Needs of Marketing, Demands and wants of Marketing?

Marketing management simplifies the activities and functions which are involved in the
distribution of goods and services. According to Philip Kotler: “Marketing management is the
analysis, planning, implementation and control of programs designed to bring about desired
exchanges with target markets for the purpose of achieving organizational objectives.”

In short word, marketing management is a process by which a product or service is introduced

and promoted to potential customers. The process covers advertising, public relations,
promotions, and sales. It represents the “road map” to accomplish greater results, such as sales
growth, brand recognition, higher market percolation, and much more.

1. Introduce new products: For a business to succeed, the product or service it provides must
be known to potential buyers. If your business is unknown to the potential customers and you
don’t have any kind of relation with your customers then marketing techniques can help you to
create brand awareness for your service or product.

2. Boost your Sale: Adam Smith has remarked that “nothing happens in our country until
somebody sells something”. Marketing is the kingpin that sets the economy revolving. The
marketing concept is about matching a company’s capabilities with customer wants. Once your
product, service or company gets on the place that you expected, it increases your chances that
consumers will make a sale. And more important is that marketing strategies also help to reduce
the cost of sales and distribution.

3. Increase Company Reputation: The major marketing activities are buying, selling,
financing, transport, warehousing, risk bearing, and build company reputation. The success of
a company often rests on a solid reputation. The company’s image is very important! It is the
soul of the business. And only marketing strategies can help any company to build a strong
reputation by identifying the best opportunities worth pursuing as well as the threats to be
avoided.

4. Source of New Ideas: The concept of marketing is a dynamic concept. Marketing

differentiates a company from competition by recognizing the distinctive benefits and the
supporting elements. Marketing also nourishes an environment in the marketplace for healthy
completion. Marketing as a document of measurement gives scope for understanding this new
demand pattern and improves the effectiveness of the Marketing message to customers and
partners.

5. Source of New Marketing Channels: The most important role of Marketing Management
and the managers who take care of the marketing department of a company or business is to
find new channels to market their product or services. And Marketing Management is
responsible to develop the smart strategy about how to market their brand or products following
the trendy paths like Digital, specially using the social media. Ask the potential customers,
provide relevant information about your product or brand or services, and create contents about
your better products so that the potential customers/clients can move ahead making informed
decisions.
6. Identifying problem and opportunities in the market: It helps in identifying new market

opportunities for existing and new products. It provides information on market share, nature of

competition, customer satisfaction levels, sales performances and channel of distribution. This

helps the firms is solving problems.

7. Formulating market strategies: Today, markets are no more local. They have become

global. Manufactures find it difficult to contact customers and control distribution channels.

Competition is equally severe. The consumer needs are difficult to predict. Market

segmentation is a complicated task in such wide markets. The marketing intelligence provided

through marketing research not only helps in framing but also in implementing the market

strategies.

8. Determining consumer needs and wants: Marketing has become customer-centric.

However, large-scale production needs intermediaries for mass distribution. Due to prevalence

of multi channels of distribution, there is an information gap. Marketing research helps in

collecting information on consumers from structured distribution research and helps in making

marketing customer oriented.

9. For sales forecasting: The most challenging task for any production manager is to keep

optimum levels of inventory. However, production is undertaken in anticipation of demand.

Therefore, scientific forecast of sales is required. Marketing research helps in sales forecasting
by using market share method, sales force estimates method and jury method. This can also

help in fixing sales quotas and marketing plans.

10. Managerial decision-making: Marketing research plays a vital role in the decision-

making processes by supplying relevant, up-to-date and accurate data to the decision-makers.

Managers need up-to-date information to access customer needs and wants, market situation,

technological change and extent of competition.

Demands of Marketing

Demands are human wants backed by ability and wiliness to buy. The person wants only those

goods which provide them maximum satisfaction. Marketers can also influence demand by

offering products at different price and quality.

Primary and Secondary Demand

1. Primary Demand: Primary demand refers to the demand of the product and services that

can satisfy particular type of needs. A primary demand is the total demand of the goods with

different names and is manufactured by different firms which fulfill the similar needs. For

example: in summer, the demand for cold drink increases. The primary demand is important

for an individual firm because it sells its products to a part of the primary demand.

2. Secondary Demand: Secondary demand refers to the demand of goods with special brand

produced by any producer. The special demand is more specific and includes demand for a

firm's product or band. The marketers use brand differentiation features such as brand name,

packaging, price and promotion to convince the consumers that its brand is different from

competitor's brand.

Creation of demand

A consumer should be motivated for creating demand. A producer should provide information

about the availability of product, use of the product, change in product or service, etc. to the

customers for creating demand

1.Personal selling: Personal selling is the oral communication with the potential customer for

the purpose of selling goods. Personal selling takes place to place, face to face, or it may be

directed to a middleman or final consumer. It is a direct method in which seller or sales

representative negotiates directly with customers, presents information to them, and motivates

them to buy products. In this way, demand is created.

2. Advertisement: Advertisement is a non-personal communication process where the

customers are given information about new goods and services to arouse curiosity in them for
buying products. The most familiar forms of ads are found in the broadcast ( TV, radio,

newspaper, magazine and media).

3. Sales promotion: Sales promotion is the demand stimulating activity besides personal

selling and advertisement. Sales promotion activities are display and decoration of products,

trade fair, exhibition, free distribution of sample, gifts program etc. This will help to increase

sales volume.

4. Publicity: Publicity is the special form of public relations that involves news stories about

an organization or its products. It reaches mass audiences through the media. An organization

provides material for the publicity in the form of news releases, press conferences, and
photographs.

Wants: Wants are not basic requirements and these are not essential for human survival, but
there exists a relation between needs and wants. If a need arises then it stimulates human tastes

and preferences and finally wants arises, because wants are not immediate needs. Wants are

not permanent and can change depending on the time, people and location. For example, if a

person feels thirsty then he/she can drink water to fulfill the need but the wants force him/her

to drink cool drink or fruit juice.

Wants are not mandatory but marketers promote the want category products and services in

such a way that these products are a mandatory part of life. In fact, wants are not necessary for

human survival.

Human wants are playing a vital role in the production of innovative products and products

with different features. Changing tastes and preferences of the customers forces the marketers

to create new products and services

In the case of needs, customers do not give much preference to the brands, whereas in the case

of wants customers purchase what they want only. These wants are not immediate needs so

that customers can spend the time to select the desired color, flavor and features.

To promote the want category products marketers, need to put extra efforts in order to satisfy

the changing tastes and preferences and wants as well. In the case of want category products,

competitors can grab the sales with their strategic marketing approaches. Customer wants can

give a space to complementary goods and substitute products also.

Examples
Pizzas, ice creams, juices, branded cloths, fine quality leather footwear, ornaments, and well-
furnished house etc.

UNIT 2
Factors Affecting Market Segmentation
1. Nature of demand: A commodity having wide demand the extent and size of the market
will be large and contrary to it the size and extent of the market will be Limited.
For example, Silver, Gold, sugar, and food-grains have a wide market while the demand for
bangles, Gandhian cap, and Nehru jacket are limited to India only.

2. Durability: Perishable goods like vegetables, eggs, milk, bread, and butter have a limited
market while durable goods namely T.V., radio, vehicles, gold, silver have a wide market.

3. Banking and Financial System: In a country where there is well developed organized
money credit, banking and financial system are in existence the market is widened because
payments are quickly finalized. On the other hand, if the banking and financial system is not
well developed and organized the markets Limited.

4. Portability: The goods having heavyweight and prices are low the market is limited while
those goods which are easily portable and prices are high have the large size and extent of the
market. Thus, Bricks, cement other building materials have a small size and extend
market while silver and gold have a large size and extend the market.

5. Piece of and Security of Life and Property: If there is peace in the country and life and
property are protected by the government the business activities will increase in the market is
widened.
6. Recognizability: A commodity is easily known on the basis of its quality by the consumers
it will be demanded more and the size of the market is widened while in the absence of
recognizability of a product buyer will not demand more and market will be Limited.

7. Sampling and Grading of Goods: Those goods which are bought and sold on the basis
of the samples and grading the market will be wide while the goods not sold on the basis of
samples and grading have a limited market.

Woollen clothes, food-grains raw cotton etc. have a Wide market.

8. Substitutes: A commodity having substitutes in the market will have a limited market
while no substitute commodity will be widely used and the size and extent of the market are
widened.

Market Segmentation or segmenting customer market?

A. Demographic Segmentation: Demographic segmentation divides the markets into groups

based on variables such as age, gender, family size, income, occupation, education, religion,
race and nationality. Demographic factors are the most popular bases for segmenting the
consumer group. One reason is that consumer needs, wants, and usage rates often vary closely
with the demographic variables. Moreover, demographic factors are easier to measure than
most other type of variables.

1. Age: It is one of the most common demographic variables used to segment markets. Some
companies offer different products, or use different marketing approaches for different age
groups. For example, McDonald’s targets children, teens, adults and seniors with different ads
and media. Markets that are commonly segmented by age includes clothing, toys, music,
automobiles, soaps, shampoos and foods.

2. Gender: Gender segmentation is used in clothing, cosmetics and magazines.

3. Income: Markets are also segmented on the basis of income. Income is used to divide the
markets because it influences the people’s product purchase. It affects a consumer’s buying
power and style of living. Income includes housing, furniture, automobile, clothing, alcoholic,
beverages, food, sporting goods, luxury goods, financial services and travel.

4. Family cycle: Product needs vary according to age, number of persons in the household,

marital status, and number and age of children. These variables can be combined into a single

variable called family life cycle. Housing, home appliances, furniture, food and automobile are

few of the numerous product markets segmented by the family cycle stages. Social class can

be divided into upper class, middle class and lower class. Many companies deal in clothing,
home furnishing, leisure activities, design products and services for specific social classes.
B. Geographic Segmentation: Geographic segmentation refers to dividing a market into

different geographical units such as nations, states, regions, cities, or neighbourhoods. For

example, national newspapers are published and distributed to different cities in different

languages to cater to the needs of the consumers.

Geographic variables such as climate, terrain, natural resources, and population density also

influence consumer product needs. Companies may divide markets into regions because the

differences in geographic variables can cause consumer needs and wants to differ from one

region to another.

C. Psychographic Segmentation: Psychographic segmentation pertains to lifestyle and

personality traits. In the case of certain products, buying behaviour predominantly depends on

lifestyle and personality characteristics.

1. Personality characteristics: It refers to a person’s individual character traits, attitudes and

habits. Here markets are segmented according to competitiveness, introvert, extrovert,

ambitious, aggressiveness, etc. This type of segmentation is used when a product is similar to

many competing products, and consumer needs for products are not affected by other

segmentation variables.

2. Lifestyle: It is the manner in which people live and spend their time and money. Lifestyle

analysis provides marketers with a broad view of consumers because it segments the markets

into groups on the basis of activities, interests, beliefs and opinions. Companies making

cosmetics, alcoholic beverages and furniture’s segment market according to the lifestyle.

D. Behavioural Segmentation: In behavioural segmentation, buyers are divided into groups

on the basis of their knowledge of, attitude towards, use of, or response to a product.

Behavioural segmentation includes segmentation on the basis of occasions, user status, usage

rate loyalty status, buyer-readiness stage and attitude.

1. Occasion: Buyers can be distinguished according to the occasions when they purchase a

product, use a product, or develop a need to use a product. It helps the firm expand the product

usage. For example, Cadbury’s advertising to promote the product during wedding season is

an example of occasion segmentation.

2. User status: Sometimes the markets are segmented on the basis of user status, that is, on the

basis of non-user, ex-user, potential user, first-time user and regular user of the product. Large

companies usually target potential users, whereas smaller firms focus on current users.

3. Usage rate: Markets can be distinguished on the basis of usage rate, that is, on the basis of

light, medium and heavy users. Heavy users are often a small percentage of the market, but

account for a high percentage of the total consumption. Marketers usually prefer to attract a

heavy user rather than several light users, and vary their promotional efforts accordingly.

4. Loyalty status: Buyers can be divided on the basis of their loyalty status—hardcore loyal

(consumer who buy one brand all the time), split loyal (consumers who are loyal to two or three

brands), shifting loyal (consumers who shift from one brand to another), and switchers

(consumers who show no loyalty to any brand).

5. Buyer readiness stage: The six psychological stages through which a person passes when

deciding to purchase a product. The six stages are awareness of the product, knowledge of what

it does, interest in the product, preference over competing products, conviction of the product’s

suitability, and purchase. Marketing campaigns exist in large part to move the target audience

through the buyer readiness stages.

1.Geographic segmentation, 2. Demographic segmentation, 3. Behavioural

segmentation,4. Psychographic segmentation

2. Segment Structural Attractiveness

Company also need to examine major structural factors that long- run Segment Attractiveness

3. Company objectives and resources:

Even if a segment has the right size and growth and is Structural Attractive the company must

consider its own objectives and resources in relation that segment.

Product Positioning Process - Steps in Product Positioning

The process of creating an image of a product in the minds of the consumers is called as
positioning. Positioning helps to create first impression of brands in the minds of target
audience. In simpler words positioning helps in creating a perception of a product or service
amongst the consumers.

Example

The brand “Bisleri” stands for purity.

The brand “Ceat Tyre” stands for better grip.

Steps to product Positioning

Marketers with the positioning process try to create a unique identity of a product amongst the
customers.

1. Know your target audience well

It is essential for the marketers to first identify the target audience and then understand
their needs and preferences. Every individual has varied interests, needs and
preferences. No two individuals can think on the same lines.

Know what your customers expect out of you.

The products must fulfill the demands of the individuals.

2. Identify the product features

The marketers themselves must be well aware of the features and benefits of the
products. It is rightly said you can’t sell something unless and until you yourself are
convinced of it.

A marketer selling Nokia phones should himself also use a Nokia handset for the
customers to believe him.

3. Unique selling Propositions

Every product should have USPs; at least some features which are unique. The
organizations must create USPs of their brands and effectively communicate the same
to the target audience.

The marketers must themselves know what best their product can do.
 Find out how the products can be useful to the end-users?

Why do people use “Anti Dandruff Shampoo?”

Anti-Dandruff Shampoos are meant to get rid of dandruff. This is how the product is
positioned in the minds of the individuals.

Individuals purchase “Dabur Chyawanprash “to strengthen their body’s internal

defense mechanism and fight against germs, infections and stress. That’s the image of
Dabur Chyawanprash in the minds of consumers.

USP of a Nokia Handset - Better battery backup.

USP of Horlicks Foodless - Healthy snack

Communicate the USPs to the target audience through effective ways of advertising.
Use banners, slogans, inserts and hoardings.

Let individuals know what your brand offers for them to decide what is best for them.

4. Know your competitors

▪ A marketer must be aware of the competitor’s offerings. Let the individuals
know how your product is better than the competitors?
▪ Never underestimate your competitors.
▪ Let the target audience know how your product is better than others.
▪ The marketers must always strive hard to have an edge over their competitors.
5. Ways to promote brands
▪ Choose the right theme for the advertisement.
▪ Use catchy taglines.
▪ The advertisement must not confuse people.
▪ The marketer must highlight the benefits of the products.
6. Maintain the position of the brand
▪ For an effective positioning it is essential for the marketers to continue to live
up to the expectations of the end - users.
▪ Never compromise on quality.
▪ Don’t drastically reduce the price of your products.
▪ A Mercedes car would not be the same if its price is reduced below a certain
level.
▪ A Rado watch would lose its charm if its price is equal to a Sonata or a Maxima
Watch.

Developing & Communicating a Positioning Strategy: All marketing Strategy

is built on STP: Segmentation Targeting Positioning: - is the act of designing the company’s
offering & image to occupy a distinctive place in the mind of the target market. Positioning is
not what you do the product. Positioning is what you do to the mind of the prospect. Ex: -
Domino’s – brand’s essence Delivery speed (30 min), hot pizza, moderate price
Differentiation Strategies Brands can be differentiated on the basis of many variables. ex: -
Subway differentiates itself in terms of healthy sandwiches as an alternative to fast food. 4
different differentiation strategies
1. Product Differentiation 2. Personnel Differentiation 3. Channel Differentiation 4. Image
Differentiation

1. Product Differentiation High – quality product positioning: - can charge premium price -
can be benefited from more repeat purchase - consumer loyalty - positive word of mouth - not
much cost difference in providing more quality. Quality image is also affected by - packaging
- Distribution - Advertising - Promotion

2. Personnel Differentiation Companies can gain a strong competitive advantage through

having better-trained people. Ex:- Singapore Airlines :- popular for its flight attendants .
McDonald’s :- people are courteous IBM :- professional Better trained personnel exhibit 6
characteristics :(i) Competence (ii) Courtesy (iii) Credibility (iv) Reliability (v)
Responsiveness (vi) Communication Retailers in particular , are likely to use their front-line
employees as a means of differentiating & positioning their brand .

3. Channel Differentiation Companies can achieve competitive through the way they design
their distribution channel’s - coverage - expertise - performance Ex:- Avon in cosmetics
distinguish themselves by developing & managing high –quality direct-marketing channels

4. Image Differentiation Buyers respond differently to company & brand images . Identify &
image difference :Identify :- the company aims to position itself or its product Image:- the
way the public perceives the company or its product . Ex:- Marlboro’s :- image is “macho
cowboy”

UNIT 3

Product Mix
Product mix, also known as product assortment, refers to the total number of product lines a
company offers to its customers. For example, your company may sell multiple lines of
products. Your product lines may be fairly similar, such as dish washing liquid and bar soap,
which are both used for cleaning and use similar technologies. Or your product lines may be
vastly different, such as diapers and razors.

(i) Product Line: Product line is a group of products that are closely related either because
they satisfy a class of need, or used together, are sold to the same customer group, are marketed
through the same types of outlets, or fall within given price ranges or that are considered a unit
because of marketing, technical, or end-use considerations. For example, The Sunsilk range of
shampoos and conditioners constitute a product line.
(ii) Product Item: It is a distinct unit within the product line that is separate from others on
basis of colour, size, price or other attributes. For example, Sunsilk Thick and Long shampoo
is a product unit distinguishable from other items in the product range.
The four dimensions to a company's product mix include width, length, depth and consistency.
The four dimensions to a company's product mix include width, length, depth and consistency.
Width: Number of Product Lines
The width, or breadth, of a company's product mix pertains to the number of product lines the
company sells. For example, if you own EZ Tool Company and have two product lines –
hammers and wrenches – your product mix width is two.
Small and upstart businesses will usually not have a wide product mix. It is more practical to
start with some basic products and build market share. Later on, the company's technology may
allow the company to diversify into other industries and build the width of the product mix.
Length: Total Products: The product mix length is the total number of products or items in
your company's product mix. For example, EZ Tool has two product lines, hammers and
wrenches. In the hammer product line are claw hammers, ball peen hammers, sledge hammers,
roofing hammers and mallet hammers. The wrench line contains Allen wrenches, pipe
wrenches, ratchet wrenches, combination wrenches and adjustable wrenches.
Depth: Product Variations: Depth of a product mix pertains to the total number of variations
for each product. Variations can include size, flavor and any other distinguishing characteristic.
For example, if your company sells three sizes and two flavors of toothpaste, that particular
line of toothpaste has a depth of six. Just like length, companies sometimes report the average
depth of their product lines; or the depth of a specific product line.
If the company also has another line of toothpaste, and that line comes in two flavors and two
sizes, its depth is four. Since one line has a depth of six and the second line has a depth of four,
your company's average depth of product lines is five (6+4=10, 10/2=5).
Consistency is Relationship: Product mix consistency describes how closely related product
lines are to one another – in terms of use, production and distribution. Your company's product
mix may be consistent in distribution but vastly different in use. For example, your company
may sell health bars and a health magazine in retail stores. However, one product is edible and
the other is not.
The production consistency of these products would vary as well, so your product mix is not
consistent. Your toothpaste company's product lines, however, are both toothpaste. They have
the same use and are produced and distributed the same way. So, your toothpaste company's
product lines are consistent.
Product Market Mix Strategy: Small companies usually start out with a product mix limited
in width, depth and length; and have a high level of consistency. However, over time, the
company may want to differentiate products or acquire new ones to enter new markets. They
may also add to their lines similar products that are of higher or lower quality to offer different
choices and price points.
This is called stretching the product line. When you add higher quality, more expensive
products, it's called upward stretching. If you add lesser quality, lower priced items, it's called
downward stretching.
Product Life Cycle:
Product life cycle is the timeline of demand for the product from its initial stage of
introduction.

Stages of Product Cycle

Product life cycle can be defined as the life cycle of the product. It means the various stages a
product sees in its complete life span.
Product life cycle comprises of the following four stages −
Introduction or innovation
Growth
Maturity
Decline
Introduction Stage: The product is introduced in the market in this stage; it is the initial stage
of the product.
Sales of the product are low in this stage because there may not be a need of the product in the
market.
The product may undergo brand trouble. In this stage, there is very little or no profit.
The demand for the product is created and developed in this stage. After this initial stage, the
next stage of the product is the growth stage.
Growth Stage: In this stage, the demands and market share increase as well as competition
emerges in the market. Generally, the price remains constant in this stage. Marketing and
promotional expenses increase. There is rapid increase in sales. The manufacturing cost
decreases so there is increase in profit margin.It penetrates other market segment.
In the growth stage, there is a boom in the demand of the product and the profit increases
substantially.
Maturity Stage: The price of the product is comparatively low, but the advertisement and
promotion cost increases in this stage. This stage remains for a comparatively longer duration.
In this stage, there is high competition. Profit is decreased. Sales growth can be divided into
the following three categories in the maturity stage −
Growth
Stability
Decay
In growth, there is an increase in the demand of the product. In stability, the demand of the
product remains constant. In decay, there is a slight decrease in the demand.
Decline Stage: There is a decrease in sales in this stage. Demand of product also decreases.
There is decrease in the price of the product. Margins are lowered. There is introduction of new
product in market. New strategies are implemented.
This is the final stage of the product. There is a decrease in demand and sales of the product.
Importance of Product Life Cycle
Product life cycle is an important tool for market forecasting, planning and control. Product
life cycle is important in various ways. The situation of the product can be analyzed properly
and changes can be made in order to increase profit. Some other important features are −
Helpful in formulating a proper product policy, production and pricing.
Helpful in modifying the marketing policy.
Helpful to the marketer regarding competition.
Cautions the management about the decline stage of the product.
New Product Development Process
If a company needs to launch a new product in the market, there is a different development
process to be considered. The following are the factors contributing to new product
development −
Demand in market
Acceptance of a product in the market
Acceptance of company strategy in market
Economic viability of the product
Changing the product as per consumer preference
Adapting as per technological development
Consideration of Government Policy
The development process has to consider these different perspectives for product development
and has to adapt as per the market demand.
Stages of New Product Development
The following are the different stages of new product development −
Stage 1 − Generation of new product ideas
Stage 2 − Screening and evaluation of ideas
Stage 3 − Development and testing of concept
Stage 4 − Development of advertisement and promotion strategies
Stage 5 − Analysis of business
Stage 6 − Development of product
Stage 7 − Testing product in market
Stage 8 − Commercialization of the product
Development of a new product follows a long process, from the generation of an idea to the
commercialization of the product in the market.

Initiating the Price Cuts- Imitating price increase

An organization may initiate price changes to deal with new forces arising within the
organization or the market. The price change may occur at both directions: increasing price or
lowering prices. After the development of structure and strategies of prices, the firm usually,
faces situations in which they must have to initiate price changes or respond to price changes
by competitors.
Initiating Price Changes
In some cases, the company may find it desirable to initiate either a price cut or a price increase.
In both cases, it must anticipate possible buyer and competitor reactions. An example for this
tactic of initiating price changes is the worldwide oil and gas industry.
Initiating Price Cuts
Several situations lead an organization to reduce the price of its products. Organizations with
excess capacity try for extra sales in order to achieve higher capacity utilization rates. In such
a situation, it may find lowering price the most easy method of achieving higher sales volume.
Example: GP and Banglalink always dramatically change their price when any new packages
launch by another. Uber and pathao also do the same thing. Pathao has started their business
only with motor bike and Uber with car. Now they both have the car and motor bike option.
They both give discounts and different rides offer to compete each other.
Low quality trap
An organization initiating price cuts may fall in a low quality trap when consumers associate
the new low prices to a poorer quality product. Example: Electronic products.

Fragile market trap

It may fall into a fragile market trap when price sensitive consumers wait for further price cuts
or search for cheaper products. Example: Online shop.

Shallow pocket trap

It may fall into the shallow pocket trap if financially strong organizations react by huge price
cuts to counter the price cuts initiated by a weak organization. Example: Apparels accessories.

Price war trap: Competitors respond by lowering their prices even more, triggering a price
war.

Example: Foods

Increasing price

Increasing price of a product is an attractive proposition for every business organization, since
a small increase in the price results in huge increase in the revenue and profits. If an
organization feels that the sales volume will not be affected by a small price increase, it may
always be tempted to increase the price. Circumstances leading to price increases cost inflation
and over demand. It can be handled by delayed quotation pricing, escalator clauses, unbundling
and reduction of discounts. When raising prices, customers will eventually turn away from
companies or even whole industries perceived as charging excessive prices. In the extreme,
claims of price gouging may even lead to increased government regulation. For instance, more
cost-effective ways to produce or distribute the products could be the key to avoiding price
increases. The company could shrink the product or substitute less-expensive ingredients
instead of raising the price. Or it can unbundle its market offering, by removing features,
packaging or services, and separately pricing elements that were formerly part of the offer.

Buyer Reactions to Price Changes

It can be of quite diverse nature. Buyers often depend on the way of initiating price changes.
Customer reactions to price changes are not always straightforward: A price increase, which
would normally lower sales, may have some positive meaning for buyers. For instance, what
would you think if Rolex or Apple raised the price of their products? It might be even more
exclusive or better made. Similarly, a price cut in the case of Rolex or Apple would rather
indicate reduced quality and a tarnished brand luxury image than that you get a better deal on
an exclusive product.

Competitor Reactions to Price Changes

An organization considering a price change must worry about the reactions of its competitors
as well as those of its consumers. Competitors are most likely to react if the number of firms
involved is small, if the product is uniform, and if the buyers are well informed about products
and prices.

How could the organization anticipate the likely reactions of its competitors? The problem is
quite complex because, like the customer, the competitor can interpret a company price cut in
several ways. It might think the firm is trying to grab a larger market share or that it is doing
poorly and trying to boost its sales. It might also think that the firm wants the whole industry
to cut prices in order to increase total demand.

The firm must be able to guess each competitor’s likely reaction. If all competitors behave
alike, this will amount to analyzing only a typical competitor. But if the competitors do not
behave alike perhaps because of differences in size, market shares, or policies then separate
analyses are required. However, if some competitors will match the price change, there is better
reason to expect that the rest will also match it. Example: Telecommunication, Electronics and
FMCG company are very much aware of their competitors.

Responding to Price Changes

Here we reverse the question and ask how a firm should respond to a price change by a
competitor. The firm needs to consider several issues: Why did the competitor change the
price?
Was it to take more market share, to use excess capacity, to meet changing cost conditions, or
to
lead an industry wide price change? Is the price change temporary or permanent? What will
happen
to the company's market share and profits, if it does not respond? Are other companies going
to respond? What are the competitor's and other firms' responses to each possible reaction
likely to be?

UNIT 4
Process of marketing communication?

1) Sender: It refers to the marketing firm which is conveying the message.

2) Encoding: Before a message can be sent, it has to be encoded. Putting thoughts, ideas, or
information into a symbolic form is termed as encoding. Encoding ensures the correct
interpretation of message by the receiver, who is often the ultimate customer.

3) Message: A message may be verbal or non-verbal, oral, written, or symbolic. A message

contains all the information or meaning that the sender aims to convey. A message is put into
a transmittable form depending upon the channels of communication.

4) Medium: The channel used to convey the encoded message to the intended receiver is termed
as medium. The medium can be categorized in the following manner:

i) Personal: It involves direct interpersonal (face-to-face) contact with the target group.

ii) Non-Personal: These are channels which convey message without any interpersonal contact

between the sender and the receiver. Examples

a) Print Media:

Newspapers, magazines, direct mails, etc.

b) Electronic Media:

Radio and Television.

5) Decoding: It is the process of transforming the sender’s message back into thought.

Decoding is highly influenced by the self-reference criteria (SRC), which is unintended

reference to one’s own culture.

6) Receiver: It is the target audience or customers who receive the message by way of reading,

hearing, or seeing. A number of factors influence how the message is received. These include

the clarity of message, the interest generated, the translation, the sound of words, and the

visuals used in the message.

7) Noise: The unplanned distortions or interference of die message is termed as ‘noise.’ A

message is subjected to a variety of external factors that distort or interfere, its reception.
8) Feedback: In order to assess the effectiveness of the marketing communication process,

feedback from the customers is crucial. The time needed to assess the communication impact

depends upon the type of promotion used. For instance, an immediate feedback can be obtained

by personal selling, whereas it takes much longer time to assess the communication

effectiveness in case of advertisements.