Course Code : MS – 6
Course Title : Marketing for Managers
Assignment Code : MS-6/TMA/SEM – I /2012
Coverage : All Blocks
Q1.a) Explain the concept of Marketing and substantiate the significance in modernorganization in accomplishment of their objectives.
Solution:- The termmarketing has changed and evolved over a period of time, today marketing isbased around providing continual benefits to the customer, these benefits willbe provided and a transactional exchange will take place.
The CharteredInstitute of Marketing define marketing as ‘Themanagement process responsible for identifying , anticipating and satisfyingcustomer requirements profitably’
If we look at thisdefinition in more detail Marketing is a management responsibility and shouldnot be solely left to junior members of staff. Marketing requires co-ordination,planning, implementation of campaigns and a competent manager(s) with theappropriate skills to ensure success.
Marketingobjectives, goals and targets have to be monitored and met, competitorstrategies analysed, anticipated and exceeded. Through effective use of marketand marketing research an organisation should be able to identify the needs andwants of the customer and try to delivers benefits that will enhance or add tothe customers lifestyle, while at the same time ensuring that the satisfactionof these needs results in a healthy turnover for the organisation.
Philip Kotlerdefines marketing as ‘satisfyingneeds and wants through an exchange process’
Within this exchangetransaction customers will only exchange what they value (money) if they feelthat their needs are being fully satisfied, clearly the greater the benefitprovided the higher transactional value an organisation can charge.
P.Tailor ofwww.learnmarketing.net suggests that ‘Marketing is not about providingproducts or services it is essentially about providing changing benefits to thechanging needs and demands of the customer (P.Tailor 7/00)’
Concepts of marketing:
Once you’ve developedyour marketing strategy, there is a “Seven P Formula” you should useto continually evaluate and reevaluate your business activities. These sevenare: product, price, promotion, place, packaging, positioning and people. Asproducts, markets, customers and needs change rapidly, you must continuallyrevisit these seven Ps to make sure you’re on track and achieving the maximumresults possible for you in today’s marketplace.
To begin with, develop thehabit of looking at your product as though you were an outside marketingconsultant brought in to help your company decide whether or not it’s in theright business at this time. Ask critical questions such as, “Is yourcurrent product or service, or mix of products and services, appropriate andsuitable for the market and the customers of today?”
Whenever you’re havingdifficulty selling as much of your products or services as you’d like, you needto develop the habit of assessing your business honestly and asking, “Arethese the right products or services for our customers today?”
Is there any product orservice you’re offering today that, knowing what you now know, you would notbring out again today? Compared to your competitors, is your product or servicesuperior in some significant way to anything else available? If so, what is it?If not, could you develop an area of superiority? Should you be offering thisproduct or service at all in the current marketplace?
The second P in theformula is price. Develop the habit of continually examining and reexaminingthe prices of the products and services you sell to make sure they’re stillappropriate to the realities of the current market. Sometimes you need to loweryour prices. At other times, it may be appropriate to raise your prices. Manycompanies have found that the profitability of certain products or services doesn’tjustify the amount of effort and resources that go into producing them. Byraising their prices, they may lose a percentage of their customers, but theremaining percentage generates a profit on every sale. Could this beappropriate for you?
Sometimesyou need to change your terms and conditions of sale. Sometimes, by spreadingyour price over a series of months or years, you can sell far more than you aretoday, and the interest you can charge will more than make up for the delay incash receipts. Sometimes you can combine products and services together withspecial offers and special promotions. Sometimes you can include freeadditional items that cost you very little to produce but make your pricesappear far more attractive to your customers.
In business,as in nature, whenever you experience resistance or frustration in any part ofyour sales or marketing activities, be open to revisiting that area. Be open tothe possibility that your current pricing structure is not ideal for thecurrent market. Be open to the need to revise your prices, if necessary, toremain competitive, to survive and thrive in a fast-changing marketplace.
The thirdhabit in marketing and sales is to think in terms of promotion all the time.Promotion includes all the ways you tell your customers about your products orservices and how you then market and sell to them.
Smallchanges in the way you promote and sell your products can lead to dramaticchanges in your results. Even small changes in your advertising can leadimmediately to higher sales. Experienced copywriters can often increase theresponse rate from advertising by 500 percent by simply changing the headlineon an advertisement.
Large andsmall companies in every industry continually experiment with different ways ofadvertising, promoting, and selling their products and services. And here isthe rule: Whatever method of marketing and sales you’re using today will,sooner or later, stop working. Sometimes it will stop working for reasons youknow, and sometimes it will be for reasons you don’t know. In either case, yourmethods of marketing and sales will eventually stop working, and you’ll have todevelop new sales, marketing and advertising approaches, offerings, andstrategies.
The fourthP in the marketing mix is the place where your product or service is actuallysold. Develop the habit of reviewing and reflecting upon the exact locationwhere the customer meets the salesperson. Sometimes a change in place can leadto a rapid increase in sales.
You cansell your product in many different places. Some companies use direct selling,sending their salespeople out to personally meet and talk with the prospect.Some sell by telemarketing. Some sell through catalogs or mail order. Some sellat trade shows or in retail establishments. Some sell in joint ventures withother similar products or services. Some companies use manufacturers’representatives or distributors. Many companies use a combination of one ormore of these methods.
In eachcase, the entrepreneur must make the right choice about the very best locationor place for the customer to receive essential buying information on theproduct or service needed to make a buying decision. What is yours? In what wayshould you change it? Where else could you offer your products or services?
The fifthelement in the marketing mix is the packaging. Develop the habit of standingback and looking at every visual element in the packaging of your product orservice through the eyes of a critical prospect. Remember, people from theirfirst impression about you within the first 30 seconds of seeing you or someelement of your company. Small improvements in the packaging or externalappearance of your product or service can often lead to completely differentreactions from your customers.
Withregard to the packaging of your company, your product or service, you shouldthink in terms of everything that the customer sees from the first moment ofcontact with your company all the way through the purchasing process.
Packagingrefers to the way your product or service appears from the outside. Packagingalso refers to your people and how they dress and groom. It refers to youroffices, your waiting rooms, your brochures, your correspondence and everysingle visual element about your company. Everything counts. Everything helpsor hurts. Everything affects your customer’s confidence about dealing with you.
When IBMstarted under the guidance of Thomas J. Watson, Sr., he very early concludedthat fully 99 percent of the visual contact a customer would have with hiscompany, at least initially, would be represented by IBM salespeople. BecauseIBM was selling relatively sophisticated high-tech equipment, Watson knewcustomers would have to have a high level of confidence in the credibility ofthe salesperson. He therefore instituted a dress and grooming code that becamean inflexible set of rules and regulations within IBM.
As aresult, every salesperson was required to look like a professional in everyrespect. Every element of their clothing-including dark suits, dark ties, whiteshirts, conservative hairstyles, shined shoes, clean fingernails-and everyother feature gave off the message of professionalism and competence. One ofthe highest compliments a person could receive was, “You look like someonefrom IBM.”
The next Pis positioning. You should develop the habit of thinking continually about howyou are positioned in the hearts and minds of your customers. How do peoplethink and talk about you when you’re not present? How do people think and talkabout your company? What positioning do you have in your market, in terms ofthe specific words people use when they describe you and your offerings toothers?
In the famous book by Al Reis and JackTrout, Positioning, theauthors point out that how you are seen and thought about by your customers isthe critical determinant of your success in a competitive marketplace.Attribution theory says that most customers think of you in terms of a singleattribute, either positive or negative. Sometimes it’s “service.”Sometimes it’s “excellence.” Sometimes it’s “qualityengineering,” as with Mercedes Benz. Sometimes it’s “the ultimatedriving machine,” as with BMW. In every case, how deeply entrenched thatattribute is in the minds of your customers and prospective customersdetermines how readily they’ll buy your product or service and how much they’llpay.
Developthe habit of thinking about how you could improve your positioning. Begin bydetermining the position you’d like to have. If you could create the idealimpression in the hearts and minds of your customers, what would it be? Whatwould you have to do in every customer interaction to get your customers tothink and talk about in that specific way? What changes do you need to make inthe way interact with customers today in order to be seen as the very bestchoice for your customers of tomorrow?
The finalP of the marketing mix is people. Develop the habit of thinking in terms of thepeople inside and outside of your business who are responsible for everyelement of your sales and marketing strategy and activities.It’s amazing howmany entrepreneurs and businesspeople will work extremely hard to think throughevery element of the marketing strategy and the marketing mix, and then paylittle attention to the fact that every single decision and policy has to becarried out by a specific person, in a specific way. Your ability to select,recruit, hire and retain the proper people, with the skills and abilities to dothe job you need to have done, is more important than everything else puttogether.
In his best-selling book, Good to Great, Jim Collinsdiscovered the most important factor applied by the best companies was thatthey first of all “got the right people on the bus, and the wrong peopleoff the bus.” Once these companies had hired the right people, the secondstep was to “get the right people in the right seats on the bus.”Tobe successful in business, you must develop the habit of thinking in terms ofexactly who is going to carry out each task and responsibility. In many cases,it’s not possible to move forward until you can attract and put the rightperson into the right position. Many of the best business plans ever developedsit on shelves today because the [people who created them] could not find thekey people who could execute those plans.
Q1.b) What is STP strategy? Discuss the concept of positioning by taking anexample of your choice and the benefits that firms accrue in acompetitive environment.
Solution: A marketingstrategy is the planning and deployment methods used to obtain customers for anorganization. The marketing strategy involves segmenting and targeting whichmarkets will be most beneficial to an organization and then marketing to thosemarkets. The marketing strategy involves the planning of company positioning aswell.
STP is a short form of- Segmenting, Targeting,Positioning.
Segmenting a market helps acompany target its products / solutions better to its customers. It is astrategic approach midway between mass marketing and individual marketing.Segmentation is based on the concept that customers in a specific segment havesimilar needs, purchasing power, geographic location, etc.
A market can be segmentedaccording to customer needs. For example, car manufacturers can segment the carmarket into two broad segments: basic cars and luxury cars. They can haveseparate product lines for each segment. For example, for the luxury carsegment, Toyota has the Lexus product line, Honda has Acura, and Nissan hasInfiniti.
Targeting is a process ofprioritizing target segments based on the firm’s core competencies orcapabilities, and other researched factors including segmented market size,growth potential of the segmented market, competitive dynamics, etc.
Unless the target segment ischosen based on considerable market research and careful planning, a company’sproduct / solution will not be able to capture the intended market share in thetarget segment. So, targeting is key, because businesses battle for marketshare in these target segments.
Thisinvolves developing a marketing mix for each targeted segment. One way to thinkof a marketing mix is using the 4P’s framework. Another way to look at positioning is articulating the value ofthe company’s products / solutions vis-à-vis customer needs, competitiveproducts, etc. Product data sheets, hot sheets, beat sheets, cheat sheets,white papers help articulate this value tactically.
Discussion of positioning:-
he term “positioning” is widely used within the marketing andadvertising communities today, and its meaning has expanded beyond the narrow definitionsof Trout and Ries. Positioning is often used nowadays as a broad synonym formarketing strategy. However, the terms “positioning” and “marketing strategy”should not be used interchangeably. Rather, positioning should be thought of asan element of strategy, a component of strategy, not as the strategy itself.
The term “positioning” is, and should be, intimately connected tothe concept of “target market.” That is, a brand’s positioning defines thetarget audience. For example, an airline could position itself against otherairlines, which defines the target audience as airline travelers. Or, it couldposition itself against all modes of transportation between two destinations,which then defines the target audience as all travelers between those twomarkets. The second positioning reaches out to a much larger target audience.Another example: a brand of peanut butter could position itself against allcompeting brands of peanut butter, which defines the audience as peanut butterusers. Or, the brand could position itself against margarine and butter, whichdefines a very different target market. Positioning, then, is analogous toaiming an artillery field gun. How you position the cannon defines who and whatthe target is. So, the term “aiming” is not a bad definition of positioning,and the term “targeting” is not a bad definition of positioning.
The positioning possibilities that exist for any given brand orservice are almost infinite in number. Some commonly used positioningstrategies are:
- Positioning against a broader market; for example, positioning a bicycle brand as a substitute for the automobile, rather than as a substitute for other brands of bicycles.
- Positioning against a price segment of the market; for example, positioning a car brand against luxury imported cars.
- Positioning against a usage segment of the market; for instance, positioning a brand of cooking oil as the very best brand of oil for frying chicken.
- Positioning against a geographic segment of a market; for example, positioning Ford trucks as made for driving conditions in Texas.
- Positioning against a psychographic segment of the market; as an example, positioning the Volvo as the car for drivers who are primarily concerned about safety.
- Positioning against a channel of distribution, a season of the year, a particular type of weather, a human fear, etc.
Again, positioning possibilities are almost limitless for anygiven brand and can be defined in many different ways. The correct positioningof a brand is basic and fundamental to its success; an incorrect or suboptimalpositioning can doom a brand to underperformance or failure. So, how does onearrive at an optimal positioning for a given brand? The search for an optimalpositioning begins in the mind of the consumer, and it is here that we mustturn to marketing research for help.
Positioning is defined aspositioning “brands clearly in target customers’ minds” (Kotler 215).Brand can be positioned at any of three levels: product attributes, desirable benefit,and beliefs and values. There is a Domino’s Pizza commercial (1985)successfully positioning the brand at the desirable benefit level.
First, the ads basically emphasizes only 2outstanding advantages of Domino’s Pizza. First, the ads tells us that Dominopromises that every pizza delivered will be fresh because they do not startmaking pizza until customers call to order (“our hands do not move untilyou tell them to”). It is a great product attribute since not every othercompetitors have so many local stores to secure the high quality of every pizzaas Domino, of which there are 9000 stores around the world.
Second, the ads promises a desirable benefit:delivery in 30 minutes. It is not a product attribute but a service associatedto its products. By this better positioning, the brand, Domino’s Pizza, isassosciated with quick delivery beside high quality in customers’ minds.Calling delicious pizza without going out of home and enjoying pizza within 30minutes are really the product and service customers are seeking for. Dominopositions its brand very successful in customers’ minds.
Q2. a) What do you understand bythe term concept of PLC? Discuss taking any two examples of your choice in the recentpart.
Product Life Cycle (PLC)is a term used to describe individual stages in the life of a product. Productlife cycle is an important aspect of conducting business which affectsstrategic planning. Product life cycle can be divided into several stagescharacterized by the revenue generated by the product.
What is thefundamental idea behind productlife cycle?
Productlife cycle is very similar to a life. A living being is first born(introduction). Then it grows through its youth (growth) to become an adult(maturity). When it gets old, it declines both mentally and physically(decline), after which it eventually dies.
An analogyto this process can be observed in production as well. First, a product isbeing developed. After we know what it is that we are selling and what thecustomer wants, we introduce it to the market. As our product becomes known byconsumers, it grows until it establishes a solid position in the market. Atthis point, our product is mature. After a period of time, the product isovertaken by development and the introduction of superior competitors. Then itgoes into decline and is eventually withdrawn. All these phases together arecalled product life cycle.
Whatis the official definition of a product life cycle?
Businessstrategy and performance is affected to a great degree by life cycle stages ofa product or service. Business priorities, budgeting, funding, production,distribution, marketing — all these production aspects change depending on howlong a product or a service has been in the market.
The product life cycle method identifies the four(five) distinct stages affecting sales of a product, from the product’sinception until its retirement.
Theintroduction phase is when the public first sees or hears about a product. Theproduct appears in stores for the first time, and people start seeing print andtelevision ads. During this phase, a company may choose one of two pricingstrategies. They may set prices high to recoup initial expenses that went intoproducing the product. For example, a cellphone manufacturer with newtechnology may introduce cell phones 10 percent to 20 percent above the pricesof most premium cell phones. They may price their phones higher because of thehype and anticipation of the new technology. The company also knows enoughpeople will pay the extra 10 to 20 percent for it to earn substantial profits.Contrarily, the same cellphone company may introduce a cell phone with basicfeatures at reduced prices in hopes of gaining lots of new customers.
Thegrowth phase is when sales and profits for the new product start rising. Acompany will usually keep product prices about the same during the growth stageto maximize earnings. Product quality is also maintained. However, a companywill usually expand its product distribution during the growth stage. Forexample, a consumer-products company might start selling its organic cereal innew markets, based on positive marketing research from consumers. Eventually,the organic cereal will start appearing in stores across the country. Companymarketers usually increase advertising during the growth phase, too, accordingto NetMBA.com.
Successinevitably leads to increased competition. Other companies eventually willstart introducing similar products, especially if the initial product is highlysuccessful. Consequently, the demand for the product and its competitors willpeak at some point. Sales growth will start to decline. Some companies maylower prices to capture additional market share or new customers. At thispoint, a company may need to develop new product features or services todifferentiate its products from the competition’s. For example, the companythat first introduced the product may enhance its customer-service departmentto establish itself as the service leader in the industry. The company’sstellar customer service may be the distinguishing element that spursadditional sales and customers. The company would then feature its superiorcustomer service in most of its advertising.
Demandfor the product will eventually wane as newer technologies are introduced.Hence, companies can either maintain the product, sell it at heavily reducedprices or discontinue the product. A company that maintains the product maycontinue increasing sales by finding new uses for the product. For example, asoap manufacturer may discover through marketing research that restaurants andindustrial companies like the cleaning properties of its soap. Subsequently,the company would start selling its soap to both consumers and businesses. Thisstrategy could help extend the life of the product.
1. The car is manufactured at a production plant. Raw materials,recycled materials and components enter the factory at one end of the enormousbuilding. Completed cars are driven out of the opposite end and transported totheir owners.
2. The car is driven throughout its useful life time. During this time at maybe used for work, business and pleasure. It consumes petrol or diesel andpollutes the atmosphere. From time to time it needs servicing and repairing.
3. Eventually, after many years, it cannot be repaired any further and itbreaks down for the last time. This may be after ten years or more. Thedecision has to be taken regarding what to do next.
4. The car is taken to the scrap yard. Once upon a time this would have beenthe final resting place of most cars. It would have been stripped of usefulcomponents and left to rust.
5. Today the useful parts are still stripped from the car. This may include awide range of materials and components. These will include the alloy wheels,recyclable rubber, plastics and metals. These parts/materials will be sold onto companies that can reclaim the materials for further use. For example, therubber from the old types can be turned into granules and reused. Many of theplastics used in modern cars can be recycled in a similar way, turning oldplastic into granules that can be used to manufacture many modern products.
6. The reminder of the car is crushed into blocks. These are melted down inspecial furnaces, the waste is removed leaving the usable metal (normallysteel). The recycled metal can be used to manufacture new cars of otherproducts.
Example 2:-news paper.
When designing andmanufacturing a product it is important to consider its life cycle. Life cyclecovers the time from its manufacture to its recycling or disposal. A typicalproduct that has a relatively short life cycle is a newspaper / magazine.Everyone reads newspapers / magazines at some point in their lives and manyread a newspaper everyday. As the recycling of products becomes more popular itis important that we consider all the products we use, even the humblenewspaper, as a valuable resource even after its ‘useful life time’. The lifecycle of a simple newspaper is considered below.
|It is commonsense to recycle as much reusable material as possible. Products made from recycled materials are usually cheaper than those made from newly processed materials. Recycling products is good for the environment and means that we are using less of the worlds resources.
|Recycling materials such as steel, copper, brass and other metals reduces pollution caused by the processing of new metals and it saves energy. It also means that the worlds valuable and irreplaceable materials will last longer. For example, it is estimated that in forty years the worlds reserves of copper ore will have run out. Copper is vital in much of the electrical equipment we use. Recycling used and discarded copper will extent the length of time copper is available. It will allow technologists time to find alternative materials capable of replacing copper.
Q2.(b) List out andexplain the three additional marketing mix element essentials in marketing of services. Discus by taking any twoservices of your choice.
Ans:- Having discussed the characteristics of a service, let us now lookat the marketing mix of a service.
The servicemarketing mix comprises off the 7’p’s. These include:
• Physical evidence.
Lets now look at the remaining 3 p’s:
An essential ingredient to any service provision is the use ofappropriate staff and people. Recruiting the right staff and training themappropriately in the delivery of their service is essential if the organisationwants to obtain a form of competitive advantage. Consumers make judgments anddeliver perceptions of the service based on the employees they interact with.Staff should have the appropriate interpersonal skills, aptititude, and serviceknowledge to provide the service that consumers are paying for. Many Britishorganisations aim to apply for the Investors In People accreditation, whichtells consumers that staff are taken care off by the company and they aretrained to certain standards.
Refers to the systems used to assist the organisation indelivering the service. Imagine you walk into Burger King and you order aWhopper Meal and you get it delivered within 2 minutes. What was the processthat allowed you to obtain an efficient service delivery? Bank that send outCredit Cards automatically when their customers old one has expired again requirean efficient process to identify expiry dates and renewal. An efficient servicethat replaces old credit cards will foster consumer loyalty and confidence inthe company.
Where is the service being delivered?Physical Evidence is the element of the service mix which allows the consumeragain to make judgments on the organisation. If you walk into a restaurant yourexpectations are of a clean, friendly environment. On an aircraft if you travelfirst class you expect enough room to be able to lay down! Physical evidence is an essentialingredient of the service mix, consumers will make perceptions based on theirsight of the service provision which will have an impact on the organizationsperceptual plan of the service.
Services example -courier service
IF YOU TAKE ”COURIER SERVICE” AS ANEXAMPLE THE CUSTOMER SATISFACTION / REPEAT SALES HAPPENS,IF PEOPLE -people [ ability, competent, right attitude] [the people should have right interpersonal skills/ communication skills / attitude/ability to respond]
-product service [ features/benefits] [the right range of locations coverage/ services like
”urgent delivery” / ”local delivery ”/international delivery”]
-place [ flexibility][home pick up service / 24 hours service ]
-price [ flexi] [ pricing as per size / weight /distance ]
-promotions [ selected weighted mix] [ contactable on mobile / 24 hours internet / yellow pages.]
[documentation / billing is simple / short /easy ]
3. a) Discuss the role and importance ofphysical distribution in accomplishing the marketing goals of a firm.
Ans- Physical distribution is the set of activitiesconcerned with efficient movement of finished goods from the end of theproduction operation to the consumer. Physical distribution takes place withinnumerous wholesaling and retailing distribution channels, and includes suchimportant decision areas as customer service, inventory control, materialshandling, protective packaging, order procession, transportation, warehousesite selection, and warehousing. Physical distribution is part of a largerprocess called “distribution,” which includes wholesale and retailmarketing, as well the physical movement of products
A SYSTEM APPROACH
Physical distribution can be viewed as a system of componentslinked together for the efficient movement of products. Small business ownerscan ask the following questions in addressing these components:
- Customer servicehat level of customer service should be provided?
- Transportationow will the products be shipped?
- Warehousinghere will the goods be located? How many warehousesshould be utilized?
- Order processingow should the orders be handled?
- Inventory controlow much inventory should be maintained at eachlocation?
- Protective packaging and materials handlingow can efficientmethods be developed for handling goods in the factory, warehouse, andtransport terminals?
These components are interrelated: decisions made in one areaaffect the relative efficiency of others. For example, a small business thatprovides customized personal computers may transport finished products by airrather than by truck, as faster delivery times may allow lower inventory costs,which would more than offset the higher cost of air transport. Viewing physicaldistribution from a systems perspective can be the key to providing a definedlevel of customer service at the lowest possible cost.
Customer service is a precisely-defined standard of customersatisfaction which a small business owner intends to provide for its customers.For example, a customer service standard for the above-mentioned provider ofcustomized computers might be that 60 percent of all PCS reach the customerwithin 48 hours of ordering. It might further set a standard of delivering 90percent of all of its units within 72 hours, and all 100 percent of its unitswithin 96 hours. A physical distribution system is then set up to reach thisgoal at the lowest possible cost. In today’s fast-paced, technologicallyadvanced business environment, such systems often involve the use ofspecialized software that allows the owner to track inventory whilesimultaneously analyzing all the routes and transportation modes available todetermine the fastest, most cost-effective way to delivery goods on time.
The United States’ transportation system has long been agovernment-regulated industry, much like its telephone and electricalutilities. But in 1977 the deregulation of transportation began with theremoval of federal regulations for cargo air carriers not engaged in passengertransportation. The deregulation movement has since expanded in ways that havefundamentally altered the transportation landscape for small business owners,large conglomerates and, ultimately, the consumer.
Transportation costs are largely based on the rates charged bycarriers. There are two basic types of transportation rates: class andcommodity. The class rate, which is the higher of the two rates, is thestandard rate for every commodity moving between any two destinations. Thecommodity rate is sometimes called a special rate, since it is given bycarriers to shippers as a reward for either regular use or large-quantityshipments. Unfortunately, many small business owners do not have the volume ofshipping needed to take advantage of commodity rates. However, small businessesare increasingly utilizing a third type of rate that has emerged in recentyears. This rate is known as a negotiated or contract rate. Popularized in the1980s following transportation deregulation, contract rates allow a shipper andcarrier to negotiate a rate for a particular service, with the terms of the rate,service, and other variables finalized in a contract between the two parties.Transportation costs vary by mode of shipping, as discussed below.
TRUCKINGLEXIBLE AND GROWING The shipping method most favored bysmall business (and many large enterprises as well) is trucking. Carryingprimarily manufactured products (as opposed to bulk materials), trucks offerfast, frequent, and economic delivery to more destinations in the country thanany other mode. Trucks are particularly useful for short-distance shipments,and they offer relatively fast, consistent service for both large and smallshipments.
AIR FREIGHTAST BUT EXPENSIVE Because of the relatively high costof air transport, small businesses typically use air only for the movement ofvaluable or highly-perishable products. However, goods that qualify for thistreatment do represent a significant share of the small business market. Ownerscan sometimes offset the high cost of air transportation with reducedinventory-holding costs and the increased business that may accompany fastercustomer service.
WATER CARRIERSLOW BUT INEXPENSIVE
There are two basic types of water carriers: inland or bargelines, and oceangoing deep-water ships. Barge lines are efficient transportersof bulky, low-unit-value commodities such as grain, gravel, lumber, sand, andsteel. Barge lines typically do not serve small businesses. Oceangoing ships,on the other hand, operate in the Great Lakes, transporting goods among portcities, and in international commerce. Sea shipments are an important part offoreign trade, and thus are of vital importance to small businesses seeking aninternational market share.
RAILROADSONG DISTANCE SHIPPING Railroads continue to present anefficient mode for the movement of bulky commodities over long distances. Thesecommodities include coal, chemicals, grain, non-metallic minerals, and lumberand wood products.
Pipelines are utilized to efficiently transport natural gas andoil products from mining sites to refineries and other destinations. Inaddition, so-called slurry pipelines transport products such as coal, which isground to a powder, mixed with water, and moved as a suspension through thepipes.
INTERMODAL SERVICES Small business owners often take advantage ofmulti-mode deals offered by shipping companies. Under these arrangements,business owners can utilize a given transportation mode in the section of thetrip in which it is most cost efficient, and use other modes for other segmentsof the transport. Overall costs are often significantly lower under thisarrangement than with single-mode transport.
Of vital importance to small businesses are transportersspecializing in small shipments. These include bus freight services, UnitedParcel Service, Federal Express, DHL International, the United States PostalService, and others. Since small businesses can be virtually paralyzed bytransportation strikes or other disruptions in small shipment service, manyowners choose to diversify to include numerous shippers, thus maintaining anestablished relationship with an alternate shipper should disruptions occur.Additionally, small businesses often rely on freight forwarders who act astransportation intermediaries: these firms consolidate shipments from numerouscustomers to provide lower rates than are available without consolidation.Freight forwarding not only provides cost savings to small businesses, itprovides entrepreneurial opportunities for start-up businesses as well.
Small business owners who require warehousing facilities mustdecide whether to maintain their own strategically located depot(s), or resortto holding their goods in public warehouses. And those entrepreneurs who gowith non-public warehousing must further decide between storage or distributionfacilities. A storage warehouse holds products for moderate to long-termperiods in an attempt to balance supply and demand for producers andpurchasers. They are most often used by small businesses whose products’ supplyand demand are seasonal. On the other hand, a distribution warehouse assemblesand redistributes products quickly, keeping them on the move as much aspossible. Many distribution warehouses physically store goods for fewer than 24hours before shipping them on to customers.
In contrast to the older, multi-story structures that dot citiesaround the country, modern warehouses are long, one-story buildings located insuburban and semi-rural settings where land costs are substantially less. Thesefacilities are often located so that their users have easy access to majorhighways or other transportation options. Single-story construction eliminatesthe need for installing and maintaining freight elevators, and foraccommodating floor load limits. Furthermore, the internal flow of stock runs astraight course rather than up and down multiple levels. The efficient movementof goods involves entry on one side of the building, central storage, anddeparture out the other end.
Computer technology for automating warehouses is dropping inprice, and thus is increasingly available for small business applications.Sophisticated software translates orders into bar codes and determines the mostefficient inventory picking sequence. Order information is keyboarded onlyonce, while labels, bills, and shipping documents are generated automatically.Information reaches hand-held scanners, which warehouse staff members use tofill orders. The advantages of automation include low inventory error rates andhigh processing speeds.
Inventory control can be a major component of a small businessphysical distribution system. Costs include funds invested in inventory,depreciation, and possible obsolescence of the goods. Experts agree that smallbusiness inventory costs have dropped dramatically due to deregulation of thetransportation industry.
Inventory control analysts have developed a number of techniqueswhich can help small businesses control inventory effectively. The most basicis the Economic Order Quantity (EOQ) model. This involves a trade-off betweenthe two fundamental components of an inventory control cost: inventory-carryingcost (which increases with the addition of more inventory), andorder-processing cost (which decreases as the quantity ordered increases).These two cost items are traded off in determining the optimal warehouseinventory quantity to maintain for each product. The EOQ point is the one atwhich total cost is minimized. By maintaining product inventories as close tothe EOQ point as possible, small business owners can minimize their inventorycosts.
The small business owner is concerned with order processingnotherphysical distribution functionecause it directly affects the ability to meetthe customer service standards defined by the owner. If the order processingsystem is efficient, the owner can avoid the costs of premium transportation orhigh inventory levels. Order processing varies by industry, but often consistsof four major activities: a credit check; recording of the sale, such ascrediting a sales representative’s commission account; making the appropriateaccounting entries; and locating the item, shipping, and adjusting inventoryrecords.
Technological innovations, such as increased use of the UniversalProduct Code, are contributing to greater efficiency in order processing. Barcode systems give small businesses the ability to route customer ordersefficiently and reduce the need for manual handling. The coded informationincludes all the data necessary to generate customer invoices, thus eliminatingthe need for repeated keypunching.
Another technological innovation affecting order processing isElectronic Data Interchange. EDI allows computers at two different locations toexchange business documents in machine-readable format, employingstrictly-defined industry standards. Purchase orders, invoices, remittanceslips, and the like are exchanged electronically, thereby eliminatingduplication of data entry, dramatic reductions in data entry errors, andincreased speed in procurement cycles.
PROTECTIVE PACKAGING AND MATERIALS HANDLING
Another important component of a small business physicaldistribution system is material handling. This comprises all of the activitiesassociated with moving products within a production facility, warehouse, andtransportation terminals. One important innovation is known asunitizingombining as many packages as possible into one load, preferably on apallet. Unitizing is accomplished with steel bands or shrink wrapping to holdthe unit in place. Advantages of this material handling methodology includereduced labor, rapid movement, and minimized damage and pilferage.
A second innovation is containerization. the combining of severalunitized loads into one box. Containers that are presented in this manner areoften unloaded in fewer than 24 hours, whereas the task could otherwise takedays or weeks. This speed allows small export businesses adequate deliveryschedules in competitive international markets. In-transit damage is alsoreduced because individual packages are not handled en route to the purchaser.
b) What are the majorpricing strategies available to the marketer? Discuss each of them in terms of this merits and demerits. Whatpricing strategy would you support in the following cases
i) Lowpriced Tablet Computer
ii) CNGfitted small car
Solution:Major pricing strategies-There are three mainapproaches a business takes to setting price:
Cost-based pricing: price is determined by adding a profitelement on top of the cost of making the product.
Customer-based pricing: where prices are determined by what afirm believes customers will be prepared to pay
Competitor-based pricing: wherecompetitor prices are the main influence on the price set
Let’s take a brief look at each of these approaches;
Cost based pricing
This involves setting a price byadding a fixed amount orpercentage to the cost ofmaking or buying the product. In some ways this is quite an old-fashionedand somewhat discredited pricing strategy, although it is still widelyused.
After all, customers are not too botheredwhat it cost to make the product –they are interested in what value the product provides them.
Cost-plus (or “mark-up”)pricing is widely used in retailing, where theretailer wants to know with some certainty what the gross profit margin of eachsale will be. An advantage of this approach is that the business will know thatits costs are being covered. The main disadvantage is that cost-pluspricing may lead to products that are priced un-competitively.
Here is an example of cost-pluspricing, where a business wishes to ensure that it makes an additional £50 ofprofit on top of the unit cost of production.
How high should the mark-uppercentage be? That largely depends on the normal competitive practice in amarket and also whether the resulting price is acceptable to customers.
In the UK a standard retailmark-up is 2.4 times the cost the retailer pays to its supplier (normally awholesaler). So, if the wholesale cost of a product is £10 per unit, theretailer will look to sell it for 2.4x £10 = £24. This is equal to atotal mark-up of £14 (i.e. the selling price of £24 less the bought cost of£10).
The main advantage of cost-basedpricing is that selling prices are relatively easy to calculate. If themark-up percentage is applied consistently across product ranges, then thebusiness can also predict more reliably what the overall profit margin will be.
You often see the tagline “special introductory offer” – the classic sign of penetration pricing.The aim of penetrationpricing is usually to increase market share of a product, providing the opportunity to increaseprice once this objective has been achieved.
Penetration pricing is thepricing technique of settinga relatively low initial entry price, usually lower than the intendedestablished price, to attract new customers. The strategy aims to encourage customers toswitch to the new product because of the lower price.
Penetration pricing is mostcommonly associated with a marketingobjective of increasingmarket share or sales volume. In the short term, penetration pricing islikely to result in lower profits than would be the case if price were sethigher. However, there are some significant benefits to long-termprofitability of having a higher market share, so the pricing strategy canoften be justified.
Penetration pricing is often usedto support the launch of a new product, and works best when a product enters amarket with relatively little product differentiation and where demand is priceelastic – so a lower price than rival products is a competitive weapon.
Skimming involves settinga high price before other competitors come into the market. Thisis often used for the launch of a new product which faces little or nocompetition – usually due to some technological features. Such productsare often bought by “earlyadopters” who areprepared to pay a higher price to have the latest or best product in themarket.
Good examples of price skimminginclude innovative electronic products, such as the Apple iPad and SonyPlayStation 3.
There are some other problems and challenges with this approach:
Price skimming as a strategycannot last for long, as competitors soon launch rival products which putpressure on the price (e.g. the launch of rival products to the iPhone oriPod).
Distribution (place) can also bea challenge for an innovative new product. It may be necessary to giveretailers higher margins to convince them to stock the product, reducing theimproved margins that can be delivered by price skimming.
A final problem is that by price skimming, a firm may slow down the volumegrowth of demand for the product. This can give competitors more time todevelop alternative products ready for the time when market demand (measured involume) is strongest.
The use of loss leaders is a method of sales promotion. A loss leader isa product priced below cost-price in order to attract consumers into a shop oronline store. The purpose of making a product a loss leader is to encouragecustomers to make further purchases of profitable goods while they are in theshop. But does this strategy work?
Pricing is a key competitiveweapon and a very flexible part of the marketing mix.
If a business undercuts itscompetitors on price, new customers may be attracted and existing customers maybecome more loyal. So, using a loss leader can help drive customer loyalty.
One risk of using a loss leaderis that customers may take the opportunity to “bulk-buy”. If the pricediscount is sufficiently deep, then it makes sense for customers to buy as muchas they can (assuming the product is not perishable).
Using a loss leader isessentially a short-term pricing tactic for any one product. Customerswill soon get used to the tactic, so it makes sense to change the loss leaderor its merchandising every so often.
Predatory pricing (note:this is illegal)
With predatory pricing, prices are deliberately set very low by a dominantcompetitor in the market in order to restrictor prevent competition. The price set might even be free, orlead to losses by the predator. Whatever the approach, predatory pricingis illegal under competition law.
Sometimes prices are set at what seem to be unusual price points. Forexample, why are DVD’s priced at £12.99 or £14.99? The answer is the perceived price barriers that customers may have. Theywill buy something for £9.99, but think that £10 is a little too much. Soa price that is one pence lower can make the difference between closing thesale, or not!
The aim of psychological pricing is to make the customer believe theproduct is cheaper than it really is. Pricing in this way is intended toattract customers who are looking for “value”.
If there is strong competition ina market, customers are faced with a wide choice of who to buy from. They maybuy from the cheapest provider or perhaps from the one which offers the bestcustomer service. But customers will certainly be mindful of what is areasonable or normal price in the market.
Most firms in a competitivemarket do not have sufficient power to be able to set prices above theircompetitors. They tend to use “going-rate”pricing – i.e. setting a price that is inline with the prices charged by direct competitors. In effectsuch businesses are “price-takers” – they must accept the goingmarket price as determined by the forces of demand and supply.
An advantage of using competitivepricing is that selling prices should be line with rivals, so price should notbe a competitive disadvantage.
The main problem is that the business needs some other way toattract customers. It has to use non-price methods to compete – e.g.providing distinct customer service or better availability.
Advantage anddisadvantage :-
Industry Standard and Life-Cycle Pricing
Pricingaccording to a mix of the cost of producing the product and industry standardis easy, but lacks competitive strategy. The price should be used inconjunction with the other elements of the marketing mix. If a product issupposed to be high-end, it should be priced accordingly. Sometimes, managersmake the mistake of leaving the price the same. The price of the product shouldvary throughout the product’s life cycle; the price strategist should setdifferent prices for product introduction, growth, maturity and decline.
Somemanagers assume that consumers who wish to purchase a product would paywhatever the product is priced. Under this line of thought, many managers pricethe product at what they think it should cost, not what the consumer thinks itshould cost. This may lead to a loss in sales because consumers often interpretprices along with past purchasing experiences and information from research.
Consumer-Based Pricing Strategies
Consumerstend to consider prices in terms of what they think the price should be, comparingtheir perceived price with the actual price. Discrepancy in either direction(too high or too low) may cause the consumer to purchase the product fromanother company. A consumer-based pricing strategy can be advantageous becauseit goes inside the mind of the intended consumer to predict what the consumerwould be willing to pay for a product. Market research and attention to otherelements of the marketing mix help determine the consumer’s ideal price.
Pricing According to Demand
Pricestrategy may also be tied to the economic “law” of supply and demand. The lawof supply and demand states that prices should rise as demand for the productrises. The rise in price leads to a rise in profits, which allows the companyto produce more products. The additional products leads to a surplus, thesurplus causes prices to fall once more, and the lower prices lead to anincrease in demand, starting the cycle over again. Advantages of demand pricinginclude the ability to optimize prices using charts and mathematics thatpredict ideal prices. However, demand pricing may lead to revenue loss byfailing to take into account variables such as production costs and theconsumer’s desired price.
Pricing strategy for:- Low priced TabletComputer :-
Ans:- cost based pricing
Pricing strategy for:- CNG fittedsmall car :-
Ans:- customer based pricing
4.a) What makes managerrely on primary data for marketing decision? Substantiate with Suitable examples
Solution: Collecting the right information to make a rational and informedmarketing decision sometimes simply means using your knowledge to make adecision on the spot. At other times, it entails collecting an enormous amountof information, or simply put data: the facts and figures related to theproblem. Facts and figures that have already been recorded before the projectat hand areSecondary data, whereas Primary data are facts and figures thatare newly collected for the project.
Gathering primarydata during marketing research is only the first step inretrieving the necessary information to continue in the marketing researchprocess. Primarydata can be supported significantly with the use of secondary data. Secondarydata can greatly substantiate all information gathered duringprimary research if primary research is even required. In some instances,secondary data alone can solve the problem, eliminating the need for primarydata.
There are many ways in which a marketingresearcher can retrieve secondary data. The largest and frequently leastexpensive source for secondary data is the World Wide Web. There are manyreasons as to why secondary data is utilized, especially from the internet. Thefirst and foremost reason for the use of online secondary data for marketingresearch is because almost any data imaginable is readily available. Secondarydata can be retrieved from thousands of places on the internet. Manyorganizations list secondary data on the internet for instant access tomarketing researchers. This allows marketing researchers quick access toinformation, which consequently, allows marketing researchers to make faster,more precise decisions.
Not all problems can be solved with the use ofsecondary online data. Despite that online secondary data is low cost, byutilizing secondary data over primary data, companies can save thousands ofdollars in marketing research expenses every year. A focus group or depthinterview is always moreappropriate than online secondary data when a corporation needs to know theinner most thoughts and motives of customers. Information retrieved through internet market researchtools always calls into question the legitimacy of the research findingsbecause of the ever growing presence of false and inaccurate information.
In conducting primary marketresearch, a company collects data directly from the foreign marketplace throughinterviews, surveys, and other direct contact with representatives andpotential buyers. Primary market research has the advantage of being tailoredto the company’s needs and provides answers to specific questions, but thecollection of such data is time-consuming and expensive.
Marketing,management and consumer research projects in higher education can be eitherpredominantly empirical, conceptual, or they can include elements of each. Empiricalknowledge derives from experience and empirical research projects utilizefirst-hand experience of primary data sets from, for
example,interviews, survey data or observation. The primary data is placed in thecontext of available literature (in the literature review) and is then analysedfor insights or findings. An empirical project report will represent thestudent’s own systematic investigation into the topic. It will include a criticalreview of relevant research literature, perhaps including importantpractitioner literature (trade press, industry reports) and published marketstudies too. The general findings from the review are then evaluated in the
light of thestudent’s first-hand experience of the particular topic area, that is, theirinterpretation of the empirical data that has been gathered. The amount ofprimary data in the empirical project can vary greatly.In research projectsthat are part of taught courses, data sampling may be based on very smallsamples for practical reasons. Qualitative data-gathering techniques usesampling approaches that are not required to provide a basis for statisticallysignificant generalization. Data can be based on convenience samples andneed not be randomized. Primary data can be used to enhance a primarilyconceptual project or it can be used as the major basis of argument for aproject. One MSc student project the author has supervised used three focusgroups, another used four interviews. The amount of primary data that is usefuldepends on the research question. It is also important for student researchersto remember that even if small samples are representative of larger groups,that is, if they share the major
characteristicsof the larger groups, findings are still limited to the immediate researchcontext and should be expressed cautiously in view of this. It is an importantinductive principle of research that even if a particular fact or relationshipbetween variables is true in millions of cases, we cannot know for sure if itwill be true in the next case we examine. Many projects combine elements ofboth conceptual and empirical approaches. One way of combining the twoapproaches is to focus on the literature review while carrying out a limitednumber of short interviews to get important practitioner or consumerperspectives on the topic. These perspectives can then be acknowledged and usedin the discussion. Many projects in marketing and management that investigate alive problem do so by reviewing relevant literature on research and practiceand then comparing the major findings with first-hand interviews withpractitioners. In this way an empirical component can be added to a mainlyconceptual research project. Conducting interviews with practising managersalso has the added benefit of sharpening students’ research interviewing skillsand filling out their knowledge of the area. It can also be a useful exercisein getting contacts in an industry that might offer employment prospects aftergraduation.
Most studies of the decision-makingprocess in marketing have used an adaptation of the scientific method. This decision-making process is asfollows:
a. Problem recognition – the consumer recognizes a problem. Forexample, her car has had major mechanical problems for the last two months.
b. Information search – internal and external. The consumer thinks about options shemay have to remedy her situation (internal search). And then she seeks external sources ofinformation such as friends, newspapers, TV, and the internet.
c. Alternative identification and evaluation – she has some ideasabout what alternatives she has and how to approach them. She now must compare and contrast theoptions she has.
d. Choice and purchase – based on this process of consideration theconsumer now purchases the most attractive option she has identified.
e. Post purchase evaluation – the consumer experiences her choice anddetermines if she is happy with it.
f. Feedback learning for future consumptionbehavior – the consumer remembers how she feels about her purchase and makesnote of it for future reference (internal search).
There are two types of data collection methods, they areprimarydata collection and secondary data collection.
Primary Data Collection: this type of datacollection are usuallyobserved and recorded or collected directly fromrespondents. This type of datamust be gathered by observing phenomena orsurveying respondents. Primary datacollection can be deemed as bespoke andtherefore time consuming and costly.
This process is more lengthy and complex, it is typically morecostly, involving experimentation, sampling, survey methods, and questionnaireconstruction. The acquisition of primary data often requires an experimentalapproach to determine which variable or variables caused an event to occur.
Experimentation: this involves keeping certain variablesconstant so that the effects of the experimental variables can bemeasured. Forexample, when Apple tests a change in its AppleWorks word processing computerprogram, all sales and marketing variables should be held constant except thechange in the program.
Sampling: by systematically choosing a limitednumber of units, or sample, to represent the characteristics of a totalpopulation, marketers can project the reactions of a total market or marketsegment. The objective of sampling in product development, therefore, is toselect representative units from total population. Sampling procedures are usedin studying the likelihood of events based on assumptions about the future.
Survey Methods: This includes interviews by mail,e-mail,or telephone and personal interviews. Selection of a survey method depends onthe nature of the problem, the data needed to test the hypothesisand theresources, such as funding and personnel that are available to the researcher. Questionnaire Construction: Acareful constructed questionnaire is essential to the success of any survey. Aquestionnaire is abase document for research purposes that provides thequestions and the structure for an interview or self-completion and hasprovision for respondents’ answers. Questions must be designed to elicitinformation that meets the study’s data requirements. Observation Methods: This method enables a researcher to recordrespondents’ overt behaviour, taking note of physical conditions and events.Direct contact with respondents is avoided; instead, their actions are examinedand noted systematically. Observation is straightforward and avoids a centralproblem of survey methods: motivating respondents to state their true feelingsor opinion.
b) Discuss the factorsthat are major determinants of promotion mix in the following Situations.
i) Midsize FMCG Company
Ans:- promotion mix
According to Philipkotler “promotion or communication mix means combination of allpromotional tools and the firm’s promotion or communication mix communicatesthe firm’s positioning strategies to its relevant markets, including consumers,employees, stockholders, and suppliers”
The primary role of promotion is to communicate withindividuals, groups, or organizations in the environment to directly orindirectly facilitate exchanges. The five major ingredients thatcan be included in an organization’s promotion mix are advertising, personal selling, publicity, packaging, and sales promotion.
Advertising is a paid form of non personal communication about anorganization and/or its products that is transmitted to a target audiencethrough a mass medium.
Personal selling is a process of informing customers and persuading themto purchase products through personal communication in an exchange situation.
Publicity is non personal communication in news story form, regarding anorganization and/or its products, that is transmitted through a mass medium atno charge.
A package can be used for promotional purposes to attract attention andto inform customers.
Sales promotion is an activity and/or material that acts as a directinducement, offering added value or incentive for the product, to resellers,salespersons, or consumers.
Several major determinants that influence the selection of promotional methodsto include in a promotion mix for a product are the organization’s promotional resources,objectives,and policies;the characteristics of the targetmarket; the characteristics of the product; and the costand availability of promotionalmethods.
The set of strategic decisions in the area of promotion which concern theallocation of effort among different methods of promotion.
Companies often use haphazard and seat-of-the-pants procedures to determine therespective roles of advertising, personal selling, and sales promotion in aproduct or market situation. A study of the American Marketing ScienceInstitute (MSI) on the subject revealed the following:
(1) Decisions on the promotional mix were often diffused among many decisionmakers. This inhibited the formation of unified promotion strategy, andindecision and conflict often occurred.
(2) Personal selling plans were sometimes divorced from the planning ofadvertising and sales promotion.
(3) Frequently the decision makers were not adequately aware of the objectivesand broad strategies of the overall product program which the promotion planwas designed to implement.
(4) Sales and market share goals tended to be constant, regardless of decreasesor increases in promotional expenditures. Thus they became unrealistic asguides and directives for planning, or as criteria of promotionaleffectiveness, or even as a fair basis for application of the judgment of thedecision makers.
(5) The working planner was usually expected to prepare only one allocationplan for a product. Alternate marketing or promotion strategies did not receivefull consideration. Decisions on the funds allocated among alternativepromotional methods usually lacked objective measures of effectiveness orreliable sets of guidelines. Lacking alternative strategies, planners wereunprepared to meet contingencies and to adapt the program readily to feedbackof its effects or environmental changes.
(6) Negative planning, to be implemented should expenditures be cut back, wasmissing. Unforeseen cutbacks were perennial in most companies. Promotion fundswere often the first to be reduced when profits were threatened.
(7) In most of the companies there seemed to be a minimum of emphasis on recordkeeping and a reluctance to worry about what actually happened in the past asopposed to what was intended.
(8) Frequently, senior marketing personnel were not clearly informed ofassumptions and conditions underlying lower-echelon decisions the programssubmitted for management review often lacked necessary details for upstreamdecision making.
(9) Lower-echelon persons in some companies were not given the authoritynecessary to carry out their assignments, yet they were responsible forresults.
(10) Top management seldom asked for support from knowledgeable line and staffgroups in arriving at their final decisions these communications difficultieswere a source of confusion and a demoralizing influence.
(11) Expenditure levels for promotion were typically derived by workingbackward rather arbitrarily from sales revenue forecasts. Quantifying theobjective, and then referring all contributory factors to systematic andcomprehensive promotional planning procedures, was rare. In those cases whenthis was found, it did not appear well documented or complete.
(12) The allocation of total budgets among the various tasks and tools ofpromotion was sometimes determined by sheer intuition, comparing past patternsof decisions, mechanically working backward from the more fixed items to aresidual for flexible items, relying on competent judgment of others, andarbitrary rules of thumb.
(13) In policy committee meetings, marketing management often presentedwell-rationalized, but not necessarily well-structured, arguments in favor ofvarious promotional mixes. These presentations suffered in comparison with themore logical and rational financial and technical proposals presented by otherline and staff people. Even less prevalent than systematic planning was thepractice of looking at prior years, performances through post audits or reviewsintended to enhance the forward-planning process.
(14) The present state of the art in marketing administration is such thatcause and effect relationships, and other basic insights, are not sufficientlyunderstood to permit knowledgeable forecasts of what to expect from alternatecourses of action. Even identifying feasible alternatives can prove difficult.
Apparently, a variety of factors needs to be considered to determine theappropriate promotion mix in a particular product or market situation. Thesefactors may be categorized as product factors, market factors, customerfactors, budget factors, and marketing mix factors:
1. Nature of product
2. Perceived risk
3. Durable versus nondurable
4. Typical purchase amount.
Product factors are mainly related to the way in which the product is bought,consumed, and perceived by the customer. For industrial goods, especiallytechnical products, personal selling is more significant than advertising sincethese goods usually need to be inspected and compared before being bought.Salespeople can explain the workings of a product and provide on-the-spotanswers to customers’ queries. For consumer goods such as cosmetics andprocessed foods, advertising is of primary importance. In addition, advertisingplays a dominant role when used for products which provide an opportunity fordifferentiation and for those being purchased with emotional motives.
The perceived risk of a purchase decision is another variabIe here.Generally speaking, the more risk a buyer perceives to be associated withbuying a particular product, the higher will be the importance of personalselling over advertising. A buyer generally likes to have more information onthe product when the perceived risk is high, and this necessitates an emphasison personal selling.
Durable goods are bought less frequently than nondurables and usually require aheavy commitment of resources. These characteristics make personal selling ofgreater significance than advertising for durable goods. However, since manydurable goods are sold through franchiseddealerships, the influence of each type of promotion should be determined inlight of the additional push it would provide in moving the product.
Finally, products purchased in small quantities are presumably purchasedfrequently and require routinedecision making. For these products advertising should be preferable topersonal selling. Often such products are of low value; therefore, a profitablebusiness in these products can only be conducted on volume. This underlines theimportance of advertising in this case.
1. Position in its life cycle
2. Market share
3. Industry concentration
4. Intensity of competition
5. Demand perspectives.
The first market factor is the position of a product in its lifecycle. The creation of primarydemand, hitherto nonexistent, is the primary task duringthe introductorystage; therefore, a high level of promotion effort is needed to explain a newproduct to potential customers.
For consumer goods in the introductory stage, the major thrust is onheavy advertising supported by missionaryselling to help distributors move the product. Additionally, different measuresof sales promotion (e.g., sampling, couponing, free demonstrations, etc.) areemployed to entice the customer to try the product.
In the case of industrial products, personal selling alone is usefulduring this period. During the growthphase there is increasing demand, which means enough business for allcompetitors. In the case of consumer goods, however, the promotional effortshifts to reliance on advertising. Industrial goods, on the other hand, beginto be advertised as the market broadens and continue to require a personalselling effort.
In the maturityphase competition becomes intense, and advertising, along with sales promotionmeasures, is resorted to in order to differentiate the product (a consumergood) from competitive brands and to provide an incentive to the customer tobuy the product. Industrial goods during maturity call for intensive personalselling.
During the declinephase, the promotional effort does not vary much initially from that during thematurity phase except that the intensity of promotion declines. Later on, as pricecompetition becomes keen and demand continues todecline, overall promotional perspectives are reduced.
For a given product class, if market share is high, both advertising andpersonal selling are used. If the market share is low, the emphasis is placedon either personal selling or advertising. This is because high market shareseems to indicate that the company does business in more than one segment anduses multiple channels of distribution. Thus, both personal selling andadvertising are utilized to promote the product. Where market share is low, theperspectives of the business are limited, and either advertising or personalselling will suffice, depending on the nature of the product.
If the industry is concentrated among a few firms, advertising will achieveadditional significance for two reasons. Heavy advertising may help discourageother firms from entering the field. It sustains a desired position for theproduct in the market. Heavy advertising constitutes an implied warranty ofproduct performance and perhaps decreases the uncertainty consumers associatewith new products. In this way new competition is discouraged and existingpositions are reinforced.
Intensity of competition tends to impact promotional blending along the samelines as market share. When competition is keen, all three types of promotionare needed to sustain the product’s position in the market. This is becausepromotion is needed to inform, remind, and persuade customers to buy theproduct. On the other hand, if competitive activity is limited, the majorfunction of promotion is to inform and perhaps remind customers about theproduct. Thus, either advertising or personal selling is mainly used.
Hypothetically, advertising is more suited for products which have relativelylatent demand. This is because advertising investmnent should open up newopportunities in the long run, and if the carryovereffect is counted, expenditure per sales monetary unitwould be more beneficial. If demand is limited and new demand is not expectedto be created, advertising outlay would be uneconomical. Thus, future potentialbecomes a significant factor in determining the role of advertising.
1. Household versus business customers
2. Number of customers
3. Concentration of customers.
Customer factors are factors which relate to the type of customers a businessserves. One of the major dimensions used to differentiate businesses is theissue of whether they market products for household consumption or fororganizational use. There are several significant differences in the wayproducts are marketed to these two customer groups, and these differences exertconsiderable influence on the type of promotion that should be used. In thecase of household customers, it is relatively easy to identify the decisionmaker for a particular good; therefore, advertising is more desirable. Also,the self-service nature of many consumer product sales makes personal sellingless important. Finally, household customers do not go through a formal buyingprocess utilizing objective criteria as organizational customers do. This againmakes advertising more useful for reaching household customers. Essentially thesame reasons make personal selling more relevant in promoting the product amongorganizational customers.
The number of customers and their geographic concentration also influencepromotional blending. For a small customer base, especially if it isgeographically concentrated, advertising does not make as much sense as it doesin cases where customers are spread all over and represent a significant mass.Caution is needed here because some advertising may always be necessary forconsumer goods, no matter what the market perspectives are. Thus, the aboveanalytical statements only provide a conceptual framework and should not beunderstood as exact yes/no decision criteria.
1. Financial resources of the organization
2. Traditional promotional perspectives.
Ideally the budget should be based on the promotional tasks to be performed.However, intuitively and traditionally, companies place an upper limit on theamount that they will spend on promotion. Such a limit may influence the typeof promotion which may be undertaken.
Budget factors affect the promotional blend in two ways. First, a financiallyweak company will be constrained in undertaking certain types of promotion.Second, in many companies the advertising budget has been traditionally linkedto revenues as a percentage. This method of allocation continues to be used sothat expected revenues will indicate how much might be spent on advertising inthe future. The allocated funds, then, automatically determine the role ofadvertising. Similarly, personal selling perspectives are determinedindependently.
Marketing Mix Factors
1. Relative price/relative quality
2. Distribution strategy
3. Brand life cycle
4. Geographic scope of market.
The promotion decision should be made in the context of other aspects of themarketing mix. The price and quality of a product relative to competitionimpact the nature of its promotional perspectives. Higher prices must bejustified to the consumer by actual or presumed product superiority. Thus, inthe case of a product which is priced substantially higher, advertisingachieves significance in communicating and establishing the product’s superiorquality in the minds of the customers.
The promotion mix is also influenced by the distribution structure employed forthe product. If the promotion is distributed directly, the sales force willlargely be counted on to promote the product. Indirect distribution, on theother hand, requires greater emphasis on advertising since the sales force pushis limited. As a matter of fact, the further the manufacturer is removed fromthe ultimate user, the greater is the need for the advertising effort tostimulate and maintain demand.
When an existing brand reaches the maturity phase in its life cycle, themarketer has three options: to employ life-extension strategies, to harvest thebrand for profits, and/or to introduce a new brand which may be targeted at amore specific segment of the market. Positioning the new brand during theintroduction phase in the desired slot in the market requires higheradvertising. As it enters the growth phase, advertising will have to be blendedwith personal selling. In the growth phase the overall level of promotion willdecline in scope. In brief, the new brand will have to be treated like a newproduct as far as promotion is concerned.
Finally, the geographic scope of the market to be served is anotherconsideration. Advertising, relatively speaking, is more significant forproducts marketed nationally than for those marketed locally or regionally.Thus, since advertising works out to be an expensive proposition, regionalmarketers should rely less on advertising and more on other forms of promotion,or substitute for television advertising another element of the marketing mix.
In addition, the promotion mix may also be affected by a desire to beinnovative, i.e., to do something different and seek uniqueness.
1. Mid size FMCG company:-
Marketingpromotion does not require a big budget if you set astrategic plan. The most affordable marketing plans happen online, where noexpense needs to be incurred for supplies. Proper use of online marketing andnetworking will make sure your business is easily discovered through thefastest and most efficient methods possible. Following up your online effort byfilling your community presence will assure your clients come back again.
Set Up Business Accounts
The first step to advertising your businesson the Internet is setting up business accounts on major search engines. Thisincludes Google, Yahoo!, and Bing, but it may also include an industry-specificsearch engine account. For example, local businesses should have a presence onCitySearch and Yelp!. Restaurants should be listed on UrbanSpoon or a localrestaurant directory.
Use Online Reviews
Once you have been listed on online reviewservices in your industry, it is time to start getting people to review you.Despite what some business owners believe, there are plenty of tricks in placeto stop a business owner from reviewing herself more than one time. This meansyou will have to ask for reviews from others, and the more the better. The goodnews is that many people commonly write reviews online already. You will beasking them to do something they routinely do, but you will still need toprovide incentive. Consider offering a product or service at a discounted ratefor individuals who have provided your business with a review or recommendationto another customer. For example, offer any individual who writes a reviewabout your coffee shop on a coffee shop review site a free cup the next timeshe comes in.
Start a Blog
Before you begin promotions, you should makesure you have a place to announce them. A blog is a great source for constantupdates on promotions and news from your new business. The best part about ablog is you can update it easily. Whenever potential customers search theInternet for information, they will be directed to your blog if it containsthat information. This gives you a separate source for discovery outside ofyour website.
Promote through Social Networks
An overwhelming number of your clients willparticipate in social networking. Whether you elect to engage them throughFacebook, Twitter, LinkedIn or FourSquare, you will find new clients on thesefree websites. Simply posting an account on these sites will not promote yourbusiness, however. Try presenting exclusive offers through social networks.This gives your clients an incentive to continually check your account or page,and in turn, this gives you more chances to get in front of your clients withnew products and services.
When you do get clients to visit your websiteor your business, it is important to capture their information for the future.For example, place buttons on your website to ask people for their emailaddresses. When you collect an email, be sure to add the sender’s address to yourdistribution list. Send information and promotions when appropriate. Askclients who visit your business to provide contact information for the future.Simply sending cards to say “Happy Birthday” to a customer’s homeaddress can remind that person to stop in to your business and make a purchase.
Utilize Community Events
Parades, conferences, fairs and more happenin your community every week or month. These are one-stop shops for capturinginformation and connecting with potentially thousands of new clients. Engagingthe community through these events not only gets your name out there; it showsyou are willing to step away from the office to participate in something thatis important to your potential clients. For example, a fitness studio shouldparticipate in a healthy living festival. A local chiropractor couldparticipate in the same festival, or she could participate in a fair for greentechnology. These are all opportunities to get in front of your clients andstart making your name known.
PROMOTIONMIX BANKING SERVICES
§ Advertising: Television,radio, movies, theatres
§ Printmedia: hoardings, newspaper, magazines
§ Publicity: roadshows, campus visits, sandwich man, Sponsorship
§ Salespromotion: gifts, discount and commission, incentives, etc.
§ Personalselling: Cross-sale (selling at competitors place),personalizedservice.
§ Telemarketing: ICICIone source Call center (mind space)
Promotional mix used by bank:
We know that the combination of all thepromotional tools is referred to as promotional mix. Here banking sector is blending a sound mixer by which it istrying to caver the whole target market. Now we will view separately all theelements of promotional mix.
bank is using all the printed media andelectronic media for communicating the services to the clients. The elements ofthe mixes are as follows:
Printed media:bank is using all the printed media including the newspaper, magazines,festoons, billboard, and etc. to communicate their services.
Electronic media:It includes different TVs both the government run and privately own to positionthe idea “your trusted partner”.
Sales promotions:Sometimes bank undertakes sales promotion to attract the existing and newclients short time basis but not appointing any personnel specifically as salespersonnel. Word of mouth of the existing clients act as sales promotion forthat period.
bank sponsors different seminars,symposiums, math Olympiad to build corporate relation with the mass people.
Asbank is performing a lot of social responsibilities. It was awarded the numberone CSR performer in the southern Asia in a conference held in Philippines. Notonly that different media both views the countrywide nonprofit ableperformances printed and electronic which are publishing and telecasting thenews countrywide. it also did the beatification of part of Dhaka city, HotelSheraton to Ishkha road and that attracted the media as a result bank isgetting publicity than any other service organization in our country thatrepresent obviously the reality.
Word of mouth:
We know that satisfied customer is thebest source of promotion and bank has a great impact of word of mouth, which isgenerated from the existing satisfied customers as they promote the bankservices that they avail. Further more those potential customers who don’t haveaccount but wish to open an account in future for availing the smart service ofbank.
In the study we find that thepromotional mixes of bank are contributing a lot to retain the goodwill and dayby day the authority is being serious about making a sound mixer of theircommunication mixes.
The service organizations offer theirofferings through the promotional mixes. If the reality is matched with the promotionalmessages then no problem but the situation will be very crucial if promises arenot matched with the real services. The deviation between the theories with thepractice is analysis. In the study we find that the inanimate environment ofthe BANK of – branch is very much modern and the behavior of front lineexecutives are standard. The standard of each advertisement in different mediaare very fine. Especially the social responsibilities performed by the bankingservice attracted to the eye of many. Actually BANK has properly used itspromotional mixes. It is trying to provide the standard and promised servicesto its clients. Banking manager thinks that the service provided will make thecustomers loyal as a result those customers will further recommend the others.For doing that it is emphasizing on the publicity and public relation andpublicity that is the result of CSR. The target customer of bank is the highercustomer group and slightly he upper middle class group as well. bank has beensuccessful to communicate with the target customers by the proposed servicesthrough the promotional mixes. The proposed on line banking hasmatched with the reality also. In short it can be asserted that the differencesbetween the services of bank communicatedthrough various tools and the real mixers of promotion, the performances ofindividual promotional tool and the reality of the service offered are positiveto bank and to the customers.
Conclusion and Recommendations:
The promotional mixes and theeffectiveness of them are fully judgmental but the reality of the services canbe understood better if we would possess accounts at the bank. In spite of thiswe can say that this joint venture is performing very well in serving thenation very well. But still there are some recommendations, which are asfollows:
Although banking sector has targeted thehigher-class income group but most of the people in our country are middleclass and lower class income group. DBBL can target that segment to increaseits market share although it has become successful to satisfy the higher incomepeople.
We know that banks has many ATM booths allover thecountry but the people are less trained about this technology. So it canprovide more training to the targeted customers about different card includingclassic card, silver card, and gold card. Although visa electronic is notavailable but the band has to teach the people about the upcoming technology.Although it is providing the prospectus and other written learning aid but thelanguage is in English. Those can be translated in to Bengali for thebetterment of the customers.
New social task:
In order to draw the attention of thepeople banking sector can create new ides that means the scope for performingthe Corporate Social Responsibility (CSR) such as promoting the bad image ofearly marriage and creating mass awareness about it. Informing the people aboutthe Sanitation and first aid in criticalsituations.