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MARKETING MANAGEMENT
Unit III Marketing Mix Decisions
Meaning of a product
A good, idea, method, information, object or service created as a result of a process and serves a need or satisfies a
want. It has a combination of tangible and intangible attributes (benefits, features, functions, uses) that a seller
offers a buyer for purchase. For example a seller of a toothbrush not only offers the physical product but also the
idea that the consumer will be improving the health of their teeth.
A product is anything that can be offered to a market that might satisfy a want or need. In retailing, products are
called merchandise.
DEFINITION OF PRODUCT
Its a bundle of physical, chemical or intangible attributes that have the potential that satisfy present and potential
customers wants. It means goods and services which combination of company offers to the target market .
Products are almost always combinations of the tangible and intangible. The entire package is sometimes referred
to as the augmented product.
The mix of tangibles and intangibles in the augmented product varies from one product or service to another.
Product is a key element in the market offering. Marketing mix planning begins with formulating an offering to
meet target customers’ needs or wants.
The customer will judge the offering by three basic elements : product features and quality, services mix and
quality, and price appropriateness.
PRODUCT LEVELS
 In planning its market offering, the marketer needs to think through five levels of the product.
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Each level adds more customer value, and the five constitute a customer value hierarchy.
FIVE LEVELS OF THE PRODUCT
(1) Core Product
(2) Basic Product
(3) Expected Product
(4) Augmented Product
(5) Potential Product
(1) Core Product / Core Benefit : The fundamental service or benefit that the customer is really buying.
(2) Basic Product : At the same level, the marketer has to turn the core benefit into a basic product.
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(3) Expected Product : A set of attributes and conditions buyers normally expect when they purchase this
product.
(4) Augmented Product : The marketer prepares an augmented product that exceeds customer expectations.
Today’s competition essentially takes place at the product-augmentation level.( In less developed countries,
competition takes place mostly at the expected product level
According to Levitt : The new competition is not between what companies produce in their factories, but between
what they add to their factory output in the form of packaging, services,advertising, customer advice,
financing,delivery arrangements, warehousing, and other things that people value.
Some things should be noted about product-augmentation strategy :
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First, each augmentation adds cost. The marketer has to ask whether customers will pay enough to cover
the extra cost.
Second, augmented benefits soon become expected benefits. For gaining competitive advantage one will
have to search for still other features and benefits.product-augmentation strategy )
Third, as companies raise the price of their augmented product, some competitors can offer a “ Strippeddown” version at a much lower price. Thus alongside the growth of fine products we see the emergence of
lower-cost products for the clients who simply want the basic product.
(5) Potential Product : encompasses all the possible augmentations and transformations the product might
undergo in the future.Companies search for new ways to satisfy customers and distinguish their offer
PRODUCT DIFFERENTIATION
The challenge before the product marketers is to create relevant and distinctive product differentiation. The product
differentiation may be based on :
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Physical Differences ( eg., features,performance, conformance, durability,reliability, design, style,
packaging )
Availability Differences ( eg., availablefrom stores or orderable by phone, mail,fax, internet )
Service Differences ( eg., delivery,installation, training, consulting,maintenance, repair )
Price Differences ( eg., very high price,medium price, low price, very low price )
Image Differences ( eg., symbols,atmosphere, events, media )
PRODUCT CLASSIFICATION
ON THE BASIS OF PRODUCTCHARACTERISTICS : DURABILITY, TANGIBILITY AND USE (consumer or
industrial )
(1) NON-DURABLE
(2) DURABLE
(3) SERVICES
(1)NON-DURABLES
These are tangible goods normally consumed in one or few uses. Becausethese goods are consumed quickly and
purchased frequently, the appropriatestrategy is to make them available atmany locations, charge only a smallmark
up and advertise heavily to inducetrial and build preference.
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(2) DURABLES
These are tangible goods that normallysurvive many uses. Normally requiremore personal selling and
service,command a higher margin, and requiremore seller guarantees.
(3) SERVICESThese are intangible,in seperable,variable andperishable products.Normally require more quality
control,superior credibility, and adaptability.
PRODUCT CLASSIFICATIONON THE BASIS OF CUSTOMER SHOPPING HABITS :
(1) CONVENIENCE GOODS
(2) SHOPPING GOODS
(3) SPECIALITY GOODS
(4) UNSOUGHT GOODS
1) CONVENIENCE GOODS are goods that the customer usually purchases frequently, immediately, and with a minimum of
efforts.
(A) Staples: Consumers purchase on a regular basis.
(B) Impulse Goods: are purchased without any planning or search efforts.
(C) Emergency Goods: are purchased when a need is urgent.
(2) SHOPPING GOODS are goods that the customer , in the process of selection and purchase, characteristically compares on such
basis as suitability, quality, price and style.
(A) Homogeneous Shopping Goods: are similar in quality but different enough in price to justify shopping
comparisons.
(B) Heterogeneous Shopping Goods: differ in product features and services that may be more important than price.
(3) SPECIALITY GOODS are goods with unique characteristics or brand identification for which buyer is willing
to make a special purchasing effort.
(4) UNSOUGHT GOODS are goods the consumer does not know about or does not normally think of buying.
These goods require advertising and personal selling support.
PRODUCT STRATEGY
Calls for coordinated decisions on :
(1) Product Mix
(2) Product Line
(3) Individual Product
(4) Service Product
PRODUCT MIX
A product mix (also called product assortment) is the set of all products and items that a particular seller
offers for sale.
A total group of products that an organization markets.
A company’s product mix has a certain width, length, depth and consistency.
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DIMENSIONS OF PRODUCT MIX
The width of company’s (say HLL’s) product mix refers to how many different product lines the company
carries, such as bathing soap, detergents, shampoos, toothpaste, food products.
The length of a company’s product mix refers to the total number of items in its product mix. Thus in each of the
product line HLL has a number of product items. Eg., in the product line of bathing soaps, HLL has several
product items like Lux, Liril, Lifebuoy, Pears.
The depth of a company’s product mix refers to how many variants are offered of each product in the line. Thus if
closeup toothpaste comes in three formulations and in three sizes, Close up has a depth of nine (3x3). The average
depth of HLL product mix can be calculated by averaging the number of variants within the brand groups.
The Consistency of the product mix refers to how closely related the various product lines are in end-use,
production requirements, distribution channels, or some other way. HLL’s product lines are consistent insofar as
they are consumer goods that go through the same distribution channels.
These four dimensions of the product mix provide the handles for defining the company’s product strategy. The
company can expand its business in four ways.
1. The Co. Can add new product lines, thus widening its product mix.
2. The Co. Can lengthen each product line.
3. The Co. Can add more product variants to each product and deepen its product mix.
4. The Co. Can pursue more product-line consistency or less, depending upon whether it wants to acquire a strong
reputation in a single field or participate in several fields.
PRODUCT LINE
 A product line is a group of products that are closely related, because they performa similar function, are sold
to the same customer groups, are marketed through the same channels or fall within the given price ranges.
 The product mix may be composed of several product lines.
Product Planning & Development
Product planning and development are essential components in how a business creates products and refines
them before offering them for sale. Planning and development are two distinct phases of the product creation
process. Planning requires information gathering from multiple business departments including consumer input
and competition information. Development is a partnership between the marketing and engineering departments,
which work together to create a final product that meets consumer needs in the most effective way possible.
Product planning and development involves the creation of a product proposal, a proof-of-concept report
and a test market study. When an idea is generated, a product proposal should be created that discusses how it will
be profitable to the company and identifies any associated risks. If the product is found to be within the company's
scope of interest and budget, it is reviewed further, based on marketing, production and competitive considerations.
Once it passes the further review, plans for its design, production and special circumstances are finalized and
assigned to someone chosen to head the project. A prototype is then made and test marketed to gauge customer
reactions, concerns or satisfaction.
Product proposals are the first step in product planning and development. When an idea merits consideration by a
company, a proposal provides management with the reasons why this product will be a positive contribution to its
current offerings. Not only does the proposal discuss specifics about the product idea, but it also outlines
associated risks and financial estimates. It should touch upon marketing, production and competitive areas to
discuss what will be needed and if additional resources or equipment will be required. Once the proposal is
approved, management will assign the project to someone who will be responsible for it through the product
planning and development stage.
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Concept of Product Planning
The marketing activities of many firms are organized along product lines. Some multiple-product producers, for
example, maintain separate sales forces for each of the company's product lines. Manufactures, wholesalers, and
retailers frequently have salesman and buyers who specialise in one or two products and operate as through they
were running their own small business.
Product Planning Definition
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Product planning in a broad sense is how a company generates the ideas for its products based on a number
of factors. These include input from multiple business departments, such as marketing, technical support, sales
teams and engineering. A business also includes analysis of competitor products and consumer needs into its
product planning. This helps a business understand what products the competition is offering, how those products
are meeting consumer needs and how the business can innovate new products to better meet those needs.
Product Planning Cycle
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The product planning cycle for a business encompasses all steps from the initial input phase of product
planning to the initiation of development. Once input on a product is received from all departments, the planning
phase moves to product proposals. These proposals may come from multiple departments, including engineering
and marketing. Executives may also have product proposals to submit. These proposals are then sanded down to a
couple of product proposals that show the most promise. The marketing department then takes these final
proposals and gauges which product can best meet customer needs as well as which product is the most
marketable. Marketing may also include other figures in making a final product determination, such as cost of
production and expected sales numbers based on the current need in the market.
Product Development Definition
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Product development is the process by which a business builds initial prototypes of a given product,
determines a product's functional specifications and which materials create the strongest product for the most
economical price. The engineering department and marketing department should work closely during this phase of
product development to ensure the product the engineering department creates is the same product the marketing
department is planning to unveil to the public. This also helps ensure the design of the product is in line with the
determinations of the product planning phase. The final product must meet consumer needs in the way the product
planning phase envisioned it.
Needs of Product Development
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Product development requires development resources to successfully create a functioning prototype of a
product and continue to make revisions as market requirements come into focus. To accomplish this, a business
must prioritize its development projects by those that show the most promise and those which may require more
design time. Allocating resources effectively is paramount to a business shortening its development time and
moving finished products to market at a more rapid pace. This allows a business to meet customer demands at peak
need before another company can swoop in and take advantage.
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The Product Life Cycle
A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the
product. If a curve is drawn showing product revenue over time, it may take one of many different shapes, an
example of which is shown below:
The life cycle concept may apply to a brand or to a category of product. Its duration may be as short as a
few months for a fad item or a century or more for product categories such as the gasoline-powered automobile.
Product development is the incubation stage of the product life cycle. There are no sales and the firm prepares to
introduce the product. As the product progresses through its life cycle, changes in the marketing mix usually are
required in order to adjust to the evolving challenges and opportunities.
Introduction Stage
When the product is introduced, sales will be low until customers become aware of the product and its benefits.
Some firms may announce their product before it is introduced, but such announcements also alert competitors and
remove the element of surprise. Advertising costs typically are high during this stage in order to rapidly increase
customer awareness of the product and to target the early adopters.
The following are some of the marketing mix implications of the introduction stage:
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Product - one or few products, relatively undifferentiated
Price - Generally high, assuming a skim pricing strategy for a high profit margin as the early adopters buy
the product and the firm seeks to recoup development costs quickly. In some cases a penetration pricing strategy is
used and introductory prices are set low to gain market share rapidly.
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Distribution - Distribution is selective and scattered as the firm commences implementation of the
distribution plan.
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Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives may be directed
toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the
product.
Growth Stage
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Rapid growth in sales and profits
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More product awareness
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Competitors see the opportunity and enter the market.
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Some competitors will copy the product or may try to make it better or more appealing to other target
markets.
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The new entries result in more product variety.
During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be
modified as follows:
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Product - New product features and packaging options; improvement of product quality.
Price - Maintained at a high level if demand is high, or reduced to capture additional customers.
Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong
interest in the product.
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Promotion - Increased advertising to build brand preference.
Maturity Stage
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Most common stage in the cycle.
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Sales begin to level off.
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The competition gets tougher as more competitors have entered the market.
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Increased competition creates a downward movement in prices.
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Industry profits are largest, but it is also when industry profits begin to decline.
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Promotion is targeted to create brand differentiation.
During the maturity stage, the primary goal is to maintain market share and extend the product life cycle.
Marketing mix decisions may include:
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Product - Modifications are made and features are added in order to differentiate the product from
competing products that may have been introduced.
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Price - Possible price reductions in response to competition while avoiding a price war.
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Distribution - New distribution channels and incentives to resellers in order to avoid losing shelf space.
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Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors'
customers to switch.
Decline Stage
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Sales continue to decline.
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Shrinking market
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New products replace the old.
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Firms will often try to use extension strategies.
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Companies may be able to keep some sales by appealing to their most loyal customers.
During the decline phase, the firm generally has three options:
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Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product.
Harvest it, reducing marketing support and coasting along until no more profit can be made.
Discontinue the product when no more profit can be made or there is a successor product.
The marketing mix may be modified as follows:
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Product - The number of products in the product line may be reduced. Rejuvenate surviving products to
make them look new again.
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Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained
for continued products serving a niche market.
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Distribution - Distribution becomes more selective. Channels that no longer are profitable are phased out.
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Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products.
Example: New Flavor of Pepsi
Stage 1: Market Introduction
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Pepsi bottles the new flavored product and places it on the market for consumers.
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Pepsi also spends a lot of money advertising the new flavor creating awareness.
Stage 2: Market Growth
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Customers like the flavor and begin to make routine purchases.
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Coke introduces their competing flavor.
Stage 3: Market Maturity
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More competitors enter the market taking some of Pepsi’s profits.
Stage 4: Sales Decline
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Customers have moved on to the next new flavor.
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Some loyal fans stay behind.
New Product Strategies
 Developed by H. Igor Ansoff in the form of growth vectors
 Market penetration – Growth direction through increase in market share for present markets
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Product development – Creating new products to replace existing ones
Market development – Finding new customers for existing products
Diversification – Developing new products and cultivating new markets
Policy-making criteria on new products should specify
Working definition of profit concept acceptable to top management
Minimum level or floor of profits
Availability and cost of capital to develop a new product
Specified time period for recuperating operating costs and contributing to profits
The New Product Development
Improving and updating product lines is crucial for the success for any organisation. Failure for an organisation to
change could result in a decline in sales and with competitors racing ahead. The process of NPD is crucial within
an organisation. Products go through the stages of their lifecycle and will eventually have to be replaced. New
product development has eight stages.. These stages will be discussed briefly below:
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Stage 1: Idea Generation
The new product development process starts with the search for ideas. Consumer’s problems are the most fertile
ground for the generation of new product ideas. New product ideas come from interacting with various groups &
from using creativity generation techniques like BRAINSTORMING, SYNECTICS etc. BRAINSTORMING is a
process, where a small group of people are encouraged to came up with their ideas on a specified problem.
Whereas in SYNECTICS, the real problem is kept away initially from the group & only a broader framework of
the problem is given to them. The group is encouraged to think in all possible dimensions and slowly the problem
will be made clear to them, & their ideas would get refined.New product ideas have to come from somewhere. But
where do organizations get their ideas for NPD? Sources include:
MarketResearch
Employees
Consultants
Competitors
Customers
Distributors and Suppliers
Stage 2: Idea Screening
This process involves shifting through the ideas generated above and selecting ones which are feasible and
workable to develop. Pursing non feasible ideas can clearly be costly for the company. The purpose of screening
stage is to drop poor ideas as early as possible. Thus an idea committee is formed to classify the proposed ideas
into 3 categories, such as: promising, marginal & rejects. Every promising idea is kept together for rigorous
screening by product evaluation committee. In screening ideas, the companies normally face 2 serious errors &
they must try to avoid these mistakes as far as possible, those 2 serious errors are: DROP ERROR & GO ERROR.
Let’s clarify: DROP ERROR: error which occurs when the company rejects one really good idea having potential.
GO ERROR: error which occurs, when the company permits & facilitates a poor idea to move onto further
development stages & commercialization
Stage 3: Concept Development and Testing
The organisation may have come across what they believe to be a feasible idea, however, the idea needs to
be taken to the target audience. What do they think about the idea? Will it be practical and feasible? Will it offer
the benefit that the organisation hopes it will? or have they overlooked certain issues? Note the idea taken to the
target audience is not a working prototype at this stage, it is just a concept. A concept is an elaborated version of a
product idea expressed in meaningful consumer terms. Example: a leading soft drink company, if wants to add a
new product, i.e. fruit juice to its product lines, then the following concepts can came across:
CONCEPT 1: FRUIT JUICE FOR YOUNG & GROWN UPS AS A FUNNY THIRST QUENCHING ITEM.
CONCEPT 2: FRUIT JUICE FOR CHILDREN AS A HEALTH SUPPLEMENTS.
CONCEPT 3: FOR ADULTS AS A NUTRITIONAL ENERGY SUPPLEMENTS.
From the above 3 concepts, the 1st one looks to be attractive & promising. After the product concept has been
developed, the stage is now set for testing them. It is here the prospective consumer understand the product idea.
Here whether they are receptive towards the idea & their willingness to try out such product is tested.
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Stage 4: Marketing Strategy and Development
How will the product/service idea be launched within the market? A proposed marketing strategy will be
written laying out the marketing mix strategy of the product, the segmentation, targeting and positioning strategy
sales and profits that are expected.
Stage 5: Business Analysis
The company has a great idea, the marketing strategy seems feasible, but will the product be financially worth
while in the long run? The business analysis stage looks more deeply into the Cashflow the product could generate,
what the cost will be, how much market shares the product may achieve and the expected life of the product . This
stage will decide whether from financial as well as marketing point of view, the project is beneficial or not. The
projects overall impact on the corporation’s financial position with & without the new product are estimated &
compared. Here management needs to prepare sales as well as cost & profit projections to determine whether they
satisfy company objectives.
Stage 6: Product Development
At this stage the prototype is produced. The prototype will clearly run through all the desired tests, and presented
to a selection of people made up of the the target market segment to see if changes need to be made.
Stage 7: Test Marketing
Test marketing means testing the product within a specific area. The product will be launched within a particular
region so the marketing mix strategy can be monitored and if needed modified before national launch. The product
here is actually tested in the selected market segments. Based on the outcomes of the test marketing, the marketer
lunches large scale manufacture of the new product. It is a controlled marketing experiment to decide the
soundness & feasibility of fully fledged marketing of the product
Stage 8: Commercialisation
If the test marketing stage has been successful the product will go for national launch. There are certain factors that
need to be taken into account before a product is launched nationally. These include:
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timing of the launch,
how the product will be launched,
where the product will be launched,
will there be a national roll out or
will it be region by region?
Conclusion
The eight stages of product development may seem like a long process but they are designed to save wasted time
and resources. New product development ideas and prototypes are tested to ensure that the new product will meet
target market needs and wants. There is a test launch during the test marketing stage as a full market launch is
expensive. Finally the commercialization stage involves careful planning to maximize product success, a poor
launch will affect product sales and could even affect the reputation and image of the new product.
REASONS FOR NEW PRODUCTS
There are at least 3 reasons for which new products should be developed.
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New products become necessary for meeting the changes in consumer needs.
New products become necessary for making new profits.
new products become necessary for combating environmental threats.
FACTORS OF NEW PRODUCT DEVELOPMENT:
New product development is a continuous function of marketing management in the present day highly
competitive environment. In the process of new product development, a company should keep in mind the
following considerations:
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Adequate market demand.
The product should fit into company’s present market structure.
The idea should fit into the company’s present production structure.
The product should fit as per the financial resources available.
Adequate distribution in depth & breadth.
Market Segmentation
Market segmentation is the identification of portions of the market that are different from one another.
Segmentation allows the firm to better satisfy the needs of its potential customers.
CONCEPT AND DEFINITION
The concept of market segment is based on the fact that the market of commodities are not homogeneous but they
are heterogeneous. Market represent a group of customer having common characteristics but two customer are
never common in their nature, habits, hobbies income and purchasing techniques
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According to Philip kotler , “ Market segmentation is sub-dividing a market into distinct and homogeneous
subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct
marketing mix.”
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Market Segmentation is a method of “dividing a market (Large) into smaller groupings of consumers or
organisations in which each segment has a common characteristic such as needs or behaviour.”
Delta Airlines offers all economy passengers a seat and soft drinks. It charges economy passengers extra for
alcoholic beverages.
The Need for Market Segmentation
The marketing concept calls for understanding customers and satisfying their needs better than the competition.
But different customers have different needs, and it rarely is possible to satisfy all customers by treating them
alike.
Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to
all customers. Mass marketing allows economies of scale to be realized through mass production, mass
distribution, and mass communication. The drawback of mass marketing is that customer needs and preferences
differ and the same offering is unlikely to be viewed as optimal by all customers. If firms ignored the differing
customer needs, another firm likely would enter the market with a product that serves a specific group, and the
incumbant firms would lose those customers.
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Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them
with the same offering. The first step in target marketing is to identify different market segments and their needs.
Requirements of Market Segments
In addition to having different needs, for segments to be practical they should be evaluated against the following
criteria:
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Identifiable: the differentiating attributes of the segments must be measurable so that they can be
identified.
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Accessible: the segments must be reachable through communication and distribution channels.
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Substantial: the segments should be sufficiently large to justify the resources required to target them.
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Unique needs: to justify separate offerings, the segments must respond differently to the different
marketing mixes.
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Durable: the segments should be relatively stable to minimize the cost of frequent changes.
A good market segmentation will result in segment members that are internally homogenous and externally
heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments.
Bases for Segmentation in Consumer Markets
Consumer markets can be segmented on the following customer characteristics.
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Geographic
Demographic
Psychographic
Behavioralistic
Geographic Segmentation
The following are some examples of geographic variables often used in segmentation.
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Region: by continent, country, state, or even neighborhood
Size of metropolitan area: segmented according to size of population
Population density: often classified as urban, suburban, or rural
Climate: according to weather patterns common to certain geographic regions
Demographic Segmentation
Some demographic segmentation variables include:
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Age
Gender
Family size
Family Lifecycle
Generation: baby-boomers, Generation X, etc.
Income
Occupation
Education
Ethnicity
Nationality
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Religion
Social class
Many of these variables have standard categories for their values. For example, family lifecycle often is expressed
as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary
survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of
the children.
Psychographic Segmentation
Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and opinions (AIO)
surveys are one tool for measuring lifestyle. Some psychographic variables include:
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Activities
Interests
Opinions
Attitudes
Values
Behavioralistic Segmentation
Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic variables
include:
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Benefits sought
Usage rate
Brand loyalty
User status: potential, first-time, regular, etc.
Readiness to buy
Occasions: holidays and events that stimulate purchases
Behavioral segmentation has the advantage of using variables that are closely related to the product itself. It is a
fairly direct starting point for market segmentation.
Bases for Segmentation in Industrial Markets
In contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They
evaluate offerings in more detail, and the decision process usually involves more than one person. These
characteristics apply to organizations such as manufacturers and service providers, as well as resellers,
governments, and institutions.
Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets
might be segmented on characteristics such as:
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Location
Company type
Behavioral characteristics
Location
In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor
for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In
some industries firms tend to cluster together geographically and therefore may have similar needs within a region.
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Company Type
Business customers can be classified according to type as follows:
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Company size
Industry
Decision making unit
Purchase Criteria
Behavioral Characteristics
In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral
characteristics may include:
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Usage rate
Buying status: potential, first-time, regular, etc.
Purchase procedure: sealed bids, negotiations, etc.
Positioning
The place a product occupies in consumers’ minds relative to competing products.
Locating a brand in consumers’ minds over and against competitors in terms of attributes and benefits that the
brand does and does not offer
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Attribute or Benefit
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Quality and Price
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Use or User
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Competition
Definition: the perception of a product or organisation in the consumer’s mind relative to their perception of other
offerings in the same category.
A couple of definitions
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Creating distinct and valued physical and perceptual differences between one’s product and its
competitors, as perceived by the target customer.
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The act of designing the firm’s market offering so that it occupies a distinct and valued place in the
minds of its target customers.
Positioning
Positioning is the last stage in the Segmentation Targeting Positioning Cycle.
Once the organization decides on its target market, it strives hard to create an image of its product in the minds of
the consumers. The marketers create a first impression of the product in the minds of consumers through
positioning.
15
Positioning helps organizations to create a perception of the products in the minds of target audience.
Ray Ban and Police Sunglasses cater to the premium segment while Vintage or Fastrack sunglasses target the
middle income group. Ray Ban sunglasses have no takers amongst the lower income group.
Garnier offers wide range of merchandise for both men and women.
Each of their brands has been targeted well amongst the specific market segments. (Men, women, teenagers as well
as older generation)
Men-Sunscreen lotions, Deodorant
Women - Daily skin care products, hair care products
Teenagers - Hair colour products, Garnier Light (Fairness cream)
Older Generation - Cream to fight signs of ageing, wrinkles
A female would never purchase a sunscreen lotion meant for men and vice a versa. That’s brand positioning.
The key words are perception in the mind of consumer’s which include attributes, benefits & brand.
•
Product’s Position - the way the product is defined by consumers on important attributes - the place
the product occupies in consumers’ minds relative to competing products.
The process of creating an image of a product in the minds of the consumers is called as positioning.
Positioning helps to create first impression of brands in the minds of target audience. In simpler words positioning
helps in creating a perception of a product or service amongst the consumers.
Example
The brand “Bisleri” stands for purity.
The brand “Ceat Tyre” stands for better grip.
Steps to product Positioning
Marketers with the positioning process try to create a unique identity of a product amongst the customers.
1.
Know your target audience well
It is essential for the marketers to first identify the target audience and then understand their needs and
preferences. Every individual has varied interests, needs and preferences. No two individuals can think on the
same lines.
Know what your customers expect out of you.
The products must fulfill the demands of the individuals.
2.
Identify the product features
The marketers themselves must be well aware of the features and benefits of the products. It is rightly said you
can’t sell something unless and until you yourself are convinced of it.
A marketer selling Nokia phones should himself also use a Nokia handset for the customers to believe him.
16
3.
Unique selling Propositions
Every product should have USPs; at least some features which are unique. The organizations must create USPs of
their brands and effectively communicate the same to the target audience.
The marketers must themselves know what best their product can do.
Find out how the products can be useful to the end-users ?
Why do people use “Anti Dandruff Shampoo?”
Anti Dandruff Shampoos are meant to get rid of dandruff. This is how the product is positioned in the minds of the
individuals.
Individuals purchase “Dabur Chyawanprash “to strengthen their body’s internal defense mechanism and fight
against germs, infections and stress. That’s the image of Dabur Chyawanprash in the minds of consumers.
USP of a Nokia Handset - Better battery backup.
USP of Horlicks Foodles - Healthy snack
Communicate the USPs to the target audience through effective ways of advertising. Use banners, slogans, inserts
and hoardings.
Let individuals know what your brand offers for them to decide what is best for them.
4.
Know your competitors




5.
A marketer must be aware of the competitor’s offerings. Let the individuals know how your product is
better than the competitors?
Never underestimate your competitors.
Let the target audience know how your product is better than others.
The marketers must always strive hard to have an edge over their competitors.
Ways to promote brands




6.
Choose the right theme for the advertisement.
Use catchy taglines.
The advertisement must not confuse people.
The marketer must highlight the benefits of the products.
Maintain the position of the brand





For an effective positioning it is essential for the marketers to continue to live up to the expectations of the
end - users.
Never compromise on quality.
Don’t drastically reduce the price of your products.
A Mercedes car would not be the same if its price is reduced below a certain level.
A Rado watch would lose its charm if its price is equal to a Sonata or a Maxima Watch.
17
Targeting
The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that
has significant potential to respond
Once the marketer creates different segments within the market, he then devises various marketing
strategies and promotional schemes according to the tastes of the individuals of particular segment. This
process is called targeting. Once market segments are created, organization then targets them.
Targeting is the second stage and is done once the markets have been segmented.
Organizations with the help of various marketing plans and schemes target their products amongst the
various segments.
Example
Nokia offers handsets for almost all the segments. They understand their target audience well and each of
their handsets fulfils the needs and expectations of the target market.
Tata Motors launched Tata Nano especially for the lower income group.
It is not possible for a marketer to have similar strategies for product promotion amongst all individuals. Kids do
not get attracted towards products meant for adults and vice a versa. Every segment has a different need, interest
and perception. No two segments can have the same ideologies or require a similar product.
Target Marketing refers to a concept in marketing which helps the marketers to divide the market
into small units comprising of like minded people. Such segmentation helps the marketers to design specific
strategies and techniques to promote a product amongst its target market. A target market refers to a group of
individuals who are inclined towards similar products and respond to similar marketing techniques and
promotional schemes.
Kellogg’s K Special mainly targets individuals who want to cut down on their calorie intake. The target
market in such a case would be individuals who are obese. The strategies designed to promote K Special would not
be the same in case of any other brand say Complan or Boost which majorly cater to teenagers and kids to help
them in their overall development. The target market for Kellogg’s K Special would absolutely be different from
Boost or Complan.
Selecting a Target Market
•
Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a
target market.
•
Market: people or institutions with sufficient purchasing power, authority, and willingness to buy
•
Target market: specific segment of consumers most likely to purchase a particular product
Basis of Target Marketing






Age
Gender
Interests
Geographic location
Need
Occupation
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How to select the Target Market ?
 It is essential for the organizations or marketers to identify the set of people whom they want to target ?.
Marketers must understand the needs and expectations of the individuals to create its target market.

The target audience must have similar needs, interests and expectations.

Similar products and brands should entice the individuals comprising the target market.

Same taglines and advertisements attract the attention of the target audience and prompt them to buy.
To select a target market, it is essential for the organizations to study the following factors:









Understand the lifestyle of the consumers
Age group of the individuals
Income of the consumers
Spending capacity of the consumers
Education and Profession of the people
Gender
Mentality and thought process of the consumers
Social Status
Kind of environment individuals are exposed to
Example:
Why do people use soaps ?
Some would use it against body odour
Some would use it to fight germs and infections
Some for a fair and spotless skin
In the above case the product is same but the needs of the individuals are different. Consumers have different
reasons as to why they use soaps.
Target Audience 1
Against body odour - Soaps with a strong and lasting fragrance.




Marketing professionals
Sales Representatives
People exposed to sun for a longer duration
Individuals travelling by public transport
Target Audience 2
To fight germs and infections - Soaps with medicinal properties


Individuals working in hospitals, nursing homes and research centres
Individuals working in unhygienic conditions
Target Audience 3
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For a whiter skin - Soaps which improve the skin tone of individuals.


Teenagers
College students
Target Audience 4
For a younger looking skin - Soaps which help get rid of wrinkles and fine lines of ageing

Individuals between age group 30 – 50 years or above
Individuals with identical requirements form the target audience. A 20 year old girl can’t be targeted along with
someone who is 50 years old.
Online matrimony sites target young individuals aspiring to get married. The organizations strive hard to fulfil
their expectations by providing suitable matches.
Other important factors like climatic conditions and geographical locations also play an important role in deciding
the target market.
Deodorants and perfumes sell like hot cakes in humid and warm places.
Target Market for Beverages
Bournvita, Complan, Maltova, Boost - Growing kids
Soft drinks (Pepsi, Coke) - Teenagers
Fruit Juice (Real, Tropicana) - Health conscious individuals
Energy Drinks(Red bull) - Professionals, Office goers
What is a Marketing Channel?
A set of interdependent organizations that ease the transfer of ownership as products move from producer to
business user or consumer.
The administration of existing channels to secure the cooperation of channel members in achieving the firm’s
distribution objectives
A set of interdependent organizations that ease the transfer of ownership as products move from producer
to business user or consumer.
Names for Marketing Intermediaries
Retailer - A channel intermediary that sells mainly to customers.
Wholesaler - An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and
ships them.
Agents and Brokers - Wholesaling intermediaries who facilitate the sale of a product by representing channel
member.
20
Retailers - Take Title to Goods
Merchant Wholesalers- Take Title to Goods
Agents and Brokers - Do NOT Take Title to Goods
Pricing Strategy
One of the four major elements of the marketing mix is price. Pricing is an important strategic issue
because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as
product features, channel decisions, and promotion.
While there is no single recipe to determine pricing, the following is a general sequence of steps that might be
followed for developing the pricing of a new product:
1.
Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning.
2.
Make marketing mix decisions - define the product, distribution, and promotional tactics.
3.
Estimate the demand curve - understand how quantity demanded varies with price.
4.
Calculate cost - include fixed and variable costs associated with the product.
5.
Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc.
6.
Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization
(status quo).
7.
Determine pricing - using information collected in the above steps, select a pricing method, develop the
pricing structure, and define discounts.
These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the above list serves
to present a starting framework.
Pricing Objectives
The firm's pricing objectives must be identified in order to determine the optimal pricing. Common objectives
include the following:

Current profit maximization - seeks to maximize current profit, taking into account revenue and costs.
Current profit maximization may not be the best objective if it results in lower long-term profits.

Current revenue maximization - seeks to maximize current revenue with no regard to profit margins.
The underlying objective often is to maximize long-term profits by increasing market share and lowering costs.

Maximize quantity - seeks to maximize the number of units sold or the number of customers served in
order to decrease long-term costs as predicted by the experience curve.

Maximize profit margin - attempts to maximize the unit profit margin, recognizing that quantities will be
low.

Quality leadership - use price to signal high quality in an attempt to position the product as the quality
leader.

Partial cost recovery - an organization that has other revenue sources may seek only partial cost recovery.

Survival - in situations such as market decline and overcapacity, the goal may be to select a price that will
cover costs and permit the firm to remain in the market. In this case, survival may take a priority over profits, so
this objective is considered temporary.

Status quo - the firm may seek price stabilization in order to avoid price wars and maintain a moderate but
stable level of profit.
21
For new products, the pricing objective often is either to maximize profit margin or to maximize quantity (market
share). To meet these objectives, skim pricing and penetration pricing strategies often are employed. Joel Dean
discussed these pricing policies in his classic HBR article entitled, Pricing Policies for New Products.
Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to those
customers who are less price sensitive. Skimming is a strategy used to pursue the objective of profit margin
maximization.
Skimming is most appropriate when:


Demand is expected to be relatively inelastic; that is, the customers are not highly price sensitive.
Large cost savings are not expected at high volumes, or it is difficult to predict the cost savings that would
be achieved at high volume.

The company does not have the resources to finance the large capital expenditures necessary for high
volume production with initially low profit margins.
Penetration pricing pursues the objective of quantity maximization by means of a low price. It is most appropriate
when:

Demand is expected to be highly elastic; that is, customers are price sensitive and the quantity demanded
will increase significantly as price declines.

Large decreases in cost are expected as cumulative volume increases.

The product is of the nature of something that can gain mass appeal fairly quickly.

There is a threat of impending competition.
As the product lifecycle progresses, there likely will be changes in the demand curve and costs. As such, the
pricing policy should be reevaluated over time.
The pricing objective depends on many factors including production cost, existence of economies of scale, barriers
to entry, product differentiation, rate of product diffusion, the firm's resources, and the product's anticipated price
elasticity of demand.
Pricing Methods
To set the specific price level that achieves their pricing objectives, managers may make use of several pricing
methods. These methods include:




Cost-plus pricing - set the price at the production cost plus a certain profit margin.
Target return pricing - set the price to achieve a target return-on-investment.
Value-based pricing - base the price on the effective value to the customer relative to alternative products.
Psychological pricing - base the price on factors such as signals of product quality, popular price points,
and what the consumer perceives to be fair.
In addition to setting the price level, managers have the opportunity to design innovative pricing models that better
meet the needs of both the firm and its customers. For example, software traditionally was purchased as a product
in which customers made a one-time payment and then owned a perpetual license to the software. Many software
suppliers have changed their pricing to a subscription model in which the customer subscribes for a set period of
time, such as one year. Afterwards, the subscription must be renewed or the software no longer will function. This
model offers stability to both the supplier and the customer since it reduces the large swings in software investment
cycles.
22
Price Discounts
The normally quoted price to end users is known as the list price. This price usually is discounted for distribution
channel members and some end users. There are several types of discounts, as outlined below.


Quantity discount - offered to customers who purchase in large quantities.
Cumulative quantity discount - a discount that increases as the cumulative quantity increases.
Cumulative discounts may be offered to resellers who purchase large quantities over time but who do not wish to
place large individual orders.

Seasonal discount - based on the time that the purchase is made and designed to reduce seasonal variation
in sales. For example, the travel industry offers much lower off-season rates. Such discounts do not have to be
based on time of the year; they also can be based on day of the week or time of the day, such as pricing offered by
long distance and wireless service providers.

Cash discount - extended to customers who pay their bill before a specified date.

Trade discount - a functional discount offered to channel members for performing their roles. For
example, a trade discount may be offered to a small retailer who may not purchase in quantity but nonetheless
performs the important retail function.

Promotional discount - a short-term discounted price offered to stimulate sales.
Functions of marketing channels
Information

A distribution channel collects and analyzes market intelligence on current and potential customers,
competitors, suppliers, regulators and on the general political and business environment. For example, a
multinational company's Chinese distributor can potentially tap into his government sources and provide
timely information about impending regulatory changes that could prove valuable in adjusting strategies
ahead of the competition.
Promotion

A channel develops marketing strategies, including preparing the marketing budget, designing the
promotional and advertising material, recruiting and training sales representatives and organizing trade
shows and other networking events. The channels can adjust their marketing efforts faster than the head
office because they are closer to their customers.
Contact

Distribution channels find and establish contact with prospective buyers. For example, a computer
wholesaler's job would be to find computer retailers, while a retailer's job would be to find customers. This
can be done through promotions that pull in customers--including attracting them directly to the company's
online store--and also through old-fashioned telephone calls and door knocking that push products to
customers.
Matching

Once contact is made, the channel partner's job changes to a matching role, which involves tailoring the
product to fit customer needs. For example, if a retailer only wants to sell laptops with word-processing
23
software included, the distributor needs to contact her company's nearest manufacturing facility to ensure
the laptops are properly configured prior to shipment.
Negotiation

Closing the sale is part of a channel's negotiation function. For a computer wholesaler, it could mean
negotiating price and minimum quantity levels with the retailer. For a master franchise operator (an
experienced franchisee with exclusive rights in a region), it could mean negotiating the franchise
agreement with a new franchisee and providing training and mentoring services.
Transportation

A distributor often transports products from the manufacturer to retailers and customers. For example, a
potato chip distributor may have one or more delivery vans departing every day to different retailers
(chains and convenience stores) to drop off their merchandise.
Financing

A distribution channel partner finances his costs, including buying and storing inventory. For example, a
car dealership may arrange financing through the car manufacturer or the local banks or a combination.
Risk

A distribution channel shares in some of the business risks. For example, if a new product launch does not
go well, the distributor may get stuck with excess inventory. There also is the risk of unpaid bills and
damaged inventory. Foreign distributors also bear the risk of political and economic uncertainty in their
respective countries.
Types and levels of distribution channel / The channels of distribution are broadly divided into four types:Zero Level Channel Producer —- Consumer
One Level
Producer —- Retailer —- Consumer
Two Level
Producer —– Wholesaler — Retailer — Consumer
Three Level
Producer —- Distributor — Wholesaler — Retailer — Consumer
Four Level
Producer — Agent —- Distributor — Wholesaler— Retailer —–Consumer

Producer-Customer:- This is the simplest and shortest channel in which no middlemen is involved and
producers directly sell their products to the consumers. It is fast and economical channel of distribution.
Under it, the producer or entrepreneur performs all the marketing activities himself and has full control
over distribution. A producer may sell directly to consumers through door-to-door salesmen, direct mail or
24



through his own retail stores. Big firms adopt this channel to cut distribution costs and to sell industrial
products of high value. Small producers and producers of perishable commodities also sell directly to local
consumers.
Producer-Retailer-Customer:- This channel of distribution involves only one middlemen called 'retailer'.
Under it, the producer sells his product to big retailers (or retailers who buy goods in large quantities) who
in turn sell to the ultimate consumers.This channel relieves the manufacturer from burden of selling the
goods himself and at the same time gives him control over the process of distribution. This is often suited
for distribution of consumer durables and products of high value.
Producer-Wholesaler-Retailer-Customer:- This is the most common and traditional channel of
distribution. Under it, two middlemen i.e. wholesalers and retailers are involved. Here, the producer sells
his product to wholesalers, who in turn sell it to retailers. And retailers finally sell the product to the
ultimate consumers. This channel is suitable for the producers having limited finance, narrow product line
and who needed expert services and promotional support of wholesalers. This is mostly used for the
products with widely scattered market.
Producer-Agent-Wholesaler-Retailer-Customer:- This is the longest channel of distribution in which
three middlemen are involved. This is used when the producer wants to be fully relieved of the problem of
distribution and thus hands over his entire output to the selling agents. The agents distribute the product
among a few wholesalers. Each wholesaler distribute the product among a number of retailers who finally
sell it to the ultimate consumers. This channel is suitable for wider distribution of various industrial
products.
What is Promotional Mix?
Promotion is dissemination of information about the product, product line, brand or company .Promotion
mix is the process of making channels of information and persuasion to sell a product, service or an idea. We can
also say that Promotion Mix is basically the tool that helps organization in getting its communication objectives.
Following are the items of Promotion Mix:
1. Advertising
2. Direct Marketing (Not traditional part but important part of IMC)
3. Internet Marketing
4. Sales Promotion
5. Publicity
6. Personal Selling
Advertising:
Advertising is basically paid form of non personal communication about the product,organization, service or idea.
Always remember that the nature of advertisement differsfrom one industry to another. Non personal
communication means that getting the immediate feedback from theaudience is not possible.
Adverting is only one element of the promotion mix, but it often considered prominent in the overall marketing
mix design. Its high visibility and pervasiveness made it as an important social and encomia topic in Indian society.
Promotion may be defined as “the co-ordination of all seller initiated efforts to set up channels of information and
persuasion to facilitate the scale of a good or service.” Promotion is most often intended to be a supporting
component in a marketing mix. Promotion decision must be integrated and co-ordinated with the rest of the
marketing mix, particularly product/brand decisions, so that it may effectively support an entire marketing mix
25
strategy. The promotion mix consists of four basic elements. They are:- 1. Advertising 2. Personal Selling 3. Sales
Promotion, and 4. Publicity 1. Advertising is the dissemination of information by non-personal means through paid
media where the source is the sponsoring organization. 2. Personal selling is the dissemination of information by
non-personal methods, like face-to-face, contacts between audience and employees of the sponsoring organization.
Advertising may be defined as the process of buying sponsor-identified media space or time in order to promote a
product or an idea. The American Marketing Association, Chicago, has defined advertising as “any form of nonpersonal presentation or promotion of ideas, goods or services, by an identified sponsor.” What Advertisement Is?
Advertisement is a mass communicating of information intended to persuade buyers to by products with a view to
maximizing a company’s profits.
The elements of advertising are:
1. It is a mass communication reaching a large group of consumers.
2. It makes mass production possible.
3. It is non-personal communication, for it is not delivered by an actual person, nor is it addressed to a
specific person.
4. It is a commercial communication because it is used to help assure the advertiser of a long business life
with profitable sales.
5. Advertising can be economical, for it reaches large groups of people. This keeps the cost per message low.
6. The communication is speedy, permitting an advertiser to speak to millions of buyers in a matter of a few
hours.
7. Advertising is identified communication.
DEFINITION OF ADVERTISISNG
The American Marketing Association, Chicago, has defined advertising as "any form of non-personal presentation
or promotion of ideas, goods or services, by an identified sponsor."
FROM THE ABOVE DEFINITIONS:





Advertisement is a MESSAGE to large groups.
It is in the form of NON_PERSONAL COMMUNICATION.
It persuade the GENERAL PUBLICS to purchase the goods or services, advertised.
It is PAID FOR by advertiser to publisher.
Advertising messages are IDENTIFIED with the advertiser.
Advertising includes the following forms of messages:
The messages carried in


Newspapers and magazines;
On radio and television broadcasts;
Circular of all kinds, (whether distributed by mail, by person, thorough tradesmen, or by inserts in
packages);

Dealer help materials,

Window display and counter – display materials and efforts;

Store signs, motion pictures used for advertising,

Novelties bearing advertising messages and Signature of the advertiser.
26
Advertising Objectives
Each advertisement is a specific communication that must be effective, not just for one customer, but for many
target buyers. This means that specific objectives should be set for each particular advertisement campaign.
Advertising is a form of promotion and like a promotion; the objectives of advertising should be specific. This
requires that the target consumers should be specifically identified and that the effect which advertising is intended
to have upon the consumer should be clearly indicated. The objectives of advertising were traditionally stated in
terms of direct sales. Now, it is to view advertising as having communication objectives that seek to inform
persuade and remind potential customers of the worth of the product. Advertising seeks to condition the consumer
so that he/she may have a favorable reaction to the promotional message. Advertising objectives serve as
guidelines for the planning and implementation of the entire advertising programme.
Advantages of advertising











Advertising is considered multi dimensional.
It helps number of marketing activities.
It is a technique of sales promotion.
Sales volume is increased by advertising.
It helps and supports the salesman in selling the products.
Consumer knowledge about the product is increase by advertising.
It helps the consumer to save their time in purchases.
It helps the manufacturer sell their products.
It helps quick selling is possible which leads to more production at less cast.
The relation between wholesalers and retailers is improved through advertising.
Advertising introduces new products, stimulates markets regarding the existing Product and repeated sales
BENEFITS TO MANUFACTURERS:
1It increase sales volume. On the one hand, it reduces the cost of production and,on the other increases profits.
1.
2.
3.
4.
It helps easy introduction of products into the markets.
It helps to create an image and reputation not only of the product but also of the advertiser.
Retail price maintance is possible.
It helps to establish a direct contact between manufacturers and consumers.
BENEFITS TO WHOLESALERS RETAILERS :
1.
Easy sale of the products is possible since consumers are aware of rhe product and its quality.
1.
2.
3.
4.
It increases the rate of the turnover of stock.
It supplements the selling activities.
The reputation credited is shared by the wholesalers and retailers and alike.
It enables them to have product information.
BENEFITS TO CONSUMERS
1.
Advertising stresses quality and very often prices. This forms an indirect guarantee to the consumers.
Further more, large scale production assured by advertising enables the seller to sell the product at a lower cast.
2.
It provides an opportunity to the customers to compare the merits and demerits of various substitute
products.
27
3.
This is perhaps the only medium through which consumers could know the varied and new uses of a
product.
4.
Modern advertisements are highly informative.
BENEFITS TO SALESMEN
1.
Introducing the product is made easy.
2.
Advertising prepares necessary ground for a salesman to begin his work. Hence sales efforts are reduced.
3.
The contact established with the customer by a salesman is made permanent through advertising.
4.
The salesman can weigh the effectiveness of advertising when he makes a direct contact with the
customer.
BENEFITS TO COMMUNITY
1.
Advertising in general is educative in nature. In the words of the late president Roosevelt of the USA,
‘Advertising brings to the greatest number of people actual knowledge concerning useful things; it is essentially a
form of education and the progress of civilization depends on education'.
2.
Advertising leads to large scale production creating more employment opportunities.
3.
Advertising has made more popular and universal the uses of such inventions as the auto mobiles, radios,
various household appliances. "Advertising nourishes the consuming power of man. Its creates wants for a better
standing of living.. It spurs individual exertion and greater production".
CONCEPT OF SALES PROMOTION
Sales promotion consists of diverse collection of incentive tools, mostly short-term designed to stimulate quicker
and / or greater purchase of a particular product by consumers or the trade.. Sales promotion includes tools for
consumer promotion (for example samples, coupons, prizes, cash refund, warranties, demonstrations, contest);
trade promotion (for example buying allowances, free goods, merchandise allowances, co-operative advertising,
advertising and display allowances, dealer sales contests); and sales-force promotion (for example bonuses,
contests, sales rallies).Sales promotion efforts are directed at final consumers and designed to motivate, persuade
and remind them of the goods and receives that are offered. Sales persons adopt several techniques for sales
promotion.
Definitions of Sales Promotion
W.J. Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations
and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers.
Consumer oriented sales promotion
Kind of
Promotion
Sales Objectives
Coupons
Stimulate demand
Deals
Increase
against
actions
28
Advantages
Disadvantages
Encourage retailer support
Consumers delay purchase
trail; retaliate Reduce consumer risk
competitor's
Consumers delay purchases;
reduce perceived product
value
Premiums
Build goodwill
Consumers like free or reduced- Consumers
buy
price merchandise
premium, not product
for
Contests
Increase
consumer Encourage consumer involvement Require
creative
purchases; build business with product
analytical thinking
inventory
or
Sweepstakes
Encourage
present Get customer to use product and Sales drop after sweepstakes
customers to buy more; store more often.
minimize brand switching
Samples
Encourage new product Low risk for consumer
trial
High cost for company
Continuity
programs
(frequent
promos)
Encourage
purchases
High cost for company
repeat Help create loyalty
user
Point-of-purchase Increase product trial; Provide good product
provide in-store support
displays
for other promotions
Rebates
Encourage
purchase;
decline
Hard to get retailer to
allocate high-traffic space.
customer to Effective at stimulating demand
stop
sales
Product placement Introduce new products; Positive message
demonstrate product use
commercial setting
in
a
Easily copied; steal sales
from
future;
reduce
perceived product value
non- Little
control
over
presentation of product.
Purpose of sales Promotion
Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, while a free
management advisory service comments along-term relationship with a retailer. From the marketer's perspective,
sales promotion serves three essential rolesit informs, persuades and reminds prospective and current customers
and otherselected audiences about a company and its products. Because distribution channels are often long, a
product may pass through many lands between a producer and consumers. Therefore, a producer must inform
middlemen as well as the ultimate consumers or business users about the product. Wholesalers, in turn must inform
retailers and retailers must inform consumers. As the number of potential customers grows and the geographic
dimensions of a market expand, the problems and costs of informing the market increase.
Objectives of Sales Promotion
The basic objectives of sales promotion are:
i) To introduce new products
To induce buyers to purchase a new product, free samples may be distributed or money and merchandise
allowance may be offered to business to stock and sell the product.
ii) To attract new customers
New customers may be attracted through issue of free samples, premiums, contests and similar devices.
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iii) To induce present customers to buy more
Present customers may be induced to buy more by knowing more about a product, its ingredients and uses.
iv) To help firm remain competitive
Sales promotions may be undertaken to meet competition from a firm.
v) To increase sales in off season
Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product.
vi) To increase the inventories of business buyers
Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
Sales Promotion Opportunities and Limitations
o
Increase in sales by providing extra incentive to purchase. May focus on resellers (push), consumers (pull) or
both.
o
o
o
o
o
o
Objectives must be consistent with promotional objectives and overall company objectives.
Balance between short term sales increase and long term need for desired reputation and brand image.
Attract customer traffic and maintain brand/company loyalty.
Reminder functions-calendars, T Shirts, match books etc.
Impulse purchases increased by displays
Contests generate excitement esp. with high payoffs.
Limitations
o
o
o
o
Consumers may just wait for the incentives
May diminish image of the firm, represent decline in the product quality.
Reduces profit margins, customers may stock up during the promotion.
Shift focus away from the product itself to secondary factors, therefore no product differential advantage.
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