Marketing & Services Management – 14 Marks Q&A Marks QA.pdf · Explain the nature, scope and importance of Marketing. Introduction ... distribution and retailing is taken by the

Marketing & Services Management – 14 Marks Q&A

1 Ranjith Kumar.A

St.Anne’s Degree College for Women

Section – C (14 Marks Questions & Answers)

1. Explain the nature, scope and importance of Marketing.

Introduction

Marketing is the process of communicating the value of a product or service to customers, for the

purpose of selling that product or service.

Marketing can be looked at as an organizational function and a set of processes for creating,

delivering and communicating value to customers, and customer relationship management that also

benefits the organization.

Marketing includes all activities involved in the creation of place, time & utilities. It is the process

of discovering and translating consumer needs and wants.

Meaning of Marketing

Marketing refers to a set of activities such as selling, distribution, retailing, advertising etc; these

activities just form a part of Marketing.

Definition of Marketing

Marketing is finding out what people need, helping to developed need, satisfiers, information and

moving properly priced products and services to consumers and keeping consumers satisfied.

Marketing is a business process by which products are matched with market and through which

transfers of ownership.

Nature of Marketing:

Nature of Marketing evolves from its multidisciplinary coverage of activities which is as follow:

1. Dynamic Process: Marketing is an ongoing activity which does not stop at any step. After

finding customer‟s needs and wants it needs to develop such products or services which can

satisfy these needs and after this there is need to advertising, promotion, distribution, etc the

process goes on.

2. Customer Oriented: Marketing is customer oriented. Marketing is the process of finding needs

and wants of customers and satisfying those needs profitably.

3. All Encompassing: Marketing is all encompassing, it is not a single process it includes

production planning, research, advertising, financial management, budgeting, selling, etc.

4. Integrating: It integrates all the departments of an enterprise be it production, finance, IT, HR,

etc.

5. Creative: Marketing is creative in nature; it looks out for new ideas, views and activities and

solves problems or encases opportunities in a creative way.

Scope of Marketing:

Marketing has a very wide scope it covers all the activities from conception of ideas to realization

of profits. Some of them as discussed as below:


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1. Product Planning: It includes the activities of product research, marketing research,

market segmentation, product development, determination of the attributes, quantity and

quality of the products.

2. Branding: Branding of products is adopted by many reputed enterprises to make their

products popular among their customer and for many other benefits. Marketing manager has

to take decision regarding the branding policy, procedures and implementation programs.

3. Packaging: Packaging is to provide a container or wrapper to the product for safety,

attraction and ease of use and transportation of the product.

4. Channels of Distribution: Decision regarding selection of most appropriate channel of

distribution like wholesaling, distribution and retailing is taken by the marketing manager

and sales manager.

5. Sales Management: Selling is a part of marketing. Marketing is concerned about all the

selling activities like customer identification, finding customer needs, persuading customer

to buy products, customer service, etc.

6. Advertising: Advertisement decisions like scope and time of advertisement, advertisement

message, selection of media, etc comes into marketing.

7. Finance: Marketing is also concerned about the finance, as for every marketing activity be

it packaging, advertising, sales force budget is fixed and all the activities have to be

completed within the limit of that budget.

8. After Sales services: Marketing covers after sales services given to customers, maintaining

good relationships with customers, attending their queries and solving their problems.

Goals of Marketing

Identification of consumer wants needs, tastes and preferences.

Get an appropriate product design to get consumer approval.

Great demand in the minds of the consumer for the product of the company.

Make arrangements for the consumers to buy the products.

Market research to help product development.

2. Briefly explain the Functions of Marketing.

The marketing process performs certain activities as the goods or services move from producer to

consumer. Every firm does not perform all these activities or jobs. However, any company that

wants to operate its marketing system successfully must carry them out. The following marketing

tasks have been recognized for a long time.

According to Clark & Clark, The following is the classification of marketing functions.


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Marketing Functions

Functions of Exchange Functions of Physical Supply Facilitating Functions

1. Buying 1.Storage & warehousing 1. Financing

2. Selling 2.Transportation 2. Risk Taking

3. Market information

4. Standardization &

grading

5. Pricing

6. Branding

7. Packing & packaging

8. Sales promotion

9. Salesmanship

10. Advertising

(a) Functions of Exchange: exchange takes place through buying and selling. These are

complementary functions.

1. Buying:

It involves what to buy, what quality, how much, from whom, when and at, what price.

People in business buy to increase sales or to decrease costs. Purchasing agents are much

influenced by quality, service and price. The products that the retailers buy for resale are

determined by the need and preferences of their customers.

2. Selling:

The purpose of selling is to find, buyers to whom goods can be sold at a price satisfactory

to the seller. At all stages of marketing, it is necessary for someone to sell. Selling is

enhanced by means of personal selling, advertising, publicity and sales promotion.

(b) Functions of physical supply: Producers of physical products & services must decide on the

best way to store & move their goods & services to their market destinations. A poor

distribution system can destroy an otherwise good product.

1.Storage and warehousing:

Goods must be stored for different reason. Goods produced seasonally may be used

throughout the year; goods meant for use during short period may be produced over the

longer period; manufacturers store raw materials for ready supply & goods are also stored

in the hope of getting a higher price in future.

2.Transportation:

Transportation choices will affect product pricing, on-time delivery performance and the

condition of the goods when they arrive, all of which will affect customer satisfaction. In

shipping goods to warehouses, dealers & customers, the company can choose among five

transportation modes: rail, air, trucks, waterways and pipelines.


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(c) Facilitating Functions:

1. Financing:

A business needs huge capital to run for investment in land, buildings, furniture & so on for

maintaining inventory & extending credit to customers. All this requires large amount of

funds & the means by which these funds are acquired is known as „Financing‟.

2. Risk taking:

In business there is risk of loss, fire, flood, theft, deterioration, bad debts etc. Loss may

occur due to changes in the conditions of supply & demand & changes in the value of

money.

3. Market information:

Marketing requires information such as no. of consumers, their locations, purchasing power,

product & brand preferences, tastes, habits and so on.

4. Standardization & grading:

Standardization refers to the establishment of standards for products. A standard is a

measure of designation for quality & carries the idea of uniformity.

When standardised goods are further subdivided into well-defined classes, they are known

to be having graded. Established standards for form goods are commonly called grades.

Grading is simply a means of dividing the products of various quality, size etc into

conforming to certain standards.

Apart from above mentioned functions of marketing, there are some other functions which

facilitate marketing of goods. These are explained below:

5. Pricing:

Price is the only element in the marketing mix that produces revenue, the other elements

produce costs.

6. Branding:

Brand name is a size or symbol of quality. Branding creates brand equity, brand loyalty and

brand image for the product in the mind of the consumer.

7. Packing & packaging:

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 and which creates an image in the mind of the

customer. The more effectively a product is packaged the more effective is its identity &

individuality.


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8. Sales promotion:

Sales promotion covers a wide variety of short term incentive tools designed to stimulate

consumer markets, the trade and the organizations own sales force. Sales promotion tools

are used by most organizations including manufacturers, distributors, retailers, trade

associations and non profit organizations.

9. Salesmanship:

The process of including & assisting a prospective buyer to buy a commodity or service or

act favourably upon an idea that has a commercial significance to the seller is called

salesmanship.

10. Advertising:

Advertising creates a magic in the market place. It is the backbone of modern national and

international marketing. It gives information, guides, educates as well as protects buyers, so

that they can buy intelligently.

3. Explain the recent trends in the field of Marketing.

The society, of which market is a small part, is dominated by a high degree of dynamism and rapid

change. Communication helps businesses grow and prosper, creates relationships, strengthens the

effectiveness of organizations, and allows people to learn about one another. Technologies, such as

the Internet, mobile phones, social media, and customer relationship management systems greatly

affect the way companies communicate with prospective customers. These new forms of

communication are changing the media landscape and the type of messaging strategy organizations

use.

Since marketing is also continuously evolving and responding to the changes in the society,

marketing witnesses several new trends and developments constantly. The following are the new

trends in marketing.

1. E-business

2. Tele Marketing

3. M-business

4. Green Marketing

5. Relationship Marketing

6. Customer Relationship Management

1. E-business:

Electronic business commonly referred to as “E-Business”. It is sometimes used interchangeably

with E-Commerce. It is the process of buying & selling of products & services across a Tele-

communication network. It is a market place where businesses are using internet technologies.


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Advantages and Disadvantages of E-commerce

E-commerce has quickly become a way of life, but like with anything – there are a number of

advantages and disadvantages of conducting business in this manner. It is important that you know

the advantages and disadvantages of each so you can ultimately succeed with the online business

world.

Advantages of E-commerce:

1. Time saving – is the reason number one for using electronic commerce. People now have

access to their money and what they need to buy from home and work all from a desktop

computer.

2. Consumers have an access to a wider range of products – company now can use internet

sites as shop fronts, so consumers can browse, buy from many different sellers and making

it easier to find exactly what they are looking for.

3. Allows small businesses to mix with the big business online – with a relatively small cost,

a new business can set its self up to conduct transactions online.

4. Provide benefits to suppliers of goods and services – company now can target a wider

variety of consumers even take the product or service international, allowing them a means

of supplying their goods to places that were before unreachable.

5. Business is Open 24 x 7– it works while you play or sleep. They are open for business

every hour of the day, every day of the week, every week of the year. Your receptionist,

greeter and front people are always working for you because they are your website. They do

not complain about the long hours.

6. Messages spreading (worldwide market space) – advertising on the web can make a big

or small firm‟s promotional message reach out to potential customers all over the world

quickly and small cost as an online marketing strategy.

7. Help protect against frauds and theft losses – electronic payments can be easier to

monitor than payments are made by cheques.

8. Thinking Outside the Globe – selling something made by someone else, shipped by yet

another and the money handled by yet another is the heart of the advantages e commerce

brings to the business world. You can even employ an international staff. Some work you

may need done can be more effectively done by companies or even individuals in other

countries.

Disadvantages of E-commerce:

1. Purchase to Delivery – when making a purchase at a brick and mortar business, you get the

product when you pay for it. On the web, there may be a time lag from purchase to actually

being able to consume. The consumer will have to wait for delivery of physical goods.


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2. Inability to Feel the Physical – it is nearly impossible to sell things like furniture and tires

online. Furniture is something people like to sit on and know the feel. Tires need to be

installed once purchased. The old tires also need to be disposed of. In both instances, there

is a need for real actions to fulfill the reason for the purchase. That‟s why things like food,

jewelry, antiques etc. can never turn to E-commerce.

3. Trouble recruiting and retaining employees – the company needs well-expert and skilled

staff to keep up and create the ecommerce facilities of the company. Many companies favor

to outsource their improvement and programming tasks to decrease labor costs.

4. Consumers feel less confident with their credit card numbers – most of the consumers

are still not confident in providing their credit card numbers for making payments on the

website while shopping on the Internet.

5. Not every company can take the benefit – some of the small companies may not be able

to take the benefit of E-commerce for example the lack of expertise and lack of technology.

The legal environment in which E-commerce is conducted is full of unclear and conflicting

laws. It should be noted that mostly these disadvantages stem from the newness and rapidly

growth of the technology.

2. Tele Marketing:

It is the act of selling or promoting a product or service to the potential customers, over the

telephone.

Telemarketing is one of the ways of direct marketing which involves the use of the telephone for

the marketing purpose. The salesperson involved uses the telephone to directly convince the

customer over the buying of some kind of product or service with the complete information and

detailing session. There is also an alternative of using the method of automatically generated

recording over the phone via the use of automatic dialing.

Advantages and disadvantages of telemarketing

Telemarketing can be an effective tool for your business and it can be an easy and effective way to

increase your profits and promote your product or service. However, it does have some

disadvantages that you should also consider.

Benefits of using telemarketing

The main benefit of using telemarketing to promote your business is that it allows you to

immediately gauge your customer's level of interest in your product or service. Additionally it

allows you to do the following:

1. Provide a more interactive and personal sale service

2. Create an immediate rapport with your customers


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3. Explain technical issues more clearly

4. Generate leads and appointments

5. Sell from a distance to increase your sales territory

6. Reach more customers than with in-person sales calls

7. Sell to both existing and new customers

8. Achieve results that are measurable

Disadvantages of telemarketing

There can be as many negatives using telemarketing as there are positives. In particular, you need

to consider that:

1. Telemarketing can be resented - particularly when dealing with business-to-consumer

customers, and when calls are made in the evenings

2. Customer lists may not always be clean and opted-out - this leaves you with a potential risk

of breaking the law

3. Customer lists can be very costly

4. Telemarketing has a negative image that could damage your business' reputation - if carried

out poorly.

5. Telemarketing has the potential to replace a sales team and this could lead to negative

feelings among employees

6. Training staff can be time-consuming and costly

7. An outside service provider can result in your losing control over your sales processes

because the people doing the work aren't your employees

3. M-business:

Any business done with the help of mobiles is known as M-business or M-commerce. Mobile

business (m-business) refers to new business models enabled by the extensive deployment of key

mobile and wireless technologies and devices (for example, Bluetooth, e-purses, smartphones and

WAP), and by the inherent mobility of most people's work styles and lifestyles.

4. Green Marketing:

Green marketing is a concept according to which a company attempts to sell its products based on

the product‟s environment friendly nature. Green marketing is also called Environmental

Marketing, Ecological Marketing and Sustainable Marketing.

5. Relationship Marketing:

Relationship is a very popular technique used by sellers. This involves basically understanding the

customer, their needs, consuming habits etc & marketing the goods to them accordingly.


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Relationship marketing involves creating, maintaining and enhancing the strong relationships with

customers.

6. Customer Relationship Management:

CRM is a total of all activities that the company does in order to maintain a good relationship with

the customer. This involves profiling customers, understanding their needs, building relationships

& providing them with suitable products & customer service.

The aim of CRM is to collect business data which helps in providing services according to needs of

the customer.

CRM enables a business to:

To create a database of customers

Understanding the customers, their needs tastes and preferences.

Retain the customers for a long term relationship.

Increase the profit & profitability through sales maximization.

Reduce the cost of managing the customers by developing well established customers.

Benefits / Advantages of CRM:

It reduces the cost because the right things are being done to retain the existing customers.

Increased customer satisfaction, because they are getting exactly what they want.

Growth in no. of customers.

Increased access their own & their competitor information.

The long term profitability & sustainability.

Conditions required for CRM:

Organizations must become customer focused.

Organizations must be prepared to adopt so that it takes customer needs into account.

Market research must be undertaken to access to customer needs and satisfaction.

Use of technology to enhance the service speed & service quality.

4. What is CRM? Explain the role of CRM.

Customer satisfaction has always been a key element in the pursuit of corporate goals and

objectives. However, the current competitive environment fostered by liberalization and

globalization of the economy and the rising customer expectations for quality, service and value

have promoted many companies to organize their business around the customers they serve, rather

than around the product lines or geographic business units.


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CRM is a total of all activities that the company does in order to maintain a good relationship with

the customer. This involves profiling customers, understanding their needs, building relationships

& providing them with suitable products & customer service.

The aim of CRM is to collect business data which helps in providing services according to needs of

the customer.

According to Philip Kotler and Gary Armstrong, „CRM is concerned with managing detailed

information about individual customers and all customer “touch points” to maximize customer

loyalty. It can also be defined as, „an alignment of strategy, processes and technology to manage

customers, and all customer-facing departments and partners‟. In short, CRM is about effectively

and profitably managing customer relationships through the entire life cycle.

CRM enables a business to:

To create a database of customers

Understanding the customers, their needs tastes and preferences.

Retain the customers for a long term relationship.

Increase the profit & profitability through sales maximization.

Reduce the cost of managing the customers by developing well established customers.

Need and Importance of CRM:

1. Better service to customers:

CRM provides more avenues for customers to communicate and explain their needs to the

organization through numerous contact points. Customers get increased satisfaction and a feeling of

being special and important because of the increased personalization of services and customization

of goods offered to them.

For example, ICICI Bank maintains a list of priority customers and provides them with additional

facilities and special offers such as free tickets to concerts, movies, and so on. Some banks, such as

Syrian Catholic Bank provide personalized services to their important customers.

2. Customization of market offerings:

Companies can customize a product or service depending on the data available with the firm. The

firm can facilitate customer-company interaction through the company contact centre and web site.

Such interactions help develop customized products.

3. Reduction in the customer defection rate:

CRM emphasizes on training and development of the employees to become more customer

oriented. Due to CRM training and development, employees show care and concern towards the

valuable customers; therefore, the customer defection rate may be reduced to a great extent.


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4. Increase and improvement in long-term relationships:

Some firms treat their customers as partners. Firms solicit the help of the customers to design new

products or to improve their services. If the customer gets involved with the firm, they are more

likely to remain with the firm.

5. Increase in customer equity:

CRM increases customer equity. Firms focus the marketing efforts more on the most valuable

customers (MVCs). The main aim of CRM is to produce high customer equity. Customer equity is

the sum of lifetime values of all customers. More focus on MVCs will enable a firm to increase the

customer equity.

6. Competitive advantage:

The firms that adopt CRM get competitive advantage in the market. They can face the competition

with much ease. Competitive advantage helps in generating higher returns on investment.

7. Building and maintaining corporate image:

The image of the firm also gets enhanced. Loyal customers become evangelists. The evangelists

spread a good word about the company and its products. This enables a firm to get additional

customers to its fold.

8. Higher return on investment:

Due to CRM, a company gains a position to generate higher returns on investment. This is because

of the repeat purchases on the part of the loyal customers. The company also makes money through

cross selling. The higher return on investment increases the shareholders‟ value.

Benefits / Advantages of CRM:

It reduces the cost because the right things are being done to retain the existing customers.

Increased customer satisfaction, because they are getting exactly what they want.

Growth in no. of customers.

Increased access their own & their competitor information.

The long term profitability & sustainability.

5. Explain the factors which influence Marketing environment

Note: Give weightage to Macro Environment

A variety of environmental forces influence a company‟s marketing system. Some of them are

controllable while some others are uncontrollable. It is the responsibility of the marketing manager

to change the company‟s policies along with the changing environment.


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According to Philip Kotler, “A company‟s marketing environment consists of the internal factors &

forces, which affect the company‟s ability to develop & maintain successful transactions &

relationships with the company‟s target customers”.

The marketing environment surrounds and impacts upon the organization. There are three key

elements to the marketing environment which are the internal environment, the microenvironment

and the macroenvironment

Types of Marketing Environment:

Types of Environment

MACRO ENVIORONMENT MICRO ENVIRONMENT

1. Demographic Factor 1.The company

2. Economic Factors 2. Suppliers

3. Natural Factors 3. Marketing Intermediaries

4. Technological Factors 4. Customers

5. Political Factors 5. Competitors

6. Socio cultural Factors 6. Publics

Macro environment:

Macro environment comprises the external factors over which the organization & management has

limited control.

1. Demographic Factors:

Demography is the study of the population of a country & also its composition based on

criteria such as gender, age, income, education, rural & urban etc. The birth rate, death rate

& growth of population are also part of demography.

Ex. If the majority of the population consists of youngsters, different types of products will

be demanded by the market as compared with a market constituting more of elders.

Thus the company has to understand the demographic breakup of the population of the

country to design appropriate products & marketing strategies.

2. Economic Factors:

The economic factors such as GDP (Gross Domestic Product), per capita income, inflation,

rate of interest, money supply conditions etc which prevail in a country.

The above factors greatly affect the marketing of a company as they collectively have a

great influence on the purchasing power of the people. The purchasing power of the people

enables them to buy goods & services.


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3. Natural Factors:

It means factors relating to Ecology, Environment etc.

Marketers need to be aware of the threats & opportunities associated with Natural

Environment.

4. Technological Factors:

Technology is a wonderful gift of our times. Technology has created positive thing such as

a computer medical equipments etc.

Negative things such as machine guns, nuclear bombs etc.

Every new technology replaces the existing technology & later goes waste. CD/DVD

players have replaced cassette players. The T.V and home theatre system has replaced the

cinema theatre. Therefore any spending of on new technology will be recovered fast by the

company.

The marketers should watch the following trends in technology, accelerating pace of

technological change, unlimited innovation opportunities, varying R&D budgets, and

increased regulation of technological change.

5. Political Factors:

The policy framed by the government in term of finances, economy, consumer protection,

ecology & environment, direct & indirect, taxations, imports & exports, foreign investments

etc have a very strong influence on marketing.

Every company has to understand the laws of the country which have an impact on its

marketing & carry on marketing appropriately. No companies can violate government laws

in any way. The company has to do everything within the frame work of law has set by the

government.

6. Socio Cultural Factors:

The customs, traditions, living habits, thinking, human relation etc of a society are longly

influenced by the culture. The cultural & society factors are extremely deep rooted in our

minds even in the case of the so called highly educated & modern minded people.

A company has to understand these cultural factors before designing products or marketing

policies. Anything goes against the cultural factor of the society will be rejected by the

society.

Micro Environment

It is also called as Internal Factors. Micro Environment refers to the forces which are close to the

company that affects its abilities to services, its customers, company, suppliers and marketing.


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1. The company or Organization:

Companies must work hard to align the organization structure, policies & culture to

changing requirements of business strategies.

If structure consists of various departments such as production, finances, marketing, human

resources & so on. All departmental heads work in co-ordination to achieve the organization

objectives.

2. Suppliers:

Suppliers are individuals who provide raw materials to a company to convert into finished

goods. Suppliers determine the quality of the products, a company makes through the

supply of goods.

Suppliers must supply quality goods on time at reasonable prices & on favourable terms and

conditions more over the cost of production of the company largely depends on cost on

which the raw materials are supplied to the company.

3. Marketing Intermediaries:

It refers to distributors, the size of production and supply will determine the channel. Choice

the organization can decide whether it should reach the customer directly or through

wholesalers or retailers.

4. Customers:

The ultimate success of marketing depends on customers; customers include individuals,

firms, governments and other company‟s imports etc. Marketing‟s aim should be to find

customer, develop customers & retain customers. The customers are the ones who sustain

the company. If customers do not buy a product of the company there is no way any

company can survive, let alone succeed.

5. Competitors:

Every business should deliver greater satisfaction to its customer than to its competitors do.

Therefore every company has to understand its competitors. If a business is unaware of the

competitors moves it will find it very difficult to outsmart to face its competitors.

6. Public:

It means any group which can impact organizations ability to achieve its objectives.

Financial Institutions

Media

Government

Local Groups

General Public

Internal Groups


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6. What are the factors influencing buyer behaviour?

Consumer behaviour refers to the Behaviour of a person when he is acting as a consumer – when he

is buying a commodity or a service.

Consumer behaviour is the decision process and psychological activity engaged in evaluation,

using and disposal activity of goods and services. It includes the understanding of consumer

thoughts, feelings and actions.In an ordinary language consumer behaviour deals with the buying

behaviour of each individual.

Factors Influencing Consumer Behaviour

There are 4 main types of factors influencing consumer behavior: cultural factors, social factors,

personal factors and psychological factors.

Factors Influencing Consumer Behaviour

Cultural Factors Social Factors Personal Factors Psychological factors

a) Culture a)Reference Class a)Age & Life cycle a)Motivation

b) Sub-Culture b)Family b)Occupation b)Perception

c) Social Class c)Role & Status c)Economic Situation c)Learning

d)Life Style d)Belief & attitudes

e)Personality

I. Cultural factors

Cultural factors are coming from the different components related to culture or cultural

environment from which the consumer belongs.

Culture and societal environment:

Culture is crucial when it comes to understanding the needs and behaviors of an individual.

Throughout his existence, an individual will be influenced by his family, his friends, his cultural

environment or society that will “teach” him values, preferences as well as common behaviors to

their own culture.

Sub-cultures :

A society is composed of several sub-cultures in which people can identify. Subcultures are groups

of people who share the same values based on a common experience or a similar lifestyle in

general.

Subcultures are the nationalities, religions, ethnic groups, age groups, gender of the individual, etc..


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Social classes:

Social classes are defined as groups more or less homogenous and ranked against each other

according to a form of social hierarchy. Even if it‟s very large groups, we usually find similar

values, lifestyles, interests and behaviors in individuals belonging to the same social class.

We often assume three general categories among social classes : lower class, middle class and

upper class.

People from different social classes tend to have different desires and consumption patterns.

Disparities resulting from the difference in their purchasing power, but not only. According to some

researchers, behavior and buying habits would also be a way of identification and belonging to its

social class.

II. Social factors

Social factors are among the factors influencing consumer behavior significantly. They fall into

three categories: reference groups, family and social roles and status.

Reference groups and membership groups :

The membership groups of an individual are social groups to which he belongs and which will

influence him. The membership groups are usually related to its social origin, age, place of

residence, work, hobbies, leisure, etc..

The influence level may vary depending on individuals and groups. But is generally observed

common consumption trends among the members of a same group.

The understanding of the specific features (mindset, values, lifestyle, etc..) of each group allows

brands to better target their advertising message.

More generally, reference groups are defined as those that provide to the individual some points of

comparison more or less direct about his behavior, lifestyle, desires or consumer habits. They

influence the image that the individual has of himself as well as his behavior. Whether it is a

membership group or a non-membership group.

Family:

The family is maybe the most influencing factor for an individual. It forms an environment of

socialization in which an individual will evolve, shape his personality, acquire values. But also

develop attitudes and opinions on various subjects such as politics, society, social relations or

himself and his desires.

Perceptions and family habits generally have a strong influence on the consumer buying behavior.

People will tend to keep the same as those acquired with their families.


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Social roles and status:

The position of an individual within his family, his work, his country club, his group of friends,

etc.. – All this can be defined in terms of role and social status.

A social role is a set of attitudes and activities that an individual is supposed to have and do

according to his profession and his position at work, his position in the family, his gender, etc.. –

and expectations of the people around him.

Social status meanwhile reflects the rank and the importance of this role in society or in social

groups. Some are more valued than others.

III. Personal factors:

Decisions and buying behavior are obviously also influenced by the characteristics of each

consumer.

Age and way of life:

A consumer does not buy the same products or services at 20 or 70 years. His lifestyle, values,

environment, activities, hobbies and consumer habits evolve throughout his life.

For example, during his life, a consumer could change his diet from unhealthy products (fast food,

ready meals, etc..) to a healthier diet, during mid-life with family before needing to follow a little

later a low cholesterol diet to avoid health problems.

Purchasing power and revenue:

The purchasing power of an individual will have, of course, a decisive influence on his behavior

and purchasing decisions based on his income and his capital.

This obviously affects what he can afford, his perspective on money and the level of importance of

price in his purchasing decisions. But it also plays a role in the kind of retailers where he goes or

the kind of brands he buys.

As for social status, some consumers may also look for the “social value” of products they buy in

order to show “external indications” of their incomes and their level of purchasing power..

Lifestyle:

The lifestyle of an individual includes all of its activities, interests, values and opinions.

The lifestyle of a consumer will influence on his behavior and purchasing decisions. For example, a

consumer with a healthy and balanced lifestyle will prefer to eat organic products and go to specific

grocery stores, will do some jogging regularly (and therefore will buy shoes, clothes and specific

products), etc..


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Personality and self-concept:

Personality is the set of traits and specific characteristics of each individual. It is the product of the

interaction of psychological and physiological characteristics of the individual and results in

constant behaviors.

It materializes into some traits such as confidence, sociability, autonomy, charisma, ambition,

openness to others, shyness, curiosity, adaptability, etc..

While the self-concept is the image that the individual has – or would like to have – of him and he

conveys to his entourage. These two concepts greatly influence the individual in his choices and his

way of being in everyday life. And therefore also his shopping behavior and purchasing habits as

consumer.

In order to attract more customers, many brands are trying to develop an image and a personality

that conveys the traits and values - real or desired – of consumers they are targeting.

IV. Psychological factors

Among the factors factors influencing consumer behavior, psychological factors can be divided

into 4 categories: motivation, perception, learning as well as beliefs and attitudes.

Motivation:

Motivation is what will drive consumers to develop a purchasing behavior. It is the expression of a

need is which became pressing enough to lead the consumer to want to satisfy it. It is usually

working at a subconscious level and is often difficult to measure.

To increase sales and encourage consumers to purchase, brands should try to create, make

conscious or reinforce a need in the consumer‟s mind so that he develops a purchase motivation.

He will be much more interested in considering and buy their products.

They must also, according to research, the type of product they sell and the consumers they target,

pick out the motivation and the need to which their product respond in order to make them appear

as the solution to the consumers‟ need.

Perception:

Perception is the process through which an individual selects, organizes and interprets the

information he receives in order to do something that makes sense. The perception of a situation at

a given time may decide if and how the person will act.

Depending to his experiences, beliefs and personal characteristics, an individual will have a

different perception from another.


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Learning:

Learning is through action. When we act, we learn. It implies a change in the behavior resulting

from the experience. The learning changes the behavior of an individual as he acquires information

and experience.

For example, if you are sick after drinking milk, you had a negative experience, you associate the

milk with this state of discomfort and you “learn” that you should not drink milk. Therefore, you

don‟t buy milk anymore.

Beliefs and attitudes:

A belief is a conviction that an individual has on something. Through the experience he acquires,

his learning and his external influences (family, friends, etc..), he will develop beliefs that will

influence his buying behavior.

While an attitude can be defined as a feeling, an assessment of an object or idea and the

predisposition to act in a certain way toward that object. Attitudes allow the individual to develop a

coherent behavior against a class of similar objects or ideas.

Beliefs as well as attitudes are generally well-anchored in the individual‟s mind and are difficult to

change. For many people, their beliefs and attitudes are part of their personality and of who they

are.

However, it is important to understand, identify and analyze the positive attitudes and beliefs but

also the negative ones that consumers can have on a brand or product. To change the brand‟s

marketing message or adjust its positioning in order to get consumers to change their brand

perception.

7. What is Product life cycle? Explain the various stages involved in it.

A new product passes through set of stages known as product life cycle. Product life cycle applies

to both brand and category of products. Its time period vary from product to product.

Modern product life cycles are becoming shorter and shorter as products in mature stages are

being renewed by market segmentation and product differentiation.

Companies always attempt to maximize the profit and revenues over the entire life cycle of a

product. In order to achieving the desired level of profit, the introduction of the new product at the

proper time is crucial. If new product is appealing to consumer and no stiff competition is out there,

company can charge high prices and earn high profits.


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Stages of Product Life Cycle

Product life cycle comprises four stages:

1. Introduction stage

2. Growth stage

3. Maturity stage

4. Decline stage

1. Introduction stage

Product is introduced in the market with intention to build a clear identity and heavy promotion

is done for maximum awareness. Before actual offering of the product to customers, product

passes through product development, involves prototype and market tests. Companies incur

more costs in this phase and also bear additional cost for distribution. On the other hand, there

are a few customers at this stage, means low sales volume. So, during introductory

stage company‟s profits shows a negative figure because of huge cost but low sales volume.

At introduction stage, the company core focus is on establishing a market and arising demand

for the product.

Product

Branding, Quality level and intellectual property and protections are obtained to stimulate

consumers for the entire product category. Product is under more consideration, as first

impression is the last impression.

Price

High(skim) pricing is used for making high profits with intention to cover initial cost in a short

period and low pricing is used to penetrate and gain the market share. company choice of

pricing strategy depends on their goals.

Place

Distribution at this stage is usually selective and scattered.

Promotion

At introductory stage, promotion is done with intention to build brand awareness.

Samples/trials are provided that is fruitful in attracting early adopters and potential customers.

Promotional programs are more essential in this phase. It is as much important as to produce

the product because it positions the product.


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2. Growth Stage

In this stage, company‟s sales and profits starts increasing and competition also begin to

increase. The product becomes well recognized at this stage and some of the buyers repeat the

purchase patterns. During this stage, firms focus on brand preference and gaining market share.

It is market acceptance stage. But due to competition, company invest more in advertisement to

convince customers so profits may decline near the end of growth stage.

Effect on 4 P’s of marketing is as under:

Product

Along with maintaining the existing quality, new features and improvements in product quality

may be done. All this is done to compete and maintain the market share.

Price

Price is maintained or may increase as company gets high demand at low competition or it may

be reduced to grasp more customers.

Distribution

Distribution becomes more significant with the increase demand and acceptability of product.

More channels are added for intensive distribution in order to meet increasing demand. On the

other hand resellers start getting interested in the product, so trade discounts are also minimal.

Promotion

At growth stage, promotion is increased. When acceptability of product increases, more efforts

are made for brand preference and loyalty.

3. Maturity stage

At maturity stage, brand awareness is strong so sale continues to grow but at a declining rate

as compared to past. At this stage, there are more competitors with the same products. So,

companies defend the market share and extending product life cycle, rather than making the

profits, By offering sales promotions to encourage retailer to give more shelf space to the

product than that of competitors. At this stage usually loyal customers make purchases.

Marketing mix decisions include:

product

At maturity stage, companies add features and modify the product in order to compete in

market and differentiate the product from competition. At this stage, it is best way to get

dominance over competitors and increase market share.

Price

Because of intense competition, at maturity stage, price is reduced in order to compete. It

attracts the price conscious segment and retain the customers.


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Distribution

New channels are added to face intense competition and incentives are offered to retailers to

get shelf preference over competitors.

Promotion

Promotion is done in order to create product differentiation and loyalty. Incentives are also

offered to attract more customers.

4. Decline stage

Decline in sales, change in trends and unfavorable economic conditions explains decline stage.

At this stage market becomes saturated so sales declines. It may also be due technical

obsolescence or customer taste has been changed.

At decline stage company has three options:

A. Maintain the product, Reduce cost and finding new uses of product.

B. Harvest the product by reducing marketing cost and continue offering the product to loyal

niche until zero profit.

C. Discontinue the product when there‟s no profit or a successor is available. Selling out to

competitors who want to keep the product.

At declining stage, marketing mix decisions depends on company’s strategy. For example, if

company want to harvest, the product will remain same and price will be reduced. In case of

liquidation, supply will be reduced dramatically.

8. Analyse the factors influencing price decision.

The term Price refers to money value or Exchange value of product or service in the market.

Pricing Policy refers to the policy of setting the price of products and services by the management

after taking in to account of various internal and external factors, forces and its own business

objectives.

Factors influencing Pricing Policy

The pricing decisions for a product are affected by internal and external factors.

A. Internal Factors:

1. Cost:

While fixing the prices of a product, the firm should consider the cost involved in producing the

product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the firm

must be able to recover both the variable and fixed costs.


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2. The predetermined objectives:

While fixing the prices of the product, the marketer should consider the objectives of the firm. For

instance, if the objective of a firm is to increase return on investment, then it may charge a higher

price, and if the objective is to capture a large market share, then it may charge a lower price.

3. Image of the firm:

The price of the product may also be determined on the basis of the image of the firm in the market.

For instance, HUL and Procter & Gamble can demand a higher price for their brands, as they enjoy

goodwill in the market.

4. Product life cycle:

The stage at which the product is in its product life cycle also affects its price. For instance, during

the introductory stage the firm may charge lower price to attract the customers, and during the

growth stage, a firm may increase the price.

5. Credit period offered:

The pricing of the product is also affected by the credit period offered by the company. Longer the

credit period, higher may be the price, and shorter the credit period, lower may be the price of the

product.

6. Promotional activity:

The promotional activity undertaken by the firm also determines the price. If the firm incurs heavy

advertising and sales promotion costs, then the pricing of the product shall be kept high in order to

recover the cost.

B. External Factors:

1. Competition:

While fixing the price of the product, the firm needs to study the degree of competition in the

market. If there is high competition, the prices may be kept low to effectively face the competition,

and if competition is low, the prices may be kept high.

2. Consumers:

The marketer should consider various consumer factors while fixing the prices. The consumer

factors that must be considered includes the price sensitivity of the buyer, purchasing power, and so

on.

3. Government control:

Government rules and regulation must be considered while fixing the prices. In certain products,

government may announce administered prices, and therefore the marketer has to consider such

regulation while fixing the prices.


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4. Economic conditions:

The marketer may also have to consider the economic condition prevailing in the market while

fixing the prices. At the time of recession, the consumer may have less money to spend, so the

marketer may reduce the prices in order to influence the buying decision of the consumers.

5. Channel intermediaries:

The marketer must consider a number of channel intermediaries and their expectations. The longer

the chain of intermediaries, the higher would be the prices of the goods.

9. Explain the various pricing policies?

Meaning of Price and Pricing Policy

The term Price refers to money value or Exchange value of product or service in the market.

Pricing Policy refers to the policy of setting the price of products and services by the management

after taking in to account of various internal and external factors, forces and its own business

objectives.

Objectives

1. Survival in the market.

2. Rate of growth & Sales maximization.

3. Prevents competition.

4. Making money.

5. Market share.

1. Marginal cost pricing

Under this method of pricing price of goals are determined on the basis of marginal cost. In other

words the price of a product is fixed on the bases of the additional variable cost associated with an

additional unit of output.

2. Target Rate of Return Pricing

Under this method a producer decide pre –determined target rate of return on capital invested

business.

This method of pricing take into account the yield form capital invested in the business has to get

certain percentage of returns on capital invested in any project

In short under this method price is determined along with a plant rate of return on investment

3. Product line pricing

Product line refers to a group of product which have similar feature and perform generally similar

functions

Ex; Tooth paste


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Product line pricing refers the determination price of individual products and finding the proper

relationship among the price of member of product group. In other words it implies the pricing of a

group of product which are related either as substitute or compliments product.

4. Skimming price policy

Under this method a firm fix a very high price in the beginning to get more profit generally when

the new substitute enter the market then the price has to reduce by the first firm.

5. Penetration pricing policy

It refers to charging high price in the initial stage of the life cycle of a product this policy is adopted

to attract the consumer when the product catches the matter price is generally raised up and they

will be no opposition for high price.

6. Administered price

Administered price are decided as those price which are fixed by government. They are the result of

government control and intervention in the market.

Ex; petroleum, oil, wheat, rations items.

7. Dual pricing

Dual pricing refers to the existence of two prices single commodity in market one controlled price

fixed by government and other free market price determined by market forces.

8. Price leadership pattern pricing

The price fixed by leaders described as price leadership and all other firms following the price

policy of the leader in the industry called as “price follower”.

9. Price Discrimination

One of the pricing strategies most commonly used by a monopoly firm with monopoly power is

called price discrimination. Monopolistic is price marker rather than price takers by using his

monopoly owner.

He is able to charge different price to different countries for the same product. For ex; if the radio

manufacture charges Rs. 900 to one customer and Rs.750 to another customer for the same product

then he practices discrimination. It occurs when a good or services are sold at different prices.

Condition or requirement for practicing price discrimination

1. Existence of imperfect market

2. Existence of two or more market

3. Existence of different degrees of price elastic demand

4. No contact among buyer

5. Legal sanitation

6. Ignorance

7. Propose of services.


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10. Dumping strategy

If the monopolistic any product charges a lower price in world market and a higher price in the

home market. It‟s said to be dumping the world market. Monopolistic may have monopoly power

in domestic market due to lot competition in the world market. The monopolistic charges a price in

the world market on the bases of perfect competition and within his country he can fix price the

higher level (monopoly).

10. Explain the various Media of Advertising.

Advertising media are the means to transmit the message of the advertiser to the desired class of

people. Channels or vehicle by which an advertising message is brought to the notice of the

prospective buyer:

There is no dearth of media today. It may be direct or indirect. Direct method of advertising refers

to such methods used by the advertiser with which he could establish a direct contact with the

prospective hand involve the use of a hired agency for spreading the information. Most of the

media are indirect in nature, e.g., press publicity, cinema, etc.

The various media that are commonly used are being explained here under:

1. Press Publicity or the Print Media:

a. Newspapers: Newspapers are useful to advertise all types of product. They are

more flexible & cheaper. In case of products, which are to be sold quickly or within

a limited period, this is the most useful media. Before selecting a particular

newspaper, the advertiser must take into account its circulation, readers, cost, etc.

Advantages:

i) It reaches almost all places, hence the exposure is maximum.

ii) As newspapers are published daily, continuous publicity is possible.

iii) They are more flexible, economical, & convenient.

iv) Advertising may be changed according to the requirements.

Disadvantages:

i) The life of advertisement is very short

ii) It becomes a waste if the readers do not go through the advertisement.

iii) It becomes a waste if there is no market for the product advertising in the place

of circulation.

b. Magazines: Magazines are read leisurely & they are more attractive. Magazines

may be either general meant for general readers. Eg: India Today or specific that is

specially meant for a particular group, Eg: Business India, Women‟s Era etc.


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Advantages

i) The quality of advertisement is better because of the better design, print, color,

& quality of the paper.

ii) The advertisement reaches the target market.

iii) Almost all advertisements are read because their number will be limited, they are

more attractive & readers have enough time to go through them.

Disadvantages:

i) It is not flexible

ii) It is comparatively costlier

iii) As it is published periodically, urgent messages cannot be advertised.

II. Direct Mail Advertising:

This method is more popular in case of mail order business. The advertiser maintains a list of

prospective customers & the advertisement is dispatched to them directly by post.

Advertisement may be in the form of circulars, leaflets, broachers, catalogues, etc.

Advantages:

1.The advertiser can reach any part of the country & convey his message directly to the

customer

2.It tries to build personal contact as the message is addressed to the customer himself.

3.The message can be altered according to the requirements.

4.It reaches the target market.

Disadvantages:

1. It is very difficult to prepare the list of prospective customers

2. In case of products, which need personal attention inspection before & after sales

services, it cannot be used.

III. Outdoor Advertising:

This is the oldest form of advertising; it is suitable to promote products that need a wide appeal.

Messages are exhibited at busy streets & places. They are primarily meant for the moving

population. Outdoor advertising helps the advertiser to remind the people of his product

frequently. Posters, Paintings, Electronic Signboards, Sky Writing, etc. are the various forms of

outdoor advertising.

Advantages:

1. It attracts the attention of the people

2. It is flexible & comparatively cheaper


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3. It has mass appeal

4. It is useful to promote the brand name.

Disadvantages:

1. The message is limited

2. It is difficult to find out the impact of advertisement

3. It is not primary form of advertising

4. At the best, it supplements other methods.

IV. The Broadcast Media:

a. Radio: In our country, radio as a means of advertising was first used in 1927, at present it is

one of most effective tools of advertising. In almost all countries, sponsored commercial

programs are very popular:

Advantages:

1. Its coverage is wide

2. It reaches even the illiterate consumers.

3. It is more flexible, in the sense that the advertiser can broadcast the messages at the

language he wants it.

4. The changes of being heard are more because advertisements are broadcasted in

between various popular programs.

5. Advertisements are effective because they are recreational in nature.

6. For emergency announcement, this is the most suitable media.

Disadvantages:

1. As it reaches general consumers, advertisement expenditure may become

unproductive.

2. Its life is extremely short

3. It is more expensive.

b. Television: Being one of the important instruction in the field of marketing it has occupied

position. Most manufacturers prefer this medium because it has both audio & visual effect.

It is suitable for consumer shopping & specialty goods & all types of industrial goods.

Advantages:

1. It is the only medium, which appeals to both eye & ears.

2. Creativity may be achieved

3. It is more life than any other medium.


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4. It is more flexible, i.e., advertisement can be telecasted when programs relate to a

particular group are telecasted. Eg: Manufactures of toys may telecast their

advertisement when children‟s programs are being telecasted.

Disadvantages:

1. Because of too many advertisements, consumers may lose interest in them.

2. The life is extremely short

3. It is the costliest form of advertisement.

c. Cinema: It is one of the most popular media in our country. It attracts a wide audience. The

main advantage is that almost all advertisements are looked at & read by the people.

Cinema advertisement may be in the form of slides, animation, documentaries, etc.

The main disadvantage is that its life is very short, in other words, when once the cinema

begins people may forget all advertisements.

d. Online Advertising or Interest Advertising: One of the features of E-marketing is online

advertising. Its popularity is increasing of late as it reaches the target market directly;

scrolls, banners, etc are some of the forms of online advertising.

e. Advertising on Mobiles: The advent of mobile phones has changed the nature of

advertising drastically. People advertise directly to mobile phone users through messages

(SMS). This method of marketing is referred to as vital marketing.

Exhibition, fairs, demonstration, window display etc are other forms of advertisements.

Criticisms of Advertising:

1. It is considered as an unproductive expenditure.

2. It forces the people to purchase those products, which are not within reach.

3. It increase the cost of the product

4. It makes people to become slaves of a particular brand.

5. Most advertisements mislead the people

6. Most advertisements are unethical & immortal

7. It is used as a tool to deceive people

8. They make false claims & omit certain things intentionally.

The above points prove that advertisement is a mere waste. But a deeper analysis proves otherwise,

it facilitates production & consumption functions. As its results are intangible, it cannot be

considered as a wasteful expenditure. It stimulates competition & helps the people to get the better

products at reasonable price.


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11. Explain the different methods of classifications of services.

The world economy now a day is increasingly characterized as a service economy. This is primarily

due to the increasing importance and share of the service sector in the economies of most

developed and developing countries. In fact, the growth of the service sector has long been

considered as indicative of a country‟s economic progress.

Economic history tells us that all developing nations have invariably experienced a shift from

agriculture to industry and then to the service sector as the main stay of the economy.

This shift has also brought about a change in the definition of goods and services themselves. No

longer are goods considered separate from services. Rather, services now increasingly represent an

integral part of the product and this interconnectedness of goods and services is represented on a

goods-services continuum.

Definition and characteristics of Services

The American Marketing Association defines services as - “Activities, benefits and satisfactions

which are offered for sale or are provided in connection with the sale of goods.”

Services span a large number of areas in the present context. Every day a new service is being

introduced. Though it is really difficult to classify all the services, the following classifications

have been accepted.

1. On the basis of end user

a) Consumer services

These are directly provided to the end users like hair dressing, laundry, package holiday,

counseling etc.

b) Business to business services

These are provided to business like consultancy, marketing research, advertising etc.

2. On the basis of tangibility

a) Tangible Services

These are services which are connected to the period to which the products are purchased

from seller like Televisions, Laptops, cars etc.

b) Intangible Services

These are services which do not provide consumers with any tangible products. Example:

consultancy and massage centres.

3. On the basis of specialization

a) Professional Services

These are services which can be provided only by sufficiently qualified and experienced

persons. Example: Counseling, Audit, Legal services, Health care etc.


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b) Non Professional Services

These are services which can be provided even by persons not possessing any educational

or professional qualifications. Example: Domestic servants, gardening, painting etc.

4. On the basis of profit orientation

a) Commercial services

These are the services offered for on business lines with an intention of earning profit.

Example: Private banking, beauty parlours etc.

b) Social Services

These are the services offered without any intension of earning profit. These are provided

with the intention of serving the society and therefore also called social services. Example:

Services rendered by orphanages, Charitable trust etc.

5. On the basis of labour intensiveness

a) People based services

These are services which involves human labour of a high degree. These services are

actually provided by human beings. Example: Repairs of auto mobiles, catering, Security

services.

b) Equipment based services

These are services where certain equipment plays a dominant role. The role played by

labourers is either minimal or totally absent. Example: ATM‟s, Self activating machines etc.

6. On the basis of contact

a) High contact service

These are services where the contact or the interaction between the service provider and the

service consumer is very high. The service cannot be provided the absence of such contact

or interaction.

b) Low contact service

These are services where the contact or interaction between the service provider and the

service consumer is very low. The service can be provided even without such a contact or

interaction. Example: Tailoring, diagnostic services etc.

Documents

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