2016 (August)
COMMERCE
(General)
Course: 304
(Principles of Marketing)
Full Marks: 90
Time: 3 hours
The
figures in the margin indicate full marks for the questions
1. Answer as directed: 1x5=5
a)Write
one of the differences between ‘marketing’ and ‘selling’.
Ans: Selling starts with the seller & the needs of the
seller. Marketing starts with the buyer & needs of buyer
b)
Mention one of the objectives of ‘marketing’.
Ans: 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.
c) ‘Discount’
and ‘Rebate’ are same. (Write True or False)
d)
State one of the demerits of waterways. Ans: Not available in every state
e)
The modern concept of marketing is based on the
ideas of ‘Profits’. (Write true or false)
2. Write short notes on: (any
four) 5x4=20
a)
Marketing
environment.
Ans: MARKETING ENVIRONMENT: A variety of environmental forces influence
a company’s marketing system. Some of them are controllable while some others
are uncontrollable. It is the responsibility of the marketing manager to change
the company’s policies along with the changing environment.
According to Philip Kotler, “A company’s
marketing environment consists of the internal factors & forces, which
affect the company’s ability to develop & maintain successful transactions
& relationships with the company’s target customers”.
The
Environmental Factors may be classified as:
1.
Internal
Factor
2.
External
Factor
External Factors
may be further classified into:
a)
External
Micro Factors &
b)
External
Macro Factors
b) Trade Marks.
Ans: Trade Mark: In
General, a trade mark is defined as any sign, as any combination of sign,
inherently capable of distinguish the goods or service of one undertaking. Trademarks
may be a combination of words, letters, and numerals. They may consist of
drawings, symbols, colours used as distinguish features. The owner of the mark
may not be involved in the relevant trade and acts purely as a certification
authority. The internationally accepted ―ISO 9000 quantity standards are
examples of such widely recognized certifications.
c)
Warehouse
Ans: Warehouse:
It is a place for the storage and preservation of goods in proper condition. It
is an establishment for the accumulation of goods.
Warehousing: Warehousing means retaining the
goods for future use. It implies holding or preservation of goods from time of
their production or purchase until their consumption or sale. The warehousing
service plays an important role in supply and distribution of goods after their
manufacture.
Need and importance of warehouses:
a)
To store excess production in anticipation of
demand
b)
To store goods those are produced
seasonally
c)
To store goods those have seasonal demand
d)
Stability in prices
e)
Storage of raw materials
f)
Basis of Trade
g)
Processing, curing and packaging of goods.
Types of
warehouses: (1) Government warehouses (2) Private warehouses (3) Public warehouses (4) Cooperative warehouse (5) Bonded warehouse (6) Excise Bonded warehouse (7) Custom Bonded warehouse
d)
Personal
Selling.
Ans:
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.
e) Packaging.
Ans:
In this age of competition, good and appropriate packaging occupies much significance. The policies pertaining
to the packaging are a part of
the product planning and product development program.
In the opinion of Prof.
Rustom S. Davar, Packaging is that art and/or science which is
related to the development and use of materials,
methods and equipment, for the packing of the goods in some containers, so that the product, while passing through
various stages of distribution,
could remain fully safe.
William Stanton has opined that the meaning of
packaging is the total group of
activities under the product planning which are related to the chalking out of a design of the outer cover
of a product and the concerned
production.
Importance
(Functions) of Packaging
a)
Safety of the Products. The main function of packaging is
to protect the things from dust, water, moisture, insects, etc. Good packing saves the products against perishing,
loss and other damages.
b)
Facility in Marketing Activities. Due to the packing, the movement of the products,
shifting, preserving, opening, collecting
and storage, become economical and easier for both the middlemen as well as the consumers.
c)
Advertisement. One of the
functions of packing is advertisement
too. Till there exists any product packet, it keeps us aware of the same.
d)
Facility in Collecting. It
is easier to store the packaged goods.
Due to packing, the products remain safe in the godowns.
e)
Information to the Customers. While making the product attractive, the packing could also make the product
useful and informative. It can
extend necessary instructions and information more effectively to the customer
regarding the use of the product.
3. (a) Discuss the traditional and modern concept of marketing. 6½ x 2=13
Ans: 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.
From the above discussion, the following differences between these two
concepts are drawn:
S. No.
|
Traditional Concept
|
Modern Concept
|
1.
|
Traditional marketing emphasis
on selling and more profit.
|
While, modern marketing emphasis
on profit as well as consumer satisfaction.
|
2.
|
Traditional marketing is start
from production and end with sell.
|
But in modern marketing it
includes planning, product, price,
promotion, place and after sell services.
|
3.
|
In traditional marketing the
manufacturer sell only those products which he produce & not focused on
consumer preference.
|
But in modern marketing
manufacturer analyse the consumer demand then produce.
|
4.
|
Traditional marketing
concentrate on favourable products.
|
But modern marketing concentrate on customer needs,
wants and satisfaction.
|
Or
(b) What do you mean by marketing mix? Discuss the factors affecting
marketing mix. 4+9=13
Ans: Marketing Mix: Marketing
mix refers to one of the major concept in modern marketing. According to 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 there is need
of continuous changes 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.
Factors affecting marketing mix
A variety of environmental
forces influence a company’s marketing system. Some of them are controllable
while some others are uncontrollable. It is the responsibility of the marketing
manager to change the company’s policies along with the changing environment.
According to Philip
Kotler, “A company’s marketing environment consists of the internal factors
& forces, which affect the company’s ability to develop & maintain
successful transactions & relationships with the company’s target
customers”.
The Environmental
Factors may be classified as:
3.
Internal
Factor
4.
External
Factor
External Factors may
be further classified into:
c)
External
Micro Factors &
d)
External
Macro Factors
1. Internal Environmental
Factors: A Company’s
marketing system is influenced by its capabilities regarding production,
financial & other factors. Hence, the marketing management/manager must
take into consideration these departments before finalizing marketing
decisions. The Research & Development Department, the Personnel Department,
the Accounting Department also has an impact on the Marketing Department. It is
the responsibility of a manager to company-ordinate all department by setting
up unified objectives.
2. (a)External Micro Factors: Some of the important external micro factors
are:
1.
Suppliers: They are the people who provide necessary
resources needed to produce goods & services. Policies of the suppliers
have a significant influence over the marketing manager’s decisions because, it
is laborers, etc. A company must build cordial & long-term relationship
with suppliers.
2.
Marketing
Intermediaries: They
are the people who assist the flow of products from the producers to the
consumers; they include wholesalers, retailers, agents, etc. These people
create place & time utility. A company must select an effective chain of
middlemen, so as to make the goods reach the market in time. The middlemen give
necessary information to the manufacturers about the market. If a company does
not satisfy the middlemen, they neglect its products & may push the
competitor’s product.
3.
Consumers: The main aim of production is to meet the
demands of the consumers. Hence, the consumers are the center point of all
marketing activities. If they are not taken into consideration, before taking
the decisions, the company is bound to fail in achieving its objectives. A
company’s marketing strategy is influenced by its target consumer. E.g. If a
manufacturer wants to sell to the wholesaler, he may directly sell to them, if
he wants to sell to another manufacturer, he may sell through his agent or if
he wants to sell to ultimate consumer he may sell through wholesalers or
retailers. Hence each type of consumer has a unique feature, which influences a
company’s marketing decision.
4.
Competitors: A prudent marketing manager has to be in
constant touch regarding the information relating to the competitor’s strategies.
He has to identify his competitor’s strategies, build his plans to overtake
them in the market to attract competitor’s consumers towards his products. Any
company faces three types of competition:
a)
Brand
Competition: It is a competition between various companies producing similar
products. E.g.: The competition between BPL
& Videocon companies.
b)
The
Product Form Competition: It is a competition between companies manufacturing
products, which are substitutes to each other E.g.: Competition between coffee
& Tea.
c)
The
Desire Competition: It is the competition with all other companies to attract
consumers towards the company. E.g.: The competition between the manufacturers
of TV sets & all other companies manufacturing various products like
automobiles, washing machines, etc.
Hence,
to understand the competitive situation, a company must understand the nature
of market & the nature of customers. Nature of the market may be as
follows:
I.
Perfect
Market
II.
Oligopoly
III.
Monopoly
IV.
Monopolistic
Market
V.
Duopoly
5.
Public: A Company’s obligation is not only to meet
the requirements of its customers, but also to satisfy the various groups. A
public is defined as “any group that has an actual or potential ability to
achieve its objectives”. The significance of the influence of the public on the
company can be understood by the fact that almost all companies maintain a
public relation department. A positive interaction with the public increases
its goodwill irrespective of the nature of the public. A company has to
maintain cordial relation with all groups, public may or may not be interested
in the company, but the company must be interested in the views of the public.
Public
may be various types. They are:
a.
Press:
This is one of the most important groups, which may make or break a company. It
includes journalists, radio, television, etc. Press people are often referred
to as unwelcome public. A marketing manager must always strive to get a
positive coverage from the press people.
b.
Financial
Public: These are the institutions, which supply money to the company. E.g.:
Banks, insurance companies, stock exchange, etc. A company cannot work without
the assistance of these institutions. It has to give necessary information to
these public whenever demanded to ensure that timely finance is supplied.
c.
Government:
Politicians often interfere in the business for the welfare of the society
& for other reasons. A prudent manager has to maintain good relation with
all politicians irrespective of their party affiliations. If any law is to be
passed, which is against the interest of the company, he may get their support
to stop that law from being passed in the parliament or legislature.
d.
General
Public: This includes organisations such as consumer councils,
environmentalists, etc. as the present day concept of marketing deals with
social welfare, a company must satisfy these groups to be successful.
2. (b) External Macro Environment: These are the factors/forces on which the
company has no control. Hence, it has to frame its policies within the limits
set by these forces:
1.
Demography:
It is defined as the
statistical study of the human population & its distribution. This is one
of the most influencing factors because it deals with the people who form the
market. A company should study the population, its distribution, age
composition, etc before deciding the marketing strategies. Each group of
population behaves differently depending upon various factors such as age,
status, etc. if these factors are considered, a company can produce only those
products which suits the requirement of the consumers. In this regard, it is
said that “to understand the market you must understand its demography”.
2.
Economic
Environment: A company
can successfully sell its products only when people have enough money to spend.
The economic environment affects a consumer’s purchasing behavior either by
increasing his disposable income or by reducing it. E.g.: During the time of
inflation, the value of money comes down. Hence, it is difficult for them to
purchase more products. Income of the consumer must also be taken into account.
E.g.: In a market where both husband & wife work, their purchasing power
will be more. Hence, companies may sell their products quite easily.
3.
Ecological
forces/Physical Environment or Natural Forces: Ecology
is the study of living things within their environment context. In a marketing
context it concerns the relationship between people and the physical
environment. Environmentalists attempt to protect the physical environment from
the costs associated with producing and marketing products. They are concerned
with the environmental costs of consumption, not just the personal costs to the
consumer. A company has to
adopt its policies within the limits set by nature. A man can improve the
nature but cannot find an alternative for it.
Nature
offers resources, but in a limited manner. A product manager utilizes it
efficiently. Companies must find the best combination of production for the
sake of efficient utilization of the available resources. Otherwise, they may
face acute shortage of resources. E.g.: Petroleum products, power, water, etc.
4.
Technological
Factors: From
customer’s point of view, improvement in technology means improvement in the
standard of living. In this regard, it is said that “Technologies shape a
Person’s Life”.
Every
new invention builds a new market & a new group of customers. A new
technology improves our lifestyle & at the same time creates many problems.
E.g.: Invention of various consumer comforts like washing machines, mixers, etc
have resulted in improving our lifestyle but it has created severe problems
like power shortage.
5.
Social
& Cultural Factors:
Most of us purchase because of the influence of social & cultural factors.
The lifestyle, values, believes, etc is determined among other things by the
society in which we live. Each society has its own culture. Culture is a
combination of various factors which are transferred from older generations
& which are acquired. Our behaviour is guided by our culture, family,
educational institutions, languages, etc.
The
society is a combination of various groups with different cultures &
subcultures. Each society has its own behavior. A marketing manager must study
the society in which he operates.
Consumer’s
attitude is also affected by their society within a society, there will be
various small groups, each having its own culture.
E.g.:
In India, we have different cultural groups such as Assamese, Punjabis,
Kashmiris, etc. The marketing manager should take note of these differences
before finalizing the marketing strategies. Culture changes over a period of
time. He must try to anticipate the changes new marketing opportunities.
4. (a) Explain the nature and scope of ‘Consumer behaviour’. 6½ x 2=13
Ans: Characteristics of
consumer behavior are:
a)
Consumer
behavior is the part of human behavior. This cannot be separated. Human
behavior decides what to buy, when to buy etc. This is unpredictable in
nature. Based on the past behavioral pattern one can at least estimate like the
past he might behave.
b)
Learning
the consumer is difficult and complex as it involves the study of human beings.
Each individual behaves differently when he is placed at different
situations. Every day is a lesson from each and every individual while we
learn the consumer behavior. Today one may purchase a product because of its
smell, tomorrow it may vary and he will purchase another due to some another reason.
c)
Consumer
behavior is dynamic. A consumer’s behavior is always changing in nature.
The taste and preference of the people vary. According to that consumers behave
differently. As the modern world changes the consumer’s behaving pattern
also changes.
d)
Consumer
behavior is influenced by psychological, social and physical factors. A
consumer may be loyal with a product due to its status values. Another may
stick with a product due to its economy in price. Understanding these
factors by a marketer is crucial before placing the product to the consumers.
e)
Study
of consumer behavior is crucial for marketers. Before producing a product
or launching a product, he has to go through a clear analysis of the consumer
behavior. If the people or prospects reject the product, he has to modify it.
f)
Consumer
behavior is a continuous process as it involves the process starts before the
buying and continuing after purchasing. Before buying there will be high
confusions and expectations about the product. After buying it, if the buyer is
satisfied with the product he shows a positive behavior, otherwise
negative.
Or
(b) Discuss the bases
for Market segmentation. 13
Ans: Basis of
Segmentation: Market segmentation dividing the Heterogenous 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.
5. (a) What do you mean by Product development? Discuss the various
stages involved in the development of a new product. 4+9=13
Ans: Product Planning and Development
Product planning is the initial step of the overall marketing programme.
In the competitive business world, producers try to produce products which can
be nearer to consumer expectation. The pressure of competition forces the
producers to replace the existing products by developing new consumers’
suitable and friendly products. Product planning covers all activities which
enable producers and middle men to determine what should constitute a company’s
line of products. Product development covers the technical activities of
product research, production and design. The well attempt effort of product
development increases the scope to satisfy the needs of the customers.
The product planning and development cover the following decision making
area:
(I) What products should be produced?
(II) Expansion of product line.
(III) Determine the new use of its products.
(IV) What brand, package and label are used for different products?
(V) What should be quantity of its production?
(VI) Pricing policy etc.
In short, product planning involves the innovation of new products and
improvement in the existing product. In the words of Karl.
H. Tietjen, “Product planning is the act of marketing and commercialization of
new products, the modification of existing lines and the discontinuance of
marginal or unprofitable items”. As per this definition product planning covers
these three considerations.
(I) The development and introduction of new products.
(II) The modification of existing lines to suit the changing consumer needs
and preferences and
(III) Elimination of unprofitable products.
Stages in New Product Development Process
The introduction of new product
usually passes through various stages. In each stage, the management must
decide whether to move on to next stage with the product idea or not.
Practically, in this process some of the ideas will be eliminated at every
step. There are six stages involved in the new product development. The stages
are given below:
(I) Idea generation: New products are produced on the basis of
new ideas. Ideas may be generated from various sources like customers, dealers,
distributors, salesman, top executive, consultancy organisation, Research and
Development Department etc. The first step is to collect ideas as many as
possible so that the company can find out one of the best idea out of those
ideas to convert the same in to actual product.
(II) Screening of Ideas: All new ideas cannot be converted into
products as it requires heavy capital investments. Those ideas should be
screened and all unworkable ideas should be dropped. Only most viable, feasible
and promising one should be selected for further processing. The company uses
the concept testing method. In this method, consumer response to a description
or picture or drawings is measured even before the product is actually
produced. The purpose is to find out few best ideas.
(III) Business Analysis: During this stage, an attempt is made to
predict the economic consequences of the product for the company. In these
stages, the management should perform the following:
(a) Identify product features.
(b) Estimate market demand and
product profitability.
(c) Establish a programme to
develop the product.
(d) Assign responsibility for
further study of the product feasibility.
(IV) Product Development or
Prototype testing: This step consists of the following:
(a) Prototype development giving
visual image of the product.
(b) Consumer testing of the
model or prototype product.
(c) Branding, packing and
labeling of the product.
The marketing people determine
an appropriate brand name, package and price and making sure that both tangible
and intangible features are considered and included. Focus groups, target
market surveys and other market research techniques with the physical product
give the marketer additional information.
(V) Market Testing: Test marketing involves placing a full
developed new product for sale in one or more selected areas and observing its
actual performance under a proposed marketing plan. In the words of P. Kotler-
“Test marketing is the stage at which the product and marketing programme are
introduced into more realistic market settings”. The basic purpose is to
evaluate the product performance and marketing programme in a real setting
prior to the commercialization. This step provides the scope of correction and
modification of the product as well as marketing programme. Many products fail
after commercialization because of lack of test marketing. In this process, the
marketers approach the trial purchasers and first repeat purchaser to know
their feelings and reaction about the product as well as marketing programme.
On the basis of their opinions the marketers make certain required modification
in the product as well as marketing programme. After the favourable result usually,
products are sent for commercialization.
(VI) Commercialization: After favourable response in test
marketing, full scale production and marketing programme are planned and then
the product is launched. It may be in phased manner or the product may be introduced
simultaneously depending on the company’s plan and resources available. The
phased manner introduction helps to avoid short supply of the product due to
initial gaps in production and distribution.
Or
(b) What do you mean by ‘Product life cycle’? Explain briefly the
different stages of Product life cycle. 4+9=13
Ans: Product Life Cycle
A product is like a human being. It is
born, grows up fast, matures and then finally passes away. Product life
cycle is the stages through which a product or its category bypass.
From its introduction to the marketing, growth, maturity to its decline or
reduce in demand in the market. Not
all products reach this final stage, some continue to grow and some rise and
fall. In short, The PLC discusses the stages which a product has to go
through since the day of its birth to the day it is taken away from the market.
However, the basic difference in case of
human beings and products is that a product has to be killed by someone. Either
the company (to bring better products) or by competition (too much external
competition). There are several products in the market which have lived on
since ages (Light Bulbs, Tubelights), whereas there are others which were
immediately taken off the shelf (HD DVD).
|
Product Life Cycle
|
Thus the Product life cycle deals with four stages of a
products life.
Stages of
Product life cycle:
A) Introduction: The stage 1 is where the product is launched. A
product launch is always risky. You never know how the market will receive the
product. There have been numerous failures in the past to make marketers
nervous during the launch of the product. The length of the introduction stage
varies according to the product.
If the product is technological and receives acceptance in the market, it
may come out of the introductory phase as soon as it is launched. Whereas if
the product is of a different category altogether and needs market awareness,
it may take time to launch.
Characteristics of Introductory stages of Product life cycle
Ø
Higher investment, lesser profits
Ø
Minimal Competition
Ø
Company tries to Induce acceptance and gain
initial distribution
Ø
Company needs Promotions targeted towards customers to
increase awareness and demand for product
Ø
Company needs Promotions targeted towards channel to
increase confidence in the product
B) Growth: Once the introductory phases are over, the product
starts showing better returns on investment. Your customers and channels begin
responding. There is better demand in the market and slowly the product starts
showing profits.
This is a stage where competition may step in to squash the product
before it has completely launched. Any marketing mistakes done at this stage
affect the product considerably as the product is being exposed to the market
and bad news travels fast. Thus special care has to be taken in this stage to
ensure competition or bad decisions do not affect the growth stage of the
product.
Characteristics of Growth stage of Product life cycle
Ø
Product is successfully launched
Ø
Demand increases
Ø
Distribution increases
Ø
Competition intensifies
Ø
Company might introduce secondary products or
support services.
Ø
Better revenue generation and ROI
C) Maturity stage: One of the problems associated with maturity
stages in a technologically advanced environment is the problem of duplication.
Not only is the product available in duplicate markets, but also there are
several competing products which arise with the same features and capabilities.
As a result, the USP’s of the product become less attrative.
Along with competition, Penetration pricing becomes a weapon for
competitors. Competitors sell products with the same features at lesser prices
thereby trying to penetrate in the market. Nonetheless, The sales of a product (especially
sales from return customers) is at its peak point during the maturity stages.
The growth of sales may be lesser, but the sales revenue of the organization is
maximum during the maturity stage of product life cycle.
Characteristics of Maturity stages of Product life cycle
Ø
Competition is high
Ø
Product is established and promotion
expenditures are less
Ø
Little growth potential for the product
Ø
Penetration pricing, and lower profit margins
Ø
The major focus is towards extending the life
cycle and maintaining market share
Ø
Converting customers product to your own is a
major challenge in maturity stage
D) Decline: 1 product, 10 competitors, minimum profits, huge
amount of manpower and resources in use – A typical scenario which a product
might face in its last stage. In this stage the expenditures begin to equal the
profits or worse, expenses are more than profits.
Thus it becomes a typical scenario for the product to exit the market. It
also becomes advantageous for the company as the company can use resources it
was spending on the declining product on an altogether different project. Characteristics
of Decline stages of Product life cycle
Ø
Market is saturated
Ø
Sales and profits decline
Ø
Company becomes cost conscious
Ø
A lot of resources are blocked in rejuvenating
the dead product.
Strategies for the
differing stages of the Product Life Cycle
A) Introduction: The need for immediate profit is not a pressure.
The product is promoted to create awareness. If the product has no or few
competitors, a skimming price strategy is employed. Limited numbers of product
are available in few channels of distribution.
B) Growth: Competitors are attracted into the market with very
similar offerings. Products become more profitable and companies form
alliances, joint ventures and take each other over. Advertising spend is high
and focuses upon building brand. Market share tends to stabilise.
C) Maturity: Those products that survive the earlier stages tend
to spend longest in this phase. Sales grow at a decreasing rate and then
stabilise. Producers attempt to differentiate products and brands are key to
this. Price wars and intense competition occur. At this point the market
reaches saturation. Producers begin to leave the market due to poor margins.
Promotion becomes more widespread and use a greater variety of media.
D) Decline: At this point there is a downturn in the market. For
example more innovative products are introduced or consumer tastes have
changed. There is intense price-cutting and many more products are withdrawn
from the market. Profits can be improved by reducing marketing spend and cost
cutting.
6. (a) Give the meaning of ‘Price’ and ‘Pricing’. Explain the
importance of Pricing. 2+2+9=13
Ans: 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.
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.
Or
(b) What is meant by ‘Promotion Mix’? Discuss the factors determining
the promotion mix. 4+9=13
Ans: Promotion Mix and Factors affecting it
Promotion is an important part of marketing mix of a business
enterprise. Once a product is developed, its price is determined the next
problem comes to its sale i.e., creating demand for the product. It requires
promotional activities. The activities are techniques which bring the special
characteristics of the product and of the producer to the knowledge of
prospective customers. Promotion is a process of communication involving
information, persuasion, and influence. The term ‘selling’ is often used synonymously
with promotion. But promotion is wider that selling. Selling is concerned only
with the transfer of title in goods to the purchaser, whereas promotion
includes techniques stimulating demand. These techniques include advertising,
salesmanship or personal selling and other methods of stimulation demand.
There are many
factors which influence promotional mix and they are known as product market
factors.
1. Nature of the product: Different product requires
different promotional mixes. Consumer goods and industrial goods require
different strategies. Consumer goods are sold through advertising, personal
selling and displays. But industrial good require more personal selling.
(a) Product complexity: If a product is technically sound and
complex in nature then it requires personal selling. For example, Industrial
products. On the other hand if the product is simple we can go for advertising.
For example, most of the FMCG products.
(b) Brand differentiation: Promotional mix is affected by
brand differentiation and the degree to which the brand is differentiated from
competitor’s brand.
(c) Purchase frequency: If buyers buy frequently a product,
such as soap, tooth paste etc. the marketer will invest a good amount on
advertising to push competition brands.
2. Nature of the market: Different market requires different
promotional mixes and strategies. In industrial market, advertising plays a
more informative role then the persuasive role for industrial buyers. Personal
selling emphasizes on two roles, i.e. information and persuasion in the
industrial and consumer’s market.
3. Stage in the product life cycle: The promotional product
mix varies within stage in the product life cycle. The nature of demand varies
according to the stages in the life cycle. During the introductory stage, the
customers do not realize the qualities of the product. Here, information about
the product and its benefits are made known to the buyers. In this stage, more
importance must be given to personal selling and trade shows. In the growth
stage, customers know the qualities of the product. Hence to stimulate demand,
advertising must be increased. In the maturity stage, sales and profits decline
and hence all the promotional activities should be cut down.
4. Market penetration: Here the product is already known to
the buyers. In that situation, a sustaining promotional strategy is suitable. A
brand has insignificant market penetration means it has a small market or
struggling market. Market size and location: Product’s market size and location
also influences the promotional mix. In narrow market, where the numbers of
potential buyers is small, direct mail is used. In a broad market advertising
is used.
5. Characteristics of buyers: The characteristics of
prospective buyers strongly influence the promotional mix. Experienced
professional buyers such as industrial purchasing agents need personal selling.
Inexperienced buyers need advertising. Some buyers give importance to time,
some to purchase of products, buyers act according to the influence of friend,
relatives etc.
6. Distribution strategy; Companies fighting more through
distribution for establishing their brands, invest more money on personal
selling and advertising. Companies which have already established their brand
in the market have to invest only a small amount in personal selling and
advertising.
7. Pricing strategy: Pricing strategy influence the
promotional mix strategy. If the brand is priced higher than the competition,
more personal selling is needed to get a middleman to stock and push the brand.
If the brand is priced lower, little promotion is needed.
7. (a) What is Channel of Distribution? Describe the significance of
Channels of distribution in marketing management. 4+9=13
Ans: Channels of Distribution: One of the important problems of marketing
is the distribution of goods & services to the right place, person &
the right time. Manufacturers often find it difficult to decide about the
effective distribution system. The channel of distributions refers to the group
of intermediaries, which perform the distribution functions. 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.”
According to Richard
Buskirk, “Channel of distribution is that system of financial organization
by which a producer sends his products to the hands of consumers.”
According to Cundiff
and Still, “Channels of distribution are those marketing nets through which
the producer flow the products toward the market.”
Functions
(Role) of the Channels of Distribution
The following are the main function of the channel of distribution:
(1) Extending Suggestions Regarding Price-Determination: The
middlemen are in the direct contact of the consumers. Therefore, they possess
the knowledge that on what price may the consumer accepts the product. Thus,
the channel of distribution extends necessary advice to the producers in the
price-determination.
(2) Regularizing the Decisions: The channel of distribution
regularizes the decisions and the transactions, resulting in the lowering of
the costs. If the products are sold off to some such store which has many
branches in the city, the producer then doesn't need going to various branches
frequently or repeatedly. The main cause of the same is that if the product
seems suitable for the store, it will itself send the purchase order to the
manufacturer and in this way, with only the limited efforts, it will become
possible to sell the products in bulk quantities.
(3) Managing the Finance: We
find that the agents generally send some advance money along with the order.
Very often the product is supplied to the agents through the bank so that the
company gets the documents discounted from the bank. Thus the finance is
arranged. Thus it-is also the function of the agents to arrange the finance.
(4) Performing the Promotion Activities: By the
middlemen, particularly by the retailers, the advertisements, individual sales,
and the sales promotion activities are performed. Very often the middlemen
themselves plan and implement the promotion activities and sometimes the
manufacturers to extend their help in such work. Really, the result or the
outcome of the sales, by the producer, very much depends upon the promotion
activities undertaken by the middlemen.
(5) Serving the Consumers: Due to
the middlemen only, the consumers get their required products. Only in
accordance with the needs of the consumers, the retailers arrange to purchase
the products from the wholesellers and the manufacturers.
(6) Minimizing the Total Transactions: If
there were no middlemen, the producer would have been required to sell the
product directly to the consumers which would have result into more of
expenditure and trouble. Really speaking, due to the existence of the middlemen
only, the number of total transactions is reduced which also reduces the costs
of distribution.
Or
(b) Write an explanatory note on ‘Inventory Control’. 13
Ans: Inventory Control: The term ‘Inventory’ is used to
denote (i) goods awaiting sale (the stock items of a trading concern and the
finished stocks of a manufacturer); (ii) the goods in course of manufacture,
known as work-in-progress, and (iii) goods to be used directly or indirectly in
production, i.e., raw materials and supplies.
In a manufacturing company, normally the cost
of materials constitutes fifty percent of the production cost and the cost of
inventory (i.e., raw materials W.I.P., and finished good) represents about
one-third of the total assets. As the costs of materials and inventory are
quite formidable but at the same time controllable, there is a great need felt
for proper planning, purchasing, handling and accounting for the same, and also
to organize the system of inventory control in a manner that it may provide the
maximum profitably to the management.
Techniques of Inventory Control
The techniques or the tools generally used to
effect control over the inventory are the following:
1)
Budgetary techniques for inventory planning;
2)
A-B-C. System of inventory control;
3)
Economic Order Quantity (E.O.Q.) i.e., how much
to purchase at one time economically;
4)
VED Analysis;
5)
Perpetual inventory system and the system of
store verification;
6)
Fixation of Stock Level;
7)
Control Ratios.
1)
Budgetary Techniques
For the purchase of raw materials and stocks,
what we required is a purchase Budged to be prepared in terms of quantities and
values involved. The sales stipulated as per sales Budget of the corresponding
period generally works out to be the key factor to decide the production
quantum during the budget period, which ultimately decides the purchases to be
made and the inventories to be planned.
2) A-B-C
Analysis
To exercise proper control on stores, it is
essential that the store items should be classified according to values so that
the most valuable items may be paid greater and due a attention regarding their
safety and care, as compared to others. The stores are divided into three
categories generally, viz., A, B, and C.
In the ABC system, greatest care and control
is to be exercised on the items of ‘A’ list as any loss or breakage or wastage
of any items of this list may prove to be very costly; proper care need be
exercised on ‘B’ list items and comparatively less control is needed for ‘C’
list items. The rules relating to receipt maintenance issue and writing off
stores items should be formed in accordance with the utility and value of the
items based on the above categorization.
ABC analysis measures the cost significance
of each item of materials. It concentrated on important items, so it is also
known as ‘Control by importance and Exception’.
3)
Economic
Order Quantity
This
represents the normal quantity to be placed on order when the stock has reached
its re-order level. Re-ordering quantity is to be fixed taking into account the
maximum and minimum stock levels. The quantity ordered must be that which, when
added to the minimum stock, will not exceed the maximum stock to be carried at
any point of time. The following factors govern the re-ordering quantity:
a)
Average consumption
b)
Cost of pacing order
c)
Cost of storage
d)
Interest on capital etc.
The economic order quantity can be determined
by the following simple formula.
4)
VED Analysis:
VED –
Vital, Essential, Desirable – analysis is used primarily for control of spare
parts. The spare, parts can be divided into three categories – vital, essential
or desirable – keeping in view the critically to production.
5) Perpectual
Inventory System
Perpectual
Inventory is a system of records maintained by the controlling department,
which reflects the physical movement of stocks and their current balance. It
aims at devising the system of records by which the receipts and issues of
stores may be recorded immediately at the time of each transaction and the
balance may be brought out so as to show the up-to-date position. The records
used for perpectual inventory are:
a)
Bin Cards;
b)
Store Ledger Accounts or Stores Record cards;
c)
The forms and documents used for receipt, issue
and transfer of materials.
6)
Fixation of stock level
The object
of fixing stock levels for each item of material is to maintain required
quantity of materials in the store and thereby the expenses may be reduced. The
different stock levels are: (1) Minimum stock level (2) Maximum stock level (3)
Reorder stock level
a.
Minimum
stock level: It
represents the minimum quantity of an item of material to be kept in the store
at any time. Material should not be allowed to fall below this level. If the
stock goes below this level, production may be held up for want of materials.
This stock is also known as safety stock level or buffer stock.
b.
Maximum stock level: It is the stock level above
which stock should not be allowed to rise. This is the maximum quantity of
stock of raw materials which can be had in the stock. It is goes above, it will
be overstocking.
c.
Reorder
stock level: It
is the point at which the storekeeper should initiate purchase requisition for
fresh supply. This level lies between the maximum level and the minimum level.
7)
Control Ratios
The control ratios are mainly two –
a)
Inventory Turnover Ratio which we have studied
and
b)
Input-output Ratio.
Inventory Turnover: Inventory Turnover is a ratio of the
value of the materials consumed during a period to the average value of
inventory held during that period.
If the inventory turnover rate in terms of
value of materials is high, or if the length of the inventory turnover period
is short, the material is said to be fast moving. So if the rate of consumption
is fast or if the inventory turnover rate is good, it is a healthy measure of
efficiency of materials control, as the capital employed is properly utilized.
Input-output Ratio: The Input-output
Ratio is the ratio of the raw material put into manufacture and the standard
raw materials content of the actual output.
This ratio enables one to find out whether
the usage of the materials is favourable or not. A standard ratio of input of
materials and output of material should be determined and the actual ratio
should be compared with the standard ratio.
***
Post a Comment
Kindly give your valuable feedback to improve this website.