ASSIGMENTS QUESTION 2019 – 2020

MARKETING MANAGEMENT – II

SUBJECT CODE – KMB 208

UNIT – I

Q.1 Define marketing Mix. What is its main element? Explain briefly.

Marketing Mix 4P's

A marketing expert named E. Jerome McCarthy created the Marketing 4Ps in the 1960s.

This classification has been used throughout the world. Business schools teach this concept in basic
marketing classes.

The marketing 4Ps are also the foundation of the idea of marketing mix.

#1 Marketing Mix – Product

A product is an item that is built or produced to satisfy the needs of a certain group of people.

The product can be intangible or tangible as it can be in the form of services or goods.

You must ensure to have the right type of product that is in demand for your market.

So during the product development phase, the marketer must do an extensive research on the life
cycle of the product that they are creating.

A product has a certain life cycle that includes the growth phase, the maturity phase, and
the sales decline phase.

It is important for marketers to reinvent their products to stimulate more demand once it reaches
the sales decline phase.

Marketers must also create the right product mix. It may be wise to expand your current product
mix by diversifying and increasing the depth of your product line.

All in all, marketers must ask themselves the question “what can I do to offer a better product to
this group of people than my competitors”.

In developing the right product, you have to answer the following questions:

What does the client want from the service or product?

How will the customer use it?

Where will the client use it?

What features must the product have to meet the client’s needs?

Are there any necessary features that you missed out?

Are you creating features that are not needed by the client?

What’s the name of the product?

Does it have a catchy name?

What are the sizes or colors available?

How is the product different from the products of your competitors?

What does the product look like?

#2 Marketing Mix – Price

The price of the product is basically the amount that a customer pays for to enjoy it. Price is a very
important component of the marketing mix definition.

It is also a very important component of a marketing plan as it determines your firm’s profit and
survival.

Adjusting the price of the product has a big impact on the entire marketing strategy as well as
greatly affecting the sales and demand of the product

This is inherently a touchy area though. If a company is new to the market and has not made a
name for themselves yet, it is unlikely that your target market will be willing to pay a high price.

Although they may be willing in the future to hand over large sums of money, it is inevitably harder
to get them to do so during the birth of a business.

Pricing always help shape the perception of your product in consumers eyes.
Always remember that a low price usually means an inferior good in the consumers eyes as
they compare your good to a competitor.

Consequently, prices too high will make the costs outweigh the benefits in customers eyes, and
they will therefore value their money over your product. Be sure to examine competitors pricing
and price accordingly.

When setting the product price, marketers should consider the perceived value that the product
offers. There are three major pricing strategies, and these are:

Market penetration pricing

Market skimming pricing

Neutral pricing

Here are some of the important questions that you should ask yourself when you are setting the
product price:

How much did it cost you to produce the product?

What is the customers’ perceived product value?

Do you think that the slight price decrease could significantly increase your market share?

Can the current price of the product keep up with the price of the product’s competitors?

#3 Marketing Mix – Place

Placement or distribution is a very important part of the product mix definition. You have to
position and distribute the product in a place that is accessible to potential buyers.
This comes with a deep understanding of your target market.

Understand them inside out and you will discover the most efficient positioning and distribution
channels that directly speak with your market.

There are many distribution strategies, including:

Intensive distribution

Exclusive distribution

Selective distribution

Franchising

Here are some of the questions that you should answer in developing your distribution strategy:

Where do your clients look for your service or product?

What kind of stores do potential clients go to? Do they shop in a mall, in a regular brick and mortar
store, in the supermarket, or online?

How do you access the different distribution channels?

How is your distribution strategy different from your competitors?

Do you need a strong sales force?

Do you need to attend trade fairs?

Do you need to sell in an online store?

#4 Marketing Mix – Promotion

Promotion is a very important component of marketing as it can boost brand recognition and sales.
Promotion is comprised of various elements like:

Sales Organization

Public Relations

Advertising

Sales Promotion

Advertising typically covers communication methods that are paid for like television
advertisements, radio commercials, print media, and internet advertisements.

In contemporary times, there seems to be a shift in focus offline to the online world.

Public relations, on the other hand, are communications that are typically not paid for.

This includes press releases, exhibitions, sponsorship deals, seminars, conferences, and events.

Word of mouth is also a type of product promotion.

Word of mouth is an informal communication about the benefits of the product by satisfied
customers and ordinary individuals. The sales staff plays a very important role in public relations
and word of mouth.

It is important to not take this literally. Word of mouth can also circulate on the internet. Harnessed
effectively and it has the potential to be one of the most valuable assets you have in boosting your
profits online.
An extremely good example of this is online social media and managing a firm's online social media
presence.

In creating an effective product promotion strategy, you need to answer the following questions:

How can you send marketing messages to your potential buyers?

When is the best time to promote your product?

Will you reach your potential audience and buyers through television ads?

Is it best to use the social media in promoting the product?

What is the promotion strategy of your competitors?

Your combination of promotional strategies and how you go about promotion will depend on your
budget.

Q.2. Explain the concept and scope of expanded Marketing Mix.

The 7Ps model is a marketing model that modifies the 4Ps model.

The 7Ps is generally used in the  service industries.

Here are the additional elements that transition the 4Ps to the 7Ps marketing model:

#5 Marketing Mix – People

Both target market and people directly related to the business.

Thorough research is important to discover whether there are enough people in your target market
that is in demand for certain types of products and services.

The company’s employees are important in marketing because they are the ones who
deliver the service.

It is important to hire and train the right people to deliver superior service to the clients, whether
they run a support desk, customer service, copywriters, programmers…etc.

When a business finds people who genuinely believe in the products or services that the particular
business creates, it's is highly likely that the employees will perform the best they can.

Additionally, they'll be more open to honest feedback about the business and input their own
thoughts and passions which can scale and grow the business.

This is a secret, “internal” competitive advantage a business can have over other competitors which
can inherently affect a business's position in the marketplace.

#6 Marketing Mix – Process

The systems and processes of the organization affect the execution of the service.

So, you have to make sure that you have a well-tailored process in place to minimize costs.

It could be your entire sales funnel, a pay system, distribution system and other systematic
procedures and steps to ensure a working business that is running effectively.

Tweaking and enhancements can come later to “tighten up” a business to minimize costs and
maximise profits.

#7 Marketing Mix – Physical Evidence

In the service industries, there should be physical evidence that the service was delivered.
Additionally, physical evidence pertains also to how a business and it's products are perceived in the
marketplace.

It is the physical evidence of a business' presence and establishment.

A concept of this is branding is for example; when you think of “fast food”, you think of
McDonalds.

When you think of sports, the names Nike and Adidas come to mind.

You immediately know exactly what their presence is in the marketplace.

They are generally market leaders and have established a physical evidence as well as psychological
evidence in their marketing.

They have manipulated their consumer perception so well to the point where their brands appear
first in line when an individual is asked to broadly “name a brand” in their niche or industry.

Q 3. Marketing mix is a mix of mixes; explain the components of marketing mix.

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

Marketing mix refers to the culmination of the various marketing elements. Every business
enterprise is interested in arriving at the most appropriate marketing mix to yield optimum results.

There are various ingredients or elements of marketing mix. But “Four P’s” were popularised by E.I.
McCarthy which are universally accepted. They are product, price, promotion and place (physical
distribution). These ingredients of the marketing mix are so interrelated to one another that
changes in one ingredient affect the others.

Each of these ingredients contains a number of variables. From these variables, management tries
to adopt a specific combination of mixes in such a way that the resultant marketing mix can adopt
best to the environment of the marketing system and lead to an optimum performance. Marketing
mix decisions constitute a large part of marketing management.

Marketing mix offers an optimum (least cost) combination of all marketing ingredients so that we
can have realisation of company goals such as profit, return on investment, sales volume, and
market share and so on. It is a profitable formula of our marketing operations.

The marketing mix will naturally be changing according to changing marketing conditions and also
with changing environmental factors (technical, social, economic and political) affecting each
market. It is, of course, based on marketing research and marketing information.
It must be fully related to customer demand, competition as well as other aforesaid environmental
forces. In the simplest manner, the basic marketing mix is the blending of four inputs or sub- mixes
which form the core of the marketing system, namely, product, price, promotion and place
(physical distribution) and are discussed below.

The outputs are optimum productivity and satisfaction.

1. Product:

The product itself (i.e. the benefits the consumer is offered by the product) constitutes the most
important element of the marketing mix. The product mix has three dimensions of width, depth and
consistency which call for specific managerial attention in any sound marketing management. The
width of the product mix refers to how many different product lines are found within the company.

It depends on the definitions established for product line boundaries. The depth of the product mix
refers to the average number of items (or length) offered by the company within each product line.
The consistency of the product mix refers to how closely relate the various product lines are in end
use, production requirements, distribution channels, or in some other way.

All three dimensions of the product mix have a market rationale. Through increasing the width of
the product mix, the company hopes to capitalise on its goods reputation and skills in present
markets.

Through increasing the depth of its product mix, the company hopes to entice the patronage of
buyers of widely differing tastes and needs. Through increasing the consistency of its product mix,
the company hopes to acquire an unparalleled reputation in a particular area of endeavour.

Closely tied to the product are its packaging and branding as a product along with its packaging and
branding create a particular image in the customer’s mind. In short, product planning and
development involves decision about (i) volume of production, (ii) quality of the product, (iii) size of
the product, (iv) design of the product, (v) packaging, (vi) branding, (vii) warranties and after sale
service, (viii) product testing, (ix) product range, etc.

2. Price:

An important consideration that would make the enterprise successful is the price. It is one of the
most difficult tasks of the management to fix the right price. Management has to decide the right
base price of the company’s products along with appropriate pricing policies and strategies to be
followed in different market segments.

Price component of the marketing mix also involves establishing policies regarding credit and
discount. The variables that are taken into consideration while fixing prices are demand for the
product in question, its cost, actual and likely competition, and government regulation.

Pricing decisions and policies have direct bearing on the total sales and profits of the enterprise.
Price, therefore, is a vital element in the marketing mix. Right price can be determined through
pricing research and by following test marketing techniques.

Pricing is complicated when it is realised that various products in a line typically have important
demand and/or cost inter- relationships. Then the objective is to develop a set of mutual prices that
maximize the profits on the whole line.

Most companies develop tentative prices for the products in the line by marking up full costs or
incremental costs or conversion costs and then modifying these prices by individual demand and
competitive factors.

3. Promotion:

Promotion is the persuasive communication about the product by the offer to the prospective
customer. It covers advertising, personal selling, sales promotion, publicity, public relations,
exhibition and demonstrations used in promotion.

Largely it deals, with non-price competition. Advertising and personal selling are important tools to
promote the sale of product of a firm. The use of promotional activities like contests, free
distribution of samples, etc. is also significant to fight competition in the market. Thus, the elements
of promotion mix are advertising, personal selling and sales promotion.

Advertisement is primarily concerned with popularising a manufacturer’s product and boosting its
sale by adopting different advertisement media viz. newspapers, magazines, radio, television, etc.

Marketing managers are faced with the necessity of making numerous decisions with regard to
advertising such as: (i) How much should be spent on the programme (money)? (ii) What message
should be used? (iii) What media should be used? Many enterprises utilise the services of
advertising agencies or specialists in creating campaigns and individual advertisements.

Sales promotion includes all the methods of communicating with the consumers except advertising
and personal selling. Among the more popular ones are coupons, premiums and contests for
consumer markets; buying allowances, co-operative advertising allowances and free goods for
distributors and dealers; discounts, gifts and extra benefits for industrial users; and sales contests
and special bonuses for members of the sales force.

Most promotional campaigns comprise a combination of two or more promotional methods as no

single method of promotion is effective alone. This is because of large scale competition and
widening of market.

However, there is no ideal promotional mix that suits all situations. Forces like nature of product,
kind of customer, stage of demand and promotional budget influence the inputs that should be
considered while making a promotional plan.

4. Physical Distribution:

Distribution is the delivery of the product and right to consume it. It includes channels of
distribution, transportation, and warehousing and inventory control. The distribution mix calls for
selecting channels and outlets through which products reach into the hands of customers and
arranging their physical movement to different market segments.

The basic object of the manufacturer in selecting and developing distribution channels in
conjunction with other elements of the marketing mix is to maximize the degree of attainment of
company goals including profit, stability and long-term growth.

It should be emphasized that marketing channel policies are an integral part of the marketing mix
and must be considered on the basis of other marketing decisions. The marketing channel decision
is affected by production and financial considerations.

In some cases, the manufacturers may even own the retail outlet. For example, there are oil
companies that own stations distributing their petroleum products. Many manufacturers also sell
directly to consumer by opening the’/ own retail shops in mill’s premises, by mail, through house to
house selling by engaging salesmen or by employing mechanical devices.

Whatever may be channel selected, the marketing managers are also responsible for measuring
channel performance and making alterations when performance falls short of fixed goals. In
addition, he has to find a system of handling and transporting the products through these channels.

Will the product be transported to middlemen by rail or by truck? If by trucks, should the company
purchase its own trucks or avail the services of a transporter to do the transporting? What is the
best route over which the goods should be moved? These are some of the decisions which the
marketing managers have to make in the field of physical distribution.
Determining the Marketing Mix:

The objective of determining the marketing mix (or marketing decision making) is to meet the
requirements of the customers in the most effective and efficient manner. With the passage of
time, the needs of the customers change, the marketing mix also changes.

Thus, marketing mix does not remain static. In the words of Philip Kotler, “Marketing mix represents
the settings of the firm’s marketing decision variables at a particular point of time.” Determining the
optimal marketing mix is not an easy job. It needs a lot of information, imagination and judgement.

The marketing manager identifies prospective customers and studies their desires and
requirements in order to formulate an effective marketing mix-one that prospective customers will
believe to be better than offered by competitors.

Marketing research, foresightedness and judgement are used in designing the marketing mix just as
they are employed in finding prospective customers and identifying their requirements.

For instance, research may show that a combination of television advertising and low prices is
effective in generating sales and the experience of a marketing manager may reveal that personal
selling is the best way to introduce new products.

As narrated above, marketing mix is a dynamic concept. It will alter with the change in the
requirements of the customers and also with the changing environmental factors. According to
Kotler, the firm’s current marketing mix can be represented by the following vector:

(P, A, D, R)

Where: P = price.

A = promotion (advertising and sales promotion).

D = place (distribution).

R = product (product-quality rating with 1.00 = average)

If a business enterprise is at present manufacturing a product priced at Rs. 11, supporting it with
promotion expenditure of Rs 12,000 per annum, distribution expenditure of Rs 15,000 per annum
and the product quality is rated at 1.20, its marketing mix at the time will be

Rs. 11, 12,000, 15,000. 1.20

The different proportion of these components will result in a number of values. An enterprise’s
current marketing mix is selected from a great number of possibilities. Moreover, these
components are not adjustable in the short run. This makes decision making complicated.
Q-4. Pricing and promotion are the integral elements of marketing mix of a firm comment

Product pricing can help your company achieve profitability, support product
positioning, and complement your marketing mix.

Once your start-up is ready to commercialize its product, you must determine
how much to charge customers to purchase the product. In other words, it is time
to establish the pricing structure.

Pricing in the marketing mix

Pricing is one of the four main elements of the marketing mix. Pricing is the only
revenue-generating element in the marketing mix (the other three elements are
cost centres—that is, they add to a company’s cost). Pricing is strongly linked to
the business model.

The business model is a conceptual representation of the company’s revenue

streams. Any significant changes in the price will affect the viability of a particular
business model.

A well-chosen price should accomplish three goals:

achieve the company’s financial goals (profitability)

fit within the realities of the marketplace (customers are willing and able to pay
the set price)

support a product’s positioning and be consistent with the other variables in the
marketing mix (product quality, distribution issues, promotion challenges)

Promotion is the communication aspect of the marketing mix. It is creating a

channel for conversation with the targeted consumer base. Through promotion,
the company aims to attract the customer’s attention and give them enough
information about the product to foster enough interest to motivate them to
purchase.

The team tasked with these activities will begin by understanding the dynamics of
the target audience and deciding which modes of promotion are likely to help
meet targets. Once the channel is decided, information from other elements of
the mix is incorporated to ensure that the message sent corresponds to the actual
product features, benefits and user experience. None of the elements of the
marketing mix work in isolation. Instead a unified body of information acts as the
source for all activities within these 4P’s. The available information is filtered to
include those areas which will be most relevant to the target audience.

Unit-2
Q-1. Explain the relationship between product differentiation and market
segmentation.

Differentiating your product from those of your competitors and segmenting a market can help you
increase sales by creating a unique selling proposition. You can segment a market with product
differentiation by making different versions of the same product. This helps you appeal to customers
with different needs. You can also segment the market using different marketing messages.

Product Differentiation

A small business can differentiate its product using marketing techniques, by physically changing the
product or by changing the price. Using marketing, you can create a brand or image in the mind of
consumers by pointing out the difference between your product and those of your competitors. For
example, your advertising can show that while your product may cost the same as your competitor’s, it
lasts longer, making it less expensive to use. If you sell tennis shoes, you can reinforce the toes, making
it a longer-lasting shoe that appeals to frequent players who wear out their shoes. Lowering or raising
the price of a product differentiates you from your competition.

Market Segmentation

Because consumers have different needs, even when shopping for the same product, it’s important to
know who is buying your product. This will help you plan your marketing, product development and
pricing. You can sell a higher-priced version of your product with extra features in specialty stores to
attract young, affluent singles, and sell another version with fewer features at a lower cost to young
families or seniors. You can sell one version of your product to consumers, and another to businesses.

Branding

Creating a brand helps you segment the market by selling the benefits of your product to specific
groups. Different consumers then associate your product with a specific benefit. If you offer a self-
service car wash, your brand is affordability. If your car wash is automated, you use more gentle
detergents, you have attendants who dry the car when it’s finished and you offer interior detailing, hand
washing and waxing, your brand is upscale car maintenance.

Customer Demographics

To segment a market, you’ll need to know the characteristics of people who buy your product. These
include age, gender, income levels, marital status, occupation, education level and other traits you can
use to create a marketing campaign. If most of your customers are single women and most of your
competitor’s customers are senior men, you can increase your sales with this knowledge by creating a
sales strategy to attract more senior men. You can segment the market in other ways. For example, if
you sell a food product, you can sell one version to consumers, one to grocery stores and one to
restaurants.

Q-2. Define product planning. Distinguish between product planning and product life cycle.

Product Planning is the ongoing process of identifying and articulating market requirements that define
a product's feature set. Product planning serves as the basis for decisions about price, distribution and
promotion. Product planning is the process of creating a product idea and following through on it until
the product is introduced to the market. Additionally, a small company must have an exit strategy for its
product in case the product does not sell. Product planning entails managing the product throughout its
life using various marketing strategies, including product extensions or improvements, increased
distribution, price changes and promotions.

Differences between the Two

A product life cycle is a conceptual map of where a product's sales are and where they may be headed.
However, it has no comment on what to do with the product. If a company believes its product is
entering the decline phase, it will probably create a plan to either rejuvenate the product or cease
production, but that is not inherent in the product life cycle. By contrast, a project life cycle is all about
action. A project life cycle maps out the steps needed to complete a project with specific targeted
results.

Strategies

Remember that the product life cycle concept has limitations. Not every product follows a smooth,
predictable bell curve from introduction to decline. A product may appear to be in the decline phase and
enjoy a return to the maturity phase due to a competitor exiting the market or a successful project
rejuvenation strategy. With regards to project life cycle management, things tend to be much more
clearly defined, but watch out for "scope creep." This is the tendency for projects to continually grow in
breadth to the point where they never actually get completed.

Q-3. What is a product known for? Distinguish between Industrial and consumer products.

Definition of Product

“Anything that can be offered to a market for attention, acquisition, use or consumption that might
satisfy a want or need. It includes physical objects, services, persons, places, organizations and ideas”.

Kotler, Wong, Saunders, Armstrong

What is a Product
A Pair of Nike shoes, a mobile phone device, a Volvo truck, a Samsung LED, your bank account, and a
doctor advice all the products. The above definition of a product by Philip Kolter not only consists
tangible product attributes, for example, a car, an office, a book, a mobile device but according to a
broader view of a product, its consist ideas, services, physical object, place and even organizations and
persons.

The above definition also covers the service in marketing. Those activities, benefits and satisfactions
essentially intangible – one party offer to another for sale. Service activities include banking services,
renting rooms in a hotel, doctor consolation, haircutting, repair and maintenance services.

Consumer Goods Industrial Goods

The demand for industrial goods is a 'derived demand'.

1. The demand for consumer goods
It is derived from the demand for consumer goods,
is a 'direct demand'.
which are made using the industrial goods.

2. The number of buyers is large. Industrial goods have only limited number of buyers.

3. The demand for consumer goods

Industrial goods have relatively inelastic demand.
is elastic.

The buyers are found to be concentrating in certain

4. The buyers are found scattered in
regions only. For example, the buyers of raw cotton,
different parts of the country /
who are the cotton textile mill owners, are found in and
world.
around Coimbatore in Tami lnadu.

5. Each purchase will generally be Each purchase involves a very high amount (in money
of small value. terms).

6. These goods are not technically Industrial goods are technically complicated. Such
complicated. goods cannot be assessed by an ordinary buyer

7. Buying is much influenced by

Buying cannot be influenced by emotions.
emotions.

Here, buying is always a group process. Finance

8. Any individual can undertake
experts, engineers, accountants and others will have to
buying.
work together before taking the purchase decision.

9. After-sale service is important in After-sale service is of paramount importance in the

the case of consumer durables. case of all industrial goods.

10. There are a number of The manufacturers of industrial goods supply directly to
Consumer Goods Industrial Goods

middlemen in the market. their customers.

11. A buyer of consumer goods may

A buyer of industrial goods must have complete
not have thorough knowledge of the
knowledge of the goods he buys and uses.
goods he buys and uses.

12. The reputation of the seller or

manufacturer may not always be The reputation of the manufacturer is always important
given importance in buying in buying industrial goods.
consumer goods.

13. Inducements to the buyers in the

form of cash discounts, free gifts, Such inducements may not be common in the marketing
etc. are made always by those of industrial goods.
marketing consumer goods.

Leasing arrangements are quite common in the

14. Leasing arrangements are not
marketing of industrial goods. The seller, in view of the
made in the marketing of consumer
high cost of the industrial goods, may provide the
goods.
facility of leasing to the buyer.

15. The market for consumer goods

The market for industrial goods is affected by
is affected by fashion and style
technological changes.
changes.

Q-4. What is branding and what are the requisites of Branding?

Branding is the marketing practice of actively shaping your brand. That’s the basic definition, but there is
so much more that goes into it.

Branding is what your business needs to break through the clutter and grab your ideal customer’s
attention. It’s what transforms first-time buyers into lifetime customers and turns an indifferent
audience into brand evangelists. It’s what you need to stand out, make an impact and take your
business to the next level.

. Comprehension

The corporation has to ensure that it has possessed sufficient understanding of what branding is all
about. If it cannot tell the difference between a product and a brand, then it is almost pointless to start
the brand-building process as it will be very difficult to carry out any constructive discussion about the
brand.

Achieving an adequate level of understanding of brands is actually not the biggest challenge. Instead,
the biggest hurdle is for the corporation to accept the fact that it may not possess the fundamental
knowledge and is willing to pay an effort to close that gap.

2. Consensus

Every corporation needs a brand-champion. This may be an individual or a team that can serve as the
steward for the brand. However, this is still not enough. The corporation has to nurture a culture that
treasures the value of the brand and is geared up to convert all employees to genuine brand
ambassadors. The logic is very simple – if the staff members are not convinced about the brand
themselves then how can they convince the other people to embrace the brand?

3. Consciousness

Brand-building has to become a second nature of the team members so that they are fully aware of
what to do and what not to do under any circumstance.  This is due to the fact that brand-building is an
on-going process and every right move will contribute to the reinforcement of the brand value.

4. Communication

Brand-building is about story-telling. It is indeed the emotions within the story that touches the heart of
the audience and eventually turn them into brand advocates.

In this information-overloaded era, out of sight is out of mind. The corporation, therefore, has to make
the best use of all the paid, earned, owned and shared media to continuously communicate with its
different stakeholders so that the brand perception will be aligned across-the-board.

5. Commitment

The last and probably the most important prerequisite is “commitment”.

Brand-building is a major undertaking that requires the top management to persistently invest both the
financial and human resources to support the brand-building effort.

Put simply, there is no shortcut in brand-building. All the top brands around the world are the result of
accumulated countless efforts and total devotion.
 

The assuring fact is that all these efforts and commitments are completely justifiable as the brand will
always remain as the ultimate point of differentiation and the most valuable intangible asset for any
corporation.

Q-5. Explain Brand Loyalty, Brand Portfolio, Brand Positioning and Brand Sponsorship.

Brand Loyalty

Brand loyalty is the positive association consumers attach to a particular product or brand. Customers
that exhibit brand loyalty are devoted to a product or service, which is demonstrated by their repeat
purchases despite competitor's efforts to lure them away. Corporations invest significant amounts of
money on customer service and marketing to create and maintain brand loyalty for an established
product. Coca-Cola Company is an example of an iconic brand that has resulted in customers
demonstrating brand loyalty over the years despite Pepsi's products and marketing efforts

2. Brand Portfolio

The Brand Portfolio refers to an umbrella under which all the brands or brand lines of a particular
firm functions to serve the needs of different market segments. In simple words, brand portfolio
encompasses all the brands offered by a single firm for sale to cater the needs of different groups of
people.

Brand portfolio is generally created because each brand has certain boundary beyond which it
cannot fulfil all the needs of different market segments.

The advantage of having the Brand Portfolio is that management can keep a check on all the brands
as a whole and frame the policies with a broader perspective. Also, the resources can be allocated to
the brand that needs the most.

3. Brand Positioning

Brand positioning has been defined by Kotler as “the act of designing the company’s offering and
image to occupy a distinctive place in the mind of the target market”. In other words, brand
positioning describes how a brand is different from its competitors and where, or how, it sits in
customers’ minds.

A brand positioning strategy therefore involves creating brand associations in customers’ minds to make
them perceive the brand in a specific way.

4. Brand Sponsorship

Brand sponsorship is a marketing strategy in which a brand is supporting an event, activity, person or
organization. Everywhere we go we can witness sponsorship investments: music festival, football games,
beneficial events and so on. Sponsorship allows big, medium and small brands to partner with other
companies as well as event agencies in order to generate a relationship that aims to economically gratify
both the sponsor and the sponsee.

Unit-3

Q-1. Explain the objective of pricing policy of a business firm. Comment on all 10 pricing strategies.
Five main objectives of pricing are: (i) Achieving a Target Return on Investments (ii) Price Stability (iii)
Achieving Market Share (iv) Prevention of Competition and (v) Increased Profits!

Before determining the price of the product, targets of pricing should be clearly stated.Objectives of a
properly planned pricing policy should be logically related to overall managerial goals.

(i) Achieving a Target Return on Investments:

This is the most important objective which every concern wants to achieve. The objective is to achieve a
certain rate of return on investments and frame the pricing policy in order to achieve that rate. For
example, the concern may have a set target of 20% return on investment and 10% return on
investments after taxes. The targets may be a short term (usually for a year) or a long term. It is
advisable to have a long-term target.

Sometimes, it is observed that the actual profit rates may be more than the target return. This is
because the targets already fixed are low and new opportunities and demand of the product exceeding
the return rate already fixed.

(ii) Price Stability:

This is another important objective of an enterprise. Stability of prices over a period reflects the
efficiency of a concern. But in practice, on account of changing costs from time to time, price stability
cannot be achieved. In the market where there are few sellers, every seller wants to maintain stability in
prices. Price is set by one producer and others follow him. He acts as a leader in price fixation.

(iii) Achieving Market Share:

Market share refers to the share of the company in the total sales of the product in the market. Some of
the concerns when introduce their product in the competitive market want to achieve a certain share in
the market in the initial stages. In the long run the concern may aim at achieving a sizeable portion of
the market by selling its products at lower prices.

The main objective of achieving larger share in the market is to enjoy more reputation and goodwill
among the people. The other consideration of widening the markets by lowering prices is to eliminate
competitors from the market.

It has been observed that companies may not like to increase the size of their share on account of fear
of Govt, intervention and control. General Motors, America, capturing about 50% of the automobile
market, passed through this situation. Some companies like General Electric and Johns-Mauville
preferred to have relatively small market say 20% rather than 50%.

(iv) Prevention of Competition:

Modern industrial set up is confronted with cut throat competition. Pricing can be used as one of the
effective means to fight against the competition and business rivalries. Lesser prices are charged by
some firms to keep their competitors out of the market. But a firm cannot afford to charge fewer prices
over a long period of time.

(v) Increased Profits:

Maximisation of profits is one of the main objectives of a business enterprise. A firm can adopt such a
price policy which ensures larger profits. However, such enterprises are also expected to discharge
certain social obligations also.

10 Pricing Strategies

1. Marketing Penetration

The price is set low in order to increase sales and market share.

2. Marketing Skimming

The price is set high and is gradually lowered as the product moves through the product life cycle.

3. Psychological Pricing

The price is set just below a whole number in order to make the product and price more attractive. E.g.
setting price at ₹99 rather than₹100.

4. Premium Pricing

The firm will set a high price. The price set will reflect the premium quality of the product.

5. Bundle Pricing

Products are bundled together and a slightly cheaper price is charged for buying the bundled item.

6. Value Pricing

Prices are set on products that reflect the value of the product. If the product has an economy feel then
the price will reflect this fact. Many supermarkets have introduced value or economy products that
reflect this.

7. Captive Pricing

With some products, you have to buy another item in order to use it. If we look at printers, you need to
buy the ink in order to run that printer. Captive pricing is a clever strategy, usually the additional items
that are needed will cost more.

8. Cost Plus Pricing

The organisation puts a percentage profit on the cost of making the product. For example, if the
production cost is ₹200 and the mark up is 20%, the selling price will be ₹240.

9. Optional Pricing

A firm will charge extra for any optional products that are sold alongside the main product.

10. Competitive Pricing

A firm looks at their competitors and decides to charge a premium price, an economy price or a mid-
range price for their products, compared to their competitors.

Q-2. What is penetration and skimming of prices? Explain their advantages and Disadvantages.

Penetration Pricing

Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or

service by offering a lower price during its initial offering. The lower price helps a new product or service
penetrate the market and attract customers away from competitors. Market penetration pricing relies
on the strategy of using low prices initially to make a wide number of customers aware of a new
product.

The goal of a price penetration strategy is to entice customers to try a new product and build market
share with the hope of keeping the new customers once prices rise back to normal levels. Penetration
pricing examples include an online news website offering one month free for a subscription-based
service or a bank offering a free checking account for six months.

Advantages

High adoption and diffusion: Penetration pricing allows a product or service to be quickly accepted and
adopted by customers.

Marketplace dominance: Competitors are typically caught off guard in a penetration pricing strategy and
are afforded little time to react. The company is able to utilize the opportunity to switch over as many
customers as possible.

Economies of scale: The pricing strategy generates high sales quantity that allows a firm to realize
economies of scale and lower marginal cost.

Increased goodwill: Customers that are able to find a bargain in a product or service are likely to return
to the firm in the future. In addition, the increased goodwill creates positive word of mouth.

High turnover: Penetration pricing results in an increased turnover rate, making vertical supply chain
partners, such as retailers and distributors, happy.

Disadvantages
Pricing expectation: When a firm uses a penetration pricing strategy, customers often expect
permanently low prices. If prices gradually increase, customers will become dissatisfied and may stop
purchasing the product or service.

Low customer loyalty: Penetration pricing typically attracts bargain hunters or those with low customer
loyalty. Said customers are likely to switch to competitors if they find a better deal.

Damage brand image: It may affect the brand image and cause customers to perceive the brand as
cheap.

Price war among competitors: It results in retaliation from competitors trying to maintain their market
share. Pricing war may decrease profitability for the overall market.

Inefficient long-term strategy: It is not a viable long-term pricing strategy. In many cases, firms that use
the strategy face a loss of profits. In this case, the firm may not be able to recover its cost if it uses
penetration pricing over an extended timeframe.

Skimming Pricing

Price skimming is a product pricing strategy by which a firm charges the highest initial price that
customers will pay and then lowers it over time. As the demand of the first customers is satisfied and
competition enters the market, the firm lowers the price to attract another, more price-sensitive
segment of the population. The skimming strategy gets its name from "skimming" successive layers of
cream, or customer segments, as prices are lowered over time.

Advantages

Perceived quality: Price skimming helps build a high-quality image and perception of the product.

Cost recuperation: It helps a firm quickly recover its costs of development.

High profitability: It generates a high profit margin for the company.

Vertical supply chain benefits: It helps distributors earn a higher percentage. The mark-up on a ₹500
product is far more substantial than on a ₹5 item.

Disadvantages

Deterrence: If the firm is unable to justify its high price, consumers may not be willing to purchase the
product.

Limitation of sales volume: A firm may not be able to utilize economies of scale if a skim price generates
too little sales.
Inefficient long-term strategy: Price skimming is not a viable long-term pricing strategy as competitors
will eventually enter the market with rival products and pricing pressure.

Consumer loyalty: If a product that costs ₹1,000 at launch has a follow-on price of ₹200 in a couple of
months, innovators and early adopters may feel ripped off. Therefore, if the firm has a history of price
skimming, consumers may wait a couple of months before purchasing the product.

Q-3. Write a critical note on the policy of resale price maintenance.

RESALE PRICE MAINTENANCE (RPM)

Agreements or concerted Practices between a supplier and a dealer with the object of directly or
indirectly establishing a fixed or minimum price or price level to be observed by the dealer when
reselling a product/service to his customers. A provision which foresees resale price maintenance will
generally be considered to constitute a hard-core restriction. In the case of contractual provisions or
concerted practices that directly establish the resale price, the restriction is clear cut. However, resale
price maintenance can also be achieved through indirect means: for example by fixing the distribution
margin or the maximum level of discount the distributor may grant from a prescribed price level, by
making the supplier’s rebates or his reimbursement of promotional costs subject to the observance of a
given price level, by linking the prescribed resale price to the resale prices of competitors, or by threats,
warnings, or even sanctions against a dealer who does not respect a certain price level (such as
penalties, delay or suspension of deliveries or termination of contracts).

A supplier specifying the minimum (or maximum) price at which the product must be re-sold to
customers. From a competition policy viewpoint, specifying the minimum price is of concern. It has been
argued that through price maintenance, a supplier can exercise some control over the product market.
This form of vertical price fixing may prevent the margin from retail and wholesale prices from being
reduced by competition. However, an alternative argument is that the supplier may wish to protect the
reputation or image of the product and prevent it from being used by retailers as a loss leader to attract
customers. Also, by maintaining profit margins through RPM, the retailer may be provided with
incentives to spend greater outlays on service, invest in inventories, advertise and engage in other
efforts to expand product demand to the mutual benefit of both the supplier and the retailer. RPM may
also be used to prevent free riding by retailers on the efforts of other competing retailers who instead of
offering lower prices expend time, money and effort promoting and explaining the technical
complexities or attributes of the product. For example, one retailer may not reduce price but explain
and demonstrate to customers the use of a complex product such as a computer. The customer may
after acquiring this information choose to buy the computer from a retailer that sells it at a lower price
and does not explain or demonstrate its uses. In many countries, RPM is per se illegal with few
exceptions or exempt products. Many economists now advocate adopting a less stringent approach in
competition law towards RPM and other vertical restraints. 
Q-4. What is channel of distribution? Discuss about different channel available to a businessenterprise.

A distribution channel is a chain of businesses or intermediaries through which a good or service passes
until it reaches the final buyer or the end consumer. Distribution channels can
include wholesalers, retailers, distributors, and even the Internet.

Distribution channels are part of the downstream process, answering the question "How do we get our
product to the consumer?" This is in contrast to the upstream process, also known as the supply chain,
which answers the question "Who are our suppliers?"

Understanding Distribution Channels

A distribution channel is a path by which all goods and services must travel to arrive at the intended
consumer. Conversely, it also describes the pathway payments make from the end consumer to the
original vendor. Distribution channels can be short or long, and depend on the number of intermediaries
required to deliver a product or service.

Goods and services sometimes make their way to consumers through multiple channels—a combination
of short and long. Increasing the number of ways a consumer is able to find a good can increase sales.
But it can also create a complex system that sometimes makes distributionmanagement difficult. Longer
distribution channels can also mean less profit each intermediary charges a manufacturer for its service.

Types of Distribution Channels

While a distribution channel may seem endless at times, there are three main types of channels, all of
which include the combination of a producer, wholesaler, retailer, and end consumer.

The first channel is the longest because it includes all four: producer, wholesaler, retailer, and consumer.
The wine and adult beverage industry is a perfect example of this long distribution channel. In this
industry—thanks to laws born out of prohibition—a winery cannot sell directly to a retailer. It operates
in the three-tier system, meaning the law requires the winery to first sell its product to a wholesaler who
then sells to a retailer. The retailer then sells the product to the end consumer.

The second channel cuts out the wholesaler—where the producer sells directly to a retailer who sells
the product to the end consumer. This means the second channel contains only one intermediary. Dell,
for example, is large enough to sell its products directly to reputable retailers such as Best Buy.

The third and final channel is a direct-to-consumer model where the producer sells its product directly
to the end consumer. Amazon, which uses its own platform to sell Kindles to its customers, is an
example of a direct model. This is the shortest distribution channel possible, cutting out both the
wholesaler and the retailer.
Q-5.Explain with examples vertical and horizontal distribution channels.

Vertical Distribution

An app aimed vertically is for a certain group of people with special skills or needs, like engineers,
marketers, or managers. They are typically customized to integrate with particular systems.

Example

Apple is a good example of a company that has gone for vertical distribution of production. They make
the hardware, the operating systems, the software, and the apps. Companies like these have more
control over their products and profit more from them, but operations are more costly as well.

Horizontal Distribution

Horizontal distribution means trying to reach a broad, diverse audience. The product or content is for
everyone, or almost everyone, and is usually simple and easy to comprehend or use.

It can also mean focusing on one particular aspect in a chain of related technologies.

Example

When it comes to mobile apps, there are a number of components involved the hardware, the operating
system, the program software, and the app itself. A horizontally-oriented company would focus on one
particular link in this chain, and produce only the hardware, for instance. These companies become
flexible and learn their craft well, or they don’t last.

Q-6.What do you understand by middle man? Explain their kinds and functions.

Middlemen are those individuals or business concerns who specialize in performing the various
marketing functions involved in the purchase and sale of goods as they are moved from producers to
consumers. Our concern here is within the place in the marketing processes which the middlemen
occupy. There is no limitation as to the way in which they are organized for doing business. They may
operate as individual proprietors, partnerships, or cooperative or non-cooperative corporations. The
middlemen of particular interest in agricultural marketing can be classified as follows:

Merchant middlemen (Retailers, Wholesalers)

Agent middlemen (Brokers, Commission men)

Processors and manufacturers

Speculative middlemen

Facilitative organizations

Kind & Functions of Middlemen

Merchant middlemen

Merchant middlemen normally take title to, and therefore own, the product they handle. The buy and
sell for their own gain and derive their income from the margins arising from the sales (i.e. difference
between buying price and selling price). Unlike other classes of middlemen, they hold uncertainty to a
minimum i.e. know what the buying and selling price in going to be. They are not risk takers.

Wholesalers: Any merchant who does not sell to ultimate consumer in any significant amount. He
therefore can sell to other wholesalers or to industrial users or retailers. Wholesalers make a highly
heterogeneous group of varying sizes and characteristics. One of the more numerous groups of
wholesalers are the local buyers or country assemblers who buy goods in producing areas directly from
farmers and ship the products to the larger cities where they are sold to other wholesalers and
processors. In this group are grain elevators, poultry and egg buyers, and local livestock buyers. Another
group of wholesalers is located in the large urban centres. This may be full-line wholesalers who handle
many different products or those who specialise in handling a limited number of products. They may be
cash-and-carry wholesalers or service wholesalers who will extend credit and offer delivery and other
services.

Retailers: Any merchant middlemen who buys goods / services for resale directly to ultimate consumers.
Represent the most numerous types of agencies involved in the marketing process. In terms of
undertaking marketing functions their role in no easier compared to wholesalers. In fact, a retailer may
have to do all the functions of marketing i.e. his job is complex. Retailer is the producers’ representative
to the consumer.

Agent middlemen

All agent middlemen of marketing don’t own what they handle i.e. not take title to the goods. Are
agents/representatives of owners of goods? Are basically hired by their principals or clients e.g. Kenya
Planters Cooperative Union does not own the coffee it handles. They derive their income from the fees
they are paid by their clients or commissions given. Agent middlemen in reality sell services to their
principals, not physical goods to customers. There are three categories of agent middlemen:

Brokers
Commission agents

Auctioneers

Their main stock in trade is their knowledge of market in which they participate. They use the
knowledge in bringing together potential sellers and buyers. Their services will be retained either by
buyers or the seller who feels that he / she does not have knowledge or opportunity to bargain
effectively for him / herself.

Commission Agents

The difference between brokers and commissions agents is one of degree to they are given power to
handle the product that is being sold i.e. discretionary powers to assist their principals in ensuring that
marketing process is a accomplished. Commission agents are given more discretionary powers over
physical handling of the product, arrangement for terms of sale / purchase, collection of revenue from
sale e.g. Coffee Board of Kenya, Kenya Tea Development Agency are commission agents. They are
allowed to deduct their commission before remitting the difference to their principals. One must have
confidence in the agents.

Brokers: hey are not given any physical control over the product. They ordinarily follow directions from
their principals. Usually have little power over terms of sale or revenue collection. Bring seller and
potential buyer together.

Auctioneers: They do not own what is handled, may be involved in a number of activities. Have places
for physical display, space where participants meet, announce the date of auction, facilitate in price
formation. During the bidding process the main role of auctioneer is to announce the price offered by
various participants such that it is heard and the highest bidder gets the good subject to the price being
equal or greater than reserved minimum price. Prices closely conform to a competitive market price. Tea
and coffee are sold through auction.

Speculative middlemen

Are those who take title to goods / products with a major purpose of profiting from price movement.
They are specialized risk takers. They take uncertainty as given. Is the closest to the futures market
usually speculative middlemen make purchase and sales at same marketing level e.g. buying grain and
selling grain i.e. have no vertical integration. They are also called traders, scalpers and spreaders.
Important distinguishing feature is that even though speculative middlemen involve themselves in
movement of goods that is not their goal. Speculative Middlemen are interested in short term price
fluctuations. Speculators derive their income from short term price fluctuations in goods they handle.
The emergence and growth of speculative Middlemen is due to the fact that merchant middlemen are
not willing to engage themselves in added risk involved in purchasing and storing of goods for longer
period of time. Speculative middlemen play important role in marketing process in ensuring that
commodities are available from time to time. Their activities are desirable especially if their expectations
are met / true. Due to their activities we may end up with more stable market prices.

Processors and manufactures

Their role in marketing in to undertake some action on the products in order to change their form. Form
changing is basically a marketing service. Manufactures and processors may take active role in other
institutional aspects of marketing e.g. may act as own buying agents in the producing areas, wholesaling
of finished products and promotion. Processing and manufacturing are only part of activities they get
involved in.

Facilitative organizations

Main function into facilitate the activities of the other middlemen of marketing. Ensure that the
activities take place in smooth manner. Does not directly participate in marketing process either as
merchants, wholesalers etc. they basically establish the rules that the other participants have to follow.
Others may get involved in establishing of the terms of sale and standards which must be followed,
assist in grading of the produce, actual arrangement of payment for the transactions. Some of the
organizations provide physical facilities for the handling of the product e.g. Nairobi City Council and
other local authorities while others provide premises where participants come together. Others are
involved in enforcing /policing the practices of their members. Trade and professional associations fit
into this category. They gather, evaluate and disseminate information of value to the members – do
research of mutual interest to members and ensure that members follow ethics. Though not active in
the buying and selling of goods, these organizations have far reaching effects on nature and organization
of markets. Derive income from fees and assessments of those who use their facilities e.g. marketing
boards, county councils operate on the commissions and cess got.