UNIT- 2

Market Segmentation, Target Market& Product Positioning

Different Levels of Market Segmentation

Marketers subdivide markets into segments, so they can do focus on marketing plans. Each
Level of market segmentation determines the strategy a company will follow to promote,
distribute and position its product in the market and respectively target audience or its
customers. Before developing a marketing plan, one must know the what are the levels of
market segmentation.
Mass Marketing
In Segemetation, Mass marketing refers to the strategy of targeting the entire potential
customer market by means of a single marketing message. The marketing strategy used in
this segmentation does not target the specific requirements or needs of customers. Mass
marketing strategy, instead of focusing on a subset of customers, focuses on the entire market
segment that can be a probable customer of a product.
An example of mass marketing strategy is of Baygon cockroach spray or Mortein mosquito
repellent coils that target all its potential customers through a single marketing message.
Segment Marketing
Segment marketing refers to a strategy where the company divides its target audience into
different segments based on their unique needs and requirements. This way the company
targets different messages to different segments, appealing them towards the unique features
the product offers. This strategy creates product differentiation for customers with similar
needs and preferences, based on their gender, age, income and location.
The example of segment marketing within clothing industry may be men, women, casual,
fashionable and business clothing segments.
Niche Marketing
This strategy of marketing focuses on a narrower customer segmentation. Customers may
want or desire a product that is not met completely by the products offered in a market. When
companies move forward and develop highly specialized products to offer these customers
their specific needs, they offer distinct products in a market that caters to specific customer
segments only.
Mountain bikes are an example of a niche marketing segment. where the market
segmentation will be individuals interested in mountain biking only. Since not every bike
manufacturing company caters to mountain bikers, it is a niche segment. Companies that
produce mountain bikes target the niche segment of mountain bikers and cater to their
specific needs, preferences and requirements.
Micro Marketing
Micro marketing follows an even narrower segmentation marketing strategy, catering to the
attribute of a much-defined subset of potential customers such as catering to individuals of a
specific geographical location or a very specific lifestyle.
An example of niche marketing is luxury cars that are very high priced and offer exceptional
features such as high speed, customized look, etc. Since these cars are very expensive and
limited in number, the niche market for these vehicles target rich, car lovers that are
interested in the unique features and has the financial capability to buy them.
Examples of Market Segmentation
Market segmentation is the most common activity of every business organization. Marketers
and Business owners cannot focus on mass marketing with one marketing strategy. Here are a
few examples of market segmentation for better understanding this point.
▪ Fast food restaurant should target teenagers and younger couples if target older people
it will be a mistake and will affect their revenue generation.
▪ If marketing Lingerie and beauty products like “Victoria Secret” focus on young,
successful and working-class women.
▪ Sports brand, for example, Nike and Lululemon segment the market and target health
conscious, athletes, gym lovers and sportsmen and sportswomen.
▪ Market segmentation is the best strategy to increase the conversion rate and cut down
on the product cost. It helps marketers to always target niche market and attain your
objectives.
Bases of segmenting Consumer Market
The four bases for segmenting consumer market are as follows: A. Demographic
Segmentation B. Geographic Segmentation C. Psychographic Segmentation D. Behavioural
Segmentation.
A. Demographic Segmentation:
Demographic segmentation divides the markets into groups based on variables such as age,
gender, family size, income, occupation, education, religion, race and nationality.
Demographic factors are the most popular bases for segmenting the consumer group. One
reason is that consumer needs, wants, and usage rates often vary closely with the
demographic variables. Moreover, demographic factors are easier to measure than most other
type of variables.
1. Age:
It is one of the most common demographic variables used to segment markets. Some com-
panies offer different products, or use different marketing approaches for different age
groups. For example, McDonald’s targets children, teens, adults and seniors with different
ads and media. Markets that are commonly segmented by age includes clothing, toys, music,
automobiles, soaps, shampoos and foods.
2. Gender:
Gender segmentation is used in clothing, cosmetics and magazines.
3. Income:
Markets are also segmented on the basis of income. Income is used to divide the markets
because it influences the people’s product purchase. It affects a consumer’s buying power and
style of living. Income includes housing, furniture, automobile, clothing, alcoholic,
beverages, food, sporting goods, luxury goods, financial services and travel.
4. Family cycle:
Product needs vary according to age, number of persons in the household, marital status, and
number and age of children. These variables can be combined into a single variable called
family life cycle. Housing, home appliances, furniture, food and automobile are few of the
numerous product markets segmented by the family cycle stages. Social class can be divided
into upper class, middle class and lower class. Many companies deal in clothing, home
furnishing, leisure activities, design products and services for specific social classes.
B. Geographic Segmentation:
Geographic segmentation refers to dividing a market into different geographical units such as
nations, states, regions, cities, or neighbourhoods. For example, national newspapers are
published and distributed to different cities in different languages to cater to the needs of the
consumers.
Geographic variables such as climate, terrain, natural resources, and population density also
influence consumer product needs. Companies may divide markets into regions because the
differences in geographic variables can cause consumer needs and wants to differ from one
region to another.
C. Psychographic Segmentation:
Psychographic segmentation pertains to lifestyle and personality traits. In the case of certain
products, buying behaviour predominantly depends on lifestyle and personality
characteristics.
1. Personality characteristics:
It refers to a person’s individual character traits, attitudes and habits. Here markets are
segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc.
This type of segmentation is used when a product is similar to many competing products, and
consumer needs for products are not affected by other segmentation variables.
2. Lifestyle:
It is the manner in which people live and spend their time and money. Lifestyle analysis
provides marketers with a broad view of consumers because it segments the markets into
groups on the basis of activities, interests, beliefs and opinions. Companies making
cosmetics, alcoholic beverages and furniture’s segment market according to the lifestyle.
D. Behavioural Segmentation:
In behavioural segmentation, buyers are divided into groups on the basis of their knowledge
of, attitude towards, use of, or response to a product. Behavioural segmentation includes
segmentation on the basis of occasions, user status, usage rate loyalty status, buyer-readiness
stage and attitude.
1. Occasion:
Buyers can be distinguished according to the occasions when they purchase a product, use a
product, or develop a need to use a product. It helps the firm expand the product usage. For
example, Cadbury’s advertising to promote the product during wedding season is an example
of occasion segmentation.
2. User status:
Sometimes the markets are segmented on the basis of user status, that is, on the basis of non-
user, ex-user, potential user, first-time user and regular user of the product. Large companies
usually target potential users, whereas smaller firms focus on current users.
3. Usage rate:
Markets can be distinguished on the basis of usage rate, that is, on the basis of light, medium
and heavy users. Heavy users are often a small percentage of the market, but account for a
high percentage of the total consumption. Marketers usually prefer to attract a heavy user
rather than several light users, and vary their promotional efforts accordingly.
4. Loyalty status:
Buyers can be divided on the basis of their loyalty status—hardcore loyal (consumer who buy
one brand all the time), split loyal (consumers who are loyal to two or three brands), shifting
loyal (consumers who shift from one brand to another), and switchers (consumers who show
no loyalty to any brand).
5. Buyer readiness stage:
The six psychological stages through which a person passes when deciding to purchase a
product. The six stages are awareness of the product, knowledge of what it does, interest in
the product, preference over competing products, conviction of the product’s suitability, and
purchase. Marketing campaigns exist in large part to move the target audience through the
buyer readiness stages.

Main Category Segmentation Base Example/s

Geographic Country/continent England, UK, Europe

Region/area of the North India, West India, South India

country

City New York, Los Angeles, Dallas, Chicago

Urban/rural Measured by the area’s population density

Climate Tropical, arid, alpine

Coastal/inland Measured by distance to the coast

Demographic Age group Pre-teens, teens, young adults, older adults

Generation Baby boomers, Gen X, Gen Y

Gender Male, female

Marital status Married, single, widowed

Family life cycle Young married no kids, married young kids

Family size Couple only, small family, large family

Occupation Professional, trade, unskilled

Education High school, university, vocational

Ethnic background African-American, Hispanic, Asian

 Religion Christian, Jewish, Hindu, Muslim

Psychographic Lifestyle Family, social, sporty, travel, education

Values (VALS) VALS = values and lifestyles

Social class Upper class, middle class, lower class

Personality/self- Ongoing, creative, innovator, serious

concept

Activities, interests, Various hobbies, sports, interests

opinions (AIO)

Benefits Sought Needs/motivations Convenience, value, safety, esteem

Behavioral Occasion Birthday, anniversary, Valentine’s Day

Buying stage Ready to buy, gathering information only

User status Regular, occasional, never

Usage rate Heavy, light

Loyalty status Loyal, occasional switcher, regular switcher

Brand knowledge Strong, some, none

Shopping style Enjoys shopping, functional, avoids

Involvement level High, medium, low

Market Segmentation Process

• The various stages in market segmentation process are as follows
• Stage -1 : Establish a sample of customers
• Stage -2 : Record personal details about the Decision – makers
• Stage -3: Understand the real needs of customers
• Stage -4: Bring together those micro – segments that illustrate similar pattern
• Stage - 5: Verify that the concluding clusters can be regarded as segments
• Stage - 6 : Establish the attractiveness of each segment
Stage - 7: Determine the relative competitive strength
 Bases for Segmenting Industrial/Business Markets
The following are the bases for segmenting business/industrial markets
1. Location of the customer: Marketers usually segment business markets geographically
and concentrate on the geographical location of the industries
2. Type of Customer:
a) Industry : Segment Their markets based on the industry
b) Size: Size of business consumers can be detrmined with the help of the factors like
sales volume,number of sales and production facilities
c) Organizational structure: Organisations to sell their products in number of ways ,like
personal selling,depend mainly on their purchasing departments.
2.Criteria for making Purchase : Buyers want quality products at low cost and on time
delivery
3. Transaction Conditions: Some marketers make use of transaction conditions for
segmenting their business
The three transaction conditions are
a) Buying Situation
b) Usage rate : Segment the markets between heavy users, light users,and non users
c) Purchasing Method: Lease, Financing or by purchasing wholly

Target Market
Definition :
A target market is a group of consumers that the business has decided to aim its
marketing efforts and ultimately its merchandise
Importance of Target Market
The following criteria should consider for identifying target customers
1. Characteristics
2. Importance
3. Process
4. Considerations
Strategies of Target Market
1. Selective Specialization
2. Product Specialization
3. Market Specialization
4. Single segment Concentration
5. Full Market Coverage
Three types of Market Aggregation Strategy
1. Undifferentiated or Market Aggregation Strategy
Market aggregation is a marketing strategy in which marketing is done to a mass number
of people belonging to the same segment of demographics having similar kinds of needs
and wants.In this type of marketing, certain standardized products or services are
marketed to a large number of consumers that out there want to purchase that product or
service so that they can satisfy their needs. Hence it is also given the name ‘mass
marketing’.

2. Market Segmentation/Differentiation//Differentiated Marketing Strategy

Market segmentation is a marketing term that refers to aggregating prospective buyers
into groups or segments with common needs and who respond similarly to a marketing
action. Market segmentation enables companies to target different categories of
consumers who perceive the full value of certain products and services differently from
one another.
3. Concentrated Marketing Strategy
Concentrated marketing is a strategy that involves a brand directing all effort and
resources to develop and market a product for one specific segment of the target
audience. This strategy is especially effective for small businesses as it helps obtain a
good position in one marketing segment.
Product Positioning
Product positioning is a form of marketing that presents the benefits of your product to a
particular target audience. Through market research and focus groups, marketers can
determine which audience to target based on favorable responses to the product. Product
positioning is an important element of a marketing plan. Product positioning is the
process marketers use to determine how to best communicate their products' attributes to
their target customers based on customer needs, competitive pressures, available
communication channels and carefully crafted key messages. Effective product
positioning ensures that marketing messages resonate with target consumers and compel
them to take action.
Understanding Customer Needs
Effective product positioning requires a clear understanding of customer needs so that the
right communication channels are selected and key messages will resonate with
customers. Product positioning starts with identifying specific, niche market segments to
target
Weigh Competitive Pressures
Effective positioning conveys to consumers why this company's product or service should
be preferred over other competitive options based on what the company knows about the
target audience's needs. Effective marketing plans clearly identify how the company's
products or services are different from competitors' offerings and in what ways.
Targeting Communication Channels
To do this effectively, they must choose communication channels that are designed to
connect with their identified target audiences at times when they will be most receptive to
these messages.Consider how automobile manufacturers position their products through
communication via television commercials during sporting events, for instance, or how
cosmetics manufacturers run full-page, full-color ads in women's magazines.
Carefully Crafted Key Messages
 The final challenge in effective product positioning is conveying the differentiating,
value-added aspects of your product or service to your target audience through the
communication channels you have selected.

Product Positioning Tools

1. Market Aggregation
Market aggregation is a marketing strategy in which marketing is done to a mass number
of people belonging to the same segment of demographics having similar kinds of needs
and wants. ... The market aggregations are often referred to as a form of differentiated
marketing.
2. Market Segmentation
Market segmentation is a marketing term that refers to aggregating prospective buyers
into groups or segments with common needs and who respond similarly to a marketing
action. Market segmentation enables companies to target different categories of consumers
who perceive the full value of certain products and services differently from one another.
3. Product Differentiation
Product differentiation is what makes your product or service stand out to your target
audience. It's how you distinguish what you sell from what your competitors do, and it
increases brand loyalty, sales, and growth. Focusing on your customers is a good start to
successful product differentiation.
HOW TO DEVELOP PRODUCT POSITIONING STRATEGIES?
Devising an effective product positioning strategy is a collaborative exercise and often
involves a close association between product management and product marketing teams to
define your product’s core essence. For this, you need to apply the knowledge of the
following areas combinedly:
● Understand Your Customer – Product positioning should distinctly capture who
your customers are along with their needs. It will help you describe your target
customers’ attributes, such as their demographic, geographic, psychographic, and
behavioral details. Also, explain the main problems that they are trying to solve. Use
these persona profiles to inform your product positioning and help your team build
empathy with your customers.
● Analyze the Market – Research your competitors and understand how they cater to
their customer needs. Based on this information, differentiate your product from the
competition. It will help you showcase your product to your potential customers as the
best alternative for solving their problems.
● Assess the Product – Conduct SWOT analysis to objectively analyze where your
product is doing well and where the scope of improvement lies. It will ensure that
your marketing message is in line with product experience and help your customers
make informed decisions.
Based on your product positioning strategy, create a brief positioning statement. Your
positioning statement should narrate your target audience, how your product is unique, and
why they should care for it.

PRODUCT POSITIONING EXAMPLES

Here are some consistently successful product positioning examples in marketing:
● Positioning Based on Corporate Identity – Baja uses the theme ‘Value for money
for years’, and Britannia extended its corporate identity through its campaign “Eat
healthy, think better.”
● Positioning Based on a Brand Endorsement – Lakme (creams, colors,
moisturizers), Annapurna (Salt, atta), Maggi (noodles, soup, sauces).
● Positioning Based on Category – Tanishq (watches sold as jewelry), Sugar-free, a
sugar-free sweetener, initially intended for diabetic patients was available in drug
stores. Nowadays, it’s being positioned as a weight-control device for the health-
conscious segment and sold through supermarkets.
● Positioning Based on Benefits – Certain products like Lifebuoy (Kills the germs you
cannot see) and M-Seal (Seal all leaks) are based on their brands’ functional benefits.
In contrast, some others like Close-up (Confident) and Axe (Irresistible) narrate how
customers feel about their products and involve emotional triggers.
● Positioning Based on Occasion and Time of Use – Nescafe (Great start to the
morning) and Kwality Walls (Post dinner treat).
● Positioning Based on Price – Tata Indica (More car per car) and Westside
(Surprisingly affordable).
● Based on Demographics – Elle 18 for teens and college kids.
● Behavioural Fit – Lays (No one can eat just one) and Coca Cola (Thanda Matlab
Coca Cola).
● Satisfaction fit – McDowell’s No. 1 (Smoothness) and Haywards (Strength).
● Psychographic – Van Heusen (Corporate/Power dressing) and Bajaj Pulsar
(Masculine).
● The Consumer as a Complete Person– The Johnson and Johnson mom and Saffola
wife.
● Unique Attribute – Moov (special ingredient for backache), Dermi Cool (prickly
heat powder that cools).
● Positioning by a Competitor – Borosoft (non-greasy vs. Boroline and Boroplus),
Savlon (doesn’t sting vs. Dettol).

UNIT -3
NEW PRODUCT DEVELOPMENT
 Meaning :
Product development is a series of steps that includes the conceptualization ,design,
development and marketing of newly created or newly rebranded goods or services
Need for New Product Development
New product becomes necessary for meeting the changes in demand
For making new profits
For combating environmental threats
To meet economic ,Social, Political and Technological threats
New Product Classification
• New products can be classified into the following categories
• New-to- the world products
• New Product Lines
• Additions to existing product lines
• Improvements and revisions of existing products
• Repositioning
• Cost Reductions

What Are the Cons of Product Development?

It can be easy to set unrealistic expectations for a product. ...
Products can fail unexpectedly. ...
External sources can change procedures, which can alter your product development. ...
Product testing can result in a failed idea.
Some of the reasons for failure of a new product are as follows:
1. Lack of product uniqueness:
Any product that does not satisfy a unique need of consumers, fails to dislodge more
established brands available. Customers must comprehend the new product’s advantages.
Unless sound communication strategies support the introduction of a new product, failure
usually follows.
A product is likely to be perceived as unique if it satisfies a new function; if it satisfies an
existing function in a new ways; if its price and performance give it an advantage over the
competitive products. It should be distinctive in one way or the other.
2. Companies must have a game-plan that carries them through every stage and aspect of
product’s life. The plan is to care for consumers. Many forces are at work that alter
consumer’s needs and wants for products; life- styles change populations, age and
preferences change; similarly needs of industrial buyers are affected by changing business
opportunities shortage of energy and material, technological advance and so on.
The market potential of the product and the nature of competition must be determined
beforehand.
3. Poor timing:
The market success depends, to a large extent, on the ability of the company to launch the
product at a time when consumer demand is at its highest. Though it may not always be
desirable to be the first to enter the market, undue delay or un-opportune time may mean that
the demand for the product demonstrated during consumer testing phase might vanish by the
time the product is launched in commercialization period. Hence, appropriate time has its
strategic importance in product success.
4. Misguided enthusiasm:
On several occasions, it so happens that there will be either an under-estimation of the
strength of competitors or an over-estimation of one’s own capabilities resulting in over-
optimistic calculations which will be shattered very soon by the actual product performance.
This can happen when executives want to market a particular product because; it is tied with
their personal ambitions in the company.
Poor planning:
Therefore, planners should rely on only authentic and unbiased information for reading the
future which is uncertain.
5. Product deficiencies:
Many a times, technical product deficiencies are the common cause of new product failure.
Engineers and product technocrats are capable of giving the best laboratory products by over-
engineering. This is a good so far as technical superiority is concerned over
competitors.However, an ‘over-engineered’ product costs a lot to the firm and finally to the
consumers where competitors have an edge over the firm in question. Technical deficiencies
are to be removed but too much should not cost much.

Stages in New Product Development

WHAT IS THE NEW PRODUCT DEVELOPMENT PROCESS?
The new product development process is a systematic guide for all budding businesses and
entrepreneurs that will help them come up with a customer-oriented, high-quality product that
has the best chance of doing well in the highly competitive markets. In an attempt to explain
new product development process, many market experts believe that there exist 6 or 7 stages
of new product development process. This number however can vary based on how detailed
the process is from one example to another. To know more about these stages and find out
what are the 8 steps of new product development process, read on.
8 STAGES OF PRODUCT DEVELOPMENT PROCESS
It is important to understand that there is no one generic product development process and
that each rendition of such a process will vary depending on the depth and detail that each
explanation covers. This article explains 8 stages of the product development process and
these are listed below.
1. Idea Generation: The first stage in the product development process is idea
generation. In this stage, the company comes up with many different and unique ideas
based on both internal and external sources. Internal idea sources more often than not
refer to the in-house research and development teams of the company and external
sources refer to competitor innovations, the customer wants, distributors and
suppliers, and so on. The company thereby focuses on coming up with as many
feasible ideas as possible.
2. Idea Screening: The next stage involves the screening of this often-large set of ideas.
The primary objective of this stage is to focus on ideas that are in line with the
 company’s customer value and financial goals. The stage focuses on the filtering out
of ideas that are poor or are not feasible and retain those that have good potential.
This is to ensure that the company does not face losses by moving ahead with fickle
ideas that do not promise adequate returns.
3. Concept Development and Testing: The third of the product development process
steps is concept development and testing. In this stage, the good product ideas must be
developed into detailed product concepts that are conveyed in consumer-oriented
terms. The concept must be made in order to project the product in terms of how it is
perceived by consumers and how it will potentially be received in the market and by
which set of potential customers. This concept must then be tested by presenting it to
the target consumers and their response must be taken into account.
4. Development of Marketing Strategy: The new product development process in
marketing is covered in stage four. In this step, the company tries to come up with
strategies to introduce a promising product into the market. The company must
therefore come up with the price, potential revenue figures as well as advertising and
distributing channels in this step.
5. Business Analysis: The product concept is put through a vigorous business analysis
or test in order to ascertain projected sales and revenue and also assess risk and
whether the production of the product is financially feasible. The company’s
objectives are considered and if these are satisfied, the product is moved on to the
next step.
6. Product Development: This is the step that comes after the management of a
company declares a product concept to be in line with the goals of the company and
issues green light for development. The research and development wing of the
company then works on the product concept for many months and even years in some
cases, to come up with a working and functional prototype of the product concept.
7. Test Marketing: This is the penultimate stage of the new product development
process and involves the testing of the product and its suggested marketing program
in realistic market settings. This stage provides an insight into how the product will be
introduced into the market, advertised, produced, packaged, distributed, and
eventually sold to the customers, and therefore any optimizations if required can be
made by the company.
8. Commercialization: The final step of the product development process is that of
commercialization. Based on the information gathered during the test marketing
process, the business management may either decide to go ahead with the launch of
the product or put it on the backburner. In case the go-ahead is given, the product is
finally introduced into the market and this process is called commercialization. This
stage often leads to massive costs in terms of initial infrastructural investments as well
as sales promotions and advertisements.

Consumer Adoption Process

Philip Kotler considers five steps in consumer adoption process, such as awareness, interest,
evaluation, trial, and adoption. On the other hand, William Stanton considers six steps, such
as awareness stage, interest and information stage, evaluation stage, trial stage, adoption
stage, and post-adoption stage. We will follow six steps.
1. Awareness Stage:
Individual consumer becomes aware of the innovation. He is exposed to innovation but
knows very little regarding the innovation. He has only limited information about it. He is
aware of either by discussion with friends, relatives, salesmen, or dealers. He gets idea about
a new product from various means of advertising like newspapers, magazines, Internet,
television, outdoor media, etc. At this stage, he doesn’t give much attention to the new
product.
2. Interest and Information Stage:
In this stage, the consumer becomes interested in innovation and tries to collect more
information. He collects information from advertising media, salesmen, dealers, current
users, or directly from company. He tries to know about qualities, features, functions, risk,
producers, brand, colour, shape, price, incentives, availability, services, and other relevant
aspects. Simply, he collects as much information as he can.
3. Evaluation Stage:
Now, accumulated information is used to evaluate the innovation. The consumer considers all
the significant aspects to judge the worth of innovation. He compares different aspects of
innovation like qualities, features, performance, price, after-sales services, etc., with the
existing products to arrive at the decision whether the innovation should be tried out.
4. Trial Stage:
Consumer is ready to try or test the new product. He practically examines it. He tries out the
innovation in a small scale to get self-experience. He can buy the product, or can use free
samples. This is an important stage as it determines whether to buy it.
5. Adoption Stage:
If trial produces satisfactory results, finally the consumer decides to adopt/buy the innovation.
He decides on quantity, type, model, dealer, payment, and other issues. He purchases the
product and consumes individually or jointly with other members.

According to professor Everett Rodgers in his book “Diffusion of Innovation“, he says that
there are five categories of adopters.
The five adopter categories divide consumers into segments based on their willingness to try
out a new innovation or product. The following post looks are each of the five types of
adopters in a bit more detail.
Adopter Categories
The five types of adopters include:
1. Innovators
Of the five adopter categories, individuals in the Innovators category represent only about
2.5% of users.
Innovators are technology enthusiasts that are willing to take risks on a new offering.
Generally, they have a high social status and are often considered mavens in their space or
industry.Of the five adopter categories, Innovators have a high degree of financial liquidity to
absorb failures and a high-risk tolerance that allows them to adopt new technologies that may
ultimately fail.They are connected socially to engineers and technology and they often
interact with other innovators.

2. Early Adopters
Of the five adopter categories, individuals in the Early Adopters category represent about
13.5% of users.They are visionaries and opinion leaders in their space or industry.Early
Adopters have a high degree of social status that allows them to influence others based on
their opinions. They are more likely to spread the word than Innovators with their followers.
Early Adopters are a bit more discerning in their adoption choices than Innovators as a way to
help them maintain the central communication position they enjoy.
3. Early Majority
Of the five adopter categories, individuals in the Early Majority category represent about
34% of users.The Early Majority adopt an innovation long after Innovators and Early
Adopters. The Early Majority are more focused on solutions and convenience over
technology and performance and therefore wait for the technology to mature.While the Early
Majority has above average social status and contact with Early Adopters, they seldom are
opinion leaders.
4. Late Majority
Of the five adopter categories, individuals in the Late Majority represent about 34% of users.
The Late Majority adopt an innovation much later in a technologies maturity cycle.Late
Majority individuals approach an innovation with a high degree of skepticism and adopt the
innovation only after the majority of society has already accepted it.The Late Majority often
has little financial liquidity so their risk tolerance is low and they are not in a position to
influence others.
5. Laggards
Of the five adopter categories, individuals in the Laggards category represent the final 16%
of usersLaggards are dead last to adopt an innovation. Laggards typically have an aversion to
change, tend to focus on “traditions,” and generally are only persuaded to adopt a technology
by close friends and family.
 Unit -4
Product & Pricing Decisions
A product is something that is manufactured for sale in the market. Customer needs are met
by the usage of products. Product is one of the main components of marketing—all marketing
activities revolve around the product. Products can be tangible or intangible. Tangible
products are known as goods while intangible products are called services.
Product – Concept
Product refers to a good or service that satisfies the needs and wants of customers. It is
offered in the market by an organization to earn revenue by meeting the requirements of
customers. Product is an asset of an organization and referred as the backbone of marketing
mix.According to Peter Drucker, “Suppliers and especially manufacturers have market power
because they have information about a product or a service that the customer does not and
cannot have, and does not need if he can trust the brand. This explains the profitability of
brands.”It is very important for an organization to understand the needs of customers. For
example, some customers use mobile phones for talking; whereas, some use mobile phones
for talking as well as business purposes, such as teleconferencing. Needs of the customers
depend on their purchasing power.For example, a customer whose basic need is surfing over
the Internet may opt for a simple computer; whereas, a software engineer may need a high
configuration computer. Therefore, when the level of need increases then the level of product
also increases.
Product Life Cycle Stages
The product life cycle has 4 very clearly defined stages, each with its own characteristics that
mean different things for business that are trying to manage the life cycle of their particular
products.
Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales
are low, although they will be increasing. On the other hand, the cost of things like research
and development, consumer testing, and the marketing needed to launch the product can be
very high, especially if it’s a competitive sector.
Growth Stage – The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production,
the profit margins, as well as the overall amount of profit, will increase. This makes it
possible for businesses to invest more money in the promotional activity to maximize the
potential of this growth stage.
Maturity Stage – During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the
most competitive time for most products and businesses need to invest wisely in any
marketing they undertake. They also need to consider any product modifications or
improvements to the production process which might give them a competitive advantage.
Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s
known as the decline stage. This shrinkage could be due to the market becoming saturated
(i.e. all the customers who will buy the product have already purchased it), or because the
consumers are switching to a different type of product. While this decline may be inevitable,
it may still be possible for companies to make some profit by switching to less-expensive
production methods and cheaper markets.

Limitations of the Product Life Cycle

• Products do not have such a predictable life and the specific life cycle
• Life cycle concept is not well suited for the forecasting of product sales
• If sales peak and then decline ,managers may conclude that the product is in the
decline phase and therefore cut the advertising budget .
Marketing Strategies for the Product Life Cycle Stages
Product life cycle is a very important concept for marketer as it is directly connected with the
marketing strategies for the product. In different PLC stages, marketers should consider to
apply different marketing strategies.
In introduction stage, the company should highly focus on building product awareness and
cover the market share rapidly as there is less challenge from competitors. Firms should
consider applying large expenditure on promotion and advertising and be prepared to get only
a small proportion of that back. Pricing is also important for company to establish in the
phase. Company can establish a high price for recovering the development costs or low
penetration price to build its market share quickly.
In growth stage, the basic guiding concept for the marketing is to expand the market and
cover the market share maximum. Its target is to maintain its competitive status while
expanding market rapidly. The marketing strategies in this phase should be different from
that in the introductory stage. Company must differentiate its products offerings from the
competitors. Promotion and advertising continues to aim in establishing a leadership in this
market. This period is also the best time to make an overall coverage strategy in all
marketplaces so as to reach to more consumers.
At maturity phase, the increasingly growth in sales is diminishing. The competition in the
marketplace with appearance of many other replaceable new brands is getting intense ever
before. At this stage, the marketing strategy’s aim is to defend the market share as best as it
can do. Various marketing tools are applied, such as pricing and discount policies as
responding to the competition environment. Promotion and advertising should emphasize
product differentiation in terms of quality and reliability. Distribution continues multi-
distributing channels. Successful product maturity stage is extended beyond the regular
expectation. “Tide” washing powder is a good example. It is a very old brand, but still
growing.
At decline stage, the sales continues decreasing and pricing strategies like discount, is not
effective. Therefore, firms should make options for handling the product effectively. If
company decide to maintain the product, three marketing strategies may be helpful. (1).
Continuance of the previous marketing strategies with respect to price, market, distribution
and promotion. (2). Concentrate on the most potential marketing channels. (3). Harvesting
strategy. It means to reduce price greatly and promotion personnel or maintain the original
price or even higher than before to maximize profits before withdrawal from the market.
Product Classification
Product classification refers to the organization of the different types of products that
consumers buy. Knowing these classifications can help marketers create advertisements for
their company's goods and services. Product classification can help professionals in all levels
of business, as it can also help determine product demand, pricing and the primary
demographic to which advertisers can target with their marketing campaigns.
What are the different product classifications?
There are four main product classifications. Professionals base these categories on consumer
habits, costs and their general characteristics. The four product classifications are:
1. Convenience products
Convenience products describe the items and services that customers purchase on a regular
basis with little thought. Typically, consumers use the same or similar brands for convenience
products unless they are compelled to do otherwise through an advertisement or availability.
For example, dish soap is a convenience product. Another characteristic of convenience
products is that they are easy to find. Most consumers can buy dish soap without conducting
research or making a special trip to the store for it.
Marketers may use more techniques that discount other brands in their campaigns when
marketing convenience products. This is because consumers may change their buying habits
and switch to a different brand if convinced, such as through a comparison advertisement. For
example, a company may market their dish soap to be more effective at removing grease
from dishes. Marketers may also spend more time with consumer test groups, to determine
how their brand compares to others or create marketing campaigns that get a consumer's
attention by surprising them.
2. Informed purchases
Informed purchases, also known as shopping goods, refers to the products and services that
consumers don't make often and usually perform research before doing so. These types of
products can range from more expensive items, such as a house or car, or more regular
purchases, such as a pair of shoes. Consumers typically take more time to make informed
purchases, which can change the way marketers advertise them.
For example, because consumers typically perform more research or have higher standards
for these purchases, they may include more information in their marketing campaigns and
choose more specific demographic groups to target. For example, a marketing team may
choose to target college-aged consumers when creating advertisements for laptops, as this
demographic often needs the product. The marketing team might also include more
information about the laptop's abilities, such as its graphics quality or operation speed.

3. Specialty items
Specialty items are unique products that marketers can advertise to a certain demographic of
consumers without worrying about their competition. These products can include innovative
goods that are one of a kind on the market or brand-name products that have a loyal fan base.
While these items may be more expensive than others, consumers often feel less of a need to
deliberate or research their decision to purchase a specialty item.
For example, the marketing team for a well-known luxury fashion brand wouldn't need to
create advertisements that compare their clothes to other brands or even include detailed
information. Instead, the brand's name and reputation alone can encourage consumers to
purchase their products. These companies can focus more on building and maintaining
customer relationships and brand recognition than distinguishing themselves from other
companies.

4. Mandatory purchases
Mandatory purchases, also known as unsought goods, are products that consumers buy out of
necessity rather than desire. Typically, these products are household or safety items that
customers don't feel excited to buy, such as batteries, smoke detectors, air filters and cleaning
products. Sometimes, consumers may buy these items out of fear or an obligatory response,
such as buying a fire extinguisher or a car maintenance membership just in case of an
emergency.When advertising these items, marketing teams can focus more on reminding
consumers of their need for these items and building brand recognition that allows consumers
to purchase a specific brand with little thought. Some companies choose to feature reasons
why you need these items in their advertisements, creating a sense of security through the
purchase of their product. For example, a marketing team may advertise a flashlight by
showing a person using one in the event of a power outage.
Product Line
What is A Product Line?
According to Philip Kotler, a product line can be defined as “a group of products that are
closely related because they function in a similar manner, and sold to the same customer
groups, are marketed through these same types of outlets, fall within given price range.”
Product line Decisions
The following types of product line decisions are related to the product line strategies that are
planned activities of adding and deleting a particular product from the line.
1. Line Stretching Decision. Product line stretching means to lengthen the current
product line. It has three dimensions downward, upward, and both-ways.
▪ Downward Stretching means adding a new product to the current line, but at a lesser
price, for example, Mercedes in a joint venture with Swatch, introduced a $10,000
Smart Micro Compact Car.
▪ Upward Stretching means adding new products but at higher prices. Companies
stretch upward because they want prestige, growth rate, or high-profit margins. For
instance, General Electric successfully added its current Monogram premium kitchen
appliance to target the higher-end consumer.
▪ Two-way Stretching means adding new products in both directions. Marriot did this
significantly and started the Renaissance Hotel target high-end consumer and Town
suites to cater to the needs of lower-end consumers.
2.Line Filling Decisions means adding new products to the same product range to use excess
capacity, increase customer base, extra profit, and keep competitors away. Sony added
waterproof and solar-powered Walkman to its current Walkman line.
3.Line Pruning Decision means to reduce the depth of a product line by removing
unprofitable products from the existing lines. Crystal Pepsi launched in the market and
discontinued after some time.
Product Line Examples
Here are a few examples of product lines from some of the reputable companies
Nike Product Lines
Nike Inc., is an American Multinational Company that design, manufacture and market and
sales footwears, apparel, and accessories. According to the company’s website, it has divided
into three main categories, i.e., Men, Women, and Kids. The following are some of the Nike
products Lines.
▪ Shoes. Lifestyle, Running, Basketball, Jordan, Training & Gym, Soccer, Golf, Tennis,
Slides & Sandals, Skateboarding, Football, and Track and Field.
▪ Clothing. Tops & T-shirts, Shorts, Hoodies & Sweatshirts, Pants, Pants and leggings,
Sports Bras, Jackets & Vests, Swimmers, Plus Size, Skirts & Dresses, Yoga, Socks &
Underwear, Big & Tall and Polos.
▪ Kids. The Nike Kids category is based on age and sizes. Boys and Girls Shoes, Boys
and Girls Clothing
Product Line Vs. Product Mix
Sometimes people confused between product line and product mix that they are the same. But
these terms are slightly different.
A product line offers unique and related products and brands in the market. These products
have similar functions and also target a defined group of customers.
On the contrary, the product mix is the combination of all the product lines and categories a
company offers to its customers.
A product mix is the combination of all product lines and items that a particular seller offers
for sale.
A company having considerable depth to its lines and consistency to its mix is more likely to
centralized its marketing effort than a company having little depth, great width, and little
consistency.
Product Mix
Dimensions Product Mix Decisions – Concepts of Width, Depth, Length, and
Consistency of a Product Mix
The product mix is the composite of products that an organization makes available to
consumers. The product mix of a company then will have a certain depth, width, consistency,
and length.
Width
A company’s width of the product mix consists of different product lines carried by the
company. The width of the product mix measures the number of product lines in the
company.
Length
The length refers to the total number of items in its product mix. For example, if a particular
detergent powder comes in three sizes and two formulae, it has a depth of six.
Depth
Depth of the product mix, on the other hand, refers to the number of variants that are offered
of each product line of the company. The depth of a product mix is measured by the number
of products offered in each product line.
Consistency
A product mix can be termed as consistent if there are similarities in terms of end-use,
production requirements, distribution channels, etc.
Product Mix Decisions Example
The width of P&G’s product mix indicates the number of different product lines the company
carries.The consistency of the product mix indicates how closely related the various product
lines are in end-use, production requirements, distribution channels, or in some other ways.
P&G’s product lines are consistent in so far as consumer products that go through the same
distribution channels. The lines are less consistent insofar as they perform different functions
for buyers.
Pricing Decision
• Pricing decision and policies have a direct influence on sales and volume and profits
of business.
• Meaning of Pricing : Pricing is the process of determining what a company will
receive in exchange for its product. The method adopted by a firm to set its selling
price.
Concept of Price
Definition:
According to Philip Kotler, “Price is the only element in the marketing mix that produces
revenue, the other elements produce cost
Importance of Price
1.Most flexible Marketing Mix variable
2. Setting the right Price
3. Trigger of First Impression
4. Important part of Sales Promotion
Objectives of Pricing
1.To maximise the profits
2. Price stability
3.Competitive situation
4. Achieving Target return
5. Capturing the market
6. Ability to pay
7. Long run welfare of the firm
8. Cash flow objective
9. Product line promotion objective
10. Survival objective

Factors Influencing of Pricing

• Furthur internal factors influence the price
• Corporate and marketing objectives of the firm
• The image sought by the firm through pricing
• The basic characteristics of the product
• The stage of the product on the product life cycle
• Price elasticity of demand of the product
• Use pattern and turn around rate of the product
• Costs of Manufacturing and marketing

Factors External forces influence the price

1. Market Characteristics
2. Buyer behaviour in respect of the particular product
3. Extent of bargaining power of particular product
4. Competitor’s Pricing Policy
5. Government controls ,Regulation or pressures on pricing
6. Other relevant legal aspects
7. Societal considerations
8. Understanding if any ,Reached with price cartels
Pricing Policy
• Pricing policy refers to the policy by which a company determines the wholesale and
retail prices for its products or services.
• Objectives of Pricing Policy
• To maximise long run profit
• To maximise short run profit
 • To increase sales volume
• To increase monetary sales
• To increase market shares
• To obtain a target rate of return on investment
• To obtain a target rate of return on sales
• To stabilize market or stabilize market
• To ensure company growth
• To maintain price leadership
• To desensitize customers to price
• To discourage new entrants into the industry
• To match competitors prices
• To encourage the exit of marginal firms into the industry
• To avoid government investigation or intervention
• To obtain or maintain the loyalty and enthusiasm of distributors
• To enhance the image of the firm ,brand , or product

Pricing Methods
Definition: The Pricing Methods are the ways in which the price of goods and services can
be calculated by considering all the factors such as the product/service, competition, target
audience, product’s life cycle, firm’s vision of expansion, etc. influencing the pricing strategy
as a whole.
Pricing Methods and Pricing Strategies
Marketing process and price setting
Price setting is part of the marketing process and it requires an in-depth market reasearch.
The right price can generate more sales while the wrong one can make potential customers
look elsewhere. Let’s have a look at the most common pricing strategies.In this short guide
we approach the three major and most common pricing strategies:
1. Cost-Based Pricing.
2. Value-Based Pricing.
3. Competition-Based Pricing.
Cost-based pricing Strategies
Cost-based pricing strategies uses production costs as its basis for pricing and, to this base
cost, a profit level must be added in order to come up with the product price.Cost-based
pricing companies use their costs to find a price floor and a price ceiling. The floor and the
ceiling are the minimum and maximum prices for a specific product or service – the price
range.The ideal thing to do, would be setting a price in between the floor and the ceiling.
Many companies mass-producing goods such as textiles, food and building materials use this
pricing technique.
Pros:
● Calculations to determine price are simple.
● During price setting unknowns are taken into account.
● Pricing ensures total profits for the business.
Cons:
 ● Ignores how customer demand affects price.
● It doesn’t take into account actions by competition.
● Price setting cannot be solely based on costs.
Value-based pricing strategies
Value-based pricing, also known as customer-based pricing, is a pricing concept which is
defined as follows: The setting of a product’s price based on the benefits it provides to
consumers. In other words, it is about finding the price that your customers are willing to pay.
Companies using value-based pricing consider the value of their product and their customers’
perceptions of value as the key to pricing. They determine how much money or value their
product will generate for the customer – a value which translates into benefits such as
increased efficiency, happiness or stability. By using this type of pricing technique, you may
aim at using price to support product image, increase product sales and create product
bundles in order to reduce inventory or to attract customers.
Pros:
● The price set supports product image.
● The value added helps increase product sales.
● Differentiation attracts new customers.
Cons:
● Calculations may ignore product costs.
● It might forget about existing competitors.
● It requires great selling techniques.
Competition-based pricing strategies
Competition-based pricing, also known as competitive pricing, consists in setting the price of
a product based on what the competition is charging. This pricing method is normally used by
businesses selling similar products, since services can vary from business to business, while
the attributes of a product remain similar.In highly competitive markets, consumers judge
products with similar features by the prices. Consequently, competitors may need to price
their products lower or risk losing potential sales.
keeping an eye on existing and emerging competition by using a competitor website price
monitoring software will allow you to be more competitive. The more you know about your
rivals and what they are doing, the better you can decide how to manage your prices.It is
important for companies to keep their production costs in mind, as well as managing the time
they spend monitoring competitors and the prices set by them. With the expansion of
eCommerce and Big Data, this last monitoring factor can be seen as a downside if it is not
carried out properly.
Pros:
● It keeps an eye on existing and emerging rivals in the industry and provides smart
data to make more effective pricing decisions.
● Setting the right price according to market state helps gain competitiveness.
Cons:
● You risk losing profits if you do not take into account information on your purchase
price and margins. You need to check on your price elasticity.
● It needs an effective price monitoring system. Automation is key in this respect to
avoid manual tracking
What is Price Skimming?
Price skimming is a pricing strategy where businesses tend to markup the initial price of the
product to a much higher rate and slowly decrease it as time goes on.
In simple terms, the business charges the highest price when the offering is launched
and is new in the market, and then reduces the price over time.
Price skimming is used by businesses in case they meet either or all of the following
situations –
The business has a well-established brand and user base
The product or service is new or revolutionary to the market
No competitors exist
The high number of prospective customers for the product
Price skimming suits well for certain industries more than the others. For example, tech
companies usually use price skimming. This is because the newly launched products usually
have no competition or the brand is well-established in the minds of its users in order to
warrant a lot of potential buyers for it.
How Does Price Skimming Work?
Basically, every pricing strategy “skims” off the top and price skimming just helps in
capturing more of the consumer surplus by charging the most they possibly can – pricing
their products as high as they can without hurting the brand image and reputation.
Let’s look at a few examples of price skimming to get a better understanding.
Examples of Price Skimming
Apple
Apple’s pricing strategy on its smartphone lineup follows the price skimming strategy to a
tee. Apple releases new iPhone models every year and prices of the newer iPhones are quite
high, in fact much higher than the rest of the competition. Meanwhile, its previous year’s
lineup gets a price cut since they are no longer considered as bleeding-edge pieces of
tech.Apple is able to do this because –It is sure that there are potential takers for the newest
tech.Doing so will not hurt its brand image.It helps establish themselves as more of a luxury
brand
Advantages of Price Skimming
Recover Costs Quickly
The higher initial price right from the launch helps recover the amount invested in the
research and development of the product/service quite quickly and easily. This also helps in
recuperating advertising and marketing costs quickly.
Proper Segmentation
This is a major benefit obtained from the proper implementation of price skimming. By
initially setting the price high, the businesses tend to filter out (read: segment) the market into
different customer categories – early-adopters, brand loyalists, and regular consumers. This
further helps to maintain inventory and also test the waters when venturing into newer
markets or introducing newer products/services.
Higher Profit Margins
A product priced at its maximum limit helps in generating higher profits for the company. It
helps them make the most out of the certain market segment that is created from pricing
highly and then reaching the rest by reducing the price as time passes.
Quicker Real-time Product Testing
The early-adopters and really avid enthusiasts are the two main target customers during the
initial launch of a product – since they are the ones who buy the product even at the higher
initial price and usually are either well informed or willing to provide feedback to the
company. These early-adopters and enthusiasts help a business to gain more insight into the
functioning and performance of their products.
Create Buzz & Hype
Higher prices tend to draw news and press coverage, helping get more exposure and
advertising for the product/service quite easily. The higher price also helps build a better
brand image – if it suits the branding and is implemented properly – among consumers.
Dynamic Pricing
Price skimming helps businesses change the price on their products according to the market
situation, brand perception, customer response, product features, and competition. Price
skimming helps businesses have better control over the pricing of their products.

Disadvantages of Price Skimming

Mostly Short-term Benefits
While the skim pricing strategy helps in increasing the profit margins of the company, this is
only for a short while. It doesn’t last long since the market will gain a few competitors and
will be harder to hold onto the high markups on its goods. Also, it leads to loss of sales and
user base if the business is unable to justify the higher price in the long run.
Proper Implementation is a Must
Price skimming can only be implemented after thorough research and analysis of the market
conditions, customer sentiments and brand-perception. There are a lot of things that could go
wrong if done improperly – most of which negatively affect the brand.
Needs Inelastic Product Curve
The skim pricing strategy is most effective when the product follows an inelastic demand
curve – a demand curve where the quantity of the product is not majorly affected by the
change in prices. In case a product does not follow the inelastic demand curve, it leads to
fluctuations in sales where it might cause increased demand when prices are lowered and
vice-versa. This makes it harder for businesses to maintain their production and inventory.
Competition Acts as a Hindrance
High competition means that the sales numbers of the product/service are affected upon the
lowering or increasing of its prices. Competition causes the goods to follow an elastic
demand curve which makes it unsuitable for implementing price skimming.
B) Penetration Pricing : It is the pricing technique of setting a relatively low initial entry
price ,often lower than the eventual price , to attract new customers.
• Advantages of Penetration Pricing
• High adoption and diffusion: Penetration pricing enables a company to get its
product or service quickly accepted and adopted by customers.
 • Marketplace dominance: Competitors are typically caught off guard by a
penetration pricing strategy and are afforded little time to react. The company is able
to utilize the opportunity to switch over as many customers as possible.
• Economies of scale: The pricing strategy generates a high sales quantity that enables
a firm to realize economies of scale and lower its marginal cost.
• Increased goodwill: Customers that are able to find a bargain in a product or service
are likely to return to the firm in the future. In addition, this increased goodwill
creates positive word of mouth.
• High inventory turnover: Penetration pricing results in an increased inventory
turnover rate, making vertical supply chain partners, such as retailers and distributors,
happy.
• Disadvantages of Penetration Pricing
• Pricing expectation: When a firm uses a penetration pricing strategy, customers
often expect permanently low prices. If prices gradually increase, customers may
become dissatisfied and may stop purchasing the product or service.
• Low customer loyalty: Penetration pricing typically attracts bargain hunters or those
with low customer loyalty. Said customers are likely to switch to competitors if they
find a better deal. Price cutting, while effective for making some immediate sales,
rarely engenders customer loyalty.
• Damage brand image: Low prices may affect the brand image, causing customers to
perceive the brand as cheap or poor quality.
• Price war: A price penetration strategy may trigger a price war. This decreases
overall profitability in the market, and the only companies strong enough to survive a
protracted price war are usually not the new entrant who triggered the war.
• Inefficient long-term strategy: Price penetration is not a viable long-term pricing
strategy. It is usually a better idea to approach the marketplace with a pricing strategy
that your company can live with, long-term. While it may then take longer to acquire
a sizeable market share, such a patient, long-term strategy is more likely to serve your
company better overall, and less likely to expose you to severe financial risks.
Netflix is the perfect example of penetration pricing done right. We have often heard
people complaining about their Netflix subscription prices going up or their one month of
free subscription ending. Nevertheless, despite occasional grumbling, people are
completely fine with paying the higher subscriptions for the unending flow of good media
content. Today, Netflix is a market leader constituting 51% of streaming subscriptions in
the United States. Other OTT platforms are following suit by deploying penetration
pricing to attract new customers.
• New Product Pricing Strategy
• Pricing Strategy for a new product depends on how distinct the product is and how
long the distinctiveness remains .The more the distinctiveness ,the higher is the
freedom to determine the price .

Price-Skimming – New Product Pricing

The first new product pricing strategies is called price-skimming. It is also referred to as
market-skimming pricing. Price-skimming (or market-skimming) calls for setting a high price
for a new product to skim maximum revenues layer by layer from those segments willing to
pay the high price. This means that the company lowers the price stepwise to skim maximum
profit from each segment. As a result of this new product pricing strategy, the company
makes fewer but more profitable sales. Many companies inventing new products set high
initial prices in order to skim revenues layer by layer from the market.
An example for a company using this new product pricing strategy is Apple. When it
introduced the first iPhone, its initial price was rather high for a phone. The phones were,
consequently, only purchased by customers who really wanted the new gadget and could
afford to pay a high price for it. After this segment had been skimmed for six months, Apple
dropped the price considerably to attract new buyers. Within a year, prices were dropped
again. This way, the company skimmed off the maximum amount of revenue from the
various segments of the market.However, this new product pricing strategy does not work in
all cases. Price-skimming makes sense only under certain conditions. The product’s quality
and image must support the high initial price, and enough buyers must want the product at
that price. Also, the costs of producing smaller must not be so high that they overshadow the
advantage of charging more. And finally, competitors should not be in sight – if they are able
to enter the market easily and undercut the high price, price-skimming does not work.

Market-Penetration Pricing – New Product Pricing

The opposite new product pricing strategy of price skimming is market-penetration pricing.
Instead of setting a high initial price to skim off each segment, market-penetration pricing
refers to setting a low price for a new product to penetrate the market quickly and deeply.
Thereby, a large number of buyers and a large market share are won, but at the expense of
profitability. The high sales volume leads to falling costs, which allows companies to cut
their prices even further.Market-penetration pricing is also applied by many companies. An
example is the giant Swedish furniture retailer Ikea. By introducing products at very low
prices, a large number of buyers is attracted, making Ikea the biggest furniture retailer
worldwide. Although the low prices make each sale less profitable, the high volume results in
lower costs and allows Ikea to maintain a healthy profit margin.In order for this new product
pricing strategy to work, several conditions must be met. The market must be highly price
sensitive so that a low price generates more market growth and attracts a large number of
buyers. Also, production and distribution costs must decrease as sales volume increases. In
other words, economies of scale must be possible. And finally, the low price must ensure that
competition is kept out of the market, and the company using penetration pricing must
maintain its low-price position. Otherwise, the price advantage will only be of a temporary
nature.

Unit-5
Promotion Mix
Gary Armstrong defines promotion mix as, “A company’s promotional mix includes
advertising, personal selling, sales promotion, public relations, direct marketing. It also
includes product design, shape, package, colour, label etc., as all these communicate
something to buyer.”
The term ‘promotional mix’ is used to refer to the combination of different kinds of
promotional tools used by a firm to advertise and sell its products.
The main promotional tools or activities which make up promotion mix are personal selling,
advertising, publicity and sales promotion. These are also known as elements of promotion
mix.
Philip Kotler opines, “A company’s total marketing communication mix also called
promotion mix consists of specific blends of advertising, personal selling, sales promotion,
public relations and direct marketing tools that the company use to pursue its advertising
and marketing objectives.”
A promotion mix is a set of different marketing approaches that marketers develop to
optimize promotional efforts and reach a broader audience. The marketer’s task is to find the
right promotion
Promotion Mix – Concept
The concept of promotional mix assumes that there is a variety of means for communicating
with consumers. The term promotional mix refers to the combination of various types and
amounts of various forms of promotion used by a marketer. The final selection of them
depends upon the jobs assigned to promotion and the environment in which they are
performed.The concept further assumes that there are different types of promotion and each
are has its advantages and disadvantages over other forms. All types of promotions are not
suited to all types of business. Certain promotion types are better suited for some tasks than
others. All promotional types are compatible and interchangeable.
The determination of the various elements in the promotional mix depends upon a number of
factors that influence the manager decisions.
These factors can be summed up as:
(1) The amount of money available for promotion purpose;
(2) The nature of market i.e., whether local, regional, national or international;
(3) The nature of the product viz., consumer or industrial, durable or non-durable or
perishable;
(4) The stage in the product life cycle i.e. introduction, growth, maturity or decline.

Factors Affecting Determination of Promotion Mix

Promotion mix consists of five elements / factors. Promotion mixing is very complicated
strategic task. Proper promotion mix should be prepared to conduct marketing successfully.
Promotion mix is directly affected by promotion objective, promotion budget, nature of
market, product life cycle, marketing promotion strategy. They are mentioned as follows:

1. Promotion objective
One of the main factors affecting determination of promotion mix is promotion objective. If
the customers are to be given clear information and make them aware about the goods
intended to sell, special emphasis should be given on advertisement and propagation.
Similarly, if the promotion objective is to make potential customers believe and give
assurance to them, personal selling and advertisement become important. If the objective of
promotion is to get order / demand, personal selling and sales promotion should be
very active. If the promotion objective is to remind the customers, advertisement becomes
more important. If the promotion objective is for brand loyalty, advertisement and
propagation become important.

2. Promotion budget
Sufficient budget should be arranged for promotional functions. In the lack of budget,
promotional works cannot be conducted. So, promotion budget also affects promotion mix
determination. A lot of budget is needed for personal / individual selling and advertisement.
If sufficient budget has been allocated for advertisement, highly responsive personal sale can
be conducted, long term advertisement policy and high amount of budget is also not needed
for publicity. It needs only good opportunity for propagation. This makes it clear that
promotional activities can be determined on the basis of promotional budget. In this way, the
fixed / prescribed budget affects promotion mix.

3. Nature of market
Nature of market also affects promotion mix. If the size of targeted market is very small one,
way / method becomes effective, and if its size is big, other way / method becomes effective.
If the targeted market is consumers' market, advertisement and sale promotional activities
should be conducted. If it is industrial market, personal sales and promotional sale should be
conducted. Similarly, if the targeted market is very small and is limited in a certain
geographical area, personal selling and advertisement should be emphasized. If the market is
big, national and international advertisement and business promotion should be emphasized.

4. Nature of product
Nature of product also affects the determination of promotion mix. Products may be
consumer target or industrial. Their information cannot be effectively communicated through
same activities. Generally, advertisement becomes important for consumer goods whereas
personal selling becomes important for industrial goods. Similarly, advertisement and sale
promotional activities become important for the low priced goods, whereas personal selling
and local advertisement become important for high priced goods. In the same way, personal
selling and propagation should be given emphasis for special goods.

5. Product life cycle

Different stages of product life cycle also affect promotion mix. Every product goes through
different four stages after it has been produced. At the introduction stage of goods / products,
advertisement and propagation should be given emphasis. After the product enters growth
stage, only advertisement becomes sufficient. Similarly, careful attention should be paid to
the product at its mature stage. If the product has entered the last stage of its life cycle,
personal selling, sales promotion and propagation are needed. Whatever tools can save
products, the same should be used for promotion.

6. Promotion strategy
There may be several strategies of promotional activities. They also affect promotion mix.
They are mentioned in short as follows:
i. Push strategy
The producers can push their products using their force. In this strategy, products are pushed
to the final consumers through distribution channel. Personal selling and trade promotion
become important.
ii. Interpersonal strategy
Interpersonal strategy is also one of the strategies. In this strategy, personal selling becomes
more important. So, this tool of promotion should be adopted.
iii. Mass communication strategy
If the promotion strategy is in favour of mass communication, sales promotion should be
given special importance. Similarly, advertising and publicity are also equally important.
Pull Strategy Is also called as Mass Communication strategy

The promotion mix combines this owned, earned, and paid media into five basic elements.
These components of the promotion mix are:

● Advertising
● Public Relations
● Personal Selling
● Sales Promotion
● Direct Marketing
Advertising
Advertising is a paid promotion method where a sponsor calls for public attention through
paid announcements. This promotional mix component uses paid media channels like TV,
radio, newspaper, billboards, or even digital advertising channels like social media platforms
and search engines.
Advertisements have the following characteristics:
● Paid form of promotion.
● Focuses on one way communication from brand to the customer.
● Can be personal or non-personal, depending on the channel used.
● Have a mass reach.
Public Relations
Public relations involves communicating to the target audience and getting their attention
using earned media channels like news, word of mouth, government announcements,
etc.Simply, public relations is a strategised process of releasing organisation-related
information to the public using trustable channels like news to maintain a favourable
reputation of the brand.
Public relations involves:
● Trustable sources,
● Brand mission oriented communication messages, and
● Two-way communication, as the brand releases the message and waits for the
public response to strategically release another set of messages.
Sales Promotion
Sales promotion is the offering’s promotion using attractive short-term incentives to stimulate
demand and increase sales.The short-term incentives are often used to –
● Promote new products in the market
● Promote unsold inventory
● Attract more customers
● Lift sale temporarily
These incentives include but are not limited to –
● Seasonal discounts,
● Financial schemes,
● Target-based benefits for retailers, wholesalers, resellers, and affiliates
● Free samples,
● Exchange schemes
● Shipping schemes
● Bulk purchase discounts,
● Trade deals, etc.

Personal Selling
Personal selling is a personalised promotion that involves person-to-person interaction
between a brand representative and a prospective customer.It involves personalised
conversations and promotion presentations by the salesperson developed after understanding
the needs and wants of the target customer they promote to.Unlike advertising, personal
selling develops a personal connection between the brand representative and the customer
and involves more costs per person reached.
Personal selling is:
● Two-way personal communication between the brand representative and the
target customer,
● Dependent on the influencing and persuasion skills of the salesperson,
● Highly flexible way of promotion, and
● Focused on educating the customer more about the product and give them
personalised reasons to buy.
Direct Marketing
Direct marketing is a promotion strategy where the target customers are contacted directly by
the brand instead of having an indirect medium like a retailer or wholesaler.It’s a great
promotional tool that helps the brand communicate directly with the prospective customers
through channels like –
● Door-to-door promotion,
● Promotional telephone calls,
● SMS, Emails, IM promotional messages,
● Targeted advertisements, etc.
But direct marketing is different from personal selling. Even though it involves direct contact
between the brand and the customer, it not often involves highly personalised sales pitches.
Advertising
According to American Marketing Association, “Any paid form of non-personal presentation
and promotion of ideas, goods and services, by an identified sponsor. The medium used are
print broadcast, and direct”.
Objectives of Advertising
a) To make an immediate sales.
(b) To build primary market.
(c) To introduce a price deal.
(d) To inform about a product.
(e) To build brand recognition or brand insistence.
(f) To help salesmen by building an awareness of a product among retailers.
(g) To create a reputation for services, reliability or research strength.
(h) To increase market share.
(i) To modify existing product appeals and buying motives.
(j) To inform about the availability of new products or features or price.
(k) To increase the frequency of use of a product,
(l) To increase the number or quality of retail outlets,
(m) To build overall company image,
(h) To increase market share.
(i) To modify existing product appeals and buying motives.
(j) To inform about the availability of new products or features or price.

Importance Of Advertising
To The Customers
● Convenience: Targeted informative advertisements make the customer’s decision
making process easier as they get to know what suits their requirements and budget.
● Awareness: Advertising educates the customers about different products available in
the market and their features. This knowledge helps customers compare different
products and choose the best product for them.
● Better Quality: Only brands advertise themselves and their products. There are no
advertisements for unbranded products. This ensures better quality to the customers as
no brand wants to waste money on false advertising.
To The Business
 ● Awareness: Advertising increases the brand and product awareness among the people
belonging to the target market.
● Brand Image: Clever advertising helps the business to form the desired brand image
and brand personality in the minds of the customers.
● Product Differentiation: Advertising helps the business to differentiate its product
from those of competitors’ and communicate its features and advantages to the target
audience.
● Increases Goodwill: Advertising reiterates brand vision and increases the goodwill of
the brand among its customers.
● Value For Money: Advertising delivers the message to a wide audience and tends to
be value for money when compared to other elements of the promotion mix.
Advantages Of Advertising
● Reduces Per-Unit Cost: The wide appeal of advertisements increases the
demand for the product which benefits the organisation as it capitalises on the
economies of scale.
● Helps In Brand Building: Advertisements work effectively in brand
building. Brands who advertise are preferred over those which doesn’t.
● Helps In Launching New Product: Launching a new product is easy when it
is backed by an advertisement.
● Boosts Up Existing Customers’ Confidence In The Brand: Advertisements
boosts up existing customers’ confidence in the brand as they get a feeling of
pride when they see an advertisement of the product or the brand they use.
● Helps In Reducing Customer Turnover: Strategic advertisements for new
offers and better service helps reduce customer turnover.
● Attracts New Customers: Attractive advertisements help the brand in gaining
new customers and expanding the business.
● Educates The Customers: Advertisements inform the customers about
different products existing in the market and also educates them in what they
should look for in an apt product.
Disadvantages Of Advertising
● Increases The Costs: Advertising is an expense to the business and is added
to the cost of the product. This cost is eventually borne by the end consumer.
● Confuses The Buyer: Too many advertisements with similar claims often
confuses the buyer in what to buy and should he buy the product or not.
● Is Sometimes Misleading: Some advertisements use smart strategies to
mislead the customers.
● Only For Big Businesses: Advertising is a costly affair and only big
businesses can afford it. This makes small businesses out of competition with
big businesses who get to enjoy a monopoly in the market.
● Encourages The Sale Of Inferior Products: Effective advertisements even
lead to the sale of inferior products which aren’t good for the consumers

Types of Advertising
Since advertising is one of the popular mediums of brand communication, it is used in many
forms and for many purposes. It is possible to classify types of advertising into various forms
as mentioned below.
Retail Advertising
These advertisements are brought to promote retail outlets and dealer points.
Political Advertising
These are done for political parties, politicians and individual candidates during elections and
referendums.
Institutional Advertising
Institutions like colleges, universities, missionary of charities and large corporates bring out
these advertisements. When these are brought out by large corporates we call them corporate
advertising.
Public Services Advertising
Government and government sponsored institutions bring such advertisements for the benefit
of general public. They communicate a message on behalf of some good cause. Advertising
professionals create these advertisements for public relations department of large corporates,
highlighting a social cause.
Advertising by media choice
These forms of advertising use electronic media like television, radio, video and
audiocassettes, electronic display boards, CDROMs for promotion of products and services.
Service Advertising
Advertising to make public aware of services offered by a company.Services would be
different types like insurance,courier,medical,airline,tele commiunication,gym,banks etc

Sales Promotion
Sales Promotion is a marketing discipline that utilizes a variety of incentives techniques to
structure sales related programs targeted to consumers/trade/ and or sales level, that generate
a specific measurable action or response for a product/ service.
Sales promotion means and includes all the activities that are performed by a producer, a
dealer or a businessman to increase his sales. The main purpose of sales promotion activities
is to encourage and persuade consumers to buy a particular product.

Philip Kotler defines it as “Sales Promotion encompasses all the tools in the marketing
mix whose major role is persuasive communication“.
Objectives of sales promotion are explained below:
1. To Introduce New Products
2. Building Product Awareness
3. Creating Interest
4. Stimulating Demand
5. Reinforcing the Brand

To Introduce New Products

Have you ever heard about distribution of free samples? Perhaps you know that many
companies distribute free samples while introducing new products. The consumers after using
these free samples may develop a taste for it and buy the products later for consumption.
Building Product Awareness
This medium is effective in exposing customers to products for the first time and can serve as
key promotional components. To build the product awareness sales promotion techniques
own advantage of capturing customer information while exposing promotion.
Creating Interest
Marketers realise that sales promotions are very potent in creating interest in a product. An
appealing sales promotion can significantly increase customer traffic to retail outlets in the
retail industry. One more way to create interest is allowing a customer to experience a
product (products for free or at low cost).
Stimulating Demand
It can be done by lowering the cost of ownership to the customer. This helps in stimulating
sales. Because building product awareness and convincing customer to purchase the product
is important
Reinforcing the Brand
After purchasing the product, mostly for additional purchase or to promote the sales. Many
companies, including airlines and retail stores, reward good or preferred customers with
special promotions (e.g., email special deals and surprise price reductions at the cash
register).

Characteristics of Sales Promotion

On the basis of the above definitions, following characteristics of sales promotion may be
enumerated:
● Sales promotion does not include advertising, personal selling and publicity.

● Sales promotion activities are generally performed at certain times. Thus, these are
not regular activities, as display fairs and exhibitions, demonstrations, seasonal
discount free-gift, etc.

● Sales promotion helps in selling and it makes advertisements and personal selling
easy and effective.

● Sales promotion encourages dealers and distributors to sell the product more.

● Sales promotion encourages consumers also to buy the product.

Advantages of Sales Promotion
1. Price discrimination
2. Produces immediate results
3. Effect on consumer behaviour
4. Support and involvement push the product
5. Effect on trade behaviour
6. Regional differences
Price discrimination
Producers can introduce price discrimination through the use of sales promotions. They can
charge different prices to different consumers and trade segments depending on how sensitive
each segment is to particular prices. Coupons, special sales events, clearance sales and
discounts are examples to explain the phenomenon.
Produces immediate results
While advertising or public relation act as an investment producing sales in the long run,
sales promotion works during a definite span of time. Most of the sales come during the sale
promotions period itself. Very often, if the promotion is successful, one can get results within
hours, days or weeks.
Sales promotion produces result by stimulating people to act to try, to buy, to buy more, or to
buy more often. It can lead to trial, generate excitement, encourage repeat purchase, attract
switchers, etc. It is especially helpful in situations where there is extreme pressure to increase
sales, e.g., at the end of the year when there are shortfalls in budgeted sales.
Effect on consumer behaviour
As sales promotions are mostly announced for a short period, customers may feel a sense of
urgency and stop comparing the alternatives. They are persuaded to act now rather than later.
Support and involvement push the product
Sales promotion techniques directed at channel members or sales force can gain channel
support and involvement and help push the product. It helps in getting shelf space and
merchandising benefits at the retail level, clearing off excess inventory, motivating sales
people to find new contacts, etc.
Effect on trade behaviour
Short-term promotions present an opportunity and encourage dealers to forward buy. This
forward buying ensures that retailers would not go out of stocks. As dealers have more than
the normal stocks, they think it advisable to advertise in local media, arrange displays and
offer attractive promotion deals to consumers.
Regional differences
The South is generally characterized by a greater degree of going out and people tend to drink
outside the house. The Tamilian consumer in particular, is value-oriented, rational and looks
up to film stars, while the Keralite is more international in his outlook.
The Bangalorean is as cosmopolitan as his Mumbai or Delhi counterpart. Such factors have
to be taken into consideration while providing incentives to the customers.

Disadvantages of Sales Promotion

1. Increased price sensitivity
2. Used for short-term results
3. Quality image may become tarnished
4. Merchandising support from dealers is doubtful
5. Increasing sales promotion activities
Increased price sensitivity
Consumers wait for the promotion deals to be announced and then purchase the product. This
is true even for brands where brand loyalty exists. Customers wait and time their purchases to
coincide with promotional offers on their preferred brands.
Used for short-term results
Most sales promotion is used for short-term results. Any excessive use can shift the focus on
short-term marketing planning that acts only at the behavioral level.
Quality image may become tarnished
If the promotions in a product category have been rare, the promotions could have a negative
effect about its quality image. Consumers may start suspecting that perhaps the product has
not been selling well, the quality of the product is true compared to the price or the product is
likely to be discontinued because it has become outdated.
Merchandising support from dealers is doubtful
In many cases, the dealers do not cooperate in providing the merchandising support nor do
they pass on any benefit to consumers. The retailer might not be willing to give support
because he does not have the place, or the product does not sell much in his shop, or may be
he thinks the effort required is more than the commission/benefit derived.
Increasing sales promotion activities
Increasing sales promotion activities has led to clutter, leading companies to cut each other
and thus eroding the bottom line.
Sales promotion strategies
As we’ve seen, sales promotions come in a large variety and can be used as a sales strategy at
any point during the sales process. It’s important, therefore, to be aware of best practices,
activities, and techniques that will ensure your promotions are successful.
There are three primary strategies for sales promotions:
● Pull strategy: The pull strategy tries to get the customer to ‘pull’ the product away
from the company, usually in the form of a discount, BOGO, or another special. This
is the most commonly used strategy across the board for all businesses.
● Push strategy: The push strategy tries to ‘push’ the products away from the company
towards the customer, usually through B2B sales. Parent companies will reward
distributors and retailers for taking additional products off their hands and selling
them to the consumers.
● Hybrid strategy: As its name suggests, the hybrid strategy is a combination of the
push and pull strategy in which the company will use a push strategy to move
products, and then a pull strategy to encourage purchasing from retailers.
Let’s dive into a few recommendations for best sales promotion practices that you can use
regardless of which strategy you’re trying out.

Public Relations
Definition: Public relations is a strategical approach towards the creation of goodwill and
brand image through developing a cordial relationship between the organization and its target
audience. Every organization exists in a social, legal, political environment where it has to
interact with different agencies and individuals.
\
Importance of Public Relations

● Increases Awareness: The company and the PR department primarily focuses on

spreading awareness by making people understand the product specifications and
brand values.
● Creates Brand Image and Reputation: The company has a chance to improve its
image and build up a reputation among the public through public relations practice.
● Develops Loyalty: The customers generate a loyalty factor for the brand because of
an intense public relations practice. They tend to buy from the company repeatedly.
● Promotes Goodwill: In the long term, public relations practice paves the way for
creating substantial goodwill for the company.
● Builds Trust and Credibility: The repetitive brand promotion, done in a way to align
the company’s objectives to those of the society and the target audience, develops
trust and credibility among the public.
Types of Public Relations
Business communication leads to building up of strong relationships and healthy business
practice.Thus, the PR department and the PR experts are required to consider the following
types of public relations for organizational growth:

1. Media Relations: The PR department collects information from the press or media
sources while maintaining cordial relations with them. This data is used by the
company to plan its marketing strategies.
2. Investor Relations: Investors are essential to the organization. Hence, the PR
department keeps them informed, manages their events, releases financial reports and
manages queries and complaints.
 3. Government Relations: Adherence to various government regulations like corporate
social responsibility, employee welfare, consumer protection, fair trade practices, etc.
builds an organization’s relationship with the government.
4. Community Relations: Society plays a crucial role in deciding the company’s as
well as the product’s future. An organization needs to create a positive image of the
brand by supporting social practices like say no to child labour, child education,
equality, environmental protection, etc.
5. Internal Relations: Communicating with the employees and counselling them on
their responsibilities, duties and actions helps in their better performance and long-
term existence in the organization.
6. Customer Relations: Interaction with the valued customers and potential consumers
is necessary to know their feedback, suggestions, interest and priorities. This data is
required to prepare further business-related strategies.
7. Marketing Communications: The company uses different marketing strategies like
brand awareness program, product launch, marketing campaigns, product positioning,
etc.
Functions of Public Relations
The organization appoints PR experts, and some of the prominent organizations even have a
PR department. It enhances the company’s image, builds goodwill and attracts the investors,
customers, media and other associates.Following are the different ways in which a company
performs public relations practice with the help of PR experts:

● Product Publicity: The company organizes brand and product promotion through
sponsorships to gather customer’s attention.
● Press Relations: The company uses the press or the media to provide information
about the product to the customers.
● Lobbying: The PR experts communicate with the government officials and the legal
department to support the favourable regulations and defeat the unfavourable ones.
 ● In-House Journals: The brands launch their magazines and booklets to promote the
products among the customers. It also publicizes the annual reports, newsletters,
websites, brochures and annual reports to capture the target market.
● Corporate Communication: The PR department is continuously engaged in providing
information about the product and the brand through internal and external
communication.
● Special Events: The PR experts organize events such as charity event, promotional
events or contests to capture the attention of the media.
● Public Service Activities: The companies often stand for social causes. They invest
their time and money and ask their employees to support such causes. This indirectly
enhances public relations in the organization.
● Counselling: At the time of product failure or poor performance, the PR department
provides suggestions and advice to the management.

Publicity
Publicity definition
Publicity is putting your business in front of the public and media outlets so you can
showcase your products, services and company news. The goal is to attract your target
audience members and make them aware of your company so they will want to engage in
business with you.
Importance of Publicity
Publicity is quite important in gaining awareness about a product, service or a person. It is
similar to marketing but the difference is that marketing focuses on selling but it is only about
awareness. It can prove to be very critical in success of brands especially in the initial phase
of launch. We see lot of publicity happening during early days of a brand or a product.
Advantages of Publicity
1. The cost of publicity is very less i.e. coming from an unsolicited newspaper or through
social media doesn’t cost anything to the company.
2. It ensures credibility as the consumers expect a significant level of bias or exaggeration in
the advertisements a company produces about its services or products. However, third-party
sources, such as blogs, online reviews and magazines are often considered less biased. This is
specifically true with trusted sources, such as longstanding publication houses or well-
regarded professional reviewers. Publicity from non-affiliated parties can often seem more
trustworthy in the eyes of your targeted customers.
3. Consistent publicity helps a company strengthen its brand as it gives a company a way to
prove its customers its worth.
4. Innovation is very important in increasing your reach and building loyalty among the
customers. If good reviews start coming up for a brand it often build the other public relations
companies interested in the company.
5. It open doors for more opportunities and help build relationships with more number of high
net worth companies.
6. It helps you go viral. Ads don’t go viral on their own publicity help them. Word of mouth
is a successful tool that drives more business for a company.
Disadvantages of Publicity
1. Damage brand equity in long term because of bad publicity. It is applicable for companies
with health hazards and safety issues.
2. Brand association will be damaged as changing the customer’s perception is very difficult.
3. Loss of trust
Publicity Examples
1. When new movies are about to be released, we see a rise of publicity in the news about the
movie and the star cast. There is a lot of social media activity by the movie cast and crew.
The objective is to do publicity of the movie so that more people are aware of the release and
watch the movie.
2. When a new car is launched in the market, we see the car in various trade events and
exhibitions available for test drive. This is also a way through which publicity is done as this
may lead to increased activity on social media about the car which is good for the brand.

Personal Selling
The main functions of personal selling are as follows:
1. To Make Sales
The first and foremost function of personal selling is to make sales both to old and new
customers.
2. Service Customers
The function of personal selling is to render services to customers, such as to introduce the
product or products, explain the right use of the product by means of demonstrations,
convince the customers about the quality of the product, remove doubts of the customers, etc.
3. Keep Sales Records
Another function of personal selling is to prepare and keep sales records.
4. Executive Functions
Personal selling also performs a number of Executive functions, such as to provide training
to the salesman, to prepare short term and long term marketing programs, to provide the
information to the sales manager about market Trends, etc.
5. To Develop Goodwill of the Company
Another function of personal selling is to develop the Goodwill of the company in the market,
Such as providing satisfaction and after-sale services to customers, etc.
. To Achieve Sales Targets.Another function of personal selling is to achieve sales targets by
increasing the volume of sales.

Important stages in personal selling process

The personal selling process consists of a series of steps. Each stage of the process should be
undertaken by the salesperson with utmost care. The stages in personal selling are briefly
explained below.
Prospecting and qualifying: ‘Prospecting and qualifying’ are the first steps the personal
selling process. This is to identify and qualify prospects in order to help sales people in the
process of selling.
Pre-approach: Having found out the prospective customers, the salesperson should collect
some important details about the prospects. For example, if the prospect is a company, then
he should know what the company needs, who takes purchase decisions and who are its
buyers.
Approach: The salesperson should properly approach the prospects. He should know how to
greet the buyer before starting his conversation. The salesperson should be properly dressed
which coincides with the temperament of the buyer.
Presentation and demonstration: The sales presentation should be based on AIDA
formula.In other words, the presentation should gain attention, ho!d interest, arouse desire
and obtain the action of the buyer.
Overcoming objections: Customers when pressed for orders, voice their objections known
as customer’s resistance. The resistance of the customers may either be psychological or
logical.
Closing the sale: A goods sales talk results in clinching a sale. At this juncture, the
salesperson closes the sale at the right moment. A salesperson can successfully close the sale
by studying the body language and the statements made by the buyers.
Follow-up and maintenance: Immediately after closing the sale, the salesperson should take
some follow up measures. He may give details about delivery time, purchase terms and mode
of payment of price, etc.

Distribution
Philips Kotler defines channel of distribution as “a set of independent organisations
involved in the process of making a product or service available for use or
consumption”. ... Channels of distribution provide convenience to customer, who can get
various items at one store.

Channel Levels:
Each layer of distribution intermediaries that performs some work in bringing the product to
its final consumer is a channel level.
(i) A Zero Level Channel:
A zero level channel, commonly known as direct marketing channel has no intermediary
levels. In this channel framework manufacturer sells merchandise directly to customers. An
example of a zero level channel would be a factory outlet store. Many service providers like
holiday companies, also market direct to consumers, bypassing a traditional retail
intermediary – the travel agent.

Eureka Forbes, leaders in domestic and industrial water purification systems, vacuum
cleaners, air purifiers & security solutions is pioneered in direct selling that makes it an
Asia’s largest direct sales organization.
The remaining channels are known as indirect-marketing channels.
(ii) A One Level Channel:
A one level channel contains one selling intermediary. In consumer markets, this is usually a
retailer. The consumer electrical goods market in the United Kingdom is typical of this
arrangement whereby producers such as Sony, Panasonic, Canon etc. sell their goods directly
to large retailers such as Comet, Dixons and Currys which then sell the goods to the final
consumers.
(iii) A Two Level Channel:
A two level channel encompasses two intermediary levels – a wholesaler and a retailer. A
wholesaler typically buys and stores large quantities of merchandise from various
manufacturers and then breaks into the bulk deliveries to supply retailers with smaller
quantities. For small retailers with limited financial resources and order quantities, the use of
wholesalers makes economic sense.
This agreement tends to work paramount where the retail channel is jumbled – i.e. not
dominated by a small number of large, dominant retailers who have an encouragement to cut
out the wholesaler. Distribution of drugs/ pharmaceuticals in the Europe and United Kingdom
is typical example of such arrangement.

(iv) A Three Level Channel:

A third level channel, as the name implies, encompasses three intermediary levels – a
wholesaler, a retailer and a jobber. In the poultry industry, products like mutton, chicken,
eggs etc. are first sold to wholesalers; he then sells it to jobbers, who sell to small and
unorganized retailers.

Four-level Channel – Four intermediaries, namely, agent, distributor, wholesaler and retailer
are present here. This channel is similar to the previous two. This type of channel is used for
consumer durable products also.

Different factors affect the choice of a distribution channel and differ from firm to firm.
We can divide these factors under five heads:
1. Market Factors
2. Product Factors
3. Company Factors
4. Environmental Factors, and
5. Financial Factors
These are explained in Detail below:
1. Market Factors:
As per the modern concept of marketing, market factors influence marketing decisions.
Similarly, the choice of distribution channel is also influenced by market factors.
This can be classified under three heads, viz., consumers, competitors, and middlemen:
(a) Consumers:
The number of consumers, their geographic location and purchase pattern affect the choice of
a channel for distribution. If the number of consumers is large, spread over a wide area, and
their purchases are frequent and in small lots, then the indirect channel is preferable. On the
other hand, if the number of consumers is small, concentrated in a small geographic location
and if the purchase is deliberative, then it is preferable to use the direct channel.
(b) Middlemen:
The terms and conditions of middle men also affects the channel choice. For example- if the
wholesaler asks for more commission, then the manufacturer may have to go for a direct
channel.
(c) Competitors:
The distribution channel used by competitors also influences the channel choice, because it
may mean choosing a customary channel in the same line of business activity. For example-
automobiles are sold in India through the indirect channel and a change from the indirect
channel to direct channel is not possible.

2. Product Factors:
The nature of the product also affects the choice of the channel in the following manner:
(a) Industrial or Consumer Goods – If the product to be distributed is an industrial good, then
the direct channel is adopted, because there are very few customers who can be given
personal attention and provided with good after sales services. But for consumer goods, the
indirect channel is preferable.
(b) Perishable Nature – If the goods are of a perishable nature, like milk, vegetables, fruits,
etc., then it is better to adopt direct methods.
(c) Standardisation – If the goods are standardised (For example- ISI Mark, AG Mark, etc.)
then the indirect method is preferable, because standardisation is a proof of uniformity and
quality.
(d) Unit Value – If the unit price of the product is high, then it is preferable to use the direct
method and if the unit price is less, then the firm can go for an indirect channel.
(e) Technicality – If the product is highly technical and complex, it is advised to go for the
direct method. For example- for computers and machinery because they require actual
demonstration, after sales service, warranty, etc.
(f) Seasonability – In the case of seasonal goods like woolen items, jams, pickles, squash etc.,
production is highly seasonal, according to the availability of raw materials. In such a
situation, the manufacturer-retailer-consumer method is preferable, i.e., the indirect channel.
(g) New Products – In the case of new products which require aggressive marketing
techniques, the indirect channel is adopted, usually by giving franchise rights.
(h) Style Obsolescence – In the case of ready-made clothes, which may go out of fashion
within a short time, it is preferable to sell the items fast, through retail shops, i.e., the indirect
channel.
(i) Number of Items in the Product-line – If the firm’s product mix consists of a large number
of product items, it can sell the items directly to consumers through its ability to deal directly
with them and the experience gained over the years.
(j) Price Stability – If the product is subject to frequent price changes, due to product
upgradation and modification, then the direct channel is preferable.
3. Company Factors:
Strengths and weaknesses of the company also affect the choice of channel in the
following way:
(a) Financial Strength:
For a reputed and financially strong company, it is possible to move from the customary
methods of distribution to experiment with new methods. So these companies usually go for
direct methods and financially weak companies go for customary methods.
(b) Past Channel Experience:
For a firm, if past experiences with middlemen have been satisfactory, then the firm may
continue in the same line and if not the firm may change the line of distribution.
(c) Marketing Policies:
If the firm is advertising heavily and supported with sales promotion, then it can choose an
indirect method. For example- Pepsi and Coke. The company has to use direct channels, if
the product is not advertised properly or not aided by sales promotion efforts.
(d) Reputation:
For highly reputed companies, middlemen are ready to join in order to be associated with the
firm. Firms like MRF Tyres and Bombay Dyeing may not find it difficult to find middlemen,
to go for the indirect channel.
(e) Market Control Desired:
The channel of distribution is influenced by the degree of market control desired by the
company. Market control refers to the efforts of a company to control intermediaries. A
company may use a smaller channel to facilitate better coordination, communication and
control.
4. Environmental Factors:
Elements of the marketing environment can also influence the choice of alternative channels
available.
They are:
(a) Economic Conditions:
This affects the choice of a channel. During depression, economic activities are dull and
therefore a shorter and cheaper channel is preferable. But in times of inflation, it is full of
business activities and so a wider channel may be adopted.
(b) Legal Factors:
In India, various Acts prevailing in the country, viz., the Companies’ Act and The
Monopolies and Restrictive Trade Practices Act influence the choice of a channel. These Acts
have been passed with a view to control monopoly, to prevent retail price maintenance and to
protect the rights and interests of companies. Therefore, channel selection is also influenced
by various Acts passed in the country.
(c) Technological Factors:
Various inventions in the technological field also influence the choice of a channel. For
example- if perishable items are to be distributed, proper refrigerated storage facilities are a
must. Only if that is possible, can the firm can go for indirect channel methods, otherwise it
has to restrict distribution through the direct method.
5. Financial Factors:
The financial factors which influence the choice of a channel are the desired sales volume
and the rate of return on investment.
(a) Sales Volume:
The required sales volume will have to be predicted on the basis of trend analysis, past
experience, industry-wise data, interpolation, extrapolation, regression, etc. Accordingly, the
firm has to choose the distribution channel in order to achieve the targeted sales volume.
(b) Rate of Return on Investment:
This is the return expected from investments. If the firm has to achieve a targeted rate of
return, it has to increase the sales volume accordingly. Therefore, the firm has to select as
appropriate distribution channel. Thus various factors influence the selection of an
appropriate distribution channel.
Designing Marketing Channel Functions
Marketing channel design means designing effective marketing channels by analyzing
customer needs, setting channel objectives, identifying major channel alternatives, and
evaluating those alternatives.
The process of marketing channel design involves the following steps:
● Recognizing or identifying the requirement for marketing channel design decisions.
● Setting and coordinating distribution objectives.
● Specifying distribution activities.
● Developing alternatives.
● Evaluating relevant alternatives.
● Selecting the best or ideal channel structure.
● Selecting channel members.

Types of Marketing Intermediary

1. Brokers and Marketing Agents

Both the terms are synonymous with each other because of their rules. This is true,
especially in the case of real estate deals when both of them are similar to any client.
There could be many differences in them, but as a whole, both of them are considered as
the same. marketing Intermediaries usually is permanent while brokers, on the other hand,
are temporary.part from this significant difference, the role of both intermediaries is the
same. Both of them are paid a commission for every sale and are not responsible for
the products that are sold. They are concerned only with facilitating the transaction.Apart
from real estate, brokers and agents are also common in the travel industry and are
commonly used in international trade. When companies cannot approach the customers
directly, and they require a specific human interaction to close the transaction, then they
approach agents or brokers.Their deals with companies are usually for a selected and
predefined time or for a selected number of products to be sold to the customer. For
example, a deal would be for three houses in case of a real estate agent or for three
passengers in case of a travel agent.
2. Wholesalers and Resellers
Wholesalers are the intermediaries who buy products from the manufacturer in a large
volume and then resell them to other small businesses, usually retailers. Some wholesalers
have multiple products to be sold to different retailers, while others specialize in only a single
product or a category.
The pharmaceutical industry commonly has many wholesalers and retailers. They usually buy
the drugs in bulk from pharma companies and then supply to individual pharmacies, hospital
pharmacies on requirement basis. Some wholesalers sell directly to the customers.Since they
buy in bulk, the prices that are offered to them are very minimal. They sell to retailers at an
increased rate, which includes their margin as well.
The Wholesalers and resellers are further divided into 3 parts
● Merchant wholesalers – These are distributors or jobbers who are owned
independently as well as operate independently. They have very little or
no ownership of the goods. Merchant wholesalers are of two types, limited service,
and full-service merchant wholesalers.
● Full-service Merchant Wholesalers – When it comes to more substantial volumes,
full-service wholesalers are the ones who are preferred. They perform a broad range
of services for their customers like operating warehouses, having a big stock
inventory, supplying credit line to different customers as well as to salespeople and
delivery of goods to customers. While a variety of merchandise is present with
general line wholesalers, on the other hand, specialty wholesalers are the ones who
only have to deal with only a limited line of products.
● Limited Service Merchant Wholesalers – These are the ones who offer very few
services to their suppliers as well as to their customers. These exist only to reduce the
cost of service. There are many limited-service wholesalers present in many
industries.
As far as the line of fast selling merchandise is concerned, they are handled by cash and carry
stores, on the other hand, sole retailers only manage cash business and are not concerned with
delivering of goods.
3. Distributors
Distributors are also known as functional wholesalers. Distributors are not the ones who buy
any product from the producers, but they are the ones who are involved in increasing or
facilitating the transaction between the retailer and the manufacturer.They work on similar
designs of brokers and agents and are usually hired for a limited time or a limited job. They
are paid a commission for every transaction from the manufacturer. Sometimes they
also demand transaction fees from retailers as well.
4. Retailers
The retailer is the final link between the customer and the organization. The customer can go
directly to the retailer and purchase it from his store. Retailers are in the format of shopping
malls, stores, carry out the lights, and also in the form of e-commerce websites. Retailers buy
directly from the producer and skip many intermediaries to increase their profit margin.
Retailers stock the products in bulk and payback in the form of commission. This usually
happens in the case of bookstores. Any intermediate party which does not manufacture the
product but buys the product from the company and sells it to the customer can be termed as
a retailer. The best example is the online e-commerce giant Amazon which sells millions of
products to millions of customers by purchasing it directly from the manufacturer.

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TEXT BOOK TO BE REFFERED