L. J.

Institute of Management Studies

MBA I Semester II
Question Bank Key Marketing Management
(The questions in OR has similar answer to the question above. It will help students to
understand in how many ways one question can be asked.)
Q. 1. Explain the nature and scope of marketing management.
OR
Explain the various marketing management tasks which signify the relevance of marketing
to business.
Answer: Marketing is about identifying and meeting human and social needs.
Marketing management can be defined as the art and science of choosing target markets and
getting, keeping and growing customers through creating, delivering and communicating
superior customer value.
Scope of marketing:
Marketers market 10 main types of entities:1) GOODS:
Physical goods constitute the bulk of most countries production and marketing efforts.
E.g. Cellos Fine grip pen, Lenovos Laptop
2) SERVICES:
As economies advance, a growing proportion of their activities focuses on the production of
services.
E.g. It includes the work of airlines, hotels, barbers etc
3) EVENTS:
Marketers promote time-based events, such as major trade shows, artistic performances, and
company anniversaries. Global sporting events such as the Olympics and the World Cup are
promoted aggressively to both companies and fans.
4) EXPERIENCES:
By orchestrating several services and goods, a firm can create, stage, and market
experiences.
E.g. Theme based restaurant depicting the culture of Gujarat/Rajasthan
5) PERSONS:
Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other
professionals all get help from celebrity marketers. Some people have done a masterful job of
marketing themselves.
E.g. Shah rukh khan promoting Nerolac paints
6) PLACES:
Cities, states, regions, and whole nations compete to attract tourists, residents, factories, and
company headquarters.
Place marketers include economic development specialists, real estate agents, commercial
banks, local business associations, and advertising and public relations agencies.
E.g. Kerala as a state
7) PROPERTIES:
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Properties are intangible rights of ownership to either real property (real estate) or financial
property (stocks and bonds). They are bought and sold, and these exchanges require
marketing.
8) ORGANIZATIONS:
Organizations work to build a strong, favorable, and unique image in the minds of their
target publics.
E.g. Tata as an organization is branded
9) INFORMATION :
The production, packaging, and distribution of information are major
industries. Information is essentially what books, schools, and universities produce, market,
and distribute at a price to parents, students, and communities.
E.g. Government of India promotes the information that free vaccinations are available on
government centers.
IDEAS:
Every market offering includes a basic idea. Charles Revson of Revlon once observed: In
the factory we make cosmetics; in the drugstore we sell hope. Products and services are
platforms for delivering some idea or benefit.
Social marketers are busy promoting such ideas as Friends
Dont Let Friends Drive Drunk and A Mind Is a Terrible Thing to Waste.
Q. 2. Explain the basic philosophies of marketing.
OR
Define the societal marketing concept. How have marketers adopted and implemented this
concept?
OR
The competing concepts under which organizations have conducted marketing activities
include: the production concept, product concept, selling concept, marketing concept, and
holistic marketing concept.- Evaluate the advantages and disadvantages of each concept.
Which concept do you believe is the most effective? Why?
OR
Trends and forces defining the 21st century indicate that Holistic Marketing will be the
future of Marketing. List and explain the four broad components of Holistic Marketing
with relevant examples
OR
Explain how Holistic Marketing concept is different form. Marketing concept by giving
suitable example.
Answer: Production Concept:
The production concept holds that consumers prefer products that are widely available and
inexpensive.
Managers of production-oriented business Concentrate on achieving high production efficiency,
low costs, and mass distribution.
Product Concept:
The product concept proposes that consumers favor products offering the most quality,
performance, or innovative features.
A new or improved product will not necessarily be successful unless its priced, distributed,
advertised, and sold properly.
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Selling Concept:
The selling concept holds that consumers and businesses, if left alone, wont buy enough of
organizations products.
It is practiced most aggressively with unsought goodsgoods buyers dont normally think of
buying such as insurance and cemetery plotsand when firms with overcapacity aim to sell
what they make, rather than make what the market wants.
Marketing Concept:
Marketing concepts he job is to find not the right customers for your products, but the right
products for your customers
The marketing concept holds that the key to achieving organizational goals is being more
effective than competitors in creating, delivering, and communicating superior customer value to
your target markets.
Holistic Marketing Concept:
The holistic marketing concept is based on the development, design, and implementation of
marketing programs, processes, and activities that recognize their breadth and interdependencies.
Holistic marketing acknowledges that everything matters in marketing and that a broad,
integrated perspective is often necessary.
It carries 4 types of marketing:1) Relationship marketing.
Relationship marketing aims to build mutually
satisfying long-term relationships with key
constituents in order to earn and retain their
business.
2) Internal marketing.
Internal marketing, an element of holistic
marketing, is the task of hiring, training, and
motivating able employees who want to serve
customers well.
It ensures that everyone in the organization
embraces appropriate marketing principles,
especially senior management
3) Integrated marketing.
Integrated marketing occurs when the marketer devises marketing activities and assembles
marketing programs to create, communicate, and deliver value for consumers such that the
whole is greater than the sum of its parts.
Two key themes are that
(1) Many different marketing activities can create, communicate, and deliver value and
(2) Marketers should design and implement any one marketing activity with all other
activities in mind.
4) Performance marketing.
Performance marketing requires understanding the financial and nonfinancial returns to
business and society from marketing activities and programs.
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Q. 3. Write a brief note on Managing Holistic Marketing Organization.

Answer: One view of holistic marketing sees it as integrating the value exploration, value
creation, and value delivery activities with the purpose of building long-term, mutually satisfying
relationships and co prosperity among key stakeholders.
Holistic marketers thus succeed by managing a superior value chain that delivers a high level of
product quality, service, and speed.
They achieve profitable growth by expanding customer share, building customer loyalty, and
capturing customer lifetime value.
Holistic marketers address three key management questions:
1. Value explorationHow a company identifies new value opportunities.
2. Value creationhow a company efficiently creates more
promising new value
offerings.
3. Value deliveryHow a company uses its capabilities and infrastructure to deliver the
new value offerings more efficiently.
Q. 4. Being a Marketing Manager of a particular organization, how will you evaluate the
Micro and Macro level factors affecting the Indian Marketing Environment? What will be
its impact on strategic planning activities carried out at different levels of the organization?
OR
Discuss the various marketing environments.
Answer: Macro Environment
Successful companies recognize and respond profitably to unmet needs and trends.
Needs and Trends
Enterprising individuals and companies manage to create new solutions to unmet needs
A fad is unpredictable, short-lived, and without social, economic, and political significance.
A direction or sequence of events with momentum and durability, a trend is more predictable
and durable than a fad; trends reveal the shape of the future and can provide strategic direction.
EXAMPLE trend toward health and nutrition awareness has brought increased government
regulation and negative publicity for firms seen as peddling unhealthy food.
A megatrend is a large social, economic, political, and technological change is slow to form,
and once in place, influences us for some timebetween seven and ten years, or longer.
Macro environment consist of following dimensions :
a) Demographic Environment
Demographic developments often move at a fairly predictable pace. The main one marketers
monitor is population, including the size and growth rate of population in cities, regions, and
nations; age distribution and ethnic mix; educational levels; household patterns; and regional
characteristics and movements.
The following sub parameters are included in it.
1)WORLDWIDE POPULATION GROWTH.
2)POPULATION AGE MIX.
3) Literacy levels of population
b) Economic Environment
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The available purchasing power in an economy depends on current income, prices, savings, debt,
and credit availability.
As the recent economic downturn vividly demonstrated, trends affecting purchasing power can
have a strong impact on business, especially for companies whose products are geared to highincome and price-sensitive consumers.
The following sub parameters are included in it.
1)CONSUMER PSYCHOLOGY
2)INCOME DISTRIBUTION
3)INCOME, SAVINGS, DEBT, AND CREDIT
c)Socio-cultural Environment
From our socio-cultural environment we absorb, almost unconsciously, a world view that defines
our relationships to ourselves, others, organizations, society, nature, and the universe.
Views of ourselves.
Views of others
Views of organizations.
Views of society
Views of nature
Views of the universe
d)Natural Environment
The Earths renewal of its natural resources such as forests, agricultural products, marine
products, etc must be taken into account. There are also the natural non-renewable resources
such as oil, coal, minerals, etc that may also impact the organisations production.
e)Technological Environment
It is the essence of market capitalism to be dynamic and tolerate the creative destructiveness of
technology as the price of progress.
Transistors hurt the vacuum-tube industry, and autos hurt the railroads. Television hurt the
newspapers, and the Internet hurt them both.
d)Political-Legal Environment
The political and legal environment consists of laws, government agencies, and pressure groups
that influence various organizations and individuals.
Sometimes these laws create new business opportunities. Mandatory recycling laws have boosted
the recycling industry and launched dozens of new companies making new products from
recycled materials.
Two major trends are the increase in business legislation and the growth of special-interest
groups.
Q. 5. How can a retailer of male apparels (premium segment) identify growth opportunities
and overcome the strategic planning gaps?
OR
With the help of the Ansoff grid, suggest how a business school can chart out its growth
strategies.
OR
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Select a product of your choice. How will you, as a marketer use the Ansoff matrix as a tool
for strategic marketing planning?
Answer: Potential of a business based on growth opportunities from global expansion,
repositioning or retargeting and strategic outsourcing.
Assessing Growth Opportunities
Assessing growth opportunities includes planning new
businesses, downsizing, and terminating older
businesses. If there is a gap between future desired
sales and projected sales, corporate management will
need to develop or acquire new businesses to fill it.
The first option is to identify opportunities for growth
within current businesses (intensive opportunities).
The second is to identify opportunities to build or acquire businesses related to current
businesses (integrative opportunities).The third is to identify opportunities to add attractive
unrelated businesses (diversification opportunities).
INTENSIVE GROWTH
Ansoff's matrix enables businesses to decide growth strategy based on products and the markets
that the products are aimed at. Under the matrix they have the option to stick with the markets
and products they know (market penetration) or change one thing the market (market extension)
or the product (product development). For those prepared to take accept big failure risks for
potentially larger rewards there is diversification into new products and markets.
The Ansoff grid is based on the following
strategies:
Market-penetration strategy (gain more market
share) - This involves increasing sales of an
existing product and penetrating the market further
by promoting the product heavily or reducing
prices to increase sales. This strategy has the
lowest risk strategy as the firm knows the product
and the market. Market penetration is often used
by supermarkets and large retail chains.
Market-development strategy (new markets for current products) Under a market development
strategy a firm sells existing products to new markets. For example a sandwich shop which is
doing well in one area, expands and opens another sandwich shop in a different region. Through
market development our sandwich shop has the potential to become a national chain. There are

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different ways to define new markets including different locations for sales to aiming products at
different customer groups (age, background, interests, income).
Product-development strategy (new products for current markets) - The business develops/introduces

new products into existing markets with the aim of selling the new product to existing customer
groups. For example Microsoft with their Xbox2 game console introduced the Kinect, an add on
that allows customers to play without the use of a controller, much like the Nintendo Wii. This is
an example of a new product which simply needs to be added onto the existing model aimed at
the existing market. Product Development is a medium risk strategy as the business is familiar
with the market but not the new product.
Diversification strategy (new products for new markets) - Diversification involves selling new

products to new markets. For example if a business which usually sells food to families, decides
it would like to sell cars to single men it would be diversifying. Diversification is a high risk
strategy as the business is unfamiliar with the product and the target market. However as it also
has the potential to produce the highest rewards many businesses are prepared to take the risk.
Corporate managements first course of action should be a review of opportunities for
improving existing businesses. One useful framework for detecting new intensive- growth
opportunities is a product-market expansion grid. It considers the strategic growth
opportunities for a firm in terms of current and new products and markets.
The company first considers whether it could gain more market share with its current products in
their current markets, using a market-penetration strategy. E.g. Use of Monaco biscuits at
different occasions such as starters during dinner.
Next it considers whether it can find or develop new markets for its current products, in a
market-development strategy. E.g. Increasing the geographical scope of a company e.g.
Starbucks opening new outlets.
Then it considers whether it can develop new products of potential interest to its current markets
with a product-development strategy.
E.g. Hyundai launching new version of i20.
Later the firm will also review opportunities to develop new products for new markets in a
diversification strategy.
E.g. Going for totally new product and market as Nirma went in to education sector from laundry
products
INTEGRATIVE GROWTH
A business can increase sales and profits through backward, forward, or horizontal integration
within its industry. Merck has gone beyond developing and selling prescription pharmaceuticals.

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DIVERSIFICATION GROWTH
Diversification growth makes sense when good opportunities exist outside the present
businessesthe industry is highly attractive and the company has the right mix of business
strengths to succeed. From its origins as an animated film producer, The Walt Disney Company
has moved into licensing characters for merchandised goods, publishing general interest fiction
books under the Hyperion imprint, entering the broadcast industry with its own Disney Channel
as well as ABC and ESPN.
Q. 6. Explain various qualitative and quantitative methods of demand forecasting.
Answer: The major concepts in demand measurement are market demand and company demand.
Within each, we distinguish among a demand function, a sales forecast, and a potential.
MARKET DEMAND
The marketers first step in evaluating marketing opportunities is to estimate total market
demand. Market demand for a product is the total volume that would be bought by a defined
customer group in a defined geographical area in a defined time period in a defined marketing
environment under a defined marketing program.
MARKET FORECAST
The market demand corresponding to this level is called the market forecast.
MARKET POTENTIAL
The market forecast shows expected market demand, not maximum market demand. For the
latter, we need to visualize the level of market demand resulting from a very high level of
industry marketing expenditure, where further increases in marketing effort would have little
effect. Market potential is the limit approached by market demand as industry marketing
expenditures approach infinity for a given marketing environment
COMPANY DEMAND
Company demand is the companys estimated share of market demand at alternative levels of
company marketing effort in a given time period. It depends on how the companys products,
services, prices, and communications are perceived relative to the competitors. Other things
equal, the companys market share depends on the relative scale and effectiveness of its market
expenditures. Marketing model builders have developed sales response functions to measure how
a companys sales are affected by its marketing expenditure level, marketing mix, and marketing
effectiveness.
COMPANY SALES FORECAST

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Once marketers have estimated company demand, their next task is to choose a level of
marketing effort. The company sales forecast is the expected level of company sales based on a
chosen marketing plan and an assumed marketing environment.
COMPANY SALES POTENTIAL
Company sales potential is the sales limit approached by company demand as company
marketing effort increases relative to that of competitors. The absolute limit of company demand
is, of course, the market potential. The two would be equal if the company got 100 percent of the
market. In most cases, company sales potential is less than the market potential, even when
company marketing expenditures increase considerably.
Different methods for demand estimating are as follows
Marketing executives want to estimate total market potential, area market potential, and total
industry sales and market shares.
1. Total Market Potential
Total market potential is the maximum amount of sales that might be available to all the firms in
an industry during a given period, under a given level of industry marketing effort and
environmental conditions.
2. Area Market Potential
Companies face the problem of selecting the best territories and allocating marketing budget
optimally among these territories. Therefore, it needs to estimate the market potential of different
cities, states, and nations.
3. Market-Buildup Method
The market-buildup method calls for identifying all the potential buyers in each market and
estimating their potential purchases. This method produces accurate results if we have a list of all
potential buyers and a good estimate of what each will buy.
4. Multiple-Factor Index Method
The method most commonly used in consumer markets is a straightforward index method. A
single factor is rarely a complete indicator of sales opportunities thus it makes sense to develop a
multiple-factor index, with each factor assigned a weight. Many companies compute other area
indexes as a guide to allocating marketing resources.
Industry Sales and Market Shares
Besides estimating total potential and area potential, a company needs to know the actual
industry sales taking place in its market. This means identifying competitors and estimating
sales.
Estimating Future Demand
Very few products or services lend themselves to easy forecasting. In most markets, total
demand and company demand are not stable. Good forecasting becomes a key factor in company
success. The more unstable the demand, the more critical is forecast accuracy, and the more
elaborate is forecasting procedure.
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Survey of Buyers Intentions

Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions.
Because buyer behaviour is so important, buyers should be surveyed.
Composite of Sales Force Opinions
Each sales representative estimates how much each current and prospective customer will buy of
each of the companys products.
Expert Opinion
Companies can obtain forecasts from experts, including dealers, distributors, suppliers,
marketing consultants, and trade associations. Many companies buy economic and industry
forecasts from well-known economic-forecasting firms. Occasionally, companies will invite a
group of experts to prepare a forecast using any one of the following methods:
1) Group-discussion method.
2) Pooling of individual estimates.
3) Delphi method.
Past Sales Analysis
Sales forecasts can be developed on the basis of past sales. Time-series analysis consists of
breaking down past time series into four components: Trend, Cycle, Seasonal. and Erratic and
projecting these components into the future.
Market Test Method
When buyers do not plan their purchases carefully or experts are not available or reliable, a
direct-market test is desirable. A direct-market test is especially desirable in forecasting new
product sales or established product sales in a new distribution channel or territory.
Q. 7. What do you mean by marketing research? Discuss the process of Marketing
Research with a suitable example.
OR
Suppose you are the brand manager for Do-the-Wild-Thing, an unscented deodorant
shampoo aimed at Generation-X members. Sales of your product have been declining.
Exploratory research suggests your brand is not price competitive. Outline a research plan
that would provide you with the information you need to decide what to do. Explain why
you selected certain methods and not other ones.
Answer: Marketing research as the systematic design, collection, analysis, and reporting of
data and findings relevant to a specific marketing situation facing the company.
Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives
Step 2: Develop the Research Plan
Data sources
There are two types of Data sources
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1) Primary Primary data are data freshly gathered for a specific purpose or for a specific
research project. Most marketing research projects involve some primary data collection.
The different sources of primary (consumers, clients, retailers, wholesalers, competitors,
employees, etc).
2) Secondary - Secondary data are data that were collected for another purpose and already
exist. Researchers usually start out their investigation by examining secondary data..
Secondary data provides a starting point and offers the advantages of low cost and ready
availability. Secondary data (company records, libraries, industrial associations,
chambers of industry and commerce, government bodies, marketing research
organizations, universities, etc).
Research approaches
1) Observational research - Fresh data can be gathered by observing the relevant actors and
settings.
2) Ethnographic research
3) focus group research - A focus group is a gathering of six to ten people who are carefully
selected based on certain demographic, psychographic, or other considerations and brought
together to discuss various topics of interest at length.
4) survey research - Companies undertake surveys to learn about peoples knowledge, beliefs,
preferences, and satisfaction, and to measure these magnitudes in the general population.
5) Behavioral data - Customers leave traces of their purchasing behaviour in store scanning data,
catalogue purchases, and customer databases. Much can be learned by analysing these data.
6) Experimental research - The most scientifically valid research is experimental research. The
purpose of experimental research is to capture cause-and-effect relationships by eliminating
competing explanations of the observed findings.
Research instruments
1) Questionnaires
2) Qualitative measures
3) Technological devices
Sampling plan
1) Sampling unit: who should we survey?
2) Sample size: how many people should we survey?
3) Sampling procedure: how should we choose the respondents?

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Contact method
1) Mail questionnaire
2) Telephone interview
3) Personal interview
4) Online interview
Step 3: Collect the Information- different automation techniques of data collection like
computers or telecommunication are used for data collection.
Step 4: Analyze the Information- Information can be analyzed in tabular or frequency
distributions. Different statistical tools like mean, median etc can be used.
Step 5: Present the Findings- The research findings needs to be presented in such a manner that
is easy to understand, interpret and can be applied in solving the management problems.
Step 6: Make the Decision Depending on marketers confidence marketers can choose its the
findings of the research.
Q. 8. Briefly explain the term Customer Perceived Value. Mention some companies and
identify their practices through which they have consistently delivered high customer
value.
OR
Why should marketers be obsessed with offering the correct value proposition to
consumers? Explain the concept of customer perceived value.
Answer: Customers tend to be value-maximisers. Customers estimate which offer will deliver
the most perceived value and act on it. Customer perceived value (CPV) is the difference
between the prospective customers evaluation of all the benefits and all the costs of an offering
and the perceived alternatives. Total customer value is the perceived monetary value of the
bundle of economic, functional, and psychological benefits customers expect from a given
market offering. Total customer cost is the bundle of costs customers expect to incur in
evaluating, obtaining, using, and disposing of the given market offering, including monetary,
time, energy, and psychic costs. Customer perceived value is based on the difference between
what the customer gets and what he or she gives for different possible choices.
Determinants of Customer perceived value.
1.
2.
3.
4.
5.

Total customer benefit

Total customer cost
Product benefit
Monetary cost
Services benefit

6. Time cost
7. personnel benefit
8. Energy cost
9. Image benefit
10. Psychological cost
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Heres a company that is a master at delivering customer value.

1. Avis
2. Google
3. Samsung mobile phone
4. Yahoo!
5. Hyatt hotels
Example:
Kingfisher airline is Indias answer to virgin of United kingdom. Here passengers are addressed
and treated as guests. . On seating, guests are welcomed through a video recorded message of
the chairmans CEO, Vijay Mallya, on individuals in flight entertainment system. The system
offers a choice of video and audio channels. The airline embodies the chairmans message,
enjoy the good time with king fisher airline.
Q. 9. Explain the concept of customer life time vales (CLV). Which parameters would you
use calculating CLV.
Answer: Marketing is the art of attracting and keeping profitable customers. The 80/20 rule
states that the top 20 percent of the customers may generate as much as 80 percent of the
companys profits. Customer profitability the ultimate test
Ultimately, marketing is the art of attracting and retaining profitable customers. The well known
20-80 rule says that the top 20% of the customers may generate as much as 80% of the
companys profits. The largest customers who are yielding the most profit. The largest customers
demand considerable service and receive the deepest discounts. The smallest customers pay full
price and receive minimal service, but the costs of transacting with small customers reduce their
profitability. The mid size customers receive good service and pay nearly full price and are often
the most profitable.
A company should not pursue and satisfy all customers.
A profitable customer is a person, household, or company that over time yields a revenue stream
that exceeds by an acceptable amount the companys cost stream of attracting, selling, and
servicing that customer.
Customer Profitability
A profitable customer is a person, household, or company that over time yields a revenue stream
that exceeds by an acceptable amount the companys cost stream of attracting, selling, and
servicing that customer. Customer profitability can be assessed individually, by market segment,
or by channel. Most companies fail to measure individual customer profitability.
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Competitive Advantage
Competitive advantage is a companys ability to perform in one or more ways that competitors
cannot or will not match. Michael Porter urged companies to build a sustainable competitive
advantage. Few competitive advantages are sustainable, at best they may be leverage. A leverage
advantage is one that a company can use as a springboard to new advantages. Any competitive
advantage must be seen by customers as a customer advantage.
Measuring Customer Lifetime Value
Customer Lifetime Value (CLV) describes the net present value of the stream of future profits
expected over the customers lifetime purchases. CLV calculations provide a formal quantitative
framework for planning customer investment and helps marketers to adopt a long-term
perspective.
Q. 10. In light of various consumer costs and values known to you, explain the
contemporary Value delivery network for the use of marketers for any product of your
choice.
OR
Explain the concept of value chain and its relevance.
Answer: Marketing and Customer Value
Marketing
involves
satisfying
consumers needs
and wants. The
task
of
any
business is to
deliver customer
value at a profit.
The
Value
Delivery Process
The traditional
view of marketing is that the firm makes something and then sells it. Marketing will not work in
economies where people face abundant choice. The new belief of marketing begins with the
planning process.
Value creation and delivery consists of three parts:
Choosing the value (segment the market, define target market, develop offering)
Providing the value (product features, prices, and distribution channels)
Communicating the value (sales force, advertising, and promotional tools)
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The Value Chain

Porter suggested that activities within an organisation add value to the service and products that
the organisation produces, and all these activities should be run at optimum level if the
organisation is to gain any real competitive advantage. If they are run efficiently the value
obtained should exceed the costs of running them i.e. customers should return to the organisation
and transact freely and willingly. Michael Porter suggested that the organisation is split into
primary activities and support activities. Michael Porters Value Chain (Figure) identifies
nine strategically relevant activities that create value and costs (five primary and four support
activities).
A) Primary activities:
1) Inbound logistics (material procurement) - Refers to goods being obtained from the
organisation's suppliers and to be used for producing the end product.
2) Operations (turn into final product) - Raw materials and goods are manufactured into the final
product. Value is added to the product at this stage as it moves through the production line.
3) Outbound logistics (shipping and warehousing) - Once the products have been manufactured
they are ready to be distributed to distribution centres, wholesalers, retailers or customers.
Distribution of finished goods is known as outbound logistics.
4) Marketing (marketing and sales) - Marketing must make sure that the product is targeted
towards the correct customer group. The marketing mix is used to establish an effective strategy,
any competitive advantage is clearly communicated to the target group through the promotional
mix.
5) Servicing (service after the sale) - After the product/service has been sold what support
services does the organisation offer customers?. This may come in the form of after sales
training, guarantees and warranties.
B) Support activities:
1) Procurement - This department must source raw materials for the business and obtain the best
price for doing so. The challenge for procurement is to obtain the best possible quality available
(on the market) for their budget.
2) Technology development - The use of technology to obtain a competitive advantage is very
important in todays technological driven environment. Technology can be used in many ways
including production to reduce cost thus add value, research and development to develop new
products and the internet so customers have 24/7 access to the firm.
3) Human resource management - The organisation will have to recruit, train and develop the
correct people for the organisation to be successful. Staff will have to be motivated and paid the
market rate if they are to stay with the organisation and add value. Within the service sector
such as the airline industry, employees are the competitive advantage as customers are
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purchasing a service, which is provided by employees; there isn't a product for the customer to
take away with them.
4) Firm infrastructure - Every organisations needs to ensure that their finances, legal structure
and management structure work efficiently and helps drive the organisation forward. Inefficient
infrastructures waste resources, could affect the firm's reputation and even leave it open to fines
and sanctions.
The firms task is to examine its costs and performance in each value-creating activity and to
look for ways to improve performance. It looks at how primary and support activities can work
together to help the organisation create a superior competitive advantage. If an activity is
performed well it is said to add value.
Q. 11. Explain the various factors affecting the consumption behavior related to dining out
(having a meal outside home).
OR
Discuss the various factors affecting consumer buying behavior.
OR
Explain the various factors affecting the consumer behavior related to any product of your
choice.
OR
Which set of factors shall affect a consumers decision to purchase water purifier?
Answer: A consumers buying behaviour is influenced by cultural, social, and personal factors.
Cultural factors exert the broadest and deepest influence.

Cultural Factors
Culture is the fundamental determinant of a persons wants and behaviours. Each culture consists
of smaller subcultures that provide more specific identification and socialization for their
members.
Subcultures include nationalities, religions, racial groups, and geographic regions. Multicultural
marketing grew out of careful marketing research that revealed that different ethnic and
demographic niches did not always respond favourably to mass-market advertising. One class
depiction of social classes defines seven ascending levels:
1) Lower lowers
2) Upper lowers
3) Working class
4) Middle class
5) Upper middles
6) Lower uppers
7) Upper uppers
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Classes have several characteristics:

Those within a class tend to behave more alike than persons from two different social classes.
Persons are perceived as occupying inferior or superior positions according to social class. Social
class is indicated by a cluster of variables (occupation, income, etc.) rather than by any single
variable. Individuals can move up or down the social-class ladder. Social classes show distinct
product and brand preferences in many areas. Social classes differ in media preferences. There
are language differences among the social classes.
Ex: McDonalds is a brilliant example of adaptation to the specificities of each culture and each
market. Well aware of the importance to have an offer with specific products to meet the needs
and tastes of consumers from different cultures, the fast-food giant

Social Factors
In addition to cultural factors, a consumers behaviour is influenced by such social factors as
reference groups, family, and social roles and statuses. A persons reference groups consist of all
the groups that have a direct (face-to-face) or indirect influence on his/her attitudes or behaviour.
Groups having a direct influence on a person are called membership groups. Some memberships
groups are primary groups such as family, friends, neighbors, and co-workers with whom the
person interacts fairly continuously and informally. Some membership groups are secondary
groups such as religious or professional groups that tend to be more formal.
People are significantly influenced by their reference groups in at least three ways:
Reference groups expose an individual to new behaviours and lifestyles, influencing attitudes
and self-concept.
They create pressures for conformity that may affect actual product and brand choices
People are also influenced by groups to which they do not belong:
- Aspirational groups are those a person hopes to join.
- Dissociative groups are those whose values or behaviour an individual rejects.
Family
The family is the most important consumer-buying organisation in society, and family members
constitute the most influential primary reference group.
Marketers are interested in the roles and relative influence of family members in the purchase of
a large variety of products and services.
Roles and Statuses
A person participates in many groups and a persons position in each group can be defined in
terms of role and status. Each role carries a status. Marketers must be aware of the status symbol
potential of products and brands.

Personal Factors
A buyers decisions are also influenced by personal characteristics. These include the buyers
age and stage in the life cycle; occupation and economic circumstances; personality and selfconcept; and lifestyle and values.
Age and Stage in the Life Cycle
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People buy different goods and services over a lifetime. Consumption is also shaped by the
family life cycle. In addition, the psychological life cycle stage may matter. Critical life events or
transitions give rise to new needs.
Stages of family life cycle:
1. Bachelor stage: young, single not living at home. Few financial burdens, fashion opinion
leader, recreation oriented.
2. Honeymooners/Newly married couple: Young no children. Highest purchase rate.
3. Parenthood: Youngest child under six
4. Post Parenthood: Grown up children, couple living with dependent children
5. Dissolution: older married couple, children not living with them.
Occupation and Economic Circumstances
Occupation influences consumption patterns and economic circumstances influence product.
These comprise of: Spendable income (level, stability, and time pattern), Savings and assets
Debts, Borrowing power, Attitudes toward spending and saving.
Personality and Self-Concept
Each person has personality characteristics that influence his or her buying behaviour.
Personality is a set of distinguishing human psychological traits that lead to relatively consistent
and enduring responses to environmental stimuli. The idea is that brands have personalities and
consumers are likely to choose brands whose personalities match their own. We define brand
personality as the specific mix of human traits that may be attributed to a particular brand.
Jennifer Aaker researched brand personalities and identified the following traits:
1. Sincerity (down-to-earth, honest, wholesome, and cheerful)
2. Excitement (daring, spirited, imaginative, and up-to-date)
3. Competence (reliable, intelligent, and successful)
4. Sophistication (upper-class and charming)
5. Ruggedness (outdoorsy and tough)
Lifestyles and Value
People from the same subculture, social class, and occupation may lead quite different lifestyles.
A lifestyle is a persons pattern of living in the world as expressed in activities, interests, and
opinions. Lifestyle portrays the whole person interacting with his or her environment.
Marketers search for relationships between their products and lifestyle groups. Lifestyles are
shaped partly by whether consumers are money-constrained or time-constrained.
Q. 12. Stating adequate examples, explain the various consumer buying decisions.
OR
Discuss in detail various stages of the Consumer Buying Process? How can marketers learn
about the stages in the buying process for their product? List and briefly characterize the
methods.
OR

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The information search in the buying decision process involves gathering information from
a number of sources. Name the four different sources and provide examples of each that an
individual would use when buying a microwave oven.
OR
Explain the stages of consumer buying decision process, giving suitable examples.
Answer: These basic psychological processes play an important role in understanding how
consumers actually make their buying decisions. Marketers must understand every facet of
consumer behaviour. Figure depicts the Five-Stage Model of the Consumer Buying Process
Five-Stage Model of the Consumer Buying Process
Problem Recognition
The buying process starts when the buyer recognises a problem or need. The need can be
triggered by internal or external stimuli.. Marketers need to identify the circumstances that
trigger a particular need so that they can
develop marketing strategies that trigger
consumer interest.
Information Search
The information sources fall into the
following four groups: Personal (family,
friends),
Commercial
(advertising,
Websites, salespeople), Public (mass
media, consumer organisations) and
Experiential (handling, examining, using
the product)
Generally speaking the consumer
receives the most information about a
product from commercial sources. The
most effective information often comes
from personal sources or public sources
that are independent authorities. The
Internet has changed information search. Most consumers are hybrid consumers.
The consumer will come to know only a subset of these brands (awareness set). Some brands
will meet initial buying criteria (consideration set). Only a few will remain as strong contenders
(choice set) and the consumer makes a final choice from this set.
The company must also identify the other brands in the consumers choice set so that it can plan
the appropriate competitive appeals.
Evaluation of Alternatives
No single process is used by all consumers or by one consumer in all buying situations. The most
current models see the process as cognitively orientated. First, the consumer is trying to satisfy a
need. Second, the consumer is looking for certain benefits from the product solution. Third, the

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consumer sees each product as a bundle of attributes with varying abilities for delivering the
benefits sought to satisfy this need.
Beliefs and Attitudes
Evaluations often reflect beliefs and attitudes. Through experience and learning, people acquire
beliefs and attitudes. These in turn influence buying behaviour.
A Belief is a descriptive thought that a person holds about something.
An Attitude is a persons enduring favourable or unfavourable evaluation, emotional feeling,
and action tendencies toward some object or idea.
Expectancy-Value Model
The expectancy-value model of attitude formation contends that consumers evaluate products
and services by combining their brand beliefs - the positives and negatives - according to
importance. Most consumers consider several attributes in their purchase decisions.
Purchase Decisions
In the evaluation stage, the consumer forms preferences among the brands in the choice set. The
consumer may also form an intention to buy the most preferred brand. In executing a purchase
intention, the consumer may make up to five sub-decisions: Brand, Dealer, Quantity, Timing and
Payment-method
Non-Compensatory Models of Consumer Choice
Consumers may not always want to invest so much time and energy to evaluate brands. They
often take mental shortcuts that involve various simplifying choice heuristics. With noncompensatory models of consumer choice, positive and negative attribute considerations do not
necessarily net out.
With the conjunctive heuristic method - the consumer sets a minimum acceptable cutoff level for
each attribute and chooses the first alternative that meets this minimum
With the lexicographic heuristic method - the consumer chooses the best brand on the basis of its
perceived most important attribute.
With the elimination-by-aspects heuristic method - the consumer compares brands on an attribute
selected and brands not meeting this attribute are eliminated
Consumers do not adopt only one type of choice rule and may combine two or more decision
rules.
Intervening Factors
Even if consumers form brand evaluations, two general factors can intervene between the
purchase intention and the purchase decision. The first factor is the attitudes of others. The extent
to which another persons attitude reduces the preference for an alternative depends on two
things:
The intensity of the other persons negative attitude toward the consumers preferred alternative
The consumers motivation to comply with the other persons wishes
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The second factor is unanticipated situational factors that may erupt to change the purchase
intention. A consumers decision to modify, postpone, or avoid a purchase decision is heavily
influenced by perceived risk. There are many types of risks that consumers may perceive in
buying and consuming a product. Some of the risks are as follows : Functional risk, Physical risk
Financial risk, Social risk, Psychological risk and Time risk
Marketers must understand the factors that provoke a feeling of risk in consumers and provide
information and support to reduce perceived risk.
Post-Purchase Behaviour
After the purchase, the consumer might experience dissonance about their purchase and be alert
to information that supports their decision. Marketing communications should supply beliefs and
evaluations that reinforce the consumers choice and help him or her feel good about the brand.
Marketers must monitor post-purchase satisfaction, post-purchase actions, and post-purchase
uses.
Post-Purchase Satisfaction
Satisfaction is a function of the closeness between expectations and the products perceived
performance.
Post-Purchase Actions
Satisfaction or dissatisfaction with the product will influence subsequent behaviour. A
dissatisfied consumer may abandon or return the product.
Post-Purchase Use and Disposal
Marketers should also monitor how buyers use and dispose of the product. A key driver of sales
frequency is product consumption rate. One potential opportunity to increase frequency of
product use is when consumers perceptions of their usage differ from reality.
Marketers must also need to know how the consumer disposes of the product once it is used.
Q. 13. Compare and contrast Consumer and Business Markets and Discuss the stages (buy
phases) of the Industrial Buying Process.
OR
How is consumer market different from business market?
Your college wants to technologically upgrade the teaching learning facilities available in
your campus. They plan to buy latest LCD projectors for all the classrooms. Suggest
suitable steps for the buying process.
Answer: Business Market:
Fewer, larger buyers - The business marketer normally deals with far fewer, much larger buyers
than the consumer marketer does
Close supplier-customer relationship - Because of the smaller customer base and the importance
and power of the larger customers, suppliers are frequently expected to customize their offerings
to individual business customer needs.
Professional purchasing - Business goods are often purchased by trained purchasing agents, who
must follow their organizations purchasing policies, constraints, and requirements.
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Several buying influences - More people typically influence business buying decisions. Buying
committees consisting of technical experts and even senior management are common in the
purchase of major goods.
Geographically concentrated buyers - The geographical concentration of producers helps to
reduce selling costs. At the same time, business marketers need to monitor regional shifts of
certain industries.
Direct purchasing - Business buyers often buy directly from manufacturers rather than through
intermediaries
Consumer Market:
Multiple sales call
Derived demand - The demand for business goods is ultimately derived from the demand for
consumer goods. For this reason, the business marketer must closely monitor the buying patterns
of ultimate consumers.
Inelastic demand - The total demand for many business goods and services is inelastic that is, not
much affected by price changes.
Fluctuation demand - The demand for business goods and services tends to be more volatile than
the demand for consumer goods and services. A given percentage increase in consumer demand
can lead to a much larger percentage increase in the demand for plant and equipment necessary
to produce the additional output.
Q. 14. Your college wants to technologically upgrade the teaching learning facilities
available in your campus. They plan to buy latest LCD projectors for all the classrooms.
Suggest suitable steps for the buying process
OR
Discuss business buying process.
Answer: The following eight stages:

Problem recognition

General need description

Product specification

Supplier search

Proposal solicitation

Supplier selection

Order-routine specification

Performance review

Problem Recognition
The buying process begins when someone in the company recognises a problem or need. The
recognition can be triggered by internal or external stimuli.
General Need Description and Product Specification
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Next, the buyer determines the needed items general characteristics and requirements.
Supplier Search
The buyer next tries to identify the most appropriate suppliers through trade directories, contacts
with other companies, trade advertisements, and trade shows.
Proposal Solicitation
The buyer invites qualified suppliers to submit proposals. If the item is complex, the buyer will
require a detailed written proposal from each qualified supplier. Business marketers must be
skilled in researching, writing, and presenting proposals.
Supplier Selection
Before selecting a supplier, the buying centre will specify desired supplier attributes and indicate
their relative importance. To rate and identify the most attractive suppliers, buying centres often
use a supplier-evaluation model.
Order-Routine Specifications
After selecting suppliers, the buyer negotiates the final order, listing the technical specifications,
the quantity needed, the expected time of delivery, return policies, warranties, and so on.
Performance Review
The buyer periodically reviews the performance of the chosen supplier(s). Here are the
commonly used methods:

The buyer may contact the end users and ask for their evaluations

The buyer may rate the supplier on several criteria using a weighted score method

The buyer might aggregate the cost of poor performance to come up with adjusted costs of
purchase, including price

The performance review may lead to the buyer to continue, modify, or end a supplier relationship

Q. 15. What is the rationale behind market segmentation? What is target marketing?
OR
Marketing success largely depends on the effective STP strategies adopted by the firm.Discuss the above statement with two examples of your choice.
Answer: A market segment consists of a group of customers who share a similar set of needs
and wants. Rather than creating the segments, the marketer's task is to identify them and decide
which one(s) to target. Segment marketing offers key benefits over mass marketing. The
company can often better design, price, disclose, and deliver the product or service and also can
fine-tune the marketing program and activities to better reflect competitors' marketing.
One way is to identify preference segments. Homogeneous preferences exist when all
consumers have roughly the same preferences; the market shows no natural segments. At the
other extreme, consumers in diffused preferences vary greatly in their preferences. If several
brands are in the market, they are likely to position themselves throughout the space and show
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real differences to match differences in consumer preference. Finally, clustered preferences

result when natural market segments emerge from groups of consumers with shared preferences.
Q. 16. Explain the bases for segmenting consumer markets, with relevant examples.
OR
Explain the various bases of segmentation available to a marketer of personal care & home
care products, with examples.
OR
Explain the basis for segmenting the consumer market
OR
You are an MNC manufacturing washing machines and want to introduce one of your
latest models in India with following specifications:
5 kg slim size model for small space and small to medium clothing load,
5-Star rated energy efficiency, wash performance and spin-performance,
Programs available for Cotton /Synthetic /Delicate /Wool /Hand wash
Programmable for Quick Rinse, Spin & Drain needs,
Additional selection of Pre wash/Rinse Hold/Super Rinse/Drain/Crease Care/Eco/Bio/No
spin/Child-Lock functions,
The LCD display shows remaining time indication and error message indication,
A large transparent door with 180 degrees opening angle,
Free Installation Servicing for 6 months
Model is Priced at the Higher-End of the price range.
What are the variables on the basis of which you will segment your market? Why?
OR
The Backpack (bags which are put on the backs) market in India is growing faster than
most of the developed markets. Backpacks are mainly used for carrying laptops, some
clothes, a water bottle and some extra space for other items. VIP and Samsonite are the
major players in this segment. You have been appointed as a consultant for a new player
which wants to enter this segment. What are the criteria for segmentation that you will use
for evaluating this segment? What are the bases of segmentation you will use for
identifying segments in this category?
Answer: A market segment consists of a group of customers who share a similar set of needs
and wants.
Basis of segmentation are Geographic, demographics, and psycho-graphic while others look at
behavioral considerations such as consumer responses to benefits, use occasions, or brands.
Regardless of which type of segmentation scheme is employed, the key is that the marketing
programme can be profitably adjusted to recognize customer differences.
Geographic Segmentation
Geographic segmentation calls for dividing the market into different geographical units. More
and more, regional marketing means marketing right down to a specific postal code.
Demographic Segmentation
In demographic segmentation the market is divided into groups on the basis of variables such as
age, family size, family life cycle, gender, income, occupation, education, religion, race,
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generation, nationality, and social class. Consumer needs, wants, usage rates, and product and
brand preferences are often associated with demographic variables. Demographic variables are
easy to measure.
Age and Life-Cycle Stage: Consumer wants and abilities change with age.
Life Stage: Persons in the same part of the life cycle may differ in their life stage. Life stage
defines a persons major concern. These life stages present opportunities for marketers who can
help people cope with their major concerns.
Gender: Men and women tend to have different attitudinal and behavioural orientations, based
partly on genetic makeup and partly on socialization. Some traditionally more male-orientated
markets, are beginning to recognise gender segmentation, changing how they design and sell
their products.
Income: Income segmentation is a long-standing practice in product and service categories.
However, income does not always predict the best customers for a given product. Increasingly,
companies are finding that their markets are hourglass-shaped as middle-market Americans
migrate toward more premium products.
Generation: Each generation is profoundly influenced by the times in which it grows up. They
share similar outlooks and values. Marketers often advertise to a cohort group by using icons and
images prominent in the experiences of such a cohort group.
Social Class: Social class has a strong influence on preferences for consumers. Many companies
design products and services for specific social classes.
Psychographic Segmentation
Psychographics is the science of using psychology and demographics to better understand
consumers. In psychographic segmentation, buyers are divided into different groups on the basis
of lifestyle or personality or values. One of the most popular commercially available
classification systems is SRI Consulting Business Intelligences VALS framework.
The major tendencies of the four groups with high
resources are innovators, thinkers, achievers and
experiencers. The major tendencies of the four groups
with lower resources are believers, strivers, makers
and strugglers.
Behavioural Segmentation
In behavioural segmentation, buyers are divided into
groups on the basis of their knowledge, attitude,
toward, use of, or response to a product.
Decision Roles: People play five roles in a buying
decision. These are: Initiator, Influencer, Decider,
Buyer and User
Behavioural Variables: Many marketers believe that
behavioural variables are the best starting points for
constructing market segments.
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Occasions: Occasions can be defined in terms of the time of day, week, month, year or in terms
of other well-defined temporal aspects of a consumers life.
Benefits: Buyers can be classified according to the benefits they seek.
User Status: Markets can be segmented into non-users, ex-users, potential users, first-time users,
and regular users of a product.
Usage Rates: Markets can be segmented into light, medium, and heavy product users. Heavy
users often account for a small percentage of the market but possess a high percentage of total
consumption.
Buyer-Readiness Stage: A market consists of people in different stages of readiness to buy a
product. Some are unaware of the product, some are aware, some are informed, some are
interested, some desire and some intend to buy.
Loyalty Status
Buyers can be divided into four groups according to brand loyalty status: Hard-core loyals, Split loyals,
Shifting loyals and Switchers. A company can learn a great deal by analysing the degrees of brand
loyalty.
Attitude: Five attitude groups can be found in a market: Enthusiastic, Positive, Indifferent, Negative and
Hostile.

Q. 17. Which are the different levels of market segmentation? How does a market leader
defend its leadership position? Which strategies can be adopted by a marketer in the
maturity stage?
OR
Markets can be segmented at four levels. Briefly describe each and explain the benefits
associated with segmenting the market at each of the four levels.
Answer: The starting point for discussing segmentation is mass marketing. In mass marketing,
the seller engages in the mass production, mass distribution, and mass promotion of one prod
uct for all buyers. Mass marketing is that it creates the largest potential market, which leads to
the lowest costs, which in turn can lead to lower prices or higher margins. However, many critics
point to the increasing splintering of the market, and the proliferation of advertising media and
distribution channels, which are making it difficult and increasingly expensive to reach a mass
audience. Some claim that mass marketing is dying. Most companies are turning to
micromarketing at one of four levels: segments, niches, local areas, and individuals.
Segment Marketing
Market segment consists of a group of customers who share a similar set of needs and wants. The
marketer does not create the segments. The marketers task is to identify the segments and decide
which one(s) to target.
Market segments can be defined in many different ways as follows:

One way to carve up a market is to identify preference segments

Homogeneous preferences

Diffused preferences

Clustered preferences

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Niche Marketing
A niche is a more narrowly defined customer group seeking a distinctive mix of benefits.
Marketers usually identify niches by dividing a segment into sub-segments.
Niche marketers presumably understand their customersneeds so well that the customers
willingly pay a premium. Globalization has facilitated niche marketing. The low cost of setting
up shop on the Internet has led to many small business start-ups aimed at niches.
Local Marketing
Target marketing is leading to marketing programmes tailored to the needs and wants of local
customer groups. Local marketing reflects a growing trend called grassroots marketing.
Marketing activities concentrate on getting as close and personally relevant to individual
customers as possible. A large part of local, grassroots marketing is experiential marketing that
promotes a product or service not just by communicating its features and benefits, but by also
connecting it with unique and interesting experiences.
Customerization
The ultimate level of segmentation leads to segments of one, customized marketing, or
one-to-one marketing. Today customers are taking more individual initiative in determining
what and how to buy. Customerization combines operationally driven mass customization with
customized marketing in a way that empowers consumers to design the product and service
offering of their choice. Each business unit will have to decide whether it would gain more by
designing its business system to create offering for segments or for individuals. Customization is
certainly not for every company.

Q. 18. Explain the relevance of target marketing and positioning in marketing.

Answers: All marketing strategy is built on STP - Segmentation, Targeting, and Positioning. A
market segment consists of a group of customers who share a similar set of needs and wants.
Once the firm has identified its market-segment opportunities, it has to decide how many and
which ones to target. Marketers are increasingly combining several variables in an effort to
identify smaller, better-defined target groups. This has led some market researchers to advocate a
needs-based market segmentation approach.
A company discovers different needs and groups in the marketplace, targets those needs and
groups that it can satisfy in a superior way, and then positions its offering so that the target
market recognises the companys distinctive offering and image.
If a company does an excellent job of positioning, then it can work out the rest of its marketing
planning and differentiation from its positioning strategy. We define positioning as follows:
Positioning is the act of designing the companys offering and image to occupy a distinctive
place in the mind of the target market. The goal is to locate the brand in the minds of
consumers to maximise the potential benefit to the firm. A good brand positioning helps guide
marketing strategy by clarifying the brands essence, what goals it helps the consumer achieve,
and how it does so in a unique way - customer-focused value proposition.
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Segmentation, Targeting and positioning Model of McDonalds:

McDonalds has segmented their products according to bases of Demographic, Psychographic
and Behavioral. They have segmented their products and positioned their products according to
kids, students and family. But they havent segmented their products according to the Adult
target group. Also they havent started segment related to breakfast in every outlet.
Segmentation:
McDonalds in India segmentation it has done is on three different bases:
1) Demographic Segmentation: Kids, Family and Students
McDonalds offers different products like Happy Meal which includes a free toy for kids. For
families it has made different outlets and meals which are suitable for takeaways and drive-thru.
McDonalds has made its environment which is suitable for students of school to hang out with
their friends and can get their lunch at McDonalds.
2) Psychographic segmentation: Convenience and lifestyle
McDonalds has adopted itself according to the convenience and lifestyle of the Indian
consumers, as India has a huge vegetarian population so McDonalds came up with a different
and new product line which includes items like Mc Veggie burger and Mc Aloo tikki Burger.
They also made McDonalds as a place to relax and even for entertainment.
3) Behavioral segmentation: Occasions, for e.g. Birthday Parties of kids
McDonalds can get more customers by whom they can get most of the share of India Fast Food
Industry but they should emphasis on their Targeting technique.
In India positioning of McDonalds has been directed as a Family restaurant. Then they started
positioning according to the kids as well by introducing new advertising of toys with their
products such as Happy Meal.
Q. 19. The market leader must work hard to stay on top of its market. Various strategies
are crafted by the organization to achieve this objective.- Describe these strategies and
any relevant sub strategies that are necessary for accomplishing the primary objective of
the organization.
Answers: The dominant firm normally gains the most when the total market expands. In general,
the market leader should look for new customers or more usage from existing customers.
New Customers
Every product class has the potential of attracting buyers who are unaware of the product or who
are resisting it because of price or lack of certain features. A company can search for new users
among three groups:
Those who might use it but do not (market-penetration strategy)
Those who have never used it (new-market segment strategy)
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Those who live elsewhere (geographical-expansion strategy)

More Usage
Usage can be increased by increasing the level of quantity of consumption or increasing the
frequency of consumption. Increasing the amount of consumption can sometimes be done
through packaging or product design. Increasing frequency of use involves identifying additional
opportunities to use the brand in the same basic way or identifying completely new and different
ways to use the brand.
To generate additional usage opportunities, a marketing programme can communicate the
appropriateness and advantages of using the brand more frequently in new or existing situations
and /or remind consumers to actually use the brand as close as possible to those situations.
Another potential opportunity to increase frequency of use is when consumersperceptions of
their usage differ from the reality of their usage. The second approach is to identify completely
new and different applications. Product development can spur new uses.
Defending Market Share
While trying to expand total market size, the dominant firm must continuously defend its current
business.
What can the market leader do to defend its terrain?
By continuous innovationdeveloping new product and customer services, distribution
effectiveness, and cost cutting - it keeps its competitive strength and value to customers.
In satisfying customer needs, a distinction can be drawn between responsive marketing,
anticipative marketing, and creative marketing. A responsive marketer finds stated need and fills
it. An anticipative marketer looks ahead into what needs customers may have in the near future.
A creative marketer discovers and produces solutions customers did not ask for but to which they
enthusiastically respond. Even when it does not launch offensives, the market leader must not
leave any major flanks exposed.
A dominant firm can use the six defence strategies:
Position defence - Position defense means occupying the most desirable market space in
consumers' minds, making the brand almost impregnable
Flank defence - Although position defense is important, the market leader should also erect
outposts to protect a weak front or possibly serve as an invasion base for counterattack.
EX-Cadbury came up with five star to protect overall market share of Cadbury dairy milk
Preemptive defence - A more aggressive maneuver is to attack before the enemy starts its
offense. A company can launch a preemptive defense in several ways. It can wage guerrilla
action across the market-hitting one competitor here, another there-and keep everyone off
balance; or it can try to achieve a grand market envelopment.
EX- Seiko has launched more than 2000 models
Counteroffensive defence - When attacked, most market leaders will respond with a
counterattack. In a counteroffensive, the leader can meet the attacker frontally or hit its flank or
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launch a pincer movement. An effective counterattack is to invade the attacker's main territory so
that it will pull back to defend it.
EX- Toyota launched lexus to responds to Mercedes attack
Mobile defence - In mobile defense, the leader stretches its domain over new territories that can
serve as future centers for defense and offense through market broadening and market
diversification. Market broadening shifts focus from the current product to the underlying
generic need.
EX- Itc entered into fmcg products
Contraction defence - Large companies sometimes must recognize that they can no longer
defend all their territory. The best course of action then appears to be planned contraction (also
called strategic withdrawal): giving up weaker territories and reassigning resources to stronger
territories.
EX- tata sold lakme to hul
Q. 20. Discuss the following statement: A company that is a market follower has no
marketing strategy of its own.
Answer: Some years ago, Theodore levitt wrote an article entitle innovative imitation, in
which he argued that strategy of product imitation might be as a profitable as a strategy of
product innovation. Innovator bears the expense of developing the new product, getting it into
distribution, and informing and educating the market. The reward for all this work and risk is
normally market leadership. However, another firm can come along and copy or improve on the
new product.
Market follower:
Thats not to say that market followers lack strategies. A market
follower must know how to hold current customers and win a fair share of new ones. Each
follower tries to bring distinctive advantages to its target market-location, services, financing.
Because the follower is often a major target of attack by challengers.
Types of marketing strategy of market follower:
1) Counterfeiter: The counterfeiter duplicates the leaders product and packages and sells it on
the black market or through disreputable dealers. Music firms, Apple, and Rolex have been
plagued by the counterfeiter problem.
2)Cloner: The cloner emulates the leaders products, name, and packaging, with slight
variations.
EX.-Parle-G=Prem-G, Puma=Pama
3)Imitator: The imitator copies some things from the leader but maintains differentiation in
terms of packaging, advertising, pricing, or location. The leader doesnt mind the imitators as
long as the imitator doesnt attack the leader aggressively. Fernandez Pujals grew up in Fort
Lauderdale, Florida, and took Dominos home delivery idea to Spain, where he borrowed
$80,000 to open his first store in Madrid.
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EX.-Onida, Videocon
4)Adapter: The adapter takes the leaders products and adapts or improves them. The adapter
may choose to sell to different markets, but often it grows into the future challenger, as many
Japanese firms have done after improving products developed elsewhere.
EX.- Micromax
Q. 21. Write a note on challenger strategies.
OR
Explain the strategies of market challenger.
OR
Explain the competitive strategies that can be adopted by challengers?
OR
Hindustan Unilever the market leader in the fast moving consumer goods category is facing
a tough competition from Proctor and Gamble, ITC and other small players. What
strategies do you suggest for Hindustan Unilever to defend its market share?
OR
Being the 2nd ranked brand in its category, what strategies would you propose to manage
competition for your brand?
Answer: Market challengers have gained ground or even overtake a leader. Toyota today
produce more cars than general motors, Lowes is putting pressure on home depot. AMD has
been chipping away at Intels market share. Challengers set high aspirations, leveraging their
resource while market leader often runs the business as usual.
Choosing a general attack strategy
Frontal attack:In a pure frontal attack, the attacker matches its opponents product, advertising, price, and
distribution. The principal of force says that the side with the greater resource will win. A
modified frontal attack, such as cutting price, cam work if the market leader doesnt retaliate, and
if the competitor convinces the market that its product is equal to the leaders.
Ex.-Amul Product
Flank attack:An enemys weak spot are natural targets. A flank attack can be directed along two strategic
dimensions geographic and segmental. In a geographic attack, the challenger spots areas where
the opponent is underperforming.
Ex. - Pepsi to co-cola
Encirclement attack:Encirclement maneuver is an attempt to capture a wide a slice of the enemys territory through
blitz. it means lunching a grand offensive on several front encirclement makes sance when the
challenger commands superiors resource believes a swift encirclement will break the opponents
will.
Ex. - FMCG Product
Bypass attack:The most indirect assault strategy is bypassing the enemy altogether and attacking easier market
to broaden the firms resource base. This strategy of three line approach: diversifying into

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unrelated products, diversifying into new geographical market, and leapfrogging into new
technologies to supplant existing product.
Ex.-Pepsi
Guerrilla attack:Guerrilla attack consists of waging smalls intermittent attack to hairballs and demoralizes the
opponent and eventually secure permanent footholds. The guerrilla challengers use both
conventional and unconventional means of attack.
EX. - Micromax
Q. 22. Service quality dimensions are important in marketing of services. How do these
dimensions affect the marketing of DTH (Direct-to-home) services?
OR
What is services marketing? How is it different from the marketing of goods? Explain the
Service quality Model with reference to hospital services in health-care sector.
OR
Define services and explain the characteristics of services.
OR
Explain generic difference between Product & Services. What challenges do these
differences pose to a marketer? Respond by explaining through befitting example(s).
OR
How is the marketing of services unique? Identify strategies adopted by marketers for
overcoming the challenges of marketing of services.
OR
Briefly explain the distinctive characteristics of services. Briefly explain any three major
marketing decisions in Retailing
OR
When the physical product cannot easily be differentiated, the key to competitive success
may lie in adding valued services and improving quality. Explain How?
Answer: Introduction
A service is the non material equivalent of a good .A service provision is an economic activity
that does not result in ownership but implying an exchange of value between seller and buyer in
the market place, and this differentiates it from providing physical goods.
DEFINITION
According to Philip kotler,A service is an act or performance that one party can offer to another
that is essentially intangible and does not result in the ownership of anything. Its production may
or may not be tied to a physical product
Characteristics of services
Services possess four unique inherent characteristics not found in goods:
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1.Intangibility:
Services are intangible unlike physical products, they can not seen, tasted felt, heard, or smelled
before they are bought. The person getting a face lift cannot see the exact result before the
purchase, and the patient in the psychiatrists office cannot know the exact outcome.
2.Inseparability:
Inseparability is the next unique feature of services. Some experts refer to it by the term
immediacy. In fact, services are marked by two kind of inseparability. In fact, services are
marked by two kind of inseparability:
i)Inseparability of production and consumption
ii)Inseparability of the service from the person who possesses the skill and performs the service.
3.Variability:
Service are also marked by variability/individuality/.This is so because of three reason.
i) The inseparability of the service from the provider leads to some variability.
ii) Service are highly people intensive and anything that is people intensive is bound to be
marked by variability.
iii) In service, the effect varies dependent on when and where the service is provided.
4. Perishability
Services cannot be stored. Some doctors charge patients for missed appointments because the
service value existed only at that point. The perish ability of services is not a problem when
demand is steady. When demand is fluctuates, service firms have problems.
The service quality of a firm is tested at each service encounter.
Service Quality Model (If Asked)
Customer Expectations
Customers form service expectations from many sources. Some expectations stem from past
experiences, word-of-mouth and advertising. In
general, customers compare the perceived
service with the expected service. If the
perceived service falls below the expected
service, customers are disappointed. If the
perceived service meets or exceeds their
expectations, they are apt to use the provider
again. Successful companies add benefits to
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their offering that not only satisfy customers but also surprise and delight them. Delighting
customers is a matter of exceeding expectations.
A service-quality model that highlights the main requirements for delivering high service quality
that identifies five gaps that cause unsuccessful delivery.
The following five gaps that cause unsuccessful delivery:
Gap between consumer expectations and management perception
Gap between management perception and service-quality specification
Gap between service-quality specifications and service delivery
Gap between service delivery and external communications
Gap between perceived service and expected service
Based upon this service-quality model, these researchers identified the following five
determinants of service quality, in order of importance:
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Based on these five factors, the researchers developed the 21-item SERVQUAL scale:
Reliability
Empathy
Providing service as promised
Giving customers individual attention
Dependability in handling customers service
Employees who deal with customers in a
problems
caring fashion
Performing services right the first time
Having the customers best interests at heart
Providing services at the promised time
Employees who understand the needs of their
Maintaining error-free records
customers
Convenient business hours
Responsiveness
Keeping customers informed as to when
Tangibles
services will be performed
Modern equipment
Prompt service to customers
Visually appealing facilities
Willingness to help customers
Employees who have a neat, professional
Readiness to respond to customers requests
appearance
Visually appealing materials associated with
the service
Assurance
Employees who instill confidence in
customers
Making customers feel safe in their
transactions
Employees who are consistently courteous
Employees who have the knowledge to answer
customer questions
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Q. 23. How has IT affected the distribution of goods and services? Which are the unique
characteristics of advertising and personal selling?
OR
Which are the key characteristics of advertising and personal selling?
Answer: Advertising and personal selling are two most important methods to create awareness
and creating and increasing demand for goods and services. These are widely used throughout
the world to introduce the products to the prospective buyers and pushing the sales. But the two
are different from each other in many ways. The points of difference between the two are as
follows: 1. Personal selling involves direct interaction of salesmen with individuals. Advertising
is non-personal and is addressed to the customers in general. 2. Personal selling is confined to a
particular area; advertisement is generally found to cover a larger number of people. 3. In
personal selling there is a two way communication. The salesman explains his viewpoint to the
potential buyer and knows about his/ her reaction. In advertisement there is one way
communication; the targeted persons' reactions cannot be known immediately. 4. In Personal
selling there is only one channel of transmission of messages i.e., personal talk of the salesman
with the potential buyers; advertisement offers a wide choice of channels, visual, audio such as
radio and audiovisual such as television.
Q. 24. What is an Integrated Marketing Communication Program? Discuss the 5 Ms of
Advertising Program?
Answer: Marketing communications, are the means by which firms attempt to inform, persuade,
and remind consumers - directly or indirectly - about the products and brands that they sell.
Marketing communications represent the voice of the brand and are a means by which it can
establish a dialogue and build relationships with consumers. Marketing communications
performs many functions for consumers.
As defined by the American Association of Advertising Agencies, integrated marketing
communications (IMC) is a concept of marketing communications planning process designed to
assure that all brand contacts received by a customer or prospect for a product, service, or
organization are relevant to that person and consistent over time. Such a plan evaluates the
strategic roles of a variety of communications disciplines such as general advertising, direct
response, sales promotion, and public relations and combines these disciplines to provide clarity,
consistency and impact.
EX: Coca-Cola - Coca-Cola Life
Recently, Coca-Cola launched a new product to its long standing line of soft drinks, called
'Coca-Cola Life' along with a month long campaign. Coca-Cola Life fits in the same kind of
category as Coke Zero and Diet Coke - another one of Coca-Colas attempts to release a
healthier option to its main heavily sugary product.
The campaign is being rolled out across 7,000 outdoor locations nationwide with billboards, bus
and digital screen ads; these are all being supported by print, digital, experiential and point of

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sale activity. Although television is not being used the buzz on social media since the drinks
launch has been mainly positive.
They then can make the five major decisions known as the 5Ms:
Mission: What are the advertising objectives? Sales goals, Advertising objectives
Money: How much to spend? Stage in PLC, market share, consumer base, competition, clutter,
advertising frequency, product substitutability.
Message: What message should be sent? Message generation, message evaluation and selection,
message execution, social responsibility
Media: What media should be used? Reach, frequency, impact, major types of media, specific
type of media vehicle, media timings, and geographical media allocation
Measurement: How should the results be evaluated? Communication impact, sales impact.

Q. 25. Explain various methods for determination of Advertising Budget. Critically

compare them with respect to their pros and cons
OR
Discuss the various advertising budget methods
OR
Discuss some of the methods of establishing the total marketing communications budget
with an example
Answer: Deciding On the Advertising Budget
How does a company know if it is spending the right amount?
Although advertising is treated as a current expense, part of it really is an investment in building
brand equity. The following are five specific factors to consider when setting the advertising
budget:
Stage in the product life cycle - New products typically merit large advertising budgets to build
awareness and to gain consumer trial. Established brands usually are supported with lower
advertising budgets, measured as a ratio to sales
Market share and consumer base - High-market-share brands usually require less advertising
expenditure as a percentage of sales to maintain share. To build share by increasing market size
requires larger expenditures.
Competition and clutter - In a market with a large number of competitors and high advertising
spending, a brand must advertise more heavily to be heard. Even simple clutter from
advertisements not directly competitive to the brand creates a need for heavier advertising.
Advertising frequency - The number of repetitions needed to put across the brand's message to
consumers has an obvious impact on the advertising budget.
Product substitutability - Brands in less-well-differentiated or commodity-like product classes
(beer, soft drinks, banks, and airlines) require heavy advertising to establish a differential image.
Establish the Total Marketing Communications Budget
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One of the most difficult marketing decisions is determining how much to spend on promotion.
Industries and companies vary considerably in how much they spend on promotion. Companies
decide on the promotion budget in four common ways: the affordable method, percentage-ofsales method, competitive-parity method, and objective-and-task method.
Affordable Method
Many companies set the promotion budget at what they think the company can afford. This
method completely ignores the role of promotion as an investment and the immediate impact on
sales volume. It leads to an uncertain annual budget, and makes long-range planning difficult.
Percentage-of-Sales Method
Many companies set promotion expenditures at a specified percentage of sales (current or
anticipated) or the sales price. Supporters of the percentage-of-sales method see a number of
advantages. Promotion expenditures will vary with what the company can afford. It
encourages management to think of the relationship among promotion cost, selling price, and
profit per unit. It encourages stability when competing firms spend approximately the same
percentage of their sales on promotion. The percentage-of-sales method has little to justify it. It
views sales as the determiner of promotion rather than as the result. It leads to a budget set by the
availability of funds rather than by market opportunities. It discourages experimentation with
countercyclical promotion or aggressive spending. Year-to-year sales fluctuations interfere with
long-range planning.
There is no logical basis for choosing the specific percentage. It does not encourage building the
promotion budget by determining what each product and territory deserves.
Ex: if profits in a period are low, it might not be the fault of sales or advertising. But if you stick
with the same percentage figure, you'll automatically reduce your advertising allotment. There's
no way around it: 2% of $10,000 is less than 2% of $15,000. Such a cut in the advertising
budget, if profits are down for other reason, may very well lead to further losses in sales and
profits. This in turn will lead to further reductions in advertising investment, and so on.
Competitive-Parity Method
Some companies set their promotion budget to achieve share-of-voice parity with competitors.
Two arguments are made in support of the competitive-parity method. Competitors expenditures
represent the collective wisdom of the industry. Maintaining competitive parity prevents
promotion wars. Neither argument is valid.
Ex: Carry out a really comprehensive competitor review. Work out where, and how often, your
main competitors are advertising. Are they primarily opting for print ads or have they plastered
every billboard between here and the moon with their logo? From this, you should be able to
work out (around about) what your competitors are spending. To remain competitive in the same
market, you may need to make sure that your brand is as visible as your competitors. You may
need to match their advertising budget.
Objective-and-Task Method
The objective-and-task method calls upon marketers to develop promotion budgets by defining
specific objectives, determining the tasks that must be performed to achieve these objectives, and
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estimating the costs of performing these tasks. The sum of these costs is the proposed promotion
budget. The objective-and-task method has the advantage of requiring management to spell out
its assumptions about the relationship among rands spent, exposure levels, trial rates, and regular
usage. A major question is how much weight marketing communications should receive in
relation to alternatives such as product improvement, lower prices, or better service. The answers
depend on where the companys products are in their life cycles - Whether they are commodities
or highly differentiable products or whether they are routinely needed or have to be sold.
Ex: You should set specific objectives: not just "Increase sales," but, for example, "Sell 25%
more of product X or service Y by attracting the business of teenagers." Then determine what
media best reaches your target market and estimate how much it will cost to run the number and
types of advertisement you think it'll take to get that sales increase. You repeat this process for
each of your objectives. When you total these costs, you have your projected budget.
Q. 26. Which are the various ways in which a marketer can communicate with its
customers personally?
Personal Communication Channels
Personal communication channels involve two or more persons communicating directly face-toface, person to audience, over the telephone, or through e-mail. Personal communication
channels derive their effectiveness through individualized presentation and feedback.
Advocate channels consist of company salespeople contacting buyers in the target market.
Expert channels consist of independent experts making statements to target buyers.
Social channels consist of neighbors, friends, family members, and associates talking to target
buyers. Personal influence carries especially great weight in two situations: With products that
are expensive, risky, or purchased infrequently and Where the product suggests something about
the users status or taste.
Communication researchers are moving toward a social-structure view of interpersonal
communication. They see society as consisting of cliques, small groups whose members interact
frequently. A liaison is a person who connects two or more cliques without belonging to either.
A bridge is a person who belongs to one clique and is linked to a person in another clique. Many
companies are becoming acutely aware of the power of word of mouth or buzz. In some cases,
positive word of mouth happens in a natural way. Buzz is managed. Companies can take the
following steps to stimulate personal influence channels to work on their behalf:
Identify influential individuals and companies and devote extra effort to them
Create opinion leaders by supplying certain people with the product on attractive terms
Work through community influentials such as presidents of social, religious, and other
organisations
Use influential or believable people in testimonial advertising
Develop advertising that has high conversation value
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Develop word-of-mouth referral channels to build business

Establish an electronic forum
Use viral marketing
Viral marketing involves passing on company-developed products, services, or information from
user to user. Marketers must be careful in reaching out to consumers. Consumers can resent
personal communications if unsolicited.

Q. 27. Advertising can perform a number of functions in business markets. Name and
explain six of those functions.
Answer: The advertising objectives must flow from prior decisions on target market, brand
positioning, and the marketing programme. An advertising goal (or objective) is a specific
communication task and achievement level to be accomplished with a specific audience in a
specific period of time. To Increase Among 30 Million Homemakers Who Own Automatic
Washers The Number Who Identify Brand X As A Low-Sudsing Detergent ,And Who Are
Persuaded That It Gets Clothes Cleaner, From 10% To 40% In One Year.
Advertising objectives can be classified according to whether their aim is to inform, persuade,
remind and reinforce.
Information - aims to create brand awareness and knowledge of new products or new features of
existing products. One Of The Most Memorable Ads Ever Starred Australian Rugby Player Jacko
For Energizer Batteries. Jacko Was Dressed As Battrie And Brust Into A Subway Car, Repeatedly
Shouting Out The Brand Name Helpless Early-Morning Commuters. Unfortuneatly , Although
People Remembred The Brand Name They Hated The Ad !Brand Awreness Cannot Come At
The Expense Of Brand Attitudues.
Persuasive - aims to create liking, preference, conviction, and purchase of a product or service.
Example:- Ujala Fabric Whitener , A Brand In India , Shot To Prominence By Introdusing It
Self Through Comparitive Ads
Reminder - aims to stimulate repeat purchase of products and services. Expensive , Four Colour
Cocacola Ads In Mazagine Are Intended To Remind People To Purchase Cocacola.
Reinforcement - aims to convince purchasers that they made the right choice. The advertising
objective should emerge from a thorough analysis of the current marketing situation.
To create brand preference
To create differentiation of companys offerings from competitors.
Q. 28. Explain in depth, the concepts of creative strategy and appeals, supported with
relevant examples.
Creative Strategy
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Communication effectiveness depends on how a message is being expressed as well as the

content of the message itself. Ineffective communication may mean that the wrong message was
used or the right message was expressed poorly. Creative strategies are how marketers translate
their messages into specific communication. Creative strategies can be broadly classified as
either informational or transformational appeals.
Informational Appeals
An informational appeal elaborates on product or service attributes or benefits.
Examples are:
Problem solving ads - Moov-dard mitaye chutki me, ENO-Kam suru sirf 6 second me
Product demonstration ads - Oral-B tooth brush with tongue cleaner
Product comparison ads - Smartphones ads( camera, processor, supporting system etc.)
Testimonials
Informational appeals assume very rational processing of the communication on the part of the
consumer - logic and reason rule. There are three types of informational appeals:
Conclusion drawing
One-versus-two-sided arguments - one-sided presentations that praise a product would be more
effective than two-sided arguments that also mention shortcomings.
Order of argument presentations
Each of these appeals has their supporters and distracters and depends heavily upon the target
audience for the message.
Transformational Appeals
A transformational appeal elaborates on a non-product-related benefit or image. It might depict:
What kind of person uses a brand
What kind of experience results from using the brand
Transformational appeals often attempt to stir up emotions that will motivate purchase
Communicators use negative appeals such as:
Fear - Cyber crime ads (government of india,cuber crime department), Tax payment deadline ads
etc.
Guilt
Shame - boroplus-sukha chahera,chipchipa chahera
(brush their teeth, have an annual health checkup) or stop doing things (smoking, alcohol abuse,
overeating).
Messages are most persuasive when they are moderately discrepant with what the audience
believes. Communicators also use positive emotional appeals such as:
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Humour - Fevicol
Love Surf Excel Daag Ache Hai, Cadbury.
Pride - Sar uthake jio-HDFC life insurance
Joy - Pappu pass ho gya
Motivational or borrowed interest devices are often employed to attract consumer attention
and raise their involvement with an ad. Borrowed interest techniques are thought to be necessary
in the tough new media environment characterised by low involvement consumer processing and
while competing with ad and programmeming clutter.
These borrowed interest approaches can attract attention and create more liking and belief in the
sponsor, but they may also:
Detract from comprehension
Wear out their welcome fast
Overshadow the product
Attention getting tactics are often too effective and distract from brand or product claims. One
challenge in arriving at the best creative strategy is figuring out how to break through the
clutter to attract the attention of the consumer - but still be able to deliver the intended message.
The magic of advertising is to bring concepts to life in the minds of the consumer target.
Q. 29. What are the different steps involved in personnel selling? Explain.
OR
Provide the steps in the selling process. What would be the two most difficult steps for most
salespeople and why?
The Six Steps
Step 1: Prospecting and Qualifying
The first step in selling is to identify and qualify prospects.
More companies are taking responsibility for finding and qualifying leads.
Leads can be categorized, with hot prospects turned over to the field sales force.
Step 2: Pre-approach
The salesperson needs to learn as much as possible about the prospect company. The salesperson
should set call objectives.
Step 3: Presentation and Demonstration
The salesperson now tells the product story to the buyer, following the AIDA formula:
Gaining attention.
Holding interest.
Arousing desire.
Obtaining action

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Step 4: Overcoming Objections

Customers typically pose objections during the presentation or when asked for the order.
To handle these objections, the salesperson maintains a positive approach, asks the buyer to
clarify the objection, questions the buyer in a way that the buyer has to answer his or her own
objection, denies the validity of the objections and turns the objection into a reason for buying.
One potential problem is for salespeople to give in too often when customers demand a discount.
Sell the price rather than sell through price.
Step 5: Closing
Salespeople need to know how to recognise closing signs from the buyer.
Step 6: Follow-Up and Maintenance
Follow-up and maintenance are necessary if the salesperson wants to ensure customer
satisfaction and repeat business. Immediately after the closing, the salesperson should cement
any details on delivery time, purchase terms, and other matters important to the customer.
Q. 30. Explain various choices amongst major media alternatives available to marketer of a
FMCG company and compare the same with their relative merits & demerits.
OR
List and explain some of the alternative advertising options that are available to marketers
Alternative Advertising Options
Many marketers are looking for alternative advertising media such as the following :
Place Advertising
Place advertising, also called out-of-home advertising, is a broadly defined category that captures
many different alternative advertising forms. Marketers are using creative and unexpected ad
placement to grab consumers attention. The rationale is that marketers are better off reaching
people in other environments, such as where they work, play or shop. Some of the options
available include: Billboards, Public places, Product placement and Point-of-purchase.
Billboards
Billboards now use colourful, digitally produced graphics, backlighting, sounds, movement, and
even three-dimensional images. Billboards do not have to be fixed. Marketers can buy space on
billboard-laden trucks.
Public Spaces
Advertisers are placing traditional TV and print ads in unconventional places such as movies,
airlines, lounges, classrooms, sports arenas, hotel elevators and other public places.
Advertisers can buy space in stadiums, on garbage cans, bicycle racks and other places.
Product Placement
Product placement has expanded from movies to all types of TV shows. Product placements can
be combined with special promotions to publicize entertainment tie-ins. Some firms get product
placement at no cost by supplying their product to the movie company. Marketers are finding
other inventive ways to advertise during actual television broadcasts. Virtual logos networks add
digitally to the playing field. Ads also appear in best-selling paperback books and movie
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videotapes. Advertorials are print ads that offer editorial content that reflects favourably on the
brand and is difficult to distinguish from newspaper or magazine content.
Point-of-Purchase

There are many ways to communicate with consumers at the point-of-purchase (POP). In-store
advertising includes ads on shopping carts, cart straps, aisles and shelves. The appeal of point-ofpurchasing advertising lies in the fact that numerous studies show that in many product
categories, consumers make the bulk of their final brand decisions in the store. One study
suggested that 70 percent of all buying decisions are made in the store. In-store advertising is
designed to increase the number of spontaneous buying decisions.
Other alternative media are aerial advertising, transit advertising, etc.
Evaluating Alternative Media
The main advantage of non-traditional media is that a very precise and captive audience often
can be reached in a cost-effective manner. The challenge with non-traditional media is
demonstrating its reach and effectiveness through credible, independent research. These new
marketing strategies must be judged on how they contribute, directly or indirectly, to brand
equity. There has been some consumer backlash when people see ads in traditionally ad-free
spaces. Perhaps because of the sheer pervasiveness of advertising, consumers seem to be less
bothered by non-traditional media now than in the past.
Q. 31. What is direct marketing? Which channels are used by direct marketers in their
direct marketing efforts?
DIRECT MARKETING
Meaning of Direct Marketing
Direct marketing, is the use of consumer-direct (CD) channels to reach and deliver goods
and services to customers without using marketing intermediary (middlemen).
Direct marketers seek a measurable response, typically a customer order. This is
sometimes called direct-order marketing.
Today, many direct marketers use direct marketing to build a long-term relationship with
the customer.
Direct marketing is one of the fastest growing avenues for serving customers. More and
more businesses have turned to direct mail and telemarketing in response to the high and
increasing costs of reaching business markets through a sales force.
Channels of direct marketing
This channels include: Direct mail, Catalogues, Telemarketing, Interactive TV, Kiosks,
Websites and Mobile devices.
I.

Direct Mail
Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a
person.
Examples include postcards with an offer, catalogs that display goods, coupons, solicitation
letters from nonprofits or free samples sent by businesses.
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For example, Pantaloons sends mail informing new style, new launch, offers etc.
Direct marketing is a popular medium because it: Permits target market selectivity, Can be
personalized, Is flexible, Allows for early testing and response measurement, In constructing an
effective direct mail campaign marketer decides on their, Objective, Target market, Offer
elements, Testing elements and Lifetime of value.
II. Catalog Marketing
In catalog marketing company send full line merchandise catalog, specialty consumer catalog and
business catalog usually prints form but also sometime as CDs, videos, or online.
Through their catalogs Avon sells cosmetics, IKEA sells furniture and Saks Fifth Avenue sells
specialty clothing.
Examples of general merchandise catalogs are: Amway, Oriflame and Avon.
III. Telemarketing
Telemarketing is the use of the telephone and calls centers to attract prospects, sell to existing
customers and provide service by taking orders and answering questions.
Telemarketing helps companies increase revenues, reduce selling costs and improve customers
satisfaction.
Companies use call center for inbound telemarketing and outbound telemarketing.
Inbound telemarketing means receiving calls from customers and outbound means initiating calls to
prospects and customers.
For example In India Wipro BPO solution and Daksh by IBM are two major players in this sector.
The telecommunications industry, for example, has used telemarketing extensively to attempt to
increase their market share.
This includes: AT&T, MCI WorldCom and Sprint
IV. Kiosk Marketing
Customer order machines, versus vending machines that actually provide products, are another form
of direct marketing. Examples are:
Your banks automatic teller machines (ATMs) placed in convenient and high traffic areas are
another example of kiosk marketing. A combination of these direct marketing techniques may offer
the optimal revenue generating solution.
V. Other Media for Direct Response Marketing

Direct marketer uses all major media. Newspaper and magazines carry abundant print ads offering
books, articles of clothing, appliances, vacations and other goods and services.
Radio ads present offers 24 hours a day.
Some companies prepare 30 and 60 minute infomercials to combine the sell od television commercial
with the draw of information and entertainment.

Q. 32. Under Interactive marketing discuss some of the options available for placing
advertisements and promotion Online
Answer:
INTERACTIVE MARKETING
The newest channels for direct marketers are electronic. The Internet provides marketers and
consumers with opportunities for much greater interaction and individualization. Today
companies can send individualized content and consumers themselves can further individualize
the content. Companies can interact and dialogue with much larger groups than in the past. The
exchange process has become increasingly customer-initiated and customer-controlled where
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customers: Define the rules of engagement, Define what information they need, Indicate what
offering they are interested in, Indicate what price they are willing to pay
Designing An Attractive Web Site
Clearly all companies need to consider and evaluate e-marketing and e-purchasing opportunities.
A key challenge is designing a site that is attractive on first viewing and interesting enough to
encourage repeat visits. Amazon and Flipkart have proposed that effective Websites feature
seven design elements that they call the 7Cs: Context, Content, Community, Customization,
Communication, Connection, Commerce.
To encourage repeat visit, companies need to pay special attention to context and content factors
and embrace another C - constant change. Visitors will judge a sites performance on its ease
of use and its physical attractiveness. Ease of use breaks down into three attributes: The Website
downloads quickly, The first page is easy to understand, The visitor finds it easy to navigate to
other pages that open quickly.
Physical attractiveness is determined by the following factors: The individual pages are clean
looking anad not overly crammed with content, The typefaces and font sizes are very readable
and The site makes good use of colour (and sound)
Placing Ads and Promotion Online
A company has to decide which forms of Internet advertising will be most cost-effective in
achieving advertising objectives.
Banner ads are small rectangular boxes containing text and perhaps a picture. Companies pay to
place banner ads on relevant Websites. Sponsorships are best placed in well-targeted sites where
they can offer relevant information or service. A microsite is a limited area on the Web, managed
and paid for by an external advertiser/company. Interstitials are advertisements that pop up
between changes on a Web site. There are search ads and display ads in interactive advertising.
The hottest growth area has been search-related ads. A newer trend, content-target advertising
links ads not keywords to the content of Web pages. Companies can set up alliances and affiliate
programmes (when one Internet company works with another one, they end up advertising each
other). Web advertising is showing double-digit growth.
E-Marketing Guidelines
If a company does an e-mail campaign right, not only can it build customer relationships, but
also reap additional profits. The following are some guidelines followed by pioneering e-mail
marketers: Give the customer a reason to respond, Personalize the content of your e-mails, Offer
something the customer could not get via direct mail, Make it easy for customers to
unsubscribe.
Direct marketing must be integrated with other communications

Q. 33. Define public relation and explain its tools.

Answer: Not only must the company relate constructively to customers, suppliers, and dealers, it
must also relate to a large number of interested publics.
A public is any group that has an actual or potential interest in or impact on a companys ability
to achieve its objectives. Public relations (PR) involves a variety of programmes designed to
promote or protect a companys image to its individual products. The wise company takes
concrete steps to manage successful relations with its key publics. Most companies have a

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public-relations department that monitors the attitudes of the organisationspublics and

distributes information and communications to build goodwill.
PR departments perform the following five functions:
1. Press relations
2. Product publicity
3. Corporate communications
4. Lobbying
5. Counseling
Marketing Public Relations
Many companies are turning to marketing public relations (MPR) to support corporate or product
promotion and image making. The old name for MPR was publicity that was seen as the task of
securing editorial space to promote or hype a product, service, idea, etc. MPR goes beyond
simple publicity and plays an important role in the following tasks:
1. Assisting in the launch of new products
2. Assisting in repositioning a mature product
3. Building interest in a product category
4. Influencing specific target groups
5. Defending products that have encountered public problems
6. Building the corporate image in a way that reflects favourably on its products
As the power of mass advertising weakens, marketing managers are turning to MPR to build
awareness and brand knowledge for both new and established products. MPR is also effective in
blanketing local communities and reaching specific groups. MPR must be planned jointly with
advertising. Creative public relations can affect public awareness at a fraction of the cost of
advertising. Some experts say that consumers are five times more likely to be influenced by
editorial copy than by advertising.
Major Decisions in Marketing PR
In considering when and how to use MPR, management must establish the marketing objectives,
choose the PR messages and vehicles, implement the plan carefully, and evaluate the results.
Establishing Objectives
MPR can:
Build awareness by placing stores in the media to bring attention to a product, service, person,
organisation, or idea
It can build credibility by communicating the message in an editorial context
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It can help boost sales-force and dealer enthusiasm with stores about a new product before it is
launched
It can hold down promotion costs because MPR costs less than direct mail and media advertising
Choosing Message and Vehicles
The MPR manager must identify or develop interesting stories about the product. Each event is
an opportunity to develop a multitude of stories directed at different audiences. The best MPR
practitioners are able to find or create stories even for mundane or out-of-fashion products.
Implementing the Plan and Evaluating Results
MPRs contribution to the bottom line is difficult to measure, because it is used along with other
promotional tools. The three most commonly used measures of MPR effectiveness are: Number
of exposures, Awareness, comprehension, or attitude change and Contribution to sales and
profits.
Q. 34. Define sales promotion. Explain the different sales promotion tools
OR
Write a detailed note on Sales promotion, with examples.
OR
Explain various strategies for consumer sales promotion for marketing of Cellular
Telecom Service aimed towards a cross section of consumer segments with elaboration.
OR
Explain the relevance and applicability of each promotional tool vis--vis various products
and services.
Answer: Sales promotion, a key ingredient in marketing campaigns, consists of a collection of
incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular
products or services by consumers or the trade.
Where advertising offers a reason to buy, sales promotion offers an incentive to buy.
Sales promotions includes tools for:
Consumer promotion
Trade promotion
Business and sales-force promotion
Objectives
Sales promotions tools vary in their specific objectives:
Sellers use incentive-type promotions to: Attract new users, Reward loyal customers, Increase
the repurchase rates of occasional users. Sales promotions are often used to attract brand
switchers.
Sales promotions used in markets of high brand similarity can produce a high sales response in
the short run. In markets of high brand dissimilarity, sales promotions may be able to alter
market shares permanently. In addition to brand switching, consumers may engage in stockpiling
during sales promotions. A number of sales-promotion benefits flow to manufacturers and
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consumers. Sales promotions enable manufacturers to adjust short-term variations in supply and
demand.
Selecting Consumer-Promotion Tools
The promotion planner should take into account the type of market, sales-promotion objectives,
competitive conditions, and each tools cost-effectiveness. We can distinguish between
manufacturers promotions and retailer promotions. Manufacturers promotions are illustrated by
uses of rebates and gifts. Retailer promotions include price cuts, feature advertising, coupons,
contests, or premiums. We can also distinguish between sales-promotion tools that are consumerfranchise building and reinforce the consumers brand preference and those that do not.
Consumer franchise-building promotions offer the best of both worlds - they build brand equity
while moving product. Sales promotion is usually most effective when used together with
advertising.
Samples: Offer of a free amount of a product or service delivered door-to-door, sent in the mail,
picked up in a store, attached to another product, or featured in an advertising offer.
Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific
product: mailed, enclosed in other products or attached to them, or inserted in magazine and
newspaper ads.
Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at the retail
shop: Consumer sends a specified proof of purchase to the manufacturer who refunds part of
the purchase price by mail.
Price Packs (cents-off deals): Offers to consumers of savings off the regular price of a product,
flagged on the label or package. A reduced-price pack is a single package sold at a reduced price
(such as two for the price of one). A banded pack is two related products banded together (such
as a toothbrush and toothpaste).
Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to
purchase a particular product. A with-pack premium accompanies the product inside or on the
package. A free in-the-mail premium is mailed to consumers who send in a proof of purchase,
such as a box top. A self-liquidating premium is sold below its normal retail price to consumers
who request it.
Frequency Programs: Programs providing rewards related to the consumers frequency and
intensity in purchasing the companys products or services.
Prizes (contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips, or
merchandise as a result of purchasing something. A contest calls for consumers to submit an
entry to be examined by a panel of judges who will select the best entries. A sweepstakes asks
consumers to submit their names in a drawing. A game presents consumers with something
every time they buy-bingo numbers, missing letters which might help them win a prize.
Patronage Awards: Values in cash or in other forms that are proportional to patronage of a
certain vendor or group of vendors.
Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they
will buy.
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Product Warranties: Explicit or implicit promises by sellers that the product will perform as
specified or that the seller will fix it or refund the customers money during a specified period.
Tie-in Promotions: Two or more brands or companies team up on coupons, refunds, and
contests to increase pulling power.
Cross-Promotions: Using one brand to advertise another noncompeting brand.
Point-of-Purchase (P-O-P) Displays and Demonstrations: P-O-P displays and demonstrations
take place at the point of purchase or sale.
Selecting Trade-Promotion Tools
Manufacturers use a number of trade-promotion tools, a higher proportion of the promotion pie
is devoted to trade-promotion tools than to consumer promotion.
Manufacturers award money to the trade: To persuade the retailer or wholesaler to carry the
brand, To persuade the retailer or wholesaler to carry more units than the normal amount, To
induce retailers to promote the brand by featuring, displaying, and reducing prices, To stimulate
retailers and their sales clerks to push the product.
The growing power of large retailers has increased their ability to demand trade promotions at
the expense of consumer promotion and advertising. Manufacturers face several challenges in
managing trade promotions:
They often find it difficult to police retailers. Manufacturers are increasingly insisting on proof
of performance before paying allowance
More retailers are doing forward buying - buying a greater quantity during the deal period than
they can sell during the deal period
Retailers are doing more diverting. Manufacturers are trying to handle forward buying and
diverting by limiting the amount that they will sell at a discount.
Price-Off (off-invoice or off-list): A straight discount off the list price on each case purchased
during a stated time period.
Allowance: An amount offered in return for the retailer's agreeing to feature the manufacturer's
products in some way. An advertising allowance compensates retailers for advertising the
manufacturer's product. A display allowance compensates them for carrying a special product
display.
Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity
or who feature a certain flavor or size.

Q. 35. What are the functions of intermediaries? Explain.

Answer: Intermediaries in a distribution channel provide services that enable manufacturers to
reach different types of customers.
A channel might include a number of intermediaries, such as agents, wholesalers, distributors
and retailers.
Intermediaries act as middlemen between different members of the distribution chain, buying
from one party and selling to another.

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They also may hold stock and carry out logistical and marketing functions on behalf of
manufacturers.
Reaching More Customers Through Retailers

Independent stores and retail chains sell products to consumers and business customers.

By appointing retailers, manufacturers can reach different areas of the country and target smaller
customers they could not afford to serve directly.

Retailers buy products for resale direct from manufacturers or from wholesalers.

They generally stock goods from many different suppliers, including competitive offerings in the
same product category, so manufacturers must use incentives and discounts to encourage
retailers to push their products in order to achieve strong sales.
Simplifying Logistics through Wholesalers

Wholesalers buy products in bulk from a number of different manufacturers, stocking them in
warehouses and selling them to retailers.

By holding stock, wholesalers enable manufacturers to supply customers in different regions

without investing in their own warehousing facilities.

Wholesalers also help manufacturers reduce their logistics costs by delivering stock to retailers
or offering stores a collection service.
Cooperative Marketing Through Distributors

Distributors carry out similar functions to wholesalers, but generally have closer working
relationships with manufacturers.

Distributors may have exclusive arrangements with manufacturers and do not carry competing
products. They may be part of a franchise, only offering the products of one manufacturer.

Like wholesalers, they provide valuable warehousing and logistical functions for manufacturers.

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They may also participate in cooperative marketing programs with suppliers, improving sales for
manufacturers.
A firm needs to identify the types of intermediaries available to carry on its channel work.
Companies should search for innovative marketing channels. Sometimes a company chooses an
unconventional channel because of the difficulty or cost of working with the dominant channel.
The advantage is that the company will encounter less competition during the initial move into
this channel.
Price Sensitivity
Companies have to decide on the number of intermediaries to use at each channel level. Three
strategies are available: exclusive distribution, selective distribution, and intensive distribution.
Exclusive distribution means severely limiting the number of intermediaries.
It is used when the producer wants to maintain control over the service level and outputs offered
by the resellers. Often it involves exclusive dealing arrangements. Exclusive deals between
suppliers and retailers are becoming a mainstay for specialists looking for an edge in a business
world. Selective distribution involves the use of more than a few, but less than all, of the
intermediaries who are willing to carry a particular product.
Intensive distribution consists of the manufacturer placing goods or services in as many outlets
as possible. Manufacturers are constantly tempted to move from exclusive or selective
distribution to intensive distribution to increase coverage and sales.
Terms and Responsibilities of Channel Members
The producer must determine the rights and responsibilities of participating channel members.
The main elements in the trade-relations mix are:
Price policy
Conditions of sale
Distributors territorial rights
Mutual services and responsibilities
Evaluating the Major Alternatives
Each channel alternative needs to be evaluated against economic, control, and adaptive criteria.
Economic Criteria
Each channel will produce a different level of sales and costs. When sellers discover a
convenient lower-cost channel, they try to get their customers to us it. Companies that are
successful in switching customers to lower-cost channels, assuming no loss of sales or
deterioration in service quality, will gain a channel advantage.
Control and Adaptive Criteria
To develop a channel, members must make some degree of commitment to each other for a
specified period of time

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These commitments invariably lead to a decrease in the producers ability to respond to a

changing marketplace. In rapidly changing, volatile, or uncertain product markets, the producer
needs channel structures and policies that provide high adaptability.

Q. 36. How has the retail scenario changed in the last decade in India?
OR
Explain briefly, how the growth of giant retailers threatens traditional retailers.
Answer: In the past, retailers held customers by offering convenient locations, special or unique
assortments of goods, greater or better services than competitors, and store credit cards. All of
this has changed! Models for department stores success seem to be emerging. These include
strong retail brand approach, the showcase store and supermarkets that have opened larger stores,
with more variety of items and upgraded facilities.
Here are some retail developments that are changing the way consumer buy and manufacturers
and retailers sell:
1. New retail forms and combinations.
2. Growth of intertype competition.
3. Competition between store based and non-store based retailing.
4. Growth of giant retailers: Through their superior information systems, logistical systems,
and buying power, giant retailers such as BigBazar are able to deliver good service and
immense volumes of product at appealing prices to masses of consumers. They are
crowding out smaller manufacturers that cannot deliver enough quantity and often dictate
to the most powerful manufacturers what to make, how to price and promote, when and
how to ship, and even how to improve production and management. Manufacturers need
these accounts; otherwise they would lose 10% to 30% of the market. Some giant
retailers are category killers that concentrate on one product category, such as home
improvement (Home Town), or Electronics (Croma). Others are supercenters that
combine grocery items with a huge selection of nonfood merchandise (Hypercity).
5. Decline of Middle-Market Retailers: Today we can characterize the retail market as
hourglass or dog-bone shaped: Growth seems to be centered at the top (with luxury
offerings from retailers such as ShopperStop) and at the bottom (with discount pricing
from retailers such as DMart and BigBazar). Opportunities are scarcer in the middle
where retailers and others have struggled or gone out of business. Supermarkets,
department stores, and drugstores are most at risk or on the brink-fewer consumers have
shopped these channels weekly in recent years as newer, more relevant places have come
to serve their needs. As discount retailers improve their quality and image, consumers
have been willing to trade down.
6. Growing Investment in Technology

Q. 37. What is retailing? How do services and store atmosphere affect retailing? Explain
with examples some of latest retailing trends in India
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Answer: Retailing, includes all the activities involved in selling goods or services directly to
final consumers for personal, non-business use. A retailer or retail store is any business
enterprise whose sales volume comes primarily from retailing.

Consumers
Cognitive process

Atmospheric Cues
_ Color
_ Lighting
_ Music
_ Crowding
_ Design and
Layout
_ Olfactory
factors
_ Tactile
factors

Purchase
intention

Patronage
intention
Store Image
Shopping
satisfaction

Customer Value

Positive word
of mouth

Services and Store Atmosphere

The services mix is a key tool for differentiating one store from another. Retailers must decide
on the services mix to offer customers: Pre-purchase services, Post-purchase services and
Ancillary services. Retailers also need to consider differentiating based on unerringly reliable
customer service. Retailers are rediscovering the usefulness of customer service as a point of
differentiation. Whatever retailers do to enhance customer service, they will have to keep women
in mind. Approximately 85 percent of everything sold in this country is either bought or
influenced by a woman. Atmosphere is another element in the stores arsenal. Every store has a
look or feel that is influenced by colours, layout, smell, and music.
Store Activities and Experiences
The growth of e-commerce has forced traditional brick-and-mortar retailers to respond. In
addition to the natural advantages over e-commerce: Products that consumers can actually see,
touch & test, Real-life customer service and No delivery lag time
They also provide a shopping experience as a strong differentiator. To entice Internet-savvy
consumers to their stores, real-life retailers are developing new services and promotions:
Calling each customer a guest
Providing a place for people to congregate
Creating in-store entertainment
Creating showcase stores
Super-regional malls are anchoring themselves with unique and interesting shops, rather than the
brand-name department stores and national retailers of old. They want to become destination
retail locations.
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Latest trends in retailing: Refer to previous question.

Q. 38. The days when all the sales force did was sell, sell, and sell are long gone. Today
companies need to define the specific objectives they want their sales force to achieve.
Discuss the various decisions organizations take for designing and managing the Sales
Force?
OR
Explain the critical issues involved in recruitment, training and motivation of sales force.
OR
What is Workload method in deciding the sales force size?
OR
Which are the steps involved in managing the sales force?
Answer:
DESIGNING THE SALES FORCE
The original and oldest form of direct marketing is the field sales call. Today most industrial
companies rely heavily on a professional sales force to: Locate prospects, Develop them into
customers and Grow the business
Nearly 12 percent of the total workforce work full time in sales occupations. No one debates the
importance of the sales force in marketing programmes. However, companies are sensitive to the
high and rising costs of maintaining a sales force. The term sales representative covers a broad
range of positions. Six can be distinguished, ranging from the least to the most creative types of
selling:
1. Deliverer - A salesperson whose major task is the delivery of a product
2. Order taker - An inside order taker (standing behind the counter) or outside order
taker (calling on the supermarket manager).
3. Missionary - A salesperson not expected or permitted to take an order but rather to
build goodwill or educate the actual or potential user (the medical "detailer"
representing an ethical pharmaceutical house).
4. Technician A salesperson with a high level of technical knowledge
5. Demand creator - A salesperson who relies on creative methods for selling
tangible products or intangible products.
6. Solution vendor - A salesperson whose expertise is solving a customer's problem,
often with a system of the company's products and services
Sales personnel serve as the companys personal link to the customers. The sales representative
is the company to many of its customers. The sales representative brings back much needed
information about the customer. Therefore, the company needs to carefully consider issues in
sales force design, namely: Development of sales force objectives, Strategy, Structure, Size
Compensation
Sales-Force Objectives and Strategy

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The days when all the sales force would do was sell, sell, sell are long gone. Today, sales reps
need to know how to diagnose a customers problem and propose a solution. Salespeople show a
customer-prospect how their company can help a customer improve profitability.
Companies need to define the specific objectives they want their sales force to achieve.
The specific allocation scheme depends on the kind of products and customers, but regardless
salespeople will have one or more of the following specific tasks to perform:
1. Prospecting searching for prospects or leads.
2. Targeting deciding how to allocate their timing among prospects and customers.
3. Communicating communicate the information about companies product or
service
4. Selling approaching, presenting, answering questions, overcoming objections
and sales closing.
5. Servicing providing various services to customers consulting on problems,
rendering assistance, arranging financing expediting delivery
6. Information gathering conducting market research and doing intelligence work.
7. Allocating deciding which customer will get scarce product during product
shortage.
Tasks such as lead generation, proposal writing, order fulfillment, and post-sale support are
turned over to others. As a result, salespeople handle fewer accounts, but are awarded for key
account growth. Todays sales representatives act as account manager who arrange fruitful
contacts between various people in the buying and selling organisations. Selling increasingly
calls for teamwork requiring the support of other personnel such as top management, technical
people, customer service representatives and office staff. To maintain a market focus,
salespeople should know how to: Analyze sales data, Measure market potential, Gather market
intelligence and Develop marketing strategies and plans
Once the company decides on an approach, it can use a direct or a contractual sales force. A
direct (company) sales force consists of full- or part-time paid employees who work exclusively
for the company. A contractual sales force consists of manufacturersreps, sales agents, and
brokers who are paid a commission based on sales.
Sales-Force Structure
The sales-force strategy has implications for the sales-force structure. Established companies
need to revise their sales-force structure as market and economic conditions change.
Sales-Force Size
Sales representatives are one of the companys most productive and expensive assets. Increasing
their number will increase both sales and costs. Once the company establishes the number of
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customers it wants to reach, it can use a workload approach to establish sales-force size. This
method has five steps:
Group customers into size classes according to annual sales volume.
Establish desirable call frequencies (number of calls on an account per year) for each customer
class.
Multiply the number of accounts in each size class by the corresponding call frequency to arrive
at the total workload for the country, in sales calls per year.
Determine the average number of calls a sales representative can make per year.
Divide the total annual calls required by the average annual calls made by a sales representative,
to arrive at the number of sales representatives needed.
Sales-Force Compensation
To attract top-quality sales reps, the company has to develop an attractive compensation
package. A company must use the following four components in determining sales-force
compensation:
The fixed amount
The variable amount
Expense allowances
Benefits
Fixed compensation receives more emphasis in jobs with a high ratio of non-selling to selling
duties and in jobs where the selling task is technically complex and involves teamwork. Variable
compensation receives more emphasis in jobs where sales are cyclical or depend on individual
initiative. Fixed and variable compensation give rise to three basis types of compensation plans:
Straight salary
Straight commission
Combination salary and commission
Some companies see a new trend toward de-emphasising volume measures in favours of factors
such as profitability, customer satisfaction, and customer retention. Other companies are basing
the reps reward partly on a sales teams performance or even company wide performance.
Managing the Sales Force
Once the company has established objectives, strategy, structure, size and compensation, it has to
recruit, select, train, supervise, motivate, and evaluate sales representatives.
Recruiting and Selecting Representatives
At the heart of a successful sales force is the selection of effective representatives. One survey
revealed that the top 27 percent of the sales force brought in over 52 percent of the sales.
Selecting sales reps would be simple if one knew what traits to look for. One good starting point
is to ask customers what traits they prefer. Finding what traits will actually lead to sales success
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is challenging. Numerous studies have shown little relationship between sales performance and
background and experience variables. Once management develops its selection criteria it must
then recruit.
Training and Supervising Sales Representatives
Todays customers expect salespeople to have deep product knowledge, to add ideas to improve
the customers operations, and to be efficient and reliable. Companies use sales-promotion tools
to draw a stronger and quicker buyer response. These demands have required companies to make
a much higher investment in sales training. New reps may spend a few weeks to several months
in training. Training time varies with the complexity of the selling task and the type of person
recruited into the sales organisation. New methods of training are continually emerging.
Companies vary in how closely they supervise sales reps.
Sales Rep Productivity
Some research has suggested that todays sales reps are spending too much time selling to
smaller, less profitable accounts when they should be focusing more of their efforts on selling to
larger, more profitable accounts.
Norms for Prospect Calls
Companies often specify how much time reps should spend prospecting for new accounts.
Companies set up prospecting standards for a number of reasons. Left to their own devices,
many reps will spend most of their time with current customers. Some companies rely on a
missionary sales force to open new accounts.
The appeal of public relations and publicity is based on the following three distinctive qualities:
(1) Using Sales Time Efficiently
Studies have shown that the best sales reps are those who manage their time effectively. One
planning tool is time-and-duty analysis. Companies are constantly seeking ways to improve
sales-force productivity. To cut costs, reduce time demands on their outside sales force, and take
advantage of computer and telecommunications innovations, many companies have increased the
size and responsibilities of their inside sales force. Inside salespeople are of three types:
Technical support people
Sales assistants
Telemarketers
The inside sales force frees the outside reps to spend more time:
Selling to major accounts
1. Identifying and converting new major prospects
2. Placing electronic ordering systems in customers facilities
3. Obtaining more blanket orders and systems contracts
(2) Motivating Sales Representatives
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The majority of sales representatives require encouragement and special incentives. Most
marketers believe that the higher the salespersons motivation, the greater the effort and the
resulting performance, rewards, and satisfaction, and thus further motivation. Such thinking is
based on several assumptions. Sales managers must be able to convince salespeople that they can
sell more by working harder or by being trained to work smarter.
Sales managers must be able to convince salespeople that the rewards for better performance are
worth the extra effort. To increase motivation, marketers reinforce intrinsic and extrinsic rewards
of all types.
(3) Evaluating Sales Representatives
We have been describing the feed-forward aspects of sales supervision - how management
communicates what the sales reps should be doing and motivates them to do it, but good feedforward requires good feedback, which means getting regular information from reps to evaluate
performance.
Q. 39. Define the term marketing channels. Being a channel manager for your firm,
you have been asked by senior managers to identify new distribution channels for the
launch of a new LCD television set. Describes a channel- design and channel management
decisions for the same, in detail for your presentation to top management.
OR
What decisions do companies face in designing their channels? What are the steps involved
in designing a channel system? Explain with examples.
OR
List and explain the channel management decisions with the help of a suitable example
OR
How shall you decide on each of the major channel design decisions for devising a channel
structure for distribution of ready to eat snacks?
Answer:
INTRODUCTION:

Successful value creation needs successful value delivery. Holistic marketers are
increasingly taking a value network view of their businesses. Instead of limiting their
focus to their immediate suppliers, distributers, and customers, they are examining the
whole supply chain that links raw materials, components and manufactured goods and
shows how they move toward the final consumers.
Companies are looking at their suppliers suppliers upstream and at their distributors
customers downstream. They are looking at customer segments and considering a wide
range of new and different means to sell, distribute and service their offerings.
Most producers do not sell their goods directly to the final users between them stands a
set of intermediaries performing a variety of functions. These intermediaries constitute a
marketing channel ( also called a trade channel or distribution channel).

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DEFINITION:Marketing channels are sets of interdependent organization participating in the process of

making a product or service available for use or consumption. They are the set of pathways a
products or service follows after production, culminating in purchase and consumption by the
final end users.
CHANNEL MANAGEMENT DECISIONS:After a company has chosen a channel alternative, individual intermediaries must be selected,
trained, motivated, and evaluated. Channel arrangements must be modified over time.
SELECTING CHANNEL MEMBERS

Companies need to select their channel members carefully. To facilitate channel member
selection, producers should determine what characteristics distinguish better intermediaries.
They should evaluate the: Number of years in business, Other lines carried, Growth and profit
records, Financial strength, Cooperativeness, Service reputation.
If the intermediaries are sales agents, producers should evaluate the number and character of
other lines carried and the size and quality of the sales force.
If the intermediaries are department stores that want exclusive distribution, the producer should
evaluate: Locations, Future growth potential and Type of clientele
TRAINING AND MOTIVATING CHANNEL MEMBERS

Companies need to plan and implement careful training programmes for their intermediaries.
Motivating Channel Members
A company needs to determine intermediaries needs and construct a channel position such that
its channel offering is tailored to provide superior value to these intermediaries.
Stimulating channel members to top performance starts with understanding their needs and
wants. The company should provide training programmes and market research programmes to
improve intermediaries performance. The company must constantly communicate its view that
the intermediaries are partners in a joint effort to satisfy end users of the product.
Producers vary greatly in skill in managing distributors. Channel power can be defined as the
ability to alter channel members behaviour.
COERCIVE POWER
REWARD POWER
LEGITIMATE POWER
EXPERT POWER
REFERENT POWER
CHANNEL PARTNERSHIPS

EVALUATING CHANNEL MEMBERS

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Producers must periodically evaluate intermediaries performance against such standards as sales
quota attainment, average inventory levels, customer delivery times, treatment of damaged and
lost goods, and cooperation in promotional and training programmes. Under performers need to
be counseled, retrained, motivated, or terminated.
MODIFYING CHANNEL DESIGN AND ARRANGEMENTS

A producer must periodically review and modify its channel arrangements. Modification
becomes necessary when the distribution channel is not working as planned. This usually occurs
when: consumer-buying patterns change, the market expands, new competition arises, innovative
distribution channels emerge and the product moves into the later stages in the product life cycle
No marketing channel will remain effective over the whole product life cycle. In competitive
markets with low entry barriers, the optimal channel structure will inevitably change over time.
The change could involve adding or dropping individual channel members, adding or dropping
particular market channels and developing a totally new way to sell goods. The most difficult
decision involves revising the overall channel strategy.
CHANNEL EVOLUTION
CHANNEL MODIFICATION DECISIONS
GLOBAL CHANNEL CONSIDERATIONS

Q. 40. Explain Vertical and Horizontal Marketing Systems, with examples.

Answer: Distribution channels do not stand still. New wholesaling and retailing institutions
emerge, and new channel systems evolve.
Vertical Marketing Systems
One of the most significant recent channel developments is the rise of vertical marketing
systems. A conventional marketing system comprises an independent producer, wholesaler(s),
and retailer(s). A vertical marketing system (VMS), by contrast, comprises the producer,
wholesaler(s), and retailer(s) acting as a unified system. One channel member, the channel
captain, owns the others, franchises them, or has so much power that they all cooperate. VMSs
arose as a result of strong channel members attempts to control channel behaviour and eliminate
the conflict that results when independent members pursue their own objectives. VMSs achieve
economies through: size, bargaining power and the elimination of duplicated services. There are
three types of VMS: corporate, administered. and contractual.
Corporate VMS
A corporate VMS combines successive stages of production and distribution under single
ownership.
Administered VMS
An administered VMS coordinates successive stages of production and distribution through the
size and power of one of the members. Manufacturers of a dominant brand are able to secure
strong trade cooperation and support from resellers. The most advanced supply-distributor
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arrangement for administered VMS involves distribution programmeming that can be defined as
building a planned, professionally managed, vertical marketing system that meets the needs of
both manufacturer and distributors. The manufacturer establishes a department within the
company called distributor-relations planning. Its job is to identify distributor needs and build
up merchandising programmes to help each distributor operate as efficiently as possible.
Contractual VMS
A contractual VMS consists of independent firms at different levels of production and
distribution integrating their programmes on a contractual basis to obtain more economies or
sales impact than they could achieve alone. Contractual VMSs now constitute one of the most
significant developments in the economy. They are of three types: Wholesaler-sponsored
voluntary chains, Retailer cooperatives, Franchise organizations.
The traditional system is the manufacturer-sponsored retailer franchise. Another is the
manufacturer-sponsored wholesaler franchise. A new system is the service-firm-sponsored
retailer franchise.
The New Competition in Retailing
The new competition in retailing is no longer between independent business units but between
whole systems of centrally programmemed networks (corporate, administered, and contractual)
competing against one another to achieve the best cost economies and customer response.
Horizontal Marketing Systems
Another channel development is the horizontal marketing system, in which two or more
unrelated companies put together resources or programmes to exploit an emerging marketing
opportunity.
A horizontal marketing system is a distribution channel arrangement whereby two or more
organizations at the same level join together for marketing purposes to capitalize on a new
opportunity. For example: a bank and a supermarket agree to have the banks ATMs located at
the supermarkets locations; two manufacturers combining to achieve economies of scale
otherwise not possible with each acting alone to meet the needs and demands of a very large
retailer; or two wholesalers joining together to serve a particular region at a certain time of year.
An example is APPLE and STARBUCKS, who announced a music partnership in 2007. The
purpose of this partnership was to allow Starbucks' customers to wirelessly browse, search,
preview, buy, and download music from iTunes store onto their iPod touch, iPhone, or PC or
Mac running iTunes. Apples leadership in digital music, together with the unique Starbucks
experience, created a partnership that offered customers a world class digital music experience.
Q. 41. Through a problem with goal inconsistency, a manufacturer of cooking utensils is
having a disagreement with a retail chain that carries its product line. The disagreement is
new and has not reached the stage where it requires third-party intervention. What
method(s) can be used to settle this conflict? What method(s) are likely to work?
Answer: Channel conflict is generated when one channel members actions prevents the channel
from achieving its goal. Channel coordination occurs when channel members are brought
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together to advance the goals of the channel, as opposed to their own potentially incompatible
goals.
Types of Conflict and Competition
Vertical channel conflict means conflict between different levels within the same channel.
Horizontal channel conflict involves conflict between members at the same level within the
channel. Multi-channel conflict exists when the manufacturer has established two or more
channels that sell to the same market.
Multi-channel conflict is likely to be especially intense when the members of one channel get a
lower price (based on larger volume purchases) or work with a lower margin.
Causes of Channel Conflict
One major cause is goal incompatibility. Some conflict arises from unclear roles and rights.
Conflicts can also stem from differences in perception. Conflict might additionally arise because
of the intermediarys dependence on the manufacturer.
Managing Channel Conflict
As companies add channels to grow sales, they run the risk of creating channel conflict. Some
channel conflict can be constructive and lead to better adaptation to a changing environment, but
too much is dysfunctional. The challenge is not to eliminate conflict but to manage it better.
There are several mechanisms for effective conflict management. One is the adoption of superordinate goals. Channel members come to an agreement on the fundamental goal they are jointly
seeking. A useful step is to exchange persons between two or more channel levels. Co-optation is
an effort by one organisation to win the support of the leaders of another organisation by
including them in advisory councils, and the like. Much can be accomplished by encouraging
joint membership in and between trade associations. When conflict is chronic or acute, the
parties may have to resort to: Diplomacy, Mediation & Arbitration and Lawsuits.

Q. 42. What is differentiated distribution strategy? Describe how a wholesaler can use this
strategy to provide better service.
Answer: Online Distribution Strategy
Tools for Direct Online Distribution:
- Web positioning.
- Search Engine Advertising.
- Email Marketing.
- Advertising using affiliates.
- Viral Marketing.
- Guerrilla Marketing: bulletins, news, blogs, etc.
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- Mobile marketing.
- Social Media.

Hybrid Channels

Omni-channel Retailing - 360 Marketing

Q. 43. Define brand. What are the advantages of branding? Enumerate branding options
prevalent in the marketplace.
OR
What criteria are important in branding decisions of a consumer product? Explain with
relevant illustration(s).
Answer: A name, term, sign, symbol, or design, or a combination of them, intended to identify
goods or services of one seller or group of sellers and to differentiate them from those of
competitors. These differences may be functional, rational, or tangible-related to the product
performance of the brand. They may also be more symbolic, emotional, or intangible-related to
what the brand represents.
The Role of Brands
Brands identify the source or maker of a product and allow consumers to assign responsibility to
a particular manufacturer or distributor. Consumers learn about brands through past experiences
with the product and its marketing programme.
Brands perform valuable functions for the firm. Brands can signal a certain level of quality so
that satisfied buyers can easily choose the product again. Brand loyalty provides predictability
and security of demand for the firm and creates barriers to entry for other firms. Branding can be
seen as a powerful means to secure a competitive advantage. To firms, brands thus represent
enormously valuable pieces of legal property that can influence consumer behaviour, be bought
and sold, and provide the security of sustained future revenues to their owner.
The Scope of Branding
How then do you brand a product? A brand, is a perceptual entity that is rooted in reality but
reflects the perceptions and perhaps even the idiosyncrasies of consumers.
Branding is endowing products and services with the power of a brand. Branding is all about
creating differences. To brand a product, it is necessary to teach consumers who the product is,
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what the product does, and why consumers should care. Branding involves creating mental
structures and helping consumers organise their knowledge about products and services in a way
that clarifies their decision-making and provides value to the firm. For branding strategies to be
successful and brand value to be created, consumers must be convinced that there are meaningful
differences among brands in the product or service category. The key to branding is that
consumers must not think that all brands in the category are the same. Brand differences often
are related to attributes or benefits of the product itself. Branding can be applied virtually in any
context where a consumer has a choice.
Example: LIFEBOUY - Launched in India 1895 in a brick red color and the cresylic, perfume.
Lifebuoy underwent several changes over the years for the growth and expansion of the brand
customer franchise. With the prelaunch lifebuoy made conscious shift in its segmentation and
positioning from its previous focus on the men to a warmer and more versatile benefit on health
for the entire family. Line extensions that included liquid soap reinforced the contemporary
image.
Q. 44. What do you mean by term brand equity?
OR
Explain the concept of Brand Equity for any popular brand that you know.
OR
Define Customer Based Brand Equity. Briefly explain the process of choosing brand
elements for creating brand equity.
OR
Define CBBE. Explain brand building according to the Brand Resonance Model
Answer: Defining Brand Equity
Brand equity is the added value endowed to products and services. This value may be reflected
in how consumers, think, feel, and act with respect to the brand as well as the prices, market
share, and profitability that the brand commands for the firm. Brand equity is an important
intangible asset to the firm that has psychological and financial value. Marketers and researchers
use various perspectives to study brand equity.
Customer-based brand equity can be defined as the differential effect that brand knowledge has
on consumer response to the marketing of that brand. A brand is said to have positive customerbased brand equity when consumers react more favourably to a product and the way it is
marketed when the brand is identified as compared to when it is not. A brand is said to have
negative customer-based equity if consumers react less favourably to marketing activity for the
brand under the same circumstances. Brand equity arises from differences in consumer response
as a result of consumers knowledge about the brand. Brand knowledge consists of all thoughts,
feelings, images, experiences, beliefs, and so on that become associated with the brand. The
challenge for marketers in building a strong brand is in ensuring that customers have the right
type of experiences with products and services and that their marketing programmes create the
desired brand knowledge structures for the brand. Customer knowledge is what drives the
differences that manifest themselves in brand equity.
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The brand resonance model views brand building as an ascending, sequential series of steps,
from bottom to top as per figure. These are:
1. Enduring identification of the brand with customers and an association of the brand in
customers minds with a specific product class or customer need.
2. Firmly establishing the totality of brand meaning in the minds of customers by strategically
linking a host of tangible and intangible brand associations.
3. Eliciting the proper customer responses in terms of brand-related judgment and feelings.
4. Converting brand response to create an intense, active loyalty relationship between customers
and the brand.
These brand building blocks can be assembled to build a brand pyramid with customers. Brand
salience relates to how often and easily the brand is evoked under various purchase or
consumption situations. Brand performance relates to how the product or service meets

customers functional needs. Brand imagery deals with the extrinsic properties of the product or
service, including the ways in which the brand attempts to meet customers psychological or
social needs. Brand judgments focus on customers own personal opinions and evaluations.
Brand feelings are customers emotional responses and reactions with respect to the brand.
Figure depicts the brand resonance pyramid.

Brand salience - is how often and how easily customers think of the brand under various
purchase or consumption situations.

Brand performance - is how well the

product or service meets customers' functional
needs.

Brand imagery - describes the extrinsic

properties of the product or service, including
the ways in which the brand attempts to meet
customers' psychological or social needs.

Brand judgments - focus on customers'

own personal opinions and evaluations.

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Brand feelings - are customers' emotional responses and reactions with respect to the
brand.

Brand resonance - refers to the nature of the relationship customers have with the brand
and the extent to which they feel they're "in sync" "with it.
Brand resonance refers to the nature of the relationship that customers have with the brand and
the extent to which customers feel that they are in sync with the brand. Resonance is
characterised in terms of the intensity or depth of the psychological bond customers have with
the brand, as well as the level of activity engendered by this loyalty.
Q. 45. Explain the concept of brand extension and line extension with the help of suitable
examples.
Answer: Brand extensions can be broadly classified into two general categories:
Line Extension and Category Extension: In a line extension, the parent brand is used to brand
a new product that targets a new market segment within a product category currently served by
the parent brand. For example Lux soap comes in different variants like Lux Crystal Shine, Lux
International etc. So when Lux comes with a new variant, it is a line extension.
In a category extension, the parent brand is used to enter a different product category from that
currently served by the parent brand. For example Woodlands extending to apparels is broadly a
brand extension and more specifically a category extension.
Brand Line: A brand line consists of all products - original as well as line and category
extensions sold under a particular brand. A brand mix (or brand assortment) is the set of all brand
lines that a particular seller makes available to buyers.
Many companies are now introducing branded variants that are specific brand lines supplied to
specific retailers or distribution channels. A licensed product is one whose brand name has been
licensed to other manufacturers who actually make the product.
Advantages of Brand Extensions
Recognising that one of the most valuable assets is a firms brand, many have decided to
leverage that asset by introducing a host of new products under some of its strongest brand
names.
Brand extensions have two main advantages:
Facilitate new product acceptance
Provide positive feedback to the parent brand and company.
New Product Success
Brand extensions improve the odds of new product success in a number of ways. Consumers can
make inferences and form expectations as to the likely composition and performance of a new
product based on what they already know about the parent brand itself. Extensions reduce risk
and costs of the introductory launch campaign. They can avoid the difficulty of coming up with a
new name and allow for packaging and labelling efficiencies.
Positive Feedback Effects
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Brand extensions can help clarify the meaning of a brand and its core brand values or improve
consumer perceptions of the credibility of the company behind the extension.
Line extensions can renew interest and liking for the brand and benefit the parent brand by
expanding market coverage. One benefit of a successful extension is that it may also serve as the
basis for subsequent extensions.
Disadvantage of Brand Extensions
Line extensions may cause the brand name to not be as strongly identified with any one product.
Brand dilution occurs when consumers no longer associate a brand with a specific product or
highly similar products and start thinking less of the brand. If a firm launches extensions
consumers deem inappropriate, it may question the integrity and competence of the brand.
Different varieties of line extensions may confuse and perhaps even frustrate consumers. The
worst possible scenario with an extension is that not only does it fail, but also it harms the parent
brand image in the process. Even if sales of a brand extension are high and meet targets, it is
possible that this revenue will have resulted from consumers switching to the extension from
existing product offerings of the parent brand- called cannibalising the parent brand. Intra-brand
shifts in sales may not necessarily be so undesirable, as they can be thought of as a form of preemptive cannibalisation. The firm foregoes the chance to create a new brand with its own unique
image and equity.
Success Characteristics
A potential new product extension for a brand must be judged by how effectively it leverages
existing brand equity from the parent brand to the new product, as well as how effectively the
extension contributes to the equity of the parent brand. The most important consideration with
extensions is that there is fit in the minds of the consumer. One major mistake in evaluating
extension opportunities is failing to take all of the consumers brand knowledge structures into
account.

Q. 46. What is a product life cycle? Explain how does the product life cycle will influence
the marketing mix decisions?
OR
Discuss the various marketing strategies that should be used at each stage of the Product
Life Cycle
OR
What are the various stages of PLC and strategies in these stages
OR
Explain the marketing strategies applicable to various stages of the Product Life cycle.
Answer: PRODUCT LIFE-CYCLE MARKETING STRATEGIES
A companys positioning and differentiation strategy must, change as the product, market, and
competitors change over the product life cycle (PLC). Products have a limited life. Product sales
pass through distinct stages, each posing different challenges, opportunities, and problems to the
seller. Profits rise and fall at different stages of the product life cycle. Products require different
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marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle
stage.
Product Life Cycles
Figure below portrays the bell-shaped life-cycle
curve.
The product life-cycle as shown in Figure is divided
into four stages:
Introduction - A period of slow sales growth as the
product is introduced in the market Profits are
nonexistent because of the heavy expenses of product
introduction.
Example:
- In 1992 launched a first handheld GSM
phone, Nokia 1011.
- Sold both GSM & CDMA phones.
- Launched first model Nokia 2100 with Nokia
tune.
Growth - A period of rapid market acceptance and substantial profit improvement.
Example:
- Launched phone without external antenna.
- Better feature like games, alarm, display etc.
- Launched mobiles like N95 to compete with Apple i-phone.
Maturity - A slowdown in sales growth because the product has achieved acceptance by most
potential buyers. Profits stabilize or decline because of increased competition.
Example:
- Launched a lot off touch screen model.
- Dropped mobile prices.
- Most profit gain.
Decline - Sales show a downward drift and profits erode.
- Poor product design which did not attract the consumers.
- Change in technology environment.
The PLC concept can be used to analyze a product category, a product form, a product, or a
brand.
Common Product Life Cycle Patterns

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Growth-slump-maturity pattern, often characteristic of small kitchen appliances such as handheld

mixers and bread makers. Sales grow rapidly when the product is first introduced'and then fall to
a "petrified" level that is sustained by late adopters buying the product for the first time and early
adopters replacing it. Cycle-recycle pattern often describes the sales of new drugs. The
pharmaceutical company aggressively promotes its new drug, and this produces the first cycle.
Later, sales start declining and the company gives the drug another promotion push, which
produces a second cycle. In Scalloped pattern sales pass through a succession of life cycles based
on the discovery of new-product characteristics, uses, or users.
Style, Fashion, and Fad Life Cycles
A style is a basic and distinctive mode of expression appearing in a field of human endeavor. A
fashion is a currently accepted or
popular style in a given field.
Marketing Strategies: Introduction
Stage and Pioneer Advantage
Profits are negative or low in the
introduction
stage.
Promotional
expenditures are at their highest ration
to sales because of the need to inform
potential consumers, induce product
trial and secure distribution in retail outlets.
Companies that plan to introduce a new product must decide when to enter the market. To be
first can be rewarding, but risky and expensive. To come in later makes sense if the firm can
bring superior technology, quality, or brand strength. Speeding up innovation time is essential in
an age of shortening product life cycles. Most studies indicate that the market pioneer gains the
most advantage.
Marketing Strategies: Growth Stage
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The growth stage is marked by rapid climb in sales. Early adopters like the product, and
additional consumers start buying it. New competitors enter, attracted by the opportunities.
Prices remain where they are or fall slightly. Companies maintain their promotional expenditures
at the same or at a slightly increased level to meet competition and to continue to educate the
market. Sales rise much faster than promotional expenditures, profits increase and manufacturing
costs fall faster than price declines owing to the producer learning effect. During this stage, the
firm uses several strategies to sustain rapid market growth.
The firm:
Improves product quality and adds new product features and improved styling.
Adds new models and flanker products.
Enters new market segments.
Increases its distribution coverage and enters new distribution channels.
Shifts from product-awareness advertising to product-preference advertising.
Lowers prices to attract the next layer of price-sensitive buyers.
A firm in the growth stage faces a trade-off between high market share and high current profits.
By spending money on product improvement, promotion, and distribution, it can capture a
dominant position.
Marketing Strategies: Maturity Stage
At some point, the rate of sales growth will slow, and the product will enter a stage of relative
maturity. This stage normally lasts longer than the previous stages and poses big challenges to
marketing management. Most products are in the maturity stage of the life cycle, and most
marketing managers cope with the problem of marketing the mature product.
The maturity stage divides into three phases:
1. Growth - where the sales growth rate starts to decline.
2. Stable - where sales flatten on a per capita basis because of market saturation.
3. Decaying maturity - where the absolute level of sales starts to decline, and customers
begin switching to other products.
The sales slowdown creates overcapacity in the industry that leads to intensified competition.
The industry eventually consists of well-entrenched competitors whose basic drive is to gain or
maintain market share. Dominating the industry are a few giant firms that serve the whole market
and make their profits mainly through high volume. Surrounding these dominant firms is a
multitude of market nichers. The issue facing a firm in a mature market is whether to become
one of the big three or pursue a niching strategy. Some companies at this stage abandon
weaker products and concentrate on products that are more profitable and on new products.

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Market Modification
The company might try to expand the market for its mature brand by working with the two
factors that make up sales volume: Volume = number of brand users x usage rate per user. It can
try to expand the number of brands users by converting nonusers. It can also try to expand the
number of brand users by entering new market segments. A third way to expand the number of
brand users is winning competitors customers.
Volume can also be increased by convincing current users to increase their brand usage by:
1. Using the product on more occasions
2. Using more of the product on each occasion
3. Using the product in new ways
Product Modification
Managers also try to stimulate sales by modifying the products characteristics through quality
improvement, feature improvement, or style improvement. Quality improvement aims at
increasing the products functional performance while feature improvement aims at adding new
features that expand the products performance, versatility, safety, or convenience.
This strategy has several advantages:
New features build the companys image as an innovator
Wins the loyalty of market segments that value these features
Provide an opportunity for free publicity
Generate sales force and distributor enthusiasm
The chief disadvantage is that feature improvements might not pay off in the long run. Style
improvement aims at increasing the products aesthetic appeal.
Marketing Programme Modification
Product managers might also try to stimulate sales by modifying other marketing programme
elements that include prices, distribution, advertising, sales promotion and personal selling.
Marketers often debate which tools are most effective in the mature stage.
Marketing Strategies: Decline Stage
Sales decline for a number of reasons, including technological advances, shifts in consumer
tastes, and increased domestic and foreign competition. All lead to overcapacity, increased pricecutting, and profit erosion. As sales and profits decline, some firms withdraw from the market.
Those remaining may reduce the number of products they offer. In handling aging products, a
company faces a number of tasks and decisions. In a study of company strategies in declining
industries, five strategies are available to the firm:
Increase the firms investment
Maintain the firms investment level until uncertainties about the industry are resolved
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Decrease the firms investment level selectively, by dropping unprofitable customer groups,
while simultaneously strengthening the firms investment in lucrative niches
Harvesting the firms investment to recover cash quickly
Divesting the business quickly by disposing of its assets as advantageously as possible
The appropriate strategy depends on the industrys relative attractiveness and the companys
competitive strength in that industry. Companies that successfully restage or rejuvenate a mature
product often do so by adding value to the original product.
Q. 47. In an economy of change, continuous innovation is necessary. Most companies
rarely innovate, some innovate occasionally, and a few innovate continuously.- Explain
the process for new product development with a suitable example.
OR
Briefly, explain the process of developing a new product. Which are the prominent pricesetting methods adopted by marketers to set prices for their offerings?
OR
Think of any product Idea, turn it into a concept that people can buy & design a test plan
for that concept.
OR
Explain the stage of Concept Development and Concept Testing in the new product
development process with a suitable example
OR
Explain the stage-gate approach to new product development.
OR
Discuss the various steps involved in new product development
OR
Consider the following situation: A large cosmetics company has developed a breakthrough
technology of producing a Gel that can erase surgery marks on the body. Convert this
product idea into 3 alternative product concepts. Which one should this company choose?
Why?
Answer: MANAGING THE DEVELOPMENT PROCESS: IDEAS
The new product development process starts with the search for ideas.

1. Idea Generation
New product ideas can come from interacting with various groups and from using creativitygenerating techniques. Some marketing experts believe the greatest opportunities and highest
leverage with new products are found by uncovering the best possible set of unmet customer
needs or technological innovation.
Interacting with Others
Ideas for new products can come from many sources, such as customers, scientists, competitors,
employees, channel members, and top management. Customer needs and wants are the logical
place to start the search. One-on-one interviews and focus group discussions can explore product
needs and reactions. Technical companies can learn a great deal by studying customers who
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make the most advanced use of the companys products and who recognise the need for
improvements before other customers do. Employees throughout the company can be a source of
ideas for improving production, products, and services. Companies can also find good ideas by
researching competitors products and services. They can find out what customers like and
dislike about competitors products. They can buy the competitors products and take them apart.
Company sales representatives and intermediaries are a particularly good source of ideas.
Although ideas can flow from a variety of sources, receiving these ideas often depends upon
someone in the organisation taking the role of product champion.
Creative Techniques
Here is a sampling of techniques for stimulating creativity in individuals and groups:
Attribute listing List attributes of the object
Forced relationships List several ideas and consider each in relation to each other idea.
Morphological analysis start with a problem
Reverse assumption analysis list all the normal assumptions about the entity and then reverse
them.
New contexts take familiar processes
Mind-mapping start with a thought
Increasingly, new product ideas arise from lateral marketing that combines two product
concepts or ideas to create a new offering.

2. Idea Screening
A company should motivate its employees to submit new ideas to an idea manager. Ideas should
be written down and reviewed each week by an idea committee. The company then sorts the
proposed ideas into three groups: Promising ideas, Marginal ideas, Rejects
MANAGING THE DEVELOPMENT PROCESS: CONCEPT TO STRATEGY
Attractive ideas must be refined into testable product concepts. A product idea is a possible
product the company might offer to the market. A product concept is an elaborated version of the
idea expressed in consumer terms.

3. Concept Development and Testing

A product idea can be turned into several concepts. Questions to ask include:
Who will use this product?
What primary benefit should this product provide?
When will people consume this product?
Each concept represents a category concept that defines the products competition. Next, the
product concept has to be turned into a brand concept.
Concept Testing
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Concept testing involves presenting the product concept to target consumers and getting their
reactions. The concepts can be presented symbolically or physically. In the past, creating
physical prototypes was costly and time-consuming. Today firms can use rapid prototyping to
design products. Companies are also using virtual reality to test product concepts. Concept
testing entails presenting consumers with an elaborated version of the concept. After receiving
information, researchers measure product dimensions by having consumers respond to the
following: Communicability and believability, Need level, Gap level, Perceived value, Purchase
intention and User targets, purchase occasions, purchasing frequency
The respondents answers indicate:
Whether the concept has a broad consumer appeal
What products this new product competes against
Which consumers are the best targets
Conjoint Analysis
Consumers preferences for alternative product concepts can be measured through conjoint
analysis, a method for deriving the utility values that consumers attach to varying levels of a
products attributes. Respondents are shown different hypothetical offers formed by combining
varying levels of the attributes, then asked to rank the various offers. Management can identify
the most appealing offer and the estimated market share and profit the company might realize.
The marketer now uses a statistical programme to derive the consumers utility functions for
each of the five attributes. The higher the utility, the stronger the consumers preference for that
level of attribute.

4. Marketing Strategy
Following a successful concept test, the new-product manager will develop a preliminary
strategy plan for introducing the new product into the market. The plan consists of three parts:
1) The first part describes the:
- Target markets size
- Structure
- Behaviour
- Planned products positioning
- Sales
- Market share
- Profit goals in the first few years
2) The second part outlines:
- Planned price
- Distribution strategy
- Marketing budget for the first year
3) The third part describes the:
- Long-run sales and profit goals
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- Marketing-mix strategy over time

5. Business Analysis
After management develops the product concept and marketing strategy, it can evaluate the
proposals business attractiveness. Management needs to prepare sales, cost, and profit
projections to determine whether they satisfy company objectives. If it does, then the concept can
move into the development stage.
Estimating Total Sales
Total estimated sales are the sum of estimated first-time sales, replacement sales, and repeat
sales. Sales-estimation methods depend on whether the product is a one-time purchase, an
infrequently purchased product, or a frequently purchased product. Infrequently purchased
products exhibit replacement cycles dictated by physical wearing out or by obsolescence.
Frequently purchased products have product life cycles sales. In estimating sales, the managers
first task is to estimate first-time purchases of the new product in each period. To estimate
replacement sales, management has to research the products survival-age distribution. Because
replacement sales are difficult to estimate before the product is in use, some manufacturers base
the decision to launch a new product solely on the estimate of first-time sales. For a frequently
purchased new-product, the seller has to estimate repeat sales as well as first-time sales.
Estimating Costs and Profits
Costs are estimated by the RandD, manufacturing, marketing, and finance departments. The
payback period here is approximately three and a half years. Management has to decide whether
to risk a maximum investment loss of $4.6 million and a possible payback period of three and a
half years. Companies use other financial measures to evaluate the merit of a new-product
proposal. The simplest is breakeven analysis. The more complex method is risk analysis.
MANAGING
THE
DEVELOPMENT
PROCESS:
DEVELOPMENT
TO
COMMERCIALISATION
At this stage, the company will determine if the product idea can be translated into a technically
and commercially feasible product.

6. Product Development
The job of translating target customer requirements into a working prototype is helped by a set of
methods known as quality function deployment (QFD). This methodology takes the list of
desired customer attributes (CAs) and turns them into a list of engineering attributes (EAs). A
major contribution of QFD is that it improves communication between marketers, engineers, and
the manufacturing people.
Physical Prototypes
The R & D department will develop one or more physical versions of the product concept. Its
goal is to find a prototype that embodies the key attributes described in the product-concept
statement that performs safely under normal use and conditions and can be produced within the
budgeted manufacturing costs. With the emergence of the Web, there is a need for more rapid
prototyping and more flexible development processes. Lab scientists must also communicate the
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products psychological aspects through physical cues. Marketers need to supply lab people with
information on what attributes consumers seek and how consumers judge whether these
attributes are present.
Customer Tests
When the prototypes are ready, they must be put through rigorous functional tests and consumer
tests.
Alpha testing is a name given to testing the product within the company. Beta testing is testing
the product with customers. Consumer testing can take several forms:
1) Bringing consumers into the laboratory
2) Give them samples to use in their homes
Consumer preferences can be measured in several ways:
The rank-order method
The paired-comparison method
The monadic-rating method

7. Market Testing
The new product is introduced into an authentic setting to learn how large the market is and how
consumers and dealers react to handling, using and repurchasing the product.
Not all companies undertake market testing. Many companies believe that market testing can
yield valuable information about buyers, dealers, marketing programme effectiveness, and
market potential. The amount of market testing is influenced by the investment cost, risk on the
one hand, and time pressure and research on the other. High investment - high-risk products,
where the chance of failure is high, must be market tested. High-risk products, those that create
new-product categories or have novel features, warrant more market testing than modified
products.
Consumer-Goods Market Testing
In testing consumer products, the company seeks to estimate four variables:
Trial
First repeat
Adoption
Purchase frequency
According to Kotler and Keller (2009:628 629) the following are four major methods of
consumer goods market testing, from the least to most costly:
1) Sales-Wave Research
In sales-wave research, consumers who initially try the product at no cost are re-offered the
product, or a competitors product, at slightly reduced prices. They might be offered the product
as many as five times (sales wave) with the company noting how many customers selected the
product again and their reported levels of satisfaction.
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2) Simulated Test Marketing

Simulated test-marketing calls for finding 30 to 40 qualified shoppers and questioning them
about brand familiarity and preferences in a specific product category. These people are then
invited to a brief screening of both well-known and new commercials or print ads.
Consumers receive a small amount of money and are invited into a store where they may buy
any items they wish.
3) Controlled Test Marketing
In this method, a research firm manages a panel of stores that will carry new products for a fee.
The company specifies the number of stores and the geographic locations it wants to test. The
research firm delivers the product and controls shelf positioning, the number of facings, displays,
point-of-purchase promotions, and pricing.
4) Test Markets
The ultimate way to test a new consumer product is to put it into full-blown test markets.
The company chooses the cities, the sales force tries to sell the trade on carrying the product and
giving it good shelf exposure. The company puts on a full advertising and promotion campaign.
The company can also test alternative marketing plans by varying the marketing programme in
different cities. Management faces several decisions. These include: How many test cities,
Which cities, Length of test, What information and What action to take
In spite of its benefits, many companies today skip test marketing and rely on faster and more
economical testing methods.
Business-Goods Market Testing
Business goods can also benefit from market testing. Expensive industrial goods and new
technologies will normally undergo alpha and beta testing (with vendors). A second common test
method for business goods is to introduce the new product at trade shows. New industrial
products can be tested in distributor and dealer display rooms. Industrial manufacturers come
close to using full test marketing when they give a limited supply of the product to the sales force
to sell in a limited number of areas that receive promotion support and printed catalogue sheets.

8. Commercialization
If the company goes ahead with commercialization, it will face its biggest costs to date. The
company will have to contract for manufacturers or build or rent a full-scale manufacturing
facility. Another major cost is marketing.
When (Timing)
In commercialising a new product, market-entry timing is critical. The company faces three
choices:
First entry
Parallel entry
Late entry
Additional considerations regarding the timing of new product launches relate to:
If the new product replaces an older product
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If the product is seasonal

If a killer application is contemplated
Complicating new product launches, many companies are encountering competitive designarounds- rivals are imitating inventions but making their own versions just different enough to
avoid patent infringement and the need to pay royalties.
Where (Geographic Strategy)
The company must decide whether to launch the new product in a single locality, a region,
several regions, the national market, or the international market. Most will develop a planned
rollout over time. Small companies will select an attractive city and put on a blitz campaign, they
will enter other cities one at a time. Larger companies will introduce their products into a whole
region and then move to the next region. Some companies will launch their products to the
national market. Most companies design new products to sell primarily in the domestic market. If
the product does well, they may decide to roll it out to other countries. In choosing rollout
markets, the major criteria are:
Market potential
Companys local reputation
Cost of filling the pipeline
Cost of communications media
Influence of area on other areas
Competitive penetration
The presence of strong competitors will influence rollout strategy. With the Web connecting farflung parts of the globe, competition is more likely to cross national borders.
To Whom (Target-Market Prospects)
Within the rollout markets, the company must target its initial distribution and promotion to the
best prospect groups. These would be the:
Early adopters
Heavy users
Opinion leaders
Reached at a low cost
The company should rate the various prospect groups on these characteristics and target the best
group.
How (Introductory Market Strategy)
The company must develop an action plan for introducing the new product into the rollout
markets. To coordinate the many activities involved in launching a new product, management
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can use network-planning techniques such as critical path scheduling. Critical path scheduling
(CPS) calls for developing a master chart showing the simultaneous and sequential activities that
must take place to launch the product

Q. 48. Explain the types of pricing methods and Also discuss the different Product Mix
pricing strategies with the help of suitable examples.
OR
What are various pricing methods? Explain each in detail
OR
Explain various approaches to setting prices.
Write in detail the price-setting procedure.
OR
How does experience or learning curve affect the average cost? List and explain any three
pricing methods that are used for determining prices
Answer:
SETTING THE PRICE
A firm must set a price for the first time when it develops a new product, when it introduces its
regular product into a new distribution channel or geographic area, and when it enters bids on
new contract work.
The firm must decide where to position its product on quality and price. Most marketers have 3
5 price points or tiers. Consumers often rank brands according to price tiers in a category. Within
any tier, there is a range of acceptable prices, called price brands. The price brand provides
managers with some indication of the flexibility and breadth they can adopt in pricing their
brands within a particular price tier.
The firm has to consider many factors in setting its pricing policy. The following is a six-step
procedure when setting pricing policy:
Selecting the pricing objective

Determining demand

Estimating costs

Analysing competitors costs, prices, and offers

Selecting a pricing method

Selecting the final price

Step 1: Selecting the Pricing Objective
The company first decides where it wants to position its market offering. The clearer a firms
objectives, the easier it is to set price. A company can pursue any of five major objectives
through pricing:
Survival
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Maximum current profit

Maximum market share

Maximum market skimming (suitable for products that have short life cycles. Ex: digital
technology, new dvd, etc.)

Product-quality leadership
Pricing
Objective
Survival
Companies pursue survival, as their major objective when they are
plagued with overcapacity, intense competition, or changing consumer
wants. Survival is a short-run objective.
Maximum
Many companies try to set a price that will maximise current profits. They
Current
estimate the demand and costs associated with alternative prices and
Profit
choose the price that produces maximum current profit, cash flow, or rate
of return on investment. This strategy assumes that the firm has
knowledge of its demand and cost functions.
Maximum
Some companies want to maximise their market share. They believe that a
Market Share higher sales volume will lead to lower unit costs and higher long-run
profit. This practice is called market-penetration pricing. The following
conditions favour setting a low price: the market is highly price-sensitive,
and a low price stimulates market growth. Production and distribution
costs fall with accumulated production experience.
A low price discourages actual and potential competition.
Maximum
Companies unveiling a new technology favour setting high prices to
Market
maximise market skimming. This is also called market-skimming
Skimming
pricing, where prices start high and are slowly lowered over time. Market
skimming makes sense under the following conditions:
A sufficient number of buyers have a high current demand. The unit costs
of producing a small volume are not so high that they cancel the advantage
of charging what the traffic will bear. The high initial price does not attract
more competitors to the market. The high price communicates the image
of a superior product.
ProductA company might aim to be the product quality leader in the market.
Quality
Many brands strive to be affordable luxuriesproducts or services
Leadership
characterised by high levels of perceived quality, taste, and status with a
price just high enough not to be out of consumers reach.
Other Objectives
Non-profit and public organisations may have other pricing objectives. Whatever the specific
objective, businesses that use price as a strategic tool will profit more than those who simply let
costs or the market determine their pricing.
Step 2: Determining Demand
Each price will lead to a different level of demand and therefore have a different impact on a
companys marketing objectives. The relation between alternative prices and the resulting
current demand is captured in a demand curve. In the normal case, demand and price are
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inversely related; the higher the price, the lower the demand. In the case of prestige goods, the
demand curve sometimes slopes upward.
Price Sensitivity
The demand curve shows the markets probable purchase quantity at alternative prices. The first
step in estimating demand is to understand what affects price sensitivity. Generally speaking,
customers are most price-sensitive to products that cost a lot or are bought frequently. Customers
are less price-sensitive to low-cost items or items they buy infrequently. They are also less pricesensitive when price is only a small part of the total cost of obtaining, operating, and servicing
the product over its lifetime (total cost of ownershipTCO). Companies prefer customers who
are less price-sensitive.
Estimating Demand Curves
Most companies attempt to measure their demand curves using several different methods.
Statistical analysis of past prices, quantities sold, and other factors can reveal their relationships.
In measuring the price-demand relationship, the market researcher must control various factors
that will influence demand. The competitors response will make a difference.

Price Elasticity of Demand

Marketers need to know how responsive or elastic demand would be to a change in price. If
demand hardly changes with a small change in price, we say the demand is inelastic. If demand
changes considerably, demand is elastic. Demand is likely to be less elastic under the following
conditions:
There are few or no substitutes or competitors

Buyers do not readily notice a higher price

Buyers are slow to change their buying habits

Buyers think the higher prices are justified

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If demand is elastic, sellers will consider lowering the price. A lower price will produce more
total revenue as long as the costs of producing and selling more units do not increase
disproportionately. It is a mistake not to consider the price elasticity of customers and their needs
in developing marketing programmes. Price elasticity depends on the magnitude and direction of
the contemplated price change. It may be negligible with a small price change or substantial with
a large price change. It may differ for a price cut versus a price increase. There may be a price
indifference band within which price changes have little or no effect. Long-run price elasticity
may differ from short-run elasticity.
Step 3: Estimating Costs
Demand sets a ceiling on the price the company can charge for its product. Costs set the floor.
Types of Costs and Levels of Production
A companys costs take two forms, fixed and variable. Fixed
costs (also known as overhead) are costs that do not vary with
production or sales revenue. Variable costs vary directly with the
level of production. Total costs consist of the sum of the fixed
and variable costs for any given level of production. Average cost
is the cost per unit at that level of production. Management wants
to charge a price that will at least cover the total production costs
at a given level of production. To price intelligently, management
needs to know how its costs vary with different levels of
production.
Accumulated Production
The decline in the average cost with accumulated production
experience is called the experience curve or learning curve.
Experience-curve pricing carries major risks. Aggressive pricing
might give the product a cheap image. The strategy assumes that
competitors are weak followers. Most experience-curve pricing
has focused on manufacturing costs, but all costs, including
marketing costs, can be improved on.
Activity-Based Cost Accounting
Today companies try to adapt their offers and terms to different
buyers. To estimate the real profitability of dealing with different retailers, the manufacturer
needs to use activity-based accounting (ABC). ABC accounting tries to identify the real costs
associated with serving each customer. The key to effectively employing ABC is to define and
judge activities properly.
Target Costing
Costs change with production scale and experience. They can also change as a result of a
concentrated effort to reduce them through target costing. The objective is to bring the final cost
projections into the target cost range.
Step 4: Analysing Competitors Costs, Prices, and Offers
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Within the range of possible prices determined by market demand and company costs, the firm
must take competitors costs, prices, and possible price reactions into account. The firm should
first consider the nearest competitors price.
Step 5: Selecting a Pricing Method
Given the 3Cs - the customers demand schedule, the cost function, and competitors prices, the
company is now ready to select a price. Costs set the floor to the price. Competitors prices and
the price of substitutes provide an orienting point. Customers assessment of unique features
establish the price ceiling. There are six price-setting methods:
Markup pricing
Target-return pricing
Perceived-value pricing
Value pricing
Going-rate pricing
Auction-type pricing
Mark up Pricing
The most elementary pricing method is to add a standard markup to the products cost.
Does the use of standard markups make logical sense? Generally, no. Any pricing method that
ignores current demand, perceived value, and competition is not likely to lead to the optimal
price. Markup pricing remains popular. Sellers can determine costs much more easily than they
can estimate demand. By tying the price to cost, sellers simplify the pricing task. Where all firms
in the industry use this pricing method, prices tend to be similar. Many people feel that cost-plus
pricing is fairer to both buyers and sellers.
For ex:
Toaster manufacturer following costs and sale expectations:
Variable cost per unit : Rs 10
Fixed costs: Rs 300000
Expected unit sales 50000 units
Unit cost = vc + fc / unit sales ( 10 + 300000 / 50000 = Rs 16 )
Now assume earn a 20 % mark up on sales.
Markup price = unit cost / 1 desired return on sales (16 / 1 -0.20 = Rs 20)
Target-Return Pricing
In target-return pricing, the firm determines the price that would yield its target rate of return
on investments (ROI). Target-return pricing tends to ignore price elasticity and competitors
prices.
For ex: General Motors has priced its automobile to achieve a 15% to 20% ROI
Toaster manufacturer following costs and sale expectations:
Variable cost per unit: Rs 10
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Invested capital RS 1000000

Expected unit sales 50000 units
Target - return price = unit cost + desired return * invested capital / unit sales
Perceived Value Pricing
An increasing number of companies base their price on the customers perceived value. They
must deliver the value promised by their value proposition, and the customer must perceive this
value. Perceived value is made up of several characteristics:
Buyers image of the product performance
Channel deliverables
The warranty quality
Customer support
Softer attributes such as:
- Suppliers reputation
- Trustworthiness
- Esteem
Furthermore, each potential customer places different weights on these different elements, with
the result that some will be:
Price buyers
Value buyers
Loyal buyers
Companies need different strategies for each of these three groups. The key to perceived-value
pricing is to deliver more value than the competitor and to demonstrate this to prospective
buyers. The company can try to determine the value of its offering in several ways:
Managerial judgments within the company
Value of similar products
Focus groups
Surveys
Experimentation
Analysis of historical data
Conjoint analysis
Going-Rate Pricing

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In going-rate pricing, the firm bases its price largely on competitors prices. The firm might
charge the same, more, or less than major competitor (s). Going-rate pricing is quite popular
where costs are difficult to measure or competitive response is uncertain.
Auction-type pricing
Auction-type pricing is growing more popular, especially with the growth of the Internet.
There are three types of auction-type pricing:
English auctions (ascending bids)
Dutch auctions (descending bids)
Sealed-bid auctions
Step 6: Selecting the Final Price
Pricing methods narrow the range from which the company must select its final price. In
selecting the price, the company must consider additional factors, including the impact of other
marketing activities, company pricing policies, gain-and-risk sharing pricing, and the impact of
price on other parties.
Product-Mix Pricing
Price-setting logic must be modified when the product is part of a product mix. Pricing is
difficult because the various products have demand, cost interrelationships, and are subject to
different degrees of competition. We can distinguish six situations involving product-mix
pricing: product-line pricing, optional-feature pricing, captive-product pricing, two-part pricing,
by-product pricing, and product bundling pricing.
1) Product-line pricing: Companies normally develop product lines rather than single products
and introduce price steps. In many lines of trade, sellers use well-established price points for the
products in its personal line. The sellers task is to establish perceived-quality differences that
justify the price differences.
2) Optional-feature pricing: Many companies offer optional products, features, and services
along with their main product. Pricing is a sticky problem, because companies must decide
which items to include in the standard price and which to offer as options.
3) Captive-product pricing: Some products require the use of ancillary or captive products.
There is a danger in pricing the captive product too high in the aftermarket.
4) Two-part pricing: Service firms often engage in two-part pricing, consisting of a fixed fee
plus a variable usage fee.
5) By-product pricing: The production of certain goods often results in by-products. If the byproducts have value to a customer group, they should be priced on their value.
6) Product-bundling pricing: Sellers often bundle products and features. Pure bundling occurs
when a firm only offers its products as a bundle (tied-in sales). In mixed-bundling, the seller
offers goods both individually and in bundles. When offering a mixed bundle, the seller normally
charges less for the bundle than if the items were purchased separately. Some customers will
want less than the whole bundle. Studies have shown that as promotional activity increases on

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individual items in the bundle, buyers perceive less savings on the bundle and are less apt to pay
for the bundle.
Q. 49. Explain utility of Reference Price and Price Cues with regards to the consumer
oriented pricing decisions in brief. Augment your response by suitable illustrations.
Answer: Price, is not just a number on a tag or an item. Throughout most of history, prices were
set by negotiation between buyers and sellers. Setting one price for all buyers is a relatively
modern idea. Today the Internet is partially reversing the fixed pricing trend. Traditionally, price
has operated as the major determinant of buyer choice. Price remains one of the most important
elements determining market share and profitability.
How Companies Price
Companies do their pricing in a variety of ways. In small companies, prices are often set by the
boss. In large companies, pricing is handled by division and product-line managers. In large
companies, top management sets general pricing objectives, policies, and often approves the
prices proposed by lower levels of management. In industries where pricing is a key factor,
companies will often establish a pricing department to set or assist others in determining
appropriate prices. Many companies do not handle pricing well. Others use price as a key
strategic tool. There are customized prices and offerings based on segment value and costs.
Effectively designing and implementing pricing strategies requires a thorough understanding of
consumer pricing psychology and a systematic approach to setting, adapting, and changing
prices.
Consumer Psychology and Pricing
Marketers recognise that consumers often actively process price information, interpreting prices
in terms of their knowledge from prior purchasing experiences, formal communications, and
point-of-purchase or online resources. Purchase decisions are based on how consumers perceive
prices. What they consider the current actual price - not the marketers stated price. Consumers
may have a lower price threshold below which prices may signal inferior or unacceptable
quality. Upper price threshold above which prices are prohibitive are seen as not worth the
money.
Reference Prices
When examining products, consumers often employ reference prices. In considering an observed
price, consumers often compare it to an internal reference price (pricing from memory) or an
external frame of reference (posted regular retail price). All types of reference prices are
possible. Sellers often attempt to manipulate reference prices. Reference-price thinking is also
encouraged by stating a high manufacturers suggested price or by indicating that the product
was priced much higher originally or by pointing to a competitors high price. Clever marketers
try to frame the price to signal the best value possible. When consumers evoke one or more of
these frames of reference, their perceived price can vary from the stated price.
Price Cues

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Consumer perceptions of prices are also affected by alternative pricing strategies. Many sellers
believe that prices should end in an odd number. Research has shown that consumers tend to
process prices in a left-to-right manner rather than by rounding. Sale signs next to prices
have been shown to spur demand, but only if not overused.

Q. 50. Discuss everyday low pricing (EDLP) in terms of how it compares to high-low
pricing. Why is EDLP becoming a commonly used pricing technique?
Answer: In recent years, several companies have adopted value pricing: They win loyal
customers by charging a fairly low price for a high-quality offering. Value pricing is thus not a
matter of simply setting lower prices; it is a matter of reengineering the company's operations to
become a low-cost producer without sacrificing quality, to attract a large number of valueconscious customers. An important type of value pricing is everyday low pricing (EDLP), which
takes place at the retail level. A retailer that holds to an EDLP pricing policy charges a constant
low price with little or no price promotions and special sales. These constant prices eliminate
week to-week price uncertainty and the "high-low" pricing of promotion-oriented competitors. In
high-low pricing, the retailer charges higher prices on an everyday basis but then runs frequent
promotions in which prices are temporarily lowered below the EDLP level. The two different
pricing strategies have been shown to affect consumer price judgments-deep discounts (EDLP)
can lead customers to perceive lower prices over time than frequent; shallow discounts (highlow), even if the actual averages are the same. Some retailers have even based their entire
marketing strategy around what could be called extreme everyday low pricing.
Every day low price (EDLP) is the pricing strategy used by retail stores that provides low prices
to the customers every single day without any special pricing discount, sale, comparison
shopping etc. Traditionally, retail stores used to keep regular pricing discounts, coupon clipping
promotions, etc. to promote their sales and increase the footfall in their stores. But, this needs a
lot of effort in terms of monetary aspects and physical aspects making it difficult to sustain the
competitive advantage. The strategy of EDLP helps to convince the consumer that they will get
better and low prices than other competitive stores everyday even though the promotions of
competitors at regular intervals might provide lowest prices but they will not be available every
day. EDLP also helps the retail stores to reduce their demand fluctuation that would occur due to
promotions on some days, and also reduces the probability of consumers receiving time degraded
products. Stores like Walmart and Spencers have used the EDLP strategy to a very good extent
for their success.
eg- EDLP has been used by BigBazar stores in their branding.

Question 51 Explain the product mix with appropriate example. Being a product manager
of cosmetic company how will you build and manage the product mix for your
organization?

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Answer: Product mix refers to the number of product lines that an organization offers to its
customers.
Product line is a group of related products manufactured or marketed by a single company. Such
products function in similar manner, sold to the same customer group, sold through the same
type of outlets, and fall within a same price range.
Marketers must modify their price-setting logic when the product is a part of a product-mix.
In product-mix pricing, the firm searches for a set of prices that maximizes profits on the total
mix.
Pricing is difficult because the various products have demand and cost interrelationships and are
subject to different degrees of competition.
We can distinguish six situations calling for product- mix pricing: product-line pricing, optionalfeature pricing, captive- product pricing, two-part pricing, by-product pricing, and productbundling pricing.
PRODUCT-LINE PRICING: - companies normally develop product lines rather than single
products and introduce price steps.
In many lines of trade, sellers use well-established price points for the products in their line.
A mens clothing store might carry mens shirts at three price levels: Rs.500, Rs.1000, and above
Rs.1500.
Customer will associate the low-, average-, and high quality shirts with three price points.
OPTIONAL-FEATURE PRICING:- many companies offer optional products, features, and
services along with their main product.
The automobile buyer can order power window controls, remote adjustable mirrors, a sunroof,
and theft protection,
Pricing is a sticky problem, because companies must decide which items to include in the
standard price and which to offer as options.
Automobile companies advertise entry-level models at low prices to pull people into the show
rooms.
CAPTIVE-PRODUCT PRICING:- When pricing their core products, companies must look at
several factors such as supply and demand, competitors' pricing and manufacturing costs.
However, pricing the accessories, or captive products, sold separately to work with those
products can be just as difficult, and may even affect sales of the core product itself.
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TWO-PART PRICING:- A pricing strategy normally used by service marketers, which consists
of a fixed fee plus a variable usage fee. For example, telephone users pay a monthly fee plus
charges for calls beyond a certain numbers. One problem the service firms face in this pricing
method is the decision with regard to the proportion of each part of the pricing i.e., how much to
charge for the basic service and how much for the variable usage. The fixed fee should be low
enough to induce purchase of the service; the profit can then be made on the usage fee.
BY-PRODUCT PRICING: - By product is something which is produced as a result of producing
something else (the main product). Usually, the byproducts are disposed off and have little value.
Example- when meat is processed for human consumption, the by product can be used as food
for dog/cat. So the manufacturer can sell it in market to recover some of his expenses say
transportation and storage costs.
PRODUCT-BUILDING PRICING:- The act of placing several products or services together in a
single package and selling for a lower price than would be charged if the items were sold
separately. The package usually includes one big ticket product and at least one complementary
good. Bundled pricing is a marketing method used by retailers to sell products in high supply
Being a product manager of cosmetic company how will you build and manage the product mix
for your organization?
The Indian cosmetic company is characterized by highly competitive marketing strategies. It
depends on ability to introduce rapidly innovative products into the market without endless
delays. A strategic marketing plans helps a company to decide proper segmentation, targeting
and positioning of the products. Developing a concise strategic marketing plan include clear
vision of business, its goal and unique selling proposition.
Significant of 4ps of marketing mix
The right product,
Sold at the right price,
In the right place an,
Using the most suitable promotion.
To create right marketing mix, Business has to meet the following Conditions:Product: - The product has to have right features with broader choice and should satisfy
consumer needs-such as ;it must look well and work well.
Price: - The price must be right. The price of an item is clearly an important cause of the value of
sales made. Price decides success of product in market.

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Place: - The goods must being the right place at right time. Making sure that the goods arrive
when and where, as they are wanted is an important operation.
Promotion: - It is the communication with the business customers.
Product policy: size growth of product range, quality differentiation strategy and assortment
renewal strategy. For a permanent satisfaction of consumers needs, Cosmetics company has to
continue the horizontal assortment range diversification strategy. Cosmetics company which
produces and sells a complex and modern range of cosmetic products, even for the most
demanding tastes. Thats why the company should adapt constantly to the market requirements
regarding the product novelty, make-up colors diversification, packaging methods, product
manufacturing technology. The quality differentiation strategy should be maintained. It is very
important to offer superior products that will satisfy all consumers categories, from those who
want to use qualitative products at affordable prices to those who would spend anything for
purchasing a prestigious product that will satisfy the most demanding wishes. The assortment
renewal strategy is the most complex and dynamic strategy. The renewal assortment leads to the
creation of new product lines within the existing range, for offering products that meet new
demands of fashion and technology.
Price policy The company approaches three aspects: the prices level, the degree of the prices
diversification and the of prices mobility. Based on each product category, their characteristics
and targeted consumer category, the company may adopt a strategy of moderate prices. Thus,
prices can vary depending on the criterion that was the basis for its establishment. For price
policy it is beneficial the maintaining of practices prices. This price level is justified by the
quality of the products. Prices applied by the company for its products reflect the quality and the
position on the market.
Placement policy The main criteria underlying the distribution strategies are: the dimensions of
the distribution channel, the size of the distribution, the degree of companys participation,
control degree, elasticity degree and the logistics of goods company applies the following
strategies: direct distribution, distribution through personal device and high level of control.
Promotion policy Promotion of the global image image expansion strategy, conducting
ongoing promotional activities, offensive promotional strategy, undifferentiated strategy,
organizing promotional activities with the help of specialized institutions.
Q. 52. Explain five dimensions on the basis of which a company can differentiate & position
its market offering? Give example of each of dimensions.
To be branded product must be differentiated. Physical products vary in their potential for
differential. At one extreme, we find products that allow little variation chicken aspirin and steel.
Yet even here some differentiation is possible. Here the seller faces an abundance of
differentiation possibilities including form, features customization, performance quality, and
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style. Design has become increasingly important means of differentiation and we will discuss it
separately. In services differentiation and we will discuss it separately. In services differential is
achieved through the use of technology and by offering value services. Here is how one of the
leading courier companies in india has achieved this.
Blue Dart:
Blue dart a leading player in the courier services industry in india, has become an important part
of the supply chain of the companies by providing integrated services. In order to augment
services the company uses several priority software that enable clients to track and monitor
shipment status. The company has a feet of aircrafts to provide cargo services a ground fleet of
vehicles large warehouse space and bounded in metro cities. The company alsop provides
advisory services to clients to develop solution on distribution issues.
Product Differentiation:
Form: many products can be differentiated in form- the size, shape or physical structure of a
product. Consider the many possible forms taken by products such as aspirin. Although aspirin is
essentially a commodity, it can be differentiated by dosage size, shape, color or action time.
Features: most products can be offered with varying features that differentiate their basic
function. A company can identify and select appropriate new features by surveying recent buyers
and then calculating customer value versus company costs for each potential feature. The
company should also consider to prioritize those features that are included and final; way to
information in terms of feature bundles or packages. Auto company often manufacture must also
think in terms of this feature. Each com0pany must decide whether to offer feature
customization.
Performance quality: most products are established at one of four performance levels low
average high and superior. Performance quality is the level at which the products primary
characteristics can operate. Quality is becoming an increasingly important dimension for
differentiation as companies adopt a value model and provide quality for less money. Firms
however should not necessarily design the highest performance level.
Conformance quality: buyers expect products to have a conformance quality. Which is the
degree to which all produced units are identical and meet the promised notifications. Suppose a
Porsche 911 is designed to accelerate 60miles per hour within 10 seconds if every Porsche 911
coming off the assembly line does this the model is said to have high conformance quality.
Durability: durability a measure of the products expected operating life under natural or stressful
conditions is a valued attribute for certain products. Duracell advertises itself a long lasting
condition is a valued attribute for a premium price. Nokia phones are also known for their
durability buyers will generally pay more for vehicles and kitchen appliances have a reputation
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for being long lasting. However this rule is subject to some qualifications the extra price must
not be excessive. Furthermore the product must not the subject to rapid technological
obsolescence as are personal computers and video cameras.
Reliability: buyers normally will pay a premium for reliable products. Reliability is a measure of
the profitability that a product will not malfunction or fail within a specified time period.
Breakthrough marketing describes how that company has excelled at making and selling high
quality, dependable automobiles.
Q.53 Create a marketing plan for product /service of your choice.
A marketing plan is a written document that summarize what the market has learned about the
marketplace and indicate how the firm plans to reach its marketing objective.
Marketing plans are becoming more customer and competitor oriented better reasoned and more
realistic than in the past they draw more input for all the functions and are team developed.
Planning is becoming a continuous process to respond to rapidly changing market conditions
Executive summary
The marketing plan should open with a brief summary for senior management of the main goals
and recommendations. a table of content outline the rest of the plan and all the supporting
rational and operational detail.
Mithaila food products Ltd will initially tide up with two large retail chains as a privet brand
supplier for them. However it plans to enter the domestic market, and subsequently the
international market with its own brand once it has stabilize its product and generated enough
financial resource. Its plans to do this through both internal accrual and venture capital funding
Situation Analysis
This section present relevant back ground data on sales costs the market, competitor and the
various forces in the macro environment,. How to do we define the market how big is it, and how
fast is it growing? What are the relevant trends? What is the product offering and what critical
issues do we face ? Firm will use all this information to carry out a swot analysis.
MFPL's owner -director analyzed the situation using 4C framework 4C stand for customer,
company, competitor and context.
the key success factor in the institutional market is the provision of quality products in the
desired quantities , and at reasonable prices. access to quality raw material at low cost which is
remunerative to the producers , is another requirement for success in this market.
Marketing strategy

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Here the product manager define the mission , marketing and financial objectives , and groups
and needs that the market offering are intended to satisfy the manager then establishment the
product line's competitive positioning, which will inform the "GAME PLAN" to accomplish the
plan objective.
customer focus with the operation efficiency and customer intimacy.
MFPL will position itself as value for money brand , one that is tasty, reliable, trustworthy , and
fun to eat.
They using marketing mix strategy 4P's stands for product , price , place , promotion .
Financial projection
Financial projection include a sales forecast an expense forecast, and break even analysis . on the
revenue side , the projection shows the forecasted sales volume by month and product category
on the expanse side they show the expected cost of marketing, broken down into final categories
. the break even analysis shows how many unites the firm sale monthly to offset its monthly
fixed cost and per unit variable cost.
Implementation control
The last section of marketing plan outlines the controls for monitoring and adjusting
implementation of the plan. typically, it spells out the goals and budget for each month or
quarter, so mgt can review each periods results and take corrective actions as needed. firm must
also take number of different internal and external measures to access the progress and suggests
possible modification.
Q54 Describe the five product levels that are a part of customer value hierarchy?
Product Levels: The Customer-value Hierarchy
In planning its market offering, maintain that the
marketer needs to address five product levels. Each
level adds more customer value, and the five
constitute a customer value hierarchy.
Core benefit: The service or benefit the customer is
really buying. The customer in search of a hotel room
demand only rest and sleep from a marketer.
Basic product: Now the marketer must turn the core
benefit into Basic product. For example customer
need basic things like bed, bathroom, chair, fan etc.
Expected products: At the third level marketer must
prepare for the expected product of the clients. a set of attributes and conditions buyers normally
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expect when they purchase this product. For example if bed, bathroom, fan are the basic product,
then clean bed sheet, neat and clean bathroom are the expected products.
Augmented product: At the fourth level, the marketers prepares an augmented product that
exceeds customers expectations. For example, beautiful wall hanging, lovely balcony, Television
set etc.
Potential product: At the fifth level stands the potential product that the marketer need to search
for the future operation. For example high speed internet, telephone line etc.
Conclusion - Based on the background of the mobile industry, this paper proposes the framework
and process of a mobile customers demands of unsought services/products by using customer
demand analysis.
This paper proposes a mobile customer demand analysis model and develops a mobile customer
value hierarchy to capture customer demand knowledge.
A well-formed model could identify the customer demand objectives dynamically from their
engagement record; then a personalized product recommendation based on the customer value
hierarchy is made.
Q. 55. Discuss the four corporate strategic planning activities with suitable example.
Some corporation gives their business units a lot of freedom to set their sales and profit goals and
strategies. Other set goals of their business unit but let them develop their own strategies. Still
other set of goals and participate in developing individual business unit strategies.
All corporate headquarters undertake four planning activities.
Defining the corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
Defining the corporate mission: An organization exists to accomplish something : to make cars,
lend money, provide a nights loading, and so on. Over time the mission may change, to take
advantage of new opportunities or respond to new market condition. Amazon.com change its
mission from being the worlds largest online bookstore to aspiring to become the worlds largest
online store; and eBay changed its mission from running online auctions for collectors to running
online auction of all kinds of goods.

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Organizations develop mission statements to share with managers, employees, and customers. A
clear, thoughtful mission statement provides employee with a shared sense of purpose, direction,
and opportunity.
2. Establishing strategic business units:
Companies often define their businesses in term in terms of product: they are in the auto
business or the clothing business. But harvards famed marketing professor ted levitt argued
that market definition of a business as a customer satisfying process, not a goods producing
process. Products are transient; basic need and customer group endure forever transportation is a
need :the horse and carriage ,the automobile ,the railroad, the airline ,and the truck are products
that meet that need.
An SBU has three characteristics :It is a single business, or a collection or related business, that can be planned separately from the
rest of the company.
It has its own set of competitors
It has a manager responsible for strategic planning and profit performance, who controls most of
the factors affecting profit.
3. Assigning resources to each SBU:
Once it has define SBUs , management must decide how to allocate corporate resources to each.
The 1970s saw several portfolio-planning models introduce to provide an analytical mean for
marketing investment decision
The GE/Mckinsey Matrix classifies each SBU According to the extent of its competitive
advantages and the attractibeness of its industry.
4. Assessing growth opportunities:
Assessing growth opportunities includes planning new business, downsizing, and terminating
older business. If there is a gap between future desired sales and projected sales, corporate
management will need to develop or acquire new businesses to fill it.
Corporate management first course of action should be a review of opportunities for improving
existing businesses. One useful framework for detecting new intensive growth opportunities is
called a PRODUCT-MARKET EXPANTION GRID .

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Current product

Current market

New market

Market
strategy
Market
strategy

new product

penetration Product
strategy

development

development Diversification strategy

Q. 56 Briefly explain the various methods for gathering market information. what are the
techniques used for monitoring customer satisfaction?
Various methods for gathering market information:
The Order-to-Payment Cycle
The heart of the internal records system is the order-to-payment cycle. Sales representatives,
dealers, and customers send orders to the firm. The sales department prepares invoices and
transmits copies to various departments. Out-of-stock items are back ordered. Shipped items are
accompanied by shipping and billing documents that are sent to various departments.
Today's companies need to perform these steps quickly and accurately. Customers favor firms
that can promise timely delivery. Customers and sales representatives fax or e-mail their orders.
Computerized warehouses quickly fill these orders. The billing department sends out invoices as
quickly as possible. An increasing number of companies are using the Internet and extranets to
improve the speed, accuracy, and efficiency of the order-to-payment cycle.
Sales Information Systems
Marketing managers need timely and accurate reports on current sales. Wal-Mart, for example,
knows the sales of each product by store and total each evening. This enables it to transmit
nightly orders to suppliers for new shipments of replacement stock. Wal-Mart shares its sales
data with its larger suppliers such as P&G and expects P&G to re-supply Wal-Mart stores in a
timely manner. Wal-Mart has entrusted P&G with the management of its inventory.
Databases, Data Warehousing, and Data Mining
Today companies organize their information in databasescustomer databases, product
databases, salesperson databasesand then combine data from the different databases. For
example, the customer database will contain every customer's name, address, past transactions,
and even demographics and psychographics (activities, interests, and opinions) in some
instances. Instead of a company sending a mass "carpet bombing" mailing of a new offer to
every customer in its database, it will score the different customers according to purchase
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recency, frequency, and monetary value. It will send the offer only to the highest scoring
customers. Besides saving on mailing expenses, this will often achieve a double-digit response
rate.
Companies warehouse these data and make them easily accessible to decision makers.
Furthermore, by hiring analysts skilled in sophisticated statistical methods, they can "mine" the
data and garner fresh insights into neglected customer segments, recent customer trends, and
other useful information. The customer information can be cross-tabbed with product and
salesperson information to yield still deeper insights. To manage all the different databases
efficiently and effectively, more firms are using business integration software (see "Marketing
Insight: Putting Data to Work with Business Integration Software").
Using its own in-house technology, for example, Wells Fargo has developed the ability to track
and analyze every bank transaction made by its 10 million retail customerswhether at ATMs,
bank branches, or online. When transaction data are combined with personal information
provided by customers, Wells Fargo can come up with targeted offerings to coincide with a
customer's life-changing event.
The Marketing Intelligence System
The internal records system supplies results data, but the marketing intelligence system supplies
happenings data. A marketing intelligence system is a set of procedures and sources managers
use to obtain everyday information about developments in the marketing environment.
Marketing managers collect marketing intelligence by reading books, newspapers, and trade
publications; talking to customers, suppliers, and distributors; and meeting with other company
managers.
Techniques used for monitoring customer satisfaction
A number of methods exist to measure customer satisfaction. Periodic surveys can track
customer satisfaction directly. Respondents can also be asked additional questions to measure
repurchase intention and the likelihood or willingness to recommend the company and brand to
others. Paramount attributes the success of its five theme parks to the thousands of Web-based
guest surveys it sends to customers who have agreed to be contacted. During the past year, the
company conducted more than 55 Web-based surveys and netted 100,000 individual responses
that described guest satisfaction on topics including rides, dining, shopping, games, and
shows.20
Companies can monitor the customer loss rare and contact customers who have stopped buying
or who have switched to another supplier to learn why this happened. Finally, companies can
hire mystery shoppers to pose as potential buyers and report on strong and weak points
experienced in buying the company's and competitors' products. Managers themselves can enter
company and competitor sales situations where they are unknown and experience firsthand the
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treatment they receive, or phone their own company with questions and complaints to see how
the calls are handled.
For customer satisfaction surveys, it's important that companies ask the right questions.
Frederick Reichheld suggests that perhaps only one question really matters: "Would you
recommend this product or service to a friend?" He maintains that marketing departments
typically focus surveys on the areas they can control, such as brand image, pricing, and product
features. According to Reichheld, a customer's willingness to recommend to a friend results from
how well the customer is treated by front-line employees, which in turn is determined by all the
functional areas that contribute to a customer's experience.21
In addition to tracking customer value expectations and satisfaction, companies need to monitor
their competitors' performance in these areas. One company was pleased to find that 80 percent
of its customers said they were satisfied. Then the CEO found out that its leading competitor had
a 90 percent customer satisfaction score. He was further dismayed when he learned that this
competitor was aiming for a 95 percent satisfaction score.
For customer-centered companies, customer satisfaction is both a goal and a marketing tool.
Companies need to be especially concerned today with their customer satisfaction level because
the Internet provides a tool for consumers to spread bad word of mouthas well as good word
of mouthto the rest of the world. On Web sites like troublebenz.com and lemonmb.com, angry
Mercedes-Benz owners have been airing their complaints on everything from faulty key fobs and
leaky sunroofs to balky electronics that leave drivers and their passengers stranded.
Q.57. List the methods of market entry for global markets. What are the terms and
responsibility of channel members?
OR
Which are the various method to enter a foreign market ?
OR
Enumerate and explain various international market entry strategies that can be adapted
by a manufacturer and marketer of processed food products from south gujarat.
Answer.
INTRODUCTION
Once a company decides to target particular country, it must determine the best mode of entry.
Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct
investment. These five market entry strategies are shown in Figure. Each succeeding strategy
entails more commitment, risk, control, and profit potential.
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Indirect and Direct Export

The normal way to get involved in an international market
is through export. Companies typically start with indirect
exporting-that is, they work through independent
intermediaries. Domestic-based export merchants buy the
manufacturer's products and then sell them abroad.
Domestic-based export agents seek and negotiate foreign
purchases for a commission) Included in this group are
trading companies. Cooperative organizations carry on
exporting activities on behalf of several producers often of
primary products such as fruits or nuts-and are partly
under their administrative control. Export management
companies agree to manage a company's export activities
for a fee.
Indirect export has two advantages. First, there is less
investment. The firm doesn't have to develop an export
department, an overseas sales force, or a set of
international contacts. Second, there's less risk: Because
international marketing intermediaries bring know-how
and services to the relationship, the seller make fewer
mistakes.
Companies eventually may decide to handle their own exports.The investment and risk are
somewhat greater, but so is the potential return .A company can carry on direct exporting in
several ways:
Domestic-based export department or division. This might evolve from a purely service function
into a self-contained export department operating as its own profit center.
Overseas sales branch or subsidiary. The sales branch handles sales and distribution and perhaps
warehousing and promotion as well. It often serves as a display and customer- service center.
Traveling export sales representatives. Home-based sales representatives travel abroad to find
business.
Foreign-based distributors or agents. These distributor s and agents can hold limited or exclusive
rights to represent the company in that country.
Many companies use direct or indirect exporting as a way to "test the waters" before building a
plant and manufacturing a product overseas.

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Using a Global Web Strategy

With the Web, it's now not even necessary to attend international trade shows to show your
wares abroad: Electronic communication via the Internet is extending the reach of companies
large and small, allowing them to attract new customers outside their home countries, support
existing customers who live abroad, source from international suppliers, and build global brand
awareness.
These companies adapt their Web sites to provide country-specific content and services to their
best potential international markets, ideally in the local language. The number of Internet users is
rising quickly as access costs decline, local-language content increases, and infrastructure
improves. After going online, upscale retailer and cataloger The Sharper Image found that more
than 25% of its online business came from overseas customers.
The Internet has become an effective means of conducting market research and offering
customers a secure process for ordering and paying for products across time zones. Finding free
information about trade and exporting has never been easier.
Licensing
Licensing is a simple way to engage in international marketing. The licensor issues a license to a
foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of
value for a fee or royalty the licensor gains entry at little risk; the licensee gains production
expertise or a well-known product or brand name.
Licensing has potential disadvantages. The licensor has less control over the licensee than it does
over its own production and sales facilities. If the licensee is very successful, the firm has given
up profits, and if and when the contract ends, the company might find it has created a competitor
prevent this, the licensor usually supplies some proprietary product ingredients or components
(as Coca-Cola does.) but the best strategy is to lead in innovation so the licensee will continue
to depend on the licensor.
There are variations on a licensing arrangement. Companies such as Hyatt and Marriott sell
management contract to owners of foreign hotels to manage these businesses for a fee. The
management firm may have the option to purchase some share in the managed company within a
stated period.
In contract manufacturing, the firm hires local manufacturers to produce the product. When
Sears opened department stores in Mexico and Spain, it found qualified local manufacturers to
produce many of its products. Contract manufacturing gives the company less control over the
manufacturing process and risks loss of potential profits on manufacturing. However, it offers a
chance to start faster, with the opportunity to form a partnership or buy out the local
manufacturer later.
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Finally, a company can enter a foreign market through franchising, a more complete form of
licensing, the franchisor offers a complete brand concept and operating system. In return, the
franchisee invests in an pays certain fees to the franchisee McDonald's, KFC, and Avis have
entered scores of countries by franchising their retail concepts and making sure their marketing is
culturally relevant.
Joint Ventures
Historically, foreign investors have often joined with local investors to create a joint venture
company in which they share ownership and control. For instance
Coca-Cola and Nestle joined forces to develop the international market for "ready-to- drink" tea
and coffee, which currently they sell in significant amounts in Japan.
Procter & Gamble formed a joint venture with its Italian archrival Fater to cover babies'
bottoms in the United Kingdom and Italy.
Whirlpool took a 53% stake in the Dutch electronics group Philips's white-goods business to
leapfrog into the European market.
In India, there are several joint ventures in various industries. Tata AIG, Birla Sun Life Financial
Services, ICICI Prudential, HDFC Standard Life Insurance, and Bajaj Allianz General Insurance
are some of the examples of joint ventures in the insurance sector. Maruti Suzuki India Limited
was another successful joint venture in the automobile sector before it acquired the shares held
by the Government of India.
A joint venture may be necessary or desirable for economic or political reason (he foreign firm
might lack the financial, physical, or managerial resources to undertake the venture alone; or the
foreign government might require joint ownership as a condition for entry. joint ownership has
certain drawback. The partners might disagree over investment, marketing, or other policies. one
might want to reinvest earnings for growth, and the other to declare more dividends joint
ownership can also prevent a multinational company from carrying out specific manufacturing
and marketing policies on a worldwide basis.
Direct Investment
The ultimate form of foreign involvement is direct ownership of foreign-base d assembly or
manufacturing facilities. The foreign company can buy p art or full interest in a local company or
build its own facilities. General Motors has invested billions of dollars in auto manufacturers
around the world, such as Shanghai GM, Fiat Auto Holdings, Isuzu, Daewoo, Suzuki, Saab, Fuji
Heavy Industries, Jinbei GM Automotive Co., and AvtoVAZ.
If the market appears large enough, foreign production facilities offer distinct advantages.

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First, the firm secures cost economies in the form of cheaper labor or raw materials, foreign
government investment incentives, and freight savings.
Second, the firm strengthens its image in the host country because it creates jobs.
Third, the firm develops a deeper relationship with government, customers, local suppliers, and
distributors, enabling it to better adapt its products to the local environment.
Fourth, the firm retains full control over its investment and therefore can develop manufacturing
and marketing policies that serve its long-term international objectives.
Fifth, the firm assures itself access to the market in case the host country insists locally
purchased goods have domestic content.
The main disadvantage of direct investment is that the firm exposes a large investment to risks
such as blocked or devalued currencies, worsening markets, or expropriation. It can be expensive
to reduce or close down operations, because the host country might require substantial severance
pay to employees.
Q. 58. How can a marketer of sports shoes differentiate his offering?
Introduction
Many people think a product is a tangible offering, but it can be more than that. Broadly , a
product is anything that can be offered to market to satisfy a want or need , including physical
goods , services , experiences ,events , persons ,place, properties ,organization ,information , and
ideas.
A marketer of sports shoes differentiate his offering as follow
(1) Form - many products can be differentiated in form the size, shape , physical statute of
product in similar manner marketer of sports shoes can offer shoes of variant size and design
(2)Features- most products can be offered with varying features that supplement there basic
function. company can identify and select appropriate new features by surveying recent buyer
then calculating customer value versus company cost for each potential features .in similar
manner the marketer sports shoes can offer shoes in different colures, looks and comfortlessness
level
(3) Customization - marketers can differentiate products by making them customize to an
individual. Mass communication is ability of the company to meet each customer requirement.
Similarly ,marketer of sports shoes has to offer shoes in different colures, design extra as per
customer requirement.

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(4) performance quality - most product are established at one of four performance level , low,
average, high, superior . performance quality is the level at which the products primary
characteristics operate quality is becoming an increasing important dimensions for differentiate
as companys adopt a value model and provide higher quality for less money. similarly marketer
sports shoes has to maintain performance quality and has to offer high quality at low price
(5)conformance quality buyers expect products to have a conformance quality, which is
degree to which all the produced units are identical and meet the promised specification .here ,
marketer of sports shoes has to stick on comfortless level of each variety of shoes and has to
meet the set standard
(6) durability durability , a measure of products expected operating life under natural or
stressful conditions ,is valued attribute for certain products .whatsoever verities is being offered
by the marketer , but the product should be durable .without durability , the verities are of no
use.
(7) reliability - buyers normally will pay a premium for more reliable products . reliability is a
major of the probability that a product will not fail within a specified time period . sports shoes ,
in the above example should be strong and comfortable able for at least six month so that the
customer may rely on requirement.
(8)style - style described the products look and feel to the buyer. On the other side , strong
style does not always mean high performance . toddy generation want the sports shoes in various
colures the different design with funky look .that means sports shoes should also be stylists
enough to meet the customer it .
Q. 59. Detail Note On BCG Matrix.
It is also known as Portfolio analysis.
This tool is developed by Boston
Consulting Group to evaluate the position
of different SBUs within the organization.
So, this technique is also known as SBUs
analysis because it is use to understand
performance of SBUs.
This matrix is developed on the basis of Z
parameter.
Relative market share of SBU
Growth rate of industry
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This 2 parameters are measured on high law frequencies.

So, that 2 x 2 matrix provides 4 different position of an SBUs within an organization.
[1] Star: This SBU reflects that it has high market share and high growth rate so, due to high market share
it enjoyed the leadership in the current market which leads to high sales high revenue and high
profit earnings from SBU and high growth rate in industry also indicates that future of SBU is
very bright and it will keep growing.
For such a promising SBU it is important to maintain its current position for an organization to
maintain the start category company Reinvest the profit earn by SBU in the business.
[2] Cash Cow: This position refers that SBU has high market sharing in the competition but the industry in
which it is operating is not growing industry. So due to high market share company will earn
more profit but as growth rate of industry is less. Company show not re-invests that profit as it is
not going to give future returned.
So company will use this profit or cash in the development of others SBU, so the strategy use for
this SBU is known as harvesting.
[3] Question Mark : This SBU indicates high growth rate if industry and low market share of SBUs this position
shows that the industry is very promising and will give good future returns but the market share
of company or sales position of company is not good
So, this SBU needs to strong then its market share by interesting use various resources such as
man power, money rate, etc. So the strategy use for the SBU is known as selective resources
allocation.
[4] Dog : This SBU indicates low market share and low growth rate. This is not a good SBU from
company. Point of view either for present or for future as industry is not growing as well as the
market share of SBU is not good.
So the strategy use for this SBU is to either change the business if possible or stop the business
IF not possible but it is not available to continue with the same SBU position.

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Q.60. Conduct a SWOT analysis for TataSky DTH or Starbucks coffee.

Answer: A company needs to gather information about each competitors strengths and
weaknesses.
The following table shows the results of a company survey that asked customers to rate its three
competitors, A, B and C on five attributes. Competitor A turns out to be well known and
respected for producing high-quality products sold by a good sales force but is poor at providing
product availability and technical assistance. Competitor B is good across the broad and
excellent in product availability and sales force. Competitor C rates poor to fair on most
attributes. This result suggests that the company could attack competitor A on product
availability and technical assistance and competitor C on almost anything, but should not attack
B, which has no glaring weaknesses.
This can be explained by the following table:

CUSTOMER
AWARENESS

PRODUCT
QUALITY

PRODUCT
AVAILABILITY

TECHNICA
L
ASSISTANC SELLING
E
STAFF

COMPETITOR
A

COMPETITOR
B

COMPETITOR
C

NOTE: E= EXCELLENT, G= GOOD, F= FAIR, P= POOR

TATASKY SWOT ANALYSIS:

TATA Sky
Parent Company

JV between the TATA Group and STAR

Category

DTH and Broadcasting

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Sector

Media and Entertainment

Tagline/ Slogan

Iskolagadaala to life jingalala;Ab channel package wohi lo

jopasandho

USP

Leading Direct-to-Home (DTH) service provider in India

STP
Segment

DTH Subscribed TV viewers, Broadband subscribers

Target Group

Top and middle section of the pyramid

Positioning

One-stop shop for all the television entertainment needs of

customers

SWOT Analysis
1. Leverage on brand TATA and high brand recall
2. Partnered with SKY Brand in the space of digital
technology to bring a state-of-the-art satellite television
service to India
3. Leader in introducing new packages and services
4. Rural penetration through ITC E-Chaupal and Godrej
Aadhar
5. Innovative product offering TATA Sky plus
6. Adopted 360 degree marketing campaign that
encapsulates television, print, radio and outdoor digital
platforms
7. Tie ups with Sony Pictures, Fox for content Pay per
view service for exclusive events
Strength

8. DVD Quality picture and CD Quality sound

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9. 24*7 customer service support in multiple languages

1.Not having first mover advantage as Dish TV captured
market share
2. Dependency on broadcaster
3. Cannot match free service provided by DD
4. Customer service are usually busy and waiting period is
usually very long
Weakness

5. High initial cost of DTH equipment

1.Focus on segmentation and differentiated product
offerings to expand its clients and spread its reach outside
Tier-I cities across the country
2. Expand distribution network through exclusive stores
3. Growing demand for quality of service in the form of
DTH over Cable
4. Increase in number of TVs sold
5. Penetrate market by competitively priced services,
superior technologies, interactive services and customer
support

Opportunity

6. Provide option of instalments and other promotional

schemes to the new user
1.Interoperability regulations
2. Cables set top boxes provide easy switching due to
negligible switching costs
3. Increasing competition
4. Dependency on broadcasters for their channel content
and thus increase in cost

Threats

5. No Exclusivity in Content and Rule of Must Carry

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6. Cap on foreign investment

Competition
1.Doordarshan
2. Sun Direct
3. Dish TV
Competitors

4. Big TV

STARBUCKS SWOT ANALYSIS:

Strengths.
Starbucks Corporation is a very profitable organization, earning in excess of $600 million in
2004.The company generated revenue of more than $5000 million in the same year.
It is a global coffee brand built upon a reputation for fine products and services. It has almost
9000 cafes in almost 40 countries.
Starbucks mission statement is Establish Starbucks as the premier purveyor of the finest coffee
in the world while maintaining our uncompromising principles while we grow. The following
six guiding principles will help us measure the appropriateness of our decisions
Weaknesses.
Starbucks has a reputation for new product development and creativity. However, they remain
vulnerable to the possibility that their innovation may falter over time.

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The organization has a strong presence in the United States of America with more than three
quarters of their cafes located in the home market. It is often argued that they need to look for a
portfolio of countries, in order to spread business risk.
The organization is dependant on a main competitive advantage, the retail of coffee. This could
make them slow to diversify into other sectors should the need arise.
Opportunities.
Starbucks are very good at taking advantage of opportunties. In 2004 the company created a CDburning service in their Santa Monica (California USA) cafe with Hewlett Packard, where
customers create their own music CD.
New products and services that can be retailed in their cafes, such as Fair Trade products.
The company has the opportunity to expand its global operations. New markets for coffee such
as India and the Pacific Rim nations are beginning to emerge.
Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers
of other goods and services both have potential.
Threats.
Who knows if the market for coffee will grow and stay in favour with customers, or whether
another type of beverage or leisure activity will replace coffee in the future?
Starbucks are exposed to rises in the cost of coffee and dairy products.
Since its conception in Pike Place Market, Seattle in 1971, Starbucks success has lead to the
market entry of many competitors and copy cat brands that pose potential threats.

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