Course Objectives
The main aim of this course is:
1. To make students understand concepts, philosophies, processes and techniques of managing
the marketing operations of a firm in turbulent business environment.
2. To provide better understanding of the complexities associated with marketing functions,
strategies and provides students with the opportunity to apply the key concepts to practical
business situations.
3. To understand the concept of Marketing, Marketing Information System and Marketing Mix
4. To learn about Consumer Behaviour and Buying behaviour
Course Outcomes
After the completion of this course students will be able to:
1. Understand the role of marketing as a fundamental organizational policy process
2. Analyze the interaction of marketing and environmental forces through an understanding of
marketing decisions and practices with social, technological, economic, and political forces
3. Apply the knowledge, concepts, tools necessary to understand challenges and issues of
marketing in a growing international and global context.
4. Interpret complex marketing issues and problems using relevant theories, concepts and
methods with regard to ethical conduct
Course Features
- Lectures 22
- Quizzes 8
- Duration 10 weeks
- Skill level All levels
- Students 3
- Assessments Yes
Curriculum
- 4 Sections
- 22 Lessons
- 10 Weeks
Expand all sectionsCollapse all sections
- UNIT1:9
- 2.1LESSON 1: Unit 1: Introduction to Marketing Management Introduction Marketing is as old as civilization. Though marketing is talked and discussed in business terms today, its origin goes back to the ancient civilization when man used symbols, signs and material to transact and communicate with others. Modern marketing revolves around the concepts, which are age old. The first signs that man made to communicate with others gave birth to the idea of marketing. The evolution of marketing has made it a structured discipline to study; otherwise marketing did exist in the ancient past. Marketing was also used as a synonym for the art of selling in the past. Even today much confusion exists between marketing and selling amongst students of management and practitioners, regarding the two dominant modes of business and exchange. Defining Marketing-related Factors Marketing starts with customers and ends with customers. Creation of superior customer value and delivering high levels of customer satisfaction are at the heart of present day marketing. It is a matter of common sense to appreciate the key marketing success factors. In case a company really endeavours to understand customer needs, carefully studies competition, develops and offers superior value at a reasonable price, makes these products available at places convenient to customers, and communicates with them effectively and efficiently, such products have every reason to be in demand and will sell consistently. Successful companies have one common trait. They are all very strongly customer-focused in their orientation. Many other factors contribute to achieving business success, such as developing great strategy, committed and skilled human resources, reliable and fast information systems, and excellent implementation and control. But in the final analysis, the focus and dedication of all these companies is to really understand customers’ needs and wants as much as possible and create satisfied customers in their target markets. In case someone asks several people what they think marketing is, the chances are these casually picked persons will reveal a variety of descriptions in their responses. Probably, the first two items describing marketing will be advertising and personal selling, as these two are the most visible aspects of marketing for most people. Marketing includes many more activities than what most people realise. The shortest definition of marketing is satisfying consumer needs in a socially responsible way at a profit. Authors of marketing books have defined marketing in different words. A few of these definitions are mentioned here. The American Marketing Association defines marketing as: “Marketing is an organisational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organisation and its stakeholders.” Philip Kotler says, “Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others”. Pride and Ferrel’s definition says, “We define marketing as the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate exchange relationships in a dynamic environment” “It (marketing) is the whole business seen from the point of view of its final result, that is, from the customer’s point of view”. (Peter F. Drucker, Practice of Management (1954). The essence of all these definitions of marketing is satisfying customer needs and wants. Apparently, this core objective sounds simple, but it is not. Research shows that in many cases customers either have inhibitions about revealing their real needs or wants by intent or may not really know themselves. It is believed that the subconscious is the real storehouse of deep-rooted motives. To the extent possible, marketers undertake consumer research and try to learn about the target customers’ needs and wants, and design appropriate marketing programmes to satisfy target customers Keeping in view the definitions of marketing, some important aspects of modern marketing can be distinguished 1. Marketing is a societal process. 2. Marketing deals with customer needs, wants, products, pricing, distribution, and promotion. 3. Marketing focuses on delivering value and satisfaction to customers through products, services, ideas, etc. 4. Marketing facilitates satisfying exchange relationships. 5. Marketing takes place in a dynamic environment. 6. Marketing is used in both for-profit and not-for-profit organisations. 7. Marketing is extremely important to businesses and the economy of a country. Concept of Exchange The concept of exchange is the essence and central to marketing thinking. Unless there is actual or potential exchange, there is no marketing. People can acquire what they need or want by pursuing socially acceptable behaviours or the behaviours not approved by the society. Two socially acceptable approaches of acquiring things include self-producing or exchanging what a person needs or wants. The third method, begging is viewed in some societies as a somewhat less than dignified way of acquiring things. The fourth approach may include behaviours such as shoplifting, burglary, or using potentially threatening force, etc., to acquire things, and these means are totally unacceptable by all civilised societies and punishable by law. The highly regarded way to acquire what a person needs or wants is the concept of exchange in marketing context. Both parties in an exchange offer something of value, and freely acceptable to each other. It is understandable that parties involved in an exchange must first agree to terms and conditions laid-down by each party so that actual exchange take Notes Something of Value (Goods, Service, Ideas, etc.) Both Parties Freely Agree to the Terms and Conditions of Exchange (Money, Credit, Goods, Labour) Something of Value Marketer Customer Barter System Barter is where people exchanged goods for other goods. It is trading for goods without a fixed price tag. Some places barter with currencies, and some use only goods to trade with. The old trading posts were often barter only, with little currency. In ancient times when money was not invented trade as a whole was on barter system. This was possible only in a simple economy but after the development of economy, direct exchange of goods without the use of money, was not without defects. There were various defects in this system. These were the following; 1. Double Coincidence of Wants 2. Absence of Standard Value 3. Indivisibility of Commodities 4. Absence of Store of Value In the modern economy barter system cannot succeed. Money is indispensable for large scale production. The functions of money are the same which were defects in barter system. Needs, Wants and Demand The very existence of human beings spells the presence of needs, and marketing thinking starts with this very important realisation. It is wrong to believe that anyone can invent needs. Needs are part of the basic fabric of human life. A need can be defined as a felt state of deprivation of some basic satisfaction. This means that unless the individual feels deprived of some basic satisfaction, at least for this individual, the need does not exist. Humans have a long list of needs, some very basic and others complex. The basic needs are physiological or biogenic in nature, and individuals are born with them. These needs are essential to sustaining human life such as need for air, water, food, shelter, clothing, and sex. These basic needs are also referred to as primary needs. Other types of needs are those that individuals learn as a result of being brought up in a culture and society such as need to belong, acquire knowledge, self-expression, self-esteem, prestige, power, achievement, etc. These are considered as secondary needs, also called acquired needs and generally believed to be the result of an individual’s subjective psychological makeup and relationship with others. Example: To differentiate between need and want, let us assume four individuals are hungry; their need is food. Assuming they have the resources to get involved in acquiring food to satisfy hunger, they go to McDonald’s. One orders a vegetable burger; the second orders Puff, the third asks for a chicken burger, and the fourth buys a huge ice cream. All of them are Notes eating some variation of food to satisfy hunger. The specific satisfier that an individual looks for defines the want. Therefore, wants are specific satisfiers of some needs. Individual wants are shaped by culture, life style, and personality. Example: An individual buys a Mercedes as a status symbol and a tribal chief in some remote area of Amazon rain forests sticks an eagle feather in his headgear as status symbol. To satisfy any given need, different people may express a variety of wants and the total number of wants for all sorts of needs is apparently unlimited. Just because people have needs and wants is not enough to affect exchanges. The resources to acquire the products are limited for every individual and hence people want to buy products that they believe will provide the maximum value and satisfaction for their money. When the want is backed by purchasing power, it is called the demand and marketers are particularly interested in demand rather than just needs or wants. Marketing aims at identifying human and social needs and endeavours to satisfy them by creating, communicating, and delivering products and services. According to Kotler, marketers are involved in marketing 10 different entities: tangible products, services, events, information, ideas, places, persons, experiences, properties, and organisations to accomplish the objective of delivering satisfaction to customers. People buy products only because these are seen as means to satisfy certain needs or wants. The concept of product is broad in its meaning and includes everything that is capable of satisfying a need and can be a physical product, service, idea, person, place, or organisation. Marketers make a sensible distinction between goods and services to place them in right perspective. Physical products are tangible and services are intangible. People acquire products or buy the services not so much for the sake of being the owner or consumer, but to derive the benefits they provide. Who would buy food just to look at it? No one presumably would buy a refrigerator to just own it but for the reason that it provides the benefit of protecting the food from becoming stale and keeping it fresh. A large family with more resources will probably buy a bigger twodoor refrigerator, while a nuclear two or three member family with lesser resources may perhaps want a smaller capacity refrigerator. Marketing Components Marketing is the effective procedure of generating responses, hopefully in a predictable manner. The components of marketing are: 1. Ongoing review, Augmentation of business, Marketing Strategies: Continuing to assess the strengths and weakness of the business and its marketing strategies with reference to continuously improving strategies. 2. Conducting Market Research: Estimation the size, potential of your customer market and understanding the industry and economic drivers with reference to the strengths and weaknesses of your competitors. 3. Customer Perspective: Understand the customer perspective. Very often, this is where the seed of innovation begins as we learn more about the customer perspective, we start to be able to identify new, emerging customer needs. 4. Differentiating: Standing out from your competitors based on price or value or developing a niche market where you are the dominant player. 5. Creating Visibility: Keep your business clearly visible to your target customer groups. If not, what things you need to do to become more visible to each of the customer group that you serve? E.g., Developing a marketing communications strategy and branding strategies will help you do this. 6. Developing Channels to Distribute Product/Service: To develop deep and wide channels for distributing your product and/or services. 7. Establishing a Marketing Budget: Budgeting for the cost of all promotional activity – salaries/commissions of sales people, advertising, sales promotions, trade show promotions, print/media packages, etc. 8. Trial, Error: To finance trial, error with your marketing activities to determine what works best. 9. Tracking Results: Track your marketing results to determine what’s working the best. 10. Following Through: Keep your promises to your customers with reference to the customer service and operations providing on-time, quality product. Marketing Tasks In a nutshell, marketing is demand management and the demand for products and services often requires different approaches for a variety of reasons. There may also be other situations where demand management would require different types of handling. Example: Demand for hotel accommodation at Mussoorie declines during a severe winter. Philip Kotler and Sidney J. Levy identified eight major demand states in two different articles: 1. Negative Demand: This situation is faced when a major part of the target market dislikes the product and may even pay a price to avoid it. The marketing task is to unearth and analyse the reasons for this state, and to learn if a product redesign or change in marketing mix elements can help. Example: Unpleasant and painful medical treatment has a negative demand. 2. No Demand: The customers may be unaware or indifferent towards the product. The remedy is to create product awareness and connect product benefits to customers’ needs and wants. Example: Small brands often face no demand situation . 3. Dormant Demand: This may occur when the currently available products fail to satisfy the strong needs that customers feel. To meet the latent demand more effectively, the marketing task is to develop product or service if the market size is favourable. Example: Cigarettes with no ill effects. 4. Falling Demand: Sooner or later, companies face this situation with respect to their products or services. The task is to reverse this trend, and marketing should find out the reasons and take swift remedial action. New markets, product feature modification, or more focused and effective promotion may hold the solution. Example: There is a falling demand for desktops these days. 5. Fluctuating Demand: Many companies experience this pattern, the demand varying according to the season, or festivals, etc. The task is to synchronise marketing efforts to alter the demand pattern by adopting flexible pricing, and sales promotion techniques. Example: Air conditioners, Refrigerators, etc. have fluctuating demand 6. Full Demand: This is a situation all companies aspire and work for. The task is to maintain the level of demand and keep pace with the changing customer preferences and ever increasing competition and monitor customer satisfaction. Example: A situation where the no. of shirts produced by the manufacturers meets the level of demand. 7. Excess Demand: At this demand level, the company is unable to meet the demand level. The only option usually available is to find ways to decrease demand temporarily or permanently. Generally, marketing seeks to discourage overall demand through demarketing, either by increasing prices or reducing promotion and services. Selective demarketing involves reducing demand from those markets that are less profitable. Example: Popular models of cars, like Maruti Suzuki Swift, have excess demand. 8. Unwholesome Demand: This concerns managing demand for harmful products. The marketing task is to make the public aware about the dangers and harmful effects caused through misuse or over use of such products by using appropriate degree of fear appeals, price hike, or reduced availability. Marketing Concepts Since the later part of the 19th century, marketing has gradually evolved through various marketing orientations. These stages in marketing evolution present a generalised picture and a sufficiently significant number of companies have adopted the most modern marketing concept or philosophy. A marketing orientation (also called the marketing concept, or consumer focus) is one that allows the wants and needs of customers and potential customers to drive all the firm’s strategic decisions. The firm’s corporate culture is systematically committed to creating customer value. In order to determine customer wants, the company usually needs to conduct marketing research. The marketer expects that this process, if done correctly, will provide the company with a sustainable competitive advantage. This consumer focus can been seen as a process that involves three steps. First customer want are researched, then the information is disseminated thoughout the firm and products are developed, then finally customer satisfaction is monitored and adjustments made if necessary. The concept of marketing orientation was developed in the late 1960s and early 1970s at Harvard University and at a handful of forward thinking companies. It replaced the previous sales orientation that was prevalent between the mid 1950s and the early 1970s, and the production orientation that predominated prior to the mid 1950s. Production Concept This concept, viewed as one of the oldest of managerial orientations, typically aimed at achieving as high an output as possible. This philosophy assumed that customers would be more interested in acquiring conveniently available, reasonably priced, and well-made products. Keeping in view the market behaviour prevailing in times when customers did not have much choice, it was a sound approach. The focus of managers, generally having backgrounds in manufacturing and engineering, was to concentrate on achieving increasingly higher efficiency in production, lower production costs, and more intensive distribution. Even today, this approach seems to be quite sensible in relatively underdeveloped and developing economies because customers are more interested in owning a product and not overly concerned about finer features and aesthetic appeal. In general, one important condition seems to be favourable to adopt production orientation: when the masses look for a cheaper product and demand far exceeds production. Example: In India, The National Textile Corporation (NTC) and all its subsidiaries are sticking to this philosophy while producing textiles for the huge, poverty-stricken population in this country. Their philosophy and positioning is reflected in their ad, “Clothiers of the nation with affordable prices.” In the global scenario, for nearly three decades Intel Corporation focused on achieving increasingly high production output of its successive generations of processors so as to bring down the prices of each improved version. The production concept is unlikely to get discarded for a very long time to come, because there would always be products and populations of such a nature that some companies would feel comfortable with this philosophy. Product Concept The Product Concept has the proposition that consumers will favor those products that offer attributes like quality, performance and other innovative features. Managers focus on developing superior products and improving the existing product lines over a period of time. Innovations in the scientific laboratory are commercialized and consumers get an opportunity to know and use these products. This is called “Technology Push Model”. The problem with this orientation is that managers forget to read the customer’s mind and launch products based on their own technological research and scientific innovations. Many times it is observed that innovations enter in the market before the market is ready for the product. Innovative products are launched without educating the Customers about them and the probable benefit or value that the customer is likely to get by using the new products. Example: The Golden Eye Technology was brought to the Indian market by t major means of increasing sales and profits during 1920s to 1950s in the developed countries of Notes that period. Companies believed that the most important marketing activities were personal selling, advertising, and distribution. Selling concept is geared towards converting existing product(s) into cash rather than first finding and then satisfying customer needs. Sales concept is often observed in practice when companies show heavy reliance on their promotional capabilities based on “hard sell” approach. It is obvious that if a company’s products do not match the changing tastes and requirements of customers, with many alternative choices available, managers might be inclined to go for aggressive promotional efforts to sell enough quantities. Example: In his book, The End of Marketing as We Know It, Sergio Zyman writes that the purpose of marketing is to sell more stuff to more people more often for more money in order to make more profit. Of late, this has been happening in case of some Credit Cards in our country. Generally, “hard sell” is often seen in case of products or services that people buy without giving much thought to the matter, such as non-essential goods, and tend to postpone such purchases. With ever intensifying competition, products becoming more standardised without any meaningful differentiation i.e., commoditization, heavy promotional efforts in all possible manners are bound to remain the practice, in order to grab more share of the customers’ purse. The consequences of “hard sell” might harm the customer base to the extent that, in some cases, they might even bad-mouth the product if the product fails to match up to their expectation Marketing Concept After World War II, the variety of products increased, people had more discretionary income, and could afford to be selective and buy only those products that more precisely met their changing needs and wants. However, these needs were not immediately obvious. Sometime during the mid-1950s, there was growing recognition among American business people that merely efficient production and extensive promotion, including hard selling, did not guarantee that customers would buy products. With the passage of time, more knowledge, and experience, customers increasingly seemed unwilling to be persuaded. More and more companies found that determining what customers wanted was a must before making a product, rather than producing products first and then persuading them to buy. The key questions became: 1. What do customers really want? 2. Can we develop it while they still want? 3. How can we keep our customers satisfied? Thus, the marketing concept era began. Marketing concept proposes that an organisation should focus on customer needs and wants, coordinate its efforts, and endeavour to accomplish organisational goals. Geraldine E Williams reported that the CEO of Nike said, “For years we thought of ourselves as a production-oriented company, meaning we put all our emphasis on designing and manufacturing the product. But now we understand that the most important thing we do is market the product.” The major focus of all sets of organisational activities should be satisfying customer needs. This requires carefully listening to customers as a student listens to a teacher. Stanley F Slater and John C Narver reported that there is positive relationship between market orientation and performance. Sometimes, philosophies that sound quite reasonable and appear attractive on paper, are difficult to put into practice. To embrace the marketing concept as the guiding philosophy, the concerned firm must accept certain general conditions and manage some problems. Alan Grant and Leonard Schlesinger are of the view that market-orientation requires organisation-wide generation of market intelligence across departments, and organisation wide responsiveness to it. It mean establishing a reliable information system to learn about real needs of customers and design the right need satisfying solutions. Setting up an information system can usually be an expensive proposition and requires committing money and time to its development and maintenance. Company-wide coordination may require restructuring the internal operations and overall objectives in case of one or more departments. Appreciating the critical role of marketing, the head of marketing has to be part of the top management team. Acceptance and implementation of marketing concept demands support of top management and other managers and staff. To inculcate a customer-orientation culture, it is necessary that employees at all levels in the organisation should understand the value of the customer and the importance of the customer satisfaction. Obviously, the internal customers (company employees at all levels) themselves should be satisfied and motivated to promote an organisation-wide culture that puts high value on creating a satisfied customer. For this, the company has to ensure an appropriate work environment and take care of their legitimate needs. Benson P. Shapiro is of the opinion that a company is customer focused if the answers are “yes” to the four critical questions: 1. Are we easy for customers to do business with? 2. Do we keep our promises? 3. Do we meet the standards we set? 4. Are we responsive to customer needs? The marketing concept emphasises three main principles: Customer-oriented Planning and Implementations It should be the sole aim of all employees, irrespective of their department or functional area, to satisfy customers’ needs. It would require carefully segmenting the market on the basis of the right criteria, targeting suitable segment(s), learning about customer needs and wants, analysing and spotting the right opportunities and matching them with the company’s strengths. Coordination of all Organisational Activities Mainly product planning, pricing, distribution, and promotion should be combined in a sensible and consistent manner, and the head of marketing should be a part of top-level management. Coordinated Marketing is Critically Important to achieve Organisational Goals The reward of doing the job well will bring in sales and profits because without profits, the firm cannot survive, neither would it be in a position to improve its offers. Example: Marketing concept is significantly different from production concept and selling concept. Not long ago, Indian auto companies, Hindustan Motors, Premier Automobiles, and Bajaj Auto hardly showed any consideration for customers, producing obsolete models in large numbers (demand exceeded the supply). Though the prices kept on increasing, little was done to improve the models. Bajaj was the only manufacturer of scooters preferred by customers and to own one, customers had to deposit money in advance and wait for five to ten years before they could become proud owners. It is only after the entry of Maruti cars, with Japanese collaboration, that things started changing. Premier Auto, and Hindustan Motors experienced major setbacks, sales declined and ultimately there were hardly any willing buyers. In the beginning, Maruti found it difficult to meet the demand and buyers willingly booked the car and waited for delivery. Bajaj Auto faced a similar situation as customers had many choices of two-wheelers. The position now appears as if almost every auto manufacturer is desperatel trying to please customers. Customers have strong preferences for certain features and price Notes ranges. Maruti has even started selling second-hand, reconditioned, and reliable cars from its outlets to customers looking for such deals, is order to expand its hold on the market. CEO Top Management Middle Management Frontline Managers and Employees Customer CEO Top Management Middle Management Frontline Managers and Employees Customer In line with the marketing concept, it is imperative that the typical pyramid depicting an organisation needs to be inverted to pursue marketing concept. In an inverted position, the customer will occupy the highest pedestal and top management will be at the bottom position. The communication flow will start from the customer, and the employees and executives will look up to learn what the customer wants and then respond to the inputs. This is the way to offer desired value, deliver more satisfaction, and help retain the customer. Did u know? Marketing concept is sometimes interpreted as a philosophy of attempting to satisfy all customers’ needs with no concern for the cost. This would seem to be a sure way to financial disaster. The marketing concept is consistent with the idea of taking into consideration only those customer segments that the company can satisfy both effectively and profitably. The firm has to earn profits to survive, offer new and better products and services, and be a meaningful member of society. A company might therefore choose to offer less costly products and services to unprofitable customer segments, or even avoid them altogether. Being market-oriented pays dividends and has a significant effect on company performance. Nature/ FEATURES /CHARACTERSTICS of Marketing The Nature of Marketing (or Modern marketing) may be studied under the following points: 1. Human activity Originally, the term marketing is a human activity under which human needs are satisfied by human efforts. It’s a human action for human satisfaction. 2. Consumer-oriented A business exist to satisfy human needs, hence business must find out what the desire of customer (or consumer) and thereby produce goods & services as per the needs of the customer. Thus, only those goods should be produce that satisfy consumer needs and at a reasonable profit to the manufacturer (or producer). 3.Art as well as science In the technological arena, marketing is the art and science of choosing target markets and satisfying customers through creating, delivering, and communicating superior customer value. It is a technique of making the goods available at right time, right place, into right hands, right quality, in the right form and at right price. 4.Exchange Process All marketing activities revolve around commercial exchange process. The exchange process implies transactions between buyer and seller. It also involves exchange of technology, exchange of information and exchange of ideas. 5.Starts and ends with customers Marketing is consumer oriented and it is crucial to know what the actual demand of consumer is. This is possible only when required information related to the goods and services is collected from the customer. Thus, it is the starting of marketing and the marketing end as soon as those goods and services reach into the safe hands of the customer. 6.Creation of Utilities Marketing creates four components of utilities viz. time, place, possession and form. The form utility refers to the product or service a company offers to their customers. The place utility refers to the availability of a product or service in a location i.e. Easier for customers. By time utility, a company can ensure that products and services are available when customers need them. The possession utility gives customers ownership of a product or service and enables them to derive benefits in their own business. 7.Goal oriented: Marketing seeks to achieve benefits for both buyers and sellers by satisfying human needs. The ultimate goal of marketing is to generate profits through the satisfaction of the customer. 8.Guiding element of business Modern Marketing is the heart of industrial activity that tells what, when, how to produce. It is capable of guiding and controlling business. 9.System of Interacting Business Activities Marketing is the system through which a business enterprise, institution or organization interacts with the customers with the objective to earn profit, satisfy customers and manage relationship. It is the performance of business activities that direct the flow of goods and services from producer to consumer or user. 10.Marketing is a dynamic process series of interrelated functions Marketing is a complex, continuous and interrelated process. It involves continuous planning, implementation and control.
- 2.2LESSON 2: MARKETING MIX The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix – Price, Product, Promotion and Place. However, nowadays, the marketing mix increasingly includes several other Ps like Packaging, Positioning, People and even Politics as vital mix elements. Price: refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the market to pay, supply – demand and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied in with an overall business plan. Pricing can also be used a demarcation, to differentiate and enhance the image of a product. Product: refers to the item actually being sold. The product must deliver a minimum level of performance; otherwise even the best work on the other elements of the marketing mix won’t do any good. Place: refers to the point of sale. In every industry, catching the eye of the consumer and making it easy for her to buy it is the main aim of a good distribution or ‘place’ strategy. Retailers pay a premium for the right location. In fact, the mantra of a successful retail business is ‘location, location, location’. Promotion: this refers to all the activities undertaken to make the product or service known to the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, direct marketing, contests and prize. All the elements of the marketing mix influence each other. They make up the business plan for a company and handled right, can give it great success. But handled wrong and the business could take years to recover. The marketing mix needs a lot of understanding, market research and consultation with several people, from users to trade to manufacturing and several others. Marketing Mix – A mixture of several ideas and plans followed by a marketing representative to promote a particular product or brand is called marketing mix. Several concepts and ideas combined together to formulate final strategies helpful in making a brand popular amongst the masses form marketing mix. Elements of Marketing Mix The elements of marketing mix are often called the four P’s of marketing. 1. Product Goods manufactured by organizations for the end-users are called products. Products can be of two types – Tangible Product and Intangible Product (Services) An individual can see, touch and feel tangible products as compared to intangible products. A product in a market place is something which a seller sells to the buyers in exchange of money. 2. 3. 4. Price The money which a buyer pays for a product is called as price of the product. The price of a product is indirectly proportional to its availability in the market. Lesser its availability, more would be its price and vice a versa. Retail stores which stock unique products (not available at any other store) quote a higher price from the buyers. 5. Place Place refers to the location where the products are available and can be sold or purchased. Buyers can purchase products either from physical markets or from virtual markets. In a physical market, buyers and sellers can physically meet and interact with each other whereas in a virtual market buyers and sellers meet through internet. 6. Promotion Promotion refers to the various strategies and ideas implemented by the marketers to make the end – users aware of their brand. Promotion includes various techniques employed to promote and make a brand popular amongst the masses. Promotion can be through any of the following ways: Advertising Print media, Television, radio are effective ways to entice customers and make them aware of the brand’s existence. Billboards, hoardings, banners installed intelligently at strategic locations like heavy traffic areas, crossings, railway stations, bus stands attract the passing individuals towards a particular brand. Taglines also increase the recall value of the brand amongst the customers. Word of mouth One satisfied customer brings ten more customers along with him whereas one dis-satisfied customer takes away ten more customers. That’s the importance of word of mouth. Positive word of mouth goes a long way in promoting brands amongst the customers. Lately three more P’s have been added to the marketing mix. They are as follows: People – The individuals involved in the sale and purchase of products or services come under people. Process – Process includes the various mechanisms and procedures which help the product to finally reach its target market Physical Evidence – With the help of physical evidence, a marketer tries to communicate the USP’s and benefits of a product to the end users Four C’s of Marketing Mix Now days, organizations treat their customers like kings. In the current scenario, the four C’s has thus replaced the four P’s of marketing making it a more customer oriented model. Koichi Shimizu in the year 1973 proposed a four C’s classification. Commodity – (Replaces Products) Cost – (Replaces Price) involves manufacturing cost, buying cost and selling cost Channel – The various channels which help the product reach the target market. Communication – (Replaces Promotion) Robert F. Lauterborn gave a modernized version of the four C’s model in the year 1993. According to him the four C’s of marketing are: Consumer Cost Convenience Communication Conclusion of the Marketing Mix: The Art of Blending the Elements: In short, a marketing manager uses four marketing tools — decision areas — that ineract with one another. These are product, promotion, distribution and price. The blending of these four tools is referred to as the marketing mix. A manager’s selection of an marketing mix is very important. Different combinations of ingredi-ents may be used. In marketing, there is no standard formula for a successful combination of marketing elements. Marketing mixes will vary from company to company, depending upon the kinds of markets Benefits of Marketing Mix An analytical study and interpretation has some benefits that are made available to the business firms. These are: 1. It provides a valuable guide for resource allocation: Every marketing effort warrants the judicious allocation of resources both human and financial. As one is aware, these resources are limited and precious and should be used in an effective manner. These needed resources depend on the nature of marketing mix that maximizes not only consumer satisfaction or delight on one hand and profit to the firm. 2. It helps to allocate the responsibilities: The creative and challenging job of marketing is a team work and part of marketing process entails the allocation of responsibilities to members of this marketing team. By virtue of specialization some are accountable for product management, others for selling and still others for physical distribution. As the marketing manager has the perfect mix on his hand and in mind, it is realty easy and logical to allocate the individual and group responsibilities; it is because, before arriving at ‘perfect mix’ good deal of house-work or punch practice is done based on logic and empirical findings. 3. It provides an opportunity to analyze cost benefit elasticity’s: Resources which are limited having alternative uses are to be judiciously allocated to the requirements of the mix input make that are designed to pay out. On illustrative basis, it can be said that one can increase the number of sales-personal in order to increase sales; or by increasing the ad budget. One must be aware of behavior of costs and revenues with the change in situation. Coming to real life situation, one has to consider the cumulative effect of these multiple tools on one another. These alternative tools are known for varying degree of elasticity’s and it is the accepted marketing-mix concept that assists to analyze such a proposition. As a “perfect-mix” is based on total recognition of relationship between the cost and revenue. This helps to determine that you can go on increasing the expenditure so long as it brings in positive revenue or results. Such an exercise is possible only when there is a marketing program that has identified the components and tents of that mix guaranteeing encouraging market response. 4. It facilitates communication process: Each business unit has its internal organization which is the framework of relations from top to bottom whether flat and slim or high-rise and tapering. Coming to each department, division, section; different units use differing terminologies for the marketing positions and sub-positions. This leads to confusion and conflict so far as meaning of each position is concerned. The titles given are so confusing that they fail to convey the contents of job titles. Thus, there can be “Marketing and promotion manager” along with “Brand managers” or “Promotion and publicity manager” side by side with “Sales and contract-manager”. If, this is the story of one company, another company speaks of “Market-research and promotion manager”.
- 2.3LESSON 3 :Marketing Concepts and Comparison with Selling Concepts Marketing constitutes one of the important functions of an organization. Along with production, finance and accounting, human resource management, research and development, purchase and stores, and numerous other functions, marketing contributes to the ability of the organization to succeed. The marketing concepts hold that the key for the achievement of the organizational goals consists in determining the needs and wants of the target markets and delivering the desired satisfactions more effectively and efficiently than the competitors. Under marketing concepts, the emphasis is on selling satisfaction and not merely on the selling the product. The objective of marketing is not the maximization of profitable sales volume, but to earn profits through the satisfaction of the customers. In spite of some claims that the knowledge of the society with regards to marketing is improving, there are opinions which indicate that the marketing is not yet very well understood subject in several organizations. The arbitrary nature of the marketing stems from the constantly shifting perspectives in socio-cultural and technological contexts, with marketing today considered to be of a dynamic nature rather than a static concept. Marketing in the present day environment is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others. The core issues related to the marketing of the products are shown in Fig 1. Fig 1 Core issues related to the marketing of the products The origins of the present day marketing lie around the time of the industrial revolution of the eighteenth century, when technological developments and production increases resulted in the termination of the personal customer contact of the organization and there were issues of surplus goods. During this period, preference towards customer needs was largely over-shadowed by the production and selling orientations. This continued until the mid-twentieth century. The marketing concepts are evolving on a continuous basis since 1960s when the marketing function was recognized as a distinctive discipline and field in the organization. This is being reflected from the definitions of marketing which are changing continuously with time. Several definitions of marketing have been put forward over the years as each generation tries to capture what marketing is at its time and what it means to the organizational functioning. Over the years, marketing function has been redefined to fit new contexts. In more recent years, the technological developments, new techniques and media have brought with them more opportunities for re-defining marketing. These definitions frequently appear to dilute the meaning of the marketing in some way, with the words marketing, sales, advertising, customer service and interactions used interchangeably and adapted by marketing professionals or sales personnel to suit their own job focus. Many definitions describe different facets and related terms but they do not always convey the much broader ideology and processes which are the part of the marketing. The evolution of various definitions of marketing also reflects change in the concepts of product marketing. Overall, product marketing concepts can be categorized into five concepts consisting of (i) production concept, (ii) product concept, (iii) selling concept, (iv) marketing concept, and (v) societal marketing concept (Fig 2). 2 Concepts of product marketing These five marketing concepts have their dominance during different period of time with the last two concepts being followed presently by most of the organizations. The evolution of the marketing concepts with time is shown in Fig 3. Fig 3 Evolution of marketing concepts Production concept – This is the oldest concept. The production concept can be trailed back as far as 1850s, through to the 1900s. This was the period of industrial revolution. During this period, there was growth in electric power generation, division of labour, rail transportation, assembly lines, and mass production. These made it possible to produce goods more efficiently with new technologies in mass quantities with new ways of using labour. Despite the increase in production of goods with these emerging ways of production, there was heavy demand for manufactured goods. The production concept is based on the assumption that consumers favour those products which are easily available and highly affordable. This required that the concentration of the organizations was directed toward product improvement and efficient distribution of their products. The production concept assumes that the ‘consumers are mostly interested in product availability at low prices; its implicit marketing objectives are cheap, efficient production and intensive distribution’. In the production concept era, the manufacturers typically concentrated on increasing output with the assumption that customers would look for, and buy, reasonably priced, and well made products. The production concept worked well for the organizations in the 1850s for achieving their organizational objectives. Today, such an organizational orientation can only make sense when the objective of the organization is to expand the market. However, production orientation hardly works in the present day environment. Organizations with such a marketing concept today risk focusing their effort too narrowly with their own operation losing sight of the core idea of producing to meet customer expectation and needs to create customer value. The trend which is prevailing in the present day scenario indicates that production concept does not have any part in most of the organizational practices today. However, where the organizational objective is for expansion to meet unsolicited demands, or where new products are introduced, the production concept can be a good complement to other more dominant concepts. Product concept – The product concept was the dominant marketing concept in the beginning of 1900s and continued to the 1930s. For more than a generation the concept of the product era dominated the understanding of the marketing. The product concept assumes that consumers prefer product based on its quality, performance, and innovative features. This means that the organization knows its product better than all others. The organization knows all the aspects of the design and the production of the product. Further, since the organization has the higher knowledge and skill in making the product, it is also assumed that it knows what is best for the consumer. The product concept compelled organizations to ensure improving product quality, and introduce new features in the product to enhance the performance as much as possible. These were done without consulting the customers to find their view on the product features, though the products were produced with the customer in mind. The product concept era reached the climax in the development of innovative products which did not have substitutes and with the customer needs not in too much a demand since customers did not know their needs in such innovative market situation. In the product concept era, organizations were able to sell all of the products which they made. The success of this concept was because of the time and level of technology in which this concept flourished. The product concept survived much of the time after the ‘industrial revolution’ since the demand exceeded supply and the emphasis on production rather than on the customer was quite an appropriate product selling thought at that time. Majority of the products were in such short supply that the organizations sell all that they made. Consequently, organizations did not need to consult with the consumers about designing and producing their products. Although some organizations still continuing to have a production oriented marketing thinking which direct their operations, the concept is not popular in the present day market environment. A product concept frequently leads to the organization focusing on the product rather than on the consumer needs which is needed to be satisfied and this leads to the ‘marketing myopia’. With the nature of customers and market environment of the present day, the production concept can be a failure in the present day environment, except in the cases of introduction of new products where there can be insufficient customer knowledge and competition. Selling concept – The selling concept was the concept of the organizations which proceeded the product concept era, and has the shortest period of dominance compared to the two preceding concepts. It began to be dominant concept from 1930s and stayed in widespread use until 1950s. The emphasis of selling concept was to create a department to be solely responsible for the sale of the organizational products, while the rest of the organization is left to concentrate on the production of the products. The orientation of the selling concept was that the organization can sell any product it produces with the use of various techniques, such as advertising, sale promotion, and personal selling. The concept assumes that consumers are unlikely to buy the product unless they are aggressively persuaded to do so, mostly through ‘hard sell’ approach. The emergence of the selling concept was necessary since there was big increase in the production of variety of goods after the ‘industrial revolution’ and also since the organizations became more efficient in production. The increase in quantity of the products and the types of products led to competition which eventually led to the end of product shortages and hence the emergence of surpluses. Due to this, there was obvious pressure on the organizations to make the customer buy the product though it can lead to loosing the customer for the future. This concept helped in the immediate sales of the products. In the concept, the surpluses of funds which the organizations generated were turned to the use of advertising and personal selling in order to reduce their inventories. The primary focus in this concept remained to sell the products with an aggressive approach. The selling concept takes an ‘inside-out’ perspective. It starts with the production plant, focuses on the organizational existing products, and calls for heavy selling and promotion to obtaining profitable sales. It focuses primarily on customer conquest by getting short-term sales with little concern about who buys or why. The selling concept also enables part of the organization to keep focusing on the product, through the product concept. In addition, the selling concept era was characterized by an orientation that a sales or marketing department can sell whatever the organization has produced. Apart from the aggressive selling approach, the selling concept era was also noted for other unhealthy features, such as the idea that ‘selling is the goal of the organization and not the customer satisfaction’. Despite the fact that the selling concept has almost seized to be a preferred organizational orientation over time, its acceptance or rejection is not to be determined by the concept itself, but the concept era and the dominant organizational orientation. Even in the era of a market oriented concept, few organizations which deal with ‘unsought’ products (such as life insurance), political parties who sell their candidates aggressively to apathetic voters in an election, and also by the organizations who have excess stock still follow this concept and use the selling orientation successfully. This means the selling concept though being less recognized in the environment of the present day, it is not completely abolished since it can be used to support some more dominant concepts in certain types of organizations. Though the marketing concept has become the prescription for facing competition, ‘old habits die hard’. Even today some organizations still hold to the fact that they must use the ‘hard sell’ approach for the organizational success and prosperity. Marketing concept – The marketing concept started to dominate organizational orientation during the 1950s, and continues in the twenty first century. This concept assumes that the starting point for any marketing process is the customer needs and wants, and no longer the aggressive selling. The key assumption underlying the marketing concept is that the organization to make only those products which it can sell, instead of trying to sell what it has made. The marketing concept focuses on the needs and wants of the customer rather than the needs of the seller and the product. The concept presumes that the principal task of marketing is not just persuading the customer to buy, but also to provide the needs of the customer with the right quantity and quality. These views are consistent with an earlier proposition which was based on the notion that the ‘goods are being made to satisfy rather than to sell’. As per this notion, in the present environment the more progressive organization is searching out the unconscious needs of the consumer, and is then producing the goods to gratify them. The marketing concept takes an ‘outside-in’ perspective. The marketing concept starts with a well-defined market, focuses on the customer needs, and integrates all the marketing activities which affect the customers. In turn, it yields profits by creating lasting relationship with the right customers based on customer value satisfaction. The marketing concept recognizes that the organizational knowledge and skill in designing products is not always being meeting the needs of customers. Thus in this concept, the organizational is orientation shifted from the product to the market. In the marketing concept, the attention has shifted from the problems of production to the problems of marketing, from the product the organization can make to the product the customers wants the organization to make. This means that the focus has shifted from the organization to the market place. It is also now been recognized that even a good sales department cannot sell every product which does not meet the needs of the customer. When customers have many choices, they always choose the one which best meets their needs. This is expressed by those organizational managements who make a clear distinction between the selling and the marketing orientation. According to these managements selling focuses on the needs of the seller whereas the marketing focuses on the needs of the customer. Selling is preoccupied with the need of the seller to convert the product into cash. On the other hand, the marketing is based on the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming the product. This concept is what is expected from the organizations of the present day. Following this concept the organizations have market orientation and hence they can reap the organizational success. Despite the fact that new concept has been developed since the emergence of the marketing concept, the concept still reigns superior in creating and retaining profitable customers, which is a primary objective of any organization. Societal marketing concept – The societal marketing concept emerged in the 1970s and has since overlapped with the marketing concept. The concept assumes that there is a conflict between consumer short-term wants and the long-run interest of the society, and that the organizations are to focus on a practice which ensures long run consumer and societal welfare. The societal marketing orientation is considered as the best business concept to be adopted by the organizations. It is suggested that this new concept represents an attempt to harmonize the goals of the organization to the occasionally conflicting goals of the society. As per the societal marketing concept, the task of the organization is to determine the needs, wants, and interest of the target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way which preserves or enhances the well being of the consumer and the society. It is understandable why this concept did not emerge until around the 1970s. The importance of this concept became eminent when the effect of organizational activities on the environment and society became too pronounced. It was then become necessary for the organizations to think on how to satisfy the market with the aim of profit, and still minimize its effects on the environment and the society. The principle thinking behind this concept is that the satisfied society is more likely to buy and to recommend the organizational product, while an unsatisfied society refuses to purchase of the organizational product even if it could satisfy the needs of the customer. This means that the societal marketing concept emphasizes that need which the customers consider in product purchase decisions has a component of their immediate environment. The appropriateness of societal marketing concept is deduced from the fact that it supports a socially responsible behaviour of the organization. It thus, challenges the earlier assertion that the social responsibility of the organization is to make profit. Organizations are required to adopt this marketing concept in order to be able to deal with the cultural and regulatory aspect of the organizational environment. This means that the adoption of the societal marketing concept generates some factors of market orientation which promote organizational performance. The societal marketing concept is considered a separate organizational objective; however the concept can be better looked at as complementary. It is to be complementary organizational thinking to the adoption of other organizational objectives, particularly, the marketing concept. Thus, whether organizational operations are production, product, selling or marketing oriented, the interest of the society is still to be given its rightful place since the society is a key stakeholder in every organization. Tab 1 Comparison of selling concept and marketing concept Sl. No. Selling concept Marketing concept 1 Selling concept is based upon the volume of production without thinking of the customer. Marketing concept is based on producing products needed by the customers the satisfaction of the customers. 2 Organization first makes the product and then figures how to sell it Organization determines the customer requirements first and then produces the product which meets the customer requirements. 3 Selling begins with the organization which is pre-occupied all the time with meeting the requirements of selling. Marketing begins with the customer and focuses constantly on the needs of the customer. 4 Selling begins with the existing activities and products of the organization. Under marketing, all activities and products take their direction from the customers and their needs. 5 Selling emphasizes on the saleable products of the organization. It seeks to convert products into cash and getting rid of the stocks. It is concerned with the methods and techniques of getting the customers to part with their cash in exchange for the products. Marketing emphasizes identification of the opportunity available in the market. It seeks to convert customer needs into the organizational products. It emphasizes on fulfilling these needs. 6 Selling over emphasizes the exchange aspect without caring for the value satisfactions inherent in the exchange. Marketing is primarily concerned with the value satisfaction which travels to the customer through the exchange. 7 Selling views organization as a product producing entity. Marketing views organization as an entity as a part of the process for satisfying the customer. 8 The selling organization determines which product is to be offered. Customer determines the product which is to be offered by the organization. The organization makes a total offering which matches and satisfies the identified needs of the customers. 9 The product precedes the selling efforts which are the consequence of the product available on hand. The consequence of the marketing efforts is the identification of the product which is needed by the customer. The organization produces the identified product in its own interest. 10 In selling concept, packaging is essentially seen as a mere protection or a mere container for the product. In marketing concept, it is seen from the point of view of the customer. it is designed to provide the maximum possible convenience and satisfaction to the customer. 11 In selling concept, emphasis is on the product. In marketing concept, emphasis is on the requirements of the customers. 12 Selling concept is based upon the transfer of title and possession. Marketing concept is based on the satisfaction of the customers. 13 In selling concept, production cost determines the price. In marketing concept, customer determines the price and price determines the product costs. 14 In selling concept, organizational management is oriented towards sale volume. In marketing concept, organizational management is oriented towards profit. 15 In the selling concept, planning is short term oriented in terms of daily sale of the product. In marketing concept, planning is long run oriented in terms of new products and future market demands etc. 16 The selling concept has inside-out perspective. The marketing concept has outside-in perspective. 17 Transportation, storage, and other distribution functions are perceived as mere extensions of the production function. Transportation, storage, and other distribution functions are seen as vital services to be willingly provided to the customer in a manner which delivers the products without any damage. 18 The emphasis is to sell somehow. There is no coordination among the different functions involved in the total process leading to the product selling. The emphasis is on an integrated approach. The integrated approach includes product, production, promotion, pricing, and distribution. 19 Different departments of the organization operate in separate water tight compartments. All the departments of the organization operate in close coordination with the sole purpose of providing satisfaction to the customer. 20 In the organizations practicing selling concept, production is the central function and sales is a subordinate or secondary function. In the organization practicing marketing concept, marketing is the key function and the entire organization is organized for supporting the marketing function. 21 Selling concept views the customer as a link in the organizational process of product selling. Marketing concept views the customer as the very purpose of the existence of the organization. It sees the organization from the view point of the customer with customer consciousness spreading in the entire organization all the time.
- 2.4LESSON 4:TOPIC: LIBERALIZATION AND GLOBALIZATION Meaning of Liberalization Liberalization is the process or means of the elimination of control of the state over economic activities. It provides a greater autonomy to the business enterprises in decision-making and eliminates government interference. Liberalization was begun to put an end to these limitations, and open multiple areas of the economy. Though some liberalization proposals were prefaced in the 1980s in areas of export-import policy, technology up-gradation, fiscal policy, and foreign investment, industrial licensing, and economic reform policies launched in 1991 were more general. There are a few significant areas, namely, the financial sector, industrial sector, foreign exchange markets, tax reforms, and investment and trade sectors that gained recognition in and after 1991. Liberalization in India Since the adoption of the New Economic Strategy in 1991, there has been a drastic change in the Indian economy. With the arrival of liberalization, the government has regulated the private sector organizations to conduct business transactions with fewer restrictions. For the developing countries, liberalization has opened economic borders to foreign companies and investments. Earlier, the investors had to encounter difficulties to enter countries with many barriers. These barriers included tax laws, foreign investment restrictions, accounting regulations, and legal issues. Economic liberalization reduced all these obstacles and waived a few restrictions over the control of the economy to the private sector. Objectives • To boost competition between domestic businesses • To promote foreign trade and regulate imports and exports • To improve the technology and foreign capital • To develop a global market of a country • To reduce the debt burden of a country • To unlock the economic potential of the country by encouraging the private sector and multinational corporations to invest and expand • To encourage the private sector to take an active part in the development process • To reduce the role of the public sector in future industrial development • To introduce more competition into the economy with the aim of increasing efficiency Reforms under Liberalization • Deregulation of the Industrial Sector • Financial Sector Reforms • Tax Reforms • Foreign Exchange Reforms • Trade and Investment Policy Reforms • External Sector Reforms • Foreign Exchange Reforms • Foreign Trade Policy Reforms Impact of Liberalization Positive Impact of Liberalization in India Free flow of capital: Liberalization has enhanced the flow of capital by making it affordable for the businesses to reach the capital from investors and take a profitable project. Diversity for investors: The investors will be benefitted by investing a portion of their business into a diversifying asset class. Impact on agriculture: In this area, the cropping designs have experienced a huge change, but the impact of liberalization cannot be accurately measured. Government’s restrictions and interventions can be seen from the production to the distribution of the crops. Negative Impact of Liberalization in India The weakening of the economy: An enormous restoration of the political power and economic power will lead to weakening the entire Indian economy. Technological impact: Fast development in technology allows many small scale industries and other businesses in India to either adjust to changes or shut their businesses. Mergers and acquisitions: Here, the small businesses merge with the big companies. Therefore, the employees of the small companies may need to enhance their skills and become technologically advanced.[1] This enhancing of skills and the time it might take, may lead to non-productivity and can be a burden to the company’s capital. Economic Reforms during Liberalization Several sectors were affected by the impact of Liberalisation. A few economic reforms were: • Financial Sector Reforms • Tax Reforms / Fiscal Reforms • Foreign Exchange Reforms / External Sector Reforms • Industrial Sector Reforms Effect of Globalization in India The growth of foreign investment in the field of corporate, retail, and the scientific sector is enormous in the country. … In recent years, globalization has increased due to improvements in transportation and information technology. What is Globalization? The term globalization refers to the integration of the economy of the nation with the world economy. It is a multifaceted aspect. It is a result of the collection of multiple strategies that are directed at transforming the world towards a greater interdependence and integration. It includes the creation of networks and pursuits transforming social, economical, and geographical barriers. Globalization tries to build links in such a way that the events in India can be determined by the events happening distances away. To put it in other words, globalisation is the method of interaction and union among people, corporations, and governments universally. Effect of Globalization in India India is one of the countries that succeeded significantly after the initiation and implementation of globalization. The growth of foreign investment in the field of corporate, retail, and the scientific sector is enormous in the country. It also had a tremendous impact on the social, monetary, cultural, and political areas. In recent years, globalisation has increased due to improvements in transportation and information technology. With the improved global synergies, comes the growth of global trade, doctrines, and culture. Globalization in the Indian economy Indian society is changing drastically after urbanisation and globalisation. The economic policies have had a direct influence in forming the basic framework of the economy. Economic policies established and administered by the government also performed an essential role in planning levels of savings, employment, income, and investments in the society. Cross country culture is one of the critical impacts of globalisation on Indian society. It has significantly changed several aspects of the country, including cultural, social, political, and economical. However, economic unification is the main factor that contributes maximum to a country’s economy into an international economy. Advantages of Globalization in India Increase in employment: With the opportunity of special economic zones (SEZ), there is an increase in the number of new jobs available. Including the export processing zones (EPZ) centre in India is very useful in employing thousands of people. Another additional factor in India is cheap labor. This feature motivates the big companies in the west to outsource employees from other regions and cause more employment. Increase in compensation: After globalization, the level of compensation has increased as compared to the domestic companies due to the skill and knowledge a foreign company offers. This opportunity also emerged as an alteration of the management structure. High standard of living: With the outbreak of globalization, the Indian economy and the standard of living of an individual has increased. This change is notified with the purchasing behavior of a person, especially with those who are associated with foreign companies. Hence, many cities are undergoing a better standard of living along with business development. Impact of globalization Outsourcing: This is one of the principal results of the globalization method. In outsourcing, a company recruits regular service from the outside sources, often from other nations, that was earlier implemented internally or from within the nation (like computer service, legal advice, security, each presented by individual departments of the corporation, and advertisement). As a kind of economic venture, outsourcing has increased, in recent times, because of the increase in quick methods of communication, especially the growth of information technology (IT). Many of the services such as voice-based business processes (commonly known as BPS, BPO, or call centres), accountancy, record keeping, music recording, banking services, book transcription, film editing, clinical advice, or teachers are being outsourced by the companies from the advanced countries to India. Debate on globalization .
- 2.5LESSON 5:Market environment Various environmental factors affect the way a business is operated. These environmental factors can be divided into two broad categories, such as the internal environment and the external environment. A business is required to adapt to these marketing environments to stay profitable and ahead in the competition. In this article, you will learn about different types of marketing environments and various components of the marketing environment Definition The marketing environment can be defined as a combination of both internal environmental factors and external environmental factors. These marketing environments surround a business and influence the operations of the business. What is the marketing environment? A marketing environment is a combination of internal and external environmental forces and factors that influences the business operation of a business and its ability to serve its customers. It is essential to know both internal as well as external environmental factors. Therefore, enterprises keep checking on them to do their business without any legal trouble and to generate maximum profit. The internal marketing environment consists of factors like material, machines, workers, money, etc. All of these components are necessary to run a business successfully. For example, if the raw material is not available on time and in sufficient quantity, then the work of production will become slow, and the company will not be able to fulfill the demand of the product in the market. On the other hand, the external marketing environment can be divided into two categories, such as macro external marketing environment and micro external marketing environment. The microenvironment is closely related to the business and constitutes all external business activities such as distribution and promotion of products of the company. The macro-environmental components affect all the companies serving in a single industry similarly. For example, changes in the laws and rules related to production or doing business will apply to all companies likely. In the next section, you will learn about all the internal as well as external components of an organization. Components of the marketing environment There are broadly two components of the marketing environment, such as the internal environment and external environment. Different types of parts of the marketing environment are categorized under these two broad categories. The internal environment of a business can be controlled, but there is very little control of a business in the external marketing environment. Let us learn about both components one by one. 1. Internal environment The internal environment is formed of all the internal factors and forces of an organization. The internal environment of an organization is within the control of the marketer, and he can change or modify the environment as per the demand in the market and requirement of the business. The following are the five factors that form the internal environment of an organization. These factors are also referred to as five Ms of a business. 1. Money 2. Men 3. Markets 4. Materials 5. Machinery All the components of the internal environment are as important as that of the components of an external environment. However, the internal environment factors are changed according to the change in the external marketing components. For example, an organization is required to upgrade its technology if new technology in the market is introduced. The internal environment of an organization also includes the marketing department, the sales department, the human resource department, and the manufacturing department. 2. External Marketing environment The external marketing environment consists of all the external marketing factors that exist outside the organization, and the marketer has little or no control over the external marketing environment factors. The external marketing environment can be divided into two categories, such as microenvironment and the macro environment. Let us learn about both macro and micro environments one by one. A. Microenvironment The microenvironment of a business consists of all the factors and forces that are directly associated with the company. The micro components of the external environment are also known as task environments. The following are the various components of the micro external environment. 1. Suppliers Suppliers are an essential part of every organization. Suppliers supplies material and all other types of resources required for the production of products. A company can run its business successfully only if its suppliers supply material of good quality and on time. 2. Market intermediaries Market intermediaries are the intermediary parties that help a business to distribute its products in the market. The market intermediaries can be wholesalers, retailers, and distributors. All of these market intermediaries are an essential part of the business as they are the face of the company in the market and represent the products of the company in the market. 3. Partners Business partners are the business entities that conduct business with the organization. For example, advertising agencies, banking and insurance companies, market research organization s, brokers, and transportation companies, etc. A company is required to partner with several other companies to run a successful business. 4. Customers Customers are the most crucial component of the business. Customers are the target audience of the product, and the preference of customers influences all the marketing and business efforts of a company. 5. Public The public is people other than the target audience of the organization. The public plays a vital role in the success of the business as it can build or destroy the image of a company in the market. The public has the power to influence the purchasing decision of the target audience. Especially in the times of the internet, the ability to control the public has increased as they can share their views about your products and services on the internet freely. 6. Competitors The last but not least component of the microenvironment is the competitors of a business. The competitors are the other businesses that sell similar products as your products or are part of the same strategic group in the industry. B. Macro Environment Macro components of a marketing environment consist of all external forces and factors that impact the whole industry rather than just changing an organization directly. Therefore, the macro marketing environment is also referred to as a large environment. The following are the six components of the macro environment. Let us learn about them one by one. 1. Technological environment Technology is one of the elements that have great potential to influence the business of an organization. It is dynamic, as it changes rapidly. Technology provides several threats and opportunities to the business environment. The technological environment consists of research and development in technology, innovation, inducement of technology, and technical alternatives, etc. 2. Demographic environment The demographic environment component of the macro marketing environment consists of people that form a market. The population of the demographic environment can be characterized based on various factors such as age, gender, density, size, location, race, and occupation, etc. The demographic environment is a crucial component for business as the company design and builds its products based on the characteristics of the demographic environment. 3. Social-cultural environment The social-cultural component of a macro environment is formed using values, lifestyle, culture, beliefs, and prejudices of the target audience of a business. The social-cultural environment varies from one region to another region. People living in one area might prefer a different type of product than the preference of the product of the people of any other region. Businesses are required to have in-depth knowledge of the social-cultural environment to design a product or service that is preferred by most people. 4. Economic environment The economic environment component is a type of component that influences all industries. The economic environment affects the purchasing power and spending patterns of the buyers. The following are the different factors that form an economic environment. 1. Interest Rates. 2. Gross Domestic Products (GDP). 3. Gross National Product (GNP). 4. Inflation. 5. Subsidies. 6. Income distribution. 7. Government funding. 8. Other significant economic variables. 5. Political-legal environment: The political-legal environment consists of laws and policies of a country. In addition to rules and procedures, the political-legal environment also includes agencies and pressure groups. All of these political entities impact the working capacity of the industry in society. 6. Physical environment: The last component of the macro environment is the physical environment in which an organization exists. The following are the components of the physical environment. 1. Climate condition 2. Environmental change. 3. Availability of the raw material. 4. Natural resources like water. 5. pollution. Examples of the marketing environment Examples of the internal marketing environment The best example of an internal marketing environment is the office culture of the organization. Your office culture consists of the values, beliefs, and attitudes of your employees. All of these factors determine how the employees of your organization will behave. For example, in an organization where employees are encouraged to perform in a team and support the members of the group are more likely to perform better than the organization where employees compete with one another. Moreover, employees are likely to perform better in a positive internal marketing environment rather than an environment where employees are nagged continuously and pressured to perform well. Google is one of the best companies that provide a positive and very healthy internal environment to its employees. Because of this, Google is now one of the leading companies in the industry. Examples of the external marketing environment The external marketing environment of an organization is formed of micro and macro environment. The microenvironment consists of suppliers, market intermediaries, partners, customers, public, and competitors, etc. for example, suppliers of an organization alter the business environment of an organization to a certain extent. If suppliers supply good quality material and supply that material on time, then the organization can produce the right quality products and can fulfill the demand in the market efficiently. Another vital component of the micro marketing environment is the market intermediaries. The market intermediaries of your business play an essential role in the success of your business. They are the face of your company. They interact with your customers daily and understand your customers and also your product. Let us take the example of a retailer. A retailer sells products from different companies in the market. It is in the hands of a retailer to decide whether to promote your product or not. The sales of your products will significantly depend on the people who represent you in the market. Therefore, it is necessary to provide proper incentives to your representatives and provide a good margin to them on your products so that they promote your products to their customers rather than promoting the products of your competitors. On the other hand, a macro marketing environment does not affect an organization directly but affects the whole industry. An organization is required to perform its business operations according to the macro-environment factors. The examples of the macro-environment are demographic environment, social-cultural environment, economic environment, political-legal environment, physical environment, and technological environment, etc. The business operations of an organization are controlled by the laws and policies decided by the government. In addition to this, the technological environment influences the business environment more than any other macro-environment factor. A business is required to upgrade the technology that it uses for business operations from time to time in order to stay ahead in the competition. The technological environment has both advantages and disadvantages for an organization as an organization is always required to think of innovation to compete with its competitors. On the other hand, it is also costly for an organization to update its technology regularly. Importance of marketing environment The marketing environment holds great importance when it comes to conducting business successfully. Businesses of all sizes, whether small or large or required to do their business within the marketing environment. The existence of the company, its profits, and its losses largely depends on the internal as well as the external environment around it. Therefore, it becomes essential for a marketer to understand and study the marketing environment thoroughly to generate profits and stay in business for a more extended period. Let us understand why the understanding and knowledge of the marketing environment is necessary to run a successful business. 1. To learn about your competitors: A business needs to learn about its competitors to stay ahead in the competition. Different companies fight for a single opportunity in a niche market using different strategies. A deeper understanding of the marketing environment helps a marketer to learn about the business strategies and plans of their competitors. Having this knowledge helps the marketers to understand the policy of their competitors and plan their business strategies accordingly. 2. To learn about your customers: Customers are an essential part of a business. All the business activities of a company are focused on serving its customers better. Therefore, a company gives great importance to learn about their customers and their changing preferences to serve them better and to have a long relationship with them. The marketing environment helps the marketer to understand the customers and their preferences. For example, when there is a slowdown in the economy and inflation is on the surge. At such times, people either prefer to spend less or cease their spending to save money. Therefore, people look for goods and services at lower prices. Consequently, a company must either introduce new products with lower prices or sell their products at discounted prices so that they can still make sales when there is an economic slowdown. 3. Necessary for future planning A business is required to plan to meet the demand of the market and produce as per the latest trends in the market. It is essential to learn about the internal and external environment to plan efficiently. 4. To make most out of the latest trends Trends change rapidly, and the change is rapid in fashion and other similar industries. Companies that are part of such industries are required to keep a check on the changing trends. To do this, they learn about every aspect of the marketing environment so that they can prepare a foolproof plan for the future. 5. To learn about all the threats and opportunities related to business Understanding the marketing environment is necessary to learn about the risks and opportunities associated with the company. The marketer can take advantage of being a first-mover if they know the opportunities related to the business. Moreover, a business must learn about the threat associated with the company to take precautions to stay safe.
- 2.6LESSON 6 :Corporate Planning Definition – Strategy, Importance, Objectives and Elements Corporate planning is a type of strategic planning, responsible for mapping out a course of strategies and their implementations to empower top-management. It optimizes exposure, reach, leads, sales, profits, credibility, loyalty, sustainability, and opportunities of a business. With the help of corporate strategic planning, a business can efficiently channelize corporate management by leveraging its resources with better acumen than the other market players. Businesses of any size should incorporate such strategic planning, as it offers- • Clarity & Direction • Efficient use of resources • A way of measuring progress • Optimized decision-making • Better coordination in business activities • Effective allocation of responsibilities • Motivation and guidance to members • Analysis Strengths and weaknesses along with opportunities and threats via SWOT analysis, etc. All in all, corporate planning empowers any kind of business to accomplish its business goals in a more effective and organized manner. Corporate Planning Definition Corporate Planning is defined as forming long-term goals and objectives within the organization’s strengths and weaknesses in the existing and prospective environment. This is done to ensure the achievement of their plans by combining their short-term and long-term objectives or bringing amendments in the structural working in the organization’s composition. In the words of David E. Hussey, writer of the book- Corporate Planning: Theory and Practice- Corporate planning includes the setting of objectives, organizing the work, people and systems to enable those objectives to be achieved, motivating through the planning process and through the plans, measuring performance and so controlling progress of the plans and developing people through better decision-making, clearer objectives, more involvement, and awareness of progress. What is Corporate Planning Strategy? Corporate Planning is a strategic process applied by several business organizations to form a roadmap to grow in the market, enhance profits, gain industrial exposure, and strengthen brand identity. It is a vital tool that successful business organizations use to leverage their existing resources better and more analytically than competitors. It is the determination of business goals, formulation of diverse strategies for attaining objectives, transforming the goals into tactical plans, implementing and reviewing it to find out the progress of strategies, and finding out loopholes. Different factors around which corporate planning is channelized via effective SWOT analysis and process of corporate management are- • Creation of long-range corporate goals and objectives. • Analysis of Macro and Micro Environments. • Analysis of Strengths and weaknesses of the business • Coordination between short term and long term business plans • Structural changes in the business • Implementation of the strategic plan as per business goals • Adept use of scarce financial resources. • Right evaluation of performance as well as feedback for purposeful corporate planning Importance of Strategic Corporate Planning In the current modern era, corporate planning holds a crucial position in a business organization, be it large-sized, medium, or even a new entrant. The importance of corporate planning can be justified because some companies even hire departmental corporate managers to check the industry’s current scenario and the current status of the organization in the market. Some of the points that describe the need and importance of corporate planning are mentioned below: 1. Long-term goals Corporate Planning broadly focuses on long-term goals and sets a blueprint to achieve them in a stipulated period. Long-term goals help an organization keep its core focus on maintaining its efforts, workforce, and efforts on a pre-decided target. Corporate Planning keeps the employees engaged in their respective tasks with deadlines and ensures effectiveness and efficiency. It also brings harmony, peace, and cooperation among the employees and supervisors in a firm as they all smoothly work towards a common objective. 2. Focus A strategic business plan helps a business organization provide a focal point not to get deviated or distracted from its end goal. The first and foremost step of corporate planning involves devising a mission statement that tells the world its roles and objectives. Formulation of a mission statement aids the firm stick to its focus, do all the requisite tasks, assign responsibilities to the employees, and evaluate their work to achieve that final destination. 3. Better Decisions Developing a strategic plan helps a company make better decisions that are beneficial and helpful in attaining the mission statement. A corporate plan should be structured to spell all the information in the organization’s interest, like the skills required with the employees, machinery or equipment required, etc. Forming a roadmap to achieve the final goal helps the business people hire the best personnel for their form, arrange funds according to the tasks, and further invest in the most viable propositions. 4. A Measure of Success Corporate planning also acts as a yardstick to determine an organization’s success in achieving its goals. A firm shall periodically analyze its work to check its progress and make further amendments like replacing personnel, hiring more employees, arranging more funds, upgrading the machinery, etc. Finding, evaluating, and analyzing the loopholes periodically that block the ways of achieving the mission statement helps in the upgradation of the work and ensure efficiency and effectiveness of the tasks devised. The touchstone function of corporate planning works best in the organizations that devise plans that allow for changes in attaining the tasks. 5. Saves money The extra benefit associated with corporate planning is that it forms budgets that help save substantial sums. Budgeting allows a firm to allocate its financial resources to the projects that require it the most by cutting out unimportant expenses. Having a detailed budget tells how much cash is earned, spent, or lent. This wipes out confusion regarding the amount of money allocated to different projects. Objectives of corporate planning in Management Following are the basic objectives of corporate plans: 1. Setting a strategy The fundamental objective of framing a corporate plan is setting a business strategy. At this stage, companies should look at the opportunities and analyze the threats in the market. For this, they can make a SWOT analysis and select viable propositions for investing their funds. 2. Planning the operations Once a firm knows its mission statement, it can use these objectives and find ways of attaining them. The sole purpose of corporate planning is to help a firm plan and prepare a list of resources it requires to deliver to achieve its goals. 3. Monitoring and Control There should be measurable indicators present in a strategic plan to evaluate the progress of the work rate vis-à-vis the initial plans. It mainly includes financial theory related to accounts, the value of output, etc. 4. Review Establishing and forming well-devised instruments to devise annual reports is a crux to a successful corporate plan. Since the market environment constantly changes with events happening in the economy, a company regularly needs to review its plans, policies, and even rules and regulations associated with the operations. Elements of Successful Corporate Plan There are six elements in a successful corporate plan: 1. Gathering information Having all the information related to the firm, industry, and competitors are the primary step towards a well-defined corporate plan. Either a business is big or small, it should be aware of the happenings in the market in its sectors, find out opportunities, grab them at the right moment and beware of the threats. 2. Set the objectives of the plan Having a well-devised mission statement helps a firm stick to its focus of achieving it and keeps all the strategic work smooth in operations. Setting objectives helps form a clear mind about the work done, and the purpose of doing the work makes it fascinating. 3. Devise strategies to meet goals Having a blueprint helps in effectively achieving the objectives. Forming strategies define the work to be done by the employees. Managers and leaders mainly devise strategies considering the funds available, personnel in the organization, and the deadline to achieve the requisite target. It brings efficiency to the operations of a business. 4. Implementing the plan The next step is to implement the plans effectively. It involves the execution of the assigned tasks by the personnel within the guidelines and deadlines set. It involves the execution of the assigned tasks by the personnel within the guidelines and deadlines set. 5. Monitor plan performance An organization should monitor its work by forming progress reports, finding the drawbacks, and work on them immediately. 6. Evaluate the effectiveness of the plan In the end, a firm should see if the corporate strategy devised by it is competitive or up to the market standards. A plan should be challenging to achieve. A plan that is easy to achieve may not be a viable option in the existing scenario. This may require the organization to reset its plans and considering the market standards. What to include in a Strategic Corporate Plan? 1. Vision statement The vision statement of a business talks about business goals that it is supposed to achieve. While planning your corporate strategy, it is important to focus on your vision statement. You should also plan as per your short as well as long term goals. Your goals should be backed for your strategic planning, plus your goals should also be SMART. 2. Mission statement Next thing upon which you should pay heed while making corporate planning is a mission statement. It tells you how you are going to achieve your vision statement. It will let you know what you are planning to offer, the target market, and the USP of your company. It will offer an elevator pitch to your corporate planning just in a few lines. 3. Resources and scope Your corporate planning should also pay attention to things that you have in your organization such as your systems, structures, employees, products, accounting, assets, divisions, programs, finance, etc that play a key role in accomplishing your goals. You need to map the current structural existence of your organization to have a proper view of things incorporated and associated with your organization. 4. Objectives You should also include different business objectives and the ways you are going to measure success in your corporate planning strategy. Here, your objectives need to be measurable, strategic, realistic, achievable, and time-driven. Including vague objectives in your corporate planning statement is of no use here. Different types of objectives might include financial objectives, customer objectives, internal objectives, learning, and growth objectives. 5. Strategies Finally, you should include strategies that will help you accomplish your business objectives. Such strategic planning can be for launching any new product, or decreasing labour costs by a certain percentage, but your strategies have to directly address the associated objectives. You should also chalk out a proper plan for implementing those strategies. Corporate planning vs. Business Planning Business planning involves strategies that a business uses and applies to attain its goals and objectives. Corporate planning consists of strategies that the employees follow to meet the objectives of an organization. The following points highlight the difference between corporate planning and business planning: 1. Interdependency A business plan may exist without a corporate plan, but its strategies are linked with corporate plans. Without business planning, the goals and objectives of a firm would be ambiguous. Thus, both business plans and corporate plans are complementary to each other. 2. Effects A planning process aids a business to succeed in the market and suggests new directions and amendments as per the industry’s short as well as long-range requirements. Thus, there can be several diversified effects on business and corporate plans. 3. Considerations Corporate planning reviews each step of the working of an organization devised for achieving the mission statement. However, a business plan focuses on the organization’s overall goals, objectives, and progress. To evaluate the tasks, a business should consider several factors such as progress rate, personnel performance, requisite funds for further operations, and many more. .
- 2.7LESSON 7 Meaning of Consumer Behavior Consumer behavior simply means how consumers behave in the market. It defines the way in which consumers purchase products & services for satisfying their wants. It basically consists of likes & dislikes of customers which influence his decision while purchasing products. It is a concept which consists of many stages starting from arising of a need till purchase of a product for end-use. Different consumers respond differently to the market. It is an important concept for every business to understand its customers. This helps in better fulfilling of demands of the customers. Businesses use customer relationship management technology to understand their consumers properly. It is a database which collects & store different information about their customers. This information helps in understanding the behavior of the customers. Nature of Consumer behavior is discussed below. Nature of Consumer Behavior Complex In Nature Consumer behavior is complex in nature as all persons differ in their needs and wants. Each individual has their own unique needs and accordingly, they behave differently in the market. It is a very difficult task for marketers to recognize the needs and patterns of each individual. Therefore, it becomes an overall complex job for the business to identify each consumer’s behavior and targets them accordingly. Systematic Process Consumer behavior is a systematic process consisting of a series of steps involved in buying decisions of consumers. It is related to how consumers make their buying decision. The buying decision of consumers involves different steps which are: Need identification to buy product, searching for information related with the product, making list and evaluating different options available, finally making a purchase decision and at last post-purchase evaluation done by the marketer. Keeps On Changing Consumer behavior is always changing concept and does not remain constant. It keeps on changing with the time which is due to the following changing factors: age, income level, education level of consumer. Same products may be liked by the same consumer who once hated them. For example, Kids have more interest in toys during their childhood but as they grow up as teenagers they lose all their interest. Reflects Status The manner in which the consumer spends and makes buying decision reflects his status. Not only the behavior of the consumer is influenced by its status but his behavior also reflects his status in society. People who spend more and buy luxury items are considered rich and high-status people by society. These high-priced goods add pride to their personality. Varies From Region To Region Consumer behavior is different for different region, states and countries. It differs from place to place. Rural population tends to spend less and are basically conservative in nature. They do not like to spend on luxury items despite having enough funds due to their psychological factors. They have a different approach from an urban population related to buying decision. However, the rural population tends to spend more and buy luxury items. They even take loans to fulfill their needs for luxuries if are short of funds. Differs From Product To Product Consumer behavior varies from product to product. Same product may be attractive for one group of consumers but not for another group. A consumer may have more interest and buys more quantity of one product and buys less or even no quantity of another product. Teenagers like to spend heavily on bikes, cars, cell phones and branded clothes to look attractive, but they would not spend much on their academics. Vital For Marketers Consumer behavior is crucial for marketers to perform their duties effectively. Marketers should have perfect knowledge of their target customers buying behavior. It will help them in understanding their likes and dislikes and also the factors influencing their buying decisions. Marketer can take appropriate actions accordingly to attract customers. It helps the companies in developing the products as per peoples demand by providing information collected by them. Improves Standards Of Living Consumer behavior has an important role in improving the standards of living of people. When consumers spend more on buying different products and services, their standard of living is improved. Higher is the spending of a person, higher is the standard of living of a person. On the other hand, despite having enough funds if a person spends less than his standard of living is low. Therefore, the level of spending directly influences a person’s living standards. Importance of Consumer Behaviour Increase Sales Consumer behavior study helps the businesses in understanding their customers. They have full information about their customer’s likes & dislikes. This helps in satisfying the wants of their customers properly & efficiently. Business will offer the right product to its customers. Customers will become loyal if getting the right product. This will increase sales & revenue for business. Setting Prices Setting prices is one of the important & difficult task for any business. It directly influences the demand for its products in the market. By understanding consumer behavior, it becomes easy to determine whether the customer is price concerned or quality concerned. There are some customers in the market who buys products only because they are cheaper. Understanding their behaviour will help companies to produce as per their price limit. Designing Sales Promotion Methods Sales promotion activities are the different methods used for inducing customers to buy a product. Promotion activities are effective if they present clearly the features of the product as per customer needs. These activities should affect the psychology of customers directly & inducing them in buying. Understanding their behavior will help in easy understanding of factors affecting customers buying decisions. Helps In Competitive Analysis Facing competition in today’s market is a very tough job for every business. There is a large number of competitors available in the market offering the same products. It becomes difficult to attract customers towards your products. Understanding their behavior helps in analyzing the reasons for which they are going for competitors’ products. It helps in understanding the advantages that competitors are possessing. This help in facing the competition in a better way. Helps In Forecasting Forecasting helps in taking competitive advantages from the businesses. If the business is able to forecast about the future it can easily take several advantages. Consumer behavior enables the businesses in easy forecasting of sales & demand forecasting. It helps companies in saving their resources, time & cost. They can easily predict future demands & focus on their operations. Helps In Targeting & Segmentation Segmentation &Targeting helps in serving customers properly. It segments the customers according to their taste & class. Segmentation helps in serving the customer better. It helps businesses to focus on customers as per their needs. After understanding consumer behavior, it becomes easy to segment different customers into different classes. Helps In Designing Product Portfolio Product portfolio refers to a set of different products offered by businesses. Every business product portfolio must consist of all class of products. It should have products for all class of peoples in the market. Understanding customer behavior helps the businesses in easy understanding demand of market. This will help in proper designing of product portfolio for the businesses Major Factors Influencing Consumer Behavior 1. Psychological Factors 2. Social Factors 3. Cultural Factors 4. Personal Factors 5. Economic Factors Consumer behavior is influenced by many different factors. A marketer should try to understand the factors that influence consumer behavior. Here are 5 major factors that influence consumer behavior: 1. Psychological Factors Human psychology is a major determinant of consumer behavior. These factors are difficult to measure but are powerful enough to influence a buying decision. Some of the important psychological factors are: i. Motivation When a person is motivated enough, it influences the buying behavior of the person. A person has many needs such as the social needs, basic needs, security needs, esteem needs and self-actualization needs. Out of all these needs, the basic needs and security needs take a position above all other needs. Hence basic needs and security needs have the power to motivate a consumer to buy products and services. ii. Perception Consumer perception is a major factor that influences consumer behavior. Customer perception is a process where a customer collects information about a product and interprets the information to make a meaningful image about a particular product. When a customer sees advertisements, promotions, customer reviews, social media feedback, etc. relating to a product, they develop an impression about the product. Hence consumer perception becomes a great influence on the buying decision of consumers. iii. Learning When a person buys a product, he/she gets to learn something more about the product. Learning comes over a period of time through experience. A consumer’s learning depends on skills and knowledge. While a skill can be gained through practice, knowledge can be acquired only through experience. Learning can be either conditional or cognitive. In conditional learning the consumer is exposed to a situation repeatedly, thereby making a consumer to develop a response towards it. Whereas in cognitive learning, the consumer will apply his knowledge and skills to find satisfaction and a solution from the product that he buys. iv. Attitudes and Beliefs Consumers have certain attitude and beliefs which influence the buying decisions of a consumer. Based on this attitude, the consumer behaves in a particular way towards a product. This attitude plays a significant role in defining the brand image of a product. Hence, the marketers try hard to understand the attitude of a consumer to design their marketing campaigns. 2. Social Factors Humans are social beings and they live around many people who influence their buying behavior. Human try to imitate other humans and also wish to be socially accepted in the society. Hence their buying behavior is influenced by other people around them. These factors are considered as social factors. Some of the social factors are: i. Family Family plays a significant role in shaping the buying behavior of a person. A person develops preferences from his childhood by watching family buy products and continues to buy the same products even when they grow up. ii. Reference Groups Reference group is a group of people with whom a person associates himself. Generally, all the people in the reference group have common buying behavior and influence each other. iii. Roles and status A person is influenced by the role that he holds in the society. If a person is in a high position, his buying behavior will be influenced largely by his status. A person who is a Chief Executive Officer in a company will buy according to his status while a staff or an employee of the same company will have different buying pattern. 3. Cultural factors A group of people are associated with a set of values and ideologies that belong to a particular community. When a person comes from a particular community, his/her behavior is highly influenced by the culture relating to that particular community. Some of the cultural factors are: i. Culture Cultural Factors have strong influence on consumer buyer behavior. Cultural Factors include the basic values, needs, wants, preferences, perceptions, and behaviors that are observed and learned by a consumer from their near family members and other important people around them. ii. Subculture Within a cultural group, there exists many subcultures. These subcultural groups share the same set of beliefs and values. Subcultures can consist of people from different religion, caste, geographies and nationalities. These subcultures by itself form a customer segment. iii. Social Class Each and every society across the globe has form of social class. The social class is not just determined by the income, but also other factors such as the occupation, family background, education and residence location. Social class is important to predict the consumer behavior. 4. Personal Factors Factors that are personal to the consumers influence their buying behavior. These personal factors differ from person to person, thereby producing different perceptions and consumer behavior. Some of the personal factors are: i. Age Age is a major factor that influences buying behavior. The buying choices of youth differ from that of middle-aged people. Elderly people have a totally different buying behavior. Teenagers will be more interested in buying colorful clothes and beauty products. Middle-aged are focused on house, property and vehicle for the family. ii. Income Income has the ability to influence the buying behavior of a person. Higher income gives higher purchasing power to consumers. When a consumer has higher disposable income, it gives more opportunity for the consumer to spend on luxurious products. Whereas low-income or middle-income group consumers spend most of their income on basic needs such as groceries and clothes. iii. Occupation Occupation of a consumer influences the buying behavior. A person tends to buy things that are appropriate to this/her profession. For example, a doctor would buy clothes according to this profession while a professor will have different buying pattern. iv. Lifestyle Lifestyle is an attitude, and a way in which an individual stay in the society. The buying behavior is highly influenced by the lifestyle of a consumer. For example when a consumer leads a healthy lifestyle, then the products he buys will relate to healthy alternatives to junk food. 5. Economic Factors The consumer buying habits and decisions greatly depend on the economic situation of a country or a market. When a nation is prosperous, the economy is strong, which leads to the greater money supply in the market and higher purchasing power for consumers. When consumers experience a positive economic environment, they are more confident to spend on buying products. Whereas, a weak economy reflects a struggling market that is impacted by unemployment and lower purchasing power. Economic factors bear a significant influence on the buying decision of a consumer. Some of the important economic factors are: i. Personal Income When a person has a higher disposable income, the purchasing power increases simultaneously. Disposable income refers to the money that is left after spending towards the basic needs of a person. When there is an increase in disposable income, it leads to higher expenditure on various items. But when the disposable income reduces, parallelly the spending on multiple items also reduced. ii. Family Income Family income is the total income from all the members of a family. When more people are earning in the family, there is more income available for shopping basic needs and luxuries. Higher family income influences the people in the family to buy more. When there is a surplus income available for the family, the tendency is to buy more luxury items which otherwise a person might not have been able to buy. iii. Consumer Credit When a consumer is offered easy credit to purchase goods, it promotes higher spending. Sellers are making it easy for the consumers to avail credit in the form of credit cards, easy installments, bank loans, hire purchase, and many such other credit options. When there is higher credit available to consumers, the purchase of comfort and luxury items increases. iv. Liquid Assets Consumers who have liquid assets tend to spend more on comfort and luxuries. Liquid assets are those assets, which can be converted into cash very easily. Cash in hand, bank savings and securities are some examples of liquid assets. When a consumer has higher liquid assets, it gives him more confidence to buy luxury goods. v. Savings A consumer is highly influenced by the amount of savings he/she wishes to set aside from his income. If a consumer decided to save more, then his expenditure on buying reduces. Whereas if a consumer is interested in saving more, then most of his income will go towards buying products.
- 2.8LESSON 8:Business Buying Process (1) Need/ Problem recognition – in business buying the need or problem arises for a product needed for operation of the business. Business buyers buy products either to take advantage of new opportunities in the market or to find a solution for any issues related to operations. There could be situations like – a machinery broke down, new machinery needed, inventory/raw materials needed for continuous production, technologically advanced new instruments needed, new product launch, new insurance provider for the staff, etc. Understanding the buying needs helps business marketers plan suitable marketing programs. For example, breakdown of a machinery results in losses till it is repaired or replaced. Here the suppliers can provide free repairs for certain period, buy back options for a new machinery, etc. They need to learn about the various buying scenarios for every client they have. Basis this they should clearly define market opportunities for themselves. In situations like Straight Rebuy, organizations usually have a contract signed to have the products supplied once the already bought products reach a specified inventory level. For example, a firm in production of leather boots will intimate the supplier of leather to send the material once it has the supplies left for few days of production. Same example applies for a construction company which needs cement and steel supplied at regular intervals. The final approving authority is informed about the buying situation in the organization by the production managers, etc. The suppliers should grab such opportunities and fulfil the contract so that the clients don’t switch to other suppliers. The need recognition is complicated in New Task and Modified Rebuy situations. (2) Need/ Problem Description – since there are many individuals involved in the decision process, a clear draft outlining the problem, quality and quantity of products needed is made for approval and discussion of concerned authorities. Inputs from primary users of the products must be taken. All the details of the product performance, characteristics, quantity, delivery time, installation requirements and price limits should be clearly defined by the buying centre. For example, a school was in need of new fleet of buses as part of its expansion. The inputs from the drivers and the admin staff responsible to get the school teachers and children to school were also taken. The need description for this case may include – • The requirement of a mini bus, etc. as per the traffic in the town, AC/ non-AC basis the weather, additional training need for the drivers, etc. • The exact number of buses needed to service the need, seat requirements, etc. • The price limit that the finance department can approve • Life of the buses, resale value, and service and repair, etc. In the discussion for the above scenario, a driver highlighted the need wherein a child with special needs should be able to alight the school bus. This resulted in a specification written which could have been overlooked and would have resulted in additional costs and grievance issues at a later stage. The requisition should be accurate as per the need recognition to ensure right product is bought. The whole effort will result in loss of time and money if the details are not accurate. (3) Information search – for Straight and Modified Rebuy the buying center already has information on the existing suppliers. In New Task situations the buying center may involve technical staff and people from other departments for their inputs. The purchasing team may seek know-how from their contacts in other organizations, refer advertisements in trade journals, internet search, or scan any proposals sent by suppliers in the recent past. A supplier search can be formal as well as informal (A.M. Weiss and J. B. Heide, “The Nature of Organizational Search in High-Technology Markets”, Journal of Marketing Research, May 1993, p 220-33). A formal search may include site visits of suppliers, analysis of product characteristics, sample test of the product, etc. Informal search includes visiting trade shows, referring journals, and meeting sales people from the supplier side. Based on the requirements a final list of suppliers is created. The suppliers not shortlisted could be because of various reasons, like bad image in the industry, high price, delivery time, quantity and quality criteria, etc. (4) Supplier Evaluation and Selection – additional information on suppliers is needed to further evaluate and select the suppliers. The organization asks the shortlisted suppliers to send proposals / quotations. The specific terms of the proposals made by each supplier helps the organization select the suppliers which meets its criteria. The organizations asks the suppliers for a formal meet or make presentations. A supplier not meeting the requirement may be immediately dropped from the list. These could be because of quality, support services, supplier flexibility, delivery terms, etc. The importance of these attributes varies according to the buying situation. The purchase agents need to be highly qualified for making negotiations. They should have the requirements listed as discussed in the meeting at the Buying Centre. The negotiations could be based on price and contract before final selection. Many organizations select more than one supplier to overcome any hurdles like a strike, etc. at one of the supplier organization. This also gives advantage at the negotiation table in bargaining on price, etc. As organizations are in the business for making profits, most of the negotiations are around the price of the product. A contract mutually agreed between the supplier and buyer is signed. The final order is made listing the product specifications, delivery terms, payment, after sale services, etc. The order is shipped, received and payment is made after inspection. (5) Post purchase evaluation – Once the products are used in the production department, organizations assess if the supplier has fulfilled all the terms of the agreement. This process is formal as compared to consumer post purchase evaluations. The outcome of this activity paves the way for learning in the purchase activity. A questionnaire may be sent to the production team for getting a clear picture on the product bought. The suppliers also follow this activity to ensure the buyers are satisfied so as to continue with the business, and maintain and increase market share. Other evaluation criteria may include delivery time, service during and after sale. A dissatisfied buyer may make demands for correction of problems and may even switch to other supplier. The supplier should work closely with the buyer in the competitive world to help each other meet their marketing objectives.10 Minutes0 Questions
- 2.9lesson 9 Topic: Personal Selling Personal Selling is also known as the door to door selling which is face to face communication between the buyer and the seller. In simple words, It is an art of persuasion in which the salesperson tries to win the confidence of the customer and also tries to know the importance of marketing strategies. However, personal selling has become consultative selling where the seller has become. It is face to face communication between buyers and sellers. This selling also helps to interact with the seller and the customer and at the same time tries to know the queries and the benefits of the product through the customers. Definition of Personal Selling- Some basic definitions are given below: 1. A famous writer Philip Kotler says, “Personal selling is a type of personal or local presentation by the firm’s sales force for the motive of making sales and building customer relationship.” 2. A famous writer W.J.Stanton says, “Personal selling involves individual personal communication in contrast to mass relatively impersonal communication of sales promotion, advertising, and other promotional tools.” 3. A famous writer Cundiff and Still, “Personal selling is kind as a method of communication. It includes not only individual but social behavior each of the individual in face contrast salesperson a prospect influence the others.” Features of Personal Selling- The features of personal selling help to educate the seller with their respective points like immediate feedback, two-way conversations, etc. The features of personal selling define the particular characteristics which are related to personal selling. It includes various points such as:- 1.Face to Face Interaction- This is the first features of personal selling and it means that there is face to face interaction between buyers and sellers. The seller tries to understand the needs of the buyers and provide the product matching the customer needs. Through this feature, the salesman helps to tries to persuade the customers for a particular product and make a healthy relationship between them. 2. Two Way Dialogue:- This is the second features of personal selling and it means that there is a two-way dialogue between the customers and the sellers in personal selling. The customer will respond in case he has certain objections while the seller will respond with an appropriate solution to customer problems. A salesman always thinks that whenever I talk to a customer, I can completely satisfy the customer for my product so that my customer gives me a positive response to my product. So this is the reason that two-way dialogue is a very effective feature for any selling procedure. 3. Immediate Feedback- This is the third most important merit or features of personal selling as compared to other forms of promotion is that various immediate feedback of consumers that will help the salesman to act accordingly. In this feature, the seller is always trying to receive the feedback of the consumers because a consumer is the only person who can tell us well about our product whether it is his goodness or the badness. 4. Art of Persuasion- This is the fourth features of personal selling and it means that in personal selling, salesperson persuades the customers to buy the product he convinced the customer and win his confidence so that sales are achieved. In any company or real life, a good salesman is considered to be a person who should influence or satisfy a customer to his product so that the customer is induced to buy and use the particular product. 5. Flexible- This is the fifth features of personal selling and it means that the nature of the product will be varied, personal selling will be also depending upon the consumer preferences. For Example– Personal selling styles will be different for industrial products. If personal selling technique is not flexible, then it will fail to persuade the customer towards our product or service. 6. Satisfaction: This is the sixth and unique feature or characteristic of personal selling that due to the effective communication between the seller and the targeted buyer a seance of satisfaction takes place in them that the products are either sold or the information is acquired from the targeted buyer about the modification and changes of the products and services. Importance of Personal Selling- The importance of personal selling in marketing includes various points for determining the selling procedure:- 1.Goal-Oriented Activity- This is the first importance of personal selling and it means that the ultimate objective of personal selling activity is that all the sales activities right from prospecting, pre-approach, approach, presentation and demonstration, handling objections, closing, follow-up are attained in a synchronous manner and ultimate objective of revenue generation is possible. It is very important for any object to be goal and objective because it explains the nature or purpose of that thing. Similarly, personal selling also has an objective that in some way I have to execute sales and earn the profit. 2. Consultative Selling- This is the second importance of personal selling and it means that this selling has become consultative selling. Nowadays, salespersons have become consultants who guide customers to purchase decisions. Through this strategy, the salesman improves the communication pattern, relationship strategies, and also improve the trust of their products. For Example– Relationship Manager helping the customer to buy an insurance policy. 3. Win-Win Approach- This is the third importance of personal selling and it means that this selling results in a “win-win” approach or philosophy. A salesman provides the right product to the customer, customer needs are fulfilled he gets desired satisfaction while on the other hand salesman sells his product and his sales targets are attained. Through this strategy, the company or salesman improves trustworthy relations, cordial relations, and other social relations with the customers because if your customer won then did you mean that you also won… 4. Helps in Relationship Building- This is the fourth importance of personal selling and it means that this selling not only helps in identifying the prospects but it also helps in building the relationship with the customers through continuous follow-up activities from the company side. This importance is very essential for the salesperson because, without a relationship-building strategy, no one salesman or company can achieve the customer’s trust and power. Through this, the salesman achieve these things like:- • Customer Trusts, • Relations, • Customers Action, • Goal or object, • and then profit. 5. Winning the Confidence of Customer- This is the fifth importance of personal selling and it means that this selling is an art of winning the confidence of the customer and inducing him/her to buy the product. This concept helps the salesman to develop or change the ‘official customers‘ into the ‘target or permanent customers‘. This is the last or most important point of personal selling because confidence is known as an assurance about handling something such as work, family, social events, and so on. Objectives of Personal Selling- The objectives of personal selling indicate how the sellers persuade or motivate our customers to buy a particular product or service. The objectives of personal selling include various points such as:- 1. To persuade the customers- The personal selling is an art of persuasion in this salesperson persuade and insist on the customer to buy the product. This objective plays a very perfect role for any personal seller. 2. To Increase sales- The ultimate objective of personal selling is to increase the sales of a particular company so that maximum revenue can be generated by the company. 3. To build long term relationship- Personal selling only helps to acquire the customers but also to grow and retain the customers. 4. To meet the specific needs of the people- Personal selling can help in meeting the specific need of the customer. For Example– Beauty and health-related products which require personal selling to match customize needs. 5. To maintain regular communication with the customers- Personal selling involves two-way dialogues between the buyers and sellers and a buyer can share his thoughts about a particular purchase with the salesperson keeping in mind the taste and preference of the consumer salesman (an offer the product an ensure communication is maintained with the customer throughout the lifetime of the company. Managing the Sales Force Creating Sales Force Structure, Territories, and Goals Creating the proper sales force structure, territoires, and goals leads to customer, sales force and firm satisfaction. Introduction Sales operations are a set of business activities and processes that help a sales organization run effectively, efficiently, and in support of business strategies and objectives. Sales operations may also be referred to as sales operations, sales support, or business operations. The set of sales operations activities vary from company to company but often include these nine categories: • Sales strategy: design, planning, execution; • Measurement of results: reporting, analytics and sales data; • Compensation, sales quota, policies; • Technology and tools, including CRM; • Training and sales communication; • Sales territory design and optimization; • Contests/spiffs; • Lead generation/sales programs; and • Customer segmentation. Creating The Sales Force Structure How will the sales process be structured? The answer to that question, an important one, depends on the company’s strategy. The resulting structure will guide the sales force and their actions and will, therefore, impact the company’s bottom line. When developing the sales force structure, sales managers must: • Figure out the right mix of generalists, product, market, or activity specialist with the objective of balancing sales force productivity. What is the right mix? That depends on the company and it’s offerings. • Design a reporting structure that makes it easy to both coordinate and control the sales process and the activities of the salespeople. • Help the sales people achieve their goals (and reduce stress) by providing training, coaching, incentives, information support, and performance management. Designing Territories Sales territories are the customer groups or geographic districts for which individual sales people or sales teams hold responsibility. Territories can be defined on the basis of geography, sales potential, history, or a combination of factors. Companies strive to balance their territories, because this can reduce costs and increase sales. Purpose The purpose of a sales force coverage (or sales territory) metric is to create balanced sales territories. There are a number of ways to analyze territories. The most common approach is to assess them based on their potential or size. If there is a large difference between territories, or they change over time, sales people may have either too much or not enough work. Too much work can cause the sales person to neglect some customers, while too little could lead to over-servicing the customers. Both actions can cost the firm revenue. In addition, if the sales person thinks that the territory distribution is unfair, they may leave and wind up working for a competitor. So, balanced territory allocation is important to keep customers, sales people, and the firm, as a whole, satisfied. “Sales potential forecast” can be used to determine sales targets and to help identify territories worthy of an allocation of limited resources. A sales potential forecast is a forecast of the number of prospects and their buying power. It does not assess the likelihood of converting “potential” accounts. Sales potential can be represented in a number of ways. Of these, the most basic is population (i.e., the number of potential accounts in a territory). In a survey of nearly 200 senior marketing managers, 62% responded that they found the “sales potential forecast” metric very useful. Construction Before they even begin to design new territories, a sales force manager should determine the workloads of all members of the sales team. The workload for a territory can be calculated as follows: Workload (#) = [Current accounts (#) * Average time to service an active account (#)] + [Prospects (#) * Time spent trying to convert a prospect into an active account (#)] They should also determine the sales potential in a particular territory. The sales potential in a territory can be determined as follows: Sales potential ($) = Number of possible accounts (#) x Buying power ($) A third metric that is just as important as the other two is to compare territories. Managers can look at the respective size of each territory or, more specifically, the travel time (the amount of time needed to reach customers and potential customers). Creating Sales Quotas Sales goals are commonly stated in terms of quotas. A sales quota is the minimum sales goal for a set time span. A sales quota may be minimum amount of dollars (monetary value) or product sold (volume). Sales quotas may also be for sales activity, such as number of calls per day. The time span could be set for the day, week, month, or fiscal quarter or year. Management usually sets the sales quota and the sales territory, but it’s not easy. When setting quotas, successful sales managers tend to: • Ask for less than they think the sales person can deliver; • Compare results to past performance, not forecasts; and • Ensure that the compensation scheme allows the sales force to make money when the company does. Recruiting and Selecting Salespeople Salespeople who have the best characteristics, and who fit the company ethos, should be chosen during the recruitment process. great deal of recent research has underscored the strategic advantage of managing employees as if they are assets rather than commodities. Making investments in a business’s assets makes a great deal of sense, because these investments will bring a return. A growing number of companies, recognizing that their employees are among their most valuable assets, are backing up that recognition with solid investment. Recruitment of the Sales Force Recruitment of talented employees is an essential part of any company’s ability to maintain success and ensure the achievement of standards within an organization. Recruiting sales personnel is no different. Recruiting sales personnel consists of actively compiling a diverse pool of potential candidates which can be considered for employment. In different industries, the constant need for talent creates a highly competitive marketplace for individuals, and it is important for any manager to be aware of these factors as they develop recruitment programs and policies. Methods of Recruitment: Internal and External There are two principal ways to recruit workers: internally and externally. Most companies will actively use both methods, ensuring opportunities for existing employees to move up in the organization while at the same time fielding new talent. Internal recruitment is often the most cost effective method of recruiting potential employees, as it uses the existing company resources and talent pool to fill needs. External recruitment focuses resources on looking outside the organization for potential candidates and expanding the available talent pool. The primary goal of external recruitment is to create diversity among potential candidates by attempting to reach a wider range of individuals unavailable through internal recruitment. Although external recruitment methods can be costly to managers in terms of dollars, the addition of a new perspective within the organization can carry many benefits which outweigh the monetary costs. Selecting Quality Candidates After obtaining a large, qualified applicant base, managers need to identify those applicants with the highest potential for success. Selective hiring helps prevent the costly turnover of staff and increases the likeliness of high employee morale and productivity. To evaluate the fit, it is important for managers to create a list of relevant criteria for each position before beginning the recruitment and selection process. Each job description should be associated with a list of critical skills, behaviors, or attitudes that will make or break job performance. When screening potential employees, managers need to select based on cultural fit and attitude as well as technical skills and competencies. There are some companies, such as Southwest Airlines, based out of the United States, who hire primarily based on attitude because they espouse the philosophy that you hire for attitude, train for skill. According to former CEO Herb Kelleher, “We can change skill levels through training. We can’t change attitude. ” Attitude and personality is especially important for sales positions, as they are often a customer’s first and only point of contact with the company. Managers must strive to identify the best applicants at the lowest cost. Companies have a variety of processes available to screen potential employees, so managers must determine which system will generate the most accurate results. The methods of selection vary both in levels of effectiveness and in cost of application. In addition to biographical information, companies can conduct personal interviews, perform background checks, and request testing. Because of the costs associated with these measures, companies try to narrow down the number of applicants in each round of hiring. Interviews One-on-One Interview: All jobs will require some sort of interview process to determine if the candidate is suitable for the role. This may be over the phone, one-on-one (above), or part of a group. Interviews determine if the candidates have the characteristics necessary for the job. The best interviews follow a structured framework in which each applicant is asked the same questions and is scored with a consistent rating process. Having a common set of information about the applicants upon which to compare after all the interviews have been conducted allows hiring managers to avoid prejudices and all interviewees are ensured a fair chance. Many companies choose to use several rounds of screening with different interviewers to discover additional facets of the applicant’s attitude or skill as well as develop a more well-rounded opinion of the applicant from diverse perspectives. Ultimately, the company will hire those who have the necessary skills and qualifications, and best fit the company culture and ethos. Salespeople have a specific set of personality attributes: they should be good listeners and have a keen desire to help people. They need to be trustworthy and honest, yet still be able to quickly perceive what the customer truly wants. They also need to be persistent. Employers will look for these attributes, among others, when hiring salespeople. Sales Training In general, training provides many diverse benefits both to the company as well as to the salesperson. Training is generally defined as the act of teaching a skill or behavior. However, what does this mean in business terms? Simply put, training in business is the investment of resources in the employees of a company so that they are better equipped to perform the tasks of their job. The type of resources invested may include time to learn, money to create programs and develop training materials, training effectiveness evaluation systems, etc. Benefits of Training Training provides greater skill and knowledge to the employees, which translate into any number of improved job performances. The belief is that providing employees with training will result in increased profits—the improved performance or error reduction of the employees results in cost reduction for the company. For sales personnel, training is especially important, as untrained salespeople interacting with customers may have a negative effect on the company’s reputation. Both the employee and the company benefit from training. By attending training sessions, employees can deepen their existing skill set, increase their overall skill set and increase their understanding of the organization (see ). Additionally (and perhaps unintentionally on the part of the company), the trained employee becomes more marketable in the event that he or she searches for another job—more and better skills will often lead to better or higher paying jobs. Other benefits that both may enjoy are increased job satisfaction, motivation and morale; increased efficiency, resulting in financial gain; increased capacity to adopt new technologies and methods; increased innovation in strategies and products; reduced employee turnover; and enhanced company image, reputation and customer satisfaction (particularly in the case of salespeople). Training: Training can be conducted in many ways, such as in a lecture or classroom format (above), online, or any number of ways. Need for Training The need for training varies depending on the type of organization that is being discussed; a manufacturing company has different training needs than an insurance firm. But regardless of the type of company being discussed, appropriate training systems can greatly benefit the company. Sales personnel will need different types of specialized training depending on the industry and the company’s unique circumstances. How does one decide on a training system? The process begins with a training needs assessment. This assessment ought to be a systematic and objective analysis of the training needs in three main areas—organizational, job, and person. Organizational needs deal mostly with the skills the company is looking for, the labor force, etc. whereas the job needs focus on the skills that the company views as necessary for a specific position. Then there are the person needs, and these are the most variable needs. Often these needs arise after a gap is seen in the expected performance compared to the actual performance of the employee. Training can also be a part of a young employee’s “exploration” stage, where training can be used to focus the employee’s interest and development towards a specific area. Training Methods Designing and implementing the training systems requires the company to consider a number of things; the method of training, the material the training will deal with, who will provide the training, how to evaluate the effectiveness of the training, etc. On-the-job training relies on the employee to recognize the skills and knowledge he or she will need as they perform their work, and then develop those skills on his or her own. Technical training focuses on a specific need of specific employees. Mentoring systems pair a younger or less experienced employee with an individual that has experience and success within the company who can offer guidance, aid and insight to the younger/less experienced employees. Coaching systems involve the manager offering developmental assistance to the employee through observation, assessment, providing feedback, questioning, etc. The training of a salesperson who will be working in a country other than his or her own can be broken into three segments—pre-departure, on-site, and repatriation. The pre-departure training consists of formal language training, training with respect to the local culture (culture sensitivity), education about the country (history, geography, government, etc.), and education about the company’s operation in the foreign country. Such training allows for easier assimilation of the employee into the country and the company’s office there. Once on site, training takes the shape of training at any other branch of the company. When the employee abroad returns, a repatriation program designed to reduce culture shock and to integrate the experience abroad is useful. Motivating and Compensating Salespeople Employees are best motivated through effective job design, equitable compensation, and treatment as stakeholders in the company. Employees as Stakeholders The concept of employees as stakeholders refers to the interest employees have in the success of the company and the fact that actions taken by the organization directly affect the employees. Employees’ stakes in the company are economic in the fact that their livelihood comes from the firm, psychological in that they derive pride from their work, and political in terms of their rights as employees and citizens. To motivate employees and improve firm performance, companies should strive for employee participation and influence. Voice and influence mechanisms allow employees to give input and to contribute their expertise to the success of the business. These mechanisms allow firms to get the most benefit from the skills of their human capital. Thus, firms with employee influence mechanisms get higher financial return from their employee assets. Effective Job Design Job design, defined as the allocation of specific work tasks to individuals and groups, is critical for any organization. Allocating jobs and tasks means specifying the contents, methods, and relationships of jobs to satisfy technological and organizational requirements as well as the personal needs of jobholders. If successful job design is not implemented, then the company’s general strategy and direction will be strongly diverted. Employees, in turn, will be demotivated. Meaningful jobs must exemplify the company’s goals and culture. Individuals, including salespeople, need to be compelled and excited to do their work. It is thus essential to design their jobs with the goal of motivating them. Motivation describes the forces within the individual that account for the level, direction, and persistence of effort expended at work. Appropriate resource allocation allows large organizations to foster and develop innovation in their workforce. Reward systems include compensation, bonuses, raises, job security, and benefits. Job design is the base element for producing effective work organizations, so without meaningful job design, an organization will never operate to its potential. Compensation: Internal Equity The first consideration for designing a compensation system is that the base pay system needs to be internally equitable. In other words, the pay differentials between jobs need to be appropriate. The amount of base pay assigned to jobs needs to reflect the relative contribution of each job to the company’s business objectives. Compensation: External Equity The second consideration in creating a base pay system is external equity. This refers to the relationship between one company’s pay levels and the pay levels of competitors. Setting pay levels higher than the competition, in the hope of attracting the best applicants, is called “leading the market.” The risk is that a company’s costs will generally be higher than the costs of its competitors. Other employers can set their pay levels lower than their competition, hoping to save labor costs. This is called “lagging the market. ” The risk is that the company will be unable to attract the best applicants. Most employers set their pay levels the same as their competition. This strategy is called “matching the market” and maximizes the quality of talent while minimizing labor costs. Types Of Compensation Cash is one way to compensate employees, but cash alone is rarely enough payment. Benefits and other forms of non-monetary compensation are becoming more appropriate forms of compensation for employees in today’s workplace. In order to attract, retain, and motivate the best employees, benefits and other sources of non-monetary compensation should be considered. If the company has an understanding of what they can offer to employees, benefits can increase a company’s workforce quality and the general morale of employees. Companies can offer different types of benefits in order to create a positive culture for their employees. These benefits have the ability to promote social interaction among employees, make life easier for working parents, or improve their quality of life. Depending on the industry and job type, benefits may be more attractive than salary figures. This fact could allow companies to pay lower wages, thus reducing the total amount spent on payroll. Pay for Performance It is important to design reward systems carefully, taking into consideration base salary and other incentives. This notion applies especially to salespeople. Most compensation systems include “variable pay.” Depending on work performance, many companies reward their employees without affecting the base salary. To reward employees for achieving a set goal, many companies use bonuses. To this point, companies such as GE, HP, and Sun Microsystems use software that directly evaluates the behavior of employees with respect to customer service. Long-term incentives are also a part of reward systems. Stock options and profit-sharing plans are representative of long-term reward systems. Measuring Sales Force Performance Appraisals are the common form of measuring how well an employee performed compared to a set of stated objectives; feedback communicates these evaluations. Measuring the performance of the sales force within a company is vital to ensuring its success. This can be done through conducting performance appraisals and offering feedback. (1) Performance Appraisals Historically, performance appraisals have been used by companies for a variety of different purposes, including salary recommendations, promotion and layoff decisions, and training recommendations. In general, “performance elements tell employees what they have to do and standards tell them how well they have to do it” (United States Department of the Interior, 2004). One key item that is often forgotten during the appraisal process (by managers and employees alike) is that the appraisal is for improvement, not blame. Numerous methods exist for gauging an employee’s performance, and each provides strengths and weaknesses for given environments. Appraisal methodologies depend greatly on the type of work being done; an assembly worker will require a considerably different appraisal system than a business consultant. Similarly, a salesperson will be appraised very differently than a researcher. Performing an appraisal can be nerve racking for both parties if the situation is not handled correctly. There are many acts a manager can perform to make the process easier on both parties, and hopefully, mutually beneficial. Many assume that performance appraisals are meant to identify weaknesses to be worked on, and exposing these weaknesses can be painful for employees. Studies show that organizations should be leveraging the strengths of each employee rather than focusing on their weaknesses. Yearly performance reviews are becoming increasingly rare as companies begin to see the benefits of frequent appraisal. Constant fine tuning of performance can be much more effective than annual overhauls. Appraisal Methods • Graphic rating scales: This method involves assigning some form of rating system to pertinent traits. Ratings can be numerical ranges (1-5), descriptive categories (below average, average, above average), or scales between desirable and undesirable traits (poor ↔ excellent). This method can be simple to setup and easy to follow, but is often criticized for being too subjective, leaving the evaluator to define broad traits such “leadership ability” or “conformance with standards.” • 2+2: This method demonstrates how appraisals can be used primarily for improvement purposes. By offering employees two compliments and two suggestions for improvement focused around high-priority areas, organizations can become more productive. If the goal of the performance appraisal is employee improvement, this system can provide significant benefits; however, if the goals are more akin to compensation changes and rankings, the system provides little benefit. (2) Feedback In the broadest sense, feedback is simply verbal or nonverbal communication between two or more parties. Feedback should be given in all work situations, good and bad. However, people sometimes think of feedback as being synonymous with criticism when it is given in situations where expectations have not been met. Regardless, we are constantly surrounded by feedback as we see the consequences of our actions and how our actions affect the impressions of those around us, as shown in this feedback diagram. Feedback: Feedback is an essential part of our personal life and our work environment, making, giving, and receiving feedback successfully is critical. One common problem that managers overlook when reviewing performance is remembering that feedback is not all about forms. Traditional performance reviews have checklists, ratings, or reports that are used as tools to analyze feedback in the organization. While these forms are useful in documenting and appraising a person’s performance, feedback should not be dictated by the type of form an organization uses. Instead, it should be well thought out and measured according to the individual employee in question, considering their unique circumstances and abilities.
- UNIT 2:10
- 3.1LESSON 1: What is Market Segmentation? Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, tastes, and preferences. The purpose is to design a marketing mix strategy that more precisely matches the needs of individuals in a selected market segment(s). Market segmentation is the technique used to enable a business to better target its products at the right customers. It is about identifying the specific needs and wants of customer groups and then using those insights into providing products and services which meet customer needs. Market Segmentation Definition Market Segmentation is the sub-dividing of a market into homogeneous subsets of customers, where any subset may conceivably be selected on a market target to be reached with a distinct marketing mix Philip Kotle Market Segmentation consists of taking the total heterogeneous market for a product and dividing into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects. William J. Stanton 1. Designing Products that are More Responsive to Market Needs: The company puts the customer in the first place, and adjusts products to satisfy them and achieve customer satisfaction at a profit. 2. Analyze Market: Segmentation market is helping executives to detect anyone who attacked its product market. 3. Assess Opportunities: After analyzing the market, companies that master the concept of segmentation will be on the lookout for the idea to find opportunities. This opportunity is not always something that big, but in its time would be great. 4. Mastering the Position of Superior and Competitive: A company that controls segments well is generally well aware of their customers. Companies understand the shifts that occurred in the segment. 5. Determining Effective Communication Strategies: After learning about the targeted segment, the company will determine how to communicate effectively with the targeted segments. ________________________________________ Types of Market Segmentation There are 4 different types of market segmentation and those are discussed below: 1. Geographic Segmentation 2. Demographic Segmentation 3. Psychographic Segmentation 4. Behavioural Segmentation Types of Market Segmentation 1. Geographic Segmentation Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities.Theorganisation can choose to operate in one or more area and pay special attention to local variation. In that way, it can tailor marketing programs to the needs and wants of the local customer. The geographic segmentation is furthermore useful when there are differences in a location where a product is marketed. The differences can be caused by cultural factors, traditions, politics etc. 2.Demographic Segmentation In demographic segmentation, the market is divided on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class. One reason demographic variables are so popular with marketers is that they’re often associated with consumer needs and wants. Variables are easy to identify and measure. 3.Psychographic Segmentation In psychographic segmentation, buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles. Psychological profiles are often used as a supplement to geographic and demographics when these do not provide a sufficient view of customer behaviour. 4.Behavioural Segmentation In behavioural segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. It considers variables like brand loyalty and the usage rate of the consumer.What is an EntrepreneurshipBases of Market Segmentation Bases of market segmentation are the factors that are used to divide the market into a small homogeneous market. 1. Geographic Segmentation: It includes the following variables: A. Region: Continent, Country, State B. Size of metropolitan area: Segmented according to population size C. Population Density D. Climate 2. Demographic Segmentation: It includes the following variables: A. Age B. Gender C. Family Size D. Family Life Cycle E. Income F. Occupation G. Education H. Generation I. Ethnicity J. Nationality K. Religion L. Social Class 3. Psychographic Segmentation: It includes the following variables: A. Interests B. Activities C. Opinions D. Values E. Attitudes 4. Behavioural Segmentation: Behavioural Segmentation is based on actual customer behaviour towards products. Some behavioural variables include: A. Benefits Sought B. Usage Rate C. Brand Loyalty D. User Status E. Readiness to buy F. Occasions ________________________________________ Market Segmentation Process Market segmentation itself is a process of grouping and sub-grouping a large heterogeneous market of the audience into similar qualities and attributes. This helps the companies concentrate on a specified group of customers they want to target which will help them gain a competitive advantage over their competitors in the market and ultimately help them gain profit. Using market segmentation the marketers can easily customize their marketing strategies. It narrows the risk of ineffective marketing strategies and chooses the right type of market segment that would suit their marketing strategies. Importance of Market Segmentation One of the most importance of market segmentation is that it allows an organization to precisely reach a consumer with specific needs and wants. Other importance of market segmentation is discussed below: 1. Adjustment of product and marketing appeals Market segmentation presents an opportunity to understand the nature of the market. The seller can adjust his thrust to attract the maximum number of customers by various publicity media and appeals. 2. Better position to spot marketing opportunities The producer can make a fair estimate of the volume of his sale and the possibilities of furthering his sales. In the regions where response of the customers is poor, the strategy of approach can be readjusted accordingly to push the sale. 3. Allocation of marketing budget It is based on market segmentation that marketing budget is adjusted for a particular region or locality. In the place where the sales are limited, it is no use allocating a huge budget. 4. Effective competition with rivals It helps the producer compete with his rivals effectively. The producer can adopt different strategies for different markets taking into account the rivals strategies. 5.Effective marketing programme It also helps the producer to adopt an effective marketing programme and serve the consumer better at comparatively low cost. Different marketing programmes can be used for different segments. 6.Evaluation of marketing activities Market segmentation helps the manufacturer to find out and compare the marketing potentialities of the products. It helps to adjust production and using resources in the most profitable manner. As soon as the product becomes obsolete, the product line could be diversified or discontinued. ________________________________________ Examples of market segmentation Example of geographic segmentation McDonald is an example of geographic segmentation. It customizes its menu that varies from country to country. McDonald’s has introduced burgers with no beef or no pork in it for India. And likewise in Mexico, more chilli sauce is used. KFC in India concentrates on veg products in south India and on chicken products in North India. Example of demographic segmentation Ferrero SpA an Italian manufacturer of branded chocolate is an example of demographic segmentation. Its sub-brand kinder manufacture chocolate specially for children and has also separate colours and toys for girls and boys. Example of psychographic segmentation Rolls Royce is an example of psychographic segmentation, it targets the consumer having the potential of buying luxury cars and having a rich lifestyle. It concentrates on the variable of the lifestyle of the consumer. Example of behavioural segmentation Airlines, hotel and such industry are the example of behavioural segmentation. Emirates airlines are the best example for it, it offers excellent services to the passengers which helps them retain the customer. It creates brand loyalty and make the customer loyal to their airlines and fly with them frequently.4Ps of Marketing Mix ________________________________________ What is the Target Market? Target market is a group of audience within which the company is planning to sell its products. It is a process after market segmentation is done, a marketer has to select one or more segments in which a marketer has to implement his marketing strategies. The target market consists of consumers who have similar characteristics who are more likely to buy the products which will be more profitable for the company. After the selection of one or more market segments, the marketer has to implement its marketing strategies. It has to modify the marketing mix (4Ps) as per the needs to reach to the customer. After a target market is selected marketer needs to position its product to the selected segment of the customers. ________________________________________ ________________________________________ •
- 3.2LESSON 2:TOPIC: Competitor Analysis Unless you’re selling Jupiter sand, chances are that you’re going to face some competition in the market. But contrary to what many people think, competition is actually good for business. Having business competition usually means there’s demand in the market, and the offering is worth selling. Moreover, it motivates you to innovate, differentiate and develop your best offering to stand out in the market and increase your market share. So, no matter if you’re new to the market or an existing player, competitive analysis is something that should be in your to-do list as your competitors are out there practising it finding opportunities to take the lead. What Exactly Is A Startup? What Is Competitor Analysis? Competitor analysis is a process of identifying the competitors and analysing their business strategies to determine their strengths and weaknesses relative to your business or offering. In simple words, competitor analysis (also called competitive analysis) is a process to – Identify who the competitors are: These include both current and potential competitors. Analyse their business strategies: Business strategies include both long term and short term corporate and competitive strategies. Identify opportunities and threats: The motive of competitor analysis is to analyse the competitors’ strength and weaknesses, compare it with your own strategies, and identify the opportunities and threats. Importance Of Competitive Analysis Besides the rationale that the competitive analysis process helps you determine the strengths and weaknesses of the competitors to discover short term and long-term opportunities and threats, conducting a competitive analysis is essential because it helps you: Build an understanding of how the existing market operates and how potential customers rate the competition. Get a good idea of what exactly does the customers require and how you can sell it to them. Develop strategies for how to grow in the current market and expand into new markets. Develop differentiated offerings which stand out of the crowd with their competitive advantages. Purpose Of Competitive Analysis Usually, there isn’t just one reason to conduct a competitive analysis. Competitive analysis in marketing is done to – Understand Market Conditions Better It’s rare when a company competes against just one competitor. Competitor analysis helps you identify all the current and potential direct and indirect competitors, which could hinder your entry or growth within the market. Find Untapped Opportunities And Upcoming Threats Competitive analysis is the analysis and evaluation of the strengths and weaknesses of the market players. This analysis often results in finding untapped opportunities that can be capitalized on for a short term or long term gain. These opportunities could be the weakness within the – Product development cycle of the competitor(s) Marketing and sales process of the competitor(s) This analysis also results in identifying an upcoming threat in the form of a new competitor or changing market trends. Come Up With Better Strategies When you know how the market currently works and what’s in the box, it’s easier to think out of the box and come up with more effective and efficient (corporate and competitive) strategies that will provide the business with a distinct advantage. Help Develop Competitive Barriers A careful analysis of competitors is instrumental in developing barriers which are hard to break. Timely competitor analysis also helps in developing barriers to prevent the entry of new competitors in the market. How To Do A Competitive Analysis? Although conducting a competitive analysis is no rocket science, it requires a lot of efforts and can often be tedious. But fret not. Here’s a simple, easy-to-use competitive analysis process that you can use to identify the competitors and perform a competitor analysis to help you keep a check on other players in your market space. Determine Your Goal Competitive analysis is an exercise backed by a goal in mind. You need a reason to analyse your competitors and evaluate their efforts. The reasons include but are not limited to – Identifying and analysing the current market players (and their marketing efforts) to develop better new product development and marketing strategies. Keeping a check on existing competitors’ marketing efforts to develop better strategies to attract more customers. Analysing competitors before entering into new markets. Finding indirect competitors which can become direct competitors in future. Identifying the strengths and weaknesses of the competitors in relation to your business. This reason forms the spine of the competitive analysis process on which the next steps depend. Identify The Competitors Once the ‘Why’ of the competitor analysis is answered, the process moves on to determining ‘who’ your competitors are. It is critical to figure out the right competitors and segregate them to compare the data correctly. Otherwise, a lot of time will be wasted with no proper insight. Remember, almost every category niche includes over a dozen players. You can easily find them by tracking your buyer’s journey or by doing some research online. But, competitor analysis isn’t about analysing them all. It’s about finding the ideal competitors which represent the biggest threat to your business. The best way to identify this is by following the WWH approach. Who is the customer? What is the problem? How is the problem solved? All you need to do is to answer these questions for all the players you think and categorize them into three types according to the answers. Direct Competitors: Competitors which cater to the same customers, address the same problem, and provide the same solution as you. For example, Uber and Lyft are complementary when we talk about on-demand cab aggregators. Secondary Competitors: Competitors which cater to different customer segments but address the same problem and provide the same solution as you. For example, Gucci and Gap, even though address the same problem of clothing, cater to different customer segments. Indirect Competitors: Competitors which cater to the same customer segment and address the same problem but provide a different solution. For example, Domino’s and McDonald’s, even though address to the same problem of the same target audience, offer different solutions. Once done, select the competitor type to be analysed according to the set goals. Identify The Parameters & Develop A Competitive Analysis Framework The next step involves you to decide the ‘What’ and ‘How’ of the competitive analysis – what needs to be analyzed, and what framework would you use to analyze it? Based on your goal, you can either use an existing competitive analysis framework or develop your own framework based on certain parameters. Some of the existing competitive analysis frameworks are – SWOT analysis: To help identify potential competitive advantage by analyzing strengths, weaknesses, opportunities, and threats of the competitors. Porter’s five forces: To help analyze the competitive structure of the industry by analyzing five factors – new entrants, buyers, suppliers, substitutes, and competitive rivalry. Strategic Group Analysis: To assess players’ positions in the competitive environment based on two variables. Growth-Share Matrix: To classify products in your company’s portfolio against the competitive landscape of the industry to determine the products worthy of investment and the ones not worthy. Perceptual Mapping: To visually represent the perception of your products relative to competitive alternatives. There are way more than just these five frameworks. Most of such frameworks use predefined parameters and many let you choose your parameters. These parameters can be both qualitative or quantitative that stems from the actual goal of the competitor analysis. Qualitative parameters include but are not limited to – Advertisement and marketing strategies used, Sales Strategies, USP, Value proposition, Store design, Website design, Customer reviews, Product quality, Customer location, Social media presence Type of ads on social media, Customer response on social media posts, etc. Quantitative parameters include but are not limited to – Pricing, Cost structure, Number of reviews, Funding received, Profit margin, Store distance from a specific place, Company size, Discount offered on products, Channels of distribution used, Keywords targeted on search engines, The number of ads running on social media, Customer income, etc. In general, when an apt competitive analysis framework isn’t found, these data parameters are grouped together and a standard competitive analysis framework is developed to collect, sort, present, and analyse data. Collect Data And Analyze Once the framework is decided, the next step involves collecting data. If you happen to conduct research online, you can make use of some of these competitor analysis tools – Ahrefs: To get their search engine related data. Sprout Social: To analyze competitors’ performance on social media. SimilarWeb: To get an overview of the website traffic, referrals, search traffic and keywords, social media, display advertising, audience, and similar sites and apps. Prisync: To track competitor prices and available stock in its ecommerce store. Crunch base: To get company insights like the number of employees, funding, etc. Here’s a list of survey tools if your research happens to involve surveys. Once the data is collected, it is then sorted and entered into the competitive analysis framework to be analyzed. Competitor Analysis Example To make the competitive analysis process even more clear, take this hypothetical example – Mr Adam owns a specialized toy shop (selling wooden puzzle) in a famous market. He notices that while his customers are reducing, his competitors aren’t making losses because they also have an online presence and sell their products online. Now, before making any spontaneous decision, Mr Adam decides to conduct a competitive analysis to strategise the best plan to come at par with his competitors. Goal To find the companies selling wooden puzzles online and analysing what all channels do they use. Identifying Competitors Even though Mr. Adam already has an idea of his competitors, he conducts more research online to find other competitors over the web. He makes use of Google queries like “Wooden Puzzle Buy Online” to find the sellers selling the same and similar products to him. Once identified, he categorizes them under direct, secondary, and indirect competitors. Now, since he has to only find out the channels they use, he chooses both direct and secondary competitors to be a part of his research. Developing A Competitor Analysis Framework He develops a simple excel sheet mentioning the competitors’ name and the channels they use. Data Collection & Analysis He individually checks every competitor’s presence online and fills his competitor analysis template. Once done, he determines the most sought after channels and develops new strategies for the same. Bottom-Line? Competitor analysis is an essential practice for new and existing players alike. A periodic competitor analysis helps the company keep a tab on its competitors, identify opportunities, and become ready for upcoming threats.
- 3.3LESSON 3: DIFFERENTIATION AND POSITIONING Differentiation vs positioning The previous article (i.e., market segmentation vs. target marketing), explains how companies segment market and how they target one or more segments to sell their output. After segmentation and targeting, the next step that comes in place is the differentiation and positioning through which companies decide how they would be serving their customers falling in their selected or targeted segment(s). Companies first go for differentiating their products from other available products and then strive to achieve a distinct position in the minds of consumers as well as in the market through positioning. The article differentiation vs positioning elucidates the meanings of and the differences between the two terms – differentiation and positioning. Definitions and meanings Differentiation Differentiation refers to the marketing strategy that a company adopts to make its product or service distinct from all other products or services available in the market. Through differentiation, the products stand out from all other competing products, such that they offer unique value and become attractive to the customers. When perceived and valued by customers, product differentiation can bring brand loyalty and competitive advantage for companies by making their product or service superior to others in the eyes of customers. The objective of differentiation is not just to make the product stand out of competitors’ products but to stand above them. Differentiation can be achieved through adding or modifying one or more of numerous attributes like price, quality, performance, design, features, order processing, availability, timing, location, distribution and after sale services and support. Differentiation does not require companies to start a product from scratch. A company can ad some important or appealing feature to its one or more of its existing products or services at any stage. For example, customer support is extremely important for a webhosting business. A web hosting company like Bluehost may focus on providing supports to its customers better than ever. A cosmetic company may add to its website a tool for finding the most appropriate foundation shades. A food restaurant may launch an android/iOS app and a website to receive online orders and start a home delivery service in particular area. Differentiation must be thought and carried out from buyers’ perspective and not from company’s own perspective, which means the buyer must be able to realize and understand the value added to the product through differentiation. Merely a change made to a product or service that don’t create a sense of value among consumers can’t be regarded as differentiation. For successful and result oriented differentiating, companies must consider the following important points: The differentiation should result in added value. It requires a detailed market research and outlining the existing market gaps in terms of unfulfilled needs, issues and challenges faced by the customers in targeted market and comprehending how the effective solutions can be offered. The customer should be able to perceive the value added through differentiation. If the customers are unable to understand the value, it means either the differentiation actually has not added any value to the product or the company has failed to communicate the same to customer. The differentiation should be such that the competitors are not able to easily copy it, i.e., the added value should be exclusive to the organization for a long time. The value introduced through differentiation should be affordable which means the customers are agree and are financially able to pay for the additional features or attributes added to the products. Positioning Product positioning is the outcome of many previous marketing efforts and activities like market segmentation, target marketing and product differentiation. If a company has successfully performed in these steps, it would certainly position itself successfully. Product positioning (or just positioning, for short) refers to the place occupied by a product in the minds of the customers in relation to other competing products in the targeted market or segment. It basically signifies how the company would like the product to be considered by its customers. It includes feelings, perceptions and impressions that actual as well as potential customers should have about the products being offered by the company. Positioning should make the customers think that the product or service is capable of providing greater value than any other. To achieve this, companies or marketers need to determine why customers should buy their products rather than an alternative or another similar product offered by someone else. To develop a distinct identity of the product in the minds of the customers targeted segment, the marketers highlight relevant and appealing aspects while striving for product promotion. These include product category, product attributes, pricing strategies, unique selling propositions, brand image, quality of both product and after sale service etc. A company’s overall marketing efforts need to be consistent with its positioning strategy. The marketers should be capable of communicating and delivering product value that is unique from that offered by their competitors. Difference between differentiation and positioning The four points of difference between differentiation and positioning are given below: 1. Meaning Differentiation is the strategy by which one or more important, unique and appealing differences, in terms of design or actual usage, are added to the product to make it stand out of same like products. Positioning is the strategy that companies use to create a specific position for the product in the minds of consumers, both actual an potential 2. Objective The objective of differentiation is to attract customers and compel them to choose your product over another in the market on the basis of additional or unique features that it offers. Positioning, on the other hand, has the objective of obtaining a specific place in the minds of consumers. It aims to define the way people think about your products and is achieved through making the people realize that the offered product has some rich and unique capabilities in terms of design, look or actual usage. 3. Specific to Differentiation is more product-specific in that it pertains to the product or service being sold. Positioning is specific to the audience in that it seeks to influence the perception of customers regarding a given product or service. It is more pertinent to the customers that are being targeted by the marketers. 4. Based on Differentiation can be based on product features, performance, attributes, quality, benefits offered or uniqueness. Positioning is based on promotional aspects of the product and is carried out by advertising products as being better than other similar products available in the market. Differentiation vs positioning – tabular comparison A comparison of differentiation and positioning in tabular form is presented below: DIFFERENTIATION VS POSITIONING Meanings Strategy used to identify the features of the products that are distinct from other competing products in the market Strategy used to create a specific image of the product in the minds of the consumers Objective Attract customers to choose your products over other competing products Determine how people think about your products and engage with it Specific to Specific to the product or service Specific to the customers and to influence their perceptions Based on Features, quality, benefits or uniqueness of the product Promotional aspects of the product Conclusion – differentiation vs positioning Differentiation and positioning are two consecutive and highly related elements that occupy a prime importance in a company’s marketing strategy. Despite the differences between them, they both have the same objective and are closely related to each other because product or service is positioned on the basis of its distinct features or qualities. Differentiation is considered effective only when it creates enough position for the product offered for sale within the target market. The concept of differentiation and positioning is applicable to all industries but is of special importance in a market with heavy competition. The purpose is to make the customers aware and realize what we can deliver that others can’t and how and why the unique capability of our product has value for them. To know whether the product is differentiated and well positioned, keep an eye on sales numbers and customers’ engagement with your product. Finally, if the numbers are not satisfactory, doing a little bit more research and changing or adding one or more new features might work.10 Minutes0 Questions
- 3.4LESSON 4 :TOPIC:PACKING AND LABELING We know about the four very important P’s of a marketing mix, namely Product, price, Place and Promotion. But did you know that many consider another P that is equally important- Packaging. That’s right, packaging of a product is a very important factor in marketing .What is Packaging in Marketing – Meaning Once the decision is taken on the brand, we have to consider the design and the make-up of the package and the labeling of the package. Branding, packaging and labeling are distinctly specialized activities, demanding the services of advertising experts. In reality it is not the product which is displayed and sold but it is the brand together with the package and the label which is sold or which enables to sell the product. In a sense your brand, package and label represent your product. Modern methods of packaging are valuable to the manufac¬turer to establish his branded products as distinct from those of his rivals. The more effectively a product is packaged the more effective is its identity and individuality. Package is advertising on the shelf, a means of attractive display in the retailers’ shops. Packaging alone makes possible branding and advertising of products e.g., tea, soap, cosmetics etc. Packaging may be defined as the general group of activities in the planning of a product. These activities concentrate on formulat¬ing a design of the package and producing an appropriate and attractive container or wrapper for a product. The container itself can act as a forceful though silent and colorful salesman at the point of purchase or an effective medium of advertisement encou¬raging impulse buying. Many a time, package design itself can act as a registered brand. Almost every article has to be packed to make a trip to the ultimate consumer. But packing is merely a physical action and provides a handling convenience, e.g., wheat, cotton, etc. Packing is necessary to prevent flowing out of such liquids as milk, drinks, etc. It is essential to maintain freshness and quality, e.g., ghee, sauce, etc. It can prevent the danger of adulteration, e.g., butter, cheese, spices, edible oil, etc. However, packaging is much more than mere packing. Packag¬ing is a marketing necessity. The public does not want just the product. It wants explanation, assurance, encouragement, confidence and praise, i.e., pat-on-the-back, all integrated or combined with a pleasant and eye-catching get-up or appearance on the top to gain action, i.e., close the sale- Thus, a good package ensures ultimate success of the product as a commercial venture. Package is an invaluable aid to decision-making by the customers. Under keen competition the consumer needs an effective means to recognize a difference and establish preference that will ensure repeated re¬purchases. Packaging does this job in a competitive market. That is why millions of rupees are spent on packaging and branding. Such huge expenditure is made for the simple reason that packaging and branding alone can sell your products. In fact, the amount spent on packaging is more than that poured into advertising. Packaging completes the sales cycle triggered by advertising. In the present age of consumer-oriented marketing approach (i.e. Buyers’ Market), packaging has gained unique importance. The utility reasons for packaging, viz., protection, identification and convenience are themselves exploited in selling and some features of the package may serve as a sales appeal, e.g., a reusable jar. Message on the label is a constant reminder to the user of the product. Packaging decorates and beautifies the product so as to lead the consumer to impulsive buying. Thus, the package serves in most cases as a vehicle by which the brand of the product is carried through to the consumers. In modern self-service stores, with mass display, well-designed packages attract attention, and through silent sales talk increase the sales volume. Packaging itself is a device of sales promotion. A customer will pay more just to get the special package—even though the increase in price exceeds the additional cost of the package, e.g., Supreme Lux Soap sold in an attractive re-usable box for lunch or tiffin. In short, packaging is an advance stage of packing and it demands the services of experts. It has assumed a specialised status in the process of marketing. ________________________________________ Classification of Packaging Kinds or methods of packaging will depend largely upon the nature of the contents in terms of their value, physical composition, and durability. The length of the distribution channel, the amount of handling which the container will receive, and variations in climatic conditions which may be encountered between the point of manufacture and sales are also to be taken into account. For example, liquid products require containers made of glass or plastics. Generally, electrical appliances require tin sheet containers. Similarly, for fragile (i.e., easily breakable or damageable) articles, wooden containers may be used. Packaging may be classified into three categories as follows: 1. Family Packaging: When the product of a particular manufacturer is packaged in an identical manner, it is known as family packaging. The size, shape, color, etc. of the packages will be similar for all his products. “Family brands” are made meaningful by using family packaging also. In such cases, packaging methods, materials used for packaging, the appearance, etc. will be one and the same for all the products of a firm. 2. Re-Use Packaging: Packages that could be used for some other purpose after the packed goods have been taken out or consumed, fall under the re-use packaging. Vegetable oils, and wellness drinks are being sold in re-usable plastic containers of different shapes. Re¬use packaging can increase the sales value of the product considerably. 3. Multiple Packaging: It is the practice of placing several units in one container. For example, liquor industry uses multiple packaging. ________________________________________ 8 Important Function Packaging is aimed at attaining two basic functions, the first to protect the product and the second to promote the product. According to Philip Kotler “protection, convenience and economy were the three traditional purposes attached to package.” But in this modern era, we need to add all the modern functions of packaging. Following are the functions of packaging: a. Containment: Packaging performs the basic functions of providing a container for a material. For example- consumer durables like televisions, refrigerators, washing machines, etc. are packed in cardboard cartons, vegetables, fruits and milk are packed in plastic cover. Beer and Milkmaid is packed in cans which are easy to open. Thus, the utilitarian function of packaging has the following advantages: 1. It protects the products from deterioration, spilling, spoilage and evaporation during its transit from manufacturer to consumer. 2. It enhances product use and convenience by keeping the contents clean and undisturbed. 3. It helps easy brand identification. 4. It makes product handling easier and safer to exhibit in super markets. b. Protection: Goods are to be transported from the place of manufacture to the ultimate consumer. This involves several types of risk. Packaging helps protect the goods from damage during transport and warehousing. It also removes the hindrance of risk by keeping goods safe and free from spoilage. Thus packaging helps make the transporting of goods easier and safer. c. Identification: Packaging helps to distinguish from one brand to another. It is mandatory that packages contain the name of the product, the maker, the ingredients, date of manufacture, expiry date, etc. This function of packaging has the following advantages: 1. Packaging makes product identification and differentiation both easy and effective. In a competitive market, unique presentation makes products look different from competing brands. 2. Package features communicate the product message and motivate consumers to buy the product. d. Convenience: Wholesalers, retailers, middlemen, warehouse keepers and consumers demand convenience in packaging i.e. they should be light-weight and conveniently packed so as to be carried by hand. For example- Amul Mithai Mate is packed in an aluminum container in an easy to open form. Similarly, ten tablets of Crocin are packed in a strip and soft drinks are packed in a glass bottle with lift off caps that required a bottle opener. These have also evolved to non – returnable, unbreakable aluminum cans. e. Attractiveness: Packaging enhances the appearance of the product. The design, colour, label, printed matter, picture etc. all add value to the packaging. For example- chocolates are always packed in attractive packets and displayed to attract the target group. f. Promotional Appeal: Products must sell themselves. This is possible, if they are placed in more attractive and eye – appealing packages. This has resulted in a number of innovations which appeal to the consumers. For example- Nescafe, Boost, Horlicks, etc. are now available in attractive glass jars. g. Re-Use: Nowadays several companies aim at providing “re – useable container”, once the product have been completely used. For example- health drinks like Boost, Horlicks, Nescafe, Pickles, Jams, etc. are sold in glass bottles that can be used for storing provisions in the kitchen. If not, they can be sold as scrap. h. Economy: Packaging should not create a financial burden for the company. Consumers prefer economical packaging options, because the packaging cost is included in the cost price. Hence, the packaging should be made attractive, appealing and economical. ________________________________________ Important Essentials From the seller’s point of view: 1. Packaging is a sales tool, 2. It identifies the maker as well as the product and carries the brand name, 3. The package label informs the buyer about inner contents and how to use them. 4. It is the biggest advertising medium. 5. It moves the product at the point of purchase. 6. It encourages impulse buying, 7. It establi¬shes a product image, and 8. It identifies the product with advertis¬ing. The following are the important essentials of packaging: 1. Protection: This is the fundamental function of packaging. The product demands protection until it is used or consumed. Package prevents damage or loss during transport and warehousing. Foreign trade without sound packaging is impossible. Air-tight package protects the quality of inner contents. Package can prevent the disappearance of volatile or gaseous articles, e.g, spirit, acid, gas, etc. 2. Dependable: Truthfulness and honest representation is the most important function and quality of packaging. Consumers rely on the package itself for the quality of the product inside the packing 3. Ease in Handling: Modern packaging facilitates easy handling and movement during the process of distribution. 4. Easy Identification: Identification is an important function of packaging, following closely protection and ease in handling. Your product can be identified by a consumer from the rival’s because packaging creates individuality and helps quick identification. Packaging enables branding and advertising. The product gains special and separate existence due to branding and packaging. 5. Convenience: Convenience in packaging is not simply a matter of customer service. Middlemen, wholesalers, retailers and warehouse-keepers, i.e., all agencies in the machinery of distribution, demand convenience. The size and shape of the package will deter¬mine the function of convenience, viz, adaptability. 6. Reasonable Cost: Costly package may be needed for fragile and very valuable products. It may be good for goods bought as gift. But in general cost of package must be reasonable. Lighter but sturdy packages can reduce cost of transport also. 7. Attractiveness (Selling Tool): Attractiveness is a major consideration in modern packaging. The design and the label on the package, printed matter, picture, layout or get-up of the package, color combination, all these are special aspects of the package and act as selling points of the package. Package must have an artistic appeal. Picture on the package adds to the attention value by drawing and holding the onlooker’s eyes on it. Prominent, clear and attractive advertising message given on the package label plays the role of a silent salesman—performing the functions of salesman— attracting attention, arousing interest, creating desire and gaining action (A.I.D.A. Formula). Promotional potency of packaging is tremendous. Packaging should be looked upon as a powerful tool of promotion just like other devices of promotion, e.g., salesman¬ship and advertising. Attractiveness, convenience of use and reusability are its significant demand creating factors. Reu¬sable packages or containers encourage repeat sales through -re¬fill packages. ________________________________________ Major Attributes of packing As a Product and As a Medium of Communication This can be divided into two heads, i.e. as a product and as a medium of communication. As a Product: 1. It should protect the content from spoilage or breakage. 2. It should be easy to open, close, and dispense from. 3. It should be safe to use. 4. It should keep the product from deteriorating. 5. It should be of proper size and shape. 6. It should be reusable or be sold as a scrap. 7. It should be economical cost wise. 8. It should be available in sizes, appropriate to the market segment reserved. As a Medium of Communication: 1. Packaging should be attractive. 2. It should project a favourable image of the product. 3. It should sell itself, i.e. it should play the role of a salesman. 4. It should be readily identifiable in a shopping situation. 5. It should act as a unique selling proposition. 6. It should have labels with the information, like date of manufacture, contents, net weight, expiry date, date of packaging, etc. 7. It should communicate on the usage of the product, precautions, benefits of the product, etc. 8. Lastly, it should not be deceptive or misleading in size, content, etc. ________________________________________ Types of Packaging Cost Various types of packaging cost are as follows: i. Material cost: It means the cost of the pack and quality control cost. ii. Storage and Handling Cost: This include the handling cost of bulky packages, heavy materials of construction, drums etc. iii. Packaging Operation Costs: This includes the cost involved in operations like, cleaning the package product filling – closing, labeling – unitizing, stenciling, handling cylindrical slums etc. iv. Storage of Filled Packages: This includes the cost incurred to shift the goods from one form of packaging to another. v. Transportation Cost of Filled Packages: This involves the transportation cost by sea, air etc. it depends on the size and volume of packages. vi. Loss and Damage Cost: It is related to the loss and damage during operation, transportation delivery etc. vii. Insurance Cost: It varies depending on the vulnerability of package, to cover the risk in transportation. viii. Obsolescence Cost: This cost involves when changes in the packaging materials, packages and labels happen. ix. Package Developmental Cost: This include the evaluation cost, pilot test cost, field testing cost, consumer research cost, feedback cost, final trial cost etc. ________________________________________ Packaging Strategies and Policies Every producer adopts a certain policy or strategy. There may be different types of packaging policies and strategies and a producer has to select any one of them. Use of a particular policy depends upon the needs, requirements and circumstances of the producer. Some of the important packaging policies and strategies 1. Transit Packaging: Every producer has to deliver the goods to its real consumers. Delivery of a product from producer to the consumer is the process involving many activities. One of these activities is the transportation of the product from the place of producer to the place of the consumers. Product must be packed in a manner that it may reach to the consumer in original conditions. Such packaging of the product is called transit packaging. Thus, transit packaging is that form of packaging which is meant to keep a product safe in the process of physical distribution. It is thus also known as “distribution packaging”. The materials generally used for transit packaging are the drums, wooden containers, tins, jute sacks, hardboard, etc. Main stress in this type of packaging is upon the safety of the product during transit. 2. Consumer Packaging: The packaging in which the product is finally delivered to the consumers is known as consumer packaging. Material used for consumer packaging may be a bottle of glass or plastic, jar, tin, plastic box, hardboard box, polythene bags, etc. Main stress in this type of packaging is upon the attraction of packaging. Packaging must attract the attention of consumers and it must be convenient for consumer to handle. 3. Product Line Packaging or Family Packaging: When a producer uses identical packaging for all the product items of a product line, it is called product line packaging or family packaging. This type of packaging is widely used by the producer of consumer goods and generally by the producers producing a large number of product items in particular product line. The best example of family packaging is packaging of shoes, slippers, etc. mainly by the producer of repute such as Bata, Liberty, Khadims, etc. 4. Protection Packaging: The basic function of packaging is to protect the product form breakage, pilferage, theft, evaporation etc. Packing of the food items, medicines are done in such a way so as to protect it from moisture, sunlight and high temperature. 5. Multiple Packaging: In this packaging strategy closely related products used by a single consumer are packed together. This strategy is economical and it also saves consumer’s time in buying different products. By packing different products in a single package, manufacturer saves packing material of different items and thus it is economical. Also consumer saves much time as he gets all the required items in one package. For example, pencil box contains pencil, pen, rubber, eraser, ruler etc. 6. Re-Use Packaging: Here the goods are packed in such a package which can be used again after consuming the product. This strategy promotes economy in the use of the product and also promotes repeat purchase by consumer. It helps in reducing pollution caused due to used packages. Re-use packaging, thus preserves the physical environment by increasing the life of packages. 7. Kaleidoscopic Packaging: Kaleidoscopic packaging is concerned with printing suitable and attractive cut-out figures, toy and cartoons on the package in order to attract the consumer and stimulate the demand. Pictures of fresh and juicy vegetables, fruits on ready to eat items give an impression of a healthy product. A healthy smiling child picture shown on various baby products signifies that the products will keep our child healthy. ________________________________________ Requisites of a Good Package Packaging is an important device of sales promotion. It acts as a colourful and silent salesman. It gives full information about the uses and features of the product to the users. It helps in giving individuality to the product. It may be noted that branding is not possible without packaging. Both are interlinked. Brand name and mark are to be printed on the package to make the product easily identifiable by the customers. In other words, the package must tell the product story at a glance. The basic purpose of packaging is to provide protection to the goods and to facilitate their easy handling and storage. But in the modern age of competitive marketing, packaging has assumed certain other objectives also. Packaging is used as a medium of publicity and as a silent salesman. It helps in preventing adulteration of goods and ensures their safety. In order to achieve its objectives efficiently, a good package should possess the following features: 1. Suitability: A package should suit the requirements of the goods to be packed in. That means the package designed should consider the size and quality of the product and the quantity to be packed in the container. 2. Protective: The package must be so designed that it protects the contents contained in it. Articles subject to deterioration in quality such as medicines, powders, acids, and edible oils require a special type of packaging. Wherever required, the package must protect its contents from sun, moisture, germs, etc. 3. Requirements of Consumers: The same product might meet the requirements of different segments of consumers who have different levels of income. The package may be more attractive and costly for selling the product to affluent users. It should be quite economical for selling the product to the users of the lower income group. For instance, polythene bags have become quite popular with the manufacturers of Ghee for selling it in small quantities, say 1 Kilogram, to the customers from low and middle income groups. 4. Packaging Materials: This factor is very important as it influences the cost of packaging. Materials to be used in packaging depend partly on the nature of goods and partly on its appealing power to customers. For instance sugar, food grains, cement, etc. are traditionally packed in gunny or jute bags and now in HDPE bags. Biscuits are packed in air tight containers or packets; so that they remain fresh, crisp and original in taste and flavor. Oils, Ghee, Jams, Pickles, etc. are stored in glass jars, metallic jars or tins. Materials used in packaging industry include glass, aluminium paper, tin, paper and card boards, cellophane, plastic, polythene and gunny bags. Their relative merits and demerits in terms of cost, utility, customer appeal have to be analysed before choosing any of the above materials for packaging. 5. Cost: The cost of package is to be considered in the context of nature and value of article and the nature of buyers. As a general rule, articles of common use such as sugar, soap, tea leaves, cereals, etc. should be packed in low cost containers. Articles of high value and catering to the requirements of high income group such as cosmetics, jewellery, etc. should be packed in attractive and durable packages. 6. Attraction Value: As far as possible, the package must possess attraction value. Design and label of the package, and the colour combination of the package are all important. Attractive packages earn reputation and increase sales and profits of the manufacturer. The use of a picture on the package is made quite often to attract the attention of people. The picture and other information printed on the package should be suggestive of the contents and its characteristics inside. It should be ensured that there is maximum information in minimum words. Attractive packaging is not always costly. Even the low cost packages can be made very attractive. It depends upon the imagination of the designer. 7. Size and Shape: The size and shape of packaging depends upon the type and value of product to a large extent. Size and shape of the package do add to its attraction value. They also facilitate proper display of the product at retail stores. 8. Durability: Durability of packages is also an important consideration. If a package is durable, it will be reusable even after the product has been consumed. For example, plastic containers of ghee, coffee jars and pickle jars are reusable. From publicity point of view also, such packages are quite useful. ________________________________________ Factors Affecting Packaging Decisions The following factors are to be considered while making packaging decisions. a. Size – The size of the package should be convenient and handy for the customer. For example- soft drinks are available in 100ml, 200ml, half a litre, one litre, one and a half litre, etc. b. Shape – The nature of the content determines the shape of the package. Moreover, it should be convenient and attractive to display in retail stores. c. Colour – The colour of the package also plays a significant role in marketing decisions. The colour should be attractive, eye – catching and at the same time relevant to the contents of the package. d. Material – The packaging material also needs careful consideration. The most commonly used packaging materials are metal, cardboard, aluminum foils, sack cloth, etc. But now, due to the growing importance of environmental protection, plastics are being used less frequently for packaging. Instead, environment friendly packaging materials are being used. e. Text – Usually, some form information is communicated to the consumers through the package. Now, it is mandatory to give the statutory warning, date of manufacture, expiry date, contents, date of packing etc.; for example “This fairness cream is only for external use”, or “Alcohol consumption is injurious to health”. f. Brand Name – The brand name should be prominently displayed on the package. The brand name differentiates a product from its competitive products. Hence, the package should contain the distinguishing brand name or brand label. g. Cost – Packaging cost is added to the cost of production. Hence, the packaging cost should be economical and minimum, so that the consumers are not over charged. Moreover, the cost of packaging also affects the cost of transportation, handling, storage, etc. ________________________________________Packaging Significance : Societal View of Packaging The various types of plastics have not only helped conserve or utilize the depleted natural resources but also revolutionized the concept of packaging. Plastics have proved to be much better substitutes to wood, cotton, metal, card board, paper, glass and so on. The new rigid PVC now manufactured by modern, computerized and automatic process both in the normal and non-toxic grade with printability and metalizing property is going to revolutionize the packaging systems for medical and food sectors and for consumer and industrial usage by thermoforming and twist wrapping process. In the Food Processing Industry the new plastic package offers strength, protection, presentation and consumer appeal. The recycling process of plastics right from collection of the garbage to segregation and conversion in prime form for reprocess and reuse has solved the problem of pollution. In India rag pickers contribute enormously to the estimated 40 per cent of plastic which is recycled. The ‘re-use’ culture is more prevalent in India, where plastic containers are re¬used several times before they are discarded. If environmentalists believe that less plastics would mean less waste, a German study indicates that without plastics the weight of packing materials would be 300 per cent higher, the volume of waste 150 per cent higher and energy consumed by packaging at least 100 per cent higher. Plastic recycling has reduced substantially problem of waste disposal and environmental degradation due to packaging. Social View of Packaging: Significance of societal view of packaging is summarized below: 1. Pollution control is a burning issue in packaging particularly in Western countries. Broken bottles, crushed cartons, and bent cans litter the streets and choke municipal dumps. This has created the solid waste problem in those countries. All packaging programmers must weigh environmental and ecological issues. 2. Resource scarcity is another problem. The same precious natural resources that are being wasted on non-returnable (disposable) containers, e.g., soft drink bottles and beer bottles, later create litter and pollution problem. Such a consumption pattern cannot be tolerated now. 3. Among the resources which are being wasted, energy sources are the most critical at present. Throwaway bottles use three times the energy of returnable bottles. The efficient, energy-saving, returnable bottles must be introduced. 4. Nutrition labeling, open dating (how fresh is the product), unit pricing, and grade labeling are the latest demands of consumers on all food products. ________________________________________ Consumer Problems with Packaging 1. Unless the package is transparent, the buyer cannot judge the contents by appearance. If quality information on the package label is absent, the buyer has to purchase almost blindly. 2. If the consumer wants a specific quantity, he may not have that amount when goods are sold in packages. 3. There is no feasible way to check weight and volume of the contents unless a buyer opens the package to ascertain the weight. Prepackaged shortages amount to about 20 per cent. 4. Package sizes and designs inflate the contents. ‘One Rupee off’ labels proclaim price reduction which may not be real. 5. Deceptive packages have several room-mates in trade practices. They are hidden declaration of contents, fine print, glorified illustrations, unexplainable fractions (3-7/8 Kilograms) etc. Consumers think that they are getting more when in fact they may be getting less due to the cunning package design. 6. Packages are same, contents are reduced and apparently same prices are charged. This method is popular in a period of rising prices. 7. Packages may create health hazards for consumers. Certain plastic food packaging has been shown to cause cancer (vinyl chloride inhaled by humans). Packages stored in godowns are susceptible to infection (rodents and insects nesting in packages). The Total Product Image: Image means a mental picture drawn by a fancy. A product image is the sum total of- 1. Inner value of the product, 2. Its ability to perform and give service and safety to user, 3. Packaging, 4. Branding, 5. Labeling, 6. Product warranty, and 7. Product services. The product image also indicates the goodwill of the product and its producer. In the product planning and development, we have to consider branding, packaging, labeling, warranty and services as these constitute the vital parts of marketing programme and these are closely interconnected in building up a bright product image in the market. Pricing decisions have strategic importance in any enterprise. Pricing governs the very feasibility of any marketing programme. Because it is the only element in a marketing mix accounting for demand and sales revenue. Other elements are cost factors. Price is the only variable factor determining the revenues or income. A variety of economic and social objectives came into prominence in many pricing decisions. We now come to the most absorbing question of pricing. ________________________________________ Labelling Definition: Labelling is a part of branding and enables product identification. It is a printed information that is bonded to the product for recognition and provides detailed information about the product. Customers make the decision easily at the point of purchase seeing the labelling of the product. .Labels must comply with the legal obligations. A company’s label needs to adhere to the Competition and Consumer Act 2010. According to The Food and Drug Administration (FDA), packaged and processed food items must have nutritional labelling. The Federal Trade Commission Act (FTC) states that cheating of labels and graphics is an offence and comprise unjust competition. The Fair Packaging and Labeling Act establishes compulsory labelling conditions, boosts independent packaging standards and grants federal companies to establish packaging regulations in certain industries. Types of Labelling There are different types of labels: • Brand label: It plays an important role in labelling as it gives information about the brand. It can be removable or non-removable. • Descriptive label: It specifies product usage. • Grade label: It describes the aspect and features of the product. Functions of Labelling The different functions of labelling are as follows: 1. Defines the product and its contents: A label is informative about the product’s usage and caution to be taken while using the product. Example, Red Label Natural Care tea mentions five ingredients in its label that provide immunity. 2. Recognition of product: Labeling assists in the identification of the product. Example, the brand name of a chocolate will help one choose from the rest of the confectionery items available. 3. Assorting of products: It means classification or grading of products according to different categories in the market. Example, shampoos are categorized as dry hair, normal hair and oily hair types and cater to consumers in the market with the dry, normal and oily scalp, respectively. 4. Assists promotion of products: It gives the customer the reason to purchase the product. Example, it attracts the attention of the consumer by displaying messages such as ‘20% free’ or ‘save rupees 15’ message in potato chips packet. 5. In compliance with the law: Labels should strictly abide by the law. Example, for tobacco, the label should mention ‘Tobacco is injurious to health’. Cigarettes also should have ‘Smoking is injurious to health’ as the statutory warning on its package. Importance of labelling 1.Provides Identification Labelling plays an efficient role in providing uniqueness & identity to products. It helps the consumers in the identification of products among large number of products available in the market. It prevents confusion among the people that can be created by the substitute products of other competitors. Therefore, through customer easily recognises its brand. For example, the Label of Dettol helps people in easy identification of its products. 2.Provides Description Label is a medium that communicates the information regarding the product to customers. It is basically a slip that contains detail like nature, quality, price, quantity etc. Customers can easily get each & every required information by simply reading labels. It will help them in making their decision during the buying process fast & easily. 3.Makes Products Comparison Easy Comparison is something on which customers relies to make the best & right choice. It has an important part in the buying process of the customers. Labelling gives each & every detail regarding the product on a small printed slip. Customers just by reading the labels of different products can choose the best one as per their choice. It enables the customers in understanding & checking product even before using it. 4.Helps In Marketing Labelling is considered an efficient sales tool for marketing of the product. It helps in the promotion of products easily. It adds attraction to the products. Labelling helps in attracting more & more products for the products. Many times the people are encouraged to buy a product just by seeing the labels of the product. Businesses should try to design attractive & small labels for their products. It will create a long-lasting influence on your customers. 5.Makes Products Grading Easy Grading is important function of businesses for categorisation of its products. Through grading, business divides their large varieties of products as per quality for a different class of customers in the market. Labels on products provide full detail regarding the quality & standard of product to customers. Customers easily recognises the quality of different products through reading their labels. It will enable them to make the right choice as per their needs. For example, Mother Dairy supplies different quality of milk in the market like full cream, half cream & toned milk. It provides all details on labels of their product package. 6.Protects Customers From Getting Cheated Labelling helps customers in the right choice. It helps the people in choosing a product that can fulfil all their demands. Customers can easily recognise fake products by seeing their labels. They can get all the details regarding the manufacturing date & date of expiry from labels. It helps in assuring the customers whether the product is right or not. Making the wrong choice during the buying process will have ill effects on customers. Therefore, it avoids all chances of wrong decisions during the buying process. 7.Provides Information As Per Law Business are required to provide certain statutory information regarding their products. It is mandatory by law & they are strictly required to follow it. Labelling is a means through which all required information required by law is provided on the product package. There are certain poisonous & hazardous products, with which providing safety tips & certain warning is very important to be mentioned. Likewise in the case of different tobacco products giving health warning is important. All these requirements of the law are fulfilled by business by printing labels with all these details. There are certain poisonous & hazardous products, with which providing safety tips & certain warning is very important to be mentioned. Likewise in the case of different tobacco products giving health warning is important. All these requirements of the law are fulfilled by business by printing labels with all these details. Advantages and Disadvantages of Labelling in Marketing Disadvantages of Labelling 1.Raise The Cost Of Product The first and foremost limitation of labelling process for every organization is that it leads to increase the cost of product. Process of labelling requires heavy expenses in designing and printing of label slip to be attached to with every product. Company generally provides three type of labels with their items that are brand label, grade label and descriptive label. All of these eventually raises the manufacturing cost of product for business which increase its price. 2.Not Ideal For Illiterates Label is of no use for peoples that are not literates enough for understanding the written information. Under the labelling process, all details are communicated to customers in written form by printing it on product package. A person should know to read and write for benefiting form products labels otherwise all efforts of company would go in vain. 3.Require Standardized Products Process of labelling is effective only if company is manufacturing a standardized range of products. Labels are standard messages which are printed on every product package. It would be inconvenient for companies to design separate labels for every product in case if they are not standardized. 4. Leads To Pre-Purchase Discarding Of Product Another major disadvantage of labelling process is that it enables customers in doing a comparison of brand products with other products without even purchasing them. They are able to detect the advantages and disadvantages of products in light of other competitive products before purchasing them. It will eventually lead to discarding of one product in favor of other one.10 Minutes0 Questions
- 3.5LESSON 5 :TOPIC: NEW PRODUCT DEVELOPMENT Products are broadly classified into two categories – consumer products and industrial products. Consumer products are products that the ultimate consumer purchases himself for direct use. The consumer purchases these consumer products to satisfy his personal needs and desires. Definition: Product development refers to the creation of a new product which has some utility; or up-gradation of the existing product; or enhancement of the production process, method or system. In simple words, it is all about bringing a change in the present goods or services or the mode of production. • In simple terms product development comprises of the following Creation and Innovation pave the way for new inventions and generation of a new product which provides utility to the consumers. • Improvement of the existing products is essential to upgrade the old products and to attain perfection. • Enhancement of the existing production process, methods, techniques and system helps in the betterment of customer experience. It is more cost-efficient for the organization too. For Example; One of the most popular electronic brands Sony came up with the idea of coloured television in the year 1960. Sony, with its new product development, has given a modern edge to the technological advancement in the entertainment world. elements: • Creation and Innovation pave the way for new inventions and generation of a new product which provides utility to the consumers. • Improvement of the existing products is essential to upgrade the old products and to attain perfection. • Enhancement of the existing production process, methods, techniques and system helps in the betterment of customer experience. It is more cost-efficient for the organization too. For Example; One of the most popular electronic brands Sony came up with the idea of coloured television in the year 196o. Sony, with its new product development, has given a modern edge to the technological advancement in the entertainment world. Content: Product Development 1. Identifying the Need 2. Process 3. Conclusion Identifying the Need for Product Development Have you ever wondered; Why is the change needed in organizations? Why do the companies keep on modifying their ways? What makes companies invest a tremendous amount in research and development? Product Development November 30, 2018 by Prachi M Leave a Comment Definition: Product development refers to the creation of a new product which has some utility; or up-gradation of the existing product; or enhancement of the production process, method or system. In simple words, it is all about bringing a change in the present goods or services or the mode of production. In simple terms product development comprises of the following elements: • Creation and Innovation pave the way for new inventions and generation of a new product which provides utility to the consumers. • Improvement of the existing products is essential to upgrade the old products and to attain perfection. • Enhancement of the existing production process, methods, techniques and system helps in the betterment of customer experience. It is more cost-efficient for the organization too. For Example; One of the most popular electronic brands Sony came up with the idea of coloured television in the year 196o. Sony, with its new product development, has given a modern edge to the technological advancement in the entertainment world. Content: Product Development 1. Identifying the Need 2. Process 3. Conclusion Identifying the Need for Product Development Have you ever wondered; Why is the change needed in organizations? Why do the companies keep on modifying their ways? What makes companies invest a tremendous amount in research and development? To answer these questions, let us go through the following reasons for which companies plan for product development: Slow or Static Product Growth When the company notices a downfall in the product performance regularly, which is not due to change in the economy or other factors which are beyond control, it should inspect the product line to find out the reason. Pressure to Lower the Product Price A business which is controlled merely by the price factor may land nowhere. If a company encounters that the customers are shifting to the competitors’ product due to the price factor and land up cutting down the prices of its product, it must opt for product development. Diminishing Business from the Most Valuable Customers The company finds out that its high revenue-generating customers prefer the competitor’s product over its product. Then, it must analyze the change in the customer’s demand and the features offered by the competitor’s product to meet that requirement. Decrease in Inquiries by Prospective Customers A product itself has the capability of acquiring customers. If the product becomes obsolete or unworthy for its buyers and is unable to attract inquiries from the potential customers, the company must consider product development. Rise in Salesforce Turnover When it becomes difficult for the sales team to sell a particular product to the customers, they tend to grab better opportunities in other companies. This leads to salesforce turnover. It signifies that something is wrong with the product due to which it is being rejected in the market. Entry of New Competitor with Innovative Product A new competitor enters the market and successfully acquires the company’s prevailing market share. The company needs to analyze that the competitor’s innovative product is providing a higher level of satisfaction to the customers, which the company’s product failed to do. Change in Customer’s Demand When the company finds out that the customers are frequently demanding a particular change in the product or seeking for some additional feature which the competitor is offering at the similar price, it should look forward to product development. Competitors Exit the Market Sometimes, many competitors leave the market since they have sensed the downfall. At this point, the company must look up to product development to retain the customers through innovation. Product Development Process Product development is a strategic approach. It should be well planned and systematically executed to achieve desired results and avoid loss. Given below is the step by step process for introducing a new product in the market: Idea Generation: The first step is knowing customer’s requirement through market research by taking feedback, conducting surveys and going through the competitor’s product. From this research, a product idea is developed. Idea Screening: The product idea is to be well studied and investigated to find out the need for introducing the new product, the requirement of additional machinery, selection of marketing channel and its break-even point. Concept Testing: The next stage is enquiring about the product feasibility by conducting concept testing. The new product idea is revealed to a group of consumers, and they are asked to share their response over it. If the majority is in favour of the product, then further steps are to be taken. Business Analysis: In this step, the organization decides whether the product is financially viable for it or not. Product’s demand, cost, competitiveness, profitability, expected sales, overheads, etc. are analyzed. Product Development: At this stage, the manufacturing of a new product, it’s financing, marketing and distribution as well as advertisement and promotion takes place. However, initially, a small quantity is produced as a test batch. Test Marketing: The product is then launched in the market on a small scale. If it attains success and can generate customers, the large-scale production is planned. If the product is rejected in the market, the company finds out the shortcomings and rectifies it. If the product fails again in the market, the company tends to dump it. Commercialization: At this point, the company executes large-scale production and distribution of the successful new product. It advertises and markets the product on a massive scale to acquire a considerable customer base. Review Market Performance: Lastly, the company keeps track of the product’s performance in the market to know customer satisfaction level, demand, profitability, sales volume, competitor’s strategy, the satisfaction of the middlemen involved, etc. Conclusion Product development is essential for the growth of all; the business, the consumers and the economy. No business can survive the competition without adding the element of innovation to its product line. Developing a successful product for the consumers require a lot of brainstorming, planning, research, trials and rectification.10 Minutes0 Questions
- 3.6LESSON 6 :TOPIC: PRODUCT LIFE CYCLE A product life cycle is the length of time from a product first being introduced to consumers until it is removed from the market. A product’s life cycle is usually broken down into four stages; introduction, growth, maturity, and decline. Product life cycles are used by management and marketing professionals to help determine advertising schedules, price points, expansion to new product markets, packaging redesigns, and more. These strategic methods of supporting a product are known as product life cycle management. They can also help determine when newer products are ready to push older ones from the market Stages of the Product Life Cycle Generally, there are four stages to the product life cycle, from the product’s development to its decline in value and eventual retirement from the market. THERE ARE 4 STAGES OF A PRODUCT LIFE CYCLE. ———– 1,INTRODUCTION 2,GROWTH 3.MATURITY 4.DECLINE 1. Introduction Once a product has been developed, the first stage is its introduction stage. In this stage, the product is being released into the market. When a new product is released, it is often a high-stakes time in the product’s life cycle – although it does not necessarily make or break the product’s eventual success. During the introduction stage, marketing and promotion are at a high – and the company often invests the most in promoting the product and getting it into the hands of consumers. This is perhaps best showcased in Apple’s (AAPL) famous launch presentations, which highlight the new features of their newly (or soon to be released) products. It is in this stage that the company is first able to get a sense of how consumers respond to the product, if they like it and how successful it may be. However, it is also often a heavy-spending period for the company with no guarantee that the product will pay for itself through sales. Costs are generally very high and there is typically little competition. The principle goals of the introduction stage are to build demand for the product and get it into the hands of consumers, hoping to later cash in on its growing popularity. 2. Growth By the growth stage, consumers are already taking to the product and increasingly buying it. The product concept is proven and is becoming more popular – and sales are increasing. Other companies become aware of the product and its space in the market, which is beginning to draw attention and increasingly pull in revenue. If competition for the product is especially high, the company may still heavily invest in advertising and promotion of the product to beat out competitors. As a result of the product growing, the market itself tends to expand. The product in the growth stage is typically tweaked to improve functions and features. As the market expands, more competition often drives prices down to make the specific products competitive. However, sales are usually increasing in volume and generating revenue. Marketing in this stage is aimed at increasing the product’s market share. 3. Maturity When a product reaches maturity, its sales tend to slow or even stop – signaling a largely saturated market. At this point, sales can even start to drop. Pricing at this stage can tend to get competitive, signaling margin shrinking as prices begin falling due to the weight of outside pressures like competition or lower demand. Marketing at this point is targeted at fending off competition, and companies will often develop new or altered products to reach different market segments. Given the highly saturated market, it is typically in the maturity stage of a product that less successful competitors are pushed out of competition – often called the “shake-out point.” In this stage, saturation is reached and sales volume is maxed out. Companies often begin innovating to maintain or increase their market share, changing or developing their product to meet with new demographics or developing technologies. The maturity stage may last a long time or a short time depending on the product. For some brands, the maturity stage is very drawn out, like Coca-Cola ‘ 4. Decline Although companies will generally attempt to keep the product alive in the maturity stage as long as possible, decline for every product is inevitable. In the decline stage, product sales drop significantly and consumer behavior changes as there is less demand for the product. The company’s product loses more and more market share, and competition tends to cause sales to deteriorate. Marketing in the decline stage is often minimal or targeted at already loyal customers, and prices are reduced. Eventually, the product will be retired out of the market unless it is able to redesign itself to remain relevant or in-demand. For example, products like typewriters, telegrams and muskets are deep in their decline stages (and in fact are almost or completely retired from the market). EXAMPLES OF PRODUCT LIFE CYCLE Many products or brands have gone into decline as consumer needs change or new innovations are introduced. Some industries operate in several stages of the product life cycle simultaneously, such as with televisual entertainment, where flat screen TVs are at the mature phase, on-demand programming is in the growth stage, DVDs are in decline and video cassettes are now largely redundant. Many of the most successful products in the world stay at the mature stage for as long as possible, with small updates and redesigns along with renewed marketing to keep them in the thoughts of consumers, such as with the Apple iPhone. Here are a few well-known examples of products that have passed or are passingthrough the product life cycle: 1. Typewriters The typewriter was hugely popular following its introduction in the late 19th century due to the way it made writing easier and more efficient. Quickly moving through market growth to maturity, the typewriter began to go into decline with the advent of the electronic word processor and then computers, laptops and smartphones. While there are still typewriters available, the product is now at the end of its decline phase with few sales and little demand. Meanwhile, desktop computers, laptops, smartphones and tablets are all experiencing the growth or maturity phases of the product lifecycle. 2. Video Cassette Recorders (VCRs) Having first appeared as a relatively expensive product, VCRs experienced large-scale product growth as prices reduced leading to market maturation when they could be found in many homes. However, the creation of DVDs and then more recently streaming services, VCRs are now effectively obsolete. Once a ground-breaking product VCRs are now deep in a decline stage from which it seems unlikely they will ever recover. 3. Electric Vehicles Electric vehicles are experiencing a growth stage in their product life cycle as companies work to push them into the marketplace with continued design improvements. Although electric vehicles are not new, the consistent innovation in the market and the improving sales potential means that they are still growing and not yet into the mature phase. 4. AI Products Like electric vehicles, artificial intelligence (AI) has been in development and use for years, but due to the continued developments in AI, there are many products that are still in the market introduction stage of the product life cycle. These include innovations that are still being developed, such as autonomous vehicles, which are yet to be adopted by consumers10 Minutes0 Questions
- 3.7LESSON 7TOPIC : BRANDING :”, A brand is an intangible asset that helps people identify a specific company and its products. This is especially true when companies need to set themselves apart from others who provide similar products on the market, including generic brands. Advil is a common brand of ibuprofen, which the company uses to distinguish itself from generic forms of the drug available in drugstores. This is referred to as brand equity. People often confuse logos, slogans, or other recognizable marks owned by companies with their brands. While these terms are often used interchangeably, they are distinct. The former are marketing tools that companies often use to promote and market their products and services.2 When used together, these tools create a brand identity. Successful marketing can help keep a company’s brand front and center in people’s minds. This can spell the difference between someone choosing your brand over your competitor’s. A brand is considered to be one of the most valuable and important assets for a company. In fact, many companies are often referred to by their brand, which means they are often inseparable, becoming one and the same. Coca-Cola is a great example, where the popular soft drink became synonymous with the company itself. This means it carries a tremendous monetary value, affecting both the bottom line and, for public companies, shareholder value This is why it’s important for companies to protect their brands from a legal standpoint. Trademarks identify exclusive ownership over a brand and/or product, along with any associated marketing tools. Registering trademarks prevent others from using your products or services without obtaining your permission. Types of Brands The type of brand used depends on the particular entity using it. The following are some of the most common forms of brands: • Corporate Brands: Corporate branding is a way for companies to market themselves in order to give themselves an edge against their competition. They make a series of important decisions in order to accomplish this, such as pricing, mission, target market, and values. • Personal Brands: As mentioned above, branding isn’t just for companies anymore. People use tools like social media to build their own personas, thereby boosting their brands. This includes regular social media posts, sharing images and videos, and conducting meet-and-greets. • Product Brands: This type of branding, which is also known as merchandise branding, involves marketing one particular product. Branding a product requires market research and choosing the proper target market. • Service Brands: This kind of branding applies to services, which often requires some creativity, as you can’t actually show services in a physical way. 7 Creating a Brand When a company settles on a brand to be its public image, it must first determine its brand identity, or how it wants to be viewed. For instance, a company logo often incorporates a company’s message, slogan, or product. The goal is to make the brand memorable and appealing to the consumer. The company usually consults a design firm, team, or logo design software to come up with ideas for the visual aspects of a brand, such as a logo or a symbol. A successful brand accurately portrays the message or feeling the company wants to get across. This results in brand awareness, or the recognition of the brand’s existence and what it offers. On the other hand, an ineffective brand often results from miscommunication.1 Once a brand has created positive sentiment among its target audience, the firm is said to have built brand equity. Some examples of firms with brand equity and possessing very recognizable brands of products include Microsoft, Coca-Cola, Ferrari, Apple, and Facebook. If done right, a brand results in an increase in sales not just for the specific product being sold, but also for other products sold by the same company. A good brand engenders trust in the consumer, and, after having a good experience with one product, the consumer is more likely to try another product related to the same brand. As noted above, this phenomenon is often referred to as brand loyalty.3 Benefits of Brands Creating a brand provides numerous benefits, whether that’s to a corporation or an individual. Successful branding leads to a lot of impressions. But what does this mean? A company that can get its message across is able to induce and evoke emotion within its customer base. These consumers develop unique relationships with these companies, allowing the latter to capitalize on their loyalty. Companies also rely on these customers to help draw in other, new consumers.1 This helps companies build trust and credibility. After all, people are more apt to purchase goods and services (or brands) from companies they know and trust. This gives companies a competitive edge against their competition. Keeping brands in the minds of consumers means a bigger bottom line.93 It also helps corporations introduce newer products and services. Since consumers are going to stay loyal to brands they know and trust—and with whom they already have a relationship—they’re more likely to spend when new products are released, even if they’re more expensive.9 Let’s use Apple as an example. The company has built a hugely loyal customer base that is willing to overlook the price tag associated with an iMac, MacBook, iPad, or iPhone because of their loyalty to the brand. Many existing customers are completely willing to replace their existing electronics when the company releases new ones.3 No firm has an unlimited marketing budget, no matter how big it is. Your branding plans depend on your long-term growth in combination with the short-term results. Every business needs to be aware of the importance of branding in marketing. Branding requires vast sums of money, but once invested your business can yield tremendous benefits. This article is targeted towards individuals, such as business owners and people in management positions, who are not sure of whether they should invest in branding or not. The Importance Of Branding 1. Creates Consumer Preference For The Product Or Service Behind The Brand A wide variety of products leads to confusion. One way purchasers manage these issues is by leaning towards brands they know and trust. Genuine and widely known brands are viewed as less risky to buy from. Hence, customers believe that the products from brands that are intensively marketed would always perform better. And it is true as the results reflect that. The more you give importance to Branding, it helps in the longer run. 2. Generates Increased Revenues And Market Share When a firm does extensive marketing or branding, its revenues and market share increases. This means that the firm can become stronger than it was before. It can use its power to enter new geographical markets, do co-branding and gain new distribution opportunities. Branded firms are well looked up to. Branding gives you wings to experiment with different sectors of the market. 3. Helps The Company Survive Temporary Crises Toyota, a brand with the best quality, has had some genuine product quality issues in 2009, which created a PR nightmare. However, the company has spent numerous years conveying its “quality” image, which has helped the organization oversee the crisis and re-establish trust in their products. Brand recall is a big part of marketing investments. people realizing that the brand stands for a particular thing is very important. 4. Expands The Organization’s Estimated Worth An organization’s physical resources and the number of workers do not contribute much to its market value. What actually matters is the brand’s equity. John Stewart, the previous CEO of Quaker says “If the business splits up and I give you the land, bricks, and cement, and take the goodwill and trademarks, I’d still stand better than you.” The company’s worth shows the importance of branding. 5. Keeps New Competition Away A market segment that is targeted by popular brands is a huge hurdle for most new competitors. If you are the first one to create and target a segment, you will gain tremendous benefits. Gaining a first movers advantage is a big deal. This helps in making a place in the consumer’s minds and staying that way. 6. Increases Employee Productivity When your brand is well-known, people will want to work for you. This opens your company up to the top talent and provides you with the most qualified and skilful employees for your company. Once you have the best people for the job, your company’s productivity level will increase as well. 7. Increases Profitability By Commanding A Higher Price This is one of the most important reasons for the significance of marketing. Clients tend to be more willing to pay a premium for a well-established brand’s product compared to a similar item from a brand that isn’t as well-known. When you are a huge firm and the biggest customer of your suppliers, they will never want to lose you. You can use this power to insist that quality products are on time and to bargain over prices as well. Often they will take a pay cut just to keep working with your company. 9. Helps The Company Attract New Distribution For Its Products A popular brand with known customer loyalty has little issues discovering distribution partners, on a local and global scale. Everyone wants to work with a brand where the client demand and return on investment are high. When employees work for a well-known brand, they showcase a sense of loyalty and purpose. This means that the employee turnover rate would drop dramatically because employees believe in what their company is doing and are proud of it. 11. Makes A Remarkable And Unique Brand Image A brand goes well past the offering of a tangible product. If your business is unique from the rest, you will attract a market in which your competitors are not able to compete. Investors always go after brands that are strong enough to inspire their target audience and genuine enough to gain their trust. An investor would never want to invest in a weak brand that only showed potential risk. When you invest in your company’s branding efforts, the opportunity for growth is limitless. The most important aspect to keep in mind is how you will execute your branding strategy so it can have the most impact. Types of Branding Strategies There are several types of branding that may add value to your company depending on your target audience, industry, budget, and marketing campaigns. Here are seven types of branding strategies that have the potential to build brand equity for your business. Personal Branding Personal branding describes branding that is used for an individual person, instead of branding for a whole business. This type of branding is often used to establish a person’s character, personality, or work as a brand. Celebrities, politicians, thought leaders, and athletes often use this form of branding to present the best version of themselves to the public. For example, Seth Godin, entrepreneur and author of over 20 marketing books, positioned himself as a business and marketing expert. Seth has a recognizable personal brand, and individuals now associate him with his short blog posts that pinpoint one idea at a time. People want to hear from Seth Godin rather than a company or organization due to the effectiveness of his personal brand. Product Branding This is one of the most popular branding types. Product branding focuses on making a single product distinct and recognizable. Symbols or designs are an essential part of product branding to help your customers identify your product easily. For example, Monster Energy drinks have distinct packaging and logos that make it easily distinguishable from Red Bull energy drinks. via GIPHY Corporate Branding Corporate branding is a core value of business and a philosophy that a business develops to present itself to the world and its own employees. Effective corporate brands often seek to display the company’s mission, personality, and core values in each point of contact it has with prospective customers, current customers, and past customers. For example, Nike’s core values and mission are recognizable across all of their platforms and products. Nike’s mission statement is “To bring inspiration and innovation to every athlete in the world.” And its slogan, next to their famous swoosh check mark logo, is “Just do it”. As a corporate brand, Nike positions themselves as a brand for athletes, sports enthusiasts, and anyone who is passionate about fitness. They also make it clear that they believe anyone can be an athlete. Service Branding Service branding leverages the needs of the customer. Companies that use service branding seek to provide their customers with world-class service. They aim to use excellent customer service as a way to provide value to their customers. For example, Chick-fil-A is known for its excellent customer service – making it now synonymous with its brand. Co-Branding Co-branding is a form of branding that connects companies together. Essentially, co-branding is a marketing partnership between two or more businesses. This helps brands impact each other positively, and it may result in one growing its business, spreading brand awareness, and breaking into new markets. For example, Frito Lay and Taco Bell came together and made the Doritos Locos Taco that appealed to both audiences. Online Branding Online branding, also known as internet branding, helps businesses to position themselves as a part of the online marketplace. This type of branding includes a company’s website, social media platforms, blogs, and other online content. Most companies use some aspect of online or internet branding in today’s marketplace. No-Brand Branding This type of branding is also known as minimalist branding. These brands are often generic brands that seek to let their products speak for themselves without all the extras many others provide their consumers with. Some of the most noteworthy no-branding branding examples include Brandless and m/f people. As you can see on Brandless‘ website, their packaging, colors, and overall aesthetic is very simple. This aligns with their mission of providing fairly priced food to people without a typical brand. Despite the fact that Brandless recently announced its closure, it is an excellent example of no-brand branding that saw great success for several years. people adopts simplicity in everything, from their branding and packaging to their product designs. For example, their skincare products are packaged in bottles with black and white colors and a simple font. This decision to opt for simplicity aligns with their commitment to making gender-neutral products and pursuing their overall mission: “We aim to make life simple, so you can focus on what matters most.” They don’t need loud colors and flashy font. They want minimalistic appeal. Define Your Brand Identity. Before you select the proper brand strategies for your business, you should define your brand identity. This involves asking yourself and others involved in the marketing and sales process a series of questions, such as: • What are my company’s mission and core values? • If I had to describe my company in three words, what would they be? • What do I want to be known for in the marketplace? • What kind of difference do I want to make in my industry? • What do I want my brand to look like visually? Asking yourself these questions helps you to determine your goals and direction in the marketplace as a unique brand. Determine Your Brand Objectives. Once you identify your brand identity and answer the key questions mentioned above, you should be able to determine your brand objectives. For example, your objective may be to position yourself as an industry leader in a set period of time or to increase customer10 Minutes0 Questions
- 3.8LESSON 8TOPIC:PACKING AND LABELING We know about the four very important P’s of a marketing mix, namely Product, price, Place and Promotion. But did you know that many consider another P that is equally important- Packaging. That’s right, packaging of a product is a very important factor in marketing .What is Packaging in Marketing – Meaning Once the decision is taken on the brand, we have to consider the design and the make-up of the package and the labeling of the package. Branding, packaging and labeling are distinctly specialized activities, demanding the services of advertising experts. In reality it is not the product which is displayed and sold but it is the brand together with the package and the label which is sold or which enables to sell the product. In a sense your brand, package and label represent your product. Modern methods of packaging are valuable to the manufac¬turer to establish his branded products as distinct from those of his rivals. The more effectively a product is packaged the more effective is its identity and individuality. Package is advertising on the shelf, a means of attractive display in the retailers’ shops. Packaging alone makes possible branding and advertising of products e.g., tea, soap, cosmetics etc. Packaging may be defined as the general group of activities in the planning of a product. These activities concentrate on formulat¬ing a design of the package and producing an appropriate and attractive container or wrapper for a product. The container itself can act as a forceful though silent and colorful salesman at the point of purchase or an effective medium of advertisement encou¬raging impulse buying. Many a time, package design itself can act as a registered brand. Almost every article has to be packed to make a trip to the ultimate consumer. But packing is merely a physical action and provides a handling convenience, e.g., wheat, cotton, etc. Packing is necessary to prevent flowing out of such liquids as milk, drinks, etc. It is essential to maintain freshness and quality, e.g., ghee, sauce, etc. It can prevent the danger of adulteration, e.g., butter, cheese, spices, edible oil, etc. However, packaging is much more than mere packing. Packag¬ing is a marketing necessity. The public does not want just the product. It wants explanation, assurance, encouragement, confidence and praise, i.e., pat-on-the-back, all integrated or combined with a pleasant and eye-catching get-up or appearance on the top to gain action, i.e., close the sale- Thus, a good package ensures ultimate success of the product as a commercial venture. Package is an invaluable aid to decision-making by the customers. Under keen competition the consumer needs an effective means to recognize a difference and establish preference that will ensure repeated re¬purchases. Packaging does this job in a competitive market. That is why millions of rupees are spent on packaging and branding. Such huge expenditure is made for the simple reason that packaging and branding alone can sell your products. In fact, the amount spent on packaging is more than that poured into advertising. Packaging completes the sales cycle triggered by advertising. In the present age of consumer-oriented marketing approach (i.e. Buyers’ Market), packaging has gained unique importance. The utility reasons for packaging, viz., protection, identification and convenience are themselves exploited in selling and some features of the package may serve as a sales appeal, e.g., a reusable jar. Message on the label is a constant reminder to the user of the product. Packaging decorates and beautifies the product so as to lead the consumer to impulsive buying. Thus, the package serves in most cases as a vehicle by which the brand of the product is carried through to the consumers. In modern self-service stores, with mass display, well-designed packages attract attention, and through silent sales talk increase the sales volume. Packaging itself is a device of sales promotion. A customer will pay more just to get the special package—even though the increase in price exceeds the additional cost of the package, e.g., Supreme Lux Soap sold in an attractive re-usable box for lunch or tiffin. In short, packaging is an advance stage of packing and it demands the services of experts. It has assumed a specialised status in the process of marketing. ________________________________________ Classification of Packaging Kinds or methods of packaging will depend largely upon the nature of the contents in terms of their value, physical composition, and durability. The length of the distribution channel, the amount of handling which the container will receive, and variations in climatic conditions which may be encountered between the point of manufacture and sales are also to be taken into account. For example, liquid products require containers made of glass or plastics. Generally, electrical appliances require tin sheet containers. Similarly, for fragile (i.e., easily breakable or damageable) articles, wooden containers may be used. Packaging may be classified into three categories as follows: 1. Family Packaging: When the product of a particular manufacturer is packaged in an identical manner, it is known as family packaging. The size, shape, color, etc. of the packages will be similar for all his products. “Family brands” are made meaningful by using family packaging also. In such cases, packaging methods, materials used for packaging, the appearance, etc. will be one and the same for all the products of a firm. 2. Re-Use Packaging: Packages that could be used for some other purpose after the packed goods have been taken out or consumed, fall under the re-use packaging. Vegetable oils, and wellness drinks are being sold in re-usable plastic containers of different shapes. Re¬use packaging can increase the sales value of the product considerably. 3. Multiple Packaging: It is the practice of placing several units in one container. For example, liquor industry uses multiple packaging. ________________________________________ 8 Important Function Packaging is aimed at attaining two basic functions, the first to protect the product and the second to promote the product. According to Philip Kotler “protection, convenience and economy were the three traditional purposes attached to package.” But in this modern era, we need to add all the modern functions of packaging. Following are the functions of packaging: a. Containment: Packaging performs the basic functions of providing a container for a material. For example- consumer durables like televisions, refrigerators, washing machines, etc. are packed in cardboard cartons, vegetables, fruits and milk are packed in plastic cover. Beer and Milkmaid is packed in cans which are easy to open. Thus, the utilitarian function of packaging has the following advantages: 1. It protects the products from deterioration, spilling, spoilage and evaporation during its transit from manufacturer to consumer. 2. It enhances product use and convenience by keeping the contents clean and undisturbed. 3. It helps easy brand identification. 4. It makes product handling easier and safer to exhibit in super markets. b. Protection: Goods are to be transported from the place of manufacture to the ultimate consumer. This involves several types of risk. Packaging helps protect the goods from damage during transport and warehousing. It also removes the hindrance of risk by keeping goods safe and free from spoilage. Thus packaging helps make the transporting of goods easier and safer. c. Identification: Packaging helps to distinguish from one brand to another. It is mandatory that packages contain the name of the product, the maker, the ingredients, date of manufacture, expiry date, etc. This function of packaging has the following advantages: 1. Packaging makes product identification and differentiation both easy and effective. In a competitive market, unique presentation makes products look different from competing brands. 2. Package features communicate the product message and motivate consumers to buy the product. d. Convenience: Wholesalers, retailers, middlemen, warehouse keepers and consumers demand convenience in packaging i.e. they should be light-weight and conveniently packed so as to be carried by hand. For example- Amul Mithai Mate is packed in an aluminum container in an easy to open form. Similarly, ten tablets of Crocin are packed in a strip and soft drinks are packed in a glass bottle with lift off caps that required a bottle opener. These have also evolved to non – returnable, unbreakable aluminum cans. e. Attractiveness: Packaging enhances the appearance of the product. The design, colour, label, printed matter, picture etc. all add value to the packaging. For example- chocolates are always packed in attractive packets and displayed to attract the target group. f. Promotional Appeal: Products must sell themselves. This is possible, if they are placed in more attractive and eye – appealing packages. This has resulted in a number of innovations which appeal to the consumers. For example- Nescafe, Boost, Horlicks, etc. are now available in attractive glass jars. g. Re-Use: Nowadays several companies aim at providing “re – useable container”, once the product have been completely used. For example- health drinks like Boost, Horlicks, Nescafe, Pickles, Jams, etc. are sold in glass bottles that can be used for storing provisions in the kitchen. If not, they can be sold as scrap. h. Economy: Packaging should not create a financial burden for the company. Consumers prefer economical packaging options, because the packaging cost is included in the cost price. Hence, the packaging should be made attractive, appealing and economical. ________________________________________ Important Essentials From the seller’s point of view: 1. Packaging is a sales tool, 2. It identifies the maker as well as the product and carries the brand name, 3. The package label informs the buyer about inner contents and how to use them. 4. It is the biggest advertising medium. 5. It moves the product at the point of purchase. 6. It encourages impulse buying, 7. It establi¬shes a product image, and 8. It identifies the product with advertis¬ing. The following are the important essentials of packaging: 1. Protection: This is the fundamental function of packaging. The product demands protection until it is used or consumed. Package prevents damage or loss during transport and warehousing. Foreign trade without sound packaging is impossible. Air-tight package protects the quality of inner contents. Package can prevent the disappearance of volatile or gaseous articles, e.g, spirit, acid, gas, etc. 2. Dependable: Truthfulness and honest representation is the most important function and quality of packaging. Consumers rely on the package itself for the quality of the product inside the packing 3. Ease in Handling: Modern packaging facilitates easy handling and movement during the process of distribution. 4. Easy Identification: Identification is an important function of packaging, following closely protection and ease in handling. Your product can be identified by a consumer from the rival’s because packaging creates individuality and helps quick identification. Packaging enables branding and advertising. The product gains special and separate existence due to branding and packaging. 5. Convenience: Convenience in packaging is not simply a matter of customer service. Middlemen, wholesalers, retailers and warehouse-keepers, i.e., all agencies in the machinery of distribution, demand convenience. The size and shape of the package will deter¬mine the function of convenience, viz, adaptability. 6. Reasonable Cost: Costly package may be needed for fragile and very valuable products. It may be good for goods bought as gift. But in general cost of package must be reasonable. Lighter but sturdy packages can reduce cost of transport also. 7. Attractiveness (Selling Tool): Attractiveness is a major consideration in modern packaging. The design and the label on the package, printed matter, picture, layout or get-up of the package, color combination, all these are special aspects of the package and act as selling points of the package. Package must have an artistic appeal. Picture on the package adds to the attention value by drawing and holding the onlooker’s eyes on it. Prominent, clear and attractive advertising message given on the package label plays the role of a silent salesman—performing the functions of salesman— attracting attention, arousing interest, creating desire and gaining action (A.I.D.A. Formula). Promotional potency of packaging is tremendous. Packaging should be looked upon as a powerful tool of promotion just like other devices of promotion, e.g., salesman¬ship and advertising. Attractiveness, convenience of use and reusability are its significant demand creating factors. Reu¬sable packages or containers encourage repeat sales through -re¬fill packages. ________________________________________ Major Attributes of packing As a Product and As a Medium of Communication This can be divided into two heads, i.e. as a product and as a medium of communication. As a Product: 1. It should protect the content from spoilage or breakage. 2. It should be easy to open, close, and dispense from. 3. It should be safe to use. 4. It should keep the product from deteriorating. 5. It should be of proper size and shape. 6. It should be reusable or be sold as a scrap. 7. It should be economical cost wise. 8. It should be available in sizes, appropriate to the market segment reserved. As a Medium of Communication: 1. Packaging should be attractive. 2. It should project a favourable image of the product. 3. It should sell itself, i.e. it should play the role of a salesman. 4. It should be readily identifiable in a shopping situation. 5. It should act as a unique selling proposition. 6. It should have labels with the information, like date of manufacture, contents, net weight, expiry date, date of packaging, etc. 7. It should communicate on the usage of the product, precautions, benefits of the product, etc. 8. Lastly, it should not be deceptive or misleading in size, content, etc. ________________________________________ Types of Packaging Cost Various types of packaging cost are as follows: i. Material cost: It means the cost of the pack and quality control cost. ii. Storage and Handling Cost: This include the handling cost of bulky packages, heavy materials of construction, drums etc. iii. Packaging Operation Costs: This includes the cost involved in operations like, cleaning the package product filling – closing, labeling – unitizing, stenciling, handling cylindrical slums etc. iv. Storage of Filled Packages: This includes the cost incurred to shift the goods from one form of packaging to another. v. Transportation Cost of Filled Packages: This involves the transportation cost by sea, air etc. it depends on the size and volume of packages. vi. Loss and Damage Cost: It is related to the loss and damage during operation, transportation delivery etc. vii. Insurance Cost: It varies depending on the vulnerability of package, to cover the risk in transportation. viii. Obsolescence Cost: This cost involves when changes in the packaging materials, packages and labels happen. ix. Package Developmental Cost: This include the evaluation cost, pilot test cost, field testing cost, consumer research cost, feedback cost, final trial cost etc. ________________________________________ Packaging Strategies and Policies Every producer adopts a certain policy or strategy. There may be different types of packaging policies and strategies and a producer has to select any one of them. Use of a particular policy depends upon the needs, requirements and circumstances of the producer. Some of the important packaging policies and strategies 1. Transit Packaging: Every producer has to deliver the goods to its real consumers. Delivery of a product from producer to the consumer is the process involving many activities. One of these activities is the transportation of the product from the place of producer to the place of the consumers. Product must be packed in a manner that it may reach to the consumer in original conditions. Such packaging of the product is called transit packaging. Thus, transit packaging is that form of packaging which is meant to keep a product safe in the process of physical distribution. It is thus also known as “distribution packaging”. The materials generally used for transit packaging are the drums, wooden containers, tins, jute sacks, hardboard, etc. Main stress in this type of packaging is upon the safety of the product during transit. 2. Consumer Packaging: The packaging in which the product is finally delivered to the consumers is known as consumer packaging. Material used for consumer packaging may be a bottle of glass or plastic, jar, tin, plastic box, hardboard box, polythene bags, etc. Main stress in this type of packaging is upon the attraction of packaging. Packaging must attract the attention of consumers and it must be convenient for consumer to handle. 3. Product Line Packaging or Family Packaging: When a producer uses identical packaging for all the product items of a product line, it is called product line packaging or family packaging. This type of packaging is widely used by the producer of consumer goods and generally by the producers producing a large number of product items in particular product line. The best example of family packaging is packaging of shoes, slippers, etc. mainly by the producer of repute such as Bata, Liberty, Khadims, etc. 4. Protection Packaging: The basic function of packaging is to protect the product form breakage, pilferage, theft, evaporation etc. Packing of the food items, medicines are done in such a way so as to protect it from moisture, sunlight and high temperature. 5. Multiple Packaging: In this packaging strategy closely related products used by a single consumer are packed together. This strategy is economical and it also saves consumer’s time in buying different products. By packing different products in a single package, manufacturer saves packing material of different items and thus it is economical. Also consumer saves much time as he gets all the required items in one package. For example, pencil box contains pencil, pen, rubber, eraser, ruler etc. 6. Re-Use Packaging: Here the goods are packed in such a package which can be used again after consuming the product. This strategy promotes economy in the use of the product and also promotes repeat purchase by consumer. It helps in reducing pollution caused due to used packages. Re-use packaging, thus preserves the physical environment by increasing the life of packages. 7. Kaleidoscopic Packaging: Kaleidoscopic packaging is concerned with printing suitable and attractive cut-out figures, toy and cartoons on the package in order to attract the consumer and stimulate the demand. Pictures of fresh and juicy vegetables, fruits on ready to eat items give an impression of a healthy product. A healthy smiling child picture shown on various baby products signifies that the products will keep our child healthy. ________________________________________ Requisites of a Good Package Packaging is an important device of sales promotion. It acts as a colourful and silent salesman. It gives full information about the uses and features of the product to the users. It helps in giving individuality to the product. It may be noted that branding is not possible without packaging. Both are interlinked. Brand name and mark are to be printed on the package to make the product easily identifiable by the customers. In other words, the package must tell the product story at a glance. The basic purpose of packaging is to provide protection to the goods and to facilitate their easy handling and storage. But in the modern age of competitive marketing, packaging has assumed certain other objectives also. Packaging is used as a medium of publicity and as a silent salesman. It helps in preventing adulteration of goods and ensures their safety. In order to achieve its objectives efficiently, a good package should possess the following features: 1. Suitability: A package should suit the requirements of the goods to be packed in. That means the package designed should consider the size and quality of the product and the quantity to be packed in the container. 2. Protective: The package must be so designed that it protects the contents contained in it. Articles subject to deterioration in quality such as medicines, powders, acids, and edible oils require a special type of packaging. Wherever required, the package must protect its contents from sun, moisture, germs, etc. 3. Requirements of Consumers: The same product might meet the requirements of different segments of consumers who have different levels of income. The package may be more attractive and costly for selling the product to affluent users. It should be quite economical for selling the product to the users of the lower income group. For instance, polythene bags have become quite popular with the manufacturers of Ghee for selling it in small quantities, say 1 Kilogram, to the customers from low and middle income groups. 4. Packaging Materials: This factor is very important as it influences the cost of packaging. Materials to be used in packaging depend partly on the nature of goods and partly on its appealing power to customers. For instance sugar, food grains, cement, etc. are traditionally packed in gunny or jute bags and now in HDPE bags. Biscuits are packed in air tight containers or packets; so that they remain fresh, crisp and original in taste and flavor. Oils, Ghee, Jams, Pickles, etc. are stored in glass jars, metallic jars or tins. Materials used in packaging industry include glass, aluminium paper, tin, paper and card boards, cellophane, plastic, polythene and gunny bags. Their relative merits and demerits in terms of cost, utility, customer appeal have to be analysed before choosing any of the above materials for packaging. 5. Cost: The cost of package is to be considered in the context of nature and value of article and the nature of buyers. As a general rule, articles of common use such as sugar, soap, tea leaves, cereals, etc. should be packed in low cost containers. Articles of high value and catering to the requirements of high income group such as cosmetics, jewellery, etc. should be packed in attractive and durable packages. 6. Attraction Value: As far as possible, the package must possess attraction value. Design and label of the package, and the colour combination of the package are all important. Attractive packages earn reputation and increase sales and profits of the manufacturer. The use of a picture on the package is made quite often to attract the attention of people. The picture and other information printed on the package should be suggestive of the contents and its characteristics inside. It should be ensured that there is maximum information in minimum words. Attractive packaging is not always costly. Even the low cost packages can be made very attractive. It depends upon the imagination of the designer. 7. Size and Shape: The size and shape of packaging depends upon the type and value of product to a large extent. Size and shape of the package do add to its attraction value. They also facilitate proper display of the product at retail stores. 8. Durability: Durability of packages is also an important consideration. If a package is durable, it will be reusable even after the product has been consumed. For example, plastic containers of ghee, coffee jars and pickle jars are reusable. From publicity point of view also, such packages are quite useful. ________________________________________ Factors Affecting Packaging Decisions The following factors are to be considered while making packaging decisions. a. Size – The size of the package should be convenient and handy for the customer. For example- soft drinks are available in 100ml, 200ml, half a litre, one litre, one and a half litre, etc. b. Shape – The nature of the content determines the shape of the package. Moreover, it should be convenient and attractive to display in retail stores. c. Colour – The colour of the package also plays a significant role in marketing decisions. The colour should be attractive, eye – catching and at the same time relevant to the contents of the package. d. Material – The packaging material also needs careful consideration. The most commonly used packaging materials are metal, cardboard, aluminum foils, sack cloth, etc. But now, due to the growing importance of environmental protection, plastics are being used less frequently for packaging. Instead, environment friendly packaging materials are being used. e. Text – Usually, some form information is communicated to the consumers through the package. Now, it is mandatory to give the statutory warning, date of manufacture, expiry date, contents, date of packing etc.; for example “This fairness cream is only for external use”, or “Alcohol consumption is injurious to health”. f. Brand Name – The brand name should be prominently displayed on the package. The brand name differentiates a product from its competitive products. Hence, the package should contain the distinguishing brand name or brand label. g. Cost – Packaging cost is added to the cost of production. Hence, the packaging cost should be economical and minimum, so that the consumers are not over charged. Moreover, the cost of packaging also affects the cost of transportation, handling, storage, etc. ________________________________________Packaging Significance : Societal View of Packaging The various types of plastics have not only helped conserve or utilize the depleted natural resources but also revolutionized the concept of packaging. Plastics have proved to be much better substitutes to wood, cotton, metal, card board, paper, glass and so on. The new rigid PVC now manufactured by modern, computerized and automatic process both in the normal and non-toxic grade with printability and metalizing property is going to revolutionize the packaging systems for medical and food sectors and for consumer and industrial usage by thermoforming and twist wrapping process. In the Food Processing Industry the new plastic package offers strength, protection, presentation and consumer appeal. The recycling process of plastics right from collection of the garbage to segregation and conversion in prime form for reprocess and reuse has solved the problem of pollution. In India rag pickers contribute enormously to the estimated 40 per cent of plastic which is recycled. The ‘re-use’ culture is more prevalent in India, where plastic containers are re¬used several times before they are discarded. If environmentalists believe that less plastics would mean less waste, a German study indicates that without plastics the weight of packing materials would be 300 per cent higher, the volume of waste 150 per cent higher and energy consumed by packaging at least 100 per cent higher. Plastic recycling has reduced substantially problem of waste disposal and environmental degradation due to packaging. Social View of Packaging: Significance of societal view of packaging is summarized below: 1. Pollution control is a burning issue in packaging particularly in Western countries. Broken bottles, crushed cartons, and bent cans litter the streets and choke municipal dumps. This has created the solid waste problem in those countries. All packaging programmers must weigh environmental and ecological issues. 2. Resource scarcity is another problem. The same precious natural resources that are being wasted on non-returnable (disposable) containers, e.g., soft drink bottles and beer bottles, later create litter and pollution problem. Such a consumption pattern cannot be tolerated now. 3. Among the resources which are being wasted, energy sources are the most critical at present. Throwaway bottles use three times the energy of returnable bottles. The efficient, energy-saving, returnable bottles must be introduced. 4. Nutrition labeling, open dating (how fresh is the product), unit pricing, and grade labeling are the latest demands of consumers on all food products. ________________________________________ Consumer Problems with Packaging 1. Unless the package is transparent, the buyer cannot judge the contents by appearance. If quality information on the package label is absent, the buyer has to purchase almost blindly. 2. If the consumer wants a specific quantity, he may not have that amount when goods are sold in packages. 3. There is no feasible way to check weight and volume of the contents unless a buyer opens the package to ascertain the weight. Prepackaged shortages amount to about 20 per cent. 4. Package sizes and designs inflate the contents. ‘One Rupee off’ labels proclaim price reduction which may not be real. 5. Deceptive packages have several room-mates in trade practices. They are hidden declaration of contents, fine print, glorified illustrations, unexplainable fractions (3-7/8 Kilograms) etc. Consumers think that they are getting more when in fact they may be getting less due to the cunning package design. 6. Packages are same, contents are reduced and apparently same prices are charged. This method is popular in a period of rising prices. 7. Packages may create health hazards for consumers. Certain plastic food packaging has been shown to cause cancer (vinyl chloride inhaled by humans). Packages stored in godowns are susceptible to infection (rodents and insects nesting in packages). The Total Product Image: Image means a mental picture drawn by a fancy. A product image is the sum total of- 1. Inner value of the product, 2. Its ability to perform and give service and safety to user, 3. Packaging, 4. Branding, 5. Labeling, 6. Product warranty, and 7. Product services. The product image also indicates the goodwill of the product and its producer. In the product planning and development, we have to consider branding, packaging, labeling, warranty and services as these constitute the vital parts of marketing programme and these are closely interconnected in building up a bright product image in the market. Pricing decisions have strategic importance in any enterprise. Pricing governs the very feasibility of any marketing programme. Because it is the only element in a marketing mix accounting for demand and sales revenue. Other elements are cost factors. Price is the only variable factor determining the revenues or income. A variety of economic and social objectives came into prominence in many pricing decisions. We now come to the most absorbing question of pricing. ________________________________________ Labelling Definition: Labelling is a part of branding and enables product identification. It is a printed information that is bonded to the product for recognition and provides detailed information about the product. Customers make the decision easily at the point of purchase seeing the labelling of the product. .Labels must comply with the legal obligations. A company’s label needs to adhere to the Competition and Consumer Act 2010. According to The Food and Drug Administration (FDA), packaged and processed food items must have nutritional labelling. The Federal Trade Commission Act (FTC) states that cheating of labels and graphics is an offence and comprise unjust competition. The Fair Packaging and Labeling Act establishes compulsory labelling conditions, boosts independent packaging standards and grants federal companies to establish packaging regulations in certain industries. Types of Labelling There are different types of labels: • Brand label: It plays an important role in labelling as it gives information about the brand. It can be removable or non-removable. • Descriptive label: It specifies product usage. • Grade label: It describes the aspect and features of the product. Functions of Labelling The different functions of labelling are as follows: 1. Defines the product and its contents: A label is informative about the product’s usage and caution to be taken while using the product. Example, Red Label Natural Care tea mentions five ingredients in its label that provide immunity. 2. Recognition of product: Labeling assists in the identification of the product. Example, the brand name of a chocolate will help one choose from the rest of the confectionery items available. 3. Assorting of products: It means classification or grading of products according to different categories in the market. Example, shampoos are categorized as dry hair, normal hair and oily hair types and cater to consumers in the market with the dry, normal and oily scalp, respectively. 4. Assists promotion of products: It gives the customer the reason to purchase the product. Example, it attracts the attention of the consumer by displaying messages such as ‘20% free’ or ‘save rupees 15’ message in potato chips packet. 5. In compliance with the law: Labels should strictly abide by the law. Example, for tobacco, the label should mention ‘Tobacco is injurious to health’. Cigarettes also should have ‘Smoking is injurious to health’ as the statutory warning on its package. Importance of labelling 1.Provides Identification Labelling plays an efficient role in providing uniqueness & identity to products. It helps the consumers in the identification of products among large number of products available in the market. It prevents confusion among the people that can be created by the substitute products of other competitors. Therefore, through customer easily recognises its brand. For example, the Label of Dettol helps people in easy identification of its products. 2.Provides Description Label is a medium that communicates the information regarding the product to customers. It is basically a slip that contains detail like nature, quality, price, quantity etc. Customers can easily get each & every required information by simply reading labels. It will help them in making their decision during the buying process fast & easily. 3.Makes Products Comparison Easy Comparison is something on which customers relies to make the best & right choice. It has an important part in the buying process of the customers. Labelling gives each & every detail regarding the product on a small printed slip. Customers just by reading the labels of different products can choose the best one as per their choice. It enables the customers in understanding & checking product even before using it. 4.Helps In Marketing Labelling is considered an efficient sales tool for marketing of the product. It helps in the promotion of products easily. It adds attraction to the products. Labelling helps in attracting more & more products for the products. Many times the people are encouraged to buy a product just by seeing the labels of the product. Businesses should try to design attractive & small labels for their products. It will create a long-lasting influence on your customers. 5.Makes Products Grading Easy Grading is important function of businesses for categorisation of its products. Through grading, business divides their large varieties of products as per quality for a different class of customers in the market. Labels on products provide full detail regarding the quality & standard of product to customers. Customers easily recognises the quality of different products through reading their labels. It will enable them to make the right choice as per their needs. For example, Mother Dairy supplies different quality of milk in the market like full cream, half cream & toned milk. It provides all details on labels of their product package. 6.Protects Customers From Getting Cheated Labelling helps customers in the right choice. It helps the people in choosing a product that can fulfil all their demands. Customers can easily recognise fake products by seeing their labels. They can get all the details regarding the manufacturing date & date of expiry from labels. It helps in assuring the customers whether the product is right or not. Making the wrong choice during the buying process will have ill effects on customers. Therefore, it avoids all chances of wrong decisions during the buying process. 7.Provides Information As Per Law Business are required to provide certain statutory information regarding their products. It is mandatory by law & they are strictly required to follow it. Labelling is a means through which all required information required by law is provided on the product package. There are certain poisonous & hazardous products, with which providing safety tips & certain warning is very important to be mentioned. Likewise in the case of different tobacco products giving health warning is important. All these requirements of the law are fulfilled by business by printing labels with all these details. There are certain poisonous & hazardous products, with which providing safety tips & certain warning is very important to be mentioned. Likewise in the case of different tobacco products giving health warning is important. All these requirements of the law are fulfilled by business by printing labels with all these details. Advantages and Disadvantages of Labelling in Marketing Disadvantages of Labelling 1.Raise The Cost Of Product The first and foremost limitation of labelling process for every organization is that it leads to increase the cost of product. Process of labelling requires heavy expenses in designing and printing of label slip to be attached to with every product. Company generally provides three type of labels with their items that are brand label, grade label and descriptive label. All of these eventually raises the manufacturing cost of product for business which increase its price. 2.Not Ideal For Illiterates Label is of no use for peoples that are not literates enough for understanding the written information. Under the labelling process, all details are communicated to customers in written form by printing it on product package. A person should know to read and write for benefiting form products labels otherwise all efforts of company would go in vain. 3.Require Standardized Products Process of labelling is effective only if company is manufacturing a standardized range of products. Labels are standard messages which are printed on every product package. It would be inconvenient for companies to design separate labels for every product in case if they are not standardized. 4. Leads To Pre-Purchase Discarding Of Product Another major disadvantage of labelling process is that it enables customers in doing a comparison of brand products with other products without even purchasing them. They are able to detect the advantages and disadvantages of products in light of other competitive products before purchasing them. It will eventually lead to discarding of one product in favor of other one.10 Minutes0 Questions
- 3.9LESSON 9 :TOPIC: PRICING DECISIONS Price is the only Marketing Mix variable that generates revenue. All the other variables viz. Product, Place, and Promotion incur costs. For any kind of transaction, an offering has a price for its value. Price goes by many names – rent, rate, fee, tuition, toll, fare, royalty, honorarium, etc. Price is the most flexible or easily changeable element of the marketing mix elements. A marketer can change the price without much investment in time as compared to making changes to the Product features, Promotion strategies, or distribution channels. Price can be defined as quantifying (into Dollars, Pounds, Rupees, etc.) the perceived value of an offering to the buyer at a particular time. Pricing includes setting of objectives, determining price flexibility, outlining strategies, finalizing price, and controlling it depending on the challenges. Organizations have to rely on the managerial skills in the implementation and control of pricing strategies. Its success relies heavily on how the managerial staff monitors the response of customers and competitors. In developing countries, price is the major factor that drives sales. Pricing and price-wars among competitors is the biggest problem that an organization faces. There are different ways in which organizations approach the final pricing decision. These decisions depend on competitors, costs, demand, perceived value, long term return on investment or short term return on investment, etc. Role/ importance of pricing in marketing strategy 1) Price in combination with promotion becomes a strong tool for influencing buyers to buy products. It interests the buyers and highlights the image of the brand to increase sales. Sometimes organization’s focus on other marketing mix elements by keeping the price constant based on recovering costs at certainpercentage. 2) Finalizing price in combination with other marketing mix variables, sets guidelines and boundaries for management to set marketing strategies. 3) Pricing also determines standard of living. The lower the prices in the economy, the higher is the purchasing power in the hands of consumers. Price reflects purchasing power of the market. 4) Price is a strong weapon against competitors. 5) Price determines the profits on sales. It is a basis of generating profits. As it is the most flexible of the marketing mix variables, organizations exercise this freedom very often for defensive or offensive pricing strategies. 6) Price influences two types of management decisions. First is setting price for a new product and second, adjusting the price of existing products basis the market situation, costs, etc. 7) Depending on the marketing program, organizations use Price in different ways – Demand oriented strategy, cost oriented strategy, competition oriented strategy, and also because of ethical constraints. 8) Price should be carefully set basis its combination with the other marketing mix variables. The price on a product affects the market of another product in the product line from the same manufacturer. For example, a soap priced similar to another soap from the same manufacturer which has different features will have impact on the sales of each other, and the customer will have difficult time in making a choice. Price setting should be according to the product features and should accompany strong promotional activities like discounts, education of product features, etc. 9) Price should be set in relation to the delivered value and perceived value of the product -Price also communicates the quality of the product. If a product is priced very low and its features communicated are better than the competitor, the customers may think that the product has low quality. In such cases organizations have to invest heavily in promotional activities and communicate clearly highlighting the services associated like warranties, brand value, etc. 10) Prices should be set in coordination with distributors. Most organizationsstrive to give higher profit margins to distributors as the distributors like wholesalers and retailers too aggressively promote the products to consumers. 11) High promotional activities result in costs. Organizations have to set price basis the costs associated to advertising, public relations, etc. The organizations have to carefully analyze the promotional expenditure and decide if it will result in production and marketing economies of scale. This will reduce the unit cost and give freedom to make price changes. objectives of Pricing AND variables/ elements of Price Mix. Pricing objectives refer to the targets to be achieved via pricing strategies in the marketing plan. These should be clearly outlined in quantitative terms so as to be understood by all the members involved in pricing decisions. The pricing objectives can be divided as Short term objectives and Long term objectives- 1) Short term pricing objectives- The short term objectives for pricing policies are as below- • Attracting new customers, middlemen, etc. • Generate interest in the product • Discourage competition • Sales or profit growth • Rapidly establish market position • Meeting competition • Maintain market share • Promote new products • Recover costs of a product in decline stage • Secure key accounts 2) Long term pricing objectives- The long term objectives for pricing policies are as below- • Stabilize industry prices • Market share growth • Maximize long-run profits • Strategic pricing in different markets • Retain or capture market share • Maintain price leadership • Maximize return on investment • Product and quality leadership Advertisements Whether the objectives are long term or short term, they should be clearly defined and easily understandable. The organization adopts a pricing strategy depending on the pricing objective. In the short run, most of the time the main objective is to survive in the market which has intense competition or changes in consumer preferences. Adding value to the brand generally comes under long term objective. Price should be used as a strategic tool rather than it being determined by costs and markets. There are many variables that affect the pricing strategy. Basis the factors, an organizationutilizes different pricing variables to cover the costs of manufacturing and generate profits. The Price Variables depend on “Pricing policies and strategies”, “terms of credit” and “resale price maintenance.” Pricing Policies and Strategies are outlined basis the market needs. These help the organization’s in outlining different Discount options – discounts offered for large quantity sale, cash discounts, trade discounts, seasonal discounts, etc. Advertisements Terms of credit help to increase of market size. Increase the sale of the product results in increase in production. More the production, more is the economies of scale. Buying on credit is the most followed option in modern day marketing as it is a means of sales promotion and contributes to hassle free selling. In today’s economy, no firm can do business without offering credit facility. Resale Price Maintenance is also followed by many organization’s. Through this the manufacturer or the distributor recommends the profit margin at which the next channel member/ members can sell the product. Here the minimum sale price is fixed below which the channel member cannot sell the product. This Price variable helps the organization in generating cooperation and support from the distributors. When a certain profit margin in fixed, the intermediaries cannot sell the product below or above the specified percentage. This helps consumers as well as it protects them from being overcharged for the product by the middlemen. Pricing Strategies. When making price decisions, an organization has to follow price strategies. Price strategies offer a set of guidelines and gives direction to the organization for pricing decisions for the target markets. It determines the extent of pricing basis the region, price variability, price levels, price stability, use of price lining, and pricing according to stages of the product in the product life cycle. 1) Region based pricing (Geographical pricing) – This involves studying the region or country of the target market and setting the prices accordingly. Different regions have different set of prevalent systems for making payments. Also, the organization may consider adding additional percentage to price basis the taxes, transportation and storage costs. Many companies are asked to invest back a percentage of their earnings in the target market country. The system in which the buyers want to payback in other forms other than money is known as countertrade. These can take place in different forms like barter, compensation deals, buyback agreements, and offset. (Source – Marketing Management; Prof. Kotler, Developing price strategies and programs, 2004, p.g. 489). Barter system involves exchange of goods instead of money and no third-partyinvolvement. Compensation deals involve seller receiving some percentage of payment in the form of products and the rest in money. In buyback agreement the seller sells the machinery, technology, etc. to buyers and agrees to buy the products developed by the buyer using that machinery, technology, etc. In Offset the seller receives the complete payment in money but needs to spend a large amount of that in the country of operation within a specified time. For example, many companies were not allowed to trade in India unless a substantial amount of earning was spent in India. There were bills passed in the parliament after a heated debate. 2) Pricing through Price variability/differentiation – When an offering is sold to buyers at two or more prices equal to each buyer’s perception of product value though they do not reflect proportional difference in marginal costs. These can be done in the following forms – Advertisements • Customer basis- one customer may pay one price and another a different price at one time and place. For example, different movie shows at different timings and different age groups, warehouse sales, etc. • Product-form basis – different versions of the product are priced differently for buyers with different perceptions. For example, Motorola sells its Moto X series with a different back cover texture at different prices. • Place basis – geographically separated target markets will have a different price of the same product though the cost of offering in each location is same. • Time basis – the product price changes with time. For example, off-peak prices for theatre, movies, seasonal products, etc. 3) Pricing through Price levels – A border pricing is set with in which the price is set. For considering the general price, management considers competitive advantage, product line objectives, attractiveness of target market, current and desired image of the firm. A company like Maruti Suzuki has always targeted middle class and upper middle-class customers. It maintained this image for a long time but has moved at changing it image in the last decade by moving into the premium segment of cars. Maruti Suzuki has cars for different income and lifestyle segments. They manufacture cars like Alto, Alto 800, A-star for lower middle-class customers. They have moved into making SUV vehicles as well. But the image that the company has maintained is of reliability, affordability and fuel-efficient vehicles for price sensitive Indian customers. 4) Pricing through Price lining – Price lining refers to setting price for products within a product line to meet the needs of customers. For example, Maruti Suzuki has cars for different income and lifestyle segments. Wagon, DeZire are targeted to middle class segments whereas Alto and A-star is to target lower middle-class market. If it launches a new car in a certain product line, it will need to consider the price level close to the products in that product line. Advertisements 5) Pricing according to stages of the product in the product life cycle – Some organization’s plan in advance the pricing strategies of the product as it moves through the different stages of life cycle. As the competition becomes intense with the success of the product, the organization has to change the price of the product or else customers will switch to new products from rival firms or substitute products. For example, after 5-6 months of its launch, a premium mobile phone has its price reduced with the launch of new models from rival companies. The firm tries to earn as much revenues possible before the product becomes obsolete in few years. New product pricing There is great flexibility with the organization’s in setting a price for a new product as compared to the product in other stages of life cycle. New product launch and its price are given lot of importance as these cover the overall marketing strategy of the organization. The products in growth, maturity and decline stage face competition and give little choice in increasing the prices. New products on the other hand have little or no competition hence, can be utilized to generate high profits through Market skimming pricing strategy and Market penetration pricing strategy. Skimming pricing strategy involves setting high profit margin relative to costs to “skim” as much profit as possible from the high demand in the market. Once the competitors enter the market with a similar or a substitute product, the organization reduces the price of the product to make it available for price sensitive customers. Most of this strategy is directed towards the Innovators and Early adopters in the target market to “skim the cream” highlighting the unique product features, brand image, and quality. (Innovators – they are willing to try new ideas and are first to buy the new product. They help get the product exposure. Early adopters – these people adopt new ideas early but carefully. They serve as the opinion leaders. Early majority – these form around 34% of the market and adopt a new product earlier than an average consumer.)For example, Samsung mobile’s launch of a new note series handset is usually high priced. After few months the price is generally lowered amidst competition. Penetration pricing strategy involves setting a low price of the new product relative to costs to increase the market share in a short period. This strategy keeps the competitors away as the profit margins are low. The organization’s objective is to gain market share and maintain it for a longer period through economies of scale. This strategy is mostly successful if the market is not big. Competitors enter the market if the market is big and the demand is high. For example, Motorola entered the Indian market through the launch of it Moto G models. The price of this model was kept fairly low as compared to competitive products offering similar features. The launch was such a great success that all the handsets of this model were sold within 20 minutes of its launch through Flipkart, an ecommerce giant, which was given exclusive selling rights. Advertisements 6) Psychological pricing – the law of demand is not always successful for making sales and profits. Customers are influenced via psychological pricing methods like odd-even pricing ($19.99), pricing the product highlighting the quality, etc. Customers usually estimate the price of a product based on their past experience or noticing the prices at some places or media channels. The sellers try to tab on these perceptions and manipulate these reference prices. They may display the product among prestige and expensive products, etc. STEPS INVOLVED IN SETTING PRICING POLICY. 1) Specify Pricing Objective- Pricing objectives refer to the targets to be achieved via pricing strategies in the marketing plan. These should be clearly outlined in quantitative terms so as to be understood by all the members involved in pricing decisions. Depending on the challenges a firm faces in the market, the objective can be either of these – survival, maximize current profit, maximize market share, product-quality leadership. These objectives can be short-term or long-term. a) Short term pricing objectives- • Attracting new customers, middlemen, etc. • Generate interest in the product • Discourage competition • Sales or profit growth • Rapidly establish market position • Meeting competition • Maintain market share • Promote new products • Recover costs of a product in decline stage • Secure key accounts b) Long term pricing objectives- • Stabilize industry prices • Market share growth • Maximize long-run profits • Strategic pricing in different markets • Retaining or capture market share • Maintain price leadership • Maximize return on investment • Product and quality leadership Whether the objectives are long term or short term, they should be clearly defined and easily understandable. Advertisements 2) Determine Costs – There is a close relationship between price and cost. The organization strives to make profits to ensure the various costs it incurred in production and marketing of the products are covered. Careful analysis of costs need to be done to make profits. Many firms fail to set price basis the costs believing that the costs will be covered over a long term through economies of scale. Costs incurred at various stages of product development including the services from departments other than production like legal Consultants, market research, finance, etc., promotion activities, and inflation should be carefully accounted for pricing strategy. A company incurs two forms of costs – Fixed costs and variable costs. Fixed costs are that which the organizations incur irrespective of the production or sales revenue. These include staff salaries, property tax, interest, rent, etc. not dependent on production or sales. Variable costs vary with production. Less the production of units will result in decrease in costs. It has been observed that with increase in production and experience, production costs decline due to the learning curve effect. Many timesorganization’s set the price below the initial total cost. As the sales and production increases, the costs decrease with experience. If this is not taken into account and the price is set higher, there is increase in profits which attracts competition. The profits earned this way are generally short run. It is therefore important that the organization’s understand the cost theory. The management should consider the probable production stages, manufacturing improvements that result from experience, variable and fixed costs for proper estimation of costs. 3) Evaluate Demand – The lower limits of price are set by costs and the upper limits are set by demand and competition. The law of demand states that Price is inversely proportional to demand. Increase in price will lower demand, and decrease in price will increase demand provided all other relevant factors remain constant. This does not holds true in all the cases. Sometimes price reflects product quality like in prestige goods. Customer responses to different price levels are difficult to estimate. Marketers use market opportunity analysis and demand estimation methods to evaluate demand. Change in demand is studied with increase in price. A small percentage increase may not affect the demand largely but a significant increase in price may decline demand substantially. The response of demand to price change is measured by price elasticity of demand. It is the relationship between changes in sales with the percentage change in price. The changes at alternative price levels are studied closely. According to the product type, the demand elasticity also changes. Elasticity is the result of consumer behavior. Increase in price of Petrol or Diesel fuel didn’t affect the sales of large vehicles. The affect was very insignificant. Advertisements According to Prof. Kotler there are many reasons for less elastic demand – • Less or no substitutes, competitors • Buyers fail to notice the price change • Buyers are slow to change their buying habits • Buyers think the price raise is fair The buyers may continue buying the product at an increased price but not for a longer period. They will eventually switch to substitute or competitor products. The response of customers to prices must be evaluated for the total market. Reducing the price may increase sales but it should justify and should be beneficial for the organization in the target market. 4) Evaluate Competition – Most of the time, organization’s set their price basis the price of the competitors. They set the price above the competition, below the competition or at par with the competition. For this the organization must study the industry structure it operates in. The organization may change the price irrespective of costs incurred just because the competitor has done so. The organization should compare the product features with substitute and competitor products. Then basis the value and benefits offered by the product, the management should set price of the product. If the product offers more features, the management can set a little higher price and vice versa. If the products in the market are similar, competition becomes intense and leads to price wars. As customers can easily check prices of products from different manufacturers, study of competitor’s prices becomes essential. 5) Select Pricing Method – Once the organization has analyzed Demand, Costs and Competition, it initiates the process of setting the price. Organizations choose from any of the below pricing methods – 1. Cost Oriented Pricing method – Costs form the base of price range and there are two commonly used methods of setting the price – Cost-Plus/ Markup pricing and Target Return pricing. 1.1 Cost-Plus/ Markup Pricing – It involves adding an additional percentage of profit to the sellers per unit cost of the product. The profit or markup is percentage of the selling price instead of the cost. The following formula can be used to determine the price- Selling price = Average unit cost/ (1 – Desired markup percentage) If the average unit cost is $10 and the markup is 20%, then the selling price will be $12.5. [10/1-0.2). This method is successful only if the marked-up price generates expected sales. The major drawback of this method is that it ignores the demand, competition and perceived value of the product. This method is popular in retail and wholesale trade. It depends on the type of goods. The markups are set higher on seasonal goods, specialty goods, goods with high storage and distribution costs, goods with inelastic demand like medicines. Premium goods will have a higher markup as compared to ordinary consumer goods. There are benefits of using this method. It avoids price wars as competition is not taken into account. The costs are identified and taken into consideration which is easier to analyses as compared to demand and competition. As demand is not considered for setting a price, the consumers are charged fairly. Else the price will be set higher if the demand is severe in the market. 1.2 Target Return Pricing – In this method the price is set such that the profit would give a target rate of return on the investment (ROI). It determines the level of sales needed to cover all the costs. The firm tries to determine the price at which it will break even or make the target profit it is seeking. The fixed and variable costs are determined before setting the price. Target Return Price = unit cost + [desired return*invested capital/unit sales] Target return pricing is based on break even analysis. Break-even volume = fixed cost /(price – unit variable costs) Different prices are considered and their impact on sales and profits are estimated. This method ignores the market demand and is solely derived from costs. But it helps ensure that the price set exceeds the costs which helps in earning profits. 2. Demand Oriented Pricing method – Demand cannot be ignored while considering pricing decisions. What customer thinks about the product (perceived value) and the market demand is given importance in this method. There are two ways of setting prices under this method – Perceived value pricing and Value pricing. 1.1 Perceived value pricing – in this method the price is set either matching or lower than customer perceived value of the product. The organization invests in promotion activities like advertising and sales force to communicate and educate customers on the perceived value of the product. For consumer products, it is based on psychological pricing strategy. Many times customers are willing to pay higher price depending on their perception of quality for which they are paying. It becomes essential for organization’s to conduct market research. The data collected through research should give a realistic estimate of the market’s perception of the value of the product. Perceived value can be based on brand image, product value based on its performance, quality, distribution network, after sales service, etc. For example, an electronic manufacturer created a temperature sensing device. Unsure of setting the price, the organization conducted a survey on their expectations as compared to similar or same products in the market. It was learned that the existing products were not as accurate. The customers showed great interest on the reliability and accuracy of the product. This helped the organization price the product little higher that the competing product in the marked based on customer perception. The organization’s product was more accurate than those available in the market. The organization should strive to deliver more value that the competitor’s product and communicate the same in the target market. 1.2 Value pricing – the price is set lower that the value being offered to the customer. The price is generally lower as compared to the high quality of the product. Reliance Jio is adopting this strategy for providing high speed internet at fairly lower price than its competitors. Other examples include pricing strategy adopted by Wal-Mart, Big Bazaar. Everyday low pricing (EDLP) is another value pricing tool used at retail level. There are no special sales or promotions done. In high-low pricing, the prices are set higher for a longer period but promotions are done to sell products even lower than EDLP for a certain period. Big Bazar sells products at lower prices on Wednesdays. The ecommerce giants like Flipkart and Amazon have low prices for products on festival days (Flipkart’s Big Billion sale on Diwali festival in India generates revenues in billions on a single day). 1.3 Demand-Modified Break-Even pricing – in this method the demand estimates in conjunction with break-even analysis and setting the alternative prices to achieve the highest profit. The estimates of market demand are required at feasible price. Then break-even points and expected total sales revenue is calculated. Here the primary challenge facing the organization is obtaining the right estimate of the price and quantity relationship. For example, a unit sold at $5, $7 or $10 can generate break-even at different profit earnings depending on the demand forecasts. The organizations can do analysis on historical data, conduct direct customer interviews to check their response for different prices, or conduct in store experiments where consumers make purchase decisions. 3. Competition Oriented Pricing method – although an organization cannot overlook the demand and cost factors when setting price, many organizations set the price of a product in relation to the competitors prices. 1.1 Going-Rate pricing – the price of the product is set equal, above or lower than that of the competitor. This method is more popular in cases where costs are difficult to measure and demand has no relation with the price. The organization believes that the market leaders are better able to set the price. This method is also more suitable when costs and demand are stable and have minimal effect on sales and profits. 1.2 Sealed-bid pricing – the firms bid the lowest to increase the odds of being selected. The firm sets a price anticipating how the competitor will respond instead of relying on the costs and demands associated with production. The organization can win the contract which requires pricing less than other firms. However, the cost factor cannot be ignored as the firm is in the business of making profits. 4. Auction based pricing and Group pricing are also becoming popular with the increased use of internet. The above methods narrow down the approach in setting the final price. However, other pricing methods also should be considered. Psychological pricing –the law of demand is now always successful for making sales and profits. Customers are influenced via psychological pricing methods like odd-even pricing ($19.99), pricing the product highlighting the quality, etc. Customers usually estimate the price of a product based on their past experience or noticing the prices at some places or media channels. The sellers try to tab on these perceptions and manipulate these reference prices. They may display the product among prestige and expensive products, etc. Influence of other marketing mix elements –Price can also be set basis the brand image, quality, advertising, etc. in relation to competition. If an organization has invested heavily on advertising for an average quality product, consumers are willing to buy a product that is well known. Similarly, customers are willing to buy a product only if there is a service center for the manufacturer in their town. For example, customers are happy buying a Samsung mobile instead of an Apple’s iPhone in a developing country because of easy access to Samsung service center. (The above discussion is loosely based on David Cravens, Gerald Hills and Robert Woodruff. Marketing Management, AITBS books, Delhi 2002; and Prof. Kotler’s, Marketing Management, 11th edition) Advertisements 6) Implementation and Control – Apart from studying the response from the consumer, the impact of pricing on distributors and sales people should also be considered. The successful implementation of price and making changes to it depends largely in coordination with the distributors and sales team. These are the people who directly talk to consumers and their inputs become very valuable in price changes. For successful control of prices, an organization should closely collect data from- • Consumers, • Distributors, • Staff members who come in direct contact with consumers, • Reaction from competitors. The data collected should be carefully monitored and acted upon by the managers who work on pricing objectives and strategies. THE PRICING METHODS Organizations mostly choose the pricing methods based on demand, costs or competition in the target market. Some of the pricing methods are given below- 1) Cost Oriented Pricing method – Costs form the base of price range and there are two commonly used methods of setting the price – Cost-Plus/ Markup pricing and Target Return pricing. a) Cost-Plus/ Markup Pricing – It involves adding an additional percentage of profit to the sellers per unit cost of the product. The profit or markup is percentage of the selling price instead of the cost. The following formula can be used to determine the price- Selling price = Average unit cost/ (1 – Desired markup percentage) If the average unit cost is $10 and the markup is 20%, then the selling price will be $12.5. [10/1-0.2). This method is successful only if the marked-up price generates expected sales. The major drawback of this method is that it ignores the demand, competition and perceived value of the product. This method is popular in retail and wholesale trade. It depends on the type of goods. The markups are set higher on seasonal goods, specialty goods, goods with high storage and distribution costs, goods with inelastic demand like medicines. Premium goods will have a higher markup as compared to ordinary consumer goods. There are benefits of using this method. It avoids price wars are competition is not taken into account. The costs are identified and taken into consideration which is easier to analyze as compared to demand and competition. As demand is not considered for setting a price, the consumers are charged fairly. Else the price will be set higher if the demand is severe in the market. Advertisements b) Target Return Pricing – In this method the price is set such that the profit would give a target rate of return on the investment (ROI). It determines the level of sales needed to cover all the costs. The firm tries to determine the price at which it will break even or make the target profit it is seeking. The fixed and variable costs are determined before setting the price. Target Return Price = unit cost + [desired return*invested capital/unit sales] Target return pricing is based on break even analysis. Break-even volume = fixed cost /(price – unit variable costs) Different prices are considered and their impact on sales and profits are estimated. This method ignores the market demand and is solely derived from costs. But it helps ensure that the price set exceeds the costs which helps in earning profits. 2) Demand Oriented Pricing method – Demand cannot be ignored while considering pricing decisions. What customer thinks about the product (perceived value), and the total market demand is given importance in this method. There are two ways of setting prices under this method – Perceived value pricing and Value pricing. a) Perceived value pricing – in this method the price is set either matching or lower than customer perceived value of the product. The organization invests in promotion activities like advertising and sales force to communicate and educate customers on the perceived value of the product. For consumer products, it is based on psychological pricing strategy. Many times, customers are willing to pay higher price depending on their perception of quality for which they are paying. It becomes essential for organizations to conduct market research. The data collected through research should give a realistic estimate of the market’s perception of the value of the product. Perceived value can be based on brand image, product value based on its performance, quality, distribution network, after sales service, etc. For example, an electronic manufacturer created a temperature sensing device. Unsure of setting the price, the organization conducted a survey on their expectations as compared to similar or same products in the market. It was learned that the existing products were no as accurate as the product created and customers showed great interest on the reliability and accuracy of the product. This helped the organization price the product little higher that the competing product in the marked based on customer perception. The organization should strive to deliver more value that the competitor’s product and communicate the same in the target market. b) Value pricing – the price is set lower that the value being offered to the customer. The price is generally lower as compared to the high quality of the product. Reliance Jio is adopting this strategy for providing high speed internet at fairly lower price than its competitors. Other examples include pricing strategy adopted by Wal-Mart, Big Bazaar. Everyday low pricing (EDLP) is another value pricing tool used at retail level. There are no special sales or promotions done. In high-low pricing, the prices are set higher for a longer period but promotions are done to sell products even lower than EDLP for a certain period. Big Bazar sells products at lower prices on Wednesdays. The ecommerce giants like Flipkart and Amazon have low prices for products on festival days (Flipkart’s Big Billion sale on Diwali festival in India generates revenues in billions on a single day). Advertisements FACTORS THAT AFFECT PRICING The management sets the price in relation to costs and the attractiveness of the target market like, customer’s ability to spend, demand, competition. The management also does the analysis for giving appropriate margins to the distributors. The possible range of prices also gets affected because of legal and ethical constraints. All these factors determine the upper and lower limit of price. These factors that affect pricing are discussed below- 1) Marketing Mix – Management can easily do variations to the price component of the marketing mix element. The other elements, product, promotion, and place (distribution channels) are not easy to change as it takes a considerable time, effort, and coordination to make changes to them. All these 4 elements are related to each other; hence pricing decision cannot be taken without considering the other elements. Change in promotion or distribution network will add to costs. Making changes to the product also results in costs because of need of different raw materials, technological investments, etc. Increase in costs will increase the lower limit of setting price. Making price changes or setting prices without considering Product, Promotion and Place elements will generally have negative impact on the entire marketing strategy and may also result in losses. 2) Organizational decision making and implementation – The skills of the management and right decision making by them goes a long way in successful pricing. The top management should work in coordination with the lower management for making an effective pricing strategy. The correct systems need to be used for the flow of information from the customers and distributors to all the concerned employees of the organization. Arriving at a pricing decision requires effective analysis of costs, demand and competitor strategy. The organization has to make sure that they have the right employees handling the right tasks at the right time 3) Product differentiation – How different the product is from the other offerings in the market? The difference can be in terms of its features, positioning, design, shape, etc. This difference is according to the customer’s perception about the product. Depending on the uniqueness of the product value to the customer, the organization sets a price. For example, HUL (Hindustan Unilever) has bathing soaps targeting different customers which are priced differently basis their uniqueness. Advertisements 4) Product life cycle – An organization can opt for penetration pricing or skimming pricing strategy for its new product. Skimming pricing involves “skimming of the cream” by targeting innovators, early adopters and early majority type of customers. Penetration pricing is done to gain immediate market share by keeping lowest possible price of the product. But once the product moves to the next stages of life cycle like growth, maturity and decline, price changes need to be done to counter competition and ensure market survival. In the decline stage the prices are kept so as to cover the costs and utilization of the inventory already bought from the suppliers. The strategy is to make as much earnings as possible to cover the fixed costs for which the organization has already paid – raw material, etc. 5) Distribution Network – As the distributors make their earnings by selling products from manufacturers or other distributors, the organization has to ensure that they receive their fair share of margin from sales. The organizations cannot survive without proper coordination from the distributors. Depending on the distribution network, the organizations strategy will have a direct impact on the costs and pricing. For example, an organisation can sell its products through ecommerce, or wholesalers and retailers, etc. Each channel has its merits depending on the marketing strategy of the firm. 6) Suppliers – The price at which the raw materials are bought from the suppliers, and changes in the same by the suppliers also affect the pricing decisions. The contract signed with suppliers make have changes after its renewal. Sometimes, suppliers have monopoly in the market in the absence of any other supplier for the same raw materials. The organizations always try to maintain cordial relation with the suppliers as the entire production depends on the products supplied by the suppliers. So the pricing decisions of suppliers have direct impact on the pricing decisions of the firm. 7) Buyers – The buyer behavior of the target market also has a great influence on the pricing decisions. The organizations constantly gather information from retailers, sales people, etc. on the response of customers. The buyers can influence price decrease by majority of them not buying and giving negative feedback about the price to the distributors and sales people. Thus the organization has to make changes to the price basis the majority of buyers in the target market. Advertisements 8) Demand – Demand cannot be ignored while considering pricing decisions. The customers understanding of the product (perceived value), and the total market demand in the market affect the price strategy largely. The demand can be elastic, wherein a fall in price would result in increase in demand. For example, 10% decrease in price would result in 20% increase in demand in the target market. If demand is inelastic, a fall in price doesn’t has a significant increase in demand. For example, a 10% price reduction may increase demand by 0.2%. The firm has to study the market demand and formulate its pricing strategy. The marketing managers are concerned with the level of demand at different price levels. The cost factor also is considered when evaluating demand for pricing. If the costs have also gone up, lowering the price of a product in elastic demand, will not generate profits. 9) Competition – The pricing strategies of competitors affect the product pricing decisions. An organization serving the same target market eats into the market share of the organization. To gain market share as much as possible, the organization has to constantly strive to gain more customers. The organization invests and makes changes in the product via differentiation (to prove product uniqueness), promotion and distribution (place) to counter competition. Depending on the price changes by competitors, the firm adjusts the price of its product to stay, survive or maintain leadership in the market. A firms pricing is affected by the marketing strategies of its competitors. 10) Target market attractiveness and economy – The spending power and types of customers (early adopters, laggards, etc.) in the target market also affects the pricing strategy. If the economic condition of the target market is good, there is great opportunity for the organization to generate sales via different pricing methods and strategies – Market penetration, market skimming, perceived value pricing, demand differential pricing, etc. If economic condition is weak, the prices are usually set low. Many times, there are no competitors in such situations, but the pricing is set so as to serve the demand in the market. If prices are set high, a competitor will usually enter the market with a low priced product. 11) Government regulations – The government regulates the prices of products through its various policies. These policies ensure that a customer is not exploited by increase in unreasonable prices. For example, the government of New Delhi (union territory and capital of India) had to intervene when customers were unfairly charged during peak season by the cab service companies. Advertisements 12) Ethical constraints – With long term moral effects of pricing decisions, the management should consider its commitment to serve the society. Ethical constraints suggest that a firm should make a reasonable profit, provide quality products and make them available at the right place at the right time. Most of the organizations try to maintain an image of themselves considering the effect of non-ethical values in the long run. Is it justified to charge customer based on product value (perception) itself even if the costs are low and profit margins too high? How high the price can be set? Management considers such questions relative to its social responsibility.10 Minutes0 Questions
- 3.10L10. Marketing Mix Strategies
- UNIT37
- 4.1LESSON 1: Marketing Channel – Definitions: Provided by Eminent Authors and Institutions ‘Marketing channels refer to an organized network of interconnected organizations and agencies involved in the process of making a product or service available to consumers.’ The marketing channels are the independent business organizations. They are also known as the middlemen, intermediaries. There are various forms of these intermediaries. They bear variety of names. They act as an interface between the firm and its customers. They facilitate the producers and ensure a smooth flow of products/services to the customers. Philip Kotler opines Channel of Distribution as that “It is a set of independent organizations involved in the process of making a product or service available for use or consumption American Marketing Association defines it as – “the structure of intra company organization units and extra company agents and dealers, wholesale and retail, through which a commodity, product or service is marketed”. Caniff and still are of the view that “it is a path traced in the direct and indirect transfer of title to a product, as it moves from producer to ultimate consumers or industrial users”. Richard M. Clewett views as – “it is the pipeline through which a product flows on its way to the consumers. The manufacturer puts his product into the pipeline or marketing channel and various marketing people move it along to the consumers at the other end of the channel”. Bowersox and cooper define channel, “as a system of relationship among businesses that participate in the process of buying and selling products and services. It means that channels comprise a number of members each responsible for specific tasks.” ________________________________________ DIFFERENT TYPES OF CHANNELS Types of channels- In Conventional marketing channel, members work independently with each other under agreement and no member has control over other member. It comprises on autonomous/ independent manufacturer, wholesaler and retailer. Each member is concerned about increasing the profits of its business and not the profit of the entire channel. For example, the manufacturer will perform the function of Product development, branding, pricing, promoting and selling. The wholesaler performs its function of buying, stocking, promoting, displaying, selling, delivering, finance, etc. The decision making resides in each firm and there is lack of proper planning to achieve the objectives of the entire channel. Vertical marketing channel has the manufacturer, wholesaler and retailer working as one system. They formally agree to cooperate with each other. The responsibility of functioning of each channel member in owned by one member. This arrangement is done through contractual agreement. The member which has authority over all the member can be the manufacturer, wholesaler or the retailer. They work in cohesion, and conflicts between channel members don’t exist. This type of channel came into existence to avoid disagreements and conflicts among channel member. As independent members try to force their influence to meet their objectives, there is always a possibility of conflict and powerful channel member influencing the other. Once the channel operates as a one system and managed by one member, there is much clarity and coordination among channel members to achieve the channel objectives. In Multiple marketing channel, the manufacturer utilises two or more marketing channels in the target market. This channel can be planned and implemented for various reasons. A manufacturer gains more market coverage through additional channel by targeting additional segments. For example, introduction of ecommerce serves a segment of consumers that are tech savvy and like home delivery and research of products on internet. It can also lower the costs. For example, a manufacturer can open a company store in the target market. Customers would prefer a company store rather than an intermediary because of reasons like brand image, etc. here the firm saves on the margins that it shares with the channel members. If the firm is a market leader, an additional channel often brings competition among the intermediaries who strive to promote and sell the products more enthusiastically. An additional channel like a sales force also helps getting directly in contact with the customer. This provides proper education, and service for complex products to the customer and a reliable feedback to the organization. Channel strategies organizations, depending on their marketing strategy, decide on the number of channel members. There are three channel strategies that organisations chose from – exclusive distribution, intensive distribution, and selective distribution- • exclusive distribution – in exclusive distribution, a firm selects only one or few intermediaries for product distribution. This leads to a strong relationship between the manufacturer and the intermediary. This system demands high level of support between the manufacturer and distributer. They both become highly dependent on each other. Manufacturer requires the knowledge and distribution expertise of the intermediary. The intermediary is asked to promote the product, and they generally do this enthusiastically as they get the benefits of higher sales. The intermediary being the sole distributor benefits from the product’s success in the market. In case the manufacturer alters the contract or gives additional selling rights to other intermediary, the relationship between intermediary and the manufacturer hits a low. Intermediaries may block the sale of products at its outlet. Many tv series sign exclusive contracts with networks for exclusive premier on certain tv channels. Manufacturers of electronic items and automobiles also sign exclusive distribution contracts. In india, Motorola, gave exclusive rights to amazon india to launch and sell its moto g4 model of its mobile phone. • intensive distribution – in intensive distribution, a firm sells products through as many outlets as possible. The products which can be easily accessed by customers without much shopping effort are sold through intensive distribution. For example, newspapers, milk, soaps, etc. These products do not require much additional services from intermediaries apart from handling and assigning shelf space. A customer can walk into any retail store or supermarket or a shopping mall and choose or ask for the product needed. The consumers can get these products when and where they are needed. These for mostly the FMCG products. This strategy provides great brand exposure and consumer convenience is given high priority. • Selective distribution – In selective distribution, the manufacturer opts to distribute products at select outlets and in select regions. This distribution lies between Selective distribution and Intensive distribution. Selective distribution gives more market coverage than Exclusive distribution and better control on the marketing channel than Intensive distribution. The intermediary may be required to add value in some way like outlet ambience, customer education before and after the sale of the product, etc. This channel strategy is also less costly as compared to Intensive distribution. For example, Cannon cameras can be found in many outlets but not all the models at all these outlets. The manufacturer sells its select models at select outlets appealing to different customers in the target markets. For expensive products organisations usually go for exclusive distribution over selective and intensive distribution. This way the firm controls the prices as well as the brand image. the steps involved in designing a marketing channel A marketing channel not designed effectively fails to make an excellent product successful. The firms usually follow the below steps for designing a marketing channel- Analysis – A channel design starts with analysing the market requirements. Basis the customer, product category, and marketing environment, the organisation has to follow the matching channel strategy – Exclusive distribution, Intensive distribution and Selective distribution. The availability of the intermediary also influences the selection of the channel member. The intermediary that the organisation wishes to sell through should be available in the target market. In their absence, the organisation will have to opt for an intermediary that is available to them. Or the organisation will have to invest to open their own stores, opt for direct selling, etc. Sometimes the intermediary is unwilling to distribute the organisations products. In such cases the firm should be ready to involve channel alternatives. The firm should take into account the functions necessary to ensure the availability of product to end users. These functions should be clearly defined as to which functions that the firm can itself perform like storage, transportation, after sales service, etc. The organisation can choose intermediaries from wholesaler, retailer, sales personal, agents and brokers, etc. The availability and capabilities of different intermediaries, number of intermediaries, and their services to competitors should be carefully analysed. Evaluation – The evaluation process involves study of costs involved, time constraints relevant to channel development, availability of channel members, political and legal constraints, functions and control of the channel members. This process is very critical and requires expert planning. For example, in intensive distribution at retail outlets, the costs may go up but there is also a great possibility of high sales turnover. In contrast, in the presence of a broker, the organisation will need to invest in promotion activities to create awareness of the product. Personal selling gives the organisation control on its selling efforts. The channel implementation usually takes a long time to generate the desired results. The firm has to decide on a channel that can be developed in the shortest period and is effective. A good product of customer’s choice lying in the stores just adds to costs and losses to the organisation. The organisation also needs to consider the control factor over the channel members. In VMS (vertical marketing system) the member which has authority over all the member can be the manufacturer, wholesaler or the retailer. As independent members try to force their influence to meet their objectives, there is always a possibility of conflict and powerful channel member influencing the other. The manufacturer controlled channel gives the manufacturer control over the prices, customer service, market coverage, etc. Sometimes the market leaders (competitor) control the intermediaries, and threaten to withdraw their products for selling competitor products. An organization has to closely study the intermediaries of the competitors. If both the rival firms sell through the same retailer, intermediaries often influence sale of a product that gives them higher profit margin. Legal and political constrains need careful consideration for channel development. Every state and region has local laws that can interfere with the channel functions. Similarly the firm has to outline the terms and conditions on various aspects of rights that can be given to the intermediaries. Channel selection An organisation can select one or more channel alternatives. The firm can do market testing and experiment with the channel alternatives. Two factors that affect the final selection are – the reach of the intermediaries to the customers in the target market and economic viability in the channel. Intermediaries consider the some or all of the below factors before getting into a relationship with a producer- • Profit margin • Effect on or reaction from other channel members • The new product category relative to the other products the intermediary helps distribute • Manufacturers brand image and relationship with other members in the market • Costs involved in functions like storage, promotion, etc. A firm can choose one or more channels basis its objectives and geographic location of the target markets. Lesser the conflicts between channel members helps in efficient and effective distribution network. There could be situations that a conflict arises when a manufacturer opens a factory outlets in addition to other channel network. Here the customers benefit from a reduced price and manufacturer can increase the profit margin to the intermediaries because of increase in sales. It requires careful consideration of various factors before final channel selection. After all the intermediaries represent the manufacturer. Customers create an image about the manufacturer through the service they receive from the intermediaries. An organisation has to constantly revise its channel strategies and make changes with the change in needs and wants of customers. THE IMPORTANCE/ OBJECTIVES/ ROLE OF MARKETING CHANNELS. Marketing channels from the soul of the marketing function. Consider a product of customer’s choice made by a manufacturer at the right price. Now when a customer wants to buy the product, he will have to locate a manufacturer who may be in a different region. Just making enquiries about the product, getting it, etc. will take immense effort from the customer. It has been noted that most of the products in the market fail if they are not made available to the target customer at the right time and at the right place. The roles, functions and benefits of marketing channels are listed below- 1) When the product information is available (promotion), the customer is bound to make enquires with different retailers, ecommerce sites, wholesalers, etc. It becomes important for the manufacturers to ensure the product is easily available to the customers. Else a competitor will take advantage of this opportunity and introduce the product with different intermediaries for the customer. 2) Presence of intermediaries reduces the number of links between the manufacturers and the buyers. As shown in the figure, for example, if the producer 1 manufactures shirts and producer 2 manufacturers shoes. So a customer looking for both these items will have to contact these 2 manufacturers separately. This effort will be greatly reduced if both of these items are available with an intermediary like a retailer. This not only benefits the customer but also the manufacturer in meeting its marketing strategy, sales, etc. 3) The presence of the marketing channels ensure market coverage and a successful marketing strategy for the organisation. The intermediaries provide a variety of products from different manufacturers at one place. The customer doesn’t needs to make extra efforts to reach the manufacturers. The intermediaries not only provide producers products but also act as hub of information about the products and manufacturers. A customer can get all the required information on the product like its features, quality, warranties, guarantees, and also have a first-hand experience of experiencing the product via demo. 4) The intermediaries provide a variety of products at one place. The buyers get a great opportunity of comparing the products and their substitutes from different manufacturers. 5) The intermediaries perform the function of product storage as well as transportation. In their absence, the manufacturer will have to perform these functions. They take the risk of transportation and storage. 6) The intermediaries reduce the transaction costs because of the lower number of links between manufacturers and buyers. 7) They are the source of information for manufacturers. The intermediaries provide information about the market like demand, competitors, consumer behaviour, consumer buyer behaviour, etc. (marketing environment) which helps manufacturers in altering marketing strategies or identifying new needs and wants in the market (information on opportunities and threats). 8) Intermediaries take the risk of new product launches. Irrespective of the acceptance of a new product in the market, the intermediaries take the risk of managing the new product that requires investment in time, effort and money. 9) Time utility function – the intermediaries perform the function of making the product available at a convenient time. 10) Place utility function – the product is made available at a convenient location. 11) Products are made available in small as well as large quantities – Break of bulk services. For example, a customer can buy a single tooth brush or half-a-dozen at a time from an intermediary. To entertain each and every request of different quantities from the buyers in the marketwill be a difficult task for the manufacturer. 12) The intermediaries help promote products via different in-store promotion activities like distribution of pamphlets, display, assigning shelf space, store salesman, etc. For example, customers do ask the store representatives about the value of the product, any complaints from other customers, etc. 13) Knowledge of the region – a manufacturer will need help of local people in the target market on the expertise on the local language, culture, etc. The retailers, etc. perform this function, and help the manufacturer in implementing its marketing strategies. We can conclude that the presence of intermediaries, middlemen or resellers fill the below gaps between the manufacturer and the consumer- a) Space gap – manufacturer location is at different location from the buyer. Intermediaries make the product available at the convenient place to the buyer. b) Time gap – As manufacturing takes place at a different place from the buyer’s location, product reaching the buyers place at the time of need is not possible. Intermediaries store the products in advance to ensure the product is readily available when needed. c) Offerings gap – Intermediaries store different kinds of goods from same as well as different manufacturers. The customer can buy groceries, clothes, shoes, etc. from a single retailer now days. For example, shopping malls, supermarkets, etc. d) Quantity gap – Products are made available in small as well as large quantities. e) Information gap – Intermediaries educate the customer about the product through demo, etc. This function helps buyers to compare different products, understand the value delivered by the product, etc. f) Product variety gap – Intermediaries store goods from different manufacturers. Buyers don’t need to contact the manufacturer individually for comparison, etc. The manufacturer can decide to skip the intermediaries. Usually large organisations directly sell to consumers like Apple store, Vodafone mini store, etc. Here the manufacturer saves the costs on intermediary margins and reduces the cost of the product. The lower cost increases the profit margins. Some examples are direct selling through company sales representatives, mail, vending machines, phone calls (telemarketing), infomercials, internet selling, etc. Channel Flows – Supply Chain Managementinvolves the management of materials, information, etc. from the suppliers to the physical distribution of the finished products to the consumers which encompasses logistics, material handling, and purchasing. The entire management in Supply Chain from the source to the consumer and back involves forward flow as well as backward flow. Apart from flow of physical products, the other flows are information, ownership, money (financial transactions), and risk. Physical flow starts from the source of the channel that is suppliers. This flow, mainly via transportation is among suppliers, manufacturers, intermediaries, and consumers. There may be backward flow of physical goods in case of returns for various reasons like defects, etc. Title flow involves transfer of ownership through the channel. The flow of ownership accompanies physical flow most of the times but not all the intermediaries take title of the product. Brokers and agents negotiate deals but don’t take title of the product. Payment flow or financial flow is movement of payment of goods within the channel. It may involve financial institutions like banks, finance firms, etc. Payment can be in cash or credit and it flows in the direction opposite to the flow of physical flow. Information flow involves negotiation, terms of sale, advertising, etc. It is the flow of information within the channel among different intermediaries, consumers, manufacturers, and suppliers. It may be a feedback, an appreciation, a request, or even a complaint from the consumer, and a reply to this from the manufacturer, wholesaler or a retailer. Risk flow involves all kinds of risks in handling the product. It usually flows with the flow of physical flow and affects all the members of the channel. Product becoming outdated, passing its expiry date, defects, price changes, etc. are many of the risks that affect the buyers and sellers. All the members on the channel try to reduce the risk by various means like insurance against damage, finance firms increase interest rates, etc. CHANNEL MANAGEMENT Each member in a channel is an organisation itself with its own marketing objectives. Each of these firms strive to achieve its objectives like increase in revenues, be a market leader, etc. The channel members should be viewed as customers by the manufacturer. This way the manufacturer understands the needs and challenges faced by the intermediaries and accordingly take steps that in the best interest of the manufacturer as well as the intermediaries. For smooth functioning of operations, clear policies and procedures should be agreed upon and formally signed. If the policies and procedures are not clearly shared and formally agreed to, the possibility of conflicts is high among channel members. Motivating channel members –An organisation should sell the product to intermediaries as a customer considering their needs and wants. This helps a manufacturer achieve its objectives. It should cooperate and help the intermediaries in every possible way with training programs, market surveys, etc. to improve their performance. There should always an open and healthy two way communication to share information. An open communication channel helps a channel work effectively when information about the customers, challenges of the intermediaries and strategies of manufacturers are shared. The information received by the manufacturer is used in product modification/ development, packaging strategies, promotion strategies, pricing strategies, etc. The other strategy that many manufacturers follow is offering the intermediaries higher margins, premiums, allowances, etc. In the presence of intermediaries, manufacturers seldom come directly in contact with the customers.Organisations always strive to build a long term relationship with channel members which is beneficial to both the organisation as well as the intermediaries. The organisation should be able to convince the intermediaries that associating or getting into a partnership is in the long term interest for both of them. Channel Conflict – Channel conflicts crop up when there are disagreements on the functioning or operating practice between any of the channel members. These conflicts may lead to a channel member leaving the channel. There could be many reasons for conflict. It can be a vertical channel conflict where a channel members at different levels get into disagreement within the same channel, like retailers and wholesalers. Sometime, wholesalers are not able to meet the sales targets of the manufacturer. Constant pressure from the manufacturer may result into a conflict. In horizontal channel conflict, channel members at the same level get into a conflict. For example, retailers can get into conflict for one offering a poor service than the other, giving services to customers in each other’s territory, etc. When a manufacturer has multiple channels (two or more channels) serving the market, there can be conflicts which are known as multiple channel conflict. When a manufacturer adds a channel to existing channel, most of the intermediaries object as it affects their market share and sales. For example, a manufacturer opening a company store for selling its products in addition to selling at retail stores. Similarly, introduction of ecommerce channel. In such cases, manufacturers try to negotiate with channel members by putting forward two options – increase their profit margins, sell some exclusive rights of selling some products only through the channel member, and taking orders through company website and leaving the responsibility will the retailers to deliver and collect the payments. These conflicts can only be solved through dialogue. If the channel members are open and clear in sharing their concerns with each other, there are less chancers of them getting into conflicts. Modifying or Revising Channels – The manufacturer has to constantly review its channel to ensure it serves the purpose and meets its objectives. There are several reason which force a manufacturer to modify its channel. • There could be performance gaps in the channels. The organization should identify these and take corrective action for proper functioning of the channel. • Introduction of new channel options like ecommerce, vending machines, etc. warrant the need to introduce these channels to stay ahead of competition and serve the customers in best possible way. Change in consumer buying behavior, • Entry of rival firms, • Changes in marketing environment (economical, legal and government policies, demographic changes, etc.), • Market expansion, • Introduction of new product in the product line, • Product moving through different stages of life cycle Organizations should monitor and revise their channels relative to the changes in the market. These changes could be because on new opportunities or threats in the market, or some weakness with in the channel that needs corrective action. As making changes to the channel is a complex and time consuming activity that involves the efforts as well as costs of experts, organizations have to be careful and clear when formulating strategies for the channel. DIFFERENT KINDS OF INTERMEDIARIES Intermediaries, also known as middlemen and re-sellers, are organisations that perform the different functions in the marketing channel to connect the manufacturer to the buyer. These can be organisations as well as individual business men. There are two types of middlemen, one those who take title to the products (merchant middlemen), and others who just facilitate the sale and purchase of product without taking title of them (agent middlemen). The first category are known as merchant middlemen which are known as wholesalers and retailers. The agent middlemen are the agents and brokers who negotiate purchase or sales, or both and do not take ownership of the product. Example of agent middlemen is agents, brokers, commission agent, forwarding and clearing agents. I. Merchant Middlemen – 1) Wholesalers – These are the organizations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc. There are different kinds of wholesalers and they can be broadly put into three categories- a) Full function wholesaler – they buy products/goods from manufacturers and sell them to other resellers like retailers, traders, etc. below the marketing or distribution channel. They buy in bulk from different manufacturers, break down the bulk, store, sell the smaller lots for cash or credit, and also help with information (advice, education, etc.) to whom he sells. As they take title to the products, they are also responsible for the risk factor involved. b) Converter wholesaler – as the name suggests, they buy the products in bulk, process them before selling them to the following channel members. For example, a wholesaler buys textile and bleaches it before selling it to other merchants. c) Industrial wholesalers – they sell the products to manufacturers instead of retailers. d) Drop shipper wholesaler – a drop shipper wholesaler doesn’t handles the product. They take orders and coordinates with the manufacturer to deliver the goods directly to the retailer or other merchants in the channel. As they take the risk of the products, they need to handle the products in case the retailer, etc. cancels the order. They trade in bulk like coal, sand, lumber, etc. 2) Retailers – Retailers sell products/ goods to final consumers for consumption or use. Retailers buy the products from different sources like manufacturers, wholesalers, traders, etc. basis the need and want in the market. They are considered the final link with the consumer in the marketing/ distribution channel. Most of the retailing in retail stores though new concept of retailing called non-store retailing is becoming popular. It is direct selling to customers via infomercials, telecalling, internet selling, ecommerce, direct mail, personal selling, etc. Retailers can be broadly classifies as small scale retailers and large scale retailers. Small scale retailers – a) Unit stores – these are general stores or single line stores like clothes, gift shops, grocery stores, utensils, book shops, bakery, etc. b) Street traders – they sell products on streets, footpaths, etc. They usually sell items that can be easily carried and are quite unique like, mobile accessories, gloves, fancy accessories, etc. They can often be found at bus stands, railway stations, etc. on busy places at times when people go out for shopping, to work etc. c) Market traders – these open for selling on specific days and move around wherever there is an event, or time specified market. They have a fixed location and arrangement made for selling like a selling van, setting a kiosk, outlet, etc. on a fixed location. For example, farmers market, magic event, crockery sales, etc. d) Hawkers and Peddlers – these retailers sell goods door to door on their cart, bicycle, etc. They carry items that are in demand and as the demand changes because of various reasons like season change, they start selling different products. A hawker selling woollen clothes in winter may change to selling clothes suitable for warm climate in summer. e) Cheap jacks – these retailers have a specific place in a locality but do change locations for business. They usually sell unbranded items like clothes, plastic vessels, kitchen utensils, shows, etc. They set up the business for a specific time before changing location. Large scale retailers – a) Departmental stores –a departmental store has wide variety of products being sold under one roof. From there one can find a raincoat to a pen. They sell a particular specialised product or an entire product line. b) Discount store – here a standard items are sold at lower prices. The business is done on higher sales and lower profit margins. For example, Wal-Mart, 49-99. c) Chain stores – these are stores near residential areas selling the same kind of products in different localities. These can be in the entire region, state or nation. For example, Nike stores, Dell, Raymond, Big Bazaar, etc. The have their chains in almost all towns. These centrally owned and managed. They mostly deal in same products across all chains like, fast food chains, Nike products, etc. The items for sale are bought centrally and sent across to all the chains. Since it operates under the same brand, the prices and quality is standardized. For example, a McDonald’s outlet will have same kind of price range, and feel and appearance of the store in different locations. d) Mail order houses – through this the seller shares information about the product via different means like advertising, press, post, catalogue, telecalling, etc. The buyer doesn’t visit the seller but orders the product and receives it via post, courier, etc. The business is done by mail or other means without inspecting the product by the consumer. TV advertising like infomercials are considered as extension of mail order houses. Here the sellers provide as much information as possible to the consumer through different media as customer will buy the product basis the advertising. e) Super market – it is a large retail store which sells a variety of consumer goods with self-service. They sell food items and articles of daily needs like, cold cream, bakery, vegetables, meat, groceries, fruits, dairy, etc. They done deal in credits and consumers move around the store to choose products of their choice from a wide variety. f) Super stores – These are oversize department stores and also known as hypermarkets.They carry a wide range of general merchandise and FMCG’s. A customer can get services like haircuts, salons, restaurants, banking, etc. at these stores. g) Convenience stores – These are small stores that deal in limited-line of high selling goods at a higher price. They are like mini-supermarkets. They are located at the corner and have fast food franchise or fast food items also. h) Consumer cooperative – It is an association of consumers themselves who buy products in large bulk for members as well as non-members. The consumers or locality residents themselves manage all the activities from designating a manager to setting the policies of the store. II. Agent middlemen- They facilitate the sale and purchase of product without taking title of them. They negotiate the sales between sellers and buyers, and generally receive commission for their service. They are classified as – a) Commission agent – They do not assume any risk of the products and receives a fixed rate of commission for his service. They are expert in dealing with the commodities they deal in and have knowledge about the market trends and the producers. They take orders and arrange the transport, delivery and payment transactions. He may or may not take possession of goods. b) Brokers – they are agents who do bargains and arrangements between parties and receives a compensation known as brokerage. They bring the buyers and sellers on one platform for discussion. Other agent middlemen are Factors who sells goods for compensation. They can sell the product in their name at a price of their choice. They buy goods on credit or cash and can sell on credit. They can sell the products in the sellers name by issuing receipts. Forwarding and clearing agents fulfill the responsibility of collecting and delivering of products on behalf of others. They are mostly dominant in export and import business. Forwarding agents receive goods and deliver the same to the intended destination. Clearing agents take delivery of imported goods and help clearance at entry. Similarly there are Auctioneers and Selling agents employed by sellers. DIFFERENCE BETWEEN WHOLESALER AND RETAILERS AND THEIR TYPES. 1) Wholesalers – These are the organisations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc. There are different kinds of wholesalers and they can be broadly put into the below categories- a) Full function wholesaler – they buy products/goods from manufacturers and sell them to other resellers like retailers, traders, etc. below the marketing or distribution channel. They buy in bulk from different manufacturers, break down the bulk, store, sell the smaller lots for cash or credit, and also helps with information (advice, education, etc.) to whom he sells. As they take title to the products, they are also responsible for the risk factor involved. b) Converter wholesaler – as the name suggests, they buy the products in bulk, process them before selling them to the following channel members. For example, a wholesaler buys textile and bleaches it before selling it to other merchants. c) Industrial wholesalers – they sell the products to manufacturers instead of retailers. d) Drop shipper wholesaler – a drop shipper wholesaler doesn’t handles the product. They take orders and coordinates with the manufacturer to deliver the goods directly to the retailer or other merchants in the channel. As they take the risk of the products, they need to handle the products in case the retailer, etc. cancels the order. They trade in bulk like coal, sand, lumber, etc. 2) Retailers – Retailers sell products/ goods to final consumers for consumption or use. Retailers buy the products from different sources like manufacturers, wholesalers, traders, etc. basis the need and want in the market. They are considered the final link with the consumer in the marketing/ distribution channel. Most of the retailing in retail stores though new concept of retailing called non-store retailing is becoming popular. It is direct selling to customers via infomercials, telecalling, internet selling, ecommerce, direct mail, personal selling, etc. Retailers can be broadly classifies as small scale retailers and large scale retailers. i) Small scale retailers – a) Unit stores – these are general stores or single line stores like clothes, gift shops, grocery stores, utensils, book shops, bakery, etc. b) Street traders – they sell products on streets, footpaths, etc. They usually sell items that can be easily carried and are quite unique like, mobile accessories, gloves, fancy accessories, etc. They can often be found at bus stands, railway stations, etc. on busy places at times when people go out for shopping, to work etc. c) Market traders – these open for selling on specific days and move around wherever there is an event, or time specified market. They have a fixed location and arrangement made for selling like a selling van, setting a kiosk, outlet, etc. on a fixed location. For example, farmers market, magic event, crockery sales, etc. d) Hawkers and Peddlers – these retailers sell goods door to door on their cart, bicycle, etc. They carry items that are in demand and as the demand changes because of various reasons like season change, they start selling different products. A hawker selling woollen clothes in winter may change to selling clothes suitable for warm climate in summer. e) Cheap jacks – these retailers have a specific place in a locality but do change locations for business. They usually sell unbranded items like clothes, plastic vessels, kitchen utensils, shows, etc. They set up the business for a specific time before changing location. ii) Large scale retailers – a) Departmental stores –a departmental store has wide variety of products being sold under one roof. From there one can find a raincoat to a pen. They sell a particular specialized product or an entire product line. b) Discount store – here a standard items are sold at lower prices. The business is done on higher sales and lower profit margins. For example, Wal-Mart, 49-99. c) Chain stores – these are stores near residential areas selling the same kind of products in different localities. These can be in the entire region, state or nation. For example, Nike stores, Dell, Raymond, Big Bazaar, etc. The have their chains in almost all towns. These centrally owned and managed. They mostly deal in same products across all chains like, fast food chains, Nike products, etc. The items for sale are bought centrally and sent across to all the chains. Since it operates under the same brand, the prices and quality is standardized. For example, a McDonald’s outlet will have same kind of price range, and feel and appearance of the store in different locations. d) Mail order houses – through this the seller shares information about the product via different means like advertising, press, post, catalogue, telecalling, etc. The buyer doesn’t visit the seller but orders the product and receives it via post, courier, etc. The business is done by mail or other means without inspecting the product by the consumer. TV advertising like infomercials are considered as extension of mail order houses. Here the sellers provide as much information as possible to the consumer through different media as customer will buy the product basis the advertising. e) Super market – it is a large retail store which sells a variety of consumer goods with self-service. They sell food items and articles of daily needs like, cold cream, bakery, vegetables, meat, groceries, fruits, dairy, etc. They done deal in credits and consumers move around the store to choose products of their choice from a wide variety. f) Super stores – These are oversize department stores and also known as hypermarkets. They carry a wide range of general merchandise and FMCG’s. A customer can get services like haircuts, salons, restaurants, banking, etc. at these stores. g) Convenience stores – These are small stores that deal in limited-line of high selling goods at a higher price. They are like mini-supermarkets. They are located at the corner and have fast food franchise or fast food items also. h) Consumer cooperative – It is an association of consumers themselves who buy products in large bulk for members as well as non-members. The consumers or locality residents themselves manage all the activities from designating a manager to setting the policies of the store. Functions of Wholesalers Wholesalers are the organisations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc. Below are the major functions of Wholesalers- 1. Buying and assembling – The wholesalers buy products from various manufacturers and assemble them for supply to retailers. They store these products in their warehouses, and ensure supply of product as per demand in particular region. 2. Warehousing – The wholesalers not only buy products but also store them in their warehouses. The quality of the products is kept intact. The products are shipped to retailers on time, basis the demand ensuring the time lag between manufacturing and consumption is efficient and effective. The products reach the consumers as intended by the manufacturer without wear and tear. 3. Breaking the bulk – It is not feasible for manufacturers to manufacture and supply products in small quantities in the target market. The job of breaking the bulk is done by wholesalers. The consumers buy products for household purposes in small quantities. This helps retailers in storing products in small quantities to meet the demand of the consumers in the marketplace. When the stocks of the retailers are exhausted, the retailers approach the wholesalers to buy products in small quantities. 4. Dispersing of products to retailers scattered in the target market – the wholesalers help in dispersing the products all over the market to the retailers. This helps manufacturers as the task of dispersing the products is no longer with them and they can focus on other marketing functions. The wholesaler becomes a source of all buying for the retailers. The retailers don’t have to contact the manufacturer. 5. Source of market information – The wholesalers are important source of information for the manufacturers. The information about demand, competitors, customer preferences as well as substitute products is available with wholesalers. They receive this information from the retailers. Not only they receive information, they also disperse information from the manufacturers to retailers as well as other players in the market. For example, launch of a new product by a manufacturer, market position of a manufacturer, etc. 6. Financing – The wholesalers do business on credit with retailers as well as manufacturers. The retailers receive the goods on credit which helps new retailers in the market who cannot buy products by giving large sums of money. Similarly, wholesalers give advance money to the manufacturers for the products that will be received later by them. This function helps in easy flow of products even when the money is not immediately exchanged. 7. Grading and Packaging – The wholesalers not only break the bulk, but also package the goods in small quantities and grade the quality on the packaging. This is a very important marketing function which helps consumers make decisions. 8. Transportation – The wholesalers buy products from wholesalers and ship them to their warehouses and godowns. From there, the products are supplied to the retailers, etc. They may employ their own vehicles for transportation. As the wholesaler is in touch with the retailers, the supply is also done effectively (on time) and efficiently (lowest cost possible). 9. Risk bearing – Products are exposed to many risks like destruction – natural as well as unnatural disasters. They can get spoiled during transportation, climate change or may even get spoiled if not sold before the expiry date. The products also bear a risk of not sold because of less demand, reduced prices of competitor or substitute products. As the manufacturer has already sold the product to the wholesaler, this risk is borne by the wholesaler. To avoid such risks wholesalers carefully buy products in right quantities and opt for insurance of different kinds. 10. Advertising – The wholesalers also do advertising of new products via distribution of pamphlets, hoardings, mouth publicity, Television ads, etc. This helps manufacturers in market growth. The consumers learn about product launches and its benefits which helps them in making proper decision when buying a product. The functions of wholesalers also varies basis the kind of wholesaler. They are as below- a) Full function wholesaler – they buy products/goods from manufacturers and sell them to other resellers like retailers, traders, etc. below the marketing or distribution channel. They buy in bulk from different manufacturers, break down the bulk, store, sell the smaller lots for cash or credit, and also helps with information (advice, education, etc.) to whom he sells. As they take title to the products, they are also responsible for the risk factor involved. b) Converter wholesaler – as the name suggests, they buy the products in bulk, process them before selling them to the following channel members. For example, a wholesaler buys textile and bleaches it before selling it to other merchants. c) Industrial wholesalers – they sell the products to manufacturers instead of retailers. d) Drop shipper wholesaler – a drop shipper wholesaler doesn’t handle the product. They take orders and coordinates with the manufacturer to deliver the goods directly to the retailer or other merchants in the channel. As they take the risk of the products, they need to handle the products in case the retailer, etc. cancels the order. They trade in bulk like coal, sand, lumber, etc.
- 4.2LESSON 2:TOPIC: Supply Chain Management and Logistics Management What is Logistics and Supply chain management? “Logistics typically refers to activities that occur within the boundaries of a single organization and Supply Chain refers to networks of companies that work together and coordinate their actions to deliver a product to market. Also, traditional logistics focuses its attention on activities such as procurement, distribution, maintenance, and inventory management. Supply Chain Management (SCM) acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance, and customer service” – Michael Hugos Supply Chain Management As you saw in the video, supply chain management is the process of managing the movement of the raw materials and parts from the beginning of production through delivery to the consumer. In many organizations, operational supply chain decisions are made hundreds of times each day affecting how products are developed, manufactured, moved, and sold. The complexity of the supply chain varies with the size of the business and the intricacy and quantity of items manufactured, but most supply chains have elements in common, such as the following: Customers: Customers start the chain of events when they decide to purchase a product that has been offered for sale by a company. If the product has to be manufactured, the sales order will include a requirement that needs to be fulfilled by the production facility. Planning: The planning department will create a production plan to produce the products to fulfill the customer’s orders. To manufacture the products, the company will then have to purchase the raw materials needed. Purchasing: The purchasing department receives a list of raw materials and services required by the production department to complete the customers’ orders. Inventory: The raw materials are received from the suppliers, checked for quality and accuracy, and moved into the warehouse. Production: Based on a production plan, the raw materials are moved to the production area. These raw materials are used to manufacture the finished products ordered by the customer and then sent to the warehouse where they await shipping. Image1: What is logistics and supply chain management Logistics When used in a business sense, logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations. The resources managed in logistics can include physical items such as food, materials, animals, equipment, and liquids, as well as abstract items, such as time and information. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, and warehousing. There is often confusion over the difference between logistics and supply chains. It is now generally accepted that logistics refers to activities within one company/organization related to the distribution of a product, whereas supply chain also encompasses manufacturing and procurement and therefore has a much broader focus, as it involves multiple enterprises, including suppliers, manufacturers, and retailers, working together to meet a customer’s need for a product or service. Image2: What is logistics and supply chain management Inbound Logistics A manager in charge of inbound logistics manages everything related to the incoming flow of resources that the company needs to produce its goods or services. These activities will include managing supplier relationships, accessing raw materials, negotiating materials pricing, and arranging quicker delivery. Outbound Logistics A manager working in outbound logistics will be focused on two issues: storage and transportation. He or she will use warehousing techniques to keep the finished goods safe and accessible. Since the products may need to be moved out to a customer at any moment, proper organization is crucial. Having as little product stored as possible can be advantageous since stored products are not making money, so the outbound logistics manager often has to balance company cost savings with consumer demand. The transportation function is by far the most complex part of outbound logistics. what is logistics and supply chain management what is logistics and supply chain management Basic concepts of Logistics and SCM Inventory Planning Organizations want to minimize the inventory levels due to its almost linear relationship with the cost. Yet if the demand is forecasted accurately, there would ideally be no need for inventory and the goods will move seamlessly from warehouses to customers. That would have been awesome, but it is deep into the ideal world zone. In the real world, the forecasted numbers can only take you so far and some inventory has to be maintained to satiate any surges in demand; the cost of unhappy consumers who are not serviced is often huge, and is immeasurable in most cases. Yet overstocks lead to increase in working capital requirements, insurance costs and blocked resources which could have been productive someplace else. Making a business forecast has largely been a gut-based process, but is changing rapidly in the era of data-based decision making. The forecast depends on the historical baseline for sales, seasonality (soft drinks have higher sales volume in May), recent trends (Samsung is losing out to competitors when it comes to phones, a declining trend), business cycles (economies go through expansion and contraction every few years), promotional offers (up to 50% off can drive the average fashionista mad) etc. what is logistics and supply chain management what is logistics and supply chain management Transportation The kind of transportation employed by an organization is a strategic decision (it usually accounts for around 1/3rd of the total logistics cost) based on the required level of risk exposure, customer service profiles, geographic area covered etc. Truck shipments take more time for delivery compared to air transport (customers with relaxed turnaround times); is cheaper but necessitates maintenance of higher inventory levels. Transportation serves the purpose of not just product movement, but storage as well (not very intuitive). Time spent for delivery means saved time for warehousing, and many times the cost to offload and reload shipments can be greater than the cost of letting the goods stay in the transportation vehicles itself. Two basic thumb rules apply for transportation decisions: truck load (TL) shipments are better than less-than-truckload (LTL) shipments as storage space is a perishable commodity (just like a commercial airline does not want to fly with empty seats), and the cost per kilometer decreases as the distance increases (two 500 km shipments is usually more expensive than a single 1000 km shipment). The factors which determine the economies of transportation decisions include but are not limited to: distance between the starting and destination points, and density (higher density products take less space — space constraints outweigh weight constraints by a huge margin), stow ability (spherical packaging will lead to more empty spaces compared to cubical) and volume of the goods. Different modes of transport serve different strategic ends (rail, road, air, water etc). Packaging The end goals differ: can either be done for end consumers or for logistical considerations. The packaging will then depend on the end goal; form factor plays the lead role when packaging goods for the end consumers, while function plays the lead role in packaging for logistical operations. Warehousing It is the back-end building for storing goods. Based on the needs of the organization, it can be in-house or outsourced. Primary functions of a warehouse are product movement and storage. Activities such as offloading of the goods coming from the suppliers, the intermediate packaging (if required), and shipping to other destinations (retailers or end consumers) are handled in the warehouse. Similarly, they can also serve as a storage house for handing peak consumer demand to avoid stock out of items, and acts as a buffer between the starting point (usually manufacturing plant) and ending point (think about a typical retail outlet). Different distribution strategies can be adopted by an organization based on its needs and infrastructure in place, namely: Cross-Docking: Relies on minimal processing at the warehouse level and facilitate seamless connection between “incoming” and “outgoing” goods through technologies such as bar code scanners; becoming increasingly important due to established structured communication between retailers and manufacturers; best for high velocity goods with predictable demand patterns. Supply chain management vs logistics While logistics is a rather large part of supply chain management, it is still only a part of an even larger picture. The key difference is that, while logistics is concerned with supply chain processes in a vacuum, supply chain management takes a holistic and contextual approach. Think of it like this …. Logistics asks, “The customer wants [product]. How do we get it to them?” Supply chain management asks, “How can we improve our supply chain processes to provide more value to our customers and outperform our competition?” Logistics are vital to your overall supply chain management efforts. After all, if your company literally isn’t able to physically move your products from Point A to Point B, there’s no way you’ll be able to succeed as a business. But, supply chain management involves much more than physically delivering your products. In involves improving the intertwining and tangential aspects of manufacturing, storage, delivery, and fulfillment in a way that maximizes your organization’s productivity and allows your business to truly soar. Logistics Management “Logistics Management deals with the efficient and effective management of day-to-day activity in producing the company’s finished goods and services” – Paul Schönsleben What is Supply Chain “Supply Chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer” – Martin Christopher What is Supply Chain Management Each researcher defines supply chain management differently. However, we would like to provide the simple definition as below, “Supply Chain Management (SCM) refers to the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served” -Michael Hugos What is the Difference Between Inbound and Outbound Logistics? “Inbound Logistics refers to movement of goods and raw materials from suppliers to your company. In contrast, Outbound Logistics refers to movement of finished goods from your company to customers” The Functions Of Logistics Within Supply Chain Management If we systematize all areas of logistics that need to be developed for the rational management of production resources, we can single out the following functions: Warehouse design and management. This role of logistics in supply chain management covers several tasks at once: from the design of storage facilities to the requirements for storage of products and ending with the introduction of various automation solutions (for example, for machinery intended for transporting goods within warehouses); The formation of packages. Packaging, tracking and accounting – all of these tasks allow for end-to-end control of goods on the way to the customer/distributor; Transportation of products. This includes work with cargo carriers and vehicles listed in the company’s fleet: planning their routes, calculating fuel costs, etc.; Working with customs. When an enterprise plans international delivery of goods, it is very important that during their transportation the goods fully comply with customs requirements and contain all the necessary documentation; Working with intermediaries. Intermediaries in logistics are all third-party, non-company resources that are directly involved in the implementation of supply chains. In turn, finding intermediaries with the most acceptable ratio of quality to cost of services, as well as establishing long-term, reliable relations with them are also included in the list of tasks for efficient logistics management; Difference Between Inbound and Outbound Logistics “Inbound Logistics refers to movement of goods and raw materials from suppliers to your company. In contrast, Outbound Logistics refers to movement of finished goods from your company to customers” To illustrate this term, we make a small graphic as below, As you can see, purchasing and warehouse (distribution center) communicates with suppliers and sometimes called “supplier facing function”. Production planning and inventory control function is the center point of this chart. Customer service and transport function communicates with customers and sometimes called “customer-facing functions. What is Transport and Logistics? “Transport and Logistics refers to 2 types of activities, namely, traditional services such as air/sea/land transportation, warehousing, customs clearance and value-added services which including information technology and consulting” International Logistics These are one of the most ambiguous groups of terms in international business out there. They are used interchangeably with international supply chain or international production and transportation activities. However, the most concise definition is as below, “International Logistics focuses on how to manage and control overseas activities effectively as a single business unit. Therefore, companies should try to harness the value of overseas product, services, marketing, R&D and turn them into competitive advantage” Third Party Logistics or 3PL The concept of 3PL appeared on the scene in the 1980s as the way to reduce costs and improve services which can be defined as below, “Third Party Logistics or 3PL refers to the outsourcing of activities, ranging from a specific task, such as trucking or marine cargo transport to broader activities serving the whole supply chain such as inventory management, order processing and consulting.” In the past, many 3PL providers didn’t have adequate expertise to operate in complex supply chain structure and process. The result was the inception of another concept. Fourth Party Logistics or 4PL The 4PL is the concept proposed by Accenture Ltd in 1996 and it was defined as below, “Fourth Party Logistics or 4PL refers to a party who works on behalf of the client to do contract negotiations and management of performance of 3PL providers, including the design of the whole supply chain network and control of day-to-day operations” You may wonder if a 4PL provider is really needed. According to the research by Nezar Al-Mugren from the University of Wisconsin-Stout, the top 3 reasons why customers would like to use 4PL providers are as below, – Lack of technology to integrate supply chain processes – The increase in operating complexities – The sharp increase of the operations in the global supply chains Supply Chain Network Many companies have the department that controls supply chain activity so they believe that SCM is a “function”. Some companies think SCM is a kind of management system under IT (information system or enterprise resource planning.) In fact, SCM is actually a “network” consists of many players as below, A generic supply chain structure is as simple as Supplier, Manufacturer, Wholesaler and Retailer (it’s more complex in the real world but a simple illustration serves the purpose.) The word “management” can be explained briefly as “planning, implementing, controlling”. Supply Chain Management (in supply chain education context) is then the planning, implementing and controlling the networks. Information Sharing Another important attribute of supply chain management is the flow of material, information, and finance (these are thing that can be found in lean manufacturing and six sigma project too). Even though there are 3 types of flow, the most important one is information flow aka information sharing. Let’s see the example of this through the simplified version of the bullwhip effect as below, When customer demand data is not shared, each player in the same supply chain must make some sort of speculation and this can become the management issues. According to the above graphic, the retailer has a demand for 100 units, but each player tends to keep stock more and more at every step of the way. This results in higher costs for everyone in the same supply chain. When information is shared via demand management from retailer down to supplier, everyone doesn’t have to keep stock that much. The result is a lower cost for everyone. This is sometimes called the extended supply chain or supply chain visibility. Information sharing will also reduce the needs to use the digital transformation solution such as supply chains systems, digital supply chain, predictive analytics or artificial intelligence. Supply Chain Coordination Information sharing requires a certain degree of “coordination” (it’s also referred to as collaboration or integration in scholarly articles). Do you wonder when people started working together as a network? In 1984, companies in the apparel business worked together to reduce overall lead-time. In 1995, companies in the automotive industry used Electronic Data Interchange to share information. So, working as a “chain” is the real-world practice. Conflicting Objectives Working as a network requires the same objective, but this is often not the case (even with someone in the same company). “Conflicting Objectives” is the term used to describe the situation when each function wants something that won’t go well together. For example, purchasing people always place the orders to the cheapest vendors (with a very long lead-time) but production people or project manager need material more quickly. To avoid conflicting objectives, you need to decide if you want to adopt a time-based strategy, low-cost strategy or differentiation strategy. A clear direction is needed so people can make the decisions accordingly. Cost/Service Trade-off The concept of Cost/Service Trade-off appeared as early as in 1985 but it seems that people really don’t get it. When you want to improve service, the cost goes up. When you want to cut cost, service suffers. It’s like a “seesaw”, the best way you can do is to try to balance both sides. Real-world example is that a “new boss” ask you to cut costs by 10%, improve service level by 15%, double inventory turns so the financial statement looks good. If you really understand the cost/service trade-off concept, you will agree that you can’t win them all. The most appropriate way to handle this is to prioritize your KPIs. Supply Chain Relationship To work as the same team, long-term relationship is key. Otherwise, you’re just a separate company with a different strategy/agenda. So academia keeps preaching about the importance of relationship-building but is not for everyone. Since there are too many suppliers to deal with, a portfolio matrix is often used to prioritize the relationship-building to create supply chain partners. Focus your time and energy to create a long-term relationship with suppliers of key products and items with limited sources of supply (or items with high supply chain risk.) Because people and human resource are the factors that can make or break your supply chain.
- 4.3LESSON :Marketing Communication Marketing communication process consists of integrated activities in which the targeted audience is identified. Although a well coordinated promotional program is prepared to generate the desired response from the audience. Most problems of preferences, image and immediate awareness in the target customers are focused by the marketing communication. However there are certain limitations associated with the concept of communication. These limitations include high cost and short term duration that cannot generate the desired results from the targeted customers. In recent years Marketing Communication is used by most marketers. As to build customer relationships at the stages of pre-selling, selling, utilization, and post utilization. Due to differences in customers, different programs of communications are developed for specific segments and niches. Element of Marketing Communication Process For Effective Communication, the marketer should know how communication works? Following are the nine elements that are involved in the marketing communication process. • Sender • Encoding • Message • Media • Decoding • Receiver • Response • Feedback • Noise Each of these is discussed one by one. Sender: The party or person who is sending the message to the other party or person is the sender. Encoding: The conversion of thought into the meaningful symbols is called encoding. Message: The group of symbols transmitted by the sender is called a message. Media: The channel of communication through which transfers the message from sender to receiver is called media. Decoding: The conversion of symbols into meaning by the receiver is called decoding. Receiver: The sent message received by another person or party is called the receiver. Response: The reaction shown by the receiver before the message is called response. Feed Back: The portion of the response of the receiver that is sent back to the sender is called feedback. Noise: The unplanned distortion during the process of communication due to which the receiver understands the wrong meaning of the original message is called noise. The effective message is that where the process of encoding is matched with the decoding of messages. Moreover the message sent should consist of words and symbols that are known to the receiver. Marketing Communication Process Steps There are certain steps that should be involved in the effective marketing communication process. The marketing and promotional activities should focus on these steps in order to attract a huge portion of long run customers. Following are the steps that make the communication process effective. • Identification of the target audience • Determination of the communication objectives • Designing of message • Message content • Message structure and format • Choosing media • Collecting feedback Each of these is now explained below. Identification of the Target Audience: The first step in the effective marketing communication process is to identify the target audience. So these audiences may be potential customers or other people that can influence the decisions of these customers. The audience may include the individuals, groups, general public or special public. Moreover the audience has a direct effect on the decisions of the communication, like what to say? How to say? And when to say? Etc. Determination of the Communication Objectives: In this step the marketing communicator should clear the objectives of the communication process. In most of the situations, the purchase is required by the marketing communicator. However purchase is made after a prominent customer decision making process. The communicators should also understand the standing position of the customer. Generally there are six Stages of Customer Readiness through which a customer passes to make a purchase which are as follows. • Awareness • Knowledge • Liking • Preference • Conviction • Purchase The target group of the marketing communicator is not much familiar with the new product or its salient features. So the marketing communicator should create the awareness and knowledge of its new product and features. However this is not the surety to the success; the new product should also provide superior customer value too. Designing of the Message: In this step the marketing communication communicator focuses upon the design of the message. So any message that can attract the attention, develop the interest, arousal of desire and stimulate the action is the effectively designed message. Hence this procedure is best known as the AIDA model that can make any message effective and potential. Besides this the marketing communicator also decides about the content and structure of the message. Message Content: In this step of the marketing communication process the content of the message is decided. The theme or an appeal is suggested that can bring the desired response from the audience or receiver. So following are the three appeals that should be used in this regard. Rational Appeal: The self interest of the audience is focused on the rational appeal in which the benefits availed by the usage of the products or services. Emotional Appeal: In this case positive or negative emotions are stimulated to encourage the purchase of the product. Moral Appeal: In this situation morality is included in the message to influence the targeted customers. Message Structure and Format: In this step the important issues of the message structure together with the message format is analyzed. In marketing communication of a product, it must be decided that the message must include the conclusion. Also may keep to the audience to get a conclusion from them. Moreover the massage presents either only the strengths of the product or both the strengths and weaknesses. Therefore the format of the message is also focused on which the size and shape use, eye-catching colors, and headlines etc. are decided in the most effective manner. Choosing Media: The channels of communication are decided in this step of a marketing communication process, which may take the following two forms. Personal: In this channel of communication two or more persons directly communicate with each other like face to face. Or through the mail, on the telephone, or through a chat on the internet. Personal Addressing and feedback is allowed in the personal communication. Non Personal: Non personal messages are spread through these channels which also excludes the option of feedback. Such channels include print media, display media, broadcast media, online media etc. Collecting Feedback: This is the last step of the marketing communication process in which the feedback from the target customers. So this can help the marker to alter the promotion program or other marketing activities. For this purpose the buying behavior of targeted customers is analyzed in the light of the new product. Questions may also be asked to the customers to collect their views about the positive and negative aspects of the new
- 4.4LESSON 4 :Promotion Mix A promotion mix is a set of different marketing approaches that marketers develop to optimize promotional efforts and reach a broader audience. The marketer’s task is to find the right promotion mix for a particular brand. Developing a promotion mix requires skills and experience in marketing. Marketers should complete various studies and gather lots of data about a particular company to come up with an effective promotion mix. For instance, it is necessary to identify your target audience, work out a budget that you can afford for a promotion, and decide the most efficient marketing channels for your audience. A promotion mix is a more expanded approach towards one of five elements of the marketing mix — Promotion. Other factors are people, product, place, and price. Promotion mix is a part of marketing mix which determines the success of all marketing efforts of company. All promotional programmers and advertising campaigns carried out by organization are included and performed in accordance with its promotion mix. It includes various marketing approaches designed by marketers with better experience and aims at optimizing the overall promotional efforts of business organizations. Promotion mix of a company is created after a lots of research and collecting data about a particular company, its target audience to involve effective tools of marketing in it. It is all the efforts of promotion mix that enables a brand to develop its better image in market and differentiates itself from other competitors. Promotion carried out by business enables in informing public about its products and impart them all required information. It is served as a communication channel in between company and its customers which helps in building trust. Why is using a promotion mix important? • Improves the effectiveness of promotional campaigns • Helps segment the audience • Improves communication with clients • Informs subscribers • Stands out from the crowd • Improves the effectiveness of promotional campaigns. Promotion is a crucial part of any business, so companies develop a promotion mix, putting all efforts to make promotions at the right place, at the right time, and to the right audience. It helps one get the most out of their marketing resources by optimizing their budget and saving time. • Helps segment the audience. To develop a compelling promotion mix, a company needs to identify its target audience. Potential subscribers may include various groups of people who have something in common, for example, age, gender, preferences, etc., and they all require an individual approach. A promotion mix is a key method for delivering a relevant promotion message via the most suitable channel for each segment. • Improves communication with clients. Companies develop a promotion mix trying to speak their consumers’ language. If prepared correctly, it helps build trust between the brand and its customers. This is a crucial factor in lead nurturing and customer retention. For example, automated email campaigns help achieve these goals by responding to people’s actions instantly. • Informs subscribers. Some promotions, on Instagram for example, aim to show the product from the best angle, and others, like SMS, emphasize the advantages of local services. When using a promotion mix, companies define the best ways to educate people about the products and services they provide. • Stands out from the crowd. People are bombarded with all sorts of advertising at every turn. With a promotion mix, it is possible to stand out from the crowd without creating chaos in your customers’ heads. Successful companies make quality prevail over quantity, promoting their product or service at the right place and right time. Components of a Promotion Mix 1. Advertising 2. Direct selling 3. Sales promotion 4. Public relations 1. Advertising. This is a non-personal promotion of products and services. Marketers use advertising as a vital tool for increasing brand awareness. Advertisers show promotions to masses of people using email, webpages, banner ads, television, radio, etc. 2. Direct selling. This is a one-to-one communication between a sales representative and a potential customer. Direct selling influences people to decide to buy certain products or services. It is one of the most effective ways of promoting your brand because the sales rep can tailor the promotion precisely to those who are most likely to make a purchase. On the other hand, this is the most expensive form of sales because companies need to pay for one person’s time. 3. Sales promotion. This is a set of short-term activities that are designed to encourage immediate purchase. Sales promotions are a campaign that uses time-sensitive offers — sales, discounts, coupons, etc., to engage existing consumers and bring in a larger audience. Many companies make this a core component of their marketing efforts, though sometimes it’s the most annoying type of communication for people. 4. Public relations. This type of promotional method determines the way people treat the brand. Companies using PR try to build a firm and attractive brand image by planting interesting news stories about their activities in the media. Public relations are not fully controlled by the company, though, as some reviews and webpages may negatively highlight the brand. If a company adequately solves these issues, people will reward them with positive word-of-mouth consideration. • Use appropriate marketing channels • Rely on the right promotion mix elements • Implement segmentation • Monitor marketing trends • Identify the target audience. Determine your target audience and take advantage of the promotion mix tactics. Create your customer profile to find out how to provide people with the products they need. • Follow a five P’s rule. Five factors form promotional marketing success: what you sell (Product), how much you want for it (Price), how you offer it (Promotion), where you sell it (Place), and whom you sell it to (People). Work on these five P’s of marketing and give your customers what they need at the most convenient time. • Provide people with useful information. Demonstrate the products and services you sell. Explain what makes them so unique and why customers should choose yours and no one else’s products. Create reviews comparing your product with competitors’ products. • Use appropriate marketing channels. Find out which channel of communication is the most convenient for your audience. Try delivering the same message through different channels and examine which performs best with your customers. • Rely on the right promotion mix elements. Personal selling is usually useful for only small businesses due to its high cost and low outreach. Every business can afford to display advertising and email marketing, though. Develop a balanced system of communication with your audience that fits your business well. • Implement segmentation. This tool targets the audience by dividing it into smaller groups based on similarities. With SendPulse, segmentation works with emails, SMS, and web push notifications. • Monitor marketing trends. As internet marketing evolves, new channels for communication with customers appear. Follow marketing trends to be able to reach your customers the way they like it. Promotion Mix Example 1. Advertising 2. Personal selling 3. Sales promotion 4. Public relations 5. Direct marketing Let’s take Nike’s promotion mix as an example and learn how they use each of the promotion mix components. 1. Advertising. In advertising campaigns, Nike aims to reach large target audiences. The brand invites celebrities who represent the image of an ideal consumer. Potential customers associate themselves with famous ones, and this motivates them to trust the brand and communicate with it. 2. Personal selling. Nike’s selling takes place in their stores. Trained store personnel assist consumers, provide details on the company’s products and stimulate visitors to buy their products. Besides, Nike’s employees help customers find the right Nike product and promote the company through the use of personalized services. 3. Sales promotion. Usually, Nike’s sales promotions include special discounts for a targeted audience. The brand motivates their customers with the savings they can have when they buy discounted products. After that, they create a demand for purchasing more products using those bonuses, turning new customers into loyal clients. 4. Public relations. Nike developed a social responsibility strategy, in response to global ecological trends. Besides, Nike sponsors numerous sports events that build a better brand image in the eyes of their audience. 5. Direct marketing. Nike uses direct marketing to promote its products among sports organizations in universities, colleges, schools. Marketers call this lead nurturing. TOPIC: ADVERTISING Advertising is a means of creating awareness and promoting a product or service in the market. It is a paid form of communication to inform the public about an idea, goods or service. Advertising is a market communication intended to influence people’s actions and persuades them to buy or try the product. This is one of the effective promotional tool of an organization for promoting its product among the target audience. It spreads the promotional message containing full details about the product among the customers. Advertising is a one-way communication by which organizations communicates to people by paying charges to advertising company. Advertising is of different kinds depending upon the type of medium used for communication such as print advertising, social advertising, outside advertising, broadcasting advertising, etc. There are three main motives of advertising: informing potential customers about brand, persuading people for buying brand products and reminding customers time to time about brand message and vision. AIMS OF ADVERTISING 1. Product Introduction: Advertising introduces a new product to peoples in the market. It explains clearly the features and uses of the new product launched by the company. 2. Creating Awareness: Advertising is the medium through which business informs about its products or services to the wider market. It creates wide awareness regarding the company products among the public. 3. Product Differentiation: Product differentiation is another important role played by advertising. It helps the business in differentiating their products from other products by properly explaining product features and advantages to customers. 4. Increasing Sales: Advertising helps in raising the sales volume of business organizations. It spread product information among a large number of peoples and persuades them for purchasing it. 5. Overcome Competition: Advertising assists business organizations in facing strong market competition. It enables in providing detailed information regarding products and differentiates it from other competitor’s products. It is a means through which business is able to attract more and more customers. 6. Enhances Goodwill: Advertising has an efficient role in improving the goodwill and reputation of the business in the market. Repeated advertising shows the company’s presence in the market and promotes the company’s quality products. It builds a better image of the brand in the mind of customers. 7. Educating Customers: Advertising is the medium through which companies communicate their product details among customers. They inform customers about the uses and utility of products through advertisement. Objectives of Advertising Objectives of Advertising 1. Promotes Products: Advertising is responsible for promoting the company’s product among large peoples in the market. It is one that informs about the latest arrivals to customers and communicates all relevant information regarding products or services. 2. Creates Demand: Advertising creates a favorable environment for increasing demand. It informs more and more customers about products and persuades them to buy by explaining product features and advantages to them. 3. Building Brand Image: It has an efficient role in building a good image and reputation of the brand. Advertising introduces manufacturers and its product in a better way to customers. It explains the product quality and develops a better image in the minds of people. 4. Stabilizing Sales Volume: Advertising helps in stabilizing the sales volumes for business. It helps in retaining more and more customers for a longer period and develops loyal customers. 5. Reduces Cost: Advertising reduces the cost of the product by expanding the scale of production. It raises the production level of business by increasing its demand which reduces the per-unit cost of products. 6. Higher Sales and Profit: It focuses on boosting the sales volume and profit level of organizations. It attracts more and more peoples to company products and persuades them to buy or try it. 7. Expands Market: Advertising expands the market opportunities for business by creating wide awareness in the market. It approaches and informs a large number of people in the market about products or services offered by the business. Sales promotion: Meaning, Types and Benefits Home » Business Studies » Sales promotion: Meaning, Types and Benefits Table of Contents Meaning of Sales Promotion Sales promotion refers to promotional activities used by business for raising the sales and encouraging peoples to use their products. It is one which supplement and coordinate both personal selling and advertising thereby making them more effective. Sales promotion encompasses activities which enables in spreading information about products in society with the aim of boosting product image and inducing people to go for trials. This serves as an important source of information to customers that facilitates them to make informed purchase decisions. Sales promotion works as a part of total distribution system which mostly involve short-term incentive tools designed for stimulating the quick and great purchases of products or services by customers. Sales promotion is a key element of promotion mix which works on taking product toward buyers. It studies and take into consideration the existing communication gaps in between the customers and producer. The techniques used under it are non-personal and indirect in nature such as displays, exhibitions, demonstrations, trade shows, direct mail, expositions and many other non-recurring efforts. Therefore, any activity which is carried out by business organization for boosting the sales and revenue temporarily falls under the purview of sales promotion. Types of Sales Promotion Various types of sales promotion are as discussed below: – Samples The sample is a type of sales promotion strategy under which customers are given goods free of cost for trial purposes. It is very effective in introducing new products expanding their market base. Sampling is a device that does the work of demand creation and increases customer’s interest in products. People via consuming free samples get a chance to compare the products with other substitutes existing in the market. Samples are given either in door-to-door delivery, sent by mail, attached to some other product, picked up in-store, etc. Coupons It is a promotional strategy under which customers are provided with vouchers for buying products at a discounted prices. Coupons are generally the certificate that reduces the price of product. Companies use this promotion for attracting and bring in more customers to their products. Coupons can be offered by attaching them with other products, inserting with into newspapers or magazines, and by mailing them. Free Trials Free trial is a scheme under which prospects are given invitations for using the product free of cost. It is performed with the hope that customer will purchase the product once he/she becomes aware with the features or benefits of a particular product. Premium Offers Premium offers are the offers which are run by businesses on a temporary basis with the motive of inducing customers for purchasing. Merchandise or gifts are offered free of cost or at reduced prices to people as an incentive to buy a particular product. Premium offers are most widely used in consumer goods like paste, soap, brush, glucose, washing powder etc. Bundling’s Bundling is a strategy in which products are put into the combination and offered for sale at the same price. Consumers are more attracted to buy products in bundled offers rather than a single offers. It is because the consumer believes that they getting two products at the price of one. An example of a bundling strategy is giving a free shampoo sachet with every piece of soap purchased by customers. Refunds And Rebate Refunds and rebate is a marketing tactic under which customer gets partial or full amount back after making purchases. The customer sends a proof of purchase to the manufacturer who in turn refund by mail the part of the purchase. In case, if the customer is not at all satisfied then he/she is liable to get the full amount refund. This strategy develops new customers and also strengthens brand loyalty. Contests Contests refer to competition which are organized by companies for introducing new products and attracting customers. In order to enter in competition, consumer need to buy product and submit evidence along with entry form. In these contests, skills and ideas of people are tested. The performance report of every participant is submitted with panel of judges who award the winner with prizes. This promotional strategy is useful in stimulating the sales of brand at retail level. Patronage Award (Trading Stamps) Patronage award refers to values in cash or other form given to the customer for buying the product in a particular shop. Sellers provide premium in the form of stamps to their consumers. Such stamps can be redeemed by customers at stamp redemption centers. Patronage awards serve as a useful means for attracting people to retail shops. Benefits of Sales Promotion The benefits provided by sales promotion can be well-understood from points given below: – Attract New Customers Sales promotion serves as an important means for attracting a new range of customers by the business organization. This promotion strategy is composed of distinct attractive offers which easily grab the attention of peoples. Product samples, coupons, giving free trials, refund offers, and giving product demonstrations are a few of the schemes included under it. All these persuade customers to make on-spot purchase decisions. Introduces New Products Companies run various sales promotion campaigns in the market for introducing their new products. Buyers are induced to purchase the new products by distributing free samples. Dealers are also motivated to stock and sell new products by giving money or merchandise allowance. Bridges Between Personal Selling And Advertising Sales promotion is composed of several activities other than advertising, publicity, and personal selling. All such activities work towards bridging the gap in between personal selling and advertising. Raise Sales During Off Seasons It enables businesses in boosting their sales volume during the off-seasons. There are many products that are only demanded during their peak seasons and there is less or no demand at the time of off-season. This strategy enables in retaining customer’s attention via offering them short-term incentives which results in stimulating the sales volume. Encourages Business Buyers The business buyers refer to retailers and wholesalers who buy brand goods for resale purposes. For motivating the wholesaler and retailer for stocking more amount of goods, different promotional activities are conducted. Dealers are compensated by providing advertising and display allowances for the space given by them for the display of products. In addition to all this, even premiums are offered for buying products above a particular level. Advantages of Sales Promotion 1. Introduce New Products: Sales promotion techniques are the most effective ways of introducing innovative products in the market by business organizations. Companies sometimes face difficulties in creating a market for new products. Sales promotion enables in attracting peoples towards these products using penetration price policy, discounts, coupons, and several other benefits. In this way, it induces clients to buy the brand products that lead to increase demands for newly developed products. 2. Generate New Leads: It generates a large number of leads for business by exposing more and more customers and other business partners to the products of the company. Sales promotion serves as a communication link between the producer and the customer. It supplies all important information about products to clients and resolves all their queries. Techniques of sales promotion aim at differentiating the products by explaining the benefits of the brand over others that is how it stands out from the crowd. This eventually enables in attracting high number of leads thereby increasing the customer base. 3. Large Scale Production: Sales promotion facilitates an organization is enjoying economies of cost by carrying out large-scale production. It focuses on increasing the demand for the company’s products by doing a mass promotion in the market. An increase in sales volume will ultimately lead to reducing the per-unit cost to the company by doing mass production of products. 4. Immediate Returns: It offers more quick and immediate returns in comparison to other components of the promotion mix like advertising and personal selling. Sales promotion uses different methods for boosting the sales volume within a short period of time. Measures like free samples, discounts, coupons, providing free trials, giving product demonstrations etc. are helpful in attracting more customers for buying products thereby raising the overall sales volume. 5. Strengthen Customer Involvement and loyalty: Another important benefit provided by sales promotion is that it keeps existing customers re-engaging with brand and builds loyalty among them. It is a mechanism used by organization that keeps on interacting with customers once they make purchases with brand or subscribe to its email’s newsletter. Sales promotion team keeps on sending promotional emails and messages to customers on a regular basis to keep them engaging which leads to developing a close connection with them. 6. Better Control: Sales promotion techniques provides effective control in the hands of management for regulating the promotional activities of organization. Programmes of sales promotion are more cost-efficient having lower promotional costs and provide quick and better returns. Managers can easily evaluate the results of each promotional programmes in relation to their cost factor. 7. Improve Public Image of Firm: It has an effective role in building a strong image of firm in market. Sales promotion provides customers with all necessary information about products and resolves all their queries. Clients in presence of right information are able to choose right product by easily doing a comparison of brand products with other competitors in market. This results in better service experience of customers with their brined thereby building a strong position in market. Advantages and Disadvantages of Sales Promotion Disadvantages of Sales promotion 1. Increase Price Sensitivity: Sales promotion is disadvantageous for business organization if it is provided on a regular basis by organization. Customers may become too price-sensitive and wait for promotional deals to be announced by the company. They may not buy products from routine sales at the market and instead buy at discounted price which lowers the overall organizational profitability. 2. Costly: Sales promotion raises the expenses of business organization which have adverse impact on their profit margin. Techniques of sales promotion like free samples, discounts, and coupons require huge costs on the part of company. It is uncertain whether all these measures will provide equal returns that reduce the profitability of business. 3. Tarnish Brand Image: Sales promotion may also lower the perception of customers towards the brand in case it is overused by the organization. When products are offered continuously at discounted price by brand then the customers believe it as a regular price. They may doubt the product quality of the brand in comparison to other competitors providing products with no offers and price reductions. 4. Short-Term Orientation: Sales promotion is meant for short-term which boosts the sales volume for a shorter period by offering distinct offers and benefits to customers. Short-term sales volume is quite difficult to maintain and has a negative influence on the long-term future of business. TOPIC: PUBLIC RELATIONS What Is Public Relations? Public relations is a strategic communication process companies, individuals, and organisations use to build mutually beneficial relationships with the public. A public relations specialist drafts a specialised communication plan and uses media and other direct and indirect mediums to create and maintain a positive brand image and a strong relationship with the target audience. In simple terms, public relations is a strategised process of managing the release and spread of organisation-related information to the public to maintain a favourable reputation of the organisation and its brands. This process focuses on – • What information should be released, • How it should be drafted, • How it should be released, and • What media should be used to release the information (usually earned or free media is used for the same). What Is The Objective Of Public Relations? The main objective of public relations is to maintain a positive reputation of the brand and maintain a strategic relationship with the public, prospective customers, partners, investors, employees and other stakeholders which leads to a positive image of the brand and makes it seem honest, successful, important, and relevant. Advertisement Functions Of Public Relations Public relations is different from advertising. Public relations agencies don’t buy ads, they don’t write stories for reporters, and they don’t focus on attractive paid promotions. The main role of public relations is to promote the brand by using editorial content appearing in magazines, newspapers, news channels, websites, blogs, and TV programs. Using earned or free media for promotion has its own benefits as information on these mediums aren’t bought. It has a third-party validation and hence isn’t viewed with scepticism by the public. The functions of public relations managers and public relations agencies include: 1. Anticipating, analysing, and interpreting the public opinion and attitudes of the public towards the brand and drafting strategies which use free or earned media to influence them. 2. Drafting strategies to support the brand’s every campaign and new move through editorial content. 3. Writing and distributing press releases. 4. Speechwriting. 5. Planning and executing special public outreach and media relations events. 6. Writing content for the web (internal and external websites). 7. Developing a crisis public relations strategy. 8. Handling the social media presence of the brand and responding to public reviews on social media websites. 9. Counselling the employees of the organisation with regard to policies, course of action, organisation’s responsibility and their responsibility. 10. Dealing with government and legislative agencies on behalf of the organisation. 11. Dealing with public groups and other organisations with regard to social and other policies of the organisation and legislation of the government. 12. Handling investor relations. Types Of Public Relations According to the functions of the public relations department/agencies, public relations can be divided into 7 types. These are: • Media Relations: Establishing a good relationship with the media organisations and acting as their content source. • Investor Relations: Handling investors events, releasing financial reports and regulatory filings, and handling investors, analysts and media queries and complaints. • Government Relations: Representing the brand to the government with regard to the fulfilment of policies like corporate social responsibility, fair competition, consumer protection, employee protection, etc. • Community Relations: Handling the social aspect of the brand and establishing a positive reputation in the social niche like environment protection, education, etc. • Internal Relations: Counselling the employees of the organisation with regard to policies, course of action, organisation’s responsibility and their responsibility. Cooperating with them during special product launches and events. • Customer Relations: Handling relationships with the target market and lead consumers. Conducting market research to know more about interests, attitudes, and priorities of the customers and crafting strategies to influence the same using earned media. • Marketing Communications: Supporting marketing efforts relating to product launch, special campaigns, brand awareness, image, and positioning. Public Relations Examples PR stunts or strategies range from donating to an affected community to running a brand activation stunt in a mall. Some of the examples of successful public relations campaigns are: Google’s Fight Ebola Campaign The outbreak of the Ebola virus in 2014 was critical as it was spread among many countries and took many lives. Google, to help the people in need and to build up a positive brand image, started a donation campaign where it pledged to give $2 for every $1 donated to the cause through its website. The public relations strategy attracted the media attention and resulted to be a huge success as Google raised $7.5 million. Paramount Pictures The Ring Publicity Stunt Paramount Pictures, to promote its new horror franchise, The Ring, and to get more user attention, took a step forward and planned a publicity stunt where the protagonist haunted the people in a real-life scenario. The film’s most iconic scene of Samara crawling out of the TV set was recreated in a TV showroom where the protagonist came crawling out of the hidden compartment behind a TV screen and scared people. The stunt went viral and the video received over 10 million views on Facebook. Just Eat & A Sick Customer Just Eat is an online food ordering application that lets users add comments to their orders to inform the delivery person about the right address or to leave the order to the neighbour etc. One unwell customer tried her luck to see if she could get the delivery person to stop en-route and get her some medicines. She wrote: Will you please stop in the Spar on the way and get me some Benylin cold and flu tablets and I’ll give you the money. Only ordering food so I can get the tablets. I’m sick xx. The delivery person delivered both and this public relations stunt went viral over the media. Facebook Paris Support Profile Pictures In response to the tragic shooting in Paris in 2015 where at least 129 people died, Facebook added a France flag filter which the users could apply to their profile pictures to support France. Millions of people applied this filter and appreciated this effort by Facebook. Advantages Of Public Relations • Credibility: Public trusts the message coming from a trusted third party more than the advertised content. • Reach: A good public relations strategy can attract many news outlets, exposing the content to a large audience. Moreover, this medium can help the company utilise certain organic touchpoints that are hard to capitalise on otherwise. • Cost effectiveness: Public relations is a cost effective technique to reach large audience as compared to paid promotion. • Better Communication: Public relations help the company to communicate more information to the public than other forms of communication media. Disadvantages Of Public Relations • No Direct Control: Unlike paid media, there isn’t a direct control over the content distributed through the earned media. This is the biggest risk of investing in public relations. • Hard To Measure Success: It is really hard to measure and evaluate the effectiveness of a PR campaign. • No Guaranteed Results: Publishing of a press release isn’t guaranteed as the brand doesn’t pay for it. The media outlet publishes it only if it feels that it’ll attract its target audience. Importance Of Public Relations With over 63% of the value of most companies dependent on their public image, public relations has become a very important topic today for numerous reasons: Builds Up The Brand Image The brand image gets a boost when the target customers get to know about it through a third-party media outlet. A good public relations strategy help the brand builds up its image in the way it wants to. It’s Opportunistic Public relations strategies make the brand capitalise on the opportunities. Google was in the news for donating to Ebola. Facebook promoted LGBTQ rights. Coca-Cola did a PR stunt against obesity. These opportunities even attract many influencers to share the brand story to their followers. Promote Brand Values PR is used to send out positive messages which are in line with the brand’s value and its image. This builds up the brand’s reputation. Strengthen Community Relations PR strategies are used to convey that the brand is as much part of society as the target audience. This builds up a strong relationship of the brand with the public. Public Relations vs Marketing vs Advertising Public relations deals in communicating expertly drafted messages using non-paid/earned media to build mutually beneficial relationships with the public. Advertising, on the other hand, is a paid communication message intended to inform people about something or to influence them to buy or try something. Marketing is the umbrella under which all the divisions dealing with creating, communicating, delivering, and exchanging dwells. That is, PR is the subset of marketing. Everything a PR department does is determined by the marketing goals set by the organisation. Public Relations Advertising Marketing Definition Public relations is a marketing tool of communicating expertly drafted messages using non-paid/earned media to build mutually beneficial relationships with the public. Advertising is the action of calling public attention to an idea, good, or service through paid announcements by an identified sponsor. Marketing refers to activities a company undertakes to create, communicate promote, deliver, and exchange the offerings that have value for the customers. Driven by Relationship driven Communication driven Company/Brand growth driven Communication Two-way One-way Two-way Importance To build a favourable relationship with the target audience. To communicate to the target audience about a certain offering, action, work, or other brand-related information Identify and cater to the customers’ needs to survive and thrive. TOPIC: DIRECT SELLING AND ONLINE SELLING Introduction to Direct Sales Direct selling is one of the primary forms of doing business. This method of sale is adopted by both small businessmen as well as big enterprises. Small entrepreneurs use it because of the low margin on products or because of the lack of funds to establish a retail store. On the other hand, there are many companies which use it along with other methods of selling to reach different segment of the population. In direct selling, a seller buys a product from the company and sell them to consumers directly, or a person produces goods and sells them directly to consumers without any middlemen. Another thing that makes direct selling unique and different from other forms of selling is that it takes place in a non-retail environment. The direct sales take place in a non-retail environment like home, public place, work, online, etc. In direct selling, both parent company and seller generate high profits as compared to other forms of businesses because there are no middlemen. It is an essential method of selling and is a primary method of selling used by several companies. Therefore, if you are planning to associate with a company that uses a method for sales, then it would be good that you read this article. It will help you to learn about the different types of direct selling and their advantages and disadvantages. This information will help you in taking a well-calculated decision. Definition of Direct Sales Direct selling is a method of selling where seller directly contacts the customers and sell products in non-retail environments such as by meeting them at their home or public places. Types of Direct Sales 1.. Party Plan sale You might have got an invitation for party plan sales by a distributor or sales representative living in your neighborhood. If yes then let me tell you that you already know what is “Party Plan direct sales”. This can take place in a group. Usually a distributor or sales representative invites his potential customers at his own house or someone else’s home. In party plan sales, you talk about your products in a group, give them a demonstration of your products, hand out material related to products, and take orders. It is a neat way of doing business and having fun altogether. This method is quite successful as you sell many units of your products at one time. 2. Single-level sale Single level direct sales are sales where you contact people individually. The examples of single-level direct sales are door-to-door selling, selling through catalogs, and selling through in-person presentations. You approach each customer with a personalized direct sales approach. 3. Multi-level sale In multi-level direct sales, sales representatives are hired by companies to sell their products, or sometimes multi-level direct sales are made through business partners. Multi-level direct sales also take place on online platforms by selling through product catalogs or selling through social networking mediums. 1. More profit margin The first and foremost advantage is a high-profit margin for both parent companies and sellers. Many entrepreneurs adopted this method to earn high profits. Small entrepreneurs usually have limited funds when they start their business. Therefore, they save the cost of mediators and thus increase their profit margin. 2. No expense of store maintenance It takes place in a non-retail environment. That means a seller is not required to set up a business store to sell his goods. A store is an expensive liability for a seller. He is required to rent or buy a place to set up his retail store, pay property taxes, keep the stock full, hire salespersons and people to maintain a store, and other small expenses. All of these expenses are paid out of the profit made from selling. A seller can avoid all of these expenses by direct selling and can increase his profit margin. Moreover, when a seller sells in-store, he is required to buy goods from a manufacturer in huge quantities which puts his own money at risk. His money will be lost if the sales of products are not as expected. Whereas, the seller can buy limited no of units and can sell more after selling the previous stock. 3. Personal contact with customers The seller has direct contact with his customers. There are various benefits of having direct contact with customers. You can learn about the needs of customers and can create business opportunities and can provide services to them as per their requirements. For example, your regular customers can place an order for the products that they need or can give your reference to their friends and family. In this way, you can expand business easily. 4. No advertising and marketing expenses The purpose of advertising and marketing is to make people aware of the existence of the product and make people know about the qualities of products. Companies spend millions of dollars in the advertising and marketing of products. The expense of advertising and marketing is part of the variable of cost of production. The expense of advertising and marketing is recovered from the profit earn by selling the products. As a result of which, the profit margin of the seller reduces. In such cases, the seller meets customers individually and tells them about the products and hands them material containing information about the products. Therefore, the expense of advertising and marketing is eliminated, and the seller can save those millions of bucks. 5. Personalized approach for each customer The sellers meet customers individually. Because of this, they have an opportunity to pitch personalized sales pitch for their customers. A personalized sales approach has several benefits. For example, you know that a particular customer is price sensitive and buy products only on discount or offers, then you will inform that customer first as soon as there is a discount on the products. In this way, you can convince them to buy products in bulk. This is not possible in other modes of selling. In other selling methods, one selling technique is used to sell products to everyone. 6. Visible customers’ reaction A seller meets his customers face to face to sell products to them. The benefit of meeting customers face to face is that you can see their reactions on their faces and modify your sales pitch based on their reactions. On the other hand, in retail stores or online shopping seller don’t see the reactions of customers and thus is unable to suggest a deal immediately persuading the customer. 7. Product demonstration Another important benefit of another type of selling is that you can provide a demonstration of your products to your customers. You win the trust of your customers by giving them a demonstration as they can see what they can check what they are putting their money. Product demonstration reduces the chances of complaints after the sales because people will buy your product only if they are satisfied with the demonstration of your product. In this way, you can protect the image of your company. 8. Feedback directly from customers It means selling products to your customers. When you meet your customers in a non-retail environment, then you have an opportunity to have a conversation with them other than just selling. In this way, you can build a healthy relationship with them where they will feel comfortable to give you honest feedback about your products. Getting honest feedback directly from customers is far better than getting feedback from mediators. You can use this information to improve the quality of your products and keep your customers satisfied. 9. Customers’ satisfaction The last benefit is that you can keep your customers satisfied. Most customers get annoyed when they are not given proper attention in stores, and they have to spend hours looking for a product in the store. Some customers have time constraints to go out for shopping. In this way, you can approach a new segment of the market. Therefore, it is not wrong to say that customers’ satisfaction is an additional benefit. Disadvantages Like every coin has two sides, it also has a few disadvantages despite several advantages mentioned above. Therefore, in this section, I am going to talk about the disadvantages of direct selling. So that you can make up your mind whether you want to go for it or not. 1. Difficult to reach a wide audience Like I mentioned before it means approaching each customer individually by going door to door or hosting in-house parties. Therefore, it is difficult for an individual to reach a wide audience. You can cover people leaving in one town at most, and it would be challenging for you to entertain all the customers at the same time. 2. Affects personal life It requires too much time from a seller. When you have invested your money, you want to make sure that you don’t lose your money. Therefore, you can’t take vacations like other people in the business. You will even need to work on your weekends because it’s the only time people are free and can come to your business meetings or can sit with you and listen to you patiently when you go to their homes to sell your products. Even though you will be making huge profits, but be ready to compromise your personal life. 3. Rejections Nowadays, when there are so many ways to buy goods, people have become a little skeptical about buying from an individual coming to their doors. There are very few people who still prefer to buy from online sellers. Therefore, you are getting into the direct selling business to be ready to face a lot of rejections. Moreover, there is a negative image of direct sellers in the market. For example, people try to avoid meeting them even accidentally because they think they will be forced to buy their products. Therefore, there might be several incidences when you feel like giving up. 4. Risk of failure Like all other businesses, there is a risk of falling too. Therefore, never put your whole fortune at risk. Take small steps and see whether your business works out or not and expand your business day by day. How to ace Direct Sale? Direct selling is not a business that everyone can do. You require a lot of patience and persistent hard to get successful. In this section, I will give you a few tips that will help you to ace. 1. Learn about your product and company In direct selling, you either sell your product or service or the products of other companies. My tip here to you is, don’t start your business instantly. Give yourself time. Do your homework. Learn about your products. Learn about their shortcomings and strengths. Learn about the history of the company whose products you are going to sell. All of the above information is important and will help you in making an effective sales pitch. Be ready to answer all the questions that your customers might ask you about your product. It will give a wrong impression if you don’t have an answer to any of their concerns. Therefore, to avoid such situations, you should learn every little about your product and your company. 2. Set your sales goal My second tip to you is to set your monthly goals. In direct selling, you will be your boss. There will be no-one to questions you or to push you to make more sales. The more sales you will make the more will be your profit. But over-work is also not a healthy approach. The right path to get successful is to set your goal. Set your goal for the month and divide the work in the right proportion throughout the week. Having a pre-decided goal will motivate you and will fill you with guilty each time you will procrastinate your work. Don’t decide your goal in your mind. Plan it properly and write it one paper and don’t fool yourself by setting unrealistic sales goals. Unrealistic or too high sales goals will only demotivate you when you fail to achieve them. 3. Plan your week and day Once you have decided on your monthly goal or target, the next thing you need to do is to distribute that work properly throughout the month. Plan your week and decide how much of your goal you want to achieve in one week. Be ready for unexpected events and be prepared to modify your plan accordingly. Plan your day. Plan in advance which areas you want to cover or the people you want to meet. When you plan your work and distribute your work equally throughout the month, you will not feel stressed at the end o the month. 4. Make an appointment in advance Don’t appear at people’s doors without giving them prior notice or without taking their permission. It is possible that they will not be at home or busy with something or have a birthday party for their child. In any scenario, they will not be able to give time to you and listen about the products that you have to offer to them. Therefore, make sure that you take an appointment with people at least one day before you visit them. 5. Organize your customers’ details Customers are the asset of your business. Therefore, it is essential to keep all the details like their contact numbers, email address, physical address, records of their history, product choice, and all other miscellaneous information. Make a google sheet or excel sheet containing all this information, because if you lose that sheet, you will lose your customers. 6. Follow up Many salespeople sell products and never bother to take follow up. But let me tell you it is a lousy business ethic. Even a well-establish business asks for feedback from their customers. Therefore, you should always take feedback from your customers after selling a product to them. There will be two outcomes if you do this. First, you will get negative feedback that you can use to improve your product. Second, you can get a reorder if they like your product and you will be one step closer to getting a loyal customer. Therefore, Never forget to take a follow-up. 7. Increase your network The success of direct selling depends mainly on your network. The more people you know more potential customers you have for your business. Therefore, socialize as much as possible. Keep your business cards handy and offer to people you meet. Don’t forget to take their contact numbers so that you can invite them whenever you organize a business house party. 8. Don’t be pushy One thing that people don’t like about sales-people is their pushy nature. Pitch your product subtly and know up to what extent you can push your customers to buy your product. 9. Brush your skills Learn selling skills and keep brushing them from time to time. Attend those workshops and training sessions organized by your company. Read the books that help you with setting your sales pitch. It will help you. 10. Always keep a positive attitude My last but not least direct selling tip for you is to keep a positive attitude. Marketing Communication Marketing communication process consists of integrated activities in which the targeted audience is identified. Although a well coordinated promotional program is prepared to generate the desired response from the audience. Most problems of preferences, image and immediate awareness in the target customers are focused by the marketing communication. However there are certain limitations associated with the concept of communication. These limitations include high cost and short term duration that cannot generate the desired results from the targeted customers. In recent years Marketing Communication is used by most marketers. As to build customer relationships at the stages of pre-selling, selling, utilization, and post utilization. Due to differences in customers, different programs of communications are developed for specific segments and niches. Element of Marketing Communication Process For Effective Communication, the marketer should know how communication works? Following are the nine elements that are involved in the marketing communication process. • Sender • Encoding • Message • Media • Decoding • Receiver • Response • Feedback • Noise Each of these is discussed one by one. Sender: The party or person who is sending the message to the other party or person is the sender. Encoding: The conversion of thought into the meaningful symbols is called encoding. Message: The group of symbols transmitted by the sender is called a message. Media: The channel of communication through which transfers the message from sender to receiver is called media. Decoding: The conversion of symbols into meaning by the receiver is called decoding. Receiver: The sent message received by another person or party is called the receiver. Response: The reaction shown by the receiver before the message is called response. Feed Back: The portion of the response of the receiver that is sent back to the sender is called feedback. Noise: The unplanned distortion during the process of communication due to which the receiver understands the wrong meaning of the original message is called noise. The effective message is that where the process of encoding is matched with the decoding of messages. Moreover the message sent should consist of words and symbols that are known to the receiver. Marketing Communication Process Steps There are certain steps that should be involved in the effective marketing communication process. The marketing and promotional activities should focus on these steps in order to attract a huge portion of long run customers. Following are the steps that make the communication process effective. • Identification of the target audience • Determination of the communication objectives • Designing of message • Message content • Message structure and format • Choosing media • Collecting feedback Each of these is now explained below. Identification of the Target Audience: The first step in the effective marketing communication process is to identify the target audience. So these audiences may be potential customers or other people that can influence the decisions of these customers. The audience may include the individuals, groups, general public or special public. Moreover the audience has a direct effect on the decisions of the communication, like what to say? How to say? And when to say? Etc. Determination of the Communication Objectives: In this step the marketing communicator should clear the objectives of the communication process. In most of the situations, the purchase is required by the marketing communicator. However purchase is made after a prominent customer decision making process. The communicators should also understand the standing position of the customer. Generally there are six Stages of Customer Readiness through which a customer passes to make a purchase which are as follows. • Awareness • Knowledge • Liking • Preference • Conviction • Purchase The target group of the marketing communicator is not much familiar with the new product or its salient features. So the marketing communicator should create the awareness and knowledge of its new product and features. However this is not the surety to the success; the new product should also provide superior customer value too. Designing of the Message: In this step the marketing communication communicator focuses upon the design of the message. So any message that can attract the attention, develop the interest, arousal of desire and stimulate the action is the effectively designed message. Hence this procedure is best known as the AIDA model that can make any message effective and potential. Besides this the marketing communicator also decides about the content and structure of the message. Message Content: In this step of the marketing communication process the content of the message is decided. The theme or an appeal is suggested that can bring the desired response from the audience or receiver. So following are the three appeals that should be used in this regard. Rational Appeal: The self interest of the audience is focused on the rational appeal in which the benefits availed by the usage of the products or services. Emotional Appeal: In this case positive or negative emotions are stimulated to encourage the purchase of the product. Moral Appeal: In this situation morality is included in the message to influence the targeted customers. Message Structure and Format: In this step the important issues of the message structure together with the message format is analyzed. In marketing communication of a product, it must be decided that the message must include the conclusion. Also may keep to the audience to get a conclusion from them. Moreover the massage presents either only the strengths of the product or both the strengths and weaknesses. Therefore the format of the message is also focused on which the size and shape use, eye-catching colors, and headlines etc. are decided in the most effective manner. Choosing Media: The channels of communication are decided in this step of a marketing communication process, which may take the following two forms. Personal: In this channel of communication two or more persons directly communicate with each other like face to face. Or through the mail, on the telephone, or through a chat on the internet. Personal Addressing and feedback is allowed in the personal communication. Non Personal: Non personal messages are spread through these channels which also excludes the option of feedback. Such channels include print media, display media, broadcast media, online media etc. Collecting Feedback: This is the last step of the marketing communication process in which the feedback from the target customers. So this can help the marker to alter the promotion program or other marketing activities. For this purpose the buying behavior of targeted customers is analyzed in the light of the new product. Questions may also be asked to the customers to collect their views about the positive and negative aspects of the new
- 4.5LESSON 5:Topic: Personal Selling Personal Selling is also known as the door to door selling which is face to face communication between the buyer and the seller. In simple words, It is an art of persuasion in which the salesperson tries to win the confidence of the customer and also tries to know the importance of marketing strategies. However, personal selling has become consultative selling where the seller has become. It is face to face communication between buyers and sellers. This selling also helps to interact with the seller and the customer and at the same time tries to know the queries and the benefits of the product through the customers. Definition of Personal Selling- Some basic definitions are given below: 1. A famous writer Philip Kotler says, “Personal selling is a type of personal or local presentation by the firm’s sales force for the motive of making sales and building customer relationship.” 2. A famous writer W.J.Stanton says, “Personal selling involves individual personal communication in contrast to mass relatively impersonal communication of sales promotion, advertising, and other promotional tools.” 3. A famous writer Cundiff and Still, “Personal selling is kind as a method of communication. It includes not only individual but social behavior each of the individual in face contrast salesperson a prospect influence the others.” Features of Personal Selling- The features of personal selling help to educate the seller with their respective points like immediate feedback, two-way conversations, etc. The features of personal selling define the particular characteristics which are related to personal selling. It includes various points such as:- 1.Face to Face Interaction- This is the first features of personal selling and it means that there is face to face interaction between buyers and sellers. The seller tries to understand the needs of the buyers and provide the product matching the customer needs. Through this feature, the salesman helps to tries to persuade the customers for a particular product and make a healthy relationship between them. 2. Two Way Dialogue:- This is the second features of personal selling and it means that there is a two-way dialogue between the customers and the sellers in personal selling. The customer will respond in case he has certain objections while the seller will respond with an appropriate solution to customer problems. A salesman always thinks that whenever I talk to a customer, I can completely satisfy the customer for my product so that my customer gives me a positive response to my product. So this is the reason that two-way dialogue is a very effective feature for any selling procedure. 3. Immediate Feedback- This is the third most important merit or features of personal selling as compared to other forms of promotion is that various immediate feedback of consumers that will help the salesman to act accordingly. In this feature, the seller is always trying to receive the feedback of the consumers because a consumer is the only person who can tell us well about our product whether it is his goodness or the badness. 4. Art of Persuasion- This is the fourth features of personal selling and it means that in personal selling, salesperson persuades the customers to buy the product he convinced the customer and win his confidence so that sales are achieved. In any company or real life, a good salesman is considered to be a person who should influence or satisfy a customer to his product so that the customer is induced to buy and use the particular product. 5. Flexible- This is the fifth features of personal selling and it means that the nature of the product will be varied, personal selling will be also depending upon the consumer preferences. For Example– Personal selling styles will be different for industrial products. If personal selling technique is not flexible, then it will fail to persuade the customer towards our product or service. 6. Satisfaction: This is the sixth and unique feature or characteristic of personal selling that due to the effective communication between the seller and the targeted buyer a seance of satisfaction takes place in them that the products are either sold or the information is acquired from the targeted buyer about the modification and changes of the products and services. Importance of Personal Selling- The importance of personal selling in marketing includes various points for determining the selling procedure:- 1.Goal-Oriented Activity- This is the first importance of personal selling and it means that the ultimate objective of personal selling activity is that all the sales activities right from prospecting, pre-approach, approach, presentation and demonstration, handling objections, closing, follow-up are attained in a synchronous manner and ultimate objective of revenue generation is possible. It is very important for any object to be goal and objective because it explains the nature or purpose of that thing. Similarly, personal selling also has an objective that in some way I have to execute sales and earn the profit. 2. Consultative Selling- This is the second importance of personal selling and it means that this selling has become consultative selling. Nowadays, salespersons have become consultants who guide customers to purchase decisions. Through this strategy, the salesman improves the communication pattern, relationship strategies, and also improve the trust of their products. For Example– Relationship Manager helping the customer to buy an insurance policy. 3. Win-Win Approach- This is the third importance of personal selling and it means that this selling results in a “win-win” approach or philosophy. A salesman provides the right product to the customer, customer needs are fulfilled he gets desired satisfaction while on the other hand salesman sells his product and his sales targets are attained. Through this strategy, the company or salesman improves trustworthy relations, cordial relations, and other social relations with the customers because if your customer won then did you mean that you also won… 4. Helps in Relationship Building- This is the fourth importance of personal selling and it means that this selling not only helps in identifying the prospects but it also helps in building the relationship with the customers through continuous follow-up activities from the company side. This importance is very essential for the salesperson because, without a relationship-building strategy, no one salesman or company can achieve the customer’s trust and power. Through this, the salesman achieve these things like:- • Customer Trusts, • Relations, • Customers Action, • Goal or object, • and then profit. 5. Winning the Confidence of Customer- This is the fifth importance of personal selling and it means that this selling is an art of winning the confidence of the customer and inducing him/her to buy the product. This concept helps the salesman to develop or change the ‘official customers‘ into the ‘target or permanent customers‘. This is the last or most important point of personal selling because confidence is known as an assurance about handling something such as work, family, social events, and so on. Objectives of Personal Selling- The objectives of personal selling indicate how the sellers persuade or motivate our customers to buy a particular product or service. The objectives of personal selling include various points such as:- 1. To persuade the customers- The personal selling is an art of persuasion in this salesperson persuade and insist on the customer to buy the product. This objective plays a very perfect role for any personal seller. 2. To Increase sales- The ultimate objective of personal selling is to increase the sales of a particular company so that maximum revenue can be generated by the company. 3. To build long term relationship- Personal selling only helps to acquire the customers but also to grow and retain the customers. 4. To meet the specific needs of the people- Personal selling can help in meeting the specific need of the customer. For Example– Beauty and health-related products which require personal selling to match customize needs. 5. To maintain regular communication with the customers- Personal selling involves two-way dialogues between the buyers and sellers and a buyer can share his thoughts about a particular purchase with the salesperson keeping in mind the taste and preference of the consumer salesman (an offer the product an ensure communication is maintained with the customer throughout the lifetime of the company. Managing the Sales Force Creating Sales Force Structure, Territories, and Goals Creating the proper sales force structure, territoires, and goals leads to customer, sales force and firm satisfaction. Introduction Sales operations are a set of business activities and processes that help a sales organization run effectively, efficiently, and in support of business strategies and objectives. Sales operations may also be referred to as sales operations, sales support, or business operations. The set of sales operations activities vary from company to company but often include these nine categories: • Sales strategy: design, planning, execution; • Measurement of results: reporting, analytics and sales data; • Compensation, sales quota, policies; • Technology and tools, including CRM; • Training and sales communication; • Sales territory design and optimization; • Contests/spiffs; • Lead generation/sales programs; and • Customer segmentation. Creating The Sales Force Structure How will the sales process be structured? The answer to that question, an important one, depends on the company’s strategy. The resulting structure will guide the sales force and their actions and will, therefore, impact the company’s bottom line. When developing the sales force structure, sales managers must: • Figure out the right mix of generalists, product, market, or activity specialist with the objective of balancing sales force productivity. What is the right mix? That depends on the company and it’s offerings. • Design a reporting structure that makes it easy to both coordinate and control the sales process and the activities of the salespeople. • Help the sales people achieve their goals (and reduce stress) by providing training, coaching, incentives, information support, and performance management. Designing Territories Sales territories are the customer groups or geographic districts for which individual sales people or sales teams hold responsibility. Territories can be defined on the basis of geography, sales potential, history, or a combination of factors. Companies strive to balance their territories, because this can reduce costs and increase sales. Purpose The purpose of a sales force coverage (or sales territory) metric is to create balanced sales territories. There are a number of ways to analyze territories. The most common approach is to assess them based on their potential or size. If there is a large difference between territories, or they change over time, sales people may have either too much or not enough work. Too much work can cause the sales person to neglect some customers, while too little could lead to over-servicing the customers. Both actions can cost the firm revenue. In addition, if the sales person thinks that the territory distribution is unfair, they may leave and wind up working for a competitor. So, balanced territory allocation is important to keep customers, sales people, and the firm, as a whole, satisfied. “Sales potential forecast” can be used to determine sales targets and to help identify territories worthy of an allocation of limited resources. A sales potential forecast is a forecast of the number of prospects and their buying power. It does not assess the likelihood of converting “potential” accounts. Sales potential can be represented in a number of ways. Of these, the most basic is population (i.e., the number of potential accounts in a territory). In a survey of nearly 200 senior marketing managers, 62% responded that they found the “sales potential forecast” metric very useful. Construction Before they even begin to design new territories, a sales force manager should determine the workloads of all members of the sales team. The workload for a territory can be calculated as follows: Workload (#) = [Current accounts (#) * Average time to service an active account (#)] + [Prospects (#) * Time spent trying to convert a prospect into an active account (#)] They should also determine the sales potential in a particular territory. The sales potential in a territory can be determined as follows: Sales potential ($) = Number of possible accounts (#) x Buying power ($) A third metric that is just as important as the other two is to compare territories. Managers can look at the respective size of each territory or, more specifically, the travel time (the amount of time needed to reach customers and potential customers). Creating Sales Quotas Sales goals are commonly stated in terms of quotas. A sales quota is the minimum sales goal for a set time span. A sales quota may be minimum amount of dollars (monetary value) or product sold (volume). Sales quotas may also be for sales activity, such as number of calls per day. The time span could be set for the day, week, month, or fiscal quarter or year. Management usually sets the sales quota and the sales territory, but it’s not easy. When setting quotas, successful sales managers tend to: • Ask for less than they think the sales person can deliver; • Compare results to past performance, not forecasts; and • Ensure that the compensation scheme allows the sales force to make money when the company does. Recruiting and Selecting Salespeople Salespeople who have the best characteristics, and who fit the company ethos, should be chosen during the recruitment process. great deal of recent research has underscored the strategic advantage of managing employees as if they are assets rather than commodities. Making investments in a business’s assets makes a great deal of sense, because these investments will bring a return. A growing number of companies, recognizing that their employees are among their most valuable assets, are backing up that recognition with solid investment. Recruitment of the Sales Force Recruitment of talented employees is an essential part of any company’s ability to maintain success and ensure the achievement of standards within an organization. Recruiting sales personnel is no different. Recruiting sales personnel consists of actively compiling a diverse pool of potential candidates which can be considered for employment. In different industries, the constant need for talent creates a highly competitive marketplace for individuals, and it is important for any manager to be aware of these factors as they develop recruitment programs and policies. Methods of Recruitment: Internal and External There are two principal ways to recruit workers: internally and externally. Most companies will actively use both methods, ensuring opportunities for existing employees to move up in the organization while at the same time fielding new talent. Internal recruitment is often the most cost effective method of recruiting potential employees, as it uses the existing company resources and talent pool to fill needs. External recruitment focuses resources on looking outside the organization for potential candidates and expanding the available talent pool. The primary goal of external recruitment is to create diversity among potential candidates by attempting to reach a wider range of individuals unavailable through internal recruitment. Although external recruitment methods can be costly to managers in terms of dollars, the addition of a new perspective within the organization can carry many benefits which outweigh the monetary costs. Selecting Quality Candidates After obtaining a large, qualified applicant base, managers need to identify those applicants with the highest potential for success. Selective hiring helps prevent the costly turnover of staff and increases the likeliness of high employee morale and productivity. To evaluate the fit, it is important for managers to create a list of relevant criteria for each position before beginning the recruitment and selection process. Each job description should be associated with a list of critical skills, behaviors, or attitudes that will make or break job performance. When screening potential employees, managers need to select based on cultural fit and attitude as well as technical skills and competencies. There are some companies, such as Southwest Airlines, based out of the United States, who hire primarily based on attitude because they espouse the philosophy that you hire for attitude, train for skill. According to former CEO Herb Kelleher, “We can change skill levels through training. We can’t change attitude. ” Attitude and personality is especially important for sales positions, as they are often a customer’s first and only point of contact with the company. Managers must strive to identify the best applicants at the lowest cost. Companies have a variety of processes available to screen potential employees, so managers must determine which system will generate the most accurate results. The methods of selection vary both in levels of effectiveness and in cost of application. In addition to biographical information, companies can conduct personal interviews, perform background checks, and request testing. Because of the costs associated with these measures, companies try to narrow down the number of applicants in each round of hiring. Interviews One-on-One Interview: All jobs will require some sort of interview process to determine if the candidate is suitable for the role. This may be over the phone, one-on-one (above), or part of a group. Interviews determine if the candidates have the characteristics necessary for the job. The best interviews follow a structured framework in which each applicant is asked the same questions and is scored with a consistent rating process. Having a common set of information about the applicants upon which to compare after all the interviews have been conducted allows hiring managers to avoid prejudices and all interviewees are ensured a fair chance. Many companies choose to use several rounds of screening with different interviewers to discover additional facets of the applicant’s attitude or skill as well as develop a more well-rounded opinion of the applicant from diverse perspectives. Ultimately, the company will hire those who have the necessary skills and qualifications, and best fit the company culture and ethos. Salespeople have a specific set of personality attributes: they should be good listeners and have a keen desire to help people. They need to be trustworthy and honest, yet still be able to quickly perceive what the customer truly wants. They also need to be persistent. Employers will look for these attributes, among others, when hiring salespeople. Sales Training In general, training provides many diverse benefits both to the company as well as to the salesperson. Training is generally defined as the act of teaching a skill or behavior. However, what does this mean in business terms? Simply put, training in business is the investment of resources in the employees of a company so that they are better equipped to perform the tasks of their job. The type of resources invested may include time to learn, money to create programs and develop training materials, training effectiveness evaluation systems, etc. Benefits of Training Training provides greater skill and knowledge to the employees, which translate into any number of improved job performances. The belief is that providing employees with training will result in increased profits—the improved performance or error reduction of the employees results in cost reduction for the company. For sales personnel, training is especially important, as untrained salespeople interacting with customers may have a negative effect on the company’s reputation. Both the employee and the company benefit from training. By attending training sessions, employees can deepen their existing skill set, increase their overall skill set and increase their understanding of the organization (see ). Additionally (and perhaps unintentionally on the part of the company), the trained employee becomes more marketable in the event that he or she searches for another job—more and better skills will often lead to better or higher paying jobs. Other benefits that both may enjoy are increased job satisfaction, motivation and morale; increased efficiency, resulting in financial gain; increased capacity to adopt new technologies and methods; increased innovation in strategies and products; reduced employee turnover; and enhanced company image, reputation and customer satisfaction (particularly in the case of salespeople). Training: Training can be conducted in many ways, such as in a lecture or classroom format (above), online, or any number of ways. Need for Training The need for training varies depending on the type of organization that is being discussed; a manufacturing company has different training needs than an insurance firm. But regardless of the type of company being discussed, appropriate training systems can greatly benefit the company. Sales personnel will need different types of specialized training depending on the industry and the company’s unique circumstances. How does one decide on a training system? The process begins with a training needs assessment. This assessment ought to be a systematic and objective analysis of the training needs in three main areas—organizational, job, and person. Organizational needs deal mostly with the skills the company is looking for, the labor force, etc. whereas the job needs focus on the skills that the company views as necessary for a specific position. Then there are the person needs, and these are the most variable needs. Often these needs arise after a gap is seen in the expected performance compared to the actual performance of the employee. Training can also be a part of a young employee’s “exploration” stage, where training can be used to focus the employee’s interest and development towards a specific area. Training Methods Designing and implementing the training systems requires the company to consider a number of things; the method of training, the material the training will deal with, who will provide the training, how to evaluate the effectiveness of the training, etc. On-the-job training relies on the employee to recognize the skills and knowledge he or she will need as they perform their work, and then develop those skills on his or her own. Technical training focuses on a specific need of specific employees. Mentoring systems pair a younger or less experienced employee with an individual that has experience and success within the company who can offer guidance, aid and insight to the younger/less experienced employees. Coaching systems involve the manager offering developmental assistance to the employee through observation, assessment, providing feedback, questioning, etc. The training of a salesperson who will be working in a country other than his or her own can be broken into three segments—pre-departure, on-site, and repatriation. The pre-departure training consists of formal language training, training with respect to the local culture (culture sensitivity), education about the country (history, geography, government, etc.), and education about the company’s operation in the foreign country. Such training allows for easier assimilation of the employee into the country and the company’s office there. Once on site, training takes the shape of training at any other branch of the company. When the employee abroad returns, a repatriation program designed to reduce culture shock and to integrate the experience abroad is useful. Motivating and Compensating Salespeople Employees are best motivated through effective job design, equitable compensation, and treatment as stakeholders in the company. Employees as Stakeholders The concept of employees as stakeholders refers to the interest employees have in the success of the company and the fact that actions taken by the organization directly affect the employees. Employees’ stakes in the company are economic in the fact that their livelihood comes from the firm, psychological in that they derive pride from their work, and political in terms of their rights as employees and citizens. To motivate employees and improve firm performance, companies should strive for employee participation and influence. Voice and influence mechanisms allow employees to give input and to contribute their expertise to the success of the business. These mechanisms allow firms to get the most benefit from the skills of their human capital. Thus, firms with employee influence mechanisms get higher financial return from their employee assets. Effective Job Design Job design, defined as the allocation of specific work tasks to individuals and groups, is critical for any organization. Allocating jobs and tasks means specifying the contents, methods, and relationships of jobs to satisfy technological and organizational requirements as well as the personal needs of jobholders. If successful job design is not implemented, then the company’s general strategy and direction will be strongly diverted. Employees, in turn, will be demotivated. Meaningful jobs must exemplify the company’s goals and culture. Individuals, including salespeople, need to be compelled and excited to do their work. It is thus essential to design their jobs with the goal of motivating them. Motivation describes the forces within the individual that account for the level, direction, and persistence of effort expended at work. Appropriate resource allocation allows large organizations to foster and develop innovation in their workforce. Reward systems include compensation, bonuses, raises, job security, and benefits. Job design is the base element for producing effective work organizations, so without meaningful job design, an organization will never operate to its potential. Compensation: Internal Equity The first consideration for designing a compensation system is that the base pay system needs to be internally equitable. In other words, the pay differentials between jobs need to be appropriate. The amount of base pay assigned to jobs needs to reflect the relative contribution of each job to the company’s business objectives. Compensation: External Equity The second consideration in creating a base pay system is external equity. This refers to the relationship between one company’s pay levels and the pay levels of competitors. Setting pay levels higher than the competition, in the hope of attracting the best applicants, is called “leading the market.” The risk is that a company’s costs will generally be higher than the costs of its competitors. Other employers can set their pay levels lower than their competition, hoping to save labor costs. This is called “lagging the market. ” The risk is that the company will be unable to attract the best applicants. Most employers set their pay levels the same as their competition. This strategy is called “matching the market” and maximizes the quality of talent while minimizing labor costs. Types Of Compensation Cash is one way to compensate employees, but cash alone is rarely enough payment. Benefits and other forms of non-monetary compensation are becoming more appropriate forms of compensation for employees in today’s workplace. In order to attract, retain, and motivate the best employees, benefits and other sources of non-monetary compensation should be considered. If the company has an understanding of what they can offer to employees, benefits can increase a company’s workforce quality and the general morale of employees. Companies can offer different types of benefits in order to create a positive culture for their employees. These benefits have the ability to promote social interaction among employees, make life easier for working parents, or improve their quality of life. Depending on the industry and job type, benefits may be more attractive than salary figures. This fact could allow companies to pay lower wages, thus reducing the total amount spent on payroll. Pay for Performance It is important to design reward systems carefully, taking into consideration base salary and other incentives. This notion applies especially to salespeople. Most compensation systems include “variable pay.” Depending on work performance, many companies reward their employees without affecting the base salary. To reward employees for achieving a set goal, many companies use bonuses. To this point, companies such as GE, HP, and Sun Microsystems use software that directly evaluates the behavior of employees with respect to customer service. Long-term incentives are also a part of reward systems. Stock options and profit-sharing plans are representative of long-term reward systems. Measuring Sales Force Performance Appraisals are the common form of measuring how well an employee performed compared to a set of stated objectives; feedback communicates these evaluations. Measuring the performance of the sales force within a company is vital to ensuring its success. This can be done through conducting performance appraisals and offering feedback. (1) Performance Appraisals Historically, performance appraisals have been used by companies for a variety of different purposes, including salary recommendations, promotion and layoff decisions, and training recommendations. In general, “performance elements tell employees what they have to do and standards tell them how well they have to do it” (United States Department of the Interior, 2004). One key item that is often forgotten during the appraisal process (by managers and employees alike) is that the appraisal is for improvement, not blame. Numerous methods exist for gauging an employee’s performance, and each provides strengths and weaknesses for given environments. Appraisal methodologies depend greatly on the type of work being done; an assembly worker will require a considerably different appraisal system than a business consultant. Similarly, a salesperson will be appraised very differently than a researcher. Performing an appraisal can be nerve racking for both parties if the situation is not handled correctly. There are many acts a manager can perform to make the process easier on both parties, and hopefully, mutually beneficial. Many assume that performance appraisals are meant to identify weaknesses to be worked on, and exposing these weaknesses can be painful for employees. Studies show that organizations should be leveraging the strengths of each employee rather than focusing on their weaknesses. Yearly performance reviews are becoming increasingly rare as companies begin to see the benefits of frequent appraisal. Constant fine tuning of performance can be much more effective than annual overhauls. Appraisal Methods • Graphic rating scales: This method involves assigning some form of rating system to pertinent traits. Ratings can be numerical ranges (1-5), descriptive categories (below average, average, above average), or scales between desirable and undesirable traits (poor ↔ excellent). This method can be simple to setup and easy to follow, but is often criticized for being too subjective, leaving the evaluator to define broad traits such “leadership ability” or “conformance with standards.” • 2+2: This method demonstrates how appraisals can be used primarily for improvement purposes. By offering employees two compliments and two suggestions for improvement focused around high-priority areas, organizations can become more productive. If the goal of the performance appraisal is employee improvement, this system can provide significant benefits; however, if the goals are more akin to compensation changes and rankings, the system provides little benefit. (2) Feedback In the broadest sense, feedback is simply verbal or nonverbal communication between two or more parties. Feedback should be given in all work situations, good and bad. However, people sometimes think of feedback as being synonymous with criticism when it is given in situations where expectations have not been met. Regardless, we are constantly surrounded by feedback as we see the consequences of our actions and how our actions affect the impressions of those around us, as shown in this feedback diagram. Feedback: Feedback is an essential part of our personal life and our work environment, making, giving, and receiving feedback successfully is critical. One common problem that managers overlook when reviewing performance is remembering that feedback is not all about forms. Traditional performance reviews have checklists, ratings, or reports that are used as tools to analyze feedback in the organization. While these forms are useful in documenting and appraising a person’s performance, feedback should not be dictated by the type of form an organization uses. Instead, it should be well thought out and measured according to the individual employee in question, considering their unique circumstances and abilities.
- 4.6lesson 6: Marketing Communication Marketing communication process consists of integrated activities in which the targeted audience is identified. Although a well coordinated promotional program is prepared to generate the desired response from the audience. Most problems of preferences, image and immediate awareness in the target customers are focused by the marketing communication. However there are certain limitations associated with the concept of communication. These limitations include high cost and short term duration that cannot generate the desired results from the targeted customers. In recent years Marketing Communication is used by most marketers. As to build customer relationships at the stages of pre-selling, selling, utilization, and post utilization. Due to differences in customers, different programs of communications are developed for specific segments and niches. Element of Marketing Communication Process For Effective Communication, the marketer should know how communication works? Following are the nine elements that are involved in the marketing communication process. • Sender • Encoding • Message • Media • Decoding • Receiver • Response • Feedback • Noise Each of these is discussed one by one. Sender: The party or person who is sending the message to the other party or person is the sender. Encoding: The conversion of thought into the meaningful symbols is called encoding. Message: The group of symbols transmitted by the sender is called a message. Media: The channel of communication through which transfers the message from sender to receiver is called media. Decoding: The conversion of symbols into meaning by the receiver is called decoding. Receiver: The sent message received by another person or party is called the receiver. Response: The reaction shown by the receiver before the message is called response. Feed Back: The portion of the response of the receiver that is sent back to the sender is called feedback. Noise: The unplanned distortion during the process of communication due to which the receiver understands the wrong meaning of the original message is called noise. The effective message is that where the process of encoding is matched with the decoding of messages. Moreover the message sent should consist of words and symbols that are known to the receiver. Marketing Communication Process Steps There are certain steps that should be involved in the effective marketing communication process. The marketing and promotional activities should focus on these steps in order to attract a huge portion of long run customers. Following are the steps that make the communication process effective. • Identification of the target audience • Determination of the communication objectives • Designing of message • Message content • Message structure and format • Choosing media • Collecting feedback Each of these is now explained below. Identification of the Target Audience: The first step in the effective marketing communication process is to identify the target audience. So these audiences may be potential customers or other people that can influence the decisions of these customers. The audience may include the individuals, groups, general public or special public. Moreover the audience has a direct effect on the decisions of the communication, like what to say? How to say? And when to say? Etc. Determination of the Communication Objectives: In this step the marketing communicator should clear the objectives of the communication process. In most of the situations, the purchase is required by the marketing communicator. However purchase is made after a prominent customer decision making process. The communicators should also understand the standing position of the customer. Generally there are six Stages of Customer Readiness through which a customer passes to make a purchase which are as follows. • Awareness • Knowledge • Liking • Preference • Conviction • Purchase The target group of the marketing communicator is not much familiar with the new product or its salient features. So the marketing communicator should create the awareness and knowledge of its new product and features. However this is not the surety to the success; the new product should also provide superior customer value too. Designing of the Message: In this step the marketing communication communicator focuses upon the design of the message. So any message that can attract the attention, develop the interest, arousal of desire and stimulate the action is the effectively designed message. Hence this procedure is best known as the AIDA model that can make any message effective and potential. Besides this the marketing communicator also decides about the content and structure of the message. Message Content: In this step of the marketing communication process the content of the message is decided. The theme or an appeal is suggested that can bring the desired response from the audience or receiver. So following are the three appeals that should be used in this regard. Rational Appeal: The self interest of the audience is focused on the rational appeal in which the benefits availed by the usage of the products or services. Emotional Appeal: In this case positive or negative emotions are stimulated to encourage the purchase of the product. Moral Appeal: In this situation morality is included in the message to influence the targeted customers. Message Structure and Format: In this step the important issues of the message structure together with the message format is analyzed. In marketing communication of a product, it must be decided that the message must include the conclusion. Also may keep to the audience to get a conclusion from them. Moreover the massage presents either only the strengths of the product or both the strengths and weaknesses. Therefore the format of the message is also focused on which the size and shape use, eye-catching colors, and headlines etc. are decided in the most effective manner. Choosing Media: The channels of communication are decided in this step of a marketing communication process, which may take the following two forms. Personal: In this channel of communication two or more persons directly communicate with each other like face to face. Or through the mail, on the telephone, or through a chat on the internet. Personal Addressing and feedback is allowed in the personal communication. Non Personal: Non personal messages are spread through these channels which also excludes the option of feedback. Such channels include print media, display media, broadcast media, online media etc. Collecting Feedback: This is the last step of the marketing communication process in which the feedback from the target customers. So this can help the marker to alter the promotion program or other marketing activities. For this purpose the buying behavior of targeted customers is analyzed in the light of the new product. Questions may also be asked to the customers to collect their views about the positive and negative aspects of the new
- 4.7L7. Channel Design and Channel Management Decisions
- UNIT 44
- 5.1lesson 1.:Customer Relationship Management The art of managing the organization’s relationship with the customers and prospective clients refer to customer relationship management. Customer relationship management includes various strategies and techniques to maintain healthy relationship with the organization’s existing as well as potential customers. Orgnaizations must ensure customers are satisfied with their products and services for higher customer retention. Remember one satisfied customer brings ten new customers with him where as one dissatisfied customer takes away ten customers along with him. In simpler words, customer relationship management refers to the study of needs and expectations of the customers and providing them the right solution. Need for Customer Relationship Management Customer Relationship Management leads to satisfied customers and eventually higher business every time. Customer Relationship Management goes a long way in retaining existing customers. Customer relationship management ensures customers return back home with a smile. Customer relationship management improves the relationship between the organization and customers. Such activities strengthen the bond between the sales representatives and customers. Steps to Customer Relationship Management It is essential for the sales representatives to understand the needs, interest as well as budget of the customers. Don’t suggest anything which would burn a hole in their pockets. Never tell lies to the customers. Convey them only what your product offers. Don’t cook fake stories or ever try to fool them. It is a sin to make customers waiting. Sales professionals should reach meetings on or before time. Make sure you are there at the venue before the customer reaches. A sales professional should think from the customer’s perspective. Don’t only think about your own targets and incentives. Suggest only what is right for the customer. Don’t sell an expensive mobile to a customer who earns rupees five thousand per month. He would never come back to you and your organization would lose one of its esteemed customers. Don’t oversell. Being pushy does not work in sales. It a customer needs something; he would definitely purchase the same. Never irritate the customer or make his life hell. Don’t call him more than twice in a single day. An individual needs time to develop trust in you and your product. Give him time to think and decide. Never be rude to customers. Handle the customers with patience and care. One should never ever get hyper with the customers. Attend sales meeting with a cool mind. Greet the customers with a smile and try to solve their queries at the earliest. Keep in touch with the customers even after the deal. Devise customer loyalty programs for them to return to your organization. Give them bonus points or gifts on every second purchase. The sales manger must provide necessary training to the sales team to teach them how to interact with the customers. Remember customers are the assets of every business and it is important to keep them happy and satisfied for successful functioning of organization. An Overview of Relationship Management and Why it is Important for Corporate Introduction: Why is Relationship Management Important ? If you are working and have a bank account, chances are that you would have heard of the term Relationship Manager who is tasked with the responsibility of attending to your banking needs as well as proactive account management. Further, if you are working for a corporate and are either a marketing personnel or you are an important client for a corporate, chances are that you are either a relationship manager or deal with a relationship manager belonging to your vendors. Thus, relationship management is indeed an aspect of management which has grown in importance in recent years mainly due to the intensely competitive marketplace where the Customer is the King and hence, any corporate wishing to “stay in the game” simply cannot do without relationship management. Who is a Relationship Manager ? Before proceeding further, it would be worthwhile to understand what Relationship Management is in the first place. Consider the Relationship Manager as a One Stop Contact Person or a Single Point of Contact for the Clients who do business with the corporates. Before the advent of relationship management, it was often the case that clients used to “talk to” various departments in the vendor’s organization wherein their issues related to sales, marketing, service, production, design, pricing, and any general query had to be resolved by multiple people and departments instead of being “routed” through a single person. In this scenario, one can imagine the hassles of dealing with multiple people in the vendor’s organization and the wastage of time and the inefficiency inherent in this approach. On the other hand, imagine if you were an important customer for the corporate and you are assigned a Single Point of Contact or a Relationship Manager for all your commercial needs. In this scenario, if the deliveries are delayed or your payment has been stuck or if the product fails the quality standards, all you have to do is simply call the Relationship Manager and talk to him or her wherein you assign the issue to them and then wait for them to call you back. Indeed, just think of the “Synergies” in this process as you need not call marketing, finance, quality assurance, or sales separately and all you have to do is talk to the Relationship Manager. Moreover, this is not only efficient but cheaper as well as more “real time oriented” meaning that there are no lags and delays arising from coordination and miscommunication aspects. Indeed, Relationship Management takes the art and science of sales, marketing, and customer service to an “entirely new level” by channelizing and routing the queries and concerns through a single point of contact who is the relationship manager. What Does the Relationship Manager Do ? Of course, this does not mean that all the queries and concerns would get addressed by the RM immediately since the RM’s job is to be the “face and the voice” that the Customers know in the vendor’s organization and once the concerns are raised, the RM would get down to work and contact the respective departments for resolution. In cases where multiple departments are involved, the RM would also ensure that there is better coordination and communication leading to efficiencies which in turn can lead to a situation where customer satisfaction goes beyond Customer Delight and instead, can easily lead to “Customer Wow” which is the pinnacle of customer service that all corporates must aspire to. What we are talking here is the essence of Relationship Management which based on the points raised so far indicates that Relationship Management is the “Management of End to End Customer Needs wherein the entire Customer Value Chain can be handled through a Single Point of Contact”. Relationship Management is also Proactive leading to Synergies and Efficiencies Having said that, Relationship Management is also proactive meaning that almost all RM’s do not stop at handling queries and concerns but also seek new business, ask for continuous feedback, meet with their clients periodically, and some who are astute become the “alter egos” for their clients meaning that they anticipate what the customer wants and give it to them even before the customer asks. This is the result of the “synergistic” combination of Marketing, Sales, Customer Service, and Contact Points for the Customers that is as much New Age Business as it is about old fashioned way of the so-called “personal touch” based customer service. Indeed, it can be said that the “wheel has come full circle” as the earlier decades management emphasized personal selling and marketing only to be superseded by automation and what we now have is the combination of technology and the “human touch” wherein customers and vendors use Big Data, Analytics, and Marketing and Sales techniques to “manage their relationships”. Conclusion: Aspiring to be a Relationship Manager? Finally, for all those of you who are aspiring for a career in Management and are already in the field or are graduating from business schools, it would be worthwhile to remember that ultimately, most career paths in organizations in the managerial vertical often lead to the designation and role of Relationship Management since this role requires both knowledge as well as experience in addition to exemplary people skills. Thus, we suggest that you take this introduction as the starting point and explore the topic in detail as well as make time to talk to practicing relationship managers so that you know the expectations, pressures, as well as the pleasures of being a Relationship Manager in the Real World. customer satisfaction Customer satisfaction refers to how well you, as a product or service provider, fulfil the needs and expectations of your customers. This applies to any interactions before and after the sale as well as during it. The following customer satisfaction definition comes from Cambridge Dictionary: “A measure of how happy customers feel when they do business with a company.” Seems simple enough, right? But the problem comes down to measuring customer satisfaction. It’s not enough to assume that a customer is satisfied because they leave with a smile on their face and don’t complain about you online. Some people might just be polite. How can you measure customer satisfaction The fact that the above definition uses the word “measure” highlights the importance of measuring customer satisfaction empirically. This is typically done using customer satisfaction surveys to gather your customers’ opinions on the different aspects of your service. You can also factor in other metrics like customer retention and loyalty to make assumptions about customer satisfaction. By measuring customer satisfaction in this way, you can identify your weaknesses and figure out how to improve your service in order to increase customer satisfaction levels. Why is customer satisfaction so important It’s much easier to forget about a customer as soon as they leave your store or click away from your website. So why should we take the time to follow up with our customers and focus on their satisfaction levels? Here are some of the key reasons why measuring customer satisfaction and striving to improve it are so important. Maximise customer lifetime value Many businesses underestimate the cost of acquiring a new customer. It is much more cost-effective to invest in retaining existing customers rather than constantly chasing new ones. If you focus on customer satisfaction, then those that buy from you are much more likely to buy from you again. This increases the lifetime value of that customer, i.e. the amount they spend with you over their entire lifetime. When customers keep coming back to buy from you, your return on investment from their customer acquisition cost increases. The bottom line is: satisfied customers are more loyal and loyal customers are more profitable for your business. Minimise customer churn Customer churn refers to those customers that stop buying from you, whether that’s after their first purchase or after several years of being a loyal customer. Customer churn can be very costly for your business because it means you need to go back to focusing on getting new customers. As mentioned above, a satisfied customer is more likely to remain loyal, therefore decreasing customer churn. Positive brand exposure Word of mouth is important to any business. Disgruntled customers will go online and complain about your business or its products, they’ll write negative reviews, and they’ll recommend your competitors over you. By improving your customer satisfaction, you not only avoid this, but you also benefit from positive word of mouth. Satisfied customers will recommend you to friends and family, talk positively about you online, and, hopefully, write positive reviews on places like Google, Facebook, and Yelp. Increase revenue All businesses want to increase their revenue and grow their business, but they might not always have the resources to invest in actively growing it. Once you’ve got your customer satisfaction strategy right, it becomes an effective way to grow your business and its revenue passively. While you focus on improving other areas of your business, satisfied customers keep coming back to buy from you and they keep recommending you to their peers or writing positive reviews online. This keeps a steady and, hopefully, increasing revenue stream coming in without you having to constantly work on it. Of course, customer satisfaction is something you should review on a regular basis to ensure you’re still hitting the nail on the head. What is customer loyalty? Customer loyalty is a customer’s willingness to repeatedly return to a company to conduct business. This is typically due to the delightful and remarkable experiences they have with that brand. One of the main reasons to promote customer loyalty is because those customers can help you grow your business faster than your sales and marketing teams. There are several other reasons why customer loyalty is critical to your success. Why is customer loyalty important? Customer loyalty is something all companies should aspire to simply by virtue of their existence: The point of starting a for-profit company is to attract and keep happy customers who buy your products to drive revenue. Customer loyalty is something all companies should aspire to. Here are the main benefits. Increased Share-of-Wallet Share-of-wallet refers to the amount of money a customer spends on a certain brand compared to how much they spend on the brand’s competitors. Customers convert and spend more time and money with the brands to which they’re loyal. That’ll mean more share-of-wallet for you. Better Word-of-Mouth Referrals Customers convert and spend more time and money with the brands to which they’re loyal. These customers also tell their friends and colleagues about those brands, too which drives referral traffic and word-of-mouth marketing. Increased Trust Customer loyalty also fosters a strong sense of trust between your brand and customers — when customers choose to frequently return to your company, the value they’re getting out of the relationship outweighs the potential benefits they’d get from one of your competitors. Since we know it costs more to acquire a new customer than to retain an existing customer, the prospect of mobilizing and activating your loyal customers to recruit new ones — simply by evangelizing a brand — should excite marketers, salespeople, and customer success managers alike. But how do you do it? How do you turn happy, satisfied customers into loyal brand evangelists? How do you use positive Yelp reviews, glowing tweets, and Instagram mentions to propel your brand’s growth? Well, we have a few ideas. How to Keep Customers Loyal 1. Be as generous as your customers. 2. Show your gratitude. 3. Provide benefits to your customers with every purchase. 4. Scratch the program completely. 5. Build a useful community for your customers. 6. Communicate effectively with your customers. 7. Improve upon your customer loyalty program. 8. Continuously evolve your business over time. 1. Be as generous as your customers. From the outside looking in, customer loyalty programs can appear to be nothing more than a scheme to get customers to spend even more money. (Let’s face it; we can all be cynics sometimes.) That’s why truly generous loyalty programs stand out among the rest. If your loyalty program requires customers to spend a lot of money only to be rewarded with meager discounts and samples, you’re doing it wrong. Instead, walk the walk and show customers how much you value them by offering perks that are so good, it would be foolish not to become a member. 2. Show your gratitude. You might think that, by offering a loyalty program, you’re expressing your gratitude for their business and loyalty. Think again. Your customers are routinely bombarded by businesses — your competitors included. Your competitors likely offer a loyalty program, too. What sets you apart in a way that keeps customers loyal? Expressing your gratitude through handwritten notes or direct, one-to-one messages. Include thank you notes in your product deliveries or purchase confirmation emails, or send special cards around the holidays. 3. Provide benefits to your customers with every purchase. Build loyalty by providing customers with awesome benefits related to your business and product or service with every purchase. The best part of this approach is that it may not necessitate creating a customer loyalty program — though that’s certainly still an option. If your company is pioneering a new product or service, a loyalty program may not be necessary. This minimalist approach works best for companies that sell unique products or services. That doesn’t necessarily mean that you offer the lowest price, or the best quality, or the most convenience. It means that you offer the only product in a certain category. Customers will be loyal because there are few other options as spectacular as you, and you’ve communicated that value from your first interaction. 4. Scratch the program completely. Considering how many businesses offer loyalty programs, one innovative idea to make yourself stand out is to nix the idea of employing a “program” altogether. Instead, build loyalty by providing customers with awesome benefits related to your business and product or service with every purchase. This minimalist approach works best for companies that sell unique products or services. That doesn’t necessarily mean that you offer the lowest price, or the best quality, or the most convenience; instead, I’m talking about redefining a category. If your company is pioneering a new product or service, a loyalty program may not be necessary. Customers will be loyal because there are few other options as spectacular as you, and you’ve communicated that value from your first interaction. 5. Build a useful community for your customers. Customers will always trust their peers more than they trust your business. Between social media, customer review sites, forums, and more, the slightest slip can be recorded and uploaded for the world to see. But, you can turn this into a positive by managing a community that encourages customer-to-customer interactions. One way to do this is with self-service support resources. If you have a knowledge base, you can add a community forum. A community forum encourages customers to communicate with one another on various topics, like troubleshooting the product or retelling service experiences. Even if they leave negative feedback, at least it’s left on your domain where you can respond to it and deal with it accordingly. A community forum can benefit your business in other ways, too — for example on the HubSpot Ideas Forum, customers can pitch ideas and upvote each other’s posts. If the idea is good, the product team will consider it for an upcoming sprint. If the idea can already be done with the product, the support team will reach out with a solution. This lets our team provide both proactive and reactive customer service through one resource. As online communities progress, you may formalize them to keep things organized. Having a consistent system in place ensures fairness and keeps customers satisfied over time. This is where customer loyalty programs come in handy. 6. Communicate effectively with your customers. Building and maintaining customers’ trust requires continuous communication. When a customer knows that your business is transparent and honest, they have trust that will have a positive experience in their interactions. This should still be the case especially when it comes to customer service and has a problem to be resolved. Good communication means your customers should know what is going on with your business. If there is a new product, a major change, company update, shortage, change in hours, or anything that a customer should be aware of so they aren’t surprised, it should be clearly communicated. This is a part of good customer service that is essential for making customers want to continue doing business with you. 7. Improve upon your customer loyalty program. While earlier we suggested forgoing the customer loyalty program, it’s still an essential cornerstone of any customer loyalty-building endeavor. It’s one of the best ways to build customer loyalty, especially if the brand keeps adding perks that make it impossible to walk away. Companies provide customer loyalty programs to their most frequent customers to encourage loyalty and long-term business by offering free merchandise, rewards, coupons, or even advance-released products. Continue improving upon yours by offering more perks and rewards as time goes on. 8. Continuously evolve your business over time. The market and the desires of your audience and customers are going to continuously change over time. Doing research and staying up-to-date in your industry reassures customers that you will always be innovative and offer the best options for meeting their needs. This doesn’t just apply to new technologies, though. Evolving should include the branding, culture, marketing, and your product itself. Customers develop trust over knowing that companies won’t be stagnant. Being aware of how to continuously improve your business ensures you’re always getting better. Loyalty to your business and your products comes with customers knowing they’re always getting the best. What is a customer loyalty program? Companies provide customer loyalty programs to their most frequent customers to encourage loyalty and long-term business by offering free merchandise, rewards, coupons, or even advance-released products. So, how do you ensure your customer loyalty program is beneficial for your business and your customers? Check out these types of loyalty programs. How do loyalty programs work? Gaining and retaining customers is the primary goal for businesses. A lot of marketing focuses on gaining customers but retaining them is often a whole different ball game. Loyalty programs work by giving customers an incentive to continue doing business with you. The incentives can be a variety of things, but they should offer a strong benefit to keep them coming back. Types of Customer Loyalty Programs 1. Point-based loyalty program 2. Tiered loyalty program 3. Paid loyalty program 4. Value-based loyalty program 5. Coalition loyalty program 6. Game-based loyalty program 1. Point-Based Loyalty Program This is arguably the most common loyalty program methodology in existence. Frequent customers earn points that translate into rewards such as a discount code, freebie, or another type of special offer. Where many companies falter in this method, however, is making the relationship between points and tangible rewards complex and confusing. “Fourteen points equals one dollar, and twenty dollars earn 50% off your next purchase in April!” That’s not rewarding. That’s a headache. If you opt for a points-based loyalty program, keep the conversions simple and intuitive. Although a points system is perhaps the most common form of loyalty program, it isn’t necessarily applicable to every type of business. It works best for businesses that encourage frequent, short-term purchases, like Dunkin’ Donuts. 2. Tiered Loyalty Program Finding a balance between attainable and desirable rewards is a challenge for most companies designing loyalty programs. One way to combat this is to implement a tiered system that rewards initial loyalty and encourages more purchases. Present small rewards as a base offering for being a part of the program, and then encourage repeat customers by increasing the value of the rewards as they move up the loyalty ladder. This solves the potential issue of members forgetting about their points (and never redeeming them) because the time between purchase and gratification is too long. The biggest difference between the points system and the tiered system is that customers extract short-term versus long-term value from the loyalty program. You may find tiered programs work better for high commitment, higher price-point businesses like airlines, hospitality businesses, or insurance companies. 3. Paid (VIP) Loyalty Program Loyalty programs are meant to break down barriers between customers and your business … so are we seriously telling you to charge them a fee? In some circumstances, a one-time (or annual) fee that lets customers bypass common purchase barriers is quite beneficial for both business and customer. If you identify factors that may cause your customers to leave, you can customize a fee-based loyalty program to address those specific obstacles. For example, have you ever abandoned your online shopping cart after tax and shipping were calculated? This is a frequent issue for online businesses. To combat it, you might offer a loyalty program like Amazon Prime — by signing up and paying an upfront fee, customers automatically get free two-day shipping on orders (plus other awesome benefits like free books and movies). 4. Value-Based Loyalty Program Truly understanding your customer requires you to identify the values and desires of your target audience — in doing so, you can encourage customer loyalty by targeting those characteristics. While any company can offer promotional coupons and discount codes, some businesses may find greater success in resonating with their target audience by offering value in ways unrelated to money — this can build a unique connection with customers, fostering trust and loyalty. 5. Coalition (Partnership) Loyalty Program Strategic partnerships for customer loyalty (also known as coalition programs) can be an effective way to retain customers and grow your company. Which company would be a good fit for a partnership? The answer depends on your customers’ everyday lives, needs, and purchase processes. For example, if you’re a dog food company, you might partner with a veterinary office or pet grooming facility to offer co-branded deals that are mutually beneficial for your company and your customer. When you provide your customers with relevant value that goes beyond what your company alone can offer them, you’re showing them that you understand and care about their challenges and goals (even those you can’t solve alone). Plus, it helps you grow your network to reach your partners’ customers, too. 6. Game-Based Loyalty Program Who doesn’t love a good game? Turn your loyalty program into a game to encourage repeat customers and — depending on the type of game you choose — solidify your brand’s image. With any contest or sweepstakes, though, you run the risk of having customers feel like your company is jerking them around to win business. To mitigate this risk, ensure your customers don’t feel like you’re duping them out of their rewards. The odds should be no lower than 25%, and the purchase requirements to play should be attainable. Also, make sure your company’s legal department is fully informed and onboard before you make your contest public. When executed properly, this type of program could work for almost any type of company and makes the process of making a purchase engaging and exciting. How to End a Loyalty Program Loyalty programs are not meant to last forever, for your or your customers. The programs, marketing, and benefits should change over time. It’s important, however, to not end loyalty programs in a way that is off-putting for customers currently in the program. A major way to avoid this is to establish a time limit to the program at the start, and remind users of the ending as it approaches. You can also give a small gift or one-time bonus at the end to counteract the negative feeling coming from losing the benefit. Now that you have some ideas for your new customer loyalty program, or how to enhance the program you already offer, you’ll also need to ensure you have a reliable way to measure its effectiveness. How to Measure Customer Loyalty 1. Customer Retention Rate 2. Negative Churn 3. Net Promoter Score® 4. Customer Effort Score 5. Purchase Habits 6. Referral Traffic 7. Social Media Mentions As with any initiative you implement, you should have some way to measure success. Customer loyalty programs should increase customer delight, happiness, and retention — and there are ways to measure these things (aside from rainbows, sunshine, and smiles). Different companies and programs call for unique analytics, but here are a few of the most common metrics companies watch when rolling out loyalty programs. 1. Customer Retention Rate Customer retention is an indication of how long customers stay with you. With a successful loyalty program, this number should increase over time, as the number of loyalty program members grows. According to The Loyalty Effect, a 5% increase in customer retention can lead to a 25% to 100% increase in profit for your company. Run an A/B test against program members and non-program customers to determine the overall effectiveness of your loyalty initiative. Discover everything you need to start running effective split tests with this complete A/B testing kit. 2. Negative Churn Customer churn is the rate at which customers leave your company. Negative churn, therefore, is a measurement of customers who do the opposite: either they upgrade or purchase additional services. These help to offset the natural churn that goes on in most businesses. Depending on the nature of your business and loyalty program, especially if you opt for a tiered loyalty program, this is an important metric to track. 3. Net Promoter Score® NPS® is a customer satisfaction metric that measures, on a scale of 1-10, the degree to which people would recommend your company to others. NPS is calculated by subtracting the percentage of detractors (customers who would not recommend your product) from the percentage of promoters (customers who would recommend you). The fewer detractors, the better. Improving your net promoter score is one way to establish benchmarks, measure customer loyalty over time, and calculate the effects of your loyalty program. 4. Customer Effort Score Customer Effort Score (CES) asks customers, “How much effort did you personally have to put forth to solve a problem with the company?” Some companies prefer this metric over NPS because it measures actual experience rather than the emotional delight of the customer. In this way, customer service impacts both customer acquisition and customer retention. If your loyalty program addresses customer service issues, like expedited requests, personal contacts, or free shipping, this may be one way to measure success. Now, here are some examples to offer inspiration while you build your own customer loyalty program. 5. Purchase Habits How long do customers take to make another purchase from you? How many customers are returning products after purchasing them from you? These purchase habits let you know whether customers are loyal to your brand — or whether they’re leaving you for your competitors. It’s important to understand what, if anything, is causing a return or delaying a repeat purchase. That’s why it’s important to consistently carry out customer satisfaction surveys at least once every quarter or whenever appropriate. You could send one to a customer after they tried out your product, for example, or right after they returned it. 6. Referral Traffic Referral traffic refers to any traffic that comes to your website from places other than search engines (such as Google). Social media sites, news websites, and other online properties would all count as referral traffic. Traffic from display ads doesn’t count. What matters is how many of your customers are linking to your site or talking about you on their social media profiles. You can measure referral traffic using a tool such as Google Analytics. 7. Social Media Mentions What are people saying about you on social media? Is it positive? Or are they spreading bad word? While this isn’t so much of a quantitative measurement as others on this list, it’s still an excellent way to track customer loyalty. You can track social media mentions using a tool such as HubSpot. Tracking mentions is an important part of a social listening strategy and one of the best ways to see whether customers are loyal. You can also find out what they’re saying about you in comparison to your competitors. Best Customer Loyalty Programs 1. Sephora Beauty INSIDER 2. Virgin Atlantic Flying Club 3. Amazon Prime 4. TOMS Passport Rewards 5. Hyatt Loyalty Program 6. Swarm Perks 7. REI Co-op 8. United Mileage Plus 9. Odacité Rewards 10. Starbucks Rewards 11. PetSmart Treats 12. Sweet Green Sweet Rewards 13. DSW 14. The North Face 15. The Body Shop What is customer retention? Customer retention is a metric that measures customer loyalty, or the ability for an organization to keep its customers over time. In addition to identifying the number of loyal customers, customer retention can reflect or predict customer satisfaction, repurchase behavior, customer engagement and emotional ties to a brand. While customer relationships typically begin with an initial interaction, customer retention metrics are related to the first purchase made by a customer and include all subsequent interactions. Once customer retention is measured, organizations can use this feedback to perform data analysis on components of customer experience and customer success. For example, if a drop in customer retention is reported, an organization can use this to help identify the root cause and adjust its product offerings. Customer retention is critical because the cost of acquiring new customers is much higher than retaining existing customers. Retained customers are also more likely to engage in word-of-mouth marketing or become brand ambassadors. Why is customer retention important for businesses? If an organization does not focus on customer retention but instead focuses solely on expanding its customer base, it is potentially losing out on repeat customers. While the process of gaining new customers, or customer acquisition, is important, it is also much more expensive. Maintaining customers and transitioning them into recurring customers is just as important of a process as gaining new ones. According to the Annexcloud.com blog post titled “21 Surprising Customer Retention Statistics For 2021,” almost 65% of a company’s business comes from repeat customers, while focusing on increasing customer retention by 5% can increase profits by 25% to 95%. The more loyal an individual becomes to a business, the more likely they will try new products or bring in new customers. Both customer retention and customer acquisition are important and should be balanced fairly. How to measure customer retention and key metrics Customer retention is typically measured in terms of retention rate and should be monitored continuously. The first step to determining this rate is to identify the period of time an organization wants to record. This can range from a month to a fiscal year or beyond. Other factors used to determine the retention rate include the following: • the number of customers in the customer base at the start of the period (S); • the number of customers at the end (E); and • the number of new customers acquired over time (N). These metrics should be recorded. Once retrieved, the formula is applied as follows: E-N/S x 100 = retention rate For example, if an organization starts with 750 customers and ends with 950, but acquires 625 over the period of time, the customer retention rate would be 43.3%. This image shows how to calculate customer retention. Customer retention strategies Some best practices and strategies to follow when considering customer retention strategies include the following: • Offer personalized service. Personalizing services to the customer can improve a customer’s experience and lead them to become repeat customers. • Use data to provide personalized support interactions. Data gathered about customers can help aid organizations in knowing their preferences, enabling them to build more personalized services. • Build trust. Building relationships with customers will help increase brand loyalty and trust. • Use social media. Social media sites such as Twitter, LinkedIn and Facebook can help an organization reach out to its customers, build relationships and trust, and even respond to customer support queries. • Incentivize loyalty. This can be done through customer loyalty programs or by offering discounts or credit. • Gather customer feedback. Gathering feedback from customers enables an organization to further personalize experiences. • Improve customer support services. Implementing a live chat or help desk tool, putting an emphasis on responding to customer support queries quickly and encouraging customers to create accounts can all help increase customer retention. All these customer retention strategies together can help build more trust between an organization and a customer, which can help increase the chances of current customers becoming repeat customers. Examples of customer retention Because customer retention can be achieved through various strategies, one organization’s attempt to gain repeat customers may look very different from another. Here are a few examples: This image shows different ways to collect customer data. Sock and apparel retailer, Bombas, donates a clothing item to a homeless shelter or homeless charity with every purchase. This process helps people in need while also enabling the customer to help by purchasing items. This can help build customer retention, as individuals may want to become repeat customers in order to fill their needs and give to their surroundings at the same time. Websites, such as Dollar Shave Club’s landing page, have a bot that will answer customer questions. Customers can type a question or select from a preset list of commonly asked questions. This can increase the chance of a customer making a purchasing decision, make them feel more welcome and potentially leading to repeat purchases. Businesses such as London-based Caffé Nero offer loyalty cards to incentivize customer retention. For example, if a customer orders a coffee or tea, they get a stamp punched on a card, and after nine stamps, they can get a free beverage. This strategy gamifies customer retention, as buyers will feel more accomplished coming back to fill out the stamps for the reward of a free drink. Assessing customer retention is valuable to organizations as it measures the happiness of customers and delivers the following benefits: • It can drive repurchase and product extension behavior. • It provides a quantitative metric for customer loyalty that can be compared or communicated. • Loyal customers are worth approximately 10 times as much as their first purchase. • Increasing customer retention leads to increased revenue. • Drops in customer retention could help identify weak spots in the business’s strategy. • Customer retention is faster and cheaper than customer acquisition.
- 5.2lesson 2:TOPICS COVERED : GREEN MARKETING , EVENT MARKETING , NETWORKING MARKETING ,DIRECT MARKETING, SOCIAL MARKETING ,BUZZ MARKETING AND VIRAL MARKETING What is Green Marketing Green marketing can be defined as, “All activities designed to generate and facilitate any exchange intended to satisfy human needs or wants such that satisfying of these needs and wants occur with minimal detrimental input on the national environment”. Green marketing refers to the marketing of products and services considered environmental – friendly that make their marketers “environmentally responsible”. The advent of green marketing was due to consumer demands. Green Marketing Definition Green marketing is the marketing of products that are presumed to be environmentally safe. – American Marketing Association Business Dictionary defines green marketing as promotional activities aimed at taking advantage of changing consumer attitude towards a brand. These changes are increasingly being influenced by a firm’s policies and practices that affect the quality of the environment and reflect the level of its concern for the community.it can also be seen as the promotion of environmentally safe or beneficial products. Evolution and Need of Green Marketing The American Marketing Association (AMA) held the first workshop on ecological marketing in 1975. In 1980 green marketing came into existence for the first time. It incorporates several activities such as product modification, changes to production processes, and packaging, advertising strategies and also increases awareness on compliance marketing amongst industries. The green marketing has evolved over a period of time. The evolution of green marketing has three phases. • First phase was termed as “Ecological” green marketing, and during this period all marketing activities were concerned to help environment problems and provide remedies for environmental problems. • Second phase was “Environmental” green marketing and the focus shifted on clean technology that involved designing of innovative new products, which take care of pollution and waste issues. • Third phase was “Sustainable” green marketing. It came into prominence in the late 1990s and early 2000. • Need of Green Marketing 1. Anthropological View 2. Educating your Customers 3. Genuine and Transparent 4. Re-assure the Buyer 5. Consider Pricing 6. Giving your Customers an Opportunity to Participate Anthropological View Issues like global warming and depletion of ozone umbrella are the main for the healthy survival. Every person, rich or poor, would be interested in quality life full of health and vigour and so would the corporate class. Educating your Customers It is not just a matter of letting people know you are doing whatever you are doing to protect the environment, but also a matter of letting them know why it matters. Otherwise, for a significant portion of your target market, it’s a case of “So what?” and your green marketing campaign goes nowhere. Genuine and Transparent You are actually doing what you claim to be doing in your green marketing campaign and the rest of your business policies are consistent with whatever you are doing that’s environmental-friendly. Both these conditions have to be met for your business to establish the kind of environmental credentials that will allow a green marketing campaign to succeed. Re-assure the Buyer Consumers must be made to believe that the product performs the job it’s supposed to do-they would not forego product quality in the name of the environment. Consider Pricing If you are charging a premium for your product and many environmentally preferable products cost more due to economies of scale and use of higher-quality ingredients, make sure those consumers can afford the premium and feel it’s worth it. Giving your Customers an Opportunity to Participate Means personalizing the benefits of your environmental-friendly actions, normally through letting the customer take part in positive environmental action. ________________________________________Green Products and Their Characteristics The products which are manufactured through green technology and that cause no environmental hazards are called green products. Promotion of green technology and green products is necessary for the conservation of natural resources and sustainable development. We can define green products by following measures: • Products those are originally grown • Products those are recyclable, reusable and bio-degradable, • Products with natural ingredients • Products containing recycled contents, non-toxic chemicals, • Products containing underapproved chemical • Products that do not harm or pollute the environment • Products that will not be tested on animals • Products that have eco-friendly packaging, i.e., reusable, refillable containers, etc. ________________________________________ Challenges in Green Marketing The firms using green marketing must ensure that their activities are not misleading to consumers or industry, and do not breach any of the regulations or laws dealing with environmental marketing. Challenges in green marketing: 1. Need for Standardization 2. New Concept 3. Patience and Perseverance 4. Avoiding Green Myopia Need for Standardization It is found that only 5% of the marketing messages from “green” campaigns are entirely true and there is a lack of standardization to authenticate these claims. There is no standardization currently in place to certify a product as organic. Unless some regulatory bodies are involved in providing the certifications there will not be any verifiable means. A standard quality control board needs to be in place for such labelling and licensing. New Concept Indian literate and urban consumer is getting more aware of the merits of green products. But it is still a new concept for the masses. The consumer needs to be educated and made aware of the environmental threats. The new green movements need to reach the masses and that will take a lot of time and effort. By India’s ayurvedic heritage, Indian consumers do appreciate the importance of using natural and herbal beauty products. The Indian consumer is exposed to healthy living lifestyles such as yoga, meditation and natural food consumption. In those aspects the consumer is already aware and will be inclined to accept the green products. Patience and Perseverance The investors and corporates need to view the environment as a major long-term investment opportunity, the marketers need to look at the long-term benefits from this new green movement. It will require a lot of patience and no immediate results. Since, it is a new concept and idea, it will have its own acceptance period. Avoiding Green Myopia The first rule of green marketing is focusing on customer benefits, i.e., the primary reason why consumers buy certain products in the first place. Do this right, and motivate consumers to switch brands or even pay a premium for the greener alternative. It is not going to help if a product is developed which is absolutely green in various aspects but does not pass the customer satisfaction criteria. This will lead to green myopia. Also if the green products ________________________________________ Marketing Mix of Green Marketing Just as we have 4Ps of marketing mix, viz., product, price, place and promotion in marketing, we have 4Ps in green marketing too, but they are a bit different. 1. Product 2. Price 3. Place 4. Promotion Product Products can be made from recycled materials or from used goods. Efficient products not only save water, energy and money, but also reduce harmful effects on the environment. Green chemistry forms the growing focus of product development. For example, Nike is the first among the shoe companies to market itself as green. Price Green pricing takes into consideration the people, planet and profit in a way that takes care of the health of employees and communities and ensures efficient productivity. Value can be added to it by changing its appearance, functionality and through customization, etc. Wal Mart unveiled its first recyclable cloth shopping bag. Place Green place is about managing logistics to cut down on transportation emissions, thereby in effect aiming at reducing the carbon footprint. For example, instead of marketing an imported mango juice in India it can be licensed for local production. This avoids shipping of the product from far away, thus reducing shipping cost and more importantly, the consequent carbon emission by the ships and other modes of transport. Promotion Green promotion involves configuring the tools of promotion, such as advertising, marketing materials, signage, white papers, websites, videos and presentations by keeping people, planet and profits in mind. Indian Tobacco Company has introduced environmental-friendly papers and boards, which are free from elemental chlorine. ________________________________________ Importance of Green Marketing Green marketing offers business bottom line incentives and top line growth possibilities. While modification of business or production processes may involve start-up costs, it will save money in the long-term. For example, the cost of installing solar energy is an investment in future energy cost savings. Companies that develop new and improved products and services with environmental impacts in mind give themselves access to new markets, substantially increase profits and enjoy competitive advantages over those marketing non-environmentally responsible alternatives. Topic: Event Marketing When it comes to making purchasing decisions, today’s consumer is bombarded with numerous pitches and commercials every day. Therefore you must attract the buyer’s eye. According to Forrester, event marketing makes up the most significant B2B marketing budget (24%). It is said to be the most important and compelling content tool as it helps you become the talk of the town if done the right way. Event marketing is a technique of creating a themed exhibit, display, or presentation to promote a product, service, cause, or organization through in-person participation is known as event marketing. It is one of the most coherent ways to connect with your audience. Event marketing is a sort of marketing that entails holding, participating in, or attending events to advocate a brand, product, or service. It aids in developing deeper ties with clients and their education about your product. Every event is distinct in terms of its target audience, substance, and culture. As a result, event marketing merits its distinct marketing strategy. How is Event Marketing Important? Event marketing is relatively simple to implement across events and at scale with the help of data and analytics. Events may help boost sales, increase spirit, and advertise a product, among other things. There appears to be an infinite number of ways to publicize a particular event. In truth, event marketing can take a variety of forms depending on your position within your company. The last two years have taught us to be conscious of the climate and industry regarding event marketing since timing might affect the event marketing process. It can’t be argued that promotion is essential for events, whether live, virtual, or hybrid. Not to forget, the purpose of the event is at the heart of the event marketing process. You can design effective promotions and realistic goals based on your objectives for the said event – that is, by clearly establishing what you want to achieve as an outcome of the event marketing process. The practice of event marketing is inextricably linked to event tactics. Take, for example, a period like this while we’re amid a global pandemic. Hence the strategies now might differ from the ones during regular times. Even though the modern marketing scenario is becoming increasingly digital-focused, event marketing has remained a hot topic on the table. Events provide marketers with an excellent opportunity to form new relationships and trust potential leads by providing that personal touch that digital often lacks. It’s a chance for customers to get in touch directly with businesses and gain a sense of their unique brand personality. The marketing process does not stop at the event; there is frequent pre-and post-event advertising. Many of the world’s most successful companies spend 1.7 times their annual marketing budget just on live events and seminars. So, is Event Marketing effective? Well, yes, it mixes value with experience. Major marketing events featuring product demos, live speakers, first-hand experiences, and one to one encounters can provide incalculable worth in terms of value in addition to content. Instead of simply reading an informative blog post, buyers may listen to an expert speak live, ask questions, and network with other like-minded people at an event. Rather than viewing a how-to video to learn how to use a product, people can test it out for themselves and get the help they need to get the most out of it. Hence, event marketing is a great way to attract leads and convert them through involving them further by being the missing link to their smooth business journey. What are the Essential Elements of Event Marketing? As an event planner, you’re probably often thinking about promotion. If you’re planning a great event, you’ll want to see a lot of people there. This commits you to plan and execute top-tier marketing strategies. To help you remember the key components of event marketing, we have put together a few points as below: 1. Events are goal-oriented Any event conducted needs to meet the set goals. For example, if the advertising goals of the event are not met, the event is a complete failure on a commercial level, regardless of how much fun people had or how much popularity it gained. 2. Visitors are the center of attraction When it comes to the number of visitors for events that have been thoroughly planned, the more, the merrier, but to ensure to invite the right audience- determine your target market and emphasize the benefits of attending the event. Guests attend events to learn about the latest goods, watch renowned presenters, and participate in seminars and workshops to expand their knowledge. Place visitor information on the event website, including vital details such as the venue, entry charges, travel, programme and event schedule, list of exhibitors, and event highlights. Provide early-bird discounts to encourage attendees to book early. 3. Create content to attract an audience It is critical to get the message across to the target audience, so deep research into the demographics of the attendees is necessary to properly communicate about the product so that they understand the product appropriately. Use social media sites like Facebook, Twitter and Instagram to share the most up-to-date information about the event, such as new product releases, updates to the presenter roster etc. 4. Devise a pivotal message to communicate through the event Creating content and having your audience consume it, on the other hand, is a boon to your event’s goal. It allows you to design the message in a way that guests will readily agree with or accept. You don’t just conduct events to cheer up the participants; events should accomplish their objective of providing information that helps audiences understand the organization and its contribution and influence. Attendees are more likely to trust the organization as a result of this. 5. Record feedback A feedback form is an excellent approach to obtain a response from the audience. Make feedback form a part of the gift voucher to gather feedback from the target audience/guests such that only after completing the feedback form and returning it to an attendant may a guest claim the gift coupon. People are often hesitant to provide feedback in writing, so these strategies are fundamental to obtain input. 6. Nurture customer relations Develop customer relationships. You can start building relationships with visitors after the event by communicating with them and keeping in touch. This will help you market future events. To retain longer-term interest, provide news about your event on your website or social media, such as the release of new items or relevant publications. Although, keeping in touch or building a bond should not always lead to a sales pitch. Because people might find it pushy sales tactics and become unresponsive to any communication from your end, instead, foster a sense of community around your event, encourage visitors and participants to share their thoughts and information on social media. 7. Pay attention to the selection of a venue Make sure the location is correct. Select a location that is both convenient and alluring to visitors and participants. The site must be able to accommodate the expected number of exhibitors and visitors. Make sure to choose a venue that is accessible by all modes of transport easily. Consider venues that offer other attractions to attendees, such as a popular tourist destination, if your event will span over many days. The most desirable spots in any exhibition area are near the event’s entrance and walking to the food booths and restrooms. How can we measure the ROI of successful event marketing? Event evaluation aims to lend a hand to the team to become more efficient and productive the next time it plans an event. It aids in the detection of errors and the subsequent learning from them. Event evaluation should be completed either immediately following the event or the next day. To review the event, a meeting with the team members should be held. A discussion would help us measure the return on investment of the event. Events generate sales leads and serve as a valuable networking opportunity for businesses and brands to meet their target audiences and clients in person. That’s what we know, at least. However, as any marketer, sales representative, or event planner can tell you, qualifying those leads is far from surefire. There are numerous tangible and intangible advantages to attending events. While there’s nothing wrong with results like brand awareness or spreading the word, specifying a goal helps to have some specific results when it comes to proving the value of your event to your supervisor. You invested a lot of time, effort, and money into producing an unforgettable experience, so do yourself a favour and devise a strategy to demonstrate how important your event is to your company and the objectives of putting the efforts into the said event. Measuring ROI begins with goal-setting, as it does with most elements of event planning. Could your goal be bringing in new business or creating hype around the debut of a new product? In any case, make a detailed list and then rank them in order of importance. Remember that some objectives will necessitate specifics. Although it is simple to calculate ticket sales revenue, determining new product awareness will necessitate establishing precise measures and values in advance. The holy grail of all marketing measures is the return on investment (ROI). However, how do you adequately quantify it? It all begins with collecting the appropriate data at each level of the event marketing funnel. As mentioned earlier, here’s a little description of how social media and surveys can help you achieve the data. Social Media Using social media to track activity before and after an event is nothing new, but monitoring what your attendees are saying during the event could provide significant hints and insights that can help you improve your event in the future. Before an event, many event marketers employ social media marketing as a primary engagement tool. However, this decreases following the occurrence. It seems ridiculous that most event organizers withdraw from social media once the event is over, and even more ridiculous that we don’t prioritize social media during events. Measure involvement around your event with social listening before, during, and after it takes place by searching for : • Your mentioned hashtags • Name of your firm • Name of the event • Name of the venue or related topics. Keep note of the number of posts/tweets, as well as any photographs or videos, to help you with your post-event activities. During sessions, social listening can be used to track involvement. Look for speaker quotations and general sentiment (e.g., if they’re going on too long, how enthusiastic they are, etc.) to help you with this. Many solutions are available to assist you in creating social listening dashboards. You may specify specific keywords, hashtags, and branded terms to track, and you’ll get a real-time report as events unfold. Live-tweeting or posting updates through pictures and videos can also be helpful. Encouraging the audience to tag your account while posting updates on social media can aid in reaching out to a larger audience. Surveys Sending out surveys during or after an event is an excellent method to measure interest from guests and acquire more data that you can use to plan your next one. Please find out how much they enjoyed the session and how long they stayed. You can also inquire about specific issues they would like you to address. This will aid in the direction of your future event strategy and your content marketing initiatives. Marketers that take the time to answer these surveys are typically invested and engaged. They are more likely to become leads. These individuals should be qualified appropriately. A survey tool or mobile app, or website can help you collect this information. You can time the distribution of your survey to strike when it’s fresh in their minds if guests use your app to indicate interest or register for sessions. If you collect participant email addresses at your event (which you should), you already have a direct line of communication with them. Not everyone will respond during the event because they are hopefully still focused on it, but you might be surprised who responds after it has ended. You’ve set yourself up to measure the amount of success from your events by gathering data and measuring the metrics suggested in this post (based on your goals). However, there is one more step to take: incorporating these findings into an ROI model. Here’s an effective strategy to help you measure both objective and subjective goals. Calculating the ROI While summing up the net expenses, we consider : • Production costs like the fee paid for the venue, catering invoices, services and bought goods. • Money spent in marketing about the event, on social media, ad boards, etc. • Time spent by the employees during the event, which is quite an important factor often ignored. Then calculating the outcome : • Revenue generated during the event. • Customers acquired. • Appointments made. • Leads generated. • Business development opportunities discovered. Now you may compute the ROI based on overall costs and income, predicted deal flow, and retention with these statistics in hand. The ROI can now be calculated as : • Net profit made = Total Revenue – Total expenditure. • ROI = Net profit /Total expenses. The part that often goes under the radar because it is pretty tricky is finding the subjective outcomes of the investment : • Awareness was created about the brand. • New Networks created. • Recruitment of newer personnel. • Refreshed customer relations. Soft Metrics can be used to measure these outcomes. Visits to your booth, attendees to a keynote, and brand mentions on social and the web are all examples of soft metrics. Both exhibitors and event planners can benefit from these figures. Soft metrics use subjective data and interactive reactions to measure an employee’s effectiveness. Unlike hard metrics, which deal with objective, measurable statistics. Soft metrics emphasize the impact of human capital on business outcomes. Brands frequently treat ROI as an afterthought. Sure, advantages like brand awareness can result in long-term gains. However, you should keep an eye on your entire profit. Practical Strategies For Successful Event Marketing Why are event marketing techniques essential to consider? The reason for this is simple: a great event marketing campaign will get you the attention and footfall you need to fill your events. But budgets for marketing are vital. Your strategy will be guided by your knowledge of available resources and your budget. However, there are many additional reasons why event marketing methods work, including effectively contacting the proper target demographic, knowing how to make an impression, and, most crucially, raising awareness about your event. It all begins with a well-thought-out marketing strategy for your event. The correct event marketing techniques are essential along the entire journey, from the moment the idea to host an event is created to when the event takes place. These are some event marketing strategies that you can try: Setting up a website for the event While a simple landing page and contact form can be added to an existing website, creating a different website for your event allows you to concentrate your branding and SEO efforts on the event itself. Make sure to choose a memorable domain name and design your site around prominent call-to-actions that direct users to a registration page. Try Giving Early Bird Discounts After the initial enthusiasm for your event has worn off, you’ll need to come up with new ways to persuade people to sign up (and register now rather than later). You can take advantage of the “early bird discount” at this time. Early bird discounts work by staggering the ticket sales that increase in price as the event approaches. It’s not unusual to have multiples of these. The rest of your marketing efforts should be focused on generating interest and leads in the run-up to the expiration of your discounts, allowing you to generate ticket sales spikes. Create a buzz on social media This strategy might help you attract the correct attention because social media is one of the best venues to engage with local influencers and people with a large following. Look for influencers in your field who have a large social media following. Never discount the power of word-of-mouth advertising! According to a survey done by Collective Bias, 70% of today’s generation relies on peer or influencer recommendations to make purchasing decisions. For instance, if you’re having an event to recruit more volunteers, the influencers could talk about how fantastic the event would be, why others should volunteer, or why they would personally go. Curate an emailing list If you already have a list of committed followers, email can be an extremely successful marketing method. Start your email marketing many months ahead of time, advertising early bird ticket prices and the speaker lineup. As the event approaches, you should send emails regularly, including reminders about discounted ticket deadlines, a completed schedule, and a final push for registrations a few days before the event. Dedicate pop-ups and landing pages To drive potential event attendees to a dedicated event page, create a pop-up form on your event website. Pop-ups might be obnoxious, but their efficacy cannot be underestimated. The material you provide on the landing page and in the pop-up is critical in determining whether users will be drawn in. Instill the Fear of Missing Out (FOMO) Instill a sense of “fear of missing out” in your audience. Use media such as video or imagery to demonstrate how they will be disadvantaged if they do not come. Contrary to conventional assumptions, people are more engaged in an event when they believe they would miss out on something worthwhile if they do not attend. To increase interest in your event, use a simple yet powerful email marketing subject line, social media campaign, or blog article like “You wouldn’t want to miss this event.” Write Blogs Publishing blog posts about your upcoming event is a simple approach to pique people’s curiosity and encourage them to sign up. It also aids in the improvement of your SEO and the attraction of a new audience who could be interested in visiting. Publish posts regularly in the weeks leading up to your event. They don’t have to be long posts — just simple schedule updates and guest speaker bios will do to keep your readers interested and engaged. Use Paid Promotion If you’re going to use paid social media advertising, Google Ads, or retargeting, now is the time to put money behind your campaign. Any of these features can be turned on and off at any time. So you might focus your marketing efforts just a few weeks before each early bird offer or event launch, reinforcing and amplifying your existing marketing efforts for maximum reach and impact. Include Thought Leadership Through Guest Posting It’s crucial to blogging on your site, but you also need to reach out to new audiences outside of it to attract new visitors. Guest posting or crafting thought leadership pieces that people will gladly share are the most significant ways to accomplish this. It might not be as evident for consumer events. You may make eye-catching infographics, gifs, or other visual assets, write about current events, or create YouTube series or podcasts that will hold their attention. A large draw for your event can be a well-known speaker. Include a speakers’ section with images of your guest speakers, as well as information about their credentials, experience, why they’re qualified to speak at your event, and how they can provide premium value to the audience. Thus, event marketing tactics enable you to make an impression in the lead up to the event and maintain momentum for your company or organization afterwards. Use this chance to demonstrate that you are focused on your customers’ requirements and objectives and that you will leave no stone unturned in delivering what you promise. Start preparing your next event now, and utilize these event advertising tactics to help it succeed. Types of Event Marketing Given that there are a variety of B2B and B2C brands that utilize event marketing to suffice different objectives that help them grow their business- it is essential to understand the types of events that would work for each business type. Simply because the time and money invested need to be for the correct type of marketing because no one type fits all businesses and their goals. When assessing your investment, it’s critical to understand the benefits and drawbacks of each event type. Some of these events take place at the same time. Many of them, for example, include a speaker. Whatever piques your interest and target market, take the event aspects that are right for you and create an experience tailored to your specific goals and needs. The exciting aspect of event marketing is that there are no right or incorrect answers as long as the event meets your marketing objectives. It’s during events that you may let your imagination run wild! Event marketing can be distinctly divided into two types: • Online Event Marketing • Physical Event marketing Types Of Physical Event Marketing Conferences A user summit, for example, is a company-specific marketing event that gathers attendees for the goal of imparting information. These events are typically more significant in scale and are hosted by businesses for training or educational objectives. Seminars Seminar” refers to smaller meetings, roadshows, or field activities. Some seminars are structured in the same way as a classroom lecture, with an expert sharing information with the audience in a traditional style. Others are designed as roadshows, in which marketers deliver their company’s message to the general public, employees, or partners. Trade shows A trade show is a physical meeting of people from a specific industry or profession on a platform that usually includes many companies from that market. A company may sponsor or exhibit at a trade show to demonstrate a product or just to network and increase its market position. Breakfasts, lunches or dinners These are usually smaller, more focused gatherings. They can be focused on both customers and prospects. These gatherings are generally small, but they can also be enormous, with 50 or more people. The smaller parties are usually high-level and provide a quiet atmosphere for networking for executives. Breakfasts, lunches, and dinners on a bigger scale can incorporate thought leadership talks as part of the event. Summits Summits are for industry leaders, top executives, and government officials instead of conferences and seminars, which are open to the general public. Summits, which feature high-profile speakers and are smaller in scope, are focused on exploring ideas and negotiating extensive agreements. Types of Online Event Marketing Webinars Webinars are online presentations, conversations, or seminars that take place over the web. They can take place in real-time or on-demand, and they usually last between half an hour and an hour. Real-time webinars allow participants to communicate with one another by receiving and debating information on a topic via web-based conferencing tools. Real-time webinars can be participatory in many different ways, with attendees often asking questions directly to the presenters. Live Streaming This type of event marketing, as the name implies, focuses on broadcasting a live event to your target audience. These are for customers who want to attend an event but are physically unable to do so. You can broadcast this live event to your audience. These can be done with only a webcam or with the entire production staff for a higher-quality broadcast. For example, live stream, Ustream, and Google Hangouts provide a live service that allows you to stream, record, and interact with your audience via chat and social media. Virtual Events Virtual events allow a potential buyer to experience an offline event and feel the same gush of adrenaline rush as an actual event. It happens when an incident is narrated well and a storyline, making the readers feel they witnessed it. A real-time programme is one example of a virtual event. Some participants who cannot attend the live event, such as a virtual booth, can acquire materials, ask questions, and even meet the personnel. Role of Event Marketing In an increasingly digital age, 95 per cent of marketers feel that live events give attendees a valuable opportunity to develop in-person contacts. By 2020, there will be 3.2 million global professional events held each year. Companies recognize the value of live events, and this trend is expected to continue in the coming years. And to incorporate this multi-layered tool called event marketing, it is necessary to understand its exact role in your business’s development. Here’s how event marketing helps a brand’s development. Builds connections Given that the goal of marketing is to sell a product or service, it stands to reason that events can help with that. Whether your organization is B2B or B2C, being present in person allows you to develop human relationships. This significantly impacts conversion rates (the number of transactions), especially when clients ask you questions straight now. You can increase your chances of closing more deals by staffing events with experienced people. Measuring event sales is a simple approach to track the ROI of your event marketing efforts immediately. One of the most important reasons companies use event marketing is to understand what the genuine prospect is thinking. Organizations can gain honest insights and feedback by having face-to-face interaction. This enables them to comprehend the buyer’s particular requirements and how he views their product or service. This data then aids in the development of their product or service. Boosting social media engagement Social networks have matured to the point that they can be integrated with many tools, providing you with unmatched intelligence to provide additional opportunities for wiser referrals. This is true for internal referral schemes that profit from the widespread use of social networks. We may do the same within our firm as we become more accustomed to disseminating information via social media. This approach is advantageous if you operate in huge organizations or with volunteers. Event marketing is an excellent technique to increase a brand’s social media engagement. Businesses utilize social media strategically to promote social media engagements before or after a live event. Offering prizes, discounts, and coupons creating contests, and even publishing pre-event or post-event images are some of the initiatives they may take to enhance their social media connections. Those mentioned above assist them in engaging their consumers and thereby building their brand’s community. Here are some specific tactics to engage your social media audience: Utilize Instagram to Boost Sales The Instagram Stories countdown sticker allows you to specify an end date and time. You can also change the clock’s name and colour. Viewers can subscribe to get notifications when the countdown expires, or they can add the countdown to their own Story. This function is essentially a customized calendar notification. It’s an excellent tool for increasing ticket sales or informing them of contest or early bird pricing deadlines. Create A Facebook Event And Boost Your Engagement Create a Facebook event with all of the information your attendees will want. Tag the official pages of any speakers or special guests you’ve invited. The event’s conversation area is a fantastic place to make announcements or answer queries. You could wish to spread the news about unique pre-sale codes or share concert set times there. If tickets are available through Eventbrite, you can connect your account to Facebook. Once the integration is in place, your attendees will be able to purchase tickets without ever leaving the Facebook event. Share live updates on Twitter Share pertinent information in the run-up to the event. Teasers help to build anticipation and can also offer your audience vital information. They’re also an excellent method to show off your honored guests. If you’re organizing a large conference, you may announce your guest speakers one at a time in the weeks preceding up to it. Building your database and attracting leads Trade exhibitions and other forms of event marketing help businesses generate a lot of leads. They have a better chance of acquiring leads on new customers because the target demographic consumers are present at the trade exhibitions. If done right, event marketing can be pretty beneficial, and it is one of the most popular marketing tactics. Plus, with re-marketing, the significant step of visiting your website can become a succession of touch-points on engaging platforms such as Google, YouTube, and Facebook, ultimately leading to a transaction. As we’ve covered, re-marketing is your most powerful ally when it comes to delivering a consistent and persistent message across the web. And in the fickle, limited attention span world of the Internet, re-marketing allows event marketers to reconnect and stay at the top of their clients’ or attendees’ minds. Networking marketing Network marketing, also known as multi-level marketing, is a business model which involves a pyramid structured network of people who sell a company’s products. The participants in this network are usually remunerated on a commission basis. That is, people in this network get commission every time they perform the specified task, like – • Make a sale of a product. • Their recruits make a sale of the product. In simple words, this model involves a pyramid structure of non-salaried participants who get paid whenever they or a person below them in the pyramid makes a sale. In this system, consumers are the participants, their family, friends, and acquaintances are their customers, and this cycle goes on Characteristics Of Network Marketing Direct Sales Network marketing organizations market and sell their product directly and don’t make use of any well-defined channel of distribution. The responsibility to sell the products is transferred to the non-employed individuals (the participants) who get the commission every time they make a sale. Independent Business Owners (IBO) The participants are called IBO as they work as if they are promoting their own business. Selling Philosophy This model involves participants to use the selling philosophy of marketing. The main focus is on recruiting and selling as much as you can to earn more commission. No relationships are built. People may even trick you to buy the products or to join them. System Of Hierarchy Suppose a person ‘A’ has a person ‘B’ under him. Now A will get the commission whenever he makes a sale and also a part of B’s commission when B makes a sale. Now, to earn more money, B will also try to recruit a person C under him and so on. This makes the system a big hierarchy. Less or No Advertising Dependency on direct sales helps the organization to rely less on advertising as personalized contact have more convincing power than advertisements. No Fixed Salaries This is a commission-based network where participants (not employees) are paid commissions to perform the specific task. Accountability Everyone is accountable only to himself. The more he sells, the more he earns. Benefits to the Participants Participants are also the consumers of the network. Hence, they also get discounts and other attractive offers to when they join the network. Examples of Network Marketing Amway – been in business for around 57 years now, this company is one of the biggest examples of a successful MLM/network marketing company. Other companies that use network marketing model include – Tupperware, Juice plus, etc. DIRECT MARKETING As the name suggests, direct marketing represents a marketing strategy for communicating directly with your customers. It can be employed by both businesses and non-profit organizations. Being cost-effective and powerful in generating sales, direct marketing strategy is considered to be ideal for small businesses with limited marketing resources. The direct marketing strategy can be applied by both B2B and B2C. This strategy involves advertising techniques that can easily reach the targeted customer and communicate the intended message. Direct marketing tools are as follows • Text messaging • Email • Telephone calls • Social media marketing • Interactive consumer websites • Online display ads • Data base marketing • Flyers • Catalog distribution • Promotional leaflets • Targeted television commercials • Outdoor advertising. It was first used in 1872 by Aaron Montgomery Ward. However, it has been given the name of direct marketing and it started to be deeply analyzed in 1967, by Lester Wunderman. Since then, the strategy is being used constantly to promote business and increase market share. Considered as a very effective and efficient tool, direct marketing allows you to make direct contact with not only existing but also potential customers in order to promote your products and services. However, in order to be able to put the strategy into practice one vital element has to be put into place, and that is the focus on “customer data”. In other words, you need to have a fantastic MIS and the database has to be up to date and accurate. Targeting your existing customer can be a simple process as long as you have implemented a customer data collection process for easily tracking your customers. However, in direct marketing, database is the most important when we are speaking about potential customers, whom you not only have to track and identify, but you to analyze them and present them products as per their needs. For facilitating this process and helping you to implement your direct marketing strategies, numerous Customer Relationship Management programs and systems are available at your disposal. Once you have established a customer database which has all the data related to your customers, (such as preferences, geography, last purchases, etc.) the direct marketing strategy requires the creation of actionable segments, pre and post campaign analytics and measurement of results. In fact these three are the most important steps of direct marketing. Three steps in direct marketing 1. Actionable segments are parts of the database on which you can immediately act on. Similarly there would be parts which need more research and finally there would be a database area which is in the blind currently and you need to research on later. Thus, you have a pipeline of action in your hand. 2. Pre and post campaign analytics tries to analyse what the customer looked like before initiating the direct marketing campaign. And post analytics then tells us which of the customers convert the best so that we can optimize our direct marketing efforts. 3. Measurement of results is most necessary for the constant optimization of the direct marketing campaign. Results can vary based on geography, demography or even the season. Thus, constant measurement of results is needed for Direct marketing. All these elements are considered irreplaceable components of a direct marketing campaign. Another basic tactic of the strategy involves creating a personalized message for each type of campaign. Thus, an email mode of communication will have a separate type of personalized communication whereas a social media will send another sort of message which boils down to whatever the company wants to communicate. The communication will most likely depend on your final goal and on what do you intend to achieve through the respective campaign. Common goals of direct marketing are • Promoting a new event • Announcing discounts or offers • Increasing the number of existing customers • Attracting a certain percentage of new customers • Recapturing old customers • Increasing sales • Gaining more market share • Generating new business • Retaining the brand equity The direct marketing strategy regularly tests and retests a market to find out the type of customers which are most responsive and converting the most to the brand so that they can have a targeted marketing strategy. In order to be successful, the right communication method is vital and it should take into consideration the preferences of the group that you are targeting. The strategy should also take into consideration the cultural differences in the scenario that the company is involved in different cultural markets. Given the current sensitive political situation, a direct marketing campaign shout not be offensive and intrusive also from a religious point of view. Another advantage of the strategy is that is presents a two ways interaction. On one side you share the benefits of your products or services while on the other side you get the chance to answer your customers’ questions, and the best example of such two ways interaction is the telemarketing as well as social media marketing. As direct marketing presents many advantages, it can also incur a relative problem regarding the fact that unsolicited letters, phone calls, etc., must only be sent to businesses and people who have given the permission to be contacted. Many people nowadays register themselves in the “Do not disturb” registry so as to avoid the direct marketing efforts of the company. Many sms companies like 160by2.com and other sms based marketing companies went in the drain as soon as “Do not disturb” was introduced in the market. However, in the long-term, there are always tools which can be exploited for direct marketing efforts. The most recent tools being used are Whatsapp and Integral to attract customers. Social marketing Social marketing is the systematic application of marketing along with other concepts and techniques to achieve specific behavioural goals for a social good. For example, this may include asking people not to smoke in public areas, asking them to use seat belts or prompting to make them follow speed limits. The primary aim of social marketing is ‘social good’, whereas in commercial marketing the aim is primarily ‘financial’. This does not mean that commercial marketers cannot contribute to achievement of social good. Applications of Social Marketing: 1. Health promotion campaigns in India, especially in Kerala and AIDS awareness programmers are largely using social marketing, and social workers are largely working for it. Most of the social workers are professionally trained for this particular task. 2. Anti-tobacco campaigns. 3. Anti-drug campaigns. 4. Anti-pollution campaigns. 5. Road safety campaigns. 6. Anti-dowry campaigns. 7. Protection of girl child campaign. 8. Campaign against the use of plastic bags. 9. Green marketing campaign. Social marketing applies a customer-oriented approach, and uses the concepts and tools used by com¬mercial marketers in pursuit of social goals such as anti-smoking campaigns or fund raising for NGOs. Advantages of Social Marketing: Social marketing—a new marketing tool—can be a great asset if used properly. The beneficial effects of social marketing for a business can be tremendous, but one must remember that it must be used in the most efficient possible way. Social marketing allows businesses and web sites to gain popularity over the Internet by using different types of social media available, such as blogs, video and photo sharing sites, social networking sites and social bookmarking web sites. There are six distinct advantages of social marketing that make it a vital tool to any marketing campaign: 1. Promotes consumption of socially desirable products. 2. Promotes health consciousness in people and helps them adopt a healthier lifestyle. 3. It helps in green marketing initiatives. 4. It helps to eradicate social evils that affect the society and quality of life. 5. Social marketing is one of the cheapest ways of marketing. 6. One of the best advantages of social marketing is that anyone can take advantage of it, even from their own home. BUZZ MARKETING Introduction to Buzz Marketing What is your recent favorite advertisement? – Do not answer me; keep the answer within you. Did you get excited about that advertisement and said to your friends about it as well? Have you ever thought why that advertisement made you feel excited and made you share about it with your friends? I believe this is not the question of why, but it is the question of what made you do this. The answer to that question is- Buzz marketing influenced you to do so. I am sure that the advertisement must have given you Goosebumps, or invoked some emotions which ultimately triggered your eagerness to share the same feeling that you gained from that advertisement to others. I am sure that it is normal for a human being and not some psychological condition. That advertisement is one of the prime examples of Buzz marketing. Buzz can be of different types to cater to different kinds of audiences. Let us have a closer look at the concepts associated with Buzz Marketing- What is Buzz Marketing Buzz marketing is the oldest, highest, and most reliable marketing method. Buzz marketing is a marketing method in which a business or brand follows all possible strategies to create a buzz to prompt their new product in society. This marketing method will generate some excitement at a product on a person’s mind and in turn; the person automatically suggests that product to others that ultimately creates hype around that product. It is a chain reaction in which the buzz of a product will be around until the product gets outdated or useless. It is usually either word by mouth strategy or mouth by ear strategy. There are lots of methods and techniques used in Buzz marketing because buzz can be created in various ways. There are various types of Buzz marketing. So, let us have a look upon those first- Types of Buzz-Marketing 1) Buzz Campaigning Campaigning is one of the oldest Buzz marketing methods. It is done by sponsoring some events or creating their game to prompt their product. Campaigning is done on sponsoring something that is always an option, but there will always be an event launch to launch their product. In which the company will explain its product, product specifications, and advantages. It considered crucial for their product promotion to creating an eagerness in people’s minds to buy their product. 2) Online campaigning Online campaigning has also become an essential method for Buzz marketing. The world is online nowadays, so it has also become a necessary platform for campaigning their product. The company will post an advertisement online at all the social media platforms to create talks about their products. I think it is the method that all the companies use nowadays to create a buzz about their product. For example, did you remember the advertisement of Vivo Apex? That was the first mobile phone advertisement to create a buzz about all display or full display mobile phone. 3) Offline campaigning Offline campaigning is prompting a product, employing person to person communication. This method consists of services like customer care, feedback, and so on. This method will give satisfaction in the consumer mind that their product is safe, and it also helps the company to improve the product to the next generation based on the customer reviews, and the customer needs. This method is followed in all the companies as mandatory to connect themselves with the customers. 4) Using Influencer or prompting through a famous Blogger It also creates a buzz of a product because the influencer or blogger will explain the features of that product very clearly. If a person is waiting for a product to be launch, then watching their favorite blogger to blogging the outcome of that product will also give them excitement to buy that product. It can even convince consumers to buy that product. The video or written blog released by that blogger can reach many customers, and that helps to create a buzz about that product. For example, unboxing of phones or review about the new products is an example for the famous bloggers who blog about products that are going to be launch or blog about product features after its launch. It is the easiest way for the company to reach its customers. Influencers also play a significant role in informing their followers about any new product launch. 5) Creating demand for that product All the company follows it, but to explain it better; I want to use one example. Lamborghini and other exclusive car companies make only a limited amount of cars for the customer, which creates a buzz and makes them sold out very fastly. Another example is the limited edition of mobile phones; the mobile phone company creates a limited edition mobile phone based on the trending matter that is happening in the world to create a buzz for their product. Whenever you heard the word defined edition, then the company that selling that product is trying to create a buzz on that product. 6) Rumour Spreading Buzz marketing is not only done by creating leverages but also by creating rumors about other products. Rumors about other product can also create a buzz which will automatically make us buy the competitive company product to that rumor product. For example, if a mobile phone company has rumors that their security is weak, and the company has less protection so that hackers can hack the users’ data of that company. What will you do then if you want to buy a mobile phone? You will consider other company’s mobile phones rather than the rumored company mobile. This is also another method of buzz marketing. After going through different types of buzz marketing, let us now delve into various steps that can help you in running an effective buzz marketing campaign- Advantages of Buzz-Marketing For Your Brand Buzz marketing has many benefits like • Free advertisement for a company. • Best reach to the customers. • I am selling products very quickly. • Getting feedback and improve that product to create the next generation of that product. • The fast reach of a product to the people Buzz marketing has many advantages, and it is one of the oldest marketing methods that are still in use and used by all the companies in the world. By using Buzz marketing method, you can easily reach the people in all the corner of the world. This marketing method can reach to the remote place very quickly because this method is a mouth by ear strategy. This method can make a better understanding of the company and customer, even if the customer is illiterate. It can make a company reach people very efficiently and also it can make the company achieve great heights. Along with these advantages, there are some disadvantages of buzz marketing as well. Let us have a look upon those as well- Disadvantages of Buzz-Marketing: The downsides or limitations describing buzz marketing are- 1. Interpersonal communication in this process lacks control. This makes the whole process less trustworthy. 2. The investment is required for goods and distributions. Hence financial stability is needed. 3. It isn’t effortless to make the product go viral in the process. Hence it is a complicated process. 4. The dependency on the customer increases for the sale of the products and services. Tips for running a Successful Buzz-Marketing For running an effective buzz marketing campaign, few key tips need your attention, so let us have a look upon those- 1. Widen the reach of your Product through Communication When you plan to run a buzz marketing campaign, your primary means of communication are your consumers. You need to incorporate a communication strategy that focuses upon your target audiences, and let them be aware of the hype that your product or service has. 2. Your product satisfaction level should match the viral you created When you are running a buzz marketing campaign, it is essential that your product matches the expectations of your consumers and satisfies them. When the product matches the real buzz, it helps in increasing the market presence and credibility more effectively. 3. Create a viral for emphasizing your uniqueness and superiority When you launch a product and create a buzz around the same, you need to ensure that your product is better than your competitors, or your product has some uniqueness that differentiates it from other existing products. Running a buzz marketing campaign that can help you overcome the competition in your target marketing is quite essential here. 4. Your viral should be directed towards the virtualization of your campaign When you are running a buzz marketing campaign, you need to support it with some other powerful means that can visualize your campaign and widen its reach by penetrating more favorable markets. You can use advertisements, referral campaigns, social media campaigns, influencer marketing, etc. for making your buzz marketing to be viral. 5. Use online channels for optimizing the reach and conversions of viral Marketing experts recommend the use of multiple online channels for optimizing the outcomes of your buzz marketing campaign. Using online advertising and marketing tactics will be quite useful in boosting the conversions of your buzz. You can use content marketing, email marketing, online advertising, social media marketing and advertising for increasing the virality of your buzz marketing. 6. Use monitoring tools to measure the success of your viral campaigns As in any other campaign, you must measure with your monitoring tools what is happening to know how your strategy is working, if you must change something, what actions to strengthen, etc. Examples of Buzz-Marketing 1) Apple The Apple Company does the most exceptional representation of Buzz Marketing. They have come up with highly effective campaigns for their Macintosh, and word of mouth became their most significant friend along with ads for creating the buzz. Being different from the rest of the manufacturers has been the USP of Apple. Thus you can say, a good Buzz marketing campaign is not focused purely on the commodity or the inbound links, it is highly dependent upon the credibility in the market. So, without having a positive interaction, you would not be able to do so either. For ensuring success for their brand via buzz marketing, a high amount of advertising strategies that assist and improve the spread of information is incorporated by the Apple marketing team. 2) Clorox Lounge Along with having some USPs and great word of mouth, some other key factors play a crucial role in optimizing the outcomes of a buzz marketing campaign. Understanding the requirements of consumers and channelizing campaigns as per their needs is also essential for creating a buzz. Clorox did the same with their Clorox Lounge campaigns. In this, an interactive website is provided to the customers in which contests, customer forums, and surveys are incorporated. By using this, the company develops a connection with their potential and existing consumers. It also allows customers to share their viewpoints about Clorox products. This strategy becomes quite useful in widening the reach, engaging with customers and building credibility that ultimately convert into conversions and increased market presence for the brand. 3) Starbucks Starbucks is yet another illustration of the process of Buzz marketing. Starbucks acknowledges that its primary marketing is name recognition via word of mouth. But, along with this, the company also ensured the top-notch quality in its every product. Offering customized services with a highly amicable ambiance has also been a prime factor of positive buzz around the brand. Some of the instances of such features are- 1. The name of the customer is illustrated with a happy expression on the bottle. 2. The staff will always be there with a smiling face to attend you. 3. The company is known for offering the best quality in the market superior to all of its competitors 4. The atmosphere is pleasant, with spaces to sit down comfortably and soothing orchestral music. 5. They give consumers free wifi. 6. Gift a loyalty card to consumers. So, all in all, the idea of having a coffee can be turned into an event thanks to the fantastic experience ensured by Starbucks. This generates the base for buzz marketing. Starbucks ‘ unique experience makes customers post photos of the spot with their smiling drink on different social networks. This does effective branding for the company. Because of such an inspiring, customized, friendly and effective market presence, the positive hype around the brand helped it to have a presence in 75+ countries around the world. Buzz marketing experts may build a sensation about a potential item or company in a variety of ways. These were only a few explanations of how companies want customers to chat, so they’re going to want to do it first hand. Conclusion: So, on the concluding note, we can say that buzz marketing is a sales tactic targeted at creating a healthy level of trust, hype, and loyalty within customers to widen the reach, optimize lead generation and boost conversions. Brands and businesses around the world need to create a healthy and productive buzz around their products and services. The tips mentioned above will for sure help you in running a result-driven buzz marketing campaign. Buzz marketing also aims to stimulate discussions among the target customer segments about a brand, its products or services. That is why; buzz marketing comprises significant advantages for the brands that are planning for a product launch.
- 5.3lesson 3:What is Global Marketing? Global marketing is basically the beginning, middle, and end of how a business organizes, creates, positions, and advertises its products and services on a global scale. Giant corporations have always had their hands in global marketing through having operations, representatives, and employees in other countries. Through social media platforms, websites, and other online tools, small businesses can also participate in the process of global marketing. Why is Global Marketing Important? • It gives businesses new opportunities to create new streams of income • Raises brand familiarity and reputation • Its gives businesses the opportunity to gain new knowledge about their products in order to adjust for better quality service What is Global Marketing Strategy? The planning part of a business trying to grow into new markets around the world is a global marketing strategy. When entering various international markets, a business must be mindful of how they will approach marketing (public relations, promotion, channels, etc.) in countries with different values, cultures, and even languages. For instance, if you have an American-based company trying to sell products in China, you must gage how to reach that particular audience. Strategies for a Successful Global Marketing 1. Establish a popular and well-recognized brand and image o When a business is successful and popular in their native country, curiosity arises in other countries from foreigners willing to try out their products 2. Use a unified approach to marketing across borders o Utilize a marketing strategy for your business as if there were no global boundaries to better analyze engagement with content from country to country 3. Make a marketing plan o Investigate goals/benchmarks of a business and the needs/wants of the region within the global market, then create a marketing plan based on research collected 4. Adjust your approach o Just a because a marketing strategy was a success in a business’ native country does not mean that it will translate well in another country with different values, culture, and language 5. Personalize promotions o Be mindful of language differences, cultural practices, and observances (i.e. holidays and events) when advertising a product or service to a foreign audience 6. Observe and know where your target audience comes from o Using tools such as Google Analytics and Shopify to pinpoint consumers by specific their location helps businesses create better marketing strategies that reach their target audiences 7. Tailor your products based on where they are sold o Fast food juggernaut McDonald’s provides cultural food staples (i.e. poutine in Canada and Crock Brie in Italy) based on the localization of every franchise o Are your services or products in any way culturally offensive? o Is your business following foreign government rules and regulations? o Is your business brand/trademark unique to the country in which services are provided? 8. Keeping branding in mind o A business must ensure that anything from the company name to the logo that they use is not similar to other business in the area, that their branding is easily translatable in a different language, and that it is familiar 9. Specify your message based on location o Different people have different wants/needs, and this is especially true for people that live and different countries. A business must make sure that their promotions speak to their customers, whether native or foreign 10. Bring an in-country marketer on your team o As the saying goes, “When in Rome, do as the Romans do.” But, no one knows Rome like an actual Roman. When tailoring your marketing strategy to foreign countries, hiring a native from those countries ensures better communication that translates to the people that a business is trying to reach. 11. Utilize the correct technology and software o If the most popular social media platform in a foreign country is Twitter, then it is imperative for a business to structure its global marketing strategy around the use of that platform to reach its desired audience 12. Take advantage of available data o Growth in the modern digital landscape has allowed for businesses to be more creative in how they reach potential customers through marketing campaigns online Development of Global Marketing Campaign • Product Is a company’s product sellable across all global markets or does it need to be changed depending on regional traditions and tastes? • Price Do prices need to be changed because of competition already in the foreign market? • Placement How do foreign customers choose and purchase their products? • Advertising Does a company’s message easy to understand across all cultures? Are there any misunderstandings based on language, culture, and/or value differences? What kinds of Customers does Global Marketing Reach? Targeting and reaching out to customers on a global scale requires a business to have various profiles instead of just one distinct profile. Every country analyzed will have different types of consumers with different types of needs. That is why global marketing campaigns must be flexible and adjustable across all borders. Benefits of Global Marketing • Increase the quality of a product or service When a business expands into a new market, they gain more knowledge. With analytical tools, they acquire knowledge at a faster pace, which leads to a higher quality of service or products that are available for customers. • The familiarity of brand image Think about why companies like McDonald’s and Starbucks are known all around the world • Raised knowledge about your brand If your business not only has ads on social media platforms but also commercials that air all around the world (tailored from country to country) there is an increased chance of gaining a global customer base. • Lesser costs, more savings By establishing a brand in other global markets, a business can acquire more consumers and get them familiarized with the brand to a point where the marketing does itself (recommendations, social media posts, etc.). Plus, by taking advantage of social media, businesses use less money for promotions. • Reach a wider target audience Being on top of the American market is nothing to sneeze at, but thanks to modern innovations (the internet) it is easier than ever before to connect with the foreign market to increase a businesses’ customer base. • Gain the upper hand on your competitors Everyone knows that McDonald’s is a dominant global powerhouse compared to Whataburger due to its reach in the global market, especially in China. • Gain relationships across borders Not only can a business form a relationship or even partnerships within their native countries (i.e. Coca-Cola and McDonald’s), but they can also establish alliances with foreign corporations to sharpen their edge within the global market. • Helps form relationship outside of the “political arena” Certain might not be able to link up in their native countries due to conflicts of interests, however, in another country, those constraints might not be there. • Helps to manifest good strategies faster in a more efficient way Thanks to digital innovations, businesses can implement global strategies with at a faster rate than reaches more people. • Reveals the advantages of e-Marketing vs traditional marketing In the age of social media posts and images with the use of social media, e-Marketing is king. • Influence and scope The more global impact that a company has the more cultural influence and power that they have, which also increases the sizes of their operations. Challenges in Global Marketing • No market, no sale An American burger joint might not be able to establish itself in a country like India because cows are considered sacred animals in their culture. They would have to adjust their menu to be more plant-based. • More financial risk A business trying to cross over into a global market is a risky task due to having to adapt their marketing strategy (which costs money) to places with differing values, cultures, and languages with could fail. • The rules are different Not only does a business entering into a foreign market have to deal with language and cultural barriers, but they also have to deal with following the rules of foreign governments. Global Marketing Examples • Airbnb This online company that helps to connect people from around the globe looking for and offering rooming and board became a success thanks to social media. Through its One Less Stranger campaign, 3 million people from all around the world posted content, discussed, and interacted with the platform and campaign. • Coca-Cola The iconic American brand put 650 clean water devices in the country of Egypt and gave food to children during Ramadan in the Middle East. This helped to establish its brand message of “Happiness” to foreign regions. • Domino’s Depending on where you live, Domino’s has menu items (including toppings, sauces, bread, and cheeses) that are available for various global markets. For instance, in Asia, Domino’s offers a variety of seafood options for toppings. • Dunkin’ Donuts Dunkin’ Donuts offers menu items to satisfy global tastes, like dry pork and seaweed donuts in China and Mango Chocolate donuts in Lebanon. These offerings are available in over 30 countries. • H&M Notoriously online savvy, H&M uses social media campaign strategies to reach audiences on a global scale. Annually, H&M has expanded by 10%-15% in-store grand openings. • Innocent Drinks Established in 13 countries all across Europe, this company is considered the top smoothie company in the U.K. Their secret to success to brand consistency. • Kentucky Fried Chicken This popular American company was able to establish going to its restaurant as a tradition in the country of Japan. They did this by associating themselves as a connection to the Christmas holiday. • McDonald’s This iconic American institution offers menu items based on global tastes. In Mexico, they serve a green chili cheeseburger and in the Middle East, there is a menu item called the McArabia, a flatbread sandwich. • Nike Through sponsorships based on the type of sport in various countries, Nike has established itself throughout the years as a popular global brand. In Latin America, where soccer is the top sport, their most paid sponsors are soccer players, whereas in America it is more likely to be basketball players getting those top sponsorships. • Red Bull The energy drink company helps to establish its global brand by hosting extreme sports competitions around the world. The Red Bull Air Race in the U.K. and the Red Bull Soapbox Race in Jordan are just some of the events the Red Bull has hosted. • Starbucks With different menu items for various local preferences throughout the globe, Starbucks has become a global powerhouse. In Hong Kong, Starbucks offers a menu item called “Dragon Dumplings.” • Unger and Kowitt This American-based law firm that collects traffic tickets offers various language and cultural options in their services. The company website is translatable in English, Portuguese, Spanish, and Creole. • World Wildlife Foundation This nature conservationist organization had its Earth Hour event, where people turn their lights off for an hour, take place in the country of Norway (known for its long daylight hours). Using a special digital banner created by Mobiento, the WWF received around 1 million impressions worldwide. Global Marketing Issues • Being vague in the targeting of specific countries • Lack of research on internal information • No adjustments of products sales and social media platform use • No changes in products or service • Having no local teams or in-country marketer Global Marketing International Marketing The whole world is a marketplace Country specific marketing All products are the same globally Targets local markets only (Example) Apple: The same products all over the world (Example) McDonald’s: Has specific menu items to blend into local markets • Having no knowledge of the global management of services Rural Marketing – Introduction The growth in the rural markets is perhaps the most significant feature of the marketing environment of India in recent time. The growth implies at once a great marketing opportunity as well as a great marketing challenge. Today, the rural market of the country accounts for a large share of the expenditure on manufactured on manufactured and branded consumer goods. The marketing environment governing the rural markets has been undergoing vast changes in the last two decades. For example, tape recorders or ‘two-in-ones’ were practically unheard of in the Indian rural market twenty years ago. Today, they are seen everywhere in rural areas, even in the remotest of hamlets. The spread of bicycles and subsequently two-wheelers has been almost in the nature of a revolution. Even TV has entered the village homes in a big way. In clothing, there has been a remarkable change- preferences have shifted to blended fabrics, knitted apparels and readymade garments. Earthenware pots have yielded place to a variety of new kitchenware. Plastic products and stainless steel goods have become common consumer items The change in every sphere in visible, palpable. Recent times have seen a steady increase in the purchasing capacity of the rural people. Contrary to popular belief, the rural market is already consuming a variety of high priced consumer durables and other modern products. And more and more companies are today targeting the rural market. While the rural market of India poses a great attraction, tapping the market is beset with a variety of problems. Marketing men find it a new market, involving a new customer and a new marketing situation. Evidently, there are two sides to India’s rural market; the market provides immense opportunities; it also displays intimidating challenges. ADVERTISEMENTS: It does not lend itself to be tapped through an automatic transfer of the tools and techniques of marketing, which proved a success in the urban marketing context. There is a difference in the kind of media mix that is used to convey the messages to the rural customers there is a need to use different models and means to reach them as what appeals to the urban customer may not appeal to him due to varying lifestyles. The communication and the design of it are also different as what attracts one need not attract the other as well. Sercon has the understanding and the ability to conceptualize and execute effective promotions in the rural areas using various below the line mediums. Rural Marketing Activities Consist of Campaign Design and Campaign Delivery: The success of IDE’s (International Development Enterprises) programs depends on rural mass marketing, both product marketing to stimulate user investment in products and services and social marketing to motivate changes in health behaviors. IDE develops marketing campaigns with the same detail and accountability as the strategies employed for the sale of commercial products. ADVERTISEMENTS: IDE doesn’t market products or behaviors; it markets dreams. In both product marketing and social marketing campaigns, instead of selling a product or a desired behavior, IDE links that product or behavior to the hopes and fears of the different target groups. The unique sales point for any campaign is never the product or habit itself, but rather the most motivating thing to the audience for that campaign. Marketing campaigns link products, techniques, and behaviors to values like prestige, wealth, health, and convenience. IDE conducts marketing campaigns with government mass organizations, extension services, schools, and other partners in addition to private sector enterprises. ________________________________________ Rural Marketing – Meaning (With Reasons for Improvement in Rural Areas) It is a two-way marketing process wherein the transaction can be: 1. Urban to rural – It involves the selling of products and services by urban marketers in rural areas. These include pesticides, FMCG products, consumer durables, etc. 2. Rural to urban – Here, a rural producer sells his produce in the urban market. This may not be direct. There generally are middlemen, agencies, government cooperatives, etc., who sell fruits, vegetables, grains, pulses and others. 3. Rural to rural – These include selling of agricultural tools, cattle, carts and others to another village in its proximity. Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives. Rural India buys small packs, as they are perceived as value for money. There is brand stickiness, where a consumer buys a brand out of habit and not really by choice. Brands rarely fight for market share; they just have to be visible in the right place. Even expensive brands, such as Close- Up, Marie biscuits and Clinic shampoo are doing well because of deep distribution, many brands are doing well without much advertising support — Ghadi, a big detergent brand in North India, is an example. The Indian rural market has a huge demand base and offers great opportunities to marketers. Two-thirds of Indian consumers live in rural areas and almost half of the national income is generated here. The reasons for heading into the rural areas are fairly clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and air conditioners is growing annually at between 7 per cent and 10 per cent. The rural market is zooming ahead at around 25 per cent annually. “The rural market is growing faster than urban India now,” says Venugopal Dhoot, chairman of the Rs.989 crore (Rs. in billion) Videocon Appliances. “The urban market is a replacement and up gradation market today,” adds Samsung’s director, marketing, Ravinder Zutshi. Reasons for Improvement of Business in Rural Area: 1. Socio-economic changes (lifestyle, habits and tastes, economic status) ADVERTISEMENTS: 2. Literacy level (25% before independence – more than 65% in 2001) 3. Infrastructure facilities (roads, electricity, media) 4. Increase in income 5. Increase in expectations. Marketing and Research Team (MART), the specialist rural marketing and rural development consultancy has found that 53 per cent of FMCG sales lie in the rural areas, as do 59 per cent of consumer durable sales, said its head Pradeep Kashyap at the seminar. Of two million BSNL mobile connections, 50 per cent went to small towns and villages, of 20 million Rediffmail subscriptions, 60 per cent came from small towns, so did half the transactions on Rediff’s shopping site. The rural markets in India are undergoing a silent but definite revolution in terms of vastly enhanced purchasing power, consumption priorities and overall volume of consumption of goods and services. The sheer size of the market, as large sections of rural population get converted into consumers, is enough to demand focused attention from both marketing practitioners and academics, to convert the emergent opportunity into realizable market shares and growth targets. ________________________________________ Rural Marketing –7 Important Characteristics: The rural market of India consists of about 65 per cent of the population of the country spread over nearly 630000 villages. Rural markets may be considered as the nerve centres of the economic, social and cultural activities of the rural life of the country. It is scattered and widespread into many villages and unlike the urban market not confined to a handful of metros, cosmopolitan cities and towns. The demand for products including consumer non-durables and durables are seasonal and therefore uneven in a year. i. Large, diverse and scattered market – The rural market in India is large and scattered into a number of regions. There may be less number of shops available to market products. ii. Major income of rural consumers- agriculture – Rural prosperity is tied with agricultural prosperity. In the event of a crop failure, the income of the rural masses is directly affected .iii. Standard of living and rising disposable income of the rural customers – It is known that a majority of the rural population lives below the poverty line and has a low literacy rate, low per capital income, societal backwardness, low savings etc., but the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him. iv. Traditional outlook – Villages develop slowly and have traditional outlook. Change is a continuous process but most rural people accept change gradually. This is gradually changing due to literacy, especially in the youth who have begged to change the outlook in the villages. v. Rising literacy levels – It is documented that approximately 45 per cent of the rural Indians are literate. Hence, awareness has increased and the farmers are well- informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle. vi. Diverse socio-economic background – Due to dispersion of geographical areas and uneven land fertility, rural people have disparate socio-economic background, which ultimately affects the rural market. vii. Infrastructure facilities – The infrastructure facilities like cemented roads, warehouses, communication system and financial facilities are inadequate in rural areas. Hence, physical distribution is a challenge to marketers who have found innovative ways to market their products. As part of a planned economic development, the government is making continuous efforts towards rural development. In this age of liberalization, privatization and globalization, rural market offers a big attraction to the marketers to explore markets that are untapped. Unlike urban markets, rural markets are difficult to predict and possess special characteristics. The featured population is predominantly illiterate, has low income, characterized by irregular income, lack of monthly income and flow of income fluctuating with the monsoon winds. Rural markets face the critical issues of distribution, understanding the rural consumer, communication and poor infrastructure. The marketer has to strengthen the distribution and pricing strategies. The rural consumer expects value for money and owing to has unsteady and meager status of weekly income; increasing the household income and improving distribution are the viable strategies that have to be adapted to tap the immense potential of the market. Media reach is a strong reason for the penetration of goods like cosmetics, mobile phones, etc., which are only used by the urban people. Increasing awareness and knowledge on different products and brands accelerate the demand. The rural audience are however critical of glamorous ads on TV, and depend on the opinion leaders who introduce the product by using it and recommending it. Opinion leaders play a key role in popularizing products and influence in rural market. Now- a-days educated rural youth also influences the rural consumers. Rural consumers are influenced by the life style they watch on television sets. Their less exposure to outside world makes them innocent and fascinated to novelties. The reach of mass television media, especially television has influenced the buying behaviour greatly. ________________________________________ Rural Marketing – Importance: 1. Size of the Rural Market: An analysis of National Sample Survey data shows that of the total expenditure on manufactured consumer goods, 75 per cent is spent in rural India. The percentage has remained almost unchanged since 1960-61. Though per capita consumption and expenditure on manufactured consumer items is low in rural areas, the market is approximately three times larger. On the assumption that ill persons or families above the poverty line form the market for some branded consumer goods, this market has a size of 42 million households. If we take Punjab, Rajasthan, Gujarat and Andhra, the target market of 72 million people is larger numerically than France, U.K. or West Germany. 2. Rural Market in Value Terms: For non-food consumption items the size of the market (estimated by applying NSS proportions to central statistical organisation data) in current prices was Rs. 5,500 crore in 1970-71, Rs. 9,500 crore in 1974-75 and 13,500 crores in 1979-80. Assuming these items are mainly consumed by the rural population above the poverty line it represents an annual expense of Rs. 5.6 per head per annum. In real terms, however, the growth has been very modest at 2.5 per cent per annum due to a number of factors such as: (a) Lack of concerted effort by the organised sector to penetrate the rural market. (b) Averages are misleading in this type of analysis as peak opportunities which occur in certain pockets may not be fumy realised. (c) If the market for consumer products is considered as a whole it overshadows the opportunities that exist for selected products which may be growing at a much faster rate. 3. Rural Target Population: Wealth distribution in rural India is uneven and the top 13 per cent of the farmers’ land holdings account for 37 per cent of cultivated area. Further, NSS data show that the top 10 per cent of the rural population accounts for above 37 per cent of the expenditure on consumer goods. Not surprisingly the potential market is at the top of the spectrum. However with the increasing spread of the rural income, consumer goods are expected to make substantial penetration into the lower income strata by the normal percolation effect. Then there is an increasing cross flow of population between urban and project town centres which act as conducts for cross flow of products and ideas thus supplementing the demand for such products. 4. The Market for Agricultural Inputs: There is a very rapidly expanding demand for agricultural inputs in rural market. This is borne out by the compound rate of growth in the off take of agricultural inputs between 1970-71 and 1980-81; i. Fertilizers – 10 per cent ii. Pesticides – 12 per cent iii. Area under high Yielding Variety – 12 per cent iv. Tractors – 15 per cent v. Pumps and tube-wells – 11 per cent A recent survey in Andhra, Punjab and Haryana revealed that over 90 per cent of the farmers interviewed felt that they should use more and more new farm practices. The study established that in these areas the farmers are eager to use newer agricultural technology for improving profits and are prepared to take calculated risks. 5. Sources of Rural Purchasing Capacity: Following are the factors which contribute to purchasing capacity in rural areas: (a) Marketable Agricultural Surplus and Rural/Urban Terms of Trade: So far as manufactured consumer goods are concerned, regression analysis indicates that there is a 0.7 per cent rise in consumption for every one per cent increase in marketable surplus of food-grains. As the surplus is increasing every year, there will be increasing purchasing capacity with farmers. (b) Remittances: The traditional remittances from within the county are now being supplemented in several states by remittances from overseas. In 1978 total inward remittances in the state of Kerala were estimated at Rs. 400 crore. This creates new consumption and purchasing patterns. (c) Dispersal of Industry: The investment in the development of backward areas will greatly speed up the income generation process in rural areas. (d) Government Expenditure: Investments in flood control and irrigation facilities will be around Rs. 12,000 crore in 1983-1985 and central sector outlay for rural development and associated programmes will be Rs. 2,300 crore. These will generate income, and increased purchasing power of rural areas can be expected to support consumption of manufactured items. Further, these investments are expected to augment the income generation process from land in future years, which in turn, will accelerate the growth of rural markets. The investment proposed during the VII plan for developing village and khadi industries is of the order of Rs. 2,000 crore. This too will encourage the income generation process. 6. Helpful in the Food Processing Industry: India is a land of agricultural, horticulture, sericulture which produce a number of varieties of food-grains, fruits, vegetables, commercial crops and flowers. The government of India making its efforts to develop the food processing industry while giving a number of benefits including tax benefits, incentives, subsidies, transportation and marketing facilities. Food manufacturers or processors are primarily engaged in adding farm utility to raw farm products. Wheat is milled into flour, livestock is converted into meat products, fruits and vegetables are canned or frozen. These firms play a vital role in transforming bulky, raw, perishable farm products into storable, concentrated, and more appealing good products. In so doing, food processors become involved in several supportive marketing functions, such as transportation storage, and financing. Thus, food processors occupy a strategic position in the food industry. Through the purchase of farm commodities, their activities are closely linked to farmers. As the source of many food product innovations and as the major brand advertisers in the food industry, they are also in close contact with consumer markets. Punjab, Himachal Pradesh and Jammu & Kashmir are the main producers of fruits and vegetables, in south Gujarat, Kerala and Karnataka, Maharashtra are the producer of coconut, groundnut, bananas, cashewnuts and certain other products like tea and coffee. Government is developing food processing industries in these states, which is being responded as per the expectations. 7. Helpful in Economic Development: Rural marketing plays an important role not only in stimulating production and consumption, but in accelerating the pace of economic development. Its dynamic functions are of primary importance in promoting economic development. For this reason, it has been described as the most important multiplier of rural development. The development of an efficient marketing system is important in ensuring that scarce and essential commodities reach different classes of consumers. Marketing is not only an economic link between the producers and the consumers; it maintains a balance between demand and supply. The objectives of price stability, rapid economic growth and equitable distribution of goods and services cannot be achieved without the support of an efficient marketing system. 8. Increase in Farm Income: An efficient marketing system ensures higher levels of income for the farmers by reducing the number of middlemen or by restricting the commission on marketing services and the malpractices adopted by them in the marketing of farm products. An efficient system guarantees the farmers better prices for farm products and induces them to invest their surpluses in the purchase of modern inputs so that productivity and production may increase. This again results in an increase in the marketed surplus and income of the farmers. If the producer does not have an easily accessible market-outlet where he can sell his surplus produce, he has little incentive to produce more. The need for providing adequate incentives for increased production is therefore very important, and this can be made possible only by streamlining the marketing system. 9. Optimization of Resource Use and Output Management: An efficient rural marketing system leads to the optimisation of resource use and output management. An efficient marketing system can also contribute to an increase in the marketable surplus by scaling down the losses arising out of inefficient processing, storage and transportation. A well-designed system of marketing can effectively distribute the available stock of modem inputs, and thereby sustain a faster rate of growth in the rural sector. 10. Growth of Agro-Based Industries: An improved and efficient system of rural marketing helps in the growth of agro-based industries and stimulates the overall development process of the economy. Many industries depend on agriculture for the supply of raw materials. So many producers have installed their industrial units near the village side and are also interested to install the units in the rural areas so as to minimise the transportation cost, easily availability of raw materials and some benefits which are specially meant for rural producers. So growth of agro based industries constitute one of the most important segment of rural marketing. 11. Widening of Markets: A well-knit marketing system widens the market for the products by taking them to remote corners of the country, i.e., to areas far away from the production points. The widening of the market helps in increasing the demand on a continuous basis, and thereby guarantees a higher income to the producer. 12. Price Signals: All efficient marketing system helps the farmers in planning their production in accordance with the needs of the economy. This work is carried out through price signals. The government is announcing the minimum support price of the agriculture produce every year and also emphasising the importance of a particular farm products. For examples during the past 5 years the government is stimulating the fanners to produce more commercial crops like sugarcane, soyabean, sunbean, groundnut, tobacco and tobacco products, sericulture products, fruits and vegetables, cotton and oilseeds. To fetch a good price the farmers are directed to produce as per the requirements of the economy. 13. Adoption and Spread of New Technology: The marketing system helps the farmers in the adoption of new scientific and technical knowledge. Past experience shows that our rural areas were totally under-developed and under-utilised because of the lack of mechanisation of agriculture. With the advancement of technology, mechanisation, introduction of high yielding varieties, development of fertiliser and pesticides and proper government policy has increased the agriculture production to a greater extent which is the back bone of rural industries. 14. Employment: The marketing system provides employment to millions of persons engaged in various activities, such as packaging, transportation and processing. Persons like commission agents, brokers, traders, retailers, weightmen, hamals and regulating staff are employed in the marketing system. A number of employees are working in the marketing system which is three tier system ranging from primary marketing society, central marketing committee and state marketing board. Side by side cooperative marketing system provides employments to a number of employees. Storage, warehousing, transportations, middlemen, provides employments to a number of prospects. 15. Better Living: The marketing system is essential for the success of the development programmes which are designed to uplift the population as a whole. Any plan of economic development that aims at diminishing the poverty of the agricultural population, reducing consumer food prices, earning more foreign exchange or eliminating economic waste has, therefore, to pay special attention to the development of an efficient marketing for food and agricultural products. 16. Contribution to National Income: Marketing activities add to the nation’s gross national product and net national product. An estimate indicate that 14% of the gross national product comes from the rural sector and 11% is derived from rural industries. Moreover there are number of activities which are called allied activities to rural sectors are also giving a reasonable contribution to the national net worth. Rural development means the development of the country cannot be over emphasised. 17. Utility Creation: Marketing is productive, and is as necessary as the farm production. It is, in fact, a part of production itself, for production is complete only when the product reaches a place in the form and at the time required by the consumers. Marketing ads cost to the product; but, at the same time, it adds, utilities to the product. The following four types of utilities of the product are created by marketing: (a) Form Utility: The processing function adds form utility to the product by changing the raw material into a finished form. With this change, the product becomes more useful than it is in the form in which it is produced by the farmer. For example, through processing, oilseeds are converted into oil, sugarcane into sugar, cotton into cloth and wheat into flour and bread. The processed forms are more useful than the original raw materials. (b) Place Utility: The transportation function adds place utility to products by shifting them to a place of need from the place of plenty. Products command higher prices at the place of need than at the place of production because of the increased utility of the product. (c) Time Utility: The storage function adds time utility to the products by making them available at the time when they are needed. (d) Possession Utility: The marketing function of buying and selling helps in the transfer of ownership from one person to another. Products are transferred through marketing to persons having a higher utility from persons having a low utility. ________________________________________ Rural Marketing – 4 Important Challenges : Availability, Affordability, Acceptability and Awareness The four A’s seek to address four important challenges linked to rural markets: Challenge # 1. Availability: Making products avail¬able to geographically scattered con¬sumers is an important challenge for marketers. The geographical expanse of rural villages is over 3.2 million square kilometres. The problem of availability is further compounded by lack of adequate infrastruc¬ture. The poor state or absence of roads poses a daunting task in terms of channels design, selection, and logistics of distribution. HUL has developed its own unique distribution network called ‘Project Shakti’ that involves local people distributing its products in interior villages with population less than 5,000 people. Challenge # 2. Affordability: Incomes disparity between rural and urban consumers creates two different levels of affordability. Low disposable income levels of rural consumers renders products designed for urban markets beyond their capacity. For instance, feature rich high quality products need to be scaled down to make them affordable to rural consumers. This requires visiting the concept of ‘value for money’ from a fresh perspective. Rural consumers do not want cheap products per se; rather they expect good value for money. Therefore, products should be scaled down to an acceptable level of quality in order to render it within their reach. Coca-Cola launched its five rupee bottle to cater to this market. Another affordability creation strategy is developing smaller affordable lower price point packs that do away with the need to invest bigger sums in buying bigger packs. Chik shampoo ushered in this revolution in India, which was followed by many other companies. Prominent brands such as Britannia Tiger, Fair & Lovely, Surf, Himani Navratan Oil, Vaseline, and Cadbury Dairy Milk are now available in affordable packs that cost less than five rupees. Challenge # 3. Acceptability: It is wrong to assume that rural consumer needs and wants are same as that of urban consumers. For instance, erratic power supply and voltage fluctuation require electronic and electric appliances to be adapted as per the rural conditions. For instance, LG and Onida have created value for money models of televisions customized as per rural markets that are marketed under different brands like ‘LG Samporna’ and ‘Igo’ respectively. Similarly, Tata and HUL have developed storage water purifiers that do not require electricity. Challenge # 4. Awareness: Unlike urban consumers, the rural consumers are difficult to reach out to in order to deliver communication messages. This is because the rural markets are not connected by media such as television, press, outdoor, and radio. Media penetration is abysmally low in rural areas. There¬fore, commonly used mass media becomes vastly incapable of reaching rural consumers. Unless consumers are informed and persuaded, brand building is not possible. There are some conventional ways such as cinema, haat, mandi, and mela which can be used to make consumers aware about brands. Some companies use communication vans that combine product promotion with screening of movies to spread awareness. Posters, banners, painting walls, painted kiosks, and events are some ways by which awareness can be built in rural areas. ________________________________________ Rural Marketing – Changes in Environment: Social Changes, Economic Changes, Ethical Changes, Political Changes, Physical Changes and Technological Changes The rural marketing environment is complex and is changing continuously. The marketing organization should foresee and adopt strategies to changing requirements in the market. An adaptive organization that makes its effective marketing plans and its own strategies or a creative one will prosper and create opportunities in the changing environment. Rural marketing environment changes will be in the area of: 1. Social changes. 2. Economic changes. 3. Ethical changes. 4. Political changes. 5. Physical changes. 6. Technological changes. 1. Social Changes: The social changes consist of 3 factors: i. Sociological factors – Consumer society or the community is important. The consumers’ lifestyle is influenced by the social set-up. The social constitution and changes influence customer habits, tastes and lifestyles. ii. Anthropological factors – The regional cultures and sub¬cultures and living patterns influence advertising, sales promotion, selling strategies and packaging. The consumers in East India have different tastes. iii. Psychological factors – Consumer behaviour, attitudes, personality and mental make-ups are unique. The study of behaviour is vital to evolve marketing mix. 2. Economic Forces/Changes: This force consists of three stages: i. Competition – A good and healthy competition brings in good and overall improvement in economic activities. It also brings good quality, quantity and prices. ii. Consumers – The consumers today are quite knowledgeable and choose. Their progress and well-being should be the aim of any economic activity. iii. Price – Pricing is a delicate issue, which should be market- friendly, not too high or too little. The marketer has to keep in mind to get decent returns on investment and efforts of procedures and marketers. 3. Ethical Changes: Business minus ethical values brings degeneration. In the long run, it brings problems. Non-standardization, adulteration, exploitation and falsification are the main ethical issues in business organizations. 4. Political Changes: The government policies towards trade and commerce, internal taxation, external levies and preferential treatments have profound influence on the marketing strategies. 5. Physical Changes: The infrastructure availability for movement and storage of goods play a significant role in the physical distribution of goods and in reaching the consumers. 6. Technological Changes: The fast changing science technologies give a cutting edge to the marketing products. The change of processes reduces manufacturing, packaging and handling cost of products. The changes warrant changes in marketing, inputs and strategies. The capital is made to work faster and harder. So is the case with the marketer. He has to use these new marketing tools and facilities in designing and implementing his marketing strategies, which are adaptive to the changing environment and ensure success. ________________________________________ Rural Marketing – Problems in Channel Management: Multiple Tiers, Higher Costs, Administrative Problems, Non-Availability of Dealers and a Few Others Organizing an effective distribution channel is the second major task in rural marketing. This task too is beset with many unique problems. The Problems: As we shall first analyze these problems and then see how channel management can be handled in the rural context. i. Multiple Tiers, Higher Costs and Administrative Problems: In the first place, the distribution chain in the rural context requires a larger number of Ina tiers, compared with the urban context. The long distances to be covered from the unproductive points and the scattered locations of the consuming households cause this situation. At the minimum, the distribution chain in the rural context needs the village level shopkeeper, the mundi level distributor and the wholesaler/stockiest in the town. And on top of them, it involves the manufacturers’ own warehouses / branch office operations at selected centers in the marketing territory. Such multiple tiers and scattered outfits push up costs and make channel management a major problem area. ii. Scope for Manufacturers’ Own Outlets Limited; Greater Dependence on Dealers Inescapable: The scope for manufacturers’ direct outlets such as showrooms or depots in the rural market unlike in the urban context. It becomes expensive as well as unmanageable. Dependence of the firm on intermediaries is very much enhanced in the rural context as direct outlets are often ruled out. But controlling such a vast network of intermediaries is a difficult task. Control is mostly indirect. And because of these factors the firm has to be more careful while selecting the channel members in the rural context. iii. Non Availability of Dealers: In addition, there is the problem of availability of dealers. Many firms find that availability of suitable dealers is limited. Even if the firm is willing to start from scratch and tryout rank newcomers, the choice of candidates is really limited. iv. Poor Viability of the Retail Outlets: Moreover, sales outlets in the rural market at the retail level suffer from poor viability. A familiar paradox in rural distribution is that the manufacturer incurs additional expenses on distribution and still the retail outlets find that the business is unremunerative to them. The scattered nature of the market and the multiplicity of tiers in the chain use up the additional funds the manufacturer is prepared to part with. And no additional remuneration accrues to any of the groups. Moreover, the business volume is not adequate enough to sustain the profitability of all the groups and the retail tier is the worst sufferer. v. Inadequate Bank Facilities: Distribution in rural markets is also handicapped due to lack of adequate banking and credit facilities. Rural outlets need banking support for three important purposes: (a) To facilitate remittances to principals and to get fast replenishment of stocks (b) To receive supplies ‘through bank’ (retiring documents with the bank) (c) To facilitate securing credit from banks As banking facilities are inadequate in the rural areas, the rural dealers are handicapped in all these aspects. It is estimated that there is only one bank branch for every fifty villages. vi. Inadequate Credit Facilities from Banks: Inadequacy of institutional/bank credit is another constraint. The rural outlets are unable to carry adequate stocks due to lack of credit facilities. They are unable to extend credit to their customers. And the vicious circle of lack of credit facilities leading to inadequate stocking and loss of business, finally resulting in poor viability of outlets, gets perpetuated. Analysis shows that many companies hesitate to venture into rural markets largely because of the problems on the distribution front. They find it uneconomic to operate outlets in rural areas as in their perception, cost of selling, cost of transportation, cost of sub-distribution and cost of servicing the outlets are all very high in the rural market. vii. The Existing Market Structure: It has been estimated that the Indian rural market is composed of 22,000 primary rural markets and 20 lakh retail sales outlets of which nearly one lakh are fair price shops of the Public Distribution System (PDS). One retail shop serves on an average 60 to 70 families in the rural areas. The structure involves stock points in feeder towns to service these retail outlets at the village level. The stock points belong to either the manufacturer or the marketer / distributor for the area. In either case, the stock point in the feeder town is the key to rural distribution. viii. The Available Channel Choices: Today, the channel types that are available in the rural markets are as follows: i. The private shops, ii. The cooperative societies. iii. The Fair Price Shops (FPS), (cooperatives or private), of the PDS. iv. The village shandy or weekly market Out of the above, the cooperative societies are mainly concerned with the distribution of agricultural inputs and the FPS with the distribution of essential commodities consumed by the common man. The Village shandy’ is a widely used channel of the rural market. But its role in marketing branded products is somewhat limited. The Private Village Shops: For a large variety of consumer products, the private shops are the main channel in the rural markets; they are also the cheapest and the most convenient channel to align with. As such, we shall examine in some detail how the private village shops are utilized by the business firms in their rural distribution effort. According to a census of retail outlets carried out by the Operations Research Group (ORG), there are 2.02 million sales outlets in rural India, with a major chunk constituted 1 by the private shops. In fact, the private village shops of India are seen to be one of the cheapest distribution channels in the world this is quite striking, considering the many handicaps with which the village shopkeeper in India has to operate He is forced to deal in a large number of products in order to make his operations viable. That means a larger inventory .The longer lead time for replenishments from the urban based production point enlarges the inventory holding further. And as his sales are not uniform throughout the year, he has to carry the inventory over a longer period of time. All these factors lead to the blocking up of his capital. The scope of compensating for the higher costs through increased markup is rather limited. He cannot add a higher mark up on many of the products he is handling simply because the consumer he is catering to cannot afford to pay a higher price. Nor is he able to make up by increased turnover. The average daily turnover of a rural shop is often less than Rs 200. Even this level of turnover is generated only when he extends credit to his customers. And he incurs additional expenses for the frequent trips he has to make to the supply points in the towns/market centers. But in spite of all these handicaps of low turnover, high inventory costs and inadequate marketing support from the principals, the village shopkeeper operates quite efficiently. He achieves this feat largely through his inborn ability for astute management of money and other inputs. He also puts in hard work. He keeps his shop open for 14 hours a day compared to the 8 hours service provided by the urban shops. And he keeps his shop open for 365 days in the year with the support of his wife and children and ensures that he does not miss a single possible sale. In fact, it is mainly human labour, the cost of which neither gets accounted nor paid for that makes the traditional private village shops of India one of the cheapest distribution channels in the world. It is quite natural that firms seeking an effective presence in the rural market, willingly embrace the private village shops as the major component of their distribution outfit. And on their part, the village shops function as an effective bridge between the scattered rural consumers and the urban-based producers. Organizing one’s channel out of these private shops, however, requires assiduous efforts on the part of the firm. It has to select its outlets from out of existing shopkeepers or select a few fresher and appoint them as the outlets. The choices are usually confined to the following categories: i. Existing traditional private shops ii. Money lenders willing to branch off to trade, iii. Land owners willing to branch off to trade iv. Educated unemployed persons The firm has to select personnel from among the above groups depending on the product line and other relevant factors and then train them and develop them into competent dealers. Satellite Distribution: A concept that has come to be known as ‘satellite distribution’ can be tried in developing a distribution channel in the rural market. Under this system, to start with, the firm appoints stockiest feeder towns. They take care of financing of goods, warehousing of goods and sub distribution of goods in the area covered by the feeder town. The firm also appoints a number of retailers in the around the feeder towns and attaches them. Managing the Rural Sales Force: The special requirements with the rural sales force has to meet, the task of sales force management too caries certain added dimensions in the rural context. In selecting the salesmen, in giving them orientation, in motivating them and in developing them the sales manager has to adapt to the unique requirements of rural selling. For example, while providing orientation to the newly recruited rural salesmen, the sales manager may have to devote a longer time. And mere classroom training will not meet the requirements of orientation of rural salesmen. The salesmen need comprehensive on- the-job coaching in selected village markets. And they need to be educated about the rural marketing environment in addition to being trained in salesmanship and selling techniques. The rural sales manager must also support his salesmen with non-conventional means of market promotion suitable to the rural consumers. Rural salesmen also need more intensive sales training, as they have to handle a variety of products. In short, sales force management in the rural context becomes an exacting job, especially when the firm has big stakes in rural marketing and when it operates on a nationwide basis. For example, Hindustan Lever’s rural salesmen have to cover 70,000 rural locations. Administering such a large and scattered sales force, supervising them, supporting them in sales calls, coaching them on the job, attending to their official and personal problems and above all, motivating them for better results is an exacting task for the sales manager. ________________________________________ Rural Marketing – Factors Affecting the Growth of Rural Marketing in India India is a land of agriculture and basically she resides in the villages. According to 1991 census more than 63 per cent of the population lives in villages. That this population makes its both ends by cultivating, selling the agricultural product, working on agriculture which is called agricultural labours, some are involved in the processing of agricultural products and allied activities. Some are rendering the services to the villagers by providing those seeds, fertilizers, pesticides and some are doing the job work on agriculture. This conclude rural marketing has taken place only from the agricultural field. There are some factors which are responsible for the growth of rural marketing in India. They are: Factor # 1. Professionalisation or Specialisation of the Marketing: Marketing has been recognised as profession in the early 1950. People are now preferring the jobs in the marketing department and accepting the challenges of the marketing management. People are now more interested to acquire knowledge of the marketing and apply it in the field of marketing. The tendency towards increasing specialization by persons in certain jobs has resulted in an increase in their efficiency and the breakdown in the self sufficiency of the family unit. Specialization, thus, has resulted in increased production, which is the base for the growth of marketing. The government is also motivating the people who are the graduates in marketing and also the institutions which are providing marketing education by allowing fellowship to the graduates and a huge amount of grants to the institutions. Factor # 2. Urbanisation: In the 1981 census the rural population was 69 per cent of the total population which fell down to 63% in the year of 1991. This indicates that the rural population is moving to the urban areas for the purpose of acquiring education seeking employment, business purposes and selling the agricultural and rural products in the urban areas. As the demand of rural products in urban areas is more and by selling these products in the areas they can earn their livelihood. Urban people are the main buyers of agricultural commodities. The urban population of India and increased from 33.5 million in 1931 to 62.9 million in 1951, to 109.1 million in 1971, to 181.9 million in 1981 and 217.2 million in 1991. This has necessitated a faster growth of agricultural marketing. Factor # 3. Development of Transportation and Communication: The modern means of transport and communication is the most important tool of developing the size of rural marketing. Transportation and communication is just like a life blood in the human life. Transportation and communication make and help the process of marketing and minimizes the distance between the different centres. The increasing transportation and communication facilities have widened the market for farm products. The length the breadth of the market to which a product is taken from the production areas have increased. In the absence of these facilities, the movement of produce from one area to another was limited, and the consumption of a product was restricted only to the areas of production or at the most to nearby area. Factor # 4. Technological Change in Agriculture: Technological developments in agriculture, such as the evolution of high- yielding varieties of seeds, increased use of modem inputs and cultivation practices in the agricultural sector, has resulted in substantial increase in farm production. The marketed surplus of the agricultural produce has therefore increased. Production conscious farmers have also become income/price conscious. This has resulted in the growth of the marketing system. The importance of an efficient marketing system as a vital link between the farmer and the consumer was recognised way back in 1928 by the Royal Commission on Agriculture. Since then, a good deal of progress has been made in organising agricultural marketing by the adoption of the various administrative and legislative measures by the Government from time to time. The establishment of the Directorate of Marketing and Inspection in 1935, the enactment of the Act for the grading and standardization of agricultural commodities, the conduct of commodity market surveys, and the establishment of regulated markets in the country-these are some of the measures which have been taken upto improving the marketing situation and to make agricultural marketing as efficient as possible. During the First and Second Five Year Plans, agricultural marketing did not receive importance. Whatever development that took place in the sphere of marketing was due to the gradual progress towards the commercialization of agriculture, as a result of its own dynamic nature, and not because of any specific Government efforts. The National Commission on Agriculture (the first commission which suggested measures for the development of agriculture in the post-independent period) remarked- “There is an increasing awareness that it is not enough to produce a crop or animal product, it must be marketed well. Increased production, resulting in a greater percentage increase in the marketable surplus accompanied by the increase in demand from urban population, calls for a rapid improvement in the existing marketing system.” Factor # 5. Cooperative Marketing and Government Efforts: Marketing Committee system and cooperative marketing are the two parallel institutions framed for the purpose of rural marketing. The marketing system is working under the direct control for the respective state governments having its three tier system, the apex institution is state marketing board, at district level central marketing committee and at block level primary marketing committees are functioning. The cooperative movement as it was envisaged by the father of nation Mahatma Gandhi, in every state we are having the producer, commission agents, government nominees and the representative of local areas. These markets are working very successfully and as a result it has increased the share of sales of rural products in the regulated markets. By this system we mean one for all and all for one. It teaches the principle of cooperation and fraternity. Moreover it is increasing the spirit of the producers as their interests are protected through the marketing system in India. So this is the main reason that rural marketing is gaining more and more attention in the Indian market scene. ________________________________________ TOPIC: MARKETING IN DIGITAL AGE • DIGITAL MARKETING HOW DIGITAL MARKETING IS HELPING E-COMMERCE TO GROW Nowadays, digital marketing has penetrated into every field. The primary reason behind this phenomenon is that business processes are evolving very quickly and there are a lot of experimentation and changes done in the industry. We are getting diverted by one or the other upcoming trends. Coming to consumers, we can’t pretend about them as their behaviour is changing by every minute. Digital marketing as a mechanism can easily adapt to these changes. What is trending today might not be the trend next month. E-commerce It is your birthday coming up but no time to go to a shopping mall, and you know you need to shop a lot – from a dress to a pair of shoes, accessories and bags. What comes to save you that moment is your E-commerce shopping website. It is a saviour again when guests are coming home for dinner but you are out of groceries, you order and you get it on time. These are a few day-to-day examples and in fact, this has become a part of our lives. We got so used to these sites, for a dress, we order from Flipkart, Myntra, Ajio, Jabong or any other site, for groceries- Reliance Smart or Grofers.com and Zomato, Swiggy or Food Panda for food. E-commerce is a business where buying and selling completely depends on the internet. Therefore the Digital Marketing comes into the picture, as it is the only medium to help E-commerce business to grow. The speedy growth of smartphones and internet give comprehensive access to selling and purchasing merchandise at an ease. Why is Digital Marketing Essential for an E-commerce Business? Using Digital Marketing, E-commerce creates huge revenue as it helps to acquire customers and brand value. Customers are no more dependent just on content or a word-of-mouth before buying a product; they make sure to read the reviews about a product on all the platforms on which the product is listed. According to the recent analysis, 37 million social media visits led to 529,000 orders approx. Out of others, Facebook helps to get more traffic to the website which leads to sales constituting average 85% of all the orders. It has become very important to grab customers attention as they get distracted really easily, this is where Digital Marketing comes into the picture and help E-commerce businesses to go through such challenges. Digital Marketing focuses on incorporating it’s appropriate marketing channels to make it easier for E-commerce businesses, find out few of the most important Digital marketing channels below. 1. Search Engine Optimization (SEO) For your e-commerce website, Search Engine Optimization (SEO) is like a blessing in disguise. It is the practice of increasing the quantity and quality of traffic to your website through organic search engine results. Let us take an example of the case study of Zagg, which is a mobile accessories retailer. They produce lots of content and aggressively post up to 35 times per week, which helps customers find them online easily. They promote their products through content, giveaways and by other promotional activities, Zagg’s content drives a lot of sales and engagement. In 2012 alone, the company reported a 172% ROI on their blog – all of which came from direct sales. 2. Search Engine Marketing (SEM) Search Engine Marketing (SEM) is focused on improving the website’s visibility in order to increase organic search engine ranking. It is a perfect channel which provides short-term results really quickly. Search engine marketing (SEM) uses paid ad campaigns based on keywords to reach out to users actively searching for your website. The most well-known and effective platform of SEM is Google AdWords, it is the paid search channel where E-commerce businesses should definitely focus on. Here is a case study of Trivago, how they used Google AdWords to be listed at the top of relevant search results. In 2015, Trivago used Google’s Dynamic Search Ads to improve automate complex search doubts, which included the question like “What are the nicest hotels in San Francisco?” According to Google, their Dynamic Search Ads feature also “automatically generated longer, more relevant ad headlines for the company’s ads based on a person’s specific search.” This resulted in a 140% higher click-through rate, with better conversions in new markets, and greater ad ROI in the markets. 3. Email Marketing Email marketing is not dead yet, it is still the most effective channel of Digital Marketing for retailers delivering actual ROI. Emails play an important role in providing a better customer shopping experience. Once you order or pay for your product on the E-commerce website, immediately you get the confirmation email and also a digital invoice. Users might email questions about products, your experience, or remind customers of their abandoned shopping cart. or general information requests about the company. Personalised emails help your customers connect with your company well. Let’s take the case-in-point of Amazon.They started with personalizing their email campaigns as per customers’ preferences. They started with segmenting customers for email marketing campaign, which made it simple for them to get personal and tap into customer’s interest which helped in enhancing the profitability index. Amazon’s process worked by having a strategic email campaign which began with sending out the welcome email with an engaging subject line, link, the brand story, any special offer and also sent out social media invitations. They even sent out the invite people to browse the store. Amazon started sending out the product suggestions based on the previous purchases and browsing history. After the purchase of the product, they started sending out thank you emails. It was the database of the customers which helped Amazon to enhance the personalization of the message and making it so effective. They designed a specific blueprint for each customer to ensure they were getting the best ROI. 4. Social Media Marketing (SMM) Social media has taken over the world, there is hardly anyone who is not active on social media. Posting regularly on Instagram or Facebook have become a day to day habit. It has become easier for brands to reach out customers through social media. As social networks are getting stronger it has become for Digital market professionals to include paid social media as part of their strategy to reach out more customers. Below is the case study of Zappos which is an online shoe store. Zappos is successful at social media not because of some special campaigns but what they did was, they projected their unique service and culture to the world. The first element of their approach is their service which are; 1. They have a Twitter account dedicated to Service Issues 2. To uncover service opportunities 3. Initiate response 4. Augment praise 5. Strengthen Service reputation Coming to their second element of the approach, which is their culture, 1. There are 400 employees in the company and they all got Twitter accounts. 2. Who they hire is cooperative with this culture of service 3. Most of their social media initiatives are about exposing the people at Zappos, who through their actions strengthen the company’s competitive advantage. Which makes the company real. The CEO of the company also communicates about his passion over Social Media. The main strategy of Zappos is to make people more eager to know about their service and culture over social media Conclusion It is not possible for an E-commerce platform to grow organically by itself in a short span of time. Digital marketing professionals could make it possible by grabbing maximum attention from the target audiences and helping out your business to convert those into sales. Also, don’t forget there would be more digital marketing channels popping up in the future, so what you have to get a hang of the above ones properly and then start with the new ones. IMPORTANCE Digital Marketing has taken the marketing world entirely by storm. Businesses are increasingly using digital marketing practices to increase their brand awareness, build a customer base, and get a greater Return On Investment (ROI), as compared to traditional marketing methods. This is especially true for e-commerce businesses. If you have an e-commerce business, there are many reasons why you should have a digital marketing strategy in place. In this blog post, we’ll talk about the importance of digital marketing, the benefits it offers, and why e-commerce businesses NEED to adopt such a strategy. 1. Digital Marketing Can Help You Market Your Products Online The days when you would have to market your product by going store to store, distributing pamphlets and leaflets are long gone. Digital marketing has revolutionized the entire concept of marketing your goods and services. Nowadays, all products and services can be marketed online. Each business has its own social media pages in addition to its website where it can promote its product, increase customer engagement, and build a loyal customer base. Buying and selling products and services has never been easier than it is in today’s digital age. E-commerce businesses are almost entirely based online, so the importance of digital marketing for them cannot be understated. 2. Reach Millions At Once The internet is growing and exploding each day with millions of users worldwide. As the owner of an e-commerce business, digital marketing channels are the perfect way to reach out to a whole lot of customers at one time. Unlike the olden days when companies would have to send separate letters in the post to each potential customer, which would cost a lot of time and money, businesses nowadays only have to type out a single email which can be sent to an entire mailing list of customers with just the click of a button. 3. Helps You Compete With Other Businesses The world as we know it today is entirely digital. Therefore, it will be difficult to compete with any other similar business if you fail to make and execute your own digital marketing strategy. The big boys of the marketing world already have this figured out, and if you want to even survive in this sphere, you’ll need to develop a digital marketing strategy and then execute it. 4. Impacts the Buying Decision of the Customer The type of digital marketing strategy that you opt for impacts the customer’s buying decision. Your strategy is what attracts your customers to your products and keeps them loyal to you. You need to make sure that in a world with so much competition, your marketing strategy is one that is able to attract and retain customers. The right digital marketing strategy will ensure that your customers are always engaged and remain loyal to your brand. You can increase loyalty by giving free products out, giving them a glimpse into the inner workings of your company, and even talking to them through polls and online discussions. 5. A Massive Increase in Sales Digital marketing efforts are the easiest way to increase sales in the short term. Since online shopping is so convenient, just advertising your product to the right demographic will ensure that people try out your products and services. If they like what you have to offer, you’ll start to develop a loyal customer base. If you are the owner of an e-commerce business, the importance of digital marketing cannot be understated for you. As such, you need to develop such a strategy and get started on executing it right away!
- 5.4L 4. E COMMERCE MARKETING IN DIGITAL AGE
