SUBJECT: COMMERCE Chapter 14 Marketing Mix STANDARD: XII (ISC)

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1 SUBJECT: COMMERCE Chapter 14 Marketing Mix STANDARD: XII (ISC) Marketing Mix refers to the combination of four basic elements product, price, place (distribution system) and promotional activities which constitute the core of the company s marketing system and is used to satisfy the needs of the targeted consumers in the most effective manner. Importance or need for Marketing Mix: It serves as a link between the business and its customers. It helps in increasing sales and thereby the profits as it is decided keeping the customers needs in mind. Since the requirements of the consumers keep changing marketing mix is dynamic. It thus helps in maintaining equilibrium between the business firm and the marketing environment. It maintains a balance between the various elements viz. product, price, place and promotion. PRODUCT MIX Product refers to the tangible and intangible elements offered to the customers in order to satisfy their needs. It includes a combination of various features relating to the product or service to be offered for sale. It involves decisions concerning the quality, size, range, package, brand name, label, warranty and services etc. Benefits in a Product: Core Benefit: It refers to the basic or the main benefit derived from the product. For e.g. A refrigerator is bought mainly for the purpose of preservation of food. Expected Benefits: It refers to the basic or the main benefit derived from the product. For e.g. A customer may expect to buy a refrigerator which reduces the consumption of electricity. Augmented Benefits: It refers to the additional benefits the business unit offers in order to compete with other similar products. For e.g. while purchasing a refrigerator the customer may be given the benefit of payment through interest free instalments. Branding: Refer to the notes of Chapter 13 Trade mark: It means a brand or part of a brand which enjoys legal protection. A registered brand can be used by the firm who gets it registered and no other company can use such name or mark. Labelling: It refers to the process of designing a label to be put on the package. Label: A label is a small slip that is put on the product through which the manufacturer gives various necessary information to the consumer. It normally mentions the products nature, contents, ingredients, price, directions of usage, name and address of the producer, date of manufacture, the expiry date, statutory warnings if any. Functions of Labelling: It gives an identity to the product ( 1 )

2 It specifies the content and the other features of the product. It helps the manufacturer in grading the product into different categories. It provides various information as required under the law. A good label can attract the attention of the consumer thereby stimulating him to buy the product. Kinds of label: Brand labels: They are meant to exclusively popularize the brand name of the product. For e.g. Revlon Grade Labels: These labels give emphasis to standards or grades and is used as a method of product identification. For e.g. green tea, black tea etc. Descriptive Labels: These are descriptive in nature and gives the feature, explains the various uses etc. of the product. Informative labels: These labels provide the maximum information to the consumers. For e.g. the characteristics of the product, the method of using it properly etc. Packaging: Refer to the notes of Chapter 13 PRICE MIX Price denotes the market value of a product or service expressed in terms of money. It is the amount of money which a seller is asking for the product or services he offers for sale and the buyer is ready to pay. It cannot be fixed at a too low or too high level. It determines the sales volume and profit margins and affects the competitive position of the firm. Factors Determining Price Internal Factors: Objective: The price fixed by the firm should be in line with the firm s objective. If the objective is to maximize profits it may be set at a high level. On the other hand if the objective is to increase market share then prices may be set at a low level. A company could have a number of objectives like reaching a target level of sales, targeting a particular market etc. Cost: Prices are normally fixed as cost of production and distribution plus the desired profit margin. So cost of the product is an important determinant while fixing the price of a product. Quality and Service: If the quality of the product or services rendered is of a high standard the price of the product can be on the higher side whereas a bad quality product/ service would not sell even if it is low priced. Promotional Strategy: Firms having a good promotional technique can price their product at a high level as they can differentiate their product from competitive products and satisfy the customers as to the products special features or advantages. External Factors: Demand: The nature and size of demand in relation to the supply of an article is an important factor affecting the fixation of price of a product. If the demand is high an inflated price can be fixed. On the other hand in cases of very low demand prices below the cost may also be required to be fixed. Competition: The prices of competitive products have to be kept in mind while fixing price of a product. It has to be somewhat similar to competitive prices as if it is comparatively too high, it will not be possible to grab a market share. If it is too low consumers might doubt the quality of the product. ( 2 )

3 Buying Motives: The buying motives of the consumer have to be kept in mind. If a product is purchased to satisfy the prestige it can be fixed at a high level. However if it is a daily necessity product it cannot be priced at a high level. Risks: Where in order to produce or sell the product the seller takes unusual risks the prices are usually high. For e.g. in case of seasonal goods, fashion articles the risk is high so they are priced at an inflated value. Government Control: For certain products the government has fixed maximum prices which has to be kept in mind while setting up the price of commodities. PLACE MIX Place mix also known as distribution mix refers to the distribution of products to make them available to the target consumers at the right place in the right quantity and at the right time. It involves two broad functions: The choice of channel of distribution through which it reaches the consumer from the manufacturer. The physical distribution comprising of the transportation and storage of goods. Channels of Distribution: It refers to the path along which the products flow from the point of production to the point of ultimate consumption or use. In between the producer and the consumer there may be several middlemen who facilitate the physical flow and the transfer of ownership of the product. It creates utility of time, place and possession. A channel of distribution represents three types of flows: Products flowing downwards from producer to consumer. Cash flowing upwards from consumer to the producer. Marketing information flowing in both the directions. Types of Channels of Distribution: Manufacturer-Consumer (Zero level or Direct or Shortest Channel): This is the simplest channel involving direct sale of goods and services by the producer to consumers. No intermediaries are present. The producer sells directly through his own retail stores, internet, or by means of door to door selling. Manufacturer-Retailer-Consumer (One Level Channel): Under this channel the manufacturer sells to one or more retailers who in turn sell to the ultimate consumers. Consumer durables, products of high value, perishable products are normally sold through this channel. Manufacturer-Wholesaler-Retailer-Consumer (Two Level Channel): Under this channel the producer sells to the wholesaler in bulk who in turn sells to a large number of retailers who then sells to a wide range of consumers. Manufacturer- Agent-Wholesaler-Retailer-Consumer (Three Level or Longest Channel): Under this channel the producer hands over his entire produce to a selling agent who in turn sells it to various wholesalers. Each wholesaler sells to a number of retailers who then sells to the consumers. ( 3 )

4 PROMOTION MIX Promotion mix refers to the combination of different kinds of promotion techniques used by a business to create and maintain sale of its products. Promotion is the process of informing, persuading and assisting the prospective buyers to buy a product or avail a service. The need of promotion has increased due to increasing competition, changing tastes of consumers, widening markets etc. Functions of Promotion: To provide Information: It helps the prospective buyers in being informed about the availability of the products, its features, its uses etc. To highlight the utility of the product: It adds value to the product by emphasizing on the special features and advantages of the product. To stimulate Demand: Promotion helps in making the buyer want the product thereby stimulating the demand in the sellers favour. To differentiate the Product: it creates consumer loyalty for the product by differentiating the product from the competitive products. To meet competition: It helps the producer to combat competition in the market. To build an image: It creates a favourable image of the business and its products in the market. Tools/ Elements of Promotion: Advertising Personal Selling Sales Promotion Publicity Importance of the various elements of Promotion: In the modern business world a combination of promotional activities have to be used because a single technique of promotion may not be as effective. All promotional tools are not of equal importance and their value may change with the changes in the business environment. Advertising Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor. It involves dissemination of information about the product or service to a widely scattered market though a wide variety of media. Objectives of Advertising: To provide information and create interest amongst the prospective buyers. To highlight the utility of the product and stimulate Demand To differentiate the Product and meet competition To build a loyalty for the brand. To enhance goodwill of the firm. To enter a new market or to launch a new product. To reach people inaccessible to salesmen To warn customers against spurious products. ( 4 )

5 Sales Promotion Sales Promotion refers to all those activities other than advertising and personal selling that stimulate consumer purchasing and dealer effectiveness. Features: Not of routine or recurring nature Supplement advertising and personal selling Offer temporary or short term incentives Is targeted at both consumers and dealers Objectives: Inspire on the spot buting Increase immediate sales Clear old stocks Generate demand during off season Supplement advertising and personal selling Personal Selling/ Salesmanship It is a two way communication process informing assisting and persuading people to buy a product or service through direct personal contact. Under this an oral presentation is made to one or a selective group of customers not only to be able to persuade them to buy the product but also to develop a close and lasting relationship. Objectives: To convert the interest and desire created by advertising into demand. To increase sales. To introduce new products through demonstration. To redress grievances and objections of customers. To persuade the dealers to carry the brand. To persuade consumers to switch over from rival brands. To collect feedback from consumers. Publicity: It is any form of non-paid, commercial significant news or comments about ideas, products or institution. It is done by the media (newspapers, radio, television etc) and may be in the favour or against a company or its products/ services and is not under the control of the organization. Objectives: To inform people about someone or something To highlight an organisation s contribution to society. To draw public attention to some noteworthy event. To warn people about undesirable activities or goods. ( 5 )

6 Extra Questions: How are products classified? Mention the features of services. Differentiate between products and services. Discuss in brief the advantages of branding. What are the pointers to be kept in mind while selecting a good brand name? Explain four advantages and disadvantages of labelling. What are the information a good label should provide? What are the factors that need to be kept in mind while choosing a channel of distribution? What are the functions performed by a channel of distribution? Discuss the features of advertising. Prepare a table distinguishing between the various promotion elements (Advertising,Sales Promotion, Personal Selling, Publicity). What are the factors that need to be kept in mind while determining the promotion mix of a business firm? Instructions to study this chapter: Please read your book for detailed information of the above topics. The length of the answer depends on the marks in the question paper and may not only be substituted with what is mentioned in the notes ( 6 )