Notes - Marketing
Category :
14.1 Meaning of Marketing
Marketing deals with identifying and meeting human and social needs. Marketing includes the policy, techniques and methods necessary for selling and distribution. Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably.
Meaning according to American Marketing Association (AMA), marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational goals.
14.1.1 Concept of Marketing
Marketing process could be performed from two different perspectives:
(i) Production Oriented/Traditional Concept of Marketing: Traditionally, marketing was viewed as the process of directing the flow of goods and services from producers to consumers.
Traditional theorist focussed on production and selling function. The traditional concept believed in maximising profits by selling goods and services.
(ii) Consumer-Oriented/Modern Concept of Marketing: It is a modern approach and it focuses on consumer. This concept emphasises that firms can achieve the objective of profit maximisation by first identifying the needs and wants of customers and then satisfying them in an effective manner. The basic role of a firm, under the modern concept, is to identify the need and satisfy it better than the competitors. This concept is also known as ‘marketing concept’, which is wider in scope and focuses on customer orientation.
14.1.2 Functions of Marketing
(i) Exchange Functions These functions are concerned with transfer of ownership. They are:
(a) Buying and Assembling Buying is purchase of raw material for production process or purchase of finished goods for the purpose of resale. Assembling means buying and collecting different items from various places and keeping them under one roof for the purpose of resale.
(b) Selling It means finding the customers, creating demand and transferring goods for value.
Selling involves the following activities:
(ii) Physical/Supply Functions Supply functions involve the physical distribution of products and services, they are:
(a) Transportation It creates place utility, as it means carriage of goods from the place of the manufacturer to the place of dealer and from the place of the dealer to the place of ultimate consumer. It has contributed to the widening of the markets.
(b) Storage and Warehousing It is a productive function, as it creates time utility. There is a time gap between the production and consumption. Warehousing helps to eliminate such gap. Storage may be required for advance production, seasonal goods, raw materials and also for quality refinement of certain products (e.g. coffee, wine, etc).
(iii) Facilitating /Auxiliary Functions
These assist the process of exchange.
(a) Product Planning and Development The design of the product contributes towards the making of the product attractive and increases its utility. A good design can improve performance of a product and also give it an asthetic value and a competitive advantage.
(b) Standardisation and Grading Standardisation means production of goods according to uniform specifications of shape, size, design, quality, performance, etc.
Grading means classifying the product on some basis such as quality, size, shape, design, etc.
Generally, it is done in agricultural produce and forestry items. Through grading, marketer can ensure better price and also facilitate sale by sample.
(c) Packaging It is a process of designing and producing a suitable package for a product. A package is a wrapper or a container, in which a product is enclosed or sealed. Packaging protects the products during transportation. It also serves as a sales promotion tool.
(d) Branding and Labelling Branding is a process of giving a separate identity to a product. A brand is a name, sign, symbol, design or a combination thereof, used to distinguish the product of an enterprise from that of others, e.g. Lux, Old Spice (names) and a girl on Amul (symbol).
Labelling refers to designing and developing the label to be put on package, which specifies the details like description of the product, price, manufacturing and expiry date, precautions, direction for use and handling, etc.
(e) Pricing Price means the money which a customer has to pay in order to buy a product or a service. It is the most crucial element of marketing. Firstly, it is the only element which is revenue generating and secondly, the consumer is price sensitive and he decides to buy or not to buy the product on the basis of price being a major determinant.
(f) Promotion In marketing, promotion includes all the activities which are designed to influence the behaviour of the buyers.
It involves informing and persuading customer, so as to make the products and services known and acceptable to them. Several techniques used for promotion are advertising, personal selling, sales promotion and public relations.
(g) Financing It is required for meeting the, expenses of getting merchandise into the hands of the buyers. For this, finance may be needed to buy raw material, for storage of goods, transportation, selling goods on credit and hire purchase, etc.
(h) Risk Taking Marketing, being part of a business system, is also posed to various risks. Some of these risks can be minimised with the help of insurance contracts.
(i) Market Research It is a systematic investigation of facts relevant to marketing. Several techniques are followed for market research. Major areas of marketing research are: knowing the needs of the consumers, demand, product research, price research and distribution research, etc. It provides a sound basis for formulation of marketing strategies and policies.
14.1.3 Role of Marketing
All marketing organisations help the individual consumers in raising the standard of living by making the products available to them for satisfying their wants. It also plays an important role in a firm and in the .economy, as explained below
14.2 Marketing Mix
It represents the total marketing programme of an enterprise, as it refers to the tools or ingredients which a marketer mixes in order to interact with a particular market (set of consumers).
According to William J Stanton, ‘Marketing mix is the term used to describe this combination of four inputs which constitute the core of company’s marketing system: viz the product, the price structure, the promotional activities and the distribution system’.
14.2.1 Components/Elements of Marketing Mix
The 4 Ps of Marketing
There are number of components, which may go into making a marketing mix, but all agree on four basic elements which are also known as the 4 Ps of marketing.
They are
(i) Product (ii) Price
(iii) Place (iv) Promotion
14.2.2 Product Mix
It refers to the decisions relating to planning, developing and producing the right type of products and services for the market. It includes decisions regarding design, quality, package, branding, trademarks, warranties and guarantees and labelling.
Concept of Product
It may be defined as ‘bundle of utilities’ consisting of various product features and accompanying services.
Consumers consider a product as a ‘bundle of satisfaction’ rather than the physical item.
Thus, package, utility, brand, label, price, status of manufacturers, services offered are part and parcel of the product.
Classification of Products
Goods which are consumed directly by the consumers and need no further processing, are called consumer goods.
Consumer goods can be further classified into following categories:
(i) On the Basis of Durability
(a) Durable Goods They are not consumed in a single use. They have a long life and are not bought frequently, e.g. washing machine.
(b) Non-durable Goods They are consumed in a single or few uses. They are frequently purchased, e.g. toothpaste, soaps, etc.
(c) Services It refers to benefits or satisfaction, which are offered for sale. Services are intangible in form. e.g. dry cleaning, hair cutting, postal services, etc.
Distinction between a product and a service
|
Basis |
Product |
Service |
|
Tangibility |
It can be seen, touched and felt. |
It cannot be seen and touched. |
|
Storage |
It can be stored. |
There is simultaneous production and consumption of services, thus, cannot be stored. |
|
Standardisation |
It can be standardised. |
They are generally not standardised. |
|
Time lag |
It can be bought in advance. |
It cannot be availed m advance. |
(ii) On the Basis of Buying Behaviour/Shopping Efforts Involved
(a) Convenience Goods These goods are purchased frequently and with minimum efforts. They meet the need of personal convenience, e.g. newspaper, soaps, etc.
(b) Shopping Goods These goods are purchased after a comparative analysis of quality, price, warranty, etc of competitive brands, e.g. furniture, cloth, TV, fridge, etc.
(c) Speciality Goods These goods are purchased with special efforts, e.g. jewellery, expensive watches, paintings, etc.
Industrial goods are classified into following categories:
(i) Materials and Parts They include the raw materials as well as manufactured parts and materials.
(ii) Capital Items These are the items which are used in producing finished goods. They include tools, machines, computers and also installations like elevators, etc.
(iii) Supplies and Business Services They include goods like paints, lubricants, computer stationery, etc.
Product Life Cycle (PLC)
It indicates that every product goes through various stages in its life cycle, namely introduction, growth, maturity, decline and abandonment. These stages are collectively called ‘Product Life Cycle’.
It is used as a forecasting tool. The management is able to devise an effective marketing strategy during the various stages of Product Life Cycle. The strategies may be integrated for marketing policies of product, price, promotion and distribution.
Advantages of Forecasting Product Life Cycle are:
(i) The firm can plan an effective product plan by knowing the current stage of life cycle of a product.
(ii) The management can plan for new uses of the product during growth and maturity stage.
(iii) It makes the management cautious and helps them in devising advance steps before the decline stage.
Stages of Product Life Cycle
Various stages of product life cycle are:
(i) Introduction Stage It is the pioneering stage when competition is almost non-existent, prices are high and sales growth are low, since the product is not known to consumers. High advertisement and promotional costs are borne in this stage.
(ii) Growth Stage As the product’s popularity increases, it moves into second phase. Demand expands, prices fall and competition increases. Promotional expenses although remain high, but falls in proportion of sales. Brand image is created and customer service is emphasised.
Fig.14.2 Stages in product life cycle
(iii) Maturity Stage When the product enters into maturity stage, the market further saturates and competition intensifies. Sales are stagnated and price falls. Expenditure on promotion increases. Product differentiation and identification of new segments are emphasised in this stage.
(iv) Decline Stage This stage is characterised by gradual displacement by some new products or change of consumers’ buying behaviour. The sales fall sharply, profits decline, expenditures have to be cut down. To combat decline stage, new features need to be added, economy packs should be added and so on.
(v) Abandonment Stage Many firms pull their product from the market and put their resources in better propositions. However, strategies like mergers with strong brand may be adopted.
14.2.3 Price Mix
The term ‘price’ is the monetary expression of value of a product or service. It is an important factor affecting the success of a firm as the customer is very sensitive to this element.
When deciding on price, the price should match the utility offered by the product. Also, various other factors are considered before deciding on the price of a product.
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Pricing Policies
· Skimming/Cream Pricing Policy Under this policy, a very high price is fixed by a firm. This policy can be continued only till the competitors enter the market. · Low Penetration Policy It is just the opposite of skimming policy and the prices are set very low, so as to capture maximum market share. · One Price Policy Under this policy, no difference is made in the price of product for different customers. Differential Pricing or Flexible Pricing Different prices are set for different customers and prices are charged according to the paying capacity or bargaining capacity of customers. · Leader Pricing Policy The prices of the product are fixed by one or two big firms and small firms follow the same fixed price. · Psychological Pricing To create a psychological impact on the consumers, that the prices are low, this type of pricing is done. Examples of such price are ` 299, ` 995, etc. · Zonal Delivery Pricing Policy Prices in a particular zone remains uniform but they may be different in different zones. All petroleum suppliers adopt this policy. |
14.2.4 Place Mix/Physical Distribution
It consists of all the activities involved in transferring ownership and physical possession of the product to consumers. Its purpose is to make the product or service available to customers at the right time and at the right place.
Elements of Distribution
Decisions related to distribution are as follows:
(i) Physical Distribution
It covers all the activities required to physically move the goods from manufacturers to the customers.
The major components of physical distribution are:
(a) Order Processing A good physical distribution should provide for an accurate and speedy processing of orders.
(b) Transportation It is one of the major component of physical distribution in which goods move from producers to consumers.
(c) Warehousing It creates time utility and they help in storing and assorting of products.
(d) Inventory Control Inventory decisions, which are linked with warehousing decisions, are the key to the success of manufacturers. Level of inventory to be maintained involves cost. Thus, an optimum level of inventory has to be maintained. A correct estimate of demand keeps down the inventory holding and carrying cost.
(ii) Channels of Distribution
Channels of distribution may be classified as under:
(a) Direct Channel (zero level channel) When goods are directly made available to consumers by the producers, it is known as the zero level or direct channel of distribution.
e.g. Bata company sells through its Bata showrooms.
Fig. 14.3 Process of zero level channel
(b) Indirect Channel When one or more intermediaries are invoked, they are called the indirect channels.
Fig. 14.4 Process of one level channel
Fig. 14.5 Process of two level channel
This is done when the line of product is limited and wide coverage is required.
Fig. 14.6 Process of three level channel
14.2.5 Promotion Mix
It refers to the use of communication with the twin objective of informing the potential customers and persuading them to buy it.
Elements of Promotion Mix
The various elements of promotion mix are described below:
(i) Advertising
It involves dissemination of information about a product, service or enterprise to induce people to take actions beneficial to the advertiser. The message which is disseminated is known as ‘advertisement’.
According to American Marketing Association, marketing can be defined as ‘Any paid form of non-personal presentation of ideas, goods and services by an identified sponsor’.
(ii) Personal Selling
Personal selling or salesmanship is the process of informing, assisting and persuading people to buy a product or service through direct personal contact. It involves face-to-face communication between a seller and a buyer. In this technique of promotion, salesperson or sales representative make oral presentation to one or more customers for the purpose of making sales.
(iii) Sales Promotion
It refers to all the activities, which are undertaken for the purpose of increasing sales. These activities mainly include lowering the price, distributing discount coupons, conducting contests, giving away gifts and many more such incentives.
It is an incentive to induce a desired response by salesman, middlemen/distributors/dealers and final consumers. Thus, sales promotion activities are designed for all of them differently.
Sales Promotion Techniques
(a) Sample (b) Prize Contest (c) Exchange offers
(d) Discount (e) Lucky Draw (f) Quality deeds
(g) Coupons (h) Scratch and win.
(iv) Public Relations
It is an important element of marketing. It means maintaining relations with public. By maintaining relations, companies create goodwill. Public does not mean only customers, but it also includes shareholders, suppliers, intermediaries; etc.
According to Public Association Relations, ‘Public relations is the art and social science of analysing trends, predicting consequences, counselling organizational leaders and implementing planned programme of action which will serve both the organisation and the public interest’.
Tools to Establish Public Relations
(a) News (b) Events (c) Printed material
(d) Speeches and interviews (e) Public service activities.
Other Important Terms
A brand is the identification of a product and can be in form of a name, symbol or design, etc. Branding is not only done to identify the seller or producer, but also to make the product superior than competitor’s product. It is a process, by which efforts are made to provide a distinct identity to the product. It is a general term covering various activities, such as giving a brand name to a product, designing a brand mark and popularising it.
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Branding Strategies
· Individual Branding Under this, the firm uses separate brands for separate products, e.g. ITC uses Sunfeast for biscuits. Wills for cigarettes, etc.
· Separate Family Brand Name The products are classified in different classes and a separate brand name is given to each class. e.g. Sean has a family brand name for appliances known as ‘Kenmore’.
· Company-cum Individual Name Some companies use both corporate as well as individual names for their products, e.g. Britannia, Good Day. |
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Terms Related to Brand
· Brand it is the identification of a product, e.g. LG, Hyundai. · Brand Name A part of brand, which can be spoken, i.e. the verbal part of a brand, e.g. Maggi. · Brand Mark A part of brand which cannot be spoken but recognised, e.g. red and blue ball of Pepsi, girl on Amul butter. · Trade Mark A part of brand which is being given a legal protection from being copied, e.g. Mother’s pride tried to use tree symbol of Dabur. Mother’s pride was legally stopped to do so. |
It means designing of a label to be put on the package. A label is a small slip attached on the packing of the product to denote its nature, contents and other necessary information which the manufacturer needs to give to the consumer.
It refers to covering, wrapping, crating, filling or compressing of goods to protect them from spoilage, pilferage, breakage, leakage, etc.
Various kinds of goods are placed or packed into appropriate containers for protection and convenient handling.
Thus, packing implies placing products in suitable packages for delivery of the product to customer or for the purpose of storage and transportation.
Levels of Packaging
Primary Packaging It means the immediate container of a product. It may be kept till the customer is ready to use and in same cases, may remain till the product is consumed, e.g. pea container, toothpaste tube, etc.
Secondary Packaging It means an additional layer of packaging, e.g. toothpaste tube is encased in a cardboard box.
Transit Packaging Packaging done to protect the product in the process of transportation.
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