Principles of Marketing Solved Paper 2021 (Held in 2022), Gauhati University B.Com 5th Sem CBCS Pattern

Principles of Marketing Solved Question Paper 2021
4 (Sem-5/CBCS) COM HC1 (POM)
2021 (Held in 2022)
COMMERCE (Honours)
Paper: COM-HC-5016 (Principles of Marketing)
Full Marks: 80
Time: Three hours
The figures in the margin indicate full marks for the questions.

1. Answer the following as directed:             1x10=10

(a) Which of the following is not included in demographic segmentation of markets? (Choose the correct answer)

(1) Gender.

(2) Age.

(3) Education.

(4) Culture.

Ans: (4) Culture.

(b) Who introduced the concept of ‘Marketing Mix’?   (Choose the correct answer)

(1) William J. Stanton.

(2) Philip Kotler.

(3) Henry L. Hemen.

(4) N. H. Borden.

Ans: (4) N. H. Borden.

(c) Which of the following is not an uncontrollable factor of marketing environment? (Choose the correct answer)

(1) Economic growth.

(2) Level of education.

(3) Marketing mix.

(4) Price Policy.

Ans: (4) Price Policy.

(d) Which one of the following is not a psychological factor of consumer behaviour? (Choose the correct answer)

(1) Motivation.

(2) Family income.

(3) Attitude.

(4) Perception.

Ans: (2) Family income.

(e) ‘Mobile hand-set’ is an example of – (Choose the correct answer)

(1) Perishable goods.

(2) Non-durable goods.

(3) Durable goods.

(4) None of the above.

Ans: (3) Durable goods.

(f) Producing a cheaper product is the focus of the ‘product concept’ of marketing. (State True or False)

Ans: True

(g) Packaging is an activity which is concerned with protection, economy, convenience and promotional consideration. (State True or False)

Ans: True [This definition is given by Philip Kotler]

(h) Under ‘Penetration pricing policy’, the price of new product fixed at initial stage is high. (State True or False)

Ans: False, Lower Price

(i) In product development process, forecasting stage precedes commercialisation and launch of product. (State True or False)

Ans: True

(j) A company that attaches the same brand name to all of its products is called family umbrella branding. (State True or False)

Ans: True

2. Answer the following questions:               2x5=10

(1) What is green marketing?

Ans: Green marketing is the marketing of products or services which are environmental friendly. Examples of green marketing include advertising the reduced emissions associated with a product’s manufacturing process, or the use of post-consumer recycled materials for a product's packaging.

(2) What is trademark?

Ans: 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.

(3) Write two advantages of direct marketing.

Ans: a) Direct Marketing eliminates middlemen and intermediaries which reduces selling cost.

b) Direct marketing focuses on targeted audience only not on large group of audiences.

(4) What is impulse goods?

Ans: Impulse goods are those products or goods which are bought by customers randomly without significant thought process. It happens because of a well-marketed product 

(5) Write briefly on affiliate marketing.

Ans: Affiliate marketing is the process by which an affiliate earns a commission for marketing another person's or company's products through its blog or Youtube channel or mobile application or by sharing link of the products on social media. The affiliate earns a commission each time someone makes a purchase through the unique link or code associated with their recommendation.

3. Answer any four of the following:           5x4=20

(a) Distinguish between selling and marketing.

Ans: Difference between Selling and Marketing



a) Selling starts and ends with the seller.

a) Marketing starts and ends with the consumers.

b) Seeks to quickly convert products into cash.

b) Seeks to convert customer ‘needs’ into products.

c) Seller is the centre of business universe.

c) Buyer is the centre of the business universe

d) Views Business as a goods producing process.

d) Views businesses as a customer satisfying process.

e) Seller preference determines the formulation of marketing mix.

e) Buyer determines the shape marketing mix should take.

f) Selling is product oriented.

f) Marketing is customer oriented.

g) Seller’s motives dominate marketing communication.

g) Marketing communication is looked upon as a tool for communicating the benefits / satisfactions provided by the product.

h) Selling concept is short term perspective.

h) Marketing concept is a long term perspective.

(b) Write the importance of study of consumer behaviour.

Ans: Importance of Consumer Behaviour: The consumer is the focus of marketing efforts. The modern concept spells out the real significance of buyer’s Behaviour. The modern marketing management tries to solve the basic problems of consumers in the area of consumption. To survive in the market, a firm has to be constantly innovating and understand the latest consumer needs and tastes. It will be extremely useful in exploiting marketing opportunities and in meeting the challenges that the Indian market offers. It is important for the marketers to understand the buyer behaviour due to the following reasons.

1.    Better Consumer: The study of consumer behaviour enables us to become a better consumer. It will help consumer to take more precise consumption related decisions. 

2.    Studying the need of consumers: It helps marketers to understand consumer buying behaviour and make better marketing decisions.

3.    Market Prediction: The size of the consumer market is constantly expanding and their preferences were also changing and becoming highly diversified. So without studying it, marketers cannot predict the future of their business. 

4.    Economic Stability: It is significant for regulating consumption of goods and thereby maintaining economic stability.

5.    Efficient utilisation of resources: It is useful in developing ways for the more efficient utilisation of resources of marketing. It also helps in solving marketing management problems in more effective manner.

(c) Explain the factors influencing product pricing decisions.

Ans: 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:

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.

B. External Factors:

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.

(d) Explain briefly the role of channels of distribution in modern business world.

Ans: 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.

(e) Write five advantages of social marketing.

Ans: Advantages of Social Media Marketing:

a) Social media marketing helps in boosting sales and increasing market share.

b) It helps in building a better image for the company.

c) It provides a competitive edge over the competitors.

d) It helps in quick promotion of new product and forms a base for growth in the long term.

e) Social marketing promotes initiatives related to green marketing because no banner and printed materials are used in social marketing.

(f)  Explain the factors influencing in selection of distribution channel.

Ans: Factors Affecting the Selection of the Channel of Distribution: Every producer, in order to pass on the product to the consumer, is required to select a channel for distribution. The selection of the suitable channel of distribution is one of the important factors of the distribution decisions. The following factors affect the selection of the channel of distribution:

A. Factors Pertaining to the Product: Keeping in view the nature, qualities and peculiarities of the product, could only the channel for distribution be properly made. The following factors concerning the product, affect the selection of the channel of distribution:

(1)   Price of the Product (2)   Perishability (3)   Size and Weight (4)   Technical Nature (5)   Goods Made to Order (6)   After-Sales Service.

B. Factors pertaining to the Consumer or Market: The following are the main elements concerned with the consumer or the market:

(1)   Number of Customers (2)   Expansion of the Consumers (3)   Size of the Order (4)   Objective of Purchase (5)   Need of the Credit Facilities.

C. Factors Pertaining to the Middlemen: The following are the main factors concerned with the middlemen:

(1)   Services Provided by Middlemen (2)   Scope or Possibilities of Quantity of Sales (3)   Attitude of Agents towards the Producers' Policies (4)   Cost of Channel of Distribution

D. Factors Pertaining to the Producer or Company: The following factors, concerning the producer, affect the selection of the channel of distribution:

(1)   Level of Production (2)   Financial Resources of the Company (3)   Managerial Competence and Experience.

E. Other Factors

(1)   Distribution Channel of Competitors:  While determining the channel of distribution, the channels of distribution of the competitors too must be borne in mind.

(2)   Social Viewpoint: What is the attitude of society towards the distribution, this fact too must be kept into consideration while selecting the middlemen. 

(3) Freedom of Altering: While selecting the agents, this fact too must be kept into mind that in case of need, there must be the liberty of changing or replacing the agents (middlemen).

4. Discuss the different components of marketing environment.                 10

Ans: 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:

a)    External Micro Factors and 

b)    External Macro Factors

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 centre 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:

a.    Perfect Market

b.    Oligopoly

c.     Monopoly

d.    Monopolistic Market

e.    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 behaviour 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 behaviour. 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.


Discuss the scope and importance of marketing in modern-day economy.              5+5=10

Ans: Scope of Marketing: The scope of marketing really is related to the old and new concept of ‘marketing’. Formerly the scope of marketing used to remain very much limited since the wants of the consumers too were quite limited. The competition was almost equivalent to nil. In the marketing, the satisfaction of the consumers was not at all con­sidered. The marketing was commodity based and immediately after the sale of the products, the marketing process was over. Nowa­days, the scope of marketing has become quite extensive, and the satisfaction of the customers too is kept in view. The process of marketing continues even after the sales have been affected. Today, the function of confirming the product, in accordance with the changing wants, habits and fashions of people, is undertaken by the process of marketing. Within the scope of marketing, -the following activities are covered:

1)      Study of Consumer Wants and Needs: Goods are produced to satisfy consumer wants. Therefore, study is done to identify consumer needs and wants. These needs and wants motivates consumer to purchase.

2)      Study of Consumer behaviour: Marketers performs study of consumer behaviour. Analysis of buyer behaviour helps marketer in market segmentation and targeting.

3)      Production planning and development: Product planning and development starts with the generation of product idea and ends with the product development and commercialisation. Product planning includes everything from branding and packaging to product line expansion and contraction.

4)      Pricing Policies: Marketer has to determine pricing policies for their products. Pricing policies differs from product to product. It depends on the level of competition, product life cycle, marketing goals and objectives, etc.

5)      Distribution: Study of distribution channel is important in marketing. For maximum sales and profit goods are required to be distributed to the maximum consumers at minimum cost.

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.

5. What is consumer behaviour? Explain the various factors that influencing consumer behaviour.  2+8=10

Ans: Consumer Behaviour: Behaviour is a mirror in which everyone shows his or her image. Behaviour is the process of responding to a thing or event. Consumer behaviour is to do with the activities of individual in obtaining and using the good and services. The term consumer behaviour is defined as the behaviour that consumer display in searching for, purchasing using, evaluating and disposing of products and services that they expect will satisfy their needs.

In the words of Kotler,” Consumer   behaviour   is   the   study   of   how   people   buy, what they buy, when they buy and why they buy.”

In the words of Solomon,” Consumer behaviour is the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires”

In the words of Professor Bearden and Associates,” Consumer behaviour is the mental and emotional process and the physical activities of people who purchase and use goods and services to satisfy needs and wants.”

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 psychological, cultural, social and personal factors and they are a part of the buyer as an individual.

(1) Psychological Factors: The starting point in the purchase decision process is the recognition of a felt need. A need is simply the lack of something useful. We all have needs and we consume different goods and services with the expectation that they will help to fulfill these needs.

When a need is sufficiently pressing, it directs the person to seek its satisfaction. It is known as motive. Thus, motives are inner states that direct people towards the goal of satisfying a felt need. The individual is moved the root word for motive to take action to reduce a state of tension and to return to a condition of equilibrium. Although psychologists do not agree on any specific classification of needs, a useful theory of the hierarchy of needs has been developed by Abraham Maslow. His list is based on two important assumptions.

1) People want animals whose needs depend on what they already possess. A satisfied need is not a motivator. Only those needs that have not been satisfied can influence behaviour.

2) All needs can be ranked in order of importance from the low biological needs to the higher level psychological needs. Each level of unfulfilled need motivates the individual's behaviour, and as each successive level of need is fulfilled, people keep moving on to the next higher level of need.

(2) 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 consists 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-conceptand 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.

d. Income: The income of a person has an extremely important influence on his consumption behaviour. He may wish to buy certain goods and services but his income may become a constraint. Income in this context really refers to the income available for spending (i.e., income after tax, provident fund and other statutory deductions). The person's attitude towards spending versus saving and his borrowing power are also important influencing factors. Small size packaging in sachets for products such as tea, shampoo, toothpaste, etc., are meant for the lower income customers who cannot afford a onetime large outlay of money on such products.

e. Life Style: Life styles are defined as patterns in which people live, as expressed by the manner in which they spend money and time on various activities and interests. Life style is a 69 function of our motivations, learning, attitudes, beliefs and opinion, social class, demographic factors, personality, etc. While reading this unit, you are playing the role of a student. At the same time, you also have your career, family and social roles to play. The manner in which you blend these different roles reflects your life style.


What is market segmentation? Describe the different bases used for market segmentation.  2+8=10

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."

Basis of Segmentation:

Market segmentation dividing the Heterogeneous 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. Geographic Segmentation: Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, countries, cites or neighbourhood. One of the major geographic segmentation in India is the division of rural & urban areas. The need to segment the market geographically becomes clearer when we look at some of the characteristics of the market. In India, there are more than 5000 towns & over 6,38,000 villages. Nearly 87% of these villages have a population of less than 2000 people. This variation in population is important for the marketer while formulating marketing strategy & plans. In addition to this products penetration, income levels & availability of infrastructure like roads & electricity make the task of geographic segmentation important. For most products, penetration levels in rural areas are lower than in urban areas. Income & lifestyle issues influence the penetration rate of products & services. Eg.: Haats & mandis serve important roles in the exchange of goods & services in rural areas.

1.    Demographic Segmentation: In demographic segmentation, the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income occupation, education religion, race generation, nationality & social class.

a) Age & Life Cycle Stage: Consumer wants & abilities change with age. Eg: Hindustan Unilever introduced Pears soap in pink colour specially for children. Johnson & Johnson Baby Powder & Talcum Powder are classic examples of products for infants & children. Television channels in India Indicate the segmentation based on age & life cycle. There are channels like Aastha & Sanskaar target which towards the old generation, cartoon network, Disney are channels for children etc.

b) Gender: Men & women have different behavioural orientation. Gender differentiation has been long applied to product categories such as clothing, cosmetics & magazines. Eg: Axe deodorant is positioned as a masculine product. Park avenue from Raymond is positioned as masculine brand. Bajaj wave is a brand specifically designed for women in the scooter segment.

c) Income: Income segmentation is a long standing practice in a variety of products & services & is a basic segmentation variable. Eg: Nirma Washing Powder, was launched as the lowest priced detergent in India primarily targeted at middle income group. Markets for many consumer’s products in India are showing rapid growth due to low unit price packaging.

d) Generation: Each generation is profoundly influenced by the time in which it grows- the music movies, politics.

e) Social Class: Social class has a strong influence on preference in cars, clothing, home, furnishings, leisure activities, reading habits, retailers etc.

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. Behaviour 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.

6. What is product life cycle? Describe the different stages of product life cycle. 2+8=10

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 is passed. 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, Tube lights), 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 attractive.

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 customer’s 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.


What is new product development? Explain the various steps involved in new product development process.  2+8=10

Ans: New Product Development refers to the complete process of bringing a new product to market. This can apply to developing an entirely new product, improving an existing one to keep it attractive and competitive, or introducing an old product to a new market.    

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 labelling 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.

7. What is promotion mix? Explain the factors affecting promotion mix decisions.               3+7=10

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 technique 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 are 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.


Highlight the importance of advertising. In this context, explain how marketing goals are met with advertising campaigns. 4+6=10

Ans: 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:

1.    Advantages of Manufacturers

1)    It creates demand for new products by informing people about the availability and suggesting them about the use of such goods.

2)    It promotes increased sales by maintaining the present demand and expanding the markets by attracting more people to buy.

3)    It creates goodwill by making the name of the manufacturer and his products famous and known in every home.

4)    It creates steady demand for products by smoothening out the seasonal fluctuations in demand.

5)    It reduces the cost of production by making large-scale production possible through creation of demand. The large-scale production reduces the total cost per unit of production.

2.    Advantages to Consumers

1)    It facilitates purchasing by educating consumers to select correct brands of commodities which increase their personal satisfaction.

2)    It makes available goods at reduced prices as advertisement increases sales, promotes large-scale production, reduces cost of production and distribution and increases competition. This result in reduction in prices and consumers get goods at reduced rates.

3)    It increases the utility of commodities. Consumers come to know about the proper and diverse use of commodities through advertising. This helps to increase the utility of commodities for the consumers.

4)    It ensures good quality of products. Advertising encourages manufacturers to produce better quality products which boosts the confidence of the consumers and ensures them availability of goods quality products.

5)    It reduces the possibility of being cheated as through advertisements the consumers come to know about the prices and composition of goods.

3.    Advantages to Salesmen

1)    It creates a proper base for the salesman by acquainting more people, in a shorter time, with the merits of a product, its new uses, new varieties and so on.

2)    It educates even salesmen and increases their confidence, capacity and initiative.

3)    It reinforces the sales points and simplifies work of the salesmen as they cannot reach all places and at all the times.

4)    It reduces the effort of the salesmen as they can reach the right prospects with the least effort.

5)    It increases the remuneration of salesmen by supplementing their efforts to increase sales and thereby increase remuneration.

4.    Advantages to the Society

Advertisement is beneficial not only to the manufacturers and the consumers but also to the society at large in the following ways:

1)    It uplifts the living standards of the people. Advertising acts as an effective tool in raising standard of living.

2)    It generates gainful employment opportunities. Advertisement generates gainful employment opportunities both directly and indirectly.

3)    It provides new horizons of knowledge. It improves the knowledge, language and style of the people.

4)    It provides a regular source of income to newspapers. It has been estimated that nearly 80% of the income of newspapers and magazines is secured through advertisements. In its absence, the newspapers and magazines would have become very costly and beyond the reach of people at large.

5)    It transforms culture of a nation. The basis of advertising is the taste of the public, its social customs and its culture. It influences the fashions, tastes, habits, attitudes and likes and dislikes, etc. of the society at large.

6)   It acts as a barometer of a nation’s economic growth. Advertising promotes healthy competition and provides better quality goods at cheaper rates to the society.


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