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Marketing Mix

Meaning:
The process of marketing or distribution of goods requires particular attention of
management because production has no relevance unless products are sold. Marketing
mix is the process of designing and integrating various elements of marketing in such a
way to ensure the achievement of enterprise objectives.

The elements of marketing mix have been classified under four headsproduct, price,
place and promotion. That is why marketing mix is said to be a combination of four Ps.
Decisions relating to the product includes product designing, packaging and labelling,
and varieties of the product. Decision on price is very important because sales depend
to a large extent on product pricing.

Definition:
According to Philip Kotler, marketing mix is the mixture of controllable marketing
variable that the firm uses to pursue the sought level of sales in the target market
(Figure 3.1).

Therefore, the marketing mix indicates the appropriate combination of four Ps


product, price, promotion, and placefor achieving marketing objectives. The
components are also known as marketing mix variables or controllable variables as they
can be used according to business requirements. In 1960, E. Jerome McCarthy in his
book, Basic Marketing, popularized a four-factor classification, the so-called four Ps
product, price, place, and promotion.

Characteristics of Marketing Mix:


1. Marketing mix is the crux of marketing process:
Marketing mix involves many crucial decisions relating to each element of the mix. The
impact of the mix will be the best when proper weightage is assigned to each element
and they are integrated so that the combined effect leads to the best results.

2. Marketing mix has to be reviewed constantly in order to meet the changing


requirements:

The marketing manager has to constantly review the mix and conditions of the market
and make necessary changes in the marketing mix according to changes in the
conditions and complexity of the market.

3. Changes in external environment necessitate alterations in the mix:

Changes keep on taking place in the external environment. For many industries, the
customer is the most fluctuating variable of environment. Customers tastes and
preferences change very fast. Brand loyalty and purchasing power also change over a
period. The marketing manager has to carry out market analysis constantly to make
necessary changes in the marketing mix.

4. Changes taking place within the firm also necessitate changes in marketing
mix:

Changes within the firm may take place due to technological changes, changes in the
product line or changes in the size and scale of operation. Such changes call for similar
changes in the marketing mix.

5. Applicable to business and non-business organization:

Marketing mix is applicable not only to business organizations but also to non-business
organizations, such as clubs and educational institutions. For instance, an educational
institution is expected to provide the right courses (product), charge the right fees
(price), promote the institution and the courses, and provide the courses at the right
place.

6. Helps to achieve organizational goals:

An application of an appropriate marketing mix helps to achieve organizational goals


such as profits and market share.

7. Concentrates on customers:
A thorough understanding of the customer is common to all the four elements. The
focus point of marketing mix is the customer, and the marketing mix is expected to
provide maximum customer satisfaction.

Nature of Marketing-Mix (Components):

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

1. Product:
A product is any good or service that consumers want. It is a bundle of utilities or a
cluster of tangible and intangible attributes. Product component of the marketing- mix
involves planning, developing and producing the right type of products and services. It
deals with the dimensions of product line, durability and other qualities.

Product policy of a firm also deals with proper branding, right packaging, appropriate
colour and other product features. The total produce should be such that it really
satisfies the needs of the target market. In short, product-mix requires decisions with
regard to (a) size and weight of the product, (b) quality of the product, (c) design of the
product. (d) volume of output, (e) brand name, (f) packaging, (g) product range, (h)
product testing, (j) warranties and after sale services, etc.

2. Price:
Price is an important factor affecting the success of a firm. Pricing decisions and
policies have a direct influence on sales volume and profits of business. Price is,
therefore, an important element in the marketing-mix. In practice, it is very difficult to fix
the right price. Right price can be determined through pricing research and test
marketing.

A lot of exercise and innovation is required to determine the price that will enable the
firm to sell its products successfully. Demand, cost, competition, government regulation,
etc. are the vital factors that must be taken into consideration in the determination of
price. Price-mix involves decisions regarding base price, discounts, allowances, freight
payment, credit, etc.

3. Promotion:
Promotion component- of the marketing-mix is concerned with bringing products to the
knowledge of customers and persuading them to buy. It is the function of informing and
influencing the customers. Promotion-mix involves decisions with respect to advertising,
personal selling and sales promotion. All these techniques help to promote the sale of
products and to fight competition in the market.
Advertising is a major tool used to communicate a message (called advertising copy)
through; newspapers, magazines, radio, television and other media of advertising.
Advertising component of the promotion-mix requires several decisions with regard to
the theme of advertising, the media to be used, the advertising budget, etc. Large firms
employ advertising agencies and specialists to run advertising campaigns and to
prepare individual advertisements.

4. Distribution:
This element of the marketing-mix involves choice of the place where products are to be
displayed and made available to the customers. It is concerned with decisions relating
to the wholesale and retail outlets or channels of distribution.

The objective of selecting and managing trade channels is to provide the products to the
right customer at the right time and place on a continuing basis. In deciding where and
through whom to sell, management should consider where the customer wants the
goods to be available.

Determining the Marketing-Mix:


The purpose of determining the marketing is to satisfy the needs and wants of the
customers in the most effective and economical manner. As the needs of the customers
and the environmental factors change, the marketing-mix also changes and it cannot
remain static. Marketing-mix is, thus, a dynamic concept. In the words of Philip Kotler,
Marketing mix represents the setting of the firms marketing decision variables at a
particular point of time.

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


consists of the following steps:

1. Identification:
First of all, the marketing department must identify the target customers to whom the
sales are to be made.

2. Analysis:
Once the target market is identified, the next step is to discover and understand the
needs and desires of the customers. Marketing research is used in locating and
analysing the target market. It is necessary to know the number, location, buying power
and motives of customers. In addition, the nature of competition, dealers behaviour and
government regulations must be analysed.
3. Design:
On the basis of the knowledge obtained through identification and analysis, an
appropriate mix of product, price, promotion and channel is designed. Design involves
not only the determination of each component but the proper integration of individual
variables so that they reinforce one another.

4. Testing:
It is desirable to make a test run of the marketing-mix designed by the marketing
department. The designed mix may be used in a small group of customers. The reaction
of customers will indicate the adjustments required in the mix.

5. Adoption:
After the necessary modifications, the marketing-mix is adopted and put into use. The
adopted mix should be evaluated from time-to-time and it must be adapted to changes
in the environment of business.

What is product life-cycle?


The product life-cycle is a conceptual representation. It is a product aging process. Just
as human-beings have a typical life-cycle going from childhood, adolescence, youth and
old-age, so also products follow a similar route.

Product life-cycle is simply graphic portrayal of the sales history of a product from the
time it is introduced to the time when it is withdrawn.

According to Professor Philip Kotler, it is an attempt to recognize distinct stages in the


sales history of the product.

To borrow the words of Mr. Kollat D.T., Mr. Blackwell R.D. and Robenson J.F. it is a
generalized model of sales and profits trends for a product class or category over a
period of time.
As a concept, it means three things:

1. Products move through the cycle of Introduction, Growth, Maturity and Decline at
different speeds.

2. Both sales volumes and unit profits rise correspondingly till the growth stage.
However, in the period of maturity stage, sales volume rises but profits fall.

3. The successful product management needs dynamic functional approach to meet the
unique situations of sales and profitability.

Important implications:

There are some misconceptions regarding this simple concept of product life-cycle.
These are dismissed if one has the clear- cut understanding about the implications of
this useful concept.

These are:

First, though most of the literature on product life-cycle states that each and every
product follows through this four-phase life-cycle; not all products introduced in the
market essentially follow through all these four states.

It is quite possible that a product might cross the first and at the most second stage and
die a premature death just as many human beings do.
Secondly, one cannot have a definite line of demarcation between one and the
subsequent stage. The succession is one of merging and not of finite calculation.

Thirdly, no two products have identical life-cycles. The length of each phase varies from
product to product depending on the nature of product, the marketing policies adopted,
changes in technology, competition and the laws of the land.

Fourthly, at a given point of time, or moment, the same product might reach different
stages in different market segments. In segment one, it might have touched the peak-
height of maturity, in segment two it may be in growth stage, in segment three, it may be
heading towards the decline.

Stages of Product Life-Cycle:


The product aging process has four stages as depicted in the Fig. 1.04 namely,
Introduction, Growth, Maturity and Decline. A detailed analysis of each stage is a must
in terms of basic features and implications.

It is really interesting and thought provoking exercise of logic to travel through


the stages of product life-cycle.

I. Introduction:
Whenever a new product is introduced, it has only a proved demand and not the
effective demand. That is why; sales are low and creeping very slowly. It may be the
case with a product like instant coffee, frozen orange juice or a powdered coffee cream.

This first stage of product life-cycle is characterized by:

1. Low and slow sales:

The product sales are the lowest and move up very slowly at snails pace.

The basic reasons for this are:

(a) Delays in expansion of production capacity.

(b) Delays in making available the product to consumers due to lack of retail outlets
which are acceptable and adequate.

(c) Consumer resistance to change over from the established consumption behavioural
patterns.

2. Highest promotional expenses:


During this period of introduction or the development, the promotional expenses bear
the highest proportion of sales. It is so because; the sales are of smaller volume on one
side and high level promotion efforts to create demand on the other.

Demand creation is not an easy task as it is a matter of breaking the barriers and
breaking new ice which is done by:

(a) Informing potential and present consumers of the new and unknown product,

(b) Inducing a trial of the product, and

(c) Screening distribution net-work.

3. Highest product prices:

The prices charged at the beginning are the highest possible because of:

(a) Lower output and sales absorbing fixed costs.

(b) Technological problems might not have been mastered fully.

(c) Higher margin to support higher doses of promotional expenses a must for growth.

(d) Very few competitors or no competitors.

(e) Sales to higher income groups in a limited area for cultivating the effective demand.

II. Growth:
Once the market has accepted the product, sales begin to rise. The prices may remain
high to recover some of the development costs. With high sales and prices, profits rise
sharply. This encourages competition leading to possible product improvement.

Although the contribution to sales is sizeable from the high income group buyers, middle
income group buyers do not contribute towards sales.

The basic characteristics of this stage of product life-cycle are:

1. Sales rise faster:

The sales start climbing up at faster rate because of:

(a) Killing the consumer resistance to the product,


(b) The distribution network retail outlets is built to the needs and

(c) Production facilities are streamlined to meet the fast moving sales. Thus, sales
increase at an increasing rate over the period of time.

2. Higher promotional expenses:

During the period of growth, the promotional strategy changes. The problem is no
longer one of persuading the market to buy the product, but rather to make it to buy a
particular brand.

The question is one of creating and maintaining and extending selective demand. The
advertising moves towards brand identification, awareness to have the effects of a
brand image.

Special offers, concessions, allowance to stockiest and dealers are given to push a
particular brand or brand group.

3. Product improvements:

With the high sales and prices, profits rise sharply and because of this, there is greater
incentive for the companies to enter the market. Competitors have the advantage of
entering the market because; research and development have already been completed
by innovating firm at its costs.

Once the originator has paved the pattern of market, competitors can become stronger
by coming out with modified products.

Along with product modification, they may reduce prices too. This makes the originators
to further improve the product and bring down the price to nab competition.

III. Maturity:
Eventually, market becomes saturated because, the house-hold demand is satisfied and
distribution channels are full. Sales level off and over capacity in production becomes
apparent.

Competition intensifies as each manufacturer wants to ensure that he can maintain


production at a level which gives him low unit costs.

The greater the cost of production and the initial investment, the more important it is to
maintain high output so as to cover fixed costs at lower rates of revenue.
Lower prices are essential to stave off the competition. Though production costs are
reduced, the margin of distributors may not taper off.

The efforts are made to extend the maturity stage. That is why; this period is much
longer than the growth stage.

The features of this stage of life-cycle are:

1. Sales increase at decreasing rate:

As most of the customers are knowing the uses of the product, the sales grow at failing
rates giving an overall picture of off level situation. It shows that there is apparent gap
in production level and sales level. This intensifies competition. Efforts are made to level
or the sales curve by extension strategies as shown in Fig. 1.05.

There is little growth in the market as there is declaration in sales growth leading to
market saturation. Therefore, demand mostly consists of repeat sales.

Consequently competition intensifies, prices tend to fall and selling effort becomes
aggressive. Profits, then, are squeezed. That is why; the firms employ extension
strategies to retain their market share. There can be at-least five such extension
strategies.

These are briefly outlined below:

(a) Development of new markets:


The first possibility is the development of new markets for existing products by isolating
areas where the product is not used and modifying it to suit to those particular segment
requirements. For instance, battery shavers were introduced to fulfil the need for electric
shavers when the users are away from electricity supply.

There has been a considerable effort to expand the usage of computers to meet the
needs and budgets of small firms.

(b) Development of new uses:

The second possibility is the development of new uses for the existing products such as
the application or red 1.c.d. (Liquid Crystal Displays) used for example, in calculators
and watches.

Nylon is another example, a product which has gone through many expansions.
Originally introduced for military purposes in the manufacture of parachutes and rope, it
is now developed as a fibre, fabric in knit and woven form and gone into tyre
manufacture.

(c) Development of more frequent use:

This can be achieved either by altering its image or by emphasizing special


characteristics like convenience and quality. Thus, turkeys which have changed from
Christmas Treat in to all year round food. Popularizing vitamin B capsules as a regular
intake than as a curative dose.

(d) Development of wider range of products:

This is another viable strategy. Today, we see practically an explosion in the flavours of
ice-cream available in the market.

Today, we get different classes of ice-cream, ranging from inexpensive everyday brands
to very costly brands with unusual exotic combinations of flavours and colours.

(e) Development of style change:

These style changes demonstrate the newness of the most recent product. Most of the
consumer durable item manufacturers such as cars, sound gadgets, cameras, watches
and the like go in for this strategy of creating new designs and models making the
consumers to discard the earlier ones.
Thus, Sony Corporation of Japan has been introducing new and latest models of
television sets as ME-2026, ME-2036, ME-2066, and ME-2096 and so on. Even
Ambassador Mark I, Mark II, Mark III speak of technical improvements, reduction in
prices to suit the needs of consumers.

2. Normal promotional expenses:

During this period of maturity, the promotional expenses reach a normal ratio to sales.
Most of the competitors spend very normal amount on promotion. Efforts are made to
rationalize the existing budget.

Though total expenditure does not expand, major share of the expenditure goes to
distribution and brand promotion to keep the dealers loyalty intact. Advertising
emphasizes the difference between one brand and those of competitors.

As a result, weaker competitors leave the market only to the larger and stronger
manufacturers.

3. Uniform and lower prices:

The prices charged by the producers are quite lower and uniform with a very narrow
difference except for the real product differentiation. The strength and vitality of higher
prices fade. That is why, extension strategies are followed. The price charged just to
cover special costs in addition to the usual manufacturing expenses plus a low margin
for the investment. It has an advantage of low margin over broad-based turnover.

IV. Decline:
In this terminal stage, sooner or later actual sales begin to fall under the impact of new
product competition and changing consumer tastes and preferences. Prices and, hence,
profits decline.

It is stages where the market for the product has been superseded by a technological or
style change which replaces the existing demand altogether. That is, the old products
are rendered obsolete.

For instance, the development of tough water based paint oil-bond has made
significant inroads into the traditional market for oil-based varnish enamel paints. That
is, alternatively, interest in the product may fade, leading to a rapid reduction in sales.

The outstanding features of this stage of product life-cycle are:

1. Rapid fall in sales:


As the product is pretty old, and new one is available, there is a change in the trend.
People are interested in buying something new. The sales, therefore, fall sharply. Over
production appears to be the major problem. This induces firms to close down as
competitors have to leave or is left to them.

The total number of firms in the arena comes down. For instance, the number of
companies manufacturing calculators is much less than what it was in 1960s and
1970s.

2. Further fall in prices:

Rapid reduction in sales creates a fear and there will be intense competition to liquidate
the stock at the earliest. There would be a new kind of competition to have enlarged
share in such a decline stage to have maximum benefit at least profit margin.

3. No promotional expenses:

Expenditure in support of product falls sharply as prices become keener for fast stock
liquidation. Distribution network is reduced to the minimum with thorough rationalization.
This is an advantage as product is known for good many years. It may enable the
manufacturer to milk the product with profit though sales are scanty.

Developing New Products

In todays marketing practices, new product development is a challenging task. New


product development process is dynamic in nature. Number of steps and types of steps
to be involved depend on a number of factors such as objectives, investment required,
degree of risk, type of people available, current market situations, type of product to be
developed, past experience, market changes, and so forth.

1. Idea Generation:
A new product is the result of new ideas. New ideas are the basic requirement for
developing new product. Manager who wants to develop a new product must search for
new ideas from various possible sources. Idea generation must be within specified
limits.

Ideas must be generated in accordance with following factors:

i. Objectives of organisation

ii. Product definition


iii. Definition of market, or users

iv. Efforts and money

v. Time available, etc.

Sources of New Ideas:


Within the stated limits, a manager should identify possible and affordable sources for
new ideas.

Most widely used internal and external sources have been listed below:

i. Top-level management

ii. Employees within marketing department

iii. Sales force or salesmen

iv. Scientists

v. Channel members or middlemen


vi. Competitors

vii. Investors

viii. Inventors

ix. Advertising agencies

x. Marketing research firms

xi. Government agencies and offices

xii. Commercial and general libraries

xiii. Private and government consultants

xiv. Industrial publications

xv. Mass media, including TV, Radio, Newspapers, Internet, magazines, etc.

Thus, in the first stage, attempts are made to generate or collect maximum number of
possible ideas. Idea committee, idea manager, or the person in charge of product
development should motivate employees to submit their ideas. Sometimes, certain
techniques are used to collect new ideas from the people directly involved in marketing
operations. Such techniques involve brainstorming; attribute mapping, need/problem
identification, benefit-listing, word association test, sentence completion test,
storytelling, and many other similar techniques.

2. Idea Screening:
The second step in the new product development process is idea screening. It is also
said as scrutinizing ideas. Poor ideas are weeded out. This step is aimed at reducing
the number of ideas. The rationale is that product development costs rise substantially
with each successive stage of development.

Therefore, it is advisable to concentrate on a few promising ideas, or to drop the poor


ideas as early as possible. Also, all the ideas so generated are not equally attractive. In
fact, a company tries to materialize one or two out of highly feasible and profitable
ideas. So, it is necessary to reduce the number of ideas so as to concentrate only on a
few promising ideas.
For idea screening purpose, appropriate criteria (often called standards) should be set,
against which each of the ideas can be compared to find out attractive and/or poor
ideas.

Various relevant criteria can be established such as:

i. Objectives

ii. Profitability

iii. Gestation period

iv. Competitiveness

v. Resource ability of company

vi. Location factors

vii. Marketability

viii. Government rules and restrictions

ix. Social and ethical factors

x. Personal factors

xi. Availability of inputs.

Each of the listed ideas is compared with these preliminary criteria. Those ideas fail to
suit the criteria are removed from the list, put aside. As a result, only attractive ideas can
be retained. While screening the ideas, there is possibility of two types of errors, which
must be avoided. First is, A DROP-error is one in which good/promising ideas, for any
reason, are dropped. The second is, A GO-error that occurs when poor idea is permitted
or selected for product development and commercialization.

3. Concept Development and Testing:


Now, a company has a limited number of most promising ideas. For each of the ideas,
concept is developed and tested to find out degree of success. All attractive ideas are
refined into testable concept. At this stage, we must understand product idea, product
concept, and product image.
Philip Kotler states that product idea is a possible product that the company may offer to
the market; product concept is an elaborated version of the idea expressed in
meaningful consumer terms; and product image is the particular picture that consumer
acquires of an actual or potential product. The step involves three sub-steps-concept
development, concept positioning, and concept testing.

Concept Development:

Each of the product idea is to be converted into several product concepts. The idea is
expressed in consumer terms. Consumer terms mean from the viewpoint of consumers.

Product concept may be expressed as:

i. Users of the product

ii. Possible uses of the product

iii. Primary benefits offered by the product

iv. Occasions of product use

v. Price range, etc.

Concept Positioning:
Some companies go beyond mere concept development. They try to position the
product concept against the competitors to find out how strongly the product stands in
relation to existing competitive products. It is called product concept positioning. On the
basis of product positioning, product positioning map or brand positioning map can be
prepared to see the current position of the proposed product.

Concept Testing:
As per Philip Kotler, concept testing calls for testing product concept with an appropriate
group of target consumers, then getting those consumers reactions. At this stage of
development, we have only picture, symbol, sketch, or description of product. However,
a computer-aided design or picture can make a strong sense.

The use of virtual reality may help consumers to perceive the reality. In some cases,
simple, less costly, and image reflective plastic or clay based models of the proposed
product are prepared to get more reliable views and reactions of consumers. Target
consumers are described the product or shown pictures to get their opinion.
A company tries to test following aspects to measure consumers views and
reactions:

i. Communicability:

Is the product concept conveying any meaning? It measures an ability of product


concept to communicate the meaning to consumers.

ii. Believability:

Do they believe that product is possible?

iii. Need Level:

Can they see product as filling needs?

iv. Gap Level:

Do they perceive the real gap between an existing product and a new product?

v. Perceived Value:

Do they believe that price is reasonable in relation to the value (utility) of product?

vi. Purchase Intention:

Are they going to buy a new product?

vii. User Target:

Who will use the product?

viii. Purchase Frequency:

When and how often will the product be bought?

Concept testing can be applied to any good or service. It provides valuable and
meaningful information about possibility of success of the proposed product. Mark that
consumers are the best judges who cannot be challenged. Only when product concept
testing produces a favourable response or result, further process is carried on;
otherwise the company drops the plan of developing a new product.
4. Marketing Strategy Formulation:
When market testing produces favourable results, marketing manager moves to
formulate marketing strategy for the proposed product. Remember that the company
has, so far, not developed any product, but it is moving toward developing a new
product. What strategy will be used if the product is to be launched? Some companies
do not follow this step at this level of development, but after development of product.
The manager develops a preliminary marketing strategy statement for introducing a new
product into the market. Marketing strategy is further refined in subsequent stage.

Marketing strategy statement includes three sub-steps, such as:

a. Target Market Determination

b. Designing Marketing Mix

c. Preparing long-term Plan

Target Market Determination:


This step describes the target market.

Main points include:

i. Definition of target market

ii. Detail about target markets size, structure, and behaviour

iii. The plan for product positioning

iv. The sales, market share, and profit goals

Designing Marketing Mix:


The second part of marketing strategy outlines various strategies on product, price,
promotion, and distribution for the initial stage. Thus, marketing strategy for the first year
is prepared.

Preparing Long-term Plan:


The third step of marketing strategy statement describes a long- term plan for the
product. It involves long-term sales and profit plans, and marketing mix strategies over
time. It contains the companys plan for different stages of product life cycle. Note that
this is not the final and complete strategy for the product. The strategy formulated is
taken as a base for the future. At the time of launching a product in the market, a lot of
changes are necessarily made.
5. Business Analysis:
In this stage of a new product development process, the manager tries to measure the
business attractiveness of the proposal. Attempts are made to know what extent a
proposed product is economically viable. The proposed product is checked with
reference to overall business environment. It simply means measuring the ability of
product to meet companys objectives (wants satisfying capacity and profitability
aspects).

This step calls for following aspects:

Estimating Sales:
It is also known as sales forecasting. On the basis of sales history and current
performance of similar types of products, or on the basis of expert opinion and
preliminary consumer survey, the rough estimate of sales can be made. By this way,
one can arrive at minimum and maximum sales to learn about range of risk.

While estimating sales, care should be taken to deal with different products such
as:

(1) One-time purchase product,

(2) Frequently purchase product, and

(3) Infrequently purchase product.

In the same way, a manager should estimate:

(1) First-time sales,

(2) Replacement sales, and

(3) Repeat sales to estimate sales more accurately.

Generally, the sales are estimated in form of quantity or number of units. For example,
in the first year sales of the product will be 100000 units. And, during the life span of the
product, sales will be 1000000 units.

Estimating Costs:
Manager estimates total costs to find out cost per unit and profit margin. Practically, the
person having adequate knowledge regarding the costing estimates costs.

Following components of the cost are estimated:


i. Development Costs:

Costs incurred for development of product including patent, buying copyrights,


purchasing license, fees paid to experts, etc. They include pre-manufacturing costs.

ii. Manufacturing Costs:

Such costs include fixed and variable costs incurred for processing or producing the
product. Fixed costs remain fixed for any level of production. Fixed costs are
depreciation on plant and buildings, interest on debt, office overheads, etc. Variable
costs vary according to level of production, such as raw materials, labor costs, fuels,
maintenance, storage costs, etc.

iii. Marketing costs:

Marketing costs include the costs necessary to sell the products to consumers. Briefly,
marketing costs covers all the selling and promotional costs, for example, packaging
and labeling costs, transportation and distribution costs, and promotional costs including
advertising, sales promotion, personal selling, and publicity.

Determining Selling Price and Profit Margin:


On the basis of estimated sales and total costs, per unit cost can be calculated. Adding
the desired per cent of profit on total costs, total sales revenue can be estimated for
each of the proposals. Dividing sales revenue by number of sales units, per unit selling
price can be arrived at.

Evaluation of Product(s):
On the basis of above statistics, now it is easy to find out feasibility of the proposed
products. When we want to select one product from the two or more products,
profitability of different proposals can be compared to find out the most attractive one.
Along with profitability, other important variables should also be considered. If one has
year-wise costs and sales data, the cash flow can be calculated; it can be used for
evaluating the proposals.

Various methods are used for evaluation purpose, such as Pay Back Period, Internal
Rate of Return, Accounting Rate of Return, Present or Net Present Value, Profitability
Index, Break-Even Analysis, and so forth. Nowadays, the use of computer and
computer-based techniques is very common for the purpose. The product which is the
most attractive in all the significant aspects is selected.

6. Product Development:
Only when business analysis shows positive results, the company will move further in
developing a new product for the selected proposal. This step calls for a heavy
investment. Product development involves product design and testing.

Companys research and development wing, marketing department, new product


development officer, production department, outside experts, and others start their work
for development of a new product. High degree of coordination and integration among
these people plays a decisive role for successful development of a new product. This is
the stage when new product idea may be translated into technically and commercial
feasible product.

A company will not directly jump into mass production, but it concentrates on preparing
a prototype (model) of the new product. Successful development of prototype takes long
or short time depending upon the type of product.

The prototype must satisfy following three conditions:

i. Attributes must be similar as described in product concept.

ii. It must perform safely and smoothly under normal conditions.

iii. It must be prepared within budgeted amount.

At the time of development of a prototype, functional as well as psychological


characteristics should be considered. Colour, size, weight, status, image, physical clues,
etc., must be given due attention.

When the prototype is ready, it must undergo two types of tests:

i. Functional Test:
It tests whether the prototype functions safely and effectively under normal uses and
conditions.

ii. Consumer Test:

Consumers are invited to laboratory to use or try the product. They are given samples to
use at home. This test measures whether the consumers perceive the prototype as
useful and beneficial.

7. Market Testing:
If the prototype satisfies all expectations, a company proceeds further in new product
development process. It is worth noted that many companies do not prefer market
testing. They directly jump into the commercialization. But, it is advisable, even
sometimes, indispensable to measure consumers and dealers reactions in handling,
using, and repurchasing product. Product is dressed-up (wrapped with packing), and
branding procedure is completed for testing it in more authentic consumer market.

Factor Influencing Promotion-Mix:


Some important factors which have an influence on the formulation of promotion-
mix are described below:

(i) Type of Product:


In case of industrial goods and consumer durables, where demonstration of the product
is required to explain their manner of handling, instructions for safety etc.; personal
selling must be emphasized more than advertising and sales promotion.Standardized
popular goods require more of advertising than personal selling to maintain and extend
their demand.

In fact, products of different nature and varieties require different promotional devices;
and there are no standard rules in this regard governing the choice among elements of
promotion-mix.

(ii) Age of the Product:


For new and innovative products, personal selling is better; as salespersons can easily
educate and convince prospects about the nature and utility of such products.
Alongside, aggressive advertising is also necessary to prepare a base for demand
creation.
For older products, whose popularity may be declining due to intense competition; sales
promotion techniques might be better able to push demand by creating an interest in
products, on the part of general publics.

(iii) Number of Consumers and Their Spread:


If the number of consumers is small and they are concentrated in particular
geographical regions; personal selling might be more effective and cheaper. If, however,
consumers are large in number and are widely spread; advertising might produce better
results in terms of creating awareness about the product.

An added aspect here may be the type of consumers ladies, gents, children, elderly
persons etc. For developing popularity of the product e.g. among ladies or children,
sales promotion techniques might better meet the expectations of the manufacturer in
producing quick sales.

(iv) Promotion Budget:


Different elements of promotion-mix have different financial implications. The size of the
promotion budget i.e. funds available for promotional purposes might have a decisive
say, in the formulation of the promotion-mix.

(v) Stage of the Product Life Cycle:


Stage of the life cycle which a product is passing through, has an important influence on
promotion-mix. During introduction stage e.g. there might be a need for emphasis on all
aspects of promotion-mix to create maximum awareness about the product. At the
saturation stage, aggressive advertising might better meet promotional requirements.

In the declining stage, there may be a need cut down expenditure and efforts on all
elements of promotion-mix and so on. However, there is no standard formula for
formulation of promotion-mix, in view of the product life cycle stage; as different
products have different implications of promotional efforts at different stages of their life
cycles.

(vi) Strategies Used by Competitors:


An ideal promotion-mix of a company must be formulated against the background of the
promotional strategies of competitors. In fact, it is desirable that the promotion-mix of a
manufacturer must be in tune with the promotion-mix of leading competitors, in order to
better face the challenges posed by them.

(vii) Appeal to Prospects:


Different promotional techniques have different influences on prospects,
depending on whether they are:
1. Urban or rural

2. Educated or uneducated (or less educated)

3. Service-class people or business class people

4. Rich, poor or average, in financial terms, and so on.

4 Most Important Elements of Promotion Mix

Some of the most important elements used in promotion are as follows


:advertising, sales promotion, personal selling and public relation!

The promotion element of marketing mix is concerned with activities that are undertaken
to communicate with customers and distribution channels to enhance the sales of the
firm.

The promotional communication aims at informing and persuading the customer to buy
the product and informing him about the merits of the products.

Promotion mix:
It refers to all the decisions related to promotion of sales of products and services. The
important decisions of promotion mix are selecting advertising media, selecting
promotional techniques, using publicity measures and public relations etc.

There are various tools and elements available for promotion. These are adopted by
firms to carry on its promotional activities. The marketer generally chooses a
combination of these promotional tools.

Following are the tools or elements of promotion. They are also called elements
of promotion mix:

1. Advertising

2. Sales promotion

3. Personal selling

4. Public relation
1. Advertising:
Advertisement can be defined as the paid form of non-personal presentation and
promotion of idea, goods or services by an identified sponsor.

It is an impersonal presentation where a standard or common message regarding the


merits, price and availability of product or service is given by the producer or marketer.
The advertisement builds pull effect as advertising tries to pull the product by directly
appealing to customer to buy it.

From the above definition we can find that the three distinct features of
advertising are:

1. Paid Form:

The sponsor has to pay for advertising he has to bear a cost to communicate with
customers.

2. Impersonality:

There is no face to face contact between customers and advertiser. It creates a


monologue and not a dialogue.

3. Identified Sponsor:

Advertisement is given by an identified company or firm or individual.

Features of Advertising and Advantages/Merits of Advertisement:


(i) Reach:

Advertising can reach a large market. As through various media of advertising there is
benefit of mass reach for example, any message given on All India Radio or TV can
reach in different corners of the country wherever TV and Radio network is available.

(ii) Choice:

There is wide variety of media available for advertising for video, audio, visual audio,
print media etc. Under each category large variety is available for example, in print
media we can select from magazines, newspaper, banner etc. This variety or choice
helps the marketer to select the media, keeping in mind the target customer.

(iii) Legitimacy:
In advertisement the messages regarding the product or service are given publicly to
customers so there is always a proof for it and customers believe that publicly the
company will not give false information of the product. The customer feels comfortable
to buy a product which is widely advertised.

(iv) Expressiveness:

Advertising provides enough opportunities to marketers to dramatize the message with


the help of drawings, colours, pictures, music, dance
etc. They can easily express the use of product through various techniques, and can
add multimedia effect also.

(v) Economy:

It is always felt that advertising increases the cost of product or service but advertising
is considered economical as compared to other promotional techniques because it
reaches masses and if we calculate cost per customer it is very low or nominal.

(vi) Enhancing Customer Satisfaction and Confidence:

Customer feel more assured about quality and feel more comfortable if sponsors claim
these benefits in advertising.

Disadvantages of Advertising:
(i) It is an Impersonal Communication/Less Forceful:

In advertising there is no direct communication between the customer and marketer.


The marketer assumes that the message is communicated but the audience or
customers do not pay any attention to impersonal messages conveyed through
advertising. The response of customer cannot be known in advertising.

(ii) Advertising is less effective:

In advertising there is only one way communication i. e., communication from seller
only, but two way communication is always more effective as in two way communication
the customer gets chance to clarify his or her queries. Sometimes customers have
many doubts regarding the use of product, these doubts can be clarified only when
there is two way communication.

(iii) Difficulty in Media Choice:


In advertising various media are available. Each media have its own advantages and
disadvantages. So the effectiveness of advertisement depends to a great extent on the
right choice of media. When choice of media is faulty or wrong no matter how good the
advertisement is it will not reach the target customer.

(iv) Inflexibility:

It is very difficult to change advertisement as companies use standardised messages


which cannot be changed according to the need of customers.

(v) Lack of Feedback:

The evaluation of effectiveness of advertisement is very difficult as there is no


immediate and accurate feedback given by the customers.

Objections to Advertising or Criticism of Advertising:


Advertising has been subject to lot of criticisms. The following are main objections
raised on advertisements by a group of people. Along with objections the answers to
these objections are also mentioned below:

(i) Effect of Advertising on Values, Materialism and Life Styles:

The major objection on advertisement is that it promotes materialism. The


advertisements inform people about more and more products, the use of existing
products and the new products are shown dramatically to attract the customers.

This knowledge about more and more products induces the customers to buy more and
more products. They start demanding the products which they dont even require. If
there was no advertising we would be less aware of material things and we can be more
contented.

We do not agree with this objection as it is wrong to say that a person who is least
informed is most contented or satisfied. The advertisement increases the knowledge of
customers by informing them about various products along with their utilities.

The advertisement only informs the customers, the final choice of buying or not, lies
with the customers only.

(ii) Advertising Encourages Sale of Inferior and Dubious Products:

The advertisements show all types of products irrespective of their quality. With the help
of advertising anything can be sold in the market.
The objection to sale of inferior goods is not correct because what is inferior and what is
superior depends upon the economic status and preference. Every one cannot afford to
buy superior quality expensive products but it does not mean they should not use the
product.

The lower income group people satisfy their needs with low cost inferior goods for
example; those who cannot afford to buy shoes of Nike or Reebok have to satisfy with
local brand only. So it is not advertisements which encourage sale of inferior goods; it is
ones pocket or financial capacity which decides this.

The real criticism of advertisement is that it encourages sale of duplicate products.


Some producers exaggerate the use of products and innocent consumers get trapped in
and buy duplicate products.

(iii) Advertising Confuses Rather than Helps:

The number of advertisements shown in TV and Radio are increasing day by day for
example, if we take TV, there are so many advertisements of different companies shown
such as LG, Onida, Sony, BPL, Samsung, Videocon etc. each brand claiming they are
the best. These claims by different companies confuse the customer and it becomes
very difficult for him to make choice.

We do not agree with this objection because advertisements give wide choice to
customers and todays customer is smart enough to know and select the most suitable
brand for him.

(iv) Some Advertisements are in Bad Taste:

Another objection to advertisements is that advertisements use bad language, the way
they are speaking may not appeal everyone, sometimes women are shown in the
advertisements where they are not required for example, a woman in after shave lotion
and in advertisements of suiting etc. Some advertisements distort relationship between
employer-employee, mother-in-law and daughter-in-law etc. for example, in
advertisement of Band Aid, Detergent Bar, Fevistick, etc.

Although those types of advertisements should be avoided but it cant be an objection


because good or bad taste differs from person to person. It is a matter of personal
opinion as to what was not accepted by yesterdays generation is accepted by todays
generation and they may not find it of bad taste.

(v) Advertisement Costs are passed on to the Customers in the Form of Higher
Price:
The most serious objection to advertisement is that it increases the price of product
because the firms spend a huge amount on advertisement and these expenses are
added to cost and consumer has to pay a higher price for the product or service.

This objection is also not correct because with advertisements the demand for product
increases which brings increase in sale and this leads to increase in production. With
increase in production the companies can get the economies of scale which reduces the
cost of production and thus the increase in cost due to expenses on advertisements
gets compensated. So if advertisement is used properly it brings reduction in cost the in
long run.

2. Sales Promotion:
Sales promotion refers to short term use of incentives or other promotional activities that
stimulate the customer to buy the product. Sales promotion techniques are very useful
because they bring:

(a) Short and immediate effect on sale.

(b) Stock clearance is possible with sales promotion.

(c) Sales promotion techniques induce customers as well as distribution channels.

(d) Sales promotion techniques help to win over the competitor.

Sales Promotion Techniques for Customers:


Some of the sales promotion activities commonly used by the marketer to increase the
sale are:

(i) Rebate:

It refers to selling product at a special price which is less than the original price for a
limited period of time. This offer is given to clear off the stock or excessive inventory for
example; coke announced 2 liter bottles at Rs 35 only.

(ii) Discounts:

This refers to reduction of certain percentage of price from list price for a limited period
of time. The discounts induce the customers to buy and to buy more. Generally at the
end of season big companies offer their products at discounted price to clear off the
stock e.g., seasons sale at Snow-White Jain Sons, Paul Garments, Bhuvan Garments,
etc.
(iii) Refunds:

This refers to refund or part of price paid by customer on presenting the proof of
purchase for example, Rs 2 off on presentation of empty pack of Ruffle Lays.

(iv) Premiums or Gifts/or Product Combination:

These are most popular and commonly used promotion tool. It refers to giving a free gift
on purchase of the product. Generally the free gift is related to product but it is not
necessary for example, Mug free with Bourn vita, Shaker free with Coffee, Toothbrush
free with Toothpaste, etc.

(v) Quantity Deals:

It refers to offer of extra quantity in a special package at less price or on extra purchase
some quantity free for example, buy three get one free e.g., this scheme of buy three
get one free scheme is available on soaps.

(vi) Samples:

It refers to distribution of free samples of product to the customers. These are


distributed when the seller wants the customer must try the product. Generally when a
new product is launched for example, when Hindustan Level launched Surf Excel it
distributed the samples as it wanted the customers to try it.

(vii) Contests:

It refers to participation of consumers in competitive events organised by the firm and


winners are given some reward for example, Camlin Company organizes painting
competition, Bourn vita quiz contest and some companies organise contest of writing
slogans and best slogan is awarded prize.

(viii) Instant Draws and Assigned Gifts:

It includes the offers like scratch a card and win instantly a refrigerator, car, T-shirt,
computer etc.

(ix) Lucky Draw:

In this draws are taken out by including the bill number or names of customers who
have purchased the goods and lucky winner gets free car, computer, A.C., T.V., etc.
Draw can be taken out daily, weekly, monthly, etc.
(x) Usable Benefits:

This includes offers like Purchase goods worth Rs 5000 and get a holiday package or
get a discount voucher, etc.

(xi) Full Finance @ 0%:

Many marketers offer 0% interest on financing of consumer durable goods like washing
machine, T.V. etc. e.g., 24 easy installments 6 paid as front payment and remaining 18
with post-dated cheques. In these types of scheme customers should be careful about
the file charges etc.

(xii) Packaged Premium:

In this type of sales promotion the free gift is kept inside the pack. The gift is kept in
limited products but the excitement of getting the gift induces the customer to buy the
product for example, gold pendant in soap, gold coin in Tata tea etc.

(xiii) Container Premium:

This refers to use of special container or boxes to pack the products which could be
reused by the customer for example, Pet Bottles for Cold Drinks. This bottles can be
used for Steering Water, Plastic Jars for Bourn vita, Maltova, etc. which can be reused
by the housewives in kitchen.
Merits of Sales Promotion:
1. Attention Value:

The incentives offered in sales promotion attract attention of the people.

2. Useful in New Product Launch:

The sales promotion techniques are very helpful in introducing the new product as it
induces people to try new products as they are available at low price or sometimes as
free sample.

3. Synergy in Total Promotion Efforts:

Sales promotion activities supplement advertising and personal selling efforts of the
company. Sales promotion adds to the effectiveness of advertisement efforts.

4. Aid to other Promotion Tools:

Sales promotion technique makes other promotion techniques more effective.


Salesmen find it easy to sell products on which incentives are available.

Demerits of Sales Promotion:


1. Reflect Crisis:

If firm is offering sales promotion techniques again and again it indicates that there is no
demand of product which can create crisis situation.

2. Spoil Product Image:

Use of sales promotion tool may affect the image of product as buyer feel that product is
of low quality that is why firm is offering incentives.

3. Personal Selling:
Personal selling means selling personally. This involves face to face interaction between
seller and buyer for the purpose of sale.

The personal selling does not mean getting the prospects to desire what seller wants
but the concept of personal selling is also based on customer satisfaction.

Features of Personal Selling:


(i) Personal Interaction:
In personal selling the buyers and sellers have face to face interaction. This closeness
allows both the parties to observe each others action closely.

(ii) Two Way Communication:

In personal selling the sellers give information about the product, at the same time the
buyer get a chance to clarify his doubts. It is suitable for sale of complex products where
buyer wants to interact with the manufacturer.

(iii) Better Response:

When seller is personally explaining the utilities of product to the customers then
customer do pay some attention and listen to the information.

(iv) Relationship:

When the seller and buyer come together this may improve relation between the
customer and seller. Salespersons normally make friendly relations with the customers.

(v) Better Convincing:

Personal selling is most effective form of promotion because with this the sales person
can convince the buyer by demonstrating the use of product and making changes in the
product according to the need of customer.

Qualities of a Good Salesman:


The qualities which are commonly found among effective salesman are described
below:

1. Physical Qualities:

A salesman must have good health and pleasing personality. He must be well built and
free from physical defects. A pleasing and charming personality boosts self-confidence.
Good grooming, appropriate dress, clean and tidy appearance and a good posture will
go a long way in creating a first impression. More importantly, a salesman must always
have a cheerful smile on his face.

2. Social Qualities:

A salesman must have good manners, courtesy in dealing with customers. The practice
of greeting and thanking customers, using polite expression are necessary for success
in personal selling. He should not be shy or reserved but an extrovert and a good
listener. He must have the ability to say the proper things and do the right thing without
offending others.

3. Mental Qualities:

A good salesman must have a high degree of intelligence, initiative and foresight. He
must be intelligent and imaginative enough to understand the customer quickly and read
his mind accurately.

Salesman must have two basic qualities i.e., empathy and ego drive. Empathy means
he must have ability to understand the problem from customers point of view. Ego drive
means salesman must pursue sale not just for money but for recognition and personal
success. A good salesman must have presence of mind and good common sense.

4. Technical Quality:

The salesman must have full technical knowledge about the product.

5. Other Qualities:

Other qualities, a salesman must possess, are:

(i) A salesman must have a good power of memory and observation.

(ii) A salesman must be honest and should not try to win the customer through false and
misleading representation.

(iii) A salesman must be a man of sound character, loyal and dependable. He must
perform his duties sincerely.

(iv) The salesman must have wide knowledge about the product he is selling and
company he is representing.

(v) He must have capacity to inspire trust.

Role of Personal Selling:


Personal selling plays a very important role in marketing of goods and services. It is
important tool for businessmen, customers and society.

1. Importance to Businessmen:
Personal selling is an important tool to increase the sale. It is important for businessman
due to following reasons:

(i) Effective Promotion Tool:

Personal selling is an effective tool to increase the sale of product. Salesmen explain
the merits of products to customers.

(ii) Flexible Tool:

Personal selling efforts can be changed according to the type of customer salesmen are
attending. They may change the offer in varying purchase situations.

(iii) Minimum Wastage of Efforts:

As compared to other methods of promotion in personal selling the wastage of efforts is


minimum.

(iv) Consumer Attention:

Through personal selling it is easy to get the attention of customer as there is face to
face interaction between salesman and customers.

(v) Relationship:

Personal selling helps to create lasting relationship between customers and sales-
persons which help in increasing sale.

(vi) Personal Support:

Through personal selling salesmen can create personal support with the customers.
This can improve competitive strength of organisation.

(vii) Very Effective to Introduce New Product:

Personal selling is very effective to introduce a new product as salesman can explain
the merits, show the demonstration and clarify the doubts of customers.

(iv) Importance to Customers:


Personal selling is very important from customers point of view, as customers can get
required information about the product from customers. Customers are benefits by
personal selling in the following ways:

1. Helps in Identifying Needs:

Salesmen help the customers to discover their needs and wants and they also help
customers to know how these needs and wants can be satisfied.

2. Latest Market Information:

In personal selling salesmen provide information regarding the new products available
in market, uses of those products etc.

3. Expert Advice:

Customers can get expert advice and guidance in purchasing various goods and
services.

4. Induces Customers:

Personal selling induces customers to buy products for satisfying their needs.

(v) Importance to Society:

Personal selling brings following positive effects for society

1. Converts Latest Demand into Effective Demand:

Personal selling creates effective demand which results in increasing sale and more
income. With more income there will be more products and services which in turn bring
economic growth.

2. Employment Opportunities:

Unemployed youth can work as salesman and earn their livelihood.

3. Career Opportunities:

Personal selling offers attractive career with job satisfaction and security.

4. Mobility of Sales Persons:


Sales people move from one place to other, this promotes travel and tourism industry.

5. Product Standardisation:

With the help of personal selling there can be uniformity of consumption by supplying
standardised products.

4. Public Relations:
Apart from four major elements of marketing mix, another important tool of marketing is
maintaining Public Relations. In simple words, a public relations means maintaining
public relations with public. By maintaining public relations, companies create goodwill.

Public relations evaluate public attitudes; identify the policies and procedures of an
organisation with the public interest to earn public understanding and acceptance.

Public does not mean only customers, but it includes shareholders, suppliers,
intermediaries, customers etc. The firms success and achievement depends upon the
support of these parties for example, firm needs active support of middle men to survive
in market, it must have good relations with existing shareholders who provide capital.
The consumers group is the most important part of public as success of business
depends upon the support and demand of customers only.

Role, Significance, advantages of public relations:


Public relations are significant in the following ways:

1. Help to convey the policies and programmes of the organisation.

2. Help to collect information about public opinion about the organisation, management
activities etc.

3. To overcome the complaints and dislikes of public.

4. To mould peoples attitude in favour of organisation.

5. To maintain goodwill and understanding between organisation and public.

6. To build an image of the organisation.

Ways/Methods and Tools of Public Relations:


The companies can use the following tools to improve their relations with public:

1. News:
Sometimes companies get involved in such kind of activities or make such policies so
that they get some positive coverage in news. For example, a companys name may be
covered in news for reservation of jobs for women or for introducing new technology etc.

2. Speeches:

The speeches given by the leaders of corporate sectors influence various members of
public specially banks, shareholders etc. Public relations department creates occasion
when the speeches are delivered by the leader of company.

3. Events:

Events refer to organizing press conferences, multimedia presentation, matches, stage


shows etc.

4. Written Materials:

Sometimes written materials such as Balance Sheet, Annual Reports, Special


documents, Brochures etc. are circulated to various parties to improve and maintain
public image of the company.

5. Public Service Activities:

Big business houses often associate themselves with various social service projects
such as women welfare programmes, charity shows, up-keeping of parks, planting trees
on road side, training schools, running schools, colleges, hospitals etc.

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