B.COM 3RD YEAR DISTANCE SOLVED PAPERS: PRINCIPLES OF MARKETING' 2016


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.
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