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MGT301 – Principles of Marketing

Principle of Marketing, the total number of activities is the transfer of goods from the Publisher and Seller to consume or buyer, including advertising, selling and shipping. In MGT301 Principles of Marketing we have you covered with Digitized Past Papers From Fall of Mid Term and Final Term.

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POSTED DATE:04-02-2019                    GDB IDEA SOLUTION

Unilever used the branding strategy of   Multibrands  to introduce  Rin in market.

  1. Unilever will cover more shelf space in market.
  2. As ‘Rin’ is of low price than ‘Surf Excel’ so by this move unilever can target people of low income.
  3. It allows unilever to protect its major brand by creating a fighter brand.
  4. A consumer gets large range of options to choose.
  5. A company can enjoy economies of scale because key ingredients/raw material is almost same.
Lesson – 23
New-product development
The development of original products, product improvements, product
modifications, and new brands through the firm’s own R&D efforts.
Idea generation
The systematic search for new-product ideas.
Idea screening
Screening new-product ideas in order to spot good ideas and drop poor  ones as soon as possible.
Product concept
A detailed version of the new-product idea stated in meaningful consumer  terms.
Concept testing
Testing new-product concepts with a group of target consumers to find out if the
concepts have strong consumer appeal.
Business analysis
A review of the sales, costs, and profit projections for a new product to find out
whether these factors satisfy the company’s objectives.
Product development
A strategy for company growth by offering modified or new products to current
market segments.
Introducing a new product into the market.
Test marketing
The stage of new-product development in which the product and marketing program
are tested in more realistic market settings.
Sequential product development
A new-product development approach in which one company department works to
complete its stage of the process before passing the new product along to
the next department and stage.
Introduction stage
The product life-cycle stage in which the new product is first distributed and made
available for purchase.
Growth stage
The product life-cycle stage in which a product’s sales start climbing quickly.
Maturity stage
The stage in the product life cycle in which sales growth slows or levels off.
Decline stage
The product life-cycle stage in which a product’s sales decline.
Innovators help get the product exposure but are not often perceived by the majority
of potential buyers as typical consumers.
Early Adopters
This group serves as opinion leaders to the rest of the market.
This group is suspicious of change and adopts only after the product is no longer
considered an innovation.
Early Majority
Some 34%  of the market that is the “typical consumer” but likely to adopt
innovations a little sooner.
Late Majority
This group is skeptical and adopts innovations only after cost of the market has
accepted the product.
Core product
Is the core, problem solving benefits that consumers are really buying when they
obtain a product or service.
Actual product
May have as many as five characteristics that combine to deliver core product
Augmented product
Includes any additional consumer services and benefits built round the core and
actual products.
 LESSON  – 24
Price the 2nd P of Marketing M ix.

  1. Introduction

All profit and  nonprofit  organizations must set prices  on their products and services.
Price  goes  by  many  names  (rent,  tuition,  fee,  fare,  rate,  interest,  toll,  premium,  et
cetera).  Price is the  amount  of money  charged for  a  product or service or the sum of
the values  that  consumers  exchange  for  the  benefits  of  having  or  using  the  product
or service. Com m on mistakes that Companies make are:

  1. Pricing is too cost-oriented.
  2. Prices are not revised often enough to reflect market changes.
  3. Prices do not take into account the other elements of the marketing mix.
  4.  Prices  are  not  varied  for  different  products,  market  segments,  and

purchase occasions.

  1. Factors to Consider W hen Setting Prices

A  company’s  racing  decisions  are  affected  by  both  internal  company  factors  and
external environmental factors

  1. a) IN TERN AL FACTORS Affecting Pricing Decision

Internal factors affecting  pricing include the company’s marketing objectives,
marketing mix strategy, costs, and organizational considerations.

  1. Marketing Objectives

Before  setting price, the company must decide on its  strategy  for the
product.  If  the  company  has  selected  its  target  market  and
positioning  carefully,  then its marketing mix strategy, including price,
will be fairly straightforward.

  1. Costs

Costs  set the  floor  for  the  price  that  the  company can  charge for its
product. The company  wants to  charge a price that both  covers all its
costs  for producing,  distributing,  and selling the product and de livers
a fair rate of return for its effort and risk.

  • Types of Costs

A  company’s  costs  take  two  forms,  fixed  and  variable.  Fixed
costs  (also  known  as  overhead)  are  costs  that  do  not  vary
with production or sales level.

  • Costs at Different Levels of Production

To  price  wisely,  management  needs  to  know  how  its  costs
var y with different levels of production.
III. Organizational Considerations
Management  must  decide  who  within  the  organization  should  set

  1. b) EXTERNAL FACTORS Affecting Pricing  Decisions

External factors that affect pricing decisions  include the nature  of the market
and demand, competition, and other environmental elements.

  1. The Market and Dem and

Whereas  costs  set  the  lower  limit  of  prices,  the  market  and  demand
set the upper limit.

  • Pricing in Different Types of Markets

The  seller’s  pricing  freedom  varies  with  different  types  of
markets.  Economists  recognize  four  types  of  markets,  each
presenting a different pricing challenge.

  • Consumer Perceptions of Price and Value

In  the  end,  the  consumer  will  decide  whether  a  product’s
price  is  right.  Pricing  decisions,  like  other  marketing  mix
decisions, must be buyer oriented.

  • Analyzing the Price–Demand Relationship

Each  price  the  company  might  charge  will  lead  to  a  different
level  of  demand.  The  relationship  between  the  price  charged
and the resulting  demand level  is shown  in  the  demand curve
in Figure.
The  price  elasticity  of  demand  is  given  by  the  following
Price  Elasticity  of  Dem and=  % change  in  Quantity
demanded / %  change in Price

  1. Competitors’ Costs, Prices, and Offers

Another  external  factor  affecting  the  company’s  pricing  decisions  is
competitors’  costs  and  prices  and  possible  competitor  reactions  to
the company’s own  pricing moves. W hen  setting prices,  the  company
also must consider  other factors in its external environment.
 Lesson – 25

  1. Setting Pricing Policy

Pricing policy setting starts with setting the pricing objective that can be: Profit
Oriented(concerned with increase in profit), Sales Oriented (basically concerned with
increase in sales) and Status Quo Oriented.

  1. General Pricing Approaches

The price the company charges will be somewhere between one that is too low to
produce a profit and one that is too high to produce any demand.
Break-even point
Companies set prices by selecting a general pricing approach that includes one or
more of three sets of factors. W e examine these approaches: the cost-based approach
(cost-plus pricing, break-even analysis, and target profit pricing); the buyer-based
approach (value-based pricing);and the competition-based approach (going-rate and sealed-
bid pricing).

  1. a)  Cost-Based Pricing

Cost-Plus Pricing
The simplest pricing method is cost-plus pricing—adding a standard markup to the
cost of the product.
Then the manufacturer’s cost per toaster is given by:
Unit Cost = variable Cost + Fixed Cost
Price – Variable Cost
The manufacturer’s markup price is given by:
Markup Price = Unit Cost
Price – Variable Cost
The manufacturer should consider different prices and estimate break-even volumes,
probable demand, and profits for each.

  1. b) Value-Based Pricing

An increasing number of companies are basing their prices on the product’s
perceived value. Value-based pricing uses buyers’ perceptions of value, not the
seller’s cost, as the key to pricing.

  1. c) Com petition-Based Pricing

Consumers will base their judgments of a product’s value on the prices that
competitors charge for similar products.

  1. New-Product Pricing Strategies

Pricing strategies usually change as the product passes through its life cycle. The
introductory stage is especially challenging. Companies bringing out a new product
face the challenge of setting prices for the first time. They can choose between two
broad strategies: market-skimming pricing and market-penetration pricing.

  1. a) Market-Skim m ing Pricing

M any companies that invent new products initially set high prices to “skim” revenues
layer by layer from the market. Intel is a prime user of this strategy, called     market-
skimming pricing .

  1. b) Market-Penetration Pricing

Rather than setting a high initial price to skim off small but profitable market
segments, some companies use  market-penetration pricing . They set a low initial
price in order to penetrate the market quickly and deeply—to attract a large number of
buyers quickly and win a large market share.

  1. Product M ix Pricing Strategies

The strategy for setting a product’s price often has to be changed when the product
is part of product mix. In this case, the firm looks for a set of prices that maximizes
the profits on the total product mix.

  1. a) Product Line Pricing

Companies usually develop product lines rather than single products. In product line
pricing, management must decide on the price steps to set between the various
products in a line.

  1. b) Optional-Product Pricing

M any companies use optional-product pricing—offering to sell optional or accessory
products along with their main product.

  1. c) Captive-Product Pricing

Companies that make products that must be used along with a main product are
using captive-product pricing.

  1. d) By-Product Pricing

In producing processed meats, petroleum products, chemicals, and other products, there are
often by-products. If the by-products have no value and if getting rid of them is costly, this
will affect the pricing of the main product.

  1. e) Product Bundle Pricing

Using product bundle pricing, sellers often combine several of their products and offer the
bundle at a reduced price.
 Lesson – 26

  1. Price-Adjustment Strategies

Companies usually adjust their basic prices to account for various customer differences and
changing situations.

  1.  Discount and Allowance Pricing

Most companies adjust their basic price to reward customers for certain responses, such
as early payment of bills, volume purchases, and off-season buying. These price
adjustments—called discounts and allowances.
A cash discount is a price reduction to buyers who pay their bills promptly.
A functional discount (also called a trade discount) is offered by the seller to trade
channel members who perform certain functions, such as selling, storing, and record
seasonal discount is a price reduction to buyers who buy merchandise or services out
of season.
Allowances are another type of reduction from the list price.

  1. Segmented Pricing

Companies will often adjust their basic prices to allow for differences in customers,
products, and locations. In segmented pricing, the company sells a product or service
at two or more prices, even though the difference in prices is not based on
differences in costs.

  1. Psychological Pricing

Price says something about the product.

  1. Promotional pricing

Companies will temporarily price their products below list price and sometimes even
below cost.

  1. Geographical Pricing

A company also must decide how to pr ice its products for customers located in
different parts of the country or world.

  1. International Pricing

Companies that market their products internationally must decide what prices to charge in
the different countries in which they operate.
Lesson – 27

  1. Price Changes

After developing their pricing structures and strategies, companies often face
situations in which they must initiate price changes or respond to price changes by

  1. Initiating Price Changes

In some cases, the company may find it desirable to initiate either a price cut
or a price increase. In both cases, it must anticipate possible buyer and
competitor reactions.

  1. Initiating Price Cuts

Several situations may lead a firm to consider cutting its price. One of
the such
circumstance is excess capacity.

  1. Initiating Price Increases

A successful price increase can greatly increase profits.

  1. Buyer Reactions to Price Changes

Whether the price is raised or lowered, the action  will affect buyers,
competitors, distributors, and suppliers and may interest government as well.

  1. Competitor Reactions to Price Changes

A firm considering a price change has to worry about the reactions of its
competitors as well as its customers. Competitors are most likely to react
when the number of firms involved is small, when the product is uniform,
and when the buyers are well informed.

  1. Responding to Price Changes

The firm needs to consider several issues: W hy did the competitor change the
price? W as it to take more market share, to use excess capacity, to meet changing
cost conditions, or to lead an industry wide price change? Is the price change
temporary or permanent?
 Lesson – 28

  1. Marketing Channel

A set of interdependent organizations involved in the process of making a product
or service available for  use or consumption by the consumer or business user.

  1. Why Are Marketing Intermediaries Used?

The use of intermediaries results from their greater efficiency in making goods
available to target markets. Through their contacts, experience, specialization, and
scale of operation, intermediaries usually offer the firm more than it can achieve on
its own.

  1. D istribution Channel Functions

The distribution channel moves goods and services from producers to consumers. It
overcomes the major time, place, and possession gaps that separate goods and
services from those who would use them. M embers of the marketing channel
perform many key functions:
Information:  •
Promotion:   •
Contact:  •
Matching:   •
Negotiation:  •
Physical distribution:  •
Financing:   •
Risk taking:   •

  1. N um ber of Channel Levels

Distribution channels can be described by the number of channel levels involved.

  1. Channel Behavior and  Organization

Distribution channels are more than simple collections of firms tied together by
var ious flows. They are complex behavioral systems in which people and companies
interact to accomplish individual, company, and channel goals.

  1. Vertical Marketing System s

Historically, distribution channels have been loose collections of independent
companies, each showing little concern for overall channel performance.
The VM S can be dominated by the producer, wholesaler, or retailer. Vertical marketing
systems came into being to control channel behavior and manage channel conflict.

  1. Corporate VMS

A corporate VMS combines successive stages of production and distribution under
single ownership.

  1. Contractual VMS

A contractual VMS consists of independent firms at different levels of production
and distribution who joins together through contracts to obtain more economies or
sales impact than each could achieve alone.

  1. Adminiterested VMS

An administered VM S coordinates successive stages of production and distribution,
not through common ownership or contractual ties but through the size and power
of one of the parties.

  1. Horizontal Marketing System s

The horizontal marketing system, in which two or more companies at one level join
together to follow a new marketing opportunity.
H . Hybrid Marketing System s
In the past, many companies used a single channel to sell to a single market or
market segment.
Hybrid Marketing Channel
Hybrid channels offer many advantages to companies facing large and complex

  1. Channel Design Decisions

W e now look at several channel decisions manufacturers face. In designing
marketing channels, manufacturers struggle between what is ideal and what is

  1. Analyzing Consumer Service Needs

Designing the distribution channel starts with finding out what targeted consumers
want from the channel.

  1. Setting Channel Objectives and Constraints

Channel objectives should be stated in terms of the desired service level of target
Usually, a company can identify several segments wanting different levels of channel

  1. Identifying Major Alternatives

W hen the company has defined its channel objectives, it should next identify its
major channel alternatives in terms of types of intermediaries, the number of
intermediaries, and the responsibilities of each channel member.

  1. Types of Intermediaries

A firm should identify the types of channel members available to carry out its
channel work.

  1. N umber of Marketing Intermediaries

Companies must also determine the number of channel members to use at each
level. Three strategies are available: intensive distribution, exclusive distribution, and
selective distribution.

  1. Channel Management Decisions

Channel management calls for selecting and motivating individual channel members
and evaluating their performance overtime.

  1. Selecting Channel Members

Producers vary in their ability to attract qualified marketing intermediaries.
Some producers have no trouble signing up channel members.

  1. Motivating Channel M embers

Once selected, channel members must be motivated continuously to do their
best. The company must sell not only through the intermediaries but to them.

  1. Evaluating Channel M embers

The producer must regularly check the channel member’s performance
against standards
Changing Channel Organization
Changes in technology and the explosive growth of direct and online marketing are
having a profound impact on the nature and design of marketing channels.
 Lesson – 29

  1. Push Versus Pull Strategy:

A promotion strategy that calls for using the sales force and trade promotion to push
the Product through the channel is called push strategy.

  1. Physical Distribution and Logistics Management

Companies must decide on the best way to store, handle, and move their products
and services so that they are available to customers in the right assortments, at the
right time, and in the right place.

  1. Nature and Importance of Physical Distribution and Marketing Logistics

To some managers, physical distribution means only trucks and warehouses. But
modern logistics is much more than this. Physical distribution—or marketing
logistics—involves planning, implementing, and controlling the physical flow of
materials, final goods, and related information fr om points of origin to points of
consumption to meet customer requirements at a profit.

  1. Goals of the Logistics System

Some companies state their logistics objective as providing maximum customer
service at the least cost. Unfortunately, no logistics system can both maximize
customer service and minimize distribution costs. Maximum customer service implies
rapid delivery, large inventories, flexible assortments, liberal returns policies, and
other services.

  1. Major Logistics Functions

Given a set of logistics objectives, the company is ready to design a logistics system
that will minimize the cost of attaining these objectives. The major logistics functions
include order processing, warehousing, inventory management, and transportation.

  1. Order Processing

Orders can be submitted in many ways—by mail or  telephone, through
salespeople, or via computer and EDI. In some cases, the suppliers might
actually generate orders for their customers.

  1. Warehousing

Every company must store its goods while they wait to be sold. A storage
function is needed because production and consumption cycles rarely match.
A company must decide on how many and what types of warehouses it needs
and where they will be located.
iii. Inventory
Inventory levels also affect customer  satisfaction. The major problem is to
maintain the delicate balance between carrying too much inventor y and
carrying too little. Carrying too much inventory results in higher-than-
necessary inventory-carrying costs and stock obsolescence.

  1. Transportation

Marketers need to take an interest in their company’s transportation decisions.
The choice of transportation carriers affects the pricing of products, delivery
performance, and condition of the goods when they arrive

  1. Integrated Logistics M anagement

Today, more and more companies are adopting the concept of integrated logistics
Management. This concept recognizes that providing better customer service and
trimming distribution costs requires teamwork, both inside the company and among
all the marketing channel organizations.
Cross-Functional Team work Inside the Company
In most companies, responsibility for various logistics activities is assigned to many
different functional units—marketing, sales, finance, manufacturing, purchasing.

  1. Building Channel Partnerships

The members of a distribution channel are linked closely in delivering customer
satisfaction and value. One company’s distribution system is another company’s
supply system.

  1. Third-Party Logistics

Companies may use third-party logistics providers for several reasons. First, because
getting the product to market is their main focus, these providers can often do it
more efficiently and at lower cost than clients whose strengths lie elsewhere.
 Lesson – 30

  1. Retailing

Retailing includes all the activities involved in selling goods or services
directly to final consumers for their  personal, no business use.

  1. Types of Retailers:

Retail stores come in all shapes and sizes, and new retail types keep
emerging.. They can be classified in terms of sever al characteristics, including
the amount of service they offer, the breadth and depth of their product lines, the
relative prices they charge, and how they are organized.
Am ount of Service
Different products require different amounts of service, and customer service
preferences vary. Retailers may offer one of three levels of service—self-service,
limited service, and full service.Self-service retailers serve customers who are willing to
perform their own “locate-compare select “process to save money.
Product Line
Retailers also can be classified by the length and breadth of their product
assortments. Some retailers, such as specialty stores, carry narrow product lines with
deep assortments within those lines.
Convenience stores
Convenience stores are small stores that carry a limited line of high-turnover
convenience goods.
Relative Prices
Retailers can also be classified according to the prices they charge.
Discount Stores:
A discount store sells standard merchandise at lower prices by accepting lower
margins and selling higher volume.
Off-Price Retailers
W hen the major discount stores traded up, a new wave of off-price retailers moved
in to fill the low-price, high-volume gap.
Independent off-price retailers
Independent off-price retailers are either owned and run by entrepreneurs or are
divisions of larger retail corporations.
Factory outlets
sometimes group together in factory outlet malls and value-retail centers, where dozens of
outlet stores offer prices as low as 50 percent below retail on a wide range of items.
Warehouse clubs (or wholesale clubs, or membership warehouses)
Warehouse clubs operate in huge, drafty, warehouse like facilities and offer  few frills.

  1. Retailer Marketing Decisions

Retailers are searching for new marketing strategies to attract and hold customers.

  1. Target Market and Positioning Decision

Retailers first must define their target markets and then decide how they  will
position themselves in these markets.

  1. Product Assortment and Services Decision

Retailers must decide on three major product variables: product assortment, services mix,
and store atmosphere.
iii. Price Decision
A retailer’s price policy is a crucial positioning factor and must be decided in  relation
to its target market, its product and service assortment, and its competition.

  1. Promotion Decision

Retailers use the normal promotion tools—advertising, personal selling, sales
promotion, public relations, and direct marketing—to reach consumer s.

  1. Place Decision

Retailers often cite three critical factors in retailing success: location, location, and
location! A retailer’s location is key to its ability to attract customers.

  1. Site Selection for Retail Location

Site selection is an important decision for retailers planning to open new stores.

  1. The Future of Retailing

Retailers operate in a harsh and fast-changing environment, which offers threats as
well as opportunities.
N ew Retail Form s and Shortening Retail Life Cycles
New retail forms continue to emerge to meet new situations and consumer needs, but the
life cycle of new retail forms is getting shorter.

  • Growth of N o store Retailing

Although most retailing still takes place the old-fashioned way across counter tops in
stores, consumers now have an array of alternatives, including mail order, television,
phone, and online shopping. ”

  • Increasing Inter type Com petition

Today’s retailers increasingly face competition from many different forms of

  • The Rise of Mega retailers

The rise of huge mass merchandisers and specialty superstores, the formation of
vertical marketing systems and buying alliances, and a rash of retail mergers and
acquisitions have created a core of superpower mega retailers.

  • Growing Importance of Retail Technology

Retail technologies are becoming critically important as competitive tools.

  1. Wholesaling

Wholesaling includes all activities involved in selling goods and services to those
buying for resale or business use. W e call wholesalers those firms engaged primarily in
wholesaling activity.

  1. Types of Wholesalers

Wholesalers fall into three major groups : merchant wholesalers, brokers and agents, and
manufacturers’ sales branches and offices.

  1. Merchant wholesalers

Independently owned businesses that take title to the merchandise they handle.

  • Full-service wholesalers

Provide a full line of services: carrying stock, maintaining a sales force, offering
credit, making deliveries, and providing management assistance. There are two types:
Wholesale merchants:
Wholesale merchants Sell primarily to retailers and provide a full range of services.
General-merchandise wholesalers carry several merchandise lines, whereas general-line
wholesalers carry one or two lines in greater depth.
Industrial distributors:
Industrial distributors Sell to manufacturers rather than to retailers. Provide several
services, such as carrying stock, offering credit, and providing delivery. May carry a
broad range of merchandise, a general line, or a specialty line.

  • Limited-service wholesalers:

Offer fewer services than full-service wholesalers. Limited-service wholesalers are of
several types:
Cash-and-carry wholesalers: Carry a limited line of fast-moving goods and sell to small
retailers for cash.
Truck wholesalers (or truck jobbers): Perform primarily a selling and delivery function.
Carr y a limited line of semi perishable merchandise
(such as milk, bread, snack foods), which they sell for
cash as they make their rounds to supermarkets, small
groceries, hospitals,restaurants, factory cafeterias, and
Drop shippers: Do not carry inventory or handle the product. On receiving an order, they
select a manufacturer, who ships the merchandise  directly to the customer.
Rack jobbers: Serve grocery and drug retailers, mostly in nonfood items.
Producers’ cooperatives :Owned by farmer  members and assemble farm produce to sell in
local markets.
M ail-order wholesalers: Send catalogs to retail, industrial, and institutional customers
featuring jewelry, cosmetics, specialty foods, and other small items.

  1. Brokers and agents

Do not take title to goods. Main function is to facilitate buying and selling, for  which
they earn a commission on the selling price. Generally, specialize by product line or
customer types.

  • Brokers:

Chief function is bringing buyers and sellers together and assisting in negotiation.

  • Agents:

Represent either buyers or sellers on a more permanent basis than brokers do. There
are several types:
Manufacturers’ agents: Represent two or more manufacturers of complementary lines. A
formal written agreement with each manufacturer covers pricing,
territories, order handling, delivery service and warranties, and
commission rates.
Selling agents: Have contractual authority to sell a manufacturer’s entire output. The
Manufacturer either is not interested in the selling function or feels
Purchasing agents: Generally has a long-term relationship with buyers and make
Purchases for them, often receiving, inspecting, warehousing, and
shipping the merchandise to the buyers.
Commission merchants: Take physical possession of products and negotiate sales.
iii. Manufacturers’ and retailers’ branches and offices
Wholesaling operations conducted by sellers or buyers themselves rather than
through independent wholesalers.
Sales branches and offices: Set up by manufacturers to improve inventory control, selling,
and promotion.
Purchasing offices: Perform a role similar to that of brokers or agents but are part of the
buyer’s organization.

  1. Wholesaler Marketing Decisions

Wholesalers have experienced mounting competitive pressures in recent years.

  1. Target Market and Positioning Decision

Like retailers, wholesalers must define their  target markets and position themselves
effectively—they cannot serve everyone.

  1. Marketing M ix Decisions

Like retailers, wholesalers must decide on product assortment and services, prices,
promotion, and place. The wholesaler’s “product” is the assortment of products and
services that it offers.
Lesson œ 31
Distribution channel
A set of interdependent organizations involved in the process of making a product
or service available for  use or consumption by the consumer or business user.
Channel level
A layer of intermediaries that performs some work in bringing the product and its
ownership closer to the final buyer.
Direct marketing channel
A marketing channel that has no intermediary levels.
Indirect marketing channel
Containing one or more intermediary levels.
Channel conflict
Disagreement among marketing channel members on goals and roles—who should
do what and for what rewards.
Conventional distribution channel
A channel consisting of one or more independent producers, wholesalers, and
retailers, each a separate business seeking to maximize its own profits even at the
expense of profits for the system as a whole.
Vertical marketing system (VMS)
A distribution channel structure in which producers, wholesales, and retailers act as a
unified system.
Corporate VMS
A vertical marketing system that combines successive stages of production and
distribution under single ownership—channel leadership is established through
common ownership.
Contractual VMS
A vertical marketing system in which independent firms at different levels of
production and distribution join together through contracts to obtain more
economies or sales impact than they could achieve alone.
Franchise organization
A contractual vertical marketing system in which a channel member, called a
franchiser, links several stages in the production-distribution process.
Administered VM S
A vertical marketing system that coordinates successive stages of production and
distribution, not through common ownership or contractual ties but through the size
and power of one of the parties.
Horizontal marketing system
A channel arrangement in which two or more companies at one level join together to
follow a new marketing opportunity.
Hybrid marketing channel
M ulti-channel distribution system in which a single firm sets up two or more
marketing channels to reach one or more customer segments.
Intensive distribution
Stocking the product in as many outlets as possible.
exclusive distribution
Giving a limited number of dealers the exclusive right to distribute the company’s
products in their territories.
Selective distribution
The use of more than one, but fewer than all, of the intermediaries who are willing to
carry the company’s products.
Physical distribution/marketing logistics
The tasks involved in planning, implementing, and controlling the physical flow of
materials, final goods, and related information fr om points of origin to points of
consumption to meet customer requirements at a profit.
Distribution center
A large, highly automated warehouse designed to receive goods from various plants
and suppliers, take orders, fill them efficiently, and deliver goods to customers as
quickly as possible.
Integrated logistics management
The logistics concept that emphasizes teamwork, both inside the company and
among all the marketing channel organizations, to  maximize the performance of the
entire distribution system.
Third-party logistics provider
An independent logistics provider that performs any or all of the functions required
to get their clients’ product to market.
Retailing includes all the activities involved in selling goods or services directly to
final consumers for their personal, no business use.
W holesaling
W holesaling includes all activities involved in selling goods and ser vices to those
buying for resale or business use.
Lesson œ 32

  1. The M arketing Communications

M odern marketing calls for more than just developing a good product, pricing it
attractively, and making it available to target customers. Companies must also
communicate with current and prospective customers, and what they communicate
should not be left to chance.

  1. The M arketing Communications M ix.

A company’s total marketing communications mix—also called its promotion mix
consists of the specific blend of advertising, personal selling, sales promotion, public
relations, and direct marketing tools that the company uses to pursue its advertising
and marketing objectives.

  1. Integrated M arketing Communications

During the past several decades, companies around the world have perfected the art
of mass marketing—selling highly standardized products to masses of customers. In
the process, they have de veloped effective mass-media advertising techniques to
support their mass-marketing strategies.

  1. The Changing Communications Environment

Two major factors are changing the face of today’s marketing communications.
First, as mass markets have fragmented, marketers are shifting away from mass
marketing. Second, vast improvements in information technology are speeding the
movement toward segmented marketing.

  1. The Need for Integrated M arketing Communications

The shift from mass marketing to targeted marketing, and the corresponding use of a
richer mixture of communication channels and promotion tools, poses a problem for

  1. A View of the Communication Process

Integrated marketing communications involves identifying the target audience and
shaping a well coordinated promotional program to elicit the desired audience

  1. Steps in Developing Effective Communication

The marketing communicator must do the following:

  •  Identify the target audience;
  •  determine the communication objectives;
  •  design a message;
  •  choose the media through which to send the message;
  •  select the message source; and collect feedback.


  1. Setting the Total Promotion Budget

One of the hardest marketing decisions facing a company is how much to spend on
promotion. How does a company decide on its promotion budget?

  1. Affordable M ethod

Some companies use the affordable method: They set the promotion
budget at the level they think the company can afford. Small businesses often
use this method, reasoning that the company cannot spend more on
advertising than it has.

  1. Percentage-of-Sales M ethod

Other companies use the percentage-of-sales method, setting their
promotion budget at a certain percentage of current or forecasted sales.

  1. Competitive-Parity M ethod

Still other companies use the competitive-parity method, setting their
promotion budgets to match competitors’ outlays.

  1. Objective-and-Task M ethod

The most logical budget-setting method is the objective-and-task method,
whereby the company sets its promotion budget based on what it wants to
accomplish with promotion.

  1. Setting the Overall Promotion M ix

he company now must divide the total pr omotion budget among the major
promotion tools—adver tising, personal selling, sales promotion, public relations, and
direct marketing.

  1. The Nature of Each Promotion Tool

Each promotion tool has unique characteristics and  costs. M arketers must
understand these characteristics in selecting their tools.

  •  Advertising
  •  Personal Selling
  •  Sales Promotion
  •  Public Relations
  •  Direct M arketing
  1. Promotion M ix Strategies

M arketers can choose from two basic promotion mix strategies—push promotion or
pull promotion. A push strategy involves “pushing” the product through
distribution channels to final consumers. Using a pull strategy, the producer directs
its marketing activities (primarily advertising and consumer promotion) toward
final consumers to induce them to buy the product.
Lesson œ 33


Any paid form of non-personal presentation and promotion of ideas, goods, or
services by an identified sponsor is termed as advertising.

  1. The Five M ‘s of Advertising

The five M ’s are basically the different important decisions that are to be taken while
designing the advertising campaign. The five M ’s of advertising are:

  •  M ission
  •  M oney
  •  M essage
  •  M edia
  •  M easurement
  1. Advertising decisions

M arketing management must take five important decisions when developing an
advertising program:

  1. Setting advertising objectives.
  2. Setting advertising budgets.
  3. Developing advertising strategy.v

o a). M essage decisions.
o b). M edia decisions.

  1. Evaluating advertising campaigns.
  2. Setting Advertising Objectives

Setting advertising objectives is the first step in developing an advertising program.
Advertising objectives can be classified by primary purpose as:
1). Informative advertising, which is used to inform consumers about a
new product or feature or to build primary demand.
2). Persuasive advertising which is used to build selective demand for a
brand by persuading consumers that it offers the best quality for their
3). Comparison advertising which is advertising that compares one brand
directly or indirectly to one or more other brands.
4). Reminder advertising, which is used to keep consumers thinking about
a product. This form of advertising is more important for mature products.

  1. Setting the Advertising Budget

After determining its adver tising objectives, the marketer must set the advertising
budget for each product and market.

  1. Developing Advertising Strategy

Advertising str ategy consists of two major elements:

  1. a) Creating advertising messages
  2. b) Selecting advertising media.

Lesson œ 34

  1. b) Selecting advertising media.

The major steps in media selection are:

  1. Deciding on reach, frequency, and impact;
  2. Choosing among major media types;

iii. Selecting specific media vehicles;

  1. Deciding on media timing.
  2. Deciding on Reach, Frequency, and Impact

To select media, the advertiser must decide what reach and frequency are needed to
achieve advertising objectives. Reach is a measure of the percentage of people in the
target market who are exposed to the ad campaign during a given period of time.

  1. Choosing Among M ajor M edia Types

The media planner has to know the reach, frequency, and impact of each of the
major media types. The major media types are newspapers, television, direct mail,
radio, magazines, outdoor, and the Internet. Each medium has advantages and
III. Selecting Specific M edia Vehicles
The media planner now must choose the best media vehicles—specific media within
each general media type.

  1. Deciding on M edia Timing

The advertiser must also decide how to schedule the advertising over the course of a
year. Suppose sales of a product peak in December and drop in M arch.

  1. Evaluating Advertising

The fourth step in the advertising campaign is evaluation of the campaign.
The advertising program should evaluate both the communication effects
and the sales effects of advertising regularly.

  1. W ays to Handle Advertising

Different companies organize in different ways to handle adver tising. In
small companies, advertising might be handled by someone in the sales
department. Large companies set up advertising departments whose job it is
to set the advertising budget, work with the ad agency, and handle other
advertising not done by the agency.

  1. Sales Promotion

Sales promotion consists of short-term incentives to encourage the purchase or sale
of a product or service.

  1. Sales Promotion Objectives

Sales promotion objectives vary widely. Sellers may use consumer
promotions to increase short term sales or to help build long-term market

  1. M ajor Sales Promotion Tools

M any tools can be used to accomplish sales promotion objectives.
Descriptions of the main consumer, trade, and business promotion tools
Consumer Promotion Tools
The main consumer promotion tools include samples, coupons, cash
refunds, price packs, premiums, advertising specialties, patronage
rewards, point-of-purchase displays and demonstrations, and
contests, sweepstakes, and games.

  • Samples are offers of a trial amount of a product. Sampling

is the most effective—but most expensive—

  • Coupons are certificates that give buyers a saving when

they purchase specified products.

  • Cash refund offers (or rebates) are like coupons except

that the price reduction occurs after the purchase rather than
at the retail outlet.

  • Price packs (also called cents-off deals) offer consumers

savings off the regular price of a product.

  • Premiums are goods offered either free or at low  cost as an

incentive to buy a product, ranging from toys included with
kids’ products to phone cards, compact disks.

  • Advertising specialties are useful articles imprinted with

an advertiser’s name given as gifts to consumers.

  • Patronage rewards are cash or  other awards offered for

the regular use of a certain company’s products or services.

  • Point-of-purchase (POP) promotions include displays

and demonstrations that take place at the point of purchase
or sale.

  • Contests, sweepstakes, and games give consumers the

chance to win something, such as cash, trips, or goods, by
luck or through extra effort.

  1. Developing the Sales Promotion Program

The marketer must make  sever al other decisions in order to define the full
size of the       sales promotion program. First, the marketer must decide on the
incentive    . A certain minimum incentive is necessary if the promotion is to
succeed; a larger incentive will produce more sales response. The marketer
conditions for participation     also must set                                       . Incentives might be offered to
everyone or only to select groups.
promote and distribute the         The marketer must decide how to
promotion                      length of the promotion  program itself. The                     is also

  1. Sales Promotion Uses and Limitations of Sales Promotion

Sales promotion tools are effective for the organizations in different aspects
like they can be used to Introduce new products, making existing customers
to buy more.
Lesson œ 35

  1. Personal selling

The direct presentation of a product to a prospective customer by a representative of
the selling organization is termed as personal selling.

  1. The Nature of Personal Selling

Selling is one of the oldest professions in the world. Today, most
salespeople are well-educated, well-trained professionals who work to
build and maintain long-term relationships with customers.

  1. The Role of the Sales Force

Personal selling is the interpersonal arm of the promotion mix. Sales
people represent the company to the customer and act as an
intermediary linking the customer to the company.

  1. Salespeople.

Salespeople act for a company and perform one of more of the
following: prospecting of new business; communicating with
potential and existing customers; servicing customers and
information gathering.

  1. Sales management.

Sales management involves the analysis, planning, implementation
and control of sales force activities.

  1. The characteristics of personal selling

Personal selling is having flexibility of system it provides one to one
contact between the buyers and sellers. It Identify specific sales
prospects the first step in the selling process is prospecting
identifying qualified potential customers.

  1. Builds Relationships

The principles of personal selling as just described are transaction
oriented—their aim is to help salespeople close a specific sale with a

  1. Basic Sales Tasks
  •  Order G etting
  •  Order Taking
  •  Supporting
  1. The advantages of personal selling
  • It can be adapted for individual customers.
  • It can be focused on prospective customers.
  • It results in the actual sale, while most other forms of promotion

are used in moving the customer closer to the sale.

  1. The disadvantages of personal selling
  • Expensive per contact
  • M any sales calls may be needed to generate a single sale
  • Labor intensive
  • It is costly to develop and operate a sales force.
  • It may be d ifficult to attract high-caliber people.
  1. Types of the personal selling

There are two types of personal selling:
The customers come to the salespeople.
M ostly involves retail-store selling. M ost salespeople fall into
this category.
The salespeople go to the customers.
Usually represent producers or wholesaling middlemen and
sell to business users. Some outside selling is relying more on

  1. Characteristics of Professional Selling

Sales reps engage in a total selling job. Reps work closely with
customers. Sales reps organize much of their own time and effort.

  1. Contributions of Personal Selling to M arketing:

Today, most professional salespeople are well-educated, well-trained
men and women who work to build long-term, value-producing
relationships with their customers. They succeed not by taking
customers in but by helping them out.

  1. Changing patterns in personal selling

Traditionally, personal selling has been a face-toface, one-on-one
situation. But now new trends and patterns are emerging which are:
Selling Centers – Team Selling
Systems Selling
Global Sales Teamsv
Relationship Selling
Œ    Telemarketing

  1. Salesperson Attributes:

Salesperson is an individual( like: Serving, and Information gathering
Salespeople, sales representatives, account executives, sales
consultants, sales engineers, agents, district managers, marketing
representatives, account development reps, etc) acting for a company
Lesson œ 36

  1. The Role of the Sales Force

Advertising consists of one-way, non personal communication with target
consumer groups.
Personal selling involves two-way, personal communication between salespeople
and individual consumers.

  1. The Personal Selling Process

The selling process consists of several steps that the salesperson must master.
These steps are:
1). Prospecting and qualifying. In this step the salesperson identifies qualified
potential customers.
2). Qualifying lead is the process of identifying good ones and screening out
poor ones.
3). Reproach is the step in which the salesperson learns as much as possible
about a prospective customer before making a sales call.
4) During the approach step, the salesperson should know how to meet the
buyer, make him satisfied and get the r elationship off to a good start.
5) The presentation and demonstration is the step in which the salesperson
tells the product “story” to the buyer, showing how the product will make
or save money for the buyer.
6) Handling objections is the step in the selling process in which the
salesperson seeks out, clarifies, and overcomes customer objections regarding
7) Closing occurs when the salesperson asks the customer for an order.
8). The follow-up occurs after the sale and ensures customer satisfaction.

  1. M anaging the Sales Force

Sales force management is the analysis, planning, implementation, and control of
sales force activities.
It includes:

  1. Designing sales force strategy and structure,
  2. Recruiting, selecting
  3. Training
  4. Compensating
  5. Supervising
  6. Evaluating the firm’s salespeople

Lesson œ 37

  1. Direct M arketing

Direct marketing consists of direct communications with carefully targeted individual
consumers to obtain an immediate response. M ass marketing is targeting broadly
with standardized messages and marketing offers distributed through intermediaries.

  1. W hat is Direct M arketing?

M ass marketers have typically sought to reach millions of buyers with a single
product and a standard message delivered through the mass media. Under
this mass-marketing model, most marketing involved one-way
Communications aimed at consumers, not two-way interactions with them.

  1. The New Direct M arketing M odel

Early direct marketers–catalog companies, direct mailers, and telemarketers–
gathered customer names and sold goods mainly through the mail and by

  1. Benefits and Growth of Direct M arketing

Direct marketing brings many benefits to both buyers and seller s. As a result,
direct marketing is growing very rapidly.

  1. Benefits to Buyers

Direct marketing benefits buyers in many ways:
1). It is convenient.
2). Buying is easy and private.
3). Greater product access and selection.
4). Provides a wealth of comparative information.
5). Online buying is interactive and immediate.

  1. Benefits to Sellers

Sellers benefit by:
1). Direct marketing is a powerful tool for customer
relationship building.
2). Direct marketing can also be timed to reach prospects at
just the right moment.
3). Reduce costs and increase speed and efficiency.
4). Online marketing offers greater flexibility.
5). The Internet is a truly global medium.

  1. The Growth of Direct M arketing

Sales through traditional direct marketing channels have been growing

  1. Forms of Direct M arketing

M ajor forms of direct marketing are summarized below:

  1. Face-to-Face Selling

The original and oldest form of direct marketing is the sales.

  1. Telemarketing

In telemarketing telephone is used to sell directly to consumers.
iii. Direct-M ail M arketing
Direct mail marketing involves sending an offer, announcement,
reminder, or other item to a person at a particular address.

  1. Catalog M arketing

A catalog is a printed, bound piece of at least eight  pages, selling
multiple products, and offering a direct ordering mechanism.

  1. Direct-Response Television M arketing

Direct-response television marketing takes one of two major forms.
1). Direct-response advertising occurs when marketers air
television spots or infomercials.
2). Home shopping channels are entire programs or
channels dedicated to selling goods and services.

  1. Kiosk M arketing

Some companies place information and ordering machines (called
kiosks) in stores, airports, and other locations (in contrast to
machines which dispense products–vending machines).
vii. Online M arketing and Electronic Commerce
Online marketing is conducted through interactive  online computer
systems, which link consumers with sellers electronically.

  • Rapid Growth of Online M arketing

electronic marketplaces (these are “market spaces” in
which sellers offer their products and services electronically,
and buyers search for information, identify what they want,
and place orders using a credit card or other means of
electronic payment).

  • The Online Consumer

The Internet user is not a pasty-faced computer nerd. As a
whole, Internet users are an elite group.

  • Creating Online M arketing

M arketers can conduct online marketing in three ways:
1).By creating an electronic online presence.
2). W eb sites vary in purpose and content.
3).Creating a W eb site is one thing; getting people to
visit the site is another.

  1. Customer Databases and Direct M arketing

There are differences between mass marketing and so-called one-to-one
marketing. A customer database is an organized collection of
comprehensive data about individual customers or prospects, including
geographic, demographic, psychographics, and behavioral data.
Database marketing is the process of building, maintaining, and using
customer database and other database for the purposes of contacting and
transacting with customers.
Lesson œ 38
Any paid form of non personal presentation and promotion of ideas, goods, or
services by an identified sponsor.
Personal selling:
Personal presentation by the firm’s sales force for the purpose of making sales
and building customer relationships.
Sales promotion:
Short-term incentives to encourage the purchase or sale of a product or
Public relations:
Building good relations with the company’s var ious publics by obtaining favorable
publicity, building up a good corporate image, and handling or heading off
unfavorable rumors, stories, and events.
Direct marketing:
Direct connection with carefully targeted individual consumers to both
obtain an immediate response and cultivate lasting customer relationships—the use
of telephone, mail, fax, e-mail, the Internet, and other tools to  communicate directly
with specific consumers.
Personal Communication Channels:
In personal communication channels, two or more people communicate directly with
each other.
Non-personal Communication Channels:
Non personal communication channels are media that carry messages without
personal contact or feedback.
Public Relations:
Public relations involves building good relations with the company’s various publics
by obtaining favorable publicity, building up a good corporate image, and handling
or heading off unfavorable rumors, stories, and events.
Advertising can reach masses of geographically dispersed buyers at a low cost per
exposure, and it enables the seller to repeat a  message many times
Public information is information about a company’s goods or services appearing in
the mass media as a news item. Stimulation of demand for a good, service, place,
idea, person, or organization by unpaid placement of commercially significant news
or favorable media presentations.
Sales Promotion:
Sales promotion consists of short-term incentives to encourage the purchase or sale
of a product or service.
Catalog M arketing:
Catalog marketing involves selling through catalogs mailed to a select list of
customers or made available in stores
Kiosk M arketing:
Some companies place information and ordering machines (called kiosks) in stores,
airports, and other location
Database marketing:
It is the process of building, maintaining, and using customer databases  and other
databases for the purposes of contacting and tr ansacting with customers.
Lesson œ 40
Competitive Strategies

  1. Approaches to M arketing Strategy

No one strategy is best for all companies. Companies differ on how they approach
the strategy planning process. Approaches to marketing strategy often pass through
three stages:
1). Entrepreneurial marketing—companies started by individuals.
2). Formulated marketing—as small companies achieve success, they
inevitably move toward more formulated marketing (formulated marketing
3). Entrepreneurial marketing—companies that became lost and re-
established themselves with the entrepreneurial spirit and actions that made
them successful in the first place.

  1. Basic Competitive Strategies

Basic competitive positioning winning strategies include (as suggested by M ichael
1). Overall cost-leadership—cost-leadership is gained by being the lowest-
cost producer in the industry.
2). Differentiation—this strategy creates competitive advantage by offering
products with unique customer benefits or features not available from
competitive offer ings.
3). Focus—this narr ow-focus strategy achieves competitive advantage by
concentrating on narrow segments of a larger market.
iii. Competitive Positions
Firms competing in a given target market, at any point in time, differ in their
objectives and resources. These firms might take four different forms:
1). M arket leader—the firm with the largest market share.
2). M arket challenger—the runner-up firm, fighting to overtake the leader.
3). M arket follower—the firm that also has runner-up status but seeks to
maintain share and not rock the boat.
4). M arket niche—the fir m that serves small segments that the other firms
overlook or ignore.

  1. M arket Leader Strategies

M arket leader strategies—most industries contain an acknowledged market

  1. M arket Challenger Strategies

These fir ms are usually the second, third, or lower in an industry. These
runner-up firms can adopt one of two competitive strategies:

  1. M arket Follower Strategies

M arket follower strategies—not all runner-up companies want to challenge
the market leader. The follower can learn from the leader’s successes and
failures and copy or improve on the leader’s product and programs, usually
with less investment.
vii. M arket Niche Strategies
M arket niche strategies—mass marketers achieve high volume, the niche achieves
high mar gins.
Companies have moved thr ough four orientations over the years:
1). Product-oriented—pay little attention to either customers or competitors.
2). Customer-oriented—started to pay attention to customers.
3). Competitor-oriented—when they started to pay attention to customers, they
became competitor-oriented.
4). M arket-oriented—this advanced form balances attention between customers
and competition.
Lesson œ 41

  1. Global Leader Strategy

Innovator in technologies, products and markets with high global share and
wide country market coverage

  1. Global Challenger Strategy 1

Frontal or encirclement attack on the leader in all markets with increasing
country market coverage and high global share but less than the leader.
iii. Global Challenger Strategy 2
Flanking or  bypassing world leader with increasing country market coverage
and high global share but less than the leader.

  1. Global Follower Strategy

Rapid imitation of leader or challenger with moderate country market
coverage and emphasis on price sensitive markets.

  1. Global Niche Strategy 1

Rapid penetration of narrow market segments by selective targeting of
country markets and small share of overall market.

  1. Global Niche Strategy 2

Infiltration – slow penetration of selected narrow markets with focus on
selected country markets and low share of the overall market.
vii. Global Collaborator Strategy
Innovations in research and development of technologies, products and
markets, set standards and shares them with other firms.
Lesson œ 42

  2. Internet M arketing:

Internet was used for the first time in 1982. It began to expand in 1991 with
the W orld W ide W eb. Internet technologies pose managerial implications to

  1. M ajor Forces Shaping the Digital Age:

Digitalization and Connectivity: The flow of digital information requires
connectivity which is best provided by the Intranets, Extranets, and the

  1. The Role of the Internet in M arketing:

It is useful for marketers in different ways like:

  • It is the fastest growing communication technology.
  • W ithin the first five years, 50 million people were connected.
  • Capable of interactively sharing information in real time.
  1. Electronic Commerce
  • E-Commerce- The process of conducting business transactions over

electronic networks, mostly the Internet

  • E-M arketing : The process of utilizing Information Technology in the

conception, distribution, promotion, and pricing of goods, services, and ideas
to create exchanges that satisfy individual and organizational objectives

  • E-Business: The use of Information Technology in all business tasks

including production, marketing, accounting, finance, and human resources

  1. Rules of E-M arketing:

General rules of E. M arketing are:

  1. Power Shift from sellers to buyers
  2. Increasing Velocity
  3. Death of Distance
  4. G lobal reach
  5. Time compression
  6. Knowledge management is key


  1. M arket deconstruction
  2. Intellectual capital rules
  3. Buyer Benefits of E-Commerce
  • Convenience
  • Easy and private
  • Greater product access/selection
  • Access to comparative information
  • Interactive and immediate
  1. Seller Benefits of ECommerce:
  • Relationship building
  • Reduced costs
  • Incr eased speed and efficiency
  • Flexibility
  • Global access, global reach
  1. Basic-Forms


  1. Virtual Business:

There are two types of the electronic commerce one is termed a
s business to business and second is termed as business to business
electronic commerce.

  1. Key Success Factor for Internet Businesses

Success of the internet business depends upon the offer of value and
customer driven products adjusting the prices according to products values,
going for specific customers instead of the mass marketing, distributing the
products according to customer’s convenience.

  1. Internet M arketing Objectives

The main objectives of the internet marketing are, to have online market
share, to increase the sales level, make customers to make repeat purchases,
market positioning, image building of the company and creation of
Lesson œ 43

  1. Social Criticisms of M arketing

M arketing receives much criticism. Some of this is justified and some is not. Social
critics claim that certain marketing practices hurt individual consumers, society as a
whole, and other business firms.

  1. M arketing Ethics

M arketing Ethics are marketers’ standards of conduct and moral values.

  1. Enlightened M arketing

Enlightened marketing is a philosophy holding that a company’s marketing should
support the best long-run performance of the marketing system.
Lesson œ 44
M arketing
M arketing involves having the right product available in the right place at the right time and
making sure that the customer is aware of the pr oduct.
Core M arketing Concepts:

  1. Needs, wants, and dem ands
  2. Products and Services
  3. Value, satisfaction, and quality
  4. Exchange, transactions, and relationships
  5. M arkets

Simple M arketing System

  1. Producer/ seller
  2. Consumer
  3. Communication
  4. Product/ service
  5. M oney
  6. Feedback

Customer Relationship M anagement
Customer relationship management (CRM ) has been defined narrowly as a customer
database management activity.
The Production Concept
The production concept holds that consumers will favor products that are available
and highly affordable and that management should, therefore, focus on improving
production and distribution efficiency.
The Product Concept
the product concept states that consumers will favor products that offer the most
quality, performance, and features, and that the organization should, therefore,
devote its energy to making continuous product improvements.
The Selling Concept
The selling concept is the idea that consumers will not buy enough of the
organization’s products unless the organization undertakes a large scale selling and
promotion effort.
The M arketing Concept
The marketing concept holds that achieving organizational goals depends on
determining the needs and wants of target markets and delivering the desired
satisfactions more effectively and efficiently than competitors do.
The Societal M arketing Concept
the societal marketing concept holds that the organization should determine the
needs, wants, and interests of target markets.
Boston Consulting Group
Using the matrix, four types of SBUs can be identified:
a). Stars are high growth, high-share businesses or products (they need heavy
investment to finance their rapid  growth potential).
b). Cash Cows are low-growth, highshare businesses or products (they are
established, successful, and need less investment to hold share).
c). Question M arks are low-share business units in high-growth markets (they
require a lot of cash to hold their share).
d). Dogs are low-growth, low-share businesses and products (they may generate
enough cash to maintain them, but do not have much future).

  1. Product/M arket Expansion Grid

The product/market expansion grid is a portfolio planning tool for identifying
company growth opportunities through:
1). M arket Penetration—making more sales to present customers without
changing products in any way (example, adding more stores).
2). M arket Development—a strategy for company growth by identifying a
developing new markets for current company products (example,
demographic and geographical markets).
3). Product Development—a strategy for company growth by offering
modified or new products to current markets.
4). Diversification—a strategy for company growth by starting up or
acquiring businesses outside the company’s cur rent products and markets.

  1. M arketing Process

The marketing process is the process of analyzing market opportunities, selecting
target markets, developing the marketing mix, and managing the marketing effort.

  1. M arketing Environment

The marketing environment consists of all the actors and forces outside marketing
that affect the marketing management’s ability to develop and maintain successful
relationships with its target customers.

  1. M arketing Information System and M arketing Research

In carrying out their marketing responsibilities, marketing managers need a great deal
of information. “Information is power” is a legitimate statement.
M arketing research:
M arketing research is the systematic design, collection, analysis, and reporting of
data and findings relevant to a specific marketing situation facing an organization.
Step 1—Problem Definition and the Research Objectives
Step 2— Developing the Research Plan
Step 3 — Implementation
Step 4— Interpretation and Reporting of Findings
M . Consumer Buying Behavior
M arkets (and those which they serve) have to be understood before marketing
strategies can be developed. The consumer market buys goods and services for
personal consumption. W ith respect to the individuals in the consumer market, the
behavior of the consumer is influenced by the buyer’s decision process.
Consumer Black Box

  1. a) Consumers make many buying decisions every day.
  2. b) A model of consumer behavior helps managers answer questions about what

consumers buy, where they buy, how and how much they buy, when they buy, and
why they buy..

  1. c) The central question is: How do consumers respond to various marketing efforts

the company might use.

  1. d) The stimulus-response model of buyer behavior shows that marketing (made up

of the four  P’s—product, price, place, and promotion) and other stimuli (such as the
economic, technological, political, and cultural environments) center on the
consumer’s “black box” and produce certain responses.

  1. e) M arketers must figure out what is “in” the consumer’s “black box.”

M arket Segmentation: “Dividing a market into distinct groups with distinct needs,
characteristics, or behavior who might require separate products or
marketing mixes”.
Lesson œ 45
New Product development Process

  1. Idea Generation

The first step in the new-product development pr ocess is idea generation, which is
the systematic search for new product ideas.

  1. Idea Screening

The second step in the new-product development process is idea screening which
involves screening new product ideas in order to spot good ideas and drop poor
ones as soon as possible.

  1. Concept Development and Testing

The third stage in the process is concept development and testing. Concepts may
take on several forms:
1). A product idea is an idea for a possible product that the company can
see itself on the market.
2). A product concept is a detailed version of the new-product idea stated in
meaningful consumer terms.
3). A product im age is the way consumers perceive an actual or potential

  1. M arketing Strategy Development

The fourth step is marketing strategy development which involves designing an
initial marketing strategy for a new product based on the pr oduct concept.

  1. Business Analysis

The next step is business analysis, which is a review of the sales, costs, and profit
projections for a new product to find out whether these factors satisfy the company’s

  1. Product Development

The sixth step is product development, which involves developing the product
concept into a physical product in order to ensure that the product idea can be
turned into a workable product.

  1. Test M arketing

The seventh step is test marketing, which is the stage at which the product and
marketing programs are introduced into more realistic marketing settings. Test
marketing lets the marketer get experience with marketing the product.

  1. Commercialization

The eighth and final step in the new-product development process is
commercialization. This step is introducing a new product into the market.

  1. Product life Cycle Strategies

It involves five distinct stages:

  1. The product developm ent stage begins when the company finds and

develops a new product idea. During product development, sales are zero
and the company’s investment costs mount.

  1. The introduction stage is a period of slow sales growth as the product is

being introduced in the market. Profits are nonexistent in this stage
because of heavy expenses of pr oduct introduction.

  1. The growth stage is a period of rapid market acceptance and increasing


  1. The m aturity stage is a period of slowdown in sales growth because the

product has achieved acceptance by most potential buyers. Profits level off
or decline.

  1. The decline stage is the period when sales fall off and profits drop.

—The amount of money charged for a product or service, or the sum of the values
that consumers exchange for the benefits of having or using the product or
Break-even point
Consumer weighs the price against the perceived value of using the product. If the
price exceeds the sum of the value, consumers will not buy the product. Consumers
differ in the values they assign to different product features and marketers often vary
their pricing strategies for different price segments.
Break-Even Analysis
Break-even pr icing (target profit pricing) is an approach to setting price to breakeven
on the cost of making and marketing products or to make the target (desired) profit
It uses a break-even chart that shows the total cost and total revenue at different
levels of sales volume.
Retailing and W holesaling
Retailing and wholesaling consist of many organizations bringing goods and services
from the point of production to the point of use. Retailing by definition includes all
the activities involved in selling goods and services directly to final consumer s for
their personal, non-business use.
M odern marketing calls for more than just developing a good product, pricing it
attractively, and making it available to target customers.
A paid form of non-personal communication about an organization and/or its
products to a target audience through a mass medium.
Personal Selling
A paid form of non-personal communication about an organization and/or its
products to a target audience through a mass medium.
Sales Promotion
Demand-stimulating activity designed to supplement advertising and facilitate
personal selling.
Public Relations
A planned communication effort by an organization to contribute to generally
favorable attitudes and opinions toward an organization and its products.
Direct M arketing
Direct connections with carefully targeted individual consumers to obtain an
immediate response and cultivate lasting customer relationship
Global M arket Place
The world is shrinking rapidly with the advent of faster communication,
transportation, and financial flows. In the twenty-first century, fir ms can no longer
afford to pay attention only to their domestic market, no matter how large it is. M any
industries are global industries, and those firms that operate globally achieve lower
costs and higher brand awareness.


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