Free Business Studies - Class 12th (CBSE) - Revision Notes - N11 - Marketing Management
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- Subject: Business Studies
- Class: 12th (CBSE)
- Chapter Name: Marketing Management
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Revision Notes for CBSE Class 12th - Business Studies
What is a market?
‘Market’ refers to the place where buyers and sellers gather to enter transactions involving the exchange of goods and services. Product market (cotton market, gold or share market), geographic market (national and international market) ,type of buyers (consumer market and industrial market), Quantity of goods transacted (retail market and wholesale market).
What is marketing?
- To move the goods and services from producers to consumers, number of activities such as product designing or merchandising, packaging, warehousing, transportation, branding, selling, advertising and pricing are required. All these activities are referred to as marketing activities.
- Marketing is not merely a post-production activity. It includes many activities that are performed even before goods are produced and continue even after the goods have been sold.
- Activities such as identification of customer needs, collection of information for developing the product, designing suitable product package and giving it a brand name are performed before commencement of the actual production. Similarly, many follow up activities are required for maintaining good customer relations for procuring repeat sale.
Features of marketing
- Need
and Want: Marketing
helps individuals and groups in obtaining what they need and want. A marketer’s job in an organisation is
to identify needs of the target customers and develop products and services
that satisfy such needs. A
need is feeling of being deprived of something. Wants, on the other hand, are
objects that satisfice the needs. A need is feeling of being deprived of
something. Wants, on the other hand, are objects that satisfice the needs.
- Creating
a Market Offering: The
marketers focus on creation of a ‘market offering. Market offering refers to a complete
offer for a product or service, having features like size, quality, taste, at a
certain price, available at a given outlet or location. A good ‘market offer’
is the one which is developed after analysing the needs and preferences of the
potential buyers.
- Customer
Value: The buyers make buying
decisions on their perceptions of the value of the product or service in
satisfying their need, in relation to its cost. A
product will be purchased only if it is value for the money.
- Exchange
Mechanism: Process
of marketing involves exchange of products and services for money. For
any exchange:
- involvement of at least two parties the buyer and the seller.
- each party should be capable of offering something of value to the other.
- each party should have the ability to communicate and deliver the product or service.
- each party should have freedom to accept or reject other party’s offer.
- the parties should be willing to enter into transaction on voluntary basis rather than on the bases of any compulsion.
Functions of marketing
- Marketing Planning
- It is a key responsibility for a marketer. It involves creating detailed plans to meet the organization's marketing goals.
- For instance, if a company that sells color TVs currently has 10% of the market and wants to grow to 20% in the next three years, the marketer must develop a full marketing plan.
- This plan will cover important details like how to increase production and how to promote the TVs. Crucially, it must also include specific steps and actions needed to achieve that 20% market share goal.
- Packaging and Labelling:
- Packaging refers to designing the package for the products. Packaging provides protection of the products and serves as a promotional tool. Labelling refers to designing the label to be put on the package.
- Physical Distribution:
- Two major decision areas under this function include:
- (a) decisions regarding channels of distribution or the marketing intermediaries (like wholesalers, retailers) to be used
- (b) physical movement of the product from where it is produced to a place where it is required by the customers for their consumption or use.
- Promotion:
- Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. The four important methods of promotion include advertising, Personal Selling, Publicity and Sales Promotion. A marketer can use the combination of the promotional tools.
- Pricing of Products:
- Price of product refers to the amount of money customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Generally, lower the price, higher would be the demand for the product and vice-versa. The marketers must properly analyse the factors determining the price of a product.
- Storage or Warehousing:
- Usually there is a time gap between the production or procurement of goods and their sale or use. In order to maintain smooth flow of products in the market, there is a need for proper storage of the products.
- Product Designing and Development:
- The design of the product contributes to making the product attractive to the target customers. A good design can improve performance of a product and give it a competitive advantage in the market. For example, when we plan to buy any product say a motorbike, we not only see its features like cost, mileage, etc. but also the design aspects like its shape, style, etc.
- Gathering and Analysing Market Information:
- It is necessary to identify the needs of the customers and analysis of the available opportunities and threats. For example, rapid growth is predicted in healthy eating alternatives or electronic gadgets. Which of these areas a particular organisation should enter or in which area should it expand requires a careful scanning of the strengths and, weaknesses of the organisation, which is done with the help of careful market analysis.
- Standardisation and Grading:
- Standardisation refers to producing goods of predetermined specifications, which helps in achieving uniformity and consistency in the output. Standardisation reduces the need for inspection, testing and evaluation of the products by the customers.
- Grading is the process of classification of products into different groups, on the basis of some of its important characteristics such as quality, size, etc. Grading is particularly necessary for products which are not produced according to predetermined specifications, such as in the case of agricultural products, say wheat, oranges, etc. Grading ensures that goods belong to a particular quality and helps in realising higher prices for high quality output.
- Branding:
- A very important decision area for marketing is whether to sell the product in its generic name (name of the category of the product, say Fan, Pen, etc.) or to sell them in a brand name (such as Usha Fan or Figo Pen). Brand name helps in creating product differentiations, i.e., providing basis for distinguishing the product of a firm with that of the competitor and build customer’s loyalty and in promoting its sale.
- Transportation:
- Transportation involves physical movement of goods from one place to the other. For example, tea produced in Assam has to be transported not only within the state but to other far off places like Tamil Nadu, Punjab, Jammu and Kashmir and Haryana, Rajasthan, where it is consumed.
- Customer Support Services:
- Customer support services includes after sales services, handling customer complaints and adjustments, procuring credit services, maintenance services, technical services and consumer information. Customer support services prove very effective in bringing repeat sales from the customers and developing brand loyalty for a product.
Marketing Management Philosophies/Concepts
- Production
Concept:
- Availability and affordability were considered crucial for a firm's success.
- During the industrial revolution, demand for industrial goods increased while the number of producers remained limited.
- As a result, demand exceeded supply, making selling goods easy for producers.
- The focus of business activities shifted towards the production of goods.
- Profits were believed to be maximized by producing on a large scale, which reduced the average cost of production.
- Product
Concept:
- Product improvement became the key to profit maximisation of a firm.
- Customers look for products which are superior in quality, performance and features.
- Emphasis of the firms is on quality of products.
- Focus of business activity is bringing continuous improvement in the quality, incorporating new features etc.
- Selling
Concept:
- Customers would not buy, or not buy enough, unless they are adequately convinced and motivated to do so.
- The product quality and availability did not ensure the survival and growth of firms because of the large number of sellers selling quality products.
- Now it was about attracting and persuading customers to buy the product.
- Firms must undertake aggressive selling and promotional efforts to make customers buy their products.
- It was assumed that buyers can be manipulated, persuade, lure or coax the buyers to buy the products.
- Marketing
Concept:
- The purpose of marketing is to generate customer value at a profit.
- Focus on satisfaction of customer’s needs.
- An organisation must identifying the needs of its present and prospective buyers and satisfying them in an effective way.
- All the decisions in a firm are taken from the point of view of the customers.
- Societal
Marketing Concept:
- Business should, not be short-sighted to serve only consumers’ needs. It should consider issues of social welfare also.
- There are various social problems like environmental pollution, deforestation, shortage of resources, population explosion and inflation.
- Any activity which satisfies human needs but is detrimental to the interests of the society at large cannot be justified.
- The societal marketing concept is the extension of the marketing concept.
Marketing Mix
"Marketing mix are the set of – marketing tools that firm uses to pursue its marketing objectives in the target market.”
- Product Mix It refers to important decisions related to the product such as quality of product, design of product packing of product etc.
- Price Mix It refers to important decisions related to fixing the price of a commodity.
- Place Mix It refers to important decisions related to physical distribution of goods and services. These decisions are deciding the channel of distribution, market for distribution.
- Promotion Mix It refers to all the decisions related to promotion of sales of products and services. Following are the tools or elements of promotion. They are also called elements of promotion ‘mix. These include advertising, sales promotion, personal selling, and publicity.
Product Mix
- Branding: is creating a corporate brand identity
for consumer and getting that brand identity imprinted on the minds of
consumer, and this requires brand positioning and brand management.
- Brand: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products—goods or services of one seller or group of sellers and to differentiate them from those of the competitors.
- Brand Name: That part of a brand, which can be
spoken, is called a brand name. In other words, brand name is the verbal
component of a brand. For example, Asian Paints, Safola, Maggie, Lifebuoy,
Dunlop, and Uncle Chips are the brand names.
- Brand Mark: That part of a brand which can be recognised but which is not utter able is called brand mark. It appears in the form of a symbol, design, distinct colour scheme or lettering. For example, the Gattu of Asian Paints or Devil of Onida or symbol of Yogkshma of LIC, or four fingers and a palm of Anacin are all brand marks.
- Trademark: A brand or part of a brand that is given legal protection is called trademark. The protection is given against its use by other firms. Thus, the firm, which got its brand registered, gets the exclusive right for its use. In that case, no other firm can use such name or mark in the country.
- Advantages of Branding to the Marketers
- Enables Making Product Differentiation
- Helps in Advertising and Display Programmes
- Differential Pricing
- Ease in Introduction of New Product
- Advantages of Branding to Customers
- Helps in Product Identification
- Ensures Quality
- Status Symbol
- Characteristics of a Good Brand Name
- The brand name should be short, easy to pronounce, spell and remember e.g., Ponds, VIP, Rin, Vim, etc.
- A brand should suggest the product’s benefits and qualities. It should be appropriate to the product’s function. e.g., Rasika, Genteel, Promise, My Fair Lady and Boost.
- A brand name should be distinctive e.g., Liril, Sprit, Safari, Zodiac.
- The brand name should be adaptable to packing or labelling requirements, to different advertising media and to different languages.
- The brand name should be sufficiently versatile to accommodate new products, which are added to the product line e.g., Maggie, Colgate.
- It should be capable of being registered and protected legally.
- Chosen name should have staying power i.e., it should not get out of date.
- Packaging: refers to the act of designing and producing the container or wrapper of a product.
- Levels of Packaging:
- Primary Package: It refers to the product’s immediate container. In some cases, the primary package is kept till the consumer is ready to use the product (e.g., plastic packet for socks); whereas in other cases, it is kept throughout the entire life of the product (e.g., a toothpaste tube, a match box, etc.).
- Secondary Packaging: It refers to additional layers of protection that are kept till the product is ready for use, e.g., a tube of shaving cream usually comes in a cardboard box. When consumers start using the shaving cream, they will dispose off the box but retain the primary tube.
- Transportation
Packaging: It refers to further packaging components necessary for storage, identification or transportation. For example, a toothpaste manufacturer may send the goods to retailers in corrugated boxes containing 10, 20, or 100 units.
- Labelling: Labels are useful in providing detailed information about the product, its contents, method of use, etc. The label may vary from a simple tag attached to the product indicating some information about the quality or price, to complex graphics that are part of the package.
Pricing Mix
When a product
is bought, some money is paid for it. This money represents the sum of values
that consumers exchange for the benefit of having or using the product.
Factors Affecting Price Determination
- Product Cost: This includes the cost of producing, distributing and selling the product. The cost sets the minimum level or the floor price at which the product may be sold. Generally, all marketing firms strive to cover all their costs and aim at earning a margin of profit over and above the costs. There are broadly three types of costs: viz., Fixed Costs, Variable Costs and Semi Variable Costs. Total Costs is the sum of the fixed, variable and semi-variable cost.
- Extent of Competition in the Market: The price will reach the upper limit in case there is lesser degree of competition while under conditions of more competition, the price will be set at the lowest level. Competitors’ prices and their anticipated reactions are considered before fixing the price of a product. Not only the price but the quality and the features of the competitive products must be examined carefully, before fixing the price.
- Pricing Objectives: If the firm decides to maximize profits in the short run, it will tend to charge maximum price for its products. But if it is to maximize its total profit in the long run, it would opt for a lower per unit price so that it can capture larger share of the market and earn greater profits through increased sales.
- Government and Legal Regulations: To protect the interest of public, Government can intervene and regulate the price of commodities. Government can declare a product as essential product and regulate its price.
- Utility and Demand: The product costs set the lower limits of the price, & the utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay. The buyer will pay up to the point where the utility from the product is at least equal to the sacrifice made in terms of the price paid. The seller would, will try to at least cover the costs.
- Marketing Methods Used: Various elements of marketing such as distribution system, quality of salesmen employed, quality and amount of advertising, sales promotion efforts, the type of packaging, product differentiation, credit facility and customer services provided affect the price of the product. For example, if a company provides free home delivery, it has some of flexibility in fixing prices. Similarly, uniqueness of any of the elements mentioned above gives the company a competitive freedom in fixing prices of its products.
Place
Mix/ Physical
Distribution
It is concerned with making the goods and services available at the right place, so that people can purchase the same.
There are two important decisions relating to this
aspect:
- The first point is regarding physical movement of goods from producers to consumers or users. (Components of Physical Distribution)
- The second point is regarding the channels or using intermediaries in the distribution process. (Distribution Channels)
Components of Physical Distribution
- Order Processing: In a typical buyer seller relationship order placement is the first step. There should be an accurate and speedy processing of orders, to avoid delay or wrong quantity. This would result in customer dissatisfaction, with the danger of loss of business and goodwill.
- Transportation: It is the means of carrying goods from the point of production to the point of sale. It is important because unless the goods are physically made available, the sale cannot be completed.
- Warehousing: It refers to storing and assorting products in order to create time utility in them. There may be difference between the time a product is produced and the time it is required for consumption. For products requiring long term storage (such as agricultural products) the warehouses are located near production sites. The products which are bulky and hard to ship (machinery, automobiles) as well as perishable products (bakery, meat, vegetables) are kept at different locations near the market.
- Inventory Control: Higher the level of inventory, higher will be the level of service to customers but the cost of carrying the inventory will also be high because lot of capital would be tied up in the stock. The decision regarding level of inventory involves prediction about the demand for the product.
Distribution Channels
Functions of Distribution Channels
- Sorting: Middlemen procure supplies of goods from a variety of sources, which is often not of the same quality, nature, and size. For example, a wholesaler of cashew nuts may procure a large quantity from different cashew nut producing areas, which would contain nuts of varied quality and sizes. He then sorts the nuts into homogenous groups on the basis of the size or quality.
- Accumulation: This function involves accumulation of goods into larger homogeneous stocks, which help in maintaining continuous flow of supply.
- Allocation: Allocation involves breaking homogenous stock into smaller, marketable lots. For example, once cashew nuts are graded and large quantities are built, these are divided into convenient packs of say 1 kg,500 gm and 250 gm, to sell them to different types of buyers.
- Assorting: Middlemen build assortment of products for resale. There is usually a difference between the product lines made by manufacturers and the assortment or combinations desired by the users. Perhaps no one manufacturer produces these products in desired combination. Middlemen procure variety of goods from different sources and deliver them in combinations desired by customers.
- Product Promotion: Mostly advertising and other sales promotion activities are organised by manufacturers. Middlemen also participate in certain activities such as demonstrations, special displays contests to increase the sale of products.
- Negotiation: Channels operate with manufacturers on the one hand and customers one, the other. They negotiate the price, quality, guarantee and other related matters with customers so that transfer of ownership is properly affected.
- Risk Taking: In the process of distribution of goods the middlemen take title of the goods and thereby assume risks on account of price and demand fluctuations, spoilage, destruction, etc.
Types of Channels
- Direct Channel (Zero Level)
- Simple and the shortest mode of distribution where in the goods are made available directly by the manufacturers to customers, without involving any intermediary.
- A straight and direct relationship is established between the manufacturer and the customer.
- For example, when a manufacturer sells his goods through his own retail outlets (e.g., Mc Donald, Bata); it is referred to as direct channel.
- Manufacturer-Retailer-Consumer (One Level Channel)
- Goods pass from the manufacture to the retailers who, in turn, sells them to the final users.
- For example, Maruti Udyog sells its cars and vans through company approved retailers.
- This type of distribution network enables the manufacturers to cover wide area of market while retaining control over the Channels.
- Manufacturer-Wholesaler-Retailer-Consumer (Two Level Channel)
- Goods like soaps, oils, clothes, rice, sugar and pulses etc. are sold.
- The wholesaler and retailer act as connecting links between the manufacturer and consumer.
- Manufacturer-Agent-Wholesaler-Retailer-Consumer (Three Level Channel)
- Manufactures use their own selling agents who connect them with wholesalers and then the retailers.
- It is done particularly when the manufacturer carries a limited product line and must cover a wide market. An agent in each major area is appointed, who in turn contact the wholesalers.
Promotion Mix
It refers to combination of promotional tools used by an organisation to achieve its communication objectives. Tools of communication are used by the marketers to inform and persuade customers about their firm’s products.
- Advertising: It is the most used tool of promotion. It is an impersonal form of communication, which is paid for by the marketers (sponsors) to promote some goods or service. The most common modes of advertising are ‘newspapers', 'magazines’, ‘television’, and ‘radio’.
- Features of advertising
- Paid Form: The sponsor must bear the cost of communicating with the prospects
- Impersonality: There is no direct face-to-face contact between the prospect and the advertiser. Advertising creates a monologue and not a dialogue.
- Identified Sponsor: Advertising is undertaken by some identified individual or company, who makes the advertising efforts and bears the cost of it.
- Personal selling: It involves oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making sales. It is a personal form of communication. Companies appoint salespersons to contact prospective buyers and create awareness about the product and make sales.
- Sales promotion: refers to short term incentives, which are designed to encourage the buyers to make immediate purchase of a product or service.
- Commonly used Sales Promotion Activities
- Rebate: Offering products at special prices, to clear off excess inventory. Example, a car manufacturer’s offer to sell a particular brand of car at discount of Rs 10,000, for a limited period.
- Discount: Offering products at less than list price. Example, a shoe company's offer of ‘Discount Up to 50%’
- Refunds: Refunding a part of price paid by customer on some proof of purchase, say on return of empty foils or wrapper. This is commonly used by food product companies, to boost their sales.
- Product Combinations: Offering another product as gift along with the purchase of a product, say offer of a pack of ½ kg of rice with the purchase of a bag of Atta (wheat flour)
- Quantity Gift: Offering extra quantity of the product For example, a shaving cream’s offer of‘40% Extra’ or ‘Buy 2 Get 1 Free’ offer
- Instant Draws and Assigned Gift: For example, ‘Scratch a Card’ or 'Burst a Cracker’ and instantly win a Refrigerator, Car, T-shirt, Computer, with the purchase of a TV.
- Lucky Draw: For example, the offer of a bathing soap to win a gold coin
- Usable Benefit: ‘Purchase goods worth Rs 10,000 and get a holiday package worth Rs 3000 free’.
- Full finance @ 0%: For goods such as Electronic goods, automobiles etc. there are easy financing schemes such as ‘24easy instalments, Eight Up Front and16 To Be Paid by Post Dated Cheques ’.
- Sampling: Offer of free sample of a product, say a detergent powder or toothpaste to potential customers at the time of launch of a new brand.
- Contests: Competitive events involving application of skills
or luck, say solving a quiz.
- Publicity: is a non-personal form of communication.
- Publicity generally takes place when favourable news is presented in the mass media about a product or service.
- For example, if a manufacturer achieves breakthrough by developing a car engine, which runs on water instead of petrol, and this news is covered by television or radio or newspapers in the form of a news item.
- Public relation: involve a variety of programmes designed to promote or protect a company’s image and its individual products in the eyes of the public.
- Their main task is to spread information and build goodwill about the business.
- Example: arranging sports and cultural events like news conferences, seminars and exhibitions Or contributing money and time to certain causes like environment, wildlife, children’s rights, education, etc.
| Advertising | Personal selling |
|---|---|
| Lacks direct feedback; marketing research is needed to judge customers’ reactions. | Provides direct and immediate feedback; salespeople learn customers’ reactions right away. |
| More useful for creating and building consumer interest in the firm’s products. | Plays an important role at the awareness stage of decision making. |
| More useful for marketing to ultimate consumers who are large in number. | More helpful for selling to industrial buyers or intermediaries (dealers/retailers) who are relatively few. |
| An impersonal form of communication. | A personal form of communication. |
| Sends standardized messages; the same message goes to all customers in a segment. | Sales talk is adjusted to the customer’s background and needs. |
| Inflexible; the message cannot be adjusted to each buyer’s needs. | Highly flexible; the message can be adjusted. |
| Reaches the masses; a large number of people can be approached. | Only a limited number of people can be contacted due to time and cost. |
| Very low cost per person reached. | Cost per person is quite high. |
| Covers the market in a short time. | Takes a long time to cover the entire market. |
| Uses mass media such as television, radio, newspapers, and magazines. | Uses sales staff, which has limited reach. |
Flowchart
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