Gauhati University Question Papers
MARKETING MANAGEMENT’ 2016
Full Marks: 80
Time: 3 hours
(The figures in the margin indicate full marks for the questions)
1. Answer the following as directed: 1×10=10
1) Television is an example of:
Ans: c) Speciality goods.
2) Which of the following is not included in psychographic segmentation of markets?
b) Life style.
Ans: d) Culture.
3) Which one of the following is related to micro-environmental forces?
b) Marketing intermediaries.
Ans: b) Marketing intermediaries.
4) Which one of the following is not a component of product planning?
a) Product innovation.
c) Product standardization.
d) Product branding.
Ans: d) Product branding.
5) Which one of the following is included in sales promotion?
a) Personal selling.
Ans: b) Exhibition.
6) The first step in new product development is idea generation. (fill in the blank)
7) The three types of vertically integrated channels of distribution are administered, contractual and corporate system. (Fill in the blank).
8) Under skimming pricing policy, a very high price is set for a new product initially and gradually the price reduced as competitors enter the market. (Fill in the blank)
9) The psychological factors influencing consumer behaviour are motivation, perception, learning, attitude and beliefs. (Fill in the blank)
10) A company that attaches the same brand name to all of its products is called umbrella brand. (Fill in the blank)
2. Answer the following questions very briefly: 2×5=10
a) What do you mean by marketing environment?
Ans: According to Philip Kotler, “A company’s marketing environment consists of the internal factors and forces, which affect the company’s ability to develop and maintain successful transactions and relationships with the company’s target customers”.
A variety of environmental forces influence a company’s marketing system. Some of them are controllable while some others are uncontrollable. It is the responsibility of the marketing manager to change the company’s policies along with the changing environment.
b)What is demand forecasting?
Ans: Full notes available in our mobile application
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c) What is product diversification?
Ans: Product Diversification: When a manufacturer offers more products in different areas, it is referred as product diversification. Diversification normally involves business in a new area. E.g.: ITC entering into hotel business, sony entering into film production business.
d) What are the different types of distribution policies?
Ans: Full notes available in our mobile application
e) What is product branding?
Ans: Product branding: A brand is define as a name, term, sign, symbol or special design or some combinations of these elements that is intended to identify the goods or services of one seller or a group of sellers. A brand differentiates these products from those of competitors. A brand in short is an identifier of the seller or the maker. A brand name consists of words, letters and / or numbers that can be vocalized. A brand mark is the visual representation of the brand like a symbol, design, distinctive colouring or lettering.
3. Answer any four of the following questions briefly: 5×4=20
1) Describe the various forces of marketing environment.
Ans: The Marketing Environmental Factors may be classified as:
- Internal Factor
- External Factor
External Factors may be further classified into:
- External Micro Factors and
- External Macro Factors
1. Internal Environmental Factors: A Company’s marketing system is influenced by its capabilities regarding production, financial and other factors. Hence, the marketing management/manager must take into consideration these departments before finalizing marketing decisions. The Research and Development Department, the Personnel Department, the Accounting Department also has an impact on the Marketing Department. It is the responsibility of a manager to company-ordinate all department by setting up unified objectives.
2. (a) External Micro Factors: Some of the important external micro factors are:
– Suppliers: They are the people who provide necessary resources needed to produce goods and services.
– Marketing Intermediaries: They are the people who assist the flow of products from the producers to the consumers; they include wholesalers, retailers, agents, etc. These people create place and time utility.
– Consumers: The main aim of production is to meet the demands of the consumers. Hence, the consumers are the center point of all marketing activities.
– Competitors: A prudent marketing manager has to be in constant touch regarding the information relating to the competitor’s strategies.
– Public: A Company’s obligation is not only to meet the requirements of its customers, but also to satisfy the various groups.
2. (b) External Macro Environment: These are the factors/forces on which the company has no control. Hence, it has to frame its policies within the limits set by these forces:
– Economic Environment
– Ecological forces/Physical Environment or Natural Forces
– Technological Factors
– Social and Cultural Factors
2) Discuss the significance of the study of consumer behaviour.
Ans: Importance of Consumer Behaviour
The consumer is the focus of marketing efforts. The modern concept spells out the real significance of buyer’s Behaviour. The modern marketing management tries to solve the basic problems of consumers in the area of consumption. To survive in the market, a firm has to be constantly innovating and understand the latest consumer needs and tastes. It will be extremely useful in exploiting marketing opportunities and in meeting the challenges that the Indian market offers. It is important for the marketers to understand the buyer behaviour due to the following reasons.
- Better Consumer: The study of consumer behaviour enables us to become a better consumer. It will help consumer to take more precise consumption related decisions.
- Studying the need of consumers: It helps marketers to understand consumer buying behaviour and make better marketing decisions.
- Market Prediction: The size of the consumer market is constantly expanding and their preferences were also changing and becoming highly diversified. So without studying it, marketers cannot predict the future of their business.
- Economic Stability: It is significant for regulating consumption of goods and thereby maintaining economic stability.
- Efficient utilisation of resources: It is useful in developing ways for the more efficient utilisation of resources of marketing. It also helps in solving marketing management problems in more effective manner.
3) What is product line policy? State the various decisions of product line policy.
Ans: Full notes available in our mobile application
4) Describe the role of channels of distribution.
Ans: Functions (Role) of the Channels of Distribution
The following are the main function of the channel of distribution:
(1) Extending Suggestions Regarding Price-Determination: The middlemen are in the direct contact of the consumers. Therefore, they possess the knowledge that on what price may the consumer accepts the product. Thus, the channel of distribution extends necessary advice to the producers in the price-determination.
(2) Regularizing the Decisions: The channel of distribution regularizes the decisions and the transactions, resulting in the lowering of the costs. If the products are sold off to some such store which has many branches in the city, the producer then doesn’t need going to various branches frequently or repeatedly. The main cause of the same is that if the product seems suitable for the store, it will itself send the purchase order to the manufacturer and in this way, with only the limited efforts, it will become possible to sell the products in bulk quantities.
(3) Managing the Finance: We find that the agents generally send some advance money along with the order. Very often the product is supplied to the agents through the bank so that the company gets the documents discounted from the bank. Thus the finance is arranged. Thus it-is also the function of the agents to arrange the finance.
(4) Performing the Promotion Activities: By the middlemen, particularly by the retailers, the advertisements, individual sales, and the sales promotion activities are performed. Very often the middlemen themselves plan and implement the promotion activities and sometimes the manufacturers to extend their help in such work. Really, the result or the outcome of the sales, by the producer, very much depends upon the promotion activities undertaken by the middlemen.
(5) Serving the Consumers: Due to the middlemen only, the consumers get their required products. Only in accordance with the needs of the consumers, the retailers arrange to purchase the products from the wholesalers and the manufacturers.
(6) Minimizing the Total Transactions: If there were no middlemen, the producer would have been required to sell the product directly to the consumers which would have result into more of expenditure and trouble. Really speaking, due to the existence of the middlemen only, the number of total transactions is reduced which also reduces the costs of distribution.
5) Explain the various factors affecting choice of channels of distribution.
Ans: Factors Affecting the Selection of the Channel of Distribution
Every producer, in order to pass on the product to the consumer, is required to select a channel for distribution. The selection of the suitable channel of distribution is one of the important factors of the distribution decisions. The following factors affect the selection of the channel of distribution:
1. Factors Pertaining to the Product: Keeping in view the nature, qualities and peculiarities of the product, could only the channel for distribution be properly made. The following factors concerning the product, affect the selection of the channel of distribution:
(1) Price of the Product: The products of a lower price have a long chain of distributors. As against it, the products having higher price have a smaller chain. Very often, the producer himself has to sell the products to the consumers directly.
(2) Perishability: The products which are of a perishable nature need lesser number of the intermediaries or agents for their sale. Under this very rule, most of the eatables (food items), and the bakery items are distributed only by the retail sellers.
(3) Size and Weight: The size and weight of the products too affect the selection of the middlemen. Generally, heavy industrial goods are distributed by the producers themselves to the industrial consumers.
(4) Technical Nature: Some products are of the nature that prior to their selling, the consumer is required to be given proper instructions with regard to its consumption. In such a case less of the middlemen arc) required to be used.
(5) Goods Made to Order: The products that are manufactured as per the orders of the customers could be sold directly and the standardized items could be sold off only by the middlemen.
(6) After-Sales Service: The products regarding which the after-sales service is to be provided could be sold off either personally or through the authorized agents.
2. Factors pertaining to the Consumer or Market: The following are the main elements concerned with the consumer or the market:
(1) Number of Customers: If the number of customers is large, definitely the services of the middlemen will have to be sought for. As against it, the products whose customers are less in number are distributed by the manufacturer himself.
(2) Expansion of the Consumers: The span over which are the customers of any commodity spread over, also affects the selection of the channel of distribution. When the consumers are spread through a small or limited sphere, the product is distributed by the producer himself or his agent. As against it, the goods whose distributors are spread throughout the whole country, for such distributors, services of wholesalers and the retailer are sought.
(3) Size of the Order: When bulk supply orders are received from the consumers, the producer himself takes up the responsibility for the supply of these goods. If the orders are received piece-meal or in smaller quantities, for it the services of the wholesalers could be sought. In this way, the size of the order also influences the selection of the channel of the distribution.
(4) Objective of Purchase: If the product is being purchased for the industrial use; its direct sale is proper or justified. As against it, if the products are being purchased for the general consumption, the products reach the consumers after passing innumerable hands.
(5) Need of the Credit Facilities: If, for the sale of any product, it becomes necessary to grant credit to any customer, it shall be helpful for the producer that for its distribution, the services of the wholesalers and retailer businessmen be sought. In this way, the need of the credit facilities too influences the selection of the channel of distribution.
3. Factors Pertaining to the Middlemen: The following are the main factors concerned with the middlemen:
(1) Services Provided by Middlemen: The selection of the middlemen is made keeping in view their services. If some product is quite new and there is the need of its publicity and promotion of sales, then instead of adopting the agency system, the work must be entrusted to the representatives.
(2) Scope or Possibilities of Quantity of Sales: The same channel should be selected by means of which there is the possibility of more sales.
(3) Attitude of Agents towards the Producers’ Policies: The producers generally prefer to select such middlemen who go by their policies. Very often when the distribution and supply policies of the producers being disliked by the middlemen, the selection of middlemen becomes quite limited.
(4) Cost of Channel of Distribution: While selecting the channel of distribution, the cost of distribution and the services provided by the middlemen or agents too must be kept into consideration. The producers generally select the most economical channel.
4. Factors Pertaining to the Producer Or Company:The following factors, concerning the producer, affect the selection of the channel of distribution:
(1) Level of Production: The manufacturers who are financially sound and are of a larger category, are able to appoint the sales representatives in a larger number and thug could distribute the commodities (products) in larger quantities. As against it, for the smaller manufacturers, it becomes necessary to procure the services of the wholesalers and the retail traders.
(2) Financial Resources of the Company: From the financial point of view, the stronger company needs less middlemen.
(3) Managerial Competence and Experience: If some producer lacks in the necessary managerial experience or proficiency, he will depend more upon the middlemen. The new manufacturers in the beginning remain more dependent upon the middlemen.
5. Other Factors
(1) Distribution Channel of Competitors: While determining the channel of distribution, the channels of distribution of the competitors too must be borne in mind.
(2) Social Viewpoint: What is the attitude of society towards the distribution, this fact too must be kept into consideration while selecting the middlemen.
(3) Freedom of Altering: While selecting the agents, this fact too must be kept into mind that in case of need, there must be the liberty of changing or replacing the agents (middlemen).
6) Discuss the various methods of measuring advertising effectiveness.
Ans: Methods of measuring Advertising effectiveness
“When a child writes the examination papers, he has to see the result come what it may be, so that he comes to know where he is wrong and where he should pay more attendance. This will help him work better in future.”
This is exactly the case of the advertisement. The work is not complete if the effectiveness of advertise is not measured. This is the only way to know how the advertisement is performing, is it reaching the targets and is the goal achieved.
It is not at all possible to measure advertisement effectiveness accurately as there are many factors like making a brand image, increasing the sales, keeping people informed about the product, introducing new product, etc, which affect the effectiveness of an advertisement.
We all know that there are some companies who advertise at very low level but still their products are a hit and some companies indulge in very heavy advertisements but they don’t get desirable results. But then, there are some traditional and modern tools to measure most of the effectiveness of an advertisement through which the advertiser can or may get more and more information about how their ads and product are performing in the market. According to Philip Kotler and Armstrong, the Gurus Of Marketing, there are two most popular areas which need to be measured for knowing the effectiveness of advertisement and they are:
- Communication Effect
- Sales Effect
Communication Effect Research consists of three types of researches:
- Direct Rating Method – here, customers are directly asked to rate the advertisement and then these rating are calculated.
- Portfolio Tests – here, the customers see the ads and listen carefully to the ads and all the contents of the ads and then they are asked to recall the ad and the contents. Then the calculations are done with help of this data.
- Laboratory tests – here, the apparatus to measure the heart rates, blood pressure, perspiration, etc are used on the customer after he watches the ad, to know the physiological reactions of the body.
Sales Effect Research totally depends on the sales of the company. The sales keep varying from time to time. There are some factors affecting sales like product availability, the price of the product, contents of the product, and sometimes the competitors. So this method is a little difficult than the communication one. The company doing sales effect research generally bothers about the sales of the product, they try to know whether or not the money they are spending on the ads is enough or excess.
As earlier said, it is not possible to measure each and everything and the chances are at the lower end if the company has many ads running through various mediums at the same time. So suggestion is that the advertiser or the company should use appropriate and different methods which are most suitable for the media under use.
- The company can hold surveys and product recognition tests
- Questionnaire or feedback flyers can be distributed and customers could be asked to fill it up.
- Toll free number can be highlighted on the ads so that customers can call up.
- The response rates can be increased by telling customers what to do. For e.g. some ads have lines in flashy color like “Hurry Up” or “No one can eat just one” or “be the first” etc.
These are the traditional ways.
Now days, internet is the modern tool for measuring the effectiveness of an advertisement. There are some types such as:
Integrated direct marketing: This is an internet based tool where they have a response corner designed on the websites. Whenever the customers visit the sites, they fill up their contact details and give feedbacks. Thus the company supplies more information and sends newsletters and also gets the idea for further action. But then its not that only online advertiser have this facility but then advertisers who don’t work online can use coupons, discount vouchers, etc. to do this.
Analysis tool: There is an analysis tool available on internet by using which the advertiser will know how many customers are visiting the site, who are shopping online, how many pages are viewed, etc. which in turn will help advertiser to measure the effectiveness.
Internet is the most easy, cheaper and cost effective way to measure the effectiveness because here no money is wasted as the ad is only viewed when the customer want to view it where as in normal print method or using TV, the ad sometimes goes unwatched or unattended and viewed for the sake of viewing.
4. What is marketing mix? Discuss the seven P’s framework of marketing mix. 10
Ans: Marketing mix refers to one of the major concept in modern marketing. According to Philip kotler “marketing mix is a set of controllable marketing variables that the firm blends to produce the response it wants in the target market”. It is the combination of seven controllable variables which constitutes the company’s marketing system.
Seven P’s of Marketing Mix and their Importance
Successful businessmen know the importance of marketing mix because they cannot design and promote their products without marketing mix. It is a mixture of 4 P’s of marketing mix such as product, place, price and promotion. 4 P’s Of Marketing Mix:
1. Product: Product is one of important part of marketing mix because it reflects the good or bad reputation of any organization. The products represent any business efficiently. Successful organizations always search out the buying habits of their customers and designed their products based on those buying habits in order to meet the customer’s requirements. They also design their products based on important factors such as purchasing power and geographical locations etc. They try to design products which are affordable for customers. Companies always design their products according to customer’s budget and affordability.
They do not compromise on their product quality. Some companies maintain their quality and do not compromise on price but there are some companies which produce products according to the affordability of customers. Marketers communicate with their customers directly and convince them to buy their products.
2. Price: It is the worth of product on which customers are agreed to buy the products. Price of the product should be according to the range of regular customers. Prices are fluctuating according to seasonal requirements. Marketers always try to satisfy their clients at any cost. If employees of the company are satisfied with their job and performance rewards, they can become an effective asset of any organization.
3. Place: Products always design based on geographical place because customers buy products according to their traditions and seasons. Companies which are going to spread their business networks throughout the world must visit the place where they want to open their branches. They need to study the traditions and seasonal changes of the country where they want to initialize their products.
4. Promotion: Promotion activities involve marketing and advertising. Promotional activities are used to create awareness about the products. Customers know about products and their specification through social marketing media. Companies adopt social marketing media in order to create awareness about their products and services. Promotional activities and techniques are important if companies initialize new products or make some changes in product’s specifications. Promotional activities include advertising, selling, public relations and sales promotions. Advertising is a paid form of promotion that grabs the attention of customers through channels or TV. It also involves relationships between customers and companies. Marketers should design products that meet customers’ needs and demands.
5. Packaging: The fifth element in the marketing mix is the packaging. Packaging is that artand/or science which is related to the development and use ofmaterials, methods and equipment, for the packing of the goods in some containers, so that the product, while passing through various stages of distribution, could remain fully safe. In this age of competition, good and appropriate packaging occupies much significance. The policies pertaining to the packaging are a part of the product planning and product development program.
6. Positioning: Product positioning is the 6th important element of marketing plan. It is the process presenting the benefits of the products to the target audience. In other words, Product positioning is a process of identifying the needs of market segments, product strength and weaknesses and the extent to which competing product are perceived to meet the consumer needs. It is an attempt to project different or refined or revised product image in the market than one that has been prevailing. It is the delicate task of relating a product to the market or a market segment. It is that method which emphasizes the product that proves attractive to the consumers. For instance, a two-wheeler manufacturer might engineer the product to be safer, more accommodative, more fuel-efficient than those of competitors.
7. People: The final P of the marketing mix is people. Develop the habit of thinking in terms of the people inside and outside of your business who are responsible for every element of your sales and marketing strategy and activities.
Explain the modern concepts of marketing. Distinguish between marketing and selling.
Ans: Modern concept of marketing
According to the modern concept, marketing is concerned with creation of customers. Creation of customers means identification of consumer needs and organising business to satisfy these needs. Marketing in the modern sense involves decisions regarding the following matters
- Products to be produced
- Prices to be charged from customers
- Promotional techniques to be adopted to contact and influence existing and potential customers.
- Selection of middlemen to be used to distribute goods & services.
Modern concept of marketing requires all the above decisions to be taken after due consideration of consumer needs and their satisfaction. The business objective of earning profit is sought to be achieved through provision of consumer satisfaction. This concept of marketing is regarded as consumer oriented as the emphasis of business is laid on consumer needs and their satisfaction.
Selling V/S Marketing
Now a days, as the technology advances along with the quantity and quality of the goods, the art of selling the goods are also very essential. The firms which follow the selling concept believe that in order to motivate a customer to buy his product, he must be convinced by aggressive selling and promotional efforts. Firms following selling concept make use of advertising powers and other persuation techniques to influence the customers.
In the words of Philip Kotler,” The Selling Concept holds that consumers and businesses, if left alone, will ordinarily will not buy enough of the organisation’s products. The organisation must, therefore, undertakes an aggressive selling and promotion efforts. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that company has a whole battery of effective selling and promotion tools to stimulate more buying,”
The marketing concept emerged in the mid 1950’s. The business generally shifted from a product – centered, make and sell philosophy, to a customer centered, sense and respond philosophy. The marketing concept concentrates on the need of the customers. This concept says than product should be designed and produced keeping in mind the need of the customers and try to satisfy the need better than the competitor. The marketing concept holds that the key to achieving organizational goals consist of the company being more effective than competitors in creating, delivering and communicating superior customers value. This concept puts the customers at both the beginning and the end of the business cycle. Every department and every worker should think about the customer and acts as per need of the customer.
The American Marketing Association has defined marketing as “an organizational function and a set of processes for creating, communicating and delivering value to the customers and for managing customer’s relations in ways that benefit the organization and the stake holders.”
Peter Drucker says it this way that,” the aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. All that should be needed is to make the product or the service available.”
Difference between Selling and Marketing
From the above discussion we find the following differences between selling and marketing:
|a) Selling starts and ends with the seller.||a) Marketing starts and ends with the consumers.|
|b) Seeks to quickly convert products into cash.||b) Seeks to convert customer ‘needs’ into products.|
|c) Seller is the centre of business universe.||c) Buyer is the centre of the business universe|
|d) Views Business as a goods producing process.||d) Views businesses as a customer satisfying process.|
|e) Seller preference determines the formulation of marketing mix.||e) Buyer determines the shape marketing mix should take.|
|f) Selling is product oriented.||f) Marketing is customer oriented.|
|g) Seller’s motives dominate marketing communication.||g) Marketing communication is looked upon as a tool for communicating the benefits / satisfactions provided by the product.|
|h) Selling concept is short term perspective.||h) Marketing concept is a long term perspective.|
5. What is market segmentation? Describe the different bases used for market segmentation. 10
Ans: Marketing Segmentation
A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. Such division is called market segmentation. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. Market segmentation enables the entrepreneur to match his marketing efforts to the requirements of the target market. Instead of wasting his efforts in trying to sell to all types of customers, a small scale unit can focus its efforts on the segment most appropriate to its market. It is defined as “The strategy of dividing the market in order to consume them”.
According to Philip Kotler, “It is the subdividing of market into homogenous subsets of consumers where any subset may be selected as a market target to be reached with distinct Marketing Mix”
According to Philip Kotler, market segmentation means “the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes.”
According to William J. Stanton, “Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects.”
Basis of Segmentation:
Market segmentation dividing the Heterogeneous market into homogenous sub-units. Heterogeneous means mass marketing, which refers people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers. The following factors are considered before dividing the market:
1. Geographical Factors: On the basis of geographical factors, market may be classified as state-wise, region-wise and nation-wise. Many companies operate only in a particular area because people behave differently in different areas due to various reasons such as climate, culture, etc.
2. Demographic Segmentation : In demographic segmentation, the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income occupation, education religion, race generation, nationality & social class.
a) Age & Life Cycle Stage : Consumer wants & abilities change with age. Eg: Hindustan Unilever introduced Pears soap in pink colour specially for children. Johnson & Johnson Baby Powder & Talcum Powder are classic examples of products for infants & children. Television channels in India Indicate the segmentation based on age & life cycle. There are channels like Aastha & Sanskaar target which towards the old generation, cartoon network, Disney are channels for children etc.
b) Gender : Men & women have different behavioral orientation. Gender differentiation has been long applied to product categories such as clothing, cosmetics & magazines. Eg: Axe deodorant is positioned as a masculine product. Park avenue from Raymond is positioned as masculine brand. Bajaj wave is a brand specifically designed for women in the scooter segment.
c) Income : Income segmentation is a long standing practice in a variety of products & services & is a basic segmentation variable. Eg: Nirma Washing Powder, was launched as the lowest priced detergent in India primarily targeted at middle income group. Markets for many consumers products in India are showing rapid growth due to low unit price packaging.
d) Generation : Each generation is profoundly influenced by the time in which it grows- the music movies, politics.
e) Social Class : Social class has a strong influence on preference in cars, clothing, home , furnishings, leisure activities, reading habits, retailers etc.
3. Psychological factors: In psychographic segmentation, elements like personality traits, attitude lifestyle and value system form the base. The strict norms that consumers follow with respect to good habits or dress codes are representative examples. E.g.: Mr. Donald’s changed their menu in India to adopt to consumer preference. The market for Wrist Watches provides example of segmentation. Titan watches have a wide range of sub brands such as Raga, fast track, edge etc. or instant noodle markers, fast to cook food brands such as Maggi, Top Ramen or Femina, women’s magazine is targeted for modern women.
4. Economic Factors: On the basis of economic factors, markets have been classified in the westerns countries as follows:
– Upper Class b. Upper-upper class c. Lower-upper class
– Middle class e. Upper-middle class f. Lower-middle class
– Lower class h. Upper-lower class i. Lower-lower class
In our country, it is classified as upper class (rich), middle class, and the lower class. Another classification based on income in our country is as follows:
a. Very Rich b. The Rich class c. The Aspiration Class and d. The Destitute.
5. Behavior Factors: This is one of the most important bases used for market segmentation. Market is classified on the basis of attitude of consumers and special occasions.
6. Occasions: Sellers can easily find out certain occasions when people buy a particular product. E.g.: Demand for clothes, greeting cards, etc. increases during the festival season. Demand for transportation, hotels etc. increases during the holiday seasons.
7. Benefits: Each consumer expects to fulfill certain desire or to derive some benefits from the product he purchases. E.g.: A person may purchase clothes to save money and another to impress others. Based upon this, markets may be classified as markets for cheap price products and market for quality products etc.
8. Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic market, indifferent market, positive market, and negative market.
What is sales forecasting? Discuss the various factors influencing sales forecasting.
7. What is product life cycle? Describe the different stages of product life cycle. 10
Product Life Cycle
A product is like a human being. It is born, grows up fast, matures and then finally passes away. Product life cycle is the stages through which a product or its category is passed. From its introduction to the marketing, growth, maturity to its decline or reduce in demand in the market. Not all products reach this final stage, some continue to grow and some rise and fall. In short, The PLC discusses the stages which a product has to go through since the day of its birth to the day it is taken away from the market.
However, the basic difference in case of human beings and products is that a product has to be killed by someone. Either the company (to bring better products) or by competition (too much external competition). There are several products in the market which have lived on since ages (Light Bulbs, Tube lights), whereas there are others which were immediately taken off the shelf (HD DVD).
Stages of Product life cycle:
A) Introduction: The stage 1 is where the product is launched. A product launch is always risky. You never know how the market will receive the product. There have been numerous failures in the past to make marketers nervous during the launch of the product. The length of the introduction stage varies according to the product.
If the product is technological and receives acceptance in the market, it may come out of the introductory phase as soon as it is launched. Whereas if the product is of a different category altogether and needs market awareness, it may take time to launch.
Characteristics of Introductory stages of Product life cycle
- Higher investment, lesser profits
- Minimal Competition
- Company tries to Induce acceptance and gain initial distribution
- Company needs Promotions targeted towards customersto increase awareness and demand for product
- Company needs Promotions targeted towards channelto increase confidence in the product
B) Growth: Once the introductory phases are over, the product starts showing better returns on investment. Your customers and channels begin responding. There is better demand in the market and slowly the product starts showing profits.
This is a stage where competition may step in to squash the product before it has completely launched. Any marketing mistakes done at this stage affect the product considerably as the product is being exposed to the market and bad news travels fast. Thus special care has to be taken in this stage to ensure competition or bad decisions do not affect the growth stage of the product.
Characteristics of Growth stage of Product life cycle
- Product is successfully launched
- Demand increases
- Distribution increases
- Competition intensifies
- Company might introduce secondary products or support services.
- Better revenue generation and ROI
C) Maturity stage: One of the problems associated with maturity stages in a technologically advanced environment is the problem of duplication. Not only is the product available in duplicate markets, but also there are several competing products which arise with the same features and capabilities. As a result, the USP’s of the product become less attractive.
Along with competition, Penetration pricing becomes a weapon for competitors. Competitors sell products with the same features at lesser prices thereby trying to penetrate in the market. Nonetheless, The sales of a product (especially sales from return customers) is at its peak point during the maturity stages. The growth of sales may be lesser, but the sales revenue of the organization is maximum during the maturity stage of product life cycle.
Characteristics of Maturity stages of Product life cycle
- Competition is high
- Product is established and promotion expenditures are less
- Little growth potential for the product
- Penetration pricing, and lower profit margins
- The major focus is towards extending the life cycle and maintaining market share
- Converting customers product to your own is a major challenge in maturity stage
D) Decline: 1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use – A typical scenario which a product might face in its last stage. In this stage the expenditures begin to equal the profits or worse, expenses are more than profits.
Thus it becomes a typical scenario for the product to exit the market. It also becomes advantageous for the company as the company can use resources it was spending on the declining product on an altogether different project. Characteristics of Decline stages of Product life cycle
- Market is saturated
- Sales and profits decline
- Company becomes cost conscious
- A lot of resources are blocked in rejuvenating the dead product.
What is new product development? Explain the various steps involved in new product development process.
Ans: The introduction of new product usually passes through various stages. In each stage, the management must decide whether to move on to next stage with the product idea or not. Practically, in this process some of the ideas will be eliminated at every step. There are six stages involved in the new product development. The stages are given below:
(I) Idea generation: New products are produced on the basis of new ideas. Ideas may be generated from various sources like customers, dealers, distributors, salesman, top executive, consultancy organisation, Research and Development Department etc. The first step is to collect ideas as many as possible so that the company can find out one of the best idea out of those ideas to convert the same in to actual product.
(II) Screening of Ideas: All new ideas cannot be converted into products as it requires heavy capital investments. Those ideas should be screened and all unworkable ideas should be dropped. Only most viable, feasible and promising one should be selected for further processing. The company uses the concept testing method. In this method, consumer response to a description or picture or drawings is measured even before the product is actually produced. The purpose is to find out few best ideas.
(III) Business Analysis: During this stage, an attempt is made to predict the economic consequences of the product for the company. In these stages, the management should perform the following:
(a) Identify product features.
(b) Estimate market demand and product profitability.
(c) Establish a programme to develop the product.
(d) Assign responsibility for further study of the product feasibility.
(IV) Product Development or Prototype testing: This step consists of the following:
(a) Prototype development giving visual image of the product.
(b) Consumer testing of the model or prototype product.
(c) Branding, packing and labeling of the product.
The marketing people determine an appropriate brand name, package and price and making sure that both tangible and intangible features are considered and included. Focus groups, target market surveys and other market research techniques with the physical product give the marketer additional information.
(V) Market Testing: Test marketing involves placing a full developed new product for sale in one or more selected areas and observing its actual performance under a proposed marketing plan. In the words of P. Kotler- “Test marketing is the stage at which the product and marketing programme are introduced into more realistic market settings”. The basic purpose is to evaluate the product performance and marketing programme in a real setting prior to the commercialization. This step provides the scope of correction and modification of the product as well as marketing programme. Many products fail after commercialization because of lack of test marketing. In this process, the marketers approach the trial purchasers and first repeat purchaser to know their feelings and reaction about the product as well as marketing programme. On the basis of their opinions the marketers make certain required modification in the product as well as marketing programme. After the favourable result usually, products are sent for commercialization.
(VI) Commercialization: After favourable response in test marketing, full scale production and marketing programme are planned and then the product is launched. It may be in phased manner or the product may be introduced simultaneously depending on the company’s plan and resources available. The phased manner introduction helps to avoid short supply of the product due to initial gaps in production and distribution.
7. What is pricing? Discuss the factors influencing product pricing decisions. 10
Ans: Price and Pricing
Price is defined as the amount we pay for goods or a service or an idea. Price is the only element in the marketing mix of a firm that generates revenue. All other elements generates only cost. Price is a matter of importance to both seller and buyer in the market place. Only when a buyer and a seller agree on price, we can have exchange of goods and services leading to transfer of ownership.
The term ― Price need not be confused with the term ― Pricing. Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. But pricing is different from price. It refers to decisions related to fixing of price of a commodity. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.
Factors Affecting Pricing
Factors affecting pricing may be categorized into two categories- internal factors and external factors. In each of these categories some may be economic factors and some may be psychological factors. Some factors may be quantitative and some others may be qualitative. Some of the important factors affecting pricing are given below:
A. Internal Factors:
As regards pricing, the firm has certain objectives -long term as well as immediate. For example, the firm has certain costs of manufacturing and marketing; and it seeks to recover these costs through the price and thereby earning a profit. In respect of all the products, the firm may have a basic philosophy on pricing. The pricing decisions of the firm have to be consistent with this philosophy. Pricing also has to be consistent with the overall objectives of the firm. These objectives could be achieving market share, short term or long term profit. The firm may be interested in seeking a particular public image through its pricing policies. All these constitute the internal factors that influence pricing. From the above, it appears that pricing is influenced by objectives and marketing strategy of the enterprise, pricing philosophy, pricing objectives and policy. More specifically, the internal factors are:
1. Corporate and marketing objectives of the firm: All pricing objectives emanate from the corporate and marketing objectives of the firm. A business firm will have a number of objectives in the area of pricing. Some of these objectives are long-term, while others are short-term. Profit is one of the major objectives in pricing. Firms may not be interested in profit maximization as such, they may be more interested in long term survival and growth.
2. The image sought by the firm through pricing: If a firm offers high quality goods at high prices, the firm will develop a premium image.
3.The characteristics of the product: Sophisticated, complex and new to the world products normally carry high prices. Products having more features carry higher prices.
4. Price elasticity of demand of the product: If price increases, demand decreases and if price decreases demand increases. Marketers may decide on pricing based on ‘what the traffic can bear’. The marketer takes the maximum price which the customers are willing to pay for the product under the given circumstances.
5. The stage of the product on the product life cycle: When a product is introduced for the first time it carries a higher price. Gradually with increasing consumer acceptance and competition price decreases.
6. Use pattern and turn around rate of the product: Price of newspaper and magazines may be different for the immediacy factor, permanence and the pass along readership. Newspapers are having a short life, while magazines enjoy a pass along readership.
7. Costs of manufacturing and marketing: Costs determine price to a great extent. Marketers will have to cover the cost and earn a profit.
8. Extent of distinctiveness of the product and extent of product differentiation practised by the firm: Products having uniform size, shape and compositions can be manufactured at a lesser cost compared to products having differentiation.
9. Other elements of the marketing mix of the firm and their interaction with pricing: Amount spent on product research, advertising, dealer development etc. are some factors which influence price of a product.
10. Composition of the product line of the firm: A firm may sell a number of products in the same product line.In that case , the products are likely to be sold under different prices depending on their quality, features etc.
B. External Factors:
In addition to the internal factors mentioned above, any business firm has to encounter a set of external factors while formulating its pricing decisions. An enterprise exists in an environment and is influenced by environmental factors. The external factors are:
1. Market characteristics: Some markets are having very stiff competition and some are having less. The number of players in a market could be more or less. Market leadership factors also may be different. Different characteristics of the market have a bearing on price.
2. Buyer behaviour in respect of the given product: Value conscious buyers are likely to be interested in low prices. Image conscious buyers may be more attracted by product image rather than low price of the product.
3. Bargaining power of major customers: In industrial buying situations major buyers have a bargaining power. They are in a better position to negotiate prices.
4. Bargaining power of major suppliers: Similar is the case with major suppliers. They are in a better position to supply bulk quantities. They are also in a better position to negotiate terms.
5. Competitors’ pricing policy: Firm’s decision to set a price is heavily influenced by the price set by the competitors. In case of highly unique product having a niche market, a firm can have its own price. In most of the cases, competitive reactions to the price set by the firm have to be seriously studied for future programmes.
6. Government controls/regulations on pricing: As stated earlier the Governmental measures like import duties, excise, subsidy, sales tax etc. influence pricing decisions.
7. Social considerations: Firms have a responsibility to society and to its customers. Firms are not expected to exploit consumers by unnecessarily charging high prices.
As discussed above pricing decisions are complex. For pricing an individual product the firm has to consider its overall objective, prices set for other products, costs etc. These are internal factors. In addition, the pricing decisions are influenced heavily by the external factors as stated above.
Distinguish between ‘sales promotion’ and ‘advertising’. Describe the various methods of sales promotion.
Ans: Distinguish between advertising and Sales Promotion.
|Meaning||The activity of generating advertisements of products and services to commercialize them is known as Advertising.||Sales promotion refers to short term use of incentives or other promotional activities that stimulate the customer to buy the product.|
|Strategy||It is permanent strategy.||It is a limited time promotion strategy.|
|Cost||It is highly expensive.||It is cost effective.|
|Best suited for||It is best suited for medium and big enterprises.||It is suitable for all enterprises.|
|Objective||Its main objective is to build brand image and boosting sales.||Its main objective is short term sales push.|
Methods and Techniques of sales promotion
Sales promotion refers to short term use of incentives or other promotional activities that stimulate the customer to buy the product. Sales promotion techniques are very useful because they bring short and immediate effect on sale. Some of the important techniques of sales promotion are listed below:
(a) Rebate: Sometimes, the product is made available at special prices less than the original prices for a limited period of time, e.g., recently Coke and Pepsi announced special price of their 500 ml bottles.
(b) Product Combination: Product combination is the bonus items given free with the purchase of a product. For e.g. A milk shakers along with Nescafe, or mugs with Bourn vita or a diary along with a packet of chips. They are effective in getting consumers to try a new product.
(c ) Lucky Draw: A firm of purchased of a fixed amount gives a coupon to a customer which entitles them for a lucky draw, e.g., Bikanerwala restaurant in particular season gives lucky draw coupon on purchase of Rs. 200 or more to its customers which entitles them to win exciting prizes like car etc.
(d) Contests: In these, consumer’ are required to participate in some competitive event involving application of skills or luck and winners are given some rewards. For instance, Golden Harvest, maker of premium bread usually has children drawing competition.
(e) Discounts: These are like price promotion in which certain percentage of price is reduced as discount from the list price, e.g., most of the retailers of garment like Snow White and Shopper’s Stop offer their product at generous discount during a limited period at the end of the season.