MARKETING The term “marketing” has been defined by a number of

INTRODUCTION scholars in a variety of ways. In fact, there are as many

Marketing as a subject of study is now attracting definitions as there are popular scholars in marketing.
attention from business firms, companies, institutions The reason is obvious. The subject is even changing
and even from countries. In history, its origin dates back and at every stage of evolution new potentialities are
to the days when the people realized that he should recognized which result in a new definition. We shall
specialize only in the activity to which he was best suited describe a few definitions here to realize how dynamic
and he found it to be his advantage to utilize the the subject marketing is–
services of others when they could do things better than 1. “Marketing is the performance of business activities
him. This specialization created the necessity of that direct the flow of goods and services from producer
exchange and thus the foundation of business was to consumer or user”.
started. After Industrial Revolution, there were changes –Committee of the American Marketing Association.
in the techniques, methods and volume of production. This definition merely emphasizes one particular aspect
Large scale production introduced the new methods of i.e. movement of goods and services from producer to
marketing to create demand for products and services. consumer. It makes marketing production oriented rather
Marketing includes various activities which are involved than consumer oriented.
in the generation of markets and the satisfaction of 2. “Marketing is that part of economics which deals with
consumer needs. Marketing is not a single activity nor is the creation of time, place and possession utilities”
it the sum of several activities. It is the result of a –American Marketing Association
balanced interaction of several activities. In this unit we
will explain the basic concept of marketing, its nature, Place utility is created by marketing the goods and
scope, importance and the evolution of marketing services available to the consumer at the place where
concepts. such goods are needed.
The traditional view of marketing states that marketing is Time utility is created by making the goods available at
mainly concerned with the physical and ownership the time when they are needed.
transfer of goods and services from the producer to the Possession utility is created by transferring the goods to
ultimate consumers. But the modern concept of those who need them.
marketing states that marketing involves the production This definition expresses the traditional views of
of the product acceptable to the customers and the marketing and it covers only few aspects of marketing.
activity which helps physical transfer and ownership 3. “Marketing is a total system of interacting business
from the producer to the ultimate consumers. The activities designed to plan, promote and distribute want
modern view assumes that marketing means identifying, satisfying products and services to present and potential
anticipating and satisfying consumer’s needs and consumers”
desires. Thus, marketing creates place utility, time utility –W. J. Stanton
and possession utility. The above definition given by Stanton appears to be
Marketing is a human activity directed at satisfying more suitable as it covers almost all the modern views
needs and wants through exchange processes. such as–
(a) It views marketing as a total concept.
A need is a state of felt deprivation. Marketers create (b) It describes marketing as dynamic process.
wants on the basis of needs. For example, food is an (c) It covers all the activities ranging from product
essential to satisfy the hunger needs. Marketers produce planning to distribution.
various types of food such as Pulao, Sweets, Tea, and (d) It indicates that marketing is the result of interaction
Coffee etc. to create wants. Creating wants means of several activities.
creating demand for a product by providing an (e) It pays importance for satisfying consumer’s needs
opportunity for choice or selection. Here, the buyers and wants.
have an opportunity to select out of the four alternatives 4. “Marketing is the process of discovering and
–Pulao, Sweets, Tea or Coffee to satisfy their hunger translating consumer wants into product and service
needs. The exchange process means the transfer or specifications and then in turn helping to make it
transaction of goods which cannot be made free of cost possible for more and more consumers to enjoy more
i.e. it should be on payment basis. and more of these products and services”.
The process of marketing starts with the identification of –Harry L. Harsen
needs and wants through market survey and converting 5. “Marketing is the business function that identifies
them into products or services and distributing the same customers’ needs and wants, determines which target
to ultimate consumers through buyer oriented channel markets the organisation can serve best, and designs
with suitable sales promotion technique at logical price appropriate products, services, and programmes to
to make a reasonable profit. serve these markets”
DEFINITION OF MARKETING –(Kotler and Armstrong, 1996).
This definition has also covered all the activities of products or services produced.
marketing starting from identification of needs and wants
of consumers, converting than into product and service (iii) Selling concept: The selling concept assumes that
the consumer’s response will not increase without
and making things available to consumers in a manner
promotional efforts. Even the best products cannot have
that they can enjoy more and more. assured sales without the help of sales promotion and
BASIC MARKETING CONCEPT aggressive salesman-ship. It implies, the consumer’s
A few decades ago, companies face a number of tough satisfaction is considered secondary; selling the product
decisions for marketing their products. They had to is the primary consideration. The seller in the long run is
determine product features, and quality, establish likely to lose his customers, who would not be satisfied
accompanying services, set the price, determine the with the product. Dissatisfied customers do act on their
distribution channels, decide how mush to spend on dissatisfaction. As a result, the dissatisfied consumers
marketing, and decide how to divide their resources do not purchase further and do not recommend your
among advertising, sales force, and other promotion product to any of their friends and relatives or they do
tools. Modern marketing has become very complex and complain to consume. Since there are many potential
dynamic. customers, the producer is not very particular about the
Chronologically, the concepts are classified in five. They reparative sales in monopoly or less competitive markets
are mentioned below: but in highly competitive market, the producers are
(i) Production concept, under compulsion to play attention or reparative
(ii) Product concept, purchases. The selling concept starts with the factory
(iii) Selling concept, and it focuses on the existing products and promotion
(iv) Marketing concept, and and calls for heavy selling and promotion to obtain
(v) Societal Marketing concept. profitable sales volume. This concept may be explained
(i) Production Concept: This concept assumes that with the help of the following diagram.
customers will favour products that are available and
highly affordable and that management should therefore;
focus on increasing production and distribution. Most of
producers believe that the customers prefer only low
priced products and so they concentrates on large scale
production to reduce the cost. A firm may apply this
concept in two types of situations:
(iv) Marketing Concept: This is a new idea in the field of
(a) When the demand for the product or service is higher
exchanging of goods. Under this concept the
than the supply of the same. organization trice its best to determine the needs, wants
(b) When the cost of the product is high and increase in
and values of the buyer’s market and takes all possible
production is going to reduce the cost due to economics
steps to deliver the desired satisfaction more effectively
of large scale production. This concept can work only in
and efficiently than its competitions do. Every attempt is
a sellers market. In buyer’s market it fails to market
made to satisfy the wants of customers and to achieve
under keen competition. American luxury car market this objective; a special programme of Market Research
was captured by Japanese and European car because
is undertaken. The organization fully understands that it
of this concept.
can win the loyalty of its customers and their
(ii) Product Concept: This concept assumes that buyers
appreciation only by providing them satisfactory services
favour those products that offer the most quality,
in respect of their needs and wants. Winning the
performance and features. The producers are of the
confidence of customers is as good as fulfilling the goals
opinion that it is the quality of product that attracts the
of the organization. It fully believes in theory known as
customers, the quality of the product alone will yield
customer sovereignty and ensure the maximum welfare
satisfactory sales and profits. Though this concepts
of consumers, thereby ensuring a good amount of
appears to be initially very sound, it failed in actual
profits. This concept assumes that organizations
operation. Leading companies have produced quality
produce what customer want and thereby yield
products but have not been able to push up the sales,
consumers’ satisfaction and make profits. This concept
unless they take positive steps to design, pack and price
may be explained with the help of the following diagram.
attractively, to place them in proper distribution
channels, bring them to the notice of persons concerned
and convince them that the product is of superior quality.
No wise marketer can follow this philosophy of
marketing in this competitive world. This concept may
lead to “marketing myopia” or short-sighted marketing
because of undue concentration on the product rather
(v) Societal Marketing Concept : This concept is
than the needs and desires of consumers for whom the
management orientation that holds that the key task of marketing is to bring circulation of products so that the
the organization is to determine the needs and wants of customers get the product in time and in right manner.
target market and to adapt the organization to deliver the
desired satisfaction more effectively and efficiently than
But the experts of marketing concept assumed that
its competitor in a way that preserves or enhances the
customers’ and society’s well being. customers’ satisfaction is an important element of
marketing. The marketers can not survive for long period
Environmental trends like public welfare concerns for if they do not consider consumers’ satisfaction is an
better living quality of life etc. indicate that organization essential element.
would have to adopt socially responsible marketing
policies and plans in order to assume social welfare in (ii) Profit Generation: The selling concept experts
addition to consumer welfare. The socially responsible
worked with an objective of generating profit.
marketing concept is based on the assumption:
(a) The mission of an organization is to create satisfied
and healthy customers and contribute to the quality of Whereas, the market concept experts are of the view
life. that the generation of profit would not be possible
(b) The organization will not offer a product to customer unless, the marketers concentrate on consumers’
if it is not in the best interest of customers. satisfaction.
(c) Marketing plans and programmes shall duly consider
consumers wants, interest, desires, social welfare and
(iii) Consumer Orientation: The selling concept experts
corporate needs e.g. profits.
(d) The organization will offer long run customer and felt that marketing should be product oriented. Where
public welfare. the experts of marketing concept advocates that
marketing should be consumer oriented. This concept
The last two concepts of current market philosophy have pays emphasis on customer’s needs and wants. The
been extensively adopted and widely accepted in the marketers first determines the needs and wants of the
interest of the organization, the consumer and society.
customer and then delivers the product to satisfy those
The first three concepts remained successful till
competitors did not emerge in a large number and needs and wants. But in selling concept they make the
supply was less than demand. As the numerous product and then decide how to sell it.
competitors came into market it became flooded with
goods and services of same quality and price. That led (iv) Planning: In selling concept, planning is short run
producers to give importance on selling efforts like oriented where as in marketing concept, planning is long
personal selling and advertisement. But the selling term oriented.
efforts of the producers did not last long. As almost all
producers applied the same sort of selling efforts.
Ultimately, the producers started price-war to increase (v) Process: In selling concept, first production, then
their market share but all of them were adversely selling takes place at a profit without knowing customer’s
affected in price-war. Thus during those periods needs. In marketing concept, first consumer’s need is
marketing managers were in big crisis. Some known and then production takes place, then the product
enlightened marketing managers thought changing of is sold at a profit.
their basic attitude and philosophy to solve the crisis.
They started to take into con-sideration of needs, wants,
(vi) Price: In selling concept, cost of production
tastes and preferences of consumers for marketing their
products. This idea saved them from un-necessary determines price where as in marketing concept, buyer
selling efforts including false propaganda and protected determines the price and price determines the cost.
them from going out of market with the adoption of this
concept. The first three concept are known as traditional (vii) Welfare: In selling concept, the experts did not
concept and the last two concepts are known as Modern assign any place to the welfare channelisation. In
marketing concept.
marketing concept, the experts talk about the payment
SELLING CONCEPT –VS- MARKETING CONCEPT
of taxes to the government and the social welfare
The differences between the two concepts are explained
programmes taken up by the business houses.
on the basis following points:

(viii) Research and Development: In selling concept, the

(i) Satisfaction: The experts of selling concepts did not
marketing survey and research did not receive the due
pay due priority to the elements consumers’ satisfaction.
place but in marketing concept these activities are
They were of the view that the ultimate objective of
considered very essential for growth of marketing. consumers. It includes channels and outlets through
which products move to the buyer and arranging their
In conclusion, it may be mentioned that the selling physical movement to different market segments. It
depends upon the middlemen, products and services,
concept unnecessarily limited the preview of marketing.
channels of distribution etc. It maintains the flow of
This selling concept cannot get results in the age of products and services from the producers to the buyers.
globalization. The combination of all the ingredients of marketing mix
is shown in the following figure:
MARKETING MIX

Marketing mix is the mixture of the essential elements of

marketing in order to enhance consumer satisfaction.
Marketing mix is the mixture of 4Ps’ – Product, Pricing,
Promotion and Place (Physical distribution and channel
of distribution). To attain success in marketing effort, the
various components should be well coordinated.
Marketing mix offers an optimum combination of all
marketing elements so that we can achieve company
goals such as profit, return on investment, sales volume,
and market shares and so on. The market mix will
naturally be changing according to changing marketing
conditions and also with changing environmental factors
such as technical, social, economic, and political and
competition.
Elements of Marketing Mix:
The elements of marketing mix are described below:

(i) Product: Product means anything which can satisfy Service can be defined as “a service is an act or
consumers needs and wants through exchange process. performance offered by one party to another. Although
It provides economic utility and socio-psychological the process may be tied to a physical product, the
advantages. The marketer may offer a single product or performance is transitory, often intangible in nature and
several products. The marketer should also revise the doesn’t normally result in ownership of any of the factors
product design, make improvements in the products of production”.
frequently so as to suit the changing tastes, habits and Phillip Kotler defined services as “Service is any act or
preferences of the consumers. Packaging and branding performance that one party can offer to another that is
decisions are also included in product decision. essentially intangible and does not result in any
ownership”.
(ii) Price: Price is the value which is paid by the buyer to A service is an act or performance offered by one party
the manufacturer in exchange of the products and to another. This performance is transitory and intangible
services. The marketer has to take into consideration the in nature. This does not necessarily result in ownership
cost factors, profit margin, the possibility of sales at of any of the factors of production. The process of
different price level and the competitors pricing policy as offering performance may be tied to a physical product.
well as number of competitors. A service is an economic activity that creates value and
provides benefits for customers of specific times and
(iii) Promotion: The marketers should provide places by bringing about a desired change in, or on
information to the customers about its products and behalf of, the recipient of service.
services and motivate customers to buy. Advertising, In the case of ‘goods’, the benefits come from ownership
personal selling, publicity and other sales promotional of physical objects, whereas in ‘services’ the benefits are
programs are the various promotional activities. All these created by actions or performances. The growing
activities increase the volume of sales by expending as complexities in the service environment demand a
well as retaining the market share for the products. higher emphasis on the marketing aspects of services. It
Basically, promotion deals with no price competition in is very important to run efficient operations, but that
the market. Promotion is done for three purposes – (a) alone is no longer enough for success. Employers must
informing, (b) persuading and (c) influencing consumers. be customer service oriented in addition to being
concerned about efficiency in operations. The service
(iv) Physical Distribution: Distribution is the delivery of product must meet customers’ requirements. The
the product and transfer of ownership to the buyers and service product should be priced realistically and
judiciously distributed through effective channels
convenient for the customers and should be actively
promoted so that customers become aware and · Price: Price is one of the important marketing tools that
interested in the service product. a marketer controls and manages. In service marketing
As a service is a deed or performances, it is ephemeral
price is often used by the buyers in making pre purchase
– transitory and perishable – and so cannot be stocked
as inventory after being produced. The service is quality assessments. Therefore low priced services are
produced and consumed simultaneously. often considered to be low quality and high price
SERVICE MARKETING MIX services are considered to be high quality. Service
Generally for goods market we use four P’s of marketing marketing is not limited to the traditional pricing task of
strategy. But the major difference in the education of determining the selling price to customers. While setting
services marketing versus regular marketing is that price, service marketer should include monetary costs,
instead of the traditional “4 P’s,” Product, Price, Place, such as travel expenses, time, mental and physical effort
Promotion, there are three additional “3 P’s” consisting etc.
of People, Physical evidence, and Process. Thus, 7p’s
of service marketing are as follows:
· Product: A product is anything that can be offered to a
market for consumption that might satisfy a want or
need. Generally when we talk about a product we
consider physical objects. But a service product is
different from a physical product. A service product
refers to an activity that a marketer offers to perform,
which result in satisfaction of a need or want of pre
determined customers. Managers must select the core
service and its supplementary service to create value for
customers.
Promotion: Promotion means promoting a product to the interact. The appearance of buildings, equipments,
potential customers. Marketers employ various vehicle, interior furnishing, staff member, brochures,
promotional tools like advertising, sales promotion, other printed material etc. provides tangible evidence of
public relation and personal selling. As services are a firm’s service quality.
intangible in nature, promotion plays a vital role in this
field. In service marketing much promotion is Process: The actual procedure through which service is
educational in nature, specially for new customers. delivered is known as process. Creating and delivering
Companies may need to teach this customers about the product elements require the design and implementation
benefits of the service, where and when to obtain it, and of effective process. A badly designed process generally
how to participate in service processes. Communication leads to slow and ineffective process and customer
can be delivered through advertising or face to face dissatisfaction.
interaction with sales people. For example, insurance
agent explains us about the benefit of their service. People: Here people mean all the human being who
takes part in the service delivery process. Many services
Place: Delivering product or service to the customers depend on direct interaction between customers and a
involves decision on the place and time of delivery, as firm’s employees. These interactions strongly influence
well as the methods and channels used. Firms may the customer’s perception of service quality. For
deliver service directly to the customers or through example getting a hair cut strongly influences customer’s
intermediaries. Service marketers also have to handle expectation from the barber.
distribution of their services. But, services can not be
produced in some centralized location and transported SCOPE OF MARKETING
later to different market for sale and consumption. Marketing has a very wide scope it covers all the
Rather services must move near the place of demand. activities from conception of ideas to realization of
profits. Some of them as discussed as below :
- Study of Consumer wants and needs : Goods
Physical Evidence: It is the environment in which service are produced to satisfy consumer wants.
is delivered and where the firm and the customer Therefore study is done to identify consumer
 needs and wants. These needs and wants finding customer needs, persuading customer to
motivates consumer to purchase buy products, customer service etc
- Study of Consumer Behaviour : Marketers - Promotion: Promotion includes personal selling,
performs study of consumer behavior. Analysis sales promotion and advertising, right promotion
of buyer behavior helps marketer in market mix is crucial in accomplishment of marketing
segmentation and targeting. goals
- Product planning and development : It - Finance : Marketing is also concerned about the
includes the activities of product research, finance, as for every marketing activity be it
marketing research, market segmentation, packaging, advertising, sales force budget is
product development, determination of the fixed and all the activities have to be completed
attributes, quantity and quality of the products with in the limit of that budget
- Branding : Branding of products is adopted by - After sales service : Marketing covers after
many reputed enterprises to make their products sales services given to customers, maintaining
popular among their customer and for many good relationships with customers, attending
other benefits. Marketing manager has to take their queries and solving their problems.
decision regarding the branding policy, NATURE OF MARKETING
procedures and implementation programs - Exchange is the essence of marketing
- Packaging : Prackaging is to provide a container - Marketing is cusomet/ consumer oriented
or wrapper to the product for safety, attraction - Marketing starts and ends with customers
and ease of use and transportation of the product - Modern marketing precedes and succeeds
- Channels of Distribution : Decision regarding production
selection of most appropriate channel of - Marketing is goal oriented and the goal being
distribution like wholesaling, distribution and profit maximization through satisfaction of human
retailing is taken by the Marketing Manager and needs
Sales Manager. - Marketing is a science as well as an art
- Pricing Policies : Marketer has to determine - Marketing is the guiding element of business ( it
pricing policies for their products. Pricing policies tells what, when how to produce, marketing is
differs from product to product. It depends on the capable of guiding and controlling business
level of competition, product life cycle, marketing - Marketing is a system – input-process and output
goals and objectives etc - Marketing is a process i.e series of interrelated
- Sales Management : Selling is a part oc functions
marketing. Marketing is concerned about all the
selling activies like customer identification,

RURAL MARKETING villages. The rural population is highly scattered,

Rural Marketing: but holds a big promise for the marketers.
Rural marketing is now a two-way marketing 2. Higher purchasing capacity:
process. There is inflow of products into rural Purchasing power of the rural people is on rise.
markets for production or consumption and there Marketers have realized the potential of rural
is also outflow of products to urban areas. The markets, and thus are expanding their operations
urban to rural flow consists of agricultural inputs, in rural India. In recent years, rural markets have
fast-moving consumer goods (FMCG) such as acquired significance in countries like China and
soaps, detergents, cosmetics, textiles, and so on. India, as the overall growth of the economy has
The rural to urban flow consists of agricultural resulted into substantial increase in purchasing
produce such as rice, wheat, sugar, and cotton. power of rural communities.
There is also a movement of rural products within 3. Market growth:
rural areas for consumption. The rural market is growing steadily over the
Features of Rural Marketing: years. Demand for traditional products such as
The main reason why the companies are bicycles, mopeds and agricultural inputs; branded
focusing on rural market and developing products such as toothpaste, tea, soaps and other
effective strategies is to tap the market FMCGs; and consumer durables such as
potential, that can be identified as follows: refrigerators, TV and washing machines has also
1. Large and scattered population: grown over the years.
According to the 2001 census, 740 million Indians 4. Development of infrastructure:
forming 70 per cent of India’s population live in There is development of infrastructure facilities
rural areas. The rate of increase in rural population such as construction of roads and transportation,
is also greater than that of urban population. The communication network, rural electrification and
rural population is scattered in over 6 lakhs
 7

public service projects in rural India, which has Product development is the incubation stage of the
increased the scope of rural marketing. product life cycle. There are no sales and the firm
5. Low standard of living: prepares to introduce the product. As the product
The standard of living of rural areas is low and progresses through its life cycle, changes in
rural consumers have diverse socio-economic the marketing mix usually are required in order to
backwardness. This is different in different parts of adjust to the evolving challenges and
the country. A consumer in a village area has a opportunities.
low standard of living because of low literacy, low Introduction Stage
per capita income, social backwardness and low When the product is introduced, sales will be low
savings. until customers become aware of the product and
6. Traditional outlook: its benefits. Some firms may announce their
The rural consumer values old customs and product before it is introduced, but such
traditions. They do not prefer changes. Gradually, announcements also alert competitors and remove
the rural population is changing its demand the element of surprise. Advertising costs typically
pattern, and there is demand for branded products are high during this stage in order to rapidly
in villages. increase customer awareness of the product and
7. Marketing mix: to target the early adopters. During the
The urban products cannot be dumped on rural introductory stage the firm is likely to incur
population; separate sets of products are designed additional costs associated with the initial
for rural consumers to suit the rural demands. The distribution of the product. These higher costs
marketing mix elements are to be adjusted coupled with a low sales volume usually make the
according to the requirements of the rural introduction stage a period of negative profits.
consumers. During the introduction stage, the primary goal is
to establish a market and build primary demand
The Product Life Cycle for the product class. The following are some of
the marketing mix implications of the introduction
stage:
A product's life cycle (PLC) can be divided into  Product - one or few products, relatively
several stages characterized by the revenue undifferentiated
generated by the product. If a curve is drawn  Price - Generally high, assuming a skim
showing product revenue over time, it may take pricing strategy for a high profit margin as
one of many different shapes, an example of the early adopters buy the product and the
which is shown below: firm seeks to recoup development costs
Product Life Cycle Curve quickly. In some cases a penetration
pricing strategy is used and introductory
prices are set low to gain market share
rapidly.
 Distribution - Distribution is selective and
scattered as the firm commences
implementation of the distribution plan.
 Promotion - Promotion is aimed at building
brand awareness. Samples or trial
incentives may be directed toward early
adopters. The introductory promotion also
is intended to convince potential resellers
to carry the product.
Growth Stage
The growth stage is a period of rapid revenue
growth. Sales increase as more customers
become aware of the product and its benefits and
The life cycle concept may apply to a brand or to a additional market segments are targeted. Once
category of product. Its duration may be as short the product has been proven a success and
as a few months for a fad item or a century or customers begin asking for it, sales will increase
more for product categories such as the gasoline- further as more retailers become interested in
powered automobile. carrying it. The marketing team may expand the
distribution at this point. When competitors enter
 8

the market, often during the later part of the loyalty, the profitability may be maintained longer.
growth stage, there may be price competition Unit costs may increase with the declining
and/or increased promotional costs in order to production volumes and eventually no more profit
convince consumers that the firm's product is can be made.
better than that of the competition. During the decline phase, the firm generally has
During the growth stage, the goal is to gain three options:
consumer preference and increase sales. The  Maintain the product in hopes that
marketing mix may be modified as follows: competitors will exit. Reduce costs and find
 Product - New product features and new uses for the product.
packaging options; improvement of product  Harvest it, reducing marketing support and
quality. coasting along until no more profit can be
 Price - Maintained at a high level if demand made.
is high, or reduced to capture additional  Discontinue the product when no more
customers. profit can be made or there is a successor
 Distribution - Distribution becomes more product.
intensive. Trade discounts are minimal if The marketing mix may be modified as follows:
resellers show a strong interest in the  Product - The number of products in the
product. product line may be reduced. Rejuvenate
 Promotion - Increased advertising to build surviving products to make them look new
brand preference. again.
Maturity Stage  Price - Prices may be lowered to liquidate
The maturity stage is the most profitable. While inventory of discontinued products. Prices
sales continue to increase into this stage, they do may be maintained for continued products
so at a slower pace. Because brand awareness is serving a niche market.
strong, advertising expenditures will be reduced.  Distribution - Distribution becomes more
Competition may result in decreased market share selective. Channels that no longer are
and/or prices. The competing products may be profitable are phased out.
very similar at this point, increasing the difficulty of  Promotion - Expenditures are lower and
differentiating the product. The firm places effort aimed at reinforcing the brand image for
into encouraging competitors' customers to switch, continued products.
increasing usage per customer, and converting
non-users into customers. Sales promotions may Introduction
be offered to encourage retailers to give the
product more shelf space over competing Pricing is one of the most important elements of
products. the marketing mix, as it is the only mix, which
During the maturity stage, the primary goal is to generates a turnover for the organisation. The
maintain market share and extend the product life remaining 3p’s are the variable cost for the
cycle. Marketing mix decisions may include: organisation. It costs to produce and design a
 Product - Modifications are made and product, it costs to distribute a product and costs
features are added in order to differentiate to promote it. Price must support these elements
the product from competing products that of the mix. Pricing is difficult and must
may have been introduced. reflect supply and demand relationship. Pricing a
 Price - Possible price reductions in product too high or too low could mean a loss of
response to competition while avoiding a sales for the organisation.
price war.
 Distribution - New distribution channels Pricing Factors
and incentives to resellers in order to avoid Pricing should take into account the following
losing shelf space. factors into account:
 Promotion - Emphasis on differentiation 1. Fixed and variable costs.
and building of brand loyalty. Incentives to 2. Competition
get competitors' customers to switch. 3. Company objectives
Decline Stage 4. Proposed positioning strategies.
Eventually sales begin to decline as the market 5. Target group and willingness to pay
becomes saturated, the product becomes An organisation can adopt a number of pricing
technologically obsolete, or customer tastes strategies, the pricing strategy will usually be
change. If the product has developed brand based on corporate objectives.
 9

Types of Pricing Strategy

Pricing
Definition Example
Strategy
Here the organisation sets a low price to
A television satellite company sets a low
Penetration increase sales and market share. Once
price to get subscribers then increases the
Pricing market share has been captured the firm may
price as their customer base increases.
well then increase their price.
The organisation sets an initial high price and
A games console company reduces the
then slowly lowers the price to make the
Skimming price of their console over 5 years, charging
product available to a wider market. The
Pricing a premium at launch and lowest price near
objective is to skim profits of the market layer
the end of its life cycle.
by layer.
Setting a price in comparison with
Competition competitors. Really a firm has three options Some firms offer a price matching service to
Pricing and these are to price lower, price the same match what their competitors are offering.
or price higher
An example would be a DVD manufacturer
offering different DVD recorders with
different features at different prices eg A HD
Product Line Pricing different products within the same and non HD version.. The greater the
Pricing product range at different price points. features and the benefit obtained the
greater the consumer will pay. This form of
price discrimination assists the company in
maximising turnover and profits.
The organisation bundles a group of products This strategy is very popular with
Bundle
at a reduced price. Common methods are supermarkets
Pricing
buy one and get one free promotions
The seller will therefore charge 99p instead
£1 or $199 instead of $200. The reason
The seller here will consider the psychology why this methods work, is because buyers
Psychological
of price and the positioning of price within the will still say they purchased their product
Pricing
market place under £200 pounds or dollars, even thought
it was a pound or dollar away. My favourite
pricing strategy.
An example of products using this strategy
Premium The price set is high to reflect the
would be Harrods, first class airline
Pricing exclusiveness of the product.
services, Porsche etc.
This strategy is used commonly within the
Optional The organisation sells optional extras along
car industry as i found out when purchasing
Pricing with the product to maximise its turnover. T
my car.
If a firm operates in a very volatile industry,
The firms takes into account the cost of
where costs are changing regularly no set
Cost Based production and distribution, they then decide
price can be set, therefore the firm will
Pricing on a mark up which they would like for profit
decide on their mark up to confirm their
to come to their final pricing decision.
pricing decision.
For example it may cost £100 to produce a
Here the firm add a percentage to costs as
Cost Plus widget and the firm add 20% as a profit
profit margin to come to their final pricing
Pricing margin so the selling price would be
decisions.
£120.00
 10

SETTING PRICING POLICY different marketing mix strategy, with each offering
alternate growth and profit opportunities.
1. Selecting the pricing objective Some different ways you can segment your
2. Determining demand market include the following;
3. Estimating costs  Demographics which focuses on the
4. Analyzing competitors’costs, prices, and characteristics of the customer. For example
offers age, gender, income bracket, education, job and
5. Selecting a pricing method cultural background.
6. Selecting final price
7. Pricing Strategies  Psychographics which refers to the customer
group's lifestyle. For example, their social class,
PRICING OBJECTIVES lifestyle, personality, opinions, and attitudes.
 Survival  Behaviour which is based on customer
 Maximum current profit behaviour. For example, online shoppers,
 Maximum market share shopping centre customers, brand preference
 Maximum market skimming and prior purchases.
 Product-quality leadership  Geographical location such as continent,
country, state, province, city or rural that the
MARKET SKIMMING PRICING customer group resides.
 Setting a high price for a new product to
skim maximum revenues layer by layer Requirement of Market Segments
from the segments willing to pay the high  Identifiable – the differentiating attributes
price: the company makes fewer but more of the segments must be measurable so
profitable sales. that they can be identified
 Accessible – the segments must be
THE CONDITION reachable through communication and
1. A sufficient number of buyers have a high distribution channels
current demand;  Substantial- the segments should be
2. The unit costs of producing a small volume sufficiently large to justify the resources
are not so high that they cancel the required to target them
advantage of charging what the traffic will  Unique needs : To justify separate
bear; offerings, the segments must respond
3. The high initial price does not attract more differently to the different marketing
competitors to market; mixes
4. The high price communicates the image of  Durable – the segments should be
a superior product. relatively stable to minimize the cost of
frequent changes
MARKET PENETRATION
 Setting a low price for a new product in TARGETING
order to attract a large number of buyers After segmenting the market based on the
and a large market share. different groups and classes, you will need to
choose your targets. No one strategy will suit all
THE CONDITION consumer groups, so being able to develop
1. The market is highly price sensitive,and a specific strategies for your target markets is very
low price stimulates market growth; important.
2. Production and distribution costs fall with There are three general strategies for selecting
accumulated production experience; your target markets:
3. A low price discourages actual and  Undifferentiated Targeting: This approach views
potential competition. the market as one group with no individual
segments, therefore using a single marketing
strategy. This strategy may be useful for a
MARKET SEGMENTATION business or product with little competition where
Market segmentation involves grouping your you may not need to tailor strategies for different
various customers into segments that have preferences.
common needs or will respond similarly to a
marketing action. Each segment will respond to a
 11

 Concentrated Targeting: This approach focuses A company faces many marketing problems. It
on selecting a particular market niche on which faces problems about consumers, product, market
marketing efforts are targeted. Your firm is competition, sales promotion, etc. Marketing
focusing on a single segment so you can research helps to solve these problems.
concentrate on understanding the needs and Definition of Market Research:
wants of that particular market intimately. Small There are many definitions of marketing research.
firms often benefit from this strategy as focusing Some important ones are:
on one segment enables them to compete 1. According to American Marketing Association
effectively against larger firms. (AMA),
 Multi-Segment Targeting: This approach is used “Marketing Research is the systematic gathering,
if you need to focus on two or more well defined recording and analysing of data about problems
market segments and want to develop different relating to the marketing of goods and services.”
strategies for them. Multi segment targeting 2. According to Philip Kotler,
offers many benefits but can be costly as it “Marketing research is a systematic problem
involves greater input from management, analysis, model building and fact finding for the
increased market research and increased purpose of improved decision-making and control
promotional strategies. in the marketing of goods and services.”
Prior to selecting a particular targeting strategy,
3. According to David Luck, Donald Taylor and
you should perform a cost benefit analysis
Hugh Wales,
between all available strategies and determine
“Marketing Research is the application of scientific
which will suit your situation best.
methods in the solution of marketing problems.”
POSITIONING
Features of Market Research:
Positioning is developing a product and brand
Systematic process:
image in the minds of consumers. It can also
Marketing research is a systematic process. It first
include improving a customer's perception about
collects data (information) about the marketing
the experience they will have if they choose to
problem. Secondly, it records this data. Then it
purchase your product or service. The business
analysis (studies) this data and draws conclusions
can positively influence the perceptions of its
about it. After that, it gives suggestions (advice) for
chosen customer base through strategic
solving the marketing-problem. So, marketing
promotional activities and by carefully defining
research helps to solve the marketing problems
your business' marketing mix.
quickly, correctly and systematically.
Effective positioning involves a good
understanding of competing products and the
Connected with MIS - Marketing research is a
benefits that are sought by your target market. It
component of Marketing Information System
also requires you to identify a differential
(MIS). Marketing research and MIS are
advantage with which it will deliver the required
interrelated. Both are used to solve marketing
benefits to the market effectively against the
problems and to take marketing decisions.
competition. Business should aim to define
themselves in the eyes of their customers in
Collection of Information:
regards to their competition.
Marketing research collects full information about
consumers. It finds out the needs and
Market Research expectations of the consumers. So the company
Marketing Research has two words, viz., produces the goods according to the needs and
marketing and research. expectations of the consumers.
1. Marketing means buying and selling
activities. Tool for decision-making –
2. Research means a systematic and The marketing manager has to take many
complete study of a problem. It is done by decisions. For this, he requires a lot of data.
experts. It uses scientific methods. Marketing research provides correct and up-to-
Thus, we can say, “Marketing Research is a date data to the marketing manager. This helps
systematic method of collecting, recording and him to take quick and correct decisions. Therefore,
analyzing of data, which is used to solve marketing research is an important tool for
marketing problems.” decision-making. Marketing research helps the
company to make its production and marketing
policies. It helps the company to introduce new
 12

products in the market. It helps to identify new- 10. Estimate the cost of marketing of goods
markets. and service.
Functions of Marketing Research:
Competitive analysis: The five main functions of marketing research
Marketing research also collects full information (MR) are:
about the competitors. The company uses this 1. Description,
information to fight competition. It also helps the 2. Evaluation,
marketing manager to take decisions. 3. Explanation,
4. Prediction, and
Continuous Process: 5. Aid in decision making.
Marketing research is a continuous process. It has Now let's discuss these prominent functions of
a few limitations. However, a company cannot marketing research.
survive and succeed without it. Marketing research 1. Description: Marketing research gives full
is a special branch and soul of 'Marketing description about the consumers. It describes
Management'. It is of recent origin and widely used their age, sex, education, income, etc. It also
by manufacturers, exporters, distributors and gives a description about the competitors and
service organisations. Marketing research is very the market situation. This description is used to
systematic, scientific, objective and organised. It take marketing decisions and solve marketing
has a wide scope. It includes product research, problems.
consumer research, packaging research, pricing 2. Evaluation: Marketing research helps to
research, etc. evaluate the company's performance. It helps
to evaluate the company's production and
Uses different methods – marketing policies. It finds out the customer
Marketing research uses three methods for reaction to the quality of the product, price,
collecting data, viz., Survey Method, Experiment packaging, advertising, sales, promotions'
Method and Observation Method. All three techniques, etc. If the consumer reactions are
methods are scientific. The researcher has to use bad, then the company must change its
a suitable method for collecting a reliable data. policies. It also compares the company's
Objectives of Marketing Research policies with the competitors' policies.
The main objective of Marketing Research (MR) is 3. Explanation: Marketing research gives
to provide information to the marketing manager. explanations (answers) for all the marketing
The marketing manager uses this information to problems. For example, it answers in detail,
make marketing decision and to solve marketing why are the sales falling, why are the retailers
problems. giving negative reaction, etc. It gives all the
The purposes or objectives of marketing research causes or reasons for the problem. It also tells
are listed below. how to solve the problem.
1. Identify the consumer response to the 4. Prediction: Marketing research also gives
company’s product. predictions. Predictions mean to forecast or
2. Know the consumers’ needs and guess about the future. It gives a prediction
expectations. about the future sales, future market
3. Seek maximum information about the opportunities, future risks, future marketing
consumer, i.e. the know consumers’ environment, future consumer behavior, etc.
income range, their location, buying All the prediction may not be correct. However,
behavior, etc. these predictions help the company to make
4. Know the nature and extent of competition future plans and policies. It helps to take
and also the strength and weaknesses of advantage of future opportunities. It also helps
the competitors. to avoid future risks.
5. Check the reaction of the dealers to the 5. Aid in decision making: Marketing research
company policies. helps the marketing manager to take
6. Evaluate the reputation of the company in decisions. It provides all the concerned data,
the market. which is necessary to take decisions. Decision
7. Identify and solve the marketing problems making means to select a course of action
of the company. from two or more alternatives. Decision making
8. Search for new marketing opportunities. requires up-to-date and correct data. MR helps
9. Find out alternative uses of the existing the marketing manager to take decisions. It
products. provides all the data, which is necessary to
 13

take decisions. It also provides alternative

course of action. It gives the merits and 6. Sales Research
demerits of each course of action. It also helps Sales research studies the selling activities of the
the marketing manager to choose the best company. It studies the sales outlets, sales
course of action. territories, sales forecasting, sales trends, sales
Scope of Market Research: methods, effectiveness of the sales force, etc.
1. Product Research:
Product means the goods and services which are 7. Distribution Research
sold to the consumers. It includes consumer Distribution research studies the channels of
products and industrial products. Product research distribution. It selects a suitable channel for the
studies the individual product. It studies the product. It fixes the channel objectives. It identifies
making and marketing of the product. It studies the the channel functions like storage, grading, etc. It
colour, size, shape, quality, packaging, brand evaluates the competitor's channel.
name and price of the product. It also deals with
product modification, product innovation, product 8. Policy Research:
life cycle, etc. The product is modified (changed) Policy research studies the company's policies. It
as per the needs and wants of the consumers. evaluates the effectiveness of the marketing
Therefore, the product will not fail in the market. policies, sales policies, distribution policies, pricing
policies, inventory policies, etc. Necessary
2. Consumer Research: changes, if any, are made in these policies.
Consumer is the person who purchases the goods
and services. The consumer is the king in the 9. International Marketing Research
market. Consumer research studies consumer International marketing research studies the
behaviour. It studies the consumers needs, wants, foreign market. It collects data about consumers
likes, dislikes, attitude, age, sex, income, location; from foreign countries. It collects data about the
buying motives, etc. This data is used to take economic and political situation of different
decisions about the product, its price, place and countries. It also collects data about the foreign
promotion. competitors. This data is very useful for the
exporters.
3. Packaging Research:
Packaging research is a part of product research. 10. Motivation Research:
It studies the package of the product. It improves Motivation research studies consumers' buying
the quality of the package. It makes the package motives. It studies those factors that motivate
more attractive. It makes the package more consumers to buy a product. It mainly finds
convenient for the consumers. It reduces the cost out, why the consumers buy the product? It also
of packaging. It selects a suitable method for finds out the causes of consumer behaviour in the
packaging. It also selects suitable packaging market.
material.
11. Market Research:
4. Pricing Research Market research studies the markets, market
Pricing Research studies the pricing of the competition, market trends, etc. It also does sales
product. It selects a suitable method of pricing. It forecasting. It estimates the demand for new
fixes the price for the product. It compares the products. It fixes the sales territories and sales
companies price with the competitor's price. It also quotas.
fixes the discount and commission which are given
to middlemen. It studies the market price trends. It 12. Media Research:
also studies the future price trends. Media research studies various advertising media.
The different advertising media are television (TV),
5. Advertising Research radio, newspapers, magazines, the internet, etc.
Advertising research studies the advertising of the Media research studies the merits and demerits of
product. It fixes the advertising objectives. It also each media. It selects a suitable media for
fixes the advertising budget. It decides about the advertising. It does media planning. It also studies
advertising message, layout, copy, slogan, media cost. It helps in sales promotion and to
headline, etc. It selects a suitable media for avoid wastage in advertising.
advertising. It also evaluates the effectiveness of
advertising and other sales promotion techniques. Market Research Process
 14

The market research process is a systematic what will your final report look like? Based on that,
methodology for informing business decisions. you’ll be able to identify the types of data analysis
The figure below breaks the process down into six you’ll be conducting (simple summaries, advanced
steps: regression analysis, etc.), which dictates the
structure of questions you’ll be asking.
Your choice of research instrument will be based
on the nature of the data you are trying to collect.
There are three classifications to consider:
Exploratory Research – This form of research is
used when the topic is not well defined or
understood, your hypothesis is not well defined,
and your knowledge of a topic is vague.
Exploratory research will help you gain broad
Step 1. Define the Objective & Your “Problem” insights, narrow your focus, and learn the basics
Perhaps the most important step in the market necessary to go deeper. Common exploratory
research process is defining the goals of the market research techniques include secondary
project. At the core of this understands the root research, focus groups and interviews.
question that needs to be informed by market Exploratory research is a qualitative form of
research. There is typically a key business research.
problem (or opportunity) that needs to be acted Descriptive Research – If your research objective
upon, but there is a lack of information to make calls for more detailed data on a specific topic,
that decision comfortably; the job of a market you’ll be conducting quantitative descriptive
researcher is to inform that decision with solid research. The goal of this form of market research
data. Examples of “business problems” might be is to measure specific topics of interest, usually in
“How should we price this new widget?” or “Which a quantitative way. Surveys are the most common
features should we prioritize?” research instrument for descriptive research.
By understanding the business problem clearly, Causal Research – The most specific type of
you’ll be able to keep your research focused and research is causal research, which usually comes
effective. At this point in the process, well before in the form of a field test or experiment. In this
any research has been conducted, I like to case, you are trying to determine a causal
imagine what a “perfect” final research report relationship between variables. For example,
would look like to help answer the business does the music I play in my restaurant increase
question(s). You might even go as far as to mock dessert sales (i.e. is there a causal relationship
up a fake report, with hypothetical data, and ask between music and sales?).
your audience: “If I produce a report that looks Step 3. Design & Prepare Your “Research
something like this, will you have the information Instrument”
you need to make an informed choice?” If the In this step of the market research process, it’s
answer is yes, now you just need to get the real time to design your research tool. If a survey is
data. If the answer is no, keep working with your the most appropriate tool (as determined in step
client/audience until the objective is clear, and be 2), you’ll begin by writing your questions and
happy about the disappointment you’ve prevented designing your questionnaire. If a focus group is
and the time you’ve saved. your instrument of choice, you’ll start preparing
Step 2. Determine Your “Research Design” questions and materials for the moderator. You
Now that you know your research objects, it is get the idea. This is the part of the process where
time to plan out the type of research that will best you start executing your plan.
obtain the necessary data. Think of the “research By the way, step 3.5 should be to test your survey
design” as your detailed plan of attack. In this instrument with a small group prior to broad
step you will first determine your market research deployment. Take your sample data and get it into
method (will it be a survey, focus group, etc.?). a spreadsheet; are there any issues with the data
You will also think through specifics about how structure? This will allow you to catch potential
you will identify and choose your sample (who are problems early, and there are always problems.
we going after? where will we find them? how will Step 4. Collect Your Data
we incentivize them?, etc.). This is also the time This is the meat and potatoes of your project; the
to plan where you will conduct your research time when you are administering your survey,
(telephone, in-person, mail, internet, etc.). Once running your focus groups, conducting your
again, remember to keep the end goal in mind– interviews, implementing your field test, etc. The
 15

answers, choices, and observations are all being thereby create new customers. Some
collected and recorded, usually in spreadsheet businessmen distribute samples among selected
form. Each nugget of information is precious and persons in order to popularize the product.
will be part of the masterful conclusions you will Common examples - shampoo, washing powder,
soon draw. coffee powder, etc.
2. Premium or Bonus offer: This is a reward
Step 5. Analyze Your Data given to the existing customers. This tool will help
Step 4 (data collection) has drawn to a close and increase the sales of the product among the
you have heaps of raw data sitting in your lap. If existing customers itself.
it’s on scraps of paper, you’ll probably need to get 3. A milk shaker along with Nescafe, mug
it in spreadsheet form for further analysis. If it’s with Bourn vita, toothbrush with 500 grams of
already in spreadsheet form, it’s time to make sure toothpaste might be some examples of this tool.
you’ve got it structured properly. Once that’s all 4. Exchange schemes: It refers to offering
done, the fun begins. Run summaries with the exchange of old product for a new product at a
tools provided in your software package (typically price less than the original price of the product.
Excel, SPSS, Minitab, etc.), build tables and This is useful for drawing attention to product
graphs, segment your results by groups that make improvement. Most common example for this tool
sense (i.e. age, gender, etc.), and look for the is - 'Bring your old mixer-cum-juicer and exchange
major trends in your data. Start to formulate the it for a new one just by paying Rs.500'
story you will tell. 5. Price-off offer: Under this offer, products
are sold at a price lower than the original price.
Step 6. Visualize Your Data and Communicate This type of scheme is designed to boost up sales
Results in off-season and sometimes while introducing a
You’ve spent hours pouring through your raw data, new product in the market.
building useful summary tables, charts and 'Rs. 2 off on purchase of lifeboy soap, Rs. 15 off
graphs. Now is the time to compile the most on a pack of 250 grams of Taj Mahal tea, Rs. 1000
meaningful take-away into a digestible report or off on cooler' etc., are some of the common
presentation. A great way to present the data is to schemes.
start with the research objectives and business 6. Coupons: Sometimes, coupons are issued
problem that were identified in step 1. Restate by manufacturers either in the packet of a product
those business questions, and then present your or through an advertisement printed in the
recommendations based on the data, to address newspaper or magazine or through mail. These
those issues. coupons can be presented to the retailer while
buying the product. The holder of the coupon gets
the product at a discount. Best example for this is
SALES PROMOTION, PRICING, CHANNELS OF coupons distributed by the pizza restaurants like
DISTRIBUTION dominos, pizza hut, etc.
7. Fairs and Exhibitions: Fairs and
MARKETING - SALES PROMOTION exhibitions may be organized at local, regional,
Sales promotion is the process of persuading a national or international level to introduce new
potential customer to buy the product. Sales products, demonstrate the products and to explain
promotion is designed to be used as a short-term special features and usefulness of the products.
tactic to boost sales – it is not really designed to Apart from this small stalls are also placed in
build long-term customer loyalty. popular locations where the products are sold in
Some sales promotions are aimed at consumers. smaller quantity to attract more customers.
Others are targeted at intermediaries (such as 8. Bonus points: certain retail shops will
agents and wholesalers) or at the firm’s sales have a scheme which will require the customer to
force. be a member of the shop and to acquire
membership card for the same. And every time the
TOOLS OF SALES PROMOTION customer makes a purchase bonus points are
To increase the sales of a product, the producers added to the card and at the end of the year gifts
or manufacturers use various measures like free are given for the points earned. Example – coffee
samples, bonus, etc. These measures are called day bonus points card
the tools or techniques of sales promotion. 9. Money Back offer: Under this scheme
1. Free samples: These are distributed to customers are given assurance that full value of
attract consumers to try out a new product and the product will be returned to them if they are not
 16

satisfied after using the product. This creates The Resellers: The success of companies marketing
confidence among the customers with regard to strategy also depends on resellers if the finished goods
the quality of the product. This technique is of a company is taken to market by market
particularly useful while introducing new products intermediaries or any other third party. These forces
include wholesaler, retailers etc. For example If the
in the market.
retail seller holds a reputable name in the market then
10. Scratch and win offer: To induce the their reputation can impact the marketing of company’s
customer to buy a particular product 'scratch and product.
win' scheme is also offered. Under this scheme a The Customers: The success of marketing strategy
customer scratch a specific marked area on the also depends on the customers of company’s product.
package of the product and gets the benefit The nature of customer such as b2c, b2b, international
according to the message written there. or local and the reason for buying the product will play a
Marketing Management - Definition & scope, Selling & role in establishing the marketing strategy of company
Modern Concepts of Marketing, Market Research, Rural and how they approach the customers and serve them.
Marketing, Marketing Environment, Customer Behaviors, The Competition: Market competition exists when two
Product Launching, Sales Promotion, Pricing, Channels of or more firms sell same or similar products and
Distribution, Advertising, Market Segmentation, Marketing services. The companies must take into account the
Mix, Positioning, Targeting way they approach the customers and sell their
products to the customer, what price and product
differentiation they have for their customer. These
Marketing Environment Definition Factors & Examples
factors can be taken into account to get edge over their
Definition
competitors.
There are several factors which affect a firm. All the
The General Public: The satisfaction of general public
things which affect the operations of a firm are known
is a duty of organization. Company must take decisions
asmarketing environment. Few of these factors can
while taking the perspective of general public into
be controlled by the firm but not all. In order to deal
consideration and how they will get affected by their
with these factors firm must understand their market
decision. The customers hold the power to make a win-
environment so that positive and negative factors
win situation for a company by helping it reach the
would be managed accordingly.
goals.
In other words a firm is surrounded by internal and
external force which have a great effect on firm’s ability
to maintain lasting relation with target customers.
Macro Micro Internal
Environment Environment Environment
Population Change
Employees Employees
Media
Media Machinery
Health and Safety
Banks Materials
Legislation
Customers Capital Assets
Green Technology
Distributors Company Policies
Carbon Neutral
Suppliers Company
Inflation
Trade Unions Procedures
Recession
Internal Environment factors Macro Environment Factors
The internal marketing environment of a firm comprise Demographic Factors: Demographic forces do impact
of all those factors which are inside firm, including the the different market segments, which includes region,
firms employees, firms policies, firms capital assets, country, age, educational level, ethnicity, lifestyle,
firms organizational structure and its products. Firm can cultural norms and values.
control these factors. Economic Factors: The organizations production and
Micro environment and Macro Environment form the decision making process of customer also affected by
external environment of a firm. The factors of this the economic environment
environment are not controlled by firm, but they greatly Natural/physical Factors: The Company must take
influence the decision of marketers during marketing into account the renewal of the natural resources of the
strategy planning. earth such as agricultural product, forest, marine
Micro Environment Factors resources etc. The organizations production can also
The Supplier: Business success depends on the be affected by the non renewable resources which
suppliers when they enjoy an authority. The supplier of includes coal, oil mineral.
a company holds the power when they are the only one Technological factors: The organization must
in market or when they are the largest supplier of the consider the technological factors as the knowledge
goods. The buyer is not essential to the suppliers and skills used in production of goods. The technology
business, as the supplier’s good is core ingredient of and materials used in production of goods and services
the finished product of buyer. helps in smoothing the process of business.
 17

Political and Legal Factors: The organization should Consumer Behaviour: Meaning/Definition and
take into consideration the political and legal Nature of Consumer Behaviour
development relating to market and organization during Article shared by Smriti Chand
decision making process. Consumer Behaviour: Meaning/Definition and Nature of
Social and Cultural Forces: The impact of your Consumer Behaviour!
organization’s services and products on the society Meaning and Definition:
must be taken into consideration. If there is any Consumer behaviour is the study of how individual
element used in production process or product that is customers, groups or organizations select, buy, use,
harmful to society should be avoided as it is a social and dispose ideas, goods, and services to satisfy their
responsibility of an organization. A most recent needs and wants. It refers to the actions of the
example is the environment and the organizations and consumers in the marketplace and the underlying
sectors who have reviewed their services and products motives for those actions.
to be considered environmentally friendly. Marketers expect that by understanding what causes
Example of Marketing Environment the consumers to buy particular goods and services,
The study of decisions that people and businesses they will be able to determine—which products are
make for resource allocation and prices for services needed in the marketplace, which are obsolete, and
and goods is known as Microeconomics. The how best to present the goods to the consumers.
governmental regulations and tax policies are also The study of consumer behaviour assumes that the
taken into consideration. Microeconomics solely consumers are actors in the marketplace. The
focuses on the forces that determine the level of price, perspective of role theory assumes that consumers play
supply and demand in an economy. For various roles in the marketplace. Starting from the
e.g. microeconomics factors see how a company information provider, from the user to the payer and to
would do to maximize the production and capacity in the disposer, consumers play these roles in the
order to lower the prices of its products and to compete decision process.
in the industry in better and efficient way. The roles also vary in different consumption situations;
Macroeconomics, on the other hand, is the study of for example, a mother plays the role of an influencer in
whole economy which includes the study of complete a child’s purchase process, whereas she plays the role
industry and economies, not just of a specified of a disposer for the products consumed by the family.
company. This involves the phenomenon’s which are Some selected definitions of consumer behaviour
economy wide, such as Gross National Product (GDP) are as follows:
and how changes in the economical factors such as 1. According to Engel, Blackwell, and Mansard,
national income, unemployment, growth rate and level ‘consumer behaviour is the actions and decision
of price affects it. For instance, the impact of net- processes of people who purchase goods and services
exports on nation’s capital account or effect of for personal consumption’.
unemployment rate on GDP. 2. According to Louden and Bitta, ‘consumer behaviour
The macro and micro economics is considered as the is the decision process and physical activity, which
study of two diverse divisions of economy. Whereas individuals engage in when evaluating, acquiring, using
there are several issues in both fields that make them or disposing of goods and services’.
inter-reliant to each other. For instance, the price of end Nature of Consumer Behaviour:
product would increase with the increase of inflation 1. Influenced by various factors:
rate, as with the increase of inflation rate, the price of The various factors that influence the consumer
raw material will increase that will end up with increase behaviour are as follows:
in price of finished goods. a. Marketing factors such as product design, price,
The microeconomics adopts the bottoms-up approach promotion, packaging, positioning and distribution.
whereas macroeconomics has a top-down tactic to b. Personal factors such as age, gender, education and
analyze the economical situation. income level.
Studying Macroeconomics c. Psychological factors such as buying motives,
factors and microeconomics factors concurrently perception of the product and attitudes towards the
plays a vital role in establishing a successful business product.
as it provides elementary means for professionals to d. Situational factors such as physical surroundings at
operate the business in an efficient and effective way to the time of purchase, social surroundings and time
generate sound revenue. factor.
Conclusion e. Social factors such as social status, reference groups
Strategic marketers must take into consideration and family.
the micro-economic factors and macro-economic f. Cultural factors, such as religion, social class—caste
factors during decision making process as these forces and sub-castes.
have a major effect on the marketing campaigns ADVERTISEMENTS:
success. Thus marketing environment forces can play 2. Undergoes a constant change:
a vital role in success of a business, its marketing Consumer behaviour is not static. It undergoes a
strategies, marketing campaigns and its branding. change over a period of time depending on the nature
of products. For example, kids prefer colourful and
 18

fancy footwear, but as they grow up as teenagers and items. For example, teenagers may spend heavily on
young adults, they prefer trendy footwear, and as products such as cell phones and branded wears for
middle-aged and senior citizens they prefer more sober snob appeal, but may not spend on general and
footwear. The change in buying behaviour may take academic reading. A middle- aged person may spend
place due to several other factors such as increase in less on clothing, but may invest money in savings,
income level, education level and marketing factors. insurance schemes, pension schemes, and so on.
3. Varies from consumer to consumer: 8. Improves standard of living:
All consumers do not behave in the same manner. The buying behaviour of the consumers may lead to
Different consumers behave differently. The differences higher standard of living. The more a person buys the
in consumer behaviour are due to individual factors goods and services, the higher is the standard of living.
such as the nature of the consumers, lifestyle and But if a person spends less on goods and services,
culture. For example, some consumers are despite having a good income, they deprives
technoholics. They go on a shopping and spend themselves of higher standard of living.
beyond their means. 9. Reflects status:
They borrow money from friends, relatives, banks, and The consumer behaviour is not only influenced by the
at times even adopt unethical means to spend on status of a consumer, but it also reflects it. The
shopping of advance technologies. But there are other consumers who own luxury cars, watches and other
consumers who, despite having surplus money, do not items are considered belonging to a higher status. The
go even for the regular purchases and avoid use and luxury items also give a sense of pride to the owners.
purchase of advance technologies. Meaning of Advertising - Advertising is an activity of
4. Varies from region to region and country to attracting public attention to a product or business, as
county: by paid announcements in the print, broadcast, or
The consumer behaviour varies across states, regions electronic media.
and countries. For example, the behaviour of the urban
consumers is different from that of the rural consumers. Advertising is a paid form of a non-personal message
A good number of rural consumers are conservative in communicated through the various media by industry,
their buying behaviours. business firms, nonprofit organisations, or individuals.
The rich rural consumers may think twice to spend on Advertising is persuasive and informational and is
luxuries despite having sufficient funds, whereas the designed to influence the purchasing behaviour and/or
urban consumers may even take bank loans to buy thought patterns of the audience. Advertising is a
luxury items such as cars and household appliances. marketing tool and may be used in combination with
The consumer behaviour may also varies across the other marketing tools, such as sales promotions,
states, regions and countries. It may differ depending personal selling tactics, or publicity.
on the upbringing, lifestyles and level of development.
5. Information on consumer behaviour is important Definition of Advertising - Advertising is defined
to the marketers: differently by different people, some of the definitions
Marketers need to have a good knowledge of the are as follows:
consumer behaviour. They need to study the various
factors that influence the consumer behaviour of their According to Richard Buskirk, "Advertising is a paid
target customers. form of non-personal presentation of ideas, goods or
The knowledge of consumer behaviour enables services by an identified sponsor."
them to take appropriate marketing decisions in
respect of the following factors: According to Wheeler, "Advertising is any form of paid
a. Product design/model non-personal presentation of ideas, goods or services
b. Pricing of the product for the purpose of inducting people to buy."
c. Promotion of the product
d. Packaging According to William J. Stanton, "Advertising consists
e. Positioning of all the activities involves in presenting to a group, a
f. Place of distribution non-personal, oral or visual, openly sponsored
6. Leads to purchase decision: message regarding disseminated through one or more
A positive consumer behaviour leads to a purchase media and is paid for by an identified sponsor."
decision. A consumer may take the decision of buying a
product on the basis of different buying motives. The
purchase decision leads to higher demand, and the
sales of the marketers increase. Therefore, marketers Objectives of Advertising - The real objective of
need to influence consumer behaviour to increase their advertising is effective communication between
purchases. producers and consumers with the purpose to sell a
7. Varies from product to product: product, service, or idea. The main objectives of
Consumer behaviour is different for different products. advertising are as follows:
There are some consumers who may buy more quantity
of certain items and very low or no quantity of other Informative
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Objective of advertising is to inform its targeted

audience/customers about introduction of new product, 4. To expand product distribution
update or changes in existing products or product When the market demand of a particular product
related changes, information regarding new offers and increases, the number of retailer and distributor
schemes. Informative advertising seeks to develop involved in sale of that product also increases, hence
initial demand for a product. The promotion of any new product distribution get expanded.
market entry tends to pursue this objective because
marketing success at this stage often depends simply 5. To increase brand preference
on announcing product availability. Thus, informative There are various products of different bands
advertising is common in the introductory stage of the are available, the brand which is effectively and
product life cycle. frequently advertised is preferred most.

Persuasive 6. To reduce overall sale cost

Objective of advertising is to increase demand for Advertising increases the primary demand in the
existing product by persuading new customer for first market. When demand is there and the product is
time purchase and existing customers for repurchases. available, automatically the overall cost will decrease,
Persuasive advertising attempts to increase demand for simultaneously the cost of sales like distribution cost,
an existing product. Persuasive advertising is a promotional cost also get decreased.
competitive type of promotion suited to the growth
stage and the early part of the maturity stage of the Classification of Advertising - Advertising can be
product life cycle. classified on the basis of Function, Region, Target
Market, Company demand, Desired
Reminder response, and Media.
The objective of advertising is to remind customers
about existence of product, and ongoing promotional A) Classification on the basis of function
activities. Reminder advertising strives to reinforce  Advertisement informs the customers about a
previous promotional activity by keeping the name of a product
product before the public. It is common in the latter part  Advertisement persuades the consumers to buy a
of the maturity stage and throughout the decline stage products
of the product life cycle.  Advertisement reminds existing customers about
the presence of the product in the market
Let us discuss some important types of advertising
Mathews, Buzzell, Levitt and Frank have listed some based on the functional aspect of advertising.
specific objectives of advertising. Informative advertising: This type of advertising
 To make an immediate sale. informs the customers about the products, services, or
 To build primary demand. ideas of the firm or organization.
 To introduce a price deal.
 To build brand recognition or brand insistence. Persuasive advertising: This type of advertising
 To help salesman by building an awareness of a persuades or motivates the prospective buyers to take
product among retailers. quick actions to buy the products or services of the firm.
 To create a reputation for service, reliability or Example: “Buy one, get one free”.
research strength.
 To increase market share. Reminder advertising: This genre of advertising
Functions of Advertising - Following are the basic reminds the existing customers to become medium or
functions of advertising: heavy users of the products or services of the firm that
have been purchased by them at least once. This type
1. To distinguish product from of advertising exercise helps in keeping the brand name
competitors' products and uses of the products in the minds of the existing
There are so many products of same category in the customers.
market and they competes with each other, advertising
performs the function of distinguishing advertiser's B) Classification on the basis of region
product from competitors. Advertisements can also be classified on the basis of
the region, say:
2. To communicate product information
Product related information required to be Global advertising: It is executed by a firm in its global
communicated to the targeted customers, and market niches. Reputed global magazines like Time,
advertisement performs this function. Far Eastern Economic Review, Span, Fortune, Futurist,
Popular Science. Cable TV channels are also used to
3. To urge product use advertise the products through out world. Supermodels
Effective advertisement can create the urge within and cinema stars are used to promote high-end
audience for a product.
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products Examples: Sony, Philips, Pepsi, Coca Cola, Doctors, engineers, teachers, purchase professionals,
etc. civil contractors architects are the prime targets of such
manufacturers.
National advertising: It is executed by a firm at the
national level. It is done to increase the demand of its Financial advertising: Banks, financial institutions,
products and services throughout the country. and corporate firms issue advertisements to collect
Examples: BPL (Believe in the best). Whirlpool funds from markets. They publish prospectuses and
Refrigerator (Fast Forward Ice Simple) etc. application forms and place them at those points where
the prospective investors can easily spot them.
Regional advertising: If the manufacturer confines his
advertising to a single region of the country, its D) Classification on the basis of desired responses
promotional exercise is called Regional Advertising. An ad can either elicit an immediate response from the
This can be done by the manufacturer, wholesaler, or target customer, or create a favourable image in the
retailer of the firm. Examples: Advertisements of mind of that customer. The objectives, in both cases,
regional newspapers covering those states or districts are different. Thus, we have two types of advertising
where these newspapers are circulated. Eg. The under this classification.
Assam Tribune (only for the NE region) etc.
Direct action advertising: This is done to get
Local advertising: When advertising is done only for immediate responses from customers. Examples:
one area or city, it is called Local Advertising. Some Season's sale, purchase coupons in a magazine.
professionals also call it Retail Advertising. It is
sometime done by the retailer to persuade the Indirect action advertising: This type of advertising
customer to come to his store regularly and not for any exercise is carried out to make a positive effect on the
particular brand. Examples: Advertisements of Ooo la mind of the reader or viewer. After getting the
la, Gupshup (Local FM channels) etc. advertisement he does not rush to buy the product but
he develops a favourable image of the brand in his
C) Classification on the basis of target market mind.
Depending upon the types of people who would receive
the messages of advertisements, we can classify Surrogate advertising: This is a new category of
advertising into four subcategories: advertising. In this type of promotional effort, the
marketer promotes a different product. For example:
Consumer product advertising: This is done to the promotion of Bagpiper soda. The firm is promoting
impress the ultimate consumer. An ultimate consumer Bagpiper Whisky, but intentionally shows soda. They
is a person who buys the product or service for his know that the audience is quite well aware about the
personal use. This type of advertising is done by the product and they know this fact when the actor states,
manufacturer or dealer of the product or service. "Khoob Jamega Rang Jab Mil Baithenge Teen Yaar ...
Examples: Advertisements of Intel, Kuttons (shirt), Aap ... Main, Aur Bagpiper").
Lakme (cosmetics) etc.
E) Classification on the basis of the media used in
Industrial product advertising: This is also called advertisement
Business-to-Business Advertising. This is done by the The broad classification based on media is as follows:
industrial manufacturer or his distributor and is so
designed that it increases the demand of industrial Audio advertising: It is done through radio, P A
product or services manufactured by the manufacturer. systems, auto-rickshaw promotions, and four-wheeler
It is directed towards the industrial customer. promotions etc.

Trade advertising: This is done by the manufacturer to Visual advertising: It is done through PoP displays,
persuade wholesalers and retailers to sell his goods. without text catalogues, leaflets, cloth banners,
Different media are chosen by each manufacturer brochures, electronic hoardings, simple hoardings,
according to his product type, nature of distribution running hoardings etc.
channel, and resources at his command. Hence, it is
designed for those wholesalers and retailers who can Audio-visual: It is done through cinema slides, movies,
promote and sell the product. video clips, TV advertisements, cable TV
advertisements etc.
Professional advertising: This is executed by
manufacturers and distributors to influence the Written advertising: It is done through letters, fax
professionals of a particular trade or business stream. messages, leaflets with text, brochures, articles and
These professionals recommend or prescribe the documents, space marketing features in newspapers
products of these manufacturers to the ultimate buyer. etc.
Manufacturers of these products try to reach these
professionals under well-prepared programmes.
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Internet advertising: The world wide web is used

extensively to promote products and services of all
genres. For example Bharat Matrimony,
www.teleshop.com, www.asianskyshop.com etc.

Verbal advertising: Verbal tools are used to advertise

thoughts, products, and services during conferences,
seminars, and group discussion sessions. Kinesics also
plays an important role in this context.