MARKETING MANAGEMENT - WordPress.comOct 21, 2015 · concepts, we have coordinated marketing management to achieve twin goals of consumer satisfaction and profitable sales. However,

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M A R K E T I N G M A N A G E M E N T

21.1 CONCEPT OF MARKETING The industrial revolution marketing management has undergone four stages in marketing concept

• Production orientation concept • Sales orientation concept • Customer orientation concept • Social orientation concept

Production orientation concept: It implies that management firmly believes that if we have a good product,

customer response is bound to be favorable and we will need very little promotion efforts. This was the marketing philosophy till 1930. Under this concept there was no need of marketing effort provided a product is good and its price is reasonable.

Sales orientation concept (Selling concept) : It points out that we cannot have enough customer response without promotional efforts. Even the best product cannot have assured sales without the help of sales promotion and aggressive salesmanship. This concept gives stress on high-pressure salesmanship to secure marketing success. Such a marketing concept, points out that goods are not bought but they have to be sold with the help of salesmanship, advertising and publicity. This concept is still popular in automobiles and pharmaceutical marketing.

Customer orientation concept (Marketing concept): This is also called as Modern marketing concept introduced after 1950. This concept points out that the primary task of business enterprise is to study needs, desires and values of potential customers and on the basis of latest and accurate knowledge of market demand, the enterprise must produce and offer the products which will give the desired satisfaction and services to the customers i.e. much better than the competitors. The essence of marketing concept is that the customer and not the product shall be the center or the heart of entire business system. It emphasized the customer-oriented marketing process. All business operation revolves around the customer satisfaction and service. Marketing plans, policies and programme are formulated to satisfy the customer’s demand. Marketing research and marketing information, service is expected to provide adequate, accurate and latest information regarding target, markets and current customer wants. The entire marketing mix will be formulated on the basis of marketing information and research. The marketing concept is built upon following premises: Customer orientation: The essence of modern marketing concept is that firm must produce what the market

needs. All elements of business should be geared towards the customer’s satisfaction. Corporate plans, programs and operations must be focused around customer needs and desires.

Marketing information system : The marketing concept also emphasizes the role of information as the key to both customer satisfaction and profit. Customer requirement can never be satisfied without integrated marketing programme based upon adequate and accurate information about customer, customer needs and competition. Information is a vital resource in planning-action-control process of management.

System approach : System approach adopts a unified view on study of marketing. All marketing activities must be properly integrated and coordinated to accomplish a set of objectives.

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Dual objectives : Marketing concept advocates serving the consumers and maximizing profit at the same time. These objectives, though conflicting, can be reconciled i.e. profit can be obtained via. customer satisfaction.

The marketing oriented company adopts these premises. At present to growth of consumerism, these concepts hold a strong presence. Any company adopting the marketing concept has three distinguishing features.

1. It has market or customer-oriented approach in business planning. 2. Corporate goals are given top priority. 3. It has system approach in planning, organizing, controlling and coordinating its entire business as

one system to achieve the overall corporate objectives. 4. It has an adequate and prompt market information system and marketing research approaches to

find the customer’s requirement and measure the customer perception or satisfaction towards the product, company has offered to customers.

Social orientation concept: It is a broadened marketing concept. An environmental trend like public welfare, concern of better living environment or quality of life etc. indicate that organization would have to adopt socially responsible marketing policies and plans in order to assure social welfare in addition to consumer’s welfare. Under the marketing concepts, we have coordinated marketing management to achieve twin goals of consumer satisfaction and profitable sales. However, under broadened societal marketing concept, marketing management has to create and deliver not merely material standard of living but also a better quality of life - free from ecological pollution. On top of this, other aspects like free from child labor, environmentally friendly products, recycled papers, less harm to animal etc. are also other aspects of societal marketing concept. The fundamental difference between selling and marketing concept is given on figure 21.1.

Figure 21.1: Difference between selling and marketing concept

However, at present none of the pure form of above marketing concept is applicable. Present marketing concept is a merged selling concept, marketing concept and societal concept. Under this approach, the marketing research is fundamental which provides adequate information about the consumer’s want or need. An organization provides or produces a societal benefits products/ services according to consumer’s need and place on the market via massive promotion strategies. The promotion aims not to push the product but to make aware of the products, its characteristics and benefits as well as social aspects, so that the consumer could make a fair choice among various substitutes. 21.2 MARKETING AND ITS FUNCTION 21.2.1 DEFINITION As studied in the concept of marketing, the definition of marketing is also varied according to the concept. The concept has shifted from product oriented to society oriented. Some definitions expressed below given by various marketing dignitaries are as follows.

• Marketing comprises both buying and selling activities. • Marketing is the economics by which the goods and services are exchanged and their values determined

in terms of money price • Marketing is the performance of business activities that direct the flow of goods and services from

producer to consumer or user.

Products: some thing that had to be sold to the

customers.

Selling and promotion

Profit through sales volume

Products: to satisfy the customer’s need & are bought by the customer

Integrated marketing mix

Profit through customer’s satisfaction

Means Objective Selling

Concept

Marketing concept

Focus

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These are some definitions that reflects the old concept i.e. product oriented and selling oriented. However, the modern definitions of marketing are primarily based on marketing concept and societal concept. Some modern definitions of marketing are as follows:

• Marketing is the process of discovering and translating consumer’s want into product and service specification and then in turn helping making it possible for more and more consumer to enjoy more these products and services.

• Marketing is a matching process by which a producer provides a marketing mix (product, price, promotion and distribution) that meets the consumer’s demand of a target market within the limit of society.

Whatever be the definitions of marketing, today’s marketing need to explore consumer’s need and should seek the growth of organization by satisfying consumer and societal needs. 21.2.2 MARKETING PROCESS The marketing process brings together producer and consumer the two main participants in exchange. The market uses marketing research as a tool to anticipate market demand. Then he provides a marketing mix in order to capitalize marketing opportunity. An exchange or a transaction takes place when the market offer is acceptable to the consumer who is prepared to give something of value (money) in return against the product so bought. In the process of exchange, both give something and both gain something. It is a win-win situation, where the producer gets the value addition in form of profit and consumer gets the surplus value in form of utility or satisfaction. However, this transaction does not occur in a close system, there is an external environment e.g. society, government, media, which is directly affecting both producer and buyer. Thus, marketing is not solely an economical phenomenon; it is a social phenomenon too. Thus, a modern marketing calls upon to demonstrate simultaneously higher level of economic performance and fulfillment of social responsibility. This only could give a sustainable growth and prosperity to organization. The modern marketing process is shown in figure 21.2.

Figure 21.2: Modern marketing process

The marketing process has the four components. They are:

• Marketing management • Marketing channels • Marketing functions • Market demand

Discussion on marketing process starts with the market demand and ends with the marketing management. The marketing process showing all four components are shown in the figure 21.3.

Market anticipation

Producers

Exchange something of value

Good flow

Good flow

(Money flow)

Consumers

Marketing mix

(Consumer demand)


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Figure 21.3 : Marketing management serving demand through distribution structure

. 21.2.3 MARKETING FUNCTION Function of marketing may be summarized as:

Contractual: The searching of buyers and sellers. Merchandising: Matching the products to consumer needs and desire (the marked requirement). Pricing: Determining the optimum price. Promotion: Persuading the buyers to favor the firm and its product. Physical distribution: Transport, warehousing and inventory control.

21.3 MARKETING MANAGEMENT AND ITS FUNCTION The marketing management may be defined as the process of management of marketing programs for the accomplishment of the organizational goal and objectives. The process of management is a set of managerial function known as planning, implementing and the control of the programs to achieve the predetermined objectives. Marketing management thus plans, implement and control the marketing programs. It is directly in a charge of:

• Setting the marketing goals and objectives. • Planning the marketing mix. • Organizing the marketing function. • Implementation and control of marketing programs.

This management process is influenced by external and internal environment of firm. As we have discussed the present philosophy or concept, marketing is not limited to selling of goods or services rather oriented towards consumer and social satisfaction. The marketing programs should be planned and implemented towards the same direction. Marketing management represent the important functional area of business management, which basically carry out the flow of goods and services from the producer to consumer. Marketing management thus performs all the managerial function (as discussed above) shown on the marketing management process diagram as shown in figure 21.4.

Figure 21.4: Marketing management process The individual function of marketing management is dealt under separate headings as follows: 21.3.1 SETTING OBJECTIVES The objective of marketing management should be derived from the overall corporate objectives. These marketing objectives are generally of two types:

(i) Sales target (ii) Market share

The first objective i.e. sales target may is not considered good objective compared to second one i.e. market share. Achieving sales target is of short-term vision, and sales target may be obtained by the loss of market

Flow of information and money

Flow of information and goods

Feedback

Setting objectives • Analyzing the market opportunity • Analyzing the environment • Analyzing the firm objective

Planning the marketing

mix

Organizing for implementation Controlling

Marketing management

Marketing agencies

Channels of distribution

Marketing function

Marketing demand


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share too. Hence, expand of market seems to be adequate marketing objective in long term and normal conditions.

Besides the market share, the other objectives may be: (i) Building strong brand image/ Institutional image (ii) To build or maintain strong distribution channel (iii) To cultivate new market. (iv) Add / delete / modify the existing product line.

The marketing management generally seeks to attain a set of objective rather than a single objective. Secondly the objective should be compliable to each other. The objective should not be vague and better to be expressed in quantitative term. These objectives are to be separated by long term (strategical) and shot term (tactical) for eased implementation and monitoring. To set the objective, the marketing opportunity analysis is must important because the sales are the function and effect and opportunity given as : S = f (E, O) where E = Effect, O = Opportunity The data obtained from marketing research or MIS are analyzed to find the opportunity and the level of effort are then determined to grasp the opportunity. 21.3.2 PLANNING THE MARKETING MIX Marketing mix is the marketing managers instrument for the attainment for marketing management objective. These are the input in the marketing system, which include product, price, promotion and distribution related activities. These elements of marketing mix constitute the core the marketing process (refer figure 21.2). The marketing manager can use this tool according to his needs and benefits or to conquer over the competitors’ strategy or to penetrate new market. That is marketing mix is only variable in entire marketing system, which can be manipulated by the manager. The major component of marketing mix are:

• Product planning and development (Product mix) • Distribution channels and distribution (place mix) • Promotion (Promotion mix) • Price (Price mix)

The individual mix and their contents are shown in following figure 21.5

Figure 21.5: Element of marketing mix Product planning and development A most powerful competing instrument on the hand of marketing manager is his product. If the product is not sound, no amount of promotion and physical distribution or price reduction will help him to achieve the marketing objectives. The marketing manager, therefore always aims at matching his product line with the market characteristic and customer need as far as possible. Since the dynamic nature of market and consumer demand, the marketing manager continuously need to review his product line, like deleting any line or product, additional new line or product or product modification. These needs are satisfied by good products planning and development. Distribution channel and physical distribution After having determining his product line offering, marketing manager has to develop an institutional structure for making his product available to his customers at right time and right place. The distribution structure may be composed of his own company, whole sellers, retailers and other marketing intermediates. The combination of channels through which the product flows from manufacturer to the customers is called distribution channels.

Product mix Brand, Style, Color, Design, Product line, Package Warranty, Service

Price mix Price strategy, Price, Policy, Bank price, Discount, Allowance

Marketing Strategy Marketing mix focus

on target market Promotion mix

Personnel selling, Advertising, Publicity, Sales promotion (Dealer , Consumer)

Distribution Channel Wholesaler, Retailer, Agent.

Physical distribution Transport, Warehouse, Inventory


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The channel selection decision of a marketing manager is based on the identification of target markets and understanding and potential customer buying behavior as well as product characteristic. The marketing manager of shopping goods such as soaps may seek to use all the available retailing outlets. In the other hand if the product is specialty goods such as refrigerator, he may choose selective distribution. Physical distribution function constitutes and important element of the marketing mix, not only because the product need to be moved from the point of production to the point of consumption, but also because the transportation and warehousing cost are significant portion of the total marketing cost. The marketing manager is always willing to use the right method of physical distribution so as to minimize total physical distribution cost and make product available to his customer at right place at right time. Promotion The promotion aim to establish a sound communication between produced and consumer. Advertising is the most widely used promotion method. The other promotion tools are personnel selling, sales promotion, publicity etc. Their tools may be used depending on the product, product lifecycle or strategy developed by company. Advertisement and sales promotion will be dealt on details on succeeding topics . Pricing Pricing has the important bearing on the competitive position of product. It is the major determinant and the sales volume and market share. It also affects the company revenue and profit. The manager may use the pricing mix as the tool for achieving the target market share, target sales volume or even met or prevent competitions. While determining the price of any commodities the management seek towards:

• Condition of production • Whole sellers and retailer margin • Cost of physical distribution • Other selling expenses • Competitors price and policy • Estimated demand at various level of price • Targeted market share and sales volume

On the analyzing those mentioned factors, manager develops the price strategy, pricing policy, basic price, discounts, allowances etc. Pricing and method of pricing will be dealt on details on succeeding topics. 21.3.3 ORGANIZING THE MARKETING FUNCTION The organizing the marketing function or simply (but not totally) determination of marketing organization structure is depended on the marketing policy, objective and marketing mix. We know, objectives are broken down to various activities and similar activities are grouped as a job and a job determine the function to be carried out. A marketing organization might be based on the product line or based on the customer type or may be a geographical type. Generally functional approach is satisfactory for marketing organization. Under functional view, the function determines the form of organization and the structure. The marketing organization by function is based on the important marketing functions such as selling, marketing research, MIS, advertising, sales promotion, physical distribution, branding, product planning and development etc. A simple type and marketing organization is given on figure 21.6.

Figure 21.6 : Functional structure of marketing organization

General Manager

Marketing Manager

Product or Brand Manager Office

Manager Sales

Manager Advertising and

Promotion Manager Physical Distribution

Manager


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21.3.4 CONTROLLING Controlling involves the evaluation of performance against objectives, plans and policies; identification of deviation and taking corrective action to ensure that the plans and policies are effectively implemented and objective will be achieved in future. Effective controlling requires continual feed back of performance data at appropriate point of organization. Sales man’s report, sales data, customer complain, competitors marketing strategies, marketing research reports, personal observations etc. are important source of information feedback. A marketing manager should build an adequate feed back system and procedure for analyzing feedback data against the standards and taking corrective action for improving the future performance. Process of marketing control is given on figure 21.7. Similarly, relation between marketing plan and control is shown on figure 21.8. The overall marketing function is summarized on figure 21.9.

Figure 21.7: Process of marketing control

Figure 21.8 : Relation between marketing plan and control

Figure 21.9: Marketing management function

Marketing Pl

Implementation of plan

Establish new plan

Marketing Control:

Compare the plan with

Not significant difference

Significant difference

Corrective action

Establish standard

Measure the actual performance

Marketing objective Taking the corrective

action or plan reformulation

Compare actual performance with

standard

Marketing management

Marketing research and information - Marketing

information system

- Marketing research project

- Market segmentation

- Distribution cost analysis

Product and pricing - Product research - Product

development - Packaging - Branding - Pricing - Warranties - After sale service

Planning and control

- Sales forecasting - Marketing mix - Annual

marketing plan - Budgeting and

control

Promotion - Management

development - Control of sales force - Advertising and publicity - Sales promotion device - Exhibitions and trade

fairs - Public relation - Government relation

Physical distribution - Channel choose and

distribution - Transport - Warehousing - Insurance - Order processing - Protective

packaging - Inventory control


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21.4 MARKETING RESEARCH

21.4.1 CONCEPT Marketing programme start from product idea and does not end and until consumer wants are adequately satisfied. Consumer is the pivot around which the entire marketing operation revolves. Alpha and omega of marketing is the consumer satisfaction. Beginning and end of marketing management is marketing research. Learning more about consumers, dealers and about marketing mix generally is the heart and marketing research. As a business grows larger and as the management becomes more remote from the market place, marketing management has to rely more heavily on marketing research as a managerial tool in solving any problems in the field of marketing. It is a valuable tool in decision-making, based on scientific investigation and analysis of a marketing problem. The marketing research supplies the missing link between the producer and consumer as shown in figure 21.10

Figure 21.10 : Marketing research linking between producer and consumer.

There is a difference between market research and marketing research. The marketing research is the systematic gathering recording and analyzing of data about the problems connected with the marketing mix i.e. product, price, promotion and distribution. Market research is concerned with research about the potential buyers i.e. it deals with research on the consumer demand e.g. behavior and attitude of consumer, dealers, and analysis of market share. To sum up market research is primarily concerned with investigation, analysis and measurement of market demand. The research area in marketing management is shown in following figure 21.11. Marketing manager face numerous problem from time to time during the conduct of marketing activities. They need information upon which they may take proper decisions. Manager is by profession a decision maker. Decision-making involves a perpetual choice making activity. From the given alternatives one alternative is selected as the most promising course of action or behavior. In sense decision-making is the essence and management. Marketing research help marketing manager to select best alternative among existing alternatives i.e. for decision making on complex marketing problem. Decision making process involves 6 steps: (i) Define the problem (ii) Search and develop alternative solution (iii) Analysis, evaluate those alternative (iv) Decide upon the best solution or select the best alternatives (v) Implement the decision, take action or execute plan (iv) Follow up the decision till expected result is obtained. Research take is purely staff function (refer organization structure). Marketing researcher is only an adviser offering expert guidance and advice to the marketing executive in the conduct of business. He helps them to do their job better and makes their work and decision making easier by providing information upon which executives can take sound decisions and action. He can improve the quality of marketing decisions and reduce visit and uncertainty in decision to the minimum. However actual decisions are made by manager and the are fully accountable for the results of their action.

Gap

Customer

Dealer

Sales

Production

Research and

engineering

Customer

Dealer

Sales

Production

Research and

engineering

Marketing Research

Producer

Consumer

Condition “A” Relationship, which exists between manufacturer, and customer under condition and one-man ship.

Condition ‘B” In the large modern business institutions, the produced has become separated from the customer and the intimate relationship no longer exists.

Condition “C” Marketing research supplies the missing link to the broken chain and thus rejoins the produced and consumer.


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Figure 21.11 : Research area in marketing management

21.4.2 IMPORTANCE AND MARKETING RESEARCH The importance of marketing could be described as under following headings. (i) Ever expanding markets require numerous middlemen between producer and consumer. Each middleman

erected a sort of wall, which blocked the backward flow of communication regarding consumer needs and dealer needs to the manufacturer. However the increase in number and such block create a chronic gap of communication – lack of returned flow or feeding back of information from consumer to producer. The widening of communication gap is the chief single factor for increasing importance of marketing research to fill up the communication gap between the consumer and producer. Marketing research alone can provide first-hand knowledge and consumers and changes in the pattern and demand refer figure 21.10.

(ii) Emergence of buyer's market and increasing competition demanded continuous need of marketing research

to ensure maximum consumer satisfaction and repeat purchase and to lay down appropriate marketing strategies to meet competition, to survive and grow in a competitive market. Marketing research can establish best positive correlation between the product/brand and consumer needs and preferences.

(iii) There is nothing permanent except change. Change alone is constant. Change is the essence of life and is

the common denominator in planning, organizing, motivating and controlling marketing activity. Marketing research enables management to anticipate met and adopt change. It further accelerates management creativity to cope with the changed condition, particularly in consumer demand. The real challenge of marketing management is to firmly believe that changing a business – finding its new role, new customers, new products, new markets – is even more important than efficient operation of business. Marketing research can easily help management in managing profitably marketing change.

(iv) Marketing research can solve the problem of catching up with new development brought about by

unprecedented growth of science and technology. It can help management is bring about prompt adjustment and innovations in product design, packaging, advertising, sales promotion and distribution policies so that the business can keep itself up to data in the dynamic market place.

21.4.3 AREA OF MARKETING RESEARCH The area and marketing research is unlimited due to dynamic nature of market and marketing problems. The major area can be classified as (i) Market research (ii) Product research (iii) Price research (iv) Promotion research (v) Distribution research The elements and these researches are shown in figure 21.11.

Marketing research • Marketing

segmentation • Buyer behavior

and attitude • Forecasting of

demand • Dealer behavior

and attitude • Competition • Forecasting of

business condition and market trends.

Product Research • Quality • Feature • Style : color, size,

shape, beauty • Brand name,

brand image • Packaging

research • Product line • Warranties • After sale service • Developing new

product

Price research • Price level • Price policy • Discounts and

allowance • Terms of

payment

Promotion Research • Personal selling • Advertising and

publicity • Sales promotion • Public relation

Distribution Research • Channel choice • Distribution coverage • Outlet location • Sales territories • Inventory levels and

location • Transportation • Ware housing • Order processing

Marketing related h


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21.4.4 OBJECTIVES OF MARKETING RESEARCH The major objective of marketing research are as follows: (1) Formulation of all marketing plans, policies, programmer and procedures. (2) Evaluation of plans, policies etc when they are brought in to practice. (3) Reducing and minimizing all marketing cost particularly selling, advertising, promotion and

distribution cost. (4) Solution or optimization of marketing problem on each element of marketing mix i.e. product, price,

promotion and distribution. (5) Marketing research assist the survival and growth of industry by anticipating the dynamic nature of

market and economy. (6) Marketing management through marketing research can bring about the sales of right product (brand

and package) through right channels to right customers at right place and at right prices by evolving right plans, policies and programmes with the help of right personnel.

(7) The main objective of marketing research is to enable manufacturer to makes good acceptable and sale-able and to see that they reach the market more easily, cheaply and profitably with out scarifying the consumed interest.

With adequate knowledge of obtained by marketing research the following benefits are offered: (i) Producer need net make unwanted goods and need not offer those through wrong outlets to persons

who are not interested. (ii) Merchants need not stock unwanted goods, offer them at the wrong season in the wrong quantities or at

wrong prices. (iii) Advertisers need not make mistakes in what they say, to whom they appeal and how they appeal to the

audience. In short marketing research enables producers, merchants, distributors and advertisers to avoid mistakes either in manufacturing or in marketing. To that extent it can minimize business failures and maximize profitability. 21.4.5 MARKETING RESEARCH PROCESS Marketing research requires the application of the system approach to the task of collecting, organizing, analyzing and interpreting desired marketing information. This means that each step of research process must be carefully planned, effectively coordinated with all other related steps so that all the steps are properly integrated and executed as specified at the proper time and in the desire sequence. The simplified procedure to carry marketing research is shown in figure 21.12.

Figure 21.12 : Marketing research procedure

Marketing researched is directly concerned with all three-operation input, process and output. Input are data i.e. fact, figure and values often quantified. These data are related to the area of research. It is the skill and talents of researcher who only pick of needed data from the indefinite data pool. The data collection might be primary data or secondary data. The next step is the analysis of the data. These data edited, tabulated and analyzed. Data are make ready for interpretation and ultimately to the recommendation for action to solve the marketing problem. After analysis phase the conclusion and recommendation supported by necessary analysis are submitted as written report and the marketing executives. The report must clearly and effectively point out the relationship among the data, the interpretation and the recommendation. This is the output of research. This output is implemented on action with feedback. 21.5 SALES FORECASTING Sales forecast is an estimate of sales in monetary or physical units, for a specified future period under a chosen marketing plan or program and under an assumed set of economic and marketing environmental forces (planning premises) outside the business organization, for which the forecast or estimate is made. The forecast could be done for entire business performance or for specific line of products as necessary. In spite of more

Feed back

Data, fact figures:

primary or secondary

Input Execute or implement

Output Process


286

refined and quantitative (statistical) techniques usually used for sales forecast the accurate forecast is not possible because of changes in forecast premises. Judgment is still an important element in all forecasting. 21.5.1 INTERACTION ABOUT BASIC TYPES OF FORECAST As it is discussed, sales forecast is a prediction of the sales volume actually expected by the company during the stated period and is usually more than one year. It is based on the assumed marketing programme for exploiting available market potential. It is an estimated sales volume under a given plan of marketing action. The sales forecast is a sub-system of industry (market forecast), which is also a sub-system of national or economic forecast. Interaction of basic type of forecast is shown on figure 21.13.

Figure 21.13: Type of forecast A common approach to sales forecasting as shown in above figure is first to have national economic forecast. It is then used for industry sales forecast. Industry sales forecast is further used to determine specific company sales forecast and product sales forecast. The sales forecast is the foundation of all budgeting and corporate operational plans.

21.5.2 USES OF SALES FORECAST The sales forecast offers the tremendous use benefit to the marketing manager. Some of them are listed below.

• Production planning • Manpower planning • Cash-flow planning • Inventory control • Purchase planning • Capital investment planning • Dividend policies • Pricing policies • Promotion policies • Sales quota for salesmen and distributors

There can be no effective business planning without estimates of sales. Sales forecast or demand forecast is the starting point in customer-oriented business planning. Sales forecast apart from the above-mentioned primary functions, may have other functions related to marketing management may given as :

• Required number of salesman to achieve sales objective. • Allocation of sales quota for each salesman. • Determination of sales compensation plan. • Determination of sales territories. • Advertising and sales promotion programme • Purchase and distribution • Production plan • Regulating inventories and purchasing • Estimating standard cost • Budgeting and controlling expenses • Planning cash requirement

In fact, our entire marketing mixes viz. product, price, promotion and physical distribution revolves round the sales forecast. Sales forecasting acts as the basis not only of production planning and marketing planning, but also financial planning and personnel planning. The master plan or budget or departmental plans and budgets are ultimately based on the sales forecast. Sales forecast is a device by means of which management may integrate its objectives, its operating programme and its targets with potential market opportunity. Thus the sales forecast is in the center of all management activities.

Country level

Economic forecast Market forecast Sales forecast

Industry level Company level

Level & trends of economic activity e.g. recession & prosperity

Market or industry forecast

Company sales forecast or product forecast


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21.5.3 BASIC ELEMENTS OF SALES FORECAST Forecasting means predicting future events by the best possible means. In any sales forecasting analysis, there are four basic elements given as:

(1) Trends (2) Cycles (3) Seasonal variations (4) Irregular (random) variations

Trends (T): Trend refers to a general growth, decline or stationary pattern of demand on the long-time frame. Simply trend is the representative of varied demand pattern on the time frame. For example trend in population shifts, income, culture change are often determined. Seasonality (S): Seasonality refers to the seasonal variation on the demand pattern or data pattern. Here, seasonal does not mean the climatic but it refers to the periodic variation that caused by holiday, climate, festivals, rainfall etc. If week is considered as a period, then the seasonal variation represents the variation and demand on each day. The following table will clarify more about the period demand pattern and number of seasons on that time period.

Period of Pattern Length Number of seasons in that period of pattern Week Month Month Year Year Year Year

Day Week Day Quarter Month Week Day

7 4.5

28-31 4

12 52 365

Cycles (C) : Cycles or cyclical variation are wave like variation that occur every several years. There cycles are often called as business cycle, which consists of a peak demand, low demand and again peak demand time interval. Thus a cycle refers time interval between successive peak demand or successive low demand. Generally one cycle in business for general goods are two to six years. The variations occurring within years are not cycles but are seasonal variations. The cycles are not always clear having distinct and low demand but often they are so irregular that it is difficult to project them. However, cycles are very important in short time business forecasting and medium range business forecasting.

Random Variables (R) : These random variables are irregular variations due to unusual circumstances such as severe weather conditions, strikes, or major changes in product and service. They do not reflect, typical behavior and inclusion in service can distort the overall picture. Whenever possible, these blips should be removed from the data pattern. The above four element is shown in figure 21.14.

Figure 21.14: Elements of sales forecast

O 1 2 3 4

one cycle

Average demand Dem

and

patte

rn

Seasonal peak Trend component

Actual demand line

Years

Irregular variation


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Based on what the people say :-

Attitude and opinion of: • Sales executive • Sales man • Customers • Potential customers • Industry and trade

executives

Based on what the people have done: - • Time series analysis

(Protection trends from time analysis)

• Statistical demand analysis based on correlations and linear regression analysis.

Based on what the people do: - Observing and gathering information (Under real or even stimulated buying conditions) on buyer behavior. • Test marketing • Market audit • Consumer panels • Fashion board

21.5.4 METHODS AND TECHNIQUES OF SALES FORECASTING The methods and techniques of sales forecasting are shown the following figure21.15.

Figure 21.15: Methods and techniques of sales forecasting

Economic forecast – level and trends

Industry activity and forecast

Company sales forecast 21.6 ADVERTISING Advertising as a component of promotion mix, is the form of mass communication. Advertising can be defined as mass, paid communication of goods, service or ideas by an identified sponsor. It is a paid communication because the advertiser has to pay for the space or time in which advertisement appears. Advertising appears in the recognized media such as newspaper, magazine, radio, television, cinema, outdoor hoardings, posters, direct mail and web sites etc. 21.6.1 MERIT AND WEAKNESS OF ADVERTISING PROMOTION TOOL Advertising is a major promotion tool. It offers the following merits in field of marketing.

(1) It offers planned and controlled message. (2) It can contact and influence numerous people simultaneously, quickly and at a low cost per prospect.

Hence it is called mass means of communication. (3) It has the ability to deliver message to audiences with particular demographic and socio-economic

features. (4) It can deliver the same message consistently in a variety of contexts. (5) It can reach prospects that cannot be approached by sales man. (6) It offers a wide choice of channels for transmission of message such as visual, aural and visual. (7) It is very useful to create maximum interest and offer adequate knowledge of the new product when the

innovation is being introduced in the market. Advertising as a promotion tool has the following weakness: (1) It is much less effective than personal selling and sales promotion at later stages in the buying process

e.g. in convincing and securing action. (2) It is less flexible than personal communication. It cannot answer objections called by prospects. (3) It is essentially one way of communication. It cannot obtain quick and accurate feedback in order to

evaluate message effectiveness. In absence of feed back personal salesman becomes necessary. (4) It is most effective communication compared to cost per prospects but very least effective as a tool of

communication. (5) Advertising media e.g. newspaper, magazines carry many message competing to secure attention of

audience simultaneous. Thus it creates noise in communication.


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21.6.2 FUNCTION AND OBJECTIVE OF ADVERTISEMENT Advertising offers the enlisted function on the marketing management, thus these too are the objective of advertisement and a promotional tool. (1) Promotion of new product: Advertising can make prospects at least aware of the entry of the new product in the market. (2) Support to personal selling: Advertising can move prospects nearer and nearer to the point of purchase. Under favorable atmosphere

salesman's job is easier and simple. In real sense, advertisement and personal selling are complementary tools and in no way competitive tools of promotion.

(3) Brand patronage: In long run, effect of advertising on brands and companies may be of great importance. It creates and retains

brand preference and brand loyalty. (4) Immediate buying action : Advertiser may attempt to obtain immediate buying action. (5) Pre-sold goods: Well-advertised brands are pre-sold goods. Buyers are pulled by such advertisement. (6) Dealer support: National or big firms advertise extensively and intensively to support dealers and distributors so that they

can assure accelerate distribution. Advertising alone can create mass market for products, which are intrinsically, sound and can easily fill the customer needs and desires. Mass marketing brings about reduction in the cost of production as well as cost of distributions. Advertising is a powerful promotion tool to establish and retain brand loyalty and even more patronage provided the product itself does not suffer from quality deficiencies, errors in design or other handicaps and the retailers do not have deterioration in their customer services.

21.6.3 MEDIA OF ADVERTISING Various media can be selected for advertisement process. The appropriate selection of media depends on the type of product, types of market, types of customer and their buying behavior, cost of promotion and company marketing policy. Figure 21.16 insights some common advertisement media.

Figure 21.16: Media of advertising 21.7 SALES PROMOTION Sales promotion is referred to activities other than personal salesmanship, advertising and publicity which stimulate consumer purchasing and dealer effectiveness e.g. displays, exhibitions and show rooms, demonstrations, free samples, coupons, premiums and various other non-recurrent selling efforts not in the ordinary routine. It is a plus ingredient in the marketing mix, where as advertising and personal salesmanship are essential and base ingredients in the marketing mix. In short sales promotion is a bridge or a connecting link covering the gap between advertising and personal salesmanship, the two ways of promotion.

Direct mail advertising

Print Media • Newspaper • Magazines • Trade journals • Technical journal and periodicals

Outdoor or Mural • Posters hoarding • Sky Advertising • Electric display • Sandwich boards

Broadcast media • Radio • Television • Film • Screen slides

Transit • Railways • Buses • Aero planes • Sub ways

Other forms • Point of purchase advertising e.g.

advertise on package, window, banner, shelf display

• Advertising specialties e.g. calendars, books, matches, pens, pencils, knives, dairies etc

• Circulars • Sales letters

• Price list • Catalogues • Leaflets • Pamphlets • Brochures

• Other direct mail

Media of advertising


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Figure 21.17: Sales promotion bridge 21.7.1 OBJECTIVE MERIT DEMERIT AND KINDS OF SALES PROMOTION Objective

• To increase buying response by ultimate consumers • To increase selling efforts and intensity by dealers as well as by sales personnel.

The result of effective total marketing programmer is sales success, which entirely depends on the customer reaction and an intense, well organized selling effort by resellers and sales persons. Merits

• It stimulates positive attitudes towards the product. • It gives extra incentives to the customer to make a purchase. • It has flexibility and it can be used at any stage of a new product introduction.

Sales promotion is very effective:

• When a new brand is introduced. • When we have to communicate a major improvement in our product. • When we want to amplify the results of advertising • When we want to increase the number of retail stores to sell our products.

Limitation

• Sales promotion has temporary and short life not exceeding three months. Sales promotion alone cannot build up brand loyalty.

• Sales promotions are only supplementary devices to supplement selling effort of other promotional tools.

• They are non-recurring in their use. They seldom have reuse value. • Excessive sales promotions may effect adversely in the brand image.

Kinds and method of sales promotion: There are various kinds (types) of sales promotion techniques variedly used by companies. The methodologies of use of any kind of promotion tools also vary on the types of industry, target costumer , market coverage , product type , benefit seeked etc. A very common way to classify sales promotion tools is as follows:

• Activities intended to educate or inform the consumer and those intended to stimulate the consumer. These are called consumer sales promotion.

• Activities to increase the interested and enthusiasm of dealers and distributors. These are called the dealer/distributor sales promotion devices.

Consumer sales promotion:

Some consumer sales promotion activities or devices are:

1. Sampling, usually called consumer sampling. Free samples are given to consumer to introduce a new product pr to expand the market.

2. Demonstration or instruction education the consumer in the manner of using the product. 3. Providing the coupon to the customer. These coupons provide other benefits e.g., price reduction or

other benefits. 4. Money funds order, that recreates additional interest and increase sales considerably 5. Premium offers are temporary price reductions, extra products, or some additional benefits like soap

with shampoo, spoon with tea etc. Some premiums are inpack ie the premiums are with in the product package.

6. Attractive reusable packaging material 7. Consumer competitions etc.

Advertising Salesmanship


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Dealer’s sales promotion 1. Provision of free display material either at the point of purchase (POP) or point of sale (POS), depending

on one’s view point. 2. Retail demonstrations 3. Trade deals are offered to encourage retailers to give additional selling support to the product 4. Buying allowance, advertisement and display allowance. 5. Buy back allowance is given to encourage repurchase of products immediately after another trade deal. 6. Free goods or samples. 7. Sales contests for sales man. 8. Dealer, distributor training, competitions, seminars, games etc.

Each form of sales promotion is used to encourage quick movement of products along the channel of distribution and enhancing the tempo of sales campaign. It also creates extra incentive or gives extra value to the channel of distribution itself, e.g., retailers. Hence, sales promotion offers a direct inducement that gives an extra value or incentive to the distribution, their sales force and the ultimate customers. 21.8 CHANNEL OF DISTRIBUTION 21.8.1 DEFINITION AND TYPES Distribution means to distribute, spread put or disseminate. In the fields of marketing, channels of distribution indicate routes or pathways through which goods are service flow, or move from producer to consumer. We can define formally the distribution channel as the set of marketing institutions participating in the marketing activities involved in the movement or the flow of goods or service from the primary producer to the ultimate consumers. Components of distribution channels are :

• All kinds of merchant middleman, such as wholesalers and retailers • All kind of agent middleman such as commission agents, factors, brokers, warehouse-keepers, and so

on • All the other facilitating agencies such as common carriers, bankers, advertising agencies an so on

The route or channel includes the manufacturer and the ultimate consumers as well as all intermediaries. These components are linked in the channel system by one or more of the marketing flows, such as transfer of title or ownership, physical movement of merchandise, transmission of marketing information and the flow of money in the form of payment of price and the consumer are interrelated and we have the total distribution system which is responsible for distribution of goods or service in order to satisfy consumer needs or desires. The most common routes for bringing the products in the market from producer to consumers are as follows: Manufacturer –Consumer (Direct sale) Under this route there is no intermediates, i.e., consumer has a direct contact with the company or its sales personnel. There are three alternatives in direct sale to consumer

1. Sales through advertising and direct methods (mail order selling) 2. Sale through traveling sales force (house to house canvassing) 3. Sales through retail shop of manufacturer, e.g., small manufacturer like bakery, handicrafts etc or very

manufacturer like cranes, aeroplanes etc. This is the shortest channel a product can follow to the market. Industrial goods may be sold directly to industrial buyers. Usually we have numerous and scattered consumers who buy in very small quantities. Hence, this channel is not popular for wider market. Manufacturer –Retailer – Ultimate consumer This channel option is preferable when buyers are large retailers, e.g., a department store, discount house, chain store, supermarket, big mail orders house, or co-operative stores. The wholesaler can be by-passed in this trade route. It is also suitable when products are perishable and speed in distribution is essential. Automobiles, appliances, men’s and women’s wear, shoes are sold directly to retailers. However, the manufacturer has to perform functions of a wholesaler such as storage, insurance, financing of inventories, and transport. Manufacturer –Wholesaler -Retailer – Ultimate consumer This is a normal, regular and popular option used in groceries , drugs, drugs goods etc. it is suitable for a producer under given conditions :

• He has a narrow product line • He has limited finance • Wholesalers are specialized and can provide strong promotional support


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• Products are durable and not subjected to physical deterioration of fashion changes. The best means pf transport and communications, growth of big retailers, computer handling small innumerable order of retailers, advances in automatic data processing, information explosion, etc., may reduce the need and importance of wholesalers in future. Manufacturer –Agent-Wholesaler-Retailer – Ultimate consumer In this channel the producer uses the service of an agent middleman such as sales agent, for the initial dispersion of goods. The agent in turn may distribute to wholesalers, who in turn sell to retailers. Many textile mills have sales agent for distribution. Agent middleman generally operate at the wholesale level. They are common in agricultural marketing. In marketing manufactured goods, agents middleman are used by manufacture to make themselves free from ,marketing tasks. An agent middleman sells on commission basis directly to wholesaler or large retailer Manufacturer –Wholesaler – Consumer/User Wholesaler may by-pass retailer when there are large and institutional buyers, e.g., industrial buyers, government, consumer co-operatives, hospitals, educational institutions, business houses etc. 21.8.2 CHANNEL CHOICE The problem of selecting the most suitable channel of distribution for a product is complex. The most fundamental factor for channel choice and channel management is economic criteria, viz., cost and profit criteria The major factors affecting the channel choice are: Product: If the commodity is perishable or fragile, producer prefers few and controlled levels of distribution. For perishable good speedy movement needs shorter channel or route of distribution. For durable and standardized goods longer and diversified channel may be necessary. Similarly for custom made product direct distribution to consumer or industrial user may be desirable. Systems approach needs package deal and shorter channel serve the purpose .For technical product requiring specialized selling and serving talents, we have the shortest channel . Products of high unit value are sold directly by traveling sales force and not through middleman Market: For consumer market, retailer is essential , whereas in industrial market we can eliminate retailer. If the market size is large, we have many channels, whereas in a small market directs selling may be profitable. For highly concentrated markets, direct selling is enough but for widely scattered and diffused markets, we must have many channels. Size and average frequency of costumers orders also influence the channel decision .In the sale of food products we need both wholesaler and retailer. Market means people with money and willing to purchase want –satisfying goods. Age, income group, sex, vocation, religion of customers will have to be studied to secure adequate information of market segments or target markets. Buying habits of customers and dealers will also influence our channel choice. Customers and dealers analysis will give a us data on the number, type, location, buying habits of consumer and dealers. Channel choice needs this information. For example, desire for credit, preference for one stop shopping, demand for personal services, amount of time and effort the costumer is willing to spend – all are important factors in channel choice . If ultimate buyers are numerous, the order is small order frequency is great and buyers insist on the right to chose from a wide variety of brands, we must have three or even more levels of distribution . Market considerations also govern mass distribution through multiple channels or selective or exclusive distribution through few or even a one dealer. When service after sale is required e.g., TV sets, freeze, etc., selective distribution is profitable Middleman: Middleman who can provide wanted marketing service would be given first preference. Of course they must be available. The selected middleman must offer maximum cooperation particularly in promotional service. They must assess marketing policies and programmes of the manufacture and activities help them in their implementation. The channel generating the largest sales volume at lower unit cost will be given top priorities. This will minimize cost. Company: The company size determine the size of market, the size of its larger accounts and it s ability to get middlemen’s cooperation. A big firm may have shorter channel. The company’s product mix influences the pattern of channels. The boarder the product line the shorter wills be the channel. If the product mix has greater depth or specialization the company can favor selective or exclusive dealership. A company with substantial financial resource need not rely to much on the middle man and can afford the level of distribution,. A weaker company has to depend on middleman to secure financial and warehousing relief. New companies rely on


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heavily on middleman due to lack of experience and ability of management. A company desiring to exercise to greater control over channel will prefer a shorter channel as it will facilitate better coordination, communication and control. Heavy advertising and sell promotion can motivate middleman to handle displays and join enthusiastically in the promotion campaign and cooperative publicity. In such cases even a longer chain of distribution can be profitable. Thus, quantity and quality of marketing services provided by company and influence the channel choice directly. Marketing environment: Marketing environment can also influence channel decision. During recession or depression, shorter and cheaper channel is always preferable. In times of prosperity, we have wider choice alternatives. Technological inventions also have impact on distribution. The distribution of perishable goods even in distance markets become a reality due to cold storage facilities in transport and ware housing. Hence this lead to expanded role of intermediaries in the distribution of perishable goods. Competitions : Marketers closely watch the channels used by rivals. Many a time, similar channels may be desirable to bring about distribution of our products also. However sometime marketer deliberately avoid customary channels (dominated by rivals) and adopt different channels strategy. For instant, a company may by-pass retail channel (dominated by rivals ) and adopt door to door sales not practiced by rivals for that product. 21.9 PRODUCT PACKAGING Packing may be defined as the genera group of activities in the planning of products. These activities concentrate on formulating a design of the package and producing an appropriate and attractive container or wrapper for a produce. The container itself act s a forceful though silent and colorful salesman at the point of purchase or an effective medium of advertisement encouraging impulse buying. Many a time package design itself can act as a registered brand. Almost every article has to be packed to make a trip to the ultimate customer that help on handling, prevent from deterioration, contain the produce etc. Packaging is much more than packing. Packaging is a marketing necessity. The public does not want just the product. They want explanation, assurance, and encouragement, combined with pleasant and eye catching getup or appearance on the top to gain action i.e., close to sell. Thus a good package ensures ultimate success of the product as a commercial venture. Thus packaging is a system approach of packing and is a integral part of marketing management rather than a technical problem in physical movement of product from producer to consumer. In the present age of consumer oriented and societal oriented marketing approach, packaging has gained unique importance. The utility reasons for packaging viz., protection, identification and convenience are themselves exploited in selling and some feature of the package may serve as a sales appeal, e.g., a reusable jar. Message on the level is a constant reminder to the user of the product. Packaging decorates and beautifies the product so as to lead the consumer impulsive buying. Thus, the package serves in most cases as a vehicle by which the brand of the product is carried through to the consumers. In modern self-service stores, with mass display, well-designed packages attract attentions, and through silent sale talk increases the sales volume. Packaging itself is a device of sales promotion. Packaging thus should contain the product safely as desired by producer in overall marketing channels and also functions other marketing activities that enhance product sell and consumer acceptance at lower cost. Function of packaging: As we have discussed, the packaging along with the physical function have other various function. From the marketing point of view :

1. Packaging is a sales tools 2. It identifies the maker as well as the product and carries the brand name. 3. The packaging label provides information as required by labeling related act or as desired by producer. 4. It is the biggest advertising medium. 5. It moves the product as the point of purchase. 6. It encourages impulse buying. 7. It establish product image.

The following are the important function of packaging

1. Protection: As the students of food technology, we all know how package protects content from the physical, chemical and microbial hazard. So the discussion about protection is skipped here.

2. Dependability: Truthfulness and honest representation is the most important function of the packaging. Consumer rely on the package itself for the quality of the product inside the packing.

3. Easy handling and convenience: Modern packaging facilitates easy handling of product during packing operation or on the distribution channel or on using by customers.


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4. Differentiation: Package design and labeling, branding differentiate products from the competitors and facilitate identification by consumers.

5. Attractiveness: Attractiveness is a major consideration in modern packaging. The design and the label on the package , printed matter, picture, layout or get-up of the package, color combination, all these are special aspects of the package and act as selling points of the package. Package must have an artistic appeal. Prominent, clear and attractive package label plays a role of a silent salesman – performing the function of sales man attracting attention, arousing interest, creating desire and gaining action (AIDA). Promotion potential of packaging is tremendous.

Package design The following factors should be considered on designing of any package.

1. Economical to manufacture, to fill, to handle and to store. 2. Functional in transit, in store and at consumer use point. 3. Communicative of brand, of product, of performance, and of usage. 4. Attractive in color, in design, and in graphic impact. 5. Societal in eco-friendly, reuse potentiality, and less hazardous. 6. Safety i.e., the content specially food product should not be contaminated with migrated compounds

from the packaging material or inks used. Social view of packaging

1. Pollution control, easy disposal and no hazardous on disposal. 2. Resource scarcity, thus reuse and recycle potential. 3. Educative like nutritional labeling

Packaging types and materials Types: Primary, secondary, tertiary and sipping package. Packaging materials :Paper, plastic, metal wood, glass 21.10 PRICING Pricing decisions have strategic importance in any enterprise. Pricing governs the very feasibility of any marketing programme because it is the only element in a marketing mix accounting for demand and sales revenue. Other elements are cost factors. Price is the only variable factor determining the revenue or income. A variety of economic and social objectives came into prominence in many pricing decisions. 21.10.1 PRICE AND PRICING Economist define price as the exchange value of a product or service always expressed in money. To the consumer the price is an agreement between seller and the buyer concerning what each is to receive. Price is the mechanism or device for translating into quantities term the perceived value of the product to customer at a point of time. The buyer is interested on the price of the whole package consisting of the physical product plus the bundle of expectations or satisfaction. The consumer has numerous expectations such as accessories, after sale service, replacement parts, technical guidance, extra service, credit and many other benefits. Thus price must be equal to the total amount of benefits i.e., physical, economical, social and physiological benefits. Any change in the price will also bring about alternations on the other side of equation. Pricing is the management process of determining the price of commodities. Basically it represents the total product offering. This offering includes a brand name, a package, and product benefits, service after sale, credit and so on. From the marketer’s point of view, the price also covers the total marketing offering plus the desired return on the investment he desires. Thus , the consumer also purchasing the information through promotion activities and compensations given to the employees and producer return on the investment.

Pricing is of vital importance to both the seller and the buyer. Only when a buyer and seller agrees on price, exchange of goods and service takes place, leading to the transfer of ownership. In competitive market economy, price is determined by free play of demand and supply. The price will move foreword or backward with changing demand and supply conditions. The going market price acts as the basis for fixing the sales price. Pricing decision is a critical factor, that determine the firm’s position on the market vis-à-vis its rivals. Major marketing variables affected by pricing decision are :

• Sales volume • Profit margin • Rate of return on investment • Trade margins • Advertising and sales promotion. • Product image • New product development.


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Price is a powerful marketing instrument. As a marketing weapon, pricing is a big-gun, however it must be used with great caution. It is so dangerous that a wrong pricing decision may doom a good product to failure, irrespective of sound marketing mix offering. The selling price plays a unique role in business because the price level controls: 1. Controls the sales volume and the firm’s market share. 2. Determine the total sales revenue. 3. Regulates the rate of return on investment and through rate of return, price influence profitability. 4. Creates on impact on unit cost on mass production. Low price increase total production and sales turnover,

and ultimately mass production leads to the lower unit cost of production. Thus the pricing policy i.e., pricing decisions are guided by variety of objectives. The major objectives that guide pricing decisions are: 1. Growth in sales: Competitive price can secure faster increase in sales. A lower price, always do not

guarantee the increase sale rather my have negative impact. 2. Market share: Price is major determinant of market share. 3. Predetermined profit level. Price is determined keeping in view the predetermined profit level i.e., generally

15 to 20 percent ROI is expected. However it might not work on competitive market where lots of substitute products are available.

4. Meet or follow competition: Many company formulate the pricing policy to chase the price determined by market leader.

While determining the objective of pricing policy marketer must take into the account reactions of a number of parties such as customers, competition, resellers or dealers, government, public opinion, and so on. The objective may not be mutually exclusive. Marketers have to resolve their conflicts. For instance, there may be a conflict between sales maximization objective and a ROI or profit objective. However it should be noted that increasing the market share is the best strategy in the long run and it assures the ROI, rather than skimming the price for short run. Probable pricing objective is shown in figure 21.18.

Figure 21.18 : Probable pricing objective 21.10.2 PRICING PROCEDURE AND TECHNIQUES Decision of pricing are taken on the light of marketing opportunities , competition and many other variables influencing pricing. The price decision must take into account all factors affecting both demand price and supply price. The price determination process involve the following steps. 1. Market segmentation : There should be a perfect match or a kind of marriage between the firm and its

market. The segmentation of market is based on the various factors like , types of product, kind of service to be rendered, cost of operation, types of customer.

2. Estimate of demand: Marketers will then estimate total demand of the product on the segment based on the sales forecast, channel opinions and degree of competition in the market.

3. Estimation of market share: The target market share sought by the company also governs the pricing decision. Proper pricing strategy is evolved to reach the expected market share either through skimming price or through penetration price or through a compromise, i.e., fair-trading or fair price – to cover cost of goods, operating expenses and normal profit margin.

4. Estimate marketing mix: Price plays an important role in relation to and in support of other element in the marketing mix. The design of the marketing mix can indicate the role to be played by pricing in relation to promotion and distribution policies.

5. Estimation of cost: Straight cost – plus pricing is not desirable always as it is not sensitive to demand. Marketers must take into account all relevant costs as well as price elasticity of demand, if necessary, through market tests.

Growth in sales

Status quo Sales oriented Profit centered

Growth in market share

Maintaining market share

Avoiding or meeting competitions

Non –price competition

Maximization of profits

Target ROI

Pricing objective


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6. Pricing policies: Price policy provides the general framework within which managerial decisions are made on pricing. Pricing policy are guidelines to carry out pricing strategy. However, pricing policies must change and adapt themselves with the changing objectives and changing environment. The common pricing policies are :

a. Pricing at the current market price (Price in line) b. Pricing above the market (Market - Plus) c. Pricing below the market (Market – Minus)

7. Pricing strategies: Pricing policies are general guidelines for recurrent and routine issues in marketing. Strategy is plan of action to adjust with changing conditions of the market place. New and anticipated development like price-cut by rivals, government regulations, economic recession, fluctuations in purchasing power of consumers, changes consumer demand, and so on demand for special attention and relevant adjustment in pricing policies and procedure.

8. The price structure: Developing the price structure on the basis of pricing policies and strategies are the final step in price determination process. The price structure will now define selling price for all products and permissible discounts and allowances to be given to middleman as well as various types

Some common mathematical techniques for determination of price are discussed on coming paragraphs. Breakeven analysis pricing: Under this method, manufacturer determines the breakeven point for a selling price and finally determine the price based on the desired profit. Breakeven analysis is the basic tolls for the analysis of cost based pricing decision. Breakeven point is the production unit where total cost is equal to the total revenue and company incurs no profit and loss i.e., is in breakeven. Production (sale) above breakeven point is profit and below is loss. An increase in selling price enables marketer to reach breakeven point much more rapidly. The more detail on the breakeven analysis is skipped here and for it refers to chapter nine. ROI: ROI is the ratio of revenue and equities. ROI can be improved through pricing that will increase turnover while maintaining earnings. Under this method, manufacturers fixed the required return of his investment and determine the price based on the desired ROI. For detail on the ROI, refer to chapter five, financial management. Cost plus or mark up pricing: This method is very simple and widely used technique. It is based on the sellers per unit cost of product plus an additional margin of profit. The markups are either based on the cost or on the selling price. These are very simple mathematical techniques used for fundamental knowledge of pricing. As discussed in preceding topics, a price determination is not totally based on the relation of cost and profit but are the result of a combination of many factors such as: production cost, marketing cost, competitors prices, consumer demand, economic conditions, government regulations, social responsibility, and so on. Both cost and demand –oriented factors determine the prices. The ultimate goal is to set a price that is in tune with the rest of the marketing mix ingredients and that will enable the firm to achieve its objective.

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MARKETING MANAGEMENT - WordPress.comOct 21, 2015 · concepts, we have coordinated marketing management to achieve twin goals of consumer satisfaction and profitable sales. However,