Chapter 11 Marketing

Traditionally, marketing refers to the performance of business activities that direct the flow of goods and services from producers to consumers. Thus, merchandising, selling and distribution are all parts of a large number of activities undertaken by a firm, collectively called marketing. In the modern sense, marketing refers to a social process, whereby people exchange goods and services for money or for something of value to them. The other topics in this chapter are Meaning or Marketing, Marketing Management, Marketing Management Philosophies, Functions of Marketing, Marketing Mix, Products, Classification of Products, Durability of Products, Industrial Products, Branding, Packaging, Level of Packaging, Functions of Packaging, Labelling, Pricing, Physical Distribution, Components of Physical Distribution, Promotion, Promotion Mix, Advertising, Merits of Advertising, Objections to Advertising, Personal Selling, Sales Promotion, Publicity and Public Relations.

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Exercise 1 ( Page No. : 321 )

Exercise 2 ( Page No. : 321 )

  • Q1 What is marketing? What functions does it perform in the process of exchange of goods and services? Explain.
    Ans:

    Marketing consists of all those activities, which involve satisfaction of consumer’s need. It is the process by which products are matched with needs and through which the consumer is able to use and enjoy the product.

    Functions of marketing are:

    • Gathering and Analysing Market information/Market Research.
    • Marketing Planning.
    • Product designing and development.
    • Standardisation and Grading.
    • Packaging and labelling.
    • Branding.
    • Customer support services.
    • Pricing of product.
    • Promotion.
    • Physical distribution.
    • Transportation.
    • Storage and warehousing.

    Q2 Distinguish between the product concept and production concept of marketing.
    Ans:

    Difference between product and production concept:

    Basis Product Concept Production Concept
    Focus Focus is on good quality products. Focus is no mass production.
    Means Product improvement. Easy availability of products.
    Ends Profit through providing better quality product. Profit through large scale production.

     


    Q3 Product is a bundle of utilities. Explain.
    Ans:

    Yes, product is a bundle of utilities. It can be explained with the help of an example. On wearing a shirt, we get the following satisfactions:

    1. Functional satisfaction: To wear the shirt and cover the body with it.
    2. Psychological satisfaction: To feel more confident and active after wearing the shirt provides psychological satisfaction.
    3. Social satisfaction:Getting recognition after wearing shirt from a group of known people is social satisfaction.

    Q4 What are industrial products? How are they different from consumer products? Explain.
    Ans:

    The products which are used as inputs to produce consumer products are known as industrial products, e.g. raw material, machinery, tools, etc.

    Difference between industrial and consumer products:

    Basis Industrial Products Consumer Products
    Meaning

    These products are used for further production of other goods.

    These products are used for final consumption by the direct consumers.

    Number of buyer

    The buyers of industrial goods are limited.

    The buyers of consumer goods are many in number.

    Buying decision

    Decisions of buyers are influenced by technical specification and goodwill.

    Decisions of buyers are influenced by advertising and various sales promotional schemes.

    Nature of demand These products have derived demand. These products have direct demand.

     


    Q5 Distinguish between convenience product and shopping product.
    Ans:
    Basis Convenience products Shoppong products
    Time and efforts They are usually standardize goods, which are purchased at convenient locations, with least time and efforts. These are purchased after a detailed comparison of various products, which involves a lot of time and efforts of the consumer.
    Unit price and profit margin Their unit and profit margin is low. Their unit price and profit margin is usually high.
    Demand They have a regular and continuous demand. They are durable in nature and survive many uses, thus no regular demand.
    Competition of product Competition in these products is usually high. Competition is not so high as in case of convenience products.
    Promotion of sales Sales promotion techniques help to promote the sale of such products. Saleman and retailers help to promote their sales.
    Example Stationery, medicines, newspaper, books, etc. Jeweler, furniture, electronics goods, etc.

     


    Q6 Describe the functions of labeling in the marketing of products.
    Ans:

    Functions of labelling in the marketing of product are discussed below:

    1. Describe the product and specify its contents: It specifies the contents and other features of the product. It enables the manufacturer to give clear instructions to the consumer about the proper use of his product. It helps to describe the product, its usage, cautions in use, contents, manufacturing and expiry dates, price, quantity, etc.
    2. Identification of the product or brand: It gives a definite identity to the product or brand and therefore, the identification of a product becomes easy. e.g. the name Pears printed on toilet soaps helps us to know which soap out of several soaps is Pears.
    3. Grading of products: It enables the manufacturer to grade the products into different categories. E.g. Hindustan lever sells different grades of tea under green, yellow and red labels.
    4. Helps in promotion of products: A good label can attract attention, describe the product and stimulate the buyer to buy the product. It helps in the promotion of the product. It plays an important role in sales promotional activities of the marketer.
    5. Providing information required by law: It provides information required under law. E.g. statutory warning ‘smoking is injurious to health’ must be stated on the package of cigarettes. Such information is considered necessary on processed foods, poisonous materials, drugs, medicines, etc, which provides safety warning to the consumers.

    Q7 Discuss the role of intermediaries in the distribution of consumer non-durable products.
    Ans:

    Intermediaries plays an important role in the distribution of consumer non-durable products by making the goods and services available at the right place, so that people can purchase the same.

    Intermediaries perform the following function in case of non-durable consumer products:

    1. Sorting: It refers to the process of sorting the product into homogeneous groups on the basis of size, quality, features and price.

    2. Accumulation: It refers to the process of accumulation of goods into larger homogeneous stocks. This helps to maintain a continuous flow of supply.

    3. Allocation: It involves breaking homogeneous stocks into smaller, marketable lots. This helps in making sales easily according to different requirements of different buyers.

    4. Assorting: It refers to the process of combining various goods of the same line of product, for sale to customers. Desired combinations of products are made to fulfill varied needs of customers, such as a cricket kit containing a bat, a ball, gloves, wickets, stumps, helmet and leg guards.

    5. Product promotion: Middlemen helps in the promotion of product by organising demonstrations, displays, contest, promotional events, etc. this helps in increasing the sale of products.

    6. Negotiation: Intermediaries usually discuss and decide the terms and conditions of sale, by negotiating the price, quality, guarantee, terms and conditions of delivery and payment, etc.

    7. Risk-taking: Middlemen usually bear risks on account of price and demand fluctuations, spoilage, destruction, etc, during the process of exchange.


    Q8 Define advertising? What are its main features? Explain.
    Ans:

    Advertising is an impersonal form of communication, which is paid for by the marketers to promote some goods or services. The common modes of advertising are newspapers, magazines, television, radio and internet.

    The main features of advertising are as follows:

    • Paid form of communication: It is a paid form, as the advertiser has to pay for the advertising media used, for the space or time used to communicate the message to the user.

    • Impersonality: Advertising presents the information regarding a product, service or idea in a non-personal form, as no face-to-face contact is involved between the seller and the customer.

    • Identified sponsor: Sponsor may be an individual or a firm, who pays for the advertisement. The name of identify of the advertiser is mentioned in the advertisement.


    Q9 Discuss the role of ‘sales promotion’ as an element of promotion mix.
    Ans:

    Sales promotion refers to all the immediate activities, which are undertaken for the purpose of increasing immediate sales. These activities mainly includes lowering the price, distributing the coupons, conducting contests, giving away of gifts, etc.

    Sales promotion refers to short-term incentives to boost sales in a short period and it supplements other promotional efforts such as advertising, personal selling and publicity, aimed at stimulating market demand for products. Companies use sales promotion tools designed specifically to promote sales among different groups as:

    • Customer: Through free samples, discounts and contests.
    • Traders or middlemen: Through cooperative advertising, dealer discounts, incentives and contests.
    • Salespersons: Through bonus, special offers and contests.

    Q10 As the marketing manager of a big hotel located at an important tourist destination, what societal concerns would be faced by you and what steps would you plan to take care of these concerns? Discuss.
    Ans:

    The societal marketing concept is an extension of the marketing concept as customer satisfaction is supplemented by social welfare. It pay attention to social, ecological and ethical aspects of marketing for dealing with problems like environmental pollution, deforestation, shortage of resources, population explosion, etc. in the above case as the marketing manager of a big hotel located at an important tourist destination following care need to be taken regarding environment are:

    • Proper drainage facility
    • In-built plant for recycling the waste
    • Rainwater harvesting
    • Solar geysers to be used
    • Proper maintenance of greenery-lawns and garden.
    • CNG based vehicles to be used to provide transport facility to the guests.

    Q11 What information is generally placed on the package of a food product? Design a label for one of the food products of your choice.
    Ans:

    A good label should provide the following information:

    • Name and address of the producer/dealer.
    • Weight and measurement of the product.
    • Size, colour and appearance of the product.
    • Raw materials used in production.
    • Directions for the proper use of the product and cautions against misuse.
    • Date of packing and date of expiry.
    • Maximum retail price including local taxes.

    Label for food product (Chocolate):

    Label for food product (chocolate)


    Q12 For buyers of consumer durable products, what ‘customer care services’ would you plan as a manager of a firm marketing new brand of motorcycle. Discuss.
    Ans:

    A motorcycle is an expensive item and for this kind of item it is important to provide after sale services to the consumer. And we need to ensure that these services should be available near to the customer.

    For this we should have the following things:

    • Customer care desk: We need to have a centralised customer care desk where the customer can call to clear their doubt and resolve their difficulty through our guidance.
    • Local office: We should have local offices in the major cities so that the customer can come there and resolve their problems. And these services can also be outsourced to the third party like vehicle dealers.

Exercise 3 ( Page No. : 322 )

  • Q1 What is marketing concept? How does it help in the effective marketing of goods and services.
    Ans:

    Marketing orientation implies that focus on satisfaction of customer’s needs is the key to the success of any organisation in the market. It assumes that in the long run an organisation can achieve its objective of maximization of profit by identifying the needs of its present and prospective buyers and satisfying them in an effective way. All the decisions in a firm are taken from the point of view of the customers. In other words, customer’s satisfaction becomes the focal point of all decision making in the organisation.

    The marketing concept is based on the following pillars:

    1. Identification of market or customer who are chosen as the target of marketing effort.
    2. Understanding needs and wants of customers in the target market.
    3. Development of products or services for satisfying needs of the target market.
    4. Satisfying needs of target market better than the competitors.
    5. Doing all this at a profit.

    Thus, marketing concept helps in effective marketing of goods and services. For example, what product will be produced, with what features and at what price shall it be sold, or where shall it be made available for sale will depend on what do the customers want. If the customers want features like double door in a refrigerator or a separate provision for water cooler in it, the organisation would produce a refrigerator with these features, would price it at a level which the customers are willing to pay and so on. If all marketing decisions are taken with this prospective, selling will not be any problem. It will automatically follow


    Q2 What is marketing mix? What are its main elements? Explain.
    Ans:

    Marketing management decisions are based on a number of controllable and non-controllable factors.

    Controllable factors are those which can be influenced at the level of the firm. E.g. price of the product, packaging decision, physical distribution, etc. However, there are certain factors which are beyond the control of the firm.

    These are called non-controllable factors or environmental factors. E.g. rate of inflation, credit policy of banks, competition, etc.

    Therefore, controllable variables become marketing tools, which are constantly shaped and reshaped by marketing managers to achieve marketing objectives.

    The combination of variables chosen by a firm to prepare its market offering, is called marketing mix. The main components of marketing mix consist of the four P’s, viz product, price, place and promotion.

    Elements of Marketing Mix are:
    Elements of Marketing Mix

    1. Product: Product means goods or services or ‘anything of value’ which is offered to the market for sale. It is a mixture of tangible and intangible attributes, which are capable of being exchanged for value.
      From the customer’s point of view, a product is a bundle of utility as it provides three types of benefits to the consumers that are Functional benefits, Psychological benefits and social benefits. It also includes the extended product or what is offered to the customer as after sales services, handling complaints, credit services, etc.
      The product mix refers to important decisions related to the product such as quality of product, design of product, packaging, etc.

    2. Price: Price of a product refers to the amount of money that the customer has to pay in the market to obtain the product. The marketers have to take a number of decisions regarding price level, pricing strategy, pricing objectives, discounts, etc, together known as price mix.

    3. Place: Place or physical distribution covers all the activities required to physically move the goods from manufactures to customers.
      The two major decision areas under this function are:

    i. Decision regarding channels of distribution.
    ii. Physical movement of goods from the place where it is produced to the place of consumption.

    1. Promotion: Promotion refers to the process of informing the customers about the product and then persuading them to buy it. Most marketing firms use a combination of advertising sales promotion, personal selling, and public relations to promote their products.
      Therefore, the combination of any of these techniques to attain the marketing objectives is called promotion mix.


    Q3 How does branding help in creating product differentiation? Does it help in marketing of goods and services? Explain.
    Ans:

    A brand is a name, term, sign, symbol, design or some combination of them used to identify the products and differentiate it from that of its competitors.

    Branding helps a firm to distinguish its product from the other competing products available in the market.

    Branding is much more than an identification mark. It is a seller’s promise to deliver quality and satisfaction of buyers’ expectations. When firms develop good reputation about quality, then brand helps them to enjoy greater control over the customers and to develop brand loyalty.

    Thus, branding is not only done to identify the seller or producer but also to make your product superior than competitor’s product. And it also helps in marketing of goods and services. Following are points highlight the importance of branding in marketing of goods and services.

    • Helps in advertising and display programmes: Without a brand, the advertiser cannot promote and create awareness for and sale his product.
    • Differential pricing: By building brand acceptance and brand loyalty, a firm can charge a different price for its product from that of its competitors.
    • Ease in introduction of new product: If a new product is introduced under an established brand name, it is likely to be accepted easily and get a quick start.

    Q4 What are the factors affecting determination of the price of a product or service? Explain.
    Ans:

    Pricing refers to the process of determining the price of a product. Price of product refers to the amount of money that the customer has to pay to obtain a product from the market. Pricing is considered as a regulator of demand of a product, because, when the price of the product is increased, demand falls, and vice-versa.

    Under perfect competition, most firms compete with each other on the basis of this factor. Therefore, firms give great importance to the fixation of price for their goods and services.

    Factors Affecting price determination of a product are:

    1. Product cost: The total cost of product includes production, selling and distribution costs. In the long run the firm strives to cover all their costs. The cost sets the minimum level of floor price for a product. In addition to that firm aims to earn profit margin over and above the cost.

      Costs can be broadly divided into three categories:

      a. Fixed costs, which do not vary with change in production.
      b. Variable costs, which vary at all levels of production.
      c. Semi-variable costs, which vary with production, but not in direct proportion with it.

      Total cost is the sum total of fixed, variable and semi variable cost, at a specific level of activity. Price is determined by adding a profit to the average cost of a product.

    2. The utility and demand: It is necessary to anticipate the utility and demand of a product, while fixing the price, as if a product is offering higher utility, one can easily charge high price from the customer.
      Whereas, if utility is low, one cannot charge high price for such products. On the other hand, if the demand is elastic, price should be set at a lower level and if the demand is less elastic or inelastic price can be set at a higher level.

    3. Extent of competition in the market: The price of a product can be set upto the higher limit, if the extent of competitors’ price, their reactions, their product, quality and features must be considered before fixing the price.

    4. Government and legal regulations: To protect the interest of general public, the government has all the rights to control the price of various products and services by including the products in the category of essential commodities.
      The common commodities in essential commodities are drugs, some food items, LPG, etc. With government intervention, there can be a check on the activity of monopolist as they cannot charge unfairly high price for essential commodities.

    5. Pricing Objectives: If the objective of the firm is to maximize sales, price will be set at a lower level, whereas, if the firm’s objective is profit maximization, price will be set at a higher level. Apart from this, the firm’s other pricing objectives may be:

      a. Obtaining market share leadership by setting the price at lower levels.
      b. Surviving in a competitive market by setting price at lower levels, in order to face intense competition efficiently.
      c. For attaining product quality leadership higher prices are set to cover high quality and cost of research and development.

    6. Marketing methods used: The price of the product also gets affected by various techniques and methods of marketing used to promote the products. If the company is using intensive advertising to promote the sale of product, them it will change high price.
      Other marketing method, which affect price of a product are type of packaging, distribution system, salesmen employed, customer support services, etc.


    Q5 Explain the major activities involved in the physical distribution of products.
    Ans:

    The physical handling and movement of goods from place of production to the place of distribution, is called physical distribution. It covers all the activities required to physically move the goods from the manufacturing to the customers.

    The major activities involved in the physical distribution of products are:

    1. Order processing: A good physical distribution system should provide for an accurate and speedy processing of orders. In the absence of this, goods would reach the customers in wrong quality or quantity, resulting in dissatisfaction of customers.

    2. Transportation: It means carrying raw materials and finished goods from one place to another. It helps in creating ‘place utility’, by making available the goods where they are required.

    3. Warehousing: It refers to the act of storing and assorting products in order to create ‘time utility’. It helps in proper placement of goods and providing facilities to store them, so that they can be made available as and when demanded by the market.

    4. Inventory control: An important decision in physical distribution is deciding about the level of inventory. Higher the level of inventory, higher will be level of service and cost of carrying the inventory and vice-versa. Various factors which are considered for determining inventory levels are:

        i. Firms’ policy regarding level of customer service.
        ii. Degree of accuracy of sales forecast.
        iii. Responsiveness of distribution system.
        iv. Cost of holding inventory.

    A good inventory decision aims at timely fulfillment of demand at minimum cost.


    Q6 ‘Expenditure on advertising is a social waste.’ Do you agree? Discuss.
    Ans:

    Advertising is the most frequent medium of promotion, it attracts a lot of criticism as social waste, multiplying needs of consumers, developing materialism, etc. but the proponents discourage such opinions. Thus, it is important to examine these criticisms and see how far they are true.

    1. Adds to cost: The opponents of advertising argue that advertising unnecessarily adds to cost of product, which passes on to the buyers in the form of high price. However, on the other hand, proponents claim that advertising helps to increase the demand of the product. An increase in production leads to large scale production which ultimately helps in reducing cost due to economies of scale and thus, the price of the product.

    2. Undermines social values: Advertising causes discontentment among the customers and promote materialism, as they come to know about newer and better products available in the market. But, the objections are not entirely true because advertisements help the buyers by informing them about the new products over the existing ones. If they are not informed, they may be using inefficient products.

    3. Confuses Buyers: The opponents say that so many advertisements make similar claims and the buyer gets confused as to which one is true and can be relied upon. It may create a state of confusion as to which product he should buy in the market. However, the criticisms are not true as we know that consumers are rational human beings, who can take their decisions considering various aspects of a product. He can use his wisdom along with information provided by advertisements to make the right choice of purchase.

    4. Encourages sale of inferior goods: Opponents of advertising claim that is does not distinguish between superior and inferior goods. However, we also know that no good is superior or inferior. The level of quality depends upon the economic status of the target customer. Advertisements promote all goods, customers may pick them according to their requirements.

    5. Some advertisements are in bad taste: Some advertisements are in bad taste and show something which is not approved by the society. They may show something objectionable and may cause distortion of certain relationships. Definitely, advertisements should avoid use of objectionable words, graphics, photos, etc, which may have a bad effect on the society.

    Thus, it can be said that though expenditure of advertisement draw criticism but the objections are not fully true. Because on the one hand they can be misused and they have their own cons but on the other hand they cannot neglect the benefits derived from advertisement.


    Q7 Distinguish between advertising and personal selling.
    Ans:
    Basis Advertising Personal Selling
    Form It is an important form of communication. It is a personal form of communication.
    Reach It reaches masses, i.e. a large number of people can be approached at the same time. Only a limited number of people can be contacted.
    Cost In advertising, the cost per person of reaching is very low. In this case, the cost per person is very high.
    Medium It makes use of mass media such as TV, Radio, Newspaper, etc. It makes use of salesperson to contact the prospective buyer.
    Flexibility It is inflexible as the message delivered cannot be adjusted to the buyer's needs. It is flxible as the sales presentation can be adjusted to fit customer's needs.
    Time It can cover wide market in short time. It takes a lot of time to cover the entire market.
    Feedback It lacks direct feedback from the customers. It provides direct and immediate feedback from the customers.
    Role It helps in creating interest of consumer in the firm's product. It helps in the process of decision-making by a consumer.

     


    Q8 Explain the factors determining the choice of channel of distribution.
    Ans:

    The choice of channels depends on various factors which are categorized as:

    1. Product related factors

    • Nature of the product: While industrial goods are usually technical, made to order and expensive products purchased by few buyers, they require shorter channels, whereas, consumer goods which are standardized, non-expensive, less bulky and frequently demanded, require longer and indirect distribution channels.
    • Perishability: Perishable and dairy products also use direct channels, while durable products require longer channels to reach widespread markets.
    • Unit value of the product: At the same time, goods whose unit value is low, prefer longer channels, whereas, high value products are directly distributed.
    • Product complexity: Similarly, complex products requiring technical details prefer direct channels, while non-complex products usually prefer longer channels.

    2. Company related factors

    • Financial strength of the firm: Direct selling involves a lot of funds to be invested in fixed assets for starting its own retail outlets. Therefore, if the financial position of the company is strong, it may use direct channels and vice-versa.
    • Degree of control: If the management wants to have greater control over distribution, shorter or direct channels will be preferred, and vice-versa.

    3. Competitive factors: Sometimes, a firm may choose such channel, which has been adopted by the competitors. In some case however, they may avoid the channel as adopted by the competing firm. Thus, it will depend upon the policy of the firm, whether it wants to go with the competitors or be different from them.

    4. Market factors

    • Number of buyers: When the number of buyers is small and concentrated in a small place, shorter channels may be used. But, if the number of buyers is large and market is widespread, longer channels should be preferred.
    • Size of the order: Similarly, if the size of order is small, longer channels may be used, but if the size of order is large, shorter or direct channels must be used.
    • Geographical concentration of buyers: If the buyers are concentrated in a small area shorted channels may be used, but if the consumers are widely spread over a large geographical area, longer channel may be used.

    5. Environmental factors: Environmental factors such as economic condition and legal constraints also affect the choice of channels. E.g. in a depressed economy, marketers use shorter channels to distribute their goods in an economical way.


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