Gauhati University Solved Question Papers
MARKETING MANAGEMENT’ 2018
(Principles of Marketing New Syllabus CBCS Pattern)
Full Marks: 80
Time: 3 hours
(The figures in the margin indicate full marks for the questions)
1. Answer the following questions as directed: 1×10=10
1) ‘Mobile hand-set’ is an example of
d)None of the above.
Ans: c) Durable goods.
2) Which one of the following is not psychological factor of consumer behaviour?
b) Family income.
Ans: b) Family income.
3) Who introduced the concept of ‘Marketing Mix’?
a)William J. Santon.
c)Henry L. Hemen.
d) H. Borden.
Ans: d) N. H. Borden.
4) Which one of the following is not an uncontrollable factor of Marketing Environment?
b)Level of education.
Ans: a) Economic growth.
5) Which one of the following methods is used for measuring effectiveness of advertising?
d)All of the above.
Ans: d) All of the above
6) Modification and adding new features in the existing products amount to new product. (State true or false)
7) Under ‘Penetration Pricing Policy’ the price of new product fixed at initial stage is high. (State true or false)
8) Product diversification is essential to meet changing test and desire of consumers. (Fill up the blank)
9) When the market is segmented on the basis of age, gender, marital status of consumers, it is known as demographic segmentation. (Fill up the blank)
10) “The Product Life Cycle is an attempt to recognise distinct stages in the sales history of the product.” (Fill up the blank)
2. Answer the following questions very briefly: 2×5=10
1) What is Macro or uncontrollable marketing environment?
Ans: 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: Social and Cultural factors, technological factors, ecological forces, economic environment and demography.
2) What is Buying motive?
Ans: A consumer does not buy a product or service just because he wants to buy. There are many factors which affects buying behaviour of consumers. Such factors are known as buying motives. Buying motives are those influence or considerations which provide the impulse to buy, induce action or determine choice in purchase of goods and services.
3) What is ‘Price differential pricing policy’?
Ans: Some firms charge different prices for the same product in different zones/ areas of the market. Sometimes, the differentiation in pricing is made on the basis of customer class rather than marketing territory. Such pricing policy is called ‘Price differential pricing policy’.
4) What is advertising budget?
Ans: Advertising budget is the money a company is willing to set aside to achieve its marketing goals. It is an estimate of a company’s promotional expenditures over a certain time period.
5) What is Product diversification?
Product Diversification: When a manufacturer offers more products in different areas, it is referred as product diversification. In fact, when a manufacturer diversification. Diversification normally involves business in a new area. E.g.: ITC entering into hotel business, sony entering into film production business.
Gauhati University Marketing Management Solved Question Papers:
3. Answer any four of the following questions briefly: 5×4=20
1) Describe the scope of marketing management.
Ans: Scope of Marketing Management
The scope of marketing really is related to the old and new concept of ‘marketing’. Formerly the scope of marketing used to remain very much limited since the wants of the consumers too were quite limited. The competition was almost equivalent to nil. In the marketing, the satisfaction of the consumers was not at all considered. The marketing was commodity based and immediately after the sale of the products, the marketing process was over. Nowadays, the scope of marketing has become quite extensive, and the satisfaction of the customers too is kept in view. The process of marketing continues even after the sales have been affected. Today, the function of confirming the product, in accordance with the changing wants, habits and fashions of people, is undertaken by the process of marketing. Within the scope of marketing, -the following activities are covered:
- Study of Consumer Wants and Needs: Goods are produced to satisfy consumer wants. Therefore study is done to identify consumer needs and wants. These needs and wants motivates consumer to purchase.
- Study of Consumer behaviour: Marketers performs study of consumer behaviour. Analysis of buyer behaviour helps marketer in market segmentation and targeting.
- Production planning and development: Product planning and development starts with the generation of product idea and ends with the product development and commercialisation. Product planning includes everything from branding and packaging to product line expansion and contraction.
- Pricing Policies: Marketer has to determine pricing policies for their products. Pricing policies differs from product to product. It depends on the level of competition, product life cycle, marketing goals and objectives, etc.
- Distribution: Study of distribution channel is important in marketing. For maximum sales and profit goods are required to be distributed to the maximum consumers at minimum cost.
2) What are the sociological factors that influence the consumer behaviour?
Ans: Social Factors: Consumer’s behaviour is influenced by social factors such as reference groups, family, social roles and status. The buyer is living in a society, is influenced and There is a constant interaction between the individual and the groups to which he belongs. All these interactions affect him in his day to day life.
- Reference Groups: A person’s reference groups consist of all the groups that have a direct or indirect influence on his attitude. They can be family friends, neighbours, co-worker, religious, professional and trade union groups. Reference groups expose an individual to new behaviours and lifestyles and influence attitude and self-concept. Brands like Levi, Prologue and Planet M used teenage icon as brand Ambassadors for in store promotions.
- Family: The family is the most important buying organization in society. From parents a person acquires an orientation toward religion politics and a sense of personal ambition, self-worth and love. E.g. In traditional joint families, the influence of grandparents on major purchase decisions affect the lifestyles of younger generations. In urban India with the growth of nuclear families and both husband and wife working the role of women in major family decisions is prominent. Children and teenagers are being targeted by companies using the internet as an interactive device.
- Role and Status: The person’s position in each group can be defined in terms of role and status. A role consist of all activities that a person is expected to perform. Each role carries a status. A Vice President of marketing has more status than a sales manager and a sales manager has more status than an office clerk and people choose those products that reflect and communicate their role and desired status in society.
3) What is Packaging? Discuss briefly its functions.
Ans: Packaging is that art and/or science which are related to the development and use of materials, 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.
Importance (Functions) of Packaging
- Safety of the The main function of packaging is to protect the things from dust, water, moisture, insects, etc. Good packing saves the products against perishing, loss and other damages.
- Facility in Marketing Activities.Due to the packing, the movement of the products, shifting, preserving, opening, collecting and storage, become economical and easier for both the middlemen as well as the consumers.
- One of the functions of packing is advertisement too. Till there exists any product packet, it keeps us aware of the same.
- Facility in Collecting.It is easier to store the packaged Due to packing, the products remain safe in the godowns.
4) What is Product line Policy? Discuss its salient features.
Ans: Full notes available on our mobile application
5) Write the meaning of Distribution channel. Explain briefly its functions.
Ans: Channel of distribution: One of the important problems of marketing is the distribution of goods & services to the right place, person & the right time. Manufacturers often find it difficult to decide about the effective distribution system. The channel of distributions refers to the group of intermediaries, which perform the distribution functions. A channel of distribution is an organised net-work or a system of agencies and institutions which, in combination, perform all the activities required to link producers with users and users with producers to accomplish the marketing task.
According to Philip Kotler, “The distribution is the set of all firms & individuals that assist in the transferring the little of goods & services as they move from producers to customers.”
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.
6) Write the functions performed by Advertising Agency.
Ans: Advertising agency performs following functions
- Contacting Clients: Advertising agency first of all identifies and contact firms which are desirous of advertising their product or services. Ad-agency selects those firms which are financially sound, makes quality products or services, and have efficient management.
- Planning Advertisement: Advertising agency’s next function is to plan ad for its client. For ad planning following tasks are required to be performed by ad-agency:
- Study of client’s product to identify its inherent qualities in relation to competitor’s product.
- Analysis of present and potential market for the product.
- Study of trade and economic conditions in the market.
- Study of seasonal demand of the product
- Study of competition and competitor’s spending on advertising.
- Knowledge of channels of distribution, their sales, operations, etc.
- Finally, formulation of advertising plan
- Creative Function: Creative people like – the copywriters, artists, art-directors, graphic-specialists have to perform the creative function which is most important part of all advertising function.
- Developing Ad-Copy: Ad-agency with the help of their writers, artists, designers, animators, graphic-designers, and film-directors prepares and develops Ad-copy.
- Approval of Client: Ad-copy is shown to the client for his approval.
4. What is Marketing Environment? Discuss the various forces of Marketing Environment. 10
Ans: MARKETING ENVIRONMENT
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.
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”.
The Environmental Factors may be classified as:
a) Internal Factor
b) External Factor
External Factors may be further classified into:
a) External Micro Factors and
b) 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.
(a) External Micro Factors: Some of the important external micro factors are:
1. Suppliers: They are the people who provide necessary resources needed to produce goods and services. Policies of the suppliers have a significant influence over the marketing manager’s decisions because, it is laborers, etc. A company must build cordial and long-term relationship with suppliers.
2. 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. A company must select an effective chain of middlemen, so as to make the goods reach the market in time. The middlemen give necessary information to the manufacturers about the market. If a company does not satisfy the middlemen, they neglect its products and may push the competitor’s product.
3. 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. If they are not taken into consideration, before taking the decisions, the company is bound to fail in achieving its objectives. A company’s marketing strategy is influenced by its target consumer. E.g. If a manufacturer wants to sell to the wholesaler, he may directly sell to them, if he wants to sell to another manufacturer, he may sell through his agent or if he wants to sell to ultimate consumer he may sell through wholesalers or retailers. Hence each type of consumer has a unique feature, which influences a company’s marketing decision.
4. Competitors: A prudent marketing manager has to be in constant touch regarding the information relating to the competitor’s strategies. He has to identify his competitor’s strategies, build his plans to overtake them in the market to attract competitor’s consumers towards his products. Any company faces three types of competition:
5. Brand Competition: It is a competition between various companies producing similar products. E.g.: The competition between BPL and Videocon companies.
6. The Product Form Competition: It is a competition between companies manufacturing products, which are substitutes to each other E.g.: Competition between coffee and Tea.
7. The Desire Competition: It is the competition with all other companies to attract consumers towards the company. E.g.: The competition between the manufacturers of TV sets and all other companies manufacturing various products like automobiles, washing machines, etc.
Hence, to understand the competitive situation, a company must understand the nature of market and the nature of customers. Nature of the market may be as follows:
– Perfect Market
– Monopolistic Market
8. Public: A Company’s obligation is not only to meet the requirements of its customers, but also to satisfy the various groups. A public is defined as “any group that has an actual or potential ability to achieve its objectives”. The significance of the influence of the public on the company can be understood by the fact that almost all companies maintain a public relation department. A positive interaction with the public increases its goodwill irrespective of the nature of the public. A company has to maintain cordial relation with all groups, public may or may not be interested in the company, but the company must be interested in the views of the public.
Public may be various types. They are:
Press: This is one of the most important groups, which may make or break a company. It includes journalists, radio, television, etc. Press people are often referred to as unwelcome public. A marketing manager must always strive to get a positive coverage from the press people.
Financial Public: These are the institutions, which supply money to the company. E.g.: Banks, insurance companies, stock exchange, etc. A company cannot work without the assistance of these institutions. It has to give necessary information to these public whenever demanded to ensure that timely finance is supplied.
Government: Politicians often interfere in the business for the welfare of the society and for other reasons. A prudent manager has to maintain good relation with all politicians irrespective of their party affiliations. If any law is to be passed, which is against the interest of the company, he may get their support to stop that law from being passed in the parliament or legislature.
General Public: This includes organisations such as consumer councils, environmentalists, etc. as the present day concept of marketing deals with social welfare; a company must satisfy these groups to be successful.
(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:
1. Demography: It is defined as the statistical study of the human population and its distribution. This is one of the most influencing factors because it deals with the people who form the market. A company should study the population, its distribution, age composition, etc. before deciding the marketing strategies. Each group of population behaves differently depending upon various factors such as age, status, etc. if these factors are considered, a company can produce only those products which suits the requirement of the consumers. In this regard, it is said that “to understand the market you must understand its demography”.
2. Economic Environment: A company can successfully sell its products only when people have enough money to spend. The economic environment affects a consumer’s purchasing behavior either by increasing his disposable income or by reducing it. E.g.: During the time of inflation, the value of money comes down. Hence, it is difficult for them to purchase more products. Income of the consumer must also be taken into account. E.g.: In a market where both husband and wife work, their purchasing power will be more. Hence, companies may sell their products quite easily.
3. Ecological forces/Physical Environment or Natural Forces: Ecology is the study of living things within their environment context. In a marketing context it concerns the relationship between people and the physical environment. Environmentalists attempt to protect the physical environment from the costs associated with producing and marketing products. They are concerned with the environmental costs of consumption, not just the personal costs to the consumer. A company has to adopt its policies within the limits set by nature. A man can improve the nature but cannot find an alternative for it.
Nature offers resources, but in a limited manner. A product manager utilizes it efficiently. Companies must find the best combination of production for the sake of efficient utilization of the available resources. Otherwise, they may face acute shortage of resources. E.g.: Petroleum products, power, water, etc.
4. Technological Factors: From customer’s point of view, improvement in technology means improvement in the standard of living. In this regard, it is said that “Technologies shape a Person’s Life”.
Every new invention builds a new market and a new group of customers. A new technology improves our lifestyle and at the same time creates many problems. E.g.: Invention of various consumer comforts like washing machines, mixers, etc. have resulted in improving our lifestyle but it has created severe problems like power shortage.
5. Social and Cultural Factors: Most of us purchase because of the influence of social and cultural factors. The lifestyle, values, believes etc. is determined among other things by the society in which we live. Each society has its own culture. Culture is a combination of various factors which are transferred from older generations and which are acquired. Our behaviour is guided by our culture, family, educational institutions, languages, etc.
What is Marketing Mix? What are the factors affecting Marketing Mix? Discuss.
Ans: Marketing Mix: 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 four controllable variables which constitutes the company’s marketing system .the four controllable variables are:
- The product
- The price structure
- The promotional activities
- The distribution system
These elements are inter related and inter dependent since decisions in one area usually actions in other area.
Factors affecting Marketing Mix
The factors influencing marketing mix are classified into two. They are internal factors and external factors.
Internal Factors: There are certain factors which can be controlled by the marketing management. They are called internal factors. Some of them are given below:
a) Product Planning: A wise product policy is essential to meet the market demand. The plan includes introduction of products and modification of products to suit the demand and elimination of unprofitable lines.
b) Price: It deals with price competitions. A reasonable profit is aimed at by the offeror, and the price of the product is fixed to suit the market.
c) Branding: It must create a particular image in the minds of the consumers. Decision of the trade mark is important in developing the products.
d) Personal Selling: Personal selling is good to increase the sale and at the same time to know the consumer’s needs and desires.
e) Sales Promotion: The marketing manager makes out programmes to increase the sales through exhibitions, displays, advertising etc. The aim is to inform and persuade the customers to buy the company’s product.
f) Physical Distribution: It includes the channels and distribution, transportation, warehousing, inventory control etc. Distribution is the delivery of products at the right time and at the right place.
g) Market Research: Market research is a system by which one can analyse the market conditions. It helps a marketer in formulating the policies by which the product reaches in an efficient way in the hands of the consumers.
External Factors: External factors are also known as uncontrollable factors. These are the factors that are beyond the control of the marketing management. These include the following.
a) Consumer’s Buying Behaviour: Consumer’s buying behaviour is affected by buying habits, buying power, motivation in buying, living standard, social environment, technological changes etc.
b) Trader’s behaviour: The behaviour of intermediaries – wholesalers or retailers, and their motivations, practices; attitudes etc. affect the marketing of the products and its volume.
c) Competitor’s Behaviour: New business firms come up which invites competition among the industrialists. The competition may be of supply and demand of the product, choice offered by the consumers, technological changes, new invention etc. The marketing manager must be vigilant about the market trend.
d) Governmental Behaviour: The marketing manager should consider the rules and regulations of the Government in respect of products, pricing, competitive practices, advertising etc. Firms have no control over the laws.
What is Market Segmentation? What factors involved in 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.“
Factors involved in marketing 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 Factors: This is the most widely used basis for market segmentation. Market is classified on the basis of population, using ages, income, sex, etc. as indicators.
a) Age : It is known fact that people of different ages like different products, need different things, and behave differently. Almost all companies use this factor to reach the target market. On the basis of age, market in our country is divided into children’s market, teenager’s market, adult’s market, and the market for old people. Companies use the census data to prepare marketing strategies on the basis of age.
b) Sex: There is a variation of consumption behavior between males and females. This factor is used as a basis for segmentation for products like watches, clothes, cosmetics, leather goods, magazines, motor vehicle, etc.
c) Family Life Cycle: This is another important factor, which influences the consumer’s behavior. E.g.: Before making purchases, a bachelor may consult his friends, a boy may ask his parents and a married man asks his wife. The study of family life cycle helps a company to prepare an effective promotional strategy.
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 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.
a) 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.
b) 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.
c) 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 importance and types of Sales Forecasting in business management.
Ans: Full Notes available on our Mobile Application
6. What is Product life cycle? What are the different stages of Product life cycle? 10
Ans: 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).
Thus the Product life cycle deals with four stages of a products life.
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 sale 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 are the different types of distribution channels? Explain each of them with suitable example.
Ans: Full notes available on our mobile application
7. What is Pricing? Briefly explain the various pricing policies adopted by companies. 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.
There are several methods of pricing and they can be grouped into few broad categories:-
(1) Cost Based Pricing
(2) Demand Based Pricing
(3) Competition Oriented Pricing
(4) Value Pricing
(5) Product Line Oriented Pricing
(6) Tender Pricing
(7) Affordability Based Pricing
(8) Differentiated Pricing.
(1) Cost Based Pricing: Under the cost based pricing, different methods used are:-
- Mark Up Pricing
- Absorption Cost Pricing
- Target Rate of Return Pricing
- Marginal Cost Pricing
Mark Up Pricing: It refers to the pricing methods in which the selling price of the product is fixed by adding a margin to its cost price. The mark ups may vary depending on the nature of the product and the market. Usually, the higher the value of the product, the larger is the mark up.
Absorption Cost Pricing: ACP rests on the estimated unit cost of the product at the normal level of production and sales. The method uses standard costing techniques and works out the variable and fixed costs involved in manufacturing, selling and administering the product. By adding the costs of operations, we get the total costs. The selling price of the product is arrived by adding the required margin towards profit to such total costs.
Target Rate of Return Pricing: It is similar to absorption cost pricing. The rate of return pricing uses a rational approach to arrive at the mark up. It is arrived in such a way that the ROI criteria of the firm are met in the process. But this process amounts to an improvement over absorption costing since it uses a rational basis for arriving at the mark up.
Marginal Cost Pricing: It aims at maximizing the contribution towards fixed costs. Marginal costs include all the direct variable costs of the product. In marginal cost pricing, these direct variable costs are fully realized. In addition, a portion of the fixed costs is also realized under competitive market conditions marginal cost pricing is more useful.
(2) Demand Based Pricing: The following methods belong to the category of demand / market based pricing:-
- What the Traffic can Bear’ Pricing
- Skimming Pricing
- Penetration Pricing
What the Traffic can Bear’ Pricing: The seller takes the maximum price that the customers are willing to pay for the product under the given circumstances. This method is used more by retail traders than by manufacturing firms. This method brings high profits in the short term. But in the long run it is not a safe concept; chances of errors in judgment are very high.
Skimming Pricing: This method aims at high price and high profits in the early stage of marketing the product. It profitably taps the opportunity for selling at high prices to those segments of the market, which do not bother much about the price. This method is very useful in the pricing of new products, especially those that have a luxury or specialty elements.
Penetration Pricing: Penetration pricing seeks to achieve greater market penetration through relatively low price. This method is also useful in pricing of new products under certain circumstances. For e.g. when the new product is capable of bringing in large volume of sales, but it is not a luxury item and there is no affluent / price insensitive segment, the firm can choose the penetration pricing and make large size sales at a reasonable price before competitors enter the market with a similar product. Penetration pricing in such cases will help the firm have a good coverage of the market and keep competition out for some time.
In all demand based pricing methods, the price elasticity of demand is taken into account directly or indirectly.
(3) Competition Oriented Pricing: In a competitive economy, competitive oriented pricing methods are common. The methods in this category rest on the principle of competitive parity in the matter of pricing. Three policy options are available to the firm under this pricing method:
- Premium Pricing
- Discount Pricing
- Parity Pricing
Premium pricing means pricing above the level adopted by competitors. Discount pricing means pricing below such level and parity pricing means matching competitors pricing.
(4) Value Pricing: Value pricing is a modern innovative and distinctive method of pricing. Value pricing rests on the premise that the purpose of pricing is not to recover costs, but to capture the value of the product perceived by the customer. Analysis will readily show that the following scenarios are possible with the cost value price chain:
- Value > Price > Costs
- Price > Value > Costs
- Price > Costs > Value
- Price > Value > Costs
(5) Product Line Pricing: When a firm markets a variety of products grouped into suitable product lines, a special possibility in pricing arises. As the product in a given product line are related to each other, sales of one influence that of the others. They also have interrelated costs of manufacturing and distribution. It can fix the prices of the different product in such a manner that the product line as a whole is priced optimally, resulting in optimal sales of all the products put together and optimal total profits from the line.
(6) Tender Pricing: Business firms are often required to fix the prices of their products on a tender basis. It is more applicable to industrial products and products purchased by Institutional customers. Such customers usually go by competitive bidding through sealed tenders. They seek the best price consistent with the minimum quality specification and thus bag the order.
(7) Affordability Based Pricing: The affordability based pricing is relevant in respect of essential commodities, which meet the basic needs of all sections of people. Idea here is to set prices in such a way that all sections of the population are in a position to buy and consume the products to the required extent.
(8) Differentiated pricing: Some firms charge different prices for the same product in different zones/ areas of the market. Sometimes, the differentiation in pricing is made on the basis of customer class rather than marketing territory.
What is Sales promotion? Discuss objectives and importance of sales promotion. Distinguish between personal selling and advertisement.
Ans: 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.
Objectives of Sales promotion
1. To introduce new products or services: Sales promotion is often used to motivate prospective consumers to try new products and services. Dealers are also induced to introduce new products and services in the market. Usually, free samples are provided through dealers during such introduction. Similarly, discounts in cash or goods may also be offered to dealers to stock new products or deal with new services. Free samples, trade discounts, cash discounts are basically sales promotion measures.
2. To attract new customers: Sales promotion measures also play an important role in attracting new customers for an organisation. Usually, new customers are those persons that are won away from other firms. Samples, gifts, prizes, etc. are used to encourage consumers to try a new brand or shift their patronage to new dealers.
3. To induce existing customers to buy more: Sales promotion devices are most often used to induce the existing customers of a firm to buy more. Product development, offering three products at the cost of two, discount coupons, are some of the sales promotion devices used by firms to motivate the existing buyers to buy more of a specific product.
4. Helps the firm to remain competitive: Most of the companies undertake sales promotion activities in order to remain in the competitive market. Therefore, in the modern competitive world no firm can escape the responsibility of undertaking sales promotion activities.
5. To increase sales in off-seasons: Many products like air-coolers, fans, refrigerators, air-conditioners, cold drinks, room heaters, etc. have seasonal demand. Manufacturers and dealers dealing with such type of goods make every effort to maintain a stable demand throughout the year.
In other words, firms try to encourage the purchase of such goods in off-seasons also. That is the main reason behind discounts and off-season price reductions of such items in the market during slack seasons.
6. To add to the stock of the dealers: Dealers like wholesalers and retailers usually deal with a variety of goods. Their selling activity becomes easier when the manufacturer supplements their efforts by sales promotion measures. When a product or service is well supported by sales promotion, dealers are automatically induced to have more of such items.
Importance of sales promotion:
1. Attention values: The incentives offered in sales promotion attract attention of the people.
2. Useful in new product launch: The sales promotion techniques are very helpful in introducing the new product as it induces people to try new products.
3. Synergy in total promotion efforts: Sales promotion activities supplement advertising and personal selling efforts of the company.
4. Aid to other promotion tools: Sales promotion technique make other promotion techniques more effective. Salesmen find it easy to sell products on which incentives are available.
Differentiate between advertising and personal selling
|Form||These are Personal.||These are impersonal.|
|Message||These are uniformity of message which means that the message is the same for the entire customer.||This message has no uniformity which means it can be changed keeping in view the behavior of the customer.|
|Flexibility||It lacks flexibility.||It is completely flexible.|
|Cost||It is relatively less costly method.||These are a most costly method.|
|Time||It takes a little time in conveying any information to the customer.||It takes more time in conveying any information to the customer.|
|Media||TV, radio, newspaper & magazine.||Through salesman.|
|Feedback||This gives no information about the reaction of the customer.||The reaction of the customer becomes immediately affect.|