Principles of Marketing Solved Papers: Nov' 2014 (3rd Semester)

2014

COMMERCE (Speciality)

Course: 301

(Principles of Marketing)

Full marks: 80

Pass marks: 24

Time: 3 hours

Ans: Product mix: Product is one of important part of marketing mix because it reflects the good or bad reputation of any organization.  The products represent any business efficiently.  Successful organizations always search out the buying habits of their customers and designed their products based on those buying habits in order to meet the customer’s requirements. They also design their products based on important factors such as purchasing power and geographical locations etc.  They try to design products which are affordable for customers.  Companies always design their products according to customer’s budget and affordability.

They do not compromise on their product quality.  Some companies maintain their quality and do not compromise on price but there are some companies which produce products according to the affordability of customers. Marketers communicate with their customers directly and convince them to buy their products.

Ans: Test marketing involves placing a full developed new product for sale in one or more selected areas and observing its actual performance under a proposed marketing plan. In the words of P. Kotler- “Test marketing is the stage at which the product and marketing programme are introduced into more realistic market settings”. The basic purpose is to evaluate the product performance and marketing programme in a real setting prior to the commercialization. This step provides the scope of correction and modification of the product as well as marketing programme. Many products fail after commercialization because of lack of test marketing. In this process, the marketers approach the trial purchasers and first repeat purchaser to know their feelings and reaction about the product as well as marketing programme. On the basis of their opinions the marketers make certain required modification in the product as well as marketing programme. After the favourable result usually, products are sent for commercialization.

Ans: Skimming Pricing : This method aims at high price and  high profits in the early stage of marketing the product. It profitably taps the opportunity for selling at high prices to those segments of the market, which do not bother much about the price. This method is very useful in the pricing of new products, especially those that have a luxury or specialty elements. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

Ans: A consumer does not buy a product or service just because he wants to buy. There are many factors which affects buying behaviour of consumers. Human beings are motivated by ‘needs’ and ‘wants’. These needs and wants build up inside, causing people to desire to buy a product or a service. These needs and wants built up pressure or tension leads to reasons which are manifested in a psychological wave called ‘motive’. ‘Motive’ is the energy which implies behaviour thought it does not give pre use direction to that behaviour”. Motive is something which is capable of inducing a person to act in a particular way. Motive is the strong feelings, urge, instinct, drive desire, stimuli, thought, emotion, a belief, a tension that makes a person to react in the form of buying decision.

Professor D. J. Duncan defined, “buying motives”, as “those influence or considerations which provide the impulse to buy, induce action or determine choice in purchase of goods and services”.

In the words of Professor William Stanton, “a motive is a drive or an urge for which an individual seeks satisfaction; it becomes a buying motive when the individual seeks satisfaction through the purchase of something”.

Ans: In General, a trade mark is defined as any sign, as any combination of sign, inherently capable of distinguish the goods or service of one undertaking. Trade marks may be a combination of words, letters, and numerals. They may consist of drawings, symbols, colours used as distinguish features. The owner of the mark may not be involved in the relevant trade and acts purely as a certification authority. The internationally accepted ―ISO 9000 quantity standards are examples of such widely recognized certifications.

Ans: Inventory refers to the stock of products a firm has on hand and ready for sale to customers. Inventories are kept to meet market demands promptly. Inventory is the link interconnecting the customer’s orders and the company’s production activity. Infact the entire physical distribution management rotates around the inventory management. Inventory management is the heart of the game of physical distribution. Marketing managers undertake an inventory planning to develop adequate assortments of products for the target market and also try to control the costs involved in obtaining and maintaining inventory.

Ans: Traditional and Modern Concept of Marketing

Traditional concept of marketing

According to this concept, marketing consists of those activities which are concerned with the transfer of ownership of goods from producers to consumers. Thus, marketing means selling of goods and services. In other words, it is the process by which goods are made available to ultimate consumers from their place of origin. The traditional concept of marketing corresponds to the general notion of marketing, which means selling goods and services after they have been produced. The emphasis of marketing is on sale of goods and services. Consumer satisfaction is not given adequate emphasis. Viewed in this way, marketing is regarded as production/sales oriented.

Modern concept of marketing

According to the modern concept, marketing is concerned with creation of customers. Creation of customers means identification of consumer needs and organising business to satisfy these needs. Marketing in the modern sense involves decisions regarding the following matters:

1. Products to be produced

2. Prices to be charged from customers

3. Promotional techniques to be adopted to contact and influence existing and potential customers.

4. Selection of middlemen to be used to distribute goods and services.

Modern concept of marketing requires all the above decisions to be taken after due consideration of consumer needs and their satisfaction. The business objective of earning profit is sought to be achieved through provision of consumer satisfaction. This concept of marketing is regarded as consumer oriented as the emphasis of business is laid on consumer needs and their satisfaction.

From the above discussion, the following differences between these two concepts are drawn:

OR

(b) What is marketing mix? Explain the elements of marketing mix.      3+8=11

Ans: Marketing Mix: Marketing mix refers to one of the major concept in modern marketing. According to Philip kotler “marketing mix is a set of controllable marketing variables that the firm blends to produce the response it wants in the target market”. It is the combination of four controllable variables which constitutes the company’s marketing system .the four controllable variables are:

These elements are inter related and inter dependent since decisions in one area usually actions in other area.

Principle Ingredients of Marketing Mix (Four P’s) and their importance

Successful businessmen know the importance of marketing mix because they cannot design and promote their products without marketing mix.  It is a mixture of 4 P’s of marketing mix such as product, place, price and promotion. 4 P’s Of Marketing Mix:

1. Product: Product is one of important part of marketing mix because it reflects the good or bad reputation of any organization.  The products represent any business efficiently.  Successful organizations always search out the buying habits of their customers and designed their products based on those buying habits in order to meet the customer’s requirements. They also design their products based on important factors such as purchasing power and geographical locations etc.  They try to design products which are affordable for customers.  Companies always design their products according to customer’s budget and affordability.

They do not compromise on their product quality.  Some companies maintain their quality and do not compromise on price but there are some companies which produce products according to the affordability of customers. Marketers communicate with their customers directly and convince them to buy their products.

2. Price: It is the worth of product on which customers are agreed to buy the products.  Price of the product should be according to the range of regular customers.  Prices are fluctuating according to seasonal requirements. Marketers always try to satisfy their clients at any cost.  If employees of the company are satisfied with their job and performance rewards, they can become an effective asset of any organization.

3. Place: Products always design based on geographical place because customers buy products according to their traditions and seasons.  Companies which are going to spread their business networks throughout the world must visit the place where they want to open their branches. They need to study the traditions and seasonal changes of the country where they want to initialize their products.

4. Promotion: Promotion activities involve marketing and advertising.  Promotional activities are used to create awareness about the products.  Customers know about products and their specification through social marketing media. Companies adopt social marketing media in order to create awareness about their products and services.  Promotional activities and techniques are important if companies initialize new products or make some changes in product’s specifications. Promotional activities include advertising, selling, public relations and sales promotions.  Advertising is a paid form of promotion that grabs the attention of customers through channels or TV. It also involves relationships between customers and companies.  Marketers should design products that meet customers’ needs and demands.

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

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

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

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

Steps in buying decision process

The marketing scholars have developed a “stage model” of the buying process. The consumer passes through 5 stages. But consumers do not always pass through all five stages in buying a product. They may skip some stages.

(1) Problem Recognition: The buying process starts when the buyer recognizes a problem or need. The need can be triggered by internal or external stimulus. With an internal stimulus, one of the person’s normal needs hunger thirst etc. become a drive or a need can be aroused by external stimuli. Marketers need to identify the circumstances that trigger a particular need by gathering information from a number of consumers.

(2) Information Search: An aroused consumer will be inclined to search for more information. A person at times simply becomes receptive to information about a product or he may enter looking for a reading material, phoning friends, going online etc. Through gathering information, the consumer learns about competing brands and  other features.

(3) Evaluation of Alternatives: The information search and  comprehension (evaluation) stages represent the information processing stage. These 2 stages constitute the cognitive field of the purchase process. Cognition refers to acquisition of knowledge.

Some basic concepts help us in understanding consumer evaluation: first the consumer is trying to satisfy a need, second the consumer is looking for certain benefits and  third the consumer views each product as a bundle of attributes to satisfy this need.

(4) Purchase Decision: The buyer must be convinced that the purchase of the product is the legitimate course of action. This stage stands as a barrier between a favourable attitude towards the product and  actual purchase. Only if the buyer is convinced about the correctness of the purchase decision, will be proceed. At this stage, he may seek further information regarding the product or attempt to assess the information already available.

(5) Post Purchase Behaviour: The purchase leads to specific post purchase behaviour, usually it creates some restlessness in the mind of the individual. He is not sure about the product. He may feel that the other brand would have been better. It can be defined in terms of satisfaction. If the performance of the product falls short of expectations, the consumers is disappointed, if it meets expectations, the consumer is satisfied, it is exceeds expectations, the consumer is delighted. These feelings make a difference in whether the customer buys the product again and  talks favourably or unfavorably about it to others.

OR

(b) Discuss briefly the bases of market segmentation.                                   11

Ans: Marketing Segmentation: A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. Such division is called market segmentation. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. Market segmentation enables the entrepreneur to match his marketing efforts to the requirements of the target market. Instead of wasting his efforts in trying to sell to all types of customers, a small scale unit can focus its efforts on the segment most appropriate to its market. It is defined as “The strategy of dividing the market in order to consume them”.

According to Philip Kotler, “It is the subdividing of market into homogenous subsets of consumers where any subset may be selected as a market target to be reached with distinct Marketing Mix”

According to Philip Kotler, market segmentation means "the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes."

According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects."

Basis of Segmentation:

Market segmentation dividing the Hetrogenous market into homogenous sub-units. Heterogeneous means mass marketing, which refers people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers. The following factors are considered before dividing the market:

1.       Geographical Factors: On the basis of geographical factors, market may be classified as state-wise, region-wise and  nation-wise. Many companies operate only in a particular area because people behave differently in different areas due to various reasons such as climate, culture, etc.

2.       Demographic Factors: This is the most widely used basis for market segmentation. Market is classified on the basis of population, using ages, income, sex, etc as indicators.

a.       Age        : It is known fact that people of different ages like different products, need different things, and  behave differently. Almost all companies use this factor to reach the target market. On the basis of age, market in our country is divided into children’s market, teenager’s market, adult’s market, and  the market for old people. Companies use the census data to prepare marketing strategies on the basis of age.

b.      Sex: There is a variation of consumption behavior between males and  females. This factor is used as a basis for segmentation for products like watches, clothes, cosmetics, leather goods, magazines, motor vehicle, etc.

c.       Family Life Cycle: This is another important factor, which influences the consumer’s behavior. E.g.: Before making purchases, a bachelor may consult his friends, a boy may ask his parents and  a married man asks his wife. The study of family life cycle helps a company to prepare an effective promotional strategy.

3.       Psychological factors: In psychographic segmentation, elements like personality traits, attitude lifestyle and  value system form the base. The strict norms that consumers follow with respect to good habits or dress codes are representative examples. E.g.: Mr. Donald’s changed their menu in India to adopt to consumer preference. The market for Wrist Watches provides example of segmentation. Titan watches have a wide range of sub brands such as Raga, fast track, edge etc. or instant noodle markers, fast to cook food brands such as Maggi, Top Ramen or Femina, women’s magazine is targeted for modern women.

4.       Economic Factors: On the basis of economic factors, markets have been classified in the westerns countries as follows:

a. Upper Class                   b. Upper-upper class                      c. Lower-upper class

d. Middle class                  e. Upper-middle class                    f. Lower-middle class

g. Lower class                    h. Upper-lower class                      i. Lower-lower class

In our country, it is classified as upper class (rich), middle class, and  the lower class. Another classification based on income in our country is as follows:

a. Very Rich                        b. The Rich class                c. The Aspiration Class and

d. The Destitute.

5.       Behavior Factors: This is one of the most important bases used for market segmentation. Market is classified on the basis of attitude of consumers and special occasions.

a.       Occasions: Sellers can easily find out certain occasions when people buy a particular product. E.g.: Demand for clothes, greeting cards, etc increases during the festival season. Demand for transportation, hotels etc increases during the holiday seasons.

b.      Benefits: Each consumer expects to fulfill certain desire or to derive some benefits from the product he purchases. E.g.: A person may purchase clothes to save money and  another to impress others. Based upon this, markets may be classified as markets for cheap price products and  market for quality products etc.

c.       Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic market, indifferent market, positive market, and  negative market.

Ans: Stages in New Product Development Process

The introduction of new product usually passes through various stages. In each stage, the management must decide whether to move on to next stage with the product idea or not. Practically, in this process some of the ideas will be eliminated at every step. There are six stages involved in the new product development. The stages are given below:

(I) Idea generation: New products are produced on the basis of new ideas. Ideas may be generated from various sources like customers, dealers, distributors, salesman, top executive, consultancy organisation, Research and Development Department etc. The first step is to collect ideas as many as possible so that the company can find out one of the best idea out of those ideas to convert the same in to actual product.

(II) Screening of Ideas: All new ideas cannot be converted into products as it requires heavy capital investments. Those ideas should be screened and all unworkable ideas should be dropped. Only most viable, feasible and promising one should be selected for further processing. The company uses the concept testing method. In this method, consumer response to a description or picture or drawings is measured even before the product is actually produced. The purpose is to find out few best ideas.

(III) Business Analysis: During this stage, an attempt is made to predict the economic consequences of the product for the company. In these stages, the management should perform the following:

(a) Identify product features.

(b) Estimate market demand and product profitability.

(c) Establish a programme to develop the product.

(d) Assign responsibility for further study of the product feasibility.

(IV) Product Development or Prototype testing:  This step consists of the following:

(a) Prototype development giving visual image of the product.

(b) Consumer testing of the model or prototype product.

(c) Branding, packing and labeling of the product.

The marketing people determine an appropriate brand name, package and price and making sure that both tangible and intangible features are considered and included. Focus groups, target market surveys and other market research techniques with the physical product give the marketer additional information.

(V) Market Testing: Test marketing involves placing a full developed new product for sale in one or more selected areas and observing its actual performance under a proposed marketing plan. In the words of P. Kotler- “Test marketing is the stage at which the product and marketing programme are introduced into more realistic market settings”. The basic purpose is to evaluate the product performance and marketing programme in a real setting prior to the commercialization. This step provides the scope of correction and modification of the product as well as marketing programme. Many products fail after commercialization because of lack of test marketing. In this process, the marketers approach the trial purchasers and first repeat purchaser to know their feelings and reaction about the product as well as marketing programme. On the basis of their opinions the marketers make certain required modification in the product as well as marketing programme. After the favourable result usually, products are sent for commercialization.

(VI) Commercialization: After favourable response in test marketing, full scale production and marketing programme are planned and then the product is launched. It may be in phased manner or the product may be introduced simultaneously depending on the company’s plan and resources available. The phased manner introduction helps to avoid short supply of the product due to initial gaps in production and distribution.

OR

(b) What is product life cycle? What strategies a marketer has to adopt to overcome the hurdles of the growth stage of a product?                              3+8=11

Ans: Product Life Cycle: A product is like a human being. It is born, grows up fast, matures and then finally passes away. Product life cycle is the stages through which a product or its category bypass. From its introduction to the marketing, growth, maturity to its decline or reduce in demand in the market.  Not all products reach this final stage, some continue to grow and some rise and fall. In short, The PLC discusses the stages which a product has to go through since the day of its birth to the day it is taken away from the market.

However, the basic difference in case of human beings and products is that a product has to be killed by someone. Either the company (to bring better products) or by competition (too much external competition). There are several products in the market which have lived on since ages (Light Bulbs, Tubelights), whereas there are others which were immediately taken off the shelf (HD DVD).

Thus the Product life cycle deals with four stages of a products life.

Stages of Product life cycle:

A) Introduction: The stage 1 is where the product is launched. A product launch is always risky. You never know how the market will receive the product. There have been numerous failures in the past to make marketers nervous during the launch of the product. The length of the introduction stage varies according to the product.

B) Growth: Once the introductory phases are over, the product starts showing better returns on investment. Your customers and channels begin responding. There is better demand in the market and slowly the product starts showing profits.

This is a stage where competition may step in to squash the product before it has completely launched. Any marketing mistakes done at this stage affect the product considerably as the product is being exposed to the market and bad news travels fast. Thus special care has to be taken in this stage to ensure competition or bad decisions do not affect the growth stage of the product.

Characteristics of Growth stage of Product life cycle

C) Maturity stage: One of the problems associated with maturity stages in a technologically advanced environment is the problem of duplication. Not only is the product available in duplicate markets, but also there are several competing products which arise with the same features and capabilities. As a result, the USP’s of the product become less attractive.

D) Decline: 1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use – A typical scenario which a product might face in its last stage. In this stage the expenditures begin to equal the profits or worse, expenses are more than profits.

Strategies for the differing stages of the Product Life Cycle

A) Introduction: The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

B) Growth: Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

C) Maturity: Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

D) Decline: At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

Ans: Price and Pricing

Price is defined as the amount we pay for goods or a service or an idea. Price is the only element in the marketing mix of a firm that generates revenue. All other elements generates only cost. Price is a matter of importance to both seller and  buyer in the market place. Only when a buyer and  a seller agree on price, we can have exchange of goods and services leading to transfer of ownership.

The term ― Price need not be confused with the term ― Pricing. Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. But pricing is different from price. It refers to decisions related to fixing of price of a commodity. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors. 

Objectives and Importance of Pricing (Role):

Objectives of Pricing:

A business firm will have a number of objectives in the area of pricing. These objectives can be short term or long term or primary objectives:-

(i) Profit maximization in the short term.

(ii) Profit optimization in the long term.

(iii) A minimum return on investment

(iv) A minimum return on sales turnover.

(v) Achieving a particular sales volume.

(vi) Achieving a particular market share.

(vii) Deeper penetration of the market.

(viii) Entering new markets.

(ix) Target project on the entire product line.

(x) Keeping competition out, or keeping it under check.

(xi) Keeping parity with competition.

(xii) Fast turnaround and  early cash recovery.

(xiii) Stabilizing price and  margins in the market.

(xiv) Providing the commodities at prices affordable by weaker section.

(xv) Providing the commodities at prices that will stimulate economic development.

Importance of Pricing:

Importance of pricing is spelled out by the following points.

1. Price is the pivot for an economy: Price is the prime mover of the wheels of the economy namely, production, consumption, distribution and  exchange price influences consumer purchase decision. It reflects purchasing power of currency. It can determine the general living standards of people. In essence, by and large every facet of our economy life is directly or indirectly governed by pricing.

2. Price Regulates Demand: Price increase or decrease the demand for the product de- marketing strategy can be easily implemented to meet the rising demand for goods and  service.

3. Price is the competitive weapon: The marketers have to perform in a highly competitive environment. Price is a very important instrument to fight competition. It is the competition that contributes maximum to the importance of pricing. Pricing is a highly dynamic function. Because of the immense competition and in meeting competition, pricing decisions acquire their real importance.

4. Price is the Determinants of profitability: Price determines the profitability of firm by influencing the sales revenue. Low price is not always necessary to increase profit. A right price can increase the sales volume and there by profit. The impact of price rise of fall is reflected instantly in the rise or fall of the product profitability.

5. Price is a Decision Input: Pricing is highly risky decision area and  mistakes in pricing might reasonably affect the firm, its profits, growth and future.

6. Marketing Communication: Price plays an important role in marketing communication. High price may indicate higher quality. Price communicates value to the consumer. Customers are basically value-maximizes. They want to have the maximum value from a given purchase. They form an expectation of value and act on it. A buyer’s satisfaction is a function of the product’s perceived performance and the buyer’s expectations. So, if the product meets the expectations of consumers and their value definitions at the given price point, price is seen as acceptable. Otherwise consumers tend to be dissatisfied. They may say that the product is overpriced and they may reject the offer. 

The above discussion indicates that pricing is a critical element in any company’s marketing plan, because it directly affects revenue and profit goals. Effective pricing strategies must consider costs as well as customer perceptions and competitor reactions, especially in highly competitive markets. Today, many firms are trying to follow the low-price trend. At the same time, many marketers have been successful in selling more expensive products and services by combining unique product formulations with engaging marketing campaigns. 

OR

(b) What is promotion mix? Discuss the factors that affect the promotion mix. 3+8=11

Ans: Promotion Mix and Factors affecting it

Promotion is an important part of marketing mix of a business enterprise. Once a product is developed, its price is determined the next problem comes to its sale i.e., creating demand for the product. It requires promotional activities. The activities are technique which bring the special characteristics of the product and of the producer to the knowledge of prospective customers. Promotion is a process of communication involving information, persuasion, and influence. The term ‘selling’ is often used synonymously with promotion. But promotion is wider that selling. Selling is concerned only with the transfer of title in goods to the purchaser, whereas promotion includes techniques stimulating demand. These techniques include advertising, salesmanship or personal selling and other methods of stimulation demand.

There are many factors which influence promotional mix and they are known as product market factors. 

1. Nature of the product: Different product requires different promotional mixes. Consumer goods and industrial goods require different strategies. Consumer goods are sold through advertising, personal selling and displays. But industrial good require more personal selling.

(a) Product complexity: If a product is technically sound and complex in nature then it requires personal selling. For example, Industrial products. On the other hand if the product is simple we can go for advertising. For example, most of the FMCG products.

(b) Brand differentiation: Promotional mix is affected by brand differentiation and the degree to which the brand is differentiated from competitor’s brand.

(c) Purchase frequency: If buyers buy frequently a product, such as soap, tooth paste etc. the marketer will invest a good amount on advertising to push competition brands.

2. Nature of the market: Different market requires different promotional mixes and strategies. In industrial market, advertising plays a more informative role then the persuasive role for industrial buyers. Personal selling emphasizes on two roles, i.e. information and persuasion in the industrial and consumer’s market.

3. Stage in the product life cycle: The promotional product mix varies within stage in the product life cycle. The nature of demand varies according to the stages in the life cycle. During the introductory stage, the customers do not realize the qualities of the product. Here, information about the product and its benefits are made known to the buyers. In this stage, more importance must be given to personal selling and trade shows. In the growth stage, customers know the qualities of the product. Hence to stimulate demand, advertising must be increased. In the maturity stage, sales and profits decline and hence all the promotional activities should be cut down.

4. Market penetration: Here the product is already known to the buyers. In that situation, a sustaining promotional strategy is suitable. A brand has insignificant market penetration means it has a small market or struggling market. Market size and location: Product’s market size and location also influences the promotional mix. In narrow market, where the numbers of potential buyers is small, direct mail is used. In a broad market advertising is used.

5. Characteristics of buyers: The characteristics of prospective buyers strongly influence the promotional mix. Experienced professional buyers such as industrial purchasing agents need personal selling. Inexperienced buyers need advertising. Some buyers give importance to time, some to purchase of products, buyers act according to the influence of friend, relatives etc.

6. Distribution strategy; Companies fighting more through distribution for establishing their brands, invest more money on personal selling and advertising. Companies which have already established their brand in the market have to invest only a small amount in personal selling and advertising.

7. Pricing strategy: Pricing strategy influence the promotional mix strategy. If the brand is priced higher than the competition, more personal selling is needed to get a middleman to stock and push the brand. If the brand is priced lower, little promotion is needed.

Ans: Channels of Distribution

One of the important problems of marketing is the distribution of goods and  services to the right place, person and  the right time. Manufacturers often find it difficult to decide about the effective distribution system. The channel of distributions refers to the group of intermediaries, which perform the distribution functions. A channel of distribution is an organised net-work or a system of agencies and institutions which, in combination, perform all the activities required to link producers with users and users with producers to accomplish the marketing task.

According to Philip Kotler, “The distribution is the set of all firms and  individuals that assist in the transferring the little of goods and  services as they move from producers to customers.”

According to Richard Buskirk, “Channel of distribution is that system of financial organization by which a producer sends his products to the hands of consumers.”

According to Cundiff and Still, “Channels of distribution are those marketing nets through which the producer flow the products toward the market.”

Factors Affecting the Selection of the Channel of Distribution

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

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

(1)   Price of the Product: The products of a lower price have a long chain of distributors. As against it, the products having higher price have a smaller chain. Very often, the producer himself has to sell the products to the consumers directly.

(2)   Perishability: The products which are of a perishable nature need lesser number of the intermediaries or agents for their sale. Under this very rule, most of the eatables (food items), and the bakery items are distributed only by the retail sellers.

(3)   Size and Weight: The size and weight of the products too affect the selection of the middlemen. Generally, heavy industrial goods are distributed by the producers themselves to the industrial consumers.

(4)   Technical Nature: Some products are of the nature that prior to their selling, the consumer is required to be given proper instructions with regard to its consumption. In such a case less of the middlemen arc) required to be used.

(5)   Goods Made to Order: The products that are manufactured as per the orders of the customers could be sold directly and the standardized items could be sold off only by the middlemen.

(6)   After-Sales Service: The products regarding which the after-sales service is to be provided could be sold off either personally or through the authorized agents.

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

(1)   Number of Customers: If the number of customers is large, definitely the services of the middlemen will have to be sought for. As against it, the products whose customers are less in number are distributed by the manufacturer himself.

(2)   Expansion of the Consumers: The span over which are the customers of any commodity spread over, also affects the selection of the channel of distribution. When the consumers are spread through a small or limited sphere, the product is distributed by the producer himself or his agent. As against it, the goods whose distributors are spread throughout the whole country, for such distributors, services of wholesalers and the retailer are sought.

(3)   Size of the Order: When bulk supply orders are received from the consumers, the producer himself takes up the responsibility for the supply of these goods. If the orders are received piece-meal or in smaller quantities, for it the services of the wholesalers could be sought. In this way, the size of the order also influences the selection of the channel of the distribution.

(4)   Objective of Purchase: If the product is being purchased for the industrial use; its direct sale is proper or justified. As against it, if the products are being purchased for the general consumption, the products reach the consumers after passing innumerable hands.

(5)   Need of the Credit Facilities: If, for the sale of any product, it becomes necessary to grant credit to any customer, it shall be helpful for the producer that for its distribution, the services of the wholesalers and retailer businessmen be sought. In this way, the need of the credit facilities too influences the selection of the channel of distribution.

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

(1)   Services Provided by Middlemen: The selection of the middlemen is made keeping in view their services. If some product is quite new and there is the need of its publicity and promotion of sales, then instead of adopting the agency system, the work must be entrusted to the representatives.

(2)   Scope or Possibilities of Quantity of Sales: The same channel should be selected by means of which there is the possibility of more sales.

(3)   Attitude of Agents towards the Producers' Policies: The producers generally prefer to select such middlemen who go by their policies. Very often when the distribution and supply policies of the producers being disliked by the middlemen, the selection of middlemen becomes quite limited.

(4)   Cost of Channel of Distribution: While selecting the channel of distribution, the cost of distribution and the services provided by the middlemen or agents too must be kept into consideration. The producers generally select the most economical channel.

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

(1)   Level of Production: The manufacturers who are financially sound and are of a larger category, are able to appoint the sales representatives in a larger number and thug could distribute the commodities (products) in larger quantities. As against it, for the smaller manufacturers, it becomes necessary to procure the services of the wholesalers and the retail traders.

(2)   Financial Resources of the Company: From the financial point of view, the stronger company needs less middlemen.

(3)   Managerial Competence and Experience: If some producer lacks in the necessary managerial experience or proficiency, he will depend more upon the middlemen. The new manufacturers in the beginning remain more dependent upon the middlemen.

E. Other Factors

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

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

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

OR

Ans: Wholesale trader is one who sales to other middlemen, institutions and individuals a fairly large quantity. According to American Management Association, wholesalers sells to retailers or other merchants and/or individual, institutional and casual users but they do not sell in significant amounts to ultimate consumers. Wholesale trade is to do with marketing and selling merchandise to retailers, wholesalers or to individuals commercial and professional or other institutional contrast to household consumers, to individuals for personal use.

Functions or services of wholesaler (Role of Wholesalers in the process of physical distribution)

The wholesaler renders a number of services to trade, industries and commerce. The services rendered by the wholesaler may be classified as:

To Producers

To Retailers

To Consumer

Need of wholesalers