is an important part of marketing, but marketing is a much wider concept.

2) Production Concept: The production concept is one of the oldest concepts in business. It holds that consumers will prefer products that are widely available & expensive. Manager of production oriented business concentrate on achieving high production efficiency low cost & mass distribution.

3) Product Concept: This concept holds that consumers will prefer those products that are high in quality, performance or innovative features. Managers in these organization focus on making superior products & improving them. Sometimes, this concept leads to marketing myopia, Marketing myopia is a short sightedness about business. Excessive attention to production or the product or selling aspects at the cost of customer & his actual needs creates this myopia.

4) Selling Concepts : This concept focuses on aggressively promoting & pushing its products, it cannot expect its products to get picked up automatically by the customer. The purpose is basically to sell more stuff to more people, in order to make more profits.

5) Marketing Concept: The marketing concept emerged in the mid 1950’s. The business generally shifted from a product – centered, make & sell philosophy, to a customer centered, sense & respond philosophy. The job is not to find the right customers for your product, but to find right products for your customers. The marketing concept holds that the key to achieving organizational goals consist of the company being more effective than competitors in creating, delivering & communicating superior customers value. This concept puts the customers at both the beginning & the end of the business cycle. Every department & every worker should think customer & act customer.

Marketing Segmentation

A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. Such division is called market segmentation. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. Market segmentation enables the entrepreneur to match his marketing efforts to the requirements of the target market. Instead of wasting his efforts in trying to sell to all types of customers, a small scale unit can focus its efforts on the segment most appropriate to its market. It is defined as “The strategy of dividing the market in order to consume them”.

According to Philip Kotler, “It is the subdividing of market into homogenous subsets of consumers where any subset may be selected as a market target to be reached with distinct Marketing Mix”

According to Philip Kotler, market segmentation means "the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes."

According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects."

Basis of Segmentation:

Market segmentation dividing the Hetrogenous market into homogenous sub-units. Heterogeneous means mass marketing, which refers people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers. The following factors are considered before dividing the market:

1. Geographical Factors: On the basis of geographical factors, market may be classified as state-wise, region-wise & nation-wise. Many companies operate only in a particular area because people behave differently in different areas due to various reasons such as climate, culture, etc.

2. Demographic Factors: This is the most widely used basis for market segmentation. Market is classified on the basis of population, using ages, income, sex, etc as indicators.

a. Age: It is known fact that people of different ages like different products, need different things, & behave differently. Almost all companies use this factor to reach the target market. On the basis of age, market in our country is divided into children’s market, teenager’s market, adult’s market, & the market for old people. Companies use the census data to prepare marketing strategies on the basis of age.

b. Sex: There is a variation of consumption behavior between males & females. This factor is used as a basis for segmentation for products like watches, clothes, cosmetics, leather goods, magazines, motor vehicle, etc.

c. Family Life Cycle: This is another important factor, which influences the consumer’s behavior. E.g.: Before making purchases, a bachelor may consult his friends, a boy may ask his parents & a married man asks his wife. The study of family life cycle helps a company to prepare an effective promotional strategy.

3. Psychological factors: In psychographic segmentation, elements like personality traits, attitude lifestyle & value system form the base. The strict norms that consumers follow with respect to good habits or dress codes are representative examples. E.g.: Mr. Donald’s changed their menu in India to adopt to consumer preference. The market for Wrist Watches provides example of segmentation. Titan watches have a wide range of sub brands such as Raga, fast track, edge etc. or instant noodle markers, fast to cook food brands such as Maggi, Top Ramen or Femina, women’s magazine is targeted for modern women.

4. Economic Factors: On the basis of economic factors, markets have been classified in the westerns countries as follows:

a. Upper Class b. Upper-upper class c. Lower-upper class

d. Middle class e. Upper-middle class f. Lower-middle class

g. Lower class h. Upper-lower class i. Lower-lower class

In our country, it is classified as upper class (rich), middle class, & the lower class. Another classification based on income in our country is as follows:

a. Very Rich b. The Rich class c. The Aspiration Class &

d. The Destitute.

5. Behavior Factors: This is one of the most important bases used for market segmentation. Market is classified on the basis of attitude of consumers and special occasions.

a. Occasions: Sellers can easily find out certain occasions when people buy a particular product. E.g.: Demand for clothes, greeting cards, etc increases during the festival season. Demand for transportation, hotels etc increases during the holiday seasons.

b. Benefits: Each consumer expects to fulfill certain desire or to derive some benefits from the product he purchases. E.g.: A person may purchase clothes to save money & another to impress others. Based upon this, markets may be classified as markets for cheap price products & market for quality products etc.

c. Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic market, indifferent market, positive market, & negative market.

Advantages / Importance / Significance of Market Segmentation:

The purpose of segmentation is to determine the differences among the purchases which may affect the choice of the market area & marketing strategies. Following are some of the benefits of marketing segmentation.

1) Facilitates consumer-oriented marketing: Market segmentation facilitates formation of marketing-mix which is more specific and useful for achieving marketing objectives. Segment-wise approach is better and effective as compared to integrated approach for the whole market.

2) Facilitates introduction of suitable marketing mix: Market segmentation enables a producer to understand the needs of consumers, their behavior and expectations as information is collected segment-wise in an accurate manner. Such information is purposefully usable. Decisions regarding Four Ps based on such information are always effective and beneficial to consumers and the producers.

3) Facilitates introduction of effective product strategy: Due to market segmentation, product development is compatible with consumer needs as there is effective crystallization of the specific needs of the buyers in the target market. Market segmentation facilitates the matching of products with consumer needs. This gives satisfaction to consumers and higher sales and profit to the marketing firm.

4) Facilitates the selection of promising markets: Market segmentation facilitates the identification of those sub-markets which can be served best with limited resources by the firm. A firm can concentrate efforts on most productive/ profitable segments of the total market due to segmentation technique. Thus market segmentation facilitates the selection of the most suitable market.

5) Facilitates exploitation of better marketing opportunities: Market segmentation helps to identify promising market opportunities. It helps the marketing man to distinguish one customer group from another within a given market. This enables him to decide his target market. It also enables the marketer to utilize the available marketing resources effectively as the exact target group is identified at the initial stage only.

6) Facilitates selection of proper marketing programme: Market segmentation helps the marketing man to develop his marketing mix programme on a reliable base as adequate information about the needs of consumers in the target market is available. The buyers are introduced to marketing programme which is as per their needs and expectations.

7) Provides proper direction to marketing efforts: Market segmentation is rightly described as the strategy of "dividing the markets in order to conquer them". Due to segmentation, a firm can avoid the markets which are unprofitable and irrelevant for its marketing purpose and concentrate on certain promising segments only. Thus due to market segmentation, marketing efforts are given one clear direction for achieving marketing objectives.

8) Facilitates effective advertising: Advertising media can be more effectively used because only the media that reach the segments can be employed. It makes advertising result oriented.

9) Provides special benefits to small firms: Market segmentation offers special benefits to small firms. The resources available with them are limited as they are comparatively new in the market. Such firms can select only suitable market segment and concentrate all efforts within that segment only for better marketing performance. Such firms can compete even with large firms by offering personal services to customers within the segment selected.

10) Facilitates optimum use of resources: Market segmentation facilitates efficient use of available resources. It enables a marketing firm to use its marketing resources in the most efficient manner in the selected target market. The marketing firm selects the most promising market segment and concentrates all attention on that segment only. This offers best results to the firm in terms of sale, profit and consumer support as compared to the results available from spending such resources on the total market.

In conclusion, it can be said that market segmentation offers benefits not only to marketing firms but also to customers. The marketing job will be conducted efficiently and the available resources will be utilised in a better mariner. These advantages also suggest the importance of market segmentation and make a case in its favour.

MARKET ASSESSMENT

Market Assessment is the evolution of market for a product or service including the analysis of the market trends, assessing the competitions and conducting market studies. It is a type of market research which is conducted before investing a great amount of time and money into a business. It is also a way to determine a clear understanding of the market environment in which the firm hopes to operate.

Market Assessment covers a scan of the competitive landscape, the value chain and the structure of the industry, the trends of a particular sector or sub-sector, the size of the addressable market and the underlying behaviours and needs of potential or existing customers.

Uses of Market Assessment

There are many uses for which market assessments are made. However, the primary reasons for undertaking such research are as follows:

1. To determine if a market or the product is worth the time and effort to pursue. The assessment can provide insights that may change the entrepreneur’s business direction and product plan perhaps abandoning either together.

2. To help in collecting information that will be used for business planning and in the preparation of materials for presentation to potential inventors.

3. To support management’s decision making as to whether to invest money for market expansion or additional product development.

Advantages of Market Assessment

Market Assessment is considered beneficial to a firm due to the following advantages:

1) Helps to validate opportunity: Market Assessment helps to validate the opportunity for a teaching or service by determining the market which the firm is operating in, its size and potential customers.

2) Provides Project Direction: Market Assessment gives an effective direction to the entrepreneur about the project he is planning to take up. For example, the entrepreneur is planning to develop X, but the market/customer wants X + 1 or X – 1. Through conducting Market Research and engaging with the market, important information can be gained regarding market needs.

3) Helps to attracts funding: Market Assessment significantly helps a firm to attract funds from various sources. By demonstrating the potential impact or value of the firm’s technology in a given market, the firm is more likely to attract funding from various public and private sources, including grants from government.

4) Helps towards Business Planning: The output received on the basis of market assessment significantly helps a firm in effective development of its business plans. Such plan covers all aspects of the enterprise management to cope with the market needs.

5) Market Planning: Through market assessment the firm becomes aware of various unknown facts about its targeted market. The firm examines and analyses its own potentiality and develops its plan of action to face the ground realities of the market.

Thus, Market Assessment very significantly helps management of a firm in numerous ways. Being an intelligence service, Market Assessment is of immense value to a firm from various angles.

Marketing Mix

Marketing mix prefers to one of the major concept in modern marketing according Philip kotler “marketing mix is a set of controllable marketing variables that the firm blends to produce the response it wants in the target market”. It is the combination of four controllable variables which constitutes the company’s marketing system .the four controllable variables are:

1) The product

2) The price structure

3) The promotional activities

4) The distribution system

These elements are inter related and inter dependent since decisions in one area usually actions in other area.

Features of marketing mix:

1) Combination of four controllable variables: Marketing mix is the combination of four variables inputs namely product, price, promotion and place that constitute the core of organizations marketing system

2) Inter relation of variables: The four P’s of marketing mix are interrelated and independent as the decision of one area automatically depends upon the other.

3) Managerial activity: Marketing mix is a managerial activity i.e. it is the responsibility of the marketing manager to combine. The four ingredients in the right proportion as to achieve optimum results.

4) Dynamic concept: Marketing mix is a dynamic concept as the need of constant as per the changes taking place in the marketing environment.

5) Consumer orientation: All marketing activities are directed towards consumer satisfaction therefore marketing mix variables need to be flexible to adopt the needs expectation, purchasing power and buying behavior of the consumer.

6) Target oriented: It is one of the important components of marketing mix centers around the consumer and his welfare.

7) Universal approach: Marketing is a universal concept. It is applicable to not only business organizational but also to non-business and non-profit organizations.

8) Creative activity: Determination of right marketing mix is a creative process. The imagination, intelligence and creativity to prepare a perfect blend of four variables to provide maximum satisfaction to the consumers and returns to the organization.

Principle Ingredients of Marketing Mix (Four P’s) and their importance

Successful businessmen know the importance of marketing mix because they cannot design and promote their products without marketing mix. It is a mixture of 4 P’s of marketing mix such as product, place, price and promotion. 4 P’s Of Marketing Mix:

1. Product: Product is one of important part of marketing mix because it reflects the good or bad reputation of any organization. The products represent your business efficiently. Successful organizations always search out the buying habits of their customers and designed their products based on those buying habits in order to meet the customer’s requirements. They also design their products based on important factors such as purchasing power and geographical locations etc. They try to design products which are affordable for customers. Companies always design their products according to customer’s budget and affordability.

They do not compromise on their product quality. Some companies maintain their quality and do not compromise on price but there are some companies which produce products according to the affordability of customers. Marketers communicate with their customers directly and convince them to buy their products.

2. Price: It is the worth of product on which customers are agreed to buy the products. Price of the product should be according to the range of regular customers. Prices are fluctuating according to seasonal requirements. Marketers always try to satisfy their clients at any cost. If employees of the company are satisfied with their job and performance rewards, they can become an effective asset of any organization.

3. Place: Products always design based on geographical place because customers buy products according to their traditions and seasons. Companies which are going to spread their business networks throughout the world must visit the place where they want to open their branches. They need to study the traditions and seasonal changes of the country where they want to initialize their products.

4. Promotion: Promotion activities involve marketing and advertising. Promotional activities are used to create awareness about the products. Customers know about products and their specification through social marketing media. Companies adopt social marketing media in order to create awareness about their products and services. Promotional activities and techniques are important if companies initialize new products or make some changes in product’s specifications. Promotional activities include advertising, selling, public relations and sales promotions. Advertising is a paid form of promotion that grabs the attention of customers through channels or TV. It also involves relationships between customers and companies. Marketers should design products that meet customers’ needs and demands.

Criticisms of the 4 P's Of Marketing Mix

So how can the marketing mix and the traditional four P's of marketing are criticised?

Ø It is completely internally focused on what the business wants. If marketing is about meeting customer needs, then surely the customer and their issues should come into the most popular framework for marketing. Can't think of P's? What about Purchaser, Problem and Pain?

Ø There are winning marketing strategies and losing marketing strategies. The four P's of the traditional marketing mix don't make it clear what the objective of the marketing is. There is no mention of Purpose or Profit. Without confirming the purpose, how can you know that you have the appropriate mix of marketing?

Ø Some argue that the marketing mix is focused on consumer marketing and that the Product, Price, Place, Promotion doesn't fit so well for industrial products and services. I'm not sure I agree with that one as each P can be adapted to industrial products and services.

Ø Others argue that the marketing mix creates subdivisions along artificial lines. Product becomes the responsibility of the product development people, pricing the responsibility of the pricing department etc.

Ø The marketing mix is very much based on the assumption that the business is pushing products out to customers. There is no interaction or feedback. It might have been fine when the producers had the marketing power but in a world of the Internet, social media and the free access to information, buyers are much better informed.

Ø As a marketer, the thing I want to do most is to build a relationship with the customer so that they buy and buy again repeatedly. There is nothing in the marketing mix which encourages the repeat purchases on the back end which is often where the real money is made.

Ø It is possible to break these criticisms of the marketing mix into finer points and you only have to look at the collection of P's that could be included in a revised marketing mix to see how much is missed out.

Product – Meaning, Features and Classes

It means good or services or anything of value which is offered to the market for exchange. A product is a set of tangible and intangible attributes including packaging, colour, price, quality and brand plus the services and reputation of the seller. A product may be a tangible goods, service, place, person or idea.

Essential features can be identified as given below:

(a) Tangibility: To be a product, it should have a tangibility character such as it can be touched or seen.

(b) Intangible Attributes: The product may also be intangible in the form of services.

(c) Associated Attributes: A product may have number of features which differentiate it from competitor’s products. Associated attributes usually cover the colour, package, brand name, installation instruction etc

(d) Exchange Value: It must be capable of being exchanged between seller and buyer at mutual agreed price.

(e) Consumer satisfaction: A product should have the capacity to satisfy consumer’s real or psychological needs.

Classification of Products

A. Products based on uses:

(i) Consumer Products: These are the products or services that are meant for final consumers for their personal, family or house hold use. These products are used by buyer for their consumption or selling but not for further processing. For example pen, watch, books, newspaper etc. Consumer products are further classified as Convenience goods, Emergency goods, Impulse goods, Shopping Goods, Specialty Goods, and Unsought Products.

(II) Industrial Products: Goods which are used for commercial production or in carrying of some business activities are known as industrial goods. It is for commercial use not for personal use.

B. Products based on durability:

(I) Perishable products: These are the products which have very short life such as newspaper.

(II) Non-durable products: When the consumers start consuming or using the products, the products last for few uses and get depleted on consumption are non durable goods. For example, tooth paste, powder etc.

(III) Durable products: These are products which have a long life and consumers may use it for several years. For example - T.V., watch, furniture, mobile hand-set etc.

C. Products based on Tangibility:

(I) Tangible products: It must be capable of being touched, seen, verified its quality etc.

(II) Intangible products: A product may be intangible also but capable of providing satisfaction through its service.

Branding and Labeling

Branding: Branding can be designed as the process of using a name term, symbol or design to identify a product. It is simply giving a name / a sign / a symbol etc to a product. For example: Pepsi, Nike etc.

The following features of goods brand name are given below:

a) The brand name should be short, easy to pronounce, spell, recognize and remember.

b) The brand name should be distinctive.

c) It should be capable of being are registered and protected legally.

d) The brand name should be sufficiently versatile to accommodate new products, which are added to the product line.

Advantages of Branding:

a) Brand name helps in advertising in an easier way.

b) Brand name establishes permanent identity of the product.

c) Branded products can be easily identified by consumers.

d) Brand name promotes repurchasing.

Labeling: A label identity is the product or brand. Labels are attached one to the product package to help the identification and provide some identity to the customer.

Function of Labeling:

a) Describe the product and specify its contents.

b) Grading of Product

c) Identification of the Product or Brand.

d) Help in promotion of Product.

e) Providing information required by law.

Packaging and Its Significance

Packaging refers to the group of those activities which are related with the designing and production of the containers in which the product are packet.

Functions of Packaging

1. Product Identification: Packaging help in identification of the product.

2. Product Protection: The main function of the packing is to provide protection to the product from dirt, insect and breakage.

3. Convenience: It provides convenience in carriage, stocking and in consuming.

4. Product Promotion: Packaging simplifies the work of sales promotion.

Importance (Merits) of Packing:

a) Rising standard of health and Sanitation: - As the people are becoming health conscious they take to buy packed goods. The reason is that the chances of adulteration in such goods are minimized.

b) Self Service outlets: - Now a day’s self service retail shops are becoming very popular particularly in big cities. Because of this the role of sales assistants has gone to packaging.

c) Innovational opportunity: - With the increasing use of packaging mote innovational opportunity becomes available in this area for the researches.

d) Product Differentiation: - Packaging is helpful in creating product differentiation. The colour, material and size of package makes diff. in the perception of the buyers about the quality of the product.

Price and Pricing

Price is defined as the amount we pay for goods or a service or an idea. Price is the only element in the marketing mix of a firm that generates revenue. All other elements generates only cost. Price is a matter of importance to both seller & buyer in the market place. Only when a buyer & a seller agree on price, we can have exchange of goods and services leading to transfer of ownership.

The term ― Price need not be confused with the term ― Pricing. Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.

Objectives of Pricing

A business firm will have a number of objectives in the area of pricing. These objectives can be short term or long term or primary objectives:-

(i) Profit maximization in the short term.

(ii) Profit optimization in the long term.

(iii) A minimum return on investment

(iv) A minimum return on sales turnover.

(v) Achieving a particular sales volume.

(vi) Achieving a particular market share.

(vii) Deeper penetration of the market.

(viii) Entering new markets.

(ix) Target project on the entire product line.

(x) Keeping competition out, or keeping it under check.

(xi) Keeping parity with competition.

(xii) Fast turnaround & early cash recovery.

(xiii) Stabilizing price & margins in the market.

(xiv) Providing the commodities at prices affordable by weaker section.

(xv) Providing the commodities at prices that will stimulate economic development.

Importance of Pricing:

Importance of pricing is spelled out by the following points.

1. Price is the pivot for an economy: Price is the prime mover of the wheels of the economy namely, production, consumption, distribution & exchange price influences consumer purchase decision. It reflects purchasing power of currency. It can determine the general living standards of people. In essence, by and large every facet of our economy life is directly or indirectly governed by pricing.

2. Price Regulates Demand: Price increase or decrease the demand for the product de- marketing strategy can be easily implemented to meet the rising demand for goods & service.

3. Price is the competitive weapon: The marketers have to perform in a highly competitive environment. Price is a very important instrument to fight competition. It is the competition that contributes maximum to the importance of pricing. Pricing is a highly dynamic function. Because of the immense competition and in meeting competition, pricing decisions acquire their real importance.

4. Price is the Determinants of profitability: Price determines the profitability of firm by influencing the sales revenue. Low price is not always necessary to increase profit. A right price can increase the sales volume and there by profit. The impact of price rise of fall is reflected instantly in the rise or fall of the product profitability.

5. Price is a Decision Input: Pricing is highly risky decision area & mistakes in pricing might reasonably affect the firm, its profits, growth and future.

6. Marketing Communication: Price plays an important role in marketing communication. High price may indicate higher quality. Price communicates value to the consumer. Customers are basically value-maximizes. They want to have the maximum value from a given purchase. They form an expectation of value and act on it. A buyer’s satisfaction is a function of the product’s perceived performance and the buyer’s expectations. So, if the product meets the expectations of consumers and their value definitions at the given price point, price is seen as acceptable. Otherwise consumers tend to be dissatisfied. They may say that the product is overpriced and they may reject the offer.

The above discussion indicates that pricing is a critical element in any company’s marketing plan, because it directly affects revenue and profit goals. Effective pricing strategies must consider costs as well as customer perceptions and competitor reactions, especially in highly competitive markets. Today, many firms are trying to follow the low-price trend. At the same time, many marketers have been successful in selling more expensive products and services by combining unique product formulations with engaging marketing campaigns.

Factors Affecting Pricing

Factors affecting pricing may be categorized into two categories- internal factors and external factors. In each of these categories some may be economic factors and some may be psychological factors. Some factors may be quantitative and some others may be qualitative. Some of the important factors affecting pricing are given below:

A. Internal Factors:

As regards pricing, the firm has certain objectives -long term as well as immediate. For example, the firm has certain costs of manufacturing and marketing; and it seeks to recover these costs through the price and thereby earning a profit. In respect of all the products, the firm may have a basic philosophy on pricing. The pricing decisions of the firm have to be consistent with this philosophy. Pricing also has to be consistent with the overall objectives of the firm. These objectives could be achieving market share, short term or long term profit. The firm may be interested in seeking a particular public image through its pricing policies. All these constitute the internal factors that influence pricing. From the above, it appears that pricing is influenced by objectives and marketing strategy of the enterprise, pricing philosophy, pricing objectives and policy. More specifically, the internal factors are:

1. Corporate and marketing objectives of the firm: All pricing objectives emanate from the corporate and marketing objectives of the firm. A business firm will have a number of objectives in the area of pricing. Some of these objectives are long-term, while others are short-term. Profit is one of the major objectives in pricing. Firms may not be interested in profit maximization as such, they may be more interested in long term survival and growth.

2. The image sought by the firm through pricing: If a firm offers high quality goods at high prices, the firm will develop a premium image.

3.The characteristics of the product: Sophisticated, complex and new to the world products normally carry high prices. Products having more features carry higher prices.

4. Price elasticity of demand of the product: If price increases, demand decreases and if price decreases demand increases. Marketers may decide on pricing based on ‘what the traffic can bear’. The marketer takes the maximum price which the customers are willing to pay for the product under the given circumstances.

5. The stage of the product on the product life cycle: When a product is introduced for the first time it carries a higher price. Gradually with increasing consumer acceptance and competition price decreases.

6. Use pattern and turn around rate of the product: Price of newspaper and magazines may be different for the immediacy factor, permanence and the pass along readership. Newspapers are having a short life, while magazines enjoy a pass along readership.

7. Costs of manufacturing and marketing: Costs determine price to a great extent. Marketers will have to cover the cost and earn a profit.

8. Extent of distinctiveness of the product and extent of product differentiation practised by the firm: Products having uniform size, shape and compositions can be manufactured at a lesser cost compared to products having differentiation.

9. Other elements of the marketing mix of the firm and their interaction with pricing: Amount spent on product research, advertising, dealer development etc. are some factors which influence price of a product.

10. Composition of the product line of the firm: A firm may sell a number of products in the same product line. In that case , the products are likely to be sold under different prices depending on their quality, features etc.

B. External Factors:

In addition to the internal factors mentioned above, any business firm has to encounter a set of external factors while formulating its pricing decisions. An enterprise exists in an environment and is influenced by environmental factors. The external factors are:

1. Market characteristics: Some markets are having very stiff competition and some are having less. The number of players in a market could be more or less. Market leadership factors also may be different. Different characteristics of the market have a bearing on price.

2. Buyer behaviour in respect of the given product: Value conscious buyers are likely to be interested in low prices. Image conscious buyers may be more attracted by product image rather than low price of the product.

3. Bargaining power of major customers: In industrial buying situations major buyers have a bargaining power. They are in a better position to negotiate prices.

4. Bargaining power of major suppliers: Similar is the case with major suppliers. They are in a better position to supply bulk quantities. They are also in a better position to negotiate terms.

5. Competitors’ pricing policy: Firm’s decision to set a price is heavily influenced by the price set by the competitors. In case of highly unique product having a niche market, a firm can have its own price. In most of the cases, competitive reactions to the price set by the firm have to be seriously studied for future programmes.

6. Government controls/regulations on pricing: As stated earlier the Governmental measures like import duties, excise, subsidy, sales tax etc. influence pricing decisions.

7. Social considerations: Firms have a responsibility to society and to its customers. Firms are not expected to exploit consumers by unnecessarily charging high prices.

As discussed above pricing decisions are complex. For pricing an individual product the firm has to consider its overall objective, prices set for other products, costs etc. These are internal factors. In addition, the pricing decisions are influenced heavily by the external factors as stated above.

Promotion Mix

Promotion means communication with customers to stimulate them to buy goods. The nature of promotion mix is determined by the marketing environment. There are various dimensions of promotion mix are:

a. Advertising and publicity

b. Personal selling techniques

c. Sales promotion measures

d. Public relation techniques etc.

Advertising – Meaning, Significance and Limitations

Advertising is the most commonly used tool of promotion. It is an impersonal form of communication, which is paid by the marketers (sponsors) to promote goods or services. Common mediums are newspaper, magazine, television & radio. Advertisements play a very important role in offering innumerable benefits to the manufacturers, customers and to the society in general.

Following are the benefits of Advertisements:

1. Advertisements attracts new buyers and maintains existing customers and to the society in general.

2. Advertisements inform the consumers about the quality and uses of the product.

3. Advertising also acts as an information service and educates the consumer. It enables him to know exactly what he wants and where to get it.

4. Advertising stimulates production and reduces the cost per unit. This reduction in the cost is generally passed on to the consumer.

5. Advertising also makes it possible to sell direct to the consumer by Mail Order Business.

6. Advertising helps in creating goodwill, brand image and brand loyalty.

7. Advertisements help the retailers in selling the advertised products.

8. It is also helpful in getting better employees and executives.

Limitations of Advertising: Several objections have been raised against advertising and some people criticize advertising as a social waste. The main point of criticism is as follows:-

a) Creates Monopoly in the Market: Advertisement leads to promotion and cover mass level of customers at a time. Large firms can bear the advertisement expenditure but not the small firms, due to that it can eliminate the small firms from the market and creates its monopoly authority in the market.

b) Higher the Prices of Product: Investment of money in advertisement leads to increase in the price of goods and services for which consumer has to face high prices and pay for it. Hence, more the advertisement cost- more the product cost.

c) Misleading the consumers: Now days, advertisement misleads the consumers on false representation regarding their goods. Consumer attracts to those goods which are not necessary for them. Thus, advertisement misleads the consumer and sale goods to them.

d) Wasteful Consumption by the Consumers: Advertisement attracts the consumers for wasteful products which are not necessary for consumers. Due to advertisement businessmen takes undue advantage from them. They sale unhealthy and artificial goods to them and exploits consumer emotions.

e) Wastage of National Resources: There will be wastage of national resources, valuable stationary, time and energy used by the people or is ignored by them. Here, Valuable resources that can be used to create new industries are wasted in the production of needless varieties and designs.

Personal Selling

Personal selling is the act of presenting of product or services so that the consumer appreciate the need for it and mutually satisfactory sales follows.

Features of Personal selling:

a) Personal contact is established under personal selling.

b) Oral conversation.

c) Quick solution of queries.

d) Receipt of Additional Information.

e) Development of relationship.

Qualities of a Good salesman:

a) Physical Qualities : Physical qualities include personality health, stamina and tolerance

b) Mental Qualities: These include mainly skill, mental alertness, imagination and self confidence.

c) Social Qualities: These include social-abilities tact, sound character, and sweet nature.

d) Vocational Qualities: It includes mainly knowledge of product, knowledge of competitive product, training and aptitude.

Importance of Personal Selling:

Personal selling plays a very important role in marketing of goods and services. It is important tool for businessmen, customers and society.

a) Importance to Businessmen: Personal selling is an important tool to increase the sale. It is important for businessman due to following reasons:

Ø Effective Promotion Tool: Personal selling is an effective tool to increase the sale of product. Salesmen explain the merits and products to customers.

Ø Flexible Tool: Personal selling efforts can be changed according to the type of customer salesmen are attending. They may change the offer in varying purchase situations.

Ø Minimum Wastage of Efforts: As compared to other methods of promotion in personal selling the wastage of efforts is minimum.

Ø Relationship: Personal selling helps to create lasting relationship between customers and sales-persons which help in increasing sale.

b) Importance to Customers: Personal selling is very important from customer’s point of view, as customers can get required information about the product from customers. Customers are benefits by personal selling in the following ways:

Ø Helps in Identifying Needs: Salesmen help the customers to discover their needs and wants and they also help customers to know how these needs and wants can be satisfied.

Ø Latest Market Information: In personal selling salesmen provide information regarding the new products available in market, uses of those products etc.

Ø Expert Advice: Customers can get expert advice and guidance in purchasing various goods and services.

Ø Induces Customers: Personal selling induces customers to buy products for satisfying their needs.

c) Importance to Society: Personal selling brings following positive effects for society:

Ø Converts Latest Demand into Effective Demand: Personal selling create effective demand which results in increasing sale and more income.

Ø Employment Opportunities: Unemployed youth can work as salesman and earn their livelihood.

Ø Career Opportunities: Personal selling offers attractive career with job satisfaction and security.

Ø Mobility of Sales Persons: Sales people move from one place to other, this promotes travel and tourism industry.

Ø Product Standardization: With the help of personal selling there can be uniformity of consumption by supplying standardized products.

Sales Promotion Techniques

(a) Rebate: - Sometimes, the product is made available at special prices less than the original prices for a limited period of time, e.g., recently Coke and Pepsi announced special price of their 500 ml bottles.

(b) Product Combination: - Product combination is the bonus items given free with the purchase of a product. For e.g. A milk shakers along with Nescafe, or mugs with Bourn vita or a diary along with a packet of chips. They are effective in getting consumers to try a new product.

(c ) Lucky Draw:- A firm of purchased of a fixed amount gives a coupon to a customer which entitles them for a lucky draw, e.g., Bikanerwala restaurant in particular season gives lucky draw coupon on purchase of Rs. 200 or more to its customers which entitles them to win exciting prizes like car etc.

(d) Contests: - In these, consumer’ are required to participate in some competitive event involving application of skills or luck and winners are given some rewards. For instance, Golden Harvest, maker of premium bread usually has children drawing competition.

(e) Discounts: - These are like price promotion in which certain percentage of price is reduced as discount from the list price, e.g., most of the retailers of garment like Snow White and Shopper’s Stop offer their product at generous discount during a limited period at the end of the season.

Channel of Distribution and factors affecting it

A channel of distribution is an organised net-work or a system of agencies and institutions which, in combination, perform all the activities required to link producers with users and users with producers to accomplish the marketing task.

According to Philip Kotler, “The distribution is the set of all firms & individuals that assist in the transferring the little of goods & services as they move from producers to customers.”

Types of Channels of Distribution:

A) Direct Channel - Manufacturer - Customer

B) Indirect Channel - Manufacturer - Retailer - customer

Manufacturer - wholesaler - Retailer - customer

Manufacturer - Agent - wholesaler - Retailer customer

Factors Affecting the Selection of the Channel of Distribution

A. Factors Pertaining to the Product: The following factors concerning the product, affect the selection of the channel of distribution: (1) Price of the Product. (2) Perishability. (3) Size and Weight. (4) Technical Nature. (5) Goods Made to Order. (6) After-Sales Service.

B. Factors pertaining to the Consumer or Market: The following are the main elements concerned with the consumer or the market: (1) Number of Customers. (2) Expansion of the Consumers. (3) Size of the Order. (4) Objective of Purchase. (5) Need of the Credit Facilities.

C. Factors Pertaining to the Middlemen: The following are the main factors concerned with the middlemen: (1) Services Provided by Middlemen. (2) Scope or Possibilities of Quantity of Sales. (3) Attitude of Agents towards the Producers' Policies. (4) Cost of Channel of Distribution.

D. Factors Pertaining to the Producer Or Company: The following factors, concerning the producer, affect the selection of the channel of distribution: (1) Level of Production. (2) Financial Resources of the Company (3) Managerial Competence and Experience.

E. Other Factors (1) Distribution Channel of Competitors. (2) Social Viewpoint (3) Freedom of Altering.

Physical Distribution of goods and its role

The channels of distribution are used by the firms to make the goods available at right place in right quantity. Whenever customer visits the market he expects all the goods and services he desires must be available there and these are made available in the market by producers with the use of various intermediaries. Physical distribution involves physical handling and movement of goods from place of production to the place of consumption. Physical distribution is also known as logistic management. In commercial sense it means the activities and decisions concerned with efficient movements of products and services.

Decisions in Physical Distribution/Components of Physical Distribution: There are four major activities involved in physical distribution of goods. There are the four major decisions which management has to take while providing physical distribution service:

a) Order Processing: Order processing means the time and steps involved between taking order from customer and delivery of goods as per order. There is direct relation between the time taken in order processing and satisfaction of customer. Fast order processing gives more satisfaction to customer but this involves cost of maintaining sufficient inventory etc.

b) Transportation: Transportation means physical movement of goods from place of production to place where they are required. Transportation adds value to the goods by moving them to place where these are required for example, Tea plantation is done in Darjeeling, Gangtok, Assam etc. but these are transported all over the country and the value of tea is much higher in other parts of country as compared to the place of production. There are various means of transportation available i.e. Rail, Road, Air, Pipeline, Water transport etc.

c) Warehousing: Whatever is produced is not sold off immediately. Therefore every company needs to store the finished goods until they are sold in the market. Storage of goods is necessary because some goods like crops are seasonal in production but are demanded throughout the year so these have to be stored for supplying throughout the year.

d) Inventory: Inventory refers to maintenance of stock of goods. The inventory needs to be maintained so that goods can be supplied whenever demanded. The proper inventory maintenance ensures product availability. But inventory also involves costs. These include cost of capital blocked in and risk of price fluctuation.

Significance or Importance of Physical Distribution Management:

The physical distribution of goods has assumed great importance particularly in recent years, because of the ever increasing competition for markets. The importance of physical distribution lies in the following directions:

1. It Creates Utilities Of Time And Place: By making available a product at the place where and when it is needed.

2. It Accounts For A Major Portion Of Marketing Costs: According to one estimate, physical distribution costs constitute as much 60% of the total marketing cost. Physical distribution is a very important area for cost savings. Over the years, in most businesses, physical distribution costs have grown into a sizeable portion of the total costs. Surprisingly, physical distribution despite being an important cost area, has remained one of the neglected areas for cost reduction.

3. Bigger Share in the National Wealth: It represents large share in the national wealth in the form of facilities—rail, road, trucks, highways, aircrafts, ship, docking facilities, pipelines, storage facilities and equipment.

4. Specialisation It Facilitates Geographic Specialization: Each area produces goods that its natural resources, climate or pool of manpower resources enable it to produce more efficiently.

5. Determines Standard Of Living: This is so because proper distribution of products makes them available to a large number of people, at a relatively lower cost. Thus it can be said that physical distribution directly affects sales, customer service and satisfaction, and costs.

Difference between selling & marketing concept

Selling	Marketing
Selling starts with the seller & the needs of the seller.	Marketing starts with the buyer & needs of buyer
Seeks to quickly convert products into cash.	Seeks to convert customer ‘needs’ into products
Seller is the centre of business universe.	Buyer is the centre of the business universe
Views Business as a goods producing process.	Views businesses as a customer satisfying process.
Seller preference determines the formulation of marketing mix.	Buyer determines the shape marketing mix should take.
Selling is product oriented.	Marketing is customer oriented.
Seller’s motives dominate marketing communication.	Marketing communication is looked upon as a tool for communicating the benefits / satisfactions provided by the product.

Difference between advertising and personal selling

Basis	Advertising	Personal Selling
Form	These are Personal.	These are impersonal.
Message	These are uniformity of message which means that the message is the same for the entire customer.	This message has no uniformity which means it can be changed keeping in view the behavior of the customer.
Flexibility	It lacks flexibility.	It is completely flexible.
Cost	It is relatively less costly method.	These are a most costly method.
Time	It takes a little time in conveying any information to the customer.	It takes more time in conveying any information to the customer.
Media	TV, radio, newspaper & magazine.	Through salesman.
Feedback	This gives no information about the reaction of the customer.	The reaction of the customer becomes immediately affect.

Small Business Management Notes - Marketing Management | B.Com Notes