Principles of Marketing Solved Papers: Nov' 2015 (3rd Semester)

2015

COMMERCE (Speciality)

Course: 301

(Principles of Marketing)

Full marks: 80

Pass marks: 24

Time: 3 hours

1. (a) Write “True” and “False”:                               1x4=4 Marks

(i) Need recognition is not a step in buying process.                                         False

(ii) Mechanical vending is designed on the principle of ‘terms cash’.         True

(iii) Marketing management can launch full-fledged advertising and promotion campaign for mass distribution.  True

(iv) Publicity is also called marketing public relations.       False

(b) Fill in the blanks:                                      1x4=4 Marks

(i) The main aim of marketing research is to provide management with factual information for marketing decisions and action.

(ii) Standardisation and grading are two important marketing functions which facilitate the sales of product.

(iii) Sales promotion is a bridge in between advertising and Personal Selling.

(iv) Labeling Means putting identification marks on the package. 

2. Write short notes on (any four):                          4x4=16 Marks

(a) 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.

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.

(b) Sales quota: Sales quota is the sales target set by a business unit for a particular product or division or sales representative. It is a parameter to drive the sales of the organisation. Generally sales quotas are set much higher than the estimated sales so as to stretch the sales force effort. It is very important factor for companies to enhance their sales volume. Sales quotas also determine the overall companies’ performance. Sales quota are of various types such as volume based, revenue based and profit based.

(c) Product diversification:  When a manufacturer offers more products in different areas, it is referred as product diversification. Diversification normally involves business in a new area. E.g.: ITC entering into hotel business, sony entering into film production business. It is simply a practice of expanding the original market for a product. This strategy is used to increase the sales associated with an existing product line, which is especially useful for a business that has been experiencing declining sales or facing tough competition in the market.

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

Features of Personal selling:

Qualities of a Good salesman:

(e) Market research: Marketing Research involves systematic gathering, recording and analysing of data about problems connected with product, pricing, promotion and distribution. It deals with research on customer demand, behaviour of customers, analysis of sales data, market share, etc. there are four main steps in marketing research process which are:

1. Identification of problem as well as having clear goal.

2. Designing an appropriate market research plan.

3. Data collection.

4. Implementation of the market research plan.

Market research is the key for the success of a new product and growth of an existing product.

(f) Prospecting: Prospecting is a process designed to identify, qualify, and prioritize sales opportunities, whether they represent potential new customers or opportunities to generate additional business from existing customers. Prospecting is an important activity for salespeople because it is the primary means of generating revenue and guarding against the effects of customer turnover. There are five main steps in prospecting process which are stated below:

1. Generate sales leads.

2. Determining sales prospects.

3. Prioritizing sales prospects.

4. Preparing for sales dialogue.

5. Trust based sales process.

3. (a) Compare “Marketing” with “Selling”. Explain those entities with which marketing people are involved. 6+8=14

Ans: Selling V/S Marketing

Selling concept: Now a days, as the technology advances along with the quantity and quality of the goods, the art of selling the goods are also very essential. The firms which follow the selling concept believe that in order to motivate a customer to buy his product, he must be convinced by aggressive selling and promotional efforts. Firms following selling concept make use of advertising powers and other persuation techniques to influence the customers.

In the words of Philip Kotler,” The Selling Concept holds that consumers and businesses, if left alone, will ordinarily will not buy enough of the organisation’s products. The organisation must, therefore, undertakes an aggressive selling and promotion efforts. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that company has a whole battery of effective selling and promotion tools to stimulate more buying,”

Marketing Concept: The marketing concept emerged in the mid 1950’s. The business generally shifted from a product – centered, make and sell philosophy, to a customer centered, sense and respond philosophy. The marketing concept concentrates on the need of the customers. This concept says than product should be designed and produced keeping in mind the need of the customers and try to satisfy the need better than the competitor. The marketing concept holds that the key to achieving organizational goals consist of the company being more effective than competitors in creating, delivering and  communicating superior customers value. This concept puts the customers at both the beginning and the end of the business cycle. Every department and every worker should think about the customer and acts as per need of the customer.

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

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

From the above discussion we find the following differences between selling and  marketing:

Or

(b) Which is marketing environment? Discuss about the controllable forces of business environment. 4+10=14

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 and forces, which affect the company’s ability to develop and maintain successful transactions and 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:

1. Internal Environmental Factors: A Company’s marketing system is influenced by its capabilities regarding production, financial and other factors. Hence, the marketing management/manager must take into consideration these departments before finalizing marketing decisions. The Research and 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 and 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 and 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 and 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 and 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 and 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 and 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 and 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 and 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 and 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 and 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 and 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 and a new group of customers. A new technology improves our lifestyle and 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 and Cultural Factors: Most of us purchase because of the influence of social and 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 and  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 and  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) Discuss the basic economic determinants of consumer behaviour. What are the importance of “buying motives” in marketing?                         8+6=14

Ans: 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.

(1) Cultural Factors : Culture is the fundamental determination of a person’s wants and  behaviour. The growing child acquires a set of values perceptions, Preferences and  Behaviours through his or her family. Each culture consists of various subcultures that provide more specific identification. It includes nationalities, religions, social groups and  geographic regions.

Every culture dictates its own unique patterns of social conduct. Within each religion there may be several sects and  sub sects, there may be orthodox group and  cosmopolitan groups. The do’s and  don’ts listed out by religion and  culture impacts the individual’s lifestyle and  buying behaviour.

(2) 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.

(3) Personal Factors: The personal factors include the buyer’s age and  stage in the life cycle, occupation and  economic position, personality and  self concept and  lifestyle and  values.

a. Age and  Stage in the Life Cycle: People buy different products like food, cloths furniture and  this is often age related. Trends like delayed marriages, children migrating to distant cities, tendency of professionals has resulted in different opportunities for marketers at different stages in consumer life cycle.

b. Occupation and  Economic Position: Occupation also influences buyer’s behaviour. A blue collar worker will buy work clothes, work shoes and  lunch boxes; a company president will buy dress suits, air travel and  club memberships. Marketers try to identify the occupational groups and  then make products according to their needs and  demands. Product choice is greatly affected by economic circumstances – spendable income, savings and  assets and  attitude towards spending and  savings.

c. Personality and  Self Concept: Each person has personality characteristics that influence his / her buying behaviour. Personality means a set of distinguishing psychological traits that has to response to environmental stimuli. Personality can be a useful variable in analyzing consumer brand choice. The idea is that brands also have personalities and  consumers like to choose those brands which suits or match their personality.

Buying motives and Its importance:

A consumer does not buy a product or service just because he wants to buy. There are many factors which affects buying behaviour of consumers. Human beings are motivated by ‘needs’ and ‘wants’. These needs and wants build up inside, causing people to desire to buy a product or a service. These needs and wants built up pressure or tension leads to reasons which are manifested in a psychological wave called ‘motive’. ‘Motive’ is the energy which implies behaviour thought it does not give pre use direction to that behaviour”. Motive is something which is capable of inducing a person to act in a particular way. Motive is the strong feelings, urge, instinct, drive desire, stimuli, thought, emotion, a belief, a tension that makes a person to react in the form of buying decision.

Professor D. J. Duncan defined, “buying motives”, as “those influence or considerations which provide the impulse to buy, induce action or determine choice in purchase of goods and services”.

In the words of Professor William Stanton, “a motive is a drive or an urge for which an individual seeks satisfaction; it becomes a buying motive when the individual seeks satisfaction through the purchase of something”.

Importance of Buying Motives

Or

(b) What is market segmentations? Discuss those factors which make segmentation successful.             4+10=14

Ans: Marketing Segmentation

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

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

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

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

Essentials elements for success of Marketing Segmentation:

Market segmentation has its own benefits and costs. The strength of it lies in better understanding of consumers for making intelligent marketing decisions and their implementation. The success of marketing segmentation of depends on the following points:

5. (a) Discuss the various objectives and the components of product planning. 7+7=14

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.

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.

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:

Or

(b) Explain the functions involved in product packaging and discuss the importance of branding.            8+6=14

Ans: Meaning of 'Packaging'

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.

Some of the main definitions of 'packaging' are being given hereunder:

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.

Functions of Packaging

Importance of Branding

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. Some of the importances of good brand name are stated below:

1. Creates customer’s preference: Similar products and services of various companies are available in the market which creates confusion amongst the customer’s mind. Branding helps to attract the customer. It induces customer’s preference towards a product or service.

2. More revenue: Branding helps the companies to increase their market share due to which their revenues also increases. Also, a company with good brand name charges higher price as compare to other competitors.

3. Helps to survive during recession: During recession a company with good brand name can easily survive which is not possible for a new or general company.

4. Increase in employee’s efficiency: When the brand of company is well known, people also want to work with that company. Highly qualified and skillful candidates always prefer to work with the establishment having good brand name.

5. Attracting new distributor: A company with good brand name can easily attract local and global distributor. Every distributor wants to work with good brand because it increases their revenue.

6. (a) Critically discuss the factors which influence product pricing decision.                      14

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) Explain the different media of indoor advertising. Discuss the factors which influence the choice of an advertising medium.                             7+7=14

Ans: When advertising is done through TV, Newspapers, Magazines, Film etc., so that people can get the message at home, such advertising is known as indoor advertising. Various media of indoor are stated below:

1. Newspaper advertisements: These are, of course, a favourite form of advertising. Here the disadvantage is that the cost of a newspaper advertisement is heavy owing to the number of advertisements contained in the newspaper, and the majority of advertisers have to be content with little space. If one could ensure the whole of the advertising space of the issue, it would be a good speculation, although at expensive one.

2. Magazines: One great advantage of the magazine over the weekly or daily paper is that it is continuously used over a period of time. The magazine is kept for several weeks, and each separate copy is probably seen by a large number of different persons.

3. Radio advertising: Radio advertisements are normally broadcast along with popular programmes. Radio advertisements carry an effective appeal and cover numerous listeners of different tastes. Radio advertisements are the very important media for rural people.

4. Television advertisement: These days television programmes are flooded with advertisements. It is the fast growing medium of advertisement.

5. Film advertisement: Films are also an important medium of advertisement. Business enterprises get short films or slides prepared from advertising agencies and distribute them to selected cinema halls for display.

6. Internet and Social Media: Present world is an internet world which affects each and every people. Now everyone is using android phone and connected with social media, is the fastest growing and very effective mean of indoor advertising. Cost of such mode is also very low with maximum reach.

The following factors must be considered before selecting the advertising medium:

1. Cost: The cost of advertising and ability of the firms to pay is the main consideration before selecting the mode of advertisement. TV, Radios and films are costly but internet and social media is very cost effective.

2. Reach: It is also an important criterion to choose amongst various media. Reach means the number of people exposed to a particular medium at least once during a specified time period. Now a days, internet and social media is preferred first so far is reach is considered.

3. Type of buyers: A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. People to be influenced should be taken into account while selecting the media. Each medium has its special viewers, readers, or audience. For the firm, it is important to know whether the target groups can be exposed by the particular medium.

4. Credibility and Image of Media: This is also an important factor. Naturally advertisement published on reputed newspapers and magazines are impressive than other mean of advertising. People don’t trust advertisement published in the lower standard media.