chapter 2 bs 2 2puc

8/13/2019 Chapter 2 BS 2 2PUC

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Business Studies

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Chapter 2

Marketing Meaning of Market

A market is a place where buyers and sellers come together for the purpose of purchase and sale. It

is the atmosphere or a region in which buyers and sellers are brought in contact with one another

and by means of which the prices of goods and services tend to be equalized easily and quickly.

Definition of Market

1. Market is an area or atmosphere for a potential exchangePhilip Kotler2. Market is an area in which forces leading to exchange title to a particular product operate,

and towards which and from which the actual goods tend to travelClark and Clark

Marketing

Marketing is what connects producers and consumers. It brings about a mechanism where

there is an exchange of goods and services for money or money equivalent. It creates

consumer satisfaction and brings revenue to the manufacturers / producers. Marketing

involves all activities in creation of place, time, possession, and awareness utilities.

Difference between Selling and Marketing

Selling Marketing

Focuses on the needs of the seller Focuses on the needs of the buyer

Preoccupied with sellers need to sell the

product and obtain cash

Preoccupied with idea of need to satisfy the

needs of the customer

The main aim of selling is to earn profit by

maximizing sales

Aims at earning profit through customer

satisfaction.

Management is sales volume oriented Management is focused on retaining

customers for long term profit.

Views business as a goods producing

process

Views business as consumer satisfying

process.

Selling is the final phase of marketing

process

Marketing starts with understanding what

products are to be made before actually

selling.


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9. Advertising: is a form of communication used to persuade an audience (viewers,readers or listeners) to take some action with respect to products, ideas, or services.

Advertising messages are usually paid for by sponsors and viewed via various media;

including traditional media such as newspapers, magazines, television, radio,

outdoor or direct mail; or new media such as websites and text messages.

10.Sales promotions: Is another way to advertise. Sales promotions are doublepurposed because they are used to gather information about what type of

customers you draw in and where they are, and to jumpstart sales. Sales promotions

include things like contests and games, sweepstakes, product giveaways, samples

coupons, loyalty programs, and discounts. The ultimate goal of sales promotions is to

stimulate potential customers to action.

11.Insurance: Companies undertaking insurance service will cover losses on damage ongoods, economic loss and even credit loss.

12.Marketing information: decisions are based on facts and figures. Market intelligencemeans spreading of market information among buyers and sellers. As the trends in

market will be changing constantly, the changes will affect the industry. This requires

companies to keep their information up to date on changing supply and demand

patterns.

13.Financing: It is the life-blood of the industry. It is essential for production andmarketing. There is a time gap between purchase of raw materials and the

manufacturing of finished products and from the time goods are made till the

consumer pays for them. Banks and financial institutions cater to the waiting period.

Marketing Mix

MarketingMix

Product

Place

Price

Promotion


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Promotion

It is the communication mix which deals with the personal and impersonal persuasive

communication about the product or service of the manufacturer. The mix includes:

a) Personal Sellingb) Advertisingc) Sales Promotiond) Trades and exhibitions

Sales Promotion

Sales promotion is any initiative undertaken by an organisation to promote an increase in sales,

usage or trial of a product or service. The objectives of sales promotion are:

a)

Awareness of new products introducedb) Information can be passed on to customers about the new brand and new packagec) Market share can be improvedd) Usage rate of products can be increasede) Customer patronage and brand loyalty can be maintained.f) More dealer outlets can be obtained

Advertising

The Definitions Committee of the American Marketing Association defines advertising as, "any paid

form of non- personal presentation and promotion of ideas, goods or services by an identified

sponsor." The term advertising is derived from the Latin word, "advertere" which means 'to turn'

attention. The objectives of advertising are:

a) Create demand for a new productb) Extend market for an existing productc) Retain demand for an existing productd) Assist the salesman in the effort of sales promotione) Overcome competition in selling goods or servicesf) Warn public against imitation of the particular product by other productg) To create reputation or goodwill for the product.

Merits of Advertising

a) It increases the sales of the company.b) It makes the customers aware about the image of the company.c) It attracts new customers and creates brand loyalty in the previous customers.d) If a company introduces a new product in the market then the company can use advertising

strategy to inform the customers.

Demerits of Advertising

a) It requires a lot of budget.


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b) It can create issues of under demand and under supply for the company and dislocates thedemand and supply equilibrium for the company.

c) It can also distort the mission of the company and the image of the company in the marketthrough wrong concept in advertisements.

d) Over advertisement of a company can create a fuss among the customersIs Advertising an Economic Waste?

a) It is incorrect to say advertisement increases prices of the product because increasedproduction leads to reduction in cost of production.

b) Advertisement creates market for a new product and extends market for existing productsthus increasing sales.

c) Advertisement imposes a duty on the advertiser to supply good quality product toconsumers.

d) In absence of advertisement; consumers would not be able to obtain information about thevarieties of products and services in the market.

Advertisement Copy

A good advertisement copy must have the following characteristics:

a) Attention Value: It should be able to draw attention of the people. This may be done usingcolourful pictures and graphics in the advertisement copy.

b) Suggestive Value: It should suggest the consumers the use of the products, their features,advantages over competitorsproduct etc.

c) Convincing Value: It should convince consumers on benefits of the products advertised. Thisis done by giving facts and figures.

d) Remembrance Value: People must remember the message of the advertisement for a longtime. This can be done by using slogans in the advertisement copy and by repeating the

advertisement again and again.

e) Sentimental Value: It must awaken interest in consumers. The advertisement must not hurtthe feelings of the reader.

f) Education Value: It should educate the people in the use of the product.g) Simplicity: It must be as simple as possible so that it can be easily understood by all. It must

contain few words which can give more information.


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Media of Advertisement

Advertisements are conveyed to the public through some media. The channel or means by which it

is conveyed to the public is called advertising medium.

The following are the main media of advertisement:

1. Press Advertisinga) Newspaper Advertising: The advantages are as follows

i. Wide circulation, so reaches a larger audienceii. Cost is relatively lessiii. Continuous advertising is possible since newspapers are published dailyiv. Advertising message can be changed promptly when necessaryv. Message can also be conveyed to a particular locality by selecting the local

newspapers.

vi. Reduces the prices of newspapers.vii. It is suitable for brief / lengthy and illustrative advertisementsviii. The advertising message can be conveyed quicklyThe disadvantages however are:

i. Advertisements have short span of life, because the life of a newspaper islimited to just one day.

ii. Advertisement message cannot be conveyed to illiterate people.iii. Most advertisements may be wasted because all the people may not be

regular readers or may even ignore the advertisements.

iv. Low quality of newspapers does not facilitate attractive colourfuladvertisements.

b) Magazines: The advantages of magazines are:i. They have longer life than newspapersii. As quality of paper is good, attractive and colourful advertisements are

facilitated.

iii. Special magazines, journals reduce chances of wastage as they are meantfor only particular classes of people

iv. The advertisement, in magazines is read carefully and hence they may havebetter impact on readers.

The disadvantages are

i. Costly compared to newspapersii. They have limited circulationiii. Message cannot be changed daily


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2. Outdoor Advertising: This includes the followinga) Posters & Painted displays: The advertisement message is written on paper or metal

sheet and displayed in prominent localities. They are highly effective,, artistic and

colourful. They can even attract illiterate customers. And are relatively cheaper as well.

b) Electric Signs: they use lights which are colourful and have various shades to attract thecustomers. These are used in localities which are high in population.

c) Sandwich-men: They carry sandwich boards, containing a message that is to beadvertised.

d) Car cards: they are posters placed in buses, trains, taxies and other vehicles. They arelikely to be read by passengers.

e) Skywriting: In this, balloons are fitted with illustrative pictures and flown. Airplanes areused to display illuminated banners containing the message in the open sky during

evening times. This method is highly appealing and makes an effective impression in the

minds of the people.

The advantages of outdoor advertising are:

i. Cheapest method of advertisingii. Can be employed in an area where there is high population.iii. Can attract attention of people easilyiv. Even illiterate people can understand the message.v. Message is displayed for a long time so it can be read by a large number of

people.

The disadvantages of outdoor advertising are:

i. They can be damaged by miscreants or by rival companies.ii. Not suitable for lengthy advertisementsiii. Cannot be changed frequently


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3. Direct Mail Advertising: This means sending letters, circulars, catalogues etc directly tocustomers by the advertiser. The advertiser maintains a mailing list for customers.

The advantages are:

i. Has personal appeal and hence is more effectiveii. Reduces the chances of wastage as the advertising message is sent only to

selected customers.

iii. Provides scope for detailed information.iv. Highly flexible form of advertising.

The disadvantages are:

i. Costly medium of advertisingii. Limited coverageiii. Covers only literate personsiv. Mailing list has to be updated regularly.

4. Radio Advertising: People can listen to radio in their vehicles, in waiting rooms, in manyrestaurants and a number of grocery stores. Radio advertising targets that captive audience

through a series of 30 second or 60 second spots which promote products or services in a

memorable way. Radio advertising is based on the idea of creating an audio-only

environment and placing the listener inside of it.

The advantages are:

i. Has a wide appealii. Suitable for illiteratesiii. Can secure dealer supportiv. Announcement can be made quicklyv. Message can be repeated.vi. Combines advertising and entertainmentvii. Advertising can be made in a select geographical area.viii. It can secure regular response


i. Costlyii. Detailed information cannot be given.iii. Message cannot be retained in the minds of the listenersiv. Cannot be made visually appealingv. Listeners may not like it.vi. Can create boredom if repeated regularly.

5. Television Advertisement: It is the most effective media of advertising as it uses both audioand video signals to convey the advertising message.

The advantages are:


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i. Uses both audio and visual effect on viewers so impact on the viewers isbetter.

ii. Reaches all categories of people in society.iii. Wide coverage.iv. Has personal touch and is educative value.v. Advertisement can be more persuasive and influence all types of people

more strongly than any other media.


i. Costliest form of advertisingii. Limited reach to only those who have a TV.iii. Difficult to get a slot on TV.iv. Ad messages cannot be referred back and it has to be repeated.v. Ad copies cannot be changed regularly.

6. Film Advertising: These are done through cinema slides or by preparing feature films bydifferent manufacturers. It has wider appeal. Audio-visual technique has maximum impact

on audiences. The cost of the advertising is very high.

7. Window Display: refers to the displaying of products behind the glass window of a shop.The advantages are:

i. Convenient and economical form of advertisingii. Ad copy can be artistic and visually appealing.iii. Flexible and can be changed when the advertiser wants.iv. Appeals to both literate and illiterate peoplev. Helps customer understand the type of goods available and their prices.

Salesmanship / Personal Selling

Personal selling is a marketing process with which consumers are personally persuaded to

buy goods and services offered by a manufacturer. Personal selling is a component element

in the communication mix. It is a two- way form of communication that has' a. number of

advantages from the point of view of marketing organization.

Personal selling gives marketers the freedom to adjust the message to satisfy the customer's

information needs. The American Marketing Association defines personal selling as "oral

presentation in a conversation with one or more prospective purchases for the purpose of

making sales".

A significant feature of personal selling is the interaction between the marketer and the

customer. For .e.g. Eureka Forbes and Aqua Guard uses this method for selling.

Objectives of Salesmanship

a) Retain existing customers


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b) Secure new customersc) Build goodwill for the seller.

Importance / Functions / Advantages of Salesmanship

a) Creation of Demand: Helps in creating demand and increasing production.b) Increase employment and income: Effective salesmanship increase activity which

ultimately leads to increase in level of employment and income for the community.

c) Improve products and sales policies: since salesmen are directly in touch withcustomers, it helps them understand the customer better. This helps manufacturer

produce goods and frame policies according to needs of the customers.

d) Avoidance of accumulation of stock: salesmanship increases turnover of goods andprevents accumulation of stock.

e) New Products: it brings to the knowledge of consumers about the introduction ofnew products into the market.

f) Raises standard of livingTypes of Salesmen

a) Manufacturers Salesman: A manufacturers' representatives (rep), also known assales agent, is an individual, sales agency or company that sells a manufacturer's

products to wholesale and retail customers. They are further classified into:

i. Pioneer Salesman: they create a market for new products introduced in themarket by the manufacturers.

ii. Dealer servicing salesman: sell to the dealers those products which arealready existing in the market

iii. Merchandising salesman: who give advice or collect information. Theypromote sales for direct orders.

b) Wholesalers Salesman: They are salesman employed by wholesalers to sell productsto retailers. They visit retailers regularly and book orders. They also advice retailers

on how to improve their sales.

c) Retailers Salesman: They are classified into:i. Counter Salesman: they are salesman who will be in the counters of a retail

outlet. They explain details of the products to the customers; also they will

persuade customers to buy products by explaining features of the product.

ii. Outdoor / Travelling salesman: spend much of their time travelling to, andvisiting with, current clients and prospective buyers. They may show samples

or catalogues that describe items their company provides, and they may

inform customers about prices, availability, and ways in which their productscan save money and boost productivity


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d) Speciality Salesman: He needs good deal of concentrated setting efforts; hence,there is a need for thorough and latest knowledge of such products; Deep market

research and aggressive publicity. Such an up-to-date knowledge is a must because,

with the lapse of time, the speciality products lose their specialities. As his work is

creative, He is paid handsomely in the forms of salary, commission and bonus.

Qualities of a Good Salesman

a) Physical quality: A salesman should have a good appearance and an impressivepersonality. He should also have a sound health.

b) Mental quality: A good salesman should posses certain mental qualities likeimagination, initiative, self-confidence, sharp memory, alertness etc. He should be

able to understand the needs and preferences of customers.

c) Integrity of character: A good salesman should posses the qualities of honesty andintegrity. He is to gain the confidence of the customers. He should be able to

understand their needs and guide them how to satisfy those needs. His employer

too should have faith in him. A salesman should be loyal both to the employer and to

the customers.

d) Knowledge of the product and the company: A salesman should have full knowledgeof the product and the company he is representing. He should be able to explain

each and every aspect of the product i.e. its qualities, how to use it, what

precautions to be taken, etc. He should be able to explain the business and service

record of the company. He should also have knowledge of products of rivalcompanies. So that he can put across the superiority of his own products.

e) Good behaviour: A salesman should be co-operative and courteous. Good behaviourenables one to win the confidence of the customers. He should not feel irritated if

the buyer puts up many questions even if the questions are irrelevant. It is also not

necessary that the person he is trying to convince buys the product. The salesman

has to remain and courteous in every case.

f) Ability to persuade: A good salesman should be good in conversation so that he canengage the person he is attending in conversation. He should be able to convince

him and create the desire in his mind to posses the commodity.

Methods of Remunerating Salesman

a) Straight Commission Method: Under such method the remuneration is paid on thebasis of the amount of sales made. The salesman is paid commission calculated at a

certain percentage of net sales or profit. The percentage of commission varies from

concern to concern and case to case. This is an effort-oriented of method of

remuneration. The income of a salesman fluctuates directly with the volume of sales

made.

The advantages of This method are:


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i. Simple and easy to understandii. Provides incentives to the salesman to increase sales.iii. Flexibleiv. EconomicalThe disadvantages are:

i. There is uncertainty in income level of salesmanii. It encourages reckless salesiii. Inexperienced salesmen are penalized.

b) Straight Salary Method: A fixed salary is paid to the salesman at the end of everymonth irrespective of the sales made by him. Increment is given annually according

to the scale of salary of the salesman. It is followed by firms where work done by anindividual cannot be measured.

The advantages are:

i. Simple and easy to understandii. Ensures a steady income for the salesmaniii. Provides a sense of security to the salesman.The disadvantages are:

i. It doesnt provide directive incentive for hard work.ii. Whatever be the sales, even efficient salesman may not work hard.

c) Salary plus commission method: A salesman is paid a fixed salary and a percentage ofcommission on the sales made by him. This ensures a minimum income to all the

salesman and is the same time provides adequate incentive to stimulate them for

greater efforts to increase the sales.

d) Salary plus bonus method: Salesman is paid salary regularly and also bonus which iscalculated on basis of earnings. The bonus is paid to the salesman at the end of the

year. The merit of this system is that bonus acts as an incentive to the salesman to

increase sales.


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Difference between Advertising and Salesmanship

Advertising Salesmanship

Impersonal in nature Personal in nature

Contact is made with prospective customers

through messages

Contact is made with prospective customers

through salespersons

Consumes less time Involves a lot of time since salespersons should

establish personal contacts with the public

Ad campaigns can contact large number of

people

Salespersons will not be in a position to establish

contact with large number of people.

Advertising message makes advertising more

successful

Success of salesmanship depends on quality of

salesperson.

No personal touch, advertising may not be

effective

Salesperson establishes a rapport with the public

it is considered more effective.Advertising precedes salesmanship Salesmanship follows after advertising

Advertising isnt flexible Salesperson can adjust his communication based

upon attitudes of customers. Hence more

flexible.

Appeals to the masses, so has more extensive

outlook

Concentrates on individual customers and is

more intensive

Advertising is a one way communication Salesmanship empathises two way

communication

More costlier than salesmanship Comparatively economical

Response from public cannot be known Salespersons study responses and impulses of

prospective customers immediately.

Aims at creating interest in the minds of the

public

Aims at effecting actual sales

Cannot clarify any doubt arising in the minds of

the public

Salesmen help the public by providing all the

details thereby clarifying all the doubts.

Publicity

Publicity is defined as "the deliberate attempt to manage the public's perception of a subject." The

subjects of publicity include people (for example, politicians, and performing artists), goods, and

services. From a marketing perspective, publicity is one component of promotion.

Fairs

They are events held for presenting or viewing of exhibits or for recreation. They are sometime

called expositions or exhibitions. Fair in the ordinary sense is a competitive exhibition of farm

products often mixed with carnival like entertainment and held annually by a country or a state.


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Exhibitions

They are also known as trade shows. Generally organized on a large scale and are held regularly in

cities. The purpose is to promote the sale of goods exhibited. Manufacturers and businessmen take

part in this. A specific area is arranged for each participant to display their products. Visitors cancheck a variety of products and understand which suits their preferences best.

Seminars

They are of recent origin. They bring together experts in a particular field to present papers with

regard to a particular subject. Audience or participants are drawn from similar fields on which

papers are presented. A fee may be charged by the organizers for participants in the seminar.

Demonstrations

It is the art of exhibiting the operation or use of a device, machine etc to a prospective buyer.Demonstration is used as synonymous with proof. Manufacturers often resort to demonstration at a

few retail outlets; sometimes salespersons demonstrate the product at the homes of customers as

well.

Public Relations

The main goal of a public relations department is to enhance a companys reputation. Staff that

work in public relations, or as it is commonly known, PR, are skilled publicists. They are able to

present a company or individual to the world in the best light. The role of a public relations

department can be seen as a reputation protector.

Channels of Distribution

A channel of distribution or trade channel is the path or route along which goods move from

producers to ultimate consumers or industrial users. In other words, it is the distribution network

through which a producer puts his product in the hands of actual users. The channel of distribution

includes the original producer, the final buyer and any middlemen-either wholesaler or retailer.

Direct Selling

Direct selling is the marketing and selling products directly to consumers away from a fixed retail

location. This is the shortest channel a product can follow to the market. It is suitable for industrial

goods.

It can be through any one of the following or through both means:

a) Sales through advertising (mail order setting)b) Sales through travelling salesman.c) Sales through manufacturer owned retail outlets.

Producer Consumer


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Indirect Selling

Producer will take assistance from one or more intermediaries or middlemen for making the

products reach the consumers.

When buyers are large retailers, the wholesaler can be bypassed in the trade route. This is suitable

when products need to reach the consumer quickly as in case of perishable goods.

The producer must perform functions of wholesaler such as storage, insurance, financing of

inventories, transport etc.

This is a normal regular channel. Suitable to the producer under the following conditions:

a) When he has limited finance at his disposalb) When there are professional wholesalers who can provide strong promotional support.c) When products are durable and not subject to perish.

In this the producer will use the services of an agent to distribute goods. The agent sells to a

wholesaler who in turn sells to retailers. Goods reach buyers from the retailer.

The agent operates at wholesale level. In marketing manufactured goods, agents are employed by

companies to free themselves from marketing tasks.

Wholesaler might directly sell the commodities to the consumers when there are large and

corporate buyers such as hospitals, consumer cooperatives, business houses, industries,

governments etc

Network Marketing / Multi Level Marketing

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not

only for sales they personally generate, but also for the sales of others they recruit, creating a down

line of distributors and a hierarchy of multiple levels of compensation. Other terms for MLM include

network marketing, pyramid selling, and referral marketing.

Producer Retailer Consumer

Producer Wholesale Retailer Consumer

Producer Wholesale RetailerConsumer

Agent

Producer Wholesale Consumer


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Most commonly, the salespeople are expected to sell products directly to consumers by means of

relationship referrals and word of mouth marketing. Some people equate MLM with direct selling,

although MLM is only one type of direct selling.

Previous Year Questions on this Chapter

SECTION A

1. Expand MLM. (Mar-11)2. Write any one of the indirect channels of distribution. (Mar-10)3. Write any one channel of distribution. (Mar-06)4. Mention any one type of salesman. (Mar-09)5. Mention any one objective of branding. (Mar-07)6. Give any two functions of marketing. (June-07)7. State any two elements of marketing mix. (June-09, June-10)8. Mention any two forms of outdoor advertising. (Mar-08)9. State any two advantages of television advertising. (June-11)10.What are demonstrations? (June-06)

SECTION B

1. What is marketing mix? (Mar-07)2. Mention any two advantages of Window Display. (Mar-07)3. Write any two differences between selling and marketing. (Mar-09, Mar-10)4. Give meaning of network marketing. (Mar-09, Mar-06, June-08, June-10)5. State any two objectives of advertising. (Mar-06, June-06)6. What is an advertisement copy? (Mar-10)7. Write any two types of outdoor advertising. (Mar-11)8. Who is a promotional salesman? (Mar-11)9. What is personal selling? (Mar-08)10.What are public relations? (June-06)11.What is publicity? (Mar-06)12.Define channels of distribution. (June-06)

SECTION C

1. Explain any 5 merits of TV advertising. (Mar-11)2. Explain any 5 objectives of advertising. (Mar-10, Mar-07)3. Explain in brief the various forms of outdoor advertising. (Mar-06)4. State the essential features of a good advertisement copy. (Mar-09, June-07, June-08, June-

11))

5. Explain the elements of marketing mix. (June-07)6. What are the limitations and of newspaper advertising? (June-10)7. What are the differences between advertising and salesmanship? (Mar-08)


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SECTION D

1. Explain the qualities of a successful salesman. (Mar-06, Mar-07, Mar-09, Mar-11)2. Explain the functions of marketing. (Mar-09, June-08, June-11)3. Explain the various methods of remunerating salesman. (Mar-10, Mar-11, Mar-06)

SECTION E

1. Prepare a list of any 5 products and suggest suitable media of advertisement. (Mar-10)

chapter 2 bs 2 2puc

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