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MODULE-5
Marketing

Notes

MARKETING MIX

In the previous lesson you learnt that marketing identifies consumers‟ needs and supplies

various goods and services to satisfy those needs most effectively
...

So the marketing manager concentrates on four major decision areas while planning
the marketing activities, namely, (i) products, (ii) price, (iii) place (distribution) and
(iv) promotion
...
All these are inter-related because a decision in one
area affects decisions in other areas
...
, product, price, place and promotion
...
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Marketing

20
...
To begin with, an organisation may decide
on its target group of customers to be served
...
These are to be combined or mixed in an
appropriate proportion so as to achieve the marketing goal
...

According to Philip Kotler “Marketing Mix is the set of controllable variables that the
firm can use to influence the buyer‟s response”
...
Each firm strives
to build up such a composition of 4„P‟s, which can create highest level of consumer
satisfaction and at the same time meet its organisational objectives
...

Let us now have a brief idea about the four components of marketing mix
...
A pair of
shoes, a plate of dahi-vada, a lipstick, all are products
...
We are paying not for the tangible product but for
the benefit it will provide
...
While buying a pair of
shoes, we are actually buying comfort for our feet, while buying a lipstick we are actually
paying for beauty because lipstick is likely to make us look good
...
Thus, the term product
refers to goods and services offered by the organisation for sale
...
It is the second most
important element in the marketing mix
...

Many factors like demand for a product, cost involved, consumer‟s ability to pay, prices
charged by competitors for similar products, government restrictions etc
...
In fact, pricing is a very crucial decision area as it has its
effect on demand for the product and also on the profitability of the firm
...
They must be made available to the
consumers at a place where they can conveniently make purchase
...
So, it is necessary that the product is available at shops in your town
...

The organisation has to decide whether to sell directly to the retailer or through the
distributors/wholesaler etc
...
The choice is
guided by a host of factors about which you will learn later in this chapter
...
Therefore promotion is an important ingredient of marketing mix as it
refers to a process of informing, persuading and influencing a consumer to make
choice of the product to be bought
...
It is done mainly with a view to
provide information to prospective consumers about the availability, characteristics
and uses of a product
...
The proliferation of print
and electronic media has immensely helped the process of promotion
...


INTEXT QUESTIONS 20A
1
...
Give one word/phrase for the following statements :
(a) The crucial decision area of marketing that has direct effect on demand
for the product and profitability of the firm
...

(c) The components that are combined to achieve the marketing goal
...

(e) The ingredient of marketing mix relating to informing, persuading and
influencing a consumer to make choice of the product to be bought
...
2 CONCEPT OF PRODUCT AND ITS CLASSIFICATION
As stated earlier, product refers to the goods and services offered by the organisation for
sale
...
For example, when a consumer buys a washing machine he is not buying
simply a machine but a gadget that helps him in washing clothes
...
Thus, the term product is defined as “anything that can be
offered to a market to satisfy a want”
...

In a broader sense, however, it not only includes physical objects and services but also
the supporting services like brand name, packaging accessories, installation, after sales
service etc
...


Product
William J
...


Jerome McCarthy
“A product is more than just a physical product with its related functional
and aesthetic features
...


PRODUCT CLASSIFICATION
Product can be broadly classified on the basis of (1) use, (2) durability, and (3)
tangibility
...


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Marketing

1
...

(a) Consumer goods: Goods meant for personal consumption by the households
or ultimate consumers are called consumer goods
...
Based on consumers‟ buying behaviour the
consumer goods can be further classified as :
(i) Convenience Goods;
(ii) Shopping Goods; and
(iii) Speciality Goods
...
Reason is, these goods
belong to the categories of convenience goods which are bought frequently
without much planning or shopping effort and are also consumed quickly
...

Such goods are usually sold at convenient retail outlets
...
In case of these goods,
consumers make choice of a product considering its suitability, price, style, quality
and products of competitors and substitutes, if any
...
It may be
noted that shopping goods involve much more expenses than convenience goods
...
They
are ready to buy these goods at prices at which they are offered and also put
in extra time to locate the seller to make the purchase
...
In fact, prior to making a trip to buy the product he/she will
collect complete information about the various brands
...

(b) Industrial Goods: Goods meant for consumption or use as inputs in production of
other products or provision of some service are termed as „industrial goods‟
...
The buyers of industrial goods are supposed to be knowledgeable,
cost conscious and rational in their purchase and therefore, the marketeers follow
different pricing, distribution and promotional strategies for their sale
...
Take for example the case of
coconut oil
...
However, the way these products are marketed to these two groups are
very different because purchase by industrial buyer is usually large in quantity
and bought either directly from the manufacturer or the local distributor
...
Based on Durability, the products can be classified as :
(a) Durable Goods; and
(b) Non-durable Goods
...
e
...
Examples of such goods are refrigerator, car, washing
machine etc
...
In case of these goods, seller‟s reputation and pre-sale and
after-sale service are important determinants of purchase decision
...
Examples of such products are
soap, salt, pickles, sauce etc
...
Such items are generally made
available by the producer through large number of convenient retail
outlets
...

3
...

(a) Tangible Goods : Most goods, whether these are consumer goods or industrial
goods and whether these are durable or non-durable, fall in this category as they
have a physical form, that can be touched and seen
...
fall in the category of tangible goods
...
Services are essentially intangible activities
which provide want or need satisfaction
...
, all fall in this category
...
Classify the following products into consumer goods and industrial goods and
further classify them into convenience goods, shopping goods and speciality
goods, if they are consumer goods :
(a) Stationery for the office
(b) Washing machine for use at home
(c) A car for the family use
(d) Oil for manufacturing soap
(e) A pair of shoes for yourself
(f) An electric lift for lifting weight in the workshop
(g) A packet of biscuits for your breakfast
2
...
(a) The following words refers to tangible and intangible products
...


(i) Cricket Bat
(ii) Ball
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(iii) Boarding a bus
(iv) „Pollution check‟
(v) Pen
(vi) Getting medical advice from a Doctor
Tangible

Intangible

(b) The following is a list of durable and non durable consumer goods
...

(i) Refrigerator
(ii) Salt
(iii) Soap
(iv) Washing Machine
(v) Television
(vi) Cooking oil
(vii) Sauce
(viii) Note Book
Durable

Non-Durable

20
...
In simple terms, it
is the exchange value of goods and services in terms of money
...
If the price fixed
is high, it is likely to have an adverse effect on the sales volume
...
Hence, it has to be fixed
after taking various aspects into consideration
...
In large number of products, the retail prices are determined by
adding a reasonable profit margin to the cost
...

(b) Demand: Demand also affects the price in a big way
...
But how high the price would be is dependent upon
prospective buyers‟ capacity and willingness to pay and their preference for
the product
...
e
...

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Marketing

(c) Competition: The price charged by the competitor for similar product is an important
determinant of price
...
Also, he may avoid charging a price lower

than the competitor
...


Notes

(d) Marketing Objectives: A firm may have different marketing objectives such
as maximisation of profit, maximisation of sales, bigger market share,
survival in the market and so on
...
For example, if the objective is to maximise sales or have a
bigger market share, a low price will be fixed
...

(e) Government Regulation: Prices of some essential products are regulated by
the government under the Essential Commodities Act
...
Hence, it is essential that the existing statutory limits, if any, are
also kept in view while determining the prices of products by the producers
...
4 METHODS OF PRICE FIXATION
Methods of fixing the price can be broadly divided into the following categories
...
Cost based pricing
2
...
Demand based pricing
4
...
Cost Based Pricing
Under this method, price of the product is fixed by adding the amount of desired
profit margin to the cost of the product
...
8 and he desires a profit of 25%, the price of the soap is fixed at Rs 8 +
(8x25/100) =Rs
...
While calculating the price in this way, all costs (variable as
well as fixed) incurred in manufacturing the product are taken into consideration
...
Competition Based Pricing
In case of products where market is highly competitive and there is negligible
difference in quality of competing brands, price is usually fixed closer to the
price of the competing brands
...


3
...
Under this method,
without paying much attention to cost and competitors prices, the marketeers try to
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Marketing

ascertain the demand for the product
...
If the demand is low, they fix low prices for their product
...
Take the case of
cinema halls where the rates of tickets differ for the different sets of rows in the hall
...
Objective Based Pricing
This method is applicable to introduction of new (innovative) products
...
e
...
Alternatively, the organisation may decide to skim the
market i
...
, to earn high profit by taking advantage of a group of customers who give
more importance to their status or distinction and are willing to pay even a higher price
for it
...


INTEXT QUESTIONS 20C
1
...

(a) _________________________ (b) ___________________________
(c) _________________________ (d) ___________________________
(e) _________________________
2
...

(b) Mannat introduces a new brand of biscuits at a low introductory price
...

(d) Rahul, a fruit-seller increases the price of mangoes if there is a heavy
demand for them during the summer season
...

(f) Jahanavi lowers the price of the vegetables at her shop in the evening, so that
customers purchase them even when they are not as fresh as they were in the
morning time
...
5 CHANNELS OF DISTRIBUTION
You are aware that while a manufacturer of a product is located at one place, its consumers
are located at innumerable places spread all over the country or the world
...
He may do so directly or, as stated earlier, through a chain of middlemen like
distributors, wholesalers and retailers
...
A channel of distribution thus, refers to the pathway
used by the manufacturer for transfer of the ownership of goods and its physical transfer
to the consumers and the user/buyers (industrial buyers)
...
Basically it refers to the vital
links connecting the manufacturers and producers and the ultimate
consumers/users
...

Primarily a channel of distribution performs the following functions:
(a) It helps in establishing a regular contact with the customers and provides them
the necessary information relating to the goods
...

(c) It facilitates the transfer of ownership as well as the delivery of goods
...

(e) It assists the provision of after sales services, if necessary
...


TYPES OF CHANNELS OF DISTRIBUTION
Generally we do not buy goods directly from the producers
...
But sometimes, they do have direct contact with the customers
with no middlemen in between them
...
The various
channels used for distribution of consumer goods can be described as follows:

(a) Zero stage channel of distribution

M

C

Manufacturer

Consumers

Notes

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Zero stage distribution channel exists where there is direct sale of goods by the
producer to the consumer
...
Also
in case of perishable products and certain technical household products, door-to-door
sale is an easier way of convincing consumer to make a purchase
...


(b) One stage channel of distribution

M

R

C

Manufacturer

Retailer

Consumer

In this case, there is one middleman i
...
, the retailer
...
This type of distribution
channel is preferred by manufacturers of consumer durables like refrigerator, air
conditioner, washing machine, etc
...
It is also used for distribution through large scale retailers such as
departmental stores (Big Bazaar, Spensors) and super markets
...
In this case, there are two middlemen used, namely, wholesaler and
retailer
...


(d) Three stage channel of distribution

M
Manufacturers

A

W

R

C

Agents

Wholesalers

Retailers

Consumers

When the number of wholesalers used is large and they are scattered throughout the
country, the manufacturers often use the services of mercantile agents who act as a
link between the producer and the wholesaler
...


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Marketing

INTEXT QUESTIONS 20D
1
...
Which type of channel of distribution will be suitable in each of the following cases?
Name it and draw a labelled diagram (in the space given below) depicting the channel
...


(c) For durable products like washing machines
...
6 FACTORS AFFECTING THE CHOICE OF DISTRIBUTION CHANNEL
Choice of an appropriate distribution channel is very important as the pricing as well
as promotion strategy are dependent upon the distribution channel selected
...
This in turn, affects not only the price of the
product but also the profits
...

Hence, the manufacturer has to be careful while finalising the channel of distribution
to be used
...

(b) Nature of Market: There are many aspects of market which determine the
choice of channel of distribution
...
But in case where number of buyers is large with small individual
purchase and they are scattered, then need may arise for use of middlemen
...
In case the product is of technical nature involving a good amount of
pre-sale and after sale services, the sale is generally done through retailers without
involving the wholesalers
...
Items like
toiletries, groceries, etc
...
As against this in case of items like
industrial machinery, having large value and involving specialised technical service
and long negotiation period, direct sale is preferred
...
But most business firms prefer
not to create their own distribution channel and concentrate on manufacturing
...


(d) Middlemen Consideration: If right kind of middlemen having the necessary
experience, contacts, financial strength and integrity are available, their use is
preferred as they can ensure success of newly introduced products
...
But from experience it is learnt that where
the volume of sales are adequate, the use of middlemen is often found
economical and less cumbersome as against direct sale
...
7 PROMOTION
Promotion refers to the process of informing and persuading the consumers to buy certain
product
...
The main objective of promotion is to seek buyers‟
attention towards the product with a view to:
– arouse his interest in the product;
– inform him about its availability; and
– inform him as to how is it different from others
...
A firm uses
different tools for its promotional activities which are as follows :
– Advertising
– Publicity
– Personal selling
– Sales promotion
These are also termed as four elements of a promotion mix
...

1
...
It is a paid
form of non-personal communication through different media about a product, idea, a
service or an organisation by an identified sponsor
...
It is a
very flexible and comparatively low cost tool of promotion
...
Publicity: This is a non-paid process of generating wide range of communication to
contribute a favourable attitude towards the product and the organisation
...
The
other tools of publicity are press conference, publication and news in the electronic
media etc
...

Marketeers often spend a lot of time and effort in getting news items placed in the
media for creation of a favourable image of the company and its products
...
Personal selling: You must have come across representatives of different
companies knocking at your door and persuading you to buy their product
...
It
refers to the use of salespersons to persuade the buyers to act favourably and buy
the product
...

4
...
The tool include contests, games, gifts, trade shows,
discounts, etc
...


Notes

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INTEXT QUESTIONS 20E
1
...
State the main factors affecting the choice of distribution channels
...
Which element of the promotion mix is being referred to in the following statements
...

(b) It does not cost money but may involve considerable time and effort by
the marketeer
...

(d) Press conference, publications and news in the electronic media are its
various tools
...

(f) It is done through popular media like radio, television, magazines,
newspapers etc
...
8 WHAT YOU HAVE LEARNT




 The mix of product, price, place (distribution) and promotional efforts is
known as „Marketing Mix‟
...
It not only includes physical objects and services but also the supporting
services like packaging, installation, after sales services etc
...
Based on use, products can be classified as
(a) Consumers goods: meant for personal consumption by the
households or ultimate consumers
...


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Marketing

(b) Industrial goods are meant for consumption or use as inputs in
production of other products or provision of some service
...
Based on durability, products can be classified as (a) Durable goods; and
(b) Non-durable goods
...
Based on tangibility, they are classified as (a) Tangible goods, and
(b) Intangible goods
 Price is the consideration in terms of money, paid by consumers for the
bundle of benefits he/she derives from use of product/services
...


 The different methods of price fixation are : 

1
...

2
...

3
...

4
...
Where the organisation decides to skim the market, prices are kept high
...
It includes the middlemen/agents engaged in the process of transfer of title
of goods
...



 The various channels used for distribution of consumer goods are : 

 (a) Zero stage channel : Manufacturer → Consumers 


(b) One stage channel : Manufacturer → Retailer → Consumers 




(d) Three stage channel : 

(c) Two stage channel : Manufacturer → Wholesaler → Retailer → Consumers 

Manufacturer → Agent → Wholesaler → Retailer → Consumers 

 Factor affecting choice of distribution channel : 

– Nature of market 

– Nature of product 

– Nature of the company 

– Middlemen consideration 

 Promotion is an applied communication used by marketeers to convey persuasive
messages and information between the firm and its potential customers
...
Advertising : It is a paid form of non-personal communication through different
media about a product, idea, service or organisation, by an identified sponsor
...
Publicity : It is a non-paid process of generating wide range of communication to
contribute a favourable attitude towards the product and the organisation
...
Personal selling : It is a direct presentation of the product to the consumers
or prospective buyers
...
Sales promotion : It refers to short term and temporary incentives to purchase or
induce trials of new goods
...
9 KEY TERMS
Marketing Mix
Product
Price
Place
Promotion
Publicity

Consumer goods
Convenience goods
Shopping goods
Speciality goods
Industrial good
Personal selling

Durable goods
Non-durable goods
Tangible goods
Intangible goods
Advertising
Sales promotion

20
...
Define the term „Advertising‟
...
What is meant by the term „product‟?
3
...

4
...

5
...

Short Answer Type Questions
6
...
Explain giving
examples for each type
...
Explain „cost based pricing‟ and „objective based pricing‟
...
State four functions performed by channel of distribution
...
Describe the various factors affecting choice of distribution channels
...
What are durable and non-durable goods? Give two examples of each of them
...
What is meant by Marketing Mix? Describe the four components of marketing mix
...
Describe the classification and sub-classification of products on the basis of
their use
...
Explain the four broad method of price fixation of a product
...
„Promotion includes four main tools‟
...

15
...
Describe this statement with the help of diagrams by mentioning
the four types of channels of distribution
...
11 ANSWERS TO INTEXT QUESTIONS
20A
1
...
(a) Price
(b) Place
(c) Marketing mix
(d) Product
(e) Promotion
20B
1
...
(a) banking, insurance or any other suitable example
(b) car, washing machine or any other suitable example
(c) salt, pickles, soap or any other suitable example
3
...
(a) Cost
(b) Demand
(c) Competition
(d) Marketing objectives
(e) Government regulation
2
...
(a) Zero stage channel of distribution
(b) Three stage channel of distribution
(c) One stage channel of distribution
20E
1
...
(a) Nature of market
(b) Nature of the company
3
...
Classify them into the product
categories that you have studied (viz
...
Also,
find out about the promotional activities that generally associated with the products
...
Mani is a marketing executive working for an
MNC and Prasad is a small scale businessman making plastic toys:
Mani

:

Hi Prasad! How are you?

Prasad

:

Hello ! Mani, nice to see you
...


Mani

:

Why?

Prasad

: For the past 3 years my sales turnover has not increased
...


Mani

: I understand, but tell me how is your distribution of the product done
...
I have a dealer
...


Mani

: No, you have to analyse your distribution channel
...
I think you should have at least three channels of distribution
...


Notes

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Marketing

Chapter at a Glance
20
...
2

Concept of Product and its Classification

20
...
4

Methods of Price-fixation

20
...
6

Factors Affecting the Choice of Distribution Channel

20

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