CHAPTER ONE

INTRODUCTION TO MARKETING MANAGEMENT

Meaning of marketing
The word marketing has been defined in different ways by several authors and
scholars. The following are some of the definitions which have been given;

American Marketing Association – A.M.A. (1964)

Marketing is the performance of business activities that direct the flow of

goods and services from producers to consumers or users.

Kotler Philip (1997)

Marketing is a social and a managerial process by which individuals and groups obtain
what they need and want through creating, offering and exchanging products of value
with others.

Other meanings
Marketing is the bridge between production and consumption.

Marketing forms the vital link between people’s needs and means of satisfying them.
Marketing is an activity that satisfies human needs through exchange processes.

Marketing, as the definitions suggests, is a dynamic process – a total integrated process

rather than a fragmented assortment of institutions or functions. Marketing is not any one
activity, nor is it exactly the sum of several, rather, is it the result of the interaction of
many activities.

Customers must be satisfied in order for a company to make repeat business. This
implies that the success of a firm is not profitability perse but profitability through
customer satisfaction.

Marketing is not limited to business. Whenever you are trying to:

Persuade somebody to do something.

The Core Concepts Of Marketing

From the foregoing definitions, it is evident that the definition of marketing rests on
the following core concepts.

i) Needs, wants and demands.

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ii) Products

iii) Utility, values and satisfaction.

iv) Exchange, transactions and relationships.

v) Markets.

vi) Marketing and marketers.

Needs, Wants and demands.

The study of marketing begins with the understanding of human needs and wants.

Needs

A human need is a state felt deprivation of some basic satisfaction. People acquire food,
shelter, clothing, safety, belonging, e.t.c. for survival.
These needs are not created by the society for marketers. They exist in their very texture of
human biology and condition.

Wants

Are desires for specific satisfiers of these deeper needs. While people’s needs are fewer, their
wants are many.

Demands

Are wants for specific products that are backed up by an ability and willingness to buy them.
Wants become demands when backed up by the purchasing power. Marketers influence
demands.
They try to influence demand by making the product attractive, affordable and easily
available.

Product

People satisfy their needs and wants with products.

A product is anything that can be offered to someone to satisfy a need of want. Products
may take different forms, e.g.
Physical products

Persons – as service providers Places

vacation land

Activities – Physical exercise.

Organizations – E.g. Lonely hearts club

Ideas – E.g. family planning or safe driving

When we buy a physical product or any of the above, we are buying a service. Therefore,
a product is necessarily a service.

Utility, Value and Satisfaction

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Utility

Utility answers the question – “How do consumers choose among alternative products
(Product choice set) in order to satisfy his needs and wants?”

Utility is the overall estimate of a product’s capacity a consumer’s needs or wants.

This is the basis on which consumers choose particular products from product choice
sets.

Value
Value is equated with price. A product is said to be of better value if it is more for the price.
Marketers should provide value to customers.

Satisfaction

Occurs when a product conforms to a consumer’s needs.

Exchange, Transactions and Relationships

Exchange
Marketing emerges when people decide to satisfy their needs and wants through exchange.

Exchange is one of the four ways that people can acquire products they need. Other ways
include:

Meaning

Exchange is the act of obtaining a desired product from someone by offering something
in return.

For exchange to take place, five conditions must be satisfactory.

There has to be at last two parties to the exchange

Each party has something that might be of value to the other party. Each
party is capable of communication and delivery

Each party is free to accept or reject the offer.

Each party believes it is appropriate or desirable to deal with the other party.

1. If these conditions exist, there is a potential for exchange.

2. Whether exchange actually takes place, depends upon whether the two parties
can agree on the terms of exchange that will leave them both better off than
before the exchange.

3. Exchange must be seen as a continuous process rather than an event.

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4. Two parties are seen to be engaging in exchange if they are negotiating and moving towards an agr

Transaction.

If an agreement is reached, we say that a transaction has taken place.

A transaction consists of a trade of values between two parties.

It involves several dimensions:-

At least two things of

value Agreed upon
conditions A time of
agreement

A place of agreement

Usually a legal system arises to support or enforce compliance on the part of the
transactors.

Markets.
The concept of exchange leads to the concept of markets.

A market consists of all the potential customers sharing a particular need or want who
might be willing and be able to engage in exchange to satisfy that need or want.

The size of the market therefore depends on the number of persons who exhibit the
need; have resources that interest others and are willing to offer these resources in
exchange for what they want.

Sellers constitute the industry and

Buyers constitute the market.

Marketing and Marketers.

Marketing consists of human activities taking place in relation to markets.

Marketing means working with marketers to actualize potential exchanges for the
purpose of satisfying human needs.

A marketer is someone seeking a resource from someone else and is willing to offer
something of value for exchange. The marketer can therefore be the buyer or the seller.

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CHAPTER TWO
MARKETING MANAGEMENT

Marketing management takes place when at least one party to a potential for
exchange gives thought to objectives and means of achieving desired responses from
other parties. A.M.A. (1985) defines marketing management as:

“The process of planning and executing the conception, planning, promotion

and distribution of ideas, goods and services to create exchanges that satisfy
individual and organizational objectives”
The definition recognizes that marketing management in a process involving
analysis, planning, implementation and control. It covers ideas, goods and
services. It rests on the notion of exchange,

The goal is to produce satisfaction for the parties involved.

Task Of Marketing Managers

Marketing managers cope with the tasks of carrying out Marketing research Planning,
Implementation and Control Target market, and Market position Product development
Pricing Promotion Channels of distribution.

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Level, Timing and Composition of demand in a way that will help the organization achieve its objectives. Ma

Types Of Demand States And Marketing Task

Negative Demand
This arises when a major part of the market dislikes the product and may pay a price to
avoid it.

Task - Analyze why demand is negative and whether the product can be modified or more
positive promotion done to change a market’s attitude.

No Demand
Target customers may be uninterested or indifferent to the product. E.g. College students
may not be interested in a foreign language.

Task - Find ways to connect the benefits of the products with the person’s natural needs
and interests.

Latent Demand
Many consumers may share a strong need that cannot be satisfied by any existing
product.

Task - Conduct a survey to identify the unmet needs

Falling Demand
Every organization, sooner or later faces failing demand for one or more of its products.
E.g. Decline in church membership
Decline in private college enrolment

Task Analyze causes of falling demand

Determine whether demand can be re-stimulated by finding new target markets Changing
products features. Reversing the declining demand through creative remarketing of the
product.

Irregular Demand
Many organizations face demand that varies on a seasonal, daily or even hourly basis,
causing problems of idle capacity or over-worked capacity.

Task - This calls for synchro-marketing. I.e. find ways to alter the same pattern of
demand through promotion, flexible pricing and other incentives.

Full Demand
Organizations face full demand when they are pleased with their volume of business.

Task - Maintain the current level of demand in the face of changing customer preferences
and increasing competition; improve or maintain quality, continuously measure customer
satisfaction to make sure it’s doing a good job.

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Overfull demand
Some organizations face a demand level that is higher than they can or want to handle.

Task - Demarketing – Finding ways to reduce the demand temporarily or permanently

e.g. raising prices or reducing promotion.

Unwholesome demand
Unwholesome products will attract organized efforts to discourage their consumption.
Unselling campaigns have been conducted against cigarettes, alcohol, hard drugs, hand
guns, x-rated movies and large families.

Task - Get people who like something to give it up.

You can use fear communication, price hikes and reduced availability.

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Marketing Management Concepts
Marketers need guidance regarding their conduct in the market place. This is because
conflicts are bound to arise between the needs of the society. Customers and the company.
These guidance are known as the marketing principles, rules, concepts or philosophies.

There are five competing concepts that may govern the operations of companies, namely;

1. The production concept

2. The product concept

3. The selling concept

4. The marketing concept and

5. The societal marketing concept.

THE PRODUCTION CONCEPT

This concept holds that “consumers will favor those products that are widely available
and low in cost.” Management focuses on high production efficiency and wider
distribution coverage.

This concept makes sense under the following circumstances;

1. When the product is a basic necessity

2. The customers are low income earners

3. When the production costs are high and have to be brought down
through high production efficiency

4. When the market is highly price sensitive.

5. When demand for the product exceeds the supply and some other means have
to be used to allocate the products to the customers.

Examples of companies guided by this concept include,

1. City Council primary schools

2. Unilever- for its basic foodstuff

3. City Council health services.

This concept ensures product availability to the consumers. However, product

quality is compromised.

THE PRODUCT CONCEPT

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The product concept holds that “consumers favor those products that offer the
most Quality, performance and features. Marketers assume that consumers
will buy those products of high quality and shun those products of inferior
quality.”

Management focuses on producing high quality products and improves on them over time.

This concept may apply under the following conditions;

1. When the market is not price sensitive

2. In the case of conspicuous goods

3. Where the customers are well-off financially.

The concept has been criticized on the following grounds:

1. The idea of a good product is defined from the company’s end but not the
consumer’s. The concept thus leads to marketing myopia [short-
sightedness]. There is undue concentration on the product rather than the
needs of the consumer.

2. A company may end up producing goods that may not have demand.

3. The concept ignores the needs of the society

Examples of firms practicing this concept are;

1. Those selling jewelleries,

2. Private schools and

3. Private hospitals

THE SELLING CONCEPT

This concept holds that consumers, if left alone, will ordinarily not buy a lot of a
company’s products. The organization must therefore undertake aggressive selling and
promotion effort. That is, a company must focus on hard selling. Under hard selling,
consumers are not willing to buy such products easily.

Examples of products sold under this concept are;

1. Life insurance policies

2. Political campaigns

3. Fund raisings

4. New products

5. Encyclopedias

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6. Funeral plots

7. Coffins.

The concept may work under the following circumstances;

1. Where the company is operating under excess capacity and wishes to fully
utilize its resources with no regard to the product’s demand

2. Where the product is new in the market

3. Where the firm has adequate machinery for effective promotion

4. where the products are obsolete or are slow moving

The selling concept has some limitations. Namely:

1. Consumers may be forced to buy products that they do not have real need for

2. It is an expensive concept as it requires a lot of resources, both human and

financial.

THE MARKETING CONCEPT

The marketing concept holds that “the key to achieving organizational goals lies in
determining the needs and wants of the target market and delivering the desired
satisfaction more effectively and efficiently than competitors This concept has been
expressed in many colorful ways;

Find needs and meet them

The customer is always right
The customer is the king
At Your service
Your problem is our business
Have it Your way
You are the Boss, e.t.c.

The concept rests on five main pillars;

1.Market Focus

The company must define the boundaries of its market. It should know those customers
that are members of their market. This can be done through a process known as
segmentation.

2.Customer Focus

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The company should determine the needs and wants of the customers from the
customers’ point of view but not the company’s. Customers’ needs must be identified
and satisfied as this result into customer loyalty which is a source of Co goodwill.

3.Integrated Or Coordinated Marketing

When all company Departments work together to achieve the consumers’ interest, the
result is integrated marketing.

The Marketing function

The various marketing functions – advertising, marketing research, sales, branding, e.t.c.
must work together. They must be well coordinated from the customers’ point of view.
Company-wide orientation

Marketing must be embraced by other departments. They must think customer. Marketing
is not a department but much of a Co-wide orientation. Teamwork must be fostered
among all departments. This requires the practice of internal as well as external
marketing. Whereas the latter is directed at people outside the firm, the former is the task
of hiring, training and motivating employees to serve customers well. Internal marketing
must external marketing. Managers must consider customers as the true profit centers
hence adopt a modern organizational chart.

4.Profitability

The ultimate purpose of the marketing concept is to help organizations achieve their
objectives. In the case of private firms, the major one is profit. However, they should aim
for profits through customer satisfaction.

5.Competition
The concept recognizes the existence of competition. However a Co should offer superior
customer value. It should serve customers better than competitors.

Circumstances under which the marketing concept may be practiced by companies

Most companies do not embrace the marketing concept until driven to it by

circumstances Various events forcing companies to adopt the marketing concept
includes:-

Sales decline: - when sales fall, companies panic and look for ways of increasing sales.
Slow growth in sales forces some companies to search for new markets. They realize they
need marketing skills to identify new opportunities.

Changing buying patterns – Most companies operate in markets characterized by rapidly

customer ways such companies need more marketing know-how if they are to track
buyers’ changing values.

Increasing competition - Complacent companies may suddenly be attacked by powerful

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competitors, e.g. Kenya Breweries

Reasons To Embrace The Marketing Concept

Marketers’ arguments

The company assets have little value without the existence of customers.
The key company task therefore is to attract and retain customers.

Customers are attracted through competitive superior offerings and retained through
satisfaction.

Marketing’s task is to develop a superior offering and deliver customer satisfaction.

SOCIETAL MARKETING CONCEPT

Some people have questioned whether the marketing concept is an appropriate
philosophy in the age of:

Environmental deterioration Resource shortages

Exposure
Population growth
World hunger and poverty
Neglected social services

The societal marketing concept holds that

“Organization’s task is to determine the needs wants and interests of the target markets
and to deliver the desired satisfactions, more effectively and efficiently than
competitors in a way that preserves or enhances the consumers’ and the society’s well
being.” The societal marketing concept calls upon marketers to build Social and Ethical
considerations into their marketing practices.

They must balance the conflict criteria of Company profits Consumer needs and Public

CHAPTER THREE

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MARKETING ENVIRONMENT

Meaning Of the Marketing Environment

A company’s marketing environment consists of actors that affect its ability to develop
and maintain successful transactions and relationships with its target customers.

They are factors and forces that affect a company’s ability to operate effectively in
providing products and services to its customers.

Marketing Environment is the combination of external and internal factors and forces which
affect the company’s ability to establish a relationship and serve its customers.
The marketing environment of a business consists of an internal and an external environment.
The internal environment is company specific and includes owners, workers, machines,
materials etc. The external environment is further divided into two components: micro &
macro. The micro or the task environment is also specific to the business but external. It
consists of factors engaged in producing, distributing, and promoting the offering. The macro
or the broad environment includes larger societal forces which affect society as a whole. The
broad environment is made up of six components: demographic, economic, physical,
technological, political-legal, and social-cultural environment.

Components of the Marketing Environment

The marketing environment can be divided into two components namely:

1. The micro-environment

2. The macro-environment

The Micro-Environment

This can be subdivided into two;

a) The Internal Micro- Environment

b) The External Micro- Environment

The Internal Micro- Environment

This consists of those forces within the company, i.e. a firm’s capabilities or bundle of
assets and skills possessed by the company. They include
• Marketing programmes

• Financial resources

• Research and development

• Purchasing

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• Manufacturing, e.t.c.

These reveal a firm’s strengths and weaknesses.

The External Micro- Environment

These consist of the actors and forces in a company’s immediate environment that
affects its ability to serve its markets. Such forces include the company’s
• Suppliers

• Marketing intermediaries

• Customers

• Competition and

• The publics

These comprise the core marketing system of the company in its efforts to meet its
primary goal of profitability and customer satisfaction.

• These forces represent the uncontrollable marketing variables that the company
must monitor and respond to

• The Macro and the external Micro-Environment both pose threats and spin
opportunities from the environment

The socio-cultural forces/ environment

External Micro-Environmental

1. THE SUPPLIERS
These are business firms and individuals who provide resources needed by the
company to produce goods and services.

Companies must

• Develop specifications

• Search for suppliers

• Qualify them and

• Choose those who offer the best mix of

- quality

- delivery reliability

- credits

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- warranties and

- low costs

Development in the suppliers’ environment can have substantial impact on the

company’s marketing operations.

Marketing managers need to watch

i) the price trends of their key inputs

ii) supply availability i.e. continuity

Marketing managers should avoid over relying on one source of suppliers.

2. MARKETING INTERMEDIARIES
These are firms that aid the company in promoting, selling and distributing its goods
and services to the final buyers. They include:

- Middlemen

- Physical distribution firms

- Marketing service agencies

- Financial intermediaries.

a) Middlemen

They are business firms that help the company to provide customers or *** sales with
them for example

i) Merchant middlemen - wholesalers and retailers,

ii) Agent middlemen - brokers, sales representatives

b) Physical distribution firms

These firms assist the company in stocking and moving goods from their original
locations to their destinations. For example

- Warehousing firms

- Transportation firms

Every company looks for the most effective models of transportation balancing such
considerations as

- cost

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- delivery

- speed and

- safety

c) Marketing service
agencies Examples here
include:-

- Marketing research firms

- Advertising agencies

- Media firms

- Marketing consulting firms

They assist the company in targeting and promoting its products to the right market.

d) Financial
intermediaries. These
include

- Banks

- Credit companies

- Insurance companies etc

These intermediaries provide financial assistance and or insure risk associated with
buying and selling of products to companies or marketing organizations

3. CUSTOMERS

These are the people that the company sells their goods to, also known as the target
markets. Five types of customer markets exist, namely: -

- Consumer markets – individuals and households that buy goods and services
for personal consumption

- Industrial markets – organizations that buy goods and services needed for
producing other products and services for the purpose of making profits
and/ or achieving other objectives

- Reseller markets – organizations that buy goods and services for the purpose
of reselling them at a profit.

- Government and non profit markets – they buy goods and services in order
to produce public services or to transfer these goods and services to others
who need them.

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- International markets – buyers found abroad including foreign customers,
producers,

resellers and governments.

Examples include:

- Banks

- Personal customer markets

- Trust department markets

- Business customers

- Profit customers – high earner members e.g. estate agents and stock brokers

- Importers and exporters.

NB

Each customer group exhibits specific characteristics that warrant careful study by the seller.

4. COMPETITORS

A company rarely stands alone in its efforts to serve a given customer market. It is
surrounded and affected by a host of competitors. These competitors have to be
identified, monitored and outmaneuvered to capture and maintain customer loyalty.

5. PUBLICS

A public is a group that has actual or potential interest in or impact on a company’s

ability to achieve its objectives.
A public can facilitate or impede a company’s ability to achieve its goals.

The wise company takes concrete steps to manage successful relations with its key
publics. Every company faces several important publics

- Financial publics - Financial institutions affect the company’s ability to

obtain funds. Examples of financial institutions include banks, investment
houses, stock brokerage firms and insurance companies.

- Media publics – companies must activate the good will of media organizations,
specifically newspapers, magazines, radio and television stations in order to set
more and better media coverage in the form of favorable news features and
editorial comments.

- Government publics – companies need to take government developments into

account in formulating marketing plans.

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- Citizen action publics / lobby groups / pressure groups – a company’s marketing practices may be

- Local publics – every company faces local publics for example neighborhood
residents and community organizations. Companies must deal with
community issues, attend meetings answer questions and make contributions
to worthwhile courses.

- General publics – a company needs to be concerned with the general

public’s attitude towards its products and practices. The public’s image of
the company affects its patronage.

- Internal publics – a company’s internal publics include blue coller workers,

white coller workers, managers, etc

Companies should spend time monitoring all its publics, understanding their needs
and opinions and dealing with them constructively.

The Macro-Environment

Demographic Factors

Population Size

1. Geographical distribution

2. Population density

3. Mobility trends

4. Age distribution

5. Birth rates

6. Death rates

7. Life expectancy

8. Household/ family size, makeup

9. Income/ wealth distribution

10. Socio –economic groups: occupation, ethnic groups

Political Factors

The political arena has a huge influence upon the regulation of businesses, and the
spending power of consumers and other businesses. You must consider issues such
as:

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1. How stable is the political environment?

2. Will government policy influence laws that regulate or tax your business?

3. What is the government's position on marketing ethics?

a. What is the government's policy on the economy?

4. Does the government have a view on culture and religion?

5. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or

others?

Legal Factors

1. Legislations

2. The legal system

3. Fiscal and monetary policies

4. Employment legislation

5. Consumer protection laws

6. Pressure groups

7. Foreign trade regulations

8. Environment protection regulation

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms.
This is especially true when planning for international marketing. You need to look at:

1. Interest rates

2. Business cycles

3. Money supply

4. Investment levels

5. Balance of payment

6. The level of inflation Employment level per capita

7. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and
so on

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Socio-cultural Factors

The social and cultural influences on business vary from country to country. It is very
important that such factors are considered. Factors include:

1. What is the dominant religion?

2. What are attitudes to foreign products and services?

3. Does language impact upon the diffusion of products onto markets?

4. How much time do consumers have for leisure?

5. What are the roles of men and women within society?

6. How long are the population living? Are the older generations wealthy?

7. Do the populations have a strong/weak opinion on green issues?

8. Demographics

9. Attitudes

10. Social class

11. Changes in consumer values and lifestyles

12. How much time do consumers have for leisure?

13. What are the roles of men and women within society?

14. How long are the population living? Are the older generations wealthy?

15. Do the populations have a strong/weak opinion on green issues?

Technological Factors

Technology is vital for competitive advantage, and is a major driver of

globalization. Consider the following points:

1. Does technology allow for products and services to be made more

cheaply and to a better standard of quality?

2. Do the technologies offer consumers and businesses more innovative

products and services such as Internet banking, new generation
mobile telephones, etc?

3. How is distribution changed by new technologies e.g. books via the

Internet, flight tickets, auctions, etc?

4. Does technology offer companies a new way to communicate with

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consumers e.g. banners, Customer Relationship Management (CRM), etc?
Natural environment

1. Product resources

• Raw materials

• Energy resources

• Mineral resources

• Water resources

2. Climatic conditions

• Seasons

• Weather

3. Physical resources

• Topography

• Attitude

• Waterfalls

• Altitude

4. Pollutions

• Air

• Water

5. Natural calamities

• Floods

• Earthquakes

• Disease outbreaks

• Storms

• Landslides

• Volcanic activity

Political / Legal

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6. Political / Legal
Economic Social Technological

Economic growth (overall; Income distribution (change Government

Environmental by in spending
distribution of disposable
regulation and industry sector) income; on research
protection
Monetary policy (interest Demographics (age structure
Taxation (corporate; rates) of the Government and
population; gender; family
consumer) size and industry focus on
composition; changing nature
of technological effort
occupations)

Government spending
International trade (overall Labor / social mobility New discoveries and
regulation level; specific spending development
priorities)

Consumer Policy towards

protection unemployment Lifestyle changes (e.g. Home Speed of technology
(minimum wage,
unemployment working, single households) transfer
benefits, grants)

Taxation (impact on Rates of

Employment law consumer Attitudes to work and leisure technological
disposable income,
incentives to obsolescence
invest in capital equipment,
corporation tax rates)

Energy use and

Government Exchange rates (effects on Education costs
organization / demand by overseas
attitude customers;
effect on cost of imported
components)

Competition Inflation (effect on costs

regulation and Fashions and fads Changes in material
selling prices) sciences

Impact of changes
Stage of the business cycle Health & welfare in
(effect on short-term Information
business technology
performance)

Economic "mood" Living conditions (housing, Internet!

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consumer
confidence amenities, pollution)

The Importance of Marketing Environment

Every business, no matter how big or small, operates within the marketing environment. Its
present and future existence, profits, image, and positioning depend on its internal and
external environment. The business environment is one of the most dynamic aspects of the
business. In order to operate and stay in the market for long, one has to understand and
analyze the marketing environment and its components properly.

Essential for planning- An understanding of the external and internal environment is

essential for planning for the future. A marketer needs to be fully aware of the current
scenario, dynamism, and future predictions of the marketing environment if he wants his
plans to succeed.

Understanding Customers - A thorough knowledge of the marketing environment helps

marketers acknowledge and predict what the customer actually wants. In-depth analysis of
the marketing environment reduces (and even removes) the noise between the marketer and
customers and helps the marketer to understand the consumer behaviour better.

Tapping Trends - Breaking into new markets and capitalizing on new trends requires a lot of
insight about the marketing environment. The marketer needs to research about every aspect
of the environment to create a foolproof plan.

Threats and Opportunities - A sound knowledge of the market environment often gives a
first mover advantage to the marketer as he makes sure that his business is safe from the
future threats and taps the future opportunities.

Understanding the Competitors - Every niche has different players fighting for the same
spot. A better understanding of the marketing environment allows the marketer to understand
more about the competitions and about what advantages do the competitors have over his
business and vice versa.

CHAPTER FOUR

MARKETING MIX

Introduction

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The marketing mix is a significant tool for creating the right marketing strategy and its implementation throug

The marketing mix refers to the set of actions, or tactics, that a company uses to promote its
brand or product in the market. The 4Ps make up a typical marketing mix - Price, Product,
Promotion and Place. However, nowadays, the marketing mix increasingly includes several
other Ps like Packaging, Positioning, People and even Politics as vital mix elements .

Elements Of The Marketing Mix

The key elements of any successful marketing plan include the concepts of product, price,
place and promotion, also known as the four Ps of marketing. The marketing mix of the four
Ps functions as a guide to help the marketing manager successfully develop a strategy for
promoting products and services to customers

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

It is alo a very important component of a marketing plan as it determines your firm’s profit
and survival. Adjusting the price of the product has a big impact on the entire marketing
strategy as well as greatly affecting the sales and demand of the product.

When setting the product price, marketers should consider the perceived value that the
product offers. There are three major pricing strategies, and these are:
 Market penetration pricing
 Market skimming pricing
 Neutral pricing
Here are some of the important questions that you should ask yourself when you are setting
the product price:
 How much did it cost you to produce the product?
 What is the customers’ perceived product value?
 Do you think that the slight price decrease could significantly increase your market
share?
 Can the current price of the product keep up with the price of the product’s
competitors?

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

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A product is an item that is built or produced to satisfy the needs of a certain group of people. The product ca
You must ensure to have the right type of product that is in demand for your market. So
during the product development phase, the marketer must do an extensive research on the life
cycle of the product that they are creating.

Marketers must also create the right product mix. It may be wise to expand your current
product mix by diversifying and increasing the depth of your product line.
All in all, marketers must ask themselves the question “what can I do to offer a better product
to this group of people than my competitors”.

In developing the right product, you have to answer the following questions:
 What does the client want from the service or product?
 How will the customer use it?
 Where will the client use it?
 What features must the product have to meet the client’s needs?
 Are there any necessary features that you missed out?
 Are you creating features that are not needed by the client?
 What’s the name of the product?
 Does it have a catchy name?
 What are the sizes or colors available?
 How is the product different from the products of your competitors?
 What does the product look like?

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

Placement or distribution is a very important part of the product mix definition. You have to
position and distribute the product in a place that is accessible to potential buyers.
This comes with a deep understanding of your target market. Understand them inside out and
you will discover the most efficient positioning and distribution channels that directly speak
with your market.
There are many distribution strategies, including:
 Intensive distribution
 Exclusive distribution
 Selective distribution
 Franchising

Here are some of the questions that you should answer in developing your distribution
strategy:
 Where do your clients look for your service or product?
 What kind of stores do potential clients go to? Do they shop in a mall, in a regular
brick and mortar store, in the supermarket, or online?
 How do you access the different distribution channels?
 How is your distribution strategy different from your competitors?

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 Do you need a strong sales force?
 Do you need to attend trade fairs?
 Do you need to sell in an online store?

4. Promotion
This refers to all the activities undertaken to make the product or service known to the user
and trade. This can include advertising, word of mouth, press reports, incentives,
commissions and awards to the trade. It can also include consumer schemes, direct
marketing, contests and prizes.
Promotion is a very important component of marketing as it can boost brand recognition and
sales. Promotion is comprised of various elements like:
 Sales Organization
 Public Relations
 Advertising
 Sales Promotion
Advertising typically covers communication methods that are paid for like television
advertisements, radio commercials, print media, and internet advertisements. In
contemporary times, there seems to be a shift in focus offline to the online world.

Public relations, on the other hand, are communications that are typically not paid for. This
includes press releases, exhibitions, sponsorship deals, seminars, conferences, and events.
Word of mouth is also a type of product promotion. Word of mouth is an informal
communication about the benefits of the product by satisfied customers and ordinary
individuals. The sales staff plays a very important role in public relations and word of mouth.

It is important to not take this literally. Word of mouth can also circulate on the internet.
Harnessed effectively and it has the potential to be one of the most valuable assets you have
in boosting your profits online. An extremely good example of this is online social media and
managing a firm’s online social media presence.
In creating an effective product promotion strategy, you need to answer the following
questions:

 How can you send marketing messages to your potential buyers?

 When is the best time to promote your product?
 Will you reach your potential audience and buyers through television ads?
 Is it best to use the social media in promoting the product?
 What is the promotion strategy of your competitors?
Your combination of promotional strategies and how you go about promotion will depend on
your budget, the message you want to communicate, and the target market you have defined
already in previous steps.
Importance Of Marketing Mix

1) It helps in a clean mix creation

Your marketing mix should have all the P’s compatible with each other. The price should be
compatible with the placement of the product. The product should be compatible with the
promotions. In general, all the P’s are intrinsically linked to each other.
As a result, when you are making a marketing mix, it becomes a chain of strong bonds. And

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these bonds then guide you forward in making the chain longer. Whenever you are considering adding a new

2) Marketing mix helps in New product development

While designing an existing product, there are any numbers of ideas which can come up for a
related product that can be designed by the company. The pricing, place and promotions
might be different for such a product. Nonetheless, it can be classified as a new product and
hence while designing the marketing mix, the company can come up with good ideas for
NPD as well.

3) Marketing mix helps increase the product portfolio

Whenever you want to increase the product depth or product line and length, you have to
make minor changes to the product. In essence, you are making minor changes in the
marketing mix itself. You are making changes to the product features, to its pricing and
possible to its promotions. As a result, by altering the marketing mix and certain features
within it, you can end up with an enlarged product portfolio.

4) It is a guide to improve a business

Physical evidence was an important P in the service marketing mix. If a restaurant or an
interior design business realizes its important, then naturally they can act on it and improve
the physical evidence of their business thereby bringing in more business.
The importance of marketing mix is evident in more than a single P. People and process are
important to the organization too and optimizing both can improve the overall working of the
organization. Hence, marketing mix is an excellent guide if someone wants to improve their
business and is doing gap analysis.

5) It helps in differentiation
When you analyze the marketing mix of Competitors, there are many different ways that you
can differentiate yourself from the competitor. The competitor might have poor promotions
and by analyzing them, you can create better promotions of your own product.
The competitor might have poor placement of products or he might have the wrong process
or the wrong people in place. All this can be improved upon giving you a better marketing
mix and therefore a competitive advantage in the market.

6) Finally, it helps you in being dynamic

A company which is well prepared is also prepared when disaster strikes. During recession or
during a poor business environment, a company should be ready to respond. At such times,
the company needs to be dynamic in nature. Such a company needs to understand its product,
processes, people, promotions and all other P’s better. If it understands them, it will respond
with a better agility.
Thus, there are many ways that marketing mix may be important to an organization. The best
part is, analyzing and understanding the marketing mix is not a lengthy procedure and the
ROI on the time spent is much higher.

Factors Affecting Marketing Mix

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- Consumers behavior. - It is determined by consumers motivation in purchasing, buying habits, living
- Competitors behavior - Competition is another factor affecting the demand and
supply for the product.
- Size and strength of the competitors.
- Number of competitors.
- Product choices offered to the consumers.
- Government exercises control and regulates the production and pricing of products,
advertising and sales promotion. - The management should consider the consider the
government laws and policies while formulating the marketing mix

CHAPTER FIVE
MARKET SEGMENTATION AND TARGETING

Market segmentation and target marketing are two steps of the marketing process. Although
the two go hand-in-hand, there are distinct differences between them, as market segmentation
must take place before a target market is determined.

According to Kotler and Armstrong’s Principles of Marketing, market segmentation is used to

research the entire market as a whole and then place consumers into separate groups based on
common characteristics. The company then decides which group is best and concentrates on
selling to them, which is also called target marketing

Marketing segmentation is “The act of dividing a market into distinct groups of buyers who
might require separate products and/or marketing mixes. Or it is the sub-division of a market
into smaller homogenous sub-markets which the organization might successfully satisfy.”

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Target Marketing involves breaking a market into segments and then concentrating your
marketing efforts on one or a few key segments consisting of the customers whose needs and
desires most closely match your product or service offerings. It can be the key to attracting
new business, increasing your sales, and making your business a success.

Importance of market segmentation and targeting

Understand Customers
To sell to your customers, you first must understand why they would want to buy your
product. Market segmentation allows for the development of profiles of the many different
kinds of customer groups who buy your products. You can use this information to create
better marketing programs. It also can be used to develop products for your target audience.

Maximize Product Potential

Segmenting your market helps you understand how your product is being used by various
customer groups. During the course of your market segmentation, you may come across an
alternate use for your product that had not been previously discussed. You may discover a
new market for your product.

Improve Distribution Network

Market segmentation assists companies in developing more efficient distribution networks.
By studying the buying behaviors of various target customer groups, you can determine the
way that customers prefer to buy your product. If customers prefer to buy online, you will
want to focus on your online presence and reduce the resources you put into retail stores.
Market segmentation also helps you identify geographic areas where your products are
popular.

Gain New Clients

A comprehensive market segmentation analysis includes reasons why consumers are not
buying your products. By understanding why the various market segments do not buy your
products, you can alter your marketing or change your product development to try to gain
new customers. It is important to have a balance when trying to gain new clients as you do
not want to alienate and lose your existing customer base.

Up-selling across the customer journey

The above example of web-based services with different pricing plans illustrates that market
segments enable businesses to target their customers according to their lifecycle phase.

As users get used to the service and grow their business, they can easily change to the next
higher plan or to supplementary services. The service bundle evolves across the customer
journey. Thus, segment-specific product bundles increase chances for up-selling and cross
selling.

Absorption of purchasing power by price differentiation

It is often difficult to increase prices for the whole market. Nevertheless, it is possible to
develop premium segments in which customers accept a higher price level. Such segments
could be distinguished from the mass market by features like additional services, exclusive
points of sale, product variations and the like. A typical segment-based price variation is by
region. The generally higher price level in big cities is evidence for this.

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When differentiating prices by segments, organizations have to take care that there is no
chance for cannibalization between high-priced products with high margins and budget offers
in different segments. This risk is the higher, the less distinguished the segments are.

Attract additional customer groups

Targeted marketing plans for particular segments allow to individually approach customer
groups that otherwise would look out for specialized niche players. By segmenting markets,
organizations can create their own ‘niche products’ and thus attract additional customer
groups.

Sustainable customer relationships in all phases of customer life cycle

Customers change their preferences and patterns of behavior over time. Organizations that
serve different segments along a customer’s life cycle can guide their customers from stage to
stage by always offering them a special solution for their particular needs.

For example, many car manufacturers offer a product range that caters for the needs of all
phases of a customer life cycle: first car for early twens, fun-car for young professionals,
family car for young families, etc. Skin care cosmetics brands often offer special series for
babies, teens, normal skin, and elder skin.

Targeted communication
It is necessary to communicate in a segment-specific way even if product features and brand
identity are identical in all market segments. Such a targeted communications allows
highlighting those criteria that are most relevant for each particular segment (e.g. price vs.
reliability vs. prestige).

Stimulating Innovation
An undifferentiated marketing strategy that targets at all customers in the total market
necessarily reduces customers’ preferences to the smallest common basis. Segmentations
provide information about smaller units in the total market that share particular needs.

Only the identification of these needs enables a planned development of new or improved
products that better meet the wishes of these customer groups. If a product meets and exceeds
a customer’s expectations by adding superior value, the customers normally is willing to pay
a higher price for that product. Thus, profit margins and profitability of the innovating
organizations increase.

Higher Market Shares

The above points have already highlighted that market segmentation is an ideas basis for
pursuing additional growth opportunities. This translates in higher market shares in many
cases.

In contrast to an undifferentiated marketing strategy, segmentation supports the development

of niche strategies. Thus marketing activities can be targeted at highly attractive market
segments in the beginning. Market leadership in selected segments improves the competitive
position of the whole organization in its relationship with suppliers, channel partners and
customers. It strengthens the brand and ensures profitability. On that basis, organizations
have better chances to increase their market shares in the overall market.

Types of Market Segmentation

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Geographic Segmentation
Geographic segmentation divides the market on the basis of geography. This type of market
segmentation is important for the marketers as people belonging to different regions may
have different requirements. For example, water might be scarce in some regions which
inflates the demand for bottled water but, at the same time, it might be in abundance in other
regions where the demand for the same is very less.

People belonging to different regions may have different reasons to use the same product as
well. Geographic segmentation helps marketer draft personalized marketing campaigns for
everyone.

Demographic Segmentation
Demographic segmentation divides the market on the basis of demographic variables like
age, gender, marital status, family size, income, religion, race, occupation, nationality, etc.
This is one of the most common segmentation practice among the marketers. Demographic
segmentation is seen almost in every industry like automobiles, beauty products, mobile
phones, apparels, etc and is set on a premise that the customers’ buying behaviour is hugely
influenced by their demographics.

Behavioral Segmentation
The market is also segmented based on audience’s behaviour, usage, preference, choices and
decision making. The segments are usually divided based on their knowledge of the product
and usage of the product. It is believed that the knowledge of the product and its use affects
the buying decision of an individual. The audience can be segmented into –
- Those who know about the product,
- Those who don’t know about the product,
- Ex-users,
- Potential users,
- Current Users,
- First time users, etc.
People can be labelled as brand loyal, brand-neutral, or competitor loyal. They can also be
labelled according to their usage. For example, a sports person may prefer an energy drink as
elementary (heavy user) and a not so sporty person may buy it just because he likes the taste
(light/medium user).

Psychographic Segmentation
Psychographic Segmentation divides the audience on the basis of their personality, lifestyle
and attitude. This segmentation process works on a premise that consumer buying behaviour
can be influenced by his personality and lifestyle. Personality is the combination of
characteristics that form an individual’s distinctive character and includes habits, traits,
attitude, temperament, etc. Lifestyle is how a person lives his life.

Personality and lifestyle influence the buying decision and habits of a person to a great
extent. A person having a lavish lifestyle may consider having an air conditioner in every
room as a need, whereas a person living in the same city but having a conservative lifestyle
may consider it as a luxury.

The Process / Steps of Market Segmentation

1) Determine the need of the segment

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What are the needs of the customers and how can you group customers based on their needs? You have to thi
For example – In a region, there are many normal restaurants but there is no Italian restaurant
or there is no fast food chain. So, you came to know the NEED of consumers in that specific
region.

2) Identifying the segment

Once you know the need of the customers, you need to identify that “who” will be the
customers to choose your product over other offerings. Quite simply, you have to decide
which type of segmentation you are going to use in this case. Is it going tobe geographic,
demographic, psychographic or what? The 1st step gives you a mass of crowd, and in the 2nd
step, you have to differentiate the people from within that crowd.

3) Analyze the most attractive segment

Now, we approach the targeting phase in the steps of market segmentation. Out of the various
segments you have identified via demography, geography or psychography, you have to
choose which is the most attractive segment for you. This is a tough question to answer
because one of them will be left out.

If you are using psychographic segmentation, then you need to target the psychology of
consumers which takes time. So you will not be able to expand faster. But if your product is
basic, then you can use demographic segmentation as the base, and expand much faster in
surrounding regions. So this step involves deciding on ALL the different types of
segmentation that you can use.

4) Find out if the segment giving profitable

So, now you have different types of segmentation being analysed for their attractiveness.
Which segment do you think will give you the maximum crowd has been decided in the 3rd
step. But which of those segments is most profitable is a decision to be taken in the 4th step.
This is also one more targeting step in the process of segmentation.

5) Positioning for the segment

Once you have identified the most profitable segments via the steps of market segmentation,
then you need to position your product in the mind of the consumers. I would not dive deep
into positioning here as you can read this quick guide to positioning. The basic concept is that
the firm needs to place a value on its products.

If the firm wants a customer to buy their product, what is the value being provided to the
customer, and in his mindset, where does the customer place the brand after purchasing the
product? What was the value of the product to the customer and how valuable does he think
the brand is – that is the work of positioning. And to complete the process of segmentation,
you need to position your product in the mind of your segments.

6) Expanding the segment

All segments need to be scalable. So, if you have found a segment, that segment should be
such that the business is able to expand with the type of segmentation chosen. If the segment
is very niche, then the business will run out of its course in due time. Hence the expansion of
the segment is the second last step of market segmentation.

7) Incorporating the segmentation into your marketing strategy

Once you have found a segment which is profitable and expandable, you need to incorporate
that segment in your marketing strategy. How do you think McDonalds or KFC became such

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big chains of fast food? They had a very clear process of segmentation because of which it became easier to f

With the steps of market segmentation, your segments become clear and then you can adapt
other variables of marketing strategy as per the segment being targeted. You can modify the
products, keep the optimum price, enhance the distribution and the place and finally promote
clearly and crisply to your target audience. Business becomes simpler due to the process of
market segmentation.

Benefits of Market segmentation and targeting

It may enable a company to select a potentially most profitable segment. It
enables a company to concentrate resources on the chosen segments.

The analysis gives a company the opportunity to review developments and anticipate
changes in its chosen segment from competitive activity, legal/political changes, e.t.c.

Sales opportunities are more likely to be effectively and fully exploited by staff when
target audience is properly defined.

Better services tailored to the needs of particular market segments are offered.
Prices are tailored to customer situations and circumstances.

It may lead to improved level of services both in terms of sophistication and general
standards.

Assists in identifying gaps. Market segmentation involves marketing research. During

this process, the marketer can also engage in ‘Gap Analysis”. Gap Analysis is:

A process which aims to seek out differences between what the market needs and wants
and what is actually being supplied – the gap.

Limitations Of Market Segmentation and Targeting

Segmentation also has its limitations as it needs to be implemented in the proper manner. As
segmentation is one of the most important process in the marketing plan or for your business,
you need to know the limitations of segmentation and what pitfalls lie ahead if you go wrong
with your target market segment.

1) Segments are too small – If the chosen segment is too small then you will not have the
proper turnover which in turn will affect the total margins and the viability of the business.

2) Consumers are misinterpreted – The right product to the wrong customers. What if
your market research says that your customers want a new soap and you come out with a new
facial cream. The concept is same, cleanliness. But the concept is completely different.

3) Costing is not taken into consideration – Targeting a segment is ok but you also need to
know how much you will have to spend to target a particular segment. If it is a Sec A segment
and you do not have the budget to be present in the places the the Sec A customer visits, then
your segmentation strategy is a failure.
4) There are too many brands – Along with segmentation, you also need to check out the

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competition offered in the same segment from other products. Getting into a segment already saturated will m

5) Consumer are confused – If the consumer himself doesn’t know whether he will be
interested in a particular product or not, than that’s a sign that you need to get out of that
segment / product.

6) Product is completely new – If a product is completely new than there is no market

research to base your segmentation on. You need to market it to the masses and as acceptance
increases, only then will you be able to focus on one particular segment.

CHAPTER SIX
CONSUMER BEHAVIOR

Introduction
Consumer Behaviour
Consumer Behaviour or the Buyer Behaviour is referred to the behaviour that is displayed by
the individual while they are buying, consuming or disposing any particular product or
services. These behaviours can be affected by multiple factors. Moreover, it also involves
search for a product, evaluation of product where the consumer evaluate different features,
purchase and consumption of product. Later the post purchase behaviour of product is studied
which shows the consumer satisfaction or dissatisfaction where it involves disposal of
product (Solomon, 2009).

Importance Of Studying Consumer Behavior

Perceptions
Studying consumer behavior helps marketers understand consumer perceptions about a
particular product or range of products. Uncovering and correcting erroneous perceptions
about a particular product may give marketers an additional competitive advantage over
competitors.

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Attitudes
Consumer attitudes very often determine consumer beliefs about certain products.
Discovering consumer attitudes allows marketers to fine tune their campaigns to resonate
with a particular consumer niche and deepen marketing reach.

Cultures
Changing population demographics around the world affect the way marketing campaigns are
designed. Understanding cultural nuances and subtleties may allow marketers to help further
define their particular target market.
Lifestyles
Consumer lifestyles also determine what products appeal to certain consumer markets.
Understanding consumer lifestyles is also a key component of consumer behavior that lets
marketers make the appropriate appeals in promoting lifestyle products and further
consumption of lifestyle products.

Experience
Like consumer attitudes, experience also colors consumer responses to certain products. By
studying consumer behavior, marketing professionals can tap into consumer experiences with
similar products to promote consumption and gain competitive advantage over competitors.

Dynamic Nature of Market:

Consumer behaviour focuses on dynamic nature of the market. It helps the manager to be
dynamic, alert, and active in satisfying consumers better and sooner than competitors.
Consumer behaviour is indispensable to watch movements of the markets.

Effective Use of Productive Resources:

The study of consumer behaviour assists the manager to make the organisational efforts
consumer-oriented. It ensures an exact use of resources for achieving maximum efficiency.
Each unit of resources can contribute maximum to objectives.
It is to be mentioned that the study of consumer behaviour is not only important for the
current sales, but also helps in capturing the future market. Consumer behaviour assumes:
Take care of consumer needs, the consumers, in return, will take care of your needs. Most of
problems can be reasonably solved by the study of consumer behaviour. Modern marketing
practice is almost impossible without the study of consumer behaviour.

Competition:
Consumer behaviour study assists in facing competition, too. Based on consumers’
expectations, more competitive advantages can be offered. It is useful in improving
competitive strengths of the company.

Developing New Products:

New product is developed in respect of needs and wants of the target market. In order to
develop the best-fit product, a marketer must know adequately about the market. Thus, the
study of consumer behaviour is the base for developing a new product successfully.

Factors Influencing Consumer Buying Behavior

Consumer buying behavior is the sum total of a consumer's attitudes, preferences,

intentions, and decisions regarding the consumer's behavior in the marketplace when
purchasing a product or service. The study of consumer behavior draws upon social science

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disciplines of anthropology, psychology, sociology, and economics.
The consumer behaviour or buyer behaviour is influenced by several factors or forces. They
are:
1. Internal or Psychological factors
2. Social factors
3. Cultural factors
4. Economic factors
5. Personal factors

1. CULTURAL FACTORS
Consumer behavior is deeply influenced by cultural factors, such as buyer’s culture,
subculture and social class.

• Culture
Essentially, culture is the share of each company and is the major cause of the person who
wants and behavior. The influence of culture on the purchasing behavior varies from country
to country, therefore sellers have to be very careful in the analysis of the culture of different
groups, regions or even countries.

• Subculture
Each culture has different subcultures, such as religions, nationalities, geographical regions,
racial, etc. marketing groups may use these groups, segmenting the market in several small
portions. For example, marketers can design products according to the needs of a specific
geographical group.

• Social Class
Every society has some kind of social class is important for marketing because the buying
behavior of people in a particular social class is similar. Thus marketing activities could be
adapted to different social classes. Here we should note that social class is not only
determined by income, but there are several other factors such as wealth, education,
occupation etc.

2. SOCIAL FACTORS
Social factors also influence the purchasing behavior of consumers. Social factors are: the
reference groups, family, the role and status.

• Reference groups
Reference groups have the potential for the formation of an attitude or behavior of
the individual. The impact of reference groups vary across products and brands. For example,
if the product is visible as clothing, shoes, car etc., the influence of reference groups will be
high. Reference groups also include opinion leader (a person who influences others by his
special skill, knowledge or other characteristics).

• Family
buyer behavior is strongly influenced by a family member. So vendors are trying to find the
roles and influence of the husband, wife and children. If the decision to purchase a particular
product is influenced by the wife of then sellers will try to target women in their ad. Here we
should note that the purchase of roles change with changing lifestyles of consumers.

• Roles and Status

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Each person has different roles and status in society in terms of groups, clubs, family, etc. organization to wh

3. PERSONAL FACTORS
Personal factors may also affect consumer behavior. Some of the important factors that
influence personal buying behavior are: lifestyle, economic status, occupation, age,
personality and self esteem.

• Age
Age and life cycle have a potential impact on the purchasing behavior of consumers. It is
obvious that consumers change the purchase of goods and services over time. Family life
cycle consists of different stages as young singles, married couples, unmarried couples etc
that help marketers to develop suitable products for each stage.

• Occupation
The occupation of a person has a significant impact on their buying behavior. For example, a
marketing manager of an organization is trying to buy business suits, while a low level
worker in the same organization buy-resistant clothing work.

• Economic situation
economic situation of the consumer has a great influence on their buying behavior. If income
and savings a customer is high, then going to buy more expensive products. Moreover, a
person with low income and savings buy cheap products.

• Lifestyle
Lifestyle clients is another factor affecting import purchasing behavior of consumers.
Lifestyle refers to the way a person lives in a society and express things in their environment.
It is determined by the client’s interests, opinions, etc and activities shapes their
whole pattern of acting and interacting in the world.

• Personality
Personality changes from person to person, time to time and place to place. Therefore, it can
greatly influence the buying behavior of customers. In fact, personality is not what one has,
but is the totality of the conduct of a man in different circumstances. Has
different characteristics, such as dominance, aggression, confidence etc that may be useful to
determine the behavior of consumers to the product or service.

4. PSYCHOLOGICAL FACTORS
There are four major psychological factors that affect the purchasing behavior of consumers.
These are: perception, motivation, learning, beliefs and attitudes.

• Motivation
The level of motivation also affects the purchasing behavior of customers. Each person has
different needs, such as physiological needs, biological needs, social needs, etc. The nature of
the requirements is that some are more urgent, while others are less pressing. Therefore, a
need becomes a motive when it is most urgent to lead the individual to seek satisfaction.

• Perception
Select, organize and interpret information in a way to produce a meaningful experience of the
world is called perception. There are three different perceptual processes which are selective
attention, selective distortion and selective retention. In the case of selective attention, sellers

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try to attract the attention of the customer. Whereas in case of selective distortion, customers try to interpret th

• Beliefs and Attitudes

Client has specific beliefs and attitudes towards different products. Because such beliefs and
attitudes shape the brand image and affect consumer buying behavior so traders are interested
in them. Marketers can change beliefs and attitudes of customers with special campaigns in
this regard.

5. ECONOMIC FACTORS:
Consumer behaviour is influenced largely by economic factors. Economic factors that
influence consumer behaviour are
a) Personal Income,
b) Family income,
c) Income expectations,
d) Savings,
e) Liquid assets of the Consumer,
f) Consumer credit,
g) Other economic factors.

a) Personal Income:
The personal income of a person is determinant of his buying behaviour. The gross personal
income of a person consists of disposable income and discretionary income. The disposable
personal income refers to the actual income (i.e. money balance) remaining at the disposal of
a person after deducting taxes and compulsorily deductible items from the gross income. An
increase in the disposable income leads to an increase in the expenditure on various items. A
fall in the disposable income, on the other hand, leads to a fall in the expenditure on various
items.

The discretionary personal income refers to the balance remaining after meeting basic
necessaries of life. This income is available for the purchase of shopping goods, durable
goods and luxuries. An increase in the discretionary income leads to an increase in the
expenditure on shopping goods, luxuries etc. which improves the standard of living of a
person.

b) Family income:
Family income refers to the aggregate income of all the members of a family.
Family income influences the buying behaviour of the family. The surplus family income,
remaining after the expenditure on the basic needs of the family, is made available for buying
shopping goods, durables and luxuries.

c) Income Expectations:
Income expectations are one of the important determinants of the buying behaviour of an
individual. If he expects any increase in his income, he is tempted to spend more on shopping
goods, durable goods and luxuries. On the other hand, if he expects any fall in his future
income, he will curtail his expenditure on comforts and luxuries and restrict his expenditure
to bare necessities.

d) Savings:
Savings also influence the buying behaviour of an individual. A change in the amount of
savings leads to a change in the expenditure of an individual. If a person decides to save more

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out of his present income, he will spend less on comforts and luxuries.

e) Liquid assets:
Liquid assets refer to those assets, which can be converted into cash quickly without any loss.
Liquid assets include cash in hand, bank balance, marketable securities etc If an individual
has more liquid assets, he goes in for buying comforts and luxuries. On the other hand, if he
has less liquid assets, he cannot spend more on buying comforts and luxuries.

f) Consumer credit:
Consumer credit refers to the credit facility available to the consumers desirous of purchasing
durable comforts and luxuries. It is made available by the sellers, either directly or indirect у
through banks and other financial institutions. Hire purchase, installment purchase, direct
bank loans etc are the ways by which credit is made available to the consumers.

Consumer credit influences consumer behaviour. If more consumer credit is available on

liberal terms, expenditure on comforts and luxuries increases, as it induces consumers to
purchase these goods, and raise their living standard.

g) Other economic factor:

Other economic factors like business cycles, inflation, etc. also influence the consumer
behaviour.

Factors Influencing Organizational Buying Behavior

Organizational buying is much more complex than consumer buying, and thus deserves to be
studied separately. The entwined interpersonal relationships and the multiple communication
processes between the organizational members, involved in the buying decision process, are
some of the major contributors to this complexity. The list of affecting factors isn’t limited to
these; there are many more important determinants. Let’s take a look at what factors
influence organizational buyers and their buying behavior. But before that we’d just like to
divert your attention to why organizational buying is so different.

Unique Features of Organizational Buying

1. Organizational buying is mostly a multi-person activity, and that’s true for more than
90% of the organizational buying. Decisions for some of the bigger purchases may
have participants from a range of departments and from different management levels.
Think about the purchase of new software – it may require a collective decision made
by end users and people from the IT, finance and administration departments.
2. When organizations make purchases there is always a meticulous formal process that
precedes the actual purchasing.
3. Organizational buying decisions are never made at the spur of a moment. The buying
decision making is stretched and this drag can even be a year long, when it comes to
critical purchases.

1. External Environmental Factors

As a major constraint under which a business operates, the external environment impacts
nearly every aspect of a business, including its buying decisions. Here’s a list of the external
elements that affect organizational buying.

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Economic Conditions: The fluctuations in the money markets and the interest rates have a
major impact on the buying strategies. The interest rates and organizational buying have an
inverse relation; in most cases, an increase in the interest rates may bring about a drop in the
buying.

Regulatory Changes: Any changes in the corporate laws, rules and regulations will also
influence how, when and what the organizations buy. There are also regulatory changes that
may affect only a particular industry and accordingly the related organizations will change
their buying patterns to stay in-line with the new regulations.

Political Environment: A change of the government or policy has a direct impact on the
economic scenario, and this ultimately translates into a shift in the organizational buying
patterns as well.

Social Environment: Societies and cultures are ever evolving, and every business has to
change its practices and procedures to meet up with the societal changes. For instance with
the rise in the number of animal lovers, pure leather suppliers have seen a slump in their
business. The clothing and footwear manufacturers have shifted to artificial leather suppliers.
This points out how the social environment can affect the buying patterns of organizations.

Competition: Today’s business is all about beating competition and staying ahead. So when
an organization's competitors move on to a newer product or service, or if they get to enjoy a
competitive edge because of their suppliers, it's very likely for the organization to change its
trends too and thus its buying pattern will change accordingly.

The external environment is the first of the four major factors that influence organizational
behavior as shown in this diagram which you can click on to enlarge.

2. Internal Organizational Factors

More than the external factors, it’s the internal organizational factors that influence
organizational buying. These internal factors are the:

Organization's Goals and Objectives: The goals and objectives of an organization are
major determinants as to how and what the organization will purchase. An organization that
wants to capture a bigger chunk of the market by selling cheaper stuff is more likely to look
for suppliers who can supply larger quantities at a low price. However, a company whose
goal is to deliver quality products may have a very contrasting buying pattern, and they will
focus more on the quality issues than on the price advantage.

Organizational Structure: Hierarchical and management structures vary from one

organization to another. While some organizations have a well established purchase
department, others may assign this job to the HR or Administration department. There are
also organizations where the purchase decisions must be taken collectively by all concerned
departments.

Policies and Procedures: How the purchase order is routed, depends on the organization's
policies. How does the buying procedure begin, who will participate and who has the
ultimate authority to decide on the purchase are all dependent on the policies and procedures
of the organization. Some organizations prefer to invite public bids, while others may contact

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only the few suppliers on their list. There are also budgetary policies that have a say in the purchase decisions

Technological Levels: Whenever making new purchases, organizations take into

consideration their current technology. Some purchases are meant to replace the current
technology with a newer version, so their buying decision will be influenced by what level of
technology they currently own. Also, organizations try to ensure that all new purchases being
made are technologically compatible with their existing technology. So, one way or the other
– an organization's existing technology has a major influence on its future purchases.

Manpower Skills: Whether the organization has the skilled manpower to make proper and
optimum use of the new purchases being made, especially equipment and machinery, is
another issue that influences organizational buying.

3. Interpersonal and Individual Factors

Since organizational buying decisions are never a one person affair, interpersonal
relationships among the decision makers plays a vital role in this type of buying.

Participation and Authority: In organizational buying situations, there are always re-
defined rules as to who can participate in the purchase decision and who is the ultimate
deciding authority.

Interpersonal Conflict: Interpersonal conflicts and conflicts of interest amongst the decision
makers often results in delays and changes. Thus, the kind of thinking and the kind of
relationship the decision makers share have a major role to play in corporate buying.

Education and Awareness: The educational background of the decision makers and their
level of awareness have a major bearing on what type of purchases they will make.

Risk Taking Ability: If the buying committee constitutes high risk takers, they will not be
averse to the idea of choosing the latest technology or new suppliers. While on the other
hand, decision makers with a low risk taking tolerance are more likely to stick to proven and
tested technology or to well known and well established suppliers.

Individual Factors: Individual factors such as age, cultural background and social status, of
the members on the buying team, also influence the buying decisions.

4.Situational Factors

In this final section we’ll take a look at some of the situational factors that can influence
organizational buyers.

Time Factor: Sometimes, organizations don’t have all the time to follow the detailed buying
procedure. If the organization needs a replacement for equipment that broke down suddenly,

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it may decide to place its order with some existing supplier or a supplier that is at close proximity.

Current Financial Situation: If the organization is crunched for cash, it may decide to place
its order with one of its existing supplier who offers extended credit. Also, if the organization
cannot spare out enough money for a certain purchase, it may opt for a readily available
cheaper version that fits into its budget.

Availability: Some buying decisions can wait while others cannot, thus if the supplier cannot
make available the exact product by the desired date, the organizational buyers may shift to a
new supplier or to a more readily available alternative.

Special Offers: Special offers being given by a supplier may also be one of the situational
factors affecting the buying decision.
As a supplier, now that you know what factors influence organizational buyers, you can work
up your business to business sales strategies to manipulate organizational buying activities
and thus procure more orders for your supply business.

Consumer Buying Decision-Making Process

The consumer decision-making process consists of five steps, which are need recognition,
information search, evaluations of alternatives, purchase and post-purchase behavior. These
steps can be a guide for marketers to understand and communicate effectively to consumers.
One note is that consumers do not always move in the exact order through the process; it can
depend on the type of product, the buying stage of the consumer and even financial status.

NEED
↓
INFORMATION GATHERING/SEARCH
↓
EVALUATION OF ALTERNATIVES
↓
PURCHASE OF PRODUCT/SERVICE
↓
POST PURCHASE EVALUATION

1. Problem recognition/Need
The first step of the consumer decision-making process is recognizing the need for a service
or product. Recognition is driven by both internal and external stimuli.
An internal stimulus occurs within you—it could include basic impulses like hunger or a
change in lifestyle. An external stimulus originates from an outside source, like a billboard or
review from a friend. Need recognition, whether it occurs through internal or external means,
prompts the same response: a want.
Once a consumer recognizes a want, they need to gather information to understand how they
can fulfill that want.

Example: Winter is coming. This particular customer has several light jackets, but
she’ll need a heavy-duty winter coat if she’s going to survive the snow and lower
temperatures.

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2. Information search
Your consumer has recognized a want. Now comes the task of gathering information.
Consumers again rely on internal and external factors, as well as past interactions with a
product or brand, both positive and negative, to make their decision. In the information stage,
the consumer may browse through options at a physical location or consult online resources,
such as Google or customer reviews.

Your job as a brand is to give the potential customer access to the information they want, with
the hopes that they decide to purchase your product or service. When creating content, put
yourself in the shoes of your customer. What might they be interested in knowing about your
product? Is there something that sets your product apart from competitors? Explore ways to
present information to your potential customers that will help them arrive at a decision faster
and easier.

Example: The customer searches “women’s winter coats” on Google to see what
options are out there. When she sees someone with a cute coat, she asks them
where they bought it and what they think of that brand.

3. Alternatives evaluation
At this point in the consumer decision-making process, the prospective buyer has developed
criteria for what they want in a product. Now they weigh their prospective choices against
comparable alternatives.
Alternatives may present themselves in the form of lower prices, additional product benefits,
product availability, or something as personal as color or style options. Your marketing
material should be geared towards convincing consumers that your product is superior to
other alternatives.

Example: The customer compares a few brands that she likes. She knows that she
wants a brightly colored coat that will complement the rest of her wardrobe, and
though she would rather spend less money, she also wants to find a coat made from
sustainable materials.

4. Purchase decision
This is the moment the consumer has been waiting for: the actual purchase. Once they have
gathered all the facts, including feedback from previous customers, the consumer should
arrive at a logical conclusion on the product or service to purchase.
Throughout this process, external and internal factors impact the end decision. Even ever-
changing factors like emotions or the weather can affect when and how a purchase is made. If
you’ve done your job correctly, the consumer will recognize that your product is the best
option and decide to purchase.

Example: The customer finds a pink winter coat that’s on sale for 20% off. After
confirming that the brand uses sustainable materials and asking friends for their
feedback, she orders the coat online.

5. Post-purchase evaluation
This part of the consumer decision-making process involves reflection from both the
consumer and the seller. As a seller, you should try to gauge the following:

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 Did the purchase meet the need the consumer identified?
 Is the buyer happy with their purchase?
Remember, it’s your job to ensure your customer continues to have a positive experience with
your product. Post-purchase engagement could include follow-up emails, discount coupons,
and newsletters to entice the customer to make an additional purchase. You want to gain life-
long customers, and in an age where anyone can leave an online review, it’s more important
than ever to keep customers happy.

Buying Roles
(Who makes the buying decisions?)

Marketers should identify the buying roles for their products. They should however
note that these roles keep changing hence care should be taken when making their
buying decisions. They have distinguished five roles that people might play in a
buying decision.

HH. Initiator – A person who first suggests the idea of buying a particular product or
service.

II. Influencer – A person whose views or advice influences the buying decision.

JJ. Decider – A person who ultimately determines any part of or the entire buying
decision :-whether to buy, what to buy, how to buy it or where to buy it.

KK. Buyer – The person who makes the final purchase.

LL. User – A person who consumes or uses the product.

A marketer needs to identify these roles because they have implications for the design of
product, determining the promotion messages and allocating the promotion budget.

Product Life Cycle

A new product progresses through a sequence of stages from introduction to growth,

maturity, and decline. This sequence is known as the product life cycle and is associated with
changes in the marketing situation, thus impacting the marketing strategy and the marketing
mix
The product life cycle has 5 very clearly defined stages, each with its own characteristics that
mean different things for business that are trying to manage the life cycle of their particular
products.

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.

1. Product Development Stage

When the company finds and develops a new product idea, product development starts.
During product development, sales are zero, and the company’s investment costs increase.

Introduction Stage
This stage of the cycle could be the most expensive for a company launching a new product.
The size of the market for the product is small, which means sales are low, although they will
be increasing. On the other hand, the cost of things like research and development, consumer
testing, and the marketing needed to launch the product can be very high, especially if it’s a
competitive sector.
Marketing strategies used in introduction stages include:
 Rapid skimming - launching the product at high price and high promotional level
 Slow skimming - launching the product at high price and low promotional level
 Rapid penetration - launching the product at low price with significant promotion
 Slow penetration - launching the product at a low price and minimal promotion

2. Growth Stage
The growth stage is typically characterized by a strong growth in sales and profits, and
because the company can start to benefit from economies of scale in production, the profit
margins, as well as the overall amount of profit, will increase. This makes it possible for
businesses to invest more money in the promotional activity to maximize the potential of this
growth stage.
Marketing strategies used in the growth stage mainly aim to increase profits. Some of the
common strategies to try are:
 Improving product quality
 Adding new product features or support services to grow your market share
 Enter new markets segments

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 Keep pricing as high as is reasonable to keep demand and profits high
 Increase distribution channels to cope with growing demand
 Shifting marketing messages from product awareness to product preference
 Skimming product prices if your profits are too low.
Growth stage is when you should see rapidly rising sales, profits and your market share. Your
strategies should seek to maximise these opportunities

3. Maturity Stage
During the maturity stage, the product is established and the aim for the manufacturer is now
to maintain the market share they have built up. This is probably the most competitive time
for most products and businesses need to invest wisely in any marketing they undertake.
They also need to consider any product modifications or improvements to the production
process which might give them a competitive advantage.
When your sales peak, your product will enter the maturity stage. This often means that your
market will be saturated and you may find that you need to change your marketing tactics to
prolong the life cycle of your product. Common strategies that can help during this stage fall
under one of two categories:
 Market modification - this includes entering new market segments, redefining target
markets, winning over competitor’s customers, converting non-users
 Product modification - for example, adjusting or improving your product’s features,
quality, pricing and differentiating it from other products in the marking

4. Decline Stage
Eventually, the market for a product will start to shrink, and this is what’s known as the
decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the
customers who will buy the product have already purchased it), or because the consumers are
switching to a different type of product. While this decline may be inevitable, it may still be
possible for companies to make some profit by switching to less-expensive production
methods and cheaper markets.
During the end stages of your product, you will see declining sales and profits. This can be
fuelled by changes in consumer preferences, technological advances and alternatives on the
market. At this stage, you will have to decide what strategies to take. If you want to save
money, you can:
 Reduce your promotional expenditure on the products
 Reduce the number of distribution outlets that sell them Implement price cuts to get
the customers to buy the product Fin another use for the product Maintain the product
and wait for competitors to withdraw from the market first Harvest the product or
service before discontinuing it
Another option is for your business to discontinue the product from your offering. You may
choose to:
 Sell the brand to another business
 Significantly reduce the price to get rid of all the inventory

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CHAPTER SEVEN
PRICING DECISIONS

Introduction
What is price?
Price is a measure of the value exchanged by the buyer for the value offered by the seller.

Price is also referred to as the amount of money, which is sacrificed to obtain something.

Pricing goes by many names, e.g. rent, tuition, fee, fare, rate, interest, toll, premium,
commission, salary, retainer, etc.

Traditionally, price has operated as the major determinant of buyer choice. Non-price
factors have however, increased in importance in buyer behavior. However, price still
remains one of the most elements determining market share and profitability

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Price is the only element in the marketing mix that that produces revenue, other elements
produce cost. Price is also one of the most flexible elements of the marketing mix, in that
it can be changed quickly. At the same time, pricing and price competition are the number
one problems facing many marketing executives. It is for this reason that price is said to
be the most unstable, uncertain of the marketing mix. It is also used as a competitive tool.

Setting The Price

A firm must set a price for the first time when the firm develops or acquires a new
product, when it introduces its regular product into a new distribution channel or
geographical area, and when it enters its bid on new contract work.

A firm must decide where to position its product on quality and price. A company can
position its product in the middle of the market, up three levels. The seven levels are
as follows:

• Ultimate

• Luxury

• Special needs

• Middle

• Ease/convenience

• Me too, but cheaper

• Price alone

There can be competition between price-quality segments

Factors To Consider When Setting The Price

Kotler describes a 6 – step procedure for price setting:

1. Select the price objective

2. Determine demand

3. Estimate cost

4. Analyze competitor’s costs, prices and offers

5. Select a pricing method

6. Select the final price

Methods for setting the price:

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Markup pricing
This is the most elementary pricing method and it involved adding a standard markup to
the product’s cost.

Markups vary considerably among different goods. Markups are generally higher on
seasonal items (to cover the risk of not selling), specially items, slower-moving items,
items with high storage and handling costs, and demand inelastic items. In addition,
companies sometimes use higher markups when hidden or variable costs are involved.
This pricing method is critical for ignoring current demand, perceived value and
competition.

Target-return pricing
The firm determines the price that would yield its target rate of return on investment
Here the company determines the price that would yield its target rate of return on investment

The formula that is usually applied is as follows:

Target return price = Unit costs + (desired capital*invested capital/ unit sales)

The company must be able to work out the costs and estimated sales in order to be able to
realize the required rate of return on the investment. The company should consider
determine the break even point i.e. point at which costs = revenue. The target sales must
be above break-even points sales.

This method ignores price elasticity and competition prices. The company needs to
consider different prices and estimate the possible impact on sales volume and profits.
The company should also research for ways to lower its fixed and/or variable costs,
because lower costs will decrease its required break-even volume.

Perceived-value pricing
This method is being used increasingly by companies. These companies see the buyer’s
perception of value, not the seller’s cost, as the key to pricing. They use non-price
variables in the marketing mix to build up perceived value in the buyer’s minds. Price is
yet to capture the perceived value.

Perceived-value pricing fits well with product-positioning thinking. A company

develops a product concept for a particular target market. With a planned quality and
price. Then management estimates the volume it hopes to sell at this price. The estimate
indicates the needed plant capacity, investment and unit costs. Management then figures
out whether the product will yield a satisfactory profit at the planned price and cost. If
answer is yes, the company goes ahead with product development. Otherwise, the
company drops the idea.

Value pricing
Value pricing says that the price should represent a high-value offer to customers.
Companies charge a fairly low price for high quality offering.

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Going-rate pricing
In going-rate pricing, the firm pays less attention to its own costs or demand and bases
its price largely on competitors’ prices. The firm might charge the same, more, or less
than its major competitor[s].

Where costs are difficult to measure or response is uncertain, firms feel that the going
price represents a good solution. The going price is thought to reflect the industry’s
collective wisdom as to the price that would yield a fair return and not jeopardize
industrial harmony.

Sealed-bid pricing
Competitive-oriental pricing is common where firms submit sealed bids for jobs. The
firm bases its price on expectations of how competitors will price rather than on a rigid
relation to the firm’s costs or demand. The firm requires submitting a lower price than
competitors. At the same time, the firm cannot set is price below cost without worsening
its position.

Adapting The Price

Companies usually do not set a single price but rather a pricing structure that reflects
variations in geographic demand and costs, market-segment requirements, purchase
timing, order levels, delivery frequency guarantees service contracts and other factors. A
company may adapt the price of its product as a result of variations in these factors. Some
price adaptation strategies include geographical pricing, price discounts and allowances,
promotional pricing, discriminatory pricing and product-mix pricing.

a) Geographical pricing

This involves the company in deciding how to price its products to different
customers in different locations and countries.

b) Price discounts and allowances

These are modifications in the basic price to reward customers for such acts as
early payments. Such price modifications may be by way of cash discounts,
quantity discounts, functional discounts, seasonal discounts, allowances and
promotional pricing.

c) Discriminatory pricing (Price discrimination)

This occurs when a company sells a product or service at two or more prices that do not
reflect a proportional difference in costs. Discriminatory pricing takes several
forms.

i. Customer-Segment pricing: Different customer groups are charged

different prices for the same product or service

ii. Product-Form pricing: Different versions of the product are priced

differently but not proportionately to their respective costs.

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iii. Image Pricing: some companies price the same product at two different
levels base on image difference.

iv. Location pricing: the same product is priced differently at different

locations even though the cost of offering at each location is the same.

v. Time pricing: prices are varied by season, day or hour.

d) Product-mix pricing
Price-setting logic must be modified when the product is part of a product mix. In this
case, the firm searches for a set of prices that maximize the profits on the total product
mix. Pricing is difficult because the various products have demand and cost inter-
relationships and are too different of competition. There are six (6) situations involving
product-mix pricing, two part pricing, by product pricing and product-bundling
pricing.

Factors Affecting Pricing

Internal Factors:
1. Cost:
While fixing the prices of a product, the firm should consider the cost involved in producing
the product. This cost includes both the variable and fixed costs. Thus, while fixing the
prices, the firm must be able to recover both the variable and fixed costs.

2. The predetermined objectives:

While fixing the prices of the product, the marketer should con​sider the objectives of the
firm. For instance, if the objective of a firm is to increase return on investment, then it may
charge a higher price, and if the objective is to capture a large market share, then it may
charge a lower price.

3. Image of the firm:

The price of the product may also be determined on the basis of the image of the firm in the
market. For instance, HUL and Procter & Gamble can demand a higher price for their brands,
as they enjoy goodwill in the market.

4. Product life cycle:

The stage at which the product is in its product life cycle also affects its price. For instance,
during the introductory stage the firm may charge lower price to attract the custom​ers, and
during the growth stage, a firm may increase the price.

5. Credit period offered:

The pricing of the product is also affected by the credit period offered by the company.
Longer the credit period, higher may be the price, and shorter the credit period, lower may be
the price of the product.

6. Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the firm incurs
heavy advertising and sales promotion costs, then the pricing of the product shall be kept
high in order to recover the cost.

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External Factors:

1. Competition:
While fixing the price of the product, the firm needs to study the degree of competi​tion in the
market. If there is high competition, the prices may be kept low to effectively face the
competition, and if competition is low, the prices may be kept high.

2. Consumers:
The marketer should consider various consumer factors while fixing the prices. The
consumer factors that must be considered includes the price sensitivity of the buyer,
purchasing power, and so on.

3. Government control:
Government rules and regulation must be considered while fixing the prices. In certain
products, government may announce administered prices, and therefore the mar​keter has to
consider such regulation while fixing the prices.

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CHAPTER EIGHT
SALES PROMOTION
In marketing, promotion refers to any type of marketing communication used to inform or
persuade target audiences of the relative merits of a product, service, brand or issue. ... It is
one of the basic elements of the market mix, which includes the four P's: price,
product, promotion, and place.

Promotions refer to the entire set of activities, which communicate the product, brand or
service to the user. The idea is to make people aware, attract and induce to buy the product, in
preference over others.

There are several types of promotions. Above the line promotions include advertising, press
releases, consumer promotions (schemes, discounts, contests), while below the line include
trade discounts, freebies, incentive trips, awards and so on. Sales promotion is a part of the
overall promotion effort.
There are also:

1. Personal selling: one of the most effective ways of customer relationship. Such selling
works best when a good working relationship has been built up over a period of time.
This can also be expensive and time consuming, but is best for high value or premium
products.

2. Sales promotions: this includes freebies, contests, discounts, free services, passes, tickets
and so on, as distinct from advertising, publicity and public relations.

3. Public relations: PR is the deliberate, planned and sustained effort to establish and
maintain mutual understanding between the company and the public.

Importance of Promotion
Increases brand parity and price sensitivity of consumer:
With more brand choices available to the consumer and with the fact that product differences
are becoming less and less apparent, consumers are becoming more and more reliant to the
price and price incentives.

Decreased brand loyalty:

Another reason which goes hand in hand in increasing sales promotions budget is decreased
brand loyalty. Consumers are getting used to the fact that almost always at least one brand
category is on sale or on a sales promotional offer.

Rewards for meeting targets:

Another reason is coming from the roots of corporate culture and the reward and promotion
strategy within corporations. In the conditions of severe competition, there is increasing
pressure on brand managers to show fast results in terms of increased sales and nothing is as
effective in short run as sales promotions to achieve this goal.

Consumer Promotion
Many popular sales promotions are targeted primarily or solely to household consumers.
Those focused on price include both discount coupons and the significant but time-limited

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price breaks known as deals, like buy-one-get-one-free offers. Contests and sweepstakes are another approach

Trade Promotion
Trade sales promotion is aimed at a market that buys for resale, not for personal
consumption. Primarily, this group includes retail and wholesale buyers who control
distribution to household consumers. Certain types of consumer promotion can influence the
trade, but marketers also use devices specifically designed for this audience. Some common
trade promotions include discounts or rebates offered in return for large orders, rewards of
cash or merchandise to high-performing salespeople, and exhibits at trade shows.

Sales Promotion
Sales promotion is a category of the promotional mix, alongside advertising, personal selling
and public relations. The primary importance of a sales promotion is to offer an inducement
to buyers, increasing sales. In some cases, the other components of the promotional mix
support a sales promotion strategy. For example, an advertising campaign might be used to
publicize a sales promotion strategy.

Consumer Sales Promotion

Manufacturers that sell directly to consumers can use sales promotion strategies to increase
sales. Consumer incentives, such as attractive financing terms, might convince consumers to
make a large purchase. Coupons, bulk discounts and frequent-buyer reward programs also
give consumers more motivation to buy a product. For example, a manufacturer might offer
steep price discounts at its on-site shop, convincing consumers to travel to its location to
obtain deals they can’t get at their local retailers.

Elements of Promotion
Elements of promotional mix are also called as tools, means, or components. Basically, there
are five elements involved in promotional mix

1. Advertising:
Advertising is defined as any paid form of non-personal presentation and promotion of ideas,
goods, and services by an identified sponsor. It is a way of mass communication. It is the
most popular and widely practiced tool of market promotion. Major part of promotional
budget is consumed for advertising alone. Various advertising media – television, radio,

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newspapers, magazines, outdoor means and so forth – are used for advertising the product.

Characteristics of advertising
i. Adverting is non-personal or mass communication. Personal contact is not possible.
ii. It is a paid form of communication.
iii. It is a one-way communication.
iv. Identifiable entity/sponsor-company or person gives advertising.
v. It is costly option to promote the sales.
vi. It can be reproduced frequently as per need.
vii. Per contact cost is the lowest.
viii. Various audio-visual, print, and outdoor media can be used for advertising purpose.
ix. It is a widely used and highly popular tool of market promotion.

2. Sales Promotion:
Sales promotion covers those marketing activities other than advertising, publicity, and
personal selling that stimulate consumer purchasing and dealer effectiveness. Sales
promotion mainly involves short-term and non-routine incentives, offered to dealers as well
consumers. The popular methods used for sales promotion are demonstration, trade show,
exhibition, exchange offer, seasonal discount, free service, gifts, contests, etc.

Characteristics of sales promotion

i. The primary purpose of sales promotion is to induce customers for immediate buying or
dealer effectiveness or both.
ii. Excessive use of sale promotion may affect sales and reputation of a company adversely.
iii. It is taken as supplementary to advertising and personal selling efforts.
iv. It involves all the promotional efforts other than advertising, personal selling, and
publicity.
v. It consists of short-term incentives, schemes, or plans offered to buyers, salesmen, and/ or
dealers.
vi. It involves non-routine selling efforts.

3. Personal Selling:
Personal selling includes face-to-face personal communication and presentation with
prospects (potential and actual customers) for the purpose of selling the products. It involves
personal conversation and presentation of products with customers. It is considered as a
highly effective and costly tool of market promotion.

Characteristics of personal have been listed below:

i. Personal selling is an oral, face-to-face, and personal presentation with consumers.
ii. Basic purpose is to promote products or increase sales.
iii. It involves two-way communication.
iv. Immediate feedback can be measured.
v. It is an ability of salesmen to persuade or influence buyers.

4. Publicity:
Publicity is also a way of mass communication. It is not a paid form of mass communication
that involves getting favourable response of buyers by placing commercially significant news
in mass media. William J. Stanton defines: “Publicity is any promotional communication
regarding an organisation and/or its products where the message is not paid for by the

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organisation benefiting from it.”

It is the traditional form of public relations. Publicity is not paid for by the organisation.
Publicity comes from reporters, columnists, and journalists. It can be considered as a part of
public relations. Publicity involves giving public speeches, giving interviews, conducting
seminars, charitable donations, inauguration by film actor, cricketer, politician or popular
personalities, stage show, etc., that attract mass media to publish the news about them.

Characteristic of publicity include:

i. Publicity involves obtaining favourable presentation about company or company’s offers
upon radio, television, or stage that is not paid for by the sponsor.
ii. It is a non-paid form of market promotion. However, several indirect costs are involved in
publicity.
iii. It may include promotion of new product, pollution control efforts, special achievements
of employees, publicizing new policies, etc., for increasing sales. It is primarily concerns
with publishing or highlighting company’s activities and products. It is targeted to build
company’s image.
iv. Mostly, publicity can be carried via newspapers, magazines, radio or television.

5. Public Relations:
The public relations is comprehensive term that includes maintaining constructive relations
not only with customers, suppliers, and middlemen, but also with a large set of interested
publics. Note that public relations include publicity, i.e., publicity is the part of public
relations.
William Stanton defines:

“Public relations activities typically are designed to build or maintain a favourable image for
an organisation and a favourable relationship with the organization’s various publics. These
publics may be customers, stockholders, employees, unions, environmentalists, the
government, and people in local community, or some other groups in society.” Thus, public
relations include organization’s broad and overall communication efforts intended to
influence various groups’ attitudes toward the organisation. Some experts have stated that the
public relations are an extension of publicity.

Main characteristic of publicity

i. Public relations is a paid form of market promotion. Company has to incur expenses.
ii. Public relations activities are designed to build and maintain a favourable image for an
organisation and a favourable relationship with the organization’s various publics.
iii. It is an integral part of managerial function. Many companies operate a special department
for the purpose, known as the public relations department.
iv. It involves a number of interactions, such as contacting, inviting, informing, clarifying,
responding, interpreting, dealing, transacting, and so forth.

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