DU SOL B.Com 3rd Year Marketing Management Notes Chapter 3 Marketing Segmentation

DU SOL B.Com 3rd Year Marketing Management Notes Chapter 3 Marketing Segmentation

Question 1.
Define the term ‘Market’. Explain the factors determining the expansion of market of a product.
Answer:
Meaning Of Market
Cournot, a French economist, defines market as “Economists understand by the term market not any particular market olace in which things are bought and sold, but the whole of any region in which buyers and sellers are in such free intercourse with one another that the price of the same goods tend to equality, easily and quickly. “According to Cairncross, “the market, in economics, is simply the network of dealings in any factors of product between buyers and sellers.'” In the word of Stonier and Hague…..fey a market, economists mean any organisation whereby buyers and sellers of a goods are kept in close touch with each other.

Originally a market was a public place in a town where provisions and other objects where exposed for sale. A great city may contain as many market as there are important branches of trade and these markets may or may not be localised. It is clear from the above definitions that the idea of locality is. not necessary. The traders may be spread over a whole town or region or a country.

The Essentials of a Market. The essential of a market are :
(a) Existence, of the commodity which is dealt with; (b) the existence of buyers and sellers; (c) a place, be it a certain regions, a country or the entire would; and (d) such intercourse between buyers and sellers that only one price should prevail for the same commodity at the same time.

Evolution of Markets. Markets were not always as we fined them today. They have taken their present shape through a long process of evolution. The evolution of markets may be studied from two points of view : (a) geographical, and (b) functional.

Geographically there are four steps of development: (i) Family market, (ii) Local market, (iii) National market, and iv) The world market when marKet for certain goods embrance the whole world. As regards functional development, markets are : (i) The general or mixed market when a great variety of articles are purchased and sold in the same market; (ii) The specialised market, i.e., separate markets for each commodity; (iii) Marketing by samples when goods are standardised and buying and selling take place on the basis of samples, and (iv) Marketing by goods when the quality is exactly defined and named so that even seeing of the sample becomes unnecessary.

The Extent Of The Market –

Market for some products is very limited whereas for some other products, it is very wide. The expansion of market depends upon a number of factors. We can group these factors into two categories: (A) Characteristics of the product, and (B) Internal conditions of the country.

(A) Characteristics of the Product – Characteristics of the product affect the expansion of the market in the following ways :

(i) Nature of Commodities – In order to have a wide market a commodity must be portable, durable, suitable for sampling, grading and exact description and as such its supply can be increased. Such commodifies are wheat, gold, government securities etc. Bulky and perishable articles have a narrow market. However, modern techniques and packaging have greatly extended the size of market even for perishable commodities like fresh vegetable, milk and fruits.

(ii) The Nature of the Demand for the Commodity – A commodity which is in universal demand, e.g., gold and silver, will have a wide market. Commodities having local demand such as milk or bricks have only limited market.

(iii) Supply of the Product – Supply of the product also affects the expansion of the market. If the supply of a product is unlimited or can be increased beyond a limit, its market may be very wide. On the other hand, if supply of the product, is limited, its market cannot be expanded beyond a limit.

(B) Internal Conditions of the Country – Internal conditions of a country also affect the expansion of the market in the following ways :

(i) Development of the means of communication and transport has enabled things to be carried long distances from the place of seller to the place of buyer and has widened the markets for all types of commodities perishable, and non-perishable.

(ii) Peace and Security – Obviously goods cannot be marketed in distant places unless law and order prevail. In war time, due to insecurity in war zone markets get restricted.

(iii) The Policy of State – Markets can be restricted by the policy of – the State. Prohibitive duties and quotas restrict the export market. Lenient policies of the State may increase the boundaries of the market.

(iv) The Degree of Division of Labour – The extent of market depends upon the degree of division of labour. Division of labour is limited by the extent of the market. The converse of this is also true. The greater the division of labour, the cheaper the article and wider the market.

(v) Development of Scientific Facilities as cold storage help widening the market. It also maintains the equilibrium in demand and supply of the product.

(vi) Currency and Credit System – If the currency and credit systems of a country are well developed, marketing can be conveniefttly and profitably carried on over extensive areas. In the absense of a developed currency and credit system, market is limited.

(vii) Development of Banking System – If in a country, banking system is developed, or traders make and collect payments or negotiate papers of little to the goods through banks, the market is wide. If it is not so, the market will be limited.

Question 2.
What do you mean by Market Segmentation? Explain its objectives and importance.
Or
Write a short essay on “Market Segmentation”.
Answer:
Definitions Of Market Segmentation
The concept of market segment is based on the fact that the markets of commodities are not homogeneous but they are heterogeneous. Market represents a group of customers having common characteristics but, two customers are never common in their nature, habits, hobbies, income and purchasing techniques. They differ in their behaviour and buying decisions.

On the basis of these characteristics, customers having similar qualities are grouped in segments. The characteristics of customers of one segment differ with those of other segments. In this way market segmentation refers to the various segments of the market based on the common characteristics of the customers.

Market segmentation has been defined by various authors as follows :

1. “ Whenever a market for a product or service consists of two or more buyers, the market is capable of being segmented, that is divided into meaningful buyer groups. The purpose of segmentation is to determine differences among buyers which may be consequential in choosing away them or marketing to them,” – Philip Kotler

2. “Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments, each of which tends to be homogeneous in full significant aspects.
– William J. Stanton

3. “The purpose of market segmentation is to determine the differences among purchasers which may effect the choice of market area of marketing methods. The market is divided into sectors or segments in such a way that the purchases in each segment while not being exactly identical are of a similar nature and are influenced by similar buying motives. ”
– Esmond Pearce

4. “Market segments are grouping of consumers according to such characteristics as income, age, degree of urbanisation, race, or either classification, geographic location or education. ” – Cundiff and Still

5. ” ………… Grouping of buyers or segmenting the market is described as market segmentation. ” – R.S. Davar

In the modern marketing concept all marketing activities have to revolve around the consumers. Effective marketing requires a clear picture of the consumer characteristics that can be described as the customer profile. Thus, marketing segmentation means dividing the customers of a product into several homogeneous groups having common characteristics, such as income, sex, age, profession etc. The main aim of market segmentation is to prepare separate programmes or strategies to all segments so that maximum satisfaction to consumers of different segments may be provided.

Objects of Market Segmentation. The customers of & product are in quite a large number and scattered and all have different characteristics. No two buyers have similar characteristics. This difference affects the demand of a product to a great extent. A successful marketer is one who understands and considers these differences of the customers of his product. For making his product more popular and for providing maximum possible satisfaction to maximum possible customers, he groups the customers on some common basis of similarity of characteristics.

Thus, the main object of segmentation of market is to identify the difference and provide maximum satisfaction to customers. In the words of Philip Kotler, “The purpose of market segmentation is to determine difference among the buyers which may be consequential in choosing among them or marketing to them.”

The producer can frame his marketing policies and strategies on the basis of these differences.

Importance Of Market Segmentation –

The market segmentation affords the following advantages to the seller or producer :

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. More resources may be allocated to market segments where sales opportunities are better.

2. Better position to spot marketing opportunities – The producer can make a fair estimate of the volume of his sale arid 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 sales on the basis of marketing research: On the basis of research, habits, tastes, hobbies and nature of consumers of different markets c?.u be understood deeply to harness marketing opportunities.

3. Allocation of marketing budget – It is on the basis of market segmentation that marketing budget is adjusted for a particular region or locality. In the place where the sales opportunities are limited, it is no use allocating a huge budget there.

4. Making the competition effectively – It helps the producer to face the competition of his rivals effectively.-The producer can adopt different policies, programmes and strategies for different markets taking into account the rival’s strategies, policies and programmes.

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 attached for different segments.

6. Evaluation of Marketing Activities – Thus market segmentation helps the manufacturer to find out and compare the marketing potentialities of the products. It helps to adjust production and using his resources in the most profitable manner. As soon as the product becomes obsolete, the product line could be diversified or discontinued.

7. Increase in Sales Volume – By segmenting, the market, the producer can increase his sales volume. As we know, each segment has different demand pattern and the producer satisfies the demand of each segment, by improving his product. The total sales volume for the enterprise increases. It is based on the fact that multiple demand curves in a market are better than a single demand curve.

Thus, we can conclude that market segmentation helps the producer to increase his safes Volume. Customer is also benefited by the market ‘ segmentation as the producer produces and supplies the goods which serve their interest and satisfy their needs and wants.

Question 3.
What criteria or bases arc used for segmenting a market ?
Or
4 What is market segmentation and what factors influence it ? Give
examples.
Or
Write a short note on a criteria for segmenting a market.
Answer:
Criteria For Market Segmentation
There may be several criteria or bases for market segmentation.
The bases may differ from product to product because the sensitivity of customers differ. For example, the bases for consumer goods may be age, sex, education, income etc. whereas for capital or industrial goods it may be nature and size of the business, location, purchasing procedure etc Gundiff and Still has mentioned the following criteria for market segmentation.

Bases for Consumer Product

  1. Income of the consumer.
  2. Age of the consumer.
  3. Sex of the consumer
  4. Degree of urbanisation of the consumer.
  5. Geographical market segmentation.
  6. Educational attainment of the consumer
  7. Religion of the consumer.

Bases for industrial Product

  1. Kinds of business.
  2. Usual purchasing procedure.
  3. Size of ucer.
  4. Geographical markets segmentation.

1. Pases for Consumer Products. The various cr’ eria for segmenting the consumer product markets may be grouped in the following four categories :

  • Socio-Economic Factors.
  • Geographical Factors.
  • Personality Factors. ‘
  • Consumer Behaviour Factors.

(i) Socio-Economic Factors – It is the most common way of segmenting the markets on the basis of socio-economic characteristics of the consumers dispersed over a geographical segments. Such factors are :

(a) Age – Age is one of the most important factor for segmenting the market. The producer should know for what age group his product would be most suited so that he can plan his pricing policy, advertisement policy, marketing policy, and strategy accordingly. For example, some breakfast products are aimed to suit the tastes of children wnile some others are attractive to consumers within a broader range of ages. Similarly cloth market or garment market may be segmented on this basis of age as children, young, ‘ adults and old. Different types of tooth brushes are produced for customers of different age groups.

(b) Sex – Markets may also be divided on the basis of sex, i.e., ladies and gents. Some products are exclusively produced for women while some others are for men. For example, lipstick is meant for women and or the other hand shaving cream is only for men. As because the altitude, needs, mental and physical attributes and motivational factors are different in men and women, therefore, advertisement strategy may differ for both types of products. Manly desires, personality, sense of family security, and social prestige are some of the factors which are given top priority in an advertisement for a product meant exclusively for men. On the other hand, beauty and purchasing ability are some factors for advertising a product meant for women.

(c) Income – The producer should also bear in mind while preparing his marketing policy, the income of the prospective buyers of his product. This factor also affects the advertising and distribution policy, i.e., media of advertisement, and pricing policy. Consumers’ needs, behaviour, habits, preferences, persuasion, etc. differ in different income groups. For example, people in high income group prefer quality of goods, design, fashion-oriented products, etc. hence they can be motivated on these factors. People in low income group attract towards low priced. Different models of television sets are introduced to meet the needs of buyers of different income groups. Similarly certain items like Refrigerators, Video Cassette Recorder (V..C.R) are produced only for high income group people.

(d) Educational Level – The consumers can be divided on the basis of educational levels such as educated, semi-educated and uneducated and the marketing activities and strategies are ascertained accordingly. For example, a book market may be segmented on this basis in Primary, Junior High School, High School, Intermediate, and Degree books markets. Advertising policy may be choosen accordingly. Products used by uneducated or low-educated people, may be advertised through Radio and Television, Cinema whereas the advertisement for educated people may be given in newspapers, journals and magazines, etc.

(e) Race and Religion – India has the co-existence of many religions, communities, castes and-sub-castes and the market may also be segmented on this basis because their feelings, life styles, and attitudes differ depending on their origin and communal associations. Brands, design, language on packing and packing decisions may differ for a product meant for different religions. For example, utensils or book market may be divided on the basis of religion.

(f) Size of Family – Market may also be segmented on the basis of size of family. Refrigerators and Cookers are produced in different sizes to suit the needs of families of different sizes.

(g) Business or Profession – It is also an important criterion to segment the market. On this basis market may be divided in businessmen, professionals, and employed persons. Professionals may further be sub¬divided into Doctors, Chartered Accountants, Lawyers etc. Employed persons may be classified as clerks, officers, teachers, executives, judges and army personnels. The needs, attitudes and preferences differ in all these customers.

(ii) Geographical Factors – The second most popular criteria for segmenting the market may be the geographical segmentation of the whole operational area. The markets are divided on the basis of geographical factors, such as area, climate and the density of population. According to area states may be taken the basis for segmentation. Each State may be recognised a separate market. The area may further be segmented in rural, town and urban areas or where market is international the division may be national or international market. On the basis of climate, markets, may be hill areas and plain areas. Such type of segmentation is best where the customers are stretched over a vast area and the production is done on large scale. The producer may design his marketing strategies taking the characteristics of the individual markets into consideration.

(iii) Psvchographic or Personality Factors – Personality, thinking, etc. are not the same in all the consumers. Some customers are crazy for noval design or products of new fashion that may increase their prestige in the society. The motto of some other customers is simple living and high thinking and they never aspire for showy-items. For example, Congress workers wear khadi irrespective of their income-level or social status.

(iv) Consumer Behaviour Factors – Consumer behaviour may also form the basis of market segmentation. Consumer behaviour divides the markets on three bases : (i) Usage-rate, (ii) Buyer motives, and (iii) Brand loyalty. Customers may be grouped according to their usage habits, i. e., non-users, light-users, medium-users and heavy-users etc. Non-users may also be divided in expected and unexpected users. In Buyers’ motives we may include factors like economic quality of gods, reliability, and prestige in society, etc. Several groups may be formed on these bases and market may be segmented accordingly. Customers may also be grouped to their loyalty to a particular brand. If, suppose, four brands of a commodity are in the market customers may be grouped in four classes on the basis of their preference of a particular brand.

2. Bases for Industrial Product. The industrial market is nearly as large as the consumer market. The industrial market, like the consumer market, is also made up of different market segments. This market segmentation is as appropriate for industrial products as for consumer products. Many different bases are used for segmenting the industrial market, the four most important and most used bases are: (i) Kind of business or activity, (ii) Usual purchasing procedure, (iii) Geographical location of the users, and (iv) The size of user.

(i) Kind of Business or Activity – Market segmentation by kind of business is generally used where the industrial house produces several products or services. For example, insurance company’s market may be segmented in fire, marine, general and life insurance businesses. A separate division may be formed for each segment representing a specific kind of activity. This may again be broken down in procurement division and lending division.

(ii) Usual Purchasing Procedure – Industrial buyers are generally more systematic buyers than ultimate consumers. But among industrial users there is much variation in the amount of consideration given to buying different items. The decision to buy a major installation, requires extensive for a product meant exclusively for men. On the other hand, beauty and purchasing ability are some factors for advertising a product meant for women.

(c) Income – The producer should also bear in mind while preparing his marketing policy, the income of the prospective buyers of his product. This factor also affects the advertising and distribution policy, i.e., media of advertisement, and pricing policy. Consumers’ needs, behaviour, habits, preferences, persuasion, etc. differ in different income groups. For example, people in high income group prefer quality of goods, design, fashion-oriented products, etc. hence they can be motivated on these factors. People in low income group attract towards low priced. Different models of television sets are introduced to meet the needs of buyers of different income groups. Similarly certain items like Refrigerators, Video Cassette Recorder (V..C.R) are produced only for high income group people.

(d) Educational Level – The consumers can be divided on the basis of educational levels such as educated, semi-educated and uneducated and the marketing activities and strategies are ascertained accordingly. For example, a book market may be segmented on this basis in Primary, Junior High School, High School, Intermediate, and Degree books markets. Advertising policy may be choosen accordingly. Products used by uneducated or low-educated people, may be advertised through Radio and Television, Cinema whereas the advertisement for educated people may be given in newspapers, journals and magazines, etc.

(e) Race and Religion- India has the co-existence of many religions, communities, castes and sub-castes and the market may also be segmented on this basis because their feelings, life styles, and attitudes differ depending on their origin and communal associations. Brands, design, language on packing and packing decisions may differ for a product meant for different religions. For example, utensils or book market may be divided on the basis _ of religion.

(f) Size of Family – Market may also be segmented on the basis of size of family. Refrigerators and Cookers are produced in different sizes to suit the needs of families of different sizes.

(g) Business or Profession – It is also an important criterion to segment the Market. On this basis market may be divided in businessmen, professionals, and employed persons. Professionals may further be sub-divided into Doctors, Chartered Accountants, Lawyers etc. Employed persons may be classified as clerks, officers, teachers, executives, judges and army personnels. The needs, attitudes and preferences differ in all these customers.

(ii) Geographical Factors – The second most popular criteria for segmenting the market may be the geographical segmentation of the whole operational area. The markets are divided on the basis of geographical factors, such as area, climate and the density of population. According to area states may be taken the basis for segmentation. Each State may be recognised market and other technical investigations plus the approval of several high executives and technical experts in the industrial user’s organisation. But the same firm may purchase some routine articles like stationery or pens etc. through ordinary suppliers and agents. The industrial marketer must apply different selling tactices and strategies to each of these buying situations.

(iii) Geographical Location of the User – Factors like variation in geographical climate and historical traditions cause considerable variation in the way industrial marketing is conducted in different areas. The topography of an area affects the transportation cost. Variation in climate affects the needs the industrial users for building materials, and heating and cooling equipments. Geographical segmentation may also exist because some kinds of business and service organisations seem to settle in particular areas.

(iv) The Size of User – Sizes of industrial purchases vary according to the size of industrial user. The market according to size may be divided in large buyers and small buyers. Since it is generally more economical to sell in large lots than small, the industrial markets quote lower rates to buyers of large quantities. This is often the main reason why marketer use different methods for reaching industrial users who vary greatly in size.
Thus, there are several bases on which market for consumer and industrial products may be segmented.

Question 4.
What do you understand by Market Aggregation ? Under what circumstances a marketer would use such a policy ? Illustrate with example.
Or
Explain the difference between Market Seggregation and Market Aggregation.
Answer:
Market Aggregation
Buyer’s behaviour is never the same and the market could be segmented on the basis of buyers’ characteristics. The producer must understand the behaviour of his customers and adopt different strategies according to the needs and characteristics of his customers, so that physical and human resources of the enterprise may be fully exploited and marketing objectives may be fully met. There are three types of marketing strategies viz., (i) Undifferentiated or market aggregation strategy, (ii) Market segmentation or differentiated marketing strategy, and (iii) Concentrated Marketing Strategy.

1. Market Aggregation or Undifferentiated Marketing Strategy – Market aggregation is just the opposite of segmentation. Aggregation implies the policy of limping together into one mass of all the markets for the product. Production-oriented firms usually adopt the method of aggregation instead of segmentation. Under this concept management having only one product considers the entire buyers as one group. Market aggregation enables an organisation to maximise its economies of scale of production, pricing, physical distribution and promotion. However, the applicability of this concept in consumer-oriented market is doubtful. The total market concept as envisaged by market aggregation may not be realistic in the present day marketing when consumers fall under hetrogeneous groups.

When the economies of organisations do not permit the division of market into segments they conceive the total market concept. In the case of fully standardised product and where substitutes are not available differentiation need not to be undertaken. Under such circumstances firms may adopt mass-advertising and other mass methods in marketing.

Advantages – A firm adopting this strategy (i) can produce and sell its product on large scale and can get large scale economies; (ii) the firm can make use of standardisation specialisation and division of labour; (iii) the firm can utilise its resources to the maximum.

Disadvantages – The drawbacks of this strategy are ; (i) This is a product-oriented (and not a customer-oriented) strategy; (ii) The effectiveness of the strategy is doubtful in consumer oriented market, (iii) This strategy is successful only in short-run.

2. Market Segmentation or Differentiated Marketing Strategy – Under this strategy, the firm groups the buyers on the basis of their common needs and desires. It differentiates one group from the other on the basis of their needs, region, characteristics, personality or behaviour. In other words, the classification of markets based on consumers characteristics is called market segmentation. Market segmentation is “the process of taking the total hetrogeneous markets for a product and dividing it into several sub-markets or segments each of which tends to be homogeneous in all significant.” For instance, instead of mentioning a single market for shoes, it may be segmented and differentiated into several sub-markets, e.g., shoes for executives, doctors, students, etc. or on the basis of sex i.e., shoes for children, ladies and gents and so on. Geographical segmentation on the very similar lines is also possible for certain other products.

Under this concept, a firm decides to operate in several or all segments of the market and designs separate product-marketing programmes. This also v helps developing intimacy between the producer and the consumer. Most firms now-a-days prefer to have a strategy of differentiated marketing because consumers’ demand is diversified. It provides an opportunity to the consumers to select his or her choice. Each kind of product offers a basis for segmentation. As the differentiated marketing is sales-oriented, it is a costly affair for the organisation.

Advantages of Differentiated Marketing Strategy – The differentiated marketing strategy offers the following advantages : (i) It is a consumer oriented market. Stress is laid on the needs of different types of customers, (ii) It attracts a large number of customers from all corners, (iii) It increases sales and profits of the enterprise.

Disadvantages of Differentiated Marketing Strategy: – Its draw backs are : (i) Different types of products are to be produced for different segments of the market to satisfy the needs of the customers; (ii) It requires intensive marketing research; (iii) Different marketing programmes and strategies are required for different segments of the market, (iv) It increases the overall cost of the product because it increases the cost of research, product planning and development, physical distribution, advertising and sales promotion substantially.
This strategy is useful for firms producing different products on large scale basis.

3. Concentrated Marketing Strategy. Both the concepts of undifferentiated marketing and differentiated marketing imply the approach of total market. Another option is to have concentrated efforts in a few markets capable, of opportunities. Instead of spreading itself in many parts of the market it concentrates its forces to gain a good market position in a few areas. When new products are introduced, this method is adopted. Another feature of this method is that here the advantage of one segment is never offset by the other because firm’s efforts are concentrate only in one segment of the market. ,

Advantages of Concentrating Marketing Strategy. It offers the following advantages : (i) It concentrates its efforts in certain markets to gain good position, (ii) It provides best possible satisfaction of customers of selected segments, (iii) It makes full exploitation of resources, (iv) It reduces cost of production and administration substantially.

Disadvantages – The disadvantages of this strategy are : (i) It is risky because if a wrong segment is selected, the very existence of the firm is endangered. (ii) It increases the possibilities of competition.
The three kinds of segmentation could be illustrated as follows :
DU SOL B.Com 3rd Year Marketing Management Notes Chapter 3 Marketing Segmentation 1
Source Philip Kottler : Marketing Management

Question 5.
What are the basic elements that influence in deciding the strategy of segmentation ?
Answer:
Elements Of Market Segmentation
An important question for the organisation is how should a policy be purposefully adopted in segmenting the markets. This question arises because of the alternative strategies available for a manufacturer. The basic elements that influence in deciding the principle of segmentation are :

1. Company Resources – Market segmentation involves heavy expenditure in implementing it. It is not a mere blueprint in paper. Unless the company has got enough resources market segmentation cannot be undertaken at all.

2. Products Characteristics – Most products are hetrogeneous in character but s.ome other products show homogeneity. In the case of former type, market differentiated strategy .is adopted but in the; latter case the necessity of segmentation is disputed. Salt, kerosene, etc. come under this group of articles and in their case undifferentiated marketing is to be selected.

3. Position of the Products in the Product Life Cycle – The various stages of a product cycle, ‘viz., introduction, growth, maturity, saturation and decline have to be taken into consideration, {n the first and last stages market segmentation is meaningless and-therefore undifferentiated marketing strategy should be selected. During the introduction stage the necessary data cannot be collected and at this stage also undifferentiated strategy would be better. If the product is at the stage of growth or development, concentrated marketing strategy should be selected. Differentiated strategy would be in the interest of the company at the stages Of maturity and saturation. At the stage of obsolescence, it would be better discontinue the product.

4. Homogeneous Nature of Market – When the market is of a homogeneous. nature there is not much use of segmentation. Proper segmentation of market is required only when the customer preferences vary from group to group.

5. Competitive Marketing Strategies – Sometimes it becomes quite necessary to fall in line with the competitors’ activity of market segmentation. Similar arrangements by competitors have to be made to meet the competition effectively. Experience shows that it is difficult for an organisation to be successful through undifferentiated marketing when competitors are practising active segmentation.

6. Government Policy – Government policy also affects the decision of adopting marketing strategy. When Government interferes, it is better to adopt the strategy which suits Government orders. For example, if Government orders to produce Janta cloth, it is better to select concentrated strategy. In case, Government does not interfere, differentiated of undifferentiated strategy may be selected.

Question 6.
How do the psychological factors influence market segmentation?
Answer:
Psychological Factors Influencing
Market Segmentation
‘‘Man is a perpetually wanting animal”; and therefore when one’s need is satisfied a new heed at a high level emerges. Various promotional devices are designed to convert needs into wants and their creating a potential customers. But the needs are essentially psychological and instructive in nature. It is these psychological factors that create an uncertainty for the manufacturer to predict the market for his product- And to overcome this difficulty only markets showing identical characteristics are segmented. This is possible because people live in social, groups, membership of which modifies behavioural response to the extent that it would be more correct to identify these factors as psycho-sociological or socio-psychological. Collectively the study of these influences has created a whole new field of marketing usually referred to as consumer behaviour.
The consumer behaviour of the demand d yerminants are :

1. Motivation. 2. Cognition. 3. Personality. 4, Reference groups. ,

1. Motivation is the underlying force of any human activity not to mention buying alone. It is wishes or desires which initiate the sequence of events known as behaviour. Motives t.ius simply stated correspond to needs, a fundamental determinant of demand. Motivation depends on :

Psychological needs, safety needs, love needs and esteem needs. Man is a bundle of wants. His wants are unlimited in number. In fact he never feels fully satisfied. As soon as one want is fulfilled, he feels the presence of new wants. The so-called cultural progress of man has multiplied the human _ wants. Today our wants are most varied and numerable as compared to the wants of our ancestors. It is, then, that the marketers function to discern the nature of these wants and attempt to satisfy them.

2. Cognition is a psychological theory which studies the response of consumers. According to it stimulation of wants is conditioned by a customer’s knowledge, his perception, beliefs and attitudes. Perception is the sum total of physical stimuli and personal factors. Certain stimuli are stronger than others and some are preceived by more people. Beliefs and attitudes also play – an important role in the cognitive process. Strong beliefs and attitudes are difficult to be changed and modified. Advertisements stressing special appeals all purposely designed by the manufacturers to overcome this kind of resistance by the customers.

3. Personality is the total of so many personal or individual traits. There are so many theories developed to explain the personality and its influence on the behaviour of people. Branding is a personality given to the produetto suit, the personality of the buyer. Different brands of cigarettes that attract different categories of smokers in the society are a good example of personality.

4. Reference groups indicate the position of a particular group of persons in a society. Man is essentially a social being ar.d interacts with other individuals in a variety of social groups, in spite of personal differences people may be forced to accept the decisions of society. For example, the Group Insurance Scheme where individual differences of opinion may not be given much consideration.

It is pertinent here to ask how these considerations influence marketing. The answer is simple for the present day marketing as it is consumer oriented and consumer’s psychology, their social and economic characteristic form the corner-stone for marketing decisions. It is this recognition accorded to consumers that has given rise to the concept of market segmentation. It is now certain that any market could be segmented to a considerable extent because buyer’s psychological characteristics are never similar. The psychological traits of the rural population in India are quite different from the psychological traits of an urban society.

The same kinds of products will, therefore, not appeal to the kinds of people living in villages and towns. Once the major motives underlie the purchases of u product, the marketing men are placed in a better position to develop an effective marketing strategy to satisfy such motives. The use low priced cigarette may supply the desire for saving money while high priced one may suggest approval and quality. The appropriate motives must be crystallised if the marketing programme is to be appropriate, /’.e.. in terms of products and advertising strategy.

Question 7.
What is the meaning of Marketing Programme ? Explain the main elements of marketing programme. What is the justification of Marketing Programme ?
Answer:
Meaning Of Marketing Programme
One characteristic of modem marketing management is that under it all the marketing activities are preplanned. Marketing programme is also a part of preplanning. When the company has finally settled its marketing objectives after a careful appraisal and analysis of all the marketing opportunities, the question arises how the objectives and goals of the company are to be achieved. Marketing programme is a well defined plan in writing which coordinates and directs the marketing activities of the enterprise in order to attain the marketing objectives of the enterprise. It defines all the activities to be performed by the marketing department.

According to Philip Kotler, “A marketing programme is a set of policy decisions on the level, allocation and mix of marketing efforts.” In the words of McCarthy, “A marketing programme is a set of marketing strategies which seek to reach the firm’s goals by making the most effective possible use of the firm’s resources.” In simple words marketing programme is the programme of marketing efforts in which decisions are taken as to how the marketing objectives be achieved within a period of time with the use of available resources.

Under marketing programme, market targets are selected, marketing mix is determined including product mix, distribution mix. communication mix and service mix. All the available resources are mobilised with a view to achieve the overall objectives. Most of the enterprises draw marketing programme for a year. These marketing programmes can also be for longer periods. In that case annual and six monthly programmes are prepared in accordance to the long period programme.

Main Elements Of Marketing Planning –

Marketing Programme can be divided into two parts :
(a) Planning of marketing programme, and (b) Implementation of marketing programme.

(a) Planning of Marketing Programme – At the time of planning of ‘ marketing programme certain factors have to be studied carefully as : (i) Demand variables; (ii) Marketing variables or internal factors; (iii) Marketing mix; (iv) Marketing strategy, etc. It is only after studying these factors carefully the planning of marketing programme should be made.

(b) Implementation of Marketing Programme – Implementation of marketing programme , is more important than planning of programme. A sound planning of marketing programme cannot produce desirable results unless it is properly implemented. If involves : (i) Marketing efforts; (ii) Marketing allocation; and (iii) Market responsiveness; etc.
(For a detailed study of various factors effectmg the marketing programme of a company, see answer to next question.)

Justification Of Marketing Programme

Why it is necessary for an enterprise to prepare a programme of marketing and to implement if is an important question which requires careful consideration. Adopting of marketing programme is absolutely necessary for the company whether its product is new or old. The followingng arguments can be put forth in support of marketing programme

1. In Case of a New Product-Launching a new product in the market is more difficult rather to sell an old product. In case of a new product marketing efforts are needed to familiarise the customers with the qualities and characteristics of the product which make it different from other products in the market. It gives information about the use of the product and the correct method have to use the product and other related information.
Thus, the marketing programme creates a demand for the new product by familiarising the product in the market, ft is therefore, necessary to prepare a marketing programme in case of a new product.

2. In Case of an Old Product – In case the product is old and is in a „ state of growth, marketing programme is necessary to face the competitors effectively. With the growth of product, the market gets regimented and the rival firms enter the market with their products. Therefore, market programme should mainly include promotional activities and product differentiation. Thus, a sound marketing programme helps in the development of market through diversification and modification of the product in order to meet the demand of the customers. Therefore, it can be concluded that marketing programme is necessary for ojd as well as new firmsor for new products and old products.

3. Optimum Utilisation of Marketing Resources – -Another point of justification in favour of adoption of marketing programme is that it helps in achieving foe objectives and goals of the company. It helps in utilising the available marketing resources in the best possible way. We know the ultimate object of the company is to earn the maximum possible profit. This can be done by reducing the costs and maintaining the level of production at the optimum favourable point. Marketing programme helps in maintaining the most favourable relation between the sales and costs. Marketing programme can boost the sales and the increased amount of sales lowers the costs per unit. All this will increase the profits of the company. The statement that “An effective marketing programme does not increase the cost of goods sold, it really extends the market, increase the sales and lowers the selling costs finally” is perfectly true.

Question 8.
What factors should be evaluated while planning marketing programme ? Explain.
Answer:
Factors Affecting The Planning Of Marketing Programme
In the words of Philip Kotler, “the marketing programme is a set of policy decision on the level allocation and mix of marketing effect.” In simple words, marketing programme is an attempt to coordinate the available marketing resources such as sales promotion, advertising, personal sales and service, etc. with a view to achieve the Overall objectives of the company by increasing sales and reducing the cost of sale per unit, It is an attempt to arrive at the optimum level most favourable to the company at a particular time. The following factors affect the planning of marketing programme.

(i) Demand variables (Controllable demand variables and uncontrollable demand variables); (ii) Marketing decision variables or Internal factors; (iii) Marketing Mix; (iv) Marketing Efforts; (v) Marketing Allocation; (vi) Marketing Strategy; (vii) Marketing Responsiveness.

(i) Demand Variables. Planning of marketing programme aims at maximising the sales and profits of the company. But sales are greatly i affected by the demand variables such as sales efforts, tastes of the customers, price, conditions of payment, competition pressure etc. They can be grouped into two broad categories : (i) Controllable, and (ii) Uncontrollable.

(a) Controllable Demand Variables – Such variables are well within the control of the company. The decisions regarding the (i) Price of product, (ii) Quality of the product, and (iii) The channels of distribution, affect to a
great extent, the demand of the product.

(b) Uncontrollable Demand Variables- Such variables, though affect the demand of the product cf the company but they are beyond the control of the company hence company should take proper care of these variables while planning the marketing programmes. Such variables include: (i) Customer variables Such as nature of customers, their behaviour, needs, income and number, etc.; (ii) Competitive variables, ye., nature of competition and number of competitors and strategies adopted by them; and (iii) Environmental variables, viz., Seasonal, economic, political and social activities, etc.

The company must study both types of demand variables, i.e., controllable and uncontrollable. .

(ii) Marketing Decision Variables or Internal Factors. According to Philip Kotler, “A marketing decision variable for marketing instruments is any factor under the control of firm which may be used to stimulate company sales.” Lazer Kelley has divided these variables in three divisions : (a) Goods and Services Mix; (b) Distribution Mix; and (c) Communication Mix. . .

(a) Goods and Services Mix. It includes product, its packaging brand, labelling etc.
(b) Distribution Mix. It includes distribution resources such as middlemen and other agencies which help, in taking the products to the customers and physial distribution including transport, storage and warehousing. ,
(c) Communication Mix – It includes all information media, personal selling, advertisement, sale promotion and other sale aids.

(iii) Marketing Mix. Out of the several marketing variables the company has to choose one best mix for its practical experiment. In the words of Philip Kotler, “Marketing mix refers to the amounts and kinds of marketing variables the firm is using at a particular time.” Developing the marketing mix involves four things :

(a) Product mix; (b) Distribution mix; (c) Communication mix; and (d) Service mix. Marketing mix tries to .coordinate all these four types of mix. In the Product Mix the firm has to see that its products suit the particular market it has selected. The process of marketing the product to confirm a particular market is called product strategy. Then comes Distribution Mix.

It is the process of taking the products to the real users. This mix is prepared keeping in view the services of various wholesalers and retailers. It has to be determined how the products reach most conveniently to the customers. It has to be adjusted to the nature of the demand. After deciding on Product Mix and Distribution Mix, the company has to decide on the Communk..iion Mix. It involves giving full information of the company’s products to the customers, In the absence of this information the customer will not know what products are available. For this advertising, sales promotion, personal selling, – dealer or distribution trefning campaigns are to be organised.

Then comes Service Mix; The customers are provided pre-sale service and also after-sale service. To capture the markets both these kinds of services are essential. The services mix provides satisfaction to the customers.

(iv) Marketing Efforts. In the words of Philip Kotler, Marketing effort is, “The total amount of company input into the marketing process to stimulate sales.” Marketing efforts indicates to all those marketing activities – which are undertaken to increase the sales. Marketing efforts of a company can be studied under two heads: (i) marketing effort level, and (ii) marketing effort effectiveness. The former refers to the amount of money actually used on the marketing effort and the latter refers to how far the amount allotted to marketing effort is effectively and efficiently used. A company’s sales are affected by both these factors. Hence marketing effort forms an essential part of marketing programme. .

(v) Marketing Allocation. According to Philip Kotler, Marketing Allocation is, “The company ‘s division of its marketing effort among its products, customer segments and sales areas.” The total amount of resources that are to be spent on marketing activities can be known by the marketing effort. Marketing allocation gives an idea in what way this amount has to be distributed on different, products and market segments. .

(vi) Marketing Strategy. In the words of Philip Kotler, Marketing Strategy is, “A set, of objectives, policies and rules that guides over time the firm’s marketing effort” The conditions in the market are never stable. Marketing strategy refers to the policy which is to be adopted to face the sudden changes in the market situation. In a competitive market the market situation remains fluid, Some new^coinpetiiors enter the market while some old ones bid goodbye to the marker. Some competitors change their strategy in a particular, Market. Under these circumstances the company has also to alter its marketing strategy to suit the new situations and challenges. While making marketing programme this fact has also to be kept in view.

(vii) Marketing Responsiveness. In the words of Philip Kotler, Market Responsiveness is, ‘The behaviour of sales in response to alternative levels, mixes and allocation of marketing effort,” A company’s marketing strategy very much depends on the responsiveness of the market. Marketing responsiveness refers to the response and reaction in the marketing as a result of marketing activities. While preparing overall marketing programme marketing responsiveness has also to be kept in view, to be realistic in the company’s marketing programme.

A careful appraisal and evaluation of the above factors is essential while preparing a retail marketing programme of the company. Overlooking any of the above factors may jeopardise the attainment of the objectives and goals of the sales.

Question 9.
What do you mean by Marketing Mix ? Describe the forces affecting the Marketing Mix
Or
Attempt a short note on ‘Marketing Mix’ ?
Answer:
Marketing Mix
“Marketing Mix refers to the amounts and kinds.of marketing variables, the firm is using at a particular time.” Under marketing mix we include mainly Product M;x, Distribution mix, Communication Mix, and Service Mix.

The idea of the ‘mix’ of Marketing functions, was” conceived by Prof.
Neil H. Gordon of tits Haivaid Business School. According to him, The marketing mix refers to the apportionment of off oh, the combination, the designing and the Integration of the elements of marketing into a programme or mix which on the basis of an appraisal of the market force will best achieve the objectives of an enterprise at a given time.'” Thus, marketing mix is apian designed to analyse the marketing” problems. These problems are analysed :

(a) By utilising the important forces emanating from the marketing operations of an enterprise.
(b) By adopting procedure and policies for an efficient marketing programme (distribution policies, promotional policies, etc.).

The marketing mix denotes a combination of various elements which in their totality constitute a firm’s “marketing system.” These elements are often described – Product, Place (Distribution), Promotion, and Service mix.
DU SOL B.Com 3rd Year Marketing Management Notes Chapter 3 Marketing Segmentation 2

Product Mix refers to different classes of product in different product lines. The firm has to see that its products suit the particular market, it has selected. Distribution Mix refers to the selection of a mix of different types of distribution channels for transmitting the goods from the producer to the final consumer. Goods may reach the consumers through wholesalers, retailers, wholesalers and retailers or direct to the customers through chainshops. The company may decide for any one or channels, taking in view how conveniently, the goods reach to the consumers. Communication Mix or promotional mix includes the sale promotion techniques like advertising, sales-promotion, personal selling, etc. It also gives full information regarding qualities and characteristics of company’s products and also a comparative v study of company’s products .with similar products of other company to the real consumers so that they can go for the company product.

The Service Mix refers to the various services to be provided to the customers before and after sale period. Different prices are also fixed according to the services rendered to different classes of customers. The company should concentrate on both these types of services in order to  capture the market and provide satisfaction to the consumers. ,

In planning the marketing programme, the company must consider the various marketing decision variables., What variables are being just by the company and what is the effect of such variable mix ? The company should evaluate the variable-mix from time to time and make the necessary changes wherever necessary in order to make it most suitable to the concern. An ideal marketing mix may give the concern the maximum profits and satisfaction to the customers. An ideal marketing mix is really a problem because there are innumerable variables but an efficient marketing manager may decide upon’ the ideal marketing mix on the basis of his own experience.

Factors Affecting The Marketing Mix –

There are innumerable factors that influence the marketing mix. These factors can be divided into two categories :
(a) Market Factors; and (b) Marketing Factors.
(a) Market Factors. Market factors affecting the marketing mix are such factors which relate to the market and over which company has no control. But they affect the marketing activities of the company. Such factors are :

1. Consumer Behaviour – Consumer behaviour (needs, will, and preferences of the consumers) affects the demand of the products. A marketing manager must study the needs, wills and the preferences of the customers and also analyse their effects on the demand of the product. Consumers’ needs, will and preferences are also affected by the change in income, fashion, social status, etc. and the manager should also study these factors also.

2. Competition – Before deciding upon the marketing mix, the marketing manager, should also study the competitive conditions in the market. For this purpose, he should take into account basis of competition, the number of competitors’ view point towards the consumers, quality and characteristics of competitors’ products, and their marketing strategies, before preparing its marketing mix.

3. The Pattern of Distribution System – The marketing manager should consider the various forms of distribution system and the nature and behaviour of distributors before deciding upon the marketing mix of his company. As distributors come into direct contact with the customers and their attitude, behaviour, opinion about the product and method of work directly affect the customer, he should be very careful about taking the decision in this regard considering the nature and characteristics of the product.

4. Government-Control – Government in India and in other countries also, control the various activities of the marketing. In India the government intervention as regards the price, quality, distribution system, and packing of the products is-too much. So, a marketing manager should think over the various government controls on the various marketing activities regarding the products of the company in preparing the marketing mix.

(b) Marketing Factors
The marketing manager should also consider the marketing factor ’before preparing the marketing mix. Marketing factors are such factors over which the company has complete control and make them fit according to the requirements of the market. These factors include the following :

(i) Product. Planning. (ii) Brand Policy. (iii) Packaging Policy. (iv) Distribution Channels, (v) Personal Selling, (vi) Advertisement Policy. (vii) Special Sales Promotion Policy. (viii) Physical Distribution. (ix) Market Research.

(i) Product Planning – The product of the company must have the quality of satisfying the needs of the customers and should plan and develop its products accordingly. Product planning is the “act of making out and supervising the search, screening, development and commercialization of new products, modification of existing lines and the discontinuance of marginal or unprofitable items”1 so that the product quality may be improv d to suit the customer’s needs.

(ii) Brand Policy – It includes decisions regards trade marks and brand name because it influences the sale volume of the product of the company. The marketing manager may go ^for the alternative policies . regarding brands. He may decide one brand name for the different products of the company or different brandsmay be used for different qualities ofthe. – same product. He may also decide that the product should be sold without any brand name.

(iii) Packaging Policy – -Packaging also has an important effect on sales. The marketing manager is to decide whether product should be sold loose or in packs, if he decides to sell the product in packs, the size and quality and get up of packing should be considered very carefully because sometimes customers prefer the product only because of its attractive packing. It also serves three main purposes : (i) Protection of merchandise; (ii) Enhancement of the product value; and (iii) Advertising the product. It improves die total profits of the company by increasing total demand due to improved product image, ’

(iv) Distribution Channels – Tlterp are three main channels of distribution: (i) fipm the manufacturer to the wholesaler, then to the retai lers and finally to the customers; (ii) from the producer to the retailers and then to the final consumers, thus avoiding the wholesaler; and (iii) from the producer to consumers directly. The marketing manager is to take the decision regarding appropriate channel of distribution for his products taking into account the nature of the product mature of the distributors, their needs, , their attitude towards the product and their morale. The marketing manager may opt one type of distribution channel for all the products or different channels for different products.

(v) Personal Selling – In many respects, salesmen are the simplest heroes of marketing. It is his skill with the help of which he matches the customers’needs with the company’s products in effecting ownership transfer or making sales. Personal sell in” involves social behaviour. The marketing manager is to decide whether to promote the sales through personal selling. It involves decisions regarding recruitment”, training and the organisation of ‘salesmen.

(vi) Advertisement Policy – Advertisement has its own role to play in the marketing. Ft is used not only to stimulate the demand of the product but ‘ for many other purposes. i. e., to maintain the demand ofthe existing products, to give the information regarding the products etc. The marketing manager has to formulate the advertising policy taking into account the purposes, area, media of advertisement, and advertisement copy, etc. Moreover, it also includes decisions estimating the advertisement expenditure and its control.

(vii) Special Sales Promotion Policy – Apart from personal setting and general advertisement policy, the business should provide for the special sales promotion compaigns as a part of its sales-promotion policy to increase the sales of the company. There are various methods of sates promotion like free samples, discount coupons, discount salts, eto. The company may choose any method of sales promotion to promote sales.

(viii) Pfiysical Distribution – All the above variables create demand but creation of demand is not sufficient. The marketing manager must plan – the supply of the product in accordance with .the heeds of the public of the different markets. For this purpose, he is to decide policy of physical , distribution of goods including transportation, warehousing and finance management so that the product may be made available at prooer time, and place with minimum cost of distribution to the customers.

(ix) Market Research – Market research is the soul of marketing; The necessary information is collected oftly’through market research and the marketing manager can use such information in preparing the marketing mix.

The study, analysis and evaluation of the above factors helps in preparing an ideal marketing mix but in practice the experience, knowledge and foresightedness of marketing authorities play the important roles rather than the above analytical and technical factors. The ratio of different factors and their roles in marketing are generally decided by the marketing authorities on the basis of their experience and foresightedness.

Question 10.
What do you understand by the term marketing strategy ? Explain how marketing strategy differ in case of consumer products and industrial products ?
Or
What do you mean by Marketing Strategy ? Explain in brief the factors to be considered in formulating overall marketing strategy.
Or
Write short note on Marketing Strategy.
Answer:
Marketing Strategy
Philip Kotler defines Marketing Slrategy as “A set of objectives, policies and rules that guide over time firms’ marketing efforts”

Marketing strategy of a company is a policy to maintain competitive position in the market. Management gives it a shape with strategies for each controllable of product, distribution, promotion and pricing. Management tries to balance the controllable with uncontrollabies and so shapes the market needs and want’s and fulfills company goals. For this he unites product market, distribution, promotion and pricing strategies into a single overall marketing strategy.

Marketing Decision in a Comparative Setting. An individual marketer skilled in planning and using the controllable has an opportunity to win the buying preferences of certain market segments on a more or less permanent basis. In monopolistic competition competitors are more so that the actions of one have no effect upon the other while their skill makes major contenders in their industries while those lacking in skill fall back. Every marketer has to consider the moves of competitors and their reactions to his own marketing decisions.

The Product – If the marketer is an inventor or a follower to market his product successfully, -he must be careful of competitor’s timings of actions. Many products have slipped below the status and disappeared by the actions of the competitors.

Distribution (Marketing Channels) – To successful product, it must reach the central Laying places. They must follow the customary channel. They should offer a better product, a lower price, a more effective promotional programme or some other combination of other factors.

Physical Distribution – Marketers want to have the right resource at the right place and at the right time,’ Marketers care for reasonable costs. Competitors’ actions and operations influence physical distribution decisions. He must try to reach his goods at the required place at the time when needed.

Promotion – The methods are applied by the marketer to stimulate market demand. He may spend some more amount on advertising giving the knowledge of qualities of’ his product and « comparison with those of competitors’ products in the market.

Price – It must coincide with the competitors’ price of similar product. Superior quality brand may be marketed at the competitive prices or the same quality product may be marketed at reduced price to have an edge over competitors.

Marketers use aggressive marketing strategies when they use the other means of eontrollables.

Formulating Overall Marketing Strategy. This needs careful integration of all dimensions of the marketing efforts. Marketers should ‘ determine whether o, not the combination of inputs going into the overall marketing strategy is optimal. It is an approach that involves evaluating of the possible inputs to, the overall marketing strategy in terms of the likely outputs.

Marketer should make selections from^the various inputs in such a way that the combination is the best, he can devise for achieving the desired .outputs.

Factors Affecting Overall Marketing Strategy

In formulating an overall marketing strategy. The following factors must be considered :
(i) Competitors’Counter-moves – This differs with various marketing inputs. The marketer must make a fair estimate of competitors’ marketing strategy. Most competitors cat: easily and quickly match or otherwise adjust to price changes. However, they often find it difficult to follow or to retaliate against product innovations. This explains why many marketer seek to gain differential advantage over their competition by varying product characteristics as altering promotion than prices. The marketer also forcast the competitors’ efforts in response to his efforts to promote sales. Cart competitors provide better services to consumers to attract customrs such as credit facility, facility of home delivery, after sale services etc. The marketing manager should take strategy decision keeping in mind these moves of the competitors.

(ii) Synergistic Potential – Marketing inputs are capable of being, mutually reinforcing or having synergistic potential and marketer should consider this working towards and optimum overall marketing strategy.

Displays and advertisements can be made mutually reinforcing since the display repeats the advertising message at a time when the consumer is in an outlet where the product is on sale.

Product inputs and marketing channel inputs can be mutually reinforcing, depending upon the effectiveness with which they are integrated.

(iii) Substitutability – The selection of marketing inputs is also affected by their degree of substitutability. It is important to know the extent to which one type of input can be substituted for another type in as much as the nature of marketing objectives, such as one channel of distribution may be substituted for another channel etc. Similarly, for increasing volume of sales, advertising .may be substituted for sales promotion techniques. A market strategist must ask himself which substitute he should use and to what degree. Consideration of such substitutability helps in determining which inputs to include and which to emphasize in the overall marketing strategy.

(iv) Diversity in Productivity Levels of various Marketing Inputs – The marketers should recognize that not all inputs have equal productivity, some inputs need a minimum level of use before they begin to have measurable effects. An advertising message must often be repeated several times before consumers become aware of it. The lower cost per consumer contact of radio, magazines and billboards often make it possible with a limited budget to present a much stronger impact on consumers.

(v) Elasticity of Marketing Inputs – Different marketing inputs are elastic and they influence the demand of the product. The marketing manager must recognise that effect on the product. For example, a manufacturer determines different prices for different customers or for different areas only on the basis of varying elasticity of demand. More often, the prices for. wholesalers retailers and Consumers are different in almost all the markets.

The marketing manager must consider all the above factors in mind while formulating the overall marketing strategy. The strategy must also be elastic so as to incorporate all the strategic factors of the competitors as and when required.

Causes Of Difference In Strategies Of Consumer Products And Industrial Products

Marketing strategy of a company very much depends upon the nature of the commodity i.e., whether it is a consumer product or industrial product. Consumer product means product which is mainly used by the consumers for the satisfaction of their needs. On the other hand, industrial product is mainly used by manufacturers for further production.

The marketing strategy for marketing these two types of product differs widely because the factors affecting the strategy also differs.

In case of an industrial product, the number of competitors are few because of large amount of investment. The number of customers are also few and therefore the demand of such products is low. It results in less expenditure on advertisement and sales promotion. Wide publicity of the product is not much fruitful. Pamphlets pr circulars explaining the characteristics of the product may be mailed to such few consumers or they may be contacted personally by the business representatives. The markets can be divided very easily on the basis of nature of customers or area and therefore, different price policies may be accommodated for different customers or regions. The substitutes of various inputs are also easily available.

On the contrary, in case of consumer product, the number of competitors . and consumers are innumerable and scattered all over the country, the marketing strategy will be quite different from that of the industrial product The company has to satisfy the needs of innumerable customers who differ widely in nature. The advertisement policy of such products may differ from region to region considering the nature of the customers: Wide publicity is necessary for such products so that it may have permanent effect on the consumers. A wide base is required for other policies also like price policies, marketing policies and other policies weighing their wide effects on the consumers. The expense on one input may affect the expense on other inputs. The study of various inputs should be made carefully. A little unawareness may oust the firm from the market.

It is amply clear from the above study that the marketing authorities should consider the nature and the number of different variables and their productivity and utility while formulating the marketing strategy;

Question 11.
Write a brief note on marketing audit.
Answer:
Any well-organised company would want to evaluate or measure the effectiveness of its marketing operations. Evaluation of marketing performance can only be done in terms of organisational objectives. The budget gives information on how money is to be spent by the various departments for the different activities required to achieve the company’s overall objectives. Hence, marketing audit occupies an important place in marketing management.

Marketing Audit
“A marketing audit is a systematic and comprehensive appraisal of the total marketing operation, a device to use in appraising the extent of integration of the inputs and a way to identify and evaluate the assumptions underlaying marketing operations. Evaluation would follow planning as planning lays down standards of what should be done and evaluation actually indicates what actually was done. A total evaluation programme of marketing activities is described as marketing audit’. Merrill defines the marketing audit as a “systematical critical and impartial revision and appraisal of the total marketing action.’”’ It would include consideration of salesmen’s performance, marketing costs involved, the. effectiveness of advertising and so on.

The measurement of inputs and outputs over a given time period with regard to most marketing activities is a difficult task. Despite the difficulties, evaluation must be made. Basically, the standards of performance used for evaluating overall marketing operations are ; 1. Profits, 2. Sales Volume, 3. Market share, and 4; Cost.

1. Profit – “Profit is the ultimate objective of all businesses and is essential of marketing using it as a standard the company may prescribe a certain return on investment” for each of the departments concerned. This however poses problems as in case of the manufacturing departments, generally a larger investment, is involved than in case of the marketing departments. Apart from this; the nature of the “transfer price” would determine the ultimate profitability of either of these departments. Thus the use of the profit centre concept poses problems but these can be solved by (i) prescribing a smaller rate of return on investment in case of the manufacturing department than for the marketing department, and (ii) fixing the transfer price at the market price at which the marketing department could have purchased the same product from outside. The profits centre concept can, however, easily and more fruitfully be applied in terms of either separate products or groups of products.

2. Sales Volume – Generally sales volume is not a useful standard. Sales may increase, profits may decrease. It must, therefore, be supplemented with a cost analysis.

3. Market Share – Market share also suffers from the same defect as a standard as sales volume. However, it helps measure the position of the company in terms of the industry sales. It also helps in sales forecasting.

4. Cost – Costs must be controlled as they directly affect ultimate profit and constitute valuable standards for evaluation.

Price Volume Relationship – Generally with an increase in volume the unit cost of the product decreases as the fixed costs, are spread over a large number of items. Break-even analysis at different prices can, therefore, considerably help in controlling stage to ascertain the present pricing strategy is appropriate or requires a change.

DU SOL B.Com Programme 3rd Year Marketing Management Notes

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