Principles of Marketing Solved Question Paper 2019 [Gauhati University BCOM 5th SEM CBCS Pattern]

Principles of Marketing Solved Question Paper 2019
[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

1) Who introduced the ‘Social marketing concept’? (Choose the correct one)

a)      William J. Santon

b)      Philip Kotler.

c)       N. H. Borden.

d)      R. S. Davar.

Ans: b)      Philip Kotler.

2) Which one of the following is not the economic factor of consumer behaviour?

a)      Consumer credit.

b)      Family income.

c)       Reference group.

d)      Standard of living.

Ans: c)       Reference group. (It is a social factor)

3)   A brand name which is used for all products of a company is known as

a)      Manufacturer’s brand.

b)      Combination brand.

c)       Individual brand.

d)      Umbrella brand.

Ans: d)      Umbrella brand.

4)   Which one of the following external factor influences the price of a product?

a)      Cost.

b)      Competition.

c)       Objectives.

d)      Marketing mix.

Ans: b)      Competition.

5)   Which one of the following is not a feature of personal selling?

a)      Persuasion.

b)      Expensive.

c)       Flexibility.

d)      Educative process.

Ans: d)      Educative process.

6) “Packaging is an activity which is concerned with protection, economy, convenience and promotional consideration.” (State true or false)

Ans: True

7)  Producing a cheaper product is the focus of the ‘product concept’ of marketing. (State true or false)

Ans: False

8)  The promotion mix of a firm include five ingredients viz. advertising, publishing, public relation, sales promotion and personal selling (Fill in the blank)

9)   A product line is a group of products that are closely related. (Fill in the blank.)

10)   Marketing helps to facilitate economic stability. (Fill in the blank.)

2. Answer the following questions very briefly:               2x5=10

1) What is marketing environment?

Ans: 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.

2)  What is packaging?

Ans: 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.

3) Distinguish between brand name and trade mark.

Ans: Distinction between Brand and Trade-Mark

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

4) What is demand forecasting?

Ans: Demand forecasting is an estimate of demand in both monetary as well as in physical terms. A demand forecast is an estimate of sales volume that a company can expect to attain within a specified future period with the marketing efforts.                

5) What is ‘Skimming Price Policy’?

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.

3. Answer any four of the following questions briefly:    5x4=20

1) Describe the various forces of marketing environment.

Ans: The Marketing Environmental Factors may be classified as:

1.       Internal Factor

2.       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:

1.   Suppliers: They are the people who provide necessary resources needed to produce goods and services.

2.   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.

3.   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.

4.  Competitors: A prudent marketing manager has to be in constant touch regarding the information relating to the competitor’s strategies.

5.   Public: A Company’s obligation is not only to meet the requirements of its customers, but also to satisfy the various groups.

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:

1.       Demography

2.       Economic Environment

3.       Ecological forces/Physical Environment or Natural Forces

4.       Technological Factors

5.       Social and Cultural Factors

2)  Distinguish between 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.

3)  Explain the functions of Distribution channel.

Ans: Functions (Role) of the Channels of Distribution: The following are the main function of the channel of distribution:

(1) Extending Suggestions Regarding Price-Determination: The middlemen are in the direct contact of the consumers. Therefore, they possess the knowledge that on what price may the consumer accepts the product. Thus, the channel of distribution extends necessary advice to the producers in the price-determination.

(2) Regularizing the Decisions: The channel of distribution regularizes the decisions and the transactions, resulting in the lowering of the costs. If the products are sold off to some such store which has many branches in the city, the producer then doesn't need going to various branches frequently or repeatedly. The main cause of the same is that if the product seems suitable for the store, it will itself send the purchase order to the manufacturer and in this way, with only the limited efforts, it will become possible to sell the products in bulk quantities.

(3) Managing the Finance: We find that the agents generally send some advance money along with the order. Very often the product is supplied to the agents through the bank so that the company gets the documents discounted from the bank. Thus the finance is arranged. Thus it-is also the function of the agents to arrange the finance.

(4) Performing the Promotion Activities: By the middlemen, particularly by the retailers, the advertisements, individual sales, and the sales promotion activities are performed. Very often the middlemen themselves plan and implement the promotion activities and sometimes the manufacturers to extend their help in such work. Really, the result or the outcome of the sales, by the producer, very much depends upon the promotion activities undertaken by the middlemen.

4) Explain briefly ‘Product Life Cycle’.

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).

5)  What is product simplification?

Ans: An organisation has to continuously evolve to create and modify an offering to stay in the market. With time, consumer preferences change and if an organisation fails to meet the needs and satisfy the wants of the target market, its products will become outdated. Product simplification or Product contraction refers to discontinuation of a certain product from a range of products (product mix) by an organisation to thin out the product line.

Advantages of Product Simplification

1) Cost reduction: economies of scale are achieved as this process results in discontinuation of a product or a product line. Various costs related to manufacturing, consultation, promotion, and time are diverted towards other products.

2) Better brand image: As unsuccessful products, which are not accepted in the market on large
scale, are discontinued, the risk of them spoiling the organisations image is reduced to a large extent.

3) Effectiveness in overall activities: the organisation can focus on less products which brings specialisation in all the functions of the organisation.

6) Explain the importance of promotion.

Ans: The marketing promotion plays a very important role in business. Without effective promotion, the product awareness may remain low in the market and lead to lower than expected revenue. But on the other hand, marketing promotion also would require dedicated budget but it helps in creating the awareness in the market enabling the organization to drive additional revenue.

The main aim of marketing promotion is:

1. To introduce a new product

2. To educate customers about the product usage

3. To increase awareness of the product

4. To differentiate from competitors

5. To achieve increase in product recall

6. To build brand value and image

7. To encourage people to buy in bulk especially in off season to level the demand

8. To encourage people to try their product over their existing products

Promotion is one of the P’s of marketing mix. Promotional activities works in tandem with other three P’s which are: Pricing decisions, Product and Place (Distribution strategies).

4. What do you mean by ‘market’ and ‘marketing’? Discuss the traditional and modern concept of marketing.    10

Ans: Meaning of Market: A market can be defined as a place where buyers and sellers meet to exchange goods, services and other relevant information is called a market. Both these parties can meet in a city, state, province, country and region. The market may be a physical or virtual.

The one party (seller) sells a product or service to a buyer for money benefits. Most of the time there are more than single buyers and seller in the marketplace. The value and prices of product and service are based on the law demand and supply in the market.

Meaning of Marketing: Marketing is an ancient art and is found everywhere. Formally or informally, people and organizations engage in a vast numbers of activities relating to exchange of goods and services that could be called marketing. Good marketing has become an increasingly vital ingredient for business success. It is embedded in everything we do- from the clothes we wear, to the web sites we click on, to the ads we see. Marketing deals with identifying and meeting human and social needs or it can be defined as “meeting needs profitably”.

The American Marketing Association has defined marketing as “an organizational function and a set of processes for creating, communicating and delivering value to the customers and for managing customer’s relations in ways that benefit the organization and the stake holders.”

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 & 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.

Or

What is marketing mix? Discuss the seven P’s framework of marketing mix.

5. What is consumer behaviour? Discuss the economic and social factors that influence the consumer behaviour.   10

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.”

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-concept and life style and 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 lifestylesand 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-worthand 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.

Or

What is market segmentation? Describe the different bases used for market segmentation.

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 Heterogeneous 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.

6. What do you mean by product planning and development? Explain the various steps involved in new product development process.  10

Product Planning and Development

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.

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

What is pricing? Discuss the factors influencing product pricing decisions.

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. 

Factors Affecting Pricing

Factors affecting pricing may be categorized into two categories- internal factors and external factors. In each of these categories some may be economic factors and some may be psychological factors. Some factors may be quantitative and some others may be qualitative. Some of the important factors affecting pricing are given below:

A. Internal Factors:

As regards pricing, the firm has certain objectives -long term as well as immediate. For example, the firm has certain costs of manufacturing and marketing; and it seeks to recover these costs through the price and thereby earning a profit. In respect of all the products, the firm may have a basic philosophy on pricing. The pricing decisions of the firm have to be consistent with this philosophy. Pricing also has to be consistent with the overall objectives of the firm. These objectives could be achieving market share, short term or long term profit. The firm may be interested in seeking a particular public image through its pricing policies. All these constitute the internal factors that influence pricing. From the above, it appears that pricing is influenced by objectives and marketing strategy of the enterprise, pricing philosophy, pricing objectives and policy. More specifically, the internal factors are: 

1. Corporate and marketing objectives of the firm: All pricing objectives emanate from the corporate and marketing objectives of the firm. A business firm will have a number of objectives in the area of pricing. Some of these objectives are long-term, while others are short-term. Profit is one of the major objectives in pricing. Firms may not be interested in profit maximization as such, they may be more interested in long term survival and growth.

2. The image sought by the firm through pricing: If a firm offers high quality goods at high prices, the firm will develop a premium image. 

3.The characteristics of the product: Sophisticated, complex and new to the world products normally carry high prices. Products having more features carry higher prices.

4. Price elasticity of demand of the product: If price increases, demand decreases and if price decreases demand increases. Marketers may decide on pricing based on ‘what the traffic can bear’. The marketer takes the maximum price which the customers are willing to pay for the product under the given circumstances.

5. The stage of the product on the product life cycle: When a product is introduced for the first time it carries a higher price. Gradually with increasing consumer acceptance and competition price decreases. 

6. Use pattern and turn around rate of the product: Price of newspaper and magazines may be different for the immediacy factor, permanence and the pass along readership. Newspapers are having a short life, while magazines enjoy a pass along readership.

7. Costs of manufacturing and marketing: Costs determine price to a great extent. Marketers will have to cover the cost and earn a profit. 

8. Extent of distinctiveness of the product and extent of product differentiation practised by the firm: Products having uniform size, shape and compositions can be manufactured at a lesser cost compared to products having differentiation. 

9. Other elements of the marketing mix of the firm and their interaction with pricing: Amount spent on product research, advertising, dealer development etc. are some factors which influence price of a product.

10. Composition of the product line of the firm: A firm may sell a number of products in the same product line. In that case , the products are likely to be sold under different prices depending on their quality, features etc.

B. 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.

7. What is channel of distribution? Discuss the factors influencing in selection of distribution channel.  10

Ans: Channels of Distribution

One of the important problems of marketing is the distribution of goods & services to the right place, person & 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 & individuals that assist in the transferring the little of goods & services as they move from producers to customers.”

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

What is promotion mix? What are the elements of promotion mix? Write advantages and limitations of personal selling.  10

Ans: 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.

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.