B.Com 5th Sem: Principles of Marketing Solved Papers' 2013 | Dibrugarh University

1. (a) Write true or false :      1x5=5

(i) ‘Creating customers’ means exploring and identifying the needs and requirements of customers. True

(ii) ‘Product differentiation and market segmentation are same.                               False

(iii) ‘Test marketing is normally the last step in the developing process before a new product is launched either at regional or at national level.        False, Commercialisation

(iv) ‘order processing’ is the component of physical distribution mix.                       True

(v) The modern concept of salesmanship is based on the idea of ‘Profit’.                              False, Create need and convert that need into want

(b) Fill in the blanks with appropriate words:      1x3=3

(i) ‘Packing’ facilitates product identification.

(ii) ‘A brand is a/an voice that acts as means of communication.

(iii) ‘Label’ helps in avoiding the consumer’s confusion.

2. (a) what are the differences between ‘Marketing’ and ‘Selling’? Discuss the importance of marketing in modern business.   5+6=11

Ans: Difference between selling & marketing concept

Importance and Uses of Marketing (Role of Marketing)

Marketing is a unique function of business which satisfies social values, needs and wants of an individual. It serves as the springboard for all industrial production. The importance of marketing can be studied under the following heads:

A. Uses to the Society

(1)   Employment of Various Persons: Since the things are manufactured or produced due to marketing, hence many people get employment through the production activities. Transport, storage and wholesale and retail services cover many persons. In this way, it might be said that by marketing the employment is created.

(2)  Availability of Various Products for Use: Today, the sphere of marketing has become worldwide or international. Due to it, the products manufactured in the foreign lands too become avail­able for consumption. All this could become possible due to the growth of the marketing and its development.

(3)  Increase in the National Income of Country: If the marketing activities are efficiently undertaken and things are produced in accordance with the needs or requirements of the cus­tomers, there must be some increase in the demand of the things. The production goes up which leads to the increase in the national income.

(4)  Protecting the Economy against the Evil Effects of Depressions: If the produced goods are not sold, there shall be piled up the unsold materials with the producers and they will fall victim to the depression effects. Thus the marketing keeps the economy safeguarded against the evil effects of the depressions.

(5)  Increase in the Standard of Living: By an efficient sys­tem of marketing, there is a fall in the prices of the products which ultimately leads to the enhancement in the consumption capacity of the society which ultimately brings reforms and improvement in the standard of living of the society.

B. Uses to the Producers

(1)   Helpful in Earning More Profits: Whenever any manu­facturer produces some commodity, he has to seek the help of so many people in letting the same reach the hands of the consumers. For instance, there is the need of the middlemen, the godown ­owners, the traders, the owners of transport companies, etc. By establishing proper distribution channel, more profits can be earned.

(2)  Getting Information Regarding Demand. By the study of marketing, the producers are able to get information regard­ing the changing demands.

(3)  Reduction in Distribution Costs. By the wide studies of distribution, it is also known that the products be passed on to the consumers on the minimum possible costs.

(4)  Helpful in Production Planning. The producer, by studying the marketing, could plan his various policies pertaining to production.

C. Uses to the Consumers

While purchasing the products, the consumers must have full knowledge of the things. This can be possible only through marketing. By the study of marketing, the consumer is able to acquire knowledge as to how the middlemen resort to their exploitation. For avoiding the middlemen's exploitation, the con­sumer co-operative societies are being promoted and developed.

D. Uses to the Middlemen

By the 'middlemen' is meant those persons who send the products from the producer to the consumer. The lower are the ex­penses of the middlemen, the greater is their profit. By studying the marketing, they get the knowledge as to how the expenses of dis­tribution be kept lower. Unless the middlemen possess sufficient knowledge of marketing, they can't become successful.

E. Uses to the Nation

With the help of marketing, in the progressive and developing countries too, good managers and entrepreneurs can be encou­raged. For resorting to the most efficient use of the resources avail­able in the country, marketing of the commodities is very necessary. By the study of marketing, the economy could be kept safeguarded against the evil effects of instability. Only due to the marketing, the processes of production and distribution continue to exist. In it the condition of full employment could be achieved. Really speaking, marketing occupies an important role in the economic development.

OR

(b) What are the elements of marketing mix? Discuss the variable of product mix of an organization.

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:

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

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

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

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

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

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

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

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

Components of product mix: The important components of product mix are:

1. The Core product: The core product is the use, benefit or problem solving service for which the consumer is purchasing the product.

2. Features of a product: The product must contain the following features: Tangibility, exchange value, Intangible and associated attributes and consumer satisfaction.

3. Brand Name: A brand is define as a name, term, sign, symbol or special design or some combinations of these elements that is intended to identify the goods or services of one seller or a group of sellers. A brand differentiates these products from those of competitors. A brand in short is an identifier of the seller or the maker. A brand name consists of words, letters and / or numbers that can be vocalized. A brand mark is the visual representation of the brand like a symbol, design, distinctive colouring or lettering.

4. 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. Trade marks 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.

3. (a) What are the various steps of buying process? Discuss The psychological determinants of consumer behaviours.   5+6=11

Ans: Steps in buying decision process

The marketing scholars have developed a “stage model” of the buying process. The consumer passes through 5 stages. But consumers do not always pass through all five stages in buying a product. They may skip some stages.

(1) Problem Recognition: The buying process starts when the buyer recognizes a problem or need. The need can be triggered by internal or external stimulus. With an internal stimulus, one of the person’s normal needs hunger thirst etc. become a drive or a need can be aroused by external stimuli. Marketers need to identify the circumstances that trigger a particular need by gathering information from a number of consumers.

(2) Information Search: An aroused consumer will be inclined to search for more information. A person at times simply becomes receptive to information about a product or he may enter looking for a reading material, phoning friends, going online etc. Through gathering information, the consumer learns about competing brands and  other features.

(3) Evaluation of Alternatives: The information search and  comprehension (evaluation) stages represent the information processing stage. These 2 stages constitute the cognitive field of the purchase process. Cognition refers to acquisition of knowledge.

Some basic concepts help us in understanding consumer evaluation: first the consumer is trying to satisfy a need, second the consumer is looking for certain benefits and  third the consumer views each product as a bundle of attributes to satisfy this need.

(4) Purchase Decision: The buyer must be convinced that the purchase of the product is the legitimate course of action. This stage stands as a barrier between a favourable attitude towards the product and  actual purchase. Only if the buyer is convinced about the correctness of the purchase decision, will be proceed. At this stage, he may seek further information regarding the product or attempt to assess the information already available.

(5) Post Purchase Behaviour: The purchase leads to specific post purchase behaviour, usually it creates some restlessness in the mind of the individual. He is not sure about the product. He may feel that the other brand would have been better. It can be defined in terms of satisfaction. If the performance of the product falls short of expectations, the consumers is disappointed, if it meets expectations, the consumer is satisfied, it is exceeds expectations, the consumer is delighted. These feelings make a difference in whether the customer buys the product again and  talks favourably or unfavorably about it to others.

Factors that influence  consumer behaviour

The buyer has a selective perception and  is exposed to a variety of products and  information. He may ignore certain piece of information whereas actually seek out some other information whereas actively seek out some other information Therefore, marketers must fully understand both the theory and  reality of consumer behaviour. A consumer’s buying behaviour is influenced by cultural, social and  personal factors and  they are a part of the buyer as an individual.

Pshycological/Social Factors: Consumer’s behaviour is influenced by social factors such as reference groups, family, social roles and  status. The buyer is living in a society, is influenced and  There is a constant interaction between the individual and  the groups to which he belongs. All these interactions affect him in his day to day life.

a. Reference Groups: A person’s reference groups consist of all the groups that have a direct or indirect influence on his attitude. They can be family friends, neighbours, co-worker, religious, professional and  trade union groups. Reference groups expose an individual to new behaviours and  lifestyles and  influence attitude and  self concept. Brands like Levi, Prologue and  Planet M used teenage icon as brand Ambassadors for in store promotions.

b. Family: The family is the most important buying organization in society. From parents a person acquires an orientation toward religion politics and  a sense of personal ambition, self worth and  love. E.g. In traditional joint families, the influence of grandparents on major purchase decisions affect the lifestyles of younger generations. In urban India with the growth of nuclear families and  both husband and wife working the role of women in major family decisions is prominent. Children and  teenagers are being targeted by companies using the internet as an interactive device.

c. Role and  Status: The person’s position in each group can be defined in terms of role and  status. A role consist of all activities that a person is expected to perform. Each role carries a status. A Vice President of marketing has more status than a sales manager and  a sales manager has more status than an office clerk and  people choose those products that reflect and  communicate their role and  desired status in society.

OR

(b) What are the benefits of market segmentation? Discuss the factors which contribute in the process of segmentation.    4+7=11

Ans: Advantages / Importance / Significance of Market Segmentation:

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

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 and  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, and  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, and  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 and  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 and  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 and  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, and  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 and

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 and  another to impress others. Based upon this, markets may be classified as markets for cheap price products and  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, and  negative market.

4. (a) What is growth stage of ‘product life cycle’? What strategies marketing houses follow to keep growing?    5+7=12

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).

Thus the Product life cycle deals with four stages of a products life.

Stages of Product life cycle:

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

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.

OR

(b) Critically discuss the objective and the component of product planning.           6+6=12

Ans: Ans: 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.

Objectives of Product Planning:

Product planning is one of the most important functions of a marketing manager. The following are its objectives:

Components of Product Planning:

5. (a) Discuss the factors that influences the pricing decision of an organization     11

Ans: 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 and  buyer in the market place. Only when a buyer and  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. But pricing is different from price. It refers to decisions related to fixing of price of a commodity. 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. 

Factors Affecting Pricing

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

A. Internal Factors:

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

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

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

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

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

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

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

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

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

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

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

B. External Factors:

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

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

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

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

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

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

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

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

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

OR

(b) What are the components of promotion mix? Discuss the various components of communication.      5+6=11

Ans: 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:

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

Elements of Promotion Mix

There are four elements of promotion mix:

a) Advertising: Advertising is a non-personal presentation of goods, services or idea. In advertising existing and prospective customers are communicated the message through impersonal media like radio, T.V., newspapers and magazine. It involves transmission of standard message simultaneously to a large number of people. The message transmitted is known as advertising.

b) Personal Selling: Personal selling is the process of assisting and persuading the existing and prospective buyer to buy the goods or services in person. It involves direct and personal contact of the seller or his representative with the buyer.

c) Publicity: Publicity is a non-personal non-paid stimulation of demand of the product or services or business unit by planning commercially significant news about the services or business unit by planning commercially significant news about in the print media or by obtaining a favorable presentation of it upon radio, television or stage.

d) Sales promotion: Sales promotion consists of all activities other than advertising, personal selling and publicity, which help in promoting sales of the product. Such activities are non-repetitive and one time offers. According to American Marketing Association, sales promotion include, “those marketing activities other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as point of purchase displays, shows and exhibitions, demonstrations and various non-recurring selling efforts not in the ordinary routine.”

Elements of Communication Process

The process of communication is the inter relationship between several independent components. It consists of a chain of related actions and reaction which together result in exchange of information. In order to understand the process of communication, it is necessary to describe each of these components. A model of communication process is as follows:-

6. (a) What is channels of distribution? How are channels classified? What are the role of marketing channels nowadays?     2+6+3=11

Ans: Channels of Distribution

One of the important problems of marketing is the distribution of goods and  services to the right place, person and  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 and  individuals that assist in the transferring the little of goods and  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.”

Types of Channels

A. Zero-level channel (producer to consumer): It is also called as direct marketing or direct selling. This channel consists of the producer who directly sells his products to the ultimate consumers. This is the shortest, simplest, and  cheapest form of distribution. Producers are benefited by increased profit, whereas consumers are benefited by reduced price. This is possible because it eliminates the middleman completely. With the development of sophisticated and  efficient retailing like supermarkets, chain-stores, automatic selling machine is financially sound follow this channel of distribution. For products like jewelry and  industrial goods like machinery, this is the best channel.

B. One-Level Channel (Producers            Retailers              Consumers or producers              Wholesalers                      Consumers): This is a short channel where the manufacturer may himself perform some of the wholesaler. This is considered to be the best channel as it eliminates some of the marketing intermediaries and  at the same time gets advantages of inclusion of retailers. In case of perishable goods, this is the best channel. When there is large scale promotion, inelastic demand and  when manufactures are financially sound this channel is preferred.

C. Two-Level Channel (Manufactures          Wholesalers                           Retailers          Consumers): This is the traditional channel. It is more useful in the case of buyers, sellers, and  manufactures who operate in small scale. The manufacturer sells his products in large quantities to a wholesaler who in turn sells in small quantities to retailers and  finally retailers sell to ultimate consumers. Products which have low unit value and  which are purchased frequently may be distributed through this channel.

D. Three Level Channel (Manufactures            Wholesalers           Agents         Retailers           Consumers): In this method manufactures appoint agent such as consignees to sell their products. It is preferable for exporters or MNCs.

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 wholesalers 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) What is physical distribution? Discuss the various component of transport mix.      3+8=11

Ans: Physical distribution is the process of making the movement of the product to the consumers. It encompasses all the activities involved in the physical flow of products from producers to consumers. Physical distribution makes the product available at the right place and at the right time, thereby maximizing the company’s chance to sell the product and strengthen its competitive position. The products have to be carried to places of consumption; they have to be stored; and they have to be distributed. The product has to be marketed over an extensive marketing territory. It has to be transported through long distances, stored for a considerable length of time before being consumed. Physical distribution largely determines the customer service level. Inefficient physical distribution leads to loss of customers and markets. There are some products which are subject to the seasonality factor - either production is continuous but demand is seasonal, or demand is continuous but production is seasonal. In all such cases, physical distribution acquires additional importance.

Decisions/ Components/ Elements of Physical Distribution

1. Material Handling: Material handling stands for the product movement after it gets out from manufacturing plant but before it is loaded on the transport mode to the destination of consumer. Material handling is undertaken at every stage of logistics activity namely, during production – storage – transport and packaging processes. Thus, it represents product handling from plant to warehouse or warehouses, location to another within the warehouse and from warehouse to the place of loading from transport models. Material handling is the sub-system of physical distribution system of a firm and is an agent of cost reduction and improved customers service. In effect, an efficient and effective materials handling system in a unit contributes to the efficiency and effectiveness of the total physical distribution system. It is because, sound management of material handling avoids damage in product handling, prevents unnecessary and irrelevant movement, facilitates order-processing and order picking and enables efficient product movement to match with inventory levels and transportation.

2. Inventory Planning And Control: Inventory refers to the stock of products a firm has on hand and ready for sale to customers. Inventories are kept to meet market demands promptly. Inventory is the link interconnecting the customer’s orders and the company’s production activity. Infact the entire physical distribution management rotates around the inventory management. Inventory management is the heart of the game of physical distribution. Marketing managers undertake an inventory planning to develop adequate assortments of products for the target market and also try to control the costs involved in obtaining and maintaining inventory.

3. Order Processing: Order processing includes the activities of receiving, recording, filling and assembling and orders for shipment. Each customer aspects that the order placed by him should be implemented without inordinate delay on one hand and that the goods dispatched match perfectly to his order specification. This implies quality control that ensures the upright execution of orders. That is why, marketers and distribution managers are very much concerned about the order cycle time and every effort is made to keep it rigged.

An order cycle is the period between the time of the placement of an order by the customer to the time of the arrival of the goods at his destination. This cycle is made up of the transmission of the order, document processing in the department and shipment of the goods. Here, document processing is a routine activity which is standardized. Since, order processing involves series of logical steps from receiving order to the dispatch, there should be a standard procedure for receiving the orders, handling the orders, granting of credit, invoicing, dispatching, collecting the bills and post dispatch adjustments. The order processing procedures followed in a firm have dual impact on consumer service level namely, it affects:

4. Communications: It is a process of passing information and understanding from one person to another. This includes the information system which should link producers, intermediaries, and customers. Computers, memory systems, display equipment and other communication technology facilitate the flow of information among other members in the channel. A manager to be successful must develop an effective system of communication. So that he may issue instructions, receive the reactions of the subordinates, and guide and motivate them.

5. Organisational Structure: The person in charge of the physical distribution should co-ordinate all Activities into an effective system to provide the desired customer service in the most efficient manner. Examples of organizational consideration are: (i) How can the five elements of physical distribution best be co­ordinated so that a team effort results? How can compartmentalization thinking be avoided? (ii) If a central head is established to direct all physical distribution activities, to whom should he report—The Head of the Marketing or The Chief Executive Officer?

6. Transportation: Transportation as the last component of distribution system is to do with the movement of products from warehouse to the customer destinations. Transportation involves loading and unloading of products and transshipment between the place of dispatch and places of arrival. The major contribution of transportation management is cost reduction because, cost of transportation is 35 per cent of total distribution costs and 15 to 20 per cent of the total price paid by the users. The point lies in cost reduction and creation of maximum of time utility. Every marketer takes sufficient interest in company transportation and transportation decisions because, it is the correct choice of transport mode of modes that will help in gaining the effects as it affects pricing of products, regular and punctual delivery performance and the conditions of the goods in transit – all affecting finally the consumer satisfaction and sales profitability.

7. Write short notes on:       4*4=16

(a) Ecological force: 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.

(b) Product positioning: Product positioning is an important element of marketing plan. It is the process presenting the benefits of the products to the target audience. In other words, Product positioning is a process of identifying the needs of market segments, product strength and weaknesses and the extent to which competing product are perceived to meet the consumer needs. It is an attempt to project different or refined or revised product image in the market than one that has been prevailing. It is the delicate task of relating a product to the market or a market segment. It is that method which emphasizes the product that proves attractive to the consumers. For instance, a two-wheeler manufacturer might engineer the product to be safer, more accommodative, more fuel-efficient than those of competitors.

According to Professor Philip Kotler, “Positioning is the act of designing the company’s image and value offer so that the segment’s customers understand and appreciate what the company stands for in relation to its competitors. “

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

Importance/Advantages of Advertising

In the present day marketing, advertising has become increasingly important to business enterprises-both large and small. Even non-business enterprises have recognized the importance of advertising. The various advantages of advertising are discussed below:

Limitations/Disadvantages/Objections to Advertising:

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

(d) 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: