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TRB - P.G.Asst. - COMMERCE (UNIT – I)

SYLLABUS: Marketing fundamental concepts and approach -Marketing Mix – Segmentation – Buyer behavior four P’s Role of Middle men Arguments for and against pricing policies and strategies.

MEANING OF MARKET

The term market is derived from the Latin word “Mercatus” meaning “to trade”. It

is also means merchandise wares, traffic, or a place of business. The common usage of

market refers to a place where goods or service are bought and sold. In its strict sense

market need not necessarily refer to a place of exchange.

Market also comprises the organization or institution which facilitates and regulates

exchange of goods and services.

In economic, the term market is used to refer to the aggregate demand for a

commodity and the conditions and forces which determine prices. In management, on the

other hand, market is described as the institution that performs the marketing functions

and acts as the intermediary between buyers and consumers.

Thus, market denotes the following:

1. A place where buyers and sellers interact.

2. The aggregate demand for a commodity.

3. The forces or conditions within which buyers and sellers makes decisions.

4. Transfer of title to goods and services.

5. Flow of goods and services from the producer to the consumer or user.

6. The organization that regulates the purchase and sale.

CLASSIFICATION OF MARKETS

Markets are classified under the following categories.1

1. ON GEOGRAPHIC OR AREA BASIS

(a) Family Market

These markets existed during ‘Village Economy’ and are

extinct now. When exchanges are confined within a family.

b) Local Market

These markets existed during ‘town economy’. They are gradually disappearing

due to innovations and development in transport and communications. They, however still

exist in village but are too few in numbers. When people-buyers and sellers, belong to local

area, participated in the market. Its called local market. For example: vegetables and fruits.

c) National Market

The rise and growth of industrialization has widened markets on the national level.

Most of the products today have acquired national markets. For a certain types

commodities, a country may be regarded as a market through the past development of

Industrialization.

d) World market or International Market

They came into existence with the growth of international transport and

communications. World are international market comes up when buyers and sellers of

goods evolve on world level.

II. ON ECONOMIC BASIS

(a) Perfect Market

It is purely an economic term and does not exist in reality. Such markets are

economically possible only where demand and supply factors are in perfect harmony. If it

satisfying following conditions, its said to be perfect market.

1) Large number of buyers and sellers and there

2) Prices should be uniform

3) Buyers and sellers have a perfect knowledge of market

4) Goods can be moved from one place to another place without restrictions

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(b) Imperfect Market

This refers to a market where some kind of demand and supply is experienced.

Every market is, in a way, imperfect. A market is to be imperfect when

1) Products are similar but not identical

2) Prices are not uniform

3) There is a lack of communication

4) There are restriction on movement of goods

III ON TIME BASIS

(A) Very Short Period market

It means the existence of the market for a day and at a particular place. It started in

a village economy but exists even today. Such markets generally sell perishable goods.

Markets which deal in perishable goods. There is no change in supply of goods.

(B) Short Period Market

This market is otherwise known as a weekly market or a fair. It is a centre for local

trade which was very prominent in village economy. In certain goods supply is adjusted to

meet the demand.

(C) Long Period market

This market is meant for selling durables. It is the long period market which paved

the way for present “Retail market”.

IV. ON THE BASIS OF BUSINESS

a) Wholesale Market : It is market where a wholesaler is the supplier and retailers are

the buyers. Here goods are bought and sold in bulk quantities.

b) Retail Market : This market is the last link in the chain of distribution. It

directly deals with consumers and hence sometimes referred to as a consumers

market.

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V. ON THE BASIS OF IMPORTANCE

(A) Primary Market :

It is a market where agricultural products are sold. Primary markets are

mostly found in villages.

(B) Secondary Market

Generally, semi-manufactured or partly manufactured goods are sold in this

market. The commodities arrive from other markets. The dealings are commonly

between wholesaler or retailer.

(C) Terminal Market

It is the market where the final product is sold to ultimate consumers. This

term is usually used in agricultural marketing.

VI. ON THE BASIS OF GOODS

(A) Commodity market

It is a market in which different kinds of commodities are sold. Commodity market

is further divided into :

1. Produce exchange (or) Commodity Exchange.

This type of markets is found only in developed industrial cities. One market deals in one commodity only. For ex. Cotton Exchange Market of Mumbai

2. Manufactured goods market.

Such type of markets deals with manufacture goods. For ex. Leather Exchange Market, Kanpur.

3. Bullion Market – This market deals in valuable metals like gold and silver.

B. Capital Market

This is the second type of the market classified on the basis of goods. This market is

further divided into three types.

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1. Money Market

It is a type of market where money is borrowed or lent.

2. Foreign Exchange Market

This is type of markets helps exporters and importers, in converting their currencies into foreign currencies.

3. Stock Market or Security Market

It is a market where shares, debentures, bonds etc. of companies are dealt with – purchased or sold.

VII. ON THE BASIS OF REGULATION

(a) Regulated Markets

These markets are regulated by Statutory measures produce exchanges, stock

exchanges are example of this,

(b) Unregulated or Free Market

These markets are uncontrolled. They are left free and mostly operate according to

demand and supply.

VII. ON THE BASIS OF THE NATURE OF TRANSACTIONS

(A) Spot Market

It is a part of organized market such as commodity exchange. In a spot market,

Physical delivery of goods takes place immediately.

(B) Future Market

It is the counterpart of spot market. In such markets no physical delivery of goods

takes place and only future contracts are made.

MEANING OF MARKETING:

Marketing includes all the aspects involved in the exchange process of transferring

the possession and ownership of goods or services from the producer to the ultimate

consumer.

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DEFINITIONS OF MARKETING:

According to American marketing association, “Marketing is concerned with the

people and activities involved in the flow of goods and services from the producer to the

consumer”.

According to Philip Kotler, “Marketing is a human activity directed at satisfying

human needs and wants through exchange process”.

According to Cundifts and Still Marketing is the business process by which products

are matched with markets and though which transfers of ownership are effected.

The term ‘marketing’ can be defined from two viewpoints micro and macro i.e.,

firm’s point of view and national point of view.

Micro-marketing

It may be described as the process of formulating and implementing such strategies

by a firm (viz. product development, pricing, promoting and distribution) that ensures flow

of need satisfying goods and services at a profit. According to Kotler “Marketing is a social

and managerial process by which individuals and groups obtain what they need and want

through creating, offering and exchanging products of value with others”. Marketing is a

human activity directed a satisfying needs and wants through exchange process.

The analysis of this definition reveals the following points:

a) Marketing is an integrated system. It is not activity but the sum total of

several activities. It is the result of interaction of many activities.

b) The ultimate aim of marketing is to satisfy human wants. In other words,

marketing is consumer oriented.

c) Marketing process begins with the recognition of consumer needs.

d) Marketing is successful only when it yields maximum profits in the long

run.

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The concepts of micro-marketing reveals two significant aspects. First, marketing

must ensure need satisfying goods and services. It should begin with the customer and

not with the production process. Secondly, marketing rather than production should

determine what products are to be made. These two aspects suggest that consumer is at

the center of all marketing activities. “The aim of marketing should be to know and

understand the customer so well that the product or service sells itself”.

Macro-Marketing

In a broader sense, marketing may be viewed as a complex system of organizations

and processes by which a nation’s resources are distributed among the people to satisfy

their needs and wants. Here the focus is on the total system rather than on the activities of

an individual firm.

Macro-marketing is concerned with how effectively a society uses is resources and

how fairly it allocates its output of goods and services.

Nature of Marketing

The main features of modern marketing are as follows:

1. Marketing is Consumer oriented

A business exists to satisfy human needs. Therefore, business must first find out

what the consumers want and then produce goods according to the needs of the

consumers. Only such products should be produced which best satisfy consumer needs

and at a profit to the market.

2. Marketing starts and ends with the consumer

Often it is thought that marketing is concerned only with the flow of goods and

services from the producer to the consumer. Under consumer oriented marketing, it is

highly essential to know what the customers really want. This is possible only when

information is collected from the consumers. In the older days the producer was in direct

contact with the consumer. But after mass production system this limit was broken.

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Therefore, a formal mechanism is required to keep in touch with consumers. Marketing

research and marketing information system have, therefore, emerged as a full fledged

function of marketing.

3. Modern Marketing Precedes and Succeeds Production

A market transaction takes places when there is a successful matching of a buyer

and seller. The power of either party to influence a transaction is basically dependent upon

the competitive strength. The seller has the bargaining power over the features of the

product, its price comparability, etc. The buyer on the other hand, acquires his bargaining

power from the usefulness and acceptability of a product to him.

4. Modern Marketing is the guiding Element of Business

It would be clear now that marketing has become a pervasive force capable of

guiding and even controlling production. In fact, it is the market potential and not

production resources that guide a business today.

In the past, it was thought that marketing was only concerned with getting goods

and services into the hands of ultimate consumers.

But later it was realized that goods must reach customers at a maximum speed but

with minimum cost. This involves the integration of a number of activities from the

conception of a product idea to its profitable selling and ultimate consumption.

5. Marketing is a Science as well as an Art

Art is the practical application of a set of rules or principles to practice. On the other

hand, science is a system of facts and principles concerning any subject.

Marketing is an art in the sense that a considerable body of rules or principles on

buying, selling, financing, standardization, marketing information etc. have been put into

practice to achieve success in the economic life of man. But later developments have

changed the art base of marketing into a science base. This was necessary, for marketing is

a study of behaviour in a particular setting.

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Marketing at present is related to four groups of social science disciplines.

a) Those that are directly linked with marketing as a result of their normal

subject-matter, area and approach, e.g. economics and political science.

b) Disciplines that are concerned with human behaviour, e.g. sociology,

psychology etc.

c) Disciplines that are related to societal issues and problems, e.g.

philosophy.

d) Disciplines concerned with tools and techniques e.g. mathematics and

statistics.

Thus, marketing is as complex phenomenon as human nature itself. The rules of

both art as well as science are applied to marketing in order to obtain the best results.

6. Marketing is a System

Marketing is a system consisting of several inter-dependent and interacting sub-

systems. It obtains the inputs from the environment (Supra System), transforms these

inputs and supplies the output (customer satisfaction, profits. etc)

7. Exchange process is the essence of marketing

All Marketing activities revolve around exchange process. Exchange implies

transactions between buyer and seller. The seller hands over a product or service to the

buyer who in turn gives money. There is also exchange of information between buyers and

sellers.

8. Marketing is Goal-oriented

Like any other business activity, marketing seeks to achieve some useful results. The

ultimate aim of marketing is to generate profits through the satisfaction of human wants.

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9. Marketing is a process

It comprises a series of function which are inter-related. It is a dynamic process

because it keeps on adjusting to the changes in the environment of business. Marketing is

also a social process in the sense that it concerned with human needs. Marketing is a

managerial process in so far as it involves the functions of planning and control. Marketing

is an important functional area of management.

Importance of Marketing (Role of Marketing in Business)

Marketing has to play an important for the well-being of a firm. This is evident

from the following words of Peter F. Drucker:

“Marketing is the distinguishing, the unique function of the business. A business is

set apart from a over human organizations by the fact that it markets a product or a

service. Neither Church, nor army, nor State does that. Any organization that fulfills

through marketing a product or a service, is a business. Any organization in which

marketing is either absent or incidental, is not a business and should never be run as if it

were one”.

Marketing is said to be the eyes and ears of business because it keeps the business

in close contact with its environment and informs of events that can influence its

operations.

Marketing is concerned with the creation of four utilities firm, place, time and

possession utilities. The firm utility is created through product development, packaging

branding and standardization. Place utility is created through transportation and by

middlemen who direct the flow of goods and services from producers to consumers. Time

utility is created through warehousing. Selling which is a part of marketing creates

possession utility.

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Recent Innovations in Modern Marketing

1. Demarketing

The role of marketing and the strategies under conditions of scarcity and during the

period of shortage have received considerably attention in recent writings. Accordingly,

Kotler and Levy have recently coined the new concept ‘demarketing”, a situation which

may come about as a result of temporary shortages occasioned by short-term excess

demand for a company’s periods.

“Marketer’s task is not blindly to seek increase in sale; rather it is to shape demand

to conform with long-run objectives. “Thus, demarketing is that aspect of marketing that

deals with discouraging customers in general to a certain class of customers in particular or

either a temporary or a permanent basis. Demarketing is concerned with the management

of excess demand. It involves reducing demand to match the supply.

Demarketing has become the declared policy of an increasing number of oil-

exporting countries. The reasons are:

1. Greater revenues

2. Conservation of resources

3. Speedy development of alternative sources of supply.

4. More control and powers

5. Political gains

2. Remarketing

Remarketing takes the form of finding or creating new uses of users for an existing

product. For example, Nylon, which originally had an end use for making cloth and hosiery.

Baking soda now finds uses as cleansing and deordorising agent etc. Thus, in real sense

marketing is a method by which new type of satisfactions are created for old products.

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3. Over marketing

Overmarketing constitutes the striving by a firm to generate increase sales while

neglecting quality control, production efficiency and / or cash flow management. An

example of overmarketing is found in the U.S. auto industry. Since the advent of Japanese

imported cars, American auto companies escalated advertisements to protect themselves

from the foreign competition.

4 Meta-marketing

Euguene. J. Kelly developed this term by saying that it is the synthesis of all

managerial, traditional, scientific, social and historical foundations of marketing and

includes specialization on the interrelationships of mental and physical processes to

supplements the facts and empirical observations of marketing practice. The word ‘meta’ is

being used to mean ‘beyond’ as in metaphysics. The concept is developed as the marketing

appears to be moving towards broader horizons. The concern of meta-marketing is to

focus all scientific, social, ethical and managerial experiences on marketing. Family

planning programmes is an example of meta-marketing or non-business marketing.

Non-Business organizations like temples, universities, NGOs etc. are all engaged in

product development, pricing, distribution and promotion to serve the needs of their

customers. They seek to develop a long term relationship with their clients. They also

compete with others to gain the preference and loyalty of their followers. Meta-marketing

has widened the horizons of marketing discipline.

5. Stimulational Marketing

This applies where there is no demand for a product or service. People are not interested

in purchasing a particular product. It may be due to lack of knowledge of the product. Here the

task is to convert ‘no’ demand into positive demand’ Philip Kotler calls this task as stimulational

marketing’ It has been observed that stimulational marketing is a hard task because customers

pay no attention to the offerings made by the marketing managers. Under stimulational marketing

the marketing manager generally follows the following methods. i) He tries to connect the

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product or service with the need that exists in the market. ii) He alters the environment in a way as

to ensure that the offerings he makes become valuable in that altered environment. iii) He

indulges in educational advertising.

6. Conversional Marketing

The question to conversional marketing arises only when there is a negative demand of a

product or service. Under the negative demand people dislike the product or service. For

instance, vegetarian have a negative demand for all kinds of meats. It is this negative demand

which offers a challenge to the marketing management to develop a plan to create a new

demand or to convert the negative demand into a positive demand for its products. According to

Philip Kotler this type of task is called conversional marketing.

7. Developmental Marketing

It is a case of latent demand of product. A state of latent demand exists when a substantial

number of people share a strong need for something that does not exist in the form of an actual

product. For cigarettes having maximum nicotine and tar content which is harmful for the health.

According to Philip Kotler the task is to convert the latent demand into actual demand and this

is called developmental marketing.

8. Maintenance Marketing

Under maintenance marketing as the name indicates, the main task is to maintain the full

demand of the product. The market demand is generally subjects to two forces. The first force is

related to the changing needs and tastes of the customers. The second force is related to

competition. These two forces will have a direct impact on demand. Under maintenance

marketing the efficiency in carrying out day to day marketing activities must be maintained at all

costs. Over and above this continuous vigilance of the marketing manager should be exercised to

spot out any new force which is likely to result in a decline of the demand. Besides the above

measures, the marketing manager should also maintain the right quality, right price, offer

incentives to customers by way of discounts, rebates and adopt other sales promotion

techniques, and motivate the sales force. The cost of production should also be maintained at the

minimum level.

9. Aggressive Marketing13

Under aggressive marketing, large – scale efforts are made to increase the sales of a

product . It applies to industries where the production line has to be kept busy throughout in

order to cover costs with the result that the product must be sold continuously . Heavy

investments have to be made in sale force, advertising and sales promotion. The technique of

aggressive marketing is also applied to capture the new markets in foreign countries.

10. Macro Marketing

Macro marketing is a term which has been recently used to refer to the study of marketing

within the context of the entire economic system with special emphasis on its aggregate

performance. In the most widely accepted meaning, macro marketing refers to marketing in

general or the marketing process in its entirely and the aggregates mechanism of institutions

performing it. It studies the aggregate role of the different components of the marketing – mix

employed by different marketers operating within the economic systems and the manner in

which they interact with the socio economic life of the society, such as, the role of cooperative

societies operating in the public distribution system or the role of firms engaged in the production

and marketing goods meant for the weaker sections of society

11. Synchro marketing

Synchro marketing indicates irregular demand. Under this state, the demand is more than

the supply. In some other seasons, whatever is supplied goes to waste for want of demand. In

other words, it is a state of irregular demand. So the term irregular demand is defined as a state in

which the current timing pattern of demand is marked by seasonal or volatile fluctuations that

depart from the timing pattern of supply. The best example of synchro marketing is that of hotels

in hill resorts where, in winter there could be insufficiently booking whereas, in summer, the

hotels would be overbooked.

Thus, any attempt at trying to resolve the irregular demand is called synchro marketing

which aims at bringing about an equilibrium between demand and supply. The only remedy for

improving the state of demand is to provide incentives and efforts upon promotional activities.

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12. Counter marketing

There are many products which have a good demand, although they are unwholesome

from the view point of the consumer’s welfare. Such products may be grouped under what may

be called vice products such as alcohol, cigarettes and hard drugs; and they are sold without any

special efforts. counter marketing is therefore, directly linked with unwholesome demand,

which is a state in which any demand is felt to be excessive, because of the undesirable qualities

of the offering.

In such a situation, the task is to ensure that a demand for such products is destroyed and

this task is referred to as counter marketing or demarketing and counter marketing. In fact in

demarketing which is covered by overfull demand and is not judged unwholesome an attempt is

made to reduce the demand where as under counter marketing, attempts are made deliberately

to destroy identify the customers with a latent demand. He should also have a through

knowledge of co-ordinating all the marketing functions to develop the market to the maximum

extent in an orderly manner.

13. Minimal Marketing

At the other end is the minimal marketing or no sell marketing. For example Kotler gives as

an illustration hospitals which assume that there will be an adequate number of patients for

their beds in the light of growing population. The sample applies to many universities. In India,

organization operating in a sellers market also follow this style of minimal marketing.

14. Balance Marketing

Balance marketing is that style of marketing where all the elements of marketing mix are

sought to be blended resulting in high consumer satisfaction and is more consumer - oriented.

15. Social Marketing

Business homes design products and services according to the needs and wants of target

group of consumers. Similarly, in social marketing target audiences must be studied and

appropriate products or services should be designed by the sellers so that the target audiences

find it desirable to purchase the products or service. Thus, where the core produced is

considered as safer driving many types of producto can be designed to contribute partially to 15

this social objection, such as safer driving courses , low insurance premium schemes for

backward and less income groups of the society.

In India, social marketing is undertaken by a variety of organisations and groups such as

units of the UNO, WHO, UNICEF, international organizations such as Red Cross, Rotary,

Government organizations, charitable institutions socially conscious associations of individuals

companies such as Birla Charitable Fund.

MARKETING AND CREATION OF UTILITIES :

The word utility means the capacity of a commodity to satisfy human wants. There

are four kind of utilizes to a product. They are

1) Firm Utility

2) Place Utility

3) Time Utility

4) Possession Utility

Marketing is concerned with the creation of all the four utilities to a commodity.

Development of a new product brings form utility. Movements of goods of services from

the place of production to the place of consumption generates place utility. Storage

function of marketing creates time utility. Transfer of title to goods results in possession

utility to a product.

EVOLUTION OF MARKETING CONCEPT :

1) Self Sufficient Stage :

After the stage as ‘nomads’ people started to settle on the banks of rivers. This had

led to starting of economic activities for Agriculture. But each family then was a self

sufficient unit as far as production and consumption junctions were concerned. They

produced what they wanted to consume and practically no surplus was available to initiate

the process of exchange. Hence, it may be stated that the concept of marketing was

absent in this stage.

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2) Exchange Oriented Stage :

When ‘nomads’ chose to live permanently at river banks and continuously engaged

in agricultural and allied operations, the problem of surplus production came. This

necessitated exchange of surplus productions with others. Gradually commerce and trade

evolved emphasizing the need for exchange. In order to smooth out exchanges Barter

system came into vogue though the latent inconveniences of such a system were felt only

a little later. It was gradually realized that the double coincidence of wants could be

attained only if the products are brought to a central location so that exchange will take

place smoothly. Thus ‘markets’ came into existence.

3) Production Oriented Stage (1869 – 1930) (Make What you know how to make)

The next stage came with the dawn of the industrial Revolution. This stage

production of goods or services was given much importance.

4) Sales – Oriented Stage (1930-1950) (“Get Rid of What you have”):

The ripple effect of Industrial Revolution did not stop with the technological changes

in industrial activities alone. It caused major social changes, there was shift from

agriculture to industry, increase in the living standards, development of transport and

communications, growth of corporate form of organization, etc. All these changes

necessitated an organized marketing procedure. At this stage everyone started realizing

the purpose and importance of marketing. It assumed that consumers will normally not

buy enough unless approached with a substantial selling and promotional effort. But no

efforts were made to satisfy the particular needs of consumers. Under this concept the

greater emphasis was on increasing the sales than on customer satisfaction.

5. Marketing Oriented Stage (1950-1960) (Have What You can Get rid of”)

As the consumers demand and the production capacity of the manufacturers came

into an equilibrium, the producers were forced to

re-think over the philosophy of marketing.

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The aim of marketing is to know and understand the customer so well that the

product or service fits him and sells itself.

6. Consumer Oriented Stage (1960s – 1980) (“Have What you can get rid of with responsibility”)

Modern day marketing concepts is based on the philosophy of “Consumer

Orientation”. According to this concept all the business activities start and end with the

consumer without consumer there is no need for production. In the words of Peter

Drucker “there is only one valid definition of business purpose : to create a customer”.

Hence customer is the king of modern marketing process. He is the centre around whom

all business activities revolve round. This form of marketing concept is known as consumer

oriented.

7. Management Oriented Stage (1990 Present)

This is the present stage of the evolution of the marketing concept. Markets are

ever growing and rapidly changing. Today marketing considerations are most crucial in

business planning and decision making.

CHANGING CONCEPT OF THE MARKETING1. The Production concept

According to Philip Kotler, the production concept holds that “consumers will

favour those products that are widely available and low in cost. Managers of production-

Oriented organisation concentrated on achieving high production efficiency and wide

distribution coverage”. Kotler here emphasises on two counts -one, that production

concept is related to uninterrupted product availability and another the low price at which

the product is made available to the ultimate consumers.

2. The Product concept:

The Product Concept holds that “consumers will favour those products that offer

the most quality, performance and feature. The managers in product oriented

organisation focused their energy on marketing good products and improving them over

time”. The consumers do admire well made products.18

3. The Selling Concept:

The selling concept holds that “Consumers, if left alone, will ordinarily not by

enough of the organisation products. The organisation must, therefore, undertake an

aggressive selling promotion effects”. It implies selling what is made rather than making

what can sell. It involves hard selling.

4. The Marketing Concept:

Philip Kotler says “the marketing concept holds that the key to achieving

organisational goals consists in determining the needs and wants of target markets and

delivering the desire satisfaction more effectively and efficiently than competitors.

5. The Societal Marketing Concept

According to Philip Kotler, “The Societal Marketing concept, holds that the

organisation’s task is to determine the needs, wants and interests of target markets and to

deliver the desire satisfactions more effectively and efficiently than competitors in a way

that preserves or enhances the customers’ and the society’s well being.

Difference between marketing and selling

Marketing Selling

Focuses on customer’s needs Focuses on sellers needs

Customer enjoys supreme importance Product enjoys supreme importance

Product planning and development to match products with markets

High pressure selling to sell goods already produced

Integrated approach to achieve long term goals

Fragmented approach to achieve immediate gain

Converting customers needs into product

Converting products into cash

Caveat vender (let the seller beware) Caveat emptor (let the buyer beware)

Profits through customers satisfaction Profit through sales volume.

Functions of Marketing : (Traditional Function)19

Clark and Clark divide the marketing function under three major headings. They

are:

1) Functions of Exchange :

a) Buying

b) Assembling

c) Selling

2) Functions of Physical Supply :

a) Transportation

b) Storage

3) Facilitating Functions :

a) Financing

b) Risk Bearing

c) Standardisation

d) Market Information

e) Promotion

I. FUNCTIONS OF EXCHANGE

A) Buying :

Buying is the first step in the marketing functions. Buying is done by manufacturers,

whole salers, retailers and consumers. When the buying function is over the buyer gets

the possession and ownership of goods without buying there is no selling. Well-bought

goods are half sold. Hence buying is the foremost function in the marketing process.

B) Assembling : Assembling refers to the collection and concentration of similar

products from different sources for further distribution. Assembling is meant for

dispersion.

C) Selling :

Buying and selling are inseparable. They are complementary to each other without

selling function in the market buyers cannot satisfy their needs selling converts desire into

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demand the function of selling transfers the title to a product to the buyers. Thus selling is

the function that helps to market the products.

II) FUNCTIONS OF PHYSICAL SUPPLY :

A) Transportation :

Marketing requires physical movement of goods or services from the place of

production to the place of consumption. Commodities are produced at one place but they

are also demanded at various other places.

B) Storage :

All goods produced are not immediately consumed . There is a gap between the

time of production and the time of consumption production of some commodities is

seasonal but the demand is regular.

The traders has to undertake the storage function of physically protecting the goods

until they are demanded for consumption warehouse undertakes to store the goods.

III. FACILITATING FUNCTIONS :

A. Financing :

Marketing process requires finance goods are to be warehoused. The manufacturer

who invests money in production needs finance until his goods are sold. The wheel of

marketing is set in motion only when adequate funds are made available at right time at

right place. Hence financing plays a major role in the field of marketing commercial banks

and other financial institutions provide the required finance.

B. Risk Bearing :

Risk means the possibility of loss by unforeseen happenings. All business

transactions are subjected to such risks. Goods may get destroyed or damaged due to fire,

flood, cyclone, earthquake etc. Price of a commodity may also fall resulting in loss.

Availability of various forms of insurance covers these risks.

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C. Standardisation :

Standardisation means division of commodities into distinct groups. A standard is a

specification used in providing certain basic qualities to the goods for their use. Standards

are fixed on the physical characteristics of products. The standardized products possess

some uniform characteristics. Example shape, size etc.

Grading applies to certain qualitative specification like colour, taste etc. Grading

starts where standardization ends. People select commodities based on the standards and

grades of goods. Hence standardization and grading are essential elements in the field of

modern marketing. Some authorized institutions are engaged in fixing standards for

products. Example BIS (Bureau of Indian Standards) and for financial services (CRISIL) etc.

D. Market Information :

Market information include size, location, characteristic of markets, consumers

wants, habits, purchasing power etc. Adequate and accurate information help in the

formulation of sales policies. Decision making and success of marketing greatly depend

upon the availability of correct market information.

E. Promotion :

Promotional activity in the marketing involves the process of stimulating demand

for products. Promotion is a wider term which includes advertising, salesmanship etc.

New List of Marketing functions

1. Contractual function : It consist of finding out the potential buyers, where they are

located and how they could be reached.

2. The Merchandizing function : This function involves co-ordination of selling with

production

3. Pricing Function : This makes it necessary on the part of sellers to evaluate the

possible prices for the products even before the products are brought to the

market.

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4. The Propaganda Function: This function comprises all methods used by the sellers

to influence and induced the buyers to by the products.

5. The Physical Distribution function: It relates to transportation and storage

activities.

6. The termination function: This function is the final link in the process of marketing,

where the seller and buyer arrive at on agreement.

APPROACHES OF MARKETING

1. Product or Commodity Approach :

This approach undertakes the study of marketing on the basis of a commodity. The

marketing situation of each product is studied under the following heads : Sources and

conditions of supply, marketing organization and policies, involvement of different

middlemen, characteristics and the extent of the market of the product etc.

For example, when one studies the marketing of cotton, one will begin with

examining the sources of supply, nature and volume of demand the purpose for which is

required, how it is transported, the problem of storage, standardization, packing, branding

etc.

This approach is termed as “descriptive approach” and that itself is claimed to be its

advantage. In this method, the commodity serves as a focus around which organizational,

institutional and managerial aspects of marketing are studied.

2. Institutional Approach :

Under this approach the description and analysis of different institutions engaged in

marketing are undertaken. It pays special attention to the problems and operations of

each type of marketing institutions. The institutions normally include producers,

wholesalers, agents, retailers and facilitating institutions engaged in activities such as

transportation warehousing etc.

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These institutions individually are the “Cells” of the marketing body and in their

inter-relationships cells constitute the functional part of marketing body. The activities

performed by each institution form part of the whole area of marketing.

Under this approach marketing process is split up into three institutional functions :

concentration, Equalisation and Dispersion.

3. Functional Approach :

The credit for designing this approach goes to a A.W. Shaw who enumerated the

functioning of middlemen as follows : Sharing the risk, transporting the goods, financing

the operations, selling and assembling, assorting and reshipping.

Later on I.D.H. weld introduced some notable changes in the concept by pointing

out that the above functions are not always performed by middlemen but also partly by

producers and partly by consumers.

4. Decision making or Management Approach :

This approach is of recent origin. It combines certain features of the other three

approaches. It is based on the fact that marketing is purely a management function.

The changes in marketing are mainly due to two factors. “Controllables” and

“Uncontrollables”. The uncontrollable factors include economic, sociological and political

forces.

The controllables mean include adjustment in prices, advertising, personal selling

etc.

5. Legal Approach :

Though fundamental and practical this approach is a very narrow one. It

concentrates only on one aspect that is the effect of transfer of title in a legal way.

Regulatory aspects alone are studied under this approach.

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Under the Indian context, however this approach has got some significance. There

are numerous enactments passed in our country which regulate or, to a large extent,

control marketing activities. For example common Carriers Act, Sales of Goods Act etc.

6. Economic Approach :

In the economic approach marketing is considered in a narrow sense, because the

economist is concerned only with the problems of value, demand and price. It is true that

value and price and demand and supply factors are important in market mechanism.

7. Systems Approach :

This is a variation or more aptly, an advancement of the management approach

Broadly defined, a system is an organized body of independent parts (or Sub-systems) that

have separate but identifiable areas of operation.

For instance, business as a whole is a body, but is composed of separate functional

areas such as production, engineering, personnel, marketing etc.

These function could be split down further into smaller parts (sub-sub-systems)

Accordingly marketing has product planning, pricing, promotion, distribution etc., as sub-

sub-systems – Each of these functions is independent but they are inter dependent also.

They are continually interacting to achieve the aim of the system as a whole.

8. Customer Approach

It is the modern approach of modern marketing. According to this approach “Consumer is

the king’ or ‘Customer is supreme’. We have to produce and sell which is liked by the people.

Emphasis is laid on maximum satisfaction of the customers. The customer is at the top of

organisation chart of the enterprise. ‘Consumer is Sovereign’ or Marketing begins with customer

and ends with customer”. The very existence of the market depends upon the customer. Market

is only when the customer is there. If there is no customer, there is no market.

Modern writers give top most priority to customer.

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9. Conceptual Approach

Under conceptual approach, marketing can be studied through theoretical analysis of

marketing institutions, functions and policies. For finding solutions to marketing problems,

hypothetical models of consumer behaviour are devised and attempts are made to predict the

reactions of consumers to various marketing situations. Afterwards the process of marketing is

improved through marketing research and innovation.

10. Scientific Approach

In recent years, considerable progress has been made towards following a more scientific

approach to the study and practice of marketing. There is rapid change in the techniques of

marketing adopted for increasing sales. Emphasis is laid on the study of consumer behaviour and

thereby get the products available according the needs of consumers.

Marketing Environment

1. Micro Environment :

a. Suppliers

b. Market intermediaries

c. Customers

d. Competitors

e. Public

2. Macro environment

a. Demographic forces

b. Economic forces

c. Political and Legal factors

d. Social and Cultural forces

e. Physical forces

f. Technological forces

What is Marketing - Mix ?

The term marketing mix was first coined by Neil Borden the president of American

Marketing Association in the year 1953. Thus marketing mix is a blending of decisions in

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the ‘4Ps’. It is a system comprising the sub systems of price, product, promotion and

distribution.

Originally this classification was popularized by E.Jerome Mc. Carthy as product,

place, promotion and price. But later on the ‘place’ element has been replaced by

‘Physical Distribution’.

Definition

According to Stanton :

Marketing mix is the term used to describe the combination of the four inputs which constitute the core of a company’s marketing system, the product, the price structure, the promotional activities, and the distribution system.

“Marketing – mix covers two things ( a) a list of important elements or ingredients that make up this marketing programme, and ( b) the list of forces having bearing on the marketing operations”.

Professor N.H. Borden

“Marketing mix is composed of a large battery of devices which might be employed to induce consumers to buy a particular product”.

Professor Keely and Lazar

“The firm s task is to find the best solution for its marketing decision variable ; the settings constitute its “Marketing – mix”

“Marketing mix is the pack of four sets of variables namely product variables, Price variables, Promotion variables and place variables”.

Mr. Jerome McCarthy

Elements of Marketing Mix

The four major ingredients of the marketing mix are described below :

1) Product :

A product is good or service that consumer want product policy of a firm also deals

with proper branding, right packing, appropriate colour and other products features.

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Product mix requires decisions with regard to (a) size and weight of the product (b)

quality of the product (c) design of the product (d) volume of

output (e) brand name (f) Packing (g) Product range (h) Product testing (i) Warranties and

after sales service etc.

2) Price :

Price is an important factor affecting the success of a firm pricing decisions and

policies have a direct influence on sales volume and profits of business price is an

important element the marketing mix. Right price can be determined through pricing

research and test marketing. A lot of exercise and innovation is required to determine.

The price that will enable the firm to sell its products successfully. Demand, Cost,

competition, Government regulation etc. are the vital factors that must be taken into

consideration in the determination of price. Price mix involves decisions regarding base

price, discounts, allowances, freight payment, credit etc.

3. Promotion :

Promotion component of the marketing mix is concerned with bringing products to

the knowledge of customers and persuading them to buy. It is the function of informing

and influencing the customers. Promotion mix involves decisions with respect to

advertising, Personal selling and sales promotion. All these techniques help to promote

the sale of products and to fight competition in the market.

4. Physical Distribution :

This element of the marketing mix involves choice of the place where products are

to be displayed and made available to the customers. It is concerned with decisions

relating to the wholesale and retain outlets or channels of distribution. The objective of

selecting and managing trade channels is to provide the products to the right customer, at

the right time and place on a continuing basis.

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DETERMINING THE MARKETING MIX :

The firms current marketing mix may be represented in the following vector

(P,A,D,R) T

Where

P = Price

A = Advertising and Sales Promotion

D = Distribution (Place)

R = Right Product

T = Particular Point of time

The process of determining the marketing mix (or marketing decision making)

consists of the following steps.

1. Identification :

First of all the marketing department must identify the present and potential

customers to whom the sales are to be made.

2. Analysis :

Once the target market is identified, the next step is to discover and understand the

needs and desires of the customers. Marketing research is used in locating and analyzing

the target market. It is necessary to know the number, location, buying power, needs and

motives of customers. In addition, the number, size, location, products market share,

strengths and weakness of rival firms must be analysed.

3. Design :

On the basis of the knowledge obtained through identification and analysis, an

appropriate mix of product, price, promotion and channel is designed. Design involves not

only the determination of each component but the proper integration of individual

variables so that they reinforce one another.29

4. Testing :

It is desirable to make a test run of the marketing mix designed by the marketing

department. The designed mix may be used in a ‘small group of customers’. The reaction

of customers will indicate the adjustments required in the mix.

5. Adoption :

After the necessary modifications, the marketing mix is adopted and put into use.

The adopted mix should be evaluated from time to time and it must be adopted to changes

in the marketing environment of the firm.

Marketing Mix for Services

1. Process – flow of activities

2. Physical evidence - facility design, equipment

3. People – employee and customers

MARKET SEGMENTATION

Market segmentation is designed as “the process of taking the total Heterogenous

market for a product and dividing it into several sub markets or segments, each of which

tends to be homogenous in all significant.

Market segmentation is a consumer oriented marketing strategy. It is a process of

dividing the market on the basis of interest, need and motive of consumers. It means

dividing market or grouping of consumers .

The market could be segmented in different ways. For instance instead of

mentioning a single market for shoes, it may be segmented into several submarkets

Example shoes for executives, doctors, college students etc.

Criteria for Successful Segmentation :

1) Substantiality

2) Measurability

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3) Accessibility

4) Representability

5) Nature of demand

6) Response rates

1. Substantiality :

Substantiality refers to the size of segmented markets. Segments must be large

enough to permit viable market effort directed towards them. Needless to say, when the

size of the segment becomes small it may not be possible for the marketer to develop

separate marketing mix for such unprofitable segments under such circumstances smaller

sized segments will be totally excluded.

2. Measurability

It is to measure the changing behavior pattern of the consumers.

Therefore the segments should be capable of giving accurate the measurements.

3. Accessibility :

Accessibility could be attained through the existing channels of distribution,

advertising media, salesman etc. Newspapers and magazines also offer some help in this

direction.

4. Represent ability :

Normally segments should be large and profitable enough to be considered as a

separate market more than that, such segments must be representative in nature and

must have individuality of their own.

5. Nature of Demand :

Nature of demand refers to different quantities demanded by various segments.

Each segmented market must exhibit difference in consumption rates from another

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segment. For example assume that a firm segments its market by age. Under 25, 25-50

above 50.

6. Differences in Response Rates :

Finally, the segments must show differences in responses to the marketing

variables. If various segments respond in similar ways to a marketing mix, there is no need

to develop a separate marketing mix. For example if all segments respond in identical

fashion to price changes, there is no need for different price for individual segments.

BENEFITS OF SEGMENTATION :

1. The manufacturer is in a better position to find out and compare the marketing

potentialities of his products. He is able to judge product acceptance or assess the

resistance to his product.

2. The result obtained from market segmentation is an indicator to adjust the

production, using men, materials and other resources in the most profitable

manner.

3. Changes required may be studied and implemented without losing markets. As

such, as soon as the product becomes absolute, or even earlier, the product line

could be diversified or even discontinued.

4. It helps in determining the kinds of promotional devices that are effective and also

helps to evaluate their results.

5. Appropriate timing for the introduction of new products, advertising etc., could be

easily determined.

Levels of Segmentation

On the basis of intensity of segmentation, marketing strategies to be adopted may

be classified into:

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1. Undifferentiated Marketing

When it is not feasible, organizations do not permit the division of market into

segments, they conceive of the total market concept. In the case of fully standardized

products and where substitutes are not available, differentiation need not be undertaken.

Under such circumstances firms may adopt mass advertising and other mass methods in

marketing e.g. Coca Cola.

2. Differentiated Marketing

Under this concept, a firm decides to operate in several or all segments of the

market and devises separate product marketing programmes. This also helps in developing

intimacy between the producer and the consumer. In recent years most firms have

preferred to have a strategy or differentiated marketing, mainly because consumer’s

demand is diversified. For example, cigarettes are now manufactured in a variety of lengths

and filter types. This provides the customers an opportunity to select his or her choice

from among filtered, unfiltered, long or short cigarettes. Each kind offers a basis for

segmentation also. Though the differentiated marketing is sales – oriented, it should also

be borne in mind that it is a costly affair for the organization.

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3. Concentrated Marketing

Both the concepts explained above imply the approach of total market either with

segmentation or without it. Yet another option is to have concentrated efforts in a few

markets capable of affording opportunities. Put in an another way, “instead of spreading

itself thin in many parts of the market, concentrates its forces to gain a good market

position in a few areas”. When new products are introduced and test marketing is

conducted, this method is adopted. The principle involved here is ‘specialization’ in

markets which are really potential. Another notable feature of this method is that here the

advantage of one segment is never off-set by the other. But in the case of the first two

types, good and poor segments are averaged.

Various concepts used under this method are distinguished as:

1. The Local Market concept

2. The Mass Market concept

3. The Segmented market concept and

4. The Global Market concept

Local Market Concept

This concept is meaningful only in those economic which have a limited

transportation and communications system. Naturally, the producer has no option but to

concentrate on particular localities only. Therefore, the seller’s activities are limited to

those customers who:

1. are geographically fairly close enough,

2. are willing and able to buy and

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3. prefer the product.

Mass Market Concept

In a developed economy where transport and communication systems are

comparatively developed, this concept is adopted. The distinction of mass market and local

market could be made in two respects. First, the mass market includes all persons who

could be reached by transportation facilities and the mass media. Secondly, it is assumed

that want patterns in the area are almost similar, i.e., it represents homogeneous market

preferences.

Mass market concept is advocated in an economic system with limited resources

and purchasing power. Under such economies, mass production will enable manufactures

to attain low unit cost of production. Indian conditions afford production on a large scale

which will lower the consumer prices of products. Unfortunately, producers seem to

produce wide varieties of products aiming at certain segments only where the profit

margin would be great.

Segmented Market Concept

This concept is just opposite to the mass market concept, where the attention will

be focused on the majority behaviour of consumers. The minor segments are not given

importance under the segmented marketed concept. This concept is applicable under

affluent conditions, where majority of population has a high purchasing power.

Global Market Concept

A Market concept that has gained interest in recent years is the global market

concept. This concept is made possible by the development of International transportation

and communication system and liberalization polices adopted by many countries now.

Patterns of Segmentation

1.Undiffernetiate marketing :

one Product One marketing mix For all segments

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2. Concentrated marketing

One Product One marketing mix One segment

3. Differentiate marketing

Several products Several marketing mixes Relevant segments

BASIS OF MARKET SEGMENTATION :

1. Geographic Segmentation :

This kind of segmentation appeared first. For planning and administrative purposes,

the marketer will often find it convenient to subdivide the country into areas in a

systematic way. The great advantage of adopting this scheme is that standard regions are

widely used by Government and it facilitates collection of statistics. Most of the national

manufacturers split up their sales areas into sales territories either State wise or District

wise.

2. Demographic Segmentation :

Under this method the consumers are grouped into homogeneous groups in terms

of demographic similarities such as age, sex, educational standard, income level etc. This is

considered to be more purposeful since the emphasis ultimately rests on customers. The

variables are easy to recognize and measure than in the case of first type, as persons of the

same group may exhibit more or less similar characteristics. For example in the case of

shoes, the needs and preferences of each group could be measured with maximum

accuracy.

3. Socio-economic Segmentation :

The segmentation here is done on the basis of social class viz. working class, middle

income group etc. Since marketing is potentially and intimately connected with the “ability

36

to buy” this segmentation is meaningful in analyzing buying patterns of a particular class.

Socio-economic factors especially when used together can help to locate a market

precisely. This method is widely used because is not only helps in locating segments but

also in measuring the size of segment easily.

4. Product Segmentation :

When the segmentation of markets is done on the basis of product characteristics

that are capable of satisfying certain special needs of customers, such a method is known

as product segmentation. The products, on this basis, are classified into.

1. Prestige Products Example Automobiles, clothing.

2. Maturity Products Example Cigaretles Blades.

3. Status Products Example most luxuries.

4. Anxiety Products Example medicines, Soaps.

5. Functional Products Example Fruits, Vegetables.

The argument in favour of this type of products segmentation is that it is directed

towards differences among the products which comprise markets. Where the products

involved show great differences this method is called a rational approach.

5. Benefit ‘Segmentation’ :

Under this method the buyers form the basis of segmentation but not on the

demographic principles mentioned above. Here consumers are interviewed to learn the

importance of different benefits they may be expecting from a product. These benefits or

utilities may be classified into Generic or primary utilities and secondary or evolved

utilities.

6. Volume Segmentation :

Another way of segmenting the market is on the basis of volume at purchases.

Under this method, the buyers are grouped into categories like bulk purchasers, medium

37

purchasers, and single unit purchasers. This analysis is also capable of showing the buying

behavior of different groups.

7. Marketing – Factor Segmentation :

The responsiveness of buyers to different marketing activities is the basis for this

type of segmentation. The price, quality, advertising, promotional devices etc. are some of

the activities involved under this method.

8. Psychographic Segmentation

In this type of segmentation, buyers are divided into different groups on the basis

of personality and life style. Marketers create brands to suit consumer personalities. Life

styles influence product interests. Goods which a person consumes express his/her life

style.

9. Behavioural Segmentation

In this case, buyers are divided into groups on the basis of their knowledge of,

attitude towards, use of, or response to a product. Main behaviour variables are as follows:

a) Occasions: Buyers can be differentiated according to the occasions they develop

a need or buy a product. For example, air travel is related to business, vacation and family

occasions. Occasion segmentation can help firms expand product usage.

b) Benefits : Buyers can be classified according to the benefit they seek from the

product.

c) User Status : Markets can be segmented into groups of non-users, ex-users,

potential users, first time users and regular users of a product.

d) Usage Rate: Markets can also be segmented into light, medium and heavy

product users.

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e) Loyalty status : A market can also be segmented by consumer loyalty. Buyers can

be divided into groups according to their degree of loyalty – completely loyal, partially

loyal and so on.

Psychological Factors Influencing Market Segmentation

Customers needs are essentially psychological and instructive in nature. These

psychological factors create an uncertainty for the manufacturer to predict the market for his

product. Following psychological factors market segmentation.

1. Motivation2. Cognition3. Personality 4. Reference Groups

1. Motivation

Motivation is the underlying force of any human activity not to mention buying

alone. It is wishes or desires which initiate the sequence of events known as behavior.

Motives thus correspond to needs, a fundamental detriment of demand. Motivation

depends on psychological needs, safety needs, love needs and esteem needs. Man is a

bundle of wants. His wants are unlimited in a number. He never feels satisfied. As soon

as one want is satisfied, he feels the presence of few wants. The marketers function to

discern the nature of these wants and attempt to satisfy them.

2. Cognition

Cognition is a psychological theory which studies the response of consumers.

According to it stimulation of wants is conditioned by a customer’s knowledge, his

perception, beliefs and attitudes. Perception is the sum total of physical stimuli and

personal factors. Certain stimuli are stronger than others and some are perceived by

more people. Beliefs and attitudes also play an important role in the cognitive process.

Strong beliefs and attitudes are difficult to be changed and modified. Advertisements

stressing special appeals all purposely designed by the manufacturers will over come this

kind of resistance by the customers.

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3. Personality

Personality is the total of so many personal or individual traits. There are so

many theories developed to explain the personality and its influence on the behavior

of people. Branding is a personality given to the product to suit the personality of the

buyer. Different brands of cigarettes that attract different categories of smokers are

a good example of personality.

4. Reference Groups

Reference groups indicate the position of a particular group of persons in a

society. Man is essentially a social being and interacts with other individuals in a

variety of social groups. In spite of personal differences people may be forced to

accept the decisions of society for example the Group Insurance Scheme where

individual differences of opinion may not be given much consideration.

Elements of Market Segmentation

There are various elements which influence the decision with regard to the

strategy of segmentation. They are :

1. Availability of Enough Resources: Segmenting the market involves huge

expenditure which all concerns cannot afford. Hence the first elements which

influences in deciding the strategy of segmentation is availability of enough

resources.

2. Characteristic of Products : Market segmentation is possible only when the

products are heterogeneous in nature. For the products which are of

homogeneous in nature, market segmentation is not at all necessary, e.g., for

products like kerosene, gas, cylinder, etc., aggregated market is suitable.

3. Various Stages of a Product Life Cycle : Market should be segmented only

after considering the various stages of a product life cycle like introduction,

growth, maturity, saturation and decline because during the introduction and

decline stages of a product segmenting the market is of no use. In the 40

introduction stage, due to lack of information, segmentation cannot be made.

In the decline stage, there is no need for market segmentation at all.

4. Marketing Strategies of Competitors : Market segments should always be in

line with the market segmentation of the competitors. When competitors are

working with segmented market, a marketer with undifferentiated marketing

cannot succeed in his activities.

Thus the marketer while deciding about the strategy of segmentation should

carefully evaluate all the above said elements in order to have an effective market

segmentation system.

Objectives of Market Segmentation

In the words of Philip Kotler, ‘the purpose of segmentation is to determine

differences among buyers which may be consequential in choosing away them or

marketing to them”.

a) To spot and to compare market opportunities by examining the needs of each

segment and how far these needs are being tried to be satisfied.

b) To use this knowledge of the marketing response differences of various

customers, he may decide how much marketing funds may be allocated to

different segments.

c) To make suitable adjustments of his products and marketing appeals. Instead of

one marketing programme aimed at to draw in all potential buyers the sellers

can create separate marketing programme and as to meet the needs of different

buyers.

MIDDLEMEN :

The term ‘middlemen’ refers to all those who intervene from the primary producer

to the ultimate consumer in the exchange of goods. The various intermediaries who assist

in the transfer of goods from the producer to the consumer can be broadly classified into

two main categories.41

a) Mercantile Agents

b) Merchant Middle man

a) Mercantile Agents or Agent Middle Man

Mercantile agents are also called functional middlemen. A mercantile agent is one

who is appointed by a businessman to act on his behalf in business matters. In the usual

course of business a merchantile agent has authority to buy or sell goods on behalf of his

principal. He has also the right to borrow money on the security of goods. He does not get

ownership of the goods eventhough they are under his custody. He is remunerated in the

form of commission on sales.

Kinds Of Mercantile Agents :

1) Brokers

2) Factor

3) Commission Agents

4) Del Credere Agents

5) Auctioneers

6) Warehouse Keepers

Brokers :

A broker is one who bargains for another and receives commission for doing so. It is

called brokerage”. His usual business is to negotiate and arrange for finalizing contracts

between two parties for the purchase or sale of goods. He brings buyer and the seller

together. He does not take possession of the goods nor does he become its owner. He is

not personally liable for the contracts concluded.

2) Factor :

A factor is a mercantile agent to whom goods are entrusted for sale by a Principal.

He takes physical possession of the goods though he does not obtain ownership of the

goods.

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A factor sells goods in his own name without revealing the name of his principal. He

may even sell them on credit and other usual terms. He is entitled to receive payment for

the goods sold and give valid receipts. He is liable for his action. He can sue or be sued for

his contracts. He has a right at lieu on goods in his possession for his unpaid charges.

3) Commission Agent :

A commission agent buys and sells goods in return for a commission. He will serve

as a middle man between his principal (Employer) and the product owners or consumers.

He gets a fixed commission for all his transactions. He does not take the risk of the trade

and all the risks involved in his transactions are borne by his employer.

4) Del Credere Agents :

A del credere agent is a mercantile agent who guarantees his principal for the

collection of dues from the customer to whom credit sales are made. If they do not pay,

the agent would bear the loss himself. In return for his guarantee he is given an extra

commission known as ‘Del Credere Commission. It is paid to the agents in addition to the

usual commission. A Del Credere agent shall be very cautious in extending credit. He will

extend credit sales only to a person of probity and reliability.

5) Auctioneers :

Auctioneers are agents who sell goods by auction on behalf of their principles.

Auction sale is a notification to the public. It clearly mentions the date, time, place and

details of goods will be widely published through newspapers, posters, leaflets and

announcements etc.

Auction sale may be ‘with Reserve’ and ‘Without Reserve’

6) Warehouse – Keeper :

A warehouse keeper accepts goods for the purpose of storage in his ware house.

He must exercise reasonable care and diligence in the storage of goods. He is entitled for

payment for his services. He will have lieu on the goods incase the payment for his

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services are unpaid. The warehouse keeper gives to the owner of the goods a receipt

known as warehouse keeper’s receipt or certificate. It is an acknowledgement meant for

the receipts of goods by him for the purpose of storage. It is not a document of title to

goods. He may issue a ‘warehouse warrant’, which is a document of title of goods.

b) Merchant Middleman :

Merchant middlemen are the intermediaries who buy and sell the goods in their

own name, and in return earn a profit out or it. They take ownership as well as possession

of the goods they sell. They operate in their own name and bear all the risks. Merchant

middleman can be subdivided into

Classification of Whole Saler

a) On the basis area covered Local wholesaler State wholesaler National wholesaler

b) On the basis of method of operation Full service wholesaler Limited function wholesaler

c) On the basis of breath of their line products General merchandize wholesalers General line wholesaler Speciality wholesaler

Classification of Retailer

Itinerant Retailers

a) Hawkers and pedlars

b) Cheap jacks

c) Market traders

d) Street traders

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Fixed Shop Retailers

a) Street stallholders

b) Second-hand Goods dealers

c) Specially good shops

d) General shops

Small-scale Retailers

a) Independent Stores

b) Automatic vending

c) Discount houses

d) Syndicate stores

Large-Scale Retailers

a) Departmental Stores

b) Mail shops

c) Mail order shops

d) Hire Purchase and Installment

e) Co-operative stores

f) Super markets

g) Hyper Markets etc.

SALESMANSHIP

Salesmanship is one of the Promotional activities of marketing. It is an art of

winning the confidence of the customers. It is a technique convincing a person to buy the

goods.

Salesmanship is the ability to induce people to buy goods which they require. It is

the ability to convert human needs into wants. The salesman is to help the consumer.

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TYPES OF SALESMAN

1. Missionary Salesman

They are also known as creative salesmen or pioneer salesmen. They are employed

by manufacturers to do the work of missionary nature. If a sales organization desires to

sell its product in a new area or territory it should do the necessary spadework in order to

popularize the product. They create demand for the products. They usually develop good

will.

2. Service Salesman

Such a kind of salesman specializes in selling intangible products like insurance,

shares, advertising space or traveling arrangements. The people who demand such

services belong to a special class and hence a service salesman needs special training and

abilities.

3. Detail Salesman or Merchandising Salesman

The names ‘detail selling’ and detail salesman are the contributions of drug industry.

Drug companies stock their products first and then create demand by calling on the

Physician/ Such salesman deals not directly with consumers but with some other agency

which is instrumental in selling the products. The salesman has to convince the Physicians

of the formula, dosage, use, research and testing result etc. in detail. Most of the “Medical

Representatives” fall under this category.

4. Manufacturer’s Salesman

The salesman directly appointed controlled and paid by the manufacturer is a

manufacturer’s salesman. This is to supplement the selling activities of wholesalers and

retailers and also to have a first and information about the markets.

In fact, all the three kinds of salesmen (creative salesman, service salesman, Detail

salesman) explained above fall under this category. These salesmen naturally must be

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imaginative and aggressive in nature. In other words, they must be ‘born’ and made

salesman.

5. Wholesaler’s salesman

A wholesaler is an intermediary and occupies a vital position in the channel of

distribution. He is the nerve centre of distribution and he has to push the goods to the

retailers. The retailers are geographically scattered and hence he might require the

services of a salesman to establish contacts with them. Such a salesman Job is

comparatively easy as the retailers are more responsible for increasing the sales volume.

Even then, he may have to introduce goods and assure a market for the retailers. Most of

the services rendered by a wholesaler’s salesman are of routine nature.

6. Retailer’s Salesman

Salesmen employed by retailers fall under this category. They are of two types.

a) Indoor Salesman

The Salesman whose area of operation in Limited within the four walls of the shop.

He is also termed as a counter salesman. His main job is to sell the articles to the

customers over the counter.

b) Outdoor Salesman

Contrary to the indoor salesman, the nature of work of an outdoor salesman

requires him to move about places. He is also called a Travelling Salesman. His jobs are

numerous and include creating customers, creating wants and very often acting as an

order taker too.

7) Speciality Salesman

Specialty articles are generally high priced and purchases are made only after a

personal selection by the buyers. Furthermore, they are not bought regularly and are

durable goods Example Car, Refrigerator etc. This requires the speciality salesman to have

a considerable amount of initiative, drive, product knowledge etc. He should have an 47

extensive training in the art of salesmanship. In fact, the job of a speciality salesman is

most onerous.

8. Stable salesman

The speciality articles do not always remain speciality articles but become staple

articles when they become common in use. Stable salesman generally concentrates on

selling necessaries like food, clothes, stationary etc. These articles are sold in bulk.

9. Exporter’s Salesman

The foreign trade involves a large number of problems on account of different

nationalities, different currency units etc. The greatest among the problems is to find a

market for the product where the manufacturer has no roots. From early times special

agencies known as ‘indent houses’ have been working in this field. They act as agents as

well as middlemen for a manufacture. For the import of goods also such indent houses

render valuable services.

Functions of Middlemen

1. Many producers do not have the resources to engage themselves in direct

selling.

2. Middlemen reduce transactions to an optimum number.

ex: 5 publishers x 20 students = 100 transactions

3. Middlemen are capable of eleminating discripancies in quantity that is

distributed. This is done by breaking the bulk. i.e., dividing a huge lot in to small

fracrtions.

4. Middlemen are capable of eleminating discripancies in assortments.

5. The producer can concentate on the production function leaving the marketign

problem to middlemen who specialize in the line.

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6. The chief function of selling intermediaries is to assemble the goods from many

producers in such a manner that a customer good effect purchase with easy.

7. The main function of middlemen is to provide the connecting link between the

produers and their respective markets.

8. Middlemen help to stablise the price too.

9. Middlemen collect huge orders and purchase products in bulk from the

producers.

PRICING POLICIES AND STRATEGIES :

Price as the exchange value of a product or service is its monetary value. Price is

not absolute but selective in terms of variables in the entire marketing programme. While

the pricing on the other hand is the art of translating into quantitative terms the value of

the products to customers and a point in time.

Pricing policy are more specific than the objectives and deal with situations in the

foreseeable future that generally recur. Pricing policies provide the framework and

consistency needed by the firm to make reasonable practicable and effective pricing

decisions. The following are, however the policies recognized for pricing.

1) Cost oriented pricing policy.

2) Demand oriented pricing policy

3) Competition oriented pricing policy.

1. Cost Oriented Pricing Policy :

Various methods adopted under cost-oriented are: i. Cost plus pricing ii. Target

pricing iii. Break-even pricing.

i. Cost Plus Pricing: Under this method, the price curves entire cost incurred and so it

assures that there will not be any loss to the products. This method is totally based on

cost-concept. Cost of a product is taken as a starting point and then a fixed percentage is

added to it so as to fix price for that product. Under the method, tentative price can be 49

fixed easily. This type of pricing policy is used by retail traders and by the manufacturers of

non-standardised products. But the criticism against this policy is that it ignored the

influence of competition and market demand completely.

ii. Target Pricing: Another common method adopted under cost-oriented pricing is known

as target pricing. Target pricing is invariably followed by manufacturers who fix a target

return on the total cost.

iii. Break-even Pricing: Break-even analysis refers to the system of determining the level of

operations where total revenues equal total expenses i.e., the point of zero profit. This is a

sophisticated pricing technique which takes into account both the fixed costs and the

variable costs.

2) Demand – Oriented Pricing Policy :

As the name suggests, under this method of pricing, the demand is the pivotal

factor. Price is fixed by simply adjusting it to the market conditions A high price is charged

when or were the demand is intense and a low price is charged when the demand is low.

Price discrimination is usually adopted under such market situations.

3) Competition – Oriented Policy :

Most companies set prices after a careful consideration of the competitive price

structure. Deliberate policy may be formulated to sell above, below, or generally in line,

with competition. One important feature of this method is that there cannot be any rigid

relation between the price of a product and the firms own cost or demand. Its own cost or

demand may change but the firm maintain its price.

Pricing of New Products

There are two options available for pricing a new product. They are:\

1. Skimming and

2. Penetration pricing

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When a product is entirely new in all respects, skimming method could be used. A

strategy of high prices coupled with large promotional expenditure in the initial stages has

proved successful in a number of cases. Skimming pricing is recommended due to the

following reasons:

i. Initial sales would less

ii. Enables to take the cream of market through high prices.

iii. People may like to own a new product even at a higher cost

iv. Helps in developing demand as the price is gradually reduced, and

v. High sales volume can be obtained an account of higher price.

However, it should be noted that high initial prices may also prevent quick sales.

The second option is adopting penetration pricing. This method of pricing is most

common and is desirable under the following conditions:

i. When sales volumes of the product is very sensitive to price

ii. When a large volume of sales is to be effected

iii. When the product faces a threat from competitors and

iv. When stability of price is required.

Product – Mix Pricing Strategies

1. Product – Line Pricing: Companies normally develop product lines rather than

single products. For example, Panasonic offers different colour video sound

cameras, ranging from a one (weighing 4.6 pounds) to a complex one.

2. Optional Product Pricing: Many companies offer to sell optional products along

with their main product. The automobile buyer can order electric window

controls, defoggers, and light dimmers.

3. Captive Product Pricing: Companies in certain industries produce products that

must used with the main product. Examples of captive products are razor blades

and camera film.

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4. By-product Pricing: If the by-products have no volume and disposing of them is

in fact costly, this will affect the pricing of the main products.

The Pricing Objectives

i) Profit maximization is assumed to the traditional and basic pricing

objective of any individual firm. It helps the firm to maximize its earnings

under given market conditions.

Profits = Revenue – Expenses

When, Revenue = Price x Quantity sold

To maximize the profit is a long-term objective, because in the early stage

of PLC, prices and profit margins are very low.

ii) Earnings a satisfactory rate of return on capital employed as a long term

basis is the most logical pricing objective. That is, the sales revenue arrived

at the end of financial year is enough to cover all the costs and leave

desired margin equal to the rate of return when a new product is to be

introduced in the product-line, the management must ensure that this is

capable of attaining the target ROI. The ROI objectives has the advantages

of maintaining price stabilization and of enhancing the goodwill of the

customers.

iii) Maiximising and stabilization of Market Shares in an important objective

and meaningful measure of the success of a marketing strategy. The

market share normally expressed as a percentage of the total industry

sales. Price and flexibility and, often, profits are linked to firm’s market

share position. For stabilizing the market shares, a firm has to take an

active role by balancing the factoral elements of the marketing –mix such

as place and promotion activities. So, these elements become the

objectives to be obtained for a firm’s policy. Matching or marring the

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competitors in the simplest strategy in case of those companies that are

more interested in non-price strategies. They are ready to fix their prices

more or less at par by the competitors. Sometimes, they are prepare to

‘follow below cost pricing’ in order to fight competition. Sometimes, they

charge les than the cost to prevent the entering of new firms in the

market.

iv) To maintain stable prices may be the crux of the pricing philosophy of

many enterprises to avoid price wars. The firms interested in minimum risk

always prefer the theory of stable prices, i.e, not allowing them to fall

below a norm during slump and not allowing them to rise above norm

during boom. This objective achieves the following merits:

- It stablises the sales turnover.

- It avoids uncertainty and panic buying.

- It eliminates the evils of price-competition and fosters non-

price competition.

- It helps on maintaining the goodwill of the firm.

v) To maintain the image of the firm which ultimately help to increase the

sales volume. Sometimes the firms set higher prices so as to maintain a

quality image.

Sometimes, a firm with an established reputation based on existing price

lines may introduce a new line at either higher or lower prices to appeal

to a different market segment. It is the sum-total of the impression that

the people have some idea about the firm. Various reputed companies

like Tata, Philips, Hindustan Lever etc. followed that price policy that

supported in the light of their long-standing reputation.

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vi) A number of social and ethical considerations are the determining factors

in certain pricing situations. Examples being regarded as fair by customers

or trustworthy of rivals. A fair price wins customers loyalty. Social

considerations are very important in setting prices for some service

businesses and many non-profit organizations. Many doctors/psychiatrists,

for example, set fees by the ability of their patients to pay. Universities

subsidize the price that many students pay for their education by offering

scholarship.

FACTORS AFFECTING PRICE OF A PRODUCT

The factors that can influence price decisions may be divided into two groups.

a. Internal factors: Internal factors are generally well within the control of the

organisation. They are sometimes as the built in factors that affect the price. These

factors include cost and objective.

i. Cost

The most decisive factor is the cost of production. Adding necessary profits to the cost

of production would give the price at which the products where to be sold.

ii. Pricing objectives

Many companies have established marketing goals or objectives and pricing

contributes its share in achieving such goals. These goals may be classified into

Target rate of return

Stability in prices

Maintenance or increase of the share of the market

Meeting or preventing competitions maximising process

iii. Marketing mix

Price is only one of the elements of marketing mix. It must be co-ordinated with other

elements. Decisions made for other elements may affects pricing decision.

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b. External factors:

External factors are generally beyond the control of the organisation. But, they have to

be considered in designing the price. These factors includes demands, competition,

the influences of distribution channels political consequences legal aspects etc.,

i. Demand

In consumer oriented marketing, the consumer influence the price. The value of a

given product to the consumer is the prime consideration.

ii. Competition

Another factor that influences pricing is competition. No manufacturer is free to fix his

price without considering competition, unless he has a monopoly.

KINDS OF PRICING DECISIONS :

1. Odd Pricing :

The term ‘odd prices’ is used in two ways. It may be a price ending in an odd

number or a price just under a round number. Such a pricing is adopted generally by the

seller of speciality or convenience goods for example, a shoe manufacturer pricing one of

his product at, say Rs.49.92.

2) Psychological Pricing :

The price under this method is fixed at a full number. The price setters fell that such

a price has an apparent psychological significance from the view point of buyers.

3) Customery Prices :

Such prices are fixed by custom. For example sweets manufacturers price their

products in such a way that a particular variety of sweets are sold at approximately the

same price. Soft drinks are also priced in the same manner. Such a pricing is usually

adopted by chain stores.

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4) Pricing at the Prevailing Prices :

This kind of pricing is undertake to meet the competition. Hence, such a pricing is

also termed as ‘Pricing at the market’ such a strategy presumes a market inelasticity of

demand below the current market price.

In other words, a price above those of the competitors would sharply bring down

sales while a lower price would not significantly increase them. Obviously, such a policy is

aimed at avoiding price competition and price wars.

5) Prestige Pricing :

Many customers judge the quality of a product by its price. Generally prestige

pricing is applied to luxury goods, where the seller is successful in creating a prestige for his

product. The price fixed normally will be in excess of those asked for near. Perfect

substitutes. In such cases sale would be less at low prices than at higher ones. The

merchandise can be priced too high. Customers may fear that at the low price it cannot be

of good quality and will actually buy more at a somewhat higher price than they would at a

lower price.

6) Price Lining :

This policy of pricing is usually found among retailers. Technically, it is closely

related to both psychological and customary prices. Under this policy the pricing decisions

are made only initially and such fixed prices remain constant over long periods of time.

Any change in the market conditions are met by adjustments in the quality of merchandise.

In other words, the decision is made with reference to the prices paid for merchandise

rather than the prices at which it will be sold.

7) Geographic Pricing :

This policy is sometimes used where a manufacturer serves a number of district

regional markets. He can adopt different prices in each areas. Without creating any ill-will

among customers. For example. Petrol is priced in this way depending on the distance

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from the storage area to the retail outlet. It is evident from this example, that a price that

is quoted without transportation cost may be different price than a price quotation on

which the seller agrees to absorb, such cost. There are three methods that relate to the

absorption of distribution cost in the price.

a) FOB Pricingb) Zone Pricingc) Basic Point Pricing

a) FOB pricing (Free on Board) may be of two types : FOB origin and FOB

destination. In the first case the buyer will have to incur the cost of transit and in the latter

the price quoted is inclusive of transit charges.

b) Zones pricing denotes some amount of equality of prices in the same zone.

For instance of India is divided into south zone, North Zone etc. a product will be sold in

the South zone at the same price irrespective of the differences in distance between two

places inside the zone.

c) Basic point pricing system charges the buyer the transportation cost from the

basic points to the buyer’s location.

8. Dual Pricing

When a manufacturer sells the same product at two or more different prices, it is

dual pricing. This is possible only if the same market, different brands are marketed. The

method should not be confused with the geographical pricing. There for the same

products, the prices are different at two places. The price differential is justified on account

of varying distributions costs. The dual pricing is adopted in Railways. For the same

distance of travel, in the very same vehicle, the services are sold to passengers at different

prices under different classes.

9. Administered Pricing

This applies to the practice of pricing products for the market not on the basis of

cost, competitive pressures or the laws of supply and demand, but purely on the basis of

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the Policy decisions of the sellers. The administrated prices usually remain unchanged for

substantial periods of time. In a sense every price is an administered one.

10. Monopoly Pricing

New product pricing is in essence, monopoly pricing. Since competition is absent,

the seller has a free hand in fixing the price such pricing will be on the principle of “What

the traffic will bear”. Such a price will maximize the profit.

11. Skimming Pricing

This is also termed as “Skim-the-cream. Pricing (Stanton). It involves setting a very

high price for new product initially and to reduce the price gradually as competitors enter

the market. It is remarked. “launching a new product with high price is an effective device

for breaking up the market into segments that differ in price elasticity of demand. The

initial high price serves to skim the cream of the market, that is relatively insensitive to

price. In the case of text books this method is followed by having a high price for the first

edition and lesser prices for subsequent editions when an item is clearly different and the

right price is not apparent, this method may be used.

12. Penetration Pricing

This method is opposite to the skimming method outlined above. The skimming

price policy is most convenient and profitable in the case of new products, especially in the

initial years.

Penetration pricing on the other hand is intended to help the product penetrate

into markets to hold a position. This can be done only by adopting a low price in the initial

period or till such time the product is finally accepted by customers.

13. Expected Pricing

In this method the price that will be accepted by the consumers is found out.

Naturally a fixed price cannot be decided before hand and hence price range is offered.

The response of consumers in the price is analysed and later a price is fixed.

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14. Sealed bid pricing :

This method is followed in the case of specific job works. Government contracts are

usually awarded through a system known as Tenders. The expenditure anticipated is

worked out in detail and the competitors offer a price (known as contract price). The

minimum price quoted is accepted and the work is awarded to the party.

15. Negotiated Pricing :

This method is invariably adopted by industrial suppliers. Manufacturers who

require goods of highly specialized and individually designed nature often negotiate and

only then fix the price. For example in the case of auto mobiles, various components

required for the manufacturer are not actually produced by the companies marketing the

automobiles. They find out the suppliers and entrust them with the work of manufacturing

and supplying various components. This ensures fixed prices or otherwise the price of

their final product would also go up. Under such circumstances the prices are negotiated

and fixed.

16. Mark-up pricing

This method is adopted by wholesalers and retailers in establishing a sale price.

When the goods are received, the retailer adds a certain percentage to the manufacturers

price to arrive at the retail price. For example an item that costs Rs.20/- is sold for Rs.25

the mark up is Rs.5 or 25%.

The initial mark-up is also referred to as ‘Mark on’. If the retailer had to cut down

the price to Rs.23 the difference between cost and the selling price would be rs.2 or 8%.

The later figure is called ‘Gross Margin’ or ‘Maintained Mark-up’.

17. Single Price Policy

As the same suggests, under this method of pricing. there is one price for all types

of customers irrespective of volume of conditions of purchase. There is no discrimination

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in price between one buyer and the other. The company lays emphasis on product’s

quality and service.

18. Psychological Pricing Policy

Psychological pricing policy is one which is based on the psychology of the

customers. In this method, the prices of commodities are so fixed as to appeal to the

customers psychologically and they are motivated to buy them. Prestige pricing, price or

low pricing policies are some of them. Under this method the price of a commodity is

fixed at a full number. For instance, it is stated that there are certain critical points at

prices such as 1, 5 and 10. The company believes that the customer’s psychology will be

influenced by odd prices.

19. Unit Pricing Policy

Under this method, each package of a product bears a label indicating the price

of the package and the quantity in the package so as to make consumers to compare the

prices of similar products. This method of pricing is usually adopted by chain stores,

departmental stores and super markets. There is no scope of any bargaining under this

method.

20. Leader Pricing Policy

Under, this method low price is fixed for a popular or leader product so as to

attract the customers. This is also known as loss leader pricing policy. For instance, if you

happen to visit a retail store you will see that he will charge low price for certain popular

items such as salt, sugar, match box etc. which are consumed by all types of the

consumers. In this way, the overall sales are increased considerably along with rapid

increase in over all profits of the firm.

Points of production to the points of consumption. Physical movement of goods is

the hall - mark of marketing that is once the price fixation is done, the journey starts

from sellers to buyers.

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Special Problems in Pricing

After fixing a price a manufacturer is often be set with the problems of price

reduction. It is needless to say that this should be considered even before fixing a price.

Hence there must always be ‘built-in’ flexibility in the price structure to accommodate such

request. These are known as Discounts, Allowances, Guarantees etc.

Discounts :

Discounts are deductions allowed by the seller from the base price of a product.

These discounts could be of the following types.

(A) Trade Discounts :

These discounts are allowed by a manufacturer to a wholesaler or by a wholesaler

to a retailer. They are usually found in bulk purchasing.

(B) Quantity Discounts

These are deductions offered from the list prices by a seller in order to encourage a

customer to buy larger amounts. This is also the case applicable to the wholesalers and

retailers.

(C) Cash Discount

It is a deduction granted by the seller to the buyer for paying his dues in time. Some

suppliers offer a special discount for payment within a stipulated period from the date of

invoice.

(D) Seasonal Discount

This refers to discounts offered during a particular season. It is sually done during

the “off-peak” periods. Example fans sold during winter season.

Allowance

These are also the same as discounts but are usually given as a consideration of

performing specific services. The various types of allowances given are :

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1. Promotional Allowances

Samples given at Concessional rates or supplying advertising materials etc. come

under this type.

2. Brokerage Allowances

This is only another form of trade discounts. A broker usually performs the function

of linking together the seller and the buyer.

BUYER BEHAVIOUR

Buyer is a person who buys a product buyer might not be the use of the product.

For ex: ‘A’ buys car for ‘B’ in this case ‘A’ is buyer and ‘B’ is the user of the car.

All the behaviour of human beings during the purchase may be termed as “buyer

behaviour”.

The process whereby individuals decide whether, what, when, how and from

whom to purchase goods and services can be termed as buyer behaviour.

BUYER BEHAVIOUR MODELS

It can be classified into four

i. Economic Theory

ii. Psychological Theory

iii. Psycho analytical Theory

iv. Socio cultural Theory

ECONOMIC THEORY

Marhsallion Model: This model was developed by classical economists. This model

describes that a consumer will buy regularly those products a relative prices that will give

him maximum satisfaction. Further, it describes that buying decisions are made as the

result of rational activities and economic calculation. One of the behavioural hypothesis

suggested by economic model is “Lower the Price of the product, higher the sales”

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PSYCHOLOGICAL THEORY

Psychological theories are known as Learning Theories. According to these

theories, people learn from past experience and the results of such experience will change

their actions on future events. It explain how the buying habits are developed through

various steps viz. repetition, motivation, conditioning and relationship. According to

stimulus – response theory, learning involve four central processes – drive, cue, response

and reinforcement. Driver are desires which may be of primary or secondary. Cue is a

weaker stimuli. The response is an answer to diver or cue. Reinforcement strengthens the

rewarding past experiences by repeating the purchase of the same brand whenever the

same thing is needed.

PSYCHO ANALYTICAL THEORY

Psycho-analytic theory was developed Sigmund Freud. It has three elements

namely, id, ego and super ego. Id deno’es the free mechanism which leads to strong drives.

Ego weighs consequence of the act instead of rushing blindly into the act. Super ego tries

to keep the acts morally right. The buyer behavior relies on the relative strength of these

three elements. Sometimes there may be a conflict between the elements of id and super

ego. Ego maintains the balance between the id and the super ego.

SOCIO-CULTURAL THEORY

This theory is also known as group theories. This theory considers man as a social

animal. The person’s buying decisions are influenced by the family and society. His wants

and behaviour are largely influenced by the group to which he belong. Other groups like

cultural groups, reference groups, social classes, family are also influence one’s buying

decisions.

What is consumer behaviour?

Consumer behaviour is to do with the activities of individuals in obtaining and

using the goods and services. Consumer behaviour is all the psychological, social and

physical behaviour of potential customers as they become aware of, evaluate, purchase,

consume and tell others about the products or services.

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Consumer behaviour Vs Buyer behaviour:

Buyer behaviour focuses on the behaviour of a particular individual who purchases

the product even though that person may not be involved in either planning the purchase

or using it. Consumer behaviour involved in planning, purchasing and using economic

goods and services.

Steps in buying process:

The consumer buying process is a five step activity. These five steps are 1. Need

recognition 2. Information search 3. Evaluation and intention 4. Purchase decisions 5. Post

purchase reaction.

1. Need recognition:

Need recognition is the awareness of the want or a desire or a consumption

problem without whose satisfaction the consumer feels restless and tension charged.

2. Information search:

Consumer interest is indicated in the consumer’s willingness to seek further

information about product or service. Since there are variety of products and he seeks to

have maximum satisfaction, he searches relevant information. Consumer has many

alternative sources of information to tap such as friends, relatives, neighbours, salesmen,

dealers, advertisements, packages, and above all consumer organisations. Consumer tries

to get up to- date and adequate information regarding the products and services he wants

to go in for.

3. Evaluation and intention:

The evaluation stage is the stage of mental trial of the product or a service. In

evaluation stage, the consumer assigns relative values or weightages to different products

or services based on the accumulated information and judges the relative worth of

alternative products or service from the angle of want satisfying potential. The final

purchase depends on the relative strength of the positive intention to buy. In evaluating

the alternatives many values are taken into account such as product characteristics, brand

images, trade-offs, facilities and concessions.

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4. Purchase decision:

It is the positive intension of the consumer that leads to a purchase decision.

Decision to purchase implies consumer commitment for a product or a service. Practically,

it is the last stage in the buying process because, it completes the exchange process.

5. Post purchase reaction:

Post purchase behaviour or reaction stands for the behaviour of a consumer after

a commitment to product has been made. This post purchase experience may be a set of

positive or negative feelings. Positive feelings or satisfaction will result in repeat sales or at

least recommending the products or services to others: on the other hand, dissatisfaction

or negative feelings creating anxiety and doubts.

Maslow’s Classification of Basic Needs

A.H. Maslow has classified human needs into five in a pyramid form called

“Hierarchy of Needs” as given below:

Self

actualization

Self esteem

Love and belongingness

Safety and Security

Physiological needs

Physiological needs:

Physiological needs refers to the basic needs and have the first priority. Until these

needs are satisfied, other needs are of no significance. Need for food, cloth, shelter are the

examples of physiological needs.

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Safety needs:

This type of need arises to ensure economic and social security. For eg. The need to

oneself from physical harm, to obtain security and safety from unexpressed dangers like

accident.

Social needs:

Social needs are also known as belonging and love needs. This is the need for

affectionate relationship with others in the society.

Self esteem needs:

This type of need arises to achieve self-respect and prestige in the society. Purchase

of luxury items like T.V. Fridge is in majority cases made to satisfy this need.

Self Actualisation (Realisation):

Self actualisation needs are the result of a person’s desires to achieve the maximum

of his capabilities. Fulfillment of this type of needs depends primarily upon the satisfaction

of the basic needs.

FACTORS INFLUENCING CUSTOMERS BUYING BEHAVIOUR:

1. Personal factors

These include factors unique to a particular person. Numerous personal factors

influence purchase decisions:

a. Demographics

Individual characteristics such as age, sex, race, ethnicity, income, occupation

and family life cycles are called demographics. These have a bearing on who

is involve in family decision making.

b. Life style

Life style means an individual’s pattern of living expressed through activities

interests, and opinions. Life style patterns includes the ways people spend

time, the extents of their interactions with others and their general outlook

on living and life.

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c. Situations

Situational factors are influences resulting from circumstances, time and

location that affect the consumer buying behaviour.

2. Social factors

The factors that other people exert on buying behaviour are called social factors.

These factors as follows:

a. Roles and family

Role means the actions and activities that a person is supposed to perform.

A person occupies several positions and therefore he or she has many roles.

For example, a man may perform the role of a son, husband, father,

employer or employee. An individual roles influence both general behaviour

and buying behaviour.

b. Reference group

A reference group is any group that exercises a positive or negative the

influence on a person’s attitudes, values and behaviour.

c. Opinion leader

The reference group members who provides information about a specific

sphere that interests members of group is called an opinion leader.

d. Social classes

A Social class mean an open group of individuals with similar social rank.

Quite often people in a society are classified into upper, middle and lower

classes on the basis of their income and occupations.

e. Culture and sub culture

Culture is the aggregate of customs, believes, values and objects that a

society uses to cope with its environment and passes on to future

generations.

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3. Psychological factors:

Factors that operate within individuals and determine their general behaviours are

as follows:

a. Perceptions

Perception is the process of selecting, organising and interpretation information to

derive meaning. Different people perceive the same thing at the same time in

different ways.

b. Motives

A motive means an internal force that orients a person’s activities towards need

satisfaction. A set of motives affects the buyer’s actions. Motives that influence

where a person buys products on a regular basis are known as patronage motives.

c. Learning

Changes in an individual behaviour due to information and experience are called

learning. The consumer tends to repeat purchase actions which create satisfaction.

d. Attitudes

Attitudes refers to an individual’s enduring evaluation feelings and behavioural

tendencies toward an object or idea. For example, everyone has attitudes towards

religion, politics, food, sex and music.

e. Personality

Personality refers to a set of internal traits and distinct behavioural tendencies that

result in consistent patterns of behaviour.

f. Self concept

Self concept or self image means a persons perceptions or view on himself.

Individuals develop and alter their self concept through interaction of social and

psychological factors.

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Types of Buying Behaviour :

1. Complex buying behavior: This type of buying behaviuor is found when the

consumers are highly involved in a purchase and aware of significant differences

among brands.

2. Dissonance-reducing Buying Behaviour: Consumer go through dissonance-

reducing buyer behavior when they are highly involved in a purchase but sees

little difference in the brands.

3. Habitual Buying Behaviour : Consumer go through habitual buying behavior,

when the consumers have low involvement and there is lack of significant brand

differences.

4. Variety Seeking Buying Behaviour: Here the consumers’ involvement is low but

brand differences are significant. Consumers are often do a lot of brand

switching.

BUYING MOTIVES OF CONSUMERS

A buying motives means what induces a consumer to buy a product. There is a

buying motive behind every purchase. But the motive may differ from one buyer to

another. Buying motives may be classified as follows:

1. Internal and External Motives

Internal buying motives are inherent in the minds of consumers. They arise from

the basic needs like hunger, safety, comfort etc.. Internal buying motives may be

rational or emotional.

External buying motives are those which a customer learns or acquire from

his environments. Social status , social acceptance etc., are the examples for such

motives. Income, education, occupation etc., influence external motives.

2. Rational and emotional motives

Rational buying motives are those which are based on logical reasoning and

consideration of economic consequences. They include the cost durability and 69

dependability of the product or service. Emotional buying motives are based on a

personal feelings. These motives includes ego, prestige, love and affection etc.,

3. Product and patronage motives:

Product motives are of two types: 1, Primary, 2. Secondary. Primary buying motives

are the reasons due to which consumers buy one class of products rather than

another. These motive arise directly from the human needs and wants. These

includes the desire for health, beauty, knowledge, relaxation, recognition etc.,

Secondary buying motive induce consumers to buy certain kinds of products. This

include desire for convenience dependability, durability, economy etc. When the

consumers purchase the goods or services on the basis of particular price, special

discount, present price, decoration behaviour and other facilities are known as

patronage motives.

Product Life Cycle

Introduction

Like a human being a product has also a certain length of life. Again like a human

being a product has also to pass through certain identifiable stages in its life. The life

cycle of some products is very short such as fashionable readymade garments. On the

other hand some are the products whose life cycle goes on up to a long period such as

machine. It is also important to note that some of the products come out of the market

even before passing through all the stages of their life cycle in the some manner as some

persons die in childhood or at young age. Product Life Cycle ( PLC) can also be divided

into five parts viz, a ) Introduction b) Growth c) Maturity d) Saturation , and e) Decline.

These five stages are collectively known as the life – cycle of a product.

Definitions

Some of the important definition are as under

The Product life cycle is an attempt to recognize distinct stages in the sales history

of the product”.70

The life cycle of a product has many points which are similarity with the human

life cycle. The product is born, grown lustily, attains dynamic maturity then enters its

declining year”.

“From its birth to death, a product exists in different stages and in different

competitive environments. It is an adjustment to the environment determines, to a great

degree just successful its life.

Different Stages in the life cycle of a product

There are five stages in the life cycle of a product. The description of each stage is

given below.

1) Introduction or Market Pioneering

a) The new product is first launched.

b) Profits are negative ( or ) Low.

c) Sales are very Low.

d) Promotion spending is relatively high.

e) The company might adopt one of several marketing strategies for

introducing new product.

f) Awareness in market is low.

g) Cost of marketing is high.

2) Growth or Market acceptance stage

The product has given satisfaction to the first buyers.

a) Sales increase quickly.

b) The product starts produce profits.

c) New competitors will enter into the market.

d) In this Growth stage the firm uses several strategies in product features

and models.

e) In this growth stage spending a lot of money on product improvement,

promotion and distribution.71

f) New buyers appear.

3. Maturity

a) In this stage the product reaching its maturity.

b) The sales are good and sales of the product increase.

c) Keen competition increases.

d) Profits also increase and competitors appear along with substitute products

in large number.

e) Additional expenses are involved in product modification and

improvement.

4. Saturation

a. The sales are at the peak and further increase in not possible.

b. The demand for the product is stable.

c. The rise and full of sale depend upon supply and demand.

d. In this stage a replacement of product is needed.

5) Decline

a) Sales start declining , buyers go for better products.

b) The product cannot stand in the market.

c) Many firms withdraw their product from the market when sales and profits are

decrease.

d) Price becomes a competitive weapon.

e) In this stage firms shift their attention to other products.

Recent Issues And Developments in Marketing

The following points are considered as the recent issues and developments in

marketing.

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1. Social Marketing

2. Green Marketing

3. Marketing Ethics

4. Online Marketing ( or ) E – Marketing.

5. Telemarketing.

Social Marketing

Marketing can be used to bring not only products and services but also social cause

to the attention of a market. In recent times, an increasing number of non – profit

organizations are getting involved in the last type of marketing namely social cause of

social change. The social cause includes population control, energy conservation,

environmental protection and cigarette smoking, drug control etc.

In the words of Philip Kotler, “Social marketing is the design, implementation and

control of programme, seeking to increase the acceptability of a social idea, cause or

practice in target group”.

2. Green Marketing

Green Marketing is also known as ‘Environmental Marketing’ and ‘Ecological

Marketing’ . It came into prominence in the late eighties and early nineties. Green

Marketing means the development, pricing, promotion and distribution of products that

do not harm the environment.

3. Marketing Ethics

Marketing ethics may be defined as principles that define acceptable conduct in

marketing. These principles or standards encourage marketers to conform to society’s

expectations.

4. Tele Marketing

Telemarketing is the performance of marketing related activity by telephone. In

recent years, telemarketing has become a major tool of direct marketing. Some

telemarketing systems are fully automated.

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5. Online Marketing

Online marketing is also known as “internet marketing” and “web marketing”.

Online marketing is the process of building and maintaining customer relationship through

online activities to facilities the exchange of ideas, products and services that satisfy the

goals of both the seller and the buyer.

Philip Kotler, An online marketing channel is one that a person can reach via-

computer and modem. A modem connects the computer to a telephone lines so that the

computer user can reach various online information services.

TRB - 2006-2007

1. Marketing is a (an)

a) Social process b) Economic process

c) Exchange process d) Social & Economic process

2. Which of the following is not related to dimension of product concept?

a) Managerial dimension b) Price dimension

c) Consumer dimension d) Social Dimension

3. From the following figure point out correct alternative market coverage strategies:

a) Differential marketing b) Undifferential marketing

c) Concentrate marketing d) none of these

4. Dividing a market into distinct groups of buyers is known as

a) Market positioning b) Market segmentation

c) Market division d) Consumer needs division

5. The global marketing concept refers to

a) Mass market b) Universal market

c) International communication & Transportation

d) mass market & universal market

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MarketCompany market mix

TRB - 2011-2012

1. The approach that considers all the middlemen and institutions in distribution channel is

a) Management approach b) Commodity approach

c) Institutional approach d) Functional approach

2. The variables – lifestyle, personality and values are considered for

a) Behavioural segmentation b) Demographic segmentation

c) Geographic segmentation d) Psychograhic segmentation

3. A pipeline through which a product flows on its way to the consumer is

a) Middleman b) Retailer c) Channel d) Distribution

4. The recent innovation which combines the features of a supermarket and a general merchandise store is

a) Retailing b) Hypermarket c) Chain store d) Departmental store

5. Price that is fixed at a full number is known as

a) Customary price b) Prestige price c) Psychological price d) Odd price

TRB – 2012-2013

Unit – I

1. Modern marketing isa) Consumer oriented b) Production orientated

c) Exchange Oriented d) Sales oriented

2. Which is the key element in the marketing mix?a) Product b) Price c) Brand d) Package

3. Resident buyer is known as

a) Retailer b) Agent c) Brokers d) Wholesalers

TRB – 2013-2014

Unit – I

1. Low price is fixed for the product undera) Penetration pricing b) Skim and cream pricingc) Follow the leader pricing d) Olisgpolistic pricing

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2. In marketing the delivery of Std of living concept is originated by

a) Peter E. Drucker b) F.E. Clerk c) William J. Standon d) Paul Mazur

3. Which one of the following denotes a combination of various elements of marketing?

a) Promotional mix b) Product mix c) Marketing mix d) Distribution mix

4. Marketing is purely a management function. This concept comes under

a) Functional Approaches b) Institutional Approach

c) Decision making approach d) Product approach

5. In what pricing method , the last unit is taken as base for pricinga) Cost plus pricing method b) Rate of return pricing methodc) Break-even pricing method d) Marginal cost pricing method

TRB – 2015-2016

1. Personal factors influencing buyer behaviour include

A. Social Class B. Attitudes and beliefs

C. Personality and self concept D. Family.

2. Elimination of middlemen is practically

A. Impossible B. Possible

C. Reduce the channel post D. Reduce the channal function

3. Modern marketing starts and ends with

A. Distributor B. Consumer C. Wholesaler D. Retailer

4. Functional approach to the study of marketing was designed by

A. Stanton B. A.H. Shaw and L.D.H. Weld

C. J.F.Pyle D. Duddy and Revzan

5. Market segment is

A. Market oriented philosophy B. Competitions oriented philosophy

C. Sales oriented philosophy D. Customers oriented philosophy

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TRB 2016-2017

1. Relationship concept of marketing is about _________

a) Competitor analysis b) Mass advertising

c) Building long term trusting d) Production analysis

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2. In Marketing mix, the term place denotes:

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3. Market segmented on the basis of family size is calleda) Demographic segmentation b) Geographic segmentationc) Economic segmentation d) Benefit segmentation

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4. The purpose of Going rate price isa) Different price for different consumes b) Pricing as per Govt. Policyc) Pricing as per demandd) Keep the price at the same level of competition

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5. Maturity stage of the product life impliesa) Supply exceeds demand b) Demand exceeds supplyc) Stagnated supply d) No change in the supply

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