MM Unit 4 - Students

Pricing , Distribution & Promotion
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What Is a Price?
Narrow Definition: The amount of money charged or paid for a product or service. Broad Definition: The sum of all values consumers exchange for the product or service.

Time Costs Emotional Costs Transaction Costs
Factors Affecting Price Decisions

Internal Factors External Factors
Marketing Objectives Pricing Marketing Mix Strategy Decisions Costs Organizational considerations
Nature of the market and demand Competition Other environmental factors (economy, resellers, government)
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Internal Factors Affecting Pricing Decisions: Marketing Objectives

Survival Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business.
Marketing Objectives
Current Profit Maximization Choose the Price that Produces the Maximum Current Profit, Etc.
Market Share Leadership Low as Possible Prices to Become the Market Share Leader. Product Quality Leadership High Prices to Cover Higher Performance Quality and R & D.
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Internal Factors Affecting Pricing Decisions: Marketing Objectives
Other specific objectives include:
Set prices low to prevent competition from entering the market, Prices might be reduced temporarily to create excitement or draw more customers.
Nonprofit and public organization may have other pricing objectives such as:
University aims for partial cost recovery, Hospital may aim for full cost recovery, Theater may price to fill maximum number of seats.
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Internal Factors Affecting Pricing Decisions-Marketing Mix Strategy:
Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program. Target costing:
Pricing that starts with an ideal selling price & then targets costs that will ensure that the price is met.
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Internal Factors Affecting Pricing Decisions-Cost Factors

Costs that dont vary with sales or production levels. Executive Salaries, Rent
Fixed Costs (Overhead)
Variable Costs
Costs that do vary directly with the level of production. Raw materials
Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production
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Types of Cost Factors that Affect Pricing Decisions
As a firm gains experience in production, it learns how to do it better. The experience curve (or the learning curve) indicates that average cost drops with accumulated production experience.
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Internal Factors Affecting Pricing Decisions
Organizational Considerations:
Must decide who within the organization should set prices. This will vary depending on the size and type of company.
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External Factors Affecting Pricing Decisions

Market and Demand Competitors Costs, Prices, and Offers Other External Factors
Economic Conditions Reseller Needs Government Actions Social Concerns
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External Factors Affecting Pricing Decisions-Market and Demand:

Costs set the lower limit of prices while the market and demand set the upper limit. Pricing in different types of markets:
Pure competition-Many Buyers and Sellers Who Have Little Effect on the Price Monopolistic competition-Many Buyers and Sellers Who Trade Over a Range of Prices Oligopolistic competition-Few Sellers Who Are Sensitive to Each Others Pricing/ Marketing Strategies Monopoly competition
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Demand Curves and Price Elasticity of Demand

A Demand Curve is a Curve that Shows the Number of Units the Market Will Buy in a Given Time Period at Different Prices that Might be Charged.
Price Elasticity Refers to How Responsive Demand Will be to a Change in Price.
Price Elasticity of Demand = % Change in Quantity Demanded % Change in Price
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Price Elasticity of Demand

Price A. Inelastic Demand Demand Hardly Changes With a Small Change in Price.
P2
P1
Q2 Q1
Price
Quantity Demanded per Period B. Elastic Demand Demand Changes Greatly With a Small Change in Price. P
2
P1 Q2 Q1
Quantity Demanded per Period

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External Factors Affecting Pricing Decisions-Competitors
How does the market offering compare? How strong is competition and what is their pricing strategy? How does competition influence price sensitivity?
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External Factors Affecting Pricing Decisions-Environmental Elements
Economic conditions Affect production costs Affect buyer perceptions of price and value Reseller reactions to prices must be considered Government may restrict or limit pricing options Social considerations may be taken into account
Pricing Objectives
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Pricing Objectives
Profit-Oriented Pricing Objectives Sales-Oriented Pricing Objectives Status Quo Pricing Objectives
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Profit-Oriented Pricing Objectives
Profit-Oriented Pricing Objectives
Profit Maximization
Satisfactory Profits
Target Return on Investment
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Sales-Oriented Pricing Objectives
Sales-Oriented Pricing Objectives
Market Share
Sales Maximization
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Status Quo Pricing Objectives
Status Quo Pricing Objectives
Maintain existing prices
Meet competitions prices
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Policies Methods for Setting Price

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Policies Methods for Setting Price

Demand oriented focus on consumer preference Cost oriented focus on businesss expenses Profit oriented focus on profit Competition oriented focus on the marketplace players
DEMAND ORIENTED APPROACHES-Attempt to determine what consumers are willing to pay for goods and services. The key to this method of pricing is the consumers perceived value of the item. The price set must be in line with this perception or the item will be priced too high or low for the target market. The higher the demand, the more a business can charge.
Skimming Pricing high initial price
Penetration Pricing low initial price

Prestige Pricing high price = quality and status Bundle Pricing- 2 products priced as one. helps poorer seller
PROFIT ORIENTED APPROACHES

Target Profit Pricing-set annual Rs volume or profit
If I need to make Rs 5000, & I can make 5 units, selling price is Rs 1000.
Target Return-on-Sales PricingWant to receive 1% of sales as my profit actors & directors
Target Return-on-Investment Pricing

I can make 5 % on my money in the bank. Set price so I make 6% on my investment if I invest it in my business.
COST ORIENTED APPROACHES-In cost-oriented pricing, marketers first calculate the costs of acquiring or making a product and their expenses of doing business, then add their projected profit margin to these figures to arrive at a price.
Markup pricing / cost-plus pricing
The process where resellers add a Rs amount (markup) to its cost to arrive at a price.
All costs and expenses are calculated, and then the desired profit is added to arrive at a price. Marginal cost Pricing
COMPETITION ORIENTED APPROACHES
Above-, At-, or Below-Market Pricing

Use largest competitor as a benchmark to set your price. Rolex watches (above) or Value City Furniture (below)
Loss-Leader Pricing Price below cost to lure buyers in Want buyer purchasing other things you sell at high mark ups
Pricing Strategies
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Pricing Strategies
Market Skimming Market Penetration Product Mix Pricing Price Adjustment Strategy
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Pricing Strategies Market
Skimming
Initially set a high price for a new product so as to skim revenues layer by layer from the market. Lower prices over time, Initially make fewer, but more profitable sales.
Best used when:

Technological Breakthrough Higher quality / premium product. Competitors with similar quality cannot easily undercut price.
Pricing Strategies Penetration
Strategy
Set a low initial price so the brand to penetrates the market quickly.
Eventually raise prices when wide adoption and brand loyalty have been achieved.
Best used when:
Market is highly price sensitive. Need to keep competition out or effects are only temporary.
Pricing Strategies- Product Mix

Product line pricing Optional-product pricing Captive-product pricing By-product pricing Product bundle pricing Geographical pricing
Product Line Pricing
Sets price steps between various product line items based on:
Cost differences between products Customer demand for additional/different features Intel from Celeron to pentium
Optional-Product Pricing
Pricing optional or accessory products sold with the main product Examples:

Computer sold with additional RAM (memory) Rental car sold with luxury
Captive-Product Pricing
Pricing products that must be used with the main product Base product is relatively cheap or free Replacement product is relatively expensive Examples:

Replacement cartridges for Gillette razors. Toner/ink for HP printers. Replacement car parts sold at car dealers
Product Bundle Pricing

Multiple products sold together for one price Creates perception of savings Eases decision-making and ordering for consumers Examples:

Computer package: PC, monitor, software, and printer. McDonalds Value Meal: Burger, Fries and Drink Vacation package: Flight, hotel and meals Season tickets for 5 days cricket match is cheaper than 5 days individually
By-product pricing
-Helps businesses get rid of excess materials used in making a product by using low prices. One example is a furniture company selling wood chips.
Pricing Strategies-Price Adjustment
Discount and allowance pricing Price discrimination (Segmented pricing) Psychological pricing Promotional pricing Dynamic pricing
Discounts and Allowances

Discount pricing involves the seller offering reductions from the usual price, and it can be done with:
Cash discounts -Cash discounts are given when the consumer pays for his/her purchase quickly.
Quantity discounts-Quantity discounts are rewards for consumers who buy large amounts of a product. These discounts can be one of two types:

Noncumulative: A discount given on one specific order Cumulative: A discount given on all orders over a specified period of time
Trade discounts-Trade discounts are the way manufacturers quote prices to wholesalers and retailers. Price cuts from the list price will be given to members of the channel of distribution. Seasonal discounts-Seasonal discounts are offered to buyers willing to buy at a time outside the customary buying season.
Price Discrimination (Segmented Pricing)
Selling a product or service for different prices to different people, where differences in price are not driven by different costs.
Four factors can help marketers use segmented pricing strategies:
Customer segment: Some customers buyers are charged differently. student's concession Product design: Different product styles may be more in demand. Powder different packs Purchase location: Some areas have higher prices than others. Multiplex & common cinema Time of purchase: Demand for products and services rises at certain times.
Psychological Pricing
Considers the psychological effects of prices usually irrational responses. Standard practice among most retailers
Even-Odd Pricing
Odd-even pricing involves setting prices that end in either odd or even numbers to convey certain images. It is based on a psychological principle that odd numbers convey a bargain image, while even numbers convey a quality image.
Rs
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Prestige Price- as Signal of Quality
A pricing technique that sets higher-than-average prices to suggest status and high quality to the consumer. The typical Price-Quality Inference
Effects of price changes on quality inferences

When pricing is NOT used as a quality signal Extensive product knowledge/expertise Repeat buys
Everyday low prices (EDLP)
Low prices set on a consistent basis with no intention of raising them or offering discounts in the future. These help to reduce promotional expenses and losses due to discounting.
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Promotional Pricing Techniques

Trade-in allowances go directly to the buyer. Customers are offered a price reduction if they sell back an old model of the product they are purchasing. Low-Interest (or Free) Financing Clearance Sales
Cash Rebates-Rebates are partial refunds provided by the manufacturer to consumers Special-Event Pricing-In specialevent pricing, items are reduced in price for a short period of time, based on a specific happening or holiday. Loss Leaders-Loss leader pricing is used to increase store traffic by offering very popular items for sale at below-cost prices.
Promotional Pricing
Deals, Clearance Sales and 0% Financing
Promotional pricing creates excitement and a sense of urgency.
Dynamic Pricing
Adjusting prices continually to meet the characteristics and needs of continuously changing supply and demand.
Geographical pricing
Price adjustments required because of the location of the customer for delivery of products. In this strategy, the manufacturer assumes responsibility for the cost and management of product delivery.
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Steps in Determining Prices

There
are six basic steps that are used to determine prices:
Establish
pricing objectives-To set effective prices, the pricing objectives must conform to the companys overall goals. They must also be specific, timesensitive, realistic, and measurable.
Determine
costs -Businesses must consider all of the costs involved in making a product available for sale, including materials, labor, and supplies. Costs can vary due to ever-changing economic conditions.
Estimate
demand-To estimate demand, marketers must research how the public will receive their product or service based on supply-and-demand theory and on the exceptions that occur because of demand elasticity.
Study
competition-Businesses need to investigate what prices their competitors are charging for similar goods and services. Decide on a pricing strategy-When choosing a pricing strategy, be sure your decision conforms to your pricing objectives and remember that as economic and market conditions change, strategies may require changes too. Set prices-The final step is setting the price. Marketers must decide how often they want to change their final, published prices. In addition to the cost of changing printed materials, customers reactions to price changes must be considered as well.
Initiating Price Changes
Price cuts
Falling sales or market share demand issues Grab market share from competitors Lower production/service costs Respond to competitors price drop Consumers have less purchasing power
Price Increases
Cost inflation Over-demand Match competitors increase
Ways to increase prices without increasing price
Revise the discount structure Change the minimum order size Charge for delivery and special services Charge for engineering, installation Charge for overtime on rushed orders Collect interest on overdue accounts Produce less of the lower margin models in the line Write penalty clauses into contracts Change the physical characteristics of the product
Channels of Distribution
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What is a Marketing Channel?
A Marketing channel is a set of organizations involved in the process of making product or services available for use or consumption. A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer.
Names for Marketing Intermediaries
Retailer
A channel intermediary that sells mainly to customers. An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Wholesaling intermediaries who facilitate the sale of a product in return for a commision
Wholesaler
Agents
JOB OF INTERMEMDIARIES
Specialization and Division of Labor Three Main Functions
Overcoming Discrepancies
Providing Contact Efficiency
SPECIALIZATION AND DIVISION OF LABOR
Provides efficiency and cost savings Aids producers who lack resources to market directly Builds good relationships with customers
OVERCOMING DISCREPANCIES
Spatial discrepancy
Exist because of gap of place between manufacturer place & consumption, e.g GSK, tea Companies to weigh between transportation cost reduction or inability to exploit economies of scale
Temporal discrepancy
Time gap between manufacturer & consumption Manufacturing is always in batches Need demand assessment & place assessment For perishable products , temporary discrepancy is complex & critical
Discrepancy of Quantity/Need to break the bulk

Exists because products are manufactured in bulk but consumed in smaller quantities Large trucks to different locations ( state capitals ) to smaller locations ( area) to retailors to consumer ITC cigarette Discrepancy of Assortment/ Need to provide assortment Consumers demand for assortments rather than single product Vegatable seller versus manufacture, big bazaaretc.
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Contact Efficiency
Distribution Channel Functions

Distribution Channel
Information Promotion Contact
Key Function
Gathering and distributing marketing research about the environment
Developing and spreading persuasive communications about an offer

Finding and communicating with prospective buyers Shaping and fitting the offer to the buyers need Agreeing on price and terms of the offer so ownership or possesion can be transfered Distribution: transporting and storing goods Acquiring and using funds to cover the costs of channel work Assuming financial risks such as the inability to sell inventory at full margin
Matching
Negotiation Physical Financing Risk Taking
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Factors Affecting Channel of Distribution-:

Market Factors Product Factors Company Factors Competitive Factors Environmental Factors Middlemen factors
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Market factors
Consumers- The number of consumers, their geographic location and purchase pattern considerable affect the choice of a channel Intermediaries- The relative strengths and weaknesses of intermediaries and the differences in the types of functions performed and facilities and privileges desired by them often determine the choice of channel. Size of the order Competitors- The distribution channel used by competitors also influence the channel choice because it may be the customary channel used by all those operating in the field.
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Product Factors
Industrial / Consumer product- When the product being manufactured and sold is industrial in nature, direct channel is useful because of the relatively small number of customers need for personalized attention, customer training requirements and after sale servicing. Perishable Nature- When products are perishable nature, like milk, dairy products bread and meat, etc., it is useful to opt for direct channel Technicality- When a product is very technical and complex like computers business machines etc. the direct channel is relatively more useful. Selling price- if selling price is low, the channel of distribution may be long as in the case of cigarette
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Company Factors

Financial Strength- A financially strong company is better placed to select and design its distribution channel . Past Channel Experience- In case of an old and established company, its past experience of working with certain kind of intermediaries also affect the channel choice. Reputation/ GoodwillControlling Power
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Environmental Factors
Economic- in depressed economic condition & in multipoint tax on sales- short channel Legal Restrictions- as per MRTP act ,any practice which may have the effect of unreasonably preventing or lessening competition in the supply of goods is not permisible
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Competitive Factors-:
Channels which are less expensive are generally preferred. Consumer convenience is also a factor to consider for selection. Alternative distribution channel may be used as a means of attaining competitive advantage Competitor controls channel of Distribution.
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Middleman Factors-:

Availability of Middleman Attitude of Middleman Services Provide by Middleman Sale potential of Middleman
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Types of Distribution Channels

Direct Distribution Direct contact between producer and customer. Often found in the marketing of relatively expensive, complex products that may require demonstrations. Internet is helping companies distribute directly to consumer market. Own Retail shops, Personal selling (door to door), Automatic vending, Franchised shops, Telephone selling (Telemarketing), Exclusive Stores/Specialty Stores-marketing
Distribution Channels Using Marketing Intermediaries Producers distribute products through wholesalers and retailers. Inexpensive products sold to thousands of consumers in widely scattered locations. Lowers costs of goods to consumers by creating market utility.
Major Distribution Channels
For distribution of consumer goods, five different types of channels are widely used. Business goods are normally distributed through four major types of channels. There are only two common channels of distribution for services. Some producers are not content to use only a single distribution channel and use multiple channels (dual distribution) Multiple channels can aggravate middlemen and cause conflicts in the channels.
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Consumer Channels
PRODUCERS OF CONSUMER GOODS
Agents
Agents
Merchant wholesalers
Merchant wholesalers
Retailers
Retailers
Retailers
Retailers
ULTIMATE CONSUMERS
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Business Channels
PRODUCERS OF BUSINESS GOODS
Agents
Agents
Merchant wholesalers (industrial distributors)
Merchant wholesalers (industrial distributors)
BUSINESS USERS
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Service Channels
PRODUCERS OF SERVICES
Agents
ULTIMATE CONSUMERS OR BUSINESS USERS
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Multiple Distribution Channels
Some firms will use several distribution channels to reach specific markets or segments Dual distribution is used, for example, to reach business and consumer markets, or to carry different groups of products or may be used to reach different segments of the sellers market; different sizes of buyers or different regions of the country Some companies operate their own stores
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Channel Design Decisions
Analyzing Consumer Needs Setting Channel Objectives Identifying Major Alternatives Evaluating the Major Alternatives
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Analysing Consumer Needs
Designing the distribution channel begins with determining what (e.g. convenient location to buy the products, immediate delivery, credit, repairs, long-term warranty) the consumers want from the channel. The company must balance the consumer service needs with the feasibility and costs plus prices. Answering key questions helps to determine customer needs:
Do consumers want to buy from nearby locations or are they willing to travel? Do consumers want many add-on services?
Firm must balance needs against costs and consumer price preferences.
Setting the Channel Objectives
The company must decide which segments to target and the best channels to use in each segment. Here, the objective of the company is to minimize the total channel cost. Besides the target market, the companys channel objectives are influenced by;
the nature of its product, e.g. perishable products require more direct marketing to avoid delays and too much handling. Daily newspaper company characteristics, e.g. the companys size and financial situation determine which functions it can handle, how many channels it can use, which transportation can be used
characteristics of intermediaries, intermediaries differ in their abilities to handle promotions, customer contact, storage and credit e.g. the companys own sales force is more intense in selling. competitors channel, some companies may prefer to compete in or near the same outlets that carry competitors products, some may not e.g. Burger King wants to locate near McDonalds environmental factors, economic conditions and legal constraints affect channel design decisions e.g. in a depressed economy, producers want to distribute their goods in the most economical way, using shorter channels.
Identifying Major Alternatives

After the channel objective have been determined, the company should identify its major channel alternatives in terms of (1) types of intermediaries, (2) number of intermediaries, and (3) the responsibilities of each channel member. Types of Intermediaries Company sales force-strategies-Expand direct sales force, Assign salespeople to territories to contact all prospects, Develop a separate sales force, Telesales Manufacturers agency- hire agents in different regions Industrial distributors-Find distributors in different regions who will buy & carry the device. Give them Exclusive distribution, Margin, opportunities, Training, Support A firm should identify the types of channel members that are available to carry out its channel work.
Number of Marketing Intermediaries Companies must also determine the number of channel members to use. There are three strategies;
Intensive distribution; is a strategy in which companies stock their products in as many outlets as possible. Convenience products and common raw materials must be available where and when consumers want them e.g. toothpaste, candy Procter & Gamble, Coca-Cola distributes its products in this way. Here, the advantages are maximum brand exposure and consumer convenience. Exclusive distribution; is a strategy (opposite to intensive distribution) in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Often found in new automobiles and prestige womens clothing e.g. Rolls-Royce. Here, the advantages are establishing image and getting higher markups.
selective distribution; (is between intensive and exclusive distribution) is a strategy in which the company uses more than one but fewer than all of the intermediaries. Most television, furniture brands are distributed in this way. Here, the advantages are; it provides good market coverage with more control and less cost than intensive distribution. It does not spread its efforts over many outlets as in intensive distribution.
Responsibilities of Channel Members The producer and intermediaries must agree on price policies, discounts, territories, and services to be performed by each party. E.g. McDonalds provides franchisees with promotional support, training, management assistance, in turn, franchisees must meet company standards for physical facilities, buy specific food products...
Evaluating the Major Alternatives

In order to select the channel that satisfy the company objectives in the best way, each alternative should be evaluated by using; economic criteria; the company compares the projected profits and costs of each channel. control issues; the company prefers to keep the channel where it has the highest control in term of sales procedure, payment & promotion. adaptive criteria; the company prefers to keep the channel which is the most flexible to the changing marketing environment.
Channel Management Decision

Selection of Channel Members Training of Channel Members
Motivation of Channel Members

Evaluation of Channel Members Modification of Channel Arrangement
Selecting Channel Members
Selecting channel members involves determining the characteristics that distinguish the better ones by evaluating channel members

Years in business Lines carried Profit record

Number and character of other lines carried Size and quality of sales force Stores customers Store locations Growth potential
Selecting intermediaries that are sales agents involves evaluating

Selecting intermediates that are retail stores that want exclusive or selective distribution involves evaluating

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Training Channel member
On the job, class room training ( products & positioning), product features, marketing & promotional materials, special meeting on the new launch, training on reports, servicing
Motivating Channel member-
Develop a cooperative/collaborative and balanced relationship with the partner Understand the partners customers their needs, wants, and demands Understand the partners business operationally and financially and whats really important to them Look at the partners needs in terms of customer support, technical support, and training Establish clear and agreed upon expectations and goals Develop recognition programs focusing on the partners contributions Build internal support systems and dedicate resources to the partner Determines intermediates needs, time to time training programme, capability building programme for improving efficiency,
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Channel Power- producers use following types of power. Coercive power- threatens to withdraw or terminate a relationship Reward power- extra benefit for performing specific acts Expert power- manufacturer has special knowledge that intermediaries value Legitimate power- manufacturer requires a behaviour that is warranted under the contract Referent power- intermediaries feel proud to be associated with the manufacturer
Evaluating Channel member criteria may be sales volume & value, profitability, level of stocks, quality & position of display, selling & marketing capabilities, quality of service to be provided to customer, market information feedback, attitude
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Channel Behavior
All channel firms should work together to be successful. Each channel member is dependent on the others e.g. a Ford dealer (retailer) depends on the Ford Motor Company to design cars that meet consumer needs. In turn, Ford depends on the dealer to attract consumers, persuade them to buy Ford cars, and service cars after the sale. The Ford dealer also depends on the other dealers to create a good overall reputation for the entire distribution channel.
Although channel members are dependent on one another, they often concentrate on their short-term benefits. Channel conflict occurs when disagreement among channel members on goals and roles - who should do what and for what rewards.
Horizontal conflict; occurs among firms at the same level of the channel. In other words, one dealer may complain about the other. Vertical conflict; occurs among different levels of the same channel. In other words, the producer may complain about its dealers or vise versa.
Conflict may be healthy or damaging for the channel. Healthy competition would encourage dealers to improve their services.
Channel organisation
Historically channels have followed the conventional distribution channel format:
comprised of independent producers, wholesalers and retailers, with separate businesses and seeking to maximise their own profit individually, even at the expense of the entire channel.
Modern channel management has evolved to develop vertical marketing systems (VMS) that provide channel leadership.
Vertical Marketing Systems
Vertical Marketing Systems (VMS) consists of producers, wholesalers, and retailers acting as a unified system - that seek to maximize profits for the whole channel. Here, one channel members owns the others, has contracts with them or use so much power that they all cooperate. Such systems occur to control channel behavior and manage channel conflict.
Types of Vertical Marketing Systems

Vertical marketing systems (VMS)
Corporate VMS
Contractual VMS
Administered VMS
Wholesalersponsored voluntary chains
Retailer cooperatives
Franchise organizations
Corporate VMS
In a corporate VMS, production and distribution stages are combined under single ownership, in order to manage cooperation and conflict management
e.g. AT&T markets its products through its own chain of distributors. Reliance owns all stages from oil exploration to oil refinery
Contractual VMS
A contractual VMS consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. There are three types of contractual VMSs;
wholesaler-sponsored voluntary chains; are contractual marketing systems in which wholesalers organize voluntary chains of independent retailers to help them compete with large corporate chain organizations.e.g vegetable & food market
retailer cooperatives; are contractual marketing systems in which retailers organize a new, jointly owned business to carry on wholesaling and possibly production. Apna bazaar in Mumbai franchise organizations; are contractual marketing systems in which a channel member, called a franchiser, links several stages in the productiondistribution process. There are three forms of franchisees;
manufacturer-sponsored retailer franchise system e.g. Ford licenses dealers to sell its cars. The dealers are independent businesspeople who agree to meet various conditions of sales and service. manufacturer-sponsored wholesaler franchisee system e.g. Coca-Cola licenses bottlers (wholesalers) in varius markets who buy Coca-Cola syrup concentrate and then carbonate, bottle and sell the finished product to retailers in local markets.
service-firm-sponsored retailer franchise system in which a service firm e.g. Hertz, Avis, McDonalds, Burger King, Holiday Inn, Ramada Inn licenses a system of retailers to bring its service to consumers.
Administered VMS
A vertical marketing system that coordinates production and distribution stages, not through common ownership or contractual ties, but through the size and power of one of the parties e.g. Procter & Gamble, Kraft, Campbell Soup (or retailers like Wal-Mart, Toys `R` Us) are very strong that they can command special displays, shelf space, promotions and prices form the other parties.
Horizontal Marketing Systems
Horizontal marketing systems is a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. The major benefit is that companies combine their capital, production capabilities, marketing resources and therefore accomplish more. Companies might join forces with competitors or noncompetitors. They might work with each other on a temporary or permanent basis or they may create a separate company.
E.g. Coca-Cola and Nestle formed a joint venture to market ready-to-drink coffee and tea worldwide. Coke provided worldwide experince in marketing and distribution beverages and Nestle contributed two established brand names - Nescafe and Nestea.
Hybrid Marketing Systems
Hybrid marketing systems is also called multichannel distribution systems where the company uses several marketing channels (e.g. direct mail - telemarketing, retailers, distributors, dealers, own sales force) to sell its products to different customer segments. E.g. IBM uses its own sales force + IBM direct which is the catalog and telemarketing operation of IBM + independent IBM dealers + IBM dealers for business segments + large retailers like Wal-Mart.
The major benefit is that when the company has large and complex markets (consumers) the company can expand its sales and market coverage by providing services to the specific needs of diverse customer segments. The disadvantage is that they are harder to control and generate more conflict.
RETAILING & WHOLESALING
What is Retailing?
All the activities involved in selling goods or services directly to final consumers for their personal, non business use. Retailers - businesses whose sales come primarily from retailing. Retailers can be classified as:
Store retailers such as Home Depot, Walmart Nonstore retailers such as the mail, telephone, and Internet.
Types of Retailers
Retailers are classified based on:
Amount of service they offer Breadth and depth of product lines Relative prices charged How they are organized
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Amount of service they offer
Self-service retailers

Customers are willing to self-serve to save money Convenience stores and fast moving shopping goods
Provide more sales assistance because they carry more shopping goods about which customers need information. Most department stores Salespeople assist customers in every aspect of shopping experience High-end department stores and specialty stores
Limited-service retailers

Full-service retailers
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Major Store Retailer Types

Specialty stores- Narrow Product Line, Deep Assortment. Sporting goods store. Raymonds Department stores- Wide Variety of Product Lines required by typical household. i.e. Clothing, Home Furnishings, & Household Items. Pentaloon retail Supermarkets- large, low cost , low margin, high volume .Wide Variety of Food, Laundry, & Household Products. Foodland & Garware in Mumbai Convenience stores- generally food stores, smaller in size than supermarket, located near residential areas. Street corner grocery store Discount stores- sell standard merchandise at lower prices than conventional merchants. Subhiksha
Copyright 2007, Prentice Hall, Inc.
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Relative prices charged
Discount stores
Low margins are offset by high volume

Merchandise bout at less than regular wholesale price & sold at less than wholesale price & sold at less than retail :often leftover goods,
Off-price retailers
Independent off-price retailers- run by entrepreneurs or by divisions of large retail corporation. E.g C3 Factory outlets- owned & operated by manufacturer & normally carry the manufacturers surplus. Bata, Levi Strauss, Reebok Warehouse clubs-serve limited selection of brand name appliances, clothing to member who pay annual membership fee. Sams Club, Costco
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How they are organized
Corporate chain stores
Commonly owned / controlled Wholesaler-sponsored groups of independent retailers Groups of independent retailers who buy in bulk Based on something unique
Voluntary chains
Retailer cooperatives
Franchise organizations
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Retail formats in India
Departmental Stores Convienience Stores Shopping Mall E-Trailers Vending Speciality Stores Co-operative Society
Challenges facing Indian Retail Industry
Tax structure in India favours small retail business Lack of adequate infra structure facilities High cost of real estates Shortage of trained man power Low Retail Management skill Dissimilarity in consumer groups
Major Retailers in India
Shoppers Stop
Westside
Pantaloons Life Style RPG retail Cross Word TATA Group Reliance
Right Pricing Strategy
The right price is one , consumers are willing and able to pay and retailers are willing to accept in exchange for merchandise and services!
The right price allows the retailer to make a fair profit while providing the consumer with value satisfaction before, during, and after the sale!
Functions of Retailers
Retailing undertakes business activities or perform functions that increase the value of products and services they sell to consumers. These functions are: Providing assortments Breaking Bulk Rendering services Risk Bearing Holding Inventory
Non-Store Retailing

Most retailing is done in retail stores.
In recent years non store retailing has

been growing much faster than store
retailing
It includes selling to final consumers
through direct mail,catalogue,telephone,

the internet, TV
Benefits of Retailer for both manufacturers and customers

Manufacturer Expectation
1. Promote Product
2.Make Product Visible 3.Be Knowledge about its use 4.Provide necessary service
Customers Expectations
1.Offer high quality or low prices
2.Hire Knowledgeable Sales Force 3.Provide Prompt Services 4.Provide service after sales
Retailing Functions
Assembling of goods Physical movements & storage Providing of information to consumer & producers Financing, credit to consumer Floor & shop operations Marketing & brand management
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113
Tasks Of Retailing
Get Consumers into your Store Convert them into customers Operate as efficiently as possible Retailing should be planned after segmentation and identifying the target market
Retail Mix

Retail mix brings the firm objective in final and practical form. Retail mix describes how major factors like price and merchandise are traded off against other retail factors- service,
location, marketing communication,quality and stores ambience

to form

Overall store image, Create value for customers Produce profit for retailer
RETAIL IN INDIA
Overview

The retailing industry in India is largely unorganised and predominantly consists of small independent, owner-managed shops Retailing is Indias largest industry in terms of contribution to GDP and accounts for 13 percent of the GDP There are around 5 million retail outlets in India There are also an unaccounted number of lowcost kiosks (tea stalls, snack centre, barbershops etc,.) and pushcarts/mobile vendors
Emergence of organized retailing
Organized retailing in India represents a small fraction of the total retail market Organized retailing was first started in India in the year 2001 and was valued at Rs. 11,228.7 billion Income in urban India is increasing A rising working population faces a shortage of time Demand for frozen, instant, ready-to-cook, ready-toeat food, and readymade clothes is rising Rural India continues to be serviced by small retail outlets The McKinsey report predicts FDI will help the retail businesses to grow to $ 460-470 billion by 2010
Traditional retail formats
Traditional retail formats refer to retail formats that have long been part of the retail landscape of India. There are predominantly two types of traditional retail formats, namely:
- Kirana and Independent Stores - Co-operative and Government owned stores
Kirana and independent stores

Kirana, Mom and Pop, and family owned retail shops represent bulk of the retail business in India These are usually shops with a very small area stocking a limited range of products, varying from region to region according to the needs of the clientele About 78% of these retail stores are small familyowned businesses utilising only household labour Even among retail enterprises that employ hired workers, the bulk of them use less than three workers These are low cost structures, mostly owneroperated, with negligible real estate and labour costs and little or no taxes to pay Branding is not the key decision criteria for a majority of customers at the traditional retail outlets particularly in the small townships and rural India Conventionally, retailers source the merchandise from wholesalers and sell it to end-users
Cooperatives and government bodies

India has large number of retail stores run by cooperative societies and government bodies across product categories Such initiatives were taken for various socioeconomic factors primarily to promote industries and employment in rural areas Super Bazaars and the Kendriya Bhandars along with the administered price Public Distribution System are organized retailing formats Examples:
Mother Dairy, Delhi and Fruit & Vegetable Project Public Distribution System in New Delhi Central Cottage Industries Emporium
Retailing in rural india

An important phenomenon in Indias consumer culture is the emergence of the rural market for several basic consumer goods Three-fourths of Indias population lives in rural areas, and brings one-third of the national income The rural market has been growing steadily over the years and is now bigger than the urban market for FMCGs (53% share of the total market) with an annual size in value terms currently estimated at around 50,000 crore A boon for the companies who are seeking new ways to increase sales NCAER projects that the number of middle and highincome households in rural India are expected to grow from 80 million to 111 million by 2007 Existing retail formats available in rural India are retail outlets within the village, feeder centre or markets, melas, haats and shandies, hawkers (mobile retailers)
Rural market penetration levels

Durable
Refrigerator Black and white television
Rural share %
24.30 62.65
Product
Coffee Biscuits
Penetration %
7 60.1
Washing machine
Pressure cooker
14.64
51.51
Toilet soap
Toothpaste
91.6
35.6
Instant Water heater

Mixer/grinder Colour television
2.04
27.43 28.77
Talcum powder 16.4

Hair oil Shampoo 16.0 39.8
Scooter
28.56
Razor blade
47.1
Motorcycle
47.87
Skin cream
15.5
Retail Strategy
The sector represents a variation in level of development and preference for formats based on product categories Product categories differ in terms of percentage share of markets, level of risk and relevance for the consumer, and the expectation and requirement of customer service
Specific product categories

1.
2.
3. 4. 5. 6. 7.
Food Category: Supermarkets,discount stores, fresh product outlets, speciality stores, convenience stores and off-price retailers. Restaurants: Apna Ghar, old formats coexist (Ghanteewala Halwai, Natraj Caf, Giani ka falooda) Health and Beauty Products: LIFESPRING HEALTH & BEAUTY PLACE (Health Foods at Beauty Products, Eye Care at Life Spring ) Clothing and Footwear Retailers: Kala Niketan, THE LOFT, Shoppers Stop, Pantaloon, Trent, Home Furniture and Household Goods Retailers Durable Goods Retailers :Viveks Petro-Retailing in India: Bharat Petroleum Retail Banking: Multi-Channel Distribution, Call Centres
(support services), Technology, Rural exposure
8. Leisure industry
Vertical marketing system In Indian retailing An independent vertical marketing system consists of all
the levels of independently owned business entities along a channel of distribution/value chain Three levels of independently owned forms: manufacturers or suppliers, wholesalers or distributors, and retailers System is compatible if: - producer and retailers are large and selective
- exclusive distribution is sought - unit sales are moderate - company resources are high and greater channel control is desired - existing wholesalers are too expensive or unavailable
All or most of the functions from production to distribution are at least partially owned and controlled by a single entity Corporate systems typically operate manufacturing units, warehouse facilities, and retail outlets
Challenges in retail business In India

Retail industry in India is in a phase of transition and faces challenges Recent examples of chains that tried ramping up too fast too soon (Barista, Domino's and Shoppers' Stop) all fell into a cash trap Deciding the right pace of expansion is critical Retailers in India face other challenges in terms of
1. Real estate 2. Regulations 3. Manpower
These challenges have an impact on thr costs and efficiency of operations of the retail business
What is wholesaling?
All the activities involved in selling goods and services to those buying for resale or business use.
Wholesaler-those firms engaged primarily in

wholesaling activity.
Why are Wholesalers Used?

Wholesalers are Often Better at Performing One or More of the Following Channel Functions:
Management Services & Advice
Selling and Promoting Buying and Assortment Building

Bulk Breaking
Market Information Risk Bearing
Wholesaler Functions
Financing
Warehousing
Transporting
Types of Wholesalers
Merchant Wholesalers
Largest group of wholesalers Account for 50% of wholesaling Two broad categories:
Full-service wholesalers- They perform all or most of the marketing functions ( carry stock, maintain a sales force, offer credit, a full range of services) normally associated with whole saling.they also referred to as distributor or a jobber. Limited-service wholesalers
11-130
Type of limited wholesalers

Cash and carry wholesalers
Functions
Emphasise on small business market.no credit ,no managerial assistance Dont store inventory . commodities like grains and coal. Inventories are carried on trucks Send catalogues to retail, industrial They serve business, gov, institutional markets
Drop shippers
Truck wholesalers or wagon jobbers Mail order wholesalers
producers and retail coperatives and Independent producers market rack jobbers together their output at discount
Brokers and Agents

Do not take title to goods Perform fewer functions Brokers bring buyers and sellers together Agents represent buyers on more permanent basis Manufacturers agents are most common type of agent wholesaler Wholesaling by sellers or buyers themselves rather than through independent wholesalers.
Manufacturers Sales Branches and Offices
Copyright 2007, Prentice Hall, Inc.
11-132
Wholesaler Marketing Decisions

Wholesaler Marketing Mix Wholesaler Strategy Target Market Retail Store Positioning Product and Service Assortment Prices Promotion Place (Location)
Trends in Wholesaling
Wholesaling Developments to Consider
Must Learn to Compete Effectively Over Wider and More Diverse Areas Increasing Consolidations Will Reduce Number of Wholesalers Surviving Wholesalers Will Grow Larger Through Acquisitions and Mergers
Vertical Integration Will Remain Strong
Global Expansion
Warehousing
Every company stores its goods while they wait to be sold. A company must decide on (1) how many and (2) what types of warehouses it needs and (3) where they will be located. The company might own private warehouses or rent space in public warehouses or both. Both has advantages and disadvantages. Owning a private warehouse;
bring more control
ties up capital is less flexible if locations change charge for rented space provide additional services for inspecting, packaging, shipping and invoicing goods but at a cost offer wide choice of locations and warehouse types
On the other hand, public warehouses;
Basic types of warehouses are; (1) storage warehouses and (2) distribution centers.
storage warehouses store goods for moderate to long periods distribution centers are designed to move goods rather than just store them. They are large and automated warehouses desinged to receive goods from suppliers, take orders and deliver goods to
Inventory
Inventory decisions involve (1) when to order and (2) how much to order. In deciding when to order, the company must think of the risks of running out of stock and costs of carrying too much. In deciding how much to order, the company must think of order-processing costs and inventory-carrying costs. Just-in-time logistic systems are used by some companies in which the producers carry only small inventories only enough for a few days of operations. Such systems result in savings in inventory carrying and handling costs.
Transportation
The choice of transportation carriers affects (1) the pricing of products, (2) delivery performance, (3) condition of the goods when they arrive - all affect customer satisfaction. In shipping goods, there are five transportation modes: rail, water, truck, pipeline, and air.
Rail; is the most cost-effective mode for shipping large amounts products e.g. coal, farm and forest products over long distances. Truck; trucks are very flexible in their routing and time scheduling. They can move goods door to door, saving
the need to transfer goods from truck to rail and back again. They are efficient for short hauls of high-value products. They can offer faster service. Water; the cost is very low for shipping bulky, lowvalue, nonperishable products e.g. coal, oil, metallic ores. It is the slowest mode and affected by the weather. Pipeline; are specialized means of shipping petroleum, natural gas and chemicals from sources to markets. It costs less than rail but more than water. Air; costs higher than rail and truck but ideal when speed is needed and distant markets have to be reached. Products are perishables (fresh fish, cut flowers), high-value, low-bulk items (technical instruments, jewellery).
In choosing a transportation mode, shippers consider five criteria; (1) speed - door to door delivery time, (2) meeting schedules on time, (3) ability to handle various products, (4) number of geographic points served, (5) cost per tone-mile.
Table 20.1 Major types of wholesalers
Table 20.1 Major types of wholesalers (continued)
Promotion and Promotion Mix
PROMOTION
Promotion involves disseminating information about a product, product line, brand, or company. It is one of the four key aspects of the marketing mix. Promotion is the process of informing your customers about your products and services. To generate sales and profits, the benefits of products have to be communicated to customers. In marketing this is commonly known as promotions.
Promotion
Promotion is the function of informing, persuading, and influencing a purchase decision.
Promotional mix - combination of personal and non personal selling techniques designed to achieve promotional objectives.
Specific combination of promotional methods such as print or broadcast advertising, direct marketing, personal selling, point of sale display etc., used for one product or a family of products. Personal selling - interpersonal promotional process involving a sellers face-to-face presentation to a prospective buyer. Nonpersonal selling - advertising, sales promotion and public relations.
Promotion
Above-the-line promotion This uses advertising media over which a firm has no direct control e.g. television, radio and newspapers Below-the-line promotion This uses promotional media which the firm can control e.g. direct mail, sales promotions and sponsorship
11/1/2012
Marketing Management Unit 1
Factors that Affect the Promotion Mix

Nature of the Product
Stage in the Product Life Cycle
Target Market Characteristics
Type of Buying Decision
Available Funds
$$$
PushandPull Strategies
Objectives of Promotional Strategies
Promotional activities
Advertising-Advertising is a paid form of communication used to persuade an audience (viewers, readers or listeners) to take some action with respect to products or services e.g. TV, billboards and internet. Sales promotions-Sales promotions are short-term incentives to encourage the purchase or sale of a product or service. e.g. Loyalty cards, discounts, sample & free gifts Sponsorship One who assumes responsibility for another person or a group for a period e.g a business pays to be associated with another firm, event or cause
11/1/2012
Promotional activities
Direct mailing promotional material is sent to potential customers by post/email Public relations is the actions of a company etc., in promoting goodwill between itself and the customers i.e. building the relationship between the firm and the public by enhancing its reputation Publicity-is the deliberate attempt to manage the public's perception of a subject
11/1/2012
Advertising - paid non personal communication delivered through various media and designed to inform, persuade, or remind members of a particular audience.
The means of providing the most persuasive possible selling message to the right prospects at the lowest possible cost". Kotler and Armstrong provide an alternative definition:"Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, television or radio by an identified sponsor". Consumers receive 5,000 marketing messages each day. Firms need to be more and more creative and efficient at getting consumers attention.
The Five Ms of Advertising

Message Money Factors to consider: Mission
Sales goals Advertising objectives Stage in PLC Market share and consumer base Competition and clutter Advertising frequency Product substitutability
Message generation
Message evaluation and selection Message execution Social-responsibility review
Measurement
Communication impact Sales impact
Media Reach, frequency, impact Major media types Specific media vehicles Media timing Geographical media allocation
Informative advertising - used to build initial demand for a product in the introductory phase. Persuasive advertising - attempts to improve the competitive status of a product or concept, usually in the growth and maturity stages. Comparative advertising - compares products directly with their competitors either by name or by inference. Reminder-oriented advertising - appears in the late maturity or decline stages to maintain awareness of the importance and usefulness of a product.
Types of Advertising- on the basis of Aims

Product advertising - messages designed to sell a particular good or service. Institutional advertising - messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities. Cause advertising - institutional messaging that promotes a specific viewpoint on a public issue as a way to influence public opinion.
Non commercial advertising- undertaken by charitable institute for raising public donation or funds to meet certain purposes
Types of Advertising- on the basis of coverage

Local advertising - circulated to a defined area National advertising for entire nation messages that promote concepts, ideas, philosophies, International advertising covers globe/specific foreign country
Types of Advertising- on the basis of users

Consumers advertising - directed at ultimate household consumer Industrial advertising related to product which are consumed by industries
Types of Advertising
Television Easiest way to reach a large number of consumers. Most expensive advertising medium. Newspapers Dominate local advertising. Relatively short life span. Radio Commuters in cars are a captive audience. Magazines Consumer publications and trade journals. Can customize message for different areas of the country. Direct Mail High per person cost, but can be carefully targeted and highly effective.
Online and Interactive Advertising Viral advertising creates a message that is novel or entertaining enough for consumers to forward it to others, spreading it like a virus. Many consumers resent the intrusion of pop-up ads that suddenly appear on their computer screen.
Common Advertising Appeals

Profit Health
Save money, keep from losing money Body-conscious, healthy
Love or Romance Fear

Admiration Convenience Fun and Pleasure Vanity and Egotism
Sell cosmetics and perfumes

Social embarrassment, growing old, losing health, power Celebrity endorsement effective Fast-food and microwave products Vacations, beer, amusement parks Expensive, conspicuous items
Advantages
To manufacturer

Increase sales volume/net profit Opening new market/ maintain the existing market Creates reputation & is less expensive Create a background/ lessen the burden Least effort Easy sales/ attract new customer Publicity Easy purchasing/ saves time Educate to the customer Employment generation
159
To sales man

To wholesalers & retailers

To the customer

To community

MM Unit 3
Sales promotion
Non personal marketing activities other than advertising, personal selling, and public relations that stimulate consumer purchasing and dealer effectiveness An activity designed to boost the sales of a product or service. It may include a free-sample campaign, offering free gifts, setting up competitions with attractive prizes, temporary price reductions More than any other element of the promotional mix, sales promotion is about action. It is about stimulating customers to buy a product. It is not designed to be informative a role which advertising is much better suited to. .
Consumer-Oriented Promotions
Premiums, Coupons, Rebates, Samples Premium -An offer oa a certain amount of product at no cost who buy a stated quantity Coupons attract new customers but focus on price rather than brand loyalty. Lifebuoy issue coupons on purchase Rebates increase purchase rates, promote multiple purchases, and reward product users. Three of every four consumers who receive a sample will try it. Games, Contests Introduction of new products. Specialty Advertising Gift of useful merchandise carrying the name, logo, or slogan of an organization. Self liquidating premium- a plastic bucket of 5 litre for Rs. 5 for purchase of 1 kg Surf.
Middlemen -Oriented Promotions

Buying allowance discount Buy back allowance-preventing the post deal sales decline Display & advertising allowance Dealer listed promotion- name & address on the advertisement & publicity material Push money-incentive for pushing the sale Sales contest- cash prize for highest sales Free gift- on quantity of purchase Credit facility
Sales force -Oriented Promotions

Bonus Contest between sales force Sales meeting/copnference
Types of Consumer & Sales Promotion Goals

Type of buyer Loyal customers People who buy your product most or all of the time Desired results Sales promotion examples Reinforce behavior, Loyalty marketing programs, increase consumption, such as frequent-buyer cards change purchase timing or frequent-shopper clubs Bonus packs that give loyal consumers an incentive to stock up or premiums offered in return for proofs-of-purchase Break loyalty, persuade Sampling to introduce your to switch to your brand products superior qualities compared to their brand Sweepstakes, contests, or premiums that create interest in the product Persuade to buy your Any promotion that lowers the brand more often price of the product, such as coupons, price-off packages, and bonus packs Trade deals that help make the product more readily available than competing products Appeal with low prices Coupons, price-off packages, or supply added value refunds, or trade deals that that makes price less reduce the price of brand to important match that of the brand that would have been purchased
Competitors customers People who buy a competitors product most or all of the time Brand switchers People who buy a variety of products in the category
Price buyers People who consistently buy the least expensive brand
Source: From Sales Promotion Essentials, 2E by Don. E. Schultz, William A. Robinson, and Lisa A. Petrison. Reprinted by permission of NTC Publishing Group, Lincolnwood, IL.
Tools for Consumer Sales Promotion

Coupons
Premiums
Six Categories of Consumer Sales Promotions
Frequent Buyer Programs

Contests and Sweepstakes Samples Point-of-Purchase Displays
Tools for Trade Sales Promotion

Trade Allowances
Push Money
Training
Free Merchandise
Six Categories of Trade Sales Promotions
Store Demonstrations Business Meetings, Conventions, Trade-Shows
Personal Selling
A form of person to person communication in which a salesperson works with prospective buyer and attempts to influence purchase in the direction of his or her companys products or services
Dr. Rosenbloom
Personal selling is oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to "close the sale A person-to-person promotional presentation to a potential buyer.
Customers are relatively few in number and geographically concentrated. The product is technically complex and requires special handling. The product carries a relatively high price.
Objectives of Personal Selling

To shoulder the entire responsibility of the promotion mix (when no other element of Promotion mix is used) To maintain contact with existing customers, take orders etc (also known as servicing existing accounts) To search and obtain new customers To secure customers cooperation in stocking and promoting the product line To inform and educate customers To assist customers in selection To provide technical assistance To assist with training the middlemens sales personnel To collect market information
Characteristics of Personal Selling

Pro Flexibility

Con
Can not reach mass audience Expensive per contact Numerous calls needed to generate sale Labor intensive
Adapt to situations Engage in dialog
Builds Relationships
Long term Assure buyers receive appropriate services Solves customers problems
Importance of Personal Selling

Allows the firm to immediately respond to the needs of the prospect Allows for immediate customer feedback Results in an actual sale Detailed information Targeted message control Cost control
Dr. Rosenbloom
Evolution of Personal Selling
Hard sell: Formerly thought customers had to be forced into making a purchase Relationship selling: Now selling requires the development of a trusting partnership in which the salesperson seeks to provide long-term customer satisfaction
Dr. Rosenbloom
Why choose the sales profession?

Employment in sales is growing Sales positions offer advantages:

Good compensation Flexible in day-to-day activities High-visibility career track Limited supervision Travel opportunities Increasing responsibilities
Dr. Rosenbloom
Selling Environments and Selling Types

Selling Environments Over-the-counter Field Selling Selling Types Order taker Order getter Professional salespeople National account managers Missionary salespeople Support salespeople Outbound Inbound
Dr. Rosenbloom
Telemarketing
Over-the-Counter Selling
Order taker
A salesperson who only processes the purchase that the customer has already selected Retail outlets that are heavily oriented toward self-service
Dr. Rosenbloom
Over-the-Counter Selling
Order Getter
A salesperson who actively seeks to provide information to prospects, persuade prospective customers, and close sales Personal service oriented stores May practice suggestion selling
Dr. Rosenbloom
Field Selling
Professional Salespeople
National account managers

Missionary Salespeople
Support Salespeople
Help prospective customers to define their needs and then suggest the best means of meeting those needs, even if that requires suggesting that the prospects use a competitive product
Dr. Rosenbloom
Field Selling

Missionary Salespeople
Support Salespeople
Highly skilled salespersons who call on key customers headquarters sites, develop strategic plans for the accounts, make formal presentations to top-level executives, and assist with all the product decisions at that level
Dr. Rosenbloom
Field Selling
Professional Salespeople National account managers Missionary Salespeople Support Salespeople
Missionary _Selling in which the salesperson's role is to inform an individual with the power to influence others to buy a product, rather than to make a direct sale to that person. These salespeople are used in industries where customers make purchases based on the advice or requirements of others.
Pharmaceuticals, where salespeople, known as product detailers, discuss products with doctors (influencers) who then write prescriptions for their patients (final customer) and Higher education, where salespeople call on college professors (influencers) who make requirements to students (final customer) for specific textbooks.Works only to create goodwill and disseminate information . Does not do any order taking.
Dr. Rosenbloom
Field Selling

Missionary Salespeople Support Salespeople

Support the sales force in a number of ways Technical support salespeople assist with technical aspects of sales presentations
Dr. Rosenbloom
Telemarketing
Telemarketing
Utilizing the telephone for prospecting, selling, and/or following up with customers Outbound: the salesperson uses the telephone to call customers Inbound: Firms which have customers calling the vendor company to place orders (toll-free phone numbers)
Delivery Salesperson Engaged in delivering the product (Person who delivers Milk, Eggs) Creative sales person of tangibles Sales person selling vacuum cleaners , encyclopedias Creative sales person of intangibles- Sales person selling Insurance, advertising services, Educational programs Political /Indirect/Back Door Selling big ticket items by catering to the other interests of the customers (which have no connection with the product) Salespersons engaged in multiple sales- Where the sales person is required to make presentation to various entities of an organization (Ad agency salespersons making presentations to selection committee, creative department, product department etc)
The Personal Selling Process

Prospecting
PreApproach
Approach
Follow-Up
Need Identification
Gaining Commitment
Handling Objections
Dr. Rosenbloom
Presentation

Prospecting
Prospecting involves finding qualified sales leads Qualified sales leads: potential customers that have a need for the salespersons product, and are able to buy Referrals: obtained by the salesperson asking current customers if they know of someone else who might have a need for the salespersons product Cold-calling: means contacting prospective customers without a prior arrangement
Dr. Rosenbloom

Pre-approach
The collection of information about the potential customer and the customers company prior to the initial visit Researching the prospect and the company will assist the salesperson in planning the initial presentation to the prospective customer
Dr. Rosenbloom
Approach
The development of rapport with the customer The chance to make a good first impression
Dr. Rosenbloom

Need Identification
Requires asking probing questions of the prospective customer to determine needs The salesperson should ask open-ended questions Make sure that the customers needs and potential concerns are addressed
Dr. Rosenbloom

Presentation
The focus of the sales presentation is the salespersons explanation of how the features of the product provide benefits Presentation may be flexible or memorized The salesperson should be prepared to provide documentation for any statements of fact that are made. Using Persuasive communication Hold Attention Stimulate Interest Desire Dr. Rosenbloom

Handling Objections The salesperson may have failed to provide adequate information, or have not demonstrated how the product meets the needs of the prospect Objection as a sign of interest on the part of the prospect Provide information that will ensure the Dr. Rosenbloom prospects confidence in making the purchase

Gaining Commitment
Commitment is gained when the prospect agrees to take the action sought by the salesperson The salesperson must ask for commitment
Dr. Rosenbloom

Follow- Up
The salesperson complete any agreed upon actions The salesperson should stay in touch after the sale by writing thank-you notes and mailing newspaper articles of interest to the prospect and calling on the customer to ensure the customers satisfaction Dr. Rosenbloom
Advertising Versus Personal Selling

Personal Selling is more important if...
The product has a high value. It is a custom-made product. There are few customers. The product is technically complex. Customers are geographically concentrated.
Advertising/Sales Promotion is more important if...

The product has a low value. It is a standardized product. There are many customers. The product is simple to understand. Customers are geographically dispersed.
Definition of PR from the Institute of Public Relations (IPR), which defines Public Relations as, the planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics. Public relations activities include, press releases. company literature, videos, websites and annual reports.
Helps a firm establish awareness of goods and services and builds a positive image of them.
Why Public Relation Growth in corporates : Businesses are growing bigger today. the need to tackle several problems, manage reputation and effective communication, managing target audiences at all levels including employees. Internal communication: Regular communication with employees is important today. Keeping employees informed, abreast of what is happening in an organisation is important in order to keep them motivated, give them a sense of belonging and consequently ensuring greater productivity. Globalisation: Globalisation is a process of integration and unification of the world into one giant market. It involves integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.
Benefits & Scope of Public Relations:
No matter how good you are, if you dont communicate with your target audiences, you will lose out to competitors who are using public relations more aggressively and effectively to ensure communication. If you dont manage the information by which people form their opinions, their views of your company will be based solely on what they hear from other sources. PR can help in building a positive image and thus helps to minimise damage when something goes wrong.
Publicity
Is the deliberate attempt to manage the public's perception of a subject It usually comes in the form of news story , editorial , or announcement about an organization and/or its products and services. Techniques used to gain publicity include news releases , press conferences , feature articles , photographs
Event sponsorship
Arrange a speech or talk Take a stand on a controversial subject Announce an appointment Stage a debate Organize a tour of your business or projects
Good publicity can promote a firms positive image.

MM Negative publicity can Unit 3 cause problems. 195
Promotional Strategies
Push Strategy Promotion
Distribution
Customer
Retail Store
Promotion Pull Strategy
16-196
Pushing strategy - relies on personal selling to market an item to wholesalers and retailers in a companys distribution channels.
Companies promote the product to members of the marketing channel, not to end users.
Pulling strategy - promote a product by generating consumer demand for it, primarily through advertising and sales promotion appeals.
Potential buyers will request that their suppliersretailers or local distributorscarry the product, thereby pulling it through the distribution channel.
Most marketing situations require combinations of push and pull strategies
What is Rural Marketing
Rural marketing is a function which manages all those activates involved in assessing, stimulating and converting the purchasing power into an effective demand for specific products and services, and moving them to the people in rural area to create satisfaction and a standard of living to them and thereby achieves the goals of the organization.
Rural Vs Urban Marketing

S. No. 1 Philosophy Aspect Urban Marketing and societal concepts, Green marketing and relationship marketing High Among units in organized sector Concentrated High High Planned, Even High level Faster Rural Marketing and societal concepts, development marketing, and relationship marketing. Low Mostly from unorganized units Widely spread Low Low Seasonal variations Low level Slow
Market (a) Demand (b) Competition (c) Consumers o Location o Literacy o Income o Expenditure o Needs o Innovation adoption
Products o Awareness o Concepts o Positioning o Usage method o Quality preference o Features
High Known Easy Easily grasped Good Important
Low Less known Difficult Difficult to grasp Moderate Less Important

Contd.
Rural Vs Urban Marketing

S. No. 4 Aspect Price o Sensitive Urban Yes Rural Very much
Distribution o Channels
Wholesalers, Stockists Retailers, Supermarkets, Specialty stores and authorized show rooms
Good High Print audio-visual media, out doors, exhibitions etc. Few languages Door-to-door frequently Contests, Gifts, Price Discounts Good opportunities
Village shops Shandies Haats and Jatras

Average Limited TV, Radio, Print Media to some extent. More languages Occasionally Gifts, Price discounts Less
o Transport facilities o Product availability
Promotion o Advertising
o Personal Selling o Sales promotion o Publicity
Why Rural Markets are Attractive?

Large population Rising prosperity Growth in consumption Life-style changes Market growth rates higher than Urban Remoteness is no longer a problem.
Attractiveness of rural market

Rural markets have become the new targets to corporate enterprises for two reasons : 1. Urban market has become congested with too many competitors. 2. The market have reached a near saturation point.
Indian Scenario

The Indian rural market today accounts for only about Rs 8 billion of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there seems to be a long way ahead. Time and again marketing practitioners have talked about the potential of the rural market. But when one zeroes in on the companies that focus on the rural market, a mere handful names come to mind. Hindustan Lever Limited (HuL) is top of the mind with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'. Clearly the main challenge that one faces while dealing with rural marketing is the basic understanding of the rural consumer who is very different from his urban counterpart. Also distribution remains to be the single largest problem marketers face today when it comes to going rural. "Reaching your product to remote locations spread over 600,000 villages and poor infrastructure - roads, telecommunication etc and lower levels of literacy are a few hinges that come in the way of marketers to reach the rural market
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In 1998 HuLs personal products unit initiated Project Bharat, the first and largest rural home-tohome operation to have ever been prepared by any company. The project covered 13 million rural households by the end of 1999. During the course of operation, HuL had vans visiting villages across the country distributing sample packs comprising a low-unit-price pack each of shampoo, talcum powder, toothpaste and skin cream priced at Rs. 15. This was to create awareness of the companys product categories and of the affordability of the products.
Khaitan fans' ad on a horse cart
The greatest challenge for advertisers and marketers continues to be in finding the right mix that will have a pan-Indian rural appeal. Coca Cola, with their Aamir Khan ad campaign succeeded in providing just that.
"Yaara da Tashan... ads with Aamir Khan created universal appeal for Coca Cola
"Yaara da Tashan..." ads with Aamir Khan created universal appeal for Coca Cola Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at Rs 5 and backed it with the Aamir Khan ads. The company, on its behalf, has also been investing steadily to build their infrastructure to meet the growing needs of the rural market, which reiterates the fact that this multinational has realised the potential of the rural market is going strength to strength to tap the same.
Amul is another case in point of aggressive rural marketing. Some of the other corporates that are slowly making headway in this area are Coca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance Corporation, Cavin Kare, Britannia and Hero Honda to name a few.
Interestingly, the rural market is growing at a far greater speed than its urban counterpart. "All the data provided by various agencies like NCAER, Francis Kanoi etc shows that rural markets are growing faster than urban markets in certain product categories at least. The share of FMCG products in rural markets is 53 per cent, durables boasts of 59 per cent market share. Therefore one can claim that rural markets are growing faster than urban markets
Satellite dish antennas reach rural India
In 2000, ITC took an initiative to develop direct contact with farmers who lived in farflung villages in Madhya Pradesh. ITC's Echoupal was the result of this initiative.
So the fact remains that the rural market in India has great potential, which is just waiting to be tapped. Progress has been made in this area by some, but there seems to be a long way for marketers to go in order to derive and reap maximum benefits. Moreover, rural India is not so poor as it used to be a decade or so back. Things are sure a changing
Typical shop in rural India stocked with sachets, etc
Marketing Mix
Product

simpler, easy to use, serviced or maintained Dispensable in single unit Brand identity is created through logo Price sensitive Hire purchase term Smaller unit sizes Well known film stars representing the common man Television, radio, wall painting, bullock cart, bus panels, hoarding Rural haat,
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Pricing

Promotion

Distribution
Customer Relationship Management
What is CRM?
CRM is a business strategy that aims to understand, anticipate and manage the needs of an organisations current and potential customers . It is a comprehensive approach which provides integration of every area of business that touches the customernamely marketing, sales, customer services and field support through the integration of people, process and technology CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers
Determinants of CRM
Trust The willingness to rely on the ability, integrity, and motivation of one company
Value The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, functional and psychological terms.
Determinants of CRM
In addition to trust and value, salespeople must: Understand customer needs and problems; Meet their commitments;
Provide superior after sales support;

Make sure that the customer is always told the truth (must be honest); and
Have a passionate interest in establishing and retaining a longterm relationship (e.g., have long-term perspective).
The purpose of CRM
The focus [of CRM] is on creating value for the customer and the company over the longer term When customers value the customer service that they receive from suppliers, they are less likely to look to alternative suppliers for their needs . CRM enables organisations to gain competitive advantage over competitors that supply similar products or services
Why did CRM develop?
The 1980s onwards saw rapid shifts in business that changed customer power Supply exceeded demands for most products Sellers had little pricing power The only protection available to suppliers of goods and services was in their relationships with customers
What does CRM involve?
Organisations must become customer focused Organisations must be prepared to adapt so that it take customer needs into account and delivers them Market research must be undertaken to assess customer needs and satisfaction
Strategically significant customers
Customer relationship management focuses on strategically significant markets. Not all customers are equally important Therefore, relationships should be built with customers that are likely to provide value for services Building relationships with customers that will provide little value could result in a loss of time, staff and financial resources
Markers of strategically significant customers
1.
2.
3.
Customers with high life-time values (i.e. customers that will repeatedly use the service in the long-term Customers who serve as benchmarks for other customers e.g. In a hospital who teach on academic courses Customers who inspire change in the supplier
Information Technology and CRM

Technology plays a pivotal role in CRM Technological approaches involving the use of databases, data mining and one-to-one marketing can assist organisations to increase customer value and their own profitability This type of technology can be used to keep a record of customers names and contact details in addition to their history of buying products or using services This information can be used to target customers in a personalised way and offer them services to meet their specific needs This personalised communication provides value for the customer and increases customers loyalty to the provider
Information Technology and CRM:
Phone calls, emails, mobile phone text messages: Having access to customers contact details and their service or purchase preferences through databases etc can enable organisations to alert customers to new, similar or alternative services or products - Illustration: When tickets are purchased online via Lastminute.com, the website retains the customers details and their purchase history. The website regularly send emails to previous customers to inform them of similar upcoming events or special discounts. This helps to ensure that customers will continue to purchase tickets from Lastminute.com in the future.
Information Technology and CRM: Examples
Cookies A cookie is a parcel of text sent by a server to a web browser and then sent back unchanged by the browser each time it accesses that server. HTTP cookies are used for authenticating, tracking, and maintaining specific information about users, such as site preferences and the contents of their electronic shopping carts (5). Illustration: The online store, Amazon, uses cookies to provide a personalised service for its customers. Amazon requires customers to register with the service when they purchase items. When registered customers log in to Amazon at a later time, they are greeted with a welcome message which uses their name (for e.g. Hello John). In addition, their previous purchases are highlighted and a list of similar items that the customer may wish to purchase are also highlighted.
Information Technology and CRM: Examples
Loyalty cards the primary role of a retailer loyalty card is to gather data about customers. This in turn leads to customer comprehension and cost insights (e.g. customer retention rates at different spending levels, response rates to offers, new customer conversion rates, and where money is being wasted on circulars), followed by appropriate marketing action and follow-up analysis (6) Illustration: The supermarket chain, Tescos, offers loyalty cards to its customers. When customers use the loyalty cards during pay transactions for goods, details of the purchases are stored in a database which enables Tescos to keep track of all the purchases that their customers make. At regular intervals, Tescos sends its customers money saving coupons by post for the products that the customers have bought in the past. The aim of this is to encourage customers to continually return to Tescos to do their shopping
CRM software- Front office solutions Many call centres use CRM software to store all of their customer's details. When a customer calls, the system can be used to retrieve and store information relevant to the customer. By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, a company aims to make cost savings, and also encourage new customers (7)
Face-to-face CRM

CRM can also be carried out in face-to-face interactions without the use of technology Staff members often remember the names and favourite services/products of regular customers and use this information to create a personalised service for them. However, face-to-face CRM could prove less useful when organisations have a large number of customers as it would be more difficult to remember details about each of them.
Why is CRM important?/Benefits of CRM
Both retaining customers and building relationships with other value-adding allies is critical to corporate performance Long-term relationships with customers are one of the most important assets of an organisation Increased sales revenue Increased margins Improved customer satisfaction rating Decreased general sales and marketing administrative cost
Benefits of CRM
Benefits of CRM include

reduced costs, because the right things are being done increased customer satisfaction, because they are getting exactly what they want (ie. meeting and exceeding expectations) maximisation of opportunities (eg. increased services, referrals, etc.) increased access to a source of market and competitor information highlighting poor operational processes long term profitability and sustainability
Stages in the development of a Customer Relationship

The Pre-relationship Stage The event that triggers a buyer to seek a new business partner. The Early Stage Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists. The Development Stage Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange. The Long-term Stage/ The final stage Characterised by the companies mutual importance to each other. The Most Important Goal is CREATE & KEEP THE CUSTOMER Not To sell Help Them To buy People love to buy Hate to be sold
The role of salespeople as relationship builders and promoters Salespeople by: identifying potential customers and their needs; approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust; coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process; contributing to constructive resolution of existing conflicts; and leading the customer relationship development team
are the individuals in any organisation who act both as relationship builders and as relationship promoters.
Managing Customer Relationships The salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Initiating the relationship Engage in strategic prospecting and qualifying; Gather and study pre-call information; Identify buying influences; Plan the initial sales call; Demonstrate an understanding of the customers needs; Identify opportunities to build a relationship
Managing Customer Relationships The salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Developing the relationship Select an appropriate offering; Customise the relationship; Link the solutions with the customers needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure commitment.
Managing Customer Relationships

The global salesperson must be involved in the following activities in order to initiate, develop and enhance the process that is aimed at building trust and commitment with the customer. Enhancing the relationship Assess customer satisfaction; Take action to ensure satisfaction; Maintain open, two-way communication; and Work to add value and enhance mutual opportunities.
International Marketing
International marketing environment involves Decide whether to enter Decide which markets to enter Decide how to enter Plan marketing programs
Global Marketing in the 21st Century
The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. International trade is booming and accounts for 25% of U.S. GDP. Global competition is intensifying. Higher risks with globalization.
Major International Marketing Decisions
International Marketing
Physical Environment Climate, topography, resources Economic Environment Population, industry structure, stage of development Political-Legal Environment Advertising restrictions, Tariffs/non-tariff barriers, Patents/Trademark protection
Cultural Environment
Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program. Business norms vary from country to country. Companies that understand cultural nuances can use them to advantage when positioning products internationally. Cultural Environment Language Attitudes How business is conducted Friendship
Cultural Differences
When Nike learned that this stylized Air logo resembled Allah in Arabic script, it apologized and pulled the shoes from distribution.
Deciding Whether to Go Global
Reasons to consider going global:

Foreign attacks on domestic markets Foreign markets with higher profit opportunities Stagnant or shrinking domestic markets Need larger customer base to achieve economies of scale Reduce dependency on single market Follow customers who are expanding Stability of government Stability of currency Tariffs/non-tariff barriers Crime/corruption Protection of property rights/technology
Deciding Which Markets to Enter
Before going abroad, the company should try to define its international marketing objectives and policies.
What Volume of Foreign Sales is Desired?
How Many Countries to Market In?

What Types of Countries to Enter? Choose Possible Countries and Rank Based on Market Size, Market Growth, Cost of Doing Business, Competitive Advantage, and Risk Level
Colgate Goes to China
Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decade.
Market Entry Strategies
Exporting:
Indirect: working through independent international marketing intermediaries. Direct: company handles its own exports.
Joint Venturing:
Joining with foreign companies to produce or market products or services. Approaches:
Licensing-Firm in foreign market produces,
distributes
Contract manufacturing Management contracting Joint ownership
Joint Ownership
KFC entered Japan through a joint ownership venture with Japanese Mitsubishi.
Direct Investment:
The development of foreign-based assembly or manufacturing facilities.
Deciding on the Global Marketing Program
Standardized Marketing Mix:
Selling largely the same products and using the same marketing approaches worldwide. Producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.
Adapted Marketing Mix:
Five Global Product and Promotion Strategies
Global Product Strategies
Straight Product Extension:
Marketing a product in a foreign market without any change. Adapting a product to meet local conditions or wants in foreign markets. Creating new products or services for foreign markets.
Product Adaptation:
Product Invention:
Global Promotion Strategies
Can use a standardized theme globally, but may have to make adjustments for language or cultural differences. Communication Adaptation:
Fully adapting an advertising message for local markets.
Changes may have to be made due to media availability.
Global Pricing Strategies
Companies face many problems in setting their international prices. Possible approaches include:

Charge a uniform price all around the world. Charge what consumers in each country will pay. Use a standard markup of costs everywhere.
International prices tend to be higher than domestic prices because of price escalation. Companies may become guilty of dumping a foreign subsidiary charges less than its costs or less than it charges in its home market.
A Brief Account of Marketing of Services

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Service
Is an act or performance that one party can offer to another that is essentially intangible & does not result in the ownership. Must include
Lack of physical output Receivers benefit Intangible nature Ideas marketing
Service? The Old View
Service is a technical after-sale function that is provided by the service department.
Old view of service = Customer Service Center
Old: Service = wrench time
The New View
Service includes every interaction between any customer and anyone representing the company, including:
Dealers Web site and any e-channel Interaction Billing and Accounting Personnel
Salespeople
Customer
Receptionists
Service Employees
Management and Executives
Examples of Service Industries

Health Care
hospital, medical practice, dentistry, eye care accounting, legal banking, investment advising, insurance restaurant, hotel/motel, bed & breakfast ski resort, rafting
Professional Services
Financial Services
Hospitality

Travel
airline, travel agency, theme park

hair styling, pest control, lawn maintenance, counseling services, health club, interior design
Others
Services Marketing Challenges

Difficulty to change
Requires different marketing strategies, such as discounted prices, seasonal prices..
Capacity is fixed Difficult to change the capacity

Elasticity
Demand is changeable Income level, season, other conditions
Services Marketing Challenges
Defining and improving quality Ensuring the delivery of consistent quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment
Characteristics of Service Marketing
Intangibility
Cant be seen, tasted, felt, or smelled before purchase. Cant be separated from service providers.
Inseparability
Variability
Quality depends on who provides them and when, where and how.
Perishability
Cant be stored for later sale or use.
Intangibility
Services cannot be inventoried, patented,be readily displayed or communicated Services can not be seen, tasted, felt, heard, or smelled. High risk associated with services. Companies should create memorable guest experiences
Someone who purchase a service may go away empty-handed, but do not go away empty-headed - Robert Lewis
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Tangible and Intangible Products/Services
Pure tangible good; no service Milk
Hybrid: Tangible equal part goods with goods and service some services Computer Meal at & Warranty Restaurant
Pure service; no tangible good
Legal Advice
Inseparability

Customer- employees are part of the product Customer and the employee interact with the service delivery system. Both service provider & customer must be present for the transaction to occur
Variability

Services are highly variable Services are produced and consumed simultaneously Service consistency depends on the service providers skill. Fluctuating demand makes it difficult to deliver consistent quality. Lack of consistency a major source of customer disappointment. Guest expectations are different.
Perishability
Lack of ability to inventory services can not be stored

Capacity and demand must be successfully managed Services cannot be returned or resold
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Traditional Marketing Mix

All
elements within the control of the firm that communicate the firms capabilities and image to customers or that influence customer satisfaction with the firms product & services
Product Price Place Promotion
Expanded Mix for Services The 7 Ps

Product Price Place Promotion People
Human factors play a part in service delivery and thus influence the buyers perceptions: namely, the firms personnel The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. The actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems.
Physical Evidence
Process
Expanded Marketing Mix for Services
Electronic Marketing: B2B, B2C, C2C
B2B MARKETING
IS MARKETING OF GOODS AND SERVICES TO:
Companies Government Bodies Institutions (i.e. hospitals) Non-Profit Organizations (i.e.Red Cross) FOR
USE IN PRODUCING THEIR PRODUCTS AND/OR TO FACILITATE THEIR OPERATIONS
What Distinguishes B2B from B2C?

B2B: goods or services are sold for any use other than personal consumption For additional production (e.g., components are combined into subassemblies and become part of the finished product) For use in operations, but not part of the finished product
DERIVED DEMAND
The demand for a companys products comes from (derived) the demand for their customers products. Most demand comes from consumers.
B2C:The selling of goods and services to final consumers. Note: It is not the nature of the product; it is the reason for the
transaction.
Industrial goods- bought for production of other products
Materials and parts
Raw Materials (a basic goods which actually becomes part of the final product)

Farm products- grain, fruits Natural products-minerals ,product of sea & forest Component materials- are fabricated further (Cement, iron, wires to be further processed) Component parts- enter the finished product with no further change (tires, motors)
Manufactured materials and parts
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Capital items ( long lasting goods that are used in developing or managing the finished goods)
Installations (Buildings ( factory, offices) and heavy equipments ( generators, elevators) Equipments (Portable factory equipments and tools) hand tools, lift trucks, personal computer etc
Supplies (short lived, low priced everyday necessity that aid the firms operation but don't become the part of finished goods)
Maintenance and repair (fuses) Operating supplies (Lubricants, coal, writing paper, pencils paper)
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Business services (may not be the direct part of production but without these ,the production cannot carry on )
Business advisory services ( legal, management consultancy)
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B2B versus B2C Marketing

Characteristic
Sales volume Purchase volume Number of buyers Size of individual buyers Location of buyers
B2B Market
Greater Greater Fewer Larger Concentrated
B2C Market
Smaller Smaller Many Smaller Diffuse More Impersonal Less direct Single/Multiple Simpler Less Advertising
Buyer-seller relationship Closer Nature of channel Buying influences Type of negotiations Use of leasing Key promotion method More direct Multiple More complex Greater Personal Selling
C2C (Consumer to Consumer)

The selling of goods from customer to final consumers. Occurs on the Web and includes a wide range of products and services. Ebay.com, auctions,
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C2B (Consumer to Business)
Consumers can search out sellers, view offers, initiate purchases, and give feedback.
Example: on priceline.com one can bid for airline tickets, hotel rooms, etc. and decide whether to accept company offers.
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What is Direct Marketing ?
Direct Marketing
Marketing that reaches customers by communications directly addressed to the customer The process of sending promotional messages directly to individual consumers, rather than via a mass medium. Includes methods such as direct mail and telemarketing The sale of products by a producer direct to consumers with promotional efforts using direct mail, advertising, or telephone sales
What can be sold via direct marketing ?
Key features
The main purpose is to make: 1. a sale 2. obtain a sales lead in highly targeted but low cost way Direct contact with customer Use of database Relationship with customer
Need for direct marketing
Expert sales force can explain and demonstrate products well Intermediaries may be unwilling or unable to sell the product Intermediaries might be too costly Potential buyer can be reached easily
Benefits of direct marketing
Convenient and hassle free (online and telemarketing) Feeling of getting the shop at your place Helps to gain more product knowledge to the customer Cost and time saving ( for customer) Helps to improve relationship with customer Better chances to convert lead into sales
Facts about direct marketing
In 2001 220 million sales 105 million in US Expected to reach 900 million is 2010
Growing heavily in India
Customer database
A customer database is an organized collection of comprehensive data about individual or customers that is current and actionable for such marketing purpose as lead generation and sale of a product or service or maintenance of customer relationship.
Database includes
Names Addresses
Contact details Returns
Age
Products purchased Dates purchased
Complaints
Credit history Amount spent
Database marketing
Database marketing is the process of building, maintaining and using customer database ad other databases (suppliers, retailers) for the purpose of contacting and transacting
Database marketing
Mostly used by hotels, banks, airlines Help for deepest targeting and segmentation Data is obtained by surveys, shops, malls, web servers, search engines and private agencies who maintain databses.
Reasons for the growth in direct marketing
Techniques of Direct Marketing
Tele Marketing
Telemarketing is a method of direct marketing in which a salesperson solicits to prospective customers to buy products or services, either over the phone or through a subsequent face to face or Web conferencing appointment scheduled during the call.
The two major categories of telemarketing are Business-to-business Business-to-consumer.
Subcategories
Lead Generation, the gathering of information Sales, using persuasion to sell a product or service Outbound, proactive marketing in which prospective and preexisting customers are contacted directly Inbound, reactive reception of incoming orders and requests for information. Demand is generally created by advertising,
publicity, or the efforts of outside salespeople.
Direct mail
The most common form of direct marketing is direct mail, sometimes called junk mail, used by advertisers who send paper mail to all postal customers in an area or to all customers on a list. The term direct mail is used in the direct marketing industry to refer to communication deliveries by the Post Office, which may also be referred to as "junk mail" or "admail" or "crap mail" and may involve bulk mail.
Junk mail includesAdvertising circulars, Catalogs. Free trial CDs. Pre-approved credit card applications. Unsolicited merchandising invitations. That may be of two typesIndividual Mail Catalogs
DRTV
Direct marketing on TV (commonly referred to as DRTV) has two basic forms: Long form (usually half-hour or hour-long segments that explain a product in detail and are commonly referred to as infomercials) Short form which refers to typical 0:30 second or 0:60 second commercials that ask viewers for an immediate response (typically to call a phone number on screen or go to a website).
Direct selling
Direct selling is the sale of products by face-to-face contact with the customer, either by having salespeople approach potential customers in person, or through indirect means such as Tupperware parties.
Door to Door Leaflet Marketing
Leaflet Distribution services are used extensively by the fast food industries, and many other business focusing on a local catchment This method is targeted purely by area, and costs a fraction of the amount of a mail shot due to not having to purchase stamps, envelopes or having to buy address lists and the names of home occupants.
Trade Shows /Exhibition

Product launch and demonstration. Lead generation. Relationship building. Brand building.
PR spin offs and corporate boost
Electronic Marketing
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E-marketing
Electronic commerce, commonly known as
(Electronic marketing) , consists of

the buying and selling of products or services over electronic systems such as the Internet and other computer networks.
How it works?
E-mail Marketing
E-mail marketing is a form of direct marketing which uses electronic mail as a means of communicating commercial or fundraising messages to an audience
E-mails
Email Marketing is a form of direct marketing which uses Email as a means of communicating messages to your clients.
Affiliated Marketing
Affiliate Marketing is an Internet-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's marketing efforts. It is an application of crowd sourcing.
Blog Marketing
Blog marketing is the term used to describe internet marketing via web blogs. These blogs differ from corporate websites because they feature daily or weekly posts, often around a single topic
A blog (a contraction of the term "web log") is a type of website, usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video. Ex-
Text email and Html email
Websites
Advantages of Internet Marketing
Internet marketing is relatively inexpensive when compared to the ratio of cost against the reach of the target audience. Wide range of audience.(Even global) Measuring statistically is easy and inexpensive. Can be customized.
India And Internet Marketing
Challenges ..
Education/Awareness Legal/regulatory problems

1. 2.
E-documentation not yet legally admissible. Absence of taxation law
1. 2. 3.
Infrastructural Problems
Low density of telephone, Pcs and Internet Bandwidth Limitation Networking Limitation

1. 2.
Infrastructure Commercial Problems Other problemsConfidence in system is low Problem of Hacking
Types Of Internet Marketing
Search Engine Optimization ( SEO) Search Engine Marketing(SEM) Digital Asset Optimization Viral Marketing Email Marketing Affiliated Marketing Blog Marketing
Search Engine Optimization ( SEO)
Search engine optimization (SEO) is the process of improving the volume or quality of traffic to a web site from search engines via "natural" or un-paid ("organic" or "algorithmic") search results.
Search Engine Marketing(SEM)
Search engine marketing, or SEM, is a form of Internet marketing that seeks to promote websites by increasing their visibility in search engine result pages (SERPs) through the use of paid placement, contextual advertising, and paid inclusion.
Digital Asset Optimization
Digital Asset Optimization is the new trend in the search engine optimization. Promoting your digital assets like videos, Images , Documents ,Presentations through digital media channel.
Viral Marketing
Marketing phenomenon that facilitates and encourages people to pass along a marketing message.
These are few types of Viral Marketing
Pass-along: A message which encourages the user to send the message to others. The crudest form of this is chain letters where a message at the bottom of the e-mail prompts the reader to forward the message. Incentivized viral: A reward is offered for either passing a message along or providing someone else's address. This can dramatically increase referrals. However, this is most effective when the offer requires another person to take action. Undercover: A viral message presented as a cool or unusual page, activity, or piece of news, without obvious incitements to link or pass along. In Undercover Marketing, it is not immediately apparent that anything is being marketed.
User-managed database: Users create and manage their own lists of contacts using a database provided by an online service provider. By inviting other members to participate in their community, users create a viral, self-propagating chain of contacts that naturally grows and encourages others to sign up as well.

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Pricing , Distribution & Promotion

Time Costs Emotional Costs Transaction Costs

Factors Affecting Price Decisions

Internal Factors Affecting Pricing Decisions: Marketing Objectives

Internal Factors Affecting Pricing Decisions: Marketing Objectives

Other specific objectives include:

Internal Factors Affecting Pricing Decisions-Marketing Mix Strategy:

Internal Factors Affecting Pricing Decisions-Cost Factors

Fixed Costs (Overhead)

Types of Cost Factors that Affect Pricing Decisions

Internal Factors Affecting Pricing Decisions

External Factors Affecting Pricing Decisions

External Factors Affecting Pricing Decisions-Market and Demand:

Demand Curves and Price Elasticity of Demand

Price Elasticity of Demand

Quantity Demanded per Period

External Factors Affecting Pricing Decisions-Competitors

External Factors Affecting Pricing Decisions-Environmental Elements

Profit-Oriented Pricing Objectives

Profit-Oriented Pricing Objectives

Target Return on Investment

Sales-Oriented Pricing Objectives

Sales-Oriented Pricing Objectives

Status Quo Pricing Objectives

Status Quo Pricing Objectives

Maintain existing prices

Meet competitions prices

Policies Methods for Setting Price

Policies Methods for Setting Price

Skimming Pricing high initial price

Penetration Pricing low initial price

PROFIT ORIENTED APPROACHES

Target Return-on-Sales PricingWant to receive 1% of sales as my profit actors & directors

Target Return-on-Investment Pricing

Markup pricing / cost-plus pricing

COMPETITION ORIENTED APPROACHES

Above-, At-, or Below-Market Pricing

Pricing Strategies Market

Best used when:

Pricing Strategies Penetration

Best used when:

Pricing Strategies- Product Mix

Product Line Pricing

Product Bundle Pricing

Pricing Strategies-Price Adjustment

Discounts and Allowances

Price Discrimination (Segmented Pricing)

Prestige Price- as Signal of Quality

Effects of price changes on quality inferences

Everyday low prices (EDLP)

Promotional Pricing Techniques

Promotional pricing creates excitement and a sense of urgency.

Steps in Determining Prices

are six basic steps that are used to determine prices:

Initiating Price Changes

Cost inflation Over-demand Match competitors increase

Ways to increase prices without increasing price

What is a Marketing Channel?

Names for Marketing Intermediaries

Providing Contact Efficiency

SPECIALIZATION AND DIVISION OF LABOR

Discrepancy of Quantity/Need to break the bulk

Distribution Channel Functions