Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                

Unit 1

Download as pdf or txt
Download as pdf or txt
You are on page 1of 115

APPLICATION

 UNIT I
 Marketing Management.
 UNIT II
 Production Management.
 UNIT III
 Human Resource Management
 UNIT IV
 Financial Management
 The term ‘market’
originates from Latin noun
‘Marcatus’ which mean “a
place where business is
conducted”.
 Market is generally known as
the place where buyers and
sellers meet and enter into
transactions involving transfer
of ownership of goods,
services, securities etc.
 It is a place where potential
buyers meet seller to
exchange goods and services
freely.
"Marketing is an
organisational function
and a set of processes
for creating,
communicating and
delivering value to
customers and for
managing customer
relationships in ways
that benefit the
organisation and its
stakeholders."
 "Management is the art of
getting things done through
and with people in formally
organised groups."

 Management consists of the


interlocking functions of
creating corporate policy and
organising, planning,
controlling, directing an
organisation's resources in
order to achieve the
objectives of the policy.
 Marketing Management
is planning and
executing the
conception , pricing ,
promotion and
distribution of ideas ,
goods and services to
create exchange that
satisfy individual and
organization goals.
 1)Two Parties- Though ,there are several parties
involved in the marketing process but the most vital
amongst them are the buyer and seller.
 2)Exchange of Value The parties involved in the process
exchange value with each other.
 3)Transportation – In the marketing besides the purchase
and sale , those activities too are included which are
concerned with the transportation of the commodities
from production to the consumption.
 4)Satisfaction – The objective of activities pertaining
to marketing to satisfy the human needs i.e to satisfy
customer and to encourage the prospective customer is
also the object of marketing.
 5)Independence- The parties are free to interact and
accept or reject the offer to each other.
 6)Growth and Development- Plans for developing the
business and the activities relate
 Marketing is a Systematic Process
 Marketing is a Legal Process by which Ownership
Transfers
 Marketing is Goal Oriented
 Marketing is a continuous process.
 Marketing is Consumer Oriented
 Marketing starts with consumer and ends with
consumer:
 Marketing is a System of Interacting Business
Activities
 Marketing had dual objectives - profit making
and consumer satisfaction.
 Marketing is a social process
 1. Study of Consumer Wants and Needs
 2. Study of Consumer behaviour
 3. Production planning and development
 4. Pricing Policies
 5. Distribution
 6. Promotion
 7. Branding
 8. Consumer Satisfaction
 9. Marketing Control
 10. Market Research
 Marketing isnot just selling off goods and services
to the customers; it means a lot more than that.
 It
starts with the study of the potential market, to
product development, to market share capturing, to
maintain cordial relations with the customers.
Following are the Functions of Marketing--
 Market Research: A complete research on
competitors, consumer expectations and demand is
done before launching a product into the market.
 Market Planning: A proper plan is designed based
on the target customers, market share to be
captured and the level of production possible.
 Product Design and Development: Based on the
research data, the product or service design is
created.
 Buying and Assembling: Buying of raw material
and assembling of parts is done to create a product
or service.
 Product Standardization: The product is graded as
per its quality and the quality of its raw materials.
 Packaging and Labelling: To make the product
more attractive and self-informative, it is packed
and labelled listing out the ingredients used,
product use, manufacturing details, expiry date, etc.
 Branding: A fascinating brand name is given to the
product to differentiate it from the other similar
products in the market.
 Pricing of the Product: The product is priced
moderately keeping in mind the value it creates for the
customer and cost of production.
 Promotion of the Product: Next step is to make
people aware of the product or service through
advertisements.
 Warehousing and Storage: The goods are generally
produced in bulks and therefore needs to be stored in
warehouses before being sold in the market in small
quantities.
 Selling and Distribution: To reach out to the
consumers spread over a vast geographical area,
selling and distribution channels are to be selected
wisely.
 Transportation: Transportation means are
decided for transfer of the goods from the
manufacturing units to the wholesalers, retailers
and consumers.
 Customer Support Service: The marketing team
remain in contact with the customers even after
selling the product or service to know the
customer’s experience, and the satisfaction
derived.
 (1) Marketing Helps in Transfer, Exchange and
Movement of Goods.
 (2) Marketing is helpful in raising and
maintaining the standard of living of the
community.
 (3) Marketing Creates Employment.
 (4) Marketing as a Source of Income and
Revenue.
 (5) Marketing Acts as a Basis for Making
Decisions.
 (6) Marketing Acts as a Source of New Ideas.
 (7) Marketing Is Helpful In Development Of
An Economy.
 Features of Marketing
 1. Continuous process – Marketing is not an isolated, static
process but is a complex, continuous and interrelated process. It
involves continuous planning, implementation and control. It is
an important functional area of the management.
 2. Systematic Process - The marketing is systematic in nature.
The main aim of marketing is to satisfy the needs and wants of
the customers by bringing into the right products. The following
is the process of marketing involves:
 • The product is design as per customer requirements.
 • The right price of product is fixed.
 • Effective promotion strategy of the product is defined.
 • Distribution of the products at the right place and at the
right time is planned.
 3. Goods, Service and Ideas - marketing sells new ideas and it
also sells goods and services. The marketing process involved
following things:
 • The tangible goods like FMCG products and consumer
durables are dispensed and plan by the marketers.
 • Services like Airlines, hotels, insurance, banks, etc. are
sold by the marketers.
 • Furthermore, ideas are marketed by social and Govt.
organizations, which includes campaigns relating to anti-drugs,
AIDS awareness, anti-corruption, etc.
 4. Customer Oriented - The marketing function of a
business is customer-centred. It makes an attempt to study
the customer needs, and goods are produced accordingly.
The business existence depends on human needs. In a
competitive market, the goods that are best suited to the
customer are the ones that are well-accepted. Hence,
every activity of a business is customer-oriented.
 5. Objective Oriented - All marketing activities are
objective-oriented. Different objectives are fixed at
different levels, but the main objective is to earn profit
from business along with the satisfac¬tion of human wants.
Marketing activities undertaken by sellers make an
attempt to find out the weaknesses in the existing system,
and measures are taken to improve the shortfalls so that
the objectives are achieved.
 6. Marketing mix - A combination of four inputs
constitutes the core of a company’s marketing system—
product, price, place, and promotion. Marketing mix is a
flexible combination of vari-ables. They are influenced by
consumer behaviour, trade factors, competition and
government regulatory measures.
 7. Integrated approach - The marketing activities must be co-
ordinated with other functional areas of an organization.
Functions such as production, finance, research, purchasing,
storekeeping and public relations (PR) are to be integrated with
marketing. This will help in achieving organiza¬tional objectives.
Otherwise, it will result in organizational conflicts.
 8. Commercial and Non-commercial Organizations - Business
organizations such as educational institutions, hospitals, religious
institu¬tions and charitable trusts have also found meaningful
applications of marketing. Thus, marketing is applicable to both
business and non-business organizations.
 9. Customer Satisfaction - A customer expects some services
or benefits from the product for which payment is made. If this
benefit is more than the amount paid, then the customer is
satisfied. In the long run, customer satisfaction helps to retain
market demand. It helps achieve organizational objectives.
Customer satisfaction can be enhanced by providing value-added
services, which includes providing additional facilities at little or
no extra cost.
 10. Competitive Advantage - The marketers should find unique
ideas and innovation to compete in today's market. The
marketers should be proactive and should have decision-making
skills. The pro-active decisions give the competitive advantage to
professional marketers.
 Marketing Management
is planning and
executing the
conception , pricing ,
promotion and
distribution of ideas ,
goods and services to
create exchange that
satisfy individual and
organization goals.
 Marketing mix is a model used to guide the
decisions needed for a company’s business
development plan. The term was coined by
the American Marketing Association in the
1950s.

 The marketing mix refers to the set of


actions, or tactics, that a company uses to
promote its brand or product in the market.
 The marketing mix guides a corporation in
finding the answers to business strategy
questions such as:
 How do I introduce a product to a target market?
 What can I do to promote my service?
 Which tactics should I employ to increase the
following of my brand?
 To put it simply, marketing mix is the
combination of all marketing tools available to
the company in order to achieve its marketing
objective. The right combination of these
marketing tools enables the company to attract
as much profit as possible.
 It creates synergy
 The four Ps of Marketing: Product, Price, Promotion, Place when
blended properly creates coordination that gives a right pitch to
the product. It follows the principle: ”the whole is greater than the
sum of its parts.”

 Brand loyalty and value


 Since the approach focuses on the needs of the customers and their
satisfaction the product consequently earns consumer loyalty and
esteem.

 Serves as a link
 The product features, pricing, and place strives to factor in the
expectations of a customer. The promotional aspects give to the
customer what your company proposes to offer and thus position
the products better. Thus a link is being forged between the
consumer and the organization.
 Enables proper integration
 The designing of the 4 Ps needs critical thinking and
perceptiveness. If they are merged correctly, then your product will
find a unique space in the customer’s mind.

 Guides decision
 The interdependence and the overarching nature of one element
over another guide you in decision making. For example: if your
product pricing is high, then in your promotional activity, you will
have to target well off customers, and your product design must be
quality based. The channels of distribution and location etc. will
also be guided by this decision.

 Higher sales volume


 The result of all the efforts is higher customer satisfaction and
greater market share which is compounded by an increase in the
sale of the products.
 The marketing mix is a crucial tool
to help understand what the
product or service can offer and
how to plan for a successful
product offering.
 The marketing mix is most
commonly executed through the 4
P’s of marketing:
 Price
 Product,
 Promotion
 Place.
PRODUCT

 A product is a good or
service that a business
owner provides for sale to
his target market. When it
comes to developing a
product, the design,
quality, packaging,
features, after-sales
service, and customer
service should be
considered.

 The products or services


offered to your customer:
Their physical attributes,
what they do, how they
differ from your
competitors and what
benefits they provide.
Place
 Place (Also referred to as
Distribution) – Where your
business sells its products or
services and how it gets those
products or services to your
customers.
 This is with regard to location,
distribution, and ways of
delivering the product to the
customer. The place may
include the location of your
business, distributors, shop
front, possible use of the
Internet, and logistics.
 It is important for you to have
a good understanding of the
strategy behind the
positioning or place.
Price
The price is the amount of money
that customers have to pay to
purchase products or avail of
services. There are several factors
that you have to consider when it
comes to price. These include
discounting, price setting, credit
collection, and cash and credit
purchases.

Price – How you price your


product or service so that your
price remains competitive but
allows you to make a good profit.
 Promotion
 Promotion is all about the
act of communicating the
values and benefits of your
products to your
customers. It involves the
use of different methods,
such as direct marketing,
sales promotion,
advertising, and personal
selling to persuade
customers to your
business.

 Promotion – The methods


used to communicate the
features and benefits of
your products or services
to your target customers.
 The factors influencing marketing mix are classified into two.
They are
1. Internal factors
2. External factors.
 Internal Factors: There are certain factors which can be
controlled by the marketing management. They are called
internal factors. Some of them are given below:
 1. Product Planning: A wise product policy is essential to
meet the market demand. The plan includes introduction of
products and modification of products to suit the demand
and elimination of unprofitable lines.
 2. Price: It deals with price competitions. A reasonable
profit is aimed at by the offerer, and the price of the
product is fixed to suit the market.
 3. Branding: It must create a particular image in the
minds of the consumers. Decision of the trade mark is
important in developing the products.
 4. Personal Selling: Personal selling is good to increase
the sale and at the same time to know the consumer's
needs and desires.
 5. Sales Promotion: The marketing manager makes out
programmes to increase the sales through exhibitions,
displays, advertising etc. The aim is to inform and
persuade the customers to buy the company's product.
 6. Physical Distribution: It includes the channels and
distribution, transportation, warehousing, inventory
control etc. Distribution is the delivery of products at
the right time and at the right place.
 7. Market Research: Market research is a system by
which one can analyse the market conditions. It helps a
marketer in formulating the policies by which the
product reaches in an efficient way in the hands of the
consumers.
 External Factors: External factors are also known as uncontrollable
factors. These are the factors that are beyond the control of the
marketing management. These include the following.

 1. Consumer's Buying Behaviour: Consumer's buying behaviour is


affected by buying habits, buying power, motivation in buying, living
standard, social environment, technological changes etc.
 2. Trader's behaviour: The behaviour of intermediaries -
wholesalers or retailers, and their motivations, practices, attitudes
etc. affect the marketing of the products and its volume.
 3. Competitor's Behaviour: New business firms come up which
invites competition among the industrialists. The competition may be
of supply and demand of the product, choice offered by the
consumers, technological changes, new invention etc.
 4. Governmental Behaviour: The marketing manager should
consider the rules and regulations of the Government in respect of
products, pricing, competitive practices, advertising etc. Firms have
no control over the laws.
 Product Management can
be defined as the general
business structure within
a company that supports
and manages all the
activities related to
developing, marketing
and selling a product – or
even more than one – all
through its lifecycle.
 The products can be classified on the basis of a) Durability &
tangibility
 b) Use.
Classification of products on the basis of Durability & tangibility
Non-durable goods
These are tangible goods that are low priced and normally consumed in
one or few uses everyday or anytime of the day such as soaps, biscuits,
shampoos, deodorants, etc. As these goods are consume quickly and
purchased frequently, the appropriate strategy is to make them
available in many locations, charge only a small mark up and advertise
heavily to induce trial and build preference.
Durable goods
These are also tangible goods that remain in use months after months
and year after year. Normally, they require more personal selling and
service, guarantee, higher margin, etc. For example: couches or chairs,
vacuum cleaners, washing machines, etc.
Services
These are intangible, inseparable, variable and perishable products. As a
result, they normally require more quality control, supplier creditability
and adaptability. Example- hair cut, legal advices, appliance repair,
financing, etc.
 Classification of products on the
basis of Uses
 In this part, the goods or services
can be classified into two broad
categories viz. Consumer goods
and Industrial goods.

 Consumer goods classification


 These are meant for use of
consumption by ultimate
consumers for the satisfaction of
their needs and wants. According
to American Marketing Association
(AMA), “Consumer products are
those products which are used by
ultimate consumers in their original
form without commercial
processing.” These are classified
into following ways:
 Convenience goods
 These are those products which a consumer purchases frequently, immediately
and with minimum efforts from convenient locations. For example, tooth
paste, bread, newspaper, cigarette, match box, medicine, soap, cold drinks,
grocery items, etc.

 Shopping goods
 These are those goods where consumers devote considerable time in making
selections before they buy. On the basis of durability, suitability, quality price
and style, the selection and purchasing of the goods takes place. For example,
household furniture, automobiles, refrigerators, sewing machines, jewelleries,
clothing, used cars; arid major appliance, etc.

 Specialty goods
 These goods possess unique characteristics and brand identification for which
a sufficient number of buyers are willing to make a special purchasing effort.
For example, stereo components, photographic equipment, men’s suits, shoes,
goggles, mobile phones, cloth material, etc.

 Unsought goods
 These are those goods which the consumer does not know about or does not
normally think of buying. These goods require advertising and personal-selling
support. For example, smoke detectors, kitchen exhaust fans like electric
chimneys, etc. The classic examples of known but unsought goods are life
insurance, cemetery plots, gravestones and encyclopedias, reference books,
etc.
 Industrial goods classification
 These are those goods that are meant for use
in making other products or for rendering a
service in the operation of business
organization. According to American Marketing
Association (AMA), “Industrial goods are those
goods which are designed to be sold primarily
for use in producing other goods or rendering
services.”
 The product life cycle is the process a product goes through
from when it is first introduced into the market until it
declines or is removed from the market. The life cycle has
four stages - introduction, growth, maturity and decline.

 Introduction Stage – This stage of the cycle could be the most


expensive for a company launching a new product. The size of
the market for the product is small, which means sales are
low, although they will be increasing. On the other hand, the
cost of things like research and development, consumer
testing, and the marketing needed to launch the product can
be very high, especially if it’s a competitive sector.

 Growth Stage – The growth stage is typically characterized by


a strong growth in sales and profits, and because the company
can start to benefit from economies of scale in production,
the profit margins, as well as the overall amount of profit,
will increase. This makes it possible for businesses to invest
more money in the promotional activity to maximize the
potential of this growth stage.
 Maturity Stage – During the maturity stage, the product
is established and the aim for the manufacturer is now
to maintain the market share they have built up. This is
probably the most competitive time for most products
and businesses need to invest wisely in any marketing
they undertake. They also need to consider any product
modifications or improvements to the production
process which might give them a competitive advantage.

 Decline Stage – Eventually, the market for a product will


start to shrink, and this is what’s known as the decline
stage. This shrinkage could be due to the market
becoming saturated (i.e. all the customers who will buy
the product have already purchased it), or because the
consumers are switching to a different type of product.
While this decline may be inevitable, it may still be
possible for companies to make some profit by switching
to less-expensive production methods and cheaper
markets.
 “A brand is a name,
term, design, symbol, or
any other feature that
identifies one seller’s
good or service as
distinct from those of
other sellers”.
 “Branding is endowing
products and services
with the power of a
brand”
 Branding is the process of
giving a meaning to specific
organization, company,
products or services by
creating and shaping a
brand in consumers’ minds.
It is a strategy designed by
organizations to help
people to quickly identify
and experience their brand,
and give them a reason to
choose their products over
the competition’s, by
clarifying what this
particular brand is and is
not.
CUSTOMERS
The nature of the customers
may influenced the
branding of the products,
e.g. if the product is for
teenagers and youngsters
the brand name should be
trendy. If the brand name is
for masses across the nation
the brand name should have
the appeal e.g. Amul,
 Quality:
 Building quality into the core
product is vital. The core product
must achieve the basic functional
requirements expected of it.
Higher quality brands achieve
greater market share and higher
profitability than their inferior
rivals.
 It is important to understand as
to how customers judge the
quality of a product. Most
customers do not do detailed
evaluations of the performance
of the product when they buy.
 EFFECTIVE
COMMUNICATION

Communication also play a


very important role in
building a successful
brand. When brand is new
communication can be
used to create awareness
then to develop the brand
personality and reinforce
the perception, so that
customer fell attached to
the brand.
PRICE
 A brand to create a positive
perception should have a
reasonable price, the consumer
should feel that they are getting
value for their money.

BRAND ASSOCIATION
 If the organization has positive
association with research and
development or technology than it
becomes easy to build such brand
Positioning:
 Creating a unique position in
the marketplace involves the
careful choice of target
market and establishing a
clear differential advantage
in the minds of these
customers. This can be
achieved through brand name
and image, service, design,
guarantees, packaging and
delivery.
Well-balanced
communication:
 Brand positioning shapes customer
perceptions. A brand needs to
communicate its positioning to its
target market. Awareness needs to
be built, brand personality
projected and favourable attitudes
built and reinforced among
customers. The brand theme needs
to be reinforced by advertising,
salespeople, sponsorship, public
relations and sales promotion
campaigns.
Being first:
 Pioneer brands are more likely to be
successful than follower brands. Being first
gives a brand the opportunity to create a
clear position in the minds of target
customers before competition enters the
market. It gives the pioneer the opportunity
to build customer and distributor loyalty. But
it requires sustained marketing effort and
the strength to withstand competitor
attacks.
Long term perspective:

 Generating awareness, communicating brand


values and building customer loyalty takes
many years. There must be a consistent, high
level of brand investment. If investment is
cut, sales are unlikely to fall substantially in
the short term but it will erode brand equity
in terms of awareness levels, brand
associations, intentions to buy, etc.
Price
The price is the amount of money
that customers have to pay to
purchase products or avail of
services. There are several factors
that you have to consider when it
comes to price. These include
discounting, price setting, credit
collection, and cash and credit
purchases.

Price – How you price your


product or service so that your
price remains competitive but
allows you to make a good profit.
 Pricing is a process to
determine what manufactures
receive in exchange of the
product. Pricing depends on
various factors like
manufacturing cost, raw
material cost, profit margin
etc.
 Price management is the most
effective way to manage the
balance between financial
risk and revenue.
 The objective once set gives the path to the business i.e. in
which direction to go. The following are the pricing objectives
that clears the purpose for which the business exists:

 Survival: The foremost Pricing Objective of any firm is to


set the price that is optimum and help the product or service to
survive in the market. Each firm faces the danger of getting ruled
out from the market because of the intense competition, a
nature market or change in customer’s tastes and preferences,
etc. The New Firms entering into the market adopts this type of
pricing objective.

 Maximizing the current profits: Many firms try to


maximize their current profits by estimating the Demand and
Supply of goods and services in the market. Pricing is done in line
with the product’s demand in the customers and the substitutes
available to fulfill that demand. Higher the demand higher will
be the price charged. Seasonal supply and demand of goods and
services are the best examples that can be quoted here.


 Capturing huge market share: Many
firms charge low prices for their offerings to
capture greater market share. The reason for
keeping the price low is to have an increased
sales resulting from the Economies of Scale.
Higher sales volume lead to lower production
cost and increased profits in the long run. This
strategy of keeping the price low is also known
as Market Penetration Pricing.
 Market Skimming: Market skimming means
charging a high price for the product and
services offered by the firms which are
innovative, and uses modern technology. The
prices are comparatively kept high due to the
high cost of production incurred because of
modern technology. Mobile phones, Electronic
Gadgets are the best examples of skimming
pricing that are launched at a very high cost and
gets cheaper with the span of time.
 Product –Quality Leadership: Many firms
keep the price of their goods and services in
accordance with the Quality Perceived by the
customers. Generally, the luxury goods
create their high quality, taste, and status
image in the minds of customers for which
they are willing to pay high prices. Luxury
cars such as BMW, Mercedes, Jaguar, etc.
create the high quality with high-status
image among the customers.
 Thus, every firm operates with the ultimate
objective of earning profits and, therefore,
the price of a product must be set keeping in
mind the cost incurred in its production
along with the benefits it offers for which
people are ready to pay extra.
FACTORS AFFECTING PRICING
I nternal Factors
 1.Cost – Cost is one of the important factors
affecting price. Cost can be divided as fixed cost
and variable cost. Companies try to recover both
these types of costs. If the cost is high then the
price of product is bound to be more.
 2.Profit expected – Profit is directly related to the
expected margin of profit. If the manufacturer
expects a higher profit margin, then he may charge
a higher price for his product.
 3.Objectives of the company – If the objective is
to increase return on investment, it may charge
higher profit. If it aims at mass marketing, it may
charge a lower price thereby making the product
affordable to a large number of consumers.
 4.PLC – The stage of the product in PLC also
affects pricing. During the introduction
stage, prices are usually less to attract the
customers.

 5.
Brand Image – The image of a brand and
the manufacturer affects its price.

 6.Product – Companies manufacturing


superior quality products charge premium
price. Manufacturer must also consider
feature of the product, nature of the product
and frequency of products’ purchase while
fixing price.
External Factors
 1.Demand - The market demand for a product or
service obviously has a big impact on pricing. Since
demand is affected by factors like, number and size of
competitors, the prospective buyers, their capacity
and willingness to pay, their preference etc. are taken
into account while fixing the price.
 2.Competition - Competitive conditions affect the
pricing decisions. Competition is a crucial factor in
price determination. A firm can fix the price equal to
or lower than that of the competitors, provided the
quality of product, in no case, be lower than that of
the competitors.
 3. Suppliers - Suppliers of raw materials and other
goods can have a significant effect on the price of a
product. If the price of cotton goes up, the increase is
passed on by suppliers to manufacturers.
Manufacturers, in turn, pass it on to consumers.
 4. Consumers – It includes purchasing power,
buying motives, personality traits and so on.
Price sensitive consumers are not willing to
buy highly priced brands. Buyers are less
price sensitive when the product they are
buying in unique or when it is high in quality,
prestige or exclusiveness.
 5.Channel of Distribution – Longer the
channel of distribution, higher would be the
price of the product. This is because
commission has to be paid to every
intermediary in order to encourage them to
sell the brand effectively and to seek their
support.
 Pricing strategy refers
to method companies use
to price their products or
services.
 Almost all companies, large
or small, base the price of
their products and services
on production, labor and
advertising expenses and
then add on a certain
percentage so they can
make a profit.
 There are several different
pricing strategies, such as
penetration pricing, price
skimming, discount pricing,
and even competitive
pricing.
Pricing strategy is important for companies
who wish to achieve success by finding the
price point where they can maximize sales and
profits. Companies may use a variety of pricing
strategies, depending on their own unique
marketing goals and objectives.
 1.Penetration Pricing - Here the
organization sets a low price to increase
sales and market share. Once market share
has been captured the firm may well then
increase their price.
 2. Skimming Pricing - The organization sets
an initial high price and then slowly lowers
the price to make the product available to a
wider market. The objective is to skim
profits of the market layer by layer.
 3. Competition Pricing - Setting a price in
comparison with competitors. In reality a firm
has three options and these are to price lower,
price the same or price higher than competitors.
 4. Psychological Pricing - Psychological pricing
strategy is commonly used by marketers in the
prices they establish for their products. For
instance, Rs. 99 is psychologically "less" in the
minds of consumers than Rs.100. It's a minor
distinction that can make a big difference.
 5. Premium Pricing - Premium pricing strategy
establishes a price higher than the competitors.
It's a strategy that can be effectively used when
there is something unique about the product or
when the product is first to market and the
business has a distinct competitive advantage.
 6. Bundle Pricing - With bundle pricing, small
businesses sell multiple products for a lower rate
than consumers would face if they purchased
each item individually. Not only is bundling goods
an effective way of moving unsold items that are
taking up space in your facility, but it can also
increase the value perception in the eyes of your
customers, since you’re essentially giving them
something for free.
 7. Economy Pricing - Used by a wide range of
businesses including generic food suppliers and
discount retailers, economy pricing aims to
attract the most price-conscious of consumers.
With this strategy, businesses minimize the costs
associated with marketing and production in
order to keep product prices down.
 Competitive-Based Pricing
 There are times when a small company may
have to lower its price to meet the prices of
competitors. A competitive-based pricing
strategy may be employed when there is
little difference between products in an
industry. For example, when people purchase
paper plates or foam cups for a picnic, they
often shop for the lowest price when there is
minimal product differentiation.
Consequently, a small paper company may
need to price its products lower or lose
potential sales.
Pricing Methods

 Definition:The Pricing Methods are


the ways in which the price of goods
and services can be calculated by
considering all the factors such as the
product/service, competition, target
audience, product’s life cycle, firm’s
vision of expansion, etc. influencing
the pricing strategy as a whole.
 The pricing methods can be broadly
classified into two parts:

 CostOriented Pricing Method


 Market Oriented Pricing Method

 Cost-Oriented Pricing Method: Many firms


consider the Cost of Production as a base for
calculating the price of the finished goods.
Cost-oriented pricing method covers the
following ways of pricing:
1) Cost-Plus Pricing: It is one of the simplest
pricing method, Cost plus pricing involves
adding a certain percentage to cost in
order to fix the price. For instance, if the
cost of a product is Rs. 200 per unit and the
marketer expects 10 per cent profit on
costs, then the selling price will be Rs. 220.
The difference between the selling price
and the cost is the profit. This method is
simpler as marketers can easily determine
the costs and add a certain percentage to
arrive at the selling price.
 2) Markup pricing

 Refers to a pricing method in which the fixed


amount or the percentage of cost of the
product is added to product’s price to get the
selling price of the product. Markup pricing is
more common in retailing in which a retailer
sells the product to earn profit. For example, if
a retailer has taken a product from the
wholesaler for Rs. 100, then he/she might add
up a markup of Rs. 20 to gain profit.
 3-Target Return Pricing:

 Helps in achieving the required rate of return


on investment done for a product. In other
words, the price of a product is fixed on the
basis of expected profit.

Market-Oriented Pricing Method: Under


this method price is calculated on the basis of
market conditions. Following are the methods
under this group:
 Perceived-Value Pricing: In this pricing
method, the manufacturer decides the price
on the basis of customer’s perception of the
goods and services taking into consideration
all the elements such as advertising,
promotional tools, additional benefits,
product quality, the channel of distribution,
etc. that influence the customer’s
perception.
 E.g. Customer buy Sony products despite less
price products available in the market, this is
because Sony company follows the perceived
pricing policy wherein the customer is willing
to pay extra for better quality and durability
of the product.
 Value Pricing: Under this pricing method
companies design the low priced products
and maintain the high-quality offering. Here
the prices are not kept low, but the product
is re-engineered to reduce the cost of
production and maintain the quality
simultaneously.
 E.g. Tata Nano is the best example of value
pricing, despite several Tata cars, the
company designed a car with necessary
features at a low price and lived up to its
quality.
 Going-Rate Pricing- In this pricing method,
the firms consider the competitor’s price as a
base in determining the price of its own
offerings. Generally, the prices are more or
less same as that of the competitor and the
price war gets over among the firms.
 E.g. In Oligopolistic Industry
 Differential Pricing: This pricing method is
adopted when different prices have to be
charged from the different group of
customers. The prices can also vary with
respect to time, area, and product form.
 E.g. The best example of differential pricing
is Mineral Water. The price of Mineral Water
varies in hotels, railway stations, retail
stores.
 In the marketing mix,
the process of moving
products from the
producer to the
intended user is called
place. In other words,
it is how your product
is bought and where it
is bought. This
movement could be
through a combination
of intermediaries such
as distributors,
wholesalers and
retailers. In addition, a
newer method is the
internet which itself is
a marketplace now.
 Most producers do not sell
their goods directly to the
final users; between them
stands a set of intermediaries
performing different
functions. These
intermediaries constitute a
marketing channel, also called
a trade channel or
distribution channel - the
Place element in the
marketing mix. These
distribution channels make a
product or service available
for use or consumption.
 Thus, distribution is of vital
importance.
 Role and Significance/Importance
of Distribution Channels

 Distribution channels offer salesmanship: The


distribution channels offer pivotal role of a sales agent.
They help in creating new products in market. They
specialize in word of mouth selling and promotion of
products. They assure pre-sale and post-sale service to the
consumers. Since these channels are in direct and regular
contact with the consumers, they do salesmanship very
well and at the same time provide true and valuable
feedback to the producers.
 Distribution channels increase distributional efficiency:
The intermediary channels ease the sales process as they
are in direct contact with the customers. They narrow
down the gap between producers and consumers both
economically and efficiently. These intermediaries reduce
the number of transactions involved in making products
available from producers to consumers.
 The channels offer products in required
assortments: Just like the producers have
expertise in manufacturing products, similarly
the intermediaries have their own expertise. The
wholesalers specialize in moving and transferring
products from various producers to greater
number of retailers. Similarly, the retailers have
expertise in selling a wide assortment of goods in
less quantity to a greater number of final
customers. Due to the presence of distribution
channels(wholesalers and retailers), it is possible
for a consumer to buy the required products at
right time from a store conveniently
located(geographically closer) rather than
ordering from a far located factory.
 The channels assist in executing the price
mechanism between the firm and the final
customers: The intermediaries help in
reaching a price level which is acceptable
both to the producers as well to the
consumers.
 Distribution channels assist in stock
holding: The intermediaries perform various
other functions like financing the products,
storing the products, bearing of risks and
providing required warehouse space.
 Thus, the distribution channels are a vital
constituent of a firm’s comprehensive
marketing strategy. They assist in expanding
product reach and availability, as well in
increasing revenue.
 Distribution channel intermediaries are
middlemen who play a crucial role in the
distribution process. These middlemen facilitate
the distribution process through their experience
and expertise. There are four main types of
intermediaries:

 1. Agents
 The agent is an independent entity who acts as
an extension of the producer by representing
them to the user. An agent never actually gains
ownership of the product and usually make
money from commissions and fees paid for their
services.
 2. Wholesalers
 Wholesalers are also independent entities. But they
actually purchase goods from a producer in bulk and
store them in warehouses. These goods are then resold
in smaller amounts at a profit. Wholesalers seldom sell
directly to an end user. Their customers are usually
another intermediary such as a retailer.

 3. Distributors
 Similar to wholesalers, distributors differ in one regard.
A wholesaler may carry a variety of competition brands
and product types. A distributor however, will only carry
products from a single brand or company. A distributor
may have a close relationship with the producer.

 4. Retailers
 Wholesalers and distributors will sell the products that
they have acquired to the retailer at a profit. Retailers
will then stock the goods and sell them to the ultimate
end user at a profit.
 Therea four ways through which a product
reaches the customers. These are also known
as Channel of distribution.
 Marketing Channels - 1
 1) Manufacturer to Consumer
 This is one of the most simple and effortless
types of the Marketing Channels as the goods
produced reach to the consumers directly from
the house of manufacturer. It works as cost-
effective and profitable for both the parties
involved as there is no further involvement of
the middlemen such as retailer, wholesalers, and
agents that charge their commission increasing
the overall price of the products.

 Example of this marketing channel : There are


many bakeries and handmade chocolatier brands
that directly sell their confections to their
customers through their shop, eating joint, or
home delivery through the orders placed on the
website or social media handles of the bakery
owners or chocolatiers.
 2) Manufacturer to Retailer to Consumer
 This type of Marketing Channels is one of the
highly adopted and preferred channels in the
industry. The manufacturers who specialize in
the manufacturing of the shopping goods such as
shoes, furniture, and fashion apparels amongst
others opt for this Marketing Channel.

 Example of this marketing channel : The various


items of furniture from the manufacturers of
China that are displayed and sold through the
local retailers are marketed and distributed
through the above-mentioned channel. They
procure the furniture items directly from the
manufacturers in China and sell it to the local
market adding their profit margins attaching the
brand name of imported furniture.
 3) Manufacturer to Wholesaler to
Consumer
 This category of Marketing Channel is usually
adopted by the consumers who are looking out
for bulk purchases of the specific items and
procuring the same from the wholesaler works
out quite easy and cost effective for them owing
to the economies of scale factor plus no
involvement of other intermediaries. The
wholesaler reduces the cost to the consumer
such as service cost or sales force cost making
the items available to the consumer at cheaper
rates.

 Example of this marketing channel : Shopping


from the factory outlets of the brand or
warehouse clubs where the consumer has to sign
for the membership with the wholesaler in order
to buy the products at cheaper rates.
 4) Manufacturer to Agent to Wholesaler to
Retailer to Consumer
 This type of Marketing Channel involves more
than one middlemen or intermediary making
the goods reach to the consumers. The
agents or the middlemen helps and assists
with the sale of the goods and charge their
commission from the manufacturer. They are
quite helpful when the goods need to reach
the consumers in a short span of time.
 Promotionis all about the
act of communicating the
values and benefits of
your products to your
customers.

 “Promotion includes,
advertising, personal
selling, sales promotion
and other selling tools.”
 1) Increasing brand awareness –
 Promotions help in creating brand awareness. With
the help of various media like the television,
billboards, radio or local newspaper news, you can
spread across information about your brand and
company, which helps people to find out more about
you and look into your products and make purchases.

 2) Segment Identification –
 If your promotional and marketing strategy is loosely
structured, it might not be successful in targeting the
“right” audiences. Having a full-proof and well-
thought-out promotional strategy and marketing plan
can help you identify different segments of
consumers in the market and offer suitable solutions
for your clients.
 3) Increasing customer traffic –
 Promotion also helps in increasing customer
traffic. The more you promote your brand, the
more will the customers know about you and
your company and the more will they be
interested in your products. Promotion can be
done even by giving out free samples which work
wonders for customers! They try your product
and ultimately, come to you and make
purchases.
 4)Providing information: Informative promotion
is more common in the early stages of the
product life cycle. An informative promotion may
explain what ingredients (for example, fiber)
will do for a consumer’s health, describe why the
product is better (for example, high-definition
television versus regular television), inform the
customer of a new low price, or explain where
the item may be purchased.
5 )Keeping loyal customers: Promotion is
also used to keep people from switching
brands. Slogans such as Campbell’s soups are
“M’m! M’m! Good!” and “Intel Inside”
remind consumers about the brand.
Marketers also remind users that the brand is
better than the competition. For years, Pepsi
has claimed it has the taste that consumers
prefer. Southwest Airlines brags that
customers’ bags fly free. Such advertising
reminds customers about the quality of the
product or service.
 The management must consider the following
factors in determining the promotion mix,
these are:
 Nature of Product: The different type of
product requires different promotional tools.
Such as, for the industrial products Viz.
Machinery, equipment or land personal
selling is more appropriate as a great deal of
pre-sale and after-sale services is required to
sell and install such products. On the other
hand, advertising and publicity are more
suitable for the consumer goods, especially
the convenience goods.
 Nature of Market: The number and location of
customers greatly influence the promotion mix. In
case the group of potential customers is small and
are concentrated in a particular locality, then
personal selling is more likely to be effective.
Whereas, if the customer base is large and
widespread, then the blend of advertising, personal
selling, and the sales promotion is required to sell
the product.
 Stage of Product’s Life: The promotion mix changes
as the product moves along its life cycle. During the
introduction stage, the principal objective of the
promotion is to create the primary demand by
emphasizing the product’s features, utility, etc.
therefore, the blend of advertising and publicity is
required. As the product reaches its maturity stage
the advertising and personal selling is required to
maintain the demand of the customers.
 And finally, during the decline stage the expenses on
other promotional activities are cut, and more
emphasis is laid on sales promotion with the intent to
push up the declining sales.
 Availability of Funds: The marketing budget also
decides the promotion mix. If the funds available
for the promotion are large, then the blend of
promotional tools can be used, whereas in the
case the funds are limited then the management
must choose the promotional tool wisely.
 Nature of Technique: Each element of the
promotional mix has unique features that
significantly influences the purpose of
promotion. Such as, the advertising is an
impersonal mode of communication that reaches
a large group of customers. Its expression can be
amplified with the use of colors and sound that
helps in developing the long lasting brand image
in the minds of the customer.
 Promotional Strategy: The promotion mix largely
depends on the company’s promotional strategy,
i.e. whether it accepts
 Push Strategy or
 Pull Strategy.
 In a Push strategy, the manufacturer forces the
dealers to carry the product and promote it to
the customer, i.e. convince the potential buyers
to buy it. Here, personal selling and trade
promotion are likely to be more effective.
 In the case of a Pull Strategy, the consumers ask
the dealers to carry the product, i.e. customers
themselves purchase the product. Here,
advertising and consumer promotion are more
appropriate.
 Advertising: The advertising is any paid form
of non-personal presentation and promotion
of goods and services by the identified
sponsor in the exchange of a fee. Through
advertising, the marketer tries to build a pull
strategy; wherein the customer is instigated
to try the product at least once.The
complete information along with the
attractive graphics of the product or service
can be shown to the customers that grab
their attention and influences the purchase
decision.
 Personal Selling: This is one of the traditional
forms of promotional tool wherein the salesman
interacts with the customer directly by visiting
them. It is a face to face interaction between
the company representative and the customer
with the objective to influence the customer to
purchase the product or services.

 Sales Promotion: The sales promotion is the


short term incentives given to the customers to
have an increased sale for a given
period.Generally, the sales promotion schemes
are floated in the market at the time of festivals
or the end of the season. Discounts, Coupons,
Payback offers, Freebies, etc. are some of the
sales promotion schemes.With the sales
promotion, the company focuses on the
increased short-term profits, by attracting both
the existing and the new customers.
 Public Relations: The marketers try to build a
favourable image in the market by creating
relations with the general public. The companies
carry out several public relations campaigns with
the objective to have a support of all the people
associated with it either directly or
indirectly.The public comprises of the customers,
employees, suppliers, distributors, shareholders,
government and the society as a whole. The
publicity is one of the form of public relations
that the company may use with the intention to
bring newsworthy information to the public.
 E.g. Large Corporates such as Dabur, L&T, Tata
Consultancy, Bharti Enterprises, Services,
Unitech and PSU’s such as Indian Oil, GAIL, and
NTPC have joined hands with Government to
clean up their surroundings, build toilets and
support the swachh Bharat Mission.
 Direct Marketing: With the intent of technology,
companies reach customers directly without any
intermediaries or any paid medium.The e-mails,
text messages, Fax, are some of the tools of
direct marketing. The companies can send
emails and messages to the customers if they
need to be informed about the new offerings or
the sales promotion schemes.
 E.g. The Shopperstop send SMS to its members
informing about the season end sales and extra
benefits to the golden card holders.

 Thus, the companies can use any tool of the


promotion mix depending on the nature of a
product as well as the overall objective of the
firm.
 Integrated marketing communication refers to integrating
all the methods of brand promotion to promote a
particular product or service among target customers. In
integrated marketing communication, all aspects of
marketing communication work together for increased
sales and maximum cost effectiveness.
 An approach to achieving the objectives of a marketing
campaign, through a well-coordinated use of different
promotional methods that are intended to reinforce each
other.
 As defined by the American Association of Advertising
Agencies, integrated marketing communications “…
recognizes the value of a comprehensive plan that
evaluates the strategic roles of a variety of communication
disciplines advertising, public relations, personal selling,
and sales promotion and combines them to provide clarity,
consistency, and maximum communication impact.”
 (i) The Foundation: As the name suggests,
foundation stage involves detailed analysis of both
the product as well as target market. It is essential
for marketers to understand the brand, its offerings
and end-users. You need to know the needs, attitudes
and expectations of the target customers. Keep a
close watch on competitor’s activities.
 (ii) The Corporate Culture: The features of products
and services ought to be in line with the work culture
of the organization. Every organization has a vision
and it’s important for the marketers to keep in mind
the same before designing products and services. Let
us understand it with the help of an example.
 Organization A‘s vision is to promote green and clean
world. Naturally its products need to be eco friendly
and biodegradable, in lines with the vision of the
organization.
 (iii)Brand Focus: Brand Focus represents the
corporate identity of the brand.
 (iv) Consumer Experience: Marketers need
to focus on consumer experience which
refers to what the customers feel about the
product. A consumer is likely to pick up a
product which has good packaging and looks
attractive. Products need to meet and
exceed customer expectations.
 (v) Communication Tools: Communication
tools include various modes of promoting a
particular brand such as advertising, direct
selling, promoting through social media such
as facebook, twitter, orkut and so on.
 (vi) Promotional Tools: Brands are promoted
through various promotional tools such as trade
promotions, personal selling and so on.
Organizations need to strengthen their
relationship with customers and external clients.
 (vii) Integration Tools: Organizations need to
keep a regular track on customer feedbacks and
reviews. You need to have specific software like
customer relationship management (CRM) which
helps in measuring the effectiveness of various
integrated marketing communications tools.
 Integrated marketing communication enables all
aspects of marketing mix to work together in
harmony to promote a particular product or
service effectively among end-users.

You might also like