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Definition of marketing:

The American Marketing association defines marketing as:

Marketing management is the process of planning and executing the conception, pricing and promotion and

distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals.

Core concepts of marketing:

a. Needs, wants and demands: Need is the basic human requirement, can be food, air, water,

clothing etc. Wants are needs directed to specific objects to satisfy the need. Need is hunger,want is if the person specifically wants idli or paniyaram or pizza. Demands are wants for

specific products backed by an ability to pay.

b. Product or offering: it is anything that can satisfy a need or a want. The major types of

basic offering are goods, ,services, experiences, events, persons, places, properties,

organizations, information and ideas.

c. Value and satisfaction: value is defined as a ratio between what the customer gets and what

he gives. The customer gets benefits like functional benefit and emotional benefit and

assumes cost like monetary cost, time cost, energy cost, and psychic cost.

d. Exchange and transaction: it involves obtaining a desired product from someone offering

something in return. For this to happen, the following five conditions must be met

(i) There are at least two parties(ii) Each party has something that might be of value to the other party.

(iii) Each party is capable of communication and delivery.

(iv)Each party is free to accept or reject the exchange offer.

(v) Each party believes it is appropriate or desirable to deal with the other party.

e. Marketing channels: Following are the marketing channels used by a company:

Communication channel: to deliver and receive message.

Distribution channel: to display or deliver the physical products.

Selling channels: to effect transactions with potential buyers.

f. Supply chain: this describes a longer chain stretching from raw materials to components to final

products that are carried to final buyers.

g. Marketing mix: it is the set of marketing tools that the firm uses to pursue its marketing objectives in

the target market. These are the four Ps Product, Price, Promotion and Place.

Evolution of marketing:

a. The production concept:

It holds that the consumers will prefer products that are widely available and inexpensive.

manufacturer concentrates on achieving higher production efficiency, low cost and mass

distribution.

b. The product concept:

It holds that the consumer will favor those products that offer the most quality, performance or

innovative features. Manufacturer concentrates on making superior products.

They assume the buyers admire well made products.

They do not take into account buyers needs, or customer inputs and they rarely examine competitor

products,

This leads to marketing myopia.

a. The selling concept:

a. It holds that consumers and businesses if left alone, will not ordinarily buy enough of the

organizations product and hence the organization must take aggressive selling efforts.b. There is heavy reliance on promotional efforts.

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c. It is practiced most often for unsought goods like insurance and encyclopedias.

d. It is also practiced for fund raising and whenever there is over capacity.b. The marketing concept:

It holds that the key to achieving organizational goals consists of the company being

more effective than the competitor in creating, delivering and communicating customervalue to its chosen target markets.

This concept rests on four pillars target market, customer needs, integrated marketing

and profitability.Difference between marketing and selling:

Marketing Selling

1. emphasis is on customer wants 1. Emphasis is on the product.

2. Company first determines wants andthen figures out how to make and deliver

a product to satisfy those wants.

2. Company first makes the productand then figures how to sell it.

3. Management is profit oriented. 3. Management is sales volumeoriented.

4. Planning is long term oriented in terms

of new products, tomorrows market andfuture growth.

4. Planning is short term oriented, in

terms of todays products andmarkets.

5. Wants of buyers are stressed. 5. Needs of sellers are stressed

Macro features in the marketing environment:1. Demographic environment: The statistical study of human population and its distribution is calleddemography. It is of special interest to marketing executives because of people constitute markets.India has more than a billion consumers. Life expectancy is more than 62 years thanks to improved healthstandards, lower infant mortality, fall in birth rates and the growth in medical facilities. Literacy :

The nation's average literacy rate is 52.11% as per 1991 census.

Male literacy - 63.86%, Female literacy - 39.42% There is a seven fold increase in the number of literates.

India has a 2.5 million strong pool of engineers, scientists and technically educated persons.

Geographic distribution of consumers :- Out of the billion consumers in India, 30% only fall in urban centers and rest 70% come in rural

areas.

Even in the urban centers, the concentration is more in the metres.

Striking diversity in language, religion and social customs:Religious diversity :

The seven major religions are Hinduism, Islam, Christianity, Sikhism, Buddhism, Jainism and

Zorashrtrian. In these religions, there are other sects and sub sects, castes and sub castes. The culture and customs and traditions all vary according to this diversity.

Linguistic diversity :

There are 16 major languages specified in the Indian constitution as national languages. Apart from this, there are hundreds of dialects. This linguistic diversity is a major challenge to any national marketer.

Diversity in dress, food habits: Each religious community has its own style of dressing, ornaments, foods etc.

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Diversity in literacy level: There is wide disparity in literacy level like 90% in Kerala, 63% in T. N. 41% in U P And38% in Bihar and Rajasthan.Diversity in density of population : The density varies from 766 sq km in West Bengal to 8 sq km in ArunachalPradesh, 747n in Kerala, 402 in Bihar, 377 in U P, 372 in T. N., 100 in Rajasthan, 77 in Himachal Pradesh, 64 inManipur, 60 in Meghalaya, 47 in Nagaland 45 in Sikkim.

2. Economic Environment:Markets require purchasing power as well as people. The people must have money to spend and be willing to spendit. Thus, the economic environment is a significant force that affects the marketing activities of about any

organization. The available purchasing power depends on current income, prices, savings debts and creditavailability..Income distribution ;Nations vary greatly in level of income and distribution and industrial structure. Thefollowing are the different categories in it:-a Subsistence Economies:-

Majority of people engage in simple agriculture.

They consume most of the output

They barter the rest for other simple goods and services.

There is very few opportunities for marketers.b. Raw material exporting economies :

These economies are rich in one or more natural resources but poor in other respects. Much of their revenue comes from exporting these resources.

c. Industrializing economies :

Here manufacturing accounts for 10 to 20% of the GDP. E.g. India.

Industrialization results in increase in imports of raw materials etc and decrease in import offinished goods.

It creates a new rich class and a small but growing middle class, both demanding new types ofgoods.

d. Industrialized economies:

They are major exporters of manufactured goods and investment funds. They buy manufactured goods from one another and also export them to other types of

economies in exchange for raw materials and semi finished goods.Income distribution pattern: a

Very low income

b. Mostly low incomec. Very low, very high incomes 'd. Low, medium, high incomese. Mostly medium incomes

The economic status of Indian consumer can be classified into the following three groups :-aThe Affluent group :

They form a negligible minority. They can afford pompous consumption of high order but do not form a demand base for

companies to depend on them.b. The middle class :

This class constitutes the largest segment of consumers of manufactured goods in the country.

c. The Poor:- Their size is also large but purchasing power is low.

Stages of business cycle :The traditional business cycle goes through four stages :Prosperity, Recession, Depression and Recovery.Marketing executives need to know which stage of the business cycle the economy currently is in, because acompany usually operates its marketing system quite differently during each economic stage.Inflation :- Inflation is a rise in the price of goods and services. When prices rise at a faster rate than personalincomes, consumer buying power declines.Managing a marketing program becomes challenging when inflation is high especially regarding pricing andcost control. Consumer spends less because their power of buying declines but sometimes they spend more

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fearing that the prices will be still high tomorrow.Interest rates : This is another economic factor that influence marketing program. When interest rates arehigh people post pond their long term purchases such as housing.

3. Social Environment:The social and cultural forces are changing much more quickly than it used to like, lifestyle changes, socialvalues, beliefs etc.With respect to India, the major change on the social scenario is the middle class explosion.

The rise in the middle class is due to the increasing number of industrial units with increased

number of engineers, managers, a sizeable portion of doctors, teachers and also govt staff both inthe center as well as states.

The members of this class are better educated and exposed to the lifestyle of rich. They often spend more than what they earn at any given point in time to cope with their new

social image.

Their expenditure on non food items, premium brands of toiletries and cosmetics has gone up. Synthetic fabrics, ready made garments, furniture, fans, stereo - music systems, t v, electric

mixers and grinders, pressure cookers, gas stoves and other modem household appliances havebecome essential items.

Breakdown of joint family system : there is a rise in nuclear families.

Working class women : is also increasing. There is a new life style among the middle class

requiring several time saving conveniences.4. Technological environment:One of the most dramatic forces shaping people's lives is technology., every new technology is a force for "creative destruction". E.g. Xerography hurt carbon paper, autos hurt rail road etc. The marketer should monitorthe following trends in technology :

a. Accelerating pace of technological change :- Many of today's common products like computers, digital watches etc were not available 40 years ago.- The time lag between new ideas and their successful implementation is decreasing rapidly.- The time between introduction and peak production is shortening considerably.- All this has a substantial impact on shopping behavior and marketing performance.b. Unlimited opportunities for innovation :

Scientists are working upon a whole range of new technologies

- E.g. in fields of biotechnology, solid state electronics, robotics and material sciences.- With the advent of new technology, the challenge will be to develop the affordable version.c. Varying R& D budgets : ,- USA has the highest R & D budget followed by Japan.- In India, most of the companies have their own R & D dept but the focus mostly is on imitating

competitor product or making slight changes rather than creating or innovating new products altogether.d. Increased regulation of technological change :

When new products are coming on it becomes mandatory for the govt to regulate the products and makelaws so that unsafe products are kept away from the market etc

- Marketers must be aware of these regulations when proposing, developing and launching new products.Technological breakthroughs affect the market in three ways :-

1. Start entirely new industries such as computers, lasers etc2. radically alter or virtually destroy existing industries e.g. calculators affected slide rules, t vcrippled radio and movies.

3. stimulate markets and industries not related to the new technology. E.g convenience goodsprovide time for additional activities.

Micro factors in the Marketing Environment:There are three external factors that are a part of company's marketing system. Though they are generallyuncontrollable but they can be influenced more than the external macro factors. These factors are a company'ssuppliers, market and its marketing intermediaries.

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The market: A market may be defined as a place where buyer and seller meet, goods or services are offeredfor sale and transfer of ownership occurs.For business purpose, market is defined as people or organizations with wants (needs) to satisfy, money tospend and the willingness to spend it.

Suppliers : A product cannot be sold if it cannot be made or bought. Thus people who supply goods or servicesthat is required to produce a product becomes important.Thus suppliers also form a part of its marketing system. Shortages may arise if cooperative relationship is not

maintained with the suppliers.Marketing intermediaries : These are independent business organizations that directly aid the flow of goodsand services between a marketing organization and its market.There are two type of intermediaries :

a. the firms we call middlemen - wholesalers and retailersb. various facilitating organizations that provide such services as transportation, warehousing and financing

etc.these intermediaries operate between a company and its suppliers. They are also called channels ofdistributions.

Organization's internal environment:These include a firm's production, financial and personnel activities. E.g if a new brand of soap needs to beintroduced, it has to be seen whether the existing production capabilities can be used or not or otherwise if a newplant needs to be set up, proper finance should be available. Other non marketing forces are -company's location

- its R & D strength- image in the public eye.

Unit II

PRODUCT FEATURES

Product classification:

The products are classified on the basis of

- durability & tangibility

- consumer goods

- industrial goods

I. Durability and tangibility:

Products are classified into three groups, according to durability and tangibility.

a. Non durable goods: these are tangible goods consumed in one or few uses. They are consumed quicklyand purchased frequently. They are made available in many locations, the margins are less and

advertising is heavy.

b. Durable goods: These are tangible goods that normally survive many uses. E.g. Refrigerator. They

require more personal selling and service, command a higher margin and require more seller guarantees.c. Services: These are intangible, inseparable, variable and perishable products. They require more quality

control, supplier credibility and adaptability. E.g. haircut.

II. Consumer goods:

Consumer goods are further classified into the following :

a. Convenience goods: These are the goods that the customer usually purchases frequently, immediately

and with minimum efforts. Customer does not feel like putting extra efforts to buy them and is ready to

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accept one of the many brands available. These goods have low unit price and are not bulky. They are

further divided into

# staples consumer purchases this on regular basis. E.g. grocery

# impulse goods they are purchased without any proper planning. E.g. chocolates, magazines.

# emergency goods these are purchased when a need is urgent. E.g. umbrella during rainy season.

b. Shopping goods: These are the goods for which consumers want to compare quality, prices and

sometimes style in several stores before making a purchase. E.g. furniture, clothing etc. The process ofsearching and comparing continues as long as the customer believes that the potential benefits from abetter purchase more than offset the additional time and effort spent in shopping.

c. Specialty goods: these are the goods with unique characteristics or brand identification for which a

sufficient number of buyers are willing to make a special purchasing effort. E.g. cars

d. Unsought goods: Consumers usually do not know about such product and they must be made aware

about the product to buy it. E.g. Insurance

III. Industrial goods :

Industrial goods are classified in terms of how they enter the production process and their relative costliness.

They are generally divided into the following categories:

a. Raw materials: These are the goods that are processes and become part of another finished product. It

includes goods that are found in their natural state, e.g. minerals or agricultural products such as cotton,fruits or livestock like chicken, egg etc

b. Fabricating materials and parts: They become part of the finished product after being processed to

some extent. The difference between raw materials and fabricating materials is that raw materials are not

at all processed whereas fabricating materials are somewhat processed. E.g. flour being part of a bread.Fabricating parts are assembled with no further change in their form. E.g. zipper in clothing.

c. Installations or capital items: these are the manufactured products that are an organizations major,

expensive and long lived equipments. E.g. large generators, blast furnace etc.

d. Accessory equipments: these are tangible products that have substantial value and are used in anorganizations operations. E.g. small power tools, fork lift trucks etc. they are not part of the finishedproduct.

e. Operating supplies: these are those goods that aid in an organizations operations without becoming

part of the finished product. E.g lubricating oil, stationary items etc.

PRODUCT MIX:

It is the set of all those products and items that a particular seller offers for sale. Any companys product mixhas width, length, depth and consistency:

Width: It refers to how many product lines the company carries. E.g. detergents, bar soap, paste etc

Length: it refers to the total number of items in the product mix.

Depth: it refers to how many variants are offered for each product in the line.

Consistency: it refers to how closely related the various product lines are in end use, production requirements,

distribution channel or some other way.

BRAND:

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A brand is a name, term, sign or symbol or a combination of them intended to identify the goods or services of

one seller or group of sellers to differentiate them from those of competitors.

Reasons for branding:

Easy to identify goods and services.

Assurance that a minimum level of quality will be provided

Reduces price comparison

Adds prestige to otherwise ordinary commodities.

Reasons for not branding:

Responsibility attached with branding to promote and maintain consistent quality of output.

Difficulty to differentiate e.g. nails, raw materials

Essential/desirable characteristics of a brand name:

Should suggest something about the product, particularly benefits & uses.

Easy to pronounce, spell and remember.

Distinctive

Should be adaptable to new products when they may be added to product line.

Capable of registration & legal protection.

Challenges to branding:

To decide whether to brand or not

Selecting a good brand name as more and more new products are coming but the words available arefixed.

To see whether the brand name chosen already exists or resembles some existing ones.

Brand Equity:

It denotes the value a brand name adds to the product. E.g. Sony, Reebok etc

Brand name decision:

a. Individual names: It means individual name for all the products.

Benefits: if one of the product fails, it will not affect other products.

If the company wants to introduce low quality products, its overall image will not be tarnished

The firm can search the best name for each product.

b. Blanket family name: All the products carry the same name. E.g. Maggi, Bajaj etc Benefits: Development cost is less as no money needs to be spent on name research or for heavy

advertising for brand recognition.

Initial awareness is easily achieved due to manufacturers image

c. Separate family name for all product lines: Different family names are invented for different qualitylines within the same product class. E.g. Lakme, Elle

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d. Company trade name combined with individual product name: Some manufacturers tie their

company name to an individual brand name for each product. The company name legitimizes and theindividual name individualizes the product.

Brand strategy decision:

A company can choose the following five strategies:

1. Line extension: Existing brand name extended to new sizes or flavors in the existing product category.

Companies may also introduce brand variants which are specific brand lines supplied to specific retailers ordistribution channels.

2. Brand extension: Using the existing brand name to launch new products in other categories. E.g. Tata,

Honda etc

3. Multi Brands: A company can also introduce additional brands in the same category. The company may be

trying to establish different features or appeals to different buying motives.

4. New brand: If none of the existing brand names suit a new product, the company can come up with a newbrand name.

5. Co Brand: Two or more well known brands are combined in an offer. E.g. Bajaj Kawasaki, Kinetic Honda,

Kotak Mahindra

PACKAGING:

A package is the actual container or wrapper. Packaging is a business function. It includes the activities ofdesigning and producing container for a product.

Purpose/Importance of packaging:

To protect the product on its way to the consumer.

Provide protection after the product is purchased to the time it is consumed.

Be part of the companys trade marketing program to meet the needs of wholesalers and retailers.

Be part of a companys consumer marketing program for identification by consumers.

To face competition.

To act as a five second commercial for the product.

Retailers prefer products with attractive package.

Rising consumer affluence is making people willing to pay extra for convenience, appearance and

dependability of the package.

Helps in building company and brand image.

Innovation opportunity in packaging brings benefits to customers and profits to producers.

Packaging strategies:

a. Packaging the product line: A company has to decide whether to develop a family resemblance whenpackaging related products. Family packaging uses either highly similar packaging for all products or

packages with a common and clearly noticeable feature.

b. Multiple packaging: This is the practice of placing several units of the same product in one container. It

also helps in increasing the sale. E.g towels, toffees etc

c. Changing the packaging: This may be done in order to

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- correct a poor feature in an existing package

- take advantage of a new development in packaging

- less expensive to design an attractive package than going for heavy advertising campaign.

Criticism of packaging:

Packaging depletes natural resources if it is not recycled or biodegraded

Packaging is too expensive

Some forms of plastic packaging & aerosol cans are causing health hazards.

Packaging is deceptive

Used and discarded packaging contributes significantly to solid waste problem.

Recent developments in Packaging:

1. Aseptic container made of lamination of paper, aluminum foils and plastic ( tetra pack ). Keepperishables fresh up to 5 months without refrigeration. It costs about of that of cans and 1/3 of bottles.

It is not bio degradable.

2. Sachet Packaging

LABELLING:

A label is that part of a product that carries information about the product and the seller. A label may be a

part of the package or it may be a tag attached to the product. There are some legal requirements also.

Types of label:

A brand label: simply the brand alone will be written on the product or the package.

A descriptive label gives objective information about the products use, construction, care,

performance and/or other features.

A grade label identify the products judged quality.

Functions of a label:

Identifies the product or brand

Grade the product

Describe the product

Promote the product

NEW PRODUCT DEVELOPMENT:

Every company must develop new products. New product development shapes the companys future. Booz,

Allen and Hamilton identified 6 categories of new products.

(a) New to the world product

(b) New product line: product is new for the company but an established market is there

(c) Addition to existing product line: products that supplement a companys existing product line.

(d) Improvements and revision for existing product: provide improved performance or greater perceived

value.

(e) Repositioning: existing products targeted to new market segments

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(f) Cost reduction : provide similar performance at lower price/cost.

Steps in new product development:

1. Idea generation: New product development starts with new ideas. A system must be designed forstimulating new ideas within the organization and acknowledging and reviewing them properly and

promptly. The sources for new ideas can be company employees, customers, suppliers, universities,

inventors, advertising or market research agencies etc.

2. Idea screening: New product ideas are evaluated to determine which one wants further study. The ideasare sorted out into three categories promising, marginal and rejects. Care must be taken to avoid the

following two types of errors: Go error permitting a poor idea to further processing and Drop error dropping an otherwise good idea.

3. Concept development and testing: Attractive ideas must be refined into testable product concepts. Aproduct concept is an elaborated version of the idea expressed in meaningful consumer terms. Concept

testing involves presenting the product concept to appropriate target consumers and getting their

reactions. Conjoint analysis is a method for deriving the utility values that consumers attach to varyinglevels of product attributes. It is used to measure consumer preferences for alternative product concepts.

4. Marketing strategy development: After testing, the new product manager must develop a preliminary

market strategy for introducing the new product which should include the target market size, structure,

behavior, planned product positioning, price, distribution strategy and marketing budget etc for the firstyear.

5. Business analysis: To evaluate the proposals business attractiveness, the company should know the

sales, cost and profit projections. They do this by

- Estimating total sales = first time sales + replacement sales + repeat sales. This in turn depends upon

whether the product is a one time purchase or infrequently purchases or frequently purchased.

- Estimating cost and profits

6. Product development: If the product concept passes the business test, it moves to R&D or engineeringdepartment to be developed into a physical product. The target customer requirements is translated into a

working prototype by a set of methods known as QFD or Quality Function Deployment wherein the list ofcustomer attributes are converted into engineering attributes. Along with the products functionalcharacteristics the lab scientists must also communicate the products psychological aspects through

physical cues.

Testing of the products:

There are two types of tests

a. Alpha testing done within the firm to see how it performs

b. Beta testing testing is done with a set of customers & their feedback taken.

7. Market testing: After the management becomes satisfied with the functional and psychological performance

of the product, the product is decorated with a brand name and packaging, it goes for market testing. This isonce again divided into two categories -

a. Consumer goods market testing can be done by

# Sales wave research initial trial is provided for free of cost and later the same product along withcompetitors product is provided at a reduced price to see how many purchase this brand.

# Simulated test marketing 30 to 40 qualified shoppers are invited to a shop for purchasing any goods after

showing them the screening of ads which contains the ad for the new product also. Those who dont buy the

new product are given free samples and feedback taken.

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# Controlled test marketing: a market research agency conducts the test marketing for the product in selected

cities.

# Test marketing: full blown test marketing is conducted in selected cities.

b. Business goods market testing this also undergoes Alpha testing and Beta testing. Other methods are

introducing the new product at a trade show or testing by means of displaying at the distributor or dealers

display room.

8. Commercialization:

The factors that are to be considered for commercialization are

When or timing - here they can adopt the following strategies

a. First entry entering before competitors

b. Parallel entry entering along with competitors

c. Late entering entering after the competitors

Where or geographic strategy: the company must decide whether to launch the product in a single locality, a

region, several regions or the national market.

To whom or target market prospect: the company must target its product to early adopters, opinion leaders,heavy users and those who can be reached at a low cost.

How or introductory market strategy: to coordinate the many activities included in a new product launch,

management can use network planning technique such as critical path scheduling i.e. developing a master chart

showing the simultaneous and sequential activities that must take place to launch the product and the estimatedtime for each activity.

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NEW PRODUCT DEVELOPMENT

PRODUCT LIFE CYCLE

Concept:

It means the product has the following four things

a. Products have a limited life.b. Product sale passes through distinct stages, each posing different challenges, opportunities and problems

to the seller.

c. Profits rise and fall at different stages of PLC

d. Product require different marketing, financial, manufacturing, purchasing and human resource strategies

in each stage of their life cycle.

A life cycle can be graphed by plotting aggregate sales volume for a product category over time usually years..

most PLCs curves are portrayed as bell shaped. The four stages are introduction, growth, maturity and

decline.

a. Introduction:

Characteristics

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DROP

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A period of slow sales growth as the product is just introduced in the market. Profits are non existent because of

heavy expenses incurred in the product introduction.

Strategy to be adopted: promotion

Low high

Price high

low

a. Rapid skimming:

launching the new product at a high price and promotion

this is done when a large segment is unaware of the product and they are eager to buy when theyknow about it.

There is a chance for potential competition.

b. Slow skimming:

High price and low promotion

Market is limited in size and aware of the product.

Buyers are willing to pay the high price.

No potential competition.

c. Rapid penetration:

Low price, high promotion.

Market is large, unaware of the product.

Buyers are price sensitive

Strong potential competition.

d. slow penetration:

Low price, low promotion.

Market is large aware of the product.

Price sensitive

Some potential competition.

b. Growth stage:

Characteristics :

A period of rapid market acceptance and substantial profit improvement.

Strategy:

13

Slow rapid

Skimming skimming

Slow rapid

Penetration penetration

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Improve product quality, add new product features & improve styling.

Add new models and flanker products( products of different size and flavors)

Enter new market segments .

Increase distribution coverage and enter new distribution channel.

Shift from product awareness advertising to product preference advertising.

Lower prices to attract the next layer of price sensitive buyers.c. Maturity stage:

Characteristics:

A period of slow down in sales growth because the product has achieved acceptance by most potential buyers.

Profits stabilize or decline because of increased competition.

Strategy:

# Market modification:

The company tries to increase the volume by increasing the number of users and usage.

Increasing number of users convert non users, enter new market segment or win competitorsconsumers

Increasing usage use more frequently, or use more per occasion or invent new uses.

# Product modification:

Quality improvement increases the products functional performance, durability, reliability, speed ortaste

Its called a plus launch or bigger or stronger etc

Feature improvement adding new features such as size, weight, materials, accessories etc

# Marketing mix modification Price price cut, special offers, easier credit terms, early purchase discount etc

Distribution more display, more outlets, new distribution channels etc

Advertising increase ad expense, change message or copy, ,media mix, time, frequency etc.

Sales promotion trade deals, coupons, rebates, warranties etc

Personal selling number & quality of sales force, sales incentives, revision of sales territories etc

Services speed up delivery, more technical assistance, more credit etc.

d. Decline stage:

Characteristics:

The period when sales show a downward drift & profits erode.

Strategy:

Increasing the firms investment ( to dominate the market or strengthen its competitive position).

Maintaining the firms investment level until the uncertainties about the industry are resolved

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Decreasing the firms investment level selectively by dropping unprofitable customer groups whilesimultaneously strengthening the firms investment in lucrative niches.

Harvesting the firms investment to recover cash quickly.

Divesting the business quickly by disposing off its assets as advantageously as follows.

Meaning of price:

Price is the amount of money and/or other items with utility needed to acquire a product.

Pricing objectives:Following can be the pricing objectives for any given company:

a. Profit oriented goals:

Profit goals may be set for the short or long. A company may select one or two profit oriented goals for itspricing policy:

(i) Achieve a target return:

A firm may price its product to achieve a target rate of return a specified percentage return on its sale or on itsinvestment. An additional amount is added to the cost of the product called a mark up, to cover anticipated

operating expenses and provide a desired profit for the period.

(ii) Maximize profits:

This is one of the most followed objectives. If profits become high in a particular industry then it will attract

more capital which will increase the supply and hence lower the profit origin.b. Sales oriented goals:

The pricing goal in this case may be to either increasing the sale or maintain or increase market share.

(i) Increase sales volume:

If the objective is to achieve rapid growth in sales, the company may put lower prices for the product or may

adopt some other aggressive pricing strategy.

(ii) Maintain or increase market share:

The companies lower the prices if they want to maintain or increase the market share.

c. Status quo goals:

This is the most aggressive of all the pricing goals. It may be either one of the following two:

(i) Stabilizing prices

(ii) Meeting competition

Different pricing policies:

1. Cost based pricing: In this method, the price is determined on the basis of cost of production plus an

additional margin of cost. E.g. mark up pricing, target rate of return on investment pricing2. Demand based pricing: the price is fixed on the basis of demand. If the demand is high, price will be

high. If the demand is low, the price is low. E.g. Perceived value pricing

3. Cost and demand based pricing: this takes into consideration both the demand factor as well as thecost of production. E.g. Value pricing

4. Competitor based pricing: Here the pricing is based on what the competitor is pricing or is expected to

price. E.g Going rate pricing, Sealed bid pricing

Different types of pricing method:

1. Mark up pricing:

In this method, a standard mark up is added to the products cost.E.g. suppose for a pen manufacturer

Variable cost per unit = Rs 10/-

Fixed cost per unit = Rs 3, 00,000/-Expected unit sales = 50, 000

Manufacturers unit cost = variable cost + fixed cost

Unit sales

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= 10 + 3,00,000

50,000= Rs 16/-

suppose mark up is 20%

then mark up price = unit cost1 desired return on sales

= 16

1 0.2

= Rs 20/-Profit per unit = 20 16

= Rs 4/-

Mark ups are higher on seasonal items, specialty items, slow moving items, items with high storage andhandling costs.

2. Target return pricing:

The firm determines the price that would yield its target rate of return on investment ( ROI ).

Suppose the pen manufacturer has invested 1 million rupees and wants to earn a 20% rate of return. Then:

Target return price = unit cost + desired return * invested capitalUnit sales

= 16 + 0.2 * 1,000,00050,000

= Rs 20/-this target will be realized only if the sales reach 50,000 units.

3. Perceived value pricing:

The price is based on the perception of the value not the seller cost, as the key to price. They use other

marketing mix elements such as advertising and sales promotion activities to create an enhanced image of the

product. E.g. gift articles.

4. Value pricing:

Here a fairly low price is charged for a high quality offering. Value pricing says that the price should represent ahigh value offer to the customer.

Value pricing is not about lowering the price but reengineering the companys operation to become a low cost

producer without sacrificing quality or profit.

5. Going rate pricing:

The firm bases its price on the competitors. In industries like steel, paper etc where the product is standardized,

usually the leader sets the price and accordingly others also set. The individual firms do not charge on the basisof their cost or their demand.

6. Sealed bid pricing:

The firm bases its price on the expectation of how competitors will price rather than on a rigid relation to theirfirms cost or demand. The firm wants to win a contract and that normally requires submitting a lower price bid

at the same time price cannot be set lower than the cost.

Pricing strategies:

a. Geographical pricing: Here different prices are set for different markets situated at different locations

based on the transportation and shipping costs. The mode of payment may be Barter exchange ofgoods of equal worth orcompensation part payment in cash and part payment in the form of goods or

buy back arrangement i.e. if the company is supplying technical know how to one country, it accepts

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the goods back produced in that company oroffset entire payment in cash but a part of the payment

has to be spent in that country itself.

b. Promotional pricing:

Loss leader pricing: the prices of well known brands are lowered to stimulate store traffic.

Special event pricing: establish special prices during special season like Deepawali etc

Cash rebates: some discounts are given if the product is purchased during a specified time period.

Low interest financing: e.g. automobiles arrange for low interest financing so that people do not

have to take the botheration of arranging loans etc.

Longer payment terms: helps in lowering monthly installments, thus lowering the monthly expense

for people.

Psychological discounting: set an artificial high price, then sell at a lower price. E.g.500 => 350/-

c. Discriminatory pricing: this is the practice of selling the same product to different customers at

different prices. The discrimination can be on the following bases:

Customer segment pricing: different customer groups charged differently. E.g. childrencharged half in buses, museums, train etc

Product form pricing: different versions of the product are priced differently. E.g. liquid soap

or bar soap.

Image pricing: same product priced differently on the basis of difference in pricing. E.g.

perfumesLocation pricing: e.g.. theatres

Time pricing: e.g hotels, airlines etc.

d. Product mix pricing: following are the different ways of product mix pricing:

Product line pricing: the companies usually produce a product range not a single product and

thus have the same product in a range. E.g. shirt costing from 800/- to 1500/- from the samemanufacturer.

Optional feature pricing: many companies offer a basic product and other optional features for

which the customer has to pay extra for only those features which the customers are opting.

Captive product pricing: some products require the use of ancillary or captive products. The

main or basic product will cost less, the captive product will cost more. E.g. camera, razors.

Two part pricing: it consists of a fixed fee + variable fee depending on usage. E.g. telephoneconnection.

By product pricing: the production of certain products like petroleum leads to production of by

products like Vaseline. In such cases, the by products should be priced on their value.

Product bundling pricing: sellers often bundle their product and features at a set price.

CHANNELS OF DISTRIBUTION:

Distribution management:

It is concerned with the activities involved in transferring goods from producers or manufacturers to the

ultimate buyers or consumers.

Objectives of distribution management:

Convenience of consumers to get the product

Choice of selection of goods

Minimum incidence of breakage or damage during transportation

Optimal distribution cost

Effective and sincere promotional activity.

Effective display and storage of goods

Effective location of godown and warehouses

Various activities in distribution channels :

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Physical flow flow of goods from one party to other.

Title flow transference of ownership of goods from one party to other.

Payment flow flow of money from one party to other.

Communication flow flow of requirement of goods from one party to other.

Advertising communication flow the members have to make themselves known.

Role and importance of distribution channels:

Information : the channels provide information about the market and competitors to the seller. Price stability: they absorb the increase in price sometimes due to high intra middlemen competition

thus resulting in price stability.

Promotion: they also undertake some promotion activities for their shop as well as the goods.

Financing: they provide working capital to the manufacturer in the form of advance payments and

deposits etc.

Title: they take the ownership for the goods once they come into their possession thereby reducing therisk of the manufacturer.

Provide distributional efficiency: they bring together the makers and buyers effectively.

Supply products in require assortment: the same middlemen operates as middlemen to so manymanufacturers thus providing the products in assortment for the customer.

Channels provide salesmanship: middlemen also have their own salesman who also canvass fororders.

Help in merchandizing:by displaying the products, they increase awareness about the product.

They act as change agents or generate demand: especially in the field of agriculture.

Patterns of distribution channels:

1. Zero level -

Manufacturer --> User

2. One level:

Manufacturer => mail order => user

Manufacturer door to door salesman user

Manufacturermanufacturers showroom user

Manufacturer retailer user

3. Two level:

Manufacturer wholesaler retailer user

4. Three level:

Manufacturer stockist/distributor wholesaler retailer user

5. Four level:

Manufacturer marketer stockist/ distributor wholesaler retailer user

Manufacturer sole selling agent stockist/ distributor wholesaler retailer user

Factors determining the length of the channel or factors affecting the distribution system:1. Market characteristics:

If there is requirement for high level of service, the distribution channel will be short.

2. Company characteristics:

Companys long term objectives, financial resources, manufacturing capacity, marketing mix etc

influence the distribution decision.

3. Product characteristics:

If the product risk and product value is high, the distribution channel is short.

If the product is perishable in nature, the distribution channel is short.

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If the product is standardized in nature, the distribution channel is long.

If the product is bulky in nature, the distribution channel is short.

4. Middlemen characteristics:

The kind of distribution channel also depends on middlemens aptitude for service, promotion &handling negotiations, storage, credit etc

5. Intensity of competition:

Some firms adopt intensive distribution strategy & are indifferent to multiple brand outlet.

6. Environmental characteristics:

The govt policy, statutory provisions, state of the economy, technological and infrastructural

developments etc also affect the distribution decisions of the firm.

Identifying major distribution alternatives:

1. Intensive distribution:

This alternative involves all the possible outlets to distribute the product.

E.g. soft drinks.

The same product will be available from a small tea stall to a five star restaurant.

2. Selective distribution:

This is the middle path approach to distribution.

Here, the firm selects some outlets to distribute the product.

This approach helps the manufacturing firm to focus its selling effort on a few outlet.

Good working relationship is established with the channel members.

Optimum market coverage & more control is possible here with lesser cost.

3. Exclusive distribution:

Here the firm distributes its products through just one or two outlets in the market who exclusivelydeal in it and not all competing brands.

This practice is usually in products and brands that seek high prestigious image.

E.g. designer wear, major domestic appliances etc.

By giving exclusive distribution rights, the manufacturer hopes to have control over the

intermediaries price, promotion, credit inventory & service policies.

The firm also hopes to get the benefit of aggressive selling by such outlets

Unit III

Communication process steps in the development of effective communication, designing message, selection ofcommunication channels, deciding promotion mix and measuring results.

Advertising decisions setting advertising objectives, advertising budget, deciding on the message, media mix,

evaluating effectiveness

Sales management & personal selling, designing the sales force, objective, strategy, size, compensation.Managing the sales force, recruiting, training, motivating sales force, personal selling principles.

Communication process:

Communication is the verbal or non verbal transmission of information between someone wanting to express anidea and someone else expected or expecting to get that idea.

There are 9 fundamental elements in any effective communication process:

1. Sender --|2. Receiver | Major parties in the communication process

3. Message | Major communication tools

4. Media |

5. Encoding |6. Decoding |

7. Response | Major communication functions

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8. Feedback |

9. Noise - random and competing messages that interfere with the intended communication.

The information the sending source wants to share must first be encoded into a transmittable

form

Once the message has been transmitted through some common channel, the symbol must be

decoded or given meaning by the receiver.

If the message has been transmitted successfully, there is some change in the receivers

knowledge, belief or faith. As a result, the receiver formulates a response.

The response serves as a feedback telling the sender whether the message was received & how it

was perceived by the recipient.

All the above stages are affected by noise.

Communication model

Sometimes the receiver does not receive the intended message because of the following reasons:

a. Selective attention: People are bombarded by thousands of commercial messages a day of which hardly

an 80 are consciously noted and about 12 provoke some reaction.b. Selective distortion: Receivers will hear what fits into their belief system. As a result, receiver often

add things to the message that is not there and do not notice other things that are there. Thus, the

communication should be simple, clear, interesting and should be repeated to get the main points across.c. Selective retention: People will retain in their long term memory only a small fraction of the messages

that reach them. If the receivers initial attitude towards the message is positive and he or she rehearses

support arguments, the message is likely to be accepted & have high recall.

Factors influencing the effectiveness of a communication as given by Fiske and Hartley:

Greater the monopoly of the source over the receiver, greater the receivers change or affect in

favor of the source.

Communication effects are greatest if the message is consistent with the receivers existing

opinions, beliefs and disposition.

Communication can produce effective shifts on peripheral issues, which do not lie at the

recipients value system. The expertise, high status, objectivity or likeability of the source effects the effectiveness of the

communication considerably.

The social context group or reference group will mediate the communication and influence

whether or not the communication is accepted.

Steps in the development of effective communication:

1. Identify the target audience

2. Determine the communication objectives

3. Design the message

4. Select the communication channels

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media

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5. Establish the total communication budget

6. Decide on the communication mix7. Measure the results

8. Manage the integrated marketing communication process.

1. Identify the target audience:

The target audience will include:

- Potential buyers

- Current users

- Deciders or influencers- Individuals

- Groups

- Particular public- General public

Image analysis: A major part of audience analysis is assessing the current image of the company; its products

and its competitors.Image is the set of beliefs, ideas, impressions a person holds regarding an object.

Image analysis is done by

First step

Familiarity scaleMeasure the target audiences knowledge about the object using the following scale:

Never heard of Heard of know a little know a fair amount know very wellSecond step

Favorability scaleTo measure the feelings towards the product

Very unfavorable somewhat unfavorable indifferent somewhat favorable very favorable

Another tool is semantic differential: It involves the following steps:1. Developing a set of relevant dimensions: The researcher asks people to identify the dimensions they

would use in thinking about the object.

2. Reducing the set of relevant dimensions: The number of dimensions should be kept small in order toavoid respondent fatigue. There are 3 types of scale

- evaluation scale ( good bad )

- potency scale - ( strong weak )- activity scale ( Active passive)

3. Administering the instrument to a sample of respondents: The respondents are asked to rate one object at a

time.

4. Averaging the results5. Checking on the image variance

2. Determining the communication objectives:

The communication objective of any company can be understood by any of the following four models:Stages AIDA model Hierarchy of effects Innovation Adoption Communication

Model model model

---------------------------------------------------------------------------------------------------------------------------------

Cognitive attention awareness awareness exposurestage

knowledge reception

cognitive response

--------------------------------------------------------------------------------------------------------------------------------------

-

Affective interest liking interest attitude

Stage

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Desire preference evaluation intention

Conviction

Behavior action purchase trial behavior stage

adoption

3. Design the message:Formulating the message requires solving four problems:

- What to say ( message content )

- How to say it logically ( message structure )- How to say it symbolically ( message format )

- Who should say it ( message source )

Message content: Here the management searches for appeal, theme, idea or USP. There are two types ofappeals:

a. Rational appeal

b. Emotional appeal

(i)Logical Appeals or Rational Appeals :-It aims for the buyers head. It tries to sell the products on the

basis of performance, features or the ability to solve the problems.(ii)Emotional Appeal :-It aims for the buyers heart. It tries to sell product on the basis of satisfaction that

comes from purchasing and then either owning or giving the product as a gift.For e.g. the ad for diamonds - one for diamond rings and the other for industrial diamonds. An emotional

appeal would be more effective for first case and logical for the second case. DeBeers ad - " diamonds are

forever ". The ad draws commitment between the product and the need for love commitment and emotionalsecurity.

On the other hand ad for industrial diamonds will talk of performance and features.

There can be lot of other appeals also :-

1. Price or value appeal :-It tells the customer that they will get more than what they are spending. e.g.

lowering the price and making them aware of the new price, or keeping the price same but offering more,

keeping the price and the product same but convincing the people the product is worth the charge.2. Quality Appeal :-An appeal to quality includes guarantee for say 20 years or telling the product history.An appeal to quality works only if the product possesses the right level of quality e.g. Raymonds - since 1925.

3. Star Appeals and Testimonials :-The public fascination for sports superstars and entertainers is the

foundation of celebrity endorsement advertisement. The presumed pull of the star appeal is that people like toidentify with their favorite stars and will therefore be positively influenced by a star's appearance in the ad.

E.g. Sachin Tendulkar in Boosts ad.

A related appeal is testimonials, in which real users of the product celebrities or not make the sales pitch byshowing the product in use, discussing the benefits they got from it. It is a powerful advertising because the

core message comes from satisfied customers, and not the advertiser. e.g. Vim bar

4. Ego Appeal :- Most consumers are open to their ego appeals whether the appeal relates to their physical

appearance, intellect, sense of humor or any other real or imaginary personal quality. E.g. the L'oreal adfeaturing Miss World Diana Hyden where she admits the product is expensive but says " I am worth it"She is

appealing to the egos of the potential buyers to think the same of themselves. The ego appeal has to happen in

private, so it works without embarrassing the audience.

5. Fear or Anger Appeal :-Extreme cases of emotional appeals are those based on fear or anger. However

appeals to fear have to be managed carefully. Extreme appeals to fear can anger the audience or even cause

them to block the message completely. On the other hand, reducing somebody's fear or anxiety, rather thanartificially increasing it, can be effective. e.g. LIC's fire insurance policy.

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6. Sensory appeal: Whenever the advertiser chooses to make an ad that appeals to any of our five senses i.e.

eyes, ears, smell, touch or taste, its called sensory appeal i.e the ad should use a beautiful scenery or melodiousmusic etc

7. Social appeal: these kind of ads use love, friendship, emotions, feelings etc to portray the message.

8. Novelty appeal: Whenever the ad uses some creative thinking or imaginative thinking to show somethingunusual to promote the product, its called novelty appeal.

Message structure:

The message can have one sided presentation that is praising a product or it can have two sided arguments that also mentions shortcomings.

Finally the order of presentation is also important i.e the order in which the arguments are presented. The

strongest argument can be presented first if the idea is to catch the attention of the audience. In case of a captiveaudience, strongest argument can be presented in the last.

Message format:

The communicator has to decide on headline, copy, illustration and color. For radio they have to choosewords, voice, qualities and vocalizations. In case of TV all the above + body language have to be planned

( facial expressions, gestures, dress, posture, hair style etc)

Message source:

Message delivered by an attractive or popular source achieve higher attention & recall.

The factors that underlie the sources credibility are Expertise- the specialized knowledge the communicator possesses

Trustworthiness how objective and honest the source is

Likeability describes the sources attractiveness

4. Selecting the communication channels:

Communication channels are of 2 types:

(i) Personal

(ii) Non personal

Personal Communication channels:

It involves two or more persons communicating directly with each other, face to face, person to audience, over

the telephone or through emails.

It can be further divided into Advocate channels Company salespeople contacting buyers in the target market

Expert channels independent experts making statements to target buyers

Social channels neighbors, friends, family members & associates talking to target buyers.

Non personal communication channels:

It includes media, atmosphere and events:-

Media print media ( newspaper, magazines, direct mail), broadcast media ( radio, TV),electronic media ( audio tapes, videotapes, video disks, CD ROM, web page) and display media (

bill boards, sign posters, etc)

Atmosphere these are the packaged environment that create or reinforce the buyers leanings

towards product purchase. E.g. luxury hotels using elegant chandeliers

Events these are occurrences designed to communicate particular messages to target audience.

5. Establishing the total marketing communication budget:

DESIGNING THE SALES FORCE:Designing the sales force involves the following activities:

1. Sales force objectives and strategy2. Sales force structure,

3. sales force size

4. Sales force compensation.

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1. Sales force objectives and strategy:

Companies need to define the specific objectives they want their sales force to achieve. The salesrepresentative has a variety of tasks to perform like

Prospecting searching for prospects or leads

Targeting deciding how to allocate their time among prospects and customers.

Communicating information about the companys product and services.

Selling approaching, presenting, answering objections and closing sales

Servicing providing various services to the customers consulting on problems, renderingtechnical assistance, arranging finance, expediting delivery etc.

Information gathering conducting market research & doing intelligence work

Allocating deciding which customer will get scarce products during product shortages.The company should decide how much time should be spent on current customers and how much on new, how

much for established products and how much on new.

The sales job also varies as per state of economy i.e. product shortage and product abundance.

2. Sales force strategy:

The sales force must be deployed strategically so that they call on the right customer at the right time and in

the right way. It can adopt any of the following:

Sales representative to buyer:- a sales representative discusses issues with a prospect or

customer in person or over the phone. Sales representative to buyer group: Sales personnel gets to know as many members of the buyer

group as possible.

Sales team to buyer group: A company sales team works closely with the members of the buyer

group.

Conference selling: The sales personnel brings company resource people to discuss a major

opportunity or problem.

Seminar selling: A company team conducts an educational seminar for the customer company

about the state of the art developments.Company can decide to use a direct or contractual sales force.

A direct sales force consists of full time or part time paid employees who exclusively work for the

company. This includes inside sales personnel conduct business from the office using the telephone andreceive visits from prospective buyers and field sales personnel who travel and visit customers.

3. Sales force size:

Once the company establishes the number of customers it wants to reach, it can use a workload approach to

establish sales force size. There are five steps in doing this:a. Customers are grouped into size classes according to annual sales volume.

b. Desirable call frequencies are established for each class.

c. The number of accounts in each size class is multiplied by the corresponding call frequency to arrive atthe total work load, in sales call per year.

d. The average number of calls a sales representative can make a year is determined.

e. The number of sales representatives needed is determined by dividing the total annual calls required by

the average annual calls made by a sales representative.4. Sales force compensation:

The company must develop an attractive compensation package to attract and retain a top class sales force.

For that, it must a. Determine the level and components of an effective compensation plan. The level must be somewhat in

alliance to what is being given by the competitors in the same field.

b. The components are a fixed amount, a variable amount, expense allowances and benefits.The fixed amount, that is the salary will satisfy the reps need for income stability. The variable amount,

which might be commissions, bonus or profit sharing stimulates and rewards greater efforts. The expensesallowances covers the expense incurred in traveling, lodging, dining and entertaining. The benefits such as

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paid vacations, accident and sickness benefits, pension, life insurance etc provide security and job

satisfaction.A popular rule favors making 70% of the compensation fixed and 30% variable

Types of compensation systems:

a. Straight salary: it provides sales representatives with a secure income, make them more willing toperform non selling activities and give them less incentive to overstock customers.

b. Straight commission: it attracts sales representatives with higher sales performance, provide more

motivation, require less supervision and control selling costs.

c. Combination: it provides the benefits of both the plans at same time reduces the disadvantages.

MANAGING THE SALES FORCE :

Managing the sales force includes the following:

Recruiting and selecting

Training

Supervising

Motivating

Recruiting and selecting

To select a good sales force, first the company must develop the selection criteria, that is what are the traits thatmust be looked in a sales candidate:

Following are the traits identified by many people:

1. According to a survey of customers, successful sales representatives have the following quality- honest,reliable, knowledgeable and helpful.

2. According to a study by Charles Garfield about superacheivers, following are the qualities in super

achievers risk taking, powerful sense of mission, problem solving bent, care for the customer, andcareful call planners.

3. Robert McMurry added the following traits high level of energy, abounding self confidence, a chronic

hunger for money, a well established habit of the industry and a state of mind that regards each obstacle,

objection or resistance as a challenge.After the management develops the selection criteria, it must recruit.

The sources for right candidates can be educational institutions, own employees, placing job ads or using

employment agencies.Selection procedure may include

Written test

Interview

Group discussion

Medical tests

Reference

Interview of spouse.

Training sales representatives :

It is necessary to provide the new sales representatives with enough training before they go to the field so that

they are well prepared in handling the customers.The Training Program goals are

Sales representatives should know and identify the company.

Sales representatives should know the company products.

Sales representatives should know customer and competitor characteristics.

Sales representatives should know to make effective presentations.

Sales representatives should understand field procedures and responsibilities.

The techniques or methods used for training are

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Lecturing, role playing, sensitivity training, cassette tapes, video tapes, CD ROMS, programmed learning and

films on selling.

Supervising sales representatives: This is done by establishing norms for customer calls, norms for prospect

calls and to see whether the sales time is used efficiently.

Motivating sales representatives:

Churchill, Ford and Walker gave a model which says that the higher the sales personnels motivation, the

greater his/her efforts. Greater efforts will lead to greater performance, greater performance will lead to greater

rewards, greater rewards will lead to greater satisfaction and greater satisfaction will reinforce motivation. This

model thus implies the following: Sales managers must be able to convince sales personnel that they can sell more by working harder or by

training them to work smarter.

Sales managers must be able to convince sales personnel that the rewards for better performance are

worth the extra efforts.

The importance of various rewards with respect to motivation follows the following order highest is pay,

followed by promotion, personal growth and sense of accomplishment.

Sales quotas:

Sales quotas prescribe what the sales representative must or should sell during the year. It can be set on rupee

value, unit volume, margin, selling effort or activity and product type. Compensation is often tied to the degreeof quota fulfillment.

On the basis of sales forecast, sales quotas are set which will usually be higher than sales forecast to encouragemanagers and sales personnel to perform at their best level.There are three schools of quota setting:

a. High quota school: Quotas are set more than what most of the reps achieve but that are attainable. It

assumes that high quotas spur extra efforts.

b. Modest quota school: Set quotas that majority of the sales force can achieve. It assumes that sales forcewill accept the quota as fair, achieve them and gain confidence.

c. Variable quota school: it says that individual differences among sales representatives warrant high quota

for some & modest quota for others.

Supplementary motivators:

Periodic sales meetings provide a social occasion, a break form routine, a chance to meet and talk with other

company employees and a chance to put forth the feelings. Sales meetings are an important tool forcommunication, education and motivation.

Sales contests spur the sales force to a special selling effort above than the average or what is normally

expected. The contest period should not be announced in advance otherwise sometimes sales people defer their

regular selling activities.

Principles of personal selling:

The principles of personal selling are professionalism, negotiation and relationship network.

I. Professionalism:

Companies are concentrating more and more in conducting sales training program so that the sales personnel

transforms from a passive order taker to an active order getter. For this there are two basic approaches:

a. Sales oriented approach: trains the person in age old high pressure techniques.b. Customer oriented approach: trains sales personnel in problem solving of the customer. The person

learns how to listen and question in order to identify customer needs and come up with sound productsolutions.

The major steps involved in any effective sales process are as follows:

Prospecting and qualifying

|

Pre approach

|

Approach

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|

Presentation and demonstration

|

Overcoming objections

|

Closing

|

Follow up and maintenance

Major steps in effective selling1. Prospecting and qualifying:

The first step in selling is to identify and qualify prospects. Previously this was the job of the sales personnel

but now mostly the companies do it and pass on to sales personnel. The source of identifying prospects are

Examining data sources ( CD- ROMS, newspaper, directories ) in search of names

Putting up a booth at tradeshows to encourage drop bys

Inviting current customers to suggest names of prospects

Cultivating other referral sources like suppliers, dealers etc

Contacting organizations and associations to which prospects belong

Using telephone, internet, mail etcThese sources are then qualified by contacting them by mail or phone to assess their level of interest and

financial capacity. The leads are categorized as hot prospects and warm prospects and cool prospects. Hot

prospects are turned over to sales personnel and warm prospects to telemarketing units.

2. Pre approach:

The sales personnel should learn as much as possible about the prospects. The sales personnel should set call

objectives like to qualify the prospects, to gather information and making an immediate sales. Sales personnelshould also decide on the best approach personal visit or a phone call or a letter and the best timing. The sales

personnel has to plan an overall sales strategy for the account.

3. Approach:

The sales personnel should know how to greet the customers, show courtesy and attention to buyers and avoiddistracting mannerisms. The opening line should be positive followed by key questions and active listening to

understand the buyers need.

4. Presentation and demonstration:

The sales personnel details the product to the buyer following the AIDA formula of Attention, Interest, Desire

and Action.

The sales personnel uses Features, Advantages, Benefits and Value ( FABV ) approach.Features: describes the physical characteristics.

Advantages : describe why the features provide advantages.

Benefits : describe the economic, technical, service and social benefits delivered by the offeringValue : describes the summative worth of the offering

Companies have developed three different styles of sales presentation.:

a. Canned approach: a memorized sales talk covering the main points. It is based on thestimulus

response thinking that the buyer is passive and can be moved to purchase by the use of right stimulus,words, pictures, terms and actions.

b. Formulated approach: also based onstimulus response thinking but first identifies the buyers needs

and buyers buying style and then uses a formulated approach for this type of buyer.c. Need satisfaction approach: starts with the search of a customers real need by encouraging the customer

to do most of the talking.

Presentation can be improved by using aids such as demonstration aids, booklets, flip charts, slides, movies,audio and video cassettes, product samples and computer based simulations.

5. Overcoming objections:

Customers pose objections and show the following resistance:

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a. Psychological resistance: resistance to interference, preference for established sources or brands, apathy,

reluctance to give up something, unpleasant associations created by the sales personnel, pre determinedideas, dislike of making decisions and neurotic attitude towards money.

b. Logical resistance: objections to the price, delivery schedule, certain product or company characteristics

To handle these objections sales personnel has to maintain a positive approach, ask the buyer to clarify theirobjections, deny the validity of the objection or turn the objection into a reason for buying.

6. Closing:

Sales personnel can use one of the several closing techniques

Can ask for order Recapitulate the points of agreement

Offer to help the secretary write up the order

Ask whether the buyer wants A or B.

Indicate what the buyer will loose if order is not placed now.

Offer specific inducements such as special price, an extra quantity or a token gift.

7. Follow up and maintenance:

This is necessary if the sales personnel wants to ensure customer satisfaction & repeat business. Immediately

after the closing, the sales personnel should inform the customer about necessary details on delivery time,

purchase terms and other matters that are important to the customers.The sales personnel should make a follow up call when the initial order is received to make sure there is proper

installation, instruction and servicing.

II. Negotiation:

Marketing is concerned with exchange of activities & the manner in which the terms of exchange are

established. The two parties need to reach agreement on the price and the other terms of sale. Sales personnel

need to win the order without making deep concessions that will hurt profitability.

Formulating a negotiation strategy:

A negotiation strategy is a commitment to an overall approach that has a good chance of achieving the

negotiators objectives.

The principled Negotiation approach to bargaining:

a. Separate the people from the problem: each party must understand the other sides viewpoint and the

level of emotion with which they hold it. Active listening to opposing arguments and addressing the

problems in response improve the chance of reaching a satisfactory conclusion.b. Focus on interest, not position: by focusing on interests, the negotiators are more likely to find a

mutually agreeable means of achieving common interests.

c. Invent options for mutual gains: Looking for options that offer mutual gains help identify sharedinterests.

d. Insist on objective criteria: insist that the agreement reach fair objective criteria independent of either

sides position. This approach avoids a situation in which one side must yield to the position of theother.

III. Relationship Marketing:

More companies are emphasizing on relationship marketing. It is based on the premise that important accounts

need focused and continuous attention. Sales personnel working with key customers must do more than callwhen they think customer might be ready to place orders. They should call or visit at other times, take

customers to dinner and make useful suggestions about their business. They should monitor key accounts, know

their problems and be ready to serve them in a number of ways.( Unit completed )

UNIT IV

STP Marketing:

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Since a company cannot serve all the customers in a broad market such as computers and soft drinks, the

company needs to identify the market segments that it can serve more effectively.

STP stands for Segmentation, Targeting and Positioning

Segmentation: identify and profile distinct groups of buyers who might require separate product or marketing

mixes.

Targeting select one or more market segments to enter

Positioning establish and communicate the products key distinctive benefits in the market.MARKET SEGMENTATION:

It is the process of disaggregating the total market for a given product into a number of sub-markets. Theheterogeneous market is broken up in the process into a number of relatively homogeneous markets..

Benefits of market segmentation:

Market segmentation helps the marketing man to distinguish one customer group from another in the

given market.

It enables him to decide which segment of the market should form his target market.

It helps to develop the marketing program on a predictable and reliable basis. The product mix, the distribution mix, the promotion mix and the pricing policy that suits the particular

customer group can be easily achieved.

Marketing efforts become more efficient and economical.

It helps to assess how far the existing offers in the market from competitors match the need of the

customer segment.

It helps in spotting out relatively less satisfied segments and uncovered segments.

Segmentation Approach:

The segmentation can be practiced at any of the following levels:

a. Segment marketing: it consists of a large identifiable group within a market with similar wants, purchasing

power, geographical location, buying attitudes or buying habits. E.g. car manufacturers can concentrate on

any one segment of the following car buyers basic transportation, high performance, luxury or safety.

Assumptions:

Each segments buyers are quite similar in wants and needs yet no two buyers are alike.

The company should provide flexible offering providing a naked solution common to all and

options that are additional features for which the customer should pay extra if they opt for it.

b. Niche marketing: A niche is more narrowly defined group typically a small market whose needs are not

well served. Niches are identified by dividing a segment into subordinates segments or by defining a groupseeking a distinctive mix of benefits.

Assumptions:

Segments attract large number of competitors but niches attract only one or two.

Niche marketers understand their customers need well, so the customers are ready to pay the premium

Characteristics of an attractive niche:

The customers in the niche have a distinctive set of needs.

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They are ready to pay a premium to the firms that best satisfy their needs.

There is no chance for much competition.

Nicher gains certain economies through specialization.

Niche has size, profit and growth potential.

c. Local marketing: Tailoring the products according to the needs & wants of a local customer group ( trading

areas, neighborhoods etc). according to this approach, National advertising is a waste as it fails to address

local needs.

d. Individual marketing: this is the ultimate level of marketing, i.e., customized or one to one marketing.Business to business marketing today is customized, in that a manufacturer will customize the offer,

logistics, communications and financial terms for each major account.

Patterns of market segmentation:

If the customers are asked to rank different product attributes, three different patterns of segmentation emerge:

a. Homogenous preference: all the customers want roughly the same preference in the product attributes

mentioned. It means the existing brands will be similar and cluster around the middle scale of both theattributes.

b. Diffused preference: customers may show great variation in their preferences for the mentioned productattributes.

c. Clustered preference: these are called the natural market segments. The first firm in this market mayposition themselves in the centre appealing to all the groups. It might position in the largest market

segment ( concentrated marketing ). It might develop several brands, each positioned in a different

segment. If the first firm develops only one brand, competitor would enter and introduce brands in other

segment.

Procedure of market segmentation:

There are 3 steps in the process of identifying market segments:

1. Step one: Survey stage:

Conduct an exploratory interview to gain insight into consumers motivation, attitudes and

behavior.

Prepare a questionnaire and collect data on attributes and their importance ratings.

Brand awareness and ratings

Product usage patterns

Attitude towards the product category

Demographics, geographic, psychographic and mediagraphic

2. Step two : Analysis stage:

Apply Factor analysis to remove highly correlated variables.

Apply cluster analysis to create a specified number of maximally different segments.

3. Step three: Profiling stage:

Each cluster is profiled in terms of its distinguishing attitudes, behavior, demographics, psychographics and

media patterns. Each segment is given a name based on its dominant characteristics.

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Market segmentation must be redone periodically because market segments change. For segmentation to be

useful the segments must be relevant, accessible, sizeable, measurable and profitable.

Methods/ Bases of market segmentation:

Markets can be segmented using several relevant bases. They can be based on the various characteristics of the

customers such as age, sex, education and geographical aspects etc. Usually, the variables are divided into two

broad categories:

a. Consumer characteristics geographic, demographic, psychographic etc

b. Consumer responses ( behavioral ) benefits sought, use occasions or brands

Geographic segmentation: Segmentation is based on region, country, state, district, urban, rural and climatic

characteristics of the area. The company can operate in one or few or all geographic areas but pay attention to

local variations.

Region:

City or metro size - based on population size it can be divided into different classes

Density: urban, suburban, rural

Climate: northern, southern etc

Demographic segmentation: Segmentation is based on the following parameters

* Age under 6, 6 11, 12 19 etc

* Family size 1 -2, 3-4, 5 + etc

* Gender male, female

* Income high income group, middle income group, low income group.

* Occupation professional, technical, managerial, proprietor, clerical etc

* Education under school, metric, +2, degree, etc

* Religion Hindu, Muslim, Christian, Sikh, Buddhist, Jain etc

* Nationality Indian, African, European, American etc

* Social class high, middle, low

Psychographic segmentation: (Lifestyles and attitudes)

Variables such as personality types, lifestyles and value systems form the basis of psychographic segmentation.

It facilitates the selection of people who en masse react in a particular manner to a particular emotional appeal

& share common behavioral pat