Principles of Marketing Solved Question Paper 2013 [Gauhati University BCOM 5th SEM CBCS Pattern]

Principles of Marketing Solved Question Paper 2013 
[Gauhati University BCOM 5th SEM CBCS Pattern]

(Principles of Marketing New Syllabus CBCS Pattern)

Full Marks: 80, Time: 3 hours

(The figures in the margin indicate full marks for the questions)

1. Answer the following as directed:      1x10=10

Choose the correct answer from the given options:

a) “Marketing is the delivery of standard”, This definition of marketing has been given by:

1) Stanton.

2) Kotler.

3) Mazur.

4) Tousley.

Ans: 3) Mazur.

b) Consumer behaviour is affected by:

1) Family.

2) Age.

3) Income.

4) All of the above.

Ans: 4) All of the above.

c) Product simplification is the process of –

1) Increasing the product-line.

2) Changing the product-line.

3) Reducing the product-line.

4) Amending the product line.

Ans: 3) Reducing the product-line.

d) Sales promotion activities are conducted by –

1) Producers.

2) Wholesalers’.

3) Retailers.

4) State.

Ans: 1) Producers.

Fill in the blanks with suitable answers:

e) Marketing begins and ends with the consumers.

f) “The product life cycle is an attempt to recognize distinct stages in the sales history of the product.” This definition has been given by Philip Kotler.

g) Social class, religion, race, culture etc. are significant variables for socio-cultural segmentation of markets.

State whether the following statements are true or false:

h) Sales forecasting for a longer period is more accurate than that of a shorter period.

Ans: False

i) The concept of “Unique Selling Proposition” was evolved by Rosser reeves.

Ans: True

j)  Under “Skimming pricing policy”, the price of a new product fixed at the initial stages is low.

Ans: False, prices are high in initial stages.

2. Answer the following questions within thirty words:         5x4=20

a) Explain the societal marketing concept.

Ans: Societal marketing concept: A company must not blindly follow the goal of customer satisfaction because it may lead to many social and environmental ills for example, a customer may want to have drugs so just to satisfy customer the firms should not supply him drugs. This concept requires that company should deliver superior value to the consumer to improve the consumer and the society. It focuses on consumer welfare. Firms should not produce harmful products.

b) How does sales forecasting help in the field of production?

Ans:

c) Explain the term “trade mark” with examples.

Ans:-Trade Mark: 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.

d) What is prestige pricing policy?

Ans: Prestige pricing is a marketing and pricing strategy where prices are consciously kept higher than normal, recognizing that lower prices will inhibit sales and that buyers will associate a high price for the product with superior quality. 

e) What do you understand by “personal selling”?

Ans: Personal Selling: Personal selling is the act of presenting of product or services so that the consumer appreciate the need for it and mutually satisfactory sales follows.

3. Answer the following questions within 200 words each: (any four)    5x4=20

a) Compare and contrast selling and marketing.

Ans: Differences between selling and marketing:

Selling	Marketing
a) Selling starts and ends with the seller.	a) Marketing starts and ends with the consumers.
b) Seeks to quickly convert products into cash.	b) Seeks to convert customer ‘needs’ into products.
c) Seller is the centre of business universe.	c) Buyer is the centre of the business universe
d) Views Business as a goods producing process.	d) Views businesses as a customer satisfying process.
e) Seller preference determines the formulation of marketing mix.	e) Buyer determines the shape marketing mix should take.

b) Explain the important economic factors that influence the consumer behaviour.

Ans: Factors that influence consumer behaviour

(1) Economic and Personal Factors: The economic and personal factors include the buyer’s age and stage in the life cycle, occupation and economic position, personality and self-conceptand lifestyleand values.

a. Age and Stage in the Life Cycle: People buy different products like food, cloths furniture and  this is often age related. Trends like delayed marriages, children migrating to distant cities, tendency of professionals has resulted in different opportunities for marketers at different stages in consumer life cycle.

b. Occupation and  Economic Position: Occupation also influences buyer’s behaviour. A blue collar worker will buy work clothes, work shoes and  lunch boxes; a company president will buy dress suits, air travel and  club memberships. Marketers try to identify the occupational groups and  then make products according to their needs and  demands. Product choice is greatly affected by economic circumstances – spendable income, savings and  assets and  attitude towards spending and  savings.

c. Income: The income of a person has an extremely important influence on his consumption behaviour. He may wish to buy certain goods and services but his income may become a constraint. Income in this context really refers to the income available for spending (i.e., income after tax, provident fund and other statutory deductions). The person's attitude towards spending versus saving and his borrowing power are also important influencing factors. Small size packaging in sachets for products such as tea, shampoo, toothpaste, etc., are meant for the lower income customers who cannot afford a onetime large outlay of money on such products.

d. Life Style: Life styles are defined as patterns in which people live, as expressed by the manner in which they spend money and time on various activities and interests. Life style is a 69 function of our motivations, learning, attitudes, beliefs and opinion, social class, demographic factors, personality, etc. While reading this unit, you are playing the role of a student. At the same time you also have your career, family and social roles to play. The manner in which you blend these different roles reflects your life style.

(2) Social Factors: Consumer’s behaviour is influenced by social factors such as reference groups, family, social roles and  status. The buyer is living in a society, is influenced and  There is a constant interaction between the individual and  the groups to which he belongs. All these interactions affect him in his day to day life.

a. Reference Groups: A person’s reference groups consist of all the groups that have a direct or indirect influence on his attitude. They can be family friends, neighbours, co-worker, religious, professional and  trade union groups. Reference groups expose an individual to new behaviours and life styles and influence attitude and self-concept. Brands like Levi, Prologue and  Planet M used teenage icon as brand Ambassadors for in store promotions.

b. Family: The family is the most important buying organization in society. From parents a person acquires an orientation toward religion politics and a sense of personal ambition, self-worth and love. E.g. In traditional joint families, the influence of grandparents on major purchase decisions affect the lifestyles of younger generations. In urban India with the growth of nuclear families and both husband and wife working the role of women in major family decisions is prominent. Children and teenagers are being targeted by companies using the internet as an interactive device.

c. Role and Status: The person’s position in each group can be defined in terms of role and status. A role consist of all activities that a person is expected to perform. Each role carries a status. A Vice President of marketing has more status than a sales manager and a sales manager has more status than an office clerk and people choose those products that reflect and communicate their role and desired status in society.

c) How can you measure the effectiveness of an advertisement?

Ans:

d) Write down the differences between brand and trade mark.

Ans: The following are the distinctions between the brand and trade-mark:

1) Registration. Brand is merely a word, symbol or a design. If it is got registered under law, it becomes a trade-mark. But the brand is not required to be legally registered.

2) Action against Imitating. If the brand has been copied out by some other concern competing the business, no legal proceed­ings against it could be undertaken for the same. As against it, if someone imitates the `trade-mark', the body might be legally sued for.

3) Scope. The scope for brand is limited while the trade­mark is quite extensive in its sphere.

4) Use or Utilization. When the brand has been got regis­tered, it becomes the trade-mark and its use could be permissible to the same body or undertaking only. Against it, one and the same brand might be used by various manufacturers, producers or sellers.

5) All the Brands are not the Trade-Marks. All the trade-marks have to be brands, but all the brands are not the trade-marks.

e) Discuss the external factors that have to be considered by an organisation in pricing.

Ans:-External Factors:

In addition to the internal factors mentioned above, any business firm has to encounter a set of external factors while formulating its pricing decisions. An enterprise exists in an environment and is influenced by environmental factors. The external factors are:

1. Market characteristics: Some markets are having very stiff competition and some are having less. The number of players in a market could be more or less. Market leadership factors also may be different. Different characteristics of the market have a bearing on price.

2. Buyer behaviour in respect of the given product: Value conscious buyers are likely to be interested in low prices. Image conscious buyers may be more attracted by product image rather than low price of the product.

3. Bargaining power of major customers: In industrial buying situations major buyers have a bargaining power. They are in a better position to negotiate prices.

4. Bargaining power of major suppliers: Similar is the case with major suppliers. They are in a better position to supply bulk quantities. They are also in a better position to negotiate terms.

5. Competitors’ pricing policy: Firm’s decision to set a price is heavily influenced by the price set by the competitors. In case of highly unique product having a niche market, a firm can have its own price. In most of the cases, competitive reactions to the price set by the firm have to be seriously studied for future programmes.

6. Government controls/regulations on pricing: As stated earlier the Governmental measures like import duties, excise, subsidy, sales tax etc. influence pricing decisions.

7. Social considerations: Firms have a responsibility to society and to its customers. Firms are not expected to exploit consumers by unnecessarily charging high prices.

As discussed above pricing decisions are complex. For pricing an individual product the firm has to consider its overall objective, prices set for other products, costs etc. These are internal factors. In addition, the pricing decisions are influenced heavily by the external factors as stated above.

f) Explain the distribution policies which are generally adopted by the manufactures.

Ans:

4. Answer the following questions within 600 words each):              10x4=40

(1) Discuss the seven-Ps framework of marketing mix.                    10

Seven P’s of Marketing Mix 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.

5. Packaging: The fifth element in the marketing mix is the packaging. Packaging is that art and/or science which is related to the development and use of materials, methods and equipment, for the packing of the goods in some containers, so that the product, while passing through various stages of distribution, could remain fully safe. In this age of competition, good and appropriate packaging occupies much significance^. The policies pertaining to the packaging are a part of the product planning and product development program.

6. Positioning: Product positioning is the 6th important element of marketing plan. It is the process presenting the benefits of the products to the target audience. In other words, Product positioning is a process of identifying the needs of market segments, product strength and weaknesses and the extent to which competing product are perceived to meet the consumer needs. It is an attempt to project different or refined or revised product image in the market than one that has been prevailing. It is the delicate task of relating a product to the market or a market segment. It is that method which emphasizes the product that proves attractive to the consumers. For instance, a two-wheeler manufacturer might engineer the product to be safer, more accommodative, more fuel-efficient than those of competitors.

7. People: The final P of the marketing mix is people. Develop the habit of thinking in terms of the people inside and outside of your business who are responsible for every element of your sales and marketing strategy and activities.

Or

Discuss the various environmental forces influencing marketing.         10

Ans: A variety of environmental forces influence a company’s marketing system. Some of them are controllable while some others are uncontrollable. It is the responsibility of the marketing manager to change the company’s policies along with the changing environment.

According to Philip Kotler, “A company’s marketing environment consists of the internal factors and forces, which affect the company’s ability to develop and maintain successful transactions and relationships with the company’s target customers”.

The Environmental Factors may be classified as:

a) Internal Factor

b) External Factor

External Factors may be further classified into:

a) External Micro Factors and 

b) External Macro Factors

1. Internal Environmental Factors: A Company’s marketing system is influenced by its capabilities regarding production, financial and other factors. Hence, the marketing management/manager must take into consideration these departments before finalizing marketing decisions. The Research and Development Department, the Personnel Department, the Accounting Department also has an impact on the Marketing Department. It is the responsibility of a manager to company-ordinate all department by setting up unified objectives.

2. (a) External Micro Factors: Some of the important external micro factors are:

i) Suppliers: They are the people who provide necessary resources needed to produce goods and services. Policies of the suppliers have a significant influence over the marketing manager’s decisions because, it is laborers, etc. A company must build cordial and long-term relationship with suppliers.

ii) Marketing Intermediaries: They are the people who assist the flow of products from the producers to the consumers; they include wholesalers, retailers, agents, etc. These people create place and time utility. A company must select an effective chain of middlemen, so as to make the goods reach the market in time. The middlemen give necessary information to the manufacturers about the market. If a company does not satisfy the middlemen, they neglect its products and may push the competitor’s product.

iii) Consumers: The main aim of production is to meet the demands of the consumers. Hence, the consumers are the center point of all marketing activities. If they are not taken into consideration, before taking the decisions, the company is bound to fail in achieving its objectives. A company’s marketing strategy is influenced by its target consumer. E.g. If a manufacturer wants to sell to the wholesaler, he may directly sell to them, if he wants to sell to another manufacturer, he may sell through his agent or if he wants to sell to ultimate consumer he may sell through wholesalers or retailers. Hence each type of consumer has a unique feature, which influences a company’s marketing decision.

iv) Competitors: A prudent marketing manager has to be in constant touch regarding the information relating to the competitor’s strategies. He has to identify his competitor’s strategies, build his plans to overtake them in the market to attract competitor’s consumers towards his products. Any company faces three types of competition:

v) Brand Competition: It is a competition between various companies producing similar products. E.g.: The competition between BPL and Videocon companies.

vi) The Product Form Competition: It is a competition between companies manufacturing products, which are substitutes to each other E.g.: Competition between coffee and Tea.

vii) The Desire Competition: It is the competition with all other companies to attract consumers towards the company. E.g.: The competition between the manufacturers of TV sets and all other companies manufacturing various products like automobiles, washing machines, etc.

Hence, to understand the competitive situation, a company must understand the nature of market and the nature of customers. Nature of the market may be as follows:

a) Perfect Market

b) Oligopoly

c) Monopoly

d) Monopolistic Market

e) Duopoly

viii) Public: A Company’s obligation is not only to meet the requirements of its customers, but also to satisfy the various groups. A public is defined as “any group that has an actual or potential ability to achieve its objectives”. The significance of the influence of the public on the company can be understood by the fact that almost all companies maintain a public relation department. A positive interaction with the public increases its goodwill irrespective of the nature of the public. A company has to maintain cordial relation with all groups, public may or may not be interested in the company, but the company must be interested in the views of the public.

Public may be various types. They are:

ix) Press: This is one of the most important groups, which may make or break a company. It includes journalists, radio, television, etc. Press people are often referred to as unwelcome public. A marketing manager must always strive to get a positive coverage from the press people.

x) Financial Public: These are the institutions, which supply money to the company. E.g.: Banks, insurance companies, stock exchange, etc. A company cannot work without the assistance of these institutions. It has to give necessary information to these public whenever demanded to ensure that timely finance is supplied.

xi) Government: Politicians often interfere in the business for the welfare of the society and for other reasons. A prudent manager has to maintain good relation with all politicians irrespective of their party affiliations. If any law is to be passed, which is against the interest of the company, he may get their support to stop that law from being passed in the parliament or legislature.

xii) General Public: This includes organisations such as consumer councils, environmentalists, etc. as the present day concept of marketing deals with social welfare; a company must satisfy these groups to be successful.

2. (b) External Macro Environment: These are the factors/forces on which the company has no control. Hence, it has to frame its policies within the limits set by these forces:

i) Demography: It is defined as the statistical study of the human population and its distribution. This is one of the most influencing factors because it deals with the people who form the market. A company should study the population, its distribution, age composition, etc. before deciding the marketing strategies. Each group of population behaves differently depending upon various factors such as age, status, etc. if these factors are considered, a company can produce only those products which suits the requirement of the consumers. In this regard, it is said that “to understand the market you must understand its demography”.

ii) Economic Environment: A company can successfully sell its products only when people have enough money to spend. The economic environment affects a consumer’s purchasing behavior either by increasing his disposable income or by reducing it. E.g.: During the time of inflation, the value of money comes down. Hence, it is difficult for them to purchase more products. Income of the consumer must also be taken into account. E.g.: In a market where both husband and wife work, their purchasing power will be more. Hence, companies may sell their products quite easily.

iii) Ecological forces/Physical Environment or Natural Forces: Ecology is the study of living things within their environment context. In a marketing context it concerns the relationship between people and the physical environment. Environmentalists attempt to protect the physical environment from the costs associated with producing and marketing products. They are concerned with the environmental costs of consumption, not just the personal costs to the consumer. A company has to adopt its policies within the limits set by nature. A man can improve the nature but cannot find an alternative for it.

Nature offers resources, but in a limited manner. A product manager utilizes it efficiently. Companies must find the best combination of production for the sake of efficient utilization of the available resources. Otherwise, they may face acute shortage of resources. E.g.: Petroleum products, power, water, etc.

iv) Technological Factors: From customer’s point of view, improvement in technology means improvement in the standard of living. In this regard, it is said that “Technologies shape a Person’s Life”.

Every new invention builds a new market and a new group of customers. A new technology improves our lifestyle and at the same time creates many problems. E.g.: Invention of various consumer comforts like washing machines, mixers, etc. have resulted in improving our lifestyle but it has created severe problems like power shortage.

v) Social and Cultural Factors: Most of us purchase because of the influence of social and cultural factors. The lifestyle, values, believes etc. is determined among other things by the society in which we live. Each society has its own culture. Culture is a combination of various factors which are transferred from older generations and  which are acquired. Our behaviour is guided by our culture, family, educational institutions, languages, etc.

The society is a combination of various groups with different cultures and  subcultures. Each society has its own behavior. A marketing manager must study the society in which he operates.

Consumer’s attitude is also affected by their society within a society, there will be various small groups, each having its own culture.

E.g.: In India, we have different cultural groups such as Assamese, Punjabis, Kashmiris, etc. The marketing manager should take note of these differences before finalizing the marketing strategies. Culture changes over a period of time. He must try to anticipate the changes new marketing opportunities.

(2) Define market segmentation. Discuss the various demographic characteristics influencing market segmentation.         2+8=10

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”.

Demographic Segmentation : In demographic segmentation, the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income occupation, education religion, race generation, nationality & social class.

a) Age & Life Cycle Stage : Consumer wants & abilities change with age. Eg: Hindustan Unilever introduced Pears soap in pink colour specially for children. Johnson & Johnson Baby Powder & Talcum Powder are classic examples of products for infants & children. Television channels in India Indicate the segmentation based on age & life cycle. There are channels like Aastha & Sanskaar target which towards the old generation, cartoon network, Disney are channels for children etc.

b) Gender : Men & women have different behavioral orientation. Gender differentiation has been long applied to product categories such as clothing, cosmetics & magazines. Eg: Axe deodorant is positioned as a masculine product. Park avenue from Raymond is positioned as masculine brand. Bajaj wave is a brand specifically designed for women in the scooter segment.

c) Income : Income segmentation is a long standing practice in a variety of products & services & is a basic segmentation variable. Eg: Nirma Washing Powder, was launched as the lowest priced detergent in India primarily targeted at middle income group. Markets for many consumers’ products in India are showing rapid growth due to low unit price packaging.

d) Generation: Each generation is profoundly influenced by the time in which it grows- the music movies, politics.

e) Social Class: Social class has a strong influence on preference in cars, clothing, home , furnishings, leisure activities, reading habits, retailers etc.

(3) Define product planning. Describe the various stages involved in the product planning process.         2+8=10

Ans: Meaning of Product Planning: Product planning is the initial step of the overall marketing programme. In the competitive business world, producers try to produce products which can be nearer to consumer expectation. The pressure of competition forces the producers to replace the existing products by developing new consumers’ suitable and friendly products. Product planning covers all activities which enable producers and middle men to determine what should constitute a company’s line of products. Product development covers the technical activities of product research, production and design. The well attempt effort of product development increases the scope to satisfy the needs of the customers.

The product planning and development cover the following decision making area:

(I) What products should be produced?

(II) Expansion of product line.

(III) Determine the new use of its products.

(IV) What brand, package and label are used for different products?

(V) What should be quantity of its production?

(VI) Pricing policy etc.

In short, product planning involves the innovation of new products and improvement in the existing product.  In the words of Karl. H. Tietjen, “Product planning is the act of marketing and commercialization of new products, the modification of existing lines and the discontinuance of marginal or unprofitable items”. As per this definition product planning covers these three considerations.

(I) The development and introduction of new products.

(II) The modification of existing lines to suit the changing consumer needs and preferences and

(III) Elimination of unprofitable products.

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

Discuss the stages in product cycle. What strategies a marketing manager should take at the decline stage of a product?      5+5=10

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 is passed. 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, Tube lights), 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.

If the product is technological and receives acceptance in the market, it may come out of the introductory phase as soon as it is launched. Whereas if the product is of a different category altogether and needs market awareness, it may take time to launch.

Characteristics of Introductory stages of Product life cycle

Ø  Higher investment, lesser profits

Ø  Minimal Competition

Ø  Company tries to Induce acceptance and gain initial distribution

Ø  Company needs Promotions targeted towards customers to increase awareness and demand for product

Ø  Company needs Promotions targeted towards channel to increase confidence in 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

Ø  Product is successfully launched

Ø  Demand increases

Ø  Distribution increases

Ø  Competition intensifies

Ø  Company might introduce secondary products or support services.

Ø  Better revenue generation and ROI

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.

Along with competition, Penetration pricing becomes a weapon for competitors. Competitors sell products with the same features at lesser prices thereby trying to penetrate in the market. Nonetheless, The sales of a product (especially sales from return customers) is at its peak point during the maturity stages. The growth of sales may be lesser, but the sales revenue of the organization is maximum during the maturity stage of product life cycle.

Characteristics of Maturity stages of Product life cycle

Ø  Competition is high

Ø  Product is established and promotion expenditures are less

Ø  Little growth potential for the product

Ø  Penetration pricing, and lower profit margins

Ø  The major focus is towards extending the life cycle and maintaining market share

Ø  Converting customers product to your own is a major challenge in maturity stage

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.

Thus it becomes a typical scenario for the product to exit the market. It also becomes advantageous for the company as the company can use resources it was spending on the declining product on an altogether different project. Characteristics of Decline stages of Product life cycle

Ø  Market is saturated

Ø  Sales and profits decline

Ø  Company becomes cost conscious

Ø  A lot of resources are blocked in rejuvenating the dead product.

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 the decline stage the industrial marketer  has a wide choice of pricing strategies subject to certain conditions. The firm  need not cut the price but reduce the cost to earn sum profits provided it has  built a reputation of high product quality and dependable services. Another  major strategy is to reduce the prices to increases sales volume above  break-even  volume of sales and use the product to help sell other products in the product  mix.

 (4) What are the elements in promotion mix? Design a sales promotion programme for a newly introduced cosmetic product.              4+6=10

Ans:-Elements of Promotion Mix: There are five elements of promotion mix:

a) Advertising: Advertising is a non-personal presentation of goods, services or idea. In advertising existing and prospective customers are communicated the message through impersonal media like radio, T.V., newspapers and magazine. It involves transmission of standard message simultaneously to a large number of people. The message transmitted is known as advertising.

b) Personal Selling: Personal selling is the process of assisting and persuading the existing and prospective buyer to buy the goods or services in person. It involves direct and personal contact of the seller or his representative with the buyer.

c) Publicity: Publicity is a non-personal non-paid stimulation of demand of the product or services or business unit by planning commercially significant news about the services or business unit by planning commercially significant news about in the print media or by obtaining a favorable presentation of it upon radio, television or stage.

d) Sales promotion: Sales promotion consists of all activities other than advertising, personal selling and publicity, which help in promoting sales of the product. Such activities are non-repetitive and one time offers. According to American Marketing Association, sales promotion include, “those marketing activities other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as point of purchase displays, shows and exhibitions, demonstrations and various non-recurring selling efforts not in the ordinary routine.”

The main aim of sales promotion is to increase sales and profits of the firm but it is quite different from personal selling and advertising. In personal selling, customer is persuaded by a sales person face to face. Advertising is a non-personal mass communication media. Sales promotion, on the other hand, is a non-recurring and non-routine method. Its main aim is to supplement and coordinate the personal selling and advertising. It is a supporting and facilitating element of promotional strategy. Sales promotion bridges the gap of advertising and personal selling.

e) Direct Marketing: The promotional strategy which relies on direct communication to customers rather than through a third party such as use of mass media is termed as Direct Marketing. It is an interactive mode of marketing where the messages can be altered depending on the consumer’s response. This form of promotion strategy is therefore more focussed than the other promotional tools as it is directed to a specific individual customer or group. Thus, direct marketing is interactive, non-public, immediate and customized.

Or

What are the objectives of pricing? What is meant by selective and intensive distribution strategy?         5+5=10

Ans: 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.

Types of Distribution strategy

Some of the important types of distribution in international market are

It represents the level of international availability selected for a particular product by the marketer; the level of intensity chosen will depend upon factor such as the production capacity, the size of the target market, pricing and promotion policies and the amount of product service required by the end-user.

There are three broad options:

1) Intensive Distribution: Intensive distribution aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used (e.g., cigarettes, beer). Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another.

This alternative involves all the possible outlets that can be used to distribute the product. This is particularly useful in products like soft drinks where distribution is a key success factor. Here, soft drink firms distribute their brands through multiple outlets to ensure their easy availability to the customer.

Hence, on the one hand these brands are available in restaurants and five star hotels and on the other hand they are also available through countless soft drink stalls, kiosks, sweetmarts, tea shops, and so on. Any possible outlet where the customer is expected to visit is also an outlet for the soft drink.

2) Selective Distribution: Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g., training) on them. Selective distribution works best when consumers are prepared to “shop around” – in other words – they have a preference for a particular brand or price and will search out the outlets that supply.

This alternative is the middle path approach to distribution. Here, the firm selects some outlets to distribute its products. This alternative helps focus the selling effort of manufacturing firms on a few outlets rather than dissipating it over countless marginal ones.

It also enables the firm to establish a good working relationship with channel members. Selective distribution can help the manufacturer gain optimum market coverage and more control but at a lesser cost than intensive distribution. Both existing and new firms are known to use this alternative.

3) Exclusive Distribution: Exclusive distribution is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area.

When the firm distributes its brand through just one or two major outlets in the market, who exclusively deal in it and not all competing brands, it is said that the firm is using an exclusive distribution strategy. This is a common form of distribution in products and brands that seek a high prestigious image.

Typical examples are of designer ware, major domestic appliances and even automobiles. By granting exclusive distribution rights, the manufacturer hopes to have control over the intermediaries’ price, promotion, credit inventory and service policies. The firm also hopes to get the benefit of aggressive selling by such outlets.