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 R

   
R

‡
      oserved:Marketing consists of those efforts which

affect transfers in the ownership of goods & services & which provide for physical
distribution.
‡ 
R
R says that marketing is a philosophy of business which states that the
consumer wants & satisfaction is the economic & social justification of a company¶s
existence.
‡       R observed: The performance of all activities necessary for
ascertaining the needs and wants of marketing,planning,product availability, effecting
transfers in ownership of products providing for their physical distribution & facilitating
the entire marketing process.
‡ R
R observed: The setting of marketing objectives, developing the market
plan,organising the marketing function, putting the plan into action and controlling the
marketing programmes,should be included in the scope of marketing
  RRRR RR

R   
RRR
  RR
R  The Industrial Age was characterized by mass production &
mass consumption, stores stuffed with inventory, ads everywhere & rampant
discounting.presently,the information age promises to lead more accurate levels of production,
more targeted communication & more relevant pricing. Much of today¶s business is carried on
over electronic networks,intranet,extranet & the internet.
   
 RTechnological advances in transportation, shipping & communication have
made it clear for companies to market in other countries & easier for consumers to buy products &
services from marketers in other countries.
 
 RMany countries have deregulated industries to create greater competition &
growth opportunities. In India industries like insurance, airlines ,mobile telephony etc have
developed.



 RMany countries have converted public companies to private ownership &
management to increase their efficiency. In India, PSUs shares are being divested by the
government.
  RRRR RR

R   
RRR
 
 
R
: Customers increasingly expect higher quality & service &
some customisation.They perceive fewer real product differences & show less brand loyalty. They
can obtain extensive product information from the internet & other services which permits them to
shop more intelligently.
 

 RA company is able to produce individually differentiated goods whether ordered
in person or on the phone or online. The company also interacts with each customer personally to
personalize message services & relationships.
 
R  


 RIn every product sector, a number of companies have entered
resulting in high competition for grabbing the same market. New innovations ,designs & variants
with competitive pricing has made customer the king of the market. Therefore, every company is
utilizing various marketing tools & techniques to push its product in the market.
! R
  RR"Many companies are producing products which are different from
their core products but are extension of the products.e.g Apple manufactures computers as its
core product but also has now introduced I Phones, I Pods etc.
# 

 R 
 R" Companies have entered the retail sector in organized format
offering all consumer consumables & consumer durables under one roof with various choices and
competitive pricing with discounts offers ,schemes and giving the µfeel & touch µexperience.
 

R   
R

Ë Initially, $%&'()*+&, -(,)*+&, was considered as the core requirement of marketing. Mass
production of essential products were undertaken by companies and selling them off to the
consumers was the only motive of the producers. There was no innovation in products and prices
were kept at a high level. There was no after sales service or customer relationships involved.
2 Then '+.*%+/(*+&, -(,)*+&, was stressed upon, in which the area of selling the products was
increased which brought about the requirement of network of sale offices and support staff.
Integration between sales, marketing and distribution functions commenced.
3 This era was followed by the industrialization of countries in which employment was generated
resulting in increase of level of income of people. Consumers with disposable income in their
hands became more choosy about the products to be purchased and quality of products took a
front seat. This brought about a change in demand. The companies attempted to motivate the
consumers by introducing after sales service functions. It was felt that marketing should become a
regular process and 01%23*+,4 -(,)*+&, became important..
The importance of marketing functions to various stake holders is as given below.

& *53 .&)+3*6"The modern marketing concept considered marketing as a set of business
philosophy which observes the social goals by providing right things to right persons at the right
time. It generates avenues of employment both in production work & in marketing activities. If any
company fails to sell their products it would contract means of employment. If the marketing
activities are not channelized effectively, large scale retrenchments can occur.
 

R   
R

‡
& *53 )&0$1,6"It generates avenues for revenues for the companies which
motivates them to raise the quantum of investment in the corporate development
programme. The marketing practices activates the communication channels between
the company & the society.
‡
& *53 ,1*+&," The economic growth is meant for development of mass markets
which makes life easier, richer & happier. The elimination of wastes in production,
making goods available at the minimum possible prices & ensuring higher standards
of living for the society are few factors affecting the rates of productivity in a positive
way.
   
R R



 

‡ The company concepts under which organization have conducted marketing activities
are as follows:
1
53
%&'()*+&, &,)3$* /
53
%&'()* &,)3$* )
53 377+,4 &,)3$*
'
53 1%23*+,4 &,)3$* 3
53 &7+.*+) 1%23*+,4 &,)3$*
1
53
%&'()*+&, &,)3$*"holds that consumers will prefer products, that are widely
available & inexpensive. This concept is brought about by companies who
concentrate on achieving high production efficiency, low costs & mass distribution.e.g
China¶s production
/
53
%&'()* )&,)3$*holds that consumers will favor those products that offer the
most quality, performance or innovative features. This is brought about by making
superior products & improve them over time.
(%'73.
owever a new or improved product will not necessarily be sucessful
unless the product is priced,distributed,advertised & sold properly.
)
53 377+,4 &,)3$*" holds that consumers and businesses, if left alone, will
ordinarily not buy enough of the organization¶s products. The organization must,
therefore undertake an aggressive selling & promotion effort. This concept is
practiced more aggressively with unsought goods, goods that buyers normally do not
think of buying, such as insurance,encyclopaedias & AMCs.Companies that have
over capacity, practice selling concept.
   
R R



 

(%'73.This concept assumes that consumers who are coaxed into buying a
product will like it and that if they do not, they will return it or complain to consumers'¶
organizations or even buy it again.
'
53 1%23*+,4 &,)3$*In this concept, instead of a productcentred,¶make & sell
philosophy', the business is shifted to a customer centred,¶sense & respond
philosophy'. In this concept the responsibility of the company is to find the right
product for the customers & not the right customers for the products. The key to this
would be company, being more effective than competitors in creating, delivering &
communicating superior customer value to its chosen target markets. In this there is
%31)*+83 01%23* &%+3,*1*+&,. which is understanding & mating customers¶
expressed needs. Further to this we have $%&1)*+83 01%23* &%+3,*1*+&,. proposed
by narver & his associates. This proposes that high level innovation is possible if the
focus is on the customers¶ latent needs. These latent needs are known through
³probe & learn´ process. Companies practicing both the orientations are implementing
a total market orientation concept.
(%'73.i rganized Resistance ii Slow Learning iii Fast forgetting
3
53 &7+.*+) 1%23*+,4 &,)3$*" This is based on the development, design &
implementation of marketing programs, processes & activities that recognizes their
breadth & interdependance.Four components of holistic marketing concept are:
   
R R



 

i Relationship Marketing ii Integrated Marketing iii Internal Marketing
iv Social Responsibility Marketing
+ 371*+&,.5+$ 1%23*+,4has the aim of building mutually satisfying long term
relationships with key parties customers,suppliers,distributors & other marketing
partners in order to earn & retain their business. This involves building of a unique
company asset called a marketing network. A marketing network consists of the
stakeholders in the company(customers,employees,suppliers,distributors,retailers,ad
agencies etc with whom the company has built mutually profitable business
relationships.
++ ,*34%1*3' 1%23*+,4In this the marketing task is to devise marketing activities &
assemble fully integrated marketing programmes to create, communicate & deliver
value for consumers.
The first traditional depiction of marketing activities is in terms of   
R 9:
1%23*+,4 +; is defined as the set of marketing tools, the firm uses to pursue its
marketing activities.
)1%*56 classified these tools into -&(% /%&1' 4%&($. 1
%&'()* /
%+)3 )

71)3 '
%&0&*+&,
   
R R



 

‡
 
 ariety, Quality,Design,Features,Brand Name,Packaging,Sizes,Services,
Warranties
‡
 Discounts, Allowances, Payment Period, Credit Terms
‡  
 
 R Advertising, Sales Force, Product Relationships, Direct
Marketing
‡  RR<
  Coverage,Locations,Inventory,Transport
The above represent the sellers view of marketing tools available for influencing
buyers.
From the buyers point of view, each marketing tool is assigned to deliver a customer
benefit.
As per &/3%* 1(*3%/&%0there is communication mix from the customers point of
view.
 R
 R 9 Customer Solutions. Customer Cost, Communication,
Convergence
Therefore, the key themes of integrated marketing are i Many different marketing
activities are employed to communicate & deliver value ii All marketing activities are
coordinated to maximize their joint efforts.
   
R R



 

+++ ,*3%,17 1%23*+,4This ensures that everyone in the organization embraces
appropriate marketing principles especially senior management This takes place on
two levels. At one level, various marketing functionssales force,advertising,customer
service, product management, marketing research must work together. At the
second level, marketing must be embraced by other departments and marketing
activities must be pervasive throughout the company.
+8 &)+17 3.$&,.+/+7+*6 1%23*+,4" This involves understanding of broader concerns
and the ethical, environmental, legal and social context of marketing activities &
programs. The cause & effect of marketing extends beyond the company and the
consumer to the society as a whole. This concept holds that the organization task is
to determine the needs, wants and interests of target markets and to deliver the
desire satisfaction more effectively and efficiently than the competitors¶ in a way that
preserves or enhances the consumers and the society¶s well being
   
R R



 

    R

   
R
a Needs are basic human requirements like food,air,clothing & shelter to survive. There
are further needs for recreation, education & entertainment
b The needs become wants directed to specific objects that might satisfy the needs.
c Demands are wants for specific products backed by an ability to pay.
There are five types of needs:
 *1*3' R33'.= the customer wants an expensive car.
 317 R33'.= the customer wants a car whose operating costs not its initial price is
low.
 ,.*1*3' R33'.= the customer expects good service from the dealer.
 37+45* R33'.= the customer would like the dealer to include an onboard navigation
system.
 3)%3* R33'.= the customer wants to be seen by friends as a savvy customer.


  


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 R:
Distinct groups of buyers are identified & profiled who might prefer to require varying
products & services mixes by examining demographic, psychographic & behavioural
differences amongst buyers. The marketer then decides which segments present the
greatest opportunity & what are its target markets For each chosen target market the
   
R R



 

 R   R: Companies address needs by putting forth a value
proposition, a set of benefits, they offer to customers to satisfy their needs. The set of
benefits is made as an &--3%+,4 which are a combination of
products,services,information & experience.
A /%1,' is an offering from a known service.
    
 
 R= 17(3. reflect the perceived tangible & intangible
benefits & costs to the consumers. This is primarily a combination of quality, service &
price.
1*+.-1)*+&, reflects a person¶s comparative judgments resulting from a products¶
perceived performance in relation to his or her expectations.
   
R R= Communication channels delivers & receives messages from
target buyers & includes newspapers,magazines,radio,television,mail,telphone,
posters etc.Distribution channels include wholesalers, retailers & agents.
 

  R= is the mode and the process involved in delivery of a product from
the production base to the end user and consists of various steps and components
including transportation,warehosing,storage,wholesalers,distributors,retailers and the
end user.
   
R R



 

‡ CMPETITINThe company has to cut costs of production by sourcing raw material
at the best possible rates and has to face competition in sourcing of the same from
various industries in the same sector.
‡ MARKETING ENIRNMENTconsists of the task environment which includes the
companies,suppliers,distributors,dealers,target customers etc.The broad environment
consists of six components. They are:demographic,economic,physical,political,legal
and sociocultural .
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is anything that can be offered to a market to
satisfy a want or a need

The fundamental level is the CRE BENEFITthe service or

benefit, the customer is really buying e.g. A hotel guest is
buying ³eat & sleep´
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PRDUCT.e.g towel,desk,dresser,wardrobe etc
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in one or a few uses like soap. These goods are made available at
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:     ± are tangible good that normally survive many
uses, e.g. refrigerator, clothing etc. Require more personal selling
and service and command high margins.
:  ±intangible, inseparable, variable & perishable
products e.g. haircut, consulting services & service stations.
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‡ Products have to be differentiated for being branded.

‡ Some products like edibles have little differentiation, but products
like cars, furniture ,buildings are capable of high differentiation.
Products can be differentiated on the following parameters:
a FRMS
b FEATURES
c PERFRMANCE QUALITY
d CNFRMANCE QUALITY
e DURABILITY
f RELIABILITY
g REPAIRABILITY
h STYLE

 
R

 R

‡ FRMSMany products can be differentiated in size, shape or

physical structure of a product.
‡ FEATURESMost products can be offered with varying features that
supplement its basic functions. Appropriate new features can be
identified and selected by companies by surveying buyers &
calculating customer values versus company costs
‡ PERFRMANCE QUALITYis the level at which the product¶s
primary characteristics operate. The performance level can be
low,average,high & superior.
‡ CNFRMANCE QUALITYis the degree to which all the produced
units are identical & meet the specifications.
‡ DURABILITYis a measure of the product¶s expected life under
natural or stressful conditions.

 
R

 R

‡ RELIABILITYis a measure of the probability that a product will not

malfunction or fail within a specified time period.
‡ REPAIRABILITYis a measure of the ease of fixing a product when it
malfunctions or fails. Ideal reparability would exist if users could fix
the product themselves with little costs in money or time.
‡ STYLEdescribes the product¶s look & feel to the buyer. It has the
advantage of creating disintinctiveness that is difficult to copy.

 

 RRR

According to CANNN & WITC
ERT Product Planning is the

inclusion of all activities conducted by manufacturers and producers in
the discovery and development of new productsthe improvement of all
products, the determination of new uses for existing products and the
reduction of product & packaging costs.
Product Planning has the following components
a Product Innovation
b Product Diversification
c Product Standardization
d Product Elimination

 

 RRRR
 


R

‡ Decisions about new product development: Innovation is the design
& development of something new, as yet unknown & not in
existence which will establish a new economic configuration out of
the old, known existing elements. The innovative product may
present itself in the following forms:
a a new product to the firm but not to the market
b a different size
c a different physical form
d an improved version
e a new package
f an altogether new product
 R
 

R

‡ Companies need to increase their revenue over time by developing new

products & expanding into new markets. New product development shapes
the company¶s future; improved or replacement products will maintain or
build sale
‡ Six Categories of new products are identified:
R3> *& *53 >&%7' $%&'()*."New products that create an entirely new market.
R3> $%&'()* 7+,3."New products that allow a company to enter an established
market for the first time.
''+*+&,. *& 3;+.*+,4 $%&'()* 7+,3."New products that supplement
established product lines(package sizes, flavors etc
0$%&8303,*.  %38+.+&,. &- 3;+.*+,4 $%&'()*.New products that provide
improved performance or greater perceived value & replace existing
products.
3$&.+*+&,+,4"Existing products that are targeted to new markets or market
segment
&.* 3'()*+&,."New products that provide similar performance at lower cost.
 
RR


‡   R
 R= NPD starts with the search for ideas which can
come about from interacting with various groups & from using creativity
generating techniques.
‡   RR=Is the product compatible with company objectives,
strategies & resources?
‡  R

 

R= 1, we find a good concept about which the
consumers say that they would try?
‡ 
 

 =Can we find a cost effective affordable mktg
strategy?
‡ R R  :Will this product meet our profit goal?
‡
 

R
=
ave we got a technically & commercially
sound product?
‡   


R?
ave product sales met expectations?
‡   
 R: Are product sales meeting expectations?

 R

‡ Packaging is defined as all the activities of designing & producing

the container for a product. It may include primary package,
secondary package & a shipping package.
‡ R
 R  @
:
‡ It identifies the brand.
‡ It conveys descriptive & persuasive information
‡ It facilitates product transportation & protection.
‡ It assists athome storage
‡ It aids product consumption

 
   
 R
Aesthetic considerations should be made in respect of:
CLR;MATERIAL;SIZE;S
APE;TEXT;GRAP
ICS
Structural design & usage of appropriate packaging material should
be good
Packaging elements must be harmonized with decisions on
  R

‡ According to Stanton µThe label is that part of a product which

carries verbal information about the product or the seller. It may be a
part of package or it may be a tag attached directly to the product.

‡ There are three types of labeling

‡ A  R : is applied to the product or to the product &
mentions the brand names or marks.
‡ B   : identifies a quality which is depicted either by a
letter or number or word.
‡ C 

  : gives careful information about the
use,care,performance,construction,ingredients or other
characteristics of the product. It gives the brand name, name &
address of the producer,weight,ingredients,directions for proper use,
cautionary measures, special care of the product, nutritional
guidelines,date of packing & expiry, retail price & unit price.
 
R 
 R

‡ According to Duddy & Rezvan:A standard is a measure that is

generally accepted as having a fixed value. The measure is in units
of intrinsic qualities or characteristics of a product or a service.
‡ Standardization may be defined as the determination of basic limits
or grades in the form of specifications to which manufactured goods
must conform & classes into which the products of agriculture & the
extractive industries may be sorted.
‡ ,'+1, *1,'1%'. ,.*+*(*+&, < ,&>  <(%31( &- ,'+1,
*1,'1%'.
‡ The ISI was established in Ë & the main objects are:
‡ preparation of standards relating to products,commodities,materials
& processes & their promotion for adoption.
‡ Coordination of the efforts of producers & users for the improvement
of materials,products,appliances,processes & methods
‡ Certification of industrial & other products.
 
R 
 R

‡ Certification of industrial & other products

‡
elping in the production of quality goods
‡ Circulation of information relating to standardization
‡ Bringing about variety reduction for achieving economies in
production
  R

‡ Grading is the division of products into classes made up of units

possessing similar characteristics of size & quantity.
‡ Types of Grading: passed i
‡ Fixed GradingGrading on the basis of fixed standards and
‡ ariable GradingGrading on the basis of varying standards
‡ AGMARK/FP
‡ The Agricultural Produce (Grading & Marketing Act was passed in
Ë3 with a view to removing the malpractices prevalent in the field
of marketing, in general and grading & standardization practices in
particular. This act was amended in Ë3 to widen its scope and to
include additional products.AGMARK standards have been finalised
for Ë commodities.
  RR

‡ %1,' is defined as a name,term,sign,symbol or design or a

combination of them ,intended to identify the goods or services of
one seller or group of sellers and to differentiate them from those of
competitors
‡ Functions of Branding:
a It identifies the source or maker of a product and allows consumers
to assign responsibility to a particular manufacturer or distributor.
b They simplify product handling or tracing
c They help to organize inventory & accounting records.
d A brand also offers the firm legal protection for unique features or
aspects of the products.
e Brands can signal a certain level of quality so that satisfied buyers
can exactly choose the product again.
  RR

f Consumers may evaluate the identical product differently

depending on how it is branded.
g Consumers learn about brands through past experiences with the
product & its marketing program. This simplifies decision making
and reduces risk.
h Although competitors may easily duplicate manufacturing
processes & product designs they cannot easily match lasting
impressions in the minds of individuals and organizations from
years of marketing activity and product experience thus securing a
competitive advantage for the firm.
  RR

‡ '81,*143.&-1/%1,'
a Improved perceptions of product performance
b Greater Loyalty
c Less vulnerability to marketing crisis.
d Larger margins
e More inelastic consumer response to price increases
f More elastic consumer response to price decreases.
g Greater trade cooperation & support
h Increasing marketing communications effectiveness
i Possible licensing opportunities
j Additional brand extension opportunities
  R9
R R

‡ When firms decide to leverage their brand asset by introducing a

host of new products under some of their strongest brands then this
action is named as %1,' ;*3,.+&,.
‡ When a brand is combined with an existing brand, the brand
extension is called a .(/ /%1,' e.g. Amul Probiotic Curd,Maruti
Esteem cars,etc
‡ The existing brand that gives birth to a brand extension is referred to
as the $1%3,* /%1,'
‡ If the parent brand is already associated with multiple products
through brand extensions, then it is called as the -10+76 /%1,'.
‡ Brand extension can be classified into +,3 ;*3,.+&,  1*34&%6
;*3,.+&,
  R9
R R

‡ In a Line Extension, the parent brand is used to brand a new

product, that targets a new market segment within a product
category currently served by the parent brands such as new
flavors,forms,colors,added ingredients and package sizes.e.g
Lifebuoy Active Red, Lifebuoy Active range,International Plus.

‡ In a Category Extension, the parent brand is used to enter a different

product category from that currently served by the parent brand like

onda cars,mobikes,snowmobiles,marine engines etc.
‡  R
=
‡ Two main advantages of brand extensions are that they can
facilitate new product acceptance as well as provide positive
feedback to the parent brand & company.
  R9
R R

‡ It assists consumers in making inferences & forms expectations as to the

likely composition & performance of a new product based on what they
already know about the parent rand itself and the extent to which they feel
this information is relevant to the new product.
‡ Because of the potentially increased consumer demand, resulting from
introducing a new product as an extension, it also may be easier to
convince retailers to stock and promote a brand extension.
‡ From the communications perspective, an introductory campaign for an
extension does not have to create awareness of both the brand & the new
product but instead can concentrate on the new product itself.
‡ It can result in reduced costs of the introductory launch campaign.
‡ It allows for packaging & labeling efficiencies and results in lower
production costs.
‡ By offering consumers a portfolio of brand variants within a brand category,
consumers2Ë can also switch to a different product type without leaving the
brand family.
  R9
R R

‡ It helps to clarify the meaning of a brand & its core brand values or improve consumer perceptions
of the credibility of the company behind the extension.
‡ Line Extensions can renew interest & liking for the brand & benefit the parent brand by expanding
market coverage.
+.1'81,*143.=
‡ Line Extensions may cause the brand name to not be as strongly identified with any one
product. This leads to brand dilution which means that consumers no longer associate a brand
with a specific product or highly similar products & start thinking less of the brand.
‡ Different varieties of line extensions may confuse & even frustrate consumers resulting in
rejecting of new extensions for ³tried & true´ favorites or all purpose versions
‡ Even if sales are high it is possible that this revenue may have resulted from consumers switching
to the extension from existing product offerings of the parent brandin effect cannibalizing the
parent brand.
‡ By introducing a new product as a brand extension, the firm foregoes the chance to create a new
brand with its own image & equity.
‡ When several brands are marketed in the same product category and meets a different consumer
want and competes against specific competitors¶ brands, this branding is called as multiple
branding.
  R

 RR

‡

 RR is the act of designing the company¶s offerings & image to
occupy a disintinctive place in the mind of the target market. This was
popularized by ³Al Ries & Jack Trout.
‡ '81,*143. &- %1,'
&.+*+&,+,4= good brand positioning helps guide
marketing strategy by clarifying the brand¶s essence, what goal it helps the
consumer achieve & how it does so in a unique way.
‡ The result is the successful creation of a customer focused value
proposition.
‡  


    R
‡ A starting point in defining a competitive frame of reference for a brand
positioning is to determine category membershipthe products or set of
products with which a brand competes and which function as close
substitutes.

R
 



‡
R
 


R
 R=
‡ PPs are associations that are not necessarily unique to the brand but
may in fact be shared with other brands. These associations come in
two basic forms: category & competitive.
‡ Category PPs are associations consumers view as essential to be a
legitimate & credible offering within a certain product or service
category.e.g Consumers might not consider a travel agency a truly
travel agency unless it is able to make air & hotel reservations, provide
advice about leisure packages and offer various ticket payment and
delivery options.
‡ Competitive PPs are associations designed to negate competitors¶
points of difference.If,in the eyes of consumers, the brand associations
designed to be the competitor¶s point of difference is as strong for a
brand as for a brand as for competitors and the brand is able to
establish another associations as strong, favorable & unique as part of
its point of its points of difference, then the brand should be in a
superior competitive position.

R
 R

‡ PD are attributes or benefits consumers strongly associate with a

brand, positively evaluate me and believe that they could not find to the
same extent brand. Strong, favorable and unique brand associations that
make up points of difference may be based on virtually any type of attribute
or benefit.
‡ Choosing PPs & PDs
‡ PPs are driven by the needs of category membership & the of negating
competitors¶ PDs. In choosing PDs two important considerations are that
consumers find the PD desirable and that the firm has the capabilities to
deliver on the PD.
‡ Relevance: Target consumers must find the PD personally relevant &
important.
‡ Distinctiveness: Target consumers must find the PD distinctive & superior.
When entering a category where there are established brands,the challenge
is to find a viable basis for differentiation.
 R

 R



‡
 
R

 R=
‡ Brands can be differentiated on basis of product forms, features,
performance,conformance,durability,repairability,style,design.
‡ Brands can be differentiated on service dimensions as ordering
ease,delivery,installation,customer training, consulting, maintenance &
repair.

 R  R

 R:
‡ Products can be sold through direct selling.
‡ Better trained personnel exhibit ± Competence,Courtesy,Credibility,
reliability,responsiveness,communication ability.e.g Eureka Forbes
‡  RR R

 R :
‡ Companies can achieve competitive advantage through their distribution
channels¶ coverage, expertise & performance. `
 R

 R



‡   R

 R
‡ Buyers respond differently to company & brand images.
‡ R

= is the way a company aims to identify or position itself or its
products.
‡  = +. the way the public perceives the company or its products.
‡ An effective identity does three things:
‡ It establishes the product¶s character & value proposition.
‡ It conveys this character in a distinctive way.
‡ It delivers emotional power beyond a mental image.

 
<


‡ Products have a limited life

‡ Product sales pass through distinct stages, each posing different
challenges, opportunities and problems to the seller.
‡ Profits rise & fall at different stages of the product life cycle.
‡ Products require different mktg,financial,manufacturing,purchasing & human
resource strategies in each life cycle stage.

‡ Sales & Profits

‡ Introduction Growth Maturity Decline


 


‡ Most PLC curves are portrayed as bell shaped and is divided into four
stages:
: ,*%&'()*+&,A period of slow sales growth as the product is introduced in
the market. Profits are non existent because of heavy expenses of product
introduction.
: %&>*5"A period of rapid market acceptance and substantial profit
improvement.
: 1*(%+*6A slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits stabilize or decline because of
increased competition.
: 3)7+,3= Sales show a downward drift and profits erode.

 


‡ 1%23*+,4*%1*34+3.",*%&'()*+&,*143: Profits are low or negative in

this stage.
‡ The market pioneer gains the most advantage. In a study by Carpenter &
Nakamoto, it was found that Ë out of 2 companies who were market
leaders in Ë23 were still market leaders in Ë3.
‡ Early users will recall the pioneers brand name if the product satisfies them.
The pioneer¶s brands normally ails at the middle of the market & so
captures more users.
‡ Pioneers can have more effective marketing spending & enjoy higher rates
of consumer repeat purchases.
‡ The pioneer should visualize the various product markets it could initially
enter & analyze the profit potential of each product market singly & in
combination & decide on a market expansion path.

 


‡ 1%23*+,4*%1*34+3.=%&>*5*143=
‡ This stage is marked by a rapid climb in sales. Early adopters like the
product and additional consumers start buying it.
‡ Prices remain where they are or fall slightly, depending on how fast demand
increases.
‡ Sales rise much faster than promotional expenditures, causing decline in
promotionsales ratio.
‡ The firm in this stage uses the following strategies:
‡ a It improves product quality & adds new products features & improved
styling.
‡ b It adds new models & flanker products (i.e. products of different sizes,
flavors etc that protect the main product.
‡ c It enters new market segments.
‡ d It increases its distribution coverage & enters new distribution channels.

 


‡ 1%23*+,4*%1*34+3.=%&>*5*143=
‡ It shifts from product awareness advertising to product preference
advertising.
‡ It lowers price to attract the next layer of price sensitive buyers.
‡ 1%23*+,4*%1*34+3.=1*(%+*6*143=
‡ This stage is divided into three phases:growth,stable & decaying maturity.
‡ In the first phase, the sales growth rate starts to decline. There are no
distribution channels to fill.
‡ In the second phase, sales flatten on a per capita basis because of market
saturation. Future sales are governed by population growth & replacement
demand.
‡ In the third phase, decaying maturity, the absolute level of sales starts to
decline & customers begin switching to other products.

 


‡ Some companies abandon weaker products & concentrate on more

profitable products & on new products.
‡   
 
 R: A company might try to expand the market for
its mature brand by working with the two factors that makes up the sales
volume;
olume=no of brand users*usage rate per user.
‡ It can try to expand the number of brand users by converting non users.
‡ It can also try to expand the number of brand users by entering new market
segments.
‡ It can expand the number of brand users by winning competitors¶
customers.
‡ It can convince existing users to increase their brand usage to increase the
sales volume.Ë To use the product on more occasions.2 Use more of the
product on each occasion3 Use the product in new ways.

 

‡
 
 
 R=
53 company also tries to stimulate sales by
modifying the product¶s characteristics through
‡ A(17+*6 0$%&8303,*= * aims at increasing the product¶s functional
performance. This strategy is effective to the extent that the quality is
improved, buyers accept the claim of improved quality & a sufficient number of
buyers will pay for higher quality.
‡ 31*(%3 0$%&8303,*= * aims at adding new features like
size,weight,materials,additives that expand the product¶s
performance,versatility,safety or convenience. New features build the
company¶s image as an innovator & win the loyalty of market segments that
value these featurs.But the disadvantage is that the features are easily
imitated.
‡ *673 0$%&8303,*= * aims at increasing the product¶s aesthetic appeal. This
gives the product a unique market identity. The disadvantage is that it is
difficult to predict whether people would like the new style. A style change
usually requires discontinuing the old style and the company risks losing
customers.

 


‡   
R
   
 R=
53 company might also try
to stimulate sale by modifying other marketing program elements.
‡
%+)3."Would a price cut attract new buyers? If so, then either through
volume sales or early purchase discounts, freight cost absorption, or easier
credit terms.
‡ +.*%+/(*+&,= 1, the company obtain more product support & display in
existing outlets? Can more outlets be penetrated? Can new distribution
channels be adopted?
‡ '83%*+.+,4= Should advertising expenditures be increased? Should the
media mix,message,copy timing, frequency or size of ads be changed?
‡ 173.
%&0&*+&,= 5&(7' the company step up sales promotion?
‡
3%.&,17 377+,4= 5&(7' the no or quality of salespeople be increased?
Should the basis for sales force specialization be changed?
‡ 3%8+)3.= Can the company speed up delivery? Can it extend more
technical assistance to customers?Canit extend more credit?

 


‡ 1%23*+,4 *%1*34+3." 3)7+,3 *143= 173. decline due to technological advances,

shifts in consumer tastes & increased domestic & foreign competition.
‡ As sales & profits decline, some firms withdraw from the market. Some may reduce
the no of products they offer and cut on their promotional budgets.
‡ Five strategies are available to the firm:
Ë Increasing the firm¶s investment to dominate the market or strengthen its competitive
position.
2 Maintaining the firm¶s investment level until the uncertainties about the industry are
resolved.
3 Decreasing the firm¶s investment level selectively, by dropping unprofitable customer
groups, while simultaneously strengthening the firm¶s investment in lucrative niches.

arvesting the firm¶s investment to recover cash quickly.
 Divesting the business quickly by disposing of its assets as advantageously as
possible

 


‡ +0+*1*+&,.=Life cycles patterns are too variable in shape & duration.

‡ Marketers can seldom tell what stage the product is in.
‡ A product may appear to be mature when actually it has reached a plateau
prior to another upsurge.
‡ The PLC pattern is the result of marketing strategies rather than an
inevitable course that sales must follow

R

‡ As per economists, price is the exchange value of a product. From the consumers'
point of view, price is an agreement between seller & buyer concerning what each is
to receive. The price is the mechanism for translating into quantitative term the
perceived value of the product to the consumer.
‡ A well known authority Pyle opines, "R&%017
%+)3 is that price at which goods &
services would change ownership if free & unrestricted competition prevailed; if
accurate market information were distributed promptly & uniformly among both
buyers & sellers; if all buyers & sellers were equally aggressive, shrewd & exercised
good segment with reference to present & future conditions of supply & demand were
so flexible that these two controlling elements of price could be brought readily could
be brought readily into equilibrium.´
‡ 1%23*
%+)3 is the price determined by free play of demands & supply. It is the price
which affects the price paid to the factors of production.e.g.rent paid to the landlords
,wages paid to the labourer,interest paid to the capitalists & profits paid to the
entrepreneurs. Thus this price becomes the regulator of the whole economic system.
The tends in the prices affect the payoffs payable to the factors of production. If there
is a rising trend in prices, the interest,wages,rent & profit are paid to the factors at an
increased rate. n the contrary, the negative trends in prices bring a direct reduction
in the payoffs to the factors of production.

R

‡ @
   
R"
 1%23*
3,3*%1*+&, /B3)*+83."is meant for setting of a relatively low price mainly to secure a
large share of the market. When any marketer is of the view that they have no alternatives for
penetrating the market or for entering a highly sophisticated competitive market, they continue
their business without making any profit. In this objective, the unit cost of production & distribution
start decreasing, specifically when the level of sales attain a particular target. This is applicable at
the initial stages of entering the market & secure a large share of the market by deliberately
setting low prices.
 1%23* 2+00+,4 /B3)*+83" In this objective, some of the entrepreneurs study the buyer¶s
needs & make efforts to provide to them the required goods, but charge higher prices for them.
The entrepreneurs prefer making profits over a short time. The ultimate object of the firm is to
maximize the rate of profit and the prices are exceptionally high. In this market, the magnitude of
competition is very low & the price is minimized if rates are increased by the competitors. But this
objective, is not meaningful particularly when the consumers do not adopt the price index or
refuse to purchase the goods at the prices fixed by the producers. This works under the following
conditions:Ë A sufficient number of buyers have a current demand2 the unit costs of producing a
small volume are not so high that they cancel the advantage of charging what the traffic will
bear3 the high initial price does not attract more competition to the market. the high price
communicates the image of a superior product.e.g. Sony introduced its CTin India of Wega
model at Rs.Ë, in 2 Ë & reduced to Rs.Ë2. / in 2  .

R


1%43* 1*3 &- 3*(%, /B3)*+83"In this, there may be two criteria viz;investment & sales.
1
1%43*3' 1*3 &, ,83.*03,*"In this regard, the producers attempt to get handsome dividends in
return on the capital invested The main objective of price setting is to get adequate return of
investment. nly companies having outstanding reputation in the market can adopt this strategy.
The target return price is given by the following formula:

1%43*"%3*(%, $%+)3C(,+* )&.* D '3.+%3' %3*(%, E +,83.*3' )1$+*17
(,+* .173.
/
1%43*3' 3*(%, &, 173."This objective of pricing is generally preferred by middlemen who
want a specific return on the goods sold.
 &0$3*+*+&, /B3)*+83"The trends in competition also determines what strategy the company
would like to adopt. The company may like to face competition or may like to be out of it.
1
& -&77&> &0$3*+*+&, /B3)*+83"is suitable when similarities exist in goods of different
producers. The company takes decisions in the background of emerging trends in competition.
The cost element has a correlation with trends in competition.
/
& $%383,* &0$3*+*+&, /B3)*+83"In this the prices are kept abnormally low to check the
number of new firms entering the market. The rival competitors are discouraged with the objective
of pricing and those companies which have established leadership in the market, adopt this
objective.

R

 1%23* 51%3 /B3)*+83" The marketers may adopt this objective throgh two criterion:
1
& 01+,*1+, *53 ;+.*+,4 51%3" The companies prefer to maintain their existing share in the
market and generally big companies adopt such pricing objective mainly to maintain profit index.
/
& +,)%31.3 *53 1%23* 51%3 /B3)*+83."This objective of pricing assigns due priority to the
increased number of shares in the market.Particularly,small businesses are interested in raising
the number of shares so as to utilise the benefits of large scale production system. When shares
are increased in number, the firms are efficacious in minimizing the costs because large scale
production system makes possible over all economies of scale and resulting in pay out of
dividends.

%&-+* 1;+0+F1*+&, /B3)*+83" Companies aim at generating profits to a considerable extent &
not to show ideological gesture to the society. But the maximization of profits should be on the
total output & not on a single item. The setting of abnormally high prices may not be the essence
of this objective but rather setting a reasonable price which generates profit without dissatisfying
any consumer is the real meaning. ver a longer period, this objective of pricing would be suitable
because the firms would get ample time for getting such equlibrium.While adopting this pricing
objective, the marketers should attempt to project their image in the market. The advertising &
sales promotion activities should start with market penetration. To be more specific in a
competitive market, it becomes impossible to charge the maximum possible prices for the
goods.
ence,the marketers should watch the reactions of the consumers. The moment they feel
that consumers have been showing negative responses, the raising of prices should be checked.

R


%&'()* +,3
%&0&*+&, /B3)*+83"This objective of pricing adopts equal prices fro the same
line. While framing the product line, the marketers includes such goods in the product line, the
marketers also include such goods in the product line which are not so popular.Thus,both the
goods, popular & unpopular are purchased by the consumers. In this objective, the ultimate object
of the marketers is to raise the overall demand of the goods. By doing so or preparing a product
line, the marketers are found successful in increasing the sales turnover or profit.

R
  R
 R" The decision makers have to concentrate on the pricing
objectives. The decision making requires consideration of internal & external variables. The
marketers involved indecision making are required to assign due weight age to all the variables
and then take a decision. The internal variables are controllable are not so complex because the
marketers find it easier to exercise control the saame.But for the external or uncontrollable
variables, it becomes a complex issue as the firms or corporations have no command over the
governmental regulations or on the trends in competition or the economic fluctuation.
 ,*3%,17 1)*&%. &% &,*%&771/73 1%+1/73."
The internal factors include factors like product charateristics,costs of the product, objectives of
the manufacturer & channel management.

%&'()* 51%1)*3%+.*+).While studying the characteristics of the product, the marketers are
expected to assign due importance to numerous factors viz:the product life cycle, the product
perishability,product substitution or the magnitude of resistance.

R

+
%&'()* +-3 6)73The pricing considerations establishes a close relation with the life cycle of
the product. The decision makers are required to diagnosis the real stage in which the firms'
products belong to the market. In all stages f the PLC,similar strategies cannot be adopted >If the
marketers find that the products have entered the first stage or the products have just been
introduced in the market the prices should be minimized to a reasonable level. At this stage, the
decision makers should assign due importance to the projection of image or creation of goodwill.
If the prices are moderate the consumers at large would be induced. At the stage of growth &
prosperity the decision makers may raise the price index but it would depend upon on the
responses received from the consumers. The more liberal attitude the decision makers follow at
the second stage, the more favorable environment they find to enter the third stage. It is in the
stage of maturity in which the pricing decisions may be in the interest of the firm. The irrational
policies adopted in the third stage bring at the fourth stage.
ence, the decisions makers should
study the different stages of T
E PLC & should make decisions in the interest of national socio
economic interest:
++
%&'()*
3%+.51/+7+*6" If the goods are perishable, the price would be low. Contrary to this when
the goods can be preserved or can be stored safely, the price may be kept high, It is not possible
to store perishable products therefore, it should be disposed at an even cost.
+++
%&'()* (/.*+*(*+&,"The goods having substitutes cannot practise the same pricing strategy as
found in goods having no alternatives. If the consumers demand a good even if the prices are
raised, the high pricing strategy can be followed. Since in this case, the demand is elastic. n the
contrary, the products lacking substitutes would be inelastic because the consumers would have
no option but to comnsume that particular goods.

R

+8
&.*$&,303,* &- 301,'"In respect of products characteristics, the marketers are also
required to consider postponement of demand.e.g. the demand for motor vehicles can be
deferred. If the marketers adopt rigid pricing strategy or increase prices abnornmally,the
consumers would postponement demand.

%&'()* &.*"While making strategy, the decision makers should attempt to optimize the cost.
The cost optimization is meant setting up of reasonable prices which provide equitable return on
the capital vis
vis the consumer¶s purchasing power..A company¶s costs take two forms; fixed &
variable. +;3' &.*. also known as overheads are costs that do not vary with production or
sales revenue. 1%+1/73 &.*. vary directly with the level of production.
&*17 &.*. consist of
the sum of the fixed & variable costs for any given level of production.
The costs determine whether or not the organization will go into a venture, continue in it or
what would be the rate of profits. In the competitive market, the price approximates full costs of
production. The production costs determines the business exietence.The demand conditions
mainly determine the price. This is based on the reason that the supply is fixed in the short run. In
this respect, the market sets the price & not the production costs. Thus costs has a significant
bearing on the pricing decision.
 51,,37 1,14303,*The distribution channels adopted & the discounts policies adopted
influence the pricing decisions. If the channel is long, the price is high. The shorter channels
helps to minimize the cost because the middlemen are absent. If the middlemen are required to
establish a godown for the storage of goods, the costs index would be naturally high. Where the
circumstances require, the distribution channel should be shortened. It would minimize the overall
costs .

R

 ;*3%,17 1)*&%. " Changes in governmental regulations, the emerging trends in

competiton,fluctuating socioeconomic condition, The changing behavior of consumers, growing
ethical considerations & the incoming environmental changes are beyond the control of the
decision makers in the organization.
 03%4+,4
%3,'. +, &0$3*+*+&,affect the pricing decisions. The trends may be either positive
or negative. The magnitude of competition in the market may be either high or low. The pricing
decisions would vary in tune with the changing trends. Generally the marketer is required to follow
an optimal pricing strategy. n the contrary, the low magnitude of competition would create
favorable environment for raising the prices. If competition exists amongst the producers,
producing the same goods, the producers themselves would find it convenient to finalize the
pricing policy.
 301,' -&% *53 $%&'()*"Demand may be elastic, perfectly elastic & highly elastic. r it may be
inelastic or perfectly inelastic. When the decision makers find demand perfectly elastic, they are
expected to maintain more precaution because at this stage, even a minor change in the prices of
the product would bring a major change in their demand. n the other hand, when the demand is
highly elastic, the marketers should prefer escalation in a reasonable condition. At this stage,
partial proportionate impact on demand.Further the elastic demand is a stage where we find
proportionate rise or fall in the price & demand of the goods. If there is inelastic demand the
general rise in the prices partially affect the demand. In the perfectly inelastic the decision making
practices may be different.

R

 &)+&"3)&,&0+) 3,8+%&,03,*" Changing trends in socioeconomic environment influence

pricing decisions. Where disposable income is high, it affects pricing decisions. Where the income
is low, the marketers would be required to adopt a distinct pricing strategy.Further,if recession
conditions are prevailing in a country, prices have to be brought down. If there is political stability
in the country, raising prices may be feasible and on the contrry,where there is political instability,
prices cannot be raised.
 &83%,03,* 34(71*+&,."are made so that pricing of any goods is not based on the desire of the
company but is based on ethics & fair play. While deciding on the prices, due weightage has to be
given to MRTP Act, Essentials Commodities Act, Consumer Protection Act, Food & Standards
Regulation Act etc.All these regulations are to optimise & regulate the distribution of consumer
goods in particular. If the marketers fail to maintain regulatory mechanisms, social legislations
would come in the way resulting in loss of company image and failure in management of business.
 *5+)17 &,.+'3%1*+&,."include rational attitude of the corporate manager while maintaining
quality of the product & cost maximisation.The qualitative transformation of the product strategy &
standardization measures is instrumental in integrating ethics with business. The consumers
should be offered the right good sat the right price without irrational pricing.
 (63%G. 3518+&(%"A detailed study of the buyer¶s behaviour is relevant to the price deciding
startegy.If the results of behavioral studies suggest rising of prices the decisions of pricing should
be positive. The trends in demand, would be a reliable criterion to measure the reactions of the
consumer. The different categories of consumers like industrial consumer or general consumer
would determine different strategies of pricing.

R

‡ 3**+,4($&-$%+)3=
<,&$&..+/73
‡ The customer¶s demand schedule, the cost function '301,' 1* *5+. $%+)3
& competitor¶s prices are three main considerations R

to select a price. Costs set a floor to the price. <(.*&03%.G 1..3..03,* &-

Competitor¶s prices & the price of substitutes provide (,+H(3 $%&'()* -31*(%3.

an orienting point. Customer¶s assessment of unique %+3,*+,4 $&+,*

features establishes the price ceiling. &0$3*+*&%.I $%+)3. 

$%+)3. &- .(/.*+*(*3.

&.*.

 


 


5%33 G. &'37 -&%
%+)3 3**+,4 <R& $&..+/73 $%&-+* 1* *5+. $%+)3

R

‡
   
R
"This policy is based on behavioural results. At all stages of
setting of prices, the marketers assess the psychological impact on the consumers concerned. In
India Bata India Ltd has adopted this pricing policy. Their pricing are generally fixed at Rs. .
without rounding off. This has a psychological impact on the consumers.
‡    
R
"This pricing policy helps in raising the sales volume or makes
possible the generation of profits at an increased scale.e.g. A producer after establishing its
products in the market, brings down the prices of the product & takes help of advertising. The
consumers also respond by making demand for the product.
‡   
  
R"n this all the firms in an industry follow the pricing practices
adopted by the market leader. When the leader increases or decreases the prices, the followers
follow the trend. The price leadership is frequently found in industries dominated by a few firms. It
is not essential that in all circumstances, the same firm would be the price leader. Sometimes
traditional followers will initiate price changes if they feel the situation is sufficiently pressing & if
the traditional leader fails to act..The price leader would quickly retaliate against any reduction
below his established price & it would be difficult to compete against the leader if the prices were
set above his list. There are certain conditions for attaining the stage of price leadership
Production of standard goods by the firms & adaptation of suitable marketing strategies.
‡ R
R
R"Price discrimination occurs when a company sells a product or
service at two or more prices that do not reflects a proportional difference in costs.
‡ In -+%.* '34%33 $%+)3 '+.)%+0+,1*+&,, the seller charges a separate price to each customer
depending on the intensity of his or her demand.

R

‡ In .3)&,' '34%33 $%+)3 '+.)%+0+,1*+&,, the seller charges less to duyers who buy a larger
volume.
‡ In *5+%' '34%33 $%+)3 '+)%+0+,1*+&,,the seller charges different amounts to different classes of
buyers as follows
1 (.*&03%".3403,* $%+)+,4Different customer groups are charged different prices for the same
product or service.e.g. city transport corporations charging concessional fares to students or for
monthly pass holders; fair price shops charging subsidized prices for food grains & kerosene oil
from under privileged sections of the society.
/
%&'()* J-&%0 $%+)+,4Different versions of the product are priced diferently but not
proportionately to their respective costs.e.g. laptops are priced much higher than a desktop with
similar configurations.
) 0143"$%+)+,4Some companies price the same product at two different levels based on image
differences.e.g. cosmetics & garment industry.
' 51,,37 $%+)+,4Same products are priced differently based on the channels of sale.e.g. soft
drinks are priced differently depending on whether it is sold through a fast food counter, a vending
machine or a fine restaurants.
3 &)1*+&,"$%+)+,4The same product is priced differently at different locations even though the
cost of offering at each location is same.e,g. A theater varies its seat prices according to audience
preferences.

R

-
+03
%+)+,4Prices are varied by season, day or hour. Public utilities vary energy rates to
commercial users by time of day & weekend versus weekday.e.g. restaurants charge less to ³early
birds´ customers.
4 +37' $%+)+,4Prices are based on yield management systems in which discounted but limited
early purchases and higher priced late purchases are offered. & the lowest rates on unsold
inventory is offered just before it expires.e.g. Airlines charge different fares to passengers on the
same flight, depending on the seating class, time of the day, the season etc.
5
%3'1*&%6 $%+)+,4  In this the selling prices are kept below the cost of production. This is a
unlawful practice and is illegal.
 
  R
R R<
 Jis a marketing policy which is adopted by an individual
or a group of manufacturers in which an agreement is entered into by both the parties that a
branded good would be sold at a certain fixed retail price. In this policy, no retailer would sell the
branded product below the fixed retail price. As per the MRTP Act ³3.173 $%+)3 +, %371*+&, *&
.173 &- 4&&'. &- 1,6 '3.)%+$*+&, 031,. 1,6 $%+)3 ,&*+-+3' *& *53 '3173% &% &*53%>+.3
$(/7+.53' /6 &% &, /3517- &- *53 .($$7+3% &- 4&&'. +, H(3.*+&, 1. *53 $%+)3 &% 0+,+0(0
$%+)3 >5+)5 +. *& /3 )51%43' &,&% +. 1,6 $%+)3 $%3.)%+/3' -&% *51* $(%$&.3 /6 1,6 )&,*%1)*
&% 14%3303,* /3*>33, *53 >5&73.173% &% %3*1+73%  1,6 .()5 .($$7+3%:K
In a virtual sense, the RPM policy is to utilise the benefit of market, by fixing the prices which suit
the manufacturers as well as the moddlemen.
ence, the RPM policy has been restricted. This
policy is based on high costs low volumes retailers which mounts to premium on inefficiency.

R

‡
R
   R  
   R
 R"Usually transportation
expenses are incurred for transporting the goods from the manufacturers¶ plant to different regions
or zones. There may be two policies adopted by the seller:
1 ;"-1)*&%6 &% : :<-%33 &, %1+7 &% : ::-1)*&%6:<%33 , &1%' " In this the goods are
loaded on the truck at the factory gate or in the train wagon and the cost of transportation is borne
by the buyer.
/ &03"'37+83%6 $%+)+,4 &% : :: '3.*+,1*+&, pricingIn this the payment for transportation is
borne by the seller.
) &,3 $%+)+,4This pricing policy charges different prices for different zones. Equal prices are
there for consumers coming under a particular area or zone,
' 1.3 $&+,* $%+)+,4"In this, the sellers or the producers charge prices for a given destination after
computation transportation charges from a fixed base point which may be the location of the mill
nearest to the buyer or it may be some arbitrary location. The main objective of this pricing policy
is to quote identical transportation charges to any one buyer. This pricing policy is found in
industries producing standardized industrial products.
3 ,+-&%0 '37+83%3' $%+)+,4"In this pricing policy, the sellers charge equal prices from all
consumers. The seller¶s price includes cost of goods & the transportation charges. This is also
called as the postage stamp pricing policy since all postal stationary are sold at the same price
and distributed without any price discrimination. This policy is suitable for products covering the
least possible transportation charges.
- %3+45* 1/.&%$*+&, $%+)+,4"In this policy, the sellers or producers bear a portion of freight. It is
preferred by those firms whose fixed cost on production is high but the marginal cost is low & is
also adopted to protect the interest of the producers from its nearest rival competitors.e.g.

R

‡  R
"Most companies will adjust their list price & give discounts & allowances for early
payment, volume purchases & off season buying. Discount pricing has become the modus
operandi of a number of companies offering both products & services Some product categories
tend to self destruct by always being on sale. The discounts undermine the value perceptions of
the offerings. Some companies in an overcapacity situation are tempted to give discounts or even
begin to supply a retailer with a store brand version of their product at a deep discount. Because
the store brand is priced lower,however,it may start making inroads on the manufacturer¶s brand.
Manufacturers should stop to consider the implications of supplying products at a discount
because they may end up losing longrun profits in an effort to meet short run volume goals. The
various discounts policy are as follows:
1 1.5 +.)&(,*"Such discount is allowed to the buyers who pay their bills within a stipulated
period. Legally cash discounts are permissible to all buyers on same terms. e.g.If the sellers
have offered that buyers making payments ten days before the date of purchase, would be
allowed a discount of 3% on the invoice price, the buyers making payment ten days before would
be required to pay only Rs. /,if the purchase amount is Rs.Ë /.Contrary to this the buyers
not opting for this would have to pay RsË /within 3 days.
/ (,)*+&,17 +.)&(,*.This is also called as the trade discount policy. A producer is required to
sell to the wholesalers at a lower price than he charges to the retailers. The retailers may be
charged a functional discount of  % whereas the same rate may not be charged to the
wholesalers. Industrial firms, export firms may be given separate functional discounts. The
functional discounts are legal as long as this is paid to bonafide members of designated class of
trade.

R

) A(1,*+*6 +.)&(,*.is a reduction in the unit prices granted for buying the goods in certain
quantity. They are of two types:
+ (0(71*+83"+.)&(,* is a reduction in the total price paid for the goods purchased over a period
of time. The purpose of this kind of discount is to obtain the entire business of the client by offering
discount on the total volume of business placed with the firm over a period of time.
++ R&,"(0(71*+83 +.)&(,*is a price reduction depending on the size of individual orders placed
by the buyers.e.g. If the seller has fixed a discount of 2% on the purchase of goods amounting to
Rs.3 /,the buyers purchasing goods worth Rs.3 / or more would be allowed a discount of
2%.If the buyer makes purchases at different times of the year, the discount would be allowed at
all times.
owever,if the buyer makes purchase at different times below Rs.3 / no discount
would be allowed.
+++ 31.&,17 +.)&(,tIn this the goods are sold at a reduced rate particularly during the off season.
The purpose of this pricing policy is to enable the manufacturer to level his production throughout
the yeear.Sometimes,this discount is given to encourage the buyers to stock up early in
anticipation of the season or to transfer the storage function from the producer to the buyer.
+8 77&>1,)3.An extra payment designed to gain reseller participation in special programs.
%1'3"
+, 177&>1,)3. are granted for turning in an old item when buying a new one.
%&0&*+&,17
177&>1,)3. reward dealers for participating in advertising & sales support programs.

R

‡ R

R
  RThere are several circumstances leading to price changes. The
price may be cut or it may be increased.
 ,+*+1*+,4
%+)3 (*.The company may have excess plant capacity.
‡ The firm may need additional business & cannot generate it through increased sales effort,
product improvement or by other measures.
‡ The firm may initiate price cuts in a drive to dominate te market through lower costs. Either the
firm starts with lower costs than its competitors or it initiates price cuts in hope of gaining ,market
share & lower costs.
‡ +.1'81,*143. &- $%+)3 )(*."
‡ &>JH(17+*6 *%1$Consumers will assume that tehe quality is low
‡ %14+73"01%23* .51%3 *%1$A ,low price buys market share but not market loyalty. The same
customers will shift to any lowerpriced firm that comes along.
‡ 5177&>"$&)23*. *%1$The higherpriced competitors may cut their prices & may have longer
staying power because of deeper cash reserves.
 ,+*+1*+,4
%+)3 ,)%31.3."
‡ The firm may increase price is cost infllation.Rising costs unmatched by productivity gains
squeeze profit margins & lead companies to regular rounds of price increases
‡ ,*+)+$1*&%6 $%+)+,4Firms often raise their prices by more than the cost increase, in anticipation
of further inflation or government price controls in anticipatory pricing
‡ 83%'301,'The firm may increase prices when it cannot supply to all its customers.

R

‡ The price can be increased in the following ways:

1 37163' H(&*1*+&, $%+)+,4The company does not set a final price until the product is finished or
delivered. This pricing is prevalent in industries with long production lead times such as industrial
construction & heavy equipment.
/ .)171*&% )71(.3.The firm requires the customers to pay today¶s prices & all or part of any
inflation increase that takes place before delivery. Escalator clauses are found in contracts for
major industrial projects like aircraft or ship constructions.
) ,/(,'7+,4The firm maintains its price but removes or prices separately one or more elements
that were part of the former offer, such as free delivery or installation.
' 3'()*+&, &- '+.)&(,*.The firm instructs its sales force not to offer its normal & quality
discounts.
‡ 
RR

  R"
Competitors are most likely to react when the number of firms are few, the product is
homogeneous & buyers are highly informed. In markets characterized by high product
homogeneity, the firm should search for ways to enhance its augmented product. And if that is not
possible, it will have to meet price reduction. If the competitor raises the price in a homogeneous
market, other firms might not match it unless the increase will benefit the industry as a whole.
, ,&, 5&0&43,3&(. $%&'()* 01%23*. a firm needs to consider the following:
‡ Why did the competitor change the price?To steal the market, to utilize excess capacity, to meet
changing cost conditions or to lead an industrywide price change?

R

‡ Does the competitor plan to make the price change temporary or permanent?
‡ What will happen to the company¶s market share & profits if it does not respond?
‡ What are the competitors¶ & other firms¶ responses likely to be each possible reaction?
Market leaders respond to aggressive price cutting by smaller firms in the following ways;
1 1+,*1+, $%+)3The leader might maintain its price & profit margins, believing thatË it would lose
too much if it reduced its prices.2 it would not lose much market share 3 it could regain market
share when necessary.
/ 1+,*1+, $%+)3  1'' 817(3The leader could improve its products, services & communications.
The firm may find it cheaper to maintain price & spend money to improve perceived quality than to
cut price & operate at lower margins.
) 3'()3 $%+)3The leader might drop its price to match the competitor¶s price. It might do so
becauseË its costs fall with volume2 it would lose market share because the market is price
sensitive and3 it would be hard to rebuild market share, once it is lost.
' ,)%31.3 $%+)3  +0$%&83 H(17+*6The leader might raise its price & introduce new brands to
bracket the attacking brand.
3 1(,)5 1 7&> $%+)3 -+45*3% 7+,3It might add lower priced items to the line or create a separate
lower priced brand.
The best response varies with the situation. The company has to consider the product¶s stage in
the life cycle, its importance in the company¶s portfolio, the competitor¶s intentions & resources,
the market¶s price, the quality senstivity,the behaviour of costs with volume and the company¶s
alternative opportunities.
   
R R
 R

‡  R

Marketing communications are the means by which firms attempt to
inform, persuade and remind consumersdirectly or indirectlyabout the products &
brands that they sell.
‡ 1%23*+,4 &00(,+)1*+&, +; consists of six major modes of communication:
 '83%*+.+,4Any paid form of non personal presentation & promotion of ideas, goods
or services by an identified sponsor.
 173.
%&0&*+&,: A variety of short term incentives to encourage trial or purchase of
a product or services.
 83,*.  3;$3%+3,)3.Company sponsored activities & programs designed to
create daily or special brand related interactions.

(/7+) %371*+&,.  $(/7+)+*6A variety of programs designed to promote or protect a
company¶s image or its individual products.
 +%3)* 1%23*+,4Use of mail,telephone,fax,e mail, or internet to communicate
directly with or solicit response or dialogue from specific consumers & prospects.

3%.&,17 .377+,4Face to face interaction with one or more prospective purchasers
for the purpose of making presentations,answetring questions & procuring orders.
   
R R
 R

‡ Relevance: Marketing communication activities contribute to brand equity by

creating awareness of the brand, linking the right associations to the brand
image in customer¶s memory, eliciting positive brand judgments or feelings
or facilitating a stronger consumer brand connection.
‡
53 &00(,+)1*+&,
%&)3.. &'37.=
‡ 1)%&0&'37 &- &00(,+)1*+&,
%&)3.. =

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‡ 373)*+83 1**3,*+&,People are bombarded by advt/messages .Ad clutter is

a major obstacle to gaining attention.
‡ 373)*+83 '+.*&%*1*+&,Receivers will hear what fits into their beliuef
systems. As a result, receivers often add things to the message that are not
there and do not notice other things that are there. The task is to strive for
simplicity,clarity,interest & repetition to get the main points across.
‡ 373)*+83 %3*3,*+&,In long term memory, people will retain only a small
fraction of the messages that reach them. If the receiver¶s initial attitude
towards the object is positive and he or she rehearses support arguments,
the message is likely to be accepted and have high recall. If the initial
attitude is negative the message is likely to be rejected but to stay in long
term memory.
 MARKETING CMMUNICATINS

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 '3,*+-6 *53 *1%43* 1('+3,)3: The target audience are the potential buyers of the
company¶s products, current users, deciders or influencers. It is often useful to define
target audience in terms of usage & loyalty. Communication strategy will differ
depending on the usage & loyalty involved. Image analysis can be conducted to
profile the target audience in terms of brand knowledge to provide further insights.
IMAGE is the set of beliefs, ideas & impressions a person holds regarding an object.
 3*3%0+,3 *53 &00(,+)1*+&,. /B3)*+83=Rossiter & Percy identify four possible
objectives as follows:
1 1*34&%6 R33': Establishing a product or service category as necessary to remove
or satisfy a perceived discrepancy between a current motivational state and a desired
one.
/ %1,' >1%3,3..= /+7+*6 to identify the brand within the category in sufficient
details to make a purchase.
) %1,' **+*('3= 817(1*+&, of the brand with respect to its perceived ability to meet
a currently relevant need.
' %1,'
(%)51.3 ,*3,*+&,= Self instructions to purchase the brand or to take
purchase related action.
   
R R
 R

 3.+4, *53 &00(,+)1*+&,.: Formulating the communications to achieve

the desired response will require the solving of the following three problems
what to say(message strategy ,how to say it(creative strategy & who
should say it(message source .
1 3..143 *%1*346: In this the management searches for appeals, themes
or ideas that will tie into the brand positioning & help establish points of
parity & points of difference. John Maloney saw buyers as expecting one of
four types of reward from a product:rational,sensory,social or ego
satisfaction. Buyers might visualize these rewards from results of use
experience, product in use experience or incidental to use experience.
/ %31*+83 *%1*346= &00(,+)1*+&, Effectiveness depends on how a
message is being expressed as well as the content of the message
itself.Creative Strategies are how marketers translate their message into a
specific communication. They are classified into Informational appeals or
transformational appeals
   
R R
 R

+ ,-&%01*+&,17 $$317.= elaborates on product or service attributes or benefits. Examples

are: problem solution ads (Saridon for headache ,product demonstration ads (LG silent washing
machines ,product comparison ads(as in automobiles & testimonials from celebrity endorsers:
++
%1,.-&%01*+&,17 $$317.= elaborates on a non product related benefit or image. It might
depict what kind of person uses a brand(Raymond¶s users are young & successful & emotionally
sensitive or what kind of experience results from using the brand( Liril as a freshness soap .
Communication use negative appeals such as fear, guilt & shame to get people to do things
as brushing their teeth, have a heart check up, or stop doing things as smoking,alchohol
abuse,overeating.Fear appeals work best when they are not too strong & when the communication
promises to relieve in a believable way & efficient way, the fear it arouses.
%1,'
5303 '
147+,3
ur car is more spacious More car per carTata Indica
wning this T is prestigious Neighbor's envy owner¶s pride nida
This butter is tasty Utterly Butterly deliciousAmul
ur motorbike is fuel efficient Fill it, Shut it, Forget it
ero
onda
) 3..143 &(%)3= Messages delivered by attractive or popular sources can potentially
achieve higher attention & recall and the source should have expertise,trustworhiness & likability.

53
%+,)+$73 &- &,4%(+*6 implies that communicators can use their good image to reduce
some negative feelings towards a brand but ib the process might loose some esteem with the
audience.
   
R R
 R

 373)* *53 &00(,+)1*+&, 51,,37.= Selecting efficient channels to carry

the massage become more difficult as channels of communication become
more fragmented & cluttered. These channels may be personal & non
personal.
1
3%.&,17 &00(,+)1*+&, 51,,37.= involve two or more persons
communicating directly face to face, person to audience, over the telephone
or through the email. These are of three types:
i Advocate channels consist of company salespeople contacting buyers in
the target market.
ii Expert channels consist of independent experts making statements to target
buyers.
iii Social channels consist of neighbours,friends,family members & associates
talking to target buyers.
   
R R
 R

‡ Companies can take several steps to stimulate personal influence channels to work on their
behalf:
‡ Identify influential individuals & companies & devote extra effort to them
‡ Create opinion leaders by supplying certain people with the product on attractive terms.
‡ Work through community influential such as local DJs,class presidents & other associations.
‡ Use influential or believable people in testimonial advertising.
‡ Develop word of mouth referral channels to build business.
‡ Establish an electronic forum
‡ Use viral marketing: This involves passing on company developed products, services or
information from user to users.
/ R&, $3%.&,17 )&00(,+)1*+&, )51,,37.?
3'+1"consist of print media(newspapers & magazines ;broadcast media(radio &
television ;network media(telephone, cable,satellite,wireless ;electronic media(audiotape,
videotape,CDRom,Web page & display media(billboards signs,posters
   
R R
 R

‡ Sales Promotion: consist of consumer promotions(such as samples,

coupons& premiums ;trade promotions(such as advertising & display
media ;& business & sales promotion (contests for sales rep
‡ Events & experiences include sports,arts,entertainment & cause events as
well as less formal activities that create novel brand interactions with
customers .
‡ Public Relations; include communications directed internally to employees
of the company or externally to consumers, other firms, the government &
media.
: .*1/7+.5+,4 *53 *&*17 01%23*+,4 )&00(,+)1*+&,. /('43*=
53%3 are
four methods to decide on the promotion budget:
1 --&%'1/73 3*5&'= Many companies set the promotion budget at what
they think the company can afford. It leads to an uncertain annual budget
which makes long range planning budget.
/
3%)3,*143 &- .173. 03*5&'= Many companies set promotion
expenditures at a specified percentage of sales or of the sales price.
   
R R
 R

) &0$3*+*+83
1%+*6 3*5&'Some companies set their promotion budget to
achieve share of voice parity with competitors.
' /B3)*+83 
1.2 3*5&'"This method calls upon marketers to develop
promotion budgets by defining specific objectives, determining the tasks
that must be informed to achieve these objectives and estimating the costs
of performing these tasks. This method has the advantage of requiring
management to spell out its assumptions about the relationships among the
funds spent, exposure levels, trial rates and regular uses.
 1%23*+,4 &00(,+)1*+&, +;= Companies must allocate the marketing
communication budget over six major modes of communication advertising,
sales promotion, public relations& publicity, events & experiences, sales
force & direct marketing.
‡ 51%1)*3%+.*+). &- 1%23*+,4 +;=
‡ Advertising; Sales promotion; Public Relations & Publicity; Events &
Experiences; Direct Marketing; Personal Selling
   
R R
 R

: 31.(%+,4 &00(,+)1*+&, 3.(7*.= -*3% implementing the

communication plan, its impact must be measured on the target audience.
Members of the target audience are asked whether they recognize or recall
the message, their previous attitudes & current attitudes towards the
product & the company.
!: 1,14+,4 *53 ,*34%1*3' 1%23*+,4 &00(,+)1*+&,
%&)3..= +. a
concept of marketing communication planning that recognizes the added
value of a communication plan. Such a plan evaluates the strategic roles of
a variety of communication disciplinesgeneral advertising, direct response,
sales promotion & public relations and combines these disciplines to
provide clarity & consistence.
 
R
‡ '83%*+.+,4 is any paid form of non personal presentation & promotion of
ideas, goods or services by an identified sponsor.
‡ +83 . &- '83%*+.+,4"+..+&,What are the advertising objectives?
‡ &,36
ow much can be spent?
‡ 3..143What message should be sent?
‡ 3'+1: What media should be used?
‡ 31.(%303,*:
ow should the results be evaluated?
‡ An 1'83%*+.+,4 &/B3)*+83 is a specific communications tasks &
achievement level to be accomplished with as specific audience in a
specific period of time. They can be classified into:
1 ,-&%01*+83 1'83%*+.+,4: aims to create brand awareness & knowledge of
new products or new features of existing products.
/
3%.(1.+83 1'83%*+.+,4= aims to create liking,preference,conviction and
purchase of a product or service. Some persuasive advertising uses
comparative advertising which makes an explicit comparison of the
attributes of two or more brands.
 
R

) 30+,'3% '83%*+.+,4: aims to stimulate repeat purchase of products &

services.
' 3+,-&%)303,* '83%*+.+,4= aims to convince current purchasers that they
made the right choice.

%&)3.. &- '83%*+.+,4
There are three steps of advertising strategy:
i Message Generation & Evaluation
ii Creative Evaluation & Execution
iii Social Responsibility Execution
i 3..143 3,3%1*+&,  817(1*+&,: A good ad normally focuses on any
one or two core selling propositions. As part of refining the brand
positioning, the advertiser should conduct market research to determine
which appeal works best with its target audience. nce they find an
effective appeal, advertisers should prepare a creative brief which is an
elaboration of the positioning statement and includes key message, target
audience, communications objectives, key brand benefits, supports for the
brand promise & media.
 
R

‡ %31*+83 3,3%1*+&,  817(1*+&,= In preparing an ad campaign the

advertiser can prepare a copy strategy statement describing the
objective,content,support & tone of the desired act.

3738+.+&, '.: T is generally acknowledged as the most powerful advertising
medium & reaches a broad spectrum of consumers. As per IRS 2  data, there are
also significant variations in the reach of television & satellite network in different
states of India.
T can be an effective means of vividly demonstrating product attributes &
persuasively explaining their corresponding consumer benefits. This can be a
compelling means for dramatically portraying user & usage imagery.
owever the
drawbacks are that due to the fleting nature of the message & the potentially
distracting creative elements often found in a T ad, product related messages & the
brand itself can be overlooked. Further, the large number of ads & non programming
material on T creates clutter that makes it easy for consumer to ignore or forget ads.
Fragmentation of the channels affects the viewership of specific programs on each
channel.
 
R

‡
%+,* '.= Magazines & newspapers are more effective at building user & usage
imagery. Format elements such as ad size,color,illustration affects a print¶s ad¶s
impact. Minor rearrangement of mechanical elements can improve attention getting
power. Larger ads gain more attention.Picture,headline & copy are important. The
picture must be strong enough to draw attention, the headline must reinforce the
picture and lead the person to read the copy. The copy itself must be engaging & the
advertising brand¶s name must be sufficiently prominent.
‡ 1'+& '.= Radio listening is low in the urban areas. In 2 , the penetration of
radio in the urban areas was about 2Ë%.Radio listening is expected to increase
significantly over the coming years, as the second phase of privatization with 32 FM
stations scheduled to come up across Ë cities in India. Since the cost of production
of advertisements is low, radio is likely to emerge as a significant medium for
advertising in India. But the disadvantages are the lack of visual images & the
relatively passive nature of the consumer processing that results.
‡ +70 '.= India is the largest producer of films in the world. India has Ë3 digital
cinemas. In 2 ,
indi cinemas generated approximately ËË million admissions in
the theaters. Advertisers can release their advertisements, to be screened along with
the film, in theaters either in the beginning of the movie or during the interval time.

owever the cost of developing of the prints for release in different theaters may be
difficult for the advertisers.
 
R

‡ &)+17 3.$&,.+/+7+*6 38+3>= Advertisers & their agencies must ensure

that their advertising does not overstep social & legal norms. As per lndian
laws, advertisements for alcoholic beverages & cigarettes cannot be
screened on television. nly surrogate advertising or indirect advertising is
allowed. Infant food, children targeted advertising,pharmaceautical
advertising that promise cure, diagnosis is not allowed. The MRTP Act
specifies that any misleading, false & wrong representation either in writing
or oral that causes actual or intended injury or loss to consumers is
considered as a unfair trade practice. Rules also prohibit advertisements
offending the morality, decency & religious suscepbility of the audience.
Women cannot be portrayed in a manner that emphasizes passive &
submissive qualities. The ASCI,a self regulatory voluntary organizations
formed by the advertising industry, provides basic guidelines for ensuring
fairness in advertising & has mechanisms to safeguard against misleading
messages.
 
R

‡ 31.(%+,43'+1--3)*+83,3..=
‡ 3'+1 373)*+&, is finding the most costeffective media to deliver the desired
number and type of exposures to the target audience. The effect of exposures on
audience awareness depends on the exposures,reach,frequency & impact:
‡ 31)5<:The number of different persons or households exposed to a particular
media schedule at leas once during a specified time period.
‡ %3H(3,)6<:The number of times within the specified time period that an average
person or household is exposed to the message.
‡ 0$1)*<:The qualitative value of an exposure through a given medium.
5&&.+,4 0&,4 1B&% 3'+1
6$3.: Media planners make their choices by
considering the following variables:
Target audience media habits
Product Characteristics
Message Characteristics
Cost
 
R

‡
  
R= is also called outofhome advertising & is a
broadly defined category that captures many different alternative advertising
forms. Some options available are:
‡ +77/&1%'.= The total size of the outdoor media in India is estimated to vary
between Rs. & RsË billion & accounts for approximately % of the total
media spent. Prominent categories that spend on outdoor media are
telecom,entertainment,media & financial products & services.
‡
(/7+) $1)3.: Advertisers are placing traditional T & print ads in
unconventional places such as movies,airlines,sports arenas, office lounges
etc.Street furniture such as bus shelters, kiosks is also being used.
‡
 

 R
= 51. expanded from movies to all types of T
shows & can be combined with special promotions to publicize
entertainment tieins.
‡ '83%*&%+17. are print ads that offer editorial content that reflects favorably
on the brand & it is difficult to distinguish from newspaper or magazine
content.
‡ Advertising inserts are found in monthly bills.
 
R

‡
R
 
 = '83%*+.3%. include ads on shopping carts,
shelves, in store demonstrations & live sampling. Numerous studies have
shown that in many product categories consumers make the bulk of their
final decisions in the store.
‡  
 R 
R
  = '. now appear virtually anywhere
consumers have a few spare minutes or even seconds & thus enough time
to notice them.
‡ 373)*+,4 $3)+-+) 35+)73.= The media planner must search for the most
cost effective vehicles within each chosen media type & depend upon
measurement services that provide estimates of audience size,composition
& media cost.
‡ Circulation: The number of physical units carrying the advertising.
‡ Audience: The number of people exposed to the vehicle.
‡ Effective audience: The number of people with target audience
characteristics exposed to the vehicle.
 
R

‡ 817(1*+,4 '83%*+.+,4 --3)*+83,3..= &&' planning & control of

advertising effectiveness. Most advertisers try to measure the
communication effect of an ad.
‡ &00(,+)1*+&, --3)* 3.31%)5"seeks to determine whether an ad is
communicating effectively. This is called as copy testing. There are three
major methods of pretesting. They are: Consumer Feedback testing
method; Portfolio Tests; Laboratory Tests.
‡ &,.(03% 33'/1)2
3.*.= asks consumers for their reactions to a
proposed ad.
‡
&%*-&7+&
3.*.: ask consumers to view or listen to a portfolio of
advertisements. Consumers are then asked to recall all the ads & their
content, aided or unaided by the interviewer.
‡ 1/&%1*&%6
3.*.: use equipment to measure physiological reactions
heartbeat,blood pressure, pupil dilation, perspirationto an ad or consumers
may be asked to turn a knob to indicate their momenttomoment liking or
interest while viewing sequenced material. Pretest critics maintain that
agencies can design ads that test well but may not necessarily perform well
in the marketplace.
 
R

‡   
 =Advertisering¶s sales effect is generally

harder to measure than its communication effect. Sales are influenced by
many factors such as features, price & availability as well as competitor¶s
actions.Sales impact is easiest to measure in directmarketing situations &
hardest to measure in brand or corporate image building advertising.
 @ 
 

‡ 173.
%&0&*+&, consists of a collection of incentive tools, mostly short term,
designed to stimulate quicker or greater purchase of particular products or services
by consumers or the trade.
‡ Whereas advertising offers a reason to buy; sales promotion offers an incentive to
buy. Sales promotion includes tools for consumer promotion;(samples,coupons,cash
refund offers,prizes,warranties,tieinpromotions,cross promotions, points of purchase
displays free trials & demonstrations trade promotions;(prices off,advertising,display
allowances, free goods business & sales force promotion(trade shows &
conventions, contests for sales representatives,speciality advertising . Companies
launch a variety of consumer promotions emphasizing the growing importance of
promotions in the company¶s communication strategy.
‡ /B3)*+83.  +4,+-+)1,)3= Sellers use incentive type promotions to attract new
triers,to reward loyal customers & to increase the repurchase rates of occasional
users.
‡ Sales promotions used in markets of high brand produce a high sales response in the
short run but little permanent gain in market share.
‡ In markets of high brand dissimilarity sales promotion may be able to alter market
share permanently.
 @ 
 

‡ Sales promotions enable manufacturers to adjust to short term variations in

supply and demand.
‡ They induce consumers to try new products, instead of never straying from
current ones.
‡ They lea to more varied retail formats, such as the everyday low price
stores and promotional pricing stores.
‡ For retailers promotions may increase sales of complementary categories
as well as induce some store switching by consumers.
‡ Sales promotions permit manufacturers to sell more than they would
normally sell at the list price.
‡ They permit manufacturers to sell more than they would normally sell at the
list price & help the manufacturers adapt programs to different consumer
segments.
  
 
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‡ &0$1%+.&,/3*>33,173.
%&0&*+&, '83%*+.+,4=
‡ Advertising builds brand loyalty and then sales promotion can be utilized.
‡ Sales promotion with its incessant prices off,coupons,deals,premiums may devalue
the product offering in buyer¶s minds. Usually when a brand is price promoted too
often, the consumer begins to devalue it & buy it mainly when it goes on sale.
‡ Sales promotions yield faster & more measurable responses in sales than advertising
does but do not tend to yield new, long term buyers in mature markets.
‡ Advertising appears to be more effective at deepening brand loyalty.

R  R
 
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=
1,(-1)*(%3%G. $%&0&*+&,." e.g. auto industry¶s frequent use of rebates, gifts to
motivate test drives & purchases & high value tradeincredit.
3*1+73% $%&0&*+&," e.g. price cuts, feature advertising, retailer coupons, retailer
contests or premiums.
&,.(03% -%1,)5+.3"/(+7'+,4 $%&0&*+&,." e.g. free samples, frequency
awards,coupons,premiums.
Non consumer franchisebuilding promotions e.g. priceoff packs, contests&
sweepstakes, consumer refund offers, trade allowances.
  
 
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‡ 1B&%&,.(03%
%&0&*+&,
&&7.=
‡ 10$73."ffer for a free amount of a product or service delivered doortodoor, sent in the mail,
picked up in a store, attached to another product or featured in an advertising offer.
‡ &($&,.Certificates entitling the bearer to a stated saving on the purchase of a specific
product;mailed,enclosed in other products or attached to them or inserted in magazine &
newspaper ads.
‡ 1.5 3-(,' --3%.<%3/1*3."Provide a price reduction after purchase rather than at the retail
shop: consumer sends a specified ³proof of purchase´ to the manufacturer who ³refunds´ part of
the purchase price by mail.
‡
%+)3
1)2. <)3,*."&-- '317."ffers to consumers of saving off the regular price of the product,
flagged on the label or package. A %3'()3' $%+)3 $1)2 is a single package sold at a reduced
price(such as two for the price of one .A /1,'3' $1)2 is two related products banded
together(such as toothpaste & toothbrush .
‡
%30+(0 <4+-*."Merchandise offered at a relatively low cost or free as an incentive to purchase a
particular product. A >+*5J$1)2 $%30+(0 accompanies the product inside or on the package. A
-%33"+,"*53"01+7 $%30+(0 is mailed to the consumers who send in a proof of purchase. A self
liquidating premium is sold below its normal retail price to consumers who request it.
‡ %3H(3,)6
%&4%10.Program providing rewards related to the consumer¶s frequency & intensify
in purchasing the company¶s products or services.
  
 
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‡
%+F3.<)&,*3.*. .>33$.*123. 4103. "
%+F3. are offers of the chance to win cash, trips or
merchandise as a result of purchasing something. A )&,*3.* calls for consumers to submit an
entry to be examined by a panel of judges who will select the best entries. A .>33$.*123 asks
consumers to submit their names in a drawing. A 4103 presents with consumers with something
every time they buy which might help them win a prize.
‡
1*%&,143 >1%'.alues in cash or in other forms that are proportional to patronage of a certain
vendor or group of vendors.
‡ %33
%+17.Inviting prospective purchasers to try the product without cost in the hope that they will
buy.
‡
%&'()* 1%%1,*+3.Explicit or implicit promises by sellers that the product will perform as
specified or that the seller will fix it or refund the consumer¶s money during a specified period.
‡
+3"+,"
%&0&*+&,."Two or more brands or companies team up on coupons, refunds and contests
to increase pulling power.
‡ %&.."
%&0&*+&,." Using one brand to advertise another non competing brand.
‡
&+,*"&-"
(%)51.3<

+.$716.  30&,.*%1*+&,.=

displays & demonstrates take place
at the pointofpurchase or sale.
  
 
 R

‡ 
R
 
 
 R
=
‡ Manufacturers award money to the trade Ë to persuade the retailer or
wholesaler to carry the brand; 2 to persuade the retailer or wholesaler to
carry more units than the normal amount; 3 to induce retailers to promote
the brand by featuring display & price reductions &  to stimulate retailers &
their sales clerks to push the product.
‡ 1B&%
%1'3
%&0&*+&,
&&7."
‡
%+)3" --< -- +,8&+)3 &% &--"7+.*"A straight discount off the list price on each case purchased
during the stated time period.
‡ 77&>1,)3An amount offered in return for the retailer¶s agreeing to feature the manufacturer¶s
products in some way. An 1'83%*+.+,4 177&>1,)3 compensates retailers for advertising the
manufacturer¶s product. A '+.$716 177&>1,)3 compensates them for carrying a special product
display.
‡ %33 &&'.ffers of extra cases of merchandise to intermediaries who buy a certain quantity or
who feature a certain flavor or size.
  
 
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‡ 373)*+,4(.+,3..173.&%)3
%&0&*+&,
&&7."
‡
%1'3 5&>.  &,83,*+&,."Industry associations organize annual trade shows & conventions.
Participating vendors expect several benefits, including generating new sales leads, maintaining
customer contacts, introducing new products, meeting new customers, selling more to present
customers and educating customers with publications, videos and other audiovisual materials.
‡ 173. &,*3.*."A sales contest aims at inducing the sales force or dealers to increase their sales
results over a stated period, with prizes (money,trips,gifts or points going to those who succeed.
‡ $3)+17*6 '83%*+.+,4"Specialty Advertising consists of useful, lowcost items bearing the
company¶s name & address & sometimes an advertising an advertising message that salespeople
give to prospects & customers. Common items are ballpoint pens,calendars,key
chains,flashlights,tote bags & memo cards.
‡ 83,*.  '83%*+.+,4"Sponsoring events provides companies opportunities to obtain wider
exposure to their brands & influences attitudes towards brands. The sponsorship of cricket in
India, for example, is a big business; the BCCI has signed mega deals with Nike for kit
sponsorship & Sahara Group for team sponsorships. Participating in car rallies provide visibility &
brand image to MRF tyres.
‡ Marketers sponsor events because:
O To identif y with a particular target market or life style

Ë To increase awareness of company or product name

  
 
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3 To create or reinforce consumer perceptions of key brand image associations

 To enhance corporate image dimensions
 To create experiences & evoke feelings
6 To express commitment to the community or on social issues.
 To entertain key clients or reward key employees
 To permit merchandising or promotional opportunities.


 R
A $(/7+) is any group that has an actual or potential interest in or impact on
a company¶s ability to achieve its objectives.

(/7+)371*+&,.<
involves a variety of programs designed to promote
or protect a company¶s image or its individual products.
The PR department of a company performs the following functions=
1
%3..371*+&,.=Presenting news & information about the organization in the most light.
/
%&'()*$(/7+)+*6=Sponsoring efforts to publicize specific products.
) &%$&%1*3)&00(,+)1*+&,.=Promoting understanding of the organization through internal &
external communications.
  
 
 R

 &//6+,4Dealing with legislators & government officials to promote or defeat legislation &
regulation.
 &(,.37+,4Advising management about public issues & company¶s positions & image during
good times & bad.
 @ 
 R   
R


(/7+)1*+&,.Companies rely extensively on published materials & influence their target markets. These include
annual reports,brochures,articles,company newsletters & magazines & audiovisual materials.
83,*.Companies can draw attention to new products or other company activities by arranging special events
like news conferences,seminars,outings,trade shows exhibits, contests & competitions & anniversaries that will
reach the targeted publics.
$&,.&%.5+$.Companies can promote their brands & corporate name by sponsoring sports & cultural events &
highly regarded causes.
R3>.ne of the major tasks of PR professionals is to find or create favorable news about the company, its
products, its people & get the media to accept press releases & attend press conferences.
$33)53. Increasingly, company executives must field questions from the media or give talks at trade
associations or sales meetings & these appearances can build the company¶s image.

(/7+)"3%8+)3 )*+8+*+3.Companies can build goodwill by contributing money & time to good cause.
'3,*+*6 3'+1Companies need a visual identity that the public immediately recognizes. The visual identity is
carried by company logos,stationary,brochures,signs,business forms, business cards,buildings,uniforms & dress
codes.
  
 
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‡
R
 
 R R=
‡ There are six major steps in an effective sales process.

%&.$3)*+,4  A(17+-6+,4The first step in selling is to identify & qualify prospects.
Companies qualify the leads by contacting them by mail or phone to assess their
level of interest & financial capacity. The leads can be categorized with ³hot´
prospects turned over to the field sales force & ³warm´ prospects turned over to the
telemarketing unit for follow up.

%31$$%&1)5The salesperson needs to learn as much as possible about the
prospect company (what it needs, who is involved in the purchase decision & its
buyers (personal characteristics & buying styles .The salesperson should set call
objectives; to qualify the prospect, gather information, make an immediate sale. The
next task is to decide on the best contact approach, which might be a personal visit, a
phone call or a letter. Finally, the sales person should plan an overall sales strategy
for the accounts:

%3.3,*1*+&,  30&,.*%1*+&,"The sales person follows the formula of gaining
attention, holding interest, arousing desire & obtaining attention.(AIDA .The
salesperson uses a features,advantages,benefits & value approach.(FAB .
  
 
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 83%)&0+,4 &/B3)*+&,."Customers pose objections during the presentation.

.6)5&7&4+)17
%3.+.*1,)3 includes resistance to interference, preference for established supply sources or
brands,apathy,reluctance to giving up something, unpleasant associations created by the sales
representatyives,pre determined ideas, dislike in making decisions. &4+)17 3.+.*1,)3 might
consist of objections to the price, delivery schedule or certain products or company
characteristics. To handle these objections, the sales person maintains a positive approach, asks
the buyer to clarify the objections, questions the buyer in away that the buyer has to answer his or
her own objection, denies the validity of the objection, or turns the objection into a reason for
buying.
 7&.+,4The next step is to close the sale. The salesperson need to know how to recognize
closing signs from the buyer, including physical actions, statements or comments & questions.
They can ask for the order, recapitulate the points of agreement, get the buyer in making choice of
colors or size or indicate what the buyer will lose if the order is not placed.
 &77&> ($  01+,*3,1,)3"are necessary if the salesperson wants to ensure customer
satisfaction & repeat business. The salesperson should cement any necessary details on delivery
time, purchase terms & other matters that are important to the customer. The salesperson should
schedule a follow up call when the initial order is received to make sure about the installation,
instructions & servicing. The salesperson should also develop a maintenance & growth plan for
the account.
  
 
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‡      R R
"The various steps in management of

sales force are as follows:
1 3)%(+*+,4  173. 3$%3.3,*1*+83.
/
%1+,+,4  ($3%8+.+,4 173. 3$%3.3,*1*+83.
) 173. 3$%3.3,*1*+83
%&'()*+8+*6
' &*+81*+,4 173. 3$%3.3,*1*+83.
3 817(1*+,4 173. 3$%3.3,*1*+83.
1 3)%(+*+,4  173. 3$%3.3,*1*+83."First the company develops its selection criteria for the
recruitment. Applications are sought by soliciting names from current sales representatives, using
employment agencies, placing job ads & contacting college students. The selection procedures
can vary from a single informal interview to prolonged testing & interviewing. Formal tests may
also be given. Parameters like personal characteristics,references,past employment history,
interviewer reactions are considered.
/
%1+,+,4  ($3%8+.+,4 173. 3$%3.3,*1*+83."The new representatives who are recruited
spend a few weeks to several months in training>The median training period is 2 weeks in
industrialproducts companies,Ë2 in service companies   in consumer ±products companies.
Training time varies with the complexity of the selling task & the type of person recruited into the
sales organization. Methods like role playing, sensitivity training, use of audio video formats,CD
RMS,programmed learning, distance learning & films on selling are used.
  
 
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Sales representatives who only receive commission, generally receive less supervision.
Those who are salaried& must cover definite accounts are likely to receive substantial supervision. In
some companies, independent, distributors are also in charge of their own sales force. They are paid a
commission on their own sales and on sales of people they recruit & train.

) 173. 3$
%&'()*+8+*6"Companies often specify the time, sales representatives should
spend prospecting for new accounts. Some companies want its sales representatives to
spend 2 % of their daily time prospecting & to stop calling on a prospect after three
unsuccessful calls.
Further, studies have shown that the best sales representatives are those who manage their
time efficiently. ne planning tool is timeand ±duty analysis, which helps representatives to
understand how they spend their time & how they increase their productivity. The actual facetoface
selling time amounts to as little as 2 % of total working time. Companies are constantly seeking ways
to improve sales force productivity. This includes training sales representatives in the use of µphone
power', simplifying record keeping & administrative time, using the computer & internet to develop call
and routing plans, supply customer & competitive information & automate the order preparation
process.

Salespeople are of three types: *3)5,+)17.($$&%*$3&$73who provide technical

information & answers to customers´questions;.173. 1..+.*1,*., who provide clerical backup for the
outside salespersons, they call ahead & confirm appointments, carry out credit checks, follow up on
deliveries & answer customers¶ questions & *37301%23*3%. who use the phone to find new leads,
qualify them & sell to them. The inside sales force frees the outside representatives to spend more
time selling to major accounts, identifying & converting new major prospects, placing electronic
ordering systems in customers¶ facilities & obtaining more blanket orders & systems contracts. Usage
  
 
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' &*+81*+,4 173. 3$%3.3,*1*+83."To increase motivation, marketers reinforce intrinsic &
extrinsic rewards of all types. Research has shown that the reward with the highest value is pay,
followed by promotion, personal growth & sense of accomplishment. The least valued rewards
were liking & respect ,security & recgnition.But it was also found that the importance of motivators
varied with demographic characteristics: Financial rewards were mostly valued by older, longer
tenured people & those who had large families.
igherorder rewards like recognition, liking &
respect, sense of accomplishment were more valued by young sales people who were unmarried
pr had small families. Companies set annual sales quota for representatives at a higher level, to
spur extra effort, or more modesty or to build confidence.
3 817(1*+,4 173. 3$%3.3,*1*+83."The most important source of information about rep is the
sales report which are divided into activity plans & write ups of activity results. The activity plans
includes the sales person¶s work plan which reps submit a week or month in advance & the plan
describes intended calls & routing. Sales reps can be evaluated on their ability to ³plan their work
& work plan". Companies also require rep to develop an annual territory marketing plan in which
they outline their programs for eveloping new accounts & increasing business from existing
accounts. Sales rep write up completed activities on call reports & also submit expense reports,
new business reports, lostbusiness reports& reports on local business & economic
conditions.Key indicators of sales performance are extracted from these reports.Ë average
number of sales calls per salespersons per day;2 average sales call time per contact,3 average
revenue per sales call, average cost per sales call,  entertainment cost per sales call, 6
percentage of orders per hundred sale calls, number of new customers per period, number of
lost customers per period and  sales force cost as a percentage of total sales.
   
R RR

‡ 1%23*+,4 51,,37. are sets of interdependent organizations involved in the process of making
a product or service available for use or consumption.
‡ Some intermediariessuch as wholesalers & retailers buy, take title to & resell the merchandise
are called as 03%)51,*.:
‡ ther intermediaries such as brokers, manufacturer¶s representatives, sales agentssearch for
customers & negotiate on the product¶s behalf, but do not take title to the goods are called as
143,*.:
‡ Intermediaries such as transportation companies, independent warehouses,banks,advertising
agenciesassist in the distribution process but do not take title to goods nor negotiate purchases
or sales are called as -1)+7+*1*&%.:
‡ 1%23*+,4 51,,37 6.*30 is the particular set of marketing channels employed by a firm.
‡ $(.5 .*%1*346 involves the manufacturer using its sales force & trade promotion money to
induce intermediaries to carry, promote & sell the products to end users. Push Strategy involves
the manufacturer using its sales force & trade promotion money to induce intermediaries to carry,
promote & sell the products to end users. This strategy is appropriate when there is low brand
loyalty in a category. brand choice is made in the store, the product is an impulse item & product
benefits are well understood.
‡ $(77 .*%1*346 involves the manufacturer using advertising & promotion to persuade consumers
to ask intermediaries for the product, thus inducing the intermediaries to order it. This is
appropriate when there is high brand loyalty & high involvement in the category, when people
perceive differences between brands.
   
R RR

‡  RR 
R

‡ A new firm typically starts as a local operation selling in a limited market, using
existing intermediaries such as sales agents, a few wholesalers, several established
retailers, transportation companies & warehouses. Then the firm uses different
channels in different markets. A supply chain view of a firm sees marketers as
destination points & amounts to a linear view of the flow. The supply chain should be
designed backward from the point of target market & this is called as the '301,'
)51+, $71,,+,4: &, Schultz has suggested the acronym SIA IN place of 
Ps,which stands for solutions,information,value & access.
‡
53 &73  (,)*+&,. - 1%23*+,4 51,,37.:
i A marketing channel performs the work of moving goods from producers to consumers.
ii It gathers information about potential & current customers,competitors & other actors & forces in
the marketing environment.
iii It reaches agreements on price & other terms so that transfer of ownership can be effected.
iv Place orders with manufacturers.
v Acquires the funds to finance inventories at different levels in the marketing channel.
vi Assumes risks connected with carrying out channel work.
vii Provide for buyer¶s payment of their bills through banks & other financial institutions.
viii Provide for the successive storage & movement of physical products.
   
R RR

‡ A F3%& 73837 )51,,37 also called a '+%3)* 01%23*+,4 )51,,37 consists of a

manufacturer selling directly to the final customer.e.g. Eureka
Forbes,Tupperware,Asian Sky Shop,ICICI Bank(telemarketing .
‡ A &,3 73837 )51,,37 contains one selling intermediary & a *>& 73837 )51,,37
contains two selling intermediaries who can be retailers,distributors,a system house
or a combination of stockists/wholesalers & retailers, distributors & dealers.
‡ Channels normally describe a forward movement of products from source to user.
however, we have also reverse flow channels which are used in the following cases.
a to reuse products or containers to refurbish products such as circuit boards or
computers for sale c to recycle products(such as paper ,d to dispose of products &
packaging(waste products .
‡ 3%8+)3 3)*&% 51,,37.Producers of services & ideas develop specific channels
for marketing of their output.
‡ ;)7(.+83 +.*%+/(*+&,"means severely limiting the number of intermediaries and is
used when the producer wants to maintain control over the service level & outputs
offered by the resellers. It involves exclusive dealing arrangements. By granting
exclusive distribution, the producer hopes to obtain more dedicated & knowledgeable
selling. It requires greater partnership between seller & reseller & is used in the
distribution of new automobiles, some major appliances & some women¶s apparel
brands.
   
R RR

‡ 373)*+83+.*%+/(*+&,involves the use of more than a few but less than all of the
intermediaries who are willing to carry a particular product. It is used by established
companies & by new companies seeking distributors. The company can gain
adequate market coverage with more control & less cost than intensive distribution.
‡ ,*3,.+83 +.*%+/(*+&, consists of the manufacturer placing the goods or services in
as many outlets as possible. This strategy is generally used for items, such as
tobacco products,soap,snack foods, gum & products for which the consumer
requires a great deal of location convenience:
‡ 3%*+)17 1%23*+,4 6.*30"comprises the producer, wholesaler & retailer acting as
unified systems. ne channel member, the channel captain owns the others or
franchises them or has so much power that they will cooperate.MSs arose as a
result of strong channel members¶ attempts to control channel behavior & eliminate
the conflict that results when independent members pursue their own objectives.
They achieve economies through size, bargaining power & elimination of duplicated
service. They are of two types: &%$&%1*3   '0+,+.*3%3' :
‡ &%$&%1*3 "combines the successive stages of production & distribution under a
single ownership e.g Indian oil companies
   
R RR

‡ '0+,+.*3%3'  coordinates successive stages of production & distribution

through the size & power of one of the members. Manufacturers of a dominant brand
are able to secure strong trade cooperation & support from resellers.e.g.
LL,Gillette
command high levels of cooperation from their resellers in connection with displays,
shelf space, promotions & price policies. The most advanced supplydistribution
arrangement for administered MSs involve '+.*%+/(*+&, $%&4%100+,4 which can
be defined as building a planned, professionally managed, vertical marketing system
that meets the needs of both manufacturer & distributors. The manufacturer
establishes a department within the company called distributorrelations planning. Its
job is to identify distributor needs & builds up merchandising programs to help each
distributor operate as efficiently as possible.e.g Procter & Gamble.
‡ &,*%1)*(17  consists of independent firms at different levels of production &
distribution integrating their programs on a contractual basis to obtain more
economies or sales impact than they could achieve alone. They are also called as
³valueadding partnerships´(AP .They are of three *6$3.= 5&73.173% .$&,.&%3'
8&7(,*1%6 )51+,.? 3*1+73% )&&$3%1*+83.? %1,)5+.3 &%41,+F1*+&,.:
   
R RR

Ë 5&73.173%".$&,.&%3' 8&7(,*1%6 )51,,37.Wholesalers organize voluntary chains of

independent retailers to help them compete with large chain organizations. The wholesaler
develops a program in which independent retailers standardize their selling practices & achieve
buying economies that enable the group to compete effectively with chain organization.
 3*1+73% &&$3%1*+83.Retailers take the initiative & organize a new business entity to carry on
wholesaling & possibly some production. Members concentrate their purchases through the
retailer coop & plan their advertising jointly. Profits are passed back to members in proportion to
their purchases. Nonmember retailers can also buy through the coop but do not share in the
profits.
 %1,)5+.3 %41,+F1*+&,"A channel member called a franchisor might link several successive
stages in the productiondistribution process.

%1'+*+&,17 6.*30
 1,(-1)*(%3'".$&,.&%3' %3*1+73% -%1,)5+.3"The dealers are independent businesspeople who
agree to meet specified conditions of sales & services.e.g. Car dealerships.
 1,(-1)*(%3'".$&,.&%3' >5&73.173% -%1,)5+.3"Beverages company like Coca Cola licenses
bottlers(wholesalers in various markets who buy its syrup concentrate & then carbonate, bottle &
sell it to retailers in retail markets.
 3%8+)3"-+%0".$&,.&%3' %3*1+73% -(,)*+&,."A service firm organizes a whole system for bringing
its service efficiently to consumers.e.g. NIIT, Apollo
ospitals,McDonalds,Dominos.
   
R RR

‡   R
   
R 
"In this two or more unrelated

companies put together resources or programs to exploit an emerging
marketing opportunity.e.g. Post ffices selling insurance & mutual funds &

LL tying up with PepsiCo India for bottling & distribution of Lipton¶s ready
todrink & other beverages.
‡ 
 RR  
R 
" occurs when a single firm uses
two or more marketing channels to reach one or more customer segments.
‡  
 RRR  RR  "
Since, a large number of channels of distribution are available to the
manufacturer for bringing his product to the consumer, one channel has to be
selected that involves least cost & ensures maximum overall profit.
owever,rational
economic analysis alone will not be enable a manufacturer to select the most suitable
channel. ther factors such as the product nature, its unit value, its technical
characteristics, its degree of differentiation from competitive products, market tends,
pricing policies, financial resources & available expertise with the company etc will
have to be considered. The following factors have to be considered:
   
R RR


 
 
"Product features exert a very decisive influence on the decision
of suitable channels
1
3%+.51/+7+*6"A perishable commodity needs speedy movement & hence shorter
route of distribution. For durable & standardized goods, longer & diversified channel
may be opted for.
/ +F3"Bulky & heavier goods generally require short channels so that distance &
number of handling from producer to ultimate consumers may be reduced.
) *673"When the style of goods is subject to frequent changes, the goods are
marketed through shorter channels.
' ,+* 17(3" If the product is of high unit value, more funds may be derived from the
unit sold & therefore shorter & more costly channels may be used. If the product is of
low value, larger & cheap channels may be used.
3
6$3 &- 3,' (.3%."This also affects the type of channels in a big way. If the product
is meant for the consumer market, retailers will have to be employed. But if it is for
both consumer & industrial uses, more than one channel will have to be employed.
   
R RR

   
 
"
1
53 R1*(%3 - *53 1%23*"is the first & foremost factor affecting the choice of the
channel. If the product is meant for the consumer market, the services of retailers will
have to be utilized & if it is also for industrial markets, more than one channel has to
be used.
/ 1%23* +F3"If the size of the market is small, direct marketing is needed & for bigger
markets, other channels can be used.
) +.$3%.17 &- ConsumersIf the potential buyers are concentrated in a limited
geographical area, direct selling may be more effective, but for scattered markets a
large number of middlemen have to be used.
' +F3 &- )&,.(03%rderIf the volume of sales is large, direct selling may be
economically feasible & in the reverse situation services of retailers etc may be
availed.
  R  
" While determining the channels of distribution, the
convenience & inconvenience of the prospective customers has to be taken care
of.e.g A large number pf consumer prefer paying for their purchase through credit
card. Although they pay a little more, the convenience of paying once a month is a
deciding factor. Some appliances like laptops or other things can be purchased
through installment systems..For convenience goods long channels are
preferred.Shopping & speciality goods are marketed directly.
   
R RR

 ,*3%03'+1%6 1)*&%."If a product needs aggressive promotion campaigns or special storage

facilities which cannot be ordinarily provided by the manufacturers, the service of middlemen such
as wholesalers or dealers has to be utilized.
 ,*3%$%+.3 1)*&%."such as financial soundness of the enterprise, its size, its willingness to
control over the channels of distribution etc. has a decisive influence on the choice of the channel.
Enterprises with substantial financial resources can afford to reduce the levels of distribution &
can grant credit for a longer period or store their products whereas enterprises with weak financial
resources, have to utilize the services of the middlemen.
owever,a new company may rely on
middlemen due to lack of experience on their part.
 ,8+%&,03,*17 1)*&%."If the economy is passing through a recessionary phase, it will be
prudent to go in for shorter or cheaper channels, whereas in times of prosperity, a relatively
costlier & longer channel may also be opted for.
 &0$3*+*&%G. 51,,37" Invariably, similar types of channels as used by the competitor¶s channel
are made use of. The reason is that, the competitor¶s channel is familiar to the purchaser & hence
could reach the customer easily.Further,the use of an altogether different channel may affect the
sales & even increase the cost of distribution.
! &.* &- 51,,37"The cost of distribution would reflect in the price of the product. Direct marketing
generally is more costlier & distribution arranged through middlemen is more economical>It also
requires that the manufacturer always keeps sufficient funds for moving the products to the
market.
   
RR

‡
53 03%+)1, 1%23*+,4 ..&)+1*+&, '3-+,3. 0+''7303, 1. O+''7303, +. &,3

>5& .$3)+17+F3. +, $3%-&%0+,4 &$3%1*+&,. &% %3,'3%+,4 .3%8+)3. *51* 1%3 '+%3)*76
+,8&783' +, *53 $(%)51.3  .173 &- 4&&'. +, *53 $%&)3.. &- *53+% -7&> -%&0
$%&'()3% *& *53 -+,17 /(63%.
Thus, a middleman is an independent marketing institution situated in marketing
channels, between the producer & the final consumer. A middleman is a great
µfacilitating force', which ensures a steady flow of goods from the initial producer to
the final buyer.
 
 R  R
When a middleman takes title to the goods & later effect sales on hos own accord,he
is known as 3%)51,* +''7303,:
When a middleman does not take title to the goods but simply gets an order from the
buyer & passes it on to the producers or sellers, he is known as 43,* +''7303,:
5&73.173%.  3*1+73%. are the prominent types of 3%)51,* +''7303,.
%&23%. &00+..+&, 43,*. 1,(-1)*(%3%G. 43,*. 377+,4 43,*.
()*+&,33%. 3*) are types of 43,* +''7303,.
   
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,@ @


@



@ @


@@

   
RR

1 &00+..+&, 43,*."Those middlemen who are appointed to make sale of goods on the sole risk
& account of the seller at the best terms & conditions are known as commission agents. They take
possession of the goods, make necessary warehousing arrangements, pass title to the buyers &
get remuneration at a certain percentage of commission on sales. They enjoy broad powers as to
prices, methods & terms of sale though they are required to carry out instructions issued by their
principles.
/ %&23%."Agents who do not have direct physical control of the goods & whose business is to
negotiate & make contacts for the sale or purchase of goods in which they deal, are known as
brokers. The brokers may represent either the buyer or the seller in negotiating purchases or sales
for their pricipals.The services of the broker are generally utilized in marketing grocery & food
articles. The broker generally works for a number of producers. They are important for small
manufacturers who cannot maintain their own selling staff.
) 377+,4 43,*."is one who performs the functions of an independent middleman taking over all
the selling activities of a producer. The selling agent generally negotiates sales of merchandise
produced by his principal & has full authority & control over prices, terms & conditions of sale. A
selling agent sometimes advertises the products he sells & organizes his own selling department.
' 1,(-1)*(%3%G. 43,*."is an agent appointed by the manufacturers who desire to sell in new
territories or whose sales in an area is limited.Specialised products like electric goods,furniture &
domestic equipment are mostly sold through agents.
   
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3 ()*+&,33%."are engaged in selling goods under the auction method of sale. They take
possession of the goods, display them to the public, sell to the highest bidder & transfer ownership
of the goods to the buyers. The goods are passed to the highest bidder, subject to any minimum
price fixed by the seller. They are specially employed by agricultural or livestock producers, used
vehicles, art dealers, cotton & tobacco merchants. They provide a location of bidding, making
advertisements & other required arrangements & other required arrangements for auction. They
get a commission on the sale proceeds of the goods.
- ;$&%*  0$&%* 43,*.they operate import cities & may act in the capacity of a broker or a
commission agent, a selling agent or manufacturer's agent. They render services in regard to
foreign trade.
4 3.+'3,* (63%.An agent who specializes in buying on a fee or commission basis chiefly for
retailers.
5
1)2+,4  &%>1%'+,4 43,*.Agents who are employed to collect, deliver & forward goods on
behalf of others.
+ 1%35&(.+,4 43,*.They specialize in storing the merchandise & take all possible care to
preserve the goods entrusted to them.
B
(%)51.+,4 43,*Middlemen who specializes in locating sources of supply for buyers of
industrial goods.
   
RR

‡   =
The American
Marketing
Association
defines
   
RR

 , *53 /1.+. &- )&00&'+*+3. *536 '317 +,:

+ 3,3%17 3%)51,'+.3 5&73.173%is a merchant wholesaler who carries a general
assortment of goods in two or more districts & unrelated merchandise lines.
++ 3,3%17 +,3 5&73.173%deals in a wide assortment of goods within a single
product line of goods.
e may also deal in other items which are closely related to
the items of product line which he stocks.
+++ +,473 +,3 5&73.173%deals only in the merchandise & may offer the whole range
of goods.
e may also specialize in concentrating on the products of a single or a
special group of manufacturers.
 , *53 /1.+. &-
3%%+*&%6 &83%3'
+ &)17 5&73.173%.They operate in a town or city or part of a town or city & supply
goods to the local retailer.
++ +.*%+)* 5&73.173%.They are also termed as regional wholesalers & operate in a
particular district or state grouped in terms of regions.
+++ R1*+&,17 5&73.173%."are located at a strategic place & distribute goods all over the
country. They  
R R may not be exclusive national and also
serve as local or state distributor
   
RR

 ,*53/1.+.&-01%23*+,4-(,)*+&,.$3%-&%03'"
+ 3%8+)3 5&73.173%."They perform full range of marketing functions & render
services to the retailers & manufacturers and are also called as µFull Function
Wholesalers¶
++ +0+*3' (,)*+&, 5&73.173%.perform only a few of the functions normally
associated with wholesaling operations. They are of the following types:
a Wagon or Truck Jobberssell from the wagon.
e often covers wide territoriesoften
ruraland distributes mostly perishable products to small retailers.
b Rack Jobbersare wholesalers who market spaeialised lines of products to certain
types of stores only. They keep their merchandise in racks & the retail buyers are
allowed to get their supplies for themselves.
c Cash & Carry JobbersThese wholesalers require retailers to come to the wholesale
warehouse, pick their own orders, pay cash for what they buy & carry away their own
purchases. Naturally their operations are less costly & the price of products is also
low.
d Mail rder Wholesalersell thriugh post offices but their importance has come down
presently.
   
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‡ (,)*+&,.&-5&73.173%.:
1 ..30/7+,4This function involves buying of manufacture goods or agricultural
produce. The wholesaler has to be particular regarding the needs & wishes of the
retailers and accordingly has to take decide the quality, quantity & variety of the
commodities to be purchased & assembled by them.
/ *&%+,4  1%35&(.+,4The goods purchased by the wholesaler are to be stored in
warehouses till they are sold to the retailers. Storing of the commodities involves risk
to the wholesaler & locking up of his capital.
) +.$3%.+&,The goods that are stored are distributed by the wholesaler to the retailer
who are generally widely spread over a large area. Retailers buy goods from the
wholesalers in small quantities to replenish their stock whenever they find their stocks
are depleted.
'
%1,.$&%*+,4Wholesalers purchase goods in large quantities from the
manufacturers & arrange for their transport first to their warehouses & later on to the
retailer¶s shops or godowns.This is economical in nature.
3 +,1,)+,4The most important form in which wholesaler offers financial assistance to
retailers is the credit sale.Further,by storing the manufactured goods in his
warehouse, he relieves the manufacturer of a great financial burden of carrying the
stock.
   
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3 +.2 31%+,4"By storing the goods in large quantities, the wholesalers faces a
number of risks such as fall in prices or risk of
damage,spoilage,pilferage,theft,deterioration in quality, loss by fire etc.Further as
wholesaler sells to retailers on credit basis, he has to bear the risk of bad debts.
- %1'+,4
1)2+,4 
1)214+,4The wholesaler after purchasing the goods from the
manufacturer grades them & repacks them into small lots which are convenient to the
retailers. Thus the wholesaler takes the responsibility for performing the functions of
grading, packing & packaging.
g Providing Market FunctionsThe wholesaler after collecting market information from
the retailers passes on this information to the manufacturer.The wholesaler provides
information to the retailers about the goods available in the market & gives
suggestion on sales promotionetc
   
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‡ 
 has been coined from a French word meaning µto cut again'. A
retailer is one who sells his goods in small quantities to the ultimate
consumers.`
. $3% @103. *3$53,.&, O3*1+73% +. 1 *%1'+,4 +,*3%03'+1%6 3,4143'
+, *53 '+.*%+/(*+&, &- )&,.(03% 4&&'. >5& +. +, '+%3)* )&,*1)* >+*5 *53
(7*+01*3 )&,.(03%:K
*1,*&, O3*1+7+,4 +,)7('3. 177 1)*+8+*+3. '+%3)*76 *& *53 .173 &- 4&&'.
&% .3%8+)3. *& *53 (7*+01*3 )&,.(03%. -&% $3%.&,17 &% ,&, /(.+,3..
(.3:K
There are four distinguishing features of retail trade:
Ë The retailer deals in small quantities.
2
is business is usually local in character.
3 A retailer invariably deals in variety of goods as has has to satisfy the
innumerable wants & needs of the consumers &
 A retailer always sells to the ultimate consumers.
   
RR

‡ R
 R  
"

 (6+,4  ..30/7+,4The retailer has to stock a wide variety of products for a large number of consumers. This
necessitates the retailer to assemble the products of different manufacturers from different wholesalers through
the process of buying.
 1%35&(.+,4  *&%+,4After buying the products from different wholesalers arranges for their storage. This
enables him to meet the requirements of his customers for different types of goods without any delay.
 377+,4The retailer has to sell the products that he has purchased from the wholesalers.
 +.2 (,'3%*12+,4The retailer undertakes all risks such as fall in price, physical deterioration in condition of
goods, natural calamities, change in fashion or business environment during the period the goods are in his
warehouse.
 %1'+,4 
1)2+,4The retailer arranges for the grading of such goods which are not graded by the wholesaler.
The packing of goods in small packs is also done by the retailer.
 %3'+* 173A retailer has to make sale of his goods to his customers on credit basis.
 (%,+.5+,4 1%23* ,-&%01*+&,They collect valuable market information such as consumer¶s behaviour,change
in taste, fashion demand etc.Thsi information is passed on to the wholesaler who in turn passes this to the
producers so that the goods are produced accordingly.
! '83%*+.+,4The retailers are a important medium of advertisement. Window dressing practised by most of the
retailers constitute a most dependable source of advertisement for themselves as well as for the producer.
# %31*+,4
&..3..+&, *+7+*6Retailers also create possession utility for the goods by facilitating transfer of title &
possession of gods.
   
RR

‡

 
 
RR =
‡ 0177)1733*1+7+,4"
 ,+* *&%3."occupy the top most position in retail trading on the basis of numerical strength & the
aggressive value of business. These stores are usually established on a proprietary basis by
individuals who fully assume the role of active management. Unit stores are invariably situated at
convenient places to cater to the needs of a local community. These unit stores may be either
general stores dealing is a variety of products or single line stores confining their activities to one
kind of products. General stores are popular in rural areas. Facility of formation, simplicity of
operstion,intensity of sales efforts & austerity in management are the prominent advantageous of
unit stores. The power of perfect adaptability with all changing phases of the business & the scope
of personal touch with consumers & employees have enabled the unit stores to hold their position
in the market.
2 Speciality TradersIn such shops goods of a particular variety are sold. The dealers specialize &
deal only in one line of goods. Shops meant exclusively for shoes,drugs,ready made garments,
books etc are some examples of speciality shops.
3 Street TradersThis type of retailers carry on their business in busy streets or on foot paths of
cities. They are often found near railway stations, bus stands & similar places where huge floating
population is invariably found.
 Market TradersThose retail traders who open their shops at different places on fixed market dates
are known as ³Market Traders". Such dates may fall either weekly, fortnightly or monthly.
   
RR

 1>23%. 
3''73%.These retailers do not have any fixed place of business. They carry goods
from one place to place with the help of a hand cart & sell their merchandise at the door of the
customer.
 6,'+)1*3 *&%3.The chief characteristics of syndicate stores is that while they offer a wide
variety of merchandise to customers, they seldom sell known brands. Most of the merchandise
they sell is generally of their own. The general practice is to purchase unbranded merchandise &
later on sell them under their own brand.
 3$1%*03,*17 *&%3.is an integrated retail organization which offers to its customers a variety of
products classified into well defined departments under one roof. 71%2  71%2 5183 '3-+,3'
*530 1. O*53 '3$1%*03,*17 .*&%3. +. 1 %3*1+7 +,.*+*(*+&, *51* 51,'73. 1 >+'3 81%+3*6 &-
03%)51,'+.3 4&&'. 4%&($3' +,*& >377 '3-+,3' '3$1%*03,*. -&% $(%$&.3 &- $%&0&*+&,
.3%8+)3 1))&(,*+,4  )&,*%&7:K A feature of the departmental store is µthe decentralization
buying & centralized selling' It is a horizontal integrated retail institution. Two models of
department store success is emerging
1 *%&,4 3*1+7 %1,' ApproachIn this type of department store, inhouse brands feature strongly & managers
take an active role in choosing inventory. While these stores tend to have high operating costs, they usually
command high margins if their inhouse brands are both fashionable & popular.e.g Pantaloons
/
53 5&>)1.3 *&%3This type of store not only sells other people¶s brands but often gets the vendors of those
brands to take responsibility for stock, staff & even the selling space. The vendor then hands over a percentage of
the sales to the store¶s owner.Thsi translates into lower gross margins for the department store but also operating
costs. Spencer¶s Stores

 

 R

‡ :@:*1,*&, ³ Physical Distribution involves the management of physical

flow of products & the establishment & operation of flow systems.´
‡ (,'+--  *+77" ³ Physical Distribution involves the actual movement &
storage of goods after they are produced & before they are consumed.´
Thus it is observed on the basis of the above definitions that physical distribution is a marketing
term which refers to the broad range of activities connected with efficient movement of goods from
the place of production to the place of consumption. It includes the movement of raw materials
from suppliers to the production plant.
/B3)*+83. &-
56.+)17 +.*%+/(*+&,=
a To ensure better customer service
b To lower the stock level
c To reduce cost.
0$&%*1,)3 &-
56.+)17 '+.*%+/(*+&,=
1 A well devised physical distribution system helps minimum cost of marketing. Since major
components of marketing costs like transportation, materials handling, inventories have registered
sharp increase in costs, marketers have to pay particular attention to cost reduction exercise in
overall marketing operations.

 

 R

b Physical distribution system helps attain the objectives of utmost customer satisfaction by
ensuring the best possible warehousing, inventory control,transport,protective packaging, physical
handling, order processing etc which gives the customer, the service they expect.
c It creates time & place utilities by making available a product at the time it is needed & at the
place, where it is stored.
d It cultivates creation of demand. nly such enterprises which are able to offer quality goods at a
suitable price & appropriate time will be able to be successful in face of stiff competitoion.Effective
customer service can act as an important selling point to attract business from potential
customers.
e It forms a major part of national income, through distribution system through means of
railways,highways,trucks,aircrafts,ships docks.

 R


 R" is the physical means of moving goods from one place to another. It imparts
place utility of goods by moving them from different centers of production to the places of
consumption. With the improvement in speed & road infrastrusture,transit time in transport has
been shortened to a greater extent, thereby increasing the turnover of capital & products of
business & preventing risk of price changes. Better transport opens up new markets,which,in turn,
increases the volume of production requiring the support of wider & large transport facilities. It has
increased the variety & quantity of goods, reduced the price of products & quickened the time of
their production & distribution.

 

 R

‡   
 R

=
53 various modes of transport fall under three
categories Land, Water & Air.
‡ 1,'
%1,.$&%*"consists of pathways used for human & animal transport & roads by
different types of vehicles like bullock carts,cycles,motor cars,trucks,lorries etc
‡ &1'
%1,.$&%*"is one of the important means of transportation. Road transport acts
as a feeder to other agencies, like railways, airways & shipping where people &
goods are to be moved over a distance. It consists of passenger carriers like
cars,taxis,buses,goods trucks & lorries. Motor transport makes no comparison with
those primitive forms of land transport & it has several advantages over railway
transport like
a It renders complete service by loading goods at the consignor¶s place of business & unloading
them at the door of the consignee;
b For comparatively short distances, motor transport is speedier as well as cheaper than rail
service;
c It offers a greater flexibility in the adjustment of services as to time & load factors. As is has no
scheduled time like the railways, truck services can be adjusted according to requirements.
d Goods carried by trucks are less liable to loss & damage partcularly in the case of fragile &
perishable goods.

 

 R

‡ Road transport are best suited for the transit of low & medium unit value goods.
‡ The truck charges can be easily calculated as compared to railways.
1+7>16."It is the cheapest & quickest means of transportation over long distances &
for heavier types of commodities.
a It is capable of running long distances at high speed & is the only choice for long
hauls in land transport.
b Small power requirement makes the railway a cheaper form of transport for carrying
heavy goods to any great distance.
c It has the power of handling larger volumes of traffic by adjusting the number of
wagons.
d It is generally not obstructed by weather conditions & provides a more dependable
service.
e Goods are more safe & secured against loss & the railway receipt being a document
of title to the goods gives rise to some privilege during transit times.
1*3%
%1,.$&%* has been a important mode of transport. In past, this was only
means of transport available for moving bulky goods of cheap value. This consists of
inland waterways & ocean transport.

 

 R

‡ R R 
 " consists of river & canals. Rivers are natural highways
which provide safe transportation for carrying goods from one place to another if at all
they are navigable. Canals are artificial waterways constructed for the purpose of
navigation & irrigation. They also provide a convenient waterway if they are deep &
broad enough to maintain a regular flow of traffic. The advantages of inland
waterways are as follows:
a It is the cheapest mode of transport because of its low operating costs.
b It is particularly suited for carrying heavier goods like coal, bricks etc.
c Initial investment is negligible and the maintenance cost is meager.
d Since traffic density is less on waterways, possibilities of delay is less.
 R
 R

"consists of coastal shipping & overseas shipping.
&1.*17 5+$$+,4"is a dignified form of inland water transport. It is meant to provide
services only within the nation.
83%.31. 5+$$+,4"is utilized for foreign trade. The ocean going vessels are classified
into four categories on the basis of their working. They are:
1 +,3%."are those vessels which provide a regular service on specified routes & move on
the basis of a predetermined schedule. They are big & fast vehicles. They carry goods of
secondary industries preferably manufactured goods such as machineries,equipments,cars
etc.

 

 R


%10$."Contrary to liners the tramps have no fixed schedule & predetermined

routes. A tramp is a handy sized vessel capable of visiting a large number of ports &
of being employed in many different trades. The owner decides for himself the load &
the route & even change the destination while it is on high seas. A tramp is cheap,
flexible & specially important in carrying freight.

1,23%."are the ships which are exclusively meant for transporting crude petroleum
& petroleum products.
 ,'(.*%+17 1%%+3%"are the ships which are owned & operated for the exclusive use of
the manufacturers. They are used to transport one¶s own finished products & in return
they bring raw materials.
'81,*143."
cean transport is considered to be the cheapest because there are no costs of
construction of roads,railway lines as in the case of motor vehicles or railways.
cean transport is the only means that has maximum capacity to move goods &
people.
It is only feasible means of transport between countries so far as bulk goods are
concerned.

 

 R

‡ 
 R

= is an important carrier for the movement of light & costly
goods. Introduction of largesizes cargo planes & economy in the operating
cost have enabled it to go in for untrodden & intractable paths. It has
reduced the time & distance barrier between countries & has made the
world shorter today than it was in the past.
‡ '81,*143."
‡ It adopts the most direct & the shortest route for carrying goods & reach
thos e places which are not accessible to other forms of transport.
‡ Where speed of transport is essential & time is valuable, it offers the only
choice.
‡ Its unsurpassed capacity to give quick delivery has resulted in reduction of
actual transport cost in several ways. The higher cost of transport is
neutralized to some extent by the benefits of increased turn over, reduced
inventory, diminished storing cost & expanded market.

 

 R

‡   R

R
= A number of improvements have taken place in the
field of transportation which have contributed substantially in removing some of the major
bottlenecks of effective & smooth transportation. These
include:&,*1+,3%.?
+$37+:,3.?
+446/1,2.?+.56/1)2. 
1773*+.1*+&,:
‡ &,*1+,3%."The containers are specially built boxes which could be taken out & placed in a ship
together with its contents. Thus a ship need not wait until the cargo is gradually taken out. As soon
as containers are taken out the ship leaves the port.Subsequently,the products are discharged
from the containers or the containers themselves are transported to the place of sea.
‡
+$37+,3.For transporting petroleum products from wells to refineries & from refineries to
consuming areas, pipelines are used. They cost about one fourth of that of the railways. The USA
has the biggest area of pipelines in the world followed by USSR and the Middle East region. The
il India limited & Indianoil,Reliance Petroleum,Indraprastha Gas are some of the companies
whish have laid pipelines in the country for transporting the material.
‡
+446/1,2" Under this method, use of flat railway cars is done to transport truckloads of
merchandise over long distances.
‡ +.56 /1)2" In fishyback services, the goods are loaded on trailers & the trailers are then loaded
on to barges or ships. The trailer is attached to a moving vehicle at the destination port & towed to
the receiving station. This avoids loading & unloading problems to a considerable extent.
‡
1773*+.1*+&,"Under this method, packed articles are handled with the use of pallets & are used
as an aid in mechanical handling merchandise.

 

 R

‡ 
     R"Storage implies preserving. It is the process of

carrying forward surplus production for future consumption for future consumption &
includes all types of storagecountry method of storage or scientific methods of
storage, whether controlled & maintained by private or public agencies.nthe other
hand, warehousing means scientific facilities for storage of commodities, generally
combined with the elements of trade & profit.
‡ (''6  38F1," O*&%143 +. 5&7'+,4 /1)2 177 4&&'. *51* 1%3 $%&'()3' -%&0
*53 *+03 &- )&0$73*+&, &- $%&'()*+&, *& *53 *+03 &- )&,.(0$*+&,:K
‡ 53**6  3''6" O*&%143 016 /3 '3-+,3' 1. *53 01%23*+,4 -(,)*+&, *51*
+,8&783. 5&7'+,4 &- 4&&'. /3*>33, *53 *+03 &- +*. $%&'()*+&,  +*. -+,17
)&,.(0$*+&,:K
‡ +4,+-+)1,)3 &- .*&%143=
Ë The need for storage of agricultural produce arises because most of the agricultural; produce are
seasonal & cannot be disposed of immediately after harvest. But the consumption of food
resources is a continuous process & therefore the produce needs to be stored till the consumption
stage.
2 Storage is necessary for goods which are purchased or used
seasonally.Coolers,refrigerators,fans,geysers have seasonal demand and hence are stored during
off season till the requirement arises as the production goes on throughout the year. The
expenses of storing in off season is less than the extra cost of providing facilities & labour when
products are needed in required quantities..

 

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3 The supply of agricultural production is not regular & uniform, but the demand remains regular. In
order to have a regular flow of marketable surplus to the markets, the conservation of agricultural
product becomes essential.
 Generally there is a time lag in between production, marketing & consumption. The storage
system tries to shorten this time lag & enables the producers to get a better price at the harvest
time. Since a new kind of commercial demand which did not exist is created, it enables the
consumer to obtain the commodities during period of scarcity & their prices is reduced as more of
the commodities are available in the off season.
 Storage creates form utility.Cpmmodities like tobacco & cheese are stored for curing purposes.
Bananas & mangoes which need ripening are harvested green and are stored. Timber is also
stored for ripening.
6 The adequate provision & extension of storage facilities pave the way for minimizing the price
fluctuations which characterize agricultural products. Where storage facilities are available, it may
be possible to narrow down the annual variation in prices.
 Where the place of production of goods is away from the place of consumption, there is a need for
storing the goods near the market as a protection against delays in supply & uncertainties in
transportation.
 Manufacturers produce goods in anticipation of demands & hence the goods produced in advance
have to be stored by the manufacturer until they are demanded in the market.
 Some perishable goods like vegetables,fruits,butter etc are kept in cold storage to preserve their
quality & to enable the consumers to consume them regularly throughout the year.

 

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‡   R" Usually a warehouse is used to denote a place of storage

& is a building or a room used for storing merchandise. Warehousing
embraces storage & helps other marketing functions such as
assembling,grading,transportation etc.
‡ R
 R    "
 *&%143"Warehousing assumes the responsibility for storage of goods, which are in surplus &
make them available to the consumers when the supply is relatively less.
 +.2"/31%+,4" The warehouseman takes care of the goods from the time of deposit till they are
released by the owners & if the goods are damaged or lost or destroyed when they are in his
warehouse, he reimburses the loss to the owner of goods.
 +,1,)+,4The warehouse receipt issued towards the storage of goods in government
warehouses & designated warehouses is used for financing of the goods to the extent of  % of
the value of the goods ,prevailing on the day of taking finance from financial institutions.

%+)3 *1/+7+F1*+&,Warehousing avoids the fall in the price of the goods, when there is more
supply than demand & rise in their prices when the demand is more than the supply. Thus
warehousing helps in stabilizing the prices of good whose supply is irregular.

1)2+,4Sometimes the warehouse keeper takes the responsibility for blending,mixing,grading &
packing of goods in convenient lots for sale purposes.
 +.)3771,3&(. (,)*+&,.It may provide representative samples to the buyers & break up large
stocks into small parcels. It may deliver goods to the buyers as per the instructions of the
depositor of goods

 

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‡  
 R   "

Warehouses may be divided on the basis of the following classifications:
+ ,*53/1.+.&-$71)3&-,3)3..+*6
++ ,*53/1.+.&-&>,3%.5+$
+++ ,*53/1.+.&-)&00&'+*6.*&%3'
,*53/1.+.&-,3)3..+*6"
1 ,"$71,* >1%35&(.3."It is usual that the manufacturers generally required to store their products
for some time before sending them to the market.Moreover,a large number of manufacturers find it
convenient to distribute the products from plants directly to retailers or to consumers. This reduces
handling cost & improves the services. This requires inplant warehousing.
/ +37' 1%35&(.3."is necessary where products from different plants are to be mixed together.
They are centrally located from where distribution is done to wholesalers & retailers.
) &,'3' 1%35&(.3."are generally located near ports. They are meant to store the unloaded
goods from the ship, before they are taken delivery by the owner. For outward transportation, the
commodities are handed over to the warehouse authorities who keep them until the ship arrives in
then port. The importer normally has to take over the goods after paying customs & other duties
due, to the shipping & port authorities. The importer can get the goods released from such
warehouses proportionately by paying these dues in instalment.It is due to this function that these
warehouses are called as bonded warehouses.

 

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' &(.35&7' >1%35&(.3.Theses warehouses are mostly temporary in character & are not used
for commercial purposes. These warehouses are meant for storing furniture & other household
articles, when one has to move away from one place or city to another. This service is found in
large cities only, where transfers of employed personnel are frequent.
, *53 /1.+. &- &>,3%.5+$"
1
%+81*3 1%35&(.3"is one which is owned & operated by a firm or a trader or a manufacturer
exclusively for his own purposes. Private warehouses are generally used by retail dealers.
Manufacturers may also own their private warehouses for the purpose of storing raw materials.
/
(/7+) 1%35&(.3" Place of storage for the general public where a variety of merchandise are
stored are known as public warehouses. The rental charges to be paid by the users are fixed on
the basis of areas occupied, period used, special nature of the commodity etc.Public warehouses
are owned either by the private individuals or institutions including government. The warehouse
receipt issued fir the goods stored is negotiable and can be given as collateral. This warehouse is
adopted to the needs of the person who wishes to carry regional stocks & who does not have
enough goods to carry regional stocks & who does not have enough goods in various storage
canters to justify the maintenance of his own employees.
) &&$3%1*+83 >1%35&(.3."is a warehouse constructed by two or more warehousing agencies or
private parties to facilitate the storage of goods at a central pl;ace.In India, warehouses are
constructed & maintained by cooperative societies.

 

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‡ ,*53/1.+.&-)&00&'+*+3..*&%3'"
1 3,3%17 3%)51,'+.3 1%35&(.3." Practically, any kind of manufactured or non manufactured
products that need protection from the weather can be stored in these warehouses. These
warehouses also carry out sorting,cleaning,packaging of goods,despatching of goods as per
direction of the owner, repairing of damaged packages, issuing of invoices to the buyers on behalf
of sellers & in some cases collection of dues from the buyers.
/ $3)+17 &00&'+*6 1%35&(.3.These warehouses are specially constructed to house certain
commodities like grains,wool,cotton,explosives etc & require special facilities such as
maintenance of fixed temperature, on exposure to light. And handle only one kind of product.
)
3%+.51/73 &00&'+*6 1%35&(.3.These are refrigerated warehouses and perishable
commodities such as fruits,eggs,meat,fish etc are stored in these warehouses.
1*3.* *%3,'. +, >1%35&(.+,4"
1 %1+, 7381*&%." is a device for storage of grain in bulk. A grain elevator is a movable warehouse
which has got two parts. ne is used as a working house, while the other is a storage house with
a number of bins. Grain is lifted on to these bins & discharged whenever necessary. All the
operations are mechanical which facilitates movement. In addition, bulk storage in elevator
minimizes deterioration in quality.
/ +7&."are generally constructed in big cities & at ports where stocks are required to be stored for
longer periods & where construction of conventional warehouses prove to be extremely costly due
to high labour & land costs. This has a vertical shaped device fitted with mechanical devices such
as conveyor belts, automatic aeration,disinfestation & temperature control arrangements.
) +,."are small cylindrical hexagonal & cubical structures for bulk storages of varying capacity till

 

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‡ RR
"means the stock level of raw materials, components required

for making a product and the finished product available with a manufacturer
or a producer or a stockist.
‡
3)5,+H(3. &- +,83,*&%6 )&,*%&7
‡ The stock level at which the manufacturer places his order is called as &%'3%<%3&%'3% $&+,*: The
order point should balance the risks of stock out against the costs of overstocks. The company
needs to balance order processing costs and inventory carrying cost.
‡ %'3%J$%&)3..+,4 )&.*. for a manufacturer consist of set up costs & running costs which are
operating costs when production is running for the item. If set up costs are low, the manufacturer
can produce the item often & the average cost per item is stable & equal to the running costs. If
set up costs are high, the manufacturer can reduce the average cost per unit by producing a long
run & carrying more inventory.
‡ ,83,*&%6 )1%%6+,4 )&.*. include storage charges, cost of capital, taxes & insurance,
depreciation & obsolescence. Carrying costs might run as high as 3 percent of inventory value. If
a company wants to carry large inventories, it is essential that larger inventories would produce
incremental gross profits to exceed incremental carrying costs.

 

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‡

  A R

"

&.*$3%(,+*

<($33.
&*17)&.*$3%(,+*

,83,*&%6")1%%6+,4)&.*$3% (,+*

%'3%"$%&)3..+,4)&.*$3%(,+*
A
%'3%A(1,*+*6

The ptimal rder quantity can be determined by observing how order processing units &
inventory carrying costs sum at different levels. In the above figure, it is shown that the order
processing costs per unit decreases with the number of units ordered because the order costs are
spread over more units. Inventory carrying charges per unit increase with the number of units
ordered because each unit remains longer in inventory. The two cost curves are summed vertically
into a total cost curve. The lowest point on the total cost curve is projected down on the horizontal
axis to find the optimal order quantity OAK