Principles of Marketing: Product, Pricing, Distribution, Promotion

This assignment delves into the core concepts of marketing, focusing on product, pricing, distribution, and promotion strategies. It begins by defining a product and its various forms, including goods, services, and ideas, before exploring the different levels of product such as tangible, intangible, augmented and total concepts. The assignment then classifies products into consumer and industrial categories, providing detailed explanations and examples of each type, including convenience, shopping, specialty, and unsought products for consumers, and materials & parts, capital items, and supplies & services for industrial users. It further examines the product life cycle (PLC), outlining its stages (introduction, growth, maturity, and decline) and the corresponding marketing strategies. The assignment concludes with an overview of the new product development process, from idea generation and screening to concept development, testing, and business analysis.

Principles of Marketing .. FERVID.. (Sem IV)
Unit- 4 PRODUCT, PRICING, DISTRIBUTION AND PROMOTION STRATEGIES
PRODUCT
Meaning of Product: A product is the core element of marketing mix. It is anything that satisfies need and want of
customers. It can be
physical goods: book, pen, furniture, etc.
services: car repair, haircut, air travel, etc.
properties: land, building, shares, etc.
idea: safe driving, go green, small family happy family, etc.
experience: bunji jumping, cablecar ride, rafting, elephant ride, etc.
person: sportsperson, filmstar, model, singer, etc.
place: picnic spot, tour package, vacation, etc.
Service is a form of product that consists of activities, benefits or satisfaction offered for sale. It is intangible (can’t
be seen or touched, but only felt). For e.g. : services provided by dry cleaners, hair saloon, banks, hotels , airlines,
communication media, and so on. Both product and service comes together.
Jerome McCarthy has said, “Product means need-satisfying offering of a firm.”
Concepts of Product (Levels of Product):
1. Tangible concept: It is the traditional concept of product. Tangible products are those which can be touched
and seen. They have physical features for e.g. books, computer, mobile, etc.
2. Intangible Concept: Products can be intangible such as services, ideas, experiences and events. They can’t
be felt by customers but can’t be seen or touched.
3. Augmented Concept: This concept combines tangible and intangible products. Many physical goods carry
service packages. For e.g. solar heater with free installation service, photocopy machine with two years
warranty for free repair and maintenance, etc.
4. Total concept: it is the combination of all- tangible, intangible and augmented product concepts. It focuses
on product features, advantages and benefits. Features are physical characters, advantages relate to the
performance & benefits and results of buying. For instance, the marketer of a car not only offers
combination of metal, rubber, plastic, but also space for 4- 5 passengers, comfortable travel with image and
status related to ownership of brand.
Classification of Products (Types of Products)
A. Consumer Products B. Industrial products
1. Convenience Products 1. Material & Parts
2. Shopping ,, 2. Capital Items
3. Speciality,, 3. Supplies and Services
4. Unsought ,,
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A. Consumer Products: Products purchased to satisfy personal and family needs. Food items, clothes,
cosmetics, refrigerator, books, etc. are examples.
B. Types of Consumer Products:
1. Convenience Products: are purchased easily & often. Consumers buy them frequently and immediately
with minimum buying effort. Examples are bread, newspaper, sweets, eggs, etc.
2. Shopping Products: are less frequently purchased goods. Customers carefully compare quality, price,
suitability and style. Furniture, shoes, television, refrigerator, etc. are shopping products. These last for
years and consumers spend more time and effort for
purchase.
3. Speciality Products: are consumer products with unique features or brand identification. These are so
special for the buyers that they are ready to put extra effort to purchase the products.e.g. Rolex watch,
jewellery, expensive camera, high brand electronic equipment, designer clothes, and so on.
4. Unsought Products: These are the products that the consumers do not know or do not normally think of
buying. Consumers have little product awareness and knowledge. Examples are life insurance policy,
painting, artistic product, encyclopedia, etc.
Features of Convenience Products
1. Convenience products are frequently or regularly purchased.
2. Purchase planning is not required.
3. Generally the price of per unit is low.
4. Convenience products are sold with good packaging.
5. Consumers prefer different variety of products at different time.
6. Such products are sold by many retailers.
Features and Marketing Considerations of Consumer Goods
Features Convenience Shopping Speciality Unsought
1. Purchase Frequency Frequently Less
frequently
Infrequently Rarely
2. Purchase planning Rarely High Very high None
3. Price Low High High High
4. Packaging Very important Less
important
Less
important
Importance
Varies
5. Brand Loyalty Low Low High None
6. Distribution Intensive(many
retailers)
Selective(few
retailers)
Exclusive
show rooms
Factory
outlets
Marketing Considerations Convenience Shopping Speciality Unsought
1. Product features Modify products Improve
features
Maintain
quality
New
products
2. Branding Awareness Image Loyalty Awareness
3. Packaging Attractive Useful
protective
Not
important
Appropriate
4. Pricing Low price High price High price High price
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5. Place(distribution) Long channels Short channels Very short
channels
Direct
channel
6. Promotion Nationwise by
manufacturer
Local by
retailer
Targeted
promotion
National &
Local
Marketing Considerations of Convenience Products: The businesspersons or marketers have to focus on
following considerations for marketing of convenience products:
1. The products features should be modified from time to time.
2. Branding (Name, symbol ,etc.) should be used.
3. Attractive packaging is required to win competition.
4. Low price is more favorable.
5. Convenience products should be distributed through long channels.
6. Manufacturer is responsible for promotion all over the country.
B. Industrial products: are purchased for business purpose- to run organization, to manufacture goods or resale.
Fuel, raw materials, machines, tools, etc. are industrial products.
Types of Industrial Products:
1. Material & Parts: include raw materials, manufactured materials and parts. Raw materials consist of
farm products(wheat, cotton, fruits, vegetables) and natural products( fish, crude petroleum, iron ore,
minerals, herbs).
Manufactured materials and parts consist of component materials(iron, yarn, cement, wires)
and component parts (tyres, spark plug, nuts, bolts,). Most of manufactured materials and parts are
directly sold to industrial users.
2. Capital Items: are fully manufactured products used for production of other products or for providing
services. They include installations and accessory equipments. Installations consist of major purchases
such as buildings, generators, elevators, lift machines, large computer systems, etc.
Accessory equipments include portable equipment& tools such as hand tools, fax machine,
telephone set, desk, table accessories, and so on. They simplify production as well as official works.
3. Supplies & Services: Supplies include operating supplies such as petrol, diesel, mobil, grease, coal,
paper, ink, nails, stapler pins, etc.
Business services include maintenance & repair service(cleaning, computer repair, facility
maintenance,) and advisory service(legal, management consultancy, advertising ). Such services
usually exist on contract.
Features and Marketing Considerations of Industrial Products
Features Raw Materials Capital Items Supplies & Services
1. Purchase Frequency Frequent Rarely Frequent or less
frequent
2. Life Span Generally short Very long Short
3. Unit Price Low Very high Medium / low
4. Purchase Planning Long term contract One time contract None
5. Brand Loyalty Low High Generally low
6. Distribution Channel Selective Exclusive Intensive
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Marketing Considerations Raw Materials Capital Items
Supplies & Services
1. Purchase
Standardization
Very much Very little Moderate
2. Brand Preference None High Low
3. Pricing Negotiated Negotiated Fixed
4. Place(distribution) Short channel Direct Long
5. Promotion None Personal Selling is
important
Less important
6. Post-sale services None Very important None
Product Life Cycle (PLC)
Concept: All products have a life-cycle like living beings. They are born, they live and they die.
Changes in technology, competition & customers’ preference affect the life of the product. PLC is
based on following assumptions:
 Every product has a limited life
 Product sales pass through in each stage different stages
 Profits rise and fall at different stages
 Different buyer groups buy products during different stages
 Marketing strategies should differ of PLC
 No product sells forever
Stages of Product Life Cycle
1.Introduction 2. Growth 3.Maturity 4. Decline
1. Introduction Stage: starts when a new product is first launched. The marketing objective is to
create product awareness & make trial purchase among consumers.
Features:
a. Slow growth of sales: due to low awareness of product.
b. Innovator customers: customer acceptance is low. Only few customers try the product.
c. Small production level: the firm is unable to predict the success of product & keeps
production at low quantity.
d. Technological problems: since the product is new, some technological problems exist.
e. High price: due to high production cost, distribution & promotion expenses.
f. No competitors: Competitors lack production facility and technical knowledge to compete.
2. Growth Stage: If the new product satisfies the market, it will enter in growth stage, where sales
start improving. This stage is the period of market acceptance. The marketing objective is to
increase market share.
Characteristics:
a. Sales increase rapidly: innovators continue to buy products. New customers join them.
b. Improved features: the firm corrects technical defects in production & adds new features in
product.
c. New market segments: the firm moves the product into new market segments.
d. High profit: high sales bring more profit.
e. Slightly lower price: production cost decreases & prices are slightly lower.
f. Growing competition: new competitors enter into the market.
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3. Maturity Stage: At some point, a product’s sales growth will slow down, & the product will enter a
maturity stage. This stage is the period of defending market share & lasts longer. The marketing
objective is to stabilize profit & defend market share. Characters:
a. Decreasing sales volume: market competition slows down the growth in sales.
b. Tough competition: more & more competitors enter into market. They are attracted by higher
sales & profit.
c. Price cuts: competitors reduce their prices forcing the organization to price cuts.
d. Heavy promotion: organization spends more on sales promotion to attract new customers.
e. Low profit: low sales, high marketing costs bring low profit.
4. Declining Stage: this is the stage where sales decline & profits also decline. The marketing objective
is to survive or withdraw their products from the market. Those who continue rapidly reduce their
prices & try to attract price sensitive buyers.
Characteristics:
a. Declining sales: new technology, change in customers’ preference, intense competition
b. Declining profits: profits decline & reach to zero or negative level.
c. Laggard customers: hard core loyal customers continue buying the products. Late comers(laggard)
also buy.
d. Declining competition: competitors withdraw attention from the market. They incur losses.
e. High price: the loyal customers are still willing to pay high price to support the organization.
New Product
Concept: In general sense, a new product is an innovative product developed & introduced for the
first time in market. However, in marketing, a new product has several meanings. It can be
original product, improved product, modified product or new brand. But it should be taken as new
by the customers.
Types of New Products
1. Innovative Products 2. Modified Products 3 . Imitating Products
1. Innovative Products: are unique or original products launched for the first time. Innovations
are costly, riskier and time consuming. Polarized glass, aneroid mobiles, medicines for cancer,
etc. are examples. Only 10% of new products are innovative and about 75% of innovative
products fail.
2. Modified Products: existing products are modified & improved in terms of quality, functions
& benefits. The objective is to capture market share. Customers believe them different from
existing products.
For example: introduction of Horlicks in paper package, change in look & features of Honda
Dio scooter, etc.
3. Imitating Products: are new to the organizations but old to the market. These products are
“copy products”& follow me too “strategy”. Some organizations find difficulty & risk to
bring innovative & modified products. They copy successful products under different brand
name to capture some market share. e.g. Podreg for Godreg, Noktel for Nokia, introduction of
“Chinese Style” ball pens by local firms& so on.
New Product Development Process
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It is time consuming and painful process. In order to create successful new products, a
company must understand its consumers, markets, competitors & deliver superior value to
customers.
Steps in New Product development Process are
1. Idea Generation: New product development starts with idea generation. A company
generates hundreds of ideas, in order to find few good ones. New ideas can be
collected through several sources such as consumers’ complaints, marketing
research, investors, competitors, inventors. Similarly, the company can also rely on
its sales representatives, middlemen, engineers, consultants and employees.
(Customers are the best source of ideas in 80% of companies in USA)
2. Idea Screening: is the method of picking out good ideas and leaving out poor ones.
The ideas are screened in terms of organization’s objectives, policies, resources &
technical capabilities. Marketers find out answers to questions like- Is it real?.., Can
we win?
3. Concept Development & Testing: Concept development is the selection of 4 to 5
ideas for consumers. Promising ideas are turned into product concept. Consumers
can easily react to product concept without seeing the physical product. For e.g.
noodles can have three product concepts:
a. breakfast in the morning
b. Tasty snacks for afternoon
c. Full meal for lunch or dinner
Concept testing is asking potential customers to evaluate description of product
concept. The interview technique is used to find out customer reaction on uniqueness
& clarity of concept, price value, need satisfying features, frequency of potential use.
4. Marketing Strategy & Business Analysis: During new product development
process, the firm has to develop primary marketing strategy for the successful
product concepts. It covers target market share, marketing budget & marketing mix.
Business analysis is done to evaluate the attractiveness of product concept. It
involves competitor analysis, demand forecast, cost statement & break even analysis
to estimate costs, and profit projections.
5. Product Development & Test Marketing: Research & development department
develops physical versions of the product. They are known as product prototypes.
Functional tests and field conditions are conducted to see the performance of
product. Product tests are mostly essential in consumer products like foods,
cosmetics, etc.
6. Test Marketing: Product is manufactured in a limited scale. It is given a brandname,
packaging and marketing programme. Trial, first repeat, adoption and purchase
frequency are monitored.
Trial: Number of consumers buying for the first time.
First repeat: ,, ,, ,, for the second time.
Adoption: ,, ,, ,, who continue using the product (adopters).
Purchase frequency: frequency of product purchased by adopters.
7. Commercialization: is the last step. It involves commercial launching of the product
in the target market. In this stage, the organization prepares full-scale production and
marketing programmes. It involves decisions relating to timing, place, market
segment & strategy for launching the product.
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Branding Strategies
Definition: Branding is an important part of product. It is used to identify manufacturer or seller of the product. A
brand is a name, sign, symbol, or combination of all to identify the product/ service. It consists of various activities
such as:
a. Brand name: is that part of brand that can be pronounced. It includes letters, words, or numbers. For e.g.
Coca Cola, Honda, Dabur, etc.
b. Brand mark: is that part of brand which can be recognized but not pronounced. It appears as a sign,
symbol, or design. For LG, √ for Nike, tree for Dabur, etc.
c. Trademark: is a legal term. It refers to a brand which is registered with the govt. The owner has only the
right to use the registered brand name & brand mark. R is used in the name. It represents that the product
has legal protection.
Objectives/ Reasons for branding:
 Product identification
 Develop brand awareness
 Prestige & status
 Product positioning
 Increase profit margin
 Customer loyalty
 Legal protection * Efficiency in marketing
Types of Brands
1. Individual Brand: Each product has a separate brand name. Each brand is targeted to a different
group of customers. Companies use individual brand name to encourage internal competition &
diversify risk. Products manufactured by Unilever are given individual brand name like LUX, Liril,
Lifebuoy, and so on.
2. Family Brand: All products are given a single brand name. It helps in the advertisement & sales
promotion. LG for electronics, Ponds for cosmetics, Dabur for consumer products.
3. Manufacturer Brand: The manufacturer plays a dominant role in the market. Such brand is owned by
the manufacture. Manufacturer brand assures quality, price is high & aggressively promoted. Sony,
Tata, IBM, John Players, etc.
4. Distributor Brand: is also called private brand. Wholesalers or large retailers follow this type of
branding. They get their brandname registered under Trademark Act. They have freedom in pricing the
products, advertisement & sales distribution. Asian Sky Shop, Tele Shopping Network, Bigbazaar,
Woolmart, etc. are examples.
Packaging
Concept: Packaging refers to the designing & providing container or wrapper for the product. Package can be made
of metals, plastics, wood, paper, glass, jar, etc. Package contains important informations about product’s
composition, price, date of manufacture, batch number, using method, etc. Therefore, packaging is also a tool for
marketing products.
Packaging is different from packing. Packaging refers to wrapping or tieing up materials in paper, plastic, cardboard,
tube, gar, etc. for safe handling & use whereas packing is done after packaging is over, in cartoons, wooden box,
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plastic bag for easy distribution. Packaging lasts long until the product is used whereas packing is for very short
time, for transporting the product.
Pride & Ferrell,” Packaging involves the development of container & a graphic design for a product.”
Levels of Packaging (Types of packaging)
1. Primary Package: It holds the actual product until it is completely consumed. For e.g. tube containing
toothpaste or ointment, a bottle containing medicine, etc.
2. Secondary Package: Is the additional layer that protects the primary package. It is removed when the
product arrives at home or is ready to use. For e.g. a packet containing 10 dot pens, a cardboard box
containing a tube of toothpaste, etc.
3. Shipping Package: is used to store & transport the product. It is designed to hold several units of primary
or secondary packages. It is removed when retailers receive the product. For e.g. a cartoon containing 5
dozen toothpaste, a wooden box having 500 tablets, etc.
Functions of Packaging
1. Containment: packages are containers for product of various shapes & sizes.
2. Product Protection: packaging provides extra use life to the product. It protects product from
evaporation, spilling, spoilage, & mishandling.
3. Identification: packaging by use of labels, provides various informations& features of product.
4. Differentiates Product: Packaging is used for product differentiation & positioning. Manufacturers
change packages to modify products.
5. Convenience: a good design of the package provides many advantages- easy to stock,display& dispose
off.
6. Cost Effective: a package increases the cost of product. A package in cosmetics has 20% to 30% , in
chocolates 5% to 10% share in the final price to the consumer.
Requirements of Packaging OR
Essentials of a Good Packaging (Things required in Good Packaging )
a. Economical : Packaging should involve least cost to fill, remove & handle for manufacturer.
b. Suitable: a package should suit the requirements of the goods. Package designer should consider the size &
quality of the product.
c. Attractive: Design, color, shape & size of package should attract customers. Generally, new packages
attract customers.
d. Protective: Packaging must be designed such that it protects the contents. Medicines, powders, acids,
edible oils, require special packaging. Packaging must protect contents from sun, moisture, germs, etc.
e. Eco-friendly: A package should also be eco-friendly. It should be made of materials that do not create
pollution. Use of plastics in consumer products should be minimized.
f. Reasonable: In some products, customers are searching package that can be reused. For e.g. jar of horlicks,
prinkles, glucose, and so on.
g. Communicative: packaging should provide all informations required by law( manufacture date, expiry
date, batch number, price, composition, etc.)
PRICING
Concept of Price: It is the exchange value of goods/services. In other words, it is the amount of money that
customers pay for the product. Rent for house, tuition fee for education, interest for bank loan, fare for taxi, salary
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for employee, premium for insurance, commission for service, etc are various forms of price. Price is an essential
component of marketing mix.
According to Philip Kotler, “Price is the amount of money charged for the product or service”.
Concept of Pricing: Pricing is the determination of appropriate value to a particular goods or service. It involves
many activities performed within an organization to determine exchange value, such as setting the list price,
determining discount and commission, and formulating pricing objectives, policies & strategies. Determination of
value of a product is a difficult task for a marketer. It is most secretly performed activity in a business organization.
Most of the firms use price as a competitive tool.
Price and pricing are inter-related, both denote monetary value. However price represents exchange value only
whereas pricing is a comprehensive term involving many activities, strategies & objectives.
Objectives of Pricing (Importance of Pricing)
Pricing objectives guide pricing methods, policies and strategies. Organizations should select pricing objectives
carefully. Objectives can be
1. Profit-oriented Objectives: Some organizations may give more preference on achieving profit than others.
Pricing objectives can be
a. Target Return: A company may price its products/ services to achieve a certain percentage on sales
or investment. A company sets a % markup on sales on investment to cover operating cost plus desired
profit. For e.g. 10 % on sales or 15% on net worth(total assets minus liabilities) Market leaders who do
not face competition use this objective.
b. Satisfactory Profit: Profit should be satisfactory i.e. reasonable which can satisfy both customers &
company. Some companies follow the concept of profit maximization.
To maximize profit on long run, sometimes companies may have to accept short-run losses. One of
the best way for profit maximization is to offer popular products at a very small profit margin.
2. Sales-oriented Objectives: focus on sales. Especially large companies focus their attention on sales
volume rather than profit. Pricing objectives can be
a. Sales Volume: the pricing objective is to gain higher sales volume, for example 30 % sales increase
annually. Low price strategy is followed to influence demand. Mass production help to lower the unit
cost. More stress on distribution is given consideration. Companies may sell products or services at
discount price, with some attractive schemes.
b. Market Share: Some companies may be willing to maintain their market share as it is or capture new
markets to expand their market or influence. Wai -Wai noodles has pricing objective to maintain its
market share in Nepal. Low price & high promotion strategies are used to increase market share.
3. Status-oriented Objectives: Some large companies focus on maintaining the current market position.
They adopt this objective in order to minimize the risk of loss & maintain their status or goodwill in the
market. These objectives are related with
a. Price Stability: The pricing objective is to stabilize current price. With the help of stable price,
companies can win the competition. Products like newspaper, recharge card, books, medicines, gain
status through price.
b. Meet Competition: Some companies price their products or services to meet competition. Market
followers use prevailing price for a long time to avoid price competition.
c. Survival: This objective is suitable in declining stage of product life cycle. Some organizations will
tolerate short run losses& internal problems, if they are necessary to continue existence. For Carpet
industry & readymade garments in Nepal, pricing objective is to survive.
4. Quality-oriented Objectives: They focus on product quality. The pricing objectives can be
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a. Quality Leadership: This is generally used by specialty products like Rolex watch, Benz car, Apple
laptop, etc. Market skimming is done by setting higher prices. The pricing objective is product quality
leadership. High image of organization, generally global reputation is needed for this objective.
b. Quality imitation: The pricing objective is to copy the high quality products. Lower prices are set to
attract price-sensitive customers. This objective is common in Nepal, India, China& Hong-Kong .
Methods of Pricing (or Pricing Approaches)
In the ancient time, prices were set through bargaining between buyers & sellers. In present day context, pricing
methods are of three types:
1. Cost-oriented Pricing Methods: Pricing is generally based on the costs. The methods can be:
a. Cost-plus Pricing: is also known as mark-up method. This is the simplest method of pricing
where a certain profit margin is added to the total cost. Resellers & small manufacturers use this
method. However, it ignores market demand, competitor’s price, output levels & customer’
willingness to pay.
Suppose unit cost is Rs.100 & profit margin is 30%
Cost-plus Price= unit cost + Profit margin
i.e. Cost-plus price= 100+30= Rs. 130
b. Target Return Pricing: A desired return on investment (ROI) is added to the total cost to set
price. This is the target return of the organization.
Target Return Price=Total Cost + Desired ROI
Unit Sales
Suppose: Total investment is Rs. 10,00,000
Target return on investment 20% (Rs. 2,00,000)
Total cost Rs. 5,00,000
Total sales 10,000 units
Target Return Price Per unit= 5,00,000+2,00,000= Rs. 70
10,000
The meaning of investment should be defined. It could be total fixed assets or net worth (fixed
assets minus liabilities)
This method is simple to calculate. But it ignores competitor’s price & fluctuations in demand.
c. Break- even Pricing: Break-even analysis uses Break Even Point(BEP) to determine revenue &
profit from a product at a given price under certain cost structure. Break -even point is the no
profit no loss point, where revenue equals to costs.If sales(revenue) increase beyond this point, the
firm is able to make a profit & beyond the
BEP can be calculated in terms of units as well as monetary value.
i. BEP in terms of unit:
Suppose
Total fixed costs = Rs. 1,00,000
Variable cost per unit= Rs. 60
Selling price per unit= Rs. 100
BEP in units = Total fixed cost
Selling price per unit- Variable cost per unit
= 1,00,000 =2,500 units
100-60
BEP in sales= 2,500 units X 100= Rs. 2,50,000
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Profit is made when sales increase beyond the BEP, i.e. more than 2500 units.
ii. BEP in terms of Value(monetary): It can be used as the basic tool for measuring various
alternatives of price with sales volume.
BEP in Value= Total Cost
1- VC per unit
Selling Cost
=40,000 / 1-0.80
1.20
= Rs. 1,20,000
2. Demand-oriented Pricing Methods: also known as customer value-oriented method. Under this method,
price is determined on the basis of customer’s perceptions. Costs and market prices are not considered. The
pricing methods can be
a. Customer Value Pricing: value is the ratio of benefits to costs. Customer expects certain level of
quality service or benefit from the seller, after purchasing the product. Free installation, home
delivery, maintenance, etc attract customers. Supermarkets use this method where one or two well
known brands are offered at low price.
b. Perceived Value Pricing: is gaining popularity for the pricing of consumer products. Under this
method, the firm collects buyer’s perception of value(price) of the product & fixes the price
around average perceived value. Demand & costs are not considered. New products are priced by
this method. Non-price variables such as product, place & promotion are used to build-up
perceived value in the minds of the customers. A company develops a product for a particular
target market with a particular market positioning in mind with respect to price, quality & service.
3. Competition-oriented Pricing Methods: also known as market-oriented pricing methods. These are based
on the competitor’s prices. The methods can be:
a. Meet Competition Method: Equal to competitor’s price. This method is used where there are
many sellers of similar products. Prices of agricultural and mineral products are similar. It is going
rate pricing.
b. Below Competition Method: Price is below than the competitor’s price. The objective is to
attract more customers. The customers may admire the products as low in quality.
c. Above Competition Method: Price is set above the competitor’s price level. This method is used
in speciality products like Rolex watch, Mercedes Benz car , Apple laptop & some others.
Manufacturers differentiate such products by positioning.
d. Sealed-bid Pricing Method: This type of pricing is used where firms compete on the basis of
bids. The bid is the firm’s offer price & is set confidentially. For winning contracts, lower price
than competitors’ is required. The price is based on
expectations of how competitors will price their bids.
DISTRIBUTION (or Place)
Concept of Distribution (Place): Distribution is the place element of marketing mix. It relates to business activities
getting the product from the place of manufacturing to the place of consumption. It involves marketing channels and
physical distribution. Marketing channels (wholesalers, retailers) make the product available to the customers.
Physical distribution (order processing, warehousing, material handling, inventory management, transportation)
makes the product accessible(reachable) to the channel members and customers.
In the words of Philip Kotler, “ Distribution includes the various activities the company undertakes to make the
product accessible and available to the target market”.
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Objectives of Distribution
1. Movement of products: distribution makes movement of products from manufacturer to channel members
and customers. It facilitates exchange relationship, which is an essential activity of marketing. Products
have to reach the market before they are sold.
2. Availability of goods: distribution channels like wholesalers and retailers make the goods available to
customers. Distribution channels have key roles in maintaining regular supply according to demand of
products.
3. Protection of products: distribution aims to properly store and handle products so that
it can reach to the buyers in good condition. Material handling and warehousing contribute in the protection
work.
4. Efficiency improvement: distribution achieves marketing efficiency. It facilitates assortment (searching) of
goods. It reduces number of transactions between manufacturer and customers. Marketing costs decrease
by proper storage and handling of good.
5. Customer satisfaction: effective distribution contributes to customer satisfaction. It adds value to the
product. It facilitates better service to customers and delivers value to target customers.
Components of Distribution (or Elements of distribution)
A. Marketing Channels. B. Physical distribution
A. Marketing Channels: are middlemen, who makes product available to customers. They are
partners in serving customers. They can be:
1. Merchants: they buy, take title to and resell products. Wholesalers and retailers are merchant
middlemen.
i. Wholesalers: link between manufacturers and retailers. They deal with retailers and
not to customers.
ii. Retailers: link between wholesalers and customers. They deal with large numbers of
customers.
2. Agents: they search for customers and make negotiations but do not take title to the product.
Sales agents, brokers and sales representatives are agent middlemen.
3. Facilitators: they help in the distribution process. They neither take title to the products nor
make negotiations. Transporters, banks, insurance companies, advertising agencies and
warehouses are facilitators.
B. Physical distribution: makes the product accessible (reachable) to customers. It moves the
products from producers to customers. Activities involved are order processing, warehousing,
material handling, inventory management, and transportation.
1. Order processing: receiving, handling, filling orders.
2. Warehousing: storage facility until the product is sold.
3. Material handing: movement of products.
4. Inventory management: control of costs and levels of inventory.
5. Transportation: carrier type and mode for transport of product.
Methods of Distribution
1. Direct 2. Indirect
2. Direct marketing: Concept and forms
Concept: direct marketing is marketing without middlemen. It is direct persuasion by
manufacturer to specific customer for purchase order. It is home shopping and non-
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personal. It is an interactive marketing system to build long-term relationships with the
customer.
Methods( or Forms) of Direct marketing:
a. Door-to-door selling: the salespersons go door-to-door to visit customers. They have
face-to-face contact with the customers to make sales. They are outdoor
salespersons. The examples are medical representative, insurance agent, etc.
b. Direct mail: the customer is directly contacted by mail to send an offer. Videotapes,
CDs can also be mailed. Mails can be sent through post office, couriers, fax, email,
etc
c. Catalogue: manufacturers send catalogue to a selected list of
customers. Telephone hot line can be used to answer questions. The customers place
orders based on the informations provided in the catalogue.
d. Telemarketing: involves the use of telephone to take orders and answer questions of
customers. Call centers can be used to receive calls from customers. Mobile phones
are getting popular for telemarketing.
e. Television: sky shops are used for direct marketing through television. Generally,
physical fitness products, kitchenwares, etc are sold through this method. Asian Sky
Shop is an example.
f. Internet marketing: is electronic marketing and also known as e-commerce. Email,
website, etc are used for direct marketing. Information communication technology
has introduced possibilities and facilities for marketing.
3. Indirect marketing: is carried out through distribution channels such as wholesalers
and retailers. Manufacturers do not directly communicate with the customers for sale
of products.
Channel Structure for Consumer Goods: Consumer goods are purchased for personal or family use. The
participants in this channel structure are manufacturer, agent, wholesaler and retailer. The alternatives available for
channel structure of consumer products are:
Manufacturer---------------------------------------------------------------Consumer--------- Zero Level
Manufacturer----------------------------------Retailer----------------Consumer--------- One Level
Manufacturer---------Wholesaler--------Retailer--------------Consumer--------- Two Level
Manufacturer-AgentWholesalerRetailer-------------------Consumer-------- Three Level
1. Manufacturer--consumer channel: This is the direct channel between manufacturer and consumer. The
manufacturer performs all the distribution activities. Service products are generally distributed through zero
level channel. Manufacturers require personal contact. The zero level channels can be door-to-door selling,
telemarketing, on-line marketing, TV marketing, own stores, etc.
2. Manufacturer—retailer—consumer channel: This channel contains retailer in between the manufacturer
and consumer. Some large retailers buy products directly from manufacturers. Agricultural perishable
products are sold through this channel. The aim is selective distribution and order size is large. Other
examples are supermarket, department stores.
3. Manufacturer—wholesaler—retailer—consumer channel: It consists of wholesaler and retailer in between
the manufacturer and consumer. It is a long channel and most common. The distribution costs are high and
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large number of retailers take part in distribution. Most of consumer goods are distributed strongly through
this channel with the aim of covering large market.
4. Manufacturer—agent—wholesaler—retailer—consumer channel: It is the longest channel where
distribution costs are the highest. Global companies use this channel where distance, language and culture
are barriers to deal directly with local wholesalers. In such a situation, the manufacturer may use a local
agent to contact a wholesaler and run sales activities.
Channel Structure for Industrial Goods: Industrial customers buy products for business use, resell or to make
other products. The channel participants for industrial products are different from consumer products. The major
participants in industrial distribution channel are manufacturers, industrial users, industrial distributors and agents.
The alternatives available for channel structure of industrial products are:
Manufacturer--------------------------------------------------------Industrial User--------- Zero Level
Manufacturer------------------------Distributor----------------Industrial user--------- One Level
Manufacturer---------Agent---Distributor----------------industrial User--------- Two Level
Distribution Channel for Industrial Goods (Channel Structure/Design)
1. Manufacturer--industrial user channel: this structure is suitable for large and expensive industrial products.
Industrial users prefer to deal directly with manufacturers to receive regular supply of products of
consistent quality. For e.g. industrial users directly purchase installations like airplanes, generators,
chemical chambers, etc. from manufacturers.
2. Manufacturer—distributor—industrial users channel: the manufacturers of building materials, construction
equipment, air-conditioning equipments use industrial distributors. Distributor specialize in product lines
and theirs costs are low. Distributors provide delivery and after-sales services.
3. Manufacturer—agent—distributor—industrial user channel: This channel contains agent and distributor
between the manufacturer and customer. There is a long channel. Agents are manufacturers’
representatives. They negotiate the sale and arrange the transfer of title to products. This method is adopted
by manufacturer of fabricating materials and parts, operating supplies(mobil, petrol, diesel), etc.
Channel Functions (Market Intermediaries& Their Role in Distribution System)
Market intermediaries are middlemen that exist between the manufacturer and customer. They can be
wholesalers, retailers, agents, and facilitators. However, wholesalers and retailers are the important
intermediaries in marketing. Their roles are:
1. Wholesalers: are link between manufacturers and retailers. They do not deal with the ultimate
consumers. Their transactions are large in volume. Their roles are:
a. Buying and assembling: wholesalers purchase and assemble different types of goods from
different manufacturers. They also import goods from different countries.
b. Storage: wholesalers store products in warehouses until they are sold to retailers. They help the
manufacturers and retailers by arranging storage facilities.
c. Transportation: they make transportation arrangement from the premises of manufacturers to their
warehouses and from their warehouses to the retail stores. They may maintain their own vehicles
for this purpose.
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d. Grading and packaging: wholesalers grade the goods according to certain standards which they
have purchased from different manufacturers. Some manufacturers also give band names to
graded products to convince their customers or users about the quality of products they deal. They
also revise packaging as convenient.
e. Financing: wholesalers provide financial support to both the manufacturers and the retailers. They
generally purchase goods on cash basis from the manufacturers and sometimes also give advance
to the manufacturers. Thus, the manufacturers need not wait till products are sold. The wholesalers
help the retailers by selling the goods on credit.
f. Risk-bearing: wholesalers face a large number of risks in the process of distribution. These risks
may occur on account of changes in prices and demands, spoilage of goods, baddebts.
g. Promotion: the wholesaler’s job does not end with selling goods to the retailers. They also help in
dispersion of goods by the retailers situated in various markets. They perform advertising and
other sales promotion activities in order to promote the sale of their products..
2. Retailers: are link between wholesalers and ultimate customers. They deal with customers. Their
transactions are small in volume. The location, display and skills are important factors in retailing. The
roles of retailers are:
a. Collection of goods: retailers purchase and collect goods from wholesalers to meet the demand of
ultimate consumers or final user of products.
b. Spokespersons of customers: retailers act as spokespersons or representatives of customers. They
communicate the needs and wants of their customers to the wholesalers and manufacturers.
c. Providing Informations: On the basis of informations about likes and preferences of customers,
retailers advise the wholesalers or manufacturers to introduce improvements in their products.
d. Supply of goods in small quantities: retailers make available to the customers all products in the
small quantities. The customers need not store the goods.
e. Large variety of goods: retailers keep large variety of goods manufactured by various producers.
The consumers are offered a wide choice.
f. Credit facility: retailers also provide credit facility to their customers. The facility is a service to
the customers having difficulty of funds all the time.
Selection of Channel of Distribution (or Strategic Consideration in Channel Selection) :
Is a complex and challenging task. Selection of channel of distribution is affected by a number of factors like
1. Consumer/market considerations: these consist of:
a. Types of market: the market can be consumer or industrial. Industrial channel structures
are shorter than consumer channel. Generally, retailers are not used for industrial
markets.
b. Number of customers: The manufacturer may use its own salesmen to sell products, if the
number of customers is small. If the number is large, manufacturer requires middleman
like wholesalers.
c. Geographic concentration: geographic concentration or dispersion of customers also
affect channel selection. Short channel is used for concentrated markets.
d. Order size: Large order requires short channel whereas small order size requires long
channel.
2. Organizational considerations: They consist of:
a. Management capability: manufacturers having strong management skills may use direct
marketing. While manufacturers lacking managerial ability and distribution experience
use middlemen for distribution.
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b. Financial resources: financially strong organizations can use direct marketing.
Middlemen are needed if financial position is weak.
c. Marketing mix: some products require aggressive advertising and sales promotion.
Channel members refuse to distribute such products if manufacturers do not promote
them.
d. Legal provisions: they can be the limiting factor in selecting channels. Legal framework
is a matter of consideration.
3. Product considerations: These include;
a. Nature of product: perishable products require direct or short channel. Long channel is
suitable for durable products. Services are generally distributed directly. If the product
has technical complexity, direct channel is used to provide after-sale services.
b. Unit value: direct or short channels are used for products with high unit value. Low unit
value fast moving consumer goods require long channels.
4. Channel considerations: They consist of:
a. Channel availability: the desired channels must be available. The available channels may
carry competing products or refuse to carry the brand.
b. Range of services provided: the channel may not be able to provide the desired range of
services. For e.g. wholesalers may be unwilling to provide post-sale services.
c. Channel attitudes: channel members may not like the manufacturer’s policies.
Manufacturer may not like the terms and conditions of the middlemen.
5. Competitive environment:
a. In a competitive market, the marketer has to select a channel design that is not only cost
effective but also more efficient than that of the competitors.
b. When several manufacturers offer similar products to the same market with almost same
channels, it is essential to select the most competent middlemen for distribution.
Physical Distribution (Marketing Logistics)
Concept: (also known as marketing logistics) Physical distribution is concerned with the management of physical
flow of goods from the point of suppliers to the point of purchasers. Customers require products in the right quantity
at the right time from the right place. Physical distribution is the process of getting products to the target customers.
It is the actual flow of products from the point of origin to the point of consumption. It assists production and selling
and performed by all enterprises in the modern time.
Components of Physical distribution ( Major Logistics Functions)
A. Order Processing: Physical distribution starts with customer order. Order processing is a set of
procedures for receiving, handling and filling orders. It can be done manually or through computer.
The activities are:
1. Receiving orders: orders can be received directly from customers or through salespersons. They can
be received through mail, telephone, fax, internet, or other source.
2. Handling orders: Once the orders are received, the orders are transmitted to the warehouse and
accounts. The warehouse confirms the availability of the product and the account department
checks the credit outstanding of the customer. If the products are not available in the warehouse, the
order is dispatched to the factory for production or as an alternative the customer is offered a
substitute product.
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3. Filling order/ Order delivery: The ordered products are packed for shipment by the warehouse.
Invoice and shipping documents are prepared. Products are sent to the transporters for delivery to
the customers. One copy of invoice is sent to accounts section.
B. Warehousing: warehouse is a place where goods are stored for the distribution of goods to the target
market whenever and wherever required. It performs various functions such as assembling, storing,
packaging and shipping. Traditionally, godowns performed the storage function. In modern time, the
focus in warehousing is on product movement rather than product storage. Distribution centres have
replaced godowns, they take orders, fill them, prepare them for shipping and quickly move them to
customers.
Types of Warehouse:
a. Private warehouses: are owned, managed and controlled by the owner of goods, usually the
wholesalers. These warehouses are normally used for their private purpose only, not for rental
purpose.
b. Public warehouses: are also called commercial warehouses. These warehouses are owned and
managed by public bodies like railway authority, municipality, dock authority or govt. or by
member of public like firms or companies. All interested traders or govt. can use these
warehouses on the payment of required rent.
c. Bonded warehouses: are situated at the borders, airports, or post towns. Dock or custom
authorities have the ownership on behalf of govt. The imported goods are stored there until
the custom duty/ tax is paid. The govt. has strict rules and arrangement for supervision.
C. Material handling: involves selecting proper equipment to handle products
physically. Efficient and suitable equipment can reduce handling costs and reduce
losses of breakdown, spoilage and theft. The handling equipment is selected on the nature of product,
size of the package and packaging materials. Material handling can be;
a. Mechanical handling: uses fork-lift trucks, cranes, conveyor belts, etc. Automated warehouses are
controlled by computers.
b. Non-mechanical handling: uses human and animals for handling material. The package size
should be small-sacks, boxes, and containers. This method is common in hilly region of Nepal,
where donkeys and other animals are used.
D. Inventory Management: Inventory management involves;
 Control of inventory costs
 Control of inventory levels
 Control of inventory costs: Inventory costs consist of:
a. Order processing costs: are related to ordering, receiving, storage, inspection and quality
control. They are ordering costs to acquire inventory.
b. Carrying costs: are costs of carrying inventory. They relate to storage charges, cost of capital,
taxes, insurance, etc. They range from 10 to 30% of inventory value.
c. Stock out costs: consist of high costs of crash purchases, inefficient production operations,
loss in sales, decreased customer service.
 Control of inventory levels: Techniques for control of inventory levels :
a. Critical Inventory levels: maximum, minimum and reorder levels for each unit of inventory
are predetermined. The factors considered for fixing critical levels are rate of consumption,
safety stocks needed, delivery time required, cost of carrying and storage, risk of stock out,
etc. New order should be placed at reorder level point.
b. Economic order Quantity (Optimum order quantity): is the volume at which the sum of order
processing costs and inventory carrying costs are at minimum. As the order size increases,
order-processing costs decline and inventory carrying costs increase.
The formula used for calculating EOQ is
EOQ(units)=ʃ 2AO/C Where, A=annual requirements
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O=ordering cost per order
C=carrying cost per unit per year
Suppose A= 6000 units, O=Rs.60, C=Rs0.5
EOQ=ʃ 2AO/C =ʃ (2X6000X60)/0.5 = 1200 units.
c. ABC analysis: inventory items are classified according to their annual consumption costs in
A, B, C categories. ‘A’ items which tie-up the highest investment in inventories are
continuously controlled. Control is relaxed on ‘C’ items. Many industries have the following
classification.
Items Inventory value
A—10% 70%
B—20% 20%
C—70% 10%
E. Transportation: transportation creates place utility in products. Almost 50% of total costs of physical
distribution is occupied by transport. Transportation moves products from manufacturer to customers.
It consists of decisions about carrier type and mode of transport;
a. Carrier type: can be:
 Private carrier: organizations own the transport mode. The movement speed can be controlled
but investment and operating costs are high.
 Contract carrier: are independent carriers that sell service on a contract basis. They are
specialists and operate efficiently.
 Common carrier: provide scheduled service between set points. They charge standard rates
and are available to all.
b. Transportation mode: the transportation modes are roadways, railways, waterways, airways,
pipeline and human/animal. Pipelines are used for liquid and gas. Transport modes should be
evaluated in terms of
 Cost: is charge or fee. Air is the most expensive and water is the cheapest.
 Speed: is the time taken for movement. Air has the best speed whereas human porters have
the worst speed.
 Consistency: refers to regularity and reliability. Air is excellent, rail is fair and road is good.
 Safety: refers to product safety during movement. Air is the best and rail is the worst.
 Availability: all modes may not be available at all the places.
Comparison of Transport Modes
Criteria Roadways Railways Waterways Airways Human/Animal
1. Cost High Medium Lowest Highest High
2. Speed Fast Medium Slowest Fastest Slowest
3. Consistency Good Medium Poor Excellent Good
4. Safety High Lowest Medium Highest Medium
5. Availability Highest Low Medium High Lowest
Promotion
Concept of Promotion: Promotion consists of all activities to communicate and persuade (convince) customers for
buying. Promotion is also called marketing communication.
Components of Promotion are:
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Advertising: paid form of non-personal communication by an identified sponsor. The source can be television,
radio, newspaper, hoarding board, banner, etc.
Sales Promotion: short term incentives or programmes to induce or encourage sales or trial purchase. For e.g.
exhibition, trade fair, discount, festival offer, coupon, etc.
Personal Selling: face to face conversation between buyer and seller (salesman/agent). Counter person, outdoor
salesman (M.R., salesman, etc)
Publicity & Public Relation (PR): non paid form of communication. Activities to protect/ promote company’s
image or products. Sources are press conference, news release, feature article, annual report, participation in social
activities, charities, etc.
Forms of Publicity: refers to the types of publicity. They are as follows:
1. Personal Communication: It can be with an individual journalist or a group of journalists. The marketers
may directly communicate to the business parties, customers, or public about the organization and the
products.
2. Press Conference: Media reporters are invited and given brief descriptions. The reporters visit firms and
executives interact directly with the media. Press kits are distributed.
3. News Release: Organizations circulates desired message in a news format to the press and TV media.
Mediapersons design them as news items. The news release can be about improved performance, new
products and technology, public service activities and others. They are written in impressive manner and
photographs make them more effective.
4. Feature Articles: Organizations hire articles from skilled journalists for publication in media. Researchers
also write such articles during their research work. Editorials are based on news relating to publicity.
5. Publications: These involve annual reports, catalogues, magazines, newsletters, etc. They provide
informations about the organization, its policies and products to target audience.
Types of Sales Promotion (Methods / Tools & Techniques of Sales Promotion):
A. Consumer Promotion B. Trade or Dealer Promotion
A. Consumer Promotion: is done to increase % use of products among consumers or to attract new
consumers. The tools and techniques can be:
1. Samples: distribution of samples is an expensive but powerful method of promotion. Samples are suitable
for introducing new products such as soaps, medicines, perfumes, tea, cosmetics, etc. Regular size
packages or special sample size packages may be used. Samples create repeated purchase.
2. Discount: In order to increase sales, manufacturers introduce discount or price-off to the customers. The
product is offered at a price lower than the normal price. For e.g. during off season(winter), ceiling fans,
coolers and refrigerators may be offered 20% off price.
3. Coupons: is a certificate declaring benefit/saving on the purchase of a particular product. It may be issued
by the dealers or through newspapers. The coupon holder can go to the retailers and get benefit on next
purchase.
4. Premium or gift offer: It is an offer of some product at no cost to customers who buy special pack or
declared quantity of product. It can be:
a. With pack premium: is included either inside or outside the packet. For e.g. one silver spoon in the
Horlicks bottle, one toothbrush free with 200gm colgate toothpaste.
b. Reusable container: is a container that can be used after the product is consumed. For e.g. a Washing
powder is offered in a plastic bucket.
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c. Free in mail premium: is an item that the company will send by mail to the customers who makes a
request for it, with a proof of purchase( cash memo or wrapper).
5. Quantity deals: salespersons brings special package which gives extra quantity of the product to the buyer
at the same price. These deals come in the form of ‘buy three get one free’ offer, or 50 gram
extra….offer…
6. Quiz contests: there may be customers’ contest, salesmen contest, and dealers, contest. Contests for
salesmen and dealers are for making them to show more effort. Customers are invited to write slogans on
the product, which helps in new advertising idea. Consumers buy more products to take part in quiz and
win prizes.
7. Trade fairs & exhibitions: help businessmen to demonstrate their products explaining features. They can
also distribute pamphlets to introduce their firms and products to the public. Trade fairs and exhibitions are
very popular in Nepal and other developing countries.
8. Free offer: some companies have been using free offers to promote their products. For e.g. DVD player
free with the purchase of television, iron free on washing machine, etc. These offers generally take place
during festivals.
9. Exchange offer: ‘exchange of old goods with new’ is the target of this offer. This offer is popular for
motorcycle, television, etc. Finance is also available to attract the customers. The offer increases demand
for new products and value satisfaction.
B. Trade Promotion: are promotional activities directed to distribution channels like dealers, wholesalers,
retailers. They are carried out by manufacturers to push channels. These include:
1. Dealer Premiums: Certain units of products are given free to the retailers for keeping large stocks of goods
or increasing the sales.
2. Advertising material: Some manufacturers supply advertising materials to their dealers and retailers. For
e.g. sign boards, banners, etc for Pepsi, Coke, Ncell,,
3. Dealer contests: Under this technique, dealers are offered additional incentives for achieving pre-
determined sales targets, or for arranging attractive display and demonstration of the products.
4. Special discounts: During promotion campaign, a manufacturer may offer special discounts on purchases
made by the retailers. Such campaign may be called price off scheme or off list. Special discounts increase
the profit margin of the dealer who gets encouragement to push up the sales.
5. Push money: the dealers may be given a specific amount of money to push the sales of the manufacturer’s
products. Cash reward is given for pushing the product among the buyers when there is tough competition
in the market.
6. Contests: manufacturers organize contest of the retailers for trade promotion. Sales targets are fixed for the
retailers. If retailers exceed the target, they are given certificates of appreciation and prizes such as two way
free air tickets to Hong Kong, or world tour at the cost of manufacturer.
7. Allowances: An allowance is compensation in cash to dealer for providing services to the manufacturer,
such as giving a special shelf space (rack) to the manufacturer’s brand or
arranging displays of products. Retailers may be given marketing research allowance for collecting
information from the customers for the benefit of the manufacturer.
8. Novelties: During festivals, manufacturers give novelty items to their trade partners. These include wall
clocks, wrist watches, diaries, pen sets, small bags, etc. Such items carry the name of the manufacturer or
brand mark.
Types of Personal Selling (or Types of Salespersons)
1. Pioneer salesmen: also known as missionary salesmen is employed by the manufacturers. They do not
directly sell products rather visit distributors and wholesalers. Medical representatives of
pharmaceutical company and insurance agents are the examples.
2. Trade selling: the main objective is to increase business volume by providing customers with
promotional and business assistance. The trade salesperson sells through customers, rather than to
customers. Particularly, for goods, textiles, apparel, etc, trade selling is done.
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3. Wholesaler’s salesmen: call on retailers at regular intervals to book their orders. They informed the
retailers about the various products offered by the wholesaler, helps them in selection of articles and
suggests the retailers in involving effective selling techniques. They may be outdoor salesmen going
out in the market for orders, or indoor salesmen receiving retailers and supplying products they need.
4. Retailer’s salesmen: are of two types:
a. Counter salesman: attends the customers who visit the store or counter.
b. Outdoor salesman: visits target customers by carrying samples of goods to convince them for
buying.
5. Technical selling: technical salespersons are like professional consultants. The main objective of
technical selling is to increase business volume by providing technical information and assistance.
Such persons are used for selling industrial products such as chemicals, machinery, heavy equipments,
etc.
Process of Selling (Personal Selling Process)
Selling is an important part of business as well as marketing. The process depends whether it is indoor sales or
outdoor sales.
1. Process of Indoor Sales (or Sales Process of Indoor Salesperson): the act of selling goods by
establishing a stall or shop at a certain place is called indoor sale and the person is called indoor
salesperson. Customers visit the shop to buy products. Supermarket, departmental store, wholesaler,
retailer, etc are indoor salespersons. The process of indoor salesperson is completed in following steps:
a. Drawing attention of customers: Indoor salespersons should attract the attention of customers towards
the shop. To attract attention of customers , use of attractive signboard, impressive decoration,
attractive displays, clean and fresh environment, etc are essentials. Similarly, female salespersons are
more effective than males.
b. Reception: when the customers enter the store, the salesman should welcome and receive them with
pleasant and good manner. A friendly smile with ‘ Can I help you?’ is effective. Chairs should be
arranged so for customers to sit. Similarly, drinking water can add benefit.
c. Inquiry: refers to finding out the needs of customers. The salesperson listens to what customer is
saying. He/ She should ask the wants and desire of customers, type , size and color of products. The
purchasing behavior and lifestyle of customer should be identified. Most importantly, Salesperson
should not ask questions that hurt their sentiments.
d. Presentation: is demonstration of products. Variety of goods are demonstrated. Features and benefits
are described. Various options are given to customers with useful suggestions. The demonstration is
done with full confidence.
e. Handling objections: It is natural that customers can have some objections. Salesman has to answer
the questions and objections tactfully. Salesman who handle the objections properly win the trust of
customers.
f. Closing sale: Customers may or may purchase the products. If the customer selects the product, terms
& conditions are finalized. The customer makes payment and salesperson makes warm thanks.
Invitation is given to visit again. If possible, small gifts like, key ring, calendar, pen, etc. are given.
Process of Outdoor sales or travelling sales (Sales Process of an outdoor Salesman): the act of selling goods
by going door to door or place to place is called outdoor sales, and the person involved is outdoor salesperson. The
job of outdoor salesperson is more challenging than that of indoor salesperson. The sales process involves following
stages:
a. Prospecting of Customers(Searching): sales process of a outdoor salesman begins with the search of
potential customers. Potential customers are those people or units who need and can purchase the products.
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Outdoor salesperson finds the customers through different sources such as family & friends, present
customers, businessmen, telephone, newspaper, advertisement, and other.
b. Pre-approach: Salesperson has to collect informations about potential buyers before meeting them.
Informations include age of customers, sex, hobbies, habit, income, present purchasing plan, education, etc.
c. Approach: In the third step, outdoor salesman approaches the customers to gain attention and interest. He
introduces himself, the company, and the product. At the time of meeting customers, salesperson should be
well dressed up, confident and cheerful.
d. Product presentation: After the attention and interest of the customer is created for the product, the
salesperson will demonstrate the product or service. Salesperson should use chart, graph, photo,
certificates, advertisement, etc .to create desire. The customers look at the product carefully and evaluate
the uses and benefits.
e. Handling objections: objections are common part for the salesperson. Salesperson should provide right
answer to the questions, provide guarantee, give factual informations, tell about the effect of the product,
and solve suspicion wisely.
f. Closing the sales: this is time for receiving purchase orders from customers. He/ she should give two or
more options for purchase and also inform about the complex situation, for e.g. stocks of goods may finish
soon,. The person should also know about special choice and preference of products regarding color, size,
design, taste, etc.
g. Departure & Follow-up: during departure, the salesperson has to thank the customers for their valuable
time. If sales take place, salesperson should provide after sale services. After departure also, salesperson
should regularly be in contact with them through phone calls or other ways. Regular contacts/ follow-up
are essential.
Selection of Promotion Mix (Factors Affecting Determination of Promotion Mix):
The design & selection of promotion mix are critical issues in marketing. Still selection
n of right promotion mix is highly essential for successful marketing. Following factors need to be
considered :
1. Promotion Objectives: affect the determination of promotion mix.
 If the objective is to build awareness through informing, advertising and publicity are important.
 If buyers are already aware of the product but do not like and prefer the brand, marketers have to focus
on personal selling and advertising.
 If buyers have favorable attitude towards the brand, but do not show clear purchase intentions, sales
promotion is essential.
2. Nature of Product: also affect determination of promotion mix
 Low cost convenience products require emphasis on national advertising and sales promotion.
 Shopping products require focus on personal selling and local advertising.
 Speciality products are sold through good public relations.
 Industrial products require more personal selling.
3. Nature of Target Market:
 In a small market, personal selling, consumer promotions and local advertising are fruitful.
 In large markets, combination of advertising, dealer promotions and consumer promotions are more
effective.
 Personal selling is more suitable to influence trade customers i.e. wholesalers and retailers.
 For industrial and institutional markets, advertising is less important than personal selling.
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4. Stage of Product life Cycle: Promotion mix changes as the product moves from one stage to another stage
of product life cycle.
 In the introduction stage, personal selling and advertising go together.
 During the growth stage, personal selling has little use while advertising is continued with a change in
its focus from awareness creation to building conviction among buyers.
 In the maturity stage, sales promotion plays the vital role and advertising is used only to support the
sales promotion campaigns.
 During declining stage, all forms of promotion become useless.
5. Push vs. Pull Strategy: Promotion mix is also affected by whether the organization follows a push strategy
or a pull strategy.*Under push strategy, the promotion is directed at the market intermediaries. The
manufacturer persuades wholesalers to carry the product, while wholesalers convince retailers to sell the
products to consumers. The retailers push the product to consumers through mouth advertisement and
point-of-purchase displays.
Manufacturer WholesalerRetailerConsumer
Push Strategy
 Under pull strategy, the manufacturers build consumer awareness and conviction through mass
advertising. When consumers start demanding the product, retailers place orders for the product to the
wholesalers, and wholesalers to the manufacturer. Pull strategy, during the maturity stage of product
life cycle, is implemented through consumer promotions.
ProducerWholesalerRetailerConsumer
Pull Strategy
6. Size of Promotion Budget: determines the selection of promotion mix.
 Advertising requires heavy expenses , as it has to be long term and of a campaign nature.
 Personal selling is suitable for small organizations. But large sales force is expensive.
 Sales promotion can be launched with a specified budget.
 Publicity is free when it appears in the media. However, there are costs to develop and implement
public relations.
Integrated Marketing Communication ( Or Marketing Communication Process)
is the complete marketing communication process and system. Organizations compete with each other
and buyers have hundreds of message every day. Only a few communications are noticed, perceived
and remembered for a long time. Marketers need to design more effective and interesting
communication. The stages can be:
Message
SenderEncodingChannelDecodingReceiver
Noise
……………………….. FEEDBACK------------------------
( INTEGRATED MARKETING COMMUNICATION)
1. Sender: Message is idea, information and emotion that need to be communicated. The sender
is the source of the message. It is the organization. The marketer is the sender who designs a
message and conveys to the target market.
2. Encoding: The message is encoded into symbols like words, sounds, pictures and actions.
Most of the marketing messages have language code, visual materials or body language.
3. Channel: is message delivering system or medium for transmission of message. The channel
can be audio/visual, such as television and radio. It can be print media, such as newspapers
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and magazines, can be personal media, such as salesperson. It can be through mechanical
devices, such as internet, fax, telephone, etc.
4. Decoding: After receiving the message, the receiver tries to understand the meaning of
message delivered, this is called decoding. The knowledge and experience of the receiver are
important for decoding. If they widely vary with those of the sender, the message may be
understood differently. The meaning of the message received should be as intended.
5. Receiver: The receiver is the target customer for communication. The reception may be
ineffective due to:
 Selective attention: consumers are selective in noticing the message given by media.
 Selective distortion: consumers hear what they want to hear. They distort messages (understand in
other way) to fit their perceptions.
 Selective retention: consumers retain small % of messages in long term memory.
6. Feedback: The response of the customers provides feedback. It tells the sender whether the
message was received as intended. Feedback helps to improve future promotion. Feedback
can be message recall, more favorable attitude, increased product awareness and increased
sales.
7. Noise: It is unplanned disturbance from external factors during promotion. It may be present
in the communication vehicles in the form of bad printing, poor TV or radio. Noise reduces
the effectiveness of the promotion.
End of Unit: 4
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