BBA GOKAK

CHAPTER 4
MARKETING MIX

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 4Ps make up a typical marketing mix - Price, Product,
Promotion and Place. However, nowadays, the marketing mix increasingly includes several
other Ps like Packaging, Positioning, People and even Politics as vital mix elements.

Elements of Marketing mix:

Price: refers to the value that is put for a product. It depends on costs of production, segment
targeted, ability of the market to pay, supply - demand and a host of other direct and indirect
factors. There can be several types of pricing strategies, each tied in with an overall business
plan. Pricing can also be used a demarcation, to differentiate and enhance the image of a
product.

Product: refers to the item actually being sold. The product must deliver a minimum level of
performance; otherwise even the best work on the other elements of the marketing mix won't
do any good.

Place: refers to the point of sale. In every industry, catching the eye of the consumer and
making it easy for her to buy it is the main aim of a good distribution or 'place' strategy.
Retailers pay a premium for the right location. In fact, the mantra of a successful retail
business is 'location, location, location'.

Promotion: this refers to all the activities undertaken to make the product or service known
to the user and trade. This can include advertising, word of mouth, press reports, incentives,
commissions and awards to the trade. It can also include consumer schemes, direct
marketing, contests and prizes.

PRODUCT

A product is the item that is developed and refined for sale in the market. It aims to meet the
customer’s needs and wants. The concept of product categorised into two, i.e., narrow
concept and wide concept. In its narrow concept, a product is a combination of physical or
chemical characteristics has some utilities. It is not just a non-living object or a physical
substance.
A product also has other functions than its utility like satisfying customer and wants, e.g., fan,
table, pen, cooler, chair, etc. In its wider concept, a pro having a variety of colours, designs,
packaging and brand is said to be a different product. For example, if a shampoo is made
available in three different variables and smells, then these are three products, as they are
fulfilling needs of custom with varied choices. Hence, product is defined as a complete
package of benefits received by a consumer.
 BBA GOKAK

Customers will choose a product based on their perceived value of it. Satisfaction is the
degree to which the actual use of a product matches the perceived value at the time of the
purchase. A customer is satisfied only if the actual value is the same or exceeds the perceived
value. Kotler attributed five levels to products:

The five product levels are:

1. Core benefit:
The fundamental need or want that consumers satisfy by consuming the product or
service. For example, the need to process digital images.

2. Generic product:
A version of the product containing only those attributes or characteristics absolutely
necessary for it to function. For example, the need to process digital images could be
satisfied by a generic, low-end, personal computer using free image processing
software or a processing laboratory.

3. Expected product:
The set of attributes or characteristics that buyers normally expect and agree to when
they purchase a product. For example, the computer is specified to deliver fast image
processing and has a high-resolution, accurate colour screen.
 BBA GOKAK
4. Augmented product:
The inclusion of additional features, benefits, attributes or related services that serve
to differentiate the product from its competitors. For example, the computer comes
pre-loaded with high-end image processing software for no extra cost or at a deeply
discounted, incremental cost.

5. Potential product:
This includes all the augmentations and transformations a product might undergo in
the future. To ensure future customer loyalty, a business must aim to surprise and
delight customers in the future by continuing to augment products. For example, the
customer receives ongoing image processing software upgrades with new and useful
features.

PRODUCT LIFE CYCLE

 BBA GOKAK

There are four stages in a product’s life cycle - introduction, growth, maturity, and decline –
but before this a product needs to go through design, research and development. Once a
product is found to be feasible and potentially profitable it can be produced, promoted and
sent out to the market. It is at this point that the product life cycle begins.The various stages
of a product’s life cycle determine how it is marketed to consumers. Successfully introducing
a product to the market should see a rise in demand and popularity, pushing older products
from the market. As the new product becomes established, the marketing efforts lessen and
the associated costs of marketing and production drop. As the product moves from maturity
to decline, so demand wanes and the product can be removed from the market, possibly to be
replaced by a newer alternative.

Managing the four stages of the life cycle can help increase profitability and maximise
returns, while a failure to do so could see a product fail to meet its potential and reduce its
shelf life.

Writing in the Harvard Business Review in 1965, marketing professor Theodore Levitt
declared that the innovator had the most to lose as many new products fail at the introductory
stage of the product life cycle. These failures are particularly costly as they come after
investment has already been made in research, development and production. Because of this,
many businesses avoid genuine innovation in favour of waiting for someone else to develop a
successful product before cloning it.

Stages

There are four stages of a product’s life cycle, as follows:

1. Market Introduction and Development

This product life cycle stage involves developing a market strategy, usually through an
investment in advertising and marketing to make consumers aware of the product and its
benefits.

At this stage, sales tend to be slow as demand is created. This stage can take time to move
through, depending on the complexity of the product, how new and innovative it is, how it
suits customer needs and whether there is any competition in the marketplace. A new product
development that is suited to customer needs is more likely to succeed, but there is plenty of
evidence that products can fail at this point, meaning that stage two is never reached. For this
reason, many companies prefer to follow in the footsteps of an innovative pioneer, improving
an existing product and releasing their own version.

2. Market Growth

If a product successfully navigates through the market introduction it is ready to enter the
growth stage of the life cycle. This should see growing demand promote an increase in
production and the product becoming more widely available.

The steady growth of the market introduction and development stage now turns into a sharp
upturn as the product takes off. At this point competitors may enter the market with their own
versions of your product – either direct copies or with some improvements. Branding
becomes important to maintain your position in the marketplace as the consumer is given a
 BBA GOKAK
choice to go elsewhere. Product pricing and availability in the marketplace become important
factors to continue driving sales in the face of increasing competition. At this point the life
cycle moves to stage three; market maturity.

3. Market Maturity

At this point a product is established in the marketplace and so the cost of producing and
marketing the existing product will decline. As the product life cycle reaches this mature
stage there are the beginnings of market saturation. Many consumers will now have bought
the product and competitors will be established, meaning that branding, price and product
differentiation becomes even more important to maintain a market share. Retailers will not
seek to promote your product as they may have done in stage one, but will instead become
stockists and order takers.

4. Market Decline

Eventually, as competition continues to rise, with other companies seeking to emulate your
success with additional product features or lower prices, so the life cycle will go into decline.
Decline can also be caused by new innovations that supersede your existing product, such as
horse-drawn carriages going out of fashion as the automobile took over.

Many companies will begin to move onto different ventures as market saturation means there
is no longer any profit to be gained. Of course, some companies will survive the decline and
may continue to offer the product but production is likely to be on a smaller scale and prices
and profit margins may become depressed. Consumers may also turn away from a product in
favour of a new alternative, although this can be reversed in some instances with styles and
fashions coming back into play to revive interest in an older product.

PRODUCT MIX

Product mix, also known as product assortment or product portfolio, refers to the complete
set of products and/or services offered by a firm. A product mix consists of product lines,
which are associated items that consumers tend to, use together or think of as similar products
or services.

Dimensions of a Product Mix

1) Width

Width, also known as breadth, refers to the number of product lines offered by a company.
For example, Kellogg’s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries and
breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods.

2) Length

Length refers to the total number of products in a firm’s product mix. For example, consider a
car company with two car product lines (3-series and 5-series). Within each product line
series are three types of cars. In this example, the product length of the company would be
six.

3) Depth

Depth refers to the number of variations within a product line. For example, continuing with
the car company example above, a 3-series product line may offer several variations such as
 BBA GOKAK
coupe, sedan, truck, and convertible. In such a case, the depth of the 3-series product line
would be four.

4) Consistency

Consistency refers to how closely related product lines are to each other. It is in reference to
their use, production, and distribution channels. The consistency of a product mix is
advantageous for firms attempting to position themselves as a niche producer or distributor.
In addition, consistency aids with ensuring a firm’s brand image is synonymous with the
product or service itself

Product Line

Product Line refers to the collection of related products marketed under a single brand, which
may be the flagship brand for the concerned company. Typically, companies extend their
product offerings by adding new variants to the existing products with the expectation that
the existing consumers will buy products from the brands they are already purchasing.

The concept revolves around the idea of leveraging brand awareness and customer loyalty.
People usually are driven towards products of those brands that they have used in the past
because they feel they can trust any new product under that brand. So, it is advisable to add a
new product variant under an existing line of product or brand.

Some of the larger companies have multiple product lines marketed under various brand
names, which is a strategy to differentiate the products from each other so that the companies
can easily target the requisite customer segment for each brand.

Examples of Product Line

Some of the prime examples are discussed below –

 Amul offers a plethora of product lines that are closely related but still different. Its
products include milk, flavoured milk, chocolate, butter, curd, yogurt, ghee, etc.
 BBA GOKAK
 As a global brand, PepsiCo has many other sub-brands that cater to different product
segments, such as Frito Lay, Quaker Oats, Gatorade, and Tropicana.

 Microsoft Corporation offers a series of products for different segments. It sells

several well-recognized product lines, including MS Office, Windows, and Xbox.

NEW PRODUCT DEVELOPMENT

Everything should be thoroughly researched and planned in the business sector. It is true even
when launching a completely new product. Preparing for the release of a new product should
not be haphazard.

The most crucial aspect of the new product development process is that your product should
be able to solve the problem of the end-user. It is paramount above everything else, as it’s the
only way to create a product that is ready for the market, which is critical to any product’s
success.

It can be difficult to bring a new product to life, especially if you have a product idea that can
benefit a target audience but you’re unsure how to get it in front of them. Thankfully, there is
a blueprint for new product development—a strategy that will assist you in bringing your
ideas to life.

STAGES OF NEW PRODUCT DEVELOPMENT

1. Idea generation

The process of developing a new product begins with the generation of ideas. It is one
of the most crucial phases of product development and entails brainstorming an idea (or
ideas) that would help you overcome an existing customer problem in a novel and creative
 BBA GOKAK
way. It’s critical to have a thorough understanding of the target audience and their pain
points, which you should tackle while brainstorming ideas to help you meet customer needs.

There are two potential sources of fresh ideas:

 Internal source: The company generates new ideas internally. It includes both R&D
and staff contributions. Employees are frequently the biggest source of fresh ideas, as
they are constantly exposed to the product as well as consumer
feedback. Organizations like Toyota have created incentive programs to encourage
their employees to come up with viable ideas in this regard.

 External sources: The company seeks out new ideas from outside sources. It
includes external sources such as distributors and suppliers, as well as competitors.
Customers are the most significant external source since the new product
development process stages must be centered on delivering value to customers.

2. Idea screening

The new product development process’s second step builds on the first. You’ve
amassed as many ideas as possible and made a list of them. It’s now time to cross off any
ideas that aren’t good enough from your list.

However, there are more things to consider while screening a product idea than
whether it is “strong” or “weak.” Ideas must also be compatible with a company’s broader
business plan and direction.

The usability of these product concepts should be determined by three primary

factors: return on investment, affordability, and market potential. Other considerations
include the product’s capacity to be successfully marketed, its link to competing products,
distribution, product pricing, and production time.

A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis might prove

to be useful when shortlisting new product development concepts.

3. Concept development & testing

Rather than testing the product itself, you would test the concept of your product at
this stage. A product concept is a more thorough version of the idea expressed in consumer-
friendly terms.

The essential steps involved in concept creation are as follows:

 Measuring the gain/pain ratio

 Performing a competitor analysis

 Identifying the core product features

 Creating a value proposition chart

The test is the next logical step once you’ve developed a well-designed concept.
Consumers should be able to comprehend the concept and see if it has been effectively
 BBA GOKAK
created. Your next step should be to demonstrate your idea to a limited group of potential
customers and evaluate it.

4. Business and marketing strategy development

Setting profit expectations is the purpose of this step in the new product development
process. Business analysis and marketing strategy are intertwined with developing a strategy
for reaching out to and connecting with a specific demographic and must be regarded as a
critical phase in the new product development process’s seven stages.

This stage, also known as marketing strategy development, involves a few key
elements in the construction of a good marketing mix. The following are some of these
aspects:

 Definition of the target market, as well as the value proposition offered from the
customer’s point of view

 Profit targets over time, particularly during the first year

 Pricing, distribution, and overall budget

 Sales forecasts for the long run

5. Product development

Your product is fit to become a prototype or the first edition of a product at this point
in the new product development process. This way, you’ll have a physical representation of
your concept that you can test in real life rather than just on paper. This prototype, also
known as a minimal viable product (MVP), is a simple version of your product that will help
you gain a sense of how it works and point out areas that have to be improved.

For iterative and incremental development, a minimum viable product (MVP) could
be introduced and deployed in the market with minimal features. Naturally, modifications are
based on the fundamental response from customers, which is obtained through effective
communication and collaboration.

According to Gartner, many firms believe in involving customers in the early stages
of product development. This places them in a stronger position to create a product while
adhering to ergonomic guidelines.

R&D and operational expenses create a significant increase in spending at this stage.
One or more physical copies of the product concept will be developed and tested by the R&D
department.

6. Test marketing

You’re doing market testing when you release prototypes to the target demographics
and ask for their feedback on how well the product works. It involves inquiring about what
your target audience enjoys about your proposed product and what they want to see fixed or
incorporated into it.
 BBA GOKAK
Running a test of your product early on can ensure its success before investing too
much time and money. A positive response indicates that there is sufficient demand for the
product, which leads to the start of the manufacturing process.

There are two types of market testing methodologies:

 Alpha testing involves test engineers analyzing a product’s performance. They keep
track of the marketing mix’s effects on the final product. If there are any issues,
changes are planned and implemented before the final thumbs up.

 Beta testing involves customers using the product and giving input to the company. It
has to do with paying close attention to the customer’s voice. If there are any
problems, they are returned to the project team for correction.

7. Commercialization

Commercialization is the ultimate stage of the new product development process,

where you put your products on the market. The business will need to establish or rent a
production facility in this phase, which will incur the biggest expenditures. In the first year, a
significant amount of money might be spent on advertising, product promotion, and other
marketing operations.

Here are a few of the most important considerations:

 Calculate the global market for your product and introduce an appropriate quantity
based on that estimate

 Make the relevant advertisements and stick to a marketing strategy that works

 Ensure your marketing strategy includes digital channels

 Prepare your consumers for a new product launch

 Choose a launch date and location for your product

 Keep a tight eye on your product and pay attention to its performance.

Reasons for Failure of new products

1) Over-estimation of Market Size: A product will not be able to perform in the market, if
the market size is over-estimated. This may lead to less revenue generation than the
desired level, even if the quality of the product is good.

2) Under-estimation of Market Competition: When a marketer fails to estimate the actual

competition level and competitors' strengths, then the product may have to deal with
severe competition in the market. This often leads to failure of new products

3) Inadequate Market Research: If a marketer is unable to study the market and makes
erroneous predictions about the customers' needs and wants, then this may fail to
 BBA GOKAK
satisfy the potential customers.

4) Lack of Uniqueness: If a product is incompetent in comparison with the competitor's

product, then customers have no reason to purchase a new product.

5) Poor Product Design: A poorly designed product may cause inconvenience to customers
in using the product. This is one of the major reasons of customers' to dislike about a
product.

6) Lack of Superiority: It is essential for a product to prove itself superior in contrast to

other similar products available in the market. Sale of new products cannot be made
on the basis of superfluous claims made by the marketers.

7) Incorrect STP Approach: A product may fail to capture the market, when a marketer
incorrectly segments the market, targets the target audience and positions the new
product.

8) Technical Issues: While using a new product, if a customer faces technical issues, then he
may discontinue purchasing the same product again.

9) High Production Costs: When the price of a product is high compared to the other
products in the market, then this may lead to product failure. This occurs, when the actual
production cost exceeds the expected production cost.

10) Wrong Entry Timing: If a new product enters the market at the wrong time by making
hasty decisions or by entering late in the market, then also the product may fail to establish its
position in the market.

11) Ineffective Promotion: Ineffective utilisation of promotional tools lead to new product
failure. The customers remain unaware of the product's attributes and functions, due to which
customers do not purchase the product.

Branding : Branding is the process of creating a distinct identity for a business in the mind
of your target audience and consumers. At the the most basic level, branding is made up of a
company's logo, visual design, mission, and tone of voice. But your brand identity is also
determined by the quality of your products, customer service, and even how you price your
products or services.

According to American Marketing Association, “Branding is a name, term, sign, symbol,

design, or a combination of them which is intended to identify the goods or services of one
seller or a group of sellers and to differentiate them from those of competitors.”

Packaging: Packaging: Packaging is the process of providing a protective and informative

covering to the product in such a way that it protects the product during material handling,
 BBA GOKAK
storage, and movement and also provides useful information to all the concerned parties
about the content of the package.

According to Kotler –

Packing constitutes all the activities of designing and producing the container for a product.

Packing: Packing is a process of building a container or box suitable for a product for
transport and storage. Different methods that can be used in packaging are wrapping,
cushioning, weatherproofing and sealing. A good packing prevents the product or items from
breakage, leakage, pilferage, etc. Few materials that are used for packing are bubble wrap,
cardboard, cellophane, and foam packaging etc. In a nutshell, packing is a material used to
cover a product and avert it from moving around and getting damaged.

PRICING

Pricing is a process of fixing the value that a manufacturer will receive in the exchange of
services and goods. Pricing method is exercised to adjust the cost of the producer’s offerings
suitable to both the manufacturer and the customer. The pricing depends on the company’s
average prices, and the buyer’s perceived value of an item, as compared to the perceived
value of competitor’s product.
 BBA GOKAK
Every businessperson starts a business with a motive and intention of earning profits. This
ambition can be acquired by the pricing method of a firm. While fixing the cost of a product
and services the following point should be considered:

 The identity of the goods and services

 The cost of similar goods and services in the market

 The target audience for whom the goods and services are produces

 The total cost of production (raw material, labour cost, machinery cost, transit,
inventory cost etc).

 External elements like government rules and regulations, policies, economy, etc.,

OBJECTIVES OF PRICING

(i) Achieving a Target Return on Investments:

This is the most important objective which every concern wants to achieve. The
objective is to achieve a certain rate of return on investments and frame the pricing
policy in order to achieve that rate. For example, the concern may have a set target of
20% return on investment and 10% return on investments after taxes. The targets may
be a short term (usually for a year) or a long term. It is advisable to have a long term
target.

Sometimes, it is observed that the actual profit rates may be more than the target
return. This is because the targets already fixed are low and new opportunities and
demand of the product exceeding the return rate already fixed.

(ii) Price Stability:

This is another important objective of an enterprise. Stability of prices over a period

reflects the efficiency of a concern. But in practice, on account of changing costs from
time to time, price stability cannot be achieved. In the market where there are few
sellers, every seller wants to maintain stability in prices. Price is set by one producer
and others follow him. He acts as a leader in price fixation.

(iii) Achieving Market Share:

Market share refers to the share of the company in the total sales of the product in the
market. Some of the concerns when introduce their product in the competitive market
want to achieve a certain share in the market in the initial stages. In the long run the
concern may aim at achieving a sizeable portion of the market by selling its products
at lower prices.

The main objective of achieving larger share in the market is to enjoy more reputation
and goodwill among the people. The other consideration of widening the markets by
lowering prices is to eliminate competitors from the market.
 BBA GOKAK
It has been observed that companies may not like to increase the size of their share on
account of fear of Govt, intervention and control. General Motors, America, capturing
about 50% of the automobile market, passed through this situation. Some companies
like General Electric and Johns-Mauville preferred to have relatively small market say
20% rather than 50%.

iv) Prevention of Competition:

Modern industrial set up is confronted with cut throat competition. Pricing can be
used as one of the effective means to fight against the competition and business
rivalries. Lesser prices are charged by some firms to keep their competitors out of the
market. But a firm cannot afford to charge fewer prices over a long period of time.

(v) Increased Profits:

Maximisation of profits is one of the main objectives of a business enterprise. A firm

can adopt such a price policy which ensures larger profits. However, such enterprises
are also expected to discharge certain social obligations also.

vi) Firm's Wellbeing in the Long-run:

The prime objective of certain organisations is to set the price of their product in a manner
that best suits the organisation in the long-run. While doing this, the econonic situation and

vii) Profit Margin of Middlemen:

The product must be priced with the aim of providing the middlemen a reasonable return on
the sale of a product. If this does not happen, they will not take relevant interest in facilitating
the product's sales.

viii) Mobilisation of Resources:

Another objective relating to pricing is the mobilisation of appropriate resources for the
growth and development of the organisation. Therefore, organisations aim to price its
products in such a manner that it can acquire enough resources.

ix) Survival:

Survival strategy is preferred by firms dealing with it's over capacity, extreme and fresh
competition or varying consumer behaviour. It is also an important objective of pricing in
certain organisations. It helps companies sail through rough waters and is hence a short-term
objective. The company prefers this strategy until the price is more than variable costs and
some of the fixed costs are retrieved. However, the company must strive to add value in the
long-term.

x) Product-Quality Leadership:
 BBA GOKAK
To achieve product-quality leadership is also one of the important pricing objectives. Firms
producing products that are better in quality than the competitor frequently try to become the
product- quality leaders in the market. They price their products higher, but try to convince
the customers that due to the enhanced quality, reliability, product experience and other such
benefits, the prices are worth the product values. They convince the price sensitive customers
by assuring them that they will be benefitted in the long-run. The point of importance here is
that rather than allowing cost to decide the price, it is better to use price as a strategic tool. If
make it known in the market and charge higher price for it. Then, it will be an organisation
has a product that is better than the competitor's, it should able to earn more profits.

Factors Influencing Pricing Policy

1) Internal Factors: Following are the internal factors influencing pricing decisions:

i) Marketing Objectives: Firms devise both specific as well as general objectives.

Survival, market share leadership, current profit maximisation and product quality leadership
are some of the general objectives of the firm. The firm may price its products lower than its
competitor to prevent their entry in the market or at times, set its price equal to its competitor
so that market is stabilised. This is an example of specific objective. Products can be priced in
order to sustain the reseller's support and loyalty prices to increase the customer interest
towards the product or attract traffic into the retail outlet. A single product, if priced
appropriately, can or to circumvent government intervention. Marketers can decrease the help
to increase the sales of other products in the product line of the company. Hence, pricing
decisions are greatly influenced by marketing objectives at various levels.

ii) Marketing Mix Strategies: Marketing mix strategies of an organisation are very
significant in influencing the organisational pricing. One marketing mix tool that the firm
uses to accomplish its objectives is 'price'. While taking price decisions, the product design,
promotion decisions and distribution plans must be aligned together to create a reliable and
valuable marketing program. Pricing decisions are strongly influenced by decisions that are
made for other marketing mix variables.
Usually, organisations position their products on the basis of price and after that modify other
marketing mix decisions, according to the price they intend to charge. In such a scenario,
price is an important product- positioning factor that classifies the market, design and
competition of the product. This kind of price-positioning strategy is supported by many
firms. They use the target costing technique, which is a powerful strategic tool. For example,
target costing was exercised by P&G while developing and pricing its very thriving electric
toothbrush named 'Crest Spin Brush'.
Hence, the entire marketing mix must be taken into consideration by marketers while setting
the prices. If price is not used as a factor while positioning a product, decisions regarding
quality, distribution and promotion have a strong impact on price. In case, positioning is done
on the basis of price, then the decisions made regarding all the other marketing mix elements
will be impacted by price. Although marketers may use price as an element for positioning,
still they must keep in mind that customers seldom base their purchase solely on price. They
look for products that provide them benefits worth the price they are paying for.
 BBA GOKAK
iii) Costs: This is the base of the price that is charged by the firm. Firms intend to charge a
price that can retrieve its production, distribution and sales cost and also provide a reasonable
rate of return against risks and efforts. Costs incurred by a company play an important role
while strategising pricing. Various companies like Wal-Mart, Southwest Airlines and Union
Carbide strive to be the industry's "low cost manufacturers". When costs are low, it becomes
easier for the firms to set a lower price, which ends up in increased profits and sales.

iv) Organisational Considerations: Decisions regarding who would e prices of products and
services in the organisation is very important management, in place of sales or marketing
department, sets the prices of Pricing is managed in different ways. In firms that are small in
size, op the products. Whereas, in bigger firms, product line managers or markets, have the
authority to bargain with the customers within y divisional managers handle pricing. Sales
people working in industrial specified price range.

All the same, the pricing policies and objectives are finalised by the management who usually
approves the prices that are suggested by the oil companies, railroads, etc., have pricing as
the main element. They lower management or sales force. Certain industries like steel,
aerospace management or the marketing department), which finalises prices for have a
separate pricing department (which directly reports to the t their products or assists other
departments in deciding the same. Sales managers, finance managers, production managers,
accountants, etc., are the other people who can influence pricing decisions.
2) External Factors: Following are the external factors that influence pricing decisions:

i) Competitor's Costs, Prices and Offers: An organisation's pricing and offers of the
current competitors. If someone is planning to purchase policy is strongly influenced by the
costs and prices as well as discoun a Sony digital camera, he will compare the prices and
value that Sony is offering with the value and prices of similar products offered by other
brands like Nikon, Kodak, etc. The pricing strategy that the company implements also
impacts the type of competition it encounters. strategy, competition may increase. Whereas, a
low-price and a low-margin For example, in the case of Sony, if it pursues a high-price, high-
margin strategy might reduce competition or drive the competitors out of the market. Thus,
Sony must benchmark its cost and value against that of the competitor. This benchmark can
then be used while setting its own pricing.

ii) Economic Conditions: A company's pricing strategies are also influenced by prevailing
economic conditions. Economic conditions like recession, boom, inflation, interest rates, etc.
have an effect on pricing decisions, since both the cost incurred in production and what the
consumer perceives about the value and price of the product, are influenced by them. The
company should also analyse the impact of its price on different members present in its
environment and the manner in which resellers respond to different prices. Prices must be set
in such a way that resellers earn sufficient profits, get necessary support and can sell the
product easily.

iii) Government Controls and Subsidies: With the intervention of the government, the
freedom of the companies to adjust prices and maintain margins is restricted. As a form of
control, the government can also ask the importers to deposit cash required in advance. As
per this requirement, the company needs to lash out funds as non- interest bearing deposits
 BBA GOKAK
for the amount of time it intends to import its products. These requirements motivate the
company to reduce the prices of the imported products as lower prices account for smaller
deposits. The subsidies that the government provides also compel companies to strategically
use sourcing in order to become price competitive.

METHODS OF PRICING

Cost consideration and consumer situation are the two fundamentals that impact price
decisions. Unfortunately, there are many firms that do not have comprehensible pricing
methods.

1) Cost-based Pricing: The most important variable as well as the basis of pricing a
particular product, is the production cost of that product. Costs may be of different kinds like
total cost, variable cost, fixed cost, marginal cost, average cost, etc.

These costs must be critically analysed in order to set a product’s price. Methods for finding
out the cost oriented price are as follows:

i) Mark-up/Cost-plus Pricing: This method requires the marketer to approximately

calculate the total production or manufacturing cost of the product and after that adding a
mark-up or the margin (that the firm
intends to earn) to it.
projects and services. The below mentioned formula can be used to This is the most basic
pricing method which is used to price a number of
calculate the mark-up price:
Mark up price = α/(1-r)

where α = Unit cost (Fixed cost + Variable cost); r = returns (expressed as per cent)
Expected sales

ii) Full Cost/Absorption Cost Pricing: In absorption/full cost pricing. the unit cost is
finalised with reference to regular production and sales level.With the help of standard
costing approach, variable as well as fixed costs concerning the production, sales, and
administration of the product are finalised. It is called full cost pricing as it aims to recover
total costs incurred on the product from its sales.

iii) Incremental Cost/Marginal Cost Pricing: In this method of pricing. The company
strives to recover its marginal cost so as to aid its overheads.

This pricing method gives best results in the market, where large firms operate or where there
is extreme competition and the firm works with the sole aim of establishing itself in the
market.

The firm adopts this pricing method when it:

a) Encounters intense competition,
b) Focuses on a new market, and
c) Possesses unexploited capacity.

iv) Break Even Point/B.E.P. Pricing: The sales volume, where the total cost becomes equal
to the product's total sales revenue is known as 'break-even point'. In other words, the sales
volume of the product, which neither witnesses profit nor loss, is break-even point.
Hence, this method is also called 'No Profit No Loss Method of Pricing'. In order to calculate
 BBA GOKAK
price using this method, total production cost is divided into fixed and variable cost. The final
price is same as the product's production cost. It is believed that the firm will not earn any
profits in the short-term, but in the long-term it will begin earning profits. The price of a
competitive product can be easily calculated by using this method.

B.E.P can be calculated by the formula mentioned below:

B.E.P. (InUnits)= Fixed Costs
Selling Price per unit-Variable Costs per unit

B.E.P.(In)=- Fixed Costs X Total Sales

Total Sales-Total Variable Costs

v) Target Pricing/Rate of Return Pricing: In this pricing method, the company needs to
calculate the desired rate of return on the capital it has invested in producing the product.
This rate of return helps in calculating the desired quantity of profit. This 'quantity of profit'
and 'production cost' are summed up to find the 'per unit price' of the product
.
A company can employ this pricing method, when it needs to get a specific return on the
capital it has invested. This method can be used only in markets with no competition at all.

2) Customer Demand-based Pricing: The fundamental aspect of the demand oriented

costing is that the cost involved does not have an impact on the profits but on the demand.
This method, contrary to cost-based pricing. begins by finding out the price that the consumer
market intends to pay for the product.
Then, a backward estimation of the level of cost and profit (that the organisation can afford
due to that price) is undertaken. Following methods are used to determine the customer
demand-based pricing:

i) 'What the Traffic Can Bear' Pricing: Using this method, the seller charges the customer
with the maximum possible price that they will pay willingly under the present situation. This
method is far from being sophisticated and is followed by retail traders and few
manufacturers.

In the short-run, it provides the company with large profits but is an unsafe method in the
long-run. Error in judgments can easily take place as it is based on trial and error. But in
markets with monopoly/oligopoly and price-inelastic demand, it can conveniently be applied.

ii) Skimming-based Pricing: Skimming pricing is the commonest pricing method. In this
method, the companies by selling at premium prices fulfil their desire of skimming the
market. The results are obtained in the below mentioned situations:
a) When high price is supposed to be a testimony of high product quality, especially in an
environment, where target market relates product quality with its price.

b) When a customer willingly purchases the product at higher price, just in order to become
the opinion leader.

c) When the customer's status is believed to be increased by product.

d) When the entry as well as exit barriers are so low that there is almo no competition in the
industry or the industry fears a threat from potential competition.

e) When a visible technological advancement is displayed by the When the firm adopts
skimming pricing technique, it aims to attain its break-even point at an early stage and takes
 BBA GOKAK
lesser time to maximise its product, which makes the product a 'high technology product'.

When the firm adopts skimming pricing technique, it aims to attain its break-even point at an
early stage and takes lesser time to maximise its profits (or find a niche to earn profits)

iii) Penetration-based Pricing: Contrary to skimming pricing, penetration- competitors.

Market penetration or gaining initial market share in an based pricing focuses on keeping the
prices low as compared to current intensely competitive market, is the main objective of this
pricing method.
Below mentioned are the situations in which this method gives results:
a) When the market is large in size and is still growing,
b) When the brands are bought by the customers not because of some definite inclinations but
because of habit, i.e., customer loyalty is low,
c) When a stiff competition dominates the market,
d) When an entry strategy is employed by the firm,
e) When the company has weak price-quality coordination.

3) Competitor/Market-based Pricing: Under this method, prices are determined by

observing the competitors' prices in a particular market. Generally, small organisations follow
such pricing method in presence of a market leader.

For example, a small tyre manufacturer may follow the prices of Apollo Tyres. Also in case
of entering a new market, a low-cost supplier may follow the market/competitor-based
pricing. A large number of companies carefully analyse the price structure of the competitors,
before setting their product's price. Firms formulate premeditated policies and choose a
competitive market for selling their products.

When a company prices its products using this method, it has four pricing options:

i) Going Rate Pricing/Parity Pricing: In this method, the competitor's product is taken as
the benchmark to set the price of the product. A firm follows this approach either when it is
new in market or when an already established firm launches a new product in the existing
market. This type of pricing is suitable for the markets with severe competition.

ii) Pricing Below the Level of Competition/Discount Pricing: When a company sets the
price of its product lower than the level of competition. i.e., below the price that the
competitor is charging for a similar product, it is called 'pricing below the level of
competition' or 'discount pricing". This method is effective in markets, where customers
equate to price. It is implemented by firms that are new in the market.

iii) Pricing Above the Level of Competition/Premium Pricing: When a company sets the
price of its product upper than the level of competition, i.e., above the price that the
competitor is charging for a similar product, it is called "pricing above the level of
competition' or 'premium pricing".

This is done to depict a better quality product by the company. This pricing policy can be
implemented only by firms that have a good reputation in the market (as their image is that of
a quality producer in the customer's mind). This makes them the market leader.

iv) Tender Pricing/Sealed Bid/Competitive Bidding: The sealed bid is

another competitive pricing method followed by firms. There are numerous projects,
government purchases and industrial marketing activities where suppliers are called to submit
 BBA GOKAK
their quotations to get the tender. The prices that are quoted show the cost incurred by the
company and what it understands about competition.

A firm that offers a price at the cost level may become the lowest bidder and bag the contract,
but would not earn any profit from the deal. Thus, it is crucial for the firms to take into
account expected profits at various price levels and finally quote the price that is most
profitable.

4) Other Pricing Methods: Below mentioned are the other main pricing methods:

1) Value-based Pricing: Understanding the value offered to customers is essential for

accurately pricing the product or service of an organisation. In this method, cost is not the
determining factor for pricing. Customer's perception of the value associated with the product
or service is the key to pricing decision.

Here, first the product or service is designed, thereafter the marketing strategy, and finally the
price is set by analysing the other marketing mix elements. It will be clearly seen in the
analysis that the below mentioned conditions can be obtained with the cost-value-price chain:

a) Value>Price>Costs: In the first condition, price of the product is kept lesser than the
value offered, to attract the potential customers. However, significant profit is generated by
maintaining the price above the cost of production.

b) Price>Value>Costs: In this condition, value offered to customers through product is more

than its cost of production. In order to maintain a significant level of profit companies set
price more than value offered.

c) Price>Costs>Value: Sometimes, cost of production is more than the value offered through
product. Profitability is maintained in this condition by setting the price above the production
cost.

d) Price=Value>Costs: A condition may also occur, where production cost is lower than
value offered. A reasonable amount of profit is generated by setting the price equal to the
value offered.

ii) Affordability-based Pricing: The basic commodities that are prices are set in such a
manner that the people from every section of the every section of the society are priced using
this method of pricing. The level. The cost involved has no impact on the price, but many
times, society is able to purchase and consume the products to a required some aspect of state
subsidy is considered while pricing the product.

iii) Prestige-based Pricing: Customers do not openly admit that their that they might be
driven by prestige when they strongly intend to purchase is prestige-oriented. At times buyers
are not even able to realise purchase a particular product. This is also termed as
'psychological pricing".

iv) Market and Demand-based Pricing: An effective pricing understands the way, a
customer's perception of value, impacts his/her willingness to pay a particular price for a
particular product. Generally, the price of a product is balanced against the benefits
associated with it. Hence, the marketer must comprehend the relation between demand of a
product and its price, before setting the final price.
 BBA GOKAK

PHYSICAL DISTRIBUTION

Physical distribution is defined as the process of physical movement of goods from the
producer to the consumer. It is an important marketing function which describes marketing
activities that involves flow of raw materials from the suppliers to the factories for production
and also the movement of finished goods from production to the final user.

Types of Distribution Channel

1. Direct Channel (Zero Level):
The shortest channel of distribution of goods and services adopted by a producer is the zero
level channel, where are absent between the producers and consumer.
A producer chooses direct distribution due to the following reasons:
(i) If the firm has marketing expertise.
(ii) If the firm is able to perform the marketing activities at a reasonable cost.
(iii) If the firm has adequate financial resources for investing in marketing.
(iv) Non-availability of suitable middlemen to handle the product.
(v) If the buyers prefer direct marketing.
(vi) If the competitors are following direct marketing.
It was widely used by producers to sell goods and services prior to the advent of industrial
revolution and is the one of the oldest method.

Under direct channel of distribution, the manufacturer can adopt one of the following
methods of selling:
(i) Selling at Manufacturer’s Plant:
It is one of the earliest, easiest and cheapest methods of distribution of goods and known as
direct selling. The goods are sold by the producers directly to the consumers under this
system, and it is usually preferred in case of perishable products like bread, milk, ice-cream,
fish, meat, egg, vegetables and agricultural products, etc.
These products are directly sold to the consumers for the reason they lose their value or
become unfit for use if they are stored or transacted for a long time.

(ii) Door-to-Door Sales:

Manufacturer employed salesmen for a door-to-door marketing. They move door-to-door to
introduce the new product at the door of a customer. Dealers may not have knowledge of the
goods or they require a good margin of profit or they do not want to stock unknown products;
for them this system is good.
Selling under this system may be costly but when the market is known, it can be reduced.
But, at the first stage, when the market is unaware of the product, even at higher cost, this
system is better.

(iii) Sales by Mail Order Method:

Here the post office plays a significant role and it is known as shopping by post or mail order
business or selling by post. It is an impersonal selling, branding, grading, standardising,
packaging etc., facilitating the growth of this system.
By Post, customers are approached by sending catalogues, price lists, pamphlets, etc.
Advertising adds further speed in the selling; e.g., books, copies, Magazines, Medicines,
watches, toys, small appliances, clothes, seeds, jewellery, etc.
 BBA GOKAK
(iv) Sales by Opening Own Shops:
The producers of perishable and non-perishable goods sell their products to customers, by
opening their own retail shops. Manufacturers can push the goods quickly through retail
shops and can offer satisfactory service to customers, thereby building goodwill. It also helps
the producers to study the market trends, fashion preferred by buyers and style trend of
people. This system offers a two way communication and the price is regulated.

Perhaps, there are few drawbacks of adopting Direct Marketing Channels are given as
under:
(i) When customers are innumerable and spiral over a large area, it may be difficult to have
direct contact with them economically.
(ii) When customers are multi-millions in number, it may be difficult to establish a direct
contact with them.
(iii) When the producers do not prove to be good salesman, the process suffers.

2. Indirect Channel:
Under this system, distribution of goods is performed by middlemen or intermediaries like
wholesalers’ stockiest distributions etc. There is one middleman like a Sole Selling Agent
who distributes the goods through a number of middlemen subsequently or, there may be a
number of middlemen when the producer distributes the products through a number of agents
or wholesalers or even retailers. Retailer sells directly to the consumers whereas wholesalers
sell through them.

Typical Indirect Channels of Distribution has four level of channels discussed as under:
(i) One-level Channel Only one intermediary between producer and consumers is present
here. It may be a retailer or a distributor.
In case the intermediary is a distributor, this type of channel is used for specialty products
like washing machines, refrigerators or industrial products.
(ii) Two-level Channel – Two intermediaries, namely, wholesaler/distributor and retailer and
present here.
(iii) Three-level Channel – Three intermediaries, namely, distributor, wholesaler and retailer
are present and it is also used for convenience products.
(iv) Four-level Channel – Four intermediaries, namely, agent, distributor, wholesaler and
retailer are present here. This channel is similar to the previous two. This type of channel is
used for consumer durable products also.

3. Hybrid Distribution Channel or Multi-Channel Distribution System:

Of late, many companies used a single channel to sell to a single market or market segment.
Recently, with the proliferation of customer segments and channel possibilities, several
companies have adopted multi-channel distribution systems, it is often called hybrid
marketing channels. Multi-channel marketing like these occurs when a single firm sets up
two or more marketing channels to reach one or more customer segments. The use of hybrid
channel systems has increased greatly in recent years.
The producer sells directly to consumer segment 1 using direct mail catalogues and
telemarketing, and reaches consumer segment 2 through retailers. It sells indirectly to
business segment 1 through distributors and dealers, and to business segment 2 through its
own salesforce.
Hybrid channels have advantages to offer to companies facing large and complex markets.
With each new channel, the company expands its sales and market coverage and gains
opportunities to tailor its products and services to the specific needs of diverse customer
segments.
But such hybrid channel systems are harder to control, and they generate conflict as more
channels compete for customers and sales. For instance, when IBM began selling directly to
customers at low prices through catalogues and telemarketing, many of its retail dealers cried
 BBA GOKAK
“unfair competition” and threatened to drop the IBM line or to give it less emphasis.

Factors Affecting Channel Choice

There are several objective and subjective factors that influence the choice of Factors
Affecting Channel Choice distribution channel and vary from company to company.
However, there are certain factors that are different and impact distribution channel in all
cases.
Those factors are discussed below:
1) Factors Related to Product Characteristics: The product that is manufactured by a firm
itself is a governing factor in selecting the distribution channel. Some of the product
characteristics are as follows:

i) Industrial/Consumer Product: When the product that is manufactured and sold is

industrial in nature, then direct distribution channel is most preferable because there are small
numbers of customers, lesser need for personal attention, after sales servicing, etc.
Conversely, indirect distribution channel is most appropriate for consumer products like
retailers, wholesalers, etc.

ii) Perishability: Products which are perishable in nature like vegetables, fruits, milk, bakery
products, sea food, etc., need to adopt direct selling since the products must reach the
consumer as soon as possible after they are produced. The repeated handling may cause
delays in delivering the products.

iii) Unit Value: If the unit value of products is high, then it is preferable to select direct
channel of distribution like company's sales force can be used for distribution rather than
appointing intermediaries.

Alternatively, if the unit value of product is low and other expenditures are also small, and
then indirect channel of distribution is most suitable for the company.

iv) Purchase Frequency: Direct distribution channel is required for products that are
purchased frequently in order to diminish the cost and burden of their distribution.
v) Newness and Market Acceptance: In case of new products having high degree of market
acceptance, a forceful sales effort is required. Thus, indirect channels can be used for this
purpose, as this may result in aggressive selling and channel loyalty.

vi) Product Breadth: A company manufacturing a large number of products is highly

capable of handling customers directly since their product line is widespread which further
increases its ability to determine sales.

2) Factors Related to Company Characteristics: The selection of suitable distribution

channel is also influenced by company's own characteristics like its size, reputation, financial
position, present marketing policies, past sales experiences, product mix, etc. Some of the
major factors in this regard are: 0 Financial Strength: A financially strong company might get
involved in direct selling. But, a financially weak company has to depend upon
intermediaries and, consequently, has to choose indirect distribution channel like wholesalers,
retailers that have a sound financial background.

i) Marketing Policies: Marketing policies related to delivery, pricing, after-sales service,

 BBA GOKAK
etc., are important for channel decisions.
For example, a company that prefers to have a quick and super-express delivery system may
opt for direct selling and, therefore, will avoid intermediaries in the process and choose the
fastest transportation system.
ii) Size of the Company: A large scale company having a wide range of products would
prefer direct selling of its products. While, a small scale company would prefer indirect
selling through retailers, distributors, etc. iv) Past Channel Experience: The choice of
selecting a distribution channel is also affected by the past channel experience. For example,
an established company which has a good past experience working with few types of
intermediaries will prefer to select the same channel in future. v) Product Mix: A company
with a wide range of product-mix is capable of dealing with its customers directly. Likewise,
consistency in the product mix of a company ensures that its marketing channels are
homogeneous, uniform and similar in nature.

3) Factors Related to Market or Consumer Characteristics: The factors related to market

and consumer characteristics largely influence the choice of channels like market location,
buying habits, order size, etc. Some of them are as follows:

i) Consumer Buying Habits: The buying habits of consumers like credit facilities, salesman
services or availability of all products at one place influences the channel choice of the
company. The channel of distribution can be short or long depending on the capability of the
company to afford all the facilities required by the customers. If a company can easily afford
all facilities then the channel will be short or else will be longer.

ii) Location of the Market: The distribution channel is preferably long when customers are
geographically widespread. Conversely, if the customers are localised and concentrated then
direct selling is used.

iii) Number of Customers: The channel of distribution would be long and indirect
involving wholesalers, retailers, etc., when there are large numbers of customers. While,
direct selling is preferable when the number of customers is small.

iv) Size of Orders: When customers purchase large quantities of product, then direct selling
is mostly preferred by manufacturers. Alternatively, when customers purchase small
quantities of product repeatedly or on a regular basis like cigarettes, matches etc., long
channels of distribution are used such as wholesalers, retailers, etc.

4) Factors Related to Middlemen Consideration: Middlemen consideration also impacts

the selection of distribution channel. The various factors related to middlemen consideration
are as follows:

i) Sales Volume Potential: While choosing a distribution channel, the capabilities of the
middlemen are considered to ensure a targeted sales volume. Through market surveys, the
sales volume potential of the channel can be determined.

ii) Availability of Middlemen: The company must select aggressive middlemen to sell their
products. If they are unavailable, then it is relevant for company to wait for the suitable
middlemen. In such cases, the company needs to handle its channel on its own until the
appropriate middlemen are available.

iii) Services Provided by Middlemen: If a product offered by the company requires after-
sales services, repair services, etc. such as automobiles, then in such cases only those
middlemen should be appointed who are capable of performing these services. If such
 BBA GOKAK
middlemen are available then direct selling system should be used.

iv) Cost of Channel: The distribution of goods by middlemen is more economical as

compared to direct selling. Direct selling is a costly approach for manufacturers, especially
for small manufacturers.

5) Factors Related to Environmental Characteristics: The environmental factors like

economic conditions, competitor's channel, fiscal structure, legal restrictions, etc., largely
influence the choice of channel.

i) Economic Conditions: During favourable market conditions like inflation, it is beneficial

to choose indirect distribution channel since the market environment is bullish in nature and
has enormous future prospects. Alternatively, during adverse market conditions, shorter
channels are recommended.

ii) Legal Restrictions: The legal restrictions obligated by the state are exceptionally daunting
and, therefore, highly influence the choice of channel. For example, M.R.T.P Act, 1969 in
India, prevents the channel systems that tends to reduce the level of competition, creates
monopoly and are partial to public interest. With such objectives as a background, it prevents
activities like exclusive distributorship, resale price maintenance and territorial restrictions,
etc.

iii) Competitor's Channel: The type of distribution channel used by the competitor
significantly impacts the decision of channel choice. Usually, manufacturers select the similar
distribution channels as that of the competitors.

iv) Fiscal Structure: A country’s fiscal structure also affects the selection of distribution
channel. For example, state sales tax rates in India differ state by state and are an important
factor that impact the final price paid by customer.

Thus it is a crucial aspect that needs to be considered while making the channel decision.
This difference not only brings about a change in the price payable by a consumer, but also
the type of distribution channel selected.

PROMOTION

According to Philip Kotler “Promotion compasses all the tools in the marketing mix whose
major role in persuasive communication”.

According to Stanton “Promotion includes advertising, personal selling, sales promotion

and other selling tools”.

Significance of Promotion

1) Increasing awareness: Promotion becomes highly critical activity when a product is at

nascent stage in the market or it is to be launched in a new potential market. Thus the overall
market awareness of the product has to be increased by citing research about the product,
validating usefulness and appeal of the product by attracting maximum media attention
towards the product, to portray image of the product. The existence of the new product in the
market has to be effectively conveyed to the target consumers.

2) Increasing Knowledge and Preference: Customers would not directly purchase the new
product or brand only by knowing that it exists in the market. Promotion has the
responsibility to further communicate the usefulness of the brand to customers by assuring
 BBA GOKAK
that the product is required by them. Putting together product (or brand) awareness and
information, is a way to attract more customers towards the stores for finding promoted
products.

3) Increasing Retailers: Promotion communication designed by the organisations, improves

the awareness and knowledge of the potential consumers about the new product(s). These
consumers seek the promoted product(s) in the retail stores. This prompts the retailers to offer
the promoted product(s) in their stores. It motivates the other retailers to offer the same
product(s). Therefore, promotion helps in increasing the number of retailers.

4) Increasing Sales and Establishing Brand: Increase in sales is the final measure of a
successful promotional strategy. As the three basic objectives of promotion are to inform, to
persuade and to remind, an effective promotion strategy leads to the sales increment of a
particular product or product-mix. It describes how products and services offered by
organisations are different from those of competitors. Thus, it helps in sales increment and
thereby building-up of brand loyalty.

5) Maintaining Public Profile: A sound public profile of the organisation and its products is
developed through the effective use of promotion. It helps in communicating the capabilities
and importance of the organisational products to target customers. Thus, it enables the
customers to buy more.

Personal Selling

Personal selling can be defined as a direct and face-to-face communication between seller
and buyer, in which the seller provides information about the firm and its products to the
buyer so that he or she can make the decision about purchase. It is a two-way communication,
allowing the buyers to actively participate in the communication process.

According to American Marketing Association, "Personal selling is oral presentation in a

conversation with one or more prospective purchasers for the purpose of making sales".

According to Richard Bushirk, "Personal selling consists of contacting prospective buyers

personally".

Personal selling builds the relationship between sellers and the customers, which in turn
makes it a unique form of selling. It is an only method of direct sales promotion. Although, it
is a flexible and efficient method of sales promotion, it also incurs a huge cost.

Advertising

A promotional tool, which stimulates the prospective customers to take or continue a

particular decision, with the help of a commercial offering, is called Advertising. The title
'advertising' is taken from a Latin word 'advertere' meaning 'to turn toward'. The
advertisements are capable of diverting the attention of the viewers, listeners, readers or the
onlookers towards a particular brand, product, service or an idea. Thus, any piece of
information that diverts the attention of the target customers towards a
brand/product/service/idea can be called 'advertising'.

According to American Marketing Association, "Advertising is any paid form of non-

personal presentation of ideas, goods or services by an identified sponsor".
 BBA GOKAK
According to Wheeler, "Advertising is any form of paid non-personal presentation of ideas,
goods or services for the purpose of inducing people to buy".

Advertisements, being the vital element of promotion, are public notices, introduced by
organisations, to make the target customers informed and stimulated towards their offerings.
Altering the buying behaviour or the thought process of the target customers and making
them convinced to take certain course of action (desired by the organisations), is the main
purpose of advertising. When advertisements are circulated through radio or television, they
are called 'commercials'. With the advent of television, different types of products, services or
ideas, have been promoted through different commercials.