Chapter 11 - Marketing

Market:
In the traditional sense, the market means a place where buyers and sellers gather to enter into transaction
involving the exchange of goods and services
In modern marketing sense, the term market has a broad meaning. It refers to a set of actual and potential
buyers of a product or service.

Marketing
Marketing is a social process whereby people exchange goods & service for money or for something of value
to them.

Why marketing is called as a social process?

It is a process in people interact with others, in order to persuade them to act in a particular way, say to purchase
a product or a service, rather than forcing them to do so

Is marketing a post-production activity?

Marketing is not merely a post-production activity. It includes many activities that are performed even before
goods are actually produced, and continue even after the goods have been sold.
For example, activities such as identification of customer needs, collection of information for developing the
product, designing suitable product package and giving it a brand name are performed before commencement
of the actual production

Important Features of Marketing

1. Needs and wants:
Need: A state of felt deprivation or feeling of being deprived of something like food, clothing, shelter etc.
Want: Culturally defined object that is potential satisfier of [Link] need is hunger ,want can be chole bathure
for notrh Indian , Idli for south Indian etc.
Marketer’s Job: Identify needs and fulfil them.

[Link] a market offering : Market offering refers to a complete offer for a product or service, having
given features like size, quality, taste, etc. at a certain price; available at a given outlet or location and so on. A
good product is developed after analysing needs and wants of the potential buyers.

3. Customer value: The buyers will purchase a product only if it is perceived to be giving greatest benefit
or value for the money. The purpose of marketing is to generate customer value at a profit

4. Exchange mechanism: The process of marketing involves exchange of goods and services for money
or for something of value to them. Exchange is, therefore, referred to as the essence of marketing

Conditions for any exchange to take place:

(i) Involvement of at least two parties viz. the buyer and the seller.
(ii) Each party should be capable of offering something of value to the other.
(iii) Each party should have the ability to communicate and deliver the product or service. No
exchange can take place if the buyers and sellers are not able to communicate with each other
or if they can not deliver something of value to the other.
(iv) Each party should have freedom to accept or reject the other party’s offer.
(v) The parties should be willing to enter into transactions with each other. Thus, the acceptance
or rejection of the offer takes place on voluntary basis rather than on the bases of any
compulsion

Marketing management philosophies/ thinking

1. Production Concept: - Mass production, reducing production cost, improving production &
distribution

2. Product Concept: - improvement in quality & features of the product,

3. Selling concept: - selling by hook or crook, Aggressive sale promotion techniques are used .MAKE
THE PRODUCT AND SELL IT TO SELL WHAT YOU CAN MAKE

4. Marketing concept: - Identify the customer’s needs and make products to fulfill their needs.
‘IDENTIFY A NEED AND FILL IT’ TO MAKE WHAT YOU CAN SELL

5. Societal marketing Concept: - extension of marketing concept, takes in to account customer

satisfaction and welfare of society

Why understanding of marketing management philosophies is important

It determines the emphasis or the weightage to be put on different factors, in achieving the organisational
objectives. Whether the marketing efforts of an organisation will focus on the product—say designing its
features etc or on selling techniques or on customer’s needs or the social concerns.

Pillars of marketing concept

(i) Identification of market or customer who are chosen as the target of marketing effort.
(ii) Understanding needs and wants of customers in the target market.
(iii) Development of products or services for satisfying needs of the target market.
(iv) Satisfying needs of target market better than the competitors.
(v) Doing all this at a profit.

Difference between different marketing management philosophies

Basis Production Product Selling Marketing Societal

Concept Concept Concept Concept Concept
Starting Factory Factory Factory Market Market &
Point society
Main Quantity of Quality of Sale of Customer’s Customer’s
Focus Product Product product needs needs &
society’s
well being
Means Availability Product Aggressive Integrated Integrated
and improvements Selling and marketing marketing
Affordability and addition of sales &
new features promotion fulfilment
of social
obligations
Ends Profits Profits through Profits Profits Profits
through product quality through through through
volume of sales volume customer customer
production satisfaction satisfaction
& social
welfare

Functions of Marketing/Marketing activities GMP5 CS BST

1. Gathering and analysing market information: This is necessary to identify the needs of the
customers and take various decisions for the successful marketing of goods and services. This is important
for making an analysis of the available opportunities and threats as well as strengths and weaknesses
(SWOT). It helps in deciding what opportunities can best be pursued by it.

2. Marketing planning: Marketing planning involves developing appropriate marketing plans to achieve
the marketing objectives of the organisation. It includes the plan for increasing the level of production,
promotion of products, etc.

3. Product designing and development: It helps to make the product attractive to the target customers.
A good design can improve performance of a product and give it a competitive advantage in the market.

4. Standardisation and Grading: Standardisation refers to producing goods of predetermined

specifications which help in achieving uniformity and consistency in the output. (Standardisation ensures
the buyers that goods conform to the predetermined standards of quality, price and packaging and reduces
the need for inspection, testing and evaluation of the products.)
Grading is the process of classification of products into different groups on the basis of quality, size, etc.
Grading ensures that goods belong to a particular quality and helps in realising higher prices for high quality
output.
5. Customer support services such as after-sales services, handling customer complaints, maintenance
services, etc. All these services aim at providing maximum satisfaction to the customers, which in turn helps
in repeat sales and developing brand loyalty.
6. Packaging and labelling
7. Branding
8. Pricing of products
9. Promotion
10. Physical distribution
11. Transportation
12. Storage or Warehousing
Marketing-Mix and its elements/ variables
Marketing mix is the set of marketing tools that the firm uses to pursue its Marketing objectives in the
target-market.
The marketing mix consists of various elements, which have broadly been classified into four categories,
popularly known as four P’s of marketing.

Elements/Components of Marketing Mix

1. Product-mix :
This is an element of Marketing mix which relates to deciding quality , design ,features ,size etc.
The three major decision areas under Product mix are :
1. Branding
B
2. Packaging P
3. Labelling L

2. Price-mix:
This is an element of marketing mix, which relates to setting the pricing objectives, determining pricing
strategies, fixing the price of product after analyzing the factors determining the price such as
[Link] cost
[Link] and utility
[Link] of Competition etc.

Of all the aspects of the marketing mix, price is the one, which creates sales revenue - all the others are
costs.

3. Promotion-mix:
This is an element of Marketing mix deals with informing the customers about the firm’s product and
persuading them to purchase the same.
The four major decision areas under Promotion mix are:
[Link] A
[Link] selling P
[Link] relations P
[Link] Promotion S

4. Place-Mix/Physical distribution mix:

This is an element of marketing mix, which is concerned with making goods and services available at right
place, in right quantity and in right time so that consumers can buy the same.
The two major decision areas under this function include
1. Decision regarding channels of distribution (like wholesalers, retailers)
2. Physical movement of the product from the producer to consumers which involves decisions relating to
which includes four elements
(i) Warehousing W
(ii) Order Processing O
(iii)Transportation T
(iv) Inventory Control I

PRODUCT MIX – Three components are - Branding, Packaging, Labelling.

Branding- It refers to the process of giving a name or sign or a symbol to a product for identifying and
distinguishing it from competitors. E.g., Titan, Audi, Bata, Lifebouy, Pears etc.

Terms related to branding:

a. Generic name – It means the name of whole class of a product.

E.g., soap, book, pen, camera, etc.

b. Brand – It is a name, term, symbol or design to identify the goods or services. E.g., Pears, Classmate,
Reynolds, Canon etc.

c. Brand name– It is a part of the brand consisting of a word, letter or group of these that can be pronounced.
E.g, Lux, Reynolds etc.

d. Brand mark – It is a part of brand that appears as a symbol, design, picture etc. which cannot be
pronounced. E.g., symbol of LIC, emblem of SBI etc.

e. Trade mark – It is the legal version of a brand. It is a brand name or brand mark registered
with legal authorities. When a brand name is registered, it becomes a Trade Mark. Once it is registered it is
legally protected and others cannot use this as a duplicate.

Qualities of a Good Brand Name

1. Short and easy – brand name should be short, easy to pronounce and to remember. E.g.,Hero, Maruti,
VIP, Vim etc.
2. Suggestive Suggests the benefit of product and its quality. E.g., Rasika, Boost, Fair N Lovely.
3. Distinctive – It should be unique such as Liril, Sero, Titan etc.
4. Adaptable – Brand name must be suitable for packing and labeling and to suit different
advertisement media and different languages.
5. Versatile – Better it is multi-purpose to adopt new products. E.g., Acer, V-guard etc.
6. Legal protection – the brand should be capable of being registered.
7. Staying power – the name chosen as brand name should not get outdated.

Advantages of Branding
To Marketers To Customers/ Marketee
i. Helps in product differentiation i. Helps in product identification

ii. Differential Pricing

ii. Status symbol
iii. Ease in introduction of new product
iii. Ensures quality
iv Helps in display and advertising programs

Packaging- Act of designing and producing the container or wrapper of a product. Good packaging
often helps in selling the product so it is called a silent salesman.

Levels of Packaging
1. Primary Package : refers to the product’s immediate container e.g. toffee in a wrapper, a match box.

2. Secondary Package: refers to additional layers of protection that are kept till the product is ready for
use e.g. a Colgate toothpaste usually comes in a card board box.

3. Transportation Package: refers to further packaging components necessary for storage, identification
and transportation e.g. package of toffees are put into corrugated boxes for storing at a manufacturer’s
warehouse and for transportation.

T
Functions of Packaging

[Link] Identification: Packaging helps in identification of the product.

[Link] Protection: The main function of the packing is to provide protection to the product from dirt,
insects and breakage.

[Link]: It provides convenience in carriage, stocking and in consumption.

[Link] Promotion: Packaging simplifies the work of sales promotion.

Importance of Packaging

[Link] standards of Health and Sanitation : The people are becoming health conscious so they
like to buy packed goods. The reason is that the chances of adulteration in such goods are minimised.

2. Self Service Outlets: The self-service retail outlets are becoming very popular, particularly in major
cities and towns. Because of this, some of the traditional role assigned to personal selling in respect of
promotion has gone to packaging.

[Link] Opportunity: With the increasing use of packaging more innovational opportunity
becomes available in this area for the researcher.

[Link] Differentiation: Packaging is helpful in creating product differentiation. The colour, material
and size of the package makes differences in the quantity of the product.

Labelling-It refers to designing the label to be put on the package.

Label is a carrier of information & provides information like - name of the product, name of the manufacturer,
contents of the product, expiry and manufacturing date, general information for use, weight etc.

Labels perform following functions:

[Link] the product: - It helps the customers to identify the product from the various types available.
For example: We can easily identify a Cadbury chocolate from the various chocolates by purple colour of
its label.

[Link] the product and specify its contents: The manufacturer prints all the information related
to the product.
[Link] of products: With the help of label, products can be graded in different categories for example:
Brook Bond Red Label, Brook Bond Yellow Label, Green Label etc.

[Link] in promotion of products :- Attractive and colourful labels excite the customers and induce
them to buy the products. For example: - 40% extra free mentioned on detergent etc.

[Link] information required by law :- There is legal compulsion to print batch no., contents,
max retail price, weight/volume on all the products and statutory warning on the packet of cigarettes,
“Smoking is injurious to health”:In case of hazardous/poisonous material appropriate safety warnings need
to be put.

PRICE MIX
Meaning and concept of Price: Price may be defined as the amount of money paid by a buyer (or
received by a seller) in consideration of the purchase of a product or a service.

Factors affecting price are:

1. Cost of Production: The cost sets the minimum level or the floor price at which the product can be
sold. Price should recover total costs (fixed costs, variable costs & semi variable) plus a profit margin.

2. Utility and demand: The utility provided by the product and the intensity of demand of the buyer
sets the upper limit of price, which a buyer would be prepared to pay.

The buyer may be ready to pay up to the point where the utility from the product is at least equal to the
sacrifice made in terms of the price paid.

When the demand of the product is inelastic, a firm can fix higher price. However, when the demand
is elastic(elasticity >1), lower price should be fixed.

3. Extent of Competition in Market: Between the lower limit and the upper limit where would
the price settle down depends on competition in marker. When a firm does not face any competition
(under monopoly situation), it can enjoy complete freedom in fixing its price. But when there is intense
competition, a firm should fix lower price of its products. Competitors’ prices and their anticipated
reactions must be considered before fixing the price of a product

4. Government Policies: The prices of certain products are regulated by government. E.g., cement,
sugar, some medicines etc. Government can declare a product as essential product and regulate its
price. This is done to protect the interest of public against unfair practices in the field of price fixing

5. Pricing Objectives
(i) If the firm wants to maximize profit
 in short run - it would charge high price
 in long run - it would charge low price
(ii) Some pricing objectives are:
a. To Obtaining market share leadership - it would charge low price
b. To Survive in a competitive market - it would charge low price
c. To Attaining product quality leadership (high prices may be charged for maintaining high quality)

6. Marketing methods used: Price determination is also affected by the distribution system, quality of
salesmen employed, quality of advertising, the type of packaging, free home delivery etc.

Place Mix/Physical Distribution Mix

Covers all the activities required to physically move goods from manufacturers to the customers Important
activities include:-

i. Order Processing: Accurate & speedy order processing of orders leads to profit & goodwill & vice
versa.

ii. Transportation : Add value of the goods by moving them to the place where they are required .Provides
Place utility

[Link] control: In order to ensure prompt supply of goods a proper inventory level must be maintained.
It must not be too high or too low.
Level of Inventory
Level of inventory Advantage disadvantage
High High level of service to cost of carrying the inventory
customers will be high
Low cost of carrying the Less level of customer
inventory will be low satisfaction
Conclusion Firm has to strike a balance between the cost of inventory and
the level of customer service.

iv. Warehousing: Need arises to fill the gap between the time when the product is produced & time when it
is required for consumption. Provides Time utility
Location of Warehouse
Type of Product Location of warehouse
Products requiring long-term storage (such as agricultural Near production sites
products)
Products which are bulky and hard to ship (machinery, Near Market
automobiles) as well as perishable products (bakery, meat,
vegetables)

Number of warehouses
Number of Advantage disadvantage
warehouse
More Lesser time taken in serving Greater would be the cost of
customers at different warehousing
locations
Less Less cost of warehousing More time taken to serve
customer so less customer
satisfaction
Conclusion Firm has to strike a balance between the cost of warehousing and
the level of customer service.
Channels of Distribution- Channels of Distribution are set of firms and individuals that take title,
or assist in transferring title, to particular goods or services as it moves from the producers to the
consumers .Example: Wholesalers, retailers etc.
Direct Channel (Zero Level) — Manufacturer- Customer
e.g., selling goods through own retail outlets (e.g. Bata), Door to door selling, mail order selling, Internet
selling.

Indirect Channel —

ONE LEVEL: Manufacturer-Retailer-Customer. e.g., Automobiles are sold through company’s

authorized retail outlets

TWO LEVEL: Manufacture-wholesaler-Retailer-customer. used for most consumer goods

like soaps, oils, clothes, rice, sugar and pulses

THREE LEVEL: Manufacture - Agent -Wholesaler -Retailer - Customer Used when the
manufacturer carries a limited product line and has to cover a wide market.

IV. Promotion Mix

It refers to combination of promotional tools used by an organisation to inform and persuade customers to buy
its products.

Twin objective of Promotion

 Informing potential customers about a product
 Persuading them to buy it.

Elements of Promotion Mix

 Advertising
 Sales Promotion
 Personal Selling
 Public Relations

What combination of these elements a firm uses will depend upon various factors such as:
(a) nature of market,
(b) nature product,
(c) the promotions budget,
(d) objectives of promotion, etc

Tools/Elements of Promotion Mix

Advertising: Most commonly used tool of promotion. It is an impersonal form to communication,

which is paid by the marketers (sponsors) to promote goods and services.
Common mediums are newspaper, magazine, television & radio.

Features of advertising
a. Paid form – The sponsor or marketer bears the cost of communication.

b. Impersonality – No face-to-face contact between seller and buyer .Monologue instead of dialogue

c. Identified sponsor – Advertisement is done by a sponsor.

Personal Selling- involves oral presentation of message in the form of conversation with one or more
prospective customers for the purpose of making sales.

Features
a. Personal form – face-to-face contact between seller and buyer . Dialogue instead of Monologue
b. Development of relationship – Salesman develops a personal relationship with the
customers.

Merits of Personal selling

a. Flexibility – The presentation of product can be adjusted to suit the prospective buyer.
b. Direct feedback – Salesman gets direct feedback about whether customer are liking the product or not
and to adapt the presentation according to the needs of the prospects.

Sales Promotion- Short-term incentives designed to encourage the buyers to make immediate
purchase of a product/services

Sales promotion tools for customers (e.g., free samples, discounts, and contests),
Sales promotion tools for tradesmen or middlemen (e.g., cooperative advertising, dealer discounts , dealer
incentives and contests)
Sales promotion tools for sales person (e.g., bonus, salesmen contests, special offers).

Public Relations- The concept of Public Relations involves a variety of programmes to promote and
protect a company’s image or its products.
For example, sponsoring sports and cultural events, contributing money and time to certain causes like
environment, wildlife, children’s rights, education, etc

Company need support of

 Customers - since they are instrumental in increasing the sales and profit
 Middlemen – their active support is needed if the firm wants to survive in a competitive selling
environment.
 general public - as they may be interested in the company and its product and have an impact on the
business ability to achieve its objectives.
 Consumer activist groups - as they need to be satisfied because they can impose restriction on the
sales of the firm’s products directly by urging customers to refrain from buying them or through the
imposition of laws

Public relations management can be performed by:

(i) the marketing department; or
(ii) a separate department to manage public relations, known as the public relations department.